Lyca Productions Private Limited v. Mr.Vishal Krishna Reddy
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 06.08.2021 Pronounced on : 18.08.2021 Coram:
THE HONOURABLE DR. JUSTICE G.JAYACHANDRAN Lyca Productions Private Limited, Rep. by its Authorised Signatory Mr.Neelkant Narayanpur, No.55, Vijayaraghavar Road, T.Nagar, Chennai - 600 017, Tamil Nadu ... Applicant in all applications /versus/ Mr.Vishal Krishna Reddy, The Sole Proprietor of M/s.Vishal Film Factory, No.73, 1st Street, Kumaran Colony, Vadapalani, Chennai - 600 026, Tamil Nadu ... Respondent in all applications Prayer in O.A.No.98 of 2021:- This Original Application is filed under Order IV Rule 8 of Original Side Rules read with Order 39 Rule 1 & 2 of the Code of Civil Procedure, 1908.
a). Why the above application should not be treated as urgent? b). Why this Hon'ble Court should not be pleased to grant an order of 1/28
interim injunction restraining the respondent their men, agents, employees representatives acting through or under the respondent from in any manner releasing or exhibiting the movie "CHAKRA" produced by respondent in theatres within India or Worldwide or on any Over-the-ToP (OTT) media streaming platforms or any other media streaming platforms or any other media pending disposal of the above suit the movie Chakra, pending disposal of the suit? Prayer in O.A.Nos.129 of 2021:- This Original Application is filed under Order IV Rule 8 of Original Side Rules read with Order XXXVIII Rule V read with Section 151 of the Code of Civil Procedure, 1908. a). Why the above application should not be treated as urgent? b).
Why this Hon'ble Court should not be pleased to grant an order granting an injunction against the respondent, its agent, employees or any person acting under or through him from receiving any funds or using, alienating or disbursing any funds received or receivable in relation to the movie "CHAKRA", either directly or indirectly without the leave of this Hon'ble Court? Prayer in A.No.555 of 2021:- This Application is filed under Order IV Rule 8 of Original Side Rules read with Section 151 of the Code of Civil Procedure, 1908. a). Why the above application should not be treated as urgent? b).
"CHAKRA" to be deposited into Court to the account of the above suit pending disposal of the said suit?
Prayer in A.No.556 of 2021:- This Application is filed under Order IV Rule 8 of Original Side Rules read with Order XXXVIII Rule-V of the Code of Civil Procedure, 1908.
a). Why the above application should not be treated as urgent? b). Why this Hon'ble Court should not be pleased to direct the respondent to furnish security to the suit claim of Rs.30,05,68,137/- (Rupees Thirty Crores Five Lakh Sixty Eight Thousand One Hundred and Thirty Seven only) failing which the order of the positive, negative and digital storage of the film titled "CHAKRA" starring Vishal Krishna, as described in the schedule to the Judges Summons, pending disposal of the above suit?
Prayer in A.No.789 of 2021:- This Application is filed under Order IV Rule 8 of Original Side Rules read with Order XXXVIII Rule V read with Section 151 of the Code of Civil Procedure, 1908.
a). Why the above application should not be treated as urgent? b). Why this Hon'ble Court should not be pleased to grant an order directing the respondent to disclose on oath all personal assets owned by the respondent, Mr.Vishal Krishna?
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Prayer in A.No.790 of 2021:- This Application is filed under Order IV Rule 8 of Original Side Rules read with Order XXXVIII Rule V read with Section 151 of the Code of Civil Procedure, 1908.
a). Why the above application should not be treated as urgent? b). Why this Hon'ble Court should not be pleased to grant an order directing the respondent to disclose on oath details of all agreements entered with regard to the move "CHAKRA", or any part thereof, including agreements for the dubbed versions of the movie in Hindi, Telugu, Malayalam and Kannada and including but not limited to distribution agreements, overseas distribution agreements, agreements with theatres, agreements with music labels, agreements for dubbing of the movie in other languages and agreements for assignment/sale of satellite rights and disclose on oath a statement of all payments, received and receivable by the respondent therefrom?
