Bombay High Court Refuses Restoration of Terminated LPG Transport Contract; Holds Arguable Wrongful Termination Alone Cannot Justify Interim Mandatory Continuation Pending Arbitration
Bombay High Court Refuses Section 9 Restoration of LPG Transport Contract; Leaves Waiver, Proportionality and Validity of Termination for Arbitral Tribunal
Facts
The Bombay High Court decided a batch of Section 9 petitions under the Arbitration and Conciliation Act, 1996 filed by several LPG transport contractors against Bharat Petroleum Corporation Limited and, in one connected petition, Indian Oil Corporation Limited. Since the legal issue was common, the Court treated P. Perumal Transports v. BPCL as the lead matter.
The petitioners sought two principal interim protections:
- keeping the termination order dated 15 June 2026 in abeyance and restraining forfeiture of ₹1 lakh caution money; and
- directing the oil company to resume and continuously allot LPG loads to the concerned tank truck until constitution of the Arbitral Tribunal and conclusion of arbitration.
BPCL had floated a tender for transportation of bulk LPG in Tamil Nadu. A corrigendum dated 4 April 2025 permitted participation of tank trucks purchased under an Agreement to Sell (ATS), subject to transfer of the Registration Certificate and PESO licence within four months from issuance of the Letter of Intent. The contractor was also required to furnish caution money of ₹1 lakh per ATS truck.
The lead petitioner received the Letter of Intent on 19 October 2025, making 19 February 2026 the deadline for completing the transfers.
The Registration Certificate was transferred on 18 February 2026, within time. However, according to the material before the Court, the application for transfer of the PESO licence was made only on 23 February 2026, and the transfer was completed on 26 February 2026.
BPCL nevertheless continued issuing LPG loads for some time. It subsequently called for documents, issued a show-cause notice on 8 April 2026, suspended loading, considered the petitioner’s reply and ultimately terminated the arrangement on 15 June 2026 while forfeiting the caution money.
The petitioner initially approached the Madras High Court but withdrew those proceedings after BPCL objected that the contractual seat of arbitration was Mumbai. The present Section 9 proceedings were thereafter instituted before the Bombay High Court.
Issues
The principal issues before the Court were:
- Whether the Court could, under Section 9, direct BPCL/IOCL to resume LPG load allotments and continue performance of a terminated contract pending arbitration.
- Whether the transportation agreement was a determinable contract within the meaning of Section 14(d) of the Specific Relief Act.
- Whether the relief sought, although framed as an interim mandatory injunction, would in substance amount to specific performance or restoration of the terminated agreement.
- Whether a short delay in obtaining transfer of the PESO licence created a sufficiently strong case for interim mandatory relief.
- Whether BPCL’s continuation of LPG allotments after expiry of the deadline amounted to waiver, acquiescence or abandonment of strict compliance.
- Whether difficulty in quantifying damages, limited operational life of specialised LPG tank trucks and alleged reputational injury established irreparable harm.
- Whether the caution money should be protected separately pending arbitration.
Petitioners’ Arguments
The petitioners argued that they were not seeking final specific performance, but only temporary protection until the Arbitral Tribunal could adjudicate the validity of termination.
They submitted that a Section 9 court can grant an interim mandatory injunction where necessary to preserve the subject matter and prevent the arbitral remedy from becoming ineffective.
The lead petitioner emphasised that the Registration Certificate had been transferred within the four-month period and that the PESO licence was transferred only seven days thereafter.
It argued that BPCL itself had not treated time limits rigidly because:
- the formal contract was executed several months after the Letter of Intent despite a 30-working-day contractual requirement;
- LPG loads were allotted even before execution of the formal agreement; and
- loads continued even after expiry of the four-month period.
The petitioner also relied upon the language of the corrigendum, which contemplated several possible consequences—caution-money forfeiture, termination and blacklisting—and argued that termination was therefore not automatic and could be disproportionate for a minor delay.
On irreparable injury, it argued that LPG tankers are specialised vehicles with limited useful operational lives and limited alternative commercial use. Loss of operating time could not later be restored.
It further argued that damages would be difficult to quantify because BPCL controlled the number, quantity and distance of LPG loads distributed across a fleet of approximately 360 trucks.
Finally, the petitioner contended that termination by a public-sector undertaking could cause reputational and goodwill damage in a highly specialised industry.
Respondents’ Arguments
BPCL argued that the contract expressly contained termination provisions and was therefore determinable by its nature.
It relied upon the tender corrigendum, the General Conditions of Contract and the executed Transport Contract Agreement.
According to BPCL, the corrigendum required the Registration Certificate and PESO licence to be transferred within four months and expressly contemplated penal action, including termination, for non-compliance.
BPCL emphasised that the petitioner had not merely suffered delay at the hands of the licensing authority. The petitioner itself had not even applied for PESO transfer until after expiry of the contractual deadline.
It also relied upon an affidavit furnished by the petitioner before issuance of the Letter of Intent, acknowledging that failure to submit the transferred documents within four months could lead to forfeiture, termination or blacklisting.
BPCL therefore argued that the requested Section 9 relief would effectively amount to specific performance of a determinable contract, contrary to Section 14(d) of the Specific Relief Act.
IOCL adopted substantially the same submissions in the connected petition.
Analysis of the Law
Four-Month Requirement Was Contractually Significant
The Court rejected the contention that transfer of the Registration Certificate and PESO licence within four months was merely procedural.
The corrigendum expressly stated that failure to submit documents evidencing change of name within four months could attract penal consequences and that the timeline would “under no circumstances” be extended.
The petitioner was also aware of this requirement through its own undertaking.
Therefore, prima facie, timely transfer could not be dismissed as an insignificant formality.
RC Was Transferred in Time, PESO Process Was Not
The Court drew a material distinction between the Registration Certificate and PESO licence.
The RC was transferred on 18 February 2026, one day before expiry of the deadline.
The PESO position was different. The application itself was made on 23 February 2026, four days after expiry of the deadline, and transfer was completed seven days after the deadline.
The Court observed that the situation might have been different if the contractor had applied within time and the statutory authority alone had delayed processing.
That was not the factual position before it.
Termination Was Not Necessarily Automatic
At the same time, the Court did not accept BPCL’s argument that termination necessarily followed from every breach of the four-month deadline.
The corrigendum stated that suitable penal action “may include”:
- EMD forfeiture;
- caution-money forfeiture;
- termination; and
- blacklisting.
The expression “may include” indicated that different consequences were contemplated and termination was not necessarily the only mandatory consequence in every case.
The Court therefore recognised an arguable question as to whether termination was proportionate, particularly because the PESO application was delayed only four days and transfer occurred seven days after expiry.
That question, however, was left for arbitration.
Continued LPG Allotments Did Not Establish Waiver at Interim Stage
The petitioner relied heavily on BPCL’s conduct in continuing performance after expiry of contractual time limits.
The Court accepted that this conduct was relevant.
It showed that the parties were acting on their arrangement even before execution of the formal agreement and that BPCL did not immediately stop operations on 20 February 2026.
But these facts did not conclusively establish waiver or abandonment of the PESO deadline.
Whether BPCL had waived, acquiesced in or abandoned strict enforcement required a fuller examination of evidence by the Arbitral Tribunal.
Contract Was Prima Facie Determinable
The Transport Contract Agreement contained two significant clauses.
Clause 33 permitted the Corporation to terminate or foreclose the contract, in whole or part, before expiry by giving 30 days’ written notice without assigning any reason.
Clause 34 permitted immediate termination upon specified events, including breach of contractual terms.
The Court held that these clauses operated in different spheres.
Clause 34 did not eliminate the independent termination power contained in Clause 33.
Therefore, prima facie, the contract contained an express power of determination and the question of interim restoration had to be considered against that contractual background.
Substance of Relief Matters, Not Its Label
The Court rejected the attempt to avoid the Specific Relief Act merely by calling the relief an “interim mandatory injunction.”
The real effect of the relief had to be examined.
The petitioner sought an order requiring BPCL to:
- disregard the termination; and
- resume and continuously allot LPG loads until arbitration concluded.
If granted, this would effectively restore the terminated contractual relationship and compel continued contractual performance.
Thus, the Court treated the practical effect of the order, not merely the drafting of the prayer, as decisive.
Higher Threshold for Interim Mandatory Injunction
The Court accepted that interim mandatory injunctions are not absolutely barred in contractual disputes.
However, such relief is exceptional and attracts a considerably higher threshold than an ordinary prohibitory injunction.
Relying on Samir Narain Bhojwani and Dorab Cawasji Warden, the Court identified three broad requirements:
- a strong case, stronger than the ordinary prima facie threshold;
- necessity to prevent serious or irreparable injury ordinarily incapable of adequate monetary compensation; and
- balance of convenience favouring the applicant.
The relief remains discretionary and equitable.
Arguable Case Is Not a Strong Case
This distinction ultimately determined the result.
The Court recognised several arguable points in the petitioner’s favour:
- the PESO delay was short;
- the truck possessed a valid licence;
- BPCL continued allotting LPG loads after expiry of the deadline;
- the corrigendum provided multiple possible penalties; and
- proportionality of termination could legitimately be questioned.
