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IN THE HIGH COURT OF DELHI
Prathiba M. Singh, J.
Ehsaas Filling Station - Appellant
Versus
Indian Oil Corporation Ltd. - Respondent
W.P.(C) 16762 of 2022, CM Appl. 52892 of 2022 & CM Appl. 52893 of 2022
Decided On : 07-12-2022
The court ruled that disputes arising from a dealership agreement are contractual in nature and not subject to writ jurisdiction, emphasizing the importance of procedural compliance and invoking arbitration.
Headnote:(A) Contract Law - Dealership Agreement - Arbitration Clause - The petitioner seeks quashing of a suspension notice pertaining to a retail outlet operated under an agreement with the respondent, alleging arbitrary action without proper notice or opportunity to be heard (Paras 2, 8, and 9).
(B) Natural Justice - The Court examined the procedural fairness of the suspension and noted the necessity for compliance with safety points as per the agreed minutes of the meeting held between the petitioner and respondent (Paras 6, 9, and 11).
(C) Jurisdiction - The Court emphasized that disputes arising from the dealership agreement are contractual and hence not amenable to writ jurisdiction, especially post-invocation of the arbitration clause (Paras 12 and 15).
Facts of the case:
The petitioner operated a retail outlet under a dealership agreement with the respondent. The suspension was based on an inspection revealing irregularities and culminated in a show cause notice for possible termination of the dealership (Paras 2 and 4).
Findings of Court:
The Court found no merit in the petition, given the compliance required by the petitioner and the invocation of arbitration, and declined to intervene in a contractual dispute (Paras 12 and 15).
Issues: Whether the respondent adhered to the principles of natural justice before suspending the retail outlet and whether the matter is subject to writ jurisdiction.
Ratio Decidendi: The Court ruled that the suspension of sales did not violate natural justice as compliance was mutually agreed upon and that the dispute was fundamentally contractual, subsequently referring the parties to arbitration (Paras 10, 12, and 14).
Result: Petition disposed of.
| Table of Content |
|---|
| 1. background of dealership agreement and suspension (Para 2 , 3 , 4 , 5 , 6) |
| 2. contentions on propriety of suspension (Para 9 , 10) |
| 3. observations on compliance and arbitration (Para 11 , 12 , 13) |
| 4. disposal of petition (Para 15) |
JUDGMENT
Prathiba M. Singh, J. (Oral)--This hearing has been done through hybrid mode.
2. The present writ petition has been filed by the Petitioner-M/s Ehsaas Filling Station which was running a Retail Outlet under a Dealership Agreement (hereinafter `dealership agreement') with the Respondent-Indian Oil Corporation (hereinafter `IOCL'). The Petitioner is seeking quashing of the suspension of its retail outlet vide emails dated 14th September, 2020 and 15th September, 2020. The writ petition is also seeking a direction for quashing of the show cause for termination of dealership which was issued on 17th December, 2020 by the Respondent.
3. The Petitioner had entered into the dealership agreement with the Respondent, dated 3rd June, 2014 for running a retail outlet for a period of 15 years at Village Bahalgarh, District Sonepat, Haryana. The case of the Petitioner is that over the years 2014-2018, various grievances were raised by it against IOCL. Thereafter, in December, 2019, the Petitioner also obtained a gas station license from Gas Authority of India Limited (GAIL) for running a gas station in at the same premises. The Petitioner also avers that between 2019-20, several complaints were made by it against the Respondent and its officials with various authorities including the Central Vigilance Commission.
4. On 14th September, 2020 and 15th September, 2020, the Petitioner received emails intimating that upon an MDT Inspection conducted by the team of IOCL, various irregularities were observed and, accordingly, sale from the retail outlet was being suspended till further notice.
5. The show cause notice has then been issued to the Petitioner on 17th December, 2021 as per which IOCL called upon the Petitioner to show cause as to why due to breaches of the agreement, the dealership agreement should not be terminated. It is not in dispute that communications have been exchanged between the parties.
6. At this stage, it is relevant to note that a meeting took place on 26th March, 2022 between the Petitioner and IOCL's representative where several points were discussed and it was agreed in the said meeting as under:
"1. Dealership will comply to safety points as per letter issued vide ref. PDO/RS/MDE/EHSSAS/FS dated 15.09.2020.
2. After compliance of safety points, RO sales will be started after re-calibration of DUs by dealer.
3. IOCL will assist in providing the facilities ass per prevailing IOCL Subsidy policy.
4. Dealer will clear all dues of IOCL after start of sales and IOCL will supply the next load after clearance of all does only supplies will be released on cash & carry.
5. Other mandatory and basic facilities as observed during the RO visit notified vide letter PDO/RS/MDE/EHSSAS/FS dated 15.09.2020 to be completed within fixed timetable of 30 days by dealer. Major Safety points to be complied before resumption of sales are as follows:
1. Emergency Shut Down Device
2. Standard Electrical Panel
3. Fire Extinguisher-2 nos. per DU-ABC type and illegible CO2 type.
4. 10 Nos Sand Buckets duly filed with dry sand to be provided in sand bucket stand.
5. Sample Almirah."
7. In the meantime, the arbitration clause in the dealership agreement, has been invoked by both the Petitioner and the Respondent and the process of appointment of Arbitrator is stated to be underway.
8. Under these circumstances, the following writ petition has been filed. The prayers in the writ petition are as under:
"a) A writ of mandamus directing the Respondents to set aside the arbitrary suspension of sales at the Retail Outlet ("RO") vide E-mail dated 14.09.2020 and 15.09.2020 and all other further consequential action of the Respondent No. 1 including issuance of show cause notice for terminatio
