INDIAN OIL CORPORATION LTD. versus AMRITSAR GAS SERVICE AND ORS.

Citation: [1990] SUPP. 3 S.C.R. 196 · Decided: 19-11-1990 · Supreme Court of India · Bench: S. RANGANATHAN

Judgment (excerpt)

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B 
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D 
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INDIAN OIL 
ORPORATION LTD. 
v. 
AMRITSAR GAS SERVICE AND ORS. 
NOVEMBER 19, 1990 
[S. RANGANATHAN, J.S. VERMA AND 
M. FATHIMA BEEVI, JJ.J 
Arbi1ration Act, 1940-Seclion 34-Terminalion of distributor-
ship agreement-Granting of relief-A ward of compensation for no/ice 
period. 
Arbilration Act, 1940-Section JO-Objection /0 award-Grant-
ing of relief on the finding of breach of c_ontract con1rary /0 Seclwn 
14( 1) of the Specific Relief Ac1--An error of law apparent on the face of 
award. 
Arbitration Act, 1940-Section JO-Objection to award-Direc-
tion based on finding of fact-Not to be interfered with. 
Arbitration Act, 1940-Section JO-Objection to award-Refe-
rence to arbitrator by Supreme Court-Refusal to consider counter-
Claim by arbitrator-An error of lQW apparent on the face of the award, 
A Distributorship Agreement was made between the appellant-
Corporation and the respondent No. 1, for sale of the Liquefied Pet-
roleum Gas (LPG) cylinders for the consumers as per the terms and 
conditions specified therein some of. 
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The appellant-Corporation received certain complaints about the 
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working of respondent No. 1 which were acts prejudicial to the interest, 
reputation and products of the appellant-corporation. 
Invoking clause 27 of the Agreement the appellant-Corporation 
terminated the distributorship. 
Aggrieved by the termination of the distributorship, respondent 
No. 1 filed a suit in the Court of Sub-Judge Ist Class, for a declaration 
that termination of the distributorship was illegal and void; and ·that the 
distributorship continued notwithstanding the said termination. 
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The appellant-Corporation filed an application under Section 3A 
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1.0.C. v. AMRITSAR GAS SERVICE 
197 
of the Arbitration Act for staying the suit, which was rejected by the 
trial Court. 
The appeal against thRt order and thereafter a revision to the 
High Court were also dismissed giving rise to the present appeal by 
special leave. 
This Court referred the disputes to an arbitrator and appointed a 
retired Judge of the Court as arbitrator. Later this Court appointed a 
retired Judge of the High Court of Punjab & Haryana in the place of the 
earlier arbitrator. 
The arbitrator, while making the award held that the appellant• 
Corporation committed breach of contract and was liable to remedy the 
breach by restoration of the distributorship and also liable to pay com· 
pensatlon. The counter-claim made by the appellant-Corporation in the 
written statement was not decided by the arbitrator on the ground 1hat 
it did not come within the scope oftbe reference. 
Respondent No. 1 filed an application to direct the arbitrator to 
file the award and to make the award a rule of the Court and to pass a 
decree in terms thereof. 
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The appellant-Corporation filed objections under Section 30 of 
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the Arbitration Act, contending that the validity of the award has to be 
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tested on the principles of private law and the law of contracts, and not 
on the touchstone of constitutional limitations; that the relief of restora-
tion of the contract granted by the arbitrator was contrary to the pro• 
hibition contained in Sections 14 and 16 of the Specific Relief Act. 
Respondent No. 1 contended that there was a presumption of fl 
validity of award and the objections taken must be ignored; and that the 
termination of distributorship cast stigma on the partners of the fmn; 
that connter-claim of the appellant-Corporation was rightly not con• 
sidered since it was not made before the order of reference; that the refe• 
rence made being of all disputes lb the suit, the nature of relief to be 
granted was also within the arbitrator's jnrisdiction; and interest also O 
must be awarded to the respondent. 
This Court disposing of the application of the respondent No. 1 
and the objections of the appellant, 
HELD: 1. The fmding in the award being that the Distributorship 
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SUPREME COURT REPORTS 
[1990] Supp. 3 S.C.R. 
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Agreement was revokable and the same being admittedly one for 
rendering personal service, the relevant provisions of the Specific Relief 
Act were automatically attracted. Sub-section (1) of Section 14 of the 
Specific Relief Act specifies the contracts which cannot be specifically 
enforced, one of which is 'a contract which is in its nature deter-
B minable'. [209C-E] 
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2. Agreement being revokable by either party in accordance with 
clause 28 by giving thirty days' notice, the only relief 

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