1. Heard Mr. D.Narendar Naik, learned counsel for the appellant- Indian Oil Corporation Limited (hereinafter referred as ‘the Corporation’) and Mr. P.Kamlakar, learned counsel for respondent No.1.
2. This intra court appeal arises out of order dated 01.04.2011, passed by a learned Single Judge by which writ petition viz., W.P.No.3131 of 2009, preferred by respondent No.1- firm has been allowed. In order to appreciate the grievance of the appellant, the relevant facts need mention, which are stated infra:
2.1. The Corporation appointed one Shri E.Satyanarayana as the dealer to run a retailed outlet in Miryalaguda of Nalgonda District. The aforesaid E.Satyanarayana set up an outlet in the name of M/s.E.Satyanarayana and Company. After his death on 09.10.1980, his three sons viz., Shri E.Purnachander, Shri E.Dhanunjaya and Shri E.Venkatesham succeeded to the dealership. After obtaining consent of the Corporation, the aforesaid three sons of late E.Satyanarayana vide Agreement dated 09.10.1980 constituted a partnership firm. One of the partners of the firm viz., Shri Venkatesham retired from the partnership firm w.e.f. 27.06.1996. Another partner viz., Shri Purnachander died on 13.06.1998. Thereafter, on 18.09.1998, a representation was submitted to the Company that the partnership firm has been reconstituted and one Smt. E.Radha, viz., widow of late Shri E.Purnachander has been inducted as partner.
2.2. The officers of the Corporation conducted an inspection on 09.05.2007 in which it was noticed that clean drinking water, free air facility etc., were not being provided. Smt. E.Radha, partner of the firm entered into Agreement with one Shri Masram Subbarao on 08.12.2006 to enable him to run the firm. Another inspection by the officials of the Corporation was carried out on 12.06.2007.
2.3. Thereafter, a show cause notice dated 18.07.2007 was issued to the firm and they were asked to show cause as to why the dealership Agreement be not terminated. The grounds enumerated in the show cause notice read as under:
You are not providing Free Air in your RO and the Air Facility provided at your RO was not working.
The premises were maintained poorly condition and the toilet in your RO was unusable.
You were not taking part in the management and affairs of the dealership.
A POA was executed in favour of Shri Marram Subba Rao on 08.12.2006 thereby he was managing the affairs of the dealership.
Shri E.Purna Chandra one of the partner died on 13.06.1990 and no reorganization is done so far.
Smt. Eduluka Radha, w/o. of late Eduluka Purnachander executed a lease Agreement with Shri Marram Subba Rao, on 08.12.2006 illegally.
2.4. The firm submitted a reply to the aforesaid show cause notice. Thereafter, by an order dated 14.02.2008, the dealership Agreement executed in favour of the firm was terminated on the ground that the firm has violated Clauses 4, 20, 35, 44, 46, 47 of the Agreement. The firm challenged the order of termination dated 14.02.2008 in a writ petition viz., W.P.No.3824 of 2008. A learned Single Judge of this Court, by an order dated 11.07.2008 quashed the order of termination dated 14.02.2008. However, the Corporation was granted liberty to initiate fresh proceedings. The order passed by the learned Single Judge was challenged by the Corporation in an intra court appeal viz., Writ Appeal No.875 of 2008. A Division Bench of this Court, by an order dated 16.09.2008, affirmed the order passed by the learned Single Judge and it was held as under:
Having heard the learned counsel appearing on both sides and having perused the material available on record, we are not inclined to interfere with the order passed by the learned Single Judge where the matter has to be reconsidered on every aspect after taking into consideration the respective pleas and arguments on both sides after giving fair opportunity to the respondent herein.
However, the learned counsel for the appellant submits that having regard to the specific clause in the Agreement about the arbitration, the respondent as well can seek arbitration instead of approaching this Court under Article 226 of the Constitution of India. Having considered the said plea, we are also of the view that the parties are at liberty to approach the arbitrator, who can pass appropriate orders after giving opportunity to the parties. Even though it has been pointed out that subsequent to the termination order another dealership has already been issued, these are all the matters, which can be considered before the appropriate forum. In view of the same, we do not find any merit in the appeal.
