Bakshi Speedways vs Hindustan Petroleum Corporation
2009 Latest Caselaw 3243 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 A.A.P. 14/2009

%                           Date of decision: 19th August, 2009

BAKSHI SPEEDWAYS                                       ....Appellant
                        Through: Mrs. June Chaudhary, Sr Advocate with
                                 Mr Ravi Sikri and Mr Saket Sikri,
                                 Advocates.

                                Versus

HINDUSTAN PETROLEUM CORPORATION ... Respondent


                        Through: Mr Kailash Vasdeu, Sr Advocate with
                        Mr Parijat Sinha, Mr Anil Kumar Mishra and Ms
                        Reshmi Rea Sinha, Advocates

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?                  Yes

2.    To be referred to the reporter or not?           Yes

3.    Whether the judgment should be reported          Yes
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. The appeal under Section 37(2)(b) of the Arbitration Act 1996

is preferred against the order dated 4th June, 2009 of the arbitral

tribunal dismissing the application of the appellant and allowing the

application of the respondent, both under Section 17 of the Act. The

appellant is the dealer for retail sale of certain petroleum products of

the respondent, from the premises in Sector-51 Gautam Budh Nagar,

NOIDA, UP, on the terms and conditions contained in an agreement

dated 23rd August, 1995 between the parties. It is inter alia provided

in the agreement that the respondent is the owner/lessee of the land

underneath the aforesaid premises at NOIDA and all the structures /

apparatus/ equipments installed thereon and wherefrom the

appellant was permitted to sell and retail petroleum products belong

to the respondent. Under clause 2 of the said agreement the

respondent granted leave and licence and permission to the

appellant, for the duration of the agreement, to enter on the said

premises and to use the premises and the apparatus and equipments

installed thereon for the sole and exclusive purpose of storing,

selling and handling the products purchased by the appellant as

dealer from the respondent; it is further provided therein that the

appellant, save in such manner shall have no right, title or interest to

the said premises or apparatus or equipments installed thereon and

shall not be entitled to claim the right of lessee, sub-lessee, tenant or

any other interest in the said premises or outfit; it is also specifically

provided therein that the appellant shall not be deemed to be in

exclusive possession of the said premises.

2. Disputes and differences having arisen between the parties

with respect to the said agreement and the respondent having

terminated the dealership of the appellant, the Chairman and

Managing Director of the respondent on 13th June, 2008, in

accordance with the arbitration clause, in the said agreement,

appointed an officer of the respondent as the arbitrator. As

aforesaid, the petitioner as well as the respondent preferred

application under Section 17 of the Act before the arbitrator; while

the appellant sought interim measures in the form of a direction

against the respondent to resume sale and supplies of the petroleum

products as was being done prior to the letter of termination, to the

appellant, during the pendency of the arbitration proceedings, the

respondent sought interim direction against the appellant

restraining the appellant from interfering with the respondent

resuming the business of sale and supply of petroleum products from

the aforesaid premises/retail outlet.

3. The arbitrator has inter alia held that the respondent had

purported to terminate the agreement with the appellant on the

allegations of stock variation, short delivery and tampering with

dispensing units; that though the petitioner had disputed the said

grounds but it would not be in the interest of the public that a dealer

whose dealership had been terminated for the said reasons should be

permitted to operate the retail outlet during the pendency of the

arbitration case and unless the issue about the correctness of the

said allegation and consequently of the termination of the dealership

is decided; that the petitioner in the event of termination being found

bad can be compensated; that resultantly the respondent during the

pendency of the arbitration case ought to be permitted to operate

the retail outlet itself without creating any third party rights therein.

4. The principles applicable to an appeal under Section 37(2)(b)

in my view ought to be the same as the principles in an appeal

against an order under Order 39 Rules 1 and 2 CPC i.e., unless the

discretion exercised by the court against whose order the appeal is

preferred is found to have been exercised perversely and contrary to

law, the appellate court ought not to interfere with the order merely

because the appellate court in the exercise of its discretion would

have exercised so otherwise. I had at the beginning of the hearing

itself inquired from the senior counsel for the appelant as to what

could be said to be perverse in the exercise of discretion by the

arbitral tribunal in the exercise of powers under Section 17 of the

Act and as to how the said interim measures granted by the arbitral

tribunal could be said to be contrary to law; it was further pointed

out that in the opinion of this court, on the perusal of the

memorandum of appeal, the only ground which appeared to have

some force was the ground taken in the memorandum of appeal of

the arbitrator as on the date of making of the order having become

functus officio.

