Delhi District Court
Vivek Service Station vs Indian Oil Corporation Ltd on 17 May, 2025
DLND010041362016
IN THE COURT OF DISTRICT JUDGE- 01,
NEW DELHI DISTRICT, PATIALA HOUSE COURTS,
NEW DELHI
Presided over by :- SH. DHARMENDER RANA (DHJS)
Arbitration No. 14078/16
M/s Vivek Service Station,
Vill- Shekhpura, Jind Bye-pass,
Hansi, Distt. Hisar. (Hr.)
Through its proprietor
Sh. Ishwar Singh Lamba
R/o H.No. 1023, UE-II
Hisar-125001. (Hr.)
......... Petitioner
Versus
1. M/s Indian Oil Corporation Limited
Through its General Manager,
Marketing Division,
World Trade Centre,
Babar Road, New Delhi
........ Respondent
Petition presented on : 10.06.2016
Arguments Concluded on : 09.05.2025
Judgment Pronounced on : 17.05.2025
Arbitration No. 14078/16
M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 1 of 29
ORDER
1. By way of the instant order, I propose to dispose off a petition moved under section 34 of the Arbitration and Conciliation Act assailing the award dated 18.08.2008, whereby the claim moved by the petitioner herein was dismissed by Ld Arbitrator.
2. Briefly stated: The Petitioner herein was running a petrol pump under a dealership agreement dated 27.10.1995, executed by Indian Oil Corporation (respondent herein) in favour of the petitioner. On 21.01.2006, an inspection was conducted at the said petrol pump by the officers of the Respondent and the inspection team noted certain lapses/discrepancies. Accordingly, show cause notice dated 23.01.2006 was served upon the petitioner by the respondent. Petitioner duly replied to the said notice vide reply dated 25.01.2006 and thereafter, another supplementary reply dated 07.03.2006 was furnished by the petitioner. Eventually, the Respondent, after considering the replies furnished by the petitioner, terminated the dealership vide order dated 13.03.2006.
3. Agitated by the termination of the said dealership, petitioner preferred his claim before the Ld Arbitrator challenging the termination letter dated 13.03.2006. The claim filed by the petitioner was ultimately dismissed by ld. Arbitrator vide impugned award dated 18.08.2008.\ Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 2 of 29
4. Aggrieved by the said award dated 18.08.2008, petitioner has now filed the present petition under Section 34 of the Arbitration and Conciliation Act challenging the award on the following grounds:
(i) It is submitted that as per clause 58 (a) of the dealership agreement dated 27.10.1995 (hereafter referred as dealership agreement), respondent could not have terminated the dealership, in case of breach of any stipulation in the said agreement, unless four days clear time is given to the petitioner/dealer to cure the breach. It is pointed out that in the case at hand, respondent has cancelled the dealership without providing the stipulated four days period to rectify the breach.
(ii) It is further submitted that as per clause no. 5.1.3 of the Marketing Discipline Guidelines-2012 (hereinafter referred to as MDG), the opinion of the officers of Weight and Measurement department is final with respect to the issue of tampering of totaliser seals. It is submitted that in the case at hand, there was no opinion of weight and measurement departments officers with respect to the alleged tampering in the totaliser seals. It is submitted that on 21.01.2006 itself, on the date of inspection in the morning, Shri Jaiveer Singh (Inspector; Legal Meteorology Department Hisar) has duly certified the totaliser seals upon the dispensing units of the petitioner herein. It is submitted that Ld Arbitrator had ignored the said certificate while upholding the termination of the dealership.
(iii) It is further submitted that Ld Arbitrator has duly recorded in the impugned award that there was no complaint with respect to Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 3 of 29 the quality and quantity of fuel disbursed by the petitioner herein yet Ld Arbitrator upheld the harsh and arbitrary decision of termination of dealership. It is submitted that the termination of dealership ought not to have been endorsed by the Ld Arbitrator, once he has concluded that there was no adulteration or any complaint about the quantity of the fuel disbursed by the petitioner to the customers.
