Madras High Court
Geetha Kasturirangan vs M/S.Hindustan Petroleum on 11 September, 2008
Author: P.Jyothimani
Bench: P.Jyothimani
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:11-9-2008 CORAM: THE HON'BLE MR.JUSTICE P.JYOTHIMANI W.P.Nos.3914 & 28696 of 2007 and connected miscellaneous petitions. ..... Geetha Kasturirangan .. Petitioner in WP.3914/2007 S.Kasturirangan .. Petitioner in WP.28696/2007 vs. 1.M/s.Hindustan Petroleum Corporation Ltd., rep. By its Managing Director No.1, Jamshad, Tata Road Mumbai 20. 2.The Regional Manager Hindustan Petroleum Corporation Ltd., 18/1 Big Bazaar Street Coimbatore. 3.Mr.S.Kasthurirangan 4.The Inspector of Police Bhavani Police Station Bhavani. .. Respondents in WP.3914/07 1.1.M/s.Hindustan Petroleum Corporation Ltd., rep. By its Managing Director No.1, Jamshad, Tata Road Mumbai 20. 2.The Chief Regional Manager Regional Office Hindustan Petroleum Corporation Ltd., 18/1 Big Bazaar Street Coimbatore. ..Respondents in WP.28696/07 Writ petitions filed under Article 226 of the Constitution of India praying for issuance of a Writ of Mandamus and Certiorari as stated therein. For petitioner : Mr. N.L.Rajah in WP.3914/07 For petitioner : Mr. V.Raghavachari in WP.28696/07 For respondents : Mr. O.R.Santhanakrishnan 1& 2in both WPs. Ms.M.Remya for R.3 in WP.3914/07 .. COMMON ORDER
The property bearing Door No.90B, Bhavani Main Road, Bhavani belongs to the petitioner in W.P.No.3914 of 2007, who is the wife of the petitioner in W.P.No.28696 of 2007. While W.P.No.3914 of 2007 filed by the owner is to forbear the first and second respondents, the Hindustan Petroleum Corporation Limited from carrying on retail trade in petroleum products in the said premises belonging to her, W.P.No.28696 of 2007 is filed by the petitioner challenging the order of the second respondent dated 31.1.2007, under which the second respondent while terminating the dealership agreement entered into between the petitioner therein and the respondent Hindustan Petroleum Corporation Limited, deputed its Officer to take possession of the retail outlet premises together with attendant facilities like, dispensing pumps, underground tanks, etc. situate in Door No.90B, Bhavani Main Road, Bhavani.
2. The petitioner in W.P.No.28696 of 2007 is the proprietor of his concern, carrying on business as dealer in petroleum products in the said premises for the past five decades. Originally, the petitioner entered into a dealership agreement with ESSO which was renewed from time to time even after the said ESSO got merged with Hindustan Petroleum Corporation Limited, the respondent in this writ petition. The grievance of the petitioner is that on 15.11.2006, the second respondent has issued a show-cause notice to the petitioner on the basis that an inspection was made by the Mobile Lab Officer on 21.8.2006, in which sample was taken and sent to the laboratory of the respondents, wherein it was found that the petitioner failed positively in 'Octane Number Test'. It is the case of the petitioner that on the same day, viz., on 21.8.2006, the same Officer who had taken the test sample issued a certificate that the sample met the specification. The petitioner replied to the show-cause notice on 20.11.2006. In the said reply, the petitioner has stated that on 10.8.2006, he took a full load of both MS and HSD and therefore, the alleged variation found in the inspection is incorrect and according to the petitioner, there cannot be two different results in respect of the same sample and the sample test conducted by the Mobile Lab is faulty and for any error committed by the respondents, the petitioner cannot be made responsible.
3. It is also his case that at the time of inspection, the petitioner was not present and no samples were given to the petitioner and on many occasions when the tests were done, it was found that there was no adulteration. The inspection was stated to have been carried on 21.8.2006, however, the notice was issued on 16.11.2006, which according to the petitioner, is with sinister motive of the Corporation. The termination order came to be passed without considering the reply and it is arbitrary. It is the further case of the petitioner that the premises belongs to his wife, the petitioner in W.P.No.3914 of 2007 and therefore, the respondents have no right to trespass into the same in respect of which the petitioner's wife had already given a police complaint. According to the petitioner, there is no violation of any condition of dealership agreement.
4. The termination order is also challenged on the legal grounds including that it is against the principles of natural justice; that the respondents have not even taken the sample from the petrol bunk of the petitioner and the records are concocted; that the respondent is under the legal obligation to conduct enquiry before sample was taken and the conduct of the respondents in interfering with the petitioner's right in carrying on business violates the right guaranteed under Constitution of India; and the action of the respondents is against the Rule 2.4.4 of the Marketing Discipline Guidelines.
