TEAM CODE: 36R

AUAP-JLU INTERNATIONAL MOOT COURT COMPETITION, 2022

BEFORE THE ARBITRAL TRIBUNAL

Under Borduria Arbitration and Conciliation Act, 1996

IN THE MATTER BETWEEN

BILL TURNER CONSTRUCTION CO. (BTC)
(Claimant)

V.

THE ROAD DEVELOPMENT CORPORATION OF BORDURIA (RDC)

(Respondent)

MEMORIAL FOR RESPONDENT

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MEMORIAL FOR RESPONDENT
 TABLE OF CONTENTS

TABLE OF ABBREVIATIONS………………………………………………………………3
INDEX OF AUTHORITIES ………………………………………………………………….5
STATEMENT OF JURISDICTION………………………………………………………....11
STATEMENT OF FACTS………………………………………………………………….. 12
ISSUES RAISED ..................................................................................................................... 14
SUMMARY OF ARGUMENTS ADVANCED...................................................................... 15
ARGUMENTS ADVANCED ................................................................................................. 17
1. RDC IS NEITHER LIABLE TO PAY LIQUIDATED DAMAGES NOR
UNLIQUIDATED DAMAGES ………………………………………………………….. 17
1.1 RDC Is Not Liable to Pay Liquidated Damages In Accordance With Clause 3.1
(iv) of the EPC Contract ................................................................................................... 17
1.2 RDC is Not Entitled to pay the Liquidated Damages for Breach of Clause 3.1(iii)
of EPC Contract ................................................................................................................ 20
1.3 Time is Not of Essence in the EPC Contract ……………………………………. 23
2. THAT THE BANK GUARANTEE ENCASHED BY RDC IS VALID AND THEY
ARE NOT LIABLE TO REIMBURSE IT TO BTC…………………………………….
…………………………………………………………………………………………… 23
2.1 The Encashed Bank Guarantee Transaction is Valid According to the Borduria
Contract Act, 1872 ……………………………………………………………………. 23
2.2 RDC Was Right in Invoking Clause 23.1(c) of the EPC Contract and Terminating
The EPC Contract in Accordance With Clause 23.1(ii) .................................................. 25
2.3 RDC Was Justified in Encashing the Performace Security In Accordance With
Clause 23.6(i)(a) of the EPC Contract…………………………………………………. 27
3. THE INVOCATION OF FORCE MAJEURE BY BTC FOR THE TERMINATION OF
THE CONTRACT IS VALID AND THEY ARE NOT ENTITLED TO RECEIVE THE
TERMINATION PAYMENT …………………………………………………………… 30
3.1 Defence of Force Majeure by the Claimant Should Not be Applicable ................... 30
3.2 The Termination of the Contract by the Claimant Was Not Rightful ...................... 33
3.3 The Claimant is Not Entitled To Receive Any Termination Amount ...................... 36
PRAYER……………………………………………………………………………………. 38

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MEMORIAL FOR RESPONDENT
 TABLE OF ABBREVIATIONS

ABBREVIATION FULL FORM

ARBITRATION The ARBITRATION AGREEMENT that has been included in the EPC
AGREEMENT CONTRACT between the parties

AIR All India Reporter

Annx Annexure

Anr Another

ART Article

& and

BG Bank Guarantee

BTC Bill Turner Construction

Co. Company

Corp. Corporations

Cl. Clause

EPC Contract Contract executed between BTC and RDC

Hon’ble Honorable

i.e., id est (that is)

Km/Kms Kilometer

Mins Minutes

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MEMORIAL FOR RESPONDENT
 Ors. Others

p./pp. Page/Pages

¶/¶¶ Paragraph/Paragraphs

Pvt. Private

RDC The Road Development Corporation of Borduria

RFP Request For Proposal

ROW Right of Way

SC Supreme Court

SCC Supreme Court Cases

§ Section

Sch. Schedule

Tribunal Tribunal constituted pursuant to the ARBITRATION AGREEMENT

between the parties
v. versus

vol. Volume

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MEMORIAL FOR RESPONDENT
 INDEX OF AUTHORITIES

INDIAN JURISDICTION CASES

Ansal Engineering Page No – 25 Ansal Engineering projects Ltd v. Tehri Hydro

projects Ltd Para No – 41 Development Corporation Ltd, (1996), 5 SCC
450.

Arun Khanna Page No – 18 Arun Khanna v. Sumit, (2019), SCC OnLine

Para No – 5 Del. 13040.
Bharat Heavy Page No – 30 Bharat Heavy Electricals Limited (BHEL) v.
Electricals Limited Para No – 63 Egyptian Electricity Transmission Company
(BHEL) & Ors. CS(COMM.) 675/2017 (Delhi High
Court)
Bharat Petroleum Page No – 36 Bharat Petroleum Corp Ltd & Anr v. M/S
Corp Ltd Para No - 89 Jethanand Thakordas Karachiwala & Ors,
2000 (1) BomCR 289.
Bridge & Roof Co Page No – 36 State of UP v. Bridge & Roof Co Ltd, (1996),
Ltd Para No – 88 6 SCC 22.
Chandra Mohan Page No – 20 State of Rajasthan vs Chandra Mohan Chopra
Chopra Para No – 16 AIR 1971 Raj 229 at 231

Continental Page No – 18 Continental Transport Organization Pvt. Ltd.

Transport Para No – 5 v. Oil & Natural Gas Corporation 187 AIC
Organization Pvt. 704.
Ltd
Dunlop Pneumatic Page No – 19 Dunlop Pneumatic Tyre Co Ltd v. New
Tyre Co Ltd Para No – 11 Garage and Motor Company, (1915) AC 79.
Dwarikesh Sugar Page No – 25 Dwarikesh Sugar Inds. Ltd. v. Prem Heavy
Inds. Ltd Para No – 39 Engg. Works, AIR 1997 SC 2477.

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MEMORIAL FOR RESPONDENT
 Electronic Page No – 20 Electronic Enterprises v. UOI AIR 2000 Del
Enterprises Para No – 16 55.

Fateh Chand Page No – 18 Fateh Chand v. Balkishan Das, (1964), SCR

Para No - 5 (1) 515.
Firm Kishanlal Page No – 22 Firm Kishanlal Shrilal Patwa v. UOI, AIR
Shrilal Patwa Para No – 24 1960 MP 289.

Ghaziabad Page No – 19 Ghaziabad Development Authority v UOI,

Development Para No - 9 (2000), 6 SCC 113.
Authority
Haliburton Page No – 29 Haliburton Offshore services vs Vedanta Ltd.
Offshore services Para No – 61 (O.M.P. (I) (COMM) & I.A. 3697/2020).
Hindustan Page No – 18 Hindustan Petroleum Corporation Limited v.
Petroleum Para No – 5 Offshore Infrastructure Limited 2015 (6)
Corporation Mh.L.J. 287.
Limited
Hindustan Page No – 24 Hindustan Steelworks Construction Ltd v.
Steelworks Para No – 39 Tarapore & Co, (1996), 5 SCC 34.
Construction Ltd
Indhirajith Power Page No – 29 Indhirajith Power Private Limited v.
Private Limited Para No – 61 UOI. W.P.(C), 2957 of 2020
Jain Plastics and Page No – 36 State of Bihar v. Jain Plastics and Chemicals
Chemicals Ltd Para No – 88 Ltd, (2002), 1 SCC 215.
Kailash Nath Page No – 18 Kailash Nath Associates v. DDA (2015) 4 SCC
Associates Para No – 5 136.
Kanchan Udyog Page No – 21 Kanchan Udyog Ltd v. United Spirits Ltd,
Ltd Para No – 22 (2017), 8 SCC 237.

M/S Alopi Parshad Page No – 33 M/S Alopi Parshad & Sons v. Union of India,
& Sons Para No – 76 (1960), SCR (2) 793.

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MEMORIAL FOR RESPONDENT
 M/S. 3I Infotech Page No – 19 M/S. 3I Infotech Limited v. Tamil Nadu E-
Limited Para No – 11 Government Agency, (2019), SCC Online
Mad 33295.
M/S. Salwan Page No – 28 M/S. Salwan Construction Co v. Union of
Construction Co Para No – 57 India ILR, (1977), 2 Del 748.
Mahanagar Page No – 18 Mahanagar Telephone Nigam Limited v. Tata
Telephone Nigam Para No – 5 Communication Ltd, (2019), SCC OnLine SC
Limited 278.

Maula Bux Page No – 19 Maula Bux v. Union of India, (1969), 2 SCC

Para No – 11 554.
McDermott Page No – 23 McDermott International Inc. v. Burn
International Inc. Para No - 32 Standard Co. Limited and Others, (2006) 11
SCC 181

Naihati Jute Mills Page No – 33 Naihati Jute Mills Ltd v. Hyaliram Jagannath,
Ltd Para No – 76 (1968), SCR (1) 821.
National Page No – 36 National Highways and Infrastructure
Highways and Para No – 88 Development Corporation Ltd & Others v.
Infrastructure M/S T.K. Engineering Consortium Pvt Ltd &
Development Others, (2019), WA 171 of 2019.
Corporation Ltd
Oil and Natural Page No – 20 Oil and Natural Gas Commission v Shyam
Gas Commission Para No – 14 Sundar Agarwalla, AIR 1984 Gau 11.

