Hindustan Petroleum Corporation Ltd vs Pooja Tripathi (Deceased) Through Her L.Rs.

$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 17.03.2026
Judgment pronounced on: 04.05.2026

+ O.M.P. (COMM) 22/2017
HINDUSTAN PETROLEUM CORPORATION LTD
.....Petitioner
Through: Mr. Avneesh Garg, Mr. Utkarsh
Sharma, Mr. P. Sinha and Ms.
Kanika, Advocates.
versus

POOJA TRIPATHI (DECEASED) THROUGH HER L.RS.
.....Respondent
Through: Mr. Arjun Mitra and Ms.
Jayanti Jha, Advocates.
CORAM:
HON’BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR

J U D G M E N T
HARISH VAIDYANATHAN SHANKAR, J.
1. The present Petition has been filed under Section 34 of the
1
Arbitration and Conciliation Act, 1996 , assailing the Arbitral
2
Award dated 04.03.2011 passed by the learned Sole Arbitrator, Sh.
3
V.K. Sawhney .
2. By the Impugned Award, the learned Arbitrator granted the
4
claims of Smt. Pooja Tripathi ( since deceased, so now being
represented through LRs ) and held the Termination Letter dated

1
A&C Act
2
Impugned Award
3
Respondent No.2/learned Arbitrator
4
Respondent No.1
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5
13.01.2006 to be null and void, hence restoring the dealership of the
6
Retail Outlet situated at Ring Road, Site No.1, Pitampura, Delhi ,
to Respondent No.1.
3. The learned Arbitrator additionally granted Compensation for
loss of profits/income, from the date of takeover of the outlet after the
7
termination of the Dealership Agreement dated 10.02.2003 till the
date on which it is restored to her for operation, by Hindustan
Petroleum Corporation Limited (through its Chief Regional
8
Manager, Delhi Retail Regional Office) to Respondent No. 1.

BRIEF FACTS:
4. The Petitioner is a Public Sector Oil Company, incorporated as
a Government Company under the Companies Act, 1956, engaged
inter alia in refining, storage, marketing and distribution of Petroleum
products throughout the country.
5. On 17.11.1993, the Petitioner issued a Letter of Intent in favour
of Smt. Kasturi Tripathi ( Respondent No.1‟s Mother ) for the
dealership of the RO, on compassionate grounds.
6. Vide letter dated 27.03.1997, said dealership came to be
finalised and Smt. Kasturi Tripathi was appointed as the dealer of the
RO.
7. After the demise of Smt. Kasturi Tripathi on 21.02.2002,
Respondent No.1 sought transfer of said dealership in her favour.
Acceding to said request, the Petitioner, vide communication dated
13.01.2003, reconstituted the dealership in her favour, appointing her

5
Termination Letter
6
RO
7
Agreement
8
Petitioner/ HPCL
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as sole proprietor. Consequently, the Agreement came to be executed
as between the parties.
8. It is the case of the Petitioner that, during the subsistence of the
dealership, various inspections were conducted at the RO wherein
several irregularities were allegedly noticed, inter alia, recurring “dry-
outs”, poor maintenance, inadequate infrastructure, non-compliance
with operational standards, and decline in sales performance.
9. On account of the aforesaid alleged deficiencies, various
communications and Show Cause Notices dated 15.12.2004,
04.07.2005 and 13.10.2005 were issued by the Petitioner to
Respondent No.1, calling upon her to explain said deficiencies and
why action, including Termination of the dealership, should not be
taken.
10. The Respondent No.1, in pursuance thereof, submitted Replies
to such Show Cause Notices attributing the decline in sales and
alleged irregularities to external factors such as construction of metro
rail and flyovers leading to diversion of traffic, non-supply of
adequate products, as well as lack of infrastructural support from the
Petitioner. Respondent No.1 also asserted that she had not committed
any breach of the Agreement as between the parties, warranting its
Termination.
11. The Petitioner, however, being dissatisfied with the explanation
furnished by Respondent No.1 in her Replies, proceeded to terminate
the Agreement vide letter dated 13.01.2006, and took over possession
of the RO on 14.01.2006.
12. Aggrieved by such Termination, Respondent No. 1 approached
this Court by way of a Writ Petition, being W.P. (C) No.959/2009,
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which was disposed of on 17.07.2009 with a direction to the parties to
refer the present disputes to Arbitration.
13. Following the same, Arbitration proceedings came to be
initiated before the learned Arbitrator, wherein the Impugned Award
came to be passed in favour of Respondent No.1.
14. The Petitioner, being aggrieved by said Impugned Award as
passed by the learned Arbitrator, has preferred the present Petition
under Section 34 of the A&C Act before this Court.

SUBMISSIONS BY THE PETITIONER - HPCL:
15. Learned counsel for the Petitioner would submit that the
Impugned Award is liable to be set aside on the ground that the
learned Arbitrator has acted in excess of jurisdiction and in derogation
of the express terms of the Agreement between the parties. It would be
contended that the learned Arbitrator has, in effect, sought to apply
principles of equity and fairness in adjudicating the disputes, despite
there being no express consent or authorization from the parties to
decide the matter on such considerations.
16. Learned counsel for the Petitioner would submit that repeated
inspections of the RO revealed serious and persistent irregularities,
including, inter alia , frequent dry-outs, deficient maintenance and
failure to adhere to the prescribed minimum operational standards. It
would thus be contended that, notwithstanding the issuance of
multiple Show Cause Notices and adequate opportunities, Respondent
No.1 failed either to rectify the said deficiencies or to furnish any
satisfactory explanation in that regard.

17. Learned counsel for the Petitioner would further contend that
the Termination of the dealership of Respondent No.1 was effected
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strictly in accordance with the Agreement as well as the applicable
9
Marketing Discipline Guidelines , and the learned Arbitrator has
failed to appreciate the binding nature of these provisions.
18. Learned counsel for the Petitioner further assails the finding of
the learned Arbitrator insofar as it attributes the deficiencies in the
performance of the RO to external factors such as metro construction
and diversion of traffic. It would be contended that such
considerations cannot, in law, absolve Respondent No.1 of her
contractual obligations under the Agreement.
19. In pursuance thereof, learned counsel for the Petitioner would
submit that the Impugned Award suffers from perversity inasmuch as
material evidence, including multiple inspection reports and
documentary records, has been ignored, while unsubstantiated pleas of
Respondent No.1 have been accepted.
20. Learned counsel for the Petitioner would further contend that
the Agreement, by its very nature, is determinable, and that the
Impugned Award, in failing to take due cognizance of this
fundamental aspect, is perverse and unsustainable in law, particularly
when the Petitioner was contractually entitled to terminate the
Agreement upon the occurrence of specified breaches. To fortify this
submission, reliance would be placed on the judgment of the Hon’ble
10
Supreme Court in K.S. Manjunath v. Moorasavirappa , wherein the
contours of contracts which are determinable in their nature have been
articulated.
21. Learned counsel for the Petitioner, in pursuance of the
abovesaid contention, would submit that Clauses 2 and 3 of the

9
MDG
10
2025 SCC OnLine SC 2378
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Agreement are to be read with K.S Manjunath ( supra ) to crystallise
the determinable nature of the present Agreement.
22. Learned counsel for the Petitioner would further contend that
the Impugned Award is vitiated by “ patent illegality ”, inasmuch as the
learned Arbitrator has failed to adjudicate the disputes in accordance
with the express terms of the Agreement between the parties. It would
be submitted that such an approach runs in clear contravention of
Section 28(3) of the A&C Act, as it then stood, which mandates that
the arbitral tribunal shall, in all cases, decide in accordance with the
terms of the contract and take into account the usages of trade
applicable to the transaction.
23. To advance this contention, learned counsel would place
reliance on the Judgment of the Hon’ble Supreme Court in State of
11
Chhattisgarh & Anr. v. Sal Udyog Pvt. Ltd. wherein it was held that
“patent illegality ground” for assailing an arbitral award is attracted
where the learned arbitrator has failed to decide the dispute in
accordance with the terms of the contract between the parties.
24. Learned Counsel for the Petitioner would place reliance on the
judgement of the Hon’ble Supreme Court in Indian Oil Corporation
12
v. Amritsar Gas Service & Ors. to vehemently contend that the
learned Arbitrator has egregiously erred in granting the relief of
Restoration of dealership of the RO to Respondent No.1, which is in
the nature of Specific Performance and is impermissible in law, being
13
in contravention of Section 14 of the Specific Relief Act, 1963 .

11
(2022) 2 SCC 275
12
(1991) SCC 533
13
SRA
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25. Learned counsel for the Petitioner would further assail the
Impugned Award insofar as it grants Compensation towards alleged
loss of profits/income in favour of Respondent No.1. It would be
contended that the said award of Compensation is wholly speculative
in nature and is not founded upon any cogent, reliable, or admissible
evidence on record.
26. It would further be urged that there has been no proper
quantification of such alleged loss, nor has any legally sustainable
basis been set out by the learned Arbitrator for arriving at the amount
awarded.
27. Learned counsel would submit that, in any event, no specific
prayer seeking Compensation on account of loss of profits/income
was made by Respondent No.1 in the Statement of Claims. In this
regard, reliance would be placed on Section 21(5) of the SRA to
contend that compensation can be granted only where a specific claim
to that effect has been expressly made, and in the absence of such a
claim, the grant of compensation is legally unsustainable.
28. Proceeding on the aforesaid basis, learned counsel for the
Petitioner would submit that the Impugned Award, in disregarding
these settled principles, is in conflict with the public policy of India
and is further vitiated by patent illegality apparent on the face of the
record. It would thus be contended that the Impugned Award falls foul
of the statutory grounds for interference and is liable to be set aside
under Section 34 of the A&C Act.
29. Lastly, learned counsel for the Petitioner would submit that the
Impugned Award has, in effect, been rendered infructuous on account
of subsequent events, namely , the demise of the original
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Claimant/Respondent No.1 herein. In support of this submission,
reliance would be placed on the Judgment of the Hon’ble Supreme
Court in Shipping Corporation of India Ltd. v. Machado Brothers &
14
Ors .
30. Learned counsel for the Petitioner, however, on the aforesaid
aspect, fairly clarifies that the aforesaid contention is being reserved
and would be urged at the appropriate stage, if and when proceedings
under Section 36 of the A&C Act are initiated for the enforcement of
the Impugned Award.

SUBMISSIONS BY RESPONDENT NO. 1:
31. Per Contra, learned counsel for Respondent No.1 would
support the Impugned Award and submit that the same is a well-
reasoned award, rendered upon due appreciation of the material on
record, and does not warrant interference within the limited scope of
Section 34 of the A&C Act.
32. Learned counsel for Respondent No.1 would contend that the
termination of the dealership was wholly arbitrary, disproportionate,
and in violation of the Principles of Natural Justice. Respondent No.1
was not afforded any fair, adequate, or meaningful opportunity of
hearing prior to the impugned action being taken. Learned counsel
would further submit that the Petitioner failed to comply with the
mandatory contractual stipulation requiring the issuance of a three-
month prior Notice before effecting termination, as expressly
contemplated under the Agreement between the parties, thereby
rendering the termination unsustainable.

14
(2004) 11 SCC 168
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33. Learned counsel for Respondent No.1 would further submit that
the alleged irregularities relied upon by the Petitioner to justify the
termination were either non-existent or, at best, trivial and
inconsequential in nature. It would be contended that such allegations
pertained merely to minor housekeeping issues and deficiencies
relating to staff uniform and appearance, which, in no manner, could
be construed as material breaches warranting the extreme and
disproportionate penalty of termination. According to learned counsel,
the action of termination, in the facts and circumstances of the case, is
thus wholly unjustified and contrary to the governing contractual and
regulatory framework.
34. Learned counsel for Respondent No.1 would contend that the
decline in sales and the alleged operational deficiencies were
attributable to factors beyond the control of Respondent No.1,
including, inter alia , diversion of traffic on account of metro
construction and deterioration of the surrounding infrastructure, which
materially impacted the viability of the RO. It would be urged that
these constraints were repeatedly brought to the notice of the
Petitioner; however, there remained a consistent lack of adequate
support and supply from them, thereby exacerbating the situation.
35. Learned counsel for Respondent No.1 would further urge that
Respondent No.1 had duly responded to each of the Show Cause
Notices and had made bona fide and earnest efforts to comply with the
stipulated requirements; however, despite the same, the Petitioner
proceeded in a predetermined and arbitrary manner, without due
application of mind to the explanations furnished or the mitigating
circumstances placed on record.
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36. Learned counsel for Respondent No.1 would submit that the
learned Arbitrator has duly appreciated the pleadings, evidence and
material on record and returned well-reasoned findings of fact, which,
being based on a plausible view, are not amenable to interference
within the limited scope of jurisdiction under Section 34 of the A&C
Act.
37. Learned counsel appearing on behalf of Respondent No.1
would support the grant of restoration, submitting that the same
constitutes a necessary and consequential relief flowing from the
finding that the termination was illegal. It would be contended that
such relief is aimed at restituting Respondent No.1 to the position she
would have occupied but for the wrongful and unlawful action of the
Petitioner. Learned counsel thus would urge that the present Petition
is, in substance, an attempt to re-agitate the merits of the dispute,
which is impermissible within the limited scope of interference under
Section 34 of the A&C Act, and is therefore liable to be dismissed.
38. Without prejudice to the aforesaid submissions, learned counsel
for Respondent No.1, during the oral submissions, fairly submitted
that, insofar as the award of Compensation is concerned, it may be
open to this Court to set aside the Impugned Award to that limited
extent alone, if the same is found to be legally unsustainable, while
sustaining the remainder of the Impugned Award.

ANALYSIS:
39. This Court has heard the learned counsel appearing on behalf of
the parties at length and, with their able assistance, has carefully
perused the Impugned Award and other material documents placed on
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record, including the record of the learned Arbitral Tribunal, as well
as the Written Submissions filed by the respective parties.
40. At the outset, it is apposite to note that this Court is conscious
of the limited scope of its jurisdiction while examining an objection
petition under Section 34 of the A&C Act. The contours of judicial
intervention in such proceedings have been authoritatively delineated
and settled by a consistent and evolving line of precedents of the
Hon’ble Supreme Court.
41. There is a consistent and evolving line of precedents whereby
the Hon’ble Supreme Court has authoritatively delineated and settled
the contours of judicial intervention in such proceedings. In this
regard, a three-Judge Bench of the Hon’ble Supreme Court, after an
exhaustive consideration of a catena of earlier judgments, in OPG
Power Generation (P) Ltd. v. Enexio Power Cooling Solutions
15
(India) (P) Ltd . , while dealing with the grounds of conflict with the
public policy of India and patent illegality, grounds which have also
been urged in the present case, made certain pertinent observations,
which are reproduced hereunder:
“ Relevant legal principles governing a challenge to an arbitral
award
30. Before we delve into the issue/sub-issues culled out above, it
would be useful to have a look at the relevant legal principles
governing a challenge to an arbitral award. Recourse to a court
against an arbitral award may be made through an application for
setting aside such award in accordance with sub-sections (2), (2-A)
and (3) of Section 34 of the 1996 Act. Sub-section (2) of Section
34 has two clauses, (a) and (b) . Clause (a) has five sub-clauses
which are not relevant to the issues raised before us. Insofar as
clause (b) is concerned, it has two sub-clauses, namely, (i) and (ii) .
Sub-clause (i) of clause (b) is not relevant to the controversy in
hand. Sub-clause (ii) of clause (b) provides that if the Court finds
that the arbitral award is in conflict with the public policy of India,
it may set aside the award.

