Hon'ble Mrs. Rekha Dikshit,J.
Heard Shri A.M. Tripathi, learned counsel for the appellant as well as Shri Ashish Chaturvedi, learned counsel for the respondents and gone through the record.
Present appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''Act, 1996') challenging the order dated 20.09.2010 passed by the District Judge, Lucknow in Regular Suit No.2 of 2007; Smt. Pushpa Devi and Another v. Bharat Petroleum Limited and Another dismissing the petition filed under Section 34 of the Act, 1996.
Facts, in brief, of the present case as submitted by learned counsel for the appellants are that on 10.12.1987 the Bharat Petroleum Corporation Limited (hereinafter referred to as ''BPCL') issued a letter of intent to Shri Moti Lal and Shri Virendra Kumar for appointing them as Bharat Gas Distributorship at Unnao.
On 02.02.1989, an agreement for awarding distributorship has been entered between the BPCL and Maruti Gas Service, which is a partnership firm between Shri Moti Lal and Shri Virendra Kumar.
In the year 1996, one of the partner Shri Moti Lal has died, so by letter/order dated 14.09.1996, Shri Virendra Kumar and Smt. Pushpa Devi, wife of late Moti Lal was appointed as Temporary distributorship of L.P.G. at Unnao till 30.11.1996 with the condition that they will comply with the terms and conditions of the earlier agreement dated 02.02.1989. In view of above said facts and as per terms of letter, the appellants were allowed to continue the temporary distributorship of L.P.G. at Unnao.
On 14.02.2005, BPCL has issued a notice to the firm/Maruti stating therein that Motial Lal and Virendra Kumar (partners of Maruti) had signed a Power of Attorney in 1993 in favour of one Mr. Jaiswal for managing the affairs of the distributorship, who in terms of the Power of Attorney, had authorized Shri Suresh Chand Mishra to run day to day affairs of the distributorship, entered into a partnership deed with Shri Mishra on 31.03.1993.
In the show cause notice, BPCL also mentioned about some shortcomings such as not running the distributorship satisfactorily, not depositing the amounts collected from customers, etc. were pointed out.
On 22.02.2005, the appellants submitted reply to the show cause notice denying the allegations made by BPCL.
By an order dated 13.04.2005, the BPCL terminated the distributorship as per the terms of agreement, on 08.11.2005 referred the dispute for arbitration and Shri P.S. Bhargava was appointed as sole Arbitrator.
Before learned Sole Arbitrator, the arbitration proceedings has been initiated under Section 34 of the Act, 1996 between the parties.
By an award dated 26.09.2006, dismissed the claim of the appellants/objectors.
Aggrieved by the same, the appellants filed objection under Section 34 of the Act, 1996 for setting aside the award dated 26.09.2006 passed by the sole Arbitrator Shri P.S. Bhargava registered as Regular Suit No.2 of 2007.
By an order dated 20.09.2010 the District Judge has dismissed the objection filed by the appellant taking into consideration the clause 21 of the agreement, relevant portion of the same is quoted herein below:
"The Clause 21 of the said agreement runs as follows:
"21- The distributor shall not assign, mortgage, or part with or otherwise transfer his interest in the distributorship or the right, interest or benefit conferred on him by this agreement to any person. In the event of the Distributor being a partnership firm any change in the constitution of the firm, whether by retirement, introduction of new partners or otherwise howsoever will not be permitted without the previous written approval of the Corporation notwithstanding that the Corporation may have dealing with such reconstituted firms or impliedly waived or condoned the breach of default mentioned herein above by the Distributor. In the event of the death of any of the partners, the Distributor shall immediately inform the Corporation giving the necessary particulars of the heirs and legal representative of the deceased partner and it shall be the option of the Corporation either to continue the Distributorship with the said firm or to have a fresh agreement of distributorship with any reconstituted firm or to terminate the distributorship agreement and the decision of the Corporation in that behalf shall be final and binding on all the parties concerned. No claim on premature termination for compensation or otherwise will be made or sustainable against the Corporation on account of such termination."
