Holding

The corporation was within its rights to terminate the dealership because the appellant was an employee (trainee) and had suppressed material information, and the cancellation was not mechanical.

Summary

The Indian Oil Corporation invited applications for a petrol pump dealership, giving preference to unemployed youth. The appellant, B.R. Chowdhury, was selected and awarded a dealership, but he was employed as a trainee sales representative at the time of application, which he concealed by marking 'Nil' in the employment column. The corporation, relying on an affidavit and the Memorandum of Agreement that allowed termination for false or material misstatements, cancelled the dealership after confirming his employment. The appellant argued that a trainee is not an employee and that the cancellation was mechanical. The Supreme Court held that a trainee constitutes an employee, the appellant suppressed material facts, and the corporation acted within its contractual rights; the cancellation was not mechanical. Consequently, the appeal was dismissed.

Issues considered

Whether a person employed as a trainee is deemed an employee for eligibility under the corporation's preference scheme.
Whether the appellant's omission of his trainee employment constitutes suppression of material fact justifying termination under the affidavit and Memorandum of Agreement.
Whether the corporation's cancellation of the dealership was a mechanical decision lacking application of mind.

Subjects

dealershippetrol pumpemploymenttraineemisrepresentationterminationaffidavitmaterial factpreference to unemployed youthIndian Oil Corporation

Judgment

A B.R. CHOWDHURY
v.
INDIAN OIL CORPORATION LTD. AND ORS.

JANUARY 15, 2004

B [SHIVA RAJ V. PATIL AND D.M. DAHARMADHIKARI, JJ.]

Dealership-Retail petrol pump-Preference given to unemployed
youths-Applicant was given dealership as he was unemployed on the relevant .
C date-Subsequently, his dealership was cancelled as he was found to be
employed during the relevant period although as a trainee-Validity of-
Held: Merely because a person was a trainee it cannot be said that he was
not an employee on the relevant date-Hence, applicant's dealership was
rig~tly cancelled.

D The respondent-Corporation invited applications for appointment of
a dealer relating to a retail outlet. It was open to all but preference was
to be given to unemployed youth. The appellant was given the dealership
as an unemployed youth. The appellant was engaged as a trainee
Professional Sales Representative in a Chemical Laboratory. However, the
appellant wrote 'Nil' against the relevant column relating to employment.
E The affidavit given by the appellant and the Memorandum of Agreement
provided that if any information given by the appellant was found to be
false his dealership was liable to be terminated.

Respondent No. 5 who had also applied for dealership filed objections
F before the Oil Selection Board challenging the selection of the appellant
on the ground that the appellant was an employee on the relevant date.
After enquiry, the appellant's dealership was cancelled. The writ petition
filed by the appellant was dismissed by the High Court. Hence the appeal.

On behalf of the appellant, it was contended that the appellant du.ring
G the relevant period was working as a trainee and not as an employee and,
therefore, cancellation of his dealership was not justified; and that the
appellant's dealership was cancelled mechanically without application of
mind.

Dismissing the appeal, the Court
H 520
B.R. CHOWDHURY v.INDIAN OIL CORPN. LTD. [PATIL. J.] 521

HELD: 1.1. The affidavit and the Memorandum of Agreement gave A
liberty to fhe respondent-Corporation to terminate the agreement on
finding that any information given by the dealer in his application for
appointment was found to be untrue or incorrect in any material respect.
1525-H; 526-AI

1.2. The appellant was an employee on the relevant date. Mere use B
of the word trainee cannot be taken to say that he was not an employee
particularly so when his services were confirmed later. Nothing prevented
the appellant from mentioning in the application as against the status of
employment at least as a trainee. But on the other hand, the appellant has
shown the status of occupation as 'Nil'. 1527-F, GI C
2. In view of the affidavit filed by the appellant coupled with the
Memorandum of Agreement, the respondent-Corporation was well within
its right to terminate the dealership of the appellant. It cannot be said that
the order passed by the respondent-Corporation terminating the
dealership of the appellant was mechanical or without application of mi!'d. D
1527-H, 528-AI

Kendriya Vidyalaya Sangathan v. Ram Ratan Yadav, 12003] 3 SCC 437,
relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 472 of E
1998.

