Red Carpet Films Ltd. a Public Limited Company Incorporated Under the Companies Act, 1956 Vs. Eros International Films Pvt. Ltd. (Formerly Known as Eros Pictures Pvt. Ltd.) a Private Limited Company Incorporated Under the Companies Act, 1956) and Eros International Media Pvt. Ltd. (Formerly Known as Eros Multimedia Pvt. Ltd. a Private Limited Company Incorporated Under the Companies Act, 1956) - Court Judgment

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- - as such, you are requested to kindly treat this as due notice and make it convenient to attend the aforesaid meeting either personally or by an authorized representative in writing, with all relevant documents without fail, failing which exparte decision will be taken, after hearing the other party present and also, based on the available papers, which please note. 17. hence, the apprehension of the petitioners is that the respondents, inspite of above facts and circumstances and as initiated and invoked those byelaws and now pressing for decision from the committee of amptpp and if the petitioners fail to appear the committee firstly will pass exparte order and if the petitioners fail to comply with the same, will declare the petitioner as defaulter and circulate accordingly. the petitioners would suffer great injustice & injury to their reputation and business including irreparable loss and damages, though the said committee has no jurisdiction or authority to pass any order in view of the specific arbitration agreement and the pendency of section 11 petition in the high court, bombay for the appointment of sole arbitrator, as parties failed to mutually nominate a sole arbitrator. 5 crores by the petitioners and their constituents with 16% interest from 5.2.2009 on allegations that they failed to take effective steps or not shown any progress in the first film within 8 to 10 months from the execution thereof as per clause 8(v) of the agreement. admittedly, the parties failed to mutually resolve their dispute. 21. as in the present case, as they mutually failed to resolve the dispute and failed to mutually appoint a sole arbitrator they have no option but to get appointed the sole arbitrator through court. there is a specific clause of arbitration and as the parties failed to mutually appoint any arbitrator, any proceeding dealing with the same subject matter of agreement and arbitration in question cannot be permitted to agitate before such committee of the amptpp, specially considering the scheme and purpose of the act, apart from binding contract between the parties. 26. the committee of amptpp threatening to pass exparte order if the petitioners failed to appear before them. 27. as noted above, if any member or nonmember pursuance to the byelaws of amptpp fail to comply with the decisions given by the committee, the association shall be entitled to declare such party as a defaulter and shall have the right to advice the members of the association to refrain from entertaining any commercial dealings with such defaulters. air2007sc2563 ,the supreme court has observed that while granting any interim order or injunction under section 9 of the act, the court need to consider various elements of civil procedure code as well as specific relief act. 40. if the order is passed under section 9 of the act against the parties to the arbitration agreement and consequently it also affects the proceedings before the committee, still in a situation like this, this court is empowered to pass order of injunction or such other order in the interest of justice.anoop v. mohta, j.1. heard finally, by the consent of the parties, based upon the material available on the record.2. the petitioners have invoked section 9 of the arbitration & conciliation act, 1996 (for short, 'the act') as dispute arose between the parties in the matter of an arbitration agreement dated 7th november, 2007.3. the petitioners - a public limited company engaged in the business of production of hindi cinematograph films. respondent no. 1 - a private limited company is also in the same business. respondent no. 2 - a private limited company is engaged in the business of distribution, exhibition and exploitation of cinematograph films through out the world.4. the parties entered into a memorandum of agreement (the agreement) on 7th november 2007 whereby, the petitioners and respondent no. 1 were to jointly produce and complete 3 to 4 full length cinematograph films each year in hindi language within a period of five years from the date of the execution of the agreement with the entire cost of production and completion of the said number of films being exclusively borne by respondent no. 1 and being marketed and distributed by respondent no. 2 globally. a sum of rs. 5,00,00,000/( rupees five crores) was paid to the petitioners by respondent no. 1 as an advance towards production and completion of the said films as per clause 5 of the agreement. the petitioners were under obligation to show progress in the first film within a period of 8 to 10 months from the execution of the agreement. as