Professional Documents
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BEFORE THE ARBITRAL TRIBUNAL UNDER CLAUSE 18.1 read with Clause
19.1.2 OF THE SSA
IN THE MATTER OF –
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MEMORANDUM of Respondents
TABLE OF CONTENTS
TABLE OF CONTENTS...........................................................................................................2
LIST OF ABBREVIATIONS.....................................................................................................4
INDEX OF AUTHORTIES........................................................................................................5
STATEMENT OF JURISDICTION...........................................................................................6
STATEMENT OF FACTS..........................................................................................................7
ISSUES RAISED.......................................................................................................................9
SUMMARY OF ARGUMENTS..............................................................................................10
ARGUMENTS ADVANCED/PLEADINGS...........................................................................12
{1.1.2 Throttle did not have the Technical Capacity to Mass Produce the Two
Wheelers}.....................................................................................................................12
[ISSUE 3] TAURUS MOTORS HAD RIGHT UNDER THE SSA TO STOP TRANCHE PAYMENTS
COMPLETELY........................................................................................................................14
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MEMORANDUM of Respondents
[ISSUE 5] THROTTLE IS NOT ENTITLED TO CLAIM DAMAGES FROM TAURUS UNDER THE
INDICAN LAWS......................................................................................................................20
PRAYER..................................................................................................................................24
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MEMORANDUM of Respondents
LIST OF ABBREVIATIONS
ABBREVIATIONS EXPANSION
LOI Letter of Intent
ISSCOM Indican Software and Service Companies
Throttle Throttle Motors Private Limited
HFC Hydrogen Fuel Cell
Taurus Taurus Motors Private Limited
SSA Share Subscription Agreement
& And
¶ Paragraph
AIR All India Reporter
ANR Another
ORS. Others
SC Supreme Court
SCC Supreme Court Cases
v Versus
Hon’ble Honorable
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MEMORANDUM of Respondents
INDEX OF AUTHORTIES
Cases
Akorn, Inc. v. Fresenius Kabi AG - No. 2018-0300-JTL, 2018 Del. Ch. LEXIS 325 (Ch. Oct.
1, 2018)................................................................................................................................16
amal v. Moola Sons & Co. (1916) 43 IA 6...............................................................................23
Cruz City I Mauritius Holdings v. Unitech Limited, (2017) 239 DLT 649 (India).................19
Dalkia Utilities Services PLC v Celtech International Limited [2006] EWHC 63 (UK)........17
Pack v. Case 30 P.3d 436..........................................................................................................13
Pannalal Jankidas v. Mohanlal, 1950 SCC 1005 (India)..........................................................22
Rajib Saha v. Paul Berkowitz, 2009 (112) DRJ 579 (India)....................................................20
The Commissioner of Income Tax v. Bharat R Ruia, (Bombay HC, 2010).............................18
Timblo Irmaos Ltd. v. Jorge Anibal Matos Sequeira, (1977) 3 SCC 474................................22
Vijay Karia and others v. Prysmian Cavi E Sistemi SRL and others, 2020(1) ARBLR 474
(SC)......................................................................................................................................20
Other Authorities
Regulations
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MEMORANDUM of Respondents
STATEMENT OF JURISDICTION
The Respondents in this case filed a statement of defence before the Arbitral Tribunal to hear
the present case by virtue of:
19.1.2. The Parties agree that any dispute arising out of this Agreement shall be resolved
through arbitration
And
Statements of claim and defence. — (1) Within the period of time agreed upon by the parties
or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim,
the points at issue and the relief or remedy sought, and the respondent shall state his defence
in respect of these particulars, unless the parties have otherwise agreed as to the required
elements of those statements.
This Memorandum Sets Forth the Facts, Contentions And Arguments On Behalf Of
The Claimants/Respondents In The Present Matter.
