Facts of the case. M.S Ramaiah Memorial 4 th National Moot Court Competition, 2011

Transcription

1 Facts of the case 1. Industan is a large country with a population of over 1 billion. Raj Khan is a very famous celebrity with over 500 films to his credit in various languages of Industan. He is almost 60 years of age but still young in the hearts of all his fans globally and has a superhero image. He is also someone who likes to experiment with his roles and has gone to an extent of doing 10 different independent roles in the same film. He stays with his family in Bostro. 2. Khan Entertainment Private Limited is a company incorporated by Raj Khan's daughter and is engaged in the business of production of animation and 3D films. The company is operated in Bostro, a state in the western part of Industan. Raj Khan has a minimal stake in the said company but the aim of Khan Entertainment is to create a 3D animation film with the main super hero being Raj Khan. Later they also plan to launch it as a 3D game for PC, PS3 and Xbox. 3. Diamond Picture Company Limited is a joint venture company in Industan. It is a Public Limited Company incorporated under the Companies Act, 1956 wherein 51% stake of the company is held by one Mr. P. Sharan acting as the majority Shareholder and the CEO and 49% of the stake, as a part of the FDI norms in Industan, by way of an automatic rule with Wolf Productions Inc., a company based in USA. Diamond Picture Company came into existence in 2002 in Bostro and has produced several super hit films in the past with a lot of celebrities. They also are instrumental in film distribution especially films produced by Wolf Entertainment which is one of the prominent production houses in the US. 4. Infinite Software Inc. is a software company which is into certain flagship games like King of Persia and King of Persia 3D. This is a company incorporated under the Delware Incorporation Laws in the US. It does not have any entity in Industan but has distributors of its games which are available worldwide in all retail merchandise stores vending computer peripherals. They are one of the initial companies to come up with 3D gaming technology in the world and they have a customer base across the globe. 5. Sanket Finance is a film finance company associated with lot of film makers and production houses. They finance production houses for big budget films. 6. Raj Khan was approached by Diamond Picture Company in April 2007 to direct, act and co-produce a venture through Khan Entertainment called as Dead Saint which was a tri-lingual venture of the Company. The total cost of the project was capped at Rs.250 crores and was termed as the costliest film in Industan. Considering the hype of Raj Khan being in the lead role, everybody had their eyes on the film which was announced in June The shares of Diamond Picture Company listed in Livido Stock Exchange saw a steep rise from 45Rs/share to 675Rs/share in a single week.

2 7. Diamond Picture Company regularly approached Sanket Finance for financing the movies that were to be produced by them without specifying the title of the project or the specific process of movie making. In January 2007, Diamond Picture Company and Sanket Finance entered into a contract by virtue of which Sanket Finance released a sum of Rs.155 crores to Diamond Picture Company as part of the contract. The contract contained a specific stipulation that the amount released by Sanket Finance (i.e Rs. 155 crores) was to be repaid to them by Diamond Picture Company on or before 1 st January 2008 along with an interest of 18% per annum till the date of repayment. 8. The contract between Khan Entertainment and Diamond Picture Company clearly stated that the funding was for the specific purpose. The purpose as defined in the contract was producing the film titled Dead Saint only. 9. The first schedule of the film was shot in the jungles in the State of Koranga in Industan and was completed by September Thereafter, due to non-availability of dates of Raj Khan, the subsequent schedules were put off indefinitely. Off the 250 crores, Diamond Picture Company transferred to the account of Khan Entertainment, Rs.175 crores after the first schedule was over. 10. Khan Entertainment run by Sara Khan, the daughter of Raj Khan, began producing a 3D animation movie called Invincible starring the prototype of Raj Khan as a warrior and a super hero. This movie was first of its kind to come from an Industani Production Company. This movie was announced in October 2007 as a co-production with Diamond Picture Company. The cost of the movie project was Rs.110 crores. The contract specifically provided that Diamond Picture Company would be involved in the project only as the fund manager. 11. Khan Entertainment engaged several animators worldwide and most of the 3D renderings were done by these animators between October 2007 and June 2008 and the film was set to release in August 2008 on the Independence Day of Industan. 12. Meanwhile, during the month of December 2007, a movie by the name Friday was released, which was a cult film that dealt with the issues of a common man adopting a unique method of teaching the terrorists a lesson. It was a critically acclaimed movie that went to be a commercial hit and grossed several crores at the Box Office across the country. Inspired by this film, Raj Khan decided to buy out the rights to the film and remake it in Tamil with a name Naan meaning Me. Raj Khan engaged another super star Prathap Lal for the said movie and gave wide publicity of the film in the media. 13. The movie was shot in 3 schedules and was completed by July 2008 and was set for release. The press publicity was immaculate considering the stardom of Raj Khan. 14. The first official trailer of Invincible came out in March 2008 conveying that movie would be released on 15 th July 2008 and was available on apart from the official website of the film. In June 2008, Infinite Software Inc. issued a notice to Khan Entertainment claiming propriety over the renderings and alleging copyright violations on

