Indian Oil Corporation Ltd. v. M/s Swantika & Ors.

breach of terms. On 14.12.2009 (Annexure P/5), and further on 23rd December 2009 (Annexure P/7) replies were submitted by Dealer alleging that fittings were apprehended to be the result of a conspiracy of two employees (respondent no.2 and 3) of the Company. Vide order dated 15/01/10 dealership of Dealer was terminated by the Company.

3. Clause 7(b) of agreement of dealership holds the dealer solely responsible for any act of his employees or agents etc. found to have been done in contravention of any Acts, Rules, Regulations etc. Clause 34 of agreement prohibits the dealer to make short supply to customers. Clause 42 authorizes the officers of Company and their representatives to enter the premises of an outlet and to make the inspection to check the records or supplies or both, as and when required. Clause 45 of deed authorizes the Company to terminate the dealership in appropriate cases. There is a specific provision in the agreement for the dealer to observe the marketing discipline guidelines (MDG for short) also.

4. There is an arbitration clause in the agreement for resolving disputes and differences of any nature between the parties.

5. According to Clause 2(f) of Motor Spirit and High Speed 3 W.A.No.339/2011 Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 1998, 'short-delivery' is defined as a malpractice. Officers of Oil Company not below the rank of a Sales Officer is authorised to make search and seizure in this respect. Communication dated 15.11.2006 Annexure RJ/1 issued by Secretary, Food & Civil Supplies Department, Government of M.P. addressed to all Collectors speaks that prosecution for short supply etc in contravention of provisions of Weight & Measurement Act, 1976 should be based on the inspection by Authorised Inspector only and harassment of dealers should be avoided. Powers and authority of the Company to enter in the premises and to make inspections etc. as per Clause 8(i) of the Agreement is not curtailed.

6. According to Marketing Discipline Guidelines, 2005 penal actions for malpractices are provided. In cases of short delivery of products where the Weight & Measurement Departments seals found intact in dispensing pumps, a lesser punishment is proposed, but where the seals of Weight & Measurement Department are tampered or unauthorised fittings etc. found in the Dispensing Unit, the only penalty prescribed is the termination of the agreement.

7. It is submitted by learned counsel for the respondent that just a day prior to the inspection, i.e. on 11.11.2009 Dispensing Pump Service Unit visited the premises and submitted report of preventive maintenance and found everything fine and correct (Annexure P/2). Therefore, inspection dated

12.11.2009 should not be relied upon because it is not free from suspicion and doubts. He submitted that his Premises has been visited without prior intimation or notice in a mala-fide manner. Reliance has been placed on 2010 (3) SCC 321 (Hindustan Petroleum Corporation and others vs. Super High Way Services and another) wherein check was conducted at the outlet of a dealer and the sample of high speed diesel failed the marker test. Such marker test was 4 W.A.No.339/2011 performed without giving the notice to the dealer. It was held that failure to give notice and consequent opportunity to be present during the test was violative of natural justice principles. The said authority does not lay down (for reasons to obvious to require mention) that prior notice should be given before surprise inspections. In the present case, officers of the Company visited the premises and inspected the dispensing pumps. There is a lot of difference between performing the marker test and making an inspection. Factually in this case there appears no lack of opportunity of participating in the proceedings of inspection by the dealer. Inspection report Annexure P/3 running in four pages has been prepared on the spot and is duly signed by the dealer.

8. In the present case, Annexure R-3/3 letter dated

13.11.2009 of dealer is very significant wherein existence of undue fittings has been categorically admitted by the dealer. The fact of short supply by dispensing pumps found place in the inspection note Annexure P/3 itself prepared on the spot and signed by the dealer. We find no substance in the contention of learned counsel for the respondent that the inspection was performed without his knowledge behind his back and dealership has been terminated without proper opportunity of hearing. Surprise inspection will lose its relevance, if it is done after giving prior notice.

9. It is pertinent to note that termination is based on the mischief committed by the dealer by putting the device of on/off switches on pump for short supply. Hence, according to Marketing Discipline Guidelines, 2005, no other punishment is provided except termination of dealership.

10. On bare perusal of dealership agreement Annexure R-3/7, panchnama Anenxure P/3, earliest response submitted by dealer Annexure R/3 and in view of the provisions of Motor Spirit and High Speed Diesel (Regulation of Supply, 5 W.A.No.339/2011 Distribution and Prevention of Malpractices) Order, 1998 as well as Marketing Discipline Guidelines, 2005, it becomes amply clear that an electrical device has admittedly been found attached with the dispensing pumps, and it was meant for short supply and entire panchnama proceeding was completed in presence of the dealer. Dealership has been terminated after issuance of show cause notice and after considering the replies of the dealers submitted by him in this respect.

11. We are conscious that alternative remedy is not always a bar to the writ jurisdiction of this Court. But in the present case a highly disputed question of pure fact has been raised by the Dealer herself. The question is whether such fittings were got installed at the behest of the Dealer who would directly benefit from the short supply, or it was done by some other person without the knowledge of the Dealer. Such a highly disputed question of pure fact needs evidence, and cannot be adjudicated in writ jurisdiction. Writ jurisdiction has its own limitations whereas arbitration clause in the agreement is more elaborate and appears to be effective in the present case. If Dealer is found using some extra device or fittings for short- supply of fuel to the customers, then the Company has no option to award lesser punishment but has to terminate the dealership. In the above view of the matter we are not expressing any opinion upon the correctness or incorrectness of the defence, and leave it to be decided upon evidence at the arbitration if sought.

12. Because of what is stated above, the impugned order of learned Single Judge is unsustainable and is hereby set aside. Appeal is allowed with a liberty to parties to avail the arbitration remedy, if they so desire. (Sushil Harkauli) (Tarun Kumar Kaushal) Acting Chief Justice Judge