Indian Oil Corporation Dealership Termination Dispute Resolved

The legal dispute between General Manager, Indian Oil Corporation & Anr. and M/S. Lala Bhairo Prasad Saraf and Sons revolved around the termination of a dealership agreement. The case reached the Supreme Court after the High Court of Allahabad set aside the termination order on the grounds of violation of natural justice. The Supreme Court, in its final ruling on September 19, 2019, provided a resolution for both parties.

Background of the Case

The respondent-firm was a retail dealer of Indian Oil Corporation (IOC), operating an outlet at Purani Bazar, Karvi Town, Chitrakoot. An inspection of the retail outlet was conducted on February 13, 2006, where certain irregularities and breaches were observed. Consequently, the respondent was served with a show cause notice on March 14, 2006, followed by additional show cause notices on August 1, 2006, and August 19, 2006.

After receiving responses from the dealership, the General Manager of IOC issued an order on November 27, 2006, terminating the dealership. Dissatisfied with this decision, the respondent filed a writ petition before the High Court.

High Court’s Decision

The High Court found that IOC had violated the principles of natural justice by failing to provide the respondent with a fair opportunity to present its case before terminating the dealership. As a result:

• The High Court quashed the termination order.
• IOC was directed to resume the supply of petroleum products to the respondent-firm.

IOC, aggrieved by this decision, appealed before the Supreme Court.

Supreme Court’s Ruling

The Supreme Court examined the case and observed that if the High Court found a violation of natural justice, it should have directed IOC to provide an opportunity for the respondent to reply and then pass a reasoned order instead of outrightly setting aside the termination.

However, during the proceedings, the respondent-firm expressed that it was no longer interested in continuing the dealership. Instead, the respondent requested a refund of the security deposit amounting to Rs. 7,05,746/-, as stated in letters sent to IOC in 2007 and 2009.

Taking into account the prolonged nature of the litigation, the Supreme Court decided:

• IOC was directed to refund the security amount of Rs. 7,05,746/- to the respondent within six weeks.
• IOC was allowed to remove all equipment and fittings, including those in underground tanks, within eight weeks.
• The respondent-firm was instructed to cooperate in the removal of the fittings.
• No interest was awarded on the refund amount due to the prolonged nature of the case.

Conclusion

The Supreme Court’s decision provided a final resolution by balancing the interests of both parties. The case highlights the importance of adhering to natural justice principles in administrative decisions while also ensuring practical resolutions when parties reach an agreement. By ordering a refund and allowing IOC to recover its infrastructure, the Court put an end to a long-drawn legal battle.

Petitioner Name: General Manager, Indian Oil Corporation & Anr..
Respondent Name: M/S. Lala Bhairo Prasad Saraf and Sons.
Judgment By: Justice R. Banumathi, Justice A.S. Bopanna.
Place Of Incident: Chitrakoot, Uttar Pradesh.
Judgment Date: 19-09-2019.

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