INDIAN OIL CORPORATION LTD. & ANR. versus T. NATARAJAN on 17 July 2018

SUPREME COURT REPORTS[2018] 6 S.C.R. 582

[2018] 6 S.C.R.

AINDIAN OIL CORPORATION LTD. & ANR.

v.

T. NATARAJAN

(Civil Appeal No. 6748 of 2018)

BJULY 17, 2018

[ABHAY MANOHAR SAPRE ANDUDAY UMESH LALIT, JJ.]

Administrative Law : Administrative decisions by GovernmentCompany – Interference by the High Court – Permissibility of – OnCfacts, dealership agreement wherein respondent selling petroleumproducts of the appellant-Government Company – Termination ofthe respondent’s dealership agreement for certain breaches –Arbitral award that letter of termination of dealership calls for sternaction, however, since their outlet closed for 2 years, lenient viewDmay be taken – High Court upheld the award with liberty to therespondent to approach appellant for continuation of dealership –Pursuant thereto, respondent moving representation for resumptionof the supply of fuel to him, and the same was rejected – Thereafter,writ petition by respondent – Single Judge upheld termination ofletter of dealership – However, the Division Bench set aside theEtermination letter and issued a mandamus to appellant to restorethe dealership of the respondent and resume supply of fuel to hisfuel station – On appeal, held: Reconsideration of the respondent’scase as to whether his dealership should be restored or not was anindependent cause of action between the parties and the same aroseFafter the award was passed and upheld by the Single Judge – It hasnothing to do with the award and nor it could be linked with thearbitration proceedings – It was solely within the discretion of theappellant to decide – Appellant came to a conclusion that it was notpossible for them to restore his dealership – Writ court justified inupholding the rejection on the ground that the High Court cannotGinterfere in the administrative decision of the appellant and nor itcan substitute its decision by acting as an appellate court over suchdecision in exercise of writ jurisdiction – It is more so when suchdecision is based on reasons involving no arbitrariness of anynature therein which may call for any interference by the High CourtH

– Order passed by the Division Bench is set aside and that of theSingle Judge is restored – Arbitration and Conciliation Act, 1996.

Allowing the appeal, the Court

HELD: 1.1 The Division Bench was not justified inreversing the decision of the Single Judge (writ court) by settingaside the letter of IOC-government company which terminatedthe respondent’s dealership and in issuing a mandamus againstthe IOC to restore the dealership of the respondent and resumesupply of fuel to his fuel station. [Paras 32, 33] [590-B-C]

1.2 A plain reading of the award and order of the SingleJudge upholding the award indicates that the Arbitrator, in clearterms, held against the respondent that he committed breachesof the dealership agreement and as a result of this categoricalfinding, the Arbitrator, in substance, upheld the letter oftermination of dealership calling for stern action against therespondent. Indeed, once the breaches were held made out, theonly consequence that ensued from such finding was to upholdthe letter of termination of dealership agreement. Since arbitrationclause 69 (c) empowers the Arbitrator to pass any order in thearbitration proceedings, the Arbitrator and so also the SingleJudge while upholding the award considered it proper to grantliberty to the respondent to file a representation to the IOC forre-consideration of his case for restoration of his dealership. Suchliberty could never be construed to mean that the Arbitrator hadeither set aside the letter of termination of the respondent’sdealership or directed to restore the supply of fuel to therespondent. [Para 34] [590-E-F]

1.3 Reconsideration of the respondent’s case as to whetherhis dealership should be restored or not was an independent causeof action between the parties and the same arose after the awardwas passed and upheld by the Single Judge. It has, therefore,nothing to do with the award and nor it could be linked with thearbitration proceedings. [Para 36] [590-G-H; 591-A]

1.4 It was solely within the discretion of the IOC - theybeing the principal to decide as to whether the respondent’sdealership should be restored or not and, if so, on what grounds.

AB

C

DE

F

G

H

AThe IOC considered the case of the respondent and after takinginto account all the facts and circumstances appearing in therespondent’s working, came to a conclusion that it was notpossible for them to restore his dealership. [Para 37] [591-B-C]

1.5 The writ Court (Single Judge) was justified in dismissingBthe respondent’s writ petition and upholding the rejection on theground that the High Court cannot interfere in the administrativedecision of IOC and nor it can substitute its decision by acting asan appellate court over such decision in exercise of writjurisdiction. It is more so when such decision is based on reasonsCinvolving no arbitrariness of any nature therein which may callfor any interference by the High Court. [Para 38] [591-D]1.6 The Division Bench committed an error in interpretingthe award. The Division Bench proceeded on entirely wrongassumption that since the award was in respondent’s favour, the DIOC had to simply issue a consequential order in compliancethereof directing the IOC to revive the respondent’s dealershipand restore the supply of fuel to the respondent. This approachof the Division Bench was erroneous and is, therefore, legallyunsustainable. The reasoning and conclusion arrived at by the Single Judge is just and proper, whereas the reasoning andEconclusion arrived at by the Division Bench is not proper and isset aside. The order of the Single Judge (writ Court) is restoredand, in consequence, the writ petition filed by the respondent isdismissed. [Paras 39, 40 and 42] [591-E-G; 592-A-B]

