N. Kumaran v. Indian Oil Corporation Ltd. & Others

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **THURSDAY, THE 12TH DAY OF APRIL 2018 / 22ND CHAITHRA, 1940** **WP(C).No. 12410 of 2017** ## **PETITIONER(S)** **N. KUMARAN, S/O. RAMAN, AGED 53 YEARS, PROPRIETOR, KUTHUPARAMBA GAS AGENCIES, KANNUR ROAD, KUTHUPARAMBA - 670 643, KANNUR DISTRICT.** **BY ADV.SRI.R.SURENDRAN** ## **RESPONDENT(S):** **1. INDIAN OIL CORPORATION LTD., REPRESENTED BY THE CHIEF LPG MANAGER, INDIAN OIL CORPORATION LTD., KERALA STATE OFFICE, PANAMPILLY AVENUE, PANAMPILLY NAGAR P.O., COCHIN - 682 036.** **2. THE CHIEF AREA MANAGER, INDIAN AREA OFFICE, INDIAN OIL CORPORATION LTD., 2NDFLOOR, PMK TOWER, CIVIL STATION P.O, WYNAD ROAD, KOZHIKODE - 673 020.** ## **3. ASSISTANT MANAGER,** **LPG (SALES), INDANE AREA OFFICE, INDIAN OIL CORPORATION LTD., 2ND FLOOR, PMK TOWER, CIVIL STATION P.O., WYNAD ROAD, KOZHIKODE - 673 020.** **4. THE PROPRIETOR, M/S. REVATHY INDANE, KUTHUPARAMBA - 670 643, KANNUR DISTRICT.** **R1 TO R3 BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM R4 BY ADVS. SRI.G.S.KRISHNAN KARTHA SRI.LIJIN THAMBAN SRI.M.RETHEESHKUMAR** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02-04-2018, THE COURT ON 12-04-2018 DELIVERED THE FOLLOWING:** **Msd.** **13.04.2018** **WP(C).No. 12410 of 2017 (A)** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **EXHIBIT P1 TRUE COPY OF AGREEMENT DATED 24-6-1991, EXECUTED BETWEEN THE PETITIONER AND THE FIRST RESPONDENT.** **EXHIBIT P2 TRUE COPY OF LETTER OF INTENT DATED 25-7-1989, ISSUED BY THE FIRST RESPONDENT TO THE PETITIONER. EXHIBIT P3 TRUE COPY OF AGREEMENT DATED 15-1-2015, EXECUTED BETWEEN THE PETITIONER AND THE FIRST RESPONDENT. EXHIBIT P4 TRUE COPY OF EMR REPORT OBTAINED FROM THE COMPUTER SYSTEM ON 4-4-2017, FOR THE MONTH OF MARCH 2017 IN RESPECT OF PETITIONER. EXHIBIT P5 TRUE COPY OF LIST OF DEFECTIVE CYLINDERS WITH SERIAL NUMBERS CERTIFIED BY THE ASSISTANT MANAGER OF THE FIRST RESPONDENT ALONG WITH EQUIPMENT RETURN VOUCHER DATED 23-3-2017. EXHIBIT P6 TRUE COPY OF PRINT OUT OBTAINED FROM THE WEBSITE OF THE FIRST RESPONDENT IN RESPECT OF PORTABILITY SYSTEM.** **EXHIBIT P7 TRUE COPY OF E-MAIL COMMUNICATIONS SENT BY THE THIRD RESPONDENT FROM 31-3-2017 TO 4-4-2017 TO THE PETITIONER. EXHIBIT P8 TRUE COPY OF THE BACKLOG DETAILS DATED 31.03.2018 SENT BY THE 3RD RESPONDENT AND RECEIVED BY PETITIONER. RESPONDENT(S)' EXHIBITS :** **EXHIBIT R1(A): TRUE COPY OF THE LETTER DATED 05.04.2013 FROM THE 1ST RESPONDENT TO THE MOP & NG. EXHIBIT R1(B): TRUE COPY OF THE LETTER DATED 14.08.2013 FROM MOP & NG TO THE OIL MARKETING COMPANIES. EXHIBIT R1(C): TRUE COPY OF THE LETTER DATED 12.11.2001 FROM MOP NG TO I.O.C, MUMBAI. EXHIBIT R1(D): TRUE COPY OF THE LETTER DATED 01.02.2002 FROM MOP NG TO I.O.C, MUMBAI. EXHIBIT R1(E): TRUE COPY OF THE RECORD NOTE ON POLICY FOR RESTRUCTURING OF EXISTING REGULAR LPG DISTRIBUTORSHIPS DATED 08.11.2012. EXHIBIT R1(F): TRUE COPY OF THE LETTER DATED 14.07.2015 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER.** **WP(C).No. 12410 of 2017 (A)** **EXHIBIT R1(G): TRUE COPY OF THE LETTER DATED 14.10.2015 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER.** **//TRUE COPY//** **P.S.TO JUDGE** **Msd. 13.04.2018** ## **SHAJI P. CHALY, J.** -------------------------------------------------- ## **W.P.(C) No.12410 of 2017** ## **----------------------------------------------Dated this the 12[th] day of April, 2018** ## **JUDGMENT** This writ petition is filed by the petitioner seeking the following reliefs: _“To issue notice to the respondents and after hearing there may be writ or other order in the nature of a) Declaration that decision of respondents No.1 to 3 to transfer 2333 number of customers under the petitioner to the 4[th] respondent's distributorship is without any authority of law or the contract,_ _b) Certiorari quashing the decision of respondents No.1 to 3 to transfer 2333 number of customers under the petitioner to the 4[th] respondent's distributorship, evidenced by Ext.P7._ _c) Mandamus directing the respondents No.1 to 3 to re-transfer all the connections/customers transferred from the petitioner's distributorship, after the introduction of portability system and_ _d) Any other relief that the Honourable Court may deem appropriate to meet the ends of justice.”_ 2. Material facts for the disposal of the writ petition are as follows: 3. Petitioner was appointed as a distributor for Liquefied Petroleum Gas (LPG) for the territory or distribution area of Kuthuparamba in Kannur District. Accordingly, Ext.P1 agreement was executed. Petitioner was selected under the 2 **W.P.