INDIAN OIL CORPORATION LTD. THROUGH ITS SENIOR MANAGER versus M/S SHREE GANESH PETROLEUM RAJGURUNAGAR THROUGH ITS PROPRIETOR MR. LAXMAN DAGDU THITE

Citation: [2022] 16 S.C.R. 450 · Decided: 01-02-2022 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 6 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 16 S.C.R.
INDIAN OIL CORPORATION LTD. THROUGH ITS SENIOR
MANAGER
v.
M/S SHREE GANESH PETROLEUM RAJGURUNAGAR
THROUGH ITS PROPRIETOR MR. LAXMAN DAGDU THITE
(Civil Appeal Nos. 837-838 of 2022)
FEBRUARY 01, 2022
[INDIRA BANERJEE AND ABHAY S. OKA, JJ.]
Arbitration And Conciliation Act, 1996 : ss. 34, 37 – Arbitral
award – Setting aside of – Parties entered into two agreements,
dealership agreement and lease agreement having distinct provisions
for reference of the dispute to the arbitrator – Termination of the
dealership agreement by the appellant – Appointment of an
arbitrator in terms of the agreement – Arbitrator passed an award
holding that the termination of the dealership was valid, and
increased the monthly lease rent and reduced the period of the lease
– Challenge to, by the appellant and the respondent – High Court
partly allowed the respondent’s appeal and dismissed the appellant’s
appeal holding that there was no scope for the district court to
interfere with the award – On appeal, held: An arbitral tribunal
being a creature of contract, is bound to act in terms of the contract
under which it is constituted – An award can be said to be
unquestionably illegal where the arbitral tribunal has failed to act
in terms of the specificities of the contract – An arbitral tribunal is
entitled to interpret the terms and conditions of a contract, while
adjudicating a dispute - An error in interpretation of a contract in
a case where there is valid and lawful submission of arbitral disputes
to an arbitral tribunal is an error within jurisdiction while
adjudicating a dispute – Court does not sit in appeal over the award
made by an arbitral tribunal – Court does not ordinarily interfere
with the interpretation made by the arbitral tribunal of a contractual
provision, unless such interpretation is patently unreasonable or
perverse – Impugned award insofar as it pertains to lease rent and
lease period is patently beyond the scope of the competence of the
arbitrator appointed in terms of the dealership agreement – An
arbitral tribunal, or for that matter, the Court cannot alter the terms
[2022] 16 S.C.R. 450
450
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and conditions of a valid contract executed between the parties
with their eyes open – Judgment of the High Court set aside, as
also of the District Court insofar as the same pertains to lease rent
and lease period.
Allowing the appeal, the Court
HELD: 1.1 The lease agreement and the dealership
agreement are distinct agreements, independent of each other.
Disputes under the lease agreement were referrable to the
arbitration of the Managing Director of the appellant who was to
be the sole Arbitrator, and only if the Managing Director was
unable or unwilling to act as sole Arbitrator the disputes were to
be referred to the sole Arbitrator designated or nominated by
the Managing Director in his place. If the disputes could not be
referred to the Managing Director for any reason, the matter
was not to be referred to arbitration at all. In the instant case, the
respondent invoked the Arbitration Clause under the Dealership
Agreement and approached the Director (Marketing) of the
appellant who appointed Mr. B.L. Parihar as the sole Arbitrator.
The Arbitrator, Mr. B.L. Parihar, nominated by the Director
(Marketing) of the appellant had no authority and/or jurisdiction
to adjudicate any dispute pertaining to the lease agreement. [Para
32, 33][476-C-F]
1.2 In so far as disputes with regard to lease rent and/or
any other conditions of the deed of lease were concerned, the
High Court proceeded on the patently erroneous basis that the
appellant had not objected to the competence or the authority or
jurisdiction of the Arbitrator to entertain and decide disputes with
regard to lease agreement, ignoring the specific averments made
by the appellant in its counter statement. In its counter statement,
the appellant had specifically averred that the alternate prayer of
the respondent claiming increase in lease rent to Rs.35,000/-
per month with 20% increase in every three years was outside
the ambit of the arbitration proceedings. The appellant also
asserted categorically that, without challenging the registered
lease deed executed by it, the respondent could not seek an order
of the Arbitrator, modifying the terms of the lease deed. The High
Court also apparently overlooked the fact that the jurisdiction of
the arbitral tribunal to increase the monthly lease rent from
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