IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE V.GIRI TUESDAY, THE 7TH APRIL 2009 / 17TH CHAITHRA 1931 WP(C).No. 22607 of 2008(W) --------------------------------------- PETITIONER: ------------------- KUMARI LEKSHMI.T.S. PROPRIETRIX, M/S. MASS FUELS, VELLAYAMBALAM, TRIVANDRUM-10. BY MR.S.GOPAKUMARAN NAIR, SENIOR ADVOCATE, ADV. MR.M.CHANDRABOSE. RESPONDENTS: ------------------------ 1. THE INDIAN OIL CORPORATION, (IOC) REPRESENTED BY THE CHAIRMAN, 3079/03 SADIQ NAGAR, J.B.TITO MARG, NEW DELHI -110 049 2. THE GENERAL MANAGER, THE INDIAN OIL CORPORATION LTD, KERALA STATE OFFICE, PANAMPILLY AVENUE, PANAMPILLY NAGAR P.O.,COCHIN-36 3. THE CHIEF L.P.G.MANAGER, THE INDIAN OIL CORPORATION LTD, KERALA STATE OFFICE, PANAMPILLY AVENUE, PANAMPILLY NAGAR P.O.,COCHIN-36 4. THE DIRECTOR (MARKETING), INDIAN OIL CORPORATION LTD, INDIAN OIL BHAVAN, 4-9-ALI OCAVER JUNGMARG, BANDRA (EAST MUMBAI 400 051. W.P.(C). NO.22607/2008-N: 5. UNION OF INDIA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, MINISTRY OF OIL AND NATURAL GAS, CENTRAL SECRETARIAT, NEW DELHI. R1 TO R4 BY ADVS. MR. SHAFFIQUE, S.C, MR. E.K.NANDAKUMAR, MR.A.K.JAYASANKAR NAMBIAR, MR.K.JOHN MATHAI, MR.P.BENNY THOMAS, MR.ANIL D. NAIR, MR.V.J.ANAND, R5 BY MR. P.PARAMESWARAN NAIR, ASST.S.G. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 07/04/2009,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C). NO.22607/2008-N: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: COPY OF THE AGREEMENT DTD. 19/04/96 EXECUTED BETWEEN THE PETITIONER AND THE R.1. INDIAN OIL CORPORATION. EXT.P.1.A: COPY OF THE RELEVANT PART OF THE LPG MARKETING DISCIPLINE GUIDELINES. EXT.P.2: COPY OF THE SUSPENSION ORDER DTD. 28/03/2008 ISSUED BY THE R.3. EXT.P.3: COPY OF THE REPRESENTATION DTD. 01/04/2008, ADDRESSED TO THE GENERAL MANAGER, I.O.C., KERALA STATE OFFICE, THE 2ND RESPONDENT, BY THE PETITIONER. EXT.P.4: COPY OF THE REPRESENTATION DTD. 01/04/2008, ADDRESSED TO THE GENERAL MANAGER, I.O.C. KERALA STATE OFFICE, THE 2ND RESPONDENT. EXT.P.5: COPY OF THE REPLY DTD. 17/06/2008 TO THE SHOW CAUSE BY THE PETITIONER. EXT.P.6: COPY OF THE DETAILED REPRESENTATION DTD. 01/07/2008 SENT BY THE PETITIONER TO THE DIRECTOR (MARKETING) THE 4TH RESPONDENT. EXT.P.7: COPY OF THE TERMINATION ORDER DTD. 11/07/2008 OF HER DISTRIBUTORSHIP ISSUED BY THE GENERAL MANAGER, I.O.C. EXT.P.8: COPY OF THE LETTER DTD. 16/04/2008 WRITTEN BY THE CHIEF AREA MANAGER, I.O.C. TO THE PETITIONER. EXT.P.9: COPY OF THE LETTER DTD. 13/05/2008. EXT.P.10: COPY OF THE REPLY DTD. 02/02/2006 IN RESPECT OF THE INSPECTION ON 10/01/2006. EXT.P.11: COPY OF THE REPLY DTD. 30/11/2007 IN RESPECT OF THE INSPECTION ON 14/11/2007. RESPONDENTS' EXHIBITS: EXT.R3.A: COPY OF THE COMMUNICATIONS DTD. 13/11/1996 ISSUED BY RESPONDENT. EXT.R3.B: COPY OF THE COMMUNICATIONS DTD. 17/12/1996 ISSUED BY RESPONDENT. EXT.R3.C: COPY OF THE COMMUNICATIONS DTD. 29/01/1997 ISSUED BY RESPONDENT. W.P.(C). NO.22607/2008-N: EXT.R3.D: COPY OF THE COMMUNICATIONS DTD. 02/09/1997 ISSUED BY RESPONDENT. EXT.R3.E: COPY OF THE COMMUNICATIONS DTD. 23/11/2006 ISSUED BY RESPONDENT. EXT.R3.F: COPY OF THE COMMUNICATIONS DTD. 21/06/2007 ISSUED BY RESPONDENT. EXT.R3.G: COPY OF THE LETTER DTD. 27/06/2001 ISSUED BY THE ADDL. DIRECTOR GENERAL OF POLICE (PRISONS). EXT.R3.H: COPY OF THE REPLY DTD. 12/06/2001 ISSUED BY THE RESPONDENT TO THE DIRECTOR GENERAL OF POLICE (PRISONS). EXT.R3.I: COPY OF THE EXPLANATION DTD. 18/06/2001 TENDERED BY THE PETITIONER ON THE SHOW CAUSE NOTICE ISSUED BY THE RESPONDENT ON THE COMPLAINT RECEIVED FROM THE CENTRAL PRISON. EXT.R3.J: COPY OF THE LETTER DTD. 24/06/05 ISSUED BY THE KERALA STATE POLLUTION CONTROL BOARD. //TRUE COPY// P.S. TO JUDGE. Prv. V.GIRI ---------------------------------------- W.P.(C)No.22607 of 2008 ----------------------------------------- Dated this the 7th day of April, 2009. JUDGMENT The petitioner, a Distributor of LPG Marketted by the Indian Oil Corporation, is aggrieved by Ext.P7 letter/proceedings issued by the respondent terminating the distributorship. It is contended that the termination of the distributorship is highly arbitrary and high handed and the same requires to be set aside, followed by a direction to the respondents to restore the distributorship of LPG to the petitioner along with all refill connections, cylinders, software etc. 2. The petitioner has been running the distributorship since 1996. Ext.P1 is the Distributorship Agreement executed by her. In addition to Ext.P1 agreement, reference is made to LPG Marketing Discipline Guidelines (MDG-2001) regulating disciplinary proceedings and action against a distributor. It is purported to be an independent format providing for penal action and the punishment that could be imposed on a distributor varying W.P.