SNMCC Memo

1
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Symbiosis National Moot Court Competition
19
th
to 21
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September, 2014

IN THE HONBLE SUPREME COURT OF INDIA

TAKA FLYINGLEAP LTD.
(PETITIONER)

V.

WINO HAUTU CHEET LTD.
(RESPONDENT)

CIVIL APPEAL NO. 96812 OF 2014

MEMORANDUM ON BEHALF OF PETITIONER
TAKA FLYINGLEAP LTD.

TEAM CODE RC23
2
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Symbiosis National Moot Court Competition.

TABLE OF CONTENTS

List of Abbreviations ................................................................................................................. 5
Index of Authorities ................................................................................................................... 7
Enactments ................................................................................................................... 7
Case Laws ..................................................................................................................... 7
Books ........................................................................................................................... 10
Statement of Jurisdiction.......................................................................................................... 11
Statement of Facts .................................................................................................................... 12
Questions Presented ................................................................................................................. 13
Summary of Pleadings ............................................................................................................. 14

Pleadings ............................................................................................................................. 15-30

ADMISSIBILITY
CONTENTION I THAT THE JURISDICTION OF THIS HONBLE COURT IS
MAINTAINABLE
A. THIS HONBLE COURT HAS JURISDICTION TO HEAR THE MERITS OF
THIS APPEAL1
1. Petitioner has approached this Honble Court under Article 136 of the Constitution of
India, 19501
B. THE DISTRICT COURT AT WANKANER AND HIGH COURT HAS TAKEN
ERRONEOUS VIEWS...1
1. Indian courts have jurisdiction to try any civil suit under code of civil procedure,
1908......1
C. PART I OF INDIAN ARBITRATION AND CONCILIATION ACT, 1996 IS
APPLICABLE..2
1. The parties have not excluded the application of indian laws2
2. Petitioner has the right to approach this Honble Court under the Arbitration Act....3

3
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CONTENTION II THE ARBITRAL AWARD IS LIABLE TO BE SET ASIDE UNDER
SECTION 34 OF ARBITRATION ACT.
A. THE RESPONDENT COMPANY IS FRAUDULENT COMPANY...3
1. The respondent is a fraudulent company by applying the doctrine of lifting of corporate
veil..3
2. The respondent company has entered into a contract fraudulently4
B. THE MAKING OF AWARD HAS BEEN INDUCED BY FRAUD BY THE
RESPONDENT..5
C. THE SAID AWARD SHOULD BE SET ASIDE UNDER SECTION 34(2)(b)(ii).5

CONTENTION III -THE RESPONDENT IS LIABLE TO PAY THE LOSS ARISING
OUT OF THE INDEMNITY IN THE REVISED SHARE PURCHASE AGREEMENT.

A. THE RESPONDENT SHOULD PAY THE INDEMNITY AS SOON AS THE
LIABILITY TO PAY ARISES..6
1. The Respondent is liable to pay as per principles of equity. .............. ...6
2. The Respondent has incurred an absolute liability7
3. The Respondent is liable under a breach of contract as per general rules of
indemnity..8

Prayer for Relief ............................................................................................................. ..9

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ABBREVIATIONS

1. Paragraph
2. AC Appeal Cases
3. AIR All India Reporter
4. All ER All England Law Reporter
5. Anr. Another
6. Art. Article
7. Bom. Bombay
8. Cal. Calcutta
9. Co. Corporation
10. ed. Edition
11. HC High Court
12. Honble Honourable
13. Id. Ibidum
14. . J. Justice
15. Ltd. Limited
16. Nag. Nagpur
17. Ors. Others
18. p. page
19. Pat. Patna
20. P & H Punjab and Haryana
21. Punj. Punjab
22. Pvt.- Private
23. S section
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24. SC Supreme Court
25. SCC Supreme Court Cases
26. SCR Supreme Court Reports
27. TN Tamil Nadu
28. UK United Kingdom
29. UOI Union of India
30. UP Uttar Pradesh
31. v. Versus
32. Vol. Volume
6
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INDEX OF AUTHORITIES
ENACTMENTS
THE CONSTITUTION OF INDIA, 1950
THE ARBITRATION AND CONCILIATION ACT, 1996
CODES
THE CODE OF CIVIL PROCEDURE, 1908
CASE LAWS
1) Chandra Bansi Singh v. State of Bihar, AIR 1984 SC 1767
2) Prasad Gope v. Makhan Gope AIR 1969
3) Jayant R Taunk v. Hemani H Patel [1993] 1 BLJE 122.
4) Worlds Sports Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pvt. Ltd., AIR 2014
SC 968.
5) Reliance Industries Limited & Anr. v. Union Of India ,2014(2)ARBLR423(SC)
6) Videocon Industries Ltd. v. Union of India & Anr.; (2011) 6 SCC 161
7) First National Bank Ltd. v. Seth Sant Lal AIR 1959 P&H 328
8) Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income Tax (Central),
Calcutta (1972) 3 SCC 252
9) Re Law Guarantee Trust and Accident Society Ltd, Liverpool Mortgage Insurance Cos
Case [1914]
10) British Union and National Insurance Co v Rawson [1916]
11) Johnson v The Salvage Association and McKiver (1887) 19 Q.B.D. 458
12) Firma C-Trade SA v Newcastle Protection & Indemnity Association [1991] 2 A.C. 1 at
28;
13) Lefevree v White [1990] 1 Lloyds Rep. 569
14) Richardson Re, Ex parte The Governors of St. Thomass Hospital (1911) 2 KB
15) Gajanan Moreshwar v. Moreshwar Madan AIR 1942 Bom 302, 304
16) Khetarpal vs. Madhukar Pictures
17) New India Assurance Co Ltd v State Trading Corpn of India, AIR 2007 Guj 517 (NOC).
18) Osman Jamal & Sons Ltd v Gopal Purshottam 1928 ILR 56 Cal 262
19) Shamlal v Abdul Salam AIR 1931 All 754
20) Ramlingathdayar v Unnamalai Achi, (1914) 24 IC 423
21) Chunibhai Patel v Natha Bhai AIR 1944 Pat 1
22) The Fanti & The Padre Island [1990] 2 LLR 191
23) Reliance Industries Limited v Balasore Alloys Limited
24) Jet Airways (India) Limited v. Sahara Airlines Limited ,2011 Supp; B.C.R. 709.

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BOOKS

1. M. P. JAIN, CONSTITUTION OF INDIAN LAW, (6TH EDITION 2010) LEXIS NEXIS,
BUTTORWORTHS WADHWA NAGPUR
2. O. P. MALHOTRA, THE LAW AND PRACTICE OF ARBITRATION AND
CONCILIATION, LEXIS NEXIS, BUTTORWORTHS, WADHWA NAGPUR
3. PRASAD, B.M, MULLAS THE CODE OF CIVIL PROCEDURE,(LEXIS NEXIS, ED.
18
TH
, VOL. 1, 2011).
4. BHADBHADE, NILIMA, PULLOCK & MULLAS THE INDIAN CONTRACT AND
SPECIFIC RELIEF ACTS, (14
TH
ED., LEXIS NEXIS, VOL. 1, 2012).
5. BIRDS, JOHN, BIRDS MODERN INSURANCE LAW, (ED. 9
TH
, SWEET &
MAXWELL, 2013)
6. SINGH, AVTAR, CONTRACT AND SPECIFIC RELIEF, (ED 11
TH
, EASTERN BOOK
COMPANY, 2013)
7. MARKANDA, P.C., THE LAW OF CONTRACT, (ED. 3
RD
, LEXIS NEXIS, VOL.1,
2013)

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STATEMENT OF JURISDICTION

The petitioner has approached the Honble Supreme Court of India through a Special Leave
Petition under Article 136 of the Constitution of India.

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STATEMENT OF FACTS

The Respondent's business was transferred entirely to the Appellant by way of a Share
Purchase agreement with a consideration of USD 500mn.
The agreement provided for dispute settlement to arbitration in London Court of
International Arbitration and the agreement would be governed by Laws of England.
The agreement also provided for an indemnity clause which would indemnify the
Appellant in respect of any loss or expenses in excess of Rs. 50 Crore incurred,
attributable to a period prior to 2009.
Owing to certain differences regarding valuation of the share price the share purchase
agreement was revised with the consideration to USD 300mn and the terms of previous
agreement were incorporated.
Due to the inaccurate filing of tax returns by a holding company of the Respondent for
the assessment year 2002 - 2003 and 2003 - 2004 an amount of Rs. 124.43 crore was
demanded towards payment of Tax liability from the Appellant.
The respondent refused any payment to the appellant on the ground that the indemnity
clause in the agreement was only against loss which will occur when the appellant will
pay the tax demands.
The appellant took this as a non compliance with the condition precedent and went for
automatic cancellation as per the agreement.
The respondent initiated the arbitration proceedings for the specific performance by the
appellant, which the tribunal granted in their favour and an award of specific performance
was followed.
The appellant filed a petition u/s 34 of the Arbitration and Conciliation Act, 1996 before
the District Court which was subsequently rejected on the basis of lack of jurisdiction
since the seat of arbitration was outside India.
After an unsuccessful attempt u/s 37 before the High Court the appellant filed a special
leave petition before this Hon'ble Court which was allowed and the parties are present to
hear the case.

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QUESTIONS PRESENTED

WHETHER THE PETITION FILED BEFORE THE DISTRICT AS
WELL AS THE HIGH COURT IS MAINTAINABLE?

WHETHER THE ARBITRAL AWARD IS LIABLE OF BEING SET
ASIDE BY INDIAN COURTS?

WHETHER THE RESPONDENT IS LIABLE TO PAY THE LOSS
ARISING OUT OF THE INDEMNITY IN THE REVISED SHARE
PURCHASE AGREEMENT?

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SUMMARY OF PLEADINGS

CONTENTION 1- WHETHER THE PETITION FILED BEFORE THE
DISTRICT AS WELL AS THE HIGH COURT IS MAINTAINABLE?

CONTENTION 2- WHETHER THE ARBITRAL AWARD IS LIABLE OF
BEING SET ASIDE BY INDIAN COURTS?

CONTENTION 3- WHETHER THE RESPONDENT IS LIABLE TO PAY
THE LOSS ARISING OUT OF THE INDEMNITY IN THE REVISED
SHARE PURCHASE AGREEMENT?

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PLEADINGS
JURISDICTION

THIS HONOURABLE SUPREME COURT OF INDIA HAS JURISDICTION TO HEAR
THE MERITS OF THIS APPEAL.

The appellant has approached this honourable court under article 136 of the Constitution of
India.
Article 136 (1) empowers the Supreme Court to grant, in its discretion, special leave to appeal
from any judgement, decree, determination, sentence or order in any cause or matter passed or
made by any court or tribunal in the territory of India.
1
The appellant approached the District
Court of Wankaner, Gujarat
2
against the arbitral award and later appealed in High court
3
.When
the certificate of fitness is refused by the high court, the aggrieved party may approach the
Supreme Court by a petition, for special leave to appeal under article 136 of the constitution of
India.
4
After an unsuccessful appeal in the High Court the appellant has approached this
honourable court for justice as the Supreme Court is not only a court of law but a court of equity
as well.
5

The appellant has right to approach this honourable court under Indian Arbitration and
Conciliation Act, 1996.
Section 37 of the Indian Arbitration Act, 1996 provides that nothing in this section shall affect or
taken away any right to appeal to the Supreme Court. The right to constitutional appeals cannot
be taken away by an Act of the Parliament or the state legislature.
6
An appeal lies against an

1
M. P. Jain, Constitution of Indian law, (6th edition 2010) Lexis Nexis, Buttorworths, Wadhwa Nagpur, p. 239
2
Moot problem para 14, p. 4.
3
Unsuccessful appeal under section 37 of the Arbitration and Conciliation Act, 1996; Moot problem, para 14, p. 5.
4
O. P. Malhotra, The Law and Practice of Arbitration and Conciliation, Lexis Nexis, Buttorworths, Wadhwa
Nagpur, p. 1277 para 37-17.
5
Chandra Bansi Singh v. State of Bihar, AIR 1984 SC 1767
6
O. P. Malhotra, The Law and Practice of Arbitration and Conciliation, Lexis Nexis, Buttorworths, Wadhwa
Nagpur, pg 1277 para 37-17.
13
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arbitral award where the court set aside or refuses to set aside an arbitral award under section 34
of Indian Arbitration Act, 1996.
7

ADMISSIBILITY

CONTENTION A - THE DISTRICT COURT AT WANKANER AND HIGH
COURT HAS TAKEN ERRONEOUS VIEW IN REJECTING THE
PETITION.

