Allahabad High Court
M/S Prakash Automobiles Indian Oil ... vs Indian Oil Corporation Ltd. Lko. Thru ... on 28 October, 2025
Author: Jaspreet Singh
Bench: Jaspreet Singh
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH HIGH COURT OF JUDICATURE AT ALLAHABAD LUCKNOW WRIT - C No. - 558 of 2020 M/S Prakash Automobiles Indian Oil Dealer Thru Partners ..Petitioner(s) Versus Indian Oil Corporation Ltd. Lko. Thru M.d. and Ors. ..Respondent(s) Counsel for Petitioner(s) : Subhash Vidyarthi, Ashok Kumar Singh, Prabhat, Radhika Singh, Rishabh Raj Counsel for Respondent(s) : Manish Jauhari, Reserved on 07.10.2025 Pronounced on 28.10.2025 Court No. - 6 HON'BLE JASPREET SINGH, J.
1. The petitioner is a partnership firm who was appointed as a retail dealer of the Indian Oil Corporation (in short 'IOC') for the sale of petroleum. The petitioner firm has been working for the last 41 years, however, on account of an alleged inspection, which took place on 07.03.2017, and it was made the basis for initiating proceedings against the petitioner which culminated in a termination order dated 30th January, 2018 passed by the respondent no. 2. The same was assailed before the Appellate Authority who also affirmed the order of termination by means of order dated 14.10.2019 and these two orders are under challenge in this writ petition.
2. Briefly, the facts giving rise to the instant petition are being noticed hereinafter:-
(a) In the year 1976 Sri O.P. Singh was selected under Schedule Caste category as a retail outlet dealer of the Indian Oil Corporation.
(b) A dealership agreement was entered on 24.03.1976. Upon the change in the constitution of the partnership, a fresh deed was executed on 28.04.2005. The firm M/s Prakash Automobiles has been a dealer of the IOC for the last 41 years dispensing petroleum through 4 dispensing units installed at the Petrol Pump site through 8 nozzles.
(c) On 07.03.2017, a random inspection was carried out by the respondent no. 1-Corporation, and at the relevant time, the seals affixed in the dispensing units by the Department of Weights and Measures were found to be intact. The totalizers seals and delivery from the aforesaid 8 nozzles were found to be correct.
(d) In a preventive maintenance report dated 17.04.2017, the original equipment manufacturer (in short OEM) namely Tokheim reported that the dispensing units were free from any additional device/tampering in the electronic circuit.
(e) On 04.05.2017, a 7 member team made an inspection and as per the inspection memo, the observations relating to the four dispensing units was as under:-
DU-1 delivery and weights and measurements seals was found intact and no additional fittings were found. The same was also true for the DU-2.
In so far as the third DU was concerned bearing No. Q400D, Serial No. D-425C176 OEM Tokheim, the seal of the weights and measurements department were found to be intact, however, it was observed that there were certain additional fittings found on the Pulsar Card, hence, the pulsar assembly was collected and sealed. As far as the fourth DU bearing No. GT22415 Serial No. LQ11709 OEM GVR was concerned, out of the two nozzles, one was found to be appropriate, however, in so far as the other nozzle was concerned, it was noticed that it was delivering shortage of 60 ML per five liters. The seals of Weights and Measurements Department was intact and additional fittings was found on the pulsar card, hence, the pulsar assembly sensor card from this unit was also collected and sealed, consequently, the dispensing units nos. 3 and 4 were sealed, the pulsar assembly/sensor card was also sealed and handed over to the representative of the OEM for further testing.
(f) On 23.05.2017, the Senior Divisional Retail Sales Manager of the IOC issued a fact finding letter to the petitioner and by referring to the inspection made on 04.05.2017, it was stated that certain additional fittings have been found which led to the sealing and handing over of the said pulsar units to the OEM for further testing and even though the result of the further testing was awaited yet the petitioner was called upon to furnish its reply relating to the discovery of additional/unauthorized fittings as well as the short delivery as the aforesaid two discrepancies were in violation of Clause 5.1.4 of Marketing Discipline Guidelines (in short 'MDG') and 5.1.2 (a) of MDG.
(g) The petitioner sent its reply on 12.06.2017 indicating that as per a routine mandatory practice in accordance with Clause 1.4.2 (d) of MDG, the DU were checked for delivery and even on 04.05.2017, it was found to be functioning appropriately. The same was also recorded in the daily sales register. The seals affixed by the Department of Weights and Measures was intact, however, as far as the short delivery is concerned that could be due to several reasons and it was pointed out by referring to the requests made by the petitioner for re-callibration and re-stamping as per Clause 5.1.2(a) of MDG.
(h) As far as the allegations of additional fittings and tampering of pulsar card is concerned, it was stated that seals of the weights and measurement department were intact, all the nozzles were found to be functioning appropriately and that the pulsar box was sealed and stamped in presence of the Inspector of the Weights and Measures Department and the OEM representative, hence, there was no way the petitioner could have installed or added some additional fittings or could have tampered with the pulsar box.
(i) Any irregularity could not be attributed to the petitioner as the petitioner did not have access to the said pulsar/sensor card especially when it had been installed by the OEM, duly found to be appropriate and functional as way back as on 17.04.2017 and even on the date when the inspection was made i.e. on 04.05.2017, the seals were found to be intact, hence, if at all, there was any discrepancy or anomaly or irregularity, the same could have been due to the OEM but nevertheless could not be attributed to the petitioner.
(j) On 13.06.2017, the respondent no. 2 issued a show cause notice to the petitioner alleging violations of the dealership agreement and Clauses of the MDG and the petitioner was required to respond failing which the dealership of the petitioner was liable to be terminated.
(k) On 30.06.2017, the petitioner gave a detailed reply to the show cause notice (a copy of which has been annexed as Annexure No. 11 with the petition) and by explaining each of the points raised in the show cause notice, it was emphatically stated that there was no fault of the petitioner. The petitioner had been working as a dealer since last 41 years without any complaint and having a unblemished record, thus, once the seals of the Weights and Measures Department, seals of the totalizers were found to be intact then the alleged tampering of the pulsar card, which was installed by the OEM in the presence of the representative of the OEM and the IOC cannot be attributed to the petitioner who in any way had nothing to do with it, hence, the show cause notice be discharged.
(l) On 30.06.2017 itself, the Executive Director of the Corporation sent a letter to the petitioner calling upon them to be present at the respondent's State office on 03.07.2017. Since the partner of the petitioner-firm was not well, the date was requested to be postponed. The petitioner was again called for a personal hearing and on 08.07.2017, the petitioner was directed to be present at the office of the OEM on 12.07.2017 to witness the testing/opening of the extraneous fittings in the OEM Lab. The petitioner sent his son who was made to wait the whole date but the said sealed pulsar cards were not opened in his presence.
(m) Later, on 30.01.2018, the respondent no. 2 passed an order terminating the dealership of the petitioner.
(n) Being aggrieved, the petitioner by invoking Clause 8.9 of the MDG filed an appeal before the Appellate Authority, before whom submissions were made and even though the appeal was heard on 12.10.2019 but the appeal did not find favour with the Appellate Authority and the termination order was upheld by means of order dated 14.10.2019 and in the aforesaid backdrop the petitioner instituted the instant petition.
3. Sri Rishabh Raj, learned counsel for the petitioner has vehemently argued that the orders passed by the respondent no. 2 and the respondent no. 3 respectively are against the principles of natural justice as the procedure contemplated was not adopted. The petitioner, though, was called upon for witnessing the opening of the sealed pulsar cards units for testing in the OEM Lab yet the same was not done in presence of the petitioner's representative. The petitioner was also not provided with the copy of the report and without meeting with the reasons as pointed out by the petitioner including certain facts which were not disputed by the respondent, yet with a pre-meditated mind-set to indict the petitioner, the termination order has been passed which has been affirmed by the Appellate Authority.
4. The learned counsel for the petitioner has further submitted that once the seals as placed by the Weights and Measures Department were found intact, this clearly indicated that there was no opening of the dispensing units and moreover the seals affixed by the Department of Weights and Measures was done in the presence of the representative of the respondent-Corporation, hence, attributing malpractices to the petitioner was unwarranted.
5. Once, the DU were found sealed and intact, there was no way the petitioner could have had access to it in order to tamper with the pulsar cards, which are placed and sealed in the DU by the OEM in presence of the representative of the Corporation. Accordingly, for any alleged tampering the petitioner could not be held liable,
6. Sri Rishabh Raj, learned counsel has further urged that by putting a reverse burden on the petitioner, the impugned orders have been passed which is clearly arbitrary and not sustainable in law. It is urged that though the petitioner had been a dealer of the Corporation for last 41 years and there was never any complaint nor the petitioner was ever accused of any short sales or any malpractice relating to tampering of the DU or the pulsar cards. There was no occasion for the petitioner to indulge into any malpractice. Termination of the dealership was a serious issue as it not only terminated the dealership but also impacted the right of livelihood of the petitioner, hence, unless there was clear material indicating the complicity of the petitioner, till then such an extreme decision should not have been taken and for the said reason, the impugned orders are bad in law and as such the writ petition deserves to be allowed.
7. Sri Manish Jauhari, learned counsel for the IOC while defending the orders impugned stated that a joint inspection team comprising of 7 officers inter-alia including officers of the STF, an officer of the Corporation, a Senior Inspector from the Legal Meteorology Department, a service Engineer from the OEM amongst others carried out an inspection in presence of the petitioner and certain tampering was found in the Pulsar units which were sealed in presence of the petitioner and sent for further testing before the OEM.
8. It was further urged that any previous inspection report would not be material to absolve the petitioner, inasmuch as, on the given date when the inspection was made, certain irregularities were found from the DU Nos. 3 and 4.
9. As per the MDG, any seals found tampered or any additional fittings and gears found in the DUs would lead to termination and this was very well known to the dealer. Once, the aforesaid irregularity in the pulsar card was discovered and confirmed in the Lab of the OEM who certified that the said additional parts were not part of the pulsar units as manufactured by the OEM. Hence, it clearly indicated the complicity of the petitioner, who is required to maintain the dispensing units free from any tampering as the said DUs are installed at the premises and is under the supervision and custody of the petitioner. Any irregularity including additional fittings which may impact the short delivery of the petrol is only for the benefit of the petitioner and no other person. Thus, in the aforesaid circumstances, having taken note of the reply given by the petitioner which was not found sufficient, the termination order was passed after affording full opportunity of hearing to the petitioner and it cannot be said to be bad in law.
10. The appeal preferred by the petitioner was also heard and considered by a panel of officers which also did not find favour with the contentions as advanced by the petitioner and the order of termination was affirmed on merits as well as by complying with the procedure including affording a personal hearing. Accordingly, in such circumstances, it cannot be said that the orders passed by the two authorities was either violative of principles of natural justice or on the merits of the matter. Thus, being a licensee and a dealer of the respondent no. 2, the petitioner cannot claim any amnesty, hence, the writ petition deserves to be dismissed.
11. The Court has heard the learned counsel for the parties and also perused the material available on record.
12. The facts in between the parties is not much in dispute. It is not disputed that on 17.04.2017 a maintenance report was generated by the OEM, a copy of which is on record as Annexure no. 5 which did not find anything suspicious addition or party or fitting in the DUs nor there was any material to indicate that any of the DUs were making short delivery.
13. It is not in dispute that on 04.05.2017, a random inspection was done in presence of the petitioner and DU Nos. 3 and 4 were sealed. The pulsar assembly/sensor card were said to be containing some additional parts, hence, they were sealed and handed over to the OEM for further investigation.
14. It is also not disputed that during the inspection on 04.05.2017, the seals placed by the Department of Weights and Measures were found to be intact.
15. It is also not disputed that the petitioner was issued with a show cause notice on 13.06.2017, a copy of which is on record as Annexure no. 10 and apart from the copy of the inspection report, no other document was annexed with the show cause notice nor any other report was provided to the petitioner which was sought to be relied upon by the respondents while taking a decision.
16. It is also not disputed that the petitioner submitted his reply on 30.06.2017 and it was only in context with the points raised in the show cause notice and by that given time it was only the inspection dated 04.05.2017 which had been provided to the petitioner to respond.
17. Later, the petitioner was required to be present at the Lab of the OEM where the pulsar cards were to be examined and in this regard it was stated that the petitioner was present but in his presence no such inspection was done and on 30.01.2018, the termination order was passed along with which the report dated 26.07.2017 issued by Gilbarco Veeder Root (GVR) was provided to the petitioner. Admittedly, the said report was never provided to the petitioner prior to the passing of the order.
18. It is also not disputed that the petitioner filed an appeal where these issues were raised regarding not providing of the copy of the report which was relied upon by the Authorities while passing the termination order yet it did not find favour with the appellant.
19. Now, in the aforesaid background, the copy of the analysis report dated 26.07.2017 issued by the OEM GVR, a copy of which has been placed on record at running page 204 to 205 of the paper-book, at the outset, would indicate that on visual inspection, it appeared that a replaced micro controller had been placed on the pulsar which could lead to variation in delivery.It also concluded that the said micro controller was not part of the OEM and the same can lead to variation in the delivery.
20. In so far as the other report of the OEM dated 24.11.2017 which is at running page 206 to 212 is concerned, it would reveal that though it observed that there was an alternation/addition in the pulsar card, however, it was further observed that there were some technical aspects i.e. to say an 8 pin SMD IC has been mounted (glued) on the PCB and jumper wires from that IC were connected to pulsar sensors. This was found in two pulsars and for the remaining three pulsars, there was no malfunctions or abnormality detected.
21. It also noticed that all operational pulsar units were checked for accuracy test and it was found to be in permissible limits and finally it concluded that it could not be said whether any abnormality could affect the delivery.
22. In the given fact scenario, what this Court finds that admittedly the seals of the Weights and Measures Department were found to be intact. There was no material to suggest that the petitioner had tampered with the seal or could have tampered with the pulsar cards.
23. In order for the Corporation to have terminated the dealership of the petitioner on the aforesaid ground, it was necessary to have established that the petitioner had tampered with the seals and was responsible for incorporating any additional part which is not part of the OEM in the pulsar cards, coupled with the fact that such anomaly could have affected the delivery.
24. It is also relevant to notice that the only basis for passing the impugned orders is the report by the OEM and as noticed above, the report of the OEM is also inconclusive for the reason the OEM also could not state with certainty that the said alien part as detected in the pulsar card was responsible for any short delivery. The report merely draws a conclusion but it does not indicate how and what tests were done to arrive at such a conclusion, apart from the fact that the said report of the OEM was not even put or given to the petitioner before passing of the impugned order of termination.
25. Learned counsel for the IOC could not dispute that the show cause notice was based merely on the basis of the inspection report and at that point of time, the report of the OEM was not there and the show cause notice also did not indicate that the Corporation would be relying upon the said report and even if they proposed to do so then it was a duty of the Corporation to have provided the copy of the report to the petitioner prior to the passing of the order to enable the petitioner to meet the reasons or contest the same and having not done so it has resulted in deprivation of an opportunity of hearing especially when the proposed action was in the nature of termination which impacted the rights of the petitioner to run the dealership which was a right to do business and earn livelihood.
26. The submission of learned counsel for the respondents-Corporation that the additional part was responsible for manipulation in the pulsar card and it was beneficial for the petitioner, hence, it should be held against him, is also misconceived for the reason that the pulsar card could not have been inserted in the DU without the presence of the officials of the OEM and the representative of the IOC as well as the officials of the Department of Weights and Measures and no such material or evidence was brought on record to indicate the complicity of the petitioner in the said act of manipulation of the pulsar cards.
27. The seals of the Weights and Measures Department was found to be intact and once the position was so obtained then any anomaly or irregularity found in the pulsar card ought to have been explained by the respondent corporation and establish as to what material was available with them which could give rise to a clear finding with sufficient certainty that in a particular manner the dealer could have tampered with the pulsar card which had a direct impact on short delivery of the petrol and this is conspicuously absent. Thus, for the aforesaid reason, this Court is not inclined to accept the submission of the learned counsel for the IOC regarding the involvement of the petitioner in manipulation without any cogent material.
28. It will be worthwhile to mention that in a similar matter, a coordinate Bench of this Court in M/s Mishra Automobiles Vs. Union of India and others;2024:AHC-LKO:53503 and dealing with similar issue and relying upon Clause 5.1.4 of the MDG, in paragraphs 14 to 18 has held as under:-
"14. From the aforesaid provision, it is clear that when any mechanisms, fitting, gear found fitted in dispensing unit with the intention of manipulation of delivery would amount to invite proceedings under the said sections and lead to cancellation of the license. Therefore, from a bare reading of Clause 5.1.4 of the MDG Guidelines, it is clear that any mechanism or fitting in the dispensing unit should result in manipulation of delivery or such additional fitting should at least the capable of manipulating the delivery. There is no dispute with regard to the fact that the foreign component was in fact found on the pulsar cards but the dispute in the present case is only with regard to the fact that as to whether discovery of a foreign component on the pulsar card would automatically lead to the conclusion that same has been installed with an intention of manipulation of delivery. In the present case, the peculiar facts are that seals of the dispensing units were intact at the time inspection. The foreign component found in the pulsar card has been reported by the OEM. Thee is no clear finding that such foreign component would led to the short supply of diesel in its original report dated 11.05.2017 or in subsequent clarification issued on 17.05.2017.
15. To return a finding with regard to the intention of manipulating the delivery, the basic fact which has to be established that the installation of the foreign component had in fact led to manipulating the delivery meaning thereby that on installation of foreign component on the pulsar cards, the dispensing unit had dispensed lesser quantity of fuel than it was supposed to dispense.
16. We do not agree with the submission of the counsel for the respondent that mere finding of the foreign component of the pulsar cards is sufficient in itself to come to a conclusion that the same has been done with an intention to manipulate the delivery. In case there is manipulation in delivery meaning thereby short supply of the fuel dispensed from the dispensing unit is a question of fact and can not be assumed. Only when it is established that the dispensing unit had in fact dispensed lesser quantity of fuel, coupled with the fact that foreign component was found in the pulsar card, can a person be held responsible for violating provisions of 5.1.4 of the MDG Guidelines and consequential cancellation of his license can be done. Apart from finding a foreign component on the Pulsar Cards there should have been categorical finding with regard to the intention to manipulate the delivery.
17. On perusal of the relevant provision i.e. 5.1.4 of MDG Guidelines, it is found to be substantially penal in nature and its essential ingredients, prima facie, consist of:
(1) The finding of the foreign objects in the dispensing unit, which is only a ground for inquiry and inspection.
(2) Intention of manipulating the delivery.
Mere presence of foreign elements does not ipso facto show intention unless there is evidence to show that the foreign components are capable of or in fact affecting the fair dispensation of fuel.
In the present case, there is no evidence with regard to the second necessary ingredient, which is 'intention of manipulating the delivery' and also the inquiry fell short of returning any finding as to show any such manipulation. Therefore, the petitioner cannot be said to have violated 5.1.4 of the MDG Guidelines.
18. In the aforesaid circumstances, firstly, it is not the case of the respondent Oil Company that there was any shortfall of the delivery, coupled with the fact that even the OEM has never reported, the result of the foreign body attached to the pulsar card and secondly, the benefit of doubt of the seal being intact during the time of inspection has to be given to the petitioner as the foreign component cannot be inserted without breaking the seal of the dispensing unit. Counsel for the respondent also could not confirm as to whether the foreign component can be inserted on pulsar card without breaking the seals. Therefore, reading the inspection report dated 05.05.2017 wherein in paragraph 2, it has clearly been found that the delivery was found to be correct, coupled with the fact that in paragraph-5, it has been stated that seals were broken in presence of the inspecting team leads to have irrebuttable conclusion that the seals were intact and there was no short supply of the fuel and consequently, in the aforesaid circumstances, it cannot be concluded that there was intention to manipulate the delivery, and hence any violation of Clause 5.4.1. of the MDG Guidelines."
29. Similarly, another coordinate Bench of this Court in R.S. Filling Station Indian Oil Corporation Ltd. Vs. Indian Oil Corporation; 2025:AHC-LKO:19838, after taking note of the relevant clauses of the MDG and taking note of a decision of Andhra Pradesh High Court in Indian Oil Corporation Vs. Pullareddy Service Centre (2021) SCC Online AP 2909 and more specifically paragraphs 18 to 27 and then concluded in paragraph 60 as under:-
"60. In the present case, as expressed above, the orders impugned cannot be sustained for the following reasons:
(i). the clarificatory e-mail, relied upon in the two orders was never supplied to the petitioner and was never made a relied upon document in the show cause notice although the same was available prior to the issuance of the show cause notice as claimed by the respondents;
(ii). the finding recorded by the first authority while considering the report of the OEM Dreser Wayne, as noticed in para 42 above, were without any material either alleged in the show cause notice or made available during the course of the proceedings, the said view appears to be a personal view and is perverse in absence of any material to justify the said view.
(iii). the appellate authority while invoking the 'deeming provisions' in para 5.1.4 of the MDG has taken two diametric views in respect of similar reports submitted by the OEM and the second view taken by the appellate authority in the case of M/s Firozabad Fuels has been accepted by the Corporation and thus, two different views interpreting a similar provision are arbitrary; and
(iv). the Para 5.1.4 of the MDG, is divided into two parts, the first being there being an additional, removal, replacement of manipulation, however the same has to be read in conjunction with the likelihood of manipulating delivery in order to gain undue benefit, to substantiate the second part of clause 5.1.4, no material exists except the clarificatory e-mail which was never made a part of the show cause notice and was never proposed to be relied upon."
30. In view of the aforesaid and the reasons recorded hereinabove, this Court is of the opinion that the impugned orders dated 30.01.2018 and 14.10.2019 are arbitrary and have been passed without providing any proper opportunity of hearing and also in absence of cogent material relating to the involvement of the petitioner in the alleged manipulation of the pulsar card cannot be sustained, hence, for the aforesaid reasons the orders dated 30.01.2018 passed by the respondent no. 2 and 14.10.2019 passed by the respondent no. 3 are accordingly quashed and set aside.
31. The writ petition shall stands allowed. Consequences to follow. There shall be no order as to costs.
(Jaspreet Singh,J.) October 28th , 2025 Asheesh