(C) No.12410 of 2017** Scheduled Tribe category, evident from Ext.P2 letter of intent dated 25.07.1989. Petitioner was successfully conducting the distributorship without any complaint from the general public and customers. Ext.P1 agreement was renewed on 15.01.2015 and Ext.P3 agreement is executed. As per Ext.P4 EMR Report obtained on 04.04.2017 from the computer system, petitioner is having 15132 customers as on March, 2017. 4. According to the petitioner, recently, the production and supply of LPG filled cylinders by the 1[st] respondent have been lagging on account of strike or other reasons. It could be seen from the account statement maintained by the 1[st] respondent, the advance amount paid by the petitioner is so high, whereas the supply of cylinders by the company is only one-third of the demand made by the petitioner. Other circumstances are also pointed out, justifying the delay in supplying cylinders to the customers. 5. While so, the 1[st] respondent, as per the policy of the Government of India, introduced a portability system for the consumers, for the purpose of having competition among distributors in the interest of customer service, that will enable 3 **W.P.(C) No.12410 of 2017** customers to migrate between cluster of distributors both intra and inter-company to be put in place. If a customer is not satisfied with the services of his parent distributor, he can migrate to his chosen distributor within the cluster for better service. The option is to be registered electronically on the website of the Oil Marketing Company (OMC) to which the consumer is presently attached. Ext.P6 availability of portability has been published by the 1[st] respondent in its website. Thus, according to the petitioner, after the introduction of portability system, it is the customer's choice and the distributor or the oil company cannot insist the customer to take service from a particular dealer. 6. However, on 07.10.2015, a total number of 5956 customers of the petitioner were transferred by the 1[st] respondent to the 4[th] respondent distributor without assigning any reason. On 11.04.2016, a total number of 1956 customers were transferred from the petitioner's distributorship to another distributor viz., M/s. Pazhassinadu Indane, Peravoor, the area where the petitioner was allowed to extend his services. Thus, according to the petitioner, petitioner lost nearly 8000 customers during 2015-2016, which 4 **W.P.(C) No.12410 of 2017** is an arbitrary action on the part of the 1[st] respondent. It is also the case of the petitioner, he had engaged nearly 18 employees in connection with his business earlier. When the transfer of customers was effected by the 1[st] respondent, petitioner was constrained to reduce the employees to 12. 7. Matters being so, petitioner received Ext.P7 series of e-mail communications from 31.03.2017 to 04.04.2017, asking the petitioner to attend a meeting purportedly for discussing the backlog in the supply of LPG, transfer of customers etc. etc. According to the petitioner, from the e- mail communications, it was understood that the attempt of the 3[rd] respondent was to favour the 4[th] respondent by transferring another batch of customers from the petitioner's distributorship. It is the case of the petitioner that, in the meeting held on 01.04.2017, petitioner made it clear that the backlog occurred only because of the delay in supply of LPG filled cylinders to the petitioner in spite of daily orders placed by him. Other contentions are also raised with respect to the objections raised by the petitioner that as per the portability system, the respondent company is not entitled to remove the customers from the distributorship. However, the choice is **W.P.(C) No.12410 of 2017** 5 that of the customers. Therefore, according to the petitioner, the steps now taken by the respondent company to remove the customers forcibly cannot be sustained under law. 8. A detailed counter affidavit is filed for and on behalf of respondents 1 to 3, refuting the allegations and claims and demands raised by the petitioner. According to the respondents, the customer strength of the petitioner had gone up to 23,000 customers and the petitioner was unable to cater to such a large clientele. LPG is marketed as per the policy guidelines issued by the Ministry of Petroleum and Natural Gas. As per the policy, 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 distributorships, an 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. The Ministry as per its letter dated 14.08.2013, accepted the ceiling limits proposed by the 1[st] respondent by way of its letter dated 05.04.2013, evident from Exts.R1(a) and R1(b). 6 **W.P.