Madras High Court
Indian Oil Corporation Ltd vs Bhagawan Bala Sai Enterprises on 22 April, 2013
Author: R.S.Ramanathan
Bench: R.S.Ramanathan
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 22.4.2013
CORAM
The Hon'ble Mr.Justice R.S.Ramanathan
O.P.Nos.206 & 653 of 2008
O.P. No.206 of 2008:-
-------------------
1. INDIAN OIL CORPORATION LTD.,
(MARKETING DIVISION)
REP.BY ITS CHIEF DIVISIONAL SALES MANAGER,
CHENNAI DIVISIONAL OFFICE,
500 ANNA SALAI,
TEYNAMPET, CHENNAI - 600 018.
2 SENIOR MANAGER (RETAIL SALES)
REP. BY INDIAN OIL Corporation LTD.,
(MARKETING DIVISION)
CHENNAI DIVISIONAL,
OFFICE 500 ANNA SALAI. TEYNAMPET,
CHENNAI - 18. .. Petitioners
Vs
1 BHAGAWAN BALA SAI ENTERPRISES,
REP BY ITS PROP.S.NIRMALA SAI,
NO.137 VELACHERY MAIN ROAD,
NEAR GURUNANAK COLLEGE,
CHENNAI - 42.
2 Mr. A.S.SUNDARARAMAN,
SOLE ARBITRATOR,
CHIEF INFORMATION SYSTEMS MANAGER
SOUTHERN REGIONAL OFFICER
INDIAN OIL Corporation LTD.
139
NUNGAMBAKKAM HIGH ROAD
CHENNAI. .. Respondents
Prayer:-
Petition filed under Section 34 (2) (A) (IV) & (V) r/w Section 16(6) of the Arbitration and Conciliation Act, 1996, to set aside the award, dated 27.02.2008, passed by the second respondent and to direct the first respondent to pay the costs of the petition.
Petitioners : Mr.T.R.Rajagopalan, Senior Counsel,
for M/s.Anand Abdul & Vinoth Associates.
For Respondents : Mr.N.S.Nandakumar
O.P. No.653 of 2008:-
-------------------
M/S. BHAGAWAN BALASAI ENTERPRISES,
REP BY ITS SOLE PROPRIETRIX S. NIRMALA,
SF 4 BLOCK-A VASANTH APARTMENTS
VELACHERY MAIN ROAD,
CHENNAI 600 042. .. Petitioner
Vs
1 INDIAN OIL CORPORATION LTD,
( MARKETING DIVISION)
REP BY ITS CHIEF DIVISIONAL SALES MANAGER,
CHENNAI DIVISIONAL OFFICE ,
500 ANNA SALAI, TEYNAMPET,
CHENNAI 600 018.
2 THE SENIOR MANAGER.
(RETAIL SALES)
REPRESENTING INDIAN OIL CORORATIN LTD.,
(MARKETING DIVISION)
CHENNAI DIVISIONAL OFFICE ,
500 ANNA SALAI TEYNAMPET
CHENNAI 600 018.
3 SHRI A.S. SUNDARARAMAN
SOLE ARBITRATOR,
CHIEF INFORMATION SYSTEMS MANAGER,
SOUTHERN REGIONAL OFFICER,
INDIAN OIL CORPORATION LTD.,
(MARKETING DIVISION)
139, NUNGAMBAKKAM HIGH ROAD,
CHENNAI 600 034. .. Respondents
Prayer:-
Petition filed under Section 34 (2) (A) (IV) & (V) r/w Section 16(6) of the Arbitration and Conciliation Act, 1996, to set aside the award, dated 27.02.2008, passed by the third respondent and to direct the first and second respondents to pay the costs of the petition and to grant reliefs as stated in ground -y of this Petition.
For Petitioner : Mr.N.S.Nandakumar
For Respondents : Mr.T.R.Rajagopalan, Senior Counsel,
for M/s.Anand Abdul & Vinoth Associates.
COMMON ORDER
Challenging the award, dated 27.02.2008, passed by the learned Arbitrator, the present Original Petitions are filed by the parties.
2.M/s.Bhagawan Bala Sai Enterprises, represented by its Proprietress, Ms.S.Nirmala Sai, viz., the petitioner in O.P.No.653 of 2008, is hereinafter referred to as 'the claimant' and the Indian Oil Corporation Ltd., viz., the petitioner in O.P.No.206 of 2008, is hereinafter referred to as 'the Corporation' throughout this judgement and order, for the sake of brevity and conciseness.
