R-634

BEFORE THE HONB’LE HIGH COURT OF MALGUDI

M/S MERCURY PARKING INC. (PETITIONER)

V.

AIRPORT AUTHORITY OF MALGUDI (RESPONDENT)

BEFORE
THE HON’BLE JUDGES OF
THE HIGH COURT OF MALGUDI

MEMORIAL ON BEHALF OF THE RESPONDENT

 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

TABLE OF CONTENTS

INDEX OF AUTHORITIES___________________________________________________ 3

ABBREVIATIONS _________________________________________________________ 6

BRIEF SYNOPSIS OF FACTS ________________________________________________ 7

STATEMENT OF JURISDICTION_____________________________________________ 9

ISSUES FOR CONSIDERATION _____________________________________________ 10

SUMMARY OF ARGUMENTS ______________________________________________ 11

ARGUMENTS ADVANCED ________________________________________________ 12

PRAYER FOR RELIEF _____________________________________________________ 26

2
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

INDEX OF AUTHORITIES

CASES

Andhra Sugars Ltd. & Anr. Etc vs State Of Andhra Pradesh & Ors 1968 AIR 599, 1968 SCR (1) 705)
____________________________________________________________________________ 22

A. Ayyasamy vs A. Paramasivam & Ors on 4 October, 2016 _______________________________ 12

Andhra Sugars Ltd. & Anr. Etc vs State Of Andhra Pradesh & Ors 1968 AIR 599 ______________ 22

Associated Cinemas of America, Inc V. World Amusement Co. (1937)201 Minn 94 _____________ 17

Babulal Badriprasad Varma v. Surat Municipal Corporation ______________________________ 15

Booz Allen & Hamilton Inc v SBI Home Finance Limited & Ors (2011) 5 SCC 532_____________ 11

Common Cause v. Union of India [1999 (6) SCC 667] ___________________________________ 17

Directorate of Education and others vs. Educomp Datamatics Limited and others); (2005) 1 SCC 679
____________________________________________________________________________ 20

Hadley V. Baxendale (1843-1860) All ER Rep 461 ______________________________________ 19

Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums __________________________ 11

In Krishna Bahadur vs. Purna Theater [(2004) 8 SCC 229 ________________________________ 15

in S.K. Jain-vs.- State of Haryana and Anr(2009) 4 SCC 357 ______________________________ 21

In Tata Cellular v. Union of India (1994) 6 SCC 651 ____________________________________ 20

Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517 ___________________________________ 20

Meil Prasad (Jv) vs The State Of Madhya Pradesh on 10 July, 2018 ________________________ 20

of Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums ________________________ 11

P. Anand Gajapathi Raju & Ors. v. P. V. G. Raju (Dead) & Ors. 2000 (4) SCC 539 ____________ 11

Premium Nafta Products Ltd & others v Fili Shipping Company Ltd & others _________________ 12

S.K. Jain-vs.- State of Haryana and Anr. reported as (2009) 4 SCC 357______________________ 16

State Of Punjab And Ors vs Gurdev Singh, Ashok Kumar 1991 AIR 221 _____________________ 15

Sudesh Prabhakar Volvoikar V. Gopal Babu Savolkar (1996) 5Bom CR _____________________ 17

Swiss Timing Ltd v Commonwealth Games (2014) 6 SCC 677 _____________________________ 12

3
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

Victoria Laundary (Windsor) V. Newman Industries Ltd. _________________________________ 19

Vimal Kishore Shah v. Jayesh Dinesh Shah (2011) 5 SCC 532 _____________________________ 13

Voestalpine Schienen GMBH v Delhi Metro Rail Corp. Ltd. (2017) 4 SCC 665 ___________________ 14

STATUTES
1. ARBITRATION AND CONCILIATION ACT,1996
2. INDIAN CONTRACT ACT,1872
3. CODE OF CIVIL PROCEDURE,1908
4. CONSTITUTION OF INDIA, 1949

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

2. Black’s Law Dictionary 665 (7th ed. 2000).

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

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

5. 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.

6. O.P Malhotra & Indu Malhotra, The Law and Practice of Arbitration and
Conciliation (2 ed. 2006), Lexis Nexis Butterworths.

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

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

8. V Dicey, J. H. C Morris & Lawrence Collins, Dicey and Morris on the

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

4
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

LEGAL DATABASE
1. MANUPATRA
2. INDIAN KANOON
3. WEST LAW

5
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

ABBREVIATIONS

AIR All India Reporter

A & C ACT Arbitration and Conciliation act,1996

AAI Airport Authority of India

CVC Central Vigilance Commission

GCC General Conditions of Contract

HC High court

ICA Indian Contract Act

NOC No-objection Certificate

NHA National Highway Authority

SC Supreme Court

SCC Supreme Court Cases

UOI Union of India

V. Versus

& And

6
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

BRIEF SYNOPSIS OF FACTS

1. The Airport Authority of Malgudi (Airport Authority) issued a tender for a contract of
managing public parking space. In the tender documents, the size of the portion of land to
be allotted to the bidder was 5000sq. meters. The terms of the tender stated that the
successful bidder would derive revenue by collecting parking charges at the land allotted
and would pay a monthly license fee to the Airport Authority.

