STATEMENT OF FACTS

Ohanu
M.V. Shoz, a vessel owned by the Gemany
odtar'Shipping Corporation, which is reputed
for the services rendered by it, was hired by Petro Oil Corporation, a state owned
entity in India, for the purpose of carrying cargo between Malaysia and Mumbai.
The Vessel, took a deviation from the normal route, during which, the Vessel was
Nalli
captured by Soarnà Pirates on 19 August, 2013, near Jaffna, Sri Lanka. On 20th
August, Gomany
vtotal Shipping Corporation sent a mail to Petro Oil Corporation, stating
that negotiations were being carried on with the Pirates.
Tndo Vallr
C
Meanwhile, a V. avd Ship intercepted a message between the Somali pirates
which gave them cause to believe that the vessel with its crew and cargo were not
likely to be released in short order as the pirates were not satisfied with the ongoing
negotiations. All the negotiations were carried on without the consultation of the
Cargo owners, i.e. Petro Oil Corporation.
Petro Oil Company was still out of possession of its cargoes and planned to initiate
negotiations with its insurer, the National Insurance Corporation (NIC) having its
registered office at Kolkata.
Initially, the insurance contract only covered 80% of the total loss due to a Pirate
intervention. However, Mr. Das who is authorized on behalf of Insured Company
Som
(POC) called up Mr. BhataY who is authorized on behalf of the Insurance Company
Soum
(NIC) to amend these terms, requested Mr. ar to increase the cover to 100%.
Sam
Mr. BhHáy replied in affirmative and said that this proposal would most likely be
approved by his Board. However, he further added that he will himself reply in one
week time after taking approval of the Board. The Insurance Contract provided a
clause wherein a Contract could be amended on mutual consent of both the parties in
a written or an oral manner. Subsequently, Petro Oil Company served a notice of
abandonment to NIC on 17 October 2013. The same was rèjected by the Insurance
Company.
The Pirates were given a ransom of US $2 million by MSC: the voyage to Mumbai
was completed on4 November 2013.
Petro Oil Corporation commenced proceedings against National Insurance
Corporation at the Bombay High Court for rejection of their claim for treating the

Page |9
-MEMORIAL FOR THE RESPONDENTS
 goods. Bombay High Court
demanding 100% ofthe value of the
cargoas total loss, of
jurisdiction. Adivision bench the samne
the matter on grounds of lack of
dismissed
in-limine.
court also dismissed the matter

has preferred a Special Leave

Aggrieved by the decision of Bombay High Court, POC
100% of total loss and
Petition before the Hon'ble Supreme Court of India claiming
Court
arguing that contract does not specificallyor expressly bars the jurisdiction of
in Bombay
 ISSUES RAISED

1. WHETHER THE SPECIAL LEAVE PETITION IS MAINTAINABLE

BEFORE THIS HON'BLE COURT.

2. WHETHER THE RESPONDENT COMPANY, NATIONAL INSURANCE

CORPORATION IS BOUND BY THE CONTRACT AS AMENDED BY MR.
BHULLAR.

3. WHETHER THE APPELLANTS HAD A GOOD CLAIM AT THE TIME OF

SERVING THE NOTICE OF ABANDONMENT T0THE RESPONDENTS.

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-MEMORIAL FOR THE RESPONDENTS
 SUMMARY OF ARGUMENTS
l THE SPECIAL LEAVE PETITION IS NOT
MAINTAINABLE BEFORE THIS
HON'BLE COURT.
It is humbly submitted to this Hon'ble Court that in the given
factual matrix, there is no
necessity or compulsion for the intervention of this Hon'ble
under Article 136. The Appellants haye Court and invoking its powers
the Courts in Delhi as was
committed a breach of contract by failing to approach
provided under the Contract. The Bombay High
the same while Court expressed
dismissing the matter.
2. THE
RESPONDENT COMPANY, NATIONAL NSURANCE
BOUND BY THE CONTRACT AS CORPORATION IS NOT
AMENDED BY MR. RAIVYXIAR. SAM
It is humbly submitted that a
company shall not be bound the acts of its
employee, as the case maybe, if the respective agent or agent or an
party, acts beyond the scope of the employee, while dealing with a third
not be liable if a third party is
authority as vested with him.
Similarly, a company shall
negligent while making transactions with the
humbly submitted that the Board of company. It is
National Insurance Company did not approve the
Contract, and hence, the contract was never
subject to any amendment whatsoever.
3. THE APPELLANTS
DID NOT HAVEA GOOD CLAIM AT THE
THE NOTICE OF TIME OF SERVING
ABANDONMENT TO THE RESPONDENTS.
The petition neither hada good claim of Actual
Totl Loss nor Constructive Total Loss at the
time of serving the notice of
abandonment. Respondent is not liable to indemnify the
petitioner, there was a deviation in the route of the vessel,
as
changing the nature of the risk
the respondent had agreed to indemnify
Appellants under. Moreover,, Appellants are in
violation of the principle of Uberrima Fides.

