IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 22.04.2010 CORAM: THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.No.17905 of 2009 and M.P.Nos.1 and 2 of 2009 M/s.K.M.Batcha and Company Represented by its Partner Smt.B.Rasheeda ... Petitioner Vs 1.The Chief Regional Manager, Hindustan Petroleum Corporation Ltd., III Floor, Thalamuthu Natarajan Building, No.1, Gandhi Irwin Road, Egmore, Chennai – 600 008. 2.The Executive Sales Officer, Hindustan Petroleum Corporation Ltd., III Floor, Thalamuthu Natarajan Building, No.1, Gandhi Irwin Road, Chennai – 600 008. ... Respondents PRAYER:-Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of certiorarified mandamus, calling for the records relating to the order dated 27.08.2009 under Ref:AKR/RET of the first respondent herein and quash the same and consequently direct the respondents herein to forthwith restore possession of the Retail Outlet of the respondent Corporation at No.1/1 Arani Road, Vandavasi 604 408, Tiruvannamalai District to the petitioner herein and resume supply of Petroleum products and permit the petitioner to make sales of the same. For Petitioner : Mr.A.R.L.Sundaresan,S.C. For Ms.A.L.Gandhimathi For Respondents : Mr.Vijayan M/s.King and Partridge O R D E R Heard both sides. 2. The petitioner is a partnership firm. They have filed the present writ petition, challenging the order dated 27.08.2009 passed by the first respondent - Chief Regional Manager, Hindustan Petroleum Corporation Ltd., (for short HPCL) and after setting https://hcservices.ecourts.gov.in/hcservices/ aside the same seeking for a consequential direction to restore possession of the Retail Outlet of the respondent Corporation situated at No.1/1 Arani Road, Vandavasi 604 408, Tiruvannamalai District to the petitioner to resume supply of Petroleum products. 3. By the impugned order, the petitioner's Dealership Agreement dated 19.07.1979 was terminated under Clause 55(A) and 55 (K) for the violations committed by the petitioner in terms of Clause Nos.28,38 and 42 of the Dealership Agreement. The petitioner was intimated that it was without prejudice to the rights of the Corporation in respect of any matter antecedent to the termination. The petitioner was also informed about Clause Nos.4,57,58,59 and 64 in the Dealership Agreement dated 19.07.1979 and she was requested to comply with the same. In the operative portion of the impugned order, it was indicated as follows:- "...The letter dated 6.3.2009 Shri A.Tikrus accepting that the load was unauthorisedly purchased from IOC petrol pump was also signed by Ms.B.Katheeja (your representative/daughter) as witness. Also, the Manager of the outlet Shri S.Annamalai, has given a letter accepting that they use to purchase MS/HSD unauthorisedly. The Manager Sri S.Annamalai also mentioned that one Mr.Ravi was operating the petrol pump earlier and that they used to remove the meter and the same will be corrected in order make the dip adjustment." 4. Notwithstanding the same, the petitioner preferred the present writ petition, on which notice was taken by the respondents. After taking notice, the respondents have filed a counter affidavit dated 30.10.2009. 5. In the counter affidavit, it was claimed that the termination arose out of breaches of certain clauses in the Dealership Agreement. The petitioner was issued with the show cause notice on 20.05.2009 observing certain irregularities and violations. The petitioner gave a reply dated 29.05.2009. Since the reply was not found satisfactory, the impugned order came to be passed. It was claimed that it is a commercial contract and the petitioner is not entitled to invoke the constitutional relief. The petitioner had agreed to abide by the terms of the contract and therefore, the writ petition is not maintainable. Since an arbitration agreement exists, the writ court could not exercise its discretionary jurisdiction. Since Clause 66 of the Arbitration Clause is provided therein, the writ petition is liable to be rejected. 6. Since the issues raised fundamental question about the maintainability of the writ petition, arguments were addressed on the said issue. 7. Mr.A.R.L.Sundaresan, learned Senior Counsel leading Ms.AL.Gandhimathi, learned counsel for the petitioner referred to https://hcservices.ecourts.gov.in/hcservices/ various judgments in support of their contentions. 8. The learned Senior Counsel appearing for the petitioner relied upon a judgment of the Full Bench of this Court in Aluminium Industries Ltd., Madras v. Minerals and Metals Trading Corporation of India Ltd., and others reported in 1997 (II) CTC 636. In paragraphs 47 and 48, it was observed as follows: "47.It is one thing to say that there is total bar to entertain writ petition under Article 226 of the Constitution of India for enforcement of contractual obligations in cases where one of the parties being a State or Authority within the meaning of Article 12 of the Constitution; and it is yet another thing to say that the power under Article 226 of the Constitution of India should be exercised rarely and sparingly in exceptional and extra-ordinary cases in such contractual matters. While reiterating that ordinarily writ petitions cannot be entertained under Article 226 of the constitution of India for enforcement of terms of contract, or to claim damages arising out of concluded contract for breach of contract, one of the parties being the State or Authority to such contract, we hold that the jurisdiction to exercise the power of judicial review under Article 226 of the Constitution is not totally curtailed or absolutely excluded in examining and testing the validity of State action, even in such matters in extra-ordinary cases as to whether the requirement of Article 14 of the Constitution were satisfied by the State/Authority, though ordinarily the courts may not entertain writ petitions, and declined to grant relief exercising powers under Article 226 of the Constitution for enforcement of terms of contract or to get remedy for a breach of contract on the basis of concluded contracts, one of the parties being State or authority to such contracts. This conclusion we have reached in the light of the aforementioned decisions and the Constitutional scheme, and in particular the provisions contained in Art.14 and 226 of the Constitution. 48.Normally for specific performance of a contract or for recovery of damages claimed on breach of contract, even against State or Authority coming within the ambit of Article 12 of the Constitution, the parties have to approach ordinary civil courts. But there may be cases where facts and circumstances of the case warrant, and the situations demand exercise of power of judicial review available under Article 226 of the Constitution of India; may be such cases are extraordinary. The courts may exercise power of judicial review under Article 226 of the https://hcservices.ecourts.gov.in/hcservices/ Constitution of India in the matters of enforcement of contractual obligations rarely and sparingly. But having regard to the Constitutional scheme, and in particular the requirements of Article 14 of the Constitution relating to all actions of the State or instrumentality of State, or Authorities within the meaning of Article 12 of the Constitution of India, they have to act fairly, justly and reasonably in all their actions." (Emphasis added) 9. The learned Senior Counsel further referred to a judgment of the Supreme Court in ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd.,(2004) 3 SCC 553. In paragraphs 52 and 53 of the judgment, the Supreme Court has held as follows:- "52. On the basis of the above conclusion of ours, the question still remains why should we grant the reliefs sought for by the appellants in a writ petition when a suitable efficacious alternate remedy is available by way of a suit. The answer to this question, in our opinion, lies squarely in the decision of this Court in the case of Shrilekha Vidyarthi wherein this Court held: (SCC pp.235-37, paras 20-22 & 24) The requirement of Article 14 should extend even in the sphere of contractual matters for regulating the conduct of the State activity. Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, the State cannot thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more. The personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot coexist. The Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity https://hcservices.ecourts.gov.in/hcservices/ contrary to the professed ideals in the preamble. Therefore, total exclusion of Article 14 — non-arbitrariness which is basic to rule of law — from State actions in contractual field is not justified. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals. Unlike the private parties the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. It is really the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in https://hcservices.ecourts.gov.in/hcservices/ addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non- arbitrariness at the hands of the State in any of its actions. 53. From the above, it is clear that when an instrumentality of the State acts contrary to public good and public interest, unfairly, unjustly and unreasonably, in its contractual, constitutional or statutory obligations, it really acts contrary to the constitutional guarantee found in Article 14 of the Constitution. Thus if we apply the above principle of applicability of Article 14 to the facts of this case, then we notice that the first respondent being an instrumentality of the State and a monopoly body had to be approached by the appellants by compulsion to cover its export risk. The policy of insurance covering the risk of the appellants was issued by the first respondent after seeking all required information and after receiving huge sums of money as premium exceeding Rs.16 lakhs. On facts we have found that the terms of the policy do not give room to any ambiguity as to the risk covered by the first respondent. We are also of the considered opinion that the liability of the first respondent under the policy arose when the default of the exporter occurred and thereafter when the Kazakhstan Government failed to fulfil its guarantee. There is no allegation that the contracts in question were obtained either by fraud or by misrepresentation. In such factual situation, we are of the opinion, the facts of this case do not and should not inhibit the High Court or this Court from granting the relief sought for by the petitioner." 