INDIAN OIL CORPORATION LTD. AND ORS versus M/S. SATHYANARAYANA SERVICE STATION & ANR on 9 May 2023

[2023] 5 S.C.R.

AINDIAN OIL CORPORATION LTD. AND ORS.

v.

M/S. SATHYANARAYANA SERVICE STATION & ANR

(Civil Appeal No.3533 of 2023)

BMAY 09, 2023

[K. M. JOSEPH AND B. V. NAGARATHNA, JJ.]

Arbitration and Conciliation Act 1996: s. 34 – Applicationfor setting aside arbitral award – Appellant-IOC entered into petrolpump dealer agreement with the first respondent – After three years,Cthe first respondent sought to withdraw from the dealership and thesaid request was notarised, and thereafter accepted by the appellant– Subsequently, first respondent expressed his intention to withdrawthe resignation from the dealership, however, the same was notaccepted – IOC took possession of the petroleum outlet and newDdealer was awarded the dealership – First respondent challengedthe same – Arbitration award in favour of the appellant – Firstrespondent then filed arbitration suit u/s 34 which was dismissed –However, the High Court set aside the arbitration award and directedthe first respondent be restored the dealership – On appeal, held:High Court erred in proceeding to order restoration of the dealershipEto the first respondent after setting aside the award and by leavingit open to the first respondent to claim damages – Court cannotafter setting aside the award, proceed to grant further relief bymodifying the award –First respondent indeed invoked clause (3) –Clause (3) did not provide for resignation from dealership – ItFprovides only for termination of the agreement – First respondentindicated in letter that it was ‘withdrawing’ from the dealership –Proceeding on the footing that a premature termination of theagreement would need acceptance, the view taken by the arbitratorcannot be characterised as being perverse – However, the HighCourt acted illegally in interfering with the finding of the arbitratorGfound acceptable to the District Judge u/s. 34 that there wasacceptance, thus, the impugned judgment set aside.

Allowing the appeals, the Court

HELD: 1.1 The first respondent cannot be permitted toHcontend that termination of the dealership cannot be brought

about by giving a three months’ notice during the first 15 yearsof the dealership. Such an interpretation was not placed for theconsideration of the Arbitrator. It is not even raised before theDistrict Court or the High Court. The first respondent is callingupon this Court in a case arising under the Act to place a whollynovel interpretation. It is not as if the contention canvassed isthe only view possible. In fact, the conduct of the first respondentis premised on the interpretation which leaves it open to theparties to terminate the contract by giving three months’ noticeeven 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 thereis a term in a contract which expressly does not require anyacceptance of the other party for the premature termination ofthe contract by giving a notice of three months. This Court wouldbreak down the clause as meaning that it contemplateddetermination of the agreement by either party (words lifted fromthe contract as such) by giving three months notice to the otherparty with the intention to terminate the agreement. The clauseprovides that upon the expiration of such notice, the agreementand the licence granted would stand cancelled and revoked. Thereare no words even faintly suggesting acceptance of a notice ofintention to terminate the agreement as being indispensable forthe determination of the agreement. The ball is set rolling by theissuance of the notice and the process appears to successfullyculminate in the agreement and the licence granted under theagreement being cancelled or revoked. [Para 19][696-F-H; 697-A]

1.3 Though such a view appears to be the correctconstruction of the agreement, the counsel, appearing for thefirst respondent would point out that IOC and what is more, eventhe arbitrator, and therefore the District Court and the High courthave all proceeded on the basis that acceptance of the notice oftermination alone suffices. In view of the fact that this appears tobe the case, the matter is to be considered on the basis thatacceptance is necessary. [Para 20][697-A-C]

1.4 There is no dispute that the first respondent addressedcommunication dated 25.09.2006. It is also indisputable that theofficers of the IOC insisted that the first respondent must notarisethe notice. A meeting in this regard did take place. The notice AB

