Rajasthan High Court - Jaipur
M/S Guru Kripa vs Hindustan Petroleum Corp Ltd And ... on 23 March, 2011
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH S.B. Civil Misc. Appeal No.603/2011 M/s. Guru Kripa Versus Hindustan Petroleum Corporation Ltd. & Anr. DATE OF JUDGMENT : 23/03/2011 HON'BLE MR.JUSTICE S.S.KOTHARI Mr. A.K. Sharma, Sr.Adv. with Mr. Rachit Sharma, for appellant Mr. S. Kasliwal, Sr.Adv. with Mr. K.Verma & Mr. Gaurav Sharma, for respondents
**** REPORTABLE The appellant submitted an application under Section 9 of Arbitration and Conciliation Act, 1996 (hereinafter called the Act) alleging that the appellant is a partnership concern and a retail outlet dealership agreement was executed between it and the respondent no.1 on 08.04.2010 for a period of 15 years w.e.f. 29.03.2009. In consequence of the said agreement, the appellant started selling Motor Spirit (for short MS) and High Speed Diesel (for short HSD) and other petroleum products of HPCL as its dealer with honesty. There was no complaint against it. The respondent no.1 intimated the appellant vide letter dated 03.11.2010 that the sample of MS obtained from its retail outlet during inspection on 04.09.2010 was found adulterated after analysis. Simultaneously, the respondent no.1 suspended supply of MS, HSD and other petroleum products and asked the appellant to show cause why the dealership agreement may not be terminated. The appellant alleged that the samples of MS and HSD were obtained in complete disregard of the rules applicable for the purpose and, as such, the alleged report cannot be relied upon. Even according to show cause notice, out of the samples of MS and HSD being tested, the sample of HSD was found to be as per prescribed norms. It was further mentioned that there is provision for arbitration in the agreement and as such, the respondent no.1 cannot terminate the agreement and the matter is required to be adjudicated by the Arbitrator. Therefore, the appellant prayed that an interim order may be issued restraining the respondents from obstructing supply of MS, HSD and other petroleum products to the appellant's outlet. The application was contested by the respondents by submitting a reply. It was mentioned therein that on 04.09.2010 samples were obtained according to three tier sample procedure in the presence of the representative of the appellants, Shri Dinesh Kumbaj, who signed on all the relevant papers. An analysis of the samples was obtained and the sample of MS contained excess sulfur and was not in accordance with the prescribed standard. Hence, show cause notice dated 03.11.2010 was issued. The operation of retail outlet is subject to conditions contained in the agreement which are governed by Marketing Discipline Guidelines. As the sample was found adulterated, the sale was stopped to prevent supply of adulterated material to the general public. The appellant was indulging in illegal activities by selling adulterated material to the public and causing economic loss to the respondents. It was also submitted that condition no.66 of agreement contains provision for adjudication of disputes through arbitration, but the appellant has not taken any steps for invoking the same. It was also submitted that the agreement executed between the parties is determinable and as such, it cannot be specifically enforced under Section 14 of Specific Relief Act, 1963 (hereinafter called Act 1963). In view of provisions of Section 41(e) of Act, 1963, no injunction can be issued and the application is liable to be dismissed. After hearing the parties, the learned Court below rejected the application of the appellant by the impugned order which has been challenged by the appellant in this appeal filed under Section 37 of the Act.
I have heard the learned Senior Advocates for the parties at length.
It has been contended on behalf of the appellant that while drawing samples of MS and HSD, the provisions of The Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices), Order 2005 (hereinafter called the Order) were violated inasmuch as no information was given to the appellant before conducting inspection and taking samples. Consequently, nobody on behalf of the appellant was present at that time. Two samples of MS were taken by emptying the containers in which samples of HSD were taken earlier. It is further contended that the information about the test report was communicated with undue delay and as such, the reports cannot be relied upon to prove that the appellant was selling adulterated MS. It is also contended that sale of HSD and MS is, respectively, 10000 and 1500 Ltrs daily at the appellant's outlet and if the appellant intended to earn money illegally, it would have resorted to adulteration in HSD and not in MS. It is further contended that there is an arbitration agreement between the parties and the respondent cannot terminate the agreement unless the disputes and differences between the parties are adjudicated by the Arbitral Tribunal. Much emphasis has been laid on the observations made by the learned Court below in its impugned order on Pages 8 and 9 that until and unless the matter is adjudicated by the arbitrator finally, the Corporation has no right to terminate the agreement dated 04.08.2010. In support of the aforesaid submissions, reliance has been placed on the cases of Harbanslal Sahnia and another Vs. Indian Oil Corporation Ltd. and others reported at (2003) 2 SCC 107 and Hindustan Petroleum Corporation Ltd. and others Vs. Super Highway Services and another reported at (2010) 3 SCC 321.