For Applicant : M/s.Hema Srinivasan in all applications For Respondent : Mr.A.Chidambaram in all applications 4/28
COMMON ORDER The two Original applications and four Applications have emanated from the plaintiff in C.S.No.59 of 2021 filed before the Commercial Division of this Court. The suit is filed for recovery of Rs.30,05,68,137/- alleged to be due from the defendant under the loan agreement dated 21.09.2019.
2. The suit prayer reads as below:- (i). Directing the defendant to pay the plaintiff a sum of Rs.30,05,68,137/- (Rupees Thirty Crores Five Lakhs Sixty Eight Thousand One Hundred and Thirty Seven Only), with interest at 30% p.a on the Principal amount of Rs.21,29,00,000/- from the date of plaint till realization. (ii). To Direct the defendant to pay the costs of the suit.
3. The reliefs pending suit sought in the above six applications under consideration reads as below:- (i). O.A.No.98 of 2021:- To grant an order of interim injunction restraining the respondent their men, agents, employees representatives acting through or under the respondent from in any manner releasing or 5/28
exhibiting the movie "CHAKRA" produced by respondent in theatres within India or Worldwide or on any Over-the-ToP (OTT) media streaming platforms or any other media streaming platforms or any other media pending disposal of the above suit the movie Chakra, pending disposal of the suit?
(ii). O.A.No.129 of 2021:- To grant an order granting an injunction against the respondent, its agent, employees or any person acting under or through him from receiving any funds or using, alienating or disbursing any funds received or receivable in relation to the movie "CHAKRA", either directly or indirectly without the leave of this Hon'ble Court?
(iii). A.No.555 of 2021:- to grant an order directing all amounts received or receivable by the respondent in relation to the film titled "CHAKRA" to be deposited into Court to the account of the above suit pending disposal of the said suit?
(iv). A.No.556 of 2021:- To direct the respondent 6/28
to furnish security to the suit claim of Rs.30,05,68,137/- (Rupees Thirty Crores Five Lakh Sixty Eight Thousand One Hundred and Thirty Seven only) failing which the order of the positive, negative and digital storage of the film titled "CHAKRA" starring Vishal Krishna, as described in the schedule to the Judges Summons, pending disposal of the above suit?
(v). A.No.789 of 2021:- To grant an order directing the respondent to disclose on oath all personal assets owned by the respondent, Mr.Vishal Krishna? (vi). A.No.790 of 2021:- To grant an order directing the respondent to disclose on oath details of all agreements entered with regard to the move "CHAKRA", or any part thereof, including agreements for the dubbed versions of the movie in Hindi, Telugu, Malayalam and Kannada and including but not limited to distribution agreements, overseas distribution agreements, agreements with theatres, agreements with music labels, agreements for dubbing of the movie in other languages and agreements for assignment/sale of satellite rights and disclose on oath a statement of all payments, received and receivable by the respondent 7/28
therefrom?
4. Facts leading to the dispute:- The Plaintiff, M/s Lyca Productions Private Limited is a Company incorporated under the Companies Act. The Defendant/Mr.Vishal Krishna Reddy is a film actor-cum-producer. He is the sole proprietor of Vishal Film Factory (VFF). In the year 2016, Mr.Vishal for VFF availed loan from Mr. Anbu Cheizan of M/s.Gopuram Films, a sum of Rs.21,29,00,000/- (Rupees Twenty One Crores Twenty Nine Lakhs only). He was unable to repay the loan to M/s.Gopuram Films and was in considerable pressure. He sought urgent help from the plaintiff. Hence, the plaintiff M/s.Lyca Productions Private Limited, took over the loan of Mr.Vishal and a agreement dated 21.09.2019 was entered between the plaintiff and the defendant. i.e., M/s.Lyca Productions Private Limited and Mr.Vishal. Wherein, Mr.Vishal agreed to pay M/s.Lyca Productions Private Limited, the principal of Rs.21.29 crores with 30% interest as per the terms of the recital found in the agreement dated 21.09.2019.
5. The clauses upon which the said applications based are:- 8/28
Recitals: Clause-C, Clause 3: Loan amount and interest cost, Clause 4: Other terms and Clause 5: Repayment.
