Delhi High Court: An appeal was filed challenging the order/ judgment dated 06-01-2023 passed by a Single Judge whereby the application of respondent 1/ defendant 6 under Order XXXIX Rule 4 of CPC, 1908 has been allowed and the application filed by the appellant/ plaintiff under Order XXXIX Rules 1 and 2 CPC, 1908 has been dismissed, thereby vacating exparte ad-interim order dated 14-10-2022 in its entirety. A division bench of Manmohan and Saurabh Banerjee, JJ., sets aside the impugned order and injuncts Respondent 1 from engaging with any third person including Respondents 2 to 5 and/ or Appellant’s competitor for monetising of any new song till 30-09-2025, except when the Appellant refuses to accept delivery of the said song subject to the Appellant proving its bonafides by depositing the balance fee (i.e. Rs.2.20 crores) with the Registry of this Court.
An agreement was entered between the Appellant i.e., Global Music Junction, a music company) and the Respondent 1, Khesari Lal Yadav, a singer for the creation and production of 200 songs within a term of 30-months for a total consideration of Rs. 5,00,00,000. Under the Original Agreement, all intellectual property and ownership rights with respect to the content produced by Respondent 1 were vested with the Appellant. Subsequently, due to disputes having arisen between the parties and after an exchange of legal notices, an addendum was entered into vide which, the parties amended and modified certain commercial terms. Consequent to deletions of exclusivity obligations via the Addendum, Respondent No.1 was allowed to engage with third parties for the monetization of songs, subject to the ‘right of first refusal’ being granted in favour of the Appellant/ Plaintiff without any alteration with respect to ownership rights.
It is the case of the Appellant that Respondent 1 created content and allowed third parties i.e. Respondents 2 to 5 and 7 to 14 to promote/ monetize the content by uploading the same on Respondent’s 6 platform, and therefore allegedly infringed the copyright vested in the Appellant. Thus, a suit was filed by the appellant/plaintiff seeking the reliefs of permanent injunction, rendition of accounts as well as damages in view of an alleged infringement of the copyright owned by the Appellant/ Plaintiff in certain literary works, musical works, cinematographic films and sound recordings by the Respondents/ Defendants. The Single Judge restrained the Respondents 2 to 5 and Respondents7 to 14 from showing, releasing, launching, airing or monetizing all contents created by Respondent 1, which are in breach of the copyrights and intellectual property rights of the Appellant/ Plaintiff granted under the agreements on platforms like YouTube, Spotify, Jio Saavan, Wynk, etc. Respondent 1 was further restrained from creating any third-party rights in contravention of the Original Agreement read with the Addendum.
The Court noted that, as originally enacted, the Contract Act of 1963 conferred wide discretionary powers upon the Courts to decree specific performance, refuse injunction, etc. As a result of wide discretionary powers, the Courts awarded damages as a general rule and granted specific performance as an exception. However, the Amendment Act, 2018 has changed the nature of specific relief from an equitable, discretionary remedy to a statutory remedy making it a general rule rather than an exception. The agreements in question are not determinable, as there is a negative covenant, and Respondent 1 has no right to terminate them. Thus, because of the legislative shift towards stronger enforcement of contracts, there is a presumption that any commercial transaction can be terminated in the absence of a termination clause by giving a reasonable notice and/or contracts for the non-performance of which compensation in money was an adequate relief would not be specifically enforced are no longer good law.
The Court further noted that while Sections 14 and 41 of the Act, 1963 prescribe contracts that are not specifically enforceable, Section 42 of the Act, 1963 provides for enforcement of a negative covenant. It is apparent that there is a distinction between a relief of specific performance of the agreement and an injunction to perform a negative covenant in the agreement In the present case there is a negative covenant (Clause 3.5) in the Addendum executed between the parties and the Appellant by way of the present appeal seeks to enforce the said negative covenant alone. Accordingly, Section 14 is inapplicable to the present case as the Appellant is not seeking specific performance of any agreement, as erroneously assumed by the Single Judge, but is only seeking to enforce a negative covenant. Consequently, nothing precludes the Court from granting an injunction to enforce the negative covenant in a contract of personal service.
The Court opined that neither the Agreement nor the Addendum between the Appellant and Respondent 1 is barred by Section 27 of the Indian Contract Act, 1872 as the said Section applies to restrictions in the post-contract period i.e. in the present case the period after the promised term of the Addendum and not after a unilateral termination of a contract by one of the parties. Section 42 of Act, 1963 will be rendered nugatory if it is held that because a party has unilaterally terminated a contract prematurely, Courts cannot enforce a negative covenant. Thus, the Single Judge has erred in holding that since Respondent 1 had terminated the contract, the negative covenant cannot be enforced.
The Court observed that the agreement between the parties is not a contract between an employee-employer or a manager-sportsperson contract, rather they are commercial contracts entered into between parties with equal bargaining power and for mutual commercial benefit. Thus, the agreements between the parties are neither ‘excessively one sided’ nor they impose a ‘bondage’ on Respondent 1. Hence, Respondent 1 cannot be permitted to renege his promises under the garb of a restriction allegedly violative of any law. The Court also noted that the conduct of Respondent 1 in the present case has been neither honest nor fair.
The Court concluded that enforcing the negative covenant encapsulated in Clause 3.5 of the Addendum will neither compel him to exclusively work with the Appellant/ Plaintiff, nor result in ‘benching’ him or rendering him ‘idle’ or preventing him from practising his trade or profession as he will continue to act, sing, dance in the Bhojpuri Film Industry as well as on national TV channels, social media platforms and on stages. Further, enforcing the negative covenant encapsulated in Clause 3.5 of the Addendum would not in substance and effect amount to a decree of specific performance of an agreement of personal service.
The Court held that as the Amendment Act, 2018 has taken away the discretion of the Courts in granting specific performance, altering the nature of specific relief from an exceptional rule to a general rule has been done to ensure contractual enforcement and to increase adherence to the sanctity of contracts, thus, the Courts are not precluded from granting an injunction to perform a negative covenant and the same is in no manner controlled/ affected by Section 14 of the Act, 1963.
[Global Music Junction Pvt Ltd. V Shatrughan Kumar, 2023 SCC OnLine Del 5479, decided on 05-09-2023]
Advocates who appeared in this case :
Mr. Akhil Sibal, Senior Advocate with Mr.Yashvardhan, Ms. Rhia Marshall, Ms. Kritika Nagpal, Ms.Smita Kant, Mr. Tarun Bhushan, Mr. Pranay Mohan Govil, Ms. Priyanka Raj and Ms. Sanya Kumar, Advocates for appellants
Mr. Pradeep Kumar Arya, Mr. Gaurav Chaudhry, Mr. Randhir Singh, Mr. Priyanshu Malik, Mr. Rahul Rana, Mr. Pulkit Chadha, Mr. Aditya Kumar Yadav, Mr. Raj Karan Sharma, Mr. Priyanshu Malik and Mr. Arpit Bamal, Advocates for R-1.
Mr. Akhand Singh, Mr. Abhinandan Gautam, Ms. Samridhi Dobhal and Ms. Deeksha Dwivedi, Advocates for R-5.
Mr. Vihan Dang, Ms. Aditi Umapathy and Ms. Pragya Jain, Advocates for R-6.
