Andhra HC (Pre-Telangana)
Ram Lal Agarwal S/O. Late Moti Lal, Aged ... vs Indian Oil Corporation Limited, Rep.By ... on 25 March, 2014
Author: P.Naveen Rao
Bench: P.Naveen Rao
THE HON'BLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION No.30227 of 2013 25-03-2014 Ram Lal Agarwal s/o. Late Moti Lal, Aged 59 years, Prop. Deccan Service Station, Opp.Fateh Maidan Club, Public Garden Road, Hyderabad.... Petitioner Indian Oil Corporation Limited, rep.by its Chairman and Managing Director, 3079/3, Sadiq Nagar, J.B.Titomarg, New Delhi and others. .... Respondents Counsel for the petitioner: Sri V.Ravinder Rao Counsel for the Respondents: Sri Deepak Bhattacharjee for respondents. <Gist : >Head Note: ?Cases referred: 1. (2004) 3 Supreme Court Cases 553 2. AIR 2009 Supreme Court 684 3. AIR 2009 Supreme Court 218 4. (2010) 11 Supreme Court Cases 186 5. (2011) 5 Supreme Court Cases 697 6. (1991) 1 Supreme Court Cases 533 7. (2005) 8 Supreme Court Cases 242 8. 2007 (3) ALD 243 9. (2010) 2 Supreme Court Cases 114 10. 2011 (3) ALT 221 HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No.30227 of 2013 Date: 25 .03.2014 The Court made the following: ORDER:
With the consent of learned counsels for the petitioner and respondents, this petition is disposed of at the admission stage.
2. Petitioner operates petroleum retail outlet. The outlet was provided with four dispensing units. Three of them from L&T company and one dispensing unit supplied by MIDCO. Periodically the retail outlet was inspected thoroughly and at no point of time, the inspecting officers noticed any deviation or malfunctioning or existence of external part in any dispensing unit was pointed out. The Legal and Metrological Department after conducting periodical inspections fixes seals on the units and all the seals were found intact.
3. On 13.02.2013 inspection team visited the premises of the retail outlet and conducted detailed inspection. In the forenoon when inspection was conducted nothing adverse was noticed and a favourable report was drawn. In the afternoon, in the absence of petitioner earlier report was reversed and an adverse report was drawn. The report alleges presence of double gear in one of the dispensing units. It also alleges on various issues concerning over all functioning of the outlet and its staff. However, the inspecting unit did not find any irregularity or illegality in functioning of the dispensing units; no differentiation was noticed in the dispensing of fuel nor the quality of petroleum products were found to be deficient in any manner.
4. On 18.02.2013 an order was served on the petitioner suspending the retail outlet from carrying out its business and also called for explanation from the petitioner on the findings recorded in the inspection report. On 20.03.2013 petitioner filed reply dealing with each and every aspect and also bringing to the notice of the respondent-corporation the illegal activities of two officers of the company. Since inspection report did not notice any illegality in the dispensing unit and the petroleum products were found to be correctly measured, the resumption of sales of petroleum was granted by order dated 30.03.2013. However, so far sales are not resumed, since petroleum products are not supplied by the respondent-corporation. On 29.09.2013 dealership was terminated. Hence, this writ petition.
5. Heard Sri V.Ravinder Rao, counsel for the petitioner and Sri Deepak Bhattacharjee, counsel for the respondents.
6. Learned counsel for the petitioner challenges the order impugned in the writ petition on the following grounds:
a) It is illegal not to grant permission to examine the officers who were involved in the inspection and against whom petitioner has made allegations. It is illegal to obtain views of officers against whom petitioner made allegations of corruption and rely on them without even communicating those views to the petitioner.
b) It is illegal nor to communicate the inspection report prepared in the forenoon favourable to the petitioner. Video recording was made by petitioner.
