M/S ALLIED AGENCIES Vs. UNION OF INDIA

JUDGEMENT

(1.) The question involved in this writ petition is "as to whether on the expiry of the term of the contract and with the execution of another contract, without there being any change in the terms and conditions, would it be a case of 'novation of contract' .

(2.) Shorn of unnecessary details, the brief facts are that the LPG Agency was allotted to the father-in-law of the petitioner in the year 1967 and after his death it devolved upon her husband and after his death, an agreement was entered into between Hindustan Petroleum Corporation Limited (for short 'the Corporation') and the petitioner on 3.3.2004 [Ist agreement] for a period of 10 years. Pursuant to that, the petitioner continued as a dealer of the Corporation. However, during this period, three inspections were made by the respondents. The Ist inspection was held on 17.12.2010 in which a penalty of an amount of Rs.43,336.30/- was ordered to be recovered. The IInd inspection was held on 9.1.2012 in which the petitioner was ordered to pay an amount of Rs.34,90,450/- (recovery at penal tariff for 19 kg cylinder @ Rs.2550/- per cylinder for 1359 cylinders + fine of Rs.25000/-). The IIIrd inspection was held between 27.11.2012 to 2.12.2012. However, this time the agency of the petitioner was terminated, which came into being vide contract dated 03.03.2004 in terms of the Marketing Discipline Guidelines, 2001. Aggrieved against the said termination order, the present petition has been filed.

(3.) Learned counsel for the petitioner has submitted that the agreement dated 3.3.2004, entered into between the parties, had expired on 3.3.2014 with the efflux of time of 10 years and thereafter another agreement came into being on 15.3.2014 [2nd agreement]. It is submitted that the 2nd agreement was valid till 15.3.2019 but before that the respondents have terminated the 1st agreement dated 3.3.2004 which has no effect on the contract between the parties as that agreement had already expired with the efflux of time. He has referred to Section 62 of the Indian Contract Act, 1872 to contend that since there was 'novation of contract' because of the execution of 2nd contract on 15.3.2014, therefore, the 1st contract dated 3.3.2004 was not required to be performed. In order to substantiate his argument in regard to 'novation of contract', he has referred to Clause 30 of the 1st contract, which read as under: -