INDIAN OIL CORPORATION LTD.versusAMRITSAR GAS SERVICE AND ORS.

                                                                                  '

                    INDIAN OILORPORATION LTD.
A
                                v.
                  AMRITSAR GAS SERVICE AND ORS.

                             NOVEMBER 19, 1990

B                [S. RANGANATHAN, J.S. VERMA AND
                       M. FATHIMA BEEVI, JJ.J

          Arbi1ration Act, 1940-Seclion 34-Terminalion of distributor-
    ship agreement-Granting of relief-A ward of compensation for no/ice
    period.
c          Arbilration Act, 1940-Section JO-Objection /0 award-Grant-
    ing of relief on the finding of breach of c_ontract con1rary /0 Seclwn
    14( 1) of the Specific Relief Ac1--An error of law apparent on the face of
    award.

D         Arbitration Act, 1940-Section JO-Objection to award-Direc-
    tion based on finding of fact-Not to be interfered with.

         Arbitration Act, 1940-Section JO-Objection to award-Refe-
    rence to arbitrator by Supreme Court-Refusal to consider counter-
    Claim by arbitrator-An error of lQW apparent on the face of the award,
E
         A Distributorship Agreement was made between the appellant-
    Corporation and the respondent No. 1, for sale of the Liquefied Pet-
    roleum Gas (LPG) cylinders for the consumers as per the terms and
    conditions specified therein some of.

F        The appellant-Corporation received certain complaints about the
    working of respondent No. 1 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.
G
           Aggrieved by the termination of the distributorship, respondent
    No. 1 filed a suit in the Court of Sub-Judge Ist Class, for a declaration
    that termination of the distributorship was illegal and void; and ·that the
    distributorship continued notwithstanding the said termination.

H         The appellant-Corporation filed an application under Section 3A

                                        196
                    1.0.C. v. AMRITSAR GAS SERVICE                     197

of the Arbitration Act for staying the suit, which was rejected by the
                                                                               A
trial Court.

      The appeal against thRt order and thereafter a revision to the
High Court were also dismissed giving rise to the present appeal by
special leave.

      This Court referred the disputes to an arbitrator and appointed a
retired Judge of the Court as arbitrator. Later this Court appointed a
retired Judge of the High Court of Punjab & Haryana in the place of the
earlier arbitrator.

       The arbitrator, while making the award held that the appellant•
Corporation committed breach of contract and was liable to remedy the          c
breach by restoration of the distributorship and also liable to pay com·
pensatlon. The counter-claim made by the appellant-Corporation in the
written statement was not decided by the arbitrator on the ground 1hat
it did not come within the scope oftbe reference.
                                                                               D
       Respondent No. 1 filed an application to direct the arbitrator to
file the award and to make the award a rule of the Court and to pass a
decree in terms thereof.                                                ·

      The appellant-Corporation filed objections under Section 30 of
the Arbitration Act, contending that the validity of the award has to be       E
tested on the principles of private law and the law of contracts, and not
on the touchstone of constitutional limitations; that the relief of restora-
tion of the contract granted by the arbitrator was contrary to the pro•
hibition contained in Sections 14 and 16 of the Specific Relief Act.

      Respondent No. 1 contended that there was a presumption of               fl
validity of award and the objections taken must be ignored; and that the
termination of distributorship cast stigma on the partners of the fmn;
that connter-claim of the appellant-Corporation was rightly not con•
sidered since it was not made before the order of reference; that the refe•
rence made being of all disputes lb the suit, the nature of relief to be
granted was also within the arbitrator's jnrisdiction; and interest also       O
must be awarded to the respondent.

      This Court disposing of the application of the respondent No. 1
and the objections of the appellant,

      HELD: 1. The fmding in the award being that the Distributorship          H
     198         SUPREME COURT REPORTS                  [1990] Supp. 3 S.C.R.

