The Author, K. Jayapriya, is an Advocate in Chennai, Tamil Nadu. She is currently interning with Latest Laws.
Madhya Pradesh High Court had pronounced a judgment in a Writ Petition praying for quashing of the administrative order passed by the Indian Oil Corporation against the Petitioner who was the Petroleum Outlet dealer.
Facts of the case:
The Petitioner and the Indian Oil Corporation are the executants of a Dealership Agreement under which the Petitioner’s Company is a petroleum outlet dealer. Since the Petitioner was convicted under Section 138 of the Negotiable Instrument Act, 1881, the Chief Divisional Retail Sales Manager of Indian Oil Corporation passed an administrative order canceling the dealership of the Petitioner on the ground of breach of a clause of the Dealership Agreement which enumerates that the Corporation has the discretion to terminate the dealership if the dealer is convicted of a criminal offence. However, a revision petition challenging the conviction was preferred by the Petitioner and is still pending before the High Court.
Petitioner’s Case:
The Petitioner contends that the termination of the said dealership agreement is arbitrary as the conviction under Section 138 of the Negotiable Instruments Act shall not be construed as a heinous case or a case involving moral turpitude. The Petitioner also explains that the proceedings under the Negotiable Instruments Act deals with a civil subject by quoting a supreme court judgment reported in P. Mohanraj and Others v. Shah Brothers Ispat Pvt. Ltd.
Respondent's Case:
The Respondent justifies the termination of the dealership on the ground of criminality of the Petitioner, as the cheque dishonor due to insufficiency of funds is derived as an offence under Sec. 138 of the Negotiable Instruments Act, 1881, and the imprisonment and fine are prescribed as penalty thereof.
High Court's observations:
The Madhya Pradesh High Court relied on the Apex Court Judgment which was also relied by the Petitioner viz. P. Mohanraj and Others v. Shah Brothers Ispat Pvt. Ltd., 2021 SCC Online SC 152, in which it was observed that the proceedings under the Negotiable Instruments Act are based on the civil subject that has criminal implications. The High Court referred to another Supreme Court judgment in Kaushalya Devi Massand v. Roopkrishore Khore (2011) 4 SCC 593, in which it was observed that the gravity of Complaint under the Negotiable Instruments Act cannot be equated with an offence under the provisions of the Indian Penal Code or other criminal offences. The Apex Court also reiterated that an offence under Section 138 of the Negotiable Instruments Act, 1881, is almost like a civil wrong that has been given criminal overtones. The High Court also referred to one another Supreme Court Judgment viz. Meters and Instruments Private Limited and Another v. Kanchan Mehta, (2018) 1 SCC 560, in which it was held that the nature of offences under Sec.138 of the Negotiable Instruments Act, 1881 was primarily a civil law, and the 2002 amendment made it compoundable.
The High Court held:
After referring to the three Apex Court judgments, the High Court of Madhya Pradesh allowed the Writ Petition and quashed the impugned order of the Respondent, observing that the proceedings under Section 138 of the Negotiable Instruments Act are civil in nature with criminal overtones. The HC directed the respondent to allow the petitioner to run the Petroleum outlet allotted to him.
Read the Judgement:
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