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IN THE HIGH COURT OF CHHATTISGARH AT BILASPUR
Satish K. Agnihotri, J.
Ayush Petrol Pump
Vs.
Hindustan Petroleum Corporation Limited and Ors.
Decided On: 14.09.2010
Breach of Dealership Agreement - Termination of Dealership - Clauses 10, 11, 12, 42, 43, 44, 55(G), 55(K) - The court discussed the dealership agreement clauses and highlighted the provisions of Clause 55(G) and (K) as well as the respondent's failure to exercise power in accordance with the agreement. The court also emphasized the principles of natural justice and the need for fairness in termination of dealership agreements.
Fact of the Case:
The petitioner's dealership was terminated due to breach of the dealership agreement by failing to make payments and dishonoring cheques. The petitioner argued that the respondent's actions were contrary to the provisions of the agreement and unreasonable.
Finding of the Court:
The court found that the respondent's decision to terminate the agreement was not in accordance with the agreement and was arbitrary and unreasonable. The court also held that the dispute could be examined under the writ jurisdiction despite the provision for reference to arbitration.
Issues: Breach of dealership agreement, exercise of power by the respondent, availability of alternative remedy, and jurisdiction of the court.
Ratio Decidendi: The court emphasized the need for the respondent to act in accordance with the provisions of the agreement, adhere to principles of natural justice, and ensure fairness in termination of dealership agreements.
Final Decision: The impugned order terminating the dealership was quashed, allowing the respondent to take appropriate action in accordance with the agreement, rules, and guidelines in the future.
Satish K. Agnihotri, J.
Writ petition under Article 226/227 of the Constitution of India
1. Challenge in this petition is to the order dated 21.12.2009 (Annexure P/1) whereby the dealership of the petitioner-firm has been terminated on the ground that the petitioner has committed breach of Clause 42, 44, 55(G) alongwith Clause 10, 11, 12, 43 and 55(K). It is further prayed that consequently, the respondent No. 1 and 2 be directed to restore the suspended supply of Motor Spirit (for short 'the M.S.') and High Speed Diesel (for short 'the H.S.D.').
2. The brief facts, in nutshell, as projected by the petitioner is that the proprietor namely Dr. Mukesh Kumar Agrawal (hereinafter referred to as 'the proprietor'), of the petitioner-firm namely Ayush Petrol Pump, is also a proprietor of a nursing home namely, Agrawal Nursing Home at Bhilai, and operates through other qualified staff for charity purposes. According to the petitioner, the role of proprietor in the said nursing home is only of a care taker for smooth functioning of the nursing home and no income is derived from the said nursing home. The petitioner-firm was appointed as dealer of the respondent No. 1 and 2-Corporation for sale of petroleum products including MS and HSD, w.e.f. 23.03.2005 (Annexure P/2). The petitioner was under an obligation to pay full price of delivery to be made on the supplies received at the depot effecting the sale of the products. Accordingly, the petitioner left several cheque books containing several signed cheque leaves with the depot of the Corporation in good faith anticipating that the Corporation authorities would fill in the correct amounts and dates on such cheque leaves against supplies to be made to the petitioner. On account of ill health of the father of the proprietor, the petitioner could not reconcile the account and his father died on 30.07.2009. The petitioner received a notice on 01.08.2009 (Annexure P/5) for payment of the amount to the tune of Rs. 26,33,033.94 immediately, followed by another notice dated 07.08.2009 (Annexure P/6) to pay a sum of Rs. 15,58,498.92 towards the principal amount and Rs. 30,000/-towards balance interest for the dishonored cheques. The petitioner immediately deposited a sum of Rs. 27,81,487.45 during the period from 03.08.2009 to 05.08.009. The petitioner submitted its reply on 25.08.2009 (Annexure P/7) stating the reasons for non-reconciling the account, however, made it clear that he had already submitted demand drafts against the returned cheques. After receipt of the entire amount alongwith interest, the respondent No. 1 and 2/Corporation decided to issue show cause notice to the petitioner on 25.08.2009 (Annexure P/8) for showing cause as to why necessary action may not be taken against the petitioner as deemed fit in terms of clauses 10, 11, 12, 42, 43, 55(g) and 55(k) of the Dealership Agreement dated 24.02.2005. The time to submit reply was 7 days from the date of receipt of the notice. The petitioner replied to the said notice on 27.8.2009 (Annexure P/9). Thereafter, the impugned order 21.12.2009 (Annexure P/1) was passed. Thus, this petition.
3. Shri Sanjay K. Agrawal, learned Counsel appearing for the petitioner with Shri Jitendra Pali, would submit that the petitioner had deposited the entire amount alongwith interest before issuance of the show cause notice for termination of the petitioner's dealership stating, inter-alia, that the dishonor of cheques had been taking place for a long time and the petitioner continued to lift the product from HPCL depot without taking corrective measures. Shri Agrawal would further submit that the account could not be reconciled due to prolonged illness of the father of the proprietor of the petitioner-firm, as well as for the reason that the petitioner was never informed before 01.08.2009. Shri Agrawal would next submit that Clause 55(g) of the dealership agreement clearly provides that if the dealer, for any reason makes default to make payment
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