Bombay High Court
Jivan Service Center vs Hindustan Petroleum Corporation Ltd. on 7 October, 1998
Equivalent citations: (1999)101BOMLR441
Author: R.P. Desai
Bench: R.P. Desai
JUDGMENT R.P. Desai, J.
1. Admit. Respondents waive service. By consent, taken up for hearing.
2. In this Appeal, exception is taken to the order dated 21st September. 1998 passed by the City Civil Court, Bombay, on Notice of Motion No. 4279 of 1998. The present Appeal is filed by the original Plaintiffs.
3. It is the case of the Plaintiffs that they are carrying on the business of dealing in petrol and petroleum products. The Plaintiffs are dealers of the Defendants. The Defendants have appointed the Plaintiffs as their dealers for the retail sale or supply of petrol/diesel/motor oils/grease, etc. The Plaintiffs contend that the Dealership Agreement dated 21st June, 1991 is entered into between the partners of Plaintiffs and Defendants for the purpose of storing, selling and handling the said products, purchased by Plaintiffs from the Defendants on the terms and conditions mentioned in the said Agreement.
According to the Plaintiffs, on 21st August, 1998, the Plaintiffs detected that five of the units were malfunctioning, and therefore, by the letter dated 21st August, 1998, they intimated this fact to the Inspector, Weights and Measures Department, Bandra, Mumbai, requesting them to visit the service station for rectification. On 24th August, 1998, the Sales Officer of the Defendants visited the suit premises. He insisted that the employees of Plaintiffs should open the locks of all the side panels of the dispensing pumps. He carried out the inspection. He shook the pumps by jerking, to examine all the seals and wires during inspection. On account of this, one of the two seal copper wires which was loose, was separated from the lead lug. The Defendants made a report of the inspection on the same day. The said Officer also sealed four dispensing units.
4. On 25th August, 1998, a show-cause notice came to be issued to the Plaintiffs. In the show-cause notice, the alleged irregularities are mentioned as under:
(i) ULP variation was beyond the permissible limits on the negative side.
(ii) Weights and Measures seals of the metering unit of ULP 11 was found to be broken.
(iii) HSD 15 was found giving short delivery to the tune of 50 ml in 5 ltr. Measure.
(iv) First Aid box was not available at the Outlet.
5. It was stated that said irregularities violate Clause 16 of the Dealership Agreement and the Plaintiffs were called upon to show cause within seven days as to why action should not be taken against them for the violation of the Dealership Agreement dated 21st June, 1991.
6. The Plaintiffs sent their reply dated 2nd September, 1998 intimating to the Defendants that by their letter dated 21st August, 1998, they had already informed the Weights and Measures Officer that seven petrol pumps needed attention. A grievance was made that the seal was broken because of hard shaking on inspection. It was stated that Officers were - called to set right the pumps for putting them to use.
7. By letter dated 2nd September, 1998, the Defendants informed the Plaintiffs that they should not call the Weights and Measures Department to set right the pumps which were sealed by their Senior Sales Officer, till further advice.
8. By letter dated 16th September, 1998, the Defendants suspended the supplies of petroleum products to the Plaintiffs for a total period of 30 days, effective immediately, and a penalty of Rs. 50,000/- was levied on the metering unit of Dispensing Unit 11 of ULP. It was stated that the penalty must be paid within the suspension period.
9. Defendants were informed by the said letter that they have not replied about irregularity Nos. (i) and (iii) mentioned in the show cause notice, viz. (i) ULP variation was beyond permissible limits on the negative side, (iii) HSD 15 was found giving short delivery to the tune of 50 ml in 5 ltr. measure.
10. It was also stated that reply to major irregularity No. (ii) i.e. Weights and Measures seals of the metering unit of ULP 11 was found to be broken, is not found to be satisfactory.
In view of this, penalty was levied and suspension was ordered.
11. The said letter was served on the Defendants on 16th September, 1998 itself, and on the said letter, an endorsement was made by the Defendants, to the effect-
Don't seal the pumps which are properly functioning despite this if you forcibly seal my pumps, we will claim damages for loss of reputation and the loss of business.
12. Being aggrieved by the said order, the Plaintiffs filed L.C. Suit No. 5101 of 1998 praying that it be declared that the Plaintiffs have not violated Clause 16 of the Dealership Agreement dated 21st June, 1991 and that, notice dated 2nd September, 1998 issued by the Defendants itself, is illegal, null and void. It was further prayed that the notice dated 16th September, 1998 be declared to be null, void and not binding on the Plaintiffs. Other consequential reliefs were also prayed.
