G V BHUSHAN Vs. UNION OF INDIA

JUDGEMENT

(1.) (This Writ Petition is field under Article 226 and 227 of the Constitution of India, praying to declare the order dated: 11.8.2006 issued by the respondent company vide Annexure-B, B1, B2 dated: 11.8.2006 suspending the sales and supplies of petrol and petroleum products to the petitioners retail outlet is illegal and void and set-aside the same and etc.,) These petitions having been heard and reserved on 16.09.2009 and coming on for pronouncement of orders this day, the Court delivered the following: These petitions are heard and disposed of together having regard to the common issues that arise for consideration notwithstanding some variance on facts in each of the cases:

(2.) The facts of each of the cases are briefly narrated hereunder: The petitioners are retail outlet dealers of petroleum products. The said products are sold at their Filling and Service Stations. Respondents 2 to 5 are companies registered under the Companies Act, 1956 and are all Government Companies within the meaning of Section 617 of the Companies Act, 1956. The objectives of the said respondents is to sell and distribute petroleum products through retail outlets such as that of the petitioners. In most cases, the said respondents themselves develop and provide the necessary infrastructure at the retail outlets. The petitioners had entered into independent dealership agreements with respondent No.2. They are Standard Form Contracts. The petitioners have no say as regards the terms and conditions of the said contracts. The Union of India, acting under Section 3 of the Essential Commodities Act, 1955, has issued an Order called the Motor Spirit and High Speed Diesel (Regulation of Supply and Distribution and Prevention of Malpractices) Order, 1998. (hereinafter called the MS & HSD Order for brevity). The said Order deals with practices and safeguards to be adopted in the process of supply, distribution, sale and search of petrol and diesel. Apart from the above, the Petroleum Act, 1934 and Rules made thereunder govern the import, production, refining transfer. Search and blending of petroleum products. Further, the manner in which the dispensing units, installed at the retail outlets are to be operated and maintained is provided for by the Standard of Weights and Measures Act, 1976 and the Rules thereunder. During the pendency of the petition, the MS & HSD Order of 1998 has been repealed and replaced by the MS & HSD Order 2005. BY the MS & HSD Order 2005, additional parameters were incorporated as regards quality and the quantity conforming to delivery documents of the products and the requirements of the Bureau of Indian Standard Specifications. It is the case of the petitioners that insofar as the supply, distribution and the maintenance of quality etc., of the petroleum products are concerned, the same are completely governed by the Petroleum Act and Rules and the Weights and Measures Act. Hence, the MS & HSD Order 2005 framed under the Essential Commodities Act was ultra vires and unconstitutional. To add to this respondents 2 to 5 have framed what are known as Marketing Discipline Guidelines ((hereinafter referred to as MDG for brevity). Under the MDG prescribe elaborate procedural formalities to be followed by the dealers in the course of supply, distribution, handling, storage and sale of the products. The said MDG have no statutory basis and are arbitrarily imposed on the petitioners and other dealers. The same provide for penalties such as suspension of sale, fines and termination of the dealership itself. The petitioners seek to challenge the guidelines as being violative of Article 14 and 19(1)(g) of the Constitution of India. The petitioner is a dealer of petroleum products, vending the same through a retail outlet under a dealership agreement with M/s IBP company Limited (the first respondent) since the year 1987) It is stated that on 21.9.1999, the petitioner was supplied with 8000 kilo litres of petrol from the depot of the first respondent. On 23.9.1999, an inspection squad of the respondent oil companies visited the outlet of the petitioner and took samples of the petrol in storage as well as samples of the petrol delivered by tankers at the time of delivery which are required to be preserved and on the allegation that the samples of petrol in storage did not conform to specification in respect of a distillation test was served with a notice dated 11.10.1999, calling upon him to show - causes as to why action ought not to be taken in terms of the dealership agreement. The notice was received by the petitioner on 23.10.1999 and the petitioner replied on 25.10.1999 bringing to the attention of the respondents that the samples of supplied and stored were the same and that was no scope for adulteration at the outlet. The first respondent however, ordered for suspension of sales for 45 days at the petitioners outlet purportedly in terms of clause-12 of the dealership agreement. The petitioner, therefore seeks to challenge the propriety of the suspension and the validity of the MS HSD Order as well as the MDG. The petitioner, is a dealer in petroleum products engaged by M/s Bharath Petroleum Corporation Limited (the first respondent) under a dealership agreement. The petitioners retail outlet was said to have been inspected by the personal of the first respondent on 11.10.1999 with an industry Mobile Laboratory and they had taken samples of petrol. Subsequently, on 16.10.1999, the petitioner was served with a show-cause notice calling upon the petitioner to show-cause as to why action should not be taken against the petitioner as the samples take from his outlet did not conform to specifications prescribed. The petitioner, in turn, had denied that he had committed any adulteration it was brought to the respondents attention that he had no way of testing the product. The respondent having thereafter passed an order of suspension of the sales and supplies of all products at the petitioners unit for a period of 45 days the petitioner has challenged the order and the constitutional validity of the MS and HSD Order as well as the MDG. The petitioner is a dealer under M/s IBP Company Limited, the first respondent herein, having been appointed under an agreement of the year 1995. It is claimed that officials of the respondent company visited the petitioners outlet and drew samples for testing and was later served with a notice to show cause as to why action ought not to be taken for violation of the dealership agreement since the sample allegedly did not meet the specified standards. Inspite of an appropriate