Court Dismisses Appeal by M/s Shree Shyam Roadlines Seeking Interim Relief Under Arbitration Act, Citing Contract’s Determinable Nature and Serious Breach of Terms
In a significant judgment dated November 6, 2026, the Himachal Pradesh High Court, presided over by Justice Mr. Romesh Verma, dismissed the arbitration appeal filed by M/s Shree Shyam Roadlines challenging the termination of its contract with Hindustan Petroleum Corporation Ltd. (HPCL) for the transportation of bulk petroleum products. The Court upheld the respondent’s decision to terminate the contract, blacklist the appellant’s entire fleet, and forfeit the security deposit on grounds of serious contractual breaches involving false information and tampering with tank truck locks.
The dispute arose from a tender issued by HPCL in October 2024 for the supply of tank trucks for petroleum transportation. M/s Shree Shyam Roadlines was awarded the contract in February 2025 under the Micro and Small Enterprises (MSE) category. The contract, effective from March 26, 2025, was valid until December 31, 2029, and included a clause allowing HPCL to terminate the agreement by giving two months’ notice without assigning reasons.
HPCL issued show-cause notices to the appellant following complaints and inspections which revealed that several tank trucks were not physically fitted with bottom-loading facilities before the tender due date, despite the submission of fabricated certificates stating otherwise. Additionally, one tank truck’s security lock was found tampered with during a random inspection. These findings constituted serious malpractices under the contract and the Oil Industry Transport Discipline Guidelines (ITDG), leading to the termination order on March 5, 2026.
The appellant sought interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, challenging the termination as non-speaking and alleging violation of natural justice principles. However, the Court found that HPCL had issued detailed show-cause notices, considered the appellant’s replies, and passed a comprehensive termination order after affording adequate opportunity for hearing, thereby adhering to principles of natural justice.
Importantly, the Court held that the contract was determinable in nature, as it expressly provided HPCL the right to terminate without cause by giving advance notice. Consequently, the relief under Section 9, which is intended to preserve the subject matter of arbitration and prevent irreparable harm, could not be used to revive or continue a terminated contract. The Court emphasized that the appellant’s remedy, if any, lies in arbitration proceedings or claims for damages and not in seeking restoration of the contract through interim relief.
The Court also underscored the paramount importance of safety in petroleum transportation and noted that leniency could not be shown in cases involving tampering and false certifications that potentially jeopardize safety and the company’s reputation.
This judgment aligns with precedents from the Supreme Court and various High Courts, which restrict interim relief under Section 9 against the termination of determinable commercial contracts. It also clarifies that mandatory injunctions to restore such contracts are impermissible, reinforcing the contractual right of companies to safeguard their interests and uphold safety standards.
Bottom Line:
Arbitration and Conciliation Act, 1996 Section 9 - Interim protection cannot be granted to restore or continue a terminated determinable commercial contract - Where transport agreement expressly permitted termination by notice and termination was founded on prima facie serious irregularities including false information in tender documents and tampering of tank truck lock, relief sought under Section 9 was in substance mandatory injunction/specific performance, which is impermissible - Remedy of aggrieved contractor lies in arbitration/damages and not revival of contract.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Section 9, Section 37(1)(b); Specific Relief Act, 1963 Section 14
