IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18.12.2009 CORAM THE HONOURABLE MR. JUSTICE N. KIRUBAKARAN W.P.No.5512 of 2003 Sakthi Enterprises (Rangaiah Chetty Service Station), Thirupathi Road, Thiruthani-631 209, Thiruvallur District, rep.by its partner Mr.E. Anbalagan .. Petitioner Vs. 1. Union of India rep.by Secretary to Government, Ministry of Petroleum, Oil and Natural Gas, New Delhi. 2. IBP Company Ltd., rep.by its General Manager, 10, Mayor VR. Ramanathan Road, Chetpet, Madras-600 031. 3. The Divisional Manager, IBP Company Ltd., 10, Mayor VR, Ramanathan Road, Chetpet, Madras-600 031. .. Respondents The Writ Petition has been filed Under Article 226 of the Constitution of India for issuance of a Writ of Certiorari, to call for the records of the second respondent in REF:CD/MDS/15 dated 12.02.2003, terminating the dealership agreement with the petitioner and quash the same. For Petitioner : Mr.V.R.Shanmuganathan For Respondents: Mr.M.Gopikrishnan Central Government Standing Counsel for R1 Mr.R.Ravi for R2 & R3 https://hcservices.ecourts.gov.in/hcservices/ ORDER The petitioner has challenged the termination of retail dealership agreement. 2. The case of the petitioner is that he is a dealer in the petroleum products of the second respondent and petitioner's predecessor Mr.Kulasekharan entered into dealership agreement with the second respondent on 23.04.1987. The said Kulasekharan was appointed as dealer with effect from 24.09.1978. Thereafter the said proprietary concern was converted into Partnership Firm and is run under in the name of Sakthi Enterprises (Rangaiah Chetty Service Station) till date. 3. The supply of petroleum is governed by Motor Spirit and High Speed Diesel (Prevention of Malpractice in Supply & Distribution) Order, 1998 which has been passed as per the Essential Commodities Act. The sale of petroleum products are governed by Marketing Discipline Guidelines which are enforced by the oil industry to ensure that marketing of petroleum products particularly in Retail are carried on principles of highest business ethics and excellence customer service and customers receive products of the right quality and quantity, dealers follow the correct and safe practices in handling and dispensing the petroleum products with higher customer expectations and to ensure quality of products and service. Marketing Discipline Guidelines have been framed and are being revised to enforce stricter measures of discipline among the leadership network to achieve the said objectives and to prevent malpractices in the sale of petroleum products. The rights and liabilities of the dealership is governed by Marketing Discipline Guidelines issued by the Oil industry where punishment/penalties are prescribed in the guidelines. 4. The petitioner and second respondent are governed by dealership agreement and the dealership agreement was made on 23.04.1987. The responsibilities of the dealer is incorporated in Clause 12 of the agreement and the responsibilities of the company is incorporated in Clause 13. Clause 24 speaks about the violation and breach of agreement would lead to punishments which are mentioned in Clause 24. 5. The petitioner has been getting supply from the second respondent regularly. There was a surprise inspection by the officials of the second respondent on 07.01.2003 and samples were taken and the density test was conducted in the bunk itself and it was found to be below the specification. During inspection, the officers would draw the samples in six alumnium containers. Out of the said samples, two are required to be given to the dealer, two are https://hcservices.ecourts.gov.in/hcservices/ to be retained by the Company and the other two required to be sent to the Lab for further test. 6. From the samples taken on 07.01.2003, the second respondent sent lab samples to Chennai Petroleum Corporation Limited (Formerly Madras Refiners Limited) for test. Based on the result, a show cause notice on 29.01.2003 was issued to the petitioner stating that samples taken on 07.01.2003 were sent to lab for RON test on 10.01.2003 and it was found to be below the specification namely 83 instead of 87. A reply was given by the petitioner on 05.02.2003 and not satisfied with the reply,the second respondent terminated the dealership agreement dated 26.09.1978 by order dated 12.02.2003. The said order is being challenged before this Court. 