reply by the petitioner the respondent company imposed a penalty of suspension of sales for 45 days it is this which is under challenge. The petitioner is a dealer of petroleum products of M/s Bharath Petroleum Corporation Limited, the first respondent in this petition and was appointed as such to manage a retail outlet under a dealership agreement dated 19.4.1997. It is the case of the petitioner that on 23.5.2000 petrol was supplied from the storage unit of the respondent. The density test carried out showed it matched with the required specification. It transpires that on the next day, an official visited the outlet and had taken a sample of the same petrol without following the proper procedure and had issued a show-cause notice to the effect that test reports revealed that the motor spirit sample failed to meet the specification with regard to final boiling point and was placed under threat of cancellation of the agreement. And without affording a further opportunity to the petitioner of affording a defence and even without any allegation that the petitioner was in any way responsible for the variation in the sample the supply and sales at the outlet stood suspended indefinitely. It was only after six days that the petitioner was served with an order of suspension of sales and supplies for a period of 45 days. The petitioner is a dealer of IBP company under an agreement dated 25.2.1991. It is the petitioners case that on an inspection by the respondent companys Anti-Adulteration Cell, it had opined that the High-Speed Diesel Stock at the outlet was beyond permissible limit and a motor spirit sample having been collected and sent for test and on obtaining an alleged Lab report it was recorded that the sample had failed the test. And after issuing a show-cause notice dated 26.2.2003 and without waiting for any reply of the petitioner, an order was passed suspending the sale and supply of products to the petitioners outlet for a period of 30 days and imposed a penalty of Rs.20,000/-. The petitioner is a dealer of the Hindustan Petroleum Corporation the second respondent herein since the year 1952. On 23.12.2002, a Mobile Checking Squad of the respondent company visited the retail outlet of the petitioner and drew samples of the motor spirit in stock with the petitioner and a report was submitted allegedly on the basis of the said sample to the effect that the boiling point was above the prescribed standard and therefore was adulterated. On a request by the petitioner, a second test is said to have been conducted and a report was said to have been sent under cover of a letter dated 25.2.2003 by the Senior Regional Manager of the respondent company to the same effect, but with a greater variance with the prescribed standard. Consequently, the second respondent company had imposed a penalty of Rs.20,000/- and passed an order suspending sales at the retail outlet for a period of 30 days which is challenged in the present petition. The petitioner is a dealer under M/s Hindustan Petroleum Corporation Limited, the second respondent herein and was so appointed under a dealership agreement dated 7.2.1996. It is alleged that on 19.5.2003, an officer of the respondent company inspected the petitioners retail outlet and drew samples of the petrol in stock and it was reported by the said officer that on the same being subjected to laboratory test it was allegedly found not to be in conformity with prescribed standards. The explanation of the petitioner disowning any responsibility insofar as the sample not matching the specified standards was rejected and the petitioner was imposed a penalty of Rs.20,000/- and sales were suspended for a period of 30 days. It is this which is under challenge. The petition is dismissed as withdrawn vide memo dated 13.7.2006. The petitioner is retail dealer under the Indian Oil Corporation having been appointed under a dealership agreement dated 13.11.1984. The petitioners retail outlet was subjected to an inspection on 18.8.2004 and it was found that there was a discrepancy in entering the density of motor spirit in the register maintained for this purpose by the petitioner. Hence, samples were drawn by the officer of the respondent company and sent for analysis. The respondent company thereafter proceeded to order suspension of sales for 30 days and imposed a fine of Rs.20,000/-. Though this action was successfully challenged in proceedings before this court, the same punishment was imposed on the basis of a subsequent hearing afforded to the petitioner. It is this which is under challenge. The petitioner is a dealer under the second respondent Indian Oil Corporation. It is alleged that the retail outlets of the petitioner was inspected by an officer of the respondent- company on 18.4.2004 and samples were drawn of the motor spirit in stock to be subjected to Laboratory tests and it was thereafter belatedly reported that the sample did not conform to prescribed standards. And inspite of the best efforts of the petitioner to establish his innocence- punishment of a penalty and suspension of sales was imposed which is sought to be questioned herein. The petitioner is a retail dealer of the products of Indian Oil Corporation, the second respondent herein. The petitioners retail outlet is said to have been inspected on 11.8.2006 by officers of the second respondent-company. It is claimed that the totalizer sealer affixed to the petrol pump was measured with by an unauthorized person accompanying one of the officers and in order to cover up this inadvertence, the petitioner was compelled to submit an untrue statement offering an explanation for the broken seal though there was no fault on her part. Though proceedings were initiated against the petitioner the same were terminated after accepting the petitioners explanation. However, the respondent- company has imposed a penalty of Rs.50,000/- which is without basis. It is this which is sought to be challenged. In the above facts, in each of these cases, the contentions on which the petitions are brought are identical. The petitioners in one capacity or the other, are dealers appointed under agreements to run retail outlets. The contract is a standard form contract in every single case. The respondent- Oil companies have jointly framed what are called Marketing Discipline Guidelines. These guidelines lay down various procedural formalities to be followed in the course of supply, distribution, handling, storage and sale of petroleum products. The petitioners seek to question the constitutionality of MSHSD Order and the MDG as being violative of their fundamental rights.

