_________________________ TEAM CODE: 001

SHARDA NOVICE MOOT COURT COMPETITION, 2019

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BEFORE THE HON’BLE DELHI DISTRICT COURT

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In the matter of

M/s Pradeshi Ltd. Plaintiff

Versus

M/s Swadeshi Ltd. Respondent 1

M/s Swastik Ltd. Respondent 2

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Written submission on behalf of the Respondents

Counsels appearing on behalf of the Respondents

-MEMORIAL ON BEHALF OF THE RESPONDENT-

- SHARDA NOVICE MOOT COURT COMPETITION, 2019 –

 -TABLE OF CONTENTS-
PARTICULARS

INDEX OF

AUTHORITIES…………………………………………………………………………………..

STATEMENT OF JURISDCTION…………………………………………………………………………..

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

ISSUES RAISED…………………………………………………………………………………………………

SUMMARY OF ARGUMENTS……………………………………………………………………………

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

ISSUE 1: Whether Swadeshi Ltd. Can have financial liability, being a subsidiary of Swastik Ltd. ?

ISSUE 2: Whether Raj Shekhar was acting in course of employment while commiting the fraud?

ISSUE 3: Whether there is breach of contract on behalf of Respondent?

PRAYER FOR RELIEF……………………………………………………………………………………..

 -MEMORIAL ON BEHALF OF THE RESPONDENT-
- SHARDA
-INDEX OF AUTHORITIES- NOVICE MOOT
COURT
COMPETITION,
2019 -

Cases Referred:

1. Balwant Rai Saluja v. Air India Ltd.

2. Delhi development Authority v. Skipper construction Co. (P) Ltd.

3. Life Insurance Corporation of India v. Escorts Ltd.

4. S.A.E. (India) Ltd. v. E.I.D. Parry (India) Ltd.

5. Saloman v. Saloman & Co. Ltd.

6. State of U.P. v. Renusagar Power Co.

7. Tesco Supermarkets Ltd v. Nattrass

8. Mohamad v. WM Morrison supermarkets

Books Referred:

Indian Contract Act,1872 (Bare Act)

Indian Penal Code (Bare Act)

Ratanlal & Dhirajlal (Indian Penal code)

Prof. S.N. Mishra (Indian Penal Code)

Web Sources Referred:

https://indiankanoon.org/

https://www.lawoctopus.com

-MEMORIAL ON BEHALF OF THE RESPONDENT-

https://www.scconline.com/

https://www.legalmatch.com

https://www.casemine.com

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-M EMORI
AL ON

LIST OF ABBERIVIATIONS

BEHALF OF THE RESPONDENT-

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ABBREVIATIONS USED ABBREVIATIONS EXPANSION

& And

(P) Private

§ Section

A.I.R All India Reporter

AC Appeal Case

UK United Kingdom
 -MEMORIAL ON BEHALF OF THE RESPONDENT-

Co. Company

Hon’ble Honourable

Ltd. Limited

v. Versus

b/w Between

U.P Uttar Pradesh

M/s Messer

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 -STATEMENT OF JURISDICTION- -MEMORIAL ON
BEHALF OF THE
RESPONDENT-

- SHARDA
NOVICE MOOT COURT COMPETITION, 2019 -

The Respondent Humbly Submits Before the Delhi District Court Under Section 20 (C) Of
the Civil Procedure Code, 1908 Reserving the Right To Challenge The Same. The
Honourable Court Has the Jurisdiction to Entertain And Adjudicate The Instant Matter. The
Section Under Which the Jurisdiction of The Court Is Invoked Is Read As:
Section 20, CPC: Other suits to be instituted where defendants reside or cause of action
arises.
 -MEMORIAL ON BEHALF OF THE RESPONDENT-
- SHARDA NOVICE MOOT COURT COMPETITION, 2019 -

STATEMENT OF FACTS-

-BACKGROUND-
Swastik Ltd, the respondent, is a company incorporated in UK. It came out with a mobile
phone application called CHOCOLATE. This software is projected to be most suitable for
buyers of media who want to advertise in UK as most of media sellers using this software are
located in UK.
The sellers of media are usually classified on the basis of geographical area. Each
geographical area is further classified under three segments based upon the price level.

SEGMEN PRICE CHARGED BY SELLER FOR YEARLY

T COMMITMENT
I US $ 100000 and above
II US $ 50000 to 99999
III Up to US $ 49999

The software is kept to be freeware which can be easily downloaded from a server located in
Dubai as the company earns on commission it charges from seller of media.

I
Swastik Ltd, the respondent, has a wholly owned subsidiary in India named Swadeshi Ltd.
Which performs marketing activity for this software in India. Swadeshi Ltd. advertises this
software in India and only induces the buyers of media to purchase media through
‘Chocolate’ software.
 II
One of the employees of Swadeshi Ltd. named Raj Shekhar who is brother of Chander
Shekhar was placed by this company in Dubai office. His task is to handle the traffic of
buyers of media that originates from India.

-MEMORIAL ON BEHALF OF THE RESPONDENT-

III
Raj Shekhar’s brother Chander Shekhar is the Managing Director of M/s Overseas Ltd, which
is an Indian company. On 1 November 2018 M/s Overseas Ltd. placed an order in third
segment. At the same time, another company, named, M/s Pradeshi Ltd, the plaintiff, which
is also an Indian company placed an order in first segment.

IV
Mr. Raj Shekhar in his personal capacity interchanged the two orders to the effect that M/s
Pradeshi Ltd, the plaintiff, who paid for first segment purchased the third slot.

V
On 5th November 2018, money was transfer from personal bank account of Chander Shekhar
to personal bank account of Raj Shekhar.

VI
M/s Pradeshi Ltd, the plaintiff, on finding that there slot has been interchanged, filed a civil
suit for appropriate relief in Delhi, against both M/s Swastik Ltd. and M/s Swadeshi Ltd.
 -ISSSUES RAISED-
-MEMORIAL ON
BEHALF OF THE
RESPONDENT-

- SHARDA NOVICE MOOT COURT COMPETITION, 2019 -

I. Whether Swadeshi Ltd. can have any financial liability, being a subsidiary of Swastik
Ltd.?

II. Whether Raj Shekhar was acting in course of employment while committing the
fraud?

III. Whether there is a breach of contract on behalf of Respondent?

 -SUMMURY OF ARGUMENTS-

-MEMORIAL ON BEHALF OF THE RESPONDENT-

- SHARDA NOVICE MOOT COURT COMPETITION, 2019 -

ISSUE 1. Whether Swadeshi Ltd. can have any financial liability, being a subsidiary of
Swastik Ltd.?

It is humbly submitted before the Hon’ble court, that M/s Swadeshi Ltd. has no financial
liability being a subsidiary of M/s Swastik Ltd. M/s Swadeshi Ltd. was wholly owned by M/s
Swastik Ltd. M/s Swadeshi Ltd had only one job to perform i.e marketing activity of the
software of media in India and all other activities were managed by M/s Swastik Ltd. Hence
Swadeshi Ltd. will not have any financial liability as per section 2(87) of companies act,
2013

ISSUE 2. Whether Raj Shekhar was acting in course of employment while committing the
fraud?
It is humbly submitted before the Hon’ble court, that the Raj Shekhar was not acting in the
course of employment. His work was only to handle the traffic of the buyers of media. His
work was not to buy and sell the media, he did not act in his given authority, but exceeded his
authority under Section 227 and 228 of Indian Contract Act. He conducted the act in his
personal capacity but not in company’s capacity. The company will not be liable for the fraud
conducted by Raj Shekhar.

ISSUE 3. Whether there is a breach of contract on behalf of Respondent?

It is humbly submitted before the Hon’ble court, that there is no breach of contract on behalf
of respondent because under section 39 of Indian contract act, 1872

-MEMORIAL ON BEHALF OF THE RESPONDENT-

M/s Swadeshi Ltd. has neither refused to perform nor has disabled itself from performing the
contract, so the contract cannot said to be breached. A breach of contract occurs when the
promise of contract is not kept.

The fraudulent contract cannot be breached. Fraud is not viable claim for breach of contract.

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 -ARGUMENTS ADVANCED-

-MEMORIAL ON BEHALF OF THE RESPONDENT-

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ISSUE 1. Whether Swadeshi Ltd. can have any financial liability, being a subsidiary
of Swastik Ltd.?

[1.1] It is humbly submitted before the Hon’ble court, that the fact M/s Swadeshi Ltd. is a
subsidiary company of M/s Swastik Ltd. does not imply that M/s Swadeshi Ltd. will have
financial liability being a subsidiary company. The corporate veil has to be pierced in order to
make the holding company liable for that incurred by subsidiary company. Since the facts
does not state any such thing. The liability in such cases arises only because of the
‘guarantee’ and not the ‘holding subsidiary’ relationship. Since the facts are silent about any
such guarantee, Swadeshi Ltd. cannot be held liable.
[1.2] It is further submitted that, in case of Balwant Rai Saluja v. Air India Ltd. Briefly stated
the facts in this case were that Air India in the capacity of the principal employer had
engaged Hotel Corporation of India (HCI) as a contractor to run a canteen on its corporate
premises which was a requirement under the Factories Act, 1948. In terms of the contract
between Air India and HCI, the responsibility to run the canteen was absolutely with HCI and
the employees for the canteen were provided by the latter.The employees were engaged on a
casual or temporary basis by HCI which acted as the contractor for running and operating the
canteen. The employees claimed to be the deemed employees of the management of Air India
on the ground that they worked in a canteen which was established on the premises of Air
India for the benefit of Air India employees. The claim of the employees went from the
Industrial Tribunal- cum- Labour Court to the High Court and eventually wound up in the
Supreme Court of India as the employees appealed the decision of the Lower Courts. Before
Supreme Court the main issue for consideration before the Court in the present reference is
“whether workers, engaged on a casual or temporary basis by a contractor (HCI) to operate
and run a statutory canteen, under the provisions of the Act, 1948, on the premises of Air
India, can be said to be the workmen of the said corporation”. In short, what in law was the
status of the employees?

-MEMORIAL ON BEHALF OF THE RESPONDENT-

The employees backed their claim on the grounds that under the Factories Act they were
treated as workmen and since they were working in a canteen established by statute, and
since they were workmen and worked under the control of Air India for whose benefit the
canteen was being run, they were not under the control of the contractor, who in turn had no
control over the management, administration and functioning of the canteen. It was alleged
that the employees worked under the supervision and control exercised by Air India’s
management as HCI also functioned under the control of Air India’s management. The
concept of control was invoked by the employees as certain judgments of the Court had
considered control as a relevant test and examined the nature of the control exercised by the
principal employer in those cases. The Court also examined cases where the test of complete
administrative control of the management over the contract workers sourced from a
contractor had been applied. The Court even referred to certain pronouncements of English
Courts in order to gather their approach to employer-employee relationship and noted some
relevant conditions like the servant agreeing to work for a consideration to provide his
services and skill, agreeing to perform his services subject to the employers control in a
sufficient degree and the need for other provisions of the contract being consistent with a
contract of service. On the issue of control, the English cases had clarified that control would
include the power of the employer to decide how the thing was to be done, the means to be
employed for doing it, the time and place where it was to be done and above all such control
must exist in a sufficient degree. And yet the Apex Court found cases where earlier rulings
qualified that no doubt control was one of the important tests but was not to be taken as the
sole test. In some cases to determine the true relationship between employer and employee all
other relevant facts and terms and conditions of the contract had also been considered. Thus,
on completing a complete tour de force of case law, the Supreme Court felt that what was
needed was an integrated approach, meaning thereby that in deciding complex cases it would
be necessary to integrate the relevant tests so as to examine whether the employees in
question were fully integrated into the employer’s business or concern or whether they were
independent of the concern although attached therewith to some extent.

Applying the integrated approach to the facts of the case, the Court found that the running of
the said canteen and control over its operations was with HCI and the functions of
appointment, payment of salary, removal from service, dismissal, and disciplinary action over
the canteen staff rested with the HCI. Despite the fact that Air India did exercise some

-MEMORIAL ON BEHALF OF THE RESPONDENT-

supervision on the quality, skill and performance of the staff, to ensure provision of good
quality food and service, the Court ruled that going by the integrated tests approach they were
satisfied that the employees of HCI stood on a different footing in as much as they were part
of a separate legal entity and different business concern which was set up for carrying out the
activity of operating and running of canteen services, nor, applying the test of control did the
Court find that Air India exercised absolute and effective control over HCI’s employees. All
things considered they did not satisfy the tests of employer- employee relationship vis-à-vis
Air India which did not qualify as their employer.

Going forward the Supreme Court’s ruling in this case is noteworthy for the Courts
integration of various tests evolved by it in the past and fashioning an integrated approach to
virtually hold that there cannot be a one size fit all approach and complex cases must be
resolved by application of a holistic set of tests.

It is humbly contended that the present case, Swastik Ltd. cannot be held liable for the act of
the employee of Swadeshi Ltd. the reason being that Swastik Ltd. had no control over the
employee of Swadeshi Ltd. Swastik Ltd. cannot be held liable for any of his actions no matter
whether the office he worked in belonged to either of the company.
[1.3] It is submitted that in the case of State of U.P v. Renusagar Power Co. the Supreme
Court observed “officer who is in default" under Section 2(60) of the Companies Act, 2013
and also includes people holding the positions of directors and key-managerial personnel.
Under Section 339 of the Companies Act, 2013 in case of winding up of the company, if it is
found that company's name was being used for carrying out a fraudulent activity, the Court is
empowered to hold any such person to be liable for such unlawful activities- be it Director,
Manager, or any other Officer of the Company.”

It is hence contended that Swadeshi Ltd. was created in order to perform the marketing
activities of the software which was created by Swadeshi Ltd., named “Chocolate” in India.
Hence the corporate veil should be lifted had Swastik Ltd. should not be held liable for the
fraudulent activities performed by employee of Swadeshi Ltd.

-MEMORIAL ON BEHALF OF THE RESPONDENT-

ISSUE 2. Whether Raj Shekhar was acting in course of employment while committing the
fraud?

[2.1] It is humbly submitted before the Hon’ble court, that Raj Shekhar committed the fraud,
he was not acting in the course of employment and hence Swadeshi Ltd. could not be
vicariously liable for his acts. He acted in his personal capacity and not in company’s
capacity. As stated under section 227 of Indian Contract Act, 1872 ‘When an agent does
more than he is authorized to do, and when the part of what he does, which is within his
authority, can be separated from the part which is beyond his authority, so much only of what
he does as is within his authority is binding b/w him and his principal. The authority given to
Raj Shekhar was to handle the traffic of buyers of media and was not to buy and sell the
media. He did not act in his given authority but exceeded the authority. Thus, his actions, in
his capacity as an individual would not generally incur a liability on the part of the
corporation, nor would he have any protection from liability for his own actions as an
individual.

[2.2] It is humbly submitted before the Hon’ble court that, in the case of Mohamud v WM
Morrison Supermarkets a petrol station customer, Mr Mohamud, found himself on the
receiving end of physical assault and racist language from a Morrison’s employee, Mr Khan.
Mr Khan pursued Mr Mohamud across the petrol station forecourt, punching him and kicking
him to the ground. Mr Khan ignored the instructions of his supervisor who tried to stop him.

Mr Mohamud brought a claim against Morrison’s for the injuries he suffered as a result of the
assault by Mr Khan. There was no question in this case of there being an employment
relationship between Morrison’s and Mr Khan, however the issue arose as to whether there
was a sufficiently close connection between what Mr Khan was employed by Morrison’s to
do, and his actions against Mr Mohamud, to render Morrison’s vicariously liable.

At first instance, it was held that Morrison’s was not vicariously liable. The trial judge found
that the sufficiently close connection test was not met. Mr Mohamud appealed to the Court of
Appeal who dismissed his appeal.

-MEMORIAL ON BEHALF OF THE RESPONDENT-

It was found that whilst Mr Khan’s duties involved interaction with customers, there was not
a clear possibility of confrontation, nor did his duties place him in a situation where an
outbreak of violence was likely. Therefore, Morrison’s could not be held vicariously liable.

Mr Mohamud’s case was heard by the Supreme Court where it was argued on his behalf (Mr
Mohamud had by then passed away from an unrelated illness) that a broader test should be
applied i.e. “whether a reasonable observer would consider the employee to be acting in the
capacity of a representative of the employer” at the time of committing the unlawful act. The
Supreme Court rejected the new test, but allowed the appeal on the basis that Mr Khan’s acts
were sufficiently connected to his employment for it to be just that Morrisons should be
vicariously liable for his actions.

The Supreme Court confirmed that the test was whether the wrongful acts were so closely
connected with employment that it would be just to hold the employer liable. The attack had
happened on Morrison’s premises and Mr Khan had ordered Mr Mohamud never to return to
his employer’s premises. It was held that Mr Khan was not acting in a personal capacity – he
had not “metaphorically taken off his uniform from the moment he stepped from behind the
counter

[2.3] In the case of Tesco Supermarkets Ltd v. Nattrass, Tesco was offering a discount on
washing powder which was advertised on posters displayed in stores. Once they ran out of
the lower priced product the stores began to replace it with the regularly priced stock. The
manager failed to take the signs down and a customer was charged at the higher price. Tesco
was charged under the Trade Descriptions Act 1968 for falsely advertising the price of
washing powder. In its defence Tesco argued that the company had taken all reasonable
precautions and all due diligence, and that the conduct of the manager could not attach
liability to the corporation.

The House of Lords accepted the defence and found that the manager was not a part of the
"directing mind" of the corporation and therefore his conduct was not attributable to the
corporation. The corporation had done all it could to enforce the rules regarding advertising.

-MEMORIAL ON BEHALF OF THE RESPONDENT-

Lord Reid held that, in order for liability to attach to the actions of a person, it must be the
case that "The person who acts is not speaking or acting for the company. He is acting as the
company and his mind which directs his acts is the mind of the company. If it is a guilty mind
then that guilt is the guilt of the company."

In the House of Lords Tesco were successful with their defence showing that,

a store manager was classed as ‘another person’, and,

a system of delegating responsibility to that person was performance of due diligence, not
avoidance of it

The store manager was not the directing mind and will of the company - the company had
done all it could to avoid committing an offence and the offence was the fault of another
person (an employee). The company was acquitted.

In the case of Tesco Supermarkets Ltd v. Nattrass, it was stated that the company is only
liable if the person with the guilty knowledge or who performed the guilty acts can be
regarded as the ‘embodiment of the company’. In such a case, the company is liable for the
acts of the person regardless of whether the acts are within the scope of his authority or not.
On the other hand, where the person is not regarded as the embodiment of the company, the
company can only be liable if his acts are within the scope of the function of management
properly delegated to him.

The Judges in the above case stated that, “A living person has a mind which can have
knowledge or intention or be negligent and he has hands to carry out his intentions. A
corporation has none of these: it must act through living persons, though not always one or
the same person. Then the person who acts is not speaking or acting for the company. He is
acting as the company and his mind which directs his acts is the mind of the company. There
is no question of the company being vicariously liable. He is not acting as a servant,
representative, agent or delegate. He is an embodiment of the company or, one could say, he
hears and speaks through the persona of the company, within his appropriate sphere and his
mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the
company.”

-MEMORIAL ON BEHALF OF THE RESPONDENT-

[2.4] It is humbly contended that, on the facts of this case Raj Shekhar could not be said to be
the ‘living embodiment of the company’ as he was too low in the chain of command. There
was also no ground for imputing his knowledge to any officer in a position of management
authority. As for the scope of the function of management, it was found that the company had
not delegated the responsibility to interchange the orders to Raj Shekhar. He was only
authorised to control the traffic of buyers from India. There was a system put in place to
perform this task and if Raj Shekhar had tried to circumvent the system, he would be acting
beyond the scope of his authority.

[2.5] As to when the corporate veil shall be lifted the observations of the Supreme Court in
Life Insurance Corporation of India v. Escorts Ltd. is worth noting. “While it is firmly
established ever since in Saloman v. Saloman & Co. Ltd that a company is an independent
and legal personality distinct from the individuals who are its members, it has since been held
that the corporate veil may be lifted, the corporate personality can be ignored and the
individual members recognised for who they are in certain exceptional circumstances.
Generally, the corporate veil may be lifted where the statute itself contemplates lifting the
veil or fraud or improper conduct is intended to be prevented or a taxing statute or a
beneficent statute is sought to be evaded or where associated companies are inextricably
connected as to be, in reality, part of one concern.”

[2.6] In the case of Delhi development Authority v. Skipper Construction Co. (P) Ltd., Justice
BP Jeevan Reddy stated that: The concept of corporate entity was evolved to encourage and
promote trade and commerce but not to commit illegalities or to defraud people. Where
therefore the corporate character is employed for the purpose of committing illegality or to
defraud others, the court will ignore the corporate character and will look at the reality behind
the corporate veil so as to enable it to pass appropriate orders to do justice between the parties
concerned.

[2.7] As per section 228 of Indian contract Act, 1872 ‘if an agent does more than he is
authorized to do, and what he does beyond the scope of his authority cannot be separated
from what is within it, the principle is not bound to recognize the transaction.’ As in the said
case, Raj Shekhar had exceeded his authority and as per the section Swastik Ltd. will not be
bound for any of his actions.

-MEMORIAL ON BEHALF OF THE RESPONDENT-

ISSUE 3. Whether there is a breach of contract on behalf of Respondent?

It is humbly submitted before Hon’ble Court that, there was no unexcused failure to do duty
on the part of Respondent. Under section 39 of Indian Contract Act, 1872 ‘When a party to a
contract has refused to perform, or disabled himself from performing, his promise in its
entirety, the promisee may put an end to the contract, unless he has signified, by words or
conduct, his acquiescence in its continuance. It is humbly submitted before the court that in
the said case, Swastik Ltd. and Swadeshi Ltd., nor did the companies ‘refused to perform’ the
contract neither did they ‘disabled themselves from performing the contract’. Raj Shekhar
acted ‘fraudulently’ and hence the contract becomes invalid. The fraud performed by Raj
Shekhar was not performed in the course of employment (as stated in the above question), so
the companies will not be liable for his act. Hence, there was no breach of contract on behalf
of the defendant, M/s Swastik Ltd. and M/s Swadeshi Ltd., as they had performed the
contract.

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-MEMORIAL ON BEHALF OF THE RESPONDENT-

- SHARDA NOVICE MOOT COURT COMPETITION, 2019 -

It is hereby most humbly prayed before the Hon’ble Court that, in the light of issue raised,
arguments advanced, authorities cited and facts mentioned, the Hon’ble court may be pleased
to adjudge and declare that:

1. The suit filed by the Plaintiff against the Respondent should be dismissed.
2. The Respondent is entitled for the costs, expenses etc. incurred whatsoever.

And pass any order relief in favour of the Respondent in the larger interest of justice, equity
and good conscience.

All of which is respectfully submitted

Sd/-

-COUNSELS ON BEHALF OF THE RESPONDENT-

-MEMORIAL ON BEHALF OF THE RESPONDENT-