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    T-Series Can’t Claim Netflix Money in Reliance Film Dispute: Delhi High Court

    Can a person claim an asset from a debtor if the latter does not legally own the asset? In April 2024, the Delhi High Court had to answer a corporate version of this complicated question while hearing the Super Cassettes Industries Pvt Ltd vs Reliance Entertainment Studios Pvt Ltd case.

    Here’s the gist of the case: In 2021, Super Cassettes (T-Series) agreed to lend INR 268 crores to Reliance to produce 11 Hindi films. When Reliance failed to repay the outstanding amount of around INR 60 crores, allegedly due in 2023, T-Series asserted a lien and charge over any future films that Reliance produces, whether independently or in collaboration with others.

    What is a lien? It is a right to retain possession of tangible property owned by another entity until an outstanding debt owed by that property’s owner is settled.

    Accordingly, when Reliance began working on new movies, T-Series claimed this lien. Yet, the company did not claim the lien from the final revenue of the movie but from the INR 42.16 crores deposit sent by Netflix for the movie ‘Amar Singh Chamkila.’ What’s even more interesting is that this amount is a part of the Netflix Reliance Agreement that stated the Window Seat Films LLP (WSF), a separate entity, as the final recipient of the money. Basically, this means that T-Series asked an amount that was not a profit generated by the film but an amount required to pay the operational and distributional costs of the film. The legal battle between Reliance and T-Series heard by Justice Sanjeev Narula thus investigated whether there was any merit to T-Series laying claim to the Netflix money.

    Can the Netflix money come under T-Series’ lien?

    Narula stated in his oral judgement that the crux of the matter lies in the interpretation and application of the clause granting T-Series a lien and charge over the future films’ revenues. After hearing both sides, he observed that in this case, the term ‘lien’ uniquely applies to the revenues of a film. However, these “revenues” would refer to the net of necessary expenditures and statutory obligations, meaning that T-Series can only claim lien against the netted financial realisations, not the gross inflows.

    “The scope of the lien or charge, while seemingly comprehensive, may not legally extend to encompass funds passing through Reliance to WSF without clear, contractual stipulations that such funds are within the purview of the lien. The enforcement of such a lien or charge over the gross revenues of co-produced films introduces several practical complications. For the film Amar Singh Chamkila, these revenues, as structured by the contractual arrangements, are not directly controlled or owned by Reliance in their entirety, but are instead processed through the partnership for specific production-related expenses. SCIPL however aims to enforce this lien and charge not merely on the net profits accruable to Reliance from the film but on the gross revenues. These gross revenues include claims from third parties involved in the production and are essential for covering the film’s operational and distribution costs. Such costs must be met before any revenue or profit can be generated,” said the judgement.

    The judge concluded that T-Series cannot claim Netflix’s deposit under its lien but agreed that the company can demand the same from the net profits of Reliance, gained from the movie.

    Who is the producer of the film?

    Aside from the argument about the lien, the discussion also sought to determine the film’s producer. Under the Copyright Act, a “producer” is someone who takes the initiative and responsibility for creating a work. As pointed out by Reliance’s legal representative, “WSF, a distinct entity where Reliance is a partner, stands as the film’s actual and legally recognised producer. [The] claim is supported by substantial documentation, including (a) the License Agreement, which permits Reliance to sub-license content produced by WSF, (b) the official recognition of WSF as the producer by Indian Film and TV Producers Council, (c) mention of WSF as a producer in the opening credits, and (d) the film certification application naming Imtiaz Ali, a partner at Window Seat Picture LLP and a stakeholder in WSF, as the producer.”

    However, T-Series argued that this fact is inconsequential since Reliance contributes to nearly 99.99 percent of WSF’s capital, blurring the distinction between the two entities. Moreover, the company said that Reliance’s financial and operational involvement in the process of film production positions Reliance as the film’s producer.

    Regarding this, Reliance’s legal counsel highlighted that WSF was responsible for negotiating and securing the rights to the biopic. Further, Reliance’s financial involvement is primarily that of receiving a commission from sub-licensing, meaning that “their role is more of a facilitator than that of a primary producer.”

    “Given these complexities, a straightforward identification of Reliance as a producer is obscured, requiring further detailed examination, that is beyond the scope of this hearing. At this stage, while it cannot be definitively concluded that Reliance is the sole and exclusive producer, the evidence presented prima facie indicates that WSF is the actual and legally recognized producer of the film “Amar Singh Chamkila,”” concluded the judgement.

    At the end of the day, the Court concluded that that the Netflix money cannot be claimed by T-Series. Instead, the court asked Reliance to deposit:

     (a) a fixed commission of two percent from the licensing fee, to be deducted from the final tranche Reliance receives from Netflix, and

    (b) 50 percent of the profits generated by the film Amar Singh Chamkila.

    “These measures reflect an equitable approach to reconciling the interests of all parties involved and ensuring compliance with the contractual and legal frameworks governing the relationships between SCIPL, Reliance, Netflix and WSF,” said the judgement.

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    The post T-Series Can’t Claim Netflix Money in Reliance Film Dispute: Delhi High Court appeared first on MEDIANAMA.

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