Kerala High Court
Vembanad Gas Agencies vs Union Of India on 21 May, 2019
Author: Shaji P.Chaly
Bench: Shaji P.Chaly
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 21ST DAY OF MAY 2019 / 31ST VAISAKHA, 1941
WP(C).No. 10824 of 2016
PETITIONER/S:
VEMBANAD GAS AGENCIES,
ANCHAL KOLLAM DISTRICT, PIN-691 306,
REPRESENTED BY ITS PROPRIETOR,
R.MADHUSOODANAN PILLAI, VEMBANATTU VEEDU,
THOLICODU.P.O., PUNALUR.
BY ADV. SRI.ANCHAL C.VIJAYAN
RESPONDENT/S:
1 UNION OF INDIA,
REPRESENTED BY ITS SECRETARY TO GOVERNMENT,
DEPARTMENT OF PETROLEUM AND NATURAL GAS,
SASTHRIBHAVAN, NEW DELHI-110 001.
2 INDIAN OIL CORPORATION LTD.,
REPRESENTED BY ITS CHIEF AREA MANAGER,
INDANE, PANAMPALLY NAGAR,
COCHIN, PIN-682 036.
3 THE SALES OFFICER,
INDANE (LPG), KOLLAM AREA,
KOLLAM DISTRICT, PIN 691 001.
BY ADVS.
R1 - SRI.B.PREM KUMAR, CGC
R2 & R3 - SRI.M.GOPIKRISHNAN NAMBIAR
SRI.P.GOPINATH (SR.)
SRI.P.BENNY THOMAS
SRI.JOSON MANAVALAN
SRI.K.JOHN MATHAI
SRI.KURYAN THOMAS
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
21.05.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.P.(C) No.10824 of 2016 2
JUDGMENT
Petitioner is a proprietary concern functioning, in the name and style 'Vembanad Gas Agencies', a distributor appointed by the Indian Oil Corporation Ltd. (IOC), the 2nd respondent, and as per Ext.P1 agreement executed by and between the petitioner and the IOC. According to the petitioner, huge amounts are spent in order to carry on with the business of the agency, however, the 2nd respondent company is now transferring customers from the petitioner agency to other distributors appointed by the company. It is also pointed out that, by virtue of Ext.P2 Inter/Intra Company Portability Scheme, an LPG consumer can now switch to the distributor of his choice within a cluster of LPG distributors in the vicinity. Petitioner has 30,000 customers and the distribution area is rural and scope for distribution of re-filled cylinders are only 3 or 4 in a year.
2. It is further pointed out that, petitioner has availed vehicle loan, house loan and cash credit facility from Banks in order to carry on with the business. But, fact remains, at the instance of the Oil Marketing Companies, various agencies are appointed within the area of distribution of the petitioner and W.P.(C) No.10824 of 2016 3 respondents 2 and 3 are transferring customers from the petitioner to other newly commissioned agencies through website, and that too, without providing an opportunity to the petitioner to object to the same.
3. It is also the case of the petitioner that, 3,500 customers were already transferred to other agencies and again rushing with the proposal to transfer customers from the petitioner to other agencies on extraneous reasons. The prime contention advanced is that, there is no power vested with the 2nd respondent as per Ext.P1 agreement to transfer any customers from the agency of the petitioner. Petitioner is put to serious prejudice due to the illegal and wanton act of the 2nd respondent, and it is affecting the livelihood not only of the petitioner but also of the employees engaged by the petitioner in order to maintain the distribution business in an effective and satisfactory manner. Thus, petitioner seeks direction to respondents 2 and 3 not to transfer LPG customers from the petitioner to newly commissioned agencies within the distribution area of the petitioner without the consent of the petitioner and the customers. It is also submitted that, during the pendency of the writ petition, more customers were W.P.(C) No.10824 of 2016 4 transferred by the 2nd respondent to other agencies, which is aggravating the already existing prejudice to the petitioner.
4. A detailed statement is filed for and on behalf of the 2nd and 3rd respondents, refuting the allegations and claims and demands raised by the petitioner. Among other contentions, it is stated that, there is no public law element involved, and if at all the petitioner has any grievance relating to his distributorship, petitioner has to raise such grievance in an arbitration proceeding as is specified in the Distributorship Agreement between the petitioner and the 2nd respondent. That apart, it is submitted that, the domestic customer strength of the petitioner agency as on 29.03.2016 is 36,301, out of which, 34,847 are active customers and there are about 1,135 commercial customers. As per the policy guidelines, as and when the refill (cylinder) sales of a distributor goes beyond the ceiling limit fixed for the area, and if there is scope for putting up one/more distributorship, the oil company is required to put up one/more distributorship to take care of the additional refill sale of the existing distributor and take care of the potential.