15
(2025) 2 SCC 417
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Public policy
31. “Public policy” is a concept not statutorily defined, though it
has been used in statutes, rules, notification, etc. since long, and is
also a part of common law. Section 23 of the Contract Act, 1872
uses the expression by stating that the consideration or object of an
agreement is lawful, unless, inter alia, opposed to public policy.
That is, a contract which is opposed to public policy is void.
*
35. In Renusagar Power Co. Ltd. v. General Electric Co., 1994
Supp (1) SCC 644, a three-Judge Bench of this Court observed
that the doctrine of public policy is somewhat open—textured and
flexible. By citing earlier decisions, it was observed that there are
two conflicting positions which are referred to as the “narrow
view” and the “broad view”. According to the narrow view, courts
cannot create new heads of public policy whereas the broad view
countenances judicial law making in these areas. In the field of
private international law, it was pointed out, courts refuse to apply
a rule of foreign law or recognise a foreign judgment or a foreign
arbitral award if it is found that the same is contrary to the public
policy of the country in which it is sought to be invoked or
enforced. However, it was clarified, a distinction is to be drawn
while applying the rule of public policy between a matter governed
by domestic law and a matter involving conflict of laws. It was
observed that the application of the doctrine of public policy in the
field of conflict of laws is more limited than that in the domestic
law and the courts are slower to invoke public policy in cases
involving a foreign element than when a purely municipal legal
issue is involved. It was held that contravention of law alone will
not attract the bar of public policy, and something more than
contravention of law is required.
*
37. What is clear from above is that for an award to be against
public policy of India a mere infraction of the municipal laws of
India is not enough. There must be, inter alia, infraction of
fundamental policy of Indian law including a law meant to serve
public interest or public good.
*
40. In ONGC Ltd. v. Western Geco International Ltd., (2014) 9
SCC 263, paras 35, 38 & 39 , which also related to the period prior
to the 2015 Amendment of Section 34(2)(b)(ii), a three-Judge
Bench of this Court, after considering the decision in ONGC Ltd.
v. Saw Pipes Ltd ., (2003) 5 SCC 705 , without exhaustively
enumerating the purport of the expression “fundamental policy of
Indian law”, observed that it would include all such fundamental
principles as providing a basis for administration of justice and
enforcement of law in this country. The Court thereafter
illustratively referred to three fundamental juristic principles,
namely:
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(a) that in every determination that affects the rights of a citizen or
leads to any civil consequences, the court or authority or quasi-
judicial body must adopt a judicial approach, that is, it must
act bona fide and deal with the subject in a fair, reasonable and
objective manner and not actuated by any extraneous
consideration;
(b) that while determining the rights and obligations of parties the
court or Tribunal or authority must act in accordance with the
principles of natural justice and must apply its mind to the
attendant facts and circumstances while taking a view one way
or the other; and
(c) that its decision must not be perverse or so irrational that no
reasonable person would have arrived at the same.
41. In Associate Builders v. DDA , (2015) 3 SCC 49 , a two-Judge
Bench of this Court, held that audi alteram partem principle is
undoubtedly a fundamental juristic principle in Indian law and is
enshrined in Sections 18 and 34(2)(a)(iii) of the 1996 Act. In
addition to the earlier recognised principles forming fundamental
policy of Indian law, it was held that disregarding:

(a) orders of superior courts in India; and
(b) the binding effect of the judgment of a superior court would
also be regarded as being contrary to the fundamental policy of
Indian law.
Further, elaborating upon the third juristic principle (i.e. qua
perversity), as laid down in ONGC Ltd. v. Western Geco
International Ltd ., (2014) 9 SCC 263 , it was observed that where:
( i ) a finding is based on no evidence; or
(ii) an Arbitral Tribunal takes into account something irrelevant to
the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision
would necessarily be perverse [ Associate Builders case ,
(2015) 3 SCC 49, para 31 ].
To this a caveat was added by observing that when a court applies
the “public policy test” to an arbitration award, it does not act as a
court of appeal and, consequently, errors of fact cannot be
corrected; and a possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate master of
the quantity and quality of evidence to be relied upon when he
delivers his arbitral award. It was also observed that an award
based on little evidence or on evidence which does not measure up
in quality to a trained legal mind would not be held to be invalid on
that score. Thus, once it is found that the arbitrator's approach is
not arbitrary or capricious, it is to be taken as the last word on
facts.
The 2015 Amendment in Sections 34 and 48
42. The aforementioned judicial pronouncements were all prior to
the 2015 Amendment. Notably, prior to the 2015 Amendment the
expression “in contravention with the fundamental policy of Indian
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law” was not used by the legislature in either Section 34(2)(b)(ii)
or Section 48(2)(b). The pre-amended Section 34(2)(b)(ii) and its
Explanation read:
*
44. By the 2015 Amendment, in place of the old Explanation to
Section 34(2) (b)(ii), Explanations 1 and 2 were added to remove
any doubt as to when an arbitral award is in conflict with the public
policy of India.
45. At this stage, it would be pertinent to note that we are dealing
with a case where the application under Section 34 of the 1996 Act
was filed after the 2015 Amendment, therefore the newly
substituted/added Explanations would apply [ Ssangyong Engg. &
Construction Co. Ltd. v. NHAI , (2019) 15 SCC 131 ].
46. The 2015 Amendment adds two Explanations to each of the
two sections, namely, Section 34(2) (b)(ii) and Section 48(2) (b) , in
place of the earlier Explanation. The significance of the newly
inserted Explanation 1 in both the sections is two-fold. First, it
does away with the use of words : (a) “ without prejudice to the
generality of sub-clause (ii )” in the opening part of the pre-
amended Explanation to Section 34(2)(b)(ii); and (b) “ without
prejudice to the generality of clause (b) of this section ” in the
opening part of the pre-amended Explanation to Section 48(2) (b) ;
secondly, it limits the expanse of public policy of India to the three
specified categories by using the words “ only if ”. Whereas,
Explanation 2 lays down the standard for adjudging whether there
is a contravention with the fundamental policy of Indian law by
providing that a review on merits of the dispute shall not be done.
This limits the scope of the enquiry on an application under either
Section 34(2) (b)(ii) or Section 48(2) (b) of the 1996 Act.
47. The 2015 Amendment by inserting sub-section (2-A) in
Section 34, carves out an additional ground for annulment of an
arbitral award arising out of arbitrations other than international
commercial arbitrations. Sub-section (2-A) provides that the Court
may also set aside an award if that is vitiated by patent illegality
appearing on the face of the award. This power of the Court is,
however, circumscribed by the proviso, which states that an award
shall not be set aside merely on the ground of an erroneous
application of the law or by reappreciation of evidence.
48. Explanation 1 to Section 34(2) (b)(ii), specifies that an arbitral
award is in conflict with the public policy of India, only if :
(i) the making of the award was induced or affected by fraud or
corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian
law; or
(iii) it is in conflict with the most basic notions of morality or
justice.
49. In the instant case, there is no allegation that the making of the
award was induced or affected by fraud or corruption, or was in
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violation of Section 75 or Section 81. Therefore, we shall confine
our exercise in assessing as to whether the arbitral award is in
contravention with the fundamental policy of Indian law, and/or
whether it conflicts with the most basic notions of morality or
justice. Additionally, in the light of the provisions of sub-section
(2-A) of Section 34, we shall examine whether there is any patent
illegality on the face of the award.
50. Before undertaking the aforesaid exercise, it would be apposite
to consider as to how the expressions:
(a) “in contravention with the fundamental policy of Indian law”;
(b) “in conflict with the most basic notions of morality or justice”;
and
(c) “patent illegality” have been construed.
In contravention with the fundamental policy of Indian law
51. As discussed above, till the 2015 Amendment the expression
“in contravention with the fundamental policy of Indian law” was
not found in the 1996 Act. Yet, in Renusagar Power Co. Ltd. v.
General Electric Co ., 1994 Supp (1) SCC 644 , in the context of
enforcement of a foreign award, while construing the phrase
“contrary to the public policy”, this Court held that for a foreign
award to be contrary to public policy mere contravention of law
would not be enough rather it should be contrary to:
(a) the fundamental policy of Indian law; and/or
(b) the interest of India; and/or
(c) justice or morality.
*
55. The legal position which emerges from the aforesaid discussion
is that after “the 2015 Amendments” in Section 34(2) (b)(ii) and
Section 48(2) (b) of the 1996 Act, the phrase “in conflict with the
public policy of India” must be accorded a restricted meaning in
terms of Explanation 1 . The expression “in contravention with the
fundamental policy of Indian law” by use of the word
“fundamental” before the phrase “policy of Indian law” makes the
expression narrower in its application than the phrase “in
contravention with the policy of Indian law”, which means mere
contravention of law is not enough to make an award vulnerable.
To bring the contravention within the fold of fundamental policy of
Indian law, the award must contravene all or any of such
fundamental principles that provide a basis for administration of
justice and enforcement of law in this country.
56. Without intending to exhaustively enumerate instances of such
contravention, by way of illustration, it could be said that:
(a) violation of the principles of natural justice;
(b) disregarding orders of superior courts in India or the binding
effect of the judgment of a superior court; and
(c) violating law of India linked to public good or public interest,
are considered contravention of the fundamental policy of Indian
law.
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However, while assessing whether there has been a contravention
of the fundamental policy of Indian law, the extent of judicial
scrutiny must not exceed the limit as set out in Explanation 2 to
Section 34(2) (b)(ii).
*
Patent illegality
65. Sub-section (2-A) of Section 34 of the 1996 Act, which was
inserted by the 2015 Amendment, provides that an arbitral award
not arising out of international commercial arbitrations, may also
be set aside by the Court, if the Court finds that the award is visited
by patent illegality appearing on the face of the award. The proviso
to sub-section (2-A) states that an award shall not be set aside
merely on the ground of an erroneous application of the law or by
reappreciation of evidence.
66. In ONGC Ltd. v. Saw Pipes Ltd ., (2003) 5 SCC 705 , while
dealing with the phrase “public policy of India” as used in Section
34, this Court took the view that the concept of public policy
connotes some matter which concerns public good and public
interest. If the award, on the face of it, patently violates statutory
provisions, it cannot be said to be in public interest. Thus, an award
could also be set aside if it is patently illegal. It was, however,
clarified that illegality must go to the root of the matter and if the
illegality is of trivial nature, it cannot be held that award is against
public policy.
67. In Associate Builders v. DDA , (2015) 3 SCC 49 , this Court
held that an award would be patently illegal, if it is contrary to:
(a) substantive provisions of law of India;
(b) provisions of the 1996 Act; and
(c) terms of the contract [See also three-Judge Bench decision of
this Court in State of Chhattisgarh v. SAL Udyog (P) Ltd .,
(2022) 2 SCC 275 ].
The Court clarified that if an award is contrary to the substantive
provisions of law of India, in effect, it is in contravention of
Section 28(1)(a) of the 1996 Act. Similarly, violating terms of the
contract, in effect, is in contravention of Section 28(3) of the 1996
Act.
68. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI , (2019)
15 SCC 131 this Court specifically dealt with the 2015
Amendment which inserted sub-section (2-A) in Section 34 of the
1996 Act. It was held that “patent illegality appearing on the face
of the award” refers to such illegality as goes to the root of matter,
but which does not amount to mere erroneous application of law. It
was also clarified that what is not subsumed within “the
fundamental policy of Indian law”, namely, the contravention of a
statute not linked to “public policy” or “public interest”, cannot be
brought in by the backdoor when it comes to setting aside an award
on the ground of patent illegality [ See Ssangyong Engg. &
Construction Co. Ltd. v. NHAI , (2019) 15 SCC 131 ]. Further, it
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was observed, reappreciation of evidence is not permissible under
this category of challenge to an arbitral award [See Ssangyong
Engg. & Construction Co. Ltd. v. NHAI , (2019) 15 SCC 131 ].

