SPEECH & SOFTWARE TECHNOLOGIES (INDIA) PVT. versus NEOS INTERACTIVE LTD.

Citation: [2008] 17 S.C.R. 62 · Decided: 05-12-2008 · Supreme Court of India · Bench: J.M. PANCHAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

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[2008] 17 S.C.R. 62 
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A 
SPEECH & SOFTWARE TECHNOLOGIES (INDIA) PVT. : 
LTD. 
v. 
NEOS INTERACTIVE LTD. 
(Arbitration Application No.22 of 2007) 
B 
DECEMBEB 5, 2008 
[J.M. PANCHAL, J.] 
Arbitration and Conciliation·Act, 1996: 
c 
ss.2(1)(b), 11(6) and (9) -
International commercial 
arbitration -
Application for appointment of arbitrator -
SeNices Agreement containing arbitration clause -: Plea that 
SeNices Agreement was made part of a later Tripartite Share 
D Purchase Agreement which sto.od terminated and with that 
SeNices Agreement ceased to exist and, the Tripartite Share 
Purchase Agreement was novated, rescinded and revoked 
on account of Letter of Intent, and, therefore the application 
~ 
was liable to ·be rejected - Held: SeNices Agreement was 
E 
not dependent upon· Tripartite Share Purchase Agreement -
An agreement to enter into an agreement is not enforceable 
nor does it confer any right upon parties - Letter of Intent 
relied upon is n.othing but an agreement to enter into anotl)er 
agreement which was not executed -
The Services 
F 
Agreement has not ceased to exist - Applicant is entitled to 
invoke arbitration clause - Disputes exist between parties 
r 
relating to execution of SeN/ces Agreement - Application 
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allowed -. Arbitrator appointed - Contract - Agreement to 
enter into an agreement. 
G 
The applicant filed the instant application uls 11 (6) of 
the Arbitration and Conciliation Act, 1996 for appointment 
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of an arbitrator stating that the applicant and the 
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respondent e~tere_d into a Services Agreement dated 
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15.7.2006 whel.-eunder the applicant was to provide 
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62 
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SPEECH & SOFTWARE TECHNOLOGIES (INDIA) PVT. 
63 
. v. NEOS INTERACTIVE LTD. 
service to the respondent on a monthly payment; that the A 
respondent had also agreed to compensate the Director 
of the applicant for coordination activities; that the 
respondent refused to make any payment to the applicant 
and insisted for execution of another agreement which 
the-latter declined. The stand· of the respondent was that B 
after the parties signed the Services Agreement dated 
15.7.2006, a Tripartite Share Purchase Agreement was 
-.I.. 
executed on 1.8.2006 of which the Services Agreement 
formed· part. The latter agreement was contingent upon 
· 
.. certain events taking place by 31.7.2006 and since the c 
said events did not .take place by the stipulated date, it 
stood automatically terminated as a result of which the 
Services Agreement dated 1 ~~7 .2006, which was part of 
the tripartite agreement, ceased to exist and, therefore, 
the applicant was not entitled to invoke the arbitration D 
clause thereof. It was further submitted by the respondent 
that the Tripartite Share Purchase Agreement was 
novated, rescinded and revoked. on account of Letter of 
Intent dated 1.8.2006 and, therefore, the application 
should be rejected. 
E 
Allowing the application, the Court 
,. 
HELD: 1. Exercise of power under Section 11 (6) of the 
Act is judicial power. The preliminary matters to be 
considered by the court are (1) existence of arbitration F 
1 
agreement, (2) territorial jurisdiction, (3) whether there are 
llt 
live issues to be referred to the arbitrator, and (4) whether 
appliCation is filed within the period of limitation 
prescribed by the law. If the court finds that the arbitration 
agreement does not exist or is rescinded then the prayer· G 
for referring the dispute to thearbitrator will have to be 
rejected. [Para 7] [68-C-D] _ 
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SBP ~nd Comparw vs. Patel. Engineering Ltd. (2005) 8 
sec 618, relied on~. . 
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64 
SUPREME COURT REPORTS 
[2008] 17 S.C.R. 
A 
2.1. From the record of the case it is evident that the 
Services Agreement dated July 15, 2006 was never a 
schedule to the Tripartite Share Purchase Agreement. 
The Services Agreement had been executed before the 
Tripartite Share Purchase Agreement was·executed. The 
B existence of the Service Agreement was not dependent 
upon the ·completion of events as contemplated by the 
Tripartite Share Purchase Agreement and, therefore, it is 
incorrect to say that the Services A.greement ceased to 
y 
exist on termination of the Tripartite Share Purchase 
c Agreement. [Para 10] [69;.E-F; 70-F-G] 
2.2. The Letter of Intent dated August 1, 2006 under 
..... 
no circumstances can be treated as .novating, rescinding 
or _revoking .the Tripartite Share Purcha

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