Bombay High Court Refuses To Lift Restrictions On Phantom Studios Making Ramayana-Based Films Till Diwali 2027

The Bombay High Court on Tuesday refused to grant interim relief to Phantom Studios India Pvt. Ltd. from contractual restrictions preventing it from producing or commercially exploiting films based on Ramayana and its key characters, including Hanuman, until Diwali 2027.

Justice Amit Borkar rejected Phantom's plea seeking to be released from the restrictions under an Assignment Agreement executed on April 19, 2024, as well as its request for disclosure of payments made and amounts payable under the agreement.

The dispute arose from an agreement under which Prime Focus Technologies Ltd. acquired intellectual property rights in Project Ramayana from Allu Mantena Media Ventures LLP. Phantom was separately made a signatory to the agreement and was required to comply with its negative covenants under Clause 5.

Phantom had argued that it was originally brought under the restrictions because of its shareholding links with Madhu Mantena and entities controlled by him. It contended that after Mantena and his entity exited its shareholding in 2024, there was no reason for it to remain bound by the restrictions.

Rejecting this argument, the court observed that Phantom had been expressly named in Clauses 5.1 and 5.2 of the agreement. The agreement did not provide that the restrictions would cease once Mantena or his entity stopped holding shares in Phantom.

“There is a difference between an entity being covered under the definition of 'Assignor Parties' and Phantom being separately named as a party bound by Clauses 5.1 and 5.2,Both expressions have been used in the Agreement. Therefore, they cannot be treated as having the same meaning, particularly when Phantom has been separately mentioned in the clauses which impose the restrictions” the court observed.

The court noted that the share buyback agreement executed on October 17, 2024, did not provide for Phantom's removal from the Assignment Agreement or termination of its obligations under Clause 5. It also found that Phantom had not produced any written amendment, signed by the concerned parties, releasing it from the restrictions.

Phantom had also claimed that Mantena had assured it that it would be released from the agreement and paid compensation of ₹9 crore on a proportionate basis until its formal release. The respondents denied giving any such assurance.

The court held that Phantom's letters repeating the allegation of an oral assurance could not, by themselves, establish that such a promise had been made. No written agreement or signed amendment recording the alleged understanding had been produced.

The court also considered the dispute over whether Phantom's board had authorised execution of the Assignment Agreement. While the respondents relied on a certified extract of a board resolution dated February 26, 2024, Phantom relied on the minutes of the meeting, which did not contain a corresponding resolution. The court observed that the competing documents required proper examination and did not conclusively decide the issue at the interim stage.

It further noted that Phantom had initially approached the court on the basis that the Assignment Agreement was binding on it and had sought to restrain the other parties from acting in breach of Clause 5. Although a party could raise an alternative plea, its earlier stand was relevant while examining whether it had established a prima facie right to be released from the agreement.

Phantom had argued that it should not be expected to continue complying with the restrictions when the other parties were allegedly acting in breach of the same clause. Rejecting this contention, the court observed that an alleged breach by one party would not automatically bring the contractual obligations of another party to an end.

“Each party has accepted its own obligation under that clause. Therefore, an alleged breach by one party does not end the obligation of another party,” the court held.

The company had also claimed that it had received an offer to develop a film based on Hanuman but could not pursue the opportunity because of the restrictions. The court, however, found that no document had been produced to establish when the offer was made, its terms, the rights offered, the proposed commercial arrangement or the identity of the person who made it.

The court clarified that it was not holding that no such offer had been made. It nevertheless found that the material placed before it did not establish a sufficiently strong prima facie right to release Phantom from the restrictions.

The court also rejected Phantom's request for disclosure of payments made and amounts still payable under the Assignment Agreement. Under Clauses 8.1 and 8.2, the consideration, including the additional revenue-linked payment, was payable to the Assignor. DNEG India Media Service Ltd.'s guarantee was also intended to secure payment to the Assignor. The agreement did not earmark any part of the consideration for Phantom.

The court held that Phantom could not seek a general disclosure of financial transactions between the other parties merely on the basis of its disputed claim that Mantena had personally promised to pay it ₹9 crore. It found no sufficient connection between the information sought and a legal right established by Phantom at the interim stage.

Accordingly, the court rejected both interim prayers. It clarified that its findings were limited to the reliefs sought under Section 9 of the Arbitration and Conciliation Act, 1996, and that the parties' respective rights and arguments in the arbitration proceedings would remain open for consideration.