Smt. Savita Sharma And 2 Others vs Union Of India Thru Secy. And 4 ...
2013 Latest Caselaw 7263 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

?AFR
 
Court No. - 10
 
Case :- WRIT - C No. - 65744 of 2013
 
Petitioner :- Smt. Savita Sharma And 2 Others
 
Respondent :- Union Of India Thru Secy. And 4 Others
 
Counsel for Petitioner :- Pranav Kumar Srivastava
 
Counsel for Respondent :- A.S.G.I.,Vikas Budhwar
 

 
Hon'ble Arun Tandon,J.

Hon'ble Anjani Kumar Mishra,J.

One Shanti Devi was appointed as a dealer for distribution of Liquefied Petroleum Gas (LPG) by Hindustan Petroleum Corporation Ltd. (Corporation) and for the purpose a dealership agreement was also executed between Shanti Devi and the Corporation.

It appears that on the death of Shanti Devi the Corporation agreed to transfer the dealership in favour of Smt. Savita Sharma and Vivek Sharma, the daughter and son of Shanti Devi and the reconstituted dealer started dealership in the name and style of M/s. Vaishno Gas Service.  A copy of the agreement executed between the Corporation and petitioners no.1 and 2 is enclosed as Annexure-2 to the present petition.

Certain complaints were received in the matter of violation of the terms of the dealership agreement as well as in the matter of loss/shortage etc of LPG cylinders.  The  Chief Regional Manager of Corporation namely Shri Dharampal Gupta  issued a show cause notice dated 18.6.2013 calling upon the two partners to show cause as to why appropriate action be not taken in the matter for the alleged violation of the dealership agreement, distributorship agreement, other discrepancies. violation of marketing guidelines and details of the discrepancies  noticed have specifically been tabulated in the show cause notice.  15 days' time was granted to submit reply to the show cause notice.  A copy of the show cause notice is enclosed as Annexure-3 to the present petition.

In exercise of the power under clause 29-A of the agreement, the Corporation also decided to suspend the supplies of the petroleum product, without prejudice to the rights and contention in the matter. 

This show cause notice along with the suspension order was subjected to challenge by the petitioner before the Hon'ble High Court by means of writ petition no.36206 of 2013.  Before the Writ Court, a preliminary objection was taken that the petitioner has an efficacious alternative remedy by way of arbitration, as provided for under

clause 39 of the agreement, entered into between the parties. 

The High Court framed nine issues to be examined in the writ petition including the issue as to whether the writ petition is to be entertained despite there being an alternative remedy. The issues framed by the High Court are at page 98 and 99 of the present paper book. 

The writ petition was disposed of vide judgment and order dated 17.9.2013 by noticing that the petitioners have already sent their preliminary objection dated 29.6.2013 to the Chairman/Managing Director of the Corporation and the ends of justice would be served by requiring the Chairman/Managing Director to consider the preliminary objection and to take appropriate decision in light of the observation made by the High Court. 

The decision was to be taken by the Chairman within six weeks and, in the meantime, the alternative arrangement to serve the customers of the petitioners' agency may continue but no permanent arrangement be made till the matter is under consideration of the Chairman/Managing Director.

In pursuance to the order of the High Court, the Chairman has considered the preliminary objection of the petitioners as per their letter dated 29.6.2013 and he has recorded a specific finidng of fact that the suspension of the sales and supply were not actuated by bias.  He has recorded that inspection was carried out in normal course of business, irregularities were identified and action has been taken strictly as per the marketing guidelines and the dealership agreement.

It has also been recorded that clause 24.3.2 will be applicable even when employment is taken subsequent to the dealership.  The purpose of the clause is that the partners must devote full time to their business.

In paragraph 4 it has been recorded that prima facie there are at least three irregularities which have been committed during the last two years and beside service of show cause notice termed as SCN, supplies have already been suspended and customers are being served through other dealers.  It has then been recorded that show cause notice earlier issued to the petitioners contained certain inaccuracies about the dates mentioned therein.  It was, therefore, directed that initial show cause notice be withdrawn and a fresh show cause notice, after taking approval from Deputy General Manager, LPG (North Zone) as per the marketing guidelines, be served.  Copy of the relevant documents to be referred to in the show cause notice was also directed to be made available to the dealer.

