* THE HON’BLE Ms. JUSTICE G. ROHINI + WRIT PETITION NO.25159 OF 2003 % 18/04/2009 # M/s.M.Satyanarayana Murthy & Co, rep. by Mg.Partner M.S.Murthy … Petitioners Vs. $ 1 Indian Oil Corporation Limited, Marketing Division, Represented by Senior Divisional Retail Sales Manager,Visakhapatnam Divisional Office, Dwaraka Nagar,Visakhapatnam and 3 others. .. Respondents < Gist > Head Note: ! Counsel for the petitioner : Sri P.Kamalakar ^ Counsel for the respondents : Sri R.Raghunandan Cases referred : IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) SATURDAY, THE EIGHTEENTH DAY OF APRIL TWO THOUSAND AND NINE PRESENT THE HON'BLE MS JUSTICE G.ROHINI WRIT PETITION NO : 25159 of 2003 Between: M/s.M.Satyanarayana Murthy & Co., Represented by Managing Partner, M.S.Murthy, Srikakulam, ..... PETITIONER AND 1 Indian Oil Corporation Limited, Marketing Division, Represented by Senior Divisional Retail Sales Manager, Visakhapatnam Divisional Office, Dwaraka Nagar, Visakhapatnam. 2 Sales Officer (Retail), Indian Oil Corporation Limited, Marketing Division, Visakhapatnam Divisional Office, Dwaraka Nagar, Visakhapatnam. 3 Anti Adulteration Cell, Southern Region, 678, Anna Salai, Teynampet, Chennai-600018. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to to issue a Writ, in the nature of a Writ of Mandamus or any other appropriate Writ, direction or order declaring the Order Ref: VR/458, dated 24-11-2003 passed by the 1st respondent as illegal and void; and pass Counsel for the Petitioner:MR.P.KAMLAKAR Counsel for the Respondent No.: MR.R.RAGHUNANDAN The Court made the following : THE HON’BLE MS JUSTICE G.ROHINI W.P.NO.25159 of 2003 ORDER The petitioner herein being the authorized dealer of the 1st respondent-Indian Oil Corporation Limited and possessing a Form-B licence under the provisions of the A.P. Petroleum Products Licence and Regulation of Supply Order,1980 has been running a retail outlet at Srikakulam town. This writ petition is filed seeking a declaration that the order dated.24.11.2003 passed by the 1st respondent-corporation suspending the sales and supplies of all products by the petitioner for a period of 30 days w.e.f. 27-11-2003 to 26-12-2003 apart from imposing a fine of Rs.20,000/- on the ground of alleged adulteration of petroleum products at the petitioner’s retail outlet as arbitrary and illegal. The facts, in brief, are as under:- On 17-09-2003 the petitioner’s outlet was supplied 12000 liters of motor spirit by the 1st respondent-Corporation from Visakha Terminal through a tanker covered by invoice No.756670 with density 0.7216. Before unloading the stock, necessary density test was conducted by the petitioner and the density was found as 0.7219 and the same was recorded in the density register maintained by the petitioner. Thereafter the stock was unloaded into the underground tank and the density of the stock in the underground was found to be 0.7222 and the same was also recorded in the density register. At about 7.30 P.M on 17-09-2003 the Anti Adulteration Cell Officer, Southern Region, Chennai inspected the petitioner’s outlet and took samples of MS & HSD after preparing an inspection report. Thereafter by letter dated.11-10-2003 while enclosing the test reports of the samples drawn from the petitioner’s retail outlet, the 1st respondent called upon the petitioner to offer its explanation within seven days as to why the RON Test carried out on MS sample did not meet the specifications. The test reports enclosed revealed that though the density of the samples met the specifications, the Research Octane Number (RON) was found to be 84.6 as against the required minimum of 89. On the same day i.e., 11-10-2003 the Sales Officer (Retail) of IOC visited the petitioner’s retail outlet and conducted another inspection. Though no irregularity was found, the Sales Officer (Retail) by letter dated.11.10.2003 directed stoppage of sales of MS and HSD in the petitioner’s outlet. Aggrieved by the same, the petitioner filed W.P.No.21571 of 2003. The said writ petition was allowed by this Court by order dated.15.10.2003 and the impugned order dated.11-10-2003 was set aside. In response to the show cause notice dated.11-10-2003 the petitioner submitted its explanation dated.10.11.2003 stating that there was no equipment available with any of the dealers to test the RON and therefore the petitioner cannot be made responsible for the alleged failure to meet the RON specifications. However the respondent while observing that the explanation offered by the petitioner was not acceptable, passed the order dated.24-11-2003 stating that as the petitioner had not retained the sample of product supplied to it by the transporter at the time of delivery of the product, the Corporation was forced to draw an adverse inference that the product was adulterated at the petitioner’s outlet and therefore it was decided to take penal action in line with the Marketing Discipline Guidelies,2001 for the first offence as under:_ 1. Suspension of sales and supplies of all products for a period of 30 days from 27-11-2003 to 26-11-2003. 