(C) No.12410 of 2017** 9. Currently, the refill ceiling limit for the petitioner's market is 8800 refills per month. Petitioner was, on an average, selling more than 9600 refills per month, i.e. much above the refill ceiling limit, and the petitioner was found not able to provide service to customers because of the huge clientele and base area covered by it. Petitioner was having a very backlog of almost 25 days and he has been maintaining such severe backlog for a long period of time, in spite of various instructions from the 1[st] respondent to rectify the situation. In that constrained circumstances, respondents, as per a letter dated 14.10.2015, directed the petitioner to clear the backlog. However, the same could not be effectively implemented by the petitioner. Therefore, in order to adequately service the existing additional customers of the petitioner and the increasing customer population, 1[st] respondent commissioned the 4[th] respondent's distributorship in the same market by following appropriate procedure to take care of the increasing demand of LPG. It is also a normal and acceptable practice to transfer customers from the existing distributor to (i) the new distributors when commissioned; or (ii) existing distributors who have not yet become viable. ## **W.P.(C) No.12410 of 2017** 7 10. As per Exts.R1(c) and R1(d), the Ministry has mandated that such transfers be made. Other instructions are also issued in order to make re-distributions as per the decision taken by all Oil Marketing Companies in their meeting held on 08.11.2012. It is also stated that the petitioner was negligent in managing the distributorship, and on many occasions, strict instructions have been made against the petitioner by the 1[st] respondent, thereby Exts.R1(f) and R1(g) letters were issued. 11. It is also the case of the respondents that, as per Clauses 1.b(ii) and 1.b(iii), the company is entitled to appoint one or more additional distributors in the same territory and such additional distributor or distributors shall be entitled to make sales in Indane in the same territory without any objection from the Distributor, and the Distributors shall not be entitled to claim any over-riding remuneration, commission or allowance for the purpose, and the Corporation is also entitled to require the distributor to effect minimum sales of Indane in accordance with the policy that may be formulated from time to time by the Corporation, and shall be further entitled at its sole discretion to reduce, restrict, modify or alter the area of 8 **W.P.(C) No.12410 of 2017** distributorship territory, and the decision of the Corporation shall be final and binding on the Distributor. 12. Therefore, the sum and substance of the contentions advanced by the respondents is that, merely because action is initiated by the respondents to transfer the customers in order to render effective and defect-free service to the customers, petitioner cannot raise any objection in view of the provisions of the agreement and the policy decision taken by the company in accordance with the terms of the agreement. It is also pointed out that, if the petitioner had any grievance with respect to the action initiated by the respondents, Clause 37 of Ext.P3 agreement enables the petitioner to invoke the alternative disputes resolution mechanism provided thereunder. However, without making any efforts to raise the grievance of the petitioner as is contemplated under Clause 37 of Ext.P3, petitioner has rushed to this Court, in effect challenging the terms and conditions in a commercial contract, which are acceded to by the petitioner. 13. A reply affidavit is filed by the petitioner reiterating the stand adopted in the writ petition. 9 **W.P.(C) No.12410 of 2017** 14. I have heard learned counsel for the petitioner and the learned Standing Counsel appearing for respondents 1 to 3. Even though notice is served on the 4[th] respondent, there is no appearance. Perused the documents on record and the pleadings put forth by the respective parties. 15. The sole question to be considered is, whether any manner of interference is warranted in the steps taken by respondents 1 to 3 to transfer the customers under the petitioner to the 4[th] respondent's distributorship. It is clear from the discussion made above that, the parties are bound by the terms and conditions of the agreement executed by and between the parties. There are clear-cut clauses entered into by and between the parties. As I have pointed out in the fact discussion made above, the company is vested with ample powers to appoint a distributor in the very same area of distributorship and the petitioner is not entitled to object to the same, in view of the settled terms and conditions of the agreement. The relevant clauses also show that the company is also vested with powers to minimize the distribution in accordance with the policy that may be formulated from time to time by the Corporation, and also entitled at its sole **W.P.