1 TEAM CODE ST- 12 · Jain (Dead) by Lrs v. State of Maharashtra; (1979) 2 S.C.C. 70. Janab M.H.M. Yakoob v. M. ... O.P Malhotra & Indu Malhotra, The Law and Practice of Arbitration

SURANA & SURANA INTERNATIONAL TECHNOLOGY LAW MOOT COURT COMPETITION, 2014

MEMORIAL ON BEHALF OF THE APPLICANT

1

SURANA & SURANA INTERNATIONAL TECHNOLOGY LAW

MOOT COURT COMPETITION – 2014 Symbiosis Law School Surana & Surana International Attorneys ___________________________________________________________________________

IN THE HONOURABLE HIGH COURT OF MUMBAI

___________________________________________________________________________

INDICO …………………………………………………...…………. APPLICANT

VS

CARCO …………………………………………………….……… RESPONDENT


________________________________________________________________

ST- 12 TEAM CODE



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___________________________________________________________________________

TABLE OF CONTENTS

___________________________________________________________________________

TABLE OF CONTENTS ……………………………………………………………… 2-3

INDEX OF AUTHORITIES …………………………………………………………. 4-7

STATEMENT OF JURISDICTION ………………………………………………...… 8

STATEMENT OF FACTS …………………………………………………………….. 9

STATEMENT OF ISSUES …………………………………………………………….. 10

SUMMARY OF PLEADINGS …………………………………………………..……... 11

ARGUMENTS ADVANCED ……………………………………………………..….… 12

THE ARBITRATION AGREEMENT UNDER THE CONTRACT IS NOT VALID AND THE CHOICE OF JURISDICTION UNDER THE CONTRACT BETWEEN CARCO AND INDICO IS MUMBAI HIGH COURT ............... 12 CHOICE OF ARBITRATION IS INVALID TAKING INTO ACCOUNT SUBJECT MATTER

ARBITRABILITY ……………………………….……………………………………………..………… 12

“INCAPABLE OF BEING PERFORMED” RENDERS THE ARBITRATION AGREEMENT

NON-ARBITRABLE …………………………………………………………………………………….…….……..…… 12

THE SUBJECT MATTER OF DISPUTE INVOLVES PUBLIC POLICY, WHICH RENDERS THE

AGREEMENT NON-ARBITRABLE ………………………………………………………………………..…….. 13

ARBITRATION AGREEMENT INVALID, BECAUSE DISPUTE CONCERNS INVASION OF

FUNDAMENTAL RIGHTS AND HUMAN RIGHTS ……….……………………………………………...… 14-17

IF THE ARBITRAL AWARD COULD BE AGAINST PUBLIC POLICY, THEN THE ARBITRATION

AGREEMENT SHOULD NOT BE PERFORMED

………………………………………………………..……………………….……. 17

a) THE ARBITRAL AWARD WOULD BE CONTRARY TO THE PUBLIC POLICY OF INDIA …………………. 18

B. JURISDICTION IN THE PRESENT CASE LIES WITH THE MUMBAI HIGH COURT ..................... 18

MUMBAI HIGH COURT HAS PECUNIARY AND TERRITORIAL JURISDICTION ………………………………………..

18

THE CAUSE OF ACTION LIES WITH THE MUMBAI HIGH COURT .……………………………..…………………….

19

THE BURDEN OF PROOF LIES ON THE PLAINTIFF ………………..……………………………………………..........

19

REAL AND SUBSTANTIAL WORK CARRIED OUT IN PUNE …………………….………………………………………

20



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OUSTER CLAUSE OF DISPUTE RESOLUTION IS INVALID ………………………………………..…………………....

21

PROCEEDINGS IN MUMBAI HIGH COURT ARE NOT OPPRESSIVE OR VEXATIOUS …………………………………...

21

PRINCIPAL PLACE OF BUSINESS WAS PUNE ………………………………………….………………………………..

22

CARCO SHOULD MAKE THE PAYMENT FOR THE 3RD INSTALLMENT AND SHOULD CEASE AND DESIST FROM USING THE PROPOSALS FORWARDED BY INDICO ……………………………………………………. 23 CARCO WRONGFULLY TERMINATED THE AGREEMENT BECAUSE INDICO DID NOT

MATERIALLY BREACH THE AGREEMENT …………………………………………………………. 23 INDICO DID NOT MATERIALLY BREACH THE AGREEMENT BY DELAYING SUBMISSION OF

THE ADDITIONAL SOW …………………………………………………………………………………………….

23

INDICO DID NOT MATERIALLY BREACH THE AGREEMENT BY USING THIRD PARTY IPR ….

24

INDICO IS ENTITLED PAYMENT OF THE THIRD INSTALLMENT, AND THE COURT SHOULD ASK

CARCO TO CEASE AND DESIST FROM USING THE PROPOSALS ALREADY FORWARDED BY INDICO

TO CARCO ……………………………………………………………………………………….………………. 24

THIS COURT SHOULD REJECT CARCO’S PLEA FOR REFUND OF MONEY PAID, AND INTERES …

25

IF THE COURT HOLDS THAT INDICO BREACHED THE AGREEMENT, THE COURT SHOULD ASK

CARCO TO CEASE AND DESIST FROM USING THE PROPOSALS ALREADY FORWARDED BY INDICO

TO CARCO …………………………………………………………………………………………………….…… 26

B. CARCO WAS NOT ENTITLED TO RESCIND THE AGREEMENT AS INDICO MADE NO MATERIAL

MISREPRESENTATIONS ………………………………………………………………………………………………...… 26

INDICO DID NOT MISREPRESENT ITS CAPACITY TO COMPLETE THE SOW ………………………. 26

INDICO DID NOT FRAUDULENTLY CONCEAL THE FACT THAT ITS EMPLOYEES HAD WORKED

ON SIMILAR TECHNOLOGIES WITH PREVIOUS EMPLOYERS, AS IT HAD NO DUTY TO DISCLOSE

SAID FACT

………………………………………………………………………………………………………………… 27

THIS COURT SHOULD REJECT CARCO’S PLEA FOR REFUND OF THE MONEY PAID AND IT IS NOT

ENTITLED TO ANY DAMAGES AND INTEREST …………………………………………………………… 28

PRAYER …………………………………………………………………………….……. 29



4

___________________________________________________________________________

INDEX OF AUTHORITIES

___________________________________________________________________________

STATUTES

24. (Indian) Arbitration & Conciliation Act, 1996.

25. Specific Relief Act, 1963.

26. The Code of Civil Procedure, 1908.

27. The Indian Contract Act, 1872.

28. The Indian Copyright, 1957.

29. The Sale of Goods Act, 1930.

TREATIES AND CONVENTIONS

European Convention on Human Rights. Rome Convention on the Law applicable to Contractual Obligations, 1980. The New York Convention, 1958 UNCITRAL Model Law, 1985.

INDIAN CASES

A.B.C. Laminart Pvt. Ltd. and Another v. A.P. Agencies, Salem, (1989) 2 S.C.C. 163.

Arinits Sales Pvt. Ltd. v. Rockwell Plastic Pvt. Ltd. And Ors, (2008) I.L.R. 2 Delhi 66.

Bhagwani Bai v. Life Insurance Corporation of India, Jabalpur, A.I.R. 1984

MP 126.

Bharat Aluminium Company v. Kaiser Aluminium Technical Service, 2012 (3) A.R.B.

LR. 515 (SC).

Chloro Controls (I) P. Ltd. v. Severn Trent Water Purification Inc. and Ors. 2012 (4)

A.R.B. LR. 1 (SC).

Enercon v. Enercon, 2014 S.C.C (Bom) 696.

Hansraj Bajaj v. The Indian Overseas Bank Ltd., A.I.R. 1956 Cal 33.

Hind Construction Contractors by its Sole Proprietor Bhikamchand Mulchand

Jain (Dead) by Lrs v. State of Maharashtra; (1979) 2 S.C.C. 70.

Janab M.H.M. Yakoob v. M. Krishnan, A.I.R. 1992 Mad 80.

K.S. Satyanarayana v. V.R. Narayana Rao, A.I.R. 1999 SC 2544.



5

Kodo Minerals Steatite Mine & Mill-Owners and Anr. v. Rohtas Industries Ltd., A.I.R. 1954 Pat

147.

M/s. Swastik Gases P. Ltd. v. Indian Oil Corp. Ltd., (2013) 9 S.C.C. 32.

Man Ronald Drickinachinen AG v. Multicolour Offset Ltd., A.I.R. 2004 SC 3345.

Matanhella Brothers and Ors. v. Shri Mahabir Industries Pvt. Ltd., A.I.R. 1970 Pat 91.

Modi Entertainment Network and Anr. v. W.S.G. Cricket Pvt. Ltd., (2003) 4 S.C.C. 341.

Mohan Lal v. Kumud Sagar, 1973 (2) A.L.J. 47.

North Eastern Electricity Power Corporation Ltd. v. Lakhi Enterprise, A.I.R. 1992 Gau

42.

Oil and Natural Gas Corporation Ltd. v. Western Geco International Ltd, 2014 S.C.C.

674.

P.S.R. Krishna and Ors. v. Union of India (UOI) rep., by its Secretary, Ministry of

Communication and Information Technology and Ors, 2006 (6) A.L.T. 593.

Pannalal Jankidas v. Mohanlal, A.I.R. 1951 SC 144.

People's Union of Civil Liberties (PUCL) v. Union of India (UOI) and Anr, A.I.R. 1997

SC 568.

Premchand v. Ram Sahai, A.I.R. 1932 Nag 148.

Ram Prakash Sharma v. Adhiraj Kapila, A.I.R. 2002 Raj 248.

Reliance Industries Limited and Anr. v. Union of India (UOI); 2014 (2) A.R.B. L.R. 423

(SC).

Shin–etsu Chemical Co Ltd v. Aksh Optifibre Ltd, (2005) 7 S.C.C. 234.

Shri Lal Mahal Ltd. v. Progetto Grano Spa, 2013 (3) A.R.B. L.R. 1 (SC).

Singhal Transport v. Jesaram, A.I.R. 1968 Raj 89.

Smt. Nandita Bose v. Ratanlal Nahata, A.I.R. 1987 SC 1947.

Venkatachalan v. Rajaballi, A.I.R. 1935 M 663.

Venture Global Engineering v. Satyam Computers, A.I.R. 2010 SC 3371.

Vikrant Tyres Ltd v. Techno Expert Foreign Trade Co. Ltd, I.L.R. 2005 KAR 4738.

Virbhadra v. Roshanlal, A.I.R. 1975 HP 13.

World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd., A.I.R. 2014

SC 968.

Zila Parishad (District Board) v. Smt. Shanti Devi and Anr, A.I.R. 1965 All 590.

U.S. CASES

Koster v. American Lumbermens Mutual Casualty Co., 330 U.S. 518 (1947).



6

Loucks v. Standard Oil Co, 224 N.Y. 99.

Rhone Mediterranee Compagnie Francese v. Achille Lauro, 712 F 2.d. 50 (3rd Cir 1983).

Twilite International Inc (US) v. Anam Pacific, U.S. No. 243.

Wilko v. Swan, 346 U.S. 427 (1953).

U.K. CASES

Clough v. L &NWR, (1871) LR 7 E.x. 26.

Coast Lines Ltd v. Hudig & Veder Chartering NV, (1972) 2 Q.B. 34 (Ca),

Compagnie Tunisienne de Navigation SA v. Compagnie d’Armement Maritime

SA, (1971) A.C. 572,

Doyle v. Olby (Ironmongers) Ltd, (1969) 2 All E.R. 191,

R. v. Kylsant, 1931 All E.R. Rep 179.

Spiliada Maritime Corporation v. Cansulex Ltd. (1986) 3 All E.R. 842.

Vita Food Product Inc. v. Unus Shipping Co Ltd, (1939) A.C. 277.

Whitworth Street Estates (Manchester) Ltd v. James Miller and Partners Ltd,

(1970) A.C. 583.

OTHERS

C.S.R. Ltd. v. Cigna Insurance Australia Ltd., 1997 (189) C.L.R. 345.

Google Spain SL v. AEPD, Case C-131/12 of the European Court of Justice.

BOOKS

83. Avtar Singh, Contract and Specific Relief (11 ed. 2013), Eastern Book Company.

84. C.K Takwani, Civil Procedure with Limitation Act, 1963 (7 ed. 2013), Eastern Book

Company.

85. G.C. Bharuka, Mulla The Indian Contract Act (12 ed. 2009), Lexis Nexis

Butterworths Wadhwa.

86. Gary B. Born, International Commercial Arbitration, (1 Ed. 2009) Wolters Kluwer,

Vol. 1.

87. Justice A. Raman, MLJ Law of Contract and Specific Relief with special emphasis on

Law of Tenders (2 ed. 2009), Lexis Nexis Butterworths Wadhwa, Vol. 1



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88. O.P Malhotra & Indu Malhotra, The Law and Practice of Arbitration and

Conciliation (2 ed. 2006), Lexis Nexis Butterworths.

89. P. Ramanatha Aiyar, Advanced Law Lexicon 3717 (3 ed. 2005).

90. PC Markanda, Law relating to Arbitration and Conciliation: Commentary on the

Arbitration and Conciliation Act, 1996 (7 ed. 2009), Lexis Nexis Butterworths

Wadhwa.

91. Sudipto Sarkar & VR Manohar, Code of Civil Procedure (11th ed. 2006), Lexis Nexis

Butterworths Wadhwa.

92. Suranjan Chakraverti & Bholeshwar Nath, Cases and Materials on Code of Civil

Procedure (5th ed, 2012), Eastern Book Company.

93. Upendra Baxi, Inconvenient Forum and Convenient Catastrophe: The Bhopal Case,

Sweet & Maxwell.

94. V Dicey, J. H. C Morris & Lawrence Collins, Dicey and Morris on the Conflict of

Laws, (14 ed. 2006), Sweet & Maxwell, Vol. 1.

95. V Dicey, J. H. C Morris & Lawrence Collins, Dicey and Morris on the Conflict of

Laws, (14 ed. 2006), Sweet & Maxwell, Vol. 2.



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96.

___________________________________________________________________________

STATEMENT OF JURISDICTION ___________________________________________________________________________

THE APPLICANTS HAVE THE HONOUR TO SUBMIT BEFORE THE HONOURABLE

HIGH COURT OF MUMBAI, THE MEMORANDUM FOR THE APPLICANTS UNDER

THE JURISDICTION OF THIS HIGH COURT.

Indico, the Applicant in the instant case has invoked the jurisdiction of this court under

Section 20 of the Code of Civil Procedure. This court has jurisdiction in the present case as

the cause of action has arisen in Pune, India and the subject matter of the present case is

non-arbitrable as it concerns Public Policy.