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Acame to be notarised and what is more, received on 16.11.2006.A perusal of the notice dated 25.09.2006 clearly indicates thatthe first respondent has clearly indicated that it gave the versionthat they have shifted to Bangalore for their childrens education,and what is more, therefore, they were not able to look after thedealership. They wished to “withdraw from the dealership andBappoint new R.O. dealers before three months as per theagreement”. In other words, there cannot be even a shred ofdoubt that the first respondent indeed invoked clause (3). Thewords used may appear to be inelegant. However, the conductleaves no doubt, and what is more, even the first respondentCdoes not have a case that the action was not traceable to theprovisions of clause (3). On the expiry of three months, theinexorable consequences provided in clause (3) would haveensued. However, since it is proceeded on the basis that IOCmust have signified its assent for the notice to bear fruit, on18.11.2006, the second appellant in the appeal filed by IOCDreferred to the notarised letter dated 03.10.2006 which wasreceived on 16.11.2006. IOC has taken note of the intention ofthe first respondent to resign from the dealership. Thereafter,the first respondent was requested to continue operation tillarrangements were made. Lastly, the letter ends with expressionEof gratitude for the association of the first respondent with theIOC and wishing both the partners the very best in their futureendeavours. From the terms and the tone of the letter and thecircumstances, the arbitrator who is the chosen judge of the factsand the merits concluded that there was acceptance of the notice.It could be open to debate whether there was sufficient articulationFof the acceptance. Words such as “have taken note of yourintention to resign from our dealership” could perhaps have beensupplanted with the benefit of hindsight with different words. Butthe question which arises is when the letter is read in the contextof the facts as a whole, particularly, in the light of the jurisdictionGof the Court to interfere with a finding of the arbitrator within hisjurisdiction, the High Court palpably erred. Clause (3) permitseither party to bring about a premature termination of the contract.By giving a notice of three months, if the notice is the IOC, IOCis enabled to make arrangements so that essential servicesprovided by a dealer do not suffer abrupt disruption. In otherH

words, alternate arrangements could be made. Likewise, atermination by IOC would put the dealer on alert and it canappropriately take steps towards arranging its affairs in a fairmanner. [Para 21][697-C-H; 698-A-C]

1.5 Proceeding on the footing that in the above sense apremature termination of the agreement would need acceptance,the view taken by the arbitrator in the facts, cannot becharacterised as being perverse. It is undoubtedly a plausibleview. It closes the door for the court to intervene. The finding ofthe arbitrator cannot be described as one betraying “a patentillegality”. [Para 22][698-D-E]

1.6 The High Court proceeded by adverting to draw adistinction between “termination of the agreement” and“resignation from dealership”. The High Court also proceededon the basis that since the agreement does not prohibit the firstrespondent from withdrawing the case, the case has to be testedon the anvil of the Contract Act. A merit review was undertakento find that the offer of the first respondent to ‘resign’ was notaccepted by letter dated 22.11.2006. [Para 23][698-E-F]

1.7 The clause in question did not provide for resignationfrom dealership. Indeed, it provides only for termination of theagreement. What the first respondent has indicated in letter dated25.09.2006, the contents of which have been reiterated in thenotarised version dated 03.10.2006 and received on 16.11.2006by the second appellant, is that the first respondent was‘withdrawing’ from the dealership. The High Court cannot besupported on the basis that the clause in question did notcontemplate resignation. In fact, though not in all cases, aresignation may assume effect only upon acceptance by theemployer. What, on the other hand, is contemplated in clause (3)is a notice of three months terminating the contract by eitherparty. [Para 24][698-F-H]

1.8 It was pointed out that acceptance by the managementof IOC actually took place on 07.12.2006 and not on 22.11.2006.However, in the light of communication dated 18.11.2006,essentially recognizing and in substance conveying acceptance A

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Aor approval; first respondent cannot draw strength from the same.IOC has a case that it was for taking the matter forward in thematter of re-awarding the dealership that the decision dated07.12.2006 was made. More importantly, the communicationpurporting to take back the withdrawal was given by firstrespondent on 11.12.2006 which is after 07.12.2006. [ParaB25][699-A; 699-E-F]

1.9 Proceeding on the basis that acceptance is necessary,the High Court in a proceeding under Section 37 acted illegallyin interfering with the finding of the arbitrator and what is more,a finding found acceptable to the District Judge under Section 34Cthat there was acceptance vide letter dated 18.11.2006. [Para26][699-G-H]

1.10 The High Court also erred in proceeding to orderrestoration of the dealership to the first respondent after settingaside the award and going further by leaving it open to the firstDrespondent to claim damages. The Court cannot, after settingaside the award, proceed to grant further relief by modifying theaward. It must leave the parties to work out their remedies in agiven case even where it justifiably interferes with the award.Thus, the impugned judgment is set aside and the award isErestored. [Para 27, 28][700-A-C]

Project Director, National Highways No. 45 E and 220National Highways Authority of India v. M. Hakeemand another(2021) 9 SCC 1 – relied on.