In support of her contentions, Ld counsel for the petitioner has relied upon the following judgments of Hon'ble Punjab & Haryana High Court in the matter of Bharat Petroleum Corporation Limited and Anr. Vs. M/s Pal filling Station and Ors. LPA No. 13 of 2015 DOD 21.04.2015 to contend that the penalty of termination of dealership in case of totaliser seals tampering is grocery disproportionate. Reliance is also placed upon the decisions of Hon'ble Calcutta High Court in the matter of Laltu Filling Station Vs. Union of India writ petition 24059 (W) of 2009 DOD 06.04.2016 and decision of Hon'ble Jharkhand High Court in the matter of Shri Sai Nath Filling Station Vs. Hindustan Petroleum Corporation Limited WP (C) No. 5640 of 2007 DOD 08.01.2010.
5. It is submitted by Ld counsel for the petitioner that since the Ld Arbitrator, while passing the award has ignored the terms of the contract i.e. clause 58, therefore, the award is contrary to public policy and impugned award deserves to be set aside. Ld counsel for the petitioner has placed reliance upon India Yamaha Motor Pvt ltd vs Divya Ashish Jamwal OMP No. 1107/2012 Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 4 of 29 DOD 30.01.2019.
6. Ld counsel for the petitioner further contends that the impugned award is patently illegal as Ld Arbitrator passed the award relying upon extraneous documents beyond the dealership agreement/contract between the parties. It is submitted that award is based upon surmises and conjectures and is not sustainable in the eyes of law.
Upon a specific query, Ld counsel for the petitioner has clarified that MDG is in fact extraneous to the contract between the parties and should not have been relied upon by the Ld Arbitrator. She has further contended that Ld Arbitrator even through relying upon MDG has failed to consider the said guidelines in toto. It is pointed out that though the Ld Arbitrator has relied upon the clause no. 6.1.3 (b) in MDG but has failed to consider the above quoted stipulation no 5.1.3 of the MDG and thus the award deserves to be set aside. Ld counsel for the petitioner has placed reliance on Mohan Steel Limited vs Steel Authority of India (SAIL) OMP 488/2015 DOD-04.03.2020.
7. It is further faintly argued that MDG has not been supplied to the petitioner by the respondent.
8. Although in the claim before the Ld. Arbitrator, besides the termination of dealership, petitioner has, inter alia, submitted some additional claims also, however, same is not subject matter of any challenge before this court as petitioner has opted not to Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 5 of 29 challenge the dismissal of the additional claims by the Ld. Arbitrator in the instant petition.
9. While dictating the order, Ld counsel for petitioner has submitted that since the award has been challenged as a whole, therefore, additional claims agitated before Ld Arbitrator may also be considered. However, when requested to point out the grounds of challenge, she has fairly conceded that as such the petitioner has not challenged the dismissal of additional claims and grounds of challenge to the dismissal of additional claims are conspicuously missing in the petition. Thus, it is concluded that disposal of the additional claim is not the subject matter of the challenge before this court.
10. This court has confirmed from counsel for the petitioner as to if all the grounds agitated by the petitioner herein have been paraphrased or not whereupon Ld counsel for the petitioner fairly submitted that all the grounds agitated by ld. counsel for the petitioner have been duly considered and correctly paraphrased as above by this court.
11. On the contrary, Ld counsel for the respondent has resisted the plea of the petitioner on the following grounds:
i) That as per clause no. 3 & clause no. 4 of the dealership agreement, the dealership contract was determinable in nature. It is submitted that Ld Arbitrator has rightly concluded that contract being determinable in nature, the respondent was well within its Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 6 of 29 rights to cancel the dealership and accordingly rightly upheld the termination notice dated 03.03.2006. It is submitted that as per Section 14(d) of the Specific Relief Act [unamended Section 14 (1) (c) of the Specific Relief Act] the contract being determinable in nature could not have been specifically enforced and therefore, approach of the Ld Arbitrator cannot be challenged on this count.