averred, the petitioners took various steps from november, 2007 and informed the progress accordingly from time to time to the respondents even by writing letters till september, 2008. however, the respondents have denied the said progress as contemplated under clause 8(v) of the agreement and by letter dated 5th november, 2008 called upon the petitioners to refund the advance of rs. 5 crores along with interest at the rate of 16% as agreed. another letter dated 6th november, 2008 was sent reiterating the said contention with intention to terminate the agreement. the petitioners, by letter dated 10th november, 2008, resisted the same and gave the details of the progress made and also requested to withdraw its notice of termination and demand for refund of rs. 5 crores. the respondents replied and maintained the termination and the demand.5. the parties made several attempts to reconcile the dispute with the respondents, but in vain.6. there is a company named as 'association of motion pictures and tv programme producers ' (amptpp) constituted to achieve various objects and to promote and to protect trade commerce and industries of india in motion pictures and allied industries, television and video and trades, including to settle all disputes between the members of the company or between the persons engaged in the film industry (television, video and allied industries) and to arbitrate amongst such contesting parties. the byelaws for dispute settlement are also framed and circulated. those dispute settlement scheme/byelaws are for settling all disputes and complaints arising amongst members of the association or between a member and a nonmember relating to any commercial dealings or any related nature. a committee is appointed by the governing council to settle/resolve the disputes as per the procedure prescribed in the bye 5 laws by giving full opportunity to both the parties. the dispute settlement committee is comprising of 7 members and one chairman appointed by the governing council. all disputes/complaints shall be decided by the committee by majority. the award/decision given by the committee, if not complied with or there is a default, the consequences are as under:in the event of either party to the complaint neglecting or otherwise omitting to comply with and/or abide by the directives and/or decisions given by the committee at any meeting the association shall be entitled to declare such party as a defaulter and shall have the right to advise the members of the association to refrain from entertaining any commercial dealings with such defaulters. as soon as the defaulter rectifies the default, the defaulter notice shall be withdrawn. 7. the respondents lodged a letter/complaint dated 17th march, 2009 before the amptpp seeking termination and the refund. the petitioners received the said letter on 19.03.2009. there is no dispute that on the date of agreement in question, both the parties were members of this association. the petitioners have now resigned from the said membership.8. the arbitration clause 22 is as under:22. arbitration : in case of any dispute or difference arising out of or in connection with this memorandum of agreement the same shall initially be resolved by mutual consultation failing which the same shall be referred to arbitration of a sole arbitrator appointed mutually by party of the second part and party of the first part failing which the sole arbitrator will be appointed vide section 11 of the arbitration and conciliation act, 1996 with the arbitration governed by the provisions of arbitration and conciliation act, 1996. the arbitration proceedings shall be in english and held in mumbai and the court in mumbai alone shall have jurisdiction.jurisdiction: this agreement shall be construed and governed by the laws of india and shall be subject to the exclusive jurisdiction of the courts in mumbai including the arbitration proceedings.9. admittedly, inspite of above membership and the byelaws of dispute settlement, the parties have agreed to resolve the dispute arising out of this agreement through the procedure as reproduced and contemplated in clause 22 as referred above.10. therefore, the petitioners by letter dated 23.03.2009 invoked the arbitration clause and nominated a sole arbitrator and sought the concurrence from the respondents. the petitioners also communicated to the amptpp and informed about the invocation of the arbitration clause.11. respondent no. 2 by letter dated 24.03.2009 declined to give its consent to the arbitrator named by the petitioners and instead proposed to appoint amptpp as sole arbitrator for the purposes of adjudication of the dispute. the respondents by other letters reiterated their stand to appoint amptpp as the sole arbitrator though the said appointment was not accepted by the petitioners. by a letter dated 1.04.2009, the petitioners gave detailed reasons and resisted the issues and allegations made by the respondents in their letters. the petitioners have also objected the authority and jurisdiction of the amptpp to adjudicate the disputes in