WP/6165/2010 of M/s Bhupathi Reddy Oil Company Ltd Indian Oil Dealer Vs Indian Oil Corporation Ltd on 30 December 2014

ORDER:

This writ petition, filed under Article 226 of the Constitution ofIndia, challenges the Order bearing Letter No.Ref.VA644 dated2.3.2010 passed by the respondent, terminating the dealership of thepetitioner.

2 . Filtering the inapposite and unnecessary details, the factspertinent for resolving the controversy in the present writ petition are asinfra:

Petitioner's husband one Sri Gangi Reddy, an Ex-Service Manwas awarded whole sale kerosene dealership of the respondentIndian Oil Corporation at Tadepalligudem, West Godavari District andafter his demise, the same was transferred in the name of the petitionerand a fresh Agreement was entered into on 8.11.1979. The officials ofthe respondent Corporation inspected the business premises on14.9.2009 and took certain documents including the GPA executed bythe petitioner in favour of one Mr.K.Bhaskara Reddy and a letter of INGVysya bank and basing on the same, the respondent issued a showcause notice vide Ref.VA/644 dated 27.11.2009, asking the petitionerto show cause as to why the dealership agreement dated 8.11.1979should not be terminated for violation of the agreement conditions. Petitioner submitted explanation and the respondent orderedtermination of the dealership agreement vide Order in Ref:VA/644dated 2.3.2010. Calling in question, the validity and the legalacceptability of the said order of termination of dealership dated2.3.2010, the present writ petition came to be filed.

3. This Court on 18.3.2010 granted Status quo order and laterordered rule nisi on 26.4.2010. Responding to the rule nisi issued bythis Court, a counter affidavit has been filed, denying the averments in the writ affidavit and in the direction of justifying the impugned action.

4. Heard Sri N.Siva Reddy, learned counsel for the petitioner andSri Deepak Bhattacharjee, learned Standing Counsel for therespondent Corporation apart from perusing the material available onrecord.

5. Submissions/contentions of Sri N.Siva Reddy, learned counselfor the petitioner:

(1) The impugned order of termination of the dealership of thepetitioner is illegal, arbitrary, without jurisdiction and unreasonable andunwarranted and is violative of Articles 14 and 19(1)(g) of theConstitution of India and opposed to the principles of natural justice.

(2) The GPA executed in favour of the Manager in the year 1993does not violate clauses 13 and 16( b) & ( c) of the DealershipAgreement and the respondent, without appreciating the same came toa conclusion erroneously that the petitioner violated the said clauses.

(3) The respondent erroneously terminated the dealership based onthe letter of ING Vysya Bank, authorising the Manager to operate theaccount and to carry on day to day transactions and the same is not inviolation of any of the conditions of the agreement.

(4) Had the explanation offered by the petitioner for the show causenotice been considered by the respondent from proper perspective, theimpugned order of termination would not have emanated.

(5) Since the respondent falls under the definition of State underArticle 12 of the Constitution, its actions should be just, fair andreasonable.

(6) Except the present imputation, there has never been anycomplaint against the petitioner for the last three (3) decades and thereis no material to show that the respondent suffered any prejudicebecause of the actions of the petitioner.

(7) The contention of the respondent with regard to maintainability ofthe writ petition is not tenable in the facts and circumstances of thecase and in view of the law laid down by the Hon'ble Apex Court andthis Court.

The learned counsel for the petitioner, to bolster hiscontentions/ submissions, places reliance on the judgments in ABLInternational Ltd., and another v. Export Credit GuaranteeCorporation of India and others[[1]], K.Harinath v. Hindustan

Conclusion

Petroleum Corporation Ltd., Mumbai and another[[2]],judgment inW.A.No.517 of 2013 dated 24.4.2013 as confirmed in SLP (Civil)No.22481 of 2013 and judgment in W.A.No.1595 of 2013 dated25.10.2013.

6. Submissions/contentions of Sri Deepak Bhattacharjee, StandingCounsel for the Respondent:

(1) The writ petition is not maintainable in view of availability ofalternative remedy of arbitration clause under the Agreement.

(2) There is neither illegality nor infringement of any statutory norconstitutional rights of the petitioner as such the petitioner is notentitled for any relief from this Court under Article 226 of theConstitution of India.

(3) Since the petitioner violated the clauses in the dealershipagreement, the respondent is justified in terminating the dealership.

The learned counsel for respondent in support of hiscontentions and submissions, takes the support of the followingjudgment:

(a) State of Bihar and others v. Jain Plastics andChemicals Ltd.,[[3]].Chemicals Ltd.,[[3]].

(b) Sri Lalitha Devi Gas Agencies v. HindustanPetroleum Corporation Ltd., Mumbai and another[[4]]Petroleum Corporation Ltd., Mumbai and another[[4]]

(c) M/s Choday Sanyasi Rao, HPC Retail Outlet, Samalkot, East Godavari District v. Hindustan Petroleum Corporation Ltd., Visakhapatnam[[5]]

(d) Sanjana M.Wig (Ms) v. Hindustan Petroleum Corpn.Ltd.,[[6]]Ltd.,[[6]]

(e) S.Suresh v. Indian Oil Corporation Ltd., SouthernRegion, Madras and another[[7]]Region, Madras and another[[7]]

(f) Pimpri Chinchwad Municipal Corporation andothers v. Gayatri Construction Company andanother[[8]]others v. Gayatri Construction Company andanother[[8]]

(g) Rajasthan State Industrial Development andInvestment Corporation and another v. Diamond &Investment Corporation and another v. Diamond &

Gem Development Corporation Ltd., and another[[9]]

(h) GAIL (India) Limited v. Gujarat State PetroleumCorporation Limited[[10]]Corporation Limited[[10]]

(i) Empire Jute Company Limited and others v. JuteCorporation of India Limited and another[[11]]Corporation of India Limited and another[[11]](j)Judgment of the Delhi High court in Appeal No.435of 2012 dated 27.11.2013 (Nirmala Kwatra v. Indian OilCorporation Ltd & another).of 2012 dated 27.11.2013 (Nirmala Kwatra v. Indian OilCorporation Ltd & another).

7. In the light of the pleadings, submissions and the contentions ofthe parties to the present writ petition, now the issues, which this Courtis called upon to answer are;

(i) Whether the present Writ Petition is maintainable in viewof the existence of arbitration clause in the agreement?of the existence of arbitration clause in the agreement?

(ii) Whether the impugned order of termination of thedealership of the petitioner is sustainable and whether therespondent is justified in cancelling the dealershipagreement in the facts and circumstances of the case?dealership of the petitioner is sustainable and whether therespondent is justified in cancelling the dealershipagreement in the facts and circumstances of the case?

8. The first issue with regard to maintainability of the writ petitionneeds examination and adjudication in the light of the principles andparameters laid down by the Hon'ble Apex Court and this Court on thisaspect. Before referring to the judgments cited by the learnedAdvocates, it may be appropriate to reproduce clause No.28 of the Dealership Agreement, which reads as follows:

“28. Any dispute or difference of any naturewhatsoever or regarding any right, liability, act,omission or on account of any of the parties hereto,arising out of or in relation to this agreement shall bereferred to the sole arbitration of the ManagingDirector of the Corporation or of some officer of theCorporation who may be nominated by the ManagingDirector. The dealer will not be entitled to raise anyobjection to any such arbitrator on the ground that thearbitrator is an officer of the Corporation or that he hasto deal with the matters to which the contract relatesor that in the context of his duty as an officer of theCorporation, he had expressed views on all or anyother matters in dispute or difference. In the event ofthe arbitrator to whom the matter is originally referredbeing transferred or vacating his office or being unableto act for any reasons, the Managing Director asaforesaid at the time of such transfer vacation of theoffice or inability to act shall designate any person toact as arbitrator in accordance with the terms of theagreement. Such persons shall be entitled to proceedwith reference from the point at which it was left by hispredecessor. It is also a term of this contract that noperson other than the Managing Director or a personnominated by such Managing Director of theCorporation as aforesaid shall act as arbitratorhereunder. The award of the arbitrator so appointedshall be final, conclusive and binding on all the partiesto the agreement subject to the provisions of theArbitration Act, 1940 or any statutory modification orre-enactment thereof and the rules made thereunderfor the time being in force shall apply to the arbitrationproceedings under this clause.

