Sakthi Enterprises(Rangaiah Chetty Service Station) v. Union of India

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 18.12.2009CORAMTHE HONOURABLE MR. JUSTICE N. KIRUBAKARANW.P.No.5512 of 2003Sakthi Enterprises(Rangaiah Chetty Service Station),Thirupathi Road,Thiruthani-631 209, Thiruvallur District,rep.by its partner Mr.E. Anbalagan.. PetitionerVs.1. Union of India rep.by Secretary to Government, Ministry of Petroleum, Oil and Natural Gas, New Delhi.2. IBP Company Ltd., rep.by its General Manager, 10, Mayor VR. Ramanathan Road, Chetpet, Madras-600 031.3. The Divisional Manager, IBP Company Ltd., 10, Mayor VR, Ramanathan Road, Chetpet, Madras-600 031. .. RespondentsThe Writ Petition has been filed Under Article 226 of theConstitution of India for issuance of a Writ of Certiorari, to callfor the records of the second respondent in REF:CD/MDS/15 dated12.02.2003, terminating the dealership agreement with the petitionerand quash the same.For Petitioner: Mr.V.R.ShanmuganathanFor Respondents: Mr.M.Gopikrishnan Central Government Standing Counsel for R1 Mr.R.Ravi for R2 & R3 https://hcservices.ecourts.gov.in/hcservices/ ORDERThe petitioner has challenged the termination of retaildealership agreement.2. The case of the petitioner is that he is a dealer in thepetroleum products of the second respondent and petitioner'spredecessor Mr.Kulasekharan entered into dealership agreement withthe second respondent on 23.04.1987. The said Kulasekharan wasappointed as dealer with effect from 24.09.1978. Thereafter the saidproprietary concern was converted into Partnership Firm and is rununder in the name of Sakthi Enterprises (Rangaiah Chetty ServiceStation) till date.3. The supply of petroleum is governed by Motor Spirit and HighSpeed Diesel (Prevention of Malpractice in Supply & Distribution)Order, 1998 which has been passed as per the Essential CommoditiesAct. The sale of petroleum products are governed by MarketingDiscipline Guidelines which are enforced by the oil industry toensure that marketing of petroleum products particularly in Retailare carried on principles of highest business ethics and excellencecustomer service and customers receive products of the right qualityand quantity, dealers follow the correct and safe practices inhandling and dispensing the petroleum products with higher customerexpectations and to ensure quality of products and service.Marketing Discipline Guidelines have been framed and are beingrevised to enforce stricter measures of discipline among theleadership network to achieve the said objectives and to preventmalpractices in the sale of petroleum products. The rights andliabilities of the dealership is governed by Marketing DisciplineGuidelines issued by the Oil industry where punishment/penalties areprescribed in the guidelines.4. The petitioner and second respondent are governed bydealership agreement and the dealership agreement was made on23.04.1987. The responsibilities of the dealer is incorporated inClause 12 of the agreement and the responsibilities of the company isincorporated in Clause 13. Clause 24 speaks about the violation andbreach of agreement would lead to punishments which are mentioned inClause 24.5. The petitioner has been getting supply from the secondrespondent regularly. There was a surprise inspection by theofficials of the second respondent on 07.01.2003 and samples weretaken and the density test was conducted in the bunk itself and itwas found to be below the specification. During inspection, theofficers would draw the samples in six alumnium containers. Out ofthe said samples, two are required to be given to the dealer, two are https://hcservices.ecourts.gov.in/hcservices/ to be retained by the Company and the other two required to be sentto the Lab for further test.6. From the samples taken on 07.01.2003, the second respondentsent lab samples to Chennai Petroleum Corporation Limited (FormerlyMadras Refiners Limited) for test. Based on the result, a show causenotice on 29.01.2003 was issued to the petitioner stating thatsamples taken on 07.01.2003 were sent to lab for RON test on10.01.2003 and it was found to be below the specification namely 83instead of 87. A reply was given by the petitioner on 05.02.2003and not satisfied with the reply,the second respondent terminated thedealership agreement dated 26.09.1978 by order dated 12.02.2003. Thesaid order is being challenged before this Court.7. Mr.V.R.Shanmughanathan, learned counsel for the petitionersubmitted that on 07.01.2003 the outlet was visited by the officialsof the second respondent Company for taking samples and the officialsgave a clean chit as the samples satisfied the specification.Subsequently on the same day there was another surprise visit, whenthe petitioner was absent and some samples were taken in plasticcontainer and those samples were said to have been sent to the lab.Based on the test report petitioner's dealership agreement wasterminated. The learned counsel submitted that the second visit wasdone in the absence of the petitioner and contrary to the guidelines,the samples were taken in the plastic container. Moreover, hesubmitted that the petitioner is only selling the petroleum productswhich has been supplied by the second respondent and there is apossibility of adulteration during transportation of petroleumproducts by the private carriers. If the private carriers indulge inadulteration, consequently the petitioner should not been found faultwith. 8.The learned counsel for petitioner further submitted thatthe test was done in the lab which was not listed in the guidelinesand that no notice was given before inspection or about the lab testand no personal hearing was given before passing of the terminationorder and therefore the impugned order has been passed in violationof the principles of natural justice.9. Mr.R.Ravi, learned counsel for the second respondentsubmitted that dealers are governed by "Marketing DisciplineGuidelines" as well as dealership agreement. The MarketingDiscipline Guidelines are issued in the public interest to see thatthe general public are supplied standard unadulterated petroleumproducts and therefore the petroleum companies are making surprisevisits of the outlets. The periodical checks are done to see that thequality of the petroleum products is maintained. The learned counselfurther submitted that public duty is cast upon the petroleum https://hcservices.ecourts.gov.in/hcservices/ companies to make surprise visit so that the consumers are able toget quality products. 10.With regard to the submission made by the learned counselfor the petitioner, Mr.Ravi replied that there were no two visits asalleged and it was only one inspection by of the officials of thesecond respondent. Samples were taken from the petitioner's outletin aluminium containers as per the regulation and not in the plasticcontainers as alleged by the petitioner. 11. With regard to "RON" Test, Mr.R.Ravi, the learned counselfor the second respondent relied upon " The order Motor Spirit andHigh Speed Diesel (Regulation of Supply and Distribution andPrevention of Malpractice) order 1998 and especially Rule 5(5). Byrelying upon the said order, the learned counsel submitted thesamples should not only pass the density test but also other ScheduleI tests and therefore other requirements should also to be met by thesamples of the dealer. Repelling the contention of the petitionerthat the lab is where petitioner's samples were tested not mentionedin Schedule III of the order, the learned counsel for respondentreplied that the said lab namely Madras Refinery Laboratory, MadrasRefineries Limited, Manali, Chennai-600 019 is shown as item 58 inthe Schedule III of the order and therefore there is no violationwith regard to the choosing of the lab and the lab cannot be statedto be un-approved lab. In nutshell Mr.Ravi submitted that thetermination was made after following the due process of law andtherefore there was no violation of any kind.12. A perusal of the records would show that there is no disputewith regard to the surprise visit of the officials of the secondrespondent on 07.01.2003 to the petitioner's Bunk and taking ofsamples. Further, the learned counsel for the petitioner submittedthat there was two visits by the officials of the second respondentand however there is no proof regarding the same. It it was so,immediately after the visits, the petitioner should have objected twovisits. However, no such objection was raised and therefore thesaid contention is rejected and this Court comes to a conclusionthere was only one visit. Secondly, with regard to taking of thesamples in the plastic container as contended by the counsel for thepetitioner, Retail dealer investigation report dated 07.01.2003signed by the officials of the second respondent and counter signedby representative of the petitioner would show that the samples weretaken in aluminium containers as reflected in page 5 of the saidreport. The report itself is a proof of taking of samples in thealuminium container and the theory of taking samples in the plasticcontainer put forth by the petitioner is liable to be rejected. 