view of the agreement between the parties.12. the petitioners have filed an application under section 11 of the act as the parties could not arrive at a consensus in appointing a sole arbitrator. the same is pending. a copy of the said petition was duly served on the respondents and also forwarded to the amptpp.13. on 22nd may, 2009, the committee of the amptpp, which is neither party to the agreement and nor to this petition, called upon an emergency meeting on 27th may, 2009. the petitioners resigned from the membership of the amptpp on 22nd may, 2009.14. the petitioners, through their advocate, sent a detailed representation to the amptpp pointing out that as the dispute is subject matter of arbitration and is presently subjudice before hon'ble high court, therefore, the meeting called upon to resolve the dispute between the parties would amount to interference with judicial proceedings and administration of justice; the amptpp is not a statutory body. by a communication dated 26th may, 2009, the amptpp again called upon the petitioners to attend the meeting as the respondents complaint was filed in time. therefore, the committee is competent to adjudicate the dispute as per their byelaws.15. the petitioners again by advocate's letter dated 28th may, 2009 replied stating that the amptpp was unilaterally nominated arbitrator by the respondents. the said nomination was not consented or concurred upon by the petitioners and, therefore, no jurisdiction or authority to adjudicate the disputes.16. another letter addressed to the petitioners by the committee of the amptpp on 29.05.20090 as the petitioners were absent inspite of earlier notice of meeting issued and, therefore re fixed the meeting on 17th june, 2009. the contents of the notice dated 29th may, 2009 is reproduced as under:since m/s. red carpet films pvt. ltd. was not present for the meeting, the said mater will be taken up at the next d.s.c. meeting to be held on wednesday, 17th june, 2009 at 4.00 p.m. at the office of the a.m.p.t.p.p. as such, you are requested to kindly treat this as due notice and make it convenient to attend the aforesaid meeting either personally or by an authorized representative in writing, with all relevant documents without fail, failing which exparte decision will be taken, after hearing the other party present and also, based on the available papers, which please note. 17. hence, the apprehension of the petitioners is that the respondents, inspite of above facts and circumstances and as initiated and invoked those byelaws and now pressing for decision from the committee of amptpp and if the petitioners fail to appear the committee firstly will pass exparte order and if the petitioners fail to comply with the same, will declare the petitioner as defaulter and circulate accordingly. this would be injurious to the petitioner's commercial interest. the petitioners would suffer great injustice & injury to their reputation and business including irreparable loss and damages, though the said committee has no jurisdiction or authority to pass any order in view of the specific arbitration agreement and the pendency of section 11 petition in the high court, bombay for the appointment of sole arbitrator, as parties failed to mutually nominate a sole arbitrator.18. the basic prayer of the petitioners is as under:(a) that pending the hearing and final disposal of the arbitration proceedings and the implementation of the award therein, respondents, its members, servants and/or agents be restrained by an order and an injunction of this hon'ble court from prosecuting or initiating any proceedings against the petitioner through association of motion pictures & tv programme producer of india (amptpp) or any other third person on the disputes arising out of the agreement dated 7th november, 2007 which form a subject matter of the arbitration agreement and which is pending adjudication before the hon'ble high court, bombay. 19. importantly, the subject matter of the arbitration agreement dated 7th november, 2007 is refund of the advance of rs. 5 crores by the petitioners and their constituents with 16% interest from 5.2.2009 on allegations that they failed to take effective steps or not shown any progress in the first film within 8 to 10 months from the execution thereof as per clause 8(v) of the agreement. the petitioners have disputed this allegation and, therefore, the subject matter of the dispute is right to claim or an entitlement to refund of the advance. the prayer is made/restricted accordingly.20. admittedly, both the parties entered into the agreement knowing fully, being member of the amptpp, at the relevant time, their respective rights and their entitlement to settle such disputes through the byelaws of the amptpp. they entered into this agreement with specific clause 22 of arbitration as referred above. as per this clause, firstly, in case of any dispute or difference arising out of or in connection with this agreement, the same shall initially be resolved by mutual consultation. admittedly, the parties failed to mutually