Writ Petition Is Not Maintainable When Effective And Efficacious Remedy In Form Of Arbitration Is Available: Calcutta High Court

Additionally, the court observed that the appellant's case does not fall in any three contingencies, and there was a binding arbitration agreement between the parties. Thus, the writ petition was not maintainable, more particularly when the agreement provides for an efficacious alternate remedy in form of arbitration.

Brief Facts of the case:

The appellant i.e., Indian Oil Corporation Limited conducted inspection in the retail outlet of the respondent and positive stock variation beyond permissible limits had been observed in the products. Also, the variation was beyond permissible limit in Motor Spirit (“MS”) and High Speed Diesel (“HSD”) was 17919 ltr and 17302 ltr respectively. Then, a committee was formed to analyse the matter, and it submitted its report on 26.10.2022. After that show cause notice was issued to the dealer and it was also approved by the competent authority. The dealer didn't submit any reply to the show cause notice so, the appellant terminated the retail outlet dealership granted to the respondent. Aggrieved by this, the respondent filed a writ petition before the Single Judge to issue a writ of mandamus to rescind/cancel the order of termination as well as the show cause notice which was issued earlier and to prohibit the appellant from giving effect to the order of termination.

Then, the Single Bench allowed the writ petition and set aside the show cause notice and the order of termination and directed the appellant to resume supply of MS and HSD and other petroleum products. Aggrieved by this decision, the appellant filed an appeal before the Division Bench against the order of the Single Bench.

Submissions:

The appellant contended that Writ Court had applied wrong tests while passing the impugned order and rendered findings beyond the scope and ambit of the writ petition and therefore the impugned order is liable to be set aside. Further, the appellant alleged that the application of doctrine of proportionality, about the punishment imposed on the dealer would not be applicable to the facts and circumstances of the case in the light of the terms and conditions of the dealership agreement read along with MDG 2012. Also, the Writ Court erred in shifting the burden of proof on the appellant when the burden of proof squarely rests on the dealer to substantiate the reasons behind positive stock variation of a substantial quantity.

The court analysed three issues:

• Whether the IOCL pre-decided the matter while issuing the show cause notice,
• Whether there has been violation of principles of natural justice,
• Whether the writ petition was maintainable when the appeal remedy as well as remedy by way of arbitration has been provided under the Dealership Agreement,
• Whether the Marketing Discipline Guideline would be binding on the writ petitioner,
• On whom the burden lies to prove that there were no stock variations,

(6) Whether termination of the dealership of the respondent could be termed to be disproportionate.

Observation of the Court:

The court held that the show cause notice doesn't have any pre-determined mind, and it cannot be said that the appellant has pre decided the matter. Also, the show cause notice should contain full particulars, that's why the authority was duty bound to disclose all facts in the show cause notice. Thus, the show cause notice has been validly issued.

Further, the court held that there has been no violation of the principle of natural justice. The court then dealt with the question of whether the writ petition was maintainable or not. The court relied on the judgment in Whirlpool Corporation Versus Registrar of Trade Marks, Mumbai and Others (1998), wherein the court held that it cannot entertain writ petition if an effective and efficacious remedy is available, the High Court would normally exercise its jurisdiction in 3 contingencies namely (i) when the writ petition was filed for enforcement of any fundamental rights, (ii) where there has been violation of principle of natural justice, or (iii) where the order or proceedings are wholly without jurisdiction or where the vires of an Act is challenged.

Then, the court observed that the appellant's case doesn't not fall in any other contingencies which have been carved out in Whirlpool Corporation. Also, the court noted that there was a binding arbitration agreement between the parties. Thus, the writ petition was not maintainable, more particularly when the agreement provides for efficacious alternate remedy.

Thereafter, the court observed that the MDG being implemented on pan India basis by all public sector oil marketing companies with a view to maintain discipline in the operation of retail network and provide high customer service standard is binding on the respondent writ petitioner.

Then, the court observed that if the dealer is found to possess an excess quantity of the products over and above the quantity supplied to them, the burden/ onus of proof is squarely on the dealer and cannot be shifted to the appellant. If the dealer had a plausible explanation for such positive stock variation, then the same is required to be decided by the appellant for its correctness. Thus, the court held that writ Court was not right in shifting the burden of proof on the appellant to establish the positive stock variation when the burden is on the respondent dealer in the light of the conditions contained in the dealership agreement read along with MDG 2012 as amended.

The court held that the termination of the dealership was on account of committing an irregularity which has been classified as a critical irregularity apart from violations of the other clauses. Thus, when the agreement and the MDG provide for certain penalties to be imposed qua the type of irregularity the question of incorporating the theory of proportionality in punishment would not arise as the right flows under the agreement and it shall be governed by the terms and conditions of the agreement.

Consequently, the court allowed the appeal and held that respondent can avail the remedy of arbitration as the agreement provides for arbitration, if he is desirous of availing such remedy.

Case Title: INDIAN OIL CORPORATION LIMITED AND OTHERS VERSUS SAUMAJIT ROY CHOWDHURY

Case Number: MAT NO. 1735 OF 2023 WITH I.A. NO. CAN 1 OF 2023

Counsel for the Appellants: Mr. Pushpendu Chakraborty, Adv. Mr. Amadipta Sengupta, Adv.

Counsel for the Respondent/Writ Petitioner: Mr. Pingal Bhatacharyya, Adv. Mr. Rajdeep Sinha, Adv.

Date of Judgment: 11.03.2025

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