Nandal Service Station vs Union of India and Others

K. Kannan, J.

The petitioner challenges the cancellation of the dealership awarded to the petitioner for retail sale of petroleum products. The petition also contains challenge to the paragraph 5.1.2 and 8.2 of the Marketing Discipline Guidelines which has been taken the basis to find that the petitioner was guilty of tampering with the facilities and consequently, entailing the termination of the dealership. The petitioner is a physically handicapped person being polio affected and he was awarded with the dealership of petroleum products in the year 1989. The facilities were periodically inspected and the records would bear out that upto 21.10.2013, there was no adverse incident requiring any action on the part of the respondents against the petitioner. On 21.10.2013, a checking had been done and the petroleum was sent for test report that revealed that the sample met to the requirements of the Motor Gasoline BSIV (EBMS). This inspection was again done on 23.10.2013 and the products were sent for test and the report given on 01.11.2013 again revealed that the sample met with the requirements. However, the inspection report recorded the fact that the totalizer seal was found broken and that re-stamping had been done on 27.07.2013 and the seal had been found broken within a period of about three months.

The petitioner''s contention is that the discharge units of petrol and diesel were themselves uncovered and being open to sun and rain, the steal and iron parts including the external cover had been rusted and the petitioner had himself claimed to have given a representation on 18.10.2012 that dispensing unit sealing wires had been rusted and worn out and they were prone to breaking. It was, therefore, requested that the sealing wires of the dispensing units might be replaced with new wires. The communication sent to the Metrology Officer, Rohtak has been filed as Annexure P-12. The respondents served a show cause notice on 18.11.2013 stating that in the inspection which was carried on 23.10.2013, the following defects/irregularities were noticed:-

"i. Weights and Measures Seals on totalizer of L & T Dispensing Unit bearing Sr. No. KR L & T 2954 on Motor Spirit (MS) service was found broken. This is pertinent to mention that re-stamping of metering unit of the said DU was done on 27.07.2013.

ii. Positive stock variations of 5.61% are found in MS which is well beyond permissible limits.

iii. Sales register/stock register not properly updated/maintained. Physical dips need to be recorded and loss/gain on daily basis to be accounted.

iv. Pump testing to be done on daily basis for all nozzles and to be recorded in sales register.

v. The retention samples to be kept tankwise. The second last sample was not sealed."

The petitioner had engaged in a response pointing out to the fact that it was wrong observation that re-stamping of the meter unit had been done on 27.07.2013 and that it had been done on 07.12.2012 as entered in the retail outlet inspection report (Annexure P-4/T). The petitioner would also explain that the breakage of the seal had not been properly done but it had been broken by natural causes of rusting of iron/steal wire and the installations. The petitioner had also availed to himself the opportunity of personal hearing but the order of termination was issued on 02.06.2014 that is nearly after 8 months after the inspection had been done. The petitioner had in the meanwhile complained that ever since the suspension of supply made after 23.10.2013, even after the test report had been obtained that there had been no shortage of the goods reported nor was any adulteration found and the petroleum products were merely getting evaporated from the underground tank causing for the loss of business to the petitioner. The impugned order was passed on the following grounds:-

"(i) Firstly you did not intimate BPCL prior to this inspection for rusting of wire/seal.

(ii) Secondly RO was inspected by the sales officer on 27.09.2013 and no such observation for rusting of seals was observed by him. Further more you neither at the time of inspection on 27.09.2013 nor at the time of QCC inspection on 23.10.2013 raised any such concern about the rusting of seals wire.

(iii) You as a DPSL signatory were responsible for managing the affairs of the RO. Thus appointment of illiterate person and his filling of 220 litres MS in a plastic barrel instead of HSD, and putting back does not absolve you from the irregularities committed at RO. In fact, filling of MS in a plastic barrel could have resulted in a serious fire hazard.

(iv) You have also mentioned that the seals/stock registers were not maintained as your manager left the job, which again reflects that you were avoiding your duties towards managing the RO as you were solely responsible for the affairs of the RO.

(v) Further your submission that samples of the product were not kept in proper condition does not absolve you from your responsibility of following prescribed guidelines. Again your averment that second last sample was not sealed due to non availability of seals with BPCL is not acceptable as seals are always available on demand, and we had not received any demand from you for plastic seals.

(vi) Your letter dated 18.10.2013 to Legal Metrology, Rohtak which you submitted at the time of personal hearing on 03.01.2014 does not find any mention in your reply dated 25.11.2013 to our show cause dated 18.11.2013 and therefore same has been placed on records as an afterthought only."

As regards the challenge to the guidelines themselves, this Court has dealt with the issue in CWP No. 5334 of 2014 upholding the guidelines but finding all the same that mere breakage of seal cannot be a cause for termination but it would still be necessary to show that there was a manipulation or tampering with the facilities provided to the dealer. I have held that it will place the burden of proof on the dealer to explain as to how the breakage had taken place and the guidelines must be understood in such a way as to draw an onus on the dealer to explain as to how the breakage had taken place and a mere breakage cannot be a ground for termination of the dealership. The point, therefore, that has to be seen is whether the irregularities attributed to the petitioner have been properly explained.

It is stated that there had been no observation of rusting of seals at any time and that the petitioner had set out this ground only in response to the show cause notice which was an afterthought. The impugned order itself refers to the fact that the petitioner had given a letter to the Legal Metrology, Rohtak but that says that this was not submitted at the personal hearing on 03.01.2014 and this was not mentioned in any reply on 25.11.2013 to the show cause notice. If the issue was whether the petitioner had really made a complaint on 18.10.2013 to Legal Metrology, Rohtak, it ought to have been possible for the enquiry officer himself to verify the details and to find out whether such a complaint had been given to the Legal Metrology Officer. I cannot, therefore, accept a reasoning that the rusting of wires and the vulnerability of the seal to break was brought up for the first time by the petitioner as an afterthought. The other ground which is taken in the impugned order is that the petitioner had appointed an illiterate person and he filled up 220 liters MS in a plastic barrel instead of HSD. This was a fact which had been brought in an earlier inspection and the petitioner had given his response and the issue was settled there. This was not taken as a ground for the show cause notice and therefore, a matter which was settled and closed could not have been taken as an instance of irregularity for cancellation. The reference to a past incident of an indiscreet act of an employee could not have been, therefore, cited against the petitioner at all. Indeed the previous communication would also reveal that the petitioner had taken appropriate action against such an employee and he was also removed from service. Even the finding that the sales stock registers were not maintained properly as a ground for cancellation is too vague for acceptance. It must be clearly established in the show cause notice itself as to the specific lapses on the part of the petitioner and any irregularity or wrong entries found in the sale register/stock register. The finding that the stock registers were not maintained properly is too vague to be considered as relevant for cancellation. Further finding that the samples of the product were not kept in proper condition is meaningless since the test report reveals that the sample revealed no defect as seen from the test reports. The order cancelling the dealership is clearly untenable and against the records which are brought before the authorities. The impugned order of cancellation is quashed and the writ petition is allowed.