MANMOHAN, J:
1. Present appeal has been filed under Section 37 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) challenging the order dated 4th March, 2021 passed by the learned District Judge (Commercial Court 02), Patiala House Court, New Delhi whereby the Appellants petition under Section 34 of the Act was dismissed. Appellant also challenges the arbitral award dated 21stJuly, 2018 whereby the Appellants claim was FAO (COMM) 75/2021 Page 2 of 16 dismissed and the Show Cause Notice dated 06th February, 2015 issued by the respondent-IOC was held to be valid. FACTS OF THE CASE
2. The Appellant, a proprietary concern of Sh. Rajendra Kumar, is engaged in the business of running a petrol and diesel pump on the National Highway no.76, Udaipur Road, Chittorgarh, Rajasthan as granted by the respondent Indian Oil Corporation Ltd. Originally, the Appellant was the owner of the land from where the petrol and diesel pump was being run. The respondent appointed the Appellant as a dealer vide Letter of Appointment dated 4th January, 1991.
3. Subsequently, the Appellant sold the land to the respondent and a fresh Dealership Agreement dated 1st February, 1997 was executed whereby the Appellant was appointed as the authorised dealer of the respondent to operate the petrol pump on the National Highway no.76, Udaipur Road, Chittorgarh, Rajasthan as a licensee of the respondent for a period of five years and thereafter for a period of one year until otherwise determined by either party.
4. On 30th October 2014, a surprise inspection was carried out by the respondent and an inspection and analysis report was prepared, pursuant to which the respondents addressed a communication dated 11th November, 2014 to the Appellant stating therein that during the inspection, the wire connecting the Mechanical Totaliser to the Computer Processing Unit [CPU] of one of the Dispensing Units was found broken with a black coloured tape put on it to join FAO (COMM) 75/2021 Page 3 of 16 the two broken ends of the wire. It was further alleged that the Mechanical Totaliser was found to be non-functional inasmuch as even though product was being dispensed from the nozzle of said Dispensing Unit, the readings in the totaliser remained static/stationary at 2833318. The respondent sought an explanation from the Appellant which was duly replied to vide communication dated 24th November, 2014.
5. Subsequently, a Show Cause Notice dated 6th February, 2015 was issued by the respondent to the Appellant regarding cancellation of the dealership, which was challenged before the Rajasthan Courts and eventually, the matter reached the Apex Court. The Supreme Court vide order dated 31st March, 2017 in SLP (Civil) No.4590-4591 of 2016, referred the parties to arbitration before the Delhi International Arbitration Center.
6. The Learned Arbitrator vide impugned award dated 21st July 2018, dismissed all the claims preferred by the Appellant and upheld the Show Cause Notice dated 06th February 2015 issued by the respondent. The relevant portion of the impugned Award is reproduced hereinbelow:-
63. Prima facie the onus was on the claimant to show as to how the tapes came to be applied to the wires connected the C.P.U. and the mechanical totalizer. In this regard, one thing is clear that the Claimant has changed his stand more than once which makes his conduct suspect and impels the Arbitral Tribunal to draw an adverse inference against him. To start with when the claimant filed reply to the notice dated 11.11.2014, this is what he said:
7. It is true that the cable is broken and the tape is put on it and the pump has been installed at my place. So prima facie I am, FAO (COMM) 75/2021 Page 4 of 16 guilty. However, I assure you no tampering has ever been done by me or by my staff at any point of time. Had it been done there would have been difference in the sale. My fault is this much that I never inspected the panel by opening it out and since the sale was matching always, my attention could not be drawn to any type of irregularity. Due to this mistake I am feeling very ashamed. Due to this I have good reputation in the company and I now believe that my reputation has been considerably damaged. I can understand this. I am feeling very hurt due to this immoral act and I do not have words to explain this.
8. This human error has been committed due to my negligence and I did not check the panel by opening it and did not inform the company in time. I am guilty of the same. I am requesting you with folded hands that I may be pardoned, and the above allegation will be cancelled and permission is granted for starting the sale with that pump on my petrol pump. Yours faithfully, Sd/- (illegible) Proprietor.
64. A perusal of the reply shows an admission on the part of the claimant that it was he alone was responsible either in breaking of the wires and wrapping the tapes or he was negligent in informing the respondent about the same.
65. The Claimant realizing that the breaking of the seal is a critical irregularity and can result in cancellation of his dealership, started changing his stand. He now takes the plea that he was ignorant of the tape and at the time when the lower panel was opened, the hinges panel were broken and the official of the FAO (COMM) 75/2021 Page 5 of 16 inspection team did not hold the panel firmly because of which the panel fell on the wires and the wires got snapped with the C.P.U.
66. In a given case, it can be so, but the question arises for consideration is whether such a thing is possible for the wires in the instant case. The answer to this question is emphatic No. The reason for this is that even if it is assumed that the wires got snapped as suggested by the claimant, even then how would the wires get taped with the black tape. They would remain naked wire without any tape. Therefore, this is outrightly a false plea. Yet, while deposing as CW1, the Claimant has changed the stand which does not add to his credibility in any manner.
67. The next question which arises for consideration is that what is the effect of putting of the black tape.
68. Regulation 8.2 makes tampering of seals of the dispensing unit as critical irregularity which can result in cancellation or termination. There is no doubt that the claimant has not been able to give a coherent, cogent and reasonable explanation and therefore, it is to be treated as critical irregularity. xxxx xxxx xxxx xxxx
79. The defence which has been set up by the Respondent that even if the wires have been taken to have been snapped, still and Claimant did not make any profit or dispense with the petroleum products over and above what was recorded manually in the sales register and what is recorded in the electronic totaliser and therefore, there was every reason to give the benefit of doubt to the Claimant and not to cancel the dealership.
80. I am not convinced with this line of argument of the Claimant for the simple reason that these marketing guidelines are to be observed both in letter and spirit as they are essentially framed for the purpose of protecting the consumer who are in no FAO (COMM) 75/2021 Page 6 of 16 way knowing the dynamics of the method of functioning of the dispensing unit. It is also immaterial that the Claimant has made any profit or not. Suffice it would be here to mention that there was a violation of critical marketing guidelines done by the Respondent for which rightfully a show cause notice has been issued before terminating the licence of the Claimant. The plea taken by the Claimant that a humanitarian view be taken or for a lenient view be taken and a chance be given to the Claimant to run the unit.
81. In my view, taking a lenient view of the conditions would be putting premium on the delinquent behaviour of the claimant. xxxx xxxx xxxx xxxx
83. I, therefore, find that the claim which has been filed by the Claimant is false, frivolous and vexatious and accordingly, the claim of the Claimant for quashing the Show Cause Notices dated 6th of February 2018 and removal of the seal of the dispensing unit dated 30.10.2014 and directing the Respondent to replace the dispensing unit at the dealership of the Claimant is totally uncalled and cannot be allowed in the eyes of law.
84. Accordingly, I feel that the show cause notice dated 06.02.2014 was issued validly to the Claimant for his having put the wires on the cover portion of the dispenser unit was not intimated to the Respondent. Further, relief of the Claimant for de-sealing the unit and permitting to operate the pump is untenable in law, and, therefore, all the three claims are dismissed.
