Partly allowed

Key Systems, v. the Chief General Manager

Kerala HC10 Sept 2021WP(C)/16010/2021

Case brief

AI extract

What is this about?

This writ petition challenged the termination of two franchise territories by BSNL due to the managing partner running businesses in four territories. The court upheld the policy but clarified that the petitioner retains the right to operate in one territory.

What did the court decide?

The franchisee-ship is confirmed in one territory if the petitioner exercises the option within three days; the decision to terminate the second territory is upheld.

Key Systems, Vs the Chief General Manager — Contract and Commercial Disputes | Kerala HC (2021)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR

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FRIDAY, THE 10^TH DAY OF SEPTEMBER 2021 / 19TH BHADRA, 1943

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WP(C) NO. 16010 OF 2021

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PETITIONERS:

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1 M/S KEY SYSTEMS, REPRESENTED BY ITS MANAGING PARTNER, NIKHIL JOSEPH, 1ST FLOOR, MADEENA COMPLEX, ALAPPUZHA-688 013.

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2 K.C.JOSEPH, CHOOLAYIL HOUSE, AVALOOKUNNU P.O., PUNNAMADA, ALAPPUZHA, PIN-688 006.

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BY ADVS. ABRAHAM VAKKANAL (SR.) PAUL ABRAHAM VAKKANAL VINEETHA SUSAN THOMAS ROHITH C.

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RESPONDENTS:

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1 THE CHIEF GENERAL MANAGER, BHARAT SANCHAR NIGAM LTD., O/O. THE CHIEF GENERAL MANAGER, BSNL, KERALA CIRCLE, DOOR SANCHAR BHAWAN, PMG JUNCTION, THIRUVANANTHAPURAM-695033.

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2 THE PRINCIPAL GENERAL MANAGER (S&M-CM), BHARAT SANCHAR NIGAM LTD., O/O. THE CHIEF GENERAL MANAGER, BSNL, KERALA CIRCLE, DOOR SANCHAR BHAWAN, PMG JUNCTION, THIRUVANANTHAPURAM-695033.

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3 THE DEPUTY GENERAL MANAGER (S&M -CM), BHARAT SANCHAR NIGAM LTD., O/O. THE CHIEF GENERAL MANAGER, BSNL, KERALA CIRCLE, DOOR SANCHAR BHAWAN, PMG JUNCTION, THIRUVANANTHAPURAM-695033.

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4 THE PRINCIPAL GENERAL MANAGER, BHARAT SANCHAR NIGAM LTD., BSNL BHAVAN,

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W.P.(C) No.16010 of 2021

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KALATHIPARAMBIL ROAD, ERNAKULAM, KOCHI-682016.

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5 THE GENERAL MANAGER, BHARAT SANCHAR NIGAM LTD., O/O. THE GENERAL MANAGER TELECOM, THIRUVALLA, PATHANAMTHITTA TELECOM DISTRICT, SH 1, THIRUVALLA, KERALA689101.

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ADV PREMJIT NAGENDRAN

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SRI.MATHEWS K PHILIP SC

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.P.(C) No.16010 of 2021

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P.B.SURESH KUMAR, J.

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W.P.(C) No.16010 of 2021

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Dated this the 10^th day of September, 2021.

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J U D G M E N T

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The first petitioner is a partnership firm doing

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business as the franchisee of Bharat Sanchar Nigam Limited(BSNL) in its two business territories namely Vyttila in Ernakulam District and Thiruvalla in Pathanamthitta District. The second petitioner was the Managing Partner of the first petitioner firm. A proprietary concern run by the second petitioner namely Mega Trading Corporation is also conducting business as the franchisee of BSNL in one business territory of BSNL. Similarly, a company namely, Key Systems India Private ltd., of which the second petitioner is a director, is doing business as a franchisee of BSNL in yet another business

