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A three-member bench said the “balance of convenience” and “prima facie” case lies in favour of the Competition Commission of India (CCI), given concurrent findings in the DG Investigation report.
“Hence in the circumstances, we are of the considered opinion that the facts do not warrant the grant of stay of the impugned order,” said the National Company Law Appellate Tribunal (NCLAT).
Earlier on April 16, CCI had imposed a penalty of Rs 1.04 crore on UFO Moviez India and its subsidiary Scrabble Digital and Rs 1.66 crore on Qube Cinema Technologies for indulging in anti-competitive conduct.
The matter pertains to the tussle between theatre owners and companies like UFO Moviez and Qube, which supply digital cinema equipment for rent.
This was challenged by them before the NCLAT, which is an appellate tribunal for the orders passed by the CCI. The NCLAT directed them to deposit 25 per cent of the penalty amount imposed by CCI within two weeks.”We have already passed an order of deposit of 25 per cent of the penalty amount vide a separate order. Be deposited within two weeks,” the NCLAT said, adding that “the application for grant of interim stay is though dismissed but we grant four weeks time to file replies by the respondents and two weeks thereafter to file rejoinders”.Both petitions are scheduled for a hearing before the appellate tribunal on August 1.
CCI, in its order, said UFO Moviez and Qube imposed restrictions on the supply of content in their lease agreements with theatre owners, which created barriers for players engaged in the post-production processing services.
In addition, these companies blocked cinema theatre owners (CTOs) with digital cinema initiatives-compliant digital cinema equipment from being served by any other players.
Both companies have a market share of 34 per cent and 47 per cent, respectively, in DCI-Compliant DCEs (Digital Cinema Equipment) on lease to Cinema Theatre Owners (CTOs) in India.
Due to the advent of technology, the distribution of a cinematograph film to various CTOs has transitioned to digital distribution from distribution through cinematograph film rolls.
The digitally distributed cinematograph film can be played by CTOs only through a DCE, and only a digitised version is played.
The NCLAT also examined the lease, terms of the agreements and the report of Dthe G of CCI.
“We find both the DG’s report and the impugned order (of CCI) are in line with each other holding inter alia the restrictions imposed relating to content are applicable on the processes subsequent to the mastering process and though as per the agreement, contents of any third party can be run on DCE, but only subject to the payment of Rs 20,000 by the CTOs and also in case where the appellants are unable to provide content,” the tribunal said.
This clause does not give any choice to the CTOs to procure content from a third party.
Moreover, KDM (Key Delivery Message) generated by other PPP (post-production processing) service providers could not be played on the DCE supplied by the appellant on lease, owing to the imposition of restriction on the server; and such practices do not appear to occur internationally and that other competitors, the NCLAT observed.
“Lastly, the clauses of the agreement(s) make the CTOs refuse to deal with other film producers of a cinematograph film who have not got his cinematograph film’s PPP services done by OP2 (Scrabble Digital), hence violative of Section 3(4)(d) of the Act,” the NCLAT said.
