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Bombay High Court: In two cross petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) challenging the arbitral award directing Tata Consultancy Services Ltd. (TCS) to compensate Inspira IT Products Private Ltd. (Inspira) for loss on failed supply of 207 Edge Servers, a single-judge bench of Sandeep V. Marne, J., upheld the arbitral award and rejected TCS’s challenge and Inspira’s limited claim for support charges.
Factual Matrix
TCS had a contract with the Department of Posts (DOP) and, for execution of that contract, issued three separate Purchase Orders to Inspira. The present dispute concerns Purchase Order dated 24-06-2013 for 207 HP Proliant ML-350 servers and 207 HP monitors, valued at Rs. 4,08,82,385/-, where “location details will be communicated… with delivery schedule by Project Team.”
The agreed delivery date was 20 July 2013. Inspira claims it procured the servers from Avnet for Rs. 7.37 crores, but TCS did not provide delivery locations. On 21 October 2013, TCS first indicated locations for only 8 of the 207 servers. Inspira responded on 22 October 2013, stating that “piecemeal billing is not possible in the edge servers” and reminding TCS that it had been holding the material for months expecting TCS to arrange warehousing.
On 27 November 2013, Inspira wrote: “We have no option now but to reverse this material to HP… Once the reversal is approved, we will not be able to fulfil the above PO at the rates quoted.” TCS replied on 28 November 2013 that internal discussions on delivery dates were ongoing and asked Inspira to “wait for confirmation before proceeding further.” Inspira then sought a timeline. No locations for the remaining 199 servers were ever provided.
Due to inaction, Inspira approached HP for reversal. HP sought clarity from TCS. TCS replied on 23 April 2014 that delivery would likely take place in June 2014, depending on UAT scheduled in mid-May. By 13 May 2014, TCS reiterated: “Hopefully… we can start taking delivery… in June. Request you to kindly bear with us.”
Later, when the DOP programme suffered delays, TCS wrote directly to HP on 5 June 2014, saying the programme was “very badly delayed” and requesting HP to “free up these PCs and divert them to other clients… perhaps it may help us to get the same at a cheaper rate”. The Court described this as TCS seeking “help” from HP to get “some relief.” HP refused, reminding TCS that the shipment had been made against a firm PO, and “solution lies with the customer.”
When HP refused reversal and TCS ceased to engage, Inspira ultimately sold the servers to Comprint in February 2016 for Rs. 2,23,14,600/-, and reversed the monitors for Rs. 13,04,100/-. Inspira sought compensation for the loss. The arbitral tribunal awarded Rs. 96,20,515/- (after deductions) with interest. Both parties filed Section 34 petitions.
Moot Points
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Whether the arbitral tribunal committed patent illegality by importing terms of another Purchase Order (DC PO) into the present PO?
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Whether the contract ended by efflux of time since delivery did not occur by 20-07-2013?
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Whether Inspira committed breach or never actually procured the servers?
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Whether Inspira failed to mitigate damages or violated Section 54(2) of the Sale of Goods Act?
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Whether deduction of Rs. 75,60,785/- (6.5-year support charges) was justified?
Court’s Observations
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Importing terms of an unrelated Purchase Order
The Court examined TCS’s allegation that the arbitral tribunal had “erroneously mixed” terms of the Data Centre PO (which provided delivery at Koparkhairane, Navi Mumbai) with the Edge Servers PO.
The Court acknowledged that the tribunal had committed a minor error in referring to the delivery address in the DC PO, and that “the Arbitral Tribunal does not appear to be entirely right” in assuming the Edge Servers also had to be delivered only at Koparkhairane. The Edge Servers PO clearly stated that delivery locations were to be provided by TCS later.
The Court acknowledged a minor error: the tribunal referred to delivery terms of another PO. However, the Court stated that this minor error was “inconsequential” and did not affect the ultimate conclusion because even if Inspira ought to have delivered the 8 servers at the locations mentioned in TCS’s 21-10-2013 email and TCS never treated Inspira’s refusal to deliver 8 servers as repudiation of the contract, instead, TCS’s subsequent conduct showed willingness to continue the contract.
The Court held that “no element of perversity or patent illegality has crept in the Award on account of this minor error” and the same did not justify interference under Section 34.
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Whether contract ended by efflux of time
The Court rejected TCS’s contention, that since the delivery date stated in the PO was 20-07-2013 the contract lapsed automatically, as “utterly baseless.”
