IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 24.4.2009 CORAM THE HON'BLE MR.JUSTICE P.JYOTHIMANI AND THE HON'BLE MRS.JUSTICE ARUNA JAGADEESAN W.A.No.495 of 2008 M.P.No.1/08 1. Kurshed Sharfudeen 2. S.Hafez Khadar Ibrahim .. Appellants/Petitioner Vs. 1. IBP Company Limited having its Regional Office at No.10, Mayor Ramanathan Road Chetpet, Chennai-31. 2. The Divisional Manager IBP Company Limited Madurai Divisional Office Plot Nos.3 and 4 Ponmeni By-pass Road Madurai-625 016. 3. The Indian Oil Corporation Limited rep. by its Divisional Manager Ponmeni N.H.7, By-Pass Road Madurai-625 016. .. Respondents/Respondents PRAYERS: Against the order of the learned Single Judge dated 18.12.2007 made in W.P.No.28758 of 2007. Presented to this Court under Article 226 of the constitution of India to issue a Writ of Certiorarified Mandamus or any other appropriate writ calling for the records of the 3rd respondent herein relating to his proceedings made under Ref.No. CH4/9 COCO at S.No.152/4B, Pudukkottai North Panchayat, Alangudi Road, Pudukottai dated 11.7.2007 quash the same and consequently direct the respondent to allot the retail outlet dealership in respect of Alangudi Road, Pudukottai Dist. to the petitioners herein. For Appellants : Mr.M.Palani For Respondents: Mr.Abdul Saleem for M/s.Anand, Abdul & Vinoth Associates https://hcservices.ecourts.gov.in/hcservices/ JUDGMENT P.JYOTHIMANI,J. This writ appeal is directed against the order of the learned Single Judge dated 18.12.2007 passed in W.P.No.28758 of 2007, dismissing the same. 2. The license to run a petroleum outlet at Alangudi Road, Pudukkottai was granted to one Mrs.Sumathi for a period of one year from 2002-2003 and it was subsequently renewed. It appears that she was not able to continue to run the outlet and therefore, she proposed to sell the land, which was purchased by the appellants, who are mother and son respectively. 3. It is the case of the appellants that, after the purchase, they have applied to the second respondent/ Corporation and based on an interview, a contract was entered into between the Corporation and the appellants, originally, for one year 2004-2005, which was renewed for the years 2005-2006 and 2006-2007 and was subsequently renewed for a period of six months, valid up to 30.9.2007. During the subsistence of the contract, the second respondent has issued a notice on 11.7.2007, terminating the contract with effect from 10.8.2007. It was aggrieved over the said order of termination of the contract, the appellants have filed the writ petition. 4. Considering the submissions made on behalf of the appellants that (i) what was granted to the appellants was not a license, but a permission, and when the same was renewed, the termination of contract, before the expiry of renewed period without any reason or fault on the appellants, would amount to denial of principles of natural justice; and (ii) there has not been equal bargaining power between the parties and therefore, the termination of license was arbitrary, the learned Single Judge, by relying upon one of the clauses of the agreement, namely Clause 48, which provides for such termination of contract even before the expiry of the period without assigning any reason, has, ultimately, dismissed the writ petition holding that there is no legitimate expectation and that there is no vested right conferred on the appellants to continue the permission or license. 5. The admitted fact remains that the land to an extent of 7185 sq.ft. belonged to one Mrs.Sumathi, to whom the second respondent has granted license to run a petroleum outlet in the year 2003. It was the case of the appellants in the writ petition that in the year 2004, the first appellant has applied for grant of dealership for petroleum retail outlet in favour of the second appellant at Annavasal Road, owned by her. It is their case that, when such application was pending, the first respondent has invited the second appellant for an interview for award of license to run petroleum outlet. It is the case of the appellants that the first respondent https://hcservices.ecourts.gov.in/hcservices/ has advised that the above said Mrs.Sumathi is running a unit, which has become sick and not viable due to improper management, and the second appellant can purchase the land from her and it was based on the said promise, it was stated that the second appellant has purchased the above said land from Mrs.Sumathi. 