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Indian Oil Corporation Vs. Leela Gurcharan Singh and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 43 of 1971
Judge
Reported inILR1972Delhi308; 1972RLR50
ActsArbitration Act, 1940 - Sections 6 and 20; Easements Act, 1882 - Sections 52
AppellantIndian Oil Corporation
RespondentLeela Gurcharan Singh and ors.
Advocates: S.N. Chopra,; C.M. Oberoi,; S.C. Singh and;
Cases Referred(Rameshwar Proshad Khandelwal v. Commissioners. Land Reforms
Excerpt:
(i) arbitration act (1940) - sections 6 & 45 read with sections 14 & 15 of specific relief act-death of a party to contract-survival of rights under, to legal representatives of deceased-indian easement act, section 52.; section 6 of the arbitration act makes it clear that an arbitration agreement shall not be discharged by the death of a party thereto unless any right of action is extinguished by operation of law on the death of a person. the general rule about the effect of death of a party to a contract on the survival of he rights under the contract to the legal representatives of the deceased party is that such rights ordinarily survive to the legal representatives (vide section 45 of the contract act), unless the very nature of the contract shows that the rights there under..........nature of things, they could not be claimed by his legal representatives (vide section 14 of the specific relief act. 1963). death or assignment is in itself not a bar even to a claim for specific performance of a contract unless the learning, skill, solvency or any personal quality of the deceased or the assignor is a material ingredient in the contract (vide the principal part of section 15 and the first part of the proviso thereto, specific relief act. 1963). in the present contract, the licensee was prohibited from assigning his rights there under. according to the second part of the proviso to section 15 of the specific relief act. 1963, a representative in interest of the party to the contract would not be able to demand specific performance in the face of the clause prohibiting.....
Judgment:

V.S. Deshpande, J.

(1) An agreement was entered into with the appellant Indian Oil Corporation by one Gurcharan Singh on 25-3-1965 by which Gurcharan Singh was appointed by the Corporation its licensee to operate a petrol pump situated at the outlet of Vinay Marg New Delhi. Gurcharan Singh paid Rs. 10,021-67 to the Corporation as consideration for the agreement. Before the petrol pump could be handed over to Gureharan Singh, however, he died on 15-12-1967. The respondents who are His widow and minor sons obtained a succession certificate and asked the Corporation to perform its part of contract by giving to them the possession and management of the petrol pump as legal heirs of Gurcharan Singh. The Corporation refused to do so. The respondents, thereforee, filed an application under section 20 of the Arbitration Act in this Court alleging that a dispute had arisen between the two parties which had to be referred to arbitration according to the arbitration clause of the agreement. The Corporation resisted the application on the ground that the contract was in the nature of personal service which did not survive the death of Gurcharan Singh and further that no dispute between the parties has arisen which could be referred to arbitration. Both these contentions were rejected by the learned Single Judge who observed that the agreement had created a right in property in favor of the late Gurcharan Singh and the respondents and passed an order referring the dispute to the Managing Director of the Corporation and also ordering that the status quo shall continue till the conclusion of the arbitration

(2) In this appeal by the Corporation, Shri S. N. Chopra learned counsel for the appellant did not seriously dispute that the rights under the contract survive the death of late Gurcharan Singh. A perusal of the agreement shows that it was not an agreement of personal service. Section 6 of the Arbitration Act makes it clear that an arbitration agreement shall not be discharged by the death of a party thereto unless any right of action is extinguished by operation of law on the death of a person. The general rule about the effect of death of a party to a contract on the survival of the rights under the contract to the legal representatives of the deceased party is that such rights ordinarily survive to the legal representatives (Vide section 45 of the Contract Act) unless the very nature of the contract shows that the rights there under were personal to the party who died and in the nature of things, they could not be claimed by his legal representatives (vide section 14 of the Specific Relief Act. 1963). Death or assignment is in itself not a bar even to a claim for specific performance of a contract unless the learning, skill, solvency or any personal quality of the deceased or the assignor is a material ingredient in the contract (vide the principal part of section 15 and the first part of the proviso thereto, Specific Relief Act. 1963). In the present contract, the licensee was prohibited from assigning his rights there under. According to the second part of the proviso to section 15 of the Specific Relief Act. 1963, a representative in interest of the party to the contract would not be able to demand specific performance in the face of the clause prohibiting assignment. But this is subject to the exception that if the original party had already performed his part of the contract or performance thereof by his representative in interest has been accepted by the other party, then even the representative in interest can ask for specific performance. In the present case, the late Gurcharan Singh had performed his part of the contract by paying the consideration thereforee. We find, thereforee, that the rights under the contract survive to the respondents on the death of Gurcharan Singh.

