: 1 : USJ IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION APPEAL NO.4 OF 2009 L.M.B. Holdings Ltd. A Company incorporated under the law of Isle of Man having its registered office at 1 st floor, Millennium House, Victoria Road, Douglas, IM24RW, British Isles .. Appellants V/s. 1. Mr. Boney Kapoor an adult India, residing at 5 th floor, Lens View Building, Veera Desai Road, Extension, Andheri (W), Mumbai  400 053. 2. M/s. S.K. Enterprises a sole proprietary concern of Mr.Surendra Kapoor, having his office at 5 th Floor,Lens View Building, Veera Desai Road Extension, Andheri (W) Mumbai  400 053. .. Respondents ..... Mr. Virag Tulzapurkar, Sr. Counsel a/w. Mr. S.V. Kadam i/by Kadam & Co. for the appellants Mr. F.E. Devitre, Senior Counsel a/w. Mr. Farhan Dubash i/by M/s. Daru Shah & Co. for respondents. ..... CORAM : S.C. DHARMADHIKARI, J. RESERVED ON : 17TH JULY, 2009 PRONOUNCED ON : 27TH AUGUST, 2009 Judgment : 1. This Appeal under Section 37(2) of the Arbitration and Conciliation Act, 1996 is directed against an order of the learned Arbitrator dated 23 rd April, 2009 (Exh. E page.197 : 2 : of the Appeal paper book). This order was delivered on an application made under Section 17 of the Arbitration and Conciliation Act, 1996 (for short the Act ). The learned sole Arbitrator dismissed the Appellants Application and that is why they have preferred this Appeal. 2. The appellants / original claimants preferred the application seeking interim measures against the respondents pending the hearing and final disposal of the Arbitration proceedings. 3. It was the case of the appellants / claimants that the respondents and the claimant have entered into an agreement dated 1 st June, 2007 (hereinafter referred to as the said Agreement), pursuant to which the respondents have irrevocably and absolutely granted, sold, assigned and transferred to the claimant the exclusive, worldwide right, title and interest including without limitation the commercial exploitation rights by any and all formats and channels of exploitation now known or hereafter devised, the right of revenues accruing from the Films viz. wanted (Remake of Pokiri), Rang Birangee, Untitled (a love story), No Entry Part-II and Untitled (Remake of Tamil Film Kadai Kondian) (hereinafter referred to as the said Films ) and all related and ancillary rights and the rights to make use of the said films for advertising, publicity and exploitation purposes and to distribute, exhibit and : 3 : exploit directly or indirectly or otherwise deal with the said Films throughout the World as the claimant may deem fit and proper and enjoy exclusively the benefits thereof and as more particularly set out in Article (2) of the said Agreement (hereinafter referred to as the said Rights ) on the terms and conditions contained therein. As per Article (3)(a) of the said Agreement, it was agreed between the claimant and the respondents that the valuation of the Rights would be mutually decided between the parties within 90 days from the date of execution of the said Agreement. However, the claimant would pay the respondents a sum of Rs.10,00,00,000/- (Rupees Ten Crores only) by way of Advance Payment (hereinafter referred to as the said Advance Payment ). As per Article (3)(b) of the said Agreement, it was agreed between the Claimant and the respondents that in the event the parties are not able to mutually agree on the consideration within the 90 days period, the respondents would refund the advance payment along with the interest calculated at the rate of 18% per annum, thereon. Till such time as the advance payment is refunded, the claimant would continue to hold the said rights granted under the said agreement. As per Article 3(e) it was agreed between the claimant and the respondents that upon the failure by the respondents to repay the claimant the said advance payment alongwith the interest thereon by 30 th September, 2007, the said rights in the said films or any other five films to be produced by the : 4 : respondents shall completely vest in the claimant. 4. In pursuance of the said agreement, the claimant has paid the respondents the said advance payment. The respondents have at all times admitted and acknowledged receipt of the said advance payment and the same is not subject matter of dispute. 5. After execution of the said agreement, the claimant and the respondents negotiated in order to agree upon the ultimate consideration for acquisition of the said rights. However, a mutually agreeable consideration amount could not be decided within the stipulated period of 90 days or even thereafter. In view thereof, the claimant orally communicated to the respondents to refund the said advance payment alongwith the interest thereon at the rate of 18% per annum as per clause 3(b) reproduced above. Despite oral communication as aforesaid and several reminders thereafter, the respondents did not refund the said advance payment alongwith interest. The claimant, therefore, issued a letter dated 27 th August, 2008 to the respondent No.1 (with a copy thereof marked to the respondent No.2), therein calling upon him to refund the said advance payment alongwith interest thereon at the rate of 18% per annum till the time of actual payment, within 28 days from the date of receipt of the said letter. : 5 : 6. Though the respondents had received and acknowledged the said letter dated 27 th August, 2008, they neither bothered to reply the said letter nor to make compliance of the requisition contained therein. Thus, the respondents failed to perform their obligation contemplated in Article 3(b) of the said agreement. As a result, right as contemplated in Article 3(e) accrued in the claimants favor, whereby the said rights in the said films or any other five films produced by the respondents (in case production of either or all of the said films was abandoned / not in existence  so as to totalling the number of films to five films) stood vested in the claimant. 