INDIAN OIL CORPORATION LIMITED & ORS.versusM/S SHREE NIWAS RAMGOPAL & ORS.

                    [2025] 8 S.C.R. 1 : 2025 INSC 832

                Indian Oil Corporation Limited & Ors.
                                  v.
                  M/s Shree Niwas Ramgopal & Ors.
              (Special Leave Petition (Civil) No. 1381 of 2025)
                                   14 July 2025
           [Pankaj Mithal* and Ahsanuddin Amanullah, JJ.]


                            Issue for Consideration
       Whether the Division Bench of the High Court rightly upheld the
       mandamus issued by the Single Judge directing the IOCL to
       maintain the supply of kerosene to the respondent No.1-partnership
       firm till it is reconstituted or its dealership agreement is terminated.

                                    Headnotes†
       Partnership Act, 1932 – s.42 – Kerosene dealership agreement
       entered into between IOCL and respondent No.1-partnership
       firm having three partners – However, on the death of one of
       the partners of the partnership firm, IOCL discontinued the
       supply of kerosene to the existing firm without terminating its
       dealership – Writ Petition filed by the firm and its partners –
       Allowed, IOCL was directed to continue the supply of kerosene
       to the existing partnership firm till it is reconstituted subject
       to the condition stated – Correctness:
       Held: No error or illegality in the order of the High Court – The
       partnership consisted of three partners and the deed of partnership
       itself, in unequivocal terms, provided that the death of a partner
       shall not cause discontinuance of partnership and the surviving
       partners may continue with the business – Therefore, the principle
       laid down in s.42 is not applicable and the partnership would
       continue despite the death of one of the partners – Furthermore,
       the firm was reconstituted as per the proposal submitted having the
       surviving partners and one of the heirs and legal representatives
       of the deceased, as the third partner – However, the said
       reconstituted firm was not recognised by the IOCL as all the
       heirs and legal representatives of the deceased persons did not
       join or did not express their unwillingness to join the partnership
       firm – The insistence of the respondent that all the legal heirs of
       the deceased partner should join the reconstituted firm or give

* Author
2                                                              [2025] 8 S.C.R.

                          Supreme Court Reports


     ‘No Objection Certificate’ to the reconstituted firm is contrary to
     the spirit of the original deed of partnership – Respondent has
     no role to play in determining as to who is the competent heir
     of the deceased partner – It should be left on the wisdom of
     the existing partners – IOCL misconstrued its own guidelines
     in not recognising the reconstitution of the partnership firm –
     Approach of IOCL arbitrary, creating hinderance in the running
     business – Deprecated – Impugned order not interfered with.
     [Paras 18, 22, 25-27, 28, 30]

                               Case Law Cited
     M/s Wazid Ali Abid Ali v. Commissioner of Income Tax, Lucknow
     [1987] SCR 3 1049 : (1988) Supp. SCC 193 – relied on.
     Sandersons & Morgans v. ITO (1973) 87 ITR 270; Noor Mohammad
     and Co. v. Commissioner of Income-Tax (1991) 191 ITR 550;
     Indian Oil Corporation v. Roy and Company, 2018 (1) CHN (Cal)
     199 – referred to.

                                 List of Acts
     Partnership Act, 1932.

                              List of Keywords
     Kerosene dealership agreement; Indian Oil Corporation Limited
     (IOCL); Death of one of the partners; No discontinuance of the
     partnership business; Surviving partners to continue the business;
     Partnership to continue despite the death of one of the partners;
     Supply of kerosene discontinued; Reconstitution of the partnership
     firm; Firm reconstituted; Reconstituted firm; Existing partnership
     firm; Partnership deed; Partnership firm; Proprietorship firm; Agency/
     distributor of kerosene oil; Deceased partner; Legal representatives/
     heirs of the deceased partner; Heirs and legal representatives;
     Mandamus; State instrumentality; Arbitrary powers; Statutory
     corporation; No fairness; Exercising arbitrary powers; Matter of
     commercial interest; Partnership business.

                              Case Arising From
     EXTRAORDINARY APPELLATE JURISDICTION: Special Leave
     Petition (Civil) No. 1381 of 2025
     From the Judgment and Order dated 04.07.2018 of the High Court
     at Calcutta in APO No. 42 of 2014
[2025] 8 S.C.R.                                                               3

                       Indian Oil Corporation Limited & Ors. v.
                         M/s Shree Niwas Ramgopal & Ors.

                              Appearances for Parties
       Advs. for the Petitioners:
       Ms. Madhavi Goradia Divan, Sr. Adv., Ms. Mala Narayan, Shashwat
       Goel, Ms. Isha Ray.
       Advs. for the Respondents:
       Yashraj Singh Deora, Sr. Adv., Ramanand Aggarwal, Anindo
       Mukherjee, Rameshwar Prasad Goyal, Ms. Pallavi Pratap, Ashag
       Gutgutia, Amjid Maqbooc, Ms. Yashvi Aswani.

                       Judgment / Order of the Supreme Court

                                     Judgment

       Pankaj Mithal, J.

1.     Heard Smt. Madhavi Goradia Divan, learned senior counsel for the
       Petitioner, Shri Yashraj Singh Deora, learned senior counsel for the
       Respondent Nos. 1 to 3 and Smt. Pallavi Pratap, learned counsel
       for the Respondent Nos.7 and 8.
2.     It is a classic case where instead of acting in a just, fair and equitable
       manner, the statutory corporation, a state instrumentality, has acted
       in a high-handed manner while exercising arbitrary powers with no
       sense of fairness in a matter of commercial interest.
3.     The Indian Oil Corporation Limited1 after having lost before the
       Single Judge and the Division Bench of the High Court of Calcutta
       in successfully defending its above action has preferred this Special
       Leave Petition, probably in order to cover its illegal action.
4.     The Special Leave Petition is directed against the judgment and
       order dated 04.07.2018 passed by the Division Bench of the High
       Court upholding the mandamus issued by the Single Judge on
       03.07.2012 in a writ petition directing the IOCL to maintain the
       supply of kerosene to the respondent No.1 till it is reconstituted or
       its dealership agreement is terminated.
5.     The brief facts giving rise to the present dispute and to this Special
       Leave Petition are that Respondent No.1 – M/s Shree Niwas
       Ramgopal herein was a proprietorship firm of one Kanhaiyalal


1    In short ‘IOCL’
4                                                            [2025] 8 S.C.R.

                         Supreme Court Reports


     Sonthalia. The said Kanhaiyalal Sonthalia reconstituted the firm
     on 24.11.1989 and included his two sons, Ramesh Sonthalia and
     Gobinda Sonthalia along with himself as partners in the said firm.
     The firm was reconstituted as a partnership firm with Kanhaiyalal
     Sonthalia having 55% share, Ramesh Sonthalia having 35% share
     and Gobinda Sonthalia holding 10% share in the said partnership
     business.
6.   The partnership was to work as an agency/distributor of kerosene
     oil for the IOCL. The said partnership firm entered into a kerosene
     dealership agreement with the IOCL on 11.05.1990 which inter alia
     specifically provided that in the event of death of any of the partners
     of the partnership firm, the dealer shall immediately inform the
     corporation and provide details of the heirs and legal representatives
     of the deceased partner. It further provided that IOCL shall have an
     option:- i) to continue with the dealership with the existing firm; or ii)
     to have fresh agreement of dealership with the reconstituted firm; or
     iii) to terminate the dealership agreement. The decision of the IOCL
     in this behalf shall be final and binding upon all parties.
7.   One of the partners of the aforesaid partnership firm Kanhaiyalal
     Sonthalia, having 55% shares in the firm, died on 29.11.2009 leaving
     behind his wife, seven sons and four daughters as his heirs and
     legal representatives which included Ramesh Sonthalia and Gobinda
     Sonthalia, the two sons who were already working as partners in
     the firm.
8.   On the death of aforesaid Kanhaiyalal Sonthalia, as usually happens
     in all business families, disputes cropped up amongst his heirs with
     regard to the stake of 55% shareholding of the deceased in the
     partnership firm.
9.   One of his legal heirs Ananda Sonthalia addressed a letter dated
     19.01.2010 to the existing partners staking claim in the partnership
     and that he be inducted as one of the partners. An undated letter
     was written by another heir Jagdish Prasad Sonthalia stating he has
     a bitter experience about the firm’s business and he does not know
     about the assets and liabilities of his deceased father, therefore, the
     remaining partners be directed to furnish the details of the assets
     and liabilities, failing which it would not be possible for him to take
     a decision in the matter. Another legal heir Rakesh Sonthalia sent
     a letter to the Chief Divisional Retail Sales Manager of IOCL on
     07.02.2010, informing him that his deceased father had left a will
[2025] 8 S.C.R.                                                                5

                     Indian Oil Corporation Limited & Ors. v.
                       M/s Shree Niwas Ramgopal & Ors.

     dated 28.05.2008, bequeathing his 55% share in the firm to him
     and that after his death he should be taken as a partner. It was
     later informed that he had already applied for probate of the said
     will through Miscellaneous Case No.11 of 2010 in the court of Civil
     Judge, Junior Division, Jangipur.
10. Pending the above confusion regarding the reconstitution of the
    partnership firm, the IOCL approved the continuation of the firm
    till 14.06.2010 and advised them to furnish documents for the
    reconstitution of the firm. Accordingly, the subsisting partners on
    13.04.2010 submitted a proposal for the reconstitution of the firm with
    the surviving partners and one another legal heir of the deceased
    i.e., Bijoy Sonthalia, with necessary documents and the reconstitution
    fee of Rs.25,000/-.
11. Despite the above, the firm was informed that the validity of the token
    to supply kerosene would not be extended beyond 14.06.2010 if a
    fresh agreement is not executed. The representations of the partners
    to continue supplies were all in vain. Thus, the firm and its partners
    were compelled to invoke the writ jurisdiction of the High Court under
    Article 226 of the Constitution by filing Writ Petition No.758 of 20102.
    The firm and its subsisting partners therein prayed for declaring
    Clause 1.5 of the policy guidelines dated 01.12.2008 to be illegal
    and contrary to the provisions of the Indian Partnership Act, 1932, for
    a mandamus to renew the licence to supply kerosene and to allow
    reconstitution of the partnership firm in terms of the partnership deed
    dated 24.11.1989. A further prayer was made to extend the validity
    of the token for the supply of the kerosene and not to stop it after
    14.06.2010 so that the partnership firm may continue its business
    till the reconstitution of the firm.
12. The aforesaid writ petition was allowed vide judgment and order
    dated 03.07.2012 directing the IOCL to allow the partnership firm
    to be reconstituted subject to any order that may be passed in the
    probate case or by the competent civil court in the event any of the
    legal heirs approaches the court. The aggrieved heirs were given
    liberty to get their rights decided by the competent civil court. The
    court directed that till their rights are not decided, the partnership
    firm will be allowed to continue with its subsisting partners and to
    receive supplies of kerosene.


2   M/s Shree Niwas Ramgopal & Ors. vs. The Director of Consumer Goods & Ors.
6                                                        [2025] 8 S.C.R.

                              Supreme Court Reports


13. Aggrieved by the aforesaid directions of the learned Single Judge of
    the High Court, only the IOCL appealed against it. No grievance was
    raised by any of the heirs and legal representatives of the deceased
    Kanhaiyalal Sonthalia. None of them assailed the aforesaid order
    before the Division Bench meaning thereby that they felt satisfied
    and accepted the directions of the Single Judge.
14. The appeal by the IOCL was disposed of by the Division Bench on
    04.07.2018 holding that in view of the law laid down earlier by the
    High Court in Indian Oil Corporation vs. Roy and Company3,
    the IOCL is not entitled to discontinue the supply of kerosene oil
    to the partnership firm. The IOCL being a state authority ought to
    act in the interest of consumers, the common people, and should
    continue to supply kerosene oil to the firm for a period of one year
    and thereafter review the same on yearly basis till the partnership
    firm is reconstituted amongst the surviving partners and the heirs
    of the deceased partner.
15. The sheet anchor of Smt. Madhavi Divan, learned senior counsel
    for the IOCL, is the revised policy guidelines dated 01.12.2008. Her
    main submission is that the IOCL is following the said guidelines
    uniformly throughout the country. The said guidelines vide Clause 1.5
    provides that in case of death of a partner(s), the partnership shall
    be reconstituted with the legal heir(s) of the deceased partner(s) and
    the surviving partner(s). Since all the heirs of deceased Kanhaiyalal
    Sonthalia have not applied or joined as partners to the reconstituted
    partnership firm, the IOCL is not bound to continue business with
    the existing partnership or to recognise the alleged reconstituted
    partnership, so as to continue the supply of kerosene.
16. In order to counter the above arguments, the counsel for the
    Respondents 1,2 and 3 i.e., the partnership firm and the surviving
    partners submitted that under the deed of partnership dated
    24.11.1989, it has been specifically stipulated vide Clause 18 that
    in the event of death of any of the partner, the partnership will not
    cease to function, rather it shall continue to carry on the business
    and the surviving partners may admit any of the competent heirs
    of the deceased partner to the partnership so as to reconstitute it.
    The Dealership Agreement dated 11.05.1990 also does not provide
    for the cessation of the existing partnership on the death of one of


