M/S Silchar Indane Service and 2 Others Vs Indian Oil Corporation Limited and 5 Ors.

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GAHC010221212025

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2025:GAU-AS:15441

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THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

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Case No. : WP(C)/5818/2025

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M/S SILCHAR INDANE SERVICE AND 2 OTHERS

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TRUNK ROAD, SILCHAR SPORTING COMPLEX, SILCHAR, DIST- CACHAR, ASSAM, REPRESENTED BY PETITIONER NO. 2 AND 3 AS ITS PARTNERS.

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2: LIPI RANI PAUL D/O.- LATE AMAR CH. PAUL PARTNER OF SILCHAR INDANE SERVICE R/O UTTAR KRISHNAPUR PT-I SILCHAR P.O. UTTAR KRISHNAPUR DIST- CACHAR ASSAM-788006.

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3: MARIAM BIBI CHOUDHURY W/O ZARJIZ ALOM CHOUDHURY PARTNER OF SILCHAR INDANE SERVICE R/O UTTAR KRISHNAPUR PT-I SILCHAR P.O. UTTAR KRISHNAPUR DIST- CACHAR ASSAM PIN-788006

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VERSUS

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INDIAN OIL CORPORATION LIMITED AND 5 ORS REPREENTED BY ITS CHAIRMAN, INDIAN OIL BHAVAN, G-9, ALI YAVAR JUNG MARG, MUMBAI EAST, MUMBAI, 400051, MAHARASHTRA

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2:DIRECTOR AND STATE HEAD INDIAN OIL AOD STATE OFFICE INDIAN OIL BHAVAN SECTOR-III NOONMATI GUWAHATI-20 ASSAM

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3:THE CHIEF GENERAL MANAGER (LPG) INDIAN OIL BHAVAN

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SECTOR-III NOONMATI GUWAHATI-20 ASSAM

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4:THE DEPUTY GENERAL MANAGER (VIGILANCE) INDIAN OIL CORPORATION LTD. IOAOD STATE OFFICE INDIAN OIL BHAVAN SECTOR-III NOONMATI GUWAHATI-20 ASSAM

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5:THE DIVISIONAL LPG HEAD INDIANE D.O. SILCHAR 1ST FLOOR JAGANNATH APARTMENT HOSPITAL ROAD SILCHAR PIN-788005 ASSAM

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6:THE ASSISTANT MANAGER (LPG-S) SILCHAR-II LSA INDIAN OIL CORPORATION LIMITED INDANE DIVISIONAL OFFICE 1ST FLOOR JAGANNATH APARTMENT HOSPITAL ROAD SILCHAR-788005 ASSAM

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BEFORE

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HON’BLE MR. JUSTICE RAJESH MAZUMDAR

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Advocate for the petitioner(s) : Mr. P.K Roychoudhury Advocate for the respondent(s): Mr. M. Sharma,

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SC, IOCL

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Date of Hearing : 06.11.2025 Date of Judgment : 13.11.2025

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JUDGMENT & ORDER (CAV)

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(Rajesh Mazumdar, J.)

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On the 24^th of October 2025, this Court had extensively heard Mr. P K Roy Choudhury, learned counsel appearing for the petitioners and Mr. M. Sharma, learned Standing counsel appearing for the Indian Oil Corporation and its instrumentalities. The hearing has been concluded on the 6^th of November 2025. The learned counsel for the contesting parties have submitted their written arguments. The judgment, which was reserved on the said date, is delivered today.

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Contentions raised in the petition:

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2. By this petition under Article 226 of the Constitution of India, the petitioners are assailing the impugned order dated 22^nd of September 2025, which was issued by the respondent No. 2, and whereby the LPG distributorship of the petitioner No.1 was terminated alleging breach of conditions of the Letter of Intent issued by the respondents on 27.06.2011, as well as violations of the provisions of the Distributor agreement dated 18^th of October 2012 and the subsequent agreement dated 21^st of November 2023.

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3. The petitioner number 2 had applied for distributorship for sale of Liquid Petroleum Gas (hereinafter, referred to as ‘LPG’) to be supplied for household consumers and commercial consumers in Silchar Town. She was accordingly issued a Letter of Intent on 27^th of June 2011 by the Respondent-Company and as she fulfilled all the terms and conditions, the petitioner No. 2 started preparations as required under the said letter of intent. Facing some financial difficulty, the petitioner No. 2 executed a power of attorney in favor of Zarzis Alam Choudhury and another Gautam Kumar Kaunda on 19.01.2012, authorizing them to manage, control, supervise and administer the proprietorship firm which was then named as M/s Silchar Indane Service. The petitioner No. 2 realized that one of the conditions laid down in the Letter of Intent was

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that she could not allow any other entity to manage the business of distributorship of LPG and therefore, she revoked the power of attorney executed on the 19^th of January 2012 by a revocation deed notarized on 8^th of October 2012. Having fulfilled all the norms as required by the letter of intent, an agreement was executed between the Indian Oil Corporation Limited through its authorized signatory and the petitioner No. 2 acting on behalf of the proprietorship firm on 18.10.2012 and the distributorship was commissioned on 19^th of October 2012.

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4. The petition further states that the petitioner No. 2 and petitioner No. 3 entered into a partnership agreement by a partnership Deed executed on 21^st of September 2023 to carry on the business of the LPG dealership and financial management as well as administrative management The respective shares of the partners in the profit and loss were recorded to be 51% and 49% respectively for the petitioner No. 2 and petitioner No. 3. The intention of reconstituting of the proprietorship firm into a partnership firm was given to the respondent authorities by a communication dated 9^th of March, 2023 and after creation of the partnership firm, the respondent No. 4 approved the reconstitution of M/s Silchar Indane Service to a partnership firm from a proprietorship firm. A fresh agreement was entered into on 21^st of November, 2023 by the petitioner Nos. 2 and 3, (acting as partners of petitioner No. 1), and the Indian Oil Corporation Limited represented by its authorized representative.

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5. The respondent IOCL received a complaint given by Gautam Kumar Kaunda, the erstwhile power of attorney holder of the petitioner No. 2, informing the IOCL that the distributorship was being run, managed and administered by Zarjis Alam Choudhury and Gautam Kumar Kaunda from beginning till date. The complaint further alleged that the petitioner No. 2 had entered into a partnership with the wife of Zarjis Alam Choudhury depriving the complainant, i.e. Gautam Kumar Kaunda, from the partnership

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without his consent.

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6. On receipt of the complaint, the Indian Oil Corporation issued a letter to petitioner Nos. 2 and 3 seeking confirmation as to whether an agreement had been signed by the original letter of intent holder that is the petitioner number one with Gautum Kumar Kaunda and Zarzis Alam Choudhury. The Petitioner No. 2, thereafter, replied to the said letter stating that the deed of agreement referred to in the complaint lodged by Gautam Kumar Kaunda was a fake, false and fabricated document. She, however, admitted that a general power of attorney has been executed but also informed that the same had been revoked by a deed of revocation notarized on 08.10.2012. She had further stated that the general power of attorney was also revoked before the SubRegistrar at Silchar on 23^rd of February 2023.

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7. After receipt of the aforesaid reply, the respondent authority issued a show-cause notice for termination of distributorship agreement with M/s Silchar Indane Service, which was communicated on 24.07.2025. A reply was filed on behalf of the petitioner firm on 1^st of August 2025. When respondents stopped the supply of cylinders as well as regulators to the petitioner-firm, the firm and its partners instituted WP(C) No. 5122 of 2025, which was disposed of by the order dated 10^th of September, 2025, directing the respondent authorities to communicate the decision taken in respect of the show cause proceedings within a period of 15 (fifteen) days from the date of the order. It was further directed that, in the eventuality such a decision was not communicated, the respondents were to abide by the terms and conditions of the Memorandum of Agreement dated 23.11.2023. This Court had specifically refrained from commenting on the legality or the validity of the show cause proceeding.

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8. Subsequent to the aforesaid proceedings, by a letter dated 22^nd of September 2025, which is the bone of contention in the present repetition, the Executive Director

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and State Head of the Indian Oil Assam Oil Division State Office informed petitioners that their distributorship stood terminated for violating the provisions of clause No. 3.3 and 3.4 of the letter of intent issued by the IOCL on 27.06.2011 and also for violation provisions of clause 21, 23 (b), 23(c) and 27 of the two distributorship agreements dated 18.10.2012 and 21.11.2023 with the IOCL. The petitioners were requested to hand over all equipments, which were property of the Corporation.

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9. Aggrieved by the termination of the distributorship, this writ petition has been filed praying for setting aside of the termination order dated 22^nd of September, 2025 and to allow the petitioners to continue carry on the business of LPG distributorship.

