Bombay High Court Upholds ₹96 Lakh Award Against TCS In Hardware Supply Dispute With Inspira

The Bombay High Court on Tuesday upheld an arbitral award directing Tata Consultancy Services Ltd. to pay Rs. 96.20 lakh to Inspira IT Products Pvt. Ltd. for the loss suffered on 207 servers and monitors that Inspira purchased for TCS but could not deliver after TCS failed to finalise delivery locations. The court rejected cross-appeals filed by both the parties.

A single bench of Justice Sandeep V Marne held on December 2 that the 2023 award contained no perversity or patent illegality, noting that the arbitrator had rightly concluded that TCS remained liable to pay for equipment it “made Inspira to purchase,” and that the award was “unexceptionable.”

The dispute arose from a 2013 contract under which TCS issued three purchase orders to Inspira for hardware required for its project with the Department of Posts. The dispute related to the third purchase order valued at Rs. 4.08 crore for 207 HP Proliant Tower ML 350 servers and 207 monitors. Inspira said it procured the equipment but could not deliver it by July 20, 2013 since TCS had not provided delivery locations.

When TCS later asked for delivery of eight servers across various states, Inspira said it could not make piecemeal billing and asked TCS to arrange warehousing. The servers remained undelivered. Inspira sought to return them to HP, but HP refused, calling them user-specific to TCS. Inspira eventually sold them to a third party for Rs 2.23 crore, leading the arbitrator to award the difference after deducting support-cost and monitor-related components.

TCS argued that the arbitrator had rewritten the contract by relying on terms from another purchase order and that the contract lapsed by efflux of time on July 20, 2013. It alleged that Inspira had not procured the servers in time and pointed to Inspira's refusal to deliver eight servers in October 2013.

TCS also invoked Section 52(2) of the Sale of Goods Act to argue that Inspira sold the servers without proper notice. Inspira countered that TCS's contentions amounted to a reassessment of factual findings beyond the scope of Section 34. It said the servers were tailor-made for use of TCS and that TCS never cancelled the purchase order. Inspira also challenged the deduction of the support-cost component of over Rs 75 thousand from the award.

The court rejected TCS's claim that the contract ended on July 20, 2013, noting that TCS itself disclosed delivery locations only on October 21, 2013. He found that TCS's allegation that Inspira never procured the servers was contradicted by its own correspondence with HP, calling its litigation stance a “volte face,” and described the mitigation defence as a counterblast raised as an "afterthought.”

Addressing the arbitrator's reference to terms of another purchase order, the court held, “No element of perversity or patent illegality has crept in the Award on account of this minor error, which needs to be ignored as being inconsequential. It therefore cannot be contended that the Award is based on terms of another contract or that the Arbitral Tribunal had foisted a new contractual bargain between the parties by rewriting the terms of contract."

On Inspira's challenge to the deduction of support charges, the court held that there was no occasion for Inspira to provide any support for undelivered Servers and monitors.

Finding that TCS had failed to make out any ground of challenge, the court dismissed both petitions.

Case Title: Tata Consultancy Services Ltd. vs  Inspira IT Products Pvt. Ltd

Case Number: COMMERCIAL ARBITRATION PETITION NO.415 OF 2024

For Petitioners: Advocate Fereshte Sethna with Advocates Mohit Tiwari, Prakalathan Bathey, Naomi Ting, Sushmita Chauhan and Tarang Saraogi instructed by  DMD Advocates

For Respondents: Advocate Rohan Savant with Advocate Vidhi Karia instructed by Advocate Jayakar & Partners

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