W.P.(C) No.10824 of 2016 5
5. It is also stated that, the viability limit for the petitioner's market is only 4000 refills per month. However, on an average, petitioner is selling around 17,000 refills per month in the last six months, i.e., more than double of the ceiling limit and the distributor was found wanting in terms of service to the customers because of the huge clientele and vast area covered by them. In order to adequately service the existing additional customers of the petitioner and the increasing customer population in line with Annexure-R2(a) policy, 2 new distributorships have been set up in the nearby areas and customers are proposed to be transferred to these new distributors, and the distributorships have been set up to ensure better customer service and timely refill to customers. In order to comply with the said requirement, based on the average per capita consumption in the market around 16,000 customers are proposed to be transferred from the petitioner to the newly appointed distributors to ensure their viability. The petitioner will continue to have enough customers to have average refill sales corresponding to the ceiling limits for the market. W.P.(C) No.10824 of 2016 6
6. That apart, it is submitted that, as per clause 1.b.(ii) of Ext.P1 agreement, 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), and such additional distributor or distributors shall be entitled to make sales of 'Indane' in the same territory without any objection from the distributor and the distributors shall not be entitled to claim any overriding remuneration, commission or allowance for the purpose. It is also pointed out that, by virtue of the conditions contained under the agreement, if at all the petitioner has any grievance, petitioner will have to resort to the remedy provided as per Clause 37 of Ext.P1 agreement, wherein 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 the 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), and the distributor will not be W.P.(C) No.10824 of 2016 7 entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an Officer of the Corporation or that he has dealt with the matters to which the contract relates. Various other provisions are also incorporated in the aforesaid Clause with respect to appointment of the Arbitrator and the procedure to be followed. In sum and substance, the contention put forth by learned counsel for the 2nd respondent is that, petitioner has not made out any case justifying interference of this Court invoking the powers conferred under Article 226 of the Constitution of India.
7. A reply affidavit is also filed by the petitioner reiterating the stand adopted in the writ petition, and refuting the contentions raised in the statement filed by the 2nd respondent.
8. I have heard learned counsel for the petitioner, learned CGC and the learned counsel appearing for respondents 2 and 3, and perused the pleadings and the documents on record.
9. In my considered view, the prime question to be considered in this case is, in view of the Arbitration clause contained under Ext.P1 agreement in order to resolve the disputes by and between the W.P.(C) No.10824 of 2016 8 parties, whether the writ petition is maintainable under law. One of the prime contention advanced by learned counsel for the petitioner in that regard is relying upon the judgment of the apex court in 'Harbanslal Sahnia and Another v. Indian Oil Corporation Ltd. and Others' [(2003) 2 SCC 107], wherein the apex court has held that, in the Alternative remedy/Exhaustion of remedies, the rule is of discretion and not one of compulsion, and there may be contingencies in which High Court could exercise its writ jurisdiction in spite of availability of the alternative remedy.
10. So also, it is submitted that, as per Clause 37, the Sole Arbitrator to be appointed is the Director (Marketing) of the 2nd respondent Corporation and by virtue of the amendment carried out to the Arbitration and Conciliation Act, 1996, an interested person cannot be appointed as an arbitrator. Therefore, the alternative disputes resolution mechanism provided under the agreement has become defunct, and therefore, there is no remedy available to the petitioner to ventilate the grievances highlighted in the writ petition. Moreover, it is submitted that, the customers are being transferred from the agency of the W.P.(C) No.10824 of 2016 9 petitioner without providing sufficient opportunity of hearing to the petitioner, and therefore, the same is violative of the principles of natural justice, and under that circumstances, this Court is vested with ample powers to entertain the writ petition.
11. On the other hand, learned counsel appearing for respondents 2 and 3 submitted that, even though it is stipulated in Clause 37 that the Sole Arbitrator will be the Director (Marketing) of the Corporation, consequent to amendment to the Act, 1996, petitioner is vested with right to approach the company to appoint an independent arbitrator, and the petitioner has every fair and reasonable opportunity to approach this Court by virtue of the provisions contained under Sec.11 of the Act, 1996, in order to seek appointment of an arbitrator to resolve the disputes by and between the parties.