Raheja Universal Page No – 18 Raheja Universal Pvt. Ltd. V. B.E. Billimoria

Pvt. Ltd. Para No – 5 and Co. Ltd., (2016), SCC OnLine Bom 1399.
Ramnath Page No – 19 Ramnath International Pvt. Ltd. v. Union of
International Pvt. Para No – 14 India & Ors, AIR 2007 SC 509.
Ltd
Shantilal Mutha & Page No – 22 Shantilal Mutha & Co (Firm) Cotton
Co (Firm) Cotton Para No - 24 Merchants, Jalna v. Chirala Co-op Spinning
Merchants Mills Ltd, (1986), 2 AP LJ 291.

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MEMORIAL FOR RESPONDENT
 Shri Coal Page No – 18 Shri Coal Enterprises India Pvt. Ltd. v. Coal
Enterprises India Para No – 5 India Limited, (2018) 187 AIC 704
Pvt. Ltd.
SPPL Hotels Pvt. Page No – 18 SPPL Hotels Pvt. Limited v. Allahabad Bank,
Limited Para No – 5 AIR 2018 Cal 185
Standard Retail Page No – 33 Standard Retail v. G.S Global Corp Pvt Ltd.
Para No – 76 (2020), Commercial Arbitration Petition (l)
no. 404 of 2020.
State Bank of India Page No – 24 State Bank of India v Mula Sahakari Sakhar
Para No – 38 Kharkhana Ltd, (2006), 6 SCC 293

Steel Authority of Page No – 19 Steel Authority of India Ltd. v. Gupta Brother

India Ltd Para No – 9 Steel Tubes Ltd, (2009), 10 SCC 63
Syndicate Bank Page No – 25 Syndicate Bank v. Ajay Kumar AIR 1992 SC
Para No – 39 1066.
Titagarh Wagons Page No – 19 Titagarh Wagons Limted v Chowgule and
Limted Para No – 9 Company, (2018), 4 Mah LJ 638
U.P. Co-Operative Page No – 25 U.P. Co-Operative Federation Ltd v. Singh
Federation Ltd Para No – 42 Consultants & Engineers, (1988), 1 SCC 174

Welspun Specialty Page No – 23 Welspun Specialty Solutions Ltd v. ONGC,

Solutions Ltd Para No – 32 (2022), 2 SCC 382.

OTHER JURISDICTION CASES

Banco de Page No – 18 Banco de Portugal v. Waterlow &

Portugal Para No – 6 Sons Ltd [1932] AC 542.
Beckham Page No – 22 Beckham v. Drake (1847–9) 2 HLC
Para No – 28 579.

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MEMORIAL FOR RESPONDENT
 Brace Page No – 22 Brace v. Calder [1895] 2 QB 253.
Para No – 28
British Racing Page No – 21 British Racing Drivers’ Club Ltd v.
Drivers’ Club Para No – 22 Hextall Erskine & Co, [1996] 3 All
Ltd ER 667
British Page No – 22 British Westinghouse Electric Co Ltd
Westinghouse Para No – 27 v. Underground Electric Rys Co of
Electric Co Ltd London Ltd [1912] AC 673.
Compania Page No – 18 Compania Naviera Maropan S/A v.
Naviera Para No – 6 Bowaters Lloyd Pulp & Paper Mills
Maropan S/A Ltd [1955] 2 QB 68.
Galoo Ltd Page No – 18 Galoo Ltd v. Bright Grahame Murray
Para No – 6 [1994] 1 WLR 1360.
Itek Corporation Page No – 30 Itek Corporation v. The First National
Para No - 63 Bank of Boston, 566 F Supp. 1210
Monarch Page No – 21 Monarch Steamship Company Ltd v.
Steamship Para No – 20 Karlshamms Oljefabrekar (A/B)
Company Ltd [1949] AC 196.
Quinn Page No – 18 Quinn v Burch Bros (Builders) Ltd
Para No - 6 [1966] 2 QB 370.
Shindler Page No – 22 Shindler v. Northern Raincoat Co Ltd
Para No – 28 [1960] 1 WLR 1038.
Weld-Blundell Page No – 18 Weld-Blundell v Stephens [1920] AC
Para No – 6 956.

Young Page No – 18 Young v Purdy [1997] PNLR 130.

Para No – 6

BOOKS REFERRED

1. Anirudh Wadhwa, Mulla The Indian Contract Act. 184, 15th ed, Lexis Nexis. 2015.

2. Ewan Mckendrick, Force Majeure, and Frustration of Contract. 141. 2nd ed, Informa
Law. 1995.

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MEMORIAL FOR RESPONDENT
 3. International Federation of Consulting Engineers (Fidic), Conditions of Contract for
Epc/Turnkey Projects 54 (1999).

4. Nisith Desai Associates, Law of Damages in India. 1st ed, 2022.

5. J Beatson, A, Burroes & J, Cartwright, Anson’s Law of Contract (31st ed, 2020).

ARTICLES, NOTIFICATIONS REFERRED

1. Ms. Amrita Ganguli, Bank Guarantees: An Analysis, MANUPATRA, (July 21,

2022, 11:05).

2. Akshay Anurag, Bank Guarantee and Judicial Intervention, MANUPATRA ( July

21, 2022, 11:05).

3. Nilava Bandyopadhyay & Adhip Kumar Ray, Force Majeure: How Successful has
the Law been Post Covid in India, Economic Times, April 24, 2021.
https://economictimes.indiatimes.com/small-biz/legal/force-majeure-how-
successful-has-the-law-been-post-covid-in-
india/articleshow/82227338.cms?from=mdr.
4. Yamika Khanna, Decoding the Quandry of Bank Guarantee Amidst the Outbreak of
Covid-19, SCC Online Web Edition, 2022, EBC Publishing Pvt Ltd.

STATUTES REFERRED

1. The Indian Contract Act, 1872.

2. The Arbitration and Conciliation Act, 1996.

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MEMORIAL FOR RESPONDENT
 STATEMENT OF JURISDICTION

Road Development Corporation of Borduria, RDC, the respondent in the instance case is
honored to submit this memorial to the Arbitral Tribunal constituted under Section 7 of the
Arbitration and Conciliation Act, 1996 in pursuance of Clause 26 of the EPC Contract between
Road Development Corporation of Borduria and Bill Turner Construction Company Ltd.
Furthermore, the contract in dispute must be interpreted in accordance with the laws of
Borduria which are in Pari Materia with the laws of India.

IN THE ARBITRATION TRIBUNAL OF BORDURIA

THE RESPONDENT MOST HUMBLY AND RESPECTFULLY SUBMITS TO THE

JURISDICTION OF THE THIS HONOURABLE TRIBUNAL

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MEMORIAL FOR RESPONDENT
 STATEMENT OF FACTS

BACKGROUND OF THE PARTIES

Bill Turner Construction Co. (BTC), the Claimant in the present case is a limited liability
company that is registered in Zembla in the country of Sylvadia and which was incorporated
in 1990. The Claimant is one of the leading construction companies in the world which deals
with various construction activities which includes the construction of roads, stadiums, bridges,
and modern-day art buildings. The Claimant has established a huge unit as they have worked
in more than 45 countries worldwide and have also established a large presence outside
Syldavia.

The Road Development Corporation of Borduria (RDC), the Respondent is a statutory body
established under the National Expressways Act, 2005. Their primary responsibility is to look
after the construction and maintenance activities concerning the inter-state expressways of
Borduria.
THE PROJECT

For the purpose of increasing the inter-connectivity between roads and for reducing the travel
duration between main towns and satellite cities, RDC released a tender on 10 February, 2018.
BTC also applied for the tender. The project was on turnkey basis and it specified that the
contractor who would bid for the lowest price and qualify the technical requirements would be
given the tender.

THE CONTRACT

BTC, the claimant company submitted their final bid on 16th March, 2018 which amounted to
around USD 197 Million. After a thorough review, the claimant company was given the tender
via a letter of acceptance dated 30 April, 2018 by RDC. Pursuant to this, directions were issued
to BTC for signing the EPC Contract and furnishing the performance security, amounting to
5% of the bid amount (i.e., USD 9.85 million). P.V. Helsing was appointed as the independent
engineer for the purpose of supervising the project on the behalf of RDC.
RDC and BTC entered into a formal EPC Contract on 24 June, 2018. According to the terms
of the tender, the commencement date was one month from the signing of the EPC Contract,
i.e., 25th July, 2018.

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MEMORIAL FOR RESPONDENT
Further, the entire land was to be provided within six months from the signing of the EPC
Contract, i.e., January, 2019. The entire term of the contract was for 32 months and the total
project length was 267Kms. The Project Completion Schedule was as follows:

MILESTONE I 8 MONTHS 35 Kms 240 days

20%
MILESTONE II 14 MONTHS 80 Kms 420 days
40%
MILESTONE 20 MONTHS 150 Kms 600 days
III 60%
MILESTONE 26 MONTHS 200 Kms 780 days
IV 80%
MILESTONE V 32 MONTHS 267 Kms 960 days
100%

THE DISPUTE:

RDC had granted 67.5% of the non-forest land to BTC by 25 July 2018, and there were
sufficient work fronts for BTC to begin the construction. However, there was improper
planning and delay in deployment of plant and machinery by BTC. Further, BTC had asked for
extension on two occasions for rain. Also, in spite of BTC being aware of the frequent rains in
the region, it had not taken adequate measures for the project to be completed in a timely
manner. Thereafter on 15 March, 2020 lockdown was imposed by the government of Borduria,
due to COVID 19 pandemic, and BTC by its letter dated 17 August 2020, terminated the
contract on the grounds of force majeure. Then, on 17 August, 2020, RDC issued a termination
notice for fault of BTC, and encashed the performance security, in the form of bank guarantee,
submitted by RDC.
The report of the independent engineer according to the letter dated 30 September, 2020 stated
that only the first two milestones were completed, whereas, the rest were still incomplete and
were under progress.