5. The senior counsel for the appellant has read various

documents, earlier orders filed alongwith the memorandum of

appeal. The senior counsel for the appellant firstly has contended

that the arbitrator erred in not finding a case in favour of the

appellant inspite of several courts in proceedings prior thereto

having granted interim orders in favour of the appellant. In this

regard it may be stated that the appellant had first preferred

WP(C)14426/2006 in this court with respect to the order of the

respondent terminating the dealership of the appellant. In the said

writ petition vide order dated 13th September, 2006, while issuing

notice to show cause to the respondent, the operation of the

termination order was stayed till the next date of hearing. It may,

however, be noted that though the respondent was represented

before the court on that date but that must be on advance notice and

no pleas appear to have been considered. Ultimately, the said writ

petition was dismissed vide order dated 5th April, 2008.

6. The appelant preferred LPA 248/2008 against the dismissal of

the writ petition and which also came to be dismissed on 20 th May,

2008.

7. The appellant thereafter preferred a petition under Section 9

of the Arbitration Act, 1996 before the court of the Additional

District Judge, Delhi who, vide an ex parte order dated 22nd May,

2008 stayed the order of termination of dealership and also directed

the respondent to restore the sale and supply of petroleum products

to the retail outlet of the petitioner, till the final disposal of the

petition under Section 9 or of the Arbitration proceedings between

the parties. Much emphasis was placed by the senior counsel for the

appellant on the said order and it was contended that inspite of the

same the arbitrator could not have decided otherwise.

8. The respondent preferred FAO 186/2008 against the ex parte

order aforesaid of the Additional District Judge. Vide ex parte order

dated 29th May, 2008 in the said FAO the operation of the order

dated 22nd May, 2008 of the Additional District Judge insofar as it

directed the respondent to resume supply of the petroleum products

to the respondent was stayed. The said FAO was ultimately disposed

of vide order dated 29th July, 2008 on the agreement of the counsel

for the parties that the order dated 22nd May, 2008 of the Additional

District Judge be set aside but on the condition that the petitioner

herein shall move an application before the arbitrator under Section

17 of the Act seeking similar relief as sought before the Additional

District Judge and the arbitrator shall deal with such application on

its own merits. It is also recorded in the said order that "the

arbitrator shall also decide the question of possession. Till then, the

parties shall maintain status quo". The senior counsel for the

appellant agrees that pursuant to the order dated 29th May, 2008

(supra), the supply of petroleum products to the retail outlet of the

appelant was stopped and thereafter there has been no supply of

petroleum products by the respondent to the appelant.

9. As far as the reliance by the senior counsel for the appellant on

the earlier interim orders is concerned, attention was invited to

recent judgment of the Supreme Court in State of Assam v. Barak

Upatyaka D.U. Karmachari Sanstha (2009) 5 SCC 694 holding

inter alia that a precedent is a judicial decision containing a

principle, which forms an authoritative element termed as ratio

decidendi; an interim order which does not finally and conclusively

decide an issue cannot be a precedent; any reasons assigned in

support of such non-final interim order containing prima facie

findings, are only tentative. Any interim directions issued on the

basis of such prima facie findings are temporary arrangements to

preserve the status quo till the matter is finally decided and cannot

be ratio decidendi or precedent. Moreover, the orders on which

reliance was placed by the senior counsel for the appellant are ex

parte and in any case finally it was directed that the arbitrator will

decide the application under Section 17 of the Act without being

influenced therefrom. Thus, it cannot be urged that the arbitrator

was bound by the aforesaid ex parte interim orders of the courts.

Faced with the said position, no further submissions were made in

this respect.

10. The senior counsel for the appellant next contended that the

arbitrator could not have dealt with the application of the respondent

under Section 17 of the Act and could not have permitted the

respondent to operate the said retail outlet on company operated

basis during the pendency of the arbitration proceedings. In this

regard, attention is invited to the opening words of Section 17 which

are "unless otherwise agreed by the parties". It is urged that the

last order dated 29th July, 2008 (supra) in the FAO was a consent

order and permitted the appelant only to move an application under

Section 17 of the Act and did not provide for /contemplate the

respondent moving such an application and thus the respondent was

barred from moving such an application.

