Supreme Court Upholds Termination of Indian Oil Dealership Agreement by Notice

07 May 2024 8:19 AM

By: Admin

The Supreme Court has upheld the validity of termination of an Indian Oil Corporation dealership agreement by notice. The case concerned clause (3) of the dealership agreement, which permitted either party to terminate the contract by giving a three-month notice without requiring any acceptance from the other party.

The dispute arose when the respondent, a dealer, gave notice of termination of the dealership agreement, which the petitioner, Indian Oil Corporation, alleged was not accepted. The matter went to arbitration, and the arbitrator found that the notice was validly terminated and that acceptance was not necessary.

The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, which was dismissed by the District Judge. However, the High Court allowed the challenge and set aside the award. It also ordered the restoration of the dealership to the respondent and left it open for them to claim damages.

On appeal, the Supreme Court held that clause (3) of the dealership agreement expressly allowed for the premature termination of the contract by either party by giving a three-month notice without requiring any acceptance. The court found that the arbitrator's decision was not perverse and closed the door for judicial intervention. The court also held that the High Court acted illegally by interfering with the arbitrator's finding and modifying the award, and it set aside the High Court's order.

Supreme Court upheld the validity of termination by notice under clause (3) of the dealership agreement and set aside the High Court's order for restoration of the dealership to the respondent and for damages.

D.D-09.May .2023

INDIAN OIL CORPORATION LTD. AND ORS. vs M/S. SATHYANARAYANA SERVICE STATION & ANR