3. The facts of the case in a nutshell are as follows:-
a) The Corporation issued an advertisement, dated 21.02.2003, in the English daily 'The Hindu', for awarding retail outlet dealership, (Location at Velachery in Kancheepuram District, within Tamil Nadu). As per the said advertisement, the interested applicant, should furnish the details of land, which he/she may make available for the retail outlet.
b) The claimant, being the owner of the property, having an extent of 14,244 sq.ft., comprised in S.Nos.8/9, 8/10, 8/11, 8/12 and 8/13, applied for the award of retail outlet dealership to the Corporation.
c)The Corporation issued a letter of intent, dated 07.04.2004 to the claimant and entered into a land lease agreement, on 12.01.2005 with the claimant for occupying an extent of 7,200 sq.ft. of land, out of 14,244 sq.ft in the abovesaid survey numbers, comprised in Block No.23, in Vellachery Main road, Vellachery Village, Mambalam-Guindy Taluk, Chennai 42, for a period of twenty years and the rent was initially fixed at Rs.29,000/- per month for the first three years and the rent will be increased for every three years, as stipulated in the agreement of lease.
d) As per the land lease agreement, the lessee and the Corporation has power to sublet, assign, appoint agents for doing business in the demised premises and the demised premises shall be used for the business of providing retail outlet of petroleum products of the Corporation.
e)Thereafter, the claimant was appointed as retail outlet dealer by the Corporation and a Dealership Agreement was entered into between the Corporation and the claimant, on 25.01.2005. The period of dealership was fixed for a period of 15 years and there is an arbitration clause in the Dealership Agreement, viz., clause 61.
f) As per clause 15 of the Dealership Agreement, the Corporation shall be at liberty upon breach by the dealer of any covenant in that agreement to stop and/or suspend forthwith, all supplies to the dealer and/or sales from the premises by the dealer for such period or periods, as the Corporation may think fit, and such right of stoppage and/or suspension of supplies shall be in addition to and/or without prejudice to any other right or remedy of the Corporation under that agreement or law.
g) As per clause 17 of the Dealership Agreement, the dealer is expected to take every possible precaution against contamination of the products by things injurious to their quality, and shall not in any way, directly or indirectly, adulterate or alter the specifications of the products as delivered. The Corporation shall have the right to exercise at its discretion at any time, and from time to time, quality control measure for products marketed by the Corporation, lying with the dealer. The opinion of the General Manager of the Corporation, as to whether any product of the Corporation has been contaminated and/or adulterated, shall be final and binding upon the dealer. In the event of the General Manager, finding that the contamination and/or adulteration of product has been due to any act or default or negligence of the dealer or of his servants or agents, the Corporation shall have the right, to remove the contaminated/adulterated products and to destroy or otherwise deal with the same, without making any payment, therefor, to the dealer and without prejudice to the Corporation's right to terminate this agreement forthwith.
h) As per clause 46 of the Dealership Agreement, notwithstanding, anything to the contrary herein contained, the Corporation shall be at liberty, at its entire discretion to terminate this agreement forthwith upon or at any time, after the happening of the following event, viz., if the dealers shall commit a breach or default of any of the terms, conditions, covenants, and stipulations contained in this agreement.
i) As per the Dealership Agreement, supplies were made to the claimant on various dates and in this case, we are concerned only with the supply made on 19.09.2006. On 21.09.2006, MS/HSD (Motor Spirit/High Speed Diesel) samples were taken from the retail outlet of the claimant by the Corporation and that was sent to Korukupet Thermal Laboratory for analysis. According to the Corporation, MS samples drawn from the claimant's retail outlet failed to meet the specifications, whereas, TT retention samples met the specifications. As per the test report, the Sulphur content and RON, in retail outlet are at variants and they are not as per the specifications and therefore, there was adulteration in the product.
j) Hence, a show cause notice, dated 29.09.2006, was issued by the Corporation to the claimant, thereby, calling upon her to give explanation for the adulteration committed and the claimant sent an explanatory letters, dated 16.10.2006 and 20.11.2006, stating in detail that they did not commit adulteration.
k) In the first explanatory letter, dated 16.10.2006, the claimant stated that, on 19.09.2006, when the load of MS/HSD was received, the trainee pump attendants unloaded roughly around 200 to 250 litters of HSD into the MS tank, immediately, corrective steps were taken and they were under the impression that not much of HSD would have gone into the tank and that was not a deliberate act of adulteration and the same was due to the error committed by the pump attendants, while unloading the MS/HSD.
l) In the second explanatory letter, dated 20.11.2006, the claimant further stated that, on 19.09.2006, 8 kl MS and 4 kl HSD were received and at that time, the stock in the tank was above 10 kl, due to the earlier supply received on 15.09.2006, and they had TT sample in respect of the load received on 15.09.2006 and the variation may be due to the adulteration of the sample load received on 15.09.2006 and the sample that was taken on 21.09.2006, was not compared with the TT sample taken on 15.09.2006 and requested the Corporation to drop further action against the claimant.
m)The Corporation, not being satisfied with the explanations given by the claimant, issued a termination notice on 18.01.2007, which resulted in a dispute between the parties, and the matter was referred to the Arbitrator, by invoking arbitration proceedings, as per the clause contained in the Dealership Agreement and one Mr.A.S.Sundaraman, was appointed as the sole Arbitrator.
n)The claimant submitted a claim statement and the Corporation submitted the counter and the parties also filed documents. By consent of both the parties, the documents filed by the claimant were marked as Exs.C.1 to C.40 and the Corporation filed 18 documents, and they were marked as Exs.R.1 to R.18. But the parties did not examine any witness on their side.
o) The learned Arbitrator, after giving sufficient opportunities to both the parties, framed eight issues and after noting the statements of the claimant and the Corporation on each issue, the learned Arbitrator gave his findings in respect of each issue followed by a summary and passed the following award:-
i)I hold and award that Dealership Agreement and land lease agreement are independent of each other and respondent is liable to pay to the claimant only as per the land lease agreement.
ii) I hold and award that the claimant is not entitled for any other compensation beyond the date of termination for occupying her land.
iii)I hold and dropping the charges 'deliberate adulteration' against the claimant.
iv) I hold and direct the respondent to restore the dealership with immediate effect. In the event of any delay, the claimant should be compensated Rs.1,00,000/- per month and the same has to be paid by the respondent at the end of the month till the date of restoration.
v) I hold and award that the claimant is not entitled to any other compensation during the period of arbitration.
vi) I hold and award that both the parties shall bear the respective costs incurred during the period of arbitration."
4. The claimant challenged the findings of the award made is para Nos.1, 2 and 5 and the Corporation challenged the findings of the award made in para Nos.3 and 4. Both the parties, therefore, prayed for setting aside the award.
5. The learned Senior Counsel, Mr.T.R.Rajagopalan, appearing for the Corporation submitted that the learned Arbitrator, having given a finding in respect of Issue No.1, that the termination dated 18.01.2007, was not arbitrary and against the provisions and having held affirmatively in respect of Issue No.2, that the test was conducted as per the procedures and no documentary evidence was produced by the claimant to prove that it was not as per the procedures, ought not to have awarded restoration of dealership and ought not to have held that there was no deliberate adulteration on the part of the claimant.
6. The learned Senior Counsel further submitted that 3-Tier sampling procedures were followed to find out the adulteration, as per the Marketing Discipline Guidelines (for short 'MDG') and hence, a sample was taken on 21.09.2006, from the retail outlet of the claimant and it was compared with Supply Point Sample, Tank Truck Sample and the commodity that was available on 21.09.2006, in the retail outlet of the claimant was the supply made by the Corporation on 19.09.2006 and the Tank Truck Sample and the Supply Point Sample, which were taken on 19.09.2006 were according to the specifications and the sample collected from retail outlet on 21.09.2006, was not according to the specifications in respect of sulphur content and RON.
7. Therefore, as per clause 6.1 of MDG, when the product does not confirm to the requirements of the Bureau of Indian Standards' specification, it is an adulterated product and when the claimant has not challenged the result of the report in respect of sample taken from the retail outlet on 21.09.2006 and also the result of the report in respect of TT sample and the Supply Point Sample, it is proved that the sulphur content and RON in the retail outlet sample of the claimant are at variance, with the Indian Standards' specification and therefore, it is proved that the claimant was selling adulterated goods. Therefore, as per clauses 17 and 46 of the Dealership Agreement, the termination is justified and when the termination is as per the agreement entered into between the parties, the learned Arbitrator has no jurisdiction to pass an award of restoration of dealership, and by ordering the same, the learned Arbitrator has exceeded his jurisdiction.
8. The learned Senior Counsel also submitted that the learned Arbitrator also committed serious error in dropping the charge of deliberate adulteration, when the result of the sample taken from the retail outlet was not according to the specifications and therefore, the learned Arbitrator ought to have held that the claimant has deliberately contaminated the product and therefore, the award Nos.3 and 4 are liable to be set aside. It is his further submission that the Arbitrator cannot act against the provisions of substantial law and as per Section 14 (1)(c) of the Specific Relief Act, when the contract, by its nature, is determinable, such contract, cannot be specifically enforced and as per clause 46 of the Dealership Agreement, the contract is determinable on the happening of events, as stated above. Therefore, the learned Arbitrator should not have awarded restoration of dealership and that is against the provisions of Section 14 (1) (c) of the Specific Relief Act and he relied upon the following judgements of the Hon'ble Supreme Court in support of his contention:-
i)(1991) 1 SCC 533 [ Indian Oil Corporation Ltd., Vs. Amritsar Gas Service and others] and
ii)(2000) 3 RAJ 63 [(SC) [ E.Venkatakrishna Vs. Indian Oil Corporation Ltd., ]
9. Per contra, Mr.N.S.Nanthakumar, the learned counsel appearing for the claimant submitted that the learned Arbitrator erred in holding that the Dealership Agreement and Land Lease Agreement are independent of each other, without looking into the advertisement and the letter of intent issued by the Corporation. It has been specifically stated in the advertisement, dated 21.02.2003, that the applicant must be able to provide the land to the Corporation on lease for getting the dealership and therefore, both the Land Lease Agreement and the Dealership Agreement must be read together and therefore, once the Dealership Agreement is terminated, the Corporation cannot retain the land belongings of the claimant and they will have to surrender the land or they will have to be pay the compensation for retention of the land by them.
