Kiran Corporation and Others vs Bharat Sanchar Nigam Ltd. and Others

K.A. Puj, J.—Since common issue is involved in this group of petitions, the same are being heard together and disposed of by this common judgment and order.

The petitioners have filed this petition under Article 226 of the Constitution of India praying for the declaration that Clause 4 and Section 3 Clause (J) of the Franchises Sales and Distribution Policy 2009 are unconstitutional and unwarranted. The petitioners have also prayed for the direction to the respondents to continue the petitioners to do their business in vacant territory till the final disposal of these petitions. The petitioners have also prayed for the directions to the respondents not to proceed with the new Policy.

Initially, only one petition is filed, wherein there are in all 17 petitioners. The Court has issued Notice on 05.04.2010 and also directed the petitioners to file separate petitions. Special Civil Application No. 4068 of 2010 was considered to have been filed by petitioner No. 5 and the remaining petitions are, therefore, filed by other petitioners i.e. Special Civil Application No. 4667 of 2010 to Special Civil Application No. 4682 of 2010.

On service of Notice, Ms. P.J. Davawala, learned Counsel appears on behalf of the the respondents i.e. Bharat Sanchar Nigam Limited and its officials and also placed on record an affidavit-in-reply duly filed by Assistant General Manager (Legal) on behalf of the respondents.

Heard Mr. K.H. Baxi, learned Advocate appearing for the petitioners and Ms. P.J. Davawala, learned Advocate appearing on behalf of the respondents.

It is the case of the petitioners that the petitioners are doing their business in Tele Communication and the franchisees were granted by the respondents as per the details furnished at Annexure-B to the petition. It is also the case of the petitioners that in order to strengthen the sales and distribution channel, the respondents in the year 2004 framed the Franchisee Policy 2004, by which distributors and dealers were appointed on the basis of merits in different Telecom Circles. The Franchisees are required to function in the demarcated area in every S.S.A. of a circle. In the year 2006, the respondents again framed new policy, namely, Sales and Distribution Policy, 2006 with variety of different objects where in the earlier Franchisees were mostly continued. The respondents have now framed new policy, namely, Franchisees Sales and Distribution Policy, 2009. The said policy compels the petitioners to vacate the particular territories. Clause (4) of the said Policy states that the existing franchisees with 1 or 2 territories will be allowed to migrate in 1 new territory whereas existing franchisees with 3 or 4 territories will be allowed to migrate in 02 new territories. It again states that the preference of new territories for franchisee will be taken in the order of franchisee performance based on certain parameters.

It is this action of the respondents which is challenged in the present group of petitions.

Mr. K.H. Baxi, learned Advocate, appearing for the petitioners has submitted that the petitioners role and responsibility are of selling BSNL products and service in a well defined geographical areas notified in the franchisees agreement and is not allowed to sale outside the same and any violation of the same contemplates even the discontinuance and debar of the franchisees. He has further submitted that as per the agreement, the franchisees are also to generate the demand for services permitted by BSNL and are also responsible for meeting the target which are often unrealistic, set by the respondents. The franchisees are also to offer after sales services with host of other duties for expanding and maintaining of business of respondents.

Mr. Baxi further submitted that as per Clause (4) of the new Policy, it is compulsory to migrate to one or two new territories. In Section 3 of the new Policy, selection process and criteria are mentioned and Clause (j) of Section 3 deals with Migration Policy for existing franchisees. On the basis of this provision in the Policy, the petitioners were informed and they were asked to give confirmation of the vacant territories. The petitioners have initially entered into communication with the respondents and persuaded them to withdraw the said Clauses as the same are contrary to the law and constitution, however, due to the insistence of the respondents for implementation of the new Policy, the petitioners were constrained to approach this Court.