7. Mr.V.R.Shanmughanathan, learned counsel for the petitioner submitted that on 07.01.2003 the outlet was visited by the officials of the second respondent Company for taking samples and the officials gave a clean chit as the samples satisfied the specification. Subsequently on the same day there was another surprise visit, when the petitioner was absent and some samples were taken in plastic container and those samples were said to have been sent to the lab. Based on the test report petitioner's dealership agreement was terminated. The learned counsel submitted that the second visit was done in the absence of the petitioner and contrary to the guidelines, the samples were taken in the plastic container. Moreover, he submitted that the petitioner is only selling the petroleum products which has been supplied by the second respondent and there is a possibility of adulteration during transportation of petroleum products by the private carriers. If the private carriers indulge in adulteration, consequently the petitioner should not been found fault with. 8. The learned counsel for petitioner further submitted that the test was done in the lab which was not listed in the guidelines and that no notice was given before inspection or about the lab test and no personal hearing was given before passing of the termination order and therefore the impugned order has been passed in violation of the principles of natural justice. 9. Mr.R.Ravi, learned counsel for the second respondent submitted that dealers are governed by "Marketing Discipline Guidelines" as well as dealership agreement. The Marketing Discipline Guidelines are issued in the public interest to see that the general public are supplied standard unadulterated petroleum products and therefore the petroleum companies are making surprise visits of the outlets. The periodical checks are done to see that the quality of the petroleum products is maintained. The learned counsel further submitted that public duty is cast upon the petroleum https://hcservices.ecourts.gov.in/hcservices/ companies to make surprise visit so that the consumers are able to get quality products. 10. With regard to the submission made by the learned counsel for the petitioner, Mr.Ravi replied that there were no two visits as alleged and it was only one inspection by of the officials of the second respondent. Samples were taken from the petitioner's outlet in aluminium containers as per the regulation and not in the plastic containers as alleged by the petitioner. 11. With regard to "RON" Test, Mr.R.Ravi, the learned counsel for the second respondent relied upon " The order Motor Spirit and High Speed Diesel (Regulation of Supply and Distribution and Prevention of Malpractice) order 1998 and especially Rule 5(5). By relying upon the said order, the learned counsel submitted the samples should not only pass the density test but also other Schedule I tests and therefore other requirements should also to be met by the samples of the dealer. Repelling the contention of the petitioner that the lab is where petitioner's samples were tested not mentioned in Schedule III of the order, the learned counsel for respondent replied that the said lab namely Madras Refinery Laboratory, Madras Refineries Limited, Manali, Chennai-600 019 is shown as item 58 in the Schedule III of the order and therefore there is no violation with regard to the choosing of the lab and the lab cannot be stated to be un-approved lab. In nutshell Mr.Ravi submitted that the termination was made after following the due process of law and therefore there was no violation of any kind. 12. A perusal of the records would show that there is no dispute with regard to the surprise visit of the officials of the second respondent on 07.01.2003 to the petitioner's Bunk and taking of samples. Further, the learned counsel for the petitioner submitted that there was two visits by the officials of the second respondent and however there is no proof regarding the same. It it was so, immediately after the visits, the petitioner should have objected two visits. However, no such objection was raised and therefore the said contention is rejected and this Court comes to a conclusion there was only one visit. Secondly, with regard to taking of the samples in the plastic container as contended by the counsel for the petitioner, Retail dealer investigation report dated 07.01.2003 signed by the officials of the second respondent and counter signed by representative of the petitioner would show that the samples were taken in aluminium containers as reflected in page 5 of the said report. The report itself is a proof of taking of samples in the aluminium container and the theory of taking samples in the plastic container put forth by the petitioner is liable to be rejected. 