Kanta Garasiya vs Hindustan Petroleum Corporation ...
2022 Latest Caselaw 2825 Raj

HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR S.B. Civil Writ Petition No. 10115/2019

Kanta Garasiya D/o Shri Heera Bhai, Aged About 47 Years, R/o Sarda Nagar, Banswara.

----Petitioner Versus

1. Hindustan Petroleum Corporation Ltd, Through Its Chairman And Managing Director, 17 Jamsedji Road, Mumbai.

2. The Regional Manager, Hindustan Petroleum Corporation Ltd, Saheli Nagar, New Polo Ground Road, Udaipur.

3. Officer-Re And Mis, Udaipur Regional Office, 50 Saheli Nagar, New Polo Ground Road, Udaipur.

----Respondents Connected With S.B. Civil Writ Petition No. 3816/2019 Kanta Garasiya D/o Shri Heera Bhai, Aged About 47 Years, Sarda Nagar, Banswara.

----Petitioner Versus

1. Hindustan Petroleum Corporation Ltd., Through Its Chairman And Managing Director, 17 Jamsedji Road, Mumbai.

2. The Regional Manager, Hindustan Petroleum Corporation Ltd., Saheli Nagar, New Polo Ground Road, Udaipur.

3. Officer-Re And Mis, Udaipur Regional Office, 50 Saheli Nagar, New Polo Ground Road, Udaipur.

----Respondents

For Petitioner(s) : Mr. Siddharth Joshi (on VC) with Mr. Vikram Singh For Respondent(s) : Mr. Manoj Bhandari, Sr. Adv. assisted by Mr. Govind Suthar

HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI

Judgment

21/02/2022

In wake of instant surge in COVID-19 cases and spread of its

highly infectious Omicron variant, abundant caution is being

maintained, while hearing the matters in the Court, for the safety

of all concerned.

(2 of 12) [CW-10115/2019]

In Writ Petition No.3816/2019:

1. The petitioner has preferred this writ petition claiming

the following reliefs:

"(i) by an appropriate writ, direction or order, the respondents may kindly be directed not to terminate the dealership of the petitioner granted to her vide dealership agreement dated 31.12.2007;

(ii) The respondents may be restrained from taking over possession of the petitioner's retail outlet by use of force with the help of police.

(iii) Cost of this writ petition may kindly be awarded in favour of the petitioner.

(iv) Any other appropriate direction or order which this Hon'ble Court deems fit in the facts and circumstances of the case may kindly be granted."

2. As the pleaded facts would reveal, the present

petitioner was awarded dealership of Hindustan Petroleum

Corporation Ltd. for retail petrol and diesel outlet vide dealership

agreement dated 31.12.2007 and since then the petitioner has

been running retail outlet in the name and style of Akshay

Automobile at Navania, Udaipur, until the present cause of action

arose. The petitioner thus, operated the retail outlet for 12 years

without any complaint or any irregularity; but in the present case,

was facing an inspection on 27.06.2017 by the company officers,

during the course of which, it was found that six nozzles out of

eight nozzles were found to be releasing lesser fuel, in the range

of 30 ml to 60 ml in both Motor Spirit (MS) and High Speed Diesel

(HSD). The inspection team prepared a report and sent the unit to

Moderate Insightful Disciplined congenial Opinionated (hereinafter

referred to as 'MIDCO' for the sake of brevity) for technical report.

The Panchnama was also prepared on the same date. The

(3 of 12) [CW-10115/2019]

respondents received the report from MIDCO noting that there

was no physical damage to the unit as well as there was no alien

or external component hardware found in the unit. However, the

report mentioned that some kind of design error was there, which

resulted into releasing lesser fuel, the report is annexed as

Annexure-4 to the writ petition. The test report was also supplied

to the present petitioner on 20.06.2018. In pursuance of the

aforesaid report, a show cause notice was served upon the

petitioner and a reply was filed on 20.06.2018; thereafter, the

respondent-Company, finding tampering in the unit, passed the

impugned order terminating the dealership of the present

petitioner.

