No Power vested to adjudicate disputes w.r.t Copyright Violations of ‘Kaithi’ Movie or Contract Termination: NCLT rejects Application by Dream Warrior Pictures [Read Order]

The applicant, Dream Warrior Pictures file application under Section 9 of the Insolvency and Bankruptcy Code, 2016 ( “the Code”) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 ( “the AAA Rules”) by Mr. Aravendraj Baskaran authorised representative and Executive Producer of the Applicant authorised vide a resolution dated 11.01.2025, for initiating Corporate Insolvency Resolution Process (“CIRP”) in respect of Reliance Entertainment Studios Pvt. Ltd., the Corporate Debtor (CD).

The Applicant released a film titled, 'Kaithi' ("Original Film in Tamil") and was the sole and exclusive copyright owner of assigned rights of the Original Film. The Remake Rights Agreement dated 29.03.2023 effective from 03.01.2022 was executed by and between the Applicant and the CD, for producing a remake of the Original Film in Hindi language. The Applicant assigned 50% of its remake rights in favour of the CD and gave the CD the right to appoint Ajay Devgn FFilm Productions LLP ("ADF") as an Additional Producer.

As per Part-IV of the Application the total amount claimed to be in default is Rs.5,93,36,438/- (Five Crore Ninety-Three Lakh Thirty-Six Thousand Four Hundred and Thirty-Eight Rupees) including principal amount of Rs 4 crores along with GST and interest at the rate of 18% p.a. from the date of default.

In January 2022, the CD approached the Applicant with a revised understanding for assignment of its remake right in the Original Film. On 29.03.2023, based on the representations, warranties and the assurances given by the CD, the Remake Rights Agreement was executed by and between the Applicant and the CD, which was given effect from 03.01.2022. A copy of the Remake Rights Agreement is annexed as Annexure F to the Application.

Under the Remake Rights Agreement, the Applicant agreed to assign its Remake Rights (defined in the agreement) in the Original Film for production of a remake in Hindi language. In this regard, (i) the Applicant assigned 50% of its remake rights in the Original Film in favour of the CD in lieu of receiving payment of assignment fee of Rs.2,50,00,000/- (plus GST); and (ii) agreed to assign the balance 50% remake rights in the Original Film to ADF for and on behalf of the CD in lieu of receiving payment of the additional fee of Rs. 2,50,00,000/- (plus GST) totalling the assignment consideration to be Rs.5,00,00,000/- with applicable GST. The total assignment consideration was agreed to be paid by the CD for 100% assignment of Remake Rights in the Original Film.

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In view of the CD’s clear breach of its obligations under Clause 4 and 5 of the Remake Rights Agreement read with breach of Clause 2.4 of the Assignment Agreement, on 28.10.2024, the Applicant through its lawyers issued a notice to the CD, inter alia calling upon the CD, (i) to pay the Applicant an amount of Rs.5,76,59,726 the amount due and payable towards the balance Assignment Fee and Additional fee with GST together with interest at 18% per annum calculated from the due dates of respective amounts until the date of issuance of the legal notice; and (ii) to furnish the final theatrical net box office collection report along with the consolidated business statement generated from the overall exploitation of the Remade Film within 30 days of receipt of the notice, to determine the amount of Variable Fee payable by the CD.

The CD despite receipt of the legal notice, wilfully failed and continued to be in default of making payment of the outstanding amounts mentioned in the notice. A copy of the legal notice dated 28.10.2024 is annexed as Annexure K of the Application.

The Applicant through its lawyer sent a notice under Section 8 of the Code dated 04.12.2024 calling upon the CD to make payment of the amount claimed to be in default, within a period of 10 days of receipt of the notice. The CD replied to this notice on 13.12.2024 by raising frivolous grounds stating inter alia that the notice was not issued in the prescribed format and therefore, the CD was not under any obligation to deal with the contents of the IBC Notice.

The AAA Rules, specifically, provide two separate forms for demand notices, one that specifically requires attachment of the invoice (Form 4), and one that does not (Form 3). The Applicant may prefer to issue the demand notice under either of the forms.

On perusal of the Co-production Agreement (Original Agreement) dated 30.01.2020, it is observed that the Applicant and a group company of the CD i.e. RFPL had executed this agreement to jointly produce the Remake Film which was originally produced in Tamil language titled ‘Kaithi’ and shall equally own rights in the Remake Film. The Original Agreement was terminated mutually and a Remake Rights Assignment Agreement was executed on 29.03.2023 which was effective from 03.01.2022.

The Remake Rights Assignment Agreement dated 29.03.2023 states that the Applicant is the sole and exclusive copyright owner of the Assigned Rights wherein Assigned Rights is defined in Clause 1.2 under the Remake Rights Agreement as “Assigned Rights shall mean 50% of Remake Rights of the Original Film in the Authorised language only”. The CD was assigned 50% rights to remake the Original Film in Hindi language.

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The bench of Shri Sameer Kakar (Member Technical) and Shri Nilesh Sharma ( Member Judicial ) observed that Adjudicating Authority is not a competent forum to decide an issue raised under the present application by the parties qua their mutual rights as to the copyright violation or effect of termination. It is open to the parties to raise these issues by invoking other legal remedies available under law.

The NeSL has recorded a dispute remark that there exists no such debt and there exists a valid and subsisting dispute between the parties.

The tribunal held that the Applicant has failed to establish a debt and default on the part of the CD in the payment of an undisputed operational debt to the Applicant, exceeding Rs.1,00,00,000/- (One Crore Rupees), being the threshold monetary limit under Section 4 of the Code, prevailing on the date of filing of the present Application. Thus, this Application under Section 9 of the Code preferred by the Applicant is found to be not maintainable.

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