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-MEMORIAL FOR THE RESPONDENTS
 ARGUMENTS ADVANCED

1. THE APPEAL IS NOT MAINTAINABILE BEFORE THIS HON'BLE COURT

1.1Irespective of the locus standi of the Appellants, the Petition for Special Leave is not
maintainable
1.1.1 Article 136 does not confer a Right of Appcal, but merely, a discretionary power to the
Supreme Court to be exercised for satisfying the demands of justice under exceptional
circumstances'. In Pritam Singh v. The State,the Supreme Court held that the power under
Article 136 is to be exercised sparingly and in exceptional cases only. In concluding the
discussion on Article 136 in the same case, it was held the by the Supreme Court that*
Generally speaking, this court will not grant Special Leave, unless it is shown that
exceptional and special circumstances exist, that substantial and grave injustice has been
done and that the case in question presents fcatures of sufficient gravity to warrant a review
of the decision appealed against."

1.1.2 Alhough the power has been held to be plenary, limitless, adjunctive, and
unassailable, in M. C. Mehta v. Union of India and Aero Traders Private Limited v.
Ravider Kumar Suri, itwas held that the powers under Article 136 should be exercised with
caution and in accordance with law and set legal principles.

1.1.3 In the cases of Secretary, State of Karnataka v. Umadevi and Shivanand

Gaurishankar Baswanti v. Laxmi Vishnu Textile Mills, the Supreme Court has criticized
the approach of settling private disputes under Article 136, stating that it would lead to
confusing results and lack of precedents. The Court observed that the Court is not bound to
interfere even if there is error of law in the impugned order.

1.1.4It is humbly submitted to this Hon'ble Court that there was no error in thejudgement of
the Bombay High Court; the contract between the Appellants and the Respondents provided
'N Suriyakala v.A. Mohandoss, (2007) 9 SCC 196
2Pritam Singh v. The State, AlR 1950 SC 169
A.V. Papayya Sastry v. Governnment of Andhra Pradesh, AIR 2007 SC 1546
Zahira Habibullah Sheikh v. State of Gujarat, AIR 2004 SC 3467
SM.C.Mehta v. Union of India, AIR 2004 SC 4618
Aero Traders Private Limited v. Ravider Kumar Suri, AIR 2005 SC 15
?Secretary, State of Karnataka v. Umadevi, AIR 2006 SC 1806 \
Shivanand Gaurishankar Baswantiv. Laxmi VishnuTextile Mills, (2008) 13 SCC 323
9Mathai Joby v. George, (2010) 4 SCC 358
Cce achi hnda mshna Page | 13
-MEMORIAL FOR THE RESPONDENTS
Delhi as the place of suing, and the Bombay High Court has
observed the same in wile
dismissing the matter, The counsel for the Respondents would also like to submit to
this
Hon'ble Court that there is no pressing matter or question of law, for
which, the intervention
of this Court would be necessary, i.e. there is no
necessity to invoke the jurisdiction conferred
upon this Hon'ble Court under
Article 136.
1.2
Nom-interference in the decision of the lower courts:
1.2.1 1f it appears prima facie that the order in
question
standard, the ends of justice and the need to maintain cannot justified by any judicial
be
judicial discipline require the
this case pointed out the errors of the Supreme
Court to intervene', the Supreme Court in
but, did not interfere in the High Court,
decision of the High Court. The Supreme Court does
with the conclusion arrived at by the not interfere
Tribunal if it has taken all the relevant factors into
consideration and there has been no misapplication of the principles of law'".
1.2.2 Normally, in exercising its
jurisdiction under Article 136, the Supreme Court does not
interfere with the findings of the fact
concurrently arrived at by the tribunal and the High
Court unless there is a clear error of law or
unless some important piece of evidence has
omitted from consideration12, been