From the Judgment and Order dated 18.3 .1997 of the Calcutta High
Court in M.A.T. No. 445 of 1997.

Tapash Ray, Sadhan Ray Choudhary, Bijan Kumar Ghosh and B.P. F
Nirbhay for the Appellant.

H.K. Puri, Ujjwal Banerjee, S.K. Puri and S.K. Bhattacharya for the
Respondents.

The Judgment of the Court was delivered by
G
SHIVARAJ V. PATIL J. The order dated 17.3.1997 passed by the
Division Bench of the High Court affirming the order dated 10.2.1997 passed
')I by a Single Judge of the High Court in C.O. No, 17843 (W) of 1996 is under
challenge in this appeal.

Indian Oil Corporation (for short 'the Corporation') invited applications H
522 SUPREME COURT REPORTS [2004] I S.C.R.

A for appointment ofa dealer relating to'a retail outlet, on 22nd June, 1987. It
was open to all but preference was to be given to the unemployed youth. The
appellant was given the dealership as an unemployed youth. The appellant
was engaged as a Trainee Professional Sales Representative with Mis. Denis
Chem Lab Limited from 23.2.1987 to 3.4.1989. He wrote 'NIL' against the
relevant column relating to employment. The respondent No. 5 who had also
B applied for dealership filed objections before the Oil Selection Board stating
that the appellant was an employee and as such he was not entitled to the
benefit of preferential treatment. The Oil Selection Board prepared a panel of
three candidates consisting of the appellant, respondent No. 5 and one another
placing the appellant at Sr. No. I and the respondent No. 5 at Sr. No. 2. The
C respondent No. 5 filed writ application No. I9758(W) of 1995 challenging
the selection of the appellant. An order was passed on 12.12.1995 in that writ
petition directing the authorities of the Corporation to make a fresh
consideration. Pursuant to the same, the Deputy General Manager of the
Corporation, keeping in mind the finding of the Oil Selection Board, rejected
the objection raised by respondent No. 5. The respondent No. 5 filed second
D Writ Application No.3262 of 1996. By the order dated 27.2.1996, in the said
writ application direction was given to consider a certificate produced by the
respondent no. 5 showing that the appellant was employed with M/s. Denis
Chem Lab Limited. The relevant portion of the said order dated 27.2.1996
reads:
E "Be that as it may, the spirit of the order passed by me is quite clear
and only on the ground that the said certificate had not been mentioned
in my order, the authorities ought not to have brushed aside the same
while considering the matter. Accordingly, I dispose of this writ
application with a direction upon the said officer and/or any other
F officer to be appointed by the Indian Oil Corporation and its authorities
to reconsider the matter in the light of the certificate dated 30th
October, 1995 and thereafter to pass final orders after giving the
parties hearing. It is made clear that running of the retail outlet shall
abide by the result of the decision of the said authorities."

G Following the said order, the Corporation considered the matter afresh
and passed the order dated 11. l 0.1996 cancelling the dealership given to the
appellant. The appellant filed the Writ Petition C.0.No. 17843 (W) of 1996
challenging the validity and correctness of the aforementioned order dated
11. l 0.1996 passed by the Corporation contending that the said order was
H perverse as the previous decision of the Corporation as well as the decision
B.R. CHOWDHURY v.INDIAN OIL CORPN. LTD. [PATIL, J.) 523

