CIVIL WRIT JURISDICTION CASE No.3290 OF 2010 In the matter of an application under Article 226 of the Constitution of India. -------- M/S KAIMUR AUTOMOBILES, Bhabhua Kudra Road, Kukuradh, District-Kaimur, Bihar through its Proprietor Barmeshwar Prasad Gond ------------Petitioner Versus 1. The Union of India 2. Indian Oil Corporation Ltd., Sadiq Nagar, J.B.Tito Marg, New Delhi- 110049 3. The Director (HR), Indian Oil Corporation Ltd. Sadiq Nagar, J.B.Tito Marg, New Delhi-110049 4. Senior Divisional Retail Sales Manager, Patna Divisional Office, 3A Maurya Lok Complex, Dak Bunglow Road, Patna-800001 (Bihar) 5. The General Manager, Indian Oil Corporation Limited (Marketing Division), Bihar State Office, Lok Nayak Jaiprakash Bhawan (5th Floor), Dakbunglow Chowk, Patna-800001 ------------Respondents -------- For The Petitioner : Mr. Binod Kumar Singh, Advocate For The Resp.2 to 5 :M/s. Kalidas Chatterji, Anil kr. Sinha and Amlesh Kumar Verma, Advocates For Union of India: Ms. Kalpana, Advocate. P R E S E N T THE HON'BLE MR. JUSTICE RAMESH KUMAR DATTA R.K.Datta, J. Heard learned counsel for the petitioner, learned counsel for the respondent-Indian Oil Corporation and learned counsel for the Union of India. 2. The petitioner seeks quashing of the order dated 14.1.2010 passed by the Director (HR), Indian Oil Corporation Limited by which the appeal of the petitioner has been dismissed and the order dated 26.2.2009 passed by the General Manager, Indian Oil Corporation 2 Limited (Marketing Division) Bihar State Office, Patna, has been affirmed by which the dealership of the petitioner has been terminated with immediate effect under the terms of Clause 3 and Clause 9 (b) of Appendix-I of the Marketing Discipline Guidelines, 2005. 3. The petitioner which is a proprietorship firm, is a dealer of retail outlet for sale of Motor Spirit (MS) and High Speed Diesel (HSD) of the Indian Oil Corporation since the year 1995. On 13.12.2006 the retail outlet was inspected by M/s. SGS India Pvt. Ltd and sample of HSD was drawn from the distribution nozzle and on analysis the said sample was found positive, i.e., failed in the Marker Test meaning thereby that it was adulterated with Kerosene. Two days later on 15.12.2006, an inspection was carried out by Mr. Alok Amitabh, P.O. (RS), Ara in the course of which he found that the stock of MS was 1870 liters above the permissible limit and of HSD was 2551 liters above the permissible limit. He also found that there was no Totaliser seal in both the HSD dispensing units(DU) and the wire of the Totaliser seal of MS dispensing unit was found to be discontinuous and entwined at one place. On the basis of the said finding he directed the petitioner to stop sale from the R.O. immediately and give an explanation for the irregularities mentioned within seven days. It was also noted in the letter of show cause that the Inspecting Officer had asked for handle to operate the HSD DU which was not provided by the petitioner for handle operation of the diesel. It was further mentioned in the said letter that the petitioner claimed and showed that the dispensing unit was not working but he never brought it to the notice of the said Officer earlier. 3 Both the inspection report and the show cause notice dated 15.12.2006 were duly received and signed by the proprietor of the petitioner-firm. 4. Thereafter it is alleged by the respondent-Corporation that on the next date, i.e., 16.12.2006 the said Officer again visited the retail outlet for drawing out the samples and again on 17.12.2006 for the same purpose but the sample could not be drawn on both the occasions as the dealer did not turn up at the R.O. despite intimation by the Corporation. The petitioner sent its explanation on 22.12.2006 stating that the tank being 12 years old due to iron rusting coupled with mud and water, the marker test was found positive. It was further stated that the dip did not match with the stock on account of the tank being very old and as a result of which the stock volume was found beyond permissible limit. It was also stated that the Totaliser could not be sealed since IOC foreman was not available after the sealing by the Weights and Measures Department. 