M/s. Divya Exports Vs.
M/s. Shalimar Video Company and others.
J U D G M E N T
G.S. Singhvi, J.
1.
This
appeal is directed against the judgment of the learned Single Judge of the Andhra
Pradesh High Court whereby he allowed the appeal filed by respondent No.1 and
decreed the suit filed by the said respondent for grant of a declaration that
it is having exclusive worldwide video rights of VCD/DVD and other formats of
video rights in respect of 15 Telugu films for which it had entered into an agreement
dated 27.8.2001 with M. Srinivasa Rao and also for restraining the appellant and
respondent Nos.2 and 3 from producing or selling VCDs/DVDs or any other video
format of those films in any form of exploitation.
2.
M/s.
Vijaya Production Private Limited (hereinafter referred to as "the
Producer") produced 15 Telugu films. By an agreement dated 28.9.1987, the
Producer granted the sole and exclusive video rights of the films to M/s.
Jyothi Video for a period of seven years. During the currency of that agreement,
the Producer gifted the films to M/s. Nagireddy Charities (respondent No.3)
represented by its Managing Trustee, Shri B. Nagireddy. Respondent No.3 entered
into an agreement of lease with respondent No.2-M/s. Vijaya Pictures whereby the
rights of theatrical and non-theatrical distribution, exhibition and
exploitation including video and TV rights were given to respondent No.2 for
the areas of Andhra and Nizam for a period of 20 years commencing from 1.1.1975
for a consideration of Rs.20 lakhs. By another agreement dated 25.6.1990 (Exhibit
A-4) the term of agreement dated 10.1.1975 was extended by 70 years with effect
from 1.1.1995. The relevant portions of that agreement are extracted below:
"Whereas the
Lessors are the absolute owners in possession of the negatives, holding the
entire rights for the Indian Union of the Telugu Talkie pictures produced by
M/s Vijaya productions Private Ltd., as specified hereunder, the rights of which
have been assigned absolutely by way of gift by the said Vijaya Productions
Private Ltd., in favour of the Lessors. Whereas the Lessors have already granted
to the Lessees, the exclusive lease rights of exploitation of their several
Black and White and Colour pictures for the territory of Andhra and Nizam by way
of agreement of lease dated 10.1.1975 for a period of 20 years from 1st of January,
1975.
Whereas the Lesees have
approached the Lessors to grant unto them the exclusive lease rights of Theatrical
and Non-theatrical distribution, exhibition and exploitations of the several
pictures by way of lease, in respect of the areas of Andhra and Nizam as known
in the Film Trade, for a further period of 70 (seventy) years from the date of
expiry of the present lease agreement i.e. from 1st January 1995 and to transfer
complete pictures negatives in favour of the Lesees herein. NOW THIS AGREEMENT
WITNESSETH AS FOLLOWS:-
1. The Lessors hereby
grant us the Lessees as the rights of Theatrical and Non-Theatrical distribution,
exhibition and exploitation by way of lease of the following Black and White
Telugu Pictures produced by M/s Vijaya Productions Pvt. Ltd. Madras 600 020
including the video and T.V. Rights thereof
a.
Shavukaru
b.
Pathala
Bhairavi
c.
Pellichehi
Choodu
d.
Chandraharam
e.
Missamma
f.
Maya
Bazar
g.
Appuchesi
Pappukudu
h.
Jagadekaveerunikatha
i.
Gundamma
Katha
j.
C.I.D.
k.
Umachandi
Gowrishankula Katha
l.
Rechukka
Pagatichukka for the Areas of Andhra and Nizam, and to appropriate to
themselves the proceeds earned by them on the said pictures by such exploitation
for a period of 70 (seventy) years from 1st January 1995.
4. The Lessees shall have
the power to assign this agreement either in part and/or whole to third parties
at their discretion, without in any manner affecting the rights of the Lessors
under this agreement.
5. It is agreed that
the Lessors shall not lease out, sell or exhibit the pictures in the
territories for which the rights of exploitation are herein be granted, till the
expiry of the agreement. The Lessees also shall not exhibit the pictures in
any station outside the territory leased herein.
7. It is understood between
the parties herein that this agreement is without prejudice to the 16mm rights;
T.V. and Video rights committed by the producers Vijaya Productions (P) Ltd for
the various periods with the parties concerned and the Lessees herein are
entitled for the said rights after the expiry of the periods committed
thereunder."
3.