resolve their dispute. secondly, therefore, failing which the same should be referred to arbitration of a sole arbitrator appointed mutually by the parties. admittedly, both the parties have refused to appoint the sole arbitrator named by them respectively or not accepted or consented to the named arbitrator. therefore, lastly, the parties have no choice but will have to get an arbitrator appointed by invoking section 11 of the act.21. as in the present case, as they mutually failed to resolve the dispute and failed to mutually appoint a sole arbitrator they have no option but to get appointed the sole arbitrator through court. there is no other course available to the parties. in my view, therefore, the parties cannot compel or impose any sole arbitrator to decide/resolve their disputes unilaterally, in such fashion. admittedly, the petitioners have already filed an application under section 11 of the act for appointment of sole arbitrator and the same is pending.22. in view of above, therefore, though the representation/complaint was filed by the respondents to the amptpp and prayed to take appropriate action against the petitioners for nonpayment/ refund of rs. 5 crores with interest as referred above which is also admittedly subject matter of the agreement. there is a specific clause of arbitration and as the parties failed to mutually appoint any arbitrator, any proceeding dealing with the same subject matter of agreement and arbitration in question cannot be permitted to agitate before such committee of the amptpp, specially considering the scheme and purpose of the act, apart from binding contract between the parties.23. as per the scheme and object of the act, once there is an arbitration agreement, even the civil court need to refer such disputes for arbitration. the agreed arbitration proceedings should be given preference over court proceedings. the parties, having once agreed to settle their dispute through such arbitration proceedings, are bound by the arbitration agreement. no party can compel other party to appear before such committee of amptpp. if both the parties mutually agree to appear before a particular arbitrator, including such committee, the court cannot interfere or object to the same, but if not, the court cannot compel the other party to appear before such committee of amptpp in view of specific arbitration clause as referred above. in the present case, the court cannot compel party to appear before a tribunal which alleged to have been constituted unilaterally by one party which is apparently in breach of clause 22 of the agreement as referred above. the court may, in a given case, pass such appropriate order by consent of the parties or even otherwise and appoint such committee or institution as a sole arbitrator but at this stage, pending the said application under section 11 of the act, the court, under section 9 of the act, is not powerless to pass appropriate order or injunction to avoid multiplicity of the proceedings and to protect the right under adjudication before the arbitral tribunal, if constituted under section 11 of the act.24. in my view, considering the scheme and purpose of the act read with the clear terms of the arbitration in question, the respondents cannot be permitted to proceed with the same subject matter of arbitration before another committee or body without the consent of the petitioners.25. the parties are at liberty inspite of specific agreement or arbitration clause to resolve their dispute through mutually appointed or nominated arbitrator or any such person. they can resolve their dispute by negotiation or conciliation also. but once there is an opposition of one party and in view of the present clause 22 which is binding to both the parties, the respondents cannot be permitted to enforce that the said committee of amptpp is their appointed sole arbitrator pending section 11 application. this, in my view, is in clear breach of the agreement and the arbitration clause which cannot be permitted as that would frustrate the whole object and purpose of the act and especially in the present facts and circumstances, amount to interference/obstruction in the administration of justice, at the instance of respondents.26. the committee of amptpp threatening to pass exparte order if the petitioners failed to appear before them.27. as noted above, if any member or nonmember pursuance to the byelaws of amptpp fail to comply with the decisions given by the committee, the association shall be entitled to declare such party as a defaulter and shall have the right to advice the members of the association to refrain from entertaining any commercial dealings with such defaulters. therefore, this would definitely cause great injustice and hardship to the petitioners, if order is passed at the instance of the respondents. such damage to the reputation would definitely affect the future commercial dealings of the petitioners for all the time. therefore, the contention of the learned senior counsel for the respondents that no harm would be caused if the petitioners appear before the committee of amptpp as the decision even if given, would have no statutory force as the said committee is no statutory body, is unacceptable. in my view, in an arbitration proceedings, in a given case, any committee or tribunal, if takes decision based upon the trade practice prevailing in the film industry or such other community, has its own impact in any other proceeding between the same parties for the same subject matter of the arbitration.28. the party is definitely, as noted above, if gives consent and ready to appear before the committee, then there is no question of any orders as prayed. but, considering the averments made and as the respondents have initiated such proceedings inspite of the specific arbitration clause as referred above, in my view, such initiation and continuation of such proceedings for same subject matter of arbitration is definitely amounts to multiplicity of proceedings and would cause great injustice and hardship and would definitely affect the rights and will frustrate the other proceedings.29. apart from above, the proceedings initiated by the respondents and pending before amptpp cannot be treated as arbitration proceedings pending before a duly constituted tribunal, as contended by the learned senior counsel for the respondents. the clear reading of arbitration agreement and the clause and in the present facts and circumstances of the case and as the petitioners have not agreed or consented, such unilateral appointment of tribunal, pending section 11 application is a apparent breach of the arbitration clause. it also frustrates the object and scheme of the act. the committee itself is not proceeding further as arbitral tribunal under the act but only under the byelaws.30. the contention based upon paragraph 29 of bhatia international v. bulk trading s.a. and anr. : [2002]2scr411 , which is reproduced as under, in the present facts and circumstances of the case is therefore also of no assistance to the respondents contention.29. we see no substance in the submission that there would be unnecessary interference by courts in arbitral proceedings. section 5 provides that no judicial authority shall intervene except where so provided. section 9 does not permit any or all applications. it only permits applications for interim measures mentioned in clauses (i) and (ii) thereof. thus there cannot be applications under section 9 for stay of arbitral proceedings or to challenge the existence or validity of the arbitration agreements or the jurisdiction of the arbitral tribunal. all such challenges would have to be made before the arbitral tribunal under the said act. 31. in my view, there is no force in the contention that all such challenges should have to be made before the committee of amptpp. therefore, there is no question of accepting the contention revolve around section 16 of the act as sought to be contended by the learned senior counsel appearing for the respondents. this also for the reason that though the respondents suggested the name of the association as their sole arbitrator, by rejecting or opposing the name suggested by the petitioners of their arbitrator, that itself cannot be the reason to accept the contention that the respondents have duly constituted the arbitral tribunal to resolve the dispute in question. the response to the representation made by the respondents to the amptpp, nowhere refer or only consented that the amptpp to be their sole arbitrator. it appears that from the representation made and the correspondences on record that even the said committee of amptpp is not dealing with the subject matter as an arbitrator appointed pursuance to clause 22 of the agreement. therefore, at this stage, in my view, no other committee or third person should proceed with the subject matter of arbitration proceedings pursuant to the agreement between the parties unless both the parties mutually agree or the arbitral tribunal is appointed under section 11 of the act.32. now, therefore, question is whether any appropriate order or injunction or any direction can be passed under section 9 of the act as invoked and as prayed.33. 'an application under section 9 under the scheme of the act is not a suit. the time or the stage for invoking the jurisdiction of court under section 9 can be; (i) before or (ii) during arbitral proceedings; or (iii) at any time after the making of the arbitral award, but before it is enforced in accordance with section 36.' the reliefs which the court may allow to a party under clauses (i) and (ii) of section 9 flow from the power vesting in the court exercisable by reference to 'contemplated', 'pending' or 'completed' before the proceedings'. 