'of the Oil Selection Board had not been considered; in any' event, the A
respondent No. 5 could not have been appointed as a retail outlet dealer in
his place; the appellant did not suppress any fact and even otherwise the
alleged suppression could not have made any difference to the decision of the
Oil Selection Board as he as a trainee was not an employee. A learned Single
Judge, by the order dated 10.2.1997 after considering the rival contentions, B
concluded that the panel prepared by the Oil Selection Board was no more
valid and in the result while upholding the cancellation of the dealership of
the appellant, set aside the dealership given to the respondent No. 5. Further
the Corporation was directed to take appropriate action in the matter as
permissible in law. Aggrieved by this order of the learned Single Judge, the
appellant, the respondent No. 5 and the Corporation filed three appeals being C
Appeal Nos. 445, 508 and 511 of 1997 before the Division Bench of the
High Court. The Division Bench of the High Court, by a detailed and
considered order dated 17.3.1997 did not find any good reason to interfere
with the judgment of the learned Single Judge and dismissed all the three
appeals. The appellant who was appellant in M.A.T. 445 of 1997 before D
Division Bench of the High Court is in appeal before this Court in this
appeal.

Learned Senior Counsel for the appellant urged that the cancellation of
dealership awarded to the appellant was mechanically cancelled by the
Corporation merely on the basis of the report of enquiry made by its officer E
without application of mind; assuming that there was any irregularity in
considering the application of the appellant for grant of dealership, it could
not be said to be void. According to him, the appellant during the relevant
period was working as a trainee and not as an employee and as such the
termination of his dealership on the ground that he gave false information F
was not at all justified; the Corporation has not shown how cancellation of
dealership of the appellant was justified particularly when the appellant had
secured more marks in the interview conducted by the Board.

The learned counsel for the Corporation made submissions supporting
the impugned oi·der. G
The leaned counsel for the respondent no. 5 made submissions supporting
the cancellation of dealership of the appellant and added that the reasons
recorded by the learned Single Judge as well as the Division Bench of the
High Court in upholding the cancellation and dealership of the appellant
were fully justified. H
524 SUPREME COURT REPORTS [2004] I S.C.R.

A We have examined and considered the rival contentions urged on behalf
of the parties having due regard to the material placed on record. The learned
Single Judge not only upheld the cancellation of the dealership given to the
appellant but also set aside the dealership given to the respondent no. 5.
Respondent no. 5 came up to this Court·in S.L.P.(C) No. 8902/97 questioni~g
B the validity of the impugned judgment to the extent he was aggrieved by the
dismissal of his appeal MAT No. 508 of 1997. The SLP was dismissed by
this Court on 30.4.1997. Before us, the only appeal filed by the appellant is
for consideration. In this view, we are not called upon to examine the
correctness of the cancellation of dealership given to the respondent no. 5
after the termination of the dealership given to the appellant earlier. In other
C words, we have to focus our attention and consider only the question as to
whether the order of termination of the dealership given to the appellant is
right in law and justified.

The facts that are not in dispute are that the Corporation invited
application for appointment of a dealer in respect of one of its retail petrol
D pump on 22.6.1987. In response to the same, several applications were
received. Eligible candidates were interviewed. Based on the selection made
by the Oil Selection Board, the Corporation issued a letter of intent in favour
of the appellant on 9,8.1995. Respondent No. S. made complaint alleging that
the appellant did not fulfill the eligibility criteria. The Oil Selection Board
E found allegations of the respondent No. 5 incorrect and advised the Corporation
not to take notice of his complaint. The respondent no. 5 filed Writ Petition
No. 17958 of I 995 challenging the recommendation made in favour of the
appellant for appointment as a dealer in respect of retail outlet in the town
of Durgapur. The writ petition was disposed of on I2.12.1995 directing the
F Corporation to consider and dispose of the objection raised by the respondent
No. 5 with regard to the grant of dealership to the appellant on the ground
indicated not only in his representation dated 12th September, 1995 but also
on the grounds raised in the Writ Petition. The Corporation nominated one
of its Officers Mr. B.D. Ghosh to consider the matter pursuant to the order
made in the aforementioned writ petition. Before the said officer, the
G respondent No. 5 urged that the appellant was employed with Mis. Denis
Chern Lab Limited. Mr. Ghosh did not decide this new contention
understanding that the direction given in the writ petition was restricted only
to the representation dated 12th September, 1995 given by the respondent
No. 5 and rejected the objections raised by the respondent No. 5 holding that
H the selection of the appellant was not bad in law. Thereafter on 23rd January,
I996, the Corporation appointed the appellant as the dealer for the retail
-1