3. Mr. Siddharth Joshi, learned counsel for the petitioner

has shown to this Court the inspection report dated 27.06.2017, in

which, the conclusion was that there was a reduced delivery of

fuel. Learned counsel thereafter, has taken this Court to the report

dated 27.06.2017, prepared by a team comprising of Shri Sunil

Kumar Bairwa, SSO Chittorgarh; Shri Babulal Meena, Sr. COMCO

Officer; Shri Manish Bhatnagar, Assistant Controller and one Shri

L.M. Udayin as being the signatory to the report, and who jointly

prepared the inspection note. In the spot inspection report

prepared by the inspection team it was stated that a reduced

delivery of 30 ml to 50 ml was observed in six nozzles out of eight

nozzles and as per the MIDCO technical report, no additional

fittings were found in any of the Pulsar Assembly. However, the

pulsar assembly was seized for further testing at OEM lab and the

box was accordingly sealed.

(4 of 12) [CW-10115/2019]

4. Learned counsel for the petitioner submits that after

the comprehensive Lab testing, the result came in and the same

reads as follows:-

Tested Parameter                       Result             Remarks
Visual Inspection                                         Item No.1:-
                                                          (I) No physical damage was
Note:                          OK                         found on received card.
                               (Refer                     (II) No Alien or External
Visual Inspection has been Remarks)                       Component/Hardware found
done without providing Power                              on any of the received item.
to the received material under
test.
Delivery Test:                         NOT OK             Conducted    deliveries for
                                       (refer             various ranges and during
                                       remarks)           test delivery we observed
                                                          unexpected errors which is
                                                          not as per our standard
                                                          design.

5. Learned counsel for the petitioner submits that the

petitioner did not damage or tamper the unit as the intensive test

conducted by the respondents pointed out that there was no alien

or external component hardware found in the unit in question

apart from the first inspection.

6. Learned counsel for the petitioner further submits that

the test report only contain a vague averment in regard to the

deliveries of the fuel, and there were unexpected errors which

were not as per the standard designs.

7. Learned counsel for the petitioner has further drawn

the attention of this Court towards the Marketing Discipline

Guidelines (in short 'MDG'), which deal with the irregularities in

question. The relevant part of the MDG Guidelines, read as

under:-

"CHAPTER-8

8. Action to be taken by OMC under the Marketing Discipline Guidelines:-

8.1 All irregularities (mentioned in chapter - 5) are classified into three categories, i.e. Critical, Major and Minor.

(5 of 12) [CW-10115/2019]

8.2 Critical Irregularities: The following irregularities are classified as critical irregularities:

i. Adulteration of MS/HSD (5.1.1) ii. Seals of the metering unit found tampered in the dispensing pumps.{5.1.2 (b)} iii. Totalizer seal of dispensing unit tampered or deliberately making the totalizer non functional or not reporting to the company if totalizer is not working. (5.1.3 read with 5.1.2) iv. Additional/Unauthorized fittings/gears/electronic component found in dispensing units/tampering with dispensing unit. {5.1.4 (a), (b), (c)} v. Unauthorized storage facilities (5.1.5) vi. Unauthorized purchase / sales of products. (5.1.6) vii. Tank lorry carrying unauthorized product found under decantation at the RO (5.1.7) Action:

Termination at the FIRST instance will be imposed for the above irregularities. 8.3 Major Irregularities:The following irregularities are classified as major irregularities:

i. Refusal by the dealer to allow drawl of samples /carry out inspections. (5.1.8) ii. Non availability of reference density at the time of inspection. (5.1.9) iii. Selling of normal MS/HSD as branded fuels.(5.1.10) iv. Stock variation beyond permissible limits but sample passing quality tests. (5.1.11) v. Non maintenance of records since last inspection. (5.1.12) vi. Overcharging of MS/HSD/CNG/ Auto LPG(5.1.13) vii. Non provision of clean toilet facility. (5.1.14.b). viii. Automated Retail outlets : 5.1.16 (a), (b), (c) ix. Non-payment of Salary, Wages and other benefits (as per clause 5.1.18) to the manpower employed at the Ros.

x. Short delivery of products with W&M seals intact : 5.1.2 (a) Action: Except in case of (iii), (vii), (viii), (ix) & (x) above: First instance: Suspension of sales and supplies for 15 days. Second instance: Suspension of sales and supplies for 30 days. Third instance: Termination of the dealership. Action in case of (iii) above would be as under:- First instance: Penalty of recovery of differential price since last inspection.

Second instance: Termination of the dealership. Action in case of (vii) above would be as under:- First instance: Penalty of Rs. 15000 (Rupees Fifteen thousand) Second instance: Penalty of Rs. 25000 (Rupees Twenty Five thousand) Third & subsequent instances: (a) Rs. 35,000 or 45% of the monthly dealer margin

(6 of 12) [CW-10115/2019]

(based on average of last 6 months), whichever is higher; and

(b) Suspension of Sales and supplies for 7 days or rectification of the defect in toilet, whichever is later.

Action in case of (viii) above would be as under:- First instance: Penalty of Rs. 1,00,000 (Rupees one lakh only) Second instance: Penalty of Rs. 2,00,000 (Rupees two lakhs only) and suspension of sales and supplies for 7 days. Third instance: Termination of the dealership. Action in case of (ix) above would be as under:- First instance : Penalty of 20% of the monthly dealer margin (based on average of last 3 months).

Second instance : Penalty of 30% of the monthly dealer margin (based on average of last 3 months).

Third & subsequent instances : Penalty of 40% of the monthly dealer margin (based on average of last 3 months) & suspension of sales and supplies for 15 days. Action in case of (x) above would be as under:- First instance : Rs. 25,000 (Rupees twenty five thousand only) per nozzle found delivering short beyond permissible limit as specified in Legal Metrology Act/Rule.

Second instance (within one year of 1st instance): Rs 50,000 (Rupees fifty thousand only) per nozzle found delivering short beyond permissible limit as specified in Legal Metrology Act/Rule & suspension of Sales and supplies for 15 days.

Third instance (within one year of 1st instance): Termination of the dealership. 8.4 Minor Irregularities: The following irregularities are classified as minor irregularities:

i. Non maintenance of specified records where records from last inspection are maintained but prior records are not available.(5.1.12) ii. Non provision of facilities like air, Telephone and first aid box.(5.1.14.a)"

8. Learned counsel for the petitioner also submits that

even if there was a reduced delivery, then also the maximum

disciplinary action prescribed in the guideline is only to the effect

of suspension of sales and supply for 15 days. Learned counsel for

the petitioner further submits that admittedly, in this case, this

(7 of 12) [CW-10115/2019]

would be the first instance in last 12 years of operations that such

a situation has arisen.

9. Mr. Manoj Bhandari, learned Senior Counsel assisted by

Mr. Govind Suthar appearing on behalf of the respondents submits

that an exhaustive procedure was carried out, commencing from

inspection, a show-cause notice and proper lab testing, and

thereafter, the same culminated into impugned order dated

06.03.2019 whereby petrol/diesel dealership agreement dated

31.12.2007 was terminated. Learned Senior Counsel further

submits that in the first inspection itself, it was found that there is

a reduced delivery in six of the units, and thereafter, the same

was confirmed by the MIDCO specialists. Learned Senior Counsel

also submits that merely because the weights and measurement

seals were found intact or that as per the MIDCO technical report,

no additional fittings were found, coupled with the MIDCO report

stating that no physical damage was found in any of the received

items and no alien or external component hardware was found on

any of the received items, the same do not mean that there was

no tampering done with the unit in question. Learned Senior

Counsel further submits that the test report dated 03.01.2018

clearly indicated that the Pulsar Assembly was not found in

accordance with the MIDCO standard design, and hence, the test

has not been passed.

10. Learned Senior Counsel has drawn the attention of this

Court towards the fact that the Corporation to be sure again sent

a mail on 11.10.2018 to MIDCO seeking clarification whether the

Pulsar Assembly fitting, if not found in conformity with the MIDCO

standard design as per the delivery test, whether the same would

amount to manipulation, so far as the delivery of the fuel is

(8 of 12) [CW-10115/2019]

concerned. Learned Senior Counsel has further drawn the

attention of this Court to the reply received from the MIDCO, in

which, the MIDCO stated that they had conducted the deliveries

for various ranges by using the subject Pulsar in their test set-up

and during test deliveries they observed unexpected errors, which

were not as per the standard design. Learned Senior Counsel also

submits that the Pulsar is the main component involved in the

agreement of fuel delivery and any non-standard behaviours of

the person tantamount to the manipulation of the delivery.

Learned Senior Counsel however, submits that the expert report

pointing it out to be a manipulation of the delivery ought not to be

interfered with, as it conforms to the standard parameters of the

respondents.

11. Learned Senior Counsel has relied upon the precedent

law laid down by the Hon'ble Apex Court in Rahul Yadav & Ors.

Vs. Indian Oil Corporation Ltd. & Ors. reported in MANU/SC/

0729/2015, in which, the Hon'ble Apex Court has laid down that

after the termination of the lease, the possession has to be

handed over and the same cannot be retained by the dealer.

12. Learned Senior Counsel has further referred to the

judgment rendered by the Hon'ble Patna High Court in M/s

Bharat Petroleum Corporation Ltd. Vs. M/s Lal Auto Trading

Company & Ors. reported in MANU/BH/0594/2008, in which,

the Hon'ble Court has held that the irregularity of tampering with

the seals and delivery system under heading of minor offences

deserves a punitive action, as has been done in the present case,

as the dealer deliberately and in a calculated manner, caused the

irregularity in question. The Hon'ble Court also held that the

(9 of 12) [CW-10115/2019]

termination of the dealership agreement was not illegal or

arbitrary.

13. Learned Senior Counsel has also referred to the

judgment rendered by the Division Bench of the Hon'ble Gujarat

High Court in Letters Patent Appeal No.540/2011 in Special

Civil Application No.2412/2011 decided on 19.09.2014, in

which, it was concluded that any manipulation, alteration and

change of micro control chip resulting into illegal gains, violated

the provisions of Motor Spirit and High Speed Diesel (Regulation of

Supply, Distribution and Prevention of Malpractices) Order, 2005,

and thus, the order of termination was not interfered with.

14. Learned Senior Counsel for the respondent has further

submitted that the present petitioner falls under the Clause-8.2

III, of critical irregularities as per the Marketing Discipline

Guideline (MDG).

15. This Court has heard the submissions made by the

learned counsel for the parties and has also examined the material

available on record.

16. The petitioner was running the retail outlet in question

since 2007 and there was no blemish in his functioning until the

inspection dated 27.06.2017. The initial inspection report

categorically pointed out that the six units were showing reduced

delivery of the product. However, the inspection report, consisting

of high level specialists and company officers, observed that no

additional fittings were found in any of the Pulsar Assemblies. The

report however, remained inconclusive as the Pulsar Assembly was

sent to the OEM laboratory for a comprehensive report, which was

also furnished by the MIDCO, the expert body.

(10 of 12) [CW-10115/2019]

17. This Court finds it very unusual that the MIDCO report,

on one hand, indicates that there was no physical damage upon

the unit received and also reiterates that there was no alien or

external component hardware found on the unit, but at the same

time, indicates that there is an unexpected error in the standard

design in the test delivery.