'the court, under section 9 is only formulating interim measures so as to protect the right under the adjudication before the arbitral tribunal from being frustrated.' firm ashok traders and anr. v. gurumukh das saluja and ors. : air2004sc1433 .34. furthermore, considering the scheme and object of the act, once there exists a valid agreement, the parties are bound to go for arbitration to settle their dispute through the prescribed procedures under the act. the arbitral proceedings, therefore, have overriding effect even proceedings filed or pending in civil court once the existence of an arbitration agreement is noticed. in the present case, the petitioners have pointed out the existence such arbitration agreement to the committee. both the parties are aware of the same still the insistence to proceed with the same subject matter and to get decided the rights flowing from the arbitration agreement, in the present facts and circumstances, is impermissible. in my view, once the objection is raised and pointed out the existence of arbitration agreement and pendency of section 11 application, the respondents ought not to have initiated and proceeded with the proceedings before the committee.35. in adhunik steels ltd. v. orissa manganese & minerals (p) ltd. : air2007sc2563 , the supreme court has observed that while granting any interim order or injunction under section 9 of the act, the court need to consider various elements of civil procedure code as well as specific relief act.moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the act. on that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under section 9 of the act. 36. strikingly, the apex court in union of india v. singh builders syndicate cdj 2009 sc 520, has observed as under:the position after the new act came into force, is different, as explained by this court in northern railway administation, ministry of railway, new delvi v. patel engineering company ltd. : (2008)10scc240 . this court held that the appointment of arbitrator/s named in the arbitration agreement is not mandatory or a must, but the emphasis should be on the terms of the arbitration agreement being adhe4red and/or given effect, as closely as possible. it was further held that the chief justice or his designate should first ensure that the remedies provided under the arbitration agreement are exhausted, but at the same time also ensure that the twin requirements of sub-section (8) of section 11 of the act are kept in view. this would mean that invariably the court should first appoint the arbitrators in the manner provided for in the arbitration agreement. but where the independence and impartiality of the arbitrator/s appointed/nominated in terms of the arbitration agreement is in doubt, or where the arbitral tribunal appointed in the manner provided in the arbitration agreement has not functioned and it becomes necessary to make fresh appointment, the chief justice or his designate is not powerless to make appropriate alternative arrangements to give effect to the provision for arbitration. 37. in coppeelavalin si/nc v. kenron chemicals and fertilizers ltd (in liq) 1994 (2) all e.r. 449, it is observed:' however, in determining whether to grant interim measures in support of the agreement to arbitrate under the icc rules, the english court, as the local court, should have regard to (a) the fact that arbitration was a consensual process and that the court should strive to make the consensus effective by identifying, so far as possible, the kind of arbitrational process that the parties either expressly or impliedly indicated that they were contemplating when they entered into the arbitration agreement.'38. the above principles are applicable to the facts and circumstances of the present case.39. therefore, the court, under section 9 of the act, has ample power and jurisdiction to issue injunction or pass such interim orders/measures as prayed basically to avoid further complication and to avoid multiplicity of the proceedings apart from the right of the petitioners to be get frustrated, including the proceedings before the arbitral tribunal at least till the appointment of tribunal/arbitrator in pending section 11 petition. in my view, the respondents should not proceed or continue with the proceedings before the committee of amptpp. the committee, in normal circumstances, is empowered to decide the disputes between the members and/or nonmembers as per the byelaws, but when both the parties/members themselves have agreed as there was no restriction and executed the arbitration agreement to settle their disputes, they are bound by the same, unless agreed and consented otherwise again. the court just cannot overlook this imperative arbitration clause.40. if the order is passed under section 9 of the act against the parties to the arbitration agreement and consequently it also affects the proceedings before the committee, still in a situation like this, this court is empowered to pass order of injunction or such other order in the interest of justice. there is no total bar to pass order as prayed as the main prayer is against the respondents, the party to the arbitration agreement.41. resultantly, the petition is allowed in terms of prayer (a). no order as to costs.42. the learned counsel appearing for the respondents prays for stay of this order. considering the reasoning given and as urgency made out, i am not inclined to grant stay. the prayer is accordingly rejected.