A.1. The courts in India have jurisdiction to try any civil suit under code of civil procedure,
1908.

As per section 9 and section 20 of code of Civil Procedure, 1908 the district court at
Wankaner and the respective High court had the jurisdiction to entertain the suit.

Under section 9 of code of civil procedure, 1908 the courts in India have jurisdiction to try all
suits of a civil nature excepting suits of which cognizance is either expressly or impliedly barred.
Thus, the appropriate civil court in India has jurisdiction to entertain the suit and pass appropriate
orders in the suit by virtue of Section 9 of the CPC
8
. Also section 20 of code of civil procedure,
1908 provides that every suit shall be instituted in Court within the local limits of whose
jurisdiction the defendant resides, personally works for gains, carries on business
9
or cause of
action, wholly or in part, arises
10
. The respondent company Wino Hautu Cheet Ltd. is a holding
company of Fliyem Offaciffe Private Ltd. operating domestic flights in India having its corporate
office in Mumbai, Maharashtra and registered office in Wankaner, Gujarat.
11
The respondent

7
Section 37 (1) (b) of Arbitration and Conciliation Act, 1996, Prasad Gope v. Makhan Gope AIR 1969 Pat 307;
Jayant R Taunk v. Hemani H Patel [1993] 1 BLJE 122.
8
Worlds Sports Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pvt. Ltd., AIR 2014 SC 968.
9
Section 20(a) of code of civil procedure, 1908.
10
Section 20(c) of code of civil procedure, 1908.
11
Moot problem, para 1, pg 1.
14
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company transferred its airline business to Taka Flyingleap Ltd., another airline operating in
India.
12
Also the respondent company is a major conglomerate in India
13
. The defendant
company carries its business in India. Further the cause of action arose in India. A Cause of
action means the circumstances forming infraction of the right or immediate occasion for the
action.
14
The tax demand was imposed on Flying Offacliffe for the assessment years 2002-03
and 2003-04 and a notice was served to the appellant for the same.
15
Therefore, it is submitted
that reading section 9 with section 20 of CPC, 1908, the respective High court and the district
court at Wankaner had the territorial jurisdiction to entertain the suit.
16

CONTENTION B - PART I OF INDIAN ARBITRATION AND
CONCILIATION ACT, 1996 IS APPLICABLE.

[B.1.] The parties have not excluded the application of Indian laws.

The parties have not excluded the application of Indian laws either expressly or impliedly. The
arbitral tribunal during the course of arbitral proceedings established that the law governing the
agreement is the laws of England, to the extent that they are not contrary to the laws of
India.
17
This finding of the arbitral tribunal clearly shows that the parties never had an
intention to exclude the application of Indian laws either expressly or impliedly.

[B.2.] The District court and the High court has erred in applying the ratio laid down by this
honourable court of law.

In the case of Reliance Industries Limited & Anr. v. Union Of India,
18
, This honourable court
held that to find a conclusive answer to the issue as to whether applicability of Part I of the

12
Moot problem, para 4, pg 2
13
Moot problem, para 2, pg 1
14
Mulla cpc, pg 424
15
Moot problem, para 8, pg. 3
16
Worlds Sports Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pvt. Ltd., AIR 2014 SC 968.
17
Moot problem, para 12, pg 4.
18
Reliance Industries Limited & Anr. v. Union Of India ,2014(2)ARBLR423(SC)
15
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Arbitration Act, 1996 has been excluded, it would be necessary to discover the intention of the
parties.
19

Here, in the instant case the intention of the parties was not to exclude the application of Indian
laws. Therefore, it is humbly submitted before this honourable court that Part I of the Indian
Arbitration Act, 1996 would be applicable.
20
Hence, the District court of Wankaner and the
respective High court were erroneous in applying the ratio laid down by this honourable court.