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MEMORANDUM of Respondents
STATEMENT OF FACTS
THROTTLE:
Throttle Motors Pvt. Ltd. (Throttle), an Indica based start-up, gathered the public attention
after proposing a plan for hydrogen powered cell(HFC) two-wheeler vehicles. During the
next eighteen months, Throttle claimed to have developed a non-working prototype, hence
securing them a conditional Letter of Intent (LOI) from Indica’s biggest food delivery
aggregator for purchase of 100 HFC two wheelers.
TAURUS:
Taurus Motors Private Limited (“Taurus Motors”), exhibited interest in acquiring a stake in
Throttle. A Share Subscription and Shareholders Agreement (“SSA”) was executed between
Taurus Motors and Throttle. Pursuant to the SSA, Taurus Motors infused first tranche and
appointed Mr. Sundar L. as its nominee director.
THE ISSUE:
Throttle unveiled a working protype for their HFC two wheelers. Nitin, the CEO, also
announced about the 1.5-billion-dollar investment. The pre bookings of the HFC two
wheelers commenced and the delivery was promised around the end of 2020. This
announcement was well received throughout Indica
On 7th July 2020 Taurus infused second tranche in Throttle; thereby collectively holding 10%
of the paid-up equity shares of Throttle after second tranche. In September of 2020, Throttle
posted that the delivery had been delayed till the first quarter of 2021 due to the ongoing
acquisition of the chief manufacturing facility of the company.
Later, Nitin posted another update in January 2021, stating that the delivery of the HFC two
wheelers is being pushed to the third quarter of 2021 without providing any elaborate reason
for this decision. Mr. Sundar L. had raised certain environmental concerns on the
geographical location and functioning of the chief manufacturing facility and had reserved
their decision on allowing the acquisition.
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MEMORANDUM of Respondents
In respect of the grant of technical know-how as per the SSA, the obligation of Taurus was in
abeyance. On December 05, 2021 Ms. Jasmine of ‘The Technology Standard’, an Indican
newspaper, published a six-page exclusive story on Nitin and Throttle with claims of a
running commentary on working of Throttle’s manufacturing plants, places of business, and
conversations with former and current employees. The said report fuelled the doubts of the
citizens of Indica.
Upon the release of the report, multiple FIRs came to be filed across Indica against Nitin and
Throttle in name of cheating the customers who pre-booked their HFC two-wheelers, with
some disgruntled customers going as far as destroying several core industrial machines in
Throttle’s production plants.
Taurus Motors sent a notice to Throttle, invoking the Put Option right under the SSA. As a
result, Taurus will not be infusing any further capital into Throttle and also Taurus Nominee
Director is resigning from the Board of Throttle with immediate effect.
Further, Taurus Motors also invoked its Put Option Right under the SSA and required Nitin to
purchase the entire shares of Taurus Motors at IRR of 25 (twenty-five) per cent. Aggrieved by
the above actions of Taurus Motors, Throttle sent a notice to Taurus Motors invoking
arbitration as per the terms of the SSA on 1st March 2022.
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MEMORANDUM of Respondents
ISSUES RAISED
1.
WHETHER TAURUS IS LIABLE FOR DELAY IN OPERATIONALIZATION OF THE CHIEF
MANUFACTURING FACILITY?
2.
WHETHER THROTTLE DEFAULTED IN FULFILLING CONDITIONS PRECEDENT TO THE
THIRD TRANCHE PAYMENT AS ENVISAGED IN THE SSA?
3.
WHETHER TAURUS MOTORS HAD ANY RIGHT UNDER THE SSA TO STOP TRANCHE
PAYMENTS COMPLETELY?
4.
WHETHER THE EXERCISE OF PUT OPTION UNDER THE SSA BY TAURUS IS LAWFUL?
5.
WHETHER THROTTLE IS ENTITLED TO CLAIM DAMAGES FROM TAURUS UNDER THE
INDICAN LAWS?
