Case: Hindustan Petroleum Corpn. Ltd Vs. M/S. Pinkcity Midway Petroleums

4. The facts necessary for disposal of this appeal, briefly stated, are as follows: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 appointed 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 whatsoever nature between the parties, arising out of or in relation to the said agreement, will have to be referred to the sole arbitration of the Chairman and the Managing Director of the Corporation who may, as per the said clause, either himself act as an arbitrator or nominate some other officer of the appellant to act as an arbitrator. It is also the case of the appellant that under Clause 20 of the said agreement, the respondent is not only obligated to comply with the terms and conditions of the said agreement but is also responsible to comply with all directions, orders, guidelines etc. issued by theon safe practices and marketing discipline. The appellant further contends that in this regard as per the marketing discipline, guidelines issued for the purpose of prevention ofThe appellant contends that while in exercise of such power of inspection on 18.11.2001 by the officers of the Corporation, it was found that there was short delivery of Motor Spirit (MS) and High Speed Diesel (HSD) in the dispensing units of the respondent. The said officers also found weights and measurement seals in the HSD dispensing units tampered with. Based on the said inspection reports, the appellant states that on 29.11.2001 anotice was issued by the appellant to the respondent in regard toand tampering, as stated above.6. In response to the abovenotice of the appellant, it is stated that the respondent submitted its reply and on consideration of the same, the appellant not being satisfied, suspended the sales and supply of petroleum products to the respondents retail outlet for a period of 30 days and also levied a penalty of Rs. 15,000/for the said irregularities committed by the respondent as per the appellants letter dated 16.1.2002.7. Being aggrieved by the said stoppage of supply of appellants 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 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.8. In reply to the plaint filed in the Civil Judges Court, the appellant filed an application under Section 8 read with Section 5 of the Act in the said suit praying for referring 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 arbitrator as per Clause 40 of the said agreement.9. The learned Civil Judge by his order dated 19.2.2002 dismissed the said application holding that the dispute between the parties was not covered by the arbitration agreement. A revision filed by the appellant in the High Court, as stated above, against the order of the learned Civil Judge came to be dismissed by the High Court. It is in the above backdrop that the appellant is before us in this appeal.

Court's reasoning:
23. Therefore, in our opinion, the courts below have erred in coming to the conclusion that the appellant did not have the legal authority to investigate and proceed against the respondent for its alleged misconduct under the terms of the Dealership Agreement. We are also of the opinion that if the appellant is satisfied that the respondent is indulging inor tampering with the seals, it will be entitled to initiate such action as is contemplated under the agreement like suspending or stopping the supply of petroleum products to such erring dealer. If in that process any dispute arises between the appellant and such dealer, the same will have to be referred to arbitration as contemplated under Clause 40 of the Dealership Agreement.24. This brings us to consider the last question involved in this appeal, namely, the maintainabilityof the revision petition beforethe High Court under Section 115 of the CPC. The High Court by the impugned order has come to the conclusion that its jurisdiction to entertain a revision petition would only be available if the order impugned is such that if its is allowed to stand, it would occasion failure of justice or cause an irreparable injury to a party against whom the said order is made. In support of this finding, the High Court has relied upon certain judgments of this Court. Having perused the said judgments, we are of the opinion that the findings given in those judgments do not apply to the facts of this case at all. We have come to the conclusion that the Civil Court had no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for arbitration. Therefore, we are of the opinion that the trial court failed to exercise its jurisdiction vested in it under Section 115 of the C.P.C. when it rejected the application of the appellant filed under Sections 8 and 5 of the Act. In such a situation, refusal to refer the dispute to arbitration would amount to failure to justice as also causing irreparable injury to the appellant. For the said reason, we are of the opinion that the High Court has erred in coming to the conclusion that the appellant was not entitled to the relief under Section 115 CPC.A perusal of this clause clearly shows that the parties to the Dealership Agreement had agreed to refer their dispute arising out of the agreement, of whatever nature it may be, to an arbitrator as contemplated in that agreement. Section 8 of the Act in clear terms mandates that a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement to refer such parties to arbiration, the language of this Section isanswer to this argument, n 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 arbitrationagreement. That part, a Constitution Bench of this Court in Konkan Railway (supra) with reference to the power of the arbitrator under Section 16 has laid downmight also be that in a given case the Chief Justice or his designate may have nominated an arbitrator although the period of thirty days had not expired. If so, the Arbitral Tribunal would have been improperly constituted and be without jurisdiction. It would then be open to the aggrieved party to require the Arbitral Tribunal to rule on its jurisdiction. Section 16 provides for this. It states that the Arbitral Tribunal may rule on its own jurisdiction. That the Arbitral Tribunal may rule "on any objections with respect to the existence or validity of the arbitration agreement" shows that the Arbitral Tribunals authority under Section 16 is not confined to the width of its jurisdiction, as was submitted by learned counsel for the appellants, but goes to the very root of its jurisdiction. There would, therefore, be no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted by reason of the fact that the Chief Justice or his designate had nominated an arbitrator although the period of thrity days had not expired and that, therefore, it had no jurisdiction". (emphasisIt is clear from the language of the Section, as interpreted by the Constitution Bench judgment in Konkan Railway (supra) that if there is any objection as to the applicability of the arbitration clause to the facts of the case, the same will have to be raised before the concerned Arbitral Tribunal. Therefore, in our opinion, in this case the courts below ought not to have proceeded to examine the applicability of the arbitration clause to the facts of the case in hand but ought to have left that issue to be determined by the Arbitral Tribunal as contemplated in Clause 40 of the Dealership Agreement and required under Sections 8 and 16 of the Act.