Tuesday, July 17, 2018

Indian Oil Corporation Ltd. & Anr. Versus T. Natarajan 17 July 2018

[Arising out of SLP (C) No.33100 of 2015]

Indian Oil Corporation Ltd. & Anr.     .. Appellant(s)
T. Natarajan             .. Respondent(s)


Abhay Manohar Sapre, J.

1) Leave granted.
2) This appeal is filed against the final judgment
and order dated 08.10.2015 passed by the High Court
of   Judicature   at   Madras   in   W.A.   No.589   of   2015
whereby the Division Bench of the High Court allowed
the writ appeal filed by the respondent herein and set
aside the order dated 17.04.2014 passed by the Single
Judge of the High Court in Writ Petition No. 10026 of
2013 by which the writ petition filed by the respondent
herein was dismissed.
3) In order to appreciate the issues involved in the
appeal, it is necessary to set out the facts in detail.
The facts are taken from the SLP paper book.
4) The appellants herein were respondent Nos.1 and
2   and   the   sole   respondent   herein   was   the   writ
petitioner in the writ petition before the High Court out
of which this appeal arises.
5) Appellant   No.1   is   the   Government   Company
called Indian Oil Corporation Ltd. (hereinafter referred
to as "the IOC").  The IOC is engaged in the business of
manufacturing and sale of several petroleum products
such as petrol, High­Speed Diesel (HSD), lubricants
etc.  The IOC has set up several retail outlets all over
the country for sale of their products through their
retail dealers.
6) On 31.08.1989, the IOC appointed respondent as
its   retail   dealer   for   sale   of   petroleum   products.     A
dealership agreement (Annexure P­12) was accordingly
executed between the IOC and the respondent in this
7) The respondent had to carry on the business as
per   the   terms   and   conditions   of   the   dealership
agreement.   The   respondent   accordingly   set   up   his
petrol pump in the name and style of M/s Lakshmi
Service Station at GST Road, Kooteripattu Town (Tamil
Nadu) and started selling petroleum products of IOC.
8) On   01.08.2008,   Deputy   Inspector   of   Labour
(Weights & Measures) carried out an inspection of the
respondent's petrol pump. It was followed by another
inspection carried out by the Sales Officer of the 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 used at MS 2 pump was
found cut”. In other words, in these inspections, "no
totalizer seal" was found in place. 
9) It   is   these   inspections,   which   gave   rise   to
issuance   of   show   cause   notice   by   the   IOC   to   the
respondent   on   27.08.2008.   The   show   cause   notice,
after   setting   out   the   details   of   the   inspections,
proceeded that why the dealership agreement of the
respondent dated 31.08.1989 be not terminated for
the alleged breaches noticed in the inspections. The
respondent   was   called   upon  to   file  his  reply.     The
respondent filed his reply.
10) Not   satisfied   with   the   reply   filed   by   the
respondent,   the   IOC,   vide   letter   dated   11.03.2009
terminated the respondent's dealership agreement.
11) The respondent felt aggrieved by the termination
of his dealership agreement and invoked clause 69 of
the   dealership   agreement   which   provided   for
resolution   of   disputes   by   the   Arbitrator   arising   in
relation to the dealership agreement and he requested
the IOC to refer the matter to the Arbitrator for his
decision.     The   IOC   acceded     to   the   respondent’s
request and accordingly referred the matter relating to
termination of his dealership to the sole Arbitrator.
12) The Arbitrator then embarked upon the reference
and   passed   his   reasoned   award   dated   14.10.2011.
The operative part of the award reads as under:
“The   act  of   continuing   the   sales   even   after
the breakage of Totalizer Seal committed by
the   claimant,   in   question,   calls   for   stern
action.   However, it is  noted that  there  was
no   variation   in   the   quality   and   quantity.
Again,   the   petitioner   has   already   suffered
substantially for more than two (2) years for
the   closed   status   of   the   retail   outlets.
Therefore, a lenient view may be considered
by   the   respondent,   bearing   in   mind   the
element of benefit of doubt.
13) The   IOC,   felt   aggrieved   by   the   award   of   the
Arbitrator,   questioned   its   legality   by   filing   an
application (OP No.358 of 2012) under Section 34 of
the Arbitration and Conciliation Act, 1996 (for short
“the Act”)   whereas the respondent filed an interim
application   No.447/2012   seeking   resumption   of
supply of fuel to him before the High Court.
14) By   order   dated   23.11.2012,   the   High   Court
dismissed the application and upheld the award. The
operative part of the order reads as under:
"In   the   result,   the   arbitral   award   dated
14.10.2011 made by the third respondent is
confirmed with liberty given to the dealer to
approach   IOC   with   request   in   writing   for
continuation   of   distributorship   and   for
supply   and   sale   and   with   further   direction
issued to  IOC to  duly  consider  such  request
of   the   first   respondent/dealer   within   one
week from the date of receipt of such written
request.     The   OP   filed   by   the   IOC   and   the
application filed by the dealer are accordingly
disposed of."
15) The aforesaid order attained finality, as neither of
