Bombay High Court
Ms. Anila Gautam Jain vs Hindustan Petroleum Corporation ... on 30 August, 2010
Author: S.J. Vazifdar
Bench: S.J. Vazifdar
This Order is modified/corrected by Speaking to Minutes Order
1 ARBP1007.09.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.1007 OF 2009
Ms. Anila Gautam Jain, ]
Proprietress of M/s. Badal Agency, erstwhile ]
HP Gas Distributor, residing at 190/5, Kamal ]
Kunj, Station Road, Wadala (W), Mumbai-400031 ] ... Petitioner
Versus
Hindustan Petroleum Corporation Limited, ]
through its Chief Regional Manager,
ig ]
Navi Mumbai LPG Regional Office, ]
1st floor, Plot No.4/1, Near MMMT Depot, ]
Sector 20, Turbhe, Navi Mumbai 400 705. ] ... Respondent
Mr. Gautam Ankhad i/b M/s. Ashwin Ankhad & Associates for the
Petitioner.
Mr. Bhalwal i/b M/s. Vyas & Bhalwal for the Respondent.
CORAM: S.J. VAZIFDAR, J.
DATED : 30TH AUGUST, 2010.
ORAL JUDGMENT :
1. This is a petition under section 34 of the Arbitration and Conciliation Act, 1996, to challenge the award passed by the sole arbitrator rejecting a ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 2 ARBP1007.09.doc substantial part of the Petitioner's claim and allowing the Respondent's claims under various heads.
2. The Petitioner and the Respondent entered into an agreement dated 17th August, 2004, under which the Respondent appointed the Petitioner as a dealer on a principal to principal basis for the sale of the Respondent's LPG in cylinders. It is common ground that the disputes and differences between the parties were rightly referred to arbitration in view of the arbitration agreement contained in clause 38 of the said agreement.
3. Even prior to the agreement dated 17th August, 2004, the Petitioner had been appointed by the Respondent as a dealer. The appointment continued thereafter under various similar agreements entered into between the parties from time to time ending with the said agreement dated 17th August, 2004. The agreement was for a period of five years from 28th March, 2004 to 27th March, 2009.
4. The Respondent informed the Petitioner on several occasions that it was dissatisfied with the manner in which the Petitioner was carrying out the ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 3 ARBP1007.09.doc dealership agreement. Ultimately, the Respondent served a show cause notice dated 23rd January, 2008, alleging that the Petitioner had committed various breaches of the terms and conditions of the agreement and, in particular, clauses 5, 6, 10, 11, 24A, 28A, 28B(g), (h), (i) and (k) thereof.
The Respondent considered the reply filed by the Petitioner unsatisfactory and, therefore, by a letter dated 3rd June, 2008, suspended the refill supplies, took over possession of the premises owned by the Respondent and let to the Petitioner on licence to operate the dealership agreement, and handed over the same to a new dealer.
5. Aggrieved by the Respondent's action, the Petitioner challenged the same by filing a writ petition in this court. Pursuant to an order dated 4 th September, 2008, the reference was made to arbitration.
6. By a letter dated 13th September, 2008, the Respondent terminated the dealership agreement. The Petitioner raised various claims based on the contention that the termination of the agreement was wrongful and illegal.
The Petitioner sought an award to quash and set aside the order of suspension and termination and to direct the Respondent to restore the ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 4 ARBP1007.09.doc dealership agreement and possession of the said premises. In the alternative, the Petitioner sought an order for payment of Rs.24,44,076.09 and a sum of Rs.12,00,000/- for a minimum period of ten years towards reimbursement of future losses assuming that the agreement would be renewed after its expiry.
7. The arbitrator, therefore, rightly considered the main question as to whether the termination was wrongful and illegal. If the termination was justified, the Petitioner's claim would require to be rejected. The arbitrator found the termination to be justified on various grounds. In other words, he found the complaints and contentions of the Respondent regarding the manner in which the Petitioner conducted the dealership agreement to be justified. The arbitrator found that there were at least five substantial breaches on the part of the Petitioner, which justified the Respondent terminating the dealership agreement. Indeed, even if one of these grounds can be sustained, the Respondent would be justified in terminating the agreement. I, therefore, do not intend dealing with all the reasons mentioned by the arbitrator. I will refer only to a few of them.
