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TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL
NEW DELHI
DATED : 23RD DECEMBER, 2011
Petition No. 220(C) of 2010
VIACOM 18 Media Pvt. Ltd. ……….. Petitioner
Vs.
MSM Discovery Pvt. Ltd. ...…….. Respondent
Petition No.250(C) of 2010
MSM Discovery Pvt. Ltd. ...…….. Petitioner
Vs.
VIACOM 18 Media Pvt. Ltd. ……….. Respondent
BEFORE :
HON’BLE MR. JUSTICE S.B. SINHA, CHAIRPERSON
HON’BLE MR. P.K. RASTOGI, MEMBER
In Petition No. 220 (C) of 2010
For Petitioner : Mr. Arun Kathpalia, Advocate
Mr. Kunal Tandon, Advocate
Mr. Angad Mehta, Advocate
For Respondent : Mr. Abhishek Malhotra, Advocate
Mr. Angad Singh Duggal, Advocate
In Petition No. 250 (C) of 2010
For Petitioner : Mr. Aman Lekhi, Sr. Advocate
Mr. Abhishek Malhotra, Advocate
Mr. Angad Singh Duggal, Advocate
For Respondent : Mr. Arun Kathpalia, Advocate
Mr. Kunal Tandon, Advocate
Mr. Angad Mehta, Advocate Page 2 of 193
JUDGEMENT
S.B. Sinha
Introduction
Interpretation of some of the provisions of a Memorandum of
Undertaking by and between the parties hereto and the consequences of
violation thereof arise for consideration in these petitions.
Factual Backdrop
2. The petitioner is a broadcaster. It (hereinafter called and referred to as
‘Viacom’) at all material times was and still is producer of three channels, MTV,
Nick and VH1.
The respondent herein, (hereinafter called and referred to as ‘MSMD’), a
Content Aggregator, was distributor of the said channels of Viacom and was
also the sole and exclusive distributor of One Alliance channels. (It is a joint
venture of MSM group of channels and of Discovery Group of channels having
74% and 26% of shares therein respectively.
The distributorship of the said channels of the petitioner had commenced
prior to 2008.
3. In the month of July 2008, ‘Viacom’ launched a Hindi General
Entertainment Channel (GEC) commonly known as ‘Colors’ as a pay channel Page 3 of 193
except in the CAS notified areas where it was launched as a ‘Free to Air’
channel. So far as NON-CAS areas were concerned, however no fee in respect of
the said channel was being charged.
The parties hereto had entered into correspondences and discussions as
regards renewal of the agreement of the said three channels.
The parties also discussed the prospect of taking over of the distribution
of the new channel ‘Colors’ by MSMD wherefor an e-mail was sent by
Himanshu Dhoreliya (RW1) to Sanjeev Hiremath – (PW2) with regard thereto.
4. A meeting took place between the representative of MSMD, Mr. Kunal
Dasgupta and the representative of Viacom, Mr. Haresh Chawla. The parties
also exchanged e-mails in regard thereto on 6th
January 2009. Another meeting
took place on or about 21st
January, 2009 wherein Mr. Kunal Dasgupta, who
was at the relevant point of time the Chief Executive Officer of MSMD, said to
have made commitments for grant of stake in the said company to Viacom
wherefor allegedly Shri Himanshu Dhoreliya sent an e-mail to MSMD.
5. On or about 11.02.2009 an MoU (hereinafter called and referred to as
‘the said agreement’) was entered into for the purpose of distribution of
aforementioned television channels produced by the petitioner including Page 4 of 193
‘Colors’. It was described therein as a ‘New Channel’, whereas ‘MTV’, ‘Nick’ and
‘VH1’ were described as ‘Existing Channels’.
It, however, stands admitted that stake to Viacom in MSMD did not form
part of the said agreement.
Communications and meetings between the parties, however, in that
regard continued.
6. Not only the exchange of several e-mails between the parties hereto took
place, but also meetings took place on or about 15th
September, 2009 and 6th
November, 2009 with regard.
e-mails were also exchanged in relation thereto on 9th November, 2009
and 23rd
November, 2009.
7. As far as grant of stake to Viacom18 in MSMD is concerned, the parties
allegedly yet again met on 25th
November, 2009.
Upon exchange of a few more e-mails, another meeting took place on or
about 12th
January, 2010. The parties also met on 16th
February, 2010. Page 5 of 193
8. We may also notice that by an e-mail dated 17th
May 2010, Mr. Rajesh
contended that proposal for Viacom’s stake in MSMD had been turned down
even prior to commercial negotiations of the MoU. We would consider the effect
and purport thereof at an appropriate stage.
Inter alia on the premise that MSMD had committed several breaches of
contract, the said agreement was terminated by a notice dated 13.06.2010.
The said notice was issued by Viacom inter alia on the premise that
although in terms of the agreement, its channels were to be placed in prime
packages, it was found that ‘SET’ (Sony Entertainment Television) a product of
MSMD was being placed in more attractive packages of the DISH TV and Tata
Sky who had captured about 55% of the DTH Market.
9. Whereas, according to Viacom, ‘SET’ on the DTH platform of DISH TV
was placed in 9 out of 10 different packages at the top, the channel of the
petitioner was placed only in 4 packs; in the case of Tata Sky, ‘SET’ had been
placed in 5 out of 7 packages; whereas that of ‘Colors’ was placed only in 3.
10. In its termination notice dated 13.07.2010, Viacom stated :-
“9) In these circumstances, without prejudice to the contents of all
aforesaid paragraphs, and assuming that the MOU is not vitiated Page 6 of 193
and avoided as set out therein, we hereby terminate the MOU with
immediate effect and call upon you to forthwith refrain from acting in
furtherance of the MOU or representing any association with
Viacom18 and/or Colors. This termination has resulted entirely due
to your breaches, wrongful acts of omissions and commission and
your fraudulent acts, which really constitute a repudiation of the
MOU by you. Your own acts/conduct rendered it impossible for you
to render your services to us properly in terms of the MOU. We also
call upon you to forthwith make payment of Rs.20,34,61,982/-
(Rupees Twenty crores thirty four lacs sixty one thousand nine
hundred and eighty two only) due from MSMD towards Fixed Fee
and Minimum Guarantee for the period until the date of this
termination letter. We also call upon you to render true and faithful
accounts in respect of the distribution on the digital platform and
forthwith pay to us the amount due to us on ascertainment. Your
actions, inactions and conduct as stated herein above have resulted
in substantial damage to us to the tune of approximately Rs.127
crores for various reasons including without limitation due to
unfavourable tiering for Viacom 18 Channels and loss due to
disruption of business.”
11. MSMD, however, by reason of a letter dated 15.07.2010 denied and
disputed the contentions raised therein and stated that although it had
complied with its part of the contract, Viacom has committed breaches thereof;
having in the meantime found out another distribution agency being the
Respondent No.3 in Petition No. 250 of 2010. Page 7 of 193
We would consider the effect of the said letter of termination at an
appropriate stage.
The Proceedings
12. Petition No. 220 of 2010 was filed by Viacom claiming inter-alia the
following reliefs :-
“(a) direct the Respondent to render true and correct account of the
revenues generated by the Respondent in respect of the
distribution of the said channels, namely ‘Nick’, MTV, VH1
and Colors from 1.4.2009 till 13.7.2010 with DTH
operators/Cable Operators/Commercial subscribers/CAS
Operators/IPTV or another platform and after such rendition
direct the Respondent to pay the deficit paid by the
Respondent, to the Petitioner along with interest @ 18% per
annum;
(b) direct the Respondent to pay Rs.20,90,36,289/- along with
interest @ 18% per annum being the outstanding sums
payable;
(c) direct the Respondent to furnish to the Petitioner true and
correct information, data, subscriber report in respect of the
said channels of the Petitioner, copies of all the agreements
entered into by the Respondents with all distribution
platforms including cable operators/DTH operators/CAS
operators/IPTV Operator and commercial subscribers and
provide the details of all active and inactive integrated
Receiver Decoders and return the inactive IRDs along with
viewing cards; Page 8 of 193
(d) direct the respondent to pay damages in the sum of Rs.168
crores (approx.) along with interest @ 18% per annum for
various breaches described hereinabove;
(e) permanently restrain the Respondent from representing the
Petitioner in all manners and direct the Respondent to remove
the said channels of the Petitioner from the Respondent’s
website/brochures/RIOs/bouquets/tiers/advertisements etc.
(f) permanently restrain the Respondents from directly or
indirectly interfering with the distribution and marketing of the
said channels of the Petitioner either by Petitioner itself or in
alliance.”
13. In its reply, MSMD inter-alia raised the following contentions :-
(1) It had not committed any breach of contract.
(2) The termination of the agreement was a motivated one as in the
meantime the petitioner has found out a new distributor.
14. Viacom filed an application for amendment of the petition which was
marked as M.A No.285 of 2010.
The said application for amendment was allowed by an order dated 16th
December, 2010. Page 9 of 193
MSMD has filed a reply thereto.
It had also filed a separate petition claiming damages for a sum of
Rs.166.98 crores.
Viacom has a filed a reply thereto.
MSMD filed Petition No. 250 of 2010 against Viacom claiming inter alia
the following reliefs :-
“i. Set aside and quash the purported termination notice dated
13th
July, 2009 issued by the Respondent No.1;
ii. Hold and declare that the Agreement dated 11.2.2009
between the petitioner and the Respondent No.1 is valid,
binding and subsisting between the parties;
iii. Restrain the Respondents including Respondents 2 and 3
and/or all other persons claiming rights through them
(whether as agents/assignees/distributors/sub-distributors)
from appointing any MSOs, Cable Operators or DTH operators
or any other Service Provider for distribution of the Colors,
VH1, Nick and MTV channels and creating any third party
rights in respect of the subject matter of the Agreement dated
11th
February, 2009 pursuant to any joint venture agreement
between the Respondents 1 and 2 inter se or any other
agreement between the Respondents 1 and/or 2 persons
claiming through or under them (agents/assignees) on one
hand and the Respondent No.3 on the other.
And/or Page 10 of 193
iv. Restrain the Respondent Nos. 2 and 3 and/or all other
persons claiming rights through them (whether as agents/
assignees/distributors/sub-distributors) from claiming
through Respondent No.1 and providing distribution services
with respect to the above four channels of Respondent No.1 to
any MSOs, Cable Operators or DTH operators or other Service
Providers.
v. Restrain the Respondents including Respondents 2 & 3 or any
other persons claiming rights through them (agents/
assignees/distributors/sub-distributors) from interfering with
the Petitioner in exercising its exclusive rights under the
Agreement dated 11th
February, 2009 for distribution of the
Colors, VH1, Nick and MTV channels.”
Viacom has filed a reply thereto raising by and large similar contentions
as contained in its petition being Petition No. 220 (c) of 2010. It furthermore
denied and disputed that by reason of alleged wrongful termination of the
agreement or otherwise, MSMD has suffered damages as alleged or at all.
Issues
15. By an order dated 24th
January 2011 in view of the rival contentions of
the parties in both the matters, the following issues were framed :-
“In Petition No. 220 (C) of 2010Page 11 of 193
1. Whether the Petitioner has illegally terminated the
MoU/Agreement dated 11.2.2009, in violation of the said
MoU/Agreement?
2. Whether the termination notice dated 13.7.2010 is wrongful or
illegal?
3. Whether the petitioner is entitled under the MoU dated 22-2-
2009 or otherwise to the data and information more particularly set
out in paragraph 12(e) and prayer ‘C’ of the Petition?
4. Whether the petitioner is entitled to receipt of inactive IRD’s
lying in the custody of the Respondents or its agents?
5. Whether the Petitioner is entitled to a decree of Permanent
Injunction as prayed?
6. Whether the petitioner is entitled to any interest? If so, at what
rate?
7. Whether the Respondent is liable to pay an amount of
Rs.20,90,36,289/- to the Petitioner alongwith interest thereon?
8. To what relief, if any, the petitioner is entitled to?
In Petition No. 250 (C) of 2010
1. Whether the Respondent Nos.2 and 3 have unlawfully
interfered with the rights of the Petitioner?
2. Whether the parties are entitled to claim any damages/specific
damages against each other as claimed in the respective petitions?” Page 12 of 193
Evidence
16. Viacom in support of its contentions examined one Shri Sujeet Jain, its
Vice President (Business and Legal Affairs) and Mr. Sanjeev Hiremath, Senior
Vice President (Network Development) (hereinafter referred to as PWs). The
latter also filed an additional affidavit annexing therewith some documents.
MSMD examined three witnesses viz. Shri Himanshu Dhoreliya, Shri
Amol Majumdar and Mr. Shankarnarayan, Director (Operations) in support of
its own claim. (hereinafter referred to as RWs)
Submissions
17. Mr. Arun Kathpalia, learned counsel appearing on behalf of Viacom
would urge :-
(i) MSMD, as would appear from the materials brought on record had
committed serious breaches of the agreement and in particular in
failing to give any stake to it in its company as also by not placing
Viacom’s channels in a preferential tier vis-a-vis the ‘SET’ and
‘SAB’ Channels belonging to it.
(ii) From the report submitted by MSMD itself, it would appear that
whereas the said channel was made available to about 23 lakh
viewers, ‘Colors’ Channel was made available to only 4,83,572
viewers. Page 13 of 193
(iii) MSMD without any pleadings, through its witness Mr. Himanshu
Dhoreliya (RW1) sought to make a distinction between the terms
‘tier’ and ‘package’, although the said words are interchangeable
which would be evident from Clause 2(f) of the Regulations framed
by the Telecom Regulatory Authority of India dated 23.08.2006
known as – The Standard of Quality of Service (Broadcasting &
Cable Services) (Cable Television and CAS areas) Regulations, 2006
(8 of 2006). In the Telecommunication (Broadcasting & Cable
Services) Interconnection (4th
Amendment) Regulation, 2007 also
contains a provision by way of Proviso appended to Clause
13.2.A.11 thereof wherein the term ‘package’ has been
interchanged with the word ‘scheme’,
(iv) Even from the practice prevalent in the industry it would also be
evident that the said words are interchangeable and would
furthermore appear from the affidavit filed by RW1 using the word
‘package’ and ‘tier’ interchangeably.
(v) From a press interview of Mr. Manjit Singh, it would appear that
he upon taking over as Chief Executive Officer of MSMD, clearly
gave out that the task assigned to him was that MSMD was
required to work in a very systematic way so as to be in the top
three channels within a period of 12 months, and at No.1 within
12-24 months, wherefor it was absolutely necessary that one of the
top three i.e. the channel of Viacom’s ‘Colors’ was to be displaced. Page 14 of 193
From his interview it would furthermore appear that it has
categorically been admitted therein that the ‘Colors’ had
successfully ousted ‘Star Plus’ from the number 1 slot and still
then MSMD’s ambition was that ‘SET’ should be one amongst the
top three.
(vi) The breaches of contract in question being repudiatory ones,
wherefor the respondent itself was to be blamed as it had not only
failed to get proper tiering/packaging for the petitioner from the
DTH operators, but also failed and/or neglected to grant stake in
the company to which it was committed, no notice in terms of
Clause XX of the agreement was necessary to be served upon
MSMD
(vii) No reliance should be placed on the evidence of the RWs as the
EPG numbering plan had nothing to do with the functions of
MSMD in terms of the agreement or otherwise.
(viii) The purpose of packaging as would appear from Clause X-1 of the
agreement being for optimising the reach of viewership for which
MSMD was required to make reasonable efforts, so as to make the
‘Color’ channel available to the viewers on DTH platform for all
packages, but it would, however, appear that whereas out of three
packages of Tata Sky, namely Super Hit, Super Value and Super
Saver, the channel of Viacom was only placed in Super Hit Page 15 of 193
package; the channel of MSMD were placed in all the three
packages.
(ix) From the conduct of the parties it would be evident that had the
contention of MSMD been that the chapter relating to giving of the
‘stake’ to Viacom was closed even before entering into the contract,
it would not have been necessary for the parties to meet on several
occasions to discuss the said issue.
(x) The entire attempt on the part of MSMD had been that the
viewership, keeping in view the popularity of Colors channel
should be suppressed by resorting to any means and only when
payment of a sum of Rs.150 crores as the minimum guaranteed
amount.
(xi) The malafide attitude on the part of MSMD would be evident from
the fact that although it’s rate was notified at 10.70 paise for the
digital mode of supply, the subscription fee fixed for DTH operators
for ‘Colors’ Channel was fixed at Rs.4/-. Although, giving of such
discount is not unknown in the Industry but the same should have
conferred a commensurate benefit to the broadcaster. Fixation of
the rate by MSMD @ Rs.4/- for DTH operators had adversely
affected Viacom as for the purpose of obtaining better packages it
would have to grant further discounts. Page 16 of 193
(xii) MSMD had been packaging the ‘Colors’ with unpopular channels,
of which MSMD was a distributor as a result whereof, Viacom has
suffered immense loss.
(xiii) MSMD had even gone to the extent of resorting to fabrication of the
records in violation of Clause X of the MOU in terms whereof it was
obligated to furnish all informations and particularly when
specifically asked to submit the same by Viacom in terms of its
letter dated 10.5.2010 to which it responded by merely saying that
it had fulfilled its contractual obligations despite the fact that there
are various materials to show that various local operators had a
higher subscriber base, as for example - Bigten Entertainment
operating in the territory of Hapur, has shown its subscriber base
to be 1093 as against 421 of MSMD, as would be evident from the
agreements entered into by and between the said cable operators,
which was discovered when Viacom could obtain copies of the
agreement.
(xiv) MSMD furthermore, failed and/or neglected to provide access to
interconnect agreements with the distribution platforms as was
required under Clause XIII.
(xv) It furthermore, failed to activate IRDs of ‘Colors’ at par with ‘SET’
in complete breach of Clause I-4 and XXVI-1, which was
discriminatory in nature and unfair. Page 17 of 193
(xvi) From the cross examination of Mr. Amol Majumdar, it would be
evident that the subscriber base of the cable operators was shown
less, allegedly in terms of some internal formula to compute the
same which must be held to be an afterthought as Viacom was
entitled to know the true and correct subscriber base of the cable
operators and supply the requisite informations to Viacom.
(xvii) MSMD furthermore, in violation of Clause XXIII of the agreement
has withheld informations, (although, it, in its letter dated
3.5.2010, expressed its intention to show transparency and access
to all the documents) as would be evident from the letters dated
10.5.2010 and 17.5.2010. It is evident that MSMD did not perform
its obligations to give access to Viacom so far as the agreements
entered into by it with the operators of the digital platforms.
(xviii) So far as supply of signals on analog mode is concerned, although,
MSMD in terms of Clause (IX) (I) was to place Viacom’s channels in
Bouquet II and despite the fact that having regard to the Tariff
Order dated 4.10.2007, being the 8th
Amendment Order issued by
the TRAI, that entry of Viacom’s channel in bouquet II might have
been prohibited but there was no prohibition to float a new
bouquet upon inclusion of the Colors channel with its existing
channels. Even otherwise ‘Colors’ Channel was placed only with
some of the unpopular channels of MSMD like ‘Aath’ a Bengali
Channel, Discovery Science and Discovery Turbo. Page 18 of 193
(xix) Moreover, MSMD itself in issuing the letter dated 7.5.2010 must be
held to have rescinded the contract itself and in that view of the
matter it was not entitled to 30 days’ notice as envisaged under
Clause (XX) of the Agreement.
(xx) Viacom could not have waited for 90 days’ more time for the
purpose of carrying out the affairs of its business further by
continuing to have an agent on whom it could no longer repose any
trust or faith, having regard to the fact that despite notices it did
not remedy the breaches in respect of tiering and moreover asked
Viacom to mind its own business apart from fabricating records,
not granting any access thereto to Viacom as well as to provide
informations etc.
(xxi) In view of breaches of contract on the part of MSMD as an agent,
Viacom is entitled to damages for a sum of Rs.168 crores.
(xxii) The loss of revenue suffered by Viacom in respect of Channel
‘Colors’ from TATA SKY and DTH is to be considered on a going
forward basis.
(xxiii) In this case, the breaches being fundamental and leading to
repudiation of the contract, Viacom was entitled to elect to avoid
the contract, in so as far as :-
(i) MSMD in its capacity as the agent stated that it is not
bound by its direction; Page 19 of 193
(ii) It failed to furnish the informations which it was
bound to do in terms of the contract.
(iii) It made wrong disclosure despite having been asked to
make correct information is available and as even
thereafter refused to rectify the deficiencies and
furnish correct declarations.
(xxiv) The termination of contract was not a malafide act on the
part of Viacom.
It is incorrect to say that Viacom had entered into a
transaction with Sun18 from much before as in fact Viacom had to
enter into an agreement with the said concern when it was left with
no alternative but to terminate the contract particularly in view of
the letter of MSMD dated 17.5.2010 which was issued despite the
fact that Viacom was willing to continue the relationship as would
appear from its letter dated 10.5.2010. In that view of the matter,
the question of causing any damage to the respondent by Viacom
does not arise.
(xxv) In any event, the damages payable to MSMD by Viacom, if any,
would be for a period of three months. While computing the
amount of damages, if found to be payable by MSMD to Viacom,
this Tribunal should consider the fact that MSMD has been
holding on Rs.20 Crores due towards invoiced amount and Rs.36 Page 20 of 193
Crores which had become payable to Viacom in the third year,
totaling Rs.56 Crores and MSMD is to be paid only a sum of Rs.45
Crores.
(xxvi) The fact that Viacom’s channel was not placed in the ‘Super Value’
and ‘Super Saver’ packages of Tata Sky itself shows that the
purported efforts on the part of MSMD were not reasonable.
(xxvii)It is incorrect to contend that ‘Colors’ channel became No. 1 on the
efforts of MSMD. In so far as reference to Target Audience Meters
(TAM) is concerned, the report is prepared only on the basis of
Gross Rating Point (GRP), which has been referred to in the
agreement and maintenance of its position was the responsibility
of Viacom.
(xxviii) From a perusal of the tables prepared by MSMD itself, which
is proved by RW-1, it would appear that therein a note has been
given showing that connectivity is ensured by Viacom directly
through placement deals; primarily through placement in cable
network/analogue was the responsibility of Viacom.
(xxix) The note made in the said document constitutes an admission.
Having regard to Clause XXI of the MOU, MSMD was entitled to
reduction of the amount of consideration unless GRP was
maintained which was Viacom’s responsibility. Page 21 of 193
(xxx) It stands virtually admitted that when the contract was entered
into Viacom had 3,849 IRDs (see Page 400-B) wherewith 1,476
IRDs were to be distributed out of 1,500 IRDs mentioned in the
MOU, totaling 5,353, apart from 1,394 viewing cards had also been
distributed. (See page 324 of RW-3), but when the contract was
terminated, the number of active decoders was found to be only
3,221 as would appear from the statement of RW-3 (See page 260
and Page 325), which would show that the actual number of
subscribers had gone down.
(xxxi) The statement of Mr. Amol Majumdar made in paragraphs 24, 25
and 26 of his affidavit-evidence, so far as the purported loss
suffered by MSMD is concerned, cannot be relied upon having
regard to the following :-
(i) MSMD has failed to prove any correlation between
termination of contract by Viacom and termination of
contract by NDTV; and
(ii) Even if that be so, it furthers the case of Viacom that
MSMD’s conduct so far as third-party channels are
concerned had not been in order.
(xxxii)There is a clear distinction between the placement/tiering of digital
channels and analogue channels inasmuch as so far as digital
channels are concerned clause IX(2) does not speak of a mere
improvement insofar as it was obligatory on the part of MSMD to Page 22 of 193
optimise the reach in contrast with the old channels which would
be evident from the fact that in respect thereof they were not to be
only “less beneficial”.
18. (I) The purported claim of MSMD being :-
(i) Loss on account of digital platform for a sum of
Rs.61,70,00,000/-;
(ii) Loss on account of analogue platform, suffered by it for a
sum of Rs.12.85 crores;
(iii) Costs and expenses borne by it for marketing and promotion
of ‘Colors’ channel, for a sum of Rs.1.04 crores;
(iv) Damages suffered on the ground of NDTV leaving its
platform for a sum of Rs.20.00 crores;
(i) Loss of business opportunity as it was forced to take
the channel NDTV Imagine, for a sum of Rs.15.00
crores.
(ii) Loss suffered by MSMD as it had to enter into an
agreement with NEO Sports wherefor it had to pay an
additional amount of Rs.58.38 crores;
must be held to be not maintainable and/or having not
been proved, having regard to the fact that :
(a) there was no breach of contract on the part of
Viacom. Page 23 of 193
(b) damages claimed are remote and indirect;
(c) In any event they have not been proved in view of
the fact that conditions laid down therefor, have not
been fulfilled.
(II) Only evidence adduced by MSMD being the oral evidence of RW-2 Mr.
Amol Majumdar, whose testimony;
(a) being tutored;
(b) unreliable
(c) inconsistent, and
(d) evasive,
no reliance can be placed thereupon.
(III) The amount received by MSMD having not been adjusted, no sanctity
thereto can be attached to the tabulation submitted by it which is in three
parts;
(IV) Even it be assumed that MSMD had suffered any loss; keeping in
view the fact that Viacom had lien over Rs.150 crores and the expenditure
to be incurred by MSMD would be 10 to 12% of its earning and its profit
may also be about 10%, on proper computation it would be evident that
Viacom‘s claim for damages is on a higher side. Page 24 of 193
(V) So far as the purported damages suffered by MSMD in respect of its
analogue platform is concerned, it must be held that :-
(i) it has failed to show any basis for claiming growth of 20% having
regard to the fact that
(a) TRAI had increased the subscription charges by 7% in terms of 9th
Amendment Tariff Order dated 26.12.2008 with effect from
1.1.2009;
(b) in the year 2009, the respondent was awarded the telecasting
right of IPL Cricket to SET;
(VI) So far as the purported damages relating to expenses is concerned, it
was primarily the responsibility of Viacom to bear the expenditures
towards marketting and promotion of the ‘Colors’ channel which having
regard to Clause VIII of the MOU, could have been incurred by MSMD
only with
(i) mutual consent and;
(ii) with prior intimation to Viacom and no such document having
been brought on record to prove the said fact, no decree can be
passed on the said basis.
(VII) So far as the alleged loss suffered by MSMD on the ground of
NDTV’s leaving its platform is concerned, although a claim of Rs.20.00
crores was made, but RW-2 in his evidence had not quantified the Page 25 of 193
amount and having merely stated in his affidavit that it has suffered
substantial damages, the claim on that account must be held to have not
been proved.
19. The internal allocation of 8%, 9% and 10% to the declared subscriber
base in respect of ‘Colors’ had a direct impact in as much as if the percentage
goes up then allocation of ‘Colors’ also goes up despite the fact that fees remain
fixed and in that view of the matter, the quantum of damages also would
increase with higher allocation but MSMD has chosen to keep the quantum of
loss confined to internal allocation.