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MEMORANDUM of Respondents
SUMMARY OF ARGUMENTS
The Counsels humbly submits before the learned arbitrators that the claimant’s submission
accusing Taurus of causing delays in operationalization of the facility is misplaced and
baseless. The delays in the operationalization of the chief manufacturing facility have been
occurred due to the actions of Throttle. There have been instances of levying of several
allegations of cheating against Throttle and a report by The Technology Standard accusing
Throttle of Falsified Employ Records and not having the technical capacity to mass produce
HFC two-wheelers. The intervention of Nominee Director of Taurus is justified in the
intervening circumstances.
The Counsels humbly submits before the learned arbitrators that Throttle defaulted in
fulfilling conditions precedent to third tranche payment as envisaged in the SSA. There were
certain conditions that were prescribed under Clause 7 of the SSA. Throttle had defaulted in
fulfilment of the aforementioned provisions by not being able to complete the first phase of
construction of the chief manufacturing facility and not being able to obtain the required
compliance certification within the time frame prescribed under the relevant Clause.
ISSUE 3: TAURUS MOTORS HAD RIGHT UNDER THE SSA TO STOP TRANCHE PAYMENTS
COMPLETELY
The counsels humbly submit before the learned arbitrators that Taurus Motors had right under
the SSA to stop tranche payments completely. For the purposes of completion of payment
amount as specified for Third tranche fulfilment of obligation as specified under the Clause 7
was required. Throttle failed to do, thus giving Taurus a right to stop the Tranche payments.
In addition to this, Throttle had also not taken prior permission of the Nominee Director of
Taurus before making out way for pre-orders of HFC two-wheelers. Throttle had also
committed event of default, thereby constituting an event having materially adverse on the
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MEMORANDUM of Respondents
business of the company. This also gave Taurus the right to invoke Put Option and revoke the
contract, thereby also suspending payment due under third tranche.
The Counsels humbly submit before the learned arbitrators that the exercise of Put Option by
Taurus is lawful. It is contented that several defaults have been committed by Throttle under
the SSA, which give Taurus the right to invoke the Put-Option clause. Throttle had not
completed its contractual obligations as specified under clause 7 within the requisite time
frame. It is also contended that the RBI circulars that have been referenced by Throttle are not
applicable to the invocation of Put Option by Taurus. Thereby, the counsels humbly contend
that the exercise of Put-Option was legal in the present case.
ISSUE 5: THROTTLE IS NOT ENTITLED TO CLAIM DAMAGES FROM TAURUS UNDER THE
INDICAN LAWS
The counsel contends that the claims of damages of contractual breaches arising from the
non-fulfilment of conditions prescribed under the SSA would be governed by the terms of
indemnification given under Clause 13 of the SSA and committal of breach was on the part of
Throttle. The counsel submits that the time limit prescribed of 15 business days under Clause
13.4 of the SSA to issue a notice to the indemnifying parties after discovery of breach has not
been adhered to by the Throttle. It is to hereby submit that the notice claiming damage from
Taurus was issued on 1 March 2022. The alleged breach for non-fulfilment of obligations by
Taurus as mentioned under Clause 9 of the SSA was discovered by the Throttle and the
Promoter considerably before the notice was sent. The delay on part of Throttle is unjustified
and has no reasonable basis.
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MEMORANDUM of Respondents
ARGUMENTS ADVANCED/PLEADINGS
The counsels humbly submit before the learned arbitrators that Taurus cannot be accused of
causing the delay in the operationalization of the chief manufacturing facility, because that
was the direct result of actions of throttle. primary ones among which are discussed
hereunder.
{1.1.1 Throttle Falsified Employment Records to show more employees than it Actually
had}
The counsels would like to direct the attention of the tribunal to the report published by the
technology standard, according to which many of the company’s supposed employees exist
only on paper. Multiple accounts, including posts by Motiramani himself, have referred to
Throttle growing from a 50-member team to a 700-member team in the last three years;
however, as per employees, this is far from the truth. There only exist 230 members in the
manufacturing facility, which is 470 less than the claim. A key part of operationalization of
the manufacturing facility would be having an adequate team to ensure its functionality, a
metric on which throttle clearly fails. The counsels would also like to assert that employing
people is not covered in the exhibit 1 of the SSA, and is therefore not in any control of taurus.
{1.1.2 Throttle did not have the Technical Capacity to Mass Produce the Two Wheelers}
The counsels would also like to put before the arbitrators that another claim in the report
stated that Throttle does not possess the capability to produce HFC two-wheelers, let alone
through any technology that it developed in-house. The technology to produce the vehicles is
a prerequisite to the operationalization of the plant. Absence of the technology raises serious
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MEMORANDUM of Respondents
questions on the operations of taurus, primary one among them being their capacity to set up
the facility to begin with.
The counsels humbly submit before the learned arbitrators that the exercise of power by the
nominee director to withhold their assent on the matter pertaining to the acquisition of the
chief manufacturing facility was reasonable and relevant to the prevailing circumstances. The
nominee director represents the interests of Taurus and any decision taken by him was in the
best interest of Taurus.
The counsel would like to direct the attention of the tribunal to the accusations made on
Throttle in the report by The Technology Standard, according to which not only there existed
numerous falsified records of employees with there being only 230 employees against the
claimed 700, but also there were claims that throttle did not have the sufficient technology or
capability to be producing the two wheelers.
Since Taurus motors has vested interests in the manufacturing and functioning of the two
wheelers, the intervention of the nominee director is reasonable and justified. As stated in
Pack v. Case1 When evaluating payment applications, Owners and Contractors certainly have
the right to ensure that monies requested have actually been earned or actually are owed.
Therefore, it was justified on Taurus’s part to withhold the assent temporarily, because as
claimed by the report, Throttle had been merely assembling the two wheelers, while it had
received grants for manufacturing them.
The Counsels humbly submit before the learned arbitrators that Throttle defaulted in fulfilling
conditions precedent to third tranche payment as envisaged in the SSA. The conditions
precedent to third tranche payment has been prescribed in Section 7 of the SSA. Throttle has
been unable to adhere to them in a timely manner. The present arguments has been justified in
the following facet: [2.1]- Violation of conditions precedent to Third Closing.
The Counsels humbly contend that Throttle had failed to uphold its duties as required by the
"Conditions precedent to Third closing" under Clause 7.1 in the present case. After repeated
delays in the delivery of vehicles for which no explanation was given, Throttle's promoter,
Mr. Nitin Motiramani, mentioned via a tweet that the company was awaiting a number of
compliance certificates from the Government of Indica.2
This indicated breach of Clause 7.1.5, which talk about procurement of necessary licenses
and certifications. In addition to this, there was also delay on part of Throttle in completion of
first phase of construction of chief manufacturing facility.3 This was due to the direct results
of the actions of Throttle. This would constitute breach of the Clause 7.1.3 of the SSA.
The counsels would also like to draw the learned arbitrators' attention to a report published on
December 5, 2021 by The Technology Standard which has made several allegations of fraud,
including the falsification of employment records and the absence of proprietary technology
necessary for the production of HFC two-wheelers. This resulted in Throttle breaking Clause
7.1.2, which deals with the representations and warranties made by Throttle and its promoter.
It is clearly mentioned under Clause 7.2 of the SSA that until all the conditions set out in
Section 7.1 have been complied with, subscription of the Third Tranche shares shall not be
deemed to have occurred. Additionally, no certificate duly signed by the Throttle or its
promoter certifying the compliance of conditions set out in Clause 7.1 has been delivered to
Taurus.
The counsels would like to point out that the Violation of any of the condition’s precedent set
out in clause 7.1 would also constitute an event of default under clause 16.1.2 which again
gives Taurus the right to invoke the Put option Clause to terminate the agreement.
[ISSUE 3] TAURUS MOTORS HAD RIGHT UNDER THE SSA TO STOP TRANCHE PAYMENTS
COMPLETELY
The counsels humbly submit before the learned arbitrators that Taurus Motors had right under
the SSA to stop tranche payments completely. The commission of contractual defaults on part
of Throttle and subsequent violation of conditions pre-requisite for payment under third
tranche has been made by Throttle. The present has been justified in the following facets:
[3.1]- Violation of Terms of SSA under Clause 7.1 and [3.2]- Other defaults committed by
Throttle under the SSA.