2. M/s. Mercury Parking Inc. (Mercury) is a company registered under Companies Act, 1956,
was awarded the tender and a license agreement for a period of 3years was entered into
between the parties.

3. Mercury came to know that some construction work had started by the NHA on the land
allotted to it. Mercury filed an RTI query, in pursuant to which Mercury receives a response
that 2000sq meters out of a total 5000sq. meter allotted to the Mercury was being acquired
by the NHA and an “NOC” had been granted by the Airport Authority to NHA in 2016 for
the said acquisition.

4. Mercury wrote a letter to the Airport Authority asking for a proportionate reduction in the
license fee since the area of land allotted to it had been reduced substantially. After some
period of time Mercury had stopped making payments towards the license fee. The
Authority issued letters to Mercury, demanding payments due for two month payable under
the license agreement.

5. Mercury invoked the arbitration agreement, the License Agreement contained an

arbitration clause which states that “In case of any dispute between the parties, the dispute
will be referred to an arbitrator to be solely appointed by the Airport Authority. As a
condition precedent to the appointment of an arbitrator, the licensee will deposit any
amount due to the licensor under the license agreement”. Therefore, the Airport Authority
replied stating that as per the terms of the arbitration agreement, all dues of the licensee
under the agreement had to be deposited as a condition precedent to the appointment of
arbitrator.

6. Mercury issued a letter to the Airport Authority stating that there was a material
misrepresentation in the tender documents as the fact that 2000sq meters of the said were

7
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

to be acquired by NHA was suppressed. Mercury also stated about its demand for revising
the license fee payable proportionately.

7. Meanwhile, Mercury was disqualified in another tender issued by the Airport Authority in
the state of Arkham, due to the tender terms of the project in Arkham. It was decided that
Mercury had pending dues in connection with the previous project awarded by the Airport
Authority.

8. Mercury filed a civil suit before the High Court of Malgudi, on the basis that the entire suit
was vitiated by fraud. Therefore, Mercury was entitled to damages.

9. The Airport Authority stated that matter should be referred to arbitration complying with
the condition precedent. Additionally, any reduction in the license fee could take place by
way of a public tender and the Authority would have to invite a fresh tender.

10. Airport Authority also indicated that Mercury has attempted to first invoke the arbitration
clause and only thereafter filed the civil suit. And if in any case only an NOC was given
which it did not mean that the portion of land was acquired by the NHA at that time.

11. Mercury contended that the clause violates the basic principles of arbitration. Mercury also
claimed damages for the loss of opportunity in tender issued in the state of Arkham. It was
finally argued that the entire matter was vitiated by fraud and should be decided by the
Civil Court itself.

8
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

STATEMENT OF JURISDICTION

In the matter of

M/S Mercury Parking Inc. V. Airport Authority of Malgudi

The respondents have the honor to submit before the honorable high court of Malgudi, the
memorandum for the respondents in the suit filed by applicant.

M/S Mercury Inc Co., the Petitioner in the instant case has invoked the jurisdiction of this
court.

Airport Authority of Malgudi, the Respondent has the honor to submit this statement of defense
pursuant to Section 8 of the Arbitration and Conciliation Act, 1996 while expressing the
reservations to the jurisdiction of this court. The respondents are not participating in this suit
and just want that the matter be referred back to arbitration as per Section 8 and want that
without prejudice the present matter should be referred back for arbitration since there was an
arbitration clause in the agreement which states that,

“In case of any dispute between the parties, the dispute will be referred to an arbitrator to be
solely appointed by the Airport Authority”

The present memorandum sets forth the facts, issues, contentions and arguments in the present
case.

9
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

ISSUES FOR CONSIDERATION

1. WHETHER THE DISPUTE IS MAINTAINABLE BEFORE THE HIGH

COURT ?

2. WHETHER ARBITRATION CLAUSE IS ONEROUS AND CONDITION

PRECEDENT AMOUNTED TO UNFAIR AND UNREASONABLE
CONDITION FOR INITIATING ARBITRATION?

3. WHETHER MERCURY IS ENTITLED TO DAMAGES FOR LOSS OF

OPPORTUNITY IN THE SECOND PROJECT AS A RESULT OF THE
PURPORTED DUES?

4. WHETHER ANY PROPORTIONATE REDUCTION IN THE LICENSE FEE

COULD TAKE PLACE ONLY BY THE WAY OF RE-BID OR THE
AUTHORITY COULD ITSELF SUO-MOTO GRANT THE REVISION IN
THE RATES OF THE TENDER?

