“R”

MOOT COURT PRACTICE

2019

Before

BEFORE THE HON’BLE SUPREME COURT OF INDIA

CIVIL CASE NO. _____/2019

[Written statement filed under Order VIII of the Civil Procedure Code, 1908 and
application under Article 136 of the Constitution Of India]

Dispute Relating to

Liquidated Damages claims to be undisputed in nature

Oil and Natural Gas Coperation Limited

(Petitioner)

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 SAW Pipes Limited

(Respondent)

Memorial on the behalf of the Respondent

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Memorial on the behalf of the RESPONDENT

TABLE OF CONTENTS

Index of Authorities ………………………………………………………3

Statement of Jurisdiction …………………………………………………4

Statement of Facts ………………………………………………………..5

The Background……………………………………………………………5

Statement of Issues ……………………………………………………….7

Summary of Arguments ………………………………………………….8

Arguments Advanced …………………………………………………….10

[1] WHETHER THE PRESENT DISPUTE IS MAINTAINABLE BEFORE THE

HONOURABLE SUPREME COURT OF INDIA?……………………….10

[2] Whether the ONGC had right to Liquidated Damages?………………..12

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[1] Whether Patent illegality could be used as a ground to assail the award under
Section 34?…………………………………………………………………14

Prayer ……………………………………………………………………..17

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Memorial on the behalf of the RESPONDENT

INDEX OF AUTHORITIES

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 CASES

2001 (1) Arb. LR 41 (Mad)(DB); Food Corporation of India v. Joginderpal

Mohinderpal, (1989) 2 SCC 347 : 1989(2) Arb. LR159.

2008 (1) RAJ 170 (Del.); Haryana Telecom Ltd. v. Union of India, AIR 2006 Del
339 : 2006 (2) Arb. LR 293 : 2006 (3) RAJ 225.

Chamsey Bhara & Co. V Jivraj Balloo and Weaving Co. Ltd;AIR 1923 PC 66:50
Ind App 324

Uttam Singh Duggal & Co. Ltd. V Union of India,1998(1) Arb LR 494:1998(2)
RAJ 125 (Del).

BOOKS, ARTICLES AND PUBLICATIONS

Vol. 1,p. 680

HALSBURY’S LAW OF ENGLAND

Journal Intervention in Arbitral Awards : A Practitioner’s Thoughts Vol. 21, No. 2

(2009), pp. 39-53

RULES AND STATUTES

Arbitration and Concilliation Act, 1996

Indian Contract Act, 1872

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Memorial on the behalf of the RESPONDENT

STATEMENT OF JURISDICTION

The defendant in the instant case, files the written statement under Order VIII of Civil
Procedure Code, 1908. This Honourable Court need not exercise jurisdiction in the
present matter as the defendant files application for reference to arbitration under
Article 136 of Constitution Of India. The legal conditions present in the case is
contrary to the Arbitration and Conceleation Act, 1996. In this case, the establishment
of Arbitral Disputes for fast settlement of cases is defeated. This being an exemplary
case, most of the companies prefer to have the venue of Arbitration outside India
because in India it is vulnerable to judicial review.

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Memorial on the behalf of the RESPONDENT

STATEMENT OF FACTS

The Background

SAW pipes company engaged in a business of supplying equipment for Offshore Oil
Exploration and maintainence by the letter dated 27th December,1995 on agreed terms
and conditions. SAW pipes according to the terms and conditions, offered to supply
ONGC casing pipes of 26’’ diameter and 30’’ diameter. ONGC by a letter dated 3rd

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June,1996. As per terms ande conditions, the goods were required to be suypplied on
or before 14th November, 1996.

The Agreement

The contention of the respondent as per CL(18) of the agreement, the raw materials
were required to be prodeuced from the reputed and proven manufacturers/suppliers
approved by the respondent as listed therein. By letter dated 8th August,1996,
respondent placed an order for supply of steel plates, that is, the raw material required
for manufacturing the pipes with Liva Laminati, Piani S.P.A, Italian suppliers
stipulating that material must be shipped latest by the end of September,1996 as
timely delivery was the essence of the order. It was also their case that all over Europe
including Italy there was a general strike of steel mill workers during September /
October,1996. Respondent conveyed the appellant that the Italian suppliers had faced
labour problems and was unable to deliver the material as per agreed schedule.

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Respondent therefore, requested for an extension of 45 days time for the execution of
the order in view of the reasons beyond its control. By letter dated December,1996 ,
the time for the delivery of the pipes was extended.

The Dispute

The contention of the respondent was that appellant made payment of the goods
supplied after wrongfully deducting an amount of liquidated damages. That deduction
was disputed by the respondent and, therefore, dispute was referred to the Arbitral
Tribunal.

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Arbitral Tribunal

The Arbitral Tribunal considered variuous decisions of this court regarding the
recovery of liquidated damages and arrived at the conclusion that it was for the
appellant to establish that they had suffered any loss because of the breach committed
by the respondent in not supplying the goods within the prescribed time limit. The
Arbitral Tribunal thereafter appreciated the evidence and arrived at the conclusion
that in view of the statement volunteered, it was clear that shortage of casing pipes
was only one of the other reasons which led to the change in the deployment plan and
that it has failed to establish its case that it has suffered any loss in terms of money
because of delay in supply of goods under the contract. Hence, the Arbitral Tribunal
held that appellant has wrongfully withheld th eagreed amount of US $ 3,04,970.20
and Rs 15,75,559/- on account of customs duty, sales tax, freight charges deducted by
the way of liquidated damages. The Arbitral Tribunal further held that the respondent
was entitled to recover the said amount with interest at the rate of 12 per cent p.a.
from 1st April,1997 till the date of the filing of statement of claim and thereafter
having regard to the commercial nature of the transaction at the rate of 18 per cent per
annum pendente lite till payment is made.

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Memorial on the behalf of the RESPONDENT

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 STATEMENT OF ISSUES

The following issues arrive for consideration in the present matter on which the
council submits the arguments:

[1] WHETHER THE PRESENT DISPUTE IS MAINTAINABLE BEFORE THE

HONOURABLE SUPREME COURT OF INDIA?

[2] WHETHER ONGC HAS A RIGHT TO LIQUIDATED DAMAGES?

[3] WHETHER PATENT ILLEGALITY COULD BE USED AS A GROUND TO

ASSAIL THE AWARD UNDER SECTION 34?

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Memorial on the behalf of the RESPONDENT

SUMMARY OF ARGUMENTS

[1] WHETHER THE PRESENT DISPUTE IS MAINTAINABLE BEFORE THE

HONOURABLE SUPREME COURT OF INDIA?

The respondent humbly submits that the agreement contains a valid arbitration clause
and this Honourable Court need not exercise its jurisdiction by entertaining the
Special Leave Petition filed by the Petitioner under Article 136 of the Indian
Constitution. This is so as, firstly, there has been no intent of deceit or intent of not
performing the terms of the contract by the Respondent, secondly, the Arbitral
Tribunal has acted within its scope of authority and has not passed a decision that is
patently illegal, and thirdly, the Petitioner is trying to dodge the arbitral award given
by the Arbitral Tribunal which has been further backed by the Bombay High Court.

[2] WHETHER ONGC HAS A RIGHT TO LIQUIDATED DAMAGES?

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It is submitted that ONGC is not entitled to any damages from the delay in performing
the contract because firstly, it is pleaded that the arbitral award given by the Arbitral
Tribunal is perfectly enforeceable as it has a simple and clear prerequisite and is not
arbitrary or burdensome, as pledged by the petitioner. The Arbitral Tribunal has not
exceeded its jurisdiction and dealt with the original dispute as per Sub-Section(3) of
Section 28 of the Arbitration and Concilliation Act(1996) and in accordance with the

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priciples of Arbitration and Alternate Dispute Resolution and the prevailing status
quo of the law of the land; and secondly, there has not been any disregard for the
prevailing trade practices, customs and usages by the Arbitral Tribunal, as rightfully

supported by the Bombay High Court, and it has taken into account the test of
reasonability present in Section 74 of the Indian Contract Act(1874).