The award shall be made in writing within sixmonths after entering upon reference or within suchextended time not exceeding further four months asthe sole arbitrator shall by a writing under his ownhands appoint.”

9. While referring to the above arbitration clause, it is the emphaticcontention of the learned counsel for the petitioner that existence of thesaid clause in the Dealership Agreement does not preclude this Courtfrom exercising the jurisdiction and entertaining the writ petition underArticle 226 of the Constitution when there is patent arbitrariness andillegality in the impugned order.

10. In ABL International Ltd., v. Export Credit Guarantee Corporationof India(1 supra), the Hon'ble Supreme Court at paragraphs 8, 10, 14, 16, 19, 27 and 51 held as under:

“8. As could be seen from the arguments addressed in thisappeal and as also from the divergent views of the two courtsbelow, one of the questions that falls for our consideration iswhether a writ petition under Article 226 of the Constitution ofIndia is maintainable to enforce a contractual obligation of theState or its instrumentality, by an aggrieved party.

10. It is clear from the above observations of this Court in thesaid case, though a writ was not issued on the facts of that case,this Court has held that on a given set of facts if a State acts in anarbitrary manner even in a matter of contract, an aggrieved partycan approach the court by way of writ under Article 226 of theConstitution and the court depending on facts of the said case isempowered to grant the relief. This judgment in K.N. Guruswamy

v. State of Mysore[1]was followed subsequently by this Court inthe case of D.F.O. v. Ram Sanehi Singh[2]wherein this Courtheld: (SCC p. 865, para 4)

“By that order he has deprived the respondent of a valuableright. We are unable to hold that merely because the source ofthe right which the respondent claims was initially in a contract,for obtaining relief against any arbitrary and unlawful action on thepart of a public authority he must resort to a suit and not to apetition by way of a writ. In view of the judgment of this Court in K.N. Guruswamy case[1]there can be no doubt that the petitionwas maintainable, even if the right to relief arose out of an allegedbreach of contract, where the action challenged was of a publicauthority invested with statutory power.”

14. This judgment again, in our opinion, does not help the firstrespondent in the argument advanced on its behalf that incontractual matters remedy under Article 226 of the Constitutiondoes not lie. It is seen from the above extract that in that casebecause of an arbitration clause in the contract, the Court refusedto invoke the remedy under Article 226 of the Constitution. Wehave specifically inquired from the parties to the present appealbefore us and we have been told that there is no such arbitrationclause in the contract in question. It is well known that if theparties to a dispute had agreed to settle their dispute byarbitration and if there is an agreement in that regard, the courtswill not permit recourse to any other remedy without invoking the remedy by way of arbitration, unless of course both the parties tothe dispute agree on another mode of dispute resolution. Sincethat is not the case in the instant appeal, the observations of thisCourt in the said case of Bridge & Roof Co.[6]are of no assistanceto the first respondent in its contention that in contractual matters,writ petition is not maintainable.

