* in the high court of delhi at new delhi i.a. no....
TRANSCRIPT
CS(OS) No.2119/2013 Page 1 of 57
* IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment pronounced on: 9th February, 2016
+ I.A. No. 20535/2015 & I.A. No.17621/2013 in CS(OS) 2119/2013
MUSIC BROADCAST PVT. LTD. ..... Plaintiff Through Mr.Sandeep Sethi, Sr.Adv. with
Ms.Meghna Mishra, Adv. with Mr.Akhil Sachar, Mr. Dheeraj P. Dev, Mr. Manan Chadha and Ms.Manmeet Kaur, Adv.
versus AXIS BANK & ORS. ..... Defendants Through Mr. Abhishek Anand, Adv. for D-1
Mr. Amit Sibal, Sr. Adv. with Mr. Jagdish Sagar & Mr. Neeraj Kumar Gupta, Adv. for D-2.
CORAM: HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J. 1. The plaintiff has filed a suit for declaration and permanent
injunction.
2. The plaintiff is, inter alia, engaged in the business of running,
operating and maintaining 20 FM Radio Broadcasting stations at the
following places in India i.e. Mumbai, Bangalore, Delhi, Lucknow,
Hyderabad, Chennai Ahmedabad, Pune, Nagpur, Jaipur, Surat,
Jalgaon, Ahmednagar, Sangli, Vishakhapatnam, Coimbatore, Akola,
CS(OS) No.2119/2013 Page 2 of 57
Solapur, Vadodara and Nanded. The plaintiff is seeking a decree of
declaration that the Cancellation Notice dated 21st June, 2013 sent by
the defendant No. 2 which was as per the plaintiff received on 24th
June, 2013 (the first working day of receipt of the notice as the office
of the plaintiff company was closed on 22nd June, 2013 being a
Saturday) whereby defendant No. 2 had cancelled 20 Compulsory
Licenses for Radio Broadcasting all dated 3rd September, 2010
issued in favour of the plaintiff pursuant to the order dated 25th
August, 2010 of Copyright Board is null and void. The plaintiff also
seeks a decree of permanent injunction restraining the defendants
from in any manner acting upon the cancellation notice dated 21st
June, 2013 and for permanent injunction restraining the defendant
No.2 from invoking and encashing the bank guarantees issued by the
plaintiff in compliance with the order dated 25th August, 2010 passed
by the Copyright Board.
3. The defendant No. 1 Bank has been arrayed in the suit, as it
has furnished the bank guarantees on the request of the plaintiff in
favour of the defendant No. 2 i.e. Phonographic Performances
Limited (hereinafter referred to as "PPL" or the "defendant No. 2").
Defendant No.2 is a copyright society registered under Section 33 of
the Copyright Act, 1957 (hereinafter referred to as the ‘Act’) and is
engaged in carrying on the copyright business of its members in
sound recordings who administers the sound recordings of its
members and further claims to charge and collect license fees from
the said users of sound recordings.
CS(OS) No.2119/2013 Page 3 of 57
4. It is alleged in the plaint that the impugned Cancellation Notice
interferes with due course of judicial proceedings pending in the High
Court of Madras and High Court of Judicature at Bombay and also
obstructs the administration of justice as the defendant No. 2 has no
power or locus under the Copyright Act, 1957 read with the Copyright
Rules, 2013 to cancel the compulsory licenses granted by the
Copyright Board.
5. The suit along with interim application was listed before the
Court on 18th November, 2013 when summon and notice were
issued. The interim order was also passed against the defendant
No.2 staying the operation of cancellation notice dated 21st June,
2013 while passing the detailed order.
6. The said order was challenged by the defendants in an appeal
being FAO (OS) 561/2013 before the Division Bench, wherein the
major issue of territorial jurisdiction of this Court was raised. The
Division Bench observed that as the question of territorial jurisdiction
is yet to be decided by the Single Judge, the Division Bench did not
make any comments thereon and directed the parties to await the
final decision on the subject by the Single Judge when the matter is
taken up.
7. Both the parties have made their submissions on merit as well
as on the question of territorial jurisdiction as the objection taken by
the defendants. They agree that if the issue of territorial jurisdiction
is decided against the plaintiff and in favour of defendant No.2, then
there is no need to go into the merit of the case.
CS(OS) No.2119/2013 Page 4 of 57
8. It is necessary to refer the brief facts as mentioned in the
plaint; the same are stated as under:-
(a) In or about October, 1999, the Government of India opened FM
Radio Broadcasting, to private parties and issued tender
documents to interested parties under the Indian Telegraph Act,
1885. The objective of the privatization of the FM Radio
Broadcasting sector was to affect a rapid increase in the
broadcast network within the country.
(b) The defendant No. 2 came out with the alleged rates of royalty
payable by the FM radio broadcasters under the mandatory tariff
scheme which any copyright society had to publish, and had
fixed the rate of royalty at Rs. 2,400 per needle hour or 20% of
the net advertisement revenue, whichever was higher. Aggrieved
by this unilateral fixation of royalty, the plaintiff along with other
broadcasters filed three complaints under Section 31 (1) (b) of
the Copyright Act, 1957 before the Copyright Board in the year
2002 seeking compulsory licenses to play the music owned by
PPL and its members.
(c) The Copyright Board by its interim order dated 19th November,
2002 in the compulsory licensing applications moved by
different private FM broadcasters (including the plaintiff) against
defendant No. 2, to finally decide the final rate of
royalty/compensation payable to defendant No. 2, had fixed
interim rates of royalty at Rs.1,200/- per needle hour during
prime time i.e. from 8 a.m. to 10 a.m. and from 6 p.m. to 8 p.m
CS(OS) No.2119/2013 Page 5 of 57
which were to remain in operation for a period of two years i.e.
2002 to 2004. A needle hour is internationally accepted as the
term denoting the actual time for which music is played during an
hour excluding the advertisements, promotional and the
presentation time taken by the radio jockey. The Copyright
Board also fixed the rate at 60% of this standard rate for the
normal 12 hours i.e. from 6 a.m. to 8 a.m., 10 a.m. to 6 p.m. and
8 p.m. to 10 p.m. and 25% of the standard rate for the eight lean
night hours i.e. from 10 p.m. to 6 a.m. as the royalty payable.
The average royalty rate worked out to Rs. 660/- per needle hour
which was to come into effect from the 1st November, 2002 and
to remain in operation till 31st October, 2004.
(d) The plaintiff along with other broadcasters, as well as defendant
No. 2 filed appeals and cross-appeals (in total nine appeals)
before the High Court of Bombay inter-alia assailing the order
dated 19th November, 2002 passed by the Copyright Board. The
Bombay High Court by a common judgment and order dated 13th
April, 2004 in First Appeal Nos. 279-294 of 2003, 421 of 2003
and 1573 of 2003 reported as Phonographic Performance Ltd.
v. Music Broadcast Pvt. Ltd., 2004 (29) PTC 282 (Bom) set
aside the order dated 19th November, 2002 and remitted the
matters back to the Copyright Board for reconsideration and for
fixation of license fees.
(e) Thereafter, Special Leave Petitions were filed by the plaintiff
and other broadcasters, before the Supreme Court, whereby
CS(OS) No.2119/2013 Page 6 of 57
the Supreme Court vide its common judgment dated 16th May
2008 reported in Entertainment Network (India) Ltd. v. Super
Cassette Industries Ltd., reported in (2008) 13 SCC 30
allowed the appeal of another broadcaster i.e. Entertainment
Network (India) Ltd. and simultaneously dismissed the Special
Leave Petition of the defendant No. 2 thereby upholding the
decision of the Bombay High Court. The Supreme Court, while
concurring with the High Court of Bombay and also remanded
the said matter to the Copyright Board for fresh consideration
on merits.
(f) Pursuant to the order dated 16th May, 2008 passed by the
Supreme Court, six fresh applications/ complaints were filed in
the year 2008 before the Copyright Board under Section 31(1)(b)
of the Copyright Act, 1957 by various other broadcasters apart
from the three applications/complaints that were remanded by
the Supreme Court.
(g) Thereafter, the trial before the Copyright Board commenced in
July, 2008 and the examination of witnesses began on 28th July,
2009 and was followed up through subsequent sittings ending on
12th July, 2010.
(h) The common order dated 25th August, 2010 was passed by the
Copyright Board in the various remanded matters as well as
fresh filings done before the Copyright Board. The Copyright
Board, in exercise of powers conferred under Section 31 (1) of
the Copyright Act, 1957, directed the Registrar of Copyrights to
CS(OS) No.2119/2013 Page 7 of 57
grant complainants i.e. the plaintiff separate licenses for
communicating the work recorded in sound recordings in the
repertoire, present and future, of the defendant No. 2 to the
public, by broadcast on revenue sharing basis subject to certain
terms and conditions as stated herein below:-
a. “2% of the net advertisement earnings of each FM radio
station accruing from the radio business only for that
radio station shall be set apart by each complaint for pro
rata distribution of compensation to all music providers
including the defendant No.2 herein in proportion to the
music provided by the respective music providers and
broadcast by the complainant. Complainant shall be
deemed to be a music provider for the music provided by
it or received by it free of cost and broadcast. For arriving
at “net advertisement earnings”, all Government and
musical taxes paid, if any, and commission paid towards
the procurement of such advertisements to the extent of
15% of such advertisement earnings shall be excluded;
b. Complainants shall furnish within a week of grant of
licence by the Registrar of Copyrights a bank guarantee
for Rs.10,000 in favour of the defendant for each radio
station. However, the sum of such bank guarantee shall
be revised within two weeks after the close of every
quarter of the year to such sum of which complainant was
liable for payment of compensation for that quarter.
CS(OS) No.2119/2013 Page 8 of 57
Quarter of a year means a period of three months ending
on the last day of March, June, September and
December of the relevant year;
c. If the complainant fails to revise the bank guarantee in
terms of clause (b), defendant shall be at liberty to cancel
the license without giving any notice and recover the
remaining dues from the available bank guarantee;
d. Payment of compensation by the complainant to the
defendant for a month shall be made by 7th day of the
month following the month to which payment relates.
Complainant shall also furnish alongwith the payment the
date wise details of the periods for which the music
relating to the defendant and all other music providers
has been used for the month. However, payment for the
period beginning with the grant of licence and ending on
30th September, 2010 shall be used in lump sum by 7th
October, 2010;
e. For any delayed payment for a month beyond 7th of the
following month, interest at the rate of 1% per month or a
part of month or a part of month shall be payable;
f. In case payment is not made by the complainant for a
radio station for consecutive two months, defendant
herein shall be entitled to cancel the licence by giving
notice of one month and recover the remaining dues from
the bank guarantee;
CS(OS) No.2119/2013 Page 9 of 57
g. A complainant may for one or more radio stations, by
giving notice of one month and after making payment of
all sums due, cancel the licence;
h. The validity of the licence granted by the Registrar of
Copyright shall come to end on 30th September, 2020.”
(i) Being aggrieved by the order dated 25th August, 2010 passed
by the Copyright Board, the defendant No. 2 had preferred an appeal
dated 28th October, 2010 under Section 72 of the Copyright Act, 1957
before the High Court of Judicature at Madras. The High Court of
Judicature at Madras vide its order dated 22nd December, 2010 in
CMA No. 3382/2010 dismissed the application for interim relief
seeking stay of the order dated 25th August, 2010. Thereafter the
defendant No.2 filed a Special Leave Petition (Civil) No. 5727-
5735/2011 before the Supreme Court inter alia assailing the order
dated 22nd December, 2010 passed by the High Court of Judicature
at Madras. The Supreme Court vide order dated 5th April, 2011
dismissed the Special Leave Petition.
(j) In pursuance of the order dated 25th August, 2010 passed in
Case No.1 of 2002 titled as 'Music Broadcast Private Limited v.
Phonographic Performance Limited' granted licenses to the plaintiff
for communicating the work recorded in sound recordings in the
repertoire, present and future of the defendant No. 2 to the public by
broadcast on revenue sharing basis subject to the terms and
conditions as adumbrated in the order dated 25th August, 2010.
These licenses were granted for all the 20 radio channels of the
CS(OS) No.2119/2013 Page 10 of 57
plaintiff on 3rd September, 2010 and are valid up to 30th September
2020, i.e. for about 10 years.
9. The plaintiff accepted the Compulsory Licensing Order and
never exercised its right of appeal against it under Section 72(2) of
the Copyright Act. The said order, therefore, has attained finality qua
the plaintiff. The defendant No.2 was unable to obtain interim stay of
the said Compulsory Licensing Order in its pending appeal under
Section 72(2) of the Copyright Act before the Madras High Court and
on further appeal from the Supreme Court.
10. The defendant No. 2 filed a Writ Petition (Civil) No.8144 of
2011 titled as ‘PPL v. Union of India and others’ before this Court
wherein the plaintiff was arrayed as respondent No.3. The relief
sought in the said writ petition was the quashing of the Compulsory
Licenses dated 3rd September 2010 granted by the Registrar,
Copyright Board. This Court by order dated 18th January, 2011
refused to grant any interim order in favour of defendant No. 2 who
by order dated 4th January, 2012 directed both the parties i.e. MBPL
and PPL to comply with the directions issued by the Division Bench in
L.P.A No. 1037/2011. It is submitted by the plaintiff that said order
dated 4th January, 2012 passed by the Single Judge of this Court was
being complied.
11. The defendant No. 2 also filed a Contempt Petition in the month
of March, 2012 being Cont. Case No. 203/2012 in Writ Petition Civil
No. 8144/2011 titled as ‘Phonographic Performance Limited v. Union
of India and Others’ inter alia alleging non-compliance of the order
CS(OS) No.2119/2013 Page 11 of 57
dated 4th January 2012 passed by this Court which mandated the
compliance of the order dated 25th August, 2010 passed by the
Copyright Board. The Contempt Petition was subsequently dismissed
as not pressed by the defendant No.2 and order therein was passed
on 19th February, 2013. The writ petition was dismissed. The LPA
filed against the judgment has also been dismissed as informed by
the parties.
12. The plaintiff in response to the letters dated 13th January, 2011
and 19th January, 2011 addressed a letter dated 24th January, 2011
to the defendant No. 2 wherein the plaintiff stated that it was
complying and would continue to comply with the final order dated
25th August, 2010 passed by the Copyright Board and the terms of
the Compulsory Licenses granted in pursuance thereto on 3 rd
September, 2010. The compulsory licenses were valid and
subsisting till date. The tariffs in terms of the License Agreements
were broadly based on orders passed by Courts/Copyright Board
and were subject to adjustments as per the final order which would
be passed by appropriate Courts/Tribunal in due course. Therefore,
the defendant No.2 says that 'unilateral adjustment' is not correct.
The plaintiff reiterated that an amount of Rs.3,80,00,000/- which
was deposited as security deposit in terms of the License
Agreement was liable to be refunded and requested the defendant
No. 2 to inspect the logs at a mutually convenient time and pointed
out that it had been making the logs available throughout the
CS(OS) No.2119/2013 Page 12 of 57
decade of its relationship with the defendant No. 2 by letter dated
14th February, 2011.
In order to adjust the excess amount in terms of Clause 6, 7
and 8 of the Voluntary License Agreements, the plaintiff in view of
order dated 25th August 2010 passed by the Copyright Board, filed a
suit being Suit No. 565/2011, in the month of February, 2011 before
the High Court of Judicature at Bombay titled as ‘Music Broadcast
Private Limited v. Phonographic Performance Limited’ inter-alia
praying that the defendant No. 2 be restrained from terminating the
Compulsory Licenses dated 3rd September, 2010 unless the excess
amounts paid by the plaintiff has been adjusted and exhausted fully.
The High Court of Judicature at Bombay by order dated 9th February
2011 had recorded that the defendant No. 2 would not terminate the
voluntary licence agreements entered with the plaintiff. The said
interim order remained operative till the filing of the present suit.
13. The defendant No. 2 sent a letter dated 17th June, 2013 in
response to the letters dated 7th March, 2013, 5th April, 2013, 7th May,
2013 and 7th June, 2013 sent by the plaintiff whereby the defendant
No. 2 averred that the plaintiff was not complying with the terms and
conditions as envisaged in the order dated 25th August, 2010 passed
by the Copyright Board. The adjustments made by the plaintiff were
unilateral and without any legal foundation. It was further alleged that
the plaintiff was in default of Para 30.27 (b) of the order dated 25th
August, 2010 passed by the Copyright Board. The defendant No. 2
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had also alleged that the plaintiff had failed to keep the Bank
Guarantees alive and subsisting even for a brief period.
14. The plaintiff replied to the letters dated 17th June, 2013 vide
separate letters dated 28th June, 2013 specifically denying the
contents thereof. The plaintiff stated that that it has been regularly
revising the bank guarantee within two weeks of the close of every
quarter of the year which rendered the contention of non-compliance
of the order dated 25th August, 2010 passed by the Copyright Board
as nugatory and otiose. The plaintiff by its letter dated January, 2013
bearing Reference Number BG/12/Mumbai/010 forwarded an
extension of the Original Bank Guarantee issued by Axis Bank
bearing number 00040100005214 dated 12th January, 2011. This
extension of the Original Bank Guarantee remained valid till 31st
March, 2013. Thereafter, the plaintiff’s bankers namely Axis Bank by
their Registered Notice dated 3rd April, 2013 notified the defendant
No. 2 about the cancellation of the Original Bank Guarantee which
expired on 31st March, 2013. Pursuant to the letter dated 3rd April,
2013, Axis Bank on instructions from the plaintiff Company had
revised the Original Bank Guarantee bearing number
00040100005214 dated 12th January, 2011 with effect from 1st April,
2013 to 30th June, 2013. Therefore, the Bank Guarantee was
extended by the plaintiff’s bankers with effect from 1st April, 2013 and
not 6th April, 2013 as falsely contended. Thereafter, in due
compliance of the order dated 25th August, 2010 passed by the
Copyright Board; the plaintiff vide letter dated 12th April, 2013 bearing
Reference No. BG/12/Mumbai/011 (within two weeks of the close, of
CS(OS) No.2119/2013 Page 14 of 57
the quarter ending 31st March, 2013 i.e. before 15th April, 2013)
forwarded the extension of the Original Bank Guarantee.
15. On merit, it is alleged by the plaintiff that in compliance with the
order dated 25th August, 2010 and the compulsory licenses granted
by the Copyright Board the amount due from the plaintiff to the
defendant No. 2 had to be adjusted against the excess payment of
license fee. The computation of the same was also sent along with
letter dated 5th October, 2010. The defendant No. 2 had in fact,
without demur and protest had been accepting the said adjustments
till the letters dated January 13th January 2011 and 19th January 2011
were written whereby for the first time the defendant No.2 raised a
grievance about the said adjustments but the same was not
acceptable to the plaintiff. The plaintiff by various letters including 8th
September 2010, complied with the terms of the order of the
Copyright Board dated 25th August, 2010 including enclosing bank
guarantees of Rs.10,000/- for the respective radio stations
(aggregating to Rs. 2,00,000/-). But the defendant No. 2 initially
refused to accept the service of the said Bank Guarantees however
thereafter has accepted the same. It is alleged by the plaintiff that
the defendant No. 2 in violation of the order dated 25th August, 2010
failed to return the said bank guarantees after its expiry and it was
only returned pursuant to the order dated 9th February, 2011 passed
by the High Court of Judicature at Bombay in Civil Suit No. 565 of
2011. Prior to the date of said order, the defendant No. 2 sent a letter
dated 13th January, 2011 to the plaintiff wherein the defendant No. 2
invoked clause 10 of the License Agreements and called upon the
CS(OS) No.2119/2013 Page 15 of 57
plaintiff to provide the defendant No. 2 an inspection of the copies of
the records of the sound recordings used by the plaintiff within 15
days from the date of receipt of the said notice and another letter
dated 19th January 2011, to the plaintiff stating that the plaintiff had
failed to pay any license fee for the period February, 2010 to
August, 2010 and the outstanding license fees was to the tune of
nearly Rs.2 crores, the adjustment of royalty could not be done
unilaterally any adjustment sought to be made by the plaintiff was
incorrect as it had preferred an appeal being CMA No. 3382/2010
assailing the order dated 25th August 2010 passed by the Copyright
Board before the High Court of Judicature at Madras.
