Andhra Pradesh HC Sets Aside Single Bench Order That Directed RTGS To Pay ₹1.4Cr To Software Company Facing Data Breach Allegations
The Andhra Pradesh High Court has set aside an order of the Single Bench that directed the Real Time Governance Society (RTGS) to release a sum of Rs. 1,40,42,000 with interest to Code Tree Software Solutions Pvt. Ltd. (Code Tree), a software company.
The Court allowed the writ appeal filed by RTGS challenged the order of the Single Bench
A Division Bench of Chief Justice Dhiraj Singh Thakur and Justice R. Raghunandan Rao observed, “In our opinion, this was not a case where a direction should have been issued to the appellant to make the payment, especially in light of the allegations made against the petitioner with regard to data breach and the relevant provisions of the agreement, which were invoked for purposes of withholding the amount. The petitioner ought to have been relegated to the remedy of arbitration in the present case.”
Advocate P. Shreyas Reddy represented the appellant, while Advocate L.J. Veera Reddy appeared for the respondent.
The Bench had to consider whether the Court should exercise its writ jurisdiction in a concluded contract between the parties and whether the withholding of the payment was justified.
Code Tree had entered into an agreement with RTGS to provide manpower for various projects over a two-year period. Despite completing the work of the contract, Code Tree alleged that RTGS withheld payment of over Rs. 1.4 Crores for services without any reasonable cause or justification.
RTGS justified the non-payment on account of the fact that Code Tree being an exclusive contractor for RTGS and rendering IT and software services to them was being investigated for the leak of data for the relevant period as per the investigation conducted by the legislative committee into the citizen data leak, which is stated to have occurred in the early 2019.
The Court noted that RTGS withheld the sum due to an alleged data breach attributed to Code Tree. According to the agreement, any failure to discharge the obligations constituted a default, allowing RTGS to withhold payment. Thus, the Court stated that the action of the RTGS was not arbitrary.
“Ultimately, the issue may have to be considered and established before an appropriate forum, i.e., the arbitral tribunal, whether there was in fact a data breach and whether the same could be attributed to the petitioner. If the appellant fails to prove the same, the amount would be payable, and if not, then perhaps the action of the appellant may be justified,” the Court remarked.
Accordingly, the High Court allowed the appeal.
Cause Title: Real Time Governance Society v. Code Tree Software Solutions Pvt. Ltd.
