Memorial- P06-2.docx

Memorandum on behalf of the Petitioner

Participant code: P06

DR. RAM MANOHAR LOHIA NATIONAL LAW UNIVERSITY, LUCKNOW MOOT COURT MEMORIAL

Before,

THE CIVIL COURT OF NOIDA

CIVIL SUIT UNDER Civil Petition No. 1 GTBE ………..…………………………………………………………………….Petitioner. v. Softech Solutions………. …………………………………………………………Respondent.

WRITTEN ON BEHALF OF THE PETITIONER

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Memorandum on behalf of the Petitioner

TABLE OF CONTENTS

TABLE OF CONTENTS...........................................................................................................2 INDEX OF AUTHORITIES......................................................................................................3 STATEMENT OF JURISDICTION...........................................................................................4 STATEMENT OF FACTS..........................................................................................................5 ISSUES RAISED.......................................................................................................................7 SUMMARY OF ARGUMENTS................................................................................................8 ARGUMEMTS ADVANCED....................................................................................................9 1.

THAT THE CIVIL COURT OF NOIDA HAS THE JURISDICTION TO TRY THIS

CASE......................................................................................................................................9 1.1.

That the subject matter of the contract is of such nature that it cannot be settled

by arbitrator and arbitration clause doesn’t prevent from filing of a civil suit..................9 2.

THAT THERE IS AN INABILITY TO PERFORM THE CONTRACT ON

ACCOUNT OF ‘FORCE MAJEURE’................................................................................13 2.1 That the doctrine of frustration as mentioned under section 56 of the Indian Contract Act 1872 won’t apply...........................................................................................................13 2.2 That time is of essence to the contract.......................................................................14 PRAYER..................................................................................................................................16

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Memorandum on behalf of the Petitioner

INDEX OF AUTHORITIES Cases A. Ayyasamy v. A. Paramasivam & Ors., A.I.R. 2016 S.C. 154................................................6 Alops Parshad and Sons Ltd. v. Union of India, A.I.R. 1960 S.C. 388......................................8 Bharat Televentures Ltd. v. Dss Enterprises Private Ltd., 123 (2005) D.L.T. 532....................6 Cricklewood proprety and Investment Trust Ltd v. Leighton’s Investment trust Ltd., 1945 A.C. 221 (HL)........................................................................................................................7 F.A. Tamplar Steamship Co Ltd. v. Anglo Mexican Products Co. Ltd., (1916) 2 A.C. 397......8 Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and Ors., Civil Appeal Nos. 5370-5371 Of 2017..................................................................................6 Megon v. Updike Grain co., 94 F 2d 551 (1938).......................................................................8 Paradine v. Jane, (1863) 3 B&S 826..........................................................................................7 Raj & Associates v. V.S.N.L., 113 (2004) D.L.T. 318................................................................6 Twensche Overseas Trading Co. Ltd. v. Uganda Sugar Factoru Ltd., (1941) 58 L.W. 315.......7 Books Anson’s Law of Contract, (22nd edition)....................................................................................8 Singh Avtar, Law of Contracts and Specific Relief, (12th Edition), Eastern Book Company. 7,9

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Memorandum on behalf of the Petitioner

STATEMENT OF JURISDICTION According to Section 19 of the CPC, the district court of NOIDA has the jurisdiction to try the present case. Section 19 of the CPC states- “Suits for compensation for wrongs to person or movable .- Where a suit is for compensation for wrong done to the person or to movable property, if the wrong was done within the local limits of the jurisdiction of one Court and the defendant resides, or carries on business, or personally works for gain, within the local limits of the jurisdiction of another court, the suit may be instituted at the option of the plaintiff in either of the said courts.”

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Memorandum on behalf of the Petitioner