Ld counsel for the respondent to support his contention has placed reliance upon the judgment of Hon'ble Apex Court in the matter of IOCL vs Amritsar Gas Service and Ors (1991) 1 SCC
533.
ii) It is submitted by ld counsel for the respondent that as per clause 58 (h) of dealership agreement, petitioner was required to adhere to the instructions issued from time to time with respect to supply of the petrol. It is pointed out that in the light of said clause, applicability of MDG, issued by the Ministry of Petrol, cannot be questioned and are very much applicable to the case at hand. It is submitted that as per clause 5.1.3 of the MDG, the opinion of weight and measurement official is required only in case of tampering of totaliser seals whereas in the case at hand totaliser seals are completely missing thus there was no occasion or any requirement for procuring the opinion of weight and measurement officials. It is further pointed out that as per clause 39 of the MDG, the respondent officials were well competent to conduct the inspection of the retail outlet to ensure the protection of consumers rights to get unadulterated and correct quantity of the fuel. Accordingly, it is submitted that, on 21.01.2006 an Inspection was conducted. It is submitted that clause 58 of the Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 7 of 29 dealership agreement itself stipulates that in case of breach dealership can be terminated forthwith. It is submitted that Ld Arbitrator has rightly upheld the termination by reading the appendix no. 1 of MDG with clause 58(h) of the dealership agreement. It is submitted that Ld Arbitrator has given detailed reasons while dismissing the claim petition.
12. It is pointed out that in the show cause notice dated 23.01.2006, it was specifically intimated to the petitioner herein that following lapses were observed by the inspecting team
a). Totaliser seals not available on any DU
b) 5 litre measurement not calibrated by W& M
c) TT Retention samples were not available.
13. It is submitted that in response dated 25.01.2006, petitioner has specifically admitted that there was no Totaliser seal available on the dispensing units. It is further pointed out that even the absence of five litre calibrated measure has not been disputed rather in the said response petitioner has admitted the shortcoming and agreed to any punishment on that count. It is further submitted that in the said response dated 25.01.2006, failure to retain TT Retention samples is also not disputed.
14. It is further pointed out that in the supplementary reply dated 07.03.2006 also petitioner admits that seal was broken, however, he came up with a suspicious plea that prior to 21.01.2006 i.e. before the date of inspection, the seals were re-
Arbitration No. 14078/16M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 8 of 29 affixed by inspector (W&M) in the morning of 21.01.2006. It is submitted that supplementary reply dated 07.03.2006 is clearly an afterthought and cannot stand in the teeth of inspection report and initial reply dated 25.01.2006. It is submitted that had the inspector (W&M) inspected the seal there was no occasion for the inspecting team of the respondent to record that the seals were missing nor the petitioner would have admitted it in the reply. It is submitted that the certification report of Shri Jaivir Singh (W&M) is either a forged and fabricated document or same is anti dated and cannot be relied upon.
15. It is submitted that requirement of notice as per clause 58(a), before terminating the dealership, would come into picture only in case if the defect is curable. It is submitted that once the petitioner has himself admitted the lapses on his part, requirement of notice can be dispensed with. Ld counsel for the respondent has placed reliance on the judgment of Hon'ble Delhi High Court in Nirmala Kwatra vs IOCL in LPA No. 435/2012 DOD-27.11.2013.
16. It is argued that neither in the statement of claim nor in the petition under section 34, petitioner has claimed that MDG is not applicable to the case at hand.
17. It is submitted that it is settled proposition of law that the Arbitrator should reflect his thought process whereby it can be ascertained as to how he has arrived at a particular conclusion. It Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 9 of 29 is submitted that scope of interference under section 34 of the Arbitration and Conciliation Act is limited. It is submitted that considering the well detailed and reasoned judgment of Ld Arbitrator, no interference is required in the instant matter. Ld counsel for the respondent has prayed for dismissal of the petition.
18. This court has inquired from the counsel for respondent as to if all his submissions have been duly noted by the court or not whereupon he submitted that all his contentions have been noted by this court.
19. In rebuttal, Ld counsel for the petitioner has submitted that judgment of IOCL has been duly considered by the Hon'ble High Court of Punjab & Haryana in the matter and this judgment is distinguishable on facts. It is submitted that as per appendix 1 of MDG, in case of tampering of seals case of termination is made out whereas it is not the case of the respondent herein that petitioner is guilty of tampering of seals rather to the contrary certificate of Shri Jaivir Singh (W&M) has been placed on record to meet the allegations of tempering of seals. Ld counsel for the petitioner has prayed for setting aside of the award.
20. I have heard the rival contentions at bar and gone through the material available on record.
21. Before proceeding ahead, it would be relevant to reproduce Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 10 of 29 section 34 of the Arbitration and Conciliation Act and stipulated guidelines herein after for ready reference:
22. Section 34 of the Arbitration and Conciliation Act provides as under:
Application for setting aside arbitral awards-.
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if--
(a) the party making the application establishes on the basis of the record of the arbitral tribunal 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:
PROVIDED that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
[Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 11 of 29
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
PROVIDED that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
23. Before adverting to the rival contentions, it would also be pertinent to examine the law on the scope of judicial intervention under Section 34 of the Arbitration Act.
24. Challenge to an Award would lie if it is opposed to public policy of India. Observations of the Hon'ble Apex Court defining the expression 'Public Policy of India' in ONGC vs. Saw Pipes1 is reproduced here as under:
'...Therefore, in our view, the phrase 'Public Policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar's case (supra), it is required to be held that the award could be set aside if it is patently illegal. Result would be - 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, or (d) in addition, if it is patently illegal. Illegality must go 1 Appeal (Civil) 7419 (2001) decided by Supreme Court of India on 17.04.2003 Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 12 of 29 to the root of the matter and if the illegality is of trivial nature it cannot be held that 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.
Such award is opposed to public policy and is required to be adjudged void.' In Mcdermott International Inc vs. Burn Standard Co. Ltd. & Ors.2 It has been held as under:
'...The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the Arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merit of the matter.
What would constitute public policy is a matter dependant upon the nature of transaction and nature of statute. For the said purpose, the pleadings of the parties and the materials brought on record would be relevant to enable the court to judge what is in public good or public interest, and what would otherwise be injurious to the public good at the relevant point, as contradistinguished from the policy of a particular government. [See State of Rajasthan v. Basant Nahata, (2005) 12 SCC 77].' Dealing with the constituents of Public Policy as mentioned in Explanation 1 of the Act, in Associate Builder vs. DDA3, the Hon 'ble Apex Court has observed here as under:
'...Fundamental Policy of Indian Law Coming to each of the heads contained in the Saw Pipes judgment, we will first deal with the head "fundamental policy of Indian Law". It has already been seen from the Renusagar judgment that violation of the Foreign Exchange Act and disregarding orders of superior courts in India would be regarded as being contrary to the fundamental policy of Indian law. To this it could be added that the binding effect of the judgment of a superior court being disregarded would be equally violative of the fundamental 2 Appeal (Civil) 4492 of 1998 decided by Supreme Court of India on 12.05.2006 3 Civil Appeal no.10531 of 2014 decided by Supreme Court of Indian on 25.11.2014 Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 13 of 29 policy of Indian law.
In a recent judgment, ONGC Ltd. v. Western Geco International Ltd., 2014 (9) SCC 263, this Court added three other distinct and fundamental juristic principles which must be understood as a part and parcel of the fundamental policy of Indian law. The Court held-
"35. What then would constitute the "fundamental policy of Indian law" is the question. The decision in ONGC [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] does not elaborate that aspect. Even so, the expression must, in our opinion, include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. Without meaning to exhaustively enumerate the purport of the expression "fundamental policy of Indian law", we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called a "judicial approach" in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of a judicial approach in judicial and quasi- judicial determination lies in the fact that so long as the court, tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a court, tribunal or authority vulnerable to challenge.
