W.P.(C) No.14824-26 of 2006 page 1 of 21 IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: July 8, 2010 Decision on: July 22, 2010 W.P. (C) Nos. 14824-26 of 2006 & CM Nos. 15547 of 2007 & 2612 of 2010 DIESEL SERVICE CENTRE & ORS. ..... Petitioners Through: Mr. A. Maitri, Advocate. versus BHARAT PETROLEUM CORPORATION LTD. ..... Respondent Through: Mr. Sudhir Chandra, Senior Advocate with Mr. A.K. Mishra, Mr. Parijat Sinha Mr. Vikram Ganguly and Mr. T.K. Majumdar, Advocates. CORAM: JUSTICE S. MURALIDHAR 1. Whether Reporters of local papers may be allowed to see the judgment? No 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in Digest? Yes J U D G M E N T Background 1. This is the second round of litigation arising out of a communication dated 11th August 2005 sent by the Respondent Bharat Petroleum Corporation Ltd. („BPCL‟) to the Petitioner No. 1 informing it that its dealership stood terminated. Earlier the Petitioner had challenged the said letter by filing Writ Petition (C) No. 13298-13300 of 2005 in this Court. The said writ petition was disposed of by an order dated 10th November 2005. While quashing the decision dated 11th August 2005, the Court held that the BPCL would be free to issue a fresh show cause notice to the Petitioner and after granting the Petitioner an opportunity of being heard, would pass a reasoned order. It was left open to the BPCL to take W.P.(C) No.14824-26 of 2006 page 2 of 21 a decision whether to suspend business till the enquiry is completed. If an enquiry was initiated, it was directed to be completed within three months and a reasoned and speaking order be passed. 2. Challenging the order dated 10th November 2005, BPCL filed LPA No. 30 of 2006 before the Division Bench of this Court. However, no stay was granted. It may be noted that LPA No. 30 of 2006 later stood disposed of by an order dated 23rd February 2007 whereby the Division Bench declined to interfere with the order of the learned Single Judge except clarifying that the said order should not be treated as a precedent and that the present writ petition should be decided without being influenced by any of the observations by the learned Single Judge. 3. To revert to the narration, consequent upon the order dated 10th November 2005, a letter dated 9th January 2006 was written by the BPCL to the Petitioner asking the Petitioner to treat BPCL‟s letter dated 11th August 2005 as a show cause notice and to furnish a reply thereto. The Petitioner No. 1 replied to the said show cause notice on 12th January 2006. An oral hearing was granted on 3rd March 2006. Thereafter by a detailed reasoned order dated 17th August 2006, the BPCL concluded that there was no reason to take a view different from what was expressed in its letter dated 11th August 2005. Accordingly, it was decided that the BPCL would not continue its business relationship and/or agreement with Petitioner No.1; that the BPCL‟s petroleum products would not be sold to the Petitioner No.1 for being resold to its retail customers; that the Petitioner No.1 would not be allowed to retain possession of the BPCL‟s W.P.(C) No.14824-26 of 2006 page 3 of 21 assets including its signage and/or its logo. The list of such assets was furnished with the letter with the request that it should be returned to the BPCL within 15 days. Finally, the Petitioner No.1 was not allowed to use the BPCL‟s name in any manner whatsoever. 4. The present writ petition challenges the above letter dated 17th August 2006. By an order dated 4th October 2006, a learned Single Judge of this Court stayed the operation of the order dated 17th August 2006, inter alia, on account of the fact that the Petitioner‟s dealership had continued for the last 27 years and that prior to the incident of 14th July 2005, no shortcomings were found or communicated to the Petitioner. 5. In the meanwhile, the term of the agreement came to an end on 19th November, 2005 and was not continued. Therefore, no supplies were made to the Petitioner by the BPCL. However, with the Respondent BPCL not being able to enter the premises to recover its assets, it filed CM No. 15547 of 2007. Events leading to the filing of this petition 6. Sometime in 1978, an agreement was entered into between the Petitioner No. 1 firm and the Respondent BPCL whereby licence was granted to the Petitioner No. 1 to operate a retail outlet of the BPCL at Karnal for dispensing both high speed diesel (HSD) and motor spirit („MS‟). It is stated that a team of the BPCL inspected the retail outlet („RO‟) of the Petitioner No.1 on 14th July 2005. The team comprised of three senior officials of the BPCL i.e. Mr. J.P. Meena (Deputy Manager W.P.(C) No.14824-26 of 2006 page 4 of 21 (Sales) Panipat), Mr. K.G. Ghatwai (Manager (Quantity Control Cell - Northern Region) and Mr. P.S. Bhargava, General Manager (Quality Control Cell - Central Office). It must be mentioned here that the land on which the RO was operating belonged to the Petitioner No.1 firm of which Petitioners 2 and 3 are partners. 7. There are two versions of what transpired on 14th July 2005 at the RO. According to the report of the inspection team, a copy of which has been placed on record as Annexure P-5, the team began its visit at around 11.15 am and introduced themselves to one Mr. Jagjeet Singh Chawla who was available at the RO. Mr. Chawla then associated himself with the inspection. While checking the four HSD Dispensing Units with respect to 5 litres measure (four to five readings were taken for each Dispensing Unit), the supply from the dispensers was “found to be erratic”. The short delivery was varying between 40-100 ml and the excess delivery from the same dispensers was varying upto 50 ml. Since no apparent reasons could be detected for such variation, the company technician Mr. Naresh was called for further examination of the dispensers. It is stated that when two dispensers were opened by Mr. Naresh, it was observed that “the gears fitted between the metering unit and totalizer were of non-standard type and one of the gears was loosely fitted”. It was observed that “the gears were having 19 & 39 teeth as against a normal design of 20 & 38 teeth respectively”. Photographs of the gears were taken by the team with the camera and the gears were taken out for further examination/study by the engineering team. As regards the MS Dispensing Units, one unit was observed giving short W.P.(C) No.14824-26 of 2006 page 5 of 21 delivery of 50 ml per 5 litres. In order to prepare a joint statement with Mr. Chawla on the findings, the team went to the sales room. It is stated that at that time the people present at the RO entered the sales room and blocked its door. That group consisted of about 30 persons who were “the office bearers/members of the local/state petroleum dealers association.” One of these members was having a camera with which photographs were taken of the inspecting team. The persons gathered started shouting and talking loudly among themselves and used foul/abusive language against the officers of BPCL. One in the group snatched the camera of the inspecting team and the papers on which the findings of the RO inspection had been written. The team was unable to prepare a joint report at the spot and was forced to leave. They were prevented from taking the non-standard gears fitted to the dispensing units to the BPCL‟s territory office for further investigation. When the team got into the car and was about to leave, one car blocked the passage. The assembled group insisted that “unless a certificate to the effect that everything was found alright during the inspection was issued, the team would not be allowed to leave the premises”. In the above mentioned threatening environment and considering the mood of the group of the people assembled, an inspection report was prepared forcibly which was signed by Shri J.P. Meena. Thereafter, the group insisted that the report must be signed by all the team members and then only the team would be allowed to leave. Therefore, other team members also signed the said report. A narration of all the above facts is contained in an undated report of the inspection team which is at Annexure P-5 to the writ petition. W.P.(C) No.14824-26 of 2006 page 6 of 21 8. On 11th August 2005, a letter was written to the Petitioners by the BPCL referring to the incidents of 14th July, 2005 and the report of the inspecting team. It stated that on 18th July 2005, one of the members of the inspecting team had filed a letter with the Senior Superintendent of Police, Karnal narrating the incidents as mentioned in the inspecting team‟s report. Reference was also made to a news item in Hindi published on 15th July 2005 in the Dainik Jagaran, Karnal and on 19th July 2005 in the Punjab Kesari, Karnal. Copies of the inspection team‟s report and the news reports were enclosed with the letter. The Petitioners were told by the BPCL that they had neither intimated their version of the incident to the BPCL “nor made any statement in the newspaper contradicting the news item as reported in the newspapers”. Therefore, the inaction on the part of the Petitioners suggested that “you were either a party to the said news item and/or concurred with the contents of the said news items”. The letter proceeded to state that since the Petitioners had neither given their version of the incident to the BPCL nor caused any report to be published in the newspaper contradicting the news item, the Petitioners intended to communicate to the general public that the BPCL was not a good company which should be trusted by the public. It was thereafter observed in the letter dated 11th August 2005 as under: “In the circumstances aforesaid, we have reason to believe that if you had not tampered with the equipments, as has been mentioned in the aforesaid report of the inspecting team of BPCL and the inspecting team of BPCL had really come to collect a bribe under the pretext of conducting inspection as hinted in the said news items, you would have, as BPCL‟s dealer, reported about the W.P.(C) No.14824-26 of 2006 page 7 of 21 incident to BPCL immediately on 14.07.2005 itself and could have called upon some of the officers of BPCL to ascertain the position instead of maligning the name of BPCL in public by calling other dealers who had nothing to do with the said retail outlet and/or instigating the reporters of the said newspapers to malign and prejudice the good name of BPCL.” 9. In para 8 of the letter dated 11th August, 2005, the analysis of the facts as stated in the inspecting team‟s report was set out. Then in para 9, the summary of the findings of the inspecting team were set out as under: “After considering all the aforesaid documents and as no action was taken by you rebutting the reports in the newspapers and/or intimating us of your version of the incident that had taken place at the retail outlet on 14.07.2005, we are of the view that the inspecting team had found that:- (a) you had tampered with the dispensers and either by yourself or through your servants or agents interfered with the working parts of the outfit or other equipments provided by BPCL. (b) the gear fitted between the metering unit and totalizer were of non-standard type and one of the gears was loosely fitted. These gears were having 19 and 39 as against the correct design of 20 to 38 teeth respectively. (c) MS dispensing unit was giving short delivery of 50 ml per 5 litres. (d) you have continued sale of MS and HSD with W.P.(C) No.14824-26 of 2006 page 8 of 21 the full knowledge that the metering units were delivering short or was showing wrong measure of the quantity and continued to operate the said defective measuring units. From the said report, it is clear that you have committed fraud and/or wrongful gain by overcharging the customers and your such act is not only a breach of the agreement between BPCAL and you but also illegal and violation of various Acts and laws. We further find that you prohibited and interfered in the job of the inspecting team and in fact did not provide facilities to the said inspecting team for carrying out their job of inspection and thereby committed a breach of the agreement.” 10. The letter dated 11th August, 2005 proceeded to state that the Petitioners‟ inactions were forbidden by law and were of such a nature that if permitted, it would defeat the provisions of the law, injure the customers of the BPCL and would be opposed to public policy. Consequently, the dealership was terminated as mentioned hereinbefore. This letter dated 11th August, 2005 was subsequently treated as the show cause notice. 11. The Petitioners‟ version of the incident is contained in their reply dated 12th January 2006 consequent upon the order passed by this Court in terms of which the said letter dated 11th August 2005 was accepted as a show cause notice. The stand of the Petitioner No.1 firm was that an inspection report was signed by Mr. J.P. Meena on 17th June 2005. A W.P.(C) No.14824-26 of 2006 page 9 of 21 calibration carried out on 6th June 2005 indicated that all the pumps were working satisfactorily. It was maintained that on 14th July 2005 the inspection team found the seals to be intact and un-tampered and the dispensing units in proper working order. This is claimed to have happened in the presence of Mr. Naresh Kumar, the technician. 