Narendra Hirawat And Co vs Sholay Media Entertainment Pvt. Ltd

NARENDRA HIRAWAT AND CO. ......Appellant(s)

VERSUS

SHOLAY MEDIA ENTERTAINMENT PVT. LTD. & ANR. ......Respondent(s) WITH

CIVIL APPEAL NO(S).1869­1870 OF 2022 (Arising out of Special Leave Petition (C) No(s).14316­14317/2021)

ORDER

Leave granted.

In connection with a suit for injunction and other reliefs filed by

the appellants, the learned Single Judge of the High Court of

Judicature at Bombay granted an order of interim injunction,

delivered on 9th March, 2020 which was challenged in appeals filed

before the Division Bench of the High Court. The appeals have been

allowed and the order of interim injunction granted by the Single

Judge has been reversed by the Appellate Bench. Questioning the

legality of the said order of the Division Bench, these appeals by way

1 of special leave petitions have been filed. As these appeals have been

filed against an interim order, we are giving only skeleton facts

relevant for the purpose of present appeals.

On 09.09.2015, two agreements were entered into between the

appellant namely, Narendra Hirawat and Company (for short ‘NHC’)

and respondent no.1, namely Sholay Media Entertainment Pvt. Ltd.

(for short ‘SME’) for the rights of films “Sholay and Sholay 3D” for the

period 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 of

the same films “Sholay and Sholay 3D” for the period from 01.04.2022

to 31.03.2027 for an amount of Rs.5 crores. This was in regard to the

first set of appeals (hereinafter referred to as “Sholay appeal”). In the

second set of appeals, similar agreements were executed on the same

date between the NHC and respondent no.1 therein i.e., Generation

Three Entertainment Pvt. Ltd. (hereinafter referred to ‘G3’). These were

with regard to the rights of the 32 films given in favour of NHC for a

similar length of period. The facts in both these sets of appeals,

though may not be identical but are very similar. For convenience we

shall deal with the facts of the first set of appeals, which we shall

henceforth refer to as “Sholay appeal”.

After the aforesaid agreements were executed, on 12.07.2016 two

2 addenda were executed in the license agreements dated 09.09.2015.

These addenda stipulated that on an additional amount of Rs.1.75

crores to be paid by NHC, the NHC would have the rights for unlimited

runs of the 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 in relation to payments of amounts and burden

of tax, which got amicably settled between the appellant­NHC and

respondent no.1 ­SME. In between on 16.05.2018, a sub­license

agreement was executed between the appellant ­ NHC and the

respondent no.2 namely, Goldmines Telefilms Pvt. 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.

As already mentioned, since there were certain disputes between

NHC and respondent no.1 ­ SME, there were dialogues between the

parties and ultimately a memorandum of settlement was arrived at

between the two parties on 05.11.2018. Finally, on 03.12.2018, a

Deed of Settlement was executed between the NHC and the SME ­

respondent no.1 in which the main stipulation was that NHC was to

pay a further sum of Rs.8.71 crores in four tranches of Rs.1.25 crores,

Rs.2.46 crores, Rs.2.50 crores and Rs.2.50 crores and instead of the

period which earlier was till 30.09.2027, the same was extended by

3 further one year, up to 30.09.2028.

Ultimately, the final dispute which has now culminated in these

proceedings is allegedly for non­compliance of the final Deed of

Settlement dated 03.12.2018, as according to the respondent no.1 the

payments have not been made in terms of Deed of Settlement. Stand

of NHC, however, is that substantial payments have already been

made, and what has not been paid was because of certain non­

compliances on the part of the respondent no.1. It is stated that NHC

has always been ready and willing to make the payment. However, on

the ground of alleged non­compliance of the terms of the Deed of

Settlement dated 03.12.2018, a termination notice was issued by the

respondent no.1 on 18.06.2019.

The respondent no.2, by notice dated 26.08.2019, terminated the

sub­license agreement dated 16.05.2018 which was entered into with

NHC, and demanded refund of over Rs.11 crores from NHC.

