The court ruled that termination of a dealership based on unproven allegations of tampering, despite intact seals, violated principles of natural justice and was arbitrary.

JUDGMENT :

K.R. SHRIRAM, J.

1. Since pleadings are completed and petition has been lodged on 2nd August 2017, with the consent of the parties, we dispose the petition at this stage. Rule made returnable forthwith.

2. Petitioners seek to quash and set aside an order of termination passed by Respondents, whereby the dealership of Petitioners in respect of petroleum and CNG retail outlet situated at Khira Compound, S.V. Road, Santacruz (West), Mumbai-400054 was terminated (the Outlet). It is Petitioners’ case that the order was passed without jurisdiction, arbitrarily and without fulfillment of mandatory pre-conditions as stated in the Marketing Discipline Guidelines, 2012 (Guidelines).

3. Petitioners had initially filed a Writ Petition bearing Writ Petition No. 3107 of 2015 in this Court for quashing the show cause notice dated 20th August 2015. When the matter was circulated, Respondents requested for one week adjournment and, thereafter, during pendency of the said petition, the order of termination was passed. Petitioners withdrew the petition with liberty to file fresh petition against the termination order. Therefore, this is the second round for Petitioners.

4. Petitioners were appointed as dealers by Respondents pursuant to a Dealership Agreement dated 24th October 1994. The dispensers or dispensing units, underground tanks and other equipments at the outlet are installed by Respondents and belong to Respondents. Since October 1994, Petitioners have been carrying on its business without any hindrance and it is Petitioners’ case, without any allegation of irregularities against Petitioners.

5. At the fuel pump, there are three dispensing units that Respondents had installed and all the dispensing units were of Gilbarco make. There are 20 nozzles in the 3 dispensing units, i.e. 2 units had 8 nozzles each and 1 unit had 4 nozzles. Out of 20 nozzles, 12 nozzles are for petrol (MS) and 8 nozzles are for diesel (HSD).

6. On or about 1st August 2015, Officers from the Legal Meteorology Department visited the outlet for inspection and sealed all the 3 dispensing units alleging certain irregularities. Petitioners were also directed not to dispense MS or HSD to any motor vehicle. Petitioners challenged the action by filing Writ Petition (L) No. 2370 of 2015. The petition was heard and allowed on 21st August 2015 and the Legal Meteorology Department was directed to forthwith remove the seals. The Department of course was given liberty to take action in accordance with law, in respect of the allegations that were made while drawing a panchnama.

7. On 11th August 2015, in the meanwhile, the representatives of Legal Metrology Department, the Sales Officer of Respondents as well as representatives of Gilbarco Veeder Root India Pvt. Ltd. (Gilbarco) came again to the outlet for inspection. Gilbarco is the Original Equipment Manufacturer (OEM) of the dispensing unit. Inspection was carried out by opening the sensor assembly of the dispensing units and after visual inspection, i.e. 6 Pulsar units from the nozzles were taken away by the officials of Legal Meteorology Department. Before taking away 6 pulsar units, a panchnama was also drawn. Admittedly before the visual inspection, all the seals were checked by the Legal Meteorology Department representatives and found intact. The representatives of the Legal Meteorology Department broke the seals and all the Electronic Register Assembly (ERA), electronic cards and cables were visually inspected. It is Respondents’ case that on opening the sensor assembly, they observed unauthorised additional fitting in 5 sensor cards and unauthorised rework in 1 sensor card.

8. Therefore, a show cause notice dated 20th August 2015 was issued to Petitioners to which a visual inspection report of Gilbarco dated 12th August 2015 was also enclosed. The relevant extracts of the show cause notice reads as under:

“..........

(a) Visual inspection was done for the cables and seals.

(b) All the seals were found intact.

(c) The s