Calcutta High Court (Appellete Side)
M/S. Laltu Fillings Station vs Union Of India & Ors on 6 April, 2016
Author: Subrata Talukdar
Bench: Subrata Talukdar
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
PRESENT:
The Hon'ble Justice Subrata Talukdar
W.P. 24059 (W) of 2009
M/s. Laltu Fillings Station
-Vs.-
Union of India & Ors.
For the Petitioner : Mr. Sundaranda Pal
Mr. Subhas Chandra Karar
Mr. Surojit Roy
For the I.O.C.L. : Mr. M. S. Yadav
Mr. Saswati Chatterjee
For the State : Mr. Naba Kumar Das
Heard on : 07/01/2016
Judgment on : 06/04/2016
SUBRATA TALUKDAR, J.: In this writ application the petitioner
challenges the order of the Appellate Authority of the Indian Oil
Corporation Ltd. (for short IOCL) upholding the order of termination
of the dealership of the petitioner entered into between the parties
on the 26th of March, 1999. By the order dated 12th August, 2008
the dealership was terminated by IOCL on the ground that pursuant
to an inspection by a team of IOCL Officers on 22nd September,
2006, the totalizer seal of the High Speed Diesel Unit No. 2 (for short
HSD-2) was found to be broken.
Sri Sundaranda Pal, Ld. Senior Counsel assisted by Sri
Subhas Chandra Karar, Ld. Counsel raises the following points:-
a) That the petitioner is a retail outlet being operated on a sole
proprietorship basis under the Corpus Fund Scheme of IOCL
(hereinafter referred to for short as the said retail outlet or the
said dealership). The said dealership was granted under the
Scheduled Caste category in favour of the writ petitioner in
March, 1999.
b) Sri Pal submits that on 22nd September, 2006 a team of IOCL
officers inspected the retail outlet and found the following
irregularities:-
i) Totalizer seal of HSD-2 was found to be broken;
ii) The observed density of the HSD sample collected from
the tank was found to be 801.8 against the last recorded
density of 835.8 and, such variation was beyond the
permissible limit.
c) Sri Pal submits that the petitioner in his reply submitted to
IOCL pointed out that the said retail outlet was lying without
stock of supplies for at least three months prior to the
inspection. Elaborating his submissions, Sri Pal points out
that on 10th of August, 2006 on behalf of the petitioner it was
communicated to the Inspector of the Legal Metrology
Department (for short LMD) that the retail outlet was out of
service and therefore stamping and calibration of the seals
could not be done on time. According to the documents on
record, the last check of the seals was done by LMD on 15th
September, 2005.
However, Sri Pal clarifies that from the correspondence
between the petitioner and the LMD it will be evident that the
re-verification of the seals and stamping was postponed by
LMD on the prayer of the petitioner on the ground that such
would be done after supplies are resumed in favour of the said
dealership. Such postponement was intimated by LMD on
18th September, 2006 and, before the re-calibration and
stamping could take place, IOCL conducted the surprise
inspection on 22nd September, 2006.
d) On the basis of the above noted factual presentation, Sri Pal
argues that the totalizer seal already stood broken and rusted
at the time of inspection. Therefore, when the inspecting
officer of IOCL attempted to roughly handle the seal, the same
got broken. Sri Pal therefore submits that there is no question
of the seal being tampered with by the writ petitioner since no
supplies could be effected from the retail outlet for several
months due to lack of supplies from IOCL.
e) The second defence taken by the petitioner to the show cause
relates to the fact that since the outlet was not functioning,
there could be no cause for deliberate variation in the density
of the product. Furthermore, the samples of the product were
collected by the inspecting officers by adopting an arbitrary
method of using a bottle from a local medical shop. Sri Pal
argues that, in the absence of supplies, IOCL could not have
proceeded with the show cause against the petitioner by citing
discrepancies qua the product.
f) Sri Pal also argues that the petitioner was urged to sign on the
dotted line of the inspection report and, had no opportunity to
record his objections thereto.
g) Sri Pal further adopts the legal stand that in the facts of this
case there was a gross abuse of due process since the LMD,
being the statutory authority under The Standard of Weights
and Measures (Enforcement Act), 1985 (for short the 1985
Act), was not consulted at all in connection with the allegedly
broken totalizer seal. In support of his argument, Sri Pal
relies upon the unreported judgment of the Hon'ble High
Court at Delhi in M/s. Bharat Filing Station & Anr. vs.