THE PRESENT MEMORANDUM SETS FORTH THE FACTS, ISSUES, AND

ARGUMENTS IN THE PRESENT CASE.



9

_________________________________________________________________________

STATEMENT OF FACTS ___________________________________________________________________________

I

Indico is a Private Limited Company incorporated in India and situated at Pune specializes in

Information Technology Services. It entered into its first international Agreement award with a

Detroit based US company, Carco. As per a Government notification such privacy invasive

technology, could only be manufactured and used with the prior permission of the Government.

II

Based on representations made by Indico, about its capabilities and experiences, Carco agreed to

enter into a contract with Indico, Scope of Work (SOW) and the total fee payable to Indico was

USD 7 Million, which was payable to Indico in installments, upon completion of certain

milestones by Indico. The SOW was deliverable within three months with an option to extend by

one month, upon delay due to certain circumstances out of Indico’s control. The entire

manufacturing process was done in Pune, India.

III

Indico ensured that it will not use any external IPR without prior written consent of Carco and

Carco shall have non-exclusive rights of the programs submitted by Indico, which Indico can use

only for any vendor after a period of 6 months from the date of completion of the SOW.

IV

Parties agreed to resolve disputes by arbitration would be held under the aegis of the New York

International Arbitration Centre (NYIAC).

V

Within ten days of signing of the agreement, Carco requested Indico to enhance the SOW, and

Indico agreed to do so for same cost. Indico informed the enquiring authorities and sought

permission to work as the codes for devices were to be used by Carco outside India. Indico

thereafter submitted the preliminary version of the products. Payment of the same was made in

Pune. Indico submitted modifications of the preliminary programs. But Carco terminated the

agreement on grounds of misrepresentation and breach of contract and stopped further payments

after 10 days of submission of beta version of the products. Indico filed a composite suit for



10

payment of third installment and for protection of their copyright to the software programs in

Mumbai. Thus this suit before this honourable court.

_________________________________________________________________________

STATEMENT OF ISSUES ___________________________________________________________________________

-- I --

WHETHER THE ARBITRATION AGREEMENT UNDER THE CONTRACT

BETWEEN CARCO AND INDICO IS VALID AND WHETHER THE CHOICE OF

JURISDICTION UNDER THE CONTRACT BETWEEN CARCO AND INDICO IS

USA.

-- II --

WHETHER CARCO RIGHTFULLY TERMINATED THE CONTRACT WITH

INDICO OR NOT, ON THE BASIS OF WHICH IT IS ASKING FOR AMOUNTS

WITH INTEREST AND DAMAGES FROM INDICO, IN EXCHANGE OF

SUBMISSIONS MADE BY INDICO.



11

_________________________________________________________________________

SUMMARY OF PLEADINGS ___________________________________________________________________________

I. THE ARBITRATION AGREEMENT UNDER THE CONTRACT IS NOT VALID

AND THE CHOICE OF JURISDICTION UNDER THE CONTRACT BETWEEN

CARCO AND INDICO IS MUMBAI HIGH COURT.

97. The Mumbai High Court would not refer the parties back to arbitration, as the

agreement is invalid, since it is ‘incapable of being performed’, because the subject

matter is non-arbitrable.

98. As the subject matter of the agreement is based on public policy, which is a ground

for determining invalidity in Section 45 of the (Indian) Arbitration & Conciliation

Act, 1996.

99. The arbitral award, which could come about from the arbitration proceedings, could

violate the public policy of India, therefore such an arbitration agreement should be

held invalid.

100. Mumbai High Court has pecuniary and territorial jurisdiction and the cause of

action had arisen in Pune, since Indico’s company was situated in Pune, India.

101. Mumbai High Court is a more appropriate forum as it has the most real and

substantial connection in terms of convenience of the parties or the expenses, and the

proceedings in Mumbai High Court will not be oppressive or vexatious.

II. CARCO SHOULD MAKE THE PAYMENT FOR THE 3RD INSTALLMENT AND

SHOULD CEASE AND DESIST FROM USING THE PROPOSALS

FORWARDED BY INDICO.

102. Indico did not breach the terms of the contract and did not misrepresent its

capacity to complete the SOW.

103. Carco wrongfully terminated the contract, and it cannot get amounts with

interest and damages from Indico, in exchange of Indico’s proposals.



12

104. Indico should get the 3rd installment for submitting the Beta version of the

software program and Carco should cease and desist from using the proposals already

forwarded by Indico to it, as the proprietary rights of the same still vest with Indico.

___________________________________________________________________________

ARGUMENTS ADVANCED ___________________________________________________________________________

105. WHETHER THERE EXISTS A VALID CHOICE OF ARBITRATION,

AND IF NOT, WHETHER JURISDICTION UNDER THE CONTRACT WILL

LIE IN USA.

106. The arbitration agreement is not valid because the subject matter of the dispute is non-

arbitrable as it involves issues related to public policy, and thus, NYIAC does not hold

jurisdiction to solve the dispute in question. Mumbai High Court holds jurisdiction because it

is the natural forum.

A. Choice of arbitration is invalid taking into account subject matter arbitrability.

107. The Honorary High Court would hold the arbitration agreement non-arbitrable

because it is ‘incapable of being performed’ since the subject matter of the dispute involves

the public policy of India. Incapability of being performed renders an arbitration agreement

non-arbitrable, thus making the agreement wholly invalid.

i. “Incapable of being performed” renders the arbitration agreement non-arbitrable.

108. The arbitration agreement is invalid because it is incapable of being performed and

thus, the parties cannot be referred back to arbitration. “Under section 451, which deals with

arbitrations to which the New York Conventions applies, a specific provision has been made

to examine the validity of the arbitration agreement in the manner provided in section 45.”2

The (Indian) Arbitration and Conciliation Act, 1996 states that the parties will be referred

back to arbitration by the judicial authority, unless the agreement is ‘null’, ‘void’,

‘inoperative’ or ‘incapable of being performed’.3

109. “The phrase ‘null and void, inoperative or incapable of being performed’ is to be

interpreted narrowly to encompass only those situations- such as fraud, mistake, duress and

waiver- that can be applied neutrally on the international scales, or when it contravenes

1 Section 45 of (Indian) Arbitration and Conciliation Act, No. 26 of 1996. 2 Shin–etsu Chemical Co Ltd v. Aksh Optifibre Ltd, (2005) 7 S.C.C. 234. 3 Supra note 1.



13

fundamental policies of the forum state.”4 “The words “null and void” may be interpreted as

referring to those cases where the arbitration agreement is affected by some invalidity right

from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue

influence.”5 “The word “inoperative” can be said to cover those cases where the arbitration

agreement has ceased to have effect, such as revocation by the parties.”6 “The expression

‘incapable of being performed’ refers to the cases which render the arbitration agreement

inoperative because the subject matter of the agreement is not arbitrable in India.”7 Thus, if

the subject matter is against public policy, it will not be arbitrable in India.8

110. The subject matter of dispute in our case lies around the products manufactured and

the rights of those products. Carco could improperly use the products in question if the rights

would still lie with them. This improper use could lead to invasion of privacy. Thus, the

subject matter of the dispute lies around payment for third installment, non-exclusive rights

and privacy issues. Privacy issues are a matter of public policy and thus, are non-arbitrable.

a. The subject matter of dispute involves public policy, which renders the agreement

non-arbitrable.