B.R. CHOWDHURY v.INDIAN OIL CORPN. LTD. [PATIL, J.] 525
.~
outlet. Respondent No. 5 filed the second Writ Petition No. 3262 of 1996 A
challenging the order appointing the appellant as the dealer. The said writ
petition was disposed of by a learned Single Judge on 27 .2.1996 directing the
Corporation to reconsider the matter in the light of the Certificate dated 30th
October, 1995 issued by M/s. Denis Chem Lab Limited on which reliance
was placed by the respondent no. 5. In the said certificate, it was stated that
appellant had worked with M/s. Denis Chem Lab Limited as a Trainee Sales B
Professional Representative from 23.2.1987 to 3.4.1989 at Gujarat. The
Corporation this time nominated one Mr. N.K. Gupta, the Chief Consumer
Manager of the Corporation. Mr. Gupta instructeq his office to send a letter
to M/s. Denis Chem Lab Limited to enquire about the employment of the
appellant. Mis. Denis Chem Lab Limited by their reply dated 21.5.1996 c
confirmed that the appellant had been working in their organization from
23.2.1987 as a Trainee Sales Professional Representative, that his services
were confirmed, his provident fund was deducted from the period 1.3.1988
and thereafter on 17 .2.1989 he tendered his resignation, which was accepted.
On these facts, Mr. Gupta concluded that on the date the appellant applied
for the dealership, he was employed at least as a trainee. He also referred to D
the application of the appellant and particularly column No. 9 relating to the
status of present occupation in which it was shown as 'Nil'. Hence, Mr.
Gupta held that the appellant was disqualified and th,e ·corporation should
take suitable action accordingly. On 11.10.1996, the Corporation terminated
the dealership of the appellant pursuant to the report of Mr. Gupta. The E
appellant challenged the order of termination of his dealership by filing Writ
Petition No. 17843 of 1996, which was disposed of by the learned Single
Judge upholding the termination of dealership of the appellant. The same was
affirmed by the impugned order by the Division Bench of the High Court in

. the appeal.

The appellant gave an affidavit for securing the dealership. In paragraph
I 0 of the affidavit, which is reproduced in the impugned order, it is clearly
F

stated that if any information given by the appellant in any application or in
any document submitted by him in support of his application for the award
of dealership is found to be untrue or incorrect or false, the Corporation
would be within its rights to withdraw the letter of intent, terminate the
G
dealership/ distributorship (if already awarded) and that he would have no
~ ·claim whatsoever against Indian Oil Corporation Ltd. for such withdrawal/
termination. Further paragraph 56 of the Memorandum of Agreement, as

-
•
indicated in the impugned order, gave liberty to the Corporation to terminate
the agreement on finding that any information given by the dealer in his H
526 SUPREME COURT REPORTS [2004] I S.C.R.

A application for appointment was found to be untrue or incorrect in any material
respect.

The offer of appointment dated 8.2.1987 given by Mis. Denis Chem
Lab Limited to the appellant reads:

B "Mr. Biswadeep Roy Chowdhury
CD/64/2, V.K. Nagar
Durgapur - 713 210 (W.B.)

Dear Mr. Chowdhury,

c Sub: Appointment Offer

We refer to your application for the job of Professional Sales
Representative and subsequent interview with us. Management is
pleased to inform you that you have been selected for a post. You
shall be paid Rs. 650 per month as sta11ing stipend. Stipend shall be
D increased to Rs. 700 at the end of six months from the date of joining
and Rs. 750 on completion of one year service. Besides this, you
shall be paid Rs. 100/- per month as vehicle maintenance allowance
if you are using a two wheeler scooter or motor cycle for your daily
field work at Head Quarter. Proof of ownership of vehicle for regular
use has to be submitted to this office for our record. Besides this, you
E shall be paid following working allowance:-

Head Quarter per working day : Rs. 22

Ex-town/transit per day : Rs. 28

F Outstation : Rs. 40

You shall be entitled for bus fair for travel within 50 K.M. from the
H.Q. For longer distance, you shall be allowed I st Class Railway
Fare. You are required to join training class at Ahmedabad from 23rd
February, 1987 for the period of three weeks. You are required to
G reach Ahmedabad on 22.2.1987. Your stay arrangements have been
fixed at Gar.<lhi Ashram Guest House, Opp. Gandhi Ashram, Ashram
Road, Sabarmati, Ahmedabad.