Submissions of the Respondent
20. Mr. Aman Lekhi, learned Senior Counsel appearing on behalf of MSMD,
on the other hand, submitted :-
(i) Viacom having entered into the Memorandum of Understanding
with MSMD with its eyes wide open and having fully satisfied itself
of its performance from 2004 onwards, this petition is not
maintainable. Moreover, MSMD was the distributor of Viacom’s
channel MTV, NICK and VH1 and the said contract was not only
renewed but even the new channel produced by it was offered for
distribution to MSMD. Page 26 of 193
(ii) The termination of contract having not occasioned by any breach
of the provisions of the contract on the part of MSMD but on the
part of Viacom as would be evident from the fact that it must have
done its preparatory work for formation of a joint venture
undertaking between itself and Network 18 (the CEO of both the
companies being common)
(iii) The termination of agreement being admittedly contrary to Clause
XX thereof, MSMD must be held to have suffered huge losses in so
far as the stipulations contained in the said clause had not been
complied with. MSMD’s witness Mr. Himanshu Dhoreliya in
paragraph 8(a) and (b) of his affidavit having clearly stated about
the preparatory work done by Viacom as also creation of some
documents before resorting to termination of contract and he
having not been cross examined on the said question, the same
must be held to have been admitted.
(v) The stipulations contained in the agreement being in writing,
before the same could be terminated in terms of Clause XX of the
agreement, the following conditions were required to be satisfied :-
(a) The breach must be material and not just any breach.
(b) An opportunity was required to be given to remedy the
said breach.
(c) The breach remained unremedied. Page 27 of 193
(vi) Although in terms of the provisions of the Indian Contract Act a
party who has committed breaches cannot enforce the contract but
having regard to provisions contained in Clause XX of the MOU
providing that no breach is a condition or intermediary term and in
view of the clear legal position that breach of intermediary term
can be repudiated only if it was sufficiently serious and go to the
root of the contract and in any event as there could have been no
repudiation without notice, the purported termination was wholly
illegal.
(vii) In a case of this nature, the provisions of Section 39 of the Indian
Contract Act would be applicable in terms whereof the right to
terminate the contract would arise in case of a party refused to
perform or disabled itself from performing its promise in his
entirety unless he has signified by words or conduct his
acquiescence in its continuance.
(viii) Having regard to the fact that the contract was continuing till that
date, it was for Viacom to establish that something had happened
after 13.7.2009 when the notice of termination was issued.
(ix) In view of the admitted fact that on and from 13.7.2009, ‘SUN18’
had started distribution of the channel of Viacom, the same must
be linked with the notice of termination,
(x) In this case, moreover, the question of any fundamental breach
would not arise as the contract did not become a totally different Page 28 of 193
one; moreover Viacom has not raised any specific grievance of
breach or raised any objection thereto.
(xi) From a perusal of the agreement and in particular Clauses (iv), (v),
(vi) and (xxvi) thereof, it would appear that MSMD had a right over
distribution of even a new channel. The principal was not to pay
any commission but in fact was to be paid in terms of contract and
MSMD in case of fall of revenue below 20% was to renegotiate the
commercial terms and even to otherwise would have been entitled
to a pro rata reduction in the event any occasion had arisen
therefor, the concept of agency is not attracted in the instant case.
(xii) In terms of Section 206 of the Indian Contract Act, in any event, an
agent would be entitled to a reasonable notice which having not
been served; MSMD must be held to be entitled to damages.
(xiii) The obligations of MSMD under the MoU being only to make
reasonable efforts subject to Regulations and having regard to the
fact that the contract was terminated within 15 months from the
date of execution thereof during which period, MSMD had made
more than reasonable efforts resulting in improvement in the
viewership of VIACOM’s channel, no breach of contract on its part
can be inferred.
(xiv) The background of the events before formation of contract must be
viewed from the fact that ‘Colors’ channel of Viacom having been
distributed free, it might have a huge viewership but as with effect Page 29 of 193
from 01.04.2009 the transmission of the channel was to be on
payment basis, its commercial viability was to be tested.
(xv) The fact that ‘SET’ and ‘SAB’ channels were part of the ‘MSM’
channels were known to Viacom and still an agreement having
been entered into, it must be held that the decision on its part was
a conscious one wherefor no force was applied.
(xvi) Viacom, while entering into the agreement could not compare the
‘Colors’ channel with ‘SET’ or other channels which were already in
the market inasmuch as it could not have expected to have a reach
immediately having regard to the fact that it remained free to air
channel for a long time.
(xvii) From a perusal of the e-mail dated 15th
February 2010, it would be
evident that even according to Viacom, the mechanism was still to
be worked out for the purpose of finding out an alternate
mechanism to meet the objections of the JV partners which would
clearly go to show that not giving any stake in the company to
Viacom was not intentional or deliberate.
(xviii) No consideration having been fixed towards the value of the stake,
the question of any commitment in relation thereto does not arise.
(xix) Mr. Sanjeev Hiremath, the witness of Viacom was not sure as to
the different methods to compute a fair market value for the ‘stake’
and, thus, there was no demonstrable co-incidence of the terms
and conditions thereof. Page 30 of 193
(xx) From the e-mail dated 22.07.2009, from Shri Haresh Chawla to
Shri Manjeet Singh, it would furthermore appear that a formal
document was in contemplation and the terms were not settled.
(xxi) The Contract Act postulates that effect of an agreement in writing
would depend on its purpose and, thus, it was necessary that the
parties would not be bound thereby unless and until both of them
sign the same.
(xxii) Viacom has not pleaded the particulars of fraud after
misrepresentation by naming the persons who had made such
inducements or misrepresentations as also the place where such
misrepresentation was made and furthermore Mr. Sujeet Jain in
his affidavit having verified the petition as also his affidavit being
true to his knowledge as derived from the records of the case,
Viacom cannot be said to have raised any pleadings on this behalf.
(xxiii)It is wholly incorrect to contend that there were any serious
breaches on the part of MSMD or that it had abandoned its
obligations inasmuch as :-
(i) The number of packages in which ‘Colors’ were
placed had increased.
(ii) The number of service providers carrying the said
channel also increased. Page 31 of 193
(iii) It became a number one channel during
subsistence of the agreement and its popularity did
not diminish.
(iv) It started earning revenue which would imply
that it had the liability also to pay carriage fee.
(v) The annual minimum guaranteed charges were
being regularly received by it.
(vi) At no point of time before 12th
July, 2010
Viacom contended that the contract would be
terminated.
(vii) Viacom claimed subscription fee for 13th
July
onwards and, thus, must be held to have given effect to
the terms of the contract.
(viii) The letter dated 09.05.2011 is not one that of
repudiation as even revenue overflow had been
contemplated thereby therein.
(ix) The question of breach of contract as envisaged
under Clause (xx) must be held to be non-existent as
‘stake’ in MSMD company was not a part of the contract
(x) The reports submitted by MSMD to Viacom were
based on informations received from the subscribers
and, thus, cannot be said to be incorrect. Page 32 of 193
(xxiv) It is a well settled principle of law that a contract must be
construed having regard to the contents thereof and as in
the MoU there was no stipulation that Viacom would have
any stake in MSMD company, only because there had been
negotiations, meetings and discussions as regards thereto,
the same would not lead to an inference that there had been
a commitment on the part of MSMD to get stake to Viacom
in its company, there being nothing on record to show that
any offer of giving stake in MSMD’s company having been
accepted by it, no concluded contract could be said to have
been arrived at.
(xxv) On a proper construction of MSMD’s letter dated 17.5.2009
it would appear :-
(a) It was open to discussion
(b) It had talked of revenue overflow.
(c) It was open to any clarification or suggestions as far as
receiving practical solutions from Viacom is concerned and,
thus, it cannot be said to be a case of repudiation of contract.
(xxvi) The fact that the contract was alive and the objective thereof
had been subsisting what was necessary for performance
thereof was holding of discussions between the parties.
(xxvii)Having regard to the stipulations contained in the agreement,
it would be evident that the relationship between the parties Page 33 of 193
hereto was on principal to principal basis and not as
principal and agent.
(xxviii)The concept of loss of fiduciary relationship being an
equitable one, it must be held before a party can be heard to
say that it has lost faith and trust in another only if the terms
of the contract are not performed in accordance with law as
for a breach of faith some basics must be laid down and/or
there should be some legal foundations therefor.
(xxix) The repudiation of contract by the petitioner could not have
been effected only on its subjective satisfaction and/or
expectations or anticipation.
(xxx)From the letter of the respondent dated 17.5.2010 it would
furthermore appear that all access have been given to its
contracts entered into by it with its MSOs subject to the
confidentiality clause and was also open to audit which
cannot be termed to be ‘repudiation of contract’.
(xxxi)MSMD had all along being hopeful of giving better results and
in that view of the matter too, the question of repudiation of
contract does not arise.
(xxxii) The termination of contract did not result from any material
breach as not only the same did not go to the root thereof
but even no new contract emerged therefrom and, thus, it Page 34 of 193
must be held that the termination of the contract was premature.
(xxxiii)The interpretation of Clause IX(2) as has been urged by
Viacom would cause violation to the language, having been
couched in the negative language, and in that view of the
matter, ‘SET’ and ‘SAB’ cannot be permitted to be brought
within the purview thereof.
(xxxiv))So far as supply of channels on analogue platform is
concerned, Viacom was to be paid fixed fee which was not to
be negotiated and in that view of the matter, there is
absolutely no reason as to why Viacom wanted to know its
stand in the market within a period of 15 months, the term
of the agreement being three years.
(xxxv) Damages claimed by Viacom are artificial and not
maintainable, it having not given the details of its claim of
Rs. 60 Crores wherefrom it would appear that they were
aware that there have been no breaches on the part of
MSMD. It is, therefore, evident that as regards the claim of
damages, the attitude of Viacom was casual in nature.
(xxxvi)TAM report was not only the basis for the opinion of the
public that Colors was at No. 1. Page 35 of 193
(xxxvii) Having regard to the admission of PWs that the
viewership had increased to a great extent, it is evident that
after the agreement had entered into, the effort of MSMD had
contributed in that behalf.
(xxxviii) From a perusal of the terms of the MOU, it would
appear that Viacom’s channel was at No. 2 but it became No.
1.
(xxxix)The period of 90 days mentioned in Clause XX is not a
period of notice but was for remedying the breaches and in
that view of the matter MSMD would be entitled to damages
as has been claimed.
(xl) The rigors of Clause XX would be attracted in this case as
there was neither any ambiguity in the contract nor was
there any general misunderstanding with regard to the
interpretation thereof and in that view of the matter there
was absolutely no reason as to why no notice had been
given.
(xli) Having regard to the fact that MSMD did not represent
Viacom in any contract, it cannot be said to be the agent of
the Viacom. Page 36 of 193
(xlii) MSMD in view of illegal termination of contract was entitled
to receive the amount of remuneration as contained in the
agreement, the damages having not been claimed by way of
profit.
(xliii) So far as the submission made by Viacom with regard to
dealer’s commission and bad debts are concerned, no
evidence having been led, Clause VI of the MOU on which
reliance has been placed in this case is not applicable.
(xliv) Clause VI (2) of the MOU has been misread as only a fixed
fee was payable to Viacom.
(xlv) MSMD has not only claimed general damages but also
special damages which need not flow from breaches of
contract.
(xlvi) Damages claimed so far as contract entered into by and
between MSMD and Neo Sports is concerned, were not
remote as after the ‘Colors’ left the network of MSMD, for the
purpose of carrying out its business some channel was
required to be carried which could take the role of a lead
channel.
(xlvii) So far as expenses incurred on promotion and marketing of
the channel, by MSMD is concerned the same being the Page 37 of 193
expenses within the purview of the MOU, the same must be
reimbursed.
Analysis
21. Whereas Viacom is the producer of four channels, as noticed
heretobefore, MSMD was content aggregator of TV channels namely ‘Max’,
‘SET’, ‘PIX’, ‘SAB’, ‘AXN’ and ‘Animax’ which are owned by ‘MSM’ and ‘AATH’
owned by Bangla Entertainment of its parent company ‘Sony Pictures
Entertainment’.
22. Discovery is also a broadcaster and owner of television channels namely
‘Discovery’, ‘Animal Planet’, ‘PLC’, ‘Discovery Science’, ‘Discovery Turbo’ and
‘Discovery HD World’.
23. MSMD is a joint-venture company of Multi Screen Media Pvt. Ltd. (MSM)
and Discovery India (Discovery), the former having 74 % share in MSMD and
the latter 26%.
24. The Board of MSMD comprises of three directors, two nominated by
MSM, who are CEO and COO of MSM and one Director of ‘Discovery’.
They are said to be operating from the same premises. Page 38 of 193
25. Before us, diagrams have been placed to show as to how the distributor
would have no role to play so far as the delivery of signal is concerned both in
non-addressable and addressable system as also the distribution value chain.
B. Distribution of Channel
ADDRESSABLE PLATFORM/ DIRECT TO HOME(DTH)
B. Distribution of Value Chain
Broadcaster‐1
Broadcaster‐2
Broadcaster‐3
Broadcaster‐4
Aggregator
MSO
MSO
MSO
MSO
LCO
LCO
LCO
LCO
LCO
ConsumerPage 39 of 193
Aggregator’s role
26. The fact that MSMD is a content aggregator is not in question. It is also
not in issue that the agreement was entered into by and between the parties
hereto upon detailed negotiations.
The respondent in its functions as a content aggregator was mainly to
provide bundling and negotiation services on behalf of the broadcasters, in
respect whereof Mr. Kathpalia had referred to the recommendations of the TRAI
on Implementation of Digital Addressable Cable TV System in India dated
05.08.2010.
As a content aggregator, MSMD was not in possession of any head end. It
was not required to re-transmit signal. Supply of signals by the broadcaster
was to be carried out directly to the MSOs and LCOs with whom the content
aggregator had entered into agreements and from them to the consumers. The
aggregator’s role related to the commercial dealings. Primarily, aggregator was
to deal with a large number of MSOs, who in turn would enter into agreements
Broadcaster‐2
Broadcaster‐3
Broadcaster‐4
Aggregator
DTH Operator
DTH Operator
DTH Operator
DTH Operator
Consumer
Broadcaster‐1Page 40 of 193
with LCOs for the ultimate receipt of signals by the consumer. For the
aforementioned purpose, the aggregator formed bouquet of various
broadcasters’ channels and negotiated subscriber fees with non-addressable
platforms.
27. So far as addressable platforms i.e. DTH operators are concerned,
broadcasters supply all signals to DTH operators via satellite, but, cannot by
reason of the said process re-transmit it to the consumers. Similarly, the
aggregators enter into agreement with DTH operators upon negotiation on the
commercial terms. The aggregator plays a role of the distributor for multiple
broadcasters by connecting signals of multiple bouquet of channels and
distribute the same to the MSOs/DTH operators/LCOs for the ultimate
consumption of consumers.
The principal role of the aggregator was to negotiate subscription fees for
supply of signals on digital and analogue platform, so as to achieve the
optimum connectivity and revenue of the channels.
Launch of ‘Colors’
28. The relationship between the parties is not in dispute. It is also not in
dispute that as a Hindi GEC, ‘SET’ was a rival channel.
The popularity of ‘Colors’ vis-à-vis ‘SET’ is also not in dispute. Page 41 of 193
Although we have noticed heretobefore the manner in which the
agreement was entered into but principally we are concerned with the terms of
the agreement.
29. The submission that ‘Colors’ was a new channel having not been
charging any fee and/or being a ‘Free to Air channel’, is, thus, of not much
significance as the placement of channel in a tier does not depend on the
length of time but its popularity.
The popularity of ‘Colors’ channel shall be evident from the fact that
MSMD had itself put it with the other unpopular channels such as ‘Aath’,
‘Discovery Science’ and ‘Discovery Turbo’, as a driver channel. It would not
have done so, but for its popularity.
If ‘Colors’ channel was considered to be a ‘driver channel’, it is strange
that on who's back the channels of MSMD were to ride there, if not of ‘Colors’.
The Agreement
Background Facts
30. The agreement between the parties in respect of three channels was to
expire on 30.04.2009 for ‘MTV’ and ‘Nick’ and 31.08.2009 for ‘VH1’. MSMD
approached Viacom not only for renewal of the agreement of the existing
channels but also for obtaining distribution rights of new channel ‘Colors’. Page 42 of 193
Viacom allegedly raised certain apprehensions so far as the efficacy of
the proposed agreement is concerned keeping in view the rivalry between them.
It was Viacom’s apprehension which were sought to be allayed by Shri Kunal
Das Gupta in a meeting held on 21.01.2009 wherein a commitment was
allegedly made to provide a stake to it in the equity of MSMD.
31. We may notice the minutes of the said meeting dated 21st
January, 2009
as would appear from para 3 of the Affidavit of Shri Sanjeev Hiremath :-
“a) The Petitioner will subscribe to, and the Respondent will
issue, stake in Respondent Company, which reflects the value
of V18 Channels to the bouquet of channels being distributed
by the Respondent, i.e. upto 40% of the paid-up equity capital
of the Respondent Company on a fully diluted basis. The
subscription price for 40% stake would be proportionate to the
fair-market value of the Respondent Company.
b) The Petitioner would have equal representation on the board
along with the other stakeholders.
c) The Petitioner would have an affirmative voting right, inter
alia, on all material issues pertaining to distribution of the
channels by the Respondent, particularly relating to tiering of
the channels and placement of the channels in appropriate
bouquets so as to ensure a fair and unbiased distribution of
all channels.”
Page 43 of 193
32. Viacom, however, contended that when the Agreement was being drawn
up Mr. Das Gupta is said to have requested Viacom to keep the ‘stake issue’
outside the agreement inter alia for the following reasons:-
1. It was to discuss the modalities with its US office and its joint
venture partner namely Discovery which would be time consuming;
2. MSMD wanted to launch V18 channels from April, 2009 as most of its
interconnection agreements were executed with operators from April
to March;
3. It wanted about 2 months for negotiations in terms of the provisions
of the Telecommunications (Broadcasting and Cable Services)
Interconnection Regulations for promotion and marketing of V18
channels.
33. The agreement was executed by Mr. Haresh Chawla on behalf of MSMD
and Mr. Kunal Das Gupta on behalf of MSMD.
34. On the aforementioned backdrop of events, we may notice the Agreement
dated 11.02.2009 in terms whereof MSMD was to distribute the 18 channels
including ‘Colors’.
We may, at the outset, notice the salient features thereof. Page 44 of 193
35. The agreement contains a background. It provides for the description of
the parties. Para 5 of the said agreement stipulates that new channel ‘Colors’
had been ranked at second position in the Hindi General Entertainment
Category and had achieved 271 GRPs.
36. In terms of the said agreement, ‘Viacom’ was to receive a sum of Rs.125
crores during the aforementioned period in the following terms :-
“(a) Year 1 – INR 36,00,00,000/- (Rupees Thirty Six Crores Only)
(b) Year 2 – INR 42,00,00,000/- (Rupees Forty Two Crores Only)
(c) Year 3 – INR 47,00,00,000/- (Rupees Forty Seven Crores
Only)”
37. The salient features of the existing channels are contained in Clause IX-2
of the agreement in terms whereof respondent was obligated to optimise the
reach of V18 channels on digital platform and place ‘Colors’ in tiers where
channels of same language and genre are placed.
38. By Clause VI-2, ‘MSMD’ undertook to pay a cumulative minimum
guaranteed amount of Rs.150 crores for digital platform on a monthly basis for Page 45 of 193
a period of three years. The said payment was to be made within 60 days of the
end of the relevant month. The respondent also agreed to achieve higher
revenues for the channels of the petitioner from digital platforms and share
70% of the additional revenues in excess of Rs.195 crores with it, described as
‘overflow’.
39. In terms of Annexure A appended to the said agreement, the base tariff of
‘Colors’ channel for the purpose of distribution thereof was to be raised at
Rs.10.70 paise.
40. In terms of Clause XXIII, Viacom was to have access to copies of all
agreements entered into by and between ‘MSMD’ pertaining to the V18
channels on digital platform.
41. Clause I-4 postulated that ‘MSMD’ was to make necessary arrangements
together with all preparatory works in regard thereto but not limited to
negotiating and executing an affiliation agreement with the authorised
distribution platforms so as to affect their distributorship of V18 channels. Page 46 of 193
42. By Clause XXVI-1, ‘MSMD’ was to deploy/activate 1500 IRDs of ‘Colors’
channel in addition to 3500 IRDs deployed by ‘Viacom’ prior to execution of the
said MoU.
43. Clause XIV of the agreement required the ‘MSMD’ to deactivate the
channels of the petitioner together with ‘The One Alliance’ (TOA) channels
without any discriminatory treatment.
44. Clause I of the said agreement provides for transition of existing
agreement. The word ‘transition period’ means a term covering the execution
thereof till 30.6.2009, by which time the parties expected that MSMD would
have signed distribution contract with all the major contractors in respect of
V18 channel.
Clause II provides for the term of the agreement to be three years.
Clause IV provides for the distribution platforms authorizing MSMD to
enter into the agreement with distributors of said TV channels for distribution
of the authorized distribution platforms; whereas Clause VI provides for
distribution of channels through analogue and digital mode respectively. Page 47 of 193
45. MSMD was to pay a fixed fees for transmission of the channels on
analogue mode amounting to Rs.125 crores for three years i.e. Rs.36 crores in
the first year, Rs.42 crores in the second year and Rs.47 crores in the third
year. The said amount was to be paid in 36 equal monthly instalments at the
end of the month, to which the said instalment pertained.
It was stipulated :-
“Even fixed fee is not subject to any deduction on account of MSMD’s
commission, Dealer’s Commission or bad debts.”
Grace period for 60 days was to be given for the payment of instalment.
46. Para 2 of the said Clause provides for a minimum guaranteed amount for
transmission of signals on digital platform for a sum of Rs.150 crores payable
in three years i.e. Rs.28 crores in the first year, Rs.52 crores in the 2nd
year
and Rs.70 crores in the 3rd
year. Similar grace period was also to be given as in
the analogue.
Clause VII, however, provides for overflow and revenue share in digital
platform. In the event the overflow is up to Rs.195 crores i.e. a sum of Rs.45
crores, no amount would be payable to Viacom by MSMD. However, if it
exceeded Rs.195 crores, the MSMD was to pay 70% of such excess revenue to Page 48 of 193
Viacom within 60 days of the expiry of the term. It contains a provision for
revenue share, which is to the following effect :-
“(1) revenue would be shared amongst the channels in all the TOA
bouquets based on their percentage allocation which shall be in the
ratio of their a-la-carte pricing for DTH platform as specified in
Annexure-A hereto. “Rate of the Channel as specified in Annexure-A
divided by the summation of the a-la-carte rates of all the TOA
Channels multiplied by 100”. This shall be applicable only in cases
wherein agreements with such digital platforms have been entered
into or renewed post execution of this MOU.
Illustration if a distributor operating a Digital Platform subscribes for
all the TOA channels wherein Rs.83.49/- is the summation of the a
la carte DTH prices of all the TOA Channels, then the total of the
Base Tariff of the V18 Channels, MTV, Nick, Vhi and Colors shall be
Rs.19.27 and, the percentage share of the V18 Channels as per the
formula would be (Rs.19.27/Rs.83.49)x100=23.08%.
(2) For Digital Platforms with whom MSMD has subsisting
agreements as on the date of execution of these presents, the
introduction of the New Chanel shall form a separate and distinct
subject matter of commercial understanding to be entered into with
such platforms by way of an Addendum to existing agreements and
any revenue arising as a result thereof shall be allocated to Viacom
18 completely. For Existing Channels on such Digital Platforms, the
revenue sharing shall continue to be in terms of the proportion that
the summation of ala carte rates of such Existing Channels bears to
the summation of the ala carte rates of all the TOA Channels
excluding the New Channel.”
Page 49 of 193
It is, therefore, evident that there was a ‘stand alone’ clause for the
‘Colors’ channel and a provision had also been made as to what would happen
in the event the ‘Colors’ channel was taken out.
Annexure ‘A’ appended to the said agreement provides for the rates of
MTV at Rs.3.75, NICK TV at Rs.3.21, BH1 at Rs.1.61 and ‘Colors’ at Rs.10.70
totalling a sum of Rs.19.27.
47. Clause VIII provides for trade marketing budget.
It reads as under :-
“Trade Marketing Budget :
Viacom 18 have agreed to spend following amounts for
marketing and promotion of the V18 Channels.
i. INR 3,50,00,000/- (Rupees Three Crores Fifty Lakhs Only) in
Year 1 (of this approximately Rs. Two Crores to be spent on
launch of the New Channel in between February and April
2009).
ii. INR 1,50,00,000/- (Rupees One Crore Fifty Lakhs Only) in
Year 2.
iii. INR 1,00,00,000/- (Rupees One Crore only) in Year 3.
It is agreed that such expenses shall be incurred only on
mutual consent of the parties and may be incurred directly by
Viacom 18 with the prior intimation to MSMD or in the event the
same has been incurred by MSMD with the prior intimation to Page 50 of 193
Viacom 18. The parties further agree to work out a detailed activity
than in consultation with each other and freeze time lines with
regard to the incurrence of such expenses.”
Clause IX is important for our purpose and will be noticed by us at
appropriate stage.
48. Clause X provides for a Subscriber Management System, whereby and
whereunder MSMD agreed to send monthly reports to Viacom furnishing
details of all subscribers receiving signals of its channel on Cable TV Platform
as also digital platform. The said reports were to be furnished on the basis of
the declarations obtained by MSMD in relation thereto.
49. Clause XI provides for Carriage Fee. It reads as under :-
“Carriage Fees
Viacom18 shall expend reasonable efforts during the Tam, at least
85% of the cable revenues passed on TAM weightage for HSM
market on which the V18 Channels are currently carried would
continue to carry the New Channel with no significant change in
band placement.
Illustration : Viacom 18 shall ensure that the New Channel is not
placed in a position that is not more than two bands below its Page 51 of 193
existing placements for eg. If the New Channel is presently placed in
Prime band, it shall not shift below S band.”
50. Clause XII provides for Audit Rights.
Clause XIII provides for Taxes.
Clause XIV provides for ‘Switch off’ in the following terms :-
“Subject to regulatory constraints, in case MSMD is required to
deactivate any of the V18 Channels, it shall deactivate the V18
Channels together with all TOA channels provided to such party.
However, none of the V18 Channels shall be targeted or be
subjected to any kind of discriminatory treatment in so far as
deactivation or switch offs are concerned. In so far as the V18
Channels are concerned, Viacom 18 shall effect switch offs within 1
working day of receipt of request thereof, from MSMD.”
51. The consequence for delay in making payments is postulated in Clause
XIV.
Clause XIX provides for a long term agreement. It is accepted that no
such long term agreement has been entered into by and between the parties.
Clause XX provides for termination of the said agreement. It reads as
under :- Page 52 of 193
“Either Party shall be entitled to terminate this MOU or the long form
Agreement on material breach of any term or terms contained in
such MOU or the Long Form Agreement. However, no such
termination shall be effected unless the aggrieved party submits a
90 day notice upon the other party so alleged to be in breach and
offers the latter reasonable opportunity to cure such alleged breach.
In the event the material breach is suitably addressed or cured to
the satisfaction of both the Parties, no further cause shall sustain of
such notice for termination. The consequences of breach, including
penalty, if any, shall be dealt with in the Long Form Agreement.”
52. In terms of Clause XXIII, the petitioner was to have access to copies of all
agreements entered into by and between the parties pertaining to Viacom 18
channels with digital platforms.
In terms of Clause XXVI, MSMD was to deploy all the activated 100 IRDs
of ‘Colors’ channel vis-à-vis 500 IRDs deployed by it prior to execution of the
said agreement.
We may notice sub-clauses 2 and 5 thereof.
“2. Viacom 18 undertakes that it has no contractual obligation in
trade excepting the carriage/placement deals with Operators
pan India, with effect from 1st
April 2009 and TATA Sky free
Promotional Period deal that shall terminate on 20th
July 2009
with no post termination obligations thereto.
5. In the event Viacom 18 is not in a position to ensure
uninterrupted supply of signals of the V18 channels for a Page 53 of 193
continuous period of 5 days or more, MSMD shall be entitled
to a pro rata deduction in the corresponding respective pay out
for that particular month wherein such interruption occurs
provided MSMD suffers such loss.”
Development during currency of the agreement
53. Viacom contends, which is neither denied nor disputed, that Mr. Kunal
Das Gupta resigned on 19.02.2009 and Mr. Manjit Singh was appointed CEO
of MSMD.
We would refer to his interview before the Press on his assignment in the
said capacity, at an appropriate stage.
Interpretation/Application of the Agreement
54. The Agreement is a commercial document. It must have been entered
into presumably after prolonged negotiations.
We have noticed heretobefore the background facts.
A commercial document, as is well settled, should be given its ordinary
effect. It should ordinarily be given commercial meaning.
However, questions regarding construction of the agreement having been
raised, we may notice certain basic principles. Page 54 of 193
Although a literal interpretation of the agreement is to be preferred, what
is necessary is to understand the real meaning wherefor the background, the
nature of the covenants, the conduct of the parties as to how they themselves
understood the terms may be held to be relevant.
(See Reliance Communication Ltd. Bharat Sanchar Nigam Ltd. (Petition
No. 264 (C) of 2010 disposed of on 22.7.2011), Clear Media (India) Pvt. Ltd. Vs.
Prasar Bharti & Anr. (Petition No. 174 (C) of 2010 disposed of on 21.04.2011)
and Aircel Ltd. Vs. Bharat Sanchar Nigam Ltd. (Petition No. 57 of 2010,
disposed of on 01.9.2010).
The parties hereto were competitors; whereas Viacom is owner of the
Viacom 18 channels, MSMD was the exclusive distributor of the ‘One Alliance
Group’ of Television Channels. MSMD was to be appointed as an exclusive
distributor not only of V18 channels, being the ‘existing channel’, but had also
a right of priority on the channel(s) which was/were to be produced by Viacom
at a later date, as 1st
offer was to be made and minimum 45 days of negotiation
was to be held. The commercial interest of Viacom subject, of-course, to
payment of the fixed fees and minimum guaranteed charges was to be on the
MSMD. It’s growth and fall was also in the hands of MSMD.
The Colors channel at the relevant point of time ranked 2nd
in the Hindi
General Entertainment Channels category, Viacom was to take such steps,
which were necessary for maintenance of the GRPs and TAM rating and in case Page 55 of 193
of its not being able to do so, MSMD was to be given substantial benefit in
terms thereof.
55. By way of minimum guaranteed amount, a fixed fee was provided subject
to MSMD’s receiving invoices.
So far as the digital platform is concerned, which was growing by leaps
and bounds, not only a minimum guaranteed amount was to be paid, the
agreement contemplated a financial growth and above Rs.195 crores, Viacom
was to receive 70% thereof. The revenue share was to be on the basis of the
formula laid down therein.
The Viacom was to expend for marketing and promotion of its channel.
In the aforementioned backdrop, the relevant provisions of the MoU are
required to be construed.
The principal provisions being the packaging of V18 channel – Clause IX,
Subscriber Management System – Clause X, Carriage Fee – Clause XI,
Switching of Provision – Clause XIV, Termination – Clause XV, Annul Review –
Clause XXI, Change in Regulation or Law – Clause XXII, Agreements on digital
platform distribution – Clause XXIII as also Misc. Clause XXVI. A bare reading
of the aforementioned provisions (although interpretation of the individual
clauses would be considered in some details at an appropriate stage), clearly go Page 56 of 193
to show that for all intent and purport, a bonafide action on the part of the
MSMD was the heart and soul of the agreement.
56. Mr. Kathpalia has relied upon the decision of the Supreme Court in U.P.
Boodan Yagna Samiti Vs. Braj Kishore (1988) 4 SCC 274 wherein the Supreme
Court was concerned with question of the construction of statute. It is,
therefore, not necessary to consider the said judgment.
Gowramma Vs. Yella Reddy Chenga Reddy AIR 1965 Andhra Pradesh
page 226, wherein again reliance has been placed by Mr. Kathpalia, was a case
of Family Partition Deed as envisaged under Section 88 of the Indian
Succession Act. The words “take the properties” with reference to all the
sharers was held to be conferring on the beneficiary a similar interest and not a
lesser interested”.
57. Harmonious construction is the rule propounded by the Supreme Court
in Narmadaben Maganlal Thakker Vs. Pranjivan Das Maganlal Thakker (1997)
2 SCC 255, while construing a deed of gift in the light of the question of
delivery of the property so as to make the gift complete as required under
Section 122 of the Transfer of Property Act. Page 57 of 193
Yet again, in the Union of India Vs. M/s. D.N. Revri & Co. (1976) 4 SCC
page 147, an Arbitration Clause contained in a commercial document was held
to be entitled to be given full effect, stating :-
"7. It must be remembered that a contract is a commercial
document between the parties and it must be interpreted in such a
manner as to give efficacy to the contract rather than to invalidate it.
It would not be right while interpreting a contract, entered into
between two lay parties, to apply strict rules of construction which
are ordinarily applicable to a conveyance and other formal
documents. The meaning of such a contract must be gathered by
adopting a common sense approach and it must not be allowed to be
thwarted by a narrow, pedantic and legalistic interpretation".
Rankin, C.J., speaking for a Division Bench of Calcutta High Court in
Khetra Mohan Dey & Co. Vs. Benode Behary Sadhu ( AIR 1930 Cal 382), while
construing a single contract with a subsidiary agreement as to delivery and
payment, held :-
“But it appears to me to be equally clear that the House of Lords did
affirm the proposition that, if the breach that had taken place was
one which went to the root of the contract, the consequence was that
the party who was in default could not insist upon the remainder of
the contract being carried out.” Page 58 of 193
Therein the contract having been made for supply of goods weighing 300
tonnes, it was opined that the same could not have been changed to 150
tonnes.
These decisions relied upon by Mr. Kathpalia stricto sensu have no
application in the instant case.
Breach of the Agreement
58. The core issue between the parties is as to whether there had been any
breach of the provisions of the agreement, apart from its failure to fulfill its
commitment of granting stake to Viacom 18 in MSMD.
Viacom, before us, has highlighted the following breaches :-
(a) Failure to package and tier clearance, as a result whereof the overflow
from digital platform was avoided and, thus, there has been a
violation of Clauses IX.2 and X.1 as also Clauses 2 and 7 thereof.
(b) Fabrication of Subscriber Report and, thus, there is a violation of
Clause X.
(c) Failure to have access to Interconnection Agreement distribution
platform and, thus, MSMD violated Clause XIII.
(d) Failure to activate the IRDs of ‘Colors’ at par with ‘SET’, as a result
whereof Clause I (iv) and XXVI (i) were violated. Page 59 of 193
(e) De-activation of the 18 channels being discriminatory in nature, it
violated Clause XXIV.
Tiering and Packaging
59. The submission made by MSMD so far as interpretation/application of
Clause IX (2) is concerned, cannot be accepted, as evidently it has taken
recourse to a different interpretations thereof which was not its case earlier as
at the stage of entering into agreement, it had no objection to place ‘Colors’ in
the channels having same genre and language.
The said clause IX (1) on proper interpretation must be construed to
mean : -
(a) optimum reach was to be achieved;
(b) ‘Colors’ channels was to be placed in all the packages;
(c) it was not only the petitioner's understanding but also the
understanding of MSMD which would appear in the crossexamination of RW-1 Mr. Himanshu Dhoreliya in the
following terms :-
“Q: Is it correct that you were obliged to make reasonable
efforts to ensure that Colors was placed in a tier with other
channels of the same genre and language?
A: Yes, we were obliged as per the Regulatory mandates. Page 60 of 193
Q: Did your RIO also provide/contemplate that Colors would
be placed in the same tier as other channels in the same
genre?
A: The RIO indicates that all the channels of MSMD shall not
be disadvantaged or otherwise treated less favourably by the
operator with respect to the competing channels on a genre
basis.
Q: Would I be correct in understanding that by competing
channels on genre basis, you mean channels of the same
genre and language?
A: Yes.
Q: Was Colors placed in the same tier as SET or SAB on the
DTH platform?
A: Yes.
Q: In the light of your answers to the tiering of Colors and SET
in various packages, would you still maintain that the two
channels were in the same tier?
A: Yes, I do.
Vol. Tiering on DTH is the prerogative of the service provider
as per the relevant Regulations. We have made all the
reasonable efforts to get the same tiering for Colors with all
the DTH service providers. We will have to look at things in
totality and I want to refer to the tiering of Colors before and
after the signing of the MOU with all the DTH service
providers. In respect of all DTH service providers there is a
clear matrix showing Viacom18 channels before and after the
MOU became effective i.e. 31.3.2009 till 19.7.2010. Reference Page 61 of 193
is invited to pages 221, 241, 245, 250 of Vol-II of the petition
no. 250 (C) of 2010) and to pages 129 and 142 of Vol-I of the
compilation of documents.)
Q: Did your reasonable efforts, as you say, result in Colors
being in the same tiers as SET?
A: Yes.
Q: Would you call a Super Saver Pack as a tier?
A: If I may clarify, tiering is the segment where all the genrewise channels are placed with the DTH service provider and
Packages is what they sell to the consumer. There is therefore
a difference between tiering and packaging. So Colors as a
channel was placed in the same tier with all the service
providers where all the GECs were placed and so Colors was
very much part of it. If you log into any DTH set-top boxes,
colors would remain part of GEC tier.”
MSMD has interpreted the said clause one way in its submissions and in
another as regards the business head of digital in respect whereof RW-1 stated
that ‘tiering’ means EPG numbering for the purpose of evading its clear
liability.
Evidence of Mr. Dhorelia besides being not convincing, is evasive and
contrary to record.
60. From the materials brought on record, it would clearly appear that the
parties had understood that ‘Colors’ was to be placed in the same package as
‘SET’ and ‘SAB’.Page 62 of 193
The carriers, although were to be made subject to the Regulations,
MSMD has taken umbrage thereunder by misusing its position inasmuch as
the ‘Colors’ channel was not placed in all the packages.
The language used in clause 2 of paragraph IX of the MoU may not be
happy but on a proper reading it would appear that the same being in two
parts, the second part cannot be divorced from the first one.
If a literal meaning is given to the said clause, both parts would be
inconsistent with each other, and in that view of the matter it should be held
that MSMD was obligated to place the ‘Colors’ channel in the same genre and
language in all the packages.
From the materials brought on record by the parties, it appears that once a
channel gets placed in a basic package, it should get entry in the add-on
packages.
61. Mr. Himanshu Dhoreliya, in his evidence, raised a contention that tiering
and packaging do not mean the same thing.
He, however, in his deposition sought to clarify that tiering is the
segment where all the genre-wise channels are placed with DTH service
providers and packages is for sale to consumers. According to him, therefore,
there is a difference between tiering and packaging. We have noticed
heretobefore his contention as to whether Super Saver Pack is a tier
Page 63 of 193
The two answers are contradictory and inconsistent with each other.
However, we may not dilate on the subject as Mr. Lekhi submitted that
assuming that the terms ‘tiering’ and ‘packaging’ are interchangeable, MSMD
has not violated the terms of the contract.
We would, therefore, proceed on that basis.
Re: Clause IX(2) (Re: Reasonable Efforts)
62. We may now consider Clause IX of the agreement.
We may at the outset, however, notice the 2nd
part of Clause IX, which
refers to the Digital Platform.
”2. MSMD in their negotiation with any distributor of channels
operating in DTH or any other Digital Platforms for the TOA channels
shall use reasonable efforts to optimize the reach for the V18
Channels. MSMD shall subject to regulatory mandates expend
reasonable efforts to ensure that (a) Existing Channels shall not be
placed in a tier which shall be less beneficial than their current tiers;
and (b) New Channel shall not be placed in tiers other than those
where other channels in same language and genre are placed.”
63. A great deal of argument has been advanced at the Bar as to what
should be the true construction of the said Clause. Page 64 of 193
Emphasis has been laid by Mr. Lekhi on the words “reasonable efforts”,
whereas emphasis has been laid by Mr. Kathpalia on the words “optimize the
reach for V18 channels”.
The term, ‘Reasonable Efforts’, has a definite connotation. It connotes an
explicit undertaking in that behalf, although there may not be any undertaking
as regards accomplishment of a goal.
Standard of “Reasonable Efforts”, however, is higher than that of good
faith. Even some decisions provide for a reasonable standard. It would imply
that parties must pursue all reasonable methods. The words sometimes are
interchanged with ‘reasonable best efforts’ or ‘with best efforts’.
The parties, however, have not placed any material before this Tribunal
to show the existence of any industry practice in this behalf. It is yet to develop
in India. For the said purpose, however, the nature of business plays an
important role.
We may, however, notice that to a great extent the question has been
dealt with by Kenneth A. Adams in an article “Understanding ’Best Efforts’ and
Its Variants (Including Drafting Recommendations).”
64. The words ‘reasonable efforts’ in the context of a commercial agreement
and the intent and purport of the exclusive distributorship agreement would
mean reasonable commercial efforts. Interest of Viacom was to be protected to Page 65 of 193
ensure that the existing channels were not placed in a less beneficial tier.
MSMD is an experienced aggregator. The new channel i.e. ‘Colors’ was not to be
placed in tiers other than those where other channels in same language and
genre are placed.
65. Tata Sky and Dish TV occupied about 55% of the market share of the
DTH operators. Grievances have been expressed in particular to the tiering
and/or packaging of ‘Colors’ channel and Tata Sky. It is true that the
agreement does not refer to two Channels, ‘SET’ and ‘SAB’ but it is conceded
that they are also the channels of same language and genre. Whereas in Tata
Sky, ‘SAB’ and ‘SET’ found place in all three important packages, namely
‘Super Hit’, ‘Super Value’ and ‘Super Saver’ pack, ‘Colors’ found place only in
‘Super Hit’ pack, which is a basic tier.
The viewership of all the three packages was more than 23,000,00;
whereas viewership of ‘Super Hit’ in March 2010 was 4,68,278 which depleted
to 4,04,306 in July 2010; whereas those of ‘Super Value’ and ‘Super Hit’ rose
from 7,85,002 to 11,30,312 and in ‘Super Saver’ it marginally dipped from
11,71,638 to 11,61,148.
Indisputably, all other channels, which were in the ‘Super Hit’, found
place both in ‘Super Value’ and ‘Super Saver’. Page 66 of 193
Similarly, in Dish TV, the ‘Colors’ channel was placed only in four out of
ten packages, whereas ‘SET’ had been placed in nine out of ten packages.
66. In the aforementioned backdrop, we may notice that Viacom (Sanjeev)
sent an e. mail to MSMD (Rajesh), concerning tiering of ‘Colors’ and ‘Tata Sky’
at par with other GECs. Yet again, on 24.7.2009, Sanjeev sent an e. mail to
Rajesh concerning better caring of ‘Colors’ and ‘Dish TV’ and update on Tata
Sky negotiations. Yet again, on 10.12.2009, Deb Kumar of Viacom sent an e.
mail to Himanshu of MSMD, complaining about wrong tiering of ‘Colors’, in
Tata Sky and Dish TV.
In reply thereto, Kunal of MSMD sent an e. mail to Deb Kumar of
Viacom, stating that (i) tiering is Tata Sky’s prerogative; and (ii) Dish TV would
improve the tiering in next 3-4 months.
On or about 16.12.2009, Viacom (Sanjeev) sent an e. mail to MSMD
(Kunal) complaining on tiering of ‘Colors’ in Tata Sky and Dish TV. A request
was also made to apprise it on the tiering of ‘Colors’ and Dish TV on
16.12.2009.
By an e. mail dated 16.12.2009, MSMD contended that notice had been
sent to Dish TV for improper tiering of Colors. Viacom made a complaint both
with regard to tiering and offer of more than 50% discount of Colors to Tata
Sky i.e. Rs.4/- in stead and in place of Rs.10.71. Page 67 of 193
Yet again on 16.12.2009, an e. mail was sent by Deb Kumar of Viacom
addressed to Kunal/Himanshu of MSMD requesting them to appraise him on
‘Colors’ and ‘Dish TV’.
On 29.4.2010, Sanjeev of Viacom sent an e. mail to MSMD concerning
poor tiering of ‘Colors’, in Tata Sky and Dish TV.
On or about 03.5.2010, a review of existing DTH contract and placement
of Colors and Tata Sky was sought for. Complaint was again made for poor
tiering and more than 50% discount by Viacom to MSMD on 10.5.2010.
The letter of MSMD dated 17.05.2010 in this context may be noticed,
which reads as under :-
“In terms of the relevant TRAI regulations, we as aggregators do not
have the right to determine the tiering and packaging of a channel
which is the sole prerogative of the distributor, who cannot be forced
to accede to any particular demand in respect thereof. You have had
an experience where despite payment of huge carriage fees you
were able to place Colors only on the “add-on” tier of Tata Sky.
Further even under the new Competition Act, any attempt by us to
force an unwilling or reluctant distributor to package our channels
only in a manner as determined by us will be treated as anticompetitive and lead to sanctions being imposed on MSMD.
We have been able to negotiate placement of Colors in the Super Hit
Pack on Tata Sky and in Platinum Pack on Dish TV. It is noteworthy
that we have been successful in continuously receiving the
subscription revenues without any corresponding outgo in the form
of carriage fees. I am sure you will agree with me that Colors Page 68 of 193
marquee position amongst Hindi GECs also owes much to the reach
it has achieved thanks to the unlisting efforts of MSMD’s distribution
team and the inherent strengths of the One Alliance’s diverse
bouquet of channels and its countrywide network.”
Notice of termination was issued inter alia on the ground of an improper
tiering.
67. Respondents, however, would contend that :- (i) tiering and packaging
are not the same; (ii) the said provision having been worded in the negative,
there was no positive obligation to place ‘Colors’ in all tiers where channels of
the same language and genre are placed and thus, where there being no other
channel of the same language and genre, Clause 9.2 would not be breached
unless it is placed in such a package; (iii) the reasonable efforts on the part of
respondent to optimize the reach would depend upon a report or analysis.
68. The word ‘optimize’ means to make the best or most effective use. The
word ‘reasonable’ would mean fair and sensible and able to reason logically.
See Oxford Dictionary page 1001 and 1193.
In Black’s Law Dictionary, the word ‘reasonable’ is stated to be ‘fair,
proper or moderate under the circumstance’. Page 69 of 193
69. Mr. Lekhi may be correct in contending that on a plain meaning being
given of Clause 9.2, it was not necessary to place ‘Colors’ in the same manner
as those of ‘Colors’, ‘SET’ and ‘SAB’.
Viacom, however, had been making complaints. MSMD acknowledged
the case of Dish TV, as was said to have taken up the matter, but it had
maintained its silence on Tata Sky.
It is difficult to comprehend that despite reasonable efforts on the part of
MSMD, a channel which ranked second in GRP rating and which according to
one of the witnesses of the petitioner became No. 1 channel in TAM towns,
would not be tiered in all the packages in the Hindi speaking areas despite
reasonable efforts of MSMD.
70. It was for the MSMD to show what efforts were made in that direction.
It’s representatives must have met the DTH operators. Correspondence must
have been exchanged. The consultative process was required to be resorted to
and it was for it to remedy the breach contemplated under the agreement and,
thus, to show as to what action had been taken by it.
No material has been brought on the record in this behalf.
71. Reasonable efforts to optimize the reach would mean real and sincere
efforts and not merely a lip service. Page 70 of 193
What efforts had been made by it in dealing with DTH operators was
within its special knowledge. The burden in terms of Section 106 of the Indian
Evidence Act was, therefore, on it.
It would be of some interest to notice that recently in CEP Holdings
Limited and CEP Claddings Limited v. Steni AS reported in [2009] EWHC 2447
(QB) a case involving the question as to whether the exclusive distributor of a
company was in breach of its obligations to use ‘reasonable endeavours to
promote sale of its products’, it was observed thus:
“In my judgment, a reasonably competent exclusive distributor, using all
reasonable endeavours, would have engaged in a far more positive
dialogue with its supplier, Steni, than Holdings actually did, in order to
maximise the promotion and sales of Steni products in the Territory. The
evidence clearly demonstrated that Holdings' responses to Steni's
enquiries about prospective marketing and sales performance were
habitually negative. Having read the correspondence, and heard the
evidence of the participants on both sides, I am not surprised that Steni
became increasingly frustrated with what it regarded as Holdings' stalling
tactics. I have little doubt that the reluctance on Holdings' part to share
information arose out of a wish to conceal what it must have appreciated
was its inadequate performance as a distributor of Steni products.”
(See the briefing note on the case by Mark Alsop published in November,
2009 wherein the learned author commented:
“The analysis of reasonable endeavours is interesting because of
judicial consideration of the various obligations that a distributor
could reasonably be expected to undertake. It is perhaps worth
mentioning that compliance with all the reasonable endeavours Page 71 of 193
activities will not of itself necessarily produce success; for that,
targets are necessary.)”
72. MSMD’s submission is that as per TAM report, there had been a slight
increase in the viewership of the Colors channel i.e. from 62.1 to 62.3.
In a situation of this nature, it is not decisive keeping in view the
phenomenal growth in the DTH sector. (Now connections are said to be over a
million per month). MSMD does not say, it did not achieve any growth.
Malafide on the part of the MSMD would also appear from the fact that
its witness, Mr. Himanshu Dholeriya has sought to confuse the issue of
Tiering/Packaging with GRP. We have noticed his deposition in this behalf
heretobefore.
He, in his cross-examination, accepted that ‘Colors’ channel was not in
many important and significant packages.
It is not disputed that except ‘Colors’, in ‘Super Value’ pack and ‘Super
Saver’ pack, all other channels are there.
If all other channels could be packed in such significant packages; why
the ‘Colors’ could not be, is difficult to comprehend.
It will bear repetition to state that no document has been brought on
record to show that any serious attempt was made by MSMD in that behalf. Page 72 of 193
If fruitful talks could have been started with Dish T.V., why no such
attempt was made so far as Tata Sky was concerned, has not been stated.
It has not been denied or disputed that placement in number of tiers
would result in increase of larger number of viewership in each channel.
The reasonable efforts on the part of MSMD, therefore, ought to have
been to see that subject of-course to the regulatory mandate and to some
extent, discretion on the part of the DTH operators, that ‘Colors’ channel, if not
better, similar treatments received by other Hindi channels including ‘SET’ and
‘SAB’.
Carriage Fee
73. On a perusal of clause XXVI (2) of the agreement read with Clause 11, it
would appear that carriage fee was not to be paid for digital channels, but only
for analogue channels.
74. Mr. Lekhi has drawn the attention of the Tribunal to the reply of MSMD
to the Viacom’s notice of termination, wherein it has inter-alia been contended
that ‘Colors’ was available on Life Style Gold Category of Tata Sky and have to
be placed in Super Hit packages without any carriage fee obligation unlike its
earlier ‘Avtar’, when it was part of the Life Style Gold package entailing
payment of carriage fee without the commensurate revenue. Page 73 of 193
So far as Dish TV is concerned, it was contended that ‘Colors’ was
available only in the Platinum package prior to the agreement at the relevant
time and it was available in Platinum as also Gold packs enhancing its reach.
75. The question, which arises for consideration, therefore, is as to whether
Viacom was to pay any carriage fee.
Payment of carriage fee was to be kept confined only to analogue mode,
which is evident from Clause XI. If that be so, MSMD cannot, on the one hand,
complain that carriage fee although was not to be paid but was only expected
to be paid but despite agreement carriage fee would be payable for the DTH
operators. If that was the contention, the same could have very well been
raised in response to various e. mails sent by Viacom to it.
It, as an experienced content aggregator as also exclusive distributor of
both Viacom and TOA and other channels, could have even before entering into
the agreement stressed the need of payment of carriage fee to the DTH
operators.
It was from that angle only, the question as to whether in a case of this
nature, Clause XXI providing for annual review would be applicable or the
same could have been enforced or not, must be considered. Page 74 of 193
If maintenance of the GRPs was the obligation of Viacom, MSMD was
concerned only with its performance in terms of the agreement, which excluded
payment of any carriage fee.
MSMD even could have taken up the matter with Viacom in its annual
review.
Termination of Contract
76. Viacom by reason of a letter dated 13.7.2010 terminated the agreement,
inter alia, contending :-
(a) The actions on the part of MSMD resulted in its loss of faith and
confidence in MSMD which has acted as slow poison for the
present and the future growth of Viacom 18 Channels.
(b) The actions of MSMD are mala fide and fraudulent in nature as a
result whereof damage to the fabric of the MoU resulting into long
term and permanent damages to Viacom has been caused.
It by the said e-mail attempted to discuss and resolve the issue and,
thus, held back any formal correspondence.
77. The fact, which was intended to be placed on record, was stated as
under:- Page 75 of 193
(i) MSMD was appointed as Viacom’s agent for rendering its personal
services for distribution of its channels.
(ii) It falsely represented that it would give substantial stake to it in
MSMD.
Upon reciting the background of events leading to entering into the
agreement as also relevant clauses thereof, Viacom specified the following
causes for termination of the said agreement:
A. Prejudicial packaging of Viacom 18 Channels vis-a-vis MSM Discovery
Channels
(i) It had failed to maximize the revenues arising from the DTH
and other digital platforms as also analogue platform.
(ii) Whereas MSM channels are available in all or most of the
packages of DTH operators, `Colors’ channel was not
available in most of them despite the fact that on several
occasions Viacom had indicated about non-placement of
channels to it; wherefor MSMD had either requested for time
to suitably resolve its apprehensions or completely ignored
them.
(iii) MSMD’s attempt to take shelter behind TRAI Regulations
was a feeble and baseless one and, thus, unacceptable.
(iv) MSMD channels were favourably packaged with a view to
diminish the reach and connectivity of Viacom18 Channels. Page 76 of 193
B. Isolation and unfavourable packaging/tiering of Colors channel ‘Colors’
channel had unfavourably been packaged with ‘Aath’, ‘Discovery Science’ and
‘Discovery Turbo’ so as to popularize its unpopular channels.
C. Avoidance of overflow of revenue shares from Viacom 18 Channels on Digital
Platform.
(a) The DTH revenue for Colors is substantially lower than the DTH revenue
for ‘SET’ compared to what ought to and could have been achieved, had
MSMD acted properly and in due performance of its contractual
obligations.
Heavy discount of more than 50% of the normal channel price had
wrongly been given.
(b) The breaches committed are fundamental in nature which are
incapable of being remedied.
(c) Failure to deploy 1500 IRDs in addition to the existing 3,500 IRDs.
(e) Withholding of information/fabrication of subscriber report.
(f) Discriminatory deactivation of Viacom 18 Channel.
(g) Unfair practice in distribution of Viacom 18 Channels while executing
agreements with cable operators. Page 77 of 193
(h) By reason of the said breaches irreparable loss and damage has been
caused to Viacom.
(i) The breaches are such, which cannot be remedied by MSMD and
resulted in a total loss of confidence.
78. We may also notice the paragraphs 8 and 9 of the Notice of termination
issued by Viacom 18 dated 13.07.2010 thereof :-
“8. By your malafide intention and fraudulent conduct, you have
completely shattered and ruined our confidence which is
indispensable for our relationship. It is manifest that your act of
inducing us to enter in to the MOU on the basis of false assurance
and commitment was a premediated effort in pursuance of the larger
design of relegating Viacom 18 Channels to an unfair position and
undermine our present and future prospects. The breaches
committed by you are irremediable and incurable since it has
resulted in permanent and irreparable damage to rights, interests
and to our faith and confidence. The cumulative effect of all these
omissions and commissions on MSMD’s part has resulted into loss
of the submission of the MOU. Your several omissions and
commissions are clear criminal offences under the Indian Penal
Code, 1860 for which each of your directors, officers and employees
in India and abroad, concerned with the aforesaid have conspired
and are therefore jointly and severally liable for the same. In the
absence of a smooth relationship, you have left us with no
alternative but to opt for a complete severance of any existing
relationship between us and you without any further notice as every Page 78 of 193
continuing day of relationship from now will further cause
irreparable damage and injury to our business and reputation and
put in danger our obligation to provide quality to millions of our
subscribers across country.
9. In these circumstances, without prejudice to the contents of all
aforesaid paragraphs, and assuming that the MOU is not vitiated
and avoided as set out therein, we hereby terminate the MOU with
immediate effect and call upon you to forthwith cease from acting in
furtherance of the MoU or representing any association with
Viacom18 and/or Colors. This termination has resulted entirely due
to your breaches, wrongful acts of omissions and commission and
your fraudulent acts, which really constitute a repudiation of the
MOU by you. Your own acts/conduct rendered it impossible for you
to render your services to us properly in terms of the MOU. We also
call upon you to forthwith make payment of Rs.20,34,61.982/-
(Rupees Twenty crores thirty four lacs sixty one thousand nine
hundred eighty two only) due from MSMD towards Fixed Fee and
Minimum Guarantee for the period until the date of this termination
letter. We also call upon you to render true and faithful accounts in
respect of the distribution on the digital platform and forthwith pay
to us the amount due to us on ascertainment. Your actions, inactions
and conduct as stated hereinabove have resulted in substantial
damage to us to the tune of approximately Rs.127 crores for various
reasons including without limitation due to unfavourable tiering for
Viacom 18 Channels and loss due to disruption of business.”
79. We intend to deal with each of the grounds separately, so far as they are
relevant for the purpose of determining the issues between the parties. Page 79 of 193
Respondent, however by its letter dated 15.7.2010 inter-alia contended
that the termination was not occasioned by any breach, far less any
intermediary breach and the same was only a ploy to avoid contractual
obligations towards it in favour of a bargain to negotiate with Network 18 &
Sun Group during the subsistence of the agreement and prior to its
termination.
80. By its letter dated 15.7.2010 MSMD, in response to the notice of
termination, stated as under:-
“Your purported notice of termination of the MOU was received at
our office at 1:05 p.m. on 13th
July 2010 and at 2:45 p.m. the same
afternoon you together with the Sun Network announced a
purported distribution joint venture. This very act speaks volumes of
a calculated and pre-mediated move on your part motivated only by
an opportunistic desire to avoid the binding contractual provisions of
the MOU. We are astonished that a Viacom entity could stoop so low
as to seek rake up untenable allegations to avoid its express
obligations under a contract. It seems to us that the shock you seek
to express in the preamble to your letter is nothing but a mere
pretence and a sham to avoid your contractual obligations.”
MSMD, moreover, contended that the termination was not occasioned by
any breach of the agreement on its part and it was mala fide as immediately
after service of the notice of termination through e-mail at about 1.15 p.m. a Page 80 of 193
joint press release was issued in conjunction with the respondents No.2 & 3 of
Petition No.250 of 2010, announcing their strategic alliance for creation of a
new distribution platform and intention to create a proposed joint venture
company.
81. Mr. Himanshu Dhoreliya (RW/1), in his evidence, stated as under :-
“A. I became aware of the termination at around 1:30 P.M. on
13.7.2010. I further became aware that within an hour of
such termination, a press conference was held to announce
that henceforth, distribution of Respondent No.1’s channels
shall be done by Respondent No.3, a new joint venture in
which Respondent No.2 was a partner. A news report dated
13.7.2010 is filed in the proceedings at pages 475-477 of
Petition No.250 (C) of 2010 and is also annexed hereto and
may be exhibited as Exhibit PW-1/2.
A. I also say that subsequent to the purported termination, my
attention was drawn to a report containing intimation to the
Bombay Stock Exchange, of a board meeting of Respondent
No.2, held on 07.07.2010, where Respondent No.2 (which
owns a 50% stake in Respondent No.1) decided to consolidate
the entire TV businesses of the Respondent No.2 group
(including the interests of Respondent No.2 in the four channels
of the Respondent No.1) in a new entity. I say this that the
purported termination of the MOU was planned and it was not
a case of sudden loss of trust and faith. A copy of the said
intimation is annexed hereto and may be exhibited as Exhibit
PW-1/3.” Page 81 of 193
82. Mr. Lekhi would contend that the said witness having not been crossexamined in material particulars on the fact that there had been a premediated action on the part of the respondent, the same must be held to have
been accepted.
Mr. Kathpalia, on the other hand, urged that the VIACOM started a
venture with SUN 18 only after it was found that it is not possible for it to carry
on its activities with MSMD.
83. Reliance has been placed on Rattan Lal Dhirajlal’s Law of Evidence 20th
Edition, wherein it is stated:-
“In HALSBURY 4th
Ed., Vol. 17, Para 278, Page 194 it is observed :
Failure to cross-examine a witness on some material on his
evidence, or at all, may be treated as an acceptance of the truth of
that part or the whole of his evidence.
It is a well-established rule of evidence that a party should
put to each of his opponents’ witnesses so much of his case as
concerns that particular witness; if no such questions are put, the
courts presume that the witnesses’ account has been accepted.
When a party has declined to avail himself of the opportunity
to put his essential and material case in cross-examination, it must
follow that he believed the testimony given could not be disputed.” Page 82 of 193
The aforementioned issue between the parties, to our mind, is not a very
important one, except that the statement of Mr. Dhoreliya was his opinion
being based on the newspaper reports and as no other evidence has been
brought on record. The reporter has not been examined.
84. We may notice that in Borgaram Deuri V. Premodhar Bora (2004) 2 SCC
227, at page 234, the Supreme Court in regard to the evidentiary value of First
Information Report opined:-
“Spreading of hatred on communal basis is an offence. The
appellant herein did not lodge any first information report. No
contemporaneous documentary evidence has been brought on record
to show that the first respondent had spread hatred towards
member of another community or caste. The contents of the news
item whereupon Mr. Sanyal relied having not been proved by
examining the reporter, the same could not have been exhibited
legally on the statement of the witness that the report had been
published in the newspaper. It was, therefore, inadmissible in
evidence.”
85. However, the fact that immediately after termination of the agreement,
VIACOM had started distributing its channels through SUN 18 is not in
dispute. Page 83 of 193
It may be noticed that according to the VIACOM, it, even as late as on
10.5.2010, intended to carry out the ongoing relationship with MSMD as would
appear from its letter of the said date. In absence of any clear evidence whether
direct or circumstantial, it is difficult to hold one way or the other in regard to
conduct of the parties so far as the motive leading to termination of contract is
concerned.
By reason of the said letter VIACOM had been asking for giving it a stake
in the MSMD. The termination was effected by reason of a letter dated
13.7.2010 much after the causa causan arose therefor, namely, the MSMD’s
letter dated 17.5.2010.
86. It may be true that cross-examination of a witness is not a mere
formality. It is necessary for the party cross examining the witness to put-forth
its own case. When, however, there are other evidences brought on record,
evidence of a witness on a particular point even if there is no cross examination
must be considered in its entirety for the purpose of arriving at a finding upon
applying the principles of appreciation of evidence.
87. We do not intend to lay much emphasis on this aspect of the matter in
the facts and circumstances of the case, as this Tribunal is mainly concerned
with the issues relating to the effect of wrongful termination. Page 84 of 193
It is, however, in absence of any pleadings of malice of fact on the part of
the VIACOM, difficult to accept the contention of MSMD that the termination
was without any reason.
88. The main issue is as to whether the VIACOM is correct in its contention
that in view of the conduct on the part of the MSMD, it had lost faith and
confidence in it.
It is also to be considered as to whether the VIACOM could have waited
for 90 days’ more time for carrying out its affairs of its business with MSMD by
issuing a formal notice in this behalf.
89. Admittedly the respondent No.1 did not serve the mandatory notice of 90
days.
90. Mr. Himanshu Dhoreliya, (RW1) in his evidence stated the said fact and
referred to a news report dated 13.7.2010 and furthermore annexed a copy of
the intimation marked as Ex.PW 1/3 containing an intimation to Bombay
Stock Exchange as regards a Board meeting of respondent No.2 held on
7.7.2010 to consolidate the entire TV business of respondent No.2 group in a
new entity and thus the same was preplanned. Page 85 of 193
However, Mr. Himanshu Dhoreliya was not cross-examined on the said
averments and, thus, the same must be held to have been admitted.
91. Mr. Lekhi has strongly relied upon J.W. Carter’s Breach of Contract,
Second Edition, at page 59.
Paragraph 304 of the said Treatise, upon which reliance has been placed,
reads as under :-
“[304] Applicable to all contracts. It is usually open to
contracting parties to agree on the circumstances which give
rise to a right to terminate the performance of a contract. If
they have reached such an agreement resolution of the issue
of whether a right to terminate exists will depend on whether
the particular circumstances of the case make the provisions
applicable. Where this is the case then, subject to the possible
application of a statutory rule rendering the right to terminate
invalid, the party in whose favour the right exists may
exercise the right”
However, in 2011 Edition of the same treatise at page 87, it is stated :-
“Introduction. Contracting parties may agree expressly on the
circumstances which will entitle a promise to terminate the
performance of a contract. That includes a right to terminate for
breach. Such rights may be termed ‘express’ or ‘contractual’ rights to
terminate, and the provisions ‘termination clauses’.
If the parties have reached such an agreement, there are three
principal issues which may arise : Page 86 of 193
(1) In what circumstances does the right arise?
(2) What steps must be taken to exercise the right?
(3) What are the consequences of exercise of the right?
These are issues of construction. However, in relation to the
requirements for exercise of the right, and also the consequences of
exercise, the parties may not have complete freedom of contract.”
Questions
92. The questions which, therefore, arise for our consideration are as to :
(i) Whether termination of contract was in terms of Clause XX of the MOU?
(ii) Whether MSMD, having committed a fundamental breach of contract, no
notice was required to be issued?
93. A subsidiary question would also arise as to whether MSMD was an
agent of Viacom within the meaning of the provisions of Section 182 of the
Indian Contract Act.
94. We may take up the said question first.
RE: Agency
95. Section 182 of the Indian Contract Act reads as under :- Page 87 of 193
An "agent" is a person employed to do any act for another, or
to represent another in dealing with third persons. The person
for whom such act is done, or who is so represented, is called
the "principal".
96. At this juncture we may also notice the definition of `Broadcaster’ as
contained in Clause 2(e) of the Regulations, being as under :-
“2(e) “Broadcaster” means any person including an
individual, group of persons, public or body corporate, firm or
any organization or body who/which is providing
broadcasting service and includes his/her authorized
distribution agencies;”
Bowstead & Reynolds on Agency 18th
Edition at page 1 describes an
agent as under:
"(1) Agency is the fiduciary relationship which exists between two persons,
one of whom expressly or impliedly consents that the other should act on
his behalf so as to affect his relations with third parties, and the other of
whom similarly manifests assent so to act or so acts pursuant to the
manifestation. The one on whose behalf the act or acts are to be done is
called the principal. The one who is to act is called the agent. Any person
other than the principal and the agent may be referred to as the third
party. Page 88 of 193
(2) In respect of the acts to which the principal so assents, the agent is
said to have authority to act; and this authority constitutes a power to
affect the principal’s relations with third parties.
(3) Where the agent’s authority results from a manifestation of assent that
he should represent or act for the principal or act for the principal
expressly or impliedly made by the principal to the agent himself, the
authority is called actual authority, express or implied. But the agent may
also have authority resulting from such a manifestation made by the
principal to a third party; such authority is called apparent authority.
(4) A person may have the same fiduciary relationship with a principal
where he acts on behalf of that principal but has no authority, and hence
no power, to affect the principal’s relations with third parties. Because of
the fiduciary relationship such a person may also be called an agent.”
In ‘On Law of Contract’ by Treitel, 11th
Edition, `Agency’ is defined as
under:
“AGENCY is a relationship which arises when one person,
called the principal, authorizes another, called the agent, to
act on his behalf, and the other agrees to do so. Generally, the
relationship arises out of an agreement between principal and
agent. Its most important effect, for the purpose of this book is
that it enables the agent to make a contract between his
principal and a third party.” Page 89 of 193
97. We have noticed heretobefore the agreement between the parties.
By reason thereof, concedingly the signals do not pass through the head
ends of MSMD.
Re: Agency or Principal to Principal
98. It was urged by Mr. Kathpalia that MSMD, having regard to the
statement made in paragraph 67 of Petition No. 250 (C) of 2010 (page 493 Vol.
VII) wherein agency coupled with interest has been pleaded, it is estopped and
precluded from contending that the MoU dated 11.02.2009 was on a principal
to principal basis.
In any event, MSMD was only a distributor and having no ownership or
possession so far as the signals of ‘Colors’ channel is concerned and even the
copyright thereof having been retained by Viacom only, the relationship
between the parties was that of principal and agent particularly in view of the
fact that Viacom would be bound by the agreement entered into by the third
parties so far as fixation of rate is concerned.
The amount of consideration mentioned in the agreement being the
minimum guaranteed amount of Rs.150 crores merely provides for a
methodology to determine the quantum of compensation and not for any other
purpose. Page 90 of 193
99. It was urged that this Tribunal, in its order dated 27.10.2010, as also the
High Court of Delhi in its judgment clearly held that MSMD had no interest in
the corpus of the property of Viacom.
Reliance placed by MSMD on a decision of this Tribunal in MSMD v.
NDTV that there was no relationship of ‘principal’ and ‘agent’ is not applicable
in this case.
Moreover, even therein it has been held :-
“Even otherwise, it appears that having regard to the provisions of
the said Regulations, both the petitioner and the respondent no.1 are
broadcasters. The agreement between them is on a principal to principal
basis. Prima facie, there does not exist any element of `agency’ within the
meaning of Chapter X of the Indian Contract Act.
Even if there exists any such relationship, it can be terminated upon
giving reasonable notice. The rights claimed by the petitioner arise from
the term of a contract qua contract. The matter is governed by the
provisions of the Specific Relief Act, 1963.”
Alternatively, it was submitted that even the respondent is not an agent
having regard to the fact that it itself has approached this Tribunal which
would clearly go to show that it is a service provider being within the purview of
the definition of ‘broadcaster’Page 91 of 193
Mr. Kathpalia’s contention that the amount of fixed fee related only to
methodology to determine the amount of remuneration or compensation is not
entirely correct.
It may also be true that third party contracts were binding on Viacom so
far as the rates thereof fixed thereunder is concerned but the same by itself
cannot be a ground for holding that MSMD was the agent of Viacom.
Moreover, the copyright of the contents of the channels also remained
with Viacom.
MSMD admittedly in its reply has pleaded ‘Agency coupled with interest’.
100. As the order passed by this Tribunal or for that matter the one by the
High Court of Delhi having been passed at an interlocutory stage, the same,
however, shall not operate as ‘Res-Judicata’.
At that point of time this Tribunal as also the High Court proceeded to
consider the contentions of the parties without going into the details of conduct
of the parties and other circumstances connected thereto. No occasion also
arose for them to consider the other materials brought on record.
(See Petition No. 151 (C) of 2010 – Jak Communications Pvt. Ltd. V. Sun
Distribution Services Pvt. Ltd.; and Petition No. 332 (C) of 2010 – M/s.
Silverline Entertainment Vs. ESPN Software India Pvt. Ltd.), State of
Assam v. Barak Upatyaka D.U. Karmachari Sanstha, (2009) 5 SCC 694 Page 92 of 193
MSMD did not enter into any agreement with a third party in the name of
Viacom. It was free to fix the rates. It was free to enter into any agreement
with the third party including DTH operators. MSMD was not to receive any
commission. The amount of commission payable by MSMD to its distributor
was on its own account.
MSMD was accountable to Viacom only in terms of the agreement. It
was not accountable for its acts of omission and commission so far as
enforcement of rights and obligations arising out of its agreements with third
parties are concerned. It was to pay a fixed fee subject to the exceptions
contained in the agreement irrespective of the fact as to whether it was in a
position to recover the said amount or not.
If MSMD was to suffer loss Viacom was not to reimburse it to that effect.
We, therefore, are of the opinion that the agreement was entered into by the
parties hereto was on a principal to principal basis and it did not create any
agency.
101. Construction of a document moreover is a question of law.
Procedural rules of `Estoppel’ would not bind any party to deprive it from
its statutory rights. Status of a party in terms of a contract again may not be
binding on it in law, they being different. Page 93 of 193
Despite pleading ‘agency coupled with interest’, MSMD, in our opinion,
would not be an `agent’ within the meaning of Section 182 of the Indian
Contract Act.
The term `Agency’ coupled with interest has a definite connotation.
In a case of this nature and having regard to the terms of the contract
MSMD did not have any interest in the corpus of the petitioner.
That would, however, not mean that the agreement did not create any
distributing agency.
102. The Regulations contemplate such an agency as is evident from the
definition of `broadcaster’ contained in Clause 2(e) of the Regulations.
The content aggregator would, thus, be a broadcaster and in that
capacity it would also be a service provider.
We have heretobefore noticed that the TRAI in its recommendations on
Implementation of Digital Addressable Cable TV System in India published on
05.8.2010 had acknowledged the role of a content aggregator.
103. The relationship between parties, therefore, was between a broadcaster
and a distributing agency. Such distributing agency subject to the terms of the Page 94 of 193
contract may be an agent within the meaning of Section 182 of the Contract
Act or may not be.
To what extent, if any, the principal would be bound by the act of the
agent would, thus, depend on the terms of the agreement. As in this case
except the rate, Viacom was not bound by any third party agreement entered
into by MSMD, it would not be an agent.
An agent must in law consents himself to act as such. An authority
claimed in him as an agent must be express or implied. He must by words or
conduct represents or permits it to be represented that another has authority
to act on his behalf.
It, however, does not mean that an agent cannot be an independent
contractor. In the latter case, the employer would not be answerable for the
acts of tort either of the contractor himself or his servants.
104. In Ganesh Import and Export vs. Mahadev Lal Nathmal reported in AIR
1956 Calcutta 188, a Division Bench of the Calcutta High Court opined that
the Court may not have any hesitation in holding that relationship of agency
has not arisen although the concerned party was described as an ‘Agent’ in the
agreement. Page 95 of 193
Re – Agency coupled with Interest
105. When the authority gives the factual security of the interest of the agent
only the authority cannot be revoked. Such an authority must be sufficient
considering the fact that the interest must be created in the property, which is
subject matter of the agency. An authority coupled with interest is not
ordinarily contemplated in a case of contract involving mutual rights and
obligations. Even where the agent has a special property in or a lien upon
goods, to which the authority relates, it does not amount securing the claims of
the agent.
Trust & Confidence
106. It is, in that context only, the issue of trust and confidence would arise
having a limited application, which in turn is also required to be considered
with the terms of the agreement.
MSMD, although was not an agent, was bound to render serious
consideration to the complaint(s) of Viacom and to do its best to remedy the
breach.
Individual opinion, as has been submitted by Mr. Lekhi, may not matter
but what is obvious from the record also cannot be ignored keeping in view the
nature of business, particularly having regard to tough competition amongst
the channels of same language and genre, MSMD was expected to perform its
role as exclusive distributor in its capacity as a content aggregator (whose Page 96 of 193
principal duty is to provide marketing and negotiation services on behalf of the
broadcasters).
We would assume that MSMD to some extent, as contended by Mr.
Lekhi, was helpless.
If it was helpless or unable to live upto the expected performance,
Viacom may be correct in forming an opinion that it was not competent or
efficient to remain its exclusive distributor. We would, however, have to
consider the fallout of holding such opinion a little later.
107. A subsidiary question will also have to be considered, namely as to
whether mutual trust and confidence, which is based on a principle of equity,
is required to be read into the agreement.
Goff and Jones in its treatise ‘The Law of Restitution’, 5th
Edn. citing
Dhitts Vs. Boartman, 1964 Weekly Law Reporter 993 at page 1010, states the
law thus :-
“There is a broad principle of equity developed by this court in order
to ensure that trustees or agents shall not retain a profit made in the
course of or by means of their office.”
The principle is said to have established for 250 years and is applied in
wide variety and circumstances and not only to trustees and agents. Page 97 of 193
The Canadian Supreme Court in Lac Minerals Ltd. Vs. International
Corona Resource Ltd., 1989 2 SCR page 574 inter-alia relying on the
aforementioned authority, states the law thus :-
"in which a fiduciary obligation have been imposed seem to possess
three general characteristics:
(1) The fiduciary has scope for the exercise of some discretion or
power.
(2) The fiduciary can unilaterally exercise that power or discretion so
as to affect the beneficiary's legal or practical interests.
(3) The beneficiary is peculiarly vulnerable to or at the mercy of the
fiduciary holding the discretion or power.
It is possible Relationships for a fiduciary relationship to be found
although not all of these characteristics are present, nor will the
presence of these ingredients invariably identify the existence of a
fiduciary relationship.
The one feature, however, which is considered to be indispensable to
the existence of the relationship, and which is most relevant in this
case, is that of dependency or vulnerability. In this regard, I agree
with the statement of Dawson J. in Hospital Products Ltd. v. United
States Surgical Corp., supra, at p. 488, that:
There is, however, the notion underlying all the cases of fiduciary
obligation that inherent in the nature of the relationship itself is a
position of disadvantage or vulnerability on the part of one of the
parties which causes him to place reliance upon the other and requires
the protection of equity acting upon the conscience of that other . . . Page 98 of 193
The necessity for this basic ingredient in a fiduciary relationship is
underscored in Professor Weinrib's statement, quoted in Guerin,
supra, at p. 384 that:
". . . the hallmark of a fiduciary relation is that the relative legal
positions are such that one party is at the mercy of the other's
discretion."…
The foundation of action for breach of confidence does not rest solely
on one of the traditional jurisdictional bases for action of contract,
equity or property. The action is sui generis relying on all three to
enforce the policy of the law that confidences be respected. (citation
omitted).
This multi-faceted jurisdictional basis for the action provides the Court
with considerable flexibility in fashioning a remedy. The jurisdictional
basis supporting the particular claim is relevant in determining the
appropriate remedy."
The decision of the Australian High Court in Hospital Products Ltd. has
also been followed in several other jurisdictions e.g. in the judgment of Lord
Brown Wilkinson in Kelly Vs. Cooper (1993) Appeal Cases 205 where an
implied term was read with the contract that estate agent, who acts for more
than one principal would not disclose confidential information. (See also in Re
Golcord Exchange Ltd. in Receivership (1995) 1 Appeal Cases page 74).
In Carter’s Breach of Contract 2011 Edition at page 59, it is stated :- Page 99 of 193
“If a client engages a professional person such as a solicitor, and the
contract is of an informal nature, a term will be implied to define the
standard of duty. It is presumed that the professional assumes a
contractual responsibility to exercise reasonable care and skill,
rather than to bring about a particular result. A term requiring the
exercise of reasonable care and skill will therefore be implied to
define the standard of duty in performance, that is, the quality of
service. Thus, a solicitor engaged by a client to conduct litigation is
assumed not to have undertaken a strict duty, that is, a duty to
ensure that the client wins (or successfully defends) the case even
though that is the result which the client desires.
A standard of ‘reasonable care and skill’ is presumed to apply
to all professionals, including solicitors, brokers, architects, auditors,
consultant engineers, valuers and medical practitioners. Therefore,
unless the parties have agreed otherwise, the term will be implied
(to define the standard of duty) as an incident of any contract with a
professional person. Although expressed in terms of ‘reasonable
care and skill’, the element of special skill distinguishes this duty
from that applicable to an ordinary employee.
Of course, this implied obligation relates to the quality of the
professional services. There may be other implied obligations,
relating to matters such as confidential information, to which a strict
standard of duty applies.”
In Hospital Products (Supra), Mason, J. stated the law thus :-
“The notion underlying all the cases of fiduciary obligation that (is)
inherent in the nature of the relationship itself is a position of Page 100 of 193
disadvantage or vulnerability on the part of one of the parties which
causes him to place reliance upon the other and requires the
protection of equity acting upon the conscience of that other.”
In Arklow Investment Ltd. Vs. Maclean (2000) 1 WLR 594, the law has
been stated in the following terms :-
”Duty of loyalty
The description of the duty under consideration as being one of
loyalty was not seen by Mr. Underhill as being the most appropriate
one, but for present purposes it is convenient to label it in that way.
In the present context, the concept encaptures a situation where one
person is in a relationship with another which gives rise to a
legitimate expectation, which equity will recognise, that the fiduciary
will not utilise his or her position in such a way which is adverse to
the interests of the principal. An example of the obligation relevant to
the present case is not to exploit or take advantage of the position of
fiduciary at the expense of the principal. The existence and the
extent of the duty will be governed by the particular circumstances."
In Bristol & West Building Society Vs. Mothew 1997 (2) Weekly Law
Reporter page 436, which has been approved by the Privy Council in Arklow
(Supra), it is stated “the distinguishing obligation of fiduciary is the obligation
of loyalty”.