MERITS

CONTENTION C - THE RESPONDENT IS LIABLE TO PAY THE LOSS
ARISING OUT OF THE INDEMNITY IN THE REVISED SHARE
PURCHASE AGREEMENT.
[C.1.] That the Respondent should pay the indemnity as soon as the liability to pay arises.

[C.1.1.] The Respondent is liable to pay as per principles of equity.
Liability" is defined by Black's Law Dictionary
21
as meaning "the quality or state of being
legally obligated or accountable; legal responsibility to another or to society, enforceable by civil
remedy or criminal punishment". A liability contemplates a financial or pecuniary obligation. In
First National Bank Ltd. v. Seth Sant Lal.
22

This Court in Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income Tax (Central),
Calcutta
23
held that a liability on account of tax had been quantified and a demand had been
created and communicated by a notice.

19
Para 34, 45, 47, Reliance Industries Limited & Anr. v. Union Of India, 2014(2)ARBLR423(SC)
20
Videocon Industries Ltd. v. Union of India & Anr.; (2011) 6 SCC 161
21
8
th
edition page 932
22
First National Bank Ltd. v. Seth Sant Lal AIR 1959 P&H 328
23
Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income Tax (Central), Calcutta (1972) 3 SCC 252
16
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In Liverpool Mortgage Insurance Cos Case Kennedy LJ of the Court of Equity held that, to
indemnify does not merely mean to reimburse in respect of moneys paid, but to save from loss in
respect of the liability against which the indemnity has been given.
24

In Johnson v The Salvage Association case the Court held that, In equity the plaintiff need not
pay, he is entitled to be relieved from liability.
25

The principle of equity was expounded in Richardson Re, Ex parte The Governors of St.
Thomass Hospital, where Buckley LJ observed: Indemnity is not necessarily given by
repayment after payment. Indemnity requires that the party to be indemnified shall never be
called upon to pay...
26

In the case at hand, the liability against which the indemnity has been given is the notice served
upon Taka Flyingleap Ltd (indemnified) by the Income Tax Department, on 10
th
October, 2014.
Rs.124.43 crore is demanded towards payment of tax liability of the assessment years 2002-03
and 2003-04.
27
Hence the indemnified does not need to pay the tax liability against which the
indemnity has been given as per principles of equity.

[C.1.2.] The Respondent has incurred an absolute liability.

In Gajanan Moreshwar v. Moreshwar Madan
28
the Bombay High Court has followed the Court
of Equity and held that if the indemnity-holders liability had become absolute then he was
entitled either to get the indemnifier to pay off the claim or to pay into court sufficient money
which would constitute a fund for paying off the claim whenever it was made.

24
Re Law Guarantee Trust and Accident Society Ltd, Liverpool Mortgage Insurance Cos Case [1914] 2 Ch. 617 at
638; British Union and National Insurance Co v Rawson [1916] 2 Ch. 476 at 479
25
Johnson v The Salvage Association and McKiver (1887) 19 Q.B.D. 458 at 460, 461; Firma C-Trade SA v
Newcastle Protection & Indemnity Association [1991] 2 A.C. 1 at 28; Lefevree v White [1990] 1 Lloyds Rep. 569 at
577-579
26
Richardson Re, Ex parte The Governors of St. Thomass Hospital (1911) 2 KB 705, 715
27
Compromis8
28
Gajanan Moreshwar v. Moreshwar Madan AIR 1942 Bom 302, 304
17
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In a subsequent judgment, Justice P.B. Gajendragadkar in Khetarpal vs. Madhukar Pictures
29

affirmed the principle enunciated by Justice Chagla in Gajanan Moreshwar.
30

In New India Assurance Co Ltd v State Trading Corpn of India
31
the Gujarat High Court has held
that, if the indemnity holder incurred liability and the liability was absolute, he would be entitled
to call upon the indemnifier to save him from that liability by paying it off.
The High Courts of Calcutta
32
, Allahabad
33
, Madras
34
and Patna
35
have all expressed their
concurrence in the principle that as soon as the liability of the indemnity-holder to pay becomes
clear and certain, and as per as per absolute liability the indemnifier is put in a position to meet
the claim.

