4TH FACULTY OF LAW (INTRA) MOOT COURT COMPETITION 2019-20

FACULTY OF LAW, JAMIA MILLIA ISLAMIA

27TH – 29TH MARCH 2020

IN THE MATTER OF

Stark Industries Ltd.

v.

James Moriarty

MOOT PROPOSITION

(Edited)
1. John Hamish Watson and James Moriarty were meritorious students and childhood
friends who grew up together in New Delhi, India. While John was an ambitious man
from a financially well off family who had dreamt of being an industrialist since time
immemorial, James came from a humble background and wanted to achieve excellence
in academics and scientific research in order to become successful.

2. After completing their primary education in 2003, John and James appeared for the
insurmountably competitive IIT-JEE entrance exam, and secured high ranks, which
eventually led to their admission in IIT Delhi (Computer Science Branch), a premier
institute for engineering and technological research in India.

3. Post the successful completion of their graduation in 2007, they parted ways to chart their
own professional course. John joined IIM-A, a top management B-School in India, in
furtherance of his wish to capture the technological markets of the country, while James
stayed at IIT Delhi to complete his Masters and PhD., wherein his research primarily
focused in artificial intelligence and complex algorithms for Applications and Operating
Systems in smart devices.

4. After gaining some managerial experience from 2009 to 2014, John finally managed to
venture into the software and technology market vide his company – ‘Stark Industries
Ltd.’ (herein after referred to as “the said company”), incorporated on 02.06.2014, with
its head office in New Delhi. The company primarily focused on Applications, Operating
Systems, anti-virus software development for smart devices compatible with modern
Artificial Intelligence. Post its inception, the said company, under the capable leadership
of John, grew exponentially and soon became a giant in the industry, providing fierce
competition in the market.

5. That after the initial projects of the company turned out to be immensely successful while
generating staggering profits, John’s ambitions grew and on 14.08.2015, after several
discussions with his Lead Developers and Operation Managers of the said company, he
decided to officially launch “Project J.A.R.V.I.S” (herein after referred to as
“JARVIS”) – an Artificial Intelligence based Application which would collect data of
its users’ activities and preferences, subsequently utilizing the same to the said user’s
advantage and convenience, while also acting as an ad hoc search engine. When it was
 introduced, it was a pioneer project with respect to the use of advanced Artificial
Intelligence in common smart devices, and almost immediately gained a positive traction
with the consumers. However, while it was a consumer friendly Application, it was
initially susceptible to unknown bugs and Trojan viruses which led to multiple
complaints from some users, making it slightly difficult for the said company to capture
the global market.

6. Meanwhile, after the completion of his PhD., Dr. James became a lecturer at a private
university at a meagre salary, after having failed to secure a research position/job at any
company or government R&D organisation due to lack of employment opportunities
prevalent in this field, and also on account of lack of funds to set up his own research
laboratory.

7. That in and around August 2016, the two childhood friends came across each other at
their college re-union party, wherein they caught up with each other’s lives and
professional achievements. After realising that John’s successful company dealt in
exactly the same field that James had done is doctoral study in, and after having severely
struggled to find a financially stable employment post his PhD, the latter began
persuading the former to hire him as a Developer in the said company. While John was
initially hesitant, upon perusing his friend’s doctoral thesis, he realised that James’ skills
made him the only person who could resolve the technical lacunae that prevailed in
JARVIS, and that he could help the said Company capture global markets as quickly as
it captured domestic markets.

8. That in addition to the fact that James was highly qualified to run JARVIS, while also
further realising that James was in a desperate requirement of financial upliftment, John
hired James as an “Assistant Developer” in the said company upon the latter’s relentless
insistence. The employment terms were stipulated in the standard Service Agreement
(ANNEXURE A-1) dated 05.09.2016, where in James was to be provided with a
monthly salary of Rs. 35,000/- (Rupees Thirty Five Thousand Only), plus certain regular
perquisites, with a pre-decided increment of 3% biannually. Furthermore, the said
Agreement also contained standard non-solicitation and non-compete clauses
(ANNEXURE A-1), which James had overlooked while signing the said Agreement.
While James requested John to increase the amount of his salary in the Agreement, the
 latter told the former that he couldn’t afford to do so at that point, while assuring the
former that it would be subsequently taken care of after JARVIS achieves global success.