12. Having evaluated the rival submissions made across the Bar, I am of the considered opinion that, if and when disputes arise by and between the parties, there is a clear remedy available to the petitioner to seek appointment of an arbitrator. It is true, the Sole Arbitrator appointed as per Clause 37 is the Director (Marketing) of the Corporation, who cannot W.P.(C) No.10824 of 2016 10 function as an arbitrator by virtue of the provisions contained under Sec.12(5) and the Seventh Schedule to the Arbitration and Conciliation Act, 1996 as amended by the Amendment Act, 2015, which came into force on and with effect from 23.10.2015. However, going through the provisions of Clause 37, it is quite clear and evident that the parties have intended in Ext.P1 agreement that, if disputes arise during the pendency of the agreement, resolve the same by resorting to Alternative Disputes Resolution Mechanism. In order to appreciate the provision, I think it is only appropriate that the provisions contained thereunder are extracted here, which read thus:
"37 (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 the 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). The Distributor will not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an Officer of the Corporation or that he has dealt with the matters to which the contract relates or that in the course of his duties as an Officer of the Corporation he had expressed views on all or any other matters in dispute or difference. In the event of the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, the Director (Marketing) as aforesaid at the time of such transfer, vacation of office or inability W.P.(C) No.10824 of 2016 11 to act may in the discretion of the Director (Marketing) designate another person to act as arbitrator in accordance with the terms of the agreement to the end and intent that the original Arbitrator shall be entitled to continue the arbitration proceeding notwithstanding his transfer or vacation of office as an Officer of the Corporation if the Director (Marketing) does not designate another person to act as arbitrator on such transfer, vacation of office or inability of original arbitrator. Such persons shall be entitled to proceed with the reference from the point at which it was left by his predecessor. It is also a term of this contract that no person other than the Director (Marketing) or a person nominated by such Director (Marketing) of the Corporation as aforesaid shall act as arbitrator hereunder. The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to the agreement subject to the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder for the time being in force shall apply to the arbitration proceedings under this clause.
(b) The award shall be made in writing and published by the Arbitrator within two years after entering upon the reference or within such extended time not exceeding further twelve months as the Sole Arbitrator shall be a writing under his own hands appoint. The parties hereto shall be deemed to have irrevocably given their consent to the Arbitrator to make and publish the award within the period referred to herein-above and shall not be entitled to raise any objection or protest thereto under any circumstances whatsoever.
(c) The arbitrator shall have power to order and direct either of the parties to abide by observe and perform all such directions as the arbitrator may think fit having regard to the matters in difference i.e., dispute before him. The arbitrator shall have all summary powers and may take such evidence oral and/or documentary, as the arbitrator in his absolute discretion thinks fit and shall be entitled to exercise all powers under the Indian Arbitration Act, 1940 including admission of any affidavit as evidence concerning the matter in difference i.e., dispute before W.P.(C) No.10824 of 2016 12 him.
(d) The parties against whom the arbitration proceedings have been initiated, that is to say, the Respondents in the proceeding, shall be entitled to prefer a cross-claim, counter-claim or set off before the Arbitrator in respect of any matter in issue arising out of or in relation to the Agreement without seeking a formal reference of arbitration to the Director (Marketing) for such Counter-Claim, Cross-claim, or set off and the Arbitrator shall be entitled to consider and deal with the same as if the matters arising therefrom has been referred to him originally and deemed to form part of the reference made by the Director (Marketing).
(e) The arbitrator shall be at liberty to appoint, if necessary any accountant or engineering or other technical person to assist him, and to act by the opinion so taken.
(f) The arbitrator shall have power to make one or more awards whether interim or otherwise in respect of the dispute and difference and in particular will be entitled to make separate awards in respect of claims or cross-claims of the parties.
(g) The arbitrator shall be entitled to direct any one of the parties to pay the costs of the other party in such manner and to such extent as the arbitrator may in his discretion determine and shall also be entitled to require one or both the parties to deposit funds in such proportion to meet the arbitrators expenses whenever called upon to do so.
(h) The parties hereby agree that the courts in the city of Madras alone shall have jurisdiction to entertain any application or other proceedings in respect of anything arising under this agreement and any award or awards made by the Sole Arbitrator hereunder shall be filed in the concerned courts in the City of Madras only."
