NCLAT refuses to stay CCI order against UFO Moviez, Qube Cinema

The National Company Law Appellate Tribunal (NCLAT) on Monday refused to stay an order of the Competition Commission of India (CCI) that found UFO Moviez India and Qube Cinema Technologies guilty of imposing exclusive-content clauses on cinema theatre owners (CTOs).

The Appellate Tribunal dismissed the applications while directing the companies to deposit 25% of the ₹2.69 crore penalty amount imposed by the CCI.

A coram of Justice (retd) Yogesh Khanna (Judicial Member) and Technical Members Ajai Das Mehrotra and Indevar Pandey held that no case for interim relief was made out.

"Hence in the circumstances, we are of the considered opinion that the facts do not warrant grant of stay of impugned order. We have already passed an order of deposit of 25% of the penalty amount vide a separate order. Be deposited within two weeks. The application for grant of interim stay is though dismissed but we grant four weeks time to file replies by the respondents and two weeks thereafter to file rejoinders."

The case originated from a complaint alleging that UFO, Scrabble Digital and Qube Cinema had engaged in exclusive arrangements that hindered competition in digital cinema services and post-production processing.

On April 16 this year, CCI imposed a cumulative penalty of ₹2.69 crore on UFO Moviez, its subsidiary Scrabble Digital and Qube Cinema for indulging in anti-competitive practices that adversely affected competition in India’s digital cinema exhibition market.

The NCLAT examined contentious equipment lease agreement clauses that formed the basis of the competition violations. The agreements contained exclusivity provisions binding cinema owners to source content only from equipment lessors or their affiliates.

Key problematic clauses included: "The Exhibitor, in consideration of the Lessor giving Equipment(s) on lease basis, irrevocably agrees to exclusively source the Content from the Lessor or its Affiliates." Another stated: "During the Agreement Term, the Exhibitor shall not exhibit any Content other than Content provided by the Lessor or its Affiliates."

Before the NCLAT, the appellants sought interim relief, claiming that they had operated with similar clauses since 2008 as industry forerunners. They contended that this model helped smaller cinema owners compete against large chains.

However, the NCLAT rejected these arguments.

"Clauses 5 and 7 of the agreement prima facie show a tie in arrangement which require the CTOs to exclusive use the contents supplied by the appellants," the NCLAT observed, noting these created improper dependencies between equipment supply and content sourcing.

When questioned about rental charges ranging from ₹1-1.5 lakh monthly, the Tribunal concluded:

"Hence, the appellant's case that it would have to bear an irreparable loss in case the stay is not granted does not appeal to us."

The stay applications were dismissed, with the NCLAT ordering that pleadings be complete by August 1, 2025.

UFO Moviez was represented by Senior Advocate Arun Kathpalia with Advocates Rahul Rai, Avinash Amarnath, Ravi Bhavika Chhabra, Riddhika D and Aaditya.

Qube was represented by Advocates Samar Bansal, Bharat Budholia, Vaishnavi Ganesh, Deepanshu Poddar, Rishabh Jain, Khushi Agarwal, Palak Jagetia and Vedant Kapur.

CCI was represented by Senior Advocate Prashanto Sen with Advocates Neeha Nagpal and Rohit Ghosh.

The informants were represented by Senior Advocate Vaibhav Gaggar with Advocates Rishi Agarwala, Aroon Menon and Tarini Khurana.

[Read order]