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2018 DIGILAW 945 (CAL)

Mahadeb Automobiles v. Indian Oil Corporation Ltd

2018-12-14

DEBANGSU BASAK

body2018
JUDGMENT : Debangsu Basak, J. 1. Termination of a dealership agreement is under challenge in the present writ petition. 2. Learned Senior Advocate appearing on behalf of the petitioners submits that, the Oil Company issued an advertisement dated August 6, 2003 inviting applications for grant of dealership. Pursuant to which, the petitioners applied. Such application dated November 10, 2003 was evaluated by the Oil Company and the dealership was awarded. Subsequently, the petitioners received a notice dated December 10, 2009 from the Oil Company requiring the petitioners to show-cause with regard to four charges given in the show-cause notice. The petitioners replied thereto by a writing dated December 18, 2009. The petitioners did not hear anything on the show-cause notice and assumed that, the first show-cause notice stood dropped. However, the petitioners received a show-cause notice dated December 31, 2010. In the second show-cause notice, it is alleged that, the petitioners had taken the resources of the Corporation illegally and un-authorizedly and submitted the same to the Investigating Agency to defend the dealership. Such second show-cause notice was replied to by a writing dated January 17, 2011. By the impugned termination letter dated May 14, 2015, the authorities found that, based on investigation conducted by the Oil Company, report of which was not made available to the petitioners that, the petitioners are guilty of inserting documents relating to finance and tide volume. He submits that, the finding in the termination notice is beyond the second show-cause notice. Therefore, such finding cannot be sustained. Moreover, the charge of theft made as against the petitioners is without any basis as the application for grant of dealership was evaluated by the Oil Company, on the basis of the documents made available by the petitioners. Therefore, the question of the petitioners stealing any document from the Oil Company relating to the application made by the petitioners for grant of dealership does not arise. He points out that, the impugned termination notice is vitiated by the breach of principles of natural justice. The impugned termination notice refers to an investigation and a report of such investigation. The petitioners were not made over copies of such investigation report. In support of his contentions that, principles of natural justice must be adhered to while the administration makes a decision, he relies upon (Union of India and Others vs. Mohd. Ramzan Khan, (1991) 1 SCC 588 ). The petitioners were not made over copies of such investigation report. In support of his contentions that, principles of natural justice must be adhered to while the administration makes a decision, he relies upon (Union of India and Others vs. Mohd. Ramzan Khan, (1991) 1 SCC 588 ). Referring to (State of Orissa vs. Dr. (Miss) Binapani Dei and Ors., (1967) AIR SC 1269), he submits that, the Oil Company did not make over the investigation report to the petitioners. In such circumstances, he submits that, the impugned action of termination should be quashed. 3. Learned Advocate appearing on behalf of the Oil Company questions the maintainability of the writ petition. He submits that, the contract is non-statutory. The contract contemplates an alternative forum for adjudication of the disputes. The disputes between the parties are such that, the parties should be asked to avail of the chosen forum. In support of such contentions, he relies upon (Indian Oil Corporation Ltd. vs. Amritsar Gas Service and Others, (1991) 1 SCC 533 ), (Pimpri Chinchwad Municipal Corporation and Others vs. Gayatri Construction Company and Another, (2008) 8 SCC 172 ) and (Empire Jute Company Limited and Another vs. Jute Corporation of India Limited and Another, (2007) 14 SCC 680 ). Relying upon (E. Venkatakrishna vs. Indian Oil Corporation and Another, (2000) 7 SCC 764 ). 4. Learned Advocate appearing on behalf of the Oil Company submits that, where, there is an arbitration agreement, a writ petition should not be entertained. He draws the attention of the Court to the first and the second show-cause notice as well as the replies thereto. He submits that, the petitioners were aware of the investigation conducted by the Oil Company. The petitioners did not request for any copy of the investigation report contemporaneously. Moreover, the petitioners are guilty of inserting documents within the file maintained by the Oil Company in order to bring the petitioners within the zone of consideration in the financial aspect. Therefore, the writ petition should be dismissed. 5. The petitioners participated in a selection process for grant of distributorship initiated by an Oil Company by its advertisement dated August 6, 2003. The petitioners made the application on November 10, 2003. An interview was held on November 13, 2003. The petitioners were awarded the distributorship. An agreement dated November 29, 2003 was entered into between the parties. 5. The petitioners participated in a selection process for grant of distributorship initiated by an Oil Company by its advertisement dated August 6, 2003. The petitioners made the application on November 10, 2003. An interview was held on November 13, 2003. The petitioners were awarded the distributorship. An agreement dated November 29, 2003 was entered into between the parties. The agreement contemplates termination of the distributorship. It allows the Oil Company to terminate the distributorship upon three months notice. 