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W.P.(C) No.16010 of 2021

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territory of BSNL. Ext.P5 is the Sales and Distribution Policy of BSNL published in the year 2018 and the said policy is still in force. In Ext.P5, it is provided that the number of territories permissible for a franchisee in a circle shall be restricted normally to three. On 09.07.2021, the second petitioner was issued Ext.P7 communication by the third respondent stating that he is running business as franchisee of BSNL in four territories; that he is not entitled to run business in more than three territories in the light of the 2018 policy and that he should therefore forego the business in one of the four territories. In terms of the said communication, the third respondent directed the second petitioner to exercise his option to continue business in three among the four territories. Ext.P8 is the reply sent by the second petitioner to Ext.P7 communication. The stand taken by the second petitioner in Ext.P8 reply is that the first petitioner firm has been reconstituted with effect from 30.6.2021 and he is no longer a partner of the first petitioner firm. In other words, according to the second petitioner, he is running business as

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W.P.(C) No.16010 of 2021

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franchisee of BSNL only in two territories. The stand aforesaid of the second petitioner was not accepted by BSNL. Consequently, the second respondent issued Ext.P11 communication terminating the franchisee-ship of the first petitioner firm in both the territories where they were doing business. Ext.P11 communication is under challenge in the writ petition.

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A statement has been filed by BSNL reiterating the stand of the third respondent in Ext.P7 communication that one person cannot run business as franchisee of BSNL in more than three territories. In addition, it is stated in the statement that the reconstitution of the first petitioner is contrary to the specific provision in the franchisee-ship agreement entered into by the first petitioner with BSNL which precludes the franchisees from changing their constitution without previous approval of BSNL.

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Heard the learned Senior Counsel for the petitioner as also the learned Standing Counsel for the BSNL.

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The learned Senior Counsel for the petitioner

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argued, placing reliance on Ext.P9 Deed of Reconstitution of the first petitioner firm that the second petitioner is no longer a partner of the first petitioner firm. Alternatively, it was argued by the learned Senior Counsel that the provision in the 2018 policy relied on by the BSNL to terminate the franchisee-ship of the first petitioner does not apply to franchisee-ships which are migrated to 2018 policy and the same is only a provision restraining grant of franchisee-ships through Expression of Interest (EoI) in terms of 2018 policy. Alternatively, it was also argued by the learned Senior Counsel that even assuming that the second petitioner is a partner of the first petitioner firm and that the provision in the 2018 policy relied on applies to the franchisee-ships which are migrated to 2018 policy as well, BSNL is not justified in terminating the franchisee-ship of the first petitioner, for the first petitioner and the Company of which the second petitioner is a Director are separate entities and the business run by them in their legal capacity cannot be considered as business run by the second petitioner himself.

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The learned Senior Counsel has attempted to reinforce the said argument pointing out that even going by the 2018 policy, for the purpose of granting franchisee-ship on EoI basis, what is taken note of is only the experience of partnership firm or company, as the case may be, and not the experience of the individual partners of the firm or the Directors of the company.

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Ext.P14 is the franchisee-ship agreement stated

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to have been executed by the first petitioner with BSNL on 30.06.2021. Admittedly, the said document is one signed by the second petitioner as the authorised representative of the first petitioner firm for doing business in the territory Thiruvalla in Pathanamthitta District. According to the petitioners, the reconstitution of the first petitioner firm was made later on the same day. Clause 27.1 of Ext.P14 reads thus :

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“27.1 In the event of the death or retirement of any director or change of shareholders of the Franchisee the appointment of a replacement or the transfer to another shareholder shall be subject to the prior approval of BSNL which shall not be unreasonably withheld and such replacement or transferee shall enter into each agreement

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to abide by the terms and conditions of this agreement as may be required by BSNL. However the decision of BSNL shall be final in this regard.”

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Going by the extracted provision in the agreement, reconstitution of a franchisee firm is possible only with the prior approval of BSNL. The petitioners do not have a case that the reconstitution of the first petitioner firm was made with the prior approval of BSNL. In other words, BSNL cannot be found fault with for having treated the second petitioner as a partner of the first petitioner firm in the matter of issuing Ext.P7 communication.