10.Hence, the learned counsel for the claimant contended that the learned Arbitrator ought to have awarded compensation from the date of termination for occupying her land and having restored the dealership with immediate effect, and having regard to the events that had taken place between 21.09.2006 and 18.09.2007, the learned Arbitrator ought to have awarded compensation for the stock held by the claimant on 18.01.2007, when the termination notice was issued by the Corporation and the learned Arbitrator ought to have awarded Rs.2,00,000/- per month for the occupation of the land belonging to the claimant and for the illegal termination and ought to have awarded a sum of Rs.4,00,000/- towards the reimbursement of products taken up by the Corporation and ought to have awarded reimbursement of Rs.3,62,834/- towards the expenditure incurred by the claimant, as per the statements in Annexure C.31 to C.36.
11.The learned counsel for the claimant also relied upon the judgement of the Hon'ble Supreme Court reported in AIR (1963) SC 1677 [Santa Sila Devi and another Vs. Dhirendra Nath Sen and others] for the proposition that the Court should approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it, by calling it, illegal. He also relied upon the judgement reported in (1987) AIR SC 82 [ Maharaj Dhiraj Himmatsinghji Vs. State of Rajasthan] for the proposition that the award is not open to challenge, on the ground that the Arbitrator has reached wrong conclusion, and the same proposition was also held by the Hon'ble Supreme Court in the following judgements:-
i)(2001) Volume 5 SCC 629 [ Sikkim Subba Associates Vs. State of Sikkim] and
ii)(2008) Volume 2 SCC 444 [ J.C.Budhraja Vs. Chairman, Orissa Mining Corporation Ltd., and another]
12. The learned counsel for the claimant further submitted that as per the judgement of the Hon'ble Supreme Court reported in AIR (1989) SC 777 [ Puri Construction Pvt. Ltd,. Vs. Union of India] the Court cannot sit on appeal on the views of the Arbitrator and has no jurisdiction to examine the correctness of the award on merits. He also relied upon the judgement reported in (2001) 2 SCC 680 [Paradip Port Trust and others Vs. Unique Builders ] for the same proposition of law. He further relied upon the judgement of the Hon'ble Supreme Court rendered in the case of [M/s.Hindustan Petroleum Corporation Ltd., Vs. M/s.Super Highway Services] SLP (Civil) No.104 of 2009, dated 19.02.2010, for the proposition that failure to strict adherence of sample test and termination of dealership on that basis is illegal and in that judgement, MDG was fully discussed and the Hon'ble Supreme Court held that failure to follow the procedures, while taking sample, goes to the root of the matter and termination of dealership on that basis was held to be illegal. Therefore, the learned counsel submitted that the Arbitrator ought to have awarded compensation for the land retained by the Corporation and for the illegal termination, as stated above.
13. Before considering the arguments of both the parties, according to me, it would be beneficial to analyze the law laid down by the Hon'ble Supreme Court in the matter of setting aside the award passed by the Arbitrator.
14. In the case of (New India Civil Erectors (P) Ltd., Vs. Oil and Natural Gas Corporation) reported in (1997) 11 SCC 75 the Hon'ble Supreme Court has held as hereunder:-
" It is axiomatic that the arbitrator being a creature of the agreement, must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount which is ruled out or prohibited by the terms of the agreement. In this case, the agreement between the parties clearly says that in measuring the built-up area, the balcony areas should be excluded. The arbitrators could not have acted contrary to the said stipulation and awarded any amount to the appellant on that account."
15. In the judgment reported in (2010) 1 SCC 549 [ Madnani Construction Corporation Pvt. Ltd., Vs. Union of India and others] the Hon'ble Supreme Court has held as follows:-
" Para No.20 It is well settled that the arbitrator is the master of facts. When the arbitrator on the basis of record and materials which are placed before him by the railways came to such specific findings and which have not been stigmatized as perverse by the High Court, the High Court in reaching its conclusions cannot ignore those findings."
16. In the judgment reported in (2011) 11 Scale 668 [ P.R.Shah, Shares & Stock Broker (P) Ltd., Vs. M/s.B.H.H. Securities (P) Ltd.,] the Hon'ble Supreme Court has held that "the court does not sit in appeal over the award of an arbitral tribunal by re-assessing or re-appreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Arbitration and Conciliation Act, 1996."
