A) ABSTRACT / HEADNOTE

The Supreme Court of India in Indian Oil Corporation Limited & Ors. v. M/s Shree Niwas Ramgopal & Ors., Special Leave Petition (Civil) No. 1381 of 2025, decided on 14 July 2025, affirmed the Calcutta High Court’s mandamus that directed IOCL to maintain kerosene supplies to a partnership-dealership despite the death of a partner and internecine disputes among heirs. The controlling instruments were the Partnership Deed dated 24.11.1989 and the Dealership Agreement dated 11.05.1990. The Deed’s Clause 18 contemplated continuity of business upon a partner’s death and permitted induction of “any of the competent heirs,” while the Dealership Agreement gave IOCL three choices upon such death—continue with the existing firm, execute a fresh agreement with the reconstituted firm, or terminate the dealership. IOCL never terminated the dealership but unilaterally halted supplies, citing Clause 1.5 of its 01.12.2008 policy guidelines and insisting that all legal heirs join or expressly disclaim partnership—an insistence the Court held to be contrary to the partnership arrangement and even to IOCL’s own guidelines. The Court read Section 42 of the Partnership Act, 1932 in light of the deed’s contrary stipulation and the firm’s three-partner constitution, and relied on M/s Wazid Ali Abid Ali v. CIT, Lucknow with supportive references to Sandersons & Morgans v. ITO and Noor Mohammad and Co. v. CIT. The Court deprecated IOCL’s arbitrary approach, sustained the High Court’s directions, and dismissed the SLP, emphasizing that a state instrumentality must act to facilitate, not hinder, an ongoing public-distribution-linked business.

Keywords: Partnership Act, 1932; Section 42; kerosene dealership; reconstitution upon death of partner; state instrumentality and arbitrariness.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

A three-partner firm, M/s Shree Niwas Ramgopal, originally a proprietorship of Kanhaiyalal Sonthalia, was transformed into a partnership on 24.11.1989, with shares split 55% (Kanhaiyalal), 35% (Ramesh Sonthalia), and 10% (Gobinda Sonthalia). The firm held a kerosene dealership under a Dealership Agreement dated 11.05.1990 with IOCL, an agreement that carefully anticipated a partner’s death and vested IOCL with three choices: continue with the existing firm; execute a fresh agreement with a reconstituted firm; or terminate the dealership. When Kanhaiyalal died on 29.11.2009, disputes among numerous heirs erupted over his 55% stake. Even as a probate proceeding over a will dated 28.05.2008 was initiated, IOCL temporarily permitted the dealership to continue up to 14.06.2010, asking for reconstitution documents. The surviving partners submitted a reconstitution proposal on 13.04.2010, inducting Bijoy Sonthalia as the third partner and paying the reconstitution fee. Yet, supplies were threatened with non-extension unless a fresh agreement was executed; the firm turned to Article 226 and succeeded before the Single Judge on 03.07.2012. The Division Bench on 04.07.2018 upheld the continuance of supplies, guided by Indian Oil Corporation v. Roy and Company (2018), and mandated annual review till regular reconstitution occurred. The SLP filed by IOCL—not any heir—led the Supreme Court to test IOCL’s insistence that all heirs join or disclaim in light of the Partnership Deed’s Clause 18, the Dealership Agreement, the 2008 guidelines (Clause 1.5), and Section 42 of the Partnership Act, 1932. The Court concluded that IOCL misconstrued its own policy and acted arbitrarily in risking disruption of an ongoing, essential public-distribution-linked business.

D) FACTS OF THE CASE

The firm’s origin and composition. M/s Shree Niwas Ramgopal began as a proprietorship of Kanhaiyalal Sonthalia and was reconstituted as a partnership on 24.11.1989, with defined shares of 55%/35%/10% for Kanhaiyalal/Ramesh/Gobinda. The business was a kerosene dealership for IOCL, under a Dealership Agreement dated 11.05.1990 that expressly addressed the consequences of a partner’s death and granted IOCL three options—continue with the existing firm; execute a fresh agreement with a reconstituted firm; or terminate the dealership. Kanhaiyalal died on 29.11.2009, leaving a large class of heirs, including the two existing partners. Intra-family disputes erupted over his 55% interest; correspondence included a demand by Ananda Sonthalia for induction, a request by Jagdish Prasad Sonthalia for asset-liability details, and a claim by Rakesh Sonthalia based on a will dated 28.05.2008, for which probate (Misc. Case No. 11 of 2010, Civil Judge, Jr. Div., Jangipur) was sought. Amid this, IOCL allowed continuation up to 14.06.2010 and asked for papers. On 13.04.2010 the surviving partners proposed reconstitution by inducting Bijoy Sonthalia and paying Rs. 25,000. Despite this compliance, IOCL warned that the supply token would lapse beyond 14.06.2010 absent a fresh agreement. Left with no option, the partners invoked Article 226, challenging Clause 1.5 of the 01.12.2008 guidelines and seeking a mandamus for supply continuity. The Single Judge on 03.07.2012 allowed continuation with subsisting partners (and reconstitution subject to orders in probate or by a civil court). IOCL alone appealed. The Division Bench on 04.07.2018 relied on Indian Oil Corporation v. Roy & Co. (2018) to mandate annual supply review until reconstitution. No heir appealed. The SLP filed by IOCL was thus a challenge to the High Court’s protection of continuity pending orderly reconstitution.

E) LEGAL ISSUES RAISED

Whether, on the death of one partner in a three-partner firm whose Partnership Deed (Clause 18) stipulates continuity and empowers surviving partners to induct “any of the competent heirs,” IOCL could insist that all heirs must either join or expressly refuse to join for reconstitution, and, based on that insistence alone, halt the supply of kerosene without terminating the Dealership Agreement; whether Section 42 of the Partnership Act, 1932 mandates dissolution in such circumstances despite a contrary deed stipulation and a multi-partner constitution; whether the Dealership Agreement—which gave IOCL three crystallized options upon death—permitted IOCL to withhold supplies absent an exercise of the option to terminate; whether Clause 1.5 of the 01.12.2008 guidelines truly required an “all heirs must join or NOC” precondition; whether a state instrumentality can adopt a hyper-technical reading of internal guidelines to choke an ongoing dealership that serves public distribution, in the face of High Court protection and no challenge by heirs; whether the High Court’s mandamus directing continued supplies pending reconstitution, subject to orders in probate or by a civil court, was within writ jurisdiction under Article 226; and whether precedents such as M/s Wazid Ali Abid Ali v. CIT and allied High Court rulings on non-dissolution upon death, where the deed so provides, support continuity rather than cessation.

F) PETITIONER/ APPELLANT’S ARGUMENTS

The counsels for IOCL anchored their case in Clause 1.5 of the revised policy guidelines dated 01.12.2008. They argued that these guidelines are uniformly applied nationwide and require that, on the death of a partner, the firm be reconstituted with the legal heirs of the deceased partner along with the surviving partners. They stressed that all heirs of Kanhaiyalal Sonthalia neither joined the reconstituted firm nor uniformly expressed unwillingness; therefore, continuation of business with the existing or partially reconstituted firm could not be recognized. The thrust was that without a complete compliance—either universal joinder or universal disclaimers—IOCL was justified in declining to extend the token or renew supplies. They implicitly sought to distinguish the Dealership Agreement’s options by treating the continuation option as contingent upon a fully valid reconstitution under the guidelines. They further suggested that in the context of a public sector corporation managing a sensitive commodity, strict compliance was essential to avoid inter se disputes undermining contractual privity and liability allocation. The petitioners framed the High Court’s mandamus as intruding upon IOCL’s contractual autonomy and policy domain, contending that the continued supply without comprehensive reconstitution would set an unworkable precedent and expose the corporation to conflicting claims among heirs, especially when probate proceedings were pending. Hence, IOCL maintained that its stance was a reasonable application of a uniform policy, not arbitrariness.

G) RESPONDENT’S ARGUMENTS

The counsels for the firm and the surviving partners placed primary reliance on Clause 18 of the Partnership Deed (24.11.1989), which stated that the partnership would not cease upon a partner’s death and that surviving partners may admit any of the competent heirs on agreed terms. They emphasized that the Dealership Agreement (11.05.1990) itself did not treat a partner’s death as an automatic cessation event; rather, it explicitly permitted IOCL to continue with the existing firm, execute a fresh agreement with the reconstituted entity, or terminate the dealership—none of which mandated a universal heir-joinder condition. As IOCL never exercised the termination option, its stoppage of supplies was said to be ultra vires the contract’s architecture. The respondents underscored their compliance: a reconstitution proposal on 13.04.2010 inducting Bijoy Sonthalia, payment of Rs. 25,000, and readiness to abide by any outcome in probate or civil proceedings. They argued that Clause 1.5 of the 2008 guidelines did not require all heirs to join; at most, it contemplated reconstitution with legal heirs and surviving partners, or with willing heirs if some declined—there was no textual basis for an “all heirs or NOC from all” rule. As a matter of Partnership Act principle, Section 42 did not force dissolution where there were more than two partners and the deed provided for continuity—positions supported by M/s Wazid Ali Abid Ali v. CIT, Sandersons & Morgans v. ITO, and Noor Mohammad and Co. v. CIT. Finally, they urged that a state instrumentality must not weaponize internal guidelines to stifle a running dealership in the essential-commodities chain.

H) RELATED LEGAL PROVISIONS

The decision turns on Section 42 of the Partnership Act, 1932, which stipulates dissolution upon death but yields to contrary contract when the firm is not a two-partner unit, a principle the Court applied by reading the statute with Clause 18 of the Partnership Deed (24.11.1989) that expressly preserved continuity and empowered induction of “any of the competent heirs.” The Dealership Agreement (11.05.1990) supplied the operative contractual matrix through Clause 30 (read with Clause 13), offering IOCL a triad of choices—continue with the existing firm, execute a fresh agreement with a reconstituted firm, or terminate—thereby making it impermissible to choke supplies without termination. The IOCL Guidelines (01.12.2008), Clause 1.5 were read textually to permit reconstitution with legal heirs and surviving partners, or with willing heirs if others declined; no “universal heir joinder” or “universal NOC” condition appears in the guideline. The writ remedy under Article 226 of the Constitution provided the supervisory authority for the High Court to protect continuity pending civil outcomes in probate or other suits, balancing contractual freedom with public interest in the kerosene supply chain. Each of these provisions—statute, deed, agreement, guideline, and constitutional remedy—interlock to disallow unilateral supply stoppage where the dealership remains un-terminated and the deed commands business continuity with flexibility in inducting heirs.

I) JUDGEMENT 

The Supreme Court dismissed the SLP and upheld the High Court’s directions sustaining the supply of kerosene to the existing partnership until reconstitution or lawful termination. The Court found that IOCL had not exercised the contractually available option to terminate the dealership; rather, it had permitted and even invited reconstitution. The firm responded with a reconstitution proposal on 13.04.2010 bringing in Bijoy Sonthalia and paying the prescribed fee, yet IOCL refused to recognize the reconstituted firm by insisting that all heirs must either join or expressly renounce. The Court held that this insistence contradicted the Partnership Deed’s Clause 18 and misstated IOCL’s own Clause 1.5 guideline. It emphasized that in a three-partner firm with a deed safeguarding continuity, Section 42 does not mandate dissolution on death; consequently, the business does not end, and supplies cannot be halted without termination of the dealership. The Court read the Dealership Agreement as recognizing continuity with the existing firm post-death and condemned IOCL’s arbitrary construal that created a needless hindrance to a running public-utility business. It approved the High Court’s calibrated relief—continuation subject to orders in probate or by a competent civil court, with annual review—to balance private rights and public interest in uninterrupted kerosene distribution. On these premises, the Court declined interference, admonished IOCL to avoid narrow approaches that engender avoidable litigation, and affirmed that the mandamus issued was sound in law and policy.

a. RATIO DECIDENDI

The core ratio rests on the interplay of Section 42 of the Partnership Act, 1932 with a contrary contractual stipulation in a three-partner firm. Where the deed explicitly provides that the firm shall not be discontinued upon the death of a partner and permits surviving partners to induct any of the competent heirs, dissolution does not ensue automatically. The Court reaffirmed that in such circumstances the demise of a partner effects only a change in constitution, not dissolution, aligning with M/s Wazid Ali Abid Ali v. CIT and the reasoning in Sandersons & Morgans v. ITO and Noor Mohammad and Co. v. CIT. On the contractual plane, the Dealership Agreement—which is the living document governing supply—contemplates, upon death of a partner, three distinct options for IOCL; unless IOCL exercises the termination option, it cannot treat supplies as automatically ended. Because IOCL did not terminate, and because the firm tendered a reconstitution proposal consistent with the deed, the corporation’s refusal based on a supposed “all heirs must join or NOC” rule lacked textual warrant in Clause 1.5 and contradicted the deed’s flexibility. Hence, reading the statute, deed, agreement, and guideline together, the High Court’s mandamus preserving the status quo of supply pending reconstitution was legally correct, and the SLP warranted dismissal.

b. OBITER DICTA 

The Court’s broader observations carry guidance on the role of a state instrumentality in commercial arrangements linked to essential commodities. It deprecated an approach that privileges procedural pedantry over continuity of a running dealership, especially when the deed and agreement furnish a sensible route to reconstitution without paralysis. The Court noted that none of the heirs challenged the High Court’s directions, reflecting practical acceptance of the continuance framework; in that context, a narrow, hyper-technical interpretation by IOCL to obstruct supplies was unwarranted. The judgment also underscores institutional restraint: writ courts can and should protect ongoing business operations against arbitrary public-sector conduct without trespassing into realms reserved for civil courts—hence the safeguard making continuation subject to probate or civil court orders and annual review. These remarks are instructive for public corporations managing distributive channels: facilitation rather than frustration of commerce is expected, particularly where livelihoods and consumer interest are at stake. The Court’s censure of avoidable litigation signals that internal policies must be applied in harmony with foundational contracts, not as instruments to create artificial deadlocks in reconstitution scenarios.

c. GUIDELINES 

The judgment articulates clear guidance on four planes. First, textual fidelity to the deed: when a Partnership Deed (Clause 18) stipulates continuity after a partner’s death and authorizes induction of any competent heir, public-sector counterparties must respect that architecture and cannot demand joinder or NOCs from all heirs as a precondition. Second, contractual discipline under the Dealership Agreement: if a public corporation wishes to end supplies post-death, it must exercise the termination option expressly provided; otherwise, it must either continue with the existing firm or recognize a deed-compliant reconstitution. Third, proper reading of internal guidelines: Clause 1.5 of the 01.12.2008 guidelines permits reconstitution with legal heirs and surviving partners, or with willing heirs when some are unwilling; it contains no universal-joinder mandate. Public entities should not over-interpret guidelines to override the parties’ deed and agreement. Fourth, public law overlay: a state instrumentality should favor continuity of essential supply chains and avoid arbitrary hindrances; courts may issue mandamus to prevent disruption while preserving the jurisdiction of civil courts and probate forums to settle inter se rights. These guidelines ensure that the Partnership Act’s default rule (Section 42) yields to contract in multi-partner firms and that distributive justice considerations inform the application of corporate policies in public supply contexts.

J) CONCLUSION & COMMENTS

The case demonstrates a careful harmonization of partnership autonomy, contractual options, and public law controls over a state corporation. The deed here privileged business continuity and allowed selective induction of heirs; the agreement granted IOCL structured choices, none of which IOCL validly exercised to end the relationship. By insisting on a non-existent “join-or-NOC-by-all-heirs” requirement, IOCL misapplied its own Clause 1.5 and strained the supply chain of an essential commodity. The Supreme Court’s reliance on M/s Wazid Ali Abid Ali v. CIT and cognate High Court authorities coheres with the view that, in such deed-driven partnerships with more than two partners, death does not ipso facto dissolve the firm; it invites reconstitution consistent with the deed’s flexibility. The High Court’s calibrated mandamus—continuity subject to probate or civil court orders and annual review—was vindicated as an appropriate public law response to arbitrary conduct, especially where no heir took issue with the continuation framework. The message for public corporations is unambiguous: apply internal guidelines as enablers that align with contractual instruments, not as hurdles that manufacture stalemates; when in doubt, avoid choking viable enterprises, particularly in sectors touching the public distribution ecosystem. With the SLP dismissed, the jurisprudence underscores that Section 42 must be read with the deed and that administrative discretion must bend to contractual structure and fair dealing.

K) REFERENCES

a. Important Cases Referred

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

b. Important Statutes Referred

i. Partnership Act, 1932, Section 42 (dissolution by death, subject to contract).
ii. Constitution of India, Article 226 (writ jurisdiction protecting continuity).