TEAM CODE-31
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
UILS INTRA DEPARTMENT MOOT COURT COMPETITION, 2024
BEFORE THE HON’BLE HIGH COURT OF DELHI
(under Section 96 of the Civil Procedure Code, 1908)
IN THE MATTER BETWEEN:
INDICORP LIMITED
(PETITIONER)
VERSUS
LEGAL AI PRIVATE LIMITED
(RESPONDENT)
CIVIL APPEAL ----/2024
As submitted to the Hon’ble Judges of Hon’ble High Court of Delhi
MEMORIAL FILED ON BEHALF OF APPELLANT
Memorial filed on behalf of Appellant i
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
TABLE OF CONTENTS
Memorial filed on behalf of Appellant ii
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INDEX OF AUTHORITIES
Memorial filed on behalf of Appellant iii
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Memorial filed on behalf of Appellant iv
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Memorial filed on behalf of Appellant v
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
Memorial filed on behalf of Appellant vi
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
STATEMENT OF JURISDICTION
The Counsel on behalf of the appellants, in the instant matter, hereby, humbly submits to the
jurisdiction of the Hon’ble High Court of Delhi under Section 961 of the Code of Civil
Procedure 1908.
1
Section 96 - Appeal from original decree
(1) Save where otherwise expressly provided in the body of this Code or by any other law for the time being in
force, an appeal shall lie from every decree passed by any Court exercising original jurisdiction to the Court
authorized to hear appeals from the decisions of such Court.
(2) An appeal may lie from an original decree passed ex parte.
(3) No appeal shall lie from a decree passed by the Court with the consent of parties.
(4) No appeal shall lie, except on a question of law, from a decree in any suit of the nature cognizable by Courts
of Small Causes, when the amount or value of the subject matter of the original suit does not exceed ten thousand
rupees.
Memorial filed on behalf of Appellant vii
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
STATEMENT OF FACTS
BACKDROP
In order to foster developments in blockchain and artificial intelligence across industries, the
Indian government has promoted initiatives like Digital India and AI for All.
With a focus on automated legal writing and contract management solutions, Legal AI (Pvt.)
Ltd. is a pioneer in India in fusing AI with legal technology on blockchain platforms.
Legal AI was chosen by IndiCorp Ltd., a sizable business consulting firm with headquarters in
Delhi, because they required a safe and effective system to manage lengthy legal contracts with
B2B clients.
FORMATION OF CONTRACT AND SCOPE OF WORK
On April 3, 2024, Legal AI and IndiCorp signed an agreement for an AI-powered blockchain
contract management solution shortly after discussions. According to the contract, Legal AI
was to offer a secure, transparent, and automated contract administration solution that
integrated smart contracts to expedite procedures including record-keeping, execution, and
writing.One of Legal AI's distinctive features was its extensive technical support after
deployment.
CHALLENGES AND DISRUPTIONS
The project went well in its early stages, but as it developed, IndiCorp reported delays and
performance issues with Legal AI, pointing to carelessness and higher expenses. Contract
execution on the blockchain was disrupted on July 20, 2024, when the CrowdStrike virus on
Microsoft's servers triggered a worldwide crash that affected Legal AI's servers. Despite Legal
AI’s communication to clients about ongoing repairs, IndiCorp alleged that delays had
damaged their operations and market reputation, prompting them to terminate the contract.
LEGAL DISPUTE AND COURT PROCEEDINGS
Under Sections 39 and 73 of the Indian Contract Act, 1872, IndiCorp filed a lawsuit in the
Rohini District Court, requesting contract revocation and damages for alleged violations. Legal
AI argued that smart contracts satisfied Section 10 provisions of the Contract Act and that
delays were caused by unanticipated worldwide interruptions and technical difficulties rather
than carelessness. The District Court ruled in favor of Legal AI, attributing the delays to
Memorial filed on behalf of Appellant viii
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
unforeseen circumstances, but IndiCorp appealed to the Delhi High Court on the grounds of
contract frustration under Section 56 and for further adjudication on issues of breach and
restrictive covenants.