17. In the judgment reported in (2003) 5 SCC 705 [Oil and Natural Gas Corporation Vs. Saw Pipes Ltd.,] the Hon'ble Supreme Court, after analyzing the law on this aspect, has laid down certain principles and the same is reproduced infra:-
" A. (1) The Court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
2) The Court may set aside the award:-
(i) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the arbitral tribunal was not in accordance with Part-I of the Act.
(ii) if the arbitral procedure was not in accordance with:-
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with Part-I of the Act. However, exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part-I of the Act from which parties cannot derogate.
(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract. (3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:-
(a) fundamental policy of Indian law;
(b) the interest of India; or
(c) justice or morality, or
(d) if it is patently illegal.
(4) It could be challenged:-
(a) as provided under Section 13(5); and
(b) Section 16(6) of the Act."
Illegality must go into the root of the matter and if the illegality is of trivial in nature, it cannot be held that the award is against the public policy. Award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the court.
18.The same principle was also reiterated in the judgement reported in (2008) 13 SCC 80 [ Delhi Development Authority Vs. R.S.Sharma and Comp. New Delhi ] wherein, the Hon'ble Supreme Court has laid down the following principles:-
" A) An award, which is
i)contrary to substantive provisions of law; or
ii)the provisions of the Arbitration and Conciliation Act, 1996, ' or
iii)against the terms of the respective contract ; or
iv)patently illegal; or
v)prejudicial to the rights of the parties;
is open to interference by the court under Section 34 (2) of the Act.
B) The award could be set aside, if it is contrary to:
a) fundamental policy of Indian law; or
b) the interest of India ; or
c) justice or morality, C) The award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the court.
D) It is open to the court to consider whether the award is against the specific terms of conract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India"
19. In the judgement reported in (1991) 4 SCC 93 [ Associated Engineering Co. Vs. Government of Andhra Pradesh and another ] the Hon'ble Supreme Court has held that the Arbitrator, who acts in manifest disregard of the contract, acts without jurisdiction, after holding that the Arbitrator's authority is derived from the contract and is governed by the arbitration act, which embodies principles derived from a specialized branch of the law of agency. In para No.24 of the same judgement, it has been held has follows:-
"The Arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. But, if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it."
In paragraph No.27 of the same judgment, [ viz., in the case of Associated Engineering Co. Vs. Government of Andhra Pradesh and another it has been held has as follows:-
"If the Arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Such error going to his jurisdiction can be established by looking into material outside the award."
20. In the judgement reported in (1999) 9 SCC 283 [ Rajasthan State Mines & Minerals Ltd., Vs. Eastern Engineering Enterprises and another], the Hon'ble Supreme Court has held as follows:-
" Para No.43
a)..........
b) ........
(c) If the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his adjudication then the Court cannot interfere.
(d) If no specific question of law is referred, the decision of the Arbitrator on that question is not final, however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. In a case where specific question of law touching upon the jurisdiction of the arbitrator was referred for the decision of the arbitrator by the parties, then the finding of the arbitrator on the said question between the parties may be binding.
(e)........
(f) To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. Arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award.
(g) In order to determine whether arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant could raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or give the arbitrator the power to decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim then the award passed by the arbitrator in respect thereof would be in excess of jurisdiction.
(h) The award made by the Arbitrator disregarding the terms of the reference or the arbitration agreement or the terms of the contract would be a jurisdictional error which requires ultimately to be decided by the Court. He cannot award an amount which is ruled out or prohibited by the terms of the agreement. Because of specific bar stipulated by the parties in the agreement, that claim could not be raised. Even if it is raised and referred to arbitration because of wider arbitration clause such claim amount cannot be awarded as agreement is binding between the parties and the arbitrator has to adjudicate as per the agreement. This aspect is absolutely made clear in Continental Construction Co. Ltd.(supra) by relying upon the following passage from M/s. Alopi Parshad Vs. Union of India [1960] 2 SCR 703 which is to the following effect: - There it was observed that a contract is not frustrated merely because the circumstances in which the contract was made, altered. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of event which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous.
(i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action.
(j) The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks just and reasonable; the arbitrator is a tribunal selected by the parties to decide the disputes according to law."
21.The Hon'ble Supreme Court also relied upon the judgement reported in (1984) 2 SCC 680 [ Tarapore & Co. Vs. Cochin Shipyard Ltd.,], wherein, it has been held as follows:-
"It has to be seen whether the term of the agreement permitted entertainment of the claim by necessary implication. It may be stated that we do not accept the broad contention of Shri Nariman that whatever is not excluded specifically by the contract can be subject-matter of claim by a contractor. Such a proposition will mock at the terms agreed upon. Parties cannot be allowed to depart from what they had agreed. Of course, if something flows as a necessary concomitant to what was agreed upon, courts can assume that too as a part of the contract between the parties."
22. In the judgement reported in (2003) Volume 7 SCC 396 [ State of U.P. Vs. Allied Constructions] the Hon'ble Supreme Court has held as follows:-
" Any award made by an arbitrator can be set aside only if one or the other term specified in Sections 30 and 33 of the Arbitration Act, 1940 is attracted. It is not a case where it can be said that the arbitrator has misconducted the proceedings. It was within his jurisdiction to interpret Clause 47 of the Agreement having regard to the fact-situation obtaining therein. It is submitted that an award made by an arbitrator may be wrong either on law or on fact and error of law on the face of it could not nullify an award. The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for arbitrator to determine (see M/s Sudarsan Trading Co. v. The Government of Kerala, ). Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set aside. The arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the Court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once, it is found that the view of the arbitrator is a plausible one, the Court will refrain itself from interfering."
23. Though in the judgment, referred above, the Hon'ble Supreme Court has dealt with the provisions of the Arbitration Act, 1940, the principles laid down therein, can be made applicable to the present Act also.
24. Thus, bearing the above principles in mind, we will have to consider the arguments advanced by the learned counsel for the parties, regarding the award passed by the learned Arbitrator and have to find out whether the award is liable to be set aside.
25. The bone of contention of the learned Senior Counsel for the Corporation is that, having regard to the provisions of Section 14(1) (c) of the Specific Relief Act, the Arbitrator has no jurisdiction to restore the dealership of agreement and the parties are only entitled to compensation, even assuming that the termination was illegal, as per the laid down by the Hon'ble Supreme Court in the judgements reported in (1991) 1 SCC 533 [ Indian Oil Corporation Ltd., Vs. Amritsar Gas Service and others] (referred supra) and (2000) 3 RAJ 63 [(SC) [ E.Venkatakrishna Vs. Indian Oil Corporation Ltd., ]( referred supra).
26. In the judgment rendered in Indian Oil Corporation Ltd., Vs. Amritsar Gas Service and others, (referred above) the Hon'ble Supreme Court, after referring to Section 14(1) (c) of the Specific Relief Act, held that the restoration of dealership is contrary to the mandate, provided under Section 14 (1) of the Specific Relief Act and when the Arbitrator passed the award, restoring the dealership, it amounts to an error of law apparent on the face of the award and such award cannot be sustained. The said principle was also reiterated in the judgment rendered in the case of [E.Venkatakrishna Vs. Indian Oil Corporation Ltd., ]( referred supra).
27. No doubt, it is true, that in those two judgments, the Hon'ble Supreme Court held that the restoration of dealership is contrary to the mandate, provided under Section 14 (1) of the Specific Relief Act and when the Arbitrator passed the award of restoration of dealership, it amounts to an error of law apparent on the face of the award and cannot be sustained. But, according to me, those two judgements cannot be applied to the facts of the case on hand, having regard to the arbitration clause contained in the Dealership Agreement.
28. It is seen from the judgement rendered in E.Venkatakrishna's case (referred supra) the arbitration clause is contained in clause 37 of the agreement and as per clause 37, what is arbitral, is only the dispute or difference in relation to the agreement. The question of restoration of distributorship does not arise under the agreement. In that contest, it was held that the Arbitrator was in error and in fact, had no jurisdiction to direct restoration of distributorship with the first respondent.
29.In the decision rendered in Indian Oil Corporation Ltd., Vs. Amritsar Gas Service and others (referred supra) too, same clause 37 was interpreted and it has been held that the Arbitrator has no power to order restoration of distributorship. But, in the present case, the clause relating to arbitration and the power given to Arbitrator are different and it is incorporated in clause 61 (a) and (h) of the Dealership Agreement, which reads as follows:-
" i) 61(a) Any dispute or difference of any nature whatsoever, any claim, cross claim, counter-claim, or set off or regarding any right, liability, act omission or account of any of the parties hereto arising out of or in relation to this agreement shall be referred to the sole arbitration of the Director (Marketing) of the Corporation, who may either himself act as the Arbitrator or nominate some other office of the Corporation to act as the Arbitrator. The dealer will not be entitled to raise any objection to any such Arbitrator on the ground that the Arbitrator is an officer of the Corporation.
ii) 61 (h) The Arbitrator shall have power to order and direct either of the parties to abide by, observe and perform all such directions as the Arbitrator may think fit, having regard to the matters in difference. i.e., the dispute before him. The Arbitrator shall have all summary powers and may take such evidence oral and/or documentary as the Arbitrator in his absolute discretion thinks fit, and shall be entitled to exercise all powers under the Indian Arbitration Act, 1940, including admission of any affidavit as evidence concerning the matter in difference, i.e., dispute before him. "
30. Further, the Constitution Bench of the Hon'ble Supreme Court in the judgment reported in (1992) 1 S.C.C 508 [ Irrigation Department, Govt. of Orissa Vs.G.C.Roy] dealt with award of pendente lite interest and while answering the question, Whether the Arbitrator has got power to award interest pendente lite, when the agreement does not provide for the grant of such interest, nor, prohibits such a grant, laid down the following principles:-
"A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute ispending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre- reference period). For doing complete justice between the parties, such power has always been inferred".
