INDIAN OIL CORPORATION LTD. AND ORS versus M/S. SATHYANARAYANA SERVICE STATION & ANR

Citation: [2023] 5 S.C.R. 682 · Decided: 09-05-2023 · Supreme Court of India · Bench: K.M. JOSEPH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2023] 5 S.C.R.
682
INDIAN OIL CORPORATION LTD. AND ORS.
v.
M/S. SATHYANARAYANA SERVICE STATION & ANR
(Civil Appeal No.3533 of 2023)
MAY 09, 2023
[K. M. JOSEPH AND B. V. NAGARATHNA, JJ.]
Arbitration and Conciliation Act 1996: s. 34 – Application
for setting aside arbitral award – Appellant-IOC entered into petrol
pump dealer agreement with the first respondent – After three years,
the first respondent sought to withdraw from the dealership and the
said request was notarised, and thereafter accepted by the appellant
– Subsequently, first respondent expressed his intention to withdraw
the resignation from the dealership, however, the same was not
accepted – IOC took possession of the petroleum outlet and new
dealer was awarded the dealership – First respondent challenged
the same – Arbitration award in favour of the appellant – First
respondent then filed arbitration suit u/s 34 which was dismissed –
However, the High Court set aside the arbitration award and directed
the first respondent be restored the dealership – On appeal, held:
High Court erred in proceeding to order restoration of the dealership
to the first respondent after setting aside the award and by leaving
it open to the first respondent to claim damages – Court cannot
after setting aside the award, proceed to grant further relief by
modifying the award –First respondent indeed invoked clause (3) –
Clause (3) did not provide for resignation from dealership – It
provides only for termination of the agreement – First respondent
indicated in letter that it was ‘withdrawing’ from the dealership –
Proceeding on the footing that a premature termination of the
agreement would need acceptance, the view taken by the arbitrator
cannot be characterised as being perverse – However, the High
Court acted illegally in interfering with the finding of the arbitrator
found acceptable to the District Judge u/s. 34 that there was
acceptance, thus, the impugned judgment set aside.
Allowing the appeals, the Court
HELD: 1.1 The first respondent cannot be permitted to
contend that termination of the dealership cannot be brought
   [2023] 5 S.C.R. 682
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about by giving a three months’ notice during the first 15 years
of the dealership. Such an interpretation was not placed for the
consideration of the Arbitrator. It is not even raised before the
District Court or the High Court. The first respondent is calling
upon this Court in a case arising under the Act to place a wholly
novel interpretation. It is not as if the contention canvassed is
the only view possible. 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. [Para 18][696-C-
F]
1.2 On a perusal of clause (3), in fact, it occurred that there
is a term in a contract which expressly does not require any
acceptance of the other party for the premature termination of
the contract by giving a notice of three months. This Court would
break down the clause as meaning that it contemplated
determination of the agreement by either party (words lifted from
the contract as such) by giving three months notice to the other
party with the intention to terminate the agreement. The clause
provides that upon the expiration of such notice, the agreement
and the licence granted would stand cancelled and revoked. There
are no words even faintly suggesting acceptance of a notice of
intention to terminate the agreement as being indispensable for
the determination of the agreement. 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. [Para 19][696-F-H; 697-
A]
1.3 Though such a view appears to be the correct
construction of the agreement, the counsel, appearing for the
first respondent would point out that IOC and what is more, even
the arbitrator, and therefore the District Court and the High court
have all proceeded on the basis that acceptance of the notice of
termination alone suffices. In view of the fact that this appears to
be the case, the matter is to be considered on the basis that
acceptance is necessary. [Para 20][697-A-C]
1.4 There is no dispute that the first respondent addressed
communication dated 25.09.2006. It is also indisputable that the
officers of the IOC insisted

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