Indial Oil Corporation Ltd. vs M/S Krishna Gas Agency
2021 Latest Caselaw 4407 MP

    HIGH COURT OF MADHYA PRADESH : JABALPUR
                  (Division Bench)

                             W.A. No.380/2021

                  Indian Oil Corporation Ltd. & others
                                -Versus-
                        M/s Krishna Gas Agency

Shri Aditya Adhikari, Senior Advocate with Shri Eijaz Siddiqui, for
the appellants.

Shri Manikant Sharma, Advocate for the respondent.
----------------------------------------------------------------------------------
CORAM :

      Hon'ble Shri Justice Mohammad Rafiq, Chief Justice.
      Hon'ble Shri Justice Vijay Kumar Shukla, Judge.
---------------------------------------------------------------------------------

Whether approved for             Yes.
reporting ?

Law laid down                     A show cause notice to constitute the valid
                             basis of a blacklisting order, such notice must
                             spell out clearly, or its contents be such that it
                             can be clearly inferred therefrom, that there is
                             intention on the part of the issuer of the notice to
                             blacklist the noticee.
Significant paragraph         23.
No(s).

Judgment Reserved on             : 9-8-2021
Pronounced on                    : 17-8-2021

          [Hearing convened through video conferencing]

                            JUDGMENT

(Jabalpur, dtd.17.08.2021)

Per : Vijay Kumar Shukla, J.-

The present intra-court appeal has been filed under

Section 2(1) of the Madhya Pradesh Uchcha Nyayalaya (Khand

Nyaypeeth ko Appeal) Adhiniyam, 2005, being aggrieved by the

order dated 07-01-2021 passed by the learned Single Judge in WP-

18913-2013 [M/s Krishna Gas Agency vs. Indian Oil Corporation

Ltd. and others], whereby the writ petitioner filed by the

respondent/writ-petitioner [hereinafter referred to as "the petitioner"]

has been allowed. The petitioner has challenged the order dated 26-

12-2011 passed by the appellants, whereby the distributorship of

LPG Gas cylinders granted in the name of M/s Krishna Gas Agency

has been terminated.

2. The facts leading to filing of the present appeal as

putforth by the petitioner are that Late Manish Yadav was awarded

Indane Distributorship at Gadarwara, District Narsinghpur under

Physically Handicapped (PH) category in the year 1994 and the

distributorship was commissioned under the name and style of M/s

Krishna Gas Agency, Gadarwara. Thereafter, Shri Manish Yadav

died on 28-8-2007 and, therefore, his wife started taking care of the

firm and applied for reconstitution of the firm.

3. The appellants vide letter dated 12-11-2007 approved the

proposal of the petitioner and directed her to submit the requisite

documents for the reconstitution of the firm. In the meantime, the

mother-in-law, namely, Smt. Heera Devi Yadav of the petitioner

preferred a writ petition (WP-8014-2008) before this Court claiming

her right to be inducted in the firm as a Partner under the provisions

of the Hindu Succession Act and, therefore, intimation in that regard

was sent on 15-03-2010 to the petitioner and No Objection

Certificates (NOCs) of legal heirs of Late Manish Yadav were also

sought from her within fifteen days therefrom. The said writ petition

was dismissed on 21-03-2013 having rendered infructuous.

4. The appellants by letter dated 17-9-2009 directed the

petitioner to submit the NOC of legal heir, mother-in-law along with

an application for reconstitution as per new policy. The petitioner

was further directed to make adequate infrastructural arrangements

and she was advised to ensure home delivery to the customers and

also to ensure that those customers who take re-filled gas cylinders

from the godown of the petitioner, are given cash and carry rebate of

Rs.8 through INDSOFT. Thereafter, counselling of the petitioner

was conducted and vide letter dated 8-9-2010 the appellants

proposed to terminate the distributorship of the petitioner owing to

irregularities caused by the petitioner-firm. The reply submitted by

the petitioner was rejected by the appellants and distributorship of the

petitioner was terminated on 26-12-2011 holding that the

irregularities found out by the inspecting officers of the appellants

were major irregularities and as per Marketing Discipline Guidelines,

2001 [for brevity, "MDG-2001] and penal action was taken. It was

also held that the firm was not running in terms of the legal

agreement with the appellants and that was also one of the reasons

for terminating the distributorship of the petitioner.

5. A detailed reply was submitted by the appellants in the

writ petition contending inter alia, that Late Manish Yadav was

awarded Indane Distributorship at Gadarwara, District Narsinghpur

under "PH" category in 1994 and the same was commissioned under

the name and style of M/s Krishna Gas Agency, Gadarwara. It was

putforth that Late Manish Yadav expired on 28-8-2007 and,

therefore, reconstitution proposal was received from the wife of the

deceased, Smt. Keerti Yadav on 19-10-2007. The reconstitution

proposal was approved subject to furnishing of the NOCs of the legal

heirs of the deceased. The appellants refuted that Smt. Keerti Yadav

was competent to file the writ petition on behalf of the petitioner-

firm, as no NOC was provided by her and besides that, no succession

documents establishing that she was the only legal heir of the

deceased was furnished by her.

6. As setforth, on 26-7-2008 and 27-7-2008 the petitioner-

firm was inspected which revealed that the petitioner was not giving

cash and carry rebate to the customers, who were not provided with

home delivery of the gas cylinders and, therefore, a fine of

Rs.10000/- was imposed on the petitioner vide Ref :

Jabalpur/AO/Inspection/08, dated 03-12-2008 under Clause 14 of the

MDG-2001, as the major irregularity was established against the

distributorship.

7. It is asserted that on 22-11-2008 a refill audit was

conducted by the appellants' "Multi Disciplinary Team" (MDT) and

it was established that the petitioner diverted 30 domestic cylinders

for non-domestic use and did not extend cash and carry rebate to the

customers, who were not provided home delivery facility which led

to imposition of major penalty in terms of Clauses (7) and 14 of the

MDG-2001 on 7-03-2009 and since this was the second instance in

the previous two years and hence, a fine to the extent of

Rs.1,00,275/- was imposed and recovered from the petitioner.

8. The appellants further putforth that another refill audit

was conducted and major irregularities were pointed out and,

therefore, an explanation was sought from the petitioner on 29-7-

2010. The reply made by petitioner on 6-10-2010 and 8-10-2010

was rejected, as the same was without any corroboration. It is

contended that as per provisions of the MDG-2001, if a major

irregularity is established thrice at any distributorship within a span

of two years, then penal action for third instance of major irregularity

leads termination of the distributorship. Hence, the distributorship

was terminated by the appellants vide order dated 26-12-2011.

9. The learned Single Judge has allowed the writ petition

filed by the petitioner by the judgment impugned in the present intra-

court appeal quashing and setting aside the order dated 26-12-2011

terminating the distributorship of the petitioner on the ground that the

decision-making process adopted by the appellants suffers from

violation of the principle of natural justice.

10. The learned counsel for the appellants submitted that the

learned Single Judge has erred in not considering the fact that the

petitioner has admitted in paras 6.5 and 6.8 of the petition that the

irregularities were minor and very harsh punishment was imposed

against the petitioner, but as per the Policy the irregularities were

major. It is putforth that as per the prevailing MDG-2001 for LPG

distributorship, irregularities were established against the

distributorship of M/s Krishna Gas Agency as per Clauses (7) of (14)

of the MDG-2001 within the area of distribution made on specific

specific request of customers, were major irregularities. It is asserted

that the learned Single Judge has further erred in holding that the

principle of natural justice has not been followed, whereas the

petitioner was issued a notice to show cause regarding the

irregularities inspected by the appellants at the firm and the petitioner

was afforded proper opportunity to putforth her side. Further, the

petitioner was given warning by the appellants in respect of

irregularities and when she did not make any improvement, the

distributorship was terminated by a speaking order.

11. It is further submitted that the petitioner/Distributorship

agency had been guilty of three major irregularities within a span of

two years under the MDG-2001. The dates of detection of the

irregularities are mentioned - (i) Major MDG Clause (14) on 26-27 th

July, 2009; (ii) Major MDG Clauses (7) and (14) on 22 nd November,

2008; and (iii) Major MDG Clauses (7) & (14) and minor MDG

Clause (2) on 11-12th June, 2010.

12. It is urged with vehemence that the learned Single Judge

has erred in presuming that by letter dated 20-11-2009 and 12-11-

2007 the appellants had finally accepted the proposal for

reconstitution of the firm. The learned Single Judge has overlooked

the fact that proposal for the reconstitution of the firm was proposed

to Smt. Keerti Yadav on 19-10-2007. Since the mother of the

deceased dealer also claimed for reconstitution of the dealership, the

appellants had no other option but to direct the petitioner to submit

the same.

13. The learned counsel for the respondent supported the

order passed by the learned Single Judge and assiduously urged that

the main reason for termination of the dealership was that it was

being run without a valid agreement. After the death of Late Manish

Yadav, Smt. Heera Devi and Smt. Keerti Yadav submitted an NOC

for running the dealership and the appellants communicated to

various authorities to grant NOCs in the name of Smt. Kirti Yadav

and she was allowed to run the dealership. Smt. Kirti Yadav

submitted proposal of reconstitution of dealership and the same was

approved by the Regional Manager as well as Legal Department of

the Company on 12-11-2007 as 100% share. Despite approval of

reconstitution agreement was not executed by the Company. The

Authority has also forwarded all requisites for considering the claim

of the petitioner, which included affidavits and NOCs.

14. The learned counsel for the respondent also alleged

malafide in the matter stating that the Officers of the appellants had

arranged the events in such a manner, within a period of two years

that the third instance of the major irregularity is attracted in the

matter.

15. The learned counsel for the respondent further

asseverated that a show cause notice was issued, but the details of the

consumers were not given, that in respect of whom violation was

alleged in the first and second instances. In the third instance the

allegations of diversion of 38 gas cylinders and not giving rebate on

non-home delivery were levied. The respondent submitted a detailed

reply and contended that no inquiry report or documents were

supplied to her and along with the reply affidavits of consumers were

submitted by her.

16. It is strenuously argued that by order dated 26-11-2011

the appellants terminated the dealership of the petitioner by a non-

speaking order. It has been passed without considering the reply of

the petitioner. Even a single line of the reply of the petitioner is

reproduced and no consideration was given to the petitioner while

taking stringent action of snatching the sole livelihood of the

petitioner, who is a widow having small children. Further the

appellants have also failed to consider the affidavits of the consumers

and have not reflected the same in the impugned order. It is urged

that the order of termination of distributorship is purely reproduction

of the show cause notice and it is clear that the show cause notice is

also vitiated, as the same was given with premeditated intention.

Further, the impugned order does not reflect the explanation of the

petitioner and it is verbatim reproduction of the show cause notice.

17. It is pleaded on behalf of the respondent that the show

cause notice did not contain the details of the earlier inspection and

consumers, as has explained in respect of third inspection and the

same has deprived the petitioner to put her explanation or affidavits

of consumers which were submitted by the petitioner in respect of

the third inspection. Therefore, no proper opportunity was given to

the petitioner and the show cause notice was vitiated.

18. We have heard the learned counsel for the parties and

bestowed our anxious consideration on the arguments advanced. We

have also perused the records produced by the learned counsel for the

appellants showing material regarding three instances of major

irregularities.

19. The respondent was served with a show cause notice of

termination of distributorship, vide communication dated 26-12-

2011. Vide memo dated 8-9-2010, the following informations were

supplied by the appellants to the respondent in the show cause notice,

regarding three instances of major irregularities :

"The first instance of major irregularity :

During the inspection on 26 & 27-07-2008, it was found that the distributorship is not providing home delivery facilities to the customers and not passing on the Cash-N-Carry rebate to the customers on non- home delivery. This constitutes major irregularity under Clause 14 of the LPG MDG-2001 and is treated as the first instance of major irregularity by the distributor and a penal action was taken as per the norms laid down in the said guidelines. Accordingly, fine of Rs.10000/- was levied and paid by you vide DD No.655870 dated 13-02-2009.

The second instance of major irregularity :

During the refill audit conducted by a team of officers on 22-11-2008 it was found that 30 domestic cylinders were diverted to non domestic use and Cash- N-Carry rebate was not provided to the customers to whom cylinders were not home delivered. This constitutes as major irregularity under clauses 7 & 14 of the LPG MDG, 2001 and is treated as the second instance of major irregularity by the distributor and a penal action was taken as per the norms laid down in the said guidelines, and a fine of Rs.100275/- was collected from the distributorship vide debit note No.500098, dated 01-6-2009.

The third instance of major irregularity :

During the refill audit conducted on 11 & 12-06-

2010 by Asst. Manager (LPG-S) Sagar for M/s Krishna Gas Agency, Gadarwara many irregularities were observed and established.

Diversion of 38 domestic cylinders for non-

domestic use. This is treated as third instance of violation of MDG-2001, under major clause No.7 in a span of two years.

Not giving rebate on non home delivery of cylinders to the customers (con. no.1074, 1023, 8287 and 110). This is treated as third instance of violation of MDG-2001, under major clause no.14 in a span of two years.

Unauthorized/unapproved non-home delivery of cylinders to consumer no.23085, 7740, 1074, 1076, 1022, 1059, 1023, 1126, 5901, 85557, 22213, 8287,

110, 1049, 5310, 7521, 7885, 22193, 22482 & 531.

This is treated as first instance of violation of clause no.2 of minor irregularities of MDG-2001.

Our Jabalpur Area Office has sought your explanation on the irregularities observed vide letter ref.JAO/DIST/66 dated 01-7-2010. Your explanation letter dated 26-7-2010 was received by Jabalpur Area Office on 29-7-2010. After going through your explanation letter, your reply has not been found to be satisfactory. The above mentioned irregularities are established against M/s Krishna Gas Agency, Gadarwara."

20. On going through the aforesaid notice, it is clear that the

details of the consumers were not given in respect of whom violation

was alleged in the first and second instances. In the third instance,

the allegation of diversion of 38 domestic cylinders in not giving

rebate on non-home delivery were levelled. The show cause notice

did not contain details of earlier inspection and consumers as has

been explained in respect of third inspection and the same has

deprived the petitioner to furnish her explanation or affidavits of

consumers.

