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2025 Supreme(Online)(Mad) 21686
IN THE HIGH COURT OF JUDICATURE AT MADRAS
MR.JUSTICE RMT.TEEKAA RAMAN, MR.JUSTICE N.SENTHIL KUMAR, JJ
THE CHIEF GENERAL MANAGER (L – Appellant
Versus
M/S SHRI VIJAYA RGGLV INDANE – Respondent
C.M.A(MD)No.130 and C.M.A.(MD)No.30 of 2023
For Appellants:M/s.Chitra Sampath, Senior Counsel For Mr.Mohammed Fayaz Ali; For Respondent: Mr.S.Vijaya Kumar, Senior Counsel For Mr.M.Kumar; For Appellant:Mr.S.Vijaya Kumar, Senior Counsel For Mr.M.Kumar; For Respondents: M/s.Chitra Sampath, Senior Counsel For Mr.Mohammed Fayaz Ali
Judicial intervention in arbitral awards is limited; courts must respect the arbitrator's findings unless there are grounds for setting aside the award under Sections 34 and 37 of the Arbitration Act.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 34 and 37 - Appeal against arbitral award - The Principal District Judge set aside clauses (vi) and (vii) of the award, which included compensation for damages and interest - The arbitrator's award was confirmed in all other respects - The court emphasized the limited scope of judicial review under Sections 34 and 37, affirming that the award can only be set aside on grounds of patent illegality or procedural irregularities. (Paras 26, 41)
(B) Legal Principles - The court reiterated that judicial intervention in arbitral awards is minimal, and the appellate court should not re-evaluate the merits of the case but ensure the lower court acted within its jurisdiction. (Paras 26, 40)
(C)
Facts of the case:
The claimant, an LPG distributor, faced penalties and suspension from the Indian Oil Corporation due to alleged irregularities. The arbitrator ruled in favor of the claimant, awarding damages and interest, which were partially overturned by the Principal District Judge. (Paras 7, 21)
Findings of Court:
The court restored the arbitrator's award of Rs. 5 lakhs for damages and interest, confirming the arbitrator's findings that the penalties imposed were impermissible. (Paras 41, 42)
Issues: The main issues were whether the Principal District Judge was justified in disallowing interest and setting aside the award for damages. (Paras 24)
Ratio Decidendi: The court found that the learned Principal District Judge misapplied Section 34, and the arbitrator's award was legally sustainable, warranting restoration of the damages and interest. (Paras 40, 42)
Result: Appeals allowed.
COMMON JUDGMENT
[Judgment of the Court was made by RMT.TEEKAA RAMAN, J.]
For the sake of convenience, the parties are referred to according to their ranking in C.M.A. No. 30 of 2023, namely, the claimant and the respondents—Indian Oil Corporation.
2. The sole arbitrator, appointed by the High Court, passed an award in Arb.O.P. No. 43 of 2021, dated 20.10.2022.
3. The said award consists of eight clauses.
4. Aggrieved by the said award, the respondent—Indian Oil Corporation—filed Arb.O.P. No. 43 of 2021 before the learned Principal District Judge, Tiruchirapalli, wherein clauses (vi) and (vii) of the award were set aside. With respect to the other clauses, the appeal preferred by the respondent-IOC was dismissed.
5. As against the modification setting aside clauses (vi) and (vii), the petitioner-agent filed C.M.A. (MD) No. 30 of 2023, which pertains to Clause (vi) of the award. This clause includes the award of Rs. 5 lakhs on the grounds of loss of reputation, mental agony, and the award of interest at 12% from 01.10.2018 until payment, as well as the order of suspension, which was rounded off for calculation purposes.
6. The respondent-IOC has also preferred C.M.A. (MD) No. 130 of 2023 concerning clauses (vi) and (iv) on one hand and clauses (v) and (vii) on the other. Hence, both cases were jointly heard and disposed of by a common order.
7. The brief facts leading to filing of the initiation of the arbitration proceedings are as under:-
(i) A Memorandum of Distributorship Agreement was executed between the appellant and the second respondent under the Physically Challenged Category (CC) on 24.08.2015.
(ii) Show Cause Notices were issued by the second respondent to the appellant for alleged irregularities in providing connections under the PMUY scheme on 09.08.2017 and 11.12.2017.
(iii) A Warning Letter was issued by the second respondent to the appellant in reference to the above-mentioned Show Cause Notices on 24.01.2018.
(iv) A Show Cause Notice was issued by the second respondent to the appellant for alleged irregularities in providing connections under the PMUY scheme on 13.06.2018.
(v) An order was passed by the second respondent imposing a penalty of Rs. 19,96,384.14/- on the alleged authorities on 05.07.2018.
(vi) A supplementary order was passed by the second respondent imposing a penalty of Rs. 3,66,313.21/- on the alleged authorities on 24.07.2018.
(vii) A Show Cause Notice was issued by the second respondent proposing the suspension of the dealership and seeking explanations within two weeks on 21.09.2018.
(viii) An order of suspension was issued by the first respondent without waiting for an explanation from the appellant on 25.09.2018.
(ix) A Memorandum of Appeal was submitted by the appellant to the first respondent regarding the imposition of the penalty on 15.10.2018.
(x) A Section 21 notice was issued by the appellant to the respondent, invoking the appointment of an arbitrator to decide the disputes between the appellant and the respondents, on 24.10.2018.
(xi) O.P. No. 1119 of 2018 was filed by the appellant seeking the appointment of an arbitrator to decide the disputes regarding the order of suspension and penalty on 13.12.2018.
(xii) An order was passed in O.P. No. 1119 of 2018, appointing Hon'ble Mr. Justice M. Thanikachalam (Retd.) as the arbitrator.
(xiii) An award was passed by the Hon'ble Arbitrator in O.P. No. 1119 of 2018. The learned Arbitrator framed as many as ten issues, dealt with them in depth, and ultimately rendered clear findings that the appellant is entitled to reliefs.
8. As stated above, aggrieved by the award passed in O.P. No. 1119 of 2018, the respondent—Indian Oil Corporation—has preferred Arb.O.P. No. 43 of 2021 .
(i) E.P. No. 31 of 2020 was filed by the appellant to attach and sell the immovable property of the respondents.
(ii) A counter affidavit was filed by the appellant in O.P. No. 43 of 2021 on 21.10.2021.
(iii) An order was passed by the learned Principal District Judge, Trichy, allowing the O.P
