26 April 2020

Rule of natural justice need not be observed where fraud or misrepresentation is played

Petitioner was appointed as Distributor of LPG - Submission of "Residence Certificate" was essential eligibility criteria for awarding the distributorship - Distributorship awarded to him -  Unfettered power to the Oil Company were given in the Dealership Agreement for termination, in case, any information found to be untrue or incorrect - Upon a complaint made by one of the unsuccessful complainants it was discovered that the furnished "Residential Certificate" to be false and incorrect - Oil Company, without issuing show cause notice terminated his distributorship. Therefore he claimed that absence of show-cause notice tantamount to absence of the opportunity of being heard and hence termination hits the soul of justice violating Article 14 of the Constitution of India and on this ground alone the said termination letter deserves to be quashed.

Held:
fraud-and-natural-justice
   A Contract is like a written form of the law or like a private legislation that legally binds the parties, hence the aforementioned clause derives utmost sanctity from the agreement. The doctrine of 'Pacta sunt servinda' governs the contractual relationship and the clauses of the contract are the law between the parties. This doctrine presupposes strict compliance of the terms enumerated in the termination clauses of the agreement, otherwise it destroys the sanctity of the contract and eludes the future performance. [Para No.17]


   Fraud and justice cannot go together. It is a settled law that "Fraud" vitiates every solemn act. In Lazarus Estate Ltd. v. Beasley, Lord Denning observed "No judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything." In the same judgment Lord Parker LJ observed that fraud "vitiates all transactions known to the law of however high a degree of solemnity.



   Once a fraud is proved or advantaged taken by wrong means, all advantages gained by playing fraud or wrong means can be taken away. Hence, the termination of the Distributorship Agreement is the consequence

   There is no legal requirement to observe the rule of natural justice while terminating the contract if there is a prima facie case of adoption of fraudulent means or misrepresentation. [Para No.23]


Orissa High Court

Sk. Talim Ali
Vs.
Hindustan Petroleum Corporation

Decided on 24/04/2020

 
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