NARENDRA HIRAWAT AND CO. versus SHOLAY MEDIA ENTERTAINMENT PVT. LTD. & ANR. on 7 March 2022

ORDER

1. Leave granted.

2. In connection with a suit for injunction and other reliefs filed bythe appellants, the learned Single Judge of the High Court of Judicatureat Bombay granted an order of interim injunction, delivered on 9[th] March,2020 which was challenged in appeals filed before the Division Benchof the High Court. The appeals have been allowed and the order ofinterim injunction granted by the Single Judge has been reversed by theAppellate Bench. Questioning the legality of the said order of the DivisionBench, these appeals by way of special leave petitions have been filed.As these appeals have been filed against an interim order, we are givingonly skeleton facts relevant for the purpose of present appeals.

3. On 09.09.2015, two agreements were entered into betweenthe appellant namely, Narendra Hirawat and Company (for short ‘NHC’)and respondent no.1, namely Sholay Media Entertainment Pvt. Ltd. (forshort ‘SME’) for the rights of films “Sholay and Sholay 3D” for theperiod from 01.04.2016 to 31.03.2022 for an amount of Rs.20 crores.The second agreement of the same date was executed for the rights ofthe same films “Sholay and Sholay 3D” for the period from 01.04.2022to 31.03.2027 for an amount of Rs.5 crores. This was in regard to thefirst set of appeals (hereinafter referred to as “Sholay appeal”). In thesecond set of appeals, similar agreements were executed on the samedate between the NHC and respondent no.1 therein i.e., GenerationThree Entertainment Pvt. Ltd. (hereinafter referred to ‘G3’). Thesewere with regard to the rights of the 32 films given in favour of NHC fora similar length of period. The facts in both these sets of appeals, thoughmay not be identical but are very similar. For convenience we shall dealwith the facts of the first set of appeals, which we shall henceforth referto as “Sholay appeal”.

4. After the aforesaid agreements were executed, on 12.07.2016two addenda were executed in the license agreements dated 09.09.2015.These addenda stipulated that on an additional amount of Rs.1.75 crores A

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Ato be paid by NHC, the NHC would have the rights for unlimited runs ofthe film and the period was also extended from 31.03.2027 to 30.09.2027.There were certain disputes with regard to the mechanism arrived at inrelation to payments of amounts and burden of tax, which got amicablysettled between the appellant-NHC and respondent no.1 -SME. Inbetween on 16.05.2018, a sub-license agreement was executed betweenBthe appellant - NHC and the respondent no.2 namely, Goldmines TelefilmsPvt. Ltd. for rights of the said film in favour of the respondent no.2,which was for the period of 15.11.2021 to 14.11.2026.

5. As already mentioned, since there were certain disputes betweenNHC and respondent no.1 - SME, there were dialogues between theCparties and ultimately a memorandum of settlement was arrived atbetween the two parties on 05.11.2018. Finally, on 03.12.2018, a Deedof Settlement was executed between the NHC and the SME - respondentno.1 in which the main stipulation was that NHC was to pay a furthersum of Rs.8.71 crores in four tranches of Rs.1.25 crores, Rs.2.46 crores,DRs.2.50 crores and Rs.2.50 crores and instead of the period which earlierwas till 30.09.2027, the same was extended by further one year, up to30.09.2028.

6. Ultimately, the final dispute which has now culminated in theseproceedings is allegedly for non-compliance of the final Deed ofESettlement dated 03.12.2018, as according to the respondent no.1 thepayments have not been made in terms of Deed of Settlement. Stand ofNHC, however, is that substantial payments have already been made,and what has not been paid was because of certain non-compliances onthe part of the respondent no.1. It is stated that NHC has always beenready and willing to make the payment. However, on the ground ofFalleged non-compliance of the terms of the Deed of Settlement dated03.12.2018, a termination notice was issued by the respondent no.1 on18.06.2019.

7. The respondent no.2, by notice dated 26.08.2019, terminatedthe sub-license agreement dated 16.05.2018 which was entered intoGwith NHC, and demanded refund of over Rs.11 crores from NHC.

8. With regard to the termination notice dated 18.06.2019 issuedby respondent no.1, NHC filed a commercial suit on 30.08.2019. Reliefsclaimed included prayer for declaration that the plaintiff is the sole andexclusive licensee in respect of the suit films for all territories, furtherHdeclaration that the termination letter was illegal, bad in law, null and void and unenforceable, permanent injunction restraining the defendantsfrom enjoying the licensed rights and damages. Temporary injunctionwas also asked for. By order dated 09.03.2020, the learned Single Judgeof the High Court (before whom the commercial suit was filed) grantedinterim injunction in favour of NHC, restraining the respondents fromdisturbing the enjoyment of license rights of the appellant in the suit filmsand also restrained the respondent no.1 - SME from acting on thetermination notice. Respondents no.1 & 2 were also restrained fromacting on the agreement executed on 24.10.2019 which, after the filingof the suit, was entered into between respondents no.1 and 2, awardingrights of the film Sholay and Sholay 3D in the first set of appeals and 32films in the second set of appeals in favour of respondent no.2. An intra-court appeal was filed assailing the order of the learned Single Judgebefore the Division Bench of the High Court, which has been allowed infavour of the respondents and, hence, these appeals before this Court.