FCIVIL APPELLATE JURISDICTION: Civil Appeal No. 6748of 2018.From the Judgment and Order dated 08.10.2015 of the High Courtof Judicature at Madras in WA No. 589 of 2015.

Huzefa Ahmadi, Sr. Adv., Rahul Narayan, Ms. Mala Narayan,GShashwat Goel, Advs. for the Appellants.

Mohan Parasaran, Sr. Adv., D. L. Chidananda, Ashwin KumarD. S., Advs. for the Respondent.

H

The Judgment of the Court was delivered by ABHAY MANOHAR SAPRE, J. 1. Leave granted.

2. This appeal is filed against the final judgment and order dated08.10.2015 passed by the High Court of Judicature at Madras in W.A.No.589 of 2015 whereby the Division Bench of the High Court allowedthe writ appeal filed by the respondent herein and set aside the orderdated 17.04.2014 passed by the Single Judge of the High Court in WritPetition No. 10026 of 2013 by which the writ petition filed by therespondent herein was dismissed.

3. In order to appreciate the issues involved in the appeal, it isnecessary to set out the facts in detail. The facts are taken from theSLP paper book.

4. The appellants herein were respondent Nos.1 and 2 and thesole respondent herein was the writ petitioner in the writ petition beforethe High Court out of which this appeal arises.

5. Appellant No.1 is the Government Company called Indian OilCorporation Ltd. (hereinafter referred to as “the IOC”). The IOC isengaged in the business of manufacturing and sale of several petroleumproducts such as petrol, High-Speed Diesel (HSD), lubricants etc. TheIOC has set up several retail outlets all over the country for sale of theirproducts through their retail dealers.

6. On 31.08.1989, the IOC appointed respondent as its retail dealerfor sale of petroleum products. A dealership agreement (Annexure P-12)was accordingly executed between the IOC and the respondent in thisregard.

7. The respondent had to carry on the business as per the termsand conditions of the dealership agreement. The respondent accordinglyset up his petrol pump in the name and style of M/s Lakshmi ServiceStation at GST Road, Kooteripattu Town (Tamil Nadu) and started sellingpetroleum products of IOC.

8. On 01.08.2008, Deputy Inspector of Labour (Weights &Measures) carried out an inspection of the respondent’s petrol pump. Itwas followed by another inspection carried out by the Sales Officer ofthe IOC on 02.08.2008. In these two inspections, it was noticed that“totalizer wires of L&T Line DU in petrol pump model serial No.1578

A

B

C

D

E

F

G

H

Aused at MS 2 pump was found cut”. In other words, in theseinspections, “no totalizer seal” was found in place.

9. It is these inspections, which gave rise to issuance of showcause notice by the IOC to the respondent on 27.08.2008. The showcause notice, after setting out the details of the inspections, proceededBthat why the dealership agreement of the respondent dated 31.08.1989be not terminated for the alleged breaches noticed in the inspections.The respondent was called upon to file his reply. The respondent filedhis reply.

10. Not satisfied with the reply filed by the respondent, the IOC,Cvide letter dated 11.03.2009 terminated the respondent’s dealershipagreement.

11. The respondent felt aggrieved by the termination of hisdealership agreement and invoked clause 69 of the dealership agreementwhich provided for resolution of disputes by the Arbitrator arising inDrelation to the dealership agreement and he requested the IOC to referthe matter to the Arbitrator for his decision. The IOC acceded to therespondent’s request and accordingly referred the matter relating totermination of his dealership to the sole Arbitrator.

12. The Arbitrator then embarked upon the reference and passedEhis reasoned award dated 14.10.2011. The operative part of the awardreads as under:

“The act of continuing the sales even after the breakage ofTotalizer Seal committed by the claimant, in question, callsfor stern action. However, it is noted that there was novariation in the quality and quantity. Again, the petitionerFhas already suffered substantially for more than two (2) yearsfor the closed status of the retail outlets. Therefore, alenient view may be considered by the respondent, bearingin mind the element of benefit of doubt.

13. The IOC, felt aggrieved by the award of the Arbitrator,Gquestioned its legality by filing an application (OP No.358 of 2012) underSection 34 of the Arbitration and Conciliation Act, 1996 (for short “theAct”) whereas the respondent filed an interim application No.447/2012seeking resumption of supply of fuel to him before the High Court.

H

14. By order dated 23.11.2012, the High Court dismissed theapplication and upheld the award. The operative part of the order readsas under:

“In the result, the arbitral award dated 14.10.2011 madeby the third respondent is confirmed with liberty given tothe dealer to approach IOC with request in writing forcontinuation of distributorship and for supply and sale and with further direction issued to IOC to duly consider suchrequest of the first respondent/dealer within one week fromthe date of receipt of such written request. The OP filed bythe IOC and the application filed by the dealer areaccordingly disposed of.”

15. The aforesaid order attained finality, as neither of the partiesfiled any appeal against the aforesaid order.

16. The respondent then on 20.02.2013 filed a representation tothe appellant (IOC) requesting them for resumption of the supply of fuelto him pursuant to the directions of the award. By letter dated 13.03.2013,the IOC rejected the representation assigning the reasons for rejectionof the respondent’s representation.

17. The respondent felt aggrieved by the rejection of hisrepresentation, filed writ petition before the Madras High Court underArticle 226/227 of the Constitution of India. The appellant (IOC) contestedthe writ petition and defended their order of rejection of the respondent’srepresentation.

18. By order dated 17.04.2014, the Single Judge (writ Court)dismissed the writ petition finding no merit to the challenge made to therejection of the respondent’s representation and upheld the same as beingjust and proper calling no interference. The respondent felt aggrievedand filed intra court appeal before the Division Bench.

19. By impugned order, the Division Bench allowed therespondent’s appeal and while setting aside the order of the Single Judgeissued a mandamus to the IOC to restore the respondent’s dealershipand resume the supply of fuel to his fuel station. The operative part ofthe order of the Division Bench contained in Para 21 and 22 reads asunder:

A

B

C

D

E

F

G

H

A“21. The application filed by the Corporation to set asidethe award has already been dismissed by the learned SingleJudge. The Corporation is now taking advantage of theliberty granted by the learned Single Judge while confirmingthe award to consider the representation. There isabsolutely no need to submit a representation and passingBorders thereon by the Corporation in view of theconclusiveness reached to the award setting aside the orderof termination. Since the supply was stopped only onaccount of the order of termination of dealership, naturallysupplies should resume immediately after the award andCupholding the said award by the learned Single Judge. Thisaspect was not considered by the learned Single Judge.We are therefore of the view that the appellant mustsucceed.

22. In the result, the order dated 13 March 2013 on the fileDof the second respondent is set aside. The writ petitionfiled by the appellant is allowed. The first respondent isdirected to pass a consequential order pursuant to the awarddated 14 October 2011 restoring the dealership of theappellant and resume supplies to the fuel station. Suchexercise shall be completed within a period of one weekEfrom the date of receipt or production of a copy of thisjudgment.”

20. It is against this aforementioned order, the IOC felt aggrievedand filed this appeal by way of special leave before this Court.F21. Heard Mr. Huzefa Ahmadi, learned senior counsel for theappellants and Mr. Mohan Parasaran, learned senior counsel for therespondent.

22. Mr. Huzefa Ahmadi, learned senior counsel while assailingthe legality and correctness of the impugned order mainly urged threesubmissions.G

23. In the first place, learned senior counsel urged that the wellreasoned order passed by the Single Judge (writ Court), which rightlyresulted in upholding of the respondent’s termination letter of dealershipshould have been upheld by the Division Bench. According to learned counsel, there was no case made out for any interference by the DivisionBench in the order of the Single Judge, who rightly dismissed therespondent’s writ petition.

24. In the second place, learned counsel urged that the approachof the Division Bench in dealing with the issue in question itself wasfaulty inasmuch as it wrongly proceeded on the assumption that theaward dated 14.10.2011 had set aside the termination letter dated13.03.2013 and restored the respondent’s dealership in his favour.

25. Learned counsel pointed out that on proper interpretation ofthe reasoning and the operative part of the award, it is clear that theArbitrator recorded a categorical finding against the respondent thatbreaches alleged by the appellants against the respondent on the basisof inspection were held made out requiring stern action.

26. Learned counsel further pointed out that the award followedby the observations of the Single Judge at best gave liberty to therespondent to file a representation for re-consideration of his case forrestoration of his dealership by the IOC but not beyond it. Indeed,according to learned counsel, if the award had been in favour of therespondent, then in such case, there was no need for the Arbitrator andSingle Judge to give liberty to the respondent to apply for re-considerationof his case.

27. In the third place, learned counsel urged that once the IOCconsidered the case of the respondent and found no case to grant himany relief much less the benefit of restoration of his dealership, the issueattained finality between the parties.

