Court Rules No Arbitration Clause Exists in Ad Hoc Dealership Agreement with HPCL
The Jammu and Kashmir High Court, presided over by Justice Rajnesh Oswal, dismissed a petition filed by Kanta Devi against the Union of India and others, asserting that no arbitration agreement exists between the petitioner and the respondent, Hindustan Petroleum Corporation Limited (HPCL). The decision, dated May 12, 2026, clarifies legal positions regarding the incorporation of arbitration clauses in ad hoc dealership agreements.
Kanta Devi, the petitioner, was appointed as an ad hoc dealer by HPCL to operate a retail outlet at Sungal Morh, Akhnoor, after the termination of the previous dealership. The arrangement was initially for one year, starting from May 15, 2018, with a possible extension. However, the tenure was extended multiple times due to the COVID-19 pandemic.
The petitioner argued that her ad hoc arrangement should continue until a regular dealer was appointed and sought the appointment of an arbitrator based on an alleged arbitration clause in the Standard Dealership Agreement. Devi's claim was grounded in the purported incorporation of Clause 66 from the Standard Dealership Agreement into her ad hoc agreement. However, the court found no specific reference to an arbitration clause in the ad hoc agreement and concluded that general references to terms and conditions were insufficient to establish such an agreement.
The court referenced significant precedents, including the Supreme Court's decisions in "M/s Inox Wind Ltd. v. M/s Thermocables Ltd." and "M.R. Engineers & Contractors. (P) Ltd. v. Som Datt Builders Ltd.", emphasizing the necessity of a clear and specific reference to incorporate an arbitration clause from another contract. Justice Oswal asserted that the intent to incorporate an arbitration clause must be explicitly clear, and a general reference to standard terms does not suffice.
HPCL argued that the petitioner's ad hoc dealership tenure was legally capped at two years, aligning with their policy. The policy mandates fresh selection processes if a retail outlet operation extends beyond two years, which occurred in Devi's case with the appointment of a new ad hoc dealer, Mr. Ajay Mahajan.
In conclusion, the court dismissed the petition, affirming that no arbitration agreement existed between the parties. The judgment underscores the legal principle that arbitration clauses from separate contracts cannot be assumed to apply without explicit incorporation, thereby setting a precedent for similar disputes.
Bottom line:-
Arbitration clause from another contract cannot be incorporated into an agreement unless there is a specific reference to the arbitration clause itself. General reference to terms and conditions is insufficient to establish an arbitration agreement.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 11(6)
Kanta Devi v. Union of India, (Jammu And Kashmir) : Law Finder Doc id # 2897242