Ssangyong Engineering & Construction CompanyFLimited v. National Highway Authority of India (NHAI)(2019) 15 SCC 131 : [2019] 7 SCR 522;Punjab StateCivil Supplies Corporation Ltd. and Another VersusRamesh Kumar and Company and Others 2021 SCCOnline SC 1056 – referred to.

GCase Law Reference

From the Judgment and Order dated 15.01.2021 of the High Courtof Karnataka at Bengaluru in MFA No.4450 of 2011.

With

Civil Appeal No.3534 of 2023

Devadatt Kamat, Sr. Adv., Nishanth Patil, Ayush P Shah, HarshPandey, Revanta Solanki, Vikaram Mehta, Ms. Rashi Ram Pal, VikasMehta, Advs. for the Appellants.

Shailesh Madiyal, Rajan Parmar, Vinayaka S Pandit, Ms. RakhiM, Akshay Kumar, Ms. Divija Mahajan, Advs. for the Respondents.

The Judgment of the Court was delivered by

K. M. JOSEPH, J.

1. Leave granted.

2. In Civil Appeal arising out of SLP(C) 5698 OF 2021, theappellants are the Indian Oil Corporation Ltd., (hereinafter referred toas “IOC”, for short), the Chief Divisional Retail Sales Manager of thefirst appellant, Bangalore and the Chief Divisional Retail Sales Managerof the Mangalore Division. The second respondent in the said appeal isone Smt. M.P. Parvati, referred to as new dealer, who is the appellant inthe other appeal, namely, civil Appeal arising out of SLP(C) 5591 OF2021.

THE FACTS

3. On 31.10.2003, IOC entered into petrol/hsd pump dealeragreement with the first respondent. Clause (3) of the agreement readas follows:

“(3) The Agreement shall remain in force for fifteen year fromday of 13th Oct 2003 and continue thereafter for successive periodsof five year each until determined by either party by giving threemonths notice in writing to the other of its intention to terminationthis agreement and upon the expiration of any such notice thisAgreement and the Licence granted as aforesaid shall standcancelled and revoked but without prejudice to such terminationprovided that nothing contained in this clause shall to the rights ofeither party against the other in respect of any matter or thingantecedent to such termination Provided that nothing contained in A

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[2023] 5 S.C.R.

Athis clause shall to such prejudice the rights of the Corporation toterminate this Agreement earlier on the happening of the eventsmentioned in Clause 56 of this Agreement.”

4. On 25.09.2006, the first respondent addressed the followingcommunication to the second appellant:

“Date: - 25-09-2006

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To,

The Chief Divisional Retail Sales Manager Indian Oil Corporation Limited Marketing Division, Bangalore Divisional Office,CIndian Oil Bhavan 29,

P. Kalinga Rao Road, (Mission Road)

Bangalore - 560027.

Dear sir,

DSub : With drawl from R.O. Dealership

Ref: Your Letter No. BD0/242 dated 23rd Oct, 2003

With reference to the above subject we are very grateful to youand IOC family members for giving us support and cooperationfor all these years for running the R.O.

EI would like to bring to your kind notice, that we have shifted toBangalore for our children’s education. Hence, we are not able tolook after the R.O.

Hence, kindly withdraw from R.O. dealership and appoint newR.O. dealers before three months as per our agreement Dt: 31[st]Oct. 2003.

