No way to settle a dispute

Uday Chatterjee
22 December 2002

Chennai: Last Monday (16 December 2002), Arun Jain, chairman and managing director of Polaris Software, and his colleague Rajiv Malhotra were detained by the police in Indonesia after a commercial dispute with an Indonesian bank.

It is still not clear under what provisions the detention was made. The officials were subsequently released on Friday (20 December) morning, but the unfortunate incident holds a lesson for the Indian government and companies.

Polaris Software is a Chennai-based, rapidly-growing software solutions company that employs more than 3,800 people, and has a current turnover of more than Rs 600 crore. It provides backend solutions to banks and insurance companies and also has several offshore development centres.

Polaris had signed a $1.3-million contract with Bank Artha Graha of Indonesia for providing solutions for central processing, disaster recovery and branch server-related work. The contract was signed in mid-2002 and the project was to be completed by July 2003.

Signs of peril Differences cropped up between the two companies regarding delivery schedules and in late November 2002, Bank Artha Graha served a notice of termination of contract. The bank also demanded compensation citing non-fulfilment of contractual obligation.

In mid-December 2002, Jain and his team went to Jakarta to settle the dispute with the bank. The bank asked Polaris to pay back some of the advances it had paid for the work Polaris had not executed in time.