38. Equally important and indeed fundamental to the policy of Indian law is the principle that a court and so also a quasi-judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Besides the celebrated audi alteram partem rule one of the facets of the principles of natural justice is that the court/authority deciding the matter must apply its mind to Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 14 of 29 the attendant facts and circumstances while taking a view one way or the other. Non-application of mind is a defect that is fatal to any adjudication.
Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it can be described as a fundamental policy of Indian law.
39. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223: (1947) 2 All ER 680 (CA)] of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes wherever the same are available.
40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest."
It is clear that the juristic principle of a "judicial approach"
demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective.
The Audi Alteram Partem principle which undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34 (2) (a) (iii) of the Arbitration and Conciliation Act. These Sections read as follows:
"18. Equal treatment of parties.- The parties shall be Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 15 of 29 treated with equality and each party shall be given a full opportunity to present his case.
34. Application for setting aside arbitral award.- (2) An arbitral award may be set aside by the Court only if-
(a) the party making the application furnishes proof that-
(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; "
31.The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.
32.A good working test of perversity is contained in two judgments. In H.B. Gandhi, Excise and Taxation Officer- cum-Assessing Authority v. Gopi Nath & Sons, 1992 Supp (2) SCC 312 at p. 317, it was held:
"7. ...................It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."
In Kuldeep Singh v. Commr. of Police, (1999) 2 SCC 10 at para 10, it was held:
"10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."
It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 16 of 29 be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score[1]. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, this Court held:
"21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye- law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."
Further in Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd.4, it has been held as under :
"...22. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the 1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section 34. While deciding applications filed under Section 34 of the Act, courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or re-appreciation of matters of fact as well as law. (See: Uttarakhand Purv Sainik Kalyan Nigam Limited. v. Northern Coal Field Limited.5, Bhaven 4 Civil Appeal no. 5627 of 2021, Arising out of SLP (C) no. 4115 of 2019 decided on 09.09.2021 5 (2020) 2 SCC 455 SLP No.11476/2018 decided by Supreme Court of India on 27.11.2019 Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 17 of 29 Construction Through Authorised Signatory Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. and Another6 and Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran7 ).
23. For a better understanding of the role ascribed to courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI)8 wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant passages of the judgment in Ssangyong (supra) are noted as under:-
"34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar"
understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .
6 2021 SCC OnLine SC 8 SLP No.11665/2015 decide by Supreme Court of India on 06.01.2021 7 (2012) 5 SCC 306 Appeal No.188/2006 decided by Bombay High Court on 25.02.2008 8 (2019) 15 SCC 131 Civil Appeal no.4779/2019 decided by Supreme Court of India on 08.05.2019 Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 18 of 29 In the matter of PSA Sical Terminals Pvt. Ltd vs. The Board of Trustee of V.O. Chidambranar Port Trust Tuticorin and Ors9, Hon'ble Apex Court has observed herein as under:
"39. Before that, it will be apposite to refer to judgment of this Court in the case of MMTC Limited (supra), wherein this Court has revisited the position of law with regard to scope of interference with an arbitral award in India.
40. It will be relevant to refer to the following observations of this Court in the case of MMTC Limited (supra):
11. As far as Section 34 is concerned, the position is wellsettled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e., if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award.
Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness.
Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b) (ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not 9 Civil Appeal No.3699-3700 of 2018 DOD 28.07.2018 Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 19 of 29 be interfered with if the view taken by the arbitrator is a possible view based on facts.(See Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Also see ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705]; Hindustan Zinc Ltd. v. Friends Coal Carbonisation [Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445]; and McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] )
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified.
Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, subsection (2A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
41. In Ssangyong Engineering and Construction Company Limited (supra), this Court after considering various judgments including the judgment in Associate Builders (supra) observed thus:
"34. What is clear, therefore, is that the Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 20 of 29 expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar"
understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263: (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263: (2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204]. 3335. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 21 of 29 3 SCC 49 : (2015)2 SCC (Civ) 204] . Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v.s Western Geco International Ltd., (2014) 9 SCC 263: (2014) 5 SCC (Civ)12], as understood in Associate Builders [Associate Builders v. DDA, (2015)343 SCC 49:
(2015) 2 SCC (Civ) 204], and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under subsection (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015)3 SCC 49:
(2015) 2 SCC (Civ) 204], namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 22 of 29 Builders [Associate Builders v. DDA, (2015)3 SCC 49: (2015) 2 SCC (Civ) 204],however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act,that would certainly amount to a patent illegality on the face of the award.