Perversity as a ground of challenge
69. Perversity as a ground for setting aside an arbitral award was
recognised in ONGC Ltd. v. Western Geco International Ltd .,
(2014) 9 SCC 263 . Therein it was observed that an arbitral
decision must not be perverse or so irrational that no reasonable
person would have arrived at the same. It was observed that if an
award is perverse, it would be against the public policy of India.
70. In Associate Builders v. DDA , (2015) 3 SCC 49 certain tests
were laid down to determine whether a decision of an Arbitral
Tribunal could be considered perverse. In this context, it was
observed that where:
(i) a finding is based on no evidence; or
(ii) an Arbitral Tribunal takes into account something irrelevant to
the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision
would necessarily be perverse.
However, by way of a note of caution, it was observed that when a
court applies these tests it does not act as a court of appeal and,
consequently, errors of fact cannot be corrected. Though, a
possible view by the arbitrator on facts has necessarily to pass
muster as the arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon. It was also observed that an
award based on little evidence or on evidence which does not
measure up in quality to a trained legal mind would not be held to
be invalid on that score.
71. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI , (2019)
15 SCC 131 , which dealt with the legal position post the 2015
Amendment in Section 34 of the 1996 Act, it was observed that a
decision which is perverse, while no longer being a ground for
challenge under “public policy of India”, would certainly amount
to a patent illegality appearing on the face of the award. It was
pointed out that an award based on no evidence, or which ignores
vital evidence, would be perverse and thus patently illegal. It was
also observed that a finding based on documents taken behind the
back of the parties by the arbitrator would also qualify as a
decision based on no evidence inasmuch as such decision is not
based on evidence led by the parties, and therefore, would also
have to be characterised as perverse [ See Ssangyong Engg. &
Construction Co. Ltd. v. NHAI , (2019) 15 SCC 131 ].
72. The tests laid down in Associate Builders v. DDA , (2015) 3
SCC 49 to determine perversity were followed in Ssangyong
Engg. & Construction Co. Ltd. v. NHAI , (2019) 15 SCC 131 and
later approved by a three-Judge Bench of this Court in Patel Engg.
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Ltd. v. North Eastern Electric Power Corpn. Ltd ., (2020) 7 SCC
167 .
73. In a recent three-Judge Bench decision of this Court in DMRC
Ltd. v. Delhi Airport Metro Express (P) Ltd ., (2024) 6 SCC 357 ,
the ground of patent illegality/perversity was delineated in the
following terms: (SCC p. 376, para 39)
“ 39 . In essence, the ground of patent illegality is available
for setting aside a domestic award, if the decision of the
arbitrator is found to be perverse, or so irrational that no
reasonable person would have arrived at it; or the
construction of the contract is such that no fair or
reasonable person would take; or, that the view of the
arbitrator is not even a possible view. A finding based on
no evidence at all or an award which ignores vital
evidence in arriving at its decision would be perverse and
liable to be set aside under the head of “patent illegality”.
An award without reasons would suffer from patent
illegality. The arbitrator commits a patent illegality by
deciding a matter not within its jurisdiction or violating a
fundamental principle of natural justice.”
Scope of interference with an arbitral award
74. The aforesaid judicial precedents make it clear that while
exercising power under Section 34 of the 1996 Act the Court does
not sit in appeal over the arbitral award. Interference with an
arbitral award is only on limited grounds as set out in Section 34 of
the 1996 Act. A possible view by the arbitrator on facts is to be
respected as the arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon. It is only when an arbitral
award could be categorised as perverse, that on an error of fact an
arbitral award may be set aside. Further, a mere erroneous
application of the law or wrong appreciation of evidence by itself
is not a ground to set aside an award as is clear from the provisions
of sub-section (2-A) of Section 34 of the 1996 Act.
75. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd .,
(2019) 20 SCC 1 , paras 27-43, a three-Judge Bench of this Court
held that courts need to be cognizant of the fact that arbitral awards
are not to be interfered with in a casual and cavalier manner, unless
the court concludes that the perversity of the award goes to the root
of the matter and there is no possibility of an alternative
interpretation that may sustain the arbitral award. It was observed
that jurisdiction under Section 34 cannot be equated with the
normal appellate jurisdiction. Rather, the approach ought to be to
respect the finality of the arbitral award as well as party's
autonomy to get their dispute adjudicated by an alternative forum
as provided under the law.
*
Scope of interference with the interpretation/construction of a
contract accorded in an arbitral award
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84. An Arbitral Tribunal must decide in accordance with the terms
of the contract. In a case where an Arbitral Tribunal passes an
award against the terms of the contract, the award would be
patently illegal. However, an Arbitral Tribunal has jurisdiction to
interpret a contract having regard to terms and conditions of the
contract, conduct of the parties including correspondences
exchanged, circumstances of the case and pleadings of the parties.
If the conclusion of the arbitrator is based on a possible view of the
matter, the Court should not intefere [See: SAIL v. Gupta Brother
Steel Tubes Ltd ., (2009) 10 SCC 63; Pure Helium India (P) Ltd.
v. ONGC , (2003) 8 SCC 593; McDermott International Inc. v.
Burn Standard Co. Ltd. , (2006) 11 SCC 181; MMTC Ltd. v.
Vedanta Ltd ., (2019) 4 SCC 163 ]. But where, on a full reading of
the contract, the view of the Arbitral Tribunal on the terms of a
contract is not a possible view, the award would be considered
perverse and as such amenable to interference [ South East Asia
Marine Engg. & Constructions Ltd. v. Oil India Ltd ., (2020) 5
SCC 164 ].

