HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE N.RAVI SHANKAR WRIT APPEAL No.1051 of 2009 DT. 14-3-2011 M. Kota Reddy …Appellant V. Indian Oil Corporation Limited, represented by its Senior Divisional Retail Sales Manager, Divisional Office, Vijayawada ..Respondent The Court made the following: HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE N. RAVI SHANKAR WRIT APPEAL No.1051 of 2009 JUDGMENT: (Per the Hon’ble Sri Justice A. Gopal Reddy) This intra court appeal under Clause 15 of the Letters Patent by the writ petitioner is directed against the order passed by the learned single Judge of this court dismissing WP No.26180 of 2005 dated 19.07.2009 upholding the proceedings of the Indian Oil Corporation Ltd (for brevity “the Corporation”) dated 10.11.2005 terminating the writ petitioner’s petrol/HSD Dealership Agreement dated 27.11.2000. 2. Pending writ appeal, this court by order dated 02.12.2009 directed the Corporation to allow the writ petitioner to proceed with the business of the retail outlet for six months commencing from 10th January 2010 till 30th June 2010 and in the meanwhile and until further orders the respondent shall maintain status quo. Aggrieved by the said order the Corporation carried the matter in appeal by way of Special Leave Petitions (Civil) Nos.35150-35151 of 2009 to the Supreme Court. The Supreme Court by order dated 24.09.2010 disposed of the special leave petition by directing that the order of status quo passed by it on 17.12.2009 and continued on 04.01.2010 will continue till the hearing of the writ appeal and requested this Court to dispose of the appeal expeditiously, if possible, within three months from the date of communication of the order. The Supreme Court dispatched the said orders through its letter dated 06.10.2010 and the same were received by the Registry on 27.10.2010. The matter was listed before us on 25.01.2011. On 25.01.2011 at the request of the learned counsel for the appellant the matter was adjourned to 01.02.2011. On 01.02.2011, a representation was made that the respondent- Corporation changed its Counsel. Therefore, the matter was directed to be posted on 08.02.2011. We have heard the counsel for the parties on 08.02.2011 and 09.02.2011. 3. The facts in a nut-shell which gave rise to the filing of this appeal are as under. The Corporation entered into a dealership agreement with the writ petitioner on 20.03.1989 for a period of 10 years for establishing, operating and running a petroleum outlet at Padugupadu village. Under the said agreement, the writ petitioner has to lift the minimum quantities of petroleum products every month and those targets have been met more than the requirement till 2000. After expiry of the period of the agreement, the Corporation offered to take the premises belonging to the writ petitioner on lease for a period of 30 years on the ground that it would invest and develop the premises as the writ petitioner was not financially sound to develop the premises on his own. A lease agreement to the said effect was entered into on 27.11.2000. As per Cl.9 of the dealership agreement, minimum quantities of the stock to be lifted were enhanced from the quantities mentioned in the agreement dated 20.03.1989 ie., Motor Spirit-20 kl; HSD-200 kl, motor oil and grease—1.5 kl. Since the writ petitioner failed to lift the minimum required quantities of petroleum and petroleum products of the Corporation for a period of more than 3 consecutive months in the past six months and the petitioner committed breach of terms and conditions of the dealership agreement, the Corporation issued a show cause notice dated 06.09.2005 to the writ petitioner calling upon him to explain as to why the petrol/HSD Pump Dealer Agreement dated 27.11.2000 should not be terminated. The writ petitioner filed a detailed explanation to the said show cause notice on 26.09.2005 giving reasons for not achieving the specified targets. Not satisfied with the explanation offered by the writ petitioner, the Corporation by the impugned order dated 10.11.2005 terminated the dealership of the writ petitioner. Questioning the same the present writ petition has been filed. That writ petition having been dismissed the writ petitioner has filed this writ appeal. 