Article 226 will not interfere with dealership termination where contractual defaults and adequate hearing opportunities are established.

The petitioner operated a retail outlet, M/s Maa Bhawani Filling Station, at Khudna Rupaspur, Katihar, under a dealership agreement executed with Indian Oil Corporation Limited (IOCL) on 10 December 2008.

Clause 10 of the agreement required the dealer to uplift and pay for prescribed minimum quantities of petroleum products and authorised IOCL to terminate the agreement if the dealer failed to achieve the minimum quantities during three out of six consecutive months, upon 30 days’ written notice.

IOCL informed the petitioner on 3 July 2018 of his poor sales performance and advised him to avail the Holiday Scheme, under which IOCL could operate the dealership for up to two years on an ad hoc basis.

IOCL subsequently stated that the outlet had remained closed since 23 December 2018 without intimation and that the last product upliftment was made on 22 December 2018.

The petitioner neither responded to the notices nor availed the Holiday Scheme, despite being given opportunities for personal appearance.

By letter dated 11 August 2022, IOCL terminated the petitioner’s dealership agreement.

The petitioner challenged the termination under Article 226 of the Constitution, contending that his inability to operate the outlet resulted from poor business conditions during the COVID-19 period and his mother’s illness.

Whether IOCL’s termination of the petitioner’s dealership agreement under Clause 10 was legally sustainable in view of the petitioner’s failure to meet the prescribed sales and upliftment requirements?

Whether the termination order violated the principles of natural justice or otherwise warranted interference under Article 226 of the Constitution?

Whether the petitioner’s financial difficulties, the COVID-19-related business downturn, and his mother’s illness justified setting aside the termination?

The Court applied the contractual terms governing the IOCL dealership, particularly Clause 10, which required the dealer to achieve specified minimum monthly product upliftment and permitted IOCL to terminate the agreement upon failure to meet the prescribed targets during three out of six consecutive months, subject to written notice.

The Court also applied the limited scope of judicial review under Article 226 of the Constitution, holding that interference would be justified where a fundamental right or principle of natural justice had been violated.

The Court further relied on the principle that a termination decision is not vitiated by denial of natural justice where adequate notices and reasonable opportunities to respond have been provided and not availed by the affected party.

No judicial precedent was expressly relied upon in the judgment.

The Court found that the petitioner’s poor performance and non-operation of the outlet predated the COVID-19 period, undermining his explanation that the termination was attributable only to pandemic-related loss of business.

Under Clause 10, IOCL was contractually entitled to act against failure to achieve the prescribed performance requirements.

The record showed that IOCL had warned the petitioner about his poor sales, offered him the Holiday Scheme, informed him that the outlet had remained closed, and afforded him opportunities to submit an explanation or appear personally.

Since the petitioner neither replied to the notices nor availed the available scheme or opportunities, the Court held that there was no violation of natural justice.

The petitioner’s financial condition and his mother’s illness did not justify judicial interference, particularly when he had failed to place those circumstances before IOCL despite being given opportunities to do so.

It held that IOCL’s termination of the dealership was supported by the contractual terms, followed adequate notice and opportunity, and disclosed no violation of natural justice or other ground warranting interference under Article 226.

The writ petition was accordingly dismissed as devoid of merit, and the termination letter dated 11 August 2022 was left undisturbed.