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2007 Supreme(Pat) 647
PATNA HIGH COURT
Mridula Mishra, J.
Lall Auto Trading Company
Versus
Union Of India
Civil Writ Jurisdiction Case No. 11210 of 2005 ;
Decided On : MARCH 30, 2007
The court emphasized the applicability of the agreements to both outlets and the necessity for proportionality in imposing penalties under the Marketing Discipline Guidelines.
Headnote:
Termination - Dealership Agreement - Principle Agreement dated 8.1.2002, Supplemental Agreement dated 30th June, 2003 - Clause I of the supplemental agreement - Marketing Discipline Guidelines, 2001, 2005
Fact of the Case:
Petitioners sought quashing of termination letter for dealership agreement and restoration of license and supply of petroleum products. Both writ applications were disposed of together. Irregularities found during routine inspection led to termination of dealership agreements. Petitioners argued forced signing of show cause and lack of notice for separate retail outlet. Respondents argued that both outlets are governed by the principle agreement and supplemental agreement, and that the penalty imposed was in line with Marketing Discipline Guidelines.
Finding of the Court:
The court found that the terms and conditions of the principle agreement were fully applicable to the supplemental agreement, and that violation by any retail outlet would amount to violation by both. The court also found that the penalty imposed was disproportionate and in violation of Marketing Discipline Guidelines, 2001.
Issues: Forced signing of show cause, lack of notice for separate retail outlet, applicability of agreements to both outlets, and proportionality of penalty under Marketing Discipline Guidelines.
Ratio Decidendi: The terms and conditions of the agreements applied to both outlets, and the penalty imposed was disproportionate and in violation of Marketing Discipline Guidelines, 2001.
Final Decision: The court quashed the termination letters and directed the respondents to restore all supplies to the retail outlets of the petitioners.
1. Petitioners in both the writ application have prayed for quashing of the termination letter dated 13.8.2005 issued by the Territory Manager (Retail), Patna whereby dealership agreement dated 8.1.2002 executed for selling petroleum product including motor spirit (petrol) as well as the supplementary agreement dated 30th June, 2003 executed for selling High Speed Diesel at Fatuha has been terminated with effect from 13.8.2005. Further prayer of the petitioner is for restoration of the license and supply of petrol, High Speed Diesel to the retail outlets.
2. Since the prayer of the petitioner in both the writ applications are same both the writ applications are taken up together and being disposed of by a common order.
3. Initially C.W.J.C. No.11210 of 2005 was filed for quashing the impugned letter terminating Dispensing Pump and Selling License (D.P.S.L.) agreement of the partners of M/s Lall Auto Trading Company, Kankerbagh, Patna. Partners of M/s Lall Auto Trading Company are sons and family members of Lall Bahadur Singh who was dealer of Bharat Petroleum Corporation Limited since the year 1967. After the death of Lal Bahadur Singh the partnership firm was formed by the sons and family members of Lal Bahadur Singh and an agreement dated 8.1.2002 was executed by the partners of the firm with the Oil Company for operating their Motor Spirit (MS)/High Speed Diesel (HSD) retail outlet at Kankarbagh, Patna on the land procured by the company and facility erected by the respondents company. Subsequently in line with the industries guidelines applicable to all the oil company the B.P.C.L. carried out a partial reassignment of HD facilities from the premises of Kankarbagh to Fatuha in the year 1997. This facility was resited on the land provided by the dealers and all other facilities were installed and erected by the respondent. Partners of M/s Lall Auto Trading Company and respondent BPCL signed a supplementary agreement supplemental to the principle agreement on 30.6.2003. Clause I of the supplemental agreement reads as follows:
"This agreement will be treated as Supplemental Agreement to the principle Agreement dated 8.1.2002 and both the Principle Agreement dated 8th January, 2002 and this Supplemental Agreement wilt always be read together and will be treated as one agreement. Breach of any of the terms of the said principle agreement as modified by this supplemental agreement will be construed as a breach of the entire agreement and the corporation will be entitied to take such action as contained in the Principle Agreement as modified by this supplemental agreement."
4. A routine inspection of the retail outlet at Kankarbagh was held on 20.6.2005 by the officials of the company and following irregularities were observed:
(i) One "Z" line DU (HZ L & T 2056) for SPEED (MS) was delivering short by 130 ml. in each 5 litres of product delivered.
(ii) A double gears system was wrongly and illegally fitted on the Z line into the system with a view to short deliver the product while the metering unit will show correct quantity in the Display Panel of the Dispensing Unit.
(iii) A negative stock variation of 506 litres was found in the MS, UG tank.
5. The company on 20.6.2005 issued letters addressed to the dealers seeking their explanation and clarification on the various irregularities found during the said inspection.
6. The case of the petitioner in C.W.J.C. No.11210 of 2005 is that they were forced by the officers of the respondent company to sign on show cause prepared by then on this assurance that no action will be taken against them.
7. The case of the petitioner in C.W.J.C. No. 15468 of 2008 is that no notice was issued to Awadhesh Kumar Sinha who is operating and running the Fatuha retail outlet in independent capacity and has no concern at all with Kankarbagh retail outlet. Suddenly on 16.8.2005 the Sales Officer and Engineering Officer alongwith a Magistrate arid police party came at Kankarbagh retail outlet whi
