M/s Chand Filling Station v. M/s Hindustan Petroleum Corporation Ltd.
2025-02-28
SUDESH BANSAL
body2025
DigiLaw.ai
ORDER : SUDESH BANSAL, J. 1. Heard counsel for both parties and perused the material placed on record. 2. This is an arbitration application, filed by and on behalf of applicant under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter for short "the A&C Act"), seeking appointment of a sole Arbitrator in terms of Clause 68, enumerated in the dealership agreement. For ready reference, Clause 68 is being reproduced hereunder:- "68. Any Dispute Or Difference Of 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 Managing Director Of The Corporation Or Of Some Officer Of The Corporation Who May Be Nominated By The Managing Director. 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 Outics As An Officer Of The Corporation He Had Expressed Views On All Or Any Of The Matters In Dispute Or Difference. In The Even Of The Arbitration To Who The Matter Is Originally Referred Being Transferred Or Vacating His Office On Being Unable To Act For Any Reason The Managing Director 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 Left By His Predecessor. It is Also A Term Of This Contract That No Person Other Than The Managing Director Of The Corporation As Aforesaid Shall Act As Arbitrator Hereunder. The Award Of The Arbitrator So Appointed Shall Be Finall, Conclusive And Binding On All Parties To The Agreement Subject To The Provisions Of The Arbitration Act 1940 Or Any Statutory Modification On Or Reenactment Thereof And The Rules Made Thereunder And For The Time Being In Force Shall Apply To The Arbitration Proceedings Under This Clause." 3.
The Award Of The Arbitrator So Appointed Shall Be Finall, Conclusive And Binding On All Parties To The Agreement Subject To The Provisions Of The Arbitration Act 1940 Or Any Statutory Modification On Or Reenactment Thereof And The Rules Made Thereunder And For The Time Being In Force Shall Apply To The Arbitration Proceedings Under This Clause." 3. The factual matrix, giving rise to the dispute arisen between parties, is that petitioner has been awarded a dealership agreement dated 30.12.2019 by respondents- Corporation, to run a petrol pump at Sikar Road, Jaipur and on 13.02.2023, an inspection of the outlets of petrol pump was made by the inspecting team and a Panchnama report was prepared. In one of the Dispensing Unit (DU), tampering with the nozzle was noticed, which results into short-supplied of motor sprint, hence the DU was seized and nozzle was sent for testing from a firm GVR TACC. After receiving testing report, respondents found that the inner part of the nozzle, is tampered with and soldered, causing short- supply. Hence, a show-cause notice dated 12.07.2023 was issued by respondents to the following effect, disclosing the factum of testing report:- "Under the facts and the circumstances stated herein above, you are hereby called upon to show cause within 14 days from the receipt of this notice as to why necessary action as deemed fit cannot be taken against you as per Clauses Nos 15, 16, 17 and 44 read with Clause No 58 (M) of the Dealership agreement dated 30/12/2019. In case, no reply to the said show cause notice is received from you within the stipulated period as mentioned hereinabove, it shall be construed that you have no explanation or reply to offer in the matter and in which case appropriate action as deemed fit and necessary including termination of the Dealership will be taken against you as per Clauses Nos 15, 16, 17 and 44 read with Clause No 58 (M) of the Dealership, agreement dated 31/12/2019 and relevant policy/guidelines, without any further notice to you." 4. It appears that the legal notice dated 12.07.2023 was replied by and on behalf of petitioner, vide reply notice dated 27.07.2023, denying and disputing the test report and thereafter, a legal notice dated 17.08.2023 was issued by the petitioner, invoking the arbitration Clause 68, to refer the dispute to the Arbitrator.
