1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. ARBITRATION PETITION NO. 387 OF 2009 Y. T. Entertainment Limited, a Company Incorporated under the provisions of the Companies Act, 1956, having its registered office at 401, Morya Estate, New Andheri Link Road, Andheri (West), Mumbai 400 053. ... Petitioner vs. 1 One More Thought Entertainment Pvt. Ltd., a Company Incorporated under the provisions of the Companies Act, 1956, having its address at Block No.8, Shah Industrial Estate, Off.Veera Desai Road, Andheri (West), Mumbai 400053, 2 Risk Design & Advertising Limited, a Company Incorporated under the provisions of the Companies Act, 1956, having its address at Block No.8, Shah Industrial Estate, Off. Veera Desai Road, Andheri (West), Mumbai 400053., 3 Mr.Azam Khan, an adult of Mumbai Indian Inhabitant, having his address at: (i) Block No.8, Shah Industrial Estate, Off. Veera Desai Road, Andheri (West), Mumbai 400053., (ii) Versova Shree Darshan Co-op. Housing Society, Plot No.15, S.V.P. Nagar, Near Versova Telephone Exchange, Andheri West, Mumbai 400053. (iii) 171/1A, Winderemere, Oshiwara, Andheri West, Mumbai 400053. 4 Goldmine Telefilms Limited, a Company Incorporated under the provisions 2 of the Companies Act, 1956, having its address Plot No.45, Ganpati Bhavan, G. Road, Goregaon (West), Mumbai 400 062. ... Respondents Mr. S. U. Kamdar, Sr. Counsel with Mr. H. N. Thakore i/b. M/s.Thakore Jariwalla & Associates for the petitioners. Mr. Virag Tulzapurkar, Sr. Counsel with Mr. Vineet Naik, i/b. Naik, Naik & Co. for respondents 1, 2 and 3. CORAM: ANOOP V. MOHTA, J. DATE : 6th August, 2009 ORAL JUDGMENT: 1 The petitioner has invoked Section 9 of the Arbitration & Conciliation Act, 1996 (for short, the Act) for various reliefs of injunction, protection against respondents 1 to 3 on the foundation of arbitration clauses in the Agreements dated 26.12.2007, 08.05.2008, 27.10.2008 and specifically last Deed of Settlement dated 07.04.2009 (the deed) confirming the liabilities and to make the payments by the instalments not, later than 30.06.2009. The amount of Rs.7,25,00,000/- (Rupees seven crore twenty five lacs), was due as per above three Agreements. It was mutually settled and reduced to Rs.5,01,00,000/- (Rupees five crore and one lac), towards full and final settlement. The respondents failed to make payment and as except, one, all other cheques were bounced. Therefore, the petition. 2 The basic clauses of the Deed are as under: “(8) The mode of payment and due date is the essence of this arrangement and we agree to make the payment as stated above. In case if we fail to repay any of the installment as per the 3 above mode of payments, then the amount paid by us till then shall be forfeited and this letter of arrangement shall stand cancelled and terminated and in addition to the above, you shall also be entitled to enforce all your rights under the aforesaid Agreements dated 26.12.2007, 8.5.2008 and 27.10.2008 in any court of law. Further it shall not in any manner derogate, diminish, repeal and/or supersede our aforesaid Agreements dated 26.12.2007, 08.05.2008 & 27.10.2008 and it shall remain valid and unchanged and binding on us unless the full payment is received by you under this agreement and you are also entitled to issue public notice to enforce the said rights of our said pictures for which we shall not object under any circumstances whatsoever. (13) It is further agreed that in case of any dispute and differences that may arise in relation to or in respect of the aforesaid Agreements dated 26.12.2007, 08.05.2008 & 27.10.2008, the same shall be, as far as possible resolved by mutual Agreement and understanding between us, failing which, by mediation under the provisions of the Arbitration & Conciliations Act, 1996 and as a last resort by referring to arbitration as per the provisions of Arbitration & Conciliation Act, 1996. The venue of arbitration shall be Mumbai. The language to be used in the arbitration proceedings shall be English.” 3 Respondents 1, 2 and 3 and the petitioners are the signatories to the Deed. They were also parties to the above referred Agreements in their respective capacity. Therefore, they mutually agreed, settled and signed the said Deed. Respondent no.3 has signed as a Guarantor also. Admittedly, the full payment was not made and/or received by the petitioners. The fact remains that even as per the Deed between the parties there is an arbitration clause to settle the dispute and differences between the parties arising out of these Agreements and the Deed also. In present case which clause should prevail and/or under which clause the parties should settle their disputes through the Arbitral Tribunal, just cannot be gone into. As per the Deed, as parties have agreed to settle their disputes, and, as dispute arose, the petitioner has invoked the arbitration clause. That itself is sufficient to proceed with the matter. Which arbitration clause 4 should be invoked for settlement may be an issue but there is dispute about the existence of the arbitration clause. For Section 9 of the Act, it is sufficient to pass interim order/injunction if case is made out. The submission in this background that there are three different Agreements