A
third agreement dated 11.12.1995 (Exhibit A-5) was entered into between respondent
Nos.3 and 2 whereby and whereunder copyright for broadcasting of films through
satellites, cassettes, disc, cable, wire, wireless or any other system
including its transmission through cable system without restriction of
geographical areas was assigned to respondent No.2 for a sum of Rs.8 lakhs. The
relevant portions of the third agreement are also extracted below: "Now,
This Agreement Witneseth:
a. The Assignors irrevocably
assign to the Assignees the copyright for broadcasting the said films through satellite,
cassette, disc, cable, wire, wireless or any other system including its transmission
through cable system without restriction of geographical areas and for this purpose
the assigners are authorized to make such copies of recordings on film, taps,
disc or such other media as may be required.
b. The Assignors have already
delivered to the Assigners the concerned version of the picture and sound
negatives of the said films as per the Agreement dated 25-6-1990 between the Assignors
and Assignees.
c. The Assignees shall
have the full right to broadcast the said Films after subtitling, editing, deleting
any portion, altering colour or inserting advertisement, or broadcasting the
excerpts, or programme including the excerpts, or part of whole of the sound
track only, at their sole and absolute discretion.
d. The Assignees shall be
entitled to assign their rights under this Agreement in part or in full to any other
party and to broadcast through any authority or agency, at their sole and absolute
discretion including Doordharshan's Terrestrial Primary Channels."
4.
After
five years, respondent No.2 entered into an agreement of lease dated 30.7.2001
with M. Srinivasa Rao and granted him rights of theatrical and non-theatrical (excluding
satellite rights) exhibition and 35 mm exploitation, video, VCD, DVD, Audio and
16 mm by way of lease in respect of 14 films for the areas of Andhra and Nizam
for a period of 60 years for a consideration of Rs.10 lakhs. Paragraphs 5 to 9
of that agreement read as under: "
i.
The
Lessees shall have the power to assign this agreement either in part or whole to
third parties at their discretion, without any manner affecting the rights of
the lessors under this agreement.
ii.
The
lessors hereby grant to the lessees the rights of theatrical and non-theatrical
(excluding satellite rights) exhibition and 35mm exploitation, video, VCD, DVD,
Audio and 16mm by way of lease of the following.
iii.
It
is agreed the lessors shall not lease out, sell or exhibit the pictures in the territories
for which the rights of exploitations herein granted till the expiry of this
agreement.
iv.
In
case the original procedures M/s Vijaya Productions Pvt. Ltd. or lessors herein
require any prints of the pictures lease out herein for any overseas
exploitation the same share be delivered by the lessees herein at cost.
v.
It
is understood between the parties herein that 16mm rights, video rights committed
by the producers Vijaya Productions Pvt. Ltd. with the parties concerned was
expired. The lessees herein are entitled for the said rights."
5.
M.
Srinivasa Rao executed an agreement dated 17.8.2001 in favour of respondent No.1
and granted CDs, VCDs, DVDs, copyrights for transferring, processing,
recording, duplication, copying, taping on to video grams, discs, CDs, VCDs,
DVDs and the digital formats for commercial and private exhibition of the 15
films for the entire world.
6.
Three
days prior to the execution of the aforesaid agreement, respondent No.3 entered
into an agreement dated 14.8.2001 with the appellant and assigned it exclusive DVD
rights, VCD rights and internet rights (worldwide web TV rights) by way of
lease in respect of the 15 films for the entire world including Indian Union
Territory for a period of 60 years in lieu of a consolidated royalty amount of
Rs.1,50,000/-.
7.
Within
8 days of the execution of agreement dated 17.8.2001, respondent No.1 got published
a notice in the newspaper dated 25.8.2001 declaring that it had purchased DVD
and VCD rights for 15 Telugu films produced by M/s. Vijaya Production. Thereupon,
respondent No.3 issued telegram to respondent No.1 and called upon it to stop
production of DVDs and VCDs. In its reply dated 31.12.2001, respondent No.1 relied
upon agreement dated 17.8.2001 executed by M. Srinivasa Rao and claimed that it
had purchased all the rights in respect of the 15 films. By way of rejoinder,
respondent No.3 informed respondent No.1 that it had not sold or assigned any rights
to respondent No.2 or M. Srinivasa Rao to produce DVDs and VCDs.
8.
After
exchange of notices, respondent No.1 filed suit for grant of relief to which reference
has been made in the opening paragraph of this judgment. It also applied for
and was granted ex parte injunction by the trial Court on 23.6.2003, which was
vacated on 22.8.2003. The appeal preferred by respondent No.1 was dismissed by
the Division Bench of the High Court.
9.
In
the written statement filed by the appellant through its Managing Partner Bh.
