XYZ Ltd., a multinational conglomerate operating across various sectors, faces a critical decision regarding a strategic partnership proposal with a promising tech start-up. With 12 directors on the board, the urgency of

CS Professional · Drafting, Pleadings and Appearances · PYQS · June 2024
XYZ Ltd., a multinational conglomerate operating across various sectors, faces a critical decision regarding a strategic partnership proposal with a promising tech start-up. With 12 directors on the board, the urgency of the matter, coupled with the diverse locations of its board members, poses a challenge in convening an in-person meeting. Consequently, the company seeks an alternative method to pass the resolution. W acted as a director on the Board of Directors of XYZ Ltd. between 2016 and 2018. He is also a shareholder in the said company, owning approximately 25.66% equity shares, and drew a salary of ₹ 2.50 lakh per month. The Commissioner of Central Goods and Service Taxes, based on the information received indicating that XYZ Ltd. was availing Input Tax Credit (ITC) against fake/ineligible invoices, commenced an investigation under section 67 of the Central Goods and Services Tax Act, 2017, against XYZ Ltd. W, as per the commissioner's statement, admitted to the fact that he had acted as a director of the company between 2016 and 2018, and since then, he has been working in the company in the capacity of a mentor/advisor. Furthermore, W also stated to the CGST Department that, in his capacity as the mentor/advisor to the company, he received ₹ 30 Lakh in the concerned FY i.e., 2019-2020, from the company. According to W, this money was given as he had been providing "strategic guidance" to the Company. The bank accounts of W have also been attached to the CGST Department. XYZ Ltd. enters into a contract with B, a logistics provides, to deliver a shipment of newly manufactured electronic gadgets to various retail stores across the country. The contract specifies a delivery deadline crucial for the upcoming Deepawali season sales. However, due to B's negligence, the delivery is delayed by two weeks, causing significant financial losses to XYZ Ltd. As a result of the delay, XYZ Ltd. misses the peak sales window, leading to decreased revenue and tarnished brand reputation. The company is contemplating seeking legal remedy for the loss caused. The Ministry of Road Transport and Highways of India has announced a significant infrastructure project for the construction of Megha Highway. This highway project aims to connect various cities and towns, boosting transportation and economic development in the region. To execute this project, the ministry has initiated a tendering process inviting bids from qualified construction firms. XYZ Ltd., which is also engaged in construction activity, is contemplating participating in the tendering process for construction of the Megha Highway. As a major player in the construction industry, XYZ Ltd. sees this project as lucrative opportunity to showcase its expertise, expand its portfolio, and contribute to the nation's infrastructure development. XYZ Ltd. wants to enter into e-contracts across the country for the sale of their various products. The company's counsel is considering the fact that conventional contract law may not be sufficient to address all the issues arising in electronic contracts. The Information Technology Act (IT Act) addresses some of the peculiar issues arises in the formation and authentication of electronic contracts. The Indian Evidence Act, 1872, deals with the presumption as to e-records, providing electronic records as evidence in disputed matters (Sections: 85A, 85B, 88A, 85C). Based on the facts of above case study, answer following questions : Advise XYZ Ltd. on the remedies available to them under the Indian Contract Act, 1872 for the loss caused.

Answer & Explanation:

According to section 73 of Indian Contract Act, 1872, when a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him, which naturally arose in the natural course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. No compensation shall be given to any remote and indirect loss or damage sustained by reason of breach. Compensation in regard to failure to discharge obligation which resembles those created by the contract. An obligation resembling those created by contract has been incurred and has not been discharged, any person affected by the failure to discharge it is entitled to receive the same compensation from the party in default as if such person had contracted to discharge it and had broken his contract. Compensation for loss or damage which naturally arose in the usual course of things from such breach. Compensations to be recovered for loss or damage which the parties knew or which would have naturally arisen in the usual course, to be likely to result from the breach of it. "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be either such as may reasonably and fairly be considered as arising naturally, i.e., according to usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it." XYZ Ltd. is advised to take action for the loss caused in accordance with above mentioned provision and case law.

Topics: Contract Law

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