10
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

SUMMARY OF ARGUMENTS

1. The present dispute is not maintainable before the High Court

It is most humbly submitted before the court that the present dispute is not maintainable before
the High Court because, Firstly, there was a valid arbitration agreement between the parties.
Secondly, provision contained under S.8 of the A&C Act, 1996 is a mandatory provision and
must be followed. Thirdly, the subject matter of the dispute is arbitrable i.e. arbitrator is
competent enough to try the dispute and lastly, the arbitration court can rule on its own
jurisdiction (Sec-16 , A& C Act)

2. Arbitration clause is not onerous and condition precedent does not amount to unfair
and unreasonable condition for initiating arbitration.
It is submitted before the Court that Arbitration clause is not onerous because Firstly, Mercury
had sufficient knowledge of the arbitration clause and its validity can not be a ground at a later
stage. Secondly, the condition precedent in the contract is fair and reasonable.

3. Mercury is not entitled to damages for loss of opportunity in the second project
It is submitted before the hon’ble court that Mercury is not entitled to damages for loss of
opportunity in the second project as a result of the purported dues because, Firstly, no loss or
any kind of damage has been accrued upon the mercury by the actions of the Airport Authority.
Secondly, Disqualification took place merely because of tender terms of the project in Arkham.
Then it is apt to state that Mercury has contributed to its own loss by not paying the dues.

4. Reduction in license fee could take place only by the way of re-bid and the airport
authority could not itself suo-moto grant the revision in the rates of tender
It is humbly submitted before the court that reduction in licensee fee could only take place by
the way of re-bid because, firstly, liability of government is different from private persons in a
contract, Secondly, the parties entered the contract with free consent.

11
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

ARGUMENTS ADVANCED

1. THE PRESENT DISPUTE IS NOT MAINTAINABLE BEFORE THE HIGH

COURT

It is humbly submitted by the Airport Authority that the present dispute is not maintainable
before the High Court since the parties have entered into a contract with an arbitration clause
and therefore, Arbitral Tribunal has appropriate remedy to deal with the concerned matter.
Section 8 of the Arbitration and Conciliation Act, 1996 provides that the judicial authority,
herein the High Court of Malgudi, before which an action is brought in a matter which is the
subject of an arbitration agreement shall, if a party to the arbitration agreement or any person
claiming through or under him, so applies not later than the date of submitting his first
statement on the substance of the dispute, then, notwithstanding any judgment, decree or order
of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima
facie no valid arbitration agreement exists.

1.1 Valid arbitration agreement supersedes the jurisdiction of court

If a dispute is referred to a judicial authority by one of the parties to be referred to arbitration,

in matters of an ‘agreement’ referred to in section 8, shall refer the parties to arbitration,
unless it finds that prima facie no valid arbitration agreement existed between the parties. It
is submitted before the Honorable High Court to refer the applicant and respondent to
arbitration, since there existed a valid arbitration agreement between the parties.

1.1.1 Valid Arbitration agreement existed between the parties

It is contended by the Respondent that both the parties had the intention to come into an
arbitration agreement and therefore, the validity of the same cannot be challenged at a later
stage. Both the parties have mutually agreed to the terms of the contract and with it the
arbitration agreement. It is well established that Mercury has accepted the arbitration agreement
and therefore, accepted Arbitral tribunal as a forum for dispute. The same can be ascertained
by the conduct of Mercury in invoking the arbitration agreement for resolution of the dispute
and requesting to appoint an arbitrator by the Airport Authority1.

1
Para 9 of the Moot Problem

12
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

1.1.2 Section 8 is a mandatory provision, which can only refer the dispute back to
arbitration

As per Section 8, High Court of Malgudi can only refer the parties back to arbitration unless it
finds that prima facie no valid arbitration agreement exists. Therefore, in cases where there is
an arbitration clause in the agreement, it is mandatory for the Court to refer the parties to
arbitration in terms of their arbitration agreement and nothing remains to be decided in the
original action after such an application is made except to refer the dispute to an arbitrator.
Therefore, if, as contended by a party in an agreement between the parties before the Civil
Court, there is a clause for arbitration, it is mandatory for the Civil Court to refer the dispute to
an arbitrator2.

It is being contended that in the instant case the existence of an arbitral clause in the agreement
is accepted by both the parties and therefore, there is no reason why the dispute should not be
referred to Arbitration. In the famous case of Hindustan Petroleum Corpn. Ltd. v. Pinkcity
Midway Petroleums3it was held that if the existence of the arbitration clause is admitted, in
view of the mandatory language of Section 8 of the Act, the courts ought to refer the dispute to
arbitration. It is now clear that when arbitration proceedings are triggered by one of the parties
because of the existence of an arbitration agreement between them, then there should not be
any judicial intervention at that stage scuttling the arbitration proceedings4.