Lastly, it has been provided that if the petitioners are not satisfied they can invoke the arbitration clause.  It is against this order, the present writ petition has been filed.

Shri Gajendra Pratap, Senior Advocate assisted by Shri Pranav Kumar Srivastava, learned counsel for the petitioners submitted before this Court that the order of the Court has not been carried out in letter and spirit and that once the show cause notice has been withdrawn, suspension cannot survive and, therefore, the Corporation is under legal obligation to resume the supplies of LPG to the petitioners' dealership.

It is further contended that the finding recorded on the interpretation of clause 24(1) of the dealership agreement by the Chief Regional Manager is based on misreading of the clause.

Lastly, it is contended that the supplies can be suspended only if there is a breach of the terms and conditions of the dealership agreement and violation of the marketing guidelines and the circulars of the Corporation cannot entail the suspension of supplies under section 29-A.

Shri Vikas Budhwar, learned counsel appearing on behalf of the Corporation again reiterated that the petitioners have efficacious alternative remedy by way of invoking the arbitration clause and that Arbitration and Conciliation Act, 1996 is a complete code itself.  The petitioners can obtain a temporary injunction before the arbitrator enters into the dispute and also during the course of arbitration under clauses 9 and 17 of the Arbitration Act. 

He further explains that the issuance of show cause notice in the matter of termination of dealership agreement needs prior approval of the Head of the Zone but so far as the suspension of supply under clause 9A is concerned no such approval is required.

It is further stated that the allegations of bias against Dharampal Gupta were not supported by any evidence and except stating that the petitioner had made a complaint against Dharampal Gupta, no material facts were brought on record to substantiate the allegation. 

He further explains that under the dealership agreement it is stipulated that the dealer shall abide by the circulars and guidelines issued by the Corporation from time to time.  Reference is made to clause 24-A of the dealership agreement for the purpose.

He submits that there are serious allegations of loss of cylinders, pilferage etc against the petitioners, cubage proceedings have already been initiated and suspension in the facts of the case cannot be faulted with.  It is the case of the Corporation that issues on merits may not  be gone into at this stage as the same are matter to be considered by the authority after reply is submitted by the petitioners to the show cause notice nor such issues could have been gone into by the Chief General Manager inasmuch as if opinion had been expressed by him for the merits, it would have prejudged the entire controversy. 

He lastly submitted that the power of suspension as exercised in the facts of the case is fair and just.  The show cause notice has already been withdrawn haveand a fresh show cause notice shall be issued in accordance with the marketing guidelines in near future.

Shri Gajendra Pratap points out that the discrepancies as per the show cause notice which has since been withdrawn have all been compounded earlier by deposit of penalty and action had already been taken.

It is also his case that the issue of availability of alternative remedy by way of arbitration stands decided in favour of the petitioners under the earlier order of the High Court dated 17.9.2013 and therefore the plea of alternative remedy needs to be rejected again.

Having heard counsel for the parties and having examined the records of the present writ petition, we may at the very outset record that in the dealership agreement entered into between the parties, there is an arbitration clause and further that the High Court while deciding the earlier writ petition, filed by the petitioners in its judgment dated 17.9.2013, had specifically held that the dispute pertaining to stopping of supply was well covered within the arbitration clause., reference is made to page 103 of the paper book.   Therefore, the said issue no more survives.

But the Division Bench went on to notice three exceptions in the matter of entertainment of writ petition, despite availability of alternative remedy, as laid down in the case of Harbans Lal Sahnia vs. Indian Oil Corporation Ltd., reported in 2003(2) SCC 107.  In paragraph 7 it has been held that (a) where the writ petition seeks enforcement of any of the fundamental rights; (b) where there is failure of principles of natural justice or (c) where the orders or proceedings are wholly without jurisdiction or the vires of any Act is challenged. 

We record that the plea of principles of natural justice was repelled by the Division Bench and it was only on the issue as to whether the order was without jurisdiction that the Court, without recording any finding, found it just and proper that the issue of show cause notice being without the approval of the Deputy General Manager, asked the higher authority namely the General Manager to examine the said aspect of the matter.

We have no hesitation to record that the High Court did not record any finding on the issue as to whether the suspension of supplies under the order of the Deputy General Manager/Chief Regional Manager was without jurisdiction or not.

Similarly, on the issue of bias as alleged by the petitioners against Dharampal Gupta, the Division Bench did not record any clear finding and only required the Chairman to look into the said aspect of the matter also.

The issue in compliance of the order of the High Court has returned with a comprehensive finding that the plea of bias is totally unfounded.   Inspection of the dealership has taken place in routine manner and irregularities identified have been found which clearly violate the marketing guidelines.  The suspension of the supplies has therefore been upheld to be in terms of the dealership agreement.

We may record that the Apex Court has repeatedly held that the allegations of bias or malafide are basic allegations of fact, they have not only to be stated but have also to be substantiated by material evidence.  In the facts of the case, we are satisfied that there is hardly any material evidence worth consideration except for the complaint allegedly lodged by the petitioners against Dharampal Gupta as having been effectuated by any bias.  The finding recorded by the High Court in that regard is not under challenge in the present writ petition and it has not been shown that there is any material evidence to establish the plea of bias against Dharampal Gupta which has not been considered by the Division Bench while deciding the issue in favour of the petitioners directing the Chairman to look into the grounds of bias.

We, therefore, reject the challenge made to the order on the ground of bias. 

Having come to the aforesaid conclusion, we are also clear in our minds that the petitioners must be asked to avail their statutory remedy of arbitration as available under the dealership agreement at the first instance.  The Arbitration and Cancellation Act, 1996 is a complete code in itself.  It takes care of interim protection which can be obtained by party to the arbitration in order to preserve the status under section 9 of the Arbitration Act by approaching the competent Civil Court and during arbitration proceedings, the arbitrator has been conferred power to such interim protection, as may be necessary to protect the status under section 17 of the Arbitration Act.

We are, therefore, see no reason as to how the remedy available to the petitioners under the arbitration clause in the agreement can be said to be arbitrary or not efficacious or not suitable alternative remedy in the facts of the case. 

We may also deal with the issue as to whether the Corporation was justified in withdrawal of show cause notice and whether the order of suspension would fall or not.  The contention having been raised only deserves to be rejected.  The issuance of show cause notice with the approval of the Zonal Head is contemplated by the marketing discipline guidelines, referred as 4.3.4, page 118 of the paper book.

The Marketing Discipline Guidelines 4.3.4 is quoted below :-

"4.3.4    Approving authority for issuance of show cause notice, termination of distributorship agreement or acceptance of resignation as per LAM Chapter II Sales Para 11 is as following :-

For SC/ST Distributorship        ..................  Director Marketing

Others                                   ................... Head Zone

This power of approval for the issuance of show cause notice is enshrined and implied when the power of the Corporation to suspend the supplies exists which flows from clause 29-A of the Arbitration Act. Both the powers are independent powers and merely because the show cause notice has been directed to be cancelled under the order impugned on technicality, as noticed above by the Chief General Manager with a direction to issue a fresh show cause notice, we have no hesitation to record that the suspension of supplies is not adversely effected in any manner because of the setting aside of the show cause notice under the order impugned especially when the Chairman/Managing Director has found that there are serious allegations of at least three irregularities having been committed by the petitioners in last two years necessitating the action taken.

We, therefore, reject the contention that because of the withdrawal of the show cause notice the suspension of supplies shall lose  its life automatically  and we hold that the order suspending the supplies is not adversely effected in any manner because of setting aside the show cause notice.  It is under a different provision and for technical reasons only. 

We also consider the charges as reflected from the records of the present writ petition and we find that they need thorough investigation and suspension of supplies in these circumstances cannot be forfeited by this Court. But the observations made by us is tentative in nature and shall not prejudice the rights of the parties during arbitration, as may be invoked by the petitioners in exercise of remedy under clause 39 of the dealership agreement.

We have also left it open to the petitioners to seek such interim protection, as may be necessary, which lies under sections 9 or 17 of the arbitration agreement before the competent authority.

The writ petition is dismissed.

Order Date :- 3.12.2013

vs