NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.6438 OF 2005
M/s. Divya Exports ... Appellant
Versus
M/s. Shalimar Video Company
and others ... Respondents
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.
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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
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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
1. Shavukaru
2. Pathala Bhairavi
3. Pellichehi Choodu
4. Chandraharam
5. Missamma
6. Maya Bazar
7. Appuchesi Pappukudu
8. Jagadekaveerunikatha
9. Gundamma Katha
10. C.I.D.
12. Umachandi Gowrishankula Katha
13. 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.
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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:
1. 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.
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2. 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.
3. 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.
4. 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:
“5. 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.
6. The lessors hereby grant to the lessees the rights of theatrical
and non-theatrical (excluding satellite rights) exhibition and
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35mm exploitation, video, VCD, DVD, Audio and 16mm by
way of lease of the following.
7. 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.
8. 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.
9. 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
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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.
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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.
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10. On the pleadings of the parties, the trial Court framed the following
issues:
“1) Whether this court has territorial jurisdiction to maintain
the suit?
2) Whether the suit is bad for non joinder of necessary
parties?
3) 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?
4) Whether the plaintiff is entitled for the relief of
declaration and the injunction sought for?
5) To what relief?”
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
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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:
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“1. Whether the assignment of copyrights made by the third
defendant in favour of first defendant is true and valid?
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?
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-
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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
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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.
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58. 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
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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
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the 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.
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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.