(3) The above provisions of the Contract Act and the Specific Relief Act which generally apply to contracts are, however, subject to section 64 of the Indian Easements Act, 1882, when a particular contract is a license within the meaning of section 52 thereof. The agreement in the present case created only a license in favor of Gurcharan Singh. It did not create any right in 'property in his favor (Rameshwar Proshad Khandelwal v. Commissioners. Land Reforms & Jagirs' Madhya Bharat AIR 1959 S. C. 498.(l) Even if a licensee for consideration is evicted by a grantor before the license has been fully enjoyed the only right to which the licensee is entitled is to recover damages from the grantor for the breach of the contract of license. The reason is that a license is revocable unless it has become irrevocable under section 60 of the Easements Act. In the present case, there is nothing to show that the license had become irrevocable either because it was coupled with a transfer of property or because the licensee had executed a work of permanent character and incurred expenses in the execution of such work acting upon the license. This unilateral revocability of the license by the grantor leads to certain important consequencs. Firstly, it would bar the remedy of specific performance of contract (vide section 14(1)(c) of the Specific Relief Act). Secondly, the remedy of of injunction would not be available to a licensee or his representative in interest asserting his rights under the license.

(4) Shri S. N. Chopra contends that the order issued by the learned Single Judge maintaining the status quo amounts to the issue of an injunction against the Corporation which is thereby prevented from granting the license to any one else till the completion of the arbitration proceedings. The effect of such an order is like the grant of a temporary injunction. Under section 37 of the Specific Relief Act. 1963, a temporary injunction may be granted at any stage of a suit in accordance with the provisions of order Xxxix of the Code of Civil Procedure. A perpetual injunction can only be grated by the decree made at the hearing and upon the merits of the suit. Under section 20(2) of the arbitration Act, an application under section 20(1) is numbered and registered as a suit between the parties. The jurisdiction to grant a temporary injunction, thereforee, existed in the learned Single Judge. Shri Chopra, however, contends that the license being revocable, there was no prospect of the respondents obtaining the relief of specific performance or possession from the arbitrator. As it either the prima-facie case nor the balance of convenience, thereforee, existed in favor of the respondents, the learned Single Judge should not have granted a temporary injunction against the Corporation. Learned counsel says that the Government have adopted a policy of granting such licenses only to young unemployed engineers and this was why the Government was not willing to grant the license to respondents even at the risk of being made to pay compensation to them for the premature revocation of the license which was to exist for a period of five years. We are impressed with this contention and, thereforee, we would modify the order appealed against by deleting the relief of temporary injunction there from.

(5) Shri Chopra concedes that a dispute has arisen between the parties which is referable to arbitration. He, however, says that the relief asked for by the respondents is possession and as such a relief cannot be granted under the law, there is really no dispute in the eye of law which can be referred to arbitration. We are unable to accept this contention of the appellant. We are of the view that a dispute has arisen between the parties from the breach of contract committed by the Corporation. It is, thereforee, referable to arbitration. It is for the arbitrator to decide whether the respondents are entitled to the relief of specific performance of the contract or possession of the petrol pump or whether they are entitled merely to compensation for the premature revocation of the license. Any observations on these questions relating to the merits of the dispute made by us above are not to fetter the quasi-judicial power of the arbitrator to decide the dispute accord- ing to law. These observations were made only while discussing the question as to whether the dispute was referable to arbitration and whether the relief of temporary injunction should have been granted by the learned Single Judge.

(6) Lastly, we find that the reference of the dispute has to be made to the Managing Director of the Corporation or to some other person appointed by him. The learned Single Judge has purported to appoint the Managing Director as the arbitrator. In practice, the Managing jg Director may be too busy a person to act as arbitractor. It ft desir- able, thereforee, to make it clear that the reference is to be to the Managing Director or to such person as may be appointed by him to act as such arbitrator.

(7) We, thereforee, dismiss the appeal insofar as the appellant contended that there was no dispute to be referred to arbitration or that the rights under the contract did not survive to the respondents. We, however allow the appeal partly, set aside the order maintaining the status quo and further modify the order of the learned Single Judge as follows: We order the arbitration agreement to be filed in Court and refer the dispute raised by the respondents to the arbitrator appointed by the parties in the agreement, namely, to the Managing Director of the appellant Corporation or if he is unable or unwilling to act, then to such ether able and willing person who may be appointed by the Managing Director to act as arbitrator,. In the circumstances,we make no order as to costs of the appeal.


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