Kannur: The Kerala State Civil Supplies Corporation Limited or Supplyco has settled a litigation with a private party on apparently costly terms even as its key departments have opposed the apparently unilateral action of the Managing Director.
Supplyco has paid Rs 2 crore as damages to San Spices of Wayanad after the government undertaking failed to meet the deadline to supply coffee powder and subsequently opted out from the deal.
The failure to keep the deadline was a clear violation of the clause in the tender agreement entered between the Supplyco and the San Spices in 2007. Following this, the Supplyco had withdrawn from the agreement with the company.
Case history
San Spices had moved the Micro & Small Enterprises Facilitation Council against Supplyco for withdrawing from the agreement. It claimed from the Supplyco a compensation of Rs 6.91 lakh and interest as the latter unilaterally withdrew from the agreement.
The Council gave a ruling against the Supplyco asking them to pay nearly Rs 38 lakh as compensation to San Spices. Following, this Supplyco got a stay from the High Court for the ruling. Even though the Supplyco had the option of approaching the Supreme Court against the Council's order, it decided to settle the litigation by paying the compensation.
MD's stand
Supplyco MD K N Satheesh justified the payment by saying that the private company could have sought up to Rs 10 crore as compensation as per the rates of commercial banks. He was referring to interest and penal interests that could be levied on dues.
Satheesh fixed a higher compensation even after the officials appraised him that the maximum compensation that the company could claim considering the interest and penal interest came to around Rs 1 crore only.
Supplyco's finance department, which is opposed to the MD's decision, reportedly held back the file over paying reparations for one month. However, it had to release the file after strict instructions from the head office. Strangely, neither its management committee nor the law department was consulted over the decision.