Written statement (defence)
16. Written statement has been filed by the defendant No.2 who is
the main contesting party in the suit and has raised various
preliminary objections inter-alia stating that the present suit is an
abuse of process whereby the plaintiff, having failed to obtain any
relief on the same cause of action in the Court within whose
jurisdiction the entire purported cause of action arose, being the
Bombay High Court, which was also the Court of exclusive
jurisdiction by express agreement between the plaintiff and the
defendant No.2, has attempted to recycle the same cause of action
by clever verbal jugglery in order to obtain relief in this Court which
does not enjoy territorial jurisdiction in the matter.
17. The case of the defendant No.2 is that the present suit is an
abuse of process of the court as the plaintiff in its own suit
No.565/2011 which was pending in the Bombay High Court, the
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plaintiff sought an injunction restraining the defendant No.2 from
terminating the voluntary licence agreements (VLAs) and the
compulsory licenses, but it could not obtain an order restraining
defendant No.2 from cancelling the compulsory licenses. The plaintiff
is now doing forum shopping, seeking to obtain orders from this Court
that the plaintiff could not obtain on the same cause of action in the
Bombay High Court.
18. It is stated that the plaintiff’s entire cause of action is its claim,
based on its own interpretation of the VLAs, of a purported right to
adjust alleged overpayments made by the plaintiff under the VLAs
against the Compulsory Licence compensation fixed by the Copyright
Board in the order dated 25th August, 2010. The main lis between the
parties comprises the plaintiff’s interpretation of Clause 8 of each of
the VLAs (a mixed question of fact and law) and the plaintiff’s
averments regarding the quantum of dues payable to defendant No.
2 under the VLAs. The dispute thus arises out of the VLAs. No fresh
cause of action has been shown to exist or to have arisen
independent of the VLA to enable the plaintiff to file this suit in Delhi.
The said dispute could have been easily denied by the Bombay High
Court. Therefore, the defendant No.2 has rightly challenged the
question of territorial jurisdiction as it is settled law that each and
every fact pleaded by a plaintiff does not give rise to a cause of
action; rather the facts constituting the cause of action are only those
having a nexus or relevance to the lis. Before exercising jurisdiction,
the Court must be satisfied that all relevant facts which have a
substantial nexus with the lis are located within its territorial
CS(OS) No.2119/2013 Page 17 of 57
jurisdiction. The plaint must be read in a meaningful manner to find
out the intention behind the suit. A mere insertion of extraneous
matter in the present suit cannot change the substance of its cause of
action. The only lis in the matter relates to the alleged rights arising
out of VLA, and the same is subject to exclusive jurisdiction of Courts
in Mumbai.
19. It is alleged by the defendant No.2 that admittedly on 25th
August, 2010 the Copyright Board issued an order allowing the
complaint filed by the plaintiff in 2002 and directed the Registrar of
Copyrights to issue Compulsory Licenses to the plaintiff on the terms
set out in the order itself. On 3rd September, 2010 the Registrar of
Copyrights issued 20 compulsory licences on the same terms. The
relevant condition of licence for the purposes of the present suit is
clause (f) which reads: "In case payment is not made by the Licensee
for consecutive two months PPL herein shall be entitled to cancel the
licence by giving notice of one month and recover the remaining dues
from the bank guarantee".
20. It was alleged that it was obligatory on the part of the plaintiff to
comply with the terms of the compulsory licenses subject to which
they were allowed to broadcast the repertoire of sound recording
works administered by the defendant No.2. But the plaintiff admittedly
never made any payment of compulsory licence compensation but,
instead, raised a claim under the Voluntary Licence Agreements for
adjustment of alleged excess payments made under the said VLAs
against the compensation payable to the plaintiff under the terms of
compulsory licence.
CS(OS) No.2119/2013 Page 18 of 57
21. It is also submitted that the plaintiff has dishonestly suppressed
the fact that the Cancellation notice took effect from 21st July, 2013.
The plaintiff had made the same false averment in para 5 of its
WP(C) No. 4533/2013 filed before this Court on 24th July, 2013 when
the matter came up for hearing. On the said date, as recorded by the
Court there was no time left for hearing, hence a temporary injunction
was granted until the next date of hearing. The plaintiff thus obtained
the said interim order whilst failing to disclose that the impugned
cancellation notice had already taken effect, in order to obtain an
order restoring the status quo ante rather than one merely
maintaining the status quo.
22. The reliance on the VLAs is misplaced since the plaintiff itself
had abandoned them from February, 2010 onwards by committing
willful breaches of their essential terms, in particular by ceasing to
pay any licence fee or submitting any logs of usage of the plaintiff's
repertoire. The plaintiff has admitted the same in its replication
however as an afterthought and in an attempt to cover up its
breaches had stated that: "The plaintiff herein out of sheer
inadvertence could not pay the royalty for a brief period of February
2010 to September, 2010." It is thus admitted that the plaintiff had
abandoned the VLAs long before the Compulsory Licensing Order.
The plaintiff's claim for an injunction based on the same agreements
which the plaintiff itself has not performed is unlawful and without
merit.
23. It is alleged by the defendant No.2 that the plaintiff deliberately
is misinterpreting Clause 8 of the VLAs inspite of its clear language.
CS(OS) No.2119/2013 Page 19 of 57
(i) The VLAs were not ad hoc or transitional agreements that were
executed merely in relation to the expected orders of the
Copyright Board. Rather, the VLAs were free standing
negotiated agreements which merely took into consideration
contingencies that might possibly arise during the terms of the
different VLAs. The term of each VLA was only 12 months and
defendant No. 2 was entirely at liberty to renew them or not.
(ii) It is the Licensor who is authorized to adjust the license fee
payable under the VLA's and not the Licensee.
(iii) The plaintiff deducted IDS both from the payments made
originally under the VLAs and again from the payments shown
as compulsory licence compensation. This is an admission by
the plaintiff that the two were separately payable.
24. On merit, defendant No.2 has submitted that the plaintiff's claim
under VLAs not based on final order. The adjustment referred to in
para 3 of Clause 8 of the VLA's arises only on "the final orders are
passed in the pending proceedings". The clause does not refer to the
orders to be passed by the Copyright Board but to the "final Orders".
The Copyright Board's orders are appealable under Section 72 of the
Copyright Act. An appeal is pending before the Madras High Court.
Either party if aggrieved by the appellate order would have a further
remedy before the Supreme Court under Article 136 of the
Constitution. There can be no question of the parties making any
adjustment under para 3 of Clause 8 of the VLAs. The plaintiff was
bound to make payments to defendant No. 2 as required by the
Compulsory Licensing order dated 25th August, 2010. As the plaintiff
CS(OS) No.2119/2013 Page 20 of 57
failed to do so, it has to face the consequences envisaged in clause
(f) of the said order.
25. Defendant No.2 submits that the plaintiff’s claim of the
purported adjustments under the VLAs is admittedly pending in the
Bombay High Court in Suit No.565/2011. The Bombay High Court
has admittedly not granted any interim relief qua the termination of
the Compulsory Licenses/adjustments.
26. As per defendant No.2 the outstanding as on 31st July, 2014 on
account of compulsory licence compensation due from the plaintiff is
Rs.9,71,89,343/- which includes the interest on outstanding from the
plaintiff. The ad-interim order has also prevented defendant No.2
from encashing the Bank Guarantees which are unconditional which
otherwise it is entitled to do. The amount secured under the Bank
Guarantee is Rs.41,97,987/-. Even if the Bank Guarantees are
allowed to be encashed the loss caused to defendant No.2 could only
be offset marginally.
The licenses granted by the Central Government to the plaintiff
for operating FM radio stations is only ten years and all
licenses/permissions are due to expire in 2016. It will be impossible
for defendant No.2 to recover the outstanding amount from the
plaintiff thereafter if the plaintiff closes down its only business.
27. The Voluntary License Agreements discloses that "In case the
rates are reduced by the final order then the Licensor shall adjust the
difference from further usages by the Licensee." Further, in terms of
Clause 8 of the Voluntary License Agreement the only 'pending
proceeding' at the time of entering the Voluntary License Agreement
CS(OS) No.2119/2013 Page 21 of 57
were the proceedings before the Copyright Board. The issue of
adjustments being done by the plaintiff is already pending before the
High Court of Judicature at Bombay in Civil Suit No. 565/2011 titled
as ‘Music Broadcast Private Limited v. Phonographic Performance
Limited’.
28. Thus, the balance of convenience entirely favours defendant
No. 2. There can be no balance of convenience in favour of a party
which has not come to Court with clean hands. The plaintiff is in
material breach of the essential terms of the VLAs which they base
upon their purported claim and the same are in infringement of
copyright as well as of the essential terms of the Compulsory
Licenses. Secondly, the retroactive nature of the interim injunction in
force deprives defendant No. 2 of its legitimate remedies for
infringement by the plaintiff after cancellation of the compulsory
licenses. Further, continuance of the interim order affects defendant
No. 2's business rather than the plaintiffs. And finally any interim
order in favour of the plaintiff in the present suit pre-judges defendant
No. 2's pending WP(C) No. 8144 of 2011 wherein, if defendant No. 2
succeeds, die plaintiff will be entitled only to five compulsory licences,
yet will have obtained additional benefit of fifteen such licences to
which it is not entitled.
29. With regard to the other submission that the plaintiff failed to
submit every month for each of its stations, complete and necessary
declarations regarding its net advertising earnings and pro-rata
distribution, the plaintiff has denied the same. It is alleged that the
plaintiff is not obliged under the said order dated 25th August, 2010
CS(OS) No.2119/2013 Page 22 of 57
Compulsory Licenses dated 3rd September, 2010 to submit, every
month for each of its stations, complete and necessary declarations
regarding the net advertising earnings and pro-rata distribution.
Further, the defendant No.2 in the impugned notice has for the first
time raised the said issue as a ground for cancellation of the
Compulsory Licenses. The defendant No.2 has since September,
2010 admittedly never raised the issue of lack of complete and
necessary declarations regarding net advertising earnings and pro-
rata distribution as a ground for Cancellation of Compulsory
Licenses.
