TaxTMI 
TaxTMI 
2003 (7) TMI 493
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....itrator as contemplated under Clause 40 of the Dealership Agreement between the parties. 4. The facts necessary for disposal of this appeal, briefly stated are as follows: 5. The appellant herein is a company carrying on the business of manufacture, sale and distribution of petroleum products which it does through dealers and distributors appointed by it. The respondent herein is one of such dealers appointed by the appellant to sell its petroleum products through a retail outlet at Jaisingpur Khera, National Highway No. 8, District Rewari, Haryana. The said appointment as a dealer of the respondent is governed by a Dealership Agreement dated 26-3-1997 executed by the parties. According to the appellant, Clause 30 of the said agreement empowers it to stop the supply of its products to a dealer for a period as the appellant thinks fit, for breach of any of the conditions contained in the agreement. The appellant also states that this stoppage of supply of its product is in addition to and without prejudice to any other right or remedy available to it or others under the said agreement. The appellant also contends that under clause 40 of the said agreement, any dispute of whats....
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....pply of appellant's product, the respondent filed Civil Suit No. 18 of 2000 in the Court of the Civil Judge (Senior Division), Rewari, praying, inter alia, for a declaration that the order dated 16-1-2002 is illegal and arbitrary. The respondent along with the plaint in the said suit also filed an application under Order 39 Rules (1) and (2) of the CPC. Learned Civil Judge was pleased to stay the suspension of supplies by the appellant to the respondent while in regard to the penalty, no stay was granted. 9. In reply to the plaint filed in the Civil Judge's Court, the appellant filed an application under section 8 read with section 5 of the Act in the said suit praying for referring in the dispute pending before the Civil Court to the arbitrator as per Clause 40 of the Dealership Agreement dated 26-3-1997. Along with that application, as required under section 8 of the Act, the appellant also enclosed a copy of the agreement. In the said application, the appellant had stated that the action taken by it was in consonance with the terms and conditions of the Dealership Agreement, hence any dispute arising out of the said action of the appellant could only be referred to the arbitr....
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....tion clause found in the Dealership Agreement could not have contemplated an adjudication by an arbitrator in regard to a dispute arising between the par ties pertaining to short-delivery of the Motor Spirit and HSD or tampering with the seal because these are the disputes which have penal consequences, hence, could only be tried by a competent criminal court on being investigated by an authorised agency as provided in the 1985 Act. He also submitted that since the dispute ex facie showed that the same cannot be adjudicated by an arbitrator, the courts below were justified in coming to the conclusion that the application filed under sections 5 and 8 of the 1996 Act was not maintainable. Learned counsel also supported the finding of the High Court in regard to non-maintainability of the revision petition before it. 13. For deciding the question whether the courts below were justified in coming to the conclusion that they could go into the question of the existence or validity of the arbitration agreement, we will have to first consider the relevant clauses found in the Dealership Agreement. Clause 40 of the said agreement reads thus: "Arbitration.- (a) Any dispu....
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.... 1940. (g) The award shall be made in writing and published by the Arbitrator within 12 months after entering upon the reference or within such extended time not exceeding one further year as the parties shall agree in writing. The parties hereto shall be deemed to have irrevocably given their consent to the Arbitrator to make and publish the award within the period referred to herein above and shall not be entitled to raise any objection or protest thereto under any circumstances whatsoever. (h) It is hereby expressly agreed that the powers of the Arbitrator appointed in the matter herein above mentioned shall include the power to make interim award/awards as the circumstances of the case may justify to appoint a receiver, commissioner or custodian by whatever name called to take possession of the property in dispute during the pendency of the proceedings and subject to such final order as may be passed by the Arbitrator and shall also have the power to issue such further orders from time to time as he may deem fit, on an application being made to him by any of the parties to the dispute where it is apprehended that the property to which it relates is in danger o....
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....below ought to have referred the dispute to arbitration. 16. The question then would arise what would be the role of the Civil Court when an argument is raised that such an arbitration clause does not apply to the facts of the case in hand? Learned counsel for the appellant contends that it is a matter which should be raised before the arbitrator who is competent to adjudicate upon the same and the Civil Court should not embark upon an inquiry in regard to the applicability of the arbitration clause to the facts of the case. While learned counsel appearing for the respondent contends that since the applicability of the arbitration clause to the facts of the case goes to the very root of the jurisdiction of the reference to arbitration, this question will have to be decided by the Civil Court before referring the matter to arbitration even in cases where there is admittedly an arbitration clause. The answer to this argument in our opinion, is found in section 16 of the Act itself. It has empowered the Arbitral Tribunal to rule on its own jurisdiction including rule on any objection with respect to the existence or validity of the arbitration agreement. That apart a Constitution B....
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.... courts below to avoid multiplicity of proceedings. 19. It was argued before the courts below as also before us that the mis-conduct, if any, pertaining to short-supply of petroleum products or tampering with the seals would be a criminal offence under the 1985 Act. Therefore, the investigation into such con duct of the dealer can only be conducted by such officers and in a manner so specified in the said Act, and it is not open to the appellant to arrogate to itself such statutory power of search and seizure by relying on some contractual terms in the Dealer ship Agreement. It is further argued that such disputes involving penal consequences can only be tried by a court of competent jurisdiction and cannot be decided by an arbitrator. 20. Having considered the above arguments addressed on behalf of the respondent as also the findings of the courts below, we are of the opinion that the same cannot be accepted because the appellant is neither exercising the power of search and seizure conferred on a competent authority under the 1985 Act nor does the Dealership Agreement contemplate the arbitrator to exercise the power of a criminal court while arbitrating on a dispute which h....
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....vants or agents of any laws, rules, regulations or bye-laws passed or made by the Central and/or State Government and/or Municipal local and/or other Authorities as may be applicable from time to time to the business including without prejudice to the generality of the foregoing. The concerned Authorities respectively appointed under the Petroleum Act, Payment of Wages Act, Shops & Establishment Act, Factories Act and the Workmen's Compensation Act or any statutory modifications or re-enactments of the said statutes or rules and the Corporation shall not be responsible in any manner for any liability out of non-compliance by the dealer with the same. The dealer shall at all times indemnify and keep indemnified the Corporation against all actions, proceedings, claims and demands made against it by the Central and/or State Government and/or Municipal Local and/or other Authorities and/or by any customer of the product and/or any other third party as a result of or in consequence of any act or omission of whatsoever nature of the dealer, his servants or agents, including, without prejudice to the generality of the foregoing, any accident or loss or damage arising out of the storage, h....
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....llant to take action against an erring dealer under the terms of the Agreement is de hors the proceedings that may be available to be initiated against an erring dealer under the provisions of various other enactments referred to in Clause 20 of the said Agreement including under the provisions of the 1985 Act. This right of the Corporation to suspend the supply of petroleum products to an erring dealer is a right exercised under the terms of the contract and is independent of the statutory provisions of the various Acts enumerated in Clause 20 of the Agreement. The courts below, in our opinion, have committed an error by misreading the terms of the contract when they came to the conclusion that the only remedy available as against a mis conduct committed by an erring dealer in regard to short-supply and tampering with the seals lies under the provisions of the 1985 Act. The courts below have failed to notice that when a dealer short-supplies or tampers with the seal, apart from the statutory violation, he also commits a misconduct under Clause 20 of the Agreement in regard to which the appellant is entitled to invoke Clause 30 of the Agreement to stop supply of petroleum products ....