Arbitral award for specific performance and damages in dealership agreement declared void due to patent illegality.
In a significant ruling, the Calcutta High Court, presided over by Justice Ravi Krishan Kapur, has set aside an arbitral award in favor of Tapas Kumar Das in a dispute with Indian Oil Corporation Ltd. The Court found the award to be vitiated by patent illegality, primarily due to the Arbitrator's decision to grant specific performance of a determinable dealership contract and award damages without substantial evidence.
The dispute arose from a dealership agreement dated March 8, 2004, appointing Das as a distributor to operate a petrol pump. Following a failed inspection in 2011, Indian Oil initiated termination proceedings against Das, leading to arbitration. The Sole Arbitrator's award, dated July 30, 2018, granted Das the right to continue operating the retail outlet and awarded Rs. 50 lakhs for loss of reputation and goodwill.
Justice Kapur emphasized that specific performance of a determinable contract, as outlined in Sections 14 and 16 of the Specific Relief Act, 1963, cannot be enforced. The Arbitrator's decision to restore the dealership was deemed contrary to well-established legal principles and the contract's express terms, which allowed for termination by either party with appropriate notice.
The Court also critiqued the Arbitrator's reliance on constitutional principles in a purely contractual dispute, labeling it as unwarranted and contributing to the award's patent illegality. Furthermore, the damages awarded for loss of reputation and goodwill were found to lack evidentiary support, rendering the assessment unreasoned and unjustified.
Justice Kapur's judgment underscores the importance of adhering to the express terms of a contract and substantive Indian law in arbitral proceedings. The decision serves as a reminder that arbitral awards must be grounded in evidence and legal principles, failing which they are susceptible to being set aside for patent illegality.
The Court's ruling allows for further legal steps by the parties, while a request for a stay of the judgment's operation by the respondent was denied.
Bottom Line:
Arbitration - Specific performance of a determinable contract cannot be enforced; damages must be supported by evidence; arbitral award disregarding contractual terms, statutory provisions, or judicial precedent is vitiated by patent illegality.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 28(3), 34(2)(b)(ii), 34(2A); Specific Relief Act, 1963 Sections 14, 16.
Indian Oil Corporation Ltd. v. Tapas Kumar Das, (Calcutta) : Law Finder Doc Id # 2826343