AFTERMATH AND LEGAL PROCEEDINGS

Because of the above chain of events, BTC decided to approach the arbitral tribunal, and the
same was intimated to the Respondent via a notice dated 3rd, October 2020 to which the
Respondent also replied by letter dated 17 October, 2020, and after a series of hearings and
cross-examination the matter was fixed for arguments on 5th-7th, August 2022.

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MEMORIAL FOR RESPONDENT
 ISSUES RAISED

ISSUE 1:

WHETHER THE CLAIMANT IS ENTITLED TO DAMAGES FROM THE

RESPONDENT FOR DELAY IN HANDING OVER OF THE SITE AND DELAY IN
RECEIVING PERMISSION FROM THE FOREST DEPARTMENT FOR THE
CUTTING OF THE TREES? IF YES TO WHAT EXTENT?

ISSUE 2:

WHETHER THE CLAIMANT IS ENTITLED TO RE-IMBURSEMENT OF THE

VALUE OF THE BANK GUARANTEE ENCASHED BY THE RESPONDENT?

ISSUE 3:

WHETHER THE CLAIMANT HAS EXERCISED ITS RIGHT OF TERMINATION

OF THE CONTRACT FOR FORCE MAJEURE CORRECTLY. IF YES, WHAT
AMOUNT IS THE CLAIMANT ENTITLED TO RECIEVE?

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MEMORIAL FOR RESPONDENT
 SUMMARY OF ARGUMENTS ADVANCED

1. RDC IS NEITHER LIABLE TO PAY LIQUIDATED NOR UNLIQUIDATED

DAMAGES TO BTC

It is submitted that RDC is not liable to pay liquidated damages in accordance with clause
3.1(iv) of the EPC Contract for breach of its obligations under clause 3.1(iii) of the EPC
Contract as there is no effective causation between the damages i.e., underutilization of plant
and machinery and the alleged breach. Further, clause 3.1(iv) is penalty clause and therefore
BTC is required to prove the loss in ‘precise and exact manner’. Further, BTC condoned any
delay on the part of RDC in granting over the required land for construction, and further waived
its right to claim liquidated damages. It is also contended that RDC is not liable to pay
unliquidated damages for breach of its obligations under clause 3.1(vi)(a) of the EPC Contract,
for the delay in getting approval from forest department for clearing the forest, as the same did
not result in any losses to BTC. Further, the required procedure for seeking the aid of RDC in
taking approval was not followed. In arguendo, no steps were taken to mitigate the losses as
well, and hence RDC is not liable to pay unliquidated damages. Finally, it is contended that
time is not of essence in the EPC Contract, and therefore no penalty should be levied for any
slight delay by RDC which did not result in any legal injury.

2. RDC IS NOT LIABLE TO REIMBURSE THE VALUE OF THE BANK

GUARANTEE ENCASHED BY IT

It is contended that the encashment of the performance security is valid according to the
provisions of the Borduria Contract Act, 1872, as the bank guarantee is an independent contract
between the parties and is an independent and irrevocable one. Further, RDC was right in
invoking clause 23.1(i)(c) of the EPC Contract, as there was delay in the achievement of first
two milestones and non-completion of the third milestone, according to the timelines set in
Schedule J, and therefore, it rightly terminated the contract in accordance with clause 23.1(ii)
of the EPC Contract. Further, RDC was right in encashing the performance security in
accordance with clause 23.6(i)(a) of the EPC Contract, as the exceptions of fraud and
irretrievable damages would not apply in the present factual case.

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MEMORIAL FOR RESPONDENT
3. THE CLAIMANT IS NOT ENTITLED TO INVOKE ‘FORCE MAJEURE’ CLAUSE
FOR TERMINATION OF CONTRACT AND IS NOT ENTITLED TO RECEIVE
TERMINATION PAYMENT

The respondents, i.e., RDC submits that the defence of Force Majeure event by BTC, i.e., the
Claimant due to occurrence of flood and Covid-19 Pandemic should not be applicable in the
present scenario as there was a breach of contract by BTC owing to the fact that they failed to
fulfil their obligations as per the terms stated in the contract. Further RDC contends that the
termination of the contract by BTC was not rightful as there was a default of the contractor in
accordance with clause 23.1 of the EPC contract as they failed to complete the project work
within the stipulated timeline. Lastly, RDC would submit before the hon’ble tribunal that the
claimant is not entitled to receive any termination payment in accordance with clause 23.6(i)(a)
or 23.6(i)(c) of the EPC Contract.

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MEMORIAL FOR RESPONDENT
 ARGUMENTS ADVANCED

1. RDC IS NEITHER LIABLE TO PAY LIQUIDATED DAMAGES NOR

UNLIQUIDATED DAMAGES

1. It is submitted that RDC is not liable to pay liquidated damages in accordance with clause
3.1(iv)1 of the EPC Contract [1.1] RDC is not liable to pay unliquidated damages for breach of
clause 3.1(vi)(a)2 of the EPC Contract.[1.2] Time is not of essence in the EPC Contract,
therefore RDC is not liable to any damages.[1.3]

1.1 RDC Is Not Liable To Pay Liquidated Damages in Accordance with Clause 3.1 (iv) of
the EPC Contract

2. It is submitted that there is no effective causation between the delay in handing over the land
and the underutilization of plant and machinery [1.1.1]. Clause 3.1(iv) is a penalty clause and
hence the loss should be proved in a precise and exact manner.[1.1.2]. BTC condoned any
delay on the part of RDC in handing over of land [1.1.3]. BTC waived its right to claim
liquidated damages [1.1.4]

1.1.1. There is no ‘effective causation’ between delay in granting over of land by RDC
and the underutilization of plant and machinery

3. It is submitted that according to section 74 of the Borduria Contract Act, where an amount
has been specified in the contract as the amount to be paid in the event of a breach, then the
party complaining of the breach is entitled to receive from the party who has broken the contract
reasonable compensation, not exceeding the amount so stipulated, “whether or not such
damage has been proved or not”.3 For the application of section 74, it is imperative that there
is a ‘causation’ link between the breach and the delay.

4. In the case of Kailash Nath Associates v. DDA (2015)4, the court held that compensation is

1
Cl. 3.1(iv), Annex-C, Moot Proposition.
2
Cl. 3.1(vi)(a), Annex-C, Moot Proposition.
3
The Indian Contract Act, 1872, §74.
4
¶Kailash Nath Associates vs DDA (2015) 4 SCC 136. ¶Mahanagar Telephone Nigam Limited v. Tata
Communication Ltd, (2019), SCC OnLine SC 278. ¶Hindustan Petroleum Corporation Limited v. Offshore
Infrastructure Limited 2015 (6) Mh.L.J. 287. ¶Raheja Universal Pvt. Ltd. V. B.E. Billimoria and Co. Ltd.,
(2016), SCC OnLine Bom 1399. ¶Shri Coal Enterprises India Pvt. Ltd. v. Coal India Limited, (2018) 187 AIC
704. ¶Continental Transport Organization Pvt. Ltd. v. Oil & Natural Gas Corporation 187 AIC 704. ¶SPPL
Hotels Pvt. Limited v. Allahabad Bank, AIR 2018 Cal 185. ¶Arun Khanna v. Sumit, (2019), SCC OnLine Del.
13040.

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MEMORIAL FOR RESPONDENT
payable only when loss or damage has been proved as a result of the breach. In the case of
Fateh Chand v. Balkishan Das (1964)5, the court held that section 74 of the Borduria Contract
Act only dispenses with proof of actual loss or damage, however the payment of compensation
is not justified in cases where no legal injury has occurred. Thus, it is evident that establishing
loss or damage is a necessary ingredient of claiming breach under section 74.6

5. Further, it is submitted that just establishing ‘causation’ is not enough. It must be proved that
the breach of contract was in fact the ‘effective cause’ of the loss, rather than just being an
event, which gives the opportunity to prove loss.7

6. In the present scenario, no legal injury has resulted as a result of the slight delay in handing
over the land. Firstly, BTC accepted themselves, that RDC had granted around 67.5% of the
land in the non-forest area for the construction of the project8. Thus, they had adequate work
fronts for construction of the project, on the portions which were made available to them.
Therefore, there was adequate opportunity to employ plant and machinery. However, when the
project commenced there was inadequate deployment of plant and machinery by BTC. Thus,
the underemployment of plant and machinery is attributable to BTC and not RDC. Further,
from the monthly progress status reports of November 2018, July 2019, January 2020, it is also
clear there was not enough deployment of plant and machinery for the milestones to be
achieved.9

7. Hence, BTC is responsible for the under-deployment of plant and machinery and causing
delay in the project. Therefore, compensating BTC is in such a situation would result in ‘unjust
enrichment’10.

8. Since, there is no causation link between slight delay caused in granting over of land by RDC
and underutilization of plant and machinery, therefore RDC is not liable to pay damages in
accordance with clause 3.1(iv) of the EPC Contract.

