2011 (6) ALT 692
High Court of Andhra Pradesh
THE HONOURABLE MR. JUSTICE B. SESHASAYANA REDDY
M/s. Jain Irrigation Systems Limited, rep. by its Joint Managing Director Ajit Bhavarlal Jain
Versus M/s. Satyam Computer Services Limited, Rep. by its Managing Director
Arbitration Application No.141 of 2010
Decided on : 18-07-2011
Arbitration and Conciliation Act, 1996 – Sections 11(5) & (6) 7(5), 7 - Companies Act, 1956 – Arbitration Agreement – Activities of business – Seeking appointment of an arbitrator - Annual maintenance agreement also came to be executed between parties – Respondent failed to carry out proper and timely services in respect of MySAP implementation for applicant and also failed to honour confidentiality agreement – Applicant Irrigation Systems Limited, engaged in business of production and supply of equipment used in irrigation projects and Respondent Computer Services Limited is a company engaged in business of providing information technology services - Applicant decided to implement SAP, which, in simple words is a software that has to be integrated in a company’s existing computer systems for effective streamlining of day-today business operations of company - Negotiations held between applicant and respondent and ultimately, negotiations culminated in appointing respondent as service provider of applicant for purpose of implementation - Said letter contained preliminary terms of contract such as scope of work, consideration, payment schedule - Applicant paid an amount to respondent towards its remuneration for providing services required by applicant - According to the applicant, respondent failed to carry out proper and timely services in respect of MySAP implementation for applicant and also failed to honour confidentiality agreement - Applicant issued a notice, to respondent seeking return of an amount of apart from damages and compensation for wrongful abandonment and breach of confidentiality - Held, It is not in dispute that there is no formal written, signed contract between parties - Indeed, this fact has been stated by the applicant in para.2-s of the affidavit filed in support of application, which has been extracted supra - Purchase order emanating from the respondent - Purchase order came to be issued after due deliberations and before parties signing on MSA - Purchase order does not contain any arbitration clause. After the purchase order, on behalf of respondent, sent certain e-mail messages to applicant - Very fact that respondent executed confidentiality agreement, indicates that there was no consciousness among parties in response to terms and conditions stipulated in format of agreement for service - A reading of purchase order, copy of which finds place at page. No.18 of material papers, and so also confidentiality agreement - Court find that applicant failed to establish that there is an arbitration agreement between parties – Arbitration Application dismissed.
1. This Arbitration Application has been taken out by the applicant under sub-sections (5) & (6) of Section 11 of the Arbitration and Conciliation Act, 1996 (for short, “the Act”), r/w. Scheme for Appointment of Arbitrators, 1996, seeking appointment of an arbitrator.
2. The applicant-M/s.Jain Irrigation Systems Limited, is a company registered under the Companies Act, 1956, engaged in the business of production and supply of equipment used in irrigation projects. The respondent-M/s. Satyam Computer Services Limited is a company registered under the Companies Act, 1956, engaged in the business of providing information technology services. In order to streamline the day-to-day activities of business, integrate and link all its departments and have a single platform for having complete coordination with all its departments, the applicant decided to implement SAP, which, in simple words is a software that has to be integrated in a company’s existing computer systems for effective streamlining of the day-today business operations of the company. Negotiations held between the applicant and the respondent and ultimately, negotiations culminated in appointing the respondent as service provider of the applicant for the purpose of implementation of MySAP ERP ECC 6.0 vide letter dated 23.11.2007. The said letter contained preliminary terms of the contract such as scope of work, consideration, payment schedule, etc. The applicant paid an amount of Rs.1,01,12,400/- to the respondent towards its remuneration for providing the services required by the applicant. An annual maintenance agreement, dated 14.11.2008, also came to be executed between the parties. According to the applicant, the respondent failed to carry out proper and timely services in respect of MySAP implementation for the applicant and also failed to honour the confidentiality agreement. Thereupon, the applicant issued a notice, dated 04.01.2010 to the respondent seeking return of an amount of Rs.9,00,00,000/- apart from damages and compensation for wrongful abandonment and breach of confidentiality. The applicant also indicated in the notice with regard to invocation of arbitration clause and reference of disputes to Mr.Bharat B. Jain, Advocate, as sole arbitrator. The respondent received the notice and remained non-responsive. Thereupon, the applicant by notice, dated 21.01.2010, invoked the arbitration clause 14.2 of the agreement for services and appointed Justice H.Suresh, Retd. Judge of Bombay High Court and sought for consent of the respondent. The respondent did not respond to the notice. I will complete the narration of facts set out in the application by referring Paras.2-s and 5 of the affidavit filed in support of the application, which read as hereunder:
“2. s. The applicant states and submits that all previous attempts of an amicable settlement and negotiations between the parties have failed. The Applicant states that the Respondent has failed to honour the said Confidentiality Agreement. The Applicant states that the Respondent has also failed to carry out proper and timely services in respect of MySAP implementation for the Applicant and have failed to resolve the numerous issues arising out of their faulty services and therefore, disputes and differences have arisen between the parties. The Applicant submits that there is no formal written signed contract between the parties. An agreement was reached between the parties, but no document was executed by the parties. Though there is no written signed document, the agreement came into existence, as the parties have acted upon the agreement. The deponent is advised to state that a formal written signed document not being present and available does not ipso facto disentitle the applicant to invoke the Arbitration Clause in the present case.” “5. The applicant states and submits that the said Agreement was abandoned by the Respondent in or around December, 2008. The said Agreement was rescinded by the
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