12. The Petitioners claim that when Petitioner No. 3 sought a copy of the inspection report, it was refused. It was alleged that the team compelled Petitioner No.3 to sign certain blank papers stating that “they would prepare the report at leisure and send a copy thereof to us later”. Petitioner No. 3 is claimed to have refused to sign such blank papers/sheets. The Petitioners state that the news of the visit by the vigilance team at the Petitioner‟s premises had spread amongst the association members, around five of whom reached the premises. Some journalists also reached the premises. It is then stated by the Petitioners in their letter dated 12th January, 2006 that “it was apparent from the attitude of the vigilance team that there was a clear attempt to prejudice our business by implicating us in some issue of misconduct as defined by the guidelines. My son informed the members of the association about his apprehensions and they took up the matter with the members of the vigilance team”. The letter proceeds to state that the vigilance team “categorically informed that their attitude and demeanour while carrying out the vigilance check amounts to misconduct and that the association would take up the matter to the highest level”. It is then stated as under: “Apparently, the Vigilance team sensed the futility of carrying forth its unsavory conduct and handed over to my son, a copy of a satisfactory inspection W.P.(C) No.14824-26 of 2006 page 10 of 21 report as well as Pump Maintenance Report signed by Mr. Naresh Kumar, Technician. The members of the Vigilance Team left thereafter.” 13. The Petitioners‟ letter dated 12th January, 2006 also states that one Mr. Shiv Om, Sales Assistant of the BPCL conducted an inspection on 16th July 2005 and gave a satisfactory report. A copy of the said report was enclosed with the reply. It is claimed by the Petitioners that since nothing had gone amiss there was no occasion for them to go to the police and had the Petitioners been called upon to give their version “they would have been more than willing to do so”. It was denied that the news items in the local newspapers were got published by the Petitioners. Since no explanation was sought from them there was no occasion to make statement to the Press. It was pointed out that the complaint was made only 4 days after the alleged incident. It was questioned that if indeed there was an unsavoury incident, “was it not the boundant (sic) duty of the officials of the public sector undertaking to make an immediate report to the police officials?” It is claimed that upon an enquiry it was found that the case has been closed as Mr. Ghatwai had stated that he did not wish any action to be taken in the complaint. As regards the past relationship, it was claimed that since there had not been a single complaint either from any customer or the BPCL as to the Petitioners‟ conduct in business, there was no occasion for loss of trust and that they were within their rights to give a complaint against the conduct of a particular official. It is claimed that the tampering of the seal “was an impossible act” since the seal was put by the BPCL itself and an additional seal by the Weights & Measures Department. A W.P.(C) No.14824-26 of 2006 page 11 of 21 detailed reference was made to the Marketing Discipline Guidelines („MDG‟) in which there were ambiguities, removal of which was sought by the Federation of All India Petroleum Traders („FAIPT‟). It was also pointed out that even assuming that there was tampering of meters or lesser volume or charging of higher price, the MDG did not envisage the penalty of termination of dealership. 14. By a further letter dated 3rd March 2006, soon after the personal hearing, a letter was written to the BPCL by the Petitioners where inter alia it was stated that “in the event any BPCL official is perturbed or disturbed by any averment or allegation on our behalf, we are, still standing by our version, ready and willing to apologise”. It was requested that the penalty of termination was not warranted. 15. The Petitioners on 20th September 2006 filed a compilation of documents in this petition. This included the leaflets in Hindi and English issued by the Haryana Petroleum Dealers Association („HPDA‟) which inter alia referred to the incident that took place in the Petitioners‟ petrol pump at Karnal. The said pamphlet alleged that “BPCL officers are habitual of flouting rules”. It is further demanded that “Enquiry on Arjun Heera, D.S. Bhargava, J.P. Meena, K.G. Ghatwai, Ms. Widhani‟s property and character should be handed over to the CBI for inquiry”. Among the documents filed was a „closure report‟ of the police dated 5th September 2005 which recorded the fact that the officials of the BPCL informed the police that they were not willing to pursue the matter any further. W.P.(C) No.14824-26 of 2006 page 12 of 21 16. In the counter affidavit, it has been pointed out by the BPCL that the letter dated 12th January 2006 was referred to Mr. P.S. Bhargava, one of the members of the inspecting team, for his comments. He replied on 31st January 2006 in which, inter alia, he reiterated that the inspection report signed by the three of them stating that a mob had surrounded them, threatened them, snatched their camera and compelled them to write out a satisfaction report, was correct. He reiterated that “a threatening atmosphere had been created on the site on 14th July 2005 and the inspecting team was not allowed to go out of the site unless they gave the so called satisfaction report”. The counter affidavit pointed out that this letter dated 31st January 2006 of Mr. Bhargava was served on the Petitioners to enable them to reply but they did not do so. Submissions of counsel 17. Mr. Maitri, learned counsel appearing for the Petitioners submitted that the MDG did not provide for such severe penalty as was handed down to the Petitioners. According to him, the maximum penalty action for adulteration of MS/HSD for the first time was a fine of Rs.20,000/- and suspension of sales and supplies of all products for 30 days. For short delivery of products, it was a fine of Rs.10,000/- and suspension of sales for 15 days. It was only on the second time irregularity in the case of adulteration that the penalty of termination was envisaged. As regards the over-charging for the first time incident, a fine of Rs.5,000/- and a suspension of sales for 15 days was envisaged. Mr. Maitri accordingly submitted that the penalty of termination of dealership was disproportionate. The supplies to the Petitioners‟ petrol pump was W.P.(C) No.14824-26 of 2006 page 13 of 21 stopped for nearly five years now and that the Petitioners had suffered enough. He submitted that there was no justification for the impugned order of termination. 18. Mr. Maitri then submitted that without prejudice to the above submissions, the inspection reports, copies of which were given to the Petitioners and enclosed with the petition clearly showed that the inspection team did not find anything amiss. It was submitted that it was on account of the Petitioners not being able to accede to the illegal gratification demanded by the officials of the BPCL that they were being harassed. He relied on the judgment of the Supreme Court in Hindustan Petroleum Corporation Ltd. v. Super Highway Services 2010 STPL (Web) 136 SC in which the Court emphasized that termination of a dealership was of a severe consequence and that the procedure followed must be absolutely fair and just. It was observed that the non-service of notice to the aggrieved person before termination of his dealership agreement also offends the well-established principle that no person should be condemned unheard. It is submitted that despite the orders of this Court, the procedure adopted was neither just nor fair. Mr. Maitri submits that where the machines are entirely maintained by the HPCL the termination of services of the dealer on the ground of tampering of the machines is not fair. He accordingly prayed that the termination order should be set aside. 19. Mr. Sudhir Chandra, learned Senior counsel appearing for the BPCL first submitted that the agreement entered into with the Petitioners had W.P.(C) No.14824-26 of 2006 page 14 of 21 already come to an end on 19th November 2005. The agreement was not renewed. The Petitioner was, therefore, not a dealer anymore and there could be no mandamus issued to execute a fresh dealership agreement with the Petitioner, particularly when on account of the incident of 14th July 2005, the BPCL had lost its confidence and trust in the Petitioner No. 1 and did not wish to renew the dealership agreement. According to the BPCL, the FIR lodged still exists but for some reasons has not been investigated. Mr.Sudhir Chandra disputed the correctness of the closure report which he termed as a collusive document. He submitted that the incident of 14th July 2005 was indeed extraordinary where the inspecting team was surrounded by a mob instigated by the Petitioners; the mob snatched the team‟s camera, papers and the notes of inspection; the members of the inspecting team were threatened, gheraoed and compelled to write out a satisfaction report. He submitted that the BPCL could not be expected in the circumstances to condone the acts and continue the dealership. 20. Mr. Sudhir Chandra submitted that this was a case where the MDG could be departed from since this was an extraordinary circumstance. The version of the Petitioners, as released to the press, was that the BPCL officers had come to the petrol pump to collect bribes and, therefore, this was clearly done to malign and defame BPCL. The pamphlets issued by