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Section 31 in the Copyright Act, 1957
Section 31(1)(b) in the Copyright Act, 1957
the Copyright Act, 1957
Section 31(1)(a) in the Copyright Act, 1957
Section 33 in the Copyright Act, 1957
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Radio Today Broadcasting Ltd vs Indian Performing Rights Society ... on 26 September, 2008

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Copyright Board
Music Broadcast Pvt. Ltd. And Ors. vs Phonographic Performance Ltd. on 19 November, 2002
Equivalent citations: 2003 (26) PTC 70 CB
Bench: B K Sharma, V Munshi, B Banerjee, D Meena

JUDGMENT Brij Kishore Sharma, Chairman

1. All the six matters arise out of complaints made by person who operate one or more radio broadcasting stations and feel aggrieved by the royalty demanded by the defendant. All the complainants invoke the powers of the Copyright Board under Clause (b) of Sub-section (1) of Section 31 of the Copyright Act, 1957. The Copyright Board has to decide reasonable compensation payable to the defendant which is a collecting society which issues licences in respect of sound recordings and is registered under the provisions of Section 33(3) of the Copyright Act. The defendant in all the six cases is Phonographic Performance Ltd. Hence, the Board has heard all the complaints together and this Order of the Board shall apply to all the complainants.

2. The complainant in Case No. 1 of 2000 viz M/s Music Broadcast Pvt. Ltd., is operating a radio broadcasting station at Bangalore and at some other places. In its complaint to the Board made under Rule 11A read with Section 31(1)(b) of Copyright Act, it is stated that the complainant intends to broadcast and prays for compulsory licence of the complete repertoire of Phonographic Performance Ltd (PPL in short), the defendant.

3. The complainant approached PPL for grant of a licence to communicate sound recordings within the repertoire of PPL to the public through its radio station. PPL informed them on 6th September, 2000 that it is necessary that they obtain a licence and pay royalty according to the tariff fixed by PPL and abide by the terms and conditions prescribed by PPL. On the 17th April. 2001, the complainant alongwith 4 other radio station owners wrote to PPL expressing their desire "to discuss a contractual business arrangement which will be beneficial to both the society and to the new radio industry in India." In reply to this letter, PPL on the 8th May, 2001 quoted its tariff and also expressed its willingness to meet the group (Radio group hereafter)

4. On 23rd May, 2001, a meeting took place at PPL office in Mumbai in which the Radio group and PPL discussed the tariff. No agreement could be reached. PPL and the Radio group again met on 5th June, 2001. Each party presented its point of view. PPL emphasized that the royalty rate of Rs. 1,500 per needle hour (actual time of music broadcast) was to be treated as minimum guarantee and PPL expects to share in the revenue. On a specific inquiry by PPL regarding the revenues of the members of the Radio group the reply given was "that most members are privately held companies with limited access to their records and were not in favour of sharing the same." At the same time, the Radio group stated that "the worldwide practice of royalty payment is either a revenue sharing arrangement with no minimum guarantees or a fixed fee mode." The Radio group did not agree to revenue sharing over and above the payment of royalty.

5. Having failed to reach an understanding, the complainant in case 1 of 2002 lodged a complaint under Section 31(1)(b) of the Copyright Act. On the 27th June, 2001, the applicant moved the Hon'ble High Court at Mumbai and prayed:-

(a) for a declaration that the Plaintiff is entitled to a licence to broadcast the sound recordings of the Defendant on payment to the Defendant of such royalty and/or compensation and subject to such other terms and conditions as the Copyright Board may determine upon the Plaintiffs application dated 21st June, 2001 for compulsory licence or otherwise;

(b) that upon the Plaintiff paying to the Defendant such amount of royalty or compensation and agreeing to abide by the terms and conditions as may be determined by the Copyright Board on the Plaintiffs application dated 21st June, 2001 for compulsory licence the Defendant, its directors, servants and agents be restrained by a permanent order and injunction of this Hon'ble Court from interfering with the Plaintiff's broadcast of the sound recordings of the Defendant;

(c) that pending the hearing and final disposal of the suit, upon the Plaintiff depositing in this Hon'ble Court the same amount of royalty it has agreed to pay to the IPRS and agreeing to abide by the terms and conditions as may be determined by the Copyright Board on the Plaintiff's application dated 21st June, 2001 for compulsory licence the Defendant, its directors, servants and agents be restrained by a temporary order and injunction of this Hon'ble Court from interfering with the Plaintiff's broadcast of the sound recordings of the Defendant;

(d)      for ad-interim reliefs in terms of prayer (c) above.
 

(e)      for costs of the suit;
 

(f)      for such further and other reliefs as the nature and circumstances of the case may require. 
 

6. This case was numbered as 2138 of 2001. The matter was heard by Hon'ble Justice D.K. Deshmukh who passed an interim order in the following terms:-

"As and by way way of ad-interim order, the defendants are directed to grant licence in favour of the plaintiffs which has been applied for by the plaintiff's for a period of four months beginning from 3rd July 2001 subject to the condition that within a period of one week from today, the plaintiffs furnish bank guarantee to the satisfaction of the Prothonotary and Senior Master in the amount of Rs. 22,00,000/-. It is further clarified that the defendants shall renew the licence for a further period of four months and shall go on renewing it in case before expiry of the period of the licence which is granted, the plaintiffs produce before it the documents which prove that guarantee is furnished to the satisfaction of the Prothonotary and Senior Master for a further period of the same amount. It is further directed that the plaintiffs shall pay to the defendants subject to further orders to be passed in this suit as also by the Copyright Board, an amount at the rate of Rs. 500/- per hour of the recorded music. It is directed that the plaintiffs before the commencement of broadcast, pay as ad hoc advance payment an amount of Rs. 2,75,000/-. This amount shall be adjusted at the end of the month and same process will be followed every month. It is clarified by consent of parties that this order is restricted to the Bangalore F.M. Radio Station of the plaintiffs. Liberty to apply in case the plaintiffs wants to start any other F.M. Radio Station at any other city. It is observed that the Copyright Board should be moved by the parties for decision, on the application filed by the plaintiffs before that Board, at an early date so that the dispute can be resolved in accordance with the Act. I hope and trust that in case such an application is moved, the Board shall consider it sympathetically."

7. On 2nd July, 2001, the Learned Judge on application of the parties pronounced the following clarifications:-

"Parties have moved for clarification of the order dated 28th June 2001. It is clarified that the Copyright Board, while deciding the application filed by the plaintiffs, obviously shall decide it on the basis of the material produced before it by the parties and shall not be influenced by the observations made in this order because these observations have been made only for the purpose of grant of ad-interim relief in favour of the plaintiffs."

8. It may be noted that PPL had filed a suit No. 1937 of 2001 in the Hon'ble High Court at Mumbai for a permanent injunction and order against the complainant to abstain from infringing the copyright of PPL.

9. In view of the order passed in Suit No. 2138 of 2001, no orders were passed in No. 2137 of 2001, except that the applicant was to apply to the Court in case it opened a new radio station.

10. The applicant took out further Notice of Motion No. 2932 of 2001 in Suit No. 2138 of 2001 seeking further relief. Hon'ble Justice F.I. Rebello granted permission to broadcast from another radio station on the same conditions as set out in the order dated 28th June, 2001. The order was:-

"Similar relief was sought for in the Notice of Motion No. 1440 of 2001 in this very suit. After hearing parties, learned Judge of this Court was pleased to pass an order on 28th June, 2001.

Reliefs sought for in the present motion are similar to the reliefs which were sought in the earlier motion. Considering that it will be just and proper that the relief also be granted in this motion in terms of the order of this court dated 28th June, 2001."

11. The complainant in Case No. 2 of 2002 is M/s. Entertainment Network (India) Ltd. The complainant was allotted time slots on the All India Radio, Mumbai and Delhi sometime in 1993 for playing Indian and foreign songs. This scheme has now been replaced by the current scheme under which private parties are allowed to establish F.M. radio stations. In July, 1993, PPL communicated to the complainant that their tariff was Rs. 1,500/- per hour per transmission per channel. PPL filed a suit No. 304 of 1993 against the complainant and some other broadcasters operating on AIR frequency in the Hon'ble High Court at Kolkata. The intention was to restrain them from infringing the copyright of PPL. The complainant filed an application before the Monopolies and Restrictive Trade Practices Commission under the provisions of Section 36A of the MRTP Act. But before the High Court or the MRTP Commission could give a decision the parties came to an out of court settlement on 22nd September, 1998. The material paras of the Consent Terms filed before the Hon'ble High Court are reproduced below:

"5. Both parties now have settled their respective disputes and have mutually negotiated a settlement on the following terms, which they have reduced into writing and recorded as herein.

i.      These Consent Terms shall be valid from the date hereof and shall continue to be binding on the parties hereto in full force and measure up to March 31, 2000 A.D., subject to the Defendant being in the business of operating F.M. radio service(s), from time to time.
 

ii.     The Defendant agrees to pay to the Plaintiff the following license fee for broadcasting of sound recordings of members of the Plaintiff, broadcast as part of the Defendant's various radio programmes, through the radio time-slots operated under the Defendant's F.M. radio service presently known as 'TIMES F.M.'.
 

iii.      It is mutually discussed and agreed that the Defendant shall pay and the Plaintiff shall accept the license fee as under, for such broadcasting of sound recordings of members of the Defendant for each centre across India, computed @ 38 minutes of actual needle time played during each hour (60 minute) duration of the programmes, being the agreed estimated song content per programme, as under:
   

I. The mutually agreed rate shall be Rs. 200 less 20% (i.e. Rs. 160/-) per needle hour from August 15, 1993 to July 31, 1996.
 

This payment shall be treated as arrears for the above period and shall be made within two weeks of the Order of this Hon'ble Court. The Defendant shall pay to the Plaintiff the difference in the amount of the royalty due as per the royalty computation rate specified herein and that which has been paid into the Special Office of this Hon'ble Court, in terms hereof. As mutually agreed, the Defendant shall retain the entire amount of the security deposit and the royalty amount shall be retained by the Plaintiff upon its return from this Hon'ble Court.

The special fees payable to such Special Officer of this Hon'ble Court, amounting to Rs. 1,200/- per month, shall be borne equally and jointly by both parties hereto. The said Special Officer of this Hon'ble Court has already appropriated dues payable to him at the above rate from the deposit maintained by the Complainant from January 1994 till March 1998 and the parties hereto agree to equally bear the total amount of Rs. 52,020/- (Rupees Fifty Two Thousand Twenty only) which has been deducted by the said Special Officer of this Hon'ble Court as also to bear any monies paid in pursuance thereof by the Plaintiff and appropriate credit/debit shall be given effect to as per actuals.

II. The mutually agreed rate shall be Rs. 200 less 20% (i.e. Rs. 160) per needle hour from August 1, 1996 to March 31, 2000 A.D. It is further mutually agreed that there shall be a 5% increase per annum in the above rate, for every financial year, starting from April 1, 1998 till March 31, 2000 A.D. All such payments shall be subject to the Defendant being in operation of its F.M. service, as per actuals. This amount shall be paid by the Defendant to the Plaintiff computed at the above rate from April 1, 1998 till 26.6.1998, being the date on which the Defendant's said F.M. radio service was on air, before being suspended, as per actuals. This payment shall be made within two weeks of the Order of this Hon'ble Court, in terms hereof.

The payment obligation by the Defendant as herein shall be revived immediately upon the scorning back on air with its F.M. radio service (Times F.M.), as per actuals. The amount payable, computed as above, shall be paid in advance on an on-going and annual basis, immediately upon the Defendant resuming F.M. operations. Such , payment to be made 15 days before commencement of the respective year. Difference, if any, between this amount paid and the actual royalty due shall be adjusted in the next following year.

iv. In pursuance of the above agreement and understanding, the Plaintiff shall withdraw the Suit No. 304 of 1993 filed by it against the Defendant and pending before this Hon'ble Court and the Defendant shall withdraw the appeal filed by it, being Appeal No. 1054 of 1993; pending before this Hon'ble Court, against the Plaintiff, within 3 weeks of the date of the Order of this Hon'ble Court, in terms hereof, subject to necessary procedures, since no cause of action as of now survives, between the Plaintiff and the Defendant.

v.     The Defendant shall provide cue sheets and a summary of cue sheets on a monthly basis for all separate centres respectively, starting from the month of resuming its F.M. operations.
 

vii      (sic) The starting date of all centres and the respective number of hours broadcast shall be intimated by the Defendant to the Plaintiff, along with any modifications to the above, if any, as may arise from time to time. All payments hereunder shall be as per actual radio broadcasts by Times F.M. from time to time.
 

viii.      The parties shall be bound by the terms aforesaid and shall comply with the same and shall also bear their own costs of litigation, respectively. 
 

7. The Defendant will co-operate with the Plaintiff in proceedings filed before the Monopolistic and Restrictive Trade Practices Commission, with a view to ensuring disposal of such proceedings in accordance with these Consent Terms. Similar Consent Terms are also being filed by the parties hereto before the Monopolies and Restrictive Trade Practices Commission. The Order of this Hon'ble Court in terms hereof shall also be filed with the said Monopolies and Restrictive Trade Practices Commission."