5. On the other hand, the petitioner in W.P.No.3914 of 2007 is questioning the right of the respondents 1 and 2 from entering into the premises which belongs to her without her permission. According to the petitioner, in the guise of cancelling the dealership of the petitioner's husband, the respondents 1 and 2 cannot have a right to enter into the property belonging to the petitioner.
6. In the counter affidavit filed by the respondent- Hindustan Petroleum Corporation Limited in W.P.No.28696 of 2007, while it is admitted that by a Memorandum of Agreement dated 24.10.2000, the writ petitioner was appointed as a dealer of the second respondent Corporation for distribution and sale of petroleum products in respect of the retail outlet at Bhavani Main Road, Bhavani, Clause 68 of the Memorandum of Agreement contains the Arbitration Clause and therefore, the filing of the writ petition is not maintainable. It is also stated that it is a contractual obligation which the petitioner seeks to enforce in the writ petition and the same cannot be permitted. It is also the case of the second respondent that as per various Clauses contained in the Memorandum of Agreement the second respondent issued a show-cause notice on 15.11.2006 and after considering the reply of the petitioner dated 20.11.2006, the second respondent Corporation had to necessarily pass order terminating the dealership agreement.
7. The show-cause notice itself directed the petitioner to explain as to why the dealership agreement should not be terminated for the failure of samples with regard to RON Test. According to the second respondent, the Mobile Lab Officer carried out only the clinical test pending RON Test, which was subsequently done by the second respondent at Ghatkesar Terminal. According to the second respondent, even if the sample passes the clinical test conducted by the Mobile Lab Officer, the subsequent test of the sample like, RON Test has to be passed and there is no bar for proceeding with RON test in spite of the fact that the sample has passed clinical test at the outlet.
8. It is denied that the same sample product cannot have two different results. It is also specifically stated that the test conducted by the Mobile Lab is not valid and not binding. It is also stated that even when the Mobile Lab Officer submitted an inspection report at retail outlet, the same was witnessed by the petitioner's representative and therefore, it cannot be said that the sample was taken from the tank maintained by the petitioner without his knowledge. The first respondent had to wait till the report of RON test conducted at Ghatkesar Terminal in Andhra Pradesh was received and that was the reason for the show-cause notice issued on 15.11.2006 while the inspection was conducted on 21.08.2006. It is also stated that the explanation submitted by the petitioner was taken into consideration before passing the impugned order. There has been a breach of various Clauses of the Agreement viz., Clauses 25, 27, 58(A), 58(M) and 58(1) of the Dealership Agreement dated 24.10.2000.
9. It is also stated that final termination order was issued only after following the procedure. The impugned order was passed invoking Clause 57 of the dealership agreement dated 24.10.2000 and the second respondent has not caused any extensive damage to the property. It is also stated that the principles of natural justice are not violated while terminating the dealership agreement. It is also stated that only after taking the sample in the retail outlet, the test was conducted. It is also stated that under the dealership agreement, the respondents are not having statutory obligation to conduct enquiry before cancelling the dealership agreement since the dealership agreement is only a commercial contract wherein the principles of natural justice stand excluded. However, the case of the second respondent is that the second respondent has followed the principles of natural justice. It is also denied that any constitutional right is affected by the impugned order of termination and it is due to the adulteration committed by the petitioner, the impugned order came to be passed.
10. In the counter affidavit filed in W.P.No.3914 of 2007, the second respondent Corporation has stated that the second respondent has taken the physical possession of the retail outlet on 31.1.2007 as per the Panchanama report after invoking Clause 57 of the Dealership Agreement dated 24.10.2000. It is also specifically stated that the second respondent Corporation is not having physical interest or control over the retail outlet property and the second respondent has no objection to surrender possession of the retail outlet premises subject to the permission of the petitioner in allowing the second respondent Corporation to remove its equipments viz., dispensing pumps, etc. which belong to the second respondent Corporation. The husband of the petitioner who is the dealer has not permitted the second respondent Corporation to remove the equipments. It is also stated that one B.K.Surendra has granted the lease in favour of the petitioner in W.P.No.28696 of 2007 to the extent of 1200 sq.ft. in Bhavani Municipality to enable the petitioner to carry on business in sale and distribution of petroleum products on a monthly rent of Rs.1200/- for the showroom and Rs.1750/- for the land and the said writ petitioner has been carrying on the proprietary concern in the name, M/s.S.Srinivasan.
11. The lessors who has granted lease have filed a suit in O.S.No.70 of 2005 against the petitioner in W.P.No.28696 of 2007 and Hindustan Petroleum Corporation Limited represented by its Regional Manager to surrender vacant possession of the suit property, failing which to permit the plaintiffs themselves to remove the superstructure over and underneath the suit property and also for damages of Rs.71,000/-. By virtue of the said plaint, the property originally belonged to one B.S.Sitharaman under a registered partition deed dated 16.9.1966 and thereafter, the plaintiffs in the said suit have become the owners as legal heirs and they filed the suit in O.S.No.70 of 2005 before the II Additional District Munsif, Bhavani. The petitioner in W.P.No.28696 of 2007 has admitted that he is only a tenant and therefore, he has no right over the land which has been taken on lease and the said suit was dismissed on 31.8.2005 against which first appeal in A.S.No.52 of 2006 before the Sub Judge, Bhavani is pending.
12. It is, in respect of breach of conditions by the petitioner in W.P.No.28696 of 2007 who is the third respondent in W.P.No.3914 of 2007, the dealership agreement was terminated. Before the termination, the sample taken from the outlet failed in RON test by recording 80 as against the specifications of 88 minimum while the tank truck sample and the sample of Irugur Depot passed the RON test and copies of the lab reports were furnished to the dealer. Since the variation between the observed RON test and the acceptable limit was very high, the second respondent Corporation has not accepted the request for testing the retention sample. It was under those circumstances, the dealership agreement came to be terminated after giving show-cause notice. After termination, the second respondent Corporation has entered the outlet on 31.1.2007 and carried on the business in the sale and distribution of petroleum products. It is also stated that the petitioner in W.P.No.3914 of 2007 is not the owner of the property and only a lessee who has no locus standi to question the stand of the second respondent Corporation for which the second respondent has relied upon various provisions of the agreement entered with the husband of the petitioner.
13. Mr.V.Raghavachari, learned counsel appearing for the petitioner in W.P.No.28696 of 2007 would submit that on 21.8.2006 when the inspection was conducted, the Mobile Lab test has met the specification, however, in the report of laboratory inspection stated to have been conducted by the second respondent Corporation in Ghatkesar Terminal, Andhra Pradesh District, curiously it is stated that the sample has not met the specification which, according to the learned counsel, is not correct. According to him, the sample was taken on 21.8.2006 while the report of laboratory test done in Andhra Pradesh is stated to have been received by the lab on 18.9.2006 and the actual test was conducted on 25.9.2006 which was more than one month later and therefore, in the meantime, the sample should have undergone various changes.
13(a). It is also the case of the learned counsel for the petitioner that the required steps for the purpose of taking sample have not been followed and no opportunity was given to the petitioner by saying that the sample taken from the petitioner would undergo further test. His submission is that three stages of taking samples; (i) taking from retail outlet; (ii) from the tank truck and (iii) despatching company viz., source sample; were not properly done and therefore, it is in violation of the principles of natural justice.
13(b). He would also submit that the arbitration clause is not effective and he would rely upon various judgements, viz.,
(i) Harbanslal Sahnia vs. Indian Oil Corporation Ltd., [2003(2) SCC 107];
(ii) Hirak Point, Dealer and Bharat Petroleum Corporation Ltd., vs. Bharat Petroleum Corporation Ltd., and Others [(2003(1) JCR 315 Jharkhand)];
(iii) Bharat Filling Station and another vs. Indian Oil Corporation Ltd., [2003(3) AD (Delhi) 694], to substantiate his contention that mere existence of arbitration clause is not effective. His submission is that RON test is not proper test.
14. On the other hand, Mr.O.R.Santhanakrishnan, learned counsel appearing for the second respondent Corporation would submit that the writ petitions are liable to be dismissed on the ground of laches. According to him, the impugned termination is on 31.01.2007 while the writ petition came to be filed on 28.8.2007 and the delay has not been properly explained. He would submit that inasmuch as an effective remedy is available by way of arbitration, the writ petitions as such are not maintainable. While it is admitted that MS sample was taken on 21.8.2006, the same has passed the test, however, it failed in RON test. It is his submission that even though no method of test has been contemplated under the Dealership Agreement, the second respondent Corporation being the Central Government undertaking, various control orders passed by the Government of India are applicable. While he admits that the sample of Depot has passed the test, the lab test went against the petitioner. He would rely upon the judgement of the Supreme Court in State of U.P. And others vs. Bridge & Roof Co. (India) Ltd., [AIR 1996 SC 3515] to show that when the arbitration clause is available, the writ petition is not a remedy.
