Gujarat High Court
Sandip Dalpatbhai Kikani vs Indian Oil Corporation on 7 June, 2022
Bench: Vaibhavi D. Nanavati
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10455 of 2021
With
CIVIL APPLICATION (FOR INTERIM RELIEF) NO. 1 of 2021
In
R/SPECIAL CIVIL APPLICATION NO. 10455 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
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1 Whether Reporters of Local Papers may be
allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair
copy of the judgment ? NO
4 Whether this case involves a substantial
question of law as to the interpretation of the
Constitution of India or any order made
thereunder ?
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SANDIP DALPATBHAI KIKANI
Versus
INDIAN OIL CORPORATION
==================================================
Appearance:
MR. SUNIT SHAH WITH MR BHARAT T RAO(697) for the
Petitioner(s) No. 1
MR. MUNJAAL M BHATT(8283) for the Respondent(s) No.
1,2,3
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C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
CORAM:HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 07/06/2022
ORAL JUDGMENT
Issue Rule returnable forthwith. Mr. Munjaal M. Bhatt,
learned counsel appearing waives services of notice of Rule on
behalf of the respondents.
1. By way of the present petition under Article-226 of
the Constitution of India, the petitioner herein has prayed for
the following reliefs:
"A. Your Lordships may be pleased to admit this Special Civil
Application;
B. Your Lordships may further be pleased to issue a writ of
certiorari and/or any other appropriate writ, order or direction
in the nature of Certiorari quashing and setting aside the
impugned Order No. DRP/IOC/RET/0004/2020, Dated:28/06/'21
and the Order No.RDO/R/5310, dated 18/01/'20 Annexure A &
B holding it to be ex-facie illegal, arbitrary, capricious,
perverse, and de-hors the Marketing Discipline Guidelines, 2012
and is liable to be quashed and set aside forthwith in the facts
and circumstances of the case and in the interest of justice;
C. Pending the admission, hearing and final disposal of this
petition, Your Lordships may be pleased to stay the execution,
operation and implementation of the impugned order No. DRP/
IOC/RET/0004/2020, Dated:28/06/'21 to meet with the ends of
justice;
D. Any other and further relief as thought fit may kindly be
granted."
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
2. The brief facts leading to the filing of the present
petition are stated thus:
2.1. The petitioner and the respondent corporation
entered into a dealership agreement on 25.02.2013, permitting
the petitioner to run retail outlet for selling high-speed diesel
and petrol at Village: Kunkavav, Dist.: Amreli for 15 years. It
is stated that the dealership agreement firstly entered into
between the respondent-Corporation and father of the
petitioner - Shri Dalpatbhai Ghusabhai Kikani in the year
1994. After petitioner's father expired on 21.08.2012, the
dealership was entered into between the petitioner and
respondent-corporation w.e.f. 25.02.2013.
2.2. On 13.05.2013, W & M department undertook the
calibration work of the petitioner's outlet and issued certificate
No. 59 of even date. It is stated that the said certificate would
be in force for a period of one year i.e. till 12.05.2014. The
respondent - Corporation thoroughly inspected the dispensing
unit on 11.07.2013 and 10.10.2013 and as per the checking
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
report, the seal on nozzles and totalizer were found intact and
the delivery of 5 Liters was also found Ok and within limit,
accordingly, reports were issued.
2.3. On 04.12.2013, the Anti-Adulteration Cell (AAC) of
the corporation inspected the dispensing unit of the petitioner.
In the said inspection report dated 04.12.2013, the AAC found
the seals on nozzle and totalier intact and also the delivery ok
and within the limit and issued report on 04.12.2013. The
report however recorded that the calibration was done on
22.05.2013 and that the K-factor was changed. Consequent
thereto, it appears that the respondent corporation issued a
fact finding / show cause notice dated 05.12.2013 to the
petitioner calling upon the petitioner to explain about the e-
calibration work dated 22.05.2013 qua the nozzle-A after
Weight & Measures Department stamping and undertaking the
work of calibration on 13.05.2013. It is stated that after the
calibration work dated 13.05.2013 was done and the seals were
put by the W & M Department, no such calibration was done
at the instance of the petitioner. The seal was put by the
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
respondent department on both the nozzles and the seal was
also put on totaliser.
2.4. The petitioner replied to the show cause notice on
20.12.2013 clarifying the fact that the outlets were brand-new
and installed before a week and that the petitioner was
innocent and not played any role. The respondent corporation
formed a committee of 5 members to investigate the cause of
change in the K-factor. It appears that the committee had to
undertake the calibration / hardware change / software change
logs from the subject DU. It observed that there is no
hardware or software change done to the DU from the date of
installation. The report further records the reason of voltage
fluctuation at the RO (Retail Outlet) and that the dealer to
submit the certificate of calibration dated 22.05.2013.
2.5. The petitioner on apprehension that the respondent
- Corporation would terminate the dealership, filed Civil Suit
being Regular Civil Suit No. 60 of 2014 against the respondent
Corporation and the State authorities before the Court of
Principal Civil Judge, Amreli for declaration and permanent
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
injunction. The said suit is pending adjudication. The Court
below rejected the application filed by the petitioner below
Exh.5 and 16 by common judgment and order dated
17.06.2014.
2.6. The petitioner being aggrieved by the said judgment
and order dated 17.06.2014 passed below Exh.5 and Exh.16,
preferred an Appeal being Civil Misc. Appeal No. 13 of 2014
in the Court of Principal District Judge, Amreli. The Appellate
Court dismissed the appeal filed by the petitioner observing
that the petitioner is permitted to do his business till date but
did not protect the petitioner by oral dated 15.05.2015.
2.7. Being aggrieved and dissatisfied by the said order
passed in Civil Misc. Appeal No. 13 of 2014, the petitioner
approached this Court by filing Special Civil Application No.
8860 of 2015 on 25.05.2015. The coordinate bench of this
Court by an order dated 26.05.2015 issued notice and notice as
to interim relief. One Mr. B.P. Mohanti, Chief Divisional Retail
Sales Manager, IOC, Rajkot Divisional Office, Rajkot issued
show cause notice dated 25.05.2015 calling upon the petitioner
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
to show cause as to why the action including the termination
of dealership agreement should not be taken against the
petitioner within 10 days. The said notice came to be served
upon the petitioner on 27.05.2015. The petitioner challenged
the said show cause notice by preferring Special Civil
Application No. 9025 of 2015. By an order dated 15.04.2019,
the coordinate bench of this Court permitted the petitioner to
approach the authority and further permitted to respond to the
show cause notice and to file a fresh reply to the show cause
notice, over and above the reply already submitted. By further
directing the interim relief which was granted by the order
dated 03.06.2015 to be continued till the respondent authority
took a decision.
2.8. The respondent authority by an order dated
18.01.2020 terminated the dealership agreement dated
25.02.2013. Being aggrieved by and dissatisfied with the said
order dated 18.01.2020, the petitioner was constrained to
challenge the said order by filing Special Civil Application No.
2699 of 2020. The respondent authority in the said application
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
appeared on caveat and submitted that it was open for the
petitioner to avail alternative remedy under Clause-8.9 of the
Marketing Discipline Guidelines (MDG-2012). The coordinate
bench of this Court by oral order dated 05.02.2020, permitted
the petitioner to approach the appellate authority and the said
interim relief was continued till such application was decided.
The petitioner preferred an appeal on 25.02.2020. The said
appeal came to be dismissed by Dispute Resolution Panel (DRP)
by an order dated 28.06.2021. Being aggrieved and dissatisfied
by the said order passed by the DRP dated 28.06.2021, the
petitioner has approached this Court seeking the reliefs as
referred herein-above.
3. Heard Mr. Sunit Shah, learned counsel with Mr.
B.T. Rao, learned counsel appearing for the petitioner and Mr.
Munjaal M. Bhatt, learned counsel appearing for the
respondent- Indian Oil Corporation Limited (IOCL).
SUBMISSIONS ON BEHALF OF THE PETITIONER:
4.1. Mr. Sunit Shah, learned counsel appearing for the
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
petitioner submitted that by way of the present petition,
petitioner challenged the order dated 18.01.2020 terminating
the dealership agreement dated 25.02.2013 and also order
dated 28.06.2021 passed by the Dispute Resolution Panel
nominated by Oil Marketing Company in Appeal No. DRP/IOC/
RET/0004/2020.
4.2. Mr. Shah, learned counsel submitted that since
1994, dealership was in the name of the petitioner's father and
after death of his father on 21.08.2012, dealership was
transferred in favour of the petitioner and executed the
dealership agreement in favour of the petitioner on 25.02.2013.
Mr. Shah, learned counsel submitted that there were 2
dispensing units for diesel with single nozzle, viz. One unit of
Zetline company and one unit of Applab company. Apart from
the above two diesel dispensing units, one dispensing unit with
2 nozzles for petrol of Midco company.
4.3. Mr. Shah, learned counsel submitted that there is
no complaint or malpractice of any nature against the
petitioner since 1994. Mr. Shah, learned counsel submitted
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
that, on 13.05.2013, respondent no.1 company replaced one
diesel dispensing unit (Applab company) with electronic MPD
pump unit having 2 nozzles (manufactured by Gilbergo
company) and process of calibration was carried-out by
company and seals were applied by representative of Legal
Metrology Department. On 11.07.2013, inspection of Retail
outlet including dispensing units (including one which was
replaced) was carried-out by respondent no.1 company through
their representative. As per the said inspection report, (I) seals
were intact, (II) there was no short delivery, (III) no stock
variation and (iv) all parameters were found to be ok. On
10.10.2013, quarterly inspection of Retail outlet including
dispensing units was carried-out by respondent no.1 company
through their representative and the said report was the same
remarks as carried-out on 11.07.2013.
4.4. Mr. Shah, learned counsel submitted that on
04.12.2013, Anti Adulteration Cell (AAC), Mumbai inspected
Retail Outlet. In the said report which is duly produced at pg.-
49, the report was same as of earlier report, however, for
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
Nozzle-A, the said report observed as under:
"The Calibration log trail of HSD Dual DU L & T sprint GVR
Sr. No. 20/30/000347 was recorded from the display of the
dispensing unit in respect of Nozzle A it is observed that last
calibration of Nozzle is done on 22.05.2013 of 21:05 hrs with
K factor as 0.933."
4.5. Mr. Shah, learned counsel submitted that, AAC
sealed the nozzle-A but permitted the petitioner to continue to
sell through nozzle-B. On 05.12.2013, the petitioner was served
with a notice to explain irregularities / discrepancies observed
by AAC on 04.12.2013 within a period of 10 days. On
20.12.2013, petitioner responded to the said show cause notice
vide his communication and attaching copy of the certificate
No. 59 of W & M Department and Inspection report dated
04.12.2013 by AAC. Mr. Shah, learned counsel further
submitted that no anomaly was found including any 'short
delivery' or 'variations' during inspection, neither sales nor
cover of the dispensing units were tempered, change in K-
factor does not show any tempering by petitioner, new pump
was installed on 13.05.2013 i.e. a week before the alleged
change in K-factor on 22.05.2013.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
4.6. Mr. Shah, learned counsel submitted that petitioner
has no knowledge of the mechanism of the electronic or the
mechanism of the DU and any occurrence of this anomaly may
be purely coincidental as the DU was new and could have a
start-up hitch. Mr. Shah, learned counsel further submitted that
the petitioner was innocent and had not indulged into any
kind of malpractice.
4.7. Mr. Shah, learned counsel submitted that thereafter,
a committee was constituted by the respondent no.3 on
19.04.2014. On 29.09.2014, the respondent no.1 company sent
e-mail to the petitioner raising certain query which reads thus:
"Whether e-calibration factor (K-factor) for the DU can be
changed only on manual intervention or it can change owing to
any other internal technical parameters?
4.8. Mr. Shah, learned counsel submitted that the said
manufacturing company Gilbarco immediately responded in its
reply through e-mail dated 01.10.2014, which reads thus:
"When we do electronic calibration procedure (after getting W
& M Approval), K-Factor is generated with date and time. K-
Factor cannot get generated or changed due to any technical
issue in the DU."
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
4.9. Mr. Shah, learned counsel submitted that the
petitioner approached the Civil Court by filing Regular Civil
Suit No. 60 of 2014 before the Court of Principal Civil Judge,
Amreli for declaration and permanent injunction, on
apprehension that petitioner's dealership may be terminated by
the respondent- Corporation.
4.10. Mr. Shah, learned counsel submitted that the show
cause notice dated 25.05.2015 issued by the respondent herein
which culminated into impugned orders which are the subject
matter of challenge before this Court, which required to be
interfered with, in view of the fact that only the issue is error
in K-Factor. Once seal is found intact, dealer cannot be
penalized for fault / defect / error in dispensing unit. If seals
are intact, there is no basis for proceeding against the dealer.
The only issue is whether dealer can be held liable in any way
for mal-functioning of the unit, if seal put is intact.
4.11. Mr. Shah, learned counsel relied upon the decision
in the case of (I) HPCL V/s. Super Highway Service reported in
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
(2010) 3 SCC 321, (II) in the case of Bharat Petroleum
Corporation Limited V/s. Jgannath and Company and others
reported in (2013) 12 SCC 278, (III) in the case of Bharat
Petroleum Corporation Ltd. v. Induben Laxmanbhai Dudakhiya
reported in 2017 (3) GLR 2571.
4.12. Mr. Shah, learned counsel relying on the aforesaid
principle submitted that both the authorities below had failed
in applying the settled legal proposition, and orders impugned
being arbitrary, illegal and perverse, are required to be
quashed and set aside.
4.13. Mr. Shah, learned counsel submitted that the
Committee's report which is signed by representative of
manufacturing company and representative of respondent no.1,
accepted the fact that fluctuation in the voltage could have
affected K-Factor without breaking / open seal. Neither and
respondent no.1 nor the Appellate Authority offered any reason
for overruling the committee's report, and therefore, order
impugned passed by the authority below is required to be
quashed and set aside.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
4.14. Mr. Shah, learned counsel lastly submitted that
impugned order is required to be interfered with by this Court
under Article-226 of the Constitution of India by quashing and
setting aside both the impugned orders passed by the
respondents.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS:
5.1. Mr. Munjaal M. Bhatt, learned counsel at the outset
appearing for the respondent-Corporation submitted that the
emphasis laid by the petitioner that the petitioner had a
'blemish free' career since 1994 is incorrect. Mr. Bhatt, learned
counsel submitted that the (i) respondent authority levied the
penalty on the erstwhile dealership on 11.11.2008 and (ii) the
petitioner has entered into a new dealership agreement on
25.02.2013, and therefore, cannot rely on any action / inaction
in respect of the erstwhile dealership.
5.2. Mr. Munjaal M. Bhatt, learned counsel appearing
for the respondent-Corporation raised the following preliminary
objections regarding the maintainability of the present petition,
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
which reads thus:
"At the outset, it may be noted that the DRP has threadbare
considered all the contentions raised by the Petitioner
including but not limited to the very same submissions which
are canvassed before this Hon'ble Court and all the judgments
which have been relied upon have also been considered. In
such circumstances, it would be highly inappropriate and
unwarranted on the part of the Petitioner to request this
Hon'ble Court to invoke its extraordinary jurisdiction under
Article 226 of the Constitution of India and dwell into the
merits as well as de-merits of the case specifically when a
detailed order has been passed by the DRP.
At this juncture, it may be noted that the DRP is headed
by a retired High Court Judge and consists of two other
technical members. Therefore, there is some sanctity
attached to the order passed, since the same has
considered all judicial as well as technical aspects of the
matter.
The Respondents seek to place reliance on a decision
rendered by the Hon'ble Apex Court of India in the case of
Municipal Corporation, Ujjain v. BVG India Limited & Ors .
reported in (2018) 5 SCC 462, wherein the Hon'ble Court
has reiterated that "under the scope of judicial review, the
High Court could not ordinarily interfere with the
judgment of the expert consultant on the issues of
technical qualifications of a bidder when the consultant
takes into consideration various factors including the basis
of non-performance of the bidder " and that "It is not
open to the court to independently evaluate the technical
bids and financial bids of the parties as an appellate
authority for coming to its conclusion inasmuch as unless
the thresholds of mala fides, intention to favour someone
or bias, arbitrariness, irrationality or perversity are met,
where a decision is taken purely on public interest, the
court ordinarily should exercise judicial restraint ."
In respect of the limited scope of interference under an
Article 226 petition, the Respondents seek to place reliance
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
on: (i) Decision passed by the Hon'ble Apex Court in the
case of Municipal Councilor, Neemuch v. Mahadev Real
Estate & Ors. reported in (2019) 10 SCC 738 (Relevant
Paras 13 to 16)- Page 63 of the petition; and (ii) Decision
passed by this Hon'ble Court in the case of Kamdar Ladat
Simiti of Nanikram v. Nanikram Shobraj Mills Limited
reported in 2004 (3) GLR 175 (Relevant Para 11)- Page 75
of the petition.
Assuming without accepting that the present petition is
filed under Article 227 of the Constitution of India, in that
case, the Respondents humbly state and submit that scope
of interference further narrows as compared to the scope
of interference under Article 226 of the Constitution of
India. Therefore, in respect of the aforesaid submissions,
the present petition filed either under Article 226 of the
Constitution of India or under Article 227 of the
Constitution of India may kindly not be entertained."
5.3. Mr. Munjaal M. Bhatt, learned counsel further
submitted that the petitioner is riding two horses at the same
time. The said submissions read thus:
"Before adverting to the merits of the captioned matter, it
may be noted that the Petitioner has also filed another
petition titled Special Civil Application No. 19962 of 2021,
pending before this Hon'ble Court, which has a direct bearing
on the present case.
The Petitioner had soon after issuance of show cause
notice in 2013, filed a Regular Civil Suit No. 60 of 2014
before the Ld. Civil Court, Amreli. The said suit was filed
"apprehending" that Respondents- IOCL "may" terminate
the dealership of the Petitioner as well as for seeking a
declaration that the Petitioner has not done any e-
calibration on 22.05.2013. The Petitioner had also prayed
for a direction that the dealership of the Petitioner may
not be terminated.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
As late as in 2021, the Petitioner preferred an application
under Order 6 Rule 17 CPC for amendment of pleadings,
where the Petitioner wished to bring on record all the
subsequent events from 2014 till 2020 i.e. till the passing
of the termination order dated 18.01.2020. It may be
noted that the DRP order dated 28.06.2021 is not brought
on record.
The Ld. Civil Court, Amreli did not allow the amendment
application, against which, the Petitioner has preferred
Special Civil Application No. 19962 of 2021.
The Respondents humbly submit that in the event the
amendment application is allowed, all subsequent events
till 18.01.2020 would be brought on record. Additionally,
either party will thereafter request the Ld. Civil Court,
Amreli to also take on record the DRP order dated
28.06.2021. If that be the position, the Ld. Civil Court,
Amreli would in essence be adjudicating the veracity and
legality of the termination order dated 18.01.2020 and
DRP order dated 28.06.2021, which is also under
adjudication before this Hon'ble Court.
Therefore, the Respondents humbly submit that the
Petitioner is as on date riding two horses at the same time
and taking his chance before two Courts of law, which can
never be permitted. Hence, first and foremost the
Petitioner may be called upon to choose which petition/
suit does he wish to continue before deciding the present
petition on merits."
5.4. Mr. Munjaal M. Bhatt, learned counsel further relied
on the importance of the Marketing Discipline Guidelines
(MDG), which reads thus:
"The Respondents would like to highlight the importance and
sanctity of the Marketing Discipline Guidelines (MDG), basis
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
which the termination order has been passed. Attention of
this Hon'ble Court is invited to Page 277 of the paper book.
It is specifically noted in the Preamble to MDG that the said
guidelines are introduced only in order to maintain a very
high customer service benchmark.
The Respondent would also like to place reliance on the
recent decision passed by the Hon'ble Division Bench of
the Delhi High Court in LPA No. 24 of 2021, a copy of
which was provided by the Ld. Advocate for the
Respondent during the course of oral arguments. The
Hon'ble Division Bench of the Delhi High Court after
considering all the submissions has under several
paragraphs specifically noted that MDG is essentially
brought into effect for customer support and maximization
of its effectiveness. The Hon'ble Court has consciously
noted that the ultimate beneficiaries of these MDG's are
the public at large. (Relevant Paras 61, 76 to 81).
The only reason for showing this point is to dislodge the
belief of the Petitioner that an adverse order has been
passed though there is no violation under the MDG. On
the contrary, any adversarial order passed by the
Respondents resulting in stoppage of sale would directly
hamper the Respondents only. Therefore, only with a view
to ensure that no mischief is played with the public at
large, is the termination order for violation of MDG been
passed."
5.5. Mr. Munjaal M. Bhatt, learned counsel relying on
the merits of the present petition, submitted thus:
"Strictly going by the prayers of the petition, though what is
to be adjudicated by this Hon'ble Court is the veracity and
legality of the orders dated 18.01.2020 and 28.06.2021, the
Petitioner has travelled beyond the scope of these two orders
and hence, the Respondents are also responding to all such
contentions raised.
The Petitioner has requested this Hon'ble Court to
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
adjudicate "Whether e-calibration was done on 22.05.2013,
specifically when there is no Weights and Measurement
Department Certificate (W&M Certificate) produced on
record by the Petitioner?"
At the outset, it may be noted that there are 3 persons
who are present at the time a DU is calibrated and K-
Factor is determined: (i) Original Equipment Manufacturer
(OEM)- in this case, Gilbarco; (ii) Petitioner himself; (iii)
Weights and Measurements Department official.
The Respondents state and submit that admittedly e-
calibration was carried out on 22.05.2013 basis which the
K-Factor was changed. The Respondents have explained in
great detail as to how K-Factor is arrived at and its
importance in their Affidavit-in-Reply (Page 55 of the
petition). Suffice it to state that once a K-Factor has been
arrived at, the same bears a lot of significance since it is
essentially providing a brain to the dispensing unit (DU)
indicating that as and when (x) Ltrs. is punched into the
DU, only (x) Ltrs. would come out of dispensing unit, no
more no less.
The Petitioner has time and again placed heavy reliance
on the fact that even though e-calibration as alleged was
carried out on 22.05.2013, the Respondents did not notice
the said fact in the inspections carried out on 11.07.2013
and 10.10.2013. The Respondents in response to this
submit that, though inspection was carried out on
11.07.2013 and 10.10.2013, however the said inspection
was not in respect of determining whether there is any
change in K-Factor. Both these reports are silent with
regard to what was the K-Factor. It is only on 04.12.2013
when the Anti Adulteration Cell (AAC, Mumbai) carried
out a random inspection at the retail outlet of the
Petitioner was this fact about change of K-Factor was
learnt.
When the Petitioner was called upon to produce a W&M
Certificate for calibration done on 22.05.2013, he could
not produce the same. As compared to the same, a W&M
Certificate was available when calibration was done on
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
13.05.2013 (Page 34 of the paper book).
At this juncture, attention of this Hon'ble Court is invited
to Page 6 of the Written Submissions filed by the
Petitioner wherein under Para 12, the Petitioner has
himself admitted that in the Regular Civil Suit No. 60 of
2014, the Weights and Measurements Department had
appeared before the Ld. Trial Court and filed written
submission stating that they have not carried any
calibration of the pump on 22.05.2013.
Admittedly, even as on date, the Petitioner has not
produced on record any such W&M Certificate for the e-
calibration which has happened on 22.05.2013. Reliance is
placed on the inspection report prepared by AAC (Relevant
Page 52 of the paper book) where a tabular chart
produced by the committee would specifically note that
calibration count on 13.05.2013 was 0.935 whereas the
calibration count on 22.05.2013 was 0.933. It is trite to
note that the Petitioner has signed the said report and
therefore, has acquiesced and acknowledged that e-
calibration was carried on 22.05.2013, but is not in a
position to produce any W&M certificate to prove the
same.
The Respondents have taken the decision to terminate the
dealership agreement of the Petitioner for breach of Clause
no. 42 r/w Clause no. 45 (a) and 45 (l) of the Dealership
Agreement dated 25.02.2013 [Pages 238 and 239 of the paper
book]. Since by virtue of Clause no. 42 of dealership
agreement, the MDG have been read into the dealership
agreement, therefore, the Petitioner was admittedly required
to adhere to the MDG as a whole. Hence, as per Clause no.
5.1.2(b) r/w Clause no. 8.2(ii) of the MDG [Pages 307 and
319 of the paper book] the Respondents have terminated the
dealership of the Petitioner.
The Petitioner has vehemently submitted that the very basis
on which the Respondent has taken the decision i.e. Clause
no. 5.1.2(b) is not applicable to the Petitioner since the W&M
Department seals have not been tampered. The said
submission is far from truth inasmuch as a bare perusal of
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
the said Clause will specifically reveal that it is not only in
cases where the seal is tampered that the said Clause can be
invoked. The said Clause notes that the seal would be
tampered in the following cases i.e. (i) Seal itself is missing;
(ii) Different seals has been put other than the embossed by
W&M Inspector; (iii) Sealing wire is broken and not in one
place. Admittedly, none of these three circumstances or cases
have arisen in the present case. However, the wordings
inserted after reproducing Clauses 1, 2 and 3 are relevant for
adjudication of the present case. It is specifically stated that
"in addition to this, other situations which can lead to
manipulation of delivery/quantities/totalizer may also be
treated as tampering. Penal action to be taken even if the
delivery is found to be correct or excess". Ba sis the aforesaid,
the Respondents humbly state and submit that since the
action of "manipulation of delivery" is also envisaged under
Clause 5.1.2(b), the said Clause is strictly applicable to the
facts of the present case.
One argument that had fallen from the Petitioner was that
after the change of K-Factor on 22.05.2013, the delivery or
the output of the DU had actually increased and therefore,
Clause 5.1.2(b) would not be applicable. In this respect,
the Respondents wish to place reliance on the latter part
of the quoted portion herein above which specifically states
that penal action is ought to be taken even if the delivery
is found to be correct or excess. Therefore, once the
Respondent Corporation comes to a solid conclusion that
there has been manipulation of delivery committed by the
Petitioner by change of K-Factor, the resultant effect of
that manipulation i.e. either equal, less or more output
would hardly be of any consequence because the Petitioner
would admittedly have been guilty of committing a critical
irregularity. Therefore, since the Respondents have reached
a conclusion that there has been a breach of Clause
5.1.2(b), the dealership of the Petitioner is terminated as
per Clause 8.2(ii).
The Petitioner has time and again harped only on one report
which is report dated 19.04.2014 [Page 59 of the paper
book]. The said report has been highlighted and relied upon
to note that under Para 6, it was noted by the Committee
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
that out of 20 logs, 18 logs are E-09 which as per the DU
OEM, vendor representative gets recorded when there is low
voltage / high voltage/ power fluctuation. The Petitioner has
placed reliance on the said report to drive home his point
that when the Committee itself under the report dated
19.04.2014 had come to the conclusion or even a probable
defense that there is a possibility that the K-Factor could
have been changed because of voltage fluctuation, the
Petitioner could not have been implicated and the termination
order resultantly having been passed.
The Respondent in response to the same would like to
submit the following:
(1) Admittedly, even as on date, the committee
report dated 19.04.2014 has not been challenged
before this Hon'ble Court in the present petition
and has therefore attained finality;
(2) The Petitioner was forming a part of the said
committee report dated 19.04.2014 and therefore,
has acquiesced and acknowledged the contents of
the said report;
(3) The report specifically states that the e-calibration
was recorded on 22.05.2013 for which the
Petitioner has not been able to produce any proof
as to how the e-calibration was carried out;
(4) All that the committee states with regard to the
power fluctuation is that there is possibility that
software could get corrupted. The Respondents
humbly state and submit that on instructions they
are in a position to submit that the Code E-09,
appears when fluctuation in voltage is detected.
Interestingly, the report does not any where state
that due to power fluctuation, there can be a
change of K-Factor. The words "K-Factor" have
been added and substituted by the Petitioner with
the words "software", which can never be
permitted.
(5) All that the committee states is that there is a
possibility that entire software of the dispensing
unit can be corrupted due to power fluctuation,
however there is no mention of K-Factor being
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
changed because of power fluctuation.
It is in this context that since the Petitioner was desirous
of getting the said issue clarified, the Respondents had on
29.09.2014 addressed an email with this very specific
query to the OEM [Page 75 of the paper book]. In
response to the same, OEM had on 01.10.2014 answered
that E-calibration and K-factor is generated with date and
time only manually and K-Factor cannot get generated due
to any technical issue in the DO.
It may also be noted that the Petitioner has till date not
challenged the veracity or sanctity of the reply submitted
by the OEM dated 01.10.2014 and therefore, has
acquiesced and acknowledged the reply given by the
OEM."
5.6. Mr. Munjaal M. Bhatt, learned counsel relied on the
following judgments, which reads thus:
(I) In the case of M.S. Desai & Company & Hindustan
Petroleum Corporation Limited [LPA No. 160 of 1989].
(II) In the case of S. Suresh v. IOCL passed by the Andhra
Pradesh High Court in W.P. No. 18572 of 1994.
(III) Andhra Pradesh High Court in the case of M/s. Pulla
Reddy Service Centre v. IOCL dated 21.9.2021. The
Respondents in this context apart from stating that the facts
of that case are not at all similar to the facts of the present
case, humbly submit the said judgment has been stayed by
the Hon'ble Apex Court under order dated 29.11.2021 passed
in Special Leave to Appeal (Civil) No. 19008 of 2021.
Therefore, reliance on the judgment passed by the Andhra
Pradesh High Court would not be proper.
5.7. Mr. Munjaal M. Bhatt, learned counsel filed
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
additional written submission on behalf of the respondent-
Corporation, which reads thus:
"(a) In continuation of the Written Submissions dated
19.03.2022, more particularly, Paragraph No. 4, the
Respondents submit that Special Civil Application No.
19962 of 2021 was listed before this Hon'ble Court on
22.03.2022 i.e. after conclusion of hearing in the
captioned writ petition.
However, the Petitioner has chosen not to withdraw the
said matter and is therefore pursuing two remedies at the
same time, which may be taken note of.
(b) The Respondents also wish to place reliance on the
most recent Judgment dated 21.03.2022 delivered by the
Hon'ble Apex Court of India in the case of M/s. N.G.
Projects Limited v. M/s. Vinod Kumar Jain & Ors. wherein
the Hon'ble Court has in no uncertain terms held that
"In contracts involving technical issues, the Courts should
be even more reluctant because most of us in judges'
robes do not have the necessary expertise to adjudicate
upon technical issues beyond our domain".
ANALYSIS:
6.1. The petitioner and respondent corporation entered
into dealership agreement dated 25.02.2013 to run retail outlet
for selling high-speed diesel and petrol at Village: Kunkavav,
Dist.: Amreli for 15 years. It appears that on 13.05.2013,
Weight and Measures Department ('W & M Department' for
short) carried-out calibration work of the petitioner's outlet
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
and issued Certificate No. 59 of even date, which was issued
for a period of one year i.e. till 12.05.2014. It appears that on
04.12.2013, the Anti-Adulteration Cell ('AAC' for short) of the
respondent Corporation inspected the petitioner's dispensing
unit. The said report dated 04.12.2013 is duly produced. The
observations of the said report are as under:
"Observations:
1) Approved sealing diagram of above Dus are available
at the RO.
2). The Calibration log trail of HSD Dual DU L & T
sprint GVR Sr. No. 201301000347 was recorded from the
display of the dispensing unit in respect of Nozzle A is
observed that last calibration of Nozzle is done on
22.05.2013 of 21:05 hrs with K factor as 0.933."
6.2. Pursuant to the said report, a show cause notice
dated 05.12.2013 came to be issued to the petitioner to explain
about the e-calibration work dated 22.05.2013 qua the Nozzle-
A, after the W and M Department carried-out calibration work
on 13.05.2013.
6.3. The petitioner replied to the said show cause notice
on 20.12.2013 stating that the petitioner has not tampered
with the seals or covers of the units of the DU in any manner,
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
and the deliveries too were found to be correct. It was further
stated by the petitioner in the said reply that the petitioner
failed to even understand as to how electric error could have
happened on 22.05.2013 that could lead to showing any
tampering by petitioner. It was further relied that pumps were
brand new, installed only about a week before the inspection,
the petitioner also have no knowledge of the mechanism of the
electronics or the mechanism of the DU. It could be said that
any occurrence of the anomaly may be purely coincidental as
the DU was brand new and could have had a start up hitch
and the petitioner had no role to play in it. The petitioner
pleaded innocence and ignorance by the said reply dated
22.05.2013.
6.4. Pursuant to the reply filed by the petitioner,
CDRSM, RDO constituted a committee on 19.04.2014, of the
followings persons to investigate further into subject matter:
1. Shri Atulkumar, Mgs (Rs), RDO
2. Shri Bhanupratap Chendra, EO, RDO
3. Shri Yogesh Patidar, AM (RS), Amreli
4. Shri Sandeep Kikani, Prop. Dealer, M/s. Indu
Petroleum, Kunkavav.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
6.5. The committee inspected the petrol pump and
recorded the findings and after recording the findings, opined
that there should be some paper (written) proof which
substantiate the E-Calibration recorded in DU (sr. No.
201301000347) on 22.05.2013, for which there is no W & M
certificate available at RO/ Dealer.
6.6. The 2nd show cause notice dated 25.05.2015 came
to be issued by the respondent - IOC to the petitioner calling
upon the petitioner stating that the explanation offered by the
petitioner cannot be considered as satisfactory, as the
petitioner have not given any concrete and proper justification
for generation of calibration log on 22.05.2013. As per the
clarification sought from the Chief of service operation, GVR,
Gujarat "K-Factor changes during E-calibration only and cannot
change owing to any other technical issues." It was further
stated that the generation and calibration tag confirms that the
box was opened by tempering the seal of W & M Department
and thereafter K-Factor was changed. In view of above finding,
the petitioner was called upon to show cause within 10 days
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
from the receipt of the said notice dated 22.05.2015 as to why
the action including termination of dealership could not be
taken against the petitioner, for the above-mentioned mal-
practice / discrepancy. It was further stated in the said notice
that, if the petitioner failed to submit any reply or the
explanation given by the petitioner is not found to be
satisfactory, the respondent- Corporation shall take further
action against the petitioner's dealership as deemed fit in line
with MDG, 2012 and the terms and conditions mentioned in
the dealership agreement dated 25.02.2013.
6.7. The petitioner challenged the said show cause
notice by preferring Special Civil Application No. 9025 of
2015, which came to be disposed of, by an order dated
15.04.2019. The Court was permitted the petitioner to respond
to the said show cause notice by producing the documentary
evidences and further directing the respondent authority to
decide the same within a period of two months from the date
of the order.
6.8. Pursuant to the order dated 15.04.2019 passed in
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
Special Civil Application No. 9025 of 2015, the petitioner filed
its reply to the said show cause notice dated 25.05.2015 and
produced all the documentary evidences alongwith the reply.
The petitioner was represented through his advocate. On
16.06.2019, the petitioner preferred Misc. Civil Application No.
2 of 2019 in Special Civil Application no. 9025 of 2015 with a
prayer to recall the oral order dated 15.04.2019 with a view to
have decision of this Court on the merits of the matter. The
said request was declined, however, it was directed not to give
effect for a period of two weeks from the date of service of
such decision, in case such decision is adverse to the
petitioner.
6.9. The respondent no.3 earlier passed an order with
reference No. RDO/R/5310 on 08.11.2019 terminating the
petitioner's dealership agreement dated 25.02.2013. The
petitioner challenged the said order by way of preferring
Special Civil Application No. 20228 of 2019 and Special Civil
Application No. 2699 of 2020. By an order dated 05.02.2020,
the petitioner was relegated to the alternative remedy of filing
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
an appeal under Clause-8.9 of the Marketing Discipline
Guidelines (MDG-2012). On 25.02.2020, the petitioner preferred
appeal as per the MDG, 2012. The appeal filed by the
petitioner came to be rejected vide an order dated 28.06.2021.
It appears that the petitioner served a copy of the amendment
application. It further transpires that the civil suit proceedings
was kept for further hearing on 09.07.2021. While an
application for amendment was pending before the court
below, the Area Sales Manager, IOC, Amreli mailed a copy of
the order dated 28.06.2021 purportedly passed by the DRP
dismissing the appeal filed by the petitioner. Being aggrieved
by the same, the petitioner approached this Court by way of
the present petition.
6.10. This Court has considered the Marketing Discipline
Guidelines (MDG)-2012 i.e. Retail Outlet Dealership / Superior
Kerosene Oil Dealership. The relevant extract of the aforesaid
guidelines germane for the adjudication of the dispute raised in
the present petition are produced thus:
"5.1.2. Short Delivery of Products
(b) with Weights & Measures department Seals
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
tampered:
W & M department seals are put on Metering unit
and Totaliser unit with the help of a sealing wire and a
lead seal which is embossed by W & M inspector.
The seal would be deemed tampered in the following
cases also:
1. Seal itself is missing.
2. Different seal has been put other than embossed by
W & M.
3. Sealing wire is broken and not in one piece.
In addition other situations which can lead to
manipulation of delivery / quantity / totaliser may also
be treated as tampering.
Penal action to be taken even if the delivery is
found to be correct or excess.
In case of this irregularity sales from the concerned
dispensing unit to be suspended, DU sealed. Samples to
be drawn of all the products and sent to lab for
testing."
"8. Action to be taken by OMC under the Marketing
Discipline Guidelines:
8.2. Critical Irregularities: The following irregularities are
classified as critical irregularities:
ii. seals of the metering unit found tampered in the
dispensing pumps.{5.1.2(b)}
Action: Termination at the FIRST instance will be
imposed for the above irregularities.
6.11. By an order dated 18.01.2020, the dealership
agreement between the petitioner and respondent -IOC dated
25.02.2013 came to be terminated on the following grounds,
which reads thus:
"1. Violation under Clause No. 8.2(ii) and 5.1.2(b) (other
situations which can lead to manipulation of delivery /
Quantity / totaliser may also be treated as tampering) of
MDG-2012 for tampering of dispensing units.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
2. Violation of following clauses of Dealership agreement
dated 25.02.2013:
(a) Clause no. 42: The dealer shall at all times faithfully
promptly and diligently observe and perform and carry
out at all times all directions instructions guidelines and
orders given or as may be given from time to time by
the corporation or its representatives on safe practices
and marketing discipline and/ or for the proper carrying
on of the dealership of the corporation. The dealer shall
also scrupulously observe and comply with all laws rules
regulations and requisitions of the central / State
Government and of all authorities appointed by them or
either of them including in particular the chief controller
of explosives, Government of India and or any other
local authority with regard to the safe practices.
(b) Clause No. 45 (a): Notwithstanding anything to the
contrary here in contained the corporation shall be at
liberty at its entire discretion to terminate this agreement
forthwith upon or at anytime after the happening of any
of the following events namely, if the dealer shall
commit a breach or default or any of the terms
conditions covenants and stipulations contained in this
agreement.
(c) Clause No. 45 (I): if the dealer does not adhere to
the instructions / guidelines issued from time to time by
the corporation in connection with marketing discipline
and or safety practices to be followed by him in the sale
or supply and storage of the corporations products or
otherwise.
In view of the foregoing, the discrepancies observed at
your RO are established. The malpractices observed at
your, RO fall under 'critical irregularity' of the
Marketing Discipline Guidelines, 2012, clause no 8.2 (ii)
and 5.1.2 (b) read with relevant clauses of Dealership
Agreement dated 25.02.2013 such as clause No. 42,
45(a), & 45 (I).
Termination of your dealership will be effective after two
weeks from the date of service of this notice of
termination in compliance of the Order dated 09.07.2019
passed by Hon'ble High Court of Gujarat in
Miscellaneous Civil Application 2 of 2019 in Special Civil
Application 9025 of 2015, Sandip Dalpatbhai Kikani vs.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
Indian Oil Corporation Limited.
Please note that you will cease to be our dealer at
Kunkavav, Dist. Amreli and the licence/permission
granted to you to operate the equipment of IOCL
installed at the RO will be cancelled after two weeks
from the date of service of this notice of termination.
You are advised to hand over peaceful possession of
equipment(s)/documents of the Dealership to our
representative of Rajkot Divisional Office as soon as he /
she calls you for the said purpose and settle your
accounts, if any, within 30 days from receipt of this
letter. You are also advised not to use any logo and
trade mark of Indian Oil Corporation Ltd. or sell any
petroleum product in the name of Indian Oil Corporation
Ltd. in future.
It may please be noted that as per clause no. 8.9 of the
chapter 8 of MDG 2012, in case of termination arising
out of invocation of MDG, the dealer will have the right
to appeal within a period of 30 days from the date of
receipt of order (in your case it will be 30 days from
effect of termination order), before the Appellate
Authority, through the concerned Divisional office of the
Oil Marketing Company (OMC). The Appellate Authority
is empowered to decide the matter and the appeal shall
be disposed of preferably within 90 days from the date
of filing of the appeal along with applicable fees in the
Divisional Office i.e. Rajkot Divisional office in your
case.
For all appeals in case of termination arising out of
invocation of MDG, the Appellate Authority will be the
Dispute Resolution Panel (DRP) nominated by the OMC.
The terminated dealer preferring appeal would be
required to deposit Non refundable Appeal fee of Rs.5
lakhs along with their appeal at Rajkot Divisional office.
However, if appeal results in restoration of the
Dealership, 50% of Appeal fee amount shall be refunded.
Accordingly, you can prefer an appeal within 30 days
from effect of termination order.
This letter is issued without prejudice to our other rights
and contentions in the matter."
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
6.12. The said order dated 18.01.2020 terminating the
dealership agreement dated 25.02.2013 came to be confirmed
by the Dispute Resolution Panel in Appeal No. DRP/ IOC/
RET/0004/2020 by an order dated 28.06.2021. The DRP was
constituted comprising of a High Court Judge and two other
technical members, as stated herein-above. The conclusion
arrived at by the said Committee, reads thus:
"(i) It is not disputed that an e-calibration record dated
22.05.2013 was found by the AAC during the inspection
where K-Factor had been changed. The inspection report
dated 04.12.2013 as well as the committee report dated
19.04.2014 recording this fact has been signed by the
Appellant. The Appellant could not produce any OEM
Service Record or W&M certificate in support of this e-
calibration record. As the K-Factor has been generated
without corresponding certificate from W&M department and
the DU was in the custody of the Appellant, he owed an
explanation as to how it happened.
(ii) The Appellant has tried to explain that the e-calibration
record might have been created due to initial start-up
hitches, the DU being new, or it could be due to low
voltage, the fact which the Committee has confirmed in its
report dated 19.04.2014 after going through the error logs
of the DU. However, the OEM has specifically confirmed
that the K-Factor can't get generated or changed due to any
technical issue in the DU. In the light of this, we are
unable to accept this contention of the Appellant.
(iii) Clause 5.1.2(a) of MDG covers for situations where
short delivery of the product is found with W&M seals
intact and in such cases it provides for suspension of sales
forthwith and recalibration and re-stamping to be done
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
before recommencement of sales. This clause applies to
cases where there no other irregularity is found except short
delivery. However, as in this case K-Factor was also found
changed, we are not able to accept the contention of the
Appellant that the case should be dealt under clause
5.1.2(a).
(iv) While specifying various situations where Weights and
measures seal would be deemed as tampered, Clause
5.1.2(b) of Marketing Discipline Guidelines also provides:
"In addition other situations which can lead to
manipulation of delivery / quantity / totalizer may also be
treated as tampering.
Panel action to be taken even if the delivery is found to be
correct or excess."
There is no denying the fact that a change in K-Factor will
result in change in delivery. Therefore, the case in hand
would be covered under this clause.
a) Clause 8.2(ii) classifies irregularity under Clause 5.1.2(b)
of Marketing Discipline Guidelines as Critical Irregularity
providing for action to be taken as termination at the FIRST
instance.
b) The Appellant has quoted few judgments without
explaining their relevance to the present case."
6.13. The submissions advanced by the learned counsel
appearing for the petitioner that on 11.07.2013, inspection of
Retail Outlet (RO) including dispensing units was carried out
by the respondent-company and as per the said inspection
report, seals were intact, there was no short delivery, no stock
variation and all parameters were found to be ok. Learned
counsel appearing for the petitioner has relied on the
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
inspection report dated 11.07.2013 and stated that on
10.10.2013 quarterly inspection was carried out by the
respondent - IOC which reiterate the same thing. On
04.12.2013, AAC, Mumbai inspected the Retail Outlet and for
Nozzle-A, the following observations is made in the report,
which reads thus:
"The calibration log trial of HSD Dual DU L & T sprint
GVR Sr. No. 20/30/000347 was recorded from the display
of the dispensing unit in respect of nozzle A it is observed
that last calibration of nozzle is done in 22.5.2013 at 21:05
hrs with K factor as 0.933."
6.14. The nozzle-A came to be sealed by the AAC,
pursuant thereto, two show cause notices came to be issued in
favour of the petitioner. The 1st show cause notice came to be
issued on 20.12.2013, which was replied by the petitioner and
considering the submissions advanced by the petitioner, the
fact finding authority by its report dated 19.04.2014 opined
that there was irregularities at the end of the petitioner herein.
The 2nd show cause notice came to be issued by the
respondent on 25.05.2015 seeking explanation from the
petitioner as to why the said dealership dated 22.05.2013
should not be cancelled. Considering the submissions made by
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
the petitioner and after granting an opportunity of hearing to
the petitioner through his advocate, the order of terminating
the dealership agreement dated 25.02.2013 came to be passed
by the respondent on 18.01.2019, which came to be confirmed
by the Dispute Resolution Panel (DRP) in Appeal No. DRP/IOC/
RET/0004/2020.
6.15. Both the authorities have concurrently held against
the petitioner, taking into consideration all the submissions
advanced by the petitioner and arrived at a conclusion and
observed that the discrepancies were established at the RO of
the petitioner. The mal-practices were also observed at the RO
of the petitioner, which fall under 'critical irregularity' of the
MDG, 2012, clause no. 8.2(ii) and 5.1.2(b) r/w. relevant
clauses of Dealership Agreement dated 25.02.2013 such as
clause No. 42, 45(a) and 45(I). Further, the authorities have
relied on the inspection report dated 04.08.2013 as well as
report dated 19.04.2014, wherein, it was reiterated that K-
factor was changed. It was further held that the petitioner
could not produce any OEM service record or W & M
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
certificate in support of this e-calibration record. Further, as
the K-Factor had been generated without corresponding
certificate from W & M department and DU was in the custody
of the petitioner, the petitioner was required to offer an
explanation as to how it happened. The authorities have
further held that OEM has specifically confirmed that the K-
Factor could not be generated or changed due to any technical
issue in DU, as stated by the petitioner and in the aforesaid
facts and circumstances, the authorities did not accept the
contentions raised by the petitioner.
6.16. This Court has considered the documents which are
produced on record and it appears that e-calibration record
dated 04.12.2013 was found by the (Anti Adulteration Cell),
ACC-Bombay, during the inspection where K-Factor had been
changed. The petitioner failed to produce any OEM Service
record or W & M certificate in support of the e-calibration
record, which was subsequent to the inspection carried-out and
relied upon by the petitioner dated 11.07.2013 and 10.10.2013,
wherein, seals were intact, there was no short delivery, no
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
stock variation and all parameters were found to be ok. The
inspection by the AAC was carried out on 04.12.2013 and e-
calibration was noticed and recorded on 22.05.2013 which is
clearly subsequent to the aforesaid inspection. It appears that
the petitioner failed to explain with regard to K-Factor having
been generated without corresponding certificate from W & M
department and DU was in the custody of the appellant.
6.17. The contention raised by the petitioner that the said
e-calibration could have been a technical defect also cannot be
accepted, in view of the fact that OEM specifically confirmed
that K-Factor could not get generated or changed, due to any
technical issue in the DU, and therefore, the said contention of
the petitioner has rightly not been accepted by the respondent
authority.
(a) It appears that, under Clause-5.1.2(a) of MDG provides
for situations where short delivery of the product is found
with W & M seals intact and in such cases it provides for
suspension of sales forthwith and re-calibration and re-
stamping to be done before recommencement of sales.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
The above-referred clause applies to the cases, where
there no other irregularity is found except short delivery.
However, in the present case, K-Factor was also found
changed, therefore, the said contention of the petitioner
was rightly not accepted by the respondent authority that
the case could not be dealt with under clause-5.1.2(a).
(b) Clause-5.1.2(b) of the Guidelines as referred above,
clearly stipulates that change in K-Factor results in change
in delivery. The authorities rightly considered the case of
the petitioner to be covered under clause-5.1.2(b).
(c) Once the authorities have concluded concurrently that
the irregularities have noticed under clause-5.1.2(b), the
action of the termination would be taken under Clause-
8.2(ii), resulting in termination of agreement. The
conclusion arrived at by the authorities is after taking
into consideration the material produced on record, the
Marketing Discipline Guidelines (MDG-2012) and after
giving due opportunity of hearing, passed the impugned
order.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
6.18. Further the Civil Suit No. 60 of 2014 preferred by
the petitioner seeking the same reliefs is pending adjudication
before the Civil Court at Amreli.
POSITION OF LAW:
6.19. The Hon'ble Supreme Court in case of M/s. N.G.
Projects Limited v. M/s. Vinod Kumar Jain & Ors. in Civil
Appeal No. 1846 of 2022, the Court has in no uncertain terms
held that "In contracts involving technical issues, the Courts
should be even more reluctant because most of us in judges'
robes do not have the necessary expertise to adjudicate upon
technical issues beyond our domain".
"13. This Court sounded a word of caution in another
judgment reported as Silppi Constructions Contractors v.
Union of India and Ors.6, wherein it was held that the
Courts must realize their limitations and the havoc which
needless interference in commercial matters could cause. In
contracts involving technical issues, the Courts should be
even more reluctant because most of us in judges' robes do
not have the necessary expertise to adjudicate upon technical
issues beyond our domain.
As laid down in the judgments cited above, the Courts
should not use a magnifying glass while scanning the tenders
and make every small mistake appear like a big blunder. In
fact, the courts must give "fair play in the joints" to the
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
government and public sector undertakings in matters of
contract. Courts must also not interfere where such
interference would cause unnecessary loss to the public
exchequer. It was held as under:-
"19. This Court being the guardian of fundamental rights is
duty bound to interfere when there is arbitrariness,
irrationality, mala fides and bias. However, this Court in all
the aforesaid decisions has cautioned time and again that
courts should exercise a lot of restraint while exercising their
powers of judicial review in contractual or commercial
matters. This Court is normally loathe to interfere in
contractual matters unless a clear-cut case of arbitrariness or
mala fides or bias or irrationality is made out. One must
remember that today many public sector undertakings
compete with the private industry.
The contracts entered into between private parties are not
subject to scrutiny under writ jurisdiction. No doubt, the
bodies which are State within the meaning of Article 12 of
the Constitution are bound to act fairly and are amenable to
the writ jurisdiction of superior courts, but this discretionary
power must be exercised with a great deal of restraint and
caution. The Courts must realize their limitations and the
havoc which needless interference in commercial matters can
cause.
In contracts involving technical issues the courts should be
even more reluctant because most of us in judges' robes do
not have the necessary expertise to adjudicate upon technical
issues beyond our domain. As laid down in the judgments
cited above the courts should not use a magnifying glass
while scanning the tenders and make every small mistake
appear like a big blunder . In fact, the courts must give "fair
play in the joints" to the government and public sector
undertakings in matters of contract. Courts must also not
interfere where such interference will cause unnecessary loss
to the public exchequer.
20. The essence of the law laid down in the judgments
referred to above is the exercise of restraint and caution; the
need for overwhelming public interest to justify judicial
intervention in matters of contract involving the state
instrumentalities; the courts should give way to the opinion
of the experts unless the decision is totally arbitrary or
unreasonable; the court does not sit like a court of appeal
over the appropriate authority; the court must realize that
the authority floating the tender is the best judge of its
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
requirements and, therefore, the court's interference should
be minimal.
The authority which floats the contract or tender and has
authored the tender documents is the best judge as to how
the documents have to be interpreted. If two interpretations
are possible then the interpretation of the author must be
accepted. The courts will only interfere to prevent
arbitrariness, irrationality, bias, mala fides or perversity.
With this approach in mind, we shall deal with the present
case."
22. The satisfaction whether a bidder satisfies the tender
condition is primarily upon the authority inviting the bids.
Such authority is aware of expectations from the tenderers
while evaluating the consequences of non-performance. In the
tender in question, there were 15 bidders. Bids of 13
tenderers were found to be unresponsive i.e., not satisfying
the tender conditions. The writ petitioner was one of them.
It is not the case of the writ petitioner that action of the
Technical Evaluation Committee was actuated by extraneous
considerations or was malafide. Therefore, on the same set of
facts, different conclusions can be arrived at in a bona-fide
manner by the Technical Evaluation Committee. Since the
view of the Technical Evaluation Committee was not to the
liking of the writ petitioner, such decision does not warrant
for interference in a grant of contract to a successful bidder.
23. In view of the above judgments of this Court, the Writ
Court should refrain itself from imposing its decision over the
decision of the employer as to whether or not to accept the
bid of a tenderer. The Court does not have the expertise to
examine the terms and conditions of the presentday economic
activities of the State and this limitation should be kept in
view. Courts should be even more reluctant in interfering
with contracts involving technical issues as there is a
requirement of the necessary expertise to adjudicate upon
such issues.
The approach of the Court should be not to find fault with
magnifying glass in its hands, rather the Court should
examine as to whether the decision-making process is after
complying with the procedure contemplated by the tender
conditions. If the Court finds that there is total arbitrariness
or that the tender has been granted in a malafide manner,
still the Court should refrain from interfer- ing in the grant
of tender but instead relegate the parties to seek damages for
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
the wrongful exclusion rather than to injunct the execution of
the contract. The injunction or interference in the tender
leads to additional costs on the State and is also against
public interest. Therefore, the State and its citizens suffer
twice, firstly by paying escalation costs and secondly, by
being deprived of the infrastructure for which the present-day
Governments are expected to work."
6.20. In the case of Letters Patent Appeal No. 160 of
1989 in Special Civil Application No. 3943 of 1982 decided on
11.04.2020 in case of M.S. Desai and Co. V/s. Hindustan
Petroleum Corp. Ltd., the the Hon'ble Division bench has held
that "If the appellants wants restoration of the dealership
agreement executed between the parties and we are of the view
that such relief cannot be granted in a petition under Article 226 of
the Constitution of India". The relevant para reads thus:
"11. Even if it is assumed for the purpose of argument that
the second set of instructions dated March 1, 1982 were
applicable to the facts of the present case, we are of the firm
opinion that the action taken by the respondent Corporation
in terminating the dealership agreement is not liable to be
voided on the ground that it is contrary to those instructions.
It hardly needs to be emphasised that the consumers are
entitled to unadulterated petroleum products for which they
pay high prices. If petrol is adulterated with diesel it has two
effects. The consumer gets lower quality of petrol and pay
higher price. Such malpractice is rightly not tolerated by the
petroleum companies. Moreover, the adulteration not only
pollutes the air but is also seriously viewed by the legislature
which can be seen from different control orders promulgated
under the provisions of the Essential Commodities Act, 1955.
If instructions dated March 1, 1982 were to be followed, no
steps could have been taken till another case of adulteration
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
was found against the appellant. It is a common knowledge
that with scanty staff it is not possible for the authorities to
take sample every day from all retail outlets and subject
them to laboratory test. Therefore, to say that dealership
agreement cannot be terminated till second lapse is found is
contrary to the overwhelming public interest and policy. The
instructions dated March 1, 1982 are contrary to public
interest as well as public policy namely that adulteration
should be viewed seriously. Therefore, those instructions
cannot be enforced by way of writ of Court. On the basis of
such instructions no relief can be granted to the dealer who
has admittedly adulterated petroleum product, in a petition
under Article 226 of the Constitution. To put it differently, if
the respondent Corporation is called upon to adhere to the
instructions dated March 1, 1982, it would give further
opportunity to the appellant to adulterate petroleum products
and perpetuate malpractices which cannot be done in a
petition under Article 226 of the Constitution. Therefore,
even if it is held that the second set of instructions dated
March 1, 1982 are applicable to the facts of the present case,
the appellant is not entitled to any relief in the present
petition. For these very reasons no relief can be granted to
the appellant on the basis of instructions of 1998 which are
sought to be produced on the record of the case by affidavit
of Smt. Sulochanaben K. Desai."
"18. The decision of the respondent Corporation to
terminate the dealership agreement indicates that everything
is considered i.e., terms of contract, three instructions,
factum of having taken sample and found adulterated, notice
dated November 1, 1981, etc. The order was not made
improperly, mistakenly nor with closed mind nor contrary to
principles of natural justice. In order to enable the appellant
to make effective representation, even punishment proposed
was also indicated in the show cause notice which cannot be
termed as the respondent having made up its mind in
advance as is contended on behalf of the appellant. The
Court in a petition under Article 226 of the Constitution does
not exercise appellate powers and the Court can examine
whether decision making process is vitiated in any manner or
not. The action of the respondent Corporation is neither
found to be arbitrary nor irrational nor irrelevant and,
therefore, is not liable to be voided in the present appeal. In
fact the prayers claimed in paragraph 26 of the petition
would indicate that the petitioner wants direction against the
respondent to resume supplies of petroleum products to the
appellant and not to terminate the dealership agreement. In
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
substance, the appellant wants restoration of the dealership
agreement executed between the parties and we are of the
view that such a relief cannot be granted in a petition under
Article 226 of the Constitution. The principle of judicial
review would apply to the exercise of contractual powers by
Government bodies in order to prevent arbitrariness or
favouritism. However, as observed by the Supreme Court in
Tata Cellular (supra) there are inherent limitations in exercise
of that power of judicial review. Duty of the Court is to
confine itself to the question of legality. Its concern should
be: whether a decision making authority has (1) exceeded its
powers, (2) committed an error of law, (3) committed a
breach of the rules of natural justice, (4) reached a decision
which no reasonable Tribunal would have reached; or (5)
abused its powers. The discussion made above does not
indicate that the decision making authority has exceeded its
powers or that it has committed any error of law or breach
of the rules of natural justice or reached a decision which no
reasonable Tribunal would have reached or abused its
powers. Therefore, no case is made out by the appellant to
interfere with the impugned judgment. The result is that the
appeal is liable to be dismissed."
6.21. The Hon'ble Supreme Court in the case of Bharat
Petroleum Corporation Ltd. v. Induben Laxmanbhai Dudakhiya
reported in 2017 (3) GLR 2571 is not applicable in the facts of
the present case. It appears that the Court exercised its
jurisdiction under Article 226 of the Constitution of India in
view of the fact that the concerned Civil Court refused to
exercise its power citing lack of jurisdiction, without relating
the parties to any other remedy. However, in the present case,
the Civil Suit is pending adjudication before the Civil Court,
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
Amreli and the petitioner is the who has approached the Civil
Court as back as in the year 2014 by filing Civil Suit.
6.22. The reliance placed by the learned counsel
appearing for the petitioner mainly deal with the violation of
the principles of natural justice and the dealing with technical
aspects of the facts of each case, this Court has referred to all
the citation as submitted by the learned counsel appearing
for the petitioner. In view of this Court, the said ratio cannot
be said to be made applicable, in the facts and circumstances
of the present case.
6.23. The Hon'ble Supreme Court in the case of
Hindustan Petroleum Corporation Pvt. Ltd. and others v/s.
Super Highway Services and Others reported in (2010) 3 SCC
347 has observed that "Non-service of notice to before
termination of dealership agreement violative of principles of
natural justice." The aforesaid decision would not apply in the
facts of the present case, in view of the fact that principles of
natural justice has been duly complied with by the respondent
authority.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
6.24. The Hon'ble Supreme Court in the case of Indian
Oil Corporation Limited & Ors. V/s. M/s. Pullareddy Service
Center, dealer, Indian Corporation Ltd. reported in 2021 (6)
ALT 17. The aforesaid judgment - i.e. M/s. Pullareddy Service
Center v/s. Indian Oil Corporation Limited & Ors. has been
stayed by the Hon'ble Supreme Court in Special Leave to
Appeal (c) No. 19008 of 2021 dated 29.11.2021.
6.25. The Hon'ble Supreme Court in the case of Bharat
Petroleum Corporation Limited V/s. Jgannath and Company
and others reported in (2013) 12 SCC 278, the said ratio is not
applicable in the present case, in view of the fact that the said
case pertains to non-adherence to marketing disciplinary
procedure / guidelines by the Corporation. The Hon'ble
Supreme Court confirmed the findings arrived at by the High
Court with regard to the termination of dealership. However,
in the present case, the respondent authorities have duly
followed the MDG-2012.
6.26. In the present case, the parties are governed by the
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
MDG, 2012 based on which the impugned termination order
dated 18.01.2020 came to be passed by the respondent
authority. The said MDG is duly produced at page-277. The
preamble of the MDG is introduced to maintain the very high
customer service benchmarks. In Letters Patent Appeal No. 24
of 2021, the Delhi High Court has considered the aforesaid
guidelines and held in para-61 and 76 to 81, which reads as
under:
"CLAUSE 5.1.2 - SHORT DELIVERY OF PRODUCTS
61. Learned Solicitor General and learned Senior Counsels
representing the respective sides have read and re-read Clause
5.1.2 of the amendment in 2017 in MDG-2012. While the
contention of the Appellants is that even where the Weights &
Measures Department Seals are intact and there is short/excess
delivery, though within the permissible limit, the sales of the
concerned Dispensing Unit are to be suspended and
recalibration and restamping is to be done, before
recommencement of sales, Respondents urged that where the
dispensation is within the permissible limit, there cannot be
suspension of sales, especially when no time limit is
prescribed for recalibration and re-stamping in the MDGs. In
order to appreciate the argument, it is pertinent to refer to
Clause 5.1.2, which is extracted hereunder for ready reference
:-
"Clause 5.1.2 a) With Weights & Measures Department Seals
intact Sales through the concerned dispensing unit to be
suspended forthwith and recalibration and re-stamping to be
done before recommencement of sales. (Even if short/excess
delivery is found within permissible limit, recalibration and
re-stamping to be done before recommencement of sales.)
Penalty in case of short delivery beyond permissible limit: i.
First instance: Rs. 25,000/- per nozzle found delivering short
beyond permissible limit as specified in Legal Metrology
Act/Rule. ii. Second instance within one year of 1st instance:
Rs. 50,000/- per nozzle found delivering short beyond
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
permissible limit as specified in Legal Metrology Act/Rule &
suspension of Sales and supplies for 15 days. iii. Third
instance within one year of 1st instance: Termination of the
dealership."
76. The relationship between the Dealers and the Appellants is
guided by Dealership Agreement subsisting between them. The
said agreement provides for certain obligations on the part of
Dealers and in terms of breach of such terms, the Appellants
have a right to take action, including termination of
Dealership Agreement. The civil right under the agreement is
obviously in addition to and not in substitution to right of
various State Authorities or their Instrumentalities to take
action against the Dealers for violation of the terms of the
Agreement or the directions issued to them under the MDGs.
77. Appellants have formulated common Guidelines to provide
for uniform and consistent practices and action against the
Dealers in the form of MDGs. The provisions of MDGs are
essentially between the Appellants and the Dealers, covering
their rights and obligations, on various counts such as,
methodology of sampling, filling and decantation of tank
lorries, maintenance of equipment at Retail Outlets and other
aspects of purely commercial nature and linked with the
Dealership Agreement.
78. The MDGs for Retail Outlets/SKO Dealerships, which have
been in existence for last 3 decades, facilitate marketing of
petroleum products (MS/HSD/SKO) by the Dealers on the
principles of highest business ethics and excellent customer
service.
79. These Guidelines are updated/amended from time to time
to meet the growing customer expectations, ensuring quality &
quantity of products and service, enforcing discipline amongst
the Dealers' network and preventing malpractices in the sale
of petroleum products. MDGs aim to bring consistency
amongst the OMCs with respect to implementation of various
marketing practices and different cases of malpractices for
taking civil action under dealership agreements.
80. Penalties are imposed where malpractices and/or violation
of Guidelines are established as the Dealers are expected to
carry on business on the principles of highest business ethics
and excellent customer service, complying with the Guidelines.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
81. Appellants brought out that it was noticed that in some
cases, the RO Dealers were involved in Chip manipulation,
short delivery, not maintaining toilets, etc. which was
adversely affecting not only the image of the Appellants but
also the consumers. Short delivery of product, non-provision
of customer convenience facilities, selling of normal Petrol &
Diesel as branded products, etc. was affecting the brand image
of the Appellants and directly hitting the sales volume. In
addition, the unwary customers are short-changed. In view of
the aforesaid, we agree with the Appellants that it was
imperative that some sort of monetary penalties are provided
for in the MDGs, which would help in curbing the
malpractices and be a deterrent, at the same time falling short
of the extreme penalty of terminating the Dealership
Agreement."
6.27. On apprehension that the dealership may be
terminated by the respondent no.1, the petitioner approached
the Civil Court by filing Regular Civil Suit No. 60 of 2014
against the respondent no.1 and others in the Court of
Principal Civil Judge, Amreli for declaration and permanent
injunction. The Civil Judge by an order dated 17.06.2014
rejected the interim injunction application filed by the
petitioner. Being aggrieved by the said order dated 17.06.2014,
petitioner preferred Civil Misc. Appeal No. 13 of 2014 before
the District Court, Amreli. The said appeal came to be rejected
by the District Court by an order dated 15.05.2015.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
6.28. The petitioner challenged the order dated
15.05.2015 passed by the District Court by filing Special Civil
Application No. 8860 of 2015 before this Court. The petitioner
preferred an application in the year 2021 seeking amendment
in the plaint, wherein, the petitioner seeks to bring on record
all the subsequent events from 2014 to 2020 i.e. till the
passing the termination order dated 18.01.2020. The Civil
Court, Amreli did not allow the amendment application,
against which petitioner had preferred Special Civil Application
No. 19962 of 2021 before this Court, which is pending. The
Regular Civil Suit No. 60 of 2014 is pending adjudication
before the Civil Court, Amreli.
6.29. This Court has considered the submissions canvassed
by the learned counsel appearing for the respective parties,
documents produced on record, the findings arrived at by the
authorities below while passing the impugned orders dated
18.01.2020 confirmed in appeal vide an order dated
28.06.2021. This Court has also taken into consideration the
ratio as laid down by the Hon'ble Supreme Court and other
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
Hon'ble High Courts as relied upon by the respective parties,
no error of law much less any error of jurisdiction can be said
to have been committed by the respondent authorities, while
passing the impugned orders. The scope of judicial review for
interference in contractual matters is very limited. In the facts
of the present case, the impugned orders passed by the
respondent authorities are based on the expert opinion and the
expertise in the field. Both the impugned orders are passed by
the experts in the field, further, the appellate authority i.e.
DRP included a High Court Judge and two technical members
examined the said issue and accordingly while passing the
impugned orders, the issue involved came to be tested by the
judicial expert as well as technical expert. At this stage, it is
apposite to refer the ratio as laid down by the Hon'ble
Supreme Court in the case of AIR 2022 1413 reported in State
of Punjab v. Mehar Din. The relevant para reads thus:
"26. This being a settled law that the highest bidder has no
vested right to have the auction concluded in his favour and
in the given circumstances under the limited scope of
judicial review under Article 226 of the Constitution, the
High Court was not supposed to interfere in the opinion of
the executive who were dealing on the subject, unless the
decision is totally arbitrary or unreasonable, and it was not
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
open for the High Court to sit like a Court of Appeal over
the decision of the competent authority and particularly in
the matters where the authority competent of floating the
tender is the best judge of its requirements, therefore, the
interference otherwise has to be very minimal."
6.30. This Court has also considered the submissions
advanced by the learned counsel appearing for the respective
parties in accordance with the MDG-2012. The authorities
below have also while passing the impugned orders tested the
case of the petitioner in light with the above-referred
guidelines and have concurrently concluded that the
irregularities were noticed under Clause-5.1.2(b) and that the
action of termination of the dealership agreement came to be
undertaken under Clause-8.2 (ii) which resulted into
termination of the agreement.
6.31. As stated above, the petitioner has also approached
the Civil Court by filing Regular Civil Suit No. 60 of 2014
which is also pending. Further, in view of this Court, two
remedies cannot be availed by the petitioner seeking the same
relief at the same time.
C/SCA/10455/2021 JUDGMENT DATED: 07/06/2022
6.32. In view of above, this Court is not inclined to
exercise its extraordinary jurisdiction under Article 226/227 of
the Constitution of India and further this Court would not sit
in appeal over the decision arrived at concurrently by the
competent authorities. Accordingly, the present petition fails
and the same is dismissed. Rule is discharged. No order as to
costs.
In view of the order passed in main petition, Civil
Application does not survive, and accordingly, the same is also
stands dismissed.
(VAIBHAVI D. NANAVATI,J)
Pradhyuman