2
Moot Proposition, ¶21.
3
Moot Proposition , ¶ 19.
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MEMORANDUM of Respondents
The Counsels humbly contend that in the present case, Throttle had defaulted in fulfilling its
obligations of ‘Conditions precedent to third closing’ under the Clause 7.1. The Promoter of
Throttle Mr. Nitin Motiramani after constant delays in the delivery of vehicles for which no
basis was provided had mentioned through a tweet that the company was awaiting certain
compliance certificates pending from the Government of Indica.4
This indicated breach of Clause 7.1.5, which talk about procurement of necessary licenses
and certifications. In addition to this, there was also delay on part of Throttle in completion of
first phase of construction of chief manufacturing facility. 5 This would constitute breach of
the Clause 7.1.3 of the SSA.
The counsels would also like to draw the attention of the learned arbitrators towards the
report dated: December 5, 2021 published by The Technology Standard, which has alleged
several fraudulent activities such as falsified employment record and non-existence of
proprietary technology required for manufacturing HFC two-wheelers. This could also lead to
Throttle being in violation of Clause 7.1.2 that deals with the correctness of the
representations and warranties made by Throttle and its promoter.
It is clearly mentioned under Clause 7.2 of the SSA that until all the conditions set out in
Section 7.1 have been complied with, subscription of the Third Tranche shares shall not be
deemed to have occurred. Additionally, no certificate duly signed by the Throttle or its
promoter certifying the compliance of conditions set out in Clause 7.1 has been delivered to
Taurus.
The counsels would like to point out that the Violation of any of the condition’s precedent set
out in clause 7.1 would also constitute an event of default under clause 16.1.2 which again
gives Taurus the right to invoke the Put option Clause to terminate the agreement. Due to
breach of contractual obligations on part of Throttle, Taurus Motors had right to stop payment
to third tranche completely.
4
Moot Proposition, ¶21.
5
Moot Proposition, ¶19.
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MEMORANDUM of Respondents
The counsels humbly submit before the learned arbitrators that Throttle had committed an
event of default under clause 16 of the SSA by non-fulfilling its obligations mentioned under
clause 7.1. This gives right to Taurus to invoke the Put-option right clause, thereby
terminating the agreement and justifying its action of stopping tranche payments completely.
In addition to this, Throttle also failed to take prior permission of the Nominee Director under
Exhibit 1 regarding the decision of the pre-ordering of vehicles. The present argument has
been justified in the following sub-issues: [3.2.1]- Commission of Event of Default and
[3.2.2]- Permission not taken under Exhibit 1.
The act of Throttle to begin pre-booking of HFC vehicles at such a phase where it was still in
the preliminary stages of construction of its chief manufacturing facility and were awaiting
approval of certain compliance certifications from the government substantially affected its
ability to fulfil its obligations under the SSA.
The counsels humbly contend that this would constitute “Material Adverse Effect” as defined
under clause 20.1.23 as it had affected the ability of the company to conduct the business and
had put more logistical strain on the already limited manufacturing resources of the company.
This gives Taurus the right to invoke the ‘Put Option Clause’ to terminate the contract upon
the happening of event of default and stop the tranche payments completely.
A breach can be termed as material if it goes to the root or essence of the agreement between
the parties, or touches the fundamental purpose of the contract and defeats the object of the
parties in entering into the contract6. The reports published by The Technology Standard7 are
to be believed, then no such proprietary technology exists, and the fundamental purpose for
which Taurus had made this investment was towards the development of proprietary
technology, that could later suit other type of automobiles also, but Throttle has breached its
warranties and representations.
6
Akorn, Inc. v. Fresenius Kabi AG - No. 2018-0300-JTL, 2018 Del. Ch. LEXIS 325 (Ch. Oct. 1, 2018).