111. The subject matter of the dispute involves products that could invade privacy, and are

banned by the Government of India. These issues are concerns of public policy, which

includes fundamental policies of India, interests in India, justice and morality and patent

illegality.9 Fundamental policies pertain to the issues affecting the rights of the citizens of

India, as righteous ‘judicial approach’ is safeguarding the rights of the people of India.10

Thus, invasion of privacy is contrary to public policy, since the right to privacy is a

fundamental right of the people of India, which might get violated. Thus, the arbitration

agreement is ‘incapable of being performed’, since the subject matter of such an agreement is 4 Twilite International Inc (US) v. Anam Pacific, yearbook commercial arbitration, Vol XX111-1998 (US No

243) 960; Rhone Mediterranee Compagnie Francese v. Achille Lauro, 712 F 2.d. 50 (3rd Cir 1983). 5 Albert Jan Van Den Berg, “The New York Convention, 1958 – An Overview”, http://www.arbitration-

icca.org/media/0/12125884227980/new_york_convention_of_1958_overview.pdf; World Sport Group

(Mauritius) v. MSM satellite (Singapore) Pte. Ltd., A.I.R. 2014 SC 968.

6 Id.

1. 7 O P Malhotra & Indu Malhotra, The Law and Practice of Arbitration and Conciliation 1359 (2 ed.

2006), LexisNexis Butterworths. 8 Supra note 2, at12; Wilko v. Swan, 346 U.S. 427 (1953). 9 Shri Lal Mahal Ltd. v. Progetto Grano Spa, 2013 (3) A.R.B. L.R. 1 (SC). 10 Oil And Natural Gas Corporation Ltd. v. Western Geco International Ltd, 2014 S.C.C. 674.



14

concerned with public policy and such matter cannot be arbitrated.11 Conflict of law rules

state that the forum’s mandatory laws should be abided by, and if a certain application goes

against those mandatory laws, including public policy, then that application would not be

given heed to.12 Indian law clearly states that right to privacy is law in the public interest of

the people, 13 and going against public interest is contrary to public policy. Thus, any

arbitration agreement concerning public policy cannot be arbitrated14 in India, and such an

agreement is ‘incapable of being performed’, and thus the parties cannot be referred back to

arbitration.

I) Arbitration agreement invalid, because dispute concerns invasion of

Fundamental Rights and Human Rights.

112. Since the subject matter of the dispute is interlinked with the fundamental rights of

the people in India, along with their human rights, the matter cannot be submitted to

arbitration, since it is against the public policy of India. The conflict of law rules state that if

a certain application of a rule of law would go against either the mandatory law or the public

policy (ordre public) of the forum, then the rule of law will not be upheld.15 The application

of this rule with reference to arbitration would be waived when, what is contracted over is

against the mandatory forum laws and public policy.

113. The notification issued by Government of India mentioned that the manufacture and

use of any product which could invade privacy of people in India is to take place with due

permission from the government.16 This exemplifies the importance of right to privacy in the

Indian forum. The goods Indico was producing did not invade privacy because of due consent

to be taken from consumers, along with a provision of an overriding button. But Carco

possesses the non-exclusive rights of those products at this moment, and is capable of

abusing such goods. Thus, the above is contrary to public policy, because right to privacy of

individuals will be violated, which is a fundamental right in India17 and a human right in the

international arena as well.18

11 Supra note 8. 12 V Dicey, J. H. C Morris & Lawrence Collins, Dicey and Morris on the Conflict of Laws, 1626 (14 ed. 2006),

Sweet & Maxwell, Vol. 2. 13 People's Union of Civil Liberties (PUCL) v. Union of India (UOI) and Anr, A.I.R. 1997 SC 568. 14 Supra note 8, at 13. 15 Id.; Loucks v. Standard Oil Co, 224 N.Y. 99; Art. 16 of the Rome Convention. 16 Para 2 of the Fact Sheet. 17 Supra note 13.



15

114. In the case of Reliance v. Union of India,19 it was stated that if the subject matter of

the dispute were concerned with the public policy, then the laws of India would be applied to

govern the arbitrability of the dispute.20 This is not in equation with the judgment in Venture

Global Engineering v. Satyam Computers21, which allowed applicability of Part 1 in relation

to public policy concerns, where ‘public policy’ was given an expansive definition. In

Reliance’s case, the definition is restricted to Shri Lal Mahal’s22 definition of public policy,

thereinafter is approved by Bharat Aluminium Company v. Kaiser Aluminium Technical

Service,23 as explained above. The obiter in Reliance’s judgment runs in tandem with the

conflict of law rules, because it states that if the forum’s fundamental laws are being violated,

then the judicial authorities should work towards solving the dispute, instead of the arbitrator.

The arbitration agreement is rendered ‘incapable of being performed’ when the fundamental

policies of the forum are violated.24

115. An integral clog to this case here is that along with being the law of the forum, Indian

Law is also the law governing the contract, since the implicit choice of both the parties was to

make Indian law the governing law of the contract, which can be interpreted through facts

and circumstances.25 The entire manufacturing process was to be performed in India. Only

the final installation was required to be carried out in USA. Along with that India is the

natural forum for jurisdiction, since maximum work was carried out here.26 If the court still

holds that these facts do not show sufficient intention on part of both the parties, it is

submitted that in case of no explicit or implicit choice made in terms of the law governing the

contract, then that country’s law will be considered to govern the contract with which the

transaction had “its closest and more real connection”.27 The first and second installment fees 18 Google Spain SL v. AEPD, Case C-131/12 of the European Court of Justice; Article 8.1 of the European

Convention on Human Rights. 19 Reliance Industries Limited and Anr. v. Union of India (UOI), 2014 (2) A.R.B. L.R. 423 (SC). 20 Id.; Vita Food Product Inc. v. Unus Shipping Co Ltd, (1939) A.C. 277. 21 Venture Global Engineering v. Satyam Computers, A.I.R. 2010 SC 3371. 22 Supra note 9, at 13. 23 Bharat Aluminium Company v. Kaiser Aluminium Technical Service, 2012 (3) A.R.B. LR. 515 (SC). 24 Twilite International Inc (US) v. Anam Pacific, Yearbook Commercial Arbitration, Vol XX111-1998 (US No

243) 960. 25 Whitworth Street Estates (Manchester) Ltd v. James Miller and Partners Ltd, (1970) A.C. 583. 26 Enercon v. Enercon, 2014 S.C.C (Bom) 696. 27 Coast Lines Ltd v. Hudig & Veder Chartering NV, (1972) 2 Q.B. 34 (Ca); Compagnie Tunisienne de

Navigation SA v. Compagnie d’Armement Maritime SA, (1971) A.C. 572.



16

were paid to Indico by Carco in India, along with the above mentioned relation with the

contract. Thus, applying the conflict of laws to determine what law governs the contract,

Indian law governs the contract as it satisfies all the conditions.