STATEMENT OF FACTS AGREEMENT AND ARBITRATION CLAUSE Raj Verma is a graduate of FMS Delhi and CEO of Green Tree Building Energy (P) Ltd (GTBE).Company deals in management of energy efficient building .GTBE is an emerging company in this sector. Viram as Strategic Director for the company in a scan of working of enterprise finds that GTBE still is working on manual operation and all charting and data analysis is being done manually with outdated computer and networks which are highly insecure and susceptible to hacking and he suggests to Raj to go for updating of GTBE in terms of updating. It is decided that company needs to be updated with state of the art computer with highly secured networking for which Viram invites tender for purchase of 100 Laptops with all new specifications, 200 desktops with latest specifications, 100 notebooks of Apple company. Softech solutions which was based in Kanpur was accepted though etendering process, there was an arbitration clause in the agreement and deadline for supply was fixed 15th December 2017. Time was essence of contract. GTBE was having its headquarter in NOIDA.The networking of company was to be processed by TCS New Delhi for a tender of 200 crores which had to completed by 15 th December 2017. The master agreement maintained that in case of disputes all matters was to be settled amicably by the arbitration and seat of arbitration was fixed in NOIDA.Softech Solutions supplied 100 laptops to GTBE as per order on 9th December. On 10th December while working for networking of the company TCS New Delhi complained of moisture in the building and stopped working till water proofing is done. MAULVIGANJ RIOTS On 6th December in Maulviganj area Muslims were observing the Black Day and commemorated the demolition of Babri Masjid. On the same day Hindu Extremist outfits were observing as ‘Shurya Divas’. A boy Ramswaroop lead a congregation in the Maulviganj area shouting anti-muslim slogan as a result in Chawk area the Muslim youths of Maulviganj got agitated by the slogans, heated argument is exchanged ,the mob turns violent and they start firing with illegal arms upon each other. Ramswaroop is killed in such firing which further triggers violence in Kanpur. In Maulviganj area Softech Solutions had the biggest warehouse which was torched by the unruly mob and in fire the whole warehouse was

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Memorandum on behalf of the Petitioner

destroyed which resulted in a damage of 500 crores to Softech. Softech is having equally big warehouses in other part of country but this damage breaks the spinal chord of the company. CASE FOR BREACH OF CONTRACT Softech writes a letter on 11th December, 2017 to GTBE about inability to perform the contract on account of ‘Force Majeure’ and GTBE writes a letter of enforcement of contract as per placed order. Softech Solutions wants the revision of original contract pleading ‘impossibility on account of riot’ to perform the contract and demands 3 months’ time to complete it. TCS starts working on network of the company after due repairs and water proofing, and is about to complete the work for which it demands all computer of the enterprise to be installed for final completion of work in order to encrypt the whole network and protect the systems of enterprise and maintain the firewall. Completion of networks by TCS was only possible when GTBE deliver all the computers by 13 th December. In wake of such situations GTBE is unable to revise the contract of Softech and wants to treat is as a breach of contract. A case is filed for breach of contract in NOIDA Civil Court which is being objected by Softech on the plea that it has no jurisdiction. Softech pleads ‘frustration’ and riot as a reason of non-performance of the contract which is negated by GTBE.

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Memorandum on behalf of the Petitioner

ISSUES RAISED

1. WHETHER THE CIVIL COURT OF NOIDA IS HAVING JURISDICTION TO TRY THIS CASE?

2. WHETHER THERE IS AN INABILITY TO PERFORM THE CONTRACT ON ACCOUNT OF ‘FORCE MAJEURE’?

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Memorandum on behalf of the Petitioner

SUMMARY OF ARGUMENTS 1. WHETHER THE CIVIL COURT OF NOIDA IS HAVING JURISDICTION TO TRY THIS CASE? 1.1. The subject matter of the contract is of such nature that it cannot be settled by arbitrator and arbitration clause doesn’t prevent filing of a civil suit. 1.1.1. The case before the court requires a complicated set of facts and require substantive deliberation on it. The Hon’ble civil court is having the resources to decide such matter, hence such petition. 1.1.2. The civil court at the place where the Seat of arbitration, as agreed upon by both the parties, is situated possess the exclusive jurisdiction over such arbitration agreement and the matters relates to such agreement and parties thereof. 1.1.3. It is well settled that an Arbitration clause does not bar/prohibit filing of a civil suit. Civil court does have the jurisdiction in exceptional cases. 1.2. That the court has jurisdiction to try the suit under Section 20 of the code of Civil Procedure Code. 1.2.1 Court has jurisdiction to try that suit under Section 20 of the CPC, 1.2.2 That the arbitration clause in the arbitration clause in the agreement between GTBE and Softech Solutions is not binding on the parties. 2.

WHETHER THERE IS AN INABILITY TO PERFORM THE CONTRACT ON ACCOUNT OF ‘FORCE MAJEURE’? 2.1. It is humbly submitted that the doctrine of frustration does not apply on our present case. 2.2. Furthermore, the principle that time is of the essence of contract shall be applicable.

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Memorandum on behalf of the Petitioner

ARGUMEMTS ADVANCED 1. THAT THE CIVIL COURT OF NOIDA HAS THE JURISDICTION TO TRY THIS CASE. 1.1. That the subject matter of the contract is of such nature that it cannot be settled by arbitrator and arbitration clause doesn’t prevent from filing of a civil suit. 1.1.1. It is humbly submitted before this court that the issue before this court requires substantial deliberation on facts and law and that this civil court is having the resources to decide on such complicated question of facts and law. a civil court would be more competent which has the requisite means to decide such complicated matter.1 1.1.2. In A. Ayyasamy v. A. Paramasivam & Ors., it is laid down that there are a number of pronouncements that have been rendered laying down the scope of judicial intervention, in cases where there is an arbitration clause, with clear and unambiguous message that in such an event judicial intervention would be very limited and minimal. This clearly lays down that Civil Court does have jurisdiction in certain exceptional cases which require complex question. This case is one of those cases since both parties are not at fault and nonperformance of contractual obligation will cause the harm to both the parties. 1.1.3. In Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and Ors.2, it was held that exclusive jurisdiction over the arbitration proceedings and and with respect to arbitration agreement would vest in the Court where the seat of Arbitration is present, as agreed by the parties in their arbitration agreement. Since it is clearly mentioned under the contract between the GTBE and Softech that seat of Arbitration os going to be NOIDA, hence Civil court of NOIDA will have the jurisdiction to monitor and hear such case. 1.1.4. In Raj & Associates vs VSNL3 and Bharat Televentures Ltd. vs Dss Enterprises Private

Ltd4,

the

courts

have

granted

liberty

to

the

plaintiff

to

initiate civil or arbitration proceedings and indisputably the plaintiff had filed a civil action for recovery of the dues instead of pursuing the path of arbitration. 1 A. Ayyasamy v. A. Paramasivam & Ors., A.I.R. 2016 S.C. 154. 2 Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and Ors., Civil Appeal Nos. 5370-5371 Of 2017. 3 Raj & Associates v. VSNL, 113 (2004) D.L.T. 318. 4 Bharat Televentures Ltd. v. Dss Enterprises Private Ltd., 123 (2005) D.L.T. 532.

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Memorandum on behalf of the Petitioner

An arbitration clause, it is well settled does not bar/prohibit filing of a civil suit The contesting party always has option to continue with the civil proceedings and give up the right to enforce the arbitration clause.5.

1.2. THAT THE COURT HAS JURISDICTION TO TRY THE SUIT UNDER SECTION 20 OF THE CODE OF CIVIL PROCEDURE, 1908. 1.2.1 Section 20 (c) of The Code of Civil Procedure, 1908 (CPC) says that: “20. Other suits to be instituted where defendants reside or cause of action arises-Subject to the limitations aforesaid, every suit shall be instituted in Court within the local limits of whose jurisdiction-…(c) the cause of action, wholly or in part, arises.”6 Further, the illustration (a) to Section 20 relates to a situation wherein B, who carries on business in Delhi by his agent in Calcutta buys goods of A, a tradesman of Calcutta and requests them to be delivered to the East Indian Railway Company which A does. In this situation, A may sue B for the price of goods in Delhi where B carries on business or in Calcutta where the cause of action has arisen. Illustration (b) also talks about a similar situation in which A, resident of Shimla, B, resident of Calcutta and C, resident of Delhi, being together in Banaras, enter into a contract wherein B and C make a joint promissory note payable on demand and deliver it to A. In this situation, A may sue B and C at Banaras, where the cause of action arose. In the case at hand, the cause of action clearly arises in whole in Noida where GTBE is having its headquarters and where the delivery of laptops, desktops and Apple notebooks was supposed to be made by Softech. Hence, by the applicability of Section 20 (c) of the CPC, the suit can be instituted in the Civil Court of Noida and the court will have the jurisdiction to try the same. “Cause of Action” means the cause or set of circumstances which lead up to a suit or the facts which establish or give rise to a right of action or the existence of which entitles a party to seek redressal in a court of law. In a contract of sale, a suit on account of non-delivery of goods may be brought in a court of the place where delivery and payment were to be made and the cause of action will be said to have arisen at that place itself. In the present case, the 5 Id. 6 The Code of Civil Procedure, 1908 § 20.

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Memorandum on behalf of the Petitioner

delivery was supposed to be made in Noida. Hence, it can be easily concluded that the suit can be brought in the Noida Civil Court and it has the competence to try the same. The performance of a contract is a part of the cause of action and a suit in respect of its breach can be filed at the place where the contract should have been performed (Noida in the present case). Thus, it can be said that the cause of action in the present case is the breach of contract by Softech which arises wholly in Noida and a suit for its performance can be filed in the Noida Civil Court. An example can be that where a buyer in Mumbai orders dyes from a seller in Delhi but after paying for and opening the parcel found it to contain only clay, he is entitled to sue for damages in Mumbai. Case of Pramod Gupta v. M/s Romesh Power Product Ltd. to be cited.