With regard to the termination notice dated 18.06.2019 issued by

respondent no.1, NHC filed a commercial suit on 30.08.2019. Reliefs

claimed included prayer for declaration that the plaintiff is the sole

and exclusive licensee in respect of the suit films for all territories,

further declaration that the termination letter was illegal, bad in law,

null and void and unenforceable, permanent injunction restraining the

4 defendants from enjoying the licensed rights and damages. Temporary

injunction was also asked for. By order dated 09.03.2020, the learned

Single Judge of the High Court (before whom the commercial suit was

filed) granted interim injunction in favour of NHC, restraining the

respondents from disturbing the enjoyment of license rights of the

appellant in the suit films and also restrained the respondent no.1 ­

SME from acting on the termination notice. Respondents no.1 & 2

were also restrained from acting on the agreement executed on

24.10.2019 which, after the filing of the suit, was entered into between

respondents no.1 and 2, awarding rights of the film Sholay and Sholay

3D in the first set of appeals and 32 films in the second set of appeals

in favour of respondent no.2. An intra­court appeal was filed assailing

the order of the learned Single Judge before the Division Bench of the

High Court, which has been allowed in favour of the respondents and,

hence, these appeals before this Court.

Mr. Mukul Rohatgi and Dr. A.M. Singhvi, learned senior counsel

along with Mr. Ankur Saigal, learned counsel have appeared for the

NHC in both sets of appeals. Mr. Neeraj Kishan Kaul, Mr. Siddharth

Bhatnagar and Mr. C.U. Singh, learned senior counsel along with Mr.

R.P. Gupta and Ms. Pooja Dhar, learned counsel have represented the

respondents in both sets of appeals. We have heard them at length

5 and perused the records.

The facts as narrated above are not disputed by the learned

counsel for the parties. From the above facts, what can be culled out

is that though there were certain disputes with regard to the payments

and other clauses of the initial agreements as well as the addenda, but

after the execution of the Deed of Settlement on 03.12.2018, all prior

disputes had been ironed out and what was now required was

compliance of the said deed. This deed provided that NHC was to pay

a sum of Rs.8.71 crores to the respondent no.1 in four tranches and

the period of license was to be extended for one year i.e. up to

30.09.2028 (instead of 30.09.2027 as earlier). Learned Single Judge

had considered all the aspects of the matter and held that the balance

of convenience was in favour of NHC and thereafter granted the

injunction in favour of the appellant. On the aspect of prima­facie

case, the Single Judge found the payment obligation were by and large

met by the plaintiff (appellant before us). Argument was advanced

before the learned Single Judge on the basis of Section 14(d) of the

Specific Relief Act 1963 by the defendants. It was contended that the

subject contracts were determinable and hence no specific

performance thereof could be granted. The learned Single Judge,

however, found that this was not a clause which contemplated

6 unilateral determination but the right to determine was subject to the

other party committing breach of the agreement. As a condition for

granting interim relief, direction was given to the plaintiff to deposit

the entire balance amount of Rs.3.25 crore as per the settlement deed.

Such deposit was to be made in Court and we are apprised by learned

counsel for the plaintiff that this part of the direction has been

complied with.

The Division Bench has, in appeal, reconsidered the entire case

and decided in favour of the respondents. It has been, inter­alia, held

by the Division Bench in the judgment under appeal:­

“62. The impugned order has brought about a highly inequitable situation. A Plaintiff, who was not ready and willing having consistently breached essential terms of the Agreements, who was admittedly in arrears on the date of the suit, who is yet to establish its rights at the final trial; is permitted by through a mandatory interim injunction to exploit all rights under the terminated Agreement. The true owners of the licensed material are prevented from monetizing their property rights. The Goldmines Telefims, which has paid money to both, Plaintiff and Licensor Appellants, is deprived of exploiting the licenses. No extraordinary situation existed for such a drastic interim order.