1.2 The agreement will be held valid since the subject matter of the dispute is arbitrable
It is most humbly submitted by the Respondent that the matter is arbitrable and therefore,
there is no reason why it should not be tried before an arbitral tribunal. It is only where the
subject matter is non-arbitrable, the dispute fell exclusively within the domain of courts 5
In the instant case the matter does not fell in the jurisdiction of Courts because, Firstly,
Allegation of Fraud does not make the matter inarbitrable. Secondly, matters related to right
in persona are arbitrable.

2
P. Anand Gajapathi Raju & Ors. v. P. V. G. Raju (Dead) & Ors. 2000 (4) SCC 539
3
(2003)6SCC503
4
Section 5, A& C Act, 1996
5
Booz Allen & Hamilton Inc v SBI Home Finance Limited & Ors (2011) 5 SCC 532

13
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

1.2.1Allegation of fraud does not make the matter inarbitrable

The Council Contends that the allegation of fraud does not make the matter inarbitrable.
Also, as far as Arbitration and Conciliation Act, 1996 is concerned, it does not make any
specific provision excluding any category of disputes terming them to be non-arbitrable.
However, there are no. of pronouncements in which inarbitrability of dispute is considered
as a factor to oust the jurisdiction of the Arbitrator. However, the case before hand is within
the Jurisdiction of the Arbitral Tribunal since plea of fraud can be adequately taken care of
even by the arbitrator.6
Reliance has been placed on the 246th Law Commission report which clearly states that
“where there are allegations of fraud simplicitor and such allegations are merely alleged,
we are of the opinion it may not be necessary to nullify the effect of the arbitration
agreement between the parties as such issues can be determined by the Arbitral Tribunal”.
Here it is noteworthy to assess the intention of parties while the framing of contract. Could
they have intended that the question of whether the contract was repudiated should be
decided by arbitration but the question of whether it was induced by misrepresentation
should be decided by a court? If, as appears to be generally accepted, there is no rational
basis upon which businessmen would be likely to wish to have questions of the validity or
enforceability of the contract decided by one tribunal and questions about its performance
decided by another.7In the instant case, the Mercury has accepted the contract with free
consent and with it the arbitration clause and the jurisdiction of Arbitrator in case of
disputes. Therefore, it can not dispute its jurisdiction at a later stage. Also, allegations of
fraud are matters capable to be dealt by the Arbitrator8 so the Jurisdiction of Court is not
needed.

1.2.2 Matters related to Right in persona are arbitrable

A right in rem is a right exercisable against the world at large, as contrasted from a right in
personam which is an interest protected solely against specific individuals. In the instant
case, the rights which were involved are personal rights as opposed to public rights and
therefore, there it is clear that the matter in dispute is related to right in persona for which

6
Swiss Timing Ltd v Commonwealth Games (2014) 6 SCC 677
7
Premium Nafta Products Ltd & others v Fili Shipping Company Ltd & others
8
A. Ayyasamy vs A. Paramasivam & Ors on 4 October, 2016

14
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

arbitration court has jurisdiction and there is no need for availing the jurisdiction of the
High Court9.

1.3 Arbitration Court can rule on its own jurisdiction

Section 16 of The Arbitration and Conciliation provides the principle of Kompetenz-
Kompetenz. According to this principle, the arbitral tribunal may rule on its own
jurisdiction, including ruling on any objections with respect to the existence or validity of
the arbitration agreement. It is contended that the objections regarding to fraud or any such
dispute are to be raised before the Arbitral Tribunal itself, which is to decide, in the first
instance, whether there is any substance in questioning the validity of the arbitration
proceedings on any of the aforesaid grounds.10. It was held in the case of KV Aerner
Cementation India Ltd.11that “Arbitral Tribunal, is endowed with ample power and
jurisdiction to rule on its own jurisdiction and it would not, therefore, be open to the Civil
Court to pass an injunction against an arbitral proceeding in the teeth of the provisions
of Section 5 of the Arbitration and Conciliation Act, 1996 and Section 16thereof.”

(i)Arbitration agreement is independent of the substantive contract

It is humbly submitted before the court that the arbitration agreement is independent of the
Substantive contract within the meaning of Sec 16(1)(a) and therefore, even if the
substantive contract is void, the arbitration agreement would still be entact. Therefore, in
no way the jurisdiction of an arbitral court can be ousted when there is a valid arbitration
agreement as is in the present case.

9
Vimal Kishore Shah v. Jayesh Dinesh Shah (2011) 5 SCC 532
10
Kvaerner Cementation India Ltd. v. Bajranglal Agarwal & Anr. (2012) 5 SCC 214
11
2001 (3) RAJ 414 (SC)

15
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

2. THE ARBITRATION CLAUSE IS NOT ONEROUS, AND THE CONDITION

PRECEDENT DOES NOT AMOUNTTO AN UNFAIR AND UNREASONABLE
CONDITION FOR INITIATING ARBITRATION.