116. Since Indian law is the law governing the contract, and the law of the forum, the

mandatory laws of the forum, including public policy, have to be abided by. If in a dispute

public policy is being invaded, it cannot be arbitrated upon.28 Since Indian law is the judge of

the arbitrability of the dispute,29 it can decide whether the parties should be referred back to

arbitration or not. In this case, as stated before, the non-exclusive rights for the products lie

with Carco, and Indico or any other company cannot use the products for six months. They

require interests and damages to be paid by Indico for the mistakes made by Carco, in

exchange of the rights. Since, Indico would not pay interests and damages because of no fault

of its own, the non-exclusive rights would still lie with Carco, and it could abuse the software

to extract personal details about individuals of India or around the world. The former would

be violating the fundamental right to privacy of the people of India,30 while the latter would

be a blatant violation of Human Rights, since privacy is also a human right.31 Right to

privacy is a fundamental right for the people granted by the Constitution of India under

Article 21, viz. the right to life and personal liberty.32 The government’s notification banning

use or manufacture of the Smart TV products which sent data to the database of the channels

gives a more blatant explanation that invasion of privacy in India is against the fundamental

policy of the state.33

117. The products in the contract were not privacy invasive because the consumers would

have given implicit consent after buying the automobile. There was intention to provide

information about the features of the car to the buyers, because an overriding switch was also

being provided along with the other software’s. The idea of providing an overriding switch

would have been redundant if information about the same was not communicated. Thus,

Indico was taking precautions that the rights of the people were not getting violated, which

Carco would not have given heed to.

28 Supra note 11, at 13. 29 Supra note 18, at 14. 30 Supra note 13, at 14. 31 Supra note 18, at 14. 32 Supra note 28. 33 Supra note 16, at 14.



17

118. The rights of the citizens are inextricably tied with the fundamental policies of

India,34 and fundamental policies of India are a part of the public policy of India.35 Violation

of human rights is a blatant ignorance of justice and morality, which is also contrary to public

policy.36 Hence, the violation of people’s rights is against public policy, and thus this dispute

is not arbitrable as per Indian law. Thus, on the basis of the dispute’s non-arbitrability, the

agreement is ‘incapable of being performed’. Because of this, the judicial authority would not

refer the parties back to arbitration, and this decision of the court will be binding on the

parties.37

ii. If the arbitral award could be against public policy, then the arbitration

agreement should not be performed.

119. Privacy issues are non-arbitrable because such disputes might lead to arbitral awards,

which cannot be enforced in India because they would be contrary to public policy. Section

48 (2) of the (Indian) Arbitration and Conciliation Act, 1996 states that if the court finds that

the enforcement of an arbitral award will be refused by India if its enforcement is contrary to

the public policy of India. Section 45 of the said Act states that if the arbitration agreement is

‘incapable of being performed’, then it is invalid. By reading both these sections together, we

can interpret that if there is a possibility that a dispute might lead to absurd arbitral awards

contrary to public policy, adjudged by an arbitrator not bound by a particular forum’s law,

then the agreement should be incapable of being performed from the start. This would save

costs incurred by the parties because they would be saved from going through the arbitral

proceedings, when in the end the arbitral award decided by the arbitrator would not be

recognized and enforced.38 Courts in USA have started determining the potential arbitral

award that could come out of a dispute, and thus decide at the threshold itself whether the

arbitration agreement would be capable of being performed entirely, with an enforceable

arbitral award.39 The theory behind legitimizing this practice is that no arbitration agreement

is successfully performed if the last stage of arbitration is successful. Thus, in order to save

time and money, it should be determined at the second stage itself, where validity of an 34 Supra note 10, at 13. 35 Supra note 9, at 13. 36 Id. 37 Vikrant Tyres Ltd v. Techno Expert Foreign Trade Co. Ltd, I.L.R. 2005 KAR 4738. 38 Chloro Controls (I) P. Ltd. v. Severn Trent Water Purification Inc. and Ors. 2012 (4) A.R.B. LR. 1 (SC). 39 Karl-Heinz Böckstiegel, Public Policy as a Limit to Arbitration and its Enforcement, IBA Journal of Dispute

Resolution 123 (2008).



18

agreement is checked, whether the fourth stage, viz. enforcement of the arbitral award, can be

successfully finished. Hence, those arbitration agreements should not be held valid, if there is

a possibility that the solving of such a dispute could lead to non-enforceable arbitral awards.

a. The arbitral award would be contrary to the Public Policy of India.

120. The arbitrator could on some basis award the rights of the product to Carco

exclusively, on the basis of an assumed breach of contract, if Indico refuses to pay the

interests and damages to Carco for something Indico did not commit. This award would be

contrary to public policy.

121. Fundamental policy, included in public policy40 is interpreted as any decision, which

is coterminous with the righteous judicial approach.41 Safeguarding rights of the people is a

righteous judicial approach, which is why rights of the people are included in the

fundamental policies of India, as mentioned above.

122. An arbitral award, which would grant exclusive rights of the products to Carco in case

Indico refuses to pay interests and damages for something it was not at fault for, would be

against the fundamental policies of India, as it violates right to privacy. Carco might later

make improper usage of the products in question, which record destinations, a person visited,

photographing and recording conversations, therein violating right to privacy.

123. Thus, such an award will not be enforceable, and the agreement should be held

incapable of being performed, which would therein give jurisdiction to the courts to solve the

dispute.

B. JURISDICTION IN THE PRESENT CASE LIES WITH THE MUMBAI HIGH

COURT.

124. Mumbai High Court has pecuniary and territorial jurisdiction.

125. In the present case, the amount, which is under dispute, is the 3rd Installment, for

which Indico has filed a composite suit for its recovery. This 3rd Installment was 30% of USD

7 million, which amounts to USD 2.1 million. Any suit, the value of which was above Rs.

1,00,000, has to be filed in the High Court on its Original Side. The Mumbai High Court has

territorial jurisdiction in the present case as the value of the composite suit filed by Indico is

above Rs. 1,00,000.42 Thus, the cause of action for filing the suit arose within the jurisdiction

of the Mumbai High Court and the Mumbai High Court has territorial jurisdiction to entertain

40 Supra note 9, at 13. 41 Supra note 10, at 13. 42 Smt. Nandita Bose v. Ratanlal Nahata, A.I.R. 1987 SC 1947.



19

the suit.43

126. The cause of action lies with the Mumbai High Court.

127. Cause of action means every fact, which would be necessary for the complainant to

prove, if traversed, in order to support his right to the jurisdiction of the court. Every fact,

which is necessary to be proved, as distinguished from every piece of evidence, which is

necessary to prove such fact, comprises cause of action.44

128. As per Section 20 of the Code of Civil Procedure, every suit shall be instituted in a

Court within the local limits of whose jurisdiction, the cause of action, wholly or in part,

arises. It is for the plaintiff to prove that the court has jurisdiction to entertain the suit. It has

been held that the cause of action is said to arise at a place (i) where contract was made or (ii)

where work under the contract work was to be performed or goods were to be delivered or

(iii) where money under the contract was to be paid.45 A court will not have jurisdiction if

there is no cause of action which exists or where the Defendant is not residing or working for

gain within the jurisdiction of the court.46

129. Indico in the present case was situated in Pune and a substantial part of the work was

required to be done at Pune, India.47 The work as per the agreement was to be required to be

performed in Pune, however only the last milestone as per the Agreement was required to be

carried out in Detroit. The claim however in the present case is only with the work which has

been carried out by Indico, which is in Pune. Thus the cause of action lies in Mumbai High

Court as the work was carried out in Pune and the money which is in dipute, i.e. USD 2.1

Million is to be paid to Indico in Pune.