1.2.3 A question is not allowed to be

raised for the first time in an appeal
Court3, It would refuse a question to be before the Supreme
developed before it when it had neither been urged
before the High Court nor before the Appellate
Tribunall4,
1.2.4 Though Article 136 is conceived in
widest terms, the practice of the Supreme Court is
not to interfere on questions of fact except in
exceptional cases when the finding is such that
it shocks the conscience of the court5.

1.2.5 The Supreme Court in the instant case need not

interfere in the decision of the High
Court of Bombay. The High Court of Bombay, while
dismissing the matter, observed that it
is not the right forum for deciding the matter;
this decision of the High Court can be
attributed to the place of suing as provided in the Contract betwcen the
Appellants and the
Respondents, which remains intact vis-à-vis the amendments to the contract
subsequently.
10 Union oflndia v. Era Educational Trust, AIR 2000 SC
1s73
"DCMv. Union of India, AlR 1987 SC 2414
12 Mehar Singh v. Shri Moni Gurudwara Prabandhak Committee, AIR 2000 SC 492
13 Nain Singh Bhakuniv. Union of ndia, AlR 1998 SC 622
14 Asst. Controller, Central Excise v. NT Co., AIR 1972 SC2563
15 Panclhanan Misra v. Digambar Mishra, AIR 200s SC 1299

Page | 14
-MEMORIAL FORTHE RESPONDENTS
 Hence, it is humbly submitted to this Hon'ble Court to dismiss the Petition for Special Leave
and allow the matter to be first heard by a Court in Delhi, subsequent to which, an appeal
might be preferred in this Hon'ble Court.
1.3Scope of Powers under Article 136:
1.3.1It is humbly submitted that if Special Leave is granted, the matter is registered as an
appeal and the Court does not take into cognizance all the points that may arise on appeal and
decide them on Merits'Û. The Supreme Court has also held that "t is not bound to go into
merits and even if we do so and declare the law or point our the error still wc may not

interfere if the justice of the case on facts does not require interference or if we feel that the
relief could be moulded in a different fashion."17 ,

(1.3.2 The Supreme Court in Kunhayammed v. State of Kerala' held that Article 136
consists of two distinct stages, the first stage where the matter is merely being decided if it is
to be accepted as an appeal or not; if the Supreme Court decides to adjudicate the matter, it
becomes an appeal, if otherwise, the matter was never an appeal.

1.3.3 Hence, it is humbly submitted to this Hon'ble Court that by reason of lack of any
specific matter that requires the intervention of this Hon'ble Court, the Court need not
entertain the matter; however, if this Hon'ble Court does decide to accept the Petition for
Special Leave, it is humbly submitted that this Hon'ble Court only adjudicate upon the order
of the Bombay High Court, i.e., not to hear this Appeal on merits, but merely, on the right
place of suing.

1.4Grounds on which appeal are granted not satisfied:

1.4.1 The Supreme Court has exercised its Jurisdiction under Article 136 under the following
circumstances

() When the Tribunal ostensibly fails to exercise its patent jurisdiction, 19

(ii) When there is an apparent error on the face of the decision20

(i) The tribunal has erroneously applied well:accepted principles of jurisprudence?1

16 Taherkhatoon y. Sala,bin Mohammam, AlR 1999 SC 1104

1" Taherkhatoon v. Sala, bin Mohammam, AIR 1999 SC 1104
I8 Kunhavammed v. State ofKerala, (2000) 245 ITR 360 (SC)
19 ChiefAdministrator cum Jt. Secretary, Government of lndia v. D. C. Dass, AIR 1999 SC 186
20 Siemens Eng &Mg Co. v. Union ofIndia, AIR 1976 sC 1785
Page| 15
-MEMORIAL FOR THE RESPONDENTS
 (iv) The tribunal acts against the
principles of Natural
question in a manner likely to cause injustice?3 Justice, has approached the
or

