1 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 01-11-2011 CORAM: THE HONOURABLE MR. JUSTICE V. RAMASUBRAMANIAN W.P.(MD)No.10447 of 2011 And M.P.(MD) No.1 of 2011 M/s.Sri Devi Gas Distributors No.106, S.R.S.Nagar, Near Bus Stand, Thuraiyur 621 010 Represented by its Partner Mrs.S.Chandrika having residing at 737, Madurapurai, Thuraiyur, Trichy District. .. Petitioner vs. 1.The Indian Oil Corporation Ltd., Represented by its Executive Director, Tamil Nadu State Office, No.139, Nungambakkam High Road, Chennai-600 034. 2.The Area Manager, The Indian Oil Corporation Ltd., 10-C, Sastri Nagar, Trichy. .. Respondents Writ Petition filed under Article 226 of the Constitution of India, praying for the issue of a Writ of Certiorari, calling for the records relating to the proceedings of the first respondent herein in TRAO:SRI DEVI:TURAIYUR dated 14.12.2009 and quash the same. For Petitioner : Mr.AR.L.Sundaresan, Senior Counsel for Mr.AN.Ramanathan For Respondents : Mr.S.Silambanan, Senior Counsel for Mr.K.Muraleedharan. O R D E R The petitioner has come up with the above writ petition challenging the termination of LPG distributorship. 2. I have heard Mr.AR.L.Sundaresan, learned Senior Counsel for the petitioner and Mr.S.Silambanan, learned Senior Counsel for the respondents. https://hcservices.ecourts.gov.in/hcservices/ 2 3. Under a Memorandum of Agreement dated 28.2.1989, the Indian Oil Corporation Limited granted distributorship to the petitioner herein for the sale of Liquefied Petroleum Gas known as 'Indane' in cylinders to household consumers and commercial consumers, in the territory of Thuraiyur Town/Municipality. At that time, the petitioner was a proprietary concern with S.Chandrika being its proprietrix. 4. Later, the petitioner was converted into a partnership firm with the sister of the proprietrix being inducted as a partner with the prior approval of the Corporation. Therefore, a fresh Agreement was entered into on 18.7.1996 with the partnership firm on the same terms and conditions. 5. In the year 2008, the petitioner made a request for inducting a third party by name A.Karthikeyan as a working partner, on two grounds viz., (i) that her sister wanted to retire from the partnership on account of her marriage and her settling down in Kuwait in 2008; and (ii) that the continuing partner started suffering from several ailments. The Corporation examined the request, interviewed the person sought to be inducted as a partner and found the request of the petitioner to be genuine. 6. But by a show cause notice dated 31.8.2009, the Corporation called upon the petitioner to show cause as to why her distributorship should not be terminated. This was on the basis that the petitioner had struck a deal with one M.Murugesan to sell the distributorship for a consideration of Rs.63 lakhs and that when enquired by the Officers of the Corporation, Murugesan admitted to the existence of such an Agreement and that the signature of the petitioner found in the Agreement tallied with that of the petitioner. The petitioner first sent a reply dated 7.10.2009, and filed a writ petition in W.P.No.13528 of 2009, challenging the show cause notice itself. But in the meantime, the first respondent passed an order dated 14.12.2009, terminating the distributorship. Consequently, the writ petition became infructuous and was dismissed by an order dated 17.12.2009. Thereafter, the petitioner has come up with the above writ petition in September 2011, almost after a period of 2 years, challenging the order of termination. 7. The respondents have filed a counter affidavit contending - (i) that even before submitting a request in 2008 for inducting A.Karthikeyan as a partner of the firm, the petitioner executed a Deed of Power of Attorney in favour of one Mr.A.Angamuthu on 26.9.2007 and sold the storage shed and the show room building to A.Karthikeyan by a Deed dated 12.11.2007; (ii) that thereafter the petitioner obtained a lease of the property sold to Mr.A.Karthikeyan under an unregistered Lease Deed dated 14.11.2007; (iii) that the transfer of ownership of the property on which the storgage shed and show room were located, was not informed to the Corporation; (iv) that under an Agreement, the petitioner agreed to transfer the partnership firm to one Murugesan for a total consideration of Rs.63 lakhs; (v) that on the reverse of the first page of the Agreement, the petitioner acknowledged the https://hcservices.ecourts.gov.in/hcservices/ 3 receipt of various amounts on various dates totalling to Rs.43 lakhs; (vi) that the petitioner had issued a receipt separately for Rs.6 lakhs, indicating thereby that she had already received a total amount of Rs.49 lakhs; (vii) that though the petitioner disputes her signature in the Agreement, she did not choose to initiate any action against Murugesan; (viii) that though the Corporation has the right to terminate the Agreements straightaway, the Corporation gave an opportunity to the petitioner to show cause and passed an order only thereafter; (ix) that though the first writ petition was filed immediately after the termination, the present writ petition is filed nearly after 2 years; (x) that the petitioner also gave a letter dated 7.7.2010, seeking reconciliation of the stocks and the settlement of her dues at the earliest; (xi) that the remedy under Article 226 is not available in respect of termination of distributorship Agreements, as there is an Arbitration Clause; (xii) that the termination of the distributorship is only in tune with the terms of the Agreement dated 18.7.1996; (xiii) that the petitioner is guilty of violation of Clauses 21 and 23 (c) (1) of the Distributorship Agreement; and (xiv) that the petitioner is also guilty of delay and laches and giving up her claim. 8. In the light of the rival pleadings, the impugned order of termination of the Distributorship Agreement is challenged by the petitioner primarily on the ground of violation of the principles of natural justice. According to the learned Senior Counsel for the petitioner, the impugned order is vitiated since (i) the respondents did not conduct any enquiry (ii) the respondents did not have the alleged Agreement between the petitioner and Murugesan examined forensically to find out if it contained the signature of the petitioner and (iii) the respondents relied upon a statement allegedly given by Murugesan behind the back of the petitioner, without giving an opportunity to the petitioner to elicit the truth from Murugesan in an enquiry. 9. In support of his contention that this Court is entitled to entertain the writ petition if there was a violation of the principles of natural justice, Mr.AR.L.Sundaresan, learned Senior Counsel for the petitioner relied upon the following decisions:- (i) M/s.Kesoram Cotton Mills Ltd vs. Gangadhar {AIR 1964 SC 708}, where the Supreme Court held that it would not be sufficient compliance with the principles of natural justice, to read out already prepared statements of witnesses to the delinquent workmen and compel them to cross-examine the witnesses. (ii) Central Bank of India vs. Prakash Chand Jain {AIR 1969 SC 983}, in which the Supreme Court held that though domestic Tribunals are not bound by the technical rules of evidence, it is necessary that principles of natural justice should be https://hcservices.ecourts.gov.in/hcservices/ 4 followed. It was further held therein that one of the basic principles to be remembered is that the statements relied upon in the course of the enquiry should be made in the presence of the person against whom the enquiry is held. (iii) Nagarjuna Construction Co. Ltd vs. Government of Andhra Pradesh {2009 (3) MLJ 493}, where the Supreme Court held that the old distinction between a judicial act and an administrative act has withered away. It was further held therein that even an administrative order which involves civil consequences must be consistent with the rules of natural justice. (iv) Automotive Tyre Manufacturers Association vs. Designated Authority {2011 (2) SC 258}, where the Supreme Court quoted with approval the observations in A.K.Kraipak vs. Union of India {1969 (2) SCC 262}, to the effect that the dividing line between an administrative power and a quasi judicial power is quite thin and that it is being gradually obliterated. In the same decision, the Supreme Court relied upon the decisions in Mohinder Singh Gill and Swadeshi Cotton Mills and concluded that unless a statutory provision excludes the application of the principles of natural justice, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into the provisions of the statute. 