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Case Number
Advocates
  • — Mr. Chetan Sharma, Senior Advocate with Mr. Debasish Mishra, Advocate
  • — Mr. Sunil Goel, Advocate
Judges
  • Acting Chief Justice Mr. Vijender Jain
  • Mr. Justice Kailash Gambhir
Acts
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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • — Mr. Chetan Sharma, Senior Advocate with Mr. Debasish Mishra, Advocate
  • — Mr. Sunil Goel, Advocate
Judges
  • Acting Chief Justice Mr. Vijender Jain
  • Mr. Justice Kailash Gambhir
Acts
See more information ...
Smart Summary

Summary of the Opinion (Vijender Jain, A.C.J. — Oral)

Factual and Procedural Background

Aggrieved by an order of a learned Single Judge, the appellant filed the present appeal before the High Court (oral judgment by Vijender Jain, A.C.J.). The dispute arises from termination/suspension of supplies under a Stockist Agreement and related distributorship arrangements. Clause 1.3 of the Stockist Agreement (quoted in the opinion) provided that the agreement "can be terminated by either party ... upon giving the other party three months notice in writing" and that termination would be "without prejudice to the rights of either party ... in respect of any matter or thing or acts or omissions antecedent to such termination."

Relevant factual chronology, as recorded in the opinion:

  • Supplies to the respondent were suspended effective 9 May 2003 (as stated in a letter dated 12 May 2003 found at page 130 of the paper book).
  • A notice dated 19 May 2003, said to be pursuant to Clause 1.3, was later sent to the respondent.
  • The respondent alleged that the 19 May notice was a camouflage because supplies had already been suspended on 9 May 2003.
  • The respondent took the matter to the Government of India, Ministry of Petroleum & Natural Gas. A Ministry letter dated 17 May 2004 advised restoration of the Stockist-ship to the respondent, but a subsequent change of Government and Minister reversed that decision.

Procedurally, the Single Judge had granted relief in favour of the respondent; the appellant challenged that order by filing the present appeal, which the High Court ultimately dismissed.

Legal Issues Presented

  1. Whether the High Court should exercise its writ jurisdiction under Article 226 of the Constitution to intervene in an alleged contractual termination/suspension that the appellant says was taken in accordance with the contractual clause (Clause 1.3) and when an arbitration clause is present.
  2. Whether suspension of supplies without prior assignment of reasons (and whether serving a notice dated after the suspension) amounted to a breach of the principles of natural justice, thereby justifying writ relief despite the availability of alternate remedies.
  3. Whether the Single Judge correctly applied precedents (including M/s Radhakrishna Agarwal and subsequent decisions) when deciding that writ jurisdiction could be exercised in this case.

Arguments of the Parties

Appellant's Arguments

  • The appellant (through Mr. Chetan Sharma) contended that where actions are taken in accordance with mutually agreed contractual stipulations the Court should not, in exercise of its Article 226 jurisdiction, interdict such action.
  • The appellant argued that the Single Judge failed to follow the dictum in M/s. Radhakrishna Agarwal v. State of Bihar (AIR 1977 SC 1496).
  • It was submitted that under Clause 1.3 of the Stockist Agreement a three months notice in writing was given (notice dated 19 May 2003) and that the clause contains an inbuilt mechanism accommodating natural justice.
  • The appellant relied on Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums (JT 2003 (6) SC 1) to argue that the existence of an arbitration clause should preclude interference under Article 226.
  • The appellant contrasted the Stockist Agreement with a Lube Distributorship Agreement (which required a show cause notice before termination), arguing that the requirement of a show cause notice in the distributorship agreement could not be imported into the Stockist Agreement where no such clause existed; the appellant claimed it had complied with the show cause requirement under the Lube Distributorship Agreement.

Respondent's Arguments

  • The respondent contended that where there is manifest injustice or a breach of natural justice the writ court has jurisdiction to intervene even if alternate remedies exist.
  • The respondent relied on authorities (Harbans Lal Sahnia v. Indian Oil Corpn. and Ors. 2003-(2)-SCC 107; Bharat Filling Station v. Indian Oil Corporation 2003 (3) AD (Del) 394) holding that although pre-decisional natural justice may be dispensed with in exceptional urgent cases, orders having civil consequences should ordinarily be passed only after following principles of natural justice, and parties affected should have a right to be heard.
  • The respondent argued that the notice dated 19 May 2003 was merely a camouflage because supplies had already been stopped on 9 May 2003, and therefore the 19 May notice could not be considered effective compliance with Clause 1.3 or with natural justice requirements.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
M/s. Radhakrishna Agarwal v. State of Bihar (AIR 1977 SC 1496) Invoked by the appellant to argue that the Court should not interfere under Article 226 where contractual provisions are followed. The Court held that this precedent was of no help to the appellant in the present facts and noted that the judgment has been discussed in a later decision (Mahabir Auto Stores v. Indian Oil Corporation). The Single Judge had duly taken its import into consideration.
Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums (JT 2003 (6) SC 1) Relied on by the appellant to support the proposition that an arbitration clause should preclude interference by writ jurisdiction. The Court found the facts of that case not applicable here, observing that the Supreme Court in that decision discussed the jurisdiction of civil courts to entertain a suit after reference to an arbitrator — a situation not present in the instant matter.
Harbans Lal Sahnia v. Indian Oil Corpn. and Ors. (2003-(2)-SCC 107) Relied on by the respondent for the principle that writ jurisdiction can be exercised where natural justice is violated; also discussed that pre-decisional natural justice may be dispensed with in urgent cases but civil consequences ordinarily require a hearing. The Court cited the principle (including its nuanced application) in support of the respondent's contention that orders with civil consequences should follow natural justice and that a post-decisional hearing may be inadequate where the facts do not justify dispensing with pre-decisional hearing.
Bharat Filling Station v. Indian Oil Corporation (2003 (3) AD (Del) 394) Relied on by the respondent as part of the authorities affirming the necessity of natural justice in actions with civil consequences. Used alongside Harbans Lal Sahnia to support the view that affected parties should have the right to be heard and that blacklisting or termination with civil consequences requires observance of natural justice.
Mahabir Auto Stores v. Indian Oil Corporation (AIR 1990 SC 1031) Referred to by the Court as a later judgment that discussed the dictum in M/s. Radhakrishna Agarwal. The Court observed that Radhakrishna Agarwal was duly discussed in Mahabir Auto Stores; this diminished the appellant's reliance on the earlier judgment as if standing alone. The Single Judge had taken Mahabir Auto Stores into account.
M/s Raghunath Thakur (supra) Sets out contingencies in which High Court may exercise writ jurisdiction despite availability of alternative remedies; one such contingency is non-observance of principles of natural justice. The Court held the present case to be squarely covered by the dictum in Raghunath Thakur, specifically the contingency of non-observance of natural justice, and applied that reasoning to uphold the Single Judge's exercise of writ jurisdiction.

Court's Reasoning and Analysis

The Court set out the competing contentions and then examined the chronological and documentary evidence. Key elements of the Court's analysis (as stated in the opinion) are:

  • The Court observed that a letter dated 12 May 2003 (page 130 of the paper book) expressly stated that supplies to the respondent had been suspended effective 9 May 2003, and that no reason was assigned for the suspension.
  • The show cause notice relied upon by the appellant, said to be pursuant to Clause 1.3, bore the date 19 May 2003 — i.e., it was issued after supplies had already been suspended. The Court treated this timing as demonstrating that the 19 May notice was a "camouflage" or device to legalise an earlier unlawful suspension.
  • The Court emphasized the centrality of the principles of fairness and non-arbitrariness as hallmarks of equality, and found the appellant's suspension of supplies without assigning reasons to be arbitrary and unfair.
  • On the scope of Article 226, the Court reiterated that High Courts possess wide powers to remedy injustice and that Article 226 confers broad jurisdiction to reach instances of alleged injustice. The Court regarded the rule excluding writ jurisdiction due to availability of alternative remedies as discretionary rather than mandatory.
  • The Court relied on the established contingency (cited from Raghunath Thakur) that non-observance of the principles of natural justice is a circumstance in which the High Court may exercise writ jurisdiction despite alternative remedies being available.
  • The Court distinguished the appellant's reliance on Radhakrishna Agarwal and Hindustan Petroleum: Radhakrishna Agarwal had been discussed in later case law (Mahabir Auto Stores) and therefore could not aid the appellant; Hindustan Petroleum concerned civil suit jurisdiction after arbitration reference, which was not the factual scenario before the Court.
  • The Court also considered the respondent's evidence that an individual (Mr. Sanjay Gaur, SRSM (Lubes)) had allegedly harassed the respondent and played a role in the terminations, and that the respondent had taken the matter to the Ministry of Petroleum & Natural Gas — which, at one stage, advised restoration of the Stockist-ship (letter dated 17 May 2004) though that Ministerial decision was subsequently reversed by a change of Government.
  • On balance, after giving careful consideration to both sides and perusing the record, the Court agreed with the respondent that the appellant had violated principles of natural justice by suspending supplies without assigning reasons and that the 19 May notice could not be treated as compliance with Clause 1.3 or with natural justice.

Holding and Implications

Core Ruling: Appeal dismissed.

Implications and direct effects as recorded in the opinion:

  • The order passed by the learned Single Judge (which the appellant had challenged) was upheld and the appeal was dismissed for lacking merit.
  • The Court concluded that the appellant's suspension of supplies (effective 9 May 2003) without assigning reasons and with a subsequent notice dated 19 May 2003 amounted to an arbitrary action that violated principles of natural justice; the 19 May notice was treated as a sham attempt to legalise earlier conduct.
  • The opinion reiterates that Article 226 confers broad remedial powers on High Courts and that where principles of natural justice are not observed the writ jurisdiction can be exercised even if alternative remedies exist; the rule excluding writ jurisdiction because alternative remedies are available is one of discretion, not compulsion.
  • No new precedent was asserted to have been created by this decision; the Court grounded its result on application of existing authority and on the specific facts (timing of suspension and notice, absence of reasons, and Ministerial correspondence), thereby affirming the Single Judge's reasoning without treating the matter as a novel point of law.

Note: This summary is confined strictly to the contents and statements contained in the provided opinion. No facts or legal propositions have been added beyond what appears in the opinion text.

Show full summary ...

    Indian Oil Corpn. Ltd. v. Dharam Chand Gupta

    Vijender Jain, A.C.J (Oral):— Aggrieved by the order passed by the learned Single Judge, the appellant has filed the present appeal. Mr. Chetan Sharma, learned counsel appearing for the appellant has contented that it is well settled that in contractual sphere where the action was taken in accordance with provisions of the mutually agreed stipulations, the Court in exercise of its jurisdiction under Article 226 of the Constitution of India should not interdict it with the action. It was contented before us that the learned Single Judge has not followed the dictum laid by the Supreme Court in M/s. Radhakrishna Agarwal v. State of Bihar (AIR 1977 SC 1496). It was also contended that in terms of Stockist Agreement between the parties and in terms of Clause 1.3 of the said agreement three months notice in writing was given to the respondent and the clause itself has inbuilt mechanism of principle of natural justice. Clause 1.3 of the Agreement is referred below :-

    “Termination and Agreement

    1.3 The agreement can be terminated by either party without assigning any reason and without liability to pay any compensation upon giving the other party three months notice in writing and upon expiry of the said notice the agreement shall stand automatically terminated and expire, but without prejudice to the rights of either party against the other in respect of any matter or thing or acts or omissions antecedent to such termination.”

    2. Our attention has also been drawn to the notice which is at page 107 of the paper book dated 19th May, 2003 sent to the respondent pursuant to Clause 1.3 of the Agreement. Mr. Chetan Sharma, learned senior counsel appearing for the appellant has also placed reliance on Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums., JT 2003 (6) SC 1 to support his argument that due to existence of arbitration clause in the Stockistship Agreement this court should not interfere by exercising its jurisdiction under Article 226 of the Constitution of India. Assailing the findings of the learned Single Judge, learned counsel for the appellant has contented that the learned Single Judge failed to notice that under the Lube Distributorship Agreement it was incumbent upon the appellant to give a show cause notice before terminating the Distributorship Agreement and, therefore, the same analogy of serving a show cause notice could not have been imported in the Stockistship Agreement where no such clause of serving a prior show cause notice before terminating the Distributorship Agreement exists. Mr Sharma also submitted that the appellant had duly complied with the said clause existing in Lube Distributorship Agreement before terminating the said agreement and since no such clause existed in the Stockist Agreement, therefore, no prior show cause notice was required to be served upon the respondent before terminating the Distributorship Agreement.

    3. On the other hand, learned counsel for the respondent has contended that if there is a manifest injustice or the principle of natural justice has been violated, the Writ Court is not without jurisdiction. Learned counsel has placed reliance on the judgment of Harbans Lal Sahnia v. Indian Oil Corpn. and Ors. 2003-(2)-SCC 107 and Bharat Filling Station v. Indian Oil Corporation 2003 (3) AD (Del) 394 wherein the Supreme Court held :-

    “23. Thus the Supreme Court held in the aforesaid cases that there may be circumstances where immediate action is required and in such cases pre-decisional natural justice may not be contemplated and purpose can be served by giving post-decisional hearing. However, going by the facts and circumstances it cannot be said that the alleged offence was so grave that it was necessary for the respondent No. 2 to dispense with the provisions of requirement of observance of show-cause notice before taking drastic action of terminating the dealership agency. Even if the respondent No. 2, in such circumstances, it was of the opinion that the kind of irregularity committed by the petitioner is serious, was not remediless and could have resorted to suspension of the dealership pending enquiry by serving show cause notice. However, the respondent No. 2, going by the allegations contained in First Information Report, took the impugned action thereby presuming that whatever is stated in the First Information Report or whatever is the Report of notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order.”

    4. Learned counsel for the respondent has further contended that the notice dated 19th May, 2003 was a mere camouflage as prior to this notice itself the appellant had already stopped the supplies on 9th May, 2003. Therefore, the argument advanced by the learned counsel for the respondent is that the notice dated 19th May, 2003 was sent merely to perpetuate its illegal action and was an empty formality on the part of appellant to camouflage its earlier action of suspending the supplies w.e.f 9th May, 2003.

    5. The present case is glaring example where the appellant has blatantly violated the principles of natural justice by suspending the supplies and that too without assigning any reason w.e.f 09-05-2003. The appellant attempted to legalise the said illegal action by sending a notice dated 19-05-2003. The learned Single Judge has correctly observed that fairness and non-arbitrariness are the hallmarks of equality and action of the appellant in suspending the supplies to the respondent is clearly arbitrary action and totally unfair. The powers of the High Court under Article 226 of the Constitution of India are very wide and the same are to be exercised to effectuate the regime of law and not to abrogate it. The Article 226 is couched in an comprehensive phraseology and it ex facie confers a very wide power on the High Courts to reach injustice wherever it is found. The present case is squarely covered with the dictum of law as laid down in M/s Raghunath Thakur (supra) relied upon by the learned Single Judge which spells out three contingencies where the High Court may exercise its jurisdiction in an appropriate case in spite of the availability of an alternative remedy and one of which is non-observance of principles of natural justice. A case of M/s Radha Krishna Agarwal v. State of Bihar AIR 1977 SC 1496 relied upon by the appellant is of no help as the said judgment has been duly discussed in the later judgment reported in Mahabir Auto Stores v. Indian Oil Corporation AIR 1990 SC 1031. The learned Single Judge has duly taken into consideration the exact import of the said judgment of M/s Radha Krishna Agarwal (supra). Another judgment which has been relied upon by the appellant is Hindustan Petroleum Corporation Ltd. (supra) but the facts of the said case are not applicable here as the Hon'ble Supreme Court of India has discussed the jurisdiction of the Civil Court to entertain a suit after reference of some dispute to the arbitrator pursuant to Arbitration Clause which is not the case here.

    6. We have given our careful consideration to the arguments advanced by learned counsel for both the parties. Going by the facts and circumstances of the case and after perusing the letter which is at page 130 of the paper book we are in agreement with the arguments advanced by learned counsel for the respondent. Letter dated 12th May, 2003 addressed to M/s. D.D Motors, copy of which was sent to M/s. Nav Bharat Trading Company clearly mentioned that due to unforeseen circumstances, the supplies of M/s. Nav Bharat Trading Company, SSA, Northwest Delhi, has been suspended effective from 9th May, 2003. No reason has been assigned for suspending the supplies to the respondent. The show cause notice on which much reliance has been placed by the appellant which is stated to be pursuant to Clause 1.3 of the Servo Stockists Auto Agreement is dated 19th May, 2003, that means when the notice dated 19th May, 2003 was given in terms of the said clause, supplies to the respondent have already been suspended. This clearly demonstrates that the notice which was sent by the appellant on 19th May, 2003 was merely a camouflage and device and the same cannot be considered to be a notice in terms of Clause 1.3 of the agreement nor the notice complied with the requirement of principle of natural justice. Another important feature which has been brought to our notice was that allegations were made against one Mr. Sanjay Gaur, SRSM (Lubes), who was harassing the respondent and was instrumental behind these illegal terminations of Dealership and Stockistship Agreements and in this regard, the respondent took the matter to the Government of India, Ministry of Petroleum and Natural Gas dated 17th May, 2004 to the following extent:-

    “No.P-19026/1/2004-Dist

    Government of India

    Ministry of Petroleum and Natural Gas

    ......

    Shastri Bhawan

    New Delhi, the 17th May, 2004

    The Director (Marketing)

    Indian Oil Corporation Limited,

    Mumbai

    Subject: Request from M/s. Nav Bharat Trading Co., New Delhi, for restoration of Stockist-ship for Servo Lube Oils.

    I am directed to refer to this Ministry letters of even No. dt. 20/2/2004, 26/3/2004 and 29/4/2004 and IOCL letters No. LS/Retail/15 dt. 17/3/2004, 5/4/2004, 3/5/2004 No.GM(RS)/19 dt. 30/4/2004 on the subject noted above.

    2. The matter has been considered in this Ministry. IOC is advised to restore the SSAship to M/s. Nav Bharat Trading Company and M/s Nav Nirman and keep them under watch for atleast one year and also stipulate that they should not make direct supplies to HMIL authorized dealers without prior intimation to IOC.

    Yours faithfully,

    (Tarun Shridhar)

    Director

    Tel. 2338 7404”

    7. In this letter, the Government of India directed the appellant to restore the SSAship to the respondent, but the bad luck of the respondent is that, in the meanwhile, the Government had changed, a new Minister came and he over turned the decision of the Ministry dated 17th May, 2004. All these circumstances go to show that the termination of the Stock Distributorship Agreement was not inconsonance either with the terms of the agreement or inconsonance with the principle of natural justice. We are conscious of the fact that the rule of exclusion of writ jurisdiction due to availability of an alternative remedy is a rule of discretion and not of compulsion. In an appropriate case, in spite of the availability of an alternative remedy in exercise of the writ jurisdiction in cases where there is a failure of principle of natural justice, the Court may issue an appropriate order or direction. We are, therefore, not impressed by any of the submissions made by the appellant. The order passed by the learned Single Judge is well reasoned order and the same does not require any interference in the present appeal. Therefore, there is no merit in the appeal. The same is hereby dismissed.

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    Indian Oil Corpn. Ltd. v. Dharam Chand Gupta
    (Aug 3, 2006)