Research › Search › Judgment

Rajasthan High Court · body

2008 DIGILAW 971 (RAJ)

Sanjay Trading Company v. State of Rajasthan

2008-04-04

MOHAMMAD RAFIQ

body2008
JUDGMENT 1. - The petitioner M/s.Sanjay Trading Company has filed this writ petition challenging the order dated 25/11/2005 passed by the Rajasthan State Mines and Minerals Ltd. whereby their agreement with the petitioner was discontinued on the ground that the term therein has expired. 2. I have heard Shri Sunil Nath, learned counsel for the petitioner and Shri R.K. Agrawal, learned counsel for Rajasthan State Mines and Minerals Ltd. and Shri Sanjay Srivastava, learned Deputy Govt.Counsel for the State. 3. Shri Sunil Nath, learned counsel for the petitioner argued that agreement for sale of "Rajphos" was duly entered into between the petitioner firm and respondent No.2 on 8/7/2002. Originally such agreement was executed on 1/4/1994 as per the terms of which, the petitioner invested heavy sum on infrastructures for distributing Rajphos. The agreement was though valid for an initial period of three years but it was extended in view of clause 11 thereof for a further period of 2 years subject to review of performance of the petitioner firm. At the satisfactory performance of the petitioner, respondent No.2 has been from time to time extending the period of agreement earlier vide agreement dated 2/9/1999 and, thereafter, on 8/7/2002. Due to the stipulation in distribution agreement, petitioner dealt with exclusively with the product of respondent No.2. In fact, respondent No.2 itself has appreciated the performance of the petitioner as satisfactory. Reference in this connection is made to the observation made by the Deputy General Manager (Marketing) of the respondent No.2 vide letter dated 7/4/2007 whereby which he recommended for inviting fresh tenders from reputed marketing agencies. During the subsistence of the contract however, the respondent No.2 in contravention of the stipulation in agreement, appointed M/s.Indian Potash as their distributor in the North East region for 2004-05 and stopped supplies to the petitioner-firm. Learned counsel argued that ostensible reason for discontinuing agreement and supplies to the petitioner is that respondent No.2 was merged with Rajasthan State Mines & Minerals Development Corporation and as a result thereof and has taken over its contractual liabilities because the said Corporation had already appointed M/s.Indian Potash as its distributor in North- East region. M/s.Indian Potash is already working as representative of respondent No.2. It was argued that respondent No.2 was under a legal obligation to extend the term of contract in view of doctrine of legitimate expectation and principle of promissory estoppel. M/s.Indian Potash is already working as representative of respondent No.2. It was argued that respondent No.2 was under a legal obligation to extend the term of contract in view of doctrine of legitimate expectation and principle of promissory estoppel. Learned counsel for petitioner submitted that remedy of writ can be availed of in the case of arbitrary, unreasonable or rational action of State which is violative of Article 14 of the Constitution of India even if the matter relates to a contract. 4. Learned counsel for the petitioner placed reliance on the judgments of the Supreme Court in Food Corporation of India v. M/s.Kamdhenu Cattle Feed Industries : (1993) 1 SCC 71 , Punjab Communications Ltd. v. Union of India and others : (1999) 4 SCC 727 and Bannari Amman Sugars Ltd. v. Commercial Tax Officer and others : (2005) 1 SCC 625 .5-6. Lastly, learned counsel argued that writ petition cannot be dismissed on the ground of alternative remedy available to the petitioner. It is argued that clause 9.1 of the agreement only states that in case of dispute/difference between the Rajasthan State Mines and Minerals Ltd. and the petitioner regarding supply of Rajphos, same can be referred to Managing Director of respondent No.2. In the present case, the dispute is not with regard to supply of Rajphos. It is regarding arbitrary action of respondent No.2 in terminating the agreement. Even if this court holds that the writ petition is not maintainable and the petitioner should avail of the remedy of arbitration, liberty should be granted to the petitioner to raise their dispute before the Arbitrator without observing anything on merits of the case. Shri R.K. Agrawal, learned counsel for respondent however has opposed the writ petition and argued that the writ petition be dismissed because it was not a case of termination of the contract. In fact, the contract itself was commenced from 2/9/2002 as per clause 11 of the agreement which was valid only for a period of three years. Though the same was extendable for other period of two years but only if both the parties agreed to do so. In the present case, Shri R.K. Agrawal argued that in absence of mutual consent for extension of the agreement, it should not be assumed that the agreement was to be extended necessarily upto 2007. Though the same was extendable for other period of two years but only if both the parties agreed to do so. In the present case, Shri R.K. Agrawal argued that in absence of mutual consent for extension of the agreement, it should not be assumed that the agreement was to be extended necessarily upto 2007. Such an agreement is not enforceable and does not create any right, muchless legal or constitutional right. Shri R.K. Agrawal has raised preliminary objections about the maintainability of the writ petition and submitted that the agreement contains clause 9.1 of the agreement which clearly provides that any dispute shall be referred to Managing Director and whose award shall be final and binding on both the parties. In the face of this, there is no extraordinary reason for entertaining a writ petition. Shri R.K. Agrawal in this connection placed reliance on the judgment of Supreme Court in State of U.P. & Ors. v. Bridge & Roof Company(India) Ltd. : (1996) 6 SCC 22 . He has also relied on the judgment of the Supreme Court in Defence Enclave Residents Society v. State of U.P. & Ors. : JT 2004(7) SC 541 and argued that the Supreme Court in the said case held that what is projected under the camouflage of an infringement of fundamental rights is really a contractual dispute pure and simple, interference under Article 32 is therefore not warranted. Shri R.K. Agrawal submitted that recommendation made by the Deputy General Manager of respondent No.2 does not on its own create any right in favour of the petitioner. The said noting made by him was meant for internal use of the respondent No.2 and does not confer any right on the petitioner. Shri R.K. Agrawal in this connection placed reliance on the judgment of the Supreme Court in Bahadur Singh Lakhubhai Gohil v. Jagdish Bhai M.Kamalia and others : (2004) 2 SCC 65 and constitutional bench judgment of the Supreme Court in Bachhitar Singh v. State of Punjab and another : AIR 1963 SC 395 .7. He argued that it was not a case of termination of contract but in fact the contract came to an end with efflux of time.8. He argued that it was not a case of termination of contract but in fact the contract came to an end with efflux of time.8. Having heard learned counsel for the parties and perused the material forming part of the record, I find that agreement in question itself contains a clause namely 9.1 that in case of dispute/difference between the Rajasthan State Mines and Minerals Corporation Ltd. and M/s.Sanjay Trading Company i.e. the petitioner, regarding supply of Rajphos, same shall be referred to the Arbitrator whose decision shall be final and binding on both the parties. While the respondent has raised an objection that there is no reason for entertaining the dispute of the present nature in the remedy of writ under Article 226, petitioner has sought to distinguish the said clause of agreement by arguing the that since there is no dispute with regard to supply of Rajphos but the dispute is about arbitrary action of the respondents in terminating the agreement of the petitioner, it would not fall within the purview of clause 9.1 of the agreement, which reads as under:- "9.1 In case of any dispute/difference between RSMML & STC regarding supply of Rajphos, the same shall be referred to the Managing Director, RSMML. The award of MD, RSMML, shall be final & binding on both the parties." 9. A reading of the clause would make it clear that in case of any dispute/difference between the respondent No.2 and the petitioner regarding supply of Rajphos, same shall be referred to the Managing Director. The petitioner is seeking to place a very narrow construction on this clause by arguing that only such dispute can be referred to the Managing Director, which is "regarding supply of Rajphos". Such an interpretation, in my considered view, is not warranted on the language of clause 9.1 of the agreement. Any dispute including the dispute with regard to extension or otherwise of the term of the agreement would essentially be a dispute regarding supply of Rajphos, for which an agreement was executed between the parties. In other words, agreement itself is regarding supply of Rajphos and when agreement is not extended, the insistence of the petitioner that the agreement should be extended would also be taken as a dispute regarding supply of Rajphos.10. In other words, agreement itself is regarding supply of Rajphos and when agreement is not extended, the insistence of the petitioner that the agreement should be extended would also be taken as a dispute regarding supply of Rajphos.10. I have properly examined the matter on merits because the petitioner can have its remedy before the Managing Director of the respondent No.2 in terms of clause 9.1 of the agreement who shall decide whether the agreement was terminated for the reason that respondent No.2 wanted to own up the contractual obligation of the Corporation merged with it or it was not extended for any other reason and if at all the petitioner had any right to get the term of the contract extended.11. The writ petition is therefore dismissed being not maintainable though with liberty to the petitioner to approach the Managing Director of respondent No.2 for arbitration of the dispute.Writ petition dismissed. *******