Spandanasphoorty Financial Limited vs IQ Technologies And Another

The present appeal is arising out of an order, dated 10.03.2022 passed in C.O.P.No.12 of 2022 by the Principal Special Court in the cadre of District Judge for Trial and Disposal of Commercial Disputes at Hyderabad, on an application preferred under Section 9 of the Arbitration and Conciliation Act, 1996.

The facts of the case reveal that I.Q.Technologies, petitioner before the trial Court, has entered into an agreement on 16.08.2021 with M/s.Spandana Sphoorty Financial Limited, appellant herein and it is a services agreement. The terms and conditions of the aforesaid agreement for rendering the services are reproduced as under:-

(i) Services pertaining to functionality enhancements, maintenance, hosting of application and database, server and storage architecture, networking, security, platform management, disaster recovery, MIS including pay roll, business intelligence, advanced data visualization, application and data base;

(ii) Build an ERP/Application for the benefit of the respondents;

(iii) Maintenance of the application and data for the respondents to ensure the smooth functioning of the business of the respondents.

The IQ Technologies/petitioner has agreed to provide all services under the same services agreement to M/s.Criss Financial Limited/respondent No.2 herein, the wholly owned subsidiary of M/s.Spandana Sphoorty Financial Limited/appellant herein on similar terms as provided under the Services Agreement.

The petitioner, as stated in the petition under Section 9 of the Arbitration and Conciliation Act, 1996, is required to provide multiple services pertaining to loan restructuring, excess interest calculation, interest capitalization and collection module restructuring apart from building new functionalities and to complete some incomplete modules of M/s.Spandana Sphoorty Financial Limited/appellant herein. A serious dispute arose between the parties and the agreement between the parties provides for dispute resolution mechanism.

Clause 16 of the aforesaid agreement between the parties is reproduced as under:-

“16. Dispute Resolution

a. Any dispute(s) arising out of this Agreement shall, as far as possible, be settled amicably between the Parties hereto failing which the following shall apply:

b. Any dispute under this Agreement shall be referred to arbitration by a sole arbitrator to be appointed jointly by the Parties.

c. The Arbitration Proceedings shall be held in Hyderabad in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory re-enactment or modification thereof for the time being in force.

d. The Parties agree that the arbitration award shall be final and may be enforced as a decree.

e. The Parties further agree that subject to the above only the competent courts at Hyderabad shall have jurisdiction in all matters arising hereunder.

f. The Parties further agree to keep the arbitration proceedings and arbitral award confidential.”

The petitioner has raised various invoices from time to time and as the amount was not being paid to the petitioner, legal notice was served on 07.01.2022 and the petitioner came to know that M/s.Spandana Sphoorty Financial Limited/appellant herein have started looking out for other vendors. As per the petition, an amount of Rs.6,89,42,680/- (Rupees six crore eighty nine lakh forty two thousand six hundred and eighty only) was outstanding by M/s.Spandana Sphoorty Financial Limited/appellant herein and a prayer was made for attachment of two bank accounts, one with the State Bank of India and another with the Kotak Mahindra Bank. The application was preferred under Section 9 of the Arbitration and Conciliation Act, 1996 and the trial Court in order to safeguard the interest of the petitioner has attached only one bank account till 24.03.2002, which is with the State Bank of India. The order passed by the Court below is an ex parte order and a notice was also issued returnable by 24.03.2022. The M/s.Spandana Sphoorty Financial Limited/appellant herein instead of filing a reply to the application filed under Section 9 of the Arbitration and Conciliation Act, 1996 or filing an application for vacating the stay has rushed to this court and the fact remains that the trial Court has granted only an ex parte interim order. It is certainly open for M/s.Spandana Sphoorty Financial Limited/appellant herein to raise all the grounds raised in the present appeal before the trial Court. At this juncture, it has been brought to the notice of this Court that the appellant has already marked its presence before the trial Court and the matter has to be heard.

In the considered opinion of this Court, as the matter has to be heard on merits by the trial Court, this Court is refraining itself from passing any order on merits and the present appeal stands disposed of giving liberty to the parties to approach this Court after an order is passed in the matter by the trial Court. At this juncture, this Court does not find any reason to interfere with the order passed by the trial Court. The trial Court is directed to hear both the parties and to pass an order as expeditiously as possible preferably within a period of thirty (30) days from the date of receipt of a certified copy of this order.

The Commercial Court Appeal is accordingly disposed of.

Pending miscellaneous applications, if any, shall stand closed.

There shall be no order as to costs.