Dealership & Lease Agreements Are Distinct; Actions Need Not Be Brought In One Litigation: J&K And Ladakh High Court
The High Court clarified that dealership and lease agreements, even when executed between the same parties for the same premises, generate separate and independent rights and liabilities.
Justice Sindhu Sharma, Justice Shahzad Azeem, Jammu & Kashmir & Ladakh High Court
The Jammu & Kashmir and Ladakh High Court has held that the causes of action arising from a 'dealership agreement' and a 'lease agreement' are independent and distinct from each other, and therefore need not be brought in one litigation.
The Court further observed that in the absence of any procedural infirmity, violation of natural justice, or infringement of fundamental rights, a writ petition under Article 226 of the Constitution ought not to be entertained if an alternative and efficacious remedy is available.
A Division Bench comprising Justice Shahzad Azeem and Justice Sindhu Sharma, while hearing an intra-court appeal filed by the Indian Oil Corporation challenging the order of the Single Judge, which had directed the Corporation either to purchase the leased-out land or to revoke the lease, enabling the petitioner to sell the land free of encumbrances, observed: “the cause of actions based on rights and liabilities arising from “Dealership Agreement” and “Lease Agreement”, respectively, are independent and distinct of each other, therefore, such actions need not to be brought in one litigation”.
Senior Advocate D.C. Raina appeared for the appellant. Advocate Shuja-ul-Haq, with Advocate Faizan Ahmad Ganie, CGC, appeared for respondents.
Background
The respondent, a Kargil war widow, had been allotted a petrol retail outlet dealership under the Operation Vijay Scheme for the rehabilitation of war widows. Alongside the dealership agreement, a lease deed was executed with the Indian Oil Corporation for the use of the land for establishing the outlet.
Following allegations of adulteration detected during inspection, the dealership was terminated in 2010.
The respondent first challenged the termination orders in a writ petition, and later filed another writ petition seeking termination of the lease agreement so that she could sell the land to fund treatment of a life-threatening disease.
Court’s Observations
The J&K High Court emphasised that the dealership and lease agreements are “independent of each other.” Relying on established principles that claims arising from distinct agreements constitute separate causes of action, the Bench observed that “if the lease deed is treated to have been terminated along with the dealership, it will lead to a situation which does not flow from the interpretation of the instruments.”
The Court reiterated that while dealership agreements are inherently terminable, lease agreements operate for a fixed contractual period, granting rights to hold and enjoy the premises so long as the lessee complies with the terms.
On the question of whether both grievances should have been raised in a single proceeding, the Bench noted that Order 2 Rule 2 and Section 11 of the CPC operate to prevent re-litigation of the same cause of action, but do not bar independent claims arising from different agreements. It was held that “the cause of action arising from both the ‘Dealership Agreement’ as well as ‘Lease Agreement’ are distinct and independent of each other, therefore, the plea is liable to be rejected.”
The Court further examined Clause 5(d) of the lease deed, which provided for disputes to be referred to arbitration by the Managing Director of the Corporation. It observed that since the parties had mutually agreed to resolve disputes through arbitration, and that “once the parties are signatory to the instrument, then they are bound to abide by the contractual obligation”.
The Court, therefore, held that the writ jurisdiction could not be invoked to bypass this agreed mechanism. The Court underscored that in the presence of an arbitration clause, the proper course was to relegate the parties to arbitration.
Finding no procedural infirmity, violation of natural justice, or infringement of Part III rights to justify the writ petition, the Bench remarked 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 instrument (lease agreement) is available.”
It was further noted that the Corporation retained the right to utilise or assign the leased premises as per the terms of the lease deed, and there was no breach by the Corporation warranting interference.
Conclusion
Holding that the writ petition was not maintainable, the Division Bench allowed the appeal, setting aside the Single Judge’s order.
The appeal was accordingly allowed, and the writ petition stood dismissed.
Cause Title: Chairman, Indian Oil Corporation vs Zareena Akhter (Neutral Citation: 2025:JKLHC-SGR:251)
Appearances
Appellant: Senior Advocate D.C. Raina with Advocate Sajjad Ashraf Mir
Respondent: Advocate Shuja-ul-Haq Tantray, Advocate Faizan Ahmad Ganaie, CGC
