Case: Bharat Petroleum Corporation Ltd Vs. M/s Jagannath &amp; Co. &amp; Others

a) The appellant – Bharat Petroleum Corporation Ltd. (in short) is a Government of India Undertaking under the administrative control of the Ministry of Petroleum & Natural Gas and is engaged in refining, distributing and selling petroleum products such as Motor Spirit (MS/Petrol), High Speed Diesel (HSD), Kerosene, Liquified Petroleum Gas (LPG) etc., all over the country. Respondent No.1-Firm is a licensed dealer of the BPCL, selling petroleum products from its Retail Outlet (RO) at Court Road, Saharanpur, U.P. Originally, the Dealership Licence was granted, vide agreement dated 24.07.1975b) It is the case of the BPCL that on 22.08.2005, a routine inspection of the said RO was conducted by a team consisting of Territory Manager, Senior Sales Officer and Senior Engineering Officer, Meerut in the presence of one of the signatories to the said Dealership Licence viz., Shri Alok Kumar Gupta-Respondent No. 3 herein. During the inspection, certain irregularities/variations were found for which samples of MS/ULP, SPEED and HSD were taken and the sale for all the products was suspended and the dispensing units and tanks were sealed after taking meter readings. Thereafter, on 23.08.2005, the seized samples were sent to the Quality Control Laboratory at Shakurbasti, Delhi for testing. Vide test reports dated 24.08.2005, the Laboratory confirmed that the samples failed to meet the required specificationsc) Being aggrieved, the respondents instituted a suit being O.S. No. 695 of 2005 before the Civil Judge (Sr. Division), Saharanpur for resumption of supply of petroleum products and for restraining the BPCL from interfering with the sales and supplies of petroleum products from their RO along with an application for temporary injunctiond) On 02.09.2005, BPCL filed a report with regard to the samples taken from the outlet. Against the said report, the respondent-Firm moved an application raising objection that the test reports are not based on the samples taken from the outlet and prayed for redrawal of the samples in the presence of independent witnessese) On 07.09.2005, BPCL issued a show cause notice to the respondents as to why action should not be taken against them including termination of the dealership. The respondents put forth their stand by way of a reply dated 21.09.2005. By order dated 03.10.2005, learned Civil Judge dismissed the application for issuing of temporary injunction. Vide order dated 18.01.2006, the Territory Manager (Retail), Meerut, terminated the dealership agreement/licence of the respondents with immediate effect. Since the dealership licence of the respondents got terminated and the possession of the outlet was handed over to M/s Om Filling Station (Respondent No. 8 herein), they filed an application for withdrawal of the suit and by order dated 22.02.2006, the said suit was withdrawnf) Thereafter, the respondent-Firm filed a writ petition being C.M.W.P. No. 26181 of 2006 before the High Court for quashing the termination order dated 18.01.2006. By impugned judgment dated 09.10.2009, the High Court allowed the petition and quashed the termination order and directed the BPCL to restore the dealershipg) Aggrieved by the said order, the BPCL filed a Review Petition being No. 286203 of 2009 before the High Court. The High Court, by order dated 06.11.2009, dismissed the said review petitionh) Being aggrieved by the judgment dated 09.10.2009 for restoring the dealership and order dated 06.11.2009 dismissing the review petition, the appellant-BPCL has filed these appeals by way of special leave.

Court's reasoning:
10) It is rightly pointed out that the samples were not tested in any government laboratory and these tests were conducted in thes laboratory itself. Therefore, in order to satisfy the conscience of the dealer about the authenticity of the tests so conducted, it has been contemplated in the Guidelines that on the request of the dealer, the test(s) could be conducted in his presence. In Hindustan Petroleum Corporation Ltd. & Ors. vs. M/s Super Highway Services & Anr., (2010) 3 SCC 321 , this Court held that the Guidelines being followed by the Corporation require that the dealer should be given prior notice regarding the test so that he or his representative also can be present when the test is conducted. The said requirement is in accordance with the principles of natural justice and the need for fairness in the matter of terminating the dealership agreement and it cannot be made an empty formality. Notice should be served on the dealer sufficiently early so as to give him adequate time and opportunity to arrange for his presence during the test and there should be admissible evidence for such service of notice on the dealer. Strict adherence to the above requirement is essential, in view of the possibility of manipulation in the conduct of the test, if it is conducted behind the back of the dealer. It was further held that the cancellation of dealership agreement of a party is a serious business and cannot be taken lightly. As pointed out in the said decision, in order to justify the action taken to terminate such an agreement, the authority concerned has to act fairly and in complete adherence to the rules/guidelines framed for the said purpose11) It is further seen that after sealing of the petrol pump in the night of 22.08.2005 by respondent No.6 herein, the respondent-dealer waited for the result but no copy of the same was given to them. Since the dealer suspected some foul game on the part of the said officer, they filed Civil Suit being O.S. No. 695 of 2005 before the Civil Judge (Senior Division), Saharanpur seeking injunction against the interference with the sale and supply of petroleum products. It is brought to our notice that immediately upon filing of the said suit, on 31.08.2005, the BPCL supplied one copy of the report alleging it to be of the samples collected from the RO. The respondent-Firm did not believe the said report and requested for fresh sampling of products and examination by some independent laboratory. As the respondent-Firm did not get any response, they filed an application in the pending suit seeking collection of fresh samples from the sealed tanks in the presence of Court Commissioner and its examination by an independent agencyIn view of the Dealership Agreement, particularly, clause 10(k) referred above, the contention of learned senior counsel for the BPCL is liable to be rejected. In terms of Section 20 ofthe Petroleum Act, 1934 the contesting respondents had a right to have fresh samples drawn and get the same re-tested within seven days of intimation of the test results. It is the assertion of the contesting respondents that the test reports were intimated to them only upon filing of a suit before the trial Court. After getting the above reports, on 02.09.2005, the contesting respondents moved an application before the trial Court in the said suit for fresh sampling/retest of the products. Though an objection was raised for filing counter statement in the said application, it is brought to our notice that in spite of several opportunities given by the Court, no such objection was ever filed. It was further pointed out by learned counsel for the contesting respondents that they timely exercised their right available in law. In view of the application filed by the contesting respondents on 02.09.2005 and in the light of Section 20 of the Petroleum Act,1934 as well as the terms of Dealership Agreement, the objection raised by learned senior counsel for the BPCL is liable to be rejected14) It is also pointed out that it was respondent No.6 herein who made the inspection, collected the samples, issued show cause notice and passed an order of cancellation of the Dealership Agreement/Licence. By impleading him as one of the respondents - respondent No.4 in the High Court – specific allegations were made against him that he acted mala fidely in cancelling the same and those assertions cannot be lightly ignored.