[3] WHETHER PATENT ILLEGALITY COULD BE USED AS A GROUND TO

ASSAIL THE ARBITRAL AWARD UNDER SECTION 34 OF THE
ARBITRATION AND CONCILLIATION ACT(1996)?

It is submitted that patent illegality is hereby no ground to assail the damages.The

petitioner is trying to dodge the award given by the arbitral tribunal further backed by
the Bombay High Court.Patent illegality by definiton means error which is apparent
in the face of the law.But contrary to what its definition states,This award is not based
on any erroneous assumption of law whatsoever.

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ARGUMENTS ADVANCED

[1] WHETHER THE PRESENT DISPUTE IS MAINTAINABLE BEFORE

THE HONOURABLE SUPREME COURT OF INDIA?

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1. The respondent humbly submits that the Honourable Court need not exercise
its jurisdiction by entertaining the Special Leave Petition filed by the Petitioner under
Article 136 of the Indian Constitution. It is further submitted that there has been no
intent of deceit or intent of not performing the terms of the contract by the
Respondent. It is also submitted that the Arbitral Tribunal has acted within its scope
of authority and has not passed a decision that is patently illegal, and that, the
Petitioner is trying to dodge the arbitral award given by the Arbitral Tribunal which
has been further backed by the Bombay High Court.

[1.1] PRINCIPLE OF ARBITRATION

2. It is humbly submitted before this Honourable Court that the Arbitral Tribunal
had acted in accordance with the very basic priciples followed in Arbitration and
other forms of Alternate Dispute Resolution. The primary reason behind people
opting for arbitration and other forms of alternate dispute is the element and need for
compromise and to avoid the hassles of court. The Arbitral Tribunal had given enough
leverage to reach a neutral point by allowing them to keep back the amount agreed

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 upon in the contract, with the only prerequisite of proving legal injury or damages
caused due to the delay in the delivery of the pipes.

3. In Union of India v.G. Ramachandra Reddy & Co.1, it was held that Courts of
law have a duty and obligation in order to maintain purity of standards and preserve

full faith and credit as well as to inspire confidence in alternate dispute redressal
methods like arbitration.

4. In Hyundai Heavy Industries Ltd. V. The Union of India and Ors2., the learned
Counsel for the Petitioner had rightfully submitted that the function of the Panel
(appointed for the purpose of an Alternate Dispute Resolution mrchanism) was
judicial in nature and, for effective administration of justice, the Panel was required to
have certain autonomy, impartiality and fair play in the discharge of their judicial
functions.

[1.2] PLAINTIFF TRYING TO DODGE THE ARBITRAL AWARD

5. It is staunchly submitted that the Petitioner is trying to dodge the arbitral award
because it is unable to prove any damages caused due to the subject of the dispute at
hand. In Indian Oil Corporation v. Lloyd Steel Industries Ltd.3, it was held that in a
case where the party complaining of breach of contract has not suffered legal injury in
the sense of sustaining loss or damage, there is nothing to compensate him for; there
is nothing to recompense, satisfy or make amends. Therefore, the finding of the

1. 2001 (1) Arb. LR 41 (Mad)(DB); Food Corporation of India v. Joginderpal Mohinderpal, (1989) 2
SCC 347 : 1989(2) Arb. LR159.

2. 2008 (1) RAJ 170 (Del.); Haryana Telecom Ltd. v. Union of India, AIR 2006 Del 339 : 2006 (2) Arb.
LR 293 : 2006 (3) RAJ 225.

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arbitrator that the petitioner would not be entitled to payment of compensation cannot
be interfered with.

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Memorial on the behalf of the RESPONDENT

[1.3] IN ARGUENDO, THE HONOURABLE COURT NEED NOT

ENTERTAIN THE SPECIAL LEAVE PETITION FILED BY
ONGC.

6. The Respopndent places a scenario before the Honourable Court that even if
there was a delay in performing the contract by Saw Pipes Ltd., the arbitral tribunal
has passed an award by taking into account what upholds the very backbone of
arbitration and the Arbitration and Concilliation Act(1996).

