Madras High Court
No.74 vs S.Prasanna Raj on 3 September, 2024
Author: S.S.Sundar
Bench: S.S. Sundar
WA.No.452/2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 03.09.2024
CORAM :
THE HONOURABLE MR. JUSTICE S.S. SUNDAR
AND
THE HONOURABLE MR. JUSTICE K.RAJASEKAR
WA.No.452/2023 & CMP.No.4271/2023
1.Indian Oil Corporation Limited
rep.by its Executive Director [Retail Sales
S and W] Appellate Authority, Indian Oil
Bhavan G-9, Ali Yavar Jung Marg, Bandra [East]
Mumbai 400 051.
2.M/s.Indian Oil Corporation Limited
rep.by its Executive Director,
Indian Oil Bhavan, No.139, Mahatma Gandhi
Road, [Nungambakkam High Road]
Chennai 600 034.
3.Divisional Retail Head Salem
M/s.Indian Oil Corporation Limited
Salem Divisional Office, Indian Oil
Officers Quarters, 1st Floor, No.74
Rasi Nagar, Jagir Ammapalayam
Salem 636 302.
4.Malarvizhi,
Sales Officers, Salem Divisional Office,
Indian Oil Officers Quarters, 1st Floor
1
https://www.mhc.tn.gov.in/judis
WA.No.452/2023
No.74, Rasi Nagar,
Jagir Ammapalayam
Salem 636 302. ... Appellants
Vs.
S.Prasanna Raj ... Respondent
Prayer : Writ Appeal filed under Clause 15 of Letters Patent Act against the
order in WP.No.27481/2022 dated 03.02.2023.
For Appellants : Mr.Mohammed Fayaz Ali
For Respondent : Mr.Jayaprakash
JUDGMENT
[Judgment of the Court was delivered by S.S.SUNDAR, J.,]
(1)The present writ appeal is directed against the order of the learned Single
Judge dated 03.02.2023 made in WP.No.27481/2022 filed by the
respondent herein for issuance of a writ of certiorari to quash the
impugned order of the 1st respondent dated 30.09.2022 confirming the
order of the 2nd respondent herein dated 13.05.2005.
(2)Brief facts that are necessary for the disposal of this appeal are as
follows:-
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(a) A Dealership Agreement dated 13.05.2005 was entered into
between M/s.IBP Company Limited and the writ petitioner /
respondent herein in respect of a Petrol [MS] and High Speed
Diesel [HSD] Retail Outlet. The said Dealership Agreement was
for a period of ten years from 26.12.2003. It is admitted that the
Dealership Agreement is determinable in nature by issuing three
months notice to the other party.
(b)As per the Dealership Agreement, M/s.IBP Co. Ltd., was entitled
to inspect the Retail Outlet and its management under specific
clauses in the Agreement and to suspend the sales in the event of
any breach of the terms and conditions of the Dealership
Agreement as per Clause 15. The Dealership can be terminated
forth with in the event of breach of contract and for other reasons
enumerated therein. Apart from the terms and conditions as per
the Dealership Agreement dated 13.05.2005, the dealer namely the
writ petitioner/respondent herein, was bound to follow the
instructions / guidelines issued by M/s.IBP Co.Ltd from time to
time in connection with Marketing Discipline Guidelines. It is
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admitted that M/s.IBP Co.Ltd was later merged with the Indian Oil
Corporation Limited, the appellants herein.
(c) The Sales Officer of M/s.Indian Oil Corporation inspected the
Retail Outlet of the writ petitioner and during the time of
inspection, a few irregularities were observed. It was found that
the Daily Sales Register was found unavailable and the Density
Register which was required to be maintained by the writ
petitioner, was not updated. Stock variation in petrol and high
speed diesel was found and it was beyond the permissible limits.
The Inspection Report was prepared by the Sales Officer. Since
the representative of the writ petitioner refused to sign in the
Report as well as on the sample labels drawn from the Retail
Outlet for testing in the Laboratory, the Inspection team took the
assistance of the local Village Administrative Officer and other
public witnesses to record the inspection and samples collected at
the Retail Outlet. A panchnama was also prepared in the presence
of the police officials, Village Administrative Officer and other
public witnesses.
