Calcutta High Court (Appellete Side)

Prosenjit Bank vs Essar Oil Ltd. (Now Known As Nayara ... on 8 August, 2023

                  IN THE HIGH COURT AT CALCUTTA
                 CONSTITUTIONAL WRIT JURISDICTION
                          APPELLATE SIDE


The Hon'ble JUSTICE BIBEK CHAUDHURI

                               WPA/4332/2023

                               Prosenjit Bank
                                     Vs
          Essar Oil Ltd. (Now Known as Nayara Energy Ltd) & Ors.

      For the Petitioner:      Mr. Biswaroop Bhattacharjee, Adv.,
                               Mr. Sanjib Seth, Adv.

      For the Respondent No. 1 to 8:

Mr. Chandra Sekher Banerjee, Adv., Mr. Shamit Dutta, Adv.,

For the Respondent No.9 to 12:-

Mr. Arka Maiti, Adv., Mr. Aniruddha Singh, Adv.

Heard on: 8 August, 2023.

Judgment on: 8 August, 2023.

BIBEK CHAUDHURI, J. : -

1. A preliminary issue of maintainability of the instant writ petition is

involved here.

2. Essar Oil Company Ltd. presently known as Nayara Energy Ltd., a

private limited company incorporated under the Companies Act, 1956

deals with the business of selling petroleum products like petrol, diesel

etc. The said company appoints different franchisees all over India on the

basis of an agreement executed by and between Essar Oil Ltd. (now

known as Nayara Energy Ltd) and the individual persons. Similarly, the

petitioner being a proprietor of M/s Lakshmi Service Station, carrying on

business of retail outlet for retailing of petroleum products at Ichhanagari,

within Police Station Jagatballavpur, District- Howrah executed an

agreement with the respondent No.1 company on 25th March, 2010 for

retail sale of petroleum products. On the basis of the said agreement the

petitioner has been running the said business since 25th March, 2010

uninterruptedly without violating any terms and conditions of the said

agreement. It is further stated by the petitioner that since the month of

March, 2020 the petitioner authorized respondent No.9, 10 and 11 to look

after the said business of the petitioner temporarily due to his sickness.

But the said respondents subsequently refused to hand over possession of

the said business to the petitioner with mala fide intention and withheld

illegally the said business keeping valuable documents under their

custody. The respondents have now opened a business under the name

and style of M/s Zas Enterprise. They also opened a bank account in a

nationalized bank in the name of Zas Enterprise and has been making

transactions by using the code of the proprietorship concern of the

petitioner. Suddenly on 7th July, 2022 the respondent No.1 issued a letter

to the petitioner warning him against any further violation of any clause

of the Franchise Agreement dated 25th March, 2010 and also requested

him to arrange for adequate working capital to ensure smooth and proper

functioning of the retail outlet failing which they would initiate action

against the petitioner. The petitioner prayed for some time to regularize

his business but subsequently similar warning letters were issued by the

respondent No.1. He was finally granted time till 25th October, 2022 to

regularize and standardize business in order to achieve sales target to be

fixed by the company. Ultimately on 16th November, 2022 the respondent

No.1 issued a show cause notice to the petitioner calling upon him to

explain within ten days of receipt of the notice as to why the Franchise

Agreement dated 25th March, 2010 shall not be terminated on account of

violation of the sale agreement. Though the petitioner gave reply to the

show cause notice, his retailorship was cancelled by the respondent No.1

company.

3. Respondent No.1-8 has filed an Affidavit-in-opposition controverting

all allegations made by the petitioner in the writ petition. Specific case of

the answering respondents is that the respondent No.1 company entered

into a Franchise Agreement on 25th March, 2010 with Lakshmi Service

Station. Both the respondent No.1 compnay and the proprietor of M/s

Lakshmi Service Station are private parties. The Franchise Agreement is

essentially a contract executed by and between the proprietor of M/s

Lakshmi Service Station and the respondent No.1, being a private limited

company there is no ailment of public law involved in the contractual

relationship between the petitioner and respondent No.1 and therefore the

instant writ petition is not maintainable. The writ petitioner has

efficacious remedy in civil court and not under the writ jurisdiction. As

the petitioner failed to achieve the sale target fixed by the respondent

company for running its business, the petitioner was initially warned

thrice. Subsequently, he was directed to give reply to the show cause

notice and finally he was terminated from service. In such view of the

matter, the respondent No.1-8 contends that the instant writ petition is

not maintainable. By filing an affidavit-in-reply the petitioner has refuted

the allegation of non maintainability of the writ petition. Mr. Biswaroop

Bhattacharjee, learned Advocate for the petitioner frankly admits that the

respondent company is incorporated as a private company limited under

the Companies Act, 1956. Thus, from the constitution of the Company it

is a private limited company carrying on business of distribution and sale

of oil products through its franchisees. However, it is submitted by the

learned Advocate for the petitioner that the private oil company has no

authority or independents to fix the price of petrol and diesel and other

fuel products. The price is fixed by the Central Government and the oil

company is exclusively owned by the Central Government. Therefore,

though the petitioner is a private limited company, it has been

discharging the duty of selling petroleum products at the rate fixed by the

Central Government. Thus, the respondent company has been

discharging public duties in the matter of selling petroleum products.

