IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:11-9-2008 CORAM: THE HON'BLE MR.JUSTICE P.JYOTHIMANI W.P.Nos.3914 & 28696 of 2007 and connected miscellaneous petitions. ..... Geetha Kasturirangan .. Petitioner in WP.3914/2007 S.Kasturirangan .. Petitioner in WP.28696/2007 vs. 1.M/s.Hindustan Petroleum Corporation Ltd., rep. By its Managing Director No.1, Jamshad, Tata Road Mumbai 20. 2.The Regional Manager Hindustan Petroleum Corporation Ltd., 18/1 Big Bazaar Street Coimbatore. 3.Mr.S.Kasthurirangan 4.The Inspector of Police Bhavani Police Station Bhavani. .. Respondents in WP.3914/07 1.1.M/s.Hindustan Petroleum Corporation Ltd., rep. By its Managing Director No.1, Jamshad, Tata Road Mumbai 20. 2.The Chief Regional Manager Regional Office Hindustan Petroleum Corporation Ltd., 18/1 Big Bazaar Street Coimbatore. ..Respondents in WP.28696/07 https://hcservices.ecourts.gov.in/hcservices/ Writ petitions filed under Article 226 of the Constitution of India praying for issuance of a Writ of Mandamus and Certiorari as stated therein. W.P.3914/07: Petition presented to this Court to issue a Writ of mandamus directing the first and second respondent to forbear from carrying on retail trade in petroleum products from the premises comprised in door No.90B Bhavani Main road Bhavani or in any manner entering the upon said land. W.P.28696/07: Petition presented to this Court to issue a Writ of Certiorari calling for the records on the file of the 2nd respondent in its proceedings CERO/BS/RET and dt 31.1.2007 and quash the same as illegal, incompetent and without jurisdiction. For petitioner : Mr. N.L.Rajah in WP.3914/07 For petitioner : Mr. V.Raghavachari in WP.28696/07 For respondents : Mr. O.R.Santhanakrishnan 1& 2in both WPs. Respondent 3 - NA .. COMMON ORDER The property bearing Door No.90B, Bhavani Main Road, Bhavani belongs to the petitioner in W.P.No.3914 of 2007, who is the wife of the petitioner in W.P.No.28696 of 2007. While W.P.No.3914 of 2007 filed by the owner is to forbear the first and second respondents, the Hindustan Petroleum Corporation Limited from carrying on retail trade in petroleum products in the said premises belonging to her, W.P.No.28696 of 2007 is filed by the petitioner challenging the order of the second respondent dated 31.1.2007, under which the second respondent while terminating the dealership agreement entered into between the petitioner therein and the respondent Hindustan Petroleum Corporation Limited, deputed its Officer to take possession of the retail outlet premises together with attendant facilities like, dispensing pumps, underground tanks, etc. situate in Door No.90B, Bhavani Main Road, Bhavani. 2. The petitioner in W.P.No.28696 of 2007 is the proprietor of his concern, carrying on business as dealer in petroleum products in the said premises for the past five decades. Originally, the petitioner entered into a dealership agreement with ESSO which was renewed from time to time even after the said ESSO got merged with Hindustan Petroleum Corporation Limited, the respondent in this writ https://hcservices.ecourts.gov.in/hcservices/ petition. The grievance of the petitioner is that on 15.11.2006, the second respondent has issued a show-cause notice to the petitioner on the basis that an inspection was made by the Mobile Lab Officer on 21.8.2006, in which sample was taken and sent to the laboratory of the respondents, wherein it was found that the petitioner failed positively in 'Octane Number Test'. It is the case of the petitioner that on the same day, viz., on 21.8.2006, the same Officer who had taken the test sample issued a certificate that the sample met the specification. The petitioner replied to the show-cause notice on 20.11.2006. In the said reply, the petitioner has stated that on 10.8.2006, he took a full load of both MS and HSD and therefore, the alleged variation found in the inspection is incorrect and according to the petitioner, there cannot be two different results in respect of the same sample and the sample test conducted by the Mobile Lab is faulty and for any error committed by the respondents, the petitioner cannot be made responsible. 3. It is also his case that at the time of inspection, the petitioner was not present and no samples were given to the petitioner and on many occasions when the tests were done, it was found that there was no adulteration. The inspection was stated to have been carried on 21.8.2006, however, the notice was issued on 16.11.2006, which according to the petitioner, is with sinister motive of the Corporation. The termination order came to be passed without considering the reply and it is arbitrary. It is the further case of the petitioner that the premises belongs to his wife, the petitioner in W.P.No.3914 of 2007 and therefore, the respondents have no right to trespass into the same in respect of which the petitioner's wife had already given a police complaint. According to the petitioner, there is no violation of any condition of dealership agreement. 