Case Note & Summary
The petitioner, Radha Krshna Films Ltd., challenged an arbitral award dated 05/01/2007 passed by the Joint Tribunal of the Film Makers Combine (FMC) and the Motion Pictures Association (MPA) under Section 34 of the Arbitration and Conciliation Act, 1996. The dispute arose from a distribution agreement for the film 'Woh Tera Naam Tha' between the petitioner (licensor) and respondent no.1 (distributor). The agreement was executed on 07/01/2004, and an affidavit was filed with MPA declaring that video, cable TV, and TV rights had not been sold and that the film would not be telecast on television for five years. However, two letters dated 07/01/2004 and 08/01/2004 from the petitioner to respondent no.1 clarified that the five-year restriction was only for MPA requirements and that the petitioner would be free to telecast the film on satellite television after six months of release. These letters were signed as 'Agreed And Confirmed' by respondent no.1. The film was released on 30/01/2004. On 05/02/2004, the petitioner granted H.V. (Home Video) rights to Sunstone Entertainment for territories outside India, Nepal, Bhutan, and Bangladesh. Respondent no.1 claimed that this violated the agreement and filed a complaint before the MPA, which referred the matter to arbitration. The tribunal awarded Rs.2,50,000/- to respondent no.1 for violation of the agreement by disposing of H.V. rights prior to six months and for retaining 10 prints without payment. The petitioner argued that the award was patently illegal and in violation of natural justice as the tribunal ignored the letters modifying the affidavit clause, failed to consider the evidence, and did not provide a reasoned award. The court analyzed the award and found that the tribunal had not considered the letters which clearly permitted the sale of H.V. rights after six months, and the finding of violation was perverse. The court held that the award suffered from patent illegality and was in conflict with the public policy of India. The court set aside the award and allowed the petition, with no order as to costs.
Headnote
A) Arbitration Law - Setting Aside Award - Section 34 Arbitration and Conciliation Act, 1996 - Patent Illegality - The award was based on no evidence and misreading of the agreement; the tribunal failed to consider the letters modifying the affidavit clause, which permitted sale of H.V. rights after six months. Held that the award suffers from patent illegality and is liable to be set aside (Paras 10-15). B) Arbitration Law - Natural Justice - Section 34 Arbitration and Conciliation Act, 1996 - Unreasoned Award - The award did not provide any reasons for rejecting the petitioner's evidence and submissions, and failed to consider the binding nature of the letters signed by the respondent. Held that the award violates principles of natural justice (Paras 12-16). C) Arbitration Law - Evidence Appreciation - Section 28(3) Arbitration and Conciliation Act, 1996 - The tribunal ignored the letters dated 07/01/2004 and 08/01/2004 which modified the affidavit clause and were agreed by the respondent. The finding of violation of agreement is perverse. Held that the award is based on no evidence and is patently illegal (Paras 10-14).
Issue of Consideration
Whether the arbitral award dated 05/01/2007 passed by the Joint Tribunal of FMC and MPA is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 for being in conflict with the public policy of India, including patent illegality and violation of natural justice.
Final Decision
The court allowed the petition and set aside the arbitral award dated 05/01/2007. No order as to costs.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 34
- Section 28(3)
- Section 31(3)
- Natural Justice
- Patent Illegality
- Reasoned Award
- Evidence Appreciation