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(d)Pursuant to confirmation of irregularities, the dealership of the writ
petitioner was suspended and the writ petitioner filed a writ
petition in WO.No.23072/2009 and the order of suspension was
stayed by an order dated 12.11.2009. By a subsequent order dated
25.11.2009, the writ petition was allowed quashing the order of
suspension, however, giving liberty to the respondents therein to
proceed further in accordance with law.
(e) Thereafter, the appellants issued a show cause notice dated
23.06.2010 calling upon the writ petitioner/respondent herein to
show cause as to why action should not be taken in terms of
Clauses 39[a], 42 and 45 of the Dealership Agreement read with
the provisions of the Marketing Discipline Guidelines, 2005.
Though the writ petitioner gave an explanation by a
communication dated 07.07.2010, the Dealership Agreement came
to be terminated by an order dated 28.03.2011. The writ petitioner
once again filed WP.No.9143/2011 and this Court granted an order
of interim stay vide order dated 08.04.2011. However, the
Dealership Agreement expired on 26.12.2013 and no extension
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was granted thereafter. It was by virtue of the interim order
granted by this Court, the supply was given to the writ petitioner
without any infraction. In the said circumstances,
WP.No.9143/2011 was disposed of by an order dated 10.11.2021,
with a direction to the writ petitioner to invoke the Arbitration
Clause in the Dealership Agreement dated 13.05.2005 or to prefer
an appeal before the Appellate Authority under the Marketing
Discipline Guidelines, 2005. The writ petitioner was permitted to
continue operations for a period of three months in the same order.
(f) The writ petitioner preferred an appeal before the Appellate
Authority which came to be dismissed vide order dated
30.09.2022. Challenging the order of the Appellate Authority, the
writ petitioner filed WP.No.27481/2022. The said writ petition
was allowed by a learned Single Judge of this Court vide order
dated 03.02.2023. It is against the said order of the learned Single
Judge, in allowing the writ petition, the present writ appeal is
preferred by the appellants.
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(3)The learned counsel for the appellants submitted that the Dealership
Agreement dated 13.05.2005 was only for a period of ten years from
26.12.2003 and can be extended for successive periods until it is
determined by either party by giving three months notice. The learned
counsel relied upon the specific clause in the Dealership Agreement
regarding period. As per clause 2 of the Agreement, the Agreement was
for a period of ten years from 26.12.2003. Even though the Agreement
can continue thereafter for successive periods until determined by either
party giving three months notice in writing to the others, of his intention
to terminate the Agreement, the fact that the Dealership Agreement was
never extended beyond the first spell of ten years is not disputed. Learned
counsel then pointed out Clause 45 of the Agreement which gives liberty
to the appellants to terminate the Agreement forthwith if the dealer
commit breach or default of any of the terms and conditions, covenants
and stipulations contained in the Agreement. Similarly, the Dealership
Agreement can be terminated if the dealer does not adhere to the
instructions / guidelines issued by the Oil Company in connection with
marketing discipline or safe practices to be followed by him in the sale,
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supply and storage of the products of Oil company. As per Clause 61,
dispute of every nature regarding right, liability, act or omission on
account of any of the parties arising out of and in relation to the
Dealership Agreement should be referred to the sole Arbitration of the
Director [Marketing] of IBP who may act as the Arbitrator or nominate
some other officer of M/s.IBP to act as the Arbitrator.
(4)The learned Single Judge found that for the violation of having excess
stock, the maximum punishment that could be imposed previously was is
to terminate the dealership Agreement that was entered into. However,
there was an amendment to the Rules in the year 2012 and after
amendment, the maximum punishment for excess stock was to suspend
the agreement for a period of fifteen days. Since the major allegation
against the writ petitioner was that he had stock in excess quantity, the
maximum punishment that could be given to the writ petitioner, was to
suspend the Dealership Agreement for a period of fifteen days. It was
in the said circumstances, the learned Single Judge, after referring
to the judgment of Hon'ble Supreme Court in Trilok Chand Vs. State
of Himachal Pradesh [2020 [10] SCC 363], held that the order
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impugned, cannot be sustained by virtue of the amendment which had
been brought into effect from 2012. In view of the conclusion reached by
the learned Single Judge, the writ petition was allowed by recording the
fact that the impugned order stopping supply, cannot be sustained.
(5)Even though an argument was advanced that parties normally are
directed to go before Arbitration, in view of the conclusion reached by the
learned Single Judge that there cannot be any excess punishment beyond
suspension of Dealership Agreement for a period of fifteen days as per
amendment, the writ petition was disposed of with a direction to the
appellants herein to resume supply of petroleum products both petrol and
diesel as granted to the writ petitioner from the date of order or at least
from 04.02.2023. However, liberty was given to the appellants herein to
take any action against the writ petitioner for any violation of any other
Rules. The learned Judge also observed that minor punishments imposed
for violations of terms and conditions are sustained leaving it open to the
individual to invoke the arbitration clause if necessary in respect of those
punishments which are independent.
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(6)This Court has already referred to relevant clauses in the Agreement. The
Dealership Agreement dated 13.05.2005 is for a period of ten years from
26.12.2003. Though the Agreement can be extended for successive
periods and the Dealership Agreement will hold good till it is determined
by either party by providing three months notice during subsistence of the
Agreement, the learned Single Judge miserably failed to read the
important clause in the Agreement.
(7)When we read Clause 2 along with Clause 45[k] which enables the Oil
Company to terminate the Agreement forthwith upon finding that the
dealer does not adhere to the instructions / guidelines issued from time to
time in connection with the marketing discipline, the learned Judge failed
to note the important fact that the Dealership Agreement was never
extended beyond the ten year period from 26.12.2003.
(8)Clauses 45[a] and 45[k] are relevant and they are extracted below:-
Clause 45:-Forthwith Termination:-
......
[a]If the dealer shall commit a breach or
default of any of the terms, conditions, covenants and
stipulations contained in this Agreement.
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....
[k]If the dealer does not adhere to the
instructions / guidelines issued from time to time by
IBP in connection with Marketing Discipline and / or
safe practices to be followed by him in the sale or
supply and storage of IBP's Products or otherwise.''
(9)The fact that the writ petitioner/respondent committed serious breach of
terms and conditions of Dealership Agreement is demonstrated before this
Court. Even the learned Single Judge has not recorded any dispute and
has acknowledge the specific violations of the terms and conditions of the
Dealership Agreement by the writ petitioner / respondent herein. In the
absence of a valid Dealership Agreement beyond 26.12.2013, the writ
petitioner cannot be permitted to operate the retail outlet based on the
Dealership Agreement which had expired long back. By the impugned
order, the appellants were directed to resume supply and continue the
contract till it is terminated. In the absence of any extension of contract,
there is no scope for issuing a direction, as if there is a subsisting
enforceable contract as between the writ petitioner / respondents and the
appellants.
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(10)In view of the conclusions reached above, this Court is unable to sustain
the order of the learned Single Judge in allowing the writ petition.
(11)In the result, this writ appeal is allowed and the order of the learned
Single Judge dated 03.02.2023 made in WP.No.27481/2022 is set aside.
The impugned order passed by the appellants which is challenged in the
writ petition, is upheld. Since the writ petitioner/respondent is carrying
on the retail outlet business for a long time even after the expiry of the
Dealership Agreement, this Court permits the appellants to take
appropriate action in accordance with law following the orders impugned
in the writ petition. No costs. Consequently, connected miscellaneous
petition is closed.
[S.S.S.R., J.] [K.R.S., J.]
03.09.2024
AP
Index : Yes / No
Internet : Yes
Neutral Citation : Yes / No
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To
1.Executive Director [Retail Sales
S and W] Appellate Authority,
Indian Oil Corporation Limited
Indian Oil
Bhavan G-9, Ali Yavar Jung Marg, Bandra [East]
Mumbai 400 051.
2.Executive Director,
M/s.Indian Oil Corporation Limited
Indian Oil Bhavan, No.139, Mahatma Gandhi
Road, [Nungambakkam High Road]
Chennai 600 034.
3.Divisional Retail Head Salem
M/s.Indian Oil Corporation Limited
Salem Divisional Office, Indian Oil
Officers Quarters, 1st Floor, No.74
Rasi Nagar, Jagir Ammapalayam
Salem 636 302.
4.Malarvizhi,
Sales Officers, Salem Divisional Office,
Indian Oil Officers Quarters, 1st Floor
No.74, Rasi Nagar,
Jagir Ammapalayam
Salem 636 302.
https://www.mhc.tn.gov.in/judis
S.S. SUNDAR, J.,
and
K.RAJASEKAR, J.,
AP
03.09.2024
https://www.mhc.tn.gov.in/judis