Sudhakar Reddy, which was adopted by respondent No.3, it was pleaded that the
rights of VCDs/DVDs had not been assigned by respondent No.3 to respondent No.2
and, as such, M. Srinivasa Rao could not acquire any such rights from respondent
No.2 and assign the same to respondent No.1. In a separate written statement,
respondent No.2 claimed that in terms of agreement dated 15.12.1995 executed with
respondent No.3, it had acquired the rights for future technical development in
the field of cinematography. Respondent No.2 pleaded that after accepting a sum
of Rs.8 lakhs, respondent No.3 had assigned irrevocable copyright for
broadcasting the said films through satellite, cassette, disc, cable, wire,
wireless or any other system including its transmission through cable system
without restriction of geographical areas and for this purpose, the assignees
were authorised to make copies of recording of films, disc, tape or such other media
as may be required. Respondent No.2 admitted that it had entered into an agreement
dated 30.7.2001 with M. Srinivas Rao for assignment of the rights acquired by it
under agreements dated 25.6.1990 and 15.12.1995.
10.
On
the pleadings of the parties, the trial Court framed the following issues: "
a. Whether this court
has territorial jurisdiction to maintain the suit?
b. Whether the suit is bad
for non joinder of necessary parties?
c. Whether the agreement
dt. 25.6.1990 will include VCD/DVD rights and whether the plaintiff is entitled
to claim the broadcasting rights thereunder coupled with the agreement dt. 15.2.2002
and thereby the plaintiff is entitled for the manufacture and sale of the
VCDs/DVDs of the suit films?
d. Whether the plaintiff
is entitled for the relief of declaration and the injunction sought for?
e. To what relief?"
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
After
considering the pleadings of the parties and evidence produced by them, the trial
Court held that the suit was bad for non joinder of M. Srinivasa Rao, who is
said to have assigned rights to respondent No.1. This is evinced from the
following observations made by the learned trial Court: "The plaintiff is claiming
his right through M. Srinivasa Rao from whom the plaintiff has obtained an agreement
for assignment of the rights over the suit schedule films. When the defendants 1
and 3 have come forward with a specific contention that the M. Srinivasa Rao have
no right at all to assign the VCD and DVD rights the plaintiff ought to have impleaded
the said M. Srinivasa Rao as a party to the suit.
But the plaintiff has
not chosen to bring him on record and he has deposed in his cross examination
that he has no grievance at all against M. Srinivas Rao and therefore he
thought that it is not necessary to bring him on record. It is important to
note that the plaintiff is claiming right through M. Srinivas Rao. He has purchased
the rights from the 2nd defendant and because the dispute is that he has conveyed
the rights which was not covered by the agreement under which he got the
assignment in his favour from the 2nd defendant the plaintiff ought to have impleaded
M. Srinivasa Rao as one of the parties and in spite of the objection taken by
the other side the plaintiff has not chosen to bring the Srinivasa Rao on record
but only satisfied by saying that he has no grievance against Srinivas Rao. This
issue to be held as against the plaintiff holding that the necessary party Srinivas
Rao is not brought on record and therefrom the suit is bad for non joinder of
necessary party and Issue No.2 is held accordingly."
12.
The
trial Court then referred to agreements dated 25.6.1990 and 15.12.1995 executed
between respondent Nos.2 and 3, agreement dated 30.7.2001 entered into between respondent
No.2 and M. Srinivasa Rao as also agreement dated 14.8.2001 executed by M.
Srinivasa Rao in favour of respondent No.1, referred to the provisions of the
Copyright Act, 1957, two judgments of the Madras High Court and concluded that the
plaintiff has failed to make out a case for grant of declaration and
injunction.
13.
In
the appeal filed by respondent No.1, the learned Single Judge framed the
following questions:
a. "1. Whether the
assignment of copyrights made by the third defendant in favour of first
defendant is true and valid?
b. 2. Whether the
assignment of copyrights made by the third defendant in favour of second defendant
confers the right of manufacturing and selling VCDs/DVDs and whether the rights
assigned and conferred under Exs.A.4 and A.5 are only meant for `broadcasting' the
suit films and if so, what is the effect thereof?
c. 3. Whether the non-joinder
of the person by name Srinivasarao, who was allegedly the assignee from the
second defendant and assignor in favour of the plaintiff, would vitiate the
suit? or Whether the plaintiff can be non-suited for non-joinder of one Srinivasarao
who was allegedly the assignee from the second defendant and assignor of the
plaintiff?"
14.
Although,
the trial Court had not framed any issue which could give rise to question No.1
and in the appeal filed by the respondent no such prayer was made, the learned
Single Judge invoked Order XLI Rule 24 of the Code of Civil Procedure, 1908
(CPC) and justified the framing of first question by recording the following
observations:
"The first point
as formulated by this Court in this appeal was not framed by the trial court as
an issue in the suit. But in my considered view, the trial court ought to have
framed this issue also in the light of the specific averment made by the
plaintiff in the plaint that the acquisition of rights by the first defendant- M/s
Divya Exports from the 3rd defendant-M/s Nagireddy Charities, represented by its
Trustee-Venugopal Reddy was totally false and baseless having regard to the
fact that Sri B. Nagireddy, the original Managing Trustee of the 3rd defendant-
M/s Nagireddy Charities, had already given away the copyrights during the year
1995 itself in favour of the second defendant.
Hence, having regard
to the said specific averment made by the plaintiff in the plaint and also in
the light of the specific ground taken by the plaintiff in this appeal with
regard to the application of Section 73 of the Indian Trusts Act 1881 (for
short "the Trusts Act"), I deem it absolutely necessary to formulate the
first point for consideration, exercising the jurisdiction of this Court under
Order 41, Rule 24 C.P.C. For this reason, this Court formulated the first point
as stated supra. From the submissions made at the Bar by the learned Counsel appearing
for the parties, it could be seen that the whole controversy revolves around Exs.A.4
and A.5 and Ex.A.3 on one side and Ex.A.3 on one side and Ex.B.1 on the
other."
The learned Single Judge
then referred to the pleadings and oral as well as documentary evidence
produced by the parties, Sections 73 and 74 of the Trusts Act and held that Exhibit
B.1 executed by respondent No.3 in favour of the appellant was not valid. Paragraphs
52 to 55 and 58 of the impugned judgment, which contain the reasons recorded by
the learned Single Judge for arriving at the said conclusion, are extracted
below:
"52. What is
more interesting to note is that no trust deed or any other document was pressed
into service by the first defendant while getting himself examined as D.W.1 to
clarify or explain that Mr. Venugopalreddy had acquired the status of a trustee
of M/s Nagireddy Charities in order to effectively represent the trust and to
execute Ex.B.1 document in favour of the first defendant. Interestingly, D.W.1 was
the Special Power of Attorney Holder also, representing M/s Nagireddy
Charities. 53. In other words, totally an alien, not connected with the affairs
of M/s Nagireddy Charities, but a beneficiary under Ex.B.1, was examined as D.W.1,
representing both defendant No.1 and defendant No.3. No document relating to
appointment of Venugopalreddy as a trustee of M/s Nagireddy Charities, authorizing
Venugopalreddy to represent trust has been brought on record and no person
directly connected with, and having knowledge of the affairs of M/s Nagireddy
Charities had been examined on behalf of the defendants.54. It is to be
remembered that the suit was instituted in the year 2003 and during the
pendency of the suit Mr. B. Nagireddy was very much alive, of course, totally in
a state of indisposition.
In such circumstances,
I am of the considered view that the burden heavily lies on either the first
defendant or the third defendant to establish the change in trusteeship of M/s
Nagireddy Charities, in which case alone Ex.B.1 document can be called as a validly
and legally executed document by Venugopalreddy in the capacity of the trustee
of M/s Nagireddy Charities in favour of the first defendant. Unfortunately, no
other witness, except D.W.1, was examined in this behalf.
55. It is well-known principle
that a person who has no proper authorization to represent a trust cannot enter
into agreements with third parties in order to bind the trust - even if such
agreements are entered into, such agreements are not valid in the eye of law. In
the instant case, the first defendant and the third defendant - M/s Nagireddy Charities,
represented by its Power of Attorney Holder have utterly failed to establish the
capacity of Venugopalreddy as trustee to execute Ex.B.1 agreement assigning the
VCDs and DVDs copyrights in respect of the suit schedule films in favour of the
first defendant during the lifetime of Sri Nagireddy, the Managing Trustee of M/s
Nagireddy Charities. This is a strong and suspicious circumstance, which compels
this Court, to hold that Ex.B.1 was not executed by a proper and authorized person
representing the third defendant-trust, conveying the copyrights of VCDs and
DVDs in favour of the first defendant.
