Calcutta High Court
Indian Oil Corporation Ltd. & Anr vs Roy And Company & Ors on 7 December, 2017
Author: Md. Mumtaz Khan
Bench: Md. Mumtaz Khan
IN THE HIGH COURT AT CALCUTTA
Constitutional Appellate Jurisdiction
Original Side
Present :- Hon'ble Mr. Justice I.P.Mukerji
Hon'ble Mr. Justice Md. Mumtaz Khan
APO No. 43 of 2013
GA 842 of 2012
WP 1240 of 2010
Indian Oil Corporation Ltd. & Anr.
Vs.
Roy And Company & Ors.
For the appellant : Mr. Ahin Choudhury...Sr. Advocate
Mr. M. S. Yadav
.....Advocates
For the Respondents : Mr. Saptangshu Basu
Mr. R. A. Agarwal
Mrs. N. Pal
Mr. R. Dhara
Mr. A. G. Mukherjee
Ms. S. Roy
....Advocates
Judgement On : 07.12.2017
I.P. MUKERJI, J.
Indian Oil Corporation Limited, through its manager (the appellants) have preferred this appeal. It is against the judgment and order dated 1st September, 2011, passed by Mr, Justice Tapen Sen in WP No.1240 of 2010 (M/s. Roy and Company & Ors. Vs. The State of West Bengal & Ors.).
The facts are these:-
Several years ago Smt. Siya Roy was carrying on a partnership business as a dealer of kerosene under the appellant. Gradually she became old and infirm. On 27th September, 2001 she converted this proprietorship business into a partnership between herself and her eldest son Binoy, the first respondent. The partnership was styled as M/s Roy and Company having its place of business at Bamakshapa Road, Bazarpara, Post Office & Police Station - Rampurhat, District - Birbhum, West Bengal. The appellant accepted this reconstitution.
On 24th July, 2009 the firm underwent another reconstitution. The wife of the first respondent, the third respondent was taken in as a partner. A deed of partnership was drawn up and executed by the partners of the reconstituted firm M/s. Roy and Company.
The appellant accepted this reconstitution also and on 29th July, 2009 granted it a fresh licence.
On 30th September, 2009 Mrs. Siya Roy died.
At this point of time it is necessary to mention the legal heirs of Mrs. Siya Roy. Apart from Binoy she had two other sons Sanjoy and Ranjoy. She also had two married daughters Smt. Sushila Roy and Smt. Chanda Roy. On 11th November, 2009 the second and third respondents made an application to the appellant to reconstitute the firm by themselves. Together with this application they submitted three no objection certificates from Sanjoy, Ranjoy and Chanda. However, their eldest sister Sushila who is about 15 years older than Sanjoy refused to submit her "No objection".
The dispute in the partnership has its roots in the succession to the estate of Siya Roy. Shew Raman Rai had two wives of whom Siya was the elder. The second wife was Lalita Roy. Sushila Roy is the daughter through Siya Roy. Binoy, Sanjoy, Ranjoy and Chanda are the offsprings from the second marriage. The allegation against Binoy is that he is trying to grab his father's property.
Now, it is very important to note certain terms and conditions of the dealership agreement between the appellant and the Roy family. Clauses 45 and 46 are set out below:-
45 - Notwithstanding anything to the contrary herein contained, the Corporation shall be at liberty at its entire discretion to terminate this Agreement forthwith upon or at any time after the happening of any of the following events namely:-
a) If the Dealer shall commit a breach or default of any of the terms, conditions, covenant and stipulations contained in this Agreement.
b) Upon
i) the adjudication as insolvent of the Dealer, if he be an individual.
