Case: Indian Oil Corporation Ltd Vs. Niloufer Siddiqui

right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today?s complex world of giant corporations with their vast infrastructural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances.? 31. Further, it has been rightly contended by the learned senior counsel Mr. Sibal by placing reliance upon Mahabir Auto Stores?s case (supra) that IOCL being a Government of India Undertaking is bound to act fairly, reasonably and its conduct is subject to scrutiny on the touchstone of Article 14 of the Constitution of India. Answer to Point No.2 32. Ms. Pinky Anand, the learned Additional Solicitor General on behalf of the appellant-IOCL contended that the High Court has erred in granting the relief of restoration of distributorship as the same is contrary to the provision of Section 14(1)(c) of the Specific Relief Act, 1963 (for short ?the Act?). She further contended that the agreement in the instant case is determinable in nature and as per the provision of Section 14 (1)(c) of the Act, the agreement which is determinable in nature cannot be specifically enforced by the court. Thus, the High Court has erroneously held that the provision of Section 14(1)(c) of the Act is not applicable to the facts situation of the case. 33. She further contended that the High Court has wrongly directed IOCL to restore the terminated distributorship as the same is bad in law. She submitted that once a distributorship, even if it is terminated in breach of the contract, cannot be restored in favour of the respondent no. 2 and the only remedy available is to claim damages from IOCL. She placed strong reliance upon the judgment of this Court in the case of Indian Oil Corporation Ltd. v. Amritsar Gas Services & Ors. ((1991) 1 SCC 533 ). 34. On the other hand, Mr. Kapil Sibal, the learned senior counsel contended that the question of maintainability of suit under Section 14(1)(c) of the Act was never raised by IOCL either before the trial court or before the first appellate court. He further submitted that it is apparent from the letter of allotment and the conduct of the parties that neither the contract was revocable nor it had become void for any reason. Thus, the provision of Section 14(1)(c) of the Act is not attracted in the instant case as has been rightly held by the High Court. 35. He further contended that the Amritsar Gas Services & Ors. case (supra) relied upon by IOCL in its contentions has no relevance in the instant case for the reason that the said case relates to the Law of Arbitration. In the instant case, it is clear from the letter of allotment that there was no arbitration clause enumerated therein to attract the Law of Arbitration and related case laws. 36. We agree with the contentions advanced by the Mr. Sibal. The High Court in the impugned judgment and order has rightly held that the provision under section 14(1)(c) of the Act is not applicable to the facts and circumstances of the instant case. It held thus: ?10.(iii) Furthermore, from the terms of agreement, namely, the letter of allotment and the conduct of the parties, it appears that neither the contract was revocable nor it had become void for any reason whatsoever. Hence, provision of Section 14(1)(c) of the Specific Relief Act is not applicable to the facts and circumstances of the instant case and the suit cannot be legally held to be maintainable under the said provision…? 37. Furthermore, from a perusal of letter of allotment, it is clear that there is no arbitration clause therein. Thus, the case of Amritsar Gas Services (supra) relied upon by IOCL in its contentions is of no relevance. Answer to Point No.3 38. For the reasons mentioned supra we are of the view that no error has been committed by the High Court in setting aside the erroneous findings of the trial court as well as the first appellate court in its judgments and orders.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]we agree with the arguments advanced by Mr. Kapil Sibal. We have examined the material on record and on the basis of the admitted facts, it is clear that there is no dispute that the appellant-IOCL offered distributorship of Indane Gas (LPG) to respondent nos.2 and 3 vide its letter of allotment dated 21.10.1971 on certain terms and conditions. It is also an admitted fact that both respondent nos. 2 and 3 got the partnership firm registered as per the terms and conditions of letter of allotment and at least twice requested IOCL to send the Company?s standard agreement for signature, but IOCL failed to send it to them. Hence, it can be inferred from the pleadings and evidence on record that the Company?s standard agreement was never executed by themThere is nothing on record to show that both the respondent nos. 2 and 3 had any knowledge or had ever agreed to the terms of the said standard agreement. We agree with the submission made by Mr. Sibal that the agreement which is not executed by the parties cannot be legally made enforceable against them. Therefore, the High Court has rightly held that the standard agreement cannot be said to be legally binding upon the respondent nos. 2 and 3 as the same has never been executed between the allottes and IOCLIt is clear from the pleadings and evidence on record that the standard agreement was never supplied to both the respondent nos. 2 and 3 and the said standard agreement cannot be said to be executed between the allottes and IOCL. Thus, as per the facts and circumstances of the case and also in the light of the aforesaid statutory provision of the Contract Act, the said standard agreement in question cannot be said to be a concluded contract between the parties in law. Consequently, it cannot be made binding upon the allottes of distributorship by IOCL29. As far as the alleged violation of clause 21 (supra) of the standard agreement by respondent nos. 2 and 3 is concerned, it is clear that the said standard agreement is not binding upon the parties for the reasons stated supra and when the said standard agreement is not binding, then the question of violation of terms and conditions does not arise. Rather IOCL has violated condition no.2 (supra) of the letter of allotment by not sending the standard agreement to both the respondent nos. 2 and 331. Further, it has been rightly contended by the learned senior counsel Mr. Sibal by placing reliance upon Mahabir Auto Stores?s case (supra) that IOCL being a Government of India Undertaking is bound to act fairly, reasonably and its conduct is subject to scrutiny on the touchstone of Article 14 of the Constitution of India36. We agree with the contentions advanced by the Mr. Sibal. The High Court in the impugned judgment and order has rightly held that the provision under section 14(1)(c) of the Act is not applicable to the facts and circumstances of the instant case37. Furthermore, from a perusal of letter of allotment, it is clear that there is no arbitration clause therein. Thus, the case of Amritsar Gas Services (supra) relied upon by IOCL in its contentions is of no relevance38. For the reasons mentioned supra we are of the view that no error has been committed by the High Court in setting aside the erroneous findings of the trial court as well as the first appellate court in its judgments and orders