MOOT PROPOSITION

1. Indiana is a country whose constitutional framework is similar to that of India. 2. In the year 2006 the Parliament of Indiana enacted the Micro, Small and Medium Enterprise
Development Act (MSMED ACT), 2006 to promote, develop and enhance the competitiveness of Micro, Small and Medium enterprises.

3. J & G Ltd. is a company incorporated in the State of Uttransh (Indiana) in year 2008. It is a
registered small scale Enterprise manufacturing of road construction machinery. It has earned a good reputation within a very short period of its existence and it is one of the preferred suppliers of road machinery and equipment.

4. Western Major Ltd., a road construction company, is incorporated in Indiana with registered
office at New-Delite (Indiana). The company has a flourishing business in Indiana.

5. In the year 2009, the State of Uttransh awarded a major contract to Western Major for the
construction of roads connecting the rural areas to the major cities/towns. The entire work of construction was divided in two parts(a) First Phase which was to be completed within two years of contract and

(b) Second Phase which was to be started after one year of initiation of first phase and was to conclude within one year of completion of work of the first phase.

6. Owing to the proximity of J&G Ltd and due to its good market reputation, Western Major
decided to enter into a contract with J & G Ltd for supply of road construction machinery.

7. J&G Ltd. agreed to supply 20 units of construction machinery to Western Major. Cost of
construction machinery was finalised Rs. 12 lakhs each unit.

8. Accordingly in the year 2009, Western Major entered into two contracts with J & G Ltd. vide
contract no. AT-336 and AT-337 for getting total of 20 construction machinery units (10 construction machinery under each contract). The contracts were signed by both the parties simultaneously on 03 Feb 2009.

Moot Proposition for Intra Moot Court Competition 2012, College of Legal Studies, UPES.

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9. Under both the contracts, the time schedule for the supply of machinery was agreed upon as
per clause 9 of the contract which reads as follows: Clause 9 of the contract Time Schedule for supply : It is hereby agreed that the ordered total quantity of 20 units ( 10 units in each contract) of construction machinery as per the terms of this contract will be supplied within a period of one year from the date of this contract. Further, clause 9 A was added which read as follows: Clause 9 A: The time schedule for supply of specific units of construction machinery shall be finalized by both the parties by mutual consensus. However, no deliberations were made in this regard.

10. Further, under the said contracts both the companies agreed to refer any dispute that may arise
in future to arbitration. Accordingly an arbitration clause, (clause 16) was inserted in both the said contracts which reads asClause 16 Arbitration: it is hereby agreed upon that in case of any dispute that may arise in future, the same shall be referred to arbitration, and such award shall be final and binding upon both the parties to the contract The arbitrator shall be appointed by mutual consent of the parties.

11. It was further agreed that in case of default in supplying the stipulated quantity of construction
machinery, the contracting party can recover the cost of machinery not supplied with interest @ 6% p.a. of the cost of quantity falling short of the contracted supply. Accordingly, a clause 23 to this effect was inserted in the said two contracts which reads as follow: Clause 23: Recovery for non- compliance It is hereby agreed upon by both parties that in case of default in supplying the stipulated quantity of construction machinery, within agreed time schedule as per clause 9, the buyer is entitled to claim cost of construction machinery not supplied with interest @6% p.a. of cost of quantity falling short from the defaulting party.

12. The above contract also received stimulus (impetus) when the State Government of Uttransh
issued a letter of Comfort (LOC) on behalf of J & G Ltd. to secure its performance. in favour of Western Major

13. As regard the first contract (i.e. AT- 336), initially, an advance payment of Rs. 50 lakh was
made to J&G Ltd and on receiving half of the ordered quantity, the remaining payment was also made to J&G Ltd.

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14. As regards the second contract, Western Major had already received the full ordered quantity
and the payment of Rs. 80 lakh was made to J&G Ltd.

15. The J&G Ltd failed to supply the contracted quantity of construction machinery under contract
No. AT-336. Only 05 units of construction machinery were supplied against the contracted quantity of 10 units to Western Major in Feb 2010 and J&G Ltd promised to supply the remaining 05 units within next two months.

16. On failing to supply the ordered quantity within the said time period of two months, Western
Major, taking recourse to clause 23, calculated the cost of unsupplied construction machinery at Rs. 60, 00, 000/- and interest @ 6% p.a. there upon (i.e. 5X12 lakh+ interest @ 6% p.a. upon it).

17. A sum of Rs. 40, 00, 000/- was recovered by Western Major from the payments pending to
J&G Ltd. under the contract No. AT-337. Further a claim of remaining sum of Rs. 23, 60, 000/was also made to J&G Ltd.

18. Having not received suitable response from the J & G Ltd and to recover remaining amount,
Western Major took recourse to the letter of comfort thereby asking the Government of Uttransh to make good the deficiency in the payment amounting Rs. 23, 60, 000/- but the claim of Western Major was out-rightly rejected by the Government.

19. On the other hand, aggrieved with the said deduction, J&G Ltd wrote a letter to Western Major
opposing the same and thereby asking Western Major to make good the deficiency in payments under contract No. AT- 337.

20. On its failure to receive any reply from Western Major, J & G Ltd. submitted an application to
the Facilitation Council under the provisions of MSMED Act, 2006 claiming the pending sum under the contract No. AT-337 and interest accrued thereon, on account of delay in payment.

21. The Facilitation Council resorted to conciliation so as to settle the said dispute. On its failure to
reach a suitable conclusion, the Council undertook Arbitration proceeding by itself whereby it passed an award in favour of J&G Ltd. granting the said amount and interest claimed thereon.

22. Aggrieved by the said award, Western Major decided to take recourse to a court of Law and
filed petition in High court of Uttransh challenging the said award claiming it to be unjust.

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