Gudivaka Srinivasa Rao vs. Union Of INDIA

Held

The Court allowed the writ petition. Regarding the VSAT services, the Court found the debit of Rs. 16,756/- to be illegal and arbitrary. The reasoning was that Clause 8(a) of the Dealership Agreement obligated the Indian Oil Corporation (a State instrumentality) to perform certain acts, and it could not charge dealers for perpetuating its duties without a specific agreement. The Court distinguished Clause 23, stating it related to general business expenses and not specifically VSAT service charges. Similarly, Clause 42 was interpreted to cover only directions on safe practices and marketing discipline, not arbitrary demands for payment. The Court held that the corporation could not act unilaterally in demanding e-locking service rentals without a specific clause in the agreement. The act of placing an order for fuel products did not amount to acquiescence for e-locking service payments, as the corporation had a duty to supply quality products. The Court emphasized that actions of a State instrumentality must be subject to the rule of law and informed by reason, meeting the test of Article 14. The principle established is that a State instrumentality cannot impose charges for services that are either not explicitly agreed upon in the contract, are not provided, or are part of the core obligations of the State under the agreement, without violating principles of fairness and non-arbitrariness. The Court directed the respondents to refrain from making further debits for VSAT or e-locking facilities and to refund the collected amounts for e-locking service rentals and the Rs. 16,756/- for VSAT services within three months.

Facts

The petitioner, Gudivaka Srinivasa Rao, operating a retail outlet under the respondent corporation (Indian Oil Corporation), filed a writ petition challenging unauthorized debits from his SAP account. The petitioner alleged that the corporation debited Rs. 16,756/- on September 30, 2022, for VSAT services which were not effectively provided and had ceased being supplied since March 31, 2021. Additionally, he contested monthly debits of Rs. 1,479/- for an e-locking system, which he claimed was introduced without his consent or a signed addendum, despite Clause 9(a) of the Dealership Agreement obligating the corporation to supply products at the dealer's premises. The total disputed amount for e-locking services was Rs. 48,811.62. The petitioner argued these debits were illegal, arbitrary, and violated his constitutional rights and the dealership agreement. The respondent corporation contended that both services were essential for efficient operations and that the petitioner had availed them, making the debits justified under various clauses of the agreement.

Key Issues

1. Whether the respondent corporation's action of debiting Rs. 16,756/- on September 30, 2022, towards VSAT services, despite the service being discontinued from March 31, 2021, and allegedly not providing stable connectivity, is illegal and arbitrary, violating the terms of the Dealership Agreement and constitutional principles? (Question of law and fact, turning on Clause 8(a) and the general principles of contract and Article 14 of the Constitution). 2. Whether the respondent corporation's monthly debit of Rs. 1,479/- towards the e-locking system, introduced without a signed addendum and allegedly without the petitioner's consent, is justified under the Dealership Agreement, particularly in light of Clause 9(a)? (Question of law and fact, turning on Clause 9(a) and general principles of contract and Article 14 of the Constitution). Petitioner's Arguments: - The debits for VSAT and e-locking services are unauthorized, illegal, and arbitrary. - The VSAT service was not stable and was discontinued, yet charges were levied. - The e-locking service was imposed without consent or a signed addendum, contrary to Clause 9(a). - The respondent corporation, being a State instrumentality, must act reasonably and fairly under Article 14. - Relied on principles from cases like E.P. Royappa v. State of Tamil Nadu, Maneka Gandhi v. Union of India, and Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors. Respondent's Arguments: - VSAT services were provided for stable connectivity, benefiting both the corporation and dealers. - The petitioner availed VSAT services and lodged complaints which were addressed. - E-locking facility was introduced for better quality and quantity of petroleum products, preventing pilferage. - The petitioner availed e-locking services since its inception, justifying the cost recovery. - Clause 8(a) does not mention VSAT installation, and Clause 23 requires the dealer to bear all business charges, making VSAT charges payable by the dealer. - Clause 42 mandates dealers to follow corporation guidelines, including payment for services.