FHope you will consider our humble request and do the needful.Thanking you, Yours faithfully, For SRI SATYANARAYANA SWAMY SERVICE STATION

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(P.S. SURESH)(JYOTI SURESH)

Partner

Partner

CC To : The Sales Officer Mysore

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5. It is not in dispute that on 30.09.2006 there was a physicalinteraction in the course of which IOC insisted that the request of thefirst respondent be notarised. There is also no dispute that a notarisedversion of letter dated 25.09.2006 was received on 16.11.2006. It wasapparently notarised earlier on 3.10.2006. A reply was sent to the samedated 22.11.2006 by the second appellant. It reads as follows:

“November 22, 2006

Regd. Post A.O.

Shri. P. S. Suresh & Smt Jyothi Suresh Partners Sri. Sathyanarayanaswamy Service Station Mysore -Bantwal RoadPeriyapatna 5 71107MYSORE DISTRICT

Dear sir,

SUBJECT : Resignation from Dealership

This has reference to the notarized letter dated 3rd October 2006received by our office on 16th November 2006 informing us ofyour intention to retire from our retail outlet dealership.

This notarized letter sent by you, with reference to the recognitionletter sent by us to you vide reference BDO : 242 dated 23. 10.2003along with the dealership agreement recognizing both of you asthe dealers of our ‘A’ site retail outlet at periyapatna, run by youunder the name and style M/s. Sathyanarayanaswamy ServiceStation.

As stated in your letter, we have taken note of your intention toresign from our dealership. We request you to continue operationtill we make an alternative arrangement.

We thank you for your association with our organization and wishyou both all the very best in your future endeavours.

Yours faithfully,For INDIAN OIL CORPORATION LIMITED

Samson Chacko

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SUPREME COURT REPORTS

AChief Divisional Retail Sales Manager

//TRUE TYPED COPY//”

6. Next, we must notice letter dated 11.12.2006 on behalf of thepartners of the first respondent to the second appellant. It reads as follows:

“Date: -11-12-2006

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To,

The Chief Divisional Retail Sales Manager Indian Oil Corporation Limited Marketing Division, Bangalore Divisional Office,CIndian Oil Bhavan 29,

P. Kalinga Rao Road, (Mission Road)

Bangalore.

Dear sir,

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I would like to bring to your kind Notice, that I have sent the R.O.Dealership withdrawal letter (Notarized) due to unavoidablecircumstances.

But I want to take back the withdrawal from the Dealership.

I am extremely sorry for the trouble and inconvenience caused.

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But I will assure you sir, that in the future we will run the outletsmoothly without giving you any problems.

Hope you will consider my humble request and do the needful.

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Yours faithfully

CC :- To The Sales Officer,

Mysore,

For Satyanarayana Swamy Service Station

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PARTNERS

//TRUE TYPED COPY//”

7. On 21.12.2006, we find the following communication addressedby the second appellant on behalf of the IOC to the first respondent:

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“BY RPAD

December 21[st], 2006

MIS. Sri Satyanarayanaswamy Service Station Indian Oil Dealer Mysore - Bantwal RoadPeriyapatna - 571107.Mysore Dist.

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.

You had initially tendered your resignation on 25/09/2006. Thiswas once again confirmed with you by the undersigned on 30/09/2006. On your confirmation, you were asked to submit a notarizedresignation letter. Thereafter, you withdrew your resignation, andonce again on 16.11.2006, you submitted a resignation letter dulynotarized on 03/l 0/2006.

On receipt of the above, we sent you a letter by RP AD acceptingyour resignation. Thereafter, you visited our office on 22/11/2016along with your father, wherein you once again upheld your decisionto resign as you were presently settled at Bangalore and you couldnot concentrate in your RO at Periyapatna. This was despite yourfather’s opposition to your point of view.

Based on your notarized resignation and personal confirmations,we have obtained our Management’s approval for accepting yourresignation. We regret to inform you that your request to withdrawthe resignation cannot be considered at this stage, due to the above-mentioned reasons.

