2024 (11) TMI 1440 - HC - VAT / Sales Tax

Kerala HC dismisses writ petition challenging dealership termination, finds no natural justice violation in institutional hearing process

S. Baby Girija Versus Indian Oil Corporation Limited; The Divisional Retail Head Indian Oil Corporation Limited; The Senior Divisional Manager, Indian Oil Corporation Limited

Kerala HC dismissed petitioner's writ petition challenging dealership termination proceedings. Court held petition maintainable under Article 226 due to ... Maintainability of a writ petition under Article 226 of the Constitution of India in the case at hand - Challenge to proceedings by which the dealership should be terminated - petitioner was not the person running the retail outlet - violation of the principles of natural justice. Is the petitioner entitled to maintain a writ petition under Article 226 of the Constitution of India in the case at hand? - HELD THAT:- In N.G.Projects Ltd. [2022 (3) TMI 1589 - SUPREME COURT], the Apex Court was considering the rejection of a bid pursuant to a tender invited by the Road Construction Department, Jharkhand. Considering the afore situation, the Apex Court held that the writ court should refrain itself from endorsing the decision over the decision taken as to whether or not to accept the bid of a tenderer, especially when the courts do not have the expertise to examine the terms and conditions of the present day economic activities of the State. The Apex Court also cautioned that the courts should not find fault with a magnifying glass in its hand; rather, the courts are only to examine whether the decision-making process is correct. In my opinion, the afore judgment cannot be applied to the facts and circumstances of the case at hand, insofar as, here, the petitioner is complaining of the absence of procedural fairness since, according to her, there is violation of the principles of natural justice. The Apex Court, in the afore judgment, has also held that the High Court can examine whether the decision-making process is one in tune with the known principles of administrative law. Insofar as the allegation raised by the petitioner is with reference to the violation of the principles of natural justice at the hands of the 1st respondent herein, which is admittedly an instrumentality of the State, the petitioner is justified in approaching this Court under Article 226 of the Constitution of India. Is there any violation of the principles of natural justice in the case at hand? - HELD THAT:- The fundamental rule that the “one who decide must hear” may not be strictly applied to “institutional hearing”. In that case, ultimately this Court found that a hearing to be provided by the Commissioner of Commercial Taxes with reference to Section 59A(2) of the KGST Act was not institutional but personal. It is in the afore circumstances that this Court interfered with the impugned order therein and directed reconsideration of the issue. A reference to the agreement entered into between the petitioner and the respondent Corporation is also to be made. The petitioner has produced the said agreement as Ext. P1 along with this writ petition. It is seen that the agreement is entered into between the “Indian Oil Corporation” and the petitioner herein. A reading of the said agreement would also show that the appointment of the petitioner as the dealer is effected by the “Corporation.” It is only that on behalf of the Corporation, a designated Manager is signing the agreement. The petitioner, being the dealer, is to act according to the said terms and conditions, not to the detriment of the Corporation and also not against the terms and conditions thereof. Under clause 56 of the agreement, the respondent Corporation is granted liberty to terminate the agreement in question. Thus, it is seen that the petitioner is entering into the agreement with the respondent Corporation and is also continuing to act on the basis of the covenants of the said agreement, set out by the Corporation. Ultimately, the termination also takes place at the hands of the “Corporation”, and it is only that the Corporation is being represented by its officials. This Court notices that the impugned order at Ext. P2 is issued for and on behalf of the Indian Oil Corporation Limited and it is only that the same is communicated/signed by the State Head. A detailed procedure has already been noticed and is provided with respect to the hearing granted and the manner in which the decision is arrived at. In my opinion, it is a case of institutional hearing and the rules of natural justice, to the extent applicable, have been followed in the matter. Merely because the hearing has been extended by the then State Head and the impugned order issued by the current State Head that may not be a reason for upsetting the impugned order. Is any prejudice caused to the petitioner on account of the violation of principles of natural justice, if there is any? - HELD THAT:- There is no violation of the principles of natural justice in the case at hand. On account of the above, there is no requirement to consider this question posed. Conclusion - The writ petition was maintainable under Article 226 of the Constitution of India due to the alleged violation of natural justice. However, the Court found no violation of natural justice in the issuance of the termination order, as the hearing process was institutional. The Court emphasized that in institutional decision-making, the rule that the one who hears must also decide does not strictly apply. Petition dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this case are:i. Is the petitioner entitled to maintain a writ petition under Article 226 of the Constitution of India in the present circumstancesRs.ii. Is there any violation of the principles of natural justice in the issuance of the impugned orderRs.iii. Is any prejudice caused to the petitioner due to the alleged violation of the principles of natural justice, if anyRs.ISSUE-WISE DETAILED ANALYSIS1. Maintainability of the Writ Petition under Article 226The Court examined whether the writ petition is maintainable given the availability of an alternative remedy through arbitration as per the dealership agreement. The respondents argued that the petitioner should not be allowed to invoke writ jurisdiction because of the arbitration clause. However, the Court referenced the Apex Court's judgment in ABL International Limited, which allows the writ jurisdiction to be exercised in cases where there is a failure of natural justice, among other grounds. The Court concluded that the petitioner could maintain the writ petition as the allegations pertained to the violation of natural justice by an instrumentality of the State.2. Alleged Violation of Natural JusticeThe petitioner argued that the principles of natural justice were violated because the officer who conducted the personal hearing was not the one who issued the termination order. The petitioner relied on precedents such as Markose v. Tahsildar and Marico Industries Limited v. State of Kerala, which emphasize that the person who hears must also decide. The respondents countered that the hearing was institutional rather than personal, allowing for different officers to conduct the hearing and issue the order.The Court analyzed the nature of the hearing process, noting that the decision-making process involved multiple levels of scrutiny and was institutional in nature. The Court referenced the Supreme Court's decisions in Ossein and Gelatine Manufacturers' Association v. Modi Alkalies and Chemicals Limited and Kalinga Mining Corporation v. Union of India, which support the validity of institutional hearings where the decision-making process involves multiple officers. The Court concluded that the hearing was institutional and that the principles of natural justice were not violated.3. Prejudice Due to Alleged ViolationGiven the Court's finding that there was no violation of the principles of natural justice, it did not need to address whether any prejudice was caused to the petitioner.SIGNIFICANT HOLDINGSThe Court held that the writ petition was maintainable under Article 226 of the Constitution of India due to the alleged violation of natural justice. However, the Court found no violation of natural justice in the issuance of the termination order, as the hearing process was institutional. The Court emphasized that in institutional decision-making, the rule that the one who hears must also decide does not strictly apply. The petition was dismissed, but the petitioner was allowed to challenge the termination order before the appellate authority on the merits.