Page 1

1

REPORTABLE      IN THE SUPREME COURT OF INDIA

   CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NO.7266 OF 2009

INDIAN OIL CORPORATION LTD.       … APPELLANT     Versus

NILOUFER SIDDIQUI & ORS.          … RESPONDENTS

J U D G M E N T  

V. GOPALA GOWDA, J.       

This  Civil  Appeal  is  directed  against  the  

impugned judgment and order dated 03.07.2007 passed  

by the High Court of Judicature at Patna in Second  

Appeal No. 516 of 1988 whereby it has set aside the  

impugned judgment and orders therein passed by the  

courts below on the ground that both the courts below  

not only committed error of record by misconstruing  

the facts and evidence on record but also ignored the  

specific provisions of law as well as the necessary

Page 2

2

and relevant case laws and also wrongly held that the  

Title  Suit  No.  68  of  1978  was  barred  by  the  

principles of res judicata.

 2. The facts which are required to appreciate the  

rival  legal  contentions  urged  on  behalf  of  the  

parties are stated in brief hereunder:

The  appellant-Indian  Oil  Corporation  Limited  

(for  short  “IOCL”)  in  the  year  1971  invited  

applications from eligible persons under the scheme  

for awarding the distributorship of Indane Gas (LPG)  

Agencies in the town of Muzaffarpur, Bihar. The said  

distributorship  was  reserved  for  ex-defence  

personnel, war-widows and dependants. The respondent  

no.2- Ex-Captain A.S. Siddiqui and respondent no.3-

Ex-Captain Jai Narain Prasad Nishad applied for the  

said distributorship and got it. On 15.10.1971 IOCL  

offered the said distributorship to respondent nos. 2  

and 3 along with a third person provided they agreed  

to enter into a partnership to run the business of  

distribution of Indane Gas. This was done with a view  

to rehabilitate more ex-servicemen in the country.  

However,  the  third  person  refused  to  form

Page 3

3

partnership.

3. The  IOCL  through  its  letter  no.  

Sales/LPG/ERN/3623  dated  21.10.1971  (hereinafter  

referred  to  as  “letter  of  allotment”)  allotted  

distributorship of Indane Gas to respondent nos.2 and  

3  subject  to  the  terms  and  conditions  mentioned  

therein. Condition no.2 of the said letter is stated  

hereunder:

“Condition no.2: This appointment is subject to the  conditions  contained  in  our  standard  agreement which will be sent to you in due  course for your signature and you shall sign  and return the same to us.”

Further condition no.8 of the said letter reads thus:

“TERMINATION:

Condition  no.8:  Notwithstanding  anything  contained  herein, the Corporation shall be at liberty to  terminate your distributorship without assigning  any  reason  whatsoever  by  giving  you  30  days  notice in writing of intention to do so and upon  the  expiry  of  the  said  notice  your  distributorship  shall  stand  cancelled  and  terminated  without  prejudice  to  the  rights  of  the  Corporation  in  respect  of  any  matter  or  thing antecedent to such termination.”

4. On  17.11.1971  the  partnership  deed  was  signed  

between  respondent  nos.2  and  3  to  carry  on  the  

business of distribution of Indane Gas at Muzzafarpur

Page 4

4

under  the  name  and  style  of  M/s  Happy  Homes  

(respondent no.4) on various terms and conditions.  

Condition no.12 of the said partnership deed reads  

thus:

“12.No partner shall without the consent of the  other  partner  obtained  in  writing  for  the  purpose of any of the following acts:-

a.  Engage while he is a partner or be directly  or  indirectly  concerned,  in  may  business  other, than that of and competing with the  business of the firm.

 XXX             XXX             XXX

h.  Assign  or  mortgage  his  share  in  the  partnership  or  attempt  to  introduce  and  consider as partner…”   

5. The  respondent  no.2  through  letter  no.59582  

dated 04.11.1971 requested the IOCL for supply of the  

copy  of  the  standard  agreement  as  referred  to  in  

condition no.2 of the letter of allotment issued by  

IOCL. IOCL vide letter dated 12.11.1971 had given an  

assurance to them to send the said agreement in due  

course.  The  respondent  no.2  through  letter  dated  

16.12.1971 again requested for a copy of the said  

standard agreement from IOCL. IOCL vide letter no.  

3622 dated 31.12.1971 allayed apprehension of both  

respondent  nos.2  and  3  on  the  score  of  non-

Page 5

5

availability of the said standard agreement and the  

termination of distributorship. The relevant part of  

the said letter no. 3622 reads thus:  

“…This agreement will be given to you in due  course.  There  is  absolutely  no  secrecy  maintained about anything and the agreement as  and when ready, would be sent to you…

 xx              xx                 xx

Please in the meantime, we would like you to  progress  fast  regarding  commissioning  the  market…”  

6. From 23.03.1972 the partnership firm-M/s Happy  

Homes started the business of distribution of Indane  

Gas without the said standard agreement by both the  

respondent  nos.  2  and  3.  The  distributorship  

continued to be regulated by the terms of the letter  

of allotment issued by IOCL to them.

 7. The  business  of  the  partnership  firm  went  on  

smoothly for some time. After few months differences  

arose between the partners i.e., respondent nos. 2  

and  3  due  to  certain  irregularities  committed  by  

respondent no.3. The interference of IOCL was sought  

by respondent no. 2 for the settlement of the said  

dispute. However, IOCL refused to interfere and asked

Page 6

6

the partners to settle their dispute themselves. On  

27.02.1973 the respondent no. 2 wrote a letter to  

Directorate  General  of  Resettlement,  Ministry  of  

Defence (for short “DGR”)  with a copy of the same to  

the Minister of Defence and the Minister of Petroleum  

requesting either to split the partnership business  

into two or to permit him to transfer his share in  

the partnership in the name of his wife Mrs. Niloufer  

Siddiqui (respondent no.1) or his father Ex-Captain  

M. Ozair or the widow of Late Captain M. Ammar in  

whose partnership he had actually applied for the  

distributorship.

 8. On 31.10.1973 both respondent nos.2 and 3 went  

to Calcutta to meet the Branch Manager, IOCL. The  

respondent no.2 expressed his desire to transfer his  

share in the partnership in the name of either his  

wife or his father. The respondent no.3 gave oral  

consent to the desire expressed by respondent no.2.  

Later, the respondent no.3 confirmed his oral consent  

by writing a letter dated 15.11.1973 addressed to the  

Branch Manager, IOCL.

9. The  respondent  no.2  through  letter  dated

Page 7

7

17.11.1973  addressed  to  the  Branch  Manager,  IOCL  

sought IOCL’s permission to transfer his share in the  

partnership in the name of either his wife or his  

father.  On  02.1.1974,  the  respondent  no.2  joined  

Bihar Government Services as Deputy Superintendent of  

Police.

10. IOCL  vide  letter  dated  25.02.1974  refused  to  

accede to the request for transfer of shares made by  

respondent no.2 and stated thus:

“…you may recall that during the discussions you  had with the undersigned as well as our Branch  Sales  Manager  Sri  SC  Ghosh  alongwith  your  partner, it was clearly advised that unless all  the  set  backs/irregularities  under  which  the  distributorship is being operated are set aside,  we shall not be forwarding any such request.”  

11. Thereafter,  the  respondent  no.2  again  wrote  a  

letter on 03.3.1975 to the DGR along with a copy of  

it to IOCL with same request but, DGR vide letter  

dated 27.3.1975 refused to accede to the request made  

by the respondent no.2. The same request was also  

refused by IOCL vide letter dated 17.4.1975.