It appears that the legal notice dated 12.07.2023 was replied by and on behalf of petitioner, vide reply notice dated 27.07.2023, denying and disputing the test report and thereafter, a legal notice dated 17.08.2023 was issued by the petitioner, invoking the arbitration Clause 68, to refer the dispute to the Arbitrator. A copy of legal notice has been placed on record as Ann.5. 5. In the legal notice, petitioner, while disputing the test report from the GVR TACC, prayed for re-investigation/ rechecking of the nozzle of concerned DU, through an independent agency. 6. It has been submitted that no reply to the legal notice dated 17.08.2023 was given by the respondents, hence for appointment of an Arbitrator to resolve the dispute between parties, petitioner has filed instant arbitration application on 23.06.2024. 7. Counsel for respondents by filing reply, has resisted the arbitration application, fundamentally on the ground that till filing of the present arbitration application and even till today, no adverse order of cancellation/ termination of the dealership agreement has been passed, in furtherance to the show-cause notice dated 12.07.2023, and at the stage of issuing a show-cause notice, an Arbitrator should not be appointed. Indeed, one of the DU is seized. 8. In addition to above, facts of the present case are glaring as it has been informed to this Court that petitioner also approached before the Commercial Court, for seeking interim relief under Section 9 of the A&C Act, whereupon the Commercial Court has restrained respondents, for not passing any adverse order against the petitioner, in furtherance to the show-cause notice dated 12.07.2023, until the dispute is referred and resolved by the Arbitrator. 9. Substantially, similar nature of facts were brought before this Court and the issue in respect of appointment of arbitrator at the stage of issuing show-cause notice, came up for consideration before this Court in S.B. Arbitration Application No.65/2023: M/s Prakash And Company Vs. Indian Oil Corporation decided on 20.09.2024, wherein an Arbitrator was appointed by this Court to resolve the dispute. This Court in Para No.14 to 18 held and observed as under:- "14.
Indian Oil Corporation decided on 20.09.2024, wherein an Arbitrator was appointed by this Court to resolve the dispute. This Court in Para No.14 to 18 held and observed as under:- "14. From bare perusal of the arbitration agreement, contained in Clause 69 of the dealership agreement, as extracted hereinabove, it appears that such arbitration agreement includes any dispute or difference of 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 the Agreement, that can be referred for arbitration. The arbitration agreement does not suggest that the arbitrator can be appointed only after taking any final decision by the IOCL against the dealer, but the arbitrator can be appointed to adjudicate and resolve the dispute of any kind whatsoever nature may be. Needless to say that there may be diverse nature of disputes. The scope of arbitration agreement is extremely widest in nature and it covers all types of possible disputes which may arise between parties in respect of or connecting with the dealership agreement. Here in the case at hand, dispute is about the veracity of the lab reports of GVR, and the IOCL merely on the basis of placing reliance on sch lab reports, has levelled allegations against the applicant for committing tempering with in DUs by the applicant. Moreover, on account of such pending dispute, and non-resolution of same at the IOCL level, the retail outlet of applicant is lying in non- operational condition, leading to business and financial losses to the applicant. Thus, in the opinion of this Court, it may not be held that no dispute has arisen or exists between the parties. 15. Surprisingly, the expression “dispute” is not defined in the A&C Act, though such expression finds reference in several provisions of the A&C Act. A perusal of the Section 7(1) of the A&C Act, which deals with the arbitration agreement indicates that arbitration agreement means an agreement by the parties to submit the arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. The principle object of the A&C Act is to resolve the dispute between rival parties through arbitration. 16.
The principle object of the A&C Act is to resolve the dispute between rival parties through arbitration. 16. The expression “dispute” came up for consideration before the Division Bench of the High Court of Madhya Pradesh in case of Indian Oil Corporation Ltd. Vs. Tatpar Petroleum Centre, decided on 27.01.2022 [(2022 SCC OnLine MP 124], and the context was accrual of dispute at the stage of issuing show-cause notice by the IOCL and invoking remedy by the applicant under Section 9 of the A&C Act, for interim relief. The Division Bench, in Para Nos. 9 to 13, held and observed as under:- "9. Since the 1996 Act does not define the expression 'dispute', this Court has to fall upon the dictionary meaning of the said expression which is as follows: 10. Black's Law Dictionary, 5th edition, page 424 defines 'dispute' as under: to argue about, to contend... words; an argument; a debate; a quarrel. 11. Cambridge Dictionary defines 'dispute' as under: "a disagreement or argument between two people, groups or countries." 12. Collins' Dictionary defines 'dispute' as under: "A dispute is an argument or disagreement between people or groups." 13. From the aforesaid dictionary meaning of expression 'dispute', it is evident as daylight that for a dispute to arise there should exist an assertion/claim which is refuted by the other side. Thus, dispute is a bilateral contract where atleast two rival parties have disagreement over a particular aspect. A dispute cannot arise when only one party asserts and other remains silent. Whether the assertion made by one and the denial made by the other leaves to passing of any particular order by one of the party is not necessary for arising of a dispute. An assertion by one and denial/ said assertion by another is enough for germination of the concept of a dispute." The Division Bench held that by issuance of show-cause notice, dispute was arisen and thus, the application under Section 9 of the A&C Act is maintainable and finally the interim order passed on such application was sustained by the High Court and held in Para Nos.17 and 18 as under:- "17.
