PER MR PREM NARAIN, PRESIDING MEMBER

        The present original petition has been filed by the Dean, Government Medical College and Post Graduate Institute and Super Speciality Hospital, Nagpur, Maharashtra against H C L Infotech Limited and Ors.

2.     The complainant has alleged that the complainant had decided to computerise the working of the hospital and for this purpose, an amount of Rs.85 lakhs was received from the Government. The complainant floated tenders for the same in the year 1997. The tender was for the hardware as well as for the software development. The tender of the opposite party nos. 1- 3, hereinafter called the HCL Infotech Limited, was finally accepted by the complainant for Rs.85 lakhs and work order was issued to the HCL Infotech Limited on 09.01.1997. Supply of the hardware was completed by the opposite party nos.1-3 and payment of Rs.62,12,000/- was released to the HCL Infotech Limited on 27.05.1998 and a further payment of Rs.5,26,500/- was made to the HCL Infotech Limited on 17.08.1998. The opposite party nos.1-3 gave the work of development of application software to another company, namely, Interface Solutions, Nagpur, Maharashtra, the opposite party no.4. The complainant was informed by the HCL Infotech Limited vide their letter dated 12.10.1998 that the HCL Infotech Limited was satisfied with their infrastructural facilities and software expertise and were confident that they, with the help of the local representative of HCL, will do a very professional and satisfactory job. It was also informed that they had entered into a partnership agreement with them and they took full responsibility for the work through their appointed agent. Based on the letter of the HCL Infotech Limited, the complainant allowed opposite party no.4 to carry out the software development after assessing the requirement in different departments of the hospital in terms of work order. OP no.4, however, vide their letter dated 25.01.2000 informed the complainant as follows:

“HCL Infosystems Calcutta has awarded the complete work of analysis and software development for your institute as has been referred in above cited letter.

Our team has taken great efforts for evolution needs of your institute and based on this prepared the user requirement. We have designed the complete package (13 modules) which is integrated one and the same was demonstrated to you in month of October 1999.

HCL Infosystem Calcutta have not paid the amount due for this software and therefore, we are constrained to inform you that we are installing the software at your site.

We shall undertake the installation and training only after we receive payment from HCL Infosystems Calcutta.

However, as you are aware that we have invested lot of man hours in developing this software, we are prepared to offer you this software at Rs.5.50 lakh.”

3.     The complainant vide their letter dated 28.03.2000 wrote to the HCL Infotech Limited that even though the hardware supply was completed, the application software has not been developed nor supplied to the complainant. It was informed that if they did not develop and supply the application software, appropriate action will be taken. As there was no response from the opposite party nos. 1- 3, the complainant sent a legal notice to them which was replied by the HCL Infotech Limited on 19.04.2001. As the application software could not be supplied to the complainant, the total computerisation programme could not be operationalized and the computers and other hardware purchased could not be put to use, therefore, the present complaint has been filed.

4.     The complaint has been resisted by the opposite party nos.1 – 3 by filing their written statement, wherein the opposite party nos.1-3 have claimed that they have already supplied the total hardware and the standard software to the complainant. However, the application software could not be delivered as the complainant failed to pay Rs.1.00 lakh to opposite party no.4. It was also stated that as per the agreement the application software was to be supplied only after signing of the MOU by the complainant and the HCL Infotech Limited. As no MOU was signed on behalf of the parties, no deficiency could be attributed to HCL Infotech Limited for not completing supply of the application software. The opposite party nos.1-3 requested for dismissal of the complaint on the above grounds and some others.

5.     Both the parties have filed their evidence by way of affidavits which have been taken on record.

6.      Heard the learned counsel for both the parties and perused the material on record. Learned counsel for the complainant has reiterated the facts alleged in the complaint and argued that in response to the legal notice sent by the complainant, the reply of the HCL Infotech Limited mentioned the following:

“(viii) In reply to paragraph 8, it is hereby informed that my clients with the consent of your clients had requested to the Professional Institute of Technology and Science/ Mr Sandeep Gupta to develop the software but because as per the agreement your clients failed to make the payment of Rs.1.00lakhs to the said firm and therefore your clients themselves are responsible for this non-development of the software”.