9. Mr. Mukul Rohatgi and Dr. A.M. Singhvi, learned senior counselalong with Mr. Ankur Saigal, learned counsel have appeared for theNHC in both sets of appeals. Mr. Neeraj Kishan Kaul, Mr. SiddharthBhatnagar and Mr. C.U. Singh, learned senior counsel along with Mr.R.P. Gupta and Ms. Pooja Dhar, learned counsel have represented therespondents in both sets of appeals. We have heard them at length andperused the records.

10. The facts as narrated above are not disputed by the learnedcounsel for the parties. From the above facts, what can be culled out isthat though there were certain disputes with regard to the payments andother clauses of the initial agreements as well as the addenda, but afterthe execution of the Deed of Settlement on 03.12.2018, all prior disputeshad been ironed out and what was now required was compliance of thesaid deed. This deed provided that NHC was to pay a sum of Rs.8.71crores to the respondent no.1 in four tranches and the period of licensewas to be extended for one year i.e. up to 30.09.2028 (instead of30.09.2027 as earlier). Learned Single Judge had considered all the aspectsof the matter and held that the balance of convenience was in favour ofNHC and thereafter granted the injunction in favour of the appellant.On the aspect of prima-facie case, the Single Judge found the paymentobligation were by and large met by the plaintiff (appellant before us).Argument was advanced before the learned Single Judge on the basisof Section 14(d) of the Specific Relief Act 1963 by the defendants. It A

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Awas contended that the subject contracts were determinable and henceno specific performance thereof could be granted. The learned SingleJudge, however, found that this was not a clause which contemplatedunilateral determination but the right to determine was subject to theother party committing breach of the agreement. As a condition forgranting interim relief, direction was given to the plaintiff to deposit theBentire balance amount of Rs.3.25 crore as per the settlement deed. Suchdeposit was to be made in Court and we are apprised by learned counselfor the plaintiff that this part of the direction has been complied with.

11. The Division Bench has, in appeal, reconsidered the entirecase and decided in favour of the respondents. It has been, inter-alia,Cheld by the Division Bench in the judgment under appeal:- “62. The impugned order has brought about a highly inequitablesituation. A Plaintiff, who was not ready and willing havingconsistently breached essential terms of the Agreements, whowas admittedly in arrears on the date of the suit, who is yet toDestablish its rights at the final trial; is permitted by through amandatory interim injunction to exploit all rights under theterminated Agreement. The true owners of the licensed materialare prevented from monetizing their property rights. The GoldminesTelefims, which has paid money to both, Plaintiff and LicensorEAppellants, is deprived of exploiting the licenses. No extraordinarysituation existed for such a drastic interim order.

63. Therefore, to recapitulate, as per the true construction of thecontract between parties, Plaintiff has failed to establish thatPlaintiff was and has always been ready and willing to performFan essential part of the terms of the contract. No prima faciecase, much less a high prima facie case, is established by Plaintiff.No extraordinary circumstances exist to grant a mandatoryinjunction again akin to the stay of the termination six monthsafter the termination was effected and third party rights werecreated. Since the basic essential terms of the contract andGdocuments on the record itself have been overlooked while passingthe impugned order, the grant of an injunction will have to be setaside, even though these appeals are appeals on principle.

64. As a result, these four Commercial Appeal, are allowed. Thecommon impugned order 9 March 2020 passed by the learnedHSingle Judge in Notice of Motion No.2591/2019 in Commercial IP

Suit No.1387/2019 and Notice of Motion No.2607/2019 inCommercial IP Suit No.1469/2019 is set aside. Considering thefacts and circumstances, no order as to costs.”