7. After giving the respondents a fair and reasonable opportunity to refund the said advance payment with the accrued interest i.e. from 1 st September, 2007 upto 30 th October, 2008, the claimant ultimately addressed a letter dated 31 st October, 2008 to the Adlabs Films Ltd. (Negative Rights Controller of the said Films) (hereinafter referred to as Adlabs ) therein requested them to lodge their claim in the physical negatives, negative rights and all other rights in respect of the said Films and not to permit any person/firm/company, including the respondents to deal with and / or exploit any rights whatsoever in respect of the said Films : 6 : without the Claimant s consent. 8. It was the appellants case that it is a standard practice followed by any aggrieved party in the film world to refer its grievances to various associations. Following this practice, a letter was addressed on 3 rd November, 2008 to Association of Motion Picture and T.V. Programme Producers, Indian Motion Picture Producers Association, Western India Film Producers Association and Producers Guild regarding that the appellants / claimants have rights in respect of the films mentioned therein and that they had approached the laboratory referred to hereinabove to register / lodge its claim in respect of the films. The said laboratory by its letter dated 7 th November, 2008 declined to register the claim in respect of the films on the ground of absence of specific authorization from the 1 st respondent in the claimants favour. The said Adlabs are not parties to the dealings between the claimants and the respondents. The matter was sought to be clarified by letter dated 10 th November, 2008 by the claimants but despite receipt of the same, M/s. Adlabs have declined to lodge / register their claim in respect of films. The claimants also through their Associate Company in India made a representation to the Association more particularly mentioned in para 10 of the application under Section 17 of the Act and requested them to look into the matter so that the rights of the matter in the films can be protected. : 7 : 9. After the respondents become aware of the representation made on behalf of the claimants, they for the fist time addressed a letter dated 22 nd November, 2008 and denied that the claimants have any rights in the films and also that they are liable to refund any advance payment alongwith interest. On the contrary, the respondents claimed damages of Rs.10 crores and more from the claimants for the purported loss. The matter was sought to be clarified by the respondents by their letter dated 2 nd December, 2008. 10. The subsequent grievance of the appellants / claimants is that in violation and breach of the agreement, the respondents sought to create some rights in respect of the films in favour of Sahara One Motion Pictures Ltd. Though this deal was made purportedly in January, 2008, the appellants / claimants learnt about the same only in mid December, 2008. Therefore, they had to approach the tribunal as the respondents are acting contrary to the terms arrived at between parties. Article 3(b) and article 3(e) of the agreement have been referred to so also the pleadings in Arbitration Petition No.49 of 2009 which was filed by the claimants in this Court under Section 9 of the Act. Upon various grounds, the arrangement was challenged. 11. Alternatively, it was urged by the appellants / : 8 : claimants before me that assuming without admitting that the respondents could divest them of their rights in the picture films and enter into any agreement / arrangement with M/s. Sahara One Motion Pictures Ltd. that is restricted to 50% only. The balance 50% rights continue to vest with the claimants. In such circumstances, even these rights may be defeated and it is necessary to protect them during the pendency of the Arbitral proceedings. These are the averments in para 14 and 15 of the application under Section 17 of the Act. 12. Based on the above, they prayed for the following reliefs:- (A) Pending the hearing and final disposal of the present arbitration petition and the execution of the award that may be issued pursuant hereto, the Hon ble Arbitrator may pass an order of injunction thereby restraining the respondents themselves, their representatives, successors, nominees, assignees, licensees, transferees or any other persons(s) claiming through or under the respondents from assigning, licensing, transferring any rights in respect of all or either of the said Films i.e. wanted (Remake of Pokiri), Rang Birangee, Untitled (a love story), No Entry Part-II and Untitled (Remake of Tamil Film Kadai Kondian) or any other five films produced by the respondents including sequel of Mr.India (in case production of either or all of the said Films was abandoned in favour of any third party whosoever other than the Claimant and / or exercising and / or exploiting any rights of the said Films or either of them by way of exhibition, telecast, broadcast, transmission and / or retransmission on any media or channel and / or by any means whatsoever and / or the rights as granted to the claimant under Article 2 of the said Agreement and / or transferring negative rights in the said Films or either of them to any third party : 9 : and permitting them to make and collect positive prints thereof; (B) Pending the hearing and final disposal of the present arbitration proceedings and the execution of the award that may be issued pursuant thereto, the Hon ble Arbitrator may grant the following relief to the claimant : (i)an order, ordering and directing the respondents to disclose on affidavit to the Hon ble