15. I have heard the learned counsel for the petitioners and the respondent Corporation and perused the entire records and given my anxious thought to the issue involved in these cases.
16. The issue to be decided in this case is, whether the impugned order of termination is valid in the eye of law?
17. Even though the order of termination is attacked by the petitioner on various grounds including the violation of principles of natural justice, it is not in dispute that before the impugned termination order came to be passed, the respondent Corporation has in fact issued a show-cause notice on 15.11.2006. In the show-cause notice it is admitted that an inspection was conducted in the retail outlet in possession of the petitioner on 21.8.2006. The sample was taken by the Mobile Lab Officer in respect of MS whereas HSD sample could not be taken since the outlet was dry. The MS sample was sent for testing in the regular laboratory in Andhra Pradesh. In the show-cause notice it is also stated that the sample of MS collected from the retail outlet along with the sample collected in the tank truck was also sent to Ghatkesar laboratory for RON test. The sample collected from the retail outlet has failed the testing by recording 80 as against the minimum specification of 88 as per the laboratory report dated 25.09.2006. However, it is stated that the tank truck sample as well as the Depot sample of Irugur has passed RON test. In those circumstances, by relying upon the failure of RON test regarding sample taken in the retail outlet, the show-cause notice came to be issued as per Clauses 25 and 27 of the Dealership Agreement, calling upon the petitioner to give his explanation within seven days.
18. It is seen that the petitioner has in fact given his explanation on 20.11.2006. In the said letter he has requested the respondent Corporation to test MS sample sealed and kept by the Mobile Lab Officer at the outlet and admittedly such test has not been done. It is also stated in the explanation that the sample has passed the test made in the mobile lab which was made on the spot, and the confirmation certificate has in fact been issued and therefore, there cannot be a different decision by merely referring to RON test. In the impugned order of termination passed by the second respondent Corporation it is stated that there is a difference between the clinical test conducted by the Mobile Lab Officer and the RON test which can be done only in the laboratory. While it is admitted that in the clinical test the sample has passed, in the RON test conducted in the laboratory, there is a vast difference, that is to say, it recorded 80 as against the minimum specification of 88 and therefore, it is presumed that there is adulteration on the basis of RON test, however, it is made clear that the samples taken in Irugur Depot and the tank truck have passed the RON test. The second respondent Corporation has also considered the request of the petitioner in the objection for the purpose of re-testing the sample kept at the outlet and rejected on the ground that the variation observed in RON test is very high and it was, in those circumstances, as per the provisions of the dealership agreement, the dealership has been terminated.
19. A reference to the dealership agreement entered into between the petitioner and the Corporation dated 24.10.2000 shows that it contains Clause 68 for referring any dispute to the arbitration. First of all, the questions that have to be seen are as to whether such arbitration clause in the context of termination of contract on the basis of failure of sample in passing RON test and in the context of the factual situation in this case can be treated as an effective remedy and whether the jurisdiction of this Court under Article 226 of the Constitution of India will be ousted even if it is found by this Court that such test stated to have been conducted by the Corporation is neither forming part of the dealership agreement, nor the method of test effected by the Corporation is as per the statutory regulations which are binding on it.
20. Before going into the maintainability of the writ petition as it is vehemently submitted by the learned counsel for the Corporation, it is necessary to consider some of the provisions of the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005 produced by the learned counsel for the Corporation. The said order is a statutory enactment passed by virtue of the powers conferred under section 3 of the Essential Commodities Act, 1955 by the Central Government. In the said Order, Clause 2(a) defines 'adulteration' as follows:
"(a) 'adulteration' means the introduction of any foreign substance into motor spirit or high speed diesel illegally or unauthorisedly with the result that the product does not conform to the requirements of the Bureau of Indian Standards specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively or any other requirement notified by the Central Government from time to time."
Clause 2(f) 'malpractices' which is stated to include adulteration also, is as follows:
"(f) 'malpractices' shall include the following acts of omission and commission in respect of Motor Spirit and High Speed Diesel:
(i)Adulteration,
(ii)Pilferage,
(iii)stock variation,
(iv)unauthorised exchange,
(v)unauthorised purchase,
(vi)unauthorised sale,
(vii)unauthorised possession,
(viii)over-charging,
(ix)sale of off-specification product, and
(x)short delivery".
Clause 2(t) which explains about the "sale of off specification product", is defined as follows:
"(t) 'sale of off specification product' means sale of motor spirit or high speed diesel by dealer of quality not conforming to Bureau of Indian Standards specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively."