For easy reference, these clauses are extracted below:- "RECITALS C. Based on mutual understanding, Lyca has taken over a loan availed by VFF from Gopuram Anbu Chezhian (referred as "Original Lender') together with interest accrued thereon amounting to INR 21.29 crores (Rupees Twenty One Crores and Twenty Nine Lakhs Only). The Parties agreed that Lyca shall keep VFF free and harmless against any claim or demand if any made by the Original Lender on VFF. VFF shall settle the loan taken over by Lyca on terms agreed as per this Agreement.
3. LOAN AMOUNT AND INTEREST COST Clause 3.1 VFF agrees to repay, an amount of Rs.21.29 Crores (Rupees Twenty One Crores Twenty Nine Lakhs Only) being the loan amount availed by VFF from the Original Lender taken over by Lyca along with an interest rate of 30% p.a. calculated on diminishing balance basis accruing from 1st October 2019 till the date of full, final and 9/28
actual settlement of the outstanding amounts that are owed by VFF to Lyca, subject to the terms and conditions mentioned in this Agreement and the other Loan Documents (hereinafter referred to as "Loan Agreement").
3.2. It is further agreed that VET shall be liable to repay the Loan Amount with interest as agreed within the Repayment Period (defined below) in the manner agreed herein.
Clause 4. OTHER TERMS Lyca shall have a first lien as a collateral security on all the rights, titles and interests in all the future film projects and its associated rights, produced or financed by VFF or Vishal Krishna till such time the Loan Amounts are fully settled by VFF. Lyca shall be and hereby is authorized to take all action and execute all documents, instruments, certificates and writings necessary or appropriate to carry out the foregoing.
....
5. REPAYMENT 5.1 Both parties agree that the Loan Amount shall be repaid by VFF to Lyca in the following manner: a. Rs.7,00,00,000/- (Rupees Seven 10/28
Crores Only), towards the Loan Amount, i.e., towards Rs.21.29 crores plus the interest accrued until such date) atleast one week prior to the release of the film, that is tentatively titled as "Thupparivalan II" and that is expected to release on or before 31st March 2020.
b.
Balance amount together with accrued interest on or before 31st December 2020 ("Repayment Period').
5.2 The Parties further expressly agree that in case VFF fails to release the film, that is tentatively titled as "Thupparivalan II" then VFF shall be liable to pay the entire Loan Amount within the Repayment Period i.e.31st December 2020.
5.3. The Parties expressly agree and acknowledge that in case VFF fails to pay the first tranche of Rs.7,00,00,000/- (Rupees Seven Crores only) one week prior to the release of Thupparivalan II (tentatively titled), without prejudice to Lyca's rights and remedies as contained herein, it shall also be entitled to all legal, equitable and injunctive reliefs and remedies including but not limited to obtaining stay of release of Thupparivalan II (tentatively titled) by obtaining injunctive orders from appropriate Court of Law and VFF 11/28
waives its rights to challenge any such remedy as Lyca may seek against VFF in this regard.
5.4 In case there is failure or breach on the part of VFF to pay the Loan Amount within the Repayment Period. Lyca shall be entitled to proceed against VFF for the recovery of the amount including but not limited to obtaining any injunctive reliefs against release of any films to be released by VFF after the Repayment Period and VFF waives its rights to challenge any such remedy ITS Lyca may seek against VFF in this regard.
...
6.1 During the term of this Agreement and until the obligations of VFF have been fulfilled to the satisfaction of Lyca, VFF undertakes to notify Lyca of any fact, matter or circumstance which would cause adverse effect on the repayment of the Loan Amount or result in breach of representations and warranties of VFF.
.....
8.9 VFF shall indemnify Lyca against, and must pay Lyca on demand for, any and all losses, demands, costs, expenses, actions, and claims of whatsoever nature arising from or in connection with breach of any terms of this Agreement"
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6. Apart from the above clauses, the loan agreement also cast upon the borrower/VFF an obligation upon him that till the loan amount is satisfied, he should notify LYCA all facts which would cause adverse effect on the repayment of the loan amount or result in breach of representations and warranties of VFF.
7. The instant suit came to be filed alleging that the Movie Thupparivalan II supposed to be released on or before 31.03.2020 not yet released. Rs.7,00,00,000/-, which is supposed to be paid one week before the release of movie Thupparivalan II not paid. The balance amount which is supposed to be paid on or before 31.12.2020 also not paid by Mr.Vishal. Attempts to contact the defendant failed. The notice of demand through speed post to the defendant address returned as 'door locked'. E-mails sent to the defendant did not evoked any response.
