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TMI Blog2008 (4) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... pending application under section 11 of the Act, if necessary. After having so said, the learned judge observed that the respondents herein have been using some copyright materials of the petitioners based on an earlier agreement till the date of the judgment and as such the respondents were exploiting appellants' right to copyright and they are entitled to make payment atleast damages to the appellants. Then he proceeds to observe that even if it is not a fit case to grant relief, arbitrator or mediator needs to be appointed to settle the dispute between the parties. The application as filed by the appellants was rejected. It is this order which is the subject matter of the present appeal. 3. On behalf of the appellants, their learned counsel in the oral arguments and supplemented by the written submissions, contends that the learned judge proceeded on the basis that there was no agreement in writing between the parties containing an arbitral clause in terms of section 7(4)(a). It is the submission of the learned counsel that what in fact the appellants had contended is that there was an arbitral agreement in writing by exchange of correspondence in terms of section 7(4)(b) as ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate that material terms have been unilaterally changed by the appellants more so pertaining to payment of dues between the purported date of termination of the past agreement and the new agreement. By the side letter which was annexed to e-mail dated 2.3.2006, the appellants unilaterally for the first time fixed rate of 50% of the gross amount received/receivable by the respondents in respect of the non-physical exploitation of the assigned sound recordings and underlying works. The period for payment of past dues also was unilaterally altered from 31.3.2006 to 30.6.2006. Even otherwise the draft side letter varies from the earlier side letter. The provisions for payment of past royalty dues was never finally decided or agreed by the parties and as it forms a material part of the agreement, in the absence of a concluded agreement in respect of such term, there was never any final and binding agreement as between the parties. There is no correspondence or pleadings to show that the parties intended to enter into arbitration agreement independent of the deed of assignment. For the reasons aforesaid, it is submitted that no interference is called for with the view taken by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid finding cannot be reopened in any proceeding between the parties either on application under section 11 of before an arbitral tribunal. The only remedy would be in an appeal filed under section 37 of the Act. 6. While considering section 9 of the English Arbitration Act in Nigel Peter Albon (trading as N.A. Carriage Co.) and Naza Motor Trading SDN BHD and others [2007] 2 All ER 1075 a division bench of the England and Wales High Court, in the context of their law referred to the judgment of the Court of Appeal in Fiona Trust v. Prialov [2007] EWCA 20, that, if the construction of an arbitration agreement is in issue, that issue has to be decided under section 9 of the 1996 Act, before a stay can be granted under that section. Reference in support was made to the guidelines laid down in Brise v. St. David [1999] BLR 19, which judgment though reversed in appeal the guidelines were approved by the Court of Appeal again in Al Naimi v. Islamic Press Agency [2000] 1 LLLR 522. The directions are (1)Where it is possible to do so, to decide the issue on the available evidence presently before the court that the arbitration agreement was made and grant the stay; (2)To give directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clause in a contract or in the form of a separate agreement. (3)An arbitration agreement shall be in writing. (4)An arbitration agreement is in writing if it is contained in- (a)a document signed by the parties; or provide (b)an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c)an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5)The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract." 8.1 Under section 7(2) the arbitration agreement may be in the form of an arbitration clause in the contract or in the form of a separate agreement. Then sub-section (3) states that an arbitration agreement shall be in writing and sub section (4) then states that when an arbitration agreement can be said to be in writing. Thus, the arbitration agreement can be contained as a clause in a contract or in the form of separate agreement as set out in section 7(4) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Madras AIR 1955 SC 781. The purport behind the rule is that the other side must have notice of the case of the plaintiff/petitioner. 10. Inspite of these specific pleadings and the correspondence, the learned counsel for the appellants contends that their case is not based on the arbitral clause as contained in the agreement of 8 May 2006, but in the correspondence exchanged culminating in the letter of 10 March 2006 and for that purpose sought to place reliance on sub-paragraphs (i) and (j) of paragraph 5. A reading of the pleadings in both the paragraphs does not result in drawing a conclusion that it was the petitioner's case that the correspondence exchanged between the parties resulted into an arbitration agreement. The court in such circumstances must consider the pleadings in totality and not in isolation. The entire correspondence is in respect of an agreement containing the terms of contract, one of the terms being the arbitral clause. What the court under section 9 apart from deciding whether there is arbitral clause would consider is whether the dispute is referable to the subject matter of the arbitral clause. In our opinion, it will not be open to a party to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titute an arbitration agreement under Arbitration Act 1940. Considering the language used there, the apex court while answering the issue observed as under: "But it is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and that it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established." 12.1 In that case the contract notes exchanged between the parties contained an agreement in writing. The court held that the arbitral proceedings commenced were competent. 