Madhya Pradesh High Court
Bharat Petoeum Corporation Ltd. Thr. vs M/S Shukla Filing Center Ratanpura ... on 12 October, 2022
Author: Anand Pathak
Bench: Anand Pathak
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IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE ANAND PATHAK
ARBITRATION CASE No. 66 of 2019
Between:-
BHARAT PETROLEUM CORPORATION
LIMITED, BHARAT BHAWAN 4 & 6
CURRIMBHOY ROAD BALLARD ESTATE,
MUMBAI 4004001.
THROUGH ITS TERRITORY MANAGER, NEAR
RAIRU RAILWAY STATION RAIRU DEPOT, POST
BARUA GWALIOR (MADHYA PRADESH)
.....APPLICANT
(BY SHRI K.N. GUPTA -SENIOR ADVOCATE WITH MS.
AYUSHI POPHLI -ADVOCATE)
AND
1. M/S SHUKLA FILING CENTER RATANPURA
DEALER BHARAT PETOLEUM COPORATION
LIMITED THROUGH ITS PROPRIETOR ANOOP
SHUKLA S/O SHRI A.K. SHUKLA, OCCUPATION
-BUSINESS, R/O LAHAR DISTRICT BHIND
(MADHYA PRADESH)
2. ANOOP SHUKLA PROPRIETOR SHUKLA
FILLING CENTER BHARAT PETROLEUM
CORPORATION R/O LAHAR DISTRICT BHIND
(MADHYA PRADESH)
.....RESPONDENTS
(BY SHRI SANJAY BAHIRANI AND SHRI HARSHAD
BAHIRANI -ADVOCATES)
-----------------------------------------------------------------------------------------------
Reserved on : 12-07-2022
Delivered on : 12-10-2022
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ORDER
1. The present application is preferred under Section 11(6) of the Arbitration and Conciliation Act, 1996 at the instance of applicant Company seeking following reliefs:
"(a) Pass an order for appointment of any of the above named Senior Advocates or any other suitable or sole Arbitrator in relation to the disputes mentioned in the earlier paras of this petition and direct him to adjudicate the dispute on or about order dated 12-12-2018 passed by Dispute Resolution Panel as per the provisions of Arbitration and Conciliation Act 1996.
(b) Pass any other order as this Hon'ble Court deems fit and proper in facts and circumstances of the case."
2. Applicant Company is seeking appointment of Arbitrator.
3. Precisely stated facts for adjudication are that respondent No.1 was a dealer for running Dispensing Pump for Motor Spirit (MS) and High Speed Diesel (HSD) under the agreement dated 24-04-2013 (Annexure P/1). Running of the said Dispensing Pump is guided by the provisions of Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Preservation of Malpractice) Order, 2005 as amended from time to time read with Marketing Discipline Guidelines (MDG). Dispensing Pump and Selling License "B"/Agreement (Annexure P/1) 3 contains clause 18 as Arbitration Clause.
4. It appears from the pleadings and submissions that routine inspection of the aforesaid dealership was carried out on 22-09-2017 by Manager (Sales), Retail, Gwalior . Three tier sampling of MS & HSD was done from the dispensing unit on same day and one sample was provided to the dealer, the other sample was kept by the corporation and the third sample sent to BPCL, Quality Assurance Laboratory, Piyala, Haryana. As per report dated 28-09-2017 the sample of HSD passed the test. However, as per sample test report of MS dated 06-10-2017, the sample failed the test. The test report clearly stated Research Octane Number (RON) as 86.9, apart from other contents which were not within permissible limits.
5. Aforesaid report dated 06-10-2017 was intimated to respondent/dealer on 13-10-2017 and he was communicated that if he wants the sample to be retested then he may apply for retesting of the sample. Respondent/dealer opted for retest and the sample was sent for retesting to Indian Oil Corporation Limited, Nishatpura Laboratory, Bhopal. The Nishatpura Laboratory in its test report dated 20-11-2017 found in both the samples Lot No.790002853063 and 790002853068 that the samples 4 failed in RON test (Result -90.5).