10. The learned Senior Counsel thereafter referred to a judgment of the Supreme Court in Popcorn Entertainment v. City Industrial Development Corpn reported in (2007) 9 SCC 593. He placed Reliance upon paragraph 47 of the judgment, which is as follows: "47. We have given our careful consideration to the rival submissions made by the respective counsel appearing on either side. In our opinion, the High Court has committed a grave mistake by relegating the appellant to the alternative remedy when clearly in terms of the law laid down by this Court, this was a fit case in which the High Court should have exercised its jurisdiction in order to consider and grant relief to the respective parties. In our opinion, in the instant case, 3 of the 4 grounds on which writ petitions can be entertained in https://hcservices.ecourts.gov.in/hcservices/ contractual matter were made out and hence it was completely wrong of the High Court to dismiss the writ petitions. In the instant case, 3 grounds as referred to in Whirlpool Corpn have been made out and accordingly the writ petition was clearly maintainable and the High Court has committed an error in relegating the appellant to the civil court." 11. The learned Senior Counsel further referred to a judgment of the Supreme Court in Harbanslal Sahnia v. Indian Oil Corpn. Ltd. Reported in (2003) 2 SCC 107. In paragraphs 6 and 7 of the judgment, it was held as follows: "6. As already stated, the cancellation is founded solely on the failure of the appellants’ sample. Non-cooperation and discourteous behaviour of the appellants has been alleged in a very general way without specifying what was the non-cooperation and what was the discourtesy shown to the officers of the respondent Corporation. The deficiency in sales is also generally stated without particularising the same. So is the case with deficiency in maintaining the records. Be that as it may, these are the grounds which formed the subject-matter of the earlier show-cause notice which was not persuaded. In all probability, the respondent Corporation felt satisfied with the explanation furnished by the appellants. The order of termination is certainly not founded on these grounds and, therefore, this aspect need not be pursued further. It may be stated that the appellants have volunteered to file a statement made on affidavit during the course of hearing before this Court, expressing regrets for any incident of departure from normal behaviour and courtesy expected of the appellants towards the officials of the respondent Corporation and submitting that it might have happened inadvertently but in the future the appellants would be more careful and shall show full regards to the visiting officials of the respondent Corporation and extend their full cooperation in their dealings with the respondent. 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 https://hcservices.ecourts.gov.in/hcservices/ alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. (See Whirlpool Corpn. v. Registrar of Trade Marks.) The present case attracts applicability of the first two contingencies. Moreover, as noted, the petitioners’ dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings." 12. He also placed reliance upon a judgment of the Supreme Court in M.P. State Agro Industries Development Corpn. Ltd. v. Jahan Khan reported in (2007) 10 SCC 88. Reliance was placed upon paragraphs 12 and 13, which is as follows: "12. Before parting with the case, we may also deal with the submission of learned counsel for the appellants that a remedy by way of an appeal being available to the respondent, the High Court ought not to have entertained his petition filed under Articles 226/227 of the Constitution. There is no gainsaying that in a given case, the High Court may not entertain a writ petition under Article 226 of the Constitution on the ground of availability of an alternative remedy, but the said rule cannot be said to be of universal application. The rule of exclusion of writ jurisdiction due to availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of the availability of an alternative remedy, a writ court may still exercise its discretionary jurisdiction of judicial review, in at least three contingencies, namely, (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. In these circumstances, an alternative remedy does not operate as a bar. (See Whirlpool Corpn. v. Registrar of Trade Marks, Harbanslal Sahnia v. Indian Oil Corpn. Ltd., State of H.P. v. Gujarat Ambuja Cement Ltd. and Sanjana M. Wig v. Hindustan Petroleum Corpn. Ltd.) 13. In the instant case, though it is true that the penalty order impugned in the writ petition was https://hcservices.ecourts.gov.in/hcservices/ appealable in terms of the aforenoted Regulations but having come to the conclusion that the order was per se illegal being violative of the principles of natural justice, it cannot be said that the High Court fell into an error in entertaining the writ petition filed by the respondent." 13. The learned Senior Counsel also placed reliance upon the following two judgments of the Division Bench of this Court: i)The Indian Oil Corporation Ltd.(Marketing Division) v. Bommai Kadhirvelu in W.A.No.731 of 2006 dated 20.06.2006. ii)Kala Agencies, Rep.by its Proprietrix v. The Deputy General Manager (LPG), Indian Oil Corporation Ltd., in W.A.No.344 of 2008 dated 30.04.2008. 