63. Therefore, to recapitulate, as per the true construction of the contract between parties, Plaintiff has failed to establish that Plaintiff was and has always been ready and willing to perform an essential part of the terms of the contract. No prima facie case, much less a high prima facie case, is established by Plaintiff. No extraordinary circumstances exist to grant a mandatory injunction again akin to the stay of

7 the termination six months after the termination was effected and third party rights were created. Since the basic essential terms of the contract and documents on the record itself have been overlooked while passing the impugned order, the grant of an injunction will have to be set aside, even though these appeals are appeals on principle.

64. As a result, these four Commercial Appeal, are allowed. The common impugned order 9 March 2020 passed by the learned Single Judge in Notice of Motion No.2591/2019 in Commercial IP Suit No.1387/2019 and Notice of Motion No.2607/2019 in Commercial IP Suit No.1469/2019 is set aside. Considering the facts and circumstances, no order as to costs.”

As we have noticed above, the entire case falls around the Deed

of Settlement executed on 03.12.2018. What is not disputed is that

out of the four payments which were to be made by NHC to the

respondent no.1, the first and the second payments were made by the

appellant ­ NHC either simultaneously on the issuance of the invoice

by respondent no.1 or after the invoice had been issued. However,

after the first two payments were made, the respondent no.1 issued a

third invoice for an amount of Rs.1.75 crores (although the third

installment was to be of Rs.2.50 crores) only on 03.06.2019 and after

the invoice was issued, the payment of the entire amount of Rs.1.75

crores was made by NHC on 10.06.2019. It is the case of NHC that

thereafter NHC had been asking the respondent no.1 for issuance of

the invoices for the balance amount so as to enable NHC to make the

8 balance payment out of Rs.8.71 crores as agreed under the Deed of

Settlement but since the invoices were not issued (as the same were

required for payment of GST), no further payment was made by the

appellant ­ NHC. According to NHC, on every occasion earlier the

payments were made by NHC only after the invoices were issued by

the respondent no.1 – SME, which included the GST amount and the

last payment could not be made because of non issuance of the

invoice by the respondent no.1 – SME.

The contention of the learned counsel for the respondent no.1 is

that the requirement of issuance of invoices was not a condition

precedent to the payments to be made in terms of the Deed of

Settlement dated 03.12.2018, whereas the NHC asserts that in terms

of clause 4 of the Deed of Settlement, respondent no.1 was to issue

the invoices against each tranche of payment stating the amount,

including the GST, after which the appellant­ NHC was to make the

payment. The entire controversy in the present case would hinge

around this provision as to whether NHC did not pay the amount in

terms of the Deed of Settlement because of non­issuance of invoices

by the respondent no.1 or otherwise.

In the facts of the present case, what we notice is that prior to

the execution of the Deed of Settlement, NHC had already paid an

9 amount over Rs.20 crores in terms of the initial agreement dated

09.09.2015. Then as per the Deed of Settlement also, Rs.5.46 crores

had already been paid. What we also notice is that from the record it is

clear, and not disputed by the respondents, that every payment that

was made by NHC, was against the invoices which were issued by the

respondent no.1.

The only reason given by the learned counsel for the respondent

no.1 for not issuing the invoices with regard to the balance amount

was that the liability of payment of GST would accrue immediately on

issuance of the invoices, even if NHC did not pay the money. We

cannot accept this form of justification as for all previous payments,

invoices had been issued by the respondent no.1 – SME.

At this stage, we would not like to give final verdict with regard

the interpretation of the various clauses of the Deed of Settlement,

including clause 4 relating to issuance of invoices, as the same would

be a matter to be considered first in the suit proceedings. However,

considering the conduct of the parties, specially the fact that the

invoices were issued by the respondent no. 1 before each of the

payments were made by the appellant – NHC, and only fraction of the

total payment remained to be paid, which also the learned Single

Judge, while issuing injunction in favour of NHC directed them to

10 deposit in court, in pursuance of which Rs.3.5 crores has already been

deposited by NHC in the High Court and also considering the other

attending factors and circumstances, we are of the opinion that the

injunction order granted by the Trial Court in favour of the appellant

cannot be faulted.