(C)No.22607 of 2008 :: 2 :: from imposition of a fine to termination of the dealership. There are major offences varying from - forced sale of stove etc., to newly enrolled customers - to not giving rebate on non-home delivery excluding C & C within the area of distributor. Minor offences vary from unauthorised out of turn delivery of refill by distributor's deliverymen excluding normal bunching of bills for backing clearances as approved by field officers/oil co office to -unauthorised out of turn release of additional cylinders. A third offence in the case of major irregularities could be visited with the termination of the dealership, whereas the 4th, repetition in the case of minor offences would also result in termination of dealership. 3. Insofar as the petitioner is concerned, vide Ext.P2, noting certain irregularities which allegedly took place from 1996 onwards extending up to 2007, the petitioner's dealership was suspended with effect from 28.3.2008. Ext.P3 reply was given by the petitioner seeking W.P.(C)No.22607 of 2008 :: 3 :: revocation of the suspension. It was not done. Ext.P4 show cause notice was then issued raising several specific allegations, many of them relatable to instances which have taken place from 1996 to 2003. Ext.P5 reply was given by the petitioner detailing the charges, followed by Ext.P6 representation for the same purpose. Nevertheless, Ext.P7 termination order was issued, terminating the petitioner's distributorship. Ext.P7 is challenged in this writ petition. 4. A detailed counter affidavit has been filed by the respondents and a reply affidavit has been filed by the petitioner. 5. I heard Mr.Gopakumaran Nair, learned Senior Counsel for the petitioner and Mr.A.M.Shaffique, learned Senior counsel appearing for the respondents. 6. The respondents refer to Clause 37(a) of Ext.P1 Distributorship Agreement which reads as follows: “Any dispute or difference of any nature whatsoever any claim, cross-claim, counter-claim or set W.P.(C)No.22607 of 2008 :: 4 :: off of the Corporation against the Distributor or regarding any right liability, act, omission on account of any of the parties hereto arising out of or in relation to this agreement shall be referred to the Sole Arbitration of the Director (Marketing) of the Corporation or of some Officer of the Corporation who may be nominated by the Director (Marketing). The Distributor will not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an Officer of the Corporation or that he has dealt with the matters to which the contract relates or that in the course of his duties as an Officer of the Corporation he had expressed views on all or any other matters in dispute or difference. In the event of the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, the Director (Marketing) as aforesaid at the time of such transfer, vacation of office or inability to act may in the discretion of the Director (Marketing) designate another person to act as arbitrator in accordance with the terms of the agreement to the end and intent that the original Arbitrator shall be entitled to continue the arbitration proceeding notwithstanding his transfer or vacation of office as an officer of the Corporation if the Director (Marketing) does not designate another person to act as arbitrator on such transfer, vacation of office or inability of original arbitrator. Such persons shall be W.P.(C)No.22607 of 2008 :: 5 :: entitled to proceed with the reference from the point at which it was left by his predecessor. It is also a term of this contract that no person other than the Director (Marketing) or a person nominated by such Director (Marketing) of the Corporation as aforesaid shall act as arbitrator hereunder. The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to the agreement subject to the provisions of the Arbitration Act, 1940 or any statutory notification or re-enactment thereof and the rules made thereunder for the time being in force shall apply to the arbitration proceedings under this clause.” 7. It is contended that, as could be seen from the operative portion of Ext.P7, the termination of the dealership has taken place under the Distributorship Agreement, read with certain clauses dealing with major irregularities as per the Marketing Discipline Guidelines. It is contended that therefore, if the termination of the distributorship is not accepted by the dealer, there arises a dispute therefrom and the same is comprehended by Clause 37(a) of the Distributorship Agreement. W.P.(C)No.22607 of 2008 :: 6 :: 8. Mr.Gopakumaran Nair, learned Senior Counsel submits that Clause 37(a) of the Distributorship Agreement does not apply to the present case since the main allegations relate to contraventions which are listed as major or minor irregularities in the LPG Distribution Guidelines, Ext.P1(a). Ext.P1(a) does not contain an arbitration clause. Therefore, infraction of Ext.P1(a) cannot be arbitrated upon, it is contended. 