We may also notice a recent observation of one of the learned Judges of
the Supreme Court of India (G.S. Mishra, J.) in a differing opinion in A.C. Page 101 of 193
Muthiah Vs. B.C.C.I. & Anr. reported in (2011) 6 SCC 617 wherein in the
context of the fiduciary duties of the Director of B.C.C.I., it was observed :-
“28. In fact, the concept of `conflict of interest management' has
increasingly drawn the attention of governments and citizens alike
in all advanced countries including United States of America over the
last several years as has been the case in much of the rest of the
world. Even a century ago in the case of Bray vs. Bradford (1896)
A.C. 44, it was held that the directors as fiduciaries must not place
themselves in a position in which there is conflict of interest between
the duties to the company and their personal interests or duties to
others. The courts have adopted a severe method of ensuring that
the trust and confidence reposed in a fiduciary such as a director
are not abused and the fundamental principle was stated by Lord
Herschell in the aforesaid case (supra) when it was held as follows:-
“ it is an inflexible rule of a court of equity that a person in a
fiduciary position...is not, unless otherwise expressly
provided, entitled to make a profit; he is not allowed to put
himself in a position where his interest and duty conflict. It
does not appear to me that this rule is, as has been said,
founded upon principle of morality. I regard it rather as based
on the consideration that, human nature being what it is,
there is danger, in such circumstances, of the person holding a
fiduciary position being swayed by interest rather than by
duty, and thus, prejudicing those whom he was bound to
protect. It was therefore deemed expedient to lay down this
positive rule”. Page 102 of 193
We are not oblivious that recently Supreme Court of India in CBSE Vs.
Aditya Badopadhyay (2011) 8 SCC 497, upon referring to various authorities
and decisions including Bristol (Supra), has held thus :-
“39. The term `fiduciary' refers to a person having a duty to act for
the benefit of another, showing good faith and condour, where such
other person reposes trust and special confidence in the person
owing or discharging the duty. The term `fiduciary relationship' is
used to describe a situation or transaction where one person
(beneficiary) places complete confidence in another person (fiduciary)
in regard to his affairs, business or transaction/s. The term also
refers to a person who holds a thing in trust for another
(beneficiary). The fiduciary is expected to act in confidence and for
the benefit and advantage of the beneficiary, and use good faith and
fairness in dealing with the beneficiary or the things belonging to the
beneficiary. If the beneficiary has entrusted anything to the
fiduciary, to hold the thing in trust or to execute certain acts in
regard to or with reference to the entrusted thing, the fiduciary has
to act in confidence and expected not to disclose the thing or
information to any third party.”
A content aggregator like the respondent was acting in its professional
capacity. It had been dealing with more than one broadcaster.
If it has expressly or by necessary implication undertook to protect the
interest of the petitioner by making reasonable efforts, it should have shown by
reason of being a person of trust and confidence, as to how and in what
manner, it had discharged its duties. Page 103 of 193
As a party to a contract, it could not have refused to disclose it’s actions
vis-à-vis its obligations under the agreement to make all reasonable efforts,
where there was an apparent conflict of interest. It should not have withheld
the best evidence in its possession.
Material Breach
108. Clause XX of the agreement provides for termination occasioned by
material breach. What would constitute a material breach has been stated in
Stroud’s Judicial Dictionary 6th
Edition at page 1565 in the following terms:
“MATERIAL BREACH. “Material” was to be defined as
“serious” or “important” in a partnership deed where the
parties agreed that a material breach by one would entitle the
other to purchase the interest of the one in breach (DB Rare
Books Ltd. v. Antiqbooks [1995] 2 B.C.L.C. 306).”
In Black’s Law Dictionary, 9th
Edition at page 214, it is stated :-
“A breach of contract that is significant enough to permit the
aggrieved party to elect to treat the breach as total (rather than
partial), thus excusing that party from further performance and
affording it the right to sue for damages.”
109. When a material breach occurs, a party to a contract would be entitled to
avoid the contract. The party will have a lawful excuse from performing the Page 104 of 193
terms of the contract. Excuses for non-performance of the contract may be
provided by the contract itself which may contain exceptions absolving a party
from its duty to perform if he is prevented from doing so by specified
circumstances. Each event of failure to perform, if brought about by any, is
not a breach at all.
{See The Angelia 1973 (1) Weekly Law Report page 210 at page 213}
Treitel on the Law of Contract, Eleventh Edition at page 838 on
Standard of Duty, stated thus :-
“Many contractual duties are strict. The most obvious illustration of
the principle is provided by the case of a buyer who cannot pay the
price because his bank has failed or because his expectation of
raising a loan has not been fulfilled, or because he is prevented by
exchange control regulations from remitting money to the place
where he has agreed to pay or because his supply of the currency in
which he has agreed to pay has become exhausted and cannot be
replenished. In such cases there is no doubt that he is liable to pay
money, even if it occurs entirely without the fault of the party who
was to make the payment, is not an excuse for failing to make the
payment. The same principle of strict liability applies to the duty of a
seller of generic goods to make delivery. It is no defence for him to
say that he was prevented from making delivery because he was let
down by his supplier or because no shipping space was available to
get the goods to their agreed destination. A charter party similarly
imposes a strict duty on the chartererer to provide a cargo, so that
inability to find one is no excuse. In all these example, by a force
majeure clause, but unless this is done liability is quite independent
of fault. Page 105 of 193
The principle of strict liability also applies to certain cases of
defective performance. At common law, a carrier of goods by sea
was held to give an “absolute” warranty of seaworthiness, it was
not enough for him to show that he had taken reasonable care to
make the ship seaworthy. In practice, sea carriers often contracted
out of this strict liability; and in many cases the duty is now reduced
by statute to one of due diligence.
Liability is, again, strict where goods delivered under a
contract of sale are defective, for example, because they do not
comply with the seller’s undertakings as to quality. It is no defence
for the seller to show that he took all reasonable care to see that
there were no defects, or that he could not have discovered the
defects because he was a retailer selling goods in packages sealed
by the manufacturer. The position appears to be the same where
goods are supplied under a contract for the supply of goods other
than one of sale, e.g. under one of hire or hire-purchase.”
All the alleged breaches on the part of the MSMD, as would appear from
the discussions made hereinafter, were not material breaches.
Repudiation Issue
110. We, thus, are required to deal with the contentions of Viacom on their
own merit. Page 106 of 193
111. Clause XX containing severe consequences for its breach should as far
as possible be construed literally, so as to be in conformity with the intention of
the parties, which would mean :-
(i) The breaches are to be serious in nature.
(ii) An opportunity to remedy the breach was required to be given.
(iii) For the said purpose notice of 90 days’ was required to be served.
(iv) A reasonable opportunity to remedy such alleged breach was to be
given.
(v) In the event of the breach being suitably addressed or cured to the
satisfaction of both the parties, no further cause shall subsist if
the consequences of such breach including penalty can be dealt
within the provisions of the long term agreement.
112. Mr. Kathpalia, however, in support of his contention that the breaches in
question were repudiatory ones has relied upon a large number of judgments.
We may notice the same.
In Northern Foods PLC vs. Focal Force Ltd. 2003(2) Lloyds Law Report
page 728, the main issue in the lis between the parties therein was as under :-
“1.7 The main issue in the second trial was whether Northern was
in repudiatory breach of the Contract by its admitted failure to order
the required percentages of sliced/diced onions from Focal.” Page 107 of 193
It was observed that various tests have been laid down to identify
breaches of intermediate terms in a contract that are sufficiently serious to
entitle the innocent party to quit the contract at an end.
In that case refusal on the part of the respondent therein to supply of
onions at the contract price was treated as an acceptance of the appellant’s
repudiation of contract. Such is not the position here.
113. For constituting a fundamental breach, the breach must form core of the
contract. The exception clause, however, will have no application if there has
been a breach of fundamental terms.
To constitute a repudiatory breach of contract, the same must go to the
root thereof. A breach is likely to occur or recur cannot of course be treated to
be ‘repudiation’ unless it would have the effect when it did occur or recur. The
remedy open to an innocent party will depend entirely upon the nature of the
breach and its foreseeable consequences.
114. In a concurring judgment McGonigal J. however, in Northern Food PLC
v. Focal Foods Ltd. reported in (2001) All E.R.(D) 306 (Jul) observed thus :-
“If a party without professing to terminate a contract fails to
perform his side of the bargain in circumstances such that his
failure is judged to be repudiatory, can he justify his failure on Page 108 of 193
the ground that the other party had wholly disabled himself
from performing his own obligation. The answer to my mind is
that he can. The essence of an executory contract is that the
performance or promise of one party provides the
consideration for the promise of the other and it would seem
both unjust and contrary to principle to hold that one party
should remain bound to perform his side of the bargain after
the other has wholly put it out of his power to perform his own
(any more than he would remain bound after the contract had
been made incapable of fulfillment by some frustrating
intervention of a third party). As to authority, this conclusion is
consistent with British & Beningtons Ltd. and Cooper, Ewing
& Co. Ltd. Vs Hamel & Harley Ltd.”
115. We may, however, notice that when the breach of the stipulation go so
much to the root of the contract that it make further commercial performance
of the contract impossible, a fundamental breach may be held to have been
committed.
[See Hong Kong Fir Shipping vs. Kawasaki Kisen Kaisha reported in
(1962) 2 Q.B. 26 at page 60)
Recently in Ontario Inc. vs. Boa-France Inc. (2005) 78 DR (3rd
) 81 (C.A.),
the Court of Appeal for Ontario by a judgment dated 01.11.2005 held as under:
“The test for determining whether a breach amounts to a
fundamental breach that deprives the innocent party of Page 109 of 193
“substantially the whole benefit of the contract” was recently
restated by this court in Shelanu Inc. v. Print Three Franchising
Corp. , (2003), 64 O.R. (3d) 533. In that case, the court adopted the
application of five factors extrapolated by Professor Waddams from
the case law, to analyze whether there has been a substantial
failure of performance amounting to fundamental breach. They are:
(1) the ratio of the party’s obligation not performed to the obligation
as a whole; (2) the seriousness of the breach to the innocent party;
(3) the likelihood of repetition of such breach; (4) the seriousness of
the consequences of the breach; and (5) the relationship of the part
of the obligation performed to the whole obligation. Writing for the
court, Weiler J.A. observed that the first and fifth factors appear to
be aimed at ascertaining whether the contract was substantially
performed; the second and fourth factors are aimed at measuring
the effect of the breach on the innocent party; and the third factor
assesses whether the aggrieved party should be released because
repetition of the breach would make continued performance
intolerable: see Shelanu, supra, at paras. 119-120.”
“If a party, without professing to terminate a contract, fails to
perform his side of the bargain, in circumstances such that his
failure on the ground that the other party had wholly disabled
himself from performing his own obligations? The answer to my
mind is that he can. The essence of an executor contract is that the
performance or promise of one party provides the consideration for
the promise the other, and it would seem both unjust and contrary
to principle to hold that one party should remain bound to perform
his side of the bargain after the other has wholly put it out of his
power to perform his own (any more that he would remain bound Page 110 of 193
after the contract had been made incapable of fulfillment by some
frustrating intervention of a third party).”
116. Reliance has also been placed on Maharashtra State Electricity
Distribution Vs. DSL Enterprises Pvt. Ltd. reported in 2009 (4) Bom. C.R.
843, wherein the law is stated thus :-
“48. It would do well to understand the concept of what is
"fundamental ".
49. The Thesaurus would show the following synonymous: basic,
key, crucial, primary, vital, central, major, principal, main, chief,
central, integral, indispensable.
50. Hence a "fundamental breach ", as the term itself suggests is a
breach of a basic, main term of the contract, so primary that upon
such a breach the other reciprocal promises cannot be performed by
the other party to the contract. Lord Reid has enunciated the ambit
of this term in the case of Suisse Atlantique Societe d' armament
Maritime S.A. v. N.V. Rotterdams che Kolen Centrele 1966 AC 361 @
397 (H.L) to which my attention was drawn by Mr. Dada. In that
case the charterer as the contracting party committed willful and
deliberate (though not fraudulent or malafide) breaches by delaying
loading and discharging the cargo even upon the pain and result of
paying demurrage charges for such cargo which was calculated to
be of lower rate than to pay for freight of the coal which they would
have had to use as fuel for more voyages that would have resulted. Page 111 of 193
51. It was observed that in such a case the Charters would have
committed a "fundamental or repudicatory breach " or a breach
"going to the root of the contract ". He further observed:
One way of looking at the matter would be to ask whether the party
in breach has by his breach produced a situation fundamentally
different from anything which the parties could as reasonable men
have contemplated when the contract was mad....
Lord Reid has thereafter held what would be the consequence or the
aftermath of such breach at page 398 thus:
If fundamental breach is established the next question is what
effect, if any, that has on the applicability of other terms of the
contract. This question has often arisen with regard to clauses
excluding liability, in whole or in part, of the party in breach. I do not
think that there is generally much difficulty where the innocent party
has elected to treat the breach as a repudiation, bring the contract to
an end and sue for damages.
52. Lord Reid further considered the case law dealing with the right
of the party guilty of breach to rely upon the exclusion clause in the
contract i.e., the clause excluding the liability of the party in breach
upon rescission of the contract. Following, amongst others, Lord
Denning's opinion in the case of Karsales (Harrow) Ltd. v. Wallis
1956 1 W.L.R. 936 he held that such party cannot use the umbrella
of the exclusion clause if the breach "goes to the root of the contract "
i.e., if it is a breach "of a fundamental term" thus:
It must mean that the law does not permit contracting out of common
law liability for a fundamental breach.
2 principles, therefore, follow from the rule of law, (as His Lordship
called) from earlier cases cited in that judgment. Page 112 of 193
a) A fundamental breach is a breach of the most basic and essential
term of the contract, which goes to the root of the contract.
b) A breach of the fundamental term enables the aggrieved party to
repudiate the contract and sue for damages.”
117. Mr. Lekhi has relied upon the decision of House of Lords in AFOVOS
Shipping Co. SA vs. Romanao Pagnan & Pietro Pagnan reported in 1983(1)
WLR 195 wherein it was held that a breach does not occur until the time for
performance arrives.
Therein a right of withdrawal was exercised by a charter by the Ship
owner from a time charter of a ship let to charterers for a period of two years
three months.
The said decision does not have any application to the fact of the present
case.
The contract does not contain an exception clause, by reason whereof a
new contract has come into being. A fundamental breach cannot be presumed
having regard to the perception of a party to the contract.
In this case, however, the alleged breach of contract and the effect
thereof as to whether they are serious enough to terminate the contract
without issuance of any notice under Clause XX of the agreement must be
considered on its own merits. Page 113 of 193
The contract, however, it must be placed on record, does not provide for
any exemption clause so as to hold that Viacom could take recourse to the
repudiatory breach of its own.
[See Suissee Atlantique Societe D Armement Maritime SA vs. NV.
Rotterdamsche Kolen Centrale (1966) 2 AII ER 61}.
There cannot, therefore, be any doubt or dispute that the termination
has been effected in violation of Clause XX of the agreement as the respondent
has not been given an opportunity to remedy the breach as indicated
heretobefore. The effect thereof shall be considered hereinafter.
Effect
118. It is in the aforementioned context, we may notice the alleged breaches
committed by the MSMD.
Stake
119. Admittedly, grant of ‘Stake’ to Viacom in MSMD was not a part of the
agreement. The premise, on which the same has been made an issue, was
Viacom’s assertion that keeping in view the conflict of interest, it was to be
given some say in the control of the MSMD. Page 114 of 193
120. It must, however, be borne in mind that although ‘stake’ was not a part
of the agreement, there are a large number of communications including the
letters dated 03.8.2009, 18.8.2009, 10.9.2009, 09.11.2009, 23.11.2009,
30.11.2009, 06.10.2010, 07.01.2010, 15.01.2010, 15.02.2010 and 10.5.2010
to suggest that the said issue had been discussed both prior to and after
entering into the agreement dated 11.02.2009.
Exchange of the said communications is not in controversy.
121. On or about 29.01.2009 an e. mail was said to have been issued for the
purpose of recording the said understanding, but both the said documents
have not been proved, which would appear from the following piece of
deposition of RW2 :-
“Q: Please refer to any document prior to or contemporaneous with
the agreement wherein the respondent’s commitment to your stake
in the respondent company is recorded?
A: Yes. I had a mail from Himanshu Dhurelia dated 29.1.2009,
before the MOU was signed. This document, however, has not been
filed. Said document can be produced.
Q: Can you explain why the said document was not filed earlier?
A: By oversight.
Q: I put it to you there was no agreement between the petitioner and
the respondent for stake in the respondent’s company? Page 115 of 193
A; There was no formal agreement but there was verbal commitment
given by Mr. Kunal Das Gupta, the then CEO. There was a clear
understanding that we would be granted equity in the company
which would be based on the value that we bring to the bouquet of
channels and in that point of time, our value was determined around
40 %. This was based again very scientifically on the television
audience measurement data and reflected the value of four channels
brought to the bouquet. Further, we were supposed to get equal
representation on the board with affirmative voting rights on all key
matters that impacted our business.”
In the aforementioned context, we may notice an e. mail dated 22.7.2009
from Mr. Haresh Chawla to Mr. Manjit Singh.
It reads as under:-
“As you may be aware we had a review of the Viacom18 channels
with the One Alliance team last week and one of the things that
came up was the discussion we had on Viacom18 becoming a
partner in the One Alliance JV and get a stakeholding which reflects
the value our channels bring to the bouquet. This commitment was
the one of the key considerations for us signing up our channels
with you but at that time, Viacom18 agreed to hold off any written
commitment on this matter since MSMD requested for time to handle
the issue with your other shareholders, plus we had a looming
deadline of the IPL to get Colors (and our other channels) into the
bouquet.
Now I believe that we should pursue this discussion with great
earnestness, since our Board is keen that we conclude this matter Page 116 of 193
asap. Do let me know when we could convene on this subject and
move things forward.
Meanwhile, I should tell you that our teams seem to work very well
together and this augurs well for our relationship.”
122. Our attention, however, has been drawn to another e. mail dated
15.02.2010 from Mr. Haresh Chawla to Mr. Manjit Singh to contend that there
was no concluded contract. It is, however, beyond any controversy that the
parties had been negotiating on giving ‘stake’ to Viacom, which would also be
evident from the letters dated 30.11.2009 and 15.01.2010.
123. Mr. Lekhi would urge that in a case of this nature, the ‘mirror image’
clause will have no application. There cannot, however, be any doubt or
dispute that so as to make a contract binding, it should be a concluded one.
MSMD, however, does not deny or dispute, nor indeed could it do so in
view of a large number of correspondence between the parties as also the oral
evidence brought on record that grant of stake was a major issue. It is not a
case where there had been no understanding between the parties at all.
In the aforementioned context, the letter of MSMD dated 17.5.2010 must
be considered, wherein it was categorically stated by it that Viacom’s stake was
turned down even prior to the commercial negotiation of the agreement. Page 117 of 193
124. In the meetings, which were being held in September and November,
2009 as also in January and February, 2010, resolution of disputes was
sought for.
However, in April 2010, it was given out that the partners of MSMD
based in United States, had some reservations with regard to grant of stake.
Moreover, even as late as in November 2009, the parties wanted to move
forward. It is true that an alternative mechanism was still to be worked out. It
is also true that value of ‘stake’ was also required to be determined as Mr.
Sanjeev Hiremath stated in his deposition that there was no written
communication in that behalf, but the same had been subject matter of
discussion.
Mr. Hiremath, however, in his evidence explained Viacom’s stand that
the matter was not pushed in the background of the MoU as respondent had
not discussed the same to its partners in U.S.A. as also its partner – Discovery,
which would have taken some time.
125. Although there can be no doubt or dispute that before a binding contract
is entered into, the provisions contained in the Indian Contract Act as also in
the Companies Act, 1956 are required to be complied with, but in this case we
are not concerned with the question of specific performance of contract but
only with the question as to whether there were enough justifications for
Viacom to lose faith and confidence in the MSMD. Page 118 of 193
Stricto sensu, therefore, it cannot be a case of misrepresentation or
fraud, particulars of which were required to be pleaded and proved in terms of
the provisions of Order VI of the Code of Civil Procedure.
The broad question is whether despite overwhelming documentary
evidence, the respondent could have denied even the fact that the chapter was
closed even prior to entering into the agreement. Answer to the said question
must be rendered in the negative.
126. The very fact that the parties had been carrying out negotiations from all
angles, we have no doubt in our mind that legal issues apart, there had been
commitment on the part of MSMD to take the discussion between the parties
forward to explore the possibility of grant of stake to Viacom in its company so
that a legal shape in that regard could be given. In the legal sense, a concluded
contract has not been arrived at, but it is difficult to comprehend the stand of
MSMD that even the negotiations had been closed prior to the said agreement.
The MSMD’s contention that the deal was closed even before the execution of
the agreement, is, therefore, not correct.
Re : Clause IX (1)
127. Clause IX (1) of the MoU reads thus :-
“Packaging of the V18 ChannelsPage 119 of 193
1. The V18 Channels shall be part of the existing Bouquet-2 of
MSMD subject to regulatory mandates. Viacom 18 is assured that
any addition of new channels and deleting of existing channels from
the TOA bouquets of MSMD shall not adversely affect Viacom 18’s
share of potential revenue vis-à-vis scenario if such change in the
TOA bouquets would not have happened. In the event there is any
such material adverse effect on the allocated revenue to Viacom 18
the same shall be duly addressed by the parties through a mutually
consultative process of review.
2. MSMD in their negotiation with any distributors of channels
operating in DTH or any other Digital Platforms for the TOA
Channels shall use reasonable efforts to optimize the reach for the
V18 Channels. MSMD shall subject to regulatory mandates expend
reasonable efforts to ensure that (a) Existing Channels shall not be
placed in a tier which shall be less beneficial than their current tiers;
and (b) New Channel shall not be placed in tiers other than those
where other channels in same language and genre are placed.”
Shri Himanshu Dhoreliya, RW-1 in his evidence, in relation to the
analogue mode of transmission, categorically stated :-
“Q: Could you please explain as to what is meant by “TAM”?
A: TAM is an agency who monitors GRPs and TRPs and reach of all
the channels available in the country.” Page 120 of 193
From the statements made in the cross examination of RW-1, it would
appear that he had no personal knowledge in the matter and thus it is
fallacious to give any credit in regard thereto by MSMD.
128. The contractual provision between the parties, in our opinion, is clear
and explicit. The ‘Colors’ channel in bouquet II was subject to the regulatory
mandate. So far as the second part of the said clause is concerned, no
violation, in the facts and circumstances of this case, is alleged.
MSMD, however, contends that placing of a new channel in bouquet II
was impermissible having regard to the provisions of Telecommunication
(Broadcasting & Cable) Services (2nd
Tariff) (8th
Amendment) Order, 2007 (3 of
2007).
Viacom in its petition contended :-
“Isolation and Unfavourable packaging/tiering of Colors
i) Under Clause IX (1), it was agreed that said Channels shall
be part of the existing Bouquet II provided by the Respondent.
It was further assured that any addition of new channels and
deletion of existing channels from the One Alliance bouquets of
the Respondent shall not adversely affect the Petitioner’s
share of potential revenue.
ii) Instead of including Colors as part of the existing Bouquet II,
the Respondent created a New Bouquet III with one of the
most popular Hindi general entertainment channel ‘Colors’
and other unpopular new channels owned by the joint venture Page 121 of 193
partners of the Respondent namely (i) ‘Aath’ (Bengali Movie
Channel) of MSM and (ii) ‘Discovery Science’ & ‘Discovery
Turbo’ (Infotainment Channel) of Discovery which are least
customer preferred. The said Channel of the Petitioner, in
specific ‘Colors’, was deliberately downgraded in the tiers. It
is apparent that the Respondent’s sole intent is to drive the
interests of its joint venture partners to popularize their
unpopular channels and further use Colors to benefit the
unpopular channels of its joint venture partners, at the cost of
Colors and the Petitioner. This has severally impacted the
reach and the connectivity/subscriber base of New Bouquet III
(including Colors) gravely affecting the connectivity and has
damaged the fundamental understanding which forms the
essence of the MoU.
iii) The Petitioner craves leave of this Hon’ble Tribunal to copies of
the print out of the website of the Respondent showing that
‘Colors’ has been put in the least preferred bouquet whereas
the MSM Channels have been put in the most beneficial
bouquet being Tier I shows the mischief, which are annexed
hereto as Annexure P-4.”
129. MSMD, however, in para 22 of its reply, stated thus :-
“Viacom claims in its notice (Please refer to paragraph 7 (b) at pages
389-90 of the Relevant Documents-II) that Viacom 18 channels were
to be part of existing bouquet II of MSMD. The averment is repeated
in paragraph 12 (b) (at page No.8) of Petition No. 220 (C) /2010. In
its reply, MSMD in paragraph 22 (at pages 540-41) of the Relevant
Documents-II) stated as follows : Page 122 of 193
“With reference to 7(b)(ii), it is denied that our only interest is
to drive the interest of joint venture partners or popularize
their unpopular channels and use Colors to benefit the
unpopular channels of its joint venture partners at the cost of
Colors. Please note that the MoU in Clause IX (1) records that
the Viacom channels shall be part of existing Bouquet 2 of
MSMD subject to regulatory mandates. Your exiting channels
namely MTV, VH1 and Nick continue to be part of Bouquet 2 of
MSMD till date. However, the Telecommunication
(Broadcasting and Cable) Services (Second) Tariff (Eighth
Amendment) Order, 2007 (3 of 2007) clearly provides that any
new pay channel that is launched after 1st
December 2007, or
any channel that was free to air channel as of 1st
December
2007 and is converted as a pay channel shall have to be
offered on a stand alone basis or as part of a new separate
bouquet if the mandated pricing ceilings were to be exceeded.
MSMD therefore has no choice by to place Colors in new
Bouquet 3 as it was converted to pay channel after 1st
December 2007. It is denied that MSMD created the Bouquet 3
to drive the unpopular channels of its joint ventures partners.
The fact remains that channel AATH came into Bouquet 3 by
the same logic as explained above. Further in view of the
same regulations new channels like Discovery Science &
Turbo were recently added to the Bouquet 3 in 2010. All your
allegations to the contrary are baseless and a work of your
imagination and devoid of facts. The fact further remains that
it was during this period only that Colors has been within the
top three GEC channel position and yet you allege that your
reach, connectivity and subscriber base is adversely
impacted. All these contentions are completely illogical and it
is denied that the allocation of bouquets in any manner Page 123 of 193
impacted the reach or connectivity/subscriber base of the new
bouquet 3 includes Colors or that it has gravely affected the
connectivity or has damaged the fundamental understanding
which forms the essence of the MOU.”
130. Only during oral hearing, Viacom contended that MSMD should have
formed a new bouquet after the agreement was entered into.
In support of the said contention, Mr. Kathpalia would bring to our
notice a communication dated 07.01.2009 from Mr. Sanjeev Hiremath to Mr.
