2002 (12) TMI 564 - SC - Companies Law

Writ petition laying challenge to the order of termination - view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed - Held that - Appeal allowed. As in the present case the petitioners dealership, which is their bread and butter came to be terminated for an irrelevant and non-existent cause. In such circumstances the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings.

Summary

Issues:
Termination of dealership agreement on grounds of sample failure, non-cooperation, and discourteous behavior. High Court's dismissal of writ petition due to arbitration clause in the agreement.

Analysis:
The judgment involves the termination of a dealership agreement between Indian Oil Corporation Limited and the appellants based on various grounds. The Corporation terminated the dealership due to a sample failure from the appellants' outlet, which did not meet standard specifications. Additionally, allegations of non-cooperation and discourteous behavior by the appellants were made. The State Government suspended the license of the appellants and imposed a fine. The High Court dismissed the appellants' writ petition, citing the presence of an arbitration clause in the agreement as the appropriate remedy. The appellants argued that the termination was based on irrelevant and non-existent grounds, emphasizing violations of government orders regarding sample testing procedures and delays in lab tests.

The appellants contended that the cancellation was solely based on the sample failure, with vague allegations of non-cooperation and deficiencies in sales and record-keeping. The appellants provided an affidavit expressing regret for any misconduct and assured cooperation with Corporation officials in the future. The Supreme Court noted that the rule of exclusion of writ jurisdiction by the availability of an alternative remedy is discretionary, not compulsory. The Court highlighted that in cases involving fundamental rights enforcement or failures of natural justice, the High Court can still exercise writ jurisdiction. In this case, the termination of the dealership on irrelevant grounds warranted relief through the writ petition rather than arbitration proceedings.

Ultimately, the Supreme Court allowed the appeals, setting aside the High Court's judgment and quashing the Corporation's termination order. The Court found the termination unjustified and ruled in favor of the appellants. No costs were awarded in the judgment.