5
Fateh Chand v. Balkishan Das, (1964), SCR (1) 515.
6
The Indian Contract Act, 1872, §74.
7
¶Galoo Ltd v. Bright Grahame Murray [1994] 1 WLR 1360. ¶Young v Purdy [1997] PNLR 130. ¶Weld-
Blundell v Stephens [1920] AC 956. ¶Banco de Portugal v. Waterlow & Sons Ltd [1932] AC 542. ¶Compania
Naviera Maropan S/A v. Bowaters Lloyd Pulp & Paper Mills Ltd [1955] 2 QB 68. ¶Quinn v Burch Bros
(Builders) Ltd [1966] 2 QB 370.
8
¶4, Annexure-A, Moot Proposition.
9
Annexure-E, Moot Proposition.
10
¶Titagarh Wagons Limted v Chowgule and Company, (2018), 4 Mah LJ 638. ¶Continental Transport
Organization Pvt Ltd v. ONGC Ltd., (2015), 7 Bom CR 922. ¶ Hindustan Petroleum Corporation Ltd v.
Offshore Infrastructure Ltd, (2015), 7 Bom CR 733.

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MEMORIAL FOR RESPONDENT
 1.1.2 Clause 3.1(iv) is a Penalty Clause and Therefore the Loss Should be Proved in a
Precise and Exact Manner

9. A clause for liquidated damages is one where parties have agreed for a certain amount to
be paid in a case of breach.11 It has a reasonable correlation with the losses suffered. On the
other hand, a penalty clause is one which does not have a reasonable correlation with the loss
suffered.12

10. In the case of M/S. 3I Infotech Limited v. Tamil Nadu E-Government Agency, (2019)13, the
Court held that a clause for liquidated damages and penalty should be treated differently when
it comes to enforcement. For enforceability of ‘liquidated damages’ clause, it must be a genuine
pre-estimate of the loss suffered. Further, it should be difficult for the parties to prove loss, and
it should have a reasonable correlation with the loss suffered.14 On the other hand, for a penalty
clause to be enforceable, it must be proved in a precise and exact manner.

11. In the present scenario, clause 3.1(iv) is a penalty clause, because it gives a uniform method,
for assessment of damages, for delay in granting of land by RDC, without considering other
factors in place, and therefore it does not have reasonable correlation with the losses suffered
by BTC, in terms of underutilization of plant and machinery.

12. Therefore, clause 3.1(iv) is a penalty clause, and hence the respondent should prove the
loss in a ‘precise and exact manner,’ in order to claim damages and hold RDC liable for the
damages suffered.

1.1.3 BTC Condoned Any Delay on The Part of BTC In Handing Over Of Land

13. It is contended that BTC condoned any delay on the part of RDC in handing over the land.
In the case of Ramnath International Pvt. Ltd. v. Union of India & Ors (2007)15, the Court
opined that if the delay is caused because of the actions of the employer, he cannot be
exonerated from his responsibility, except for a situation where the constructor has accepted
an extension of time as a consequence of the delay. In the case of Oil and Natural Gas
Commission v. Shyam Sundar Agarwalla (1984)16, a contractor’s request for an extension of

11
¶Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Ltd, (2009), 10 SCC 63. ¶Ghaziabad
Development Authority v UOI, (2000), 6 SCC 113.
12
J, BEATSON, A, BURROES & J, CARTWRIGHT, ANSON’S LAW OF CONTRACT (31 st ed, 2020).
13
M/S. 3I Infotech Limited v. Tamil Nadu E-Government Agency, (2019), SCC Online Mad 33295.
14
¶Dunlop Pneumatic Tyre Co Ltd v. New Garage and Motor Company, (1915) AC 79. ¶ Maula Bux v. Union
of India, (1969), 2 SCC 554.
15
Ramnath International Pvt. Ltd. v. Union of India & Ors, AIR 2007 SC 509.
16
Oil and Natural Gas Commission v Shyam Sundar Agarwalla, AIR 1984 Gau 11.

PAGE- 19
MEMORIAL FOR RESPONDENT
time, on account of non-availability of material was allowed, and hence the imposition of
penalty on account of delay was considered to be unjustified.

14. In the present scenario as well,17 BTC had asked for extensions, on the ground of delay in
handing over of land, and the same was granted by RDC, therefore it is evident that BTC had
condoned the slight delay caused by RDC in granting over of land by BTC.

1.1.4 BTC Waived Its Right to Claim Liquidated Damages

15. It is contended that BTC waived its right to claim liquidated damages in the present case.
In the case of Electronic Enterprises v. UOI (2000)18, where the goods were accepted pursuant
to delay, the court considered the same as a waiver of the right to claim compensation. In
another case of State of Rajasthan v. Chandra Mohan Chopra (1971)19, a contractor was
allowed extension of time by the employer, and the bill was prepared without any penalty, the
court held that the employer had waived its right to claim compensation.

16. Similarly, in the present scenario as well, when the non-forest land of 67.5% instead of the
entire 75% of non-forest land was granted by RDC to BTC, and BTC accepted the same,
without making any claim for compensation at that particular point of time, it waived its right
to claim damages from RDC.

1.2 RDC is Not Liable to Pay the Liquidated Damages for Breach of clause 3.1(iii) of EPC
Contract

17. It is submitted that the required procedure was not followed by BTC with respect to taking
assistance from RDC in acquiring permission from the forest department for clearing forest as
mentioned in clause 3.1(vi)(a) of the EPC Contract [1.2.1] Further, BTC did not suffer any
losses as a result of breach of clause 3.1(vi)(a)[1.2.2.]. No steps were taken by BTC to mitigate
the losses resulting from the alleged breach. [1.2.3]

1.2.1 The Required Procedure as Stipulated under Clause 3.1(vi)(a) was not followed by BTC

18. In the present scenario, clause 3.1(vi)(a) of the EPC Contract, required that a ‘written
request’ should be made by the contractor to the RDC in order to make a request for assistance
in procuring applicable permits, however no written request was made in the present case by
BTC to RDC.20 Hence, the required procedure in accordance with clause 3.1(vi) (a) was not

17
¶14, Statement of Undisputed Facts, Moot Proposition.
18
Electronic Enterprises v. UOI AIR 2000 Del 55.
19
State of Rajasthan vs Chandra Mohan Chopra AIR 1971 Raj 229 at 231
20
Art.3, Annexure-C, Moot Proposition.

PAGE- 20
MEMORIAL FOR RESPONDENT
followed.

1.2.2 BTC Did Not Suffer Any Loss as A Result of Alleged Breach of Clause 3.1(vi)(a)

19. According to section 73 of the Borduria Contract Act,21 in the event of a breach of contract,
the innocent party is liable to receive from the party who has broken the contract, compensation
for any loss or damage caused thereby, which the parties likely knew would result from the
breach. Further, the compensation is not required to be given in the event of any indirect loss
or damage caused due to breach.22

20. Further, a causal connection must be made between the breach of contract by the defendant
and the loss of the plaintiff. 23When it comes to a claim for unliquidated damages, the loss must
have resulted from the breach.24 Further, the breach should not have just provided an
opportunity for the loss to happen,25 and should be an effective cause for the loss to happen.26

21. In the present scenario, the delay in granting over of land did not result in any injury or loss
to BTC, for them to claim compensation under section 73 of the Borduria Contract Act, 187227.
The permission for clearing forest was received by 7 July, 2019. The monthly progress report
of July, 2019 shows that BTC did not deploy adequate plant and machinery of required
labourers, hot mix plant, road roller, cement mixer, and transport truck for earthwork. The
actual deployment was much less than required. Therefore, underutilization of plant and
machinery is not attributable to RDC.28

22. Therefore, since the delay in taking permission from the forest department for clearing
forest did not resulted in any legal injury, therefore, RDC is not liable to pay any amount of
unliquidated damages.

23. Further, RDC could also not be held liable for delay caused at later stages due to rain, and
COVID, because it would be too remote a loss to be made attributable to RDC.29

21
The Indian Contract Act, 1872, §73.
22
Ibid.
23
¶Kanchan Udyog Ltd v. United Spirits Ltd, (2017), 8 SCC 237. ¶Monarch Steamship Co Ltd v. A/B
Karlshamns Oljefabriker, (1949) AC 196. ¶Quinn v Burch Bros (Builders) Ltd, (1966), 2 QB 370.
24
British Racing Drivers’ Club Ltd v. Hextall Erskine & Co, [1996] 3 All ER 667
25
J, BEATSON, A, BURROES & J, CARTWRIGHT, ANSON’S LAW OF CONTRACT (31 st ed, 2020).
26
Kanchan Udyog Ltd v. United Spirits Ltd, (2017), 8 SCC 237.
27
Ibid.
28
Annexure-E, Moot Proposition.
29
¶Firm Kishanlal Shrilal Patwa v. UOI, AIR 1960 MP 289. ¶Shantilal Mutha & Co (Firm) Cotton Merchants,
Jalna v. Chirala Co-op Spinning Mills Ltd, (1986), 2 AP LJ 291.

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MEMORIAL FOR RESPONDENT
 1.2.3 No Steps Were Taken By BTC To Mitigate The Losses After It Got The Permission For
Clearing The Forest

24. In arguendo, even if BTC contends that there was a breach of clause 3.1(vi)(a) of the EPC
Contract which resulted in losses, the respondent contends that once, BTC was provided
permission for clearing the forest, it did not take any steps to mitigate losses for underutilization
of plant and machinery, which further caused delay in construction.

