INDIAN OIL CORPORATION LTD. Vs. NILOUFER SIDDIQUI & ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 7266 of 2009, Judgment Date: Dec 01, 2015
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.7266 OF 2009
INDIAN OIL CORPORATION LTD. … APPELLANT
Versus
NILOUFER SIDDIQUI & ORS. … RESPONDENTS
J U D G M E N T
V. GOPALA GOWDA, J.
This Civil Appeal is directed against the impugned judgment and order dated
03.07.2007 passed by the High Court of Judicature at Patna in Second Appeal
No. 516 of 1988 whereby it has set aside the impugned judgment and orders
therein passed by the courts below on the ground that both the courts below
not only committed error of record by misconstruing the facts and evidence
on record but also ignored the specific provisions of law as well as the
necessary and relevant case laws and also wrongly held that the Title Suit
No. 68 of 1978 was barred by the principles of res judicata.
The facts which are required to appreciate the rival legal contentions
urged on behalf of the parties are stated in brief hereunder:
The appellant-Indian Oil Corporation Limited (for short “IOCL”)
in the year 1971 invited applications from eligible persons under the
scheme for awarding the distributorship of Indane Gas (LPG) Agencies in the
town of Muzaffarpur, Bihar. The said distributorship was reserved for ex-
defence personnel, war-widows and dependants. The respondent no.2- Ex-
Captain A.S. Siddiqui and respondent no.3-Ex-Captain Jai Narain Prasad
Nishad applied for the said distributorship and got it. On 15.10.1971 IOCL
offered the said distributorship to respondent nos. 2 and 3 along with a
third person provided they agreed to enter into a partnership to run the
business of distribution of Indane Gas. This was done with a view to
rehabilitate more ex-servicemen in the country. However, the third person
refused to form partnership.
The IOCL through its letter no. Sales/LPG/ERN/3623 dated 21.10.1971
(hereinafter referred to as “letter of allotment”) allotted distributorship
of Indane Gas to respondent nos.2 and 3 subject to the terms and conditions
mentioned therein. Condition no.2 of the said letter is stated hereunder:
“Condition no.2: This appointment is subject to the conditions contained in
our standard agreement which will be sent to you in due course for your
signature and you shall sign and return the same to us.”
Further condition no.8 of the said letter reads thus:
“TERMINATION:
Condition no.8: Notwithstanding anything contained herein, the Corporation
shall be at liberty to terminate your distributorship without assigning any
reason whatsoever by giving you 30 days notice in writing of intention to
do so and upon the expiry of the said notice your distributorship shall
stand cancelled and terminated without prejudice to the rights of the
Corporation in respect of any matter or thing antecedent to such
termination.”
On 17.11.1971 the partnership deed was signed between respondent nos.2 and
3 to carry on the business of distribution of Indane Gas at Muzzafarpur
under the name and style of M/s Happy Homes (respondent no.4) on various
terms and conditions. Condition no.12 of the said partnership deed reads
thus:
“12.No partner shall without the consent of the other partner obtained in
writing for the purpose of any of the following acts:-
Engage while he is a partner or be directly or indirectly concerned, in
may business other, than that of and competing with the business of the
firm.
XXX XXX XXX
h. Assign or mortgage his share in the partnership or attempt to introduce
and consider as partner…”
The respondent no.2 through letter no.59582 dated 04.11.1971 requested the
IOCL for supply of the copy of the standard agreement as referred to in
condition no.2 of the letter of allotment issued by IOCL. IOCL vide letter
dated 12.11.1971 had given an assurance to them to send the said agreement
in due course. The respondent no.2 through letter dated 16.12.1971 again
requested for a copy of the said standard agreement from IOCL. IOCL vide
letter no. 3622 dated 31.12.1971 allayed apprehension of both respondent
nos.2 and 3 on the score of non-availability of the said standard agreement
and the termination of distributorship. The relevant part of the said
letter no. 3622 reads thus:
“…This agreement will be given to you in due course. There is absolutely no
secrecy maintained about anything and the agreement as and when ready,
would be sent to you…
xx xx xx
Please in the meantime, we would like you to progress fast regarding
commissioning the market…”
From 23.03.1972 the partnership firm-M/s Happy Homes started the business
of distribution of Indane Gas without the said standard agreement by both
the respondent nos. 2 and 3. The distributorship continued to be regulated
by the terms of the letter of allotment issued by IOCL to them.
The business of the partnership firm went on smoothly for some time. After
few months differences arose between the partners i.e., respondent nos. 2
and 3 due to certain irregularities committed by respondent no.3. The
interference of IOCL was sought by respondent no. 2 for the settlement of
the said dispute. However, IOCL refused to interfere and asked the partners
to settle their dispute themselves. On 27.02.1973 the respondent no. 2
wrote a letter to Directorate General of Resettlement, Ministry of Defence
(for short “DGR”) with a copy of the same to the Minister of Defence and
the Minister of Petroleum requesting either to split the partnership
business into two or to permit him to transfer his share in the partnership
in the name of his wife Mrs. Niloufer Siddiqui (respondent no.1) or his
father Ex-Captain M. Ozair or the widow of Late Captain M. Ammar in whose
partnership he had actually applied for the distributorship.
On 31.10.1973 both respondent nos.2 and 3 went to Calcutta to meet the
Branch Manager, IOCL. The respondent no.2 expressed his desire to transfer
his share in the partnership in the name of either his wife or his father.
The respondent no.3 gave oral consent to the desire expressed by respondent
no.2. Later, the respondent no.3 confirmed his oral consent by writing a
letter dated 15.11.1973 addressed to the Branch Manager, IOCL.
The respondent no.2 through letter dated 17.11.1973 addressed to the Branch
Manager, IOCL sought IOCL’s permission to transfer his share in the
partnership in the name of either his wife or his father. On 02.1.1974, the
respondent no.2 joined Bihar Government Services as Deputy Superintendent
of Police.
IOCL vide letter dated 25.02.1974 refused to accede to the request for
transfer of shares made by respondent no.2 and stated thus:
“…you may recall that during the discussions you had with the undersigned
as well as our Branch Sales Manager Sri SC Ghosh alongwith your partner, it
was clearly advised that unless all the set backs/irregularities under
which the distributorship is being operated are set aside, we shall not be
forwarding any such request.”
Thereafter, the respondent no.2 again wrote a letter on 03.3.1975 to the
DGR along with a copy of it to IOCL with same request but, DGR vide letter
dated 27.3.1975 refused to accede to the request made by the respondent
no.2. The same request was also refused by IOCL vide letter dated
17.4.1975.
By a notice published in the daily newspaper ‘Indian Nation’ the respondent
no.2 indicated his intention to transfer his share in M/s Happy Homes in
favour of his wife i.e., respondent no.1 and invited objections to the
same, if any. The IOCL vide its letter No. Sales/LPG/3710 dated 16.01.1978
terminated the distributorship. The relevant portions of the said letter
are extracted as under:
“It was clearly understood that you will not take up any other business or
employment during the continuation of the aforesaid distributorship vide
his letter of November, 1973 and September, 1975 Capt. Siddiqui has
approached us for our permission to his transferring his share in the
aforesaid Distributorship to his father which was not acceded to and he was
advised to choose one or the two i.e., either to keep his job or remain our
distributor. In addition it was also made clear to you by us and also the
Directorate General of Resettlement that he cannot be allowed to transfer
his share to his father. But he has persisted with the breach and violation
of this agreement and did not resign from the job.
xx xx xx
In view of the foregoing it has been decided to terminate your
distributorship and this letter may be treated as our notice for this
purpose. Please note that your distributorship rights shall stand
terminated and cancelled on expiry of the period of 30 days without
prejudice to the rights of the corporation in respect of any matter or
thing antecedent to such termination.”
On 23.1.1978, the respondent no.2 executed a deed of transfer (Baimokasa)
in favour of his wife i.e., respondent no.1 whereby he transferred his
share in the partnership in the name of his wife.
On 9.6.1978, the respondent no.1 instituted a Title Suit no. 68 of 1978 in
the court of Executive Munsif, Muzaffarpur seeking declaration that
termination of the distributorship by IOCL vide letter dated 16.01.1978 was
illegal, arbitrary and unjustified. The respondent no.1 also prayed for
restoration of the distributorship. The trial court vide its judgment and
order dated 11.04.1985 dismissed the said suit holding, inter alia, that
respondent no.2 had no right to transfer his share in the partnership in
the name of his wife i.e., respondent no.1.