21. It is relevant to find that the said sale of off specification product is also one of the malpractices under Clause 2(f) of the said Order. What is stated as sale of off specification product is that the quality of motor spirit or high speed diesel not conforming to Bureau of Indian Standards specifications and the provision does not contain anything about RON test.
22. The said Order in Clause 3(3)(b) enables the dealer to inspect the container or tank truck in which he receives the product to ensure that the quantity and quality of the product are as per the documents and in conformity with the Indian Bureau of Standards specifications number IS 2796 for motor spirit and IS 1460 for high speed diesel. It is also stated in the said Clause that it is the duty of the oil company to indicate the density of the product at 15 degrees centigrade and the dealer shall maintain a record of densities and keep samples of products duly signed jointly by him and the driver of the tank truck and the said clause is as follows:
"3. Product supply and transportation:
(3) The dealer or consumer shall inspect such container or tank-truck in which he receives the product to ensure -
(3)(b) that the quantity and quality of the product is as per delivery documents issued by the oil company and the quality of the product conforms to the requirements of the Bureau of Indian Standard specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively. For this purpose, the oil company shall indicate density of the product at 15 degrees centigrade in the delivery documents and the dealer or consumer shall maintain a record of densities and keep samples of product duly signed jointly by him and the driver of tank truck and also take other measures as prescribed by the oil company. The variation in density at 15 degrees centigrade of the product in tank truck compared to the density mentioned in delivery documents should not be more than +/- 0.0030."
This clause certainly enables the dealer to check up the density of the commodities supplied.
23. The clause 7 of the Order enables the authority viz., any Gazetted officer of the Central Government or State Government or any police officer not below the rank of Deputy Superintendent of Police by general or special order, in order to secure compliance of the provisions of the Order, to enter and search any place or premises of a dealer, transporter, or consumer; (b) stop and search any person or vehicle; and (c) take samples of the product and seize any of the stocks of the product. Apart from that, the powers of search and seizure enshrined under section 100 Cr.P.C. are made applicable. Clause 7 of the Order reads as follows:
"7. Power of search and seizure -
(1) Any Gazetted Officer of the Central Government or a State Government or any police officer not below the rank of Deputy Superintendent of Police duly authorised, by general or special order of the Central Government or a State Government, as the case may be, or any officer of the oil company, not below the rank of sales officer, may, with a view to securing compliance with the provisions of this order, or for the purpose of satisfying himself that this Order or any order made thereunder has been complied with or there is reason to believe that all or any of the provisions of this Order have been and are being or are about to be contravened, -
(a) enter and search any place or premises of a dealer, transporter, consumer or any other person who is an employee or agent of such dealer or transporter or consumer,
(b) stop and search any person or vehicle or receptacle used or intended to be used for movement of the product;
(c) take samples of the product and seize any of the stocks of the product and the vehicle or receptacle or any other conveyance used or suspected to be used for carrying such stocks and thereafter take or authorise the taking of all measures necessary for securing the production of stocks or items so seized before the Collector or District Magistrate having jurisdiction under the provisions of the Essential Commodities Act, 1955 and for their safe custody pending such production;
(d) inspect, seize and remove with such aid or assistance as may be necessary, books, registers, any other records or documents of the dealer, transporter, consumer or any other person suspected to be an employee or agent of the dealer, transporter or consumer;
(2) While exercising the power of seizure provided under sub-clauses (c) and (d) above, the authorised Officer shall record in writing the reasons for doing so and a copy of such recording shall be provided to the dealer, transporter, consumer or any other concerned person, as the case may be.
(3) The provisions of section 100 of the Code of Criminal Procedure, 1973 (2 of 1974), relating to search and seizure shall, as far as may be, apply to searches and seizures under this Order."
24. The important provision of the Order is Clause 8 which speaks about the entire procedure to be followed for the purpose of taking samples of products. The said provision is in total conformity with the concept of natural justice not only to enable the Corporation to see that the quality supplied to the consumer is maintained, but also to protect the dealer from any arbitrary action by the authorities of the second respondent Corporation for various reasons. While taking samples, the said provision makes it clear that the sample should be taken in clean aluminium container to check whether the density and other parameters conform to the requirements of Bureau of Indian Standards specifications. The authorised officer has to take and seal six samples of one litre each of the motor spirit or three samples of one litre each of the high speed diesel out of which two samples of motor spirit or one sample of high speed diesel would be given to the dealer or transporter or concerned person under acknowledgement to enable him to preserve the sample till the testing or investigation is completed. Two samples of motor spirit or one sample of high speed diesel is kept by the oil company and the remaining two samples of motor spirit or one sample of high speed diesel would be taken for laboratory analysis. It is also made clear that the authority is expected to forward the sample within 10 days to any of the laboratories which are mentioned in Schedule III to the said Order for the purpose of checking as to whether it conforms to the requirements of Bureau of Indian Standards. The test results has to be communicated to the dealer within five days of receipt of test results from the laboratory. It is also stated that the laboratory is expected to furnish the test report to the officer within 20 days from the receipt of sample at the laboratory. Clause 8 of the Order reads thus:
"8. Sampling of product.