28. It was his submission that the Division Bench, in thiscircumstance, in its writ jurisdiction had no power to sit as an AppellateCourt over the decision of the IOC and direct restoration of therespondent’s dealership.

29. It is mainly these three submissions, the learned senior counselelaborated his submissions by referring to various documents on record.

30. In reply, Mr. Mohan Parasaran, learned senior counsel,supported the impugned order and contended that the impugned orderdoes not call for any interference and, therefore, the appeal deservesdismissal.

AB

C

D

E

F

G

H

A

31. Having heard the learned counsel for the parties and on perusalof the record of the case, we find force in the submissions urged by thelearned senior counsel for the appellant.

32. The short question, which arises for consideration in this appeal,is whether the Division Bench was right in reversing the decision of theBSingle Judge (writ court). In other words, the question, which arises forconsideration is whether the Division Bench was right in setting asidethe letter dated 13.03.2013 of IOC which terminated the respondent’sdealership and was, therefore, justified in issuing a mandamus againstthe IOC to restore the dealership of the respondent herein and resumesupply of fuel to his fuel station.C

33. In our considered opinion, the Division Bench was not justifiedin doing so and this we say for the following reasons.

34. Coming first to the question as to what is the properinterpretation of the award dated 14.10.2011 and the order of the SingleDJudge which upheld the award and what it actually decide, in our opinion,a plain reading of these orders indicates that the Arbitrator, in clear terms,held against the respondent that he committed breaches of the dealershipagreement and as a result of this categorical finding, the Arbitrator, insubstance, upheld the letter of termination of dealership calling for sternaction against the respondent. Indeed, once the breaches were held madeEout, the only consequence that ensued from such finding was to upholdthe letter of termination of dealership agreement. Since arbitration clause69 (c) empowers the Arbitrator to pass any order in the arbitrationproceedings, the Arbitrator and so also the Single Judge while upholdingthe award considered it proper to grant liberty to the respondent to fileFa representation to the IOC for re-consideration of his case for restorationof his dealership. Such liberty could never be construed to mean that theArbitrator had either set aside the letter of termination of the respondent’sdealership or directed to restore the supply of fuel to the respondent.

35. The respondent, pursuant to the liberty granted, filed hisGrepresentation to the IOC but the IOC, in their discretion, rejected thesame with reasons.

36. In our opinion, reconsideration of the respondent’s case as towhether his dealership should be restored or not was an independentcause of action between the parties and the same arose after the award H

was passed and upheld by the Single Judge. It has, therefore, nothing todo with the award and nor it could be linked with the arbitrationproceedings.

37. In our opinion, it was solely within the discretion of the IOC -they being the principal to decide as to whether the respondent’sdealership should be restored or not and, if so, on what grounds. TheIOC considered the case of the respondent and after taking into accountall the facts and circumstances appearing in the respondent’s working,came to a conclusion that it was not possible for them to restore hisdealership. It was accordingly informed to the respondent vide letterdated 13.03.2013.

38. In our opinion, the writ Court (Single Judge) was, therefore,justified in dismissing the respondent’s writ petition and upholding therejection on the ground that the High Court cannot interfere in theadministrative decision of IOC and nor it can substitute its decision byacting as an Appellate Court over such decision in exercise of writjurisdiction. It is more so when such decision is based on reasons involvingno arbitrariness of any nature therein which may call for any interferenceby the High Court.

39. The Division Bench, in our opinion, committed an error ininterpreting the award. The Division Bench proceeded on entirely wrongassumption that since the award was in respondent’s favour, the IOChad to simply issue a consequential order in compliance thereof directingthe IOC to revive the respondent’s dealership and restore the supply offuel to the respondent. As held supra, this approach of the DivisionBench was erroneous and is, therefore, legally unsustainable.

40. In the light of what is discussed above, we are of the consideredview that the reasoning and conclusion arrived at by the Single Judge isjust and proper, whereas the reasoning and conclusion arrived at by theDivision Bench is not proper and hence deserves to be set aside.

41. Learned senior counsel for the respondent then argued thatthe IOC has issued certain circulars providing therein as to how thecases of terminated dealership of any dealer is to be re-considered. Thissubmission, in our opinion, has no merit and we do not consider it properto go into this aspect of the case in the light of what is held above.

A

B

C

D

E

F

G

H

[2018] 6 S.C.R.

A42. In view of the foregoing discussion, we allow the appeal, setaside the impugned order of the Division Bench and restore the order ofthe Single Judge (writ Court) and, in consequence, dismiss the writ petitionfiled by the respondent.

BNidhi Jain

Appeal allowed.

C

D

E

F

G

H