INDIAN PERFORMING RIGHT SOCIETY LTD. v.

EASTERN INDIA MOTION PICTURES ASSOCIATION

March 14, 1977

[V. R. KRISHNA }YER AND JASWANT SINGH, JJ.)

Copy Right Act (Act 14 of 1957), 1957-Whether in view of the provisions of the Copy Right Act 1957 an existinJ? and future rights of nHtsic . ... c(imposer, lyricist is capable of assignment under s. 18 when he grants a licence or permission uls. 30 to an author (owner) of a cine1natograph film for its incorporation in the ound track of a cinen1atocraph film-Whetht!r the producer of a cinematograph film can defeat the same by engaging i;1 the ~ame person: Scope of ss. 2(d), (f), (j), (m), (p), (q), (r), (v), (y), 13, 14, 17, 18, 19, 22, 26, 30 and 34 of the Act.

The appellant society was incorporated in terms of section 2(r) of the Copyright Act, 1957 (Act 14 of 1957), in tho State of Maharashtra on August 23, 1969 as a company limited by guarantee for the purpose of carrying on business in India of issuing or granting licences for performance in public of aH existing and: futar-e Indian musical works in which copyright within the meaning of s. 13 subsists i_n India. The appellant company has amongst its members the composers of musical works, authors of literary and dramatic works and artistes. In accordance with the provisions of section 3 3 of the Copyright Act, the appellant published on September 27, 1969 and November 29, 1969 in the "Statesman" and the Gazette of India respectively a tariff laying down the fee:-s, charges and royalties that it proposed to collect for the

grant of licences for perlormance in public of works in respect of which it claimed to be an assignee of copyrights and to have authority to grant the aforesaid licences. A number of persons including various associations of producers of cinematograph films including the sound track thereof and the Cinematograph Exhibitors Association of Iitdia filed objections in respect of the tariff before the Copyright Board in accordance with the provisions of section 34 of the Act, repudiating the rights of the appellant. The Copyright Board held : ( 1) In the absence of proof to the contrary, the composers of lyrics and tnusic retained the copyright in their musical works incorporated in the sound track of cinematograph films provided such lyrical and rriuskal works were printed or written and that they could assign the performing right -in public to the appellant.

(2) The tariff as published by the appellant was reasonable.

(3) The appellant had the right to grant licences for the public performance of music in the sound track of copyrighted Indian cinematograph films and (4) It could collect fees, royalties and charges .in respect of those films w.e.f. the date on which the tariff was published in the Gazette of India.

The High Court a1Jowed the appeal preferred by the respondents under s. 72 of the Act and held: (i) Unle-ss there is a contract to the contrary, a composer who composes lyric or music for the first time forvaluable consideration for a cinematograph film does not acquire any copyright either in respect of film or its sound track which he is capable of assigning. (ii) Under proviso (b} to section i 7 of the Act, the owner of the film at v.hose instance the composition is made becomes the first owner of the copyright in the composition. (iii) The composer can claim a copyright in his work only if there is an express agreement between him and the owner of the cinematograph film reserving his copyright.

(iv) Though section 18 of the Act confers power to make a contract of assignment, the power can be exercised only when there is an existing or future right to be assigned and that in the circumstances of the present case, assignment, if any, of the copyright in any future work is of no effect.

In appeal by certificate to this Court, the appellant contended (I) The author (composer) of a literary or musical work has copyright which includes. inter a/ia, the exclusive right (a) to perfor1n the work in public and

I.P.R. SOCIETY v. E.I.M. PICTURE (Jaswant Singh, J.) 207

(b) to make any cinematograph film or a record in respect of the work.

(2) That copyright iin a literary or musical work is infringed by any person if 'vithout a licence granted to him by the owner of the copyright, he makes a .cinematog; raph film in respect of the work or perlorm the work in public by

xhibiting the cinematograph film.

(3) If a person desires to exhibit in public a cinematograph film containing a musical work, he has to take the permission not only of the owner of the copyright in the cinen1atograph _film but also the permissi_on of the owner of the copyright in the literary or musical \York which is incorporated in the cinematograph film, as according to s. 13(4) B of the Act, the copyright in a cinematograph film or a record does not effect :the separate copyright in any work in respct of which or a substantial part of which the film or as the case may be1~ the record is made ( 4). fhe provi- :sions of section J 7 (b) of "the Act have no application to a literary or musical work or the separate copyright therein and do not take away the copyright in a literary or musical work embodied in a cinematograph film. (5) The only modes in which the author of a literary work or musical work ceases to be the owner of copyright in the work are (a) by assigning under s. 18 (b) by relinquishment under s. 21 and ( c) by the con1poser con1posing the work C in the course of his employment under a contract of service v.ith an employer in which c_ase the employer becomes the o\vner of the copyright in the _musical work. (~J In the case of an assignment of copyright in future work and the employment of the author to produce a work under a contract of service, the questi_on of priorities will be decidedaccording to the principles "where equities 3-re equal, the first in time shall prevail". The respondent's Contentions were (i) lJnless a music is notationally written, printed or graphically reproduced it is not a musical work within the meaning of Copyright Act .and there is no copyright in songs -0r orchestral pieces sung or played directly D without its notation being written.

(ii) Since a "cinematograph film" is defined in section 2(f) of the Act as including the sound track and the "cinematograph" is required to be construed to include any work produced by any process analogous to cinematography the owner of the cinematograph film is the first owner of the copyright therein including the right of the composer of the literary or musical work incorporated in the sound track of the film. (iii) Jn the case of tb'e film in which a lyric (which literally means a short poem directly expressing the poet's own thoughts and sentin1ents in instances falling \Vithin the purview of the expression "literary wo:rk" as defined in section 2(o) E .of the Act) has been plagiarised, there wil1be copyright in the film vesting in the nroducer.

(iv) The Act confers a separate copyright of a cinemato- -graph film s a film, its author under s. 2(d) (v) of the Act being the owner of the film at th~ tin1e of its completion.

(v) Jn the case of a lyric or music incorporated under the sound track of a cinematograph film, since in section 2(f) of the Act cinematograph film includes its sound track and section 13 (1) (b) of the Act confers copyright on the cinematograph film and section 14(c) (ii) of the Act confers on the owner of copyright the right to cause the F film in so far as it consists of visual images to be seen in public and in so far as it consists of songs to be heard in public, it is not necessary for the owner of the cinematograph film to secure the permission of the composer of the lvric or of the music incorporated in the sound track of a cinematograph film for exhibiting or causing the exhibition of the sound portion of the film in

public or for causing the records of the sound track of the film to be heard in rublic. (.vii) It is not correct to say that under s. 17 proviso (b) in order that the producer of the cinematograph film should have copyright in the literary or musical work incorporated in iti the making of the entire film should be con1- G missioned.

Section 17 (b) will equally apply if someone is comrnissioned to make any component part of a cinematograph film such as a lyric or musical ·\vork i.e. when such 1::omponent of the film is made at the instance of a film producer for valuable consideration, the copyright for such component shall as well vest in the producer.

(viii) As the Act confers a separate copyrip:ht on a cinematograph film as a film the producer can exercise both the rights conferre<l on him under s. !41(c)(ii) of the Act and all that section 13(4) of the Act (when applicable) provides is that the rights created by section J4(1)(a) H -and (b) shall co-exist with thooe created by section 14 ( !) ( c) and ( d) of the Act.

Dismissing the appeal the Court,

HEID : (Per Krishna Iyer, J. concurring)

( 1) Copyright in a cinema film exists in law hut section 13 ( 4) of the Act: preserves the sep_arate survival in its individuality of a copyright enjoyed by any work notwithstanding its confluence in the film.

Thispersistence of the aesthetic personality of the intellectual property cannot cut down the Copyright of the film qua film.

The exclusive right, otherwise, called copyright, in the case of a musical work extends to all the sub rights spelt out in section 14(1) (a).

A harn1onious construction of s. 14, which is the integral yoga of copyright sh9ws that the artiste enjoys his copyright in the musical _work; the film1 producer is the masbr of his combination of artistic pieces and the two calli happily co-exi&t and need not conflict. [223 A-CJ

(2) The boundaries of composite creations of art whic; h are at once individual and collecJive may be viewed from different angles. In a cosmic perspective, a thing of beauty has no boundary and is humanity's prop1!rty but in the materialist plane on \Vhich artistes thrive private and exclusive estate in r .. rt subsists. 1'he enigmatic sma1e of Mona Lisa is the timeless heritage of mankind, but, till liberated by the prescribed pasagc of time"- the private copyright of the human maker says, "hands off'. [223 F-G]

(3) The film producer has the sole right to exercise \vhat is his entitlement under section 14-(1) (c) qua film.

But, he t'annot trench on the composer's copyright which he does only if the 'music' is perforn1ed OJ produced or reproduced separately, in violation of section 14(1) (a). A film may be caused to be exhibited as a film but the pieces of music cannot be picked out of the sound track and played ill the cinema or the theatre.

