The Marketing Discipline Guidelines are enforceable, but penalties imposed without proper reasoning violate administrative law principles, necessitating fresh proceedings.

JUDGMENT

[WP(C) Nos.9331/2020, 9360/2020, 9383/2020, 26790/2021, 30986/2023, 22290/2024 and 22392/2024]

These writ petitions are filed by various LPG distributors appointed by the Indian Oil Corporation Limited (for short, the “respondent Corporation”), challenging the orders of penalty imposed on them as also seