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PETITIONER: INDIAN OIL  CORPORATION LTD.

       Vs.

RESPONDENT: AMRITSAR GAS SERVICE AND ORS.

DATE OF JUDGMENT19/11/1990

BENCH: VERMA, JAGDISH SARAN (J) BENCH: VERMA, JAGDISH SARAN (J) RANGNATHAN, S. FATHIMA BEEVI, M. (J)

CITATION:  1990 SCR  Supl. (3) 196  1991 SCC  (1) 533  JT 1990 (4)   601        1990 SCALE  (2)1056

ACT:     Arbitration  Act, 1940--Section 34--Termination of  dis- tributorship agreement--Granting of relief--Award of compen- sation for notice period.     Arbitration   Act,   1940--Section   30--Objection    to award--Granting  of relief on the finding Of breach of  con- tract  contrary  to  Section 14(1) of  the  Specific  Relief Act--An error of law apparent on the face of award.     Arbitration   Act,   1940--Section   30--Objection    to award--Direction based on finding of fact--Not to be  inter- fered with.     Arbitration   Act,   1940--Section   30--Objection    to award--Reference to arbitrator by Supreme Court--Refusal  to consider counter-Claim by arbitrator--An error of law appar- ent on the face of the award.

HEADNOTE:     A Distributorship Agreement was made between the  appel- lantCorporation  and the respondent No. 1, for sale  of  the Liquefied Petroleum Gas (LPG) Cylinders for the consumers as per the terms and conditions specified therein some of.     The  appellant-Corporation received  certain  complaints about the working of respondent No. 1 which were acts preju- dicial  to  the  interest, reputation and  products  of  the appellant-Corporation.     Invoking clause 27 of the Agreement the appellant-Corpo- ration terminated the distributorship.     Aggrieved  by  the termination of  the  distributorship, respondent No. 1 flied a suit in the Court of Sub-Judge  1st Class,  for a declaration that termination of the  distribu- torship  was illegal and void; and that the  distributorship continued notwithstanding the said termination. The appellant-Corporation flied an application under Section 3A 197 of  the  Arbitration  Act for staying the  suit,  which  was rejected by the trial Court.     The appeal against that 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

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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 appellantCorporation  committed breach of contract  and  was liable to remedy the breach by restoration of the  distribu- torship  and also liable to pay compensation.  The  counter- claim  made  by  the appellant-Corporation  in  the  written statement  was not decided by the arbitrator on  the  ground that it did not come within the scope of the 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.     The appellant-Corporation filed objections under Section 30  of the Arbitration Act, contending that the validity  of the award has to be tested on the principles of private  law and  the  law  of contracts, and not on  the  touchstone  of constitutional  limitations; that the relief of  restoration of  the contract granted by the arbitrator was  contrary  to the  prohibition  contained  in Sections 14 and  16  of  the Specific Relief Act.     Respondent No. 1 contended that there was a  presumption of  validity  of  award and the  objections  taken  must  be ignored;  and that the termination of  distributorship  cast stigma  on the partners of the firm; that  counter-claim  of the  appellant-Corporation was rightly not considered  since it  was  not made before the order of  reference;  that  the reference made being of all disputes in the suit, the nature of  relief  to be granted was also within  the  arbitrator’s jurisdiction;  and  interest  also must be  awarded  to  the respondent.     This Court disposing of the application of the  respond- ent No. 1 and the objections of the appellant, HELD:  1. The finding in the award being that the  Distribu- torship 198 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  speci- fies  the contracts which cannot be  specifically  enforced, one  of which is ’a contract which is in its nature  ’deter- minable’. [209C-E]     2. Agreement being revokable by either party in  accord- ance with clause 28 by giving thirty days’ notice, the  only relief which could be granted was the award of  compensation for the period of notice, that is 30 days. [210B-D]     3.  Granting the relief of restoration of the  distribu- torship even on the finding that the breach was committed by the  appellant-Corporation  is contrary to  the  mandate  is Section  14(1)  of the Specific Relief Act and there  is  an error  of  law apparent on the face of the  award  which  is stated  to  be  made according to ’the  law  governing  such cases’.  The  grant of this relief in the  award  cannot  be sustained. [209D-F]     4.  The appellant-Corporation has also been directed  in the  award to return the amounts of two hank drafts  on  the ground that no supplies were made to the  plaintiff-respond- ent No. 1 against the amounts. This direction was based on a finding  of  fact  which cannot be gone into  and  the  same cannot be interfered with. [209G-H]     Since  the reference to the arbitrator was made by  this Court  in an appeal arising out of refusal to stay the  suit under  Section 34 of the Arbitration Act, and the  reference was  made of all disputes between the parties in  the  suit,

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the  occasion to make a counter-claim in the written  state- ment  could  arise only after the order  of  reference.  The pleadings  of the parties were filed before the  arbitrator, and  the reference covered all disputes between the  parties in the suit. Accordingly, the counterclaim could not be made at any earlier stage. Refusal to consider the  counter-claim disclosed an error of law apparent on the face of the award. [210E--G]     M/s. Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay, [1989] 3 SCC 293; Mahabir Auto Stores  & Ors.  v. Indian Oil Corporation & Ors., JT (1990) 1 SC  363; Km. Shrilekha Vidyarthi etc. etc. v. State of U. P. &  Ors., JT (1990) 4 SC 211, referred. [Decision  based an private law rights alone referred  since the plaintiffs’ 199 claim was confined duly to private law rights and not  based on public law rights.]

JUDGMENT: