2009 (8) TMI 1306 - HC - Indian Laws

Summary

The appeal under Section 37(2)(b) of the Arbitration Act 1996 was filed against an arbitral tribunal's order dismissing the appellant's application and allowing the respondent's application, both under Section 17 of the Act. The appellant was a dealer for retail sale of petroleum products from premises owned by the respondent. Disputes arose leading to termination of the dealership, prompting arbitration proceedings.

The appellant sought interim measures to resume sale and supplies during arbitration, while the respondent sought to restrain the appellant from interfering with its operations. The arbitrator found that allowing the appellant to operate during arbitration was not in public interest due to allegations of stock variation and tampering. The arbitrator decided that the respondent could operate the outlet during arbitration without creating third-party rights.

The Court considered the principles applicable to an appeal under Section 37(2)(b), akin to those for an appeal against an order under Order 39 Rules 1 and 2 CPC. It emphasized that appellate interference is warranted only if the discretion was exercised perversely or contrary to law. The Court found no perversity in the arbitral tribunal's discretion under Section 17 of the Act.

The appellant argued that previous interim orders favored them, but the Court noted such orders were ex parte and did not bind the arbitrator. The Court referenced a Supreme Court judgment stating interim orders are temporary and not precedents. The arbitrator was not bound by earlier interim orders, and the appellant's argument was dismissed.

The appellant contended that the respondent's application under Section 17 was barred by a consent order, but the Court found no merit in this argument. The Court held that the order did not preclude the respondent from applying under Section 17, as no agreement existed barring such an application. The right under Section 17 is statutory and cannot be waived in the manner suggested by the appellant.

The appellant argued the arbitrator failed to address possession, but the Court found the arbitrator's decision allowing the respondent to operate the outlet addressed this issue. The agreement indicated the respondent owned the land and equipment, and the appellant was merely a licensee. The arbitrator's order aligned with the agreement and protected the appellant's rights by prohibiting third-party rights until arbitration concluded.

The appellant's argument for specific enforcement of the agreement was unsupported. The Court noted agreements of this nature are not specifically enforceable, and the remedy is for compensation. The arbitrator's decision to allow the respondent to operate the outlet, while preserving the appellant's right to compensation, was consistent with legal principles.

The appellant challenged the arbitrator's reference to public interest, arguing equities favored them as a widow of a defense official. However, the Court upheld the arbitrator's concern for public interest, given allegations of tampering with measuring instruments. Allowing the appellant to operate could harm customers, who could not be compensated for short supply.

The appellant raised the issue of the arbitrator being functus officio, arguing the mandate expired before the order. However, the Court found the appellant's conduct implied consent to extend arbitration, as they proceeded with their application under Section 17. The appellant could not challenge the arbitrator's mandate after seeking relief under the same proceedings.

The Court noted the 1996 Act does not specify a time limit for awards, but the parties' conduct extended arbitration. The appellant did not raise the issue before the arbitrator or seek court intervention under Section 14. The appeal under Section 37 assumes ongoing arbitration proceedings, and the appellant's argument was deemed inconsistent.

The Court dismissed the appeal, noting the appellant's reliance on earlier orders was misplaced. The appeal was dismissed with costs of Rs 35,000/- payable to the Delhi Legal Services Authority, with the respondent ensuring compliance during arbitration.