Accordingly, the Writ Appeal is dismissed.
No costs.
2.5. In pursuance of the liberty granted to the Corporation, the Corporation issued a fresh show cause notice to the partner of the firm and had granted an opportunity of personal hearing. Thereafter, by an order dated 16.01.2009, the Corporation terminated the dealership for the firm. The firm challenged the order of termination dated 16.01.2009 in Writ Petition No.3131 of 2009. The learned Single Judge, by the impugned order dated 01.04.2011, inter alia held that since the Corporation has not raised objection with regard to availability of an alternative remedy in the first round of litigation, therefore, the same cannot be raised in the subsequent proceeding. The learned Single Judge quashed the order dated 16.01.2009 and allowed the writ petition. In the aforesaid factual background, this appeal has been filed.
3. Learned counsel for the Corporation submitted that learned Single Judge ought to have appreciated that Clause 47(iii) of the Agreement expressly mandates that reconstitution of the partnership firm cannot take place without obtaining prior consent or approval from the Corporation. It is further submitted that learned Single Judge ought to have appreciated that the firm had handed over the control of the retail outlet in favour of a third party and thus, violated Clause 47(i) of the Agreement. It is urged that the learned Single Judge ought to have appreciated that in view of the arbitration clause contained in Clause 69(a) of the Agreement, no interference was called in a proceeding under Article 226 of the Constitution of India, as the dispute between the parties requires adjudication on factual aspects. In support of the aforesaid submission, reliance has been placed on the decisions of the Supreme Court reported in Indian Oil Corporation Limited v. Amritsar Gas Service and others (1991)1 SCC 533 and Harbanslal Sahania and another v. Indian Oil Corporation Limited (2003) 2 SCC 197.
4. On the other hand, learned counsel for the firm submitted that the writ petition has rightly been held to be maintainable by the learned Single Judge. It is further submitted that the remedy of arbitration in the facts and circumstances of the case is not an efficacious remedy as the arbitrator has no power to direct restoration of the Agreement. In support of the aforesaid submissions, reliance has been placed on decisions of the Supreme Court in Sanjana WIG (Ms) v. Hindustan Petroleum Corporation Limited (2005) 8 SCC 242 and a Division Bench decision of this Court in K.Harinath v. Hindustan Petroleum Corporation Limited and another 2013(4) ALT 651 (DB).
5. It is contended that the firm has not violated Clause 47(iii) of the Agreement and Smt. E.Radha was not a partner of the firm. It is submitted that the order of termination of dealership suffers from the vice of non-application of mind. It is further submitted that the show cause notice was issued on incorrect factual grounds and therefore, the impugned order dated 01.04.2011, passed by the learned Single Judge does not call for any interference.
6. We have considered the rival submissions made on either side and have perused the record.
7. It is trite law that rule of exhaustion of an alternative remedy is a rule of discretion and not of jurisdiction and the jurisdiction of this Court under Article 226 of the Constitution of India in the facts of the case can be exercised. This is the second round of litigation and the learned Single Judge has dealt with the controversy on merits. Therefore, in the peculiar facts and circumstances of the case, we are not inclined to relegate the firm at this point of time to the alternative remedy of arbitration, as the case in hand does not involve adjudication of facts.
8. Clause 47 of the Agreement executed between the parties on 09.10.1990 reads as under:
Except with the previous written consent of the Corporation:
(i) The Dealer shall not enter into any arrangement contract or understanding whereby the operations of the Dealer hereunder are or may be controlled carried out and/or financed by any other person firm or company whether directly or indirectly and whether in whole or in part;
(ii) The Dealer himself (if he be an individual) or the partners/member or any of them of the Dealer (if the Dealer is a firm/co-operative society) shall not take up any other employment or engage in any other business apart from the running of the retail outlet which is the subject matter of this Agreement.
(iii) The Dealer (if it be a firm or a co-operative society) shall not effect any change in its constitution whether in the identity of its partners members or in the share/share-holding of any of them or in the terms of the Deed of Partnership or of the Bye-laws as the case may be.