11. I however do not find any merits in the said submission also

and which was also raised before the arbitrator and has been

rejected by the arbitrator also. The order aforesaid cannot be read

as foreclosing the rights of the respondent to make an application

under Section 17. Admittedly besides in the said order, there is no

other agreement whereby the respondent had precluded itself from

applying under Section 17 of the Act. A right under Section 17

conferred by the statute on a party to the arbitration proceedings is

an important right and cannot be deemed to have been

waived/abandoned in such a fashion. Merely because the petitioner

who had applied under Section 9 of the Act to the court was by the

said order permitted to reapply before the arbitrator under Section

17 cannot be read as meaning that the respondent if entitled to could

not so apply.

12. The senior counsel for the appellant has also contended that

though this court in the said order had directed the arbitrator to

decide the question of possession but the order is quiet on the same

and in fact disturbs the order of status quo qua possession. In this

regard it may be noticed that there is a factual dispute also between

the parties. The senior counsel for the respondent has contended

that it is the respondent who has already been operating the said

retail outlet. The senior counsel for the appellant contends

otherwise. I, however, need not detain myself on this aspect. The

order aforesaid of this court directed the arbitrator to decide the

question of possession. The arbitrator in directing that the

respondent shall be entitled to operate the retail outlet has decided

the said question. I do not find anything wrong in the said direction

of the arbitrator. As per the agreement (supra) between the parties,

the land as well as structure, apparatus, equipments thereon belongs

to the respondent and the appellant was merely a licensee to operate

the same. I have inquired from the senior counsel for the appellant

whether there is anything in the agreement which bars such an

arrangement. Though it is the admitted position that the term of the

dealership agreement had not expired but the senior counsel for the

appellant admits that the agreement otherwise was terminable even

prior to the expiry of its term on stipulated defaults by the appellant.

That being the position, the order impugned is found to be in

consonance with law. The order protects the rights of the appellant

by directing that the respondent shall not appoint any dealer or

create any third party rights with respect to the said outlet till the

disposal of the arbitration proceedings and adjudication of the

disputes qua the termination order.

13. I had repeatedly inquired from the senior counsel for the

appellant as to how the agreement of such a nature could be

specifically enforceable as was sought by the appellant as a interim

measure. Nothing was forthcoming in this regard. The senior

counsel for the respondent has, on the contrary, invited the attention

to clause 64 of the agreement providing that in the event of

termination of the agreement the dealer shall not be entitled to any

compensation or claim any loss or damage from the respondent in

respect of the goodwill or otherwise. Inspite of specific query, the

senior counsel for the appellant has not pointed out any clause in the

agreement whereunder during the pendency of the disputes as to the

validity of termination also the appellant is entitled to continue

operating under the agreement. Else it may be noticed that the

agreements of such nature are not specifically enforceable and the

remedy, if any, is for compensation only. Reference in this regard

can also be made to Indian Oil Corporation Ltd Vs Amritsar Gas

Service (1991) 1 SCC 533.

14. The arbitrator has already held that in the event of the award

in favour of the petitioner, the petitioner shall be entitled to

compensation for the time deprived of operating the said retail

outlet.

15. The senior counsel for the appellant has also challenged the

finding of the arbitrator qua the public interest and contended that

in fact the equities are in favour of the appellant who is a widow of a

defence official and had been allotted the petrol pump on

compassionate ground. In my view reference by the arbitrator to

public interest is justified. The arbitrator has noticed that one of the

grounds for termination was tampering by the appellant of the

instrument measuring the quantity of petroleum products supplied

by the appellant to the customers. The arbitrator was thus of the

opinion that if the said allegations were to be true, it is not fair to

allow the appellant to continue operating the retail outlet to the

detriment of the customers and who can never be compensated for

the short supply by the appellant.

16. In my view the only ground worth consideration in this appeal

is of the arbitrator being functus officio on the date of the making of

the order. In this regard it may be stated that the agreement

between the parties in clause 66 inter alia provides for arbitral

award to be made within six months after entering upon reference or

within such extended time not exceeding further four months as the

arbitrator shall by a writing under his own hands appoint. It is not in

dispute that the arbitrator was appointed on 13th June, 2008. The

senior counsel for the appellant has contended that arbitrator

entered into reference on 4th July, 2008; the period of six months

expired on 4th November, 2008 and the further period of four months

would expire on 4th March, 2009. The order aforesaid is dated 4th

June, 2009. It is thus the contention of the senior counsel for the

appellant that the arbitrator neither extended any time by four

months neither by any order nor by the impugned order and was

thus functus officio on the date of the making of the award.

