All you need to know about Rajma war that MoD lost against Kendriya Bhandar in Supreme Court

Army Purchase Organisation has been directed to return the cashed bank guarantee amount of Rs 44.5 lakh to KB with 7.5 per cent interest since 2012.

MoD at South Block

New Delhi: The Ministry of Defence recently lost a decade-long legal battle on the deficient supply of kidney beans or rajma to the Kendriya Bhandar (KB). Army Purchase Organisation has been directed to return the cashed bank guarantee amount of Rs 44.5 lakh to KB with 7.5 per cent interest since 2012.

The Supreme Court, led by Chief Justice of India DY Chandrachud, informed the Attorney General R Venkataramani, who represented the Ministry of Defence, that there were no grounds to challenge the findings of the trial court and the Delhi High Court, which had upheld the arbitral award.

In May 2011, the Army Purchase Organisation (APO) had invited tenders for the supply of 1,200 tonnes of rajma for defence services, estimated at a cost of Rs 4.44 crore. KB was awarded the contract and provided a bank guarantee of Rs 44.5 lakh as a security deposit.

A dispute arose over the quality of rajma supplied by KB. In January 2012, the APO terminated the contract after KB had supplied 310 tonnes of rajma and cashed the bank guarantee. When KB filed a claim seeking a refund of the cashed bank guarantee amount, the APO contested it, claiming that it had to purchase the required rajma from the open market.

The bench, led by the Chief Justice, told the Attorney General, “Although there was a breach of contract, the APO must prove that it suffered losses due to procuring rajma from the open market. Once the bank guarantee was cashed, the money came to you. You must demonstrate the amount of financial loss incurred. Both the trial court and the High Court have upheld the arbitral award. Why should we intervene?”

The arbitrator had determined that there was no evidence to suggest that the APO made alternative purchases at a higher price than the contracted price with KB.

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