6. It is also stated that, in the meantime, the first respondent has also advised the appellants to take the place on contract basis. Thereafter, the contract was stated to have been awarded to the second appellant by letter dated 8.3.2004, effective from 31.3.2004 for one year. It was renewed from 1.4.2004 to 31.3.2006 and it was thereafter renewed for a further period of one year 1.4.2006 to 31.3.2007, which was subsequently renewed for six months, valid up to 30.9.2007. As stated above, before the expiry of the period, a notice of termination was issued on 11.7.2007, terminating the contract with effect from 10.8.2007. 7. A reference to the order passed by the second respondent dated 8.3.2004 addressed to the second appellant shows that the second appellant has been selected as Maintenance and Handling Contractor for operation of its COCO at Pudukkottai. Therefore, it was not a license or dealership granted to the second appellant by the second respondent, but only a contract for maintenance and handling of their COCO outlet. 8. After the purchase of the land from Mrs.Sumathi, who has originally leased out the property to the second respondent for a period of fifteen years, since the said previous owner Sumathi has written to the second respondent about the sale of property to the second appellant, it appears that the above said contract has been awarded by the second respondent to the second appellant. 9. The contract, which was entered into between the second appellant and the second respondent, itself is captioned as a "Contract for Maintenance and Handling". The contract is for the purpose of selling the petroleum products of the second respondent, more particularly, Petrol, Diesel, lubricants and such other petroleum products and also to render services as per the said contract and for the purpose of the same. It was with a desire to engage a contractor to operate the outlet for retail sale of the said products, the second appellant was appointed as a Maintenance and Handling contractor. 10. Clause 48 of the said contract, which is as follows, makes it clear that the agreement may be terminated at the option of either party by giving one month's notice in writing and without assigning any reason. It also states that, in case of breach of contract, the second respondent reserves its right to terminate the contract immediately, which means without notice. https://hcservices.ecourts.gov.in/hcservices/ "48. The agreement will be for a period of ONE YEAR effective from 31.3.2006 to 30.3.2007 subject to the renewal by the year 2007 at the Company's option at the same rates, and on the same terms and conditions as are herein contained. Without prejudice to the aforesaid, this Agreement may be terminated at the option of either party by giving at least one month's notice in writing to the other party, without assigning any reason whatsoever. In case of breach of contract, the Company reserves the right to terminate this Agreement forthwith. Unless otherwise mentioned or renewed in writing this Agreement stands automatically terminated at the end of the agreement period. If any information given by the M & H Contractor in his application for appointment shall be found to be untrue or incorrect, in material respect, the Company reserves the right to terminate this Contract forthwith." (emphasis supplied) 11. Clause 51 of the said agreement, which is as follows, provides for resolution of dispute by arbitration process. "51. Any dispute or difference of any nature whatsoever or regarding any right, liability, act, omission on account of any of the parties hereto arising out of or in relation to this Agreement or any interpretation of any clause or provision hereof shall be referred to the sole arbitration of the Head of the Region, of the Company, or of some officer of the Company who may be nominated by the Head of the region. The M & H Contractor will not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an office of the Company. In the event the arbitrator to whom the matter is originally referred to is transferred or vacates his office or is unable to act for any reason the Head of the Region as aforesaid at the time of such transfer, vacating of office or inability to act, shall designate another person to act as an arbitrator in accordance with the terms of the Agreement. Such person shall be entitled to proceed with the reference from the point at which it was left by his predecessor. It is also a term of this Agreement that no person other than the Head of the Region or a person nominated by him/her shall act as sole 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 & Conciliation Act, 1996 and the Rules made thereunder or any statutory modification or re-enactment thereof and for the time being in force." https://hcservices.ecourts.gov.in/hcservices/ (emphasis supplied) 12. It is not in dispute that after the expiry of contract period on 31.3.2007, the same was extended by the second respondent in favour of the second appellant up to 30.9.2007. 