30. It is submitted by the plaintiff that the defendant No.2 in the
impugned notice has raised the alleged issue of submission of log
reports as a ground for cancellation of the compulsory licenses. The
defendant No.2 has since September, 2010 admittedly never raised
the issue of lack of submission of monthly usage log reports as a
ground for Cancellation of Compulsory Licenses. It is specifically
denied that the plaintiff has failed and neglected to submit monthly
usage log reports. It is submitted that the plaintiff vide their letters
dated 24th January, 2011 and 14th February, 2011 addressed to the
defendant No.2 indicated that the logs were available at its office and
the same may be inspected by a prior written notice. In fact, the same
were enclosed vide letter dated 14th February, 2011 by way of
abundant caution for its records as it chose not to inspect the same
by visiting the office.
31. In the reply to the other allegation that the plaintiff has not
reported its net advertisement revenue for the month of January,
CS(OS) No.2119/2013 Page 23 of 57
2012 for its FM Radio Station located in the city of Ahmedabad, the
plaintiff has denied the same. The plaintiff has also referred its letter
dated 6th February 2012, whereby it has forwarded its net
advertisement revenue for the month of January 2012 for its FM radio
station located in the city of Ahmedabad. It is submitted by the
plaintiff that the alleged grievance is only an afterthought and has
been raised more than one year after the alleged default. The alleged
grievance of the defendant No.2 was communicated to the plaintiff
only by way of the Cancellation Notice dated 21st June, 2013. The
defendant No.2 had never in any of its prior correspondence sought
to terminate the Compulsory Licenses on the basis of the said
grievance.
32. The other contention of the defendant No.2 is that the plaintiff
has been making defaults in providing Bank Guarantees as per
clause (b) of the compulsory license read with para 30.27(b) of the
Copyright Board’s order. However, it is submitted that it has been
regularly revising the Bank Guarantee within two weeks of the close
of every quarter of the year which renders the contention of non-
compliance of Para 30.27 (b) of the order dated 25th August, 2010,
passed by the Copyright Board as erroneous. The plaintiff vide its
letter dated 11th January, 2013 bearing Reference Number
BG/12/Mumbai/010, forwarded an extension of the Original Bank
Guarantee issued by defendant No.1 bearing number
00040100005214 dated 12th January,2011. This extension of the
Original Bank Guarantee remained valid till 31st March, 2013.
Thereafter, the plaintiff's bankers namely defendant No.1 by their
CS(OS) No.2119/2013 Page 24 of 57
Registered Notice dated 3rd April, 2013 notified the defendant No.2
about the cancellation of the Original Bank Guarantee which expired
on 31st Match, 2013. Pursuant to the letter dated 3rd April, 2013
defendant No.1 on instructions from the plaintiff have revised the
Original Bank Guarantee bearing number 00040100005214 dated
12th January, 2011 with effect from 1st April, 2013 to 30th June,2013.
Therefore, the Bank Guarantee was extended by the plaintiff's
bankers with effect from 1st April, 2013 and not 6th April, 2013 as
falsely contended. Thereafter, in due compliance of the order dated
25th August, 2010 passed by the Copyright Board, the plaintiff has
vide letter dated 12th April, 2013 bearing Reference No.
BG/12/Mumbai/011 within two weeks of the close of the quarter
ending 3rd March, 2013 (i.e. before 15th April, 2013) forwarded the
extension of the Original Bank Guarantee. The said Bank Guarantees
have been regularly revised/extended by the plaintiff till date in terms
of the Compulsory License(s).
33. In rejoinder arguments, it is also submitted that the impugned
cancellation notice is a ploy to circumvent the order dated 25th
August, 2010 by the Copyright Board which has been upheld by
various courts including the Supreme Court, as the defendant No.2
had assailed the said order before various Courts. Firstly the
defendant No. 2 had preferred an appeal dated 28th October, 2010
under Section 72 of the Copyright Act, 1957 before the High Court of
Judicature at Madras. The said Court by its order dated 22nd
December, 2010 in CMA No. 3382/2010 dismissed the application for
interim relief, seeking stay of the order dated 25th August 2010. The
CS(OS) No.2119/2013 Page 25 of 57
above said order dated 22nd December, 2010 was challenged before
Supreme Court in Special Leave Petition (Civil) No. 5727-5735/2011
which was also dismissed by order dated 5th April, 2011.
34. As the defendant No.2 has failed to get the orders of stay of
operation of the order dated 25th August, 2010 passed by the
Copyright Board, the defendant No. 2 by instituting a Writ Petition
(Civil) No.8144 of 2011 titled as ‘PPL v. Union of India and others’
before this Court wherein the plaintiff was also arrayed as respondent
No.3, sought quashing of the Compulsory Licenses dated 3rd
September, 2010 granted by the Registrar of the Copyright Board.
This Court vide order dated 18th November, 2011 refused to grant any
interim order in favour of defendant No. 2. The Division Bench of this
Court vide order dated 4th January 2012 directed both the parties i.e.
plaintiff and defendant No.2 to comply with the directions issued by
the Division Bench in LP.A No.1037/2011. It is submitted that the
plaintiff continues to comply with the order dated 4th January, 2012
passed by the Single Judge of this Court.
This Court vide order dated 9th January, 2015 dismissed the
W.P. (C) No. 8144 of 2011.The defendant No. 2 thereafter in a ploy
to circumvent the order dated 25th August, 2010 passed by the
Copyright Board filed a Contempt Petition in the month of March,
2012 being Cont. Cas No. 203/2012 in the above said writ petition
Civil No. 8144/2011 ,inter alia, alleging non-compliance of the order
dated 4th January 2012 passed by this Court which mandated the
compliance of the order dated 25th August 2010 passed by the
CS(OS) No.2119/2013 Page 26 of 57
Copyright Board. The petition was subsequently dismissed as not
pressed, by this Court by its order dated 19th February, 2013.
35. The plaintiff admits that it had earlier filed a Writ Petition being
W.P. (Civil) No. 4533 of 2013 inter-alia seeking a writ of certiorari for
quashing the impugned notice dated 21st June, 2013. The plaintiff
herein vide order dated 29th October, 2013 withdrew the Writ Petition
with the liberty to agitate its grievance before a Civil Court.
36. It is also pointed out by the plaintiff that the defendant No.2 by
relying upon the Cancellation Notice dated 21st June, 2013 filed a suit
for infringement being Suit (Stamp) No. 626 of 2013 against the
plaintiff filed a suit for infringement. Till date, the defendant No.2 has
not been granted any relief in the said suit.
It is also stated that the plaintiff has received the Cancellation
Notice dated 21st June, 2013 on 24th June, 2013. In fact, the plaintiff
received this notice on 22nd June, 2013 as averred in the written
statement of defendant No. 2 and proved by the Speed Post and
courier delivery reports filed by defendant No. 2 at pp. 54 and 55 of
its documents. In its replication the plaintiff has not denied and hence
admitted the said delivery on 22nd June, 2013.
37. In view of rival submissions made by the parties and various
documents referred by the parties, let me first deal with the issue of
territorial jurisdiction. It is settled law that once the Court holds that it
has no jurisdiction in the matter, it should not consider the merits of
the matter. Reliance is placed on Jagraj Singh v. Birpal Kaur,
(2007) 2 SCC 564 (para 27). Thus, as agreed by the parties also let
me first deal with the issue of territorial jurisdiction.
CS(OS) No.2119/2013 Page 27 of 57
38. On the issue of territorial jurisdiction arising from the location of
a subordinate office, Mr. Amit Sibal, learned Senior counsel
appearing on behalf of the defendant No.2 has referred the judgment
of Patel Roadways Ltd. v Prasad Trading Co. AIR 1992 SC 1514
(paras 9-12) in which it has been explained the true import of Section
20(a) and the explanation to Section 20 CPC. The Supreme Court
interpreted the explanation to Section 20 as an Explanation to
Section 20(a), and the law is settled that a suit can be filed at a place
where the branch/subordinate office of the defendant is located only if
a part of cause of action has arisen at that place and not otherwise.
This Court relied upon Patel Roadways (supra) in Anant Raj
Industries Ltd v. Balmer Lawrie Co. Ltd., (2003)103 DLT 169,
(para 10) and held as under:
“10………..When this decision is applied to the facts of the present case, it will appear that it may have been proper for the Plaintiff to file a suit in Calcutta where the principal office of the Defendant is located. It could also have been filed in Delhi where a subordinate office is located, provided the cause of action of which the Plaintiff is aggrieved, has had arisen in Delhi. In am of the view that despite the fact that the contract might have been entered into at Delhi and money is paid in Delhi, the cause of action on which the suit is predicated was unrelated to the agreement………………. On an application of the ratio of Patel Roadways, there is no scope for Delhi Court to exercise jurisdiction.” Please also see Kensoft Infotech Ltd. vs. Mr. R.S. Krishnaswami & Ors., ILR (2007) I Delhi 308 at para 61-62, pp 339-340.”
39. It is submitted by the defendant No.2 that the contents of
present plaint are similar as that of the plaint in Suit No. 565 of 2011
CS(OS) No.2119/2013 Page 28 of 57
filed by the plaintiff in the Bombay High Court and the cause of action
is also similar viz. the plaintiff’s claim under the Voluntary Licence
Agreements. Thus, this Court has no jurisdiction to entertain the
present suit. The plaint is liable to be returned to the plaintiff for
presentation before the proper Court under Order 7 Rule 10 CPC.
It is argued by Mr. Amit Sibal, learned Senior Counsel that each
and every fact pleaded by the plaintiff does not give rise to a cause of
action creating territorial jurisdiction, rather the intention of the suit as
a whole has to be considered, trivial aspects of the stated cause of
action with no nexus to the lis between parties do not confer territorial
jurisdiction. The facts constituting the “cause of action” are only those
having a substantial nexus or relevance to the lis. Before exercising
jurisdiction, the Court must be satisfied that all such facts arise within
its territorial jurisdiction. The cause of action consists of bundle of
facts which give cause to enforce the legal injury for redress in a
court of law. In other words, it is those facts, which if taken with the
law applicable to them, gives the plaintiff a right to claim against the
defendant. The facts pleaded must be material, integral or essential
to the lis between the parties which must be determined on a
meaningful reading of the plaint.