12. Thus the parties ended the dispute and the litigation by agreeing to a rate of Rs. 160/- per needle hour for the period between 15th August, 1993 to 21st July, 1996 and for 5% escalation every year. The agreement was to remain alive till 31st March, 2000.

13. In 1999, the Government invited tenders for the purpose of granting licence for private F.M. broadcasting services in 40 cities. The complainant in Case No. 2 of 2002 viz M/s. Entertainment Network (India) Ltd., was the successful bidder for 12 cities including Kolkata, Chennai, Mumbai, Delhi and Hyderabad. PPL communicated its tariff to M/s. Entertainment Network (India) Ltd. (In short EN). They had meetings as member of the Radio group but no agreement could be arrived at. The complainant considered the tariff fixed by PPL as unreasonable and has come to the Board seeking fixation of compensation payable to PPL.

14. In Case No. 3 of 2002, the complainant is M/s. Millenium Chennai Broadcast Pvt. Ltd. (in short MCB). MCB corresponded with PPL and had a meeting also but the parties could not agree to a rate. Hence, the complaint that the rates demanded by PPL are unreasonable.

15. In Case No. 4 of 2002, the complainant is M/s. Millenium Mumbai Broadcast Pvt. Ltd., (in short MMB) and the grounds and prayer are identical.

16. In case No. 5 of 2002, the complainant is M/s. Millenium Delhi Broadcast Pvt. Ltd. (in short MDB). It appears that MCB, MBB and MDB are having the same Board of Directors and may be called associated companies. Their grounds and prayers are also identical.

17. In case No, 6 of 2002, the complainant is M/s. Radio Mid Day West (India) Ltd. The grounds and prayers of M/s Radio Mid Day West are almost identical to the complaints in Case Nos. 3, 4 and 5 of 2002.

18. M/s. Music Broadcast Pvt. Ltd., the complainant in Case No. 1 of 2002 has taken the following pleas for fixation of compensation by the Board:

(i)     The rate of royalty fixed by PPL is economically unviable. Burdened with royalty at that rate it would incur losses and never recoup the investment.
 

(ii)     That in the out of court settlement between PPL on the one hand and some other broadcasters (PPL v. Benett Coleman & Co. Ltd.) PPL had agreed to a rate of Rs. 160 per clock hour, which comes to Rs. 101/- per needle hour. The out of court settlement subsisted till 31st March, 2000.
 

(iii)      That PPL should agree to charge royalty at the rates comparable to the rates agreed by Indian Performing Rights Society (IPRS).
 

(iv)      That PPL controls only one category of work while IPRS controls two classes of works.
 

(v)      That IPRS tariffs are much higher than those charged by PPL for identical categories of users.
 

(vi)      That by its refusal PPL is depriving millions of Indians of the benefit of F.M. radio stations.
 

(vii)      That it has offered to pay at the rate of Rs. 191/- per hour subject to reasonable parameters such as the category of city, the weightage of time slots and the duration for which music was actually paid over the radio in a given hour (needle time or needle hour) 
 

19. M/s. Entertainment Network (India) Ltd, complainant No. 2 of 2002 has suggested the following to form the basis for fixation of rates by the Board: -
   

(i)      In the recent past PPL has charged the complainant at the rate of Rs. 160/- per needle hour of music.
 

(ii)      PPL controls only one category of work being sound recordings and IPRS controls two categories, yet PPL is demanding almost double the rate agreed by IPRS.
 

(iii)      A comparison of various tariffs charged by IPRS and PPL for identical categories of users shows that IPRS tariffs are nearly always much higher than those charged by PPL.
 

(iv)      More than reasonable offers have been refused by PPL.
 

(v)      The complainant has obtained every licence at great expense from the Government and other agencies. If PPL persists in its demand, the complainant will be put to huge losses. It will discourage other parties from opening new F.M. Radio Stations and also cause Government huge losses.
 

(vi)      The complainant has entered into a licencing arrangement with IPRS on reasonable terms and the same consideration may form the basis for determining the royalty payable to PPL.
 

(vii)      Even if the Board directs that PPL should be paid royalty at the rates agreed by IPRS, the royalty would be much larger than what PPL had obtained from the complainant about 3 years ago.
 

(viii)      Refusal by PPL would deprive millions of Indians of the benefit of Radio Stations.
 

(ix)      The private radio industry in India is still in its infancy and will be killed if measures are not taken to encourage it. 
 

20. The complainant No. 3 (3 of 2002) MCB has proposed the following rates:-

 

 

21. To justify its proposal MCB gives the following reasons: -
   

(i)      It refers to the out of court settled in PPL v. Benett Coleman & Co. Ltd., in which Rs. 160/- per clock hour was the rate to which the parties agreed. If 38 minutes is the time during which music is played in one hour than the rate is Rs. 101/- per needle hour.
 

As the number of F.M. Radio Stations in Chennai will go up from 1 to 13 (11 Private and 2 Prasar Bharati), the amount has been reduced suitably.
 

(ii)      IPRS controls copyrights in public performances of both the musical and accompanying literary works and has offered an effective average needle rate of Rs. 70/- only.
 

(iii)      That by selling tapes and C.Ds of film music published before 31.12.2000, the members of PPL have already recovered their costs and continue to generate profits on the same.
 

(iv)      That when the members of PPL had paid for the rights of music acquired prior to 31.12.2000, they had not factored additional revenues from private F.M. Radio Stations.
 

(v)      Recognizing that the cost of acquiring rights for new film music has increased in the year 2000, it proposes to pay PPL a surcharge of 25% for film music released on or after 1.1.2000 (i.e. Rs. 31.25 per needle hour).
 

(vi)      For pop music, the rate proposed is Rs. 12.5 because it has low popularity.
 

(vii) In Chennai, 11 private broadcasters have been licensed. In addition, Prasar Bharati has 2 radio stations. The maximum number of radio stations in Chennai may go up to 50. This will generate intense competitions and may result in an extremely difficult operating environment.

(viii)      The licence fees that the radio companies have contracted to pay the Government are very high in comparison to the prevailing licence structure in other countries.
 

(ix)      The MCB can hope to break even after the 5th year and recoup the losses in the 7th year. It has given an estimated profitability statement which is reproduced below:-
  

  

  

 

 

(x)      Because Chennai will be having 13 radio stations at the needle rate of Rs. 31.25 offered by MCB, the defendant PPL will be earning Rs. 406.25 per hour from 13 radio stations:
 
 

(xi)      Radio is a poor man's medium and PPL is unreasonable burdening the radio industry. The music companies are rolling in wealth.
 

(xii)      Large number of members of PPL are foreign companies whose earning as fabulous.
 

(xiii)      The rates demanded by PPL should be comparable to those offered by IPRS - an average effective rate of Rs. 70/- per hour.
 

(xiv)      PPL's demand for revenue sharing is unreasonable. In several countries it is a fixed licence fee. The rate of 20% of revenue is unviable.
 

(xv)      That PPL has till date executed no revenue sharing contract with any broadcaster. Even from cinema halls, hotels, restaurants, bars, shops, airlines and railways etc., who pay a royalty fee it does not charge percentage of revenue.
 

(xvi)      PPL has been licencing All India Radio for about 50 years yet the licence is not based on revenue sharing.
 

(xvii)      In the USA, the radio companies do not pay any royalty to Recording Industry Association of America (RIAA).
 

(xviii)      By playing music owned by PPL, the radio industry popularises the songs and gives indirect publicity.
 

(xix)      MCB will purchase CDs and other materials to play the songs. It would be purchasing such material every year. 
 

22. Complainant No. 4 and 5, which are associate companies of No. 3, have adopted identical pleas and basis for determining compensation payable to PPL.
 

23. Complainant No. 6, M/s. Radio Mid Day West (India) Ltd., has proposed the following rates:-

 


 

For some categories, these rates are 2 times and for other 4 times the rates proposed by complainant No. 3, 4 and 5.
 

24. The basis for fixation of compensation suggested by Radio Mid Day West are similar and at places identical to those made by complainant No. 3, 4 and 5.
 

25. It is interesting to note that the average effective rate per needle hour charged by IPRS according to Radio Mid Day West is Rs. 81/- while according to complainant No. 3, 4 and 5 it comes to Rs. 70/- only. The table of calculation given by it is reproduced below:-
 

 

26. The defendant in all these complaints is PPL. Their pleas and reasons have the same basic note with six variations suiting the six complaints. Hence, they arc stated below in a collective manner and not complaint-wise:-
   

(i)      The requisite fees have not been paid hence the complaint should be rejected in limine. The fees to be paid should be in relation to the number of works to be licensed, i.e., Rs. 200/- per work and not Rs. 200/- for all the repertoire.
 

(ii)      Material facts regarding the place where cause of action arose have been concealed.
 

(iii)      The tariff rates had been published in the Gazette of India on 12th August, 2002 and on 6th September, 2000. The owners of the copyright deserved to be compensated for the use of their music.
 

(iv)      That in Suit No. 2138 of 2001, the Hon'ble High Court at Mumbai directed PPL to issue a licence to the complainant No. 1 on condition that the complainant furnishes a bank guarantee for a sum of Rs. 22,00,000/- at the rate of Rs. 1,000/- per needle hour (18 hours of sound recording played in 24 hours). The complainant was directed to pay to PPL at the rate of Rs. 500/- per needle hour every month and to give an ad hoc advance of Rs. 2,75,000/- which was to be adjusted at the end of the month and the same process would continue.
 

(v)      The purpose of the complainant is to conduct a lucrative business and earn substantial profits by broadcasting sound recordings administered by PPL.
 

(vi)      The tariff is fixed by PPL in the interest of its members after following the procedure prescribed by law.
 

(vii)      It is incorrect to suggest that if PPL does not reduce its rates the complainant would be forced to withdraw from the radio business.
 

(viii)      The dispute with Benett Coleman & Co. Ltd., (No. 304 of 1993) pertained to the provisions of the Copyright Act, prior to its amendment and pro liberalisation background. Mrs. Justice Ruma Pal had fixed an ad interim rate of Rs. 150/- per hour as against the then existing AIR rate of Rs. 40/- per hour (3.75 times more). The present rate of AIR is higher than Rs. 40/- per hour.
 

(ix)      IPRS does not control the rights over literary work per se but only the rights of musical works with or without words.
 

(x)      The sound recordings of the members of PPL is produced by technical innovations and contains the inputs and contributions of many artists, technicians, engineers, packagers and marketing men.
 

(xi)      The inputs and financial stakes of IPRS in the broadcasting revenues is insignificant as compared to the sound recordings of PPL.
 

(xii)      From the license given by IPRS, the complainant can only use the "tune" with or without the "words" and would require the services of singers and musicians to sing a song live over the microphone.
 

(xiii)      IPRS and PPL have distinct rights in law. The comparison sought to be made is untenable and irrational.
 

(xiv)      PPL's tariff is based on the business model of cost plus pricing and takes into account several factors.
 

(xv)      A study conducted by Economic Times Intelligence Group published by Benett Coleman & Co. Ltd in regard to the cost analysis for private F.M. Radio Industry provides a higher cost to PPL vis-vis IPRS, i.e. 2.6 crores to PPL as against 70 lacs to IPRS. It shows that experts think that royalty rates of PPL deserve to be much higher than those of IPRS. The table is reproduced below:
 
 

(xvi)      The government has taken into account the size and population of the city. Where the member of listeners is large 10 to 11 licences have been offered viz in Mumbai, Delhi, Kolkata, Chennai etc. In cities where listeners are less in number only one licence has been offered e.g., Bhubaneshwar, Cochin, Cuttack etc.
 

(xvii)      There is no public interest involved in the present complaint accept the commercial interest of the complainant.
 

(xviii)      The high quality of broadcast from F.M. radio allows the consumers to make their own recordings at home. This adversely affects the sale of music cassettes and CDs. It also deters the public from buying cassettes and CDs.
 

(xix)      Determination of fees must have regard to:
   

(a) Investments and risks undertake by the members of PPL. The success ratio is 10 to 15% of the releases.
 

(b) Value to the broadcasting companies of having blanket access to a large number of sound recordings.
 

(c) Globally many collective societies charge royalty as percentage of annual revenues of broadcasting organisation or minimum fees, whichever is higher. 
 

(xx)      PPL has considered the following aspects before arriving at its tariff:
   

(a) Average time spent on viewing television has increased and music listenership has gone down.
 

(b) F.M. radio stations directly and adversely affect the sale of music cassettes and CDs. PPL has quoted the following extract from a study conducted by E.T. Intelligence Group:-
  

  The negative aspect of so many radio stations is that listeners may not buy music cassettes, as they will get enough exposure to the music on radio itself. Some may even end up recording a song or two from the album as they may not find it worthwhile to buy the entire album.
 