It is humbly submitted by the Respondents that the Arbitration clause is not onerous and the
condition precedent does not amount to unfair and unreasonable condition for initiating
arbitration because, firstly, Mercury had knowledge of the arbitration clause and therefore,
cannot challenge its validity subsequently, secondly, Mercury cannot claim the rights which it
has waived under the contract. Thirdly, Condition precedent is just and fair .

2.1 Knowledge of the arbitration clause

It is humbly submitted that arbitration clause is a separable contract, which not only records
the intention of the parties to resort to arbitration in case of disputes but also spells out the
procedure agreed by parties regarding appointment of arbitrators, qualification of arbitrator,
number of arbitrator, seat of arbitration, language of arbitration. Hence, parties should carefully
negotiate the arbitration clauses and finalize the same, so that the arbitration clause does not
put any party to disadvantage at the time of the arbitration.12

It is most humbly submitted that Mercury a well-established company, very well aware of its
right and duties in a contract signed the contract. It was open to Mercury as well as all others
not to enter into the contract. Neither Mercury nor any other company was under any pressure
or influence of accepting the contract. It was simply an invitation to offer which Mercury with
its own consent accepted it. Accepting the terms and conditions clearly implies that you are
legally binded by the terms and conditions of the contract. Biasness of the arbitrator is
questioned only on the ground of it being appointed by the Airport Authority. Merely because
the persons proposed were to be employed by Airport Authority (and in no way connected to
the Petitioner), that by itself would not make them ineligible to act as arbitrators. Had it been
the intention of legislature to cover such persons, it would have been provided for in the
Seventh Schedule. Bias or even real likelihood of bias cannot be attributed to such highly
qualified and experienced persons, simply on the ground that they are being appointed by the
Airport Authority and not by Mercury, and where they had no connection with the Petitioner.13
Pursuant to the amendment, there is an embargo on a person to act as an arbitrator if he has

12
Voestalpine Schienen GMBH v Delhi Metro Rail Corp. Ltd. (2017) 4 SCC 665
13
Bundel Khand Advertising ... vs State Of U.P. And 8 Other

16
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

been either an employee or consultant or advisor or had any past or present business relations
with the parties, which was not the case.

2.2) Waiver of rights in a contract

A waiver is the voluntary relinquishment or surrender of some known right or privilege. It is

submitted that there lies no legal remedy once the party has waived its legal rights of a contract.
Mercury while signing the contract and accepting the terms and conditions had waived its right
of appointing the arbitrator. There lies no remedy to the party who has waived any of the rights
in a contract. The truth of the matter is that the court will invalidate an order only if
the right remedy is sought by the right person in the right proceedings and circumstances. The
order may be hypothetically a nullity, but the Court may refuse to quash it because of the
plaintiff's lack of standing, because he does not deserve a discretionary remedy, because he has
waived his rights, or for some other legal reason.14 Waiver should be a voluntary and
intentional relinquishment of a known right.15 But the party to whom waiver is attributed should
be aware of the right that he was waiving. In the case of Krishna Bahadur vs. Purna Theater16 ,
While estoppel is a rule of evidence, waiver is contractual. But to constitute waiver, it must be
clearly established that a party against whom waiver is set up was fully aware of his rights, but
had agreed not to assert the right, for a consideration. In the case of Babulal Badriprasad Varma
v. Surat Municipal Corporation 17 "waiver" is the abandonment of a right "in such a way that
the other party is entitled to plead the abandonment by way of confession and avoidance if the
right is thereafter asserted, and is either express or implied from conduct. Thus, it is humbly
submitted by the counsel that the party has already waived their rights and in no way can now
claim or invalidate the clause. The party before entering into the contract could have thought
of all the reasonable consequences.

2.3) Fairness and reasonableness of the condition precedent

The onerous nature of the terms is no ground for the licensees to resile from the express
obligations undertaken by them. The licences in the present case are contracts between the
parties. It is argued that once they parties have signed the contract and accepted the clause they

14
State Of Punjab And Ors vs Gurdev Singh, Ashok Kumar 1991 AIR 2219
15
Provosh Chandra Dalui v. Biswanath Banerjee , AIR 1989 SC 1834
16
[(2004) 8 SCC 229
17
2008 (3) GLH 137

17
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

are bound to follow the procedures of the contract18. Accepting the contract and denying the
clauses render a breach toward them. It is also indicated that Mercury had attempted to first
invoke the arbitration clause and only thereafter filed the civil suit. This clearly shows that they
were reluctant towards this condition. Earlier, they stopped the payment of license fees for two
months and later on now they are reluctant in fulfilling the condition before invoking the
arbitration.

