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ASSIGNMENT ON:

ARBITRATION PROCEEDINGS IN INDIAN OIL CORPORATION

SUBMITTED TO: SUBMITTED BY:

MR. VIBHANSHU GOSWAMI NIVEDITA SINGH

ASST. MANAGER (LAW) IV YEAR

MARKETING DIVISION DR. RAM MANOHAR

IOCL LOHIA NATIONAL

LUCKNOW LAW UNIVERSITY,

LUCKNOW.
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ACKNOWLEDGEMENT

“Words can never convey what deeds have done.”

Writing a project on any topic is never a single man’s job. I am overwhelmed in all humbleness
and gratefulness to acknowledge my depth to all those who have helped me to put these ideas,
well above the level of simplicity and into something concrete.

I am very thankful to my mentor Mr.Vibhanshu Goswami for his valuable help. He was always
there to show me the right track when I needed his help. With the help of his valuable
suggestions, guidance and encouragement, I was able to complete this project.
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TABLE OF CONTENTS

BACKGROUND…………………………………………………………………………….4

INDIAN OIL CORPORATION LIMITED V AMRITSAR GAS SERVICE AND ORS……5

SUNDAR SINGH KURMI V INDIAN OIL CORPORTAION………………………………7

GURU NANAK SERVICE STATION V INDIAN OIL CORPORATION………………….8

CONCLUSION………...…………………………………………………………………...11

BIBLIOGRAPHY…………………………………………………………………………..12
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BACKGROUND

Arbitration has emerged as the preferred mechanism for the resolution of commercial
disputes amongst various dispute resolution mechanisms available. One of the reasons for
proliferation of arbitration has been the flexibility provided to the parties to conduct arbitral
proceedings as per the law chosen by them, along with arbitrators of their choice and at a
venue and place convenient to parties, as opposed to a court proceeding. Moreover, party
autonomy being the thumb rule in arbitral proceedings, parties is also generally permitted to
agree upon the procedure governing the resolution of disputes.

The arbitral process is normally accompanied by certain procedural safeguards such as

interlocutory or interim measures that safeguard parties during the pendency of proceedings.

It has been observed that parties engage in dilatory tactics to delay proceedings or prejudice
rights of opposite parties by inter alia dissipating assets or interfering with the functioning of
bodies. (In case of a company where both parties are stakeholders). In such a situation, the
final relief granted by a tribunal may be rendered nugatory or meaningless unless the arbitral
tribunal or court is able to safeguard the rights of parties during the pendency of the arbitral
proceedings. Therefore, in the intervening period between juncture at which the ‘dispute’ arose
(in certain circumstances even before the commencement of arbitration) and till the execution of
the award, certain interim measures may be necessary to protect a party’s rights and ensure that
justice is done.
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Indian Oil Corporation Limited V Amritsar Gas Service and Ors1

A Distributorship Agreement was made between the appellant Corporation and the respondent
for sale of the Liquefied Petroleum Gas (LPG) Cylinders for the consumers as per the terms and
conditions specified therein some of. The appellant-Corporation received certain complaints
about the working of respondent which were acts prejudicial to the interest, reputation and
products of the appellant-Corporation.

Invoking clause 27 of the Agreement the appellant-Corporation terminated the distributorship.

Aggrieved by the termination of the distributorship, respondent filed a suit for a declaration that
termination of the distributorship was illegal and void and that the distributorship continued
notwithstanding the said termination.

Supreme Court elaborated upon what determinable means. The distributorship agreement
between the parties contained a clause ‘termination for convenience’ clause, which empowered
the parties to terminate the agreement by giving 30 days notice to either party without providing
reason. Supreme Court held that such a clause falls within the category of determinable and
hence specific performance cannot be granted under Section 14 of the Specific Relief Act, 1963.
It was further noted by the Supreme Court that the relief that could be granted in such cases was
compensation for loss of earning during the notice period. In another judgment of 2001, the
Supreme Court further reaffirmed this view. They held that a contract unilaterally terminable
before delivery of possession is ‘determinable’ in nature.

‘Termination for Convenience’ Clause means a typical commercial contract which usually
contains a mechanism for exiting or terminating the contract. Such provision in a contract is
termed as a ‘termination clause’. The termination clause is basically of two kinds, a) termination
with cause and b) termination without cause. The ‘termination without cause’ is also called as
termination for convenience clause as the party has an option of exiting the contract after
expiration of a pre- determined notice period, without providing any reason.

1
[1990]Supp3SCR196
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Specific Relief Act, 1963 governs the principles relating to specific performance and injunctions.
Section 14 of the said Act reads ‘Contracts not specifically enforceable’ and Section 14 (1) reads
as follows:

The following contracts cannot be specifically enforced, namely:—

(a) a contract for the non-performance of which compensation is an adequate relief;

(b) a contract which runs into such minute or numerous details or which is so dependent on the
personal qualifications or volition of the parties, or otherwise from its nature is such, that the
court cannot enforce specific performance of its material terms;

(c) a contract which is in its nature determinable;

Section 14 (1) (c) uses the term ‘determinable’, which means the contracts which are by nature
revocable. If a contract is by nature determinable, it will be hit by Section 14(1)(c) and cannot be
specifically enforced. A contract providing for a termination for convenience clause, allowing a
defendant to terminate the contract without notice and without assigning any reason, has been
held as determinable in nature and therefore not specifically enforceable.2

2
Avtar Singh, Contract and Specific Relief, Eastern Book Comapny, 11th ed, 2013, See pp.847-849.
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Sundar Singh Kurmi V Indian Oil Corportaion

The present matter was placed before the arbitrator on an order passed by the Hon'ble Allahabad
High court in a writ petition. In the writ petition, an order was challenged whereby LPG
distributorship of the claimant was terminated.
The claimant (Sundar Singh Kurmi) was granted distributorship of LPG for home use for Pali,
district Lalitpur. In the name of 'Jai Indane Gas Service'. The claimant was running the firm
distributorship successfully having no complaint of any nature recorded against him by any
consumer or any other sources.

Since, claimant had to frequently visit places outside Lalitpur he intended that his wife may be
allowed to be inducted as a partner in Jai Indane Gas service, for this an application was sent to
the Senior regional Manager, IOC, Lucknow.
The distributorship was suspended on the ground that the wife of the claimant had informed the
officials of the company that the claimant has been jailed. To protect the interests of the
consumers of that area so that the supply was not affected and to protect the corporate's interest,
the supply was suspended with immediate effect.
On the other hand the supply of the agency in question was attached to another gas agency.

Since, the decision is still pending, in my view; the termination of the agency was valid.
Because,

1. Clause 27(d) of the distribution agreement read

"Notwithstanding anything to the contrary herein contained, the corporation shall also be at
liberty at its entire discretion to terminate this agreement forthwith: if the distributor or nay
partner in the distributor's firm or any whole time office bearer of the Cooperative Society
appointed as Distributor hereunder shall be involved in any criminal offence relating to moral
turpitude". This clause was violated as the claimant was convicted and awarded imprisonment
for charges under sections 147,148,149 and 302 IPC and sections 25, 27 and 30 of Arms Act.

2. When the claimant submitted an application for induction of his wife as partner in the
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distributorship firm, the Corporation had advised him to submit the reconstitution proposal along
with necessary documents.

3. Since the claimant has not submitted the reconstitution proposal in the prescribed format as
required, in the guidelines of the corporation, there was no question of reconstituting the
proposal and inducting the claimant's wife as a partner in the distributorship firm. Also the
claimants have no inherent right of reconstitution of the distributorship firm and it is the
discretion of the corporation to allow or reject the request.

4. The advertisement published by the Corporation, inviting applications for allotment of gas
agency at Pali, was justifiable because the public cannot be made to suffer the consequences of
the claimant's act.

Guru Nanak Service Station V Indian Oil Corporation

Guru Nanak Service station, the claimant, was operating a 'B' sight retail outlet dealership
agreement under dealership agreement between Indian Oil Corporation and the partners of Guru
Nanak Service Station. The agreement was for the term of 15 years. The claimant was also given
work order for operating truck tanker lorry to deliver MS and HSD from the oil depot
corporation to the retail outlet to the of the claimant firm.