As per the Report of M/s Arthur Anderson "Envisioning for Tomorrow" (March, 2001 Page 42 & 43) the turnover of the music industry is approximately Rs. 1250 crores. It is estimated that these Metropolitan and Major Cities approximately contribute 60% to 70% sales of Music Cassettes (MC) and Compact discs (CD). Hence even if 3-4% reduction in the sales on the above is taken into account, the total loss suffered by the members of the Defendant will be Rs. 37.5 Crores. If the loss is divided over 37 stations playing music 365 days for 24 hours with approximately 40 minutes of music per hour (16 hours of music per day), then the cost per hour payable by the Applicants would be Rs. 37,50,000/- or 37 x 365 x 16 = Rs. 1735/- per needle hour. In view of the estimated growth of music industry as per the Arthur Anderson Report Strategy and Vision (March, 2000 Page 47/48) - assuming the turnover of music industry would increase by 12.5% in the second year (12.5% increase over Rs. 1250 crores) then 3% loss would be Rs. 42 crores and if the aforesaid amount of Rs. 42 crores is divided over 45 stations (estimated increase from 37 stations to 45 stations), cost per needle hour would be Rs. 1598/- per hour. In the circumstances, the tariff of the Defendants at Rs. 1,500/- per needle hour is just proper.

The success of any media organisation be it television, print or radio depends upon the following in that order: -

A - Reach B - Content C - Marketing D - Sales It is submitted that in any media organisation higher weightage is given to Reach and Content and relatively lesser weightage is give to Marketing. The value of Sales function as per the norms of media organisation is clearly defined at 15% of the total revenue earned. It is submitted that the two functions viz. Reach and Content are equal in terms of importance since if the Reach of the media is good and Content is not good, it will not be successful. Similarly if the Content is good and the Reach is poor again the sales will be affected. The role of marketing is also important to promote the medium. However, as a matter of practice, the percentage of cost on marketing and promotion is not more than 5% of total revenue and may be stretched to 10% of revenue for its initial period. Therefore, the value of Reach and Content should be 100% 3/4 (15% (sales) + 10% (marketing)] = 75%. Considering that both Reach and Content are equally important they individually should get weightage of 75/2 = 37.5%. Assuming whilst not admitting that the cost of infrastructure to reach the public is high, out of 75% for Reach and Content, 50% can be assigned for Reach for setting up of infrastructure and balance 25% for Content. The cost of Content can be further divided into cost of basic content and cost of packaging. Therefore, even after providing for 5% towards the cost of packaging, the cost of basic Content works out to a minimum of 20% of total revenue. Accordingly, the tariff fee of Defendants at 20% of the net advertising revenue is also just and proper.

(c) In order to arrive at the estimates of revenue earnings of F.M. broadcasting companies through advertising, the following factors have to be assessed:

(i) total advertising market

(ii) present share of radio

(iii) percentage share of radio in the total market.

(iv) likely share of radio PPL has extracted and quoted the following tables and figures etc., from E.T. Knowledge series 2001-2002:

(Source: World Advertising Trends, Refer Page 12 of the ET Knowledge Series - Entertainment 2001-02) It is submitted that the present share of Radio as percentage to total advertisement spend is 2% as against 6.8% internationally and the same can be attributed to the following factors:-

(a)      Quality of transmission  (present  network is  either AM  or SW (short-wave) - Reception is of low quality.
 

(b)      Till date radio has been controlled by Government.
 

Now with the advent of private F.M. stations the radio market will undergo sea change and will grow at a faster rate. Assuming that over the period of next 5 years the radio market shall also reach the levels as in the developed economies, the share of advertising expenditure of radio is likely to go up as projected in the study. Even if we assume that only 50% of the total Ad Spend of the Radio medium comes to F.M. Radio stations and only 27, 37, & 50 F.M. radio stations commence operation by years 2002, 2003 & 2004 respectively, the Ad Spend per F.M. radio station i.e. the advertisement Revenue earned by F.M. Radio station is shown below: -

Thus from the consideration of revenue earnings of F.M. Radio stations from the use of sound Recordings PPL Tariff of Rs. 1500 per needle hour is just and proper.

(ii) Revenue Earnings of F.M. Radio Stations from the view point of "Air Time Utilisation": -

Air time utilisation is a term used to determine the amount of actual advertisement time sold by a radio station. IT is calculated as a ratio of actual revenues earned to the maximum or peak revenue i.e., if all ad slots were sold at the card rate.

For the purpose of calculations, the following A.I.R. card rates (Rs.per 10 Second Ad Slot) are taken: -

Prime Time Rs. 800 Standard Time Rs. 500 Over night Rs. 100 The total ad revenue earning capacity based on 10 minutes Ad time in an hour i.e., 60 Ad slots of 10 second is show below:

 Prime time 6 Hrs in a day 800 x 600		= Rs. 2,88,000
Standard Time 13 Hrs in a day 500 x 13 x 60	= Rs. 3,90,000
Over Night Time 5 Hrs in a day 100 x 5 x 60	= Rs. 30,000

		Total:				= Rs. 7,08,000
 

As per the study undertaken by the Economic Times Intelligence Group (ETIG) (Refer the E T Knowledge Series - Entertainment, Page 142) the Air time utilization during 1997-1999 from non F.M. channels on A.I.R was between 8% and 11% and the utilization for F.M. channels was 27.5% when Private F.M. Channels were operating, and between 6% to 14% when A.I.R. F.M. was operating. The Defendants stated that in any event the advertisement card rates charged by the complainant are higher than the AIR Card rates.

'The table below shows the Revenue earnings per day, for different Air time Utilisation rates and PPL's share at 20% of ad revenue: -

From the above, it is seen that even if the moderate figure of 20% Air Time Utilisation is achieved, the likely revenues for the F.M. Radio station is Rs. 1,41,600/- and the defendant's share at 20% comes to Rs. 28,320 per day or Rs. 1,573 per needle hour. Thus the tariff of Rs. 1,500/- per hour is justified on the above consideration also.

(d) The All India Radio, a public service organisation and an integral part of the Government of India, is in a class by itself and cannot be compared to a commercial organisation.

(e) Advertisement rates charged by the complainants in the year 2002 are substantially higher than those charged in 1997. The complainants must produce their rate cards.

(f) The complainants are running the F.M. radio station not for philanthropic cause but for earning profit and for this purpose, the sound recordings of PPL are their mainstay. The listener is neither paying nor is expected to pay.

27. On behalf of the complainants in Case No. 1 of 2002, Shri Parvin Anand, advocate presented oral arguments. He also made a PowerPoint presentation which was helpful in elucidating and understanding the whole case. Summarising the history of events proceeding the present complaints, he submitted that the government has issued 37 licences in different parts of the country covering 19 cities. This was in furtherance of the government policy to open broadcasting and allow private sector to participate in it. Previously, the All India Radio which is owned and controlled by the government had a monopoly in all broadcasting.

28. Shri Anand presented the testimony of Shri Paul William Kempton before the United States Copyright Office. Discussing whether the royalty rates for performance of sound recordings should be more or less than the rates for musical compositions Shri Kempton gave the opinion that "royalty rates for performance of sound recordings are no higher, and indeed, are generally set lower than royalty rates for the musical compositions." Shri Kempton further submitted that "the absolute value attributed to the two performance rights depends on a particular interplay of economic and legal factors within the particular territory. This may affect the comparisons of rates set for the same performance right in different jurisdictions." He desisted from making any assessment as to whether the sound recording right is of any less intrinsic legal value than the musical composition right and opined that an attempt to demonstrate that such a hierarchy exists or to make a relative valuation on this basis would lead to an area of subjective impressions. He gave a country-wise table showing the rates of musical and sound recordings: -

29. Another testimony submitted for consideration of the Copyright Board was that of Shri Michael Fine tendered before the United States Copyright Office. In the opinion of the learned expert, the radio airplay of music has a powerful promotional effect on the sale of sound recordings - the more a song is played on the radio, the greater the sale of recordings that include that song. Radio airplay brings about consumer awareness of artists, new songs and album releases and motivates the music consumers to make album purchasing decisions. Radio advertising influences those who purchase pre-recorded music. It is a well-known fact that radio companies pay to independent promoters to promote radio airplay.

30. Another testimony cited before the Board was that of Adam B-Jaffe before the United States Copyright Office. The view expressed by the learned expert includes the following:-

"It is typically not possible to determine the reasonable or competitive fee level on the basis of the fundamentals underlying costs and benefits. The fundamental indeterminacy of a reasonable fee is common with respect to the valuation of intellectual property, because the cost of providing the property to an additional user is essentially zero, while the value of the property to the user is in extricably interwoven with other components of the user's product or service. For these reasons it is common..... for royalties for the use of copyrights, patents and other intellectual property to be established by "comparables' and "benchmarks" rather than derived from explicit cost or value considerations."

The expert admitted that in the presence of good information, there will always be a range of buyer variations and that there was no demonstrably reasonable benchmark rates. For sound recordings, the fee paid in musical works can be a starting point. Especially in the context of the newness in the media and the small number of licences a reasonable benchmark cannot be pointed out. Referring to the practice of fixing royalty rates in terms of revenue Shri Jaffe stated that the reason that revenue was used as the basis for royalties in intellectual property agreements was that it was relatively easy to measure. In his opinion, the promotional value of the public performances or airplay by broadcasters is greater to the owners of sound recording copyrights. A broadcast stimulates sales of albums. Thus the "total consideration" that is likely to correspond to the value of the performance of the underlying musical work or sound recording is the sum of two components - a royalty paid plus the promotional value. According to the information of the expert, France was the only country in which royalty for the performance of sound recordings is higher than the royalty for the performance of musical works.

31. Shri Parvin Anand addressing the Board stated that PPL had fixed royalty rates at a very high level. They were demanding Rs. 1,500 per hour of recorded music or 20% of net advertising revenue, whichever is higher. The rates were published in the Government of India Gazette on 12.08.2000 and PPL communicated it to ail the new F.M. radio stations. Complainant No. 1 proposed a rate of Rs. 191 per hour of recorded of music (needle hour). This rate is based on the statement that PPL entered into Benett Coleman & Co. Ltd., in order to settle a court case pending before the Kolkata High Court. The complainant states that the agreed rate in the Benett Coleman case was Rs. 160 per needle hour. This the complainant has adjusted applying certain factors and thinks that the proposed rate of Rs. 191 per needle hour is the most reasonable. According to the complainant, while determining a rate, weightage is to be given to: -

(i)      Density - which means the catchment audience or the number of persons living in the area in which the programme is broadcasted.
 

(ii)      Time band - rate should be 100% for the prime 4 hours - should be 50% less for standard 12 hours and only 25% of the prime rate for the 8 lean hours at night.
 

(iii)      Needle hour - is the actual time during which the licenced music is played. From the clock hour the time taken for talks, announcements and advertisements is excluded. 
 

32. It was further argued that the rates proposed by PPL are economically unviable for private F.M. radio stations. Section 31(1)(b) vests in the Copyright Board the power to consider a complaint made under that clause and after giving the parties a reasonable opportunity of being heard and holding such enquiry as it may deem necessary on being satisfied that the grounds for such refusal are not reasonable direct the Registrar to grant a licence subject to such terms and conditions as the Copyright Board may determine and subject to payment to the owner of such compensation as the Board may determine. Hence, this enquiry is for determining reasonable compensation and other terms and conditions.

33. Compensation may be given in different ways. It may be an annual lump sum, it may be needle hour rate, it may be a percentage of net advertising revenue or it may be per performance or per song. It was suggested that there are various methods for valuation. The cost method in which the replacement cost is assessed or the cost of creating equivalent asset is determined is one of the ways. But this method is not useful in case of intellectual property because the amount spent on creation of a work may have little or no relation to the value attached to it. The endorsement by a well-known author or critic may boost the sales of a work overnight. Another method is to view current market transactions of comparable assets. Another method is the royalty rate or income method in which the income producing capacity of the property is taken into consideration. In case of intellectual property, the only method that could be just and equitable could be the determination of rate on the basis of comparable rights or benchmarks. At present, there are three rates available for comparison: -

(a)      The All India Radio rate as on the date of application;
 

(b)      The Benett Coleman & Co. Ltd., rate suitably adjusted for inflation etc., and
 

(c)      The IPRS agreed rate with a base of Rs. 250. 
 

34. It was further argued that the Copyright Act protects the rights of creators as also the rights of the entrepreneurs. The rights of the creator, for example, are embodied in Section 14(c)(i)(iv) and that of the entrepreneurs are indicated in Sub- Clause (v) and (vi). Another example of this may be Clause (d) and (e) of Section 14.

35. PPL, the defendant, has a limited membership. They represent only 63 music companies. The IPRS apart from artists represents 210 record companies. Citing the testimonies of Kempton and Jaffe etc., discussed above in para 28, 29 and 30, it was suggested that the composer and lyricist collection societies charge royalties at a higher rate than sound recording collection societies. Even in India, the IPRS rates for certain category users are higher than PPL. It was further argued that PPL does not have to bear a high infrastructure cost. On the other hand, as the radio industry has peculiar difficulties, the Board should keep in mind the high licence fee in determining reasonable compensation. The All India Radio has a much greater reach as compared to the private KM. stations. Hence, there is no reason for the AIR rate to be lower. The record companies get adequately compensated by increased sales due to radio airplay thus they get free publicity for their products. The IPRS member are creators and they have a higher right as compared to the entrepreneurs whose inputs are monetary and therefore their rights are inferior. Quoting from a decision of Copyright Tribunal of UK in AIRC and Anr. v. PPL and BBC, [1994] R.P.C. 143, the counsel attempted to establish that airplay creates and encourages sales of albums and sound recordings.