4. The contentions of the appellant/petitioner are that in the years 2003 and 2004 two retail outlets came to be established within the radius of 1.5 KMs from the petitioner’s outlet, thereby decreasing the sales of petroleum products. Subsequently in November 2004 bye-pass road was laid due to which the entire traffic moving on National Highway-5 which used to pass through Padugupadu village hitherto was diverted through the said bye- pass road and that reduced the traffic considerably as a result of which the sales dropped considerably and though the said facts have been mentioned in the explanation submitted to the show cause notice, the said facts have not been properly considered by the Corporation while passing the impugned order. Even after passing the impugned orders, the writ petitioner requested the Corporation to consider his case sympathetically and review the decision, but without considering the request of the writ petitioner, the Corporation has called individuals for interview on 18.12.2005 for appointing an adhoc dealer to the petitioner’s retail outlet. The plea of the petitioner is that he is solely dependent on the income derived from the retail outlet in question and if the adhoc dealer is appointed he will be put to irreparable loss. 5. The Corporation filed a counter affidavit and its stand is this. The dealership agreement itself provides an alternative efficacious remedy in the form of arbitration and hence the writ petitioner cannot circumvent the above procedure and file the present writ petition by invoking the extra-ordinary jurisdiction of this court. When disputed questions of fact are involved the writ petition is not a proper remedy. Further Marketing Discipline Guidelines, 2005 issued by the Ministry of Petroleum and Natural Gas, Government of India, provide an appeal against the order of termination of dealership and hence the writ petitioner cannot be permitted to circumvent the alternative remedy and invoke the jurisdiction of this court. It is admitted that upto December 2000 the writ petitioner was selling an average of 20 kl of MS per month and 200 kl of HSD which were the minimum quantities to be lifted and from January 2001 there was a marked decrease in the sale of petroleum products at the petitioner’s outlet and the sales statistics are furnished in Para-4 of the counter. It is denied that after opening of the bye-pass road the vehicular traffic has come down on the road in which petitioner’s outlet is situated and sales in the neighbouring outlets during the period from March to August, 2005 have been well above the sales achieved by the petitioner’s retail outlet. Three retail outlets viz., D.S. Auto Services of the Bharath Petroleum Corporation Limited, General Auto of the Hindustan Petroleum Corporation Limited and Sri Devi Oil Agency of the Indian Oil Corporation Limited are situated in the same trading area as the petitioner’s retail outlet and they are admittedly on the same road also. The proximity to Nellore town was a valid reason for higher sales of MS in these outlets but there is no valid or tenable excuse for the poor sales performance of the petitioner’s retail outlet as regards HSD, all the more so, in view of its proximity to the truck parking area of the Nellore District Lorry Owners Association and the Godowns of the FCI. The poor performance of the petitioner’s outlet was mainly because of the non-involvement of himself personally in the management of retail outlet as he is involved in prawn culture business. As explanation submitted by the writ petitioner seeking excuse for poor performance of his retail outlet on various untenable grounds was not acceptable to the Corporation, the agreement was terminated by the impugned proceedings setting out the reasons. 6. A reply affidavit has been filed by the writ petitioner specifically stating that the High Court as well as the Supreme Court in more than one case to which the Corporation is a party has held that arbitrator has no power to set-aside the termination of dealership agreement and restore the same and therefore the said remedy is not efficacious alternative remedy. The alternative remedy of appeal provided as per Marketing Discipline Guidelines, 2005 is no bar where fundamental rights are violated or principles of natural justice are not complied with. After opening of “Golden Quadrangle” in the year 2003, Hindustan Petroleum Corporation Limited has opened an outlet at a distance of 2.7 KMs from the petitioner’s outlet towards North which is run by its dealer M/s.Chowdhary Brothers. Reliance Petroleum Company has opened its outlet in the year 2004 at a distance of 4.3 KMs towards North of the petitioner’s outlet and further North of the outlet of M/s.Chowdhary Brothers. With a view to bye-pass Nellore town, a road with a new bridge on the river Penna was laid and the said bye-pass road was opened for traffic in November 2004. By reason of which the traffic commuting on “Golden Quadrangle” got diverted. Therefore the minimum quantities which were fixed on 27.11.2000 based on the sales potential as on the date are no more valid or relevant. It is admitted that during the period 2001- 2002, the family of the writ petitioner had certain financial problems and they could not improve the sales and by the time they could recoup and start putting efforts for improving the sales the above said two outlets were opened. Due to opening of the said outlets the writ petitioner could not achieve the targets. While setting forth these pleas which were not initially stated in the affidavit filed in support of the writ petition for not achieving the targets it was denied that Nellore District Lorry Owners Association truck parking area and also godowns of the FCI are located close to the petitioner’s outlet. It is also stated that the ground taken in the show cause notice as to the fact of sales of other outlets in the vicinity is vague as the details of outlets have not been mentioned in the show cause notice. 