Himanshu Dhoreliya, the relevant portion whereof reads as under :-
“Colors will be the only channel in B3 initially. Should any other
channel be added on, the same above principle will apply, however,
Viacom18 should have the option to agree that the same be included
in B3.”
131. It is, however, not disputed that after negotiations and despite the said
Tariff Order holding the field, the parties had specifically opted for Bouquet II.
The fact that MSMD could not have placed the ‘Colors’ channel in Bouquet II in
view of the said statutory mandate is not in controversy.
It is also difficult for us to accept the submissions of Mr. Kathpalia that
although there was no statutory embargo that ‘Colors’ ought to have been
made a part of a new Bouquet, no such demand was made apart from the fact Page 124 of 193
that there was no such contractual obligation on the part of the MSMD. The
validity of the said Tariff Order is not in question before this Tribunal.
The matter was pending before the Supreme Court of India. An order of
status quo was passed.
132. It was placed in Bouquet III with two other new channels of MSMD as
they were said to have been launched sometimes in January, 2010.
It is true that by reason of an e. mail dated 02.03.2009, MSMD stated
that the matter may be fought out in the Supreme Court to get a favourable
order, but the same does not mean such as a favourable order from the
Supreme Court of India could have been predicted. We are, therefore, of the
opinion that MSMD cannot be said to have violated the provision of Clause IX
(1) of the Agreement.
Mr. Lekhi submits that as Viacom had received payments, despite
knowledge that ‘Colors’ remains in Bouquet III, it must be held to have waived
its right.
133. We intend to deal with the question of waiver separately as we are
satisfied that MSMD has not violated Clause IX (1) of the MoU. Page 125 of 193
Suppression of the Subscriber Reports
134. The obligation on the part of the MSMD in this behalf is contained in
Clause X of the MoU.
By reason of the said provision, MSMD had agreed to send monthly
report to Viacom giving details of all subscribers receiving of its channel both
on analogue as also digital platform. Such reports were to be furnished on the
basis of the declarations made by MSMD. Indisputably, the figures were to be
declared on the basis of the declarations and not on the basis of its own
internal arrangement.
MSMD, however, has principally raised three contentions; viz. :-
(i) An internal arrangement was required to be made as the report
was not to disclose the exact number of subscribers, but merely to
furnish information;
(ii) No information had been shut out; and
(iii) No prejudice has been caused as the purpose for which the
informations were required to be furnished, were necessary to be
possessed by Viacom only after termination of the agreement and
not during the currency thereof. Page 126 of 193
Re: Fabrication of Record :-
135. In the context of analogue mode of carriage of channels, Viacom had
already attained No. 1 position and, thus, in that view of the matter, it was
necessary :-
a. To make known the Universe of MSMD including those of
LCO,
b. The SLRs were to be on the basis of the declarations made
and
c. The declared subscriber base as contained in the
agreements between MSMD and the LCOs.
136. A bare reading of Clause X would clearly go to show that the
informations were to be furnished on the basis of the declaration of those who
received the signals and, thus, not on the basis of viewership.
137. MSMD, in any event, has not disclosed the method of declaration.
138. A bare perusal of Clause X of the MoU would clearly go to show that the
obligation on the part of the MSMD was absolute. It was not for MSMD to deny Page 127 of 193
such informations to Viacom on the premise that the same was not required by
it. It was not for MSMD to say, what is required and what is not by Viacom.
139. The fact that the correct information had not been supplied is not in
dispute. In its e. mail dated 16.6.2010, the number of subscribers with Big Ten
Entertainment was shown at 421; whereas from the Validation Form furnished
by the said affiliate, it would appear that the number of subscribers declared
by it was 1093.
It is not in controversy that different figures were also shown in the case
of Digi Neon News Network Pvt. Ltd. (Delhi), Birender Cable Network ((Delhi),
Carry Cable Network (Bhutan, Barra Bazar), Jindal Cable Network, Imli Bazar,
U.P., Virender Cable Network, Bulandshahar, U.P.
140. Submission of Mr. Lekhi that in analogue mode the actual number of
subscriber would not be known may be correct but that is the principal reason
why the declared subscriber base by the affiliates were to be disclosed.
Such figures of declared subscriber base/negotiated subscriber base
being available, we fail to see any reason as to why the same could not have
been disclosed.
It is not for MSMD to suggest as to the purpose for which the said Clause
had been inserted. If there was a contractual obligation on its part, it was Page 128 of 193
bound to comply therewith. We are unable to accept that as against the figure
1093 subscribers, so far as the operator ‘Big Ten Entertainment’ is concerned,
prescribing a number 421 of ‘Colors’ is fair reflection of the weightage given to
‘Colors’ as contended by MSMD or at all.
141. It is stated that the said internal allocation was based on past practice in
respect of MTV, Nick, and BH1.
Even if that was so, the same could have been stated explicitly in the
agreement. It is, therefore, not correct to contend that MSMD has complied
with its obligations under the Clause. Whatever be the purpose for which
Viacom intended to have such an information, it would take a back seat as it is
not for us to probe into the matter any further.
Thus, MSMD has, thus, violated the provisions of Clause X of the MoU.
Unfair or Impermissible Discount
142. It is not in dispute that in the ROI, the rate of ‘Colors’ channel was fixed
at 10.70 paise. It is also not in controversy that ‘Colors’ channel was provided
to the DTH operators @ Rs.4/- per subscriber per month.
143. In para 8 (c) (iii & (o)) of his affidavit, Mr. Sanjeev Hiremath stated that
heavy discount of more than 50% was granted by MSMD. It is not in dispute Page 129 of 193
that grant of such discount is permissible. Emphasis, however, was laid only
on the contention that commensurate benefit should have been granted to
Viacom. With a view to prove breach of contract on that account, Viacom
should have pleaded and established what was the existing business practice
and how and to what extent it has been financially prejudiced.
144. It is not in dispute that ordinarily, the wholesale tariff of DTH platform
provides for a much lower rate than the RIO rate.
Mr. Himanshu Dhoreliya in his cross-examination contended that such
discounted rate of SET and SAB channels was as high as 80%. MSMD had
kept Viacom informed thereabout. No protest was raised. We are, therefore, of
the opinion that Viacom has not been able to establish the said breach on the
part of the MSMD.
Had the contract entered into by and between MSMD and the DTH
operators impacted the over-flow, Viacom should have taken up the matter
with it before issuance of the notice of termination.
145. Our attention, however, has been drawn to the evidence of Mr. Sanjeev
Hiremath, which is to the following effect :-
“Q: Does it generally happen that contracts with DTH operators are `
executed at rates lower than the RIO rates? Page 130 of 193
A: Subject to the desired tiering, it is yes.
Q: That means there is nothing rigid about the rate of 10.7?
A: Not entirely correct. In case you have no deal in place and the
channel is not in basic, Rs. 10.7 would be applicable.
Q: So you deny the suggestion that broadcasters generally negotiate
rates with DTH operators, which are 25-30 % of non CAS rates?
A: No, I do not deny.
Q: Is there any specific instance of a particular deal which would be
of the nature of the reply which you had given to the question prior
to the previous question?
A: This will automatically apply if there is no deal.
Q: Is Colors presently earning Rs.10.7?
A:In instances where we don’t have a negotiated deal, yes we were
are billing at 10.7.
Q: Is there any such deal in existence today?
A:No. It is an automatic rate applicable in absence of a deal.”
146. In its e. mail dated 16.12.2009, Mr. Sanjeev Hiremath stated as under :-
“I anticipated something amiss here. What are the incremental subs
we get with just basic? Can we get their current nos. I don’t think
the nos are significant as Tata Sky has mostly basic + subscribers. I
think the economics favors them more if you consider that they can’t
move us out of the current Lifestyle and if they have to pay us at RIO
rate for this then the payout is 20Cr in year 1 itself, so far a more Page 131 of 193
than 50% discount incrementally what we get is their lowest other
package. Though I don’t have the exact revenue nos this is the sense
I have. In fact it will be disconcerting to see what the actual rate
works out to if you factor the Super Hit Base and Lifestyle sub nos.
We had categorically requested you to share the deal terms prior to
confirmation and seek our inputs but we have not been taken into
confidence.
Kindly share the agreed terms at the earliest since your comments
below confirms that the deal is done.”
147. To the similar effect, is an e. mail of Mr. Sanjeev Hiremath addressed to
Rajesh Kaul of MSMD on 29.4.2010.
148. There is, however, nothing to show as to what would have been the
reasonable amount of discount. In any event, the same should have been
discussed and sorted out and, thus, it cannot be said to be a material breach
on the part of the MSMD.
At most, it could be one of the factors supplementing the contention of
Viacom that there was a lack of reasonable efforts being made by MSMD to
ensure proper tiering but the lack of any specific pleadings or records to
indicate the contours of a permissible discount, it is difficult for us to consider
the contention of Viacom in this regard. Page 132 of 193
Quality of Evidence:-
149. The witnesses examined on behalf of MSMD and in particular Mr. Amol
Mazumdar, Mr. Kathpalia urged, having deposed only on hearsay evidence, the
same is inadmissible in nature. (See Suraj Mal vs State reported in AIR 1979
SC 1408), being tutored witness (see Sh. Mahesh Dhingravs Smt. Kamla
Dhingra- unreported decision of Delhi High Court and Abdul Wahid v. State of
Rajasthan reported in (2004) 11 SCC 241 at Page 245 Para. 6).
150. He also contended that the evidence of Mr. Himanshu Dhoreliya being
evasive, no reliance can be placed thereupon as MSMD failed to establish any
direct and substantial loss or the quantum of damages allegedly suffered by it
as is required under law.
151. Reliance in this behalf has been placed on :-
(a) M/s Polimer Channel v. M/s Sumangali Cable Vision,
Petition No.132(C) of 2010, Paragraphs 26, 27, 28 for the
proposition.
(b) IndusInd Media & Communications Ltd. v. City Cable & Ors.
Petition No.67(C) OF 2008 disposed of on 27.07.2011 (Page
63 and 67)
(c) Abdulali Moosabhoy v. Gokaldas Lalji, AIR 1927 Sind 49 @
Page 52 Page 133 of 193
(d) W. Jayaraghavan v. The Leo Films, AIR1948 Mad 442 @ Para
9 & 14 wherein it has been held that the burden in this
behalf.
(e) the Decision of Bombay High Court in Union of India (UOI) v.
Godrej Industries Ltd. reported in 2008(3)BomCR827 which
has been noticed by this Tribunal in Polimer (supra).
In view of the discussions made hereinafter, it may not be necessary to
deal with the aforementioned decision.
152. Submission of Mr. Lekhi, on the other hand, is that this Tribunal is
concerned only with probity vis-a-vis the relevant provisions of the Indian
Evidence Act, viz. the rule of prescribing best evidence.
In a case involving a limited company, Mr. Lekhi urged, it cannot be
expected that an officer would know the working of each and every department
and as such feedback from the other concerned departments would be
essential.
153. Section 60 of the Evidence Act provides that oral evidence must be direct.
In the event a witness refers to a fact which he has heard from another, the
witness from whom he has heard must also be examined subject of course to Page 134 of 193
the exceptions contained in the Indian Evidence Act, as for example, Section 32
thereof.
In Kalyan Kumar Gogoi Vs. Ashutosh Agnihotri reported in (2011) 2 SCC
532, at page 544, it is stated as under:-
“33. The word “evidence” is used in common parlance in three different
senses: (a) as equivalent to relevant, (b) as equivalent to proof, and (c) as
equivalent to the material, on the basis of which courts come to a
conclusion about the existence or non-existence of disputed facts. Though,
in the definition of word “evidence” given in Section 3 of the Evidence Act
one finds only oral and documentary evidence, this word is also used in
phrases such as best evidence, circumstantial evidence, corroborative
evidence, derivative evidence, direct evidence, documentary evidence,
hearsay evidence, indirect evidence, oral evidence, original evidence,
presumptive evidence, primary evidence, real evidence, secondary
evidence, substantive evidence, testimonial evidence, etc.
34. The idea of best evidence is implicit in the Evidence Act. Evidence
under the Act, consists of statements made by a witness or contained in a
document. If it is a case of oral evidence, the Act requires that only that
person who has actually perceived something by that sense, by which it is
capable of perception, should make the statement about it and no one else.
If it is documentary evidence, the Evidence Act requires that ordinarily the
original should be produced, because a copy may contain omissions or
mistakes of a deliberate or accidental nature. These principles are
expressed in Sections 60 and 64 of the Evidence Act.” Page 135 of 193
154. So far as Hearsay Evidence is concerned and its appreciation, the law
was stated, thus:-
“37. Here comes the rule of appreciation of hearsay evidence.
Hearsay evidence is excluded on the ground that it is always
desirable, in the interest of justice, to get the person, whose
statement is relied upon, into court for his examination in the regular
way, in order that many possible sources of inaccuracy and
untrustworthiness can be brought to light and exposed, if they exist,
by the test of cross-examination. The phrase “hearsay evidence” is
not used in the Evidence Act because it is inaccurate and vague. It is
a fundamental rule of evidence under the Indian law that hearsay
evidence is inadmissible. A statement, oral or written, made
otherwise than by a witness in giving evidence and a statement
contained or recorded in any book, document or record whatsoever,
proof of which is not admitted on other grounds, are deemed to be
irrelevant for the purpose of proving the truth of the matter stated.
An assertion other than one made by a person while giving oral
evidence in the proceedings is inadmissible as evidence of any fact
asserted. That this species of evidence cannot be tested by crossexamination and that, in many cases, it supposes some better
testimony which ought to be offered in a particular case, are not the
sole grounds for its exclusion. Its tendency to protract legal
investigations to an embarrassing and dangerous length, its intrinsic
weakness, its incompetence to satisfy the mind of a judge about the
existence of a fact, and the fraud which may be practiced with
impunity, under its cover, combine to support the rule that hearsay
evidence is inadmissible.” Page 136 of 193
Why such hearsay evidence is not received as relevant, the following
reason was assigned :-
“The reasons why hearsay evidence is not received as relevant
evidence are :-
(a) the person giving such evidence does not feel any responsibility.
The law requires all evidence to be given under personal
responsibility i.e. every witness must give his testimony, under
such circumstance, as expose him to all the penalties of
falsehood. If the person giving hearsay evidence is concerned, he
has a line of escape by saying ”I do not know, but so and so told
me”,
(b) truth is diluted and diminished with each repetition, and
(c) if permitted, gives ample scope for playing fraud by saying
“someone told me that…”. It would be attaching importance to
false rumour flying from one foul lip to another. Thus, statement
of witnesses based on information received from others is
inadmissible.”
In Surajmal Vs. The State (Delhi Administration) reported in AIR 1979
SC 1408, the law was stated as under:-
“It is well-settled that where witnesses make two inconsistent
statements in their evidence either at one stage or at two stages, the
testimony of such witnesses becomes unreliable and unworthy of
credence and in the absence of special circumstances no conviction
can be based on the evidence of such witnesses.” Page 137 of 193
155. It is, however, difficult to accept that the evidence of Mr. Majumdar can
be ignored on the premise that he was a tutored witness.
156. We may notice that in Abdul Wahid Vs. State of Rajasthan reported in
(2004) 11 SCC 241, which dealt with a criminal case, the evidence of a witness
was not accepted on the premise that he was a tutored witness.
157. Mr. Lekhi himself has placed reliance on Mohd. Ikram Hussain Vs. The
State of Uttar Pradesh and Others reported in AIR 1964 SC 1625 (V51 C 218),
wherein it was held :-
“As against this the learned Judges apparently held that Kaniz
Fatima was over 18 years of age. They relied upon what was said
to have been mentioned in a report of the Doctor who examined
Kaniz Fatima, though that report was not before them. Reference to
it was made in the affidavits of Mahesh and the Sub Inspector
which were both hearsay and not admissible under the Evidence
Act in proof of the contents of a document. The primary documentary
evidence ought to have been summoned. The High Court thus
reached the conclusion about the majority without any evidence
before it in support of it and in the face of direct evidence against it.”
Black’s Law Dictionary (8th
Edition) defines hearsay as under :- Page 138 of 193
“hearsay. 1. Traditionally, testimony that is given by a witness who
relates not what he or she knows personally, but what others have
said, and that is therefore dependant on the credibility of someone
other than the witness. Such testimony is generally inadmissible
under the rules of evidence. 2. In federal law, a statement (either a
verbal assertion or nonverbal assertive conduct), other than one
made by the declarant while testifying at the trial or hearing, offered
in evidence to prove the truth of the matter asserted.”
158. We will have to consider the best evidence rule as propounded by the
Apex Court while considering the respective claim of damages in both the
petitions.
Consequences of the termination not being valid
159. Once it is found that parties have with their eyes wide open and full
knowledge of the implications of the termination clause contained in Clause XX
of the Agreement and the breaches alleged by VIACOM on the part of the
MSMD would not amount to fundamental breaches leading to repudiation of
contract, what would be the consequences thereof?
The consequences, in our opinion, would be that the termination could
be illegal but the same by itself may not mean that MSMD would be entitled to
damages under different heads as has been prayed for. Page 139 of 193
160. It is one thing to say that a party in view of a breach of a termination
Clause would be entitled to damages but quantification thereof would depend
upon (i) the nature of injury; (ii) the injured party’s responsibility therefor and
the extent thereof; and (iii) the nature and extent of injuries caused to the
parties on each other.
161. The measure of damages may, therefore, have to be resorted upon
considering the amount payable by one party or the other and whether they
have taken recourse to mitigation of damages.
Damages, the Principles of:-
162. Both the parties have claimed damages against each other.
Whereas Viacom claims damages on the ground that MSMD has failed
and/or neglected to perform its part of contract; MSMD’s claim for damages
principally rests on the ground of non compliance of Clause XX of the MOU.
163. The principles governing award of damages although are well settled, we
may notice some of them.
Damages can be granted inter-alia for wrongful termination of contract.
In a claim for award of damages, the petitioner was obligated to prove the Page 140 of 193
quantum by raising proper pleas and establishing the same by leading
appropriate evidence.
164. The damages principally are of two kinds, general or special.
The special damages claimed, if any, are required to be specifically
pleaded and proved.
The leading case in this behalf is Hadley v Baxendale reported in
[1843-60] All ER Rep 461, wherein, Alderson B. stated the law thus:-
“We think the proper rule in such a case as the present is this.
Where two parties have made a contract which one of them
has broken the damages which the other party ought to receive
in respect of such breach of contract should be such as may
fairly and reasonably be considered as either arising
naturally, i.e., according to the usual course of things from
such breach of contract itself, or such as may reasonably be
supposed to have been in the contemplation of both parties at
the time they made the contract as the probable result of the
breach of it. If special circumstances under which the contract
was actually made were communicated by the plaintiffs to the
defendants, and thus known to both parties, the damages
resulting from the breach of such a contract which they would
reasonably contemplate would be the amount of injury which
would ordinarily follow from a breach of contract under the
special circumstances so known and communicated. But, on
the other hand, if these special circumstances were wholly Page 141 of 193
unknown to the party breaking the contract, he at the most,
could only be supposed to have had in his contemplation the
amount of injury which would arise generally, and in the great
multitude of cases not affected by any special circumstances,
from such a breach of contract. For, had the special
circumstances been known, the parties might have specially
provided for the breach of contract by special terms as to the
damages in that case; and of this advantage it would be very
unjust to deprive them.”
165. The principle of law stated in Hadley v Baxendale must be applied
having regard to the terms “type of damage”, “loss of a kind which” and “the
type of consequence” as used in the formulation in its second Rule. In a case
of loss of profit, where the type of profits expected from the normal use of a
profit earning machine is used to place a cap on a claim for a loss of different
type of profit caused by the breach of contract, quantum of damages would be
determined on that basis.
(See Vacwell Engineering Company Limited Vs. BDH Chemicals Limited,
reported in [1971] Queens Bench 88).
The said question has also been dealt with at some details in Mc. Gregor
on Damages, 18th
Edition under the heading “Special Damages” at Page 1793. Page 142 of 193
166. In Anson’s Law of Contract, at Page 592, it is stated that the damages
are not to be penal.
Hadley Rule excludes all other kinds, as being too remote other than the
appropriate subject of compensation.
167. The measure of damages, however, should not be confused with the
principles thereof.
168. We may notice that one of the heads for claim of damages is the
“Performance or Expectation measure” which has been noticed in Anson’s Law
of Contract, 28th
Edition at Page 596 in the following terms:-
“THE ‘PERFORMANCE’ OR ‘EXPECTATION’ MEASURE
The object of an award of damages for breach of contract is to place
the claimant, so far as money can do it, in the same situation, with
respect to damages, as if the contract had been performed. Claimants
are thus enabled to recover damages in respect of the loss of gains of
which they have been deprived by the breach. For example, if
machinery is not delivered to a person or delivered late in breach of
contract, that person will have a claim for loss of profits for being
deprived of its use. Such a claim, however, is not peculiar to an action
in contract, since a similar claim would lie if the machinery were
damaged or destroyed by a tort. But the law of contract goes further Page 143 of 193
and entitles claimants (in appropriate circumstances) to damages for
the loss of the bargained-for performance, that is to say, for the loss of
the particular benefit which it was expected would be received by the
contract which has been broken: an art dealer contracts to purchase a
painting which is worth far more than the agreed price; a record
company by contract obtains for a relatively modest sum the sole right
to distribute the records of what proves to be a highly successful popgroup; a caterer obtains an extremely lucrative contract to cater for a
banquet in each case, if the contract is broken by the other party, the
damages will be assessed by reference to the claimant’s
‘performance’ or ‘expectation’ loss, consisting of what would have
been received had the contract been duly performed.”
In M/s. Polimer Channel Vs. M/s. Sumangali Cable Vision, Petition No.
132 (C) of 2010, disposed off on 04.02.2010, this Tribunal, referring to an
earlier decision rendered in Indian Cable Net Company Limited Vs. Grabss.
Com & Ors., Petition No. 159 (C) of 2009 decided on 05.05.2010, opined that in
some cases even without any proof, a petitioner may be held to be entitled to
damages, which it must have suffered by reason of non service of notice as
contractually agreed.
Yet again in IndusInd Media and Communication Limited Vs. City Cable
& Ors., Petition No. 67 (C) of 2008, disposed off on 27.07.2011, it was
observed:-
“Damages are of different kinds. It can be compensatory; it can be
consequential also. Compensatory damages would be payable to the Page 144 of 193
plaintiff for all the natural and direct consequences of the defendant’s
wrongful act. The measure, therefore, must be real and tenable
although it may be difficult to fix the amount with certainty. For the
said purpose loss of profit resulting from the injury may be a relevant
factor.
The burden of proof in this behalf was on petitioner. It should have
brought on record some materials to prove the period during which it
remained out of business, being unable to operate its network. No
document has been brought on record to prove the details of the
damages suffered by the petitioner.”
169. Mr. Kathpalia has relied on an old decision of Judicial Commissioner,
Sind in “Abdulali Moosabhoy Vs. Gokaldas Lalji & Anr., reported in AIR 1927
Sind 49, wherein the law was stated as under :-
“11. It is a well-known principle of law that the loss or damage for
which compensation is recoverable in case of breach must be either
(1): such as arises naturally in the usual course of things from the
breach or (2) such as the parties knew at the time of the contract to
be likely to result from it. Now the profit which plaintiffs would have
made out of their contract with Snnderji and Valabdas, if the
defendants had fulfilled their contract, could be recovered only if
the defendants knew about it or were informed at the time of
making the contract. But there is not an iota of evidence on the
record which would avail to prove that defendants were aware at
the time they made the contract with the plaintiffs that the latter
were to make a profit out of the transaction by the re-sale of the
property. Hence in the present case plaintiffs cannot recover by Page 145 of 193
way of damages the profit of Rs. 5,000 that they would have made
if the defendants had fulfilled their part of the contract, by the sale
to Sunderji and Valabdas of the property in suit at the price of Rs.
80,000. Section 73 of the Contract Act makes it compulsory for the
plaintiff to prove that he has suffered damages and the extent to
which he has suffered before a Court can award him damages for
breach of contract.
12. In Joseph v. Shew Bux [1919] 36 M.L.J.151, a Privy Council
case, it was laid down that in a suit for damages for not taking
delivery of goods if the party whose duty it is to prove damages
does not give the best evidence, every presumption should be made
against him ; if there is any range, the range should be taken
against him, but this case does not relieve the Court altogether of
the duty of assessing the damages, as best it can on the evidence
and materials actually before it. Nor is the Court empowered to give
nominal damages merely. Plaintiffs appear to me to have entirely
failed to prove any damages sustained by them arising in the usual
course of things out of the breach of the contract by the defendants
and there are no materials before me to enable me to assess any
damages in their favour.”
170. It was opined that the court has a duty of assessing the damages as best
as it can on the evidence and materials actually before it and it is not
empowered to give nominal damages merely.
We do not think such a strict view is possible to be taken in all the cases
in the days when globalization of trade is governed by international treaties and
covenants. Page 146 of 193
However, evidently in that case, the plaintiffs therein failed to prove that
any damage had been sustained by them.
Reliance has also been placed on W. Jayaraghavan Vs. The Leo Films,
reported in AIR 1948 Madras 442, wherein it was observed that the nominal
damages are not recoverable in view of Section 78 of the Contract Act and that
proof of damages is necessary to enable recoverability. Section 78 of the Act
(as it was then) dealt with Sale of Goods. The said decision, therefore, has no
application.
171. Mr. Lekhi, on the other hand, would strongly rely upon a passage from
McGregor on damages, Para 29.002 under the heading “Contracts for
Profession and Other services”.
The contract in question, however, is not for rendition of services and,
thus, the said passage need not be referred to.
172. Reliance has also been placed on Union of India & Ors. Vs. Sugauli
Sugar Works (P) Ltd., reported in (1976) 3 SCC 32, wherein it has been stated:-
“22. The market rate is a presumptive test because it is the general
intention of the law that, in giving damages, for breach of contract, the
party complaining should, so far as it can be done by money, be
placed in the same position as he would have been in if the contract
had been performed. The rule as to market price is intended to secure Page 147 of 193
only an indemnity to the purchaser. The market value is taken because
it is presumed to be the true value of the goods to the purchaser. One
of the principles for award of damages is that as far as possible he
who has proved a breach of a bargain to supply what he has
contracted to get is to be placed as far as money can do it, in as good a
situation as if the contract had been performed. The fundamental basis
thus is compensation for the pecuniary loss which naturally flows from
the breach. Therefore, the principle is that as far as possible the
injured party should be placed in as good a situation as if the contract
had been performed. In other words, it is to provide compensation for
pecuniary loss which naturally flows from the breach. The High Court
correctly applied these principles and adopted the contract price in the
facts and circumstances of the case as the correct basis for
compensation.”
The said decision was rendered with regard to a Railway claim.
173. Our attention has also been drawn to the following passage in
Ramachandran on the Law of Contract in India.
