1 arbp276.07.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 276 OF 2007 Radha Krshna Films Ltd. A Company registered under the Provisions of the Companies Act, 1956, having its registered office at Kamala Cottage, 6, Juhu Tara Road, Mumbai-400 049. ....Petitioner. Vs. 1 Jyoti Film Distributors Pvt. Ltd., A company registered under the provisions of the Companies Act, 1956, having its registered office at Kamala Cottage, 6, Juhu Tara Road, Mumbai-400 049. 2 Motion Pictures Association, 52/55, Mangal Market, Bhagirath Palace, Chandni Chowk, Delhi-110 006. ....Respondents. Mr. Nikhil Sakhardande with Mr. Pratik Pawar i/by M/s. AZB & Partners for the Petitioner. Ms. Neeta Jain i/by Mr. Vikash Kumar for Respondent No.1. None for Respondent No.2. CORAM : ANOOP V. MOHTA, J. JUDGMENT RESERVED ON : 21st APRIL, 2011. JUDGMENT PRONOUNCED ON : 5th MAY, 2011. JUDGMENT:- The Petitioner (Original Respondent) has challenged award 2 arbp276.07.sxw dated 05/01/2007 passed by the Joint Tribunal of the Film Makers Combine (for short, FMC) and the Motion Pictures Association (for short, MPA). The basic directions as per the award are as under:- “Awarded that Rs.2,50,000/- be paid by the Defendants, M/s. Radha Krshna Films Ltd., Mumbai in clear violation of their own agreement by disposing H.V. Rights prior to six months & for retaining 10 prints of the Distributor, M/s. Jyoti Film Distributors Pvt. Ltd. without payment of any consideration amount. The said amount of Rs.2,50,000/- shall be paid to the Distributors i.e. M/s. Jyoti Film Distributors Pvt. Ltd. Delhi within 30 days from the date of communication of decision failing which, the awarded amount will carry an interest @18% per annum till the date of making the final amount.” The relevant facts are- 2 On 18/12/2003, both the parties filed a form with the MPA seeking registration of a motion picture “Woh Tera Naam Tha” (the “Film”). 3 On 07/01/2004, the Petitioner and Respondent No.1 enter into an Agreement of License for distribution of the Film. (The Agreement). An affidavit filed on behalf of the Petitioner, declaring 3 arbp276.07.sxw inter alia that the Video, Cable TV and TV rights of the Film have not been sold or parted with by the Petitioner. Clause (iv) of the Affidavit stated that the Petitioner would not give out the Film for telecast through television for a period of five years. Two letters from the Petitioner to Respondent No.1 informing that Clause (iv) of the Affidavit was incorporated at the request of Respondent No.1, to meet the MPA requirements at Delhi and shall not be binding on the Petitioner, and they shall be free to telecast the Film on satellite television after six months of the release of the Film. The letters was signed as being ‘Agreed And Confirmed The Above’ by Respondent No.1. 4 On 28/01/2004, a Power of Attorney executed by the Petitioner in favour of Respondent No.1 for the purposes of protecting the copyrights of the Film in the specified territory. The date of release of the Film was 30/01/2004. 5 On 05/02/2004, an agreement between the Petitioner and Mr. Sanjay Jumani proprietor of M/s. Sunstone Entertainment (“Sunstone”) whereby Petitioner granted various copyrights in respect of all countries in the world excluding India, Nepal, Bhutan and 4 arbp276.07.sxw Sikkim. A declaration was made by the Petitioner accordingly. Unfortunately, the film was flopped in the box office. 6 On 12/02/2004, a letter from Respondent No.1 to the Petitioner with the details of the investment in the Film to the tune of Rs. 44,92,045 and that Respondent No.1 had recovered only about Rs. 15,00,000/-. Respondent No.1 requested the Petitioner to ‘sympathetically consider’ sharing the deficit/loss. 7 On 18/02/2004 and 21/02/2004, two letters from Respondent No.1 to the Petitioner with railway receipt showing dispatch of two lots of five prints of the Film, and requested the Petitioner to receive the prints. 8 On 11/03/2004, a letter from MPA to Respondent No.1 registering the Film in their name as per the Producers’ Distributors” Certificate dated 18th December, 2003. 