13. It is seen from the records records that the samples were drawn on 7-1-2003; test was conducted on 10.01.2003 and the result https://hcservices.ecourts.gov.in/hcservices/ was reported on 13.1.2003. The specification to be met in the "RON" test is 87 whereas petitioner's sample recorded only 83. The dispute is with regard to the "RON" test. Para 7 of the Reply sent by the petitioner reads as follows: " 7. We with great respect submit, we do not know what "RON" test is, how it is conducted? Etc. Our retail out let is also not provided with any such equipments. Hence how the standard and substandard are calculated is un-understandable" The aforesaid reply to show cause notice would only show that the petitioner pleads ignorance about RON test and the procedures being followed by the oil industries. The petitioner also contended that the samples were not taken in the petitioner's presence and the said contention does not deserve consideration as petitioner's representative who countersigned the report was present and the same is revealed in the investigation report. 14. Regarding the "RON" test, as rightly contended by the learned counsel for the second respondent, it is stated in Clause 5 of the Regulation 5 of the Motor Spirit and High Speed Diesel (Regulation of Supply and Distribution and Prevention of Malpractice) order 1998, which reads as follows:- "The authorised officer shall send the sample of the product taken under sub clause(2) within 10 days to any of the laboratories mentioned in Schedule III appended to this Order or such other laboratory as notified by the Government in the Official Gazette for this purpose, for analysis with a view to checking requirements indicated in Schedule I." In that clause it has been specifically stated the samples are required to be sent to lab mentioned in Schedule 3 of the order for the purpose of analysis to check whether the density and / or other parameters of the products conform to requirements indicated in Schedule I. Schedule I speaks about the RON test which has been described in V (a) which is referred as follows:- "v) Octane Requirements a) Research Octane number, Min 87 87 98 (P:27) A reading of the said order would make it clear that the sample should meet the requirements/specification specified has stated in Clause 5 of Regulation 5. When the order speaks about the said test namely "RON", it is not open to the petitioner to plead ignorance of the same. The said regulation has been issued by the first respondent https://hcservices.ecourts.gov.in/hcservices/ Government exercising powers under Section 3 of the Essential Commodities Act, 1955 (Central Act 10 of 1955). The aforesaid order is binding on the petitioner. In fact he entered into dealership agreement as per the order. Ignorance of law is not an excuse. Therefore the petitioner cannot be allowed to plead ignorance about the order issued by the Ministry of Petroleum and the petitioner is bound by the order . 15. The petitioner's sample failed to meet the specification and therefore it is clear that the products sold by the petitioner Retail outlet were not quality products. Regulations 2 of the order speaks about the malpractice which is as follows:- e) "malpractice" shall include the following acts of omission and commission in respect of motor spirit and high speed diesel: I.adulteration, II.pilferage III.stock variation, IV.unauthorised exchange, V.unauthorised purchase, VI.unauthorised sale VII.Unauthorised possession VIII.Over-charging IX.Sale of off-specification product When the specifications as stated in the order were not met , the petitioner was rightly found to have violated the terms and conditions and as per Clause 24 of the Dealership Agreement, the dealership agreement is liable to be terminated. Based on the report of the lab and after giving an opportunity to the petitioner, the dealership agreement was rightly terminated and therefore the same cannot be found fault with. 16. As far as the contention that there is possibility of adulteration during transportation, Mr.R.Ravi submitted that during delivery of the products, the retailer is required to take samples and if there is suspicion about the quality of the products, the same could be tested and the dealer has not made any such request during delivery of products. Therefore he submitted that the said contention is an after thought to get over the problem and the same is accepted by this court. 17. The learned counsel for the petitioner submitted that an opportunity should have been given before passing the termination order. Based on the lab test, a show cause notice dated 29.1.2003 enclosing the report was issued to the petitioner and reply dated 5.2.2003 was also given by the petitioner. Therefore this Court comes to the conclusion that by giving a show cause notice, https://hcservices.ecourts.gov.in/hcservices/ principles of natural justice have been complied with and therefore there is no question of giving any further opportunity to the petitioner. 18. Clause 1(d) of Chapter VI of the Marketing Discipline Guidelines reads as follows:- "If the sample passes the lab test, including RON in case of MS, sales and supplies of all products, if suspended earlier, will be resumed to the dealer immediately. If the sample is certified to be adulterated, after laboratory test, a show-cause notice should be served on the dealer and explanation of the dealer sought within 7 days of the receipt of the show- cause notice. If the explanation of dealer is not satisfactory, the Company should take action as follows: i)Fine of Rs.1 lakh and suspension of sales and supplies for 45 days in the first instance. ii)Termination in the second instance." As per the said clause only the petitioner was given a show cause notice and since the explanation was not found to be satisfactory, the termination was given. Apart from that, Mr.Ravi, the learned counsel for the second respondent submitted that the dealer was found to be indulged in malpractice for the second time and he produced the file which proved that there was a surprise visit on 15.09.2000 and the sample drawn on the day did not meet specifications as stipulated in Motor Spirit and High Speed Diesel control order 1998. A show cause notice was issued and after receiving the reply, the second respondent took lenient view and passed an order of stoppage of supply for 45 days. Mr.Ravi submitted that usually, the second respondent would not take any step to terminate the dealership, if the dealer is found to be at fault for the first time and only on subsequent instances of malpractice the dealership agreement is being terminated following the procedure. Since it happened for the second time, the second respondent was left with no other option except to terminate the dealership agreement of the petitioner. 19. The termination orders have been passed only in the interest of the public and it is the duty of the petroleum companies to supply quality products through their dealers and it is bounden duty of the companies to verify the quality of the petroleum products sold by the dealers regularly. It is the responsibility of the officials of the petroleum companies to see that adulterated products are not sold by the dealers as it would affect the public. 20. The Hon'ble Apex Court in M.C.Mehta vs. Union of India https://hcservices.ecourts.gov.in/hcservices/ reported in AIR 1998 SC 2963 referred about the white paper published by Government of India which states that 70% of air pollution is contributed by vehicles. In that case certain directions were given for controlling pollution of air. The adulteration of the petroleum product is one of the reasons for air pollution and is not good for environment and for mankind in particular. Apart from that, the adulterated products affect the speed of the vehicles. It is proved that substandard petroleum products would affect the mechanism of the vehicle resulting in more accidents. Adulterated petroleum products is one of the causes for noise pollution also. The Hon'ble Supreme Court in In Re:Noise Pollution with Forum Prevention of Environment & Sound Pollution vs. Union of India and another reported in AIR 2005 SC 3136 declared right to life under Article 21 includes Freedom from noise pollution. 21. Therefore the respondent's duty assumes more important to check the quality of the petroleum products. It is common knowledge that more vehicles are added on road every day in our country and accidents are raising alarmingly due to speed driving, drunken driving, violation of road rules etc. The adulterated products would further compound the problems . Therefore, in the interest of the public, the dealership of the petitioner who is found to be selling adulterated products has to be terminated. The respondent rightly terminated the dealership agreement of the petitioner and therefore, the writ petition is dismissed. No order as to costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ssj To 1. The Secretary to Government,Union of India Ministry of Petroleum, Oil and Natural Gas, New Delhi. 2. The General Manager,IBP Company Ltd., 10, Mayor VR. Ramanathan Road, Chetpet, Madras-600 031. https://hcservices.ecourts.gov.in/hcservices/ 3. The Divisional Manager, IBP Company Ltd., 10, Mayor VR, Ramanathan Road, Chetpet, Madras-600 031. +1cc to Mr.VR Shanmuganathan, Advocate Sr 70149 +1cc to Mr.R.Ravi, Advocate Sr 69610 +1cc to Mr.M.Gopikrishnan,CGSC, Sr 69589 PA(CO) km/19.10. W.P.No.5512 of 2003 https://hcservices.ecourts.gov.in/hcservices/