*THE HONOURABLE SRI JUSTICE L.NARASIMHA REDDY + Writ Petition No.20302 of 2010 %14.03.2011 #M/s.P.Laxmikanth Rao and Sons. ..Petitioner. Vs. $ The Union of India and others. ..Respondents. !Counsel for the petitioner : Sri D.Prakash Reddy ^Counsel for the Respondents : Sri T.Srinivas <Gist : >Head Note: ?Cases Referred: [1] 2002 (5) ALD 389 2 (2005) 12 SCC 731 3 (2000) 6 SCC 293 4 2010 (6) ALD 517 (DB) 5 2007 (3) ALD 243 THE HON’BLE MR JUSTICE L. NARASIMHA REDDY Writ Petition No.20302 of 2010 ORDER: The petitioner is a dealer in products of the Hindustan Petroleum Corporation Limited, the 2nd respondent. An outlet was established by it at Dichpally of Nizamabad District on National Highway No.7. Dispensing unit is said to have been established about 50 years ago. An inspection was conducted on 24.11.2009 at 7 p.m. Based upon the observations of the inspection, a show cause notice dated 08.12.2009 was issued alleging that the HSD dispensing unit was delivering 140 ml. litre short, for every five litres. It is also mentioned that on further examination, the lever of the metering unit was found to have been tampered, by replacing a gear with 39 teeth, in the place of the one with 38 teeth. The petitioner submitted an explanation stating that the seal of the Vending unit was in tact, and that even according to the show cause notice, the respondents have opened the seal, after obtaining the permission of the authorities of the Legal Metrology Department and the Manufacturers. He contends that once the seal is found to be in tact, the dealer cannot be held responsible for any error, or defect as to measurement. He pointed out that the dealer has no control over the dispensing unit, and the Corporation and the Maintenance Agency are in complete control over the units. Not satisfied with the explanation, the Corporation terminated the dealership of the petitioner through proceedings dated 12.08.2010. The same is challenged in this writ petition. The petitioner contends that the dispensing unit is manufactured by M/s.Larsen and Tubro and it is periodically maintained by them. It is also stated that the seals are put by the Legal Metrology Department and for any error in measurement, the company as well as the department, referred to above, that have calibrated the equipment, are answerable. It is also pleaded that the petitioner was unnecessarily penalized for no fault of it. The respondents filed counter-affidavit, opposing the writ petition on several grounds, including the one as to the maintainability of the writ petition. It is stated that the petitioner tampered with the machinery and inserted a spurious gear, with an oblique motive. Reference is made to the relevant clauses of the agreement and it is submitted that the petitioner is guilty of serious misconduct. Sri D.Prakash Reddy, learned Senior Counsel for the petitioner, submits that even according to the notice issued by the respondents, the seal on the equipment was in tact and there was absolutely no basis for proceeding against the petitioner. He contends that the terms of agreement and other related documents are to the effect that under no circumstances, the petitioner shall touch or tamper with the equipment and it is not explained as to how the petitioner has access to the internal parts of the unit, even while the seal is in tact. It is urged that the writ petition is very much maintainable, since the impugned order suffers from the vice of non-application of mind, arbitrariness, and is violative of Article 14 of the Constitution of India. Sri T.Srinivas, learned counsel for the respondents, submits that the petitioner was under obligation to check accuracy of measurement everyday and he did not report at any point of time about the discrepancy. He contends that the root cause for short delivery of the product was found to be the interpolation with the gear and the experts opined that a furious gear was inserted. Learned counsel submits that a writ petition does not lie for resolution of disputes of this nature. He places reliance upon the judgments of this Court in Sri Lalitha Devi Gas Agencies v. Hindustan Petroleum Corporation Limited, Mumbai[1]; Western India Plywoods Limited v. Collector of Customs, Cochin[2]; Keraka State Electricity Board v. Kurien E.Kalathil and others[3]; and Hindustan Petroleum Corporation Limited v. Margadarsi Service Centre, Secunderabad[4], apart from an unreported judgment dated 10.07.2009 in W.P.No.26180 of 2005. The petitioner established the petroleum outlet about half a century ago. It is one of the oldest petrol bunks in the area. Periodical inspections were conducted upon the units by the Officials of the Company, the Authorities of the Civil Supplies Department and Legal Metrology Department. The purpose of inspection conducted by the company would be to verify whether the product of proper quality is supplied and whether other conditions, such as ensuring delivery of accurate quantity of petroleum product and taking safety measures etc. are being followed. In the inspection that was caused on 24.11.2009, it was noticed that the dispensing unit was delivering 140 ml. short for every 5 litres of diesel i.e. 28 ml. per litre. The petitioner was not available in the station at the time of inspection. A show cause notice dated 08.12.2009 was issued. It was pointed out that on noticing discrepancy in the measurements, the permission of the Legal Metrology Department was obtained over telephone, the unit was opened by breaking the seal, and it was found that a furious gear with 39 teeth was fitted in the place of the one, with 38 teeth. The relevant clauses in the agreement were cited. The petitioner submitted explanation on 16.12.2009. Apart from other grounds, the petitioner pleaded that the previous inspection by the Company was made on 14.09.2009 and the seal on the equipment, put by the Department of Legal Metrology on 26.03.2009 was found in tact. It was stated that no discrepancy as to measurement, was pointed out on 14.09.2009 and if any difference has arisen even while the seal was in tact, the petitioner cannot be held liable. The petitioner further stated that the representatives or mechanics of the manufacturer of the unit i.e. Larson and Tubro, regularly carried out maintenance work and at no point of time anything objectionable was found or reported. Not satisfied with the explanation submitted by the petitioner, the Corporation passed the impugned order terminating the