Allahabad High CourtM/S Prakash Filling Stataion And ... vs M/S Indian Oil Corporation Ltd. And ... on 19 January, 2011Author:V.K.ShuklaBench:V.K.ShuklaHIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

                                                                 Court No. 21
 
                                                                                    Reserved on 07.12.2010
 
                                                                                    Delivered on 19.01.2011
 

 

 
Civil Misc. Writ Petition No. 45568 of 2009
 

 
M/s Prakash Filling 
 
Station and another 
 
Versus
 
M/s Indian Oil Corporation
 
 Limited and others
 
Hon'ble V.K.Shukla,J.Present writ petition has been filed questioning the validity of the orders dated 23.1.2008 passed by the General Manager, M/s Indian Oil Corporation Limited, terminating the Retail Outlet Dealership of the petitioner and order of its affirmance in appeal dated 19.5.2009 passed by the Appellate Authority/ Executive Director (Retail Sales), M/s Indian Oil Corporation Limited.Brief background of the case is that petitioner has been authorized retail outlet dealer of  M/s Indian Oil Corporation Limited. Petitioner has stated that he has been carrying his business since last 36 years and further submitted that  he is having four underground storage tanks, out of which 3 tanks are of the capacity of 15,000 litres (15KL) while the other  other 1 tank is that of 20,000 (20KL) litres capacity. Petitioner has further stated that 15000 litres capacity tank is used for storing MS (Petrol) and HSD (Diesel) whereas one 15 KL and 20 KL capacity tanks of HSD are lying dry. Petitioner has stated that earlier  IBP Limited  was the company with whom petitioner's dealership agreement was entered into and  the land on which retail outlet has been  commenced had been lease out to IBP Limited initially on 23.12.1972 and said lease was renewed from time to time as per the terms and  conditions of the lease deed. Petitioner has stated that  said lease ultimately expired in  the  year 2002 and same was not  at all renewed. Petitioner claims to have given legal notice to M/s Indian Oil Corporation on 28.6.2007 for vacating of the land and removing their constructions and equipments. Petitioner has stated that  as a counter blast to said legal notice, on 26.9.2007 respondent-company  carried out inspection at the retail outlet and further claims that on the said dates various irregularities have been observed by the team and  same have been recorded in the inspection report.  The Inspection report dated 26.9.2007 reflects following irregularities, which is being extracted below:-(a) The Totaliser Seal was intact 1 HSD DU (Midco Mach) was found loose and came out with Seal intact.(b) Also the Totaliser MS DU came out with Seal intact.(c) Another DUM HSD Tank could not be checked as the RO staff did not open the DU lock and refuse to 0open the panel of the DU. The dealer's representative did not allow to check the density.(d) The RO staff did not allow/cooperative to complete the inspection and did not provide the documents /stock register etc. After totaliser came out the  staff sanatched the totaliser from us
 

 
	Petitioner claims that based on the said inspector report, notice dated 27.9.2007 was issued suspending the sales and supplies from the outlet. Petitioner has stated that said notice was never received by him. Notice dated 27.9.2007 reflected following irregularities, which are being extracted below:-(a) The Inspection was resisted by your staff deployed at your Petrol pump.(b) Documents, sales records pertaining to Pump and sales were not made available during the inspection.(c) The Seal of the Totaliser was found loose which could be taken out easily.(d) Yourself was not present and when contacted over phone (mobile you did not extend any kind of co-operation.Thereafter, another notice dated 12.10,2007 has been issued giving therein details of irregularities as reflected from the inspection report dated 26.9.2007 and also  giving therein reference that sales and supplies was suspended by team on 26.7.2007 and reference was also given of letter dated 27.9.2009. Petitioner has stated that even said notice was not received and notice dated 12.10.2007 observed following irregularities:-(I) Previous Inspection reports and Daily Stock Register not provided by you and your staff to the inspection team.(II) During the inspection Totaliser of HSD DU (Midco Mach) was loose and came out with seal. Also the Totaliser MS DU (Z Line) was in the same condition and sales was continue from the machine.(iii) After  the checking of two DUs, You and your staff could not allow the team for checking records, taking tank dip, delivery of dispensing Units,seal of other DUs etc and refused to carried out of inspection and drawl of sample.(IV) HSD tank number 2 and 3 were dry has told by the staff to the team and did not allow the team for taking the dip.(V) Air facility was not available at RO for customers.(VI) No responsible person was available at RO at the time of inspection.(VII) Poor housekeeping at RO premises.Thereafter  another notice was issued on 22.10.2007 mentioning therein that, sale had not been stopped, reply had not been submitted and petitioner was advised to submit reply within seven days of receipt of the letter. This letter was  followed by another notice dated 24.10.2007 as a last opportunity. Petitioner further claims that notice dated 22.10.2007 and 24.10.2007 were duly replied by the petitioner on 16,.11.2007. Petitioner has stated that during period from 26.9.2007 till 26.10.2007 when sale was suspended, no fresh supply was given by the respondents-corporation and petitioner was selling the old stock only. Petitioner has stated that there was no violation of  Marketing Discipline Guidelines,2005  and further it has been stated that on 30.9.2007 through their stockist Indian Oil Corporation sold the Mobile Oil to petitioner. Petitioner has stated that not only this respondent's corporation also accepted the bank of Rs. 1,70,000/- dated 24.9.2009 and Bank Draft dated 1.10.2009 for a sum of Rs. 2,26,225 for supply of HSD. Petitioner has stated that thereafter order has been passed cancelling dealership on 23.1.2008. Against the same, appeal  has been preferred and same has also been dismissed on 19.5.2009. At this juncture present writ petition has been filed.Pleadings inter-se parties have been exchanged and thereafter present writ petition has been taken up for final hearing and disposal with the consent of the parties.Sri. V.K. Birla, Advocate, learned counsel for the petitioner contended that  in the present case seal of totaliser in question was not found tampered  with and as such by no stretch of imagination order terminating dealership could have been passed  on the said score and coupled with this factum of non cooperative, is belied from the circumstances  that density has been checked up by official  and coupled with this reasonable opportunity  has not been provided for  as at no point of time any notice for stopping sale had  ever been received as such on the said  ground action taken is vitiated.Countering the said submission, Sri P. Padia, Advocate representing M/s Indian Oil Corporation on the other hand contended that dealership  has to act strictly in consonance with the Marketing  Discipline Guidelines, 2005  and here action which has been taken is  strictly as per parameter provided for, as totaliser has been found to be tampered and  there has been complete  non cooperation on the part of the petitioner, and in spite of sale being stopped, recklessly sale was  being made in breach of said directive as such writ petition be dismissed.After respective arguments have been advanced, this much is accepted position that Marketing Discipline Guidelines, 2005  for petrol and  diesel retail outlets have been enforced to facilitate the marketing of these petroleum products by the dealers of Public Sector Oil Marketing Companies on the principles of highest business ethics and excellent customer service. These guidelines have been enforced to ensure quality of product and service, enforcing stricter discipline amongst the dealership network and preventing malpractices in the sale of petroleum products. Marketing Disciplines Guidelines, 2005  also deals with procedure for handling of  products at retail outlet by dealers. As per Marketing Disciplines Guidelines, 2005 it is the responsibility  of dealers to supply product of correct quality and quantity and provide  excellent customer service and  in this direction at the  time of arrival of tank lorry, the dealer is obliged to match the details of invoice with the receipt of consignment in the following manner. (i) Tank Lorry No.(ii) Seal/Security Lock No. (iii) No. of compartments and quantity/product contained therein. (iv) The time tank lorry left Supply Point. (v) Recorded Density at 15  Degree C. Even at the time of decanting of product, dealer is obliged to carry out various formality provided for under Clause 1.2. Dealer is obliged to maintain and follow quality and  quantity control measures. Under Clause 1.4.2 (a) of 2005 Guidelines, it is duty of the dealer to take on daily basis  the Weights and measures seal in the Metering Unit/Totaliser of the dispensing units for correctness and also that Weights and  Measures certification of the units is valid. It is also provided that in case W&M/ totaliser seals are found tampered, sales through the concerned dispensing unit should be suspended forthwith and matter reported immediately to oil company, sales to remain suspended till the seals are replaced.  Chapter 4 of Marketing Discipline Guidelines deals with maintenance of company  equipments at retail outlets. Clause 4.1 deals with dispensing units standardisation of fitters/Chargemans maintenance report format provided in Annexure-2. Clause 4.2 deals with maintainable of pumps and other equipments, and clearly provides that Oil Company shall attend breakdown maintenance of Dispensing pumps, and it is the responsibility of dealer to ensure that these equipments are handled in just and proper manner and day to day upkeep are carried out. Clause 4.3 deals with rectification of defects in dispensing  units / pipeline/ tanks. Chapter 6 deals with irregularities at retail outlet. Clause 6.1.3 deals with short  delivery of products. Clause 6.1.4 cover the  field of totaliser seals found tampered with. Clause 6.1.4 of Marketing Discipline Guidelines 2005 is being extracted below :-6.1.4 TOTALISER SEALS FOUND TAMPERED WITH
 
     If intended tampering of the Totaliser seals are established leading to manipulation of totaliser reading, with Weights & Measures seals intact. Penal action as given in Appendix-1 to be taken.The plain language of the aforementioned  provision would go to show that if intended tampering of totaliser seals are established leading to manipulation of totaliser reading with Weights and Measures seals intact, then penal action  as given in Appendix 'A' has to be taken. Marketing Discipline Guidelines 2005, contains Appendix I,II, III respectively, wherein, penal action vis-a-vis irregularity has been specified. The note to the Chapter 6 of Marketing Discipline Guidelines note 1 clearly provides that the general guidelines and the penal actions prescribed therein in Appendix 1 are minimum, and the competent authority can take appropriate higher punitive action against the erring dealer, if deemed necessary including termination in the first or any instance. Note VIII, proceeds to mention that in case of irregularities not specifically covered/mentioned, the competent/ appropriate authority of the concerned oil company shall impose proper penalty/or issue warning after  enquiry and in accordance with principal of natural justice. Thus for ensuring quality/quality all wide powers  are there, but before taking action principal of natural justice has to be complied with, and the irregularity has to be established before any penal action is taken against dealer.  The said guidelines in question are non statutory in character. Indian Oil Corporation stands the test of other authority as provided for underArticle 12of the Constitution of India. The action of Indian Oil Corporation, can always be examined by this court, in exercise of its authority underArticle 226of the  Constitution of India, on the parameters of judicial review provided for, when complaint is made that action taken is  arbitrary/unreasonable  so as to violate the constitutional mandate ofArticle 14or for other valid reasons action taken is bad such as passing order without jurisdiction, order  passed in violation of principle of natural justice,  relevant factors not considered and irrelevant factors considered,  decision was one which reasonable person would not have  taken on the material available on record; proportionality and on the ground of abuse of power / fraud on power. Hon'ble Apex Court in the case ofHindustan Petroleum Corporation Vs. Super Highway Servicesand other 2010 (3) SCC 321, has taken the view that cancellation of dealership agreement of party is serious business  and cannot be taken lightly. In order to justify the action taken to terminate such an agreement, the authority concern has to act fairly and in complete adherence to the rules/guidelines framed for the said purpose. In the said case action taken has been disapproved being in violation of principal of natural justice.In the present case  inspection was carried out at the retail outlet of the petitioner  and therein totaliser seal was intact  but HSD DU (Midco make)was found loose and came out with seal intact. The totaliser of MS DU (Z line) also came out with Seal intact. Another DU on HSD tank could not be checked as the RO staff did not open the DU lock and refuse to open the panel of the DU. The dealer's representative did not allow to check the density. The RO staff did not allow/cooperate to complete the inspection and did not provide the documents /stock register etc.
 
	Inspection  report submitted by the Inspecting Team clearly pointed out the irregularities which were in existence  at the point of time when inspection had been carried out. Petitioner's emphasis is that in the present case seal of totaliser were intact and  so were  the seals of weights and measure department in such a situation and in this background it cannot be said that totaliser seal were found tampered and as such drastic action could not have been taken  and further refusal of dealer to allow drawl of sample/ or carrying out inspection entailed penal action at the first instance by imposition of fine of Rs. 50,000/-; at the second instance by imposition of fine of Rs. 1,00,000/-along with suspension of sale for 45 days and 90 days respectively and at the third instance penal action of termination, and here their point of view though placed has not at all been considered.In the present case most surprising feature is that two dispensing units were permitted to be examined namely HSD DO (Midco make) and MS DO (Z Line) and qua both the dispensing units seals were intact, but totaliser  of both the dispensing units came out with seals intact. The third dispensing unit was not permitted to be  examined. This is too much of  a co-incidence and  same clearly gives a prima facie impression of manipulation and manevuouring  being there. It is true, that under Clause 6.1.4, if intended tampering of seals are established leading to manipulation of totaliser reading, with weights and measures seals intact, penal action as given in Appendix 'A' is to be taken,  but the Corporation has reserved for itself qua irregularities not specifically covered, to impose proper  penalty, after enquiry, in accordance with principal of natural justice. In cases where totaliser itself comes out with seals intact, with weights and measure seals intact and it is established that same is intended to manipulate the totaliser reading, then the same is equally serious irregularity entailing serious  penal action, as net effect of the same is that for all practical purpose totaliser is there, but not fulfilling the object for which it has been installed. Strictly speaking this is not the tampering of seal, but if established same would tantamount to tampering with entire  totalising system itself i.e. frustrating the very object of putting totaliser  and qua the same Corporation is entitled to make enquiry and accord penalty accordingly.In the present case, as to whether totaliser has been functioning at the point of time when it has been taken out, or the same has been kept on hold by illegal means qua the same no finding has been returned. Coupled with this, finding has been returned that had appellant not indulged in tampering of totaliser  of dispensing units, there  was no need for his staff for not allowing the inspection team to carry out checking of totaliser of other dispensing units. The inspection report itself indicates, that on mobile phone inspecting team was informed that inspection be completed, when petitioner reaches the outlet and  thereafter further note was made problem at retail outlet, and on instruction of Manager (RS) Bareilly site was left. Thus this is accepted position that petitioner had requested  to wait for him, and thereafter what further development had taken place which prompted the inspecting team to leave has not at all been discussed. In the present case all these aspect of the matter has not at all been examined whereas in the reply so submitted, all such plea has been raised and specially that on the day when inspection was carried out there was Shradh ceremony of his father. On charge no.1 matter requires re-consideration.Next issue raised is in respect of  R.O. was found selling unauthorizedly on 19.19.2007 i.e. 22 days after the first intimation and even 7 days after the second intimation. Notice has been  sent by the  registered post at the address mentioned. Clause 24 of agreement at page 36 of the paper book contains condition to the effect, that any notice or communication from the company to licence shall be deemed to have been served on licensee, if it is dispatched by post in cover addressed to them at the address furnished. Petitioner has clearly stated that at no point of time, the two letters dated 27.9.2007 and 12.10.2007 had ever been received by him send by registered post under receipt No. 7803 and 2801 respectively. No finding has been returned as to whether these two letters had been actually served or that the petitioner had knowledge of these two letter and in spite of the same had indulged in illegal sale of products. Second charge also requires reconsideration
 
	Consequently, orders dated 19.5.2009 passed by the Executive Director (Retail Sales)/ Appellate Authority, M/s Indian Oil Corporation Limited and 23.1.2008 passed by the General Manager, M/s Indian Oil Corporation  are hereby quashed  and set aside. However, authority concern is directed to take fresh decision in accordance with law, preferably within period of next four months from the date of production of certified copy of this order.  Passing of this order would not ipso-facto entitle the petitioner to resume  business unless and until, charges are cleared and fresh order is not passed.With these observations, writ petition is allowed.Dt.  19.01.2011
 
T.S.