There are three multiproduct dispenser Units (DUs) at the Retail outlet of the Claimant. An
inspection of the retail of the claimant firm was made by joint inspection team comprising of the
Area Rationing Officer, Senior Inspector, Weights and Measures Department, Mirzapur, the
sales officers (Retail Sales, Mirzapur) of the Indian Oil Corporation and the representative of the
Original Equipment Manufacturer (OEM) Midco and an inspection report was given by the team
with a finding that the weights and measures seal provided on the calibration point was found
broken and tampered in Midco DU (Model No. 12 (BC44409V), one of the three MPD's at the
retail outlet.
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A fact finding letter was issued by the Chief Divisional Retail Sales Manager of the Indian Oil
Corporation to the firm through its partners referring to the inspection made and the
irregularities observed by the Committee that the weights and measures seal had been found
broken and tampered in Midco DU and it was stated that this irregularity found at the retail outlet
was in violation of the provisions and clauses of the Marketing Discipline Guidelines, 2012 as
well as dealership agreement dated. It was followed by a show cause notice from the Chief
Divisional Retail Sales Manager for Indian Oil Corporation in which it was stated that the
irregularities are in breach of the provisions of the Dealership Agreement and Clauses
no.5.1.2(b) of MDG 2012. The Claimant submitted their reply to the show cause notice.

However, the Indian Oil Corporation by letter of Chief Divisional Retail Sales Manager,
Allahabad Divisional Office informed that the reply was not found satisfactory by the competent
authority and therefore, the competent authority has decided to terminate the retail outlet
dealership of the claimant in line with Clause 8 and 42 read with Clauses 45 of the Dealership
Agreement dated.

1. Since the award given was based on facts, affidavits and witness examination, in the statement
of claim it was alleged that during the annual stamping, the official of the weights and measures
department again stamped the old sealing wire which was stamped a year ago, instead of putting
a new sealing wire, the official told the claimant that he was not equipped with the new sealing
wire.

2. The government order issued by state government in furtherance of an order issued earlier for
inspection and raid on petrol and diesel pumps, mentioning certain officials who will be involved
while the inspection.

3. During the inspection at the depot, one of the officials of W & M department pulled the
sealing wire behind the back of the inspection team.

4. It was also mentioned by the claimant that it was the he who pointed out the old sealing wire
which broke off from the rusted end and soon the incident was reported to the officials.
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An FIR against the claimant under sections 3/7 of the Essential Commodities Act, 1955 was
filed. For the calibration seal of one of the Multi Product Dispensers was broken. After the
inspection the dealership of the retail outlet was terminated. In my opinion, it was the duty of the
claimant to complain about the official to the Area manager for not being equipped with the new
sealing wire.

"Clause 45 of the Dealership Agreement provides for the conditions in which the agreement can
be terminated. The relevant portion of clause 45 -

a) if the dealer shall commit a breach or default of any term of the terms, conditions and
stipulations contained in this Agreement.

(1) if the dealer does not adhere to the instructions/guidelines issued time to time by the
Corporation in connection with Marketing Discipline and/or safe practices to be followed be him
in the sale or supply and shortage of the Corporation's products or otherwise."

Breach of the guidelines in connection of the Marketing Discipline was a ground under clause
45(1) of the Dealership Agreement to terminate the Dealership Agreement. Since the W&M seal
in calibration point was found broken and tampered in Midco DU, the dealership was terminated.
The dealership was terminated on grounds under contractual provisions and breach of the
Marketing Discipline Guidelines and not for any offence in considering the breach of any
provision of the control order or under the Essential Commodities Act or for any offence under
Legal Metrology Act.
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CONCLUSION

Arbitration providers tout their voluntary efforts to ensure that arbitration provides due-process
protections and unbiased decision-makers. However, while voluntary efforts by arbitration
service providers and corporations to enhance due process in their arbitration procedures are
desirable, they do not address the fundamental problem that the current law of arbitration allows
the corporation to decide what type of arbitration procedure to impose on its employees or
customers. Voluntary measures cannot prevent corporations that want to protect their interests—
at the expense of employees and customers—from introducing provisions such as class-action
waivers and loser-pay clauses that cut off access to justice. Nor can they adequately police
against repeat-player bias.
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BIBLIOGRAPHY

BOOK:

 Avtar Singh, Contract and Specific Relief, Eastern Book Comapny, 11th ed, 2013.