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.
42. Given the fact that the amended Act will now apply, and that the "patent illegality" ground for setting aside arbitral awards in international commercial arbitrations will not apply, it is necessary to advert to the grounds contained in Sections 34(2)(a)(iii) and (iv) as applicable to the facts of the present case."
42. It will thus appear to be a more than settled legal position,that in an application under Section 34, the court is not expected to act as an appellate court and reappreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The interference would be so warranted when the award is in violation of "public policy of India", which has been held to mean "the fundamental policy of Indian law". A judicial intervention on account of interfering on the merits of the award would not be permissible. However, the principles of natural justice as contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. The ground for interference on the basis that the award is in conflict with justice or morality is now to be Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 23 of 29 understood as a conflict with the "most basic notions of morality or justice". It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, reappreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award.
43. A decision which is perverse, though would not be a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. However, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
44. To understand the test of perversity, it will also be appropriate to refer to paragraph 31 and 32 from the judgment of this Court in Associate Builders (supra), which read thus:
"31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.
32. A good working test of perversity is contained in two judgments. In Excise and Taxation Officercum Assessing Authority v. Gopi Nath & Sons [1992 Supp39(2) SCC 312], it was held: (SCC p. 317,para 7)"7. ... It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse,then, the finding is rendered infirm in Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 24 of 29 law."In Kuldeep Singh v. Commr. Of Police [(1999) 2 SCC 10: 1999 SCC (L&S) 429], it was held: (SCC p. 14, para 10)"10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."
25. Evidently, the scope of judicial interference in a petition under Section 34 of the Arbitration and Conciliation Act assailing an award is very limited. Keeping the above quoted principles in mind, we will have to examine the present case.
26. At the very outset, I have no hesitation in observing that the Ld. Arbitrator has passed a detailed and well reasoned order and I absolutely find no reasons to interfere with the same. The award is neither against the fundamental policy of Indian law nor it is against the basic notion of morality & justice. The award cannot be said to be afflicted with the vice of any patent illegality. The petitioner has failed to cite any palpable ground justifying intervention under Section 34 of The Arbitration and Conciliation Act.
27. Let us now deal with the contentions of the petitioner.
The contention that the dealership could not have been terminated without giving a 4 days notice for rectifying the breach holds no merits. Ld. Counsel for the respondent has Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 25 of 29 rightly pointed out that as per clause 58(h) of the Dealership Agreement read with MDG guidelines Appendix 1, the dealership can be terminated forthwith. It is only in case of breach of stipulations, envisaged under clause 58(a) of the Dealership Agreement, the contract stipulates 4 days notice period, however, no such requirement of notice is stipulated under the succeeding sub-clauses of clause 58. Therefore, I do not find any merits in the contention of the petitioner on this count and the same is accordingly rejected.
28. The contentions with respect to the opinion of the officer of Weight and Measurement Department, in accordance with clause 5.1.3 of the MDG guideline, is also bereft of any merits. In this regard, it would be germane to observe herein that the said stipulation no.5.1.3 finds a mention only in the MDG guidelines issued in 2012 and counsel for the petitioner has failed to point out any similar clause in the relevant MDG guidelines 2005. Even otherwise also, counsel for the respondent has rightly pointed out that the said stipulation would only be relevant in case if the totaliser seal is found to be tempered. The opinion of Weights and Measurement Department can only be held to be relevant to ascertain as to if there is any tempering or not but in case of total absence of totaliser seals there is no requirement of opinion of the Weight and Measurement Officials as it is not a case requiring ascertainment of any tempering. Consequently, I do not find any merits in this contention also.
