TMI Blog2011 (11) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... dia) Ltd. without first giving an opportunity to the Appellant in terms of Clause 21 of the MoA dated 9 th August 2001. 2. Since both the appeal and the petition arise out of the same facts between the same parties, they have, with the consent of the parties, been heard together. 3. Modi Entertainment Network Ltd. ('MEN') and the Respondent entered into the MOA on 9 th August 2001 whereunder the Respondent appointed MEN as its sole and exclusive distributor in the Territory, i.e., India, Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka and Maldives, for distribution of the Respondent's international and crypted fashion channels through cable and satellite, through its sales distribution network, carrying a mixture of international and India specific programmes, as mutually decided by the parties. The Respondent also appointed MEN as sole and exclusive air-time sales representative in the Territory to undertake sales of advertising time on the channel. MEN was also appointed the sole and exclusive distributor for merchandising and licensing of the Respondent's products on a revenue sharing basis and the sole and exclusive distributor for internet including prog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst refusal and read as under: 21. FIRST RIGHT TO REFUSAL: During the subsistence of this MOA and on formation of JVCO, if FTV launches any new channels or any business considered in this MOA in the Territory, it agrees and undertakes to provide MEN with the exclusive first opportunity to acquire distribution, air time marketing and merchandising rights for the same ( the Offer ). Any such Offer shall be in writing and MEN shall have 30 days to accept the Offer of FTV. If MEN fails or declines to accept the FTV Offer, then in that case, FTV may offer the same to any third party, except that if FTV determines to enter an agreement with a third party with respect to distribution, air time marketing and merchandising rights for new channels, FTV shall first re-offer to MEN the opportunity to enter into an agreement on the same terms as with the third party (and will provide MEN with written notice of its determination, the terms of such agreement and the identity of third party). MEN will have a period of 30 days in which to accept such re-offer, failing which FTV shall be free to enter into an agreement with such third party on the terms no less favorable than those described to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d agreed upon between FTV BVI and FTV India, taking into consideration the market conditions in India. 10. The Respondent was to be paid a minimum guarantee of US$ 240,000 per annum or 30% of the net revenue collected, whichever was higher for revenue from advertising sales, sponsorship sales, events, programme placement income and any other revenue to air-time sales in the Territory. The minimum guarantee of US$ 20,000 per month was to be paid to the Respondent by the 15th of the subsequent month and not to be reduced by any costs or tax. 11. This was followed by a Second Addendum dated 30 th March 2006 (hereinafter 'Second Addendum') executed by the Respondent and the MEN which stated that the said MOA read with the consent terms are being further amended as per the second addendum. It was further stated that the Second Addendum will regulate the terms of commercial business and understanding of the above-mentioned parties including the Assignors and beneficiaries and or their agents on the terms as hereinafter mentioned. Clause 3 of the Second Addendum stated that the India signal will be Free to Air and any decision of converting it to an encrypted mode wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will amount to an acceptance of the offer: 5.1 The right to broadcast the local FTV Channel according to the Agreement will be extended subject to the paragraphs set out below until such time as it is determined by any party in its sole discretion. 5.2 The Agreement and any non-contractual obligations arising in connection with the same shall be governed by the law of England and Wales and in the event of any dispute arising under or in connection with the Agreement (including claims in respect of non-contractual liability and including claims based upon events already taken place or in respect of rights already accrued), the parties hereby irrevocably submit to the exclusive jurisdiction of the Courts of England and Wales. 5.3 If by 4pm on 31 st March, you accept that this offer in writing, then any dispute referred to in 5.2 above shall be referred to arbitration before a sole arbitrator appointed in accordance with the rules of the London Court of International Arbitration ( the LCIA ); the seat of the arbitration shall be England and the rules of the LCIA shall apply. 14. MEN then sent an e-mail to the Respondent in which it stated that the Respondent had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d June 2011 filed an application for vacation of the said interim order. On 3rd August 2011 after hearing the parties and after noting that the parties had nominated their respective Arbitrators, this Court disposed of O.M.P. No.390 of 2011 and I.A. No.9848 of 2011 in the following terms: a. 50% minimum guarantee amount deposited by the petitioner with the Registrar General of this Court shall be kept in FDR by the Registrar General of this Court for a period of six months. b. It is agreed between the parties that they have no objection if nominated arbitrators will appoint the Presiding Arbitrator within one week from today. c. The parties are agreeable that the petition under Section 9 of the Act be treated as application under Section 17 of the Act which could be decided by the arbitral tribunal within two weeks from the date of commencement of the first meeting. The petitioners agree to file pleadings of the petition under Section 9 of the Act within the period of seven days from the date of passing of the order and the interim order dated 24.05.2011 shall continue till the disposal of the interim application which would be decided as per its own merit and withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to be enforceable and where the positive and negative covenants were inter related. If such circumstances existed in which the performance of positive covenant in favour of the Appellant would not be enforced by injunction, then the negative covenant would also not be enforced by grant of injunction; (e) A perusal of the MOA, the consent terms and the two Addendums showed that the parties had entered into a somewhat complex commercial relationship which would not be possible to be supervised by the Court. Under Section 41(e) of the Specific Relief Act, 1963 ('SRA') an injunction could not be granted to prevent the breach of a contract the performance of which would not be specifically enforced. It could not be said that the Appellant would suffer irreparable injury if an ad interim injunction was not granted. 