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TMI Blog2022 (2) TMI 1450X X X X Extracts X X X X X X X X Extracts X X X X ..... ears, pursuant to a deed of lease dated 20th September 2005 which was duly registered, in order to set up a retail outlet for sale of its petroleum products. 5. The recital of the deed of lease, inter alia, records:- "1).......The abovementioned Property is owned by SHRI. LAXMAN DAGDU THITTE. The said leased Property is more particularly described in the Schedule hereinbelow given together with the Structures and Building now standing thereon or that may be hereafter erected thereon by the LESSEE TO BOLD the premises hereby demised I hereinafter for the sake of brevity referred to as the ("DEMISED PREMISES") unto the LESSEE for a term of 29 (TWENTY NINE years, commencing from the 20th day of SEPTEMBER 2005 renewable and determinable as hereinafter provided yielding and paying thereof during the said term monthly and the proportionately for any part of a month the rent of Rs. 1750 /- (RUPEES ONE THOUSAND SEVEN HUNDRED AND FIFTY only) to be paid without any deduct on or before the 15th day of each and every calendar month." 6. The deed of lease, hereinafter referred to as "the lease agreement" contained, inter alia, the following terms and conditions:- "2) THE LESSEE DOTH HERE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat event it shall be lawful for the LESSOR at any time thereafter to re-enter upon the said premises or any part thereof in the name of the whole and to take action to possess and enjoy as in all their former state and interest Provided always and it is hereby agreed and declared that the Power of Re-entry hereinabove contained shall not be exercised unless and until the LESSOR/S shall have first given to the LESSEES 90 days' Notice in writing pointing out the Breach in respect of which the right to Re-Entry is exercised and the LESSEE shall have failed to remedy the breach within a reasonable period of not less than 90 days thereafter. .... ... (e) The LESSEE shall be entitled to ASSIGN, TRANSFER, SUBLET, UNDERLET or part with the Possession of the DEMISED PREMISES or any part thereof to any person above name whomsoever it chooses without the consent of the LESSOR. (f) The LESSEE shall be entitled to appoint, remove, reappoint, change and substitute any dealers, agents, licensees and other authorized representatives on and in respect of the DEMISED PREMISES without the consent OF THE LESSOR. ...... (n) PROVIDED ALWAYS AND IT IS AGREED AND DECLARED that at the expir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the business of refining and sale of petroleum products and more particularly of Motor Spirit (MS) and High Speed Diesel Oil (HSD): Recitals AND WHEREAS the Corporation is the Owner/Lessee/Tenant/licensee of a Plot of land and is the Owner/Lessee/Tenant/licensee of the superstructures thereon more particularly described in the First Schedule hereunder written and of the structures thereon (Hereinafter collectively referred to as "the Premises") and has installed and/or is about to install at and under the said premises the apparatus and equipment described in the Second Schedule hereto (hereinafter called "the Outlet") 1st Schedule WHEREAS at the request of the Dealer, the Corporation has agreed to appoint the Dealer as its Dealer for the retail sale or supply at the said premises of certain petroleum products on the terms and conditions hereinafter contained. 2nd Schedule ... 2. This agreement shall remain in force for a period of fifteen years from 15th day of Nov' 2006 and continue thereafter for successive periods of one year each until determined by either party by giving three months' notice in writi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees, agents of any Acts, rules, regulation or bye-laws of the central and/or State Government and/or Municipal Local and/ or other authorities as may be applicable to the business including without prejudice to the generality of the foregoing, the concerned authorities respectively appointed under the Petroleum Act, Payment of Wages Act, Shops and Establishments Act, Factories Act and the Workmen's compensation Act. The Explosives Act, 1884 or any other Act or Statutory Rules, Regulations or Bye-Laws made thereunder and/ or applicable from time to time to the business of storage and sale of products and servants, workmen and persons engaged in connection therewith and the corporation shall not be responsible in any manner for any liabilities arising out of non-compliance by the Dealer with the same. ... 8(e) For the use of the said premises including the construction thereon and outfit, the Dealer shall pay to the Corporation a licence fee as may be fixed and recovered or deducted in the manner as may be decided by the Corporation, at its sole discretion and without any previous notice to the Dealer shall from time to time and at all times be entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of stoppage and/or suspension of supplies shall be in addition to and/or without prejudice to any other right or remedy of the Corporation under this Agreement or Law. For the purpose of this clause, the General Manager of the Corporation for the time being at Mumbai shall be the Sole Judge as to whether a breach of any covenant of this agreement has been committed by the Dealer. The Dealer shall not be entitled to claim any compensation or damage from the Corporation on account of any such stoppage and/ or suspension of supplies. Corporation's right to suspend supplies ... 17. ......The Corporation shall have the right to exercise at its discretion at any time and from time to time quality control measures for products marketed by the Corporation and lying with Dealer. The opinion of the General Manager of the Corporation for the time being at Mumbai as to whether any product of the corporation has been contaminated and/or adulterated shall be final and binding upon the Dealer Product Specification/ Conamination/ adulteration In the event of the said General Manager finding that the contamination and/or adulteration of product ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistance and give all information to the Corporation and its duly authorized representatives in that behalf and produce to the Corporation and/or its duly authorized representatives in that behalf whenever required to do so Invoices/Cash Memos for all purchases and receipts for all payments which it is the Dealer's duly to make whether under the terms of this Agreement or otherwise. Corporation's right to inspect management of dealership ... 