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MSM Discovery shall not represent Viacom: TDSAT

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The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) restrained MSM Discovery, a channel distribution company, from representing Viacom. Viacom 18 Media Private Ltd., Mumbai had filed a petition with the TDSAT alleging that MSM Discovery had materially breached, misrepresented and under reported the subscribers' base on MSM Discovery's distribution bundle in a deliberate, unfair and unfavorable manner.

MSM Discovery was appointed as the designated agent of Colors by Viacom 18 with effect from April 1, 2009. As agents, MSM was supposed take over the distribution of Colors and collect subscription fees from the affiliates. Subsequently, Colors was also converted to a Pay Channel with effect from April 1, 2009 in accordance with clause 7 of the Regulation and clause 6 (v) of the Telecommunication (Broadcasting and Cable) Services (Third) (CAS Areas) Tariff Order, 2006. The Agreement was for a period of three years for a minimum amount of `125 crores.

Viacom’s grievance was that MSM had packaged Colors in an unfair manner such that despite being one of the best-rated Hindi entertainment channels, it was not included in the basic tiers/bouquets/packages of DTH operators like Tata Sky and Dish TV. The agreement clearly provided that V18 Channels shall be part of the existing Bouquet-2 of MSMD subject to regulatory mandates and Viacom was assured that any addition of new channels and deletion of existing channels from the TheOneAlliance (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. However, when Sony was placed in more prime packages on the top, Viacom, on 13th June, 2010, terminated the distribution agreement and called upon MSMD to pay `20,34,61,982/-.

MSMD filed an application under section 9 of the Arbitration & Conciliation Act, 1996 before the Bombay High Court, wherein, it prayed for an order of injunction but the same was declined and the matter finally reached TDSAT. MSMD argued that Viacom terminated the contract without the 90 day mandatory notice which amounted to a negative covenant and requested TDSAT to dismiss the petition, finding Viacom to be in breach of contract. MSMD also argued that Colors had become the no. 1 channel only after MSMD became its distributor and there was no merit in the petitioner’s arguments.

The tribunal noted that the termination agreement was clearly in violation of Clause XX of the distribution contract. The tribunal was of the opinion that the respondent, in the event of a success, can be adequately compensated on monetary terms. Though the Tribunal admitted that the parties were certainly at consensus ad idem while entering into the contract and the contract did provide for a 90 day notice period, the fact that Colors was not placed at the top of prime packages on Tata Sky and Dish TV and MSDM had expressed its helplessness to do so made Viacom lose its trust and faith in MSDM. The tribunal opined that a court of law shall not thrust an unwilling principal on an agent, particularly, when in terms of the provisions of the Indian Contract Act the latter would have a legal remedy to pursue, namely, to sue it for damages.

The tribunal was prima facie satisfied that MSDM could not be permitted to carry out its business in terms of the contract and since Viacom had successfully raised a triable issue and established a prima facie case, the tribunal held that the balance of convenience and irreparable injury lied in favor of Viacom. MSDM was hence, restrained from representing Viacom with any third parties until further orders.


Case Caption: Viacom 18 Media Private Ltd., Mumbai v. MSM Discovery Pvt. Ltd., Mumbai

Before: Hon’ble Mr. Justice S.B.Sinha, Chairperson; Hon’ble Mr. G.D. Gaiha, Member; Hon’ble Mr. P.K. Rastogi, Member.

Counsel for Petitioner: Mr.Mukul Rohtagi, Sr.Advocate; Mr.Arun Kathpalia, Advocate; Mr. Navin Chawla, Advocate; Mr.Ameet Naik, Advocate; Mr. Rishi Agrawala, Advocate; Mr.Nikhil Rohtagi, Advocate

Counsel for Respondent: Mr.Ramji Srinivasan, Sr.Advocate; Mr.Gopal Jain, Advocate; Mr.Kaushik Mishra, Advocate; Mr.Zeyaul Haque, Advocate; Mr.Ankur Sood, Advocate

Date of Judgment: 27th July, 2010

Petition No. 220(C) of 2010

The original text of the judgment can be found at: http://bit.ly/aU0Z8r

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