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Clause 2D(c) of 2018 policy relied on by the third respondent for terminating the franchisee-ships given to the first petitioner firm read thus :

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“Number of territories permissible to a franchisee in a circle is restricted to normally three through EoI/Migration.”

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The contention of the petitioners that the clause aforesaid does not apply to franchisee-ships migrated to 2018 policy cannot be

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accepted in the light of the unambiguous provision in the clause. True, registered partnerships and incorporated companies cannot be equated with the individual partners in the firm and individual directors in the company. It is seen from the statement filed by BSNL that when complaints have been received alleging that the conduct of the second petitioner in running business as franchisee of BSNL in more than three territories is violative of 2018 policy, it appears, on account of the said reason, the third respondent has sought a clarification from the corporate office of BSNL as to whether different entities run by one person could be permitted to do business as franchisee of BSNL in more than three territories and it has been clarified by the corporate office of BSNL that if a person or entity applies for franchisee-ship in different forms, it shall be treated as multiple applications of the same person. It is seen that the provision relied on for the purpose of terminating the franchiseeship of the first petitioner firm is not worded unambiguously to justify an action based on the same against the first petitioner

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firm, for the allegation is only that the business is being run by the second petitioner in the name of a registered partnership of which he is a partner and an incorporated company of which he is a director. But, as noted, the corporate office of BSNL has interpreted the clause to mean that if one person or entity applies for franchisee-ship in different forms, it shall be treated as multiple applications of the same person. No doubt, such an interpretation of the clause aforesaid may not be justified in law. The question, therefore, is whether this Court would be justified in interfering with Ext.P11 decision on that ground. According to me, the answer to the question shall be in a negative. The reason is that BSNL, though a public sector company engaged in commercial activities, shall have the freedom to form its own policies. Unlike other public sector companies, BSNL is publishing its policy for maintaining transparency in its functions. No doubt, public bodies who proclaim that they would follow a particular norm for a particular purpose have to scrupulously follow the said norms. However, in case of any

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doubt, it is for the author of the policy to explain as to the scope of the policy and if the policy is not found unreasonable, the courts are bound to accept the explanation offered by its author. In the context of resolving identical and similar disputes relating to the interpretation of a clause in a tender document, it has been held by the Apex Court in Silppi Constructions Contractors v. Union of India , (2020) 16 SCC 489 that the authority which floats a tender is the best Judge to clarify the scope of every clause in the tender. The proposition aforesaid though not laid in the context of interpreting the provisions in a policy, I do not find any reason why the same shall not be extended to a case dealing with the scope of the terms of a policy of the public sector body as well. In other words, insofar as it is clarified by BSNL that its policy is that one person shall not permitted to do business as its franchisee in more than three territories, the court cannot say otherwise especially when the policy is in relation to the commercial activity undertaken by the body. That apart, I do not find any unreasonableness also in the

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said policy, for in the absence of such a policy, one can monopolize the franchisee business of BSNL by constituting several partnerships and incorporated companies. In other words, the arguments advanced by the learned Senior Counsel for the petitioner for impugning Ext.P11 decision of the second respondent are all unsustainable.

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It is seen from the materials that though the

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third respondent refers only to the business of the second petitioner in four territories in Ext.P7 communication, even while business of one person is permissible in three territories, the third respondent chose to terminate the business of the first petitioner in both the territories in which it was carrying on business. When a query was raised by the Court as to the reason for such a decision, the learned Standing Counsel for the BSNL has replied that the company of which the second petitioner was a director was permitted to run business as franchisee of BSNL in another territory namely Cherthala in Alappuzha District on a provisional basis until alternative

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arrangements are made for conducting business in that territory and it is on account of the said reason that the franchisee-ship of the first petitioner in both the territories have been terminated. I do not find any justification for terminating the franchisee-ship of the first petitioner in both the territories in which it was carrying on business, for the policy permits one person to carry on business in three territories.

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In the result, the writ petition is disposed of confirming Ext.P11 decision, but clarifying that the first petitioner shall be permitted to run business as franchisee of BSNL in one of their territories, if an option to that effect has been exercised by the first petitioner within three days from the date of receipt of a copy of this judgment.

