Pranav B Prem

The National Company Law Tribunal (NCLT), Mumbai Bench comprising Shri Sameer Kakar (Member Technical) and Shri Nilesh Sharma (Member Judicial) has held that it lacks jurisdiction to adjudicate disputes arising out of copyright violations and termination of contracts. The Tribunal clarified that such issues fall outside the ambit of the Insolvency and Bankruptcy Code, 2016 (IBC) and must be pursued before a competent forum having jurisdiction.

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Background

The application under Section 9 of the IBC was filed by Dream Warrior Pictures, the producer of the Tamil blockbuster Kaithi, against Reliance Entertainment Studios Pvt. Ltd. for alleged non-payment of amounts due under a Remake Rights Agreement. The Applicant, represented by Advocate Shyam Kapadia, claimed a default of ₹5.93 crore (including GST and interest) arising out of the assignment of remake rights for a Hindi film adaptation of Kaithi, which was later released as Bholaa starring Ajay Devgn and Tabu.

As per the agreement dated 29.03.2023 (effective from 03.01.2022), the Applicant assigned 50% of its remake rights in favour of Reliance Entertainment for a consideration of ₹2.5 crore, with an additional ₹2.5 crore to be paid for assignment of the remaining 50% rights to Ajay Devgn FFilms (ADF). The Corporate Debtor initially paid ₹1 crore plus GST but allegedly defaulted on the remaining amounts. The Applicant also pointed to continuing exploitation of the film Bholaa on platforms such as Amazon Prime, Zee Cinema, and YouTube even after termination of the agreement.

Applicant’s Submissions

The Applicant contended that despite repeated reminders by emails in July and August 2023, followed by a legal notice on 28.10.2024 and a statutory demand notice under Section 8 on 04.12.2024, the Corporate Debtor failed to discharge its payment obligations. It was argued that issuance of invoices was not a condition precedent for payment under the Remake Rights Agreement. According to the Applicant, Clause 4.6 merely entitled the Corporate Debtor to demand an invoice, but the debt itself had already accrued upon completion of the obligations and release of the remake film. It was further contended that the claim exceeded the statutory threshold under the IBC even if GST was excluded, and hence CIRP deserved to be initiated. The Applicant alleged that the Corporate Debtor was seeking to evade liability by taking technical objections regarding the format of the demand notice and invoice requirements.

Corporate Debtor’s Defence

Appearing for the Respondent, Advocate Rohit Gupta argued that the claim sought by the Applicant was in the nature of damages/compensation for breach of contract, which cannot be treated as an “operational debt” under Section 5(21) of the IBC. Reliance was placed on Clause 4.6 of the Remake Rights Agreement, which made issuance of valid invoices a precondition for any payment. Since no invoices were raised by the Applicant, no debt could be said to have crystallised.

The Corporate Debtor further pointed to Clause 9 of the Agreement, under which termination resulted in automatic reversion of all rights to the Applicant. Once such reversion took place, the consideration ceased to be payable. At best, the Applicant’s remedy lay in claiming damages for breach of contract, but not in initiating insolvency proceedings. It was also argued that Reliance Entertainment, being one of India’s largest studios with investments across platforms such as Netflix, Amazon, Disney+ Hotstar, and Jio Studios, could not be regarded as insolvent, and hence insolvency proceedings were unwarranted.

Tribunal’s Findings

The Bench carefully examined the agreements, correspondence, and rival contentions. It noted that as per Clause 4.6 of the Remake Rights Agreement, “payment was conditional upon the receipt of a valid invoice”, and since such invoices were not furnished, the Applicant’s claim remained uncrystallised. The Tribunal further held that once the Agreement was terminated through the legal notice dated 28.10.2024, the rights reverted to the Applicant and the consideration ceased to be payable. Any subsequent claims could only be for damages or compensation, which require evidence and detailed adjudication beyond the jurisdiction of the NCLT under the IBC.

The Bench observed: “Such claims may give rise to damages or compensation but not a debt. The appropriate relief in this case would be to seek injunction or claim damages, not initiation of CIRP under Section 9 of the IBC.”  It distinguished the case from Smartworks, where damages were quantifiable under the agreement. Here, the claim was unliquidated and not an operational debt. The reliance on Somesh Choudhary and Heritage Oil was also found misplaced.

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Holding that the dispute related essentially to copyright infringement and termination of contract, the Tribunal reiterated that it had no jurisdiction to adjudicate such issues under the IBC framework. Since the Applicant failed to establish a clear operational debt, the Section 9 petition was dismissed.

Appearance

Operational Creditor: Adv. Mr. Shyam Kapadia a/w Adv. Mr. Aayush Tainwala, Adv. Mr. Deepak Deshmukh, Adv. Mr. Jahan Ajay Chokshi & Adv. Mr. Sarosh Krishnan i/b KJAC & Associates.

Corporate Debtor: Adv. Mr. Rohit Gupta a/w Adv. Ms. Krushi Bartiwala a/w Adv. Mr. Vishal Jathar a/w Adv. Mr. Archit Shah i/b Parinam Law Associates.

Cause Title: Dream Warrior Pictures V Reliance Entertainment Studios Pvt. Ltd.

Case No: C.P. (IB)/156(MB)2025

Coram: Shri Sameer Kakar [Member Technical], Shri Nilesh Sharma [Member Judicial]