*THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY + Writ Petition No.3131 of 2009 % 01-04-2011 # M/s E. Satyanarayana & Co., Indian Oil Dealer, Nalgonda District Rep. By its Managing Partner ..petitioner And $ The Indian Oil Corporation Limited, rep. by Chief Divisional Retail Sales Manager Vijayawada, and another ..Respondents !Counsel for the petitioner : Sri E. Manohar, learned Senior Counsel ^Counsel for respondents : Sri R. Raghunandan Rao, for R-1 Smt. V. Sujatha, for R-2 < Gist: > Head Note: Citations: THE HON’BLE MR JUSTICE L. NARASIMHA REDDY Writ Petition No.3131 of 2009 ORDER: On 23-05-1979, the Indian Oil Corporation Limited, the 1st respondent herein, appointed one Sri E. Satyanarayana, as its dealer, to run a retail outlet at Miryalaguda of Nalgonda District. He established the outlet in the name of M/s E. Satyanarayana and Company. He died on 09-10-1980, and his three sons, by name, E. Purnachander, Dhanunjaya and Venkatesham succeeded to the dealership. With the consent of the 1st respondent, they constituted a partnership firm. Venkatesham retired from the partnership with effect from 27-06-1996, and the same was approved by the 1st respondent. Another partner, Purnachander, died on 13-06-1998. An application submitted by the remaining partner, Dhanunjaya to take Smt. E. Radha, wife of Dhanunjaya, as partner, was not positively responded, and only one partner is running the outlet. On 09-05-2007, an inspection was conducted by the officials of the 1st respondent. Certain minor infractions, as to the services being rendered for providing clean drinking water, free air facility, etc., were noticed. Further, in the course of inspection of the premises, they are said to have come across certain papers, which are to the effect that Smt. Radha entered into an agreement with one, Sri Subba Rao, to enable him to run the dealership, and that a G.P.A was executed in his favour. Another inspection was conducted on 20-05-2007, and by that time, the deficiencies of the services of supply of clean drinking water, free air, etc., are said to have been rectified. A show-cause notice was issued on 18-07-2007 by the Company to the petitioner, in the name of the firm, pointing out that the entrustment of the dealership to a GPA or execution of agreements is contrary to the clauses of the Dealership Agreement. Ultimately, the petitioner was directed to explain within seven days, as to why the dealership be not terminated. The petitioner submitted explanation on 27-07-2007. Not satisfied with that, the 1st respondent terminated the dealership of the petitioner, through order dated 14-02-2008. Four days thereafter, the possession of the entire retail outlet was taken over by the 1st respondent. The petitioner filed W.P.No.3824 of 2008 before this Court, against the order of termination. An interim order was passed on 25- 02-2008, directing that the petroleum outlet shall not be entrusted to third party. It is however, stated that the 1st respondent entrusted the outlet to the 2nd respondent; a dealer, who was selected in the year 2005. The writ petition was allowed on 11-07-2008, on the ground that the 1st respondent did not submit reasons, in support of its conclusion, to terminate the dealership. Liberty was given to the 1st respondent to pass fresh orders, duly furnishing the reasons. Writ Appeal filed against the said order was dismissed. Thereafter, the 1st respondent passed fresh order on 16-01-2009, terminating the dealership of the petitioner. The same is challenged in this writ petition. The petitioner contends that Smt. Radha, the wife of one of the deceased partners, did not become the partner, on account of lack of clearance from the 1st respondent, and there was absolutely no basis for taking into account, any agreements, or arrangements, said to have been made by her, with the third parties. It is also stated that a dealer has no freedom, whatever, to enter into agreement or arrangement and without the approval of the 1st respondent, and that by the same reasoning, the 1st respondent has no basis or justification to infer anything from the acts and omissions on the part of the persons, who are not in the partnership. The 1st respondent filed a counter-affidavit, justifying its action to terminate the dealership of the petitioner. Reference is made to various clauses of the agreement, and it is pleaded that the management of the dealership was entrusted to certain third parties, without any approval of, or intimation to the Company. An objection is raised as to the maintainability of the writ petition. Sri E. Manohar, learned Senior Counsel appearing for the petitioner submits that the manner in which a partnership is to be constituted or reconstituted, vis-à-vis a dealership of the petitioner is totally governed by the 1st respondent, and without its approval, even minor changes cannot be effected. He contends that a request made by the sole surviving partner, to take his sister-in-law, Smt.Radha, as one of the partners, was not acceded to by the 1st respondent, and in that view of the matter, there was no basis for the 1st respondent to give any credence to the so-called arrangement or agreements, said to have been entered by her. He submits that any penal action could have been taken, if only the change in dealership or partnership has taken place with the participation of the sole surviving partner. Learned counsel submits that contrary to the interim orders passed by this Court in W.P.No.3824 of 2008, the dealership was entrusted to the 2nd respondent. He contends that a serious error, on the face of the record, has crept in, when the 1st respondent proceeded on the assumption that the petitioner had executed power of attorney in favour of one Mr.Subba Rao, without prior permission or knowledge of the Company, when the allegation in the show cause notice itself is that, such arrangement was made by Smt.Radha, and not the petitioner. Sri R. Raghunandan Rao, learned counsel for the 1st respondent submits that even while making efforts to induct Smt.Radha, as partner, the dealers have proceeded to alter the composition of the management and have inducted the third party into it, to the exclusion of the surviving partners. He contends that the action of the petitioner in inducting a new person into management and their omission to take the permission from the 1st respondent constitute serious violation of the terms of agreement, and that no exception can be taken to the impugned order. He raises serious objection as to the maintainability of the writ petition. Smt. V. Sujatha, learned counsel for the 2nd respondent submits that her client has been selected way back in the year 2005, as a dealer, under SC category, and the petroleum outlet was entrusted to his management, on cancellation of the dealership of the petitioner. She contends that huge resources have been mobilized by her client, by raising loans and he cannot be put to hardship, even if there is any scope for interference with the impugned order. The objection raised by the 1st respondent, as to the maintainability of the writ petition needs to be taken up, at the threshold. This is not the first time that the matter pertaining to the dealership of the petitioner has landed before this Court. The order of cancellation was passed initially on 14-02-2008, and aggrieved thereby, the petitioner filed W.P.No.3824 of 2008. Not only the writ petition was entertained, but the order impugned therein was also set aside. If no objection existed for entertaining of that writ petition, it is just unimaginable as to how the things are different, when a writ petition is filed against an order passed in pursuance of the directions issued by this Court, in an earlier writ petition. Further, when a plea is raised as to there being error apparent on the face of the record, the objection as to the jurisdiction of this Court, or the contention that there exists alternative remedy, becomes feeble On the death of the original proprietor of the petroleum outlet viz., E. Satyanarayana, his sons constituted a firm, with the approval of the 1st respondent, and they are running the outlet. Out of the three partners, one retired with the consent of the 1st respondent, and the other died, few years thereafter. The request made by the surviving partner, to permit his sister-in-law, as one of the partners, was turned down by the 1st respondent. In the show cause notice, dated 18-07-2007, the allegation made against the petitioner is that, contrary to the terms and conditions of the agreement, the surviving partner is not taking part in the management and affairs of the dealership; a power of attorney was executed in favour of one Mr.Subba Rao, no re-organization was done, after the death of Purnachgander, a partner, and that his wife Radha executed lease agreement with Subba Rao on 08-12-2006. In their reply, the petitioner categorically stated that a request made to induct Smt. Radha, as partner, was not accepted by the 1st respondent, and that any arrangement or agreement on her part is not binding upon him or the firm. An order was passed, initially on 14-02-2008, hardly with any reasons. That was set aside by this Court in W.P.No.3824 of 2008. Thereafter, a reasoned order was passed on 16-01-2009. A detailed account was given in the impugned order, as to the observations made, at the time of inspection. The official of the Company came across certain documents, which are said to have been executed by Smt. Radha, in favour of Subba Rao. However, it is not alleged that any remittances were made by Subba Rao, or that he was running the petroleum outlet. Admittedly, it was an authorized representative of the surviving partner, that was on the seat of management. Reference was made to a clause in the dealership agreement, that the dealer must personally supervise the running of the outlet. It is different from requiring that a dealer must be physically present at any point of day, through out. That however is not the basis, on which the dealership was cancelled. Neither in the show cause notice, nor in any other correspondence, it was alleged that Smt. Radha was a partner and that she entered into agreement with others, keeping the 1st respondent in dark. In fact, the allegation can be only against an existing dealer, and anything done by persons other than the actual dealer would not bind him. Further, the order of termination proceeded on an error apparent on the face of the record. The observation reads: “Thus on the one hand you are stating that you have applied for reorganization which is pending with the Corporation, whereas on the other hand you had executed Power of Attorney in favour of Sri Maram Subba Rao without prior written consent or without knowledge of the Corporation. Thus ipso-facto proved that you have no regard for various terms, conditions, covenants and stipulations contained in the Dealership Agreement dated 09-10-1990 which is sacrosanct for operation of the Retail Outlet” When there was not even an allegation that the surviving partner was a party to the GPA or other arrangements, and Smt. Radha, who executed them, was not a partner at all, it is just ununderstandable as to how those acts were attributed to the surviving partner. This not only presents a case of non-application of mind, but also the one, of error apparent on the face of the record. If the approach of the 1st respondent is to be countenanced, the easiest way for a rival of a petroleum dealer will be, to place certain documents, not signed by the dealer, but in relation to the same petroleum outlet; in the desk, before any inspection takes place. On the basis that an arrangement came into existence, may be, without the participation of the dealer, and without the knowledge of the Company, the dealership can be terminated. Such a course would not only be contrary to the basic principles of contract, but also would give rise to a clear instance of arbitrariness, violative of Article 14 of the Constitution of India. Therefore, the impugned order cannot be sustained in law. The 2nd respondent was selected as a dealer under SC category, way back in the year 2005. Normally, a person or agency selected as dealer must make their own arrangements, as to infrastructure, such as land, capital. However, where an SC candidate is selected as a dealer, the obligation rests upon the Company to provide such infrastructure. The 2nd respondent was selected as dealer, way back in the year 2005, and the 1st respondent found it handy to induct him into the petroleum outlet, established by the petitioner. That was possible as long as the order of termination of dealership is inforce. It is brought to the notice of this Court that the 2nd respondent raised loans to arrange for capital. The 2nd respondent pleads that he cannot be displaced, abruptly. Now that this Court has taken the view that the termination of the dealership of the petitioner is untenable, the 1st respondent would be under obligation to accommodate the 2nd respondent. For the foregoing reasons, a) the writ petition is allowed, and the impugned order dated 16-01-2009 is set aside; b) the 1st respondent shall be under obligation to re-deliver the petroleum outlet to the petitioner, within a period of six weeks from today; and that c) the 1st respondent shall also be under obligation to accommodate the 2nd respondent by providing necessary infrastructure, enabling him to run the dealership, not later than two months from the date on which, he is displaced from the present outlet. There shall be no order as to costs. _______________________ L. NARASIMHA REDDY, J. Dt.01-04-2010. Note: L.R. copy to be marked. KO