16. A perusal of this judgment though shows that a writpetition involving serious disputed questions of facts whichrequires consideration of evidence which is not on record, will notnormally be entertained by a court in the exercise of itsjurisdiction under Article 226 of the Constitution of India. Thisdecision again, in our opinion, does not lay down an absolute rulethat in all cases involving disputed questions of fact the partiesshould be relegated to a civil suit. In this view of ours, we aresupported by a judgment of this Court in the case of GunwantKaur v. Municipal Committee, Bhatinda[8]where dealing with sucha situation of disputed questions of fact in a writ petition this Courtheld: (SCC p. 774, paras 14-16)

“14. The High Court observed that they will not determinedisputed question of fact in a writ petition. But what facts were indispute and what were admitted could only be determined afteran affidavit-in-reply was filed by the State. The High Court,however, proceeded to dismiss the petition in limine. The HighCourt is not deprived of its jurisdiction to entertain a petition underArticle 226 merely because in considering the petitioner’s right torelief questions of fact may fall to be determined. In a petitionunder Article 226 the High Court has jurisdiction to try issues bothof fact and law. Exercise of the jurisdiction is, it is true,discretionary, but the discretion must be exercised on soundjudicial principles. When the petition raises questions of fact of acomplex nature, which may for their determination require oralevidence to be taken, and on that account the High Court is of theview that the dispute may not appropriately be tried in a writpetition, the High Court may decline to try a petition. Rejection ofa petition in limine will normally be justified, where the High Courtis of the view that the petition is frivolous or because of the natureof the claim made dispute sought to be agitated, or that thepetition against the party against whom relief is claimed is notmaintainable or that the dispute raised thereby is such that itwould be inappropriate to try it in the writ jurisdiction, or foranalogous reasons.

15. From the averments made in the petition filed by theappellants it is clear that in proof of a large number of allegationsthe appellants relied upon documentary evidence and the onlymatter in respect of which conflict of facts may possibly arise related to the due publication of the notification under Section 4 bythe Collector.

16. In the present case, in our judgment, the High Court wasnot justified in dismissing the petition on the ground that it will notdetermine disputed question of fact. The High Court hasjurisdiction to determine questions of fact, even if they are indispute and the present, in our judgment, is a case in which in theinterests of both the parties the High Court should haveentertained the petition and called for an affidavit-in-reply from therespondents, and should have proceeded to try the petitioninstead of relegating the appellants to a separate suit.”

19. Therefore, it is clear from the above enunciation of lawthat merely because one of the parties to the litigation raises adispute in regard to the facts of the case, the court entertainingsuch petition under Article 226 of the Constitution is not alwaysbound to relegate the parties to a suit. In the above case of Gunwant Kaur[8]this Court even went to the extent of holding thatin a writ petition, if the facts require, even oral evidence can betaken. This clearly shows that in an appropriate case, the writcourt has the jurisdiction to entertain a writ petition involvingdisputed questions of fact and there is no absolute bar forentertaining a writ petition even if the same arises out of acontractual obligation and/or involves some disputed questions offact.

27. From the above discussion of ours, the following legalprinciples emerge as to the maintainability of a writ petition:

(a) In an appropriate case, a writ petition as against a State oran instrumentality of a State arising out of a contractual obligationis maintainable.

(b) Merely because some disputed questions of fact arise forconsideration, same cannot be a ground to refuse to entertain awrit petition in all cases as a matter of rule.

(c) A writ petition involving a consequential relief of monetaryclaim is also maintainable.

51. From the terms of the contract, we have noticed in clause6, as amended by the addendum, consideration by way of barterof goods is not the sole mode of payment of consideration. Thesaid clause contemplates alternate modes of payment ofconsideration, one of them being by barter of goods and the otherby cash payment in US $. The terms of the insurance contractwhich were agreed between the parties were after the terms ofthe contract between the exporter and the importer wereexecuted which included the addendum, therefore, without