31. The same aspect was also considered by the Hon'ble Supreme Court in its later judgment reported in (2001) 2 SCC 721 : AIR (2001) SC 626 [ Dhenkanal Minor Irrigation Division Vs. N.C.Budharaj] and after considering both Indian and English cases, and the ratio of the Constitution Bench laid down in [ Irrigation Department, Govt. of Orissa Vs.G.C.Roy's case (referred supra) the Hon'ble Supreme Court summed up the proposition as follows:-
"By agreeing to settle all the disputes and claims arising out of or relating to the contract between the parties through arbitration instead of having recourse to civil court to vindicate their rights the party concerned cannot be considered to have frittered away and given up any claim which otherwise it could have successfully asserted before courts and obtained relief. By agreeing to have settlement of disputes through arbitration, the party concerned must be understood to have only opted for a different forum of adjudication with less cumbersome procedure, delay and expense and not to abandon all or any of its substantive rights under the various laws in force, according to which only even the arbitrator is obliged to adjudicate the claims referred to him. As long as there is nothing in the arbitration agreement to exclude the jurisdiction of the arbitrator to entertain a claim for interest on the amounts due under the contract, or any prohibition to claim interest on the amounts due and become payable under the contract, the jurisdiction of the arbitrator to consider and award interest in respect of all periods subject only to Section 29 of the Arbitration Act, 1940 and that too the powers of the court thereunder, has to be upheld."
Therefore, even though grant of interest was not specifically proved under the contract, having regard to the terms of the contract and as long as nothing in the arbitration agreement to exclude the jurisdiction of the arbitrator to entertain a claim for interest, the Arbitrator has got jurisdiction to grant interest.
32. In this case, as per clause 61(h) of the Dealership Agreement, Arbitrator is conferred with power to order and direct either of the parties to abide by, observe and perform all such directions, and he has also been given power to pass any order and direct the parties to give certain evidence in respect of the matters in difference or in respect of the dispute before him, as he may think fit. Therefore, as per the law laid down by the Constitution Bench of the Hon'ble Supreme Court, as referred supra, the Arbitrator must have the power to decide all the disputes or dispute of difference, arising between the parties and if the Arbitrator has no power to award restoration of dealership, the party claiming it, would have to approach the Court for that purpose, and that would lead to multiplicity of proceedings. Further, the Arbitrator is a creature of agreement and it is open to the parties to confer upon him such powers and prescribe such procedures for him to follow, as they think fit, so long as they are not opposed to law. Further, as laid down by the Hon'ble Supreme Court in (1991) 4 SCC 93 (supra), if the Arbitrator has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with. Further, if the Arbitrator commits an error in the construction of the contract, that is an error within the jurisdiction. Therefore, even assuming that the Arbitrator has no power to order restoration of dealership, the alleged error is within his jurisdiction and cannot be interfered with. Further, the award cannot be said to be unfair and unreasonable, so as to shock the conscience of the Court. Hence, the award cannot be said to be opposed to public policy. Therefore, when the Arbitrator has been given such power, he is entitled to pass the order of restoration of dealership by giving cogent reasons and therefore, it cannot be stated that the Arbitrator has exceeded his jurisdiction or acted outside the jurisdiction, in awarding the restoration of dealership.
33. According to me, having regard to the nature of contract entered into between the parties, viz., the Land Lease Agreement and the Dealership Agreement and the fact that arbitration proceedings was initiated by the claimant, challenging the termination and also for restoration of dealership, having regard to clause 61 h of the Dealership Agreement, I am of the view that the Arbitrator is justified in awarding restoration of dealership and it does not offend any law and opposed to law.
34. In the judgment reported in (2006) 11 SCC 181 [ McDermott International Inc. Vs. Burn Standard Co. Ltd., and others ], it is held as follows:-
"The 1996 Act, makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the Court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc., The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again, if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."
Therefore, in this case, no ground has been made out for intervention of Court.
35. Further, in the judgement reported in (1999) 4 SCC 214 [ H.P.Seb Vs. R.J.Shah and Co.] the Hon'ble Supreme Court held as under:-
"In order to determine whether the arbitrator has acted in excess of jurisdiction what has to be seen is whether the claimant could raise a particular dispute or claim before the arbitrator. If the answer is in affirmative, then it is clear that arbitrator would have the jurisdiction to deal with such a claim. On the other hand if the arbitration clause or a specific term in the contract or the law does not permit or give the arbitrator the power to decide or to adjudicate on a dispute raised by the claimant or there is a specific bar to the raising of a particular dispute or claim, then any decision given by the Arbitrator in respect thereof would clearly be in excess of jurisdiction."