Arbitrator the immovable and movable assets, owned and possessed by them jointly or severally and furnish adequate security, at least to the extent of Rs.12,69,26,027/- (Rupees Twelve Crores sixty nine lakhs twenty six thousand and twenty seven only); OR (ii)an order, ordering and directing the respondents to deposit jointly or severally the sum equivalent to Rs.12,69,26,027/- (Rupees Twelve Crores sixty nine lakhs twenty six thousand and twenty seven only) in an escrow account to be opened in the joint names of teh parties hereto till the Arbitration proceedings are conclusively decided; OR. (iii)an order, ordering and directing the respondents to keep a minimum balance of Rs.Rs. 12,69,26,027/- (Rupees Twelve Crores sixty nine lakhs twenty six thousand and twenty seven only) in its bank account No.0028-728958050 with Indusind Bank Limited, Lokhandwala Branch, Mumbai and / or any other Bank, creating charge of the Claimant on the said amount, with further order restraining the respondents from discounting or closing the said bank account till the Arbitration proceedings are conclusively decided. 13. This application was served on the respondents and on their behalf the 1 st respondent filed an affidavit in reply opposing the reliefs, claimed by the Appellants. 14. He contended that the claimants have suppressed various material documents which have been executed between the first respondent and the Associate Companies of the : 10 : Claimants / Appellants relating to the production and distribution of feature films. He contended that a joint venture was proposed to be incorporated by and between parties and, therefore, the arrangement with regard to films was worked out. He then contended that there is no urgency in the matter. He submitted that the alleged advance of Rs.10 Crores was to be refunded according to the claimants on or before 30 th September, 2007. The claimants however made a demand for refund for the fist time on 27 th August, 2008. They also filed a Petition under Section 9 of the Act. According to the 1 st respondent the Appellants falsely claim that they became aware of the News Article only as late as in December, 2008. 15. In para 4 and 6 of his affidavit this is what has been stated by him :- (4)As more particularly detailed herein below I have already borrowed large amounts and created various and diverse third party rights in respect of the very same 5 films against which the claimant has sought relief in this application. I was compelled into doing the same by reason of the claimant defaulting / breaching the understanding between us and upon his failure to pay / advance the further amounts to me / joint venture. Towards production costs of the said films. In the light of the same, it is respectfully submitted that no interim relief which would adversely affect the right of the said third parties ought to be granted in favour of the claimant. (6) In any event and without prejudice to the contentions raised herein, I say that the claimant, if at all, has a mere monetary claim against the respondents for refund of the alleged advance of : 11 : Rs.10 crores, which I am entitled to set off towards my claim for damages suffered by the respondents by reason of the breaches and defaults committed by the claimant, including their failure to finalize and / or carry out the terms of the said Joint Venture agreement as hereinafter staed. In respect off the same, I have a claim for damages against the claimant towards loss of reputation that I have suffered, in addition to the damages caused to me in the matter of business and marketability of the said 5 films as a direct result of the claimant making false claims in respect of the 5 films mentioned in the said Agreement in their several letters addressed to the laboratories and other Film Trade bodies. In view thereof, the claimant is not entitled to any injunctive and / or other interim reliefs sought in the application. 16. The 1 st respondent then set out his version on merits and pointed out that he is one of the leading producers in the Hindi Film Industry. He is son of Mr. Surinder Kapoor, Proprietor of the 2 nd respondent, who is also noted film producer. It is urged that the 1 st respondent has 25 years of experience in film making and has produced a number of commercially successful and critically acknowledged movies. He said that he has produced about 28 films and one Television serial. 17. He contended that the claimant is Associate Company of B4U Network ( Europe ) Ltd. and B4U Television Network (India) Ltd. He contended that one Gokul Binani is the promotor of the parent company of the B4U Group of Companies. The 1 st respondent met him in England in the presence of Shri. Sunil Rohra and Shyam Sundar. The said Rohara is the C.E.O. of B4U Network (Europe) Ltd. and : 12 : pursuant to discussions, the 1 st respondent informed said Binani and Rohara that he was facing debt trap having many creditors from whom he had borrowed large sums of money. He required, time to time, monies for production of films. The details of the loans obtained were given to the said Binani. Further version of the 1 st respondent is that Binani and Rohra were also informed by the 1 st respondent with regard to loans from Sahara One Motion Pictures Ltd. He pointed out that 2 nd respondent was also liable to pay to Sahara One Motion Pictures Ltd. large amounts towards interest / compensation. The amount of Rs.20 Crores which was due and payable to Sahara One Motion Pictures Ltd. was also referred to and details of other claims of distributors were also mentioned. It is then stated that Mr. Gokul Binani realized this position and, therefore, he evinced his companies interest in having a tie-up with the 1 st respondent for production of feature films and media related