IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No 15505 of 2008 Sushil Kumar Singh, son of late Musafir Singh, proprietor of M/s Tirupati Filling Station, N H 28, Sasamusa, Gopalganj - Petitioner Versus 1) M/S Indian Oil Corporation Ltd, Indian Oil Bhawan, G-9, Ali Yawar Jang Marg, Bandra (East), Mumbai – 400 051 through its Managing Director 2) The Executive Director, M/s Indian Oil Corporation Ltd, Indian Oil Bhawan, G-9, Ali Yawar Jang Marg, Bandra (East), Mumbai – 400 051 3) The Divisional Regail Sales Manager, Indian Oil Corporation Ltd, Muzaffarpur Divisional Office, Krishna Complex, Akhara Ghat Road, Muzaffarpur – 842 001 - Respondents *** For the petitioner : M/s Y V Giri, Sr Advocate For the respondents : M/s K D Chatterji, Anil Kr Sinha & Kamlesh Verma, Advocates *** 6 23.07.2009 The petitioner has a retail outlet for selling petroleum products of Indian Oil Corporation Limited at NH 28 Sasamusa in the district of Gopalganj. He carries on the business in the name and style of M/s Tirupati Filling Station. On 20.09.2006, an inspection was conducted in the business premises of the petitioner by officials of IOC. As a result of inspection, basically 3 discrepancies in the business were found. Firstly, it was alleged that there was some unexplained excess stock of High Speed Diesel (HSD), secondly there was density variation in HSD both suggesting adulteration and thirdly some people were found using premises as their residence which was not permissible. Business of petitioner was suspended. Ultimately after show causes issued, the dealership has been cancelled which termination has not been interfered with at the appellate stage. This is what has brought the 2 petitioner to this Court. The submission of the petitioner assailing the orders, inter alia, are that with regard to unexplained excess of stock, the method adopted for determining the same was not correct and, as such, the finding cannot be relied upon. So far as the allegation of adulteration is concerned, the dealer had requested for second testing of the same sample as provided under the Marketing Discipline Guidelines which was not acceded to and that being so adulteration could not be established against him. In respect to third, a charge which was not seriously pursued by the respondent-Corporation, it is submitted that there were night guards and other employees who had to stay in the petrol pump premises to guard the money, equipment and stocks and they had provided for themselves place to rest and sleep. The dealership has been terminated mainly for the first two allegations. The facts, which are not in controversy, are noted hereunder. It is not in dispute that on 12.08.2006, petitioner wrote to the Sales Officer of the respondent-Corporation pointing out that the totalizer meter is not functioning uniformly and requested for its replacement. Here, it may be mentioned that totaliser meter are meters installed by the Oil Company at the exit point of the fuel tank. It is calibrated and sealed by the Weighs and Measures Department. It totalises the total fuel drawn from the tank for sale. Pursuant to the aforesaid intimation of the petitioner, IOC sent people to attend to the totaliser. They came on 25.08.2006. Though they were inclined to install a new totaliser, they could not do so because of the seals of the Weighs and Measures Department being there which had to be, with 3 permission only, removed. It is not in dispute that before the totaliser could be rectified and/or replaced, on 20.09.2006, an inspection was conducted at the premises of the petitioner. The totaliser reading was taken which showed the total fuel drawn since the last reading. The authorities then took measurement of the contents in the tank by dip rod method. Thus, they calculated the stocks that ought to be available and the stocks that were found. Allegedly about 3292 litres of HSD was found in excess by these methods of measurement. This is what is alleged as unexplained excess. The authorities took 3 samples from the 2 underground HSD tanks. Thus, there were 6 samples. One from each tank was sent for chemical analysis, one of each tank was retained by the Oil Company and one from each tank was sealed and given to the dealer. In respect of both the tanks, there were contemporaneous tank lorry samples as well. The tank lorry samples were also sent for chemical analysis as well as contemporaneous samples from the depot of the Oil Company for a comparison report. On the analysis report being submitted, allegedly discrepancy was found in the quality suggesting adulteration. Accordingly, show causes were issued. Petitioner’s defence was that so far as excess stock is concerned, the measurements were not correct and not reliable. The inference of excess was based upon an incorrect totaliser reading which was, admittedly, defective from before as also being based upon the dip rod method which was not scientific nor very accurate method. Accordingly, the readings could not be taken to be correct and 4 considering the two, no action could be based thereon. With regard to adulteration, the dealer denied adulteration. It requested that second set of contemporaneous samples that were available with the Oil Company be sent for retesting in dealer’s presence and action may be taken only on receipt of report thereof. Let it be noted that this request of second testing of sample, was not acceded to on the ground that once unexplained excess stock was found, the finding of adulteration could not be doubted and there was no need of second testing. In view of this Court, as would be shown later in the judgment, such a stand is not permissible and this itself is enough to vitiate the actions taken by the Oil Company. The Company did not find the show cause satisfactory and terminated the dealership which has not been interfered with by the appellate authority. The appellate authority has given reasons for not accepting the show cause. With regard to unexplained excess, it is held that if totaliser was found to be defective, petitioner should have stopped making sales. The appellate authority or for that matter the original authority noted that much prior to inspection complaint of the petitioner with regard to mal-functioning of the totaliser was there. With regard to adulteration, the authorities have taken view that as unexplained excess stock was found, it clearly suggested of addition of adulterant and coupled with chemical analysis report, it established the charge of adulteration. It is the correctness of these findings that is under challenge. 