13. By a termination letter dated 11.7.2007, the second respondent has given one month's notice, as per clause 48 of the above said agreement, stating that the contract stands terminated with effect from 10.8.2007, which is as follows: "We hereby give one month's notice w.e.f. 11.07.07 as per Clause No.48 of the M&H agreement executed on 9.6.2006, and terminate the M&H Contract awarded to you for our COCO at Sy.No.152/4B, Pudukottai North Panchayat, Alangudi Road, Pudukottai. Necessary instruction for the safe handover of the COCO to our Company Officials will be adivsed by our Dy.Manager(S), Madurai. Please be advised that your contract stands terminated on 10.8.2007." 14. On the above said undisputed factual background, the primary contention raised by the learned counsel for the appellants, against the said termination order, is that: (i) the termination order is discriminatory and violative of Article 14 of the Constitution of India; (ii) the order terminating the contract is a colourable exercise of power, since the intention of the second respondent, after terminating the contract, is to give it to a third party, which cannot be permitted, as under the contract, there is a clause for renewal and, in fact, the second respondent has renewed the contract for nearly three terms; and (iii) the termination is hit by the principles of promissory estoppel, by which the learned counsel means that it was at the instance of the first respondent, the second appellant has purchased the property and developed the property with a hope that the contract will be continued. 15. As far as the maintainability of the writ petition in contractual matters, it is the contention of the learned counsel for the appellants that for termination of contract if no reasons are adduced, then the writ petition will be maintainable. 16. According to the learned counsel for the appellants, in cases where the parties have unequal bargaining powers, arbitrariness has to be checked only by this Court under Article 226 of the Constitution of India and in this regard, he would rely upon the https://hcservices.ecourts.gov.in/hcservices/ judgment of the Supreme Court in United India Insurance Company Limited v. Manubhai Dharmasinhbhai Gajera and Others, JT 2008 (5) SC 457 and Delhi Development Authority and Another v. Joint Action Committee, Allottee of SFS Flats and Others, [2008] 2 SCC 672. 17. To substantiate his contention that even in respect of contractual matters, if there is discrimination, this Court can interfere, the learned counsel for the appellants would rely on the decisions of the Supreme Court in Ramana Dayaram Shetty v. The International Airport Authority of India and Others, AIR 1979 SC 1628, M/s.Dwarakadas Marfatia & Sons v. Board of Trustees, Bombay Port, AIR 1989 SC 1642 and Shrilekha Vidyarthi v. State of U.P., AIR 1991 SC 537. 18. The learned counsel for the appellants would rely upon the decision of the Supreme Court in Narendra Kumar Maheswari v. Union of India, AIR 1989 SC 2138 to substantiate his contention that in case of irrationality and irrelevancy the interference by this Court is permissible. 19. He would also rely upon the judgment of the Supreme Court in State of Arunachal Pradesh v. Nezone Law House, [2008] 5 SCC 609 to contend that in the absence of any reason, which is given in the order of termination, especially when it is not in dispute that the second respondent is going to let the outlet to only a third party, a writ petition would lie. 20. To substantiate his contention about legitimate expectation, the learned counsel for the appellants would rely upon the decision of the Supreme Court in Ibrahimpatnam Taluk Vyavasaya Collie Sangham v. K.Suresh Reddy and Others, JT 2004 [6] SC 70 and Beg Raj Singh v. State of U.P. and Others, [2003] 1 SCC 726. 21. On the other hand, it is the submission of Mr.Abdul Saleem, learned counsel appearing for the respondents, that what was given to the second appellant was not a dealership, but only a service contract for maintenance and handling and that was also only on a temporary and adhoc basis, pending the regular dealership contract to be awarded to the persons as per law. 22. It is the submission of the learned counsel for the respondents and also not in dispute that the previous owner Mrs.Sumathi has leased the land to the second respondent for a period of fifteen years from 18.7.2003 for running an outlet. Based on that, in fact, the second respondent has given a contract of service to the husband of Mrs.Sumathi, Mr.Nandagopal, for a period of six months from 1.10.2003 to 1.4.2004. It was thereafter, when the second appellant has applied, the contract was given to him, which was renewed up to 30.9.2007. That was originally given by the Indian https://hcservices.ecourts.gov.in/hcservices/ Oil Corporation, which has subsequently merged with the second respondent. 