45. Notwithstanding anything to the contrary herein contained, the Corporation shall be at liberty at its entire discretion to terminate this Agreement forthwith upon or at any time after the happening of any of the following events namely:- Forthwith Termination a) If the Dealer shall commit a breach or default of any of the terms, conditions, covenants and stipulations contained in this Agreement,... ... 61.(a) Any dispute or difference of any nature whatsoever, any claim, cross-claim, counter-claim or set-off 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nated by the Managing Director, the dealership agreement provided for reference of disputes to the sole arbitration of the Director (Marketing) of the Corporation who might either himself act as the Arbitrator or nominate some other officer of the Corporation to act as the Arbitrator. 14. The lease agreement expressly provided that disputes under the said agreement were not to be referred to any person other than the Managing Director of the Appellant, and if for any reason that was not possible, the matter was not to be referred to arbitration at all. On the other hand, as stated above, disputes under the dealership agreement were referable to the Director (Marketing) of the Appellant who was debarred from entertaining any reference of dispute under the lease agreement. 15. The learned Additional Solicitor General, Ms. Madhavi Diwan, appearing on behalf of the Appellant referred to a judgment of this Court in Rahul Yadav and Another v. Indian Oil Corporation Limited and others [(2015) 9 SCC 447] , where this Court clearly held that a dealership agreement by which the lessor of a land was appointed a dealer was distinct and independent from the lease agreement by which the land o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be entitled to any claim or allowance for such direct or indirect sales." 19. It is appropriate to mention here that Clause 56 of the said agreement stipulates that notwithstanding anything to the contrary containing before the said clause, the Corporation would be at liberty to terminate the agreement forthwith upon any time after happening of certain events. The conditions are manifold. We may, for the sake of completeness, reproduce two conditions: "(h) If the Dealer does not adhere to the instructions issued from time to time by the Corporation in connection with safe practices to be followed by him in the supply/storage of the Corporation's products or otherwise. (i) If the Dealer shall deliberately contaminate or temper with the quality of any of the Corporation's products." 20. On a plain reading of the aforesaid agreement, it is clear as noon day that it has no connection whatsoever with the lease agreement. Both the agreements are independent of each other. The appellant was a dealer under the lessee, that is, the Corporation. The dealership is liable to be cancelled on many a ground. In case there is a termination, dealership is bound to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the Appellant dismissed the appeal of the Respondent. 22. By a letter dated 24th August 2009, the Respondent invoked the arbitration clause in the dealership agreement and requested the Director (Marketing) of the Appellant to appoint an Arbitrator. 23. The Director (Marketing) of the Appellant appointed Mr. B.L Parihar as Arbitrator in terms of the dealership agreement, by an order dated 9th November 2009. 24. The Respondent filed its Statement of Claims before the learned Arbitrator challenging the order of termination of the dealership agreement. In addition to the prayer for setting aside of the order of termination of the dealership agreement and the prayer for damages, the Respondent made an alternative prayer for amendment of the lease agreement to enhance the monthly rent of the said premises to Rs.35,000/- with a 20% increase after every three years. 25. The Appellant filed its Written Statement to the Statement of Claim. In its Written Statement, the Appellant contended: - "2. The Claimant alternatively claimed a sum of Rs.45,28,000/- with interest at the rate of Rs.15% per annum and further claimed increase in lease rent to Rs.35,000/- per month with 20% incre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "FINDINGS AS TO ISSUE NO.2, 3 & 4 ...I hold that the Claimant has committed the breaches of terms and conditions of the Dealership Agreement dated 15.11.2006 and MDG 2001 and therefore Termination Letter dated 20.08.2008 issued by the Respondent is legal & valid. I therefore find that the Claimant therefore is not entitled for any restoration. FINDINGS AS TO ISSUE NO.5 I find that the Claimant has made investment of Rs.45,28,000/- whereas the Respondent has also made investment of Rs.57,00,000/- for construction of Retail Outlet and allied expenditures. The Claimant has committed the serious irregularities which are not at all permitted as per the said Dealership agreement & MDG and provision penalties are also made thereof, which has caused the serious loss of goodwill and reputation to the Respondent Company. Due to the serious irregularities, the Claimant's dealership was terminated. The Claimant therefore is not entitled for sum of Rs.45,28,000/- and interest thereon. FINDINGS AS TO ISSUE NO.6 & 7 The Claimant had raised an Appeal before Executive Director (Retail Sales) of the Respondent to revoke the termination of Dealership on humanitarian ground since lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication No. 115 of 2011 under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as "the 1996 Act" for setting aside of the said award in the Court of the District Judge, Pune. The Respondent filed its cross objection to the impugned award and also filed a counter claim in the Court of the District Judge, Pune. 29. The counter claim filed by the Respondent was apparently misconceived. There could be no question of any counter claim to an application for setting aside of an award. 