The court emphasized that administrative orders must provide clear reasoning to ensure accountability and uphold principles of natural justice.

JUDGMENT :

(C.S. DIAS, J.)

The writ petition is filed to quash Exts.P1 and P3 communications and to declare that the Marketing Discipline Guidelines, May 2022 ('MDG', for brevity) do not have the force of law.

2. The petitioner is a Liquefied Petroleum Gas distributor of the second respondent corporation ― a State-Owned Oil Marketing Company. The third respondent had issued Ext.P3 notice to the petitioner to show cause why action should not be taken under clause 4.2 of the MDG. In response to Ext.P3, the petitioner submitted Ext.P4 reply. However, by Ext.P1 order, the third respondent has imposed a penalty of Rs.1,39,751/- on the petitioner. The penalty has been imposed on the ipse-dixit quantification of the third respondent on the petitioner's average monthly distributor's commission. The third respondent has threatened the petitioner that the amount would be debited from the petitioner's PAD balances if the penalty is not paid. The penalty has been imposed due to the alleged poor rating of the petitioner in respect of the Targeted Delivery Time (‘TDT’, in short) during the quarter of July–September 2024. No proper or cogent reasoning has been given in Ext.P1 order, which is a non-speaking order. There is only a mechanical extraction of explanations put forth by the petitioner. The third respondent has passed a casual one-liner that the petitioner’s submission cannot be accepted. In Ext.P2(A) judgment, this Court has set aside the penalty orders passed under the MDG because they were non-speaking orders. Ext.P1 is to be declared bad in law. The MDG is only a guideline framed by the State Oil Marketing Companies to give instructions to dealers and distributors. It lacks the force of law. Therefore, Exts.P1 and P3 may be quashed.

3. The respondents 2 and 3 have filed a statement contending that the writ petition is not maintainable in view of the alternative dispute mechanism of arbitration provided in the Distributorship Agreement. Therefore, this Court may not exercise its extraordinary jurisdiction. Ext.P1 is a speaking order. As per the TDT report of July-September 2024, the petitioner's TDT rating is 'Poor' because the delivery time was more than 8 days for more than 15% of the deliveries, based on the information in the 2^nd respondent’s computer system. In response to Ext.P3 show cause notice, the petitioner has alleged vague and unsubstantiated excuses for the 'Poor' TDT rating. The third respondent in Ext.P1 order has duly considered the excuses put forth by the petitioner. The materials forming the basis of Ext.P3 show cause notice was made available to the petitioner. The third respondent’s power to impose a penalty under the MDG is no longer res-integra in view of Ext.P2(A) judgment passed by this Court and the Delhi High Court.Therefore, the writ petition may be dismissed.

4. Heard: Sri. Adarsh Kumar, the learned counsel for the petitioner; Sri. T.C. Krishna, the learned Solicitor General of India for the first respondent; and Sri. Paulose C. Abraham, the learned counsel appearing for respondents 2 and 3.

5. The learned counsel for the petitioner reiterated the contentions in the writ petition. He contended that the respondents 2 and 3 are not empowered to impose liquidated damages when the breach is not admitted. He also argued that as per the mandate clause 4.2 (ix) of Ext.P2 MDG, the third respondent was bound to pass a speaking order. Furthermore, the petitioner was not furnished with the relevant report as provided under clause 4.2 (vii) of Ext.P2. The third respondent has unilaterally imposed the penalty under the MDG, which is foreign to the law of contracts. Respondents 2 and 3 can only act in line with the Distributorship Agreement. The learned counsel relied on the decision of the Honourable Supreme Court in M.P. Power Management Company Limited, Jabalpur v. M/s Sky Power Southeast Solar India Private Limited & Others [(2022) 5 S.C.R. 1] and the decision of this Court in Build Tech. India v. State of Kerala & O