Video footage of the afternoon events show the existence of first report as admitted by the inspecting team.
c) Impugned order takes into consideration past issues contrary to Marketing Discipline Guidelines (MDG). Past issues were not subject matter of the show- cause notice. No opportunity was offered to the petitioner to offer his explanation. According to clause 8.5.5 of MDG, the issues which occurred five years prior to the current inspection should not be considered while taking penal action. The past issues which were referred to in the final order occurred in the year 2000 and 2003.
d) The mere presence of double gear per se cannot attract allegation of committing critical irregularity. Clause 5.1.4 of MDG is attracted only if it is proved that there was intention to manipulate delivery of fuel. In this case inspection report clearly disclosed that delivery was accurate, seals were found to be intact and the samples taken did not contain any impurities. Thus, what is alleged against petitioner cannot be classified as critical irregularity and thus termination of dealership is illegal.
(e) Petitioner was supplied with second hand MIDCO dispensing unit which was causing lot of difficulties to him. The company has the responsibility to supply and maintain the dispensing unit and the over all outlet. The outlet was established long ago and requires thorough overhauling. Petitioner has complained on several occasions on various issues, but are not attended.
(f) Two members of inspection team Sri K.Venugopalan and P.Kiran Kumar demanded the petitioner to pay money to give favourable report. As the petitioner was not yielding to their demand, the inspecting team started misbehaving with the staff as well as harassing the petitioner. Unable to tolerate intimidation meted out to the petitioner, petitioner called the officers of CBI and reported the issue to them. This oral complaint lodged by the petitioner on the same day was followed up by written complaint dated 18.02.2013 and petitioner understands that CBI is investigating into the complaint. In the afternoon when petitioner went to his home to take lunch, the seals were broken and fresh report was prepared alleging that MIDCO dispensing unit was fitted with double gear. Petitioner leveled grave personal allegations on inspection team. Petitioner filed O.S.No.578 of 2013 claiming damages against them, which is pending on the file of Additional Chief Judge, City Civil Court, Hyderabad.
7. In support of his contentions, learned counsel placed reliance on the following decisions:
i) ABL International Ltd. and another v. Export Credit Guarantee Corporation of India Ltd. and others1
ii) M/s. Karnataka state Forest Industries Corporation V. M/s.Indian Rocks with M/s. Karnataka State Forest Industries Corporation v. State of Karnataka and Ors.2
iii) M.D., H.S.I.D.C. and Ors. Vs. M/s. Hari Om Enterprises and Anr3
iv) Zonal Manager, Central Bank of India V. Devi Ispat Limited and others4
v) Union of India and others vs. Tantia Construction Private Limited5
vi) Writ Petition No.10243 of 2008
8. Sri Deepak Bhattacharjee, vehemently denied all the contentions of the learned counsel for petitioner. Learned standing counsel made following submissions:
I) The writ petition is not maintainable on the following grounds:
(a) Petitioner instituted O.S.No.578 of 2013 on the very same set of facts and for the very same cause of action. The relief claimed in the O.S. is similar to the relief claimed in the writ petition. Thus, the petitioner already invoked jurisdiction of the Civil Court complaining against the conduct of the two officers of the respondent company and seeking consequential relief and hence, he cannot invoke the jurisdiction of this Court under Article 226 and simultaneously prosecute two remedies.
(b) The relationship of the petitioner and respondent company is governed by the clauses in the agreement entered into by them. Clause 65 of the contract provides for settlement of disputes through arbitration. Settlement of disputes through arbitration is an effective alternative remedy and the parties are bound by the said clause.
(c) There are several disputed questions of fact raised in the writ petition which are required to be resolved. Disputed questions of fact cannot be resolved in proceedings under Article 226 of the Constitution of India. II) Petitioner was afforded due opportunity at every stage and relevant documents were supplied to him. There was no procedural irregularity or illegality. Petitioner has been operating the dealership for a very long time and, therefore, petitioner was expected to know every aspect of functioning of the retail outlet including the dispensing unit. Without the knowledge of the petitioner, the double gear could not have been inserted in the dispensing unit.