and, therefore, one common petition like this is not maintainable, has no force, specially in view of the last Deed of Settlement signed by the parties whereby they agreed to settle the dispute through the provisions of the Act. 4 The respondents have filed their reply and resisted all points. However, there is no denial to the specific averments with regard to the execution of these Agreements including the Deed. The respondents have re-iterated and confirmed the liability of Rs.7.25 crores and agreed to settle at Rs.5,01,00,000/-. The parties in fact have acted upon the same. The respondents had issued cheques accordingly. However, except one cheque of Rs.11,00,000/- (Rupees eleven lacs), all other cheques were bounced. Therefore, at this stage as there was no full payment made, the original liability except the amount of one cheque of Rs.11 lac, remained unpaid. 5 All these Agreements were to advance the finance to the producer/distributor by the petitioner which is a limited company carrying on business of Financing and producing Cinematographic films. Respondents 1 and 2 are the limited company carrying on business of production of feature films. Respondent no.3 is an individual, who is a Director of Respondents 1 and 2, who stood Guarantor for the payment of the amount advanced to respondents 1 and 2 5 by the petitioners. The Agreement of 08.05.2008 was with respondent no.1 for the film “Dasvidaniya” and all other related rights including music, T.V. Satellite telecasting, broad casting, DVD, Home T.V. , Video rights, inter-net, electronic media rights etc. There is no denial to the receipt of amount based upon the said Agreements by the respondents. 6 An Agreement dated 26.12.2007 is between the petitioner originally M/s. R F C Limited now changed to Y. T. Entertainment Ltd. And respondents 2 and 3 for the film titled “Khalbali Fun Unlimited” with rights of film and all other related rights. There is also no dispute about the receipt of amount. Respondent no.3 stood Guarantor and signed accordingly. 7 Another agreement is dated 27.10.2008 for the film “My name is 340”, signed between respondent no.1 and the petitioner, for the same purpose. Here also there is no dispute about the receipt of money. 8 As there was no payment made by the respondents, a demand was made by the petitioner. There arose dispute between the parties. Those terms and conditions of the deed failed as cheques were also dis-honoured. 9 Section 27 of the Indian Contract Act, 1872 provides as under : “27. Agreement in restraint of trade, void.- Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Exception 1.- Saving of agreement not to carry on business of which goodwill is sold.- One who sells the goodwill 6 of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.” 10 Section 14 read with Section 42 of the Specific Relief Act, 1963 are also important for this purpose. Section 42 reads as under: “42 Injunction to perform negative agreement. - Notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the Court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement: Provided that the plaintiff has not failed to perform the contract so far as it is binding on him.” 11 The submission with regard to the “Doctrine of Negative Covenant”, based upon above Section, in the facts and circumstances of the case, in no way sufficient to overlook the case of the petitioner. The Doctrine of Negative Covenant cannot be extended blindly in each and every case, where the parties knowing fully the principle behind the Doctrine, incorporate those provisions/clauses and when it comes to payment, the defaulted party invokes the Doctrine to use as a shelter/umbrella to avoid the obligations. The commercial transaction like this where the parties entered into the contract of production of the film & having once obtained the benefits arising out of the finances so received, just cannot be allowed to turn around to say that in view of the said Doctrine, no order should be passed against them. The amount of Rs. 7.25 crores was reduced to Rs.5,01,00,000/-, therefore, though settled and agreed but not made the payment, in my view, such party is not entitled to claim the 7 benefit of the said Doctrine. Apart from this, the earlier agreements provide for this Doctrine, but not the last Deed, and now cannot be permitted to invoke the same when it comes to their responsibilities/obligations to perform their part of the contract. 12 In my view, this Section cannot be interpreted or extended to assist a defaulted person/party and specially in the present facts and circumstances of the case. There is nothing in this clause or section to direct the parties to comply with agreed clauses and to pay the agreed amount or at least to secure the same. Section 27 of the Contract Act just cannot be extended blindly in each and every case merely because such clause is mentioned in the Agreement. Any direction and/or order to make the payment of agreed amount against any person, in my view, cannot be said to be granting any order of restrainment of trade or a lawful profession, trade or business. They can do or continue with their business or trade but subject to agreed payment. 