It has been contended on behalf of the respondents that they are committed to supply pure material to the general public at large in public interest. Keeping the said object in mind, conditions have been incorporated in the agreement executed between the parties that the dealer shall abide by the terms and conditions agreed upon between the parties for supplying MS, HSD and other petroleum products to the public in good quality condition. It has been submitted that keeping in view the provisions of Marketing Discipline Guidelines, immediate action is taken for termination of the agreement of dealership agreement in case of adulteration. The inspection of the retail outlet of the appellant was conducted and samples of MS and HSD were drawn as per provisions of the Order 2005. The samples were sent for analysis and, after the test, the sample of MS was found to be adulterated as it did not conform to the prescribed specifications. On getting the report, show cause notice dated 03.11.2010 was issued to the appellant to show cause why his dealership agreement may not be terminated. Instead of submitting a reply to the notice and taking recourse to arbitration proceedings, the appellant filed an application under Section 9 of the Act. After rejection of the said application by the Court order dated 18.11.2010, the appellant submitted a reply to the show cause notice dated 29.11.2010 which was duly considered and an order dated 01.02.2011 was issued terminating the dealership agreement. The said order was duly served on the appellant. Supply of MS and HSD had already been stopped with the issuance of show cause notice dated 03.11.2010 and M/s.New Rajasthan Petrol Service has been appointed as adhoc dealer in order to ensure resumption of supply of MS and HSD to the general public at the outlet. The learned Senior Counsel also submitted that the appellant has not submitted any notice for invoking arbitration agreement. He has also contended that the observations of the learned Lower Court, that the dealership agreement cannot be terminated prior to the adjudication of the disputes by the arbitrator, are of no consequence and the respondents are entitled to challenge them under the provisions of Order 41 Rule 22 CPC without submitting cross-objection. It has also been submitted that the dealership agreement executed between the parties is of determinable nature and no injunction can be granted for its specific performance. In support of the above submissions, reliance has been placed on the cases of Indian Oil Corporation Vs. Amritsar Gas Service and others reported at (1991) 1 SCC 533, Sundaram Finance Ltd. Vs. NEPC India Ltd. reported at (1999) 2 SCC 479, Hindustan Petroleum Corporation Ltd. Vs. Sri Sriman Narayan and another reported at AIR 2002 SC 2598, Indian Oil Corporation Vs. M/s. Bhatia Filling Station Ajmer reported at 2002 (4) WLC (Rajasthan) 742 and Adhunik Steels Ltd. Vs. Orissa Manganese and Minerals (P) Ltd. reported at 2007 (7) SCC 125.
I have given thoughtful consideration to the contentions raised on behalf of the parties, and carefully gone through the record of the case and the cases relied upon by the parties.
At the outset, it may be stated that the question of exhaustion of alternative remedy is not involved in the present case as the existence of arbitration agreement between the parties in Clause 66 of the dealership agreement is not in dispute. The appellant filed an application under Section 9 of Act, 1996 on the basis of existence of arbitration agreement between the parties. The respondents did not deny the existence of arbitration agreement. Hence, it need not detain me further as the application as well as appeal submitted by the appellant are maintainable.
The objections of the appellant that the samples of MS and HSD were not taken in accordance with the provisions of Order 2005 and consequently, the test reports cannot be used against it is a disputed and debatable question. The respondents have denied all the allegations of the appellant in the order dated 01.02.2011. This shows that there is serious dispute on this question between the parties which can be decided only by the Court / Arbitral Tribunal and not in these proceedings. It is not necessary in this appeal to go into the constitutional limitations of Article 14 of the Constitution to which the respondent corporation, as an instrumentality of the State, would be subject on account of the fact that the dispute between the parties is based only on breach of terms of agreement and remedies flowing therefrom. Hence, the cases relied on behalf of the appellant do not help it as the judgments were rendered in proceedings under Articles 226, 136 of the Constitution of India.
The contention of the appellant regarding observations of the learned Lower Court about non-termination of dealership agreement prior to decision by the Arbitrator is also of no help to it. A careful reading of the impugned order goes to show that the said observations are contained on Pages 8 and 9 during the course of discussions and are nothing but obiter dicta. The settled position of law is that a decision is only an authority for what it actually decides. What is of essence in a decision is its ratio and not every observation found therein. It is not a profitable task to extract a sentence here and there from a judgment and to build upon it. Moreover, it has been submitted by the respondents that they are entitled to challenge the said observations under provisions of Order 41 Rule 22 CPC without submitting cross-examination in view of the law laid down by Hon'ble Apex Court in the case of Ravinder Kumar Sharma Vs. State of Rajasthan reported at AIR 1999 SC 3571. However, this aspect need not detain me further as the aforesaid observations are not a finding, but only obiter dicta which were totally uncalled for.