7. It is firmly contended that the allegations put forth by the Petitioner is nothing
but an attempt to dodge the the arbitral award passed, without taking into account the
prevailing law of the land.

[2] WHETHER ONGC HAS A RIGHT TO LIQUIDATED DAMAGES?

1. Although section 28(3) of the Arbitration and Concilliation Act (1996) states the
arbitral tribunal shall decide in accordance with the terms of the contract and shall
take into account the statutory provisions along with the usages of the trade applicable
to the transaction, it does not mean that the Arbitral Tribunal has to apply the same in
strictu sensu. The very purpose of having the Arbitration and Concilliation Act, 1996
and the primary reason behind people opting for Arbitration and other forms of

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Alternate Dispute Resolution is the element of compromise and to avoid the hassles of
going to court.

[2.1] THE SOLE CONSIDERATION OF THE AWARD

3. The Arbitral Tribunal had given enough leverage to reach a neutral point by
allowing them to keep back the amount agreed upon but the only prerequisite was to
prove that sufficient legal injury by way of damages had been caused due to the delay

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in the delivery of the pipes4. In Kailash Nath Associates v. Development Authority5, it

was held with regard to the present interpreation of breach of contract under Section
74 of the Indian Contract Act that where a sum is named in a contract as a liquidated
amount payable by way of damages, the party complaining of a breach can receive as
reasonable compensation such liquidated amount only if it is a genuine pre-estimate
of damages fixed by both parties and found to be such by the Court.

3. It is strongly contented that ONGC had asked for compensation for loss caused due
to delay in performance in the present case but the loss might have entirely been
caused by the various other constraints faced by ONGC and it is further strongly
contended that there is no reason to wrongfully enrich ONGC as the petioner has
insufficient grounds to claim for damages.

3. id. at 2

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4. Thus, since the sole consideration of the contract between ONGC and SAW pipes
was the procurement and delivery of the steel pipes and the only purpose of the clause
containing claim for liquidated damages (clause 6 of the contract between the parties)
was to recover reasonably ascertained damages arising out of the failure to perform
the given contract, it means that SAW pipes had agreed to pay for damages only when
there actually would have been any proven damages, which, in the case, there are not.

[2.2] TEST OF REASONABILITY IN REFERENCE TO SECTION 74 OF

THE INDIAN CONTRACT ACT(1872)

1. As per the status quo, Section 74 is interpreted as follows: a Court has the power
to award reasonable damages but with the award agreed upon as the upper limit. In
Nand Lal Nirula v. State of Punjab and others6, it was held that in enacting section 74

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of the Contract act,the Indian legislature has departed from the English common law
and that it has attempted to eliminate the distinctions between the stipulations
providing for payment of liquidated damages and those in nature of penalty….The
Court has apparently jurisdiction in assessing damges for breach of contract to award
such compensation,as it deems to be reasonable,having regard to all the circumstances
of the case,but subject to the limit of the penalty stipulated.

4. 1965 16 STC 967 P H.

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2. Paragraph II of the judgement of Fateh Chand v. Balkishan Das7, which was also
referred to in paragraph 69 of Kamal Jeet v Sneh Lata Chaturvedi, stated that,

“……Duty not to enforce the penalty clause but only to award reasonable
compensation is statutorily imposed upon courts by Scetion 74. In all cases,
therefore, where there is a stipulation in the nature of penalty for forfiture of an
amount deposited pursuant to the terms of contract which expressely provides for
forfeiture,forfeiture, the court has jurisdiction to award such sum only as it considers
reasonable but not exceeding the amount specified in the contract as liable to
forfeiture.

3. Under heading 17 of the same8, the court has added emphasis by stating
“…..a forfeiture of an earnest money necessarily falls under section 74 of the Contract
Act,i.e,before forfeiture can take place it must be necessary that loss must be
caused ……..Courts are empowered to treat the amount of liquidated damages(earnest
money)as one in the nature of penalty clause and that earnest money amount only
represents the upper limit of damages which are allowed to be forfeited in terms of the
forfeiture clause and actual forfeiture actually of a lesser and reasonable amount
should be allowed instead of the large amount/ penalty as stated under a contract as
entitled to be forfeited and that too merely because a contractual clause allows such a
forfeiture.

