Clause (3) of the agreement read as follows: “(3) The Agreement shall remain in force for fifteen year from day of 13th Oct 2003 and continue thereafter for successive periods of five year each until determined by either party by giving three months notice in writing to the other of its intention to termination this agreement and upon the expiration of any such notice this Agreement and the Licence granted as aforesaid shall stand cancelled and revoked but without prejudice to such termination provided that nothing contained in this clause shall to the rights of either party against the other in respect of any matter or thing antecedent to such termination Provided that nothing contained in this clause shall to such prejudice the rights of the Corporation to terminate this Agreement earlier on the 3 happening of the events mentioned in Clause 56 of this Agreement.”
Also Read: https://newslaw.in/case-type/civil/application-of-code-of-civil-procedure-in-small-causes-court/
Dealership Ref: Your Letter No BD0/242 dated 23rd
Oct, 2003 With reference to the above subject we are very grateful to you and IOC family members for giving us support and cooperation for all these years for running the R.O. Sathyanarayanaswamy Service Station Mysore -Bantwal Road Periyapatna 5 71107 MYSORE DISTRICT 5 Dear sir, SUBJECT : Resignation from Dealership
This has reference to the notarized letter dated 3rd October 2006 received by our office on 16th November 2006 informing us of your intention to retire from our retail outlet dealership. It reads as follows: “Date: -11-12-2006 To, The Chief Divisional Retail Sales Manager Indian Oil Corporation Limited Marketing Division, Bangalore Divisional Office, Indian Oil Bhavan # 29, P.
Dear Sir, Sub : Withdrawal of resignation We have for reference your letter on the subject dated 18/12/2006, withdrawing your resignation from our Dealership. Thereafter, you withdrew your resignation, and once again on 16.11.2006, you submitted a resignation letter duly notarized on 03/l 0/2006.
Also Read: https://newslaw.in/case-type/criminal/dereliction-of-duty-and-grave-lapses-a-legal-analysis/
The Sole Arbitrator by award dated 15.01.2009 found inter alia that “inasmuch as the IOC and its officers had 9 communicated the acceptance of the claimant’s resignation of the dealership vide their letter dated 22.11.2006, which brings the contract between both parties to an end, their rejection of the claimant’s subsequent request dated 11.12.2006 for withdrawing the resignation was in accordance with law”.
The notice period of 3 months mentioned in the contract is only the outer limit by which time the party who gets the notice have to make their alternate arrangements. By the impugned order in an appeal carried by the first respondent, the High Court has set aside the 11 award as also the order passed by the court under Section 34. We heard Shri Vikram Mehta, learned counsel appearing on behalf of the appeal filed by the IOC.
He would also submit that the High Court has clearly acted illegally in not merely setting aside the award but even proceeding to modify the award which is wholly beyond its power. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator’s view is not even a possible view to take. In the present case, the High Court was required to determine as to whether the District Judge had acted contrary to the provisions of Section 34 of the 1996 Act in rejecting the challenge to the arbitral award. Shri Shailash Madiyal, learned counsel sought to counter the appellants in the following manner:
He would submit that actually, clause (3) of the agreement in question clearly contemplated that the dealership was to remain sacrosanct for a period of 15 years. However, the facility of termination of the dealership by giving a three months’ notice, in writing, was impermissible during the first 15 years. In regard to the complaint of the appellants that the High Court has exceeded its authority acting under Section 36 of the Act by modifying the Award, he very fairly submits that there may be merit in the said contention having regard to the view taken by this Court.
In fact, the conduct of the first respondent is premised on the interpretation which leaves it open to the parties to terminate the contract by giving three months’ notice even within the first 15 years of the dealership.
The ball is set rolling by the issuance of the notice and the process appears to successfully culminate in the agreement and the licence granted under the agreement being cancelled or revoked. A perusal of the notice dated 25.09.2006 clearly indicates that the first respondent has clearly indicated that it gave the version that they have shifted to Bangalore for their childrens education, and what is more, therefore, they were not able to look after the dealership.
IOC has taken note of the intention of the first respondent to resign from the dealership. Proceeding, therefore, on the footing that in the above sense a premature termination of the agreement would need acceptance, we are unable to find that the view taken by the arbitrator in the facts, can be characterised as being perverse.
What the first respondent has indicated in letter dated 25.09.2006, the contents of which have been reiterated in the notarised version dated 03.10.2006 and received on 16.11.2006 by the second appellant, is that the first respondent was ‘withdrawing’ from the dealership. Subsequent to the submission of the resignation the defendants went ahead with the termination of the dealership on the receipt of the notorized letter from the claimants, which was approved by the Management of IOC on 07.12.06 and had to take action for making alternative arrangements to operate the retail outlet for protecting the commercial interest of the Corporation and also to keep in mind of the supply of petroleum product to the public at large.” There is no obligation on the part of Indian Oil corporation as per 25 clause 3 of the dealership agreement to reject the letter of resignation submitted by the plaintiffs.” However, in the light of communication dated 18.11.2006, essentially recognizing and in substance conveying acceptance or approval; first respondent cannot draw strength from the same. The High Court also erred in proceeding to order restoration of the dealership to the first respondent after setting aside the award and going further by leaving it open to the first respondent to claim damages. Parties are to bear their respective costs.
Case Title: INDIAN OIL CORPORATION LIMITED Vs. M/S SATHYANARAYANA SERVICE STATION (2023 INSC 507)
Case Number: C.A. No.-003533-003533 / 2023
