The rules of the Bar Council of India prohibit law firms from advertising and soliciting work through communication in the public domain. This website is meant solely for the purpose of information and not for the purpose of advertising. Kings & Alliance LLP does not intend to solicit clients through this website. We do not take responsibility for decisions taken by the reader based solely on the information provided in the website. By clicking on ‘ENTER’, the visitor acknowledges that the information provided in the website (a) does not amount to advertising or solicitation and (b) is meant only for his/her understanding about our activities and who we are.
By continuing to use this site you consent to the use of cookies on your device as described in our Cookie Policy
A contractor can have a credible case that its termination was disproportionate and still fail to persuade a court to temporarily restore the contract. That distinction lies at the heart of the Bombay High Court’s decision in P. Perumal Transports v. Bharat Petroleum Corporation Limited & Connected Matters1, decided on 14 August 2026.
The dispute arose from BPCL’s tender for transportation of bulk LPG by road in Tamil Nadu. Certain transporters had offered tank trucks held under Agreements to Sell (ATS). Under the tender conditions, once a Letter of Intent (LoI) was issued, an ATS truck had to be transferred into the successful bidder’s name within 120 days, along with the necessary Registration Certificate (RC) and Petroleum and Explosives Safety Organisation (PESO) licence.
For the lead petitioner, the LoI was issued on 19 October 2025. The 120-day period therefore expired on 19 February 2026. The RC transfer was completed on 18 February. The PESO position was different: the application for transfer was made on 23 February and the licence was transferred on 26 February, seven days after the contractual deadline.
BPCL continued allocating LPG loads to the tanker beyond 20 February. It was only later that BPCL sought an explanation, issued a show-cause notice and ultimately terminated the contract on 15 June 2026. The caution deposit of ₹1 lakh was also forfeited.
The transporter invoked arbitration and approached the High Court under Section 9 of the Arbitration and Conciliation Act, 1996. Its immediate objective was to stay the termination and secure a direction requiring BPCL to resume LPG load allocations while the dispute proceeded to arbitration.
That request brought two separate questions into focus: whether BPCL’s termination could ultimately withstand arbitral scrutiny, and whether the Court should, before that question was decided, compel the parties to resume a terminated commercial relationship.
The High Court treated them as distinctly different questions.
The transporter’s challenge to termination raised substantial issues. It argued that BPCL had continued allocating loads even after the 120-day deadline and had therefore waived strict compliance. The delay concerning the PESO licence was short. The tanker was specialised equipment with limited alternative commercial use and a finite operational life. According to the transporter, termination of a five-year arrangement would therefore cause losses that could not readily be quantified in damages.
The contractual consequence of the breach itself also required examination. The relevant corrigendum contemplated several possible consequences for non-compliance, including forfeiture, termination and blacklisting. This gave rise to an arguable question whether termination was proportionate to a delay of four days in applying for transfer and seven days in obtaining the PESO endorsement.
It expressly recognised that the proportionality of BPCL’s action, its conduct in continuing load allocations, the petitioner’s plea of waiver or acquiescence and the appropriate contractual consequence of the delay were matters capable of examination by the Arbitral Tribunal.
The Section 9 application, however, required the petitioner to cross an additional threshold. The petitioner was seeking an interim mandatory injunction. The requested order would require BPCL to resume load allocations and, in essence, restore performance of a contractual relationship that BPCL had already terminated.
That distinction changed the applicable threshold. Relying on the Supreme Court’s decision in Samir Narain Bhojwani v. Aurora Properties and Investments2, and the principles governing mandatory injunctions traced through Dorab Cawasji Warden v. Coomi Sorab Warden3, the High Court emphasised that such relief requires a case stronger than the ordinary prima facie case sufficient for a prohibitory injunction. The applicant must demonstrate a strong case for trial, serious or irreparable injury and a balance of convenience supporting intervention.
The contractual termination machinery added another layer. Clause 34 dealt with termination for specified defaults. Clause 33, however, independently permitted BPCL to foreclose the agreement by giving 30 days’ written notice without assigning reasons. The Court considered this clause relevant in determining the nature of the contractual relationship and referred to Section 14(d) of the Specific Relief Act, 1963, which makes contracts that are in their nature determinable incapable of specific enforcement.
Indian Oil Corporation Ltd. v. Amritsar Gas Service4 was important in this context. The Supreme Court had dealt with a distributorship agreement containing a termination mechanism and held that restoration of a determinable contractual relationship could not simply follow from a finding that termination was wrongful.
The Bombay High Court treated Section 14(d) as one part of the inquiry rather than as an absolute answer to every Section 9 application arising from a terminated contract. It specifically recognised that interim mandatory relief remains available in an appropriate contractual dispute. The nature of the contract and the ultimate relief available remained relevant, while the interim prayer also had to satisfy the heightened requirements governing mandatory relief.
The higher threshold for mandatory relief therefore became decisive. The transporter demonstrated an arguable dispute about the validity and proportionality of BPCL’s termination. Compelling BPCL to restart performance pending arbitration required the stronger prima facie case applicable to an interim mandatory injunction.
The distinction is significant. A court considering Section 9 relief separately examines the strength of the underlying arbitral dispute and the legal requirements governing the particular interim relief sought. Where the requested order would effectively recreate the contractual position existing before termination, the circumstances must independently justify mandatory intervention before the tribunal has adjudicated the underlying dispute.
The petitioner’s specialised investment, the difficulty in quantifying future losses and the possibility of the tribunal ultimately finding the termination disproportionate were all relevant considerations. Taken together, they remained insufficient to satisfy the higher threshold required for restoration.
The Court therefore refused to direct resumption of LPG load allocations. It nevertheless protected the ₹1 lakh caution deposit by directing BPCL to keep the amount separately and not finally appropriate it, leaving the parties to seek appropriate relief before the Arbitral Tribunal.
P. Perumal Transports draws an important line in Section 9 jurisprudence. A party challenging termination may show that the respondent’s conduct raises serious questions of proportionality, waiver or contractual interpretation. Those questions may be substantial enough for arbitration. Temporary restoration of the contractual relationship, however, requires satisfaction of the separate and higher threshold governing an interim mandatory injunction.
The character of the interim relief matters. When Section 9 is invoked to compel continued performance of an already terminated commercial contract, the court is being asked to alter the existing position through a mandatory injunction.
The applicant must therefore establish considerably more than an arguable case that the termination may eventually be held wrongful.
For arbitration practitioners, that distinction should shape the Section 9 strategy from the outset.
The inquiry involves both whether the termination can be challenged and whether the interim relief sought can satisfy the independent and substantially higher threshold required to reverse its consequences before the tribunal decides that challenge.
Citations
Expositor(s): Adv. Megha S Pillai