The perusal of above condition clearly shows that all the objection petitioners and all other distributors are restrained from selling, assigning, mortgaging, or part with or otherwise transfer his interest in the distributorship or the right, interest or benefit conferred on them. It is also clearly mentioned that in case of the Distributor being a partnership firm any change in the constitution of the firm, whether by retirement, introduction of new partners or otherwise howsoever will not be permitted without the previous written approval of the opposite party.
In view of the above condition of the agreement, the arbitrator had specifically found the breach of the said condition as the objection-petitioners have themselves admitted in their statement that Power of Attorney had been executed by them regarding distributorship and sale of godown had been made by them without any permission or approval of the opposite party, so the award has been passed totally in accordance with fundamental policy of Indian law in accordance with justice and morality and conditions of the agreement. It is also not patently, so no interference is required. The objection-petition has no force and is liable to be dismissed."
Aggrieved by the order dated 20.09.2010 passed by the District Judge, Lucknow, the present appeal has been filed by the appellants under Section 37 of the Act, 1996.
Shri A.M. Tripathi, learned counsel for the appellants has pressed the present appeal on the following grounds:
(1) The learned trial court has failed to appreciate the judgement reported in AIR 2003 (SC) 2629 (O.N.G.C. versus SAW Pipes Limited) while passing the judgement under challenge in the present appeal.
(2) It is admitted fact of the parties that the agreement dated 02.02.1989 was expired due to the death of Moti Lal Jain the Sole Arbitrator and learned District Judge committed an error of law in relying the agreement and its claim and no termination can be made by the respondents.
(3) Order dated 13.04.2005 is in violation of the principle of natural justice and therefore, the said termination order is against the public policy.
(4) The appellants were issued afresh temporary letter of intent on 14.09.1996 and due to end of earlier executed agreement the provisions of said agreement can not be relied upon or followed by the appellants.
(5) The learned trial court has failed to take into account that the liability of the appellants in regard to the previous firm was only to the extent of financial and other liabilities and the other terms mentioned in the said agreement cannot be forced on the appellants in view of the provisions of law.
(6) The distributorship was granted to the previous firm and during it's operation no action was initiated by the respondents nor there was any complaint to the effect and if there was any complaint against the working of said firm then there was no reason or jurisdiction for issuing fresh letter of intent dated 14.09.1996 and further it was extended from time to time till 9 years and 7 months.
Accordingly, Shri A.M. Tripathi, learned counsel for the appellants submits that the order 20.09.2010 passed by the District Judge, Lucknow in Regular Suit No.2 of 2007; Smt. Pushpa Devi and Another v. Bharat Petroleum Limited and another award dated 26.09.2006 passed by the sole Arbitrator Shri P.S. Bhargava may be set aside, appeal may be allowed.
Shri Ashish Chaturvedi, learned counsel for the respondents, in rebuttal, submits that the order dated 20.09.2010 by which objection filed under Section 34 of the Act, 1996 for setting aside the award has been dismissed are perfectly valid because the learned District Judge after considering the entire case of the appellants dismissed the objection under Section 34 of the Act, 1996 vide order dated 20.09.2010 in Regular Suit No.2 of 2007. The appellants by filing the present appeal want to enlarge the scope of Section 37 of the Act, 1996.
As per scope of Section 37 of the Act, 1996, the award is not open to challenge on the ground that Arbitrator reached wrong conclusion, so taking into the said facts, the order 20.09.2010 passed by the District Judge rejecting the objection under Section 37 of the Act, 1996 for setting aside the award dated 26.09.2006 is perfectly valid. In support of his arguement, he placed reliance on following judgements:
(i) Navodaya Mass Entertainment Limited v. J.M. Combines; (2015) 5 SCC 698 (ii) Satlaj Constructions Limited v. Union Territory of Chandigarh; 2018 (1) SCC 718 and (iii) Madhya Pradesh Housing Board v. Progressive Writers and Publishers; (2009) 5 SCC 678.