9. The jural relationship between the petitioner on one hand and the respondents herein on the other, was brought into existence by the execution of Ext.P1 agreement. There is principal-agent relationship brought into vogue by reason of the agreement. Several disputes could arise therefrom and all such disputes are comprehended by the Distributorship Agreement. Termination of the agreement is by resort to the following clauses under Ext.P1 agreement. W.P.(C)No.22607 of 2008 :: 7 :: “1(b)(iv), 5. 7, 9, 11, 18(a), 18(b), No Warranty Clause (a) (b), 23(a) 23(A), 25(a), 27(a), 27(g), 27(h), 27(k) and 27(n) of the Indane (Liquefied Petroleum Gas) Distributorship (Domestic & Commercial) agreement dated 19.04.1996, clauses of MDG 2001 Major: 1, 3, 7, 11, 12 & 13 and Minor: 2, 4, 5, 9 & 12” 10. Clause 27 of the Distributorship Agreement refers to the liberty of the Corporation to terminate the agreement forthwith or at any time after the happening of any of the events, which are listed under sub-clauses (a) to (n) of Clause 27 of the agreement. It is further made clear that the right to terminate the agreement is without prejudice or without affecting other rights of the corporation. It is possible that the Distributor may take up a contention that the action taken by the Corporation is not authorised by the agreement. But this will give rise to a dispute as comprehended by Clause 37(a) of the Distributorship Agreement, which amounts to an arbitration W.P.(C)No.22607 of 2008 :: 8 :: agreement within the meaning of Arbitration and Conciliation act, 1996. The Marketing Discipline Guidelines Ext.P1, no doubt, do not specifically provide for an arbitration. But, in my view, it does not really make any difference as the jural relationship between the parties is governed by the distributorship agreement. The marketing discipline guidelines seems to be intended to lay down certain specific punishments for irregularities. This is taking into account the large number of distributorships or dealerships prevailing in the country and the frequency with which public sector undertakings like the respondent will have to encounter cases like the present one. Rather than each case being adjudicated upon and visited with penalty that could range from censure to termination, the corporation is competent to specify the irregularity and punishment. Termination is one of the penalties that could be imposed under the marketing discipline guidelines. W.P.(C)No.22607 of 2008 :: 9 :: 11. In the circumstances, the termination order need not be subject to judicial review under Article 226 of the Constitution, since the same is also comprehended by Clause 37(a) of Ext.P1. 12. I am of the further view that Ext.P1(a) must necessarily be read in conjunction with the clauses in Ext.P1. Ext.P1(a) are guidelines of a general nature and that by itself does not result in the creation of any jural relationship between the parties. It has no independent existence capable of regulating rights of the parties. There could only be instances of contravention of Ext.P1(a) at the instance of the Corporation. That would also be comprehended by the arbitration clause contained in Clause 37(a). Otherwise, the distributor would not have a ready remedy, if there is a contravention of the MDG by the company. 13. I am, therefore, in agreement with the submission made by the learned counsel for the respondents that there is an efficacious remedy available to the W.P.(C)No.22607 of 2008 :: 10 :: petitioner by way of arbitration proceedings. I am also in agreement with the contention of the learned counsel for the respondents that the issues raised in the writ petition stems from a contractual relationship and can, therefore, be effectively adjudicated only before a forum that can permit adduction of evidence and adjudicate the disputed questions of facts. 14. Mr.Gopakumaran Nair, learned senior counsel has taken me through the allegations in Exts.P2, P4 and his reply in Ext.P5 and the ultimate findings. He contends that the allegations are of a minor nature and ought not to have been visited with an order of termination of distributorship. 15. Mr.Shaffique refutes the same and points out that earlier instances of relatively minor abberrations have been taken note of and referred only to show that Ext.P7 was not a hurried action, but a culmination of several instances of warning, verification and supervision that have taken place over the years. W.P.(C)No.22607 of 2008 :: 11 :: 16. I refrain from entering into an adjudication of these disputed questions of facts, firstly because proceedings under Article 226 of the Constitution are not the appropriate forum, and secondly because any expression of opinion by me on these disputed facts could prejudice the interests of either parties, if arbitration proceedings are initiated. For all these reasons, the writ petition is disposed of holding that it is open to the petitioner to invoke Clause 37(a) of Ext.P1, both in relation to the termination of the distributorship and for any other related ancillary claim against the respondents. Sd (V.GIRI) JUDGE sk/- //true copy//