9. Consequently, James began working on JARVIS immediately after he joined the

company. Since James was John’s friend, and since John had realised his true potential,
James was given unfettered access to all labs, data, algorithms, clientele, and operations
of the company – details to which only the senior top management was privy. In less than
one year, James not only resolved the technical glitches which were prevalent in JARVIS,
but also improved the interface and user compatibility exponentially. The security
features were also strengthened, as evidenced from a Technical Audit Report dated
19.11.2017, which gave a detailed analysis of the said feature. Furthermore, a leading
and reputed Magazine also displayed James’ photo on its cover, while describing his
contribution as a “Stroke of Genius which gave impetus to unbridled technological
advancements and triggered a global Technological Revolution”. Soon enough, the said
company managed to dethrone global giants and captured international markets, while
its goodwill and JARVIS’ brand equity increased throughout the 6 habitable continents.
Post the publication of the Magazine displaying James, he received job offers at a
significantly higher pay from the competitors of Stark Industries, while he didn’t accept
the offers still hoping to find a significantly higher salary in Stark Industries due to his
friend, John.

10. While John was immensely pleased with the rousing global success of JARVIS, the
Board still did not increase James’ salary apart from the minor increments as mentioned
above, despite constant reminders from James. That his salary wasn’t significantly
increased even after James was promoted to the position of “Lead Developer” in January
2018, despite the fact that the industry standard of salary for a person in his position was
somewhere around 80-90 thousand per month.

11. During James tenure as a Lead Developer, he befriended a woman named Pam Beesly, a
junior colleague who joined directly under his tutelage. They worked closely for the next
few months, wherein James taught her the skills of their trade and even shared classified
information with her, to which only he was allowed to be privy.
12. That subsequently on 30.06.2018, James confidently approached John yet again and
demanded a substantial raise in his salary from the following month, along with fatter
bonuses and perquisites for the additional goodwill and revenue that JARVIS had
generated under his command. His tone and demeanour irked John, who flatly refused to
entertain such bullish negotiation tactics, and rudely reminded James that it was John
who had alleviated him from poverty to transform him into the successful man that he
had become. This led to a fierce argument between the two, and in a fit of rage, James
stormed off and sent a letter of resignation effective immediately, while choosing not to
honour the 30-day notice period enshrined in clause 9 of the Service Agreement.

13. That after resigning abruptly from Stark Industries Ltd, James decided that he was an
institution unto himself, and his expertise and public image were sufficient to set up his
own company and to attract necessary equity and capital. In pursuance of the aforesaid,
he set up his own company titled ‘Dunder Mifflin Ltd.’ which was incorporated on
01.10.2018 at New Delhi. Co-incidentally, Pam, his close friend and former colleague,
also resigned abruptly from Stark Industries at around the same time that Dunder Mifflin
Ltd. was incorporated. Soon after its incorporation, Dunder Mifflin issued an Initial
Public Offering (IPO) and raised staggering funds. Elated at the resounding success of
his first IPO, James began on his pilot project titled “Project U.L.T.R.O.N” ((herein
after referred to as “ULTRON”), which was an Application and was similar in its
functions to JARVIS, but with wider functions and an in-built search engine customized
in over 150 languages, including provisions for Braille. Upon launching the same in the
market, it became an instant hit as its success rode on James’ previous impeccable track
record with JARVIS and his individual goodwill. In under two months itself, the monthly
revenue of Dunder Mifflin saw an exponential rise while Stark Industries’ sales suffered
a sharp decline, with many regular users shifting to ULTRON for its wider functions and
smoother user interface, coupled with their loyalty to James.

14. Sensing that something was amiss, John confronted James in mid-December 2018, and
accused James of stealing confidential information and trade secrets from the company,
while also violating the non-compete and non-solicitation clauses of his service
Agreement. James, in response, proudly boasted that he not only solicited Pam Beesly
from Stark Industries, but will soon occupy other divisions and employees of Stark
 Industries as well. He also threatened to come after Stark Industries’ domestic market
share in order to run JARVIS into oblivion and financial ruin.