3    2018 (1) CHN (Cal) 199
[2025] 8 S.C.R.                                                            7

                    Indian Oil Corporation Limited & Ors. v.
                      M/s Shree Niwas Ramgopal & Ors.

     the partners, rather it provides to continue the dealership with the
     existing firm or to have a fresh dealership agreement with the firm,
     if reconstituted, or to terminate the dealership agreement. Since
     the dealership agreement was never terminated, the IOCL is not
     empowered to stop the supplies of the kerosene or to treat the
     business having come to an end.
17. In the light of the facts as narrated above and the submissions
    advanced by the counsel for the parties, it would be prudent to first
    refer to the Dealership Agreement dated 11.05.1990 which lays down
    the conditions of dealership inter alia that in the event of death of any
    partner, the subsisting partners of the dealership shall immediately
    inform to the IOCL about the death of the partner with necessary
    details of legal heirs of the deceased partner; whereupon it would
    be open for the IOCL to:- (i) either continue the dealership with the
    existing firm; or (ii) to have the fresh agreement of the dealership with
    the firm if reconstituted; or (iii) to terminate the dealership agreement.
    The above three conditions are evident from the plain and simple
    reading of Clause 30 of the dealership agreement.
18. It is an admitted position that the IOCL till date has not exercised the
    option of terminating the dealership of the firm, rather has provided
    opportunity to the firm to reconstitute itself. The firm has been
    reconstituted as per the proposal submitted on 13.04.2010 having
    the surviving partners and Vijay Sonthalia, one of the heirs and
    legal representatives of the deceased, as the third partner. However,
    the said reconstituted firm has not been recognised by the IOCL
    simply for the reason that all the heirs and legal representatives of
    the deceased persons have not joined or have not expressed their
    unwillingness to join the partnership firm.
19. The deed of partnership on the other hand vide Clause 18 clearly
    stipulates that the death of any partner shall not cause discontinuance
    of the partnership business and that the surviving partners may
    continue the business and the interest of the deceased partner shall
    vest in the legal heirs of the deceased. The surviving partners have
    the option to admit any of the competent heirs of the deceased
    partner to the partnership on such terms and conditions as may be
    agreed upon.
20. The aforesaid clause thus permits the existing partners to continue
    with the partnership business notwithstanding the death of one of
8                                                            [2025] 8 S.C.R.

                                    Supreme Court Reports


       the partners, leaving it open for the surviving partners to induct any
       of the competent heirs of the deceased partner in the partnership
       business. It is not necessary for the surviving partners to include all
       the heirs of the deceased partners in the partnership or to wait for
       their consent to be included or not to be included in the partnership.
21. It is settled in law by virtue of Section 42 of the Partnership Act,
    19324 that the partnership will stand dissolved inter alia on the
    death of the partner but this is applicable in cases where there are
    only two partners constituting the partnership firm. The aforesaid
    principle would not apply where there are more than two partners
    in a partnership firm and the deed of partnership provides otherwise
    that the firm will not stand automatically dissolved on the death of
    one of the partners.
22. In the case at hand, the partnership consisted of three partners and
    the deed of partnership, in unequivocal terms, provided that the death
    of a partner shall not cause discontinuance of partnership and the
    surviving partners may continue with the business. Therefore, the
    principle laid down under Section 42 of the Partnership Act would
    not be applicable and the partnership would continue despite the
    death of one of the partners.
23. This Court in M/s Wazid Ali Abid Ali vs. Commissioner of Income
    Tax, Lucknow5 observed that under the Partnership Act, on death
    or demise of a partner, the firm shall not be dissolved but shall be
    carried on with the remaining partners or by including the heirs and
    representative of the deceased partner on such terms and conditions
    mutually agreed upon. The aforesaid decision relied upon the decision
    of Calcutta High Court in Sandersons & Morgans vs. ITO6 wherein
    it was reiterated that if one of the partners dies or retires, there is
    change in the constitution of the firm but there is no dissolution. A
    similar view was expressed by the Allahabad High Court in Noor
    Mohammad and Co. vs. Commissioner of Income-Tax7 wherein
    it was held that the partnership would continue despite the death of
    one of the partners in terms of the Partnership Deed.