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SUBMISSIONS MADE ON BEHALF OF THE PETITIONERS

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10. Mr. P.K Roychoudhury, learned counsel appearing for the petitioners has submitted that the respondent authorities had terminated the agreement of dealership with the petitioners without affording the petitioners an opportunity of personal hearing. Assailing such a termination to be in violation of the principles of natural justice and also in violation of the provisions of the Marketing Guideline Disciplines, 2022, more

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specifically, the provisions of clause 3.9, which came into force on the 1^st of May 2022, the learned counsel submits that even though the same provided for a personal hearing to the signatories to the distributorship agreement, the petitioner-firm admittedly, was not afforded a personal hearing before the termination of the distributorship. He submits the impugned order of termination deserves an interference on that ground alone. Taking his arguments further, the learned counsel submits that in the entire period from 2012 to 2025, there has been no allegations against the petitioner-firm, either when it was a proprietorship firm or when it was functioning as a partnership firm, regarding the same being managed by any person other than the ones who had entered into agreements with the Corporation. He has submitted that the allegations of the firm being run on a “benami” basis is wholly uncalled for, since there were no allegations from any front in

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the last 13 years. He has further submitted that on the day, when the petitioner No. 2 had executed the power of attorney in favour of the complainant, there was no agreement existing between the respondent and the petitioners and in fact, on 18.10.2012, when the agreement for dealership was executed, the power of attorney had already been revoked by the petitioner. He has submitted that as on the date of commissioning of the dealership and during the subsistence of the dealership, there was no power of attorney in existence and, therefore, the allegation of violation of the provisions of Clause 3.3, 3.4 of the letter of intent is not sustainable. He has further submitted that none of the conditions enumerated in the two agreements entered into with the Corporation were violated, since there is no allegation that any power of attorney or delegation of authority had taken place after the agreements had been entered into. He has further submitted that assuming any provisions of the initial letter of intent had been violated prior to entering into the agreements, the penalty of termination of distributorship, which is also the source of bread and butter for 55 (fifty-five) numbers of employees, is too harsh a penalty and which would also shock the conscience of the Court. The learned counsel has stated that motive of the respondents in terminating the dealership is evident from the fact that though the respondents had relied upon a so-called “on field investigation’’ not only to level the allegations but later to hold such allegations to be proved on the basis of such investigation, the petitioners were not given access to such investigation, if any, was actually done. He has submitted that both actions of the respondents, first while not allowing the petitioners to participate in the alleged “field investigations” and second, by depriving them of a copy of the investigation report, have violated the principles of natural justice and even in such view of the matter, the impugned termination of distributorship agreement deserves the interference of this Court.

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11. The learned counsel has placed reliance on the following judgments of the Apex Court to buttress his submissions.

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I. Brig. L I Singh YSM - vs- Union of India and Others, reported in (2021) 13 SCC 272 , on the point of effect of non supply of investigation report.

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II. Om Kumar -vs- Union of India and Others , reported in (2001) 2 SCC 386 , on the principle of proportionality.

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III. State of MP -vs- Munna Choubey and Another , reported in (2005) 2 SCC 710 , on the principle of proportionality.

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SUBMISSIONS ON BEHALF OF THE RESPONDENTS:

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12. Mr. M. Sharma, learned counsel, appearing for the respondents have vehemently opposed the submissions made on behalf of the petitioners. The learned counsel has submitted that the fact remains that the petitioner No. 2 had executed a power of attorney in favor of third parties after having received the Letter of Intent and despite having knowledge that creation of such third party rights was prohibited by the terms of the letter of intent itself. He has submitted that even when the first agreement was entered into in the year 2012 and the second agreement was entered into in the year 2024, the petitioners had kept the respondent authorities in the dark and had deliberately hidden the fact that a power of attorney had been executed and that the same had also been revoked. He submits that therefore, on both the occasions, the execution of the agreements by the IOCL were based on fraud and misrepresentation of the petitioners. The learned counsel had submitted that the petitioner No. 2 has admitted that she had executed a power of attorney with regard to the dealership even before the dealership was commissioned and, therefore, there is a clear admission of violation of the provisions of the letter of intent offered to her. He has submitted that the termination of the agreement was not based on violation of any clause of the MDG, 2022, since the MDG 2022 does not preclude any action under the Distributorship Agreement. He has submitted that even if it is assumed that the MDG, 2022 provided for a personal hearing to be afforded before termination of agreements, in the case of the petitioners, affording

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such opportunity would be an empty formality in light of the admission made by the petitioner No. 2, regarding violation of the provisions of the letter of intent. He has submitted that in the event the respondents had been made aware of the fact of execution of a power of attorney before the agreements had been entered into, there was every possibility that the respondents might have and could have opted out of entering into an agreement with the petitioner No. 2 in the year 2012 itself. He has referred to the provisions of Section 19 of the Indian Contracts Act, 1872, to submit that when consent to an agreement is obtained by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so obtained. In the present case, he has submitted that the consent being obtained by suppression of facts, the agreement was voidable at the option of the Corporation.