130. The Burden of Proof lies on the Plaintiff

131. Parties by agreement cannot confer jurisdiction over a court where no cause of action

has arisen.48 Suit against another party can be filed at the place where assignment is made.49

The burden of proof is on the plaintiff to prove that the court has jurisdiction in the case that

43 World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd., A.I.R. 2014 SC 968. 44 P.S.R. Krishna and Ors. v. Union of India (UOI) rep., by its Secretary, Ministry of Communication and

Information Technology and Ors, 2006 (6) A.L.T. 593. 45 North Eastern Electricity Power Corporation Ltd. v. Lakhi Enterprise, A.I.R. 1992 Gau 42. 46 Arinits Sales Pvt. Ltd. v. Rockwell Plastic Pvt. Ltd. And Ors, (2008) I.L.R. 2 Delhi 66. 47 Para 3 of the Fact Sheet. 48 Ram Prakash Sharma v. Adhiraj Kapila, A.I.R. 2002 Raj 248. 49 Mohan Lal v. Kumud Sagar, 1973 (2) A.L.J. 47.



20

he is alleging.50 Where as per the contract money was payable at a place A, or at any other

place, then the cause of action will also arise at A, even if some other place had been agreed

upon by the parties.51 Part of cause of action also arises where payment is to be made.52 The

non-payment is also a part of the cause of action in a suit for damages for the non-payment,

that is, in a suit for a termination of a contract.53

132. The place where the communication of the breach of the contract or cancellation of

the contract is received is a place where in such a suit a part of the cause of action can be said

to have arisen.54 In a suit for damages for breach of contract the cause of action consists in

the making of the contract and of its breach, and consequently such a suit may be filed at the

place where the contract was made or at the place where it should have been performed but

for the breach which had occurred.55

133. Indico submits that since substantial part of the work as per the agreement was

required to be carried out in Pune, where Indico’s company was located. Also, the fee

payable to Indico as well as the monies to be received by Indico were to be received in Pune,

and since there was non-payment by Carco and termination of contract by Carco, hence under

section 20(3) of the Code of Civil Procedure, cause of action lies in the Mumbai High Court.

Where the parties have agreed on a particular forum, such an agreement is valid, as long as it

is not being contrary to public policy or contravenes Section 23 of the Indian Contract Act.56

134. Real and Substantial work carried out in Pune.

135. In the Spilliada case it has been laid down that in order to determine the criteria as to

which court is a more appropriate forum, the court will first look for that forum with which

the action had the most real and substantial connection in terms of convenience or expense,

availability of witnesses, the law governing the relevant transaction and the places where the

parties resided or carried on business.57

136. Carco in the present case cannot claim or proceed in any other court, apart from the

Mumbai High Court as Indico in the present case is a more appropriate forum as it has the

50 Virbhadra v. Roshanlal, A.I.R. 1975 HP 13. 51 Singhal Transport v. Jesaram, A.I.R 1968 Raj 89. 52 Venkatachalan v. Rajaballi, A.I.R. 1935 M 663. 53 Zila Parishad (District Board) v. Smt. Shanti Devi and Anr, A.I.R. 1965 All 590. 54 Matanhella Brothers and Ors. v. Shri Mahabir Industries Pvt. Ltd., A.I.R. 1970 Pat 91. 55 Kodo Minerals Steatite Mine & Mill-Owners and Anr. v. Rohtas Industries Ltd., A.I.R. 1954 Pat 147. 56 Man Ronald Drickinachinen AG v. Multicolour Offset Ltd., A.I.R. 2004 SC 3345. 57 Spiliada Maritime Corporation v. Cansulex Ltd. (1986) 3 All E.R. 842.



21

most real and substantial connection in terms of convenience of the parties or the expenses.

Substantial part of the work was to be done at Pune, India where Indico’s company was

situated, and the cause of action also lies in Mumbai High Court. Thus, the law governing

this matter will be Indian law as Indico carried out its business in Pune, and the cause of

action also lies in India and not in New York.

137. Ouster clause of Dispute Resolution is invalid.

138. It has been laid down by the Supreme Court that, any clause that ousts the jurisdiction

of all courts having jurisdiction and confers jurisdiction on a court as per an agreement is

invalid. It is well settled principle that the parties cannot by agreement confer jurisdiction on

a court which does not have jurisdiction; and that only where two or more courts have the

jurisdiction to try a suit or proceeding, an agreement that the disputes shall be tried in one of

such courts if is not contrary to public policy.58

139. It has also been held that when jurisdiction of a certain court is specified in a contract,

an intention to exclude all others from its operation may be inferred; the exclusion clause has

to be properly construed and the maxim “expression unius est exclusio alterius” (expression

of one is the exclusion of another) may be applied.59

140. Thus in the present case, the Dipsute Resolution clause which confers jurisdiction on

the New York court is invalid. Sine the clause mentions that Seat of Arbitration is New York,

it in itself imples the intention to specifically oust the jurisdiction of the (Indian) Arbitration

and Concilliation Act, 1996 and thereby the jurisdiction of Indian Courts, hence it is invalid.

Thus the jurisdiction lies in the Mumbai High Court and the Dispute Resolution clause

conferring jurisdiction on New York is invalid.

141. Proceedings in Mumbai High Court are not oppressive or vexatious

142. The Supreme Court has said that it cannot be laid down as a general principle that

once the parties have agreed to submit to the jurisdiction of a foreign court, the proceedings

or the action brought either in the court of natural jurisdiction or in the court of choice will

per se be oppressive or vexatious. It depends on the facts of each case and the question

whether the proceedings in a court are vexatious or oppressive which has to be decided on the

basis of the material brought before the court.60

143. Court would choose that forum as an appropriate forum in which the case could be

58 A.B.C. Laminart Pvt. Ltd. and Another v. A.P. Agencies, Salem, (1989) 2 S.C.C. 163. 59 M/s. Swastik Gases P. Ltd. v. Indian Oil Corp. Ltd., (2013) 9 S.C.C. 32. 60 Modi Entertainment Network and Anr. v. W.S.G. Cricket Pvt. Ltd., (2003) 4 S.C.C. 341.



22

tried more suitably for the interests of all the parties and for the ends of justice.61 The courts

should rarely disturb the position of the plaintiff’s choice of forum.62 Court can only stay an

action brought within its jurisdiction in respect of a cause of action arising entirely out of the

jurisdiction when it is satisfied that the plaintiff will thereby suffer no injustice whereas if the

action is continued the defendant will, in defending the action, be the victim of such injustice

as to amount to vexation and oppression and which vexation and oppression would not arise

for the defendant if the action were brought in another accessible Court where the cause of

action arose.63

144. In such a case the onus is upon the defendant to satisfy the Court, first, that the

continuance of the action would work an injustice because it would be oppressive or

vexatious to him or would be an abuse of the process of the Court and, secondly, also that the

stay will not cause any injustice to the plaintiff. In the present case, Mumbai High Court is

the natural forum of jurisdiction as substantial part of the work, which Indico as per the

Agreement had agreed to perform, was to be carried out at Pune, India. Indico filed the

composite suit in the Mumbai High Court, because the cause of action arose in Pune, India

and Mumbai High Court has jurisdiction over the matter, as it is the natural forum.

Substantial portion of the work which was needed to be carried out as per the agreement was

also required to be done in Pune, hence the proceedings for Carco are not be oppressive or

vexatious.

145. Principal Place of Business was Pune

146. In Advanced Law Lexicon, ‘principal place of business’ is defined as “where the

governing power of the corporation is exercised, and where those people meet who have a

right to control the affairs and prescribe what policy of the corporation. The place of a

particular corporation's chief executive offices is viewed as the place designated as the

principal place of business of the corporation in its certificate of incorporation.”64 In the

present case, Indico is a company incorporated under the Indian Companies Act and its

principal place of business was Pune, India. Hence, the suit can be filed in Pune.

61 C.S.R. Ltd. v. Cigna Insurance Australia Ltd., 1997 (189) C.L.R. 345. 62 Koster v. American Lumbermens Mutual Casualty Co., 330 U.S. 518 (1947). 63 Hansraj Bajaj v. The Indian Overseas Bank Ltd., A.I.R. 1956 Cal 33. 64 P. Ramanatha Aiyar, Advanced Law Lexicon 3717 (3 ed. 2005)



23

II. WHETHER CARCO RIGHTFULLY TERMINATED THE CONTRACT WITH

INDICO OR NOT, ON THE BASIS OF WHICH IT IS ASKING FOR AMOUNTS

WITH INTEREST AND DAMAGES FROM INDICO, IN EXCHANGE OF

SUBMISSIONS MADE BY INDICO.

147. As

stated above, by applying the conflict of law rules, Indian law would govern the contract. A.

Carco wrongfully terminated the Agreement because Indico did not materially breach

the Agreement.

i. Indico did not materially breach the Agreement by delaying submission of the

Additional SOW.

148. Acco

rding to section 11 of the Sale of Goods Act, “Whether any other stipulations as to time is of

the essence of the contract or not depends on the terms of the contract.”65 Since, on the there

is nothing in the terms of the contract that explicitly states that time is of the essence, we

cannot conclude that time is of the essence in this contract.

149. Acco

rding to section 55 of the Indian Contract Act, when time is not the essence of the contract

according to the intention of the parties at the time they entered into 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.66

150. It is

also very well supported by case law that even if a particular contract prima facie seems to

connote time as an essence of the contract, it might still have stipulations within it like facility

to seek extension of time in advance of reasonable grounds etc., which render the contract as

one where time is not of the essence.67 In the given case, the contract did have a provision that

enabled the parties to extend the delivery of the SOW by a month if certain circumstances

arise beyond the control of Indico.

65 Section 11 of the Sale of Goods Act, No. 3 of 1930. 66 Section 55 of the Indian Contract Act, No. 9 of 1872. 67 Hind Construction Contractors by its Sole Proprietor Bhikamchand Mulchand Jain (Dead) by Lrs v. State of

Maharashtra; (1979) 2 S.C.C. 70.



24

151. Indic

o confirmed that it was capable of completing the additional SOW and agreed to include the

same within the actual SOW for the same cost. There was no mention of the time by which

Indico was supposed to complete the additional SOW. Thus, the fact that the parties allowed

such provisions to remain in the contract, makes it quite obvious that time is not an essence of

this contract, in terms of both the original SOW and the additional SOW. Hence, terminating

it on the grounds of section 55 does not hold good in this situation.

152. Even

if we say time was an essence of the contract, Indico did abide by the Milestones clause of the

contract while completing the SOW for Carco, as it did finish the original SOW within the

stipulated time itself, as it had contended. The additional SOW was an extra task that Indico

had to perform for the same cost but not necessarily within the same time, as laid out in the

original terms of the contract.

153. The

delay in the submission of the SOW took place because of the enhancement of original scope

of work by Carco. It was already mentioned in the contract that if delay happened in the

delivery of the SOW due to circumstances beyond the control of Indico, the date of

submission would be extended by a month.68 That is why Indico could extend the submission

of the additional SOW by a month.

154. Even

if the submissions were late, Carco had waived any objections as it accepted the delayed

submissions of the SOW and made no objections based upon late submission. Thus, there was

no material breach by Indico, and Carco has wrongfully terminated the contract.

ii. Indico did not materially breach the Agreement by using third party IPR.

155. Indic

o’s partner did work on the AACN technology abroad, but there is no mention of a company

for which he worked there. Hence, he would have been Indico’s employee at that time also

and thus, the AACN technology belongs to Indico, according to section 17(c) of the Indian

Copyright Act, 1957. According to this section, employer owns the copyright first if employee

(author) made it during the course of employment under a contract of service or

apprenticeship.69

68 Para 3 of the Fact Sheet. 69 Section 17(c) of the Indian Copyright Act, No. 14 of 1957.



25

156. Even

if we say that the partner was not employed at that time with Indico and minor tweaking of

AACN’s logic was done to make Indico’s software codes, Indico still completely reworked

any external third party IPR such that the preliminary versions contained only Indico’s IP.

iii. Indico is entitled payment of the third installment, and the court should ask Carco

to cease and desist from using the proposals already forwarded by Indico to Carco.

157. Accord

ing to section 64 of the Indian Contract Act, “When a person at whose option a contract is

voidable rescinds it, the other party thereto need not perform any promise therein contained in

which he is the promisor. The party rescinding a voidable contract shall, if he had received

any benefit thereunder from another party to such contract, restore such benefit, so far as may

be, to the person from whom it was received.70

158. Anothe

r benefit that Carco unjustly received under the contract was the Beta version of the program.

It is a well-known fact that “... Any civilized system of law is bound to provide remedies for

cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man

from retaining the money of, or some benefit derived from, another which it is against

conscience that he should keep…”71. 3rd installment is payable within one week of submission

of the Beta version, subject to satisfaction of Carco.72

159. The

beta version stage generally begins when the software is feature complete. It is conduction of

usability tests for the software so that any glitch that might be there in the working of the

software, does not impact the final users. Since in the given scenario, Carco had already

accepted the preliminary programs by making payments for the same, the software was

feature complete now.

160. Indico

submitted the beta version of the program with modifications after Carco made payments for

the 2nd installment. Since Carco had already accepted the basic features of the software

program, it shouldn’t have had a problem with the beta version of the program as well. Thus,

Indico must be paid for the beta version submissions of the software program.

70 Section 64 of the Indian Contract Act, No. 9 of 1872. 71 K.S. Satyanarayana v. V.R. Narayana Rao, A.I.R. 1999 SC 2544. 72 Para 3 of the Fact sheet.



26

161. The

preliminary programs are Indico’s intellectual property as proved in sub section A. After

rescinding the contract, Carco should return all benefits received under the contract from

Indico. Thus, Carco should not use the preliminary programs submitted by Indico and return

them back to Indico as well.

iv. This Court should reject Carco’s plea for refund of money paid, and interest.

162. The

question of section 75 does not arise in this situation at all because the contract was not

rightfully rescinded by Carco, as it has been argued above. Thus there can be no compensation

demaded from Indico under the pretext of this section.

163. Follow

ing the rationale of section 73 of the Contract Act, whichever party is breaching the contract

must make compensation in respect of the direct consequences flowing from the breach and

not in respect of loss or damages which is remotely or indirectly caused.73 In this case, it is too

improbable to say that eventually Carco would have suffered losses due to Indico’s late

submission, and hence, it should be given damages for this improbable loss that might happen

in the future.

164. Accord

ing to section 55 of the Contract Act, in cases of a contract becoming voidable on account of

the promisor’s failure to perform his promise at the time agreed, the promisee accepts such

promise at any time other than agreed, the promisee cannot later on go on about trying to

claim compensation for any loss occasioned by the non-performance of the promise at the

time agreed, unless, at the time of the acceptance he gives notice to the promisor of his

intention to do so.74

165. Even if

we say that time is the essence of the contract in this case, the fact that Carco accepted the

submission of the 2nd milestone, without the additional SOW, at a time different from the one

agreed upon, shows that Carco cannot go ahead and claim compensation from Indico for

losses occurred due to Indico’s non-performance, if any. Hence, Indico should not pay

amounts with interests and damages to Carco.

v. If the Court holds that Indico breached the Agreement, the court should ask Carco

73 Pannalal Jankidas v. Mohanlal, A.I.R. 1951 SC 144. 74 Id.



27

to cease and desist from using the proposals already forwarded by Indico to Carco.