7. A learned single Judge of this court after elaborately considering the pleas and the clauses in the dealership agreement dismissed the writ petition holding that no procedural failure has been pointed out in terminating the dealership agreement and once the dealership agreement comes to an end due to breach of terms and conditions therein there is nothing that could be done in a writ petition as held by the Supreme Court in SANJANA M. WIF (Ms) v. HINDUSTAN PETROLEUM CORPORTION LIMITED[1]. 8. Sri M.Ravindranath Reddy, learned counsel for the appellant contended that arguments at length were heard in the main writ petition on 14.09.2007 on which date the matter was reserved for judgment and the judgment was delivered on 10.07.2009 nearly after one year and ten months and in the process the learned single Judge has not taken the crucial letter dated 19.04.2004 wherein the Corporation requested the petitioner to inform them the latest development within three days with regard to the finalization of the site for resitement of the petitioner’s outlet to new bye-pass on NH-5. The appellant filed WAMP No.2329 of 2009 to implead M/s. Indian Oil Corporation Limited represented by its Senior Divisional Retail Sales Manager, Tirupati as second respondent to the Writ Appeal and also WAMP (SR) No.100972 of 2009 seeking production of the records pertaining to the termination proceedings including a letter seeking inspection of the complete record pertaining to termination proceedings which was served on the advocate for Corporation as per Writ Proceedings Rules, 1977. It is also contended that though it is mentioned in the show cause notice that other retail outlets in the location are getting average sales of 30 kl MS and 150 kl HSD every month, the names of those retail outlets have not been mentioned, for giving an effective reply to the show cause notice and the same amounts to violation of principles of natural justice. The Corporation was conscious about the decrease in sales and necessity for resitemnt and the said facts were mentioned in the explanation offered by the petitioner but they have not been properly considered by the Corporation taking into consideration the existing facts in the locality which adversely impacted in achieving the targets. The data made available by the nearest Toll Collecting Station on the “Golden Quadrangle” which is located towards North of the petitioner’s outlet would disclose that 4000 vehicles pass through the said “Golden Quadrangle” and therefore minimum quantities fixed prior to opening of bye-pass road are irrelevant. It is also stated by the learned counsel for the petitioner that the petitioner and his brothers are solely dependant upon the income derived from the business and they have sold the property and raised Rs.12,30,000/- and the said fact was brought to the notice of the Corporation by representation dated 20.12.2005. In spite of the same the Corporation did not consider the request for restoration of the dealership. The second respondent who is now sought to be impleaded failed to comply the interim order passed by this court dated 06.01.2006 in WPMP No.681 of 2006. The learned counsel for the petitioner further contends that though the Supreme Court categorically held that an arbitrator, except awarding damages, could not restore dealership which relief can be granted only in exercise of jurisdiction under Article 226 of the Constitution, the petitioner at this stage cannot be driven away to avail the alternative remedy, that too after admitting the writ petition and keeping it pending for two years and therefore this Court should grant the relief of restoration of the dealership agreement which was entered into for 30 years by setting aside the impugned termination order. In support of his contentions the learned counsel for the petitioner relied upon the following judgments. 