4. The termination order is also challenged on the legal grounds including that it is against the principles of natural justice; that the respondents have not even taken the sample from the petrol bunk of the petitioner and the records are concocted; that the respondent is under the legal obligation to conduct enquiry before sample was taken and the conduct of the respondents in interfering with the petitioner's right in carrying on business violates the right guaranteed under Constitution of India; and the action of the respondents is against the Rule 2.4.4 of the Marketing Discipline Guidelines. 5. On the other hand, the petitioner in W.P.No.3914 of 2007 is questioning the right of the respondents 1 and 2 from entering into the premises which belongs to her without her permission. According to the petitioner, in the guise of cancelling the dealership of the petitioner's husband, the respondents 1 and 2 cannot have a right to enter into the property belonging to the petitioner. https://hcservices.ecourts.gov.in/hcservices/ 6. In the counter affidavit filed by the respondent- Hindustan Petroleum Corporation Limited in W.P.No.28696 of 2007, while it is admitted that by a Memorandum of Agreement dated 24.10.2000, the writ petitioner was appointed as a dealer of the second respondent Corporation for distribution and sale of petroleum products in respect of the retail outlet at Bhavani Main Road, Bhavani, Clause 68 of the Memorandum of Agreement contains the Arbitration Clause and therefore, the filing of the writ petition is not maintainable. It is also stated that it is a contractual obligation which the petitioner seeks to enforce in the writ petition and the same cannot be permitted. It is also the case of the second respondent that as per various Clauses contained in the Memorandum of Agreement the second respondent issued a show-cause notice on 15.11.2006 and after considering the reply of the petitioner dated 20.11.2006, the second respondent Corporation had to necessarily pass order terminating the dealership agreement. 7. The show-cause notice itself directed the petitioner to explain as to why the dealership agreement should not be terminated for the failure of samples with regard to RON Test. According to the second respondent, the Mobile Lab Officer carried out only the clinical test pending RON Test, which was subsequently done by the second respondent at Ghatkesar Terminal. According to the second respondent, even if the sample passes the clinical test conducted by the Mobile Lab Officer, the subsequent test of the sample like, RON Test has to be passed and there is no bar for proceeding with RON test in spite of the fact that the sample has passed clinical test at the outlet. 8. It is denied that the same sample product cannot have two different results. It is also specifically stated that the test conducted by the Mobile Lab is not valid and not binding. It is also stated that even when the Mobile Lab Officer submitted an inspection report at retail outlet, the same was witnessed by the petitioner's representative and therefore, it cannot be said that the sample was taken from the tank maintained by the petitioner without his knowledge. The first respondent had to wait till the report of RON test conducted at Ghatkesar Terminal in Andhra Pradesh was received and that was the reason for the show-cause notice issued on 15.11.2006 while the inspection was conducted on 21.08.2006. It is also stated that the explanation submitted by the petitioner was taken into consideration before passing the impugned order. There has been a breach of various Clauses of the Agreement viz., Clauses 25, 27, 58(A), 58(M) and 58(1) of the Dealership Agreement dated 24.10.2000. 9. It is also stated that final termination order was issued only after following the procedure. The impugned order was passed invoking Clause 57 of the dealership agreement dated 24.10.2000 and the second respondent has not caused any extensive damage to the https://hcservices.ecourts.gov.in/hcservices/ property. It is also stated that the principles of natural justice are not violated while terminating the dealership agreement. It is also stated that only after taking the sample in the retail outlet, the test was conducted. It is also stated that under the dealership agreement, the respondents are not having statutory obligation to conduct enquiry before cancelling the dealership agreement since the dealership agreement is only a commercial contract wherein the principles of natural justice stand excluded. However, the case of the second respondent is that the second respondent has followed the principles of natural justice. It is also denied that any constitutional right is affected by the impugned order of termination and it is due to the adulteration committed by the petitioner, the impugned order came to be passed. 10. In the counter affidavit filed in W.P.No.3914 of 2007, the second respondent Corporation has stated that the second respondent has taken the physical possession of the retail outlet on 31.1.2007 as per the Panchanama report after invoking Clause 57 of the Dealership Agreement dated 24.10.2000. It is also specifically stated that the second respondent Corporation is not having physical interest or control over the retail outlet property and the second respondent has no objection to surrender possession of the retail outlet premises subject to the permission of the petitioner in allowing the second respondent Corporation to remove its equipments viz., dispensing pumps, etc. which belong to the second respondent Corporation. The husband of the petitioner who is the dealer has not permitted the second respondent Corporation to remove the equipments. It is also stated that one B.K.Surendra has granted the lease in favour of the petitioner in W.P.No.28696 of 2007 to the extent of 1200 sq.ft. in Bhavani Municipality to enable the petitioner to carry on business in sale and distribution of petroleum products on a monthly rent of Rs.1200/- for the showroom and Rs.1750/- for the land and the said writ petitioner has been carrying on the proprietary concern in the name, M/s.S.Srinivasan. 11. The lessors who has granted lease have filed a suit in O.S.No.70 of 2005 against the petitioner in W.P.No.28696 of 2007 and Hindustan Petroleum Corporation Limited represented by its Regional Manager to surrender vacant possession of the suit property, failing which to permit the plaintiffs themselves to remove the superstructure over and underneath the suit property and also for damages of Rs.71,000/-. By virtue of the said plaint, the property originally belonged to one B.S.Sitharaman under a registered partition deed dated 16.9.1966 and thereafter, the plaintiffs in the said suit have become the owners as legal heirs and they filed the suit in O.S.No.70 of 2005 before the II Additional District Munsif, Bhavani. The petitioner in W.P.No.28696 of 2007 has admitted that he is only a tenant and therefore, he has no right over the land which has been taken on lease and the said suit was dismissed on 31.8.2005 https://hcservices.ecourts.gov.in/hcservices/ against which first appeal in A.S.No.52 of 2006 before the Sub Judge, Bhavani is pending. 12. It is, in respect of breach of conditions by the petitioner in W.P.No.28696 of 2007 who is the third respondent in W.P.No.3914 of 2007, the dealership agreement was terminated. Before the termination, the sample taken from the outlet failed in RON test by recording 80 as against the specifications of 88 minimum while the tank truck sample and the sample of Irugur Depot passed the RON test and copies of the lab reports were furnished to the dealer. Since the variation between the observed RON test and the acceptable limit was very high, the second respondent Corporation has not accepted the request for testing the retention sample. It was under those circumstances, the dealership agreement came to be terminated after giving show-cause notice. After termination, the second respondent Corporation has entered the outlet on 31.1.2007 and carried on the business in the sale and distribution of petroleum products. It is also stated that the petitioner in W.P.No.3914 of 2007 is not the owner of the property and only a lessee who has no locus standi to question the stand of the second respondent Corporation for which the second respondent has relied upon various provisions of the agreement entered with the husband of the petitioner. 13. Mr.V.Raghavachari, learned counsel appearing for the petitioner in W.P.No.28696 of 2007 would submit that on 21.8.2006 when the inspection was conducted, the Mobile Lab test has met the specification, however, in the report of laboratory inspection stated to have been conducted by the second respondent Corporation in Ghatkesar Terminal, Andhra Pradesh District, curiously it is stated that the sample has not met the specification which, according to the learned counsel, is not correct. According to him, the sample was taken on 21.8.2006 while the report of laboratory test done in Andhra Pradesh is stated to have been received by the lab on 18.9.2006 and the actual test was conducted on 25.9.2006 which was more than one month later and therefore, in the meantime, the sample should have undergone various changes. 13(a). It is also the case of the learned counsel for the petitioner that the required steps for the purpose of taking sample have not been followed and no opportunity was given to the petitioner by saying that the sample taken from the petitioner would undergo further test. His submission is that three stages of taking samples; (i) taking from retail outlet; (ii) from the tank truck and (iii) despatching company viz., source sample; were not properly done and therefore, it is in violation of the principles of natural justice. 