KUMARI LEKSHMI.T.S. PROPRIETRIX v. THE INDIAN OIL CORPORATION

W.P.(C). NO.22607/2008-N: 5. UNION OF INDIA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, MINISTRY OF OIL AND NATURAL GAS, CENTRAL SECRETARIAT, NEW DELHI. R1 TO R4 BY ADVS. MR. SHAFFIQUE, S.C, MR. E.K.NANDAKUMAR, MR.A.K.JAYASANKAR NAMBIAR, MR.K.JOHN MATHAI, MR.P.BENNY THOMAS, MR.ANIL D. NAIR, MR.V.J.ANAND, R5 BY MR. P.PARAMESWARAN NAIR, ASST.S.G. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 07/04/2009,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C). NO.22607/2008-N: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: COPY OF THE AGREEMENT DTD. 19/04/96 EXECUTED BETWEEN THEPETITIONER AND THE R.1. INDIAN OIL CORPORATION.EXT.P.1.A: COPY OF THE RELEVANT PART OF THE LPG MARKETING DISCIPLINEGUIDELINES.EXT.P.2: COPY OF THE SUSPENSION ORDER DTD. 28/03/2008 ISSUED BY THE R.3.EXT.P.3: COPY OF THE REPRESENTATION DTD. 01/04/2008, ADDRESSED TO THEGENERAL MANAGER, I.O.C., KERALA STATE OFFICE, THE 2ND RESPONDENT, BY THEPETITIONER.EXT.P.4: COPY OF THE REPRESENTATION DTD. 01/04/2008, ADDRESSED TO THEGENERAL MANAGER, I.O.C. KERALA STATE OFFICE, THE 2ND RESPONDENT.EXT.P.5: COPY OF THE REPLY DTD. 17/06/2008 TO THE SHOW CAUSE BY THEPETITIONER.EXT.P.6: COPY OF THE DETAILED REPRESENTATION DTD. 01/07/2008 SENT BY THEPETITIONER TO THE DIRECTOR (MARKETING) THE 4TH RESPONDENT.EXT.P.7: COPY OF THE TERMINATION ORDER DTD. 11/07/2008 OF HERDISTRIBUTORSHIP ISSUED BY THE GENERAL MANAGER, I.O.C.EXT.P.8: COPY OF THE LETTER DTD. 16/04/2008 WRITTEN BY THE CHIEF AREAMANAGER, I.O.C. TO THE PETITIONER.EXT.P.9: COPY OF THE LETTER DTD. 13/05/2008.EXT.P.10: COPY OF THE REPLY DTD. 02/02/2006 IN RESPECT OF THE INSPECTION ON10/01/2006.EXT.P.11: COPY OF THE REPLY DTD. 30/11/2007 IN RESPECT OF THE INSPECTION ON14/11/2007.RESPONDENTS' EXHIBITS: EXT.R3.A: COPY OF THE COMMUNICATIONS DTD. 13/11/1996 ISSUED BY RESPONDENT.EXT.R3.B: COPY OF THE COMMUNICATIONS DTD. 17/12/1996 ISSUED BY RESPONDENT.EXT.R3.C: COPY OF THE COMMUNICATIONS DTD. 29/01/1997 ISSUED BY RESPONDENT. W.P.(C). NO.22607/2008-N: EXT.R3.D: COPY OF THE COMMUNICATIONS DTD. 02/09/1997 ISSUED BY RESPONDENT.EXT.R3.E: COPY OF THE COMMUNICATIONS DTD. 23/11/2006 ISSUED BY RESPONDENT.EXT.R3.F: COPY OF THE COMMUNICATIONS DTD. 21/06/2007 ISSUED BY RESPONDENT.EXT.R3.G: COPY OF THE LETTER DTD. 27/06/2001 ISSUED BY THE ADDL. DIRECTORGENERAL OF POLICE (PRISONS).EXT.R3.H: COPY OF THE REPLY DTD. 12/06/2001 ISSUED BY THE RESPONDENT TO THEDIRECTOR GENERAL OF POLICE (PRISONS).EXT.R3.I: COPY OF THE EXPLANATION DTD. 18/06/2001 TENDERED BY THE PETITIONERON THE SHOW CAUSE NOTICE ISSUED BY THE RESPONDENT ON THE COMPLAINTRECEIVED FROM THE CENTRAL PRISON.EXT.R3.J: COPY OF THE LETTER DTD. 24/06/05 ISSUED BY THE KERALA STATEPOLLUTION CONTROL BOARD.//TRUE COPY// P.S. TO JUDGE. Prv. V.GIRI----------------------------------------W.P.(C)No.22607 of 2008-----------------------------------------Dated this the 7th day of April, 2009.JUDGMENTThe petitioner, a Distributor of LPG Marketted bythe Indian Oil Corporation, is aggrieved by Ext.P7letter/proceedings issued by the respondent terminating thedistributorship. It is contended that the termination of thedistributorship is highly arbitrary and high handed and thesame requires to be set aside, followed by a direction to therespondents to restore the distributorship of LPG to thepetitioner along with all refill connections, cylinders,software etc.2. The petitioner has been running thedistributorship since 1996. Ext.P1 is the DistributorshipAgreement executed by her. In addition to Ext.P1agreement, reference is made to LPG Marketing DisciplineGuidelines (MDG-2001) regulating disciplinary proceedingsand action against a distributor. It is purported to be anindependent format providing for penal action and thepunishment that could be imposed on a distributor varying W.P.(C)No.22607 of 2008:: 2 ::from imposition of a fine to termination of the dealership.There are major offences varying from - forced sale of stoveetc., to newly enrolled customers - to not giving rebate onnon-home delivery excluding C & C within the area ofdistributor. Minor offences vary from unauthorised out ofturn delivery of refill by distributor's deliverymen excludingnormal bunching of bills for backing clearances as approvedby field officers/oil co office to -unauthorised out of turnrelease of additional cylinders. A third offence in the caseof major irregularities could be visited with the terminationof the dealership, whereas the 4th, repetition in the case ofminor offences would also result in termination ofdealership.3. Insofar as the petitioner is concerned, videExt.P2, noting certain irregularities which allegedly tookplace from 1996 onwards extending up to 2007, thepetitioner's dealership was suspended with effect from28.3.2008. Ext.P3 reply was given by the petitioner seeking W.P.