Allowed

Indian Oil Corporation Ltd. v. Vijay Automotive Services

Bombay HC10 Aug 2012ARBP/814/2009

Case brief

AI extract

What is this about?

The High Court quashed an award that directed the petitioner to restore and renew a terminated petrol dealership with the respondent. The Court held that a dealership is a determinable personal contract unenforceable under Section 14(1) of the Specific Relief Act.

What did the court decide?

The Award dated 25 June 2009 is quashed and set aside. There shall be no order as to costs.

Indian Oil Corporation Ltd. Vs Vijay Automotive Services — Specific Performance | Bombay HC (2012)

arbp-814-09.sxw

dgm

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

¶5

ARBITRATION PETITION NO. 814 OF 2009

¶6

Indian Oil Corporation Limited Indian Oil Bhavan, G-9, Ali Yavar Jung Marg, Bandra (E), Mumbai 400051 ......Petitioners

¶7

Vs.

¶8

M/s. Vijay Automotive Services Indian Oil Dealers, Solapur-Pune Road, A/P Sawleshwar, Tal. Mohol, Dist. Solapur and “Sudarshan”, 39/8, Railway Lines, Solapur ......Respondent

¶9

Mr. Naushad Engineer i/by M/s. RMG Law Associates for the Petitioner.

¶10

Mr. Rahul Karnik for the Respondent.

¶11

CORAM :- ANOOP V. MOHTA, J. JUDGMENT RESERVED ON :- 7 August , 2012. JUDGMENT PRONOUNCED ON :- 10 August, 2012.

¶12

JUDGMENT:-

¶13

The Petitioners have challenged the Award dated 25 June 2009,

¶14

passed by the sole Arbitrator appointed under the Agreement between

¶15

the parties. The operative part of the Award is as under :

¶16

“1 The termination of dealership of claimant is

¶17

quashed and set aside;

¶18

2 arbp-814-09.sxw

¶19

dgm

¶20

2 Respondent is directed to restore the

¶21

dealership and also to execute fresh dealership agreement for resited location.”

¶22

2 Based upon Agreement dated 20 February 1974, the Respondent

¶23

was appointed as dealer for the purpose of selling the petrol and petroleum products of the Petitioners. The business was not as per the mark. The sales were zero. Inspite of regular discussion and follow up, the position was not improved. A show cause notice dated 8 March 2005 was issued. There was no reply. Another show cause notice dated 24 May 2005 was also issued. By reply/letter dated 15 July 2005 the Respondent gave assurance, but expressed that due to financial problems, the petrol pump was closed. The reply was not satisfactory. Therefore, by letter dated 2 September 2005, the dealership agreement was terminated. The Respondent,

¶24

invoked arbitration clause 69 of the agreement on 16 December 2005. The parties led their respective evidence and also filed written submissions. In the meanwhile, the Petitioners appointed another dealer to operate the said petrol pump. The Respondent challenged

¶25

the said order in the Civil Court at Ahmednagar. No relief was granted by the court in his favour. The Arbitrator ultimately passed

arbp-814-09.sxw

dgm

the Award as referred above on 25 June 2009.

¶30

3 Heard the counsel appearing for the parties and gone through the record with the assistance of respective counsel and the legal position including citation so referred and relied even by the Arbitrator.

¶31

4 The Arbitrator though gave finding that “It is not disputed by both the parties that performance of the claimant in operating the subject dealership was not satisfactory for which number of correspondence was exchanged between the parties. And finally, after issuing show cause notice, respondent terminated the dealership under clause 9 of dealership agreement”, yet, observed that the termination of dealership based upon the breach of clause 9 of the agreement is incorrect and thereby granted the order to restore the dealership. The Arbitrator, referring to the Civil Court proceedings, ultimately passed the order even to grant the dealership agreement in respect of the re-sited location. There is ample material on record including the letters given by the Respondent themselves expressing

¶32

their inability to run the petrol pump because of their financial problems. Letter dated 15 July 2005 by which the Respondent also

¶33

4 arbp-814-09.sxw

¶34

dgm

¶35

assured that they will start the outlet shortly. The agreement was of 1974, the business was not at all achieved even the basic mark continuously for so many years, inspite of due discussion and follow up. It is a commercial transaction. The Petitioners know how to deal and proceed with their business. Mere grant of dealership itself is not sufficient. The requisite sale is also parallel and equal obligation. The request was made to continue the dealership at Savleshwar as recorded in letter dated 28 September 2005. The fact remains that the Respondent always admitted their defaults and capacity to fulfill the requisite target. The termination of dealership, therefore, in this background which the Arbitrator completely overlooked cannot be stated to be bad in law, based upon the agreement including clause 9.

¶36

5 The Arbitrator, inspite of this granted the order in the terms which is referred above.

¶37

6 The Apex Court in Indian Oil Corporation Ltd. v. Amritsar Gas Service and others ,1 while dealing with the provisions of Specific Relief Act has observed as under :

¶38

“12 ….........The finding in the award being that

1 (1991) 1 SCC 533

5 arbp-814-09.sxw

dgm

the Distributorship Agreement was revocable and the same being admittedly for rendering personal service, the relevant provisions of the Specific Relief Act were automatically attracted. Sub-section (1) of Section 14 of the Specific Relief Act specifies the contracts which cannot be specifically enforced, one of which is a contract which is in its nature determinable'. In the present case, it is not necessary to refer to the other clauses of sub-section (1) of Section 14, which also may be attracted in the present case since clause (c ) clearly applies on the finding read with reasons given in the award itself that the contract by its nature is determinable. This being so granting the relief of restoration of the distributorship even on the finding that the breach was committed by the appellantCorporation is contrary to the mandate in Section 14(1) of the Specific Relief Act and there is an error of law apparent on the face of the award which is stated to be made according to the law governing such cases'. The grant of this relief in the award cannot, therefore, be sustained”.

arbp-814-09.sxw

dgm

7 The Supreme Court ultimately not granted the order of restoration of the dealership though restricted the Award only with regard to the compensation. In the present case, admittedly, Respondent never asked and/or pressed for any compensation. Therefore, in view of above Supreme Court judgment and the findings read with the provisions of law, in my view, the Award so passed is absolutely contrary to the record, as well as, the law. There is no question of granting any order of dealership as done in the present case. It is impermissible, apart from the unexecutability, when one party refuses to enter into fresh agreement with another party in any circumstances. The facts, in the present case, in my view, are sufficient to take decision by the Petitioners to terminate the contract. The commercial business and the transactions cannot be directed to be proceeded by any management like the Petitioners under the supervision and/or direction of the Court. It is impermissible.

¶47

8 Resultantly, the Petition is allowed. The Award dated 25 June

¶48

2009 is quashed and set aside. There shall be no order as to costs.

¶49

(ANOOP V. MOHTA, J.)

Indian Oil Corporation Ltd. v. Vijay Automotive Services

Case brief

What is this about?

What did the court decide?

Indian Oil Corporation Ltd. v. Vijay Automotive Services

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Citicorp Finance (India) Ltd. Vs Mohammed Hanif Gul Syed and Anr.

H.N. Karandikar Vs the Cantonment Board and Anr.

H.N. Karandikar Vs the Cantonment Board and Anr.

National Spiritual Assembly of Baha'Is of India, and Ors. Vs Mr. Aniruddha Jotiram Karanjkar, and Ors.

National Spiritual Assembly of Baha'Is of India, and Ors. Vs Mr. Aniruddha Jotiram Karanjkar, and Ors.

M/S. Francis Klein and Company Pvt.Ltd. Vs N.K.Karunakaran