III) Double gear was visible from outside. Petitioner ought to have reported to the company immediately. Petitioner never informed the company the existence of double gear in the dispensing unit though there was lot of correspondence with the company. Thus, petitioner was aware and never took steps to remove the double gear in the dispensing unit. Mere existence of double gear in the dispensing unit is sufficient to hold a dealer responsible as double gear gets installed only to manipulate delivery and actual shortage of delivery is not material.
IV) Petitioner has not come with clean hands. He has concocted a story of demand of bribe by the officers only to divert the issue and escape from the allegation of critical irregularity. Petitioner was well prepared to face any eventuality. It is appropriate to notice that the petitioner videographed the proceedings in the afternoon. Even though serious allegations leveled against the officers of the respondent-company, the video recording did not show any such evidence. Petitioner has not produced any evidence in support of his contention of demand of illegal gratification, except making bald assertion.
There was no illegality in conducting the inspection by the officers and inspection team has noticed grave irregularities in the functioning of the dispensing unit.
9. In support of his contention, the learned standing counsel placed reliance on the following decisions.
i) Indian Oil Corporation Ltd. vs. Amritsar Gas Service and others6
ii) Sanjana M.Wig (Ms) vs. Hindustan Petroleum Corpn.Ltd.7
iii) S.Suresh v. Indian Oil Corporation Ltd., Southern Region, Madras and another8
iv) Dalip Singh v. State of Uttar Pradesh and others9
v) 2011 LawSuit (Madras) 153 (Appeal No.2732/2010)
vi) 2012 LawSuit (Rajasthan) 1108 (Appeal No.12280 of 2012)
10. In reply learned counsel for the petitioner contended that the grounds of challenge in O.S.No.578 of 2013 are entirely different. The cause of action for instituting the writ petition is the order of termination of dealership agreement, which was not the prayer in the civil suit. The background facts necessitate instituting the O.S.No.578 of 2013 and writ petition are same but the cause of action being separate, the writ petition is maintainable. Petitioner is not seeking resolution of facts which are disputed. The contentions urged against the impugned order of termination are based on legal submissions and are based on facts which are not in dispute. Mere existence of arbitration clause is not a bar to maintain writ petition. Petitioner has raised several issues which go to root of the exercise of power to terminate the dealership and arbitration is not an efficacious remedy in matters agitated in the writ petition.
11. Having regard to the submissions made by the counsels, the points that arises for determination in this writ petition are as under:
i) Whether the writ petition is maintainable ?
ii) Whether the order of termination of dealership of the petitioner is valid ?
MAINTAINABILITY OF THE WRIT PETITION:
12. The dealership granted to petitioner is governed by terms of contract. Clause 65 of the contract provides for resolution of disputes through medium of arbitration.
13. Though various clauses of the contract are referred to in the operative portion of the impugned order, all those clauses deal with the generality of obligations of parties, but do not deal specifically with reference to misconduct and consequential action. The misconduct and the consequential action is codified in MDG.
14. Arbitration clause is provided in dealership agreement. Whereas termination is based on violation of clauses in MDG. MDG is not part of dealership contract. It is independent.
15. In Union of India, Supreme Court held as under:
"Apart from the above, even on the question of maintainability of the writ petition on account of the arbitration clause included in the agreement between the parties, it is now well established that an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction of the High court or the Supreme Court and that without exhausting such alternative remedy, a writ petition would not be maintainable. The various decisions cited by Mr. Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution. "
16. On the question of maintainability of writ petition against termination of a petroleum retail outlet notwithstanding an arbitration clause was considered by a Bench of two judges of this Court in W.A.No.318 of 2011. This Court held that writ petition is maintainable.
17. In W.P.Nos.12355 of 2007 and 11931 of 2009, learned single Judge of this Court, following the decision in W.A.No.318 of 2011, similar objection of maintainability of writ petition in view of availability of alternative remedy by way of arbitration was rejected. Decision of learned single judge was upheld by Bench of two learned judges in W.A.No.517 of 2013. SLP No.22481 of 2013 against W.A.No.517 of 2013 was dismissed by Supreme Court by order dated 25.07.2013. Following the decision in W.A.No.318 of 2011, W.P.No.20350 of 2010 was entertained rejecting the contention of alternative remedy. These writ petitions dealt with termination of petroleum outlets.