Aggrieved by the decision of the trial court, the respondent no.1 preferred
Title Appeal no. 32 of 1986 in the court of Additional District Judge,
Muzaffarpur. The first appellate court vide its judgment and order dated
13.06.1988 dismissed the appeal and upheld the decision of the trial court.
Aggrieved by the decision of the first appellate court, the respondent no.1
preferred Second Appeal no. 516 of 1988 in the High Court of Judicature at
Patna by framing certain substantial questions of law and urged various
tenable grounds in support of the same. The High Court vide its judgment
and order dated 03.07.2007 allowed the appeal by setting aside the
judgments and orders passed by the courts below. It declared that the
letter of termination dated 16.01.1978 issued by IOCL in terminating
distributorship of respondent no.2 to be illegal, arbitrary and unjustified
and gave direction for restoration of the distributorship. Hence, this
appeal is filed by the appellant questioning the correctness of the
impugned judgment and order by framing certain questions of law.
We have carefully heard Ms. Pinky Anand, the learned Additional Solicitor
General on behalf of appellant-IOCL and Mr. Kapil Sibal, the learned senior
counsel on behalf of respondent nos. 1, 2& 4. On the basis of factual
evidence on record produced before us, the circumstances of the case and
also in the light of the rival legal contentions urged by the learned
senior counsel on behalf of both the parties, we have broadly framed the
following points which require our attention and consideration-
Whether IOCL had the right to terminate the distributorship of respondent
nos. 2 and 3?
Whether the provision of Section 14(1)(c) of the Specific Relief Act, 1963
is applicable in the instant case?
What order?
Answer to Point No.1
Ms. Pinky Anand, the learned Additional Solicitor General on behalf of the
appellant-IOCL contended that IOCL had the right to terminate the
distributorship without assigning any reason. She submitted that the High
Court has incorrectly held that IOCL violated Condition no.8 (supra) of the
terms and conditions as mentioned in the letter of allotment dated
21.10.1971 by terminating the distributorship without giving 30 days notice
to respondent no.2 which was a pre-requisite condition. She further
submitted that the said 30 days notice as required under condition no.8 was
given in the notice of termination itself. She placed reliance upon the
decision of this Court in the case of Her Highness Maharani Shanti Devi P.
Gaikwad V. Savjibhai Haribhai Patel & ors[1]. The relevant portion of the
judgment cited by her reads thus:
54..“5.… it is the court’s duty to give effect to the bargain of the
parties according to their intention and when that bargain is in writing
the intention is to be looked for in the words used unless they are such
that one may suspect that they do not convey the intention correctly. If
those words are clear, there is very little that the court has to do. The
court must give effect to the plain meaning of the words however it may
dislike the result. We have earlier set out clause 10 and we find no
difficulty or doubt as to the meaning of the language there used. Indeed
the language is the plainest…”
Thus, the termination of the distributorship of the Indane Gas of
respondent no.2 was legal, proper and justified according to the terms and
conditions in the letter of allotment issued by IOCL which the High Court
had failed to consider and appreciate the same while recording its findings
and answering the said substantial question of law.
It was further contended by her that the High Court has erred in coming to
the conclusion that respondent nos. 2 and 3 have not committed any breach
of the terms and conditions of the standard agreement on the ground that
the same was never supplied to them. The finding of the High Court on this
point is not only bad in law but also factually wrong. She submitted that
the evidence on record clearly shows that respondent nos. 2 and 3 were
shown the terms of the standard agreement and were specifically made aware
of clause 21 which prohibited the partners from assigning their shares in
favour of outsiders without the consent of IOCL. The fact that respondent
no.2 repeatedly sought permission from IOCL for assigning his share to his
wife clearly shows that he was aware of such a condition in the agreement.
Clause 21 of the standard agreement reads thus:
“21. The distributor shall not sell, assign, mortgage or part with or
otherwise transfer his interest in the distributorship or the right,
interest or benefit conferred on him by this agreement to any person. In
the event of the Distributor being a partnership firm any change in
constitution of the firm, whether by retirement, introduction of new
partners or otherwise howsoever will not be permitted without the previous
written approval of the Corporation notwithstanding that the Corporation
may have dealings with such reconstituted firm or impliedly waived or
condoned the breach or default mentioned hereinabove by the Distributor…”
She further submitted that the validity of termination of distributorship
has to be tested on the principles of private law and the law of contract
and not on the touchstone of constitutional or public law. In the present
case the question involved is purely a question of breach of contract alone
between the parties for which the respondent no.1 & 2 at best if they prove
the breach on the part of the appellant they are entitled for damages but
not declaratory remedy and consequential relief as prayed in the plaint.