7
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MEMORANDUM of Respondents
Material breach can be termed as a breach that has “a serious effect on the benefit which the
innocent party would otherwise derive”8 , the common denominator in every case analysis is
that a material breach must be substantial. The non-fulfilment of obligations by the company
under Clause 7.1 within the stipulated time frame, accepting pre-orders, and destruction of a
significant number of industrial machines essential to the company’s assembly process are all
events that can be deemed to be in material breach of the terms and conditions of the contract.
The counsels would like to draw the attention of the learned arbitrators towards point no. 8
under exhibit 1. In regard to that, it is submitted that ‘Nature of Business’ of the company
will include that any direct or indirect impact on the reputation of the company and all
material events having an impact on the company’s business including the operational
aspects.9
The decision of allowing Pre-orders on part of the company and its promoter violated Clause
17 which mandated prior approval and affirmative vote of the Nominee Director of Taurus on
certain subjects mentioned under Exhibit 1.
8
Dalkia Utilities Services PLC v Celtech International Limited [2006] EWHC 63 (UK).
9
Guidance note on board’s report - ICSI (2017). Available at:
https://www.icsi.edu/media/webmodules/Guidance%20Note%20on%20Board's
%20Report.pdf (Accessed: April 2, 2023).
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MEMORANDUM of Respondents
It is pointed out that Throttle received a large number of pre-orders at such a stage where it
was not able to complete first phase of construction of its chief manufacturing facility and
was also awaiting certain compliance certifications from the government. This was sufficient
to make material change in the nature of business of the company. This indicates that,
accepting pre-order was such a subject which came under the point no. 8 as mentioned under
Exhibit 1. Thus, it required mandatory consent and affirmative vote of the nominee director
of Taurus.
A put option is nothing but a contract for the sale or purchase of a right to obtain securities at
a predetermined rate in the future. “Buying a put option is not an obligation but a right of
selling an agreed amount of a financial instrument or particular commodity to the seller at a
future date for a predetermined price called the exercise price.”10
It was incumbent upon the Company to complete the construction of the first phase of the
chief manufacturing facility prior to the Third closing date, but it failed to do so. In addition
to this, certain compliance certificates were also pending were also pending to the Company
from the Government of Indica.11
The same was expressly tweeted by the Promoter, after constant delays in the completion of
delivery of the vehicles to the customers who had pre-booked their vehicles. This default on
10
The Commissioner of Income Tax v. Bharat R Ruia, (Bombay HC, 2010).
11
Moot Proposition, ¶ 21.
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MEMORANDUM of Respondents
part of the company can be said to be in violation of Clause 7.1.4. Furthermore, the decision
of allowing Pre-orders on part of the company and its promoter violated Clause 17 of the
SSA which mandated prior approval and affirmative vote of the Nominee Director of Taurus
on certain subjects mentioned under Exhibit 1.
The Company received a large number of pre-orders and it needed to increase its production
capacity or adjust its inventory levels to meet demand, but that could not happen due to
several constraints. This significantly impacted the company's inventory management
especially at a time when its chief manufacturing facility was not ready and it was still was
awaiting approval of certain compliances from the government.
This can require significant investment and planning, and may have a material impact on the
company's operations and profitability. This is sufficient to constitute an event of default that
could have a Material Adverse Effect on the business of the Company under the Ambit of
Clause 16.1.3, which again validated the act of Taurus of invoking the Put Option Clause.
The Provision and conditions listed in the SSA for invocation of Put Option Right Clause
under Clause 16.2.1 is a mutually agreed contractual provision between the Company and the
Taurus. It is also contented that the RBI Circular referenced by Throttle in the present case
would be non-applicable to invocation of Put-Option by Taurus. The Delhi High Court has
expressly held that RBI 2014 Circulars may not be applicable to cases where a foreign
investor based its claim on breach of contract.