12. By  a  notice  published  in  the  daily  newspaper  

‘Indian  Nation’  the  respondent  no.2  indicated  his

Page 8

8

intention to transfer his share in M/s Happy Homes in  

favour of his wife i.e., respondent no.1 and invited  

objections to the same, if any. The IOCL vide its  

letter No. Sales/LPG/3710 dated 16.01.1978 terminated  

the  distributorship.  The  relevant  portions  of  the  

said letter are extracted as under:

“It  was  clearly  understood  that  you  will  not  take up any other business or employment during  the  continuation  of  the  aforesaid  distributorship  vide  his  letter  of  November,  1973  and  September,  1975  Capt.  Siddiqui  has  approached  us  for  our  permission  to  his  transferring  his  share  in  the  aforesaid  Distributorship  to  his  father  which  was  not  acceded to and he was advised to choose one or  the two i.e., either to keep his job or remain  our distributor. In addition it was also made  clear  to  you  by  us  and  also  the  Directorate  General  of  Resettlement  that  he  cannot  be  allowed to transfer his share to his father. But  he has persisted with the breach and violation  of this agreement and did not resign from the  job.

   xx              xx               xx         In view of the foregoing it has been decided to  terminate your distributorship and this letter  may be treated as our notice for this purpose.  Please  note  that  your  distributorship  rights  shall stand terminated and cancelled on expiry  of the period of 30 days without prejudice to  the rights of the corporation in respect of any  matter or thing antecedent to such termination.”

13. On  23.1.1978,  the  respondent  no.2  executed  a  

deed of transfer (Baimokasa) in favour of his wife

Page 9

9

i.e.,  respondent  no.1  whereby  he  transferred  his  

share in the partnership in the name of his wife.  

14. On  9.6.1978,  the  respondent  no.1  instituted  a  

Title Suit no. 68 of 1978 in the court of Executive  

Munsif,  Muzaffarpur  seeking  declaration  that  

termination  of  the  distributorship  by  IOCL  vide  

letter dated 16.01.1978 was illegal, arbitrary and  

unjustified.  The  respondent  no.1  also  prayed  for  

restoration of the distributorship. The trial court  

vide  its  judgment  and  order  dated  11.04.1985  

dismissed the said suit holding, inter alia, that  

respondent no.2 had no right to transfer his share in  

the  partnership  in  the  name  of  his  wife  i.e.,  

respondent no.1.

15. Aggrieved by the decision of the trial court,  

the respondent no.1 preferred Title Appeal no. 32 of  

1986  in  the  court  of  Additional  District  Judge,  

Muzaffarpur.  The  first  appellate  court  vide  its  

judgment  and  order  dated  13.06.1988  dismissed  the  

appeal and upheld the decision of the trial court.

16. Aggrieved by the decision of the first appellate

Page 10

10

court, the respondent no.1 preferred Second Appeal  

no. 516 of 1988 in the High Court of Judicature at  

Patna by framing certain substantial questions of law  

and urged various tenable grounds in support of the  

same.  The  High  Court  vide  its  judgment  and  order  

dated 03.07.2007 allowed the appeal by setting aside  

the judgments and orders passed by the courts below.  

It  declared  that  the  letter  of  termination  dated  

16.01.1978  issued  by  IOCL  in  terminating  

distributorship  of  respondent  no.2  to  be  illegal,  

arbitrary  and  unjustified  and  gave  direction  for  

restoration  of  the  distributorship.  Hence,  this  

appeal  is  filed  by  the  appellant  questioning  the  

correctness of the impugned judgment and order by  

framing certain questions of law.  

17. We  have  carefully  heard  Ms.  Pinky  Anand,  the  

learned  Additional  Solicitor  General  on  behalf  of  

appellant-IOCL  and  Mr.  Kapil  Sibal,  the  learned  

senior counsel on behalf of respondent nos. 1, 2& 4.  

On the basis of factual evidence on record produced  

before us, the circumstances of the case and also in  

the light of the rival legal contentions urged by the

Page 11

11

learned senior counsel on behalf of both the parties,  

we have broadly framed the following points which  

require our attention and consideration-

i. Whether IOCL had the right to terminate  

the distributorship of respondent nos. 2  

and 3?

ii. Whether the provision of Section 14(1)(c)  

of  the  Specific  Relief  Act,  1963  is  

applicable in the instant case?

iii. What order?