1.4.2 In the instant case, the

Bombay High Court has not committed any
High Court has respected the error in law. The
was not the right forum for
subsisting contract between the parties and has observed that it
justice; to say the decision ofadjudicating
the matter. There is no breach in law or
the Bombay High Court was natural
the matter has not been wrong would be wrong because
this Hon'ble Court that adjudicated on merits
no grounds can be whatsoever. Hence, it is humbly submitted to
Leave. made out for accepting this
petition for Special
1.5 Grounds of
rejection:
1.5.1 In
Kunhayammed and Others State of Kerala and
petition seeking grant of special
v.
leave to appeal may be Another4, it was held that a
question raised by the petitioner for rejected for several reasons The
or deserving being consideration
dealt with by the Apex
by this Court being not
fit for
ground for invoking this Hon'ble Court; it is humbly submitted thatconsideration
there is no
Court's jurisdiction under Article 136.

2.
NATIONAL
MR. BHULLARINSURANCE
AND THE
IS NOT CORPORATION LIABLE FOR THE ACTS OF
VALID. AMENDMENT TO THE CONTRACT WILL NOT BE

2.1 Extent of
Authority of an Agent
2.1.1 Section 187 of the
Indian Contract Act defines the extent of
agent in the course of dealings with the authority vested in the
third parties. It reads as, An
express when it is given by words spoken or authority is said to be
it is to be inferred from
written. An authority is said to be implied when
the circumstances of the case; and
things spoken or written, or the
21 Clerks of Calcutta
22 City Corner v. P.A. Tramnways
v. Calcutta
to the Collector, AlR Tramways Co. Ltd., AIR 1957 SC 78
1976 SC 143
25 Mohan Lal v.
2 KunhayammedManagement,
Bharat Electronics Ltd.,
and Others v. State of Kerala and AIR 1981 SC1253
Another, (2000) 6 SCC 359
-MEMORIAL FOR THE RESPONDETS Page | 16
ordinary course of dealing, may be accounted circumstances of the CANG.

2.1.2 As denoted from the cireumstances, Mr. Bhullar acted in the capacity of an agent while
representing National Insurance Corporation in the negotiations for the amendment of the
contract. However, the authority confered on him was restricted only to the negotiations
pending the approval of the directors. Hence, any representations that were made by him
were beyond the scope of his authority.

2.1.3 An agent has "apparent authority" to bind a corporate principal when the corporate
principal does something by word or deed to cause a third party to reasonably believe that the
agent has authority to act, even though the agent lacks such authority." In order for a
corporate principal to be liable, the principal must communicate, directly or indirectly, with
the third party in a manner sufficient to instil a reasonable belicf of the agent's
authority,
based upon objective manifestations of the principal.26 Such a belief is not "reasonable" if the
third party had such "knowledge of facts as would reasonably require him to inquire as to the
authority of the agent.27) X
2.2 Creation of Agency by Estoppel

2.2.1 On the samne basis, the creation of agency by estoppels

cannot be argued by the
Appellants due to the fact that Mr Bhullar as an agent has been held out to have a limited
authority to effect an amendment in the contract. If the agent is held out as having
only a
limited authority to do, on behalf of his principal, acts of a particular class,the
principal is not
bound by an act outside that authority even though it be an act of that
particular class,28 The
onus lies upon the person dealing with the agent to prove either real or
ostensible authority29
and it is a matter of fact in each case whether
ostensible authority existed for the particular
act for which it sought to make the principal liable." No
representation made solely by the
agent as to the extent of his authority can amount to holding out by the
principal.!

25 Ballantine, Private Corporations, (1927) 347 at p. 110.

26 Smith v. Hansen, 63 Wash App
27 Deers Inc. v. 355.
DeRuyter, 9 VWash App
28 Grant v.Norway (1851) 10 CB 665; 240.
29 Pole v Leask, (1862) 33 L Ch 155 Armagas Ltd v.Mundogas SA, The Ocean Frost,
;Rohtas Industries Ltd. v. [1986]AC 717
ILR (1951) 1Cal 420. Maharaja of Kasimbazar China Clay Mines,
30 Leckenby v.Wolman, [1921)WN
31 V/O Rasnoimport v.Guthrie & Co.100; Bocking Garage v. Mazurk
Ltd., [1966] 1 Lloyd's Rep 1. [1954] CLY 14.

