2022 (1) TMI 1483 - HC - Indian Laws

Arising of dispute between the rival parties to enable the respondent to invoke Section 9 of the 1996 Act - absence of any termination of the dealership - HELD THAT - The show cause notice was issued on 31.03.2021 asking the petitioner to show cause as to why his dealership agreement be not terminated for certain lapses for discovery of illegalities prima facie demonstrating manipulation of dispensing unit operation and delivery of fuel from dispensing unit. In response the respondent initially sought time on 03.05.2021 vide Annexure A/3 which was granted by extending the period of submission of reply by 11.6.2021. As per the contents of para 4.3 of this appeal the IOC has submitted that the respondent had filed reply to the show cause notice and thereafter was given a personal hearing on 09.09.2021 vide Annexure R/5. It is vivid that on the IOC issuing a show cause notice and respondent refuting the same by way of reply and in the personal hearing dispute between the rival parties germinated making available cause of action to the respondent to invoke Section 9 of the 1996 Act. Conclusion - A dispute under the 1996 Act arises from the assertion of a claim by one party and its refutation by another independent of any final decision on the matter. No case for interference is made out. Appeal stands dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Court was whether a dispute had arisen between the parties sufficient to allow the respondent to invoke Section 9(1)(d) of the Arbitration & Conciliation Act, 1996 (the "1996 Act") in the absence of a final decision by the appellant, Indian Oil Corporation Ltd. (IOC), regarding the termination of the dealership agreement.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework primarily involves Section 9(1)(d) of the 1996 Act, which allows a party to seek interim measures of protection before or during arbitral proceedings. The concept of a "dispute" is central to this provision, although it is not explicitly defined in the 1996 Act. The Court relied on dictionary definitions to interpret the term "dispute" and considered precedents that elucidate when a dispute is deemed to arise.

Court's Interpretation and Reasoning

The Court interpreted the term "dispute" using various dictionary definitions, concluding that a dispute arises when there is an assertion by one party and a refutation by another. The Court emphasized that a dispute is inherently bilateral, requiring disagreement between at least two parties. The Court dismissed the appellant's argument that a dispute requires a final decision on the matter, clarifying that the assertion and denial itself constitute a dispute.

Key Evidence and Findings

The key evidence involved the issuance of a show cause notice by the IOC on March 31, 2021, alleging certain irregularities by the respondent in the operation of the dealership. The respondent refuted these allegations in their reply and during a personal hearing. This exchange of assertions and denials was deemed sufficient by the Court to constitute a dispute under the 1996 Act.

Application of Law to Facts

Applying the law to the facts, the Court found that the issuance of the show cause notice and the subsequent refutation by the respondent created a dispute, thereby entitling the respondent to seek interim relief under Section 9(1)(d) of the 1996 Act. The Court held that the absence of a final decision by the IOC did not preclude the existence of a dispute.

Treatment of Competing Arguments

The appellant argued that no dispute existed as no final decision regarding the termination had been made. The respondent countered that the issuance of the show cause notice itself constituted a dispute. The Court sided with the respondent, emphasizing that a dispute arises from the assertion and refutation, not necessarily from a final decision.

Conclusions

The Court concluded that the respondent was justified in invoking Section 9(1)(d) of the 1996 Act based on the existence of a dispute arising from the show cause notice and the subsequent refutation. The Court found no jurisdictional error in the Commercial Court's decision to grant interim relief to the respondent.

SIGNIFICANT HOLDINGS

The Court established that a dispute under the 1996 Act arises from the assertion of a claim by one party and its refutation by another, independent of any final decision on the matter. This interpretation aligns with the dictionary definitions of "dispute" and supports the respondent's right to seek interim measures under Section 9(1)(d) of the 1996 Act.

The Court held that the application under Section 9(1)(d) did not suffer from any jurisdictional error, affirming the Commercial Court's decision and dismissing the appeal.