7. The said arbitral award was challenged before the learned District Judge, vide OMP (COMM.) No. 44 of 2018 which was dismissed vide impugned order dated 4th March 2021. The relevant portion of the impugned order dated FAO (COMM) 75/2021 Page 7 of 16 4th March, 2021 passed by the learned District Judge is reproduced hereinbelow:-
36. The impugned award was passed by former Learned and Hon'ble Judge, High Court of Delhi as Sole Arbitrator whereas the findings were given, based on appreciation of facts, evidences and law after giving all reasonable opportunities to the parties to lead their evidence. Not only the reasonings of Learned Sole Arbitrator are logical but all the material and evidences were taken note of by the Learned Sole Arbitrator. The Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of the Learned Sole Arbitrator, as per the law laid in the precedents, elicited herein above. Cogent grounds, sufficient reasons have been assigned by the Learned Sole Arbitrator in reaching the just conclusion and no error of Jaw or misconduct is apparent on the face of the record. This Court cannot reappraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Learned Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Learned Sole Arbitrator. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act. ARGUMENTS ON BEHALF OF THE APPELLANT
8. Mr. Anil Airi, learned senior counsel for the Appellant stated that the learned District Judge failed to appreciate that there was an error apparent on the face of record in the arbitral proceedings inasmuch as the burden of proof FAO (COMM) 75/2021 Page 8 of 16 regarding the tampering had been erroneously shifted upon the Appellant. According to him, the burden of proof was upon the respondent to conclusively show that the Appellant was guilty of tampering with Dispensing Unit.
9. He contended that deliberate tampering had to be shown in order to prove critical irregularity. He pointed out that Dispensing Unit had been inspected numerous times earlier and no irregularity had been found.
10. Learned senior counsel for the Appellant emphasised that the Mechanical Totaliser stopped working at the time of inspection as the panel had fallen after its hinges broke when it was being opened by the respondents. According to him, due to the said mishandling by the respondent, the wires connecting the Mechanical Totaliser to the CPU snapped. He pointed out that Dispensing Unit was old and had been previously installed at another filling station and the reason for the wire snapping was attributable to the depreciated quality of Dispensing Unit and respondents mishandling the Dispensing Unit during the inspection.
11. He stated that reading of the Mechanical Totaliser duly matched with the reading of the Electronic Totaliser, which was functional, and also matched with the Daily Sales Register. He further stated that even if the Mechanical Totaliser was faulty, the Electronic Totaliser was working properly and therefore, there was no irregularity in the dispensing of product from the Dispensing Unit.
12. He contended that when Dispensing Unit was in automated/electronic mode, it could not be tampered with as the data was fed live to the server that could be checked by the respondents. Therefore, according to him, the readings FAO (COMM) 75/2021 Page 9 of 16 of the mechanical totaliser were irrelevant and could be disregarded as the readings of the Electronic Totaliser were available. ARGUMENTS ON BEHALF OF THE RESPONDENT-IOCL
13. Per contra, Ms. Mala Narayan, learned counsel for the respondent stated that the present appeal ought to be rejected as it was primarily challenging the factual findings rendered by the learned Arbitrator. She submitted that as the arbitrator is the sole judge of the quality and quantity of the evidence and once it was found that the arbitrators approach was neither arbitrary nor capricious, no interference was called for. In support of her submission, she relied upon the Supreme Court judgments in Associate Builders Vs. Delhi Development Authority AIR 2015 SC 620 and McDermott International Inc. Vs. Burn Standard Co. Ltd. (2006) 11 SCC 181.
14. Learned counsel for the respondent stated that the Appellant had laid emphasis on new documents (Annexure No. 1 and 2 of the written submissions on behalf of the Appellant), produced for the first time before this Court, describing the automation system presently being used. She pointed out that the said documents pertained to the automation systems installed at the much later stage i.e. seventh or eighth phase of automation, whereas the automation system installed at the Retail Outlet of the Appellant was admittedly of the first phase/stage, which was full of glitches and was often non-functional. She pointed out that this was the reason why the said documents were never produced either before the learned Arbitrator or before the learned District Judge. Consequently, according to her, no cognizance could be taken of the FAO (COMM) 75/2021 Page 10 of 16 said documents at this stage. She lastly stated that the learned District Judge had rightfully dismissed the Section 34 petition of the Appellant. COURTS REASONING ONCE AN ARBITRAL AWARD HAS BEEN CONFIRMED IN AN APPLICATION FILED UNDER SECTION 34 OF THE ACT, THE APPELLATE COURT MUST BE EXTREMELY CAUTIOUS IN DISTURBING CONCURRENT FINDINGS OF THE FACT AND LAW AS THEY ARE ORDINARILY NOT AMENABLE TO INTERFERENCE UNDER SECTION 37 OF THE ACT.
15. Having heard the learned counsel for the parties, we are of the opinion that it is essential to first outline the scope of this Courts jurisdiction under Section 37 of the Act. The Supreme Court in MMTC Ltd. vs. Vedanta Ltd. (2019) 4 SCC 163 while discussing the scope of interference with an arbitral award has held as under:-
11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, patent illegality itself has been held to mean contravention of the substantive FAO (COMM) 75/2021 Page 11 of 16 law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. Delhi Development Authority . (2015) 3 SCC 49. Also see ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation . (2006) 4 SCC 445 and McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181). xxx xxx xxx xxx
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.
16. Consequently, while exercising appellate jurisdiction under Section 37 of the Act, this Court has similar restrictions as prescribed under Section 34 of the Act i.e. this Court can only ascertain whether the exercise of power by the learned District Judge under Section 34 of the Act was lawful or not. Also, once an arbitral award has been confirmed in an application filed under Section FAO (COMM) 75/2021 Page 12 of 16
34 of the Act, the Appellate Court must be extremely cautious in disturbing concurrent findings of the fact and law as they are ordinarily not amenable to interference under Section 37 of the Act. Further, it is settled law that the Appellate Court should generally not interfere unless it is apparent that the perversity of the arbitral award goes to the root of the case, without a possibility of alternative interpretation that might sustain the award. THE CONTENTION THAT THE WIRE OF THE MECHANICAL TOTALIZER HAD SNAPPED DUE TO RESPONDENTS MISHANDLING IS CONTRARY TO THE VIDEO OF THE INSPECTION [COMPREHENSIVE CD; FILED VIDE DIARY NUMBER 334593] IN FACT, THERE WAS A BLACK TAPE ATTACHED TO THE WIRES, WHICH WAS NOT EXPLAINED BY THE APPELLANT. CONSEQUENTLY, THIS COURT IS IN AGREEMENT WITH THE FINDINGS OF THE LEARNED DISTRICT JUDGE THAT THE LEARNED ARBITRATOR HAD RIGHTLY CONSIDERED THE EVIDENCE ON RECORD TO CONCLUDE THAT THE TAMPERING OF DISPENSING UNIT, AS EVIDENT FROM THE BLACK TAPE, WOULD AMOUNT TO CRITICAL IRREGULARITY.
17. In the present case, the Appellant has challenged the arbitral award and the order passed by the learned District Judge primarily on the ground that the alleged irregularities committed by the Appellant had not been proved conclusively and that the wire of the mechanical totalizer had snapped due to respondents mishandling.
18. This Court finds that the said contention is contrary to facts and evidence on record inasmuch as the video of the inspection [Comprehensive CD; filed vide diary number 334593] placed on record by the respondent proves that there was no mishandling of the panel of the Dispensing Unit. In fact, there was FAO (COMM) 75/2021 Page 13 of 16 a black tape attached to the wires, which was not explained by the Appellant before the learned Arbitrator despite being given due opportunity. Consequently, this Court is in agreement with the finding of the learned District judge that the learned Arbitrator had rightly considered the evidence on record to conclude that the tampering of Dispensing Unit, as evident from the black tape, would amount to critical irregularity. THE APPELLANTS NEW PLEA, TO RELY ON THE READINGS OF THE ELECTRONIC TOTALIZER, CAN BE DISREGARDED AS THE FACT THAT THE ELECTRONIC TOTALIZER WAS FULL OF GLITCHES WAS NOT DISPUTED AND THE READINGS OF MECHANICAL TOTALISER WERE ALONE TAKEN AND CONSIDERED BY THE RESPONDENT FOR STOCK VERIFICATION. FURTHER, IN ORDER TO SUBSTANTIATE ITS ARGUMENT, THE APPELLANT HAD PLACED RELIANCE ON NEW DOCUMENTS THAT HAD NEITHER BEEN PRODUCED BEFORE THE LEARNED ARBITRATOR NOR BEFORE THE LEARNED DISTRICT JUDGE.
19. This Court is also of the view that the Appellants new plea regarding automated/electronic totalizer can be disregarded as the fact that the electronic totalizer was full of glitches was not disputed. In fact, the Officer of the respondent had very clearly stated in his evidence that only the readings of the mechanical totalizer were relevant for stock verification. The relevant portion of evidence of respondents Officer -Mr. M.E. Zuberi/RW-1 is as under:- With respect to the contention of the Claimant that the Respondent Corporation has not provided any guidelines or source to indicate that the Respondent is required to consider the readings from a Mechanical Totaliser and not Electronic Totaliser, the Deponent submits the following, which substantiates the said contention of the Respondent Corporation: FAO (COMM) 75/2021 Page 14 of 16
i. the Respondent Corporation has never ever instructed the Claimant to record the readings of the Electronic Totaliser and/or to maintain a DSR or Electronic Totaliser;
ii. the Respondent Corporation has never conducted even a single inspection of the Claimants RO on the basis of the Electronic Totaliser readings.
20. Even the Appellant, in his statement of claim as also in his Rejoinder to the Statement of Defence had stated, on 30.1.2014 before the officials of the Respondent visited the petrol and diesel pump or station of the Claimant for surprise inspection the reading of the mechanical totaliser had already been entered in the Daily Sale Register.. Consequently, admitting that the readings of mechanical totaliser were taken and considered by the Respondent for stock verification and only the readings of mechanical totaliser were to be recorded in the daily stock register which had to be manually maintained by the dealer.
21. Moreover, reliance placed upon the readings of the automated/electronic totaliser is misplaced for the simple reason that the automation system at Petitioners Retail Outlet was admittedly among the first few automation systems and was full of glitches. In this regard, it was admitted by the CW-1 Rajinder Kumar Patni (dealer) that, it is correct that our petrol pump was the first one to have been automated. It is correct that our pump was automated in the Phase I Category while as presently Phase VI Category is on. It is correct that automation system installed at our pump was faced with glitches and we had complained to the Respondents number of times FAO (COMM) 75/2021 Page 15 of 16
22. Further, in his evidence, the officer of the Respondent Mr. M.E. Zuberi/RW-1 had stated that since admittedly, the Automation system which was used and installed at the Claimants RO at the relevant point of time, was in its initial phase i.e. Phase-I, it admittedly suffered from several glitches, on account of which, stock verification by the Respondent Corporation by using the electronic totaliser was not possible. Further, it was stated by RW-1 in his cross examination as under:- Q.6 Is it correct that when the unit is on automation mode all the data is recorded and updated/uploaded on a server maintained by the Corporation on a daily basis? Ans. Not necessarily as at times certain data is not transferred in the automation server/system even if the unit is on automation mode. The reason for this are technical glitches especially on account of the fact that the system which was doing this job is categorized as Phase 1 system and pertained to initial period. (Vol.) We keep on improving the system and at presently phase VI is in operation.
23. It is pertinent to mention that in order to substantiate its argument, the Appellant had placed reliance on new documents that had neither been produced before the learned arbitrator nor before the learned District Judge. This Court is of the view that the veracity of the said documents cannot be examined at this stage as it is settled law that an Appellate Court should not travel outside the record of the lower court and cannot take any evidence in appeal. FAO (COMM) 75/2021 Page 16 of 16
24. Keeping in view the aforesaid, this Court is of the opinion that the Appellant has failed to demonstrate that the findings of the learned Arbitrator as well as the learned District Judge are ex-facie perverse.
25. Consequently, this Court is in agreement with the impugned order of the learned District Judge confirming the impugned arbitral award.
26. Accordingly, the present appeal, being devoid of merits, is dismissed along with pending applications. MANMOHAN, J NAVIN CHAWLA, J JULY 07, 2021 js/rn/TS
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