IN THE HIGH COURT OF JUDICATURE AT PATNA LPA No.1195 of 2009 1. M/S INDIAN OIL CORPORATION LTD., Indian Oil Bhawan, G-9, Ali Yawar Jang Marg, Bandra (East), Mumbai- 400051, through its Managing Director 2. The Executive Director, M/s Indian Oil Corporation Ltd., Indian Oil Bhawan, G-9, Ali Yawar Jang Marg, Bandra (East), Mumbai- 400051 3. The Divisional Retail Sales Manager, Indian Oil Corporation Ltd., Muzaffarpur Divisional Office, Krishna Complex, Akhara Ghat Road, Muzaffarpur- 842001 … Respondents-Appellants Versus SUSHIL KUMAR SINGH, son of late Musafir Singh, Proprietor of M/s Tirupati Filling Station, NH-28, Sasamursa, District Gopalganj … Petitioner-Respondent. ----------- For the Appellants: Mr. K.D.Chatterjee, Adv. with Mr. Anil Kumar Sinha,Adv. For the Respondent: Mr. Y.V.Giri, Sr.Adv. with Mr. Raju Giri, Adv. ------------ PRESENT- THE HON’BLE THE CHIEF JUSTICE THE HON’BLE MR. JUSTICE MIHIR KUMAR JHA O R D E R (18/05/2010) As per Mihir Kumar Jha,J. Heard Mr. K.D.Chatterjee, learned counsel for the appellants and Mr. Y.V.Giri, learned Senior counsel for the sole respondent- writ petitioner. 2. In this intra-Court appeal the appellants have assailed the order of the learned Single Judge dated 23.7.2009 passed in C.W.J.C.No. 15505/2008 allowing the writ petition of the respondent- writ petitioner with regard to termination of his dealership of a petroleum retail outlet. 2 3. Mr. K.D.Chatterjee, learned counsel for the appellants, while assailing the aforementioned order of the learned Single Judge, has submitted that the allegation of adulteration in High Speed Diesel (HSD) against the respondent-writ petitioner in his petroleum retail outlet being so obvious and proven on the face of the record, the resultant order of termination of his petroleum retail outlet ought to have not been interfered in a mechanical manner on a mere alleged infraction of a directory provisions of the Marketing Discipline Guidelines, which at best is an executive instruction having no statutory force. In this Context he has placed reliance on the judgment of the Apex Court in the case of J.R. Raghupathy vs. State of A.P. & ors., reported in AIR 1988 S.C. 1681. 4. Drawing further inspiration from the judgment of the Apex Court in the case of Dalchand vs. Municipal Corporation Bhopal & anor., reported in A.I.R. 1983 S.C. 303, Mr. Chatterjee has submitted that the glaring facts of the case as with regard to discovery of an excess stock of 3292 liters on the date of surprise inspection of the petroleum outlet of the respondent- writ petitioner by 3 itself was demonstrative of irresistible conclusion that there was adulteration in the stock of diesel in the petroleum outlet of the respondent- writ petitioner and therefore, mere technicality ought to have not weighed in setting aside the order of termination of the dealership of the petrol pump of the respondent- writ petitioner. The core submission of Mr. Chatterjee, therefore, is that there was no error in the decision making process relating to termination of the dealership of the respondent- writ petitioner and therefore, the learned Single Judge ought to have avoided entering into the merits of the case and in this regard he had broadly canvassed the parameters under which judicial review can be made of an administrative action under Article 226 of the Constitution of India. 5. Per contra, Mr. Y. V. Giri, learned Senior counsel appearing on behalf of the respondent- writ petitioner while supporting the order of the learned Single Judge has submitted that the allegation of adulteration in the diesel supplied to the respondent- writ petitioner by the Indian Oil Corporation and the consequence of cancellation of his dealership being 4 crucial to the right of life guaranteed under Article 21 of Constitution of India as also to the right to carry trade and profession guaranteed under Article 19(1)(g) of the Constitution of India, any infraction of related marketing guidelines, by itself was sufficient to vitiate the decision making process and the resultant decision of cancellation of dealership of the respondent- writ petitioner. He has further submitted that the cancellation of dealership cannot be made on mere ipsi dixit or uncorroborated allegation, against respondent-writ petitioner. He has, accordingly, commanded to us to approve the view taken by the learned Single Judge in the impugned order also by placing reliance on the judgments of the Apex Court referred to in the impugned order in the case of Ex-Capt. Harish Uppal vs. Union of India & anor., reported in (2003) 2 SCC 45, Harbanslal Sahnia & anor. vs. Indian Oil Corporation Ltd. & ors., reported in (2003) 2 SCC 107, Food Inspector vs. G. Satyanarayana., reported in (2004) 13 SCC 72 and a judgment of this Court in the case of Nathmal Kabra & anor. vs. The State of Bihar, reported in 1990(1) PLJR 477. 5 6. In order to appreciate the aforementioned contentions it would become necessary to take stock of the admitted facts inasmuch as most of them have gone un-noticed in the impugned order of the learned Single Judge. 7. On 20.9.2006 there was a surprise inspection in the petrol pump of the respondent- writ petitioner and a retail outlet inspection report in his presence and with his signature thereon was prepared by the joint inspection team of Mr. Niladri Banerjee, Senior Manager (Fleet Marketing), Eastern Range, and Mr. Alok Kumar Das, Manager (P & A), Eastern Region, wherein after making necessary entries in the prescribed proforma it was found that there was excess of 3292 liters in the stock of the respondent- writ petitioner. The inspecting team had also taken samples from the two high-speed diesel tanks of the respondent- writ petitioner and it was clearly mentioned therein that in the stock verification the variance was beyond permissible limit and samples were also collected for its being tested to check adulteration. 6 8. Additionally, in the prescribed inspection report, as contained in Annexure 2, containing the signature of the writ-petitioner it was also mentioned that the employees of the respondent- writ petitioner were living inside the premises of the petroleum pump wherein three beds in two rooms were found which was in violation of the Explosive Rules under the Indian Explosive Act. 9. This note of inspection along with two samples were handed over to the petitioner by the inspecting team which had also immediately at the spot given a show cause notice to the petitioner asking him to explain the stock variation of diesel which was found to be beyond the permissible limit, variation being 3292 liters as also as to why his employees were living inside the premises of the petrol pump violating the Explosive Rules. It is very significant to note here that the inspecting team had given also the measurement of three totalisers as also tank-dip in the said show cause notice for which a reply was to be given by the respondent- writ petitioner within a period of 10 days. 7 10. The spot show cause notice given by the inspecting team was followed by yet another show cause notice issued by the Divisional Manager of the Indian Oil Station at Patna dated 25th September, 2006 wherein on the basis of the same measurement already indicated in the inspection report handed over to the respondent- writ petitioner on 20.9.2006 it was analyzed and noticed that the density variation of tank No.1 being 17.9 gm/cc was also beyond permissible limit. The writ petitioner was again accordingly asked to explain within a period of seven days from the date of issuance of the show cause notice as to why necessary action should not be taken against him due to density variation. 11. It has to be noted that the respondent- writ petitioner did not choose to file any reply within the prescribed time limit which had expired on 27.9.2006 or 3.10.2006 whereafter the Divisional Manager at Patna having received the report of the laboratory with regard to sample collected at the petrol pump of the petitioner from Haldia had issued another show cause notice dated 4.10.2006 enclosing the test report of the sample wherein it was observed that the sample test of tank No.1 had 8 failed in Kinametic Viscosity and density corresponding to tank number did not match within the characteristic of the depot sample and the tank lorry retention sample. The 3rd show cause notice in fact, therefore, was confined soliciting the reply of the respondent- writ petitioner within a period of seven days from the receipt of the said show cause notice for explaining as to why action should not be taken against the respondent- writ petitioner due to failure of the sample in the test report of tank No.1. 12. The respondent- writ petitioner thus having before him not only on the spot inspection report made available to him at the spot on 20.9.2006 alongwith the first show cause notice, as also allegation with regard to density variation in the second show cause notice dated 25.9.2006 and the test failure report of the seized sample, chose to however give reply only to the first show cause notice dated 20.9.2006 on 10.10.2006 wherein it was stated that totaliser meter of the respondent- writ petitioner was not functioning since 12.8.2009, a fact which was already brought to the notice of the authorities of the appellant company for which reliance was placed 9 on the same report of the Maintenance Officials dated 25.8.2006. 13. The writ petitioner had however filed another show cause reply to the second notice dated 25.9.2006 on 16.10.2006 wherein some sort of criticism was made as with regard to allegation or density variation on the ground that the members of the inspecting team had not in their earlier show cause notice dated 20.9.2006 chosen to bring any such allegation and a specific demand made with a fresh density check by way of fresh inspection should be held again in presence of the respondent- writ petitioner. 14. Curiously the respondent - writ petitioner thereafter on 3.11.2006 had filed his another separate reply to the third show cause notice dated 4.10.2006 wherein he had admitted the delay on his part in filing his reply but had made a request for drawing of a fresh sample in his presence for its being subjected another laboratory test, inasmuch as he had put certain question marks, manner of collection of samples in course of inspection by the inspecting team on 20.9.2006. 10 15. A most significant fact in this respect to be noticed here is that the said request of the respondent- writ petitioner as with regard to another inspection was acceded and a fresh inspection was held on 10.11.2006 wherein the same reading of the three totalisers were again recorded by a set of different officials, namely, Mr. Nirmal Kumar, A.M.(E), Pat-II and Mr. P.S. Bhattacharjee, AM(E), PSO, who had also found the same measurement of the tank dip as recorded by the first inspecting team of Mr. N. Banerjee and Mr. A.K.Das. The second inspection in fact alike the first inspection was made in presence of the petitioner and both the inspection reports contains his signature in acknowledgement of the proof of such inspection being carried out at his petrol pump. 16. The respondent- writ petitioner thereafter had filed a further reply to the show cause notice dated 4.10.2006 on 27.11.2006 in which he had come out with the grievance that through the measurement was made by the second inspecting team but fresh sample from the retail outlet for the purpose of testing in terms of Clause 2.5(K) was not carried out and accordingly, a request 11 was made that appropriate steps should be taken for drawing fresh sample from the outlet of the respondent- writ petitioner for its being tested in his presence in accordance with Clause 2.5(K). 17. The respondent- writ petitioner thereafter had filed his further reply to the show cause notice dated 3.11.2006 and 27.11.2006 wherein again the same thing was repeated that fresh sample be drawn from his outlet for its being tested in the laboratory in his presence. 18. The competent authority of the appellant Oil Company, however, on 26.3.2007 having taken into account the stand taken by the respondent- writ petitioner in all the aforesaid show cause reply had issued a final show cause notice dated 26/28.03.2007 as to why his appointment of dealership should not be terminated for the reasons mentioned in the show cause notice. 19. The respondent- writ petitioner after service of this show cause notice dated 26/28.3.2007 had filed a writ application, C.W.J.C.No. 2455/2007 wherein he had made a prayer for quashing of the entire proceedings arising out of the joint inspection report dated 20.9.2006 and had also prayed that the suspension of sales and 12 supplies to the outlet of the respondent- writ petitioner should be quashed. This Court, however, by its order dated 10.8.2007 did not choose to interfere with on going proceedings or even restoring the supply of the retail outlet by lifting the suspension on sales and supplies and had disposed of the matter by making an observation that if the respondent- writ petitioner would submit its final show cause reply to the show cause notice dated 26/28.3.2007 the same should be considered within three weeks and should be disposed of in accordance with law as per Marketing Guidelines and if the matter was not finally decided within two months the supply to the retail outlet of the respondent- writ petitioner would be restored. 20. The respondent- writ petitioner thereafter on 4.9.2007 had submitted his final reply to the show cause notice dated 26/28.3.2007 which were followed by the reminders dated 13.12.2007 and 12.3.2008 for restoring supply and lifting the ban in terms of the order of the High Court, where-in-after the impugned order terminating the dealership of the respondent- writ petitioner was passed on 30.4.2008 and an appeal 13 preferred by the respondent- writ petitioner was also rejected by a reasoned order dated 15.9.2008 whereafter the connected writ application was filed on 16.10.2008 in which this Court by an order dated 22.10.2008 had refused to grant stay as prayed for by the respondent- writ petitioner and had only directed for maintaining status quo with regard to the site in question till further orders. The writ application was ultimately heard on different dates and was allowed on 23.7.2009 by holding that neither the charge of unexplained excess of 3292 liters of diesel nor charge of adulteration were conclusively proved and as such, the findings recorded by the authorities of the appellant were bad on both the counts. 21. Before us the same submissions were virtually reiterated which have been taken note of in the impugned order of the learned Single Judge but then Mr. Chatterjee has emphasized that the Marketing Discipline Guidelines in Clause 2.5 cannot be read as mandatory, inasmuch as there is a discretion vested in the competent authority as with regard to retesting or fresh testing of the samples. He has also submitted that the respondent- writ petitioner 14 in fact was all along pressing for a fresh testing of a fresh samples to be taken out in terms of Clause 2.5(K) of the Marketing Discipline Guidelines (hereinafter referred to as „the Guidelines‟) and in this context he has sought support from the various replies filed by the respondent- writ petitioner to which we would readably refer to after noticing the provisions of the Guidelines. 22. It would be significant to note here that the Guidelines under Chapter-2 lays down the manner of sample collection and testing, described therein as 3-tier sampling system which begins with a preamble under Clause 2.1 that the basic objective of the 3-tier sampling procedure is to ensure that the petrol and diesel sold by the retail outlet is the same product which has been supplied to them in respect of oil companies. Such sampling procedure in fact has been laid down to help in establishing whether malpractice/ adulteration, if any, has taken place at the retail outlet during transportation or at supply locations. Clause 2.2. lays down the places where the samples would be drawn i.e. at supply location and at retail outlets. Clause 2.3 relates to drawal of samples by dealer/ his representative and clause 2.4 lays 15 down drawal of samples by oil company‟s representative within 48 hours of supply or before next load is received by the retail outlet in case of suspected malpractice and adulteration. In this respect in the case at hand we are concerned with clause 2.4.2, inasmuch as it was the oil company‟s representative who had resorted to his power of drawal of samples. Clause 2.4.2 reads as follows: “ 2.4.2 HSD- Oil Company Representative should collect three samples of 1 litre each from each tank of the ROs. One sample is to be retained by the dealer, one sample at Division/ Territory/ Regional Office and one sample sent to the oil industry marketing laboratory for testing It would be the responsibility of the Oil Company representative drawing the sample to ensure that the following samples are collected and sent to the Oil Industry Marketing Laboratory for clinical tests. (i) One (1X1 litre) samples of each tank drawn by him from the RO (ii) One (1X1 litre) tank lorry sample of last supply which was drawn and retained by the dealer for each tank (this should pertain to the tank which is connected to the dispensing unit from which the samples were taken by Oil Co. representative). 16 (iii) One (1X1 litre) reference sample of the supply location. This sample should be the one which is from the same tank from which the supply was made to the RO dealer and tank reference of which was mentioned on the delivery documents covering the supply to the Retail Outlets. If the RO has more than one tank for HSD and the last receipt of each of these tanks were on different days, corresponding reference sample of the supply location for these supplies would have to be collected and sent for testing. All the above samples should reach the laboratories for testing preferably within ten days of the collection of the samples.” 23. It is thereafter that clause 2.5 has been provided in the guidelines as general points to be observed in all cases which reads, inter alia: “ 2.5 General points to be observed in all cases A) All samples should preferably be suitably coded before sending to lab for testing within 10 days of drawal. B) If all the sample passes the test, dealer should be intimated in writing and all pertinent retention samples at ROs. Divisions/ Territory/ Regional and dispatch 17 locations can be disposed off. C) If the sample fails, explanation of the dealer/ transporters as applicable shall be called for in writing, giving details of failure and enclosing copy of the test report. In case, the explanation is not found satisfactory, appropriate action to be initiated against dealer/ transporter. D) In case of sample failure in the event of request for testing by the dealer, the same to be considered on merits by the State Office/ Regional/ Zonal General Manager of the concerned Oil Company. If approved by GM the sample of retail outlet retained by the dealer along with the counter sample retained with the Field Officer/ Oil Company are to be tested as per the guidelines, preferably in presence of the Field Officer, RO dealer/ representative and representative of QC Dept. of the Oil Co. after due fertification of the samples. All the 3 samples should be tested only in the same lab. and if possible by the same person to ensure repeatability and reproducibility. The expenditure incurred for such testing should be recovered from the dealer. The decision of the GM which would be based on the test results of all the 3 samples would be decisive and binding on all. 18 E) Wherever dealer and transporter are the same, action needs to be taken against the dealer in his capacity as dealer or the transporter as the case may be in the event of sample failure. F) Wherever tank lorry sample is not retained/ made available by the dealer to the inspecting officials at the time of drawal of sample from the RO, the same would not be considered for testing at the later stage. In such case, the result of the RO sample will be compared with the supply point sample and action of any will be initiated against the dealer only. G) In case of density/ filter paper test failure, clinical test failure by mobile lab. sales and supply of all products will be suspended and samples will be drawn and send for testing. Laid down procedure will be followed and appropriate action will be taken based on the outcome of the test results. H) In case routine samples drawn from the retail outlet fail, appropriate action will be taken against the dealership. Any unsold off spec product at the retail outlet will be appropriately disposed off by the concerned oil company before sales is recommended at the RO. I) The purpose of mentioning time frame for various activities e.g. sending samples to lab 19 preferably within 10 days etc. is to streamline the system and is no way elated to quality/ result of the product. J) Whenever any one agency has detected any irregularity on account of quality and initiated investigation, parallel investigation by way of drawal of samples will not be carried out during pendency of the proceedings. K) In all cases where the samples are found to be off-spec a subsequent sample should be drawn from the same RO within 3 months from the date of test report of the earlier sample.” 24. To complete the scope of guidelines it is just and proper to also refer to clause 2.6 which mentions about sample containers to be used, Clause 2.7 the manner of sealing of sampling containers, clause 2.8 is with regard to sample tags, clause 2.9 is with regard to retention of samples at supply locations and at retail outlets as also at Divisional/ Territory/ Regional Office of the Oil Company and clause 2.10 relates to sample testing and results. 25. In the light of the aforementioned provisions if we look into the stand taken by the respondent- writ petitioner in his different communications by way of 20 reply to the show cause notice it would become manifest that what he was actually always aiming at was a fresh collection of samples, inasmuch as upon receipt of the show cause notice dated 4.10.2006 with the test report of the laboratory when he had filed his show cause reply on 3.11.2006 he had straightway questioned the manner of collection of samples on 20.9.2006 in the following terms: “ 10. That the manner in which the samples have been drawn from the 2 underground tanks and sent for laboratory test is not full proof and is susceptible to give incorrect findings. 11. That the retail outlet in question supplies only such diesel which it receives from the Company and thus there is no reason for variation in the standard level in viscosity unless the quality of the diesel supplied itself is effected. 12. That in this context it would also be necessary to bear in mind that the viscosity level of each consignment of diesel received by the outlet varies from tanker to tanker and does not have identical viscosity for each land. In the same tank various load are received from time to time resulting in a 21 composite mixture of product. This sample will obviously have deferent character as compared to the reference sample with regard to parameters, such as viscosity etc. 13. That the second infirmity in the manner of drawing sample is that the stock available in tank no.1 was very low on the date of inspection and in normal circumstances the reports of samples taken from low level of stock does not give the correct picture and it is in this view that the sample report of tank no.2 which had substantial stock available, was within prescribed