To do that is the privilege of the composer and that right of his is not drowned in the film copyright except where there is spcial provision such as section 17, _proviso (c).

Beyond exhibiting the filn1 as a cinema sho\V if the produce:r plays the songs separately to attract an audience or for other reasons he infringes the con1poser's copyright, the copyright of the composer or the Performing Acts Society comes into play, if a music is played, \vhether in n restaurant or aeroplane or radio station or cinema theatre. [223 C-E]

( 4) Section 14 has in its careful arrangement of the right belonging t<> each copyright has a Certain melody and harmony to music which is to loose the sense of the same.

Our copyright statute protects the composite e-inematograph \vork produced by lay out of heavy nloney and many talents but does not extinguish the copyrightable component parts in toto. The n1usic which has merged through the sound track, into the nlotion picture is copyright by the producer but, on account of this monopoly, the music con1poser's copyright does not perish. The twin rights can co-exist each fulfiling itself in its delectable distinctiveness. r224 A-B1

Observation :

Apart from the music composed, the singer must be conferred a right Copyrighted music is not the soulful tune, t11e superb singing, the glorious.- voice or the wonderful rendering.

It is the melody or harmony reduced to print writing or graphic form of musical works. Author as defined in s.2(d) in relation to a musical work is only the compcger and section 16 confines copyright to those works which are recognised by the Act., which means the cotnposer alone has Copyright in a musical 'vork and the singer has none.

This disentitlement of the musician or group of musical artistes to copyright is

un-Jndian because the major attraction which lends monetary val1:1e to a musical performance is not the music maker so much as the musician. Perhaps both desrve to be recognised by the copyright lw, because art _in on_e sense depends on the ethos and the aesthetic best of a people and Vv'h1le universal protection of iiltellectual and aesthetic property of creators of "works'~ is an international obligation eaCh countrv in its la'v must protect such rights 'vherever originally is contributed. [224 E-H]

H Per Jas1;,.•c.11t Singh J.

( 1) The existing and future right of music ........ composer and lyrics in their respective works as defined in the. Act 'is capable of assigriment subject to the conditions mentioned in section 18. of the Act as also in section

19 of the Act which requires an assignment to be in writing, signed by the assigner or by his duly authorised agent. [215 D-E]

(2) The interpretation of clause (f) of section 2 \Vhich is n'ot exhaustive leaves no room fn_r doubt when read in conjuncrion with section 14(1)(c)(iii) that the term cinematograph film includes a sound tn!ck atlociated \Vith the film. [220 DJ

(3) A harmonious and rational instead of mechanical construction of s 34, :g s. 14(1)(a)(iii) ands. 14(1)(c)(ii) will be:

(A) Once the author of a lyric or a musical work parts v1ith a portion of bis copyright by authorising a film producer to make a cinematograph film in res pect of his work and thereby to have his work incorporated or recorded in sound'. track of a cinematograph film, the latter acquires by virtue of section 14(1)(c) of the Act on completion of the cinematograph film a copyright which gives him the exclusive right, inter afia, Of performing the work in public that is, to c cause the film in so far as it consists of visual images to be seen in public and in so tar o.s il consists of the acoustic portion including a lyric or a musical \\'Ork to be heard in public without securing any further prmis'5ion of the author (i!omposer) of the lyric or a musical work for the pzrfonnance of the work in public. A distinct copyright in the aforesaid circu111stances co1nes to vest in the cinematograph film as a \\'hole which relates both to copying the filn1

anJ to its performance in public.

(B) If an author (composer) of a lyric or a musical work authorises a Di cinematograph film producer to make a cinematograph film of his composition by recording it on the sound track or a cinematograph film, he cannot con1plain of the infringement of hiS copyright if the author (owner) of the cinc1n1.tograph film causes the lyric or the musical work recorded on the sound track of the film to be heard in public and nothing contained in section 13(4) of the ._'\ct can operate to affect the rights acquired by the author ( own.:.!r) of the film by virtue of section 14(1)(c) of the Act.

(C) The composer of a lyric or musical work retains the right of perforn1- E ing it in public for profit otherwise than as a part of cinematograph film and he cannot b; restrained from doing so.

In other words, the author (con1poser) of a lyric or musical v;1ork who has authorised a cin-:matograph film producer to make a cinmatograph film of his work and thereby permitted him to appropriate his work by incorporating or recording it on the sound track of a cine1natograph film cannot restrain the author (owner) of the film from causing the acoustic portion of the film to be performed or projected or screened in public for profit or from making any record embodying the recording in any part of F the sound truck associated with the film by utilising such sound jrack or from co1n1nunica1ing or authorising the comn1unicatiOn of the film by fadio diffusion, as section 14 ( 1) (c) of the Act expressly permits the owner of the copyri£"ht of a cinematograph film to do all these things. In such cases rhe author (owner) of the cjnematograph film cannot be said to -.vrongfu1ly appropriate anything which belongs to the composer of the lyric or musical work.

Any other construction would not only render the express provisions of clause (f), (m), (y) of section 2, section 13(1)fbJ and seclion 14(l)(c) of the Act otiose but v.ould also defeat the intention of the legislature which in view of the growing importance of the cinematograph film as a powerful rnedia of expression and the highly complex, technical and scientific process and heavy capital outlay involved in its production has sought to recognise as a separate entity and to treat a record embodying the recording in any part of the sound track a'sociated \vith the film by utilising such sound track ns sonu!thing distinct from a record as ordinarily understood. [220 G-H; 221 AGl

(4)Clauses (d), (v), (f), (rn), (v) and (y) of section 2. section 13(1) and 14(1)\C), provisos (b) and (c) to section 17 and section 22 and 26 of the Act abundantly n1ake it clear that protectable copyright (comprising a bundle of exclusive rights mentioned in section 14(1)(c) of the Act comes tQ

vest i!1 a cineatograph fili; n on its. completion which is said to t<lke place \Vhen the visual portion and audible portion are synchronized. [221 H; 222 .A]

(_5) Th~ rigts of music ........ composer or lyricist can be defeated by the . producer ot a cmematograph film in the manner laid down in proviso {b) Dnd

(c) of section 1! of the Act. Jn both the cases falling under clauses (b) and

(~) of s. 17, a c1nematograph film producer becomes the first ov.•ncr of the copynght and no copyright subsists in the composer of the lyric or n1usic so compoed unless. there is a contract to the contrary between the composer of the Iync or music on one hand and the producer of the cinematograph filn1 on the other. [222 D-FJ

Wallerstein v. Herbert (1867) Vol. 16, Law Times Reports 453, quoted \vith approval.

CIVIL A.PPELLATE JURISDICTION: Civil Appeal No. 967 of 1975. (From the judgment and order dated 13-2-1974 of the Calcutta High Court iu Copyrigtht No. 2/73).

A. K. Sen, E. P. Skons James, J. I. Mehta, J. Roy Choudhary, S. K.

Mehta, K. R: Nagaraja and P. N. Puri, for the appellant.

S. Chaudhury, R. K. Bachawat, D. K. Sinha, H. S. Parihar and I. N. Shroff, for respondents 1-5 and 12 and 22.

J. C. Bhat, Atul Munim and B. R. Agarwala, for respondents 6-K

B. Sen, B. K. Bachawat, D. K. Sinha, H. S. Parihar and l. N.

Shroff, for respondents 12 and 22.

J. L. Nain, Atul Munim and B. R. Agarwala, for respondent E No. 19.

The Judgment of the Court was delivered by Jaswant Singh, J., V. R. Krishna Iyer, J. also gave a separate opinion.

JASWANT SINGH, J.

This appeal by certificate granted under Article 133(1) of the Constitution by the High Court of Judicature at Calcutta which is directed against its judgment dated February 13, 1974, raise~ the following substantial question of law of general importance:-

"Whether in view of the provisions of the Copyright Act, 1957, an existing and future rights of music ...... composer, lyricist is capable of assignment and whether the proucer ot a cinematograph film can defeat the same by engaging the same person."

The facts giving rise to the appeal are : The Indian Perfoming Right Society Ltd. (hereinafter referred to for the sake of brevity as 'the IPRS') the appellant before us, was incorporated in the State of

Maharashtr~ on August 23, 1959, as a company limited by guarantee, for the purpose of carrying on business in India of issuing or grant!ng licences for performa'!-ce in puJ;>lic of al! exsting and futue Indian Musical works in which copynght suJ;>s1sts m India.

The ncorpora tion of the JPRS was in terms of sectton 2(r) of the Copyngbt Act,

I.P.R. SOCIETY v. E.I.M. PICTURE (Jaswant Singh, !.) 2 u

1957 (Act 14 of 1957) (hereinafter referred to as 'the Act') which A was enacted after taking into consideration the Report of the (British) Copyright Committee, 1952, the suggestions of the various Ministries of the Government of India and the State Governments, the Indian Universities and certain interested industries and associations who were invited to send their comments on the subjects of copyright. The IPRS

has amongst its members the composers of musical works, authors of Be literary and dramatic works and artists.

In accordance with the provisions of section 33 of the Act, the IPRS published on September 27, 1?69 and November 29, 1969 in the 'Statesman' and the Gazette of India respectively a tariff laying down the fees, charges and royalties that it propos<•d to collect for the grant of licences for performance in public of works in respect of which it claimed to be an assignee of copyrights and to have authority to grant the aforesaid licences.

A C number of persons including various associations of producers of cinematograph films who claimed to be the owners of such films including the sound track thereof and the Cinematograph Exhibitors Association of India filed objections in respect of the aforesaid tariff in accordance with the provisions of section 34 of the Act repudiating the claim of the IPRS that it had on behalf of its members authority to grant licences for performance in public of all existing and future musical D works which are incorporated in the sound track of cinematograph films in which copyright may subsist in India or the right to collect in relation thereto any fees, charges. or royalties.

The association of producers averred •inter alia that their members engaged composers and sound writers under contracts of service for composing songs to be utilised in their films; that the musical works prepared by the composers of lyric and music under contract of service with their members- E. producers of the cinematograph films-having been utilised and incorporated in the sound. track of the cinematograph films produced by the latter, all the rights which subsisted in the composers and their works including the right to perform them in public became the property of the producers of the cinematograph films and no copyright subsisted in the composers which they could assign to and become the basis of the claim of the IPRS under section 33 of the Act; that their members F. i.e. the producers of cinematograph films being the authors and first owners of the copyright in the cinematograph films produced by them had the exclusive right inter alia to cause the said films in so far as the same consisted of sounds (which include musical works) to be heard in public as also the exclusive right to make records embodying the sound track of the films produced by them (including any musical work incorporated therein) and to cause the said records to be heard G, in public; that in the making of a cinematograph film as contemplated by the Act a composer composes a lyric or music under a contract of service or for valuable consideration which is substantial a music director sets it to tunes and imparts music to it and a singer sings the same but none of them nor any one of their aforesaid works can and have any separate copyrights; that motion picture is the combination of all arts and music in the sound track which cannot be detached from the H. film itself; that the purpose of making a motion picture is not only to complete it but also to publicly exhibit it throughout the world; that having regard to the provisions of the Act the copyright in the case of

a cinematograph film vests in the owner of the film as defined in section 2(d) (v) of the Act; and that in the premises any assignment purportmg to have been made m favour of the IPRS was void and of no effect and was incapable of conferring any rights whatsoever in sucil musical works on the IPRS.

. The Cinematograph Exhibitors Association of India also filed objections challengmg the nght of the IPRS to charge fees and royalties in respect of performance in public of the musical works incorporated in the sound track of the films.

Besides raising contentions identical to those raised by various associations of producers they averred that copy. right in a cinematograph film which vested in the producers meant copyright in the entirety of the film as an integrated unit including the musical work incorporated in the sound track of the film and the right to perform the work in public; that in accordance with the agreement with the distribucors of films the exhibition of cinematograph film includes t.he right to play in publ; c the music which is an integral part and parcel of the film; that the producers lease out copyrights of public performance of the films vested in them to the distributors who give those rights to the exhibitors under an agreement and that when "n exhibitor takes a licence for exhibition, it is complete in all respects and a third party like the IPRS cannot claim any licence fee from the exhibitors.

On the aforesaid objections being referred to it for ddermination under section 35 of the Act, the Copyright Board expressed the view that in the absence of proof to the contrary, the composers of lyrics and music retained the copyright in their musical works incorporated in the sound track of cinematograph films provided such lyrical and musical works were printed or written and that they could assign the performing right in pnblic to the IPRS. The Copyright Board further held that the tariff as published by the IPRS was reasonable and the IPRS had the right to grant licences for the public performance of music in the sound track of copyrighted Indian cinematograph films and it could collect fees, royalties and charges in respect of those films with effect from the date on which the tariff was published in the Gazette of !Maia.

Aggrieved by the decision of the Copyright Board, the objectors preferred an appeal under section 72 of the Act to the High Court which allowed the same holding that unless there is a contract to the contrary, a composer who composes a lyric or music for the first time for valnable consideration for a cinematograph film does not acquire an} copyright eit'her in respect of film or its sound track which he is capable of assigning and that under proviso (b) to section 17 of the Act the owner of the film at whose instance, the composition is made, becmes the first owner of the copyright in the composition.

The High Court further held that "the composer can claim a copyright in his work only if there is an express agreement between him and the owner of the cinematograph film reserving his copyright".

The High Court also held that "though section 18 of the Act confers power to make a contract of assignment, the power can be exercised only when

there is an existing or future right to be assigned and that in the cir- A cumstances of the present case, assignment, if any, of the copyright in any future work is of no effect".

Dissatisfied with this decision, the lPRS has, as already stated, come up in appeal to this Court.

The copyright law in. our country being fairly complicated because of the involved language in which some of its provisions are couched and the case being of first impression, learned counsel for the parties have tried hard to help us in solving the knotty points by advancing copious and able arguments. Appear; ng on behalf of the appellant, Mr. Ashok Sen has urged that the author (composer) of a literary or musical work has copyright which includes inter alia the exclusive right (a) to perform the work in public and (b) to make any cinematograph film or a record in respect of the work; that copyright in a literary or musical work is infringed by any person if without a licence granted .to him by the owner of the copyright, he makes a .cinematograph film in respect of the work or performs the work in public by cxhibiting the cinematograph filll); that if a person desires to exhibit in public a cinematograph film containing a musical work, he has to take the permission not only of the owner of the copyright in the cinematograph film but also the permission of the owner of the copyright in the literary or musical work which is incorporated in the cinematograph film, as according to section 13 ( 4) of the Act, the copyright in a cinematograph film or a record does not affect the separate copyright in any work in respect of which or a substantial part of which, the film, or as the case may be, the record is made; that the provisions of section 17 (b) of the Act have no application to a literary or musical work or the separate copyright therein and do not take away the copyright in a literary or musical work embodied in a cinematograph film; that the only modes in which the author of a literary or musical work ceases to be the owner of copyright in the work are (a) liy assignment,

(b) by relinquishment and (c) by the composer composing the work in the course of his employment under a contract of service with "n employer in which case, the employer becomes the owner of the copyright in the musical work; that in the case of an assignment of copyright in future work and the employment of the author to produce a work under a contract of service, the question of priorities will be , decided according to the principle "where equities are equal, the first

fo time shall prevail".

Mr. Sachin Chaudhary, learned counsel for respondents 1, 2 and 3, as well as Mr. J. C. Bhat, learned counsel for respondents 6, 7 and 8, and Mr. J. L. Nain, learned counsel for respondent 19, who followed Mr. Chaudhary have on the other hand submitted that the dispute in the instant case, according to the petition of appeal, the judgment of the Copyright Board and the judgment of the Calcutta High Court is confined to the sound track associated with a cinematograph film (which expression, according to Copinger and Skone James on COPYRIGHT,

means "any record of sounds which is incorporated in any print, negative, tape or other. article ?n which the film i:r prt. of it, in so far as it consists of visual images, 1s recorded, or which IS issued by the maker

of the film for use in conjunction with such an article"); that the contention .advanced m behalf of t.he appellant that copyrigh~ in a literary or musical work mcorporated m the sound track of a cmematograph film vests in the composer of literary or musical work and when the cinematograph film is performed i.e. exhibited in public, the composer is entitled to fee or royalty in that behalf and since the appellant is the assignee of the copyright from the composers, it has the right to collect the fee or royalty is entirely unfounded; tl\at unlike (the law) in England, in India unless a music is notationally written, . printed or graphically reproduced, it is not musical work witl1in the meaning of the Copyright Act and there is no copyright in songs or orchestral pieces sung or played directly without its notation being written; that since a 'cinematograph film' is defined in section 2(f) of the Act as including the sound track and the 'cinematograph' is required to be construed to include any work produced by any process analogous to cinematography, the owner of the cinematograph film is the firt owner of the copyright therein including the right of the composer of the literary or musical work incorporated in the sound track of the film; that in the case of the film in which a lyric (which literally means a short poem directly expressing the poet's own thoughts and sentiments in stanzas falling within the purview of the expression "literary work" as defined in section 2 ( o) of the Act) has been plagiarised, there will be copyright in the film vesting in the producer; that the Act confers a separate copyright on a cinematograph film as a film, its author under section 2(d)-

(v) of the Act being the owner of the film at the time of its completion; that in the case of a lyric or music incorporated in the sound track of a cinematograph film, since under section 2(f) of the Act, cinematograph film includes its sound track and section 13 ( 1) (b) of the Act confers copyright on the cinematograph film and section 14(c) (ii) of the Act confers on the owner of copyright the right to cause the film in so far as it consists of visual images to be seen in public and in so far as it consists of songs to be heard in public, it is not necessary for the owner of the cinematograph film to secure the permission of the compos.er of the lyric or of the 1, ll';'ic incorpora!ed in the sound track of a cmematograph film for exh1b1tmg or causmg the exhibition of the sound portion of the film in public or for causing the records of the sound track of the film to be heard in public.