In the event of the death of any partners/member of a firm/co-operative society which has been appointed as Dealer hereunder the surviving partners/members hereby agree to indemnify and keep indemnified the Corporation Against any claims or demands which may be made the heirs of the deceased partner/member.
9. Thus, in view of stipulations contained in Clause 47 of the Agreement, it is evident that the dealer can neither hand over the control of the retail outlet nor can change the constitution of the firm without prior approval of the Corporation.
10. From a perusal of the material available on record, it is evident that a communication was sent by two of the partners of the firm viz., Shri Dhananjay and Smt. E.Radha to the Senior Divisional Manager of the Corporation, which has been received by the Corporation on 17.09.1998. The aforesaid communication is extracted below for the facility of reference;
We, M/s. Edukulal Satyanarayana & co., a partnership firm consisting of three partners namely Edukulla Poornachander (Age:40 years), Edukulla Venkatesham (Age:37 years), Edukulla Dhanamjaya (Age:30 years) having dealership from I.O.C have been carrying on retail out-let business at Miryalguda. All the partners are brothers and on account of certain family arrangements regarding the Assets and Liabilities from our father, Mr.Edukulla Venkatesham is going to retire from the partnership firm. He has already established a P.V.C. manufacturing Unit at Miryalguda. He was not in a position to spare this finance. His consent letter for retirement from the firm is enclosed herewith for your kind perusal and record.
We further wish to inform you Mr. Edukulla Poornachander expired on 13.06.1998, the wife of the expired partner Smt. Edukulla Radha (aged:35 years) joined as a new partner in this existing firm. We are enclosing the death certificate of Mr. Edukulla Poornachander and No-objection certificate from the other legal heirs of the deceased partner.
With the availability of financial resources between the two partners, we shall run the retail outlet and commit to improve the sales with min.24 kl.p.m. Ms. and 300kl. H.S.D p.m.
Hence, we request you to approve the reconstituted partnership firm deed so that we can prepare partnership deed accordingly and complete all the necessary legal formalities in this regard.
11. Thus, from a perusal of the aforesaid communication, which has been sent on behalf of the firm, duly signed by two of the partners viz., Shri E.Dhananjay and Smt. E.Radha, it is evident that the partnership firm was already reconstituted. The approval of the Corporation was sought after reconstitution of the firm. The action of the firm in reconstituting the partnership firm without seeking prior approval of the Corporation is clearly in contravention of Clause 47(iii) of the Agreement.
12. An inspection of the retail outlet was conducted on 09.05.2007 by the officers of the Corporation. The relevant extract of the inspection note reads as under:
Shri J.L.K.Gupta reportedly Manager of M/s. E.Satyanarayana & Co was present in the RO during inspection. When asked to produce dealership Agreement, Shri J.L.K.Gupta produced a photo copy of an Agreement dated 8th December, 2006 written in Telugu (in non judicial paper) reportedly lease Agreement for running the RO and signed by Smt. E.Radha, Proprietor of E.Satyanarayana & Co. He also produced a copy of power of attorney signed by E.Radha on behalf of Shri Marram Subba Rao for running the RO. Both these documents were taken over.
13. Thus, from a perusal of the aforesaid inspection note, it is evident that the control of the retail outlet was handed over to a third person viz., Shri M.Subba Rao, who was running the outlet on behalf of a partner Smt. E.Radha, who herself was inducted as partner of the firm without seeking approval of the Corporation. Thus, it is evident that the dealer has violated Clause 47(i) and 47(iii) of the Agreement.
14. An inference with regard to violation of the aforesaid clauses can be derived on the basis of the admissions made on behalf of the firm by its partners. However, the learned Single Judge has failed to take into account the aforesaid admitted facts, which are evident on record and has in a casual and cavalier manner has recorded a finding that the firm has not violated the terms and conditions of the Agreement and the order terminating the dealership suffers from the vice of non-application of mind.
15. In view of the preceding analysis, the order dated 01.04.2011, passed by the learned Single Judge in W.P.No.3131 of 2009 cannot be sustained in the eye of law. Therefore, it is hereby quashed.
16. In the result, the Writ Appeal is allowed. No costs.
As a sequel, miscellaneous petitions, pending if any, stand closed.