(C) No.12410 of 2017** 10 discretion to reduce, restrict, modify or alter the area of distribution territory and the decision of the company shall be final, and binding on the distributor. Since the petitioner has signed the agreement accepting the covenants contained thereunder, at a later point of time, petitioner is not at liberty to turn around and attack the power conferred on the company by virtue of the terms and conditions of the agreement. Petitioner has not raised any ground in the writ petition that the terms and conditions so made in the agreement are void or illegal, justifying interference with the same. Moreover, Clause 37 of Ext.P3 agreement makes it amply clear that, if at all petitioner has any grievance, a dispute resolution mechanism is provided thereunder, which read thus: _“37.(a) All questions, disputes and differences arising under or in relation to this agreement shall be referred to the sole arbitration of the Director (Marketing) of the Corporation. If such Director (Marketing) is unable or unwilling to act as the sole arbitrator, the matter shall be referred to the sole arbitration or same other of the Corporation by such Director (Marketing) in his place, who is willing to act as such sole arbitrator. It is known to the parties herein that the Arbitrator appointed hereunder is an employee of the Corporation and may be Shareholder of the Corporation. The arbitrator to whom the matter is originally referred, whether the Director (Marketing) or officer, as the case may be, on his being transferred vacating his office or being unable to act, for any reason, the Director (Marketing) shall designate any other person to act as arbitrator in accordance with the_ 11 **W.P.(C) No.12410 of 2017** _terms of the Agreement and such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also the term of this agreement that no person other than the Director (Marketing) or the person designated by the Director (Marketing) as aforesaid shall act as arbitrator. The award of the Arbitrator so appointed shall be final, conclusive and binding on all the parties to the Agreement and provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the Rules make thereunder and for the time being in force shall apply to the arbitration proceedings under this clause.”_ 16. It also makes it clear that, before rushing to this Court, petitioner had a remedy in order to make an attempt to ventilate his grievance, which course of action is not adopted by the petitioner. However, it is contended by learned counsel for the petitioner that, by virtue of Sec.8 of the Arbitration and Conciliation Act, 1996, if at all the respondents had a case that the writ petition is hit by the provisions of the Arbitration and Conciliation Act, the respondents should not have contested the proceedings on the merits of the matter. Section 8 of the Arbitration and Conciliation Act, 1996 read thus: _“_ _**8. Power to refer parties to arbitration where there is an arbitration agreement** .--(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds_ 12 **W.P.(C) No.12410 of 2017** _that prima facie no valid arbitration agreement exists._ _(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:_ _Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court._ _(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”_ 17. Therefore, in my considered opinion, since the respondents have contested the proceedings traversing through the merits of the matter, and the substantive statement is filed, alternative contention that petitioner had a remedy under Clause 37 of Ext.P3 agreement, cannot be sustained under law. Anyhow, as I have pointed out earlier, petitioner is liable as per the terms and conditions of Ext.P3 agreement, whereby the petitioner has agreed that the respondent company will be at liberty to make suitable arrangements in order to have an efficient supply of LPG 13 **W.P.(C) No.12410 of 2017** cylinders to the customers in the very same area operated by the petitioner. 