THE HON’BLE SRI JUSTICE NOOTY RAMAMOHANA RAO WP No. 20350 of 2010 --- ORDER: This writ petition has been instituted by a dealer of the 1st respondent – Hindustan Petroleum Corporation Limited (for short `Oil Company’) - challenging the validity of the orders passed on 12.8.2010 by the Chief Regional Manager (Retail) terminating the Dealership Agreement of the petitioner dated 1.2.1976. The most crucial facts needed to be noticed are these: A Dealership Agreement has been entered into by and between the petitioner and the Oil Company on 1.2.1976 for retail sale and supply of petrol, diesel, motor oil, grease and other petroleum products to be supplied by the Oil Company. The infrastructural equipment for running the retail outlet is required to be provided by the petitioner as per the directions and instructions of the Oil Company. In terms of Clause (13) of the Dealership Agreement, the dispensing machinery was required to be installed by the Oil Company at its own expense. In terms of Clause (14) of the said agreement, it is the Oil Company, which would be maintaining the dispensing units and keep them in good working condition. Similarly, the District Inspector of Legal Metrology (Weights and Measures) would inspect the equipment and issue certificate regarding the working condition of the said outlet. Thereafter, seals would be applied by the Inspector of Legal Metrology. On 8.10.2009, the District Inspector of Legal Metrology inspected the petitioner’s outfit and certified that the outfit was working in proper condition and thereafter he sealed the equipment. On 8.10.2009, the Authorised Agent of the 1st respondent – Oil Company also visited the petrol pump for undertaking the maintenance work and submitted his report that the pumps were in sealed condition and they are working properly. On 19.10.2009, the Field Officer of the Oil Company inspected the unit and filed his report confirming that the seals are in tact and that the pumps are in good working condition. However, there was inspection on 24.11.2009 carried out at 11.30 AM by a Committee, and finding some discrepancies that the pumps were delivering 25 ml excess for every five (5) litres, verified the equipment and reported that the gear of the equipment was having 39 numbers of teeth as against the standard of 38 numbers of teeth and hence seized the dispensing unit. Inspection Report dated 24.11.2009 was furnished to the petitioner. A show-cause notice dated 8.12.2009 was issued thereafter for the irregularity noticed. The writ petitioner submitted a detailed explanation on 15.12.2009 denying the allegations and submitted that no retail outlet dealer would install a gear which would ultimately deliver excess petroleum/diesel/oil for every five (5) litres as that would be causing directly loss to the retail outlet dealer only and to the benefit of the consumers. If a retail outlet dealer seeks to take advantage by tampering with the equipment, he would seek to derive advantage for himself. It will be against human conduct, for the purpose of conferring a benefit on the consumer, the individual retail outlet dealer would have attempted to tamper with the equipment installed by the oil company. It is submitted that without proper consideration being bestowed on the explanation offered by the petitioner, orders were passed on 12.8.2010 terminating the dealership in a mechanical fashion and that gave rise to the present writ petition. The 1st respondent Oil Company has filed a detailed counter affidavit in the matter. Several objections have been raised including the objection relating to the maintainability of the writ petition, inasmuch as the enforcement of contractual obligations cannot be secured in a proceeding under Article 226 of the Constitution of India. It is asserted that a team of four officers have carried out the inspection of the petitioner’s retail outlet on 24.11.2009 and they found that the dispensing unit is delivering 25 ml excess for every five (5) litres. Upon further investigation carried out by the team, it is realized that the lever of the dispenser had extra play. After duly obtaining the permission of the Weights and Measures department, the sales put up by the said department were broken and the metering unit was opened and the inspection team has found that the gear was having two layers of teeth i.e., one spurious gear having 39 teeth was found fitted on the metering assembly in addition to a standard gear having 38 teeth. The equipment is required to have only one gear of 38 teeth. The inspection was in fact carried out in the presence of the representatives of the retail outlet dealer. It is therefore clear that an additional gear has been got installed over the gear which was already installed. This act of the dealer amounts to tampering with the dispensing unit and for such misdemeanor, the termination of the dealership agreement is a perfectly legitimate action. The 1st respondent – Oil Company cannot countenance any illegal fittings made to the equipment with or without tampering the seals and such additional fittings could not have been undertaken without the knowledge of the dealer or his representatives and therefore for the presence of the foreign gear with 39 teeth in the equipment, the retail outlet dealer himself is responsible. Learned Standing Counsel for the Oil Company Sri T.Srinivas, has placed reliance upon the judgment rendered by me earlier in WP No. 26180 of 2005, dated 10.7.2009, holding that contractual obligations cannot be got enforced through a proceeding under Article 226 of the Constitution of India. Learned counsel has also placed reliance upon the judgment reported in S.Suresh v. Indian Oil Corporation Limited[1] in support of his plea. Per contra, Sri Challa Gunaranjan, learned counsel has placed reliance upon judgment rendered by a learned single Judge in WP No. 20302 of 2010, dated 14.3.2011, which was confirmed on merits by a Division Bench in WA No. 318 of 2011. Presence of a spurious gear having 39 teeth in the equipment, got installed by the 1st respondent – Oil Company, is a serious act of misfesance. But, however, before any liability could be fastened on to the petitioner in that regard, it must be established that he could gain unauthorized access to the equipment and then tamper with it, while simultaneously maintaining the seals in tact. The facts are not in dispute in this case. The equipment including the petrol/diesel/oil dispensing units have been inspected not only by the District