2002 (12) TMI 564 - SC - Companies Law

Dealership termination invalidated as based on irrelevant allegations; writ relief preferred over compelled arbitration to protect livelihood

Harbanslal Sahnia And Anr. Versus Indian Oil Corpn. Ltd. And Ors.

SC held that the termination of the appellants' dealership was not legitimately based on alleged non-cooperation or discourteous behavior; the appellants ... Writ petition laying challenge to the order of termination - Termination of dealership - Non-cooperation and discourteous behavior of the appellants - Held that:- The order of termination is certainly not founded on these grounds and, therefore, this aspect need not be pursued further. It may be stated that the appellants have volunteered to file a statement made on affidavit during the course of hearing before this Court, expressing regrets for any incident of departure from normal behavior and courtesy expected of the appellants towards the officials of the respondent-Corporation and submitting that it might have happened inadvertently but in future the appellants would be more careful and shall show full regard to the visiting officials of the respondent-Corporation and extend their full cooperation in their dealings with the respondent. In an appropriate case in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the Fundamental Rights; (ii) where there is failure of principles of natural justice or, (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act and is challenged. As in the present case the petitioner's dealership, which is their bread and butter came to be terminated for an irrelevant and non-existent cause. In such circumstances the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings. Issues:Termination of dealership agreement on grounds of sample failure, non-cooperation, and discourteous behavior. High Court's dismissal of writ petition due to arbitration clause in the agreement.Analysis:The judgment involves the termination of a dealership agreement between Indian Oil Corporation Limited and the appellants based on various grounds. The Corporation terminated the dealership due to a sample failure from the appellants' outlet, which did not meet standard specifications. Additionally, allegations of non-cooperation and discourteous behavior by the appellants were made. The State Government suspended the license of the appellants and imposed a fine. The High Court dismissed the appellants' writ petition, citing the presence of an arbitration clause in the agreement as the appropriate remedy. The appellants argued that the termination was based on irrelevant and non-existent grounds, emphasizing violations of government orders regarding sample testing procedures and delays in lab tests.The appellants contended that the cancellation was solely based on the sample failure, with vague allegations of non-cooperation and deficiencies in sales and record-keeping. The appellants provided an affidavit expressing regret for any misconduct and assured cooperation with Corporation officials in the future. The Supreme Court noted that the rule of exclusion of writ jurisdiction by the availability of an alternative remedy is discretionary, not compulsory. The Court highlighted that in cases involving fundamental rights enforcement or failures of natural justice, the High Court can still exercise writ jurisdiction. In this case, the termination of the dealership on irrelevant grounds warranted relief through the writ petition rather than arbitration proceedings.Ultimately, the Supreme Court allowed the appeals, setting aside the High Court's judgment and quashing the Corporation's termination order. The Court found the termination unjustified and ruled in favor of the appellants. No costs were awarded in the judgment.