The story of the litigation leading up to the ‘Special Resolution’ which curbed the rights of authors and composers

This is the story of how the big music companies tried every trick in the book to keep postponing IPRS’s Annual General Meeting for 4 years after which they finally managed to amend the bye-laws of IPRS, in January 2008, in such a manner that they were in complete control of IPRS after ensuring that composers and lyricists would always be in a minority on the Board of Directors.

(i) The strategy to cancel the AGMs in 2004, 05 & 06: The Annual Reports of IPRS mention how one of its biggest members, Saregama kept suing IPRS in order to prevent it from holding its Annual General Meeting (AGM). As per the Annual Reports, one suit each filed in the years 2004, 2005 & 2006. (Click here for more details on these cases). Saregama sued on different grounds in each year. Although we don’t have the Order in 2004, we have the other two orders of the Civil Judge (Senior Division):

(i) Saregama India Ltd. v. IPRS; Title Suit No. 10 of 2005 before Shri. H.S. Ghosh Hazra, Civil Judge (Senior Division) Barasat , North 24 Parganas, West Bengal dated 22.9.2005; (available over here)

(ii) Saregama India Ltd. v. IPRS; Title Suit No. 124 of 2006 before Shri. H.S. Ghosh Hazra, Civil Judge (Senior Division) Barasat , North 24 Parganas, West Bengal dated 22.9.2005; (available over here)

Saregama had filed both suits on the grounds that as per the 1993 MoU, IPRS had recognized that Saregama was the owner of several literary and musical works and that as per the MoU and the Copyright Act, IPRS is required to amend its AoA in order to ensure that only the owners were members of IPRS and not authors and that only owners could vote at Annual General Meetings (AGM). After perusing the record which included correspondence with IPRS, the Court granted injunctions against the holding of the AGMs in both suits. The suit in 2004 was filed on the same ground, as per the Director’s Report. As a result of these three suits IPRS had to cancel its AGM for all three years. At this point I’m not sure whether they were postponed or cancelled but I’m guessing they were cancelled. The reason for this uncertainty is that the Court passed a very limited order i.e. for a period of only 10 days, in which time-period, notice was to be served and IPRS was to defend itself. What benefit then did Saregama get from this postponement of the AGM? Did IPRS construe this as an order to cancel the AGM? We would have of course had much better answers if the Copyright Office had co-operated in providing us with copies of the Annual Reports under the RTI Act.

(ii) Did the Civil Judge (Senior Division) have the jurisdiction to hear the suits?
As discussed in an earlier post a Civil Judge (Senior Division) does not have the jurisdiction to entertain petitions in regards company matters. The errors in the order of the Civil Judge are simply glaring:

(a) Such petitions pertaining to the Companies Act can be entertained only by Company Law Boards (CLB). Besides there is an explicit Section 10 provision in the Companies Act which states that only High Courts and District Courts can exercise jurisdiction in a few situations under the Companies Act.

(b) Saregama filed the suit as a ‘Title Suit’. That is simply ridiculous – a ‘Title Suit’ is filed to establish title over land or other property, how can you ask for an injunction against a AGM on the basis of a Title Suit?

(c) Even for a minute presuming that the Civil Judge was authorized under the law to hear the matter, how did he establish territorial jurisdiction under Section 20 of the Code of Civil Procedure? IPRS’s registered office is in Mumbai, any action again an AGM of the company has to be filed in Mumbai. The Civil Judge however was located in West Bengal i.e. literally the other side of the country!

(iii) The strategy in 2007 to postpone the AGM: Interestingly in 2007, for reasons not clear, Saregama did not approach the Barasat Court. Instead on 23rd August 2007, a Board Resolution authorized by Directors Kumar Taurani & Gulshan Bawra, during the 176th Meeting of the Governing Council of IPRS, recommended to the Company that an application be made to the Registrar of Companies seeking an extension in time for holding the AGM for the financial year 2006-07. The resolution does not specify the reasons as to why the AGM was delayed. (The full text of the resolution is available over here) On 28th September, 2007, the Registrar of Companies granted permission for postponing the AGM on the grounds that the application filed by the company had claimed that there was litigation pending in the High Court because of which the AGM could not be held and therefore an extension was granted till the 31st of December, 2007. (The full text of the RoC granting extension is available over here).

(iv) Was wrong information submitted to the Registrar of Companies (RoC)?

The Annual Reports of IPRS are silent on any High Court restraining it from conducting an AGM. It discusses litigation before Civil Courts and even the Company Law Board but is silent on any litigation before the High Courts. Moreover why is the Board Resolution authorizing the Company to seek an extension silent on this pending case before the High Court? Surely IPRS would not have submitted a false statement to the Registrar because Section 628 of the Companies Act punishes false statements to the RoC with a prison term extending to two years apart from a fine. Only an inspection of the RoC file at Mumbai will shed light on the truth because obviously some documents have not been loaded onto the website.

(v) Was Saregama acting alone or in concert with other companies such as Tips & Universal?

It is interesting to note that while Saregama had reposed its faith before the Civil Judge (Senior Division), Barasat, other music companies on IPRS such as Tips, Universal Music India Ltd & Sony BMG Music Entertainment (India) Ltd. moved the Company Law Board on the grounds that IPRS was being mismanaged and that they were being oppressed! As per the Annual Reports of IPRS no orders were passed by the CLB restraining them from conducting a AGM.

Conclusion: On the 5th of January, 2008 i.e. 5 days after the extension granted by the RoC, expired, IPRS amended its entire membership criteria to fulfil the long pending request of music companies that only owners be made members with voting rights and who are also eligible to be elected on to the Board of Directors. (The full text of the board resolution is available over here.) For a Special Resolution which was attempting to throw out lyricists and composers from the company it was extremely brief. Finally after 4 years of stalling AGMs the music companies managed to amend IPRS’s AoA in a manner which ensured that IPRS belonged to them. I highly doubt the legality of the new AoA given the manner in which it was passed.

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