Safiya Malik

The High Court of Jammu & Kashmir and Ladakh, Division Bench of Justice Sindhu Sharma and Justice Shahzad Azeem held that dealership and lease agreements are separate and independent contracts, and disputes arising from them need not be combined in a single case. The Court set aside a writ court order requiring Indian Oil Corporation to either acquire or vacate land leased from war-widow Zareena Akhter, ruling that the petition was not maintainable. It recorded that the lease deed contained an arbitration clause, and disputes must be addressed through that mechanism rather than writ jurisdiction.

The case before the High Court of Jammu & Kashmir and Ladakh arose out of disputes between war-widow Zareena Akhter and the Indian Oil Corporation (IOC). Following the death of her husband in the Kargil War of 1999, Akhter was allotted a retail outlet dealership for petroleum products under the Government of India’s Operation Vijay Scheme. A dealership agreement was executed on 26 February 2004, and simultaneously, a lease agreement dated 28 January 2004 was entered into, under which Akhter leased two kanals and nine marlas of land to IOC for thirty years at a monthly rent of ₹6,000 with periodic increases. A filling station was established under the name “M/S Shaheed G. M. Filling Station” at Bumhama, Kupwara.

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On 30 April 2010, a joint surprise inspection was carried out by the Central Bureau of Investigation and Bharat Petroleum Corporation. Samples collected from the outlet were reported to be adulterated, failing tests for density and kinematic viscosity. A formal case was registered under Section 3/7 of the Essential Commodities Act and provisions of the Petroleum Act. The Area Manager of IOC directed stoppage of sales on 1 May 2010, followed by a show cause notice dated 5 May 2010. On 7 June 2010, IOC terminated the dealership under the Marketing Discipline Guidelines, 2005.

Akhter challenged the termination orders in OWP No. 585/2010. While that petition was pending, she filed WP (C) No. 3441/2023 seeking termination of the lease agreement so she could sell her land free of encumbrances. The two petitions were clubbed and decided together by the Single Judge on 24 September 2024. The Court dismissed OWP No. 585/2010 citing the arbitration clause in the dealership agreement but allowed WP (C) No. 3441/2023, directing IOC to either purchase the leased land or revoke the lease.

IOC filed LPA No. 70/2025 challenging the Single Judge’s decision. The appellants argued that the lease agreement was still subsisting and disputes were subject to arbitration under Clause 5(d) of the lease deed. They also submitted that filing a second writ petition during pendency of the first was barred by Order 2 Rule 2 and Section 11 CPC. The respondent opposed the appeal, citing urgent financial needs due to illness and the fact that the land had remained unused since termination of the dealership.

The Division Bench recorded: "The cardinal principle of Order 2 Rule 2 and Section 11 of the Code of Civil Procedure is to prevent a Plaintiff from vexing the Defendant twice for the same cause of action... all the claims arising from a single cause of action are required to be adjudicated together to avoid fragmented litigation." However, it added: "From the long drawn authoritative pronouncements on the subject, what is deducible is that the second Suit on different cause of action is not barred, whereas, this Rule only applies when the cause of action is same in the new Suit also."

The Bench observed that the dealership agreement and lease agreement were independent contracts. It referred to Rahul Yadav & Anr. v. M/S Indian Oil Corporation Ltd. & Ors.; AIR 2015 Supreme Court 2742, quoting: "On a plain reading of the aforesaid agreement, it is clear as noon day that it has no connection whatsoever with the lease agreement. Both the agreements are dependent of each other... The dealership agreement has been terminated... The inevitable consequence of that is the appellant has to vacate the premises and the Corporation has the liberty to operate either independently or through another dealer." It further cited Indian Oil Corporation Limited v. Shree Ganesh Petroleum Rajgurunagar; (2022) 4 SCC 463, reiterating that the dealership and lease agreements are distinct and independent.

Accordingly, the Bench rejected the contention that the second writ petition was barred, holding: "The plea raised by the Appellants-Corporation that the second Writ Petition was not maintainable does not hold good, in view of the settled proposition of law that the cause of action arising from both the 'Dealership Agreement' as well as 'Lease Agreement' are distinct and independent of each other."

Turning to the arbitration clause in the lease, the Bench noted Clause 5(d) of the lease agreement, which provided: "Any dispute or difference of any nature whatsoever regarding any right, liability, act, omission or account of any of the parties hereto arising out of or in relation to these presents shall be referred to the sole arbitration of the Managing Director of the lessee..." The Court observed: "The rights and liabilities of the parties are undoubtedly governed by the terms of lease agreement and both the parties have duly consented to it and also obligated to adhere to its terms and conditions... once the parties are signatory to the instrument, then they are bound to abide by the contractual obligation."

Citing Hindustan Petroleum Corporation Ltd. v. M/S Pinkcity Midway Petroleum; AIR 2003 SC 2881, the Bench stated: "In case where there is 'Arbitration Clause' in the agreement, it is obligatory for the Court to relegate the parties to arbitration in terms of the agreement."

It recorded: "In the wake of the above noted factual aspect, still to say that the Appellant-Corporation does not intend to utilize the land cannot be accepted."

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The Bench concluded: "From the above discussion, it emerges that 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 and, also in absence of any procedural infirmity... 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."

The Division Bench declared: "Thus, we are of the considered opinion that the impugned Judgment dated 24th of September, 2024 passed by the Writ Court is unsustainable in the eyes of law, as such, the instant appeal is allowed and the impugned Judgment is hereby set aside. Resultantly, the Writ Petition-WP (C) No. 3441/2023 shall stand dismissed. LPA No. 70/2025 shall stand disposed of on the above terms, along with any application(s) pending therewith."

Advocates Representing the Parties

For the Appellants: Mr. D. C. Raina, Senior Advocate with Mr. Sajjad Ashraf Mir, Advocate

For the Respondents: Mr. Shuja-ul-Haq Tantray, Advocate; Mr. Faizan Ahmad Ganie, CGC vice Mr. Tahir Majid Shamsi, DSGI

Case Title: Chairman, Indian Oil Corporation & Anr. v. Zareena Akhter & Anr.

Case Number: LPA No. 70/2025 in WP(C) No. 3441/2023

Bench: Justice Sindhu Sharma; Justice Shahzad Azeem