REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6748 OF 2018 [Arising out of SLP (C) No.33100 of 2015]

Indian Oil Corporation Ltd. & Anr.     .. Appellant(s)

Versus

T. Natarajan             .. Respondent(s)

J U D G M E N T

Abhay Manohar Sapre, J.

1) Leave granted.

2) This  appeal is filed  against the final judgment

and order dated 08.10.2015 passed by the High Court

of Judicature at Madras in W.A. No.589 of 2015

whereby the Division Bench of the High Court allowed

the writ appeal filed by the respondent herein and set

aside the order dated 17.04.2014 passed by the Single

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Judge of the High Court in Writ Petition No. 10026 of

2013 by which the writ petition filed by the respondent

herein was dismissed.  

3) In order to appreciate the issues involved in the

appeal,  it  is necessary to set out the facts  in detail.

The facts are taken from the SLP paper book.

4) The appellants herein were respondent Nos.1 and

2 and the sole respondent herein was the writ

petitioner in the writ petition before the High Court out

of which this appeal arises.

5) Appellant No.1 is the Government Company

called Indian Oil Corporation Ltd. (hereinafter referred

to as "the IOC").  The IOC is engaged in the business of

manufacturing and sale of several petroleum products

such as  petrol,  High­Speed  Diesel (HSD), lubricants

etc.  The IOC has set up several retail outlets all over

the  country for  sale  of their  products through  their

retail dealers.  

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6) On 31.08.1989, the IOC appointed respondent as

its retail dealer for sale of petroleum  products.   A

dealership agreement (Annexure P­12) was accordingly

executed between the IOC and the respondent in this

regard.  

7) The respondent had to carry on the business as

per the terms and conditions of the dealership

agreement. The respondent accordingly set up his

petrol pump in the name and style of  M/s Lakshmi

Service Station at GST Road, Kooteripattu Town (Tamil

Nadu) and started selling petroleum products of IOC.

8) On 01.08.2008, Deputy Inspector of Labour

(Weights & Measures) carried out an inspection of the

respondent's petrol pump. It was followed by another

inspection carried out by the Sales Officer of the IOC

on 02.08.2008. In these two inspections, it was

noticed that “totalizer wires of L&T Line DU in petrol

pump model serial No.1578 used at MS 2 pump was

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found cut”. In other words, in these inspections, "no

totalizer seal" was found in place.    

9) It is these inspections, which gave rise to

issuance of show cause notice by the IOC to the

respondent on 27.08.2008. The show cause notice,

after setting out the details of the inspections,

proceeded that  why the dealership agreement of the

respondent  dated  31.08.1989  be  not terminated for

the alleged breaches noticed  in  the  inspections.  The

respondent  was called  upon to file his reply.   The

respondent filed his reply.

10) Not satisfied with the reply filed by the

respondent, the IOC, vide letter dated 11.03.2009

terminated the respondent's dealership agreement.  

11) The respondent felt aggrieved by the termination

of his dealership agreement and invoked clause 69 of

the dealership agreement which provided for

resolution of disputes by the Arbitrator arising in

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relation to the dealership agreement and he requested

the IOC to refer  the matter to the Arbitrator  for his

decision.   The IOC acceded   to the respondent’s

request and accordingly referred the matter relating to

termination of his dealership to the sole Arbitrator.

12) The Arbitrator then embarked upon the reference

and passed his reasoned award dated 14.10.2011.

The operative part of the award reads as under:

“The act of  continuing the sales even after the breakage of Totalizer Seal committed by the claimant, in question, calls for stern action.   However, it is noted that there was no variation in the quality and quantity. Again, the petitioner has already suffered substantially for more than two (2) years for the closed status of the retail outlets. Therefore, a lenient view may be considered by the respondent, bearing in mind the element of benefit of doubt.

13) The IOC, felt aggrieved by the award of the

Arbitrator, questioned its legality by filing an

application (OP No.358 of 2012) under Section 34 of

the Arbitration and Conciliation Act,  1996 (for  short

“the  Act”)  whereas the respondent filed  an interim

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application No.447/2012 seeking resumption of

supply of fuel to him before the High Court.  

14) By order dated 23.11.2012, the High Court

dismissed the application and upheld the award. The

operative part of the order reads as under:

"In the result, the arbitral award dated 14.10.2011 made by the third respondent is confirmed with liberty given to the dealer to approach IOC with request in writing for continuation of distributorship and for supply and sale and  with further direction issued to IOC to duly consider such request of the first respondent/dealer within one week from the date of receipt of such written request.  The  OP  filed  by  the  IOC and the application filed by the dealer are accordingly disposed of."  

15) The aforesaid order attained finality, as neither of

the parties filed any appeal against the aforesaid

order.  

16) The respondent then on 20.02.2013 filed a

representation to the appellant (IOC) requesting them

for resumption of the supply of fuel to him pursuant to

the directions of the award.   By letter dated

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13.03.2013, the IOC rejected the representation

assigning the reasons for rejection of the respondent's

representation.

17) The respondent felt aggrieved by the rejection of

his representation, filed writ petition before the

Madras High Court under Article 226/227 of the

Constitution  of India.  The  appellant (IOC) contested

the writ petition and defended their order of rejection

of the respondent's representation.  

18) By order dated 17.04.2014, the Single Judge

(writ Court) dismissed the writ petition finding no

merit to the challenge  made to the rejection  of the

respondent's representation and upheld the same as

being just and proper calling no interference. The

respondent felt aggrieved and filed intra court appeal

before the Division Bench.  

19) By impugned order, the Division Bench allowed

the respondent’s  appeal  and while  setting  aside the

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order of the Single Judge issued a mandamus to the

IOC to restore the respondent's dealership and resume

the supply of  fuel to his fuel station.   The operative

part of the order of the Division Bench contained in

Para 21 and 22 reads as under:

“21. The application filed by the Corporation to set aside the award has already been dismissed by the learned Single Judge.   The Corporation is now taking advantage of the liberty granted by the learned Single Judge while  confirming the award to consider the representation.   There is absolutely no need to submit a representation and passing orders thereon by the Corporation in view of the conclusiveness reached to the award setting aside the order of termination.  Since the supply was stopped only on account of the order of termination of dealership, naturally supplies should resume immediately  after the  award  and upholding the said award by the learned Single Judge. This aspect was not considered by the learned Single Judge.  We are therefore of the view that the appellant must succeed.

22. In the result, the order dated 13 March 2013 on the file of the second respondent is set aside.   The writ petition filed by the appellant is allowed.  The first respondent is directed to pass a consequential order pursuant to the award dated 14 October 2011 restoring the dealership of the appellant and resume supplies to the fuel station.   Such

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exercise shall be completed within a period of one week from the date of receipt or production of a copy of this judgment.”

20) It is against this aforementioned order, the

IOC felt aggrieved and filed this appeal by  way of

special leave before this Court.  

21) Heard Mr. Huzefa Ahmadi, learned senior

counsel for the appellants and Mr. Mohan Parasaran,

learned senior counsel for the respondent.

22) Mr. Huzefa Ahmadi, learned senior counsel while

assailing the legality and correctness of the impugned

order mainly urged three submissions.  

23) In the first  place, learned senior  counsel  urged

that the  well reasoned order passed by the Single

Judge (writ Court), which rightly resulted in upholding

of the respondent’s termination letter of dealership

should have been upheld by the Division Bench.

According to learned counsel, there was no case made

out for any interference by the Division Bench in the

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order of the Single Judge, who rightly dismissed the

respondent's writ petition.

24) In the second place, learned counsel urged that

the approach of the Division Bench in dealing with the

issue in question itself was faulty inasmuch as it

wrongly proceeded on the assumption that the award

dated 14.10.2011 had set aside the termination letter

dated 13.03.2013 and restored the respondent's

dealership in his favour.  

25) Learned counsel pointed out that on proper

interpretation of the reasoning and the operative part

of the award, it is clear that the Arbitrator recorded a

categorical finding against the respondent that

breaches alleged by the appellants against the

respondent on the basis of inspection were held made

out requiring stern action.

26) Learned counsel further pointed out that the

award followed by the observations of the Single Judge

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at best gave liberty to the respondent to file a

representation for re­consideration of his case for

restoration of his dealership by the IOC but not

beyond it.  Indeed, according to learned counsel, if the

award had been in favour of the respondent, then in

such case, there was no need for the Arbitrator and

Single Judge to give liberty to the respondent to apply

for re­consideration of his case.

27) In the third  place, learned counsel  urged that

once the  IOC considered the case of  the respondent

and found no case to grant him any relief much less

the benefit of restoration of his dealership, the issue

attained finality between the parties.  

28) It was his submission that the Division Bench, in

this circumstance, in its writ jurisdiction had no power

to sit as an Appellate Court over the decision of the

IOC and direct restoration of the respondent's

dealership.

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29) It is mainly these three submissions, the learned

senior counsel elaborated his submissions by referring

to various documents on record.

30) In reply,  Mr.  Mohan Parasaran, learned  senior

counsel, supported the impugned order and contended

that the impugned order does not call for any

interference and, therefore, the appeal deserves

dismissal.

31) Having heard the learned counsel for the parties

and on perusal of the record of the case, we find force

in the submissions urged by the learned senior

counsel for the appellant.

32) The short question, which arises for

consideration in this appeal,  is whether the Division

Bench was right in reversing the decision of the Single

Judge (writ court). In other words, the question, which

arises for consideration is whether the Division Bench

was right in setting aside the letter dated 13.03.2013

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of IOC which terminated the respondent's dealership

and was, therefore,  justified in  issuing a mandamus

against the IOC to restore the dealership of the

respondent herein and resume supply  of fuel to  his

fuel station.  

33) In our considered opinion, the  Division  Bench

was not justified in doing so and this we say for the

following reasons.  

34) Coming  first to the  question as to  what is the

proper  interpretation of the award dated 14.10.2011

and the order of the Single Judge which upheld the

award and what it actually decide, in our opinion, a

plain reading of these orders indicates that the

Arbitrator, in clear terms, held against the respondent

that he committed breaches of the dealership

agreement and as a result of this categorical finding,

the Arbitrator, in substance, upheld the letter of

termination of dealership calling for stern action

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against the respondent. Indeed, once the breaches

were held made out, the only consequence that ensued

from such finding was to uphold the letter of

termination of dealership agreement.  Since arbitration

clause 69 (c) empowers the Arbitrator to pass any

order in the arbitration proceedings, the Arbitrator and

so also the Single Judge while  upholding the award

considered it proper to grant liberty to the respondent

to file a representation to the IOC for re­consideration

of his case for restoration of his dealership. Such

liberty could never be construed to  mean that the

Arbitrator had either set aside the letter of termination

of the  respondent's  dealership  or  directed to  restore

the supply of fuel to the respondent.

35) The respondent, pursuant to the liberty granted,

filed his representation to the IOC but the IOC, in their

discretion, rejected the same with reasons.       

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36) In our opinion, reconsideration of the

respondent's case as to whether his dealership should

be restored or not was an independent cause of action

between the parties and the same arose after the

award was passed and upheld by the Single Judge.  It

has, therefore, nothing to do with the award and nor it

could be linked with the arbitration proceedings.

37) In our opinion, it was solely within the discretion

of the IOC ­ they being the principal to decide as to

whether the respondent's dealership should be

restored or not and, if so, on what grounds. The IOC

considered the case of the respondent and after taking

into account all the facts and circumstances appearing

in the respondent’s working, came to a conclusion that

it was not possible for them to restore his dealership.

It  was accordingly informed to the respondent vide

letter dated 13.03.2013.

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38) In our opinion, the writ Court (Single Judge) was,

therefore, justified in dismissing the respondent's writ

petition and  upholding the rejection on the ground

that the High Court cannot interfere in the

administrative decision of IOC and nor it can

substitute its decision by acting as an Appellate Court

over such decision in exercise of writ jurisdiction. It is

more so when such decision is based on reasons

involving no arbitrariness of any nature therein which

may call for any interference by the High Court.

39) The Division Bench, in  our  opinion,  committed

an error in interpreting the award. The Division Bench

proceeded on entirely wrong assumption that since the

award  was in respondent's favour, the IOC  had to

simply issue a consequential order in compliance

thereof directing the IOC to revive the respondent's

dealership and restore the supply of fuel to the

respondent. As held  supra, this approach of the

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Division Bench was erroneous and is, therefore, legally

unsustainable.

40) In the light of what is discussed above, we are of

the considered view that the reasoning and conclusion

arrived at by the Single Judge is just and proper,

whereas  the reasoning and conclusion arrived at  by

the Division Bench is not proper and hence deserves to

be set aside.

41) Learned senior counsel for the respondent then

argued that the IOC has issued certain circulars

providing  therein as  to how the cases of terminated

dealership of any dealer  is  to be re­considered. This

submission, in our opinion, has no merit and we do

not consider it proper to go into this aspect of the case

in the light of what is held above.

42) In view of the foregoing discussion, we allow the

appeal, set aside the impugned order of the Division

Bench and restore the order of the Single Judge (writ

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Court) and, in consequence, dismiss the writ petition

filed by the respondent.

           …..………………………………J.      (ABHAY MANOHAR SAPRE)

.………………………………..J  (UDAY UMESH LALIT)

New Delhi, July 17, 2018

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