Court holds that co-production agreement grants joint intellectual property rights and mandates following contractual termination procedures, while directing disclosure of accounts and preservation of film revenues pending arbitration.
In a significant interim order dated October 5, 2026, the Bombay High Court, presided over by Justice Amit Borkar, partially allowed a petition filed by VVAA Films Private Limited seeking protection of its interests under a co-production agreement with DUNE Collective LLP relating to the Hindi feature film titled "SNAP".
The dispute arose when the Respondent, DUNE Collective LLP, unilaterally purported to terminate the co-production agreement by email demanding payment of Rs. 6.5 crores within 36 hours, threatening immediate termination if the demand was not met. VVAA Films, which had agreed to fund Rs. 15 crores in three tranches for production and publicity in exchange for 40% ownership of the film's intellectual property rights and net profits, contended that the second tranche was not payable as the conditions precedent were not met, and that the Respondent had failed to comply with reciprocal obligations including maintaining an escrow account and providing proper accounts.
The Court examined the terms of the co-production agreement dated April 3, 2026, which clearly granted the Petitioner a 40% share in the intellectual property rights and profits, jointly owned with the Respondent in perpetuity. It held that the agreement was not a mere financing contract but a partnership under which the Petitioner had a proprietary interest in the film requiring protection. Further, the Court emphasized that the contract was terminable only for cause and after a notice period of 30 days to cure any breach, rejecting the Respondent's attempt to shorten this to 36 hours.
Rejecting the Respondent's claim that the Petitioner's failure to pay subsequent tranches amounted to a breach justifying immediate termination, the Court observed that the Respondent's own communications showed outstanding invoices and incomplete conditions for releasing the second tranche. It found that the purported termination was not in accordance with the contractual termination procedure.
The Court granted interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, restraining the Respondent from creating any third-party rights or encumbrances in the film or its intellectual property rights that belong to the Petitioner's 40% share until the arbitral tribunal adjudicated the dispute. The Respondent was directed to preserve the film's revenues, make the escrow account operational, and disclose full details including bank statements, vouchers, and financial records relating to the Petitioner's investment.
However, the Court declined to grant a blanket injunction restraining the Respondent from acting on the termination email or ordering specific performance of the entire co-production agreement at this interim stage, noting that the relief must be limited to preserving the subject matter and protecting the parties' rights pending arbitration.
The Court further clarified that all observations were prima facie for the purposes of the interim petition and the arbitral tribunal would decide the merits based on pleadings and evidence.
The Petitioner is directed to initiate arbitration within 30 days, and the matter is now poised for detailed adjudication by the arbitral tribunal.
This judgment underscores the importance of adherence to agreed contractual termination procedures in joint intellectual property ventures and the courts' role in protecting proprietary interests and preventing unilateral actions that may prejudice arbitration outcomes.
Bottom Line:
Arbitration and Conciliation Act, 1996 Section 9 Co-production agreement for film - Where co-producer claimed 40% joint intellectual property rights in film and challenged unilateral termination by producer - Held, at interim stage, Court can protect subject matter of arbitration by restraining creation of third-party rights in film and directing disclosure of accounts - However, blanket relief of specific performance and injunction against acting on termination not granted - Contract terminable only for cause with cure period is not merely because of such clause "determinable in nature", but interim relief must remain confined to preservation of rights and subject matter.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 9; Specific Relief Act, 1963 Sections 14(d), 41(e)
VVAA Films Private Limited v. DUNE Collective LLP, (Bombay) : Law Finder Doc Id # 2990661