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The learned counsel has relied upon the following citations to buttress his submissions:

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I. Indian Oil Corporation Ltd. -vs- T. Natarajan , reported in (2018) 9 SCC 235 , on the point that the High Court cannot interfere in administrative action of IOC, nor can it substitute its decision by acting as an appellate court.

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II. Chairman, Board of Mining Examination and Chief Inspector of Mines and Another -vs- Ramjee, reported in (1977) 2 SCC 256 , on the point that if fairness is shown by the decision maker, no breach of natural justice can be complained of.

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CONCLUSIONS:

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13. The submissions made on behalf of the parties have been considered and the citations referred to have also been perused.

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14. The undisputed facts in the present case are that the respondent-Corporation had issued a letter of intent to the petitioner No. 2, expressing intention to allot a dealership

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to her on her fulfilling certain conditions. One of the conditions, at clause 3.3 and 3.4 was that the petitioner No. 2 would have to operate the distributorship personally and that she would not induct any partner without approval of the Corporation. The petitioner had executed a registered power of attorney in favour of two persons on 19.01.2012 and revoked the same on 08.10.2012 through a notarized deed. The agreement for the dealership was entered into on 18.10.2012 and the dealership was commissioned on 19.10.2012. The petitioner No. 2 informed the respondents about her intention to convert the proprietorship firm into a partnership firm by inducting a partner and the said arrangement was approved by the respondents on 21.11.2023. A new agreement was executed between the partnership firm and the IOCL on 21.11.2023 itself. On the basis of a complaint made by one of the erstwhile power of attorney holders, the IOCL terminated the dealership agreement after issuing a show cause reply and then, after issuing another notice and receiving a reply, however, without giving an opportunity of hearing.

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15. This Court has noticed that the petitioner no 2 had executed a general power of attorney soon after being offered the letter of intent and the same was also withdrawn even before the first agreement in the year 2012 was entered into between the petitioner No. 2 and the IOCL. The provision, violation of which has been alleged, made it incumbent upon the prospective allottee to ensure that no other person/entity should be allowed to participate in the proposed dealership business. It is not alleged either in the first show cause notice or in the later memorandum that the petitioner No. 2 had allowed any other person to wield the authority vested in a dealer at any point of time prior to the receipt of the complaint. This Court finds force in the submission made on behalf of the petitioners that the dealership, at that time existing as a partnership firm with due approval of the IOCL, had suffered in their defence when they were not given an opportunity to participate in the alleged field enquiry. It may be true that the field enquiry may have the contours of a “preliminary enquiry’ where the participation of the

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petitioners may not be mandatory, but it is also true that when the respondent depended on the said enquiry report to act to the detriment of the petitioner firm, it was incumbent upon the respondents to have supplied a copy of the enquiry report on the petitioners before they were required to answer allegations levelled on the basis of the enquiry report.

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16. This Court further finds that the respondents have not relied upon or referred to any documentary evidence or oral statements to presume that the firm, when it existed as a proprietorship firm, had carried on a ‘benami” business. In the absence of any such reference, this Court is of the considered opinion that such a conclusion, at best, is the result of presumption, which cannot be the basis of determining the dealership agreement in the manner done.

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17. This Court also finds force in the submission made for the petitioners that even if it is assumed that there was an initial error committed on the part of the petitioner No. 2 in executing a power of attorney before being allotted the dealership, it cannot be ignored that the she had rescinded such a grant of power of attorney even before the agreement was entered into. The respondents, either in the impugned order or in the present proceedings, have not divulged as to how the alleged violation of terms of the letter of intent in executing a power of attorney and withdrawing the same before entering into the agreement with the IOCL could have been material enough to justify the cancellation of the dealership agreement. There is no imputation of violation of any terms of the agreement entered into by the IOCL with the partnership firm. The reason given by the respondents to terminate the agreement is that the factum of execution and withdrawal of the power of attorney was not divulged prior to signing of the agreement in the year 2012 and such non-disclosure did not allow the IOCL to exercise its discretion in the year 2012 itself, as to whether or not to proceed with the dealership proposal. The question that deserves to be answered is whether the respondents are justified in terminating the agreement without considering the subsequent events and

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facts, such as that there has been no occasion brought on record regarding the past 13 years of the dealership, which required the respondents to re-consider the continuance of the dealership. The respondents contend that the original agreement was voidable at their discretion. While it may be so, exercise of such discretion has to be based upon objective criteria and on the basis of due consideration of all relevant aspects. The object of the provision 3.3 of the letter of intent is to ensure that the distributorship is operated by the person intended and it is reflected in the impugned order itself that the petitioner No. 2 had not authorized any third party to operate the bank accounts.