A    Agreement was revokable and the same being admittedly one for
     rendering personal service, the relevant provisions of the Specific Relief
     Act were automatically attracted. Sub-section (1) of Section 14 of the
     Specific Relief Act specifies the contracts which cannot be specifically
     enforced, one of which is 'a contract which is in its nature deter-
B    minable'. [209C-E]


           2. Agreement being revokable by either party in accordance with
     clause 28 by giving thirty days' notice, the only relief which could be
     granted was the award of compensation for the period of notice, that is
     30 days. [2108-D]

c       3. Granting the relief of restoration of the distributorship even on
  the f"mding that the breach was committed by the appellant-Corpora-
  tion is contrary to the mandate Is Section 14(1) of the Specific Relief Act
  and there is an error of law apparent on the face of the award which is
  stated to be made according to 'the law governing such cases'. The
D grant of this relief in the award c811Ilot be sustained. [209D-F]

        4. The appellant-Corporation bas also been directed in the award
  to return the amounts of two bank drafts on the ground that no supplies
  were made to the plaintiff-respondent No. 1 against the amounts. This
  direction was based on a finding of fact which cannot be gone into and the
E same cannot be interfered with. [209G-H]

           Since the reference to the arbitrator was made by this Coutt in an
     appeal arising out of refusal to stay the suit under Section 34 of the
     Arbitration Act, and the reference was made of all disputes between the
     parties in the suit, the occasion to make a counter-claim in the written
fl   statement conld arise only after the order of reference. The pleadings of
     the parties were med before the arbitrator' and the reference covered
     all disputes between the parties in the suit. Accordingly, the counter-
     claim could not be made at any earlier stage. Refusal to consider the
     counter-claim disclosed an error of law apparent on the face of the
     award. [210E-G]
G
          M/s. Dwarkadas Marfatia and Sons v. Board of Trustees of the
     Port of Bombay, [1989] 3 SCC 293; Mahabir Auto Stores & Ors. v.
     Indian Oil Corporation & Ors., JT (1990) 1 SC 363; Km. Shri/ekha
     Vidyarthi etc. etc. v. State of U.P. & Ors., JT (1990) 4 SC 211, referred.

H          [Demion based oo private law rights alone referred since the plaintiffs'
                 1.0.C. v. AMRITSAR GAS SERVICE [VERMA, J.]              199

     claim was confined duly to private law rights and not based on public
     law rights.]                                                               A


           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5701
     of 1985.
                                      WITH
                                                                                B
           Civil Misc. Petition No. 3053 of 1987.

          From the Judgment and Order dated 5.11.1984 of the Punjab
     and Haryana High Court in C.R. No. 2340 of 1984 .
.-
            Harish N. Salve, R. Shakdhar, S. Singhi, Ms. P. Shroff, S.S.
     Shroff, R. Sasiprabhu and Ms. Suruchi Aggarwal for the Appellant.          c

           D.V. Sehgal and N.K. Agarwal for the Respondents.

           The Judgment of the Court was delivered by
                                                                                D
           VERMA, J. This appeal by special leave is by the Indian Oil
     Corporation Ltd. against the judgment of the Punjab and Haryana
     High Court in Civil Revision No. 2340 of 1984, decided on 5. 11.1984,
     dismissing the revision against the order dated 28. 7. 1984, passed by
     the Additional District Judge. Amritsar. in C.M.A. No. 22 of 1983.
     affirming the order dated 19.10.1983 of the Sub-Judge, 1st Class,          E
     Amritsar, in Suit No. 376 of 1983 by which the appellant's application
     made under Section 34 of the Arbitration Act for stay of the suit was
     dismissed. The brief facts giving rise to this appeal and indicating the
     points for decision herein are now stated.

           A Distributorship Agreement dated 1.4.1976 was made between          F
     the Indian Oil Corporation Ltd. (hereinafter called as 'the Corpora-
     tion') and the Amritsar Gas Service. respondent No. 1, as distributor
     of the Corporation for sale of the Corporation's Liquefied Petroleum
     Gas (LPG) known as 'Indane' in cylinders only for household consu-

..   mers and commercial consumers in the area at Amritsar, specified in
     the Agreement. The terms and conditions of distributorship were
     specified in the Agreement. Clause 27 of the Agreement provided for
                                                                                G

     termination of the Agreement by the Corporation forthwith on the
     happening of any of certain specified events. Clause 28 permitted
     either party 'without prejudice to the foregoing provision or anything
     to the contrary· contained in the Agreement to terminate the Agree-
     ment by thirty 'days' notice to the other party 'without assigning any     H
     200        SUPREME COURT REPORTS                [ 1990] Supp. 3 S.C.R.

     reason for such termination'. Clause 37 provided for adjudication of
A
     any dispute·or difference of any nature by arbitration.