 Answer to Point No.1

18. Ms.  Pinky  Anand,  the  learned  Additional  

Solicitor  General  on  behalf  of  the  appellant-IOCL  

contended that IOCL had the right to terminate the  

distributorship  without  assigning  any  reason.  She  

submitted that the High Court has incorrectly held  

that  IOCL  violated  Condition  no.8  (supra)  of  the  

terms and conditions as mentioned in the letter of  

allotment  dated  21.10.1971  by  terminating  the  

distributorship  without  giving  30  days  notice  to

Page 12

12

respondent no.2 which was a pre-requisite condition.  

She further submitted that the said 30 days notice as  

required under condition no.8 was given in the notice  

of termination itself. She placed reliance upon the  

decision of this Court in the case of  Her Highness  

Maharani Shanti  Devi  P.  Gaikwad  V.  Savjibhai  Haribhai Patel & ors1. The relevant portion of the  judgment cited by her reads thus:

54..“5.… it is the court’s duty to give effect  to the bargain of the parties according to their  intention and when that bargain is in writing  the intention is to be looked for in the words  used unless they are such that one may suspect  that they do not convey the intention correctly.  If those words are clear, there is very little  that the court has to do. The court must give  effect to the plain meaning of the words however  it may dislike the result. We have earlier set  out clause 10 and we find no difficulty or doubt  as to the meaning of the language there used.  Indeed the language is the plainest…”

Thus, the termination of the distributorship of the  

Indane Gas of respondent no.2 was legal, proper and  

justified according to the terms and conditions in  

the letter of allotment issued by IOCL which the High  

Court had failed to consider and appreciate the same  

while recording its findings and answering the said  

substantial question of law. 1   (2001) 5 SCC 101

Page 13

13

19. It was further contended by her that the High  

Court  has  erred  in  coming  to  the  conclusion  that  

respondent nos. 2 and 3 have not committed any breach  

of the terms and conditions of the standard agreement  

on the ground that the same was never supplied to  

them. The finding of the High Court on this point is  

not only bad in law but also factually wrong. She  

submitted that the evidence on record clearly shows  

that respondent nos. 2 and 3 were shown the terms of  

the  standard  agreement  and  were  specifically  made  

aware of clause 21 which prohibited the partners from  

assigning their shares in favour of outsiders without  

the consent of IOCL. The fact that respondent no.2  

repeatedly sought permission from IOCL for assigning  

his share to his wife clearly shows that he was aware  

of such a condition in the agreement. Clause 21 of  

the standard agreement reads thus:

“21.  The  distributor  shall  not  sell,  assign,  mortgage or part with or otherwise transfer his  interest  in  the  distributorship  or  the  right,  interest  or  benefit  conferred  on  him  by  this  agreement to any person. In the event of the  Distributor being a partnership firm any change  in  constitution  of  the  firm,  whether  by  retirement,  introduction  of  new  partners  or  otherwise  howsoever  will  not  be  permitted  without  the  previous  written  approval  of  the

Page 14

14

Corporation notwithstanding that the Corporation  may have dealings with such reconstituted firm  or impliedly waived or condoned the breach or  default  mentioned  hereinabove  by  the  Distributor…”  

20. She  further  submitted  that  the  validity  of  

termination of distributorship has to be tested on  

the principles of private law and the law of contract  

and not on the touchstone of constitutional or public  

law. In the present case the question involved is  

purely a question of breach of contract alone between  

the parties for which the respondent no.1 & 2 at best  

if they prove the breach on the part of the appellant  

they are entitled for damages but not declaratory  

remedy  and  consequential  relief  as  prayed  in  the  

plaint.  

21. Per contra, Mr. Kapil Sibal, the learned senior  

counsel on behalf of respondent nos.1, 2 & 4 sought  

to justify the impugned judgment and order passed by  

the High Court by urging various factual as well as  

legal contentions in justification of the impugned  

judgment.

22.  It was further contended by him that  both the

Page 15

15

respondent nos. 2 and 3 have fulfilled all the terms  

and  conditions  of  the  letter  of  allotment  of  

distributorship which was given to them by IOCL. It  

is  IOCL  which  has  violated  the  said  terms  and  

conditions  by  not  sending  a  copy  of  the  standard  

agreement despite repeated demands made by respondent  

no.2  to  IOCL.  Both  the  respondent  nos.  2  and  3  

started their business on 23.03.1972 on the basis of  

the letter of allotment. At no point of time they  

were made acquainted with the terms and conditions of  

the standard agreement by IOCL. He further submitted  

that  the  agreement  which  is  not  executed  by  the  

parties cannot be legally made enforceable against  

them.  Therefore,  the  terms  and  conditions  of  the  

standard agreement cannot be made binding upon them  

as  they  have  not  executed  the  same.  Thus,  the  

termination of the distributorship of Indane Gas as  

per the terms and conditions enumerated in the said  

standard agreement is illegal as has been rightly  

held by the High Court in its reasoned judgment by  

answering the substantial question of law in favour  

of respondent no.1 & 2.

Page 16

16

23. It  was  further  contended  by  him  that  as  per  

condition  no.8  of  the  letter  of  allotment  IOCL  

reserved the right to terminate the distributorship  

without assigning any reason by giving 30 days notice  

in writing. The purpose of the said 30 days notice  

was to afford time to both the respondent nos. 2 and  

3 to advance their explanation against such intended  

termination made by the IOCL by invoking its right  

under condition no.8. He further submitted that IOCL  

itself has completely violated the terms enumerated  

in  condition  no.8  of  letter  of  allotment.  It  has  

arbitrarily terminated the distributorship by issuing  

a letter without giving any notice to them  by giving  

irrelevant  reasons  which  is  in  violation  of  the  

principles of natural justice as well. In his further  

submissions he assailed the condition no.8 of the  

letter of allotment itself. He submitted that the  

said condition is unconscionable in so far as it gave  

IOCL  an  unfettered  right  to  terminate  the  

distributorship of Indane Gas in favour of both the  

respondent nos. 2 & 3 without assigning any reason  

whatsoever. He fortified his submission by placing  

strong reliance upon the decision of this Court in

Page 17

17

Central Inland Water Transport Corporation Limited &  

Anr.  V. Brojo Nath Ganguly & Anr.2 which has been  

followed by the Constitution Bench of this Court in  

the  case  of  Delhi  Transport  Corporation  v. DTC  

Mazdoor Congress and Others.3 The relevant paragraph  

from  Central Inland Water Transport’s case (supra)  

cited by the learned senior counsel is extracted in  

the later part of this judgment.

  24. It was further contended by him that IOCL, being  

a Government of India Undertaking is bound to act  

fairly and its conduct is subject to scrutiny on the  

touchstone  of  Article  14  of  the  Constitution  of  

India. He further submitted that it is clear from the  

evidence on record that the action of IOCL was high  

handed and arbitrary. He placed strong reliance upon  

the decision of this Court in the case of  Mahabir  

Auto Stores and Ors v. Indian Oil Corporation & Ors.4  

Paragraph 12 of the aforesaid case reads thus:

“12. It is well settled that every action of  the State or an instrumentality of the State in  exercise  of  its  executive  power,  must  be  informed  by  reason.  In  appropriate  cases,  actions uninformed by reason may be questioned  

2   (1986) 3 SCC 156 3  1991 Supp (1) SCC 600 4  (1990) 3 SCC 752

Page 18

18

as arbitrary in proceedings under Article 226  or Article 32 of the Constitution. Reliance in  this  connection  may  be  placed  on  the  observations  of  this  Court  in  Radha  Krishna  Agarwal v. State of Bihar. It appears to us, at  the outset, that in the facts and circumstances  of the case, the respondent company IOC is an  organ of the State or an instrumentality of the  State as contemplated under Article 12 of the  Constitution. The State acts in its executive  power under Article 298 of the Constitution in  entering  or  not  entering  in  contracts  with  individual  parties.  Article  14  of  the  Constitution  would  be  applicable  to  those  exercises of power. Therefore, the action of  State organ under Article 14 can be checked.  See Radha Krishna Agarwal v. State of Bihar at  p.  462,  but  Article  14  of  the  Constitution  cannot and has not been construed as a charter  for judicial review of State action after the  contract has been entered into, to call upon  the State to account for its actions in its  manifold activities by stating reasons for such  actions. In a situation of this nature certain  activities  of  the  respondent  company  which  constituted  State  under  Article  12  of  the  Constitution  may  be  in  certain  circumstances  subject to Article 14 of the Constitution in  entering  or  not  entering  into  contracts  and  must be reasonable and taken only upon lawful  and  relevant  consideration;  it  depends  upon  facts  and  circumstances  of  a  particular  transaction  whether  hearing  is  necessary  and  reasons have to be stated. In case any right  conferred on the citizens which is sought to be  interfered, such action is subject to Article  14 of the Constitution, and must be reasonable  and can be taken only upon lawful and relevant  grounds  of  public  interest.  Where  there  is  arbitrariness in State action of this type of  entering  or  not  entering  into  contracts,  Article  14  springs  up  and  judicial  review  strikes such an action down. Every action of  the State executive authority must be subject  to rule of law and must be informed by reason.

Page 19

19

So,  whatever  be  the  activity  of  the  public  authority,  in  such  monopoly  or  semi-monopoly  dealings, it should meet the test of Article 14  of the Constitution. If a governmental action  even in the matters of entering or not entering  into contracts, fails to satisfy the test of  reasonableness, the same would be unreasonable.  In this connection reference may be made to  E.P. Royappa v.  State of Tamil Nadu,  Maneka  Gandhi v. Union of India, Ajay Hasia v. Khalid  Mujib Sehravardi, R.D. Shetty v. International  Airport Authority of India and also  Dwarkadas  Marfatia and Sons v. Board of Trustees of the  Port of Bombay. It appears to us that rule of  reason  and  rule  against  arbitrariness  and  discrimination, rules of fair play and natural  justice are part of the rule of law applicable  in situation or action by State instrumentality  in dealing with citizens in a situation like  the present one. Even though the rights of the  citizens  are  in  the  nature  of  contractual  rights, the manner, the method and motive of a  decision of entering or not entering into a  contract, are subject to judicial review on the  touchstone  of  relevance  and  reasonableness,  fair play, natural justice, equality and non- discrimination in the type of the transactions  and nature of the dealing as in the present  case.”

25.  Mr. V.K. Monga, the learned counsel on behalf  

of respondent no.3 in his contentions supported the  

arguments advanced by Ms. Pinky Anand, the learned  

ASG on behalf of appellant-IOCL.

  26.  After careful considerations of the findings of  

the High Court both on fact and law and considering  

the rival legal submissions made on behalf of the

Page 20

20

parties, 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 them.  

 27. On 23.03.1972 both the respondent nos. 2 and 3  

started  their  business  without  the  said  standard  

agreement  being  signed  by  both  of  them.  The  

partnership business continued to be regulated by the  

terms  and  conditions  of  the  letter  of  allotment  

issued by IOCL. Hence, the claim of IOCL that both

Page 21

21

the respondent nos. 2 and 3 were aware of the said  

standard agreement is unsusceptible in law. There 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 IOCL.

28. Further, Section 7 of the Indian Contract Act  

1872, specifically provides that acceptance must be  

absolute. It reads thus:

“In order to convert a proposal into a promise  the acceptance must – (1)be absolute and unqualified. (2)be expressed in some usual and reasonable  manner,  unless  the  proposal  prescribes  the  manner in which it is to be accepted. If the  proposal prescribes a manner in which it is to  be accepted; and the acceptance is not made in  such  manner,  the  proposer  may,  within  a  reasonable  time  after  the  acceptance  is  communicated to him, insist that his proposal  shall be accepted in the prescribed manner,

Page 22

22

and not otherwise; but; if he fails to do so,  he accepts the acceptance.”

It 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 IOCL.

 29. 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

Page 23

23

agreement to both the respondent nos. 2 and 3.

