Case: Sajan Varghese Vs. State of Kerala

2. For the sake of convenience, we will refer to the petitioner in S.L.P. Nos.as Sajan K. Varghese and the petitioner inas M/s.Super Film.3. Sajan K. Varghese is the Managing Partner of a film producing concern M/s.Saj Productions and also a Finance Company known as the Oriental Exchange and Finance Company, Kottayam (for short the Finance Company). It would appear that the Finance Company offered very high rates of interest to investors and depositors and this led to a large number of people investing crores of rupees with the Finance Company and in the case of many, their entire savings. Taking advantage of his position as the Managing partner of M/s.Saj Productions as well as the Finance Company, Sajan K.Varghese began to utilise considerable sums of money from out of the deposits with the Finance Company for production of films by M/s.Saj Productions. The last film in the production of which Sajan K. Varghese engaged himself is a production titled as "Kadathanadan Ambadi". The film is said to be based on the life of a legendary hero of Kerala folk lore. The film was produced on a very lavish and extravagant scale and according to Sajan K. Varghese himself, he had invested more than 82 lakhs of rupees in the production of the incomplete film. In spite of such lavish spending only about 90% of the shooting of the film is over and the rest of the shooting has to be completed and thereafter the film has to be edited and colour prints taken for the film to be commercially screened in theatres. It is common ground that a major portion of the investment of 82 lakhs of rupees for shooting the incomplete film was met by utilisation of funds invested by the public in the Finance Company as deposits.4. Besides the amount taken from the Finance Company, M/s.Saj Productions is also said to have borrowed an amount of Rs. 10 lakhs from M/s.Super Film under an agreement, dated December 12,1986. As per the agreement M/s.Super Film is to have charge over the film for the sum of Rs. 10 lakhs advanced by it. There is a further provision in the agreement that should the production of the film be not completed on or beforeM/s.Super Film will be entitled to take over the negatives and complete the. picture.5. Smooth sailing of operations of the Finance Company came to face rough weather when several advertisements of allegedly questionable nature made by the Finance Company came to the adverse notice of the Monopolies and Restrictive Trade Practices Commission and the Commission passed an order restraining the Finance Company from publishing such advertisements. Thereafter the investments by the public in the Finance Company dwindled and the Company came to face a financial crisis when depositors clamoured for return of their deposit amounts. This led to a total cessation of activity of the Finance Company. There was public uproar, and some of the depositors filed a police complaint which resulted in a criminal case being registered against Sajan K. Varghese and he was eventually arrested and remanded to custody.6. Besides the criminal case filed against Sajan K. Varghese, an insolvency petition O.P.No.10/87 also came to be filed against the Finance Company, Sajan K. Varghese and his parents and brothers in the Court of the Subordinate Judge of Kottayam. The Insolvency petition was filed by Shri.V.K.Kuruvilla the 4th respondent herein. Besides being a creditor himself the 4th respondent is also the President of the Association of the depositors in the Finance Company. It is stated that about 3,500 depositors of the Finance Company have formed themselves into an Association to safeguard their interests and it was on behalf of all the members of the Association the Insolvency petition was filed in the Court of the Subordinate Judge, Kottayam. One of the items included in Schedule B of the Insolvency petition is the negatives of the unfinished film,Kadathanadan Ambadi. The Sub Judge appointed the Official Receiver attached to the District Court of Kottayam (3rd respondent herein) to be the Interim Receiver under S.20 of the Kerala Insolvency Act.7. Besides the insolvency petition filed in the Subordinate Judges Court, Kottayam, two more insolvency petitions also came to be filed on the Original Side of the Madras High Court against the Finance Company represented by Sajan K. Varghese. The 3rd respondent would say that those petitions have been engineered by Sajan K. Varghese himself in order to thwart the insolvency proceedings in the Sub Court at Kottayam. We are not however concerned with that aspect of the matter. We are making mention of the filing of the insolvency petitions in the Madras High Court only to show that more than one insolvency petition has been filed against the Finance Company and Sajan K Varghese.8. Pursuant to the registration of a criminal case against Sajan K. Varghese and his arrest by the C.B., C.I.D.(FS), Trivandrum, the police took into their custody thefilm and the negatives of the unfinished film of Kadathanadan Ambadi and produced the same before the Chief Judicial Magistrate, Trivandrum. The Magistrate directed the film and the negatives to be kept in safe custody in a cinema studio known as Chitranjali Studio in Trivandrum. Subsequently, the High Court deemed it advisable to take into its custody the negatives and have them kept in a place of safe custody.9. After getting himself enlarged on bail, Sajan K. Varghese filed Criminal M.C.. No.49/88 before the High Court praying that the incomplete film may be returned to M/s. Prasad Laboratories Madras where from they were seized and that he be permitted to complete the film by making further investments and also effect sales of distribution rights and make arrangements for the screening of the film. To the said petition Sajan K. Varghese impleaded only three respondents viz. the State of Kerala, the Deputy Superintendent of Police, C.B., C.I.D. (RS) Trivandrum and the Advocate Receiver in I.P.No.10/87 on the file of the Sub Court, Kottayam.10. In its turn, M/s. Super Film filed a petition Criminal M.C.No.63/88 praying the High Court to hand over the negatives of the incomplete film to it so that it can complete the picture and make arrangements for the sale of distribution rights and the exhibition of the film. M/s. Super Film based its claim on the rights conferred on it under the agreement executed by M/s. Saj Productions when it advanced a loan10 lakhs to M/s. Saj Productions.11. The 4th respondent got himself impleaded as a party in the petitions filed by Sajan K. Varghese and M/s. Super Film before the High Court. The 3rd and 4th respondents opposed the applications of Sajan K. Varghese and M/s. Super Film on various grounds, the principal one among them being that thousands of creditors have been defrauded of several crores of rupees by Sajan