12. As we have noticed above, the entire case falls around theDeed of Settlement executed on 03.12.2018. What is not disputed is thatout of the four payments which were to be made by NHC to therespondent no.1, the first and the second payments were made by theappellant - NHC either simultaneously on the issuance of the invoice byrespondent no.1 or after the invoice had been issued. However, afterthe first two payments were made, the respondent no.1 issued a thirdinvoice for an amount of Rs.1.75 crores (although the third installmentwas to be of Rs.2.50 crores) only on 03.06.2019 and after the invoicewas issued, the payment of the entire amount of Rs.1.75 crores wasmade by NHC on 10.06.2019. It is the case of NHC that thereafterNHC had been asking the respondent no.1 for issuance of the invoicesfor the balance amount so as to enable NHC to make the balance paymentout of Rs.8.71 crores as agreed under the Deed of Settlement but sincethe invoices were not issued (as the same were required for payment ofGST), no further payment was made by the appellant - NHC. Accordingto NHC, on every occasion earlier the payments were made by NHConly after the invoices were issued by the respondent no.1 – SME, whichincluded the GST amount and the last payment could not be made becauseof non issuance of the invoice by the respondent no.1 – SME.

13. The contention of the learned counsel for the respondent no.1is that the requirement of issuance of invoices was not a conditionprecedent to the payments to be made in terms of the Deed of Settlementdated 03.12.2018, whereas the NHC asserts that in terms of clause 4 ofthe Deed of Settlement, respondent no.1 was to issue the invoices againsteach tranche of payment stating the amount, including the GST, afterwhich the appellant- NHC was to make the payment. The entirecontroversy in the present case would hinge around this provision as towhether NHC did not pay the amount in terms of the Deed of Settlementbecause of non-issuance of invoices by the respondent no.1 or otherwise.

14. In the facts of the present case, what we notice is that prior tothe execution of the Deed of Settlement, NHC had already paid anamount over Rs.20 crores in terms of the initial agreement dated09.09.2015. Then as per the Deed of Settlement also, Rs.5.46 croreshad already been paid. What we also notice is that from the record it isclear, and not disputed by the respondents, that every payment that was AB

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Amade by NHC, was against the invoices which were issued by therespondent no.1.

15. The only reason given by the learned counsel for the respondentno.1 for not issuing the invoices with regard to the balance amount wasthat the liability of payment of GST would accrue immediately on issuanceBof the invoices, even if NHC did not pay the money. We cannot acceptthis form of justification as for all previous payments, invoices had beenissued by the respondent no.1 – SME.

16. At this stage, we would not like to give final verdict with regardthe interpretation of the various clauses of the Deed of Settlement, includingCclause 4 relating to issuance of invoices, as the same would be a matterto be considered first in the suit proceedings. However, considering theconduct of the parties, specially the fact that the invoices were issued bythe respondent no. 1 before each of the payments were made by theappellant – NHC, and only fraction of the total payment remained to bepaid, which also the learned Single Judge, while issuing injunction inDfavour of NHC directed them to deposit in court, in pursuance of whichRs.3.5 crores has already been deposited by NHC in the High Courtand also considering the other attending factors and circumstances, weare of the opinion that the injunction order granted by the Trial Court infavour of the appellant cannot be faulted.

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17. Even otherwise, we are of the opinion that interference by theDivision Bench of the High Court in appeal against the order of thelearned Single Judge granting the injunction was not justified speciallywhen the injunction order passed could not, in our opinion, be said to beperverse or unjustified in law. Several authorities were cited on behalfFof the learned counsel for the parties outlining the principles for grantinginterim injunction. In Wander Ltd. and Anr. vs. Antox India P. Ltd.[1990 (supp) SCC 727], it had been held:- “14.The appeals before the Division Bench were against theexercise of discretion by the Single Judge. In such appeals, theGappellate court will not interfere with the exercise of discretion ofthe court of first instance and substitute its own discretion exceptwhere the discretion has been shown to have been exercisedarbitrarily, or capriciously or perversely or where the court hadignored the settled principles of law regulating grant or refusal ofinterlocutory injunctions. An appeal against exercise of discretionHis said to be an appeal on principle. Appellate court will not reassess

the material and seek to reach a conclusion different from theone reached by the court below if the one reached by that courtwas reasonably possible on the material. The appellate court wouldnormally not be justified in interfering with the exercise of discretionunder appeal solely on the ground that if it had considered thematter at the trial stage it would have come to a contrary conclusion.If the discretion has been exercised by the trial court reasonablyand in a judicial manner the fact that the appellate court wouldhave taken a different view may not justify interference with thetrial court’s exercise of discretion. After referring to these principlesGajendragadkar, J. In Printers (Mysore) Private Ltd.v.PothanJoseph [(1960) 3 SCR 713 : AIR 1960 SC 1156] : (SCR 721)

“... These principles are well established, but as has beenobserved by Viscount Simon inCharles Osenton &Co.v.Jhanaton [1942 AC 130] ‘...the law as to the reversalby a court of appeal of an order made by a judge below in theexercise of his discretion is well established, and any difficultythat arises is due only to the application of well settled principlesin an individual case’.”

The appellate judgment does not seem to defer to this principle.”