the   parties   filed   any   appeal   against   the   aforesaid
16) The   respondent   then   on   20.02.2013   filed   a
representation to the appellant (IOC) requesting them
for resumption of the supply of fuel to him pursuant to
the   directions   of   the   award.     By   letter   dated
13.03.2013,   the   IOC   rejected   the   representation
assigning the reasons for rejection of the respondent's
17) The respondent felt aggrieved by the rejection of
his   representation,   filed   writ   petition   before   the
Madras   High   Court   under   Article   226/227   of   the
Constitution of India. The appellant (IOC) contested
the writ petition and defended their order of rejection
of the respondent's representation.
18) By   order   dated   17.04.2014,   the   Single   Judge
(writ   Court)   dismissed   the   writ   petition   finding   no
merit to the challenge made to the rejection of the
respondent's representation and upheld the same as
being   just   and   proper   calling   no   interference.   The
respondent felt aggrieved and filed intra court appeal
before the Division Bench.
19) By impugned order, the Division Bench allowed
the respondent’s appeal and while setting aside the
order of the Single Judge issued a mandamus to the
IOC to restore the respondent's dealership and resume
the supply of fuel to his fuel station.   The operative
part of the order of the Division Bench contained in
Para 21 and 22 reads as under:
“21. The application filed by the Corporation
to   set   aside   the   award   has   already   been
dismissed by the learned Single Judge.   The
Corporation   is  now   taking   advantage  of   the
liberty   granted   by   the   learned  Single  Judge
while   confirming   the   award   to   consider   the
representation.   There is absolutely no need
to   submit   a   representation   and   passing
orders thereon by the Corporation in view of
the   conclusiveness   reached   to   the   award
setting aside the order of termination.  Since
the   supply  was   stopped   only   on   account  of
the   order   of   termination   of   dealership,
naturally   supplies   should   resume
immediately   after   the   award   and   upholding
the  said  award  by  the   learned  Single  Judge.
This   aspect   was   not   considered   by   the
learned Single Judge.  We are therefore of the
view that the appellant must succeed.
22.   In  the  result,  the  order  dated  13  March
2013 on the file of the second respondent is
set   aside.     The   writ   petition   filed   by   the
appellant is allowed.   The first respondent is
directed   to   pass   a   consequential   order
pursuant to the award dated 14 October 2011
restoring the dealership of the appellant and
resume   supplies   to   the   fuel   station.     Such
exercise shall be completed within a period of
one   week   from   the   date   of   receipt   or
production of a copy of this judgment.”
20) It is against this aforementioned order, the
IOC   felt   aggrieved   and   filed   this   appeal   by   way   of
special leave before this Court.
21) Heard   Mr.   Huzefa   Ahmadi,   learned   senior
counsel for the appellants and Mr. Mohan Parasaran,
learned senior counsel for the respondent.
22) Mr. Huzefa Ahmadi, learned senior counsel while
assailing the legality and correctness of the impugned
order mainly urged three submissions.
23) In the first place, learned senior counsel urged
that   the   well   reasoned   order   passed   by   the   Single
Judge (writ Court), which rightly resulted in upholding
of   the   respondent’s   termination   letter   of   dealership
should   have   been   upheld   by   the   Division   Bench.
According to learned counsel, there was no case made
out for any interference by the Division Bench in the
order of the Single Judge, who rightly dismissed the
respondent's writ petition.
24) In the second place, learned counsel urged that
the approach of the Division Bench in dealing with the
issue   in   question   itself   was   faulty   inasmuch   as   it
wrongly proceeded on the assumption that the award
dated 14.10.2011 had set aside the termination letter
dated   13.03.2013   and   restored   the   respondent's
dealership in his favour.
25) Learned   counsel   pointed   out   that   on   proper
interpretation of the reasoning and the operative part
of the award, it is clear that the Arbitrator recorded a
categorical   finding   against   the   respondent   that
breaches   alleged   by   the   appellants   against   the
respondent on the basis of inspection were held made
out requiring stern action.
26) Learned   counsel   further   pointed   out   that   the
award followed by the observations of the Single Judge
at   best   gave   liberty   to   the   respondent   to   file   a
representation   for   re­consideration   of   his   case   for
restoration   of   his   dealership   by   the   IOC   but   not
beyond it.  Indeed, according to learned counsel, if the
award had been in favour of the respondent, then in
such case, there was no need for the Arbitrator and
Single Judge to give liberty to the respondent to apply
for re­consideration of his case.
27) In the third place, learned counsel urged that
once the IOC considered the case of the respondent
and found no case to grant him any relief much less
the benefit of restoration of his dealership, the issue
attained finality between the parties.
28) It was his submission that the Division Bench, in