21. The appellants as well as respondent have relied on the

judgment of the Apex Court rendered in the case of Gorkha

Security Services vs. Government (NCT of Delhi) and others,

(2014) 9 SCC 105. In the said judgment pertained to challenge of

blacklisting of a consumer. In the factual background it was held that

it is mandatory requirement to mention that action of blacklisting is

proposed; or it should be possible to draw clear inference to this

effect from notice. The show cause notice only mentioning that costs

were liable to be levied and other "actions taken as deemed fit"

against the appellant-firm, but the notice was silent on contemplated

action of blacklisting. It was ruled by the Supreme Court that is

incumbent on the part of the Department to state in show cause

notice that it intended to impose a penalty of blacklisting, so as to

provide adequate and meaning opportunity to show cause against the

same. However, even if it is not mentioned specifically but from the

reading of the show cause notice, it can be clearly inferred that such

an action was proposed, that would fulfil this requirement.

22. In the case in hand, the show cause notice lacks the

substantial material to propose of termination of dealership of the

respondent and it does not contain the details of the earlier inspection

and consumers. Even, the records produced before us, do not

indicate the same.

23. In a recent decision of the Apex Court rendered in the

case of UMC Technologies Private Limited vs. Food Corporation

of India and another, (2021) 2 SCC 551, it is ruled that a show

notice to constitute the valid basis of a blacklisting order, such notice

must spell out clearly, or its contents be such that it can be clearly

inferred therefrom, that there is intention on the part of the issuer of

the notice to blacklist the noticee. Such a clear notice is essential for

ensuring that the person against whom the penalty of blacklisting is

intended to be imposed, has an adequate, informed and meaningful

opportunity to show cause against his possible blacklisting.

24. In the instant case, the show cause notice was not clear

and specific, as it did not contain the details of the consumers, which

has deprived the respondent/writ-petitioner to put-forward her

explanation and affidavits of customers, as she has submitted in

respect of the third instance. Thus, the show cause notice is vague,

which has resulted in denial of proper opportunity to the respondent

to defend herself, in a case where an order of termination of

dealership has been passed by the appellants. The learned Single

Judge has rightly held that the appellants/respondents have already

taken a decision and approved the proposal for reconstitution of the

firm. From the letter dated 20-11-2019 as well as letter dated 12-11-

2007, it is luminescent that the appellants have admitted that the

proposal for reconstitution of the firm has been approved by them.

Once the authority itself has accepted the proposal and approved the

same for reconstitution of the firm, after the death of the husband of

the petitioner showing that the said agency is only the source of her

livelihood and the proposal was accepted by the appellants.

Thereafter, if any objection is raised by the mother-in-law of the

petitioner and even thereafter, she was allowed to run the agency by

the appellants, its termination, denial of renewal of licence on the

ground of non-submission of NON from her mother-in-law has been

held to be not justified and unreasonable. The learned Single Judge

has taken note of the letter dated 8-9-2010, which is appended as

Annexure-P/8 to the writ petition. The relevant portion of the said

letter is reproduced hereunder :

"After the sad demise of Shri Manish Kumar Yadav, on 28-8-2007, both Smt. Kirti Yadav w/o Late Shri Manish Kumar Yadav & Smt. Heera Devi Yadav, mother of Late Manish Kumar Yadav, have given an application for keeping the supplies to distributorship running. On humanitarian ground Corporation allowed the distributorship to run."

25. The contents of the above-referred letter makes it limpid

clear that the appellants have allowed the respondent to run the

Distributorship/firm which was initially allotted to her husband, Late

Manish Kumar Yadav. Accordingly, the stand taken by the appellants

that in absence of NOC of the mother-in-law of the respondent, she is

not entitled to claim renewal of the licence and the petition

challenging the order of termination of Distributorship of the agency

is not tenable, is unsustainable and the said stand was rightly rejected

by the learned Single Judge and he has rightly held that the decision-

making process adopted by the appellants was violative of the

principle of natural justice.

26. For the premised reason, we do not find any merit in the

contention of the learned counsel for the appellants that the direction

to continue the LPG distributorship could not have been granted in

view of Section 14(c) of the Specific Relief Act. The aforesaid relief

is ancillary to the main relief, as the order of termination of

dealership was set aside.

27. In view of our preceding analysis, we do not perceive

any illegality in the order passed by the learned Single Judge

allowing the writ petition and we concur with the findings ascribed

by the learned Single Judge in the writ jurisdiction.

28. Resultantly, the writ appeal, being sans substratum, is

dismissed without any order as to costs.

      (Mohammad Rafiq)                            (Vijay Kumar Shukla)
        Chief Justice                                    Judge




ac.
 Digitally signed by AJAY KUMAR CHATURVEDI
 Date: 2021.08.18 11:35:40 +05'30'