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18. This Court has noticed that clause 3.3 had prohibited induction of partners in case of a proprietorship firm. The petitioner no 2 did not induct partners but had executed a power of attorney, which according to her, upon her realising that it may jeopardize the proposal, was also withdrawn before the agreement was entered into. There are no other allegations against the firm. The IOCL has relied upon suppression of material information. Suppression of ‘material’ information presupposes that what is suppressed that ‘matters’ not every technical or trivial matter. Though a person who has suppressed the material information cannot claim unfettered right to be condoned or pardoned but he has a right not to be dealt with arbitrarily. Exercise of power has to be in a reasonable manner with objectivity, having due regard to facts of cases. While dealing with matters regarding cancellation of candidatures on the basis of "suppression of material facts’’, the Apex in the case of Avtar Singh -vs- Union of India and Others , reported in (2016) 8 SCC 471, has held that if information not asked for but is relevant, comes to knowledge of the employer, the same can be considered in an objective manner while addressing the question of fitness of a candidate to continue in employment. In the present case, the objective evaluation of the case of the petitioner is not decipherable in the impugned order dated 22.09.2025.

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19. In view of the observations made herein above, the impugned order dated 22.09.2025 which caused termination of M/s Silchar Indane Service (SAP-259218) is

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interfered with and set aside and quashed. In the event the respondents are of the opinion that the act of executing of a power of attorney by the petitioner No. 2 in the year 2012, deserves further action/consideration, the respondent IOCL shall be at liberty to take an objective evaluation of the facts involved and take an appropriate decision as to whether the act complained of can be condoned and/or whether it requires any action to the detriment of the firm. However, such resort shall be only after following the due procedure of law.

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20. One aspect of the matter needs mention. While perusing the records, it has come to the notice of this Court that the agreements entered into by the contesting parties contained an “arbitration clause”. None of the parties had referred to it. This Court has, therefore, proceeded to decide the contentions raised on merit. It is true that where the contract itself provides an effective alternative remedy by way of reference to arbitration, it is ordinarily a good ground for declining to exercise the extra-ordinary and discretionary jurisdiction under Article 226 of the Constitution of India. It has been held in Ram Barai Singh and Company -vs- State of Bihar and Others , reported in (2015) 13 SCC 592 , that a constitutional remedy by way of writ petition is always available to an aggrieved party and an arbitration clause in an agreement between the parties cannot ipso facto render a writ petition not maintainable. It has been observed to the effect that availability of alternative remedy is definitely a permissible ground for refusal by a writ court to exercise its jurisdiction in appropriate cases. But once the respondent had not objected to entertainment of the writ petition on the ground of availability of alternative remedy, the final judgment rendered on merits is not to be faulted with. It is for the writ court to consider whether in an appropriate case, the writ petitioner should be relegated to avail alternative remedy or not. But once the writ petition is heard at length and decided against one or the other party on merits, such a decision/order cannot be held to be bad in law only on the ground that the writ petition was not maintainable due to availability of alternative remedy. In Maharashtra Chess Association -vs- Union of

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India and Others, reported in (2020) 13 SCC 285 , it has been observed that mere existence of alternate forums where the aggrieved party may secure relief does not create a legal bar on a High Court to exercise its writ jurisdiction. (M/s. M.K. Dhiroomal Associates JV, a Joint Venture of M/s M.K. Engineering and M/s Shiroomal and Sons Pvt. Ltd. -Versus- Union of India, reported in 2023 (7) GLT 267 )

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21. In the earlier round of litigation between the parties, the respondents were required to abide by the terms and conditions of Memorandum of Agreement dated 23.11.2023 and in the present round, the operation of the termination order was stayed. The respondents are now also directed to abide by the terms and conditions of the Memorandum of Agreement dated 23.11.2023.

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22. Writ petition is accordingly allowed to the extent indicated above. No costs.

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JUDGE

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Comparing Assistant

M/S Silchar Indane Service and 2 Others v. Indian Oil Corporation Limited and 5 Ors.

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M/S Silchar Indane Service and 2 Others v. Indian Oil Corporation Limited and 5 Ors.

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