The Andhra Pradesh Cinemas (Regulation) (Amendment) Act, 2021, by mandating that movie theatres in Andhra Pradesh sell tickets only through a government website, fails the proportionality test by unreasonably restricting the right to freedom of trade and commerce, writesSRI HARSHA KANDUKURI.
THE Andhra Pradesh (AP) legislature has passed an amendment bill to the AP Cinemas (Regulation) Act, 1955 in its recently concluded winter session. This amendment Act, which replaces a previously promulgated ordinance, makes it mandatory for all the movie theatres in the state to sell movie tickets only “through the online booking platform of the Government Company.” The state’s Minister for Information and Public Relations, who piloted the Bill in both the Houses of the legislature, stated that the government would create a website similar to IRCTC (Indian Railway Catering and Tourism Corporation) or APSRTC (Andhra Pradesh State Road Transport Corporation) for the online sale of movie tickets.
The newly inserted provision which says that the theatres cannot sell movie tickets except through a government website, puts an unreasonable restriction on the freedom of trade and commerce guaranteed by the Constitution of India. Every citizen in this country is free to choose the medium of conducting the business. The State cannot compel any citizen to do his business either only through online or offline mode. This right to do the business through the medium of their choice was recognised by the Supreme Court in the Jammu and Kashmir internet shut down case last year, in which the petitioners pleaded that they have the right to indulge in online business.
The freedom of contract is also affected by this new provision. The freedom to list or not to list their theatres on a government website or other websites is taken away by this amendment. Why should a private business not get to choose their own way of business as long as they are complying with the price and tax requirements? The State cannot assume that the conventional (offline) mode of doing business is always illegal or unethical.
Moreover, there seems to be no connection between the current regulation and the intended objectives. The Bill’s statement of objects and reasons claim that it “enhance[s] movie-theatre experience” by providing an online movie booking system. It should be noted that this bill is not a pioneer in creating online movie booking system and many theatres in the state already allow for online bookings through private merchants like Bookmyshow or Paytm. The statement of objects and reasons also ambitiously claim that the bill “reduces pollution and traffic problems”, which seems farfetched and unconnected.
Every citizen in this country is free to choose the medium of conducting the business. The State cannot compel any citizen to do his business either only through online or offline mode.
The Minister, while piloting the bill, stated that the provision was inserted to check arbitrary prices imposed by the theatres which are higher than the maximum rates fixed under the law. Though one cannot deny that the online booking helps in tackling with arbitrary prices, we cannot assume that the government website is the only way through which this can be achieved. The AP Cinemas (Regulation) Act, 1955 already prohibits the sale of movie tickets at higher price than the maximum price fixed by the state. The problem of higher prices ought to be addressed by better enforcement and regular inspections.
Tax evasion is another purported reason why the Government wants to introduce this online system. In an online system, every sale of movie ticket is recorded, and it is impossible to escape the tax regime. However, the potential for high prices and tax evasion are present in other service-providing industries as well. For example, most players in the hotel and lodging industry increase their prices during the holiday season based upon increased demand, and there is scope for tax evasion as well. The State cannot ask hotel industry to conduct the sales only through a government website for better tax compliance. If transparency in sales is what the government wants, this can be achieved through private merchants as well. What is needed is harsher penalties and frequent inspections from the Government to curb the tax evasion.
Previous similarly restrictive government order struck down by High Court
The Government of AP, through a government order dated April 8, 2021 fixed the maximum ceiling rates for admission into cinema theatres based on the geographical location of the theatre (panchayat, municipality, or metropolitan corporation) and the type of theatre (Multiplex, air conditioned and non-air conditioned). The government order prescribed a maximum price of Rs.15 for a premium class ticket in a non-AC theatre in a gram panchayat area, whereas the maximum rate fixed for a premium class ticket at a multiplex in a municipal corporation area is Rs. 250.
Why should a private business not get to choose their own way of business as long as they are complying with the price and tax requirements? The State cannot assume that the conventional (offline) mode of doing business is always illegal or unethical.
Some movie producers challenged the order before the AP High Court on the ground that it violates the freedom of trade and commerce under Article 19(1)(g) of the Constitution, and the classification made on the basis of geographical locations is arbitrary. The petitioners contended that the movie rates should be fixed based upon the facilities (type of projector, sound system, seating and so on) rather than the geographical location, especially when maintenance, distribution, labour and electricity costs are almost the same everywhere. An AC theatre in a village could provide the same facilities as another AC theatre in a metropolitan area. However, as per the government order, the former can charge a lesser price (even considering the difference in infrastructural costs) than the latter.
The AP High Court had, in the case of Thirumala Theatre, Khammam vs. Government of AP (2012)invalidated a similar government order which fixed rates based on geographical location, stating that it is an unreasonable classification. Unfortunately, the impugned government order does not cure this defect.
The high court earlier this month suspended the government order after referring to the Thirumala Theatre judgement.
Recently, the Telangana state government too revised the minimum and maximum rates of movie tickets. Unlike in AP, though, the classification is not based on the geographical location and even the prices are not unreasonably low.
Why the IRCTC/APSRTC analogy is improper
Using the analogy of IRCTC and APSRTC to justify this new online booking system is problematic. Firstly, IRCTC and APSRTC are government services provided over Government platforms. Whereas, the government through the bill is mandating private businesses to list exclusively on its website and prohibiting other modes of selling the tickets.
Secondly, both IRCTC and APSRTC are listed on other private websites as well. We do not know, whether the same arrangement would be available to theatres as well, since the newly inserted Section 5A says that theatres cannot “sell or allowed to be sold except through the online booking platform of the Government company”.
The state’s Cinemas (Regulation) Act, 1955 already prohibits the sale of movie tickets at higher price than the maximum price fixed by the state. The problem of higher prices ought to be addressed by better enforcement and regular inspections.
There is no doubt that the government has a legitimate interest in checking the arbitrary higher prices of movie tickets, and tax evasion by the movie theatres, but not at the cost of theatres’ freedom of business, trade or commerce. The current restrictions on the movie screening industry do not survive the proportionality test under Article 19(6). The same objectives can be achieved through other means such as better law enforcement, wide publicity of the maximum rates prescribed by the law, and firm action against the defaulters.
(Sri Harsha Kandukuri is an Assistant Professor of Law at CMR University, Bengaluru. The views expressed are personal.)