M/S Lakshami Narain Maheshwari, ... vs Bharat Petroleum Corporation ...
2017 Latest Caselaw 8023 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

RESERVED
 
Court No. - 37
 
Case :- WRIT - C No. - 7554 of 2006
 

 
Petitioner :- M/S Lakshami Narain Maheshwari, Bharat Petroleum Corp. & Ors
 
Respondent :- Bharat Petroleum Corporation Ltd. Thru' Its Territory M.
 
Counsel for Petitioner :- H.R. Mishra,Somesh Khare
 
Counsel for Respondent :- S.N. Srivastava,A.P.Srivastava,S.C.
 

 
Hon'ble Amreshwar Pratap Sahi,J.

Hon'ble Saral Srivastava,J.

This writ petition has been filed praying for quashing of the orders that have been passed against the petitioner, a petroleum dealer whereby the license of the petitioner under the memorandum of agreement copy whereof is annexure no.2 to the writ petition has been cancelled and terminated.

The petitioner has also challenged the earlier order of penalty passed on a previous occasion and also restraining supply of petroleum products for a particular period. The orders dated 6th January, 2005 and 21st July, 2005 annexure nos. 14 and 27 respectively passed by the respondent no.2 have been prayed to be quashed with a prayer to quash the sample test reports that have given rise to the aforesaid orders and for the restoration of the license and to allow the petitioner to run the petroleum outlet.

At the very outset, we may mention that the petitioner had earlier filed the writ petition where certain amendments were sought but the writ petition was dismissed as withdrawn with liberty to file a fresh writ petition vide order dated 13th December, 2005. Consequently, the present writ petition was filed where again an amendment was sought that was allowed on 2nd May, 2012. The parties have exchanged their affidavits, whereafter this matter has come up before us finally.

Sri H.N. Singh, learned Senior Counsel for the petitioner assisted by Sri Manish Tandon advanced his submissions by stating the facts giving rise to the controversy and has assailed the impugned orders primarily on the following grounds:-

A- That the sample testing has not been carried out in the manner as prescribed in the Marketing Discipline Guidelines of 2001 by not permitting the sample testing as requested by the petitioner.

B- That the impugned orders have been passed by the Territorial Manager and not by the Regional Manager who was the competent authority to deal with the request of a sample testing.

C- That there was a clear variation indicated within the permissible limits of the density of the sample collected which was not attributable to the petitioner but the same indicated an attempt to adulterate the sample when it was in the custody of the respondents.

D- There is no allegation of tampering of the seal which remains intact and was a seal that was fixed by the Weights and Measure Department, hence the penalty of termination could not have been imposed on the appellant.

E- That the petitioner has clearly denied the existence of any electronic device on the strength whereof the allegation of short supply could be made and by ignoring the said reply the impugned order of cancellation has been passed that is vitiated.

F- That there was no admission on the part of the petitioner or acquiescence to the order dated 1st May, 2005 impugned herein, inasmuch as, the penalty had been deposited by the appellant under protest and therefore, it was still open to challenge.

G- That no special reasons have been recorded for otherwise terminating the license under the terms of the agreement so as to deviate from the stage wise procedure prescribed for penalties.

The said arguments have been refuted by Sri Satendra Nath Srivastava, learned counsel for the Bharat Petroleum Corporation contending that the guidelines clearly permit the termination of the license at any stage which is not withstanding the stages provided for in the annexure appended to the guidelines. Even otherwise, Clauses 7, 9, 10 12, and 13 of the license agreement read together leave no room for doubt that bereft of the guidelines the agreement would bind the parties and the license is terminable under the aforesaid clauses by simply giving a notice. He submits with the strength of the averments made in paragraph 29 of the counter affidavit that even if the seal put by the Weights and Measure Department was intact, the installation of the electronic device by the petitioner for short delivery was nowhere concerned with the same as it had been installed in the upper portion of the pump which is separate from the sealing unit that is installed and placed at the lower end of the dispensing unit. He submits that this was a special reason found by the authorities to terminate the license of the petitioner forthwith. Sri Srivastava, even though reluctantly, has placed reliance on a Division Bench judgment in the case of Mitthan Lal Gupta Vs. District Magistrate, Etah and another 2000 (3) AWC 2019 paragraph 7 to contend that the petitioner cannot take any benefit of the provisions of Section 20 of the Petroleum Act, 1934 to raise any plea on that count.

Responding to the aforesaid counter on behalf of the Bharat Petroleum Corporation, Sri H.N. Singh has urged that any violation of procedure relating to sample testing resulting in termination of dealership has been viewed seriously by the Apex Court and, therefore, any violation of the guidelines vitiates the impugned order. He has relied on the judgment in the case of Hindustan Petroleum Corporation Ltd and others Vs. Super Highway Services and another 2010 (3) SCC 321 and the judgment in the case of Bharat Petroleum Corporation Ltd Vs. Jagannath and Company and others 2013 (12) SCC 278. Learned counsel for the petitioner has further invited the attention of the Court to the specific guidelines applicable to the controversy that shall be discussed hereinafter.

The facts that emerge after exchange of pleadings are that in 2002, the petitioner was granted the license to run the dealership of petroleum product including motor spirit and high speed diesel oil. An inspection was carried out on 20th September, 2004 and samples of the Petroleum products were taken by the Company officials on the basis whereof a laboratory test was carried out and a sample report was submitted on 20th October, 2004 before the Competent Authority. A show cause notice dated 18.12.2004 was served on the petitioner on 26.12.2004 and on 31st December 2004, the petitioner instead of submitting a complete reply tendered a request for re-testing of the samples that were retained by the dealer as per the marketing guidelines of 2001. The impugned order dated 6th January, 2005 was passed stopping supply of the petroleum products for specified period and a penalty of Rs.20,000/- was imposed. The petitioner deposited the penalty which according to him was under protest but the fact remains that the said order dated 6th January, 2005 was not assailed then. It has, however been challenged now.

The aforesaid inspection which had been carried out resulted in an allegation of variation in density as well as Research Octane Number. The allegation was that the requirement of the Research Octane Number is 88 which was found to be 85.9 which is below the standard fixed. This reflected some sort of adulteration. There was also a variation in the density but the same was within the permissible limits. On the strength of such report, show cause was issued on 18.12.2004 to which a reply was given on 31.12.2004. The said reply on 31.12.2004 only made a request for re-testing of the sample as retained by the petitioner under the Marketing Discipline Guidelines of 2001.

Learned counsel for the petitioner has invited the attention of the Court to the guidelines contained in Annexure No. 3 to urge that the samples have to be collected at the supply locations and at the retail outlets. The samples are required to be drawn by the dealer from the tank lorries and by the Sales Officer's while inspection, the officers are required to draw samples through the nozzles of the dispensing unit from all the tanks of motor spirit and high speed diesel. The inspecting officials are to retain their samples and simultaneously the dealer has to retain his sample. Two samples are to be retained by the dealer, two samples at the Regional office, and two samples are to be sent to the nearest oil industry marketing laboratory for testing. According to the petitioner, such samples were retained by the dealer and after having received the show cause notice, the request was made for getting the same tested which is permissible as per Clause C of the general points to be observed in all cases. Clause C of the guidelines is extracted hereinunder:-

"In the event of request for retesting by the dealer/transporter, the same to be considered on merits by the Regional GM. The sample of Retail Outlet retained by the dealer should be sent for retesting."

According to the learned counsel for the petitioner, this is a procedure that has been introduced that supplements Section 20 of the Petroleum Act 1934, Section 20 is extracted hereinunder:-

"20. Right to require re-test:- (1) The owner of any petroleum, or his agent, who is dissatisfied with the result of the test of the petroleum may, within seven days from the date on which he received intimation of the result of the test, apply to the officer empowered under Section 14 to have fresh samples of the petroleum taken and tested.

(2) On such application and on payment of the prescribed fee, fresh samples of the petroleum shall be taken in the presence of such owner or agent or person deputed by him, and shall be tested in the presence of such owner or agent or person deputed by him.

(3) If, on such re-test, it appears that the original test was erroneous the testing officer shall cancel the original certificate granted under Section 19, shall make out a fresh certificate, and shall furnish the owner of the petroleum, or his agent, with a certified copy thereof, free of charge."

The petitioner contends that inspite of the request made on 31st December, no such procedure was followed, and the impugned order dated 6th January, 2005 was passed. The said order is Annexure 14 to the writ petition. The same records that the notice had been issued to the petitioner and he gave a reply on 31st December, 2004 which was not found to be satisfactory. Consequently, the penalty of withholding and suspending sales and supply of petroleum product for thirty days was imposed with effect from 15.01.2004 and a penalty of Rs.20,000/- was also slapped on the petitioner.

As noted above, the petitioner deposited the penalty amount and after the gestation period again started operating the unit.

A second inspection was carried out on 18th May, 2005 and this inspection report contained the allegation of short delivery of 100ml per 5 litres dispensation of petroleum product with the aid of a modified electronic circuit installed with an additional toggle switch arrangement. The same report also mentions that the Weights and Measures Department seal was intact and the density variation was within permissible limits. Based on the said report, the petitioner was issued a show cause notice on 19th May, 2005 where eleven allegations were made to the following effect.

"1. Variation in MS was found beyond permissible limit at 1695 litres.

2. Both the dispensing units of MS were delivering short by 100ml in 5 litres measure.

3. It was observed an additional unauthorized fitment to modify electronic circuit of ERA (Electronic Register Assembly) card was installed by you on both the MS units for the purposes of making short delivery. Additional toggle switch was found installed on the units, to operate this fitment for making short delivery.

4. The First Aid Box did not have items needed for first aid.

5. The certificate of calibration for 5 litre measure was not available at the Retail Outlet.

6. Toilet was fond dirty & devoid of water. It was stated by your representative that bore well motor was out of order at that time.

7. There was no Air Boy to provide air.

8. Lube prices were not displayed in the salesroom.

9. Message regarding availability of complaint / suggestion book was not displayed at the Outlet.

10. Water dip record not maintained.

11. Extract of explosive's rules not displayed in Retail Outlet Premises."

This was followed by another show cause notice dated 31st May, 2005 which also contained the allegation of the previous penalty imposed on the petitioner on 6th January, 2005 and was made the basis of the allegations, in order to terminate the license of the petitioner. The sample report had arrived on 26th May, 2005, whereafter this notice was issued which indicated a variation in the contents of sulphur indicating adulteration. The requirement of 0.10 % was stated to have been violated as the sample report indicated the percentage by Mass as 0.44%. The petitioner submitted a reply on 15th June, 2005 and in this reply, the petitioner again made a request for a fresh sample test as per the guidelines. No order of re-test was passed and was refused, and simultaneously the impugned order dated 21st July, 2005 has been passed terminating the license of the petitioner.

Having heard learned counsel for the parties and having traversed the aforesaid facts that are on record what we find is that so far as the order dated 06.01.2005 is concerned that related to an allegation of deviation of the Research Octane Number which relates to the contents of the petroleum product the testing whereof was carried out. The petitioner has taken a categorical stand that in response thereto he had made a request on 31.12.2004 for a re-testing of the sample in terms of the Marketing Discipline Guidelines, 2001 extracted hereinabove.

Even otherwise there was a statutory right conferred to avail of such a benefit. We may put on record that the licensing and award of dealer-ship may be under an agreement, and some guidelines, but they are all statutorily controlled by the Petroleum Act, 1934 and the Rules framed thereunder. This statutory back-up therefore enables the Corporation to take appropriate action in the matter. It would not be inappropriate to mention that unless there is a statutory authority conferred to impose penalty, the same can not be a matter of simple guidelines and it is for this reason that a statutory protection has been given under Section 20 for ensuring that the sample testing is carried out in case of a dispute at the instance of the dealer. Section 20 deals with storage of petroleum as well and it does not carve out any distinction with regard to the form of storage and the agent authorized to store the same. In our opinion Section 20 does apply in the case of retail outlet dealers as presently involved. The Division Bench judgment in the case of Mitthan Lal Gupta Vs. District Magistrate, Etah and another (Supra) high speed diesel oil and light diesel oil petty dealer who was found to have adulterated the same with kerosene and was a licencee under the Control Order of 1981. In the instance case this is a direct investigation carried out on an inspection made by the company officials themselves. We therefore do not find the judgment in the case of Mitthan Lal Gupta Vs. District Magistrate, Etah and another (Supra) to be laying down a law of universal application and the same would not apply on the facts of this case.

The respondents were therefore under an obligation to have considered the request of re-testing of the petitioner as per his request dated 31.12.2004 which admittedly was not done and the order dated 06.01.2005 was passed simply stating that the reply of the petitioner was not satisfactory. We may put on record that there was virtually no reply on the merits of the matter as the petitioner had requested for a re-testing in order to verify the status and contents of the sample itself which had been made the basis of a report utilized against him. The petitioner was therefore denied an opportunity that was available to him as per the provisions aforesaid and for which no reasons were given when the order dated 06.01.2005 was passed. The petitioner deposited the penalty and then continued to operate the petroleum outlet which according to him was under protest. We therefore find that the statutory provisions as well as the guidelines were clearly violated and the re-testing was inappropriately denied to the petitioner. Learned counsel for the petitioner has rightly relied on the judgments cited by him that support the said contention.

Coming to the second charge that arose out of the inspection that was carried out on 18.05.2005 where the shortage of delivery is the main charge, the charge against the petitioner was clearly that both the dispensing units of motor spirit at the out-let were delivering shortened amounts of petroleum at the rate of 100ml per 5 ltrs. measure. It was found that an additional unauthorized fitment to modify the electronic circuit of the Electronic Register Assembly card was installed on both the dispensing units of motor spirit that was adopted as a device to facilitate the short delivery. Additional toggle switch was found to have been used to operate the said fitment.

The only denial made by the petitioner in his reply is that no such device was installed by the petitioner and in the additional reply which was submitted it was further improved upon by saying that the same was not found to have been installed as alleged at the time of inspection.

The impugned order categorically records that the inspection had been carried out in the presence of the employees/agents of the petitioner who were present when the inspection was made on 18.05.2005. These allegations and counter allegations therefore have to be assessed in the background that there appears to be no reason as to why the respondent/Corporation and its inspection team would make a false allegation, that too even with regard to an electronic device the description whereof is specifically mentioned in the report as well as in the show cause notice. If there were any such prejudices or malafides other allegations could also have been made but we do not find any foundation for the same and therefore the denial about the discovery of the unauthorized electronic device by the petitioner appears to be a bald denial with a view to escape liability. The inspection was witnessed by the agents of the petitioner as is evident from the inspection report itself. The shortage of delivery was not on account of the agents themselves doing it in any individual case but it was in the nature of a fixed device that was operated upon with a switch for making short delivery. The shortage in delivery itself was noted in the inspection report. We have not been able to gather any reason so as construe that the said allegation was a false allegation. It is not the allegation of the petitioner that the device was planted, nor any explanation or evidence was adduced to establish that the device had been planted to falsely implicate the petitioner. Consequently the charge of shortage of delivery was clearly established with the presence of an additional unauthorized fitment operated by a switch that was operational. We accordingly, can not accept the contention raised on behalf of the petitioner on this count nor is the explanation given by it is acceptable.

The argument advanced by Sri H.N.Singh, learned Senior Counsel is that the petitioner could not have been punished with termination of license at the first instance of such discovery, and even assuming that it was a second instance then too even, according to the penalty procedure the stage of termination of licence would have arisen at the fourth stage default. The respondents according to him had violated their own procedutral guidelines to that effect.

We are unable to accept this contention inasmuch as the applicability of stage-wise punishment procedure as contained in annexure (iv) to the guidelines dated 26.06.2001 is concerned, the same is subject to the following paragraph clearly mentioined therein :

"This is to inform you that Ministry of Petroleum & Natural Gas has approved MDG 2001 vide it letter No.P-21025/4/95-Dist dated 12.4.2001.

In view of the above, attached please find ---

(i)Procedure for handling of Petroleum Products at Retail outlet by Dealers (Annexure-i).

(ii) Procedure for selling, distribution or supply of Kerosence under Public distribution System (Annexure - ii).

(iii) Sampling Procedure (Annexure--iii).

(iv) Details of Penal Action for Major & Minor Irregularities (Annexure - iv).

The details mentioned at point iv above are general guidelines and notwithstanding what has been stated above,k the Competent Authority of our Company can take appropriate higher punitive action against erring dealer including in the first or any instance. Further, in case of irregularities not specifically mentioned covered above, the Competent Authority shall impose proper penalty and/or issue warning letter after enquiry and in accordance with the principles of natural justice."

In view of the aforesaid categorical authority under the guidelines, it is evident that a higher punitive action can be taken at any stage subject to the satisfaction of the authority. The argument of the learned counsel for the petitioner that some special reasons have to be shown for the same. We find on record that this shortage of delivery being attempted through the utilization of an unauthorized electronic equipment was itself a special reason and the same has been recorded to be one of the main reasons for terminating the license of the petitioner.

There is yet another reason namely that the agreement containing the license awarded to the petitioner contains independent clause for terminating the dealership in the wake of the aforesaid findings. There is a clear breach of the terms and conditions of the clause that have been relied upon by the learned counsel for the respondents and noted hereinabove. A perusal of the said clause leaves no room for doubt that even of the guidelines bereft the company could have taken action against the petitioner for the breach that has been found to be established and indicated hereinabove. The petitioner therefore can not escape the major penalty of termination even if minor faults are not found to be proved.

Thus even though we have found that the sample testing procedure had not been strictly adhered to by the Corporation in relation to the earlier inspection resulting in the order dated 06.01.2005, yet in view of the findings with regard to the short delivery as observed hereinabove we do not find any error in the conclusion drawn by the authority in proceeding to terminate the licence of the petitioner.

Sri Singh contended that in the second round of inspection also the sample testing has been carried out in violation of the guidelines by not allowing the sample retained by the petitioner to be tested. The testing of the sample is for the qualitative contents of the petroleum product. So far as the shortage of quantity is concerned the same was already established with the measurement carried out at the time of inspection. Thus even assuming that the sample testing procedure had not been adhered to even during the second inspection, the same would not make any difference as the main charge relating to shortage of delivery stood proved. The company therefore was not under any obligation to wait for fourth stage to arrive to impose the penalty of termination.

In view of the aforesaid finding it is not necessary for us to delve into the other short comings and the explanation given by the petitioner as the issue relating to short delivery has been answered affirmatively by us against the petitioner.

The writ petition accordingly fails and is hereby dismissed.

Order date:- 15.12.2017

Arif/S.Chaurasia/R./