1.2.2

THAT THE ARBITRATION CLAUSE IN THE AGREEMENT BETWEEN GTBE AND SOFTECH SOLUTIONS IS NOT BINDING ON THE PARTIES.

The counsel on behalf of the plaintiff humbly submits before the Hon’ble Court that the arbitration clause in the agreement between GTBE and Softech Solutions is not binding on the parties and there was no intention of the GTBE to be bound by the same. In the case of M/s Linde Heavy Truck Division Ltd. v. Container Corporation of India Ltd. & Anr.7, the Arbitration Clause of the agreement contained “…that in case either party may require that the dispute be referred for resolution by arbitration…”. The Apex Court held that if the agreement between the parties provides that in the event of any dispute, they may refer the same to arbitration, such clause would not constitute a binding arbitration agreement and a clause of such kind would envisage a fresh consent for arbitration in case the option for arbitration is sought to be exercised by one of the parties to the dispute. This position was also confirmed by the Rajasthan High Court in the case of B. Gopal Das v. Kota Straw Board8 wherein the dispute resolution clause in the agreement prescribed: “That in case of any dispute arising between us, the matter may be referred to arbitrator mutually agreed upon and acceptable to you and us.”

7 195 (2012) D.L.T. 366. 8 1970 W.L.N. 572.

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Memorandum on behalf of the Petitioner

In the case of M/s Castrol India Ltd. v. M/s Apex Tooling Solutions 9, the Hon’ble High Court of Madras held that though the arbitration clause used the words “shall have the right”, the court held that the said wordings are only optional in nature, either to go for competent civil court or to refer the matter to the arbitration and further observed that there is no definite intention of the parties to go for arbitration in case any dispute or differences arise between the parties. It was held that unless there is a definite intention in the clause found in the agreement to refer the matter only to arbitration, it cannot be said that there is a valid clause of arbitration in the agreement. In the case at hand, there was indeed an arbitration clause in the agreement between GTBE and Softech but there is no evidence of the fact that the arbitration clause precluded the civil court of Noida from its jurisdiction and it was the intention of the parties to refer the matter of dispute between them to arbitration only. This clearly indicates that the referral of the matter in dispute to arbitration was merely optional in nature and not binding upon the parties. This would further require a fresh consent of the parties to refer the matter to arbitration which the plaintiff, GTBE does not wish to provide in the present case. The master agreement also provides that in case of disputes, all matters shall be settled amicably by arbitration. The use of the word amicably suggests that the referral of the matter in dispute to arbitration required the consent and mutual agreement of both the parties which is absent in the present case (Refer to B. Gopal Das Case). Therefore, it is humbly submitted before the Hon’ble Court that the Civil Court of Noida has the jurisdiction to try the suit under Section 20 of the CPC and the presence of the arbitration clause in the agreement does not preclude the court from its jurisdiction as the parties are not bound by the clause to proceed for arbitration and it was also not the intention of the parties to be bound by the arbitration clause.

9 2014 (2) A.R.B.L.R. 481 (Mad.).

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Memorandum on behalf of the Petitioner

2. THAT THERE IS AN INABILITY TO PERFORM THE CONTRACT ON ACCOUNT OF ‘FORCE MAJEURE’. 2.1 That the doctrine of frustration as mentioned under section 56 of the Indian Contract Act 1872 won’t apply. 1.1.5. It is humbly submitted before the Hon’ble court that the doctrine of frustration won’t apply in the current case since there was no physical impossibility of performance of contract as the defendant was still having the “equally big warehouses in other part of country”10 and there was no complete disappearance of the subject matter.11. In Paradine v. Jane12 it was held that when the party by his own contract creates a duty, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his own contract.” 1.1.6. Explaining the concept “frustration of contract” in Cricklewood proprety and Investment Trust Ltd v Leighton’s Investment trust Ltd13 Viscount SIMON LC said that it means “occurrence of an intervening event or change of circumstances so fundamental so as to regarded by the law both as striking at the roots of the agreement, and as entirely beyond what was contemplated by the parties when they entered into the contract”. To the same effect in the following statement of Lord WRIGHT14, “The word frustration here is used in a technical legal sense. T is a short of shorthand” it means that contract has ceased to bind the parties because the common basis on which by mutual understanding it was based has failed, it would be more accurate to say, not that the contract has been frustrated, but that there has be a failure of what in the contemplation of both parties would be the essential condition or purpose of the performances.” 1.1.7. The doctrine of frustration comes into play only in two types of conditions, first, where the performance is physically cut off, and, second where the object has failed15. In either of the case Softech was in full capacity for performance 10 Mentioned in the moot proposition. 11 Singh Avtar, Law of Contracts and Specific Relief, (12th Edition), Eastern Book Company, Lucknow, 2016. 12 Paradine v. Jane, (1863) 3 B&S 826. 13 Cricklewood proprety and Investment Trust Ltd v. Leighton’s Investment trust Ltd., 1945 AC 221 (HL). 14 Twensche Overseas Trading Co Ltd v. Uganda Sugar Factoru Ltd., (1941) 58 L.W. 315. 15 Supra.

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Memorandum on behalf of the Petitioner

and the main object, which in this case was the delivery of the computers for installation purpose was still possible. The alteration of circumstances must be such as to upset altogether the purpose of the contract16. The condition of Softech is an example of Commercial hardship which may make the performance unprofitable or more expensive or dilatory, but is not sufficient to excuse performance, for it does “not bring about a fundamentally different situation such as to frustrate the contract.”17 Doctrine of frustration or impossibility does not apply to a situation so as to excuse performance where performance is not practically cut off but only rendered more difficult or costly.18 1.1.8. In Alops Parshad and Sons Ltd. v. Union of India 19, Hon’ble Supreme Court has said that there is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract merely because, on account of an uncontemplated turn of events, the performance of the contract may become onerous. Hence the defence taken by the Softech that the Riots have broken the spinal cord of the Softech doesn’t stand ground because it was still having the resources to fulfil its obligation. 2.2 That time is of essence to the contract. 2.2.1 It is humbly submitted before this court that in a contract between my client (GTBE) and Softech clearly mentioned that time was of essence. As mentioned under section 55 of the Indian Contract Act ,187220 when the contract 16 F.A. Tamplar Steamship Co Ltd. v. Anglo Mexican Products Co. Ltd., (1916) 2 A.C. 397. 17 Anson’s Law of Contract, (22nd edition), Guest, 1964. 18 Megon v. Updike Grain co., 94 F 2d 551 (1938). 19 Alops Parshad and Sons Ltd. v. Union of India, A.I.R. 1960 S.C. 388. 20 Effect of failure to perform at a fixed time, in contract in which time is essential.—When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. —When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract." Effect of such failure when time is not essential.—If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. —If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure." Effect of acceptance of performance at time other than that agreed upon.—If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for

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Memorandum on behalf of the Petitioner

is of essence and it is not performed at the specified time it becomes voidable at the option of the promise, hence GTBE is having the right to sue since the desktops were to be delivered before 15th December as agreed between the parties. 2.2.2 The time for performance can be extended only by an agreement arrived at between the promisor and the promisee. A mere extension of time and nothing more is only a waiver to the extent of substituting the extended time for the original time and not an utter destruction of the essential character of time, where the other party did not communicate any acceptance, the time for performance was not extended.21 Although Softech applied for the extension of time but the same was not granted by the GTBE hence the contract was still bound by the earlier time specified, failure of GTBE to deliver deskptops at that specified date constituted breach of contract. 2.2.3 Under section 48 of the Indian Contract Act, 1872 22which lays down that where the application for performance is required by the promisor for performance at a particular time and place, he should perform his obligation immediately after getting such application. We all know that GTBE issued a letter of enforcement of contract immediately after Softech’s letter dated 11 th December 2017. This goes to prove that promisor i.e. Softech was bound to fulfil the obligation and deliver the desktops by 15th December 2018 at GTBE building.

any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention to do so.1 —If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention to do so.1" 21Singh Avtar, Law of Contracts and Specific Relief, (12th Edition), Eastern Book Company, Lucknow, 2016. 22 Application for performance on certain day to be at proper time and place.—When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the duty of the promisee to apply for performance at a proper place and within the usual hours of business. — When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the duty of the promisee to apply for performance at a proper place and within the usual hours of business." Explanation.—The question “what is a proper time and place” is, in each particular case, a question of fact.

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Memorandum on behalf of the Petitioner

PRAYER Wherefore in the light of the Issues raised, Arguments advanced and Authorities cited, it is humbly prayed that this Hon‟ble Court may be pleased to adjudge and declare that: 1. Noida Civil Court has complete jurisdiction over the case of breach of contract. 2. Plead for the Doctrine of frustration should be quashed. 3. As per Section 73 of the Indian Contract Act,1972 the defendant is liable to pay compensation to GTBE for the loss incurred from TCS. And pass any other judgment in the interest of equity, justice and good conscience.

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