18. In the case of Shah Babulal Khimji Vs. Jayaben D. Kaniaand Anr. [(1981) 4 SCC 8], a three Judge Bench of this Court hadopined that Section 104 read with Order 43 Rule 1 of the Code of CivilProcedure, 1908 applied to a Letters Patent appeal as well. In DorabCawasji Warden Vs. Coomi Sorab Warden and Ors. [(1990) 2 SCC117] grant of mandatory injunction at the interim stage has been left tothe sound judicial discretion of the Court. Metro Marins and Anr. Vs.Bonus Watch Co. (P) Ltd. and Ors. [(2004) 7 SCC 478] also followsthe principles laid down in the case of Dorab Cawasji Warden (supra).But these two authorities dealt with the question of grant of interiminjunction in relation to disputes arising out of transfer of immovableproperty. Applicability of Rules 1 and 2 of Order 39 of the Code on thequestion of granting interim injunction has been reconfirmed by aCoordinate Bench of this Court in Best Seller Retail (India) PrivateLtd. Vs. Aditya Birla Nuvo Ltd. and Ors. [(2012) 6 SCC 792]. InColgate Palmolive (India) Ltd. Vs. Hindustan Lever Ltd. [(1999)7 SCC 1], the principles guiding grant of interim injunction have beensummarized as:- A

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A“24. We, however, think it fit to note herein below certain specificconsiderations in the matter of grant of interlocutory injunction,the basic being non-expression of opinion as to the merits of thematter by the court, since the issue of grant of injunction, usually,is at the earliest possible stage so far as the time-frame isconcerned. The other considerations which ought to weigh withBthe court hearing the application or petition for the grant ofinjunctions are as below:

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(i) extent of damages being an adequate remedy;

(ii) protect the plaintiff’s interest for violation of his rights though,however, having regard to the injury that may be suffered bythe defendants by reason therefor; C

(iii) the court while dealing with the matter ought not to ignorethe factum of strength of one party’s case being stronger thanthe other’s; D(iv) no fixed rules or notions ought to be had in the matter ofgrant of injunction but on the facts and circumstances of eachcase — the relief being kept flexible;

(v) the issue is to be looked at from the point of view as towhether on refusal of the injunction the plaintiff would sufferEirreparable loss and injury keeping in view the strength of theparties’ case;

(vi) balance of convenience or inconvenience ought to beconsidered as an important requirement even if there is a seriousquestion or prima facie case in support of the grant; F

(vii) whether the grant or refusal of injunction will adverselyaffect the interest of the general public which can or cannotbe compensated otherwise.”

19. In our opinion, however, each individual case is to be decidedon its own facts and in the present case, in view of the facts as narratedGabove, equity is in favour of NHC. It has made substantial paymentsand the balance, which is little more than 10% of the total amount, hasalready been deposited in the High Court in terms of the injunction orderof the Single Judge. As regards the claim of the respondent no.2, what isnoteworthy is that initially the sub-license agreement was executedHbetween NHC and respondent no. 2 on 16.05.2018. After the dispute arose, the termination notice was issued by the respondent no.1 on18.06.2019. The suit had been filed by NHC on 29.08.2019 and it wasonly then, on 24.10.2019 that the respondent no.2 entered into a freshagreement with respondent no.1 with regard to the same films beingSholay and Sholay 3D in the first set of appeals and 32 other films in thesecond set of appeals. Considering the aforesaid facts and keeping inview that the agreements between respondents no.1 and 2 were enteredinto during the pendency of the civil suit, of which the respondent no.2would also be well aware of, we are of the opinion that respondent no.2would also be governed by the injunction order granted by the SingleJudge of the High Court.

20. Since the facts of both sets of appeals are on the same lines,with slight differences of certain dates and some amounts to be paid,and there being no other material difference, both sets of appeals wouldbe governed by this order.

21. Accordingly, as we are of the firm view that the appellant hasmade out a prima facie case for grant of injunction and also that thebalance of convenience is in favour of the appellant – NHC, hence weallow these appeals. The Single Judge’s order was founded on soundreasoning and we find no fault in exercise of discretion by the SingleJudge in granting the order of injunction. We, thus, set aside the orderpassed by the Division Bench of the High Court and restore the order ofthe learned Single Judge. The learned Single Judge, however, is requestedto expedite the hearing of the suit and decide the same as expeditiouslyas possible, preferably within one year, in accordance with law and withoutbeing influenced by any observations made by the Single Judge whilegranting the injunction order or by the Division Bench of the High Courtpassed in appeal, as well as by this Court. The parties shall not seek anyunnecessary adjournment in the High Court.

22. There shall be no order as to costs.

Devika Gujral

Direction issued.

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