Your Headquarter of posting shall be decided at the end of training.
Your regular appointment letter shall be issued on successful·
H completion of training. Please sign duplicate copy of this letter in
B.R. CHOWqHURY v.INDIAN OIL CORPN. LTD. [PATIL, J.] 527

token of your acceptance and return for our record. A
Dress for sales training class shall be suite or shirt with necktie and
trousers.

We confirm having sent a telegram to you reading as under:-

YOU R APPOINTMENT OFFER POSTED (.) CONFIRMED B
TELEGRAPHICALLY ACCEPTANCE AND JOINING FOR
TRAINING STRARTING 23RD FEBRUARY.

In case we do not receive your confirmation by 14th February, we
shall extend our offer to next candidate on your selection list. C
Thanking you,

Yours faithfully,
For DENIS CHEM LAB LTD."

The reply dated 21.5.1996 given by Mis. Denis Chem Lab Limited to D
the letter dated 4.4.1996 written by the Corporation confirms that the appellant
was working in their organization from 23.2.1987. He was working as a
Trainee Sales Profession.Representative; his services were confirmed and his
provident fund number was GJll 57711137, certain amount was also collected
towards provident fund and he resigned from services on 17.2.1989, which E
was accepted on 5.4.1989. A combined reading of the offer of appointment
and the aforementioned reply of the Mis. Denis Chem Lab Limited clearly
shows that the appellant was an employee on the relevant date. Mere use of
word trainee cannot be taken to say that he was not an employee particularly
so when his services were confirmed later. In the application filed by the
appellant for securing dealership, as against column No. 8(c) whether he was F
temporarily employed, he has filled as 'No'. In column No. 9, as against the
present occupation, he has shown as 'Nil'. These statements made by the
appellant in column No. 8(c) and column No. 9 amount to suppression of
material fact. This apart, nothing prevented the appellant from mentioning in
column no. 9 of the application as against the status of employment at least G
as a trainee. But on the other hand, in column 9 he has shown the status of
occupation as 'Nil'. The contention advanced on behalf of the appellant that
the status of occupation as shown was bona fide cannot be accepted. In view
of para I0 of the affidavit filed by him coupled with the para 56 of the
Memorandum, the Corporation was well within its right to terminate the H
dealership of the appellant. There is no substance in th~ argument advanced
r --

528 SUPREME COURT REPORTS [2004] I S.C.R.

A on behalf of the appellant that the Corporation passed the order oftennination
of the dealership of the appellant mechanically and without application of
mind. On the facts found and in view of the findings recorded by Mr. Gupta,
it cannot be said that the order passed by the Corporation terminating the
dealership of the appellant was mechanical or without application of mind.
B This Court in Kendriya Vidyalaya Sangathan and Ors. v. Ram Ratan Yadav,
[2003] 3 sec 437 while dealing with the effect of suppression of material
infonnation took a view that the purpose of seeking information cannot be
defeated which has bearing on the selection. Added to this, if only the appellant
had given correct information about status of his occupation as on the relevant
date as rightly held by the learned Single Judge which view was affirmed by
C the Division Bench of the High Court, possibly the position would have been
different. At any rate, the appellant is bound by his own affidavit and the
Memorandum of Agreement mentioned above.

Thus, having regard to all aspects, in our view, the impugned judgment
D does not call for any interference. Hence, the appeal is dismissed. No costs.
v.s.s. Appeal dismissed.