Further, when Mr. Venugopalreddy's
authority as trustee to execute Ex.B.1 is in serious doubt, first defendant, who
is the beneficiary of the said document cannot be placed on a higher and
comfortable position that Mr. Venugopalreddy. 1458. From the perusal of the
impugned judgment it could be seen the court below while discussing issues 3
and 4, without going to the aspect of validity or otherwise of the assignment
of copyright in favour of first defendant by third defendant, incidentally
recorded a finding basing on the Xerox copy of a document Ex.A-12, that the
plaintiff is estopped from raising a plea that B. Venugopal Reddy has no authority
to represent third defendant trust. But a perusal of Ex.A-12 discloses that it
is only a reiteration of assignment of broadcast rights under Ex.A-5. In this
context it is to be noted that Ex.A-12 is only a Xerox copy and the original is
not filed.
No reasons were
recorded by the trial court with regard to the admissibility of the said document.
Even assuming that the said document was really executed by B. Venugopal Reddy in
favour of second defendant, as already noticed, it is only a reiteration or
confirmation of Ex.A-5. Further there is no cross-examination by the defendants
1 and 3 on this aspect and there is also no reference to this document in the written
statements filed by them.
Therefore, so long as
the execution of Ex.A-4 was agreed to have been in subsistence by virtue of its
execution by B. Nagi Reddy, Managing Trustee of third defendant assigning
rights for a period of seventy years, Ex.A-12 does not gain any significance.
If Ex.A-12 is to be accepted, notwithstanding the admissibility or otherwise of
it, at best it has to be presumed that B. Venugopal Reddy had become the
Managing Trustee of third defendant as on the date of execution of Ex.A-12 dated
15-2-2002. But in the present case, the whole dispute is with regard to the
authority of B. Venugopal Reddy to execute Ex.B-1 document in the capacity of trustee
of third defendant in favour of first defendant, which is a prior transaction.
In other words the genesis
of the rights of assignment of broadcast is Exs.A-4 and A-5, but not Ex.A-12.
Furthermore, the reasons for bringing into existence of the controversial Ex.A-12
is not explained in the evidence of either of the parties and as its execution is
subsequent to the execution of Ex.B-1, on which defendants 1 and 3 are mustering
their claim of copyright of VCDs and DVDs, the same is not relevant and
inconsequential. Hence, the finding of the trial court that the plaintiff is
estopped to question the validity or otherwise of the trusteeship of B. Venugopal
Reddy for third defendant is not justifiable."
15.
Although,
learned senior counsel appearing for the parties made elaborate arguments on the
merits of the findings recorded by the learned Single Judge with reference to questions
No.2 and 3 and produced publications titled Copinger and Skone James on
Copyright (15th Edition), Goldstein on Copyright (3rd Edition) Volume 1 and the
judgments of different High Courts, we do not consider it necessary to examine
the same because in our considered view, the learned Single Judge was not at all
justified in non-suiting the appellant by recording a finding that Exhibit B.1
was invalid.
16.
Since
the trial Court had not framed specific issue touching the validity of agreement
Exhibit B.1, the parties did not get effective opportunity to lead evidence in support
of their respective cases. In the absence of any issue, the trial Court did not
even advert to the question whether or not agreement Exhibit B.1 was valid. The
evidence available on the record was not at all sufficient for deciding that question
and yet the learned Single Judge decided that question by drawing inferences
from the statements made by the witnesses examined by the parties with
reference to 16the issues framed by the trial Court and returned a negative
finding on the validity of Exhibit B.1.
17.
In
our view, in the peculiar facts of this case, the learned Single Judge was not
at all justified in invoking Order XLI Rule 24 CPC. If at all the learned Single
Judge felt that the trial Court should have framed specific issue on the validity
of agreement Exhibit B.1, then he should have remanded the matter to the trial
Court with a direction to frame such an issue and decide the suit afresh. The
omission on the part of the learned Single Judge to adopt that course has
resulted in manifest injustice to the appellant.
18.
In
the result, the appeal is allowed. The impugned judgment is set aside and the
case is remitted to the trial Court with the direction that it shall, after
considering the pleadings of the parties, frame an additional issue on the
validity of agreement Exhibit B.1 executed between respondent No.1 and
respondent No.3, give opportunity to the parties to produce evidence and decide
the suit afresh without being influenced by any of the observations made by the
High Court and this Court.
19.
Since
the matter is sufficiently old, we direct the trial Court to dispose of the
matter as early as possible but latest within nine months from the date of receipt/production
of copy of this judgment. The parties are directed to appear before the trial
Court on 10.10.2011.
20.
The
Registry is directed to send a copy of this judgment to IX Additional Chief
Judge, City Civil Court (Fast Track Court), Hyderabad by fax.
.....................................J.
[G.S. Singhvi]
.....................................J.
[Asok Kumar Ganguly]
New
Delhi;
September
02, 2011.
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