36. In most of the countries in the world, royalties are paid as a percentage of revenue. Again quoting the AIRC case (cited in para 35 above), it was stated that revenue based tariff is an over simplification and is a very imperfect measure. The revenue on which the royalty is based is created by the entire broadcast output of a station and its promotion of itself and its image as an advertising media. Music is only a part of this. The F.M. radio stations are providing free publicity to the products of PPL. By such publicity the sale of the sound recordings will definitely increase. The loss, which the defendants estimate, is owing to piracy and not because of the radio stations. If 20% of the net advertising revenue were given to PPL, almost nothing would be left for the radio stations because they have to pay other music companies also such as T-Series and South India Music Companies Association (SIMCA).

37. Shri Pradeep Sancheti, advocate presented the case for Entertainment Network (India) Limited who are the complainant in Case No. 2 of 2002. Shri Sancheti submitted that there is no direct guide to what constitutes reasonableness under subsection (1) of Section 31. The further submissions were as follows: -

Rule 11-D of the Copyright Rules throws some light on what should be the parameters in determination of reasonableness. The prevailing standard of royalty worldwide should be taken into consideration for determination of royalty by the Copyright Board. PPL had submitted that the Board should take into consideration the likely loss of revenue, the cost of making a musical work and the revenue earnings of F.M. radio stations into consideration for determining royalty. According to the complainant, the information given by PPL is presumptive and not factual. The complainant felt that Rs. 160 per needle hour should be the headline rate that was a basis of settlement between PPL and Benett Coleman & Co. Ltd., while withdrawing the case before the Kolkata High Court. The agreement that various radio stations have entered into with the IPRS should be taken into consideration for coming to the conclusion as to what should be the reasonable rate. He dissected the factual statement made by PPL and said that there is no basis to form the premise that the value of contents (musical works) should be 20%. It was, further, submitted that the statements regarding expenditure on advertisement is flawed. Based on the Benett Coleman & Co. Ltd. Agreement with a suitable multiplier for inflation, the reasonable rate would be Rs. 191 per needle hour. If the AIR rate is similarly updated, the result would be almost the same.

38. On behalf of the complainant No. 3, 4 and 5, Shri Himanshu Kane, advocate put forth the following: -

The paragraph below Clause (b) of Sub-section (1) of Section 31 speaks of payment to the owner of copyright of such compensation ...... as the Copyright Board may determine. He said that compensation should be just equivalent. According to the complainant, compensation is something which is given to make good the loss suffered by a party. PPL has not given any facts showing that PPL is suffering any loss due to broadcasting. Hence, it is doubtful whether they are entitled to any compensation. The complainant supported the submissions made by the complainant No. 1 & 2 and expressed that the foundation for determination of reasonable rates as suggested by them is equitable and should be followed. The complainant laid great stress on the agreement which they have executed with IPRS and expressed the view that they would be happy if the same rates are applied in case of the sound recordings belonging to PPL. The complainant did not favour any scheme in which PPL would share in the revenues or profit of the complainant. The complainant specifically referred to the defendant's affidavit and stated that the sum of Rs. 14,000 crores which is taken as a basis of Ad Spend is completely wrong. The complainant emphasised that they have to pay Rs. 9.75 crores as licence fee for the radio station at Mumbai, which will grow every year and reach Rs. 34 crores in the 10th year. It was submitted that this heavy burden of licence fee should be taken into consideration by the Copyright Board for determining the reasonable rates.

39. Counsel for complainant No. 6 Shri Navroze Seervai stated that the Board under Section 31 acts as a protector of public interest. The Board has to keep in mind the policy of the government in allowing private radio stations and that all authorities should see that they flourish and did not perish. In order to determine reasonable compensation there have to be some comparators. It was admitted by the counsel that at present, we have hardly any facts and figures that may form solid basis for determination of rates. The facts and figures are either wholly lacking or are woefully inadequate. KM. channels are serving the same parties as Prasar Bharati or All India Radio F.M. channels. Hence, the rates fixed for these may be taken as comparators. The rates may be used only as a comparator because absolute parity between the two is neither claimed nor necessary. A rate that is slightly higher than the AIR rate may not be unreasonable. The complainant stressed that the new fledgling institution (the radio stations) need some help from the Copyright Board. The F.M. stations have just come into existence and in their infancy they need support. Referring to the agreement between PPL and AIR etc., executed into 2002, it was stated that the rates fixed for the metro cities and mini metres was Rs. 90 while the smaller metros, it was Rs. 100 (This interpretation was disputed by PPL which said that the rates are as stated in the agreement, Rs. 450 for each one of the metros and mini metros and Rs. 400 for each one of the smaller cities). It was further submitted that the F.M. stations should not be asked to give security for advance payment. The counsel argued at length favouring the IPRS model of agreement in which the rates are Rs. 250, Rs. 200 and Rs. 125 depending on the city and time slots. The average rate comes to Rs. 125. If converted into the daily payment, it comes to Rs. 3000 for the whole day.

40. The Copyright Board after hearing the arguments for the first day, found that there were certain aspects which had not been dealt by the parties in their pleadings. In order to bring their attention to those points, the Board gave a questionnaire to all the parties and requested them to offer their views in writing or orally. The questionnaire is reproduced below: -

The Board would like the learned counsels to present their views and give information in regard to the following: -

1. (a) In view of Section 31, the Board has jurisdiction in regard to Indian works. "Indian work" has been defined in Section 2(d) and the definition has been enlarged by the Explanation given below Section 31(1). PPL has in its repertory foreign works also. Is the Board empowered to give direction covering a foreign work?

(b) What is the effect of the proviso to sub Section (2) of Section 34?

2. The complaints and replies are mainly concerned with the rates to be fixed. Section 31 empowers the Board to lay down such other terms and conditions as it may determine. What should be such terms and conditions?

3. Calculated at the rate fixed by the Hon'ble High Court at Bombay (or at Kolkata) the Royalties paid constituted what percentage of the gross advertising revenue (including sponsorship) in the financial year 2001-02. (for each station separately)

4. What should be the effective date from which the rates determined by the Board be made applicable?

5. (a) Should the rates be backdated (given retrospective effect)

(b) If so, from what date or dates?

6. Has PPL entered into an agreement with All India Radio and Prasar Bharati in July, 2002? If so, whether the rates can be used as a benchmark?

7. What would be the most simple and hassle free basis for assessing royalty?

(a) Actual audience size and needle time.

(b) Catchment (audience) size and needle time.

(c) Gross broadcasting revenue

(d) Net broadcasting revenue (Gross broadcasting revenue minus standard deduction)

(e) Profits (before tax)

(f) Any other

8. (a) Should the rate structure be uniform for all broadcasting stations and also in regard to the hours of the day (morning, evening, late night)? Single Hat Rate

(b) If not what should be the factors depending on which the applicable rates may be more or less? (graduated tariff)

9. (a) Should there be a ceiling in terms of money? (b) If so, what should be the amount?

10. (a) Should there be a minimum payable amount also? (b) If so what should be the amount?

11. (a) Should relief or concession be given to small stations?

(b) How to define a small station?

(c) Should all stations be graded?

(d) What should be the basis of grading?

(e) How is the concession to be calculated?

(f) Should relief be given to those stations which play PPL recordings for less than a fixed percentage of time? e.g. less than 20% of airtime?

12. (a) Should there be concessionary start up rates for new stations?

(b) If so, should it be for one year or more from the date of operation?

13. Do you think that as the rates are being fixed for the first time the licence should be for one year? By that time, more data will be available - earnings by PPL, Balance Sheet and Profit and Loss Accounts of the Broadcasting companies etc -. These are not available at present. Next time the licence may be for a longer duration. This will provide a self-correcting mechanism.

14. (a) Should the stations be directed to deposit a certain sum in advance in the name of PPL from which PPL may deduct their monthly bill?

(b) What should be the amount?

15. (a) If a station does not pay the monthly bill, PPL should have a right to withdraw the licence?

(b) At what stage, PPL will have the right to switch off.

16. Should the billing be monthly or quarterly or at any other intervals? 17.

If the royalty is determined as a percentage of advertising revenue, should it be determined annually, six monthly or quarterly? How is it to be related to payment by a station to PPL? (e.g. Within 30 days at the end of each quarter)

18. (a) What were the gross broadcasting revenue of the Radio industry during the financial year 2001-02?

(b) What were the gross broadcasting revenue of your station during the financial year 2001-02?

19. (a) How many F.M. stations were functioning in your licensed territory during 2001-02?

(b) How many licences have been issued?

(c) How many have come into operation after March, 2002?

20. What should be the fee payable by the complainant and at what stage?

41. Shri. Virendra Tulzapurkar, advocate represented the defendant in all the 6 cases before the Copyright Board. The defendant was common in all these cases namely M/s Phonographic Performance Limited which has earlier been referred as PPL. The learned counsel analysed the various provisions of the Copyright Act and put forth his views in a clear, lucid and forceful manner. The submissions made may be summarised as under: -

Each complaint arises from the inability of two business persons namely the complainant and the PPL to come to an agreement in regard to payment of royalty. They have approached the Board for fixation of royalty. The function of the Board in this case is to decide as to what should be the reasonable rate of royalty. Before undertaking to do that, Section 31 has to be read and interpreted. Section 31 would be attracted only where PPL has withheld a work from the public. This may be done by refusal to republish or refusal to allow the republication of a work. If the terms offered by PPL are unreasonable, then only the Board gets jurisdiction to entertain the matter. The present case being a case of competition between two businessmen, the Board has no jurisdiction to intervene. The counsel laid stress and argued that under Section 31, whoever comes before the Board must establish that the rates are not reasonable. It was further submitted that the burden lies on the complainant to show that the rates and the terms offered by PPL are unreasonable and in all the six cases the burden has not been discharged by the complainants. It was also urged that Sub-section (2) of Section 31 is applicable to the case and under that sub-section compulsory licence can be granted only to one of the complainants and not to all The Copyright Board will have to determine which complainant would best serve the interest of the general public. The one who is preferred by the Copyright Board will alone be entitled to the licence at the rate fixed by the Board. All others will have to go to PPL and enter into an agreement on such terms as may be agreed upon between them.

42. Referring to the arguments submitted by the complainants, Shri Virendra Tulzapurkar submitted that the rates agreed between PPL and Benett Coleman & Co. Ltd., were part of a settlement in 1998 by which a case was withdrawn. When a party comes to an out of court settlement concerning a pending litigation, the pressures and deciding factors are multifarious. After withdrawal of litigation Benett Coleman & Co. Ltd has become a member of PPL. This was one important factor for having agreed to a lower rate. Demolishing the proposal that IPRS agreement should be taken as a comparator, it was submitted that the nature of the two licences are totally different. IPRS has nothing to do with sound recordings. PPL does not grant identical licences. It was pointed out that Justice Ruma Pal in the interim order which she passed as a Judge of the Kolkata High Court had rejected the comparison.

43. Disputing that the AIR rate be taken as the benchmark, it was submitted that the private F.M. radio stations and AIR Prasar Bharati and F.M. radio stations of AIR are not on the same footing. AIR is not paying any royalty to IPRS. AIR, being an organ of the government has to perform several functions which include encouraging upcoming artists, employing well-known artists, promoting classical music and bringing folk songs and folk music to the ears of the listeners.

44. The complainants had put forth that the F.M. radio stations were in their infancy and needed support. The defendant felt that the request for support on the basis of infancy must show some acceptable ground. A mere statement repeated many times could not be enough justification. The complainants must show how much advertisement revenues they are earning and what are their profits. They must produce facts within their power so that the Board is able to calculate and not speculate. PPL has produced a rate card of some of the F.M. stations showing the rate at which they accept advertisements. The rate card shows how much is to be paid for a 30 second or one minute slot. The rates vary according to the time. The prime time rates are the highest. But the figures of actual earnings being in the power and possession of the complainants it was their duty to submit.

45. If the agreed rates between AIR and PPL are to form the basis for calculating royalty then the rates fixed in 2002 may be taken as the basis and then multiplied by 3.75, because in 1993 the Kolkata High Court in its interim order fixed a rate which was 3.75 times the prevailing rate with AIR at that time.

46. Referring to the arguments of the complainants that while fixing the rates the cost of acquisition by PPL is not a factor that is relevant. The counsel pointed out that the complainants at the same time urged that their cost of acquisition is relevant and it should be taken into consideration. The complainants have repeatedly stated that they have to pay a very high licence fee and urged the Board to take into consideration the heavy burden imposed by the licence fee and prayed for a lower rate so that the burden does not break them. Taking this argument further the counsel stated that the complainants should come forward and state that in case, the licence fee is reduced they would agree for an upward revision of the royalty rates.