         It appears that the appellant-Corporation received certain .
  complaints about the working of the distributorship alleging unautho-
  rised connections being given and tampering of the waiting list of
B customers by the distributor which were acts prejudicial to the
  interest, reputation and products of the appellant-Corporation.
  Accordingly, the appellant-Corporation invoked clause 27 of the Dis-
  tributorship Agreement and by its letter No. LPG/001 dated
   11.3.1983, it terminated forthwith the distributorship. The said notice
  reads as under:                                                                -.
               "M/s. Amritsar Gas Service,
               Madan Mohan Malviya Road,
               Amritsar City.

               Dear Sirs,
D
                     Re: Indane Distributorship at Amritsar

               "Please refer to the LPG Distributorship Agreement dated
               1st April, 1976 executed between you and the Ind'•n Oil
               Corporation. Clause 27 of the Distributotship Agreement
lE             reads as under:

                     "27: Notwithstanding anything to the contrary
                     herein contained, the Corporation shall also be at
                     liberty at its entire discretion to terminate this Agree-
                     ment forthwith upon or at any time after the happen-
                     ing of any of the following events, namely:

                     (h) If the Distributor does not adhere to the instruc-
                     tions issued from time to time by the Corporation in
                     connection with safe practices to be followed by him
                     in the supply and storage of the Corporation's pro-
G                    ducts or otherwise;
                                                                                 '
                     (i) If the Distributor shall give out unauthorised con-
                     nections of any person without the Corporation
                     receipt/subscription voucher or otherwise howsoever;

H                    (n) If the-Distributor shalt either by himself or by his
 1.0.C. v. AMRITSAR GAS SERVICE [VERMA, J.]               201

     servants or agents commit or suffer to be committed·        A
     any act which, in the opinion of the Regional
     Manager of the Corporation for the time being at
     New Delhi, whose decision in that behalf shall be
     final, is prejudicial to the interest or good name of the
     Corporation or its products; the Regional Manager
     shall not be bound to give reasons for such decision."      13
It has come to our knowledge that either you or your
servants or agents have committed the followings;

1. That you have released unauthorised connections by
tampering with the waiting list registration record.
                                                                 c
2. That you have issued connections to those people who
had not booked themselves for gas connections.

3. That you have sold refill to unauthorised customers.
                                                                 D
4. That you have issued duplicate issue slips.

The above acts jointly and severely in my opinion are acts
which are prejudicial to the interest or good name of the
Corporation or its products and accordingly in exercising
my right under the above noted clause, I hereby order that       E
the LPG distributorship agreement stands forthwith ter-
minated and cancelled and you shall cease to be our LPG
distributor at Amritsar with immediate effect.

You are hereby called upon to settle all your accounts with
the Corporation and immediately handover, return and F
redeliver the entire stock of LPG filled, empty cylinders,
equipments lying with you. You are hereby also advised to
handover all the documents, stationery and other relevant
papers of the said distributorship to the authorised rep-
resentative of the Corporation who would be calling on you
shortly.                                                    G

                      Yours faithfully,
for and on behalf of Indian Oil Corporation Ltd.
                            sd/-
                      (B.K. BAKSHI)
               "GENERAL MANAGER"                                 H
    202         SUPREME COURT REPORTS                [1990] Supp. 3 S.C.R.

