CASE TITLE:
RBEP Entertainment Pvt Ltd. (Applicant), in the matter between\
Suit 1:- Hungama Digital Media Entertainment Pvt. Ltd. V RSEP Entertainment Pvt. Ltd
Suit 2:- Super Cassettes Industries Pvt. Ltd. V. RSEP Entertainment Pvt. Ltd.
DATE OF ORDER:
18 January 2023
JUDGE(S):
Justice Manish Pitale
SUBJECT
The Bombay High Court, in the present case, held that if plaintiffs seek reliefs against parties who are not the parties to the agreement providing for settlement by arbitration, the matter can not be mechanically referred to arbitration. Only if such parties are either claiming through/ under such signatories can they be referred to the arbitration tribunal in such cases.
BRIEF FACTS OF THE CASE
- Two suits were filed against RBEP Entertainment Private Limited. One was by Super Cassettes Industries Private Limited and the other was by Hungama Digital Entertainment Private Limited.
- A Long Form Agreement was entered into by the defendant in both suits i.e RBEP with Sugar Cassettes and Hungama Digital Entertainment Pvt. Ltd. As per the agreement the defendant was to assign to Sugar Cassettes 40% and Hungama Entertainment Pvt. Ltd. 20% of copyright in existing music titles held by RBEP and also unreleased future music titles.
- Over the course of time, several disputes arose between the parties regarding the Long Form Agreement.
- Several independent agreements were also entered into between the above referred parties and also new parties, which are also the defendants in either of the two suits.
- The plaintiffs in the two suits prayed for permanent injunction against the defendants from exploiting the copyrights in respect of which the plaintiffs claim proprietary rights on the basis of the Long Form Agreement as also assignment deeds executed by the defendant RBEP, independent of the Long Form Agreement, to the extent of the shares of the plaintiffs. The plaintiffs also claim damages. They have also moved applications f
- The defendant RBEP filed an application to refer the matter to arbitration.
ARGUMENTS ADVANCED BY THE APPLICANT/DEFENDANT
- It is argued by the learned counsel for the applicant i.e the defendant RBEP that a clause in the Long Form Agreement deals with referring any matter of dispute between the parties to the arbitral tribunal.
- It was submitted that even though all the defendants in the two suits were not the parties to the Long Form Agreement yet they all claim under the defendant no. 1 i.e RBEP
- That although the rights claimed by the party while asserting its copyright can be said to be rights in rem, but in the facts of the present case, the parties were asserting their rights in personam against each other.
ARGUMENTS ADVANCED BY THE PLAINTIFFS
- The learned counsel for the plaintiff i.e Sugar Cassettes contended that the disputes in the suit lie beyond the ambit of the Long Form Agreement between the three parties.
- An independent dispute regarding the assignment deed of 6 films and specific assignment deeds for 3 other films also arose between the Sugar Cassettes and RBEP. These assignment deeds had no links to the said agreement.
- It was further submitted that defendant Nos.4, 5 and 6 had absolutely nothing to do with the Long Form Agreement and they claimed assignment of the copyrights on the basis of independent commercial transactions executed with defendant RBEP.
- It was also contended that if only the parties to the Long Form Agreement were to be referred to arbitration, it would lead to splitting the suit. Such splitting of causes of action is against public policy as it would lead to parallel proceedings.
- The learned counsel for the plaintiff Hungama Digital Entertainment Private Limited in addition, submitted that considering the scheme of the Copyright Act, 1957 and the fact that any decision in the disputes raised by the defendant RBEP would necessarily lead to findings on rights in rem pertaining to copyrights, the disputes were not arbitrable.
LEGAL ISSUE
- Whether all the parties, even the ones who were not a part of the Long Form Agreement could be referred to the arbitration by treating them as claiming rights through/under defendant no. 1 i.e RBEP?
ANALYSIS BY THE COURT
- While adjudicating upon the matter, the Court observed the ratio of several judgements dealing with same/similar issues.
- The Court laid down that even though amendment to section 8 of A&C Act in 2015 seems to have shifted the position of law but if a plaintiffs seek reliefs against parties who are not the parties to the agreement providing for settlement by arbitration, the matter can not be mechanically referred to arbitration.
- The Court also took into account the concept of claiming ‘through and under’ a signatory to the arbitration agreement. It observed that the applicants in the present case would succeed if they are able to show, on a prima facie examination that the defendants in the present suit, who are not signatories to the Long Form Agreement, are claiming through and under defendant No.1 RBEP or that the agreements executed by defendant No.1 RBEP in favour of the other defendants who are non- signatories to the Long Form Agreement, can be said to be underlying agreements necessarily linked with the Long Form Agreement.
- The Court also reiterated the observation made by the Supreme Court in the case of Vidya Drolia and others Vs. Durga Trading Corporation[(2021) 2 SCC 1] wherein it was said that arbitration as a mode of dispute resolution is unsuitable when the subject matter of a dispute in the factual background, requires collective adjudication before one court or forum.
- The Court observed that some of the defendant, namely, Zee Entertainment Enterprises Limited and Madman Film Ventures Limited were claiming rights on the basis of contracts quite independent of the Long Form Agreement. As such a clause of arbitration in that agreement can be said to bind the parties who are not a party to it.
- The Court while pointing towards the complex nature of the matter before it held that to refer only the signatories to the Long Form agreement to arbitration would be against public policy and against the object of speedy disposal of cases because if the contentions raised on behalf of the applicant are to be accepted, it would inevitably lead to splitting of the suits, creating a situation where more than one proceeding would continue, resulting in conflicting / contradictory findings before different fora.
CONCLUSION
The light of the above observations made, the learned Court rejected the application by RBEP to refer the matter to arbitration.
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