Supreme Court Rules: Court Cannot After Setting Aside the Award, Proceed to Grant Further Relief by Modifying Award

Supreme Court Rules: Court Cannot After Setting Aside the Award, Proceed to Grant Further Relief by Modifying Award

The Supreme Court by its division judge’s bench of Justices K.M. Joseph and B.V. Nagarathna observed that, it is beyond the pale of any doubt that the Court cannot, after setting aside the award, proceed to grant further relief by modifying the award.

The brief facts of the case are that in 2003, Indian Oil Corporation (IOC) entered into a petrol/hsd pump dealer agreement with the respondent and thereafter, there was a physical interaction in the course of which IOC insisted that the request of the respondent be notarized and the same was done. IOC took possession of the petroleum outlet in 2006 and then a new dealer came to be awarded the dealership.

An appeal was filed by the respondent before the General Manager of IOC which came to be dismissed and this led to the matter being referred to arbitration. The Sole Arbitrator held that the action of the respondent in withdrawing was not in accordance with the law and that the Letter of Intent issued in favor of the new dealer was not flawed.

The issue revolved around Clause (3) of the dealer agreement.

The Supreme Court while noting the facts observed that in the light of the jurisdiction of the Court to interfere with a finding of the arbitrator within his jurisdiction, it was of the view that the High Court had palpably erred.

“Clause (3) permits either party to bring about a premature termination of the contract. … we are unable to find that the view taken by the arbitrator in the facts, can be characterized as being perverse. It is undoubtedly a plausible view. It closes the door for the court to intervene,” the Court observed.

The Court asserted that the finding of the arbitrator cannot be described as one betraying “a patent illegality.”

The Court held, “The High Court also erred in proceeding to order restoration of the dealership to the first respondent after setting aside the award and going further by leaving it open to the first respondent to claim damages. It is beyond the pale of any doubt that the Court cannot, after setting aside the award, proceed to grant further relief by modifying the award. It must leave the parties to work out their remedies in a given case even where it justifiably interferes with the award.”

The Court observed that the High Court in a proceeding under Section 37 of the Act acted illegally in interfering with the finding of the Arbitrator and what is more, a finding found acceptable to the District Judge under Section 34 of the Act that there was acceptance vide letter.

Accordingly, the Court allowed the appeals, set aside the judgment of the High Court, and restored the award.

Advocate Vikram Mehta appeared on behalf of the appellants while Senior Advocate Devdatt Kamath and Advocate Shailesh Madiyal appeared on behalf of the respondents.