Per contra, Mr. Kapil Sibal, the learned senior counsel on behalf of
respondent nos.1, 2 & 4 sought to justify the impugned judgment and order
passed by the High Court by urging various factual as well as legal
contentions in justification of the impugned judgment.
It was further contended by him that both the respondent nos. 2 and 3 have
fulfilled all the terms and conditions of the letter of allotment of
distributorship which was given to them by IOCL. It is IOCL which has
violated the said terms and conditions by not sending a copy of the
standard agreement despite repeated demands made by respondent no.2 to
IOCL. Both the respondent nos. 2 and 3 started their business on 23.03.1972
on the basis of the letter of allotment. At no point of time they were made
acquainted with the terms and conditions of the standard agreement by IOCL.
He further submitted that the agreement which is not executed by the
parties cannot be legally made enforceable against them. Therefore, the
terms and conditions of the standard agreement cannot be made binding upon
them as they have not executed the same. Thus, the termination of the
distributorship of Indane Gas as per the terms and conditions enumerated in
the said standard agreement is illegal as has been rightly held by the High
Court in its reasoned judgment by answering the substantial question of law
in favour of respondent no.1 & 2.
It was further contended by him that as per condition no.8 of the letter of
allotment IOCL reserved the right to terminate the distributorship without
assigning any reason by giving 30 days notice in writing. The purpose of
the said 30 days notice was to afford time to both the respondent nos. 2
and 3 to advance their explanation against such intended termination made
by the IOCL by invoking its right under condition no.8. He further
submitted that IOCL itself has completely violated the terms enumerated in
condition no.8 of letter of allotment. It has arbitrarily terminated the
distributorship by issuing a letter without giving any notice to them by
giving irrelevant reasons which is in violation of the principles of
natural justice as well. In his further submissions he assailed the
condition no.8 of the letter of allotment itself. He submitted that the
said condition is unconscionable in so far as it gave IOCL an unfettered
right to terminate the distributorship of Indane Gas in favour of both the
respondent nos. 2 & 3 without assigning any reason whatsoever. He fortified
his submission by placing strong reliance upon the decision of this Court
in Central Inland Water Transport Corporation Limited & Anr. V. Brojo Nath
Ganguly & Anr.[2] which has been followed by the Constitution Bench of this
Court in the case of Delhi Transport Corporation v. DTC Mazdoor Congress
and Others.[3] The relevant paragraph from Central Inland Water Transport’s
case (supra) cited by the learned senior counsel is extracted in the later
part of this judgment.
It was further contended by him that IOCL, being a Government of India
Undertaking is bound to act fairly and its conduct is subject to scrutiny
on the touchstone of Article 14 of the Constitution of India. He further
submitted that it is clear from the evidence on record that the action of
IOCL was high handed and arbitrary. He placed strong reliance upon the
decision of this Court in the case of Mahabir Auto Stores and Ors v. Indian
Oil Corporation & Ors.[4] Paragraph 12 of the aforesaid case reads thus:
“12. It is well settled that every action of the State or an
instrumentality of the State in exercise of its executive power, must be
informed by reason. In appropriate cases, actions uninformed by reason may
be questioned as arbitrary in proceedings under Article 226 or Article 32
of the Constitution. Reliance in this connection may be placed on the
observations of this Court in Radha Krishna Agarwal v. State of Bihar. It
appears to us, at the outset, that in the facts and circumstances of the
case, the respondent company IOC is an organ of the State or an
instrumentality of the State as contemplated under Article 12 of the
Constitution. The State acts in its executive power under Article 298 of
the Constitution in entering or not entering in contracts with individual
parties. Article 14 of the Constitution would be applicable to those
exercises of power. Therefore, the action of State organ under Article 14
can be checked. See Radha Krishna Agarwal v. State of Bihar at p. 462, but
Article 14 of the Constitution cannot and has not been construed as a
charter for judicial review of State action after the contract has been
entered into, to call upon the State to account for its actions in its
manifold activities by stating reasons for such actions. In a situation of
this nature certain activities of the respondent company which constituted
State under Article 12 of the Constitution may be in certain circumstances
subject to Article 14 of the Constitution in entering or not entering into
contracts and must be reasonable and taken only upon lawful and relevant
consideration; it depends upon facts and circumstances of a particular
transaction whether hearing is necessary and reasons have to be stated. In
case any right conferred on the citizens which is sought to be interfered,
such action is subject to Article 14 of the Constitution, and must be
reasonable and can be taken only upon lawful and relevant grounds of public
interest. Where there is arbitrariness in State action of this type of
entering or not entering into contracts, Article 14 springs up and judicial
review strikes such an action down. Every action of the State executive
authority must be subject to rule of law and must be informed by reason.