Whether unexpressed term can be read into a contract as an
implied condition
85. Ordinarily, terms of the contract are to be understood in the
way the parties wanted and intended them to be. In agreements of
arbitration, where party autonomy is the grund norm, how the
parties worked out the agreement, is one of the indicators to
decipher the intention, apart from the plain or grammatical
meaning of the expressions used [ BALCO v. Kaiser Aluminium
Technical Services Inc ., (2016) 4 SCC 126 ].
86. However, reading an unexpressed term in an agreement would
be justified on the basis that such a term was always and obviously
intended by the parties thereto. An unexpressed term can be
implied if, and only if, the court finds that the parties must have
intended that term to form part of their contract. It is not enough
for the court to find that such a term would have been adopted by
the parties as reasonable men if it had been suggested to them.
Rather, it must have been a term that went without saying, a term
necessary to give business efficacy to the contract, a term which,
although tacit, forms part of the contract [ Adani Power (Mundra)
Ltd. v. Gujarat ERC , (2019) 19 SCC 9 ].
87. But before an implied condition, not expressly found in the
contract, is read into a contract, by invoking the business efficacy
doctrine, it must satisfy the following five conditions:
(a) it must be reasonable and equitable;
(b) it must be necessary to give business efficacy to the contract,
that is, a term will not be implied if the contract is effective
without it;
(c) it must be obvious that “it goes without saying”;
(d) it must be capable of clear expression;
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(e) it must not contradict any terms of the contract [ Nabha Power
Ltd. v. Punjab SPCL , (2018) 11 SCC 508 , followed in Adani
Power case , (2019) 19 SCC 9 ].
(emphasis supplied)

42. In view of the foregoing, the legal position may be crystallised
to the effect that a re-appreciation of the factual matrix or
reassessment of evidence is wholly impermissible while exercising
jurisdiction under Section 34 of the A&C Act. The scope of
interference at this stage remains confined to the limited grounds
statutorily prescribed and does not extend to a re-evaluation of the
merits of the dispute.
43. In the present case, a perusal of the material on record
demonstrates that the learned Arbitrator has undertaken a
comprehensive and detailed examination of the facts, duly considering
the pleadings, evidence, and submissions advanced by the parties.
44. Considering the contentions advanced by the parties and upon a
perusal of the relevant portions of the Impugned Award, it emerges
that the issues arising for consideration in the present case are two-
fold, namely :
(a) whether the restoration of the dealership of the RO to
Respondent No.1 by the learned Arbitrator was justified; and
(b) whether the award of Compensation towards loss of
profits/income in favour of Respondent No.1, as directed
against the Petitioner, is sustainable.
Each of these issues is examined separately hereinafter.

(a) Restoration of Dealership of RO to Respondent No.1
45. Learned counsel for the Petitioner has contended that, in view
of then Section 14 of the SRA, the grant of Restoration of the RO by
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the learned Arbitrator in the Impugned Award is impermissible in law
for the reason that the Agreement is, by its very nature, determinable,
inasmuch as it is liable to be terminated by either party at will or upon
the occurrence or non-occurrence of specified contingencies, and
therefore, not amenable to Specific Performance.
46. A perusal of the Agreement executed between the parties would
reveal that the termination clause is embodied in Clause 3 thereof,
which is reproduced herein below for ready reference:
“ 3. THIS AGREEMENT SHALL REMAIN IN FORCE FOR
(SIC) FROM 10th DAY OF FEBRUARY, 2003. HOWEVER
THE SAME MAY BE DETERMINED WITHOUT ASSIGNING
ANY REASON BY EITHER PARTY BY GIVING THREE
MONTHS NOTICE IN WRITING TO THE OTHER OF ITS
INTENTION TO TERMINATE THIS AGREEMENT, AND
UPON THE EXPIRATION OF ANY SUCH NOTICE THIS
AGREEMENT AND THE LICENCE GRANTED AS
AFORESAID SHALL STAND CANCELLED AND REVOKED
BUT WITHOUT PREJUDICE TO THE RIGHTS OF EITHER
PARTY AGAINST THE OTHER IN RESPECT OF ANY
MATTER OR THING ANTECEDENT TO SUCH
TERMINATION PROVIDED THAT NOTHING CONTAINED
IN THIS CLAUSE SHALL PREJUDICE THE RIGHTS OF THE
CORPORATION TO TERMINATE THIS AGREEMENT
EARLIER ON THE HAPPENING OF THE EVENTS
MENTIONED IN CLAUSE 55 OF THIS AGREEMENT. UPON
THE EXPIRY OF THE AFORESAID PERIOD OF FIFTEEN
YEARS, THE CORPORATION AT ITS OWN MAY ENTER
INTO A FRESH AGREEMENT WITH THE DEALER FOR A
FUTURE PERIOD OF FIVE YEARS ON THE SAME TERMS
AND CONDITIONS AS HEREIN CONTAINED.”
( emphasis supplied)

47. A plain reading of the aforesaid Clause 3 makes it evident that
the dealership of the RO could be terminated by the Petitioner only
upon issuance of a written Notice of three months to Respondent
No.1, upon the expiry of which the Agreement, along with the licence
in respect of the RO, would stand terminated.
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48. However, a perusal of the material on record reveals that no
such Notice, as contemplated under the Agreement, was issued by the
Petitioner to Respondent No.1 prior to effecting the termination. This
indicates that the termination of the dealership of the RO, as sought to
be justified by the Petitioner as being in accordance with the terms of
the Agreement, may not be in consonance therewith.
49. This Court takes note of the Judgment of the Hon’ble Supreme
Court in K.S. Manjunath ( supra ). The said decision undertakes a
detailed examination of the jurisprudence concerning contracts “in
their nature determinable” within the meaning of Section 14 of the
SRA, and elucidates the principles governing the grant or refusal of
specific performance in such cases. For the sake of ready reference,
the relevant paragraphs of the said Judgment are extracted herein
below:
“ 47. The High Court of Madras in A Murugan v. Rainbow
Foundation Ltd , 2019 SCC OnLine Mad 37961 , had further
elaborated on the aspect of determinable contracts. For the purpose
of ascertaining determinability, the court bifurcated contracts into
several categories: (i) contracts that are unilaterally and inherently
revocable or capable of being dissolved such as licenses and
partnerships at will; (ii) contracts that are terminable unilaterally
on a “without cause” or “no fault” basis; (iii) contracts that are
terminable forthwith for cause or that cease to subsist “for cause”,
without a provision for remedying the breach; (iv) contracts which
are terminable for cause subject to a breach notice being issued and
an opportunity to cure the breach being given, and; (v) contracts
without a termination clause, which could be terminated for breach
of a condition but not a warranty, as per applicable common law
principles. The court held that the abovementioned (iii), (iv) and
(v) categories of contract are not determinable contracts. The court
further observed that although the (iv) and (v) categories
are terminable yet the same cannot be said to be in
nature determinable . The relevant observations are as under:
“17. On examining the judgments on Section 21(d) of SRA
1877 and Section 14(c) of the Specific Relief Act, as
applicable to this case, i.e. before Act 18 of 2018, I am of
the view that Section 14(c) does not mandate that all
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contracts that could be terminated are not specifically
unenforceable. If so, no commercial contract would be
specifically enforceable. Instead, Section 14(c) applies to
contracts that are by nature determinable and not to all
contracts that may be determined. If one were to classify
contracts by placing them in categories on the basis of
ease of determinability, about five broad categories can be
envisaged, which are not necessarily exhaustive. Out of
these, undoubtedly, two categories of contract would be
considered as determinable by nature and, consequently,
not specifically enforceable : (i) contracts that are
unilaterally and inherently revocable or capable of being
dissolved such as licences and partnerships at will; and
(ii) contracts that are terminable unilaterally on “without
cause” or “no fault” basis. Contracts that are terminable
forthwith for cause or that cease to subsist “for cause”
without provision for remedying the breach would
constitute a third category. In my view, although
the Indian Oil case referred to clause 27 thereof, which
provided for termination forthwith “for cause”, the
decision turned on clause 28 thereof, which provided for
“no fault” termination, as discussed earlier. Thus, the
third category of contract is not determinable by nature;
nonetheless, the relative ease of determinability may be a
relevant factor in deciding whether to grant specific
performance as regards this category. The fourth category
would be of contracts that are terminable for cause
subject to a breach notice and an opportunity to cure the
breach and the fifth category would be contracts without a
termination clause, which could be terminated for breach
of a condition but not a warranty as per applicable
common law principles. The said fourth and fifth
categories of contract would, certainly, not be
determinable in nature although they could be terminated
under specific circumstances. Needless to say, the
rationale for Section 14(c) is that the grant of specific
performance of contracts that are by nature determinable
would be an empty formality and the effectiveness of the
order could be nullified by subsequent termination.”
(Emphasis Supplied)
48. In Narendra Hirawat & Co. v. Sholay Media Entertainment
Pvt. Ltd. , 2020 SCC OnLine Bom 391 , the Bombay High Court
observed that the phrase “ a contract which is in its nature
determinable ” would mean a contract which is determinable at the
sweet will of a party to it, without reference to the other party or
without reference to any breach committed by the other party or
without any eventuality or circumstance. In other words, the phrase
would contemplate a unilateral right in a party to a contract to
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determine the contract without assigning any reason. The relevant
observation is as under:

49. The Delhi High Court in DLF Home Developers
Limited v. Shipra Estate Limited , 2021 SCC OnLine Del 4902 ,
while considering an agreement to sell a property held that the
question whether a contract is in its nature determinable must be
answered by ascertaining whether the party against whom it is
sought to be enforced would otherwise have the right to terminate
or determine the contract when the other party is willing to
perform and is not in default. In other words, where a contract
cannot be terminated so long as the other party remains willing to
perform its part, such a contract is not determinable and, in equity,
is specifically enforceable. The relevant observation is as under:
“78. Section 14 of the Specific Relief Act, 1963 sets out
certain classes of contracts that are not specifically
enforceable. One such class of contracts comprises of
contracts, which are in their nature determinable. Clause
(d) of Section 21 of the Specific Relief Act, 1877 expressly
provided that contracts which are in their nature
„revocable‟ are unenforceable. The said statute was
repealed and replaced by the Specific Relief Act, 1963.
Clause (c) of Section 14(1) of the Specific Relief Act,
1963, as was in force prior to Specific Relief Act, 1877,
expressly provided that contracts, which are in the nature
determinable, were not specifically enforceable. The word
„revocable‟ as used in Clause (d) of Section 21 of the
Specific Relief Act, 1877 was replaced by the word
„determinable‟. The rationale for excluding such
contracts, which are in their nature determinable, from
the ambit of those contracts which may be specifically
enforced, is apparent. There would be little purpose in
granting the relief of specific performance of a contract,
which the parties were entitled to terminate or otherwise
determine. The relief of specific performance is an
equitable relief. It is founded on the principle that the
parties to a contract must be entitled to the benefits from
the contracts entered into by them. However, if the terms
or the nature of that contract entitles the parties to
terminate the contract, there would be little purpose in
directing specific performance of that contract. Plainly, no
such relief can be granted in equity.
79. Viewed in the aforesaid perspective, it is at once
apparent that the contract is in its nature determinable if
the same can be terminated or its specific performance
can be avoided by the parties. Thus, contracts that can be
terminated by the parties at will or are in respect of
relationships, which either party can terminate; would be
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contracts that in their nature are determinable. If a party
can repudiate the contract at its will, it is obvious that the
same cannot be enforced against the said party.
80. However, if a party cannot terminate the contract as
long as the other party is willing to perform its
obligations, the contract cannot be considered as
determinable and it would, in equity, be liable to be
enforced against a party that fails to perform the same.
Almost all contracts can be terminated by a party if the
other party fails to perform its obligations. Such a
contract cannot be stated to be determinable solely
because it can be terminated by a party if the other party
is in breach of its obligations. The party who is not in
default would, in equity, be entitled to seek performance of
that contract. In such cases, it cannot be an answer to the
non-defaulting party's claim that the other party could
avoid the contract of the party seeking specific
performance, had breached the contract; therefore, the
same is not specifically enforceable. Thus, the question
whether a contract is in its nature determinable, must be
answered by ascertaining whether the party against whom
it is sought to be enforced would otherwise have the right
to terminate or determine the contract even though the
other party are ready and willing to perform the contract
and are not in default.
81. The contention advanced on behalf of Indiabulls that
the ATS is in its nature determinable as Indiabulls could
terminate it on failure of the other parties to perform their
obligations is, plainly, unmerited. This contention is
premised on the basis that Indiabulls is correct in its
assumption that the other parties had breached the terms
of their obligation. Concededly, if the other parties were
ready and willing to fully perform their obligations,
Indiabulls would not have any recourse to the termination
clause. Such recourse is contingent on the failure of the
other parties to perform the contract. It cannot be stated
that the contract by its very nature is not specifically
enforceable because it entitles a party to terminate the
contract if the other parties have failed to perform their
obligations.

94. The question whether the contract by its very nature is
determinable is required to be answered by ascertaining
the nature of the contract. Contracts of agency,
partnerships, contracts to provide service, employment
contracts, contracts of personal service, contracts where
the standards of performance are subjective, contracts
that require a high degree of supervision to enforce, and
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contracts in perpetuity are, subject to exceptions, in their
nature determinable. These contracts can be terminated
by either party by a reasonable notice.
(Emphasis Supplied)
50. In Affordable Infrastructure & Housing Projects (P)
Ltd. v. Segrow Bio Technics India (P) Ltd. , 2022 SCC OnLine
Del 4436 , the lease deed provided for a termination clause. Under
the termination clause, the respondent had an option to terminate
the lease deed by serving a 15 days' written notice in case the
petitioner failed to make the payment for two consecutive months.
The Delhi High Court on the strength of DLF Home (supra)
observed that almost all contracts can be terminated by a party, if
the other party fails to perform its obligations and that such
contracts cannot be stated to be determinable solely because it can
be terminated by a party if the other party is in breach of an
obligation. The non-defaulting party would in equity be entitled to
seek performance of that contract. The court held that the question
whether a contract is in its nature determinable must be answered
by ascertaining whether the party against whom it is sought to be
enforced would otherwise have a right to terminate or determine
the contract even though the other party is ready and willing to
perform the contract and is not in default. The relevant observation
is as under:
“37. The law as stated above mandates against grant of
stay against Termination Notice in respect of the
Contracts which are determinable. The petitioner has
relied upon DLF Home Developers Limited v. Shipra
Estate Limited, (2022) 286 DLT 100, wherein it was
observed that a party cannot terminate the Contract so
long as the other party is willing to perform its
obligations. The Contract cannot be considered as
determinable as it would in equity be liable to be enforced
against a party that fails to perform the same. Almost all
Contracts can be terminated by a party, if the other party
fails to perform its obligations. Such a Contract cannot be
stated to be determinable solely because it can be
terminated by a party if the other party is in breach of the
obligations. The party who is not in default would in
equity be entitled to seek performance of that Contract. In
such cases, it cannot be an answer to a non-defaulting
party's claim that the other party could avoid the Contract
of the party seeking specific performance and the same is
not specifically enforceable. Thus, the question whether
the Contract is in its nature determinable must be
answered by ascertaining whether the party against whom
it is sought to be enforced would otherwise have a right to
terminate or determine the Contract even though the other
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party is ready and willing to perform the Contract and is
not in default.”
(Emphasis Supplied)
51. The Bombay High Court in Kheoni Ventures (P)
Ltd. v. Rozeus Airport Retail Ltd. , (2024) 2 HCC (Bom) 60 , also
observed that in order to arrive at a conclusion whether a contract
is determinable or not, it is to be ascertained whether the parties
have a right to terminate it on their own, without the stipulation of
any contingency and without assigning any reason. The relevant
observation is as under:
“11. In order to infer whether a contract is determinable
or otherwise, it is to be ascertained, whether the parties
have a right to terminate it on their own, without stipulation
of any contingency and without assigning any reason. An
inherently determinable contract would permit either party
to terminate it without assigning any reason and merely by
indicating, that the contract shall come to an end, either by
giving a notice for specified period, if stipulated or even
without such a notice.”
(Emphasis Supplied)

62. Since in principle unilateral termination of the contract is
impermissible except where the agreement is determinable within
the meaning of Section 14 of Act of 1963, it also becomes
necessary, at this juncture, to examine whether the ATS dated
28.04.2000 was in its nature determinable. This question requires
to be answered on a scrutiny of the terms of the ATS and the
nature of the rights and obligations flowing therefrom.

