(Prayer: Writ Appeal filed under Clause 15 of Letters Patent, against the order dated (18.09.2025 passed by this Court in W.P(MD)No.21160 of 2025.)

Dr. G. Jayachandran J

1. Indian Oil Corporation (IOC) represented by its Executive Director and General Manager is the Appellant and its distributor, M/s Mugavai Indian Gas Agency, Ramanadapuram is the Respondent in this writ appeal.

2. This writ appeal is directed against the judgement passed by the learned Single Judge in W.P(MD)No.21160 of 2025 filed by M/s Mugavi Indian Gas Agency, seeking for a writ of certiorari to quash the order passed by the Executive Director and State Head of IOC, dated 29.07.2025 cancelling the distribution-ship given to the M/s.Mugavai Indian Gas Agency.

3. In the affidavit filed along with the writ petition, it is contended that in violation of the principles of natural justice, the distribution-ship of LPG cylinders to public, was cancelled by IOC without proper enquiry and without affording due opportunity, alleging that by availing finance from third parties and entering into a partnership agreement with third parties without prior consent of IOC, the distributor has violated the terms and conditions of the agreement dated 15.03.2019.

4. The case of the appellant is that, the Learned Single Judge allowed the writ petition by erroneously holding that the impugned order was passed based on the report of the Committee constituted by IOC, however, the copy of the report was not furnished to the writ petitioner. Hence, the principles of natural justice is violated. Though there is a provision in the contract that dispute between the parties must be resolved through Arbitration, since there is a violation of natural justice in passing the impugned proceedings, the writ petition is maintainable.

5. Aggrieved by the above findings, IOC had preferred the intra Court appeal on the ground that the violation of agreement condition is admitted by the practitioner. Therefore, non-furnishing of the committee report has not prejudiced the writ petitioner in any manner. Secondly, it is contended that as distributor and supplier the relationship between the writ petitioner and the Appellant is purely a contractual. Hence, the writ petition is not maintainable. More so, when there is a specific provision in the contract for arbitral remedy. Thirdly, M/s.Mugavai Indian Gas Agency is a proprietary concern. It is not an legal entity. It has no legal personality to sue or to be sued. The writ petition is filed in the name of the proprietorship concern, which is not a natural or legal person. The Writ Court, on that score, ought to have rejected the writ petition.

6. The reason for termination of the dealership is for getting financial assistance to run the distributorship without prior permission from IOC. The agreement says, before availing financial assistance, prior written permission from IOC is required. In this case, the writ petitioner without intimation or permission has availed finance and entered into a written agreement. The allegation is that, he got finance giving them promise to induct them as partners in the business. In this regard, a civil suit between the writ petitioner and his financiers is pending. The writ petitioner admits that he had received financial assistance. However, he denies execution of partnership agreement with them. This is now the subject matter of the civil suit. Receipt of financial assistance from any person for the purpose of LPG distribution business must be only with prior permission of IOC. In the explanation to the show cause notice as well as in the plaint, which is instituted by the writ petitioner before the civil court, he concedes receiving financial assistance for the establishment and administration of the business. In such circumstances having violated the contractual terms, dealership is terminated. Being purely a dispute arising in connection with a contract, there is no public element involved in this matter. Hence, the writ Court ought not to have entertained the writ petition under Article 226 of the Constitution of India.

7. It is the appellant's case that the writ petitioner has changed the constitution of the proprietorship concern into a partnership firm by inducting his financiers in the distributorship and sharing the profit under the guise of paying interest. As per the terms of the contract, the distributor is prohibited from entering into any arrangement, contract or understanding, whereby the operation of the distribution may be controlled by other person or firm or company directly or indirectly, wholly or partly. Hence, the cancellation of distributorship is legally sustainable.