“A distinction must be drawn, however, between cases where the
difficulties are due to uncertainty as to the causation of damage,
where questions of remoteness arise, and cases where they are due
to the fact that assessment of damages cannot be made with any
mathematical accuracy. Lack of relevant evidence may make it
possible to assess damages at all, as where the extent of the loss is
dependent upon too many contingencies, nominal damages only
may be awarded. Where it is established, nominal damages only Page 148 of 193
may be awarded. Where it is established, however that damage has
been incurred for which a defendant should be held liable, the
plaintiff may be accorded the benefit of every reasonable
presumption as to the loss suffered. Thus, the court….doing the best
that can be done within sufficient material may have to form
conclusions on matters on which there is no evidence, and to make
allowance for contingencies even to the extent of making a pure
guess.”
174. In Organo Chemical Industries Vs. Union of India reported in (1979) 4
SCC 573, the law was stated in the following terms:-
“38. What do we mean by “damages”? The expression “damages”
is neither vague nor over-wide. It has more than one signification but
the precise import in a given context is not difficult to discern. A
plurality of variants stemming out of a core concept is seen in such
words as actual damages, civil damages, compensatory damages,
consequential damages, contingent damages, continuing damages,
double damages, excessive damages, exemplary damages, general
damages, irreparable damages, pecuniary damages, prospective
damages, special damages, speculative damages, substantial
damages, unliquidated damages. But the essentials are (a)
detriment to one by the wrongdoing of another, (b) reparation
awarded to the injured through legal remedies, and (c) its quantum
being determined by the dual components of pecuniary
compensation for the loss suffered and often, not always, a punitive
addition as a deterrent-cum-denunciation by the law. For instance,
“exemplary damages” are damages on an increased scale, awarded Page 149 of 193
to the plaintiff ever and above what will barely compensate him for
his property loss, where the wrong done to him was aggravated by
circumstances of violence, oppression, malice, fraud, or wanton and
wicked conduct on the part of the defendant, and are intended to
solace the plaintiff for mental anguish, laceration of his feelings,
shame, degradation, or other aggravations of the original wrong, or
else to punish the defendant for his evil behavior or to make an
example of him, for which reason they are also called “punitive” or
“punitory” damages or “vindictive” damages, and (vulgarly) “smartmoney”. It is sufficient for our present purpose to state that the
power conferred to award damages is delimited by the content and
contour of the concept itself and if the Court finds the Commissioner
travelling beyond, the blow will fall. Section 14-B is good for these
reasons.”
Hadley Rule has been noticed by the Supreme Court of India in
Pannalal Jankidas Vs. Mohan Lal, reported in 1950 SCR 979 wherein it has
been observed that it is not possible to lay down any universal formula; the
dominant rule of Law is the principle of ‘Restitutiom Integrem’.
Claim for Damages by Viacom
175. So far as damages claimed by the VIACOM is concerned, it comprises of
two parts: (a) a sum of Rs.108 crores purported to have been suffered by it by
way of damages up to 31.7.2010 and a sum of Rs.60 crores from the said date
till 31.3.2010. Page 150 of 193
We may, at the outset, notice that the claim of Rs.60 crores said to have
been suffered by way of damages by VIACOM has been given up.
The claim of damage for a sum of Rs.108 crores has been calculated only
on the basis of the connectivities of 2 principal DTH operators, namely DISH
TV and TATA SKY which controlled about the 55% of the market share. The
calculation proceeds on the basis that had the business continued and MSMD
realized the subscription fee @10.70p per subscriber per month in stead and in
place of Rs.4/-, an amount of Rs.192 crores could have been collected by it, to
which VIACOM’s share would have been Rs.108 crores being 70% thereof, i.e,
in terms of the agreement, which admittedly provides that for the revenue
between Rs.150 and Rs.195 crores, the share of VIACOM would have been 77%
and beyond 195 crores it would have been come down to 70%.
176. VIACOM also claims a sum of Rs. 80 crores which MSMD allegedly has
collected from M/s DISH TV and M/s TATA Sky for supply of signals of Colors
channel.
The loss of revenue has been claimed on a going forward basis.
177. Claim (A) reads as under:-
“Claim A : Page 151 of 193
4. The attached computation sheet (refer “Exhibit D”)
suggests that if the Respondents had placed ‘Colors’ in the
right tier/package and distributed it at a right price of
Rs.10.70, the total revenues collected by the Respondent for
‘Colors’ from Tata Sky and Dish TV for the period April 1,
2009 to August 12, 2010 would have been about Rs.180
Crores.
5. Assuming, the Petitioner was entitled to only 70%
(ideally Petitioner was entitled to 77% until certain amount),
the Petitioner’s share of revenues would have been Rs.126
Crores, i.e. 70% of Rs.180 Crores.
6. Admittedly, as per the reports provided by the
Respondent to the Petitioner, the Respondent has collected
revenue of Rs.18 Crores (approx.) from Dish TV and Tata Sky
DTH platforms for ‘Colors’ channel (refer Exhibit C Colly).
Assuming, the Respondent has paid such entire sum of Rs.18
Crores (approx.) to the Petitioner, the Petitioner is still entitled
to loss of Rs.108 Crores (approx.), i.e. Rs.126 Crores less
Rs.18 Crores.”
178. It also proceeded on the basis that had Colors channel been placed in
right tier at the right price, the revenue collected for the period 01.4.2009 and
July, 2009 would have been Rs.180 crores.
The contents of the petition were verified by one Shri Suresh Amesar. In
support of its case, Viacom has examined Shri Sujeet Jain and Shri Sanjeev
Hiremath. Page 152 of 193
So far as proof of damages is concerned, reliance has been placed by
VIACOM on the evidence of Shri Sanjeev Hiremath only.
For the said purpose, VIACOM has relied upon the TRAI’s Quantity
Indicative Reports and the Reports published in SCAT Magazine in May 2010.
179. In this connection, Viacom has placed on record the quarterly report of
TRAI as on 30.6.2010, for a perusal whereof it would appear :-
“Snapshot
(Data As on 30th June 2009)
Telecom Subscribers (Wireless +Wireline)
Total Subscribers 464.82 Million
% change During Quarter 8.17%
Urban Subscribers 328.55 Million (70.7%)
Rural Subscribers 136.27 Million (29.3%)
Teledensity 39.86
Urban Teledensity 95.05
Rural Teledensity 16.61
Wireless Subscribers
Total Wireless Subscribers 427.29 Million
% change During Quarter 9.07%
Urban Subscribers 301.34 Million (70.5%)
Rural Subscribers 125.95 Million (29.5%)
GSM Subscribers 328.83 Million (77.0%)
CDMA Subscribers 98.46 Million (23.0%)
Teledensity 36.64
Urban Teledensity 87.18
Rural Teledensity 15.35
Wireline Subscribers
Total Wireline Subscribers 37.53 Million
% change During Quarter -1.14%
Urban Subscriber 27.21 Million (72.5%)
Rural Subscribers 10.32 Million (27.5%)
Teledensity 3.22
Urban Teledensity 7.87 Page 153 of 193
Rural Teledensity 1.26
Village Public Telephones (VPT) 0.56 Million
Public Call Office (PCO) 6.11 Million
Internet & Broadband Subscribers
Total Internet Subscribers 14.05 Million
% change During Quarter 3.80%
Broadband Subscribers 6.62 Million
Wireless Data subscribers 126.97 Million
Broadcasting & Cable Services
Total Number of Registered Channels with I&B Ministry 447
Number of Pay Channels 136
Number of FM Radio Stations 248
DTH Subscribers 15.17 Million
Number of Set Top Boxes in CAS areas 816,192
Telecom Financial Data (for the QE June-09)
Gross Revenue during the quarter Rs. 39,108.33 Crore
% change in GR during Quarter -3.30%
Share of Public sector undertaking’s in GR 23.92%
Adjusted Gross Revenue (AGR) Rs. 29,732.52 Crores
% change in AGR during Quarter 0.02%
Revenue & Usage Parameters (for the QE June-09)
Average Revenue Per User (ARPU) GSM Rs. 185
Average Revenue Per User (ARPU) CDMA Rs. 92
Minutes of Usage (MOU) GSM 454 Minutes
Minutes of Usage (MOU) CDMA 342 Minutes
Minutes of Usage for Internet Telephony 131.94 Million”
180. That total DTH subscriber is 15.17 million for one quarter for the months
of April to June, 2010 which on a yearly basis would be thrice the amount.
Viacom has also relied upon the report as published in SCAT Magazine
which is to the following effect :- Page 154 of 193
“At present there are 7 pan-India operators. They include Dish TV,
Sun Direct, Tata Sky, Big TV, Airtel, Videocon and Doordarshan’s
FTA Ku band transmissions.
1. Dish TV : 7 Mn
2. Sun Direct : 5.3 Mn
3. Tata Sky : 5.2 Mn
4. Big TV : 2.5 Mn (Approx.)
5. Airtel DTH : 2 Mn
6. Videocon D2H : 0.2 Mn
Approx. DTH Subscriber Counts (Source: Press Reports)”
181. For the month of May, 2010 the quantum of damages has been claimed
by Viacom on the premise that its bouquet ought to have been placed in all the
packages of Dish TV and TATA Sky.
182. Having regard to the fact that IPL had started which made the ‘SET’
channel very popular in 2009, the situation could have been continued despite
increase of the subscription fee by the TRAI to the extent of 7% in as much as
there was a substantial increase in the viewership also.
A channel placed in a bouquet carries with it an internal strength. The
increase in revenue results from increase in viewership and popularity.
Nobody has been examined to prove the report of TRAI nor anybody has
been examined to prove the report of the SCAT Magazine. Page 155 of 193
Having regard to the provisions contained in Section 60 of the Indian
Evidence Act, so far as opinion evidence is concerned, a witness is required to
state the grounds on which the opinion is held in as much as such opinion
evidence must be based on the said grounds.
Shri Sanjeev Hiremath, in his cross examination, clearly admitted that
he has not participated in the study as to on what basis, SCAT Magazine
prepared the said report. He, furthermore, was not sure as to whether the
subscribers mentioned in the report were all active subscribers or all of them
subscribed to Colors. We have also noticed heretobefore that the rate of the
channel being at Rs.10.70p fixed by VIACOM in its RIO was not sacrosanct.
We have held heretobefore that the notice of termination was not in
consonance with Clause XX of the Agreement.
183. We, therefore, are of the opinion that keeping in view the nature of
evidence produced by VIACOM, it cannot be said to have proved that it suffered
any damages.
VIACOM has also claimed a sum of Rs.20,90,36,289/- on the premise
that the said amount was payable up to 13th
July, 2010. MSMD does not deny
or dispute the same but merely contends that it has suffered a larger amount
by way of damages. Page 156 of 193
184. Clauses VI (1) and VI (2) provides for payment of amount of fixed fee in
the first year, the second year and the 3rd
year of the agreement. In the second
year of agreement the amount payable was Rs.42 crores, which was to be paid
on or before expiry of 60 days from the end of the month, to which the said
instalment became due.
In terms of the said provision the above fixed fee was not subject to any
deduction.
185. So far as digital platform is concerned, VIACOM was entitled to a sum of
Rs.52 crores in the second year as a minimum guarantee, which again was not
subject to any deduction on account of MSMD’s commission, Dealer’s
commission or Bad Debts etc.
VIACOM was, thus, entitled to Rs.20,90,36,289/- by way of fixed fee and
Minimum Guaranteed amount for the relevant period.
Election/Estoppel Issue
186. Mr. Lekhi, in support of his submission that Viacom in estopped form
claiming damages would rely upon Section 39 of the Indian Contract Act,
contending that Viacom having not taken recourse thereto, the repudiation
cannot be held to be justified. For the purpose of attracting Section 39 of the
Indian Contract Act, the ’promisee’ may put an end to the contract but he, in a Page 157 of 193
case of this nature, would be entitled to do so after he puts his house in order.
He cannot, by repudiating a contract, afford to stop his entire business and,
thus, in fact its entire business in future. In order to attract Section 39 of the
Contract Act, a party must refuse altogether to perform his part of the contract.
Termination of a contract undoubtedly should be in clear terms. It is not a case
involving sale and purchase of goods. It is not a case where an agency has been
terminated by a principal. It is also not a case where a person has disabled
himself from performing the contract.
In a business involving broadcasting & cable services, a broadcaster
appoints a distributor to see that his production reaches the viewers.
By terminating the agreement in question, immediately, the viewers
would not have been able to view its production, Loss to that extent, if any,
could have been entirely that of the producers as for the purpose of
viewership, a lot of efforts were required to be made.
For the purpose of invoking a provision of law in a new type of contract
like the present one, the Tribunal cannot lose sight of the ground realities. The
action and/or inaction on the part of the promissor or promisee to a contract
cannot be judged bereft of their respective positions vis-à-vis the ground
realities as regards the nature of the trade.
Unlike contract of employment, the rights and obligations of the parties
were noticed. We, therefore, do not find any reason to hold that in a case of this Page 158 of 193
nature, the provision of Section 39 of the Indian Contract Act will have any
application.
The concept of affirmation of a contract refers to affirmation of the
promisee to go on with the contract notwithstanding his right to terminate the
same. It may be either a matter of positive choice or election to perform its own
obligations. It can, however, be inferred only from the unequivocal conduct.
187. In United Australia Ltd. Vs. Barclays Bank Ltd. (1941) AC1 at 30, Atkin,
LJ, stated the law thus :-
“….if a man is entitled to one of two inconsistent rights it is fitting
that when with full knowledge he has done an unequivocal act
showing that he has chosen the one he cannot pursue the other,
which after the first choice is by reason of the inconsistency no
longer his to choose.”
Knowledge in the context of breach means at least knowledge of the
circumstances which in law give rise to the right to terminate. Ordinarily,
election should be communicated and communication will be essential if there
would otherwise be no unequivocal act. (See China National Foreign Trade
Transportation Corporation V. Evlogia Shipping Co. (1979) 2 All ER 1044 and
Peyman V. Lanjani (1985) Ch 457 at 493).
Affirmation does not, as a general rule, affect the promisee’s right to
claim damages for the promisor’s breach. (See Compagnie de Renflorement de Page 159 of 193
Recuperation et de Travaux Sous-Marins V.S. Baroukh et Cie v. W. Seymour
Plant Sales and Hire Ltd. (1981) 2 Lloyd’s Rep. 466).
Waiver and Election are two different concepts as was opined in Super
Chem Products Ltd. v. American Life and General Insurance Co. Ltd. (2004)
UKPC02 : (2004) 2 All ER (Comm.) 713 : (2004) Lloyd’s Rep. IR 446.
Some Judges, however, used different words to mean the same thing and
the same word mean to different things i.e. waiver, total waiver, waiver of
remedy, waiver of rights, election, abandonment, equitable estoppels,
promissory estoppels, quasi estoppels and waiver by estoppels. It is considered
to be one of the most complex and difficult area in the modern law of contract.
The law is still in a state of development.
Lord Denning, however, has used the words ‘waiver’, and ‘estoppel’
interchangeably. (See Woodhouse AC Israel Cocoa Ltd. Vs. Nigerian Produce
Marketing Co. Ltd. (1971) 2 QB 23).
Unlike election, which concentrates mainly on the conduct of the
promisee, the principal focus of estoppel is on conduct of the promissor in
reliance on what the promise has said or done following the breach which
provides the basis for termination. Estoppel, ordinarily, is based on a
representation which need not be expressed in all situations, although requires
to be unequivocal.
In this case, we are of the view that the said principle has no application. Page 160 of 193
Waiver Issue
188. Contention of Mr. Lekhi is that as during the intervening period between
17.5.2010 and 13.7.2010 VIACOM having :
(i) continued the distribution of its channel,
(ii) accepted payments, and
(iii) acted in terms of the agreement, it must be held to have elected to
continue the same upon waiving all of its rights.
189. In a case of breach of contract ordinarily a party will have three options,
i.e., (i) to terminate the contract; (ii) to ignore the same and to continue to act
on the basis of the terms of the contract; (iii) to sue for damages.
A party to a contract indisputably may waive a contractual right. The
common law principle puts a man to election between alternative inconsistent
recourses to conduct, that is, by ‘approbation or reprobation’, which is distinct
and different from the equitable doctrine of ‘election’.
When a doctrine of election is resorted to, a party must have two
inconsistent remedies and by choosing one of them induces the other to alter
his position. In such a case, he cannot take recourse to and/or force the other
party to alter the other remedy available. Page 161 of 193
190. The doctrine of approbation and reprobation, on the other hand, is
merely a specie of estoppel. The said doctrine will have no application in
respect of the provisions of statute. Ordinarily such inconsistent positions are
taken in different stages of the same action or even different actions. Before,
however, the doctrine of ‘approbation and reprobation’ is held to be applicable
there has to be an ‘estoppel’ in one form or the other. If rule of ‘estoppel’ does
not apply, the rule of approbation or reprobation shall also not apply.
The ordinary rule known as Tinkler’s Rule (Tinkler Vs. Hilder, (1819) 4
Ex 187) must be confined to those cases where the person elected to take a
benefit otherwise on the merit of the claim in the lis under an order to which
beneficiary could not have entitled except for the order.
Mr. Lekhi will, however, rely upon a judgment of the Calcutta High Court
in Irpan Ali Laskar vs. Jogendra Chandra Das Patni AIR 1932 Calcutta 708. In
that case, payment was accepted to which the plaintiff was not entitled to.
Before, however, the doctrine of estoppel/election/approbation and
reprobation is resorted to, we may consider one question.
191. Can it be said that the VIACOM has accepted some payment to which it
was not entitled to under the agreement?
The answer to the said question must be rendered in the negative. For
the purpose of application of the said doctrines, the nature of business, the Page 162 of 193
position of the parties, the terms of the contract are also required to be
considered. The Tribunal cannot lose sight of the ground realities. It has to
take a pragmatic approach.
Only because VIACOM has sought for payments in this petition and/or
received payments during the period 17.5.2010 and 13.7.2010 by itself may
not amount to waiver of its right.
VIACOM did not do anything and at least nothing has been pointed out
before us as to whether it has taken recourse to any extraordinary steps. It was
entitled to some payments under the contract, it was entitled to claim the
amount. VIACOM did not treat it as a fresh obligation. If it had taken a stand,
to which it is otherwise entitled to take as a prudent businessman, no
exception thereto can be taken. The said contention, therefore, in a situation of
this nature cannot be accepted.
Re: Damages suffered by MSMD
(a) Damages are said to have been suffered by MSMD by reason of unlawful
termination of the agreement as it had not committed any material
breach of the contract.
According to it, the total projected revenue earned from the digital
platform was expected to be at Rs.250.68 crores and, thus, an over
flow of Rs.55.68 crores was to be distributed between the parties
hereto in the ratio of 70:30, which coupled with its share upto Rs.195
crores i.e. Rs.45.00 crores, would come to Rs.61.70 crores. Page 163 of 193
(b) It is also said to have suffered a loss of Rs.12.85 crores so far as
analogue platform is concerned as the fixed fee payable by MSMD to
Viacom during the period 01.4.2010 and 31.3.2011 as also the period
01.4.2011 and 31.3.2012 would have been Rs.89.00 crores.
(c) Marketing and promotional expenses incurred by it to the extent of 1.04
crores.
(d) Damages of Rs.20 crores suffered on the ground of NDTV’s leaving its
platform.
(e) A sum of Rs.15.00 crores on account of loss of business opportunity in
regard to distribution of NDTV Imagine.
(f) Damage of Rs.58.38 crores as it was made to pay the said amount for the
purpose of entering into an agreement with Neo Sports.
MSMD in support of its claim for damages has examined Shri Amol
Mazumdar.
We may now consider the claim of Damages allegedly suffered by MSMD
under the following heads.
Evidence of Shri Mazumdar
192. So far as the alleged loss suffered by MSMD on digital platform is
concerned, Mr. Mazumdar stated :
“22. I say that the calculation of the amount of
Rs.75.59 crores, due and payable to the Petitioner, is
explained below:- Page 164 of 193
A. Digital Platforms
i) I say that Petitioner’s revenue on account of the
distribution of the Channels of Respondent No.1 on the
Digital Platforms for the term of the MOU, i.e.,
April1,2009 to March 31,2012, was likely to be
Rs.250.68 Crores (Rupees Two hundred and fifty crores
and sixty eight lakhs).
ii) I say that the basis of the above figure is the actual
amounts accrued to the petitioner between April1, 2009
and July 13, 2010, and projections for the period July
14, 2010 and March 31, 2012, arising out of and based
on agreements entered into between the petitioner and
various digital distribution platforms in relation to
distribution of the channels of respondent No.1.
iii) I say that the details of the revenues of the petitioner
set out and explained in the table prepared under my
instructions and filed in the present proceedings as an
enclosure ot the e-mail dated May 17, 2010. Copy of
the details of revenue of the petitioner is filed in Petition
No.250(C) of 2010 at page 895 and is also annexed
hereto and may be exhibited as Exhibit PW-2/3 and a
copy of the e-mail dated May 17, 2010 is filed in
Petition No.220 (C) of 2010 at pages 150 to 151 and
also annexed hereto and may be exhibited as Exhibit
PW-2/4.
iv) I reiterate that the petitioner has made all payments
due to the respondent No.1.
v) I say that based on the calculation above as also as
set out in Exhibit PW-2/1, the petitioner would have
earned Rs.61.70 (45 + 16.70) Crores, from the digital Page 165 of 193
platform distribution, if the MOU had not been illegally
terminated and run its course till 31.3.2012.”
He, furthermore, with regard to the losses allegedly suffered so far as the
analogue platform is concerned, stated :-
“B. Analogue Platform
i) I say that the petitioner has earned revenue from the
analogue platforms for the period 1.4.2008 to 31.3.2009 in
the amount of Rs.341.40 crores (Rupees three hundred and
forty one crores and forty lakhs).
ii) I say that the petitioner has earned revenue from the
analogue platforms, for the period 1.4.2009 to 31.3.2010 in
the amount for Rs.404.85 crores (Rupees four hundred and
four cores and eighty five lakhs). Certified copies of the
extracts of financial statement of the petitioner for the
financial years 2008-09 and 2009-10 are annexed herewith
and may be exhibited as Exhibit PW-2/5.
iii) I say that a comparison of the two amounts
demonstrates that the petitioner has generated a growth in
revenue, of approximately 20%.
iv) I say, based on my experience and internal
projections, that this growth rate was expected to be
continued year on year for the duration of the MOU.
v) I say that the petitioner’s projection for allocable
revenue on account of the Channels of respondent No.1 for
the period 1.4.2010 to 31.3.2011 and 1.4.2011 to
31.3.2012, is Rs.101.85 crores (Rupees One hundred and
one crores and eighty five lakhs). The said projection is Page 166 of 193
based on the data for previous years and is further
recorded in a table, which is filed in the present
proceedings in Petition No.250 (C) of 2010 at page 1203-A
and also annexed hereto and may be exhibited as Exhibit
PW-2/6.
vi) I say that in terms of the MOU, the fixed fee payable
by the petitioner to the respondent No.1 in respect of the
said period, i.e., 1.4.2010 to 31.3.2011 and 1.4.2011 to
31.3.2012, is Rs.89 crores (Rupees eighty nine crores only).
vii) I say that as per the above calculation and
explanation, the petitioner would have earned Rs.12.85
crores (Rupees Twelve crores eighty five lakhs).”
So far as Marketing and Promotional expenses are concerned, Mr.
Mazumdar stated:
“ C. Marketing and Promotional Expenses:
I further say that the petitioner had spent an amount
of Rs.1.04 crores (Rupees one crore and four lakhs, only) on
account of launch and promotion of the Colors channel in its
bouquet 3. The petitioner is also entitled to recover the said
amount from the respondents. The details of the
expenditure incurred by the petitioner for launch of Colors
channel is set out in the table annexed hereto and the same
may be exhibited as Exhibit PW-2/7.” Page 167 of 193
On the MSMD’s alleged sufferance of loss towards loss of opportunity to
distribute NDTV Imagine and Neo Sports, the witness stated as under:
“23. I say that the petitioner is also entitled to a sum of
Rs.71.38 crores on account of damages calculated in the
succeeding paragraphs below.
24. I say that petitioner is entitled to Rs.15 crores (Rupees
fifteen crores only) on account of loss of business opportunity
in distribution of NDTV Imagine.
25. I say that the petitioner received an offer from M/s ND
TV Imagine for joining petitioner’s distribution bouquet.
Based on its assessment, the petitioner’s projection was that
it would have earned a minimum of Rs.5 crores (Rupees five
crores) per annum by distributing NDTV Imagine after
paying a fixed fee to the said channel.
26. I say that the petitioner had to forego the opportunity to
distribute NDTV Imagine as it opted to distribute Colors and
the unlawful termination by the respondent No.1 has
resulted in consequential loss of business earnings from
distributing NDTV Imagine, which amounts to Rs.15 crores.
A copy of the proposal sent to the petitioner by NDTV
Imagine that demonstrates the revenue that the petitioner
would have earned, is annexed hereto and may be exhibited
as Exhibit PW-2/8.
27. I say that after the respondent No.1 illegally terminated
the MOU, the other broadcasters started renegotiating their
executed deals even prior to the expiry of their respective
agreements for continuing the distribution of their channels Page 168 of 193
on the petitioner’s platform. I say that on account of such
illegal termination by the respondent No.1, the petitioner
was exposed to the risk of losing the other third party
channels that were part of its distribution platform. I further
state that drawing cue from such illegal termination of a
validly executed contract by the respondent No.1, another
broadcaster namely New Delhi Television Limited illegally
and prematurely terminated its contract with the petitioner
just to reap monetary gains and without any breach on the
part of the petitioner and causing a substantial loss to the
petitioner.
28. I further say that in view of the illegal and premature
(purported) termination of the MOU, the petitioner’s Bouquet
3 was left without a strong ‘driver’ channel in the absence of
Colors. I say that the petitioner was compelled to bring in
new driver channels in order to strengthen its Bouquet 3. I
say that it is for this reason the petitioner was compelled to
pay an exorbitant price to Neo Sports in comparison to what
it was paying to the respondent No.1 for distribution of its
channels. This resulted in additional/extra outflow of
Rs.56.38 crores to Neo Sports. This loss to the petitioner is
directly attributable to the illegal actions of respondent No.1
and hence the petitioner is entitled to the said amount of
Rs.56.38 crores. Table evidencing loss of Rs.56.38 crores
caused to the petitioner on account of illegal termination by
Respondent No. 1 is annexed hereto and may be exhibited
as Exhibit PW-2/9.”
Mr. Amol Mazmudar further deposed: Page 169 of 193
“25. I say that the Petitioner received an offer from M/s. NDTV
Imagine for joining Petitioner’s distribution bouquet. Based on its
assessment, the Petitioner’s projection was that it would have
earned a minimum of Rs.5 crores (Rupees Five Crores) per annum by
distributing NDTV Imagine after paying a fixed fee to the said
channel.”