However, save for this bare averment nothing further has been

contended on this important aspect.

17. The senior counsel for the respondent on enquiry in this

respect contended that the 1996 Act unlike the 1940 Act does not

provide for any time for making of the award. It is further argued

that in the present case the parties have by their conduct extended

the time for the arbitrator to make the award.

18. I had inquired from the senior counsel for the appellant

whether the appellant had taken the said plea before the arbitrator.

The answer is in the negative.

19. Even though the 1996 Act does not provide for any time for

making of the award but under Section 28(3) the arbitral tribunal is

governed by the contract between the parties. Further under

Section 32 (2)(b) the proceedings before the arbitrator terminate

where the parties agree on the termination of the proceedings. Also

under Section 15(1)(b) the mandate of the arbitrator terminates by

or pursuant to agreement of the parties.

20. In the face of the aforesaid statutory provisions, it cannot

possibly be contended by the counsel for the respondent that inspite

of the agreement aforesaid, the mandate of the arbitrator did not

terminate. Even though clause 66 of the Agreement between the

parties relied upon by the appellant in this regard does not expressly

provide that the mandate of the arbitrator shall terminate or the

arbitration proceedings shall stand terminated on the expiry of six

months or further time of four months but that is the only logical

meaning of the said provision.

21. However, that is not end of the matter. The arbitration

agreement as defined in Section 7(4)(c) includes an exchange of

statement of claim and defence in which the existence of the

agreement is alleged by one party and not denied by the other. In

the present case the petitioner, on the basis of the existence and

continuation of the arbitration proceedings, proceeded with its

application under Section 17 of the Act before the arbitrator and now

cannot be permitted to contend that the arbitrator was functus

officio. The petitioner cannot sail in two boats or indulge in wager,

i.e., in the event of a favourable order on its application under

Section 17, enjoy the protection thereof and upon losing in the said

application contend that the arbitrator had become functus officio.

22. Further if a party contends that a mandate of the arbitrator

has come to an end, it is required to raise the said controversy and if

the said controversy remains, to approach the court in this regard

under Section 14 of the Act. The petitioner has not done anything of

this nature. The present petition is also not under section 14 but an

appeal under Section 37 of the Act. An appeal under Section 37 lies

only against an order granting or refusing the interim measures

under Section 17; such an order assumes the subsistence of the

arbitration proceedings at the time of making of the order; if the

contention sought to be pressed by the petitioner is that there are no

arbitration proceedings, no question of appeal against the said order

arises. Thus I find that parties by agreement express and/or implied

had extended the arbitration agreement beyond the term provided in

clause 66 of the earlier agreement between the parties.

23. I have had occasion to deal with such a clause also in

Surender Pal Singh Vs. Hindustan Petroleum Corp. Ltd.

MANU/DE/0929/2009. I find that even when the mandate of the

arbitrator and/or the arbitration proceedings terminates in

accordance with such an agreement between the parties, under

Section 15(2) of the Act a substitute arbitrator is to be appointed,

according to the rules that were applicable to the appointment of the

arbitrator being replaced. That being the position, the expiry of the

time aforesaid loses its significance inasmuch as the only impact

thereof is of the appointing authority of the respondent again

appointing the arbitrator. Considering that the arbitration

proceedings were/are underway before the arbitrator already

appointed, in all likelihood the same arbitrator would have been

appointed again. Thus, no merits are found in the said ground also.

24. The senior counsel for the appellant has in conclusion also

made some other arguments with respect to the arbitrator not giving

dates and having decided the application without taking any

evidence of the parties. It has further been contended that Section

17 is a benovelent provision and the respondent is the state and

ought to act fairly and the arbitrator being an officer of the

respondent is deliberately delaying the proceedings. However, the

said contentions are beyond the appeal under Section 37 of the Act.

The appeal is consequently dismissed. As noticed above, the

appellant insisted upon reading the earlier orders inspite of being

informed that the same are of no consequence and which had

resulted in the appellant being informed that it will be burdened with

heavy costs for taking up the time of the court; though at that time I

was inclined to award heavy costs, the appeal is dismissed with

minimal costs of Rs 35,000/- payable by the appellant to the Delhi

Legal Services Authority. The respondent to ensure compliance as

to payment of costs by the appellant, during the course of arbitration

proceedings.

RAJIV SAHAI ENDLAW (JUDGE) 19th August, 2009 M