(1) The authorised under clause 7 shall draw the sample from the tank, nozzle, vehicle or receptacle as the case may be, in clean aluminium containers, to check whether density and other parameters of the product conform to the requirements of Bureau of Indian Standards specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively. Where samples are drawn from retail outlet, the relevant tank truck sample retained by the dealer as per clause 3(b) would also be collected for laboratory analysis.
(2) The authorised officer shall take and seal six samples of 1 litre each of the motor spirit or three samples of 1 litre each of the High speed diesel. Two samples of motor spirit or one of high speed diesel would be given to the dealer or transporter or concerned person under acknowledgement with instruction to preserve the sample in his safe custody till the testing or investigations are completed. Two samples of Motor Spirit or one of High Speed Diesel shall be kept by the concerned oil company or department and the remaining two samples of Motor spirit or one of High Speed Diesel would be used for laboratory analysis;
(3) The sample label shall be jointly signed by the authorised officer who has drawn the sample, and the dealer or transporter or concerned person or his representative and the sample label shall contain information as regards the product, name of retail outlet, quantity of sample, date, name of the authorised officer, name of the dealer or transporter or concerned person or his representative;
(4) The authorised officer shall forward the sample of the product taken within ten days to any of the laboratories mentioned in Schedule III or to any other such laboratory when it may be notified by the Government in the Official Gazette for this purpose, for analysing with a view to checking whether the density and other parameters of the product conform to the requirements of Bureau of Indian Standards specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively.
(5) The laboratory mentioned in sub-clause (4) shall furnish the test report to the authorised officer within twenty days of receipt of sample at the laboratory.
(6) The authorised officer shall communicate the test result to the dealer or transporter or concerned person and the oil company, as the case may be, within five days of receipt of test results from the laboratory for appropriate action."
25. At this stage, it is also relevant to point out that Schedule III of the said Order categorises the laboratories for testing petroleum product samples consisting of various laboratories which also includes in No.3, Chennai Petroleum Corporation Limited Refinery Laboratory, Manali, Chennai-19, Tamil Nadu.
26. On facts, it is clear that the officials of the second respondent Corporation have taken sample on 21.8.2006, it was sent to the laboratory on 18.9.2006 which is not within ten days from the date of taking sample as per Clause 8(4) of the Order. The laboratory which has received the sample on 18.9.2006 has conducted the test on 25.9.2006 which is also not as per the statutory Order. The above said dates are not in dispute as the particulars are found in the documents furnished by the second respondent Corporation itself. It is also not clear that while Schedule III contains a laboratory in Chennai, why the sample was sent to the laboratory at Ghatkesar Laboratory, Andhra Pradesh.
27. Further, on facts, it is also clear that there is no clause in the dealership agreement or in the statutory Order as to the RON test which is stated to have been conducted by the second respondent Corporation through its officials and the statutory Order only states that the product should conform to the requirements of Bureau of Indian Standards specifications, IS 2796 and IS 1460 in respect of motor spirit and high speed diesel respectively.
28. It is also not the case of second respondent Corporation in the counter affidavit that number of samples were taken as per the said Order and in such factual background, it is to be decided as to whether arbitration is an effective remedy. On the face of the factual situation, I do not agree with the learned counsel for the second respondent Corporation that the petitioner should be driven to avail the remedy under the dealership agreement by referring the dispute to arbitration. The mere presence of alternative remedy does not oust the jurisdiction of this Court under Article 226 of the Constitution of India and law is well settled that the rule of exclusion of writ jurisdiction is a discretion and not a matter of compulsion and in certain contingencies the High Court can always exercise the writ jurisdiction in spite of availability of alternative remedy and that was the principle laid down by the Hon'ble Apex Court in Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107]. The contention raised on behalf of the dealer in that case was similar to the one raised in this case, viz., the violation of principles of natural justice, as elicited by the Hon'ble Apex Court which is as follows:
"5. It is submitted by Shri P.P.Malhotra, the learned senior counsel for the appellants that the dealership has been terminated on irrelevant and non-existent grounds and, therefore, the order of termination is liable to be set aside. The Government of Uttar Pradesh has issued directions to all the District Magistrates of the State in the matter of taking of samples and carrying out tests. There are two Government orders issued, namely, No.1459/19-7-97-731-PP dated 25.4.1997 and No.2722/29-7-2000-PP/2000. The orders state inter alia that the strength/frictions of petrol and diesel change after ten days and therefore a time-limit of ten days is fixed for testing of such products. It is also emphasized that in the interest of natural justice, the inspecting officials should test the sample for quality and density at the retail outlet itself in the presence of the dealer with necessary equipments such as filter paper, hydrometer, thermometer, jar and the conversion table which are available at the retail outlets and record density thereat only in the presence of the dealer. ....."
29. The other point about the availability of alternative remedy and jurisdiction of the High Court under Article 226 of the Constitution of India was decided by the Hon'ble Apex Court in favour of the dealer as follows:
"7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed is concerned, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. (See Whirlpool Corpn. v. Registrar of Trade Marks (1998) 8 SCC 1). The present case attracts applicability of the first two contingencies. Moreover, as noted, the petitioners' dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we fell that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings."
30. By applying the said ruling of the Apex Court to the facts of the case wherein not only the provisions of the statutory Order have not been followed while samples were taken, but there was also gross violation of principles of natural justice, there is no difficulty to come to the conclusion that under the factual situation the writ petition filed by the petitioner should be maintained and the petitioner need not be driven to avail the alternative remedy of arbitration process.
31. In Dharam Chand Gupta v. Indian Oil Corporation Ltd. And Ors [130 (2006) DLT 102], the Delhi High Court, while deciding about the maintainability of the writ petition in the presence of arbitration clause in the agreement, has held that the public authorities are expected to act in an non-arbitrary manner and in such circumstances, the remedy is the rule of discretion. The Delhi High Court while narrating the case laws on the subject, has held as follows:
"21. In F.C.I. v. Kamdhenu Cattle Feed Industries MANU/SC/0257/1993 a different dimension was put to the issue, when the Supreme Court underscored the importance of non-arbitrariness in action by public authorities. It was observed thus:
In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law. A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'.
22. In the decision reported as Harbans Lal Sahnia v. Indian Oil Corporation Ltd. And Ors. MANU/SC/1199/2002 the Supreme Court dealt with a somewhat similar situation, where the dealership of Indian Oil Corporation was terminated. It turned down the plea of availability of a contractually agrees dispute resolving mechanism, viz. Arbitration, set up as an objection to maintainability of writ proceedings, in the following terms:
So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. (See Whirlpool Corpn. v. Registrar of Trade Marks (1998) 8 SCC 1). The present case attracts applicability of the first two contingencies. Moreover, as noted, the petitioners' dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we fell that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings."
23. xxxx
24. xxxx
25. Fairness and non-arbitrariness are the hallmarks of equality; indeed they are the bedrock of democratic governance. They were sacrificed for no apparent reason in this case. Therefore, following the decisions in Harbans Lal Sahnia (supra) and Bharat Filling Station (supra) I hold that the decision or letter communicating cancellation of the stockeistship contract, on 19.5.2003 was arbitrary. The same is hereby quashed. As a consequence the respondents shall resume the supplies to the petitioner under the agreement; however liberty to take such action as the IOC wishes to, is permitted to it, provided the petitioner is issued a show cause notice, and given opportunity o present its point of view, in an appropriate manner, in answer to the allegations. Since the decision dated 5.5.2003 cancelling the distributorship agreement is not being interfered with, liberty is reserved to the petitioner to proceed in accordance with law, as per remedies available to it, for claiming damages or compensation, if he chooses to do so."
32. The law laid down by the Supreme Court about the jurisdiction of the High Court under Article 226 of the Constitution of India in respect of availability of alternative remedy in Harbans Lal Sahnia v. Indian Oil Corpn.Ltd. [(2003) 2 SCC 107] has been reiterated and confirmed authoritatively by the Hon'ble Apex Court in M.P.State Agro Industries Development Corpn.Ltd. v. Jahan Khan [(2007) 10 SCC 88] in the following words:
" 12. Before parting with the case, we may also deal with the submission of learned counsel for the appellants that a remedy by way of an appeal being available to the respondent, the High Curt ought not to have entertained his petition filed under Articles 226/227 of the Constitution. There is no gainsaying that in a given case the High Court may not entertain a writ petition under Article 226 of the Constitution on the ground of availability of an alternative remedy, but the said rule cannot be said to be of universal application. The rule of exclusion of writ jurisdiction due to availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of the availability of an alternative remedy, a writ court may still exercise its discretionary jurisdiction of judicial review, in at least three contingencies, namely, (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. In these circumstances, an alternative remedy does not operate as a bar. (See Whirlpool Corpn. v. Registrar of Trade Mars [(1998 (8) SCC 1]; Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107]; State of H.P. v. Gujarat Ambuja Cement Ltd. [(2005) 6 SCC 499] and Sanjana M.Wig v. Hindustan Petroleum Corpn. Ltd. [(2005) 8 SCC 242]."