this circumstance, in its writ jurisdiction had no power
to sit as an Appellate Court over the decision of the
IOC   and   direct   restoration   of   the   respondent's
29) It is mainly these three submissions, the learned
senior counsel elaborated 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   order   does   not   call   for   any
interference   and,   therefore,   the   appeal   deserves
31) Having heard the learned counsel for the parties
and on perusal of the record of the case, we find force
in   the   submissions   urged   by   the   learned   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 the Single
Judge (writ court). In other words, the question, which
arises for consideration is whether the Division Bench
was right in setting aside the letter dated 13.03.2013
of IOC which terminated the respondent's dealership
and was, therefore, justified in issuing a mandamus
against   the   IOC   to   restore   the   dealership   of   the
respondent herein and resume supply of fuel to his
fuel station.
33) In  our  considered opinion,   the  Division  Bench
was not justified in doing so and this we say for the
following reasons.
34) Coming first to the question as to what is the
proper interpretation of the award dated 14.10.2011
and the order of the Single Judge 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   dealership
agreement and as a result of this categorical finding,
the   Arbitrator,   in   substance,   upheld   the   letter   of
termination   of   dealership   calling   for   stern   action
against   the   respondent.   Indeed,   once   the   breaches
were held made out, the only consequence that ensued
from   such   finding   was   to   uphold   the   letter   of
termination of dealership agreement.  Since arbitration
clause   69   (c)   empowers   the   Arbitrator   to   pass   any
order in the arbitration proceedings, the Arbitrator and
so also the Single Judge while upholding the award
considered it proper to grant liberty to the respondent
to file a representation to the IOC for re­consideration
of   his   case   for   restoration   of   his   dealership.   Such
liberty   could   never   be   construed   to   mean   that   the
Arbitrator had either set aside the letter of termination
of the respondent's dealership or directed to restore
the supply of fuel to the respondent.
35) The respondent, pursuant to the liberty granted,
filed his representation to the IOC but the IOC, in their
discretion, rejected the same with reasons.     
36) In   our   opinion,   reconsideration   of   the
respondent's case as to whether his dealership should
be restored or not was an independent cause of action
between   the   parties   and   the   same   arose   after   the
award was passed and upheld by the Single Judge.  It
has, therefore, nothing to do with the award and nor it
could be linked with the arbitration proceedings.
37) In our opinion, it was solely within the discretion
of the IOC ­ they being the principal to decide as to
whether   the   respondent's   dealership   should   be
restored or not and, if so, on what grounds. The IOC
considered the case of the respondent and after taking
into account all the facts and circumstances appearing
in the respondent’s working, came to a conclusion that
it was not possible for them to restore his dealership.
It  was  accordingly  informed  to   the  respondent  vide
letter dated 13.03.2013.
38) In our opinion, the writ Court (Single Judge) was,
therefore, justified in dismissing the respondent's writ
petition and upholding the rejection on  the ground
that   the   High   Court   cannot   interfere   in   the
administrative   decision   of   IOC   and   nor   it   can
substitute its decision by acting as an Appellate Court
over such decision in exercise of writ jurisdiction. It is
more   so   when   such   decision   is   based   on   reasons
involving no arbitrariness of any nature therein which
may call for any interference by the High Court.
39) The Division Bench, in our opinion, committed
an error in interpreting the award. The Division Bench
proceeded on entirely wrong assumption that since the
award   was   in   respondent's   favour,   the   IOC   had   to
simply   issue   a   consequential   order   in   compliance
thereof directing the IOC to revive the respondent's
dealership   and   restore   the   supply   of   fuel   to   the
respondent.   As   held  supra,   this   approach   of   the
Division Bench was erroneous and is, therefore, legally
40) In the light of what is discussed above, we are of
the considered view that the reasoning and conclusion
arrived   at   by   the   Single   Judge   is   just   and   proper,
whereas the reasoning and conclusion arrived at by
the Division Bench is not proper and hence deserves to
be set aside.
41) Learned senior counsel for the respondent then
argued   that   the   IOC   has   issued   certain   circulars
providing therein as to how the cases of terminated
dealership of any dealer is to be re­considered. This
submission, in our opinion, has no merit and we do
not consider it proper to go into this aspect of the case
in the light of what is held above.
42) In view of the foregoing discussion, we allow the
appeal, set aside the impugned order of the Division
Bench and restore the order of the Single Judge (writ
Court) and, in consequence, dismiss the writ petition
filed by the respondent.


New Delhi,
July 17, 2018

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