So, whatever be the activity of the public authority, in such monopoly or
semi-monopoly dealings, it should meet the test of Article 14 of the
Constitution. If a governmental action even in the matters of entering or
not entering into contracts, fails to satisfy the test of reasonableness,
the same would be unreasonable. In this connection reference may be made to
E.P. Royappa v. State of Tamil Nadu, Maneka Gandhi v. Union of India, Ajay
Hasia v. Khalid Mujib Sehravardi, R.D. Shetty v. International Airport
Authority of India and also Dwarkadas Marfatia and Sons v. Board of
Trustees of the Port of Bombay. It appears to us that rule of reason and
rule against arbitrariness and discrimination, rules of fair play and
natural justice are part of the rule of law applicable in situation or
action by State instrumentality in dealing with citizens in a situation
like the present one. Even though the rights of the citizens are in the
nature of contractual rights, the manner, the method and motive of a
decision of entering or not entering into a contract, are subject to
judicial review on the touchstone of relevance and reasonableness, fair
play, natural justice, equality and non-discrimination in the type of the
transactions and nature of the dealing as in the present case.”
Mr. V.K. Monga, the learned counsel on behalf of respondent no.3 in his
contentions supported the arguments advanced by Ms. Pinky Anand, the
learned ASG on behalf of appellant-IOCL.
After careful considerations of the findings of the High Court both on
fact and law and considering the rival legal submissions made on behalf of
the parties, we agree with the arguments advanced by Mr. Kapil Sibal. We
have examined the material on record and on the basis of the admitted
facts, it is clear that there is no dispute that the appellant-IOCL offered
distributorship of Indane Gas (LPG) to respondent nos.2 and 3 vide its
letter of allotment dated 21.10.1971 on certain terms and conditions.
It is also an admitted fact that both respondent nos. 2 and 3 got the
partnership firm registered as per the terms and conditions of letter of
allotment and at least twice requested IOCL to send the Company’s standard
agreement for signature, but IOCL failed to send it to them. Hence, it can
be inferred from the pleadings and evidence on record that the Company’s
standard agreement was never executed by them.
On 23.03.1972 both the respondent nos. 2 and 3 started their business
without the said standard agreement being signed by both of them. The
partnership business continued to be regulated by the terms and conditions
of the letter of allotment issued by IOCL. Hence, the claim of IOCL that
both the respondent nos. 2 and 3 were aware of the said standard agreement
is unsusceptible in law. There is nothing on record to show that both the
respondent nos. 2 and 3 had any knowledge or had ever agreed to the terms
of the said standard agreement. We agree with the submission made by Mr.
Sibal that the agreement which is not executed by the parties cannot be
legally made enforceable against them. Therefore, the High Court has
rightly held that the standard agreement cannot be said to be legally
binding upon the respondent nos. 2 and 3 as the same has never been
executed between the allottes and IOCL.
Further, Section 7 of the Indian Contract Act 1872, specifically provides
that acceptance must be absolute. It reads thus:
“In order to convert a proposal into a promise the acceptance must –
(1)be absolute and unqualified.
(2)be expressed in some usual and reasonable manner, unless the proposal
prescribes the manner in which it is to be accepted. If the proposal
prescribes a manner in which it is to be accepted; and the acceptance is
not made in such manner, the proposer may, within a reasonable time after
the acceptance is communicated to him, insist that his proposal shall be
accepted in the prescribed manner, and not otherwise; but; if he fails to
do so, he accepts the acceptance.”
It is clear from the pleadings and evidence on record that the standard
agreement was never supplied to both the respondent nos. 2 and 3 and the
said standard agreement cannot be said to be executed between the allottes
and IOCL. Thus, as per the facts and circumstances of the case and also in
the light of the aforesaid statutory provision of the Contract Act, the
said standard agreement in question cannot be said to be a concluded
contract between the parties in law. Consequently, it cannot be made
binding upon the allottes of distributorship by IOCL.
