- (1.) THIS is a reference by the Chief Controlling Revenue Authority, Madras, under s. 57 of the Indian Stamp Act, 1899, for our opinion whether the instrument in question is a mortgage with possession coming under Art. 40 (a) of Schedule I of the Indian Stamp Act or an agreement.
(2.) THE instrument styled as an agreement, is the record of a transaction common in the film trade, whereby the film producer granting distribution rights in specified territories to the financier termed, the distributor. The instrument secures to the distributor the realisation of his advance by covenants giving him specified rights over the film. It generally specifies the title of the film and also names of prominent artistes, featuring or expected to feature in the film. The instrument in question under consideration has been entered into by Messrs. Sudarsanam pictures, Film Producers, with Messrs. Gee Pictures (P.), Ltd. , film distributors, in respect of a Tamil talkie entitled "aval Yar". the document provides for the advance of a sum of Rs. 50,000, by the distributors to the producers, the amount to be paid in four instalments, the final instalment,, a sum of Rs. 20,000, being payable against delivery of the prints, that is, positive prints for exhibition. The producers grant to the distributors the exclusive rights of exhibition, distribution and exploitation of the picture in specified territories for a period of five years. Mutual covenants are found for the protection of the respective interests of the producer and the distributor. There is provision for the distributor having commission on the realisations from the exhibition of the film. The operative part of the instrument, material for our purpose, is found in the following clauses:-- "the producers hereby grant the distributors the exclusive rights of exhibition, distribution and exploitation of the said picture for the area referred to hereinabove for a period of five (5) years from the date of its first release in the said area. The producers shall deliver to the distributors three positive prints of the said picture for distribution, with three sets of photo cards, three sets of enlargements, three sets of slides and other lean publication. The producers shall, subject to availability of raw stock prepare and supply to the distributors as many extra prints as the distributors may require for which the distributors shall advance to the producers the necessary amounts towards the cost of the prints and debit the amount to the account of the producers. . . . . . . . . . . . . . . . The distributors shall have the first and paramount charge on the nett realisations. The distributors shall be entitled in the first instance to appropriate themselves the commission due to them from the realisations. The balance of the net realisations shall thereafter be appropriated towards the recovery of all advances made by the distributors. When all the advances and payments made by the distributors shall have been recovered as aforesaid, the distributors shall every month remit the net realisations less their commission on or before the 15th of the succeeding month. The distributors shall have the first charge over the distribution, exhibition and exploitation right of the said picture for the said distribution area, the realisations therefrom and of the copies of the picture supplied hereunder until the amount due to the distributors is fully discharged. . . . . . On the expiration of the period of distribution the distributors shall return to the producers all the prints of the said picture along with the lean publicities in the then existing conditions. If, within one year from the date of the first release of the said picture, the amounts advanced by the distributors are not fully collected, the producers shall be entitled to repay to the distributors the amounts standing to their credit. " This document is signed by the producers and the distributors. It bears stamp as an agreement and is not attested.
(3.) THE learned Additional Government Pleader appearing for the Chief Controlling revenue Authority, contends that the instrument is a mortgage, and a mortgage with possession in fact falling under Art. 40 (a) of the Stamp Act. He stresses on to covenant in the Stamp Act. He stresses on the covenant in the instrument providing for delivery of positive prints of the picture to the distributors and the covenant that the distributors shall have the first charge over the prints and the distribution, exhibition and exploitation rights of the picture in the specified territory till the amount due to the distributors is fully discharged. Reliance is placed on the assurance in the instrument that the distributors shall have a first and paramount charge on the net realisations from the picture. Mr. R. Janardhana rao, appearing amicus curiae for the respondent emphasises that at the time when the instrument was executed, the picture was still under production, the positive prints were yet to be taken after the completion of the picture and there was than no property in existence for any transfer to operate thereon. It is pointed out that before positive prints are got ready and given to the distributor for exhibition, several stages have to be passed through, the negatives have to be completed and the picture would have to pass through the Board of Censors. The picture may come through as proposed and planned or there may be variations. Till the picture is completed and ready for exhibition, the property over which mortgage rights could be claimed would be non-existent. It may be that the distributor could enforce the contract and secure the prints if they should come into existence, but that would not make the instrument at its execution a mortgage deed.;