Memorial filed on behalf of Appellant ix
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
STATEMENT OF ISSUES
ISSUE 1
WHETHER THE NON-PERFORMANCE BY LEGAL AI, AS ALLEGED BY INDICORP,
f
CONSTITUTES A BREACH OF CONTRACT UNDER THE INDIAN CONTRACT ACT,
1872?
ISSUE 2
WHETHER THE RESTRICTIVE COVENANTS IMPOSED BY INDICORP ARE VALID IN
THE CONTEXT OF SMART CONTRACTS UNDER INDIAN CONTRACT ACT, 1872?
ISSUE 3
WHETHER THE OUTAGE RESULTED IN FRUSTRATION OF THE CONTRACT, OR IS
INDICORP ENTITLED TO COMPENSATION FOR BREACH OF CONTRACT?
Memorial filed on behalf of Appellant x
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
SUMMARY OF ARGUMENTS
Memorial filed on behalf of Appellant xi
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
Memorial filed on behalf of Appellant xii
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ARGUMENTS ADVANCED
ISSUE 2 - WHETHER THE RESTRICTIVE COVENANTS IMPOSED BY INDICORP
ARE VALID IN THE CONTEXT OF SMART CONTRACTS UNDER INDIAN
CONTRACT ACT, 1872?
(¶)1. It is most humbly submitted before this Hon’ble High Court the restrictive covenants
imposed by IndiCorp are valid in the context of smart contracts under Indian Contract Act,
1872. In Niranjan Shankar Golikari v. The Century Spinning and Manufacturing Company
Ltd2, the Hon’ble Supreme Court observed that the restrictive covenants can be valid as long
the restriction imposed is reasonable and not against public policy. In addition to, statutory
provision (Section 27) of Indian Contract Act 1872 deals with validity of restrictive covenants
in restrain to trade. Therefore, the premise of the following argument shall be in three-fold: [1]
Reasonableness of restriction imposed, [2] Restriction not against public policy and, [3]
Exception envisaged in Section 273 of the Indian Contract Act, 1872
[2.1] REASONABLENESS OF RESTRICTION IMPOSED
(¶)2. It is most humbly submitted that restrictive covenants imposed by IndiCorp are necessary
and reasonable and necessary to protect it’s legitimate business interests. The parameters of
these restrictions are precisely defined, adhering to the principles of reasonableness established
in several landmark judgments. The argument will demonstrate that the restrictions imposed
by IndiCorp are reasonable, legitimate, and necessary for the protection of its business. The
grounds of the reasonableness shall be established as in following;
1) Legitimate Business interest
2) Proportionality of Restriction
2
1967 SCR (2) 378
3
27. Agreement in restraint of trade, void.-
Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any
kind, is to that extent void.
Exception 1.Saving of agreement not to carry on business of which good-will is sold.One who sells the good-
will of a business may agree with the buyer to refrain from carrying on a similar business, within specified local
limits, so long as the buyer, or any person deriving title to the good-will from him, carries on a like business
therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.
Memorial filed on behalf of Appellant 1
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
[2.1.1] LEGITIMATE BUSINESS INTEREST
(¶)3. It is most humbly submitted that company's trade secrets, customer relationships, private
information, and specialized knowledge that gives it a competitive edge are all examples of
legitimate business interests. In order to stop rivals from unfairly profiting from a company's
investments and breakthroughs, it is crucial to protect these interests. Restrictive covenants are
then imposed to safeguard these business interests.
(¶)4. In M/s Sociedade de Fomento Industrial Limited v. Ravindranath Subrya Kamat4 SC
upheld that if an agreement between a company and a person appointed at its advisory stipulates
that he would not carry business activities similar to those carried on by the company, the
restraint is not void u/s 27of the Indian Contract Act 1872. Similarly in Gujarat Bottling Co.
Ltd. and Ors. v. Coca Cola and Ors5. Supreme Court upheld that a restrictive covenant is
enforceable if it legitimately protects the interests of one party and does not impose undue
restrictions on the other.
