Indian Oil Corporation vs M/S. R.M. Service Centre

2) The dealer was granted retail dealership for sale of motor spirit (petrol), High Speed Diesel, motor oil and grease as a physical 1 for short, ‘dealer’ 2 for short, ‘Guidelines’ 1 disabled person on a depot located at Ghograpar, National Highway -31 in the District of Nalbari, Assam. The sale and supply from the retail outlet of the dealer was suspended by the appellants on 6 th May, 2013 when it was found, on the joint inspection, variation of stock of High Speed Diesel beyond permissible limit; density of Tank No. 2 was not available and that tanker truck retention of the corresponding tank was not available at the time of inspection. The appellant had drawn three samples from Tank No. 2. One sample was sent for testing, another sample was retained by the Field Survey Officer and the third sample was handed over to the dealer. A show cause notice was issued to the dealer on 6th May, 2013, alleging violation of Clauses 5.1.9 and 5.1.11 of the Guidelines. The dealer submitted his explanation on 21st May, 2013, inter alia, stating that dispensing unit was not working properly and, therefore, wrong readings were shown.

4) The request of the dealer for retest was accepted on 6 th August, 2013. The retest was carried out in the Laboratory of the appellants on two sets of samples including the one retained by the Field Survey Officer of the appellants. The report of the aforesaid two sets of samples was issued on 19th August, 2013. The report of the sample which was retained by Field Survey Officer of the appellants was that it did not meet the BIS III specifications whereas, the sample of the dealer was not fit for testing due to presence of sludge.

5) On the basis of the test reports dated 29 th May, 2013 and 19th August, 2013, the dealership was terminated on 25th April, 2014 after serving another show cause notice dated 10 th December, 2013 wherein, it has been stated that deviation was observed during inspection pertaining to stock variation and non-availability of reference density. The appellants have mentioned details of non-conformity and the violation of the Clauses in the letter of termination dated 25th April, 2014, which read as under: 3

6) It was also pointed out that out of three samples drawn from Tank No. 2 on 6th May, 2013, one sample was sent to the Laboratory, another was retained by the Field Survey Officer and the third sample was handed over to the dealer. The result of the three samples is as under:

8) The dealer challenged the termination of the dealership before the Gauhati High Court. The learned Single Judge allowed the writ petition on 13th October, 2015 holding that as per the Guidelines, the samples were required to reach the Laboratory preferably within ten days whereas, the first sample was tested on 29 th May, 2013 that is after ten days and the umpire sample given to the dealer was tested on 19th August, 2013. It was held that there is non-compliance of the time line fixed. The learned Single Judge held as under:

xx xx xx In case of positive stock variation beyond permissible limits, samples will be drawn and sent to laboratory for testing. Sales and supplies of all products to be suspended immediately. Study to be carried out to identify the reasons for stock variation. If the sample passes but some other irregularity like unauthorized purchase etc. is established action to be taken accordingly. However, if the sample fails, action in line with that of adulteration will be initiated.

16) The first test report dated 29th May, 2013 was found deficient in the density as also in K.V. @40 degree celsius, sulphur and distillation recovery. Even the report dated 19 th August, 2013 is found to be deficient in density, K.V., distillation recovery and sulphur. The result of the second report is almost the same as the sample tested on 29th May, 2013. Thus, the appellant has rightly terminated the dealership for adulteration of the High Speed Diesel. 14

19) Consequently, we find that order passed by the High Court is not legal and sustainable and, thus, the same is set aside. The writ petition is dismissed and the termination of dealership is held to be valid and legal. Civil Appeal is allowed.

NOVEMBER 07, 2019.