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8. The arbitrator found that there were repeated diversions of LPG refills during February, 2005 to November, 2005, which was in violation of the dealership agreement and, in particular, the clauses mentioned earlier. The arbitrator found important the fact that the Petitioner had accepted that there were diversions, but had blamed the same on the commercial establishments and her own staff/delivery men for the same. The Petitioner contended that it was not possible for her to check the illegal connections and her duty was only to report the same to the Respondent who ought to have taken necessary action to remedy the situation.
The arbitrator rejected this contention as a valid defence to the breach.
He posed the correct question viz. as to whose responsibility was it to arrest the diversions of domestic cylinders to commercial establishments or to any other non-existent, non-genuine customers. Clause 18 of the dealership agreement reads as under :-
"18. In all contracts or engagements entered into by the Delaer with the customers for sale of LPG and/or the sale and/or installation and/or repairs of appliance and/or connection thereof with LPG cylinders (filled or empty) and/or refills and/or pressure regulators and/or attached equipment the Dealers shall act and shall always be deemed to have acted as a principal and not as an agent or on account of the Corporation, and the ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 6 ARBP1007.09.doc Corporation shall not in any way be liable in any manner in respect of such contracts and/or engagements and/or in respect of any act or omission on the part of the Dealer, his servants, agents and workmen in regard to such installation, sale, distribution, connections, repairs or otherwise, the Dealer shall be bound to inform the customers in writing of this provision, through correspondence or at the time of enrollment, of the customer."
9. The arbitrator construed the clause and held that the principal to principal relationship between the parties was not limited only to non-
transfer of liabilities as contended on behalf of the Petitioner, but that it was the total responsibility of the Petitioner to take all necessary steps to arrest such diversions. The arbitrator emphasized the fact that the Petitioner's own case was that her delivery men were also responsible for the same.
10. The reasoning cannot be faulted. The clause expressly states that the Respondent would not, in any way, be liable in any manner in respect of the contracts between the dealers and the customers in respect of any act or omission on the part not merely of the dealer/Petitioner, but also on the part of the dealer's/Petitioner's servants, agents and workmen. The clause, therefore, has been correctly construed. To say the least in favour of the Respondent, the clause is certainly capable of being construed in that ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 7 ARBP1007.09.doc manner. Even if I were, therefore, to have interpreted the clause differently, it would not have justified setting aside the reasoning on that ground.
11. The arbitrator has also held that even on general principles of law, the Petitioner was responsible for the acts of her servants. It was held that the Respondent could never be responsible for the acts of the Petitioner's servants. I agree.
12. It is pertinent to note that the Petitioner had herself in one of her letters accepted the fact that the cylinders were being sold without refill bookings. The arbitrator rightly rejected the contention that it is not the Petitioner, but the Respondent who should be held liable for the same.
13. Based on this erroneous contention, the Petitioner refused to pay the penalty levied upon her which was also contrary to the dealership agreement.
14. Mr. Ankhad, the learned counsel appearing on behalf of the Petitioner challenged the finding in this regard on the basis that the refill order reports ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 8 ARBP1007.09.doc were relied upon by the arbitrator in favour of the Respondent. Mr. Ankhad submitted that the Respondent led no evidence to establish the truth of the contents of the refill records.
15. Firstly, even it this contention is upheld, it would make no difference for the reasons set out earlier. Secondly, the arbitrator weighed the evidence and rightly proceeded on the basis of a balance of possibility regarding the correctness of the contents of the refill audit reports. He did so on the basis that the same were signed, not merely by the Respondent's officials, but also by the Petitioner. The Petitioner refuted the correctness thereof, only later.
The arbitrator is not bound by the strict rules of evidence. The Petitioner was always present when the audit was being carried out and the reports were signed by the Petitioner. The reliance upon the refill audit reports, therefore, cannot be said to be perverse or unsustainable.
16. Thus, in view of the above finding itself, the Respondent was justified in terminating the agreement. Repeated diversions of LPG refills was a serious breach of the terms of the contract. The finding in this regard can, ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 9 ARBP1007.09.doc by no stretch of imagination, be said to be perverse on any ground whatsoever.
17. The arbitrator also found that the Petitioner had not provided the rebate to the customers. The arbitrator also upheld the termination on the ground that there was shortage of cylinders. In this regard, he justifiably considered important the fact that the Petitioner had herself accepted that there was a shortage of 47 cylinders of 14.2 kg. and 156 cylinders of 19 kg.
The Petitioner had refused to pay for the same on the ground that the Respondent had wrongly claimed that there was a shortage of 276 cylinders of 19 kg. and that this was because no reconciliation of cylinders and regulators was carried out since 1996. The Petitioner contended that it was the Respondent's responsibility to reconcile the stocks for verification and payment. The Petitioner had requested for the same repeatedly, but the Respondent had refused to do so.
The arbitrator upheld the Respondent's contention that it was the Petitioner's responsibility to maintain the stock on a daily basis and to submit the reconciled statement of cylinders and regulators on a weekly/regular basis for verification.
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18. The arbitrator once gain posed the correct question by observing that the crux of the issue is to find out who was responsible for the reconciliation of cylinders and regulators and to prepare the reconciliation statement. He then set out clause 24 of the dealership agreement which reads as under :-
"24. All correspondence, accounts returns of stocks and sales, and such other documents as may be required by the Corporation shall be made written neatly and correctly in English or Hindi language and all accounts shall be produced for inspection of the Corporation's representatives at any time when called upon by them to do so. The Dealer shall send to the Corporation either fortnightly or at such other intervals as the Corporation from time to time determine a report of all sales effected by the Dealer and of the unsold stocks in his custody in the form to be prescribed by the Corporation."
The arbitrator construed the clause to fix the responsibility on the Petitioner to prepare and submit the statements. The reasoning is correct. It is, in any event, not unsustainable or perverse.
19. In this view of the matter, it is not necessary to deal with the findings of the learned arbitrator upholding the Respondent's contention regarding the other breaches of the dealership agreement. Even if the other reasons ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 11 ARBP1007.09.doc cannot be sustained, the above findings were sufficient to hold that the Respondent was justified in rejecting the Petitioner's claims.
20. This brings me to the challenge to the award insofar as the arbitrator has directed the Petitioner to pay various amounts to the Respondent. The arbitrator has directed the claimant to pay a sum of Rs.10,39,474.68 towards penalties levied against the Petitioner from the date they were due; a sum of Rs.34,700/- towards stock verification; a sum of Rs.5,35,191.69 towards debit balance in legacy account; a sum of Rs.1,27,669.54 towards debit balance in the ERP account and a sum of Rs.1,07,298/- towards non paid show room and godown licene fee. The above amounts have been directed to be paid with interest from the dates they were due. There is a high degree of possibility that amounts may be due for payment by the Petitioner to the Respondent in view of the fact that the Petitioner had committed several breaches of the agreement and the termination of the agreement by the Respondent is held to be valid. However, the entire award deals only with the submissions of the Petitioner in support of her claims. The award contains sufficient and, if I may add with respect, cogent reasons for rejecting the Petitioner's contentions and claims. Unfortunately, there are no ::: Downloaded on - 09/06/2013 16:22:49 ::: This Order is modified/corrected by Speaking to Minutes Order 12 ARBP1007.09.doc reasons whatsoever for allowing the Respondent's claims/counter claims.
There is nothing to indicate how the amounts have been computed. I repeatedly asked Mr. Bhalwal to indicate whether any reasons could be deciphered from the award, either expressly or even by implication in support of the arbitrator having awarded the amounts in favour of the Respondent. I granted time to consider this aspect.
21. Mr. Bhalwal conceded that there were no reasons whatsoever in support of the amounts granted by the arbitrator in favour of the Respondent.
He, however, submitted that even if an award contains no reasons, it cannot be set aside. In this regard, he relied upon a judgment of the Supreme Court in Paradip Port Trust & ors. v. Unique Builders, etc., AIR 2001 SC 846.
The judgment does not support the contention. The award in that matter did not contain any reasons and was a non speaking one. However, that matter was governed by the Arbitration Act, 1940 and not by the Arbitration and Conciliation Act, 1996. Under the 1996 Act, reasons are mandatory. In the circumstances, the petition succeeds only partly to the extent of the arbitrator having directed the Petitioner to pay the various amounts to the Respondent.
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22. However, in view of the fact that the award is set aside to the extent mentioned above only on the ground that it does not contain reasons, it would be open to the Respondent to adopt appropriate proceedings in respect thereof, including seeking a fresh reference for the same.
23. With the above clarification/liberty reserved to the Respondent, the petition is disposed of by the following order :
ORDER:
The award is upheld to the extent that it rejects the Petitioner's claims. The award is set aside only to the extent that it grants some of the Respondent's claims. There is no challenge by the Respondent to the award insofar as it awards certain amounts to the Petitioner. That part of the award is also, therefore, upheld. There shall be no order as to costs.::: Downloaded on - 09/06/2013 16:22:49 :::