Federation of Automobile Dealers Associations   Home  Termination of Dealership: Manufacturer Asked by the Court to Take Back Inventory   In an important judgement having far-reaching implications for manufacturers and dealers, the District Judge, Udaipur, has ordered TVS Motor Company to take back the vehicles, spares and accessories lying in the stock of Singhvi Engineers, Udaipur and to pay to the dealer an amount equal to the value of the inventory taken back, pending arbitration proceedings on the dispute regarding termination of dealership. Alternatively, the company could ask any of its other dealers to purchase the inventory lying with Singhvi Engineers. The order was delivered on 15th December 2003. The facts of the case in brief are as under: Singhvi Engineers, Udaipur, Petitioner, had been operating the dealership of TVS Motor Company Ltd. since 1984. On 31-3-03, Singhvi Engineers received a letter dated 21-3-03 from TVS Motor Company saying that the company had granted Singhvi Engineers the dealership from 1-4-2000 to 31-3-03. Accordingly, the letter said, the dealership would automatically come to an end on 31-3-03 after which the Petitioner could not use the TVS Motor Company name/ trademark, etc. in its public dealings. The Petitioner made the submission that it had been carrying on the business of authorized dealership without any problem since 1984 and had deposited Rs. 2,50,000/- with TVS Motor Company as security. As on 1-4-03, it had vehicles stock worth Rs. 27,59,950/-, spare parts worth Rs. 20,00,000/-, and accessories worth Rs. 10,00,000/-. It had claims amounting to lakhs of rupees for free services and other such dues from different customers. Under such circumstances, discontinuation of the dealership was not only against law but also against the terms of the dealership contract. As per the contract, the Opposite Party must have given at least a 90 days' notice before terminating the dealership. However, this was not done and the dealership cancelled abruptly. The Opposite Party, in its response, argued that the dealership was not for an indefinite period and had to be renewed from time to time in accordance with the terms of contract. The Company vide its letter dated 21-3-03 had stated that the dealership was in force from 1-4-2000 to 31-3-03. The Petitioner had been the dealer of TVS Motor Company since 1984, but the dealership was being renewed every three years. TVS Motor Company, accordingly, pleaded that it was not liable to make good the losses incurred by the dealer on its stock and other items, as the Petitioner should have taken note of the fact that its dealership was coming to an end on 31-3-03. The Petitioner contended that having regard to the terms of the dealership contract, TVS Motor Company's notice abruptly terminating the dealership was illegal. Singhvi Engineers prayed to the Court under section 9 of the Arbitration and Conciliation Act, 1996 to direct TVS Motor Company to compensate it for the loss arising out of abrupt termination of dealership due to stock-in-trade or otherwise. The Opposite Party, TVS Motor Company contended that contracts in the nature of 'private commercial transactions' can be terminated and that the order providing interim relief could not be issued by the Court. However, the District Judge, brushing aside the contentions of TVS Motor Company, said that the Court could issue interim order under section 9 of the Arbitration and Conciliation Act, 1996, even after the arbitration proceedings had been initiated. The District Judge further averred that in the interest of justice, the Court could even go beyond what was prayed in the petition and come up with other remedies.

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