47. The object of Section 31 according to the defendant is to allow the members of public to participate in the culture of the country and listen to the music. The object of Section 31 is not to see that the F.M. stations are able to make profit.

48. On the point of Court fee, it was argued that each musical works is a work for the purpose of payment of Court fee and for each musical works the complainant must deposit a Court fee of Rs. 200. Answering the submission of the complainants especially complainant No. 1, that the right of the creator is higher and that of others stand on a lower pedestal it was pointed out that the Copyright Act enacted by our Parliament does not make a distinction between the rights of the creator and the rights of others. They are on exactly the same footing.

49. Referring to Article 27 of "Universal Declaration of Human Rights", the counsel stated that everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic provision of which he is the author. According to the defendant, the Board must give effect to Article 27 of the Universal Declaration of Human Rights and allow the owners of the copyright to reap the benefit fully. Referring to a decision of this Board in Pune tydeo Theatres Association v. Cinemaster delivered on 29th August, 2001 and reported in (2002) 24 PTC 242, it was submitted that the present complaints are not maintainable. The Board's earlier decision is applicable to the present situation and the complaints on that basis deserve to be dismissed. The defendant referred to a decision by the Hon'ble Supreme Court namely, IPR Society v. EIMP Association, AIR 1977 SC 1443, The defendant stated that according to that decision in case of a sound recording the only person who has a right is PPL. IPRS has no right in a sound recording which is separate and not contained in a cinematograph film. Sound recording is an entirely different product and has been so defined under Section 2(xx). The defendant drew the attention of Copyright Board to the fact that members of IPRS do not pay anything for acquiring property, while members of the PPL have to spent a fortune for acquisition of rights in a sound recording.

50. The defendant felt that the music broadcast mix in India is totally different from the Western world. The music industry in the West is entirely different from that in India. In India, film music or musical compositions of a film attract a very large number of listeners. Their value is much more compared to other musical works. It should be borne in mind that our Copyright Act makes no distinction between primary and secondary or neighbouring rights. Hence, foreign rates are not comparable. The defendant urged the Board to recognise the fact that the AIR, is not driven by profit motive. Similarly, Prasar Bharati though broadcasting advertisements is not driven by the sole purpose of earning profits. The purpose of AIR and that of the complainants are as different as chalk and cheese. The complainants had produced a part of a table appearing in an Annual Report of the Ministry of Information & Broadcasting which pertains to Prasar Bharati. The defendant argued that the complainants have purposely withheld other information from the Board.

51. The complainants have not disputed the rate card produced by the defendant and it must be taken for estimating how much revenue they are earning. In the view of the defendant, the only material available with the Board is the rate contained in the agreement between the defendant and the AIR which for the metro cities is Rs. 450. This rate should be suitably multiplied. The multiplier taken by the Kolkata High Court was Rs. 3.75. This should be enhanced because at that time, the F.M. radio stations were on air for only 7 hours a day. Now they are earning advertisements even during lean time. The complainants have stressed the points that they will be able to break even only in the 7th year. Answering the point, the defendant stated that whether the complainants are making profit or not is not the concern of the Board. Moreover, the figures supplied by the complainants are hypothetical. If the complainants have of their own volition paid a sum of Rs. 9.75 crores for obtaining a licence and agreed to an increase of 15% every year then they must have made some calculation and if they have committed a commercial error then it is no part of the jurisdiction of the Board to come to their help. Some of the complainants had doubted the veracity and the bona fides of the agreement between AIR and PPL executed in the year 2002. The defendant informed the Board that the negotiations with AIR were going on since 1999 and have been finalised only in the year 2002. Referring to the testimonies of some foreign experts submitted on behalf of the complainant in Case No. 1 of 2002, the defendant argued that the opinion of the experts are based on particular facts and circumstances. Our circumstances and law are completely different and hence their observations are inapplicable in the Indian situation.

52. We have paid utmost consideration to the pleadings of the parties and to the submissions made by the learned counsels. We are conscious that the question of determining compensation has come up before the Board for the first time. We have therefore tried to understand the problem by ourselves undertaking some search and study. We will first examine the two preliminary objections taken by the defendant (i) in regard to jurisdiction and (ii) in regard to payment of fees.

53. These complaints have been lodged under Section 31(1)(b) of the Copyright Act, 1957. Section 31 reads as under:

   

 31.     Compulsory licence in works withheld from public
   

(1)      If at any time during the term of copyright in any Indian work which has been published or performed in public, a complaint is made to the Copyright Board that the owner of copyright in the work -
   

(a) has refused to re-publish or allow the re-publication of the work or has refused to allow the performance in public of the work, and by reason of such refusal the work is withheld from the public; or
 

(b) has refused to allow communication to the public by broadcast, of such work or in the case of a sound recording the work recorded in such sound recording, on terms which the complainant considers reasonable; the Copyright Board, after giving to the owner of the copyright in the work a reasonable opportunity of being heard and after holding such inquiry as it may deem necessary, may, if it is satisfied that the grounds for such refusal are not reasonable, direct the Registrar of Copyrights to grant to the complainant a licence to republish the work, perform the work in public or communicate the work to the public by broadcast, as the case may be, subject to payment to the owner of the copyright of such compensation and subject to such other terms and conditions as the Copyright Board may determine; and thereupon the Registrar of Copyrights shall grant the licence to the complainant in accordance with the directions of the Copyright Board, on payment of such fee as may be prescribed.

Explanation: In this sub-section, the expression "Indian work" includes-

(i) an artistic work, the author of which is a citizen of India; and

(j) a cinematograph film or a sound recording made or, manufactured in India.

(2)      Where two or more persons have made a complaint under Sub-section (1), the licence shall be granted to the complainant who in the opinion of the Copyright Board would best serve the interests of the general public.  
 

54. The Board has jurisdiction to direct the Registrar of Copyrights to grant to the complainant a licence to communicate the work to the public by broadcast. But before the jurisdiction can be invoked, the following facts and conditions must exist:
   

(a)      the work is an Indian work;
 

(b)      the work has been published or performed in public, i.e. it must be an existing work and not a future work yet to be created.
 

(c)      the owner of copyright has refused to allow communication to the public by broadcast of such work or sound recording on terms which the complainant considers reasonable.
 

(d)      a complaint is made to the Copyright Board, 
 

55. In the present cases, all the four situations coexist The works are all Indian works which have been published and the terms offered by PPL are such which are considered by the complainants as unreasonable.
 

56. After these conditions precedent have been fulfilled, the Copyright Board is to hold such inquiry as it may deem necessary and may pass an order if it is satisfied that the grounds for such refusal are not reasonable. The next step to be taken by the Board is directing the Registrar of Copyrights to grant to the complainant a licence subject to payment to the owner of the copyright of such compensation as the board may determine and subject to such terms and conditions as the Board may decide. The Registrar will grant the licence on payment of such fees as may be prescribed.

57. Section 31 mandates that the Board shall hold such inquiry as it may deem necessary. The Board cannot form an opinion on the basis of surmises or guess work. It must base its opinion on hard facts and use scientific method. In arriving at a conclusion a tribunal must take into account relevant considerations and must not take into account irrelevant considerations. A decision based on irrelevant considerations is invalid (S.P. Agrawal v. Union of India, AIR 1991 SC 814). An order made is invalid when there is nothing on record to support it (Nepal Singh v. State of U.P. AIR 1985 SC 84).

58. The duty entrusted to the Board is similar to that of a regulatory authority like the Telecom Regulatory Authority of India or the Electricity Regulatory Authority. It may also be compared to Agriculture Prices Commission. The Board has to take into account the cost of the inputs, capital involved, risks undertaken, the intellectual property rights of individuals, the benefit accruing to the public and all other relevant factors and try to strike a judicious balance between the claims and interests of the parties.

59. There is a clear distinction between Section 31(1)(a) and Section 31(1)(b). For invoking Section 31(1)(a), the prerequisite is that by reason of the refusal of the copyright owner, the work is withheld from the public. The words withheld from the public do not occur in Section 31(1)(b). Hence, for invoking Section 31(1)(b), it is not a prerequisite that the work should be withheld from the public. While construing Section 31(1)(b) we cannot read into it the words and conditions of Section 31(1)(a) which the legislation has chosen not to include in Section 31(1)(b). In the light of the specific reference to the words withheld from the public occurring in Section 31(1)(a), and their specific absence in Section 31(1)(b), the argument of PPL is misconceived and is contrary to all canons of statutory interpretation. It would not only violate the basic principle of interpretation that plain and unambiguous words must be interpreted according to their ordinary meaning, but would entail reading words into the sub-section which the Parliament has not put in it. The intention of the legislature is to be gathered from the language used, which means that attention should be paid to what has been said as also to what has not been said (Institute of Chartered Accountants v. Price Waterhouse, AIR 1998 SC 74). It has been laid down in Shyam Kishori Devi v. Patna Muncipal Corporation, AIR 1966 SC 74 that it is contrary to all rules of construction to read words into an Act when it is absolutely unnecessary to do so.

60. It is precisely for this reason i.e. withholding from the public not being a prerequisite for attracting of Section 31(1)(b), that Section 31 has been divided into two sub-sections. And for this reason, the earlier decision of the Board in Pune Video Theatres Association v. Cinemaster, (2002) 24 PTC 242 is distinguishable and not applicable. The complaint in that case pertained to exhibition of cinematograph films while Section 31(1)(b) is related to sound recordings and broadcast. The two are separate and distinct. Publication or performance of the work in public is the subject matter of Section 31(1)(a). The subject matter of Section 31(1)(b) is communication to the public of a work or a sound recording by way of broadcast, which is different from that of Section 31(1)(a). Hence, the ratio decidendi of Pune Video case in regard to the requirement of withholding from the public is restricted in its applicable to Section 31(1)(a).

61. Independently of the aforesaid, the said case is wholly distinguishable from the present cases under consideration in view of the fact that in that case there were several other parties to whom the defendants in that case had already granted a licence at the royalty rates demanded from the complainants. Some of the complainants in that case had entered into an agreement but wanted a further concessional rate and had approached the Board for a compulsory licence.

62. The submission of the defendant that only one person may be granted a licence is not sustainable. In the beginning portion of Section 31(1) the words used are "copyright in any Indian work". As defined in Section 2(1)," 'Indian work' means a literary, dramatic or musical work,--

(i)      the author of which is a citizen of India; or 
 

(ii)      which is first published in India; or
 

(iv)     the author of which, in the case of an unpublished work, is, at the time of the making of the work, a citizen of India." 
 

63. The explanation to Section 31 has further enlarged the meaning of "Indian work" to include an artistic work, a cinematograph film and a sound recording. When such a work is permitted to be published under a compulsory licence granted by the Copyright Board, the publisher must have an exclusive right otherwise after spending a lot of money on publication and incorporating considerable cost in publicity of the work other persons may reap the benefit by obtaining licence from the Board. Thus, the provisions of Sub-section (2) of the Section 31 in their very nature are applicable only to those cases which fall within Clause (a) of Sub-section (1). It is well known that our Copyright Act is not very happily drafted. The Supreme Court itself observed in IPR Society v. E.I.M.P Association, AIR 1977 SC 1443 ; "The copyright law in our country is fairly complicated because of its involved language in which some of its provisions are couched."

64. A reference to the earlier provision here would clarify the issue. Chapter 7 of the Copyright Act, 1957 has been substituted by Act 38 of 1994 with effect from 10.05.1995. The earlier provisions, which are relevant in this context, are Sections 33, 34 and 35. They are reproduced below: -

"33. Performing rights society to file statements of fees, charges and royalties.

(1) Every performing rights society shall, within the prescribed time and in the prescribed manner, prepare, publish and file with the Registrar of Copyrights, statements of all fees, charges or royalties which it proposes to collect for the grant of licences for performance in public of works in respect of which it has authority to grant such licences.

(2) If any such society fails to prepare, publish or file with the Registrar of Copyrights the statements referred to in Sub-section (1) in relation to any work in accordance with the provisions of that sub-section, no action or other proceeding to enforce any remedy, civil or criminal, for infringement of the performing rights in that work shall be commenced except with the consent of the Registrar of Copyrights.

34. Objections relating to published statements.

Any person having any objections to any fees, charges or royalties or other particulars included in any statement referred to in Section 33 may at any time lodge such objections in writing at the Copyright Office.

35. Determination of objections.

(1)      Every objection lodged at the Copyright Office under Section 34 shall, as soon as may be, be referred to the Copyright Board and the Copyright Board shall decide such objection in the manner hereinafter provided.
 

(2)      The Copyright Board shall, in respect of every such objection, give notice thereof to the performing rights society concerned.
 

(3)      The Copyright Board shall, after giving such society and the person who lodged the objection a reasonable opportunity of being heard and after making such further inquiry as may be prescribed, make such alterations in the statements as it may think fit, and shall transmit the alterations made by it to the Registrar of Copyrights, who shall thereupon, as soon as practicable after the receipt of such alterations, publish them in the Official Gazette and furnish the performing rights society concerned and the person who lodged the objection with a copy thereof.
 

(4)      The fees, charges or royalties as altered by the Copyright Board shall be the fees, charges or royalties which the performing rights society concerned may respectively lawfully sue for or collect in respect of the grant by it of licences for the performance in public of works to which such fees, charges or royalties relate.
 

(5)      No performing rights society shall have any right of action or any right to enforce any civil or other remedy for infringement of the performing rights in any work against any person who has tendered or paid to such society the fees, charges or royalties specified in respect of that work in a statement published by that society under Sub-section (1) of Section 33 or where such statement has been altered by the Copyright Board under this section in the statement so altered.
 

(6)      Where any person has lodged an objection at the Copyright Office regarding the fees, charges or royalties in respect of any work included in a statement published under Section 33, that person or any other person, on depositing such fees, charges or royalties at the Copyright Office, may, pending the final decision of such objection by the Copyright Board or the High Court as the case may be, perform that work without infringing the copyright therein.
 

(7)      The fees, charges or royalties deposited at the Copyright Office under Sub-section (6) shall be paid to the performing rights society concerned or to the person who made the deposit, or partly to such society and partly to such person, in accordance with the final decision on the objection as aforesaid."  
 

65. The procedure earlier was that a performance right society was mandated to file with the Registrar of Copyrights a statement of all fees, charges or royalties which it proposes to collect for the grant of licences in respect of which it has authority to grant licences. Under Section 34, any person having any objections to any fees, charges or royalties was empowered to lodge objections at the Copyright Office at any time. Under Section 35, every objections lodged at the Copyright Office was referred to the Copyright Board and the Board was empowered to decide the objections. The Copyright Board had the authority to alter fees, charges or royalties. The law required the Board to give the society and the objector a reasonable opportunity of being heard and after making such further enquiry as may be prescribed make such alterations as it may think fit. The fees, charges or royalties determined by the Copyright Board were to be the fees, charges or royalties that could be demanded and recovered by the performance right society. In the existing Chapter VII, the part relating to publication of the rates of fees, charges or royalties by the copyright society has been omitted. The procedure of publication objections and determination by the Copyright Board has been done away with. The reason was the same right is contained in Section 31. It is not now necessary to invite objection but a person who does not agree with the rates has been given a valuable and specific right. Any person may approach the Copyright Board if he considers that the copyright society has refused to allow him to broadcast "on terms which the complainant considers reasonable". Thus, the cause of action arises from the subjective conclusion of the complainant regarding reasonableness. If he thinks that the terms are not reasonable, he can come before the Copyright Board. But once he has come before the Board, the Board has to observe the principles of natural justice, and hold such enquiry as it may deem necessary and determine the compensation and the terms and conditions subject to which the copyright society will allow broadcast to be made.

66. It is the same power and authority which was earlier vested in the Copyright Board for altering the table of rates published by a copyright society. Earlier, the Board was moved by filing objections. After the amendment the Board is activated by a complaint being lodged by a person. The complainant need not show that the rates are unreasonable in order to enter the threshold. He has only to state that in his own opinion, the terms are not reasonable.

67. The exclusivity which is contemplated by Section 31(2) is incapable of being applied to broadcast. A person who is licenced to republish the cinematograph film may prepare copies of it which may be sent to the distributors who may in turn allow the exhibitors to exhibit it in different cinema halls. But in case of broadcast, the radio station, which is allowed to broadcast cannot work as a distributor and is not allowed to prepare copies and distribute them for being broadcasted to other broadcasting stations. The licence is restricted to a particular broadcasting station. Thus, the purpose of Section 31 is to see that such works, which are an expression of the cultural life of the community, are not confined to the almirahs and vaults but are made available to the people so that they are able to enjoy the works. Hence, Section 31(2) is not applicable to a complaint under Section 31(1)(b).

68. One more reason for adopting this view is that the whole of the Chapter VII, specially the proviso to Sub-section (3) of Section 33 creates a monopoly in favour of a copyright society to do business in respect of a particular class of works. The Constitution itself considers monopolies and dominant undertakings as vices. For the purpose of controlling monopolistic undertakings the Monopolies and Restrictive Trade Practices Act has been passed by the Parliament Even for creating a monopoly in favour of the State, Article 19(6) of the Constitution had to be amended by the Constitution (First Amendment) Act, 1951, because every monopoly is a violation of the fundamental right enshrined in Article 14 and 19(1) (g) of the Constitution. Hence, Section 31 of the Copyright Act vested in the Copyright Board a power to control these monopolistic undertakings namely the copyright societies. If it were not so some parts of the Copyright Act would become unconstitutional.

69. Sound recordings are on an entirely different footing. The time required to play a sound recording is short. In case of a song generally limited to three minutes. Sound recordings are repeatedly played on the same day or on different days by different stations. A sound recording is played without the audience being asked to pay. The Copyright Act has a special provision for sound recordings in Section 52(1)(j). Such a provision in the nature of things cannot be made in case of cinematograph films or books. Hence, Section 31(2) may be applicable to publication of cinematograph films and other works but not to broadcasting of sound recordings.

70. The argument that only one compulsory licence may be issued under Section 31(2) is fallacious because the complaints are individual complaints and not class complaints or complaints on behalf of a class of persons. If the Board hears at one point of time only one complainant then the Board may direct a licence to be issued in favour of the complainant. This may happen at different points of time with different complainants. This would lead to a anomalous situation that if two or more persons come together then only one out of them will be granted a licence. But if they come individually one after other then each one of them would be entitled to a licence. It cannot be presumed that the Parliament intended to create such absurdity. Hence, the correct interpretation is that Sub-section (2) applies only to the two cases covered by Section 31(1)(a) and not to those falling under Section 31(1)(b).

71. Such an interpretation is in consonance with the canons of statutory interpretation laid down by the Supreme Court. In N.T. Veluswami Thevar v. G. Raja Nainar, AIR 1959 SC 422 Justice Venkatarama Aiyar observed: "It is no doubt true that if on its true construction, a statute leads to anomalous results, the Courts have no option but to give effect to it and leave it to the Legislature to amend and alter the law. But when on a construction of a statute, two views are possible, one which results in an anomaly and the other not, it is our duty to adopt the latter and not the former, seeking consolation in the thought that the law bristles with anomalies" (p.427, 428). In regard to giving a narrower construction to the words used in a statute, the Supreme Court observed in Chief Justice v. L.V.A. Dikshitalu, AIR 1979 SC 193: "Where two alternative constructions are possible, the court must choose the one which will be in accord with the other parts of the statute and ensure its smooth, harmonious working and eschew the other which leads to absurdity, confusion or friction, contradiction and conflict between its various provisions, or undermines or tends to defeat or destroy the basic scheme and purpose of the enactment" (p.205).

72. A preliminary objection raised by the defendant relates to the payment of fee. The defendant has pointed out that the fees paid by the complainants are woefully inadequate and therefore the complaints cannot be entertained. All the complainants have tried to argue that they have paid the right amount of fees and have further submitted that in case the Board takes the view that the fee is deficient or is less than what should have been paid then each one of them gave a solemn undertaking that it is prepared and willing to pay without murmur the amount of fees determined by the Board.

73. It is to be noted that the rules framed under the Copyright Act and particularly Form II-A is not entirely compatible with the Act. Para 12 of statement contained in Form II-A reads as under:

"12. Whether the prescribed fee has been paid and, if so, particulars of payment (give postal order/bank draft/treasury challan number)."

74. This indicates that the fee is to be paid at the lime of submitting application in Form II-A. But Section 31 of the Copyright Act contemplates that when the Board has directed the Registrar to grant a licence, he shall do so in accordance with the directions of the Board on payment of such fees as may be prescribed. Only when a licence is about to be granted by the Registrar acting under the directions of the Board that the fees become payable. In case the Board rejects the complaint or does not deem it necessary to direct the Registrar to issue a licence no fees would be required to be paid. What para 12 of Form II-A prescribes is contrary to what the Principal Act lays down. To this extent, para 12 has to be ignored. It is an established principle applicable to delegated legislation that rules are to be consistent with the provisions of the enabling Act (State of U.P. v. Baburam, AIR 1961 SC 751) and if a rule goes beyond what the Act contemplates, the rule must yield to the Act (Babaji Kondaj v. Nasik Merchants, AIR 1984 SC 192). A rule becomes ultra vies if it is repugnant to the statute under which it has been made (Rameshwar v. State of U.P. AIR 1983 SC 383). It is observed that Form II-A has not been designed to suit the requirement of the parent provision viz, Section 31. Section 31 contemplates a complaint being made to the Copyright Board but Form II-A is not a complaint but an application. It has many other items which do not suit Section 31. Similarly, Rule 11A makes no reference to Section 31. The Board urges the Government to pay heed to these anomalies and correct them.

75. It was argued by the defendant that 'such fee' occurring in the last line of Section 31 means the licence fee determined by the Board. The argument ignores the adjectival clause qualifying the word 'fee'. The material portion is "on payment of such fee, as may be prescribed". The word 'prescribed' is defined in Section 2(u) which says "prescribed" means prescribed by rules made under this Act. So the fee referred in Section 31 is not licence fee but the fee that is prescribed in exercise of powers conferred by Section 78(2)(g).

76. Hence, the objection by the defendant PPL in regard to payment of fees cannot be sustained. The prescribed fees would be payable at the time of grant of licence and the Board is certain that the Registrar will perform his duty by ensuring that the prescribed fee is paid.

77. Now we come to the question of what should be the proper fees. Section 78 of the Copyright Act confers on the Central Government the power to make rules. Sub-section (2) of Section 78 empowers the Central Government to make rules to provide for the matters mentioned therein which includes the following: -"(g) the fees which may be payable under this Act: -"

78. In exercise of this power, the Central Government has enacted Rule 26 which is reproduced below: -

   

 "26.    Fees
   

(1)      The fees payable under this Act in respect of any matter shall be as specified in the Second Schedule.
 

(2)      The fees may be paid to the Registrar of Copyrights, New Delhi, by a postal order or bank draft issued by a Scheduled Bank of India under the head of Account; Major Head - XLVI - Miscellaneous, Minor Head 'Naturalisation, Passport and Copyright Fees'.
 

(3)      Postal orders and bank drafts shall be crossed and drawable in New Delhi.
 

(4)      Payment by bank drafts shall not be valid unless the amount of bank commission is included therein.
 

(5)      Where payment is made by deposit in a Government Treasury or a branch of the Reserve Bank of India or the State Bank of India, the challan evidencing the payment shall be sent to the authority concerned by pre-paid registered post."  
 

79. The Second Schedule referred in Sub-rule (1) of Rule 26 is in the form of a table. The first 5 items of the Schedule are reproduced below: -
 
 

80. It would be seen that in the first four cases, the fees to be paid are for a licence. While in the case Sl. No. 5 and also for Sl. No. 6 to 11, the fee is to be paid for an application for a licence or for registration etc. The complainants are desirous of obtaining licences for the complete repertoire of PPL. The repertoire consists of sound recordings.

81. An Indian work in the context of Section 31 has to be read as defined in Section 2(1) and as modified in the explanation below Section 31(1). The definition of Indian work as enlarged by the above mentioned explanation includes a sound recording made or manufactured in India.

82. It would also be useful to refer to Section 2(y) which contains the definition of 'work'. Work according to that section means any of the following works, namely,-

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

(ii)      a cinematograph film; 
 

(iii)      a sound recording.
 

83. The combined effect of the definition of "work", the definition of "Indian work", the definition of "sound recording" and the enlarged definition of "Indian work" contained in Section 31 is that each sound recording, that is to say, every song or every musical composition which is recorded and which is a distinct entity is an Indian work for the purpose of Item No. 4 of the Second Schedule. Hence, for each sound recording, the complainants have to pay Rs. 200. The Board is constrained to remark that the fees appear to be exorbitant. When a civil suit is filed in the Hon'ble High Court at Delhi, the fees payable are much less. If a suit is valued at one crore, the court fee payable would be around Rs. one lac only.

84. If the total sound recordings that are licenced by PPL are 5,000 then each applicant will have to pay Rs. 10 lakhs as the fee. The Board feels that this is an unintended anomaly that has crept in and requests the Central Government to consider and remove it. A democratic and republican government should not charge excessive fees from a litigant. While amending the Rules, it is suggested that Form II-A should also be revised so that the anomaly between this form and Section 31 is removed. The form does not fit an application for broadcasting. As discussed above, the form also shows that the fee is to be paid alongwith the application. But Section 31 clearly stales that when the Board directs the Registrar of Copyrights to grant a licence then the Registrar would grant the licence on payment of such fees as may be prescribed. We would also like to point out that Rule 11-A will have to be suitably modified. This Rule does not cover complaints under Section 31. It applies only to applications made under the sections mentioned in it. But the Form II-A referred in Rule II-A covers Section 31 also. It is suggested that a separate rule should be inserted for complaints under Section 31 and an appropriate form relevant to that section be created.