Even otherwise, we are of the opinion that interference by the

Division Bench of the High Court in appeal against the order of the

learned Single Judge granting the injunction was not justified

specially when the injunction order passed could not, in our opinion,

be said to be perverse or unjustified in law. Several authorities were

cited on behalf of the learned counsel for the parties outlining the

principles for granting interim 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 the exercise of discretion by the Single Judge. In such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the

11 matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. After referring to these principles Gajendragadkar, J. In Printers (Mysore) Private Ltd.v.Pothan Joseph[(1960) 3 SCR 713 : AIR 1960 SC 1156] : (SCR 721) “... These principles are well established, but as has been observed by Viscount Simon inCharles Osenton & Co.v.Jhanaton[1942 AC 130] ‘...the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case’.” The appellate judgment does not seem to defer to this principle.”

In the case of Shah Babulal Khimji Vs. Jayaben D. Kania and

Anr. [(1981) 4 SCC 8], a three Judge Bench of this Court had opined

that Section 104 read with Order 43 Rule 1 of the Code of Civil

Procedure, 1908 applied to a Letters Patent appeal as well. In Dorab

Cawasji Warden Vs. Coomi Sorab Warden and Ors. [(1990) 2 SCC

117] grant of mandatory injunction at the interim stage has been left

to the sound judicial discretion of the Court. Metro Marins and Anr.

Vs. Bonus Watch Co. (P) Ltd. and Ors. [(2004) 7 SCC 478] also

follows the principles laid down in the case of Dorab Cawasji Warden

(supra). But these two authorities dealt with the question of grant of

12 interim injunction in relation to disputes arising out of transfer of

immovable property. Applicability of Rules 1 and 2 of Order 39 of the

Code on the question of granting interim injunction has been

reconfirmed by a Coordinate Bench of this Court in Best Seller Retail

(India) Private Ltd. Vs. Aditya Birla Nuvo Ltd. and Ors. [(2012) 6

SCC 792]. In Colgate Palmolive (India) Ltd. Vs. Hindustan Lever

Ltd. [(1999) 7 SCC 1], the principles guiding grant of interim

injunction have been summarized as:­

“24. We, however, think it fit to note herein below certain specific considerations in the matter of grant of interlocutory injunction, the basic being non­expression of opinion as to the merits of the matter by the court, since the issue of grant of injunction, usually, is at the earliest possible stage so far as the time­frame is concerned. The other considerations which ought to weigh with the court hearing the application or petition for the grant of injunctions are as below:

(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 by the defendants by reason therefor;

(iii) the court while dealing with the matter ought not to ignore the factum of strength of one party's case being stronger than the other's;

(iv) no fixed rules or notions ought to be had in the matter of grant of injunction but on the facts and circumstances of each case — the relief being kept flexible;

(v) the issue is to be looked at from the point of view as to whether on refusal of the injunction the plaintiff would suffer irreparable loss and injury keeping in view the strength of the parties' case;

13 (vi) balance of convenience or inconvenience ought to be considered as an important requirement even if there is a serious question or prima facie case in support of the grant;

(vii) whether the grant or refusal of injunction will adversely affect the interest of the general public which can or cannot be compensated otherwise.”

In our opinion, however, each individual case is to be decided on

its own facts and in the present case, in view of the facts as narrated

above, equity is in favour of NHC. It has made substantial payments

and the balance, which is little more than 10% of the total amount,

has already been deposited in the High Court in terms of the

injunction order of the Single Judge. As regards the claim of the

respondent no.2, what is noteworthy is that initially the sub­license

agreement was executed between NHC and respondent no. 2 on

16.05.2018. After the dispute arose, the termination notice was issued

by the respondent no.1 on 18.06.2019. The suit had been filed by

NHC on 29.08.2019 and it was only then, on 24.10.2019 that the

respondent no.2 entered into a fresh agreement with respondent no.1

with regard to the same films being Sholay and Sholay 3D in the first

set of appeals and 32 other films in the second set of appeals.

Considering the aforesaid facts and keeping in view that the

agreements between respondents no.1 and 2 were entered into during

the pendency of the civil suit, of which the respondent no.2 would also

14 be well aware of, we are of the opinion that respondent no.2 would

also be governed by the injunction order granted by the Single Judge

of the High Court.