IOCL & Anr. being WP (C) 9432-33 of 2005.
h) Relying on the decisions in AIR 1985 SC 1147 in the matter
of Ram and Shyam Company vs. State of Haryana & Ors.;
2007 (9) SCC 593 in the matter of Popcorn Entertainment
& Anr. vs. City Industrial Development Corporation &
Anr.; and AIR 1965 SC 1321 in the matter of Municipal
Council, Khurai & Anr. vs. Kamal Kumar & Anr., Sri Pal
argues that it is by now judicially settled that the exhaustion
of an alternative remedy either by way of an appeal or by way
of an arbitration does not afford, in all cases, a complete relief.
A writ application is therefore maintainable when the action of
the respondent is de hors the statute, in violation of the
principles of natural justice and, to the fundamental rights of the writ petitioner.
i) Sri Pal argues that in the facts of the present case having regard to the 1985 Act and, in spite of the provisions of such Act, the LMD has been completely bypassed by IOCL while fixing responsibility on the petitioner in respect of the broken totalizer seal with reference to the contemporaneous correspondence between the petitioner and the LMD read with the fact that the retail outlet was lying comparatively dry for a substantial period of time as well as to avoid an arbitrary decision and, to identify the reasons behind the broken seal, IOCL ought to have referred the matter to the LMD. By not doing so IOCL has violated the statutory mandate under the 1985 Act and, proceeded to finalise the penalty under the Marketing Discipline Guidelines, 2005 (for short MDG-2005), thereby creating room for relief by way of this writ petition. Sri M. S. Yadav, Ld. Counsel appearing for IOCL submits as follows:-
i) That natural justice was extended to the writ petitioner by granting an opportunity to reply to the show cause.
Thereafter the writ petitioner was afforded the opportunity of personal hearing on the 29th of December, 2006. The writ petitioner also preferred an appeal before the Appellate Authority, which was disposed on by a detailed order upholding the termination on the ground of alleged tampering of the seal.
ii) Sri Yadav points out that by the order of termination dated 12th August, 2008 the IOCL did not proceed against the petitioner on the aspect of mis-match of density. However, on the first aspect of tampering with the totalizer seal, Sri Yadav argues that the defence of the writ petitioner that the seal was broken ought to have been taken at the first instance while appending his signature to the Inspection Report (for short IR). However, the petitioner signed on the IR without recording any objection. Therefore, the writ petitioner's version of a broken seal is an afterthought.
iii) Taking this Court to the provisions of the MDG-2005, Sri Yadav points out that it is the duty of the dealer to take every step to maintain the regulatory and purity of supplies. The presence of the broken seal raises the presumption of tampering and such tampering is punishable at the first instance with termination of the dealership, irrespective of delivery being short/correct/excess vide Clause 3 of Appendix I of MDG-2005.
iv) Taking this Court to the orders of termination and of the Appellate Authority respectively, Sri Yadav points out that even in the past the petitioner was cautioned on several occasions with regard to the functioning of the retail outlet. Under the Corpus Fund Scheme the land on which the retail outlet is situated and, the infrastructure attached thereto entirely belongs to IOCL and the submission of the petitioner that he dealt with the items on credit is not acceptable since the dealership was required to be operated on a cash and carry basis. The petitioner owed the IOCL at the time of termination a total amount of Rs. 5, 52, 092.39/-.
