Dismissed

M/S.Vasavi Oil Stores v. M/S.Indian Oil Corporation Ltd.

Madras HC24 Mar 2022WP/19559/2011

Case brief

AI extract

What is this about?

This court dismissed a writ petition challenging the termination of an oil dealership agreement for breach of terms, specifically unauthorized delegation of business supervision. The court held the petition was not maintainable as the agreement mandated arbitration for dispute resolution under Clause 27, making writ jurisdiction inappropriate.

What did the court decide?

Writ petition held not maintainable and dismissed; no order as to costs.

M/S.Vasavi Oil Stores Vs M/S.Indian Oil… — Contract and Commercial Disputes | Madras HC (2022)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED :24.03.2022

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CORAM :

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THE HONOURABLE MR.JUSTICE M.GOVINDARAJ

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WRIT PETITION NO.19559 OF 2011 & M.P.NO.1 OF 2011

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M/S.Vasavi Oil Stores Rep.by its Partner, D.Ravi Kumar Sathyamangalam Erode-638 401.

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... Petitioner

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-Vs-

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M/S.Indian Oil Corporation Ltd., Rep.by its Managing Director, Having its Registered Office at No.99, Ali Yaver Jung Marg, Bandra (East), Mumbai-400 051.

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The Executive Director Indian Oil Corporation Ltd. Marketing Division, Southern Region, Indian Oil Bhawan, 139 Mahatma Gandhi Road (Nungmbakkam High Road) Chennai-600 034

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…. Respondents

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Prayer :

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Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari, calling for the records relating to the proceedings in CBEDO/R/TN Sri Vasavi dated 29.07.2011 of the 2nd Respondent herein and quash the same.

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For Petitioner : Ms.A.L Ganthimathi

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For Respondents: Mr.Vijaya Mehanath for MrAnand, Abdul & Vinod Associates

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O R D E R

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Petitioner challenges the termination of dealership agreement dated 29.07.2011 by way of this writ petition.

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Petitioner is a partnership firm. The husband and wife are the partners. The respondent corporation approved the partnership and entered into a fresh dealership agreement with the petitioner on 30.10.1991 for carrying on the business, as a dealer of the respondent corporation for kerosene. The dealership agreement was renewed by the District Supply Officer on 19.11.2008 for a period between 01.01.2009 and 31.12.2011. While the license was valid till 31.12.2011, the District Revenue Officer issued a show cause notice dated 07.09.2010 to show cause as to why the license should not be cancelled for transferring it in favour of a third party. The petitioner immediately cancelled the Power of Attorney given in favour of one D.Ramakrishnan and submitted his explanation to the District Revenue Officer that they have never transferred the license in favour of third party and the Power of Attorney was given only to monitor the business.

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Thereafter, on 17.09.2010, an officer of the Respondent Corporation issued a show cause notice as to why action should not be initiated against the petitioner for violation of terms and conditions of the dealership agreement. Petitioner submitted their reply on 22.09.2010 and also submitted a detailed report to the District Revenue Officer on 23.09.2010. He also submitted a certified copy of the certificate for the cancellation of Power of Attorney on 05.10.2010. Thereafter, for violation of clause 13 and 16 of the Dealership Agreement, the agreement was terminated by the respondent on 27.01.2011.

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The petitioner would challenge the termination order on the grounds of violation of Principle of Natural Justice. The respondent without conducting any inquiry and without giving ample opportunity, immediately terminated the contract without any basis. The petitioner engaged the Power of Attorney to supervise the business and it was not transferred in favour of any third party and the Power of Attorney happened to be the brother of one of the partners. Therefore, the termination order which happened to be passed hastily stands vitiated for non application of mind and that the respondent failed to see the partnership firm and dealership is carried on only by the petitioner.

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The respondent would resist the contention on the ground that breach of terms and conditions writ large and borne out by documents. A perusal of Power of Attorney issued by the petitioner in favour of D.Ramakrishnan is very clear that

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dealership is transferred in favour of the third party and the condition that the dealer shall personally be present and supervise the business was clearly violated. Therefore, termination is justified.

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From the materials produced before this Court, it is noted that the dealership agreement sets out for several terms and conditions mutually performed by both the parties. Clause 13 of the agreement mandates that the dealer shall not sell, assign, mortgage or part with or otherwise transfer his interest in the dealership of the right, interest or benefit conferred upon him to any person. The induction of new partner and retirement of a partner and reconstitution of the partnership business shall be done with the approval of the Respondent Corporation.

