Breach of contract established against one party due to application of unjust enrichment and fulfilment of obligations by another; court granted modified interest rate for commercial transactions.

COMMON JUDGMENT

The intra-court appeals under consideration are against the common judgment dated 19/02/2024 passed by the Learned Single Judge in C.S.No.128 of 2021 and C.S.(Comm.Div).No.63 of 2022.

2 . Genesis of the dispute leading to the appeals: -

The dispute is in respect of the execution of the work order dated 18.03.2017 issued by PERS Enterprises Private Limited (For the sake of brevity, hereinafter to be referred as ‘PERS’ in short) in favour of Aavanor Systems Private Limited, later renamed as Aavanor Systems LLP (For the sake of brevity, hereinafter to be referred as ‘Aavanor’ in short).

3. ‘PERS’ is operating Multi-Speciality Hospitals under the name of “SRM Institutes of Science (SIMS Hospital)”. Aavanor is a software developer. “DOC 99” is a software developed by Aavanor providing clinical engines which allows creating of multiple templates for the hospitals administration to capture the clinic data at different interfaces in the clinics and diagnostic centres. Shortly, it is a Hospital Information System with an advanced Electronic Medical Record Modules.

4. After negotiations, PERS issued the work order to Aavanor on 18.03.2017 consenting to pay Rs.40,00,000/- (Rupees Forty Lakhs only) towards the license fees for the use of the software at SRM Institutes of Science (SIMS) Hospital, Vadapalani and Rs.9,90,000/- towards implementation, training and customisation services. It was agreed by the parties that the payments would be made in instalments. The work to be completed within 120 days.

5. At the time of negotiation and on the date of issuing the work order, the “DOC 99” software was designed by default to be operated on an Oracle database. However, after issuance of the work order, PERS considering the high costs involved in installing Oracle Database on its servers, sought for a cost-effective database which will support the “DOC 99” software. Accordingly, the parties decided to make the necessary migration from Oracle database to Postgre SQL database which operates on an Open Source Platform in LINUX Operating System. Obviously, there was delay in completing the customisations as well as effective operation of the software modules due to migration from Oracle software to Postgre SQL.

6. Aavanor raised the invoices dated 11.09.2017 for Rs.22,65,000/- and 13.01.2018 for Rs.26,62,080/- but PERS did not pay the bills. Consequently, Aavanor has informed PERS that they may not be able to continue their services any further without clearing the dues. Thereafter, the parties have exchanged notices blaming other party and ultimately the dispute has culminated in instituting Corporate Insolvency Resolution Process (CIRP) by Aavanor against PERS before the National Company Law Tribunal (NCLT), Chennai Bench, in IBA No.1436 of 2019.

7. Pending CIRP proceedings, PERS filed O.S.No.2545 of 2019 before the City Civil Court, Chennai, against Aavanor, seeking recovery of Rs.37,45,000/- advanced to Aavanor pursuant to the work order dated 18.03.2017, along with 18% interest and an additional sum of Rs.25,00,000/- towards damages. Being a disputed claim, IBA No.1436 of 2019 was dismissed by National Company Law Tribunal, Chennai Bench on 05.05.2020.

8. Alleging that, PERS after issuing the work order dated 18.03.2017, wanted migration to Postgre SQL and through e-mail dated 07.04.2017, agreed to pay additional cost of Rs.6 lakhs for the migration. Subsequently, on various dates, PERS sought for additional customisation work, which was carried by Aavanor. However, PERS failed to pay the invoices raised for training and customise. A sum of Rs.1,04,52,423/- remains outstanding and pay