hesitation we must proceed on the basis that the first respondentissued the insurance policy knowing very well that there wasmore than one mode of payment of consideration and it hadinsured failure of all the modes of payment of consideration. Fromthe correspondence as well as from the terms of the policy, it isnoticed that existence of only two conditions has been made as acondition precedent for making the first respondent Corporationliable to pay for the insured risk, that is: (i) there should be adefault on the part of the Kazak Corporation to pay for the goodsreceived; and (ii) there should be a failure on the part of theKazakhstan Government to fulfil their guarantee. This is clearfrom the terms of the insurance contract read with the letter of thefirst respondent dated 8-9-1993 wherein at clause 3-A, it isstated: “Our liability will arise only after default has beenestablished on the guarantee of the Ministry.” From the above, itis clear that both the grounds as put forth by the learned counselfor the respondent before us as well as in the two letters ofrepudiation issued by the first respondent are unsustainable. Inour opinion, the first respondent insured the export risk of theappellants in regard to the non-payment of the consideration forthe tea exported, whether it arose from the non-fulfilment of thebarter clause or from the non-fulfilment of the cash paymentclause. The argument advanced on behalf of the respondent thatthe appellants refused to accept the barter by goods offered bythe Kazak Corporation which amounted to a default under thecontract on the part of the appellants has no legs to stand in viewof the clear language of the amended clause 6 of the agreementwhich as noted above, states that the obligation of the buyer,namely, the Kazak Corporation to pay for the goods received byit in US $ arises when payment by barter fails for “any reasonwhatever”. The use of the words “any reason whatever” in thesaid amended clause includes the reasons of refusal by theappellants to accept the goods offered in barter. On the face ofthe said language of the amended clause, there could be no roomfor two opinions at all in regard to the liability of the firstrespondent to pay for the loss suffered by the appellants even incases where payment by barter fails at the instance of theappellant. The learned counsel for the respondent contended thatfor a correct interpretation of this amended clause and the otherclauses of the contracts i.e. the contract of export and thecontract of insurance, between the parties there is need for oralevidence being led without which a proper interpretation of thisclause is not possible, therefore, it is a fit case in which theappellants should be directed to approach the civil court toestablish their claim. We find no force in this argument. We havecome to the conclusion that the amended clause 6 of the

agreement between the exporter and the importer on the face of itdoes not give room for a second or another construction than theone already accepted by us. We have also noted that relianceplaced on sub-clause (d) of the proviso to the insurance contractby the Appellate Bench is also misplaced which is clear from thelanguage of the said clause itself. Therefore, in our opinion, itdoes not require any external aid, much less any oral evidence tointerpret the above clause. Merely because the first respondentwants to dispute this fact, in our opinion, it does not become adisputed fact. If such objection as to disputed questions orinterpretations is raised in a writ petition, in our opinion, the courtscan very well go into the same and decide that objection if factspermit the same as in this case. We have already noted thedecisions of this Court which in clear terms have laid down thatmere existence of disputed questions of fact ipso facto does notprevent a writ court from determining the disputed questions offact. (See Gunwant Kaur[8].)”

11. In K.Harinath v. Hindustan Petroleum Corporation Ltd.[[12]]a Division Bench of this Court, by relying upon the judgments of theHon'ble Apex Court in Indian Oil Corporation Ltd v. Amritsar GasService[[13]]and E.Venkata Krishna v. Indian Oil Corporation[[14]]turned down the contention with regard to alternative remedy ofarbitration while finding in favour of maintainability of the writ petition.

12. In W.A.No.517 of 2013 dated 24.4.2013, a Division Bench of thisCourt confirmed the judgment rendered by the learned Single Judgewith regard to the maintainability of the writ petition. The learnedSingle Judge in WP.Nos.12335/2007 & 1193/2009 by relying upon thejudgments in Harbanslal Sahnia v. Indian Oil Corporation Ltd.,[[15]]