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The paramount condition under sub-clause (b) of Clause 16 is that the partners shall take active part in the management and running of the dealership and shall personally supervise the same and shall not under any circumstances do so through any person, firm or body. Apart from this, Clause 28 of the agreement provides for arbitration for resolution of disputes arising out of agreement.

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In order to find whether the termination is legal or not it is useful to look into the registered Power of Attorney executed in favour of one D.Ramakrishnan by the petitioner. A recital in the Power of Attorney recites that since the partners are not in a position to directly conduct or supervise and develop the business and that they were travelling outside the place of business, they have given this power of attorney in favour of their agent. A reading of this Clause clearly shows that condition No.16 that the partner shall personally supervise the business and shall not under any circumstances do through any other person proved to be violated.

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The further recital prove that the Power of Attorney is empowered to open new bank account and also by giving required sureties and guarantees to secure loan by submitting required documents to banks or private financial corporations for the purpose of developing the business. Relevant paragraph is extracted hereunder:

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“ nkw;go _ thrtp Mapy; !;nlhh;!;" bgahpy; cs;s t';fpf;fzf;Fis j';fs; bgaUf;F khw;wpf; bfhs;st[k; jh';fs; tpUk;g[k; t';fpfspy; g[Jf;fzf;Ffs; Muk;gpj;Jf;bfhs;st[k; j';fSila bghWg;gpy; jFe;j Mtz';fis bfhLj;J t';fpfspd; \ykhfnth/ my;yJ jdpahh; epWtd';fs; \ykhfnth/ tpahghuj;ij mgptpUj;jp bra;a[k; bghUl;L fld;fs; bgwt[k;

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t';fpf;fzf;Ffis Koj;Jf;bfhs;st[k; tpahghu mgptpUj;jpf;fhf th';fpa fld;fSf;F mry;tl;o rfpjk; fld;fis jPh;j;Jf;bfhLj;Jk; tuntz;oaJ.”

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A reading of this particular paragraph clearly proves that the Power of Attorney can open a new bank account in his name and he can secure loan on his responsibility to develop the business. It is required to be noted that the power is not given to secure loan in the name of the partnership firm, but in the personal name of the Power of Attorney. This power to secure loan in the name of the third party and to run the business by opening a new bank account in the name of the third party and develop the business on his own responsibility clearly proves that the terms and conditions of a dealership agreement namely Clause 13 and 16 are violated.

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After violating the terms and after issuance of show cause notice by the District Supply Officer and the Corporation, the petitioner in order to set right the breach of terms, cancelled the Power of Attorney. But the fact remains, terms and conditions specified under Clause 13 and 16 of the dealership agreement were breached. The respondent Corporation has issued a show cause notice and the petitioner had submitted a reply and on consideration of the same, the termination order came to be passed. If at all the petitioner is aggrieved, he should have invoked the Arbitration Clause under Clause 27 for resolution of the dispute. Instead he has approached this Court by way of a writ petition.

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Considering the above issues, I do not find any reason to interfere with the order passed by the respondent on the grounds of violation of Principle of Natural Justice and also I decline to entertain the writ petition and to interfere with the order as there is an inbuilt provision of resolution of dispute through arbitration under Clause 27 is available in the dealership agreement itself.

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Therefore, this writ petition is not maintainable and accordingly dismissed. It is open to the petitioner to work out his remedy in the manner known to law. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.

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Sd/Assistant Registrar

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//True Copy//

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Sub Assistant Registrar

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sha/kpr

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https://hcservices.ecourts.gov.in/hcservices/

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The Managing Director, Indian Oil Corporation Ltd., Having its Registered Office at No.99, Ali Yaver Jung Marg, Bandra (East), Mumbai-400 051.

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The Executive Director Indian Oil Corporation Ltd. Marketing Division, Southern Region, Indian Oil Bhawan, 139 Mahatma Gandhi Road (Nungmbakkam High Road) Chennai-600 034.

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+1cc to Ms.A.L Ganthimathi, Advocate, S.R.No.20417

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+1cc to M/s.Anand Abdul & Vinod Associates, S.R.No.20465

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W.P.No.19559 of 2011

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& M.P.No.1 of 2011

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AKII(CO) PM/24/05/2022

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