In the instant case, the indemnity-holder i.e. Taka Flyingleap Ltd has incurred an absolute
liability in the form of the notice served by the Income Tax Department for payment of
Rs.124.43 crore. The indemnity-holder is entitled to call upon the indemnifier (Respondent) to
save him by paying off the tax liability and meeting his absolute liability claim.

[C.1.3] The Respondent is liable under a breach of contract as per general rules of indemnity.

A loss in insurance terms can include costs, expenses and damages. Expenses incurred are
liabilities which have already accrued but which are yet to be discharged.
36
Hence the expenses
incurred by Taka Flyingleap Ltd are liabilities which have accrued as per the notice served by the
Income Tax Department.
37
The expenses are yet to be discharged as the Respondent is to pay the
tax liability as per absolute liability claims and principles of equity.

29
footnote
30
Supra fn. 5
31
New India Assurance Co Ltd v State Trading Corpn of India, AIR 2007 Guj 517 (NOC).
32
Osman Jamal & Sons Ltd v Gopal Purshottam 1928 ILR 56 Cal 262
33
Shamlal v Abdul Salam AIR 1931 All 754
34
Ramlingathdayar v Unnamalai Achi, (1914) 24 IC 423
35
Chunibhai Patel v Natha Bhai AIR 1944 Pat 1
36
Add sweet & Maxwell book reference
37
Supra fn. 4
18
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Lord Goff of the House of Lords in The Fanti & The Padre Island (No. 2)
38
has said that A
promise of indemnity is simply a promise to hold the indemnified person harmless against a
specified loss or expense...No debt can arise before the loss is suffered or the expense
incurred; however, once the loss is suffered or the expense incurred, the indemnifier is in
breach of contract for having failed to hold the indemnified person harmless against the
relevant loss or expense. There is no condition of prior payment; ...As a general rule of
indemnity requires that the party to be indemnified shall never be called upon to pay...
The Bombay High Court in 2014
39
relied upon the judgment Jet Airways (India) Limited v.
Sahara Airlines Limited,
40
where Jet has submitted before the Court the principle of absolute
liability. Liability was imposed upon Jet Lite by the Income Tax authorities on 5 March 2008.
That was in the amount of Rs. 107.08 crores. The Court comes to the conclusion that there
was a failure on the part of Sahara to fulfill its indemnity obligations in the SPA, as amended
by the Consent Terms, the liability of Jet to pay the additional sum of Rs. 550/crores did not
arise.

In the instant case, the loss suffered or the expense incurred is the tax liability of Rs.124.43
crore,
41
the indemnifier (Respondent) is in a breach of contract for having failed to hold the
indemnified person harmless against the tax liability. As per the general principles of
indemnity law, the party to be indemnified i.e. Taka Flyingleap Ltd shall never be called upon
to pay.

38
The Fanti & The Padre Island [1990] 2 LLR 191
39
Reliance Industries Limited v Balasore Alloys Limited
40
Jet Airways (India) Limited v. Sahara Airlines Limited ,2011 Supp; B.C.R. 709. Paragraph 40 and 41 of the
said judgment
41
Supra fn. 4
19
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PRAYER FOR RELIEF

In the light of facts of the case, issues raised, arguments advanced and authorities cited, this
Court may be pleased to:

I. DECLARE THAT THE IMPUGNED ACT AND DELEGATED LEGISLATION IS
UNCONSTITUTIONAL.

II. HOLD THAT SUBSIDIES SHOULD BE PROVIDED FOR VITAL DRUGS OF SPECIAL TYPES AND
THE DRUGS FOR SEXUALLY TRANSMITTED SHOULD BE AVAILABLE AT REASONABLY
AFFORDABLE PRICE.

AND PASS ANY OTHER ORDER IN FAVOUR OF THE APPELLANT THAT IT MAY DEEM FIT IN THE ENDS
OF JUSTICE, EQUITY, AND GOOD CONSCIENCE.

ALL OF WHICH IS HUMBLY SUBMITTED

Counsels for Petitioner

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