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Rajasthan High Court · body

2019 DIGILAW 1434 (RAJ)

Rajesh Indian Oil Highway Facility v. Indian Oil Corporation Ltd.

2019-05-10

ALOK SHARMA

body2019
ORDER : ALOK SHARMA, J. 1. This application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act of 1996’) has been filed for appointment of an arbitrator in view of clause 67 of the agreement dated 26-4-2005. 2. The facts relevant for adjudication of this application are that on successful interview of the applicant company by the respondent Indian Oil Corporation (hereafter ‘IOC’) it was appointed as the Retail Outlet dealership (hereafter ‘RO’) vide letter dated 18-1-2005 for class ‘A’ market. An agreement was accordingly signed between the parties on 26-4-2005. Thereafter the applicant carried on its duties as a RO dealer by selling approximately 180 kiloliters of product per month from 2005 to 2012. 3. In 2012 four laning Yarlipura-Tonk section of NH-12 carried out by the National Highways Authority of India, due to which the applicant’s RO was rendered substantially defunct as most vehicles could not approach the RO from the highway. The applicant lifted no supplies commencing March 2012, the RO in issue became an “uneconomical RO” as per definition of respondent’s circular dated 26-3-2006. The applicant in the circumstances vide its letter dated 21-5-2014 requested for resitement of the RO as per IOC’s guidelines, as the IOC’s circular dated 9-10-2006 under clause 3.2 provides for resitement of a RO on varied grounds including but not limited to road widening, diversion of road, realignment of an existing road by a new one etc. And that resitement is to be permitted only in the same class of market within the same State. When the applicant’s letter dated 21-5-2014 was not replied to, it sent other letters as reminder for resitement/resumption of RO between 1-10-2015 and 6-11-2015. 4. The applicant’s case is that instead of considering its request for resitement of RO, the respondent IOC on 13-12-2017 issued a show cause notice that as resumption of sales had not been commenced by the applicant on the original RO site, tantamounting to violation of the dealership agreement why its RO dealership should not be terminated. The applicant in the circumstances filed an application under Section 9 of the Act of 1996 before the District Court, which vide order dated 15-5-2018 restrained the respondent IOC from taking any coercive action against the applicant. The applicant in the circumstances filed an application under Section 9 of the Act of 1996 before the District Court, which vide order dated 15-5-2018 restrained the respondent IOC from taking any coercive action against the applicant. And this application under Section 11(6) of the Act of 1996 has hence been filed for appointment of an arbitrator as per clause 67 (arbitration clause) in the dealership agreement dated 26-4-2005 to adjudicate the disputes between the parties arising out of the failure of the respondent to recite the RO dealership and its misdirected action seeking to terminate the RO dealership itself. 5. It has been submitted that clause 67 of the agreement dated 26-4-2005 provides for arbitration proceedings. It has been further submitted that albeit thereunder the Director Marketing of the Corporation is to be appointed as Arbitrator, in terms of Section 12 of the Arbitration and Conciliation (Amendment) Act, 2015 any person whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the Seventh Schedule he shall be rendered ineligible. As such the employees of IOC fall under the prohibition of Section 12(5) of the Act of 1996 read with Seventh Schedule and they cannot be appointed as arbitrator for adjudication of disputes between the applicant company and non applicant IOC. In such circumstances, the applicant vide arbitration notice dated 22-1-2018 requested to refer the disputes in issue for adjudication in accordance with the agreement dated 26-4-2005 to Hon’ble (Retd.) Justice S.K. Keshote. No response emanating, this application for appointment of a sole independent arbitrator has been filed. 6. The defence of the respondent in the reply to the application under consideration is that the applicant has not been able to make out any contravention of its legal right and resultant disputes to invoke the jurisdiction of this court under Section 11 of the Act of 1996 and appointment of an arbitrator. It has been submitted that the applicant’s RO does not come within the resitement/reconstitution/revival guidelines of the IOC as the construction work of overbridge has been completed and a service lane has also been constructed and yet no supplies have been lifted by the applicant in breach of his obligation under the agreement dated 26-4-2005. It has been submitted that the applicant’s RO does not come within the resitement/reconstitution/revival guidelines of the IOC as the construction work of overbridge has been completed and a service lane has also been constructed and yet no supplies have been lifted by the applicant in breach of his obligation under the agreement dated 26-4-2005. However clause 67--relating to arbitration--of the agreement dated 26-4-2005 has not been denied and receipt of the applicant’s notice 22-1-2018 for appointment of an arbitrator has been admitted. 