5 With consent of parties, the writ petition was heard at length for final disposal at the stage of admission itself. Having considered the matter, in my view, the writ petition must succeed. The order of termination cannot be sustained on the findings as arrived at by the authorities on both counts. Firstly, dealing with the aspect of unexplained excess, there is no dispute that the totaliser, which is an instrument to show the quantity of the fuel taken out of the tank, was mal-functioning. That is the report of the Company’s own representative who wanted to replace the totaliser but could not do it because of the seal of Weighs and Measures Department whose permission was necessary before it could be replaced and resealed. Thus, the figures obtained from such a mal- functioning totaliser ipso facto became unreliable. Then we come to the dip rod method for ascertaining the volumetric contents of the underground storage tank. Tanks are of a fixed shape and size. The depth of fuel therein indicates the contents therein. This is calibrated and a chart is there for every tank. A rod is then dipped in the tank at a specified place and the height of the contents measured. Compared with the calibration chart the content of the tank is worked out. This method of measuring the content is not accurate but only approximated. It appears even the Indian Oil Corporation itself has, from time to time, issued circulars cautioning people about its accuracy. This aspect of the matter, I need not discuss in detail as this has been subject matter of consideration by this Court in the case of Nathmal Kabra & Another – Versus- The State of Bihar since reported in 1990 (1) PLJR 477 and 6 the discussion is to be found in paragraphs-10 to 13 of the said reports. This Court has clearly held that it is neither accurate nor scientific nor legal method of measuring quantity of liquid. It is not a method approved by law relating to weighs and measures and no action can be taken solely on basis thereof. In that case, a wholesale dealer in kerosene oil was convicted for having unexplained shortage of stocks based on dip rod method. The method of measurement was disapproved and the conviction set aside. Taking into consideration both these aspects, one with regard to mal-functioning totaliser and the second non-scientific method – dip rod method, the calculation of unexplained excess cannot be said to be fundamentally correct. It is fundamentally inaccurate and unreliable. It may be noted here that it is well established principle of law that wherever a procedure is to be adopted for taking a drastic action then the procedure has to be strictly followed. The more drastic the consequences the stricter adherence to proper norms is required by the Courts. Here, on both counts, the officials faulted. Thus, this cannot be relied upon. Next we come to the aspect of adulteration. For the said purpose, I may first quote Clause 2.5 D of the Marketing Discipline Guidelines : “2.5 GENERAL POINTS TO BE OBSERVED IN ALL CASES A) … … … … … … … … … … B) … … … … … … … … … … C) … … … … … … … … … … D) In case of sample failure, in the event of request 7 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 counters sample retained with the Field officer/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. … … … … … …” From the above, it would be seen that the Marketing Discipline Guidelines which provides for and lays down the procedure for sampling and action to be taken thereafter clearly provides for taking 3 samples. This was done in the present case. One sample, as provided in the Guidelines, was sent for testing. One was given to the dealer and the other retained by the Oil Company. A reference to Clause 2.5 D would show the purpose why 3 samples are taken. It gives a right to the dealer to ask for retesting of the contemporaneous samples in his presence at the same place. This is so because the consequences are drastic. The dealer, if found guilty of adulteration, looses his bread and butter by termination of his dealership. That is the only safeguard that is available to a dealer. Here, in the present case, the dealer did request for retesting. The same was refused on the ground that the excess stock clearly indicated adding of adulterant and, thus, adulteration was confirmed and no useful purpose would be served. As pointed out above, the allegation of excess stock is not sustainable. It is then argued by the respondents that it was the discretion of the authority to permit 8 retesting or not. In my view, this is not the correct position. Where a procedure has been prescribed, authorities are bound to follow the procedure as all other procedures are prohibited. Where a duty is cast to do an act then authorities must do such an act especially when the consequences of not doing so are grave. In this respect, I may refer to the case of Ex – Capt Harish Uppal –Versus- Union of India & Another since reported in (2003) 2 Supreme court Cases 45 and, in particular, being a Constitution Bench judgment of the Apex Court and, in particular, paragraph-30 thereof wherein the Apex Court has held thus : “30. … … … … … … No body or authority, statutory or not, vested with powers can abstain from exercising the powers when an occasion warranting such exercise arises. Every power vested in a public authority is coupled with a duty to exercise it, when a situation calls for such exercise. The authority cannot refuse to act at its will or pleasure. … … … …” Here, a right was given to the dealer to ask for retesting. How retesting was to be done was also provided. Yet on self-assumed reasons, authority refused to get the retesting done. That vitiates the allegation itself. It causes serious prejudice to the petitioner. Here, I may refer to another decision of the Apex Court in the case of M/s Gupta Chemicals Private Limited & Others –Versus- State of Rajasthan & Another since reported in 2002 (5 )Supreme 549 wherein dealing with a similar situation under the Insecticides Act, 1968 where second testing was not done, the Apex Court held that it caused severe prejudice to the accused inasmuch as the Apex Court then quashed the 9 prosecution which was pending. Thus seen, on both counts, the orders of the authorities cannot be sustained. That being so and those being gravemen of charge against the petitioner, the termination of dealership cannot be held to be valid. Before parting, I may refer to another decision of the Apex Court in the case of Harbanslal Sahnia & Another –Versus- Indian Oil Corporation Limited & Others since reported in (2003) 2 Supreme Court Cases 107 wherein a petroleum retail dealership was cancelled on grounds of adulteration. The Apex Court set aside the order on grounds that the procedure prescribed for establishing the charge had not been followed. It being a serious matter dealing with the bread and butter of the citizen, it could not be taken lightly. Thus, considering the entire facts and circumstances, the order of termination of dealership of the petitioner cannot be held to be legal and valid and is quashed accordingly. The writ petition is allowed. M.E.H./ (Navaniti Prasad Singh)