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)
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
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
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
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
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
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
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
15) The aforesaid order attained finality, as neither of
the parties filed any appeal against the aforesaid
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
13.03.2013, the IOC rejected the representation
assigning the reasons for rejection of the respondent’s
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
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
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
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
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
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
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
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
33) In our considered opinion, the Division Bench
was not justified in doing so and this we say for the
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
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.
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.
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
Division Bench was erroneous and is, therefore, legally
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
Court) and, in consequence, dismiss the writ petition
filed by the respondent.
(ABHAY MANOHAR SAPRE)
(UDAY UMESH LALIT)
July 17, 2018