8. The learned Additional Solicitor General of India appearing for the appellants submitted that the writ petitioner did not request the copy of the committee report before commencement or in the course of enquiry. Neither he is prejudiced by not furnishing the committee report. The content of the committee report is spelt out in the show cause notice and the writ petitioner has given his explanation. The said explanation of the petitioner has been duly considered and cancellation order speaks about it. The writ petitioner has grossly violated Clauses 21 and 23(c) of the Distributorship Agreement. In addition, Clause 28 of the Agreement also vest right on IOC to terminate the agreement with 30 days notice even without assigning any reason. In the instant case, the termination order was issued only after issuing show cause notice and on receipt of the explanation. In any case, Clause 37(a) of the Agreement provides for settlement of dispute through arbitration. In case of this nature, the petitioner ought to have sought for appointment of an Arbitrator to settle the dispute, if he was really aggrieved. The writ Court failed to consider that the committee report is for the company to satisfy itself to act on the complaint received about the violation of the terms of agreement. The writ Court had set aside the termination order even without giving liberty to the company to proceed afresh against the distributor, after furnishing the copy of the committee report.

9. The learned Senior Counsel appearing for the Respondent/writ petitioner, submitted that the explanation as well as the plaint in the civil suit has been wrongly understood by the Company. The financiers, who wanted exorbitant rate of interest, gave complaint to IOC with a concocted story and documents. It is true that loan was obtained by the respondent, however it was prior to the date of dealership agreement. Therefore, getting financial assistance from the third party prior to the date of agreement, cannot be a ground for terminating the distributorship entered subsequently. Moreso, when the very fact of the so called partnership deed relied by the complainant is pending before the civil Court, the issue whether the said deed is genuine or not is sub-judiced and the finality is not yet reached, the company prematurely had jumped into a conclusion as if the distributor has violated the terms of the agreement by entering into a partnership with thirdparty contrary to the restriction imposed under Clause 21 of the Agreement. Therefore, the order of the writ Court has to be upheld.

10. Records relied by the appellants as well as the respondent reveals that the invitation by Indian Oil Company offering LPG distributorship was widely published in English daily on 21.09.2013. Mr.Gurumoorthy Kamaraj as the proprietor of Mugavai Indian Gas Agency, Ramanathapuram, has applied and got appointed as distributor for Indian Oil Company LPG for Ramanathapuram, vide letter of intend dated 28.09.2016. This has been followed by a Bi-party agreement between Indian Oil Corporation and M/s Mugavai Indian Gas Agency on 15.03.2019.

11. The following three Clauses in the agreement are relevant for deciding the present appeal, hence they are extracted below:- .

                  “Clause 21:The Distributor shall not sell, assign mortgage or part with or otherwise transfer his interest in the distributorship or the right, interest or benefit conferred on him by this Agreement to any person In the event of the Distributor being a partnership firm any change in the constitution of the firm, whether by retirement, introduction of new partners or otherwise howsoever will not be permitted without the previous written approval, of the Corporation notwithstanding that the Corporation may have dealings with such reconstituted firm or impliedly waived or condoned the breach or default mentioned herein above by the Distributor. In the event of the death of any of the partners, the Distributor shall immediately inform the Corporation giving the necessary particulars of the heirs and legal representatives of the deceased partner and it shall be the option of the Corporation either to continue the distributorship with the said firm or to have a fresh Agreement of distributorship with any reconstituted firm or to terminate the Distributorship Agreement and the decision of the Corporation in that behalf shall be final and binding on all parties concerned. No claim on premature termination for compensation or otherwise will be made or sustainable against the Corporation on account of such termination.

                  Clause 23 ( c )(i):(c) Except with the previous written consent of the Corporation:

                  the Distributor shall not enter into any arrangement, contract or understanding whereby the operations of the Distributor hereunder are or may be controlled/carried out and/or financed by any other person firm or Company, whether directly or indirectly and whether in whole or in part

                  Clause 28:Without prejudice to the foregoing provision or anything to the contrary herein contained. either of the parties hereto, namely the Corporation or the Distributor. shall be entitled to terminate this Agreement on giving thirty days notice to the other party without assigning any reason for such termination.

                  Clause 37 (a): All questions, disputes and differences arising under or in relation to this Agreement shall be referred to the sole arbitration of the Director (Marketing) of the Corporation. If such Director (Marketing) is unable or unwilling to act as the sole arbitrator, the matter shall be referred to the sole arbitration or some other officer of the Corporation by such Director (Marketing) in his place, who is willing to act as such sole arbitrator. It is known to the parties herein that the Arbitrator appointed hereunder is an employee of the Corporation and may be Shareholder of the Corporation. The Arbitrator to whom the matter is originally referred, whether the Director (Marketing) or Officer, as the case may be, on his being transferred or vacating his office or being unable to act, for any reason, the Director (Marketing) shall designate any other person to act as arbitrator in accordance with the terms of the Agreement and such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It Is also the term of this Agreement that no person other than the Director (Marketing) or the person designated by the Director (Marketing) as aforesaid shall act as Arbitrator. The award of the Arbitrator so appointed shall be final, conclusive and binding on all the parties to the Agreement and provisions of the Arbitration & Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the Rules made thereunder and for the time being in force shall apply the arbitration proceedings under this clause.”

12. On reading of these Clauses in the Agreement, it is clear that the distributor should not alter the constitution of the dealership and also he is prohibited from getting any financial help without prior written consent of IOC. In this case, the Respondent/Writ Petitioner had availed financial assistance and he has not intimated IOC before availing such financial assistance and no written consent was obtained from IOC as mandated in the Agreement. This admission found in the explanation as well as in the plaint filed by the respondent had been taken into consideration by IOC for issuing the Termination Order. However, the learned Single Judge has thought fit that the committee report played a crucial role in the decision making, so having failed to furnish the committee report to the distributor, the action taken by IOC through the order of termination is bad for violating natural justice principle.

13. This reason may be a good ground to quash the impugned termination order, as it was passed without offering opportunity and without disclosing the reason for termination. In this case, before taking action, sufficient opportunity given to the distributor to explain why he failed to intimate IOC before changing the constitution of the proprietary concern into partnership firm and why before availing loan for the business, he failed to get prior consent from IOC. His explanation being not satisfactory, IOC had terminated the distributorship assigning reasons. The decision to terminate for the reason assigned may either be excessive or not warranted, nevertheless, being a decision in terms of the contract, the scope of judicial review is very limited.

14. The decision to terminate the distributorship for violation of the terms of Agreement can be challenged by resorting to arbitration proceedings. As per the terms of the contract, the aggrieved party ought to have sought for reference to Arbitrator under Clause 37 (a) of the Agreement. Instead, the Respondent had approached the High Court under Article 226 of the Constitution of India.

15. The writ Court has relied on the judgment of the Hon’ble Supreme Court rendered in Harbanslal Sahnia –vs- Inidan Oil Corporation Ltd reported in (2003) 2 SCC 107, wherein the Apex Court has observed as below:-

                  “7.So far as the 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 is concerned, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies:(i)Where the writ petition seeks enforcement of any of the fundamental rights; (ii)where there is failure of principles of natural justice; or (iii)where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged.”

16. This court finds that omission to furnish the committee report is not violation of natural principle when the respondent de hors of the committee report, had all opportunity to put forth his reasoning for availing loan without prior permission from IOC and had availed the opportunity afforded to him. The omission of not providing him the committee report is at the most, a defect which could have been cured if the respondent had sought for the report when he was issued with the show cause notice, which contains the reason for initiating action. Hence, we hold that the Learned Single Judge, had quashed the termination order, without giving opportunity to the company to proceed against the distributor for the alleged violation of the terms of the agreement. Foreclosure of the right to proceed afresh against the distributor is bad in law.

17. The learned Single Judge also erred in declining to relegate the parties to seek redressal in the arbitral proceedings as agreed under the contract. Depriving the Company to test its decision of terminating the distributorship suffers arbitrariness. The pendency of the Civil Suit in O.S.No.81 of 2025 filed by the respondent, in which IOC is not even a party cannot be a shield for the distributor for the violation of the terms of contract. Whether violation of contract terms, if any, warrants termination of the contract has to decided independently in the manner known to law and as agreed by the parties.

18. As a result, the Judgement passed in W.P.(MD)No.21160 of 2025 dated 18.09.2025 is set aside and Writ Appeal in W.A(MD)No.3290 of 2025 is allowed. The parties are permitted to refer the dispute for Arbitration as per Clause 37(a) of the Agreement, by mutual consent. They can name an Arbitrator or if they fail to have a consensus regarding the Arbitrator, they can approach the court, as per the Arbitration and Conciliation Act and seek for appointment of Arbitrator by the Court. The said process should be preferably commenced within a period of one month from the date of receipt of a copy of this order. Consequently, connected miscellaneous petitions stands closed. There shall be no order as to costs.