TaxTMI 
TaxTMI 
2022 (2) TMI 1450
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...., on lease from the Respondent for a term of 29 years, pursuant to a deed of lease dated 20th September 2005 which was duly registered, in order to set up a retail outlet for sale of its petroleum products. 5. The recital of the deed of lease, inter alia, records:- "1).......The abovementioned Property is owned by SHRI. LAXMAN DAGDU THITTE. The said leased Property is more particularly described in the Schedule hereinbelow given together with the Structures and Building now standing thereon or that may be hereafter erected thereon by the LESSEE TO BOLD the premises hereby demised I hereinafter for the sake of brevity referred to as the ("DEMISED PREMISES") unto the LESSEE for a term of 29 (TWENTY NINE years, commencing from the 20th day of SEPTEMBER 2005 renewable and determinable as hereinafter provided yielding and paying thereof during the said term monthly and the proportionately for any part of a month the rent of Rs. 1750 /- (RUPEES ONE THOUSAND SEVEN HUNDRED AND FIFTY only) to be paid without any deduct on or before the 15th day of each and every calendar month." 6. The deed of lease, hereinafter referred to as "the lease agreement" contained, inter alia, the ....
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....or a period of one year after becoming payable and after being demanded or if the LESSEE to be observed and performed their and in that event it shall be lawful for the LESSOR at any time thereafter to re-enter upon the said premises or any part thereof in the name of the whole and to take action to possess and enjoy as in all their former state and interest Provided always and it is hereby agreed and declared that the Power of Re-entry hereinabove contained shall not be exercised unless and until the LESSOR/S shall have first given to the LESSEES 90 days' Notice in writing pointing out the Breach in respect of which the right to Re-Entry is exercised and the LESSEE shall have failed to remedy the breach within a reasonable period of not less than 90 days thereafter. .... ... (e) The LESSEE shall be entitled to ASSIGN, TRANSFER, SUBLET, UNDERLET or part with the Possession of the DEMISED PREMISES or any part thereof to any person above name whomsoever it chooses without the consent of the LESSOR. (f) The LESSEE shall be entitled to appoint, remove, reappoint, change and substitute any dealers, agents, licensees and other authorized representatives on and ....
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....ted 15th November 2006 was executed by and between the Appellant and the Respondent. 8. The dealership agreement, inter alia, provided:- "AND WHEREAS the Corporation carries on the business of refining and sale of petroleum products and more particularly of Motor Spirit (MS) and High Speed Diesel Oil (HSD): Recitals AND WHEREAS the Corporation is the Owner/Lessee/Tenant/licensee of a Plot of land and is the Owner/Lessee/Tenant/licensee of the superstructures thereon more particularly described in the First Schedule hereunder written and of the structures thereon (Hereinafter collectively referred to as "the Premises") and has installed and/or is about to install at and under the said premises the apparatus and equipment described in the Second Schedule hereto (hereinafter called "the Outlet") 1st Schedule WHEREAS at the request of the Dealer, the Corporation has agreed to appoint the Dealer as its Dealer for the retail sale or supply at the said premises of certain petroleum products on the terms and conditions hereinafter contained. 2nd Schedule ... 2. This agreement shall remain in fo....
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....he termination of this Agreement as the Corporation may at its absolute discretion think fit. The Petroleum Act (b) The Dealer shall also be solely responsible for any breach or contravention by himself, his employees, agents of any Acts, rules, regulation or bye-laws of the central and/or State Government and/or Municipal Local and/ or other authorities as may be applicable 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 and Establishments Act, Factories Act and the Workmen's compensation Act. The Explosives Act, 1884 or any other Act or Statutory Rules, Regulations or Bye-Laws made thereunder and/ or applicable from time to time to the business of storage and sale of products and servants, workmen and persons engaged in connection therewith and the corporation shall not be responsible in any manner for any liabilities arising out of non-compliance by the Dealer with the same. ... 8(e) For the use of the said premises including the construction thereon and outfit, the Dealer shall pay to the Co....
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....ontrary herein contained the Corporation shall be at liberty upon breach by the Dealer of any covenant in this Agreement to top and/or suspend forthwith all supplies to the Dealer and/ or sales from the premises by the Dealer for such period or periods as the Corporation may think fit, and such right of stoppage and/or suspension of supplies shall be in addition to and/or without prejudice to any other right or remedy of the Corporation under this Agreement or Law. For the purpose of this clause, the General Manager of the Corporation for the time being at Mumbai shall be the Sole Judge as to whether a breach of any covenant of this agreement has been committed by the Dealer. The Dealer shall not be entitled to claim any compensation or damage from the Corporation on account of any such stoppage and/ or suspension of supplies. Corporation's right to suspend supplies ... 17. ......The Corporation shall have the right to exercise at its discretion at any time and from time to time quality control measures for products marketed by the Corporation and lying with Dealer. The opinion of the General Manager of the Corporation for the time being at Mu....