85. The Board is conscious that it is a tribunal, which has been created by a Statute, and its powers are circumscribed by the provisions of the Act. The Board's jurisdiction in case of Section 31 is limited to an 'Indian work which has been published'. In other words, it may grant compulsory licence in works which are in existence. The Board has no power to licence such works which may take existence in future and may form part of the kitty of PPL.

86. The arguments of the defendants based on Article 27 of the "Universal Declaration of Human Rights" is untenable. As stated above, the Copyright Board is a tribunal having limited powers. It cannot travel beyond its boundaries and take into consideration the provisions of other Acts or the "Universal Declaration of Human Rights" and thus enlarge its jurisdiction. The jurisdictional limit of a tribunal cannot be transgressed by it. It is only the Courts which are constituted by the Constitution and which are vested with plenary powers that may take into consideration a vast variety of factors while delivering justice. The Hon'ble Supreme Court and the various High Courts may exercise such authority but not the Copyright Board. Hence, howsoever attractive, the arguments may be the Copyright Board has no jurisdiction to entertain it and base its decision on an article of the "Universal Declaration of Human Rights".

At the same time, the Board would like to state that it has in a way fully abided by the said Article. Article 27 of the 'Universal Declaration of Human Rights' is reproduced below: -

i)      Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in the scientific advancement and its benefits.
 

ii)      Everyone has the right to the protection of moral and material interests resulting from any scientific, literary or artistic production of which he is the author. 
 

The Declaration while speaking of the need to protect the material interest of the author, stresses the right of everyone to participate in cultural life and enjoy arts etc. This Declaration only reiterates the balance of public interest and the reward to authors which is crucial to the copyright system. The decision we are taking in this case is based upon this principle of maintaining a balance contained in Article 27.

87. All the complainants have uniformly maintained that the Board must decide by taking into consideration the rates of the following three comparators: -

(i)      The rate at which PPL has licenced All India Radio, Prasar Bharati etc;
 

(ii)      The rate that formed the basis of settlement in PPL v. Benett Coleman & Co. Ltd., before the Kolkata High Court; and
 

(iii)      The agreed rates between IPRS and different F.M. stations. (The IPRS has signed identical agreement with all F.M. stations.) 
 

88. It was further argued that IPRS represents the musicians and the lyricists and must be put at a higher pedestal as compared to PPL. It was also stated that All India Radio must be put at par with other radio stations because AIR is also engaged in commercial activities. It accepts advertisements and is a source of revenue to the government. For this, the following table was produced which is contained in the Annual Report of the Ministry of Information & Broadcasting for the year 2001-2002: -

89. Great stress was laid by the complainants on the rates accepted by PPL in the Benett Coleman case as a basis for settlement and withdrawal of case before the Kolkata High Court.

90. We feel that the Prasar Bharati and All India Radio are in a class by themselves. The All India Radio performs a wide variety of functions. It has a News Services Division which puts out 316 news bulletins daily with a total duration of 39 hours and 32 minutes. The broadcasts are done from Delhi and from 45 regional news units. In the external services AIR broadcasts 64 news bulletins. It also puts 29 news headline bulletins daily.

91. AIR also broadcasts special bulletins such as sports, news and youth bulletin. During Parliament sessions, commentaries are broadcasted in English and Hindi, reviewing the day's proceedings in both Houses. It also broadcasts review of the proceedings of the State Legislatures.

92. The External Services Division of AIR serves as an important link between India and the rest of the world. The external radio network covers about 100 countries in 26 languages. It has also a Central Monitoring System engaged in monitoring news and news based programmes of important foreign radio networks. All India Radio has also a Central Education Planning Unit. All stations of All India Radio broadcast farm and home programmes. AIR stations broadcast family welfare programmes in the regional languages. It has special programmes for children and for women.

93. Around 40% of the total broadcast of AIR comprises music which includes classical music, light music, folk music, film music and music of various regions and in different regional languages. The national programme of music is broadcast on the Saturdays and a Sangeet Sabha is organised on Sundays.

94. It holds annual Sangeet Sammelan and concerts at various places. Eminent and upcoming artists are featured in the year's concerts. Apart from this, All India radio is engaged in research and development of the technology in radio broadcasting.

95. The All India Radio spends millions on live music and gives part-time and full-time employment to support the artists.

96. None of the complainants is engaged in or obliged to take up anyone or more of the services mention above in paras 90 to 95. The complainants' claim of equal treatment with AIR cannot be sustained because AIR is in a class by itself. It has many duties to perform and is principally financed and supported by the Government of India.

97. The table produced before the Board by the complainants gives an incomplete picture. It gives only the revenue figures of Prasar Bharati, For example, the revenue figures in the 9th months in the year 2001-2002 (up to December, 2001) is shown as 62.40 crores. It can be safely taken to be 75 crores (approx.) for the whole year. The total outlay according to the Annual Report of the Ministry of Information & Broadcasting for the year 2001-2002 is approximately 191 crores (p.62). Thus, the All India Radio is not a profit making body. Its purposes and objectives are totally different and hence, its agreement with PPL cannot be taken as an appropriate comparator. We would like to point out that in AIRC and Anr. v. PPL and BBC, [(1994) R.P.C. 143], the U.K. Copyright Tribunal has concluded that BBC is not a reliable comparator for Commercial Radio licence.

98. The IPRS standard contract which, it has worked out with great skill and foresight, has been willingly accepted by all the complainants before us and we were given to understand by many more. Till date, no complaints have been voiced against it. It may be a praiseworthy product of collective bargaining and a contract which both the parties consider as beneficial. Yet before it may be regarded as comparator it must be established that the subject matter of licence by IPRS is more or less identical to that offered by PPL. None of the complainants has been able to establish this. A musical composition is different from a sound recording of a film song. It is a feature peculiar to our television and radio that they are unable to conceive music programmes without using sound recordings. Most of the music programmes that are aired, entirely or mostly make use of sound recordings in which copyright vests with PPL.

99. We are not judging the comparative value of the repertoire of IPRS and PPL nor are we stating whether or not IPRS shares the copyright with PPL in the sound recordings specially those based on films. The reasons are firstly that the matter was not argued before us and secondly we think that it will depend on the term of the contract that a musician or a lyricist may enter with the film producer. In the circumstances, we do not think that it would be proper for the Board to regard IPRS agreement as a measure for determining compensation. We are not in any way adjudging the question or expressing any view whether the works or rights of IPRS are superior to that of PPL or vice versa. Any a priori assumption of superiority would be a grave mistake.

100. We now come to question whether the rate agreed by the parties in PPL v. Benett Coleman & Co. Ltd., may be regarded as a valid comparator. For this, we have to look at the surrounding circumstances when the dispute arose. The licence issued was for a limited number of hours. The quality of broadcast too was not so high. Moreover, both the parties desired to come to an out of court settlement. It is common knowledge and experience that in resolving a pending dispute before a court, there is an amount of pressure on the parties. The considerations are different than what they are in the marketplace where a willing buyer meets a willing seller. Another factor that cannot be ignored is that Benett Coleman & Co., the defendant became a member of PPL. Thus, the agreement was not a marketplace transaction where nothing but the market forces operated. Hence, it would be a mistake to recognise it as a benchmark.

101. All the complainants laid great stress on the Benett Coleman & Co. Ltd., settlement. The agreed rates on the basis of which the case was withdrawn was Rs. 160 per needle hour. All the complainants unanimously submitted that while adjusting inflation and other factors Rs. 191 should be made as the benchmark rate. We are conscious that when a case is before the Court there are many factors in consideration of both the parties. Whether it is a case between a creditor and a debtor or a landlord and a tenant or an employer and an employee there are numerous compelling circumstances in which the parties come to a compromise. Each one shedding some of its demands. It is also an admitted fact that Benett Coleman & Co. Ltd., which was a party before the High Court later became a member of PPL. It is also to be noted that when the compromise took place the licenced radio stations were broadcasting by making use of the transmitters of the AIR and the hours of broadcast were very limited. Now under the new licence regime there is no limit on transmitting time. A radio station has the permission to broadcast on all the days in the year for all the hours in the day. Hence, we find ourselves in an unenviable position where we are left with no comparators.

102. It was suggested that royalty payment in other countries be taken in to consideration. The dissimilarities in music broadcast (particularly its content) between the western countries and India are glaring. Our broadcast music is very largely based on film music which is not the case elsewhere. The European scene itself is not uniform. In AIRC and Anr. v. PPL and BBC, [(1994) R.P.C. 243], the U.K Copyright Tribunal held that the radio industries in France, Germany and Spain were so different from U.K. that no useful comparison can be made. This supports the view adopted by us in India.

103. At this stage, we would like to point out a dilemma before the Board. In S.P. Agrawal v. Union of India, AIR 1991 SC 814, the Supreme Court observed: "In arriving at a decision a tribunal must take into account relevant considerations and must not take into account irrelevant considerations. A decision based on irrelevant considerations is invalid".

104. In another case, the Supreme Court had observed: "An order made is invalid when there is nothing on record to support it" (Nepal Singh v. State of U.P. AIR 1985 SC 84.

105. There is no doubt that a tribunal should not work in an ignorant manner. If does so, it does a wrongful act. A public tribunal must base its order on hard facts and not on opinions, surmises and guess. The parties specially the complainants could not present full facts. In most cases, the stations had functioned for less than one year so reliable and relevant data was simply not available. They cannot be faulted on this count. Hence, the data available to the Board which may form the basis of the order is either non-existence or inadequate. A tribunal is expected to give its judgment on the basis of complete facts. At the same time, a few complaints to the Board have been pending for more than a year. In the meanwhile, two Hon'ble Justices of the High Courts have directed the Copyright Board to expedite the hearing. In the circumstances, the option before the Board was either to wait for a year more when more facts could be collected and presented before it or to give a decision right now with an express declaration that the judgment would be applicable only for a limited period and would be subject to modification and alteration in the light of the facts that may be brought to its notice after the expiry of the period indicated. In the interest of fair play and justice, the Board has chosen the second path.

106. Some of the complainants have in their complaint given a table showing the expected revenues, the expenses, income etc., which generally show that they would be able to break even in the 7th or 8th year. It can safely be stated that each one of the radio stations must have obtained loans or guarantees from banks or financial institutions. Naturally, they must have submitted to the bank a feasibility study showing the expected revenue, income etc., because no bank or financial institutions will undertake to give a loan or a guarantee without examining the expected income of the applicant. But none of the complainants has shown to the Board the manner in which it obtained financial assistance and support from the bank or financial institutions.

107. The complainants have not disputed the rate card produced by the defendant. When a specific question was put to the bar as to what is the total advertising revenue earned by the complainant radio stations, the answer given were incomplete and evasive. It was stated that the rate card does not indicated the actual rates. It was stated that in the industry, discounts are given to the extent to 50 to 80% of the rate shown in the rate card. This has to be contrasted with an article that appeared in "Economic Times" dated 28th August, 2002. The article has surveyed a number of clients. The table given below shows the commission as percentage of media billings: -

Vidcocon 2.0 Gillette 4.0 Raymond 4.0 General Motors 4.5 Kenstar 5.0 Hero 5.0 Colgate 6.0 HDFC Standard Life 7.0 Ranbaxy 7.5 Bajaj 8.0 HSBC 9.0 This shows that the commission paid to the advertising agencies is very low and what was stated at the bar was not the truth.

108. One radio station at Bangalore has shortly completed one year of its existence while most of the stations are approximately six months old and some more will come into existence with every passing month. Their Balance Sheet and Profit and Loss Account, duly audited would be ready only after the end of the financial year. Hence, the Board does not know the expenditure incurred, the revenues received and income earned by the F.M. radio stations,

109. In the projected financial studies submitted by the complainants, they have not taken into account the rates demanded by PPL but have filled in some other rates which they thought would be applicable. This has made their financial studies unreliable and may be contrived too.

110. The Board does not accept the contentions of the complainants that the rights of the creator are higher than that of an entrepreneur. The dichotomy between the creators' rights and neighbouring rights has no place in the Copyright Act, 1957. Hence, the Board cannot draw a distinction between the two. As a corollary to this, the Board would scrupulously abstain from commenting whether the rights of those represented by IPRS are superior to those which are represented by PPL. When the question was put at the bar as to the amount of royalty paid by the various stations to IPRS under the agreement executed by them and to PPL under the interim orders of the High Court, the answer provided was that because the period was short, no such calculations were made but would be available after the end of the current financial year.

