W.P. (C) 5422 of 2008 Page 1 of 18 IN THE HIGH COURT OF DELHI AT NEW DELHI W. P. (C) 5422/2008 & CM APPL 10648/2010 Reserved on: April 25, 2011 Decision on: May 25, 2011 EVENT AND ENTERTAINMENT MANAGEMENT ASSOCIATION ..... Petitioner Through: Mr. S.K. Bansal with Mr. Santosh Kumar and Mr. Vikas Khera, Advocates. versus UNION OF INDIA & ORS. ..... Respondents Through: Mr. Sumeet Pushkarna with Mr. Jitendra Kumar, Advocates for R-1 and R-2. Mr. Sudhir Chandra, Senior Advocate with Mr. Jagdish Sagar, Advocate for R-3. Mr. Ameet Datta, Advocate for R-4. CORAM: JUSTICE S. MURALIDHAR 1. Whether Reporters of local papers may be allowed to see the judgment? No 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in Digest? Yes JUDGMENT 25.05.2011 Introduction 1. The prayer in this writ petition is for a direction to the Union of India, Ministry of Human Resource Development („HRD‟) to frame appropriate and objective standards towards the determination and levying of royalties of various copyrighted works administered by Phonographic Performance Limited („PPL‟), Respondent No. 3, and the Indian Performing Right Society Limited („IPRSL‟), Respondent No. 4, or any other society that may be so created by it, and the mode of enforcing and administering such royalties when so fixed. A further direction is for investigation of the books of account of PPL and IPRSL to ascertain whether they have paid their dues to the owners/authors of copyrights. W.P. (C) 5422 of 2008 Page 2 of 18 Case of the Petitioner 2. The Petitioner, Event and Entertainment Management Association („EEMA‟), is a society registered under the Societies Registration Act, 1860. It comprises of members from all over India who are engaged in the business of organizing events, functions and entertainment shows like road shows, music concerts/shows, brand promotion, dealers meet and other social events like marriages and get-togethers etc. Individual members of EEMA are stated to provide their services for organization of events and entertainment “wherein they themselves are neither hosts nor guests but act merely as service providers”. It is stated that during the aforesaid events and shows, the members of EEMA, as per the instructions of their clients, host or arrange or make arrangements for playing music recorded on tapes, compact discs, DVDs and other storage devices legally available in the markets. They also arrange for performance of live music, instrumental as well as singing of literary works in the form of songs by known as well as not so known artists/performers. It is further stated that in all three categories of events, i.e. social functions, brand promotion events and purely commercial events, live or recorded music is played or performed. 3. Respondent No. 1 has registered PPL and IPRSL as copyright societies in terms of Section 33 of the Copyright Act, 1957 („CR Act‟). While PPL is registered as a copyright society for sound recordings, IPRSL is for musical and literary works. The exploitation of a sound recording implies exploitation of the underlying literary or musical work as well. One important function of the PPL and IPRSL is the business of granting licence in respect of the works wherein copyright exists and to charge royalties towards the same. Accordingly, the licence fee for the sound recordings on the one hand and the literary and musical works on the other have to be paid for separately by the users thereof to PPL and IPRSL respectively on behalf of their members who hold the relevant copyrights thereto. By a letter dated 15th October 1997, the HRD Ministry clarified that since the public performance of music involves mechanical rights in sound recording as well as rights of composers, performers etc. licences from both PPL and IPRSL have to be obtained for playing recorded music whose copyright administration vests in these two societies. EEMA contends that Respondent No.1 has failed to exercise its jurisdiction under Section 33 CR Act to set down any objective standards and criteria for charging of royalties by PPL and IPRSL. It is stated that both the PPL and IPRSL are acting arbitrarily in fixing tariffs with no objective standards and have assumed the role of the W.P. (C) 5422 of 2008 Page 3 of 18 legislature in fixing the amount of royalties at their sole discretion, the role of a law enforcer in enforcing the collection of such royalties and in taking coercive action against the members of EEMA. It is stated that demanding of royalties for playing music at social functions and events is a violation of Section 52 CR Act. It is submitted that inasmuch as Respondent No. 1 has a constitutional obligation under Article 14 of the Constitution of India not to act arbitrarily or unreasonably the same applies to copyright