Kisan Filling Station vs Indian Oil Corporation Limited

Pratap Krishna Lohra, J.—Petitioner, a dealer of Indian Oil Corporation Limited (for short, ''IOCL'') having its Filling Station at Deedwana Road, Jayal, District Nagaur, authorized to carry on business of retail sale of petroleum products, viz., Petrol/HSD/Motor Oil/Grease etc., has laid this writ petition challenging Retail Outlet Analysis and Inspection Report dated 24th August 1998 (Annex. P/5) and order dated 15th of September 1998 (Annex. P/8), whereby its sales and supply of all products is suspended for 30 days with fine/penalty worth Rs. 1,10,000/- under three heads; viz., stock variation, tempering of totalizer seals and discourteous behavior/refusal to sign Inspection Report and sign labels. The facts, necessary for the purpose of this writ petition, are that offer for the dealership of OICL was furnished to the petitioner on 2nd June 1973 and thereafter agreement was signed between the parties. The retail outlet started w.e.f. 31st March 1976 with the installation of the entire infrastructure by the company including tank, pump etc. For the requisite infrastructure, obligation on the petitioner was to pay monthly rent but its maintenance was to be carried out by the company. In the event of leakage in the petroleum products, Fitter/Chargeman was authorized to rectify the defects and if it is reported that there is a major leakage, Fitter/Chargeman was authorized to advice the dealer to suspend the sales. It is also averred in the writ petition that in the event of leakage in the tank, dealer can report to the company about suspected loss of products. Petitioner has very specifically averred that provisions of Standards of Weights and Measures Act 1976 (for short, ''Act of 1976'') and Petroleum Act 1934 (for short, ''Act of 1934'') would apply to the dealer. As per version of the petitioner, record of stock of its retail outlet was regularly maintained by it. In the month of July 1998, petitioner addressed a letter to the Deputy Manager, IOCL apprehending leakage in the tank by alleging that there is variation in the stock to the extent of 1050 ltr. petrol and a letter to this effect was addressed on 30th July. Alleging ulterior motive against respondents No. 3 & 4, the petitioner has averred that they were harboring some grievances against the petitioner and therefore a false Inspection Report was submitted by them on 24th August 1998 wherein some defects were pointed out. In the Inspection Report, precisely, two defects were pointed out, viz., abnormal shortage in MS as well as HSD stocks and discourteous behavior during inspection by the petitioner/his representative. Pointing out many discrepancies in the Inspection Report, petitioner has submitted in the writ petition that variation in stock was due to leakage in the tank and allegation about discourteous behavior is false and fabricated. Be that as it may, pursuant to the said report, a show cause notice was issued to the petitioner on 25th August 1998, wherein precisely three discrepancies were pointed out against the petitioner, which are as under:

Abnormal shortages were observed in MS as well as HSD stocks.

The totalizers seals in respect of one MS DU were observed to have been changed as their serial numbers were not tallying with records.

Your authorized representative refused to sign on the inspection report as well as the sample labels.

The show cause notice was replied by the petitioner on 2nd of September 1998. The complete text of reply in vernacular is reproduced as under:

After receipt of the reply, the third respondent passed the impugned order. The order impugned is assailed by the petitioner precisely on the ground that it has been passed mechanically without application of mind and in gross violation of principles of natural justice. The petitioner has alleged that it was an ex-parte order and allegation of tempering seal is incorporated without any basis inasmuch as the same did not find place in the Inspection Report. To assail the impugned order, petitioner has also taken shelter of Section 3 of the Act of 1976 as well as Act of 1934 and violation of Article 14 & 19 of the Constitution.

On behalf of respondents, reply to the writ petition is submitted. In the return, the respondents have raised a preliminary objection about availability of alternative remedy. While referring to Para 69 of the Dealership Agreement, respondents have averred in the reply that against the impugned action petitioner can avail the remedy of arbitration and as such writ petition cannot be entertained. It is also averred in the reply that case involves serious disputed questions of facts which are not required to be adjudicated in exercise of extraordinary jurisdiction. On merits, respondents have submitted that there was no leakage in the tank and this entire story is cooked up by the petitioner to camouflage his serious omissions and commissions.

Defending their impugned action, the respondents have in the reply averred that variation in the stock was of high magnitude and as such it became imperative to pass the impugned order. Respondents have specifically mentioned in the return that there was variation in the stock of petrol as it was falling short of 1451 ltrs. and shortage of diesel was about 4565 ltrs. Even if it is assumed that 4000 ltrs. HSD was directly sold by the petitioner to the customers, still shortfall of the stock by 565 ltrs. was considerable warranting action against the petitioner.

Joining issue with the petitioner on its defence about leakage in tank, respondents have placed on record Inspection Report dated 12th September 1998 with a clear stipulation that there is no leakage in the tank. The report is also signed by the authorized representative of the petitioner. Petitioner has also placed on record Annex. R/2 Marketing Discipline Guidelines, whereby the company was authorized to take punitive action against the dealer after show cause notice.

In totality, the respondents have defended their action and submitted that the guidelines, are framed in consonance with the provisions of the Act of 1976 and as such there is no question of infraction of any of the rights of the petitioner including violation of principles of natural justice.

Mr. Ankur Mathur, learned counsel for the petitioner, has submitted that impugned order has been passed in gross violation of principles of natural justice and therefore the same cannot be sustained. Mr. Mathur has urged that the petitioner has tendered a satisfactory explanation pursuant to show cause notice but without considering the same respondents have passed the impugned order mechanically without application of mind. Learned counsel would contend that impugned order is without any authority inasmuch as in the show cause notice nothing is attributed to the petitioner as to which provision of law it has violated. Mr. Mathur has submitted that tempering of seal was not mentioned in the Inspection Report pointing out defects but the same has also been set out as a ground for penalizing the petitioner, which clearly indicates that respondents have acted unfairly vis-a-vis petitioner and have considered the facts and circumstances which were wholly irrelevant. Lastly, the learned counsel has urged that the impugned action has violated Article 14 & 19 of the Constitution and therefore cannot be sustained.

Mr. Jitendra Chopra, on the other hand, has urged that there was umpteen material available with the respondents indicating malpractices by the petitioner and therefore impugned order is just and proper and calls for no interference. Mr. Chopra has submitted that variation in stock of petrol and diesel is directly attributed to the petitioner and explanation tendered by the petitioner in this behalf is absolutely vague and cryptic and therefore all the grounds urged by the petitioner for challenging the impugned order are bereft of any merit and cannot be sustained. Mr. Chopra has urged that the so called ground for stock variation as set out in reply to the show cause notice by the petitioner is contrary to the Inspection Report Annex. R/1, which is posterior to the impugned order, and therefore, no interference with the impugned order is called for. Learned counsel has also reiterated his argument about maintainability of the writ petition on the anvil of disputed questions of facts and availability of alternative remedy.

I have heard learned counsel for the parties and perused the materials available on record.

In the instant case, at the threshold on 14.10.1988 notices were issued and learned counsel for the respondents accepted notice. On 26th October 1998, when the matter came up, learned counsel for the respondents sought time to file reply and the Court was pleased to pass interim order in following terms:

"Mr. A.L. Chopra prays and granted three weeks time to file reply. Meanwhile, the respondents shall resume the supply to the petitioner and the recovery of fine imposed by the impugned order shall remain stayed."

On 12th October 2000, the petition was admitted and thereafter on 10th of September 2003 the interim order was confirmed. In this view of the matter, due to the indulgence granted by the Court, the impugned order remained in abeyance since 1998 and by this time more than one and half decades have elapsed, therefore, in my view so far as the order of suspension of sales and supplies is concerned, it has lost its significance for all practical purposes and now after a lapse of more than 15 years it is not desirable to uphold the impugned order to that extent. Therefore, in totality, the order to that extent has lost its sanctity by afflux of time.

Now adverting to the second part of the order, whereby the petitioner was saddled with penalty of different denominations for the malpractices amounting to Rs. 1,10,000, suffice it to say that variation in the stocks of petrol and diesel is a serious omission on the part of petitioner and such a omission cannot be excused. The so called explanation tendered by the petitioner to meet the malpractice of shortage of stock of petrol and diesel cannot be accepted on the anvil of Inspection Report Annex. R/1. It goes without saying that petrol and diesel are highly inflammable and an incumbent, who is an authorized dealer of these petroleum products, is not expected to show such, callousness or negligence having far reaching consequences. The so called explanation tendered by the petitioner in this behalf is not only false but is lackadaisical and it clearly indicates that petitioner has made an attempt to camouflage his serious omissions and commissions. The only defence of the petitioner for variation in stock of petrol is leakage of tank, which is contrary to the Inspection Report Annex. R/1 and as such there remains no shadow of doubt that this variation in the stock is directly attributable to the petitioner. Well it is true that in the Retail Outlet Inspection and Analysis Report (Annex. P/5), recitals are contained that "Dealer representative Shri Banshilal refused to sign on report and samples" but there is no specific recital about discrepancy No. 2 as mentioned in show cause notice. However, the petitioner cannot escape from his serious omissions about other two discrepancies, i.e., discrepancy No. 1 & 3.

Although the objection of availability of alternative remedy of arbitration under Clause 69 of the Dealership Agreement is vociferously canvassed by the learned counsel for the respondents, but keeping in view the fact that the petition is pending before this Court since 1998, I am not persuaded to relegate the petitioner to alternative remedy of arbitration after a lapse of more than one and half decade.

In the backdrop of facts and circumstances of the instant case, in my considered opinion, the impugned order to the extent of imposition of fine of Rs. 50,000 for tempering of totalizer seals and suspension of sales and supplies cannot be sustained but fine for the malpractices No. 1 & 3 is liable to be sustained.

Resultantly, this writ petition is allowed in part and the impugned order to the extent it relates to suspension of sales and supplies and imposition of fine of Rs. 50,000 for tempering totalizer seals is quashed and set aside and part of the order whereby fine of Rs. 50,000 for stock variation and fine of Rs. 10,000 for discourteous behavior or refusal to sign Inspection Report and sample labels is maintained.

No order as to costs.