25. According to the principle of ‘mitigation’, a person who has suffered from a breach of
contract, should take reasonable steps in order to mitigate the losses that resulted because of
breach.30

26. Thus, an innocent party cannot claim to be compensated from the other party for a default
or loss which has occurred as a result of its own failure to act reasonably, rather than as a result
of the breach.31The underlying policy is to avoid a loss which could have been avoided by
taking reasonable actions.32

27. In the case of Bechkam v. Drake (1847)33, the court said that an employee who has been
dismissed wrongly, must accept an offer of a suitable alternative employment. Further, the
courts are also of the opinion that a claimant who has taken unreasonable steps, cannot make
defendant liable for the loss suffered by them.34

28. In the present scenario, adequate steps were not taken by RDC so as to mitigate losses. It
was alleged by BTC that the delay in handing over of land resulted in underutilization of plant
and machinery. However, as already stated, BTC had been given enough work fronts by 25
July 2018. Therefore, it was reasonable for it to deploy adequate plant and machinery.
However, during the entire completion schedule, the deployment of plant and machinery, was
less than required as is also clear from the Monthly Progress Reports of November 2018, July
2019, and January 202035. Therefore, it is clear that BTC had enough and ample opportunity
to mitigate the losses which it did not employ.

30
The Indian Contract Act, 1872, §74.
31
British Westinghouse Electric Co Ltd v. Underground Electric Rys Co of London Ltd [1912] AC 673.
32
J, BEATSON, A, BURROES & J, CARTWRIGHT, ANSON’S LAW OF CONTRACT 555 (31 st ed, 2020).
33
¶Beckham v. Drake (1847–9) 2 HLC 579. ¶Shindler v. Northern Raincoat Co Ltd [1960] 1 WLR 1038.
¶Brace v. Calder [1895] 2 QB 253.
34
Banco de Portugal v. Waterlow & Sons Ltd [1932] AC 452.
35
¶9, Annexure-B, Moot Proposition.

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MEMORIAL FOR RESPONDENT
 1.3 Time Is Not of Essence In The EPC Contract

29. It is argued that time is not of essence in the EPC Contract, and hence any penalty should
not be imposed for any slight delay, not amounting to any legal injury.

30. In the case of Welspun Specialty Solutions Ltd v. ONGC (2022) 36, the Supreme Court held
that in a situation where parties have provided expressly that ‘time is of essence,’ then the
stipulation would have to be read along with other provisions of the contract. In the case of
McDermott International Inc. v. Burn Standard Co. Limited and Others (2006)37, the court was
of the opinion that a contract containing clauses for extension of time, is indicative of the fact
the time is not of essence in the contract. Additionally, placing reliance on the conditions of
the contract and the parties’ conduct is necessary to conclude that time is of essence in the EPC
Contract.38

31. In the present factual scenario, it is clear from the conduct of the parties that time is not of
essence in the EPC contract. As stated by BTC themselves, by its application dated 1 October,
2019, BTC was granted extension of time by 5 months. Therefore, from the conduct of the
parties, it is clear that time is not of essence in the EPC Contract.

32. Therefore, since time was not of essence in the EPC Contract, no penalties should be
imposed on RDC for the slight delay, as the same did not resulted in any legal injury as well.

2. THE BANK GUARANTEE ENCASHED BY RDC IS VALID AND THEY ARE NOT
ENTITLED TO RE-IMBURSE IT TO BTC

33. It is contended that the encashment of the bank guarantee is valid according to Borduria
Contract Act, 1872 [2.1] and that RDC was right in invoking clause 23.1(i)(c) of the EPC
Contract and terminating the EPC contract in accordance with clause 23.1(ii) [2.2]. It is further
contended that RDC was justified in encashing the performance security in accordance with
clause 23.6(i)(a) of the EPC Contract. [2.3] Hence, the performance security should not be re-
imbursed.

2.1 That the Encahsment of The Bank Guarantee Is Valid According To The Borduria
Contract Act, 1872

34. It is contended that in the present case the Bank Guarantee is a Contract between the Bank
as the Principal Debtor and RDC as the Beneficiary and therefore it is independent of

36
Welspun Specialty Solutions Ltd v. ONGC, (2022), 2 SCC 382.
37
McDermott International Inc. v. Burn Standard Co. Limited and Others, (2006) 11 SCC 181
38
Welspun Specialty Solutions Ltd v. ONGC, (2022), 2 SCC 382.

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MEMORIAL FOR RESPONDENT
interference from the contentions of BTC [2.1.1] and further due to the unconditional nature of
the Bank Guarantee [2.1.2] the encashment of the bank guarantee is good in Law.

2.1.1 That the Tripartite agreement created via the Bank Guarantee for the given EPC
contract also created an independent Contract between the Bank and RDC

35. It is contended that the bank guarantee in the present factual scenario falls under sec. 12639
of the Borduria Contract Act, 1872 and accordingly, BTC had agreed to furnish 5% of the total
bid price of USD 197 million i.e. USD 9.85 million as performance security to RDC, whereby
the bank agreed to discharge the liability of BTC in case it defaults with its promise.40 This was
further upheld in the EPC contract signed between the two parties on 24th May 2018.41

36. However, a bank guarantee also creates a distinct and independent contract between the
bank and the beneficiary which is not affected by the underlying contract between the parties.42
Further, in the case of State Bank of India v. Mula Sahakari Sakhar Kharkahana (2006),43 the
court was of the opinion that an argument claiming that an unequivocable bank guarantee,
could be said to be subject to the terms of the EPC Contract, would be impermissible in law.
Therefore, it cannot be said that the BG in the present case was subject to the conditions of the
EPC Contract between BTC and RDC.

37. Further, it was held by the SC in Hindustan Steel Works Construction Ltd v Taparapore
and Co and Anr (1996)44, that the beneficiary is the sole and final judge on the question of
breach of the primary contract and the bank is necessitated to pay the amount covered in the
guarantee without any questions.45 Therefore, here, RDC being the beneficiary, shall be the
sole judge of deciding whether there was primary breach of contract or not.

2.1.2 That the Encashed Bank Guarantee was Unconditional in Nature

38. It is further contended that BTC agreed to furnish 5% of the final bid price as Performance
Security46 and this Performance Security has further been defined as “unconditional” according
to Article 7 of the EPC Contract.47 Since, the performance security is unconditional and

39
The Indian Contract Act, 1872, §126.
40
Ibid.
41
¶10, Statement of Undisputed Facts, Moot Proposition.
42
Ms. Amrita Ganguli, Bank Guarantees: An Analysis, MANUPATRA, ( July 21, 2022, 11:05).
43
State Bank of India v Mula Sahakari Sakhar Kharkhana Ltd, (2006), 6 SCC 293.
44
Hindustan Steelworks Construction Ltd v. Tarapore & Co, (1996), 5 SCC 34.
45
¶Syndicate Bank v. Ajay Kumar AIR 1992 SC 1066. ¶Dwarikesh Sugar Inds. Ltd. v. Prem Heavy Engg.
Works, AIR 1997 SC 2477.
46
¶8, Statement of Undisputed Facts, Moot Proposition.
47
Art.7, Annexure-C, Moot Proposition.

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MEMORIAL FOR RESPONDENT
irrevocable in nature, the encashment of the same is valid.

39. In the case of Hindustan Steelworks Construction Ltd v. Tarapore & Co (1996),48 the court
held that the in case of an ‘unconditional bank guarantee,’ the bank has an absolute and
unequivocal obligation to encash the performance security not considering any existing
underlying dispute in the main contract.49

40. This was further upheld in the case of U.P. Co-Operative Federation Ltd v. Singh
Consultants & Engineers (1988)50, wherein the Supreme Court held that the bank has to pay
the security the minute it is demanded without any contestation regarding non-performance of
the contract, in order to protect large commercial construction undertakings, in the case of an
‘unconditional bank guarantee’51

41. In the present factual scenario, taking into consideration that an independent contract arose
between the Bank and RDC out of the tripartite agreement between the Bank, BTC and RDC,
and the bank guarantee was unconditional and irrevocable in nature, RDC had the right to
encash it, upon the default of the contractor as stipulated under clause 23.1(i)(c) of the EPC
Contract, which is also in furtherance of the commercial sanctity of the EPC Contract.

2.2 That RDC Was Right in Invoking Clause 23.1(c) Of the EPC Contract And further
Terminating the Contract in Accordance with Clause 23.1(ii)

42. It is argued that in the present scenario, the extension of 5 months taken by BTC was not
required [2.2.1] and further, there was breach of clause 23.1(i)(c) of the EPC Contract and
hence RDC was right in terminating the EPC Contract in accordance with clause 23.1(ii) [2.2.2]

2.2.1 Extension of 5 months taken by BTC was not actually required in the Present
Circumstances

43. In the EPC Contract, clause 23.1(c)52 of the EPC Contract stipulated that if, the contractor
fails to achieve the latest milestone as provided under Schedule J, which was further subject to
any extension of time, and continues to be in default for 45 days, the same would be considered
as default, except where the same has occurred as a result of breach by authority or due to a
force majeure event.

48
Hindustan Steelworks Construction Ltd v. Tarapore & Co, (1996), 5 SCC 34.
49
Ansal Engineering projects Ltd v. Tehri Hydro Development Corporation Ltd, (1996), 5 SCC 450.
50
U.P. Co-Operative Federation Ltd v. Singh Consultants & Engineers, (1988), 1 SCC 174.
51
Akshay Anurag, Bank Guarantee and Judicial Intervention, MANUPATRA ( July 21, 2022, 11:05).
52
Cl. 23.1(c), Annex-C, Moot Proposition.

