Supreme Court stays arbitration in AP traffic challan fraud involving Digi Yatra developer

The Supreme Court on April 2 stayed the arbitral proceedings between State of Andhra Pradesh and Dataevolve Solutions, the developer of Digi Yatra, over a scam involving siphoning of ₹37 crore from traffic challans [State of Andhra Pradesh Vs Dataevolve]..A Bench of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and Vipul M Pancholi issued notice to Dataevolve on the State’s appeal against Andhra Pradesh High Court's decision to appoint an arbitrator to adjudicate the dispute.The matter will be heard next on May 25. .The dispute arose from a 2018 contract awarded by the Andhra Pradesh Police to Dataevolve for the supply and maintenance of an e-challan software system. The contract was for a fixed term of three years.According to the State, the contract expired on December 31, 2021 and was never renewed. The State has alleged that despite this, the company continued to operate the system and large sums collected as traffic challan payments were diverted.This led to the registration of a criminal case..Dataevolve approached the Andhra Pradesh High Court seeking the appointment of an arbitrator, claiming that disputes had arisen between the parties in relation to payments and continuation of services. .Dataevolve’s case before the High Court was that although the original 2018 work order for the e-challan system was for three years, the State had orally asked it to continue providing services even after expiry of the contract in December 2021, on an ad hoc basis with a revenue-sharing arrangement. It claimed that disputes later arose over payments and reconciliation of accounts, including demands raised by the State.The State opposed the plea, arguing that the contract had come to an end, that the company had failed to transfer the source code as required and that there were serious issues relating to the functioning of the system..The High Court did not enter into the merits of the allegations. Instead, it appointed Justice AV Sesha Sai, a former judge of the High Court, as the sole arbitrator to adjudicate the disputes between the parties..The State then filed a petition before the arbitral tribunal challenging its jurisdiction and subsequently moved the Supreme Court challenging the order of the High Court. The State has argued that the allegations involve serious offences involving the public exchequer and are not arbitrable in nature.It also contended that in the absence of a subsisting contract, no valid arbitration agreement survived and therefore, the High Court should not have appointed an arbitrator..The Supreme Court on April 2 stayed the arbitral proceedings. .The State of Andhra Pradesh was represented by advocates Prerna Singh, Dhruv Yadav and Guntur Pramod Kumar.Dataevolve is also engaged in a separate dispute before the Delhi High Court over the ownership and intellectual property rights relating to the Digi Yatra platform..[Read Judgment]