A         Aggrieved by termination of the distributorship in this manner,
    respondent No. 1 filed a suit in the Court of Sub-Judge, 1st Class,
    Amritsar, on 23.9.1983, impleading as defendants the appellant-
    Corporation, some of its officers and some other persons to whom the
    distributorship for that area was tq be given. The relief claimed iri the
B   suit in substance was for a declaration that termination of the dis-
    tributorship of the plaintiff-respondent No. 1 was illegal and void; that
    the distributorship continued notwithstanding the said termination;
    and some other consequential reliefs. It may be mentioned that the
    suit was based entirely on the terms and conditions of the Distributor-
    ship Agreement and inapplicability to the facts of clause 27 permitting
    forthwith termination without any notice or opportunity to show cause
c   being given to the distributor. The appellant-Corporation filed an
    application under Section 34 of the Arbitration Act for staying the suit
    which was rejected by the trial Court. The appeal against that order
    and thereafter a revision to the High Court were also dismissed giving
    rise to the present appeal by special leave.
D
          This Court, by its order dated 16.12.1985, while granting special
    leave to appeal, passed the following order:

                "Special Leave granted.

                      We have heard learned counsel for the parties and .we
E
                are of opinion that the disputes between the parties can
                more appropriately be disposed of by arbitration. Subject
                to his consent in that behalf, we appoint Shri A.D. Koshal,
                a retired Judge of this Court, as arbitrator for the purpose
                of deciding the disputes between the parties, the disputes
                being those mentioned in Suit No. 376 of 1983 pending
F
                before the Court of the learned Senior Subordinate Judge,
                Amritsar. Learned counsel for the parties are agreed to the
                appointment of Shri A.D. Kosh al as arbitrator, and are
                further agreed that they will be bound by any award made
                by him and will not question that award in any proceeding
                hereafter ..... .
G
                      The appeal is disposed of accordingly."

          It appears that Shri A.D. Koshal was unable to function as the
    arbitrator and, therefore, a modification was made by this Court's
H   order dated 9.4.1986, as under:
                1.0.C. v. AMRITSAR GAS SERVICE [VERMA, J:I               -203

               "By consent of parties we appoint Mr. B.R . Tuli, a retired
                                                                                 A
               Judge of the High Court of Punjab & Haryana as arbitrator
               tO arbitrate on the dispute between the parties raised in this
               appeal and the dispute in Suit No. 376/83 pending before
               the court of learned Senior Subordinate Judge, Amritsar
                .......... The award will be subject to the provisions of
               the Arbitration Act, including the remedies available             B
               under the Act."

          It is pursuant to the order of reference dated 16.12.1985,
    modified as above by the order dated 9.4.1986 by this Court, that Shri
    B.R. Tuli, a retired Judge of the Punjab and Haryana High Court has
    made the award dated 15.11.1986. On the pleadings of the parties, the
    arbitrator framed the issues as under:
                                                                                 c
               "(1) Whether the termination of plaintiff's distributorship
               was validly effected by the defendant Corporation? ORD.

               (2) If issue No. 1 is decided against the defendant Corpo-        D
               ration, to what relief is the plaintiff entitled? OPP.

               (3) Is the defendant entitled to make the counter-claim as
               stated in the written statement? If so, to what amount is the
               defendant entitled? OPD."
                                                                                 E
    The arbitrator then recorded his decision on the issues framed and
    granted the reliefs as under:

               "I have very carefully considered the evidence, both oral
               and documentary, led in the case and the arguments
               addressed by the learned counsel for the parties. In the light    F
               of the facts and circumstances of the case and the law
               governing such cases, I record my decision on various isslies
               framed in the case as under:-

               Issue No. 1. I hold that the termination of the plaintiff's
•              distributorship was not validly effected by the defendant         G
               Corporation and thus decide this issue in favour of the
               plaintiff.

                Issue No. 2. As a consequence of my decision on Issue No.
                l, the plaintiff is granted a declaration that the termination
'               of its distributorship by the defendant Corporation by           H
A
    204     SUPREME COURT REPORTS                 [ 1990] Supp. 3 S.C.R.

            letter dated l lth March, 1983, was wrongful, invalid and
            not binding on the plaintiff. The plaintiff is held entitled to
                                                                              -
            due compensation flowing from the breach of the contract
            by the defendant Corporation.till the breach of the·contract
            is remedied by the restoration of the distributorship. The
            quantum of compensation will he the commission that the
B           plaintiff would have earned on the supply of L.P. Gas
            cylinders to its customers if the distributorship had not
            been terminated, as per the statement made by the learned
            counsel for the defendant Corporation before the learned
            Subordinate Judge, First Class, Amritsar, on October 15,
            1983 and the order of the learned Court dated October 19,
             1983, based on that statement. The defendant Corporation
c         . shall render account of such commission which would have
            been earned by the plaintiff firm from the date of the
            wrongful termination of the plaintiff's distributorship, i.e.,
            March 14, 1983, to the date on which the distributorship is
            restored to the plaintiff firm. The learned Court, before
D           whom the application is made for making the award the
            rule of the Court, shall pass an appropriate decree in this
            behalf in case the award is upheld. The plaintiff is also held
            entitled to the price of 224 cylinders, which, I hold, were
            filled ones and to the return of 384 regulators and all other
            articles, registers and cards etc., taking into possession by
E           the defendant Corporation from the office premises and
            godowns of the plaintiff firm on March 14, 1983. In Short;
            the position will be restored as it was before cancellatiqn.

                The defendant Corporation shall also return the
           amounts of two drafts of Rs.15,580-83 each dated 8-3-83
F          and 11-3-83 sent to its Jalandhar Depot by the plaintiff firm
           against which no supplies were made to it.

                 Since the defendant Corporation has committed the
           breach of the contract of distributorship of the plaintiff
           firm, I hold it liable to remedy the breach by restoration of
G          the distributorship in the peculiar facts of this case. I con-
           sider it to be an exceptional case for the following reasons:-

           (i) The damages cannot be determined as the number of
           years for which the damages should be awarded cannot be
           fixed nor will damages afford an adequate relief to the ·
H          plaintiff firm.
     1.0.C. v. AMRITSAR GAS SERVICE [VERMA, J.l               205

    (ii) The distributorship of L.P. Gas is not easily available
                                                                     A
    as it is not a commodity which is sold and bought in the
    market.

     (iii) The partners of the plaintiff firm are Engineering
     graduates and were granted the distributorship in the
     category of Unemployed Engineering Graduate to provide          B
     them with the means of livelihood as per the policy of the
     Government. They were appointed by letter dated
     December I, 1971, in pursuance of which they made 'Iii



-
    arrangements by hiring office premises and godowns and
    fitting and furnishing them properly by investing a good
     deal of money to make this business the source of their
     livelihood. They had held this distributorship for 11 years
                                                                     c
     before it was terminated. Those were the years which were
     vital for them to establish themselves in service or business
     and make a career thereof for earning livelihood during the
     rest of their lives. Those precious years have gone never to
    return.                                                          D

    (iv) The distributorship agreement was for an indefinite
    period, that is, till the time it was terminated in accordance
    with the terms contained therein. Since it has not been
    terminated in accordance with clause 27 thereof. under
    which the termination was made, the plaintiff firm is            E
    entitled to the continuance of the distributorship in the
    special circumstances of this case.

          This award will, however, not feller the righ1 of 1he
    defendanl Corporation to terminate 1he dis1ributorship of
    the plaintiff in accordance with the 1erms of the agreemenl      F
    dated April 1, 1976, if and when an occasion arises.

    Issue No. 3.I hold that the counter claim made by the
    defendant Corporation in its written statement cannot be
    determined by me in these arbitrator proceedings for the
    reason that only the dispute between the parties raised in       G
    Civil Appeal No. 5701 of 1985 in the Supreme Court and
    the dispute in Suit No. 376 of 1983, pending in the Court of
     the learned Senior Subordinate Judge, Amritsar, have
    been referred to me for decision. The counter claim made
    by the defendant Corporation in its written statement was
    not there on April 9, 1986, the date of the order of the         H
        206        SUPREME COURT REPORTS                 (1990] Supp. 3 S.C.R.

