In a commercial relationship involving intellectual property (IP), termination of an agreement can have consequences far beyond the end of a contractual relationship. It may affect ownership of valuable IP assets, rights to commercialise a product, entitlement to revenue, and the ability to enter into arrangements with third parties. Where substantial investments have been made in reliance on an agreement, an improperly exercised termination clause can expose a business to considerable legal and financial uncertainty.
A critical question therefore arises: can a party terminate an IP agreement merely because it alleges that the other party has committed a contractual breach, or must it strictly follow the termination procedure agreed upon by the parties? The answer becomes particularly significant when termination is disputed and the rights at stake cannot easily be restored through monetary compensation.
The Bombay High Court examined these issues in VVAA Films Private Limited v. DUNE Collective LLP, decided on 5 October 2026 (click here for the judgment). Although the dispute arose from a film co-production agreement, the Court’s observations have wider relevance for commercial collaborations in which funding obligations, contractual performance, and intellectual property rights are interdependent.
The Dispute: Funding Default or Improper Termination?
The dispute arose from a co-production agreement dated 3 April 2026 for a Hindi feature film tentatively titled SNAP. Under the agreement, VVAA Films Private Limited agreed to invest up to ₹15 crore in return for a 40% interest in the film’s intellectual property rights and a 40% share in its net profits.
The investment was structured in three tranches, with the release of the second tranche subject to specified conditions. These included written confirmation concerning completion of principal photography and payments to various third parties involved in production.
Disagreements subsequently arose over whether the conditions for releasing the second tranche had been satisfied. The producer, DUNE Collective LLP, demanded ₹6.5 crore and threatened to terminate the agreement if payment was not made within 36 hours. VVAA Films disputed the demand and contended that the agreement required written notice and an opportunity of up to 30 days to remedy the alleged breach.
The co-producer approached the Bombay High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection of its claimed intellectual property interest and other contractual rights pending arbitration.
The central conflict was not simply whether funding had been delayed. It concerned whether the alleged default justified termination in the manner attempted and whether the producer could create third-party interests in the film while the parties’ rights remained disputed.
Termination Clauses Must Be Clear and Contractually Enforceable
A termination clause defines the circumstances in which a party may bring a contractual relationship to an end. In a well-drafted commercial agreement, it should identify the grounds for termination, the notice required, the period available to remedy a breach, and the consequences of termination.
These provisions become particularly important in IP agreements because termination may affect rights that have already been licensed, assigned, jointly owned, or commercially exploited. An agreement should therefore distinguish between termination for convenience, termination for breach, and termination following the failure to remedy a specified default.
The distinction is substantive, not merely formal. Where termination is permitted only upon specified grounds and subject to an agreed procedure, a party cannot necessarily treat the existence of a breach as sufficient authority to bypass that procedure.
In VVAA Films, the agreement contemplated an opportunity of up to 30 days to remedy the relevant default. The termination communication, however, demanded payment within 36 hours and threatened immediate termination.
The Court observed that these periods were substantially different and that the agreed cure period could not be reduced merely because the producer considered the alleged default serious. It found, at the interim stage, that the material before it did not establish compliance with the contractual cure mechanism.
The decision underscores an important principle for businesses: a termination right must be exercised in accordance with the conditions governing its exercise. A party’s belief that the other side has breached the agreement does not, by itself, dispense with an expressly agreed notice or cure requirement.
Are Contracts Containing Termination Clauses Always Determinable?
The dispute also raised the question of whether the co-production agreement was a contract “in its nature determinable” under Section 14(d) of the Specific Relief Act, 1963. Section 41(e) of the Act restricts the grant of injunctions to prevent the breach of contracts whose performance cannot be specifically enforced.
The producer relied on this framework to oppose the requested injunctive relief. The issue, however, was whether the mere presence of a termination clause was sufficient to characterise the agreement as determinable in law.
