U.O.I Vs SUDDI
Bench: P. SATHASIVAM,M.Y. EQBAL
Case number: C.A. No.-000039-000039 / 2014
Diary number: 35145 / 2009
Advocates: B. V. BALARAM DAS Vs
ABHA JAIN
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOs. 3838-3839 OF 2013 (Arising out of SLP (C) Nos. 31536-31537 of 2009)
Bharat Petroleum Corporation Ltd. .... Appellant (s)
Versus
M/s Jagannath & Co. & Ors. .... Respondent(s)
J U D G M E N T
P. Sathasivam, J.
1) Leave granted.
2) These appeals have been filed against the final
judgment and order dated 09.10.2009 passed by the High
Court of Judicature at Allahabad in C.M.W.P. No. 26181 of
2006 and order dated 06.11.2009 in Civil Misc. Review
Petition No. 286203 of 2009. By judgment dated
09.10.2009, the High Court allowed the writ petition filed by
the contesting respondents herein and quashed the order
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dated 18.01.2006 passed by the Territory Manager (Retail),
Meerut, BPCL terminating the dealership licence of the outlet
of respondent No.1-Firm and directed restoration of their
dealership. Review petition filed by the appellant herein
against the said order was also dismissed on 06.11.2009 by
the High Court.
3) Brief facts:
a) The appellant – Bharat Petroleum Corporation Ltd. (in
short “BPCL”) 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 24.07.1975.
b) It is the case of the BPCL that on 22.08.2005, a routine
inspection of the said RO was conducted by a team
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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 specifications.
c) 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 injunction.
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d) 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 witnesses.
e) 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 withdrawn.
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f) 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 dealership.
g) 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 petition.
h) 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.
4) Heard Mr. Sudhir Chandra, learned senior counsel for
the BPCL, Mr. Shanti Bhushan, learned senior counsel for
Respondent No-1, Mr. R.P. Gupta, learned counsel for
Respondent No. 3 and Mr. Harish Chandra, learned senior
counsel for the Union of India.
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5) Before going into the contentions, learned counsel for
the contesting respondents highlighted the background of
the case as a long and chequered history in order to
consider the stand put forth by them. As per the information
furnished, it is seen that 37 years back, vide agreement
dated 24.07.1975, M/s Burmah Shell Oil Storage &
Distributing Company (now BPCL) has entered into a
dealership agreement with the respondent-firm. Since its
beginning in the year 1975, not even a single deficiency has
been reported in the matter of measurement or purity either
by the parent company – M/s Burmah Shell or by the BPCL
during the course of regular inspection carried out every
month. It is also pointed out that only once a notice was
issued on 09.03.1995 for lesser sales. It is also pointed out
that on 22.08.2005, one Amit Garg, impleaded as
respondent No.4 in the High Court (respondent No.6 herein),
who was holding the post of Territory Manager (Retail),
Meerut and against whom allegations of mala fide had been
made in paragraph Nos. 11 & 12 of the writ petition, has
conducted regular inspection and found no deficiency in the
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measurement. However, he took into custody Sales and
Density Registers and collected 8 samples – two samples of
ULP from ULP 20KL Tank, two samples of ULP from 10KL
Tank, two samples of Speed from Speed Tank, one sample of
HSD from HSD Tank and one sample from barrel. After
collecting the samples, he sealed all the five pumps, viz.,
two of ULP, two of Speed and one of HSD. It is pointed out
that although, in total, eight samples were collected but
respondent No.6 herein has filed photocopies of only seven
sealed covers of wooden containers duly signed by the
dealer but the photocopy of one of the two samples of ULP
collected from 10KL Tank has not been filed.
6) Mr. Sudhir Chandra, learned senior counsel for BPCL,
after taking us through the impugned order of the High
Court, submitted that in view of the perversity in the
conclusion, the same has to be interfered with. On the other
hand, Mr. Shanti Bhushan, learned senior counsel for
respondent No.1-Firm, submitted that inasmuch as the BPCL
failed to follow the principles of natural justice contrary to
Section 20 of the Petroleum Act, 1934 and Marketing
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Discipline Guidelines, 2005 (in short, “the Guidelines”), the
High Court was fully justified in setting aside the order of
termination and no interference is warranted exercising
jurisdiction under Article 136 of the Constitution of India.