(C)No.22607 of 2008:: 3 ::revocation of the suspension. It was not done. Ext.P4 showcause notice was then issued raising several specificallegations, many of them relatable to instances which havetaken place from 1996 to 2003. Ext.P5 reply was given bythe petitioner detailing the charges, followed by Ext.P6representation for the same purpose. Nevertheless, Ext.P7termination order was issued, terminating the petitioner'sdistributorship. Ext.P7 is challenged in this writ petition.4. A detailed counter affidavit has been filed bythe respondents and a reply affidavit has been filed by thepetitioner.5. I heard Mr.Gopakumaran Nair, learned SeniorCounsel for the petitioner and Mr.A.M.Shaffique, learnedSenior counsel appearing for the respondents.6. The respondents refer to Clause 37(a) of Ext.P1Distributorship Agreement which reads as follows:“Any dispute or difference of any naturewhatsoever any claim, cross-claim, counter-claim or set W.P.(C)No.22607 of 2008:: 4 ::off of the Corporation against the Distributor orregarding any right liability, act, omission on account ofany of the parties hereto arising out of or in relation tothis agreement shall be referred to the Sole Arbitrationof the Director (Marketing) of the Corporation or ofsome Officer of the Corporation who may be nominatedby the Director (Marketing). The Distributor will not beentitled to raise any objection to any such arbitrator onthe ground that the arbitrator is an Officer of theCorporation or that he has dealt with the matters towhich the contract relates or that in the course of hisduties as an Officer of the Corporation he hadexpressed views on all or any other matters in disputeor difference. In the event of the arbitrator to whomthe matter is originally referred being transferred orvacating his office or being unable to act for any reason,the Director (Marketing) as aforesaid at the time of suchtransfer, vacation of office or inability to act may in thediscretion of the Director (Marketing) designate anotherperson to act as arbitrator in accordance with the termsof the agreement to the end and intent that the originalArbitrator shall be entitled to continue the arbitrationproceeding notwithstanding his transfer or vacation ofoffice as an officer of the Corporation if the Director(Marketing) does not designate another person to act asarbitrator on such transfer, vacation of office orinability of original arbitrator. Such persons shall be W.P.(C)No.22607 of 2008:: 5 ::entitled to proceed with the reference from the pointat which it was left by his predecessor. It is also a termof this contract that no person other than the Director(Marketing) or a person nominated by such Director(Marketing) of the Corporation as aforesaid shall act asarbitrator hereunder. The award of the arbitrator soappointed shall be final, conclusive and binding on allparties to the agreement subject to the provisions ofthe Arbitration Act, 1940 or any statutory notificationor re-enactment thereof and the rules made thereunderfor the time being in force shall apply to the arbitrationproceedings under this clause.”7. It is contended that, as could be seen from theoperative portion of Ext.P7, the termination of thedealership has taken place under the DistributorshipAgreement, read with certain clauses dealing with majorirregularities as per the Marketing Discipline Guidelines. It iscontended that therefore, if the termination of thedistributorship is not accepted by the dealer, there arises adispute therefrom and the same is comprehended by Clause37(a) of the Distributorship Agreement. W.P.(C)No.22607 of 2008:: 6 ::8. Mr.Gopakumaran Nair, learned Senior Counselsubmits that Clause 37(a) of the Distributorship Agreementdoes not apply to the present case since the main allegationsrelate to contraventions which are listed as major or minorirregularities in the LPG Distribution Guidelines, Ext.P1(a).Ext.P1(a) does not contain an arbitration clause. Therefore,infraction of Ext.P1(a) cannot be arbitrated upon, it iscontended.9. The jural relationship between the petitioneron one hand and the respondents herein on the other, wasbrought into existence by the execution of Ext.P1agreement. There is principal-agent relationship broughtinto vogue by reason of the agreement. Several disputescould arise therefrom and all such disputes arecomprehended by the Distributorship Agreement.Termination of the agreement is by resort to the followingclauses under Ext.P1 agreement. W.P.