INDIAN OIL CORPORATION LTD. & ANR.versusT. NATARAJAN

582                      [2018]REPORTS
               SUPREME COURT   6 S.C.R. 582                 [2018] 6 S.C.R.


A                INDIAN OIL CORPORATION LTD. & ANR.
                                        v.
                                T. NATARAJAN
                         (Civil Appeal No. 6748 of 2018)
B                                JULY 17, 2018
                     [ABHAY MANOHAR SAPRE AND
                        UDAY UMESH LALIT, JJ.]
             Administrative Law : Administrative decisions by Government
      Company – Interference by the High Court – Permissibility of – On
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      facts, dealership agreement wherein respondent selling petroleum
      products of the appellant-Government Company – Termination of
      the respondent’s dealership agreement for certain breaches –
      Arbitral award that letter of termination of dealership calls for stern
      action, however, since their outlet closed for 2 years, lenient view
D     may be taken – High Court upheld the award with liberty to the
      respondent to approach appellant for continuation of dealership –
      Pursuant thereto, respondent moving representation for resumption
      of the supply of fuel to him, and the same was rejected – Thereafter,
      writ petition by respondent – Single Judge upheld termination of
      letter of dealership – However, the Division Bench set aside the
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      termination letter and issued a mandamus to appellant to restore
      the dealership of the respondent and resume supply of fuel to his
      fuel station – On appeal, held: 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
F     after the award was passed and upheld by the Single Judge – It has
      nothing to do with the award and nor it could be linked with the
      arbitration proceedings – It was solely within the discretion of the
      appellant to decide – Appellant came to a conclusion that it was not
      possible for them to restore his dealership – Writ court justified in
      upholding the rejection on the ground that the High Court cannot
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      interfere in the administrative decision of the appellant 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
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                                      582
INDIAN OIL CORPORATION LTD. & ANR. v. T. NATARAJAN                     583


– Order passed by the Division Bench is set aside and that of the      A
Single Judge is restored – Arbitration and Conciliation Act, 1996.
      Allowing the appeal, the Court
      HELD: 1.1 The Division Bench was not justified in
reversing the decision of the Single Judge (writ court) by setting
aside the letter of IOC-government company which terminated            B
the respondent’s dealership and in issuing a mandamus against
the IOC to restore the dealership of the respondent and resume
supply of fuel to his fuel station. [Paras 32, 33] [590-B-C]
       1.2 A plain reading of the award and order of the Single
Judge upholding the award indicates that the Arbitrator, in clear      C
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 against the
respondent. Indeed, once the breaches were held made out, the          D
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      E
re-consideration 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. [Para 34] [590-E-F]                                        F
      1.3 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       G
arbitration proceedings. [Para 36] [590-G-H; 591-A]
      1.4 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.
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584            SUPREME COURT REPORTS                      [2018] 6 S.C.R.


A     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. [Para 37] [591-B-C]

            1.5 The writ Court (Single Judge) was justified in dismissing
B     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
C     involving no arbitrariness of any nature therein which may call
      for any interference by the High Court. [Para 38] [591-D]

            1.6 The Division Bench 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
D     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. This approach
      of the Division Bench was erroneous and is, therefore, legally
      unsustainable. The reasoning and conclusion arrived at by the
      Single Judge is just and proper, whereas the reasoning and
E     conclusion arrived at by the Division Bench is not proper and is
      set aside. The order of the Single Judge (writ Court) is restored
      and, in consequence, the writ petition filed by the respondent is
      dismissed. [Paras 39, 40 and 42] [591-E-G; 592-A-B]

F           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6748
      of 2018.

            From the Judgment and Order dated 08.10.2015 of the High Court
      of Judicature at Madras in WA No. 589 of 2015.

           Huzefa Ahmadi, Sr. Adv., Rahul Narayan, Ms. Mala Narayan,
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      Shashwat Goel, Advs. for the Appellants.

             Mohan Parasaran, Sr. Adv., D. L. Chidananda, Ashwin Kumar
      D. S., Advs. for the Respondent.

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INDIAN OIL CORPORATION LTD. & ANR. v. T. NATARAJAN                             585


      The Judgment of the Court was delivered by                               A
      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         B
dated 17.04.2014 passed by the Single 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         C
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.
                                                                               D
     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, High-Speed 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.                                         E
        6. On 31.08.1989, the IOC appointed respondent as its retail dealer
for sale of petroleum products. A dealership agreement (Annexure P-12)
was accordingly executed between the IOC and the respondent in this
regard.
                                                                               F
       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 &                 G
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
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586            SUPREME COURT REPORTS                          [2018] 6 S.C.R.


A     used at MS 2 pump was 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
B     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,
C     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
D     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
E     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
F           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,
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      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 application No.447/2012
      seeking resumption of supply of fuel to him before the High Court.

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INDIAN OIL CORPORATION LTD. & ANR. v. T. NATARAJAN                            587
            [ABHAY MANOHAR SAPRE, J.]

      14. By order dated 23.11.2012, the High Court dismissed the             A
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                  B
      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.”                                               C

       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      D
to him pursuant to the directions of the award. By letter dated 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        E
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     F
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 order of the Single Judge
                                                                              G
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:

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588            SUPREME COURT REPORTS                          [2018] 6 S.C.R.


A           “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
B
            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
C           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
D           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
            exercise shall be completed within a period of one week
E           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.

F           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
G     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
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INDIAN OIL CORPORATION LTD. & ANR. v. T. NATARAJAN                             589
            [ABHAY MANOHAR SAPRE, J.]

counsel, there was no case made out for any interference by the Division       A
Bench in the 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             B
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          C
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 at best gave liberty to the
respondent to file a representation for re-consideration of his case for       D
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 re-consideration
of his case.
                                                                               E
       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               F
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.
      29. It is mainly these three submissions, the learned senior counsel
elaborated his submissions by referring to various documents on record.
                                                                               G
      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.
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590             SUPREME COURT REPORTS                            [2018] 6 S.C.R.


A            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
B     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 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.
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             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
D     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 against the respondent. Indeed, once the breaches were held made
E     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
F     a representation to the IOC for re-consideration 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
G     representation to the IOC but the IOC, in their discretion, rejected the
      same with reasons.
            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
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INDIAN OIL CORPORATION LTD. & ANR. v. T. NATARAJAN                             591
            [ABHAY MANOHAR SAPRE, J.]

was passed and upheld by the Single Judge. It has, therefore, nothing to       A
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          B
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.                                                              C
       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            D
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         E
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 Division
Bench was erroneous and is, therefore, legally unsustainable.
                                                                               F
       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          G
the IOC has issued certain circulars providing therein as to how the
cases of terminated dealership of any dealer is to be re-considered. 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.
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592                SUPREME COURT REPORTS                        [2018] 6 S.C.R.


A            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 Court) and, in consequence, dismiss the writ petition
      filed by the respondent.

B     Nidhi Jain                                                    Appeal allowed.




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