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....egard to the safe practices. Dealer to comply with Corporation's directives 43. The Corporation by its officers, representatives or servants will be entitled at all times to enter upon the premises and inspect the management of the retail outlet by the Dealer in all respects and the Dealer shall be bound to render all assistance and give all information to the Corporation and its duly authorized representatives in that behalf and produce to the Corporation and/or its duly authorized representatives in that behalf whenever required to do so Invoices/Cash Memos for all purchases and receipts for all payments which it is the Dealer's duly to make whether under the terms of this Agreement or otherwise. Corporation's right to inspect management of dealership ... 45. Notwithstanding anything to the contrary herein contained, the Corporation shall be at liberty at its entire discretion to terminate this Agreement forthwith upon or at any time after the happening of any of the following events namely:- Forthwith Termination a) If the Dealer shall commit a breach or default of any of the terms, co....
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....eement on the Respondent to pay a licence fee for use of the said premises demised by the Respondent to the Appellant. 13. While the lease agreement provided for reference of disputes to the Managing Director of the Appellant for arbitration and if the Managing Director was unable or unwilling to act as a sole Arbitrator, then the sole arbitration of any other person designated or nominated by the Managing Director, the dealership agreement provided for reference of disputes to the sole arbitration of the Director (Marketing) of the Corporation who might either himself act as the Arbitrator or nominate some other officer of the Corporation to act as the Arbitrator. 14. The lease agreement expressly provided that disputes under the said agreement were not to be referred to any person other than the Managing Director of the Appellant, and if for any reason that was not possible, the matter was not to be referred to arbitration at all. On the other hand, as stated above, disputes under the dealership agreement were referable to the Director (Marketing) of the Appellant who was debarred from entertaining any reference of dispute under the lease agreement. 15. The learned Addit....
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....poration to terminate this Agreement earlier on the happening of the events mentioned in Clause 56 of this Agreement. *** 7. Nothing contained in this Agreement shall be construed to prohibit the Corporation from making direct and/or indirect sales to any person whomsoever or from appointing other dealers for the purpose of direct or indirect sales at such places as the Corporation may think fit. The dealer shall not be entitled to any claim or allowance for such direct or indirect sales." 19. It is appropriate to mention here that Clause 56 of the said agreement stipulates that notwithstanding anything to the contrary containing before the said clause, the Corporation would be at liberty to terminate the agreement forthwith upon any time after happening of certain events. The conditions are manifold. We may, for the sake of completeness, reproduce two conditions: "(h) If the Dealer does not adhere to the instructions issued from time to time by the Corporation in connection with safe practices to be followed by him in the supply/storage of the Corporation's products or otherwise. (i) If the Dealer shall deliberately contaminate or t....
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....alleged. 20. By a letter dated 20th August 2008, the Appellant terminated the dealership of the Respondent, called upon the Respondent to vacate the retail outlet and hand over peaceful possession thereof to the Appellant and also to settle accounts with the Appellant. 21. The Respondent appealed to the Appellate Authority of the Appellant against the order of termination dated 20th August 2008. By an order dated 17th July 2009, the Appellate Authority of the Appellant dismissed the appeal of the Respondent. 22. By a letter dated 24th August 2009, the Respondent invoked the arbitration clause in the dealership agreement and requested the Director (Marketing) of the Appellant to appoint an Arbitrator. 23. The Director (Marketing) of the Appellant appointed Mr. B.L Parihar as Arbitrator in terms of the dealership agreement, by an order dated 9th November 2009. 24. The Respondent filed its Statement of Claims before the learned Arbitrator challenging the order of termination of the dealership agreement. In addition to the prayer for setting aside of the order of termination of the dealership agreement and the prayer for damages, the Respondent made an alternative prayer....
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.... for Order/Decree against the Respondent for the sum of Rs.45,28,000/-? 6. Whether this Arbitral Tribunal has jurisdiction to increase monthly Lease Rent from Rs.1750/- per month to Rs.35,000/- per month with 20% increase after every three years? 7. Whether the Claimant proves that the Claimant is entitled for increase in monthly lease rent from Rs.1,750/- per month to Rs.35,000/- per month with 20% increase after every three years?" 27. The learned Arbitrator made and published an award dated 04.11.2010 holding :- "FINDINGS AS TO ISSUE NO.2, 3 & 4 ...I hold that the Claimant has committed the breaches of terms and conditions of the Dealership Agreement dated 15.11.2006 and MDG 2001 and therefore Termination Letter dated 20.08.2008 issued by the Respondent is legal & valid. I therefore find that the Claimant therefore is not entitled for any restoration. FINDINGS AS TO ISSUE NO.5 I find that the Claimant has made investment of Rs.45,28,000/- whereas the Respondent has also made investment of Rs.57,00,000/- for construction of Retail Outlet and allied expenditures. The Claimant has committed the serious irregularities which ar....