(C)No.22607 of 2008:: 7 ::“1(b)(iv), 5. 7, 9, 11, 18(a), 18(b), NoWarranty Clause (a) (b), 23(a) 23(A), 25(a),27(a), 27(g), 27(h), 27(k) and 27(n) of theIndane (Liquefied Petroleum Gas)Distributorship (Domestic & Commercial)agreement dated 19.04.1996, clauses ofMDG 2001 Major: 1, 3, 7, 11, 12 & 13 andMinor: 2, 4, 5, 9 & 12”10. Clause 27 of the Distributorship Agreementrefers to the liberty of the Corporation to terminate theagreement forthwith or at any time after the happening ofany of the events, which are listed under sub-clauses (a) to(n) of Clause 27 of the agreement. It is further made clearthat the right to terminate the agreement is withoutprejudice or without affecting other rights of thecorporation. It is possible that the Distributor may take up acontention that the action taken by the Corporation is notauthorised by the agreement. But this will give rise to adispute as comprehended by Clause 37(a) of theDistributorship Agreement, which amounts to an arbitration W.P.(C)No.22607 of 2008:: 8 ::agreement within the meaning of Arbitration andConciliation act, 1996. The Marketing Discipline GuidelinesExt.P1, no doubt, do not specifically provide for anarbitration. But, in my view, it does not really make anydifference as the jural relationship between the parties isgoverned by the distributorship agreement. The marketingdiscipline guidelines seems to be intended to lay downcertain specific punishments for irregularities. This is takinginto account the large number of distributorships ordealerships prevailing in the country and the frequency withwhich public sector undertakings like the respondent willhave to encounter cases like the present one. Rather thaneach case being adjudicated upon and visited with penaltythat could range from censure to termination, thecorporation is competent to specify the irregularity andpunishment. Termination is one of the penalties that couldbe imposed under the marketing discipline guidelines. W.P.(C)No.22607 of 2008:: 9 ::11. In the circumstances, the termination orderneed not be subject to judicial review under Article 226 ofthe Constitution, since the same is also comprehended byClause 37(a) of Ext.P1. 12. I am of the further view that Ext.P1(a) mustnecessarily be read in conjunction with the clauses in Ext.P1.Ext.P1(a) are guidelines of a general nature and that byitself does not result in the creation of any jural relationshipbetween the parties. It has no independent existencecapable of regulating rights of the parties. There could onlybe instances of contravention of Ext.P1(a) at the instance ofthe Corporation. That would also be comprehended by thearbitration clause contained in Clause 37(a). Otherwise, thedistributor would not have a ready remedy, if there is acontravention of the MDG by the company.13. I am, therefore, in agreement with thesubmission made by the learned counsel for the respondentsthat there is an efficacious remedy available to the W.P.(C)No.22607 of 2008:: 10 ::petitioner by way of arbitration proceedings. I am also inagreement with the contention of the learned counsel forthe respondents that the issues raised in the writ petitionstems from a contractual relationship and can, therefore, beeffectively adjudicated only before a forum that can permitadduction of evidence and adjudicate the disputed questionsof facts.14. Mr.Gopakumaran Nair, learned senior counselhas taken me through the allegations in Exts.P2, P4 and hisreply in Ext.P5 and the ultimate findings. He contends thatthe allegations are of a minor nature and ought not to havebeen visited with an order of termination of distributorship. 15. Mr.Shaffique refutes the same and points outthat earlier instances of relatively minor abberrations havebeen taken note of and referred only to show that Ext.P7was not a hurried action, but a culmination of severalinstances of warning, verification and supervision that havetaken place over the years. W.P.(C)No.22607 of 2008:: 11 ::16. I refrain from entering into an adjudicationof these disputed questions of facts, firstly becauseproceedings under Article 226 of the Constitution are not theappropriate forum, and secondly because any expression ofopinion by me on these disputed facts could prejudice theinterests of either parties, if arbitration proceedings areinitiated.For all these reasons, the writ petition isdisposed of holding that it is open to the petitioner to invokeClause 37(a) of Ext.P1, both in relation to the termination ofthe distributorship and for any other related ancillary claimagainst the respondents. Sd (V.GIRI) JUDGEsk/-//true copy//