7) In view of the above, it is important to consider the
relevant provisions of the Guidelines. As per clause (c) of
para 2.4.5 of the Guidelines, the samples so collected would
be sealed and labeled and the labels so pasted over the
containers must have the product name, name of the retail
outlet, package type, sample source, quantity of sample,
sampling date, batch number etc., and should be jointly
signed by the dealer or his representative(s) and the
Inspecting Officer. As per clause (a) of para 2.4.5, the
Inspecting Officer has to draw three samples from one tank–
one for the dealer, second for the Company and the third will
be sent to the Laboratory for testing. In order to ensure that
all the three containers are containing samples from the
same tank, all the three containers must have the same
batch numbers duly signed by the dealer and the Inspecting
Officer, otherwise it would be difficult to know as to whether
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the container left with the dealer was containing sample
from the same tank as has been sent for testing to the
laboratory. It is the complaint of the contesting respondents
that the said officer, however, allotted three different
numbers to the containers containing samples from the
same tank. Moreover, the BPCL has filed photocopies of the
labels pasted over 7 sealed containers duly signed by the
dealer, each containing aluminium container Nos. 008997,
008950, 008923, 008976, 008949, 008916 and 008952
along with wooden container Nos. 008960, 008957, 008923,
008976, 008949, 008916 and 008952 in which aluminium
containers have been placed. It is further pointed out by the
contesting respondents that these numbers do not co-relate
with the container numbers purported to have been sent by
the Inspecting Officer to the Laboratory because all the three
containers containing sample from the same tanker had
been differently numbered.
8) It is also demonstrated by the contesting respondents
that out of 8 samples so collected, only 5 samples were
tested by the Company Laboratory. Also, no explanation
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was given about the other three samples. It is the claim of
the contesting respondents that the BPCL has filed report in
respect of only 5 samples and report of 3 samples has either
been suppressed or has not been sent to the Laboratory and
only a forwarding letter has been filed. It is also highlighted
that the Laboratory has also not indicated the numbers of
the containers so tested in its report. In such circumstances,
as rightly pointed out, it is impossible to know which sample
has been tested by the Laboratory. It has also not been
mentioned in the report that the Laboratory has received the
samples in sealed covers and the seals were opened by
them as is the practice in every report received from
forensic laboratory. It is further highlighted that the absence
of container numbers in the report raises a doubt as to
whether the laboratory has tested the same samples as had
been sealed and counter signed by the dealer or some other
contaminated samples. These important questions were
raised before the writ Court alleging that the samples tested
were not of those collected from the respondent-Firm.
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9) In order to ensure fairness in testing the samples, it has
been provided in clause (D) of para 2.5 of the Guidelines that
in case of sample failure, in the event of request for testing
by the dealer, the same shall be tested at Company’s
Laboratory in the presence of representative(s) of the dealer.
The relevant extract of clause (D) of para 2.5 reads as under:
“In case of sample failure, in the event of request for testing by the dealer, the same to be considered on merits by the State Office/Regional/Zonal General Manager of the concerned Oil Company. If approved by GM, the sample of retail outlet retained by the dealer alongwith the counter sample retained with the Field Officer/Oil Company are to be tested as per the guidelines, preferably in presence of the Field Officer, RO dealer/representative and representative of QC department of the Oil Company after due verification of samples.”
10) It is rightly pointed out that the samples were not
tested in any government laboratory and these tests were
conducted in the company’s 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
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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 purpose.
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11) 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 agency.
12) In this regard, it is relevant to refer Section 20 of the
Petroleum Act, 1934 which reads as under:
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“20. Right to require re-test – (1) The owner of any petroleum, or his agent, who is dissatisfied with the result of the test of the petroleum may, within seven days from the date on which he received intimation of the result of the test, apply to the officer empowered under Section 14 to have fresh samples of the petroleum taken and tested.
(2) On such application and on payment of the prescribed fee, fresh samples of the petroleum shall be taken in the presence of such owner or agent or person deputed by him, and shall be tested in the presence of such owner or agent or person deputed by him.
(3) If on such re-test, it appears that the original test was erroneous the testing officer shall cancel the original certificate granted under Section 19, shall make out a fresh certificate, and shall furnish the owner of the petroleum, or his agent, with a certified copy thereof, free of charge.”
13) Though the appellant-BPCL protested the said
application contending that the said provision in the
Petroleum Act,1934 is not applicable and the very same
objection was raised by learned senior counsel for the
appellant before us, it is relevant to quote clause 10(k) of
the Dealership Agreement with which the parties are bound
is as under:
“10(k) - To abide by the Petroleum Act, 1934 and the rules framed hereunder for the time being in force as also in other laws, rules or regulations either of the Government or any local body as may be in force.”
In view of the Dealership Agreement, particularly, clause
10(k) referred above, the contention of learned senior
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counsel for the BPCL is liable to be rejected. In terms of
Section 20 of the 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 rejected.
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14) 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.
15) The High Court, after considering all the above specific
claims of the contesting respondents, rightly interfered with
the order of termination of the dealership agreement/licence
dated 18.01.2006 and quashed the same. We are in entire
agreement with the said conclusion. In view of the same,
the appellants are directed to implement the directions
given by the High Court in the impugned judgment dated
09.10.2009 within a period of four weeks from the date of
receipt of this judgment.
16) In the light of the above discussion, the civil appeals
are dismissed with no order as to costs.
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...…………….…………………………J. (P. SATHASIVAM)
.….....…………………………………J. (M.Y. EQBAL)
NEW DELHI; APRIL 12, 2013.
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