10. In support of his contention that though the Distributorship Agreement between the petitioner and the respondent-Corporation was in the realm of a contract containing an arbitration clause, writ petitions were entertained by this Court and the Apex Court against termination of such Agreements, the learned Senior Counsel for the petitioner relied upon the following decisions:- (i) Harbanslal Sahnia vs. Indian Oil Corporation Ltd {2003 (1) CTC 189}, where the Supreme Court set aside the cancellation of dealership. It was held in the said decision that the High Court could exercise writ jurisdiction in spite of the availability of an alternative remedy in the form of arbitration proceedings, if there was violation of the principles of natural justice. (ii) Indian Oil Corporation Ltd vs. Bommai Kadhirvelu {W.A.No.731 of 2006 dated 20.6.2006}, where a Division Bench of this Court upheld the order of the single Judge setting aside the termination of distributorship. It was held therein that the availability of alternative remedy in the form of an Arbitration Clause under the Agreement itself, was not a bar for entertaining the writ petition. (iii) Kala Agencies vs. Deputy General Manager, Indian Oil Corporation {W.A.No.344 of 2008 dated 30.4.2008}, where another Division Bench of this Court followed the ratio laid down in Indian Oil Corporation vs. Bommai Kadhirvelu. 11. Though it is true that even in the matter of termination of distributorship by the Indian Oil Corporation, the Supreme Court and the Division Bench of this Court had entertained writ petitions, it cannot be disputed that there is also a line of authorities which profess judicial restraint for a Court exercising jurisdiction under Article 226 of the https://hcservices.ecourts.gov.in/hcservices/ 5 Constitution, in respect of matters falling within the realm of contracts. In Radhakrishna Agarwal vs. State of Bihar {AIR 1977 SC 1496}, a 3 Member Bench of the Supreme Court held that the limitations imposed by the rules of natural justice, cannot operate upon powers which are governed by the terms of an Agreement. Similarly in State of U.P. vs. Bridge Roof Co. (I) Ltd {AIR 1996 SC 3515}, the Supreme Court pointed out that the writ petition arising out of a non-statutory contract containing an arbitration clause cannot be entertained. A similar view was expressed by a Division Bench of this Court in Union of India vs. Sri Gayathri Agencies {2000 (4) CTC 711}. 12. Therefore, there are innumerable authorities both for and against the propositions. Ultimately, it depends upon whether the action of the contracting party is so shocking and whether the violation of principles of natural justice is of such a grave nature that the termination of the contract cannot be allowed to stand even for a minute. 13. Keeping the above principles in mind, if we look at the case on hand, it is seen that the termination of the distributorship was on the basis that the petitioner had entered into an Agreement for the sale of the partnership firm for a sum of Rs.63 lakhs to one Mr.Murugesan. The contention of the petitioner is that the respondents rely upon a statement recorded from Murugesan behind her back and that when the petitioner had no opportunity to test the correctness of the statement allegedly made by Murugesan, there was gross violation of natural justice. 14. Though this contention appears to be very attractive at first blush, it is unsustainable on a careful consideration. The response of the petitioner to this serious allegation is not one of stout denial. On the contrary, the petitioner's response is wishy-washy. The petitioner admits to the following facts:- (i) that she has a relative by name Murugesan; and (ii) that taking advantage of her relationship and her ill- health, the said Murugesan might have created some documents. After admitting the above facts, the petitioner also claims that she did not enter into any Agreement for the sale of the partnership firm to Murugesan. 15. All the above 3 statements made by the petitioner fail to inspire the confidence of this Court. The respondents, being a Corporation, could have never known that the petitioner had a relative by name Murugesan and that he was making a claim like this. As a matter of fact, the respondents have pointed out that out of the total consideration of Rs.63 lakhs, the said Murugesan had already paid Rs.49 lakhs to the petitioner. The petitioner could have easily done two things viz., (i) she could have obtained a statement from her relative Murugesan denying the allegation that the officials of the Corporation ever met him or (ii) alternatively, the petitioner could have issued notice to Murugesan, if he was inimically opposed, calling upon him to confirm whether he ever gave such a statement to the officials of the respondents and whether he would stand by such a statement. https://hcservices.ecourts.gov.in/hcservices/ 6 16. After having accepted that there was such a person by name Murugesan and after having claimed that he might have created such a document, the petitioner's claim for adherence to natural justice, can only be a wolf's cry. Therefore, as held by the Apex Court in several cases, the plea of natural justice cannot be allowed to be raised by unruly horses and at any rate, there is no straight jacket formulae for the application of natural justice. 17. In any event, even if the impugned order is presumed to be violative of the principles of natural justice, the petitioner is not entitled to any relief, even for other reasons. The order of termination of the distributorship was passed on 14.12.2009. The correspondence that took place between the petitioner and the respondent-Corporation shows that the petitioner had waived her right to challenge the termination, by her subsequent conduct. The petitioner had written one letter on 7.7.2010 whose contents are as follows:- "Our agency was terminated on 17.12.2009. Due to that some 270 BPL (Free LPG Scheme) connections were held. The deposit amount received for the above BPL connections from TNCSC, Trichy was returned to them through a LVB, Thuraiyur DD dated 7.7.2010 DD No. is 277353 DD amount is Rs.3,78,000/- (Rupees Three Lakhs Seventy Eight Thousands). We have obtained a letter and a receipt from TNCSC and both the copies were handed in your office. So far we have not received our distributorship copy for the stocks taken and statement for the refund to us. We request you to despatch the about statements and release our fund as early as possible. We hope you will do the needful and thanking you." 18. The next letter that the petitioner wrote on 5.10.2010 reads as follows:- "Last week we have received a cheque for rupees seven lakh plus as our final settlement. The refund is only the advance DD, we were kept in the plant at the time of termination. You have mentioned in the letter as final settlement. But, the amount for the stocks (full cylinders), taken from us at the time of termination was not included. So, we request you to refund the same as early as possible. We hope you will do the needful and thanking you." 19. On 20.9.2010, the respondent-Corporation had sent a cheque bearing No.000775 dated 14.9.2010 for a sum of Rs.7,63,125.15 towards the return of the amount lying with them, after the termination of distributorship. The cheque was received and the amount was also encashed by the petitioner. Thereafter, she came up with the above writ petition only in September 2011. In other words, the petitioner came up with the above writ petition, challenging the termination of https://hcservices.ecourts.gov.in/hcservices/ 7 distributorship, after one year and 9 months and after having requested the respondent-Corporation to make a final settlement. Therefore, the petitioner is not entitled anymore to challenge the termination of distributorship. 20. However, relying upon two decisions of the Supreme Court, Mr.AR.L.Sundaresan, learned Senior Counsel for the petitioner contended that the question of estoppel, acquiescence or waiver would not arise in the case on hand. The first decision relied upon by him is the one in Sha Mulchand & Co. vs. Jawahar Mills Ltd {AIR 1953 SC 98}. The second decision is U.P.Jal Nigam vs. Jaswant Singh {2006 (11) SCC 464}. 21. In the first case, the Supreme Court held in the light of Section 115 of the Evidence Act, that mere waiver or acquiescence or laches not amounting to an abandonment of the right or to an estoppel against a person cannot disentitle that person from claiming relief in equity in respect of his executed and not merely executory contract. But in the said case, the Appellate Court recorded a finding that there was no plea of waiver, acquiescence or estoppel established in that case. Nevertheless, the Appellate Court proceeded to give relief on the plea of abandonment. Therefore, the Supreme Court held in paragraph-12 of its decision that if the facts on record were not sufficient to sustain the plea of waiver, acquiescence or estoppel, a plea of abandonment of right which is an aggravated form of waiver, acquiescence or laches cannot be sustained on the self-same facts. 22. The decision in U.P.Jal Nigam, arose out of the enhancement of the age of retirement of employees of the Nigam. By the time, the Supreme Court decided that the employees are entitled to continue upto 60 years, a few persons had retired. After the decision of the Supreme Court, those employees who also collected their post-retirement benefits made a claim. When a question arose as to whether they were guilty of estoppel, acquiescence or waiver, the Supreme Court held that the Court cannot go to the rescue of such persons. Nevertheless, the Court granted relief to a few persons who had filed writ petitions when they were in service. 