The Bombay High Court has upheld an arbitral award passed in favour of Aegis Logistics Pvt. Ltd., refusing to interfere with findings that Hindustan Petroleum Corporation Ltd. (HPCL) had wrongfully terminated an Operating and Services Agreement relating to the Guntakal oil depot in Andhra Pradesh.
A Single Judge Bench of Justice Sandeep V. Marne held that the arbitral tribunal had adopted a plausible and well-reasoned view while concluding that Aegis was justified in issuing a stop-work notice after serious safety deficiencies were flagged at the railway siding by the Oil Industry Safety Directorate (OISD).
The case stemmed from the termination of an Operating and Services Agreement awarded by HPCL to Aegis Logistics Pvt. Ltd. for the operation and maintenance of HPCL’s Guntakal oil depot in Andhra Pradesh. Relying on the audit by OISD flagging serious safety concerns and HPCL’s ‘Stop Work Authority policy’, Aegis suspended operations at the railway siding, while continuing other depot activities. HPCL treated the stoppage as a contractual breach and terminated the agreement in March 2017. Arbitration proceedings followed, during which the arbitral tribunal ruled that the termination was wrongful and awarded damages to Aegis, prompting HPCL to file an appeal under Section 34 of the Arbitration and Conciliation Act, 1996.
Dismissing HPCL’s challenge, the High Court held that none of the grounds under Section 34 were made out to warrant interference with the award. The Court noted that the award was a detailed one, containing elaborate reasons supporting each finding, and rejected the contention that the tribunal had merely reproduced the parties’ submissions without independent reasoning. The arbitral tribunal was found not to have ignored any vital material, and its interpretation of the contractual terms was held to be fair and reasonable.
The Court further rejected the Petitioner’s reliance on Som Datt Builders Ltd.vs. State of Kerala, (2009) 10 SCC 259, and Dyna Technologies Private Limited vs. Crompton Greaves Limited, (2019) 20 SCC 1, holding that those decisions were inapplicable as the award was neither unreasoned nor unintelligible. The argument that the tribunal had rewritten the contract or acted beyond the contractual framework was also rejected, with the Court holding that the tribunal had acted strictly within the four corners of the agreement.
The Court also noted that the Petitioner had not raised the issue of part repudiation or performance of a composite contract before the arbitral tribunal and had instead contested the dispute on the footing of breach arising from non-decantation. In that backdrop, the Court held that reliance on Alopi Prashad and Sons Ltd. to argue the necessity of performance of the contract in its entirety was misconceived.
Accordingly, the Court has upheld the arbitral award and interfered only with the direction on costs, reducing the arbitration costs payable by the Petitioner from ₹1.6 crore to ₹25 lakh.
Appearances
Mr. Zal Andhyarujina, Senior Advocate with Mr. Nilesh Modi. Ms. Akanksha Agarwal, Ms. Serena Jethmalani, Ms. Drishti Modi, Mr. Ashish Rebello & Ms. Pratishtha Chari i/b Rustamji & Ginwala, for Petitioner
Mr. Mustafa Doctor, Senior Advocate with Ms. Spenta Kapadia. Mr. Aruz Gazdar, Mr. Dhruv Dhandekar & Ms. Prarthana Balasubramanian i/b Veritas Legal, for Respondent