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 would be

governed by this order.

Accordingly, as we are of the firm view that the appellant has

made out a prima facie case for grant of injunction and also that the

balance of convenience is in favour of the appellant – NHC, hence we

allow these appeals. The Single Judge’s order was founded on sound

reasoning and we find no fault in exercise of discretion by the Single

Judge in granting the order of injunction. We, thus, set aside the order

passed by the Division Bench of the High Court and restore the order

of the learned Single Judge. The learned Single Judge, however, is

requested to expedite the hearing of the suit and decide the same as

expeditiously as possible, preferably within one year, in accordance

with law and without being influenced by any observations made by

the Single Judge while granting the injunction order or by the Division

Bench of the High Court passed in appeal, as well as by this Court.

The parties shall not seek any unnecessary adjournment in the High

15 Court.

There shall be no order as to costs.

………………………………,J.

(VINEET SARAN)

………………………………,J.

(ANIRUDDHA BOSE) NEW DELHI;

MARCH 07, 2022.

16 ITEM NO.42 Court 9 (Video Conferencing) SECTION IX

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C) No(s).14124-14125/2021

(Arising out of impugned final judgment and order dated 26-08-2021 in CAL No.8026/2020 26-08-2021 in CAL No. 9909/2020 passed by the High Court Of Judicature At Bombay)

NARENDRA HIRAWAT AND CO. Petitioner(s)

VERSUS

SHOLAY MEDIA ENTERTAINMENT PVT. LTD. & ANR. Respondent(s)

(List on 07.03.2022 as a first case after fresh matter IA No. 124327/2021 - APPLICATION FOR PERMISSION IA No. 114326/2021 - EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT, IA No.122789/2021 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES, IA No.121256/2021 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES, IA No.118654/2021 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES)

WITH SLP(C) No. 14316-14317/2021 (IX) (IA No.124314/2021 - APPLICATION FOR PERMISSION IA No. 115227/2021 - EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT, IA No.122766/2021 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES)

Date : 07-03-2022 These matters were called on for hearing today.

CORAM :

HON'BLE MR. JUSTICE VINEET SARAN HON'BLE MR. JUSTICE ANIRUDDHA BOSE

For Petitioner(s) Mr. Mukul Rohatgi, Sr. Adv. SLP(C) 14124-25/21 Mr. Mahesh Agarwal, Adv.

Mr. Ankur Saigal, Adv.

Mr. Anirudh Bhatia, Adv.

Ms. Deepshikha Mishra, Adv.

Mr. E. C. Agrawala, AOR

SLP(C) 14316-17/21 Dr. A.M. Singhvi, Sr. Adv.

Mr. Mahesh Agarwal, Adv.

Mr. Ankur Saigal, Adv.

Mr. Anirudh Bhatia, Adv.

Ms. Deepshikha Mishra, Adv.

Mr. E. C. Agrawala, AOR

For Respondent(s) Mr. Neeraj Kishan Kaul, Sr. Adv.

17 Mr. Siddharth Bhatnagar, Sr. Adv.

Mr. Mehul M. Gupta, Adv.

Ms. Shreya Parikh, Adv.

Mr. Archit Jayakar, Adv.

Ms. Divya Tyagi, Adv.

Mr. R. P. Gupta, AOR

Mr. Chander Uday Singh, Sr. Adv.

Mr. Aurup Dasgupta, Adv.

Mr. Rohan Thawani, Adv.

Ms. Pooja Dhar, AOR Ms. Gunjan Ahuja, Adv.

UPON hearing the counsel the Court made the following O R D E R Leave granted.

The appeals are allowed in terms of the signed reportable

order.

Pending application(s), if any, stands disposed of

accordingly.

(ARJUN BISHT) (RAM SUBHAG SINGH) (ASHWANI THAKUR) (COURT MASTER (SH) (BRANCH OFFICER) AR-CUM-PS (Signed reportable order is placed on the file)

18