(¶)5. That in the present case, IndiCorp’s restriction on Legal AI from engaging with similar
business competitors serves the legitimate purpose of protecting IndiCorp’s proprietary
information, customer relations, and contract management systems. The restriction is imposed
to prevent Legal AI from potentially transferring specialized knowledge to a competitor, which
would undermine IndiCorp’s competitive edge.
[2.1.2] PROPORTIONALITY OF RESTRICTION
(¶)6. It is most humbly submitted that Proportionality of Restriction indicates the least amount
of restriction imposed. In this regard, IndiCorp's restrictive covenants are imposed to strike a
compromise between maintaining their proprietary interests and making sure that Legal AI's
expansion prospects aren't unduly restricted.
(¶)7. In Percept D’Mark (India) Pvt. Ltd. v. Zaheer Khan & Anr6 the Supreme Court took a
conservative approach while interpreting Section 27 and held that a restrictive covenant
extending beyond the term of the contract is void and not enforceable. The court further held
that the doctrine of restraint of trade does not apply during the continuance of the contract of
4
AIR 1999 (Bom.) 158
5
AIR 1995 (SC) 2372
6
(2006) 4 SCC 227
Memorial filed on behalf of Appellant 2
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
employment and it applies only when the contract comes to end. This position was further re-
affirmed in Superintendence Company of India (P) Ltd. v. Krishan Murgai7.
(¶)8. It is most humbly submitted that proportions of restriction in the present case were limited
up to nature of business i.e. similar kind of businesses and within the terms of contract.
IndiCorp’s restrictive covenant is a well-defined, proportionate, and necessary measure to
protect its legitimate business interests. It does not broadly restrict Legal AI but focuses on
preventing direct competition, aligning with Indian judicial principles that support reasonable
restraints crafted to protect unique business assets without imposing undue hardship on the
restricted party.
[2.2] RESTRICTION NOT AGAINST PUBLIC POLICY
(¶)9. It is most humbly submitted that any act which is injurious to the interest of society is
against public policy. The doctrine of public policy is based on the maxim “ ex turpi causa
non oritur action”, which means:
“ an agreement which opposes opposes public policy would be
void and of no effect.8”
(¶)10. It is most humbly submitted that public policy does not explicitly forbid restrictive
covenants, particularly in commercial agreements. Rather, it allows them when they safeguard
a business's justifiable interests without unjustly restricting trade or worker rights. IndiCorp's
covenants, which only address protection from unfair competition, are within this permissible
range.
(¶)11. It is most humbly submitted that importance of the case Nordenfelt v. Maxim Nordenfelt
Guns & Ammunition Co. Ltd.9 lies in the fact that it laid down that both the general as well as
the partial restraint of trade are prima facie void,except when the restraint is reasonable in
reference to the interest of parties concerned and also to the interests of the public. The
following statement of Lord Macnaughten may be noted:
"All interferences with individual liberty of action in trading, and
all restraints of trade of themselves, if there is nothing more, are
contrary to public policy and therefore void. That is the general rule.
7
1981 SCC (2) 246
8
Holman v. Johnson (1775) 1 Cowp 341
9
Memorial filed on behalf of Appellant 3
UILS INTRA DEPARTMENT MOOT COURT COMPETITION,2024
But there are exceptions. Restraints of trade and interference with
individual liberty of action may be justified by the special circumstances
of a particular case. It is a sufficient justification, and indeed, it is the
only justification, if the restriction is reasonable-reasonable, that is, in
reference to the interest of the parties concerned and reasonable in
reference to the interests of the public..”
(¶)11. It is most humbly submitted that IndiCorp's restrictive covenants are fair, well-defined,
and safeguard lawful commercial interests, they do not contravene public policy. The covenants
are intended to protect IndiCorp's investments in its proprietary processes, proprietary data,
and customer connections rather than disrupt fair competition or unnecessarily restrict
individual freedom in the workplace.
[2.3] EXCEPTION ENVISAGED IN SECTION 2710 OF THE INDIAN CONTRACT
ACT, 1872
(¶)12. It is most humbly submitted that any
10
Supra note 3
Memorial filed on behalf of Appellant 4