8. Meanwhile, M/s.Lyca Productions Private Limited, came to know that Mr.Vishal is likely to release his movie titled "CHAKRA" on 19.02.2021. As per clause 4 of the Loan Agreement dated 21.09.2019, M/s.Lyca Productions Private Limited, have lien over all the movies and future products of Mr.Vishal 13/28
until full settlement of the dues owned to M/s.Lyca Productions Private Limited, which includes the movie "CHAKRA" also.
9. Along with the suit, M/s.LYCA Productions Private Limited had filed Application No.98 of 2021, for interim injunction restraining Mr.Vishal, his men and agents from releasing or exhibiting the movie "CHAKRA" in theatres and OTT or any other media. Apart from, the ad-interim application, also filed five other applications. They are :- (i). Application No.555 of 2021, for an order directing Mr.Vishal and his men and agents to deposit all the amount received or receivable in relation to the film CHAKRA.
(ii). Application No. 556/2021, for an order directing Mr.Vishal to furnish security to the suit claim amount of Rs.30,05,68,137/-, failing which order of attachment of the positive/negative and digital storage of the film titled CHAKRA starring Vishal Krishna.
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(iii). Original Application No.129 of 2021, for an order of injunction restraining Mr.Vishal or his agents from receiving any funds directly or indirectly in relation to the movie CHAKRA.
(iv). Application No.789 of 2021, to grant an order directing Mr.Vishal to disclose on oath all personal assets owned by him. (v). Application No.790 of 2021, for a direction to Mr.Vishal to disclose on oath details of all agreements entered with regard to the movie CHAKRA or any part thereof, including dubbing rights in other Indian languages. Injunction restraining Mr.Vishal or his agents from receiving any funds directly or indirectly in relation to the movie CHAKRA.
10. This Court, on considering the averments made in the Application Nos.555 of 2021 & 556 of 2021 and Original Application No.98 of 2021 passed the following order on 18.02.2021:- 15/28
"8. Mr. Satish Parasaran, learned Senior Counsel invited the attention of the Court to the agreement termed as Loan Agreement dated 21.09.2019 which had been entered into between the plaintiff and the defendant. The learned Senior Counsel placed special emphasis on the fact that a loan of Rs.2.29 crores had been agreed as having been received by the defendant herein not directly from the plaintiff but as received from Anbu Chezhian of Gopuram Film which loan the plaintiff had taken over. The covenants with respect to the repayment of the loan was also pointed out by the learned Senior Counsel. More importantly, the learned Senior Counsel also pointed out the following terms in the agreement under the sub-heading 'Other Terms' in Clause 4, namely, "Lyca shall have a first lien as a collateral security on all the rights, titles and interests in all the future film projects and its associated rights, produced or financed by VFF or Vishal Krishna......"
9. Placing reliance on this covenant, the learned Senior Counsel stated that one of the said future film as on September 2019 was the present movie "CHAKRA" which is scheduled to be released on 19.02.2021.
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10. Granting injunction from release of a movie a day or two prior to its release is frowned upon by Courts in general. Ofcourse, it is an order granted when the plaintiff makes out a prima facie case. But it has to be balanced with the hardships such an order would cause to the promotional steps taken to ensure successful release of the movie in the theatre. Several theatre would have been blocked, advances would have been paid, in this instance in theatres across South India since the movie is also to be released in Telugu, Malayalam and Kannada and also World Wide wherever there is a substantial population of Indian diaspora. All these efforts would come to nought if the film is injuncted from being released.
There would also be much loss which would be caused to the producers and to the various other stakeholders who are dependent on the release of movie in theatres not to mention the general public, who are very much interested in watching movies in the theatres. The sanctity of the agreement however, has also to be upheld. There had been a specific covenant by the defendant that the amount would be repaid. Such covenant had not been adhered to by the defendant. It is clear that the defendant had not repaid any amount towards the loan of Rs.21.29 crores.
financial constraints.
