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2021 (7) TMI 1156 - HC - Indian LawsTermination of dealership - breach of Clause 45 (d) of dealership agreement - Co- operative Society appointed as dealer, involved in a criminal offence or not - petitioner was convicted under Section 138 of Negotiable Instruments Act, 1881, for dishonor of cheque - heinous case or case involving moral turpitude or otherwise? - HELD THAT - Apex Court in the case of P. MOHANRAJ ORS. VERSUS M/S. SHAH BROTHERS ISPAT PVT. LTD. 2021 (3) TMI 94 - SUPREME COURT has reiterated that proceedings under Negotiable Instruments Act are basically civil in nature having criminal colour. Apex Court has defined the proceedings aptly as civil sheep in a criminal wolf's clothing and has reiterated the law laid down - Similarly, in M/S. METERS AND INSTRUMENTS PRIVATE LIMITED ANR. VERSUS KANCHAN MEHTA 2017 (10) TMI 218 - SUPREME COURT , it has been held that nature of offences under Section 138 of Negotiable Instruments Act is primarily a civil law and 2002 amendment specifically made it compoundable. Thus, it is clear that proceedings under Section 138 of Negotiable Instruments Act are civil in nature with criminal overtones - impugned order is quashed - respondent is directed to allow petitioner to run the Petroleum outlet allotted to him vide agreement dated 1.8.2008 - petition allowed.
Issues:
Termination of Petroleum Outlet Dealership based on criminal conviction under Section 138 of Negotiable Instruments Act, 1881. Analysis: 1. Termination of Dealership Agreement: The petitioner's dealership agreement was terminated by the Chief Divisional Retail Sales Manager of Indian Oil Corporation based on a breach of Clause 45(d), which allowed termination if the dealer or any partner in the dealership firm was convicted of a criminal offence. The petitioner was convicted under Section 138 of the Negotiable Instruments Act, 1881, for bouncing a cheque. 2. Legal Arguments - Petitioner: The petitioner argued that the termination was arbitrary as the offence under Section 138 of the Negotiable Instruments Act is not heinous and does not involve moral turpitude. The petitioner's counsel cited a Supreme Court judgment to support the argument that a Section 138 proceeding is essentially civil in nature, aimed at protecting the victim's interests rather than the larger interest of the State. 3. Legal Arguments - Respondent: The respondent, represented by Senior Counsel, supported the termination, stating that the bouncing of a cheque under Section 138 of the Negotiable Instruments Act is indeed an offence punishable with imprisonment and fine. The Senior Counsel argued that since the Act defines the bouncing of a cheque as an offence, the termination of the dealership agreement was justified. 4. Judicial Precedents: The High Court referred to various Supreme Court judgments to establish that proceedings under Section 138 of the Negotiable Instruments Act are civil in nature with criminal overtones. The judgments highlighted that such cases are akin to civil wrongs with criminal implications, emphasizing the compoundable nature of the offences under the Act. 5. Decision: Considering the arguments and legal precedents, the High Court quashed the order terminating the dealership agreement. The Court directed the respondent Corporation to allow the petitioner to continue operating the Petroleum outlet allotted under the agreement dated 1.8.2008. The writ petition was allowed in favor of the petitioner. In conclusion, the judgment emphasized the civil nature of proceedings under Section 138 of the Negotiable Instruments Act, leading to the reinstatement of the petitioner's dealership agreement.
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