Calcutta High Court: While deciding an appeal against order refusing renewal of LPG Distributorship Agreement, a Division bench of T. S. Sivagnanam, CJ., and Hiranmay Bhattacharyya,* J., observed that the supplementary partnership deed resulted in a change in the firm’s constitution, as it significantly affected the 9th respondent’s role and share and held that,
“the changes made in the Supplementary Deed without the previous approval of BPCL is violative of Clause 21 of the distributorship agreement.”
Factual Matrix
In the instant matter, respondent 9 was appointed as an LPG distributor under the name M/s. Buroma Gas Service, and an agreement was executed between the respondent 9 and Bharat Petroleum Corpn. Ltd. (BPCL) on 23-02-1989.
On 05.06.1992, a partnership deed was executed between the appellants and the respondent 9, whereby the appellants had 24% share each, and the respondent 9 had a 52% share in the partnership business. On the same day, the partnership business was approved by BPCL, and a distributorship agreement was executed. A supplementary partnership deed was executed on 15-09-1993, which changed the profit-sharing ratio of the partners, and the respondent 9’s share was reduced to 1% while the appellants’ shares were increased to 75% and 24%.
BPCL requested all partners to execute documents for the renewal of the distributorship agreement, however, the respondent 9 refused to sign for the renewal, leading to the filing of a writ petition by the appellants requesting BPCL to renew the distributorship agreement based on their signatures alone, without requiring the signature of the respondent 9.
The Single Judge bench of this Court vide order dated 18-05-2023, disposed of the petition giving liberty to BPCL to take steps as per the requirement under the guidelines only after the joint/ individual representations made by the parties concerned within the stipulated time limit. Aggrieved by the impugned order passed by the Single Judge bench of this Court, the appellants preferred the present appeal challenging the same.
Moot Point
Whether the changes made through the supplementary partnership deed dated 15-09-1993 required the previous written consent of BPCL, as stated in Clause 21 of the distributorship agreement?
Appellant’s Contentions
The appellants contended that since the appellants hold 99% share in the partnership business and a previous order of the Division Bench directed authorities to renew the licenses based on the documents for 99% shareholding, then BPCL cannot insist on the respondent 9’s signature. The appellants contended that the supplementary partnership deed only changed the profit-sharing ratio and did not constitute a “reconstitution of the firm” as defined in Clause 21 of the distributorship agreement. The appellants further contended that respondent 9 was creating disturbances in the partnership firm, and the Civil Court issued an order restraining her from interfering with the management.
Respondents’ Contentions
The respondents contended that the supplementary partnership deed resulted in a change in the constitution of the firm, which required BPCL’s prior written approval as per Clause 21, moreover, the supplementary partnership deed reduced the original allottee’s share to 1%, which is prohibited under the oil companies’ policy guidelines for reconstitution of dealerships. The respondents further contended that distributorship agreement is determinable by nature and cannot be specifically enforced under Section 14 of the Specific Relief Act.
The supplementary partnership deed reduced the original allottee’s share to 1%, which is prohibited under the oil companies’ policy guidelines for reconstitution of dealerships.
Court’s Observation
After analysing the distributorship agreement, the supplementary partnership deed, and the actions of the parties, the Court observed that the supplementary partnership deed resulted in a change in the firm’s constitution, affecting the respondent 9’s role and share significantly and this change fell within the expression “or otherwise” used in Clause 21 of the distributorship agreement.
The Court observed that the injunction order issued by the Civil Court further confirmed the intention of the appellants to carry on the partnership business jointly without the respondent 9’s involvement in the distributorship.
The Court held that the changes made without BPCL’s written approval were violative of the agreement. The Court further held that the BPCL could not be faulted for suspending supplies as the same happened due to internal disputes between the appellants and respondent 9, which resulted in non-renewal of the distributorship agreement.
Court’s Verdict
The Court dismissed the appeal and left BPCL free to take necessary steps to ensure that the interests of the public and consumers are not affected by the internal disputes between the parties.
[Monmohan Dutta v. Bharat Petroleum Corpn. Ltd., WPA 23196 of 2022, order dated 01-08-2023]
*Judgment by Justice Hiranmay Bhattacharyya
Advocates who appeared in this case :
Mr. Debabrata Saha Roy, Mr. Pingal Bhattacharyya, Mr. Neil Basu, Mr. Sankha Biswas, Counsel for the Appellants;
Mr. Sanjib Kumar Mal, Mr. Bimalendu Das, Ms. Shomrita Das, Mr. Shomrik Das, Counsel for the Respondent 1 to 8;
Mr. Pankaj Halder, Mr. Subhas Chandra Basu, Mr. Sanatan Panja, Mr. Tapas Manna, Counsel for the Respondent 9.