1. COMMISSIONER OF POLICE V. GORDHANDAS[2] 2. MOHINDER SINGH GILL V. CHIEF ELECTION COMMISSIONER[3] 3. MIR SABIR ALI V. COMMISSIONER OF POLICE[4] 4. STATE OF H.P. V. GUJARAT AMBUJA CEMENT[5] 5. BHAGAT RAM V. STATE OF H.P. & OTHERS[6] 6. UNION OF INDIA V. I.S.SINGH[7] 7. L.HIRDAY NARAIN V ITO[8] 8. KANAK V. UP AVAS EMAM VIKAS PARISHAD[9] 9. E.VENKATAKRISHNA V. IOC[10] 9. Sri Deepak Bhattacharjee the learned counsel for the respondent-Corporation while supporting the judgment under appeal contended that as per the fresh agreement entered into on 27.11.2000 the dealer undertook to lift and pay for the minimum quantities of petroleum products and failure to lift the minimum quantities which can be revised by the Corporation from time to time or if the dealer did not achieve the minimum turnover at any time during three out of any six consecutive months during the currency of the agreement, the Corporation is entitled to terminate the agreement de hors other conditions. Under Cl. 54 of the agreement, if the dealer commits any breach of covenants contained in the agreement, the Corporation had a right to terminate the agreement and on termination, disputes or differences have to be resolved through arbitration, therefore the same cannot be a subject matter of judicial review under Article 226 of the Constitution. In support of the said submissions reliance is placed on the following judgments: 1. S. SURESH V. INDIAN OIL CORPORATION LTD., SOUTHERN REGION, MADRAS[11] 2. SRI LALITHA DEVI GAS AGENCIES V. HINDUSTAN PETROLEUM CORPORATION LTD.,[12] 3. CHODAY SANYASI RAO V. HINDUSTAN PETROLEUM CORPORATION LIIMITED, VISAKHAPATAM[13] 4. INDIAN OIL CORPORATION LTD V. AMRITSAR GAS SERVICE[14] 5. HARBANSLAL SAHNIA v. INDIAN OIL CORPORATION LTD.,[15] 6. STATE OF H.P. V. GUJARAT AMBUJA CEMENT (5 supra) 10. Before we proceed to consider the rival contentions, rights of the parties and obligations created under the agreement dated 27.11.2000 have to be looked into, particularly Cl.9 of the agreement, which reads as under: “9. The Dealer undertakes to further the sales of the Corporation’s petroleum products. It is specifically agreed and declared that it is a basic condition of the grant of the Dealership rights by the Corporation to the Dealer herein that the Dealer hereby agreed, undertakes and covenants to lift and pay for the following minimum quantities of the Corporation’s petroleum products per month as specified hereunder: Product Quantity Motor spirit 20 KL HSD 200 KL MOTOR OIL GREASE 1.5 KL OTHER PRODUCTS VIZ., -- The Corporation shall have the absolute right to revise the aforesaid sale targets from time to time. It is specifically agreed that in the event of the Dealer not achieving the aforesaid minimum turnover at any time during three out of any six consecutive months during the currency of this agreement, the Corporation shall be entitled, not withstanding any acquiescence of waiver of this condition in respect of any one more months and notwithstanding any other provisions herein contained, to terminate this Agreement by giving one month’s notice to the Dealer.” The above clause is independent of other clauses in the dealership agreement which authorizes the Corporation to cancel the agreement in the event of failure to achieve the minimum turnover and failure to lift and pay for the minimum quantities. Cl.54 provides an additional right to the Corporation to terminate the dealership on the happening of the events mentioned in sub- clauses (a) to (l) of Cl.54. On termination of the contract/agreement, Cl.65 provides for arbitration to resolve the disputes between the parties. 11. It is not in dispute that on the appellant/writ petitioner failing to lift the minimum quantities under the agreement as agreed, the Corporation issued a show cause notice dated 16.09.2005 referring to Clauses 4, 9 and 54 of the Dealership Agreement pointing out the following irregularities: 1. During the last two years, the retail outlet was not functioning properly and the writ petitioner used to give the excuse of traffic diversion for the poor sales performance. 2. The retail outlet has not been achieving the targeted volumes of 20 KL MS and 200 KL HSD and the sales have been hovering around 10 KL MS and 50 KL HSD per month in the past few years. 3. The other retail outlets in the location are getting an average sale of 30 KL MS and 150 KL HSD every month. 4. The outlet used to operate with bear minimum stock and the writ petitioner was not present in the retail outlet to look after the day-to-day affairs of the retail outlet. 5. Due to lack of personal involvement the retail outlet could not tap the potential existed in that trading area. Alleging all the above acts constitute gross violation of the terms and conditions of the subject dealership agreement dated 27.11.2000, the Corporation called upon the writ petitioner to show cause as to why the petrol/HSD pump dealer agreement dated 27.11.2000 entered between the Corporation and the writ petitioner should not be terminated, to which the writ petitioner submitted his explanation on 26.09.2005 as under: “It is true during the last two years the retail outlet was not functioning properly because of the following reasons. 