SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

BEFORE THE HON’BLE

ADDITIONAL DISTRICT JUDGE OF NOIDA

RAUT SPARES PVT. LTD.

(APPELLANT)

V.

VOLVO

(DEFENDANT)

ON SUBMISSION TO THE DISTRICT COURT OF NOIDA

MEMORIAL ON THE BEHALF OF DEFENDANT

SUBMITTED TO : SUBMITTED FROM:

MR.SIDDHARTHBALANI KANCHI SINGH RAJPUT

ASST.PROF. B.A.LL.B (HONS.)

SSLG IXTH SEMESTER

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

TABLE OF CONTENTS

INDEX OF AUTHORITIES .................................................................................................................................... III

STATEMENT OF JURISDICTION .......................................................................................................................... IV

STATEMENT OF FACTS ....................................................................................................................................... V

ISSUE PRESENTED .......................................................................................................................................... VIII

ARGUEMENTS ADVANCED .................................................................................................................................. 1

1. WHETHER THE CONVENTION ON INTERNATIONAL SALES OF GOODS, 1980 IS APPLICABLE OR NOT. ...... 1

A. THE TRANSACTION IN THE MATTER IS INTERNATIONAL COMMERCIAL ARBITRATION. ..................... 1

B. THE SUBJECT MATTER IS OF INTERNATIONAL SALES ........................................................................ 2

2. WHETHER THE CONTRACT SHOULD CONTINUE BETWEEN RAUT SPARES AND VOLVO OR NOT. ................ 3

A. THERE IS A FUNDAMENTAL BREACH OF CONTRACT.......................................................................... 3

B. THE DAMAGES SHOULD BE PAID FOR THE CONSEQUENCES OF THE BREACH ..................................... 4

3. WHETHER THE ARBITRATION CLAUSE SHOULD REMAIN IN EXISTENCE EVEN AFTER THE TERMINATION OF
CONTRACT OR NOT. ...................................................................................................................................... 5

PRAYER............................................................................................................................................................. IX

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

INDEX OF AUTHORITIES

CASES REFERRED:

 Dow Chemical Co. v. United States 476 U.S. 227 (1986)

 Sarhank v. Oracle Corporation 01CIV1285 DAB

 M/s SEI Adhavan Power Private Limited v. M/s Jinneng Clean Energy Technology Limited

 Chloro control india pvt ltd v. Severn Trent water purification Inc, 2013 1SCC 641

 GMR Energy Limited v. Doosan Power Systems India CSCOMM-447/2017

 Corp v. Flood & Conklin Manufacturing Co.388 U.S. 395 (1967)

 Buckeye Check Cashing, Inc. vs. Cardegna 546 US 460

BOOKS REFERRED:

 Sukumar Ray: Alternative Dispute Resolution, 2012 Edition Eastern Law Pvt. Ltd.

 Madabhushi Sridhar: Alternative Dispute Resolution 2006 (reprint 2010)

STATUES REFERRED:

 The Arbitration and Concillation Act, 1966

INTERNATIONAL CONVENTION:

 United Nations of Convention of International Sales of Goods, 1980

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

STATEMENT OF JURISDICTION

The appeallant have approached this Hon’ble courtunder Section 34 of the Arbitration and Conciallation
Act, 1996. However, the defendant challenge the jurisdiction of this court as well as maintainability of the
application filed.

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

STATEMENT OF FACTS

 Mr. Ajay Kumar runs a manufacturing unit of spare parts for multi utilities vehicles (MUV) at Noida,
India. The manufacturing unit has been incorporated as Raut Spares Pvt. Ltd (Raut Spares), 90 percent
shares of which are owned by Mr. Ajay Kumar. Raut Spares has developed a new technology that helps
the engine to start even at sub zero temperature. The technology is known as Turbo Ignition.

 Raut Spares has a sister concern in Sweden, Raut Spares (Sweden) Pvt. Ltd incorporated under Swedish
law, 25 percent shares of which is owned by Mr. Ajay Kumar. He enters into an electronic mail (e-mail)
conversation with a leading Swedish SUV manufacturing company Volvo which was referred to him
by Mr. Alex, an angel investor based in Switzerland. Mr. Alex owns four percent of share of Raut Spares
Pvt. Ltd.

 Mr. Cook is the Managing Director of Volvo, he responded to the mail of Mr. Ajay Kumar and invited
him to Stockholm for further negotiations. A meeting on 2nd January, 2018 between Cook and Mr. Ajay
Kumar resulted into an agreement between both the parties.

 As per the agreement Mr. Ajay Kumar’s Raut Spares were to be send to Volvo Six million units of
spare parts in three parts containing Two million parts on each delivery. Additionally, it was further
agreed between them that Volvo would pay $ 600, 000.00 per delivery. The first consignment
was scheduled to be arrived at Ahus port in Sweden on 20th March, 2018.

 The agreement is made between Swedish Raut Spares and Volvo.

 The first unit was shipped on 1st March 2018 and was unloaded at the destination on 20th March, 2018 as
per schedule. Accordingly, Volvo released the first installment that was timely received by the Raut
Spares.

 When the Raut Ignitions were being installed in the cars, test of the Raut ignitions were conducted and it
functioned pretty well. after Volvo hit the market equipped with new technology, it started
malfunctioning. The usual complaints received by the company was that engines started making heavy
noises and became over heated with fumes coming out of it.

 A careful examination of the problem revealed that it was the installation of Raut Ignition that was the
root cause of malfunctioning of engine.

 Mr. Cook wrote an email to Mr. Vijay Kumar, Chief Executive Officer, of Raut Spares (Sweden) Pvt. Ltd
stating the problem in the goods delivered to him. Mr. Vijay Kumar directed the matter to Research and
Development wing of the Raut Spares in India.
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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

 Initial studies conducted by them revealed the possibilities of the malfunctioning, however, there could be
other components to the malfunctioning of the engine and for that they needed more time to come out
with something concrete and conclusive.

 The snags that the R&D department could determine were taken care of and successful test was
conducted on similar SUVs as Volvo. Thereafter, the second consignment sailed for the destination
with the improvised Raut Ignition.

 The problem aggravated in Sweden to the extent Volvo was forced to roll back all the cars from the
market. Mr. Cook sent a fax to Mr. Ajay Kumar stating that he has no option but to terminate the
agreement. By the time the Fax was sent the second consignment from Turbo Spares, India had already
arrived at the Ahus Port.

 Mr. cook refused to take delivery of the consignment and insisted that it be sent back Mr. Ajay Kumar
was intimated of the matter, he called Mr. Cook requesting him to accept the consignment and give it a
shot, as technical snag were rectified, additionally he offered to take back all the Raut Ignitions that were
unused and repair those which has developed faults at a very nominal cost.

 He also informed that he came to know the matter only on receipt of the fax. Mr. Cook, however, would
not budge and refused to discuss the matter with him any further.

 Mr. Ajay Kumar received a letter after few days from Volvo asking for a return of first installment and a
further damage of $1,000, 000, in total a claim of $1,600,000.00. Mr. Ajay insisted that contract must be
enforced as there was no fault on his part and moreover, technical snags were rectified and he also offered
repair and accepted all the unused goods.

 This led to a dispute and Mr. Cook went on to refer the matter for the arbitration. Art.Z of the agreement
has the arbitration clause which is as follows, “Any dispute, controversy or claim arising out of or in
connection with this contract, or the breach, termination or invalidity thereof, shall be settled by the
arbitration in accordance with the Arbitration Rules of London Court of International Arbitration,
London. The arbitral Tribunal will consist of three arbitrators. The seat of arbitration shall be Singapore.
The language to be used in the arbitral proceedings will be English.”Mr. Alex was appointed as the
arbitrator from Volvo and in response Raut Spares (Sweden) appointed Mr. Ashok Kharre as their
arbitrator. Mr. Alex wrote an email to Mr. Cook stating that he does not feel confident about the position
as he has Five percent of shareholding in Raut Spares. However, Mr. Cook does not respond to this mail
and continue with proceedings. The award was decided in the favour of Volvo, the proper law was
determined to be Convention on International Sales of Goods, 1980.

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

 Mr. Ajay Kumar filed a suit to set aside the award in the Court of Additional Judge of Noida. pleading that
arbitration between Volvo and his company is not possible as arbitration stands terminated with the
termination of main contract and that the tribunal was not properly constituted therefore it vitiated the
entire proceedings. He also pleaded that Volvo must perform the contract and accept the goods standing
at Swedish Port. He also pleads that the Convention on International Sales of Goods, 1980 would not be
the applicable law as the subject matter is not international sales as he was mere supplier of the goods and
also the matter is not international commercial arbitration, as the agreement is between two Swedish
companies. He further pleads that the Arbitration and Conciliation Act, 1996 is only applicable
to international commercial arbitration and awards.

 Volvo also filed a counter complaint by pleading the court to grant an injunction so that Mr. Ajay Kumar
is restricted to sell, alienate or destroy the property of Raut Spares Pvt. Ltd. It argues that an injunction
can be granted under the Arbitration and Conciliation Act, 1996.

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

ISSUE PRESENTED

1. WHETHER INTERNATIONAL CONVENTION OF SALES OF GOOD IS APPLICABLE OR NOT.

2. WHETHER THE CONTRACT SHOULD CONTINUE BETWEEN RAUT SPARES AND VOLVO
OR NOT.

3. WHETHER THE ARBITRATION CLAUSE SHOULD REMAIN IN EXISTENCE EVEN AFTER THE
TERMINATION OF CONTRACT OR NOT.

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

ARGUEMENTS ADVANCED

1. WHETHER THE CONVENTION ON INTERNATIONAL SALES OF GOODS, 1980 IS

APPLICABLE OR NOT.