As far as the alleged violation of clause 21 (supra) of the standard
agreement by respondent nos. 2 and 3 is concerned, it is clear that the
said standard agreement is not binding upon the parties for the reasons
stated supra and when the said standard agreement is not binding, then the
question of violation of terms and conditions does not arise. Rather IOCL
has violated condition no.2 (supra) of the letter of allotment by not
sending the standard agreement to both the respondent nos. 2 and 3.
We agree with the contentions advanced by Mr. Sibal that condition no.8
of the letter of allotment is unconscionable as it gives IOCL an unfettered
right to terminate the distributorship without assigning any reason. In the
instant case, respondent no.2 is far weaker in economic strength and has no
bargaining power with IOCL. At the time when the letter of allotment was
issued, respondent no.2 had no other means of livelihood and was dependent
on the grant of Indane Gas agency by IOCL for sustenance of himself and
family members. The letter of allotment contains standard terms and
respondent nos. 2 and 3 had no opportunity to vary the same. Condition no.8
of letter of allotment provides for unilateral termination of
distributorship without assigning any reason which is liable to be read
down in the light of Article 14 of Constitution of India as well as
observations made by this court in Central Inland Water Corporation
Limited’s case (supra). The relevant paragraph cited by the learned senior
counsel is reproduced hereunder:
“89. Should then our courts not advance with the times? Should they still
continue to cling to outmoded concepts and outworn ideologies? Should we
not adjust our thinking caps to match the fashion of the day? Should all
jurisprudential development pass us by, leaving us floundering in the
sloughs of 19th century theories? Should the strong be permitted to push
the weak to the wall? Should they be allowed to ride roughshod over the
weak? Should the courts sit back and watch supinely while the strong
trample underfoot the rights of the weak? We have a Constitution for our
country. Our judges are bound by their oath to “uphold the Constitution and
the laws”. The Constitution was enacted to secure to all the citizens of
this country social and economic justice. Article 14 of the Constitution
guarantees to all persons equality before the law and the equal protection
of the laws. The principle deducible from the above discussions on this
part of the case is in consonance with right and reason, intended to secure
social and economic justice and conforms to the mandate of the great
equality clause in Article 14. This principle is that the courts will not
enforce and will, when called upon to do so, strike down an unfair and
unreasonable contract, or an unfair and unreasonable clause in a contract,
entered into between parties who are not equal in bargaining power. It is
difficult to give an exhaustive list of all bargains of this type. No court
can visualize the different situations which can arise in the affairs of
men. One can only attempt to give some illustrations. For instance, the
above principle will apply where the inequality of bargaining power is the
result of the great disparity in the economic strength of the contracting
parties. It will apply where the inequality is the result of circumstances,
whether of the creation of the parties or not. It will apply to situations
in which the weaker party is in a position in which he can obtain goods or
services or means of livelihood only upon the terms imposed by the stronger
party or go without them. It will also apply where a man has no choice, or
rather no meaningful choice, but to give his assent to a contract or to
sign on the dotted line in a prescribed or standard form or to accept a set
of rules as part of the contract, however unfair, unreasonable and
unconscionable a clause in that contract or form or rules may be. This
principle, however, will not apply where the bargaining power of the
contracting parties is equal or almost equal. This principle may not apply
where both parties are businessmen and the contract is a commercial
transaction. In today’s complex world of giant corporations with their vast
infrastructural organizations and with the State through its
instrumentalities and agencies entering into almost every branch of
industry and commerce, there can be myriad situations which result in
unfair and unreasonable bargains between parties possessing wholly
disproportionate and unequal bargaining power. These cases can neither be
enumerated nor fully illustrated. The court must judge each case on its own
facts and circumstances.”
Further, it has been rightly contended by the learned senior counsel Mr.
Sibal by placing reliance upon Mahabir Auto Stores’s case (supra) that IOCL
being a Government of India Undertaking is bound to act fairly, reasonably
and its conduct is subject to scrutiny on the touchstone of Article 14 of
the Constitution of India.
