NCLAT refuses to stay CCI penalty against UFO Moviez and Qube Cinema
The CCI had earlier flagged several restrictive clauses in the lease agreements of UFO and Qube.
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The National Company Law Appellate Tribunal (NCLAT) has declined to stay the Competition Commission of India’s (CCI) order penalizing UFO Moviez India and Qube Cinema Technologies for anti-competitive practices.
A three-member bench of the NCLAT ruled that the “balance of convenience” and a “prima facie” case lay in favour of the CCI, citing the concurrence between the commission’s findings and the detailed investigation conducted by its Director General.
“Given the circumstances, we are of the considered opinion that the facts do not warrant the grant of stay of the impugned order,” the bench stated, according to a PTI report.
The case revolves around the supply of digital cinema equipment to theatre owners, an area where UFO Moviez and Qube have considerable market control. In April, the CCI had slapped a penalty of ₹1.04 crore on UFO Moviez and its subsidiary Scrabble Digital, and ₹1.66 crore on Qube Cinema, after finding both companies guilty of creating unfair barriers for other post-production service providers.
UFO and Qube had moved the NCLAT seeking a stay on the order, but were instead directed to deposit 25% of the penalty amount within two weeks. The tribunal noted that while interim relief is denied, the companies are free to continue with their appeals. The next hearing is scheduled for August 1.
The CCI had earlier flagged several restrictive clauses in the lease agreements of UFO and Qube. These allegedly prevented cinema theatre owners (CTOs) from using equipment to play content provided by rival service providers unless an additional ₹20,000 was paid — and even then, only in cases where UFO or Qube failed to provide the content themselves.
This setup, the CCI concluded, not only limited the freedom of CTOs but also blocked third-party content delivery systems, particularly the use of Key Delivery Messages (KDMs) from outside post-production providers. The tribunal noted that such restrictive practices are not common in international markets.
Furthermore, the NCLAT observed that the terms effectively forced CTOs to refuse content from producers who hadn't used the services of Scrabble Digital, a subsidiary of UFO, thereby violating Section 3(4)(d) of the Competition Act, which prohibits exclusive dealing arrangements that limit market access for competitors.
