A Party Cannot Be Allowed To Take Advantage Of Inartistic Drafting Of Arbitration Clause When Intent To Arbitrate Is Clear: Bombay High Court

The Bombay High Court observed that a party cannot be allowed to take advantage of inartistic drafting of the arbitration clause, as long as it contains the necessary ingredients and clear intent to arbitrate.

The High Court dismissed a Petition filed by Abihshek Pictures under Section 9 of the Arbitration and Conciliation Act seeking directions restraining some persons from producing a sequel to the film "Goodachari" on the ground that they were authorized to produce only a remake and not a sequel of the original film through a Deed of Transfer.

Justice Manish Pitale emphasized that under the Deed of Transfer, the rights granted are exhaustively outlined in the document and Schedule I, encompassing remake rights in multiple languages.

“A perusal of the above quoted clause 1(b) shows that the rights conferred upon Respondent Nos. 1 and 2 have been exhaustively stated in the document above the said clause, as also in Schedule I. A perusal of Schedule I to the Deed of Transfer shows that the rights transferred include remake rights in all languages other than theatrical release rights in Telugu Language, dubbing rights in Hindi and North Indian languages. Schedule I specifically elaborates that such rights would mean and include as many as 39 aspects of the rights specified therein”.

Advocate Mayur Khandeparkar appeared for the Petitioner and Advocate Venkat Rao appeared for the Respondent.

The Petitioner and Respondent No. 3 jointly produced a film called "Goodachari" and held Intellectual Property Rights and Exploitation Rights in the proportion of 50%:50%. Respondent Nos. 1 and 2 acquired the rights concerning the film, including remake rights, through a Deed of Transfer. The interpretation of the clauses of the said Deed of Transfer gave rise to a dispute between the Petitioner and the Respondents over the sequel of the film.

The Petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking directions restraining the Respondents from producing a sequel to the film "Goodachari", on the ground that Respondent No. 1 was authorized to produce only a remake of the original film through a Deed of Transfer.

The Court criticized the wording of Clause 23 of the Deed of Transfer and observed that the Clause in question revealed that the parties intended to resolve all disputes under the provisions of the Arbitration Act. Additionally, the clause referenced the exclusive jurisdiction of the Mumbai courts for such matters, including interim relief under Section 9 of the Arbitration Act.

“There can be no doubt about the fact that the clause is not very happily worded. This is because the Deed of Transfer ends with clause 23 and there is no clause 25 therein. Yet, there is reference to clause 25 in the above quoted clause 23. Nonetheless, this Court finds that a proper and holistic reading of the above quoted clause 23 of the Deed of Transfer would show that parties agreed for determination of all matters under the provisions of the Arbitration and Conciliation Act, 1996”, the Court added.

In light of the legal precedent laid down in the case of K. K. Modi v K.N. Modi & Others [(1998) 3 SCC 573 6], the Court observed that even if the clause's drafting is inartistic, it still qualifies as an Arbitration Agreement between the parties as the essential elements of an Arbitration Agreement are present in Clause 23.

The Court observed that the dispute revolved around the interpretation of clauses in the Deed of Transfer, particularly in relation to the rights to produce or create a sequel to a film. Upon examining the Deed of Transfer and its appendices, the Court said that the entire document, along with the schedules, should be interpreted as a whole. The rights granted to Respondent Nos. 1 and 2 are exhaustively outlined in the document and Schedule I, encompassing remake rights in multiple languages.

Furthermore, the Court noted that Clause 1(b) of the Deed of Transfer clarified that the term "Said Rights" referred to the rights defined in Schedule II. While the petitioner emphasized the exclusion of "Exploitation Rights" and "Derivative Rights," a closer look at Schedule II revealed that accepting this interpretation would result in an absurd outcome, potentially even preventing the production of a film remake. The Court held that such interpretation contradicts the overarching structure of the document and the intent of the parties, as indicated in the Deed of Transfer and Schedule I.

The Court observed that the Petitioner's claim of urgency in moving the petition in October 2023, despite filing it in July 2023, was contrived. This urgency was ostensibly based on an interview given by the lead actor of the film in September 2023 regarding the proposed production of a sequel. Statements from Respondent No. 1 and Respondent No. 5 indicated that the film was already in pre-production, with agreements, contracts, and investments in digital rights for the sequel "Goodachari-2. This involvement of third parties demonstrated that they would face hardships if the prayers in the petition were granted.

Accordingly, the Court dismissed the Petition.

Cause Title: Sri Abihshek Pictures v Abhishek Agarwal Arts LLP and Ors. (2023:BHC-OS:12748)

Click here to read/download Judgment