and Union of India v. Tantla Constructions (P) Ltd.[[16]]held infavour of the maintainability. Against the said order of the learnedSingle Judge, the said Writ Appeal was filed and as against the ordersin W.A.No.517/2013, SLP(Civil) No.22481/2013 was preferred and thesame was dismissed by the Hon'ble Apex Court by an order dated27.4.2013. Itis also relevant to mention that the said proposition of law was reiterated by another Division Bench in W.A.No.1595/2013. Onthe other hand the judgments of the Hon'ble Apex Court on whichstrong reliance is placed by the learned counsel for the respondentwould not render any assistance to the respondent on the issue ofmaintainability as none of the same dealt with maintainability of thewrit petition in the matter of termination of dealership. Anothersignificant aspect which needs to be noted is that even as per the lawlaid down in those judgments, there is no absolute bar on thejurisdiction of this Court under Article 226 of the Constitution of India incontractual matters also. Therefore, by any stretch of imagination, itcannot be said that the present writ petition is not maintainable. Another vital aspect which has significant bearing on the issue is thatthe petitioner who is the widow of an Ex-Service Man is now 87 yearsold and is in the evening of her life and this is yet another valid reasonwhich weighs this Court to hold in favour of the petitioner on the issue,touching the maintainability of the writ petition.

13. This writ petition came to be filed in the year 2010 and now weare in 2014 and at this length of time, relegating the petitioner to thealternative remedy of Arbitration would be highly unreasonable. It isalso to be noted that in the case of Nirmala Kwatra v. Indian OilCorporation Ltd & another (Appeal No.435 of 2012 dated 27.11.2013),a partnership deed was also executed, transferring majority of theshares i.e. 98% of the shares in favour of a third party. In the facts andcircumstances of the said case, the Hon'ble Delhi High Court refusedto grant any relief in favour of the party in the said writ petition. Accordingly, the first issue is answered, in favour of the petitioner inview of the above referred authoritative pronouncements and thereasons, holding that the present Writ Petition is maintainable underArticle 226 of the Constitution of India.

14. Coming to issue No.2, touching the sustainability and legality and tenability of the impugned order of termination of dealership of thepetitioner -

15. There is absolutely no dispute with regard to the realities that thepetitioner is the widow of an Ex-service Man and initial grant of thedealership in favour of the petitioner's husband and the transfer of thedealership subsequently in favour of the petitioner following thedemise of her husband. It is also the case of the petitioner that therehas never been any complaint against her at any point of time exceptthe present issue which is not disputed by the respondent. Thematerial made available before this Court reveals that following aninspection carried out by the officers of the respondent Corporationand while pointing out two documents said to have been handed overby the petitioner namely (1) GPA dated 7.11.1992 executed by thepetitioner in favour of one Mr.Kovvuri Bhaskara Reddy and (2) a letterdated 16.9.2009 issued by ING Vysya Bank Ltd., Tadepalligudem, therespondent issued a Show Cause Notice vide Ref:VA/644 dated27.11.2009, calling upon the petitioner to show cause as to why theDealership Agreement dated 8.11.1979 should not be terminated foralleged violation of Conditions 13 and 16(b) &(c) of the DealershipAgreement. The said conditions read as under:

“Clause No.13.Assignment of agreement:

The Dealer shall not sell, assign, mortgage or part with orotherwise transfer his interest in the dealership or the right,interest or benefit conferred on him by this agreement to anyperson. In the event of the Dealer being a partnership firm anychange in the constitution of the firm, whether by retirement,introduction of new partners or otherwise howsoever will not bepermitted without the previous written approval of the Corporationnotwithstanding that the Corporation may have dealings withsuch reconstituted firm or impliedly waived or condoned thebreach or default mentioned hereinabove by the Dealer. In theevent of the death of any of the partners, the Dealer shallimmediately inform the Corporation giving the necessaryparticulars of the heirs and legal representatives of the deceasedpartner and it shall be the option of the Corporation either to continue the dealership with the said firm or to have a freshagreement of the dealership with any reconstituted firm or toterminate the dealership agreement and the decision of theCorporation in that behalf shall be final and binding on all theparties concerned. No claim on premature termination forcompensation or otherwise will be made or sustainable againstthe Corporation on account of such termination.

