Safiya Malik

The High Court of Madras Single Bench of Justice N. Anand Venkatesh dismissed a petition challenging an arbitral award arising from a dispute over a film distribution agreement for the movie “Maatraan”. The Court affirmed the Sole Arbitrator’s direction requiring a film production company to pay over ₹1.23 crore to the counterparty under the agreement. It further concluded that the document described by the petitioner as a “comfort letter” was in fact a guarantee deed containing a binding commitment to cover the financial loss, that it was enforceable in law, and that there was therefore no ground to interfere with the arbitral award.

The petition was filed under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set aside the arbitral award dated 30.09.2020 passed in favour of the respondent. The dispute arose from a distribution agreement dated 09.05.2012 entered into between the respondent and Eros International Media Limited for theatrical distribution of the Tamil and Telugu versions of the film “Maatraan” in Karnataka.

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The respondent paid ₹2 crores out of the minimum guarantee of ₹4 crores, but due to civil unrest linked to the Cauvery dispute, Tamil films could not be released, leading the respondent to invoke the force majeure clause. At this stage, the petitioner intervened, mediated, and executed a guarantee deed dated 11.10.2012 assuring compensation if the respondent failed to recoup the ₹2 crores after releasing the Telugu version. The film performed poorly, and the respondent claimed a loss of ₹1,24,29,432.

The claimant sought joint and several liability against all respondents, while Eros filed a counter-claim for ₹3,20,80,000. The petitioner denied liability, contending that it was not party to the distribution agreement, that the guarantee deed lacked participation of the principal debtor, that the guarantee lapsed upon release of the Tamil version, and that quantification of loss lacked evidentiary basis. Evidence included Exhibits C1–C28, R1–R7, correspondence, and account statements.

The Court recorded that the respondent had paid ₹2 crores under the minimum guarantee clause and that “the respondent, through an email dated 09.10.2012, informed his predicament and sought to invoke the force majeure clause”. It noted that the petitioner intervened, negotiated, and “a guarantee deed dated 11.10.2012 was executed in favour of the respondent”, wherein the petitioner undertook to compensate if the respondent was unable to recoup the ₹2 crores.

The Court stated that it was “too late in the day for the petitioner to wriggle out of the guarantee deed executed on 11.10.2012” and referred to Exhibit C8, the letter dated 12.02.2013, where the petitioner acknowledged the respondent’s hardship and its own role in mediating the dispute. The Court recorded that the Arbitrator relied on Exhibits C22 and C4 to conclude that the petitioner “is the contract holder for the release of the Tamil and Telugu versions of the film ‘Maatraan’ in the Karnataka territory.”

Addressing the argument that the arbitration clause could not be invoked against the petitioner, the Court noted the petitioner’s earlier application under Section 8 of the Act in the respondent’s civil suit, where the petitioner “placed specific reliance upon the distribution agreement dated 09.05.2012 and took a stand that the suit is not maintainable and that the dispute can be resolved only through arbitration.” It held that the petitioner could not “approbate and reprobate in this manner.”

Evaluating the contention under Section 126 of the Contract Act, the Court referred to the Arbitrator’s finding that mediation by the petitioner “could not have taken place without the knowledge of Eros International Media Limited.” The guarantee deed itself made a specific reference to the original distribution agreement and an undertaking “to compensate the respondent to the extent of Rs.2 Crores.”

On the issue of quantification, the Court recorded that the Arbitrator considered Exhibits C7, C12, C19 and C20, and that the account statements and supporting bills were not effectively challenged. The Court observed that the Arbitrator “had taken into consideration the box office collection, distribution commissions and expenses” and that no perversity or patent illegality was established.

The Court concluded that “none of the grounds provided under Section 34 of the Act has been satisfied by the petitioner.”

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The Court stated: “this Court does not find any perversity or patent illegality in the award passed by the sole Arbitrator and none of the grounds provided under Section 34 of the Act has been satisfied by the petitioner. Hence, the present petition lacks merit and the same is hereby dismissed with costs of Rs.1,50,000/- payable by the petitioner to the respondent.”

“In the result an Award is passed: i) directing the 2nd Respondent to pay to the claimant a sum of Rs.1,23,04,231/- within three months from the date of Award failing which, directed to pay the said sum with interest at 12% per annum from the date of award till the date of payment. ii) the 1st respondent is not entitled to any counter claim and the counter claim is rejected. iii) Parties are to bear their own costs.”

Advocates Representing The Parties

For the Petitioner: Mr. T. Saikrishnan
For the Respondent: Mr. Avinash Wadhwani

Case Title: M/s Mediaone Global Entertainment Limited v. M/s Vishnu Associates & Others
Case Number: Arb O.P (Com.Div.) No. 34 of 2021
Bench: Justice N. Anand Venkatesh