activities. Thereafter, Mr. Gokul Binani came to India and there was a meeting in which it was mentioned that the promotors of the B4U Group including Mr. N.L. Mittal were appraised of the talks. It was then agreed to form a joint venture between the 1 st respondent and nominees of the Companies and / or Associate Companies including B4U Network (Europe) Ltd. The details of the joint venture are then mentioned in the affidavit and documents relevant thereto according to 1 st respondent, are attached. : 13 : 18. Thus, it was his version that pending the joint venture which was proposed a stop gap arrangement was made by entering into the subject Agreement dated 1 st June, 2007. Agreement dated 1 st June, 2007 was not to be acted upon and enforced. The details of the meetings with regard to the joint venture are then mentioned by him in his affidavit and he contended that it was agreed and understood between the parties that the subject agreement dated 1 st June, 2007 would not be enforced and the amount of Rs.10 Crores which was paid to the 1 st respondent would not be required to be repaid by him but would be adjusted towards the initial contribution of the joint venture. It is in these circumstances, that he denied his liability to pay the monies and placed an interpretation on the terms and conditions of the agreement. 19. After the reply and rejoinders were duly filed, the application under Section 17 was heard by the learned Arbitrator and in para 9 of the impugned order, the learned Arbitrator observes thus :- 9. Having heard the parties and seen the documents, it prima-facie does appear that 1 st company. The case that the Agreement dated 1 st June, 2007 has nothing to do with those negotiations is belied by the various documents produced and particularly by the email dt.1 st June, 2007. Also the two draft agreements show that initially the agreement was to be taken in the name of a sister concern. It can be seen that the : 14 : formation of the joint venture was taking time. It is clear that the 1 st respondents was in a debt trap and needed monies urgently. At this stage it does appear that the 1 st respondents case, that the sum of Rs.10 crores was advanced as a stop gap arrangement, is correct. The fact that Mr. Sunil Rohra has signed Heads of agreement and this agreement also supports, at this prima-facie stage, the case that the amount had been advanced as a stop gap arrangement pending formation of the joint venture. The drafts show that the parties intended to transfer the rights in all the films to the joint venture. There was no intention to transfer rights of the claimants. At this prima facie stage a reading of the agreement dated 1 st June, 2007 also suggests that no rights were to be transferred to the claimants. On a reading of the agreement it is not clear whether the  Rights are supposed to have vested in the the claimants on execution of the same or on payment of consideration or on the amount not being repaid. It is also clear that the value of all the films was more than Rs.10 crores. If that be so  Rights would not be transferred for merely Rs.10 crores. Further the fact that the claimants delayed so long in claiming repayment of the sum of Rs.10 crores also indicates that the sum was paid as a stop gap arrangement and that no  Rights in films were being vested in the claimants. The delay has also resulted in rights being created in 3 rd parties who are not before this Tribunal. At this stage it does not appear that the claimants only have a money claim and the 1 st respondents ha s a counter-claim. For all the above reasons no interim relief can be granted. Even otherwise balance of convenience and interest of justice require that no interim order be passed. As seen respondents is in a debt trap. It has not been argued that third party rights are being created to defeat or delay claim of claimants. He is only raising monies, in the ordinary course of his business to complete production of the two films and to pay of his creditors. Any interim order would affect him and possible make it impossible for him to do his business. On the other hand claimants would not suffer any irreparable loss if no interim order is passed their money claim will survive. 20. Consistent with this prima-facie finding, the learned Arbitrator proceeded to dismiss the application and that is : 15 : how the instant appeal has been filed challenging the order of the learned Arbitrator. 21. Mr. Tulzapurkar, learned Senior Counsel appearing for the appellants / claimants contended that the impugned order is ex-facie erroneous and unsustainable. He submits that the agreement is clear. He submits that the agreement is between the 1 st respondent and the appellants. There is no third party thereto. It is stated very clearly in the agreement that the respondents are desirous of assigning the films and projects to the appellants herein and that is how the definitions in the agreement also read. He invited my attention to the definition of the terms rights , delivery dates , terms and contends that clause 2 must be seen in the backdrop of these definitions. It is very clearly stipulated that the appellants are entitled exclusively and solely to all the rights in the films. The agreement is irrevocable and the parties have agreed that notwithstanding the exercise or non-exercise of any rights granted under this agreement within a period of 1 year from the date of the agreement, the Assignee (Appellants) shall continue to own the rights during the term and the respondents as an assignors have waived all rights in favour of the appellants. 22. Mr. Tulzapurkar invited my attention to clause 3 of the agreement which reads as under:- : 16 : 3. Consideration : (a) The valuation of the Rights shall be mutually decided between the parties within 90