20. On behalf of the Appellant it was submitted by Mr. Ramji Srinivasan, learned Senior counsel and Ms. Shally Bhasin, learned counsel as under: (i) Till date there was no formal termination of the MOA dated 9th August 2001. The consent terms and two Addendums did not alter the essential features of the MOA, particularly the renewal of the MOA for a fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of the amount in this Court. The Appellant was prepared to deposit remain 50% without prejudice to its rights and contentions. (v) The Arbitral Tribunal had misread Clauses 6 and 7 of the MOA. It failed to appreciate that Clause 6.3 was independent of Clauses 6.1 and 6.2, therefore, not subject to Clause 7. Even in the correspondence with the Appellant, the Respondent referred to Clause 17 (a) and 17 (b) of the MOA. Once the Arbitral Tribunal found that the Appellant had a prima facie case, the balance of convenience lay in favour of the Appellant to continue the status quo as of that date. The business relationship between the parties continued notwithstanding the First and Second Addendums. 21. On behalf of the Respondent Mr. N.K. Kaul and Ms. Indu Malhotra, learned Senior counsel submitted as under: (i) The contract was by very nature determinable and therefore could not be specifically enforced in terms of Section 14(1)(c) and Section 41(e) SRA. (ii) The Appellant had misled this Court when the interim order dated 24 th May 2011 was passed as was evident from the para 6 of the said order. Even in para 10 of the memorandum of appeal the Appellant had persis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was limited. There was nothing or perverse in the impugned order which called for interference. 22. Having considered the above submissions, this Court does not find any valid ground having been made out by the Appellant for interference with the impugned order dated 20 th October 2011 passed by the Arbitral Tribunal rejecting the Appellant's application under Section 17 of the Act. The reasons for this conclusion follow. 23. At the outset, it requires to be stated that the reasoning that follows is only a prima facie view of the court on the basis of the existing pleadings and the submissions of the counsel for the parties in regard to the grant of interim relief in an application under Section 17 of the Act. In other words it is not to be construed as a final view on merits. 24. The term of the MOA was essentially for a period of five years beginning 1st August 2001. The MOA envisaged that there would be a joint venture company ('JVCO') incorporated by the two parties in India with equal equity participation. Clause 6 of the MOA made the formation of the JVCO, during the subsistence of the MOA, contingent upon MEN achieving the gross revenue projections st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es after 31 st March 2011. There is merit in the contention of the learned Senior counsel for the Respondent that the mere fact that the Respondent did not withdraw the signals to the Appellant immediately did not mean that the Respondent had consented to the extension of the MOA. The Respondent would have otherwise had to remain idle till it found another Indian party holding a broadcast licence to enter into an agreement with. It is not possible to accept the contention of learned Senior counsel for the Appellant that after 31 st March 2011, the automatic extension clause of the MOA dated 9 th August 2001 stood revived and the MOA was meant to expire only on 8 th August 2013. Consequently, the question of a negative covenant in the MOA, i.e., Clause 21 thereof, being enforceable thereafter. 26. The relief of an injunction to enforce a negative covenant under Section 42 SRA is a discretionary one. It is contingent upon the injunction seeker performing its obligations. Section 42 SRA reads as under: 42. Injunction to perform negative agreement: - Notwithstanding anything contained in clause (e) of Section 41, where a contract comprises an affirmative agreement to do a ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restraint on the respondent from entering into an agreement with third parties would certainly render it idle if it were not to permit the Appellant to downlink the signal. Therefore, by continuing the ad interim injunction restraining the Respondent from contracting with third parties the Court would be doing indirectly what it cannot directly under Sections 14(1)(c) read with Section 41(e) SRA. In other words the Court would in effect be requiring the Respondent to perform a positive obligation to keep alive a contract which is not only by its very nature determinable but has in fact come to an end by efflux of time and is therefore not specifically enforceable. The decisions cited by learned Counsel for the Appellant are distinguishable on facts. 29. This Court does not find any error committed by the Arbitral Tribunal in its conclusion that the balance of convenience does not lie with the Appellant and that it is not likely to suffer any irreparable injury if an ad interim injunction is not granted in its favour. This Court also concurs with the prima facie opinion expressed by the Arbitral Tribunal that the injury likely to be suffered by the Respondent by grant of an ad in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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