Union of India and 2 others vs Sri Gayathri Agencies

N.K. Jain, ACJ.

These writ appeals have been filed against the order of the learned Single Judge dated 20.3.2000 made in W.M.P.Nos.5389 to 5395, 5778,

6659 and 6682 and 6683 of 2000 in W.P.Nos.3528 to 3534, 3749, 4334 and 4355 of 2000, whereby the learned Single Judge directed the

respondent to make fresh supply and stayed the impugned suspension orders dated 17.2.2000 and 21.2.2000 for 45 days pending writ petition.

The learned Additional Solicitor General of India for Union of India submits that the learned Single Judge has erred in holding the writ petitions

are maintainable and staying the suspension order, when the contract, which is a non-statutory, is not amenable to writ jurisdiction. More so, there

is a specific provision for arbitration in the contract itself. It is submitted that the learned Single Judge has not followed the judgment of a Division

bench of this Court, which, while deciding an identical issue, held that no writ will lie in view of the arbitration clause. On merits, it is submitted by

the learned Additional Solicitor General that the petitioners have not maintained the standards prescribed by the various control orders. As per the

agreement itself, if any violation of standard prescribed is found, licences can be ordered to be suspended, and that one cannot agitate such order

on the ground of principles of natural justice. Learned Additional Solicitor General submits that in the instant case as per the standard RON will

have to be at 87, and when supplied with 88, it was actually found as 84, which is in clear violation. The petitioners were supplied with the test

report along with the show cause notice, calling for explanation and after considering the explanation, suspension order was passed, which is within

the jurisdiction and competence, and the same has been stayed at the interlocutory stage. The learned Single Judge has failed to notice the fact of

complaints of adulteration received from the general public and tests were carried out at random and found that the product is in adulteration, yet

orders of stay have been passed.

The learned counsel Mr.O.R.Santhanakrishnan for respondents in W.P.Nos.3528 to 3534 and 4355 of 2000 submits that in the sample test,

adulteration was found and the licence was suspended for 45 days. He submits that no writ will lie when there is an arbitration clause in the

agreement. It is also submitted that there is only one refinery to perform RON. test, whereas these petroleum products have to be supplied to 4

companies. Counsel submits that these products passes through tanker for transportation and reach after meeting proper, regular and periodical

cleaning of the respective places on change of products, as per the procedure prescribed, and therefore, no question of any adulteration or

variation in the standards prescribed will arise from the starting point to end. Counsel submits that admittedly, as per the test report it was below

standard and therefore, them was no special circumstances to interfere with the suspension order. Learned counsel submits that the learned Single

Judge granted the main relief itself by way of interim order, that too when the writ petition is not maintainable. Therefore, it is prayed that this Court

may be pleased to set aside the interim order and to dismiss the writ petitions. The learned counsel relied on the decisions in Radhakrishna

Agarwal and Others Vs. State of Bihar and Others, wherein it is held that ""State while terminating contract of lease on breach of certain conditions

of contract, opportunity to show cause against cancellation need not be given"" and State of U.P. and others Vs. Bridge and Roof Co. (India) Ltd.,

wherein it is held that ""writ petition to restrain Government from making deduction is not tenable as the contract is a non-statutory one containing

arbitration clause"". The learned counsel also relied on Andiappan Vs. Palaniyandi, wherein it is observed that"" regarding agreements relating to

commercial contract terminated in exercise of power vested in the agreement, writ petition is not maintainable as breach of commercial contract

and determining of liability involving money claim are matters which require adjudication after trial and hence civil court alone is competent to

entertain such matters"".

Mr.K.Kumar, A.C.G.S.C. for respondents in W.P.No.4759 of 2000 reiterating the arguments of Mr.O.R.Santhanakrishnan submits that there

is no arbitrariness or mala fide in passing the suspension order, so as to interfere with in the extraordinary jurisdiction of this Court, and the

petitioners cannot take advantage of the cases cited. The learned counsel relied on the decision in Delhi Petrol Dealer Association and another v.

Union of India and others, 1999 DLT 400 wherein it is held that ""the writ petition under Article 226 of the Constitution of India is an extraordinary

remedy and cannot be used for enforcement of contractual disputes and remedies which can be resorted to on the basis of the agreement executed

between the parties"".