111. A characteristic that distinguishes India from other countries is that our broadcasting stations make large use of music based on films. It is common knowledge that in India every film has a number of songs and dances. A film without songs is an exception that occurs once in five or ten years. But in the West, musical films arc rare. They are as rare as non-musical films in India. The result is that in the West, the broadcasting stations are broadcasting songs and other musical compositions which are not film based. Hence, the property of the PPL which consists mostly of sound recorded in films is of considerable value and if we may say so the very lifeline of the radio stations. Perhaps, the stations may not be able to survive without film music. It is a part of our history that earlier the All India Radio did not broadcast film music. When Radio Ceylon was enjoying monopoly of advertisement revenue from the Indian companies, the Government thought it necessary to start Vividh Bharati to attract advertisement revenue. Vividh Bharati was declared to be a film based radio unit. It succeeded in its objectives. Thus, the importance of the recordings, which are in the kitty of IT U cannot be underestimated in terms of its value to the broadcasters. We have no way of knowing the amounts spent by members of IPRS for creating the lyrics arid the compositions. Of course, admittedly creativity cannot be measured in terms of the money spent. It is not the cost that counts but the value and for commercial success the advertisement revenue. On the other hand, we were told by the defendant that their members have to spend crores of rupees for obtaining the sound recordings of films. We were told that in the recent years the sound recording of a film was purchased for 7.5 crores and in another case for 10 crores. This shows that the cost of acquisition is substantially high. We cannot ignore the cost of acquisition by saying that the acquirer is an entrepreneur having a secondary right. As stated above, our Copyright Act only recognizes the owner of a copyright. The owner may be the creator himself or any other person deriving his title from the creator. In both cases, the rights are the same. A perusal of the standard agreement, which is signed by all the radio stations with IPRS, indicates that their starting point is Rs. 750 per needle hour. By giving different types of discounts, the rate comes to Rs. 250 and even Rs. 150. It was not disclosed as to how the figure Rs. 750 or different percentages on discount were arrived at. In the absence of any data we are unable to subscribe to the view that the IPRS agreement should be taken as a comparator. We can only say that the IPRS agreement is an agreement which has commended itself to both the parties so that both the parties recognize it as reasonable.. But we do not know, as no data was produced before us, as to what are the actual earnings of IPRS from the various F.M. stations and they form what percentage of the net revenues of the radio stations.

112. The complainants have given a table showing the percentage of revenue given as royalty in foreign countries. It is well known that the Copyright Law of U.S is entirely different. The owners of the sound recordings in the U.S.A are entitled to much lesser right than are available to their counterparts in India. The enactment applicable to a particular country also lays down the limits or the conditions in which royalty may be fixed. For example, Sub-section (11) of Section 152 of the Copyright Act, 1958 of Australia, says that the maximum amount to be paid in case of a compulsory licence by a broadcaster would not exceed the sum obtained by multiplying the population of Australia by 1/2 of one cent for each completed year. Our Copyright Act does not lay down any such ceiling or other terms and conditions. As we are governed by the Copyright Act, we do not think that we should be guided by the rates fixed by foreign tribunals.

113. The complainants have given a table showing economic viability of F.M. broadcasting in Mumbai. We are taking the table relating to Mumbai as an example: -

114. In this chart it is shown that the broadcasting station would be in the red till the 9th year or make profits only in the 10th year. On an examination of the various tables furnished by the complainants the only factor that is based on hard data is the licence fee to be paid to the Government. In case of Mumbai, the licence fee is Rs. 9.75 crores, which increases every ear by 15%, till the 10th year. All other data has been assumed. The quoted rate of IPRS is Rs. 750 per needle hour. On this, IPRS gives infancy discounts at the rate of 33.3% so that the effective rate comes to Rs. 250 per hour. From year 2 to 6, the rates are increased at 5% form the preceding year, rates from 7 to 10 year are inflated by 10% from the preceding year. The rates differ according to the time of the day also. They are divided into prime time, non-prime time, and nighttime lean hours. The average effective rate payable for 10 years is Rs. 155 per hour.

Note:

A      Quoted Rate is Rs. 750/- per hour
 

B      Infancy Discount (applicable for years 1-6) - 33.3% = Rs. 250/- per hour.
 

C      Needle Time (the time of actual music/sound recording played in the sixty minute hour) is calculated on actuals.
 

D     For the purpose of calculations, we are estimating needle time to be 60% of total time
 

E      Rates for Years 2 to 6 are inflated at 5% from the preceding years fee.
 

F      Rate for Year 7 is Rs. 750/- per hour.
 

G      Rates for Years 7 to 10 are inflated at 10% from the preceding years fee.
 

H      The Average Effective Rate Payable for 10 Years is Rs. 155/- per hour. 
 

115. As stated above, all the complainants while arguing the case before the Board abandoned their proposed rates and adopted the rates proposed by the complainant No. 1. Hence, all the calculations and tables given by them, which were at variance with the rates proposed by the complainant No. 1, became worthless. This also goes to show that what they had proposed and shown in their tables and charts was based on conjectures and surmises. Had it been based on hard facts they could not have jettisoned it in such a perfunctory manner. When the complainants themselves are not sure of their stand and of the estimates made by them, the Board would be committing a grave mistake if it agrees to base its decision on those estimates.

116. The complainants had repeatedly pleaded that unless the rates proposed by PPL are substantially reduced, they would have to suffer losses and may go out of business. F.M. radio stations are a new type of enterprise. The complainants therefore named it as an infant industry and pleaded for leniency being shown to the infant. On the other hand, the defendant has tried to show that some of its member companies arc suffering losses. For example, it was stated that as per un-audited results for the year ending 31st March, 2002 Saregama India Limited suffered a loss of Rs. 25 crores, Universal Music (India) Limited showed a loss of Rs. 10 crores and Tips Industries Limited recorded a loss of Rs. 8.6 crores.

117. PPL has tried to emphasise that the acquisition cost and promotion cost of recent acquisitions and releases has soared to new heights. For example, Saregama India Limited obtained the film music of "Rehna Hai Tere Dil Mein" for Rs. 5.25 crores, the Sony Music obtained the sound recordings on "Kabhie Khushi" for Rs. 11 crores and of "Lagaan" for Rs. 7 crores. This is without the cost of promotion. The cost of promotion may vary from Rs. 50 lakhs to Rs. 3 crores. Thus, both the parties are emphasising that they have necessarily to incur considerable expenses to remain in business. The complainants feel that if the royalty rates were reduced, they would be able to survive. On the other hand, the defendant feels that reduction of royalty rates would be totally unjustified and will ring the death knell of the music industry.

118. The Board feels that justice is the balancing of competing interests. The competing claims of different groups have to be properly assessed and then settled in a fair, equitable and reasonable manner. This can only be done on the basis of hard facts. As stated above, the only hard fact available at present is the licence fee paid to the Government by the complainants. We are not commenting on whether the licence fee, which the complainants themselves offered to pay to the government, is exorbitant or not. But it may be noted that the reserve licence fee for Mumbai was Rs. 1 crores and what the F.M. radio stations offered is Rs. 9.75 crores in the first year which will be raised 15% every year till the 10th year. If we calculate on the basis of the table quoted in para 113 above, in the first year the licence fee is almost 50% of the operation costs. In the fifth year it grows to 68% and in the 10th year touches 75%. The burden is very heavy and may even kill. It is expected that the complainants must have made proper estimates of their expenditure and earnings. They cannot simply press that PPL should be pressurised to reduce the charges so as to make the broadcasting companies viable. At the same time, PPL cannot ask for the moon. PPL starts by stating that the success of the media organisation is depending on four factors namely, reach, content, marketing and sales. It is doubtful whether a radio broadcasting company can be labeled as a media company. The defendant has attributed the value of the content in its formula as 20% and argued that for 20% value attributable to the content compensation at the rate of 20% licence fee of the revenue generated should be payable. Of course, the defendant has not claimed that all 20% of the revenue is to he paid to PPL alone. It will be shared by other collective agencies or suppliers of music such as T-Series or SIMCA.

119. The estimates and studies, formally submitted by both the parties to support their cases involving eminent persons and experts and taken from various publications may form a good classroom exercise but it will be dangerous for us to assume that they are entirely correct and what they project is bound to happen. For example, if the projections given by the complainants themselves were correct, then all the F.M. stations in a particular city would be earning almost the same revenue and making similar profits. But when we look at what has actually happened during the brief period of less than 12 months then we find that from a survey conducted by IMRB in regard to Mumbai that the Radio Mirchi is tuned by 7 times more people than all other 4 private channels together. This was reported in the "Economic Times" dated 4th October, 2002. Naturally, inspite of all the projected studies, some of the radio stations will close down because of the keen competition. Their death cannot be attributed to the demands of PPL. In the competition generated by multiple licences in the same city some companies have already decided to withdraw. The "Economic Times" dated 30th August, 2002 reported that two licence holders in Delhi and Chennai have decided to pull out.

120. PPL based its demands on the growth of advertising and the share of radio industry in the total advertising revenues. PPL admitted that the radio share in the advertisement revenue is 2.5% and is expected to go to 4% by 2005. On the other hand, another study conducted by another group shows that the radio share in ad spent is currently 1.3% and shall continue to hover around the same figure during the next 10 years. Thus all the studies and opinions do not commend universal acceptance and respect.

121. On the basis of above discussion and after considering carefully the submissions made before us by both the parties in writing and orally, we venture to make a determination to the best of our judgment. As stated above, we have been directed by the High Court to determine the royalty rates expeditiously and yet we do not have much data which may form basis of a reasonable determination. In the circumstances, the only course open to us is to make what is called the Income Tax Law as the best judgment assessment. This has necessarily to be a value judgment and to that extent slightly arbitrary. The mitigating factor is that this will remain in operation only for the period indicated below. Within that period the affected parties will communicate to us the required data. On that basis the Board will hear the parties again and, if necessary, modify and alter the rates.

122. We consider that any determination of compensation must take into account a number of factors some of which should be (a) the audience size (b) the time band (prime time, normal and lean hours) (c) cost of acquisition by PPL (d) paying capacity of radio stations (e) growth of competition in broadcasting (more players trying to attract the same audience) (f) revenue earned by radio stations (g) the number of radio stations (The flow of money to PPL increases directly in proportion to the number of radio stations) (h) benefit of airplay to PPL (i) radio stations as a new and valuable source of income to PPL (j) indeterminacy of intellectual property rights in the manner the cost of immoveable property is determined (k) necessity to have a concessionary fee for smaller stations etc. In the circumstances this determination shall come into effect from the 1st day of November, 2002 and shall remain in operation till 31st October, 2004.

123. The parties shall, as soon as the audited accounts for the year ending 31st March, 2004 are ready, furnish a copy of their Balance Sheets and Profit and Loss Accounts for the two years that is for the year ending 31st March, 2003 and for the year ending 31st March, 2004. They will also furnish a certificate showing the payments made during the above two years to IPRS and PPL separately, duly certified by their statutory auditor. The parties may also furnish such other information which is based on facts and statistics and which they feel has a bearing on and should be considered for determining compensation under Section 31(1)(b).

124. It is common knowledge that when the government invited offers for licences in Tele communications it reaped a rich harvest. Subsequently, the licencees found to their dismay that the licence fee, which they had offered to pay, was not viable. The government considered their demands sympathetically and invented a new model based on revenue sharing. The licencees were permitted to migrate to new models. It would be better if the government addresses itself to the difficulties faced by the F.M. radio stations and changes the licence fee to something akin to the revenue sharing model for the telephone companies.

125. The Board will, between 1st September, 2004 and 31st October, 2004, hear the parties again and fix the reasonable compensation on the basis of the available data for a period much longer than two years. We accordingly direct the Registrar of Copyrights to issue a licence to all the complainants embodying the following terms and conditions: -

(i)      Each of the complainants shall make a deposit of Rs. 20 lakhs per radio station by way of security in favour 'of PPL. This may be substituted by a bank guarantee in favour of PPL.
 

(ii)      Every radio station shall every month give a log sheet (cue sheet) to PPL to enable it prepare a debit note or invoice and for making payments to its members.
 

(iii)      PPL will every month submit a debit note or invoice to each party showing the amount of royalty payable in the relevant previous month. On receipt of the debit note or invoice, the broadcasting station will make a payment to PPL through normal banking channels.
 

(iv)      If the debit note or invoice submitted by PPL remains unpaid for two consecutive months, PPL will be entitled to deduct the amount due from the security deposited or may obtain it from the bank which has stood guarantee.
 

(v)      In case the outstandings are not cleared by radio stations for three consecutive months, PPL may terminate the licence by giving 30 days notice to that radio station and also recover the sum due from the security deposit alongwith interest at the prevailing rates. 
 

126. The standard rate of payment for royalty during the prime time broadcast shall be Rs. 1,200/- per needle hour. The rate for day time (also called normal hours) and for night time (lean hours) shall be at a reduced rate. The reduction formula is given in para 128 below

127. We have not fixed differential rates for different cities after classifying them according to their population. The reason is that the more populous cities have larger number of F.M stations. If the population of a city is divided by the number of stations the resultant number is almost the same for all the cities. Thus all the F.M stations are more or less on the same footing as regards the size of the audience.

128. The standard rate shall be applicable to prime time broadcast which shall be 2 hours in the morning (8 a.m to 10 a.m) and 2 hours in the evening (6 p.m to 8 p.m). The rate for 8 lean hours (night hours) i.e. 10 p.m to 6 a.m shall be 25% of the standard rate. The rate applicable to 12 normal hours (which do not fall in the prime time or night hours category) shall be 60% of the standard rate.