13 In view of above and considering the facts and circumstances on record, including the rival affidavits and material as relied on, by considering the basic principle, grant of injunction/appointment of Receiver/attachment of property as contemplated under Code of Civil Procedure and as elaborated in Adhunik Steels Ltd. vs. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125 as follows: “It is true that Section 9 of the Act speaks of the Court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject-matter of the arbitration 8 agreement and such interim measure of protection as may appear to the court to be just and convenient.” “Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act.” 14 Before passing any order or injunction and/or interim relief, the aspects of delay/latches and the conduct of the parties are also necessary and relevant. It is observed in Kishorsinh Ratansinh Jadeja v. Maruti Corp. & ors., JT 2009 (5) SC 180 as under : “12 In addition to the above, Mr.Ranjit Kumar also referred to the decision of this Court in Mandali Ranganna & ors v. T. Ramachandra [2008 (11) SCC 1] wherein an additional principle was sought to be enunciated relating to grant of injunction by way of an equitable relief. This Court held that in addition to the three basic principles, a Court while granting injunction must also take into consideration the conduct of the parties. .....” 15 The earlier contracts have been emerged with the last Deed and the respondents have already acted by making some payment as recorded in the Deed itself. Such commercial contracts cannot be said to be one sided or excessive. The default on the part of the respondents cannot be permitted to utilise and to use against the petitioner to deny his right of getting interim protection/measure/reliefs which, otherwise available in the present case, on the basis of the basic elements of equity, balance of convenience and injury. The 9 conduct of respondent by not paying the amount though settled and agreed is also an additional facet. The apprehensions, therefore, so raised in the petition are supported by the material particulars and the conduct of the respondent as referred above. 16 The un-controverted default, as referred above and in view of above, in my view, the petitioner has made out a case as contemplated under Order 38, Rule 5 of Civil Procedure Code at this stage to protect his interest in the event the dispute is decreed or decided in his favour. Therefore, a case is also made out for direction to secure the amount of Rs.5,01,00,000/- at least or balance amount after deduction of the amount, if any, paid after the date of the Deed. This agreed amount, therefore, at this stage, and as prayed need to be protected. I am not denying the right of the petitioner to claim whole amount in full trial or right of parties to settle the dispute for all the purposes. [ Rajendran & ors. v. Shankar Sundaram & ors. (2008) 2 SCC 724 : 2008 Mah. L. J. 547 ] 16 In view of above, I am inclined to pass the following order in the present mater : ORDER (a) With regard to the feature film “Dasvidaniya”, there is no dispute that the DVDs and many other commercial rights have been already released and the third party rights have already been created since long. In view of the fact that various transactions have been entered into with 10 regard to the DVD rights and related such right, therefore, subject to that Agreement and as satellite rights to telecast the film, through proper channels, as stated, are created. Therefore, the injunction is restricted to the satellite rights only in respect of film “Dasvidaniya”. (b) With regard to the film “My Name is 340”, the same is not pressed. (c) With regard to the feature film “Khalbali Fun Unlimited” . This film’s production has been going on. Any production of film is always a process of huge involvement of time, energy and various other infrastructure and considering the nature of business, at this stage, I am not inclined to pass any order of injunction so far as the process of production and making of films. It may go on. However, considering the admitted position on record, including the admitted liability, at this stage, I am inclined to grant prayer (d) except to the above extent. (d) With regard to feature film “Phoonk”, as there is a material on record to show that the various rights have already been created. Therefore, no injunction/relief with regard to those Agreements except satellite rights or such related rights of the film “Phoonk”. Therefore, prayer (e) is granted accordingly except to the above extent only. (e) In view of the admitted default and considering the scope and 11 purpose of Section 9 of the Act, I am inclined to grant prayers (h), (i) directing the respondents to furnish the security in the sum of Rs. 5,01,00,000/-, subject to the adjustment of the amount, if already paid for the Deed to secure the petitioners’ dues within ten (10) weeks failing which I am granting liberty to the petitioner to invoke the prayer clause (j) & (k). (f) However, I do not deny the right of the parties to settle the matter inspite of above order and raise appropriate defence before the Arbitral Tribunal, if constituted. (g) Resultantly, the petition is allowed to the above extent with liberty. No costs. (ANOOP V. MOHTA, J.)