Bombay High Court Refuses To Restore Terminated LPG Transport Contract Pending Arbitration

The Bombay High Court has refused to order Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation Limited (IOCL) to resume LPG load allotments to tank-truck operators whose transport arrangements were terminated.

The court held that such a direction would effectively revive the terminated contractual relationship while the dispute is pending arbitration.

Justice Amit Borkar observed, “if prayer clause (b) is granted, result would be that contractual relationship which has been terminated would again get restored and Respondent would be required to continue performing contract during pendency of arbitration.”

The petitions arose from a BPCL tender for transportation of bulk LPG by road in Tamil Nadu. P. Perumal Transports and other operators approached the court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection and resumption of LPG load allotments.

The petitions were heard together, with P. Perumal Transports' case taken up as the lead matter.

A corrigendum issued on April 4, 2025, allowed certain trucks whose ownership could not immediately be transferred to participate through Agreements to Sell. It gave the operators four months from the Letter of Intent to transfer the Registration Certificate and PESO licence. The corrigendum also allowed penalties such as forfeiture of caution money and termination.

BPCL issued the Letter of Intent to P. Perumal Transports on October 19, 2025. The four-month deadline was February 19, 2026.

The Registration Certificate was transferred on February 18. However, the application to transfer the PESO licence was made only on February 23. The transfer was completed on February 26.

The formal Transport Contract Agreement was executed on February 23. BPCL had already issued the first LPG load on December 24, 2025, before the formal agreement was executed. It continued allotting loads after the February 19 deadline, with the last load issued on April 4, 2026.

BPCL sought the required documents on April 5 and issued a show-cause notice on April 8. It also suspended LPG load allotments. P. Perumal Transports replied on April 27, explaining the delay and seeking resumption of transportation.

BPCL subsequently withdrew the Letter of Intent, terminated the tank truck from the Transport Agreement on June 15 and forfeited the ₹1 lakh caution money.

The operators argued that the PESO delay was short and that BPCL's continued allotment of loads after the deadline showed that strict compliance had not been insisted upon. BPCL maintained that the contractual terms permitted termination. IOCL adopted BPCL's submissions.

The court found that the operators had raised arguable issues. These included whether the short delay justified termination and what effect BPCL's continued allotment of LPG loads had. However, it held that an arguable dispute was not enough to meet the higher threshold for an interim mandatory injunction.

Justice Borkar also noted that Clause 33 of the Transport Contract Agreement allowed BPCL to terminate or foreclose the contract before expiry by giving 30 days' notice without assigning any reason. The court held that this provision was relevant to whether the contract was determinable.

“These issues require examination by Arbitral Tribunal. However, material available does not establish strong case required for directing restoration and continued performance of terminated contract by granting an interim mandatory injunction,” the court observed.

It therefore rejected the request to resume LPG load allotments. The court left the dispute over the termination to the arbitral tribunal.

The court nevertheless directed BPCL to keep the ₹1 lakh caution money separately. It barred BPCL from appropriating, utilising or finally dealing with the amount until arbitration begins and an appropriate application is made before the arbitral tribunal.

The order clarified that this protection does not stay the June 15 termination or revive the Transport Contract Agreement.

For Petitioner (P. Perumal Transports and connected operators): Advocates Ayush Kashyap, Shivam Lathuriya and Sujit Bhuyare.

For Respondent (Bharat Petroleum Corporation Limited): Senior Advocate Pankaj Sawant, Advocates Murtaza Kachwalla, Shreyas Lavekar, Abhinav Naiknaware and Nehha Rukhana, instructed by Indus Law Advocates.

For Respondent (Indian Oil Corporation Limited): Advocates Samkit Jain and Sandhya Yadav, instructed by Ashok Purohit & Co.