15. On 29.12.2018, Stark Industries sent a Legal Notice to James Moriarty for being in
flagrant violation of his Service Agreement dated 05.09.2016, the ramifications of which
were felt vide actual and notional financial losses to Stark Industries’ business and
revenue.

16. Upon receiving no response, Stark Industries instituted a civil suit against James Moriarty
before a single bench of the Hon’ble High Court of Delhi for the reasons enshrined in
their Legal Notice dated 29.12.2018, while stating the cause of action to have arisen on
30.06.2018, when James left Stark Industries without due notice, and continued when
James set up a rival company while unlawfully soliciting trained employees of Stark
Industries. In its Plaint, Stark Industries further claimed that due to James’ abhorrent
conduct, it had suffered actual and notional losses amounting to Rs. 12,46,00,000/-
(Rupees Twelve Crores Forty Six Lacs Only). Additionally, they also prayed for interest
at the rate of 12% from the date of the cause of action to the date of actual payment, along
with compensation for harassment amounting to Rs. 3,00,00,000/- (Rupees Three Crores
Only). Furthermore, Stark Industries also claimed that James violated the confidentiality
clause (Clause 8) of the Service Agreement and utilized sensitive company information
for his personal benefit. In his Written Statement (Reply), James took refuge under
Article 19(1)(g) of the Indian Constitution and Section 19A of the Indian Contract Act,
1872 wherein he claimed that since the Agreement was signed under Undue Influence,
the same is voidable at the option of the party so unfavourably influenced. Furthermore,
James claimed that the said Non-Compete clause was also void as it was in restraint of
trade.

17. The Hon’ble High Court framed the following issues:

a. Whether the fundamental right granted under Article 19(1)(g) of the Constitution
of India with respect to contractual provisions of Non-Compete clauses is absolute
or subject to the test of reasonableness inquiry?

b. Whether the Non-compete clause enshrined in the Service Agreement dated

05.09.2016 is void to that extent on the ground that it puts restrictions on trade?
 c. Whether Section 27 of the Indian Contract Act, 1872, includes, within the meaning
of ‘Restraint to Trade’, only an absolute restraint or a time bound restraint as well?

d. Whether the Agreement dated 05.09.2016 is voidable on the ground that it was
signed under Undue Influence, even if the party so unfavourably influenced has
partly gained out of it?

e. Whether the Plaintiff is entitled to Compensation on account of notional losses and

on the ground of harassment?

18. After perusing the evidence tendered by both parties in the trial and after hearing the
arguments presented by the respective counsels, the Hon’ble Judge was pleased to pass
a decree dated 19.08.2019 in favour of the Plaintiff, while granting the reliefs prayed for
by the Plaintiff.

19. Subsequently, a Regular First Appeal was filed before the Division Bench of the Hon’ble
High Court of Delhi, and the Bench was pleased to set aside the decree of the Single
Judge vide an order dated 12.12.2019, and to grant the reliefs prayed for by the
Appellant/Defendant, without recording any cogent reasons for doing so.

20. Aggrieved by this, Stark Industries approached the Hon’ble Supreme Court of India vide
a Special Leave Petition while reiterating the prayers it made in the Original Plaint. The
Hon’ble Supreme Court admitted the SLP and framed the following questions of law:

a. Whether the order dated 12.12.2019 of the Division Bench of the Hon’ble High
Court of Delhi amounts to gross miscarriage of justice?

b. Whether the fundamental right granted under Article 19(1)(g) of the Constitution
of India with respect to contractual provisions of Non-Compete clauses is absolute
or subject to the test of reasonableness inquiry?

c. Whether the Non-compete clause enshrined in the Service Agreement dated

05.09.2016 is void to that extent on the ground that it puts restrictions on trade?
 d. Whether Section 27 of the Indian Contract Act, 1872, includes, within the meaning
of ‘Restraint to Trade’, only an absolute restraint or a time bound restraint as well?

e. Whether the Agreement dated 05.09.2016 is voidable on the ground that it was
signed under Undue Influence, even if the party so unfavourably influenced has
partly gained out of it?

f. Whether the Plaintiff is entitled to Compensation on account of notional losses and

on the ground of harassment?