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[3] WHETHER PATENT ILLEGALITY COULD BE USED AS A GROUND

TO ASSAIL THE AWARD UNDER SECTION 34?

5. 0963 AIR 1405, 1964 SCR (1) 515.

6. id. at 5.

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1. The respondant humbly submits that the arbitrary tribunal has not exceeded its
authority in passing the decision by virtue of the decision not being based upon an
erroneous assumption.

[3.1] THE MEANING OF THE TERM PATENT ILLEGALITY.

2. The respondant firmly contends that the term patent illegality,by definition,contrues
an error apparent on the face of the law.Since no damages have

been proven by the petitioner yet and their claim to compensation is valid only as long
as they have suffered any damages.Henceforth,the respondant hereby submits that
since the award is not based on an erroneous proposition as the plaintiff is yet to prove
its damges,patent illegality being a valid ground to assail the award goes against the
very meaning of the term “patent illegality”.

[3.2]ERROR OF LAW.

3. The respondant humbly submits that an error of law on the face of the award
means that you can find in the award or a document actually incorporated thereto ,as
for instance a note appended to by the arbitrator,stating the reasons for his judgement
or some legal proposition which is the basis of the award and which you can say is
erroneous9.Judicial decisions over the decades have indicated that error of law or fact

commited by an arbitrator itself does not constitute misconduct warranting

interference in the award10.

4. In HALSBURY’S LAW OF ENGLAND11,it has been stated-

“An error of law on the face of the award, in order to be the ground for setting
aside the award,must be such that there can be found in the award,or a document

7. Chamsey Bhara & Co. V Jivraj Balloo and Weaving Co. Ltd;AIR 1923 PC 66:50 Ind App 324

9. Uttam Singh Duggal & Co. Ltd. V Union of India,1998(1) Arb LR 494:1998(2) RAJ 125 (Del).

10. Vol. 1,p. 680 HALSBURY’S LAW OF ENGLAND

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incorporated therewith,some legal proposition which is the basis of the award,and

which is erroneous.If a specific question of law is submitted to the arbitrator for his
decision and he decides it,the fact that the decision is erroneous does not make the

award bad on its face so as to permit of it being set aside;and where the question
referred for arbitration is a question of construction ,which is, generally speaking a
question of law, the decision of the arbitrator cannot be set aside only because the
court itself would have come to a different conclusion;but if the arbitrator has
proceeded illegally,e.g,if he has decided on evidence which was not admissable or on
principles of construction which the law does not countenance,there is error in law

which may be the ground for setting aside the award12.But in this case the arbitrator
has not proceeded illegally at all as there was no erroneous basis whatsoever on which
this award was based since the sole consideration of the contract between ONGC
and SAW pipes was the procurement and delivery of the steel pipes and the only
purpose of the clause 6 containing claim for liquidated damages (clause 6 of the
contract between the parties) was to regulate reasonably ascertained damages
arising out of the failure to perform the given contract, it means that SAW pipes had
agreed to pay for damages only when there actually would have been any proven
damages,which,in the case ,there are not.

12 Journal Intervention in Arbitral Awards : A Practitioner’s Thoughts Vol. 21, No. 2 (2009), pp. 39-53

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Memorial on the behalf of the RESPONDENT

PRAYER

Wherefore, in light of the facts presented, the issues raised, arguments advanced and
authorities cited, it is humbly prayed that this Honourable Court may be pleased to
hold, adjudge and declare that :

1. The ONGC do not have the right to Liquidated Damages.

2. The use of Patent Illegality must not be used as a ground to assail the award
under Section 34.

And based on these findings, the RESPONDENT further requests this Honourable
Court:

1. To pass and order setting aside award and ask for refund the amount that ONGC
had with themselves.

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2. To pass and order as to patent illegality under the terms of public policy.

and pass any other order as it may deem fit in the interest of the justice, equity and
good conscience.

All of which is humbly prayed.

Sd/-

Consel for the RESPONDENT

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