Clause No.16(b) Faithful performance:

It shall be a paramount condition of the agreement thatthe Dealer himself (if he be an individual) or both the partners ofthe dealer firm (if the Dealer is a partnership firm consisting oftwo partners only) or the majority of the partners of the dealer firm(if the Dealer is a firm consisting of more than two partners) orthe majority of the members of the dealers Cooperative Society(if the Dealer is a Cooperative Society), as the case may be shalltake active part in the Management and running of the dealershipand shall personally supervise the same and shall not under anycircumstances do so through any other person, firm or body.

(c) Except with the previous written consent of the Corporation

(i) The dealer shall not enter into any arrangement, contractor understanding whereby the operations of the Dealerhereunder are or may be controlled, carried out and/orfinanced by any other person firm or Company, whetherdirectly or indirectly and whether in whole or in part.or understanding whereby the operations of the Dealerhereunder are or may be controlled, carried out and/orfinanced by any other person firm or Company, whetherdirectly or indirectly and whether in whole or in part.

(ii) The Dealer himself if he is an individual or the partnersmembers or any of them of the Dealer (if the Dealer be afirm/Cooperative Society) shall not take up any otheremployment or engage in any other business apart from theoperation of the dealership which is the subject matter ofthis agreement.members or any of them of the Dealer (if the Dealer be afirm/Cooperative Society) shall not take up any otheremployment or engage in any other business apart from theoperation of the dealership which is the subject matter ofthis agreement.

(iii) The dealer (if it be a firm or a Cooperative Society) shallnot effect any change in its constitution whether in theidentify of its partners or members of in the terms of theDeed of Partnership or of the Bye-laws as the case maybe”.not effect any change in its constitution whether in theidentify of its partners or members of in the terms of theDeed of Partnership or of the Bye-laws as the case maybe”.

16. In response to the said show cause notice, the petitionersubmitted her explanation dated 7.12.2009, stating as follows:

“To Visakhapatnam Senior Divisional Manager. I amdoing IOC Dealership of Kerosene from 1979 by name Bupathi Reddy Oil Company at Tadepalligudem.

I did not give any partnership to anybody in the firm. I became aged so I want to give to K.Bhaskara Reddyfor only seeing the office work and bank works. I gave fullpower is not a partner. If I want to give any partnership firm, Ishould have informed to you.

I am running the ING Vysya Bank Account by my own”.

17. As per Condition No.13 of the Dealership Agreement, no dealershall sell, assign, mortgage or part with or otherwise transfer hisinterest in the dealership or the right, interest or benefit conferred onhim by the agreement to any person and as per condition No.16(b) it isincumbent on the part of the dealer to take active part in themanagement and as per condition 16(c), the dealer shall not enter intoany arrangement, contract or understanding whereby the operations ofthe dealer are/or may be controlled, carried and/or financed by anyother person, firm or company, whether directly or indirectly whether inthe whole or in part. These conditions have to be read along withCondition No.15 of the Dealership Agreement which reads as under:

“The dealer undertakes that he and his servants and agentsshall observe and perform provisions of the Petroleum Act, 1934or any statutory re-enactment or/modification thereof for the timebeing in force and all the rules and regulations made thereunderand all other Government or Municipal, Local or such like acts,laws, regulations and bye-laws as may be in force from time totime. If there is any violation on the part of the dealer of theaforesaid the provisions or statutory rules and regulation, theCorporation will have absolute right to discontinue the suppliesand take any other action including termination of this agreementas the Corporation may at its absolute discretion think fit”.

