The mere presence of a double gear in a dispensing unit does not justify the termination of dealership without evidence of intent to manipulate fuel delivery.

JUDGMENT :

(Anil Kumar Jukanti, J.)

1. This intra court appeal is filed challenging the order, dated 25.03.2014, passed by the learned Single Judge in Writ Petition No. 30227 of 2013.

2. Heard Mr. Deepak Bhattacharjee, learned Senior Counsel for the appellants and Mr. V. Ravinder Rao, learned Senior Counsel for the respondent.

3. Brief facts:

Respondent was a dealer of Indian Oil Corporation (herein after referred to as 'Corporation') for more than 45 years. Initially his father was a proprietor and managed the retail outlet of Burmah Shell. Subsequently, Burmah Shell was taken over by the Corporation. As on the date of writ petition, agreement dated 28.06.2005 was in vogue. Periodical inspections were carried out by officers of the Corporation for accuracy of the delivery and quality, as per the Marketing Discipline Guidelines (herein after referred to as "MDG") of the appellant outlet and that there were no complaints.

3.1. That retail outlet had three dispensing units of Larsen and Toubro and one dispensing unit of MIDCO. On 13.02.2013, officials and staff of Corporation inspected retail outlet at 9.40 A.M. to 10.40 A.M. The inspecting team checked the deliveries from the nozzles of High Speed Diesel (hereinafter referred as "HSD") dispensing unit. They opened the dispensing unit and found a double gear assembly in the gear train in one of the metering unit of MIDCO HSD DUO. The Corporation passed an order dated 27.09.2013 stating that the dealer committed irregularities and that as per the MDG the dealership agreement was terminated.

3.2. Learned Single Judge having extracted the clauses of MDG and taking into consideration the facts on record, gave a finding that no variation was noticed in the quantity of fuel discharged from the dispensing unit and that it was not proved about insertion of double gear in the dispensing unit. It is also observed by the learned Single Judge that the order of the termination did not record a finding of deliberate insertion and actual manipulation of delivery of fuel. That the termination order proceeded on mere existence of double gear in dispensing unit as sufficient enough for termination of the dealership.

3.3. Learned Single Judge held that as per clause 5.1.4 of MDG, existence of a double gear is a critical irregularity, if there was an intention to manipulate the delivery, but no such variation was noticed in dispensing of fuel.

3.4. The dealer made serious allegations against two officers of Corporation, who were part of inspection team and that views of the officers were obtained by the Corporation and the allegation of the dealer was not believed and the version of two officers obtained were relied on. On this issue, the learned Single Judge held that this amounted to prejudging the issue and also a biased decision and that the officers were not subjected to examination by the petitioner which adversely affected the defence of the petitioner which amounted to denial of reasonable opportunity. Learned Single Judge held that penal consequences should not be inflicted without observing procedural formalities. It is also recorded by the learned Single Judge that two reports were prepared and first report was at variance with that of the second and it was the second report which was acted upon for initiating action against the dealer.

4. Learned Senior Counsel appearing on behalf of the Corporation/appellants contended that the very presence of double gear in the dispensing unit itself is a critical irregularity and for such critical irregularity, the Corporation has rightly terminated the dealership of the respondent. Our attention is invited to clause 54 of the agreement which discloses that on happening of any of the events mentioned in clause 54 of the agreement, the Corporation was at liberty to terminate the agreement. Our attention was further invited to inspection report to buttress the contention that the double gear assembly in gear train of one of the meter units of HSD, MIDCO mechan