9 On 16/03/2004, a letter by Respondent No.1 to the Petitioner giving the details of the investments and the losses allegedly suffered in the distribution of the Film and requested the Petitioner to share 5 arbp276.07.sxw the alleged loss ‘on humanitarian grounds’ to the extent of Rs.22,60,000/-. Respondent No.1 stated that the Film be telecasted on Satellite Channels prior to the six months and such revenues be shared with Respondent No.1 to minimize Respondent No. 1’s loss. 10 On 18/03/2004, an agreement between the Petitioner and Sunstone. Sunstone was granted the license of the copyright in respect of the Home Video rights of the Film by the Petitioner within India, Nepal, Sikkim and Bhutan. There was no assignment of the TV or satellite rights of the Film by the Petitioner, which was amended on 19/03/2004 to include Bangladesh. 11 On 18/05/2004, a letter from Respondent No.1 claiming a loss of Rs.25,74,753.40 allegedly recoverable from the Petitioner as an un- recouped investment on the Film. 12 On 08/06/2004, a fax from the Petitioner to Respondent No.1 stating that the Petitioner is in the process of assigning the satellite rights of the Film. The Petitioner, accordingly, sought permission under Article 31 of the Agreement. 6 arbp276.07.sxw 13 On 11/06/2004, a letter from Respondent No.1 about their consent for the pre-mature release of the Film and the release of its VCD. 14 The alleged losses of Rs.25,39,041.40 were again claimed from the Petitioner. 15 On 20/07/2004, 18/08/2004 and 17/09/2004, letters from Respondent No.1 to the Petitioner. Respondent No.1 threatened, in case the amount so demanded not paid within fifteen days, the matter would be referred to the MPA for the realization of the alleged dues. 16 On 20/09/2004, the claims made by Respondent No.1 before the Acquiring Sub Committee of the MPA giving details pertaining to the losses allegedly suffered in distribution of the Film. Respondent No.1 requested the MPA to issue an interim circular of caution against the Petitioner in view of the alleged claims of Respondent No.1. 17 On 23/09/2004, a letter from the Petitioner in response to Respondent No.1’s letter dated 18th August, 2004. The Petitioner denied all the claims made by Respondent No.1 and also the liability, 7 arbp276.07.sxw by referring to various provisions of the Agreement. 18 On 06/10/2004, Respondent No.1 denied the contents of the Petitioner’s letter and stated that they filed a complaint with the MPA and requested the Petitioner to submit their reply to the Association. 19 On 08/10/2004, an agreement between the Petitioner and Sunstone, whereby the rights in the Film that were previously granted to Sunstone were subsequently relinquished by Sunstone in favour of the Petitioner. 20 On 02/11/2004, an interim Circular issued by the Acquiring Sub. Committee of the MPA to the members of MPA stating that Respondent No.1 had raised a claim amounting to Rs.25,22,091.40 with interest @ 24% per annum, plus claim fee and circulation charges of Rs.5,300/- against the Petitioner and two of its directors- Mr. V.P. Singhania and Mr. P.R. Jain (“Directors”). 21 On 04/11/2004, a letter that the Agreement was not that of partnership and Respondent No.1 was not liable for all costs and expenses in relation to the distribution of the Film. 8 arbp276.07.sxw The Petitioner entered into an agreement for granting the TVB rights of the Film with M/s. SET India Pvt. Ltd. 22 Respondent No.1 stated that since the matter is subject to arbitration, all the claims would be decided by the Arbitral Tribunal. 23 On 14/12/2004, a letter from MPA to the Petitioner informing them about circular dated 2nd November, 2004 and the claims of Respondent No.1. 24 On 10/01/2005, a letter from the Advocates for the Petitioners to MPA in response to the latter’s letter dated 14th December, 2004. The claims made by Respondent No.1 were denied and it was reiterated that the Agreement was not a partnership and that the Petitioner is not liable for any loss suffered by Respondent No.1. 25 On 13/01/2005, a letter from MPA to Respondent No.1 referring to the 10th January, 2005 letter and the Agreement and solicited comments of Respondent No.1 in this regard. 