7. Heard counsel for the parties and perused the material available on record. 8. Clause 67 of the agreement dated 26-4-2005 provides thus:- “67. Any dispute or any nature whatsoever 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 arbitration of the Director Marketing of the Corporation, or of some Officer of the Corporation who may be nominated by the Director Marketing. The Dealer will not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an officer of the Corporation or that he has to deal with the matters to which the contract relates or that in the course of his duties as an officer of the Corporation he had expressed views on all or any of the 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, shall designate another person to act as arbitrator in accordance with the terms of the Agreement. Such person shall be entitled to proceed with the reference from the point at which it was left by his predecessor. It is also at term of this contract that no person other than the Director Marketing or a person nominated by such Director Marketing of the Corporation as aforesaid shall act as arbitrator hereunder. Such person shall be entitled to proceed with the reference from the point at which it was left by his predecessor. It is also at term of this contract that no person other than the Director Marketing or a person nominated by such Director Marketing of the Corporation 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 and Conciliation Act, 1996, or any statutory modification of or re-enactment thereof and the rules made thereunder and of the time being in force shall apply to the arbitration proceedings under this clause.” 9. The aforesaid clause 67 of the agreement dated 26-4-2005 clearly provided for arbitration of disputes relating to or arising out of the agreement in issue. The applicant vide notice dated 22-1-2018 prayed for appointment of Hon’ble (Retd.) Justice S.K. Keshote, Eden garden, Bajaj Nagar Enclave, near Gandhi Nagar Railway station, Jaipur, as none of the officer of the non applicant could be appointed despite clause 67 of the agreement dated 26-4-2005, so providing in view of Section 12(5) of the Act of 1996 r/w schedule VII thereof. A dispute is legally recognized as obtaining where a party asserts a fact which is denied by the other. On that test a dispute between the applicant and respondent with regard to the agreement dated 26-4-2005 obtains. But whether such a dispute is arbitrable is best left to the arbitrator. The respondent IOC’s notice 13-12-2017 regarding termination of applicant’s RO dealership, which is apparently an arbitrable dispute, has been stayed by the District Court vide order dated 15-5-2018 by restraining it from taking any coercive action against the applicant. 10. Counsel for the respondent IOC in view of Section 12(5) of the Act of 1996 read with Schedule VII thereof has no objection to appointment of Hon’ble Justice S.K. Keshote as an independent sole arbitrator to adjudicate all arbitrable disputes/differences between the parties relating to and arising out of the agreement dated 26-4-2005. 11. In view of aforesaid, in the facts of the case this application under Sections 11 of the Act of 1996 deserves to be allowed. 11. In view of aforesaid, in the facts of the case this application under Sections 11 of the Act of 1996 deserves to be allowed. Hon’ble (Retd.) Justice S.K. Keshote, Eden garden, Bajaj Nagar Enclave, near Gandhi Nagar Railway station, Jaipur is appointed as sole Arbitrator to adjudicate all arbitrable disputes/differences between the parties relating to and arising with regard to the agreement dated 26-4-2005. The arbitrator shall be free to determine whether a dispute raised before him by any of the parties is arbitrable. The Arbitrator shall also, if warranted, make requisite disclosure under Section 11(1) of the Act of 1996. Payment of the cost of Arbitration proceedings and arbitration fee shall be made as per the fourth schedule of the Act of 1996 as amended from time to time and so computed as directed by the Arbitrator. 12. A copy of this order be communicated to Hon’ble Mr. Justice S.K. Keshote for entering upon the reference and proceed thereon as per the Act of 1996 as amended from time to time and adjudicate all arbitrable disputes/differences between the parties arising out of/relating to the agreement dated 26-4-2005. 13. The application stands allowed accordingly.