Case: Speech &amp; Software Technologies (India) Pvt. Ltd Vs. Neos Interactive Ltd

a period of fifteen days from the expiry of the previous month. Clause 10 of the said agreement provides for consequences which would ensue on termination of the agreement, whereas clause 19 enables the aggrieved party to approach arbitrator for resolution of the disputes. It is relevant to note that by letter dated February 15, 2007 the applicant had terminated the Services Agreement and appointed its sole arbitrator as well as called upon the respondent to concur with the said appointment or to appoint its arbitrator. It is an admitted fact that no reply was given by the respondent to the said notice. It is also relevant to notice that the execution of the Services Agreement dated July 15, 2006 is not denied by the respondent. What is claimed by the respondent is that the Services Agreement ceased to exist in view of termination of Tripartite Share Purchase Agreement. 10. From the record of the case it becomes at once evident that the Services Agreement dated July 15, 2006 was never a schedule to the Tripartite Share Purchase Agreement. This becomes clear from the contents of clauses 5.2 and 5.2.5 of the Tripartite Share Purchase Agreement dated August 1, 2006. Clause 5 of the Tripartite Share Purchase Agreement, which is to be found on running page 99 of the short counter affidavit filed on behalf of the respondent, provides the venue where completion of the said agreement would take place and also mentions post completion obligations. According to clause 5.1 of the said agreement, completion was to take place at a venue to be agreed between the applicant and Abela on the second business day after the day on which the conditions stipulated were satisfied. The consequences which were to follow on the completion of the Tripartite Share Purchase Agreement are mentioned in clause 5.2. Clause 5.2.5 of the agreement reads as under: - SST and the Company shall enter into the Services Agreement and Shareholders Agreement (SHA) as per drafts given in Schedule A and B. It is the specific case of the respondent that the Tripartite Share Purchase Agreement dated July 15, 2006, of which Schedules A and B were intrinsic and inseparable parts, stood automatically terminated on July 31, 2006 owing to non-completion of the material conditions as postulated in clause 3.4 of the agreement, without any further obligations, liability or claim between the parties under the agreement. As the Tripartite Share Purchase Agreement automatically stood terminated due to non-completion of the conditions mentioned in clause 3.4 of the agreement, there was no obligation on the applicant to enter into the Services Agreement, draft of which was annexed to the Tripartite Share Purchase Agreement as Schedule A or Shareholders Agreement, draft of which was produced as Schedule B to the agreement. It is not the case of the respondent at all that the draft of the Services Agreement was signed by the applicant at any point of time. Hence, automatic termination of Tripartite Share Purchase Agreement has nothing to do with the existence of the Services Agreement dated July 15, 2006, which was already separately executed between the parties. The record would indicate that the Services Agreement was executed before the Tripartite Share Purchase Agreement was executed. The existence of the said agreement was not dependent upon the completion of events as contemplated by the Tripartite Share Purchase Agreement and, therefore, it is wrong to contend that the Services Agreement ceased to exist on termination of the Tripartite Share Purchase Agreement. 11. Similarly, the plea that the Tripartite Share Purchase Agreement was novated, rescinded and revoked on account of Letter of Intent dated August 1, 2006 and, therefore, the instant application should be rejected, has no force. The Letter of Intent dated August 1, 2006 under no circumstances can be treated as novating, rescinding or revoking the Tripartite Share Purchase Agreement. The said Letter of Intent on a bare reading is nothing but an agreement to enter into another agreement because it is provided in the said letter that both parties agree to have set a deadline to sign this agreement by 15th September, 2006. It is well settled legal position that an agreement to enter into an agreement is not enforceable nor does it confer any right upon the parties. The agreement in terms of the said Letter of Intent was to be signed on or before September 15, 2006. It is not the case of the respondent that any agreement was executed between the parties on or before September 15, 2006. The respondent has not stated in its counter reply that the agreement, which was to be executed by September 15, 2006, was in fact executed. During the course of hearing of the instant application it was fairly conceded by the learned counsel for the respondent that no such agreement was executed between the parties at all. Hence, as the agreement contemplated by the Letter of Intent was never executed, it cannot be said that the agreement contemplated by the said Letter of Intent had novated, rescinded or superseded the Tripartite Share Purchase Agreement. Further, the scope/terms of the Tripartite Share Purchase Agreement as well as those of the Services Agreement and the terms contemplated by Letter of Intent dated August 1, 2006 are not consistent at all and, therefore, it is difficult to hold that novation of the Tripartite Share Purchase Agreement read with the Services Agreement had taken place, as contended by the respondent. 12. The net result of the above discussion is that the Services Agreement dated July 15, 2006 has not ceased to exist and the applicant is entitled to invoke the arbitration clause contained in that agreement. The application filed by the applicant is within the time prescribed by law. There is no manner of doubt that disputes are existing between the parties relating to the execution of the Services Agreement dated July 15, 2006, which are arbitrable. Under the circumstances, the instant application will have to be accepted. 13.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The net result of the above discussion is that the Services Agreement dated July 15, 2006 has not ceased to exist and the applicant is entitled to invoke the arbitration clause contained in that agreement. The application filed by the applicant is within the time prescribed by law. There is no manner of doubt that disputes are existing between the parties relating to the execution of the Services Agreement dated July 15, 2006, which are arbitrable. Under the circumstances, the instant application will have to be accepted.