14. On the first judgment of the Division Bench presided by A.P.Shah,C.J.(as he then was), reliance was placed upon paragraph 5 of the judgment, which is as follows: "5.The only question which arises for our consideration is whether the discretionary jurisdiction under Article 226 of the Constitution of India could be refused to be exercised only on the ground of existence of an alternative remedy, which is not efficacious. It is well settled that access to justice by way of public law remedy would not be denied when a lis involves public law character and when the forum chosen by the parties would not be in a position to grant appropriate relief." 15. The second judgment of the Division Bench presided by S.J.Mukhopadhaya,J.(as he then was) followed the earlier Division Bench judgment and in paragraph 18, it was held as follows: "18.In view of the judgment of the Supreme Court, the judgment of this Court as referred to above and observations as we have made in the preceding paragraphs, we are of the view that the learned single Judge, instead of dismissing the case for moving before arbitrator, should have entertained the Writ Petition for its determination on merit." On the basis of these precedents the learned Senior Counsel contended that the writ remedy is available to his client. 16. Per contra, Mr.Vijayan learned counsel representing M/s.King and Partridge, counsel for the respondents relied upon a judgment of the Supreme Court in Rukmanibai Gupta v. Collector reported in (1980) 4 SCC 556 for the purpose of showing that the https://hcservices.ecourts.gov.in/hcservices/ Award given by a party is open to challenge only under the Arbitration Act and the writ remedy is barred. 17. Similarly, the learned counsel relied upon a judgment of the Supreme Court in CDC Financial Services (Mauritius) Ltd. v. BPL Communications Ltd. reported in (2003) 12 SCC 140. In paragraph 14, it was observed as follows: "14. Whatever may be the merits of the writ application, we are of the view and it has been fairly conceded by the learned Senior Counsel appearing on behalf of Respondent 1 that the High Court should have had regard to Section 5 of the 1996 Act before granting the reliefs it did. Under Section 5 of the 1996 Act, courts are restrained from interfering with arbitration except in the manner provided in the 1996 Act. That the orders passed by the High Court would amount to a violation of this mandate is not seriously disputed by the respondents. We, accordingly, set aside the orders of the High Court without expressing our views on the merits of the contentions of the parties in any manner whatsoever. The orders dated 4-7-2002 and 23- 7-2002 are accordingly, set aside. The respondents are restrained from moving any applications in the pending writ petition which would have the effect of interfering with the continuance and conclusion of the arbitration proceedings. The appeal of Respondent 1 before the Division Bench being preferred from the refusal to grant an interim order, does not survive and is accordingly dismissed. The matter shall now be heard by the learned Single Judge and disposed of in accordance with law." 18. The learned Counsel also relied upon another decision of the Supreme Court in Empire Jute Co. Ltd. v. Jute Corpn. of India Ltd. reported in (2007) 14 SCC 680. Reliance was placed upon paragraphs 15 and 18, which is as follows: "15. It is not correct to contend that Clause 8.0 provides for procedure for claim settlement. The said provision in regard to the quality of jute supplied has in our opinion nothing to do with Clause 9.0. The arbitration agreement entered into by and between the parties is independent of Clause 8.0. It is now well settled that when there exists an arbitration agreement, the writ court ordinarily would not exercise its discretionary jurisdiction to enter into the dispute. 18. The power of judicial review vested in the https://hcservices.ecourts.gov.in/hcservices/ superior courts undoubtedly has wide amplitude but the same should not be exercised when there exists an arbitration clause. The Division Bench of the High Court took recourse to the arbitration agreement in regard to one part of the dispute but proceeded to determine the other part itself. It could have refused to exercise its jurisdiction leaving the parties to avail their own remedies under the agreement but if it was of the opinion that the dispute between the parties being covered by the arbitration clause should be referred to arbitration, it should not have proceeded to determine a part of the dispute itself." Therefore, he sought for dismissal of the writ petition. 19. In reply to the contentions raised by the respondent, Mr.A.R.L.Sundaresan, learned Senior Counsel stated that in the present case, there are no disputed questions. On the contrary, when the show cause notice was issued on 20.05.2009, a reply was sent by the petitioner stating that there was considerable delay in sending the show cause notice. It was also stated that they were not present during the inspection and only their Manager Annamalai was present in the outlet. One of their customers had purchased