1995 (11) TMI 451 - SC - Companies Law

Summary

Issues involved:
The issues involved in this case are wrongful termination of distributorship, establishment of relationship between parties as agent and principal, interpretation of contract terms, and application of Section 206 of the Contract Act.

Wrongful Termination of Distributorship:
The plaintiff, a trading firm, alleged that they were wrongfully terminated as distributors by the defendants, a company manufacturing Vespa Scooters and Vespa Auto-rickshaws. The defendants denied appointing the plaintiffs as their agent, asserting that the relationship was that of principal to principal. The Trial Judge held that there was no agent-principal relationship and lawful termination, which was affirmed by the High Court.

Establishment of Relationship as Agent and Principal:
The plaintiffs contended that they were appointed as sole selling agents by the defendants, citing a letter appointing them as distributors. However, the evidence presented indicated a buyer-seller relationship rather than an agency relationship. The Court examined the terms of the contract and witness testimonies, concluding that the contract was one of sale, not agency.

Interpretation of Contract Terms:
The Court analyzed the contents of the appointment letter and witness statements to determine the nature of the relationship between the parties. The evidence revealed that the plaintiffs purchased vehicles for resale, indicating a buyer-seller arrangement rather than an agency agreement.

Application of Section 206 of the Contract Act:
The plaintiffs argued that the termination of distributorship without reasonable notice violated Section 206 of the Contract Act. However, since no agent-principal relationship was established, the Court found that the termination notice given by the defendant was not unreasonable, as it was provided about 15 days in advance.

In conclusion, the appeal was dismissed as the Court found no error in the lower courts' decisions regarding the relationship between the parties and the termination of distributorship, emphasizing the absence of an agency relationship and the contractual terms indicating a buyer-seller arrangement.