18. Learned Standing Counsel for the respondents have invited my attention to a Division Bench judgment of this Court in ' _**All India L.P.G Distributors Federation & Others v. Union of India & Others**_ ' [2003 (2) KLJ 451]. Paragraphs 5 and 11 of the said judgment are relevant to the context, which read thus: _“5. The petitioners are distributors of liquefied Petroleum Gas. They were appointed as distributors by the Indian Oil Corporation. At the time of appointment, an agreement was executed. A copy of the agreement as executed on June 28, 1990 by the first petitioner has been produced as Ext.P1. The petitioners allege that vide letters dated October 29, 1985, April 29, 1995, May 14, 1997 and February 26, 2000 the respondent-Corporation had been periodically revising the ceiling limits on the sale of L.P.G refills by each distributor. The copies of these letters have been produced as Exts.P2 to P5. To illustrate: in the letter dated October 29, 1985 the number of refills in a city with a population of below 50,000 had been fixed at 4000. This was prior to the date on which the petitioners had been appointed as distributors. In the revision made more than 10 years later, vide letter dated April 21, 1995, at the time of revision in case of towns with a population up to 10 lakhs the ceiling was raised from 4000 to 5000. Vide letter dated May 14, 1997 it was raised to 6000. Finally in February 2000, the limit was raised to 8000.”_ _11. Admittedly, an agreement had been executed at the time of appointment of the petitioners as distributors. A perusal of the terms of the agreement shows that the Corporation had specifically reserved the right to “appoint one or more additional distributors_ 14 **W.P.(C) No.12410 of 2017** _in the same territory ….......” This could be done “without any reference to or consent of the distributor”. Still further it was also provided that the distributor shall be liable to “confine himself to effect the sales in the area or territory specified hereinabove but the Corporation shall be entitled without the consent of the Distributor to enlarge, reduce, increase or modify such area or territory to such other place as may from time to time be authorized by the Corporation in writing”. Thus, it is clear that under the agreement the corporation was entitled to appoint additional distributors for the area which had been allotted initially to any dealer including the present petitioners. Still further, the Corporation was also entitled to unilaterally reduce the area which may have been initially allotted to a dealer. Another fact which deserves mention is that in clause 11 of the agreement the distributors had specifically undertaken to “faithfully and diligently observe and carry out all directions, orders, terms and conditions as may be issued from time to time.......”. In clause 23 also, a similar provision had been made.”_ 19. It is also held thereunder that the Corporation has reserved the right to reduce the area of operation. It has also reserved the right to appoint additional distributors for the area initially allotted to them. The reduction in the area of operation would automatically result in the number of consumers registered with the dealer. It is further held that, the appointment of new dealers for the area carved out of the operational limits of an existing dealer would automatically result in the reduction of the number of customers, and thus it cannot be said that the action of the Corporation or the Government of India violates the terms of the agreement. As **W.P.(C) No.12410 of 2017** 15 is noticeable, the action is taken by the Company on the basis of the policy decision taken by the Government of India, which, in my considered opinion, is an added factor to decline the reliefs sought for by the petitioner. 20. Therefore, in my considered opinion, the subject issue raised by the petitioner in this writ petition tallies with the issue considered by the Division Bench of this Court referred to _supra_ , in terms of the agreement executed by and between the parties. Furthermore, a learned Single Judge of this Court had occasion to consider the very same issue raised by the petitioner, in W.P.(C) No.8321 of 2018 and connected cases, and rendered a judgment dated 19.03.2018, declining interference with the policy or with the steps taken for implementation of the same. 21. Therefore, I am of the considered opinion that, the issue is also squarely covered by the proposition of law laid down by the Division Bench of this Court in the judgment referred to _supra_ . Therefore, the petitioner is not entitled to get any reliefs as is pointed out above. However, I make it clear that, if any of the customers of LPG of the petitioner makes any complaint to the company with respect to the 16 **W.P.(C) No.12410 of 2017** difficulties faced by the customers in the matter of acquiring cylinders, it shall be looked into by respondents 1 to 3, in order to alleviate any inconveniences faced by such customers. Resultantly, writ petition will stand dismissed, however, subject to the above observation with respect to protection of interest of the customers of the LPG cylinders. Sd/- **SHAJI P. CHALY JUDGE** St/07.04.2018