(3.) Shri Ravi Vaarma Kumar, Senior Advocate, appearing for the counsel for the petitioners contends as follows: The filed pertaining to the supply, distribution and maintenance of quality and quantity of petroleum products are governed by the provisions of the Petroleum Act, 1934 and the Rules made thereunder, the Standard of Weights and Measures Act, 1976 and the Rules made thereunder, the Essential Commodities Act, 1955 and the Motor Spirit and High Speed Diesel (Regulation of Supply and Distribution and Prevention of Malpracties) Order 2005 framed under Section 3 of the Essential Commodities Act. It is pointed out that the above statutes cover the entire filed pertaining to maintenance of the quality, Supply, distribution and the sale of petroleum products in the face of which, the several public sector Oil marketing companies have together framed what are termed as marketing Discipline Guidelines to be adhered to by the retail outlets, such as those run by the petitioners. These guidelines seek to supplement and elaborate the procedural formalities to be followed in the course of supply, distribution, handling, storage and sale of petroleum products. It is contended that the guidelines provide for imposition of penalties, which include suspension of sales, fines and even termination of dealership. The same are unilateral and are issued without authority of law. None of the aforesaid statutes contemplate or authorise the framing of such guidelines and are therefore unconstitutional as being in violation of Articles 14, 19(1)(g), 19(6) and 21 of the Constitution of India. The onerous and irrational character of the MDG is sought to be highlighted by reference to a few of the instances in respect of which the Oil Companies have given unto themselves the power to penalize the petitioners. The dispensing units at the retail outlets are owned and maintained by the Oil companies. The same are caliberated and are armed which seals installed by authorities under the SWM Act. Hence, any instance of short supply can be dealt with under the mechanism provided under the SWM Act. Hence, the guidelines prescribing heavy penalties on the dealers on alleged erratic delivery by the dispensing units, which are incidentally duly certified by the Oil companies, is arbitrary and illegal as the possible malfunctioning of the dispensing units owing to varies factors such as, climatic conditions, erratic power supply and the Oil companies own want of quality maintenance in certifying the units is completely discounted and overlooked. There are guidelines which prescribe penalties for alleged discourteous behaviour by sales person, non- provision of first- aid and toilet facilities. As the retail outlets are established by the Oil companies, the continued existence of the infrastructure is really the responsibility of the Oil companies. Though the employees at the retail outlets are to maintain a minimum level of courtesy- the power to impose penalties on alleged mis-behaviour and discourtesy is arbitrary and at the will of the Oil companies. In establishing the retail outlet, the design and layout of the storage tanks, the dispensing units and other infrastructure is decided by the Oil companies and statutory permission is obtained under the Explosives Act, 1884, the dealers have no say in this aspect of the matter. However, the MDG now provides that if any action is taken by the authorities under the Explosives Act, 1884 for any discrepancy, the Oil companies can terminate the dealership on that ground. Though the Indian Standard methods of sampling of petroleum and its products provides the manner in which samples are to be collected, depending on the product, the MDG provides unbridled power to the officials of the Oil companies to collect samples for purposes of ascertaining quality or other parameters- exposing the dealers to punishment under the MDG on the basis of unfair and inaccurate reports on account of improper collection of samples of products. The MDG does not provide for any remedy by way of an appeal or revision on a decision taken by the officers of the Oil companies this is opposed to law and has made the Oil companies totally authoritarian. The MDG provides for penal measures which are inconsistent with the statutory provisions governing the activity of the petitioners and is thus clearly illegal and unconstitutional. Under Article 19(6) of the Constitution of India, the rights guaranteed under 19(1)g can be restricted under two conditions namely, the restrictions should be reasonable and can only be brought about by legislation. In the absence of any legislative sanction to the MDG they are liable to be struck down as being unconstitutional. The MDG being a humungous, gloss sought to be placed on the statutory provisions and the contractual obligations binding the petitioners are clearly draconian and are an abuse of power by the Oil companies.