7.     The learned counsel for the complainant argued that there was no question of paying any amount to opposite party no.4 as  OP No. 4 was appointed by the opposite party nos.1 -3 and not by the complainant and there was no privity of contract between the complainant and opposite party no. 4. The opposite party no.1-3 had entered into a partnership with OP no.4 as mentioned in their letter dated 12.10.1998 and for any payment to OP no.4, it was the responsibility of opposite party no. 1- 3. The complainant cooperated with the opposite party no.4 in giving the information for assessing the user requirements and consequently development of application software. However, the OP no.4 did not supply the software to the complainant as the opposite party no. 1- 3 did not pay any amount to opposite party no.4, which is evident from the letter of OP no.4 dated 25.01.2000 addressed to the complainant. It has been categorically stated that OP no. 4 has been ready to give the software for Rs.5.50 lakhs as he has not received any payment from the opposite party no.1-3. Learned counsel has also stated that during the pendency of the present complaint, this Commission vide order dated 7^th April 2004 constituted a committee consisting of the following persons/ experts to examine the issue and how the machinery could be made functional.

1. Dean of the Government Medical College or his authorised Representative;

2. Head of the Department, Computer Science, VNIT, Nagpur;

3. General Manager of the OP no.1;

4. Sr Manager of OP no.1;

5. Engineer appointed by the OP No.1 having technical knowledge of the disputed machinery

8.     This Committee submitted its report on 18.05.2004. The following action plan was proposed by the committee;

1. Development, delivery , installation, training for all the fourteen modules of customised application software;

2. Supply and installation of upgraded version of licensed software;

3. Up-gradation of the entire hardware system and networking to match the customised application software needs. The entire system should support retrieval of fifteen years patients date with reasonable performance criteria;

4. Commissioning, training and handing over of the entire system with reasonable period and providing three years on-site warranty including one year on site software and hardware engineer for support as agreed in tender conditions;

5. HCL Infosystems have asked for fourteen months’ time period for customised application software development and installations. The entire compliance is feasible and practicable within a maximum period of 10 to 12 months.

9.     The opposite party nos.1-3 further demanded Rs.67 lakh for implementation of its suggested plan. As the complainant had already paid about 90% of the contracted amount, there was no question of agreeing to the demand of Rs.67 lakh by the opposite party no. 1-3 and therefore, the matter could not be proceeded any further. Resultantly, all the money paid to the opposite party no. 1 – 3 has gone waste because due to non-development and non-supply of the application software the computerisation programme failed and hardware could not be put to any use. Therefore, the complainant is entitled to refund of the paid amount to the opposite party no.1-3 along with interest and compensation for deficiency in service on the part of the opposite party no.1 - 3.

10.   Learned counsel for the complainant also stated that there was some delay in filing the present complaint and the delay was condoned by this Commission vide its order dated 21.09.2012.

11.   On the other hand, the learned counsel for OP nos.1 - 3 stated that in the tender document item nos.1 to 6 are the specific hardware which were supplied; item no.7 is the network solution; item no. 8 is peripherals and accessories and this is also a part of the hardware which has been supplied; item no. 9 is the integrated software solution which is the main bone of contention. Learned counsel agrees that it is this item which has not been supplied by the opposite party no.1-3. Item no. 10 relates to licensed software which has also been supplied by the opposite party no.1-3.

12.   It was stated by the learned counsel that out of the 11 items, only one item being item no.9 that has not been supplied. Thus, if only a minuscule part has not been supplied by the opposite party no.1-3, they cannot be asked to refund the total amount paid to them.

13.   Another objection raised by the learned counsel for the opposite party no.1-3 is that the complainant is not a consumer. Tender for computerisation programme was floated for different activities of the hospital and the hospital is charging fees from the patients. As the activities of the hospital are commercial in nature, the computerisation programme for the activities of the hospital could only be treated as for commercial purposes as it would generate more profit for the hospital. In support of this contention he relied upon the following judgments of the Hon’ble Supreme Court and of this Commission:

1. In the case of Kalpavruksha Charitable Trust vs Toshniwal Brothers (Bombay) Pvt. Ltd., and Anr., in IA no.2 in CA no. 9737 of 1996 decided on 12.10.1999;

2. in the case of M/s Iffco – Tokio General Insurance Company Ltd., and Anr. vs M/s Nippon Yusen Kabushiki Kaisha and 3 Ors., NYK Line (Nippon Yusen Kaisha) and Ors – 2016 SCC Online NCDRC 1987 decided on 11.08.2016;

3. in the case of Dr Neelam Gupta vs Onida Switch Gear – 2016 SCC Online NCDRC 2470 decided on 21.10.2016; and

4. in the case of K S Dabas vs Rajinder Kumar Chhabra (Dr) – III (2007) CPJ 423 (NC) decided on 03.10.2005

14.   The learned counsel further argued that the above cited judgments are in respect of those hospitals that were charging fees and they have been treated as involved in commercial activities. These judgments are equally applicable in the present case also.