                   Hon'ble Supreme Court making reference co me. This
A
                   counter-claim is, therefore, left undecided:-

                   RELIEFS: The plaintiff is granted the following reliefs:-

                   ( 1) A declaration that the termination of its distributorship
B                  of L.P. Gas by the defendant Corporation by letter dated
                   March 11, 1983, was wrongful and invalid and not binding
                   on the plaintiff.

                   (2) The defendant Corporation is directed by mandatory
                   injunction to remedy the breach of the contract by restor-
                   ing the distributorship to the plaintiff as it existed on March
c                  14, 1983, before its termination and to return all articles,
                   goods and records taken into possession by the defendant
                   Corporation from the office premises, showrooms and
                   godowns of the plaintiff and to pay to the plaintiff firm the
                   amounts of two demand drafts for Rs.15,580-83 each dated
D                  8-3~83.and 11-3-83 sent to Jalandhar Depot of the defen-
                   dant Corporation for supply or refills and against which no
                   supplies were made.

                   (3) The defendant Corporation shall render account of the
                   commission which the plaintiff firm would have earned if
E                  the distributorship had not been terminated from March 14,
                    1983, to the date of the restoration of the distributorship
                   and to pay the same to the plaintiff firm.

                   (4) The defendant Corporation shall pay the costs of the
                   suit as may be determined by the learned Court. The
F                  defendant Corporation shall also pay to the plaintiff the
                   costs of these arbitration proceedings amounting to
                   Rs.6,750, the amount of fees paid by it to me."

                                                             (emphasis supplied)

G            In short, the arbitrator in his award has held that the appellant-
        Corporation committed breach of contract and on that basis, it has
        been held liable to remedy the breach by restoration of the distributor-
        ship and pay compensation for the reasons given in the award. The
        counter-claim made by the appellant-Corporation in the written state-
        ment was not decided by the arbitrator on the ground that it did not
    H   come within the scope of the reference. Respondent No. 1 has filed an
             1.0.C. v. AMRITSAR GAS SERVICE [VERMA, J.]                207

application (C.M.P. No. 3053 of 1987) to direct the arbitrator to file
                                                                              A
the award and then to make the award a rule of the Court and to pass a
decree in terms thereof. The appellant-Corporation has, however,
filed objections dated 31.8.1987 under Section 30 of the Arbitration
Act. It is this C.M.P. and the objections therein which are to be
decided by us.
                                                                              B
       The arguments advanced by Shri Harish Salve on behalf of the
appellant-Corporation to the validity of the award are these. The first
contention is that the validity of the award has to be tested on the
principles of private Jaw and the law of contracts and not on the touch-
stone of constitutional limitations to which the Indian Oil Corporation
Ltd. as an instrumentality of the State may be subject since the suit
was based on breach of contract alone and the arbitrator also pro-            c
ceeded only on that basis to grant the reliefs. It is urged that for this
reason the further questions of public law do not arise on the facts of
the ·present case. The next contention is that the relief of restoration of
the contract granted by the arbitrator is contrary to law being against
the express prohibition in Sections 14 and 16 of the Specific Relief Act.     D
It is urged that the contract being admittedly revokable at the instance
l>f either party in accordance with clause 28 of the Agreement, the only
relief which can be granted on the finding of breach of contract by the
appellant-Corporation is damages for the notice period of thirty days
and no more. It was then urged that the reasons given in the award for
granting the relief of restoration of the distributorship are untenable,      E
being contrary to law. Shri Salve contended that the propositions of
law indicated in the award and applied for granting the reliefs disclose
an error of law apparent on the face of the award. It was also urged
that the onus of proving valid termination of the contract was wrongly
placed by the arbitrator on the appellant-Corporation instead of
requiring the plaintiff-respondent No. I to prove that the termination        F
was invalid. It was also contended that the failure of the arbitrator to
consider and decide the appellant-Corporation's counter-claim when
the whole suit was referred for decision constitutes legal misconduct.

      In reply, Shri Sehgal on behalf of the respondent No. I con-
tended that there is a presumption of validity of award and the objec-        G
tions not taken specifically must be ignored. This argument of Shri
Sehgal relates to the grievance of the appellant relating to placing the
onus on the appellant-Corporation of proving validity of the termina-
tion. This contention of Shri Sehgal must be upheld since no such
specific ground is taken in"the objections of the appellant. Moreover,
there being a clear finding by the arbitrator of breach of contract by        H
    208         SUPREME COURT REPORTS                [ 1990] Supp. 3 S.C.R.

    invalid termination. the question of onus is really of no significance.
A
    The other arguments of Shri Sehgal are that the termination of dis-
    tributorship casts stigma on the partners of the firm; counter-claim of
    the appellant-Corporation was rightly not considered since it was not
    made before the order of the reference: the reference made being of
    all disputes in the suit. the nature of relief to be granted was also
B   within the arbitrator's jurisdiction; and interest also must be awarded·
    to the respondent.

           We may at the outset mention that it is not necessary in the
    present case to go into the constitutional limitations of Article 14 of
    the Constitution to which the appellant-Corporation as an instrumen-
    tality of the State would be subject particularly in view of the recent
c   decisions of this Court in Mis Dwarkadas Marfatia and Sons v. Board
    of Trustees of the Port of Bombay. [1989] 3 SCC 293; Mahabir Auto
    Stores & Ors. v. Indian Oil Corporation & Ors., JT ( 1990) 1 SC 363 and
    Km. Shrilekha Vidyarthi etc. etc. v. State of U.P. & Ors. IT (1990) 4 SC
    2 11. This is on account of the fact that the suit was based only on
D   breach of contract and remedies flowing therefrom and it is on this
    basis alone that the arbitrator has given his award. Shri Salve is, there-
    fore, right in contending that the further questions of public law based·
    on Article 14 of the Constitution do not arise for decision in the
    present case and the matter must be decided strictly in the realm of
    private Jaw rights governed by the general law relating to contracts
E   with reference to the provisions of the Specific Relief Act providing
    for non-enforceability of certain types of contracts. It is, therefore, in
    this background that we proceed to consider and decide the conten-
    tions raised before us.

          The arbitrator recorded finding on issue No. I that termination
F   of distributorship by the appellant-Corporation was not validly made
    under clause 27. Thereafter, he proceeded to record the finding on
    issue No. 2 relating to grant of relief and held that the plaintiff-
    respondent No. I was entitled to compensation flowing from the
    breach of contract till the breach was remedied by restoration of dis-
    tributorship. Restoration of distributorship was granted in view of the
G   peculiar facts of the case on the basis of which it was treated to be an
    exceptional case for the reasons given. The reasons given state thatthe
    Distributorship Agreement was for an indefinite period till terminated
    in accordance with the terms of the Agreement and, therefore, the
    plaintiff-respondent No. I was entitled to continuance of the distri-
    butorship till it was terminated in accordance with the agreed terms.
H   The award further says as under:                                             '
             1.0.C. v. AMRITSAR GAS SERVICE [VERMA, J.]               209

            "This award will, however, not fetter the right of the
                                                                             A
            defendant Corporation to terminate the distributorship of
            the plaintiff in accordance with the terms of the agreement
            dated April 1, 1976, if and when an occasion arises."

This finding read along with the reasons given in the award clearly
accepts that the distributorship could be terminated in accordance with      B
the terms of the Agreement dated 1.4.1976, which contains the
aforesaid clauses 27 and 28. Having said so in the award itself, it is
obvious that the arbitrator held the distributorship to be revokable in
accordance with clauses 27 and 28 of the Agreement. It is in this sense
that the award describes the Distributorship Agreement as one for an
indefinite period, that is, till terminated in accordance with Clauses 27    C
and 28. The finding in the award being that the Distributorship Agree-
ment was revokable and the same being admittedly for rendering
personal service, the relevant provisions of the Specific Relief Act
were automatically attracted. Sub-section ( 1) of Section 14 of the
Specific Relief Act specifies the contracts which cannot be specifically
enforced, one of which is 'a contract which is in its nature determin-       D
able'. In the present Call!', it is not necessary to refer to the other
clauses of Sub-section (1) of Section 14, which also may be attracted in
the present case since clause (c) clearly applies on the finding read with
the reasons given in the award itself that the contract by its nature is
determinable. This being so granting the relief of restoration of the
distributorship even on the finding that the breach was committed by         E
the appellant-Corporation is contrary to the mandate in Section 14( I)
of the Specific Relief Act and there is an error of law apparent on the
face of the award which is stated to be made according to 'the law
governing such cases'. The grant of this relief in the award cannot,
therefore, be sustained.
                                                                             F.
      Another relief granted in the award is the price of 224 cylinders
and 384 regulators taken away by the appellant-Corporation from the
plaintiff-respondent No. 1. These articles did not belong to the
plaintiff-respondent No. 1 and were the property of the appellant-
Corporation and, therefore, the direction to pay its price to the
plaintiff-respondent No. 1 also discloses an error of law apparent on        G
the face of the award. The appellant-Corporation has also been
directed in the award to return the amounts of two bank drafts of
Rs.15,580.83p. each dated 8.3.1983 and 11.3.1983 on the ground that
no supplies were made to the plaintiff-respondent No. I against these
amounts. This direction is based on a finding of fact which cannot be
gone into and. therefore. the same cannot be interfered with.                H
    210         SUPREME COURT REPORTS                [ 1990] Supp. 3 S.C.R.

          The question now is of the relief which could be granted by the
A
    arbitrator on its finding that termination of the distributorship was not
    validly made under clause 27 of the Agreement. No doubt, the notice
    of termination of distributorship dated ll.3.1983 specified the several
    acts of the distributor on which the termination was based and there
    were complaints to that effect made against the distributor which had
B   the effect of prejudicing the reputation of the appellant-Corporation;
    and such acts would permit exercise of the right of termination of
    distributorship under clause 27. However, the arbitrator having held
    that clause 27 was not available to the appellant-Corporation, the
    question of grant of relief on that finding has to proceed on that basis.
    In such a situation, the Agreement being revokable by either party in
    accordance with clause 28 by giving thirty days' notice, the only relief
c   which could be granted was the award of compensation for the period
    of notice, that is, 30 days. The plaintiff-respondent No. 1 is, therefore,
    entitled to compensat!bn being the loss of earnings for the notice
    period of thirty days instead of restoration of the distributorship. The
    award has, therefore, to be modified accordingly. The compensation
D   for thirty days notice period from 11.3.1983 is to be calculated on the
    basis of earnings during that period disclosed from the records of the
    Indian Oil Corporation Ltd.

          The appellant's grievance regarding non-consideration of its
    counter-claim for the reason given in the award does appear to have
E   some merit. In view of the fact that reference to arbitrator was made
    by this Court in an appeal arising out of refusal to stay the suit under
    Section 34 of the Arbitration Act and the reference was made of all
    disputes between the parties in the suit, the occasion to make a
    counter-claim in the written statement could arise only after the order
    of reference. The pleadings of the parties were filed before the
F   arbitrator, and the reference covered all disputes between the parties
    in the suit. Accordingly, the counter-claim could not be made at any
    earlier stage. Refusal to consider the counter-claim for the only reason
    given in the award does, therefore, disclose an error of law apparent
    on the face of the award. However, in the present case, the counter-
    claim not being pressed at this stage by learned counsel for the appel-
G   lant, it is unnecessary to examine this matter any further.

          As a result of the above discussion, the award is modified to the
    extent indicated inasmuch as the plaintiff-respondent No. 1 is entitled
    to compensation amounting to loss of earnings for the notice period of
    thirty days from the date of notice dated !1.3.1983 calculated as indi-
H   cated above, but not to restoration of the distributorship; and refund
                                                                                 )
            1.0.C. v. AMRITSAR GAS SERVICE [VERMA, J.]            211

of amounts of two demand drafts for Rs.15,580.83 each dated 8.3.1983     A
and 11.3.1983 given by respondent No. 1 to the appellant-Corpora-
tion. A decree in terms of such a modified award be drawn. Costs of
arbitration are to be paid by the appellant-Corporation. Costs of this
appeal shall also be borne by the appe!!ant.

V.P.R.