23. But in the case on hand, there are two serious issues. They are:- (i) the immediate reaction of the petitioner to the termination of her distributorship was only to seek a final settlement. Though it is contended by the learned Senior Counsel for the petitioner that under the terms of the Agreement, no deposit was made and no refund was claimed, so as to draw a presumption of "final settlement", the fact remains that the amounts payable by the Corporation to the petitioner as a consequence of the termination of the distributorship were received by the petitioner, without any demur or protest. Until the expiry of one year and 9 months from the date of termination, the petitioner did not exhibit an inclination to question the termination. As a matter of fact, the petitioner filed a writ petition challenging the show cause notice even before the termination. But after termination, the petitioner merely sought the payment of amounts lying with the respondent- Corporation. https://hcservices.ecourts.gov.in/hcservices/ 8 (ii) Moreover, the entire affidavit in support of the writ petition is completely silent about what transpired in July and October 2010. The letters dated 7.7.2010 and 5.10.2010 are completely suppressed by the petitioner. The petitioner has not stated in her affidavit in support of the writ petition, anything about the receipt of money and her claim for final settlement. Apart from the fact that the petitioner did not state in her letters dated 7.7.2010 and 5.10.2010 that she would receive the amounts under protest or without prejudice, she chose not to claim even in her affidavit in support of the writ petition that she never gave up her right. If it is the case of the petitioner that she never intended to give up her rights to challenge the termination, she must have at least stated so in the affidavit in support of the above writ petition. But she did not even make a whisper about the receipt of money and the claim for final settlement made by her. 24. In Joint Action Committee of Airline Pilots Association of India vs. D.G. of Civil Aviation {2011 (5) SCC 435}, the Supreme Court held in paragraph-12 as follows:- "12. The doctrine of election is based on the rule of estoppel—the principle that one cannot approbate and reprobatge inheres in it. The doctrine of estoppel by election is one of the species of estoppels in pais (or equitable estoppel), which is a rule in equity. By that law, a person may be precluded by his actions or conduct or silence when it is his duty to speak, from asserting a right which he otherwise would have had. Taking inconsistent pleas by a party makes its conduct far from satisfactory. Further, the parties should not blow hot and cold by taking inconsistent stands and prolong proceedings unnecessarily." 25. In Indira Bai vs. Nand Kishore {1990 (4) SCC 668}, the Supreme Court held as follows:- "Estoppel is a rule of equity flowing out of fairness striking on behaviour deficient in good faith. It operates as a check on spurious conduct by preventing the inducer from taking advantage and assailing forfeiture already accomplished. It is invoked and applied to aid the law in administration of justice. But for it great many injustice may have been perpetrated. Present case is a glaring example of it." 26. Therefore, the petitioner cannot challenge the termination and seek restoration of distributorship. As a matter of fact, the termination of distributorship may give rise to a claim for two sets of reliefs. One may be for the restoration of distributorship and another may be for damages. The receipt of final settlement may not operate as an abandonment of right to claim damages. But it would certainly operate as waiver of her right to seek a restoration of the distributorship. https://hcservices.ecourts.gov.in/hcservices/ 9 27. In view of the above, there is no justification to interfere with the order of termination of distributorship. Hence, the writ petition is dismissed. There will be no order as to costs. Consequently connected miscellaneous petition is also dismissed. Sd/- Assistant Registrar(Records) /True Copy/ Sub-Assistant Registrar To 1.The Executive Director, Indian Oil Corporation Ltd., Tamil Nadu State Office, No.139, Nungambakkam High Road, Chennai-600 034. 2.The Area Manager, The Indian Oil Corporation Ltd., 10-C, Sastri Nagar, Trichy. +One Cc to M/s.AN.Ramanathan, Advocate, SR.No.37326 Svn rl/4 c- 11.11.2011 Order in W.P.(MD)No.10447 of 2011 01-11-2011 https://hcservices.ecourts.gov.in/hcservices/