They have further urged that it is not correct to say that nnder section 17, proviso (b) in order that the producer of the cinematograph film should have copyright in the literary or musical work incorporated in it, the making of the entire film should be commissioned. According to counsel for respondents section 17 proviso (b) will equally apply if someone is commissioned to make any component part of a cinematograph film such as a lyric or musical work i.e. when such component of the film is made at the instance of a film producer for valuable consideration, the copyright for such component shall as well vest in the producer; that as the Act confers a separate copyright on a cinematograph film as a film, the producer can exercise both the rights conferred on him under section 14(1)(c)(ii) of the Act and all that section 13(4) of the Act (when applicable) provides is that the rights created by section lfl(l) (a) and (b) shall co-exist with those created by section 14(1)(c) and (d) of the Act, e.g. un<ler clause (a), the

copyright in a literary work such as a novel entitles its author to make A a cinematograph film in respect of the work, and to exercise the remaining rights created by section 14(1) (a) of the Act.

But once he has licensed someone to make a cinematograph film, the licensee shall have the rights provided in clauses (c) and (d) of section 14(1) of the Act in respect of the film.

We have given our earnest consideration to the snbmissions made by learned counsel for the parties.

So far as the first part of the question reproduced above is concerned, there is no dispute between the parties.

Both sides are agreed that in view of the provisions of section 18 of the Act, the material portion of which lays down that-"(!) the owner of the copyright in an existing work or the prospective owner of the copyright in a future work may assign to any person the copyright either wholly or partially and either generally or subject to limitations and either for the whole term of the copyright or any part thereof; provided that in the case of the assignment of copyright in any future work, the assignment shall take effect only when the work comes into existence, (2) where the assignee of a copyright becomes entitled to any right comprised in the copyright, the assignee as respects the rights so assigned, and the assignor as respects the rights not assigned, shall be treated for the purposes of this Act as the owner of copyright and the provisions of this Act shall have effect accordingly", the first part of the question should be answered in the affirmative.

It is accordingly held that an existing and future right of music ...... composer and lyricist in their respective 'works' as defined in the Act is capable of assignment subject to the conditions mentioned in section 18 of the Act, as also in section 19 of the Act which requires an assignment to be in writing, signed by the assignor or by his duly authorised agent.

It is the second part of the question which has been a hot bed of controversy between the parties that has got to be tackled.

The main point for determination in regard to this part of the question is whether the composer of lyric or musical work (which in terms of section 2 ( p) of the Act means only a. notationally written, printed or graphically produced or reproduced music) retains a copyright in the lyric or musical work if he grants a licence or permission to an author (owner) of a cinematograph film for its incorporation in the sound track of a cinematograph film.

For a proper appreciation and determination of the contentions raised before us, it is necessary to notice certain provisions of the Act.

The terms 'author', 'cinematograph film', 'exclusive licence', 'infringing copy', 'musical work', 'performance' performing rights society', 'radio-diffusion' and 'work' are defined in clauses (d), (f), (j), (m), (p), (q), (r), (v) and (y) respectively of section 2 of the Act as under:-

" ( d) author means,-

(i) in relation to a literary or dramatic work, the author of the work;

I 5-240SCI/77

- '",-·

(ii) in relation to a musical work, the composer;

(iii) ** ** **

(iv) ** ** **

( v) in relation to a cinematograph film, the owner of the film at the time of its completion; and ·

(vi) in relation to a record, the owner of the original plate from which the record is made, at the time of the making of the plate".

"(f) cinematograph film includes the sound track, if any, and "cincmatograph" shall be construed as including any work produced by any process analogous to cinematography."

"(j) exclusive licence means a licence which confers on the licensee or on the licensee and persons authorised by him, to the exclusion of all other persons (including the owner of the copyright), any right comprised in the copyright in a work, and "exclusive licensee" shall be construed accordingly." ·

"(m) infringing copy means,-

(i) in relation to a literary, dramatic, musical or 3rtistic

work, a reproduction thereof otherwise than in the form of a cinematograph film;

(ii) in relation to a cinematograph film, a copy of the film or a record embodying the recording in any part of the sound track associated with the fihn;

(iii) **

(iv) ** ** ** ••

**"

"(p) musical work means any combination of melody and harmony or either of them, printed, rednced to writing or otherwise graphically produced or reproduced".

" ( q) performance includes any mode of visual or acoustic presentation including any such presentation by the exhibition of a cinematograph film, or by means of radiodiffusion, or by the use of a record, or by any other means and, in relation to a lecture, includes the delivery of such lecture". ·

"(r) performing rights ociety means a societ)'., assoc!ation or other body, whether mcorporated or not, which cames on business in India of issuing or granting licences for the performance in India of any works in which copyright subsists".

"(v) radio-diffusion includes communication to the public by any means of wireless diffusion whether in the form of sounds or visual images or both".

"(y) work means any of the following works, namely--

(i) a literary, dramatic, musical or artistic work;

(ii) a cinematograph film;

(iii) a record''.

Section 13 of the Act provides as follows :-

"13. Works in which copyright subsists.-(!) Subject to the provisions of this section and the other provisions of this Act, copyright shall subsist throughout India in the following classes of works, that is to say,-

(a) original literary, dramatic musical and artistic works;

(b) cinematograph films; and

( c) records.

(2) ** ** ••

(3) Copyright shall not subsist-

(a) in any cinematograph film if a substantial part of the film is an infringement of the copyright in any other work;

(b) in any record made in respect of a literary, dramatic or musical work, if in making the record, copyright in such work has been infringed.

( 4) The copyright in a cinematograph film or a record shall not affect the separate copyright in any work in respect of which or a substantial part of which, the film, or as the case may be, the record is made.

(5) ** **

* *"

Section 14 of the Act which contains the meaning of the expression "copyright" is to the following effect :-

"14. Meaning of copyright."-(!) For the purposes of this Act, "copyright" means the exclusive right, by virtue of, and subject to the provisions of, this Act,-

(a) in the case of literary, dramatic or musical work, to do and author.ise the doing of any of the following acts, namely-

(i) to reproduce the work in any material form;

(ii) to publish the work;

(iii) to perform the work in public;

(iv) to produce, reproduce, perform or publish any translation of the work;

( v) to make any cinematograph film or a record in respect of the work;

(vi) to communicate the work by radio-diffusion or to communicate to the public by a loud-speaker or any other similar instrument the radio-diffusion of the work;

(vii) to make any adaptation of the work;

(viii) to do in relation to a translation or an adaptation of the work any of the acts specified in relation to the C work in clauses (i) to (vi)

(b) ** ** **

( c) in the case of a cinematograph film, to do or authorise the doing of any of the following acts, namely-

(i) to make a copy of the film;

(ii) to cause the film, in so far as it consists of visual images, to be seen in public and, in so far as it consists of sounds, to be heard in public;

(iii) to make any record embodying the recording in any part of the sound track associated with the film by utilising such sound track;

(iv) to communicate the film by radio-diffusion;

( d) in the case of a record, to do or authorise the doing of any of the following acts by utilising the record, namely-

(i) to make any other record embodying the same recording;

(ii) to cause the recording embodied in the record to be heard in public;

(iii) to communicate the recording embodied in the record by radio-diffusion.

(2) Any reference in sub-section (I) to the doing of any act in relation to a work or a translation or an adaptation thereof shall include a reference to the doing or that act in relation to a substantial part thereof".

Section 17 of the Act which relates to ownership of copyright provides as under :-

" 17. First owner of copyright-Subject to the provisions of this Act, the author of a work shall be the first owner of the copyright therein;

Provided thatr

(a) in the case of a literary, dramatic or artistic work A made by the author in the course of his employment by the proprietor of a newspaper, magazine or similar pedodical under a contract of service or apprenticeship, for the purpose of publication in a newspaper, magazine or similar periodical, the said proprietor shall, in the absence of any agreement to the contrary, be the first owner of the copyright in the work in so B far as the copyright relates to the publication of the work in any newspaper, magazine or similar periodical, or to the reproduction of the work for the purpose of its being so published, but in all other respects the author shall be the first owner of the copyright in the work;

(b) Subject to the provisions of clause (a), in the case of a photograph taken, or a painting or portrait drawn, or an engraving or a cinematograph film made, for valuable consideration at the instance of any person, such person shall, in the absence of any agreement to the contrary, be the first owner of the copyright

therein; D

( c) in the case of a work made in the course of the author's employment under a contract of service or apprenticeship, to which clause (a) or clause (b) does not apply, the employer shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein;

(d) **

(e) ** ** ** ** **

Sections 22 and 26 of the Act which deal with the term of copyright in musical and other works and cinematograph films are to the following effect :- F

"22. Term of copyright in published literary, dramatic musical and artistic works.-Except as otherwise hereinafter provided, copyright shall subsist in any literary, dramatic, musical or artir.tic work (other than a photograph) pnblished within the life-time of the author until fifty years from the beginning of the calendar year following the year in which the author dies.

Explanation.-In this section, the reference to the author shall, in the case of a work of joint authorship, be construed as a reference to the author who dies last".

"26. Term of copyright in cinematograph films.

In the H case of a cinematograph film, copyright shall subsist until fifty years from the beginning of the calendar year next following the year in which the film is published".

A Section 30 of the Act which deals with grant of licences by owners of copyright runs thus :-

"30. Licences by owners of copyright-The owner of the copyright in any existing work or the prospective owner of the copyright in any future work may grant any interet in the right by licence in writing signed by .him or by his duly B authorised agent :

Provided that in the case of a licence relating to copyright in any future work, the licence shall take effect only when the work comes into existence.

Explanation.-When a person to whom a licence relating to copyright in any future work is granted under this section dies before the work comes into existence, his legal representatives shall, in the absence of any provision to the contrary in the licence, is entitled to the benefit of the licence".

The interpretation clause (f) of section 2 reproduced above, which is not exhaustive, leaves no room for doubt when read in conjunction with section 14(1) (c) (iii) that the term "cinematograph film" includes a sound track associated with the film.

In the light of these provisions, it cannot be disputed that a "cinematograph film" is to be taken to include the sounds embodied in a sound track which is associated with the film.

Section 13 recognises 'cinematograph film' as a distinct and separate class of 'work' and declares that copyright shall subsist therein throughout India.

Section 14 which enumerates the rights that subsist in various classes of works mentioned in section 13 provides that copyright in case of a literary or musical work means inter alia (a) the right to perform or cause the performance of the work in public and (b) to make or authorise the making of a cinematograph film or a record in respect of the work.

It also provides that copyright in case of cinematograph film means among other rights, the right of exhibiting or causing the exhibition in public of the cinematograph film i.e. of causing the film in so far as it consists of visual images to be seen in public and in so far it consists of sounds to be heard in public. Section 13 ( 4) on which Mr. Ashok Sen has leaned heavily in support of his contentions lays down that the copyright. in a cinematograph film or a record shall not affect the separate copyright in any work in respect of which or a substantial part of which, the film, or as the case may be, the record is made.

Though a conflict may at first sight seem to exist between section 13 ( 4) and section 14(1) (a) (iii) on the one hand and section 14(1) (c) (ii) on the other, a close scrutiny and a harmonious and rational instead of a mechanical construction of the said provisions cannot but lead to the irresistible conclusion that once the author of a lyric or a musical work parts with a portion of his copyright by authorising a film producer to make a cinematograph film in respect of his work and thereby to have his work incorporated or recorded on the sound track of a cinematograph film, the latter acquires by virtue of section 14(1)(c) of the Act on completion of the cinematograph film a copyright which gives

him the exclusive right inter alia of performing the work in public i.e.

A to cause the film in so far as it consists of visual images to be seen in public and in s.o far as it consists of the acoustic portion including a lync or a musical work to be heard in public without securing any further perm1ss1on of the author (composer) of the lyric or a musical work for lche performance of the work in public. In other words, a distinct copyright in the aforesaid circumstances comes to vest in the cinematograph film as a whole which in the words of B British Copyright Committee set up in 1951 relates both to copying the film and to its performance in pnblic.

Thus if an author (composer) of a lyric or . musical work authorises a cinematograph film producer to make a cmematograph film of his composition by recording it on the sound track of a cinematograph film, he cannot complain of the infringement of his copyright if the author (owner) of the cinematograph film causes the lyric or musical work recorded on C the sound track of the film to be heard in public and nothing contained in section 13 ( 4) of the Act on which Mr. Ashok Sen has strongly relied can operate to affect the rights acquired by the author (owner) of the film by virtn, e of section 14 ( 1) ( c) of the Act.

The composer of a lyric or a musical work, however, retains the right of performing it in public for profit otherwise than as a part of the cinematograph film and he cannot be restrained from doing so.

In other words, the D author (composer) of lyric or musical work who has authorised a cinematograph film producer to make a cinematograph film of his work and has thereby permitted him to appropriate his work by incorporating or recording it on the sound track of a cinematograph film cannot restrain the author

(owner) of the film from causing the acoustic portion of the film to be performed or projected or screened in public for profit or from E making any record embodying the recording in any part of the sound track associated with the film by utilising such sound track or from commnnicating or authorising the communication of the film by radio-diffusion, as section 14 (1) ( c) of the Act expressly permits the owner of the copyright of the cinematograph film to do all these things.

In such cases, the author (owner) of the cinematograph film cannot be said to wrongfully appropriate anything which belongs to the F composer of the lyric or musical work.

Any other construction wonld not only render the express provisions of clauses (f), (m), (y) of section 2, section 13(1) (b) and section 14(1) (c) of the Act otiose but would also defeat the intention of the Legislature, which in view of the growing importance of the cinematograph film as a powerful media of expression, and the highly complex technical and scientific process ancl heavy capital outlay involved in its production, G has sought to recognise it as a separate entity and to treat a record embodying the recording in any part of the sound track a; sociated with the film by utilising such sound track as something distinct from a record as ordinarily understood~

On a conspectus of the scheme of the Act as disclosed in the provisions reproduced above particularly clauses (d)(v), (f) (1,11), (v) H and (y) of section 2, sections 13(1) and 14(1) (c), po~1sos. (b) and ( c) to section 17 and sections 22 and 26 of the Act, 1t 1s, therefore, abundantly clear that a protectable copyright (comprising a

A bundle of exclusive rights mentioned in sectipn 14(1) (c) of the Act) comes to vest in a cinematograph film on its completion which is said to take place when the visual portion and audible portion are synchronized.

This takes us to the core of the question namely, whether the producer of a cinematograph film can defeat the right of the composer of music . . . . or lyrics! by engaging him.

The key to the solution of this question lies in provisos (b) and (c) to section 17 of the Act reproduced above which put the Jilatter beyond doubt.

According to the first of these provisos viz. proviso (b) when a cinematograph film producer commissions a composer of music or a lyricst for reward or valuable consideration for the purpose of making his cinematograph film, or composing music or lyric therefor i.e. the sounds for incorporation or absorption in the sound track associated with the film, which as already indicati:d, are included in a cinematograph film, he becomes the first owner of the copyright therein and no copyright subsists in the composer of the lyric or music so co111posed unless there is a contract to the contrary between the composer of the lyric or music on the one hand and the producer of the cinematograph film on the other.

The same result follows according to aforesaid proviso ( c) if the composer of music or lyric is employed under a contract of service or apprenticeship to compose the work.

It is, therefore, crystal clear that the rights of a music . . . . composer or lyricst can be defeated by the producer of a cinematograph film in the manner laid down in provisos (b) and ( c) of section 17 of the Act.

We are fortified in this view by the decision in Wa/lerstei11 v. Herbert

(1867) Vol. 16, Law Times Reports 453, relied upon by Mr. Sachin Chaudhary where it was held that the music composed for reward by the plaintiff in pursuance qf his engagement to give effect to certain situations in the drama entitled "Lady Andley's Secret", which was to be put on the stage was not an independent composition but was merely an accessory to and a jl'art and parcel of the drama and the plaintiff did not have any right in the music.

For the foregoing reasons, we do not find any justification to interfere with the order of the High Court. Consequently, the appeal fails and is dismissed but in the circumstances of the case without any order as to costs.

KRISHNA IYER, J.-Thc judgment just delivered is on behalf of Ille Court, which makes this footnote, in a sense, otiose.

But I do append the abbreviated opinion solely to belight a slightly penumberal area of the law and to voice a need for legislative exploration to protect a category now left in the cold.

A cinematograph is a felicitous blend, a beautiful totality, a constellation of stars, if I may use these lovely imageries to drive home my point, slurring over the rule against mixed metaphor. Cinema is more than long strips of celluloid, more than miracles in photography, more thau song, dance and dialogue and indeed, more than dramatic story, exciting plot, gripping situations and marvellous acting. But it is that

ensemble which is the finished product of orchestrated performance by each of th<: several participants, although the components may, sometimes, in themselves be elegant entities.

Copyright in a cinema film exists in law, buts. 13(4) of the Act preserves the separate survival, in its individuality, of a copyright enjoyed by any 'work' notwithstanding its confluence in the film.

This persistence of the aesthetic 'personality' of the intellectual property cannot cut down the copyright of the film qua film.

The latter right is, as explained earlier in my learned brother's judgment, set out indubitably in s. 14(1) (c). True, the exclusive right, otherwise called copyright, in the case of a musical work extends to all the sub-rights spelt out in s. 14(1 )(a). A harmonious construction of s. 14, which is the integral yoga of copyrights in creative works, takes us to the soul of the subject.

The axtist enjoys his copyright in the musical work, the film producer is the master of his combination of artistic pieces and the two can happily co-exist and need not conflict.

What is the modus vivendi? ·

The solution is simple.

The film producer has the sole right to exercise what is his entitlement under s. 14(1) (c) qua film, but he cannot trench on the composer's copyright which he docs only if the 'music' is performed or produced or reproduced separately, in violation of s. 14(1) (a). For instance, a film may be caused to be exhibited as a film but the pieces of music cannot be picked out of the sound track and played in the cinema or other theatre.

To do that is the privilege of the composer and that right of his is not crowned in the film copyright except where there is special provision such as in s. 17, provi:; o ( c). So, beyond exhibiting the film as a cinema show, if the producer plays the songs separately to attract an audience or for other reason, he infringes the composer's copyright.

Anywhere, in a restaurant or aeroplane or radio station or cinema theatre, if a music is played, there comes into play the copyright of the composer or the Performing Arts Society.

These are the boundaries of composite creations of art which are at once individual and collective, viewed from different angles.

In a cosmic perspective, a thing of beauty has no boundary and is humanity's property but in the materialist plane on which artists thrive, private and exclusive estate in art subsis!s.

Man, the noblest work of the Infinite Artist, stmngcly enough, battles for the finite products of his art and the secular law, operating on the te_mporal level, guardians material works possessing spiritual values.

The enigmatic small of Mona Lisa is the timeless heritage of mankind but, till liberated by the prescribed passag~ of time, the private copyright of the human maker says, 'hands off'.

The creative intelligence of man is displayed in multiform ways of aesthetic expression but it often happens that economic systems so operate that the priceless divinity which we call artistic or literary creativity in man is exploited and masters, whose works are invaluable, are victims of piflling payments.

World opinion in defence of the human right to intellectual property led to international conventions H and municipal laws, commissions, codes and organisations, calculated to protect works of art.

India responded to this universal need by enacting the Copyright Act, 1957.

Not the recommendations in conventions but provisions in municipal laws determine enforceable rights.

Our copyright statute protects the composite cinematograph work produced by lay-out of heavy money and many talents but does not extinguish the copyrightable component parts in toto. The music which has merged, through the sound track, into the motion picture, is copyrighted by the producer but, on account of this monopoly, the music corr.poser's copyright does not perish. The twin rights can co-exist, each fulfilling itself in its delectable distinctiveness. Section 14 has, in its careful arrangement of the rights belonging to each copyright, has a certain melody and harmony to miss which is to lose the sense of the scheme.

A somewhat un-Indian feature we noticed in the Indian copyright Act falls to be mentioned.

Of course, when our law is intellectual borrowing from British reports, as admittedly it is, such exoticism is possible. 'Musical work', as defined in s.2 (p )", reads :

"(p) musical work means any combination of melody

and harmony or either of them printed, reduced to writing or otherwise graphically produced or reproduced."

Therefore, copyrighted music is not the soulful tune, the superb singing, the glorious voice or the wonderful rendering. It is the melody or harmony reduced to print, writing or graphic form.

The Indian music lovers throng to listen and be enthralled or enchanted by the nada brahma, the sweet concord of sounds, the tags, the bhava, the lava and the sublime or exciting singing.

Printed music is not the glamour or glory of it, by and large, although the content of the poem or the lyric or the song does have appeal. Strangely enough, 'author', as defined in s.2(d), in relation to a musical work, is only the composer and s. 16 confies 'copyright' to those works which are recognised by the Act. This means t.hat the composer alone has copyright in a musical work.

The singer has none.

This disentitlement of the musician or group of musical artists to copyright is un-Indiim, because the major attraction which lends monetary value to a musical performance is not the music maker, so much as the musician. Perhaps, both de.serve to be recognised by the copyright law.

I make this observation only because act in one sense, depends on the ethos and the aesthetic best of a people; and while universal protection of intellectual and aesthetic property of creators of 'works' is an international obligation, each country in its law must protect such rights wherever originality is contributed. So viewed, apart from the music composer, the 'singer must be conferred a right.

Of course, law-making is the province of Parliament but the Court must communicate to the lawmaker such infirmities as exist in the law extant.

S.R.

Appeal dismissed.

INDIAN PERFORMING RIGHT SOCIETY LTD

JASWANT SINGH, JJ.

Copy Right Act

s. 18

ss. 2(d)

section 2(r)

Copyright Act, 1957

Maharashtra

August 23, 1969

India

s. 13

section 3

Copyright Act

September 27, 1969

November 29, 1969

section 34

s. 72

section 18

Jaswant Singh

s. 13(4)

s. 18

s. 21

Copyright Act

section 2(f)

section 2(o)

s. 2(d)

section 2(f)

section 13

section 14(c)

s. 17

Section 17

section 13(4)

section 14

Krishna Iyer

section 13

section 14(1)

s. 14

section 14

section 14(1)

section 17

Section 14

section 16

section 18

section

19

section 2

section 14(1)(c)(iii)

s 34

s. 14(1)(a)(iii)

section 14(1)(c)

section 13(4)

section 14(1)(c)

section 14

section 2

section 13(1)

section 2

section 13(1) and 14(1)

section 17

section 22 and 26

section 14(1)(c)

section 1

s. 17

Calcutta High Court

A. K. Sen

E. P. Skons James

J. I. Mehta

J. Roy Choudhary

S. K.

Mehta

K. R: Nagaraja

P. N. Puri

S. Chaudhury

R. K. Bachawat

D. K. Sinha

H. S. Parihar

I. N. Shroff

J. C. Bhat

Atul Munim

B. R. Agarwala

B. Sen

B. K. Bachawat

l. N.

Shroff

J. L. Nain

V. R. Krishna Iyer

Article 133(1)

High Court of Judicature at Calcutta

Indian Perfoming Right Society Ltd.

JPRS

IPRS

section 33

IPRS

September 27, 1?69

section 34

section 33

section 2(d)

section 35

Maia

section 72

section 17

section 18

Ashok Sen

section 13

section 17

Sachin Chaudhary

J. C. Bhat

J. L. Nain

Copinger

Skone James

England

Copyright Act

section 2(f)

section 2

section 2(d)

section 2(f)

section 13

section 14(c)

section 17

section 17

section 14(1)(c)(ii)

section 13(4)

section 14(1)(c)

section 14(1)

section 14(1)

section 18

section 18

section 19

section 2

section 2

Section 13

Section 14

Section 17

Sections 22 and 26

Section 30

section 2

section 14(1)

Section 13

Section 14

section 13

Section 13

section 13

section 14(1)

section 14(1)

section 14(1)(c)

section 13

section 14

section 14

section 2

section 13(1)

section 14(1)

section 2

sections 13(1) and 14(1)

section 17

sections 22 and 26

section 17

section 17

KRISHNA IYER

s. 14(1)

s. 14(1 )(a)

s. 14

s. 14(1)

s. 14(1)

s. 17

Section 14

s. 16

Parliament


, '

COMMISSIONER OF INCOME TAX, WEST BENGAL A

TOLLYGUNGE CLUB LTD.

March 15, 1977

[P. N. BHAGWATI AND S. MURTAZA fAZAL ALI, JJ.]

Income-tax Act.

1922-S. 15B-Diversion of income or diversion of source-Charity su-rcharge whether inco1ne-Obligation in the nature of trust, how to be created.

The assesGee was a Company limited by guarantee and owned a Social nd Sports Club one of \vhose activities consisted of conducting horse races \vith C amateur riders. It charged for admission into the enclosure of the club admission fee !o the guests introduced by the members of the club as \Yell as to the members of the public.

It also charged a surcharge of eight annas solely earmarked for local charities.

That was done pursuant to a resolution passed at the meeting of the General Body providing that , the surcha!'g<! of eight ann?.s on the f'.:ntrance ticket should be earmarked for local charities.

The Income Tax Officer pdor to the assessment year 1960-61 did not treat 1he receipts on account of surcharge as trading receipts of the assessee and bring them to tax as income of the aessee. While making the assessment for the assessment year 1960-61, the Income Tax Officer took the vie\v that the receipts on account of surcharge were revenue receipts in the hands of assessee and they could not be excluded from the total income of the asessee merely on the-ground that they were applied for charitable purposes. It \Vas common

ground that the amounts received by way of surcharge had in fact been disbursed to local charities.

The Income Tax Officer treated the receipts on account of surcharge as income of the assessee: and allowed rebate under s. 15B in respect of the amounts actually disbursed in favour of local charities.

The .A.ppellate AssiStant Commissioner confirmed the order of th.e Income Tax Officer on the ground that a person who wished to gain admission to the enclosure of the club had to pay the surcharge whether he was willing to contribute to the charity or not and the amount of the surcharge was therefore a part of the price charged by the assessee for admission and it was accordingly a revenue receipt in the hands of the assessee.

On further 3.ppeal, the Tribunal held that the surcharge, \Vas levied on admission ticket for the purpose of charity and hence the receipts in respect of the surcharge were not income of the assessee at the point of time when they reached its hands and being earmarked for charity they never belonged to the assessee.

The High Court on a reference made by the Tribunal. agreed with the view taken by the Tribunal holding that since the surcharge \Vas charged by the assessee an<l paid by the race goers for the specific purpose of being applied to local chanties pursuant to the resoluti,-on passed by the general meeting of

the assessee, there was at the time of receipts of the amounts in respect of the G surcharge, a legally enforcible obligation on the assessee to apply them to local charities and those amounts accordingly did not reach assessee as its income but were diverted to local charities before they reached the assessee.

Dismissing the appeal,

HELD : ( 1) Income tax is a tax on income.

Every receipt by the assessee is not necessarily income in his hands.

It is only when it bears the H character of income at the time when it reaches the hands of the assessee that it becomes exigible to tax. [228 El

Lo11don County Cou11cil v. Attorney General [1901] AC 26.

(2) The assumptions of the Revenue that the surcharge was received as part of the price for admission 10 the club enclosure and that there was no legally enforcible obligation on the assessee to spend the amounts on charity are erroneous.

The admission to the enclosure was the occasion and not the consideration for the surcharge taken from the race-goers.

It is not a correct analysis of the nature of the legal relationship to say that there v.:as nothing rr.ore than a mere desire or intention on the part of the assessee to apply the amounts received on account of surcharge to the local charities \Vithout any legally enforcible obligation.

The resolution was passed at the general meeting of the assessee and pursuant to that resolution the surcharge was paid by the race-goers and received by the assessee for the specific purpose of being applied to local charities. The surcharge when paid was clearly impressed with an obligation in the nature of trust for being applied for the benefit of local charities.

A trust may be created by any language sufficient to show the intention and no technical words are necessary. [228 H, 229 A, C,.

D & GJ

C.I.T v. Thakar Das Bhargava. 40 I.T.R. 301, followed.

(3) In the present case, the surcharge being impressed with an obligation in the nature of trust for being applied to local charities was by this pbligation diverted before it reached the hands of the assessee and at no stage 1t became a part of the income of the assessee.

The amount of surcharge n.ever reached the nssessec as parts of its income. [230 G-H]

C.I.T. v. Sitaldas TirathdaS, 41 I.T.R. 367, followed.

CML APPELLATE JURISDICATION : Civil Appeal No. 578 of 1972.

, (From the Judgment and Order dated 17-4-1969 of the Calcutta High Court in Income Tax Reference No. 71 /65)

S. C. Manchanda and R. N. Sachthey, for the appellant.

E Sukumar Mitra, Q. N. Mukherjee and N. R. Chaudhary, for the

respondent.

The Judgment of the Court was delivered by

BHAGWATI, J.

This is an appeal on a certificate of fitness_ granted by the High Court of Calcutta under section 66A, sub-section (2) of the Indian Income-tax Act, 1922.

The facts giving rise to the appeal are few and may be briefly stated as follows.

The asscssee is Tollygunge Club Ltd., a company limited by guarantee, and it owns a social and spm; ts club one of whose activities consists of conducting Gymkhana races, that is, horse races with 11mateur riders.

It charges for .admission into the enclosure of the Club at the time of the races, admission fee to the guests introduced by the members of the Club as well as to the members of the public.

There is no dispute between the parties that the admission fee received, by the assessee constitutes trading receipt i_n the hands of the assessee exigible to tax.

But it appears that on 28th February, 1945 a resolution was , passed at the meeting of the General Body of the Club for levying a surcharge of eight annas over and above the admission fee, the proceeds of which were to go to the Red Cross Fund. This - resolution was subsequently varied by another resolution dated 30th January, 1950 and the new resolution provided that the surcharge of eight annas on entrance ticket should be earmarked "for local charities and not solely for the Indian Red Cross".

The assessee

.,,,.,

• (.

...

accordingly issued to every entrant to the enclosure on the race course A two tickets one an admission ticket for admission to the enclosure of the Club a'nd the other, a separate ticket in respect of the surcharge -0f eight annas for local charities.

The slip in respect of the surcharge -0f eight annas was in the following term:

"Surcharge on admission to The Tollygunge Gymkhana Races for Local Charities Rs. 4/8 Enclosure Surcharge Rs. -181-"

The receipts from the surcharge were not credited to the profit and loss account but they were carried directly to a separate account styled 'Charity Account'.

These receipts on account of surcharge were not treated as tradil)g receipts of the assessee and were not brought to tax as income of the assessee in the assessment years perior to the as.essment year 1960-61.

But while making assessment for the .assessment year 1960-61, the Income Tax Officer took the view that receipts on account of surcharge were revenue receipts in the hands of the asscssee and they would not be excluded from the total Income of the assessee merely on the ground that they were applied for charitable purposes. It may be pointed out at this stage that it was not disputed before the Revenue authorities that the amounts realised by way of surcharge had been disbursed to local charities and in fact a list was filed showing the local charities in whose favour such disbursement had been made.

The Income Tax Officer treated the disbursement of the amounts received on account of surcharge as application of the income belonging to the assessee and he accordingly included these receipts in the total income of the assessee, but allowed rebate under section 15B on the amounts actually disbursed in favour of local charities during the accounting year.

This view taken by the Income Tax Officer was affirmed on appeal by. the Appellate Assistant Commissioner who held that a person who wished to gain admission to the enclosure of the aub on any racing day had to pay the surcharge whether he was willii'ig to contributes to the charity or not and as such the amount of the surcharge was a part of the price charged by the assessee for admission to the enclosure and it was, therefore, a revenue receipt in the hands of the assessee.

This was followed by a further appeal to the Tribunal and this time the assessee was successful.

The Tribunal held that the suichange. was levied on admission tickets for the purpose of charity and hence the receipts in respect of the surcharge were not income of the assessee at the point of time when they reached its hands and being "earmarked for charity", they ... nevcr belonged to the assessee" and were hence not includible in the taxable income of the assessee.

The Tribunal accordingly directed that the receipt of the surcharge credited to the charity account should be

deleted from the total income of the assessee.

D '

SUPREME COURT REPORTS [1977] .J_s.C.R.

The Commissioner then moved the Tribunal for stating a case to the High Court on the question of law which arose out of the order of the Tribunal.

The Tribunal was of the opinion that a question of law did arise out of its order. and hence it formulated a question in the following terms:

"Whether, on the -facts and in - the circumstances of the case, the Appellate Tribunal was right in holding that the assessee's receipts from the surcharge levied on admission tickets for purposes of charity could not be included in the assessee's taxable income for the assessment year 1960-61?",

and referred it to the High Court for its opinion.

The High Court agreed with the view taken by the Tribunal and held that since the surcharge on admission tickets_ was charged by the assessee and paid by the race-goers for the specific purpose of being applied lo local charities pusuant to the resolution passed by the general meeting of the assessee, there was, at the time of receipt of the amounts in respect of the surcharge, a legally enforceable obligation on the assessee to apply them to local charities and those amounts accordingly did not reach the assessee as its income but were diverted to local charities before they reached the assessee. The correctness of this decision is questioned by the Commissioner in the present appeal under section_ 66A, sub-section (2) of the Act.

It is familiar learning and yet Lord Magnaughten had to draw our attention to it in London County Council v. Attorney General(') that income tax is a tax on income.

It is what reaches the assessee as income that is intended to be charged to tax under the Act.

Every receipt by the assessee is not necessarily income in his hands. It is only when it bears the character of income at the time when it reaches the hands of the assessee that it becomes exigible _to tax. The quest on which, wherefore, arises for determination here is whether the amounts received F on account of surcharge reached . the hands of the assessee as its income.

The argumentof the Revenue was that these amounts were received by the assessec as part of the price for admission into the enclosure of the Club and merely because the assessee expressed its desire or_ intention to apply them to local charities, they did not cease to be the income of the assessee. _ This argument is based on

twG assumptions: first, that the amounts on account of surcharge G - were received as part of the price for admission to the Club enclosure, and secondly, that it was merely a voluntary desire on the part of the assessee to use these amounts for private charities and there was no legally enforceable obligation on the assessee to do so.

These two assumptions are .in a way inter-related, each depending on and to some extent supporting the other, but in our view neither of them is well founded.