6. Respondent/dealer applied for retesting of the sample by a different laboratory on 16-10-2017. The applicant company disputed this and according to them the retesting was applied on 23-10-2017. The test report was submitted by IOC Lab on 20-11-2017. Respondent/dealer has urged that he submitted an application on 28-11-2017 to the applicant company through mail that in view of the sample test report of Indian Oil Corporation Lab, Nishatpura, Bhopal wherein sample passed all the tests except in RON which was found 90.5 whereas it should come in parameter of 91.00 and such a sample cannot be declared sub-standard and adulterated. The variation of 0.5 was found. Respondent/dealer placed reliance on IS1448 (P:27):2013 ISO 5164:2005 Indian Standard Methods of Test for Petroleum and its Products clause 13.3. Clause 13.3 which according to him was relevant in facts situation. Further in short, respondent /dealer urged that he is not guilty of adulteration in MS. And relied upon Marketing Discipline Guidelines (MDG) and definition as contained into it.
7. It appears that vide order dated 13-08-2018, Dispensing Pump and Selling License/Agreement was terminated.
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8. Being aggrieved by the said order of termination, respondent/dealer appears to be have preferred an appeal on 03-12-2018 before Dispute Resolution Panel, New Delhi by way of Appeal No.DRP/BPC/RET/0005 of 2018. It further appears from the record that meanwhile respondent No.2 filed a writ petition bearing No.95/2018 before this Court and it further appears that vide order dated 05-12-2018 respondent No.2 sought liberty to raise all the legal issues before appellate authority i.e. Dispute Resolution Panel, New Delhi and withdrew the writ petition with liberty as referred above.
9. Said appellate authority -Dispute Resolution Panel consists of a Retired Judge of High Court as Chairman and two other experts as members. Applicant and respondent/dealer both appeared and advanced arguments before the appellate authority and vide order dated 18-12- 2018 appeal filed by respondent No.1 was allowed and order dated 13- 08-2018 passed by the applicant company whereby licence of respondent No.1 was terminated was set aside and Dispensing Pump and Selling License Agreement (DPSL -B) dated 24-04-2013 entered into between the parties was restored and applicant company and its officers were directed to restore the agreement and resume the supply of MS 6 and HSD within a week from the date of said order. It was further mentioned that since appeal has been allowed, Company (Bharat Petroleum Corporation Ltd.) cannot invoke clause 12 proviso of Dispensing Pump and Selling License Agreement dated 24-04-2013.
10. After passing of the said order, it appears that applicant company issued notice dated 02-04-2019 (Annexure P/4) in which it has raised its grievances in respect of order dated 18-12-2018 passed by the appellate authority and sought remedy under Arbitration and Conciliation Act (hereinafter referred to as "the Act") for appointment of arbitrator and proposed names of three Senior Advocates of Gwalior to be appointed as Sole Arbitrator (one of them).
11. It further appears that without any affirmative response received at the instance of respondent/dealer, application under Section 11(6) of the Act was preferred by the applicant company by way of Arbitration Case No.61/2019. That application was withdrawn by the applicant company vide order dated 17-07-2019 with liberty to invoke clause 18 of the Dispensing Pump and Selling License Agreement dated 24-04-2013 for resolution of the dispute. After withdrawal of the said application it appears that applicant company tried to approach the Director 7 Marketing of the Company to act as Arbitrator as per clause 18 but he showed his inability to act as Arbitrator on the basis of Section 12(5) of the Act read with Scheduled VII and as per judgment of Apex Court in the case of TRF Limited Vs. Energo Projects Limited (2017) 8 SCC
377. Thereafter the present application under Section 11(6) of the Act is being preferred.
12. It is the submission of learned counsel for the applicant that since respondent/dealer did not yield to the request of the applicant company and dispute exists between the two, therefore, one of the named Senior Advocates (mentioned in the application) or any other suitable person as sole arbitrator for resolution of dispute be appointed.
13. It is further submitted that even after passing of the order dated 18-12- 2018 by the appellate authority/DRP, arbitration clause can be invoked because it is provided in clause 18 of the Agreement dated 24-04-2013 and there is no bar as such regarding arbitration proceedings. He relied upon the judgment of Apex Court in the matter of Centrotrade Minerals and Metal Inc. Vs. Hindustan Copper Limited, (2006) 11 SCC 245, Centrotrade Minerals and Metals Inc. Vs. Hindustan Copper Ltd. AIR 2020 SC 3163 and order dated 10-02-2009 passed 8 by the Coordinate Bench in the case of M/s Abhay Sales Retail Outlet Vs. Indian Oil Corporation Ltd. in Writ Petition No.5708/2008.