18. In M.D., H.S.I.D.C., (supra) Supreme Court held as under:
"It may be true that ordinarily in a matter of enforcement of a contract qua contract, a writ court shall not exercise its jurisdiction under Article 226 of the Constitution of India. But, it is also trite that where the action of a State is violative of Article 14 of the Constitution of India as being wholly unfair and unreasonable, the writ court would not hesitate to grant relief in favour of a person, where both law and equity demands that such relief should be granted."
19. On review of case law including decisions in ABL International Ltd., and M/s.Karnataka State Forest Industries Corporation, Supreme Court held as under:
"However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power (See Whirlpool Corpn. V. Registrar of Trade Marks (1998) 8 SCC 1 ). And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise and the said jurisdiction."
20. The principle deduceable from the decisions cited by learned standing counsel are, that if an arbitration clause is incorporated in contract the same should be treated as an effective alternative remedy; that in matters which do not involve public law element, writ petition should not be entertained; and that when there are some disputed questions of fact involved, writ petition under Article 226 of the Constitution of India is not the effective remedy as writ court cannot go into disputed questions of fact. However, in all those decisions it is also held that there are no fetters imposed on a writ court under Article 226 of the Constitution of India and writ court is vested with wide discretion and entertaining the writ petition even on disputed questions of fact, in contract matters and even when alternative remedy is available depends on facts in each case. In the facts of this case, the decisions relied on by the learned standing counsel do not come to his aid to through the writ petition at the threshold on the ground of maintainability.
21. The petitioner challenges the termination of dealership on the grounds of violation of procedural safeguards and relevancy of the existence of double gear in the dispensing unit. The contentions urged are based on settled principles of law. Consideration of facts of the case are only to analyse the contentions. There are no serious disputed questions of fact requiring consideration of the contentions.
22. Thus, in the facts of this case, petitioner cannot be non-suited on the ground of availability of alternative remedy of arbitration and that there are disputed questions of fact. Following the principles enunciated in the precedents referred to above, the objection on maintainability of writ petition is rejected and the point is answered in favour of petitioner.
WHETHER THE ORDER OF TERMINATION OF DEALERSHIP OF THE PETITIONER IS VALID ?
23. The MDG classified three kinds of irregularities, which can result in appropriate penal action i.e., critical irregularity (8.2), major irregularity (8.3) and minor irregularity (8.4). The violation of clause 5.1.4 would attract critical irregularity (8.2 (iv)). Refusal by the dealer to allow drawl of sample or carry out inspection and non-availability of reference density at the time of inspection are classified as major irregularities. Major irregularity would attract suspension of sales and supplies for 15 days for the first irregularity, 30 days for the second irregularity and would invite termination of dealership, if such offences committed third time. Poor housekeeping, driveway salesmen at the ROs not in uniform/wearing badges are classified as minor irregularities, which would attract warning and guidance in the first instance, imposing of fine of Rs.10,000/- on second instance and Rs.25,000/- per irregularity on occurrence of third instance onwards.
24. As noticed above, show-cause notice alleged primarily existence of double gear assembly in dispensing unit and also narrated the events that occurred, which would attract major irregularity and minor irregularity.
25. As seen from the provisions of MDG, only violation of clause 5.1.4 would attract the termination of dealership. All other allegations do not result in such termination. Violation of major irregularity would attract suspension for 15 days in the first instance. The petitioner's dealership was suspended on 18.02.2013 and though suspension was subsequently lifted till the impugned order was passed, supplies were not resumed.