From the above discussion, it is vivid that on the IOC issuing a show cause notice and respondent refuting the same by way of reply and in the personal hearing, dispute between the rival parties germinated making available cause of action to the respondent to invoke Section 9 of the 1996 Act. 18. Consequently, filing of the application under Section 9(1) (d) of the 1996 Act before the Court by the respondent and the Court deciding the same do not suffer from any jurisdictional error." The order of Division Bench was put to challenge before the Hon’ble Supreme Court by filing Special Leave to Appeal No.6353/2022, but the Apex Court declined to interfere with the order, taking note of that the application under Section 11 of the A&C Act for appointment of arbitration tribunal was pending before the High Court and the Special Leave to appeal too was dismissed vide order dated 20.04.2022. 17. It is most important and worthy to note here that apparently the decision, pursuant to the show-cause notice dated 05.09.2022 is pending at the level of respondent-IOCL and on account of such notice and allegations of tempering with the DUs by the applicant, levelled in the notice, outlet of applicant is lying non-operational since about more than 2 years, hence certainly a cause of action has also arisen to the applicant for claiming possible business/ financial losses, on account of his fuel outlet being non-operational and there is deliberate delay on the part of IOCL. 18. Thus, in such peculiar circumstances, it may not be held that no arbitrable dispute arises or exists between parties, but it is clear that the dispute between parties is liable to be referred for arbitration under Clause 69 of the arbitration agreement." 10. In the present case as well, dispute in respect of testing report, relied upon by the respondents and seizure of one of the DU of petitioner since July 2023, have arisen. Indisputably, as per Clause 68 of the dealership agreement, referred hereinabove, there is an arbitration agreement between the parties to refer the dispute for arbitration, in case the dispute is not resolved amicably. Indisputably, the dispute between parties has not been resolved with mutual consent, hence in view of the arbitration clause, the matter is required to be referred for Arbitration. 11.
Indisputably, the dispute between parties has not been resolved with mutual consent, hence in view of the arbitration clause, the matter is required to be referred for Arbitration. 11. The scope of the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 is confined to look into the existence of dispute and an arbitration agreement between the parties. The High Court, being a referral Court while dealing with the application for appointment of Arbitrator, exercises its jurisdiction within a narrow compass in the light of provision of Section 11(6A) of the A&C Act, 1996, which reads as under:- “(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub- section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.” 12. In the recent judgment of Hon'ble Supreme Court in case of SBI General Insurance Co. Ltd. Vs. Krish Spinning: [Civil Appeal No.7821/2024 arising out of SLP (C) No.3792/2024] delivered on 18 th July, 2024, in respect of scope of the High Court while dealing with the arbitration application in context of Section 11(6A) of the A&C Act, 1996, it has been held and observed by Hon'ble Supreme Court in following paras as under:- "110. The scope of examination under Section 11(6-A) is confined to the existence of an arbitration agreement on the basis of Section 7. The examination of validity of the arbitration agreement is also limited to the requirement of formal validity such as the requirement that the agreement should be in writing. 111. The use of the term 'examination' under Section 11(6- A) as distinguished from the use of the term 'rule' under Section 16 implies that the scope of enquiry under section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the arbitral tribunal to 'rule' under Section 16. The prima facie view on existence of the arbitration agreement taken by the referral court does not bind either the arbitral tribunal or the court enforcing the arbitral award. 112.
