SETECH ELECTRONICS LTD Vs. BINATONE COMPUTERS P LTD

JUDGEMENT

(1.) BY this order I shall dispose of objections filed by the petitioner under Section 30/33 of the Arbitration Act, 1940 against the award dated 21st January, 2006 made and published by the learned Sole Arbitrator.

(2.) BRIEF facts relevant for the purpose of deciding this petition/objections are that M/s Binatone Computers Private Limited (claimant)entered into an Agreement dated 18th March, 1993 with the petitioner whereby the petitioner was permitted to manufacture and sell in India audio systems under the brand name 'binatone'. The petitioner in consideration of being permitted to use the design, technical knowhow and brand name 'binatone' was to pay a minimum royalty of Rs. 16 lac per annum w. e. f. 18th March, 1993 upto 17th March, 1998 to the claimant/respondent with minimum increase of 20% over the immediate preceding year. The royalty was payable every month to the respondent; 50% on the 1st day and 50% on the 15th day of following month on the basis of actual royalty or the pro-rata amount of the minimum royalty, guaranteed by the petitioner, whichever was higher. Reconciliation of accounts was to take place on quarterly basis. Under the agreement, the respondent was to make arrangements for import of TDM and for this purpose it advanced money to the petitioner. It was agreed that raw material finished goods etc. , belonging to the claimant and lying with the petitioner would be taken over by the petitioner (petitioner was a dealer of the claimant prior to the Agreement ). The respondent claimed that it raised royalty bills which remained unpaid. The petitioner manufactured and sold audio systems in India under the brand name of 'binatone' and made certain part payments towards royalty but failed to make payment for the entire royalty amount to the claimant and also failed to repay the advances and cost of material etc. The petitioner on the other hand disputed the claim of the claimant and pleaded that it was earlier manufacturing audio systems and supplying the same to the claimant, who used to market the same under its own brand name i. e. 'binatone'. The claimant was not interested in manufacturing audio system. However, it asked the petitioner to manufacture the same and sell under the brand name 'binatone' in India. Claimant only lent its design, technology and brand name to the petitioner.

(3.) THE signing of agreement for payment of royalty was not denied by the petitioner. However, the petitioner pleaded that the claimant did not have the title over the brand name 'binatone' and therefore was not competent to lend the same to the petitioner. One Mr. Trilochan Singh, proprietor of M/s harman Agencies had filed a suit against the petitioner for permanent injunction against use of trade name 'binatone' claiming that M/s Harman Agencies was the owner of the trade name. M/s Harman Agencies also filed a Civil Suit against the claimant which was pending in the High Court. When the petitioner learnt about this litigation, it found that the credibility of name 'binatone' was lost in Indian market. The respondent had suppressed the fact of pending litigation from the petitioner. The royalty agreement entered into between petitioner and the respondent, was therefore incapable of performance and the agreement stood determined. It is also averred that the technology given to the petitioner by the respondent/claimant was defective and the product was not well received in the market. There were various complaints and the petitioner suffered heavy losses. The petitioner claimed that the respondent's claim regarding loans and advances were beyond the scope of the Arbitration Agreement. The claim filed by the respondent before the Arbitrator was to the tune of Rs. 71,06,903/- inclusive of interest. The petitioner filed a counter claim of Rs. 4,68,81,056/ -. Both parties claimed pendente lite interest and future interest @ 24 %. After completing the pleadings, the Arbitrator framed following issues with the consent of parties: