Satish K. Agnihotri, J.
Writ petitions under Article 226 of the Constitution of India
1. By this petition, the petitioner seeks to challenge the legality and validity of the order dated 09/03/2009 (Annexure P/1) passed by the Appellate Authority, Indian Oil Corporation Limited, Mumbai, whereby the appeal preferred by the petitioner against the order dated 01/09/2008 (Annexure P/15) was dismissed. The Retail Outlet (Gramin Sewa Kendra) Dealership at Birra, Distict - Janjgir-Champa allotted in favour of the petitioner was terminated, by order dated 1/9/2008. The petitioner further seeks a direction to the respondents for uninterrupted supply of HSD to the petitioner, in accordance with law.
2. The facts, in short, for disposal of the case, are that on 11/12/2006 an agreement was executed between the petitioner and the respondent-Indian Oil Corporation Limited (for short "IOCL") whereby the petitioner was appointed as Dealer of Retail Outlet (Gramin Sewa Kendra) Dealership at Birra, Distict-Janjgir-Champa (for short "RO") for sale of petrol [MS/High Speed Diesel (HSD)] of the IOCL.
3. According to the petitioner, on 20/10/2007, the officers of the IOCL reached to the RO of the petitioner and demanded money. On refusal, the authorities of the IOCL conducted inspection at about 7.30 p.m. in absence of proper light. Thereafter, the alleged adulterated sample was taken away. On 22/10/2007, a marker test was conducted at Bishrampur, where the petitioner put his signature on the report mentioning that `esjs fglkc ls column No. 04085481 dk fjtYV fiad ugha gS''. The marker test report dated 22/10/2007 was prepared (Annexure P/5).
4. The petitioner received a show cause notice dated 07/11/2007 (Annexure P/6) whereby the petitioner was directed to explain the reasons for not turning up for witnessing the retesting of the sample at Nishatpura Lab, Bhopal on 02/11/2007. The petitioner submitted his reply on 15/11/2007 stating that no notice was served upon him to appear at Nishatpura Lab, Bhopal on 02/11/2007. Again on 13/12/2007 (Annexure P/7) the petitioner was directed to present at Nishatpura Lab, Bhopal on 20/12/2007. The petitioner appeared on the said day, but the testing was not done. The reasons for the same are best known to the authorities of IOCL. The petitioner raised an objection stating that no sample has been given to him and the sample taken by the IOCL is 60 days old, thus, he requested for taking new sample. However, without considering the objection raised by the petitioner and behind the back of the petitioner on 21/12/2007, the test was conducted and the report was prepared (Annexure P/9).
5. On 28/02/2008 (Annexure P/12) show cause notice was issued to the petitioner regarding the alleged irregularities committed by him and calling upon the petitioner to submit his reply within 10 days. Accordingly, the petitioner submitted his reply dated 11/03/2008 (Annexure P/13). After receipt of the reply, by order dated 10/09/2008 (Annexure P/15), allotment of the RO of the petitioner was terminated.
6. Being aggrieved by the said termination order, the petitioner preferred an appeal before the appellate authority. The appeal was dismissed by order dated 09/03/2009 in an illegal and arbitrary manner and without appreciating the points raised by the petitioner. Thus, this petition.
7. Shri Sharma, learned Counsel appearing for the petitioner, would submit that the inspection was conducted by the officials of the IOCL on 20/10/2007 in an abnormal atmosphere and without having proper lighting facility. The Bishrampur Lab is not a notified testing lab for conducting marker test of the HSD, as per the requirement of MDG 2005. Shri Sharma would further submit that no proper opportunity of hearing was afforded to the petitioner and even the principles of natural justice has also not been followed in its letter and spirit. The test at Nishatpura Lab was conducted on 21/12/2007 behind the back of the petitioner and without considering the objection submitted by the petitioner on 20/12/2007. While dismissing the appeal of the petitioner, preferred against the termination order dated 10/09/2008, the appellate authority has not considered the points raised by the petitioner.
8. Shri Sharma would next submit that under the provisions of Clause 2.4.2 of the Marketing Discipline Guidelines, 2005 (for short "the MDG, 2005") one sample is to be retained by the dealer out of three samples. Admittedly, no sample was given to the dealer for comparison. Thus, this amounts to denial of proper opportunity of hearing.
9. On the other hand, Shri Koshy, learned Counsel appearing for the respondents would submit that the allegation regarding demand of money by the officers of the IOCL is absolutely baseless and false. On a routine inspection carried out by the officials, they found that the HSD was adulterated. Shri Koshy would further submit that the petitioner was noticed for being present in the sample test which was to be carried at Nishatpura Lab, Bhopal on 02/11/2007 vide letter dated 30/10/2007. Apart from the letter of intimation, the petitioner and the transporter were verbally instructed by the field officer to come at Nishatpura Lab on 02/11/2007, but the petitioner did not turn up. Though the petitioner reached to Nishatpura Lab on 20/12/2007 but he refused to witness the re-testing of the sample. The full clinical test was conducted on 21/12/2007 and it was established that the RO sample did not meet with the specification with respect to sulphur test, whereas the TT/Depot Sample did meet such specification. Therefore, it was confirmed that the product being sold at the RO of the petitioner was adulterated. After considering all the aspects of the matter, the termination order of allotment of RO was passed. Even the appellate authority after considering the matter from all angles rightly rejected the appeal of the petitioner and the same does not warrant any interference by this Court.
10. Shri Koshy would next submit that challenging the validity of the marker test procedure and its consequences, a number of petitions have been filed before many High Courts, after considering its purpose and all other relevant aspects, it has been found valid, just and in accordance with law. Thus, there is no illegality or irregularity in the marker test procedure, which had been performed by the IOCL. The subject matter of the same is a contractual dispute under the contract dated 11/12/2006. The petitioner, being a dealer of the IOCL is duty bound to maintain the requisite standard of the product supplied by the IOCL in order to assure the growth in business and also to maintain the goodwill of the IOCL but the petitioner has failed to do the same.
11. Shri Koshy would also submit that Clause 8 of the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005 (for short "the Order, 2005") has been amended by notification dated 12/1/2007 and new control Order namely; Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Amendment Order, 2007 (for short "the Amendment Order, 2007") was brought in force w.e.f. 12/1/2007 (Annexure - R/1).
12. I have heard learned Counsel appearing for the parties, perused the pleadings and the documents appended thereto.
13. There is no dispute with regard to date of inspection of RO on 20/10/2007. It is further not in dispute that one sample of HSD collected from RO was not given to the dealer (the petitioner). In the test conducted at Bishrampur on 22/10/2007, which was attended by the petitioner, the result showing pink was doubted by the petitioner. Thereafter, notice dated 13/12/2007 (Annexure - P/7) was issued directing the petitioner to remain present at Nishatpura Lab, Bhopal on 20/12/2007 for witnessing the test. It is also not in dispute that pursuant to the said notice, the petitioner appeared on 20/12/2007, but the test was not conducted on the said date and the same was conducted on the next date i.e. 21/12/2007 without informing the petitioner. The test was conducted on 21/12/2007 at Nishatpura Lab, Bhopal, without giving information to the petitioner and at the back of the petitioner. Thus, unhesitatingly I hold that the test on 21/12/2007 was not conducted in presence of the petitioner.
14. The purpose of retaining a sample by the dealer is that in case of sample failure and in the event of request for testing by the dealer, the same is to be considered by the State Office/ Regional Office / Zonal General Manager of the concerned oil company as provided under 2.5 (D) of the MDG, 2005.
15. Clause 2.5 (D) of the MDG, 2005 reads as under:
2.5 General Points to be observed in all cases
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D) In case of sample failure, in the event of request for testing by the dealer, the same to be considered on merits by the State Office / Regional / Zonal General Manager of the concerned Oil Company. If approved by GM, the sample of retail outlet retained by the dealer along with the counter sample retained with the Field Office/ Oil Company are to be tested as per the guidelines, preferably in presence of the Field Officer, RO dealer/ representative & representative of QC Dept. of the Oil Co. after due verification of the samples.
All the 3 samples should be tested only in the same lab, and if possible by the same person to ensure repeatability and reproducibility. The expenditure incurred for such testing should be recovered from the dealer. The decision of the GM, which would be based on the test results of all the 3 samples would be decisive and binding on all.
16. MDG, 2005 have been framed in accordance with the provisions of the Order 2005. Thus, it appears that retention of a sample by the dealer is necessary to cross-check the report prepared by the officials on the basis of the sample retained by the dealer.
17. In the case on hand, admittedly the sample collected by the IOCL was tested at Nishatpura Lab, Bhopal on 21/12/2007 behind the back of the petitioner, as there was no notice to the petitioner to remain present on 21/12/2007 to witness the testing of sample. Thus, retention of a sample by the dealer becomes necessary. In such a situation it cannot be ruled out that the testing conducted by the IOCL officials was proper, as the other obligations as provided under Clause 8 of the Order 2005 read with Clause 2.5 (D) of the MDG 2005 was not followed in its letter and spirit.
18. Reliance of the learned Counsel appearing for the respondents upon the decisions of the High Court of Jharkhand in Jharkhand Petroleum Dealers Association v. Union of India and Ors. High Court of Jammu & Kashmir in Kashmir Valley Tank Owners v. UOI and Ors. and High Court of Madhya Pradesh in Bhopal Petroleum Multipurpose Dealers, M.P. v. Union of India and Ors., are not relevant to the facts of the case on hand, as there is no challenge to the marker test or there is no demand for supply of marker test kit by the petitioner in the instant petition.
19. The next contention of the respondents that the statutory requirement to give one sample to the dealer as provided under the Clause 8 of the Order 2005 has been dispensed with by amendment Order, 2007 is not correct on the face of it.
20. Original Clause 8 of the Order 2005 reads as under:
8. Sampling of Product.-(1) The authorized under Clause 7 shall draw the sample from the tank, nozzle, vehicle or receptacle, as the case may be, in clean aluminum 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 authorized 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 acknowledgment 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 authorized 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 products, name of retail outlet, quantity of sample, date, name of the authorized officer, name of the dealer or transporter or concerned person or his representative;
(4) The authorized 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 Standard 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 authorized officer within twenty days of receipt of sample at the laboratory.
(6) The authorized 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.
21. Clause 8 of the Amendment Order 2007 published by notification dated 12/1/2007 reads as under:
G.S.R. 18 (E).-In exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (10 of 1955) the Central Government hereby makes the following order to amend the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005, namely;
1.(1) This Order may be called the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Amendment Order, 2007.
(2) It shall come into force on the date of its publication in the Official Gazette.
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(3) In the said order, in Clause 8.-
(a) for the heading "sampling of product", the heading "sampling of product and testing" shall be substituted.
(b) after the heading and before the Sub-clause (1), the following sub- clause shall be inserted, namely:
(1A) The authorized officer under Clause 7 shall draw the sample from the tank, nozzle, vehicle or receptacle, as the case may be, in the test kit and test the product with the aid of test kit, to check whether the product contains any traces of marker. If such traces are found in the product, the authorized officer shall record the same in triplicate which shall be jointly signed by him and the dealer or transporter or concerned person or his representative, as the case may be, and give one copy of such recording to the dealer or transporter or concerned person or his representative and another copy to the oil company concerned, as the case may be.
(c) in Sub-clause (1), for the words, "the authorized", the following shall be substituted, namely:
Where the product does not contain marker under Sub-clause (1A), the authorized officer.
G.S.R. 19 (E).-In exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (10 of 1955) the Central Government hereby makes the following order further to amend the Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993, namely:-
1.(1) This Order may be called the Kerosene (Restriction on Use and Fixation of Ceiling Price) Amendment Order, 2007 .
(2) It shall come into force on the date of its publication in the Official Gazette.
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(3) In the said order, after Clause 8, the following clause shall be inserted, namely:
8A. Kerosene to be blended with marker-All kerosene sold in India, whether under the public distribution system or parallel marketing system, shall be blended with marker at five parts per million (ppm) concentration with the objective of preventing its diversion or adulteration of other petroleum products.