The Court distinguished between a contract that may be terminated at a party’s will and one that permits termination only upon specified grounds and subject to an agreed opportunity to cure. At the prima facie stage, it held that the existence of a termination clause alone did not resolve the question of whether the agreement was in its nature determinable.
This distinction is significant for commercial drafting. A contract should not be assumed to fall outside the scope of injunctive relief merely because it contains a termination provision. Its nature, the terms governing termination, and the circumstances in which the termination right was exercised must be examined.
The judgment does not establish that every contract requiring notice and a cure period is necessarily enforceable by injunction. The statutory restrictions continue to apply, and the legal character of the particular contract remains decisive.
Section 9 Arbitration: Protecting IP Rights Pending Adjudication
Where an agreement contains an arbitration clause, Section 9 of the Arbitration and Conciliation Act, 1996, enables a party to seek appropriate interim measures from a court. Such relief may be necessary where waiting for the arbitral tribunal to determine the dispute could expose the subject matter to irreversible prejudice.
In VVAA Films, the co-producer apprehended that the producer might bring in third-party financiers or create third-party interests in the film and its underlying intellectual property. Such dealings, it argued, could prejudice its claimed 40% interest and undermine the effectiveness of the arbitration.
The Court found a prima facie basis for the co-producer’s claim to an interest in the film’s intellectual property rights. It considered that the creation of third-party rights during the dispute could affect the commercial position of the parties in ways that monetary compensation might not adequately address.
The Court therefore partly allowed the petition. It restrained the producer, subject to the agreement and the arbitral tribunal’s orders, from creating third-party rights concerning the co-producer’s claimed interest. It also directed the disclosure of documents relating to the utilisation of the funds received and required the production accounts and financial records contemplated by the agreement.
Importantly, the Court did not finally determine the validity of termination, the parties’ ultimate entitlements, or the precise share to which the co-producer would be entitled. Nor did it grant the requested relief directing complete performance of the agreement or restraining the producer from acting upon the termination in the form sought. Those matters remained open for arbitration.
The decision illustrates the distinction between preserving disputed rights and finally adjudicating them. Interim protection is intended to prevent the subject matter of a dispute from being prejudiced while the substantive issues await determination.
Implications for Intellectual Property Agreements
The commercial implications extend beyond the film industry. In technology collaborations, software development, research partnerships, licensing arrangements, and joint ventures, intellectual property may represent a substantial part of the value created by the parties.
Agreements governing such relationships should expressly address whether IP ownership vests upon execution, upon payment, or upon fulfilment of specified milestones. They should also clarify the consequences of partial funding, delayed performance, termination, and outstanding financial obligations. Where rights are jointly owned, the agreement should define the extent to which either party may independently license, assign, transfer, or otherwise exploit those rights.
Equally, businesses should establish clear procedures for issuing default notices and calculating cure periods. A termination notice should identify the contractual basis of the alleged breach and provide the opportunity required by the agreement. The parties should also preserve relevant financial records and comply with contractual obligations concerning accounts, disclosures, and the use of invested funds.
These safeguards do not eliminate the possibility of litigation or arbitration. They do, however, reduce ambiguity and provide a more reliable framework for resolving disputes without unnecessarily jeopardising the underlying IP assets.
Conclusion
The significance of VVAA Films Private Limited v. DUNE Collective LLP lies in its examination of the relationship between contractual default, termination procedure, and the preservation of disputed intellectual property rights. The Bombay High Court’s interim findings emphasise that an alleged breach does not automatically justify disregarding the procedure agreed upon for termination.
For businesses, the lesson is clear. Intellectual property agreements must define not only who owns or exploits the IP, but also how those rights are affected when the commercial relationship breaks down. Termination provisions, cure periods, payment conditions, ownership clauses, and restrictions on third-party dealings must operate as parts of a coherent contractual framework.
A termination clause is not merely an exit provision. In an intellectual property agreement, it can determine who retains control over the asset, who may commercially exploit it, and whether the parties’ rights remain capable of effective protection.
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