13. On a proper analysis of the above provisions, it is explicit, the true intention is for resolving the disputes by resorting to the said mechanism, and W.P.(C) No.10824 of 2016 13 therefore, mere naming of the interested person as an arbitrator in the agreement, will not in any manner stifle the intention of the parties to arbitrate the issues. To put it otherwise, naming of the arbitrator was only for convenience, which is not expected to interfere in any manner with the true intention of resolving the disputes as per the mechanism provided under the agreement. Which thus also means, the bar created under Sec.8 of Act, 1996 will come into play to entertain any other judicial proceedings.
14. The decision relied upon by the petitioner referred to supra is in respect of termination of a dealership, in which it is held that the termination was done for an irrelevant and non-existent cause. But, in this case, there is a clear clause contained under the agreement executed by and between the parties that the 2nd respondent is at liberty to appoint one or more additional distributors in the same territory, which cannot be objected to by the petitioner.
15. Learned counsel for the respondents in that regard has invited my attention to the judgment of a Division Bench of this Court in 'All India L.P.G Distributors Federation and Others v. Union of India and Others' [2003 (2) KLJ 451], wherein the question W.P.(C) No.10824 of 2016 14 with respect to the appointment of additional distributors for the area initially allotted to a distributor and the reduction in the area of operation and reducing the number of consumers registered with the dealer was taken into account and held that the dealer is not entitled to make any claim against the same. Moreover, during the pendency of this writ petition, customers were transferred by the 2nd respondent Corporation.
16. Taking into account all these aspects, I am of the considered opinion that, petitioner has not made out any case justifying interference of this Court under Article 226 of the Constitution of India, there being no arbitrariness or illegality in the action. However, petitioner is at liberty to raise the dispute and seek appointment of an Arbitrator in accordance with the terms and conditions agreed upon by and between the parties.
17. Therefore, the writ petition is dismissed, however, leaving open the liberty of the petitioner to seek remedy in accordance with the Alternative Disputes Resolution mechanism agreed to be adopted by the parties in the event of any dispute by and between the parties, contained under Ext.P1 agreement. I make it W.P.(C) No.10824 of 2016 15 clear that the other questions of fact and law raised in this writ petition are left open. The observations and findings rendered above shall not stand in the way to consider the issues in any arbitration proceeding instituted in accordance with law, and on the merits of the matter.
Sd/-
SHAJI P.CHALY JUDGE St/-
23.05.2019 W.P.(C) No.10824 of 2016 16 APPENDIX PETITIONER'S/S EXHIBITS:
EXHIBIT P-1 TRUE COPY OF THE AGREEMENT EXECUTED BETWEEN THE PETITIONER AND THE CHIEF, LPG MANAGER OF INDIAN OIL CORPORATION LTD. DATED 15.6.1989.
EXHIBIT P-2 TRUE COPY OF THE SCHEME INTRODUCED BY THE INDIAN OIL CORPORATION LIMITED, HPCC AND BPCL WITH THE APPROVAL OF THE 1ST RESPONDENT.
EXHIBIT-P.3 TRUE COPY OF THE LIST OF CUSTOMERS WHO OPTED EXHIBIT P2 SCHEME.
EXHIBIT P.4 TRUE COPY OF THE COMMUNICATION ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.
EXHIBIT P5 TRUE COPY OF THE COMMUNICATION ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER DATED 31.03.2016.
EXHIBIT P6 TRUE COPY OF THE JUDGMENT DATED 06.08.2018 IN W.A.NO.964/2018 OF THE HON'BLE HIGH COURT OF KERALA.
EXHIBIT P7 TRUE COPY OF THE COMMUNICATION DATED 07.03.2019 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.
EXHIBIT P8 TRUE COPY OF THE NOTIFICATION ISSUED BY THE OIL COMPANIES IN THE MALAYALA MANORAMA DAILY NEWSPAPER DATED 03.09.2017 FOR ENGAGING DISTRIBUTORS OF LPG IN KERALA. RESPONDENTS' ANNEXURES.
ANNEXURE R2(A) A TRUE COPY OF LETTER DATED 05.04.2013 FROM THE 2ND RESPONDENT TO THE MOP&NG.
ANNEXURE R2(B) A TRUE COPY OF THE LETTER DATED 14.08.2013 FROM MOP&NG TO THE OIL MARKETING COMPANIES.
//TRUE COPY// P.S. TO JUDGE St/-