21. The matter is now listed before the Hon’ble Supreme Court of India on 29th March 2020
and the parties are now required to make their submissions and argue on the issues
mentioned herein under paragraph no. 20.

NOTE:

a) The issues framed in the Compromis/Moot Proposition are final and no other issue shall
be altered/added/deleted to the same. Sub issues, however, are permissible, as long as
they adhere to the primary issue.
b) No issue as to the jurisdiction or admissibility shall be raised.
c) No issue/argument/question involving Intellectual Property Rights or Competition Law
is to be brought up.
d) Certain excerpts of the Service Agreement between Stark Industries and James Moriarty
are enshrined in ANNEXURE A-1 and may be further used to substantiate the
arguments.
e) This Moot Problem has been drafted by Mohd Yasin and Musheer Zaidi, 5 th year
students of B.A.LL.B (H) Faculty of Law, Jamia Millia Islamia. Any attempt to
contact the aforesaid regarding the present Moot Problem shall lead to an
immediate disqualification.
 ANNEXURE A-1

SERVICE AGREEMENT
(Excerpts)
…..“ This Service Agreement is executed at New Delhi on this 5th day of September, 2016, by and
between;

Stark Industries Ltd., (hereinafter referred to as ‘FIRST PARTY’)

And

James Moriarty, son of Dwight Moriarty (hereinafter referred to as ‘SECOND PARTY’)

…..6. Non-Compete – During the term of this Agreement and for a period of 5 (five) years from the
date of termination of the present Agreement, the SECOND PARTY shall not, directly or indirectly, either
through himself or any other person, in any manner whatsoever engage in any capacity with any
business competitive with the FIRST PARTY’s current line of business or any business then engaged in
by the Company, any of its subsidiary or any of its affiliates, for its own benefit or any person related
to him. The SECOND PARTY undertakes, agrees, and covenants that he shall not set
up/initiate/promote/collaborate with/join/or manage any competitive business operating in the same
industry/market or any incidental industry/market. Any violation of the aforesaid is liable to attract
damages and penalties as stipulated in clause 10.

7. Non-solicitation – That the SECOND PARTY undertakes, agrees, and covenants that he shall not,
either directly or indirectly, or through any other person, solicit, invite, lure, or motivate other existent,
future, or potential employees of the FIRST PARTY, to terminate their employment with the FIRST
PARTY or take /make any steps, attempts or efforts in that regard. Any violation of the aforesaid is
liable to attract damages and penalties as stipulated in clause 10.

In case of termination of the present Service Agreement, the SECOND PARTY shall not deal with or
approach the past, present, or potential Business Partners of the FIRST PARTY, including distributors,
sub-distributors, CNF, independent contracts, and other vendees, or their related parties, relatives,
assignees, legal representatives etc, under any circumstances whatsoever.

8. Confidentiality– Without prejudice to the rights of the FIRST PARTY to reflect this Agreement in their
books and mention this at their Annual General Meeting;

The SECOND PARTY covenants and undertakes that he shall not, during the operating of the present
Agreement and after its termination, distribute, disseminate, or otherwise disclose any confidential
information about the Company, its subsidiaries, its branch offices, its financial policies, or any other
information which is not within public domain. All trade secrets which the SECOND PARTY knows, or
has reason to believe, or has absolute or restricted access to, or is, by reason of his erstwhile position,
aware of, shall be confidential and deemed to be protected by this Agreement. Any such trade secret
stored electronically shall either be deleted or handed over immediately.

THE SECOND PARTY agrees that he shall be bound by this Service Agreement and keep the terms of
this Agreement and the trade secrets confidential. For the purposes of this agreement, “confidential”
means the facts and issues of the underlying dispute and the terms of this Agreement shall not be
disseminated, discussed, or commented upon to anyone other than those Employer officials who have
a need to peruse this Agreement in order to implement it. However, the SECOND PARTY may disclose
the terms of this agreement to his immediate family members, tax preparers, taxing officials, counsels,
and as otherwise required by law.

9. Termination – The present Service Agreement can be terminated at the behest of either parties after
giving a due notice of 30 days prior to the date of termination of the Agreement, failing which the
defaulting party shall be subject to a fine amount to Rs. 1,00,000/- (Rupees One Lac Only).