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SUPREME COURT OF INDIA
BEFORE S. RANGANATHAN, J.S. VERMA AND M. FATHIMA BEEVI, JJ.
INDIAN OIL CORPORATION LTD.
Versus
AMRITSAR GAS SERVICE AND OTHERS.
Decided on 19-11-1990
Advocates appeared
Harish N. Salve, R. Shakdhar, S. Singhi, Ms P. Shroff, S.S. Shroff, R. Sasiprabhu and Ms Suruchi Aggarwal, Advocates, for the Appellant; D.V. Sehgal, Senior Advocate (N.K. Agarwal, Advocate, with him) for the Respondents.
Arbitration Act - Section 34 - Application for setting aside arbitral award - Distributorship Agreement - Unauthorised connections - Termination of distributorship - Arbitrator in his award has held that appellant-Corporation committed breach of contract and on that basis, it has been held liable to remedy breach by restoration of distributorship and pay compensation for reasons given in award - Appellant-Corporation received certain complaints about working of distributorship alleging unauthorised connections being given and tampering of waiting list of customers by distributor which were acts prejudicial to the interest, reputation and products of appellant-Corporation - Accordingly appellant-Corporation invoked clause 27 of Distributorship Agreement and by its letter, it terminated forthwith distributorship - Held, Section 34 of Arbitration Act and reference was made of all disputes between parties in suit, occasion to make a counter-claim in written statement could arise only after order of reference - Pleadings of parties were filed before arbitrator, and reference covered all disputes between parties in suit - Accordingly, counter-claim could not be made at any earlier stage - Refusal to consider counter-claim for only reason given in award does, therefore, disclose an error of law apparent on face of the award - However, in present case, counter-claim not being pressed at this stage by learned counsel for appellant, it is unnecessary to examine this matter any further - Award is modified to extent indicated inasmuch as plaintiff-respondent 1 is entitled to compensation amounting to loss of earnings for notice period of 30 days from date of notice calculated as indicated above, but not to restoration of distributorship; and refund of amounts of two demand drafts for Rs 15,580.83 each and given by respondent 1 to appellant-Corporation – Order accordingly.
Key Points: - (!) (!) (!) Court discusses termination clauses (clause 27) and grounds for immediate termination; whether termination was valid and the scope for restoration. - (!) (!) (!) Arbitrator found termination not validly effected and granted restoration plus compensation and return of assets; but issues arise about enforceability under Specific Relief Act. - (!) (!) The award includes monetary compensation for notice period and return of drafts; restoration granted as exceptional relief. - (!) (!) Court identifies error of law apparent on the face of the award for granting restoration where contract is revokable; heavy reliance on Sections 14, 16 of Specific Relief Act. - (!) Counter-claim status: arbitrator did not decide counter-claim since not within reference; issue discussed for potential legal misconduct. - (!) (!) Questions framed about validity of termination and relief; legal arguments about onus and constitutional considerations. - (!) (!) Modified relief: compensation for 30-day notice period and return of drafts; costs ordered. - (!) Citation: 1991(1) SCC 533.
JUDGMENT
VERMA, J.— This appeal by special leave is by the Indian Oil Corporation Ltd. against the judgment of the Punjab and Haryana High Court in Civil Revision No. 2340 of 1984, decided on November 5, 1984, dismissing the revision against the order dated July 28, 1984, passed by the Additional District Judge, Amritsar, in C.M.A. No. 22 of the 1983, affirming the order dated October 19, 1983 of the Sub-Judge, 1st Class, Amritsar, in Suit No. 376 of 1983 by which the appellants application made under Section 34 of the Arbitration Act for stay of the suit was dismissed. The brief facts giving rise to this appeal and indicating the points for decision herein are now stated.
2. A Distributorship Agreement dated April 1, 1976 was made between the Indian Oil Corporation Ltd. (hereinafter called as the Corporation) and the Amritsar Gas Service, respondent 1, as distributor of the Corporation for sale of the Corporations Liquefied Petroleum Gas (LPG) known as Indane in cylinders only for household consumers and commercial consumers in the area at Amritsar, specified in the agreement. The terms and conditions of distributorship were specified in the agreement. Clause 27 of the agreement provided for termination of the agreement by the Corporation forthwith on the happening of any of certain specified events. Clause 28 permitted either party without prejudice to the foregoing provision or anything to the contrary contained in the agreement to terminate the agreement by 30 days notice to the other party without assigning any reason for such termination. Clause 37 provided for adjudication of any dispute or difference of any nature by arbitration.
3. It appears that the appellant-Corporation received certain complaints about the working of the distributorship alleging unauthorised connections being given and tampering of the waiting list of customers by the distributor which were acts prejudicial to the interest, reputation and products of the appellant-Corporation. Accordingly, the appellant-Corporation invoked clause 27 of the Distributorship Agreement and by its letter No. LPG/001 dated March 11,1983, it terminated forthwith the distributorship. The said notice reads as under:
"M/s Amritsar Gas Service
Madan Mohan Malviya Road,
Amritsar City.
Dear Sirs,
Re: Indane Distributorship at Amritsar
Please refer to the LPG Distributorship Agreement dated April 1, 1976 executed between you and the Indian Oil Corporation. Clause 27 of the Distributorship Agreement reads as under:
"27. Not with standing any thing to the contrary herein contained, the Corporation shall also be at liberty at its entire discretion to terminate this agreement forthwith upon or at any time after the happening of any of the following events, namely:
(h) If the distributor does not adhere to the instructions issued from time to time by the Corporation in connection with safe practices to be followed by him in the supply and storage of the Corporations products or otherwise;
(i) If the distributor shall give out unauthorised connections to any person without the Corporation receipt/subscription voucher or otherwise howsoever;
(ii) If the distributor shall either by himself or by his servants or agents commit or suffer to be committed any act which, in the opinion of the Regional Manager of the Corporation for the time being at New Delhi, whose decision in that behalf shall be final, is prejudicial to the interest or good name of the Corporation or its products;
the Regional Manager shall not be bound to give reasons for such decision."
It has come to our knowledge that either you or your servants or agents have committed the following:
1. That you have released unauthorised connections by tampering with the waiting list registration record.
2. That you have issued connections to those people who had not booked themselves for gas connections.
3. That you have sold refill to unauthorised customers.
4. That you have issued duplicate issue slips.
The above acts jointly and severely in my opi
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