-MEMORIAL FOR THE RESPONDENTS Page | 17

 7they

In the LIC case2 it was argued that the LIC was liable on the
basis of the doctrine of
apparent authority of the agent to collect premium from the policy holders. Though
collection
of premium amount is a general practice followed by
the LIC agents, it was found that the
LIC had not by any of its conduct induced the policy
holders into believing that the agents
were authorised to collect premium.
In the present
circumstances, Mr. Bhullar who had been authorised by the National Insurance
Company to negotiate the
amendment of the contract exercised his authority
Hence, the National Insurance
Corporation will not be vicariously liable for the negligently.
acts of Mr.
Bhullar. The requirement of the passing of the
essential one and Mr. Das, who was resolution the Board of Directors was an
by
authorized by the Petroleum Oil
knowledge about it. Corporation , had
Where a person contracting with the
agent has actual or
on the agent's
ostensible authority, he is bound by theconstructive notice of any restriction
authorised by the power of attorney to operate a restriction. Thus, where an agent,
the power of attorney to a business, but not to borrow money, produced
lender he asked for a loan, but the
advanced a loan, he could not recover it lender did not read it and
from the principal because he
notice that the agent had no power to had a constructive
borrow. s Once an ostensible
principal becomes bound by agent's acts within the authority is created, the
upon any private restrictions upon the scope of such authority. He cannot
agent's authority.34 rely
2.3 Doctrine of Constructive Notice:
2.3.1 Section 610 of the
Companies Act, 1956 provides for the Doctrine of
Notice, according to which, a company is Constructive
protected against third parties dealing with the
company; the thirdparty is presumed to have
knowledge of the company's public documents,
recorded in the relevant register by the Registrar. The
documents are open to public for inspection. presumption arises because there
2.3.2 Any outsider who intend to deal with
the company to be informed of the
such documents available for contents of
inspection at the Registrar"s ofice as well as statutory records
available for inspection at the registered office of the
company in their own interest, and even

32 Harshat J. Shah v.LIC, (1997) 5 SCC 64.

33 Jacobs v.Morris, (1902) 1Ch 816
(CA)
34 Sarshar Ali v. Roberts Cotton Assn.,
(1963) 1 SC244 ; Kamal Singh Dugar v.
Lid., AIR 1963 Cal 464. Corporated Engineers (India)
Page | 18
-MEMORIAL FOR THE RESPONDENTS
if they do not do so they are deemed in lavw to have done so and have the knowledge of
contents, and they will not be heard to say that they did not do so".
2.3.3 In one of the Madras case that of Kotla Venkataswamy v. Chinta Ramamurthy, the
Articles of association of the company required that all documents should be signed by the
managing irector, secretary and the working director on behalf of the company. Adeed of
mortgage was executed by the secretary and the working director only. The court held that no
claim would lie under such deed. The learned judge observed that the mortgagee should have
consulted the articles before the deed was executed. Therefore, even though the mortgagee
may have acted in good faith and the money borrowed applied for the purpose of the
company, the mortgage was nevertheless invalid.

2.3.4 Thus, persons dealing with a body corporate, incorporated company or a society are
bound to take notice of disabilities imposed on the body corporate and its officials by the
memorandum and articles or other documents of constitution?

2.3.5 Consequently, if aperson enters into a contract which is beyond the powers of the
company, as defined in the memorandum, or outside the limit set on the authority of the
directors as per the memorandum or articles, he cannot, as a general rule, acquire any rights
under the contract against the company.

2.4 Exceptions to the Doctrine of Indoor Management are applicable

2.4.1 The exceptions to the doctrine ofindoor management are as under:

2.3.4.1 Knowledge of irregularity: When a person dealing with a company has actual or
constructive notice of the iregularity as regards internal management, he cannot
claim benefit under the rule of indoor management. In the case of T.R Pratt
(Bombay) Ltd. v. E.D. Sassoon &Co. Ltd."", Company A lent money to Company
B on a mortgage of its assets. The procedure laid down in the articles for such
transactions was not complied with. The directors of the two companies were the