30. Section 5 of the 1996 Act provides that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I of the 1996 Act, no judicial authority shall intervene except where so provided in Part I. 31. Section 34 in Part I of the 1996 Act as it is stood at the material time provided as follows: "34. Application for setting aside arbitral award.-(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 furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by reappreciation of evidence.]" 32. As observed above, the lease agreement and the dealership agreement are distinct agreements, independent of each other. Disputes under the lease agreement were referrable to the arbitration of the Managing Director of the Appellant who was to be the sole Arbitrator, and only if the Managing Director was unable or unwilling to act as sole Arbitrator the disputes were to be referred to the sole Arbitrator designated or nominated by the Managing Director in his place. If the disputes could not be referred to the Managing Director for any reason, the matter was not to be referred to arbitration at all. 33. In the instant case, the Respondent invoked the Arbitration Clause under the Dealership Agreement and approached the Director (Marketing) of the Appellant who appointed Mr. B.L. Parihar as the sole Arbitrator. The Arbitrator, Mr. B.L. Parihar, nominated by the Director (Marketing) of the Appellant had no authority and/or jurisdiction to adjudicate any dispute pertaining to the lease agreement. 34. The Arbitral Award is liable to be set aside in so far as the same deals with disputes with regard to the Lease Agreement which are not contemplate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to agree for the lease of 29 years and 11 months, though the advertisement permitted him dealership for only 19 years and 11 months. It is nobody's case that the lease rent of Rs.1,750/- per month was at the market rate at the relevant time. It is obvious that the claimant had agreed for the extended period of the lease only because the same was coupled with the dealership agreement. In the circumstances, there was no scope for the District Court to interfere with the impugned award. To that extent, the appeal of the claimant must be allowed and the directions contained in the impugned order at paragraph "2" be set aside. Hence, Arbitration Appeal No.39 of 2013 is dismissed. Arbitration Appeal No.19 of 2013 is partly allowed. The direction at para 2 of the impugned order is set aside." 38. In the High Court, learned senior counsel appearing for the Appellant had submitted that adjudication of the dispute under the lease agreement was beyond the jurisdiction of the learned Arbitrator. It was pointed out that the lease agreement provided for a specified Arbitrator that is the Managing Director of the Appellant or any other person designated or nominated by the Managing Director. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook into the merits of the award except when the award is in conflict with the public policy of India as provided in Section 34(2)(b)(ii) of the 1996 Act. 43. In Associate Builders (supra), this Court held that an award could be said to against the public policy of India in, inter alia, the following circumstances: - (i) When an award is, on its face, in patent violation of a statutory provision. (ii) When the Arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in deciding the dispute. (iii) When an award is in violation of the principles of natural justice. (iv) When an award is unreasonable or perverse. (v) When an award is patently illegal, which would include an award in patent contravention of any substantive law of India or in patent breach of the 1996 Act. (vi) When an award is contrary to the interest of India, or against justice or morality, in the sense that it shocks the conscience of the Court. 44. An Arbitral Tribunal being a creature of contract, is bound to act in terms of the contract under which it is constituted. An award can be said to be patently illegal where the Arbitral Tribunal has failed to act in terms of the contract or has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "76. However, when it comes to the public policy of India, argument based upon "most basic notions of justice", it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February 2013 - in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry's change in the base indices from 1993-1994 to 2004-2005. Further, in order to apply a linking factor, a Circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other party's consent. Indeed, the Circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the Circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier judgment of this Court in MD. Army Welfare Housing Organization v. Sumangal Service (P) Ltd. [(2004) 9 SCC 619] and held that an Arbitral Tribunal is not a court of law. It cannot exercise its power ex debito justitiae. 54. In Satyanarayana Construction Company v. Union of India and Others [(2011) 15 SCC 101] , a Bench of this Court of coordinate strength held that once a rate had been fixed in a contract, it was not open to the Arbitrator to rewrite the terms of the contract and award a higher rate. Where an Arbitrator had in effect rewritten the contract and awarded a rate, higher than that agreed in the contract, the High Court was held not to commit any error in setting aside the award. 55. There can be no dispute with the proposition of law enunciated by this Court in Central Inland Water Transport Corporation Limited and Another v. Brojo Nath Ganguly and Another [(1986) 3 SCC 156] , cited by Mr. Keswani. The judgment, however, has no application in this case. 56. In Brojo Nath Ganguly (supra), this Court held that a term in a contract of employment as also service rules of a Government company providing for termination of services of permanent employees withou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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