IMPORTANT POINT
If there is any objection as to applicability of the arbitration clause to the facts of the case, same will have to be raised before concerned Arbitral Tribunal as provisions of Section 8 of Arbitration & Conciliation Act is peremptory.

Headnote:(i) Arbitration and Conciliation Act, 1996-Section 8 r/w 5 and 16-Dealership agreement between appellant and respondent for supply of petroleum products by appellant-Short delivery of Motor Spirit and High Speed Diesal detected in an inspection in dispensing units of respondent-After show cause, appellant suspended sales and supply of products to respondent for 30 days and levied fine-Suit for declaration and injunction with interim stay application filed by respondent and civil judge stayed suspension of supplies-Appellant filed application u/s 8 r/w Section 5 of the Act for referring dispute to arbitrator as per clause 40 of Dealership Agreement-Civil Judge dismissed application holding that dispute about suspected short supply was not covered by arbitration agreement-Revision dismissed by High Court-Appeal-Section 8 is peremptory in nature and it is mandatory for Civil Court to refer dispute to arbitrator if agreement contained arbitration clause-If there was any objection as to applicability of arbitration clause to facts of the case, same will have to be raised before concerned Arbitral Tribunal.
       Held : This Court in the case of P. Anand Gajapathi Raju & Ors. v. P.V.G. Raju (Dead) & Ors. [2000 (4) SCC 539] has held that the language of Section 8 is peremptory in nature. Therefore, in cases where there is an arbitration clause in the agreement, it is obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, it is clear that if, as contended by a party in an agreement between the parties before the Civil Court, there is a clause for arbitration, it is mandatory for the Civil Court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the agreement is accepted by both the parties as also by the courts below but the applicability thereof is disputed by the respondent and the said dispute is accepted by the courts below. Be that as it may, at the cost of repetition, we may again state that the existence of the arbitration clause is admitted. If that be so, in view of the mandatory language of Section 8 of the Act, the courts below ought to have referred the dispute to arbitration. (Para 13)
       Further held : It is clear from the language of the Section, as interpreted by the Constitution Bench judgment in Konkan Railway (supra) that if there is any objection as to the applicability of the arbitration clause to the facts of the case, the same will have to be raised before the concerned Arbitral Tribunal. Therefore, in our opinion, in this case the courts below ought not to have proceeded to examine the applicability of the arbitration clause to the facts of the case in hand but ought to have left that issue to be determined by the Arbitral Tribunal as contemplated in Clause 40 of the Dealership Agreement and as required under Sections 8 and 16 of the Act. (Para 15)
       (ii) Arbitration and Conciliation Act, 1996-Section 8 r/w Section 5-Appellant suspended supply of petroleum products to respondent dealer when during an inspection dispensing units of respondent were found providing short delivery of product-Arbitration clause in dealership agreement-Trial Court & High Court found that dispute was not covered by arbitration clause-Validity of the view-As per clause 20 in agreement appellant was entitled to stop or suspend supply of its products to such a dealer without prejudice to other remedies if dealer committed default in complying with obligations-Courts below erred in its conclusion that appellant did not have legal authority to investigate and proceed against respondent for its alleged misconduct.
       Held : The courts below, in our opinion, have committed an error by misreading the terms of the contract when they came to the conclusion that the only remedy available as against a misconduct committed by an erring dealer in regard to short-supply and tampering with the seals lies under the provisions of the 1985 Act. The courts below have failed to notice that when a dealer short-supplies or tampers with the seal, apart from the statutory violation, he also commits a misconduct under Clause 20 of the Agreement in regard to which the appellant is entitled to invoke Clause 30 of the Agreement to stop supply of petroleum products to such dealer. The power conferred under the Agreement does not in any manner conflict with the statutory power under the 1985 Act nor does the prescribed procedure under the 1985 Act in regard to search and seizure and prosecution apply to the power of the appellant to suspend the supply of its petroleum products to an erring dealer. The power exercised by the appellant in such a situation is a contractual power under the agreement and not a statutory one under the 1985 Act. The existence of dual procedure; one under the criminal law and the other under the contractual law is a well-accepted legal phenomenon in the Indian jurisprudence. Therefore, in our opinion, the courts below have erred in coming to the conclusion that the appellant did not have the legal authority to investigate and proceed against the respondent for its alleged misconduct under the terms of the Dealership Agreement. We are also of the opinion that if the appellant is satisfied that the respondent is indulging in short-supply or tampering with the seals, it will be entitled to initiate such action as is contemplated under the agreement like suspending or stopping the supply of petroleum products to such erring dealer. If in that process any dispute arises between the appellant and such dealer, the same will have to be referred to arbitration as contemplated under Clause 40 of the Dealership Agreement. (Paras 20 & 21)

JUDGMENT

Santosh Hegde, J.-Heard learned counsel for the parties.