It is not correct to say that merely because sur- H charge is levied from every race-goer, Vfho wants admission to the enclosur!' of the Club, it becomes a part of the price for admission.

The ' ' ' - ,

(I)

[1901] A.C.26. "

.r-

- .

test is not whether every race-goers seeking admittance to the enclosure of the Club is required to pay the surcharge but what is it for which the surcharge is taken. Is it taken as part of the price for admission, or for some other purpose, such as, benefit of local charities ? Suppose every race-goer seeking admittance to the Club enclosure were told that in addition to the price of the admission ticket he would have to contribute a certain amount to a recognised charity, could it be contended that the amount which he is required to contribute to charity--{lnd we are deliberately using the word 'required' because otherwise he would not be able to secure admittance to the Club enclosure is part of the price for admission? the surcharge is undoubtedly a payment which a race-goer is required to make in addition to the price of admission ticket if he wants to witness the race from the Club enclosure, but on that account it does not become part of the price for admission.

The admission to the enclosure is the occasion and not the consideration for the surcharge taken from the race-goer. It is true that but for this insistence on payment of the surcharge at the time of admission to the enclosure, the race-goer might not have paid any amount for local charities.

But that does not render the payment of the surcharge involuntary, because it is out of his own volition that he seeks admittance to the enclosure and if he wants such admittance, he has to pay not only the price of the admission ticket but also the surcharge for local charities.

The surcharge is clearly not a part of the price for admission but it is a payment made for the specific purpose of being applied to local charities.

Secondly, it is not a correct analysis of tho nature of the legal relationship to say that there was nothing more than mere desire or intention on the part of the assessee to apply the amounts received on account of surcharge to local charities, without any legally enforceable obligation binding it to do so.

We may straightaway concede that if nothing more had been done by the assessee than merely passing a resolution deciding to utilise a part of the admission fee received by it to charitable purposes, no legal obligation would have been created obliging the assessee to utilise this amount for the purpose of charity.

Such a resolution would have left it open to the assessee to alter it or to rescind it and it would have been nothing but an expression of the desire or intention of the assessee to apply the amount for charitable purposes. But here a resolution was passed at the general meeting of the assessee for levying the surcharge for local charities and pursuant to this resolution, the surcharge was paid by the race-goers and received by the assessee for the specific purpose of being applied to local charities.

The surcharge when paid was clearly impressed with an obligation in the nature of trust for being applied for the benefit of local charities.

It is settled law, as observed, by this Court in C1.T. v.

Thakar Das Bhargava (') that a trust may be created by any language sufficient to show the intention and no technical words are necessary and it may even be created by the use of words which are primarily words of condition.

The only requisites which must be satisfied are that there should be "purposes independent of the donee to which the subject-matter of the gift is rquird to be applied

(2) 40 LT. Tl. 101.

and an obligation on the donee to satisfy those purposes".

When the race-goers paid the surcharge to the assessee, they did so far a specific purpose and thereby imposed an obligation on the assessee to utilise it for local charities.

The question then arises whether this obligation to utilise the surcharge for local charities was an obligation to apply the surcharge to local charities after it reached the assessee as its income or it was diverted for being applied to local charities before it was resolved by the assessee.

Did it involve an application by the assessec of a part of its income to local charities, or was it rather an allocation of a receipt for local charities before it became income in the hands of the assessee ? The true test for determining this question is, to use the words of Hidayatullah, J., in C.l.T. v. Sitaldas Tirathdas(') whether the amount sought to be deducted, in truth, reaches the asscssee as his income. The learned Judge proceeded to explain this test in the following words :

"In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessce as nis income. Obligations, no doubt, there are in every case, but il is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply but of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee.

Where by the obligation income is diverted before it reaches the assessee, it is deductible : but where the income is required to be applied to discharge an obligation after such income reaches the asscssee, the same consequence, in the law, does not follow.

It is the first kind of payment which can truly be excused and not the second.

The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied.

The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family\ received a portion of the income of the assesec, after the assessee had received the income as his own. The case once is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another's income".

It is dear on the application of this test that in the present case, the surcharge being impressed with an obligation in the nature of trust for being applied to local charities was by this obligation diverted before it reached the hands of the assessec and at no stage, it became a part of the income of the assessee.

When the assessee received the amounts on account of surcharge, they were impressed with a legal

(I) 411.T.R 367.

obligation to be applied for the benefit of local charities and they never reached the assessee as part of its income.

The case clearly fell within the rule in Raja Bijoy Singh Dudhuria v. C./.T.(') and the surcharge received by the assessee could not be regarded as income assessable to tax.

Before we end the discussion of this question, we must refer to the decision of this Court in Thakar Das Bhargava's case (supra) on which strong reliance was placed on behalf of the Revenue.

The assessee in this case was an advocate who agreed to defend certain accused persons in a criminal trial on condition that he would be provided with a sum of Rs. 40,000/- for creating a public charitable trust.

When the trial was over, the assessee was paid a sum of Rs. 32,500/-

and he created a trust of that amount by executing a trust deed. The question arose whether this sum of Rs. 32,500/- was liable to be taxed as part of the professional income of the assessee. This question was answered by the High Court in favour of the assessee but the view taken by the High Court was reversed by this Court on appeal. This Court pointed out that the findings of the Tribunal clearly showed "that the persons who paid the sum of Rs. 32,500/- did not use any words of an imperative nature creating a trust or an obligation. They were anxious to have the services of the assessee in Farrukhnagar case; the assessee was at first unwilling to give his services and later he agreed, proposing that he would himself create a charitable trust out of the money paid to him for defending the accused persons in the Farrukhnagar case." Considerable reliance was placed by this Court on the recital in the trust deed where the assessee had said "that he was receiving his professional income as an advocate accruing after June 1944 for payment of taxes and charity and accordingly when he received his professional income in the F arrukhnagar case he created a charitable trust out of the money so received." It was also emphasised by this Court that it was not stated any where "that the persons who paid the money created a trust or imposed a legally enforceable obligation on the assessee" and even in the affidavit made by the assessee there was "no suggestion that the persons who paid the money created the trust or imposed any obligation on the assessee" and it was "the assessee's own voluntary desire that he would create a trust out of the fees paid to him for defending the accused persons in the Farrukhnagar case" and "such a voluntary desire on the part of the assessee created no trust, nor did it give rise to any legally enforceable obligation".

This Court accordingly held that "the money when it was received by the assessee was his professional income, though the assessee had expressed a desire earlier to create a charitable trust out of the money when received by him". It will be seen from what is stated above that when the accused person paid a sum of Rs. 32,500/- to the assessee, they paid it by way of fees and they did not impose any obligation on the assessee that this amount should be utilised only for the purpose of charity. It was merely a voluntary desire on the part of the assessee that he would create a trust m1t of the amount of fees paid to him and until ilie

(I) [193311 I.T.R. 135 A.LR. 1933 P.C. 145.

16--240SCI/77

trust was created by the assessee, there was no legal obligation to utilise that amount for charity. That is why this Court held that the amount when received by the assessee was income in his hand and the creation of trust was merely application of the amount after it reached his hands as his income. This C9urt by approving the following observations of the Appellate Assistant Commissioner that "if the accused persons bad themselves resolved to create a charitable trust in memory of the professional aid rendered to them by the appellant and had made the asscssee trustee for the money so paid to him for that purpose, it could, perhaps, be argued that the money paid was earmarked for charity ab initio but of this there was no indication anywhere" clearly suggested that if the money paid by the accused persons had been "earmarked for charity ab initio" it would have been pqssible to say that they had made the assessee trustee for the money so paid to him and in that event the conclusion would have been that the money did not reach the hands of the assessee as bis income.

Here, the surcharge paid by the race-goers was earmarked for local charities ab initio and the surcharge was received by the assessee with a legal obligation to apply it to local charities.

The decision of this Court in Thakar Das Bhargava's case (supra), therefore, far from militating against the contention of the assessee, supports it.

We must accordingly hold that the High Court was right in answering the question referred to it in favour of the assessee and in this view, the appeal must stand dismissed with costs.

P.H.P.

Appeal dismissed.

COMMISSIONER OF INCOME TAX, WEST BENGAL

A

TOLLYGUNGE CLUB LTD

March 15, 1977

P. N. BHAGWATI

S. MURTAZA fAZAL ALI, JJ.

Income-tax Act

S. 15B

s. 15B

CML APPELLATE JURISDICATION

Calcutta High Court

S. C. Manchanda

R. N. Sachthey

E Sukumar Mitra

Q. N. Mukherjee

N. R. Chaudhary

BHAGWATI

High Court of Calcutta

section 66A

Indian Income-tax Act, 1922

Tollygunge Club Ltd.

28th February, 1945

30th January, 1950

section 15B

Magnaughten

Vfho

Hidayatullah

Thakar Das Bhargava

Farrukhnagar

arrukhnagar