SIMRAN AUTOMOBILES PVT LTD v. HERO HONDA MOTORS LIMITED
2006-01-03
BADAR DURREZ AHMED
body2006
DigiLaw.ai
BADAR DURREZ AHMED, J. ( 1 ) THIS is an application under Section 9 of the Arbitration and conciliation Act, 1996 whereby the petitioner is seeking interim directions and interim orders before the commencement of the arbitration proceedings. The prayers sought by the petitioner are, inter alia, as under:-"i) Direct the respondent company to resume/restore the supplies in terms of dealership agreement to the petitioner company, during the pendency of the present petition and pending settlement of the disputes through arbitration; ii) restrain the respondent, its representatives, Managing director/directors, attorneys, etc. from executing or entering into with any party any Dealership Agreement in Amroha (J. P. Nagar) U. P. , so as to protect the rights and interests of the petitioner, till the final settlement of disputes through arbitration. " ( 2 ) THE petitioner is a private limited company and was awarded the dealership by the respondent in respect of the motorcycles and spare parts manufactured by the respondent. The dealership was situated at Amroha, district-J. P. Nagar, U. P. It is an admitted position that the dealership commenced on 24. 03. 2001 and it was continued on the basis of a dealership agreement, a copy whereof has been filed by the petitioner alongwith the petition. Essentially, the term of the dealership was for three years w. e. f. 24. 03. 2001 which was automatically renewable for subsequent one year periods. It is also an admitted position that the said dealership was a non-exclusive dealership. The relevant clauses of the agreement for the purposes of this application are Articles XX, XXI and XXVI. Article XX sets out the term of the agreement which was initially for a period of three years and to be renewed automatically thereafter for periods of one year each. It was also provided in the said article that either party could opt out of the arrangement by giving prior notice of two months before the expiration of the initial period or any subsequent one year period. The second proviso contained in Article XX provided that the agreement could be terminated by either party giving to the other 60 days prior notice to that effect or could be terminated by the respondent in terms of Article XXI thereof. Article XXI is the termination clause and which essentially gives power to the respondent to terminate the agreement on the default of the dealer (the petitioner ).
Article XXI is the termination clause and which essentially gives power to the respondent to terminate the agreement on the default of the dealer (the petitioner ). Article XXVI provides for arbitration of all the disputes and differences arising in relation to or in connection with the agreement or any breach thereof. It provides that the arbitration shall be conducted by the PHD Chamber of Commerce and Industry whose decision shall be final and binding upon the parties thereto. The learned counsel for the petitioner states that by a letter dated 01. 12. 2005, he sent a notice to the respondent invoking the arbitration clause. A reply to this has been sent by the respondent by a letter dated 07. 12. 2005, a copy of which has been annexed with the reply filed by the respondent. ( 3 ) IN sum and substance, the argument of the petitioner is that for the initial period of three years w. e. f. 24. 03. 2001 to 23. 03. 2004, there was no difficulty in the arrangement between the petitioner and the respondent. However, during the extended period of the agreement, i. e. , during the period 24. 03. 2004 to 23. 03. 2005, certain difficulties had arisen as a result of which the supply of motorcycles continued only upto November, 2004 and thereafter no further supply of motorcycles were made by the respondent to the petitioner. This position continued right upto 05. 10. 2005 when the petitioner saw the advertisement of the respondent in the newspaper known as Amar Ujala which is brought out in Hindi. The advertisement showed the petitioner as one of the dealers of the respondent company situated at Amroha. The petitioner submitted that the cause of action for the present petition arose on 13. 11. 2005 when in the same newspaper, i. e. , Amar Ujala, in an advertisement taken out by the respondent, it found, to its dismay, that its name was missing from the list of dealers of the respondent. Instead, it was submitted, a dealer at Gajraula, which is some 20-22 kms away from Amroha, was shown as one of the dealers of the respondent. The learned counsel for the petitioner also pointed to the correspondence exchanged between the petitioner and the respondent in 2004 He referred particularly to the letter written on 22. 11.
Instead, it was submitted, a dealer at Gajraula, which is some 20-22 kms away from Amroha, was shown as one of the dealers of the respondent. The learned counsel for the petitioner also pointed to the correspondence exchanged between the petitioner and the respondent in 2004 He referred particularly to the letter written on 22. 11. 2004 by the respondent to the petitioner asking the petitioner to take corrective measures so that the dealership could function properly. The learned counsel for the petitioner pointed to the letter dated 15. 12. 2004 written by the petitioner to the respondent giving a pointwise answer to each of the aspects raised by the respondent in its letter dated 22. 11. 2004 The learned counsel for the petitioner also submitted that some of the grounds mentioned in the letter written by the respondent were not tenable. In particular, he said that although there was an allegation that the sales were deteriorating, in point of fact, the sales under the dealership of the petitioner had increased. He further submitted that after 15. 12. 2004, there was no further correspondence exchanged between the petitioner and the respondent and supply of motorcycles had already stopped in November, 2004 After seeing the advertisement of 13. 11. 2005, the petitioner sent a notice dated 01. 12. 2005 invoking the arbitration clause and also requesting the respondent to desist from awarding the dealership to any other person and to resume supply of motorcycles. Although the notice of 01. 12. 2005 gave a period of 30 days to the respondent to take corrective measures before any legal action could be taken, the petitioner rushed to this court and filed the present petition before the expiration of the said 30 days. ( 4 ) ANOTHER point which needs to be taken care of is that the petitioner had initially filed a suit in the district court at Amroha, U. P. in respect of the same subject matter. However, as the petitioner was advised that there exists an arbitration clause and that a suit would not be maintainable, it moved an application for withdrawal of the said suit and it is because of that (i. e. , the arbitration clause) that the present petition under Section 9 has been filed.