26. Clause 5.1.4 of MDG would make it clear that double gear in dispensing unit would assume critical irregularity only if deficiency is noticed in quantity of fuel dispensed with. Clause reads as under:
5.1.4 Additional/ unauthorized fittings/gears found in dispensing unit/ tampering with dispensing unit Any mechanism/fittings/ gear found fitted in the dispensing unit with the intention of manipulating the delivery.
Removal, replacement/ manipulation of any part of the dispensing unit including microprocessor chip/ electronic parts/OEM software will be deemed as tampering of the dispensing unit.
In case of this irregularity sales from the concerned dispensing unit to be suspended, DU sealed. Samples to be drawn of all the products and send to lab for testing.
27. It is useful to extract relevant portion of the order impugned.
" .. The dispensing unit installed in the outlet was in the custody of the Dealer and it is his responsibility to ensure that no unauthorized fittings are installed in it. At the time of sealing of any dispensing unit by the W & M Department (Legal Metrology), the dealer or his representative is always present to make sure that the sealing is done properly and for the correct measures.
.. The dealer has failed to explain the presence of double gear in the metering unit of MIDCO HSD DUO unit and the explanation offered on this issue is not tenable. Moreover, none else other than the Dealer could have any interest whatsoever in installing such fittings which can be used for manipulating delivery from the unit at will.
.... This explanation does not merit attention since the very existence of the additional fitting tantamount to tampering of the dispensing unit which is violative of Dealership Agreement.
.. It is a known fact that unscrupulous dealers use double gears to deliver short at will. If there was no intention of doing so this type of fitting would not have existed in the dispensing unit. There would be no reason for the double gears to be present in the DU, which admittedly were present.
The dealer has stated that the CBI was informed about the huge amount demanded by the AAC officers towards illegal gratification after having found everything in order at the outlet. Since he was not prepared to meet their illegal demands, the officers threatened that they would see that the dealership license is terminated by creating false evidence and false report. They tore off the inspection report prepared by them in the first instance with correct findings and proceeded to prepare a second report. The explanation offered by the Dealer does not have any base and hence it is not accepted. In normal practice, in case of errors/corrections/ over writings, a new report is prepared so that the same contains the facts as observed. Hence, to state that the inspection team has asked for illegal gratification after having found everything in order is unsubstantiated.
.... The explanation offered by the Dealer is not accepted as the allegation of officers abusing, manhandling and assaulting are found to be false. In fact, as has come out, it is the dealer who started to misbehave and threaten the inspecting officials. Even earlier records in the dealer file indicate that the dealer had indulged in such activities in the past also to prevent inspections. "
28. In W.P.No.20350 of 2010, dealership was terminated on the ground that gear of equipment was having 39 numbers as against standard 38. Learned single judge held as under:
"No attempt has been made to assess as to the possible impact of this. In the absence of any such material, I am of the opinion that the conclusion drawn by the 1st respondent - company, that it is the writ petitioner who is responsible for the foreign gear, is an unsustainable one.
An arbitrary decision, simply put, is one which lacks a reasonably sustainable basis. If the material available on record, does not necessarily lead to the conclusion that the tampering and tinkering has taken place at the hands of the writ petitioner, it will be totally unjust to penalize himself. It is a fundamental principle of law that no innocent person should be penalized, for no fault of his. That would be contrary to cannons of justice. In the absence of linkage of the presence of the additional gear with 39 teeth in the equipment at the premises of the retail outlet run by the petitioner to him, it will not be safe to infer that he is guilty of tampering with the equipment. If there is no reasonable substratum to a conclusion that the petitioner is guilty of tampering with the equipment, no adverse action of termination of his dealership agreement could have been drawn against him. The petitioner therefore could not have been faulted unnecessarily.
29. In P. Laxmikantha Rao and Sons V. Union of India rep.by its Secretary, Ministry of Petroleum and others10, this Court held as under:
" If however the seal is found to be in tact, the dealer cannot be held liable for the malfunctioning of the unit. If at all any one, it is manufacturer or the oil company that have to explain such discrepancy."