11. Balancing all these facts, I would rather instead of granting injunction against the release of the movie grant an order to direct the defendant as follows:-
(1) To furnish to the Court a statement with respect to the collections of the theatrical release of the movie "CHAKRA" from 19.02.2021 till 05.03.2021 in all theatres in India and World Wide in Tamil, Telugu, Kannada and Malayalam languages release of the movie. This statement of accounts should be filed in Court on or before 10.03.2021;
(2) The defendant to disclose by way of an affidavit the agreements entered into for release of the movie "CHAKRA" in OTT platforms. This affidavit is to be filed on or before 10.03.2021."
11. Consequence to the above interim order, the defendant Mr.Vishal forwarded a statement of accounts with respect to revenue earnings through the theatrical release of the movie "CHAKRA" and an affidavit stating that, he had not entered into any agreement for release of the movie in OTT platforms. 18/28
Recording the same, this Court, on 18.03.2021 passed the following order:- "3. An affidavit has also been filed by the defendant wherein he had stated that he had not entered into agreement for release of the movie in OTT Platforms. If any agreement is entered into a copy of the same shall be filed and an affidavit should be filed the details of the agreement, the parties to the agreement and the consideration for the same. Even if agreement is entered into for release of the movie through satellite television, similar disclosures shall be made by way of an affidavit."
12. At this juncture, the plaintiff M/s.Lyca Productions Private Limited, has filed the Application No.2339 of 2021, to pass a judgment on admission under Order XII Rule 6 of C.P.C and to direct Mr.Vishal to pay the suit claim along with interest at the rate of 30% till the realisation. In the Application No.2339 of 2021, to pass a decree on admission, this Court had passed separated order dismissing the application with costs.
13. The remaining five applications are considered in this common order.
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The cause for these five applications substantially stems up from Clauses 4, 5 and 6 of the Loan Agreement. The Learned Counsel for the applicant/plaintiff submitted that, after considering the rival submissions, this Court, on 18.02.2021 issued interim directions a). Defendant to furnish to the Court the statement with respect to the collections of the theatrical release of the movie "CHAKRA" b). defendant to disclose by way of an affidavit the agreements entered into for the release of the movie "CHAKRA".
14. The respondent/defendant had furnished the details of theatrical collections. He had filed affidavit stating that, due to multiple applications by M/s.Lyca Productions Private Limited and propaganda, he could not finalize agreement in respect of release of the film in OTT platforms. Taking note of the affidavit filed by Mr.Vishal, this Court, on 09.04.2021, directed the defendant shall not enter into any agreement for release of the movie "CHAKRA" in OTT platforms in any language, without prior approval of the draft agreement of this Court. Thereafter, the defendant filed an additional affidavit, by way of clarification has stated that, he is the producer of the film "CHAKRA" only in respect of the straight Tamil version and dubbed Telugu version. He released the 20/28
film only in Tamil version and dubbed version in Andhra and had furnished accounts regarding World Wide Theatrical collections in all languages pursuance to the order dated 18.02.2021. By mistake, he had stated that, he had not entered into any agreement regarding OTT rights in any language. He has already assigned the entire copyright relating to Hindi dubbing rights to M/s.IVY Entertainment Private Limited, New Delhi, under an agreement dated 04.02.2021. Similarly, has assigned Malayalam language dubbing rights to M/s.V.S.International Films, Chennai, under an agreement dated 26.03.2021. Therefore pleaded stated that, the earlier statement made in the affidavit dated 27.02.2021 that, he had not entered into any agreement regarding OTT rights in any language is a bonafide mistake occurred out of confusion on his counsel while drafting the earlier affidavit.
15. The Learned Counsel for the applicant/plaintiff M/s.Lyca Productions Private Limited, relying upon the clauses 4, 5 and 6 submitted that, in view of the lien created as a collateral security on all the rights, titles and interests in all the future films projects and its associated rights, produced or financed by VFF or Vishal Krishna, till the loan amount found in the agreement dated 21/28
21.09.2021 is paid, the plaintiff is entitled to take action and execute all documents, instruments, certificates and writings necessary or appropriate to carry out the lien.