societies like PPL and IPRSL, constituted under Section 33 CR Act. It is further submitted that the valuable rights of the members of EEMA to carry on their trade under Article 19 (1) (g) of the Constitution of India cannot be violated by the PPL and IPRSL. Stand of Respondent No. 3 PPL 4. In its counter affidavit PPL contended that by the amendments brought about by the Copyright (Amendment) Act, 1994 („Amendment Act 1994‟), the erstwhile provisions of Chapter VII of the CR Act relating to performing right societies were replaced. The new Chapter VII contains elaborate provisions regarding the conduct, self-governance and accountability of the management of all copyright societies. The contention is that under the amended provisions “copyright societies are made strictly accountable to their owners, do not enjoy any monopoly, and their licence fees are subject to market forces”. It is submitted that the amended provisions of Chapter VII of the CR Act reflect the current legislative policy, encompassing economic policy. It is submitted that the writ jurisdiction cannot be invoked to intervene in such policy. It is further submitted that EEMA has not supplied any data which could justify its apprehension that the licence fees as determined by PPL are unreasonable. It is submitted that members of EEMA who are themselves organizers of events costing lakhs and crores of rupees cannot plead their inability to pay the modest licence fees charged by the copyright societies. It is pointed out that in relation to every kind of dispute regarding the subsistence of copyright or liability for infringement there are civil remedies provided under Chapter XII of the CR Act. In many cases many of the members of EEMA have been paying licence fees to PPL and other owners of copyright for their live events. It is submitted that the present petition has been filed only with a view to avoid payment of licence fees. It is further submitted that the Memorandum of Association of EEMA does not contain a clause whereby EEMA may sue or be sued. There is no authorization by the governing body of EEMA for filing the present petition. W.P. (C) 5422 of 2008 Page 4 of 18 5. Explaining the importance and utility of copyright societies, PPL states that the amended provisions of the CR Act in a sense acknowledge the difficulties of the members of the copyright societies in individually enforcing their copyrights. Individual members of copyright societies cannot also be expected to identify and chase broadcasting organizations, shops, ships, aircrafts, departmental stores, showrooms, emporiums, restaurants, hotels, clubs, offices, organizers of live concerts etc. all over the world where the copyrighted works may be used or commercially exploited. Copyright societies collect royalties after deduction of administrative expenses as prescribed under Rule 14H of the Copyright Rules, 1958 („CR Rules‟) which are distributed amongst the members of the copyright societies in proportion to the actual use of the works of such members subject to the scheme which are approved by the members. It is asserted that the fee structure fixed by PPL is collectively decided by the members of the PPL in an Annual General Meeting („AGM‟). PPL is required to fix tariffs at a level “which balances affordability of music to users and at the same time ensures fair returns”. It is submitted that the fee structures fixed by PPL are reasonable and in fact work out “only to a negligible and insignificant percentage of the turnover of, for example, shops, departmental stores, showrooms, emporiums, hotels, pubs and restaurants, or of the cost of high profile events such as those organized by the members” of EEMA. 6. Copies of the Gazette Notification dated 18th May 2002 giving a complete list of the types of licence and the corresponding fees to be paid, as partially modified and published in the Gazette Notification dated 10th September 2005, have been enclosed with the counter affidavit of PPL. The licences issued by the PPL can broadly be classified into two separate categories: annual licenses granted to various establishments for playing the sound recordings administered by PPL as piped music or background music etc. in their respective establishments („annual licence‟) and, individual licences granted to an establishment for playing sound records belonging to PPL‟s repertoire during an event/show organized by the establishments on special occasions like New Year‟s eve („event licence‟). Most of the hotels have obtained both annual and event licences keeping in view the separate sets of rights flowing from the particular licences. It is stated that by paying an annual fee to PPL, an establishment obtains automatic and blanket permission to play music from the