v) Taking this Court to the IR, Sri Yadav clarifies that the contents with regard to the seals and delivery as well as the density test were correctly recorded and countersigned on behalf of the writ petitioner by the proprietor himself without raising any objection. Sri Yadav relies on the following decisions in support of the point that where an arbitration clause exists, such as in the agreement between the writ petitioner and IOCL, the writ court has a mandatory duty to refer the disputes to an arbitrator. Sri Yadav cites the reference of 2003 (6) SCC 503 in the matter of Hindustan Petroleum Corporation Ltd. vs. Pinkcity Midway Petroleums at Paragraphs 18 and 19 which read as follows:-
"18. It was argued before the courts below as also before us that the mis-conduct, if any, pertaining to short-supply of petroleum products or tampering with the seals would be a criminal offence under the 1985 Act. Therefore, the investigation into such conduct of the dealer can only be conducted by such offices and in a manner so specified in the said Act, and it is not open to the appellant to arrogate to itself such statutory power of search and seizure by relying on some contractual terms in the Dealership Agreement. it is further argued that such disputes involving penal consequences can only be tried by a court of competent jurisdiction and cannot be decided by an arbitrator.
19. Having considered the above arguments addressed on behalf of the respondent as also the findings of the courts below, we are of the opinion that the same cannot be accepted because the appellant is neither exercising the power of search and seizure conferred on a competent authority under the 1985 Act nor does the Dealership Agreement contemplate the arbitrator to exercise the power of a criminal court while arbitrating on a dispute which has arisen between the contracting parties. This is clear from the terms of the Dealership Agreement. In our opinion, the findings of the courts below in this regard run counter to the clauses of the said Agreement, as could be seen from the following clauses of the Dealership Agreement which read thus: "20. Dealer to comply with provisions of Acts, Rules & Regulations
(a) The Dealer shall at all times faithfully, promptly and diligently observe and perform and carry out at all times, all directions, orders, rules, terms and conditions as may be issued by the Corporation or its representatives from time to time on safe practices and marketing discipline and for the proper carrying on of the Dealership of the Corporation.
(b) The Dealer shall observe and comply with the provisions of Petroleum Act, 1934, Explosives Act, 1884, Weights & Measures Act, 1976, etc., and all rules and regulations made thereunder.
(c) The Dealer shall faithfully observe and perform all the obligations, duties and requirements under the licences required or obtained for running the dealership and shall promptly renew all licences from time to time.
(d) The Dealer shall be solely responsible for any breach or contravention by them, their employees, of any Acts, rules, regulations or bye-laws of the Central and/or State Governments and/or Municipal, Local and/or other authorities as may be applicable to the Retail Outlet business and the Corporation shall not be responsible in any manner for any of the liabilities arising out of non-
compliance by the Dealer, their employees, their agents and sub-agents.
(e) The Corporation will obtain in its name a storage licence from the Controller of Explosives for the storage of petroleum products at the said premises and the dealer shall faithfully observe and perform all the terms and conditions of such licence(s).
(f) The dealer shall obtain any or every licence(s) necessary for the storage/sale of petroleum and other products at the said premises required under any Central/State Government or local enactment for the time being in force and shall faithfully observe and perform all the terms and conditions for such licence(s) and shall promptly renew the same from time to time. 6
(g) The dealer shall be solely responsible for any breach or contravention by them, their servants or agents of any laws, rules, regulations or bye-laws passed or made by the Central and/or State Government and/or Municipal local and/or other Authorities as may be applicable from time to time to the business including without prejudice to the generality of the foregoing. The concerned Authorities respectively appointed under the Petroleum Act, Payment of Wages Act, Shops & Establishment Act, Factories Act and the Workmen's Compensation Act or any statutory modifications or re-enactments of the said statues or rules and the Corporation shall not be responsible in any manner for any liability out of non-compliance by the dealer with the same. The dealer shall at all times indemnify and keep indemnified the Corporation against all actions, proceedings, claims and demands made against it by the Central and/or State Government and/or Municipal Local and/or other Authorities and/or by any customer of the product and/or any other third party as a result of or in consequence of any act or omission of whatsoever nature of the dealer, his servants or agents, including, without prejudice to the generality of the foregoing, any accident or loss or damage arising out of the storage, handling and/or sale of the products or attributable to the use of the said premises for the aforesaid purposes whether or not such act or omission or accident or loss or damage was due to any negligence, want of care or skill or any misconduct of the dealers, their servants or agents.
(h) The dealer shall indemnify and save harmless the Corporation from all losses, damages, claims, suits or actions which may arise out of or result from any injury to any person or property or from violation of any statutory enactments, rules or regulations or other written orders or other laws or caused by or resulting from non- observance by the dealer of the provisions of this Agreement.""
vi) On the point of natural justice, Sri Yadav submits that although factually the show cause notice followed by the subsequent hearing in respect of such show cause notice, thereafter followed by disposal of the appeal were dealt with by three separate officers of IOCL, the petitioner was not denied the right of institutional hearing since all three officers were institutionally empowered by IOCL to carry out both the enquiry and the hearing. Such institutional hearing has been upheld by the Hon'ble Apex Court in 2013 (5) SCC 252 in the matter of Kalinga Mining Corporation vs. Union of India & Ors..
vii) Relying on the decisions reported in 2008 (8) SCC 172 in the matter of Pimpri Chinchwad Municipal Corporation & Ors.
vs. Gayatri Construction Company & Anr. and, AIR 1996 SC 3515 in the matter of State of UP & Ors. vs. Bridge & Roof Company (India) Ltd., as well as an unreported judgment of an Hon'ble Single Bench of this Court in WP 1618(W) of 2012 in the matter of M/s. Hazra Filling Station vs. Indian Oil Corporation & Ors., Sri Yadav argues that there should be no interference in contractual matters by writ courts in exercise of jurisdiction under Article 226 of the Constitution of India. The Court must look towards the remedy provided for in the contract itself for settlement of the disputes.
Sri Naba Kumar Das, Ld. Counsel appearing for the State- respondents, inter alia, submits that the role of the specific State Authority, viz. the LMD is provided under Rule 22(3) of the West Bengal Standards of Weights and Measures (Enforcement) Rules, 1990. Sri Das argues that the present pari materia provision is Rule 21(3) of the West Bengal Legal Metrology (Enforcement) Rules, 2011. Such rule, Sri Das points out, reads as follows:-
"Any weight or measure, which has been verified and stamped in situ, shall not (emphasis supplied) be dismantled and removed from its original site without prior intimation to the Controller or other person authorized by him in this behalf."
Sri Das further argues that twice replies were sent from the State Public Information Officer, also holding the position of Assistant Controller of Weights and Measures Department of Legal Metrology under the Right to Information Act to the writ petitioners vide replies dated 30th September, 2011 and 8th November, 2011.
However, Sri Das makes the final point that in view of the arbitration clause in the dealership agreement between the parties, the present writ application may not be in the nature of an efficacious remedy.
Having heard the parties and considering the materials relied upon, this Court arrives at the following conclusions:-
A) At the very outset this Court is required to respectfully notice the law as laid down In Re: Pinkcity Midway Petroleum (supra) wherein the Hon'ble Apex Court was pleased to, inter alia, hold that when a dealer, who has entered into an agreement with an oil company, commits a statutory violation, such dealer is also (emphasis supplied) liable to be proceeded against for misconduct under the terms of its agreement with the oil company. The terms of the agreement empowering the oil company to take steps against the dealer do not conflict with the statutory provisions such as The Standard of Weights and Measures Act, 1976 (for short the 1976 Act) and the 1985 Act.
The Hon'ble Apex Court was therefore pleased to direct that the oil company is not denuded of its powers to proceed against the dealer under the relevant clauses of the agreement and the existence of a dual procedure under the criminal law and, under the contractual law is recognized in Indian Jurisprudence. The Hon'ble Apex Court was therefore pleased to take notice of the Arbitration and Conciliation Act, 1996 (for short the 1996 Act) and, particularly Section 8 thereof, directing the parties to the dispute to arbitration.
B) The ratio of the Hon'ble Apex Court In Re:
Pinkcity (supra) was also pointed out by the Hon'ble Apex Court In Re: Pimpri Chinchwad Municipal Corporation & Ors. (supra) limiting judicial review in a writ jurisdiction qua contractual transactions with the Government or with agencies in the nature of a Government such as the oil company. Such ratio has been identified to in In Re: Empire Jute Company Pvt. Ltd. & Ors. (supra), wherein the Hon'ble Apex Court was pleased to lay down that the power of judicial review vested in superior courts which, although of wide amplitude, ought not to be exercised when disputed questions of facts are required to be examined on the touchstone of contractual terms relied upon by the parties to the contract. C) Noticing the law as laid down by the Hon'ble Apex Court in the above noted judgments, this Court is required to next identify the dispute which fell for consideration by the oil company resulting in termination of the dealership and, now is the subject matter of the writ petition.
The dispute in this writ petition centres on the totalizer seal which was found to be broken. While the petitioner has alleged that the totalizer seal was broken at the time when the inspection was carried out by the officers of the oil company, on the other hand, on behalf of IOCL it has been alleged that such charge is an afterthought and the petitioner ought to have placed such charge on record while signing on the IR.
The further point is taken by the oil company that following the date of inspection on 22nd September, 2006 and the issuance of the show cause notice dated 11th October, 2006, the petitioner did not pen a single communication to IOCL about breakage of the totalizer seal by the inspecting officers at the time of inspection. IOCL has also taken the point that at the personal hearing afforded to the petitioner following the reply submitted by him to the show cause notice, no evidence was adduced in support of the allegation of breakage of the totalizer seal at the time of inspection although, such inspection took place not only in the presence of the sole proprietor of the petitioner-concern but, in presence of its other employees as well since, the petitioner has gone on record in his communication to the oil company that it is incurring expenses for retaining guards, employees etc. necessary to man the retail outlet.
D) On behalf of the petitioner it has been contended and, such contention deserves due attention, that prior to the inspection on the 22nd of September, 2006, the retail outlet was not supplied with regular petroleum products. Therefore, in the inspection report it has emerged that the delivery could not be checked as the product was below the suction level.
Therefore, the petitioner points out that the natural presumption would be that the totalizer seal was already lying in a brittle condition and, was broken due to rough handling by the inspecting officers. The petitioner has supported such argument with the fact that the verification/calibration of the seals stood postponed, as would be evident from the inter se communication between the petitioner and the LMD, since the retail outlet was not receiving adequate supplies. The further fact that calibration/verification of the dispensing pumps was due for expiry and, such dispensing pumps including their seals, were required to be re-calibrated/re-verified on or before 14th of September, 2006 by the LMD acting under both the 1976 Act and the 1985 Act (supra), the seals were lying in an unused condition and were broken when handled by the inspecting officers.
E) On the part of the oil company the argument is raised that the petitioner deliberately delayed the re-calibration/re- verification of the seals on the ground that there were inadequate supplies to the retail outlet. Such stand taken by the petitioner is described by the oil company as a time consuming tactic with the full knowledge of the petitioner that the totalizer seal was lying in a broken condition and would be so found during any inspection carried out either by the LMD or, by the oil company.
F) The order impugned in this writ petition of the Appellate Authority dated 3rd December, 2009 seeks to consider the opposing facts as cited above and concludes with the following observations:-
"As regards no complaint having been made under Weights and Measures Act by the Respondent, during the hearing the Respondent (read IOCL) submitted that when ever seals are found broken the action contemplated under MDG is adopted (emphasis supplied). Therefore, keeping in view all the facts and circumstances of the case, I am inclined to reject this contention of the Appellant."
G) To the mind of this Court the above noted observation followed by the rejection of the appeal by the Appellate Authority requires to be commented upon. On a close examination by this Court the provisions of both the 1976 Act and the 1985 Act (supra) are specific and exhaustive. The relevant provisions elucidate the role required to be played by the LMD in the matter of calibration/verification of the weights and measures, which, includes the seals in the retail outlet. Therefore, although under the ratio of the judgment In Re:
Pinkcity (supra), the oil company was entitled to proceed against the dealer under the provisions of the applicable MDG for infraction of any term of the agreement, at the same time the observation of the Appellate Authority to the extent that whenever seals are found to be broken action under the MDG is adopted, renders the statutory authorities of LMD under the 1976 Act and the 1985 Act respectively mere ciphers.
H) In connection with the above noted reasoning this Court is also required to notice the argument raised by Ld. State Counsel with reference to the West Bengal Legal Metrology (Enforcement) Rules, 2011, specifically Rule 21(3) thereof which provides, inter alia, for restriction in respect of dismantling and removing a weight or a measure (read seal) without prior intimation to the LMD. Accordingly, this Court is of the considered view that the reference to the LMD as provided under the (Enforcement) Rules, 2011 is mandatory in nature.
I) In the backdrop of the above discussion this Court is required to also notice the observations of the Hon'ble Apex Court In Re: Pinkcity (supra). At Paragraph 23 it was pronounced as follows:-
"23. Therefore, in our opinion, the courts below have erred in coming to the conclusion that the appellant did not have the legal authority to investigate and proceed against the respondent for its alleged misconduct under the terms of the Dealership Agreement. We are also of the opinion that if the appellant is satisfied that the respondent is indulging in short-supply or tampering with the seals, it will be entitled to initiate such action as is contemplated under the agreement like suspending or stopping (emphasis supplied) the supply of petroleum products to such erring dealer. If in that process any dispute arises between the appellant and such dealer, the same will have to be referred to arbitration as contemplated under Clause 40 of the Dealership Agreement."
Therefore, this Court is of the respectful view that post the suspension and stoppage of supplies of petroleum products and, before imposing a penal measure under the MDG, the oil company is required to, at the least, consult or seek the opinion of the LMD under the 1976 and the 1985 Acts. In the considered view of this Court since calibration/verification of the seals involves only the statutory jurisdiction of the LMD, action under the MDG by the oil company without seeking an opinion from the LMD is not only a violation of due process but, also exhibits an indifference to the essence of natural justice for the reasons discussed below. J) It is trite law based on the maxim 'Caesar to Caesar' that no party shall be a judge of its own cause. In the facts of the present case the oil company, that is IOCL, stands in an adverserial position to the petitioner - both being the contracting parties. Therefore, natural justice demands that post the action of suspending and stopping supplies under the MDG-2005 as laid down in Para 23 of In Re: Pinkcity (supra), prior to imposing any penalty under the MDG-2005, it could not be the intention of the Hon'ble Apex Court to bar an oil company, viz. IOCL to seek the opinion of the statutory authority under the 1976 and the 1985 Acts (supra) for an independent verification.
In the light of the above referred reasons the sweeping observations of the Appellate Authority exuding undiluted confidence in the action taken under the MDG "whenever seals are found to be broken" deserves to be set aside along with the order of termination.
K) This Court is further conscious of a line of authorities reported in 2004 (3) SCC 553 in the matter of ABL International Ltd. & Anr. vs. Export Credit Guarantee Corporation of India Ltd. & Ors.; 2003 (2) SCC 107 in the matter of Harbanslal Sahnia & Anr. vs. Indian Oil Corporation Ltd. & Ors. as well as 2011 (5) SCC 697 in the matter of Union of India & Ors. vs. Tantia Construction Pvt. Ltd. wherein, despite an arbitration clause in a contract, the remedy by way of a writ petition was found to be maintainable. In the facts of the present case the dispute between the parties requiring at the least the consultative opinion of the statutory authority responsible for calibrating/verifying the seals stands on a higher pedestal than an interpretation of a term of the contract.
Accordingly, the present writ petition is found to be maintainable to the above extent and both the order of termination dated 12th August, 2008 as well as the order of the Appellate Authority dated 3rd December, 2009 are set aside. The matter is remanded to the original disciplinary authority of IOCL to take a decision afresh after seeking the opinion of the statutory authority under the 1976 and the 1985 Acts (supra), i.e. the LMD, by proceeding from the stage of suspension of the writ petitioner.
WP 24059(W) of 2009 stands accordingly disposed of. There will be, however, no order as to costs.
Urgent certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.
(Subrata Talukdar, J.)