3 the ground that most of the renderings were a copy of its flagship game King of Persia. Though Khan Entertainment received the notice, it did not respond to the same. 15. Diamond Picture Company had produced another film with a celebrity which flopped in the box office resulting in huge losses for them. As more than one year since filming of Dead Saint had elapsed, Diamond Picture Company conducted an audit. Upon such audit, they found out that the money given to Khan Entertainment was never audited by them for the last two years. The auditors of Diamond Picture Company asked Mr. Sharan to check on the same and upon investigation, found that the movie Naan was produced with money received from Diamond Picture Company for Dead Saint. 16. Aggrieved by the same, Diamond Picture Company filed OS No.26/2008 before the High Court of Bostro 1 for recovery of money from Khan Entertainment to the tune of Rs. 175 crores which was allotted specifically for producing Dead Saint along with an Interlocutory Application praying for an Order of Temporary Injunction restraining Khan Entertainment from releasing the movie Naan. The High Court of Bostro, by its order, granted Temporary Injunction restraining Khan Entertainment from releasing Naan a week before its scheduled release. Consequently, the release got delayed by an additional two weeks. In the meantime, Khan Entertainment filed an application for vacation of the interim order of the Bostro High Court with an undertaking mentioned in the said application that they would share the profits of the film with Diamond Picture Company. The Court heard the said application with the main matter and noted that as an undertaking was given by Khan Entertainment as aforesaid, the suit would not survive on the basis of the said undertaking. The matter was accordingly disposed off with a direction that Khan Entertainment would share the profits of the film with Diamond Picture Company. 17. In the meantime, to everyone s shock and surprise, Diamond Picture Company shelved the movie Dead Saint. 18. Infinite Software Inc. filed OS No.42/2008 before the High Court of Bostro on 1 st July 2008 against Khan Entertainment seeking Permanent Injunction against the release of the film Invincible and seeking damages on the grounds of infringement of its copyright based on the contention that the renderings were copied blatantly by Khan Entertainment. Diamond Picture Company was also arrayed as a defendant in the suit. In the said suit, Infinite Software Inc. claimed that it had documentary proof to show that Diamond Picture Company was equally involved in the process of making of Invincible along with Khan Entertainment. Infinite Software Inc. had also filed an Interlocutory Application along with the said suit seeking Temporary Injunction against the release of the film Invincible till 1 Please Note that the High Court of Bostro has Original Side Jurisdiction as that of the High Court of Tamil Nadu

4 the disposal of the suit. The High Court of Bostro granted temporary injunction against the release of Invincible pending disposal of the suit. 19. Khan Entertainment filed their Written Statement before the Bostro High Court contending that since both renderings were different, they did not fall under the definition of adaptation under copyright laws. Diamond Picture Company pleaded that they had only funded Invincible. Hence, Infinite Software Inc. had no claim against them. 20. Sanket Finance filed OS No. 57/2008 in the High Court of Bostro on 1 st August 2008 against Diamond Picture Company to recover money lent to the company to the tune of Rs. 155 crores. 21. Subsequently, The High Court of Bostro clubbed all the matters, as the parties and the subject matters were common, and posted it for final hearing and upon hearing the submissions of all the Parties decided that: a. Khan Entertainment owed money to Diamond Picture Company to the tune of Rs.175 crores and ordered Khan Entertainment to pay off the same with an interest of 18% p.a. as the contract in relation to the usage of the money only related to the film Dead Saint and not for usage of any other films. b. Sanket Finance did not have any locus standi in the case relating to Infinite Software Inc. as they had funded Diamond Picture Company as an Angel Investor and were mere creditors and did not feature anywhere in the board of Diamond Picture Company. c. Infinite Software Inc. was due damages worth Rs.100 crores to be paid jointly by Khan Entertainment and Diamond Picture Company for violation of copyright vested with Infinite Software Inc. relating to King Of Persia as the renderings clearly established that there was a blatant violation of Copyright without due acknowledgement and the said act of omission was done with an intent to make wrongful gains. d. Sanket Finance was to be paid a sum of Rs. 155 crores with an interest of 18% p.a. from 1 st Januray 2008 till the date of repayment by Diamond Picture Company purely on the grounds that it was a suit for recovery of money. 22. This decision came on 15 th February After a lot of deliberation, Khan Entertainment and Diamond Picture Company by way of a Special Leave Petition approached the Supreme Court on 1 st September 2011 against the orders of the Bostro High Court. The Supreme Court clubbed both the matters and posted it for final hearing on 25 th September Note: The Laws of Industan and India are in pari materia.

5 The parties are required to base their arguments on the following: (i) Interpretation of the contract between Khan Entertainment and Diamond Picture Company under the provisions of the Contract Act. (ii) The recovery amount to be paid to Sanket Finance. (iii) The mere similarity between renderings of a game and that of a movie in 3D format to be an adaptation under Section-2(a) of The Copyright Act. (iv) Interpretation of Section-2(f) and Section-2(ffc) of The Copyright Act. (v) Interpretation of the provisions of The Copyright Act in light of the two works in question being different forms of expression. The matter is posted before the Hon'ble Supreme Court of Industan for final arguments. The teams are allowed to argue on grounds apart from the above.