The Court noted that the TCS itself provided delivery locations only in October 2013, therefore did not treat 20-07-2013 as sacrosanct; after Inspira’s 27-11-2013 email, TCS responded that it was finalising delivery dates and requested Inspira to “wait;” by April—May 2014, TCS assured both HP and Inspira that it would take delivery after UAT and TCS’s later correspondence with HP seeking reversal “belies the theory” that the PO had ended.
Thus, the Court held that the TCS never terminated the PO and its conduct clearly showed the contract continued. Hence, the tribunal was correct in holding that the contract continued well beyond October 2013, and TCS remained liable.
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Alleged non-procurement or breach by Inspira
The Court dismissed TCS’s argued that Inspira had never actually purchased the servers and produced a “bogus invoice” as “completely baseless” and characterised the same as a “volte face” and “false plea”. The Court held that TCS’s suggestion that non-payment to Avnet meant non-procurement was irrelevant.
“This Court does not appreciate the plea raised… that Inspira actually did not procure the Servers… Having made repeated efforts with HP for reversal… TCS has taken a volte face.”
The Court noted that TCS itself corresponded with Hewlett Packard (HP) repeatedly asking for reversal of the servers, which is inconsistent with the claim that the servers never existed. It was noted that HP’s own emails indicated the servers had been shipped against a firm PO from Inspira and Inspira produced both purchase and sale invoices. Moreover, Inspira’s refusal to deliver 8 servers in October 2013 was due to objection to piecemeal billing, not because servers did not exist. The Court further stated that rejection of warehousing charges did not imply non-procurement.
The Court held that the “evidence on record clearly demolishes the case of TCS that Inspira had not procured the Servers.” Thus, no breach by Inspira was established.
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Mitigation of Loss and Sale of Goods Act
The Court approved the tribunal’s rejection of TCS’s mitigation argument that Inspira should have sold the servers earlier and should have given notice under Section 54(2) of the Sale of Goods Act.
The Court noted that there was no occasion to sell immediately after 20-07-2013 because TCS had to supply delivery locations. The Court further noted that Inspira attempted to mitigate by seeking reversal in November 2013, but TCS expressly asked them to wait.
The Court asserted that Inspira successfully sold user-specific servers in 2016 and this mitigated TCS’s liability. The Court held that Inspira’s ability to find a buyer for “user-specific servers” saved TCS from a much larger liability.
“TCS should consider itself lucky that Inspira was successful in selling TCS’s user-specific Servers… Otherwise, TCS would have been liable to pay the entire price.”
The Court further added that TCS’s argument that Inspira should have given notice under Section 54(2) of the Sale of Goods Act was “not too inspiring,” especially because TCS itself had been trying to dispose of the servers via HP.
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Tribunal’s Award on Damages
The Tribunal awarded Inspira the difference between the PO value, i.e., Rs. 4,08,82,385/- and the amount recovered through sale and monitor reversal after deducting 6.5-year support charges. The Court found Tribunal’s approach in awarding damages to Inspira entirely justified.
The Court rejected that Inspira argument that the support charges deduction was wrong, and upheld the deduction of support charges (Rs. 75,60,785/-) as the same was correct and not perverse. The Court held that support charges was payable only if servers were delivered and deployed and since no delivery occurred, there was no occasion to provide support.
Court’s Decision
The Court dismissed both the TCS’s petition and Inspira’s petition and upheld the Arbitral Award entirely, awarding to Inspira —
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Rs. 96,20,515/- (difference between PO value and sale proceeds, after deductions).
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Interest @ 9% p.a. from 01-03-2016 until payment.
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Costs: Rs. 26,29,967/-.
[Tata Consultancy Services Ltd. v. Inspira IT Products (P) Ltd., 2025 SCC OnLine Bom 4832, Decided on 02-12-2025]
Advocates who appeared in this case:
Ms. Fereshte Sethna with Mr. Mohit Tiwari, Mr. Prakalathan Bathey, Ms. Naomi Ting, Ms. Sushmita Chauhan and Mr. Tarang Saraogi i/b M/s. DMD Advocates, Counsel for the Petitioner
Mr. Rohan Savant with Ms. Vidhi Karia i/b Ms. Jayakar & Partners, Counsel for the Respondent
Buy Arbitration and Conciliation Act, 1996 HERE