14. Per contra, learned counsel for the respondents vehemently opposed the submissions and submitted that agreement dated 24-04-2013 raised an obligation over the dealer to act in a certain manner as per the requirement of Relevant Acts/Rules. Power to search and seizure by the officers of the applicant company were performed under Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Preservation of Malpractice) Order 2005, which is framed in exercise of power conferred by Section 3 of the Essential Commodities Act, 1955 and as per the Marketing Discipline Guidelines for RO/SKO Dealership of Public Sector Marketing Companies. Said guidelines (MDG) deals exhaustively in respect of Procedure for Handling of Products at Retail Outlets by dealers (Chapter -1), Industry Guidelines for Sample Collection and Testing (Chapter -2), Handling of MS/HSD/SKO at Company's storage points and duties of Oil Companies (Chapter -3), Maintenance of Company's Equipment at Retail Outlet (Chapter -4) and Action to be taken by the OMC under the MDG (Chapter -8) etc. 9
15. Clause 8.9 of the MDG refers Appellate Proceedings and exercising the remedy as provided in the said provision of MDG, respondent/dealer preferred an appeal and succeeded into it. Vide order dated 18-12-2018 passed by the appellate authority/Dispute Resolution Panel consisting of one retired Judge of High Court and two members as experts, termination order was set aside and agreement dated 24-04-2013 was directed to be resumed. Just to frustrate the said order, this application has been preferred which prejudicially affects the rights of respondents. When their own prescribed mechanism provides relief to the respondents then no dispute exists inter se, because it was bi-parte order and therefore, applicant has to comply the order passed by the appellate authority dated 18-12-2018 rather than proceeding further for arbitration.
16. He relied upon Division Bench Judgment of Allahabad High Court in the matter of M/s Kamal Kant Automobiles and another Vs. Hindustan Petroleum Corporation Ltd. and 2 others passed on 18- 02-2019 in Writ -C No.25127/2018 wherein the Division Bench held that arbitrator has no jurisdiction to direct restoration of dealership to the dealer. All that arbitrator could do, if he found that the termination of the 10 distributorship was unlawful, was to award damages, as any civil court would have done in a suit.
17. He prayed for dismissal of application and submitted that action of applicant company for appointment of arbitrator is misplaced and therefore present respondents have challenged the notice given by the applicant for arbitrator through Writ Petition No.4284/2019 and for enforcement of order dated 18/12/2018 by way of W.P.No.8131/2019.
18. Heard learned counsel for the parties and perused the documents appended thereto.
19. This is a case where applicant (Bharat Petroleum Corporation Ltd.) is seeking appointment of arbitrator for resolution of dispute existing between the parties.
20. It is not in dispute that vide agreement dated 24-04-2013 respondent No.1 was awarded the dealership of Dispensing Pump and Selling License. As per the said agreement, clause 18 was in respect of dispute and mechanism for resolution. Same is reiterated as under:
"18(a) Any dispute or difference of any nature whatsoever, any claim, cross-claim, counter claim or set off of the Company against the Licensee or regarding any right, liability, act, omission or account of any of the 11 parties hereto arising out of or in relation to this agreement shall be referred to the Sole Arbitration of the Director (Marketing) of the Company or of some officer of the Company who may be nominated by the Director (Marketing). The licensee will not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an officer of the Company or that he has dealt with the matters to which the contract relates or that in the course of his duties as an Officer of the Company, he had expressed view on all or any other 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 Director (Marketing) as aforesaid at the time of such transfer, vacation of office or inability to act may in the discretion of the Director (Marketing) designate another person to act as arbitrator in accordance with the terms of the agreement to the end and intent that the original Arbitrator shall be entitled to continue the arbitration proceedings notwithstanding his transfer or vacation of office as an officer of the Company if the Director (Marketing) does not designate another person to act as arbitrator on such transfer, vacation of office or inability of original arbitrator. Such person shall be entitled to proceed with the reference from the point at 12 which it was left by his predecessor. It is also a term of this contract that no person other than the Director (Marketing) of the Company or a person nominated by such Director (Marketing) 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 & Conciliation Act 1996 or any statutory modification or re-enactment thereof and the rules made thereunder for the time being in force shall apply to the arbitration proceedings under this clause.
(b) 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. 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 & Conciliation Act 1996 including admission of any affidavit as evidence concerning the matter in difference i.e. dispute before him.