15.   In the acceptance letter issued by the complainant it has been mentioned for item no.9 that Integrated Customised Application Software Solution will be as per Annexure ‘B’ and Annexure ‘B’ reads as under:

“General outline of the software modules is provided along with the tender form. Detail information for each module is to be collected by the supplier from Super Speciality Hospital and Post Graduate Institute, Nagpur. A memorandum of understanding for software details will be finalised by Super Speciality Hospital and Post Graduate Institute, Nagpur and HCL HP Ltd, Nagpur. The delivery period for software will be calculated after the memorandum of understanding for software is finalised”.

16.    It was argued by the learned counsel that no MOU was signed between the complainant and the opposite party no.1-3 and hence, the OP was not obliged to finalise the integrated customised application software solution and supply the same to the complainant.  From the above Annexure ‘B’ it is also clear that the responsibility to give proper MOU to the opposite party was of the complainant and the complainant has failed in shouldering this responsibility. Hence, on this count alone no liability can be fastened upon the opposite party no.1-3.

17.   It was further argued by the learned counsel for the opposite party no.1-3 that the HCL has entered into a partnership with OP no. 4 for development of integrated customised application software solution and the complainant was informed accordingly. The complainant also cooperated with OP no.4 and OP no.4 finally developed all the 13 modules after assessing the user requirements. However, the complainant did not accept these modules. No payment was made to OP no.1-3 for development of the software. Therefore, the OP no.1-3 could not pay anything to OP No.4. The duty was cast on the complainant that if the OP no.1-3 were not able to supply the integrated customised application software solution, then the complainant should have taken the service of other software developers for development of this software and the complainant has failed in this regard. It is important to note that OP no.4 offered the developed 13 modules as per the tender document to the complainant for Rs.5.50 lakh, whereas the cost accepted for this software was Rs.10 lakh in the tender acceptance letter of the complainant, but the complainant did not accept even these modules. The fact is that the complainant has fully utilised the computer hardware by means of standard software also supplied by OP no.1-3 and they were really not interested in further computerising their different services for integrated solution. Learned counsel referring to section 73 of the Contract Act, tried to establish that the complainant should have got this software developed from any other source if the opposite party no.1-3 were not supplying the same. In support of his argument, the learned counsel cited the judgment of the Hon’ble Supreme Court in the case of Murlidhar Chiranjilal vs Harischandra Dwarkadas and Anr. – Civil Appeal no. 193 of 1958 decided on 29.03.1961, wherein it has been observed that:

“The two principles on which damages in such cases are calculated are well-settled. The first is that, as far as possible, he who has proved a breach of a bargain 83 658to supply what he contracted to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed; but this principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable step" to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps: (British Westinghouse Electric and Manufacturing Company Limited v. Underground Electric Railways Company of London (1)). These two principles also follow from the law as laid down in s. 73 read with the Explanation thereof If therefore the contract was to be performed at Kanpur it was the respondent's duty to buy the goods in Kanpur and rail them to Calcutta on the date of the breach and if it suffered any damage thereby because of the rise in price on the date of the breach as -compared to the contract price, it would be entitled to be reimbursed for the loss. Even if the respondent did not actually buy them in the market at Kanpur on the date of breach it would be entitled to damages on proof of the rate for similar canvas prevalent in Kanpur on the date of breach, if that rate was above the contracted rate resulting in loss to it. Bat the respondent did not make any attempt to prove the rate for similar canvas prevalent in Kanpur on the date of breach. Therefore it would obviously be not entitled to any damages at all, for on this state of the evidence it could not be said that any damage naturally arose in the usual course of things”.

18.   Learned counsel further mentioned that in the letter dated 10.03.1998 the complainant has indicated the following:

“The comment in your letter that there is lack of availability of experienced and qualified computer system specialist is highly objectionable and denied in toto. Please take a note that for this project here exists a scrutiny committee comprising of qualified computer specialists and the application software reports and documentation is verified by the same committee.

The question whether to start a fresh or customise existing package is not raised from our end. The institute desires that the application software package (customised and developed for this institute) should be in line with outline of various modules specified in tender/ order wherein it is made clear that it is your responsibility to collect details about the various modules from respective departments in Super Speciality Hospital and once the institute is satisfied with details and the way, they shall be accommodate in the software the only a memorandum of understanding shall be prepared and signed bilaterally. Based on this memorandum development and delivery of software shall be binding on you”.

