The Plaintiff, Zee Entertainment, is a known entity in India’s media and entertainment sector that owns a large repertoire of copyrights in sound recordings and audio visuals/music videos. The Defendant, Triller Inc., is a company incorporated in the United States of America that owns, operates and controls a video-sharing social networking platform known as Triller that allows its users to create and share videos which are automatically synchronised to music using artificial intelligence (AI) technology.
The case of Zee v. Triller offers an examination of the complexities of international contractual disputes and their interplay with the mandatory pre-suit mediation laid down in the Commercial Courts Act, 2015. In this article, we delve into the factual nuances of the case dealing with pre-suit mediation, urgency of interim relief, and contractual obligations with respect to interest on delayed payments.
Facts and Rival Contentions
In pursuance of their business, the plaintiff and the defendant had entered into a Record Music License Agreement in October 2020 (‘the Agreement’), whereby the plaintiff granted the Defendant a license to exploit its sound recordings repertoire (‘the Licensed Works’) for a period of one year ending on June 30, 2021, for a consideration of USD 600,000 plus taxes payable in four equal quarterly instalments.
In September 2021, by way of an amendment, the parties decided to extend the agreement by one year, commencing on July 1, 2021 up to June 30, 2022, on the same terms as in the original agreement.
It was undisputed that the defendant continued to enjoy the license and exploit the Licensed Works. For the first two quarters, the defendant paid the plaintiff an amount of USD 300,000 under two invoices, respectively. However, the plaintiff contended that the defendant continued to exploit the Licensed Works without making the payments for the third and fourth instalments. The plaintiff thus issued reminder notices in August 2022 demanding the defendant to pay the principal sum of USD 300,000 along with interest @ 18% per annum from the date of the invoices till payment. Upon non-payment, the plaintiff issued a legal notice in September 2022. In response to this notice, the defendant, via email, assured payment of the third and fourth instalments by October 31, 2022 and January 29, 2023, respectively. Thus, the defendant admitted and acknowledged its liability. The plaintiff accepted the revised timelines on the condition that any further delay would attract the interest of 18% p.a.
However, the defendant did not comply and disregarded three more notices the plaintiff sent in November 2022 while continuing to exploit the Licensed Works. In light of this, the plaintiff filed the present suit on January 4, 2023.
Among other contentions, the plaintiff highlighted that the defendant was a habitual defaulter, having several litigations pending before various courts in the USA. Therefore, the plaintiff apprehended that the defendant might attempt to sell or dispose of its assets in India to escape liability. The plaintiff placed reliance on the cases of IDBI Trusteeship Services Limited v. Hubtown Limited, Antara Housing LLP v. M/s Primeland Constructions, Future Corporate Resources Pvt. Ltd. v. Edelweiss Special Opportunities Fund, and Suresh K Jogani v. M/s Champalal K Vardhan.
The defendant’s preliminary objection was that the suit was premature. They argued that the present suit was filed before the last instalment was due in order to circumvent the pre-suit mediation given under Section 12-A of the Commercial Courts Act, 2015. They reiterated that the suit is barred for non-compliance with Section 12-A as the plaintiff was first required to exhaust the remedy of pre-institution mediation before proceeding with a suit. They contended that they had made a proposal for settlement in June 2023, but the plaintiff found that unacceptable and rejected it. They placed reliance on the cases of Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. and Dilip Kumar Rungta v. KLG Tradefin Pvt. Ltd. to submit that adherence to Section 12-A is mandatory and cannot be violated.
Further, the defendant denied that there were any monies due or payable to the plaintiff and that they never agreed to pay any interest on the principal amount.
The Court, after hearing both sides, made the following observations:
At the outset, the Court stated that the fact that the defendant owed the plaintiff an amount of USD 300,000 was abundantly clear. The defendant acknowledged that in their email reply to the first legal notice of September 2022 and, therefore, could not now deny that they owed any monies. With regard to the interest charged at 18% p.a., a bare perusal of the invoices clearly showed that interest at this rate would be charged for delayed payment. The plaintiff also mentioned this in all their letters in January, August and September 2022. Therefore, such bare denials of the Defendants only showed dishonesty, inconsistency and frivolity. The Court thus upheld the contractual commitments and interest to be paid on delayed payments.
Coming to the primary bone of contention, Section 12-A of the Commercial Courts Act, 2015 states that if a suit does not contemplate any urgent interim relief, it shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation and settlement.
The Court accepted the plaintiff’s submissions that there is every possibility that the defendant may alienate its assets and properties in India considering the number of pending litigations and, therefore, was seeking urgent relief. The Court rejected the submissions of the defendant, stating that this was a clear case of urgent interim relief, which carved out an exception to the mandate of Section 12-A. The Court opined that the plaintiff had made several attempts to settle the matter before approaching this Court, but the defendant only sought to delay and/or defeat the plaintiff’s claim. Thus, the Court underscored the pressing nature of the case, and in accordance with the precedent set in Patil Automation Pvt. Ltd. vs. Rakheja Engineers Pvt. Ltd., the Court emphasised that Section 12-A should not be employed as a tool to circumvent genuine requests for urgent interim relief.
In view of the above, the Court granted the decree in favour of the plaintiff and directed the defendant to pay the outstanding sum of USD 300,000 (i.e., INR 2,44,26,480) along with interest at the rate of 18% per annum from January 27, 2023, till payment and/or realisation, as well as an amount of INR 2,50,000 (approx. USD 3,000) as costs of the suit.
The Court, with this conclusive judgment, reinforced the contractual obligations even in case of international disputes and answered the central legal conundrum that while Section 12-A is a necessary milestone in any dispute resolution process, it cannot be exploited to undermine the imperative of urgency, and interim relief may be granted as an exception to the rule in such cases.