Yours faithfully,For INDIAN OIL CORPORATION LIMITED

(Samson Chacko)Chief Divisional Retail Sales Manager A

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SUPREME COURT REPORTS

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//TRUE TYPED COPY//”

8. IOC took possession of the Petroleum Outlet on 23.12.2006.Thereafter, the new dealer came to be awarded the dealership on28.12.2006. An appeal was carried by the first respondent before theGeneral Manager of the IOC, Karnataka. The appeal came to beBdismissed on 02.04.2007. This led to matter being referred to arbitration.The Sole Arbitrator by award dated 15.01.2009 found inter alia that“inasmuch as the IOC and its officers had communicated the acceptanceof the claimant’s resignation of the dealership vide their letter dated22.11.2006, which brings the contract between both parties to an end,their rejection of the claimant’s subsequent request dated 11.12.2006 forCwithdrawing the resignation was in accordance with law”. In regard tothe question as to whether the action of the first respondent in withdrawingthe resignation from the dealership by letter dated 11.12.2006 was inaccordance with law, it was found that acceptance of the resignationhaving been conveyed on 22.11.2006, the action of the first respondentDin withdrawing was not in accordance with law. In regard to the issuewhether the first respondent had withdrawn the notice of resignationwithin the time as prescribed in clause (3) of the Memorandum ofAgreement, it was found as follows:

“Clause 3 of the Memorandum of agreement does not specificallyEmention a time limit for withdrawal of resignation. The noticeperiod of 3 months mentioned in the contract is only the outer limitby which time the party who gets the notice have to make theiralternate arrangements. At any time during the notice period, therecipient party can convey acceptance thereby bringing thecontract between the parties to an end. Moreover, Section 5 ofFthe Indian Contracts Act states that a proposal may be revoked atany time before the communication of it’s acceptance, but notafterwards. Since the Respondents have communicated theiracceptance of the resignation of the Claimant vide their letterdated 22.11.2006, the Claimant’s subsequent letter datedG11.12.2006 requesting for withdrawing the resignation letter is notin accordance with law. Hence the issue as to whether theClaimants have withdrawn their resignation within the time limithas no relevance.”

(Emphasis supplied)

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9. The arbitrator further found that the Letter of Intent being issuedin favour of the new dealer was not flawed. Answering all other issueswhich need not detain us against the first respondent, the award waspassed. The first respondent knocked at the doors of the Principal andSessions Judge, Mysore under Section 34 of Arbitration & ConciliationAct, 1996 (hereinafter referred to as “the Act”). The arbitration suitunder Section 34 of the Act was dismissed.

10. By the impugned order in an appeal carried by the firstrespondent, the High Court has set aside the award as also the orderpassed by the court under Section 34. Still further, the High Court directedthat the first respondent shall be restored the dealership within threemonths from the date of the receipt of the certified copy of the judgmentfailing which the first respondent was held entitled to seek execution ofthe judgment and also seek necessary damages from IOC and its officers.

11. It is this judgment which has led to the filing of the two appeals.Apart from the IOC and its officers, impugning the order of the HighCourt the new dealer, namely, M.P. Parvati has filed the other appeal.

12. We heard Shri Vikram Mehta, learned counsel appearing onbehalf of the appeal filed by the IOC. We also heard Shri DevadattKamath, learned senior counsel appearing on behalf of the new Dealer.Next, we heard Shri Shailash Madiyal, learned counsel on behalf of thefirst respondent.

13. Shri Vikram Mehta, learned counsel for the IOC would submitthat the High Court has overstepped the well settled limits set by a catenaof decisions in the matter of overturning an arbitration award. He tookus to the correspondence and also the conduct of the first respondent tocontend that the first respondent wanted to terminate the contract as isself-evident by sending the notice dated 25.09.2006. Upon being toldthat the communication must be notarised, it was got notarised on03.10.2006 and it was received by the second appellant on 16.11.2006.The same was accepted on 18.11.2006. The Arbitrator has enteredfindings on the above lines. It is a plausible view. The District Judge inproceedings under Section 34 had found the award invulnerable.Therefore, even on a different view being possible, the High Court actedillegally in interfering with the award. He would, in fact, submit that theview taken by the arbitrator was in fact, the right view. The expressionof words conveying the best wishes for the partners of the first respondent AB

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Aapart from the penultimate paragraph in letter 18.11.2006 is harped upon.The High Court, it is pointed out, has proceeded to apply principles oflaw which may not be apposite in the context. He would submit that thefindings of the arbitrator cannot certainly be described as perverse. Hewould also submit that the High Court has clearly acted illegally in notmerely setting aside the award but even proceeding to modify the awardBwhich is wholly beyond its power. In other words, he would point out thedirection by the High Court to restore the dealership to the first respondentas being palpably illegal.