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P.B.SURESH KUMAR, JUDGE.

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YKB

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W.P.(C) No.16010 of 2021

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APPENDIX OF WP(C) 16010/2021

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PETITIONER EXHIBITS

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Exhibit P1	A TRUE COPY OF THE PARTNERSHIP DEED DATED 31.1.2005.
Exhibit P1(A)	A TRUE COPY OF THE ACKNOWLEDGEMENT OF REGISTRATION OF FIRM DATED 11.9.2007 ISSUED FROM THE REGISTRAR OF FIRMS, KERALA.
Exhibit P2	TRUE COPIES OF THE EXPRESSION OF INTEREST ISSUED IN 2011.
Exhibit P3	TRUE COPIES OF THE CM SALES AND DISTRIBUTION POLICY, 2012.
Exhibit P4	TRUE COPY OF THE 2014 AMENDMENT TO EXT.P3 POLICY DATED 13.10.2014.
Exhibit P5	TRUE COPY OF THE CM SALES AND DISTRIBUTION POLICY, 2018.
Exhibit P6	A TRUE COPY OF THE LETTER DATED 22.2.2021 GRANTING EXTENSION OF FRANCHISEE SHIP TILL 22.2.2021.
Exhibit P7	TRUE COPY OF THE EMAIL DATED 9.7.2021 ALONG WITH THE ATTACHED LETTER.
Exhibit P8	TRUE COPY OF THE REPLY DATED 13.7.2021 GIVEN BY K.C.JOSEPH.
Exhibit P9	TRUE COPY OF THE NOTARIZED COPY OF THE PARTNERSHIP DEED DATED 30.6.2021.
Exhibit P9(A)	TRUE COPY OF THE ACKNOWLEDGEMENT RECEIPT DATED 16.7.2021 FROM THE OFFICE OF THE REGISTRATION INSPECTOR GENERAL, THIRUVANANTHAPURAM.
Exhibit P10	TRUE COPY OF THE FRANCHISEE SHIP

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TERMINATION NOTICE DATED 29.7.2021 ISSUED BY THE 2ND RESPONDENT TO THE 1ST PETITIONER.

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Exhibit P11 TRUE COPY OF THE LETTER DATED 30.7.2021 ISSUED BY THE 2ND RESPONDENT TO THE 2ND PETITIONER.

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Exhibit P12 TRUE COPY OF THE LETTER FROM THE AGM (EB & MKTG), PATHANANAMTHITTA BA

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Exhibit P13 TRUE COPY OF THE RELEVANT PAGES OF THE AGREEMENT (IE.FOR DISTRIBUTION OF PRODUCT AND ORIGINALLY GIVEN BY 2ND PETITIONER ON 30/6/2021)

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Exhibit P14 TRUE COPY OF THE RELEVANT PAGES OF AGREEMENT FOR PROVISION OF SERVICES OF BSNL (ORIGINALLY GIVEN BY 2ND PETITIONER ON 30/6/2021)

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Exhibit P15 TRUE COPY OF THE EMAIL EVIDENCING RECEIPT OF THE FRANCHISEE SHIP AGREEMENT

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RESPONDENT EXHIBITS

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ANNEXURE R1(A) A PHOTOCOPY OF THE FIRST AND LAST PAGE OF THE AGREEMENT FOR EXTENSION WITH BSNL THIRUVALLA TERRITORY FOR A PERIOD FROM 01.01.2021 TO 31.12.2021 DATED 07.07.2021

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ANNEXURE R1(B) A TRUE COPY OF THE RELEVANT PAGE CONTAINING CLAUSE 27 OF THE AGREEMENT BETWEEN THE FIRST PETITIONER AND BSNL DATED 6.03.2018.

Key Systems, v. the Chief General Manager

Case brief

What is this about?

What did the court decide?

Key Systems, v. the Chief General Manager

Case brief

What is this about?

What did the court decide?

What the court decided

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