36. Applying the law laid down in the above judgement, it cannot be stated that the restoration of dealership awarded by the Arbitrator is beyond his jurisdiction. Admittedly, the claimant can raise the dispute of restoration of dealership before the Arbitrator and when the claimant is entitled to raise such a dispute, the Arbitrator has jurisdiction to deal with such claim. Therefore, it cannot be stated that Arbitrator acted beyond the scope of reference or acted or exceeded his jurisdiction in awarding restoration of dealership.
37. Further, as per the law laid down by the Hon'ble Supreme Court in the matter of [M/s.Hindustan Petroleum Corporation Ltd., Vs. M/s.Super Highway Services and another ] when the corporation failed to test the TT Sample taken on 15.09.2006, when the same was available, it cannot be said that the corporation proved that the claimant adulterated the product. In that case, restoration of dealership is a natural corollary.
38. The learned Arbitrator, after giving findings to the eight issues framed by him, he has also given a summary of his findings and a perusal of the same makes it clear that he applied his mind to various aspects of the case with reference to the documents addued by the parties and arrived at a conclusion that there was no deliberate adulteration on the part of the claimant and held that the failure on the part of the Corporation to have the TT Sample in respect of the load delivered, on 15.09.1996, which was available, when the Multi Disciplinary Team took the sample from the retail outlet would also support the case of the claimant that the Corporation failed to prove that adulteration was done at the instance of the claimant. The Arbitrator has also given reason for, rejecting the arguments of the Corporation that the claimant has accepted mixing of MS/HSD by quoting the Corporation's letter, wherein, the Corporation itself ruled out the possibility of variants of sulphur and RON due to the mixing of MS with HSD.
39. Therefore, having regard to the summary of the facts given by the learned Arbitrator, before passing the award, it cannot be stated that Arbitrator has exceeded his power or there is error, apparent on the face of record and the Court cannot sit on appeal on the award and cannot re-appraise the evidence and come to a different conclusion, when the view of the Arbitrator is plausible. Further, restoration of dealership is a necessary concomitant, after holding that there was no deliberate adulteration and the Court can assume that too, as a part of the contract entered into between the parties as held in the judgment reported in (1984) 2 SCC 680 ( supra)
40. Hence, I am not accepting the contention of the learned Senior Counsel for the Corporation and I hold that the Arbitrator was within his powers in awarding restoration of dealership and also I hold that there was no deliberate adulteration committed by the claimant. Therefore, the Petition filed by the Corporation, viz., O.P.No.206 of 2008, fails and it is dismissed.
41. As regards the contention of the learned counsel for the claimant that the Arbitrator ought to have held that the Dealership Agreement and Land Lease Agreement are interconnected, having regard to the advertisement and intent letter, I am unable to accept the contention of the learned counsel for the claimant. Though, as per the advertisement, anybody, who wants to get the dealership, has to provide land on lease to the Corporation and letter of intent will be issued on that basis, having regard to the contract entered into between the parties, it cannot be stated that the Land Lease Agreement and the Dealership Agreement are inter linked.
42. As stated supra, the Land Lease Agreement was dated 12.01.2005 and the Dealership Agreement was dated, 25.01.2005. As per the Land Lease Agreement, possession was handed over on 12.01.2005, and it contains various clauses, regarding rights and liabilities of the lessor and lessee and as per the Dealership Agreement, the claimant accepted the Corporation, as the person having control over the land and entered into the land, as licensee of the Corporation and therefore, having regard to clauses 7, 8, 15, and 17 of the Dealership Agreement, it cannot be stated that both the agreements are interlinked and have to be construed as such.
43. Therefore, I am of the view that the Arbitrator has rightly held that Dealership Agreement and Land Lease Agreement are independent of each other and the corporation is liable to pay rent to the claimant, only as per the Land Lease Agreement. The claimant is also not entitled to any other compensation beyond the date of termination for occupying her land by the Corporation and therefore, the Arbitrator is justified in passing the award in respect of clauses 1 and 2. Further, the claim of the claimant that she is entitled to compensation at the rate of Rs.2,00,000/- per month for the use of land, after termination and she is entitled to Rs.3,62,834/- as per Exs.C.33 to C.36, and she is entitled to the claim of Rs.4,00,000/- towards the reimbursement of products taken by the Corporation from the retail outlet of the claimant are concerned, those cannot be brought under the dispute as understood by the parties in this case and the dispute is regarding the termination of the contract and the consequences therefor. Therefore, the Arbitrator has rightly rejected such claims. Hence, O.P.Nos.653 of 2008, also fails and it is dismissed.
44. In the result, both the Original Petitions are dismissed.
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