vast collection of millions of songs, both Indian and foreign. No time and cost is lost in either travelling or in entering into any other form of negotiations with the right holders. Further, uniform rates are charged, W.P. (C) 5422 of 2008 Page 5 of 18 eliminating the difficulty that a user may face from some particular, unreasonable copyright owner. Further, the emphasis of the whole system is to provide a single window clearance through which a user gets quick, automatic permission without any cost of travel or negotiation for all works. A list of countries in which such systems are prevalent has been enclosed with PPL‟s counter affidavit. Stand of Respondent No. 4 IPRSL 7. Respondent No. 4, IPRSL, in its counter affidavit raises more or less the same preliminary objection as the PPL. It is stated that IPRSL is affiliated to 200 world societies of authors and composers, which are included within its Federation, i.e. CISAC, Paris (established under the auspicious of UNESCO and WIPO Charter). IPRSL is also a member of the Copyright Enforcement Advisory Council („CEAC‟) set up by the Government of India to advise the government regarding measures for improving the enforcement of the CR Act. The members of IPRSL comprising of authors, composers and publishers of Indian literary and musical works have executed deeds of assignment, assigning their public performing rights and communication to the public rights in respect of their literary and/or musical works including such literary and musical works which they may own in the future, in favour of IPRSL. It is asserted that for IPRSL, this is the most efficacious way of enforcing the rights of its members as this allows IPRSL to act more efficiently. Since the membership is for a limited set of rights and subsists during the membership of IPRSL, the interests of individual members are also protected. The membership of the Board of the Governing Council of IPRSL, comprises lyricists, music composers, music publishers (comprising of music companies/film & other audio- visual producers). It is pointed out that the CR Act recognizes lyrics writers and music composers created works as „literary‟ and „musical works‟ and they belong to a number of categories like musical compositions and performances. The owner of the copyright in the literary or musical works enjoys a number of rights exclusively, which are set out in Section 14 (a) of the CR Act. 8. The counter affidavit of IPRSL illustrates the advantages enjoyed by the Copyright Board or the members of IPRSL. It also illustrates the advantages to those like the Petitioner who obtained licences for use of such copyright work from IPRSL. It is stated that royalty rates fixed by IPRSL are relative to the value of the music to the establishment concerned. It is stated that the object, therefore, while fixing tariffs, is to W.P. (C) 5422 of 2008 Page 6 of 18 ensure affordability and at the same time ensure just rewards to the creators of music. The counter affidavit of IPRSL refers to the CR Rules which provided for an exhaustive procedure for application and conditions for grant of permission to carry on the copyright business. It is further stated that the conditions set out under the CR Rules, 1958 are tailored to satisfy the registering authority of the collective nature of the applicant. 9. It is stated that working of the copyright societies continues to be monitored and guided by the CR Act. A copyright society is expected to submit a report of returns under Rule 14M CR Rules. Rule 14P CR Rules requires IPRSL to submit annual returns which would contain various details such as audited accounts of the society, tariff scheme, distribution scheme, and a declaration from the governing body of IPRSL as regards all its activities. It is submitted that the tariff fixed by IPRSL may be called into question before the CB under Section 31 CR Act. Inasmuch as the tariff in the present case has been fixed by IPRSL diligently and after collective decision of the members of IPRSL taken in an AGM it cannot be said to be arbitrary, unreasonable or violative of any provision of any law. It is stated that there are adequate safeguards provided within the CR Act to check the consequences of any perceived excessive delegation inasmuch as Section 33 (4) CR Act provides that the central government may, if it is satisfied that a copyright society is being managed in a manner detrimental to the interest of the owners of the copyrights, cancel the registration of such society after such inquiry, as may be prescribed. Under Section 36 CR Act, the central government can also call for any report or any record of any copyright society for the purpose of satisfying itself that the fees collected by the society in respect of rights