(c) The parties against whom the arbitration proceedings have been initiated, that is to say, the
Respondents in the proceedings, shall be entitled to prefer 13 a cross-claim, counter claim or set off before the Arbitrator in respect of any matter in issue arising out of or in relation to the Agreement without seeking a formal reference of arbitration to the Director (Marketing) for such counter-claim, cross claim or set off and the Arbitrator shall be entitled to consider and deal with the same as if the matters arising therefrom has been referred to him originally and deemed to form part of the reference made by the Director (Marketing).
(d) The arbitrator shall be at liberty to appoint, if necessary any accountant or engineering or other technical person to assist him, and to act by the opinion so taken.
(e) The arbitrator shall have power to make one or more awards whether interim or otherwise in respect of the dispute and difference and in particular will be entitled to make separate awards in respect of claims of cross claims of the parties.
(f) The arbitrator shall be entitled to direct any one of the parties to pay the costs to the other parties in such manner and to such extent as the arbitrator may in his discretion determine and shall also be entitled to require one or both the parties to deposit funds in such proportion to meet the arbitrators expenses whenever called upon to 14 do so.
(g) The parties hereby agree that the courts in the city of Bhopal alone shall have jurisdiction to entertain any application or other proceedings in respect of anything arising under this agreement and any award or awards by the Sole Arbitrator hereunder shall be filed (if so required) in the concerned courts in the city of Bhopal only."
21. From documents and submissions, it appears that conditions of retail-
services (Dealership) were guided by Control Order 2005, as well as MDG. Perusal of MDG indicates that different chapters provide detail guidelines right from procedure for handling of products at Retail Outlets by dealers till action to be taken by the Oil Marketing Companies under the MDG. Clause 8.10 deals in respect of irregularities/malpractices in respect of SKO -LDO dealership. Irregularities are divided into three categories; (i) Critical Irregularities, (ii) Major Irregularities and (iii) Minor Irregularities. Correspondingly, penalties are also provided in which in respect of proven Critical Irregularities, the dealership is to be terminated at the first instance which is the case in hand. Any action taken against the dealership is to be taken only in consultation with Local Civil Supplies 15 Authorities so as to it may not result disruption of supplies of PDS SKO to the common people.
22. Said guidelines are exhaustive in nature and carries different annexures in which different tables and tests etc. are referred.
23. Clause 8.9 of MDG is worth consideration in the present set of facts which is reproduced below:
"8.9 Appellate proceedings:
1. In case of orders in critical irregularities, the dealer will have the right to appeal within a period of 30 days from the date of receipt of order, before the appropriate authority who will be empowered to decide the matter and the appeal shall be disposed off preferably within 90 days from the date of filling the appeal in the office of the appellate authority.
2. For all appeals in case of critical irregularities, except termination in case of SC/ST dealerships, the appellate authority will be the ED (Retail) in the Head Quarters or any other ED level officer at the Head Quarter so nominated by the company. For all cases of termination of SC/ST dealerships, the appellate authority will be a Director other than Director (Mktg.) of the OMC."
24. Perusal of said clause reveals that in case of orders in Critical Irregularities (like present case), dealer may prefer appeal as provided in 16 clause 8.9.
25. After termination of dealership, respondent No.1 availed the said remedy of appeal as per clause 8.9 and contemporaneously he preferred writ petition also bearing No.95/2018 and meanwhile, since he preferred appeal also before the Dispute Resolution Panel invoking clause 8.9 of MDG, respondent No.2 sought withdrawal of said writ petition bearing No.95/2018 vide order dated 05-12-2018 (Annexure R/1) and sought liberty to raise all the legal issues before the appellate authority. Said liberty was granted and petition was withdrawn.
26. Once respondent/dealer availed the benefit of appeal under clause 8.9 of MDG in which both the parties, i.e. applicant company as well as respondents appeared and advanced arguments then dispute attained finality so far as allegations as referred in the termination order is concerned. The appellate authority not only set aside the termination order dated 13-08-2018 but also directed to resume supply of MS and HSD and not to invoke clause 12 of the agreement dated 24-04-2013.
27. Therefore, dispute comes to an end or in other words, dispute is resolved by the appellate authority. If any party was aggrieved by the said order (applicant in the case) it could have availed other legal 17 remedies as available to it in accordance with law taking exception to the said order dated 18-12-2018 but invoking Section 11(6) of the Act would not be proper remedy more so, when earlier application preferred under Section 11(6) of the Act, bearing Arbitration Case No.61/2019 was already dismissed. Now no dispute as per clause 18 of the agreement dated 24-04-2013 exists which is to be resolved as per the agreement.
