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M/S SUMITRA BHARAT GAS AGENCY THRU., PROPRIETOR versus UNION OF INDIA THRU SECY., PETROLEUM & NATURAL GAS & OTHERS

High Court of Judicature at Allahabad

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M/S Sumitra Bharat Gas Agency Thru., Proprietor v. Union Of India Thru Secy., Petroleum & Natural Gas & Others - WRIT - C No. 51679 of 2005 [2007] RD-AH 3074 (23 February 2007)

 

This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).

HIGH COURT OF JUDICATURE OF ALLAHABAD

A.F.R.

COURT NO.34

Civil Misc. Writ Petition No.51679 of 2005

M/s. Sumitra Bharat Gas Agency

Vs.

Union of India & Ors.

Hon'ble Dr. B.S. Chauhan, J.

Hon'ble Ran Vijai Singh, J.

(By Dr. Justice B.S. Chauhan)

The challenge in this writ petition is the grant of a Gas Dealership in favour of respondent no.5 by the respondent Corporation on the ground that the same violates the agreement which restricts the said respondent Corporation from introducing a fresh dealership within a radius of 15 kilometers of the area of operation of petitioner's agency.  The petitioner further contends that other agencies by some other oil companies have also been permitted to operate within the said area, which adversely affect the petitioner economically.

To substantiate the aforesaid submissions, Shri Shashi Nandan, learned Senior Counsel appearing for the petitioner has relied upon the terms of the agreement and other documents brought on record by way of an amendment application and the rejoinder affidavit.  The main thrust of argument has been that area of operation of the petitioner could not be reduced unilaterally without involving the petitioner firm.

Shri Prakash Padia, learned counsel appearing for the Corporation and and Shri B.L. Yadav for respondent No.5 have submitted that the petitioner does not have a locus standi to challenge the dealership granted in favour of respondent no.5 or in favour of any other person by other oil companies being a rival businessman and in case he is adversely affected economically, that cannot be termed as a "legal injury". More so, as the agreement entered into between the parties contains an arbitration clauses, the petition filed by the petitioner should not be entertained, inasmuch as while entering into an agreement, the Corporation has reserved the right to grant any other agency in the same area.

We have considered the rival submissions made by learned counsel for the parties and perused the record.

The agreement dated 25.02.2002 entered into between the petitioner and the respondent Corporation provides for terms and conditions for running the agency and the relevant part thereof, reads as under:-

"1. (a) The Corporation hereby appoints the Distributor and the Distributor hereby accepts the appointment as Distributor of the Corporation, on principal to principal basis, initially for a period of ten years commencing from 25th day of Feb 2002 and renewable every five years at the sole discretion of the Corporation, for sale of the Corporation's Liquefied Petroleum Gas (LPG) known as ''Bharatgas' in cylinders only for household consumers, and commercial consumers like hotels, canteens, hospitals etc., but not for any industrial use nor for any industrial consumer in the territory or distribution area of  within 15 km radius of Majhauliraj, Distt. Deoria (UP).

(b) ............ (i) ...............

(ii) The Corporation reserves the right, without any reference to or consent of the Distributor, to appoint one or more additional distributors in the same territory referred to in Clause 1(a) above and such additional distributor or distributors shall be entitled to make sales of Bharatgas in the same territory without any objection from the Distributor and the Distributor shall not be entitled to claim any over-riding remuneration, commission or allowance for the purpose.

(iii) Without prejudice to the above, the Corporation shall also be entitled to require the Distributor to effect minimum sales of Bharatgas in accordance with the policy that may be formulated from time to time by the Corporation and shall be further entitled at its sole discretion to reduce, restrict, modify or alter the area of the distributorship territory and the decision of the Corporation shall be final and binding on the Distributor. The Corporation shall further be entitled to notify, without any legal obligation to do so, from time to time to the Distributor in writing the minimum number of LPG filled cylinders which the Distributor shall be required to uplift in each month. The Corporation shall also be entitled to require the Distributor to maintain during the duration of the Agreement such minimum stock as to meet the customers' requirements.

.......... ................

38(a) Any dispute or difference of any nature whatsoever any claim, cross-claim, counter-claim or set off of the Corporation against the Distributor or regarding any right, liability, act, omission or account of any of the parties hereto arising out of or in relation to this agreement shall be referred to the Sole Arbitration of the Director (Marketing) of the Corporation or of some officer of the Corporation who may be nominated by the Director (Marketing)." (Emphasis added).

The aforesaid agreement makes it clear that the Corporation has reserved the right to grant a fresh distributorship, in the same area but if the same is sought to be questioned, appropriate way may be to approach the Arbitrator as the agreement contains the arbitration clause. The facts have very seriously been disputed and contested by the respondent Corporation. The scope of judicial review is very limited in such matters and the Court cannot sit as an appellate forum against the decision taken by the Corporation nor it can substitute its own decision. The Court cannot function as a super board, or with the zeal of a pedantic schoolmaster substituting its judgment for that of the authority. (Vide Tata Cellular Vs. Union of India, (1994) 6 SCC 651).

In K. Vinod Kumar Vs. S. Palanisamy & Ors., AIR 2003 SC 3171, the Hon'ble Apex Court considered the scope of judicial review in case of grant of LPG distributorship and held as under:-

"The proceedings of the Dealer Selection Board must satisfy the requirements of a bona fide administrative decision arrived at in a fair manner. There are no mala fides alleged against the Dealer Selection Board or the President or any Member thereof. There is no specific plea raised impugning the manner of making. It appears that all the three members of the Board including the President conducted the proceedings, and each one of them gave markets expressing his own assessment of the merits of the applicants. The markets given by the three were then totaled and arranged in the order of merit. The appellant herein topped the list. In the absence of a particular procedure or formula having been prescribed for the Board to follow, no fault can be found with the manner in which the proceedings were conducted by the Board. The Board is entrusted with the task of finding out the best suitable candidate and, so long as the power is exercised bona fide, the Board is free to devise  and adopt its own procedure subject to satisfying the test of reasonableness  and fairness. There is no averment that the procedure adopted by the Board was arbitrary, unfair or unreasonable.

............... ............ ..........

The law is settled that over proceedings and decisions taken in administrative matters, the scope of judicial review is confined to the decision making process and does not extend to the merits of the decision taken."

Therefore, in judicial review, the powers of the Court are very limited and the order can be set aside if it is based on extraneous grounds or there are no grounds at all for passing it or the grounds are that no one can arrive at such an opinion. The Court does not sit as a Court of Appeal but merely reviews the manner in which the decision is taken. Such jurisdiction cannot be exercised unless it is found that formation of belief by the authority suffers from mala fide, dishonesty or corrupt practice. The authority must act in good faith. Thus, the jurisdiction is circumscribed and confined to correct the errors of law or procedural error if it results in manifest miscarriage of justice or violation of principles of natural justice. This apart, when some error is found in decision making process, the Court must exercise its discretionary powers with great caution keeping in mind the larger public interest  and only when it comes to the conclusion that overwhelming public interest requires interference.

The agreement admittedly contains an arbitration clause, therefore, the question does arise as to whether in the facts and circumstances of the case, the Court must entertain the writ petition in spite of the said arbitration clause.  In M/s. Bisra Stone Lime Co. Ltd. Vs. Orissa State Electricity Board & Anr., AIR 1976 SC 127, the Hon'ble Supreme Court  considered a similar issue and held that where the arbitration clause contained in the agreement is of wide amplitude taking in its sweep even interpretation of the agreement, the writ Court should not entertain the petition and the matter should be adjudicated upon in arbitration proceedings.

In Hindustan Petroleum Corporation Ltd. Vs. Pinkcity Midway Petroleums, AIR 2003 SC 2881, the Hon'ble Supreme Court reiterated a similar view observing that where the Arbitrator is competent to adjudicate upon the same issue, the Court should not embark upon and enquire even in regard to the applicability of the arbitration clause on the facts of the case and if any dispute arises regarding the violation of terms of the agreement, the matter must be referred to arbitration for adjudication.

In ABL International Ltd. & Anr. Vs. Export Credit Guarantee Corporation of India Ltd. & Ors., (2004) 3 SCC 553, the Hon'ble Supreme Court  observed as under:-

"It is well-known that if the party to a dispute is agreed to settled their dispute by arbitration and if there is an agreement in that regard, the Court will not permit recourse to any other remedy without invoking the remedy by way of arbitration unless of course both the parties to the dispute agree on another mode of dispute resolution."

In Harbansh Lal Sahania & Anr. Vs. Indian Oil Corporation Ltd. & Ors., AIR 2003 SC 2120,  the Hon'ble Supreme Court  held as under:-

"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, 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 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 Corporation Vs. Registrar of Trade Marks, Mumbai & Ors., (1998) 8 SCC 11]. The present case attracts applicability of 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."

The Hon'ble Supreme Court in Sameer Barar & Ors. VS. Ratan Bhushan Jain & Ors., (2006) 1 SCC 419, dealt with a case where a civil suit was filed  to enforce the terms of an agreement which contained the arbitration clause. The Hon'ble Apex Court held that the suit was not maintainable. However, the plaint of the said suit may be treated as an application under Section 9 of the Arbitration and Conciliation Act, 1996 only for the purpose of grant of interim relief till the matter is ceased by the Arbitrator.

A Division Bench of this Court in Civil Misc. Writ Petition No.4609 of 2007, M/s. Bihari Ji Filling Station & Anr. Vs. Indian Oil Corporation & Anr., decided on 12.02.2007, dealt with the issue at length and refused to entertain the writ petition asking the petitioners to resort to the arbitration proceedings as per the arbitration clause contained in the agreement.

In view of the above referred to legal proposition, availability of an alternative remedy is not an absolute bar for entertaining a writ petition  rather rule of exclusion of jurisdiction in such a situation is a rule of discretion and not one of compulsion. In appropriate case, where the fundamental rights of a person are violated or orders are passed in violation of principles of natural justice or the proceedings are initiated without having jurisdiction, entertaining a writ petition in spite of not exhausting the statutory remedy by the party concerned, is permissible but the Court must reach a conclusion as to whether the party can be relegated to the appropriate forum for proper adjudication upon the issues involved in a case and where the parties voluntarily have entered into an agreement containing the arbitration clause, there is no reason why a party should not be asked to resort to the said remedy available to him.

In the facts and circumstances of the case, as the agreement contains the arbitration clause and the matter is seriously disputed by the respondent Corporation, we are not inclined to exercise our discretionary jurisdiction. The petition is accordingly dismissed with liberty to the petitioner to resort to arbitration proceedings. Interim order passed earlier stands vacated.

23.02.2007/AHA


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