2. Fine of Rs.20,000/- The said order dated.24-11-2003 is under challenge in this writ petition contending inter alia that the impugned order imposing penalty is arbitrary, illegal and in violation of principles of natural justice apart from being in contravention of the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order,1998 ( for short “Control Order 1998”) as well as the Marketing Discipline Guidelines,2001. It is also contended that the Corporation failed to follow the procedure prescribed in the Marketing Discipline Guidelines-2001 for collection and testing of samples from the petitioner’s retail outlet. Though a further contention was raised on behalf of the petitioner that the Anti Adulteration Cell which is not duly authorized by the Central Government as required under Clause.4 of the Control Order, 1998 has no power, authority or jurisdiction to search and take the samples, the said ground has not been pressed in view of the material placed before this Court by the respondents to show that the Anti Adulteration Cell was granted such authorization by notification dated.17-01-2002. So far as the merits of the case are concerned in the counter- affidavit filed on behalf of the Corporation it is explained that one of the important characteristics of motor spirit is its RON which measures as how resistant the motor spirit is to premature detonation and that an Octane rating of 88 is ideal specification for motor spirit for anti knocking performance of fuel in an engine. Since the motor spirit collected from the petitioner’s outlet failed in RON test, the irregularity was clearly established. It is further stated that as per the Marketing Guidelines 2001 it is mandatory on the part of the petitioner to retain the truck retention sample as soon as the supplies are received from the Terminal and since the petitioner had not retained the tank truck sample it amounts to violation of the Marketing Discipline Guidelines,2001 and therefore the penal action was rightly initiated. It is further explained that since RON testing equipment costs about Rs.70 to 80 lakhs per unit, it is not possible to provide the equipment to each and every dealer and professionally qualified officers at the refinery location of the Oil Companies conduct the said test and as per the specification the RON rating should be 88. I have heard the learned counsel for both the parties and perused the material on record. A perusal of the impugned order shows that it was concluded by the 1st respondent that the M.S at the petitioner’s retail outlet was adulterated on the ground that RON test of the said product did not meet the specifications. It was further added in the impugned order that since the petitioner failed to retain the sample of product supplied to it by the transporter at the time of delivery, the Corporation was forced to draw an adverse inference that the product was adulterated. The petitioner could not dispute the fact that the sample of the product supplied by the transporter on 17-09-2003 (tank lorry sample) was not retained by it. Therefore, the laboratory report that RON test of the product failed to meet the specifications stood unrebutted. However, Sri E.Manohar, the learned Senior Counsel appearing for the petitioner contended that even assuming that RON test did not meet the specifications the same does not amount to adulteration as defined under Clause.2(a) of the Control Order,1998. The learned Senior Counsel while relying upon a decision of this Court in W.P.No.9934 of 2001 dated.18-09-2008 further contended that the definition of “adulteration” has to receive strict consideration. It is also contended that the adverse inference drawn by the Corporation that the product was adulterated is unsustainable since the Corporation failed to draw the samples as provided in Annexure-III of the Marketing Discipline Guidelines,2001. It is to be noted that the Marketing Discipline Guidelines, 2001 were formulated by the Ministry of Petroleum and Natural Gas, Government of India and Annexure-III of the said Guidelines specified the procedure to be followed for taking samples and sending the same for testing. The details of penal action for major and minor irregularities have been provided in Annexure-IV. The relevant clause under Annexure-III with regard to drawal of the samples runs as under:- FOR MS: Sales Officer or Representative from Division/Territory/Regional Office should collect six samples of 1 litre each from each tank of the Retail Outlet. Two samples are to be retained by the Dealer, two samples at division/territory/Regional Office and two samples sent to the nearest Oil Industry Marketing Laboratory for testing. It would be the responsibility of the sales Officer or Representative from the Division/Territory/Regional Office to ensure that the following samples are collected and sent to the nearest Oil Industry Marketing Laboratory. Wherever the Laboratory is not equipped with the