13. In this Suit, the Plaintiffs took out Notice of Motion praying that pending hearing and final disposal of the suit, direction be given to the Defendants to remove all the seals put by the Defendants on the Plaintiffs' service station, and the operation and effect of the notice dated 2nd September, 1998 by stayed similarly, operation and effect of notice dated 16th September, 1998 be stayed.
14. Upon hearing the rival contentions, the learned Trial Judge, by the impugned order declined to grant any relief to the Plaintiffs and hence, the appeal.
15. I have heard learned Counsel for the parties at great length. I have been taken through the Dealership Agreement. Clause 66 of the Dealership Agreement provides for arbitration, of any dispute arising between the parties.
Clause 66 reads thus-
Any dispute or difference of any nature whatsoever 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 Managing Director of the Corporation or of some Officer of the Corporation who may be nominated by the Managing Director. 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 or that he has to deal with the matters to which the contract relates or that in the course of his duties as an officer of the Corporation he had expressed views on all or any of the matters in dispute or difference. In the event of the Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason the Managing Director as aforesaid at the time of such transfer, vacation of office or inability act, shall designate another person to act as Arbitrator in accordance with the terms of the Agreement such person shall be entitled to proceed with the reference from the point at which it was left by his predecessor. It is also a term of this Contract that no person other than the Managing Director or a person nominated by such Managing Director of the Corporation as aforesaid shall act as Arbitrator hereunder. The Award of the Arbitrator so appointed shall be final, conclusive and binding on all parties to the Agreement, subject to the provisions of the Arbitration-Act, 1940 or any statutory modification of or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause.
16. With the assistance of the learned Counsel appearing for both the sides, I have gone through the relevant documents, as also, the relevant provisions of law. Section 8 of the Arbitration and Conciliation Act, 1996 reads thus-
8. Power to refer parties to arbitration where there is an arbitration agreement.- (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under Sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
It will also be appropriate to refer Section 9.
9. Interim measures by Court - A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court-
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:
(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient.
and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
17. My attention was drawn to the Judgment of the Bombay High Court Bombay Gas Co. Ltd. v. Parmeshwar Mittal and Ors. AIR 1998 Bom. 118, where, while considering the provisions of Section 34 of the old Act, and Section B of the Arbitration and Conciliation Act, 1996, it is observed-
Section 8 of the new Act makes a complete departure from the old provisions which only provided for stay of the suit in the discretion of the Court. Section 8 on the other hand makes it mandatory for the Court to refer the parties to arbitration. The element of discretion is thus completely taken away.
In view of Section 8 of the new Act and its mandatory nature, I am of the opinion that in the facts and circumstances of the case, the correct and proper remedy for the parties would be to go for arbitration. In this connection, I may refer to a Judgment of the Kerala High Court reported in Asoken v. Jayan , where, in somewhat similar fact situation, the Kerala High Court has stated that in view of Section 5 read with Section 8 of the Act, a judicial authority before whom action is borne has no other course except to refer the matter for Arbitration. It is also observed that Section 9 of the Act enables the parties to seek interim orders and the proper Court to ask for such an order would be a Court that comes within the meaning of Section 2(e) of the said Act. It was observed that it is for the petitioner to move the appropriate Court for appropriate reliefs under Section 9 of the Act. Applying the ratio of the above Judgments, to the facts of this case, I am of the opinion that considering Clause 66 of the Dealership Agreement, the parties should approach the appropriate Court for referring the matter for arbitration and also for appropriate relief under Section 9 of the said Act. The Trial Court has after applying its mind to the clauses of the Dealership Agreement arid the guidelines, made certain adverse comments. It is only fair that when the parties go in for arbitration, they should not be prejudiced by the said observations. It is therefore, necessary to clarify that while considering any application made by either parties in this behalf, the appropriate Court shall do so independent of any observations made by the Trial Court in its Order dated 21st September, 1998. No comments made by the Trial Judge either on law or on facts should influence the appropriate Court while dealing with the application if any filed by either parties.
18. In the result, the Order dated 21st September, 1998 passed by the Trial Court is set aside. If either of the parties moves an application before the appropriate Court, the appropriate Court shall dispose it of as expeditiously as possible.
Appeal is disposed of accordingly.