The defendant contends that the Convention on International Sales of Goods, 1980 is applicable because:

a) The transaction in the matter is international commercial Arbitration

b) The subject matter is of international sales

A. THE TRANSACTION IN THE MATTER IS INTERNATIONAL COMMERCIAL ARBITRATION.

The defendant contends that the allegation brought forth by the appellant that the matter is not international
commercial arbitration as the agreement was made between two Swedish companies i.e, Sweden Raut Spare
Pvt. Ltd. And Volvo1 but the arbitration clause can be extended by widely known principle for the extension
of arbitration agreements the group of companies’ doctrine, which evolved in the famous Dow Chemical
case2. This doctrine provides that several companies that form part of a larger corporate group may be
regarded as a single legal entity or “une réalité économique unique”. Under the doctrine, a group of companies
constitutes one and the same economic reality - despite the legal independence of the individual entities from
one another - where the circumstances of the contract's conclusion, its performance, its (possible) subsequent
termination, and the degree of control executed among the group companies warrants such an inference. In
essence this doctrine states that when a non-signatory company of group of companies is an active participant
in the contractual relationship, then the arbitration agreement can be extended to it.

In Dow Chemical case3, an ICC Tribunal sitting in Paris decided that the parent company, Dow Chemical
Company (USA) should become a party to an agreement applying to its subsidiary Dow Chemical (France). In
a similar decision, Sarhank v. Oracle Corporation4, a tribunal sitting in Cairo decided that “Despite their
having separate juristic personalities, subsidiary companies to one group of companies are deemed subject to
the arbitration clause incorporated in the contract because contractual relations cannot take place without the
consent of the parent company owning the trademark by, and upon which transactions proceed.”

1
Moot propostion para 10
2
Dow Chemical Co. v. United States 476 U.S. 227 (1986)
3
Ibid
4
Sarhank v. Oracle Corporation 01CIV1285 DAB

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

The Madras HC5 referred to the decision of the Supreme Court in Chloro Control6 where the ‘group of
company’s doctrine’ was considered and it was held that an arbitration agreement entered into by a company
within the group of companies can bind its non-signatory affiliates.The Delhi High Court had recently
in GMR Energy Limited v. Doosan Power Systems India 7 followed Chloro Control and directed
non-signatories to arbitration.

In the instant case, by applying the doctrine of group of companies the arbitration agreement between the
Sweden raut Spares Pvt. Ltd. And Volvo is extended to the Raut Spares Pvt. Ltd. (India) as both the companies
situated in Sweden and India are sister concern and thus part of the same group. Mr. Ajay Kumar who has 90%
shares in Raut Spares Pvt. Ltd. and 25% shares in Sweden Raut Spares Pvt. Ltd. The Noida Raut Spares
maufactures the spare parts of the MUV and engaged the Sweden Raut Spares as contractor and therefore the
group of companies divided the work between themselves to carry out different activities among which the
project is one. Therefore, the arbitration clause extended to the Noida Raut Spares Pvt. Ltd. making the
transaction between the two countries i.e, India and Sweden and therefore, the arbitration is the international
commercial arbitration8

B. THE SUBJECT MATTER IS OF INTERNATIONAL SALES

The defendant contends that the convention of international sales of goods, 1980 is applicable on the subject
matter in the presented facts as the matter is of international sales because the sales of goods was made
between the parties of the two different nations (India and Sweden). The Convention on International Sales of
Goods applies to contracts of the sale of goods between parties whose places of business are in different states9

5
M/s SEI Adhavan Power Private Limited v. M/s Jinneng Clean Energy Technology Limited
6
Chloro control india pvt ltd v. Severn Trent water purification Inc, 2013 1SCC 641
7
GMR Energy Limited v. Doosan Power Systems India CSCOMM-447/2017
8
Sec 2(1)(f) of The Arbitration and Concialation Act, 1996
9
Article 1 of CISG 1980

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

2. WHETHER THE CONTRACT SHOULD CONTINUE BETWEEN RAUT SPARES AND VOLVO OR
NOT.

The defendant contends that the contract should not be continued which was made between the Raut Spares
Pvt. Ltd. and Volvo to send to Volvo six million units of spare parts of MUV manufactured by Raut Spares
Pvt. Ltd. in three parts containing two million parts on each delivery and Volvo would pay $ 600, 000.00 per
delivery because:

a) There is a fundamental breach of contract

b) The damages should be paid for the consequences of the breach

A. THERE IS A FUNDAMENTAL BREACH OF CONTRACT

The defendant contends that there is a breach of contract on the part of the Raut Spares as spare parts of
engine which was manufactured by the party is malfuntioned, started making heavy noises and became over
heated with fumes coming out of it.

According to the Article 25 of the CISG, a breach by one of the parties is fundamental if

“it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect
under the contract, unless the party in breach did not foresee, and a reasonable person of the same kind in the
same circumstances would not have foreseen, such a result”

There will be a fundamental breach of contract by the defaulting party if a party fails to receive the essence
of what he was entitled to expect according to the contract. The focus is on the substantial deprivation of the
contractual expectation of the aggrieved party.The concept of substantial deprivation is thus fused together
with the concept of contractual expectation, since a detriment can be characterised as a fundamental breach
only if the injured party has no further interest in accepting the performance of the contract. The
expectations of the aggrieved party are qualified by such phrases as ‘what he is entitled to expect under the
contract’ in Article 25 CISG. It must be stressed that the expectations of the aggrieved party have to be
discernible from the contract.

The doctrine of fundamental breach10 is chiefly predicated on the facts or assumption that a party to a contract
or contract of sale has committed a misnomer in the contract that goes to the root of the contract, thereby
knocking the bottom off its commercial relevance.

10
L. Graffi, ‘CsaeLaw on the Concept of “Fundamental Breach” in the Vienna Sales Convention’, (2003), International Business
Law Journal

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

Under the CISG, if a buyer wishes to reject tendered goods, she must avoid the contract. 11 To accept the
goods, he simply does not avoid the contract.

The buyer may declare the contract avoided if the failure by the seller to perform any of his obligations under
12
the contract or this Convention amounts to a fundamental breach of the contract to avoid the contract, he
must provide notice of the avoidance to the other party. The notice must clearly express that the buyer now
treats the contract as at an end.

In the instant case, Raut Spares Pvt. Ltd. constitutes a fundamental breach of contract as the agreement was
to sell the spare parts of the engine with turbo ignition technology and Volvo was entitled to expect that the
product will functioned well after installation in the car but it fails to do so, therefore Volvo can terminate
the contract under article 49 of the CISG, 1980.

B. THE DAMAGES SHOULD BE PAID FOR THE CONSEQUENCES OF THE BREACH

The defendant contends that damages should be paid for loss occured due to the consequences of breach of
contract and Raut Spares Pvt. Ltd. Should be made liable for the total claim of $1,600,000.00

Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit,
suffered by the other party as a consequence of the breach. 13 In the presented case, the damage claimed by
the defendant is the sum equal to the loss, including the loss of profit and goodwill of the company in the
market as they had to take back all the cars from the market with the turbo ignition technology. They had
already paid the price for the first consignment i.e, $ 600, 000 and further damage of $1,000,000 which made
the total claim of $1,600,000.

11
United Nations Convention on Contracts for the International Sale of Goods, art. 49
12
Ibid
13
Art. 74 of CISG

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

3. WHETHER THE ARBITRATION CLAUSE SHOULD REMAIN IN EXISTENCE EVEN AFTER THE
TERMINATION OF CONTRACT OR NOT.

The defendant contends that the arbitration clause should survive even after the termination of contract as the
an aribration clause which forms part of a contract shall be treated as an agreement independent of the other
terms of the contract.14 The doctrine of separability says that the arbitration clause in a contract is considered
to be separate from the main contract of which it forms part and, as such, survives the termination of the
contract.

The “separability doctrine” was articulated comprehensively by the United States Supreme Court in prima
paint Corp v. Flood & Conklin Manufacturing Co.15where the Court ruled that arbitration clauses can be
‘separable’ from the contracts in which they are included.

Buckeye Check Cashing, Inc. vs. Cardegna16acknowledged that the Separability rule permits a court “to
enforce an arbitration agreement in a contract that the arbitrator later finds to be void”.

Therefore, in the instant case the arbitration clause which was made under the article Z of the agreement
between Raut Spares Pvt. Ltd and Volvo will remain in existence even after the termination of the contract.

14
Article 16(1)(a) of The Arbitration and Conciallation Act, 1996
15
Corp v. Flood & Conklin Manufacturing Co.388 U.S. 395 (1967)
16
Buckeye Check Cashing, Inc. vs. Cardegna 546 US 460

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SUBJECT MOOT: ALTERNATIVE DISPUTE RESOLUTION Memorial on the behalf of Defendant

PRAYER

For the foregoing reasons, the respondent, respectfully requests the court to adjudge and declare that:

 To grant the injuction to restrict sale, alienate, or destroy the property

 To grant the required damages

ANY OTHER ORDER IT DEEMS FIT IN THE INTERESTS OF JUSTICE, EQUITY AND GOOD CONSCIENCE.

ALL OF WHICH RESPECTFULLY SUBMITTED BY THE RESPONDENT.

(COUNSEL FOR THE DEFENDANT)

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