14. Shri Devadatt Kamat, learned senior counsel appearing onbehalf of the new dealer would submit that the conduct andCcorrespondence resorted to by the first respondent would reveal that itwas carefully thought out. In other words, it is not a case where therewas any coercion or other vitiating element which drove the partners toinvoke clause (3). He would refer to the judgment of this Court inSsangyong Engineering & Construction Company Limited v.DNational Highway Authority of India (NHAI)1, Therein, he emphasisedthe following statement:

“40. The change made in Section 28(3) by the Amendment Actreally follows what is stated in paras 42.3 to 45 in AssociateBuilders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2ESCC (Civ) 204] , namely, that the construction of the terms of acontract is primarily for an arbitrator to decide, unless the arbitratorconstrues the contract in a manner that no fair-minded orreasonable person would; in short, that the arbitrator’s view is noteven a possible view to take. Also, if the arbitrator wanders outsidethe contract and deals with matters not allotted to him, he commitsFan error of jurisdiction. This ground of challenge will now fallwithin the new ground added under Section 34(2-A).”

15. Next, he drew our attention to the judgment of this Court inPunjab State Civil Supplies Corporation Ltd. and Another Versus2Ramesh Kumar and Company and Others.G

“12. In the present case, the High Court was required to determineas to whether the District Judge had acted contrary to theprovisions of Section 34 of the 1996 Act in rejecting the challenge 1 (2019) 15 SCC 131

2 2021 SCC ONLINE SC 1056

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to the arbitral award. Apart from its failure to do so, the HighCourt went one step further while reversing the judgment of theDistrict Judge in decreeing the claim in its entirety. This exercisewas clearly impermissible. The arbitrator was entitled to drawrelevant findings of fact on the basis of the evidence which wasadduced by the parties. This was exactly what was done in thearbitral award. The award of the arbitrator was challengedunsuccessfully by the respondents under Section 34 of the 1996Act. In this backdrop, there was no basis in law for the HighCourt to interfere with the judgment of the District Judge and, aswe have noted earlier, to even go a step further by decreeing theclaim.”

16. He also submitted that the purport of clause (3) of theagreement was to give a benefit to the party to whom the communicationis sent terminating the contract. A construction of the contract by theArbitrator is not open to interference on the score that the court findsthe same incorrect. Yet this is precisely what has been done in theimpugned judgment. He would point out that, in fact, the new dealer isthe wife of a Martyr being the widow of a slain soldier.

17. Shri Shailash Madiyal, learned counsel sought to counter theappellants in the following manner: He would submit that actually, clause(3) of the agreement in question clearly contemplated that the dealershipwas to remain sacrosanct for a period of 15 years. This is subject only toan earlier termination as contemplated in clause (56). Clause (56), it ispointed out, provided for termination by IOC on certain acts and omissionsby the dealer. He further contended that it is only after the expiry of first15 years that the parties contemplated extension of the contract by 5years at a time. The total period of the contract is 15 years to begin withand, by virtue of subsequent extension of 5 years each, could go upto 30years. However, the facility of termination of the dealership by giving athree months’ notice, in writing, was impermissible during the first 15years. He would submit that such an interpretation is warranted havingregard to the fact that a person who would have invested a huge sumwould lose the dealership by the IOC being endowed with the power toterminate the contract by merely giving a notice of three months’ duration.Since the notice was, in this case, admittedly sent within the first 15years, clause (3) was inapplicable, and there was no termination in law.The learned counsel did agree that such a contention was never raised AB

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Abefore the arbitrator, the District Judge or the High Court. Next, hecontended that the alleged acceptance dated 28.11.2006 was notunambiguous. He supported the view taken by the High Court. He pointedout that before the actual acceptance which, he points out, took placeonly on 07.12.2006 by the Management, the first respondent hadwithdrawn the earlier communication. He would submit that in the factsBof the case there was no error committed by the High Court in interferingwith the Award. In regard to the complaint of the appellants that theHigh Court has exceeded its authority acting under Section 36 of theAct by modifying the Award, he very fairly submits that there may bemerit in the said contention having regard to the view taken by this Court.CANALYSIS

18. The controversy revolves around clause (3) which we haveset out earlier. We must proceed in the matter on the basis that wecannot permit the first respondent to contend that termination of thedealership cannot be brought about by giving a three months’ noticeDduring the first 15 years of the dealership. Such an interpretation wasnot placed for the consideration of the Arbitrator. It is not even raisedbefore the District Court or the High court. The first respondent is callingupon this Court in a case arising under the Act to place a wholly novelinterpretation. It is not as if the contention canvassed is the only viewEpossible. In fact, the conduct of the first respondent is premised on theinterpretation which leaves it open to the parties to terminate the contractby giving three months’ notice even within the first 15 years of thedealership.

19. On a perusal of clause (3), in fact, it occurred to this CourtFthat here is a term in a contract which expressly does not require anyacceptance of the other party for the premature termination of thecontract by giving a notice of three months. We would break down theclause as meaning that it contemplated determination of the agreementby either party (words lifted from the contract as such) by giving threemonths notice to the other party with the intention to terminate theGagreement. Thereafter, the clause provides that upon the expiration ofsuch notice, the agreement and the licence granted would stand cancelledand revoked. There are no words even faintly suggesting acceptance ofa notice of intention to terminate the agreement as being indispensablefor the determination of the agreement. The ball is set rolling by theHissuance of the notice and the process appears to successfully culminate in the agreement and the licence granted under the agreement beingcancelled or revoked.

20. Though such a view appears to be the correct construction ofthe agreement, Shri Shailash Madiyal the learned counsel, appearing forthe first respondent would point out that IOC and what is more, even thearbitrator, and therefore the District Court and the High court have allproceeded on the basis that acceptance of the notice of terminationalone suffices. In view of the fact that this appears to be the case, wewould consider the matter on the basis that acceptance is necessary.

21. There is no dispute that the first respondent addressedcommunication dated 25.09.2006. It is also indisputable that the officersof the IOC insisted that the first respondent must notarise the notice. Ameeting in this regard did take place. The notice came to be notarisedand what is more, received on 16.11.2006. A perusal of the notice dated25.09.2006 clearly indicates that the first respondent has clearly indicatedthat it gave the version that they have shifted to Bangalore for theirchildrens education, and what is more, therefore, they were not able tolook after the dealership. They wished to “withdraw from the dealershipand appoint new R.O. dealers before three months as per our agreementDt: 13[th] Oct. 2003.” In other words, there cannot be even a shred ofdoubt that the first respondent indeed invoked clause (3). The wordsused may appear to be inelegant. However, the conduct as noticed leavesus in no doubt, and what is more, even the first respondent does not havea case that the action was not traceable to the provisions of clause (3).On the expiry of three months, the inexorable consequences provided inclause (3) would have ensued. However, since we are proceeding onthe basis that IOC must have signified its assent for the notice to bearfruit, on 18.11.2006, the second appellant in the appeal filed by IOCreferred to the notarised letter dated 03.10.2006 which was received on16.11.2006. IOC has taken note of the intention of the first respondentto resign from the dealership. Thereafter, we may note that the firstrespondent was requested to continue operation till arrangements weremade. Lastly, the letter ends with expression of gratitude for theassociation of the first respondent with the IOC and wishing both thepartners the very best in their future endeavours. From the terms andthe tone of the letter and the circumstances, the arbitrator who is thechosen judge of the facts and the merits concluded that there wasacceptance of the notice. It could be open to debate whether there was AB

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Asufficient articulation of the acceptance. Words such as “we have takennote of your intention to resign from our dealership” could perhaps havebeen supplanted with the benefit of hindsight with different words. Butthe question which arises is when the letter is read in the context of thefacts as a whole, particularly, in the light of the jurisdiction of the Courtto interfere with a finding of the arbitrator within his jurisdiction, we areBof the view that the High Court has palpably erred. Clause (3) permitseither party to bring about a premature termination of the contract. Bygiving a notice of three months, if the noticee is the IOC, IOC is enabledto make arrangements so that essential services provided by a dealer donot suffer abrupt disruption. In other words, alternate arrangements couldCbe made. Likewise, a termination by IOC would put the dealer on alertand it can appropriately take steps towards arranging its affairs in a fairmanner.

22. Proceeding, therefore, on the footing that in the above sense apremature termination of the agreement would need acceptance, weDare unable to find that the view taken by the arbitrator in the facts, canbe characterised as being perverse. It is undoubtedly a plausible view. Itcloses the door for the court to intervene. The finding of the arbitratorcannot be described as one betraying “a patent illegality”.

23. The High Court has proceeded by adverting to draw aEdistinction between “termination of the agreement” and “resignation fromdealership”. The High Court has also proceeded on the basis that sincethe agreement does not prohibit the first respondent from withdrawingthe case, the case has to be tested on the anvil of the Contract Act. Amerit review was undertaken to find that the offer of the first respondentto ‘resign’ was not accepted by letter dated 22.11.2006.F

24. It may be true that the clause in question did not provide forresignation from dealership. Indeed, it provides only for termination ofthe agreement. What the first respondent has indicated in letter dated25.09.2006, the contents of which have been reiterated in the notarisedversion dated 03.10.2006 and received on 16.11.2006 by the secondGappellant, is that the first respondent was ‘withdrawing’ from thedealership. We are unable to support the High Court on the basis thatthe clause in question did not contemplate resignation. In fact, thoughnot in all cases, a resignation may assume effect only upon acceptanceby the employer. What, on the other hand, is contemplated in clause (3)His a notice of three months terminating the contract by either party.

25. Shri Shailash Madiyal pointed out that acceptance by theManagement of IOC actually took place on 07.12.2006 and not on22.11.2006. It is true that in the pleading (before the District Court inproceedings under Section 34), it is inter alia stated as follows:- “4. Subsequent to the submission of the resignation the defendantswent ahead with the termination of the dealership on the receiptof the notorized letter from the claimants, which was approved bythe Management of IOC on 07.12.06 and had to take action formaking alternative arrangements to operate the retail outlet forprotecting the commercial interest of the Corporation and also tokeep in mind of the supply of petroleum product to the public atlarge.”

“5. The dealer have requested for withdrawal of dealership on25.09.2006. As stated in the earlier para based on the notorizedletter reinforcing what is stated in letter dated 25.09.2006. Thisdefendant has obtained management approval for termination ofthe dealership on 07.12.2006 and have also replied through theletter dated 21.12.06 mentioning that the dealers request forwithdrawal cannot be considered. There is no obligation on thepart of Indian Oil corporation as per clause 3 of the dealershipagreement to reject the letter of resignation submitted by theplaintiffs.”

However, in the light of communication dated 18.11.2006,essentially recognizing and in substance conveying acceptance orapproval; first respondent cannot draw strength from the same. IOChas a case that it was for taking the matter forward in the matter of re-awarding the dealership that the decision dated 07.12.2006 was made.More importantly, the communication purporting to take back thewithdrawal was given by first respondent on 11.12.2006 which is after07.12.2006.

26. Proceeding on the basis that acceptance is necessary, we areof the view that the High Court in a proceeding under Section 37 of theAct acted illegally in interfering with the finding of the Arbitrator andwhat is more, a finding found acceptable to the District Judge underSection 34 of the Act that there was acceptance vide letter dated18.11.2006.

A

B

C

D

E

F

G

H

A27. The High Court also erred in proceeding to order restorationof the dealership to the first respondent after setting aside the awardand going further by leaving it open to the first respondent to claimdamages. It is beyond the pale of any doubt that the Court cannot, aftersetting aside the award, proceed to grant further relief by modifying theaward. It must leave the parties to work out their remedies in a givenBcase even where it justifiably interferes with the award [See in thisbehalf Project Director, National Highways No. 45 E and 2203National Highways Authority of India v. M. Hakeem and another].

28. The appeals are allowed. The impugned judgement will standset aside and the award restored. Parties are to bear their respectiveCcosts.

Nidhi Jain

(Assisted by : Rakhi, LCRA)

Appeals allowed.

D

E

F

G