The above referenced RBI circulars proscribe assured return on investments in India under
the guise of equity, but would not apply to cases where the foreign investor exercises a put
option as a remedy pursuant to a breach of contract.12
A special leave petition filed before the Supreme Court against this decision of the Delhi
High Court was dismissed. The same ratio was furthered in the case of Rajib Saha v. Paul
Berkowitz. In this regard the court had remarked, “Where an individual had entered into a
share transfer agreement and failed to fulfill its obligations the valuation of shares in terms
of RBI guidelines would not be relevant."13
12
Cruz City I Mauritius Holdings v. Unitech Limited, (2017) 239 DLT 649 (India).
13
Rajib Saha v. Paul Berkowitz, 2009 (112) DRJ 579 (India).
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MEMORANDUM of Respondents
The Hon’ble Supreme Court also had upheld the judgement of the Delhi High Court in the
case of Vijay Karia and others v. Prysmian Cavi E Sistemi SRL and others14 has gone a step
further than the previous referred decisions by specifically enforcing the contractually agreed
put-option clause despite the argument that such transfer would be in violation of the FEMA
Courts in India have favored enforcement of arbitral awards honoring put option clauses,
notwithstanding a possible violation of the pricing guidelines under the FEMA, provided that
the put option is triggered by a contractual default. Such exercise of a put option at a fixed
price is not seen as an assured exit by the courts.
[ISSUE 5] THROTTLE IS NOT ENTITLED TO CLAIM DAMAGES FROM TAURUS UNDER THE
INDICAN LAWS
The counsels humbly submit before the learned arbitrators that Throttle is not entitled to
claim damages from Taurus under the Indican Laws. The present argument has been justified
in the following facets: [5.1]- Awarding Damages is Not Consonance with the Terms of SSA
and [5.2]- Losses Caused Due To Own Neglect And Remoteness Of Damage.
The counsel contends that the claims of damages of contractual breaches arising from the
non-fulfilment of conditions prescribed under the SSA would be governed by the terms of
indemnification given under Clause 13 of the SSA and committal of breach was on the part of
Throttle. The counsel would like to justify this argument in the following sub-issues: [5.1.1]-
Barred by Time Period Under Clause 13.4 and [5.1.2]- Breach of Obligation on part of
Throttle were there.
“Notices of claims under this Agreement shall be given by the Indemnified Parties to the
Indemnifying Parties within 15 (fifteen) Business Days of discovery by the Indemnified
14
Vijay Karia and others v. Prysmian Cavi E Sistemi SRL and others, 2020(1) ARBLR 474 (SC).
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MEMORANDUM of Respondents
Parties, as the case may be, of the breach, giving in reasonable detail information of the
legal and factual basis of the claim and the evidence on which the Indemnified Parties relies
and, if practicable, an estimate of the amount of Losses which are, or are to be, the subject of
the claim”
The time limit of 15 business days to issue a notice to the indemnifying parties after
discovery of breach has not been adhered to by the Company. It is to hereby submit that the
notice claiming damage from Taurus was issued on 1 March 2022. The alleged breach for
non-fulfilment of obligations by Taurus as mentioned under Clause 9 of the SSA was
discovered by the Company and the Promoter considerably before the notice was sent.15
This delay on part of the Company is completely unjustified and no reasonable basis
substantiating this delay has been elaborated upon by the Company in its notice dated: March
01, 2022. Thus, it is hereby contented that the claims of the company seeking damages or
indemnification cannot be allowed as they time-barred. Right to terminate for material breach
can be waived if the party having the right to terminate continuing to receive the benefits of
performance from the breaching party16.
A non-breaching party may waive its right to assert material breach if it accepts the benefits
of the contract with knowledge of a breach 17. In the present scenario, as discussed in the
aforementioned paragraph, Throttle had discovered non-fulfilment of obligations by Taurus
considerably well-before filing a notice for claiming of damages, but it continued to be a
party to the SSA signed between the parties and thus, accepted the benefits of the contracts
with knowledge of the breach. This essentially eliminates the rights of the Company to assert
material breach on part of Taurus and claim damages from it.
The obligations of the company under Clause 7.1.3 includes obtaining all sorts of licenses,
approvals and permissions required under the Applicable law. Thus, this indicates failure of
15
Moot Proposition, ¶ 19 & 20.