12.2 In the instant case the correspondence exchanged does not disclose that the parties are at ad idem on an independent arbitral clause in terms of section 7(4)(1). The correspondence exchanged at the highest may result in considering the appellants' contention as contained in the pleadings that there was an agreement in writing, containing an arbitral clause. 13. Let us now consider the judgments relied upon before answering the issue. In Dresser Rand S.A. v. Bindal Agro Chem Ltd. [2006] 1 SCC 751, the court was considering the provisions of the Foreign Awards (Recognition and Enforcement) Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties cannot without the consent of both get rid of the contract already arrived at." 14.1 In Pagnan S.P.A. v. Feed Products Ltd. [1987] Lloyd's LR 601, the court observed that we need not look into actual intent in a man's mind. You look at what he said and did. A contract is formed when there is, to all outward appearances, a contract. A man cannot get out of a contract by saying 'I did not intend to contract' if by his words he has done so. His intention is to be found only in the outward expression which his letters convey. If they show a concluded contract, that is enough. Where the parties have not reached agreement on terms which they regard as essence for binding contract, it naturally follows that there cannot be a binding agreement until they do agree on those terms. The test, therefore, would be to examine all the documents and decide from them whether the parties had agreed upon all material terms. In such circumstances, the proper inference is that they agreed to be bound by those terms from that time onwards. From the judgment of Lord Justice Lloyd, the test for determining whether there is a written contract in existence may be set out. "As to the law, the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssential for the formation of a binding contract, then the statement is tautologous. If by "essential" once means a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the judge, 'the masters of their contractual fate'. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day which parties enter into so called 'heads of agreement'. 15. The next issue is what reliance can be placed on the documents which had been forwarded as 'draft for discussion purpose only'. It is submitted on behalf of the appellants that remark was not inserted into the draft as per the instructions of either party, but it is merely a template used routinely and hence, it is of very little significance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any agreement. The conduct can also be seen in another aspect namely, respondents were already exploiting the appellants" copyright even during the stage of negotiations in the present case. The aforesaid conduct of the respondents during the stage of the negotiations is reconcilable with only one view of the matter, that the respondents were on the brink of committing to an agreement during the course of negotiations and from the correspondence it clearly emerges that the agreement was clearly arrived at. It is pointed out that the previous agreement did not pertain to and did not authorise non physical exploitation of copyright, namely, exploitation by way of ring tones downloads etc. While purporting to act under the previous agreement the respondents have denied any obligation to pay for non physical exploitation of the appellants copyright. In the new agreement dated ( 8.5.2006), it is for the first time expressly dealt with non physical use of copyright and the royalty to be paid thereupon. In the matter of conduct of the parties the learned counsel relying on the judgment in F & G Sykes Ltd. v. Fine Fare Ltd. [1967] I Linds Ref.53 of the Court of Appeal Denning L.J. comments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is subject to his comments. The said side letter set out the amount to be paid as royalty for the use after termination and before signing of the new agreement. The correspondence dated 9.2.2006 also indicates that it was subject to verification of the details by the parties. Next is the communication dated 2.3.2006 forwarding a clean version of the draft deed of assignment as also side letter to be exchanged between the parties in respect of the applicable rates for past dues. In this letter the amount to be paid for past dues was set out. As noted earlier this amount was not reflected earlier. Then there was the letter dated 10.3.2006 and the relevant portion of the said letter is as under: "I await confirmation of your acceptance of the entire agreement and the indication of the date on which you are willing to sign." 17.2 It also contained revised draft in terms of royalty (clause-b). Then on 8.5.2006 the appellants wrote to the respondents wherein they set out that after extensive negotiations, all the terms therefore, had been agreed and the deed of assignment was awaiting execution by both the parties. The relevant portion reads as under: "Please note that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial part of the agreement had not been concluded and in the absence of the concluded agreement in respect of such terms there was no final binding agreement. It may also be mentioned that the parties have also not acted in terms of the agreement dated 8.5.2006, in the matter of payment of royalties, to arrive at a finding that the agreement had been acted upon and, therefore, the respondent No. 1 should be held by their conduct. There is also no other material to indicate that after the communication by respondent No. 1 by their letter dated 2.6.2006, they had related back to the appellants nor is there any correspondence from appellants to respondent No. 1 setting out that the issue of royalty for the past period has been settled. In the absence of parties arriving at an agreement on a material term of the contract even assuming that there was no dispute between the parties on the other terms of the agreement can it be said that there was an agreement in writing. In our opinion, an agreement for the payment of royalty between the date of termination and the date of the new agreement was a material term. Postponing the date from 31.3.2006 to 30.6.2006 may not be relevant as it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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