testing of Octane Number, then the second sample of each of the following should be sent only to the nearest lab where CFR engine is available for Octane Number test: (i) Two samples drawn by him (2 x 1 litre). (ii) Two Tank Lorry samples of last supply which were drawn and retained by the Dealer (this should pertain to the tank which is connected to the Dispensing Unit from which the samples were taken by the Sales Officer or Representative from the Division/Territory/Regional Office.) (iii) Two Reference samples of the supply location – These samples should be those which are from the same tank from which the supply is made to the Dealer and tank reference of which is mentioned on the delivery documents covering the supply to the Retail Outlets. All the above samples should reach the respective laboratories for testing within 10 days of the collection of the samples.” It is specifically alleged by the petitioner that the Corporation failed to send the reference samples of supply point at Visakhapatnam for analysis. It is also contended that the penal proceedings against the petitioner can be initiated only when it is established that there was variation in the sample drawn at the petitioner’s retail outlet when compared to the reference sample of the Indian Oil Corporation (IOC) drawn from the supply location. The allegation that the Corporation did not send the reference samples of the supply location has not been denied by the Corporation in its counter-affidavit. In view of the said lapses on the part of the Corporation, the question is whether it is permissible for the Corporation to draw an adverse inference against the petitioner on the ground that it had failed to retain the “tank lorry sample” . In this context it is necessary to refer to the definition of “adulteration” under clause.2(a) of the Control Order,1998. “2(a). “adulteration” means the introduction of any foreign substance into motor spirit/high speed diesel illegally or unauthorisedly with the result that the product does not conform to the requirements and specification of the product indicated in Schedule.1. Having considered the scope and object of the said definition, this Court in W.P.No.9934 of 2001 dated.18-09-2008 held as under:- “There is no clause warranting an inference that whenever the requirements/specifications failed to conform to the standards of petroleum products in Schedule I, that product is adulterated. A petroleum product can be said to be adulterated only when there is introduction of any foreign substance into petroleum product, which again results in the product not conforming to the requirements and specifications in Schedule.I. The definition contains the word “means”. The definition has to be interpreted strictly and it is not possible to expand the purport or scope of the definition. It is not the case of the petroleum company that the petitioner by introducing foreign substance offered petrol for sale, which does not conform to the requirements and specifications. It is only inferentially based on the value of RON (when the specification is 88, RON was found 71.7) that the Territory Manager came to the conclusion that MS is adulterated. In that view of the matter the sampling and testing assume great importance.” As held by this Court in the above decision, the specific provisions under the Control Order 1998 as well as the Marketing Discipline Guidelines,2001 with regard to drawing the samples are mandatory and in case of violation of any such provision, the Corporation shall be restrained from taking penal action against the dealer. In the instant case since the Corporation failed to comply with the provisions of the Marketing Discipline Guidelines 2001 which mandated that the samples drawn from the supply location shall also be sent for analysis along with the samples drawn from the petitioner’s retail outlet, I am of the opinion that it is not open to the Corporation to draw an adverse inference that the product was adulterated merely on the ground that the petitioner failed to retain the tank lorry sample. It is also relevant to note that no show cause notice was issued to the petitioner proposing to impose the penalty on the ground that MS sample drawn from the petitioner’s outlet did not meet the stipulated specification for RON. Hence on that ground also the impugned order imposing penalty is liable to be set aside being in violation of fundamental principles of natural justice. For the aforesaid reasons, the impugned order is declared as arbitrary, illegal and the same is hereby set aside. However, since the fact remains that the petitioner failed to retain the tank truck sample, it is left open to the Corporation to take appropriate action in accordance with law so far as the said lapse is concerned after giving an opportunity to the petitioner to make his representation against the proposed action. Accordingly the writ petition is disposed of. No costs. ______________ G. ROHINI, J. Dt.18.04.2009 LR copy to be marked: YES (B/O) *TSNR