In a sweeping order that could reshape how arbitration is approached in government-linked projects, the Karnataka High Court has struck down an arbitral award of nearly ₹179 crore against the State. The reason: a critical party was left out of the entire process.
The Division Bench of Justices Anu Sivaraman and K Manmadha Rao found that Karnataka State Electronics Development Corporation (KEONICS) — the nodal agency entrusted with implementing the massive ₹412 crore school technology scheme — was not included in the arbitration. That omission, the Court said, wasn’t a technical slip but a fundamental defect that hollowed out the proceedings.
“Without KEONICS, there would have been no contract at all. Yet, KEONICS was not impleaded before the Tribunal,” the judgment declared, calling the award “inherently defective” and riddled with “patent illegality.”
The Background
The dispute traces back to the Information and Communication Technologies (ICT) scheme, designed to bring digital tools to 4,396 schools across Karnataka. The State tied up with KEONICS in 2011 to execute the project through the Department of Educational Research and Training (DSERT).
Everonn won the bid and partnered with Siddharth Infotech and Ricoh India to roll out the project. But delays piled up, frustrations mounted, and by August 2016 the State issued a termination order.
Siddharth Infotech then triggered arbitration proceedings, which culminated in a September 2021 ruling against the State — awarding nearly ₹179 crore plus steep interest. A commercial court upheld that award in 2023.
Why the HC Stepped In
The High Court didn’t mince words: there was no direct contract between the State and Siddharth Infotech. The entire arrangement flowed through KEONICS. By leaving KEONICS out, the arbitrator effectively built a case without its central pillar.
“The omission deprived the proceedings of completeness, led to adjudication without consideration of vital obligations and evidence, and rendered the award inherently defective,” the Court noted.
The Fallout
With the award now set aside, the ruling underscores how arbitration involving government projects cannot bypass key entities that form the backbone of contractual obligations. The judgment could influence how future arbitrations are structured when State agencies act as intermediaries.