4. It is also submitted by the Mr. Bhattacharjee that in Ajay Hasia &

Ors. vs. Khalid Mujib Sehravardi & Ors. reported in (1981) 1 SCC 722,

the Supreme Court had the occasion to determine the circumstances

when a corporation can be said to be an instrumentality or agency of the

Government relying on its earlier decision in International Airport

Authority case. The Hon'ble Supreme Court summarized the decision in

the International Airport Authority, (1980) 3 SCC 459 in the following

words:-

i) One thing is clear that if the entire share capital of the corporation is held by Government or it would go a long way towards indicating that the corporation is an instrumentality or agency of Government.

ii) Where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with governmental character.

iii) It may also be a relevant factor to consider whether the corporation enjoys monopoly status which is State conferred or State protected.

iv) Existence of deep and pervasive State control may afford an indication that the Corporation is a State agency or instrumentality.

           v)     If the functions of the corporation are of public
                  importance      and       closely   related    to   governmental

functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government.

vi) Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of the inference of the corporation being an instrumentality or agency of a Government.

5. However, it is submitted by Mr. Bhattacharjee that Public Law is a

realm that has developed to a great extent since the days when Ajay

Hasia's case was decided by the Hon'ble Supreme Court. In support of his

contention he refers to the decision of the Hon'ble Supreme Court in St.

Mary's Education Society & Anr. vs. Rajendra Prasad Bhargava & Ors.

reported in (2023) 4 SCC 498. It is submitted by Mr. Bhattacharjee that

even if a person or authority is discharging public function or public duty,

the writ petition would be maintainable under Article 226 of the

Constitution, if court is satisfied that the action under challenge falls

within the domain of public law, as distinguished from private law. The

twin tests for maintainability of writ are as follows:- If the person or

authority is discharging public duty or public functions, their action

under challenge falls in domain of public law and not under common law.

6. Mr. Bhattachrjee also refers to the well celebrated judgment of the

Hon'ble Supreme Court in Pradeep Kumar Biswas vs. Indian Institute

of Chemical Biology & Ors. reported in (2002) 5 SCC 111. He

specifically submits from Pradip Kumar Biswas-

"Initially the definition of State was treated as exhaustive and confined to the authorities or those which could be read ejusdem generis with the authorities mentioned in the definition of Article 12 itself. The next stage was reached when the definition of "State" came to be understood with reference to the remedies available against it. Thus, a statutory corporation, with regulations framed by such corporation pursuant to statutory powers was considered a State, and the public duty was limited to those which were created by Statute."

"The picture that emerges from the case-law is that the tests formulated in Ajay Hasia case, (1981) 1 SCC 722 for determining as to when a corporation can be said to be an instrumentality or agency of the Government are not a rigid

set of principles so that if a body falls within any one of them it must, ex hyupothesi, be considered to be a State within the meaning of Article 12. The question in each case would - whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control must be particular to be body in question and must be pervasive. If this is found then the body is a State within Article 12. On the other hand, when the control is merely regulatory whether under statute or otherwise, it would not serve to make the body a State."

7. In K.K Sexena vs. International Commission of Irrigation and

Drainage and Ors, Civil Appeal No.11499 of 2014 decided on 18th

December, 2014, the Hon'ble Supreme Court in paragraph 46 and 47 held

as hereunder:

"46) It is trite that contract of personal service cannot be enforced. There are three exceptions to this rule, namely: (i) when the employee is a public servant working under the Union of India or State; (ii) when such an employee is employed by an authority/ body which is a State within the meaning of Article 12 of the Constitution of India; and (ii) when such an employee is 'workmen' within the meaning of Section 2(s) of the Industrial Disputes Act, 1947 and raises a dispute regarding his termination by invoking the machinery under the said Act. In the first two cases, the employment ceases to have private law character and 'status' to such an employment is attached. In the third category of cases, it is the Industrial Disputes Act which confers jurisdiction on the labour court/industrial tribunal to grant reinstatement in case termination is found to be illegal.

47) In the present case, though we have held that ICID is not discharging any public duty, even otherwise, it is clear that the impugned action does not involve public law element and no 'public law rights' have accrued in favour of the appellant which are infringed. The serviceconditions of the appellant are not governed in the same manner as was the position in Anadi Mukta Sadguru (supra)."

8. Having heard the learned Advocates for the petitioner as well as the

respondent No.1 and on careful perusal of the decisions referred by Mr.

Bhattacharjee, learned Advocate for the petitioner, it is seen that in the

instant case the relation between the petitioner and the respondent No.1

is absolutely contractual. Therefore, any dispute arising of a contract

which is of private nature is a civil wrong to be adjudicated upon by the

competent civil court. In the instant case the contractual relation between

the petitioner and the respondent No.1 does not have any public law

element. The learned Advocate for the petitioner tries to establish that the

respondent No.1/company discharges function of public nature because

the said company is under obligation to sale petroleum products at a

price fixed by the government. The company does not have any