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....r restoration of dealership. 2. The claimant is not entitled, for claim of Rs.45,28,000/- and interest thereon. 3. The monthly lease rent of the said land to be increased from Rs.1750/- to Rs.10000/- with 10% increase after every three years w.e.f. the date of the termination of the dealership and period of lease deed to be kept as per period mentioned in the advertisement published in the News Paper on 6.7.2005. With the above award, I have concluded the arbitration proceedings and published this award on 4.11.2010." 28. The Appellant filed an application being Civil Misc. Application No. 115 of 2011 under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as "the 1996 Act" for setting aside of the said award in the Court of the District Judge, Pune. The Respondent filed its cross objection to the impugned award and also filed a counter claim in the Court of the District Judge, Pune. 29. The counter claim filed by the Respondent was apparently misconceived. There could be no question of any counter claim to an application for setting aside of an award. 30. Section 5 of the 1996 Act provides that notwithstanding anything con....
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.... (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.]" 32. As observed above, the lease agreement and the dealership agreement are distinct agreements, independent of each other. Disputes under the lease agreement were referrable to the arbitration of the Managing Director of the Appellant who was to be the sole Arbitrator, and only if the Managing Director was unable or unwilling to act as sole Arbitrator the disputes were to be referred to the sole Arbitrator designated or nominated by the Ma....
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....f 2013 filed by the Respondent and dismissed Arbitration Appeal No.39 of 2013 filed by the Appellant observing that there was no scope for the District Court to interfere with the impugned award. The High Court held:- "10. Coming to the interference by the appellate court with the award on the dispute under the lease agreement, it is patent from the impugned order that the interference with the same was beyond the provision of Section 34 of the Arbitration Act. The learned Judge on the one hand permitted enhancement of the lease rent but denied the reduction of the lease period. The learned Judge lost sight of the fact that the claimant had contended before the learned Arbitrator that he was compelled by the respondent to agree for the lease of 29 years and 11 months, though the advertisement permitted him dealership for only 19 years and 11 months. It is nobody's case that the lease rent of Rs.1,750/- per month was at the market rate at the relevant time. It is obvious that the claimant had agreed for the extended period of the lease only because the same was coupled with the dealership agreement. In the circumstances, there was no scope for the District Court to interfer....
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....he Arbitral Tribunal to increase the monthly lease rent from Rs.1750/- per month to Rs.35,000/- per month was specifically in issue before the learned Arbitrator (Issue No.6) as evident from the impugned award. 42. As held by this Court in Associate Builders v. Delhi Development Authority [(2015) 3 SCC 49] , cited by Mr. Prasenjit Keswani, learned counsel appearing on behalf of the Respondent, Section 34 in conjunction with Section 5 of the 1996 Act makes it clear that an arbitral award that is governed by Part I of the 1996 Act, can only be set aside on grounds mentioned under Sections 34(2) and (3) of the said Act and not otherwise. The Court considering an application for setting aside an award, under Section 34 of the 1996 Act cannot look into the merits of the award except when the award is in conflict with the public policy of India as provided in Section 34(2)(b)(ii) of the 1996 Act. 43. In Associate Builders (supra), this Court held that an award could be said to against the public policy of India in, inter alia, the following circumstances: - (i) When an award is, on its face, in patent violation of a statutory provision. (ii) When the Arbitrator/Ar....
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....ve, the impugned award insofar as it pertains to lease rent and lease period is patently beyond the scope of the competence of the Arbitrator appointed in terms of the dealership agreement by the Director (Marketing) of the Appellant. 49. The lease agreement which was in force for a period of 29 years with effect from 15th April, 2005 specifically provided for monthly lease rent of Rs.1750 per month for the said plot of land on which the retail outlet had been set up. It is well settled that an Arbitral Tribunal, or for that matter, the Court cannot alter the terms and conditions of a valid contract executed between the parties with their eyes open. 50. In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) [(2019) 15 SCC 131] , this Court held: "76. However, when it comes to the public policy of India, argument based upon "most basic notions of justice", it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued....
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.... an unwilling party. This Court has further held that a party to the Agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a Court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category." 52. In PSA SICAL Terminals Pvt. Ltd. (supra) this Court clearly held that the role of the Arbitrator was to arbitrate within the terms of the contract. He had no power apart from what the parties had given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction. 53. In PSA SICAL Terminals Pvt. Ltd. (supra) this Court referred to and relied upon the earlier judgment of this Court in MD. Army Welfare Housing Organization v. Sumangal Service (P) Ltd. [(2004) 9 SCC 619] and held that an Arbitral Tribunal is not a court of law. It cannot exercise its power ex debito justitiae. 54. In Satyanarayana Construction Company v. Union of India and Others [(2011) 15 SCC 101] , a Bench of this Court of coordinate strengt....