13(b). He would also submit that the arbitration clause is not effective and he would rely upon various judgements, viz., (i) Harbanslal Sahnia vs. Indian Oil Corporation Ltd., [2003(2) SCC 107]; https://hcservices.ecourts.gov.in/hcservices/ (ii) Hirak Point, Dealer and Bharat Petroleum Corporation Ltd., vs. Bharat Petroleum Corporation Ltd., and Others [(2003(1) JCR 315 Jharkhand)]; (iii) Bharat Filling Station and another vs. Indian Oil Corporation Ltd., [2003(3) AD (Delhi) 694], to substantiate his contention that mere existence of arbitration clause is not effective. His submission is that RON test is not proper test. 14. On the other hand, Mr.O.R.Santhanakrishnan, learned counsel appearing for the second respondent Corporation would submit that the writ petitions are liable to be dismissed on the ground of laches. According to him, the impugned termination is on 31.01.2007 while the writ petition came to be filed on 28.8.2007 and the delay has not been properly explained. He would submit that inasmuch as an effective remedy is available by way of arbitration, the writ petitions as such are not maintainable. While it is admitted that MS sample was taken on 21.8.2006, the same has passed the test, however, it failed in RON test. It is his submission that even though no method of test has been contemplated under the Dealership Agreement, the second respondent Corporation being the Central Government undertaking, various control orders passed by the Government of India are applicable. While he admits that the sample of Depot has passed the test, the lab test went against the petitioner. He would rely upon the judgement of the Supreme Court in State of U.P. And others vs. Bridge & Roof Co. (India) Ltd., [AIR 1996 SC 3515] to show that when the arbitration clause is available, the writ petition is not a remedy. 15. I have heard the learned counsel for the petitioners and the respondent Corporation and perused the entire records and given my anxious thought to the issue involved in these cases. 16. The issue to be decided in this case is, whether the impugned order of termination is valid in the eye of law? 17. Even though the order of termination is attacked by the petitioner on various grounds including the violation of principles of natural justice, it is not in dispute that before the impugned termination order came to be passed, the respondent Corporation has in fact issued a show-cause notice on 15.11.2006. In the show-cause notice it is admitted that an inspection was conducted in the retail outlet in possession of the petitioner on 21.8.2006. The sample was taken by the Mobile Lab Officer in respect of MS whereas HSD sample could not be taken since the outlet was dry. The MS sample was sent for testing in the regular laboratory in Andhra Pradesh. In the show-cause notice it is also stated that the sample of MS collected from the retail outlet along with the sample collected in the tank truck was also sent to Ghatkesar laboratory for RON test. The sample collected from the retail outlet has failed the testing by recording https://hcservices.ecourts.gov.in/hcservices/ 80 as against the minimum specification of 88 as per the laboratory report dated 25.09.2006. However, it is stated that the tank truck sample as well as the Depot sample of Irugur has passed RON test. In those circumstances, by relying upon the failure of RON test regarding sample taken in the retail outlet, the show-cause notice came to be issued as per Clauses 25 and 27 of the Dealership Agreement, calling upon the petitioner to give his explanation within seven days. 18. It is seen that the petitioner has in fact given his explanation on 20.11.2006. In the said letter he has requested the respondent Corporation to test MS sample sealed and kept by the Mobile Lab Officer at the outlet and admittedly such test has not been done. It is also stated in the explanation that the sample has passed the test made in the mobile lab which was made on the spot, and the confirmation certificate has in fact been issued and therefore, there cannot be a different decision by merely referring to RON test. In the impugned order of termination passed by the second respondent Corporation it is stated that there is a difference between the clinical test conducted by the Mobile Lab Officer and the RON test which can be done only in the laboratory. While it is admitted that in the clinical test the sample has passed, in the RON test conducted in the laboratory, there is a vast difference, that is to say, it recorded 80 as against the minimum specification of 88 and therefore, it is presumed that there is adulteration on the basis of RON test, however, it is made clear that the samples taken in Irugur Depot and the tank truck have passed the RON test. The second respondent Corporation has also considered the request of the petitioner in the objection for the purpose of re-testing the sample kept at the outlet and rejected on the ground that the variation observed in RON test is very high and it was, in those circumstances, as per the provisions of the dealership agreement, the dealership has been terminated. 19. A reference to the dealership agreement entered into between the petitioner and the Corporation dated 24.10.2000 shows that it contains Clause 68 for referring any dispute to the arbitration. First of all, the questions that have to be seen are as to whether such arbitration clause in the context of termination of contract on the basis of failure of sample in passing RON test and in the context of the factual situation in this case can be treated as an effective remedy and whether the jurisdiction of this Court under Article 226 of the Constitution of India will be ousted even if it is found by this Court that such test stated to have been conducted by the Corporation is neither forming part of the dealership agreement, nor the method of test effected by the Corporation is as per the statutory regulations which are binding on it. 20. Before going into the maintainability of the writ petition as it is vehemently submitted by the learned counsel for the https://hcservices.ecourts.gov.in/hcservices/ Corporation, it is necessary to consider some of the provisions of the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005 produced by the learned counsel for the Corporation. The said order is a statutory enactment passed by virtue of the powers conferred under section 3 of the Essential Commodities Act, 1955 by the Central Government. In the said Order, Clause 2(a) defines 'adulteration' as follows: "(a) 'adulteration' means the introduction of any foreign substance into motor spirit or high speed diesel illegally or unauthorisedly with the result that the product does not conform to the requirements of the Bureau of Indian Standards specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively or any other requirement notified by the Central Government from time to time." Clause 2(f) 'malpractices' which is stated to include adulteration also, is as follows: "(f) 'malpractices' 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, and (x)short delivery". Clause 2(t) which explains about the "sale of off specification product", is defined as follows: "(t) 'sale of off specification product' means sale of motor spirit or high speed diesel by dealer of quality not conforming to Bureau of Indian Standards specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively." 21. It is relevant to find that the said sale of off specification product is also one of the malpractices under Clause 2 (f) of the said Order. What is stated as sale of off specification product is that the quality of motor spirit or high speed diesel not conforming to Bureau of Indian Standards specifications and the provision does not contain anything about RON test. https://hcservices.ecourts.gov.in/hcservices/ 22. The said Order in Clause 3(3)(b) enables the dealer to inspect the container or tank truck in which he receives the product to ensure that the quantity and quality of the product are as per the documents and in conformity with the Indian Bureau of Standards specifications number IS 2796 for motor spirit and IS 1460 for high speed diesel. It is also stated in the said Clause that it is the duty of the oil company to indicate the density of the product at 15 degrees centigrade and the dealer shall maintain a record of densities and keep samples of products duly signed jointly by him and the driver of the tank truck and the said clause is as follows: "3. Product supply and transportation: (3) The dealer or consumer shall inspect such container or tank-truck in which he receives the product to ensure - (3)(b) that the quantity and quality of the product is as per delivery documents issued by the oil company and the quality of the product conforms to the requirements of the Bureau of Indian Standard specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively. For this purpose, the oil company shall indicate density of the product at 15 degrees centigrade in the delivery documents and the dealer or consumer shall maintain a record of densities and keep samples of product duly signed jointly by him and the driver of tank truck and also take other measures as prescribed by the oil company. The variation in density at 15 degrees centigrade of the product in tank truck compared to the density mentioned in delivery documents should not be more than +/- 0.0030." This clause certainly enables the dealer to check up the density of the commodities supplied. 23.