Inspector of the Legal Metrology, Department of Weights and Measures, but also by the officials of the 1st respondent – Oil Company, at regular periodicity. It is the District Inspector of Legal Metrology who has sealed the equipment after his verification found that there is nothing wrong with the unit. As was already noticed supra, on the very same day viz., 8.10.2009, the Authorised Agent of the Oil Company has visited the retail outlet of the petitioner for attending to the maintenance work and he has drawn his report that the petrol pump dispensers were in sealed condition and were also in good working order. On 19.10.2009, the Field Officer of the Oil Company inspected the outlet and he also submitted a similar report. It is only on 24.11.2009 that the team of officials of the 1st respondent – Oil Company who upon breaking open the seals put by the District Inspector of Metrology, which are not alleged to have been tampered with have noticed the presence of an unauthorized gear having 39 teeth placed over and above the authorized gear having 38 teeth. What all logically can follow therefrom is that a foreign gear has found its entry into the sealed equipment. No material much less a credible one at that was shown by the respondent, to disclose any unauthorized access to the equipment by the petitioner. This apart, if the petitioner intended to remove the gear with 38 number of teeth, and insert in its place another one with 39 teeth, one can possibly infer that an attempt to tamper with the equipment has been made. What was the effect of putting one gear over the other, in the operation of the dispenser, could not be explained even by the investigating and inspecting team of officials of the Oil Company. On the other hand, it is their finding that excess of 25 ml for every five (5) litres dispensed with by the equipment was taking place. This is where the respondent – Oil Company ought to have concentrated more to rule out the possibility of any error at the time of installation of the equipment by the supplier. Normal human conduct would be prompting one to derive undue advantage for himself. It is hard to believe that a retail outlet dealer would be tinkering or tampering with the equipment in such a manner as to cause benefit to a third party consumer by delivering him 25 ml in excess of every five (5) litres of petrol or diesel supplied by him. To the extent of such excess delivery effected, it is the retail dealer who will be suffering the corresponding loss of revenue. Therefore, the respondent – Oil Company could have resorted to a more realistic and rationale investigation for the presence of the additional gear over and above the one which was already installed in the equipment. No attempt has been made to assess as to the possible impact of this. In the absence of any such material, I am of the opinion that the conclusion drawn by the 1st respondent – company, that it is the writ petitioner who is responsible for the foreign gear, is an unsustainable one. An arbitrary decision, simply put, is one which lacks a reasonably sustainable basis. If the material available on record, does not necessarily lead to the conclusion that the tampering and tinkering has taken place at the hands of the writ petitioner, it will be totally unjust to penalize himself. It is a fundamental principle of law that no innocent person should be penalized, for no fault of his. That would be contrary to cannons of justice. In the absence of linkage of the presence of the additional gear with 39 teeth in the equipment at the premises of the retail outlet run by the petitioner to him, it will not be safe to infer that he is guilty of tampering with the equipment. If there is no reasonable substratum to a conclusion that the petitioner is guilty of tampering with the equipment, no adverse action of termination of his dealership agreement could have been drawn against him. The petitioner therefore could not have been faulted unnecessarily. Further, matters arising out of contracts entered into by public institutions or matters arising there out of are not totally outside the area of scrutiny for judicial review purposes. In an appropriate case, a writ petition can be maintained in matters relating to contracts entered into by and between the State and its citizens. A Division Bench of this court, which decided Writ Appeal No. 318 of 2011, on 21.7.2011, speaking through Justice Goda Raghuram, has set out the relevant principle, in crystal clear terms as under: “…… In the circumstances, if the jurisdiction of this Court extends to examining the vitality of a conduct under a contract entered into by a public authority, such jurisdiction cannot be excluded either by legislation or by a contract including by an arbitration clause. No binding authority has been cited before us which unequivocally elucidates a principle that examination of non-statutory contracts involving disputes arising between the parties to a contract, where the State or an instrumentality of the State is a party, is beyond the jurisdiction of this Court and entertainment of such disputes is excluded from the ambit of the power of judicial review, under Article 226 of the Constitution of India. In fact, after a fairly comprehensive analysis of several precedents including the judgment i n ABL International Ltd and Anr. V. Export Credit Guarantee Corporation of India Ltd. And Ors [ (2004) 3 SCC 553] the Supreme Court in Noble Resources Ltd V. State of Orissa (AIR 2007 SC 11) concluded that the contractual matters are not beyond the realm of judicial review. Its application may however be limited and this statement of principle was recorded in the context of non-statutory contracts of public authorities; since a statutory contract in any case and beyond the disputation is within the public law domain, of judicial scrutiny. The several precedents of the Supreme Court on the area of availability of judicial review on contracts of public authorities; ….” Bound, as I am, both by the weight of principle and by precedent, and that too, in exactly the same factual scenario, I have no hesitation to reject the contention of Sri T.Srinivas that this writ petition is not maintainable. In view of these findings, I have no hesitation to hold that the impugned order is not sustainable and it has to be set aside. The writ petition is accordingly allowed. But, however, without costs. Dt : 14.10.2011 Knk -------------------------------------- JUSTICE N.RAMAMOHANA RAO [1] 2007(3) ALD 243