Mr. Baxi further submitted that the action of the respondents is absolutely arbitrary, unreasonable, discriminatory as well as mala fide and violative of the constitutional provisions contained under the Articles 14, 19 and 21 of the Constitution of India. The Policy, on the face of it, envisages that the Franchisees having high performance are to give up the business and migrate to new territory. Under no circumstances such removal of high performers can stand to any reason. The selection was on the basis of performance up-till-now and the performance has been rated high and having recognized such high performance, compelling such high performers to forego and leave out of the field itself proves mala fide of the respondents. Mr. Baxi further submitted that the working of the policy turns out to be selective and some are required to forego one and some are required forego two areas which is unreasonable, arbitrary and not having the nexus with the object sought to be achieved, but is contradictory and defeats the whole policy and objects. He has further submitted that because of the continued policy, the petitioners have already made substantial investment and they were always under pressure to achieve the target. Now, all of a sudden, they were asked to vacate some of the areas under the new Policy. He has, therefore, submitted that the reliefs prayed for in the present petition are required to be granted.

Mr. Baxi further relied on the interim orders passed the Orissa High Court as well as Madras High. He has also placed on record of the petition the interim orders so passed by these two High Courts. Mr. Baxi also submitted that before the Madras High Court, interim protection was granted to the petitioner and stay was granted against the Expression of Interest. He has, therefore, submitted that this being an All India Policy, similar protection should be granted by the Court to the present petitioners also.

Mr. Baxi in support of his submissions has relied on the decisions of the Supreme Court in the case of Comptroller and Auditor General Vs. Kamlesh Vadilal Mehta, ; in the case of Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay, and in the case of Punjab Communications Ltd. Vs. Union of India and Others,

Based on the aforesaid decisions, he has submitted that the court will have the ample power to take judicial review in the matter and since the Policy is arbitrary, unreasonable and mala fide, the same will have to be struck down. He also relied on the proposition of law laid down in the above mentioned judgments that by virtue of continued practice under the existing policy, there is legitimate expectations of the petitioners that earlier franchisees should be continued.

Ms. P.J. Davawala, learned Counsel, appearing on behalf of the respondents, on the other hand, has submitted that this being policy decision, the Court should not interfere in the matter. She has further submitted that the proposed object to adopt the policy of 2009 is to remove monopoly of the franchisees. She has further submitted that by virtue of Policy of 2009, adequate improvement in the employment opportunities will be given and it cannot be said that the Policy of 2009 is arbitrary, unreasonable or mala fide. She has further submitted that the Policy of 2009 intends to remove monopoly of the franchisees and to reach upto rural areas. It is further intended to cover the every corner of the country on the basis of the market forces. On the basis of the the market study conducted by the agency appointed by the BSNL, the policy decision is taken to introduce the present policy and after examining the various factors, the decision was taken to introduce the present policy and, hence, she has submitted that the policy cannot be said to be arbitrary or unreasonable. She has further submitted that as per Target selling in the new Policy, each circle and SSA should set the targets for franchisees for various primary products (consumer mobility related products) before the start of the month. These targets are based on Network coverage, wireless potential of territory and historical performance of franchisees. She has further submitted that there is scientific base in introducing such a policy and there is no arbitrariness or illegality as alleged. She has further submitted that as per the Policy of 2009, a Franchisee can have maximum number of two franchisee territories in a circle. Franchisees having 3 or 4 territories in a circle are allowed to migrate in two preferred territories and franchisee having 1 or 2 territories in a circle is allowed to migrate in one preferred territory. Franchisees who have performed to benchmark will be allowed to migrate to the territory preferred by it. She has further submitted that the respondent BSNL and petitioners are bonded with franchisee ship agreement. As the contract between the Franchisees and BSNL have expired in vacant territories, a further extension has been given upto 30.04.2010, no further extension can be given now as new franchisees will be appointed for these vacant territories .

In support of her submission, she relied on the decision of the Apex Court in the case of Siemens Public Communication Networks Pvt. Ltd. and Another Vs. Union of India (UOI) and Others, ; in the case of Dilip Kumar Garg and Another Vs. State of U.P. and Others, and in the case of BECIL Vs. Arraycom India Ltd. and Others,

Based on the aforesaid decisions, she has submitted that this being a policy decision of the respondent-BSNL and the same is framed after considering all aspects of the matter and there is no allegation regarding any mala fides, the court should not interfere in the policy decision taken by the respondent - BSNL and the petitions deserve to be dismissed.