  30. We  agree  with  the  contentions  advanced  by  

Mr.  Sibal  that  condition  no.8  of  the  letter  of  

allotment  is  unconscionable  as  it  gives  IOCL  an  

unfettered  right  to  terminate  the  distributorship  

without assigning any reason. In the instant case,  

respondent no.2 is far weaker in economic strength  

and has no bargaining power with IOCL. At the time  

when the letter of allotment was issued, respondent  

no.2  had  no  other  means  of  livelihood  and  was  

dependent on the grant of Indane Gas agency by IOCL  

for sustenance of himself and family members. The  

letter  of  allotment  contains  standard  terms  and  

respondent nos. 2 and 3 had no opportunity to vary  

the  same.  Condition  no.8  of  letter  of  allotment  

provides  for  unilateral  termination  of  

distributorship without assigning any reason which is  

liable to be read down in the light of Article 14 of  

Constitution of India as well as observations made by  

this  court  in  Central  Inland  Water  Corporation  

Limited’s case (supra). The relevant paragraph cited  

by  the  learned  senior  counsel  is  reproduced

Page 24

24

hereunder:

“89. Should then our courts not advance with  the times? Should they still continue to cling  to  outmoded  concepts  and  outworn  ideologies?  Should we not adjust our thinking caps to match  the  fashion  of  the  day?  Should  all  jurisprudential development pass us by, leaving  us floundering in the sloughs of 19th century  theories?  Should  the  strong  be  permitted  to  push  the  weak  to  the  wall?  Should  they  be  allowed to ride roughshod over the weak? Should  the courts sit back and watch supinely while  the strong trample underfoot the rights of the  weak? We have a Constitution for our country.  Our judges are bound by their oath to “uphold  the  Constitution  and  the  laws”.  The  Constitution was enacted to secure to all the  citizens  of this  country social  and economic  justice.  Article  14  of  the  Constitution  guarantees to all persons equality before the  law and the equal protection of the laws. The  principle deducible from the above discussions  on this part of the case is in consonance with  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

Page 25

25

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.

Page 26

26

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.

Page 27

27

She placed strong reliance upon the judgment of this  

Court in the case of Indian Oil Corporation Ltd. v.  

Amritsar Gas Services & Ors.5.

  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  

5   (1991) 1 SCC 533

Page 28

28

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

Page 29

29

Court in setting aside the erroneous findings of the  

trial court as well as the first appellate court in  

its judgments and orders.  

 39. The facts and circumstances of this case are  

such that we are constrained to make observation that  

the appellant-IOCL must be very cautious and careful  

while  exercising  its  power  to  terminate  the  

distributorship  of  this  nature.  For  the  aforesaid  

reasons the appeal is liable to be dismissed.

 40.  On the issue of cost, we are of the opinion that  

since  the  respondents  have  been  litigating  for  a  

period of around 37 years, spending precious time in  

the courts of law seeking justice for themselves, they  

are entitled thereto in the facts and circumstances of  

the  case.  The  respondent  nos.  2  and  3  are  ex-

servicemen  in  whose  favour  the  distributorship  was  

awarded,  the  same  was  terminated  arbitrarily  and  

unfairly. This conduct on the part of IOCL defeats the  

laudable object of the scheme of the Government of  

India by which distributorship was allotted in favour  

of  the  ex-defence  personnel,  war-widows  and  

dependants. Thus, respondent nos. 1 & 2 deserve to be

Page 30

30

awarded with costs.

41. Accordingly, we pass the following order-

i)  This  Civil  Appeal  is  dismissed.  The  order dated 13.12.2007 granting stay shall  stand vacated.

ii) We direct the appellant-IOCL to restore  the  LPG  distributorship  in  favour  of  respondent nos. 1 or 2 and 3 forthwith and  submit a compliance report to this court.

iii) The cost of Rs. 1 lakh be paid to  respondent nos. 1 and 2 within four weeks  from the date of receipt of the copy of the  Judgment.

iv) All pending applications are disposed  of.                

                                  …………………………………………………………J.                                  [V.GOPALA GOWDA]   

                                          …………………………………………………………J.                         [AMITAVA ROY]

New Delhi, December 1, 2015