33. By applying the law laid down by the Apex Court to the facts of the present case, as I have elicited above, especially that taking of sample by the second respondent is against the provisions of the Statutory Order viz., the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005, in the sense that the sample was not taken as per the procedure contemplated under the Order, there was also gross violation of timings between taking the samples and testing the samples, it is clear that it certainly takes away the right of the petitioner to defend himself, because by efflux of time, there is possibility of difference in density of petroleum products. Probably that is the reason for the authorities who have enacted the said statutory Order to fix the time limit not only for taking sample and referring the same to the lab, but also for the lab to complete the test.
34. The reliance placed by the learned counsel for the second respondent Corporation on the judgement of the Supreme Court in State of U.P. vs. Bridge & Roof Co. (India) Ltd. [A.I.R. 1996 SC 3515] is in the context of breach of contractual obligation relating to the contract with the Government for improvement of road. In that case, when the Government deducted certain amount against the provisions of the contract on the ground that tax had been reduced, the writ petition was filed to restrain the Government from making such deduction which was not maintainable as per the contractual obligation. It was, in those factual circumstances, held that the arbitration is the proper remedy to decide about the breach of contractual obligation between the parties. But, the said judgement is not supporting the case of the second respondent Corporation in the factual matrix.
35. The judgement of the Division Bench of this Court in O.S.A.Nos.67 and 68 of 2001 dated 11.12.2007 (Bharat Petroleum Corporation Ltd., vs. Sree Venkateswara Service Station), on which reliance was placed by the learned counsel for the second respondent is also not useful to substantiate the defence of the second respondent Corporation. That was a case where on a surprise check made by Civil Supplies C.I.D. of the State Government, it was found that the proprietor's son was unloading white kerosene into the underground tank and he was caught red handed and subsequently, he was arrested and the lorry was seized and after giving show-cause notice, the dealership was terminated. A reference to the judgement of the Division Bench makes it clear that in that particular case MS sample taken from the outlet has failed and HSD sample taken from the outlet also failed to meet the requirements of 'ultra high speed diesel' and it was, on that factual situation and also taking into consideration that on three earlier occasions the said dealer was found to have committed gross irregularities, the Division Bench held that the termination is not invalid in law.
36. In this view of the matter, the reasons adduced by the second respondent Corporation for termination of dealership agreement based on the alleged test conducted which is not as per the statutory Order, cannot be held to be proper reasons for termination of the dealership agreement. It is astonishing to note that the second respondent Corporation in the counter affidavit has taken a stand that they would follow any procedure while the admitted fact is that the sample taken on the spot was found to have passed the test, whereas the sample sent to the laboratory at Andhra Pradesh nearly after one month, has failed, which is an act that cannot be approved by any stretch of imagination. The public authorities are expected to act in fairness while dealing with any individual person either in the matter of statutory contract or in any public activity and in the factual situation that the provisions of the statutory Order are not followed, the procedure stated to have been followed by the second respondent Corporation cannot be approved as fair procedure. There is certainly a violation of the principles of natural justice, which can never be treated as an empty formality at least in the factual matrix of the case. When an allegation is made against the petitioner that he committed adulteration in petroleum products on the basis of a particular test which does not form part of either the dealership agreement, or the statutory Order, there can be no presumption that the petitioner should be termed as an adulterator. Even otherwise, such a decision can be arrived at only after following the established procedure in conformity with the principles of natural justice since any such decision certainly affects the rights of a person to carry on his trade or business which is Constitutionally guaranteed, of course, with reasonable restrictions.
In view of the same, the writ petitions stand allowed and the impugned order of the second respondent Corporation dated 31.01.2007 is set aside. No costs. Connected miscellaneous petitions are closed.
kh To
1.The Managing Director M/s.Hindustan Petroleum Corporation Ltd., No.1, Jamshad, Tata Road Mumbai 20.
2.The Regional Manager Hindustan Petroleum Corporation Ltd., 18/1 Big Bazaar Street Coimbatore.
3.The Inspector of Police Bhavani Police Station Bhavani