Having heard the learned Advocates appearing for the parties and having considered their rival submissions and also having taken into account the various Clauses of the Policy of 2009 and considering the limited scope of interference of this Court under Article 226 of the Constitution of India, the Court is of the view that, the policy decision taken by the BSNL cannot be interfered with in a petition under Article 226 of the Constitution of India. The Policy of 2004 and 2006 are very clear and in 2006 Policy the Clause 24 discusses about Terms and Condition for Existing Franchisee having more than four franchisee areas. It states that (a) the existing franchisees, which are having franchisee ship at more than 04 areas in a circle, they may be allowed to continue till the expiry of the existing contract; (b) they will be allowed to choose and keep four of their choice. But this will in no way confer any right upon them for future franchisee agreement; (c) self declaration from franchisee is to be taken that not more than four franchisees area in the country is with them. The declaration, if found wrong, will disqualify all franchisee ship areas. Based on this policy of 2006, the petitioners have entered into a contract with the respondent. They were aware about the fact that this would not confer any right upon them for future Franchisee agreement. The period expired on 31.03.2010 and after that period, they have no right to ask for more than what is available under the new Policy of 2009. Now BSNL came out with the policy of 2009. Even before pronouncement of that policy, they have undertaken the detailed procedure. All scientific aspects of the matters were taken into consideration. In this new Policy, different provisions were made, which enumerate about the terms and conditions with look after arrangement; Migration Policy for existing franchisees; Requirements after EOI Approval; Selection criteria for franschisee ship. It, therefore, cannot be said that there is any unreasonableness or arbitrariness in the new policy. The restriction imposed in the new policy with regard to number of territory is in view of the objects of decentralization of work among maximum qualified persons and not to encourage concentration of income and wealth in the hands of only few persons. These are in consonance with the constitutional provisions and, hence, it cannot be said to be unreasonable or arbitrary nor it is violative of constitutional provisions. The decisions relied upon by both the parties clearly indicate that normally the Court would not interfere in the policy decision unless it is pointed out that the policy is arbitrary or unreasonable. The burden is on the person challenges that policy. There is no averment in the petition that there is any mala fide in introduction of the new policy. It is an All India based policy and applicable to all. By virtue of this policy, the petitioners might have given up some territories in the circle, but that is in the lager public interest. The criterias adopted by the BSNL, cannot be said to be unreasonable or arbitrary and, hence, challenge to the policy decision, which may be entertained by the Court in a given case is not one which is canvanssed here and on that ground the policy cannot be declared as null and void or unconstitutional. Even the stay prayed for by the petitioners cannot be granted simply because other two High Courts have granted ex parte stay in the matter. On behalf of BSNL it is stated that they are pursuing the matter in those High Courts to see that the stay is immediately vacated. Even other wise, with all humility at command of this Court and without showing any disrespect to the said High Courts, it is found that there is no reasoning in the interim orders which are placed on record and such interim orders passed by the said High Courts may not have much persuasive value, much less to say that they have any binding effect on this Court.

Having regard to the facts and circumstances of the case and considering the Policy as a whole and the settled legal position in the matter, this Court is of the view that, the new Policy does not require any interference by this Court while exercising its jurisdiction under Article 226 of the Constitution of India and, hence, all these petitions must fail.

However, in the interest of justice and considering the fact that two High Courts granted interim protection, on an equitable consideration, the Court directs the respondents not to finalize the Expression of Intention upto 30th June, 2010 and the present arrangement should be continued, till then. If the stay is vacated by the said High Courts prior to 30th June, 2010, it is open for the respondents to move this Court for appropriate direction.

Subject to the aforesaid direction all the petitions are dismissed. Notice discharged without any order as to cost.