K. Varghese and therefore the interests of the general body of creditors needed protection and as such the negatives should be handed over either to Sajan K. Varghese or M/s. Super Film. They also disputed the genuineness of the loan transaction between M/s. Super Film and Sajan K. Varghese and attributed collusion between them.12. The High Court explored the possibility of some workable arrangement being arrived at so that the film could be completed and commercially exploited so that the money derived from the collections could be made use of to satisfy the claims of the creditors to the best extent possible. The efforts of the High Court did not prove successful and the High Court has observed that "prolonged negotiations, and several adjournments, did not yield meaningful results, and stalemate prevailed."13. At that stage of the matter, the counsel for the Receiver sought the permission of the court to find out whether any other producer could be secured to complete the film on terms advantageous to the creditors. After making diligent enquiries, the counsel for the Receiver found that M/s. Navodaya, the 7th respondent would be a competent and suitable agency for entrusting the task of completing the unfinished picture and releasing it for commercial exhibition. Consequently, the 7th respondent was impleaded as a party. Shri M.C. Punnose alias Appachan who owns Navodaya is by all accounts an experienced and reputed film producer with a standing of 38 years in the field. The High Court took note of his credentials and standing in the field and was satisfied that he was the best suited person to whom the onerous task of completing the film could be entrusted. The High Court also found that the terms offered by Navodaya for completing the film and releasing it for commercial exhibition were more advantageous to the creditors than the terms offered by Sajan K. Varghese or M/s. Super Film. Consequently, the High Court declined to grant the request of Sajan K. Varghese and M/s. Super Film for the return of the negatives to them and instead passed an order for the handing over of the negatives of the film to Shri M.C. Punnose alias Appachan of M/s. Navodaya. The High Court also gave detailed directions as to how the film was to be completed and the collections realised from the screening of the film are to be utilised. It is not necessary to set out those details in this order. Aggrieved by the order of the High Court, Sajan K. Varghese and M/s. Super Film have filed the two sets of special leave petitions.

Court's reasoning:
21. Coming now to that part of the order of the High Court which pertains to the selection of the 7th respondent as the best suited agency for completing the film and releasing it for exhibition and the acceptance of the terms offered by it, the High Court was influenced by several relevant considerations. We have already referred to the fact. that the High Court had earlier afforded ample opportunity to the parties to offer a workable solution, which would safeguard the interests of all parties concerned for completing the picture but eventually the High Court found that in spite of prolonged negotiations and several adjournments no meaningful results could be achieved and that the stalemate continued. It is only thereafter the High Court accepted the suggestion of the advocate for the Receiver and impleaded the 7th respondent as a party and examined the credentials of the 7th respondent and its suitability for being entrusted with the task of completing the film and releasing the picture so that the net collections realised after reimbursing the 7th respondent the amounts invested by it, could be made available for the general body of creditors of the Finance Company. The High Court has also taken into consideration the fact that Shri M.C. Punnose alias Appachan, owning M/s. Navodaya had produced several films which werehits and which had won him National and State awards, and that he had all the facilities at his command including equipment and finances for completing the film. It may be that in certain aspect the terms offered by the 7th respondent were higher than the terms offered by Sajan K. Varghese and M/s. Super Film but in the larger perspective of the interests of the general body of creditors of the Finance Company which needs safeguarding the High Court has deemed it fit and proper to accept the terms of the 7th respondent and to entrust it with the task of completing the film and realising the collections.22. It only now remains for us to deal with the statement of the counsel for the 7th respondent that the 7th respondent is no longer interested in taking up the assignment given to him by the High Court. As already stated the reason or the change of attitude of the 7th respondent is that some of the artists acting in the film have lost their charisma to some extent. We are of the view that there would be neither grace nor justice if the 7th respondent were to go back on the offer made by it to the High Court: Shri Jose Punnose S/o. Shri M.C. Punnose alias Appachan has filed an affidavit before the High Court and has stated therein that the 7the respondent deems it a great privilege to have been summoned and impleaded in the criminal miscellaneous case, and that in voluntaring its services to take up and complete the picture it was willing to provide, as an act of humane gesture, their existing studio facilities such as shooting floor, quarters for accommodation, editing facilities, shooting facilities and the services of the production staff etc. free of charge. The 7th respondent had further offered to complete the film with its own money. Shri Jose Punnose has stated asto the conditions mentioned in Para.14 above, and as detailed in the earlier paragraphs, this respondent is willing to complete the film "Kadathanadan Ambadi" in this noble venture and desired by this Honble Court to relieve the hardships and miseries of the poor creditors of the Oriental Finance and Exchange Company.This respondent shall complete the film "Kadatnanadan Ambadi" within three months from the date of receipt of items (1) to (7) to the best of our ability and knowledge, so that the film may generate as much income as possible".Having gone so far and having persuaded the High Court to accept its terms and conditions and having expressed its willingness to provide its services to the maximum extent possible so as to provide relief to the poor and distraught creditors of the Finance Company, it would not be just and fair nor would it befit the status and standing of the 7th respondent and its proprietors to go back on the offer made and accepted by the High Court.We cannot, therefore, accept the statement of the 7th respondent that it is no longer interested in taking the assignment of completing the film and arrange for its release.