Answer to Point No.2
Ms. Pinky Anand, the learned Additional Solicitor General on behalf of the
appellant-IOCL contended that the High Court has erred in granting the
relief of restoration of distributorship as the same is contrary to the
provision of Section 14(1)(c) of the Specific Relief Act, 1963 (for short
“the Act”). She further contended that the agreement in the instant case is
determinable in nature and as per the provision of Section 14 (1)(c) of the
Act, the agreement which is determinable in nature cannot be specifically
enforced by the court. Thus, the High Court has erroneously held that the
provision of Section 14(1)(c) of the Act is not applicable to the facts
situation of the case.
She further contended that the High Court has wrongly directed IOCL to
restore the terminated distributorship as the same is bad in law. She
submitted that once a distributorship, even if it is terminated in breach
of the contract, cannot be restored in favour of the respondent no. 2 and
the only remedy available is to claim damages from IOCL. She placed strong
reliance upon the judgment of this Court in the case of Indian Oil
Corporation Ltd. v. Amritsar Gas Services & Ors.[5].
On the other hand, Mr. Kapil Sibal, the learned senior counsel contended
that the question of maintainability of suit under Section 14(1)(c) of the
Act was never raised by IOCL either before the trial court or before the
first appellate court. He further submitted that it is apparent from the
letter of allotment and the conduct of the parties that neither the
contract was revocable nor it had become void for any reason. Thus, the
provision of Section 14(1)(c) of the Act is not attracted in the instant
case as has been rightly held by the High Court.
He further contended that the Amritsar Gas Services & Ors. case (supra)
relied upon by IOCL in its contentions has no relevance in the instant case
for the reason that the said case relates to the Law of Arbitration. In the
instant case, it is clear from the letter of allotment that there was no
arbitration clause enumerated therein to attract the Law of Arbitration and
related case laws.
We agree with the contentions advanced by the Mr. Sibal. The High Court in
the impugned judgment and order has rightly held that the provision under
section 14(1)(c) of the Act is not applicable to the facts and
circumstances of the instant case. It held thus:
“10.(iii) Furthermore, from the terms of agreement, namely, the letter of
allotment and the conduct of the parties, it appears that neither the
contract was revocable nor it had become void for any reason whatsoever.
Hence, provision of Section 14(1)(c) of the Specific Relief Act is not
applicable to the facts and circumstances of the instant case and the suit
cannot be legally held to be maintainable under the said provision…”
Furthermore, from a perusal of letter of allotment, it is clear that there
is no arbitration clause therein. Thus, the case of Amritsar Gas Services
(supra) relied upon by IOCL in its contentions is of no relevance.
Answer to Point No.3
For the reasons mentioned supra we are of the view that no error has been
committed by the High Court in setting aside the erroneous findings of the
trial court as well as the first appellate court in its judgments and
orders.
The facts and circumstances of this case are such that we are constrained
to make observation that the appellant-IOCL must be very cautious and
careful while exercising its power to terminate the distributorship of this
nature. For the aforesaid reasons the appeal is liable to be dismissed.
On the issue of cost, we are of the opinion that since the respondents
have been litigating for a period of around 37 years, spending precious
time in the courts of law seeking justice for themselves, they are entitled
thereto in the facts and circumstances of the case. The respondent nos. 2
and 3 are ex-servicemen in whose favour the distributorship was awarded,
the same was terminated arbitrarily and unfairly. This conduct on the part
of IOCL defeats the laudable object of the scheme of the Government of
India by which distributorship was allotted in favour of the ex-defence
personnel, war-widows and dependants. Thus, respondent nos. 1 & 2 deserve
to be awarded with costs.
Accordingly, we pass the following order-
i) This Civil Appeal is dismissed. The order dated 13.12.2007 granting stay
shall stand vacated.
ii) We direct the appellant-IOCL to restore the LPG distributorship in
favour of respondent nos. 1 or 2 and 3 forthwith and submit a compliance
report to this court.
iii) The cost of Rs. 1 lakh be paid to respondent nos. 1 and 2 within four
weeks from the date of receipt of the copy of the Judgment.
iv) All pending applications are disposed of.
…………………………………………………………J.
[V.GOPALA GOWDA]
…………………………………………………………J.
[AMITAVA ROY]
New Delhi,
December 1, 2015
-----------------------
[1] (2001) 5 SCC 101
[2] (1986) 3 SCC 156
[3] 1991 Supp (1) SCC 600
[4] (1990) 3 SCC 752
[5] (1991) 1 SCC 533
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