However, the petitioner had not applied for PESO transfer within the contractual period.
Accordingly, the Court held that the dispute was plainly arguable, but an arguable dispute is not the same as the “strong case” required for an interim mandatory injunction.
Damages Need Not Be Mathematically Exact
The petitioner submitted that damages could not be precisely quantified because load allotments were discretionary and future business depended upon BPCL’s operational decisions.
The Court accepted that future losses may sometimes be difficult to calculate exactly.
But difficulty of quantification does not automatically justify continuation of the contract. An arbitral tribunal can examine:
- historical load allocations;
- past performance;
- number and nature of trips;
- relevant contractual terms; and
- evidence of loss of profit.
Accordingly, uncertainty in damages did not satisfy the higher threshold for mandatory restoration.
Operational Life and Reputation Were Insufficient
The Court also considered the specialised nature and limited operational life of LPG tank trucks.
While potentially relevant to irreparable injury, the material did not establish that the truck had no alternative permissible use whatsoever or that its remaining economic value would be destroyed during arbitration.
Similarly, possible reputational harm arising from termination by a PSU was relevant but insufficient at the interim stage to justify mandatory continuation of the contract.
Precedent Analysis
Indian Oil Corporation Ltd. v. Amritsar Gas Service
The Court relied on the Supreme Court’s principle that where a distributorship or commercial agreement is revocable in accordance with its terms, the contract is determinable in nature.
Even where termination is ultimately found wrongful, restoration or specific performance does not necessarily follow. The aggrieved party may instead have a remedy in damages.
This principle was directly relevant because the BPCL agreement contained an express termination clause.
Samir Narain Bhojwani v. Aurora Properties & Investments
The Court relied upon this decision for the stringent requirements governing an interlocutory mandatory injunction.
A party seeking such relief must establish a stronger case than an ordinary prima facie case and show that mandatory intervention is necessary to prevent serious or irreparable injury.
Dorab Cawasji Warden v. Coomi Sorab Warden
The Court referred to Dorab Cawasji Warden through Samir Bhojwani.
The principle is that interim mandatory injunctions may be issued to restore the last uncontested status or undo an act wrongfully done, but only where the applicant satisfies the higher equitable threshold.
The power is exceptional and must be exercised cautiously.
Court’s Reasoning
The Court found that the petitioner had raised genuine issues requiring arbitration.
It did not conclusively hold that BPCL’s termination was lawful.
Indeed, it expressly left open questions concerning:
- proportionality of termination;
- effect of the short PESO delay;
- continued allotment of LPG loads;
- waiver or acquiescence;
- availability of alternative contractual penalties; and
- correctness of the forfeiture.
However, Section 9 relief directing BPCL to resume LPG transportation would do more than preserve the dispute.
It would effectively restore a terminated contract and compel continued commercial performance.
Given the express termination clause and the petitioner’s admitted failure to initiate PESO transfer within time, the Court held that the petitioner had not crossed the higher threshold required for that exceptional relief.
Caution Money Protected Separately
The Court treated the ₹1 lakh caution money differently.
Because the corrigendum provided several possible penal consequences and because justification for forfeiture remained part of the arbitral dispute, the Court found it appropriate to preserve the amount.
BPCL was therefore directed to:
- maintain the ₹1 lakh separately; and
- not appropriate, utilise or finally deal with it until commencement of arbitration and an appropriate application before the Arbitral Tribunal.
This protection did not amount to staying or setting aside the termination order.
Conclusion
The Bombay High Court rejected the prayer seeking immediate restoration and continuation of LPG transportation work.
It held that although the petitioners had raised arguable disputes regarding the proportionality and validity of termination, they had not established the strong prima facie case necessary for an interim mandatory injunction compelling continuation of a terminated commercial contract.
The Court nevertheless protected the caution money by directing the respondent to maintain ₹1 lakh separately pending commencement of arbitration and consideration by the Arbitral Tribunal.
The termination itself remained operative, and the Tribunal was directed to decide all disputes independently without being influenced by the High Court’s prima facie observations.
Case Details
Case: P. Perumal Transports v. Bharat Petroleum Corporation Limited, with connected petitions
Court: Bombay High Court, Ordinary Original Civil Jurisdiction
Case Numbers: Arbitration Petition (L) Nos. 22666, 22924, 23272, 23312, 23394, 23702 and 23005 of 2026
Judge: Justice Amit Borkar
Date: 14 August 2026
Result: Section 9 relief seeking resumption of LPG loads rejected; termination remained operative; ₹1 lakh caution money protected from appropriation pending arbitration.