18. In opinion of this Court, an expert like MIDCO

furnishing this kind of vague report is in itself surprising and ought

to be construed as a report without any substantial proof against

the error in the unit in question. The submissions made by learned

counsel for the respondents regarding the impugned order

containing the fact that a specific question was again posed to the

MIDCO vide their letter dated 11.10.2018, to which, the MIDCO

again replied that there was an unexpected error in the standard

design, which tantamounts to manipulation of delivery; the same

again is very vague and it is rather arbitrary and shocking to

construe this as a behaviour attributable to the present dealer.

19. It is not in dispute that this was the first time that in

the complete tenure of his dealership, the petitioner was facing

such allegations. The non-standard behaviour noted by the MIDCO

is not clear from the record and nothing is pointed out in the

report, which could be made attributable to the dealer. It is also

not disputed that the Pulsar is designed by MIDCO and if it is

unable to find out as to what was the unexpected error and how it

would amount to manipulation of delivery then it is a poor show

on the part of the expert body like MIDCO and also a failure of the

respondents to prove the case against the petitioner for

termination of dealership.

(11 of 12) [CW-10115/2019]

20. The precedent laws cited by the learned counsel for the

respondents do not apply in the present case as the lease could

have been given back, if the petition deserves dismissal, but in the

present circumstances, the petition deserves to be allowed.

21. The precedent law of Rahul Yadav & Ors. (supra)

and M/s Bharat Petroleum Corporation Ltd. (supra) also

would not apply in this case, as the respondents have miserably

failed to point out manipulation of delivery either in their initial

inspection report or in the intensive test report conducted

subsequently. A business retail dealer ought to have the

confidence of the respondents, while doing business with them

that they shall act fairly and such confidence would emanate out

of a scientific approach to be adopted in such cases.

22. In the present case, the test report clearly indicates

lack of physical damage and interference in the external

component of the hardware and once a vague term 'unexpected

error' as used by the respondents so to terminate the dealership

in question, then such term would not warrant such harsh action

against the dealer, who is having 12 years of unblemished record.

23. This Court also takes note of the MDG Guidelines for

discipline of the dealer, which have been quoted above, in which,

the fault referred by the respondents does not fall within the

category of 8.2, which is Critical Irregularities and would at best

fall in the category of 8.3 Major Irregularities 'X' reduced delivery

of products with W&M seals intact. The disciplinary guidelines

provides for punishment of suspension for 15 days in such cases,

whereas in the present case, the termination of dealership has

been made, which is much harsh, in the given facts and

circumstances. The action of the respondents, who is a

(12 of 12) [CW-10115/2019]

responsible Body/Corporation is not only arbitrary and devoid of

merits, but also does not induce confidence of this Court for

continuance of the termination order of dealership. Neither the

MDG guidelines nor the expert report of MIDCO indicate anything

which could sustain the impugned order of termination of

dealership.

24. The averment made by learned Senior Counsel

indicating the applicability of Clause 8.2 III of the MDG guidelines

of critical irregularities is uncalled for because this provision

requires the totalizer seal of dispensing unit tampered or

deliberately made non-functional, whereas in the expert report

made on the site as well as after examining in Lab analysis, the

same do not indicate any such deliberate tampering.

25. Thus, in light of the aforesaid observations, the present

petition is allowed and while quashing the impugned order dated

06.03.2019, the respondents are directed to permit the petitioner

to continue with the dealership as per the agreement dated

31.12.2007. All pending applications stand disposed of

accordingly.

In Writ Petition No.10115/2019:

1. This writ petition does not call for any final adjudication, in

view of the aforementioned judgment delivered today in the

above-numbered S.B. Civil Writ Petition No.3816/2019.

2. Consequently, the present writ petition is disposed of as

having become infructuous. All pending applications also stand

disposed of accordingly.

(DR.PUSHPENDRA SINGH BHATI),J.

1-2 Zeeshan/Jitender

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