ii) The dissolution of the partnership of the Dealer's firm or the death or adjudication as insolvent of any partner of the firm, if the Dealer be a firm:
iii) The liquidation, whether voluntary or otherwise or the passing of an effective resolution for winding up if the Dealer be a Company or a Co-
operative Society;
c) If any attachment is levied and continues to be levied for a period of seven days upon the effects of the Dealer or any individual partner for the time being of the Dealer's firm or any member of the Dealer's Co-operative Society:
d) If the Dealer or any partner in the Dealer's firm or any member of Co-
operative Society appointed as Dealer hereunder shall be convicted of a criminal offence:
e) If a Receiver shall be appointed of any property or assets of the Dealer or of any partner in the Dealer's firm or of any member of the Dealer's Co-
operative Society and shall not be discharged within seven days of the date of such appointment;
f) If the licence issued by the relevant authorities for the storage of petroleum product supplied by the Corporation is cancelled or modified or suspended or revoked or is not renewed before the date of expiry by such authority;
g) If any licence or permit issued to the Dealer by any authority for the carrying on of the business by the Dealer as suspended or modified by any such authority or is not renewed before the date of expiry by such authority;
h) If the Dealer shall for any reason make default in payment to the Corporation in full of his outstandings as appearing in the Corporation's books of account beyond 4 days of demand by the Corporation;
i) If any information given by the Dealer in his application for appointment as a dealer or in any document supplied therewith or filed in support thereof shall be found to be untrue or incorrect;
j) If the Dealer has concealed any information which if disclosed would in the opinion of the General Manager of the Corporation for the time begin at Kolkata whose decision shall be final have disentitled him to be appointed as a Dealer;
k) If the Dealer does not adhere to the instructions/guidelines issued from time to time by the Corporation in connection with Marketing discipline and/or safe practices to be followed by him in the sale or supply and storage of the Corporation's products or otherwise;
l) If the Dealer shall contaminate/adulterate or tamper with the quality of any of the products supplied by the Corporation;
m) If the Dealer sells any of the products supplied by the Corporation at prices higher than those fixed by the Corporation/statutory authority;
n) If the Dealer allows the Dealership to be operated as 'Benami' or causes the same to be operated through any Power of Attorney or otherwise by any outside third party;
o) If the Dealer shall either by himself or by his servants or agents commit or suffer to be committed any act which in the opinion of the General Manger of the Corporation for the time being at KOLKATA whose decision in that behalf shall be final, is prejudicial to the interest or good name of the Corporation or its products, the General Manager shall not be bound to give reasons for such decision;
p) The Corporation's right to terminate this Agreement under the terms of this clause shall be without prejudice to and without affecting any of its other rights and remedies against the Dealer.
46 - Notwithstanding to the contrary herein contained, in the event of the Dealer being a partnership firm, the Agreement shall automatically come to an end and stand terminated upon any change in the constitution of the firm, whether by retirement or death of any partner(s) introduction of new partner
(s) or otherwise howsoever unless after receipt of a written notice from the original surviving partner(s) of the Dealer firm of such death or retirement or induction, the Corporation shall have expressly agreed in writing to continue the Dealership with the surviving partners(s) or with the re-constituted firm. Any supplies of the products made by the Corporation, subsequent to the death or retirement or a partner or the induction of new partner(s), with or without the knowledge of the death or retirement or induction, or any other action on the part of the Corporation under or in pursuance of this agreement subsequent to such death or retirement or induction in favour of or in relation to the surviving partner(s) and/or the reconstituted firm shall not and shall not be deemed to confer any dealership or other rights in favour of the surviving partner(s) and/or the reconstituted firm unless and until the Corporation conveys in writing its specific approval or assents to confer any dealership or other rights upon the surviving partner(s) and/or the reconstituted firm as the case may be and the Corporation shall always be at liberty without any previous notice to discontinue, withhold or stop any such supplied or perform any such act as it deems fit at its discretion. We, thus, notice that if a dealer with the appellant is a partnership firm, immediately upon the death of a partner, the agreement between the parties comes to an end. The appellant however retains the power to continue its business with the reconstituted firm. The deed of partnership dated 24th July, 2009 contains the following provisions:-
20) ADMISSION:- That in case of admission of any new partner or partners for overall interest of the firm they may admit any new partner's with their mutual consent (subject o prior approval of the Indian Oil Corporation Limited and the licensing authority under West Bengal Kerosene Control Act);
22) LEGAL HEIR:- That if any one of the parties to this indenture is died or is become insolvent, the other party is permitted to continue the firm after fulfilment of the necessary requirements and only in that case the existing party will be entitle to continue and run the firm smoothly but in that case the existing party shall have every duty to meet up the entire liabilities of the firm and after that the existing party will be eligible to enjoy all type of benefits of the firm.
24) PRIOR APPROVAL:- That notwithstanding anything contained herein, it is hereby agreed and stated by us that any change in the constitution of this partnership shall be with prior written approval of Indian Oil Corporation Limited and without obtaining such written prior consent no change shall be effected.
So we have two agreements. One is the dealership agreement between the appellant and the partnership firm. The other is the partnership agreement between the partners of that firm. The partnership firm operates as the licensee of the appellant. By operation of the said clauses in the dealership agreement, upon the death of Siya Roy, the relationship between the firm and the appellant came to an end. However the second and third respondents are very strong in their belief that in spite of the objection of Sushila they are entitled to continue the partnership without her and do business with the appellant.