5. The explanation submitted by the petitioner was not found acceptable by the authorities of the respondent Corporation and, accordingly, a show cause notice dated 12.1.2007 was issued, which was replied by the petitioner on 24.1.2007, in which he reiterated the points stated in the earlier explanation and also sought to justify the allegation regarding refusal to show up for the drawing of sample stating that on account of illness of his wife he had gone firstly to Bhabua and thereafter to Varanasi and so he was not present on 16.12.2006 & 17.12.2006. On a consideration of the explanation and reply to the show cause the authorities of the Corporation by order dated 26.2.2009 4 terminated the dealership of the petitioner in terms of Clause 3 and Clause 9(b) of Appendix 1 of Marketing Discipline Guidelines. Aggrieved by the same the petitioner filed an appeal but the same was also rejected by the impugned order dated 14.1.2010 of the Director (HR) of the Corporation holding that the action of termination of dealership of the petitioner by the Corporation is in order. 6. Learned counsel for the petitioner has made various submissions on several aspects of the matter but since the order of termination of dealership was only on two grounds, namely, totaliser seals of MS and HSD dispensing units were found tampered and there was variation of stock of MS and HSD units, the consideration of the present writ petition is confined to the same. 7. Regarding the tampering with the totaliser seals it is urged by learned counsel for the petitioner that in the inspection held on 13.12.2006 by M/s. SGS India Private Limited it did not find any problem with the HSD dispensing unit. Learned counsel, however, does not challenge the fact that the seals of all the three dispensing units were not in order but sought to rely upon the fact that the petitioner had deposited an amount of Rs.2660/- on 16.5.2006 for sealing of totaliser seal. The slip has been annexed as Annexure-8, on the back of which there is a remark that on 24.5.2006 the seal may be done in the presence of the fitter of the Company. The said date 24.5.2006 also appears to have been cancelled out and above it 14.6.2006 has been mentioned. It is alleged by learned counsel that since the foreman/mechanic of the Indian Oil Corporation did not turn up, for the said reason the work of 5 sealing the totaliser unit could not be done by the Inspector of Weights and Measures Department and thus the petitioner cannot be held to be liable for the same. 8. With respect to stock variation beyond permissible limit it is urged by learned counsel that as a matter of fact there was no variation in stock. It is submitted that so far as MS is concerned, since January, 2006 there was no supply of the same and thus there are no facts and figures to show variation. Learned counsel vehemently contends that the sale register of the petitioner was very much there according to which there was no variation in stock either of MS or HSD and the sale register has not been challenged by the respondent authorities. Thus only on the basis of the measurement taken by dip arriving at different conclusion is not permissible. It is further submitted that even the dip regarding one of the HSD has been wrongly shown as 45.2 making the quantum 3281 litres; whereas actual measurement, according to the petitioner, was 21.0 dip which comes to 1100 litres as stock maintained by the petitioner. It is also submitted by learned counsel that as per the stock register the petitioner had received 12000 litres of HSD on 28.11.2006 and between 28.11.2006 to 14.12.2006 the petitioner sold 11991 litres of HSD and thus there was no occasion for any excess HSD in the stock. 9. It is also argued by learned counsel that dip is not a scientific method for recording the stock in the tank and it might wrongly record the actual material present in the tank and since there is no difference in the meter reading of the petitioner’s retail outlet and the stock register 6 and only the dip shows difference of stock, hence the same cannot be a basis for holding that the petitioner was having excess stock. 10. Learned counsel also points out that different figures of variation of stock have been mentioned in the order of cancellation and the appellate order: in the original order the stock variation of MS has been stated to be +1867 litres; whereas in the appellate order the same has been shown to be 1870 litres. 11. It is also alleged by learned counsel that the report has been prepared at another petrol pump 18 kilometers away at the behest of the owner of the said petrol pump and the petitioner was forced to sign the receipt of the same and thus no reliance can be placed on the report of the Field Officer. 12. It is also urged by learned counsel that without drawing of samples as provided in the M.D.G. and obtaining the report of the same in the manner prescribed, no cancellation could have been ordered in terms of Clause 9 of M.D.G. as under the same for arriving at a finding regarding the stock variation the samples have to be drawn and sent for testing, which provision is mandatory. 13. Learned counsel for the Indian Oil Corporation, on the other hand, submits that under Clause 1.4.2(a) of the M.D.G. the dealers were required to check on daily basis the weights and measures seal in the metering unit/totaliser of the dispensing units for correctness. Clause 1.4.2(a) of M.D.G. is as follows : “The dealer shall check on daily basis the Weights & Measures seal in the Metering Unit/Totaliser of the dispensing units for correctness and also that Weights & Measures certification for the unit is 7 valid. In case W & M/totaliser seals are found tampered, sales through the concerned dispensing unit should be suspended forthwith and matter reported immediately to oil company. Sales to remain suspended till the seals are replaced.” 14. It is thus urged that it was for the petitioner to ensure that there was proper seal in the outlet and once the same was broken/tampered no benefit can be taken by the petitioner on the pretext of having deposited an amount for the sealing. The seal was found damaged at least in the month of May, 2006 as per the petitioner’s own admission and it continued to sell oil in violation of M.D.G. for a period of nearly seven months thereafter. Hence, in terms of Clause 3 of Appendix-1 of the M.D.G. the dealership was liable to be terminated. Thus no benefit, according to him, can be taken by the petitioner on the alleged ground that the Mechanic of the respondent Corporation did not attend and for that reason the sealing of the totaliser could not be done. 15. It is further urged by learned counsel that the inspection report dated 15.12.2006 by the Field Officer ,which has been annexed as Annexure R/1 to the counter affidavit, has been received and signed by the petitioner himself and similarly the Annexure 4 report and show cause dated 15.12.2006 by the Field Officer has also been personally received by him. In the said reports the details of stock calculation have been clearly given and the petitioner did not challenge the same while receiving the report that the measurement as per the dip was not accurate. Hence it is not open to the petitioner to challenge the same at a later stage as there is a presumption that the measurement as per the dip was recorded as shown in the said reports. In this regard, learned 8 counsel refers to Clause 6.1.10 of the M.D.G. which provides that the normal operational variation of the stock should be in the range of +/- 4% of the tank stock and in case of variation in stock is beyond the permissible limit action given in Appendix-1 should be taken. 16. According to learned counsel, Clause 9(b) of Appendix-1 of M.D.G. provides that even if the sample passes but the explanation for the stock variation beyond the permissible limit is found unsatisfactory then the penal action in line with unauthorized purchase/sales has to be taken and under Clause 6 of Appendix 1 of M.D.G. for unauthorized purchases/sales/exchange of MS/HSD the penal action prescribed is termination irrespective of the product being On/Off Spec. Clause 9 of Appendix 1 and Clause 6 of Appendix 1 are quoted below : “9. Stock variation beyond permissible limits : Sales & supplies of all products to be suspended immediately and samples to be drawn and sent for testing. Dealer’s explanation to be called for. a) If explanation is found satisfactory and sample passes, sales/supplies to be resumed. b) If explanation is found unsatisfactory but sample passes, penal action in the line with unauthorized purchase/sales. c) If explanation is found unsatisfactory and sample also fails, penal action in line with adulteration.------------ --b) Termination c) Termination” “6. Unauthorised purchases/sales/exchange of MS/HSD-----------------Termination, irrespective of the product being On/Off Spec.” 17. It is thus urged by learned counsel for the respondent Oil Company that the issue of drawing or non-drawing of sample is irrelevant if a penal action is taken under Sub Clause (b) of Clause 9 because under the said Sub-Clause even if the sample may have been 9 found within the specification and sample passes but if the stock variation is beyond the permissible limit then the penalty of termination has to be imposed. Thus, according to learned counsel, the argument of learned counsel for the petitioner on this point is misconceived. 18. Learned counsel submits that in the present matter all materials have been taken into consideration by the original as well as the appellate authority and due opportunity was given to the petitioner and there was no violation of principles of natural justice and conclusions drawn by them cannot be held to be perverse. Once it is shown that there was some material on which conclusion can be arrived at then in proceedings for judicial review the sufficiency of materials cannot be gone into. The only limited question to be considered is whether there was any infirmity in the decision making process. In the present matter it is urged by learned counsel that there is no such infirmity in the decision making process and thus the order ought not to be interfered with by this Court in its writ jurisdiction. 19. On a consideration of the rival submissions of the parties this Court is of the view that so far as the finding regarding tampering of the totaliser seals is concerned, the same has been practically admitted by the petitioner and the only ground taken in support of the petitioner’s stand is the deposit of an amount for sealing by the Inspector which has been made as far back as on 16.5.2006 but the seal could not be done as the Company fitter /mechanic did not make himself available. In view of the provisions of Clause 1.4.2 of the Marketing Discipline Guidelines it is evident that it is for the dealer to ensure on a daily basis that the 10 Weights & Measures seal in the Metering Unit/Totaliser of the dispensing units are in order duly certified by the Weights & Measures Department and in case the seals are found to be tampered then the sale from the unit should be immediately suspended and the matter should be immediately reported to the oil company and the sales are to remain suspended till the seals are fixed. The petitioner admitted that for a long period of at least seven months he continued to make sale although the seal of totaliser was in tampered/damaged condition and thus he has clearly violated the provisions of Clause 3 of Appendix 1 of M.D.G., 2005 for which the only penal action prescribed is termination irrespective of the delivery being short/correct/excess. In my view, no benefit can be taken by the petitioner of the alleged fact that the Company’s foreman did not turn up for the sealing of the totalisers. It was for the petitioner to ensure that the totaliser seals were in order otherwise he ought to have suspended the sales. In the said circumstances, the action of the respondent authorities on this ground cannot be held to be illegal. 20. So far as the question of stock variation beyond permissible limit is concerned, from the perusal of the two reports it is evident that the proprietor of the petitioner has personally received the two reports without any objection to the same. Thus the findings recorded in the said reports cannot be challenged by him at this stage. From the appellate order it is evident that the stock variation has been verified by the respondents by cross checking from the dip and receipts of the dealer vis-à-vis the position on the last inspection. That being the 11 position, the petitioner cannot insist that the stock register which is maintained by it has to be relied upon or otherwise challenged by the respondent authorities in order to hold that there has been variation of stock beyond permissible limits. The authorities of the Oil Company are not bound to rely upon the stock register of the petitioner and have rightly made comparison of the stock as per the previous inspection vis- a-vis receipt by the dealer and the stock position obtained by dip. 21. This Court also does not find any force in the submission of learned counsel for the petitioner that the method of calculating the stock on the basis of dip is not a scientific method. Even a primary school student knows that the volume of a cubical container (like the storage tank in the present case) is derived by multiplying its length by its width and its height. Since the length and width of the storage tank is known, hence the height of the MS or HSD contained in it is measured by the dip and thus the volume is correctly determined thereby. The method is, therefore, scientific and accurate. 22. So far as the submission of learned counsel for the petitioner that the samples not having been drawn and sent for testing in compliance with the requirement of Clause 9 of Appendix 1 is concerned, the same does not appear to be correct in view of the clear language of Clause 9(b). In the first place it is evident that the petitioner has himself created a situation that no sample could be drawn even on 16th December or 17th December, 2006. The explanation submitted by the petitioner for his absence does not appear to be justified considering the fact that he was very much present on 15th December, 2006 and he 12 had already learnt that the wrong-doings committed by him have been found out by the respondent authorities. Moreover, Clause 9(b) clearly states that even if the sample which has been drawn and sent for testing passes but the explanation for stock variation for permissible limit is found to be unsatisfactory then penal action is to be taken on unauthorized purchase/sales. Thus, the moment the explanation for stock variation beyond permissible limit is found to be unsatisfactory by the authorities of the respondent Corporation then the question of the sample being within the specification or off specification becomes irrelevant as the dealer becomes liable to penal action of termination. Such being the clear language of Clause 9(b) read with Clause 6 of Appendix 1 of the M.D.G., no benefit can be derived by the petitioner from the fact that the sample could not be drawn and sent for testing. 23. So far as the allegation of collusion with another petrol pump owner is concerned, the same only appears to have been an after thought. The petitioner has to justify his case on the basis of the facts on the record and the question of collusion is wholly irrelevant. The petitioner has signed both the reports. He has to take responsibility for the same and he cannot get away by making allegation against the officials of the respondent Corporation. 24. At this stage, I may refer to two decisions relied upon by learned counsel for the petitioner. The first is the case of Pasupati Nath Singh vs. M/s.IBP Company Limited & Ors. :2006(4) PLJR 363, in paragraph 9 of which it has been held as follows : 13 “9. I have considered the arguments and the various documents and certificates as well as the counter affidavits. The question is whether the seal was broken by the officers of the Department of Weights and Measures or not. The petitioner furnished certificates of the officials and the officials who are statutory functionary supported the defence of the petitioner in their counter affidavit before this Court as well. It was for the IBP Company to make enquiries or get enquiries done about the certificates when they were filed before them. They chose not to make any enquiry in the matter and rejected the same outright. Now when their decision making process is attacked, they want an enquiry in the matter. It must be remembered that while dealing with matters like this which entails heavy civil consequences by reason of termination of dealership, the responsibility to act fairly and objectively is far greater when statutory authority has given a certificate though not happily worded, due weight ought to have been given on it and in case of any doubt before rejecting the same, proper enquiry ought to have been made. In my opinion, in the present case, the decision making process stands vitiated by not making full and complete enquiry in the matter before taking a decision of such serious consequence to the petitioner. In any view of the matter, in view of the positive stand taken by the respondents of the Weights and Measures Department, Government of Bihar, the bona fides of the petitioner cannot be doubted. Thus, in my view, it is now to be accepted and stands established that the totalizer seal in question was broken by the officials of the Weights and Measures Department and replaced only after the inspection done by the IBP Company. For this, the petitioner cannot be penalized. The decision making process, thus, stands vitiated as also the decision.” From the facts stated in the said case it is evident that there was a clear affidavit of the authorities of the Weights and Measures Department that the seals have been broken by the officers of the department and in that circumstance this Court held the action of the Oil Corporation to be unjustified on the ground of seal having been found to 14 be broken. Thus no benefit can be derived by the petitioner from the said case. In the present matter the petitioner with full knowledge of the seal being broken/tampered had continued to make the sale from the said dispensing unit. 25. The other case relied upon by learned counsel for the petitioner is that of M/s. Chirag Keshaw Service Station vs. The Bharat Petroleum Corpn. Ltd. :2008(2) PLJR 667, in paragraphs 9 & 10 of which it has been held as follows : “9. In my view, it must be kept in mind that if the law contemplates drastic action leading to cancellation of dealership, then to invoke that the law and the procedure prescribed has to be scrupulously followed and there should be no scope for doubt or dispute. In the present case, as two reports themselves demonstrate that RON changes rapidly, in the view of this Court, this cannot be a safe method