166. Accord

ing to Clough v. L &NWR, “No man can at once treat the contract as avoided by him, so as to

resume the property which he parted with under it, and at the same time keep the money or

other advantages which he has obtained under it”.75 Since Carco is terminating the contract, it

has to cease and desist from using proposals already forwarded by Indico, even if Indico has

to compensate Carco for the losses Carco suffered.

B. Carco was not entitled to rescind the Agreement as Indico made no material

misrepresentations.

i. Indico did not misrepresent its capacity to complete the SOW.

167. Even if Indico is deemed to have failed to complete the Additional SOW in a timely

manner, it had no intent to deceive Carco. Hence, Indico has not fraudulently misrepresented

its capacity to complete the Additional SOW under Section 17 of the Contract Act.

168. According to section 18 of the Indian Contract Act, “Misrepresentation means and

includes the positive assertion in a manner not warranted by the information of the person

making it.”76 Indico did not assert in a manner, not warranted by the information it knew

about its own capacity to complete the SOW. It is a reputed Indian company in this field and

that is why it got this International Agreement award from Carco at the first place, which

means that Carco would have also done some due diligence77 before signing this contract with

Indico.

169. Misrepresentation also means and includes causing, however innocently, a party to an

agreement, to make mistake as to the substance of the thing, which is the subject of the

agreement.78 In the given contract, Carco wanted Indico to complete the SOW as per certain

specifications. These specifications were the substance of the SOW, which in turn was the

subject matter of the agreement. When Indico submitted the 2nd milestone of the SOW and

Carco accepted the same, there was an implied acceptance of the specific quality of the

preliminary programs as made by Indico. Hence, it did not misrepresent in any way so that it

could enable Carco to make a mistake as to the substance of the thing, which is the subject

matter of the agreement.

75 Clough v. L &NWR, (1871) LR 7 Ex 26. 76 Section 18 of the Indian Contract Act, No. 9 of 1872. 77 Exception to Section 19 of the Indian Contract Act, No. 9 of 1872. 78 Id.



28

170. In order to prove the contract to be voidable under the Indian Contract Act and rescind

it eventually, the party rescinding it has to prove that its consent to the contract was so caused

by the other party’s misrepresentation. 79 According to Bhagwani Bai v. Life Insurance

Corporation of India, Jabalpur, “The perusal of explanation attached to section 19 clearly

goes to show that in order to avoid a contract, misrepresentation or fraud must be proved to be

the main cause in obtaining the consent of the other party to the contract and if it is not found,

the fraud or misrepresentation ipso facto would not render the contract voidable.”80

171. The additional SOW was only an extra task that Indico had to perform. Indico’s

capacity or incapacity to perform it did not cause the consent of Carco to the original contract.

Also, enhancement of the Scope of Work cannot be considered as an alteration of the contract

as there is no variation of rights, liabilities or legal position of the parties as ascertained by the

deed, from its original state.81 Indico did not misrepresent its capacity to complete the SOW.

ii. Indico did not fraudulently conceal the fact that its employees had worked on

similar technologies with previous employers, as it had no duty to disclose said fact.

172. Misrepresentation of a party to the contract can arise also through suppression or non-

disclosure of vital facts82, either fraudulently83 or otherwise. Indico’s partner did work on the

AACN technology abroad, but there is no mention of a company for which it worked there.

Hence, it would have been Indico’s employee itself at that time also and thus, the AACN

technology also belongs to Indico, according to section 17(c) of the Indian Copyright Act,

1957, as proved in the above sub issue. Thus, it did not hide anything substantial from Carco,

which is fraudulent in nature and use it to cause the consent of Carco to the contract.

173. Still if Carco believes that Indico committed misrepresentation or fraudulent

misrepresentation to cause the consent of Carco to the contract, Carco should have exercised

some due diligence before entering into the contract. Exception to section 19 of the Indian

Contract Act 1872 says that if a party’s consent to a contract was caused by misrepresentation

or silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not

voidable, if the party whose consent was so caused had the means of discovering the truth

with ordinary due diligence. Thus, under the above-mentioned grounds, Indico did not

79 Section 19 of the Indian Contract Act, No. 9 of 1872. 80 Bhagwani Bai v. Life Insurance Corporation of India, Jabalpur, A.I.R. 1984 MP 126. 81 Janab M.H.M. Yakoob v. M. Krishnan, A.I.R. 1992 Mad 80. 82 R. v. Kylsant, 1931 All E.R. Rep 179. 83 Section 17(2) of the Indian Contract Act, No. 9 of 1872.



29

misrepresent its ability to deliver requirements under the SOW; the contract is not voidable as

a result and hence, Carco wrongfully terminated the contract.

iii. This Court should reject Carco’s plea for refund of the money paid and it is not

entitled to any damages and interest.

174. As already proved above, Indico did not misrepresent to Carco in order to cause its

consent to the contract. Thus, there can be no rescission of the contract on those grounds and

no claiming of compensation as a result.

175. Misrepresentation anyways is not equivalent to breach. Thus, Carco will not be

entitled to get damages, as envisaged under section 73 and section 75 of the Contract Act, on

this ground.

176. When the consent to an agreement is caused by misrepresentation, the promisee can

either avoid the contract or ask for specific performance but he cannot sue for damages.84

Thus, even if innocent misrepresentation is proved, Carco cannot sue for damages. It can only

avoid the contract and get compensation for the extra benefit that Indico has got.

177. Even if fraudulent misrepresentation is proved, we do know that the damage to the

misrepresented party must have flowed directly from the fraud perpetrated on him.85 This link

between Carco’s suffered losses arising out of Indico’s claimed misrepresentation is nearly

impossible to be proved and thus, does not give rise to damages and interests from Indico to

Carco.

________________________________________________________________________

PRAYER ___________________________________________________________________________

In light of the issues raised, arguments advanced, and authorities cited, Indico requests this

Honorable Court to adjudge and declare that:

178. Arbitration agreement between Carco and Indico is non-arbitrable.

84 Premchand v. Ram Sahai, A.I.R. 1932 Nag 148, 149. 85 Doyle v. Olby (Ironmongers) Ltd, (1969) 2 All E.R. 191.



30

179. Mumbai High Court has Jurisdiction under the contract between Carco and

Indico.

180. Indico shall not pay amounts with interests and damages to Carco, and

Carco should make the payment for the 3rd installment to Indico and it should cease

and desist from using the proposals forwarded by Indico.

And Pass any other Order, Direction, or Relief that it may deem fit in the Best Interests of Justice, Fairness, Equity and Good Conscience.

For This Act of Kindness, the Respondent Shall Duty Bound Forever Pray.

ALL OF WHICH IS RESPECTFULLY SUBMITTED

Documents

1 TEAM CODE ST- 12 · Jain (Dead) by Lrs v. State of Maharashtra; (1979) 2 S.C.C. 70. Janab M.H.M. Yakoob v. M. ... O.P Malhotra & Indu Malhotra, The Law and Practice of Arbitration