The rejection of a partnership reconstitution application based on penalty demands is arbitrary and contrary to the Indian Partnership Act and applicable guidelines.

ORDER :

1. As the issue involved in both the writ petitions is inter-related, both these writ petitions are taken up together and are disposed of through this common order. W.P.No.24595 of 2024 is taken as a leading case.

W.P.No.24595 of 2024

2. W.P.No.24595 of 2024 is filed under Article 226 of the Constitution of India, claiming the following relief:

“To issue Writ of Mandamus declaring the highhanded action of the respondents in rejecting the reconstitution application bearing no 275520231 dated 03/08/2023 vide Email Communication dt. 08.07.2024 on the grounds of non payment of penalties imposed under the MDG letters dated 14.11.2022 as contrary to Clause 3 4 and further action of the respondents in compelling Petitioner No 3 to carryon business activity forcefully as contrary to Section 32 of the Partnership act 1932 and further violative of fundamental rights of the petitioner under Articles 14, 19(g) and 21 of Constitution of India and consequently direct the Respondents herein to reconstitute Petitioner No 1 firm distributorship as per the application bearing no 275520231 dated 03/08/2023 and relieve Petitioner No 3 from Petitioner No 1 distributorship”

3. M/s. Hindustan Petroleum Corporation Limited entered into LPG Distributorship Agreement dated 31.07.2018 with M/s. Vijayawada Gas Company, a partnership firm with the partners namely Smt. D. Shailaja Rani, Sri D. Manoj Kumar and Smt. M. Subhaprada. Due to death of D. Manoj Kumar, Petitioner No.3 having no further interest in continuing as partner in Petitioner No.1 firm due to gradual decline in physical and mental health due to age 65 years, Petitioner Nos.2 & 3 herein have submitted an application bearing No.27555-2023-1 dated 03.08.2023 for reconstitution of Petitioner No.1 firm through Respondent No.1 online portal. Respondent No.2 issued notice dated 20.05.2024 demanding payment of Rs.50,03,890/- for processing the reconstitution application with a threatened action to reject the application in case of failing to make payment within 15 days from the date of receipt of notice. It is the case that, inspite of the best efforts of the petitioners, the reconstitution application of Petitioner No.1 bearing No.27555-2023-1 dated 03.08.2023 has been rejected by the respondents vide e-mail communication dated 08.07.2024. Challenging the same, the present writ petition has been filed.

4. Respondents filed counter affidavit refuting the allegations made by the petitioners. It is submitted that, the petitioners were appointed as LPG Distributors to market and sell HP Gas LPG connections and cylinders by entering into LPG Distributorship Agreement, incorporating certain terms and conditions agreed by and between the parties, apart from the regulations and guidelines issued by the Corporation from time to time. Respondent No.1/HPCL entered into LPG Distributorship Agreement dated 31.07.2018 with, M/s. Vijayawada Gas Company/Petitioner No.1 – a partnership firm with partners namely (i) Mrs. Dandamudi Sailaja Rani (ii) Smt. Mallela Subhaprada and (iii) Sri D. Manoj Kumar. The petitioners LPG Distributorship/partnership firm violated the terms and conditions of the LPG Distributorship Agreement dated 31.07.2018 and Marketing Discipline Guidelines of the Corporation by issuing unauthorized LPG cylinders and diversion of domestic LPG cylinders for commercial purposes, for which, after due enquiry, the respondent corporation imposed a penalty of Rs.50,03,890/- vide proceedings dated 20.05.2024. Questioning the penalty proceedings the petitioners filed W.P.No.40317 of 2022, wherein interim order was granted only for a period of four weeks and not extended any further.

5. It is submitted that, reconstitution of an LPG Distributorship, whether it is a Partnership firm/society/company, is the sole prerogative of HPCL and whether to allow or not allow any such reconstitution of the LPG Distributorship is a commercial transaction and it is for HPCL to decide as to with whom it wants to conduct b