IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.16808 of 2008 M/S ARA INDANE VYAPAR MANDAL Sahyog Samitiltd. Devi Asthan, Ara,Bhojpur through its Secretary, Subodh Kumar son of late Umesh Chandra Verma, resident of Devi Asthan Ara, p.S. Town, District- Bhojpur at Ara. Versus 1. INDIAN OIL CORPORATION LTD. through its General Manager, Bihar State Office, 5th Floor, Loknayak Bhawan, Patna,Bihar. 2. The Area Manager (Marketing Division), Indane Area Office, Indian Oil Corporation Limited, Exhibition Road, Shahi Bhawan,Patna-1. 3. The Area Manager, (L.P.G.), Indane Area Office, Indian Oil Corporation Limited, Exhibition Road,Patna. ----------- For the Peittioner : Mr. Gajendra Pratap Singh Mr. Ashwani Kumar Singh and Mr. Pankaj Kr. Singh For IOC : Mr. Anil Jha. 3. 14.05.2009 Heard. Petitioner is a Co-operative of consumers and is a retail dealer for LPG Cylinder of the respondent- Indian Oil Corporation at Devi Asthan Ara in the district of Bhojpur. The present writ petition is filed challenging the order dated 5.7.2007, as contained in Annexure 3, of the Area manager of the Indian Oil Corporation by which penalty totalling to Rs. 7,19,053/- has been imposed on two counts, first, alleged diversion of domestic cylinders to non-domestic use for which the penalty is Rs. 6,50,403/- and the second is with regard to shortage of Corporation’s equipment entrusted with the distributors, which is 22 Cylinder and 5 Pressure Regulators, for which the total penalty is Rs.38,650/-. These are in addition to the fine of Rs. 20,000/- and Rs. 10,000/- for the two charges. The total of penalty is Rs. 7,19,053/-. Indian Oil Corporation has app[eared and filed a counter affidavit. Petitioner does not pray for filing a rejoinder. With the consent of the parties, this writ 2 petition is being disposed of at this stage itself. The petitioner- Cooperative was appointed as a dealer in the year 2006. It appears that on 19.2.2007 aNd 20.2.2007, an inspection was conducted of the business premises of the petitioner by the District Administration, Bhojpur and a representative of the Corporation was also called. On verification of stock register ,it was found that there was a short of 22 cylinders and 5 Pressure Regulators. The authority of Indian Oil Corporation then started verifying cash memos and delivery receipts. A detail Refill Audit Report was then drawn up on verification of the cash memo and delivery slips. This based on comparing the cash memos and the delivery receipts. Those delivery slips in respect of 1020 cylinders could not be accounted for. It is not in dispute that cash memo in respect of all these were duly available. Based on these inspection report, petitioner was issued a show cause under letter dated 10.4.2007, as contained in Annexure 1. There were two charges, one with regard to alleged diversion of 1020 Cylinders and second shortage of 22 Cylinders and 5 Pressure Regulators. Petitioner filed his show cause on 4.5.2007, as contained in Annexure 2. With regard to first, he stated that there was no case of diversion. Only delivery receipts (Adhkati) could not be produced. Delivery receipts are collected by the delivery men from the consumers and from time to time deposited. It is a part of the cash memo drawn up and carbon copies of cash memos were available for every delivery. With regard to 22 Cylinders and 5 pressure Regulators , it was stated that in course of business , while issuing and receiving cylinders, this point was 3 detected and was recorded in the proceedings dated 12.2.2007 of the Corporation and accordingly an information was thereafter lodged with the local police station. Petitioner’s explanation was not accepted and it was held that diversion of 1020 cylinders stood established. . Similarly missing cylinders and pressure regulators were taken to be established without account. Accordingly for 1020 cylinders the difference of the price of commercial and domestic use value was taken out and a demand of Rs. 6,50,403/- was created and similarly it was loss of 22 cylinders and 5 pressure regulators, the cost was calculated at Rs. 38,650/-. Petitioner does not contest so far as second charge is concerned but so far as first charge is concerned, Mr. Gajendra Singh, learned counsel for the petitioner submits that there is no report at all to justify the allegation or the finding that there was any diversion of cylinders from domestic to non domestic. From the report drawn up, on the date of inspection itself, all that found was that delivery receipts in respect of 1020 cylinders were not found . There was a cash memo reconciliation difference. Even , at the first instance, there was no iota of allegation that domestic cylinders were delivered by the petitioner to non domestic consumers. In the counter affidavit , the inspection report is there . That also does not show any such factual allegation. Before a penalty can be imposed, the facts have to be clearly ascertained. Penalty in such matter is of quasi criminal proceeding. It has serious repercussion on a person. In absence of any allegation of diversion in business, penalty for diversion cannot be 4 sustained. Even we are to consider the show cause of the petitioner, it has not been dealt with in the order. The petitioner clearly states that for each and every cash memo, carbon copy thereof was available. That was not considered. Merely because of delivery receipts were not accounted for, a presumption of diversion has been raised. Such a presumption is neither permitted nor sanctified by the Marketing Discipline Guidelines. Even in one case in which the Corporation found that the petitioner had delivered domestic cylinders to non domestic consumers, the case would have been otherwise but there is no such averment. I may mention here that pursuant to this inspection, which, as noted above, was conducted primarily by the District Authority, the District Authority then verified the credential of a person in respect of whom delivery receipts were not made available. The entire report is contained in Annexure 6 and was marked to Indian Oil Corporation also. Out of thousand such cases, at random others were enquired on basis of carbon copy of the cash memo. The report is that they were found to be bona fide domestic consumers. The Corporation has not taken note of such a report. In that view of the matter the entire penalty on the first charge cannot sustain. As the petitioner admits that there was, in fact, physical shortage of 22 cylinders and 4 pressure regulators and the amount thereof has already been debited to his account on 13.7.2007 by the Corporation by issuance of debit note, I do not wish to go into the validity of that imposition of fine in respect of 22 cylinders and 5 pressure regulators. 5 In the result, the writ petition is allowed. So far as penalty/fine in respect of the first charge is concerned, it is held to be not sustainable in fact and in law. So far as second charge is concerned, the same is not interfered with. Singh/- (Navaniti Prasad Singh)