40. Mr. Sibal has argued that the plaintiff has erroneously relied
upon a suit filed by defendant No. 2 as plaintiff in this Court in
Phonographic Performance Limited v Spring Club, 2014(209)
DLT 584 to argue that defendant No. 2 itself avers that it has a
branch office in Delhi from which it carries out the business of
licensing of sound recordings. The said case is irrelevant for
CS(OS) No.2119/2013 Page 29 of 57
determining whether “cause of action” has arisen within the territorial
jurisdiction of this Court in the facts of the present case. In
Phonographic Performance Limited (supra), defendant No. 2 had
filed a suit for infringement of its copyright in sound recordings and
averred that it has a branch office in Delhi from which it carries out
the business of licensing sound recordings to maintain a suit as a
plaintiff under Section 62(2) of the Copyright Act. Section 62(2) of the
Copyright Act reads as under:
“For the purpose of sub-section (1), a “district court having jurisdiction” shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), or any other law for the time being in force, include a district court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or other proceeding or, where there are more than one such persons, any of them actually and voluntarily resides or carries on business or personally works for gain.” Under Section 62(2) of the Copyright Act, it is not a sine qua non,
for a copyright owner to maintain a suit for infringement, that the
cause of action should arise at the place of suing. The situation is
wholly different from Section 20(a) CPC read with the Explanation,
which mandates that the ‘cause of action’ must have arisen at the
place of a subordinate office of the defendant to create territorial
jurisdiction at such place. The fact that defendant No. 2 has an office
in Delhi and does licensing of sound recordings from such office does
not give rise to any cause of action as it is immaterial to the lis
between the parties in this suit, which relates to the entitlement of the
CS(OS) No.2119/2013 Page 30 of 57
plaintiff to adjust the alleged excess payments made under
VLAs.
It is submitted that mere location of a branch office of PPL in
Delhi and the licensing of sound recordings from such office does not
clothe this Court with territorial jurisdiction as no “cause of action” has
arisen within the territorial jurisdiction of this Court.
41. It is relevant to mention here that after the order in the interim
application was reserved on 10th August, 2015 and before
pronouncement of the order, the plaintiff filed fresh application being
I.A. No.20535/2015 under Section 151 CPC for placing on record
certain further development and additional documents. The said
applications were listed before Court on 29th September, 2015. The
defendant No.2 sought time to file the reply. After filing the reply on
8th January, 2016, it was observed and agreed by the parties that the
averments made in the application are linked with the interim
injunction application thus the same be decided along with I.A.
No.1762/2013.
42. It was alleged in the application that on 14th September, 2015
pending motion being No.654/2015 was taken by the Bombay High
Court in C.S (O.S) 565/2011 and the same was disposed of after
recording the statement on behalf of the plaintiff that the plaintiff has
adjusted the amount permitted by the Copyright Board under the
compulsory licenses in respect of voluntary licenses and no further
amount remains to be adjusted. Counsel for defendant No.2 raised its
objection that the adjustment was impermissible and Court had
CS(OS) No.2119/2013 Page 31 of 57
observed that the objections be kept open to the final hearing of the
suit, however the pending motion was disposed of.
43. It is evident from the said order that the issue of adjustment of
the amount is kept alive which is to be decided at the final stage. The
said amount is pertaining to voluntary licenses and the plaintiff has
exercised its power to adjust the amount suo-motto in view of the
clause 8 of the agreement.
44. Mr. Sibal has rightly argued that once the advantage has been
taken by the plaintiff in clause 8 of the agreement, the clause 33 of
the said agreement ipso facto would be attracted.
45. The plaintiff has invoked the territorial jurisdiction of this Court
to entertain the present suit on the grounds that the defendant No.2
carries on business within the territorial jurisdiction of this Court at
Delhi. The defendant No.2 in Writ Petition (Civil) No. 8144/2011 filed
by it before this Court inter-alia seeking cancellation of 15
Compulsory Licenses granted by the Registrar of Copyrights has
admitted in Writ Petition that the defendant No.2(petitioner therein) is
carrying on business from its office in Delhi. The defendant No.2 in
the said Writ Petition (Civil) No. 8144/2011 describing the jurisdiction
of this Court to entertain the Writ Petition stated that the plaintiff
(arrayed as respondent No.3 in the Writ Petition) is broadcasting the
sound recordings of the defendant No.2 (petitioner in the writ petition)
from one of its FM Radio Stations located at Delhi.
Writ petition (Civil) No.8144/2011 preferred by the defendant
No.2 (Petitioner therein) has been dismissed vide judgment dated 9th
January, 2015.
CS(OS) No.2119/2013 Page 32 of 57
46. It is alleged by the plaintiff that the defendant No.2 has also
filed a Civil Suit being CS (OS) No. 2749/2011 before this Court titled
as ‘Phonographic Performance Limited v. HT. Media’, which also
pertains to the order dated 25th August, 2010 passed by the
Copyright Board wherein it has been stated that PPL is carrying its
business of compulsory licensing from Delhi. The reliance is also
placed on the order dated 18th November, 2013 passed by this Court
in the present suit wherein this Court rejected the contention of the
defendant No.2 qua the lack of territorial jurisdiction of this Court.
Paragraph 14 of the impugned order is reproduced herein below:-
“Admittedly, the defendant's subsidiary office is at Delhi, part of cause of action has arisen at Delhi as the Compulsory Licenses were issued at Delhi, the breach whereof is alleged by the defendant and the right to cancel conferred on the plaintiff arises from the Compulsory Licenses issued at Delhi. Thus, it cannot be said that this Court has no territorial jurisdiction to try the present suit. It is further the contention of the defendant that since the plaintiff is relying upon voluntary agreements, as per Clause 33 of the voluntary license agreement the parties agreed to submit to the jurisdiction of High Court of Judicature at Bombay exclusively and thus this Court does not have the territorial jurisdiction to entertain the suit. In the present suit, the cause of action does not arise because of voluntary license agreement between the parties but relates to the Cancellation Notice dated 21st June, 2013 issued by the defendant citing. breaches of the Compulsory Licenses dated 3rd September, 2010, Hence the terms of the Voluntary License Agreements between the parties will not govern the present suit."
47. The contention of the defendant No.2 is that the suit could have
only been filed in Bombay High Court and not in Delhi, if any fresh
CS(OS) No.2119/2013 Page 33 of 57
cause of action has arisen. The filing of suit before this Court is an
abuse of process of Court.
48. Mr. Sibal, learned Senior counsel contends that the presence in
Delhi of one out of twenty of the plaintiff’s radio stations has no
substantial nexus or relevance to the lis. If the plaintiff could sue in
any one of twenty places at its choice without the cause of action
arising at the place where a radio station of the plaintiff is located.
The averments in the plaint in the context of territorial jurisdiction of
this Court are not integral, material and essential to the lis between
the parties.
49. In any case, even assuming arguendo as argued by Mr. Sibal
that part of cause of action has arisen both in Mumbai and Delhi, the
exclusive jurisdiction clause in the VLAs cannot be derogated from
and operates as a jurisdictional bar on this Court.
50. There are following admitted facts and circumstances which
may be relevant for the purpose of deciding the issue of territorial
jurisdiction as per the pleadings. The same are as under:-
a) All VLA’s are made and executed at Mumbai. Clause 33 of
each VLA is an exclusive jurisdiction clause of the Bombay
High Court. Therefore, any dispute arising out of the VLAs
has to be decided by the Bombay High Court. Such suit has
already been filed by the plaintiff (Suit No.565/2011) before
the Bombay High Court.
b) Both the plaintiff and defendant No. 2 have their registered
offices in Mumbai. The plaintiff’s various letters addressed to
the defendant No.2 containing their alleged claim of
CS(OS) No.2119/2013 Page 34 of 57
adjustment were sent by the plaintiff from their Mumbai office
to the defendant No.2's Mumbai office.
c) Defendant No.1 (registered office is in Ahmedabad) issued
the relevant bank guarantees from its Mumbai office and
received instructions from defendant No. 2 invoking the same
in its Mumbai office.
d) Defendant No. 2' s cancellation notice dated 21st June, 2013
is addressed and issued from the Registered office of the
defendant No.2 in Mumbai and addressed to and received by
the plaintiff at its registered office situated in Mumbai.
e) All other relevant correspondence between the parties also
admittedly took place in Mumbai. In paragraph 11 of the
plaint the plaintiff states that its cause of action arose from a
series of acts of defendant No. 2 which took place only in
Mumbai.
51. The cause of action to file the present suit arose on 21st June,
2013 when the defendant No. 2 issued the Cancellation Notice
terminating the Compulsory Licenses dated 3rd September, 2010.
Admittedly, the said cancellation notice was issued and received in
Mumbai. The cause of action also arose on 22nd July, 2013 when the
defendant No. 2 sought to invoke the Bank Guarantees in question
by addressing a letter to the defendant No.1, admittedly this
happened in Mumbai.
As per the plaintiff, the cause of action arose on 23rd July, 2013
when the defendant No.2 filed the Suit (Stamp) No. 626 of 2013
CS(OS) No.2119/2013 Page 35 of 57
[now numbered as Suit No. 796 of 2013] inter-alia on the alleged
plea of infringement by the plaintiff of the repertoire of the defendant
No. 2. The said suit was admittedly filed in the Bombay High Court.
Even in para 12 and 13 of Suit No.565/2011 filed by the plaintiff in
the Bombay High Court, the plaintiff has itself averred that the cause
of action regarding its claim of adjustment between the VLAs and the
apprehension that the Compulsory licenses will be terminated by the
defendant No.2 arose in Mumbai and accordingly claimed the
jurisdiction of the Bombay High Court.
52. The plaintiff claimed jurisdiction in Delhi on the basis that
defendant No. 2 has a branch office in Delhi, that the plaintiff has 1
out of 20 FM Radio Stations in Delhi, that the Copyright Board and
the Registrar of Copyrights have respectively passed the Compulsory
Licensing Order and issued the Compulsory Licenses from their
offices in Delhi after proceedings conducted in Delhi is without any
substance as none of these facts has any bearing on the plaintiff's
actual cause of action. As per settled law that each and every fact
pleaded by the plaintiff does not ipso facto give rise to a cause of
action creating territorial jurisdiction, rather the intention of the suit as
a whole has to be considered, trivial aspects of the cause of action do
not confer territorial jurisdiction.
The argument of the plaintiff is that the claim of territorial
jurisdiction in Delhi on the basis that the Copyright Board's order was
passed in Delhi is irrelevant, since the plaintiff has not disputed the
said order and in any case because the geographical location of a
CS(OS) No.2119/2013 Page 36 of 57
tribunal is no basis for claiming territorial jurisdiction. Further, in
A.B.C Laminart Pvt. Ltd. v. A.P. Agencies, 1989 (2) SCC 163
Supreme Court held that in cases of repudiation of contract, the
jurisdiction will lie with Courts where the said repudiation was
received.
53. Even some part of the cause of action arose in Delhi, the most
essential and inseparable part of the plaintiff's cause of action
indisputably rests on the plaintiff's above claims made on the basis of
the VLAs. No event occurring in Delhi can derogate from the
exclusive jurisdiction clause in the VLAs. This Court cannot dispose
of the lis between the parties de hors the plaintiff's purported claim of
adjustment under the VLAs against compulsory license
compensation. Even assuming arguendo that this Court has territorial
jurisdiction on the basis of any other elements of the cause of action,
the jurisdiction of this Court remains barred by the exclusive
jurisdiction clause in the VLAs. Reliance is placed on the following:
Begum Sahiba Sultan v Nawab Mohd. Mansur Ali (2007) 4
SCC 343 (para 10).
M/s Hanil Era Textiles Ltd. v M/s Puromatic Filters (P) Ltd.
(2004) 4 SCC 671 (para 7).
54. The plaintiff has now averred that this Court has territorial
jurisdiction as the plaintiff is operating one of their FM Radio Stations
in Delhi. It is pertinent to note that the Compulsory Licenses or the
Copyright Board’s order is not under challenge in the present suit so
as to confer territorial jurisdiction to this Court. The plaintiff is claiming
compliance of the terms of the Compulsory Licenses by letter written
CS(OS) No.2119/2013 Page 37 of 57
from its registered office in Mumbai to the defendant No.2 who also
has its registered office in Mumbai. The plaintiff is submitting the
usage reports (although incomplete and unsubstantiated) for all its 20
FM Radio stations from the registered office in Mumbai to the
defendant No.2‘s registered office in Mumbai.
The plaintiff has addressed all its correspondence after the
Copyright Board’s order dated 25th August, 2010 referred to and
relied upon in the present suit from their registered office in Mumbai.
The plaintiffs have addressed all their letters claiming purported
adjustments from their registered office in Mumbai to the defendant's
registered office in Mumbai.
55. The Supreme Court in Union of India v. Adani Exports Ltd.,
(2002) 1 SCC 567 held as under:
"17…….. It is clear from the above judgment that each and every fact pleaded by the respondents in their application does not ipso facto lead to the conclusion that those facts give rise to a cause of action within the courts territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the lis that is involved in the case. Facts which have no bearing with the lis or the dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the court concerned….” (Emphasis supplied)
56. Another decision of the Supreme Court in Alchemist Ltd &
Anr. v State Bank of Sikkim & Ors. (2007) 11 SCC 335, has been
relied upon by the defendant No.2, in which after discussing a
catena of judgments, it was held as under:
“25.The learned counsel for the respondents referred to several decisions of this Court and submitted that whether a particular
CS(OS) No.2119/2013 Page 38 of 57
fact constitutes a cause of action or not must be decided on the basis of the facts and circumstances of each case. In our judgment, the test is whether a particular fact(s) is (are) of substance and can be said to be material, integral or essential part of the lis between the parties. If it is, it forms a part of cause of action. If it is not, it does not form a part of cause of action. It is also well settled that in determining the question, the substance of the matter and not the form thereof has to be considered.”
57. Reliance is also placed on the following judgments in this
regard. South East Asia Shipping Co. Ltd. v. Nav Bharat
Enterprises Pvt Ltd & Ors., (1996) 3 SCC 443, (para 3); Kensoft
Infotech Ltd. v. R.S. Krishnaswami & Ors. ILR (2007) I Delhi 308,
(para 61); Rattan Singh Associates (P) Ltd. v. M/s Gill Power
Generation Company Pvt. Ltd., ILR (2007) I Delhi 275 (paras 12,
18, 21, 22 and 31); Sector twenty-one Owners Welfare
Association v Air Force Naval Housing Board & Ors., (1997) 65
DLT 81 (DB) (para 13.)
58. Admittedly, correspondences were exchanged between the
parties in regard to the above from Mumbai i.e. from their offices. As
a matter of fact the plaintiff itself has based its suit filed before the
Bombay High Court on its repudiation of the defendant No.2 by letter
dated 19th January, 2011 refusing to accept the purported
adjustments sought to be made by the plaintiff.
59. The plaintiff admittedly instituted Suit No. 565 of 2011 in the
Bombay High Court, seeking enforcement of its claim under the VLAs
abandoned by them for adjustment of alleged excess payment
thereunder against the compensation payable to the defendant No.2
CS(OS) No.2119/2013 Page 39 of 57
for compulsory licence, and seeking permanent and interim
injunctions restraining the defendant No.2 from cancelling the
compulsory licences for non payment of compensation. Prayers (b)
and (e) in the said suit are reproduced below:-
"(b) That this Hon'ble Court be pleased to declare that the Defendant
is bound to adjust and the plaintiff is not liable to pay any usage
amount under the License Agreements and the Compulsory
License Agreements dated 3rd September, 2010 until such time
as the excess amount computed in terms of prayer (a) above to
the extent of Rs.8,83,06,248/- or such sum that may remain after
adjustment of amounts against future usage has been adjusted
and exhausted fully...
(e) That the Court be pleased to pass a permanent order and
injunction restraining the Defendant, its officers, servants.
directors, employees, authorized representatives and agents or
any one from in any manner terminating or taking any coercive
steps under the License Agreements and the Compulsory
License Agreements dated 3rd September 2010 as long as (i) the
excess amount is lying with the defendants and (ii) the monthly
payments are made by the plaintiff in consonance with the order
dated 25th August 2010 passed by the Copyright Board;
60. It is evident that the plaintiff’s claim for enforcement of its
interpretation of the VLAs and the same plaintiff’s claim to be
complying with the terms of the compulsory licences, are not merely
indissolubly interlinked but in fact are one and the same plea as well
as one and the same cause of action.
CS(OS) No.2119/2013 Page 40 of 57
61. In the plaint in Suit No. 565 of 2011 filed by the plaintiff before
the Bombay High Court set out the cause of action and the territorial
jurisdiction for the said suit. The plaintiff has averred that the cause of
action is the defendant No.2’s letter dated 19th January, 2011. Further
for territorial jurisdiction the plaintiffs have averred that all the VLA's
are executed at Mumbai and the plaintiffs and the defendant No.2
have their registered offices (principle places of business) in Mumbai.
The plaintiff carries on its business within the jurisdiction of the
Mumbai High Court and therefore under Section 62 of the Copyright
Act (which vests jurisdiction in case of suits under chapter XI of the
Copyright Act to the District Court having jurisdiction). Section 62 (2)
contains exclusive interpretation of the terms ‘District Court having
jurisdiction appearing in sub section (1) of Section 62’. It specifies the
district court within whose jurisdiction the person instituting the suit
actually and voluntarily reside or carry on business. The cause of
action to file the suit in Mumbai and a fresh cause of action is sought
to be made out by the plaintiff in the present suit. The subject matter
of the Bombay suit is the 20 VLA's and the 20 Compulsory Licenses.
The plaintiff has averred jurisdiction of Mumbai High Court (exclusive
under Section 62) with respect to all the compulsory licenses
pleading that it is carrying on business in Mumbai.
62. Thus, it appears to the Court very clearly that the lis between
the parties arises entirely out of the VLAs. Both in the Bombay suit
and in the present suit, the plaintiff is seeking to enforce its claims
under the VLAs with a consequential injunction against cancellation
(whether prospective or post facto) of its compulsory licences for non-
CS(OS) No.2119/2013 Page 41 of 57
payment. These are not two lis, which might be adjudicated
separately but only one, and there is no cause of action de hors the
same.
63. No doubt after the Copyright Board’s order dated 25th August,
2010 (also referred to as “Compulsory Licensing Order”), claiming the
right to adjust under Clause 8 of the VLA’s, the plaintiff sent notices
to defendant No. 2 stating that it need not make payments under the
compulsory licenses until alleged excess payments made under the
VLAs are adjusted. Defendant No. 2 did not accept the said claim for
adjustment.
64. Accordingly, defendant No. 2, by exercising its right under
clause (f) of the compulsory licenses and Para 32.27(f) of
Compulsory Licensing Order sent a notice of cancellation for 20
compulsory licenses to the plaintiff, which was served on 22nd June,
2013, and took effect on 21st July, 2013. In the present suit (as in the
Bombay suit) the plaintiff assails defendant No. 2’s right to cancel the
licenses on the basis of its claim to adjust under VLAs.
65. The defendant No. 2 had issued the Cancellation Notice inter-
alia on various grounds such as alleged non-payment of
compensation by 7th day of each month on and from October, 2010
or any other date, for all the FM Radio Stations till date; alleged
failure to submit monthly usage log reports; defaults in providing
Bank Guarantees as per clause (b) of the Compulsory Licenses read
with Para 30.27 (b) of the Copyright Board’s order dated 25th August,
2010 etc. which are not the subject matter of the suit filed before the
High Court of Bombay. The suit filed before the High Court of
CS(OS) No.2119/2013 Page 42 of 57
Bombay seeks to restrain the defendant No. 2 from terminating the
Compulsory Licenses dated 3rd September, 2010 as long as the
excess amount is lying with the defendant No. 2 and the monthly
payments are made in consonance with the order dated 25th August,
2010 passed by the Copyright Board. However, in the Cancellation
Notice dated 21st June, 2013, the defendant No. 2 has sought to
terminate the Compulsory Licenses on various other false and
baseless grounds as detailed in the Cancellation Notice which
constitute a fresh cause of action.