Further it is not permissible to a court to examine correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. In support his contention, he placed reliance on a judgement in the case of Steel Authority of India Limited v. Gupta Borther Steel Tubes Limited; (2009) 10 SCC 63. And it is settled position of law that the Arbitrator appointed by the parties is the final judge of the facts. The finding of facts recorded by him cannot be interfered with on the ground that the terms of the contract were not correctly interpreted by him. In support of his submission, he placed reliance on judgements in the case of Swan Gold Mining Limited v. Hindustan Cooperative Limited; (2015) 5 SCC 739 and Rashtriya Ishpat Nigam Limited v. Deewan Chand Ram Saran; 2012 (5) SCC 306.
Lastly, it is submitted that if the arbitrator has applied his mind to the pleadings, the evidence adduced before him and the terms of contract and if two views are possible, arbitrator takes one view then the same will prevail and cannot be set aside in the proceedings under Section 34 of the Act, 1996. In this regard he placed reliance on the following judgements: (i) U.P. State Electricity Board v. Searsole Chemicals Limited; AIR 2002 Sc 1171 and (ii) Hindustan Tea Co. v. K.Sashikant Co. and Others; AIR 1987 SC 81, so the present appeal is liable to be dismissed.
We have heard learned counsel for the parties and gone through the record.
In order to resolve the controversy involved in the present case, we feel it appropriate to consider the law as laid down by Hon'ble Apex Court in the judgements cited by the learned counsel for the parties.
In the case of Oil and Natural Gas Corporation Limited v. SAW Pipes Limited; AIR 2003 SC 2629, the Hon'ble Apex Court while dealing with scope of Section 34 of the Act has held as under:
"Therefore, in our view, the phrase 'Public Policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar's case (supra), it is required to be held that the award could be set aside if it is patently illegal. Result would be - award could be set aside if it is contrary to: -
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void."
In Navodaya Mass Entertainment Limited (supra) the Hon'ble Apex Court has held as under:
"In our opinion, the scope of interference of the Court is very limited. Court would not be justified in reappraising the material on record and substituting its own view in place of the Arbitrator's view. Where there is an error apparent on the face of the record or the Arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail. (See: Bharat Coking Coal Ltd. Vs. L.K. Ahuja, (2004) 5 SCC 109; Ravindra & Associates Vs. Union of India, (2010) 1 SCC 80; Madnani Construction Corporation Private Limited Vs. Union of India & Ors., (2010) 1 SCC 549; Associated Construction Vs. Pawanhans Helicopters Limited, (2008) 16 SCC 128; and Satna Stone & Lime Company Ltd. Vs. Union of India & Anr., (2008) 14 SCC."
In Madhya Pradesh Housing Board (supra) Hon'ble Apex Court has held as under:
"29. In Ispat Engineering & Foundry Works, B.S. City, Bokaro vs. Steel Authority of India, B.S. City, Bokaro [(2001) 6 SCC 347], it is held :
"4. Needless to record that there exists a long catena of cases through which the law seems to be rather well settled that the reappraisal of evidence by the court is not permissible. This Court in one of its latest decisions [Arosan Enterprises Ltd. v. Union of India (1999) 9 SCC 449] upon consideration of decisions in Champsey Bhara & Co. v. Jivraj Balloo Spg. & Wvg. Co. Ltd. [AIR 1923 PC 66], Union of India v. Bungo Steel Furniture (P) Ltd. [(1967 1 SCR 324], N. Chellappan v. Secy., Kerala SEB [(1975) 1 SCC 289], Sudarsan Trading Co. v. Govt. of Kerala [(1989) 2 SCC 38], State of Rajasthan v. Puri Construction Co. Ltd. [(1994) 6 SCC 485] as also in Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan [(1999) 5 SCC 651] has stated that reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under Section 30 of the Arbitration Act. This Court in Arosan Enterprises categorically stated that in the event of there being no reason in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, interference would still be not available unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. This Court went on to record that in the event, however, two views are possible on a question of law, the court would not be justified in interfering with the award of the arbitrator if the view taken recourse to is a possible view. The observations of Lord Dunedin in Champsey Bhara stand accepted and adopted by this Court in Bungo Steel Furniture to the effect that the court had no jurisdiction to investigate into the merits of the case or to examine the documentary and oral evidence in the record for the purposes of finding out whether or not the arbitrator has committed an error of law. The court as a matter of fact, cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties."