6. The Oil Company, however, in the facts of the present case, did not invoke the provisions of distributorship agreement to terminate the distributorship. It did not issue three months notice terminating the distributorship. 7. The issue of maintainability of the writ petition was kept open to be decided at the time of granting the parties opportunity to file affidavits. The issue of maintainability as raised on behalf of the Oil Company requires consideration. 8. As noted above, the distributorship agreement contains the arbitration clause. Existence of the arbitration clause or the existence of statutory alternative remedy is not an absolute bar to the maintainability of a writ petition. In a given case, where the petitioners are in a position to substantiate that, fundamental right of the petitioners stands breached or the impugned decision of the administrative authorities is contrary to any provision of the Constitution or where the impugned decision is vitiated by breach of principles of natural justice or where the impugned decision is beyond jurisdiction or where the impugned decision is perverse or is such that, no reasonable person can arrive at such decision on the materials made available to the authority, then a Constitutional Court exercising jurisdiction under Article 226 of the Constitution of India can intervene. 9. Amritsar Gas Service and Ors. (supra) is a case where the Gas distributorship was terminated. The distributor approached the Civil Court by filing a suit. In such suit, an application under Section 34 of the Arbitration Act, 1940 was filed for stay of such suit. Such application received the consideration of the Supreme Court. The Supreme Court directed the parties to go arbitration. The Arbitrator passed an award. The award of the Arbitrator received the consideration of the Supreme Court. It is in such context, the Supreme Court decided the first issue framed in the arbitration proceedings. Amritsar Gas Service and Ors. Such application received the consideration of the Supreme Court. The Supreme Court directed the parties to go arbitration. The Arbitrator passed an award. The award of the Arbitrator received the consideration of the Supreme Court. It is in such context, the Supreme Court decided the first issue framed in the arbitration proceedings. Amritsar Gas Service and Ors. (supra) cannot be read to be a proposition to say that, jurisdiction under Article 226 of the Constitution of India stands barred by reason of existence of an arbitration clause in the distributorship agreement. 10. Gayatri Construction Company & Another (supra) spells out the scope of judicial review in contractual transactions. In the facts of that case, it found that disputed questions of facts to be involved and that, such disputes should be gone into appropriately by a forum other than the Constitutional Court. 11. E. Venkatakrishna (supra) is a proceeding under Section 31 of the Arbitration Act, 1940. It held that, observations made by a Court does not vest the arbitrator with a jurisdiction which, he does not have. Empire Jute Company Ltd. (supra) is of the view that, a writ petition is ordinarily not maintainable if there exists an arbitration clause. It, however, holds that, the point of judicial review vested in the superior Courts undoubtedly has wide amplitude. In the facts of the case, it found that, there were disputes which were referable to arbitration and therefore, the disputes ought to be looked into by the chosen forum. Again, the same cannot be construed to have laid down that, existence of an arbitration clause is an absolute bar to the maintainability of a writ petition. 12. In the facts of the present case, the decision of the Oil Company to terminate a dealership agreement is challenged on the ground of breach of principles of natural justice amongst others. Such a charge can be looked into and considered by a Writ Court. 13. In such circumstances, the writ petition is held to be maintainable. 14. There are two show-cause notices issued by the Oil Company. The first show-cause notice is dated December 10, 2009. It contains four charges. They are as follows:- "1. Your offer dated 08-08-2003 could not have been considered in isolation and dealership could not have been offered without advertisement for dealership in view of the guidelines for selection circulated on 19-09- 2003. 2. The first show-cause notice is dated December 10, 2009. It contains four charges. They are as follows:- "1. Your offer dated 08-08-2003 could not have been considered in isolation and dealership could not have been offered without advertisement for dealership in view of the guidelines for selection circulated on 19-09- 2003. 2. Only your offered land was evaluated for the purpose of dealership and the other offer of another application was ignored. Thus selection of your offered land, by ignoring other lands, which became basis of your selection under land owner category, was unfair. 3. The dealership application was issued to you on 06-11-2003 even before your land was selected. Apart from this your land should not have been considered as it was not entitled to secure 75% marks under sales potential parameters. 4. The marks awarded to you in the interview by the dealer selection committee was not as per the Dealer Selection Policy and its norms. On a correct appreciation you are found to be entitled to 35.07 marks out of 65 marks which becomes less than 60%, the qualifying milestone." 15. Such show-cause notice was replied to by the petitioners on December 18, 2009. 16. The first charge in the first show-cause notice claims that, the offer of the petitioners dated August 8, 2003 could not have been considered in view of the guidelines for selection circulated on September 19, 2003. With respect, the guidelines of September 19, 2003 cannot have retrospective effect and govern an offer made prior thereto. Moreover, the offer was made pursuant to the advertisement issued by the Oil Company on August 6, 2003. 17. The second charge contained in the first show-cause notice again is without any basis. A land was offered which was evaluated. Why the Oil Company has found such evaluation to be improper or the land to be insufficient is not spelt out therein. The third charge, on the parity of the reasoning of the second charge also has no basis. The fourth charge has not been substantiated. At least, nothing is placed on record to substantiate the same. The Oil Company, thereafter, issued a second show-cause notice dated December 31, 2010. The second show-cause notice was replied to, by the petitioners, by a writing dated December 31, 2010. The fourth charge has not been substantiated. At least, nothing is placed on record to substantiate the same. The Oil Company, thereafter, issued a second show-cause notice dated December 31, 2010. The second show-cause notice was replied to, by the petitioners, by a writing dated December 31, 2010. The second show- cause notice although to be stated to be supplementary to the first show-cause notice, charges the petitioners to have taken out the records of the corporation illegally and un authorizedly and then submitting the same to the Investigating Agency to defend the dealership. With respect, the offer for dealership made by the petitioners on August 8, 2003 pursuant to the advertisement dated August 3, 2003 was accompanied by relevant documents of the petitioners. Therefore, there is no question of the petitioners stealing such documents submitted with the Oil Company for consideration. This is the stand of the petitioners in their reply dated December 31, 2010. Nothing is on record to suggest that such stand of the petitioner is without basis and cannot be accepted. In the impugned termination notice dated May 14, 2015, the Oil Company considers an investigation to have been conducted, and the report along with such investigation, for the Oil Company to arrive at a finding that, the petitioners allegedly inserted documents relating to Finance and Tied up volume. It offers to the investigation report dated March 22, 2006. The investigation report dated March 22, 2006 is not on record. The Oil Company did not furnish the investigation report dated March 22, 2006 to the petitioners prior to deciding any of the show- cause notices. Therefore, in such factual matrix, the irresistible inference is that, the decision making process and the decision itself stood vitiated by breach of principles of natural justice. 18. An administrative action, which affects any right of an individual, must be informed with reasons and should be taken after adhering to the principles of natural justice, that is to say that, the delinquent is afforded a reasonable opportunity of hearing to meet the charges made against him. In the present case, the investigation report, on the basis of which the termination letter is found, was not made over to the petitioners to meet the charges. The petitioners met the other charges made by the Oil Company against it. In the present case, the investigation report, on the basis of which the termination letter is found, was not made over to the petitioners to meet the charges. The petitioners met the other charges made by the Oil Company against it. The decision of the Oil Company as contained in the impugned letter of termination, is not based on the charges that were made against the petitioners. It is based on the investigation report, copy of which was not made over to the petitioners. 19. In Bina Pani Devi (supra), the Supreme Court is of the view that, an administrative order, which involves civil consequences must be made consistent with the principles of natural justice, after informing the parties affected thereby the evidence available and after giving an opportunity of being heard. 20. Md. Ramzan Khan (supra) deals with a disciplinary proceeding. In the context of a disciplinary proceeding it is of the view that, the delinquent must be furnished with copy of any report which the disciplinary authority is seeking to rely upon. Failure to do so will vitiate the proceeding. 21. In the facts of the present case, the decision making process being vitiated by breach of principles of natural justice, in not furnishing the investigation report which forms a part of the decision of termination, the decision of termination cannot be sustained. The same is quashed. 22. There subsists an interim order to permit the Oil Company to continue with the dealership purely on ad hoc basis and such appointment of new dealership to abide by the result of the present writ petition. With the quashing of the letter of termination, the dealership in favour of the petitioners revives. The Oil Company will take expeditious steps to restore the petitioner its dealership in respect of the plot of land concerned. 23. This order will, however, not prevent the respective parties to take recourse to the dealership agreement to govern their relationship. 24. W.P. 11430 (W) of 2015 is disposed of without any order as to costs.