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MEMORIAL FOR RESPONDENT
44. The extension asked by BTC53 was invalid because firstly, the independent engineer had
urged BTC to provide him with a programme of the construction period, however, the same
wasn’t provided by BTC. Secondly, the independent engineer had advised BTC that it should
spend the time of the rainy season in constructing pre-fabricated units for the flyovers required
to be made at the Lorraine, Munro and Lubniti intersections. However, the same was not done
by BTC. Thirdly, the rain was a yearly phenomenon in the region. Fourthly, BTC themselves
had claimed their expertise in constructing white top roads in the rainy season of the world.54

45. Therefore, an extension on the ground of rain is not valid in the present circumstances,
which also lead to delay in the completion of first two milestones, and they were completed by
September, 2020, instead of being completed in 14 months i.e., by August 2020.

2.2.2. RDC was right in invoking clause 23.1(i)(c) of the EPC Contract, and terminating the
contract in accordance with clause 23.1(ii)

46. According to Schedule J of the EPC Contract, the third milestone should have been
completed within 20 months from the date of commencement of the project 55. Here, the date
of commencement of project was 24 June, 2018.56Thus, 20 months from the commencement
date would be 24 January, 2020. Additionally, also considering the extension of five months
granted by independent engineer and additional 45 day-period,57 the entire project should have
completed by 9 August 2020. However, the same did not happen. Further, here, even though
RDC had invoked force majeure and the same was not valid as will be argued in the 3rd issue.

47. Hence, RDC was right in invoking clause 23.1(i)(c)58 of the EPC Contract, due to the delay
caused by BTC in completing the first two milestones, and its failure of not being able to
achieve the third milestone according to the deadline set by Schedule J, and therefore RDC was
also entitled to terminate the contract in accordance with clause 23.1(ii)59 of the EPC Contract.

53
¶14, Statement of Undisputed Facts, Moot Proposition.
54
¶4, Statement of Undisputed Facts, Moot Proposition.
55
Schedule J, Annexure -C, Moot Proposition.
56
¶10, Statement of Undisputed Facts, Moot Proposition.
57
¶7, Annexure-A, Moot Proposition.
58
Cl. 23.1(i)(c), Annex-C, Moot Proposition.
59
Cl. 23.1(ii), Annex-C, Moot Proposition.

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MEMORIAL FOR RESPONDENT
 2.3 That RDC was Justified in Encashing the Performance Security In Accordance With
Clause 23. 6(i)(a) Of the EPC Contract.

48. It is contended that under the EPC Contract, there was a timeline which was agreed upon
in the form of Schedule-J and which had to be adhered to for the smooth completion of the
project, which BTC didn’t adhere to [2.3.1]. BTC did not prepare for heavy rainfall known to
be seasonal in Borduria [2.3.2]. The invocation of the performance security is valid as BTC had
not shown any intention towards completion of the project [2.3.3].

2.3.1. That BTC did not adhere to the timeline for the Construction of the Highway

49. It is contended that BTC was given a project duration of 32 months60 for the completion of
the highway. Taking into consideration the Covid-19 pandemic which delayed the project by
3 months and 15 days, starting from March 2020, and continuing till 15 June, 2020 61 BTC
should have been able to complete the construction activities. The project started in 2018,
however, BTC had only managed to complete the second project milestone till September,
2020, i.e. 80 Kms out of a total 267 Kms, as was indicated by the status report of the
independent engineer dated 30 September, 2020.62 BTC has attributed this to delays in
receiving ROW of 67.5%63instead of 75%, however, this was sufficient enough for BTC to
start the construction activity.

50. Further, RDC was granted an extension of time by 5 months and was further even willing
to offer additional support for the Pandemic situation. However, BTC issued a notice of
termination showing that it had no intention of completing the project and thereby, RDC was
left with incomplete and half-finished roadworks. As a result, RDC suffered additional losses,
due to practical implications such as time and money required to release a new tender and
finding a new constructor to finish the project.

51. Hence, RDC was right in invoking clause 23.1(i)(c) of the EPC Contract, due to BTC’s
failure of not being able to achieve the third milestone according to the deadline, and therefore
was also correct in terminating the EPC contract in accordance with clause 23.1.

60
¶12, Statement of Undisputed Facts, Moot Proposition.
61
¶9, Annexure-A, Moot Proposition.
62
¶17, Statement of Undisputed Facts, Moot Proposition.
63
¶4, Annexure-A, Moot Proposition.

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MEMORIAL FOR RESPONDENT
52. Hence, RDC rightfully encashed the Bank Guarantee on the ground of contractor default
as there was non-performance by BTC even before the COVID-19 pandemic, as shown by their
delay in project milestone I and II, and non-completion of project milestone III, as also proved
in issue 2.2.2. Hence RDC was right in invoking clause 23.6(1)(a) of the EPC Contract.

2.3.2 BTC did not prepare for the Heavy Rainfall known to be Seasonal in Borduria

53. It is further submitted that BTC was not equipped to construct the white-top highway, given
that they sought two extensions64 due to rainfall known to be seasonal in the regions of Borduria
and further showed carelessness in not preparing and deploying adequate plant, machinery, and
manpower as is visible from the monthly progress reports of 1 November 2018, 1 July 2019,
and 1 January 2020.

54. Further, it did not pay attention to the advice of the independent engineer who by letter
dated 7 July, 2018, had advised BTC that it should spend the time of the rainy season in
constructing pre-fabricated units for the flyovers required to be made at the Lorraine, Munro,
Lubniti intersections.65 Despite the callous attitude shown by BTC, the Independent Engineer
granted an extension of 5 months so that BTC could make up for its delays in the project66.

55. In the case of M/S Salwan Construction Co v. UOI (1977), the court held that that a
contractor can claim delay for omission of the employer which might have lead to increase of
expenses in the performance of works. However, in this case BTC was employed with the
specific reason of constructing the road in an area with heavy rainfall. Salwan case further
mentions that this claim would not hold if the employer provided additional time to make up
for the delay67, which RDC, was in fact, provided in the present case. Hence, the only entity
suffering loss in this situation is the RDC and therefore their encashment of the Bank Guarantee
for under-performance of BTC is good in Law.

2.3.3 It is valid to encash the performance security in accordance with clause 23.6 of the
EPC Contract, and the exceptions of force or irretrievable damages does not apply in the
present scenario

64
¶14, Statement of Undisputed Facts, Moot Proposition.
65
¶6, Annexure-B, Moot Proposition.
66
¶5, Annexure-B, Moot Proposition.
67
M/S. Salwan Construction Co v. Union of India ILR, (1977), 2 Del 748.

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MEMORIAL FOR RESPONDENT
56. It is contended that an injunction against bank guarantee can be granted upon the occurrence
of a Force Majeure event in such a way that it becomes impossible for the parties to perform
the contract, or the contract becomes frustrated.68 However, in the present scenario, the event
was a non-political Force Majeure event. Even if it halted the construction work, for around 3
months and 15 days69, it did not in any way frustrate the contract or prevented BTC from
working on other parts of construction.

57. Further, construction work could have been continued when the lockdown was lifted on
15th June 2020. However, by this point, BTC was significantly behind the construction of the
highway. Further, RDC was willing to offer relief and support to BTC including an extension
for the completion of the project70 but BTC instead sent a notice to RDC, terminating the EPC
Contract on the grounds of Non-Political Force Majeure event.

58. In this case, RDC was left in a lurch with an incomplete national highway, leading to further
new problems such as the need to release new tenders and bids, accounting for the lack of
progress, and fear due to the pandemic and time lost in the slow construction as well as the
time lost in finding a new constructor. Further, RDC faced monetary losses far exceeding the
value of the Bank Guarantee and as such encashed it to rightfully recoup some of the losses.

59. In the case of Haliburton Offshore Services v. Vedanta Ltd (2020), the court highlighted
that non-performance due to Covid-19 pandemic is not the sole determinant in termination but
also the ‘behaviour of the contractors prior to the termination.’71 This was also upheld by the
Supreme Court in Indhirajith Power Private Limited v. UOI (2020).72 In the present scenario,
the attitude of the BTC towards completing the milestones prior to COVID 19 clearly shows
their insincere attitude as also proved in issue 2.3.2.

60. Therefore, since BTC did not meet the set-out project deadlines and nor did it take the
advice of the Independent Engineer into consideration, the lack of intention to complete the
construction activities is evident, which further shows that there is no case for exception of
‘special equities’ or ‘irretrievable injury’ to be invoked in the present case, and it was RDC,
who had been suffering losses throughout the project. In the case of Itek Corporation v. The
First National Bank of Boston (1981),73 the court was of the view, that if in a situation the

68
Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd., (1997), 6 SCC 450.
69
¶9, Annexure-A, Moot Proposition.
70
¶11, Annexure-B, Moot Proposition.
71
Haliburton Offshore services vs Vedanta Ltd. (O.M.P. (I) (COMM) & I.A. 3697/2020).
72
Indhirajith Power Private Limited vs UOI. W.P.(C), 2957 of 2020.
73
Itek Corporation v. The First National Bank of Boston, (1981), 566 F Supp. 1210

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MEMORIAL FOR RESPONDENT
termination would cause unjust enrichment to the beneficiary and irretrievable harm to the
guaranteeing party, then the bank guarantee should not be encashed. This stance was also taken
in the case of and Bhel v Egyptian Electricity Transmission Co (2017)74. However, no
irretrievable loss would be caused to RDC in the present case if the bank guarantee is encashed.
Further, an injunction for fraud can only be granted when the Beneficiary, for the purpose of
drawing credit, fraudulently presents to the bank documents of a nature he knows contains
untrue facts, which is clearly not applicable to the factual situation at hand.75

3. THE INVOCATION OF ‘FORCE MAJEURE’ BY BTC FOR THE TERMINATION

OF THE CONTRACT IS NOT VALID AND THEY ARE NOT ENTITLED TO
RECEIVE THE TERMINATION PAYMENT

61. The Respondent contends that the defence of ‘Force Majeure’ by the claimant due to the
occurrence of floods as a result of heavy rainfall in Latveria and imposition of Covid-19
lockdown should not be applicable [3.1]. The respondent also challenges the termination of the
contract by the claimant on the grounds of Force Majeure was not rightful as there was a default
of the claimant itself as per clause 23.176 of the EPC Contract [3.2]. Lastly, the respondents
would like to present an argument that the claimant is not entitled to receive any termination
amount as per clause 23.6(i)77 of the EPC Contract [3.3].