The prima facie view on existence of the arbitration agreement taken by the referral court does not bind either the arbitral tribunal or the court enforcing the arbitral award. 112. The aforesaid approach serves a two-fold purpose - firstly, it allows the referral court to weed out non-existent arbitration agreements, and secondly, it protects the jurisdictional competence of the arbitral tribunal to rule on the issue of existence of the arbitration agreement in depth. 113. Referring to the Statement of Objects and Reasons of the Arbitration and Conciliation (Amendment) Act, 2015, it was observed in In Re: Interplay (supra) that the High Court and the Supreme Court at the stage of appointment of arbitrator sha l l examine the existence of a prima facie arbitration agreement and not any other issues. The relevant observations are extracted hereinbelow: "209. The above extract indicates that the Supreme Court or High Court at the stage of the appointment of an arbitrator shall "examine the existence of a prima facie arbitration agreement and not other issues". These other issues not only pertain to the validity of the arbitration agreement, but also include any other issues which are a consequence of unnecessary judicial interference in the arbitration proceedings. Accordingly, the "other issues" also include examination and impounding of an unstamped instrument by the referral court at the Section 8 or Section 11 stage. The process of examination, impounding, and dealing with an unstamped instrument under the Stamp Act is not a timebound process, and therefore does not align with the stated goal of the Arbitration Act to ensure expeditious and time-bound appointment of arbitrators.[...]" (Emphasis supplied) 114. In view of the observations made by this Court in In Re: Interplay (supra), it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia (supra) and adopted in NTPC v. SPML (supra) that the jurisdiction of the referral court when dealing with the issue of "accord and satisfaction" under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in In Re: Interplay (supra)." (Emphasis supplied) 13.
As a result, the instant arbitration application succeeds and is hereby allowed and this Court appoints Hon’ble Mr. Prashant Kumar Agarwal (Former Judge of Rajasthan High Court), Mob. No.9414439777, Address:- C-82, Ram Nagar, Shastri Nagar, Jaipur, E-mail:- pka1955@yahoo.co.in, as Arbitrator to adjudicate the dispute between parties in accordance with provisions of the Arbitration and Conciliation Act, 1996. 14. The appointment of the Sole Arbitrator is subject to the declarations being made under Section 12 of the Arbitration & Conciliation Act, 1996 with respect to independence and impartiality, and the ability to devote sufficient time to complete the arbitration within the prescribed period. 15. The arbitration fee of the Sole Arbitrator shall be payable in accordance with the provisions contained in the Manual of Procedure for Alternative Dispute Resolution, 2009 as amended by the Manual of Procedure for Alternative Dispute Resolution (Amendment), 2017 vide notification dated 23.03.2017 read with 4 th Schedule appended to the Act of 1996 or as determined by the Arbitrator with consensus of parties. 16. The Registry is directed to intimate Arbitrator Hon’ble Mr. Prashant Kumar Agarwal (Former Judge of Rajasthan High Court), for his approval and consent to act as Arbitrator. 17. All other issues may be raised by the parties before the Arbitrator, which shall be considered in accordance with law. 18. Since as per Section 29A of the Arbitration and Conciliation Act, 1996, the arbitration proceedings are required to be concluded within scheduled time as stipulated therein, it is expected from the parties to appear before the Arbitrator on 17.03.2025 or any other date as informed by the Arbitrator to parties or agreed between parties with the consent of Arbitrator, and further parties shall provide their respective E-mail/ Contact Number/ Mobile Number as also of their authorized representatives/lawyers, appearing on their behalf before the Arbitration Tribunal, in order to facilitate the Arbitrator to send information to the parties, whenever required. The information sent by the Arbitrator, on such address/ E-mail/ cellphone of the parties/ their authorized representatives/lawyers, shall be treated as sufficient unless same is not changed. 19. The instant arbitration application stands disposed of accordingly.