Back
2015 Supreme(Del) 2329
IN THE HIGH COURT OF DELHI AT NEW DELHI
VED PRAKASH VAISH, J.
M/S BHATIA SERVICE STATION - Petitioner
Versus
INDIAN OIL CORPORATION LTD. - Respondent
W.P.(C) 5983/2012
Decided on : 21st August, 2015
Mr. Shyam D. Nandan with Mr. Siddharth Bambha, Advocates.
Mr. Rajat Navet with Ms. Prachi V. Sharma, Advocates.
The termination of a dealership agreement must be done in accordance with the Marketing Discipline Guidelines and principles of natural justice. The availability of alternative remedies does not prevent the court from exercising its jurisdiction.
Headnote:
Marketing Discipline Guidelines (MDG) 2005 - The MDG were enacted to prevent the respondent corporation from terminating contracts arbitrarily and to ensure smooth functioning of dealership agreements. The court held that the respondent corporation cannot act arbitrarily and must follow the MDG while terminating a dealership agreement. The court also observed that the dealership agreement cannot be cancelled solely based on the agreement itself, but must be done in accordance with the MDG.
Fact of the Case:
The petitioner seeks quashing of termination letter issued by the respondent whereby dealership of the petitioner has been terminated. The petitioner is an authorized dealer of the respondent since 1960 and has been operating a retail outlet. A surprise inspection was conducted by the respondent at the retail outlet of the petitioner and abnormal short delivery was observed. The respondent issued a show cause notice to the petitioner and after considering all the material on record, the competent authority concluded that no case for termination of petitioner’s dealership was made out. However, the respondent later terminated the petitioner’s dealership agreement. The petitioner challenged the termination before the court. The court found that the termination was in violation of principles of natural justice and the Marketing Discipline Guidelines. The court set aside the termination and directed the respondent to remove the seals from the delivery units belonging to the petitioner to enable the petitioner to resume its operations.
Finding of the Court:
The court considered the arguments of both parties and observed that the termination of the dealership agreement was in violation of principles of natural justice. The court also noted that the respondent had not followed the Marketing Discipline Guidelines while taking the termination action. The court further held that the availability of alternative remedies does not oust the jurisdiction of the court. The court referred to a previous Supreme Court judgment which stated that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. The court also observed that the respondent had concealed certain letters and had cancelled the dealership agreement arbitrarily. The court concluded that the respondent's actions were unreasonable and discriminatory. The court set aside the termination and directed the respondent to remove the seals from the delivery units to enable the petitioner to resume its operations.
Ratio Decidendi: The termination of the dealership agreement was in violation of principles of natural justice and the Marketing Discipline Guidelines. The availability of alternative remedies does not oust the jurisdiction of the court. The respondent's actions were unreasonable and discriminatory.
Result: The court set aside the termination and directed the respondent to remove the seals from the delivery units to enable the petitioner to resume its operations.
1. The petitioner, M/S Bhatia Service Station seeks quashing of termination letter dated 14.09.2012 issued by the General Manager, Indian Oil Corporation Ltd., New Delhi (respondent herein) whereby dealership of the petitioner to the petrol retail outlet at premises bearing No.4, Factory Road, Ring Road, near Trauma Centre, Safdarjung Hospital, New Delhi has been terminated.
2. The facts germane to the present petition are that the respondent is a company fully controlled and managed by the Central Government, being the national oil distributing concern is engaged in refining, pipeline transportation and marketing of petroleum products to exploration and production of crude oil and gas, marketing of natural gas and petrochemicals. The petitioner is an authorized dealer of the respondent since 1960 and has been operating a retail outlet from the aforementioned premises since then. The constitution of the petitioner concern has been changed and approved by the respondent from time to time and as on date Smt. Vandana Aggarwal is the sole proprietor of the petitioner concern. The last and subsisting dealership agreement was executed between the parties on 11.11.2009.
3. On 27.10.2011, a surprise inspection was conducted by a team of Anti Adulteration Cell, Northern Region (AAC, NR) of the respondent at the retail outlet of the petitioner. The inspection team, after inspecting the retail outlet, observed abnormal short delivery from three dispensing units (for short “DU”). All the three DUs were sealed by the inspecting team. On the basis of the above inspection report dated 27.10.2011, the respondent issued a show cause notice dated 28.10.2011 to the petitioner. The petitioner, vide letter dated 01.11.2011 objected and replied to the aforesaid show cause notice dated 28.10.2011. Prior to the aforementioned inspection dated 27.10.2011, the retail outlet of the petitioner was inspected on 22.09.2011 by the Field Officer; thereafter on 26.09.2011 by the Joint District Supply Officer (for short “DSO”) and further on 13.10.2011 by the Vigilance Teams but no discrepancy was ever found by any of the said team. Further, on 09.11.2011 the manufacturer, of two out of three DUs i.e. L&T (Gilbarco) submitted its report for the component of DUs taken by the inspecting team on 27.10.2011. The lab opined that no manipulation was observed and as such concluded that there is no alteration in DUs. Thereafter, the testing lab of the manufacturer of the other dispensing units i.e. MIDCO, submitted its report on 10.11.2011 wherein it opined that even though there was some deviation found in the circuit which was not as per standard design of MIDCO but no specific finding of manipulation with the same was observed by the testing lab. On 20.12.2011, the expert of the respondent corporation submitted its observations with the respondent on above stated reports given by the L&T and MIDCO. The petitioner was given a clean chit, but only with regard to MIDCO’s observation of the circuit not being as per set standards, and the said expert opined that the possibility of manipulation cannot be ruled out.
4. On the basis of the aforementioned material and facts, on 05.01.2012 the competent authority i.e. General Manager of the respondent, after considering all the material on record concluded that no case for termination of petitioner’s dealership was made out and rejected the recommendation of the department to terminate the petitioner’s dealership and ordered further necessary action. The respondent vide letter dated 10.01.2012, conveyed the decision of the competent authority, i.e., the General Manager dated 05.01.2012 and allowed the petitioner to recalibrate the concerned three dispensing units by the weight and measurement department in the presence of Area Field Officer and resumed sales from the said Dispensing units. Pursuant to the letter dated 10.01.2012 all the three dispensing units were recalibrated by the weight and measurements departme