Mr.M.Venkatachalapathy, learned Senior Counsel for respondents in the writ appeals submits that as per the 1990 control order RON test was

not required and it has only come into existence in the control order of the year 1998 by adding Schedule-1. Counsel submits that as per the

document given the density was maintained, and therefore, it cannot be said that on the basis of the letter dated 20.1.2000 from the MRL to HPC

Ltd., as per IS 2796 -1995 the sample was not meeting the specification of RON and the licence cannot be suspended. It is also contended that

only one pipeline is used for the supply of Motor Spirit, High Speed Diesel, Naptha, Kerosene, etc., Therefore, there is every likelihood of mixing

of foreign materials right from the starting point of supply to the storage point of supply. Oil companies in turn send it through oil tankers. At that

point of time, there is every possibility for mischief by the drivers. It is also submitted that the impugned order was passed with mala fide intention

and at the instigation of the Minister. The order of the learned Single Judge staying the suspension order is perfectly correct and the writ is

maintainable for the reasons stated above. The learned Senior Counsel relied on the decision in B.Jenarthanam, Balaji Services Station,

Coimbatore v. The Senior Regional Manager, H.P.C., Coimbatore Regional Office, Coimbatore, 2000 (1) LW 502 wherein it is observed that

the Government shall take into consideration the grievance of the retail outlet dealers ''and introduce appropriate safeguards to'' protect the

interests of dealers and the general public by making necessary provisions in the Control Order to collect samples at the time of delivery to the

dealers, leave one such sample with the dealers and keep one sample with the oil company, which can be compared as and when the question of

adulteration or contamination or any mal practice is complained of against the dealers, which would in fact avoid any evasion of any of the

provisions of the Control Order"".

Mr.Mohan Parasaran, learned counsel for the petitioner in W.P.No.4355 of 2000, reiterating the submissions made by the learned Senior

Counsel, submitted that the contract was prior in time and the Schedule-I was included in the control order of the year 1998, therefore, they

cannot press into service, when the IS 2796 - 1995 Schedule-1 document was not given. Learned counsel further submits that as per this

Schedule Research Octane Number (RON) would be 87, 87, 93 for 87 Octane unleaded. 87 Octane leaded and 93 Octane leaded respectively.

Though the petitioner''s samples fail in RON test, in the other tests called Filler paper Test and Density Test, the samples would come out

successfully, which test was not at all conducted by the respondents. Therefore, they cannot suspend the licence. Normally, the licences were used

to be terminated for a period of 45 days only, but in this case the licence was terminated for an indefinite period meaning thereby, terminating the

licence in its entirety. The learned counsel relied on some observations made in The Aluminium Industries Ltd.. Madras Rep. by its Commercial

Manager, 1997 (3) L.W. 741. Wherein it is observed that

referring to few decisions of the Apex Court and decisions or the Division Benches or this Court mentioned in the order of reference, the Division

Bench felt that enforcement of the contract is not a matter which has to be decided under Article 226 of the Constitution of India, and that parties

aggrieved have to approach the Civil Court for appropriate relief. The Division Bench also felt that every now and then similar cases arise for

consideration. As such the Division Bench thought it appropriate to refer these appeals to a larger Bench by its order dated 10.3.1997"".

In reply, Mr.V.T.Gopalan, learned Additional Solicitor General submits that the contract entered into between the parties was non-statutory

contract, therefore, it is very clear that parties have to abide by the terms of the contract. Therefore, petitioners cannot take the plea that Union of

India is not supposed to prescribe the standards by adding Schedule-1 in the control order of the year 1998. Secondly, the apprehension of the

learned counsel for the petitioners that many petroleum products are passing through the same pipeline and there is every possibility of adulteration

from its initial stage to the end, is not warranted. As already stated, everytime when the passing product changes, it is regularly cleaned as per the

procedure. Learned counsel further submits that the other test, as suggested by the learned counsel Mr.Mohan Parasaran is not necessary, as the

product is proved to be below standard in the first test itself. Counsel submits that while maintaining the density as same, by adding something

RON is reduced. It is also submitted that the licence is terminated for 45 days only, and not permanently, as submitted by Mr.Mohan Parasaran.

The learned counsel further submits that in an identical matter in W.A.No.2609 of 1999 this Court vide order dated 1.2.2000 dismissed the writ

appeal holding that being a non-statutory contract the provisions of the contract will apply and the learned Single Judge was perfectly justified in

dismissing the writ petition. It was further held that when there are disputed questions of fact and the contract itself provides for a mode of

settlement of disputes, the appellant is not entitled to invoke Article 226 of the Constitution for judicial review and the remedy of the appellant lies

elsewhere. The learned counsel further submits that in view of Section 8 of the Arbitration -and Conciliation Act, 1996, the civil Court has to refer

the matter to arbitrator, and there is also a provision in the new Act to challenge the jurisdiction of the arbitrator before the arbitrator himself, and

can raise all the points before him. The learned counsel relied on the decision in India Cements Capital Finance Ltd. Vs. Kwality Spinning Mills