The facts of this case clearly show that the allegation against the appellant is that it was selling adulterated MS. Clause 58 of the agreement executed between the parties specifically provides as below:
58. Notwithstanding anything to the contrary herein contained, the Corporation shall also be at liberty to terminate this agreement forthwith upon or at any time after the happening of any of the following events namely:
(i) If the dealer shall contaminate or tamper with the quality of any of the products supplied by the Corporation.
The respondents have in exercise of their power terminated the dealership agreement vide order dated 01.02.2011. They have also taken over possession of the premises of the outlet as is clear from the documents placed on record along with reply of the stay application. They have also appointed M/s.New Rajasthan Petrol Service as adhoc dealer. In these circumstances, the application for interim relief under Section 9 of Act, 1996 has, in effect, become infructuous.
In the aforesaid facts and circumstances, prayer sought by the appellant virtually amounts to grant of mandatory injunction for restoration of dealership to sell petroleum products. Injunction is a form of specific relief. It is an order of a court requiring a party either to do a specific act or acts or to refrain from doing a specific act or acts either for a limited period or without limit of time. In relation to a breach of his obligations under a contract, the remedy is either damages or specific relief. The two principal varieties of specific relief are decree of specific performance and the injunction. The remedy for the non-performance of a duty are (1) compensatory, (2) specific. In the former, the court awards damages for breach of the obligation. In the latter, it directs the party in default to do or forbear from doing the very thing, which he is bound to do or forbear from doing. Specific relief is relief in specie. It is a remedy which aims at the exact fulfillment of an obligation. The law of specific relief is said to be, in its essence, a part of the law of procedure, for specific relief is a form of judicial redress.
The power to grant injunctions by way of specific relief is covered by the Specific Relief Act, 1963. Section 10 of the Act provides for the cases in which specific performance of the contract is enforceable. It reads as under:
10. Cases in which specific performance of contract enforceable.- Except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the court, be enforced-
(a) when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or
(b) when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief.
Section 14(1) and (2) of the Act is relevant in this respect and deserves to be reproduced hereunder as it deals with contracts not specifically enforceable:
14. Contracts not specifically enforceable.-(1) The following contracts cannot be specifically enforced, namely:-
(a) a contract for the non-performance of which compensation in money is an adequate relief;
(b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms;
(c) a contract which is in its nature determinable;
(d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise.
(2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit.
Compelling the defendants not to terminate the dealership agreement amounts to asking them to continue the dealership which means specific performance of the contract of dealership. The Court has to apply its mind to the provisions of Section 10 and 14 of the Act while deciding whether there is any prima facie case in favour of the plaintiff when he asks for relief which amounts to asking for specific performance of the contract. This Court in the case of Indian Oil Corporation Vs. Bhatia Filling Station Ajmer (supra) refused to grant such an order as specific performance of such contract is barred and loss suffered can be compensated in money. The Hon'ble Apex Court has in the case of Indian Oil Corporation Ltd. Vs. Amritsar Gas Service and others (supra) held that as the agreement was terminable, the only relief which could be granted was award of compensation.
There is one more aspect of the matter which requires consideration. Admittedly, there is an arbitration agreement in Clause 66 of the dealership agreement executed between the parties. All the disputes and differences between the parties can be settled by arbitration. The Hon'ble Apex Court has held in Sunderam Finance Ltd. Vs. NEPC India Ltd. (supra) that before passing the interim order, the Court must be satisfied about the existence of an arbitration agreement and about the applicant's intention to take the matter to arbitration. This view was again reiterated by the Hon'ble Apex Court in the case of Firm Ashok Traders and others Vs. Gurumukh Das Saluja reported at AIR 2004 SC 1433. In the instant case, the existence of an arbitration agreement is not in dispute, but it is important to note that right from 03.11.2010 to the date of arguments in this appeal, no attempt was made by the appellant showing its intention of referring the disputes and differences between the parties to the Arbitrator under Clause 66. It also deserves to be mentioned that the appellant can file an appeal against the order dated 01.02.2011 terminating dealership agreement under note (iv) of 6.3.5 of Chapter 6 of Marketing Discipline Guidelines.
In view of the aforesaid discussion, I am of the firm view that the appellant has failed to prove prima facie case, balance of convenience and irreparable loss in its favour and the findings of the court below do not call for any interference by this Court.
Before parting with this order, I deem it necessary to mention that the discussions and observations made by the learned Court below or by me in this order will not in any way affect and influence the Appellate Authority / Arbitrator in deciding the appeal and conducting arbitral proceedings in the matter with fair and open mind without in any way being influenced by them if the appellant files an appeal and initiates arbitral proceedings.
For the aforesaid facts and reasons, I am of the view that the present appeal being devoid of merits, deserves to be rejected.
Accordingly, the appeal is dismissed. Costs easy.
S.B. Civil Misc. Stay Application No.378/2011 & S.B. Civil Misc. Second Stay Application No.722/2011 also stand dismissed.
[S.S.KOTHARI], J.
FRBOHRA603CMA2011.doc