19.   From the above, it is argued that in this letter, the complainant is asking first to develop software and then to sign the MOU, whereas, Annexure ‘B’ of acceptance letter says that the modules would be developed once the MOU is signed. In fact, the complainant neither issued the MOU nor accepted the modules developed by OP No.4.

20.   It was also open to OP no.1-3 to have purchased software for Rs.5.50 lakh and should have supplied to the complainant for Rs.10 lakh the contract price. There is no letter from OP No.1-3 to complainant that you can get the work done from any other agency.

21.   I have carefully considered the arguments advanced by the learned counsel for both the parties and examined the material on record. The first objection raised by the opposite party is that the complainant is not a consumer as the implementation of computerisation project was to earn more profit. It has been alleged that the complainant is charging some fees in their hospital from the patients therefore, this will come under commercial purpose. The other view that has been put forward by the complainant is that it is a Government Medical College and Post Graduate Institute as well as Super Speciality Hospital and even if some fees is charged, it is only to get all the patients registered and to get proper treatment. If any service charges are sought from the patients for different services like blood test, x-ray etc., they are the user charges that are charged in most of the Government hospitals and clearly profit is not the purpose of charging this fees from the patients and some patients are also seen free of cost. Even normal registration charges and user charges are less as compared to other private institutions that might be running hospitals for commercial purpose. In my view, commercial purpose is not the motive of the activities of the complainant. Even then, it is to be seen whether the computerisation project was for any commercial purpose. In the present case, computerisation programme was taken up by the complainant institution for the betterment of the administration and management in the Government Medical College and Post Graduate Institute and Super Speciality Hospital, for increasing their efficiency in dealing with their patients and other stake holders. Clearly there is no intention to earn profit by implementation of computerisation programme in such an institute. Had it been to earn profit, the Government should have sanctioned project cost after adjusting the profit to be earned after implementation of the project, but this is not the case in the present matter. Increasing efficiency by way of computerisation and digitisation cannot be said to be an activity to earn profit. Thus, in my view, the complainant has taken up the computerisation programme only for increasing the efficiency and effectiveness in the administration and management of its services without any profit motive. Thus, the complainant is a consumer within the definition of consumer as given in the Consumer Protection Act, 1986.

22.   Now coming to the merits of the case, it is seen that the hardware was supplied to the complainant by the OPs within a very short time and OPs took the major share of the payment. The fact remains that item no.9 of the purchase order which relates to development of customised software and integration of various units has not been completed by the OPs, though the OPs gave this work to their agent and that agent completed some of the work, however, the OPs did not take back the developed software from their agent and supply to the complainant. The OPs had argued that when OP no.4 was selling 13 modules of customised software to the complainant at Rs.5.50 lakh, the complainant should have taken these modules and should have implemented the programme so that they would not have suffered the loss. This argument of the OPs is bereft of any legal logic [though, it might be having an administrative logic] because the contract was between OP nos.1-3 and the complainant. OP no.4 was not involved in the contract and the responsibility to supply the purchase order was with OP nos.1-3. It is also not clear as to why OP Nos.1-3 did not pay to OP no.4 if they had asked OP no.4 as their agent to develop the modules of software. In fact the OP no.4 has even written to the complainant that OP nos.1-3 have not paid for the development of these modules and software. Learned counsel for OP nos. 1-3 has argued that Rs.1.00 lakh was not paid by the complainant to OP no.4 and therefore, they could not supply the modules and software to the complainant. In fact, this seems to be only a pretext on the part of OP nos.1-3 as complainant did not owe any amount to opposite party no.4, nor there was any agreement between the complainant and OP No.4, therefore, there was no question of paying any amount to OP no.4 by the complainant. Thus, I have no hesitation in accepting the argument that there was no contract between OP no.4 and the complainant and the responsibility to supply the customised integrated software rested with OP no.1 - 3.

