Delhi HC rules on profit sharing, release of film 'Amar Singh Chamkila'

New Delhi, April 10: The Delhi High Court, ruling on the profit sharing and release of the film "Amar Singh Chamkila'', produced by Reliance Entertainment Studios and streaming on Netflix, directed the former to allocate 50 per cent of the film's profits to T-Series, among other measures.

Justice Sanjeev Narula’s decision, on a plea filed by Super Cassettes Industries Private Ltd (SCIPL) or T-Series, came after Reliance Entertainment Studios offered to share 50 per cent of the profits generated by the film with T-Series, in accordance with agreements between the two companies.

"This commitment (by Reliance) includes the deposit of (a) a fixed commission of 2 per cent from the licensing fee, to be deducted from the final tranche Reliance receives from Netflix, and (b) 50 per cent of the profits generated by the film 'Amar Singh Chamkila'," the court noted.

Despite objections from T-Series seeking a broader injunction against Reliance's future film releases due to outstanding debts, the court opted for a more nuanced approach.

In its observations, the court stressed the complexity of distinguishing between gross revenues and net profits, particularly in the context of film production and distribution agreements, and concluded that T-Series' claim over revenues from the Netflix agreement should be enforceable over the net profits earned by Reliance, rather than the gross revenues.

"Given the complexities inherent in distinguishing between gross revenues and direct profits accruing to Reliance, the Court finds that SCIPL’s lien or charge, under the current circumstances pertaining to the film in question, is more appropriately enforceable over the net profits of Reliance, rather than the gross revenues," it said.

Acknowledging the equitable considerations at play, the court directed Reliance to honour its commitments, including a fixed commission from the licensing fee and 50 per cent of the profits from "Amar Singh Chamkila" as it highlighted the need to balance the interests of all parties involved and ensure compliance with contractual and legal frameworks governing their relationships.

"These measures reflect an equitable approach to reconciling the interests of all parties involved and ensuring compliance with the contractual and legal frameworks governing the relationships between SCIPL, Reliance, Netflix and WSF," the court observed.

"The above undertaking is accepted and shall bind the Defendant (Reliance), who shall deposit the aforesaid amounts with the Registrar General of this Court as and when the same is received by them."

Super Cassettes Industries Private Ltd had, for the second time, filed the application seeking to prevent Reliance Entertainment Studios Private Ltd from releasing, exhibiting, and broadcasting cinematographic films. It alleged non-compliance by Reliance with a prior undertaking given to this court, suggesting that Reliance is proceeding with the release of new films, despite a commitment to the contrary.

SCIPL claimed a lien and charge on the revenues generated by these films, asserting a consequential right to seek an injunction emanating from the Loan Agreement.