26 On 19/01/2005, Respondent No.1 stated that as the matter was 9 arbp276.07.sxw before the Joint Arbitral Tribunal as per the terms of the Agreement (Article 32 of the Agreement) all claims be taken up before them. 27 On 19/01/2005, Respondent No.1 sent a letter to MPA for placing the matter before the Joint Tribunal, as the claimants application was already sent to the Producers by letter dated 06/10/2004. On 29/01/2005, the first telecast of the Film took place. 28 On 31/01/2005, the Petitioner and Respondent No.1 agreed for the arbitration before the Tribunal. A letter from the Petitioners to Respondent No.1 giving a parawise reply to Respondent No.1’s letter dated 19th January, 2005. The authority of MPA to issue the abovementioned circular was also challenged. 29 On 31/01/2005, before the Joint Tribunal of FMC and MPA, both the parties in writing agreed to submit for the reference/adjudication of the dispute of the Film (Woh Tera Naam Tha) in terms of clause 9 of the Arbitration Agreement as recorded in the Producers’ Distributors’ Certificate for registration of the Film. The time was sought by the Petitioner’s advocate and it was 10 arbp276.07.sxw accordingly adjourned also. 30 On 03/02/2005, a letter of the Advocates for the Petitioners to Film Maker’s Combine placing on record the Petitioner’s reply dated 1st February, 2005 (above) along with an application of the Directors dated 2nd February, 2005 filed under Section 16 of the Arbitration and Conciliation Act, 1996, praying that there was no arbitrable dispute between the Petitioner and Respondent No.1 and alternatively challenging the jurisdiction of the Tribunal. 31 On 17/02/2005, a letter from Respondent No.1 stating that submissions were made to the wrong tribunal. 32 On 01/03/2005, a letter from the MPA to the Petitioner referring to the premature telecast of the Film and stating that action as a gross violation of the undertaking contained in the acquiring form dated 18th December, 2003 and the Affidavit. 33 On 02/03/2005, the Petitioner’s reply to Respondent No.1’s statement of claim before Tribunal denying all claims made by Respondent No.1 by stating the material terms of the Agreement. 11 arbp276.07.sxw The Directors file an application under Section 16 of the Arbitration and Conciliation Act, 1996 (for short the Arbitration Act) before the Tribunal stating that there is no arbitrable dispute and alternatively challenged the Tribunal’s jurisdiction to entertain the claim of Respondent No.1. 34 On 02/03/2005, affidavit of reply filed by Respondent No.1. On 10/03/2005, letter from the Petitioner to the MPA in reply to its letter dated 1st March, 2005. 35 On 14/03/2005, the Petitioner by its letter informed Respondent No.1 that the ten prints were sent out of their own will without being called upon to do so by the Petitioner and that the Petitioner could only remit Rs.20,000/- from the sale of two of the ten prints on account of Respondent No.1. The Petitioner reiterated that the said prints were lying with the Petitioner on Respondent No.1’s account. 36 Respondent No.1 inter alia called upon the Petitioner to make payments in respect of the ‘un-recouped investment’, which was denied again on 08/04/2005. 12 arbp276.07.sxw 37 On 07/05/2005, based upon the written joint agreement dated 22/04/2005, the matter was adjourned for filing documents pertaining to Cable, Video and Satellite rights including Home Video Rights. 38 On 11/05/2005 a letter from the Petitioner whereby they agreed to pay Rs.20,000/- for two prints referring to stock of 10 prints held- up by them. 39 On 17/08/2005 and 19/11/2005, it was again adjourned for clarification from the Petitioner and the same was again signed and recorded jointly. 40 On 20/12/2005, a letter from Respondent No.1 to the Petitioner forwarding to them the business statement for the Month of November, 2005. 41 On 28/03/2006, affidavit filed by Mr. P.R. Jain before the Tribunal seeking dismissal of Respondent No.1’s claim. 42 On 05/01/2007, the Petitioner placed its submissions on record 13 arbp276.07.sxw before the Tribunal. The Tribunal passed the impugned award, awarding Respondent No.1 a sum of Rs.2,50,000/-. Hence this Petition. THE JOINT TRIBUNAL HAS JURISDICTION 43 The Clause 32 and 33 of the agreement between the parties dated 7th January, 2004, with regard to the Arbitration is as under:- 32. It is agreed between the parties hereto that any dispute/s arising out of this LICENSE it shall be referred to the Joint Arbitration of the PRODUCERS Association and Distributors Association, and their decision shall be binding on both the parties. 33. It is agreed between the parties hereto that the appropriate Associations and Courts in Mumbai shall have the jurisdiction to entertain and try any suit or matter in dispute between them relating to or arising from this LICENSE.” 44 The parties even otherwise agreed and appeared before the Joint Tribunal and submitted to its jurisdiction for all the purposes. 45 In view of this, I am not inclined to accept the case of the Petitioner that the Joint Tribunal has no jurisdiction to decide the issue. In view of above clauses and conduct of the parties itself, this court has a jurisdiction to entertain the present petition and the Joint 14 arbp276.07.sxw Arbitral Tribunal has jurisdiction to decide the dispute arising out of the agreement, apart from the signed documents from time to time by the parties before the joint Tribunal. UNREASONED AWARD- UNSUSTAINABLE 46 The purpose of recording above events is to emphasis that, for want of details and disputed facts in the award passed by the Arbitral Tribunal, and as submissions are made by the counsel for the Petitioner, the award is liable to be interfered with, also for want of specific reasoning with regard to the lump sum amount, as awarded. It is unclear, how this amount is arrived at, and under which clause of the agreement, specially when the Petitioner has denied every demand so raised by Respondent No.1, from its inception stating it to be beyond any agreement/contract. No amount can be awarded in commercial contract, unless agreed otherwise, on the basis of “sympathetic consideration” or on assumption and presumption. 47 From the material, as well as, correspondences as exchanged and as events show that there were settlement between the parties based upon which 10 prints were with the Petitioner but the finding is given, without referring to the said settlement, against the Petitioner by the Arbitral Tribunal. It is not made clear that on what basis the 15 arbp276.07.sxw composite award of Rs.2,50,000/- was passed against the Petitioner referring it to be in violation of the agreement of H.V. rights prior to six months and for retaining 10 prints of the Distributor. There were no details whatsoever provided on record by Respondent No.1 before claiming such amount. The Arbitrator also failed to provide any actual supporting details/accounts for assessing such amount. 48 It is necessary for the Arbitral Tribunal, though constituted under the respective terms and conditions of the Associations and/or practice and usage to provide details while granting/awarding the amount against any party, basically when such award is not final, unless it has gone through the procedure as contemplated under Sections 34 and/or 37 of the Arbitration Act. Normally, as per the agreement and the procedure so adopted by the parties and as per the practice and usage, award may be unreasoned but there is no such procedure and/or rules pointed out and/or adopted by the parties. Therefore, the Joint Arbitral Tribunal is bound to provide and give reasons while passing the award. 