Ltd. and Others, , wherein it is observed that ""when agreement contains a clause for arbitration it is mandatory to refer the parties to arbitration and

employment of the word ""shall"" in Section 8 makes it mandatory"". In reply to the argument of Mr.M.Venkatachalapathy, learned Senior Counsel,

that Rule 3(a) itself is challenged, Mr.V.T.Gopalan submits that no prayer is sought for in the writ petitions praying to struck down the rule and

petitioners cannot take advantage merely on the basis of the argument. He further submits that the petitioners are bound by the provisions of the

contract, and when the contract is a non-statutory one, it will not be amenable to writ jurisdiction. He further submits that when the petitioners were

fully aware of the terms of the contract, when entering into the contract, now they cannot challenge the same. To prevent adulteration Government

had taken so many preventive measures. It is of national importance that if any adulteration or contamination or mal practice is complained of in the

petroleum products, it will tell upon heavily the national economy. It is further submitted that as per the report, now received, the product is found

to be below standard.

Mr.O.R.Santhanakrishnan, learned counsel for Hindustan Petroleum submits that the petitioners have already filed a suit before the civil Court,

and as such the matter is sub judice. Pending suit, application for appointment of arbitrator is also pending, whereas by the interim order they are

continuing their business. On this account also the writ petitions are not maintainable.

We have heard the learned counsel for the respective parties and perused the materials on record. Though the matter could have been disposed

of on the short ground, since the learned counsel for the parties have argued the matter at length, without insisting upon to decide the main case, we

have no other option but to mention their arguments in detail, as above. It is settled that if a right has been claimed in terms of the contract, such a

right cannot be enforced in writ petition. In other words the extraordinary remedy cannot be used for the enforcement of contractual obligations,

since the same can be resorted on the basis of the agreement executed between the parties i.e., by way of arbitration clause, as in the present case,

as per the agreement. It is also settled, that generally this Court does not interfere with the interlocutory orders passed by the courts below, as the

matter Is still pending, and has not been finally decided. But from the facts culled out, and the arguments advanced by the learned counsel for the

parties, and applying the case laws cited, it is crystal clear that the matter agitated before us pertains to questions of facts, which needs investigation

and that is based on the contract, which is a non-statutory one and is also being safeguarded with the arbitration clause. A perusal of Section 8(1)

(i) of the Arbitration Act reveals that a judicial authority, before which an action is brought, in a matter which is the subject of an arbitration

agreement, shall refer the parties to arbitration. Under these circumstances and in the absence of any special reasons/ circumstances warranting the

learned Single Judge to grant the main relief itself in the interim order, in our humble opinion, it is not sustainable. It is also to be seen that Clause 69

of the agreement contains arbitration clause. As per this Clause any grievance of the parties can be agitated before the arbitrator and this Court

cannot go into the questions of facts. That apart, the learned Single Judge is bound to follow the decision of the Division Bench. Admittedly, in an

identical matter, with arbitration clause in the agreement, a Division Bench of this Court has not interfered with the suspension order and dismissed

the writ appeal, concurring with the order of the learned Single Judge that the writ petition is not maintainable. So, we see no reason to differ with

it. That apart, in the case cited supra by the learned counsel Mr.Mohan Parasaran, the Full Bench has finally dismissed the writ appeals. The

learned counsel cannot take advantage of the observations made by the Division Bench while referring the matter to the Full Bench in that case, nor

in the facts of the present case it is necessary to refer the issue to a larger Bench. In view of what we have discussed above and for the reasons

mentioned in the cases cited above, the writ petitions are not maintainable and the interim order passed by the learned Single Judge is liable to be

set aside. So far as the other cases, which are arising from non-statutory contracts having no arbitration clause are concerned, in view of the above

discussion the point raised cannot be agitated in the writ petition. However, parties are at liberty to take recourse of the remedy, as per the

agreement entered into between the parties, which are framed for public good. It is stated that in one case, the matter is pending before the Civil

Court and in that an application for arbitration is also pending. In these circumstances, we direct the Competent Civil Court to decide the issue at

the earliest point of time, within four weeks from the date of receipt of the copy of this order, by appointing arbitrator/s as per the terms of the

agreement. The writ appeals are allowed. The interim stay granted by the learned Single Judge in each case mentioned above is vacated. The other

writ petitions are also disposed of accordingly. No costs. It is made clear that as we have not gone into the merits of the case, any observation

made in this judgment will not prejudice the case of either parties, when they take recourse before the appropriate forum.