2008 (4) TMI 512 - HC - Companies Law

Arbitral proceedings - Held that - The very fact that the appellants contend that there is an arbitral agreement evidenced by communication upto 10.3.2006 must negate the contention of the appellants that there was a concluded agreement on 8.5.2006. We, therefore, hold that there was no concluded agreement and if there being no concluded agreement merely because there was an arbitral clause in the documents exchanged and there was no dispute about the arbitral clause would not result in holding that there was an contract containing an arbitral clause. The arbitral clause was not independent of the agreement to be entered into. The very fact that the appellants contend that there is an arbitral agreement evidenced by communication upto 10.3.2006 must negate the contention of the appellants that there was a concluded agreement on 8.5.2006. We, therefore, hold that there was no concluded agreement and if there being no concluded agreement merely because there was an arbitral clause in the documents exchanged and there was no dispute about the arbitral clause would not result in holding that there was an contract containing an arbitral clause. The arbitral clause was not independent of the agreement to be entered into.

Issues Involved:
1. Existence of a binding arbitration agreement.
2. Applicability of Section 7(4)(b) of the Arbitration and Conciliation Act, 1996.
3. Interpretation and application of Section 9 of the Arbitration and Conciliation Act, 1996.
4. Evaluation of the correspondence exchanged between the parties.
5. Conduct of the parties and its impact on the agreement.
6. Material terms of the agreement and their finalization.

Detailed Analysis:

1. Existence of a Binding Arbitration Agreement:
The primary issue was whether there existed a binding arbitration agreement between the parties. The learned Single Judge dismissed the application for interim relief, concluding that there was no binding arbitration agreement due to the non-signing of the basic documents. The appellants argued that an arbitration agreement existed through the exchange of correspondence, as per Section 7(4)(b) of the Arbitration and Conciliation Act, 1996.

2. Applicability of Section 7(4)(b) of the Arbitration and Conciliation Act, 1996:
The appellants contended that the arbitration agreement was in writing by exchange of correspondence, even though no document was signed by the parties. They relied on Section 7(4)(b), which states that an arbitration agreement can be in writing if it is contained in an exchange of letters, telex, telegrams, or other means of telecommunication. The respondents argued that the appellants' claim was inconsistent with their pleadings, which initially relied on an agreement dated 8.5.2006.

3. Interpretation and Application of Section 9 of the Arbitration and Conciliation Act, 1996:
The court examined Section 9, which allows for interim measures before or during arbitral proceedings. It was noted that the court has the jurisdiction to decide whether there is a valid arbitration agreement and whether the dispute falls within the scope of the arbitration clause. The court referenced the Supreme Court's decision in SBP & Co. v. Patel Engineering Ltd., which affirmed the court's power to resolve these issues under Section 9.

4. Evaluation of the Correspondence Exchanged Between the Parties:
The court analyzed the correspondence exchanged between the parties to determine if a concluded contract existed. The appellants argued that the exchange of correspondence indicated a binding arbitration agreement. However, the respondents maintained that the correspondence only reflected ongoing negotiations and not a finalized agreement. The court considered the various drafts and communications, including the fact that some documents were marked as "draft for discussion."

5. Conduct of the Parties and Its Impact on the Agreement:
The court also considered the conduct of the parties, noting that the respondents continued to use the appellants' copyright materials even during the negotiations. The appellants argued that this conduct indicated a commitment to an agreement. However, the court found that the conduct alone was insufficient to establish a concluded agreement, especially given the unresolved issues regarding royalty payments for past dues.

6. Material Terms of the Agreement and Their Finalization:
The court emphasized that a binding agreement requires the finalization of all material terms. In this case, the payment of royalties for past dues was a significant unresolved issue. The court concluded that the absence of an agreement on this material term meant there was no final and binding agreement between the parties.

Conclusion:
The court held that there was no concluded agreement containing an arbitration clause. The correspondence and conduct of the parties did not establish a binding arbitration agreement as per Section 7(4)(b). The appeal was dismissed, affirming that the learned Single Judge's decision was correct in law, and no interim relief was granted under Section 9 of the Arbitration and Conciliation Act, 1996.

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