23.   Another similar argument has been made by the learned counsel for OP nos.1 - 3 that the complainant should have given the contract to some other vendor for developing the software modules, if they were not satisfied by the performance of OP nos.1-3. The complainant is a Government Institute and they were not entitled to spend more money for implementation of the part of the same contract which was signed with the OP nos.1-3. The total project was given to OP no.1 - 3 including item no. 9 in the purchase order, therefore only after OP Nos.1 - 3 refused to do it that the Government Institute would have taken any decision to go ahead for purchase of the same thing from some other vendor. It is true that in the judgment of the Hon’ble Supreme Court in the case of Murlidhar Chiranjilal vs Harishchandra Dwarkadas and Anr., (supra) the Hon’ble Supreme Court has observed that the principle to be followed for assessment of damage for breach of contract is that the person who has suffered loss should have taken steps to minimise the loss and in fact, the complainant had already invested a major share of the amount sanctioned by the Government for the project and should have taken steps to save that investment by looking at various options for the same. On the administrative side, they should have included this alternative also in their consideration for getting the customised software developed from some other agency as the sum of Rs.10 lakh which was kept for item no.9, i.e., for development of customised software was not released to the OPs. Another option to them was to get the software from OP no.4 at half the price to save the major investment in the project. However, this aspect is only an administrative aspect of the problem. The complainant should have considered these possibilities in order to save investments that had already gone into the project, though, in my view, this would not have made much difference in evaluating the deficiency in service on the part of the OP Nos.1-3.

24.   Another point has been raised by the learned counsel for the OP nos.1-3 that MOU was never signed as per the provision in the annexure B, wherein it has been mentioned that once the MOU is finalised between the parties then the customised software will be developed. It is clear from the record that none of the parties tried to enter into such MOU or even to finalise the MOU as per the provision mentioned in the annexure B. It seems that the primary responsibility to finalise the MOU was of the complainant, though the OP nos.1-3 were also equally responsible for preparing the MOU as it would have included various technical parameters and other aspects which would have been collected or developed or suggested by OP nos.1-3. In my view, both the parties are responsible for not signing the MOU.

25.   Though this Commission vide its order dated 7^th April 2004 had appointed a Committee of technical experts to find out how the machinery in question could be made functional. The report of the Committee of technical experts dated 18.05.2004 was not implemented due to financial reasons and obviously no interest was taken by any of the parties in implementing the committee’s recommendations. Thus, these efforts have also failed. The whole investment of the Government has really become unfruitful as the computerisation programme could not be taken up for the purpose it was sanctioned. OP nos.1 - 3 supplied the hardware and standard software to the tune of Rs.67 lakh approximately, and, this amount was paid to the OPs. Clearly after getting the large portion of the sanctioned amount, OP nos. 1 - 3 did not take any interest in the project and gave the contract to OP No.4 by making OP no.4 as their agent. In principal agent relationship, it is the principal who is always responsible for implementing a contract with a third party and in the present case, there is a contract between the complainant and the principal OP nos.1 - 3. Learned counsel for OP nos.1 - 3 could not explain as to why customised integrated software was not developed by OP Nos. 1 - 3 and if OP No.4 was made their agent, then also why the software modules were not taken from OP no.4 and supplied to the complainant. This clearly is a deficiency in service on the part of OP nos.1 - 3 that they have failed to supply the customised integrated software to the complainant which was crucial in completing the project and to make it operational. It was argued by the learned counsel for OP nos.1 - 3 that the integrated customised software was only for Rs.10 lakh and therefore, the claim of Rs.67,98,500/- in the complaint is not justified. In this respect, it is to be taken note of that if any computer programme is taken up, customised integrated software is the key to the whole project and if the right software is not developed, the hardware cannot be purposefully used and the hardware also becomes junk. The same thing has happened in the present case. So if only the cost is awarded, it will not offset the loss of the complainant. It is a fact that the whole project has failed and the complainant is asking compensation for the failure of the whole project. Thus, the argument of the learned counsel that the claim of the complainant may be limited to Rs.10 lakh is not justified. OP nos.1 - 3 and the complainant to some extent have all contributed to the failure of the project. Obviously the main reason for the failure of this project is due to the non-development and supply of customised integrated software which was to be used for the operation of the project and the responsibility to develop this software lied with OP Nos.1 -3. Thus this deficiency in service on the part of OP nos.1 - 3 is proved and the complainant deserves appropriate compensation.

26.   Keeping the conduct of both the parties in implementing the project, I am of the view that a compensation of Rs.30 lakh (rupees thirty lakh only) will be reasonable and sufficient. This amount will be paid along with interest @ 6% per annum from the date of filing of the complaint till the actual date of payment by OP nos.1 - 3 to the complainant. OP nos.1-3 are directed to comply with this order within a period of 45 days from the date of receipt/ service of this order.