28. The Apex Court in the matter of E. Venkatakrishna vs. Indian Oil Corporation and another, (2000) 7 SCC 764 held that only remedy available to the dealer by invoking the Arbitration Clause would lead to a finding by the Arbitrator holding the termination as unlawful and for awarding the damages and the arbitrator do not have any jurisdiction for restoration of the fair price shop and thus the arbitration clause would not give any efficacious remedy to the dealer for the relief sought. Para 5 and 7 are worth consideration therefore, reproduced as under:
"5. The award was challenged by the respondent in proceedings under Section 30 of the Arbitration Act taken before a learned Single Judge of the Madras High Court. The learned Single Judge rejected the challenge. The respondent preferred an appeal and the Division 18 Bench, in the judgment and order that is impugned before us, upheld the challenge. It said:
"There is considerable force in the contention of the appellant that what is arbitrable under Clause 37 is only the dispute or difference in relation to the agreement. The question of restoration of distributorship would not arise under the agreement. Therefore, we have no hesitation in holding that the Arbitrator was in error and in fact had no jurisdiction to direct restoration of distributorship to the 1st respondent.
7. We find it difficult to accept the contention on behalf of the appellant that what was referred to the arbitrator was the issue of restoration of distributorship in the sense that the arbitrator could direct, upon holding that the termination was unlawful, that the distributorship should be restored. We think that the reference itself contemplated consequential damages for wrongful termination. In any event and assuming that there is any error in so reading the reference, it is difficult to hold that the arbitrator was thereby vested with jurisdiction to award restoration."
29. Division Bench of Allahabad High Court in the matter of Kamal Kant Automobiles (supra) has discussed this aspect in detail and reiterated 19 the legal position that arbitrator at best could award damages and cannot restore dealership (of Oil Company) even if he finds termination of the dealership as unlawful.
30. Here in the present case, when the remedy of appellate authority provided under MDG which is a piece of executive instruction, has already been availed by both the parties without raising any objection in the said proceedings, then it is imperative that sanctity be attached to the order of said appellate authority otherwise it would be a futile exercise for a dealer to avail the appellate proceedings (where he had to deposit Rs.5 lacs as prerequisite) and thereafter again have to undergo the rigours of arbitration proceedings.
31. Even otherwise arbitration by its very concept is Original in nature (as original proceedings) and very initiation of arbitration indicates start of resolution of dispute and not as a forum, available as appellate authority. Here arbitrator cannot stand as appellate authority to another appellate authority/Dispute Resolution Panel (as per clause 8.9) created by the executive fiat.
32. Perusal of notice dated 02-04-2019 issued by the applicant Company to the respondent dealer specifically reveals that Oil Company was not 20 satisfied with the finding given by the appellate authority. Thus, instead of taking exception to the said appellate order and to challenge the findings contained into it, the Oil Company is invoking Arbitration Clause. Such practice cannot be countenanced.
33. Judgments relied upon by the applicant company move in different factual realm and therefore, not applicable in the present set of facts. Judgment relied upon by the applicant in the case of M/s Abhay Sales Retail Outlet (supra) was of 2009, thereafter MDG Guidelines, 2013 came into being. Even otherwise para 20 and 21 of the said order go into different factual realm and controversy in the said case was altogether different, therefore, said order is not applicable in the present set of facts.
34. In the cases of Bharat Sanchar Nigam Ltd. and Ors. Vs. Nortel Networks India Pvt. Ltd. (2021) 5 SCC 738, Secunderabad Cantonment Board Vs. B. Ramachandraiah & Sons, (2021) 5 SCC 705 and Vidya Drolia and Others Vs. Durga Trading Corporation, (2021) 2 SCC 1, Supreme Court has clarified that non arbitral disputes cannot be referred for arbitration.
35. In the considered opinion of this Court, no case for appointment of any 21 arbitrator is made out by the applicant company rather it has to proceed as per law and as per the order dated 18-12-2018 passed by the appellate authority. No case for appointment of arbitrator is made out. Application sans merit and is hereby dismissed.
(Anand Pathak) Judge Anil* ANIL KUMAR CHAURASIYA 2022.09.22 04:32:08
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