23. It is also his contention that it has been the specific case of the respondents that at no point of time they have insisted the appellants to purchase the property from Mrs.Sumathi and the purchase of land by the second appellant from the said Mrs.Sumathi on 24.7.06 was on his own volition. It is also his case that what was purchased by him was only land, whereas the infrastructure has already been provided by the second respondent and therefore, it is not correct to state as if the appellants, after the purchase of land, have spent substantial amount for the purpose of improvement. 24. It is also his submission that a clause in the contract, which states that the maintenance and handling contractor should inform the Company at least thirty days in advance of the expiry of the license or permission to enable the company to renew, relates to the other statutory authorities like the Fire Department, etc., who grant permission for the purpose of running the retail outlet for petroleum products. 25. The learned counsel for the respondents submits that this being a contract given only for a limited period, and the respondents having never promised anything to the appellants, the plea of legitimate expectation raised by the appellants is unsustainable. 26. He would also submit that after purchase of the property, by letter dated 12.8.2007, the first appellant has, in fact, terminated the lease agreement with the second respondent/Corporation. This will prove that the appellants case of legitimate expectation has no basis. He would also submit that even in a suit filed by the appellants against the Corporation, it was never whispered by the appellants that the Corporation has insisted the appellants to purchase the land from Mrs.Sumathi. 27. It is his further submission that, after dismissal of the writ petition, the contract for Maintenance and Handling has already been awarded to one Manikammal. 28. The learned counsel for the respondents also relied on the decisions of the Supreme Court in Director General of Foreign Trade v. R.B. & Sons, 2004 [5] CTC 696 to substantiate his contention that, even if the contract is terminated, the right of the appellants is to only claim damages. 29. He would also submit that the appellants have no vested interest, since what was granted is adhoc arrangement of giving job work and he would rely upon the judgments of the Supreme Court in Sanjana M.Wig v. Hindustan Petro Corporation Ltd., 2005 [5] CTC 292 https://hcservices.ecourts.gov.in/hcservices/ and ABL International Ltd. v. Export Credit Guarantee Corporation of India Limited, [2004] 3 SCC 553. 30. We have heard the learned counsel for the appellants as well as the respondents and also perused the various records, including the order of the learned Single Judge, which is questioned before us. 31. On the factual matrix, as enumerated above, it is clear that what was granted by the second respondent to the second appellant was not petroleum dealership by following the provisions of the relevant law. Simply because the second appellant has applied for regular dealership and even assuming that an interview has been conducted for that, so long as such regular dealership has not been conferred on him, it cannot be said that the second appellant has any right of dealership in respect of the sale of the petroleum products of the second respondent. 32. On the other hand, as per the contract, which has been granted, as stated above, it is clear that what was given to the second appellant was only contract in respect of the sale of petroleum products of the second respondent/Company, including service and maintenance of the outlet situated in the land, which originally belonged to one Mrs.Sumathi. 33. In the context that Mrs.Sumathi has leased out the said land to the second respondent for fifteen years and based on that lease, the second respondent has put up various infrastructure for the purpose of making the place as a petroleum outlet; and that the second appellant was only given a contract of maintenance and handling, it is not possible to accept the contention of the learned counsel for the appellants as if, after purchase of the property from Sumathi, they have spent huge amount for developing the said land. 34. Equally, it is not possible to accept the contention of the learned counsel for the appellants that the second appellant was forced to purchase the property from Mrs.Sumathi, at the advise of the first respondent. On the categoric stand taken by the first respondent that such an advise has never been given and in the absence of any document or any other acceptable evidence to that effect, the contention in that regard has to be totally rejected. 35. What has, therefore, been granted as a contract is only a contract to render maintenance and service by sale of petroleum products of the second respondent and that appears to be on adhoc basis, subject to the final decision by the second respondent in awarding regular dealership as per law. In such a situation, the relationship between the second respondent and the appellants is purely contractual and the question of any statutory obligation on the part of the second respondent, under any law, does not arise. https://hcservices.ecourts.gov.in/hcservices/ 36. The clause in the agreement, which is relied upon by the learned counsel for the appellants, in Clause (1)(r), which states as follows, can be only taken to mean that the second respondent desires the second appellant to inform in advance of the expiry date of the licenses and permissions in order to enable the second respondent to renew and that, by itself, does not confer any right on the second appellant to have permanent renewal of the contract. "1(r). The M & H Contractor will inform the Company at least 30 days in advance of the expiry date of the Licenses, permissions, etc. of the retail outlet to enable the Company to renew the same." 37. This being a contract in simplicitor between the second appellant and the second respondent, it has no statutory force whatsoever. Even in cases where there is a breach of contract, the remedy open to the appellants is not certainly by way of filing a writ petition under Article 226 of the Constitution of India. 38. In fact, the clause in the contract, especially Clause 48, enumerated above, makes it very clear that, even during the continuance of the period of contract, it is open to any one of the parties to the contract to terminate the contract, for which the only requirement is giving one month's notice in writing. In fact, it makes it clear that no reason need be assigned for the purpose of terminating the contract, by giving thirty days notice. It is only in cases where there is a breach of contract, termination can be made immediately. In the present case, inasmuch as the second respondent has given such notice of thirty days, as contemplated under Clause 48, there is absolutely no scope to contend that such termination letter should give reasons. Apart from the fact that, under the terms of the contract between the second appellant and the second respondent, no reason need be assigned and, therefore, the termination order cannot be said to be illegal, it can never be contended that in spite of such specific clause under the contract reason should be assigned. 39. On the factual situation, as stated above, and in the absence of any statutory obligation that has been imposed on the second respondent in respect of the adhoc contract for maintenance and handling, it cannot be held that the second respondent, being a public authority, should give proper reason even for the purpose of terminating the contract. It is true that the second respondent, being a public authority performing the function of sale of petroleum products, which is certainly public in nature, is bound by the principles of natural justice and fair play in cases of awarding contracts, for example, while awarding contract of dealership, no discrimination can be exercised for the purpose of picking and choosing an individual dealer as a dealer and equally opportunity must be given to all, but, in cases where the terms of contract are violated, we do not think that the principles of natural justice can https://hcservices.ecourts.gov.in/hcservices/ be raised in a writ petition under Article 226 of the Constitution of India. 40. In Harbanslal Sahnia and Another v. Indian Oil Corporation Limited and Others, [2003] 2 SCC 107, relied upon by the learned counsel for the appellants, the Hon'ble Supreme Court was dealing about the termination of dealership of petroleum products, on the basis that the sample taken in the outlet was not satisfied and matching with the standard specifications. On the facts of that case, finding that the sample test was carried out in violation of the instructions contained in the Government Orders, the termination of dealership was set aside, holding that even in contractual matters the High Court has jurisdiction under Article 226 of the Constitution of India in three instances, viz., (i) to enforce fundamental rights; (ii) failure of principles of natural justice; and (iii) order becomes wholly without jurisdiction. The operative portion of the said judgment reads as follows: "7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed is concerned, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative