2000 (8) TMI 1142 - SC - Indian Laws

Arbitrator Overstepped Authority in Distributorship Case

The Supreme Court held that the Arbitrator exceeded jurisdiction by directing restoration of distributorship, stating that such relief was not arbitrable ... - Issues:1. Termination of distributorship contract based on storage of spurious gas cylinders.2. Dismissal of writ petition due to arbitration clause in the contract.3. Appointment of an arbitrator to resolve issues related to termination, restoration of distributorship, damages, and interest.4. Arbitrator's award directing restoration of distributorship challenged in court.5. Decision on whether the arbitrator had jurisdiction to direct restoration of distributorship.Analysis:1. The appellant's distributorship contract was terminated by the respondent due to alleged storage of spurious gas cylinders, as per the termination clause in the contract. This led to a legal dispute regarding the validity of the termination.2. The appellant's writ petition seeking restoration of distributorship was dismissed by the High Court due to the presence of an arbitration clause in the contract. The Single Judge suggested that the appellant could raise issues before the Arbitrator regarding the termination being arbitrary and lacking sufficient justification.3. Subsequently, the appellant invoked the arbitration clause and requested the Director (Marketing) of the respondent to act as an arbitrator or appoint one to address issues related to termination, restoration of distributorship, damages, and interest. The Director declined to act as an arbitrator but appointed one to adjudicate the disputes.4. The Arbitrator made an award directing the restoration of distributorship to the appellant, among other monetary benefits. However, the respondent challenged this award under Section 30 of the Arbitration Act before a Single Judge of the High Court.5. The Division Bench of the High Court upheld the challenge, stating that restoration of distributorship was not arbitrable under the contract. The Supreme Court agreed with this decision, emphasizing that the Arbitrator's jurisdiction was limited to awarding damages for wrongful termination, not directing restoration of distributorship.6. The Supreme Court rejected the appellant's argument that the Arbitrator had the authority to order restoration based on the reference made, clarifying that the reference only contemplated consequential damages for wrongful termination.7. Additionally, the Court dismissed the contention that invoking the arbitration clause was based on the High Court's order, emphasizing that the Arbitrator's jurisdiction was not expanded by any observations in the High Court's judgment.8. The Court directed the appellant to seek continuation of distributorship from the respondent, which would be considered on its merits. Finally, the appeals were dismissed, upholding the decision to delete the relief for restoration of distributorship and maintaining the other awarded reliefs.