Jammu & Kashmir and Ladakh High Court: The present intra Court appeal was filed against the common judgment passed by the Single Judge (‘Writ Court’), wherein two writ petitions were disposed of with a direction to the appellant (‘Corporation’) either to purchase the leased out land or to revoke the lease enabling Respondent 1 to sell the leased property free from all encumbrances. The Division Bench of Sindhu Sharma and Shahzad Azeem*, JJ., set aside the judgment of the Writ Court and held that a dealership agreement and a lease agreement were distinct contracts and any disputes arising out of them could be litigated separately. The Court further held that if there was an arbitration clause contained in them, the Court must not entertain any dispute regarding any matter which could be dealt with by the Arbitral Tribunal.
Background:
Under Operation Vijay Scheme, Respondent 1, who lost her husband in the Kargil War, was appointed Retail Outlet Dealer at Bumhama, Kupwara, by a letter dated 26-02-2004 on the terms and conditions contained in the dealership agreement, and simultaneously a lease agreement for 2 kanals and 9 marlas of land to the Corporation for 30 years at Rs 6000 per month with an increase in rent by 10 percent every 5 years, was also executed on 28-01-2004. She established the Outlet, as a registered firm, for motor spirit, highâ€speed diesel (‘HSD’), lubricants, and greases. After a joint surprise check by Central Bureau of Investigation (‘CBI’) and the Industry Mobile Laboratory of Bharat Petroleum Corporation, on 30-04-2010, adulteration in the samples was discovered and a criminal case was filed against the firm. The firm was ordered to stop the sales, and later, its dealership was terminated on 07-06-2010.
Respondent 1, being the proprietor of the firm, challenged both the orders in a writ petition and during its pendency filed a second writ petition praying to direct the Corporation to terminate the lease agreement between her and the Corporation. Both the writ petitions were disposed of by a common judgment on 24-09-2024 wherein the Court dismissed the first writ petition on the ground that Clause 67 of the Agreement of Dealership contained an arbitration clause and since the alternate remedy was available, the writ petition was not maintainable.
But the Court, while allowing the second writ petition, observed that the dealership of the Outlet was terminated in 2010 and, by now, lease period had been more than 20 years, therefore, it would not be in the interest of justice if the land was still kept by the Corporation without being put to any use. The Writ Court also observed that had the Corporation allotted this Retail Outlet to some other person, things would have been different, and therefore, directed the Corporation to either purchase the land or revoke the lease agreement. The judgment in the second writ petition was the subject matter of the present appeal.
The Corporation contended that Respondent 1 had filed the second writ petition just to frustrate the Corporation’s stand and thus it was barred under Order 2 Rule 2 and Explanation 6 to Section 11 of the Civil Procedure Code, 1908 (‘CPC’). It was argued that the lease agreement entered between the parties was for a period of 30 years and the said period had not yet expired, and therefore, the parties were bound by its terms and conditions, and in view of the arbitration clause, any dispute that arose was to be decided by the Arbitral Tribunal, ousting the jurisdiction of the Court. However, Respondent 1 submitted that the dealership was terminated in 2010 and since then the leased land was not put to use, and on account of her life-threatening disease, huge funds were required. She wanted to sell the land, but it could not be done until the lease agreement was revoked.
Issues:
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Whether the second writ petition, filed during the currency of the first, was maintainable?
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Whether an arbitration clause existed in the lease agreement duly executed between Respondent 1 and the Corporation.
Analysis and Decision:
The Court emphasised that the cardinal principle of Order 2 Rule 2 and Section 11 CPC was to prevent a plaintiff from vexing the defendant twice for the same cause of action, and was incapsulated in the maxim nemo debet bis vexari pro una et eadem causa, and the other principle was based on the maxim res judicata pro veritate accipitur, i.e., a matter adjudicated is taken as conclusive and correct. These provisions ensured that all claims were brought in one suit, and Section 11 CPC also operated to bar re-litigation of decided matters. The Court acknowledged that the second suit on a different cause of action was not barred, whereas this Rule only applied when the cause of action was the same in the new suit as well.
The Court followed Rahul Yadav v. Indian Oil Corpn. Ltd., (2015) 9 SCC 447, and observed that it was well settled that both the agreements, i.e., dealership agreement and lease agreement, were independent of each other and, if there was any grouse in respect of stoppage of operation of the Outlet and the termination of dealership, that was an independent cause and thus, Respondent 1 was not enjoined to bring the cause of actions arising under dealership agreement and lease agreement, respectively, in one writ petition.
The Court reiterated the law laid down in Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum, (2022) 4 SCC 463, wherein it was held that the lease agreement and the dealership agreement were distinct agreements, independent of each other. It was further held that the dealership agreement was inherently terminable, while the lease agreement was for a fixed period from the date of execution thereof. Therefore, as for the first issue, the Court held that the second writ petition was maintainable as the cause of action arising from both the agreements were distinct and independent of each other.
Regarding the second issue, the Court noted that besides Clause 67 of the ‘Agreement of Dealership’, Clause 5(d) of the lease agreement also contained a similar arbitration clause. Thus, it was mutually agreed between the parties, while executing the lease agreement, that in case of any dispute or difference of any nature, the same should be referred to the sole arbitration of the Managing Director of the Corporation. The Court relied on Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503, wherein it was held that where there was an arbitration clause in the agreement, it was obligatory for the Court to relegate the parties to arbitration in terms of the agreement.
The Court further noted that the Corporation had sought direction to assign the leased premises to an ad hoc dealership during the pendency of the appeal and therefore, rejected the contention that the Corporation did not intend to utilise the land. The Court observed that in absence of any procedural infirmity; violation of rules of natural justice; or violation of any of the rights contained in Part-III of the Constitution, a writ petition under Article 226 of the Constitution ought not to be entertained if alternative and efficacious remedy arising out of the lease agreement was available.
Consequently, the Court, while allowing the appeal, held that the judgment passed by the Writ Court was unsustainable in the eyes of the law and thus, ordered it to be set aside.
[Indian Oil Corpn. v. Zareena Akhter, 2025 SCC OnLine J&K 943, decided on 15-09-2025]
*Judgment authored by: Justice Shahzad Azeem
Advocates who appeared in this case:
For the Appellants: D. C. Raina, Senior Advocate with Sajjad Ashraf Mir, Advocate.
For the Respondents: Shuja-ul-Haq Tantray, Advocate, Faizan Ahmad Ganie, CGC vice Tahir Majid Shamsi, DSGI.