Court holds defendants liable for unpaid GST despite plaintiff having paid full consideration; tax authorities' recovery proceedings unaffected by civil decree
In a significant commercial dispute involving the assignment of dubbing rights to the Telugu feature film "Saakshyam," the Madras High Court has directed the first and second defendants, M/s. Shri Abishek Pictures, to jointly and severally pay a sum of Rs.1,22,66,092 along with interest and costs to the plaintiff, M/s. SPM Arts LLP. The judgment, delivered on October 16, 2026, by Justice P.B. Balaji, underscores the contractual obligation of the defendants to bear the GST component payable under the Deed of Assignment dated February 5, 2018.
The plaintiff, a limited liability partnership engaged in the purchase and sale of copyrights including dubbing rights, had entered into an agreement to acquire sole and exclusive dubbing rights to the film "Saakshyam" in all Indian languages except Tamil, Telugu, Kannada, and Malayalam. The total consideration for this assignment was fixed at Rs.7.50 crores, inclusive of GST. The plaintiff paid the entire amount upfront, relying on the defendants' representation that they would remit the GST to the tax authorities.
However, the defendants failed to pay a GST component amounting to Rs.42,85,714 despite invoicing the plaintiff for the same and receiving the full consideration. This non-payment led to tax authorities issuing a show-cause notice and initiating recovery proceedings against the plaintiff as well. The plaintiff subsequently filed a commercial suit seeking recovery of the unpaid GST along with interest and penal interest from the defendants.
The court examined the evidence, including the Deed of Assignment, invoices, correspondence, and ledger accounts, and found that the contractual liability to pay GST rested squarely on the defendants. The plaintiff had fulfilled its contractual obligations by paying the full consideration and was entitled to recover the GST arrears and consequential liabilities caused by the defendants' default.
The court also clarified that the pendency of the GST appeal filed by the plaintiff against the tax authorities did not bar the civil recovery suit against the contracting parties. While the tax authorities (defendants 3 and 4) were impleaded during the arguments stage, the court held that a decree could not be passed against them in this suit, as the plaintiff had not amended the plaint's prayer accordingly. Hence, the relief was granted only against the first two defendants.
The defendants were ordered to pay Rs.1,22,66,092 along with interest at 24% per annum from the date of the plaint until the decree, and thereafter at 6% per annum until full realization. They were also directed to bear the costs of the suit, including those incurred by the tax authorities.
This judgment serves as an important precedent emphasizing the contractual allocation of GST liabilities in commercial agreements and the plaintiff's right to recover such dues from defendants even when tax authorities pursue recovery independently.
Bottom Line:
Commercial suit for recovery of GST component, interest and penal interest arising out of Deed of Assignment of dubbing rights - Where consideration under assignment was inclusive of GST and assignors had specifically undertaken to pay GST, plaintiff who had paid entire consideration was entitled to recover from defendants 1 and 2 the GST arrears and consequential liability fastened by tax authorities - Pendency of GST appeal does not bar civil recovery against contracting parties - Decree, however, could be passed only against defendants 1 and 2 and not against subsequently impleaded tax authorities.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Section 16(2), Section 50(3) of the Central Goods and Tax Rules, 2017
M/s SPM Arts LLP v. M/s. Shri Abishek Pictures (Madras) : Law Finder Doc Id # 3000820