18. The above said condition undoubtedly authorises the dealer toengage servants and agents and this gives discretion to theCorporation to take action and this discretion needs to be exercised ina reasonable manner and with a pragmatic approach to the issueinvolved and keeping in view the facts and circumstances of the case. While dealing with the issue, the vital and crucial aspects which would have bearing on the situation such as age of the dealer, thecircumstances under which she is placed and the background in whichthe dealership was transferred in favour of the petitioner and the quotaunder which the dealership was initially granted in favour of thepetitioner's husband who was an Ex-Service Man and the laudableobject behind earmarking certain number of outlets for Ex-Service Mencannot be lost sight of. All these aspects are relevant considerationswhich the respondent is required to consider while resorting to theextreme action of terminating the dealership. Any efforts undertakenby the respondent in the said direction are conspicuously absent in thepresent case. It is also to be noted that simply because the power isavailable for termination of dealership, such a discretionary powershould not be exercised in a routine and mechanical manner unlessthe circumstances warrant such extreme action. The GPA madeavailable before this Court, in the considered opinion of this Court andin the facts and circumstances of the case, is neither in the direction ofparting with the dealership nor the same can be construed as violationof the Conditions 13 and 16(b)&(c) of the Dealership Agreement. It isalso to be noted that despite the directions of this Court to produce theletter dated 16.9.2009 said to have been issued by ING Vysya BankLtd., which the respondent herein made as one of the foundations forissuing show cause notice, the same could not be produced by therespondent. On the other hand, an affidavit deposed by the Manager,Retail Sales, IOCL on 9.12.2014 is filed saying that despite trying theirlevel best to trace out the letter dated 16.9.2009, the same could not betraced out.

19. In the facts and circumstances of the case, this Court is of thedefinite opinion that the alleged violations would not tantamount todeviation from the conditions. Tested on the touchstone of Chapter IIIof the Constitution of India, the impugned order of termination ofdealership of the petitioner is liable to be declared as iniquitous and unwarranted and the same is liable to set aside.

20. For the foregoing reasons, the writ petition is allowed, settingaside the order of termination vide Letter No.Ref.VA644 dated2.3.2010 issued by the respondent herein and consequently, thedealership of the petitioner shall be restored forthwith. As a sequel,the miscellaneous petitions, if any, shall stand closed. There shall beno order as to costs.

Date: 30.12.2014DA

______________

A.V.SESHA SAI, J

30.12.2014

DA

IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESHAT HYDERABAD

Date: 30.12.2014

Between:

M/s Bhupathi Reddy Oil Company,Indian Oil Dealer in SKO, Tadepalligudem,West Godavari district, rep. by itsPropreitor L.Shakuntala.

Petitioner

And

Indian Oil Corporation Ltd.,Marketing Division, Visakhapatnam, The counsel for petitioner relies on (2004)3SCC 553(paras8,10,14,16,19,27 and 51------------------2013(4)ALD 518,-----------Judgement in WANo.517/2013 dt.24-4-2013 as confirmed inSLP(civil)No.22481/2013 -----------Judgment in W.A.1595/2013 dt.25-10-2013.

Learned counsel for respondent relies on (2002) 1 SCC 216 (paras3&7)---------(2002(5)ALD 389(para 8)---------2003(1)ALD 692(paras16&17)-------------(2005)8SCC 242(paras13 to 18)------2007(3)ALD 243(paras 11,14,15,27 & 28)---------(2008)8 SCC 172 (paras 11&17)------and (2013) 5 SCC 470( para 19)-----------to be noted all the SCjudgments are by 2 Judges [1](2004) 3 SCC 553[2]2013(4) ALD 518 (DB)[3](2002) 1 SCC 216[4]2002(5) ALD 389 (DB)[5]2003(1) ALD 692 (DB)[6](2005) 8 SCC 242[7]2007(3) ALD 243[8](2008) 8 SCC 172[9](2013) 5 SCC 470[10](2014) 1 SCC 329[11](2007) 14 SCC 680[12]2013(4) ALD 518(DB)[13](1991),1 SCC 533[14](2000) 7 SCC 764[15](2003) 2 SCC 107[16](2011) 5 SCC 697