35 Taxmann"'s Company Law by Krishnamurti D.S.R., 2006 Ed. Page 295

%Kotla Venkataswamy v. Chinta Ramamurthy AlR 1934Mad 579
37 Taxmann"'s Company Law &Practice By Majumdar AK 1995 Ed. Page 143
38 TR Pratt (Bombay) Ltd. v. E.D. Sassoon &Co. Ltd., AIR 1936 Bom 62
Page | 19
-MEMORIAL FOR THE RESPONDENTS
 same. Held, the lender had notice of the irregularity and hence the mortgage was not
binding.
2.3.4.2 Negligence: Where a person dealing with a company could
discover the irregularity
if he had made proper inquiries, he cannot claim the
benefit of the rule of indoor
management. The protection of the rule is also not available where the
CIrcumstances surrounding the contract are so suspicious as to invite inquiry, and
the
outsider dealing with the company does not make proper
Lal v. Dinshaw & Co39, the inquiry. In Anand Bihari
plaintiff, in this case, accepted a transfer of a
property from its accountant. Held, the transfer was company's
void as such a transaction was
apparently beyond the scope of the accountant's
seen the power of attorney authority. The plaintiff should have
executed favour of the accountant by the
in
2.3.4.3 Acts outside the scope of company.
apparent authority: If an
contract with a third party and if the act of officer of a company enters into a
the
authority, the company is not bound. In such a officer is beyond the scope of his
case, the plaintiff cannot
protection of the rule of indoor claim the
power to do the act could have management simply because under the articles the
been delegated to him. The
company only if the power to act has in fact been plaintiff can sue the
he entered into the delegated the officer with whom
to
contract. In
Kreditbank Cassel v. Schenkers Ltd,40, a branch
manager of a
company drew and endorsed bills of
company in favour of a payee to whom he was exchange on behalf of the
authority from the company to do so. Held, the personally indebted. He had no
company was not bound.
Similarly in Sri Krishna v. Mondal Bros.& Co"., the
manager of a company had the
authority under the Memorandum and the Articles of the
He borrowed company to borTOW money.
money on a hundi but did not place the
in the
money did not place the money
coffers of the company. It was held that the
the hundi. It could not defeat the
company was bound to honour
bona fide claim of the creditor for
money on the ground of fraud of its own officer.
recovery of the

2.3.4.4 Acts outside the scope of apparent

authority - If an officer of a company enters into a
contract with third party and if the act of the officer is
a
beyond the scope of his
39 Anand Bihari Lal v. Dinshaw & Co, (1946) 48 BOMLR 293
40 Kreditbank Cassel v. Schenkers Ltd., [1927)1KB 826
41 Sri Krishna v. Mondal Bros.& Co., AIR 1967 Cal 75

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-MEMORIAL FOR THE RESPONDENTS
 authority, the company is not bound. In such a case, the plaintiff cannot claim the
protection of the rule of indoor management simply because under the Articles the
sue the
power to do the act could have been delegated to him. The plaintiff can
delegated to the officer with whom
company only if the power to act has in fact been
he has entered into the contract.

a company drew and

In Kreditbank Cassel v. Schenkers Ltd.42, a branch manager of
a payee to whom
endorsed bills of exchange on behalf of the company in favour of
he was personally indebted. He had no
authority from the company to do so. It was
But if an officer of a company acts
held that the company was not bound.
the company, the company is
fraudulently under his ostensible authority on behalfof
liable for his fraudulent act.

wherein The manager of a company had the

In Sri Krishna v. Mondal Bros. & Co.t,
Articles of the company to borrow money.
authority under the Memorandum and the
did not place the money did not
place the money
He borrowed money on ahundi but
bound to honour
was held that the company was
in the coffers of the company. It of the
claim of the creditor for recovery
the bona fide
the hundi. It could not defeat
fraud of its own officer.
money on the ground of
of the current factual
hence humbly submitted to this Hon'ble Court that by virtue
2.4.2 It is mentioned
exceptions to the Doctrine of lndoor Management, as
matrix falling within the
to bind the
the Appellants cannot claim any of the exceptions and attempt
above,
misrepresentation of facts whatsoever. An act
Respondents. The Respondents have done no
binding under
negligence on the part of the Appellants shall not make the Respondents
of only be as per the
liability, if at all, would
whatsoever circumstances. Hence, any contractual
amended contract.
initial contract and not as per the

42 Kreditbank Cassel v. Schenkers Ltd [1927) 1KB 826

Sri Krishna v. Mondal Bros.& Co. AIR 1967 Cal 75

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