3.1 Defence of Force Majeure by the Claimant Should not be Applicable:

62. The respondent herein contends that defence of Force Majeure by the claimant should not
be applicable as clause 21.278 of the EPC Contract states about the various non-political
situations such as floods and epidemics wherein the affected party can make a claim for relief,
subject to the conditions under clause 21.2(d)79, wherein the principle of Force Majeure cannot
be invoked.

63. Clause 21.2(d) states that a non-political force majeure would not be applicable in cases,
(i) where there has been a failure of the contractor to comply with applicable laws or permits,
(ii) where there has been a breach of enforcement of this agreement, and (iii) where there is a
breach by a party in exercising its rights in accordance with the contract.

74
Bharat Heavy Electricals Limited (BHEL) v. Egyptian Electricity Transmission Company & Ors.
CS(COMM.) 675/2017 (Delhi High Court).
75
Itek Corporation v. The First National Bank of Boston, 566 F Supp. 1210
76
Cl. 23.1, Annexure-C, Moot Proposition.
77
Cl. 23.6(i), Annexure-C, Moot Proposition.
78
Cl. 21.2, Annexure-C, Moot Proposition.
79
Cl. 21.2(d), Annexure-C, Moot Proposition.

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MEMORIAL FOR RESPONDENT
64. In the present scenario, a formal EPC Contract was entered into between the parties on 24th
May, 2018 and the date of the commencement of the project was decided to start 1 month from
the signing date80. It was decided that out of the project length of 267 km, 75% of work, i.e.,
198 kms in the forest land would be delivered within 1 month from Commencement date, i.e.,
25th July, 2018, and the rest of the Project by January 201981.

65. The claimant here raised an argument that there was a delay in handing over the land by
the respondent as only 67.5% of non-forest land out of 75% was granted by 25th July, 2018.
However, as respondents we would first contend that, the claimant were provided with 67.5%
of the non-forest land on 25th July 2018, and during that time there was no incidence of any
force Majeure event, and nor did the claimant ask for any extensions during that period. This
act of not continuing the construction work on the 67.5% available land shows that the claimant
was negligent in their activity as they had adequate Workfront’s, but the same was not utilized.
Hence, this argument of claimant does not have merit.

66. This non-performance of the construction activity shows that there was a breach by the
party in enforcing the terms of the agreement and that they had not exercised their rights as per
the terms of the contract which stated that the construction activity in the non-forest land was
to be handed over within a month from the date of commencement, however even after
receiving 67.5% of the land, the claimant only managed to complete 2nd milestone, i.e., a stretch
of only 80 kms in 2 years’ time period82.

67. Further, the respondent also submits, that the argument raised by claimant with regards to
extension due to floods should be nullified because, the independent engineer by its letter dated
07th July, 2018 had already warned the claimant regarding the rainy season at the construction
stretch.83 Thus, seeing that rain is a common phenomenon in the region, the same cannot be
regarded as an extreme event for which the force majeure can be invoked 84. Additionally, the
claimant had an expertise in performing construction activities in the tropical region85, thus
even after having an expertise in the area and considerable knowledge about the weather
conditions, the claimant did not adopt appropriate measures to continue the work, and thus the
respondent would like to present that the excuse of heavy rainfall for invoking the force

80
¶10, Statement of Undisputed Facts, Moot Proposition.
81
¶11, Statement of Undisputed Facts, Moot Proposition.
82
¶17, Statement of Undisputed Facts, Moot Proposition.
83
¶6, Annexure-B, Moot Proposition.
84
¶7, Annexure-B, Moot Proposition.
85
¶4, Statement of Undisputed Facts, Moot Proposition.

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MEMORIAL FOR RESPONDENT
majeure clause should not be held valid.

68. In Furtherance, it is important to note that the claimant have also taken the excuse of covid-
19 pandemic for the non-completion of the project work86. However, as respondent we would
like to submit, that although Covid-19 Pandemic amounted to an event under Force Majeure,
but the same cannot be exercised by the claimant as there was a breach of obligations from
their side much before the pandemic started as they failed to achieve the required milestone
even after being provided with an extension of 5 months .87

69. Also, by the time Pandemic commenced 80% of the milestone, i.e., a stretch of 200 Kms88
was supposed to be completed after providing extensions89, however the claimant managed to
complete only a stretch of 80 kms within a stipulated time of 2 years90.

70. This clearly reflects that the claimant did not comply with terms of the agreement, and there
was breach on the part of the claimant in performing the obligations as per the contract, thus
the excuse of Covid-19 Pandemic should not subsist.

71. The courts have also taken a firm and a strong stand in scenarios which involve the usage
of Force Majeure Clause as defence. In the case of M/S Alopi Parshad & Sons v. Union of India
(1960)91, the court ruled that the defence of force majeure should be viewed strictly and mere
difficulty in performing the obligations is not a sufficient cause to invoke the clause. A similar
stand was also taken in the case of Naihati Jute Mills Ltd v. Hyaliram Jagannath (1967)92,
where the courts opined that a performance cannot be excused merely on the ground that the
contract has become onerous.

72. Considering, all these rulings by the various courts, it is clear, the excuse of Covid-19
Pandemic as a force majeure event has been interpreted in a strict sense, where the courts have
stated that in order to justify a non-performance or breach of contract due to COVID 19, it must
be ascertained on the basis of facts and circumstances of each case, and the same can be held
true only in those scenarios where the non-performance by the party was genuine.93In the case

86
¶10, Annexure-A, Moot Proposition.
87
¶8, Annexure-B, Moot Proposition.
88
Schedule-J, Annexure-C, Moot Proposition.
89
¶11, Annexure-B, Moot Proposition.
90
Schedule-J, Annexure-C, Moot Proposition.
91
M/S Alopi Parshad & Sons v. Union of India, (1960), SCR (2) 793.
92
¶Naihati Jute Mills Ltd v. Hyaliram Jagannath, (1968), SCR (1) 821. ¶ Standard Retail v. G.S Global Corp
Pvt Ltd. (2020), Commercial Arbitration Petition (l) no. 404 of 2020.
93
Nilava Bandyopadhyay & Adhip Kumar Ray, Force Majeure: How Successful has the Law been Post Covid
in India, Economic Times, April 24, 2021. https://economictimes.indiatimes.com/small-biz/legal/force-majeure-
how-successful-has-the-law-been-post-covid-in-india/articleshow/82227338.cms?from=mdr.

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MEMORIAL FOR RESPONDENT
of Halliburton vs Vedanta, the court held that force majeure clause has to be interpreted
narrowly, and if there is a breach of contract before Covid-19 period, then the party is not
entitled to take benefit of the Force Majeure Clause.94

73. Thus, applying the principles of these judgments, it is submitted that the claimant should
not be allowed to take the defence of Covid-19 Pandemic in order to invoke the Force Majeure
Clause as they had breached the contract prior to the start of the pandemic.

74. Thus, keeping in view the above arguments and reasoning, the respondent submits that the
defence of Force Majeure by the claimant should not be applicable.

3.2 The Termination of the Contract by the Claimant was not Rightful:

75. The respondent herein contends that the termination of the contract by the claimant on the
grounds of force majeure was not rightful, as there was a breach of contract by the claimant
themselves as they failed to fulfil their obligations as per the terms of the contract, and therefore
the respondent contends that the termination notice sent by them was lawful and termination
of the contract should be enforced in accordance with clause 23.195 of the EPC Contract, which
deals with the issue of “Termination for Contractor Default”.

76. Clause 23.1(c)96 states that a contractor would have deemed to be in default of the
agreement if the contractor does not achieve the latest outstanding project milestone in
accordance with Schedule J97 of the EPC Contract in furtherance with the time extension being
provided and the default continues for 45 days even after being provided the extension.

77. In the present scenario, the claimant contractor company was provided with contract to
complete the 267 km expressway in a time frame of 32 months98, starting from 24th June 2018.
However, the status report dated 30th September 202099, revealed that the claimant had only
managed to complete the 2nd milestone of the contract, i.e., only a stretch of 80 kms were
completed in a span of 2 years, whereas that work should have been concluded in 14 months
from the date of commencement. i.e., 24th August 2019100.

94
M/S Haliburton Offshore Services v. Vedanta Limited & Anr, (2020), O.M.P. (I) (Comm) 88/2020 & L.A.
3697/2020.
95
Cl. 23.1, Annexure-C, Moot Proposition.
96
Cl. 23.1(c), Annexure-C, Moot Proposition.
97
Schedule-J, Annexure-C, Moot Proposition.
98
¶12, Statement of Undisputed Facts, Moot Proposition.
99
¶17, Statement of Undisputed Facts, Moot Proposition.
100
Schedule-J, Annexure-C, Moot Proposition.

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MEMORIAL FOR RESPONDENT
78. Though, the claimant has contended that there were floods in the tropical area, due to which
the work was halted, but the same contention should be nullified because an extension of 5
months was provided to the claimant against their application dated 1st October 2019 due to
the delay caused due to rains101. Though the extension application of the claimant dated 4th
December 2018 seeking 3-month extension was rejected102, but there were adequate grounds
to do the same as the whole purpose of the contract was to build an expressway in the tropical
region by building roads more durable and efficient during rain103.

79. Additionally the claimant was made aware about the frequent rains in the region by a letter
dated 07th July, 2018104, but the same was ignored by them. As a result, they failed to complete
the project within the stipulated time limit decided as per the contract.

80. In Furtherance, the respondent would like to submit that the claimant, contractor company
had not mobilised adequate plant and machinery towards the construction work, and thus due
to this they failed to achieve the milestones. The same can be proven using the Monthly
Progress Report shared by the Independent Engineer dated 1st November 2018, 1st July, 2019,
and 1st January 2020105.

81. Progress report of November 2018 clearly shows that the contractor had deployed less
machinery and labour i.e., only 29 labourers were deployed whereas the requirement was of
50106. A similar scenario can be seen in all the reports that there was underutilization and less
deployment of plant and machinery, than what was required to complete the project. Thus, the
delay in completion of work should not be attributable to the respondent as there was a breach
of contract by the claimant itself.

82. Thus, as respondent we contend that as per clause 23.1(c), the contractor did not achieve
the milestone due to their own fault, and did not manage to cope up the default within 45 days.
In furtherance, as respondent we would submit, that as per clause 23.1(ii)107 of the EPC
Contract, if such default takes place, then the authority, i.e., the respondents in this case are
entitled to terminate the agreement by issuing a termination notice to the contractor. Thus, in
the present scenario, the termination notice dated 17th August 2020 sent by the respondent to

101
¶7, Annexure-A, Moot Proposition.
102
¶8, Annexure-A, Moot Proposition.
103
¶5, Annexure-B, Moot Proposition.
104
¶13, Statement of Undisputed Facts, Moot Proposition.
105
¶9, Annexure-B, Moot Proposition.
106
Annexure-E, Moot Proposition.
107
Cl. 23.1(ii), Annexure-C, Moot Proposition.

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MEMORIAL FOR RESPONDENT
the claimant108 was not illegal, as the terms of the EPC Contract were duly complied with.

83. The courts have also taken a strong stand in cases involving termination of contract due to
contractors’ default and have held that in cases and circumstances where it can be reasonably
inferred that the termination notice has been issued taking into account the various factors
responsible for it, the same can be held valid. Further, there should not arise any question of
non-termination on any reason whatsoever because there has been no intent by the contractor
to expedite the project and in such a scenario there is no other option left with the authority,
other than terminating the contract.109

84. The Bombay High Court in the case of Bharat Petroleum Corp Ltd & Anr v. M/S Jethanand
Thakordas Karachiwala & Ors (2000)110, held that when a party is suffering losses due to the
non-performance by the other party, then in such a scenario, the affected party cannot be
compelled to continue the contract, and the same can be terminated at the option of the affected
party.

85. A similar inference can also be drawn in the present case where it was the fault of the
claimant as they failed to complete the project in the given time period due to which the
respondent had to suffer losses for the maintenance of the expressway and reinstating new
tenders. Further, even after providing extension, there was no intent by the claimant to expedite
the project work which can be seen through the status report shared by the independent engineer
which reflects that the claimant continued to work with under utilization of plant and machinery
and deployed less resources than the actual prescribed limit, hence as a result the claimant
failed to achieve the milestones.

86. Thus, applying all the reasoning and arguments, the respondent submits that the termination
of the contract by claimant on the grounds of force majeure is not rightful, and that the
termination notice sent by the respondent on the ground of contractor’s default should be held
valid as per clause 23.1 of the EPC contract.

108
¶16, Statement of Undisputed Facts, Moot Proposition.
109
¶National Highways and Infrastructure Development Corporation Ltd & Others v. M/S T.K. Engineering
Consortium Pvt Ltd & Others, (2019), WA 171 of 2019. ¶State of UP v. Bridge & Roof Co Ltd, (1996), 6 SCC
22. ¶State of Bihar v. Jain Plastics and Chemicals Ltd, (2002), 1 SCC 215.
110
Bharat Petroleum Corp Ltd & Anr v. M/S Jethanand Thakordas Karachiwala & Ors, 2000 (1) BomCR 289.

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MEMORIAL FOR RESPONDENT
 3.3 The Claimant is not Entitled to Receive any Termination Amount

87. The respondent with regards to the present case would submit before the honorable’ tribunal
that the claim raised by the claimant on account of receiving the termination amount due to the
event of force majeure should not be taken into consideration as there was sheer negligence by
the claimant in completing the project work, and the excuse of flood and Covid-19 should be
nullified as the whole failure to perform the obligations fall under the Default of the Contractor
company, i.e., the claimants and thus the amount granted in situations of termination would be
dealt in accordance with Clause 23.6111 of the EPC contract.

88. Clause 23.6(i)(a)112 of the EPC contract states that, if the termination of the contract has
been due to the contractor’s default, then in such a scenario, the authority has the right to encash
and appropriate the performance security, and they can also raise a claim for any amount which
has been in excess of the amount of the encashed performance security for any losses, or any
other costs which have incurred due to delay in work or completing the work and maintenance.

89. In the present scenario, the claimant has raised a contention and demanded that USD 9.85
million which is equivalent to the value of encashed performance security be reimbursed113.
However, the respondent contends that the construction work was not completed due to the
claimant’s default, as they underemployed the manpower and machinery to complete the
project milestones. Additionally, there was inadequate planning on the side of the claimant and
failing to take into the consideration the advice of the independent engineer with respect to
handling of rains.

90. Owing to all the reasons stated above it can be clearly inferred that the contractor claimant
company was at default, and due to this reason clause 23.6(i)(a) of the EPC contract should be
invoked and the respondent can encash USD 9.85 million which was paid as performance
security.

91. The claimant also demanded that they would be entitled to receive the value of unpaid work
due to the termination of the contract. This contention was raised by the claimant as clause
23.6(i)(c)114 of the EPC contract states that the contractor is entitled to receive the value of
unpaid work after adjusting the sum amount payable or recoverable as the case may be.

111
Cl. 23.6, Annexure-C, Moot Proposition.
112
Cl. 23.6(i)(a), Annexure-C, Moot Proposition.
113
¶14, Annexure-A, Moot Proposition.
114
Cl. 23.6(i)(c), Annexure-C, Moot Proposition.

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MEMORIAL FOR RESPONDENT
92. However, in the present scenario, the claimant is not entitled to any payment for unpaid
work because the losses which the respondent suffered were in excess of the BG that was
encashed and the value was equivalent to the cost of unpaid work115.

93. Moreover, clause 23.6(i)(a)116 clearly states that the authority can claim any amount due to
losses, delay, or maintenance, and in the present scenario also, the claim for unpaid work should
be adjusted to the cost that the respondent will incur in maintaining the project work which has
been completed along with the costs the respondent will further incur in appointing a new
tender for the project117.

94. In the case of M/S Haliburton Offshore Services v. Vedanta Limited & Anr, (2020)118, which
resembled similar facts and circumstances as are given in the present situation, the courts held
that the contractor was obligated to pay various damages to the authority due to their default,
and it was expressly mentioned that if there is a default in payment by the contractor
construction company, then the authority can terminate the contract and deduct money from
the amount which is paid to the contractor as per the agreement between both the parties.

95. Thus, in response to all the above arguments and judicial interpretation, the respondent
submits that the claimant should not be entitled to termination payment due to the force majeure
clause, and further the respondent urges before the tribunal that the termination of the contract
by the respondent owing to contractor’s default is lawful and that they are entitled to receive
termination payment as per clause 21.8 and 23.5 of the EPC contract.

115
¶14, Annexure-B, Moot Proposition.
116
Cl. 23.6(i)(a), Annexure-C, Moot Proposition.
117
Supra at note 41.
118
M/S Haliburton Offshore Services v. Vedanta Limited & Anr, (2020), O.M.P. (I) (Comm) 88/2020 & L.A.
3697/2020.

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MEMORIAL FOR RESPONDENT
 PRAYER

In light of the above submissions, counsel for Respondents respectfully requests that:

I. The Respondent should not be held liable to pay liquidated damages to the claimant
in accordance with clause 3.1(iv) of the EPC Contract
II. The Respondent should not be held liable to pay unliquidated damages to the
Claimant
III. The Respondent was correct in encashing the bank guarantee and it is not to be re-
imbursed to the Claimant
IV. The Claimant was not right in invoking Force Majeure clause in accordance with
Clause 21 of the EPC Contract.
V. The termination of the contract by the claimant was not rightful as per clause 23.1
of the EPC Contract.
VI. The Respondent was lawful in terminating the contract due to claimant’s default
and they are not liable to pay termination payment in accordance with clause 21.8
and 23.5 of the EPC Contract.

DATE: 26/07/2020 COUNSEL FOR THE RESPONDENT

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MEMORIAL FOR RESPONDENT