administered by it are being utilized or distributed in accordance with the provisions of the CR Act. Stand of Respondent No. 1 UOI 10. The counter affidavit filed by Respondent No. 1, UOI, on 14th July 2009, did not deal with the contention raised by the Petitioner that monopoly rights are being created in favour of societies without any regulatory mechanism to deal with arbitrary price fixation. Consequently, by an order dated 16th July 2009, this Court directed the UOI to file an additional affidavit. On 22nd October 2009 four weeks were further granted to file the said additional affidavit. After costs were imposed by an order dated 19th February 2010, the UOI filed the said additional affidavit on 30th April 2010. It is pointed W.P. (C) 5422 of 2008 Page 7 of 18 out by the UOI that the disputes involving royalty/licence fee are sub judice, at the instance of some of the members of EEMA before the Copyright Board (CB). It is contended that since an efficacious remedy is available to EEMA before the CB, the present writ petition ought not to be entertained. The affidavit of UOI also sets out the chronology of the litigation and the record of evidence before the CB in the various petitions relating to fixation of royalty and licence fee for various copyright works in which some of the members of the Petitioner Association are involved. The list of writ petitions and the issues pending in this Court have also been set out. EEMA’s stand in rejoinder 11. EEMA has, in response to the additional affidavit, filed a reply on 16th July 2010 pointing out that the said additional affidavit does not answer the contention of the Petitioners that the copyright societies have deliberately created a monopoly in the fixation of tariff and royalty and that they have acted in an arbitrary and unjust manner. It is pointed out that in its order dated 19th November 2002 in the case of Music Broadcast Private Limited v. Phonographic Performance Limited 2003 (26) PTC 70 the CB has noticed that there are no reasonable standards or data available on the basis of which the CB can determine royalty rates and that they have to act only on the basis of a best judgment assessment which is open to the arbitrariness, uncertainty, modifications and alterations. EEMA has also filed copies of the tariff schedule of PPL, the extracts of the audited accounts IPRSL, a sampling of the agreements entered into between the owners of copyright and IPRSL 12. This Court has heard the submissions of Mr. S.K. Bansal, learned counsel appearing for the Petitioner, Mr. Sumeet Pushkarna, learned counsel for the UOI, Mr. Sudhir Chandra, learned Senior counsel and Mr. Jagdish Sagar learned counsel for PPL and Mr. Amit Dutta, learned counsel on behalf of IPRSL. The statutory scheme under the CR Act 13. The relevant provisions of the CR Act and CR Rules may be referred to first. Section 33 CR Act prior to its amendment provided for a performing rights society („PRS‟) under Chapter VII. Under Section 33 (1) of the unamended CR Act, every PRS was to furnish to the Registrar of Copyrights („Registrar‟) a statement of all fees, charges or royalties which it proposed to collect for the grant of licences for performance in public of works W.P. (C) 5422 of 2008 Page 8 of 18 in respect of which it had authority to grant such licences. Failure to do so disentitled the PRS from initiating action in relation to performing that work “except with the consent of the Registrar”. Under Section 34 of the unamended CR Act, “any person having any objections to any fees, charges or royalties or other particulars included in any statement referred to in Section 33 may at any time lodge such objections in writing at the Copyright Office.” Both objections were to be decided under Section 35 of the CR Act. The Amendment Act, 1994 introduces the concept of the copyright societies under Section 33 of the CR Act, which as amended in 1994 reads as under: “33. Registration of copyright society – (1) No person or association of person shall, after coming into force of the Copyright (Amendment) Act, 1994 commence or, carry on the business of issuing or granting licences in respect of any work in which copyright subsists or in respect of any other rights conferred by this Act except under or in accordance with the registration granted under sub- section (3); Provided that an owner of copyright shall, in his individual capacity, continue to have the right to grant licences in respect of his own works consistent with his obligations as a member of the registered copyright society. Provided further that a performing rights society functioning in accordance with the provisions of Section 33 on the date immediately before the coming into force of the Copyright (Amendment) Act, 1994 shall