The licensees voluntarily accepted the contracts. They fully exploited to their advantage the
contracts to the exclusion of others. It was not open to Mercury to resile from the contracts on
the ground that the terms of payment were onerous. The reason being that they accepted the
licence by excluding their competitors and it would not be open to them to challenge the terms
either on the ground of inconvenient consequence of terms or of harshness.19 The decision of
the Supreme Court therefore affirms the view that in case of contracts freely entered into with
the State, there is no room for invoking the doctrine of fairness and reasonableness against one
party to the contract (State), for the purpose of altering or adding to the terms of the contracts,
merely because it happens to be the State. In such cases the mutual rights and liabilities of the
parties are governed by the terms of the contracts and the law relating to contracts. It is seen
that the contract in the present case was entered into pursuant to floating of tender and there
was no compulsion on anyone to enter into the contract. Therefore, there can be no question of
State power being involved in such a voluntary contract. Therefore, there is no force in the
submission made on behalf of the Appellant that only public law principles would
exclusively apply to the relationship between the parties and that private law principles flowing
from the terms of the contract would have no application to the subject contract.

It is to bring to the notice of the court that in tenders like these the Government asks to deposit
Earnest Money (EMD) as already mentioned in the GCC guidelines. This amount is deposited
by it for the security purposes. Any breach or loss from the side of the party will be payable by
this deposited amount. The condition precedent of the arbitration clause can be called a mirror
of the same clause as provided in the GCC guidelines.At a concluding note the counsel most
respectfully submits that the arbitration clause is in no way onerous and the condition precedent
does not amounts to an unfair and unreasonable condition for initiating arbitration.

18
Panna Lal v. State of Rajasthan (1975) 2 SCC 633, State Bank of Haryana v. Jage Ram (1980) 3 SCC 599
19
S.K. Jain-vs.- State of Haryana and Anr. reported as (2009) 4 SCC 357

18
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

3. MERCURY IS NOT ENTITLED TO DAMAGES FOR LOSS OF OPPORTUNITY

IN THE SECOND PROJECT AS A RESULT OF THE PURPORTED DUES

Mercury will not be entitled to any damages for loss of opportunity in the second project
because of the purported dues because. Firstly, No Loss/damage has accrued upon Mercury by
the actions of the Airport Authority. Secondly, Mercury has contributed to its own loss by non-
payment of dues.

3.1 No loss/damage has accrued upon mercury by airport authority

Damages means compensation in terms of money for the loss suffered by the injured party20.
In context of the Indian Contract Act, 1872, Damages are the pecuniary compensation,
obtainable by success in an action, for a wrong which is either a tort or a breach of contract,
the compensation being in the form of a lump sum which is awarded unconditionally.”21 It is
noteworthy from the above definition that a claim for damages can only subside when there is
a breach of contract. It is most humbly submitted by the Respondent that no breach of contract
has taken place in the instant case. Also, the Respondent cannot be compelled to make good
the losses which are too remote as was in the present case.

3.1.1 No breach of contract has taken place

A breach of contract occurs when a party thereto renounces his liability under it, or by his own
act makes it impossible that he should perform his obligations under it or totally or partially
fails to perform such obligations.22 This means that for an act to be classified as a breach there
should be some contractual liability and this liability was broken and as a result the contract is
breached. It is humbly submitted by the Respondent that no contractual liability was broken by
the Respondent.

(i)No Fraud /Material misrepresentation was made by the Airport Authority

Fraud is a false representation which was made knowingly, or without belief in its truth, or
recklessly careless whether it be true or false.23

20
Sudesh Prabhakar Volvoikar V. Gopal Babu Savolkar (1996) 5Bom CR
21
Common Cause v. Union of India [1999 (6) SCC 667]
22
Associated Cinemas of America, Inc V. World Amusement Co. (1937)201 Minn 94
23
Derry V. Peek (1899) 14 337 at p. 374

19
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

In terms of the Indian Contract Act, ‘Fraud’ means and includes any of the following acts
committed by a party to a contract, or with his connivance, or by his agent, with intent to
deceive another party thereto or his agent, or to induce him to enter into the contract: —"

(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

(2) the active concealment of a fact by one having knowledge or belief of the fact;

(3) a promise made without any intention of performing it;

(4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent.

Explanation.—Mere silence as to facts likely to affect the willingness of a person to enter into
a contract is not fraud, unless the circumstances of the case are such that, regard being had to
them, it is the duty of the person keeping silence to speak, or unless his silence, is, in itself,
equivalent to speech.24

The Section indicates five actions, the commission of any of which, would constitute 'fraud' if
the said acts committed with either an intent to deceive another or to induce him to enter into
the contract. The mere commission of any of the five acts, by itself, are not sufficient to
constitute fraud. The acts or any of them must have been committed either with intent to
deceive or to induce to enter into the contract. Going by the Explanation to the Section, silence
as to a particular fact will not constitute fraud unless, the circumstances involved cast a duty
on the person to speak, or the circumstances are such that the silence in itself is equivalent to
speech.