49 In a case like this, where various detailed facts are denied and because of alleged losses suffered, though not part of any terms and 16 arbp276.07.sxw conditions, it is essential for the parties, to place on record the material, as well as, for the Joint Arbitral Tribunal to assess and analyse the material and pass detailed reasoned order of awarding monetary compensation and/or award against any party. THE QUANTUM OF DAMAGES = PROVED OR UNDISPUTED EVIDENCE 50 The Arbitral Tribunal is bound by the terms and conditions between the parties and the substantive and the procedural law. Though the Civil Procedure Code and the Evidence Act are not applicable, yet the principle of natural justice, equity and fair-play do apply even in such proceedings as, by the award the Tribunal decides the rights for and against the parties. I have already observed in Indian Oil Corporation Ltd. Mumbai Vs. M/s. Kadbrotee Engineering Industries, Navi Mumbai 1 that- “12. In view of Section 19 of the Act and the provisions of the Code of Civil Procedure, and/or the Evidence Act, are not strictly applicable, still the basic requirement of proof of documents, as it goes to the root of the matter, just cannot be overlooked specially when the parties nowhere agreed to follow such procedure while leading the evidence. The Arbitrator, therefore, need to consider the basic principle of awarding the damages or compensation as provided under the Contract Act. 51 In the judgment Anindya Mukherjee Vs. Clean Coats Private 1 2011(2) Mh.L.J. 659 17 arbp276.07.sxw Limited, 1 I have observed that:- “18 The Arbitrator needs to consider the basic laws while assessing and granting any kind of damages/ compensation. The Apex Court in the STATE OF RAJASTHAN & ANR. VS. FERRO CONCRETE CONSTRUCTION PRIVATE LIMITED, (2009) 12 SCC 1, has observed in paragraph No. 55 as under:- “55. While the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable.” THE SPECIALISED ARBITRAL TRIBUNAL= REASONED AWARD 52 It is important to note that , when the parties agreed to settle the disputes through a specialized Arbitral Tribunal, based upon their agreements and adopt its practice and procedures, it is necessary for such specialized Arbitral Tribunal to give sufficient reasons while passing any awards unless agreed otherwise. The relevant trade/commerce laws though are relevant, apart from practices and usages, yet for a proper adjudication of such disputes the basic principle of natural justice and fair-play definitely play important role 1 2011(1) Mh.L.J. 573 18 arbp276.07.sxw in such matters. All this is not because the specialized Tribunal has taken decision which is final and binding between the parties, but it is necessary for proper appreciation of the decision so taken, as such award is enforceable subject to the provisions of Arbitration Act. 53 The expertized/special Arbitral Tribunal, just cannot expect that the decision so given by the expert or specialized mind, but not reflected through sufficient reasons, that itself is sufficient for the Court not to interfere with the order. 54 The Court under Section 34 of the Act, even otherwise, bound to see and record the reasoning in case of commercial matters and/or any such general matters to maintain or to modify or to set aside the award, within the framework of law and the record. 55 In view of this and as there are no reasons given to the rival contentions raised by the parties and how the amount so claimed falls within the framework of the agreement between the parties and it is within the scope of reference. 56 Therefore, in view of the above facts and circumstances as already recorded and as there are no supportive reasoning reflected 19 arbp276.07.sxw in the short award though passed by the specialized Joint Arbitral Tribunal, in my view, is liable to be interfered with for want of reasons. The award of the Joint Arbitral Tribunal is in violation, the contract terms and as it is beyond the power, authority and jurisdiction. (Oil and Natural Gas Corporation Vs. Wig Brothers Builders and Engineers Private Limited) 1 57 I am inclined to interfere with the order. However, I am remanding the matter back to the Joint Arbitral Tribunal for re- hearing and to pass reasoned award in accordance with law. THE RESULT 58 Resultantly, the Petition is allowed. The impugned award dated 5th January 2007, is quashed and set aside. However, the liberty is granted to the parties to appear before the Joint Arbitral Tribunal within 4 weeks for the directions. The Joint Arbitral Tribunal to pass award within 4 months, after hearing both the parties. 59 The Petition is allowed in terms of prayer clause (a), with the above directions. No order as to costs. (ANOOP V. MOHTA, J.) 1 (2010) 13 S.C.C. 317