Mr. Chaudhuri, learned Senior Advocate for the appellant drew this Court's attention to a policy statement of his client relating to reconstitution of commission dealership/distributorship.
(v) In case of death of one of the partner(s), the partnership shall be reconstituted with the legal heir(s) of the deceased partner(s) and surviving partner(s). However, if there is no legal heir or the legal heir(s) has expressed unwillingness, the dealership/distributorship shall be reconstituted with the surviving partner(s).
The contention of Mr. Choudhuri is that on the death of Siya Roy the partnership firm could only be reconstituted with her legal heirs and the second and third respondents. Of course the second respondent is one of the legal heirs of Siya Roy. Any other reconstitution would not be automatically recognised by the appellant. There had to be an express agreement. Since Sushila Roy one of the daughters of Siya Roy did not consent to the reconstitution of the firm with the second and third respondents as its partners, this reconstituted firm could not be recognised by the appellant. Learned Counsel submits that his client had the right to treat the agreement as terminated more particularly under Clause 45(b)(ii) of the dealership agreement.
It appears that after 30th September, 2010 the appellant stopped supply of kerosene oil to the partnership firm. It is now continuing the supply by virtue of an interim order passed by this court in the writ and continued in appeal.
The learned trial judge made the following findings:-
(i) The appellant could not refuse the licence of the first respondent under the 1968 Control Order,
(ii) They could not refuse reconstitution of the partnership firm without a no objection from the Sushila, the seventh respondent.
(iii) Sushila given was the liberty of establishing her civil rights in an appropriate forum.
Our Views-
Initially Siya Roy was carrying on business as a proprietor. The appellant granted her a licence to deal in kerosene oil. On 27th September, 2001 Siya Roy took her son the second respondent as a partner. The business was reconstituted into a partnership firm. The appellant readily granted a fresh dealership licence under the 1968 Order to the firm. On 24th July, 2009 the partnership was further reconstituted by induction of the second respondent's wife Nisha Roy the third respondent as a partner. This was also accepted by the appellant by granting the reconstituted firm a new licence on 29th July, 2009.
Again, after the death of Siya Roy the surviving partners have reconstituted the firm with the second respondent and his wife Nisha as partners. The heirs of Siya Roy except one daughter Sushila have issued no objection Certificates.
The stipulation in the dealership agreement that on the death of a partner the agreement between the appellant and the dealer would stand terminated is not a very fair clause. It is not illegal because in our opinion any person can choose to do business with a firm with a particular constitution. It is true that upon the death of a partner, a partnership firm may be dissolved or it may be re-constituted. There is a state of uncertainty in it. Any person doing business with it is unable to ascertain, in case of its re-constitution, the credentials of the future partners of the firm. A firm is not a juristic entity. So an agreement of dealership with a firm is an agreement to do business with individual partners of the firm jointly and severally. Therefore, when a partner dies the person doing business with it may or may not be willing to do business with the partners of the re-constituted firm.
The appellant is a statutory body. It is enjoined with a duty to act fairly and reasonably in contractual matters. It should not act arbitrarily. On the contrary its actions should be rational and just.
For the appellant to insist that the agreement would permanently stand terminated on the death of a partner is an extreme step. It would be reasonable if for the time being it was terminated. Thereafter the partners of the re-constituted firm and the appellant should have been given an option of entering into a fresh agreement.
In this case there is no complaint regarding the service rendered before or after the death Siya Roy. The appellant has permitted the firm to re- constitute itself from time to time. It has renewed licences of the re- constituted firms for a long period of time.
After the death of Siya Roy the firm has been re-constituted with the second and third respondents as partners. The appellant should not be concerned as to the dispute between the second respondent and his half sister. The appellant ought to have examined the past and present performance of the firm with regard to its business of a licensee under it, while considering grant of a new licence.
In those circumstances, this court upholds the decision of the appellant to terminate the agreement. By virtue of the status quo order in this writ the respondent firm continues to be a dealer of the appellant. It shall continue to do so on a temporary basis. The appellant is to take a decision as to whether it will renew the dealership with the reconstituted first respondent on a permanent basis, on the basis of the above observations and after taking all relevant factors into consideration within one year from date. This appeal is disposed of accordingly.
Certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities. I agree.
(Md. Mumtaz Khan, J.) (I.P. MUKERJI, J.)