In the instant case there has been no material misrepresentation made by the Petioners for
inducing the other party to enter into contract with Airport Authority, there was only an
invitation to offer to enter into contract and that was accepted by Mercury with free consent.
The terms and conditions of the contract were accepted by Mercury at that very stage and so
can not be disputed at a later stage.

24
Section 17, ICA, 1872

20
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

(ii)Silence as to material facts is not fraud

It is most humbly submitted by the Respondent that Mere silence is no fraud even its result is
to conceal facts likely to affect the willingness of person to enter into a contract.25 A contracting
party is under no obligation to disclose the whole trust to the other party or to give him the
whole information in his possession affecting the subject-matter of the contract. In the instant
case Airport Authority had not made any active concealment of important facts but only a
passive concealment of material facts. Granting of NOC to NHA in 2016 was only a material
fact to the case since the same was not acquired by NHA at that time. The acquisition took
place only after two years which is not the case when the contract took place in the first
instance.

3.1.2 In any case Remote/ Indirect cannot be claimed26

It is humbly submitted before the Court that the claim for loss of opportunity in the second
project is a damage which is too remote to be considered as a consequence of breach of contract.
Therefore, even if the claim for breach of contract is demanded, demand for damages for loss
of opportunity can not be sustained. Only such loss is recoverable as was at the time of contract
reasonably foreseeable as liable to result from the breach.27or such as may reasonably be
supposed to have been in the contemplation of parties at the time they made the contract28. It
cannot be expected from the Airport Authority to make good every loss which the party may
incur.

3.2 MERCURY HAS CONTRIBUTED TO ITS OWN LOSS BY NON-PAYMENT OF

DUES

It is contended by the Respondent that only mercury is liable for the loss of opportunity in the
Second project and that is why there are no grounds for mercury to claim
compensation/damages from the Airport Authority. No person can claim damages where they
themselves are liable for the loss caused. In the instant case, Mercury had without no reason
stopped making payments from March and it is only after April that Airport Authority asked
for payments.

25
Section 17 (Explanation) Illustration (a) and (d), ICA
26
Sec 73 (Explanation),ICA
27
Victoria Laundary (Windsor) V. Newman Industries Ltd.
28
Hadley V. Baxendale (1843-1860) All ER Rep 461

21
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

3.2.1 Arbitration Clause only required unpaid dues to be deposited

It is contended by the Respondents that there was a condition precedent for invoking arbitration
according to which the licensee will deposit any amount due to the licensor under the license
agreement. The word deposit here clearly shows that the money will only be deposited to the
tribunal and not paid to the Airport Authority. Only after the matter is decided by the Arbitrator
the money will go either to the Airport Authority or back to Mercury.

3.2.2 No Economic Burden over Mercury for payment of dues

The Respondents wants to bring the fact here that Mercury was an affluent company and had
been engaged in the business of parking lots for various airports across the country. There was
no chance that depositing the unpaid dues would impose any economic burden over Mercury.

3.2.3 Airport authority of Arkham has the right and discretion to enter into contract with
anyone it wants

It is humbly submitted by the Respondents that Airport Authority of Arkham has the right and
discretion to choose with whom it wants to enter into a contract. It is undisputable that the past
experience of a contractor is a relevant consideration for the State to take into consideration
whether the State should enter into contract with such contractor.29 The terms and conditions
in the tender are prescribed by the Government bearing in mind the nature of contract and in
such matters the authority calling for the tender is the best judge to prescribe the terms and
conditions of the tender30 In the instant case, The tender issued by the Airport Authority of
Arkham had a disqualification clause which stated that the tender participant would be
disqualified if there are any pending dues in any other project of the airport authority. The
disqualification clause was only an eligibility criterion which is to be followed. It can not be
ascertained that how this loss of opportunity can be credited to the Airport Authority of
Malgudi. We may add that the owner or the employer of a project, having authored the tender
documents, is the best person to understand and appreciate its requirements and interpret its
documents. The constitutional Courts must defer to this understanding and appreciation of the
tender documents, unless there is mala fide or perversity in the understanding or appreciation
31
or in the application of the terms of the tender conditions The right to choose cannot be

29
Meil Prasad (Jv) vs The State Of Madhya Pradesh on 10 July, 2018
30
Directorate of Education and others vs. Educomp Datamatics Limited and others); (2005) 1 SCC 679
31
Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517

22
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

considered to be an arbitrary power. Of course, if the said power is exercised from any collateral
purpose the exercise of that power will be struck down.32

4. REDUCTION IN LICENSE FEE COULD TAKE PLACE ONLY BY THE WAY OF

RE-BID AND THE AIRPORT AUTHORITY COULD NOT ITSELF SUO-MOTO
GRANT THE REVISION IN THE RATES OF TENDER

4.1. Government Contract is different from a private contract

The State cannot, act arbitrarily in entering into relationship, contractual or otherwise with a
third party, but its action must conform to some standard or norm which is rational and non-
discriminatory. A State, when it enters into a contract, must do so fairly without discrimination
and without unfair procedure; and its action is subject to judicial review under Article 14 of the
Constitution of India.