64. In this backdrop, it would be useful to advert to the
classification set out in A. Murugan (supra), wherein the Madras
High Court categorised contracts into five broad classes depending
on their ease of determinability. Out of those, the first two i.e., (i)
contracts inherently revocable such as licences and partnerships at
will, and (ii) contracts terminable unilaterally on a “without-cause”
basis, were held to be determinable in nature. The remaining
classes, namely, (iii) contracts terminable for cause without
provision for cure, (iv) contracts terminable for cause with
notice and opportunity to cure, and (v) contracts without a
termination clause but terminable only for breach of a condition,
were all held not determinable in nature.
65. Further, as laid down in DLF Home (supra), the question
whether a contract is in its nature determinable lies in ascertaining
whether the party against whom specific performance is sought has
the right to terminate the contract even when the other party is
ready and willing to perform. This means if the contract cannot be
terminated so long as the other party stands willing to perform, it is
not determinable in its nature and would, in equity, be specifically
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50. A conjoint reading of Clause 3 of the Agreement, along with
the relevant observations in K.S. Manjunath ( supra ), would indicate
that the Agreement as between the parties contemplates termination
upon issuance of Notice to Respondent No.1, without the necessity of
assigning any reasons, by either party. This position stands
crystallised from the express stipulation in Clause 3, which provides
that “…HOWEVER THE SAME MAY BE DETERMINED WITHOUT
ASSIGNING ANY REASON BY EITHER PARTY BY GIVING THREE
MONTHS NOTICE IN WRITING TO THE OTHER OF ITS
INTENTION TO TERMINATE THIS AGREEMENT… ”.
51. In view of the foregoing, this Court is of the considered opinion
that a plain reading of Clause 3 of the Agreement renders the contract
determinable by its very nature, inasmuch as it expressly permits
termination without assigning reasons upon issuance of Notice.
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However, such determinability does not, as a necessary corollary,
validate the impugned termination of the dealership.
52. As noted hereinabove, the contractual stipulation mandates that
termination could be effectuated only upon service of a written Notice
of three months upon Respondent No.1 by the Petitioner. A perusal of
the material on record, including the extracts reproduced hereinabove,
reveals the absence of any such Notice issued by the Petitioner to
Respondent No.1. The termination, therefore, having been effected in
breach of the binding contractual stipulation, is rendered unsustainable
in law.
53. It is further pertinent to note that the requirement of issuance of
the written Notice of three months constitutes the very foundation of
termination under Clause 3 of the Agreement. Consequently, for a
termination to be effected strictly in accordance with the contractual
terms as agreed between the parties, the issuance and service of such
written Notice of three months was a mandatory contractual
stipulation that the Petitioner, as per the material on record for the
perusal of this Court, has failed to comply with. It is on this ground
that the termination of the dealership of RO by the Petitioner has been
held to be illegal and rendered null and void.
54. Further, a perusal of the Arbitral Record would indicate that
Respondent No.1 had, on multiple occasions, sought support and
assistance from the Petitioner for the better operation of the RO. The
Petitioner, however, has failed to place on record any material to
substantiate the assistance allegedly extended to Respondent No.1
towards the improvement of the functioning of the RO. This position
stands crystallised, inter alia , from the repeated requests made by
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Respondent No.1 for repair of the broken driveway, which remained

unaddressed.
55. It is also pertinent to note that Respondent No.1 was evicted
from the said RO by the Petitioner on 14.01.2006, whereafter the
outlet was converted into a Company-Owned and Company-
16
Operated outlet. However, no material has been placed on record to
demonstrate any improvement or increase in sales even thereafter,
despite the said ground having been cited as the principal basis for
termination, allegedly in terms of Clause 9 of the Agreement requiring
achievement of a stipulated minimum monthly sale.
56. The Petitioner has thus failed to substantiate that the alleged
deficiency in performance was attributable to Respondent No.1,
particularly when the same benchmark could not be met even under
the COCO model. Moreover, the RO had, under the stewardship of
Respondent No.1, been conferred with the award for best diesel sales.
57. Further, Section 28(3) of the A&C Act, as it stood at the
relevant time, mandated that the learned Arbitrator shall adjudicate the
disputes in accordance with the terms of the contract and take into
account the usages of trade applicable to the transaction, which, in the
present case, would include the MDG. Then Section 28(3) of the A&C
Act is extracted hereinbelow:
“ 28. Rules applicable to substance of dispute-

(3) In all cases, the arbitral tribunal shall decide in accordance with
the terms of the contract and shall take into account the usages of
the trade applicable to the transaction.”
(emphasis supplied)


16
COCO
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58. A scrutiny of the Impugned Award indicates that the learned
Arbitrator, while adjudicating the disputes, has undertaken a detailed
and comprehensive analysis of the factual matrix placed before him
and has duly considered the relevant clauses of the Agreement as well
as the applicable MDG. The learned Arbitrator has, thus, not
proceeded on a prima facie view, but has engaged in a thorough
evaluation of each of the alleged breaches attributed to Respondent
No.1 by the Petitioner. Consequently, the view taken by the learned
Arbitrator emerges as a plausible one, founded upon a detailed
appreciation of the material placed on record.
59. In view of the foregoing, this Court is of the considered opinion
that no infirmity can be found in the conclusion arrived at by the
learned Arbitrator holding the termination of the dealership of the RO
by the Petitioner to be illegal, inasmuch as the mandatory precondition
of a three-month Notice was not complied with. The grant of
restoration of the RO in favour of Respondent No.1, being a
consequential relief in the facts and circumstances of the case, cannot
be said to be impermissible and has been justifiably awarded by the
learned Arbitrator.

(b) Compensation for Loss of Profits/Income
60. It is a well-settled principle of law that compensation cannot be
awarded in the absence of a specific prayer to that effect, as such relief
does not arise automatically or incidentally. Unlike ancillary reliefs
such as costs or, in certain circumstances, interest, the grant of
compensation is inherently contingent upon clear and specific
pleadings by the claimant. The statutory mandate in this regard, as
embodied in Section 21(5) of the SRA, is unequivocal and admits of
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no discretion, inasmuch as it expressly proscribes the award of
compensation unless the same has been specifically claimed. This
settled position has been consistently affirmed and reiterated in
judicial pronouncements. Section 21(5) of the SRA is extracted herein
below:
“ 21. Power to award compensation in certain cases-

(5) No compensation shall be awarded under this section unless the
plaintiff has claimed such compensation in his plaint:
Provided that where the plaintiff has not claimed any such
compensation in the plaint, the court shall, at any stage of the
proceeding, allow him to amend the plaint on such terms as may be
just, for including a claim for such compensation.”
(emphasis supplied)

61. A perusal of the Impugned Award, as well as the material
placed on record before this Court, reveals that the Compensation
awarded by the learned Arbitrator is neither founded upon any specific
Prayer made by Respondent No.1 nor quantified in definite or
ascertainable terms. The relevant portion of the Impugned Award is
reproduced herein below:
“AWARD
In view of the foregoing facts, finding and circumstances, I hold
and award as under:
That the termination, vide letter No. DRR:RLA:RET dated January
13, 2006 by which the dealership agreement dated 10th February,
2003 has been terminated, is held null and void and quashed.
That the Respondent Chief Regional Manager, Delhi Retail
Regional Office of M/s. Hindustan Petroleum Corporation Limited
is directed to forthwith restore the Retail Outlet dealership of the
Claimant Smt. Pooja Tripathi at Site No. 1, Pitam Pura, Opp.
Punjab Kesari, Ring Road, New Delhi- 110034, which existed
prior to the termination of the dealership agreement and was
running in the name and style of M/s. Trips Service Station with
Smt. Pooja Tripathi as the Sole Proprietress. That the Claimant
Smt. Pooja Tripathi should be given compensation for loss of
profits/income from the date of take over of the outlet after the
termination of the dealership agreement till the date on which the
outlet is restored to her physically to be run by her. The
compensation will be average annual income from the start of the
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retail outlet under her late mother till the date it was taken over by
the Respondent Chief Regional Manager, Delhi Retail Regional
Office, M/s. Hindustan Petroleum Corporation Limited. The
income/profit is to be taken as shown for each year in the income
tax returns pertaining to the dealer/retail outlet. In case there is no
taxable income for any such period, then the profit as per the
audited balance sheet of the retail outlet should be taken for that
period. In case of a period of incomplete year, then the
proportionate income/profit for that period should be given e.g. If
the period from her dealership termination up to the restoration is
62 months, it should be treated as 5 completed years and balance
two months should be treated as 1/6th of a year.
THUS IT IS ADJUDICATED AND DIRECTED
ACCORDINGLY.”
(emphasis supplied)

