IBP Company Ltd. and Others vs T.A. Jayaprabhu and Others

K.L. Manjunath, J.—The present appeals are filed by M/s. Indian Oil Corporation Ltd., M/s. Hindustan Petroleum Corporation Ltd., and M/s. Bharat Petroleum Corporation Ltd., challenging the legality and the correctness of the order passed by the learned Single Judge dated 13.01.2010 in W.P. No. 37175/1999 and other connected writ petitions.

The writ petitioners are granted with the dealership licence by different oil corporations, who are doing business in sale of petroleum products in retail outlets properly known as "petrol filing service station". An agreement is entered into between the dealers and oil corporations. Both the parties are bound by the terms and conditions of the agreement.

The writ petitions were filed by the petitioners challenging the amended Marketing Discipline Guidelines framed in August'' 2005 by the oil corporations as unconstitutional, illegal, arbitrary and void. Contending that the said guidelines are unconstitutional and illegal and as such, guidelines would not bind the writ petitioners since such guidelines are framed unilaterally and contrary to the terms and conditions of the dealership agreement and based on such guidelines the dealers cannot be made to suffer.

The appellants - oil companies, the respondents before the learned Single Judge contended that the Marketing Discipline Guidelines for petrol and diesel outlets/SKO dealership have been framed to ensure the dispensation to correct the quality and quantity of the product sold through their network. In order to ensure complaints of the Marketing Discipline Guidelines, oil companies would immediately register the cases of serious nature like irregularity and essential commodities and to prevent adulteration of sale of petroleum products and in the best interest of consumer, the guidelines have been prepared. While preparing the guidelines, the oil corporations have also taken note of duties and responsibilities of the dealers in supplying the quality and quantity of petroleum products. According to them, these guidelines are inbuilt mechanism of the corporations and for preparation of such guidelines, no statutory provision is required to authorize them to frame and guidelines are more in nature bringing discipline in marketing the petroleum products.

According to the oil corporations they have a right to issue guidelines from time to time in terms of dealership agreement and dealers are bound to comply with the Marketing Discipline Guidelines issued from time to time. Therefore, they requested the Court to dismiss the writ petitions contending that the guidelines framed by the corporations are not unconstitutional or arbitrary. They also contend that petitions filed by the petitioners are not maintainable.

The learned Single Judge after examining the matter in detail, came to the conclusion that the parties are bound by the dealership agreement and corporations can unilaterally frame the guidelines and there is no power vested in the corporations to frame guidelines. Accordingly, he came to the conclusion that the guidelines framed by the corporations is unilateral in nature. Accordingly, writ petitions came to be allowed quashing the Marketing Discipline Guidelines as unconstitutional. Therefore, present appeals are filed.

We have heard Sri. Udaya Holla, learned Senior counsel appearing for appellants and Sri. Subhash, learned counsel appearing for dealers, who are petitioners before the learned Single Judge and Sri. Arvind Sharma, learned counsel appearing for Union of India.

The main contention of Sri. Udaya Holla is that the corporations are entitled to issue marketing guidelines to see that quantitative petroleum products are supplied to the consumers. According to him, Clause 42 of the dealership agreement provides right of the corporations to issue guidelines from time to time for the purpose of maintaining the quality of supply of the petroleum products. Relying upon Clause 42 of model agreement, he contends that the learned Single Judge has committed an error in allowing the writ petitions in toto. He also relied upon some of the dealership licences granted to the dealers, who have produced the copy of the dealership agreement which includes the provisions of Clause 42 of the model agreement. Therefore, he contends that the order of the learned Single Judge requires to be set aside.

Per contra, learned counsel for the writ petitioners/respondents submits that Clause 42 of the model agreement has come into force on issuance of model agreement and some of the dealerships were granted to much prior to issuance of copy of model agreement produced by the appellants. Therefore, he contends that wherever the Clause 42 of model agreement is not included in the agreement entered into in respect of the dealership granted earlier, the corporations cannot issue such guidelines from time to time as the same is unilateral in nature, since such dealers have not agreed upon to carry out the instructions. According to him, both the parties are bound by terms and conditions of the contract and any of the terms and conditions are to be modified, the same shall be bound by mutual consent by way of modified agreement. In which circumstance, he requests the Court to dismiss the appeals.

Having heard the learned counsel for the parties, we have to consider the following points:

"(i) Whether the learned Single Judge has committed an error in allowing the writ petitions in toto? and;

(ii) Whether the order of the learned Single Judge requires to be interfered with?"

The relationship between the oil corporations and the writ petitioners as dealers of their products, is not in dispute. It is also not in dispute that the dealers have executed a dealership agreement in favour of the corporations and terms and conditions of the agreement is binding upon both the parties. Copy of Clause 42 of model agreement produced before the Court reads as under:

"42. The Dealer shall at all times faithfully, promptly and diligently observe and perform and carry out at all times all directions, instructions, guidelines and orders given or as may be given from time to time by the Corporation or its representative(s) on safe practices and marketing discipline and/or for the proper carrying on of the Dealership of the Corporation. The dealer shall also scrupulously observe and comply with all lays, rules, regulations and requisitions of the Central/State Government and of all authorities appointed by them or either of them including particular the Chief Controller of Explosives. Government of India and/or any other local authority with regard to the safe practices." 12. Learned counsel for the contesting respondents (dealers) is not disputing the incorporation of Clause 42 of model agreement in most of the dealership agreement. The writ petitioners have also produced certain dealership agreements, which shows Clause 42 of the model agreement is also included. Such dealers cannot contend before the Court that the oil corporations have no power to issue instructions, directions, guidelines from time to time on safe practices and marketing discipline for the purpose of carrying on of the dealership of the corporations. It is also mentioned in Clause 42 of the model agreement that the dealers were scrupulously observed and comply with all laws, rules, regulations and requisitions of the Central/State Government and all authorities appointed by them or either of them which includes the corporations, which granted licence. The learned Single Judge without considering the effect of Clause 42 of the said agreement has allowed the writ petitions in toto, which according to us is an error committed by the learned Single Judge.

In the dealership agreement, if Clause 42 of the model agreement is included, in such circumstance, dealers cannot contend that in-house mechanism of the oil corporations in issuing directions by way of marketing guidelines is not binding on them, cannot be accepted. This legal issue is not disputed by Sri. S. Subhash, learned counsel for the dealers. We could appreciate the contention of dealers only when if Clause 42 of model agreement is not incorporated in any of the agreement. In such circumstance, this court can only say that issuance of Marketing Discipline Guidelines, which is questioned in the writ petitions, does not bind such dealers only. We are also of the view that if Clause 42 of model agreement is not incorporated in the dealership agreement, it is always open for the corporations to include such clause whenever the dealership licence is required to be renewed.

In the result, appeals are allowed in part. Order of the learned Single Judge is modified holding that the Marketing Discipline Guidelines framed on 2005 is binding upon all the dealers whereunder Clause 42 of the model agreement is incorporated in the dealership agreement entered into between the dealers and the corporations. Such Marketing Discipline Guidelines is not applicable in respect of the dealers where Clause 42 in the dealership agreement is not incorporated in the dealership agreement.