22. Clause 8 of the Order 2005 was amended to the effect for the heading `sampling of product'' was substituted by the heading `sampling of product and testing''. After Sub-clause (1), Sub-clause (1A) was inserted. There is no change/amendment in Sub-clause (2) of Clause 8 of the Order 2005, which provides for giving of one sample of High Speed Diesel to the dealer. Clause 8A has also been inserted dealing with Kerosene to be blended with maker without any amendment in Sub-clause (2) of Clause 8 of the Order, 2005. Thus, Sub-clause (2) of Clause 8 of the Order, 2005 remains un-amended and the same ought to have been given full effect to.
23. In Hindustan Petroleum Corporation Limited and Ors. v. Super Highway Services and Anr., while considering the termination of dealership the Supreme Court observed as under:
31. The cancellation of dealership agreement of a party is a serious business and cannot be taken lightly. In order to justify the action taken to terminate such an agreement, the authority concerned has to act fairly and in complete adherence to the rules/guidelines framed for the said purpose. The non-service of notice to the aggrieved person before the termination of his dealership agreement also offends the well- established principle that no person should be condemned unheard. It was the duty of the petitioner to ensure that Respondent No. 1 was given a hearing or at least serious attempts were made to serve him with notice of the proceedings before terminating his agreement.
33. The guidelines being followed by the Corporation require that the dealer should be given prior notice regarding the test so that he or his representative also can be present when the test is conducted. The said requirement is in accordance with the principles of natural justice and the need for fairness in the matter of terminating the dealership agreement and it cannot be made an empty formality. Notice should be served on the dealer sufficiently early so as to give him adequate time and opportunity to arrange for his presence during the test and there should be admissible evidence for such service of notice on the dealer. Strict adherence to the above requirement is essential, in view of the possibility of manipulation in the conduct of the test, if it is conducted behind the back of the dealer.
24. With regard to the contention of the respondents that the disputed had arising out of a contract is noticed to be rejected on a simple ground that the IOCL has been held as an organ or instrumentality of the State as contemplated under the provisions of Article 12 of the Constitution of India. (See Mahabir Auto Stores and Ors. v. Indian Oil Corporation and Ors.). Thus, the arbitrariness, discrimination and unreasonableness exercised on the part of respondent Corporation can be examined by this Court under the writ jurisdiction.
25. The test conducted on 21/12/2007 and the report of the same was intimated to the petitioner on 28/2/2008, which was also in contravention of the provisions of Sub-clause (6) of Clause 8 of the Order 2005.
26. It is a duty cast on the authorities of the State and the instrumentalities of the State that they should follow the proper procedure prescribed in the rules and regulations. The contravention of the same cannot be permitted. It is uncontroverted legal position that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all.
27. A constitution Bench of the Supreme Court in Sukhdev Singh and Ors. v. Bhagatram Sardar Singh Raghuvanshi and Anr., observed that the rules and regulations framed by the statutory Corporations have the force of law and, as such, the statutory authorities cannot deviate from the statutory provisions. If there is any deviation, the Court may invalid such actions in violation of statutory rules and regulations by a legal sanction of declaration.(See Haresh Dayaram Thakur v. State of Maharashtra and Ors. and Prabha Shankar Dubey v. State of Madhya Pradesh).
28. In Sukhdev Singh (supra), the Supreme Court observed as under:
33 ...These regulations impose obligation on the statutory authorities. The statutory authorities cannot deviate from the conditions of service. Any deviation will be enforced by legal sanction of declaration by courts to invalidate actions in violation of rules and regulations....
29. In the case on hand, indisputably the provision of Clause 8 of the Order 2005 read with MDG 2005 have not been complied with. Thus, the respondents cannot claim any sanctity in law and the Court is well within its jurisdiction to declare such an act illegal and invalid.
30. For the reasons mentioned hereinabove, the impugned order dated 9/3/2009 (Annexure - P/1) passed by the Appellate Authority, Indian Oil Corporation Limited, Mumbai, is not sustainable in the eye of law and the same is hereby quashed. Consequently, the termination order dated 10/09/2008 (Annexure P/15) also stands quashed.
31. In the result, the writ petition is allowed.
32. There shall be no order asto costs.