193. The entire claim of damages is based on projection revenue.
We may notice the same :-
“i. I say that Petitioner’s revenue on account of the distribution of
the Channels of Respondent No.1 on the Digital platforms for the
term of the MOU, i.e., April 1, 2009 to March 31, 2012, was likely to
be Rs.250.68 Crores (Rupees Two hundred and fifty crores and
Sixty Eight Lakhs).
ii. I say that the basis of the above figure is the actual amounts
accrued to the Petitioner between April 1, 2009 and July 13, 2010,
and projections for the period July 14,2010 and March 31, 2012,
arising out of and based on agreements entered into between the
Petitioner and various digital distribution platforms in relation to
distribution of the Channels of Respondent No.1.
iii. I say that the details of the revenues of the Petitioner set out
and explained in the table prepared under my instructions and filed
on the present proceedings as an enclosure to the e. mail dated May
17, 2010. Copy of the details of revenue of the Petitioner is filed in
Petition No.250(C) of 2010 at page 895 and is also annexed hereto
and may be exhibited as Exhibit PW-2/3 and a copy of the e. mail
dated May 17, 2010 is filed in Petition No. 220 (C) of 2010 at pages Page 170 of 193
150 to 151 and also annexed hereto and may be exhibited as
Exhibit PW-2/4.”
Re : The Digital Platform
194. MSMD in support of its case has not filed any primary document.
A projection of revenue is different and distinct from loss of actual profit.
It has also not produced its books of account. It has not filed its balance
sheet. Even the auditor’s report has not been filed.
Mr. Lekhi would submit that along with the letter dated 17.5.2009, an
excess Chart was communicated to Viacom which was neither denied nor
disputed by Viacom in its pleadings and thus, the same must be held to have
been admitted.
This submission in our opinion is not correct.
An excess chart which was allegedly annexed with a communication was
required to be proved on its own in accordance with law. It need not be denied
or disputed in pleadings.
Only when a fact is pleaded, the same is required to be traversed. In no
pleadings, a party to the lis is either required to plead evidence nor deny or
dispute the same. Page 171 of 193
Question of appreciation of evidence must be determined upon taking
into consideration the entire material on record. It is also incorrect to contend
that the figures given in the chart had been proved. The figures could have
been proved only by placing on record the primary evidence. Only because
somebody has produced a chart which in absence of any primary document
and/or admission within the meaning of the provisions of Indian Evidence Act
cannot per se be held to have been proved, particularly, having regard to the
fact that the same by itself cannot be said to be a documentary evidence.
Mr. Amol Mazumdar in paragraph 22 of his evidence merely stated that
the projections were based on his experience on internal projection. An
internal projection is for internal consumption of the officers. It, without any
primary evidence by itself cannot be held to be a proof for claiming damages.
Mr. Majmudar does not state that what was the basis for his contention
or as to how the same has anything to do with his experience.
He verified the entire statement made in his affidavit as true to his
knowledge derived from the records of the case. No record has been produced
in support of the statement contained in his affidavit. The affidavit, therefore,
does not meet the requirements of law as envisaged under Order XIX Rule 3 of
the Code of Civil Procedure.
It is, furthermore, difficult to accept Mr. Lekhi’s submission that the said
chart is corroborative in nature. A chart is relevant if the same refers to some Page 172 of 193
evidences. It must be in consonance with the material brought on record. It by
itself is no evidence; even by way of corroboration.
A corroborative evidence must corroborate some other evidence which in
turn would mean evidence brought on record in accordance with law and not
otherwise.
We are also not in a position to accept the submission of Mr. Lekhi that
the said chart constitutes a proof or has any evidentiary value. Moreover, the
said chart does not take into consideration the fact that before a profit can be
said to have been earned, the expenses incurred therefor must also be taken
into consideration.
There cannot be any doubt or dispute that the damages are required to
be assessed by way of restitution.
The same would not, however, mean that the projection of a revenue can
be the only criteria for computation of damages without taking into
consideration the expenditure involved in the process.
The agreement itself suggests that for the purpose of running a business
of this nature, inter alia, the distributor’s commission has to be paid. There
may be cases of bad debts.
We are also not in a position to accept the submission of Mr. Lekhi that
having regard to the nature of establishment of MSMD the fixed cost stood
incurred and there would be negligible variation, if any, in the variable costs. Page 173 of 193
MSMD has claimed a huge amount by way of damages. It was, therefore,
required to show if not with a mathematical exactitude as to how much
damages have actually been suffered by it.
It cannot brush aside the contentions of Viacom on the ground that it
was concerned only with a fixed fee. If MSMD raises a claim by way of
damages, it was obligatory on its part to establish that it would have expected
to earn a huge amount by way of revenue and consequently would have earned
profits.
It could have filed a balance sheet to show how much profit it had been
earning in the past years and what would have been the quantum of
expenditure including the revenue expenditure.
With the increased amount of revenue, the amount of expenditure
ordinarily is likely to go up. It could have easily shown that how much amount
it had received, earned and retained in the past years, so as enable this
Tribunal to give credence to the evidence of Mr. Amol Mazmudar.
Moreover, the said Ex.PW2/2 (page 264) is in three parts. Part-A refers to
the concluded contract. Part-B represents the revenue deals and Part-C is the
addition of Part-A and Part-B.
If it be assumed even hypothetically that MSMD had suffered loss, an
expenditure of about 10% to 12% was to be incurred. It has to meet its Page 174 of 193
liabilities in respect of both direct tax and indirect tax. The expected rate of
profit would be also 10% to 15%.
For the financial year 2011, a sum of Rs.71.50 crores is said to have
been earned. The projected revenue is Rs.13.93 crores. A claim for damages of
Rs.61.70 crores for all the three years, ex facie, is on a higher side. The figures
of the concluded contract have been changed. The figures of projections have
also been changed, as would appear from a comparison of the said exhibit and
the annexures said to have been enclosed is made with the e-mail dated
17.5.2010.
The figure of total revenue of Rs.235.42 crores has become Rs.250.68
crores. The spill over revenue has been shown to be Rs.230.62 crores.
Mr. Mazmudar did not say so. The same is stated to be a typographical
error. The projected figure of Rs.3.60 crores and Rs.4.00 crores in respect of
SUN Direct TV Pvt. Ltd. became Rs.5.00 crores and Rs.7.00 crores.
A comparison of both the tabulations, therefore, would clearly go to show
that the figures mentioned therein do not reflect the correct figure arising out
of a concluded contract.
Re-Analogue Platform
195. The basis for claiming damages on analogue mode is said to be on the
premise that the growth of MSMD would have been 19%. A growth of 20% has
been claimed for the year 2008. No report of the TRAI has been brought on Page 175 of 193
record. It is not disputed that in the year 2008 the TRAI increased the
subscription charges by 7%. Thereafter there has been no increase in the
subscription fee.
It is also not in dispute that in the year 2000, MSMD was awarded the
casting right in respect of IPL Cricket. Mr. Lekhi would contend that with the
telecasting right in respect of IPL Cricket, the respondent has acquired a higher
viewership. The viewership, however, may undergo a change. A channel may
be popular if there is a sports event or any other popular event. Its popularity
may, however, go down, if its future productions are not to the expectation of
the viewing public and/or otherwise not upto the mark.
Respondent had referred to a chart wherein an allocation of Rs.17.10
crores has been shown for the financial year 2009, 32.51% for the financial
year 2010 and 43.54% for financial year 2011 and a sum of Rs.58.31 crores for
the financial year 2012 have been mentioned, totaling a sum of Rs.134.36
crores. It has not been shown as to on what basis Rs.32.51 crroes in the
financial year 2010 has been allocated out of Rs.404.85 crores.
Even otherwise earnings of the revenue projected for the relevant years
does not take into consideration the expenditure including the amount of tax
payable by MSMD. Page 176 of 193
Expenditure incurred towards Marketing and Promotion
196. MSMD is said to have incurred an expenditure of Rs.1.04 crores towards
launch and promotion of Colors Channel in Bouquet III.
Clause VIII of the agreement provides that expenses towards marketing and
promotion were to be on account of Viacom. Such expenses were required to
be incurred with the mutual consent of the parties.
It is not the case of the MSMD that consent of Viacom was obtained or
that any prior intimation therefor had been given. No invoice or any other
document furthermore has been produced to show as to how and in what
manner the said expenditure has been incurred. In absence of such primary
documents, it is difficult to accept that MSMD has been able to prove that it
had incurred loss of business opportunity.
Re: NDTV Imagine
197. Mr. Mazmudar in his affidavit stated as under:
“25. I say that the Petitioner received an offer from M/s. NDTV
Imagine for joining Petitioner’s distribution bouquet. Based on its
assessment, the Petitioner’s projection was that it would have
earned a minimum of Rs.5 crores (Rupees Five Crores) per annum by
distributing NDTV Imagine after paying a fixed fee to the said
channel.” Page 177 of 193
The assessment of damages, thus, was again based on the projection of
MSMD. No factual basis therefor has been laid. Moreover, the process of
negotiation between NDTV and MSMD began on 05.3.2009 which would appear
from the e- mail dated 06.3.2009 issued by Shri Ram Kumar Darpan to Shri
Himanshu Dhorreliya from a perusal whereof it would appear that the
distribution proposal for NDTV Imagine channel was annexed therewith.
The proposed contract was for a period of three years commencing from
01.4.2009. However, the commercials were yet to be finalized. A distribution
proposal which is at page 278 of the paper book is also dated 05.3.2009. If
that be so, MSMD ought to have shown as to how it could not successfully
negotiate with the said channel. It has also not been shown as to how
termination of contract by Viacom led to abandonment of the negotiations
and/or talks. It has furthermore not been shown that exit of the channel of
Viacom had anything to do with NDTV’s going out of negotiation process, as it
is not the case of the MSMD that it did not have the requisite capacity on its
part.
Mr. Amol Mazmudar, in his evidence, stated as under:
“24. I say that Petitioner is entitled to Rs.15 crores (Rupees Fifteen
Crores only) on account of loss of business opportunity in
distribution of NDTV Imagine.
25. I say that the Petitioner received an offer from M/s. NDTV
Imagine for joining Petitioner’s distribution bouquet. Based on its
assessment, the Petitioner’s projection was that it would have Page 178 of 193
earned a minimum of Rs.5 crores (Rupees Five Crores) per annum by
distributing NDTV Imagine after paying a fixed fee to the said
channel.
26. I say that the Petitioner had to forego the opportunity to
distribute NDTV Imagine as it opted to distribute Colors and the
unlawful termination by the Respondent No.1 has resulted in
consequential loss of business earnings from distributing NDTV
Imagine, which amounts to Rs.15 crores (Rupees Fifteen Crores
only). A copy of the proposal sent to the Petitioner by NDTV Imagine
that demonstrates the revenue that the Petitioner would have
earned, is annexed hereto and may be exhibited as Exhibit PW-
2/8.”
In his cross-examination, he stated :-
“Concluded deal did not change. Value for said concluded deal
remains to be Rs.4.32 crores only. Since we were to renegotiate the
entire deal, we projected it to be total Rs.8 crores. Hence
summarized in Block B of my affidavit. This Projections are basis
inputs from our business team.”
198. We may also refer to distribution proposal that a sum of Rs.60.00 crores
at the end of the period of three years had been deliberated upon which is in
the following term:
In INR Crs. Page 179 of 193
Average GRPs Year 1 Year 2 Year 3 Total
60-100 17 20 23 60
101-20 25 30 35 90
Above 200 30 45 60 135
20% of Rs.60.00 crores would be Rs.12.00 crores i.e. Rs.4.00 crores per
annum. On that basis, therefore, the sum of Rs.20.00 crores could not have
been claimed as damages.
Here again no expenditure has been shown. No profit was even
calculated.
Mr. Mazmudar in his cross-examination has accepted that he did not
have any personal knowledge in the matter. He did not indicate as to who had
the requisite personal knowledge with regard thereto. His evidence that MSMD
would have earned a minimum Rs.5.00 crores per annum by distributing
NDTV Imagine after paying a fixed fee is, therefore, speculative in nature. He in
his cross-examination stated that he was also not aware as to whether NDTV
stated in writing that they had terminated their contract because Viacom’s
terminating its with MSMD. He accepted that he was not aware that the NDTV
terminated its agreement only because of breach of agreement by MSMD. In
any event this is otherwise indicative of the fact that even NDTV Imagine did
not think it apposite to appoint MSMD as it distributor. Page 180 of 193
RE: NEO Sports
199. So far as the claim for a sum of Rs.56.38 Crores for entering into an
agreement with Neo Sports is concerned, Mr. Amol Majumdar stated as under:-
“I further say that in view of the illegal and premature (purported)
termination of the MoU, the Petitioner’s Bouquet 3 was left without a
strong ‘driver’ channel in the absence of Colors. I say that the
Petitioner was compelled to bring in new driver channels in order to
strengthen its Bouquet 3.”
From the said statement, it would appear that the ‘Colors’ channel was
the driver channel although bundled with new channels of MSMD in bouquet
III.
The only evidence adduced in support of the said claim was the
tabulations made in his affidavit by Mr. Amol Majumdar but in support thereof
no document has been filed including the agreement entered into by and
between MSMD and NEO Sports.
Paragraph 28 of the affidavit of Mr. Amol Majumdar indicates that the
damages to the extent of Rs.56.8 Crores was claimed on the premise that
because of Viacom leaving the network of MSMD, it was forced to find out some
other channel and had to pay something extra which is belied by the following
facts :-
(a) MSMD had already been negotiating with Neo Sports as would
appear from paragraph 87 of the petition which reads as under :- Page 181 of 193
“87. The petitioner submits that while it was in negotiation with
Neo Sports, the circumstances created by the purported notice dated
13.7.10 had an adverse effect on the Petitioners’ bargaining
position.”
(b) the amount of damages claimed was remote and speculative;
(c) had there been an adverse impact on negotiation by reason of
Viacom’s exit from the network of MSMD, it should have been
established by adducing cogent and reliable evidence;
For the purpose of establishing the quantum of damages on that
account, the respondent was bound to establish as to what was the
proposed amount before the entry of Viacom and what was the agreed
amount after its departure?
The Neo channel could have been brought in the network of MSMD
independent of Viacom’s channel, being of different genre.
Mr Amol Majumdar, in his cross examination clearly admitted that
the ‘Colors’ channel being in GEC and ‘Neo Sports channel being a sports
channel, there was no comparison between the two.
Mr Majumdar, in his cross examination, stated as under : -
“The witness is shown para 28 of the affidavit.
Q: Is it correct that NEO Sports is a channel of a different genre from
the channels of Viacom 18?
A: Yes. Page 182 of 193
Q: Would you be aware of the average GRPs of Neo Sports?
A: I am not aware.
Q: Are you aware that the GRPs of Colors are far higher than the
average GRP of Neo Sports?
A: I am not aware.
Q: From where have you got these figures pertaining to Neo Sports
as set out in the tabulation at exhibit PW2/9?
A: As per commercial agreement between Neo Sports and MSMD.
Q: Is this agreement on record?
A: No.
Q: This figure of Rs. 82.38 is for which period?
A: This figure of Rs.82.38 crores is for the period of April, 2011 upto
March, 2012.“
It is, therefore, evident that he is not a competent witness to establish
sufferance of the alleged damages by MSMD on that count.
The said claim cannot be allowed as :-
(a) it was remote and speculative in nature;
(b) it is contrary to pleadings;
(c) there was no comparison either of genre and/or rating;
(d) no evidence has been adduced to prove the actual loss; Page 183 of 193
(e) the witness having no personal knowledge as regards negotiations
between MSMD and Neo Channel, no reliance can be placed his
deposition;
(f) the witness having failed to make a proper disclosure, no decree
can be passed relying on or on the basis thereof;
(g) Remoteness of damages, as has been dealt with in Hadley v
Baxendale reported in (1843) 60 All ER (Reprint) 461 at page 467
in regard to the claim of MSMD, relating to Neo Sports and NDTV
Imagine would apply in this case;
(h) Viacom had no knowledge in regard thereto as there had been no
communication by and between the parties in that behalf.
Mr. Lekhi, however, would contend that Colors being a rival channel it
was essential that after Viacom left it, any other channel should have been
included in Bouquet III as a lead channel. Bouquet III constituted of new
channels including Discovery Turbo and Discovery Science.
Neo Sports is a channel of different genre. Each contract must be entered
into by the parties on their own volition. There is nothing on record to show
that Neo Sports had exerted any pressure to which willingly or otherwise,
MSMD had to give in keeping in view the situation in which it was. There is
nothing on record to show that Neo Sports had taken undue advantage of its
position. Page 184 of 193
RE: NDTV
200. So far as purported claim of damages for Rs.15.00 crores for NDTV,
terminating its distributorship agreement with MSMD is concerned, no details
of the loss having been produced, the same cannot be entertained.
Re: IRD Boxes
201. A contention has been raised that the respondent has committed
breaches of the agreement entered into by and between the parties as
contained in the MoU dated 11.02.2009, in terms whereof, the respondent
agreed to distribute 1500 more decoders apart from the 3500 decoders which
had already been distributed.
202. RW-3 in his cross-examination stated as under:-
“Q: How many IRDs of SET were active when the MOU between
Viacom18 and MSMD was signed?
A: At this point of time, I would not know how many IRDs of SET
were active at that point of time.
Q: Do you know how many IRDs of SET are active today?
A: Approx. 3900-4000.
(witness is shown page 372 of the Affidavit)
Q: Is it correct that as per this tabulation, 3859 IRDs of Colors were
active when the MOU was signed? Page 185 of 193
A: At the time when the MOU was signed, we were given a list of
3847 IRDs. Subsequently, we were given additional information
about 12 IRDs but whether they were active or inactive was not
known to us. They were given to us as Data of IRDs that were
seeded on the ground by Viacom directly. This seeding had been
done prior to the execution of the MOU.
Q: Would I be correct in understanding that you requested for
deactivation of 1628 of these 3859 IRDs?
A: Yes, we asked for deactivation of 1628 viewing cards in respect
of these IRDs, for various reasons.
Q: You have also stated in this tabulation that 162 IRDs were to be
regularized. Were these regularized?
A: Subsequently many of these were regularized. Some were
remaining to be regularized and remained in that state and we did
not request for their viewing cards to be deactivated.”
203. According to the petitioner, however, the respondent upon termination of
the contract has returned only 2900 decoders. It is stated that the respondent
has not returned 1541 IRD Boxes to the petitioner. The respondent denies and
disputes the said figure. The respondent moreover contends that all the
deactivated decoders which are lying with the LCOs/MSOs/Subscribers can be
returned provided petitioner pays a sum of Rs. 11 Lacks which amount
respondent would be incurring by way of ‘incentives’ payable to the distributors
of MSMD. Page 186 of 193
Mr. Sanjeev Hiremath in his cross examination stated as under :-
“…It is correct that 3500 IRDs mentioned in Para (d) (I) on page 43 were
already on the ground. It is further correct that these 3500 IRDs were not
seeded through the respondent. It is correct that additional IRDs were to
be supplied by the petitioner in terms of the MOU. It is correct that the
IRDS also require to be paid with viewing cards.
Q: Is it correct that you were provided with the list by the respondent
showing the absence of complete pairing between IRDs and viewing cards
furnished by you?
A: Yes, these are constant operational issues, which need to be correlated.
It is correct that of the IRDs provided, some have to be kept in stock for
service requirements
I deny the suggestion that the number of IRDs seeded through the
respondent as mentioned at page 43 in the affidavit is incorrect.
Q: Is it correct that there was a scheme with regard to replacement of IRDs
of M TV, Nick and VH1 in order to give effect to change in encryption
software for which you were to make payments to distributors of
respondent?
A: Yes.
Q: I put it to you that the petitioner did not make the payment in terms of
the scheme so devised and agreed?
A: It is correct. There is an amount of approximately Rs. 11 Lacs pending
and we have asked the respondent to deliver the balance stock of IRDs
and collect this payment.
Q: I put it to you that. dispute regarding the IRDs is only because of the
outstanding reconciliation in terms of the scheme as devised by you? Page 187 of 193
A: It is incorrect. The crux of the matter was the 1500 + IRDs for Colors
which had to be mass deactivated in the absence of sign ups.
Q: I put it to you that deactivation can only be done by the petitioner?
A: Yes, subject to authorization from the distributor, in this case the
respondent.
Q: Has the respondent insisted upon continued activation without
simultaneously raising the issue about outstanding reconciliation?
A: These are two separate matters.
I deny the suggestion that there is any outstanding dispute with regard to
the IRDs.
It is correct that the respondent was distributing other channels prior to
execution of the MOU.
Mr. Kathpalia, the Learned Counsel for the petitioner submitted that in
that view of the matter petitioner is ready and willing to pay the said sum of Rs.
11 lakhs to the distributors.
204. For the aforementioned purpose, we are of the opinion that the parties
should meet for reconciliation of accounts in respect of IRDs/decoders/viewing
cards. Subject to the petitioner’s making payment of the incentive charges to
the distributors of the respondent, the IRDS/Decoders/Viewing Cards must be
returned to the petitioner by the respondent. Page 188 of 193
205. We, therefore, direct that the authorised representatives of the parties
meet within two weeks for reconciliation of accounts in respect of the decoders
and viewing cards and on such reconciliation; the respondent shall adjust the
incentive charges therefor from the amount payable to Viacom by it after the
parties reconcile their accounts with regard to the number of IRD
boxes/viewing cards.
The parties shall also work out the modalities of retrieving the IRD
boxes/viewing cards for the distributors of the respondent.
The petitioner subject to the aforementioned and subject to adjustment
of the requisite amount would be entitled to return of the IRD boxes/viewing
cards.
This issue is decided accordingly.
Quantum of Damages - Conclusion
206. What should be the quantum of damages will depend upon various
factors. We may, for the aforementioned purpose, summarise our findings :-
(a) Termination of contract being stricto sensu not in terms of Clause XX
of the Agreement, it was not legal;
(b) It is not a case where there had been a fundamental breach of
contract justifying repudiation of the agreement; Page 189 of 193
(c) The relationship between the parties was not that of a principal and
agent but between a principal and principal;
(d) Despite the same, there was a fiduciary relationship between the
parties which, to a great extent, has been breached by MSMD in so far
as it has not given proper tiering and/or packaging to its channels be
it;
(e) The contention of MSMD that there had been no commitment to grant
stake to MSMD, and the talks failed even prior to entering into the
agreement in question was also not in spirit of the maintaining good
relationship between the parties;
(f) It had been fabricating subscriber reports;
(g) It had failed to provide access to interconnection agreements with the
distribution platforms.
(h) It’s attitude towards Viacom vis-à-vis its own channel was to some
extent discriminatory.
MSMD, on the other hand, has not committed any material breach as
regards :-
(i) Clause IX (2) of the agreement;
(ii) To activate IRDs of ‘Colors’;
(iii) Packaging of the ‘Colors’ bouquet;
(iv) Grant of any unjust discount. Page 190 of 193
We have noticed heretobefore the principles and/or measures for grant of
damages. We, therefore, are of the opinion that grant of three months’ profit as
damages subject of-course, to the adjustment of due amount to Viacom in
terms of the agreement would sub-serve the ends of justice; claim of damages
under other heads having not been proved.
We are unable to agree with Mr. Kathpalia that the Courts cannot award
nominal damages. In our opinion, they can if any case has been made out
therefor.
In Farley Vs. Skinner 2002 (2) A.C. 732, it is stated ‘damages should not
be awarded, unless perhaps nominally for the fact of a breach of contract –
distinct from the ‘consequence of a breach’.
It is, however, true that the principle that a claim of damage should
extend only to compensation for the real losses, which is said to be the bedrock
of law (See Rowly Vs. Cenberes Software Ltd. 2001 EWC A (C) 78 Per Sadley J
(para 27).
What, thus, should be the quantum of damages would depend upon fact
situation obtaining in each case.
Without multiplying decisions on this point, we may refer to “The Law of
Contract”, Third Edition of Butteworth’s Common Law Services (Edited by
Andrew Grubs at page 1575), which reads thus :- Page 191 of 193
“In Farley v Skinner Lord Clyde stated that “…damages should not
be awarded, unless perhaps nominally, for the fact of a breach of a
contract distinct from the consequences of the breach. The principle
that a claimant’s damages should extend only to compensation for
‘real losses’ has been said to be ‘a bedrock of our law’. In British
Westinghouse Electric and Manufacturing Co.Ltd. v Underground
Electric Rlys Co of London Ltd. Viscount Haldane LC said : ‘the
fundamental basis {of an award of contractual damages} is thus
compensation for pecuniary loss naturally flowing from the breach
…’. In Johnson v Agnew Lord Wilberforce observed that : the general
principle for the assessment of damages is compensatory. More
recently in A-G v Blake Lord Nicholls reiterated that : “…with
breaches of contract ..(t) the general principle regarding assessment
of damages is that they are compensatory for loss or injury”.
In exceptional cases a different aim might be pursued. In Chester v.
Afshar the House of Lords justified a departure from the usual
principles of causation by reference to the need to vindicate a
patient’s right to exercise an informed choice prior to consenting to
medical treatment. This vindicatory function is more usually
associated with an award of nominal damages. In other cases the
focus of the court’s attention may shift from the effect upon the
claimants of the defendant’s wrong to that the defendant has gained
from his wrong-doing. Such cases where an account of profits may
exceptionally be awarded also seek to promote a different aimrestitution through the reversal of unjust enrichment.
This general compensatory aim of an award of damages for breach
of contract has been confirmed many times and has recently been
said to be ‘beyond dispute’ and ‘axiomatic’. In the same case the
House of Lords acknowledged that there was ‘a light sprinkling of
cases’ where courts had, under different rubrics, granted financial Page 192 of 193
remedies which went beyond compensating the claimant for his loss
and required the defendant to account for the profit he derived from
his breach of contract. There was therefore ‘no reason, in principle,
to rule out an account of profits as a remedy for breach of contract’.
However the members of the House of Lords in A-G v Blake who
endorsed a non-compensatory award emphasized repeatedly the
exceptional nature of such a remedy. The focus of the ‘usual’ award
is therefore the loss to the victim consequent on breach rather than
the gain, if any, made by the perpetrator of that breach. Sometimes,
however, it is difficult to reconcile a supposedly compensatory
award with established principle.”
For the financial year 2011, the total collection was Rs.71.50 crores. For
three months, therefore, the amount would be around Rs.17.87 crores. We may
assume that the profit element would amount to 15% of the said amount.
The amount of damages payable in favour of MSMD would, thus, be
Rs.2.68 crores.
207. In the result, both the petitions are allowed in part and to the extent
mentioned heretobefore.
MSMD, upon adjusting the amount of Rs.2.68 crores and Rs.11 lakhs
payable to it by Viacom, is directed to pay the balance sum to Viacom within
four weeks from date, failing which interest @ 12% p.a. shall become payable
till realization thereof. Page 193 of 193
208. In the facts and circumstances of this case, there shall be no order as to
costs.
……….......
(S.B. Sinha)
Chairperson
……………….
(P.K. Rastogi)
Member
rkc