1. Traffic diversion in new bye pass road. 2. Due to bad debts in credit sales tuning to Rs.10 lakh. 3. My diversification to prawn culture which thrown me into deep waters. 4. Too many retail outlets came in my market area”. It is nowhere stated in the reply given to the show cause notice that for lack of furnishing the details of other retail outlets in the location getting an average sales of 30 kl MS and 150 kl HSD every month, the writ petitioner is not in a position to give explanation effectively to deal with the contents mentioned in the show cause notice. The writ petitioner in his reply mentioned the reasons as aforementioned for non-functioning of the outlet properly and requested the Corporation to permit him to bring in financial partner or one year business holiday so that he can come up with sufficient capital to run the business after selling away his property. Having not been satisfied with the above explanation the impugned order has been passed terminating the dealership agreement pointing out that as per Cl.9 of the Dealership Agreement, the writ petitioner had agreed to lift 20 kl of MS, 200 kl of HSD and 1.5 kl of Lubes per month and the writ petitioner failed to achieve the sales target in more than three months during the last six months. The termination was made on writ petitioner’s failure to lift the minimum petroleum products as undertaken but not for any other reason as contended by the learned counsel for the writ petitioner. If the impugned termination order is on the other grounds which are not specified in the show cause notice, there would be some merit in the contention of the writ petitioner that there is violation of principles of natural justice. Giving reasons for termination by not accepting the explanation offered by the petitioner cannot be said to be an irrelevant ground which has not been made known to the writ petitioner in the show cause notice. 12. The Supreme Court while considering the jurisdiction of the Arbitrator to order restoration of the distributorship and payment of compensation on a finding that the Corporation committed breach of contract held that restoration of contract granted by the arbitrator is contrary to law being against the express prohibition in Sections 14 and 15 of the Specific Relief Act and the dealer is entitled only to compensation {see IOC LTD., Vs. AMRITSAR GAS SERVICE (14 supra) and E. VENKATAKRISHNA V. IOC (10 supra)}. 13. In HARBANSLAL SAHNIA (15 supra), dealership agreement was terminated on the ground that the sample drawn from the outlet of the dealer did not satisfy and match with the standard specifications. The dealer challenged the termination order by filing a writ petition before the High Court of Utaranchal. The High Court of Uttaranchal dismissed the writ petition on the ground that the relationship between the parties is contractual and the dealership agreement contains an arbitration clause and therefore the appropriate remedy available to the dealer was to have recourse to arbitration rather invoking the writ jurisdiction. On filing appeal by the Dealer, the Supreme Court held 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 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 are challenged (see Whirlpool Corporation v. Registrar of Trade Marks=(1998)8 SCC 1). While considering the facts, the Supreme Court while observing that cancellation is founded solely on the failure of the dealer’s sample and non co-operation and discourteous behaviour of the dealer 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 Corporation, and failure of the sample taken from the dealer’s outlet on 11.02.2000 becomes an irrelevant and non-existent fact, which could not have been relied on by the Corporation for canceling the dealer’s licence, as Government orders were violated in respect of the sample taken, namely, test was not carried out at the retail outlet itself and the time gap between the sample taken and the lab test carried out is of about a month which is capable of causing marginal variation as detected and allowed the appeal filed by the dealer quashing the Corporation’s order terminating dealership of the dealer. 14. I n SANJANA M.WIG (Ms) (1 supra), Justice S.B.Sinha speaking for the Bench dealt with the scope and ambit of judicial review vis-à-vis availability of alternative remedy in terminating the dealership agreement. The appellant filed a writ petition questioning the notice issued by the respondent-Corporation terminating the agreement entered