As far as certificate of Sh. Jaivir Singh (Inspector Legal Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 26 of 29 Meteorology) is concerned, I am constrained to observe that the said document is of dubious character. If Sh. Jaivir Singh conducted inspection at any point of time, before the inspection carried out by the officials of the respondent, there was no occasion for the inspecting team to note down the absence of totaliser seals and even the petitioner would not have admitted the absence of totaliser seals upon the dispensing units in its initial reply. The petitioner has nowhere challenged the correctness of the inspection report. Consequently, the said report is not of any assistance for the cause of petitioner.
29. The contention that the decision to terminate the dealership is harsh and arbitrary merits some consideration of the Court. In this regard, it would be apt to observe that this Court, in its limited capacity under section 34 of The Arbitration and Conciliation Act, cannot substitute its own opinion with the opinion of the Ld. Arbitrator. Ld. Arbitrator while dealing with the issue no.1 regarding the termination of dealership has elaborately dealt with the issue and rightly concluded that since the dealership agreement is determinable in nature therefore, the dealership was validly terminated. Reliance in this regard can be placed upon the judgment of our own Hon'ble Delhi High Court in the matter of Kal Airways Pvt. Ltd and Ors. vs. Spicejet Ltd. & Ors. Manu/DE/5452/2023 in OMP (Comm.) 450/2018 decided by Hon'ble High Court of Delhi on 31.07.2023 wherein it has been held as under:
'37. Therefore, while considering a challenge to an Arbitral Award where private parties are involved, the Court need not examine the Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 27 of 29 validity of the findings or the reasoning behind the findings given by an Arbitrator. The extent to which a Court may exercise supervisory powers in this respect is limited to examining whether the Award and the conclusion drawn therein are supported by findings and not whether the findings themselves are erroneous or sound.
38. It has also been reiterated that, while adjudicating a challenge under Section 34 of the Arbitration Act, the Courts must limit themselves to examining the Award itself and not the merits or facts of the case. A Court shall in no manner conduct a roving enquiry into the facts and evidence of the matter and neither shall the Court sit in appeal against the Award of the Arbitrator.'
30. In view of the same, I do not find any merits in the contentions of counsel for petitioner and the same is accordingly rejected.
31. Now, as far as the issue of non-applicability of MDG is concerned, counsel for respondent has rightly pointed out that as per clause 58(h) of the Dealership Agreement, the instructions issued from time to time by the corporation in connection with the safe practices in the supply/ storage of the petrol shall be binding upon the petitioner. Further, the petitioner himself is relying upon the MDG thus it cannot be contended that the Ld. Arbitrator has erred by relying upon the said guidelines.
32. As far as issue of the non-receipt of the MDG is concerned, the Ld. Arbitrator has duly recorded in the impugned award that the respondent has placed on record the receipt proving the dispatch of MDG 2005 addressed to the petitioner alongwith the registered AD receipt vide post under the intimation letter dated September 15, 2005 which was addressed Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 28 of 29 to the petitioner stating that the provisions have come into force from August 1st 2005. In these circumstances, this Court cannot interfere, vested with limited jurisdiction under Section 34 of The Arbitration and Conciliation Act, with a conclusive finding of fact. Consequently, even this contention of the petitioner deserves to be rejected.
33. As a cumulative effect of the aforesaid discussions, I do not find any palpable reasons to interfere with a well reasoned and detailed award passed by the Ld. Arbitrator. The petition under section 34 of The Arbitration and Conciliation Act, is found to be bereft of any merits and is accordingly dismissed.
34. Ordered accordingly.
35. Arbitral record, if any, be sent back.
36. File be consigned to record room after necessary compliance. Digitally signed by DHARMENDER DHARMENDER RANA RANA Date:
2025.05.17 Pronounced in open Court 17:01:43 +0530 on 17.05.2025 (Dharmender Rana) District Judge-01, New Delhi District, Patiala House Courts, New Delhi Arbitration No. 14078/16 M/s Vivek Service Station Vs. Indian Oil Corporation Limited Page No. 29 of 29