4    Hereinafter referred to as the “Partnership Act”
5    (1988) Supp. SCC 193
6    (1973) 87 ITR 270
7    (1991) 191 ITR 550
[2025] 8 S.C.R.                                                          9

                    Indian Oil Corporation Limited & Ors. v.
                      M/s Shree Niwas Ramgopal & Ors.

24. Moreover, the dealership agreement itself recognises that in the
    event of death of one of the partners, the IOCL may continue the
    dealership with the said firm. Therefore, on the death of one of the
    partners of the firm, the business of the firm would not come to an
    end in view of Clause 18 of the deed of partnership read with Clause
    13 of the dealership agreement. In such a situation, the IOCL could
    not have discontinued the supply of kerosene to the existing firm
    without terminating its dealership.
25. The IOCL has refused to recognise the reconstituted firm on the
    pretext that all the heirs of the deceased partners have not joined or
    expressed their willingness either way to join or not to join the firm.
    In this connection, Clause 1.5 of the guidelines dated 01.12.2008 is
    very relevant and important. The said guidelines simply provide that
    in the case of death of one of the partners, the partnership shall be
    reconstituted with the legal heirs of the deceased partner and the
    surviving partners. It further provides that if there are no legal heirs
    or any of them have expressed unwillingness to join the firm, the
    dealership shall be reconstituted with the surviving partners or with
    the willing heirs of the deceased partner. The aforesaid guidelines
    nowhere stipulates that it is mandatory for all the legal heirs to join
    or reconstitute the partnership firm or otherwise to express their
    unwillingness to participate. It simply provides that a firm can be
    reconstituted with the legal heirs of the deceased partner which does
    not in any manner mean that it is mandatory for all the legal heirs
    to join for reconstitution of the firm. In fact, the deed of partnership
    specifically provides that on the death of any of the partners, the
    business of the partnership will continue with the surviving partners
    and they may induct any of the competent heirs of the deceased
    partners, which means that it is not imperative upon the surviving
    partners to induct all the heirs of the deceased partner in the
    reconstituted partnership firm. The insistence of the IOCL that all
    the legal heirs of the deceased partner should join the reconstituted
    firm or give ‘No Objection Certificate’ to the reconstituted firm would
    be contrary to the spirit of the original deed of partnership. The
    IOCL has no role to play in determining as to who is the competent
    heir of the deceased partner. It should be left on the wisdom of the
    existing partners.
26. In the wake of the above analysis and the discussion, the IOCL
    appeared to have misconstrued its own guidelines in not recognising
    the reconstitution of the partnership firm with the surviving partners
10                                                          [2025] 8 S.C.R.

                             Supreme Court Reports


      and one new partner being one of the competent heir and legal
      representative of the deceased partner.
27. It is trite to mention that the IOCL is supposed to act in a manner
    which is beneficial for the continuance of the business and not to
    adopt an arbitrary approach thereby creating hinderance in the
    running business. It is for this reason that the learned Single Judge
    and the Division Bench of the High Court issued Mandamus, directing
    IOCL to continue the supply of kerosene to the existing partnership
    firm till it is properly reconstituted, subject to any order that may be
    passed in the probate case or by the competent Civil Court, if any
    of the heirs of the deceased partners approaches such a court and
    that the situation be reviewed on yearly basis to allow reconstitution
    of the firm with the surviving partners.
28. In the facts and circumstances of the case, there is no error or
    illegality on the part of the High Court in issuing the above directions.
29. It may be pertinent to note that none of the heirs and legal
    representatives were dissatisfied by the directions issued by the High
    Court as they have not assailed the same in any forum. Therefore,
    when the heirs and legal representatives of the deceased partner
    were not aggrieved, it was not appropriate for the IOCL to have taken
    a hyper-technical approach on the interpretation of the guidelines,
    so as not to extend the period of supply of kerosene or to stop the
    supply which, in effect, is axiomatic to the continuance and the
    smooth flow of business which was continuing for past many years.
30. Accordingly, in view of the aforesaid facts and circumstances, we do
    not propose to entertain the Special Leave Petition and to interfere
    with the impugned order(s) of the High Court.
31. The Special Leave Petition is devoid of merit and is dismissed with
    the observation that the IOCL ought to avoid such litigations by
    interfering with the continuance of any running business by taking
    a narrow approach.

      Result of the case: Special Leave Petition dismissed.



      †
          Headnotes prepared by: Divya Pandey