be deemed to be a copyright society for the purposes of this Chapter and every such society shall get itself registered within a period of one year from the date of commencement of the Copyright (Amendment) Act, 1994. (2) Any association of persons who fulfils such conditions as may be prescribed may apply for permission to do the business specified in such-section (1) to the Registrar of Copyrights who shall submit the application to the Central government. (3) The Central may, having regard to the interests of the authors and other owners of rights under this Act, the interest and convenience of the public and in particular of the groups of persons who are most likely to seek licences in respect of the applicants, register such association of persons as a copyright society subject to such conditions as may be prescribed: Provided that the Central government shall not ordinarily register more than one copyright society to do business in respect of the same class of works. (4) the Central government may, if it is satisfied that a copyright society is being managed in a manner detrimental to the interests of the owners of rights concerned, cancel the registration of such society after such inquiry as may be prescribed. (5) If the Central government is of the opinion that in the interest of the owners of rights concerned, it is necessary so do to it may, by order suspend the registration W.P. (C) 5422 of 2008 Page 9 of 18 of such society pending inquiry for such period not exceeding one year as may be specified in such order under sub-section (4) and that Government shall appoint an administrator to discharge the functions of the copyright society.” 14. PPL and the IPRSL are both registered under Section 33 (3) CR Act. Under Section 33 (5) CR Act, the central government can, in the interests of the owners of copyrights, suspend the registration of a copyright society pending inquiry for such period not exceeding one year. Under Section 33 (4) CR Act the central government can cancel the registration of a copyright society after inquiry “if it is satisfied that the copyright society is being managed in a manner detrimental to the interests of the owners of rights concerned”. Further, the administration of rights of owners by a copyright society is provided in Section 34 of the CR Act, which reads as under: “34. Administration of rights of owner by copyright society – (1) Subject to such conditions as may be prescribed – (a) a copyright society may accept from an owner of rights exclusive authorization to administer any right in any work in any work by issue of licences or collection of licence fees or both; and (b) an owner of rights shall have the right to withdraw such authorization without prejudice to the rights of the copyright society under any contract. (2) It shall be competent for a copyright society to enter into agreement with any foreign society or organization administering rights corresponding to rights under this Act, to entrust to such foreign society or organization the administering in any foreign country of rights administered by the said copyright society in India, or for administering in India the rights administered in a foreign country by such foreign society or organization: Provided that no such society or organization shall permit any discrimination in regard to the terms of licence or the distribution of fees collected between rights in Indian and other works. (3) Subject to such conditions as may be prescribed, a copyright society may – (i) issue licences under Section 30 in respect of any rights under this Act; (ii) collect fees in pursuance of such licences; (iii) distribute such fees among owners of rights after making deductions for its own expenses; (iv) perform any other functions consistent with the provisions of section 35.” 15. Further, under Section 34-A CR Act special rights can be conferred on a copyright W.P. (C) 5422 of 2008 Page 10 of 18 society in respect of certain classes of works. Section 34 A reads as under: “34A. Payment of remunerations by copyright society – (1) If the Central government is of the opinion that a copyright society for a class of work is generally administering the rights of the owners of rights in such work throughout India, it shall appoint the society for the purposes of this section. (2) The copyright society shall, subject to such rules as may be made in this behalf, frame a scheme for determining the quantum of remuneration payable to individual copyright owners having regard to the number of copies of the work in circulation. Provided that such scheme shall restrict payment to the owners of rights whose works have attained a level of circulation which the copyright society considers reasonable.” 16. The control over the copyright