66. It is also the admitted position that the plaintiff in Bombay suit
sought injunction restraining the defendant No.2 from terminating
VLA’s and compulsory licenses who could not get the injunction from
cancelling the compulsory licenses. When the present suit was filed
the suit in Bombay High Court was pending.
The case of the plaintiff is that the present suit arises out of a
fresh cause of action that has arisen on 21st June, 2013 when the
defendant No. 2 had issued the impugned Cancellation Notice dated
21st June, 2013 cancelling the Compulsory Licenses granted by the
Registrar, Copyright Board. The cause of action also arose on 22nd
July, 2013 when the defendant No. 2 sought to invoke the Bank
Guarantees by addressing letter to the defendant No.1.
67. Counsel for the plaintiff argued that all the said VLAs have
expired and therefore the exclusive jurisdiction clause cannot be
enforced. The plaintiff cannot claim rights arising from the contract de
hors the contract. If according to the plaintiff, Clause 33 cannot
survive on the expiry of the agreement, then neither can the other
CS(OS) No.2119/2013 Page 43 of 57
clauses. In that case the plaint is without any basis or cause of
action, because the entire plea of right to adjust is based on Clause 8
of the VLAs. Moreover, this argument of learned counsel for the
plaintiff contradicts the plaint, which asserts rights based on Clause 8
of VLA in which case other clauses also survive, including Clause 33
which bars the jurisdiction of this Court. If the plaintiff argues that
there cannot be any reliance on the exclusive jurisdiction clause
contained in Clause 33 of VLAs since they have expired, the same
rationale will also be extended to the entire VLA, including Clause 8.
68. The contention of learned counsel for the plaintiff that the
exclusive jurisdiction clause is not enforceable after expiry of an
agreement is contrary to law and without any valid reason. The
judgment of National Textile Corpn Ltd v. Ashval Vaderaa,
2009(107) DRJ 637, relied upon by the plaintiff, does not support his
proposition, as it is inapplicable to the facts of the present case and
completely distinguishable. In National Textile Corpn. Ltd. (supra),
the rights of the petitioner neither flowed from the agreement dated
16th October, 1978 that had expired in 1980 (more than 25 years
earlier) nor related to that period. During those 25 years, the expired
agreement was succeeded by agreements whose terms kept on
changing from time to time. A new month to month tenancy was in
existence from 1st January, 2005 (with no arbitration clause) when the
landlord filed a suit for possession in 2006. Thereafter in 2006/2007,
the petitioner-tenant filed an application invoking the arbitration
clause of the expired/exhausted 1978 agreement with which the
controversy had no relation, and no rights from the earlier expired
CS(OS) No.2119/2013 Page 44 of 57
agreement or for that period were in question. It is in this context that
this Court held that that a party cannot resort to an arbitration clause
in the exhausted/expired contract as the disputes were covered by a
new contract, which had no arbitration clause.
69. This issue is no longer res integra as this Court, on facts and
subject matter similar to the present suit, has held that an ouster
clause (exclusive jurisdiction clause) will continue to be applicable for
interpretation of the rights of the parties flowing from an agreement
even after its tenure has come to an end. Reliance is placed on
Nariman Films v. Dilip Mehta & Anr., 2005(31) PTC 571 (Del.),
(para 19-21).
70. Once the advantage has been taken by the plaintiff in clause 8
of the agreement and the similar relief has also been sought by the
plaintiff earlier in Bombay High Court then the clause 33 of the said
agreement ipso facto would be attracted. Both clauses 8 and 33 of
the agreement are reproduced herein below:-
“8. The Licensor hereby grants voluntary license for the existing and future works of Licensor’s members upon following terms and conditions :
As per the standard terms and conditions of the voluntary license, the licensee, before the commencement of the broadcast was required to pay an advance payment of Rs.30,00,000/- (Rs. Thirty Lacs only) per station as an interest free security deposit. However as the Licensee has commenced six stations and is obtaining voluntary License for Mumbai station, the Licensor as a special consideration agrees to Rs.20,00,000/- (Rupees Twenty Lacs only) as interest free security deposit. The deposit amount shall be paid back to the Licensee subject to deduction of dues if any,
CS(OS) No.2119/2013 Page 45 of 57
in case the radio stations is closed or if the License is cancelled/terminated.
The Licensee before the commencement of the broadcast to make an adhoc advance payment of Rs.3,00,000/- (Rs. Three Lacs only). This amount shall be adjusted at the end of the month as per the following royalty rate :
o Rs.1200/- per needle hour during 8 a.m. to 10 a.m. & 6 p.m. to 8 p.m.
o Rs.300/- per needle hour during 10 p.m. to 6 a.m. and
o Rs.720 per needle hour during rest of the day.
The licensee do hereby agree to pay arrears, if any, from the date of commencement of broadcast to Licensor in accordance with the final orders that may be passed in the pending proceedings. In case the rates are reduced by the final order then the Licensor shall adjust the difference from further usage by the Licensee.
It is further agreed declared and confirmed that the rate of license fee payable by the Licensee to the Licensor under this agreement shall not be construed as a discount or rebate or concession granted by the Licensor to the Licensee and that the rate of Licensee fee shall be such as may be finally determined for Licensees operating at the city of operation by the Hon’ble Court and/or Tribunal. The Licence Fee is exclusive of any Sales Tax, Service Tax, Lease Tax and/or other such taxes as may be levied on the Licence Fee payable, by any government authority and regulations. All taxes, duties or other similar payments (including VAT) shall be borne by the Licensee.
33. This License shall be governed by and construed in accordance with the laws of India and the High Court of Judicature at Bombay shall have exclusives jurisdiction.”
71. The plaintiff has admitted that the amount has been adjusted in
view of the order passed by the Copyright Board under Clause 8 of
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the VLA’s. In view of admission, clause 33 of the same very VLA’s
would also get attracted wherein it has been stipulated that High
Court of judicature at Bombay shall have exclusive jurisdiction.
72. On a meaningful reading of the plaint, it is clear that the entire
lis between the parties is covered by Clause 33 of the VLAs. The
plaintiff claims that the cancellation of compulsory licence is invalid
because the plaintiff is entitled to adjust the amounts payable under
the compulsory license from the amount already paid under VLAs,
which is subject to the exclusive jurisdiction clause. An exclusive
jurisdictional clause cannot be allowed to be circumvented by clever
verbal jugglery and recycled cause of action (from C.S. No. 565 of
2011 in Bombay High Court) in order to obtain relief from this Court
that it could not get from the Bombay High Court. It is settled law that
even where courts in two places may have jurisdiction, an exclusive
jurisdiction clause in favour of one of the two places ousts the
jurisdiction of the other. Reliance is placed on Swastik Gases Pvt.
Ltd. v Indian Oil Corporation Ltd. (2013) 9 SCC 32, (paras 31-33);
ABC Laminart Pvt. Ltd. (supra) (paras 12, 15, 16 & 18); M/s Hanil
Era Textiles Ltd. (supra). Since this suit seeks adjudication on rights
of the plaintiff to adjust allegedly excess payments under VLAs,
Clause 33 of VLA operates as a jurisdictional bar on all other courts
other than the Bombay High Court, including this Court.
73. In view of the admitted facts referred above and as per clause
33, this Court has no jurisdiction to entertain the present suit as per
following judgments :
CS(OS) No.2119/2013 Page 47 of 57
(i) Balaji Coke Industry Private Limited v. Maa Bhagwati
Coke Gujarat Private Limited, (2009) 9 SCC 403, (paras
24 to 30), which read as under:-
“24. The only question which falls for our consideration is whether, notwithstanding the mutual agreement to make the high-seas sale agreement subject to Kolkata jurisdiction, it would be open to the respondent Company to contend that since a part of the cause of action purportedly arose within the jurisdiction of the Bhavnagar Court, the application filed under Section 9 of the Arbitration and Conciliation Act, 1996, before the Principal Civil Judge (Senior Division), Bhavnagar (Gujarat), would still be maintainable.
25. The aforesaid question has often troubled the courts with one view being that since the parties to the agreement had agreed to a particular forum, they could no longer resile from the said position and claim that other courts, where a part of the cause of action may have arisen, would also have jurisdiction to entertain a suit or other proceeding. The other view has been that, if by the said agreement the rightful jurisdiction of a court was sought to be ousted and a court was vested with the jurisdiction to entertain a suit, which it did not have, the same would be contrary to the provisions of Section 28 of the Contract Act, 1872, being contrary to public policy. One of the earlier judgments on this dichotomy of views is that of this Court in Hakam Singh [(1971) 1 SCC 286 : AIR 1971 SC 740]. 26. Faced with the question as to whether an agreement arrived at between two parties that one of the two courts having jurisdiction, would decide all the disputes relating to such agreement, was hit
CS(OS) No.2119/2013 Page 48 of 57
by the provisions of Section 28 of the Contract Act, 1872, this Court in Hakam Singh case held that where two courts or more have the jurisdiction to try a suit or proceeding under the provisions of the Code of Civil Procedure, an agreement between the parties that one of such courts would have the jurisdiction to decide the disputes arising between the parties from such agreement would not be contrary to public policy and would not, therefore, be contrary to the provisions of Section 28 of the Contract Act, 1872. 27. The said question once again arose in A.B.C. Laminart (P) Ltd. [(1989) 2 SCC 163], wherein following the decision in Hakam Singh, but relying on the maxim ex dolo malo non oritur actio, this Court held that by an agreement which absolutely ousted the jurisdiction of a court having the jurisdiction to decide the matter, would be unlawful and void, being contrary to public policy under Section 28 of the Contract Act. But so long as the parties to a contract do not oust the jurisdiction of all the courts, which would otherwise have the jurisdiction to decide the cause of action under the law, it could not be said that the parties had by their contract ousted the jurisdiction of the court. 28. This Court in A.B.C. Laminart case went on to observe that where there may be two or more competent courts which can entertain a suit consequent upon a part of the cause of action having arisen therewithin, if the parties to the contract agree to vest jurisdiction in one such court to try the dispute which might arise between them, the agreement would be valid. 29. The question also arose in R.S.D.V. Finance Co. (P) Ltd. v. Shree Vallabh Glass Works
CS(OS) No.2119/2013 Page 49 of 57
Ltd. [(1993) 2 SCC 130] , where an endorsement “subject to Anand (Gujarat) jurisdiction”, was relied upon to contend that only the courts in Anand would have the jurisdiction to entertain any dispute relating to such jurisdiction and the suit filed in Bombay on the ground that the cause of action arose in Bombay was not maintainable. In the said case, this Court held that since apart from the endorsement on the deposit receipt, there was no formal agreement between the parties, the said endorsement would not divest the courts in Bombay of their jurisdiction to entertain the suit. As will be evident from the facts of the suit, the same stood on a different footing and does not advance the case of the respondent in any way. 30. In the instant case, the parties had knowingly and voluntarily agreed that the contract arising out of the high-seas sale agreement would be subject to Kolkata jurisdiction and even if the courts in Gujarat also had the jurisdiction to entertain any action arising out of the agreement, it has to be held that the agreement to have the disputes decided in Kolkata by an arbitrator in Kolkata, West Bengal, was valid and the respondent Company had wrongly chosen to file its application under Section 9 of the Arbitration and Conciliation Act before the Bhavnagar Court (Gujarat) in violation of such agreement. The decisions of this Court in A.B.C. Laminart (P) Ltd. as also Hakam Singh are very clear on the point.”