It is most humbly submitted by the Respondent that the liability of a state is different from that
of a private person and that is why it cannot be expected from a state authority to perform its
contractual liability similar to that of a private person. In the instant case, Airport Authority
could not Suo-moto grant the revision of the tender because it would be unfair to the other
bidders or tenderers who may have participated in the previous tender.

It is contended by the Respondents that the issuing of tender by government are in accordance
with the procedure laid down by the Central Vigilance Commission. Some mandatory
procedures are to be followed before the government floats any tender. Thus if the conditions
are altered and entered into a new contract with the same party, it will be discriminatory for the
other tenderers..

Additionally, the Supreme Court has also laid down general principles concerning
determination of issues pertaining to government contract /tenders, which are illustrated below

As, stated by this Court in Panna Lal v. State of Rajasthan he onerous nature of the terms is no
ground for the licensees to resile from the express obligations undertaken by them. The Court
observed:

32
In Tata Cellular v. Union of India (1994) 6 SCC 651

23
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

"The licences in the present case are contracts between the parties. The licensees voluntarily
accepted the contracts. They fully exploited to their advantage the contracts to the exclusion of
others. The High Court rightly said that it was not open to the appellants to resile from the
contracts on the ground that the terms of payment were onerous.”

The reasons given by the High Court were that the licensees accepted the licence by excluding
their competitors and it would not be open to the licensees to challenge the terms either on the
ground of inconvenient consequence of terms or of harshness.

These decisions of the Supreme Court therefore affirm the view that in case of contracts freely
entered into with the State, there is no room for invoking the doctrine of fairness and
reasonableness against one party to the contract (State), for the purpose of altering or adding
to the terms of the contracts, merely because it happens to be the State. In such cases the mutual
rights and liabilities of the parties are governed by the terms of the contracts and the law relating
to contracts.

4.2) Free will of the parties

33
It is very well established that Mercury is a well-established company engaged in the
business of operating parking lots for various airports across the country. It can be nowhere
seen or concluded that the Authority is at a dominating position. This is market where we have
huge number of sellers and huge number of buyers. All the sellers and buyers have a free entry
and exit option. No one is bound by anyone to enter into a contract. Thus, no one can be at a
dominating position or a superior position to enter into a contract.

Mercury on the other hand entered with its free consent and will. It was under no pressure
either of the market or of the government to enter into the contract.

Section 2 of the Indian Contract Act provides that when one person signifies to another his
willingness to do or to abstain from doing anything with a view to obtaining the assent of the
other to such act or abstinence, he is said to make a proposal. When the person to whom the
proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal
when accepted becomes a promise. Every promise and every set of promises forming the
consideration for each other is an agreement. There is mutual assent to the proposal when the
proposal is accepted and in the result an agreement is formed. Under S. 10, all agreements are

33
Para 3, Moot Problem

24
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

contracts if they are made by the free consent of parties competent to contract for a lawful
consideration and with a lawful object and are not by the Act expressly declared to be void,.
Section 13 defines consent. Two or more persons are said to consent when they agree upon the
same thing in the same sense. Section 14 defines free consent. Consent is said to be free when
it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.34

It is most humbly submitted that mercury was very much aware of the terms and conditions of
the contract will accepting the terms and conditions of the contract. It was under no influence
to accept the contract. Accepting the contract made it to follow all the terms and conditions.
Thus, legally it binding to the contract.

At a concluding note it is submitted that Mercury can now not change or alter the terms and
conditions accordingly. The contract requires passing all the tests of reasonableness,
arbitrariness, and has to non-discriminatory. These all tests are to be done and a new bid has to
float after passing all these.

The Government cannot suo-moto take the action of altering the terms and entering into a new
contract with the same party. .

34
Andhra Sugars Ltd. & Anr. Etc vs State Of Andhra Pradesh & Ors 1968 AIR 599, 1968 SCR (1) 705

25
 6th KIIT NATIONAL MOOT COURT COMPETITION, 2018

PRAYER FOR RELIEF

In the light of the issues raised, arguments advanced, authorities cited, the counsel for the
respondent humbly prays the Hon’ble court to:-

1. Refer the matter to Arbitration since it has appropriate jurisdiction,

2. Allegation of fraud to be set aside,
3. Order a Fresh bid without revising the licensee fee,
4. Grant payment for the months,

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.

26