dealership. It is no doubt true that a writ petition does not lie for determination of disputed questions of fact, particularly when the relationship between the parties is governed by a written contract. In S.Suresh v. Indian Oil Corporation Limited, Southern Region, Madras[5], the allegations against the dealer were that retail outlet was totally neglected, the dealer was absconding and there was serious discrepancy in the stock position. When the ultimate order of termination of dealership was challenged, this Court took the view that there are several disputed questions of fact, particularly as to the discrepancy in quantities, lack of proper maintenance of the outlet etc. and the writ petition was not entertained. The other decisions relied upon by the learned counsel for the respondent are on the same line i.e. when disputed questions of fact arise for consideration, the party has to pursue the remedies in a civil Court in terms of the written agreement. It is not necessary to refer to them in detail. In the instant case, hardly there is an occasion for this Court to go into the disputed questions of fact. The only issue is as to whether the petitioner can be held liable in any way for functioning or malfunctioning of a unit, if the seal put upon it is in tact. Beyond that this Court does not intend to discuss any other issue. The show cause notice dated 08.12.2009 issued to the petitioner is self-explanatory. The first paragraph refers to the existence of dealership in favour of the petitioner, and causing of inspection on 24.11.2009. The allegations against the petitioner are contained in second paragraph. It reads as under: “Dispensing unit of L&T Z line make having serial number FV L&T 1866 on HSD service was found to deliver 140 ml short per 5 litres. On investigation it was observed that the lever of the metering unit had extra play. After obtaining approval from the Weights and Measures Department over telephone the seals were broken and metering unit was opened and it was observed that thee was a spurious gear having 39 teeth fitted on the metering assembly instead of standard gear having 38 teeth. This gear was having two layers of teeth. As none of the partners were available in the outlet at time of inspection our Officer Shri Moola Naga Satish had informed you over phone and advised you that consequent to the approval given by the Assistant Controller of Weights and Measures, Nizamabad the seals will be broken for checking the metering unit. Your representative Shri Y.Hanumantha Rao was present in the outlet when these irregularities were identified by the inspecting officials on 24.11.2009 and have acknowledged the findings of these irregularities and signed on the Inspection Report and Seizure Report. Our officials had taken the photographs of the spurious gear teeth, which were duly signed by your representative. The said spurious gear has been taken into our custody. By act of putting additional gear to the dispensing unit resulting short delivery is tantamount to tampering of dispensing unit.” Thereafter, the relevant clauses in the dealership agreement are mentioned and the petitioner was required to show cause. One important aspect, which needs to be noticed is that the seal upon the unit is found in tact and it was opened by the officials of the Corporation after obtaining oral permission from the department of legal metrology. There is some discrepancy in the nature of allegations pertaining to the gear in the unit. At one place it is stated that a gear with 38 teeth was replaced with a spurious one, with 39 teeth. At another place it was mentioned that an additional gear was fitted. The equipment for measuring and supply of petroleum products is chosen and fitted by the respondents themselves. A dealer has absolutely no say in the matter. Further, the terms of agreement prohibit a dealer from meddling in any manner, with the dispensing unit. If any defect is noticed, the only step which the dealer is required to take is that he should report it to the company. Once the manufacturer of the unit calibrates the equipment ensuring proper delivery of the product, the relevant part of the machinery is sealed by the department of legal metrology, after verification of the accuracy. The very purpose of the sealing of the equipment by the department of legal metrology is to ensure that the dealer does not tamper with the same. In case a seal is found to have been removed or tampered with, there does not exist any occasion for this Court to decide whether the allegation is true or not. Tampering with the seal, by itself, is a serious dereliction and would constitute a ground for proceeding against the dealer. In such cases, accuracy or otherwise of measurement becomes secondary. If however the seal is found to be in tact, the dealer cannot be held liable for the malfunctioning of the unit. If at all any one, it is manufacturer or the oil company, that have to explain such discrepancy. In case the petitioner had access to any parts of the machinery bypassing the seal of the unit also, it would have been liable to be proceeded notwithstanding the fact that the seal is in tact. It is not even alleged that the petitioner had access to the gears mentioned in the show cause notice, without removing the seals. The petitioner made an elaborate reference to the previous inspections, the condition of seals etc. In the impugned order, it is stated that a duplicate gear was implanted by the petitioner. Not a word is said about the seal being in tact. Therefore, it is a case of non- application of mind. Things would have been different had the respondent said that the petitioner, or for that matter any individual, can have access to the gear even while the seal was in tact. Further, it is stated that the opinion tendered by the manufacturer of the unit i.e. Larson and Tubro, was not made available to the petitioner. Failure to supply the same, results in violation of principles of natural justice. The petitioner cannot be expected to answer certain issues regarding which he has no information. Viewed from any angle, the impugned order cannot be sustained in law. Accordingly, the writ petition is allowed and the impugned order is set aside. There shall be no order as costs. _____________________ L. NARASIMHA REDDY, J. Dt.14.03.2011. Note: L.R. copy to be marked. GJ [1] 2002 (5) ALD 389 [2] (2005) 12 SCC 731 [3] (2000) 6 SCC 293 [4] 2010 (6) ALD 517 (DB) [5] 2007 (3) ALD 243