16. The respondent/defendant has failed to release the film THUPPARIVALAN II within the tentative period i.e., before 31.03.2020 and also failed to pay the entire loan amount within the repayment period i.e., 31.12.2020. Therefore, the applicant-M/s.LYCA Productions Private Limited, in exercise of clause 5.4, is entitled to proceed against the respondent-Mr.Vishal, for the recovery of the amount including but not limited to obtaining any injunctive reliefs against release of any films to be released by VFF after the repayment period and VFF had waived its rights to challenge any such remedy as LYCA may seek against VFF in this regard.
17. This Court is concern about the legal sanctity and validity of clauses 4 (first part) and clause 5.4. At the risk of repetition same is again extracted below:- Clause 4:- OTHER TERMS 22/28
"LYCA shall have a first lien as a collateral security on all the rights, titles and interests in all the future films projects and its associated rights, produced or financed by VFF or Vishal Krishna till such time the loan amounts are fully settled by VFF. Lyca shall be and hereby is authorized to take all action and execute all documents, instruments, certificates and writings necessary or appropriate to carry out the foregoing."
Clause 5.4:- "In cases there is failure or breach on the part of VFF to pay the loan amount within the repayment period, LYca shall be entitled to proceed against VFF for the recovery of the amount including but not limited to obtaining any injunctive reliefs against release of any films to be released by VFF after the repayment period and VFF waives its rights to challenge any such remedy as Lyca may seek against VFF in this regard."
18. By invoking clause 4 and 5.4 of the Loan Agreements, the above applications are filed. If these clauses are understood and interpreted in the way the applicant had understood and filed these petitions, the consequence of these applications will end in Mr.Vishal, to work and earn for Lyca till LYCA satisfies itself that the entire loan borrowed by Mr.Vishal is discharged. The 23/28
respondent/defendant (Mr.Vishal) has to notify all his commercial activity, without intimating the LYCA. He cannot enter into contract to act or produce movie or anything, which the applicant think will cause adverse effect on the repayment of the loan. No commercial activity of the respondent/defendant will be on the free will of the respondent Mr.Vishal but upon the wishes and consent of LYCA because he has lend money on the above terms. Further, if LYCA resort to any Court for injunction relief against Mr.Vishal, he cannot contest the case since he has agreed to waive the right to challenge under clause 5.4.
19. Reading of these terms and the way the applicant/plaintiff has understood and filed multiple applications only reminds this Court the Section 2(d) of the Bonded Labour System (Abolition) Act, 1976 which defines 'Bonded debt'.
20. The 'waiver of right to challenge' clause 5.4, is prima facie against the public policy. The constitutional validity of the clauses which indirectly restrict the freedom of trade/profession/vocation are to be tested. This Court reserves to test the same at the time of final disposal of the suit. 24/28
21. That apart, whether the repayment period agreed as 31.12.2020 by the parties and the liability if any is mitigated in view of the Force Majeure clause is a mixed question of facts and law to be decided in view of the lockdown announced by the Government due to pandemic.
22. Under these circumstances, this Court is of the view that the relief sought in these applications are filed not a protect the applicant's interest in true sense. It will only obliterate the value of the respondent produce namely the film "CHAKRA" and cripple the borrower in toto. The lien over the future films of VFF cannot be enlarged to an extend of prohibiting the producer from dealing with any film in any manner, which will auger income for his livelihood and to discharge the loan availed.
23. Therefore in supersession/modification of earlier orders passed in these applications, this Court dispose of all the applications with the following directions :- (i). The Respondent/Defendant is directed to submit the monthly 25/28
statement of accounts in respect of the movie "CHAKRA" by all mode of exhibition in all languages/region and world wide. In future, the respondent shall deal with his right over the movie "CHAKRA" subject to the condition that before giving effect to the agreement, the respondent shall deposit 50% of the sale consideration into the suit account and shall conclude the contract only on permission of this Court.
(ii). The direction of this Court in its order dated 18.02.2021 at paragraph No.11 (1) stands enlarged to the effect that any collections through the theatrical release of the movie in India and world wide in all languages either directly or through distributors, 50% of the sale proceed should be deposited into the suit account within a week from the collection date along with the statement of accounts.
24. Accordingly, the Applications are disposed of. No costs. 18.08.2021 Index : Yes Internet : Yes/No.
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Speaking order/Non-speaking order 27/28
Dr.G.Jayachandran,J.
bsm Pre-delivery common order in 18.08.2021 28/28