Leave granted.

2. This appeal is filed against the judgment of the High Court of Punjab & Haryana at Chandigarh delivered in Civil Revision No. 1688 of 2002 on 1-7-2002 whereby the High Court dismissed the revision petition filed by the appellant herein against an order made by the Civil Judge, (Senior Division), Rewari, Haryana, dated 19-2-2002 dismissing the application filed by the appellant herein under Section 8 read with Section 5 of the Arbitration and Conciliation Act, 1996 (for short the Act ) in a suit pending before it seeking reference of the suit pending before it to an arbitrator as contemplated under Clause 40 of the Dealership Agreement between the parties.

3. The facts necessary for disposal of this appeal, briefly stated, are as follows:

The appellant herein is a company carrying on the business of manufacture, sale and distribution of petroleum products which it does through dealers and distributors appointed by it. The respondent herein is one of such dealers appointed by the appellant to sell its petroleum products through a retail outlet at Jaisingpur Khera, National Highway No. 8, District Rewari, Haryana. The said appointment as a dealer of the respondent is governed by a Dealership Agreement dated 26-3-1997 executed by the parties. According to the appellant, Clause 30 of the said agreement empowers it to stop the supply of its products to a dealer for a period as the appellant thinks fit, for breach of any of the conditions contained in the agreement. The appellant also states that this stoppage of supply of its product is in addition to and without prejudice to any other right or remedy available to it or others under the said agreement. The appellant also contends that under Clause 40 of the said agreement, any dispute of whatsoever nature between the parties, arising out of or in relation to the said agreement, will have to be referred to the sole arbitration of the Chairman and the Managing Director of the Corporation who may, as per the said clause, either himself act as an arbitrator or nominate some other officer of the appellant to act as an arbitrator. It is also the case of the appellant that under Clause 20 of the said agreement, the respondent is not only obligated to comply with the terms and conditions of the said agreement but is also responsible to comply with all directions, orders, guidelines etc. issued by the appellant-Corporation on safe practices and marketing discipline. The appellant further contends that in this regard as per the marketing discipline, guidelines issued for the purpose of prevention of mal-practices, irregularities at retail outlets, the officers of the appellant are entitled to conduct inspections, make necessary report and take action thereon. This right of the Corporation, according to the appellant, is in addition to the powers of the Government of India and other statutory authorities as notified in the Notification dated 28-12-1998 issued in exercise of powers conferred under Section 3 of the Essential Commodities Act, 1955 and Order of 1998 issued thereon for purposes of checking mal-practices.

4. The appellant contends that while in exercise of such power of inspection on 18-11-2001 by the officers of the Corporation, it was found that there was short delivery of Motor Spirit (MS) and High Speed Diesel (HSD) in the dispensing units of the respondent. The said officers also found weights and measurement seals in the HSD dispensing units tampered with. Based on the said inspection reports, the appellant states that on 29-11-2001 a show-cause notice was issued by the appellant to the respondent in regard to short-delivery and tampering, as stated above.

5. In response to the above show-cause notice of the appellant, it is stated that the respondent submitted its reply and on consideration of the same, the appellant not being satisfied, suspended the sales and supply of petroleum products to the r

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2003 Supreme(SC) 640

IMPORTANT POINTIf there is any objection as to applicability of the arbitration clause to the facts of the case, same will have to be raised before concerned Arbitral Tribunal as provisions of Section 8 of Arbitration & Conciliation Act is peremptory.

Cases Referred (2)

IMPORTANT POINT
If there is any objection as to applicability of the arbitration clause to the facts of the case, same will have to be raised before concerned Arbitral Tribunal as provisions of Section 8 of Arbitration & Conciliation Act is peremptory.