30. Interpretation of a contract, it is trite, is a matter for the arbitrator to determine. Even in a case where the award contained reasons, the interference therewith would still be not available within the jurisdiction of the court unless, of course, the reasons are totally perverse or award is based on wrong proposition of law.
"4. .. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once it is found that the view of the arbitrator is a plausible one, the court will refrain itself from interfering..." [see Sudarsan Trading Co. vs. Govt. of Kerala (1989) 2 SCC 38 and State of U.P. vs. Allied Constructions (2003) 7 SCC 396].
44. The findings recorded by the arbitrator that the specific performance of the second agreement is barred by limitation; that the agreement is itself unconscionable; that the agreement ceases to subsist after the 1980 agreement and was not revived are not based on the sole ground that the second agreement came to be executed under political pressure. There is enough material available on record to arrive at such conclusion as the one arrived at by the arbitrator. All the said conclusions were not arrived solely on the basis of conjectures and surmises."
In Steel Authority of India Limited (supra), Hon'ble Apex Court has held as under:
"18. It is not necessary to multiply the references. Suffice it to say that the legal position that emerges from the decisions of this Court can be summarised thus:
(i) In a case where an arbitrator travels beyond the contract, the award would be without jurisdiction and would amount to legal misconduct and because of which the award would become amenable for being set aside by a Court.
(ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award.
(iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face.
(iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal.
(v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof.
(vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award.
(vii) It is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings.
19. Having noticed the legal position, we now turn to Clause 7.2 which can be analysed thus:
(i) SAIL shall supply materials as described in the offer/work order(s)/delivery order(s) issued from time to time.
(ii) SAIL shall have a period of one month as grace period for the purpose of supply or supplies after expiry of the indicated quarter(s).
(iii) SAIL shall pay to the customer(s) compensation @ 0.25 per cent per month or part thereof on the value of the materials of the supplies in the event of its failure(s) to deliver the indicated quantity even after the expiry of the grace period subject to maximum of three per cent of the value of the delayed supplies.
(iv) The compensation shall be paid within three months from the date of completion of order.
(v) In case the order is not executed within 12 months from the expiry of grace period, the order would be treated as closed after payment of applicable compensation.
(vi) SAIL shall not bear any liability for such period where delay caused in effect of supplies is on account of failure/non-observance of the required formalities by the customer."
In view of the above said position, the scope of this Court for interference in the matter in question can be summarized as under:
(i) In a case where an arbitrator travels beyond the contract, the award would be without jurisdiction and would amount to legal misconduct and because of which the award would become amenable for being set aside by a Court.
(ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award.
(iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face.
(iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal.
(v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof.
(vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award.
Reverting to the facts of the present case, on 10.12.1987, the BPCL issued a letter of intent to Moti Lal and Virendra Kumar for appointing them as Bharat Gas Distributor at Unnao. Thereafter Moti Lal and Virendra Kumar formed a partnership firm in the name of Maruti Gas Service. An agreement dated 02.02.1989 has been entered between Maruti and BPCL by which Bharat Gas Distributorship was awarded to him. The terms of the said agreement is binding upon the parties.
After the death of Moti Lal in 1996, the BPCL by letter dated 14.09.1996 informed Virendra Kumar and Pushpa Devi, wife of late Moti Lal appointing them temporary dealers till 30.11.1996 on certain terms and conditions of the agreement dated 02.02.1989 and the same has been continued till it has been terminated.
From perusal of the record, the position, which emerge out, is that Virendra Kumar and Moti Lal had signed a Power of Attorney in favour of Mr. Jaiswal and Shri Mishra for managing the affairs of the distributorship and entered into a partnership firm unauthorizedly and sold the godown etc. to Shri Mishra. The said fact was carried out without intimation/notice to the BPCL is contrary to the terms of the agreement dated 02.02.1989. The said fact is in contravention of Clause 21 of the agreement dated 02.02.1989, so taking into consideration the said clause, learned District Judge has rightly dismissed the Regular Suit No.2 of 2007 filed by the appellants under Section 34 of the Act, 1996 rather the same is in accordance with the law.
In the result, the appeal lacks merit and is dismissed.
No order as to costs.
Order Date :-30.11.2018 Anupam S/-