Indian Oil Corporation Limited vs M/S Shree Niwas Ramgopal

2025 INSC 832 REPORTABLE

IN THE SUPREME COURT OF INDIA

EXTRAORDINARY APPELLATE JURISDICTION SPECIAL LEAVE PETITION (CIVIL) NO. 1381 OF 2025

INDIAN OIL CORPORATION LIMITED & ORS. …PETITIONER(S)

VERSUS

M/S SHREE NIWAS RAMGOPAL & ORS. …RESPONDENT(S)

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

Signature Not Verified and equitable manner, the statutory corporation, a state Digitally signed by SNEHA DAS Date: 2025.07.14 17:50:32 IST Reason: instrumentality, has acted in a high-handed manner while

1 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 Sonthalia. The said Kanhaiyalal Sonthalia

reconstituted the firm on 24.11.1989 and included his two

sons, Ramesh Sonthalia and Gobinda Sonthalia along with

1 In short ‘IOCL’

2 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

3 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

4 left a will 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

5 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

2 M/s Shree Niwas Ramgopal & Ors. vs. The Director of Consumer Goods & Ors. 6 decided, the partnership firm will be allowed to continue

with its subsisting partners and to receive supplies of

kerosene.

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

3 2018 (1) CHN (Cal) 199

7 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

8 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 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

9 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.

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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 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

4 Hereinafter referred to as the “Partnership Act”

11 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

5 1988 (Supp) SCC 193

12 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.

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.

6 (1973) 87 ITR 270 7 (1991) 191 ITR 550

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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

14 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 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

15 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

16 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.

.............……………………………….. J.

(PANKAJ MITHAL)

.............……………………………….. J.

(AHSANUDDIN AMANULLAH) NEW DELHI;

JULY 14, 2025.

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