16
23 Williston on Contracts § 63:9 (4th ed.).
17
Madden Phillips, 315 S.W.3d at 813.
18
Moot Proposition, ¶ 21.
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MEMORANDUM of Respondents
Throttle in fulfilment of obligations. The same would constitute an event of default under
Clause 16.1.2 that would have a material adverse effect on the business and also constitutes
material breach of obligations. Thus, it is submitted that Throttle and its promoter contributed
in breach of contractual obligations.
A party may not make any claim against the opposing party in a contract if that party itself
had contributed to the breach of the contract.19 In line with the jurisprudence laid down in this
regard, it can be contented that the Company i.e., Throttle and its promoter had contributed in
the damages done and non-fulfilment of obligation. Thus, they should not be allowed to make
any sort of claims for damages to the opposing party i.e., Taurus.
The party in breach must make compensation in respect of the direct consequences flowing
from the breach and not in respect of loss or damage indirectly or remotely caused. 20 The
ratio has been mentioned in the SSA under Clause 13.6 which reads as:
None of the Parties shall be liable under this Clause for any indirect, punitive, exemplary or
consequential Losses such as loss of profit, revenue, goodwill, reputation etc.
Thus, the damages suffered by the Company and its promoter in the course of time due to
partial fulfilment of the SSA cannot be attributed to Taurus. The company has suffered
irreparable loss of goodwill after the publication of report dated: December 5, 2021 by the
Technology standard. This loss would come under the category of indirect loss.
The respondent cannot be held liable for all that follows from his breach. There must be a
limit to liability and beyond that limit the damage is said to be too remote and, therefore
irrecoverable.21 Section 7322 of the Indian Contract Act is declaratory of the common law as
to damages. For the purpose of determination of claim of damages, two rules have been laid
down regarding the said section:
19
Timblo Irmaos Ltd. v. Jorge Anibal Matos Sequeira, (1977) 3 SCC 474 (India).
20
Pannalal Jankidas v. Mohanlal, 1950 SCC 1005 (India).
21
Ram Kumar Agarwala v Lakshmi Narayan Agarwala, AIR 1947 Cal 157 (India).
22
Indian Contract Act, § 73 (1872).
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MEMORANDUM of Respondents
It is hereby contented that the damages to the Company did not arise in the natural course as a
consequence of alleged breaches on part of Taurus. It cannot be held liable for the loss of
destruction of industrial machines by disgruntled customers which was something that did not
arose in the natural course of the nature. The Publication of newspaper report against Throttle
and the subsequent filing of FIR against it for cheating which is cognisable and non-bailable
offence. Also, such happening could not have been anticipated by the parties at the time of
entering into the contract. Thus, as a rule Taurus is not bound to pay damages to Throttle for
such Indirect and remote loss caused to it.
The Company cannot claim as damages any sum which is due to its own neglect. 23 In the
present case, the act of the company of allowing pre-order and subsequently requesting
deposits from the customer at a stage when it awaits approval of regulatory compliances from
the government of Indica and its acquisition of the chief manufacturing has not been
completed yet indicates neglect on its part regarding the conduct of the business and ensuring
timely delivery of the HFC vehicles to the customers. The subsequent losses that have been
caused to Throttle are due to its own neglect and it cannot be allowed to claim its
compensation or recovery from Taurus.
23
Jamal v. Moola Sons & Co. (1916) 43 IA 6.
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MEMORANDUM of Respondents
PRAYER
Wherefore, in light of the facts stated, issues raised, authorities cited and arguments
advanced, it is most humbly implored before the tribunal that it may be pleased to: —
2. Throttle is not entitled to claim damages from Taurus under the SSA.
3. The Claimants shall pay all of the Respondent's costs and expenses of this arbitration,
including without limitation, Arbitral institution’s administrative expenses, the
Tribunal's fees and expenses, and the Respondent's legal and other fees.
(Sd-/)
PLACE: Singapore (Counsel of the Respondent)
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