(ii) Swastik Gases Private Limited (supra) paras 7, 28 & 57
which read as under:-
“7. We have heard Mr Uday Gupta, learned counsel for the appellant and Mr Sidharth Luthra, learned Additional Solicitor General for the
CS(OS) No.2119/2013 Page 50 of 57
Company. The learned Additional Solicitor General and the learned counsel for the appellant have cited many decisions of this Court in support of their respective arguments. Before we refer to these decisions, it is apposite that we refer to the two clauses of the agreement which deal with arbitration and jurisdiction. Clause 17 of the agreement is an arbitration clause which reads as under:
17. Arbitration
If any dispute or difference(s) of any kind whatsoever shall arise between the parties hereto in connection with or arising out of this agreement, the parties hereto shall in good faith negotiate with a view to arriving at an amicable resolution and settlement. In the event no settlement is reached within a period of 30 days from the date of arising of the dispute(s)/difference(s), such dispute(s)/ difference(s) shall be referred to 2 (two) arbitrators, appointed one each by the parties and the arbitrators, so appointed shall be entitled to appoint a third arbitrator who shall act as a presiding arbitrator and the proceedings thereof shall be in accordance with the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof in force. The existence of any dispute(s)/ difference(s) or initiation/continuation of arbitration proceedings shall not permit the parties to postpone or delay the performance of or to abstain from performing their obligations pursuant to this agreement.
8. The jurisdiction Clause 18 in the agreement is as follows:
18. Jurisdiction
CS(OS) No.2119/2013 Page 51 of 57
The agreement shall be subject to jurisdiction of the courts at Kolkata.
9. The contention of the learned counsel for the appellant is that even though Clause 18 confers jurisdiction to entertain disputes inter se parties at Kolkata, it does not specifically bar jurisdiction of courts at Jaipur where also part of the cause of action has arisen. It is the submission of the learned counsel that except execution of the agreement, which was done at Kolkata, though it was signed at Jaipur, all other necessary bundle of facts forming “cause of action” have arisen at Jaipur. This is for the reason that:
(i) the regional office of the respondent Company is situate at Jaipur;
(ii) the agreement was signed at Jaipur;
(iii) the consignment agency functioned from Jaipur;
(iv) all stock of lubricants was delivered by the Company to the appellant at Jaipur;
(v) all sales transactions took place at Jaipur;
(vi) the godown, showroom and office of the appellant were all situated in Jaipur;
(vii) various meetings were held between the parties at Jaipur;
(viii) the Company agreed to lift the stock and make payment in lieu thereof at a meeting held at Jaipur, and
(ix) the disputes arose at Jaipur.
CS(OS) No.2119/2013 Page 52 of 57
The learned counsel for the appellant would submit that since part of the cause of action has arisen within the jurisdiction of the courts at Jaipur and Clause 18 does not expressly oust the jurisdiction of other courts, the Rajasthan High Court had territorial jurisdiction to try and entertain the petition under Section 11 of the 1996 Act. He vehemently contended that Clause 18 of the agreement cannot be construed as an ouster clause because the words like “alone”, “only”, “exclusive” and “exclusive jurisdiction” have not been used in the clause.
29. When it comes to the question of territorial jurisdiction relating to the application under Section 11, besides the above legislative provisions, Section 20 of the Code is relevant. Section 20 of the Code states that subject to the limitations provided in Sections 15 to 19, every suit shall be instituted in a court within the local limits of whose jurisdiction:
(a) the defendant, or each of the defendants where there are more than one, at the time of commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action, wholly or in part arises.
30. The Explanation appended to Section 20 clarifies that a corporation shall be deemed to carry
CS(OS) No.2119/2013 Page 53 of 57
on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.
31. In the instant case, the appellant does not dispute that part of cause of action has arisen in Kolkata. What appellant says is that part of cause of action has also arisen in Jaipur and, therefore, the Chief Justice of the Rajasthan High Court or the designate Judge has jurisdiction to consider the application made by the appellant for the appointment of an arbitrator under Section 11. Having regard to Section 11(12)(b) and Section 2(e) of the 1996 Act read with Section 20(c) of the Code, there remains no doubt that the Chief Justice or the designate Judge of the Rajasthan High Court has jurisdiction in the matter. The question is, whether parties by virtue of Clause 18 of the agreement have agreed to exclude the jurisdiction of the courts at Jaipur or, in other words, whether in view of Clause 18 of the agreement, the jurisdiction of the Chief Justice of the Rajasthan High Court has been excluded?
32. For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties by having Clause 18 in the agreement is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expressio
CS(OS) No.2119/2013 Page 54 of 57
unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner.”
57. For the reasons mentioned above, I agree with my learned Brother that in the jurisdiction clause of an agreement, the absence of words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” is neither decisive nor does it make any material difference in deciding the jurisdiction of a court. The very existence of a jurisdiction clause in an agreement makes the intention of the parties to an agreement quite clear and it is not advisable to read such a clause in the agreement like a statute. In the present case, only the courts in Kolkata had jurisdiction to entertain the disputes between the parties.”
(iii) Jyothi Turbopower Services Pvt. Ltd., Biswajit Nath, J
Nath v. Shenzhen Shandong Nuclear Power
Construction Company Ltd., Deputy Project Manager,
Liu Yan Zheng and Syndicate Bank, Branch Manager,
CS(OS) No.2119/2013 Page 55 of 57
(2011) 3 Arb. LR 442 (DB), paras 17, 18, 30 & 31, which
read as under:-
“17. Having regard to the contentions of the respective counsel, the points that arise for consideration in the present appeal are:
1) Whether the Court below has jurisdiction to entertain the present application filed by the appellant under Section 9 of the Act, for an interim measure, when the parties have designated the State of Orissa, as the place of arbitration?
2) Whether the Court below is justified in going into the merits of the matter and giving a finding that there is no prima facie case in favour the appellant, having held that it has no jurisdiction to entertain the present petition?
18. The learned counsel for the appellant submits that even a fraction of cause of action is enough and sufficient to decide the territorial jurisdiction of a Court for entertaining the petition under Section 9 of the Act. According to him, the registered office of the appellant company is situated at Hyderabad, the tender documents under Ex.A11 have been submitted from Hyderabad, agreement works are being monitored from Hyderabad and the bank guarantees have been drawn at the banks at Hyderabad, and thus cause of action having arisen within the jurisdiction of the Court below, in view of the provisions of Section 20 C.P.C., the Court below had the jurisdiction to entertain application under Section 9 of the Act. In support of this contention, he relied upon the decision of a Division Bench of this Court in INCOMM Tele Ltd. v. Bharat Sanchar Nigam Ltd (1 supra).
x x x x x
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30. Though the learned counsel for the appellant contended that decisions of this Court in Salarjung Museum case and Paramita Constructions case, cannot be made applicable to the facts of the case on hand because the former dealt with an application filed under Section 34 of the Act, for setting aside the award passed by the Arbitrator, and the latter dealt with an application filed under Section 11 of the Act for appointment of Arbitrator, and not an application under Section 9 of the Act, but the fact remains, in the said two decisions, the Courts, though not directly, but incidentally, while considering the provisions of the law, held that when the parties have chosen a particular State/City, as the place of arbitration, the “Court” appearing in Sections 9 and 34 shall be the Courts situated in the said State/City alone, and not any other.
31. In the case on hand, as noted supra, the parties have specifically, in Article 10 of the agreement, have agreed to the place of arbitration as the State of Orissa. That being so, we are of the considered opinion that the appellant cannot be permitted to invoke the theory of cause of action by application of the provisions of the Code of Civil Procedure, so as to confer jurisdiction upon the Court at Hyderabad, for entertaining application under Section 9 of the Act, and if such argument of the appellant is accepted, then the very purpose of the parties agreeing to the place of arbitration as State of Orissa in Article 10 of the agreement, would be defeated.”
74. In view of the above settled law, I am of the considered view
that this Court has no jurisdiction to entertain the present petition.
The plaint therefore is liable to be returned under Order 7 Rule 10
CPC for presentation before the appropriate Court i.e. High Court of
CS(OS) No.2119/2013 Page 57 of 57
Judicature at Bombay who is only competent to have the territorial
jurisdiction. In view of the peculiar facts of the present case wherein
the plaintiff has alleged that the termination letter has been issued
during the judicial proceedings pending in the High Court of Madras
coupled with the fact that the interim order to stay the termination
letter has been continued for the last more than 2 years, the interim
order passed on 18th November, 2013 will continue for further period
of four weeks. The Transferee Court would be at liberty to consider
the matter and pass the order whether to continue or not the interim
order as per the merit of the case. The Registry would return the
plaint along with all the pleadings of the parties and documents to the
plaintiff through counsel, against receipt as per procedure.
(MANMOHAN SINGH) JUDGE
FEBRUARY 9, 2016