However, as the petitioner was advised that there exists an arbitration clause and that a suit would not be maintainable, it moved an application for withdrawal of the said suit and it is because of that (i. e. , the arbitration clause) that the present petition under Section 9 has been filed. ( 5 ) THE learned counsel for the respondent referred to the reply filed by him and stated that this petition was not maintainable on several grounds. First of all, he said that the second prayer of the petitioner could not be granted because the dealership agreement with the petitioner was a non-exclusive one. Therefore, there could not be any order injuncting the respondent from granting a dealership to anybody else in Amroha or anywhere else. I am in agreement with the submissions made by the learned counsel for the respondent that the dealership agreement which admittedly was a non-exclusive agreement could not be taken as a basis for seeking the second prayer that the petitioner has sought of injuncting the respondent from awarding the dealership to any other person, including the award of a dealership at Gajraula, U. P. ( 6 ) INSOFAR as the first prayer is concerned, the learned counsel for the respondent referred to two decisions, one of the Supreme Court and one of a division Bench of this court, namely, Indian Oil Corporation Ltd v. Amritsar Gas service and Others: 1991 1 SCC 533 and Rajasthan Breweries Limited v. Stroh brewery Company: AIR 2000 Del 450 . Referring to these decisions as well as the provisions of Section 41 (e) and 14 (c) of The Specific Relief Act, 1963, he submitted that the agreement by its very nature was terminable and, therefore, no order which entails the specific performance of such an agreement could be passed by any court. He submitted that there was no question of granting interim relief. I am in agreement with the submission made by the learned counsel for the respondent that an agreement which is terminable in itself, cannot be specifically enforced unless the exception provided in Section 42 of the Specific Relief Act comes into play which is not the case here.
He submitted that there was no question of granting interim relief. I am in agreement with the submission made by the learned counsel for the respondent that an agreement which is terminable in itself, cannot be specifically enforced unless the exception provided in Section 42 of the Specific Relief Act comes into play which is not the case here. ( 7 ) IN Rajasthan Breweries Limited (supra), a Division Bench of this court, following the decision of the Supreme Court in Indian Oil Corporation Ltd (supra), held that as the agreement was terminable in that case, the same could not be specifically enforced and the questions whether the termination was wrongful or not; whether certain events alleged had happened or not; whether the respondent was or was not justified in terminating the agreement were questions which were yet to be decided. Similar questions arise in the present petition inasmuch as the petitioner has alleged that there was, in fact, no termination of the agreement and the letters of resignation, etc. shown by the respondent in their reply were not admitted by the petitioner. Be that as it may, if the petitioner is able to show that the respondent had illegally or unlawfully and in breach of the agreement stopped the supplies of the motorcycles and spares to the petitioner, then the petitioner would have a remedy in damages / compensation. He would still not be entitled to specific performance of the said dealership agreement. ( 8 ) IN Indian Oil Corporation (supra), the Supreme Court observed as under in para 12 thereof:-"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.
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 appellant-Corporation 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. "the Supreme Court also, in paragraph 14 of the said judgment, considered the relief that could be given to the respondent in that case which involved a similar distributorship agreement with the Indian Oil Corporation as also the question of termination of the distributorship agreement and it was found by the arbitrator and confirmed by the Supreme Court that the termination was bad. It was also bad for the reason that the 30 days notice which was prescribed therein was not given. However, the Supreme Court held that the only relief which could be granted was an award of compensation for the period of notice, i. e. , for the 30 days. In the present case, the learned counsel for the petitioner submitted that, in fact, no notice of termination was at all given and the supplies were stopped on their own. The learned counsel for the respondent, however, replied by saying that the supplies were stopped not on account of the respondent but on account of some internal disputes between the directors / shareholders of the petitioner company and also because no orders were placed on the respondent since August, 2004 and that one of their directors, who had been authorised to deal with the respondent, had voluntarily terminated the agreement with the respondent. Of course, both these facts are controverted by the learned counsel for the petitioner. Anyway, I do not want to enter into these disputes because that would be impinging upon the merits of the matter.
Of course, both these facts are controverted by the learned counsel for the petitioner. Anyway, I do not want to enter into these disputes because that would be impinging upon the merits of the matter. The fact of the matter is that the dealership agreement between the petitioner and the respondent is a terminable agreement so much so that by virtue of Article XX of the agreement, the same could be the subject matter of termination simpliciter without assigning any reason. The only casualty, it appears, would be the period of notice for which it has been made clear by the Supreme Court in Indian Oil corporation Ltd (supra) that the petitioner, if it is able to make out a case in its favour, would be entitled to compensation / damages for that period. ( 9 ) IN view of the foregoing discussion, I find that the petitioner is not entitled to any of the reliefs prayed for in the present petition and, accordingly, the same is dismissed. .