13. It is seen from the records records that the samples weredrawn on 7-1-2003; test was conducted on 10.01.2003 and the result https://hcservices.ecourts.gov.in/hcservices/ was reported on 13.1.2003. The specification to be met in the "RON"test is 87 whereas petitioner's sample recorded only 83. The disputeis with regard to the "RON" test. Para 7 of the Reply sent by thepetitioner reads as follows: " 7. We with great respect submit, we do not knowwhat "RON" test is, how it is conducted? Etc. Ourretail out let is also not provided with any suchequipments. Hence how the standard and substandard arecalculated is un-understandable"The aforesaid reply to show cause notice would only show that thepetitioner pleads ignorance about RON test and the procedures beingfollowed by the oil industries. The petitioner also contended thatthe samples were not taken in the petitioner's presence and the saidcontention does not deserve consideration as petitioner'srepresentative who countersigned the report was present and the sameis revealed in the investigation report.14. Regarding the "RON" test, as rightly contended by the learnedcounsel for the second respondent, it is stated in Clause 5 of theRegulation 5 of the Motor Spirit and High Speed Diesel (Regulation ofSupply and Distribution and Prevention of Malpractice) order 1998,which reads as follows:-"The authorised officer shall send the sample ofthe product taken under sub clause(2) within 10days to any of the laboratories mentioned inSchedule III appended to this Order or such otherlaboratory as notified by the Government in theOfficial Gazette for this purpose, for analysiswith a view to checking requirements indicated inSchedule I."In that clause it has been specifically stated the samples arerequired to be sent to lab mentioned in Schedule 3 of the order forthe purpose of analysis to check whether the density and / or otherparameters of the products conform to requirements indicated inSchedule I. Schedule I speaks about the RON test which has beendescribed in V (a) which is referred as follows:-"v) Octane Requirements a) Research Octane number, Min 87 87 98 (P:27)A reading of the said order would make it clear that the sample shouldmeet the requirements/specification specified has stated in Clause 5of Regulation 5. When the order speaks about the said test namely"RON", it is not open to the petitioner to plead ignorance of thesame. The said regulation has been issued by the first respondent https://hcservices.ecourts.gov.in/hcservices/ Government exercising powers under Section 3 of the EssentialCommodities Act, 1955 (Central Act 10 of 1955). The aforesaid orderis binding on the petitioner. In fact he entered into dealershipagreement as per the order. Ignorance of law is not an excuse.Therefore the petitioner cannot be allowed to plead ignorance aboutthe order issued by the Ministry of Petroleum and the petitioner isbound by the order .15.The petitioner's sample failed to meet the specification andtherefore it is clear that the products sold by the petitioner Retailoutlet were not quality products. Regulations 2 of the order speaksabout the malpractice which is as follows:-e) "malpractice" shall include the followingacts of omission and commission in respectof motor spirit and high speed diesel:I.adulteration,II.pilferageIII.stock variation,IV.unauthorised exchange,V.unauthorised purchase,VI.unauthorised saleVII.Unauthorised possessionVIII.Over-chargingIX.Sale of off-specification productWhen the specifications as stated in the order were not met , thepetitioner was rightly found to have violated the terms andconditions and as per Clause 24 of the Dealership Agreement, thedealership agreement is liable to be terminated. Based on the reportof the lab and after giving an opportunity to the petitioner, thedealership agreement was rightly terminated and therefore the samecannot be found fault with.16.As far as the contention that there is possibility ofadulteration during transportation, Mr.R.Ravi submitted that duringdelivery of the products, the retailer is required to take samplesand if there is suspicion about the quality of the products, the samecould be tested and the dealer has not made any such request duringdelivery of products. Therefore he submitted that the said contentionis an after thought to get over the problem and the same is acceptedby this court.17. The learned counsel for the petitioner submitted that anopportunity should have been given before passing the terminationorder. Based on the lab test, a show cause notice dated 29.1.2003enclosing the report was issued to the petitioner and reply dated5.2.2003 was also given by the petitioner. Therefore this Courtcomes to the conclusion that by giving a show cause notice, https://hcservices.ecourts.gov.in/hcservices/ principles of natural justice have been complied with and thereforethere is no question of giving any further opportunity to thepetitioner. 18. Clause 1(d) of Chapter VI of the Marketing DisciplineGuidelines reads as follows:-"If the sample passes the lab test, including RONin case of MS, sales and supplies of all products,if suspended earlier, will be resumed to thedealer immediately.If the sample is certified to be adulterated, afterlaboratory test, a show-cause notice should beserved on the dealer and explanation of the dealersought within 7 days of the receipt of the show-cause notice. If the explanation of dealer is notsatisfactory, the Company should take action asfollows:i)Fine of Rs.1 lakh and suspension of sales andsupplies for 45 days in the first instance.ii)Termination in the second instance."As per the said clause only the petitioner was given a show causenotice and since the explanation was not found to be satisfactory,the termination was given. Apart from that, Mr.Ravi, the learnedcounsel for the second respondent submitted that the dealer was foundto be indulged in malpractice for the second time and he produced thefile which proved that there was a surprise visit on 15.09.2000 andthe sample drawn on the day did not meet specifications as stipulatedin Motor Spirit and High Speed Diesel control order 1998. A showcause notice was issued and after receiving the reply, the secondrespondent took lenient view and passed an order of stoppage ofsupply for 45 days. Mr.Ravi submitted that usually, the secondrespondent would not take any step to terminate the dealership, ifthe dealer is found to be at fault for the first time and only onsubsequent instances of malpractice the dealership agreement is beingterminated following the procedure. Since it happened for the secondtime, the second respondent was left with no other option except toterminate the dealership agreement of the petitioner.19. The termination orders have been passed only in the interestof the public and it is the duty of the petroleum companies to supplyquality products through their dealers and it is bounden duty of thecompanies to verify the quality of the petroleum products sold by thedealers regularly. It is the responsibility of the officials of thepetroleum companies to see that adulterated products are not sold bythe dealers as it would affect the public. 20.The Hon'ble Apex Court in M.C.Mehta vs. Union of India https://hcservices.ecourts.gov.in/hcservices/ reported in AIR 1998 SC 2963 referred about the white paper publishedby Government of India which states that 70% of air pollution iscontributed by vehicles. In that case certain directions were givenfor controlling pollution of air. The adulteration of the petroleumproduct is one of the reasons for air pollution and is not good forenvironment and for mankind in particular. Apart from that, theadulterated products affect the speed of the vehicles. It is provedthat substandard petroleum products would affect the mechanism of thevehicle resulting in more accidents. Adulterated petroleum productsis one of the causes for noise pollution also. The Hon'ble SupremeCourt in In Re:Noise Pollution with Forum Prevention of Environment &Sound Pollution vs. Union of India and another reported in AIR 2005SC 3136 declared right to life under Article 21 includes Freedom fromnoise pollution. 21. Therefore the respondent's duty assumes more important tocheck the quality of the petroleum products. It is common knowledgethat more vehicles are added on road every day in our country andaccidents are raising alarmingly due to speed driving, drunkendriving, violation of road rules etc. The adulterated products wouldfurther compound the problems . Therefore, in the interest of thepublic, the dealership of the petitioner who is found to be sellingadulterated products has to be terminated. The respondent rightlyterminated the dealership agreement of the petitioner and therefore,the writ petition is dismissed. No order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarssjTo1. The Secretary to Government,Union of India Ministry of Petroleum, Oil and Natural Gas, New Delhi.2. The General Manager,IBP Company Ltd., 10, Mayor VR. Ramanathan Road, Chetpet, Madras-600 031. https://hcservices.ecourts.gov.in/hcservices/

3. The Divisional Manager, IBP Company Ltd., 10, Mayor VR, Ramanathan Road, Chetpet, Madras-600 031.+1cc to Mr.VR Shanmuganathan, Advocate Sr 70149+1cc to Mr.R.Ravi, Advocate Sr 69610+1cc to Mr.M.Gopikrishnan,CGSC, Sr 69589PA(CO)km/19.10.W.P.No.5512 of 2003