30. In W.A.No.318 of 2011 against judgment in Laxmikantha Rao, Bench of two learned Judges held as under:
"Since the HSD vended by the dealer is clearly found to be in short supply and that is an undisputed fact, and since a spurious gear having 39 teeth instead of 38 was also found embedded inside the HSD Unit, the conclusion is irresistible in a world governed by physical laws that someone or some agent introduced a nonstandard gear into the HSD Unit. But from this fact to take a logical leap to infer that it was introduced by the dealer, is irrational. The chain of circumstances is not complete and merely because the dealer alone would stand to benefit from the short supply, no such inference could legitimately be drawn. ....
As the supplier of the gear, which was found to be nonstandard, is an agent of the appellants by the same standards of preponderance of probabilities the possibility of a defective or spurious gear having being supplied cannot be excluded. This is the implication as well as the expressed reason, on the basis of which the writ petition was allowed."
31. The facts on record disclose that no variation was noticed in the quantity of fuel discharged from the dispensing unit. As seen from the extracted portion of the order of termination of dealership, plea of petitioner was rejected on possible effect of presence of double gear. It is not proved as to when such double gear was inserted. Order does not record a finding of deliberate insertion and actual manipulation of delivery of fuel. Order proceeds as if mere existence of double gear in dispensing unit is sufficient to terminate the dealership. Whereas, according to Clause 5.1.4, existence of double gear is a critical irregularity if there was intention to manipulate the delivery. Thus, as held by this court in W.P.No.20350 of 2010, the irregularity alleged against the petitioner does not amount to critical irregularity. Unless what is proved is critical irregularity, it does not result is termination of dealership. As held in W.A.No.318 of 2011, mere existence of external part in the dispensing unit of petitioner outlet that it was introduced by dealer is irrational and merely because petitioner would alone stand to benefit from the short supply, no adverse inference can be drawn against petitioner. In an issue which results in penal consequences, no adverse inference can be drawn on assumptions and presumptions. It is appropriate to notice that no variation in dispensing of fuel was noticed by the inspecting team. Thus, findings recorded are ex facie illegal and amounts to arbitrary exercise of power.
32. Clause 8.5.5 of MDG vests discretion in the competent authority to consider past performance of the dealer while assessing the nature of disciplinary action he can take. However, such discretion is restricted to consideration of past performance occurred within the five years of present irregularity. Contrary to the above clause, past performances of the years 2000 and 2003 were considered. This shows non-application of mind.
33. Petitioner requested to permit him to examine two officers who were part of inspection team. He made serious allegations of corruption against them. Said request was not acceded to. Furthermore, on the allegation made by petitioner, views of those two persons were obtained. As evident from stand of respondent company, the allegation of petitioner was not believed and version of those two officers were relied on to hold that petitioner's allegation was not valid. This amounts to prejudging the issue and also amounts to biased decision. The decision that there was no demand for money and it was made to divert the issue was arrived at without furnishing the views of those two officers and without subjecting them to examination by the petitioner. This has adversely affected the defence of the petitioner. It amounts to denial of reasonable opportunity. The order impugned has serious penal consequences. No such penal consequence can result without observing procedural formalities. It amounts to arbitrary exercise of power. The prejudice caused to petitioner is writ large. Competent authority assigned lot of weight to the version of those officers and rejected the contention of petitioner that they were biased against him and with vengeance prepared second report which is at variance with first report. This second report was the cause for initiating action against petitioner. Thus, their examination was crucial and not permitting him to examine them was fatal. It is appropriate to notice that petitioner complained against those two officers to CBI and CBI is stated to be investigating into these allegations.
34. Thus, for all the afore stated reasons order of termination of dealership is not sustainable.
35. Accordingly, the writ petition is allowed setting aside the Order passed by the 2nd respondent in Ref.APSO/R/SDO/HYD/9, dated 27.09.2013. No costs.
Miscellaneous petitions if any pending in this writ petition shall stand closed.
__________________________ JUSTICE P.NAVEEN RAO Date: 25.03.2014