62. The Hon’ble Supreme Court, in Universal Petro-Chemicals
17
Ltd. v. B.P. PLC , has unequivocally held that the grant of
compensation, whether in substitution of specific performance or
otherwise, is governed by a statutory mandate, and the existence of a
specific claim to that effect constitutes a condition precedent. It thus
stands crystallised that even where the facts of a case may otherwise
justify the award of compensation, the same cannot be granted dehors
the pleadings. The relevant paragraphs of the said Judgment read as
under:
“14. Mr Rakesh Dwivedi, learned Senior Counsel appearing for the
appellant submitted at the outset that the relief of specific
performance of the collaboration agreement cannot be granted by
this Court as the collaboration agreement expired on 31-12-2009.
He submitted that the appellant is entitled for damages for the
period from 24-8-2005 till 31-12-2009. He relied upon the
judgments of this Court in Jagdish Singh v. Natthu Singh , Urmila
Devi v. Mandir Shree Chamunda Devi and Sukhbir v. Ajit Singh
and argued that the appellant is entitled for damages even though
such relief was not specifically sought for either in the suit or in the
appeal. He referred to the proviso to Section 21(5) of the Specific
Relief Act to contend that the appellant should be allowed to seek
compensation at any stage of the proceeding.


17
(2022) 6 SCC 157
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16. It was submitted that specific performance of the agreement
was a relief that could have been granted at the time when the
appellant approached this Court in 2008 but cannot be done at this
point of time. Therefore, the appellant is entitled for damages,
especially after the appellant succeeded before the High Court
which declared the termination notice as illegal.
17. Ms Debolina Roy, learned counsel appearing for the
respondent countered the submission of Mr Dwivedi by contending
that the judgments cited by the appellant pertained to award of
compensation under the Land Acquisition Act wherein the manner
of calculation of compensation was either ascertainable or
expressly agreed upon between the parties, and are not applicable
to the facts of this case. She submitted that the appellants failed to
plead relief for damages either in the civil court, before the High
Court or even before this Court. She submitted that even assuming
that the collaboration agreement expired on 31-12-2009, the
appellant did not raise this ground or seek to amend the relief
during the pendency of this appeal for the past 13 years.

19. Ms Roy referred to a judgment of this Court in Shamsu
Suhara Beevi v. G. Alex to contend that the plaintiff who has been
remiss in expressly seeking the relief of damages under Section
21(5) of the Specific Relief Act, is not entitled for any such relief.
The further contention of the respondents is that damages can only
be granted for the loss suffered and not for the loss of profits as per
Section 73 of the Contract Act.

31. The learned Single Judge expressly mentioned in his judgment
that the appellant did not claim any relief for damages. Even in the
appeal filed by the appellant, no relief for damages was claimed by
the appellants. In fact, it was a specific submission on behalf of the
appellant before the Division Bench that no relief in the nature of
damages and/or compensation could be granted. It was submitted
that it was difficult to quantify such damages/compensation as
neither the anticipated loss of business nor could estimated value
of the goodwill be prospectively assessed. It might be true that the
appellant was interested in the relief of specific performance of the
collaboration agreement when he filed the special leave petition in
2008 as the collaboration agreement subsisted till 31-12-2009.
However, even thereafter no steps were taken by the appellant to
specifically plead the relief of damages or compensation.
32. The judgments relied upon by the appellant are not applicable
to the facts of this case. Though, the claim in Shamsu Suhara
Beevi v. G. Alex case pertained to grant of compensation in
addition to the relief of specific performance, this Court considered
the point relating to the relief of compensation in substitution of
the performance of the agreement as well.
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33. We are afraid that the request of the appellant for grant of
damages cannot be accepted.
34. For the aforementioned reasons no relief can be granted to the
appellant. Civil Appeal No. 3127 of 2009 is disposed of. Civil
Appeal No. 3128 of 2009 is hereby dismissed.”
(emphasis supplied)

63. A perusal of the material on record makes it abundantly clear
that, in the present case, no claim whatsoever was laid at any stage of
the proceedings in respect of Compensation for the alleged loss of
profits/income. The grant of such relief is, therefore, ex facie contrary
to the statutory mandate contained in Section 21(5) of the SRA, as it
amounts to conferring a relief wholly beyond the pleadings.
Consequently, the Impugned Award, to the extent that it grants
Compensation under this head, stands vitiated by patent illegality, the
learned Arbitrator having clearly transgressed the permissible confines
of the pleadings in awarding such relief.
64. In view of the foregoing, it follows that the Impugned Award is
liable to be set aside to the limited extent that it grants Compensation,
the same having been awarded in the absence of any specific claim
and, in any event, not having been duly quantified or determined in
accordance with law.
65. At this juncture, it becomes apposite to advert to the settled
principles governing the partial setting aside of arbitral awards and the
doctrine of severability, particularly in the context of the Impugned
Award insofar as it grants Compensation towards loss of
profits/income to Respondent No.1. A Constitution Bench of the
Hon’ble Supreme Court, in Gayatri Balasamy v. M/s ISG Novasoft
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18
Technologies Limited , has examined this very issue and clarified the
legal position in the following terms:
“ 33. We hold that the power conferred under the proviso to Section
34(2)(a)(iv) is clarificatory in nature. The authority to sever the
“invalid” portion of an arbitral award from the “valid” portion,
while remaining within the narrow confines of Section 34, is
inherent in the court’s jurisdiction when setting aside an award.
34. To this extent, the doctrine of omne majus continet in se
minus—the greater power includes the lesser—applies squarely.
The authority to set aside an arbitral award necessarily
encompasses the power to set it aside in part, rather than in its
entirety. This interpretation is practical and pragmatic. It would be
incongruous to hold that power to set aside would only mean
power to set aside the award in its entirety and not in part. A
contrary interpretation would not only be inconsistent with the
statutory framework but may also result in valid determinations
being unnecessarily nullified.
35. However, we must add a caveat that not all awards can be
severed or segregated into separate silos. Partial setting aside may
not be feasible when the “valid” and “invalid” portions are legally
and practically inseparable. In simpler words, the “valid” and
“invalid” portions must not be inter-dependent or intrinsically
intertwined. If they are, the award cannot be set aside in part.”

66. In the considered view of this Court, this portion of the
Impugned Award pertains exclusively to the grant of Compensation
towards loss of profits/income to Respondent No.1 for the period
commencing from the date of takeover of the RO following
termination of the Agreement until the date of its physical restoration
for operation.
67. The adjudication of this limited aspect is neither so intrinsically
interwoven with, nor dependent upon, the determination of the
remaining claims, particularly the restoration of the dealership in
favour of Respondent No.1, as to necessitate a reappreciation of the
entire evidentiary record or to unsettle the findings returned in respect
thereof. The said component is, therefore, clearly severable from the

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2025 SCC OnLine SC 986
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remainder of the Impugned Award and is capable of being set aside
independently, without in any manner impacting the adjudication
pertaining to the restoration of the RO.

CONCLUSION:
68. In view of the foregoing submissions advanced before this
Court, the analysis undertaken on the issues arising for consideration,
and the judicial precedents noticed hereinabove, the present Petition is
partly allowed to the limited extent that the Impugned Award, insofar
as it grants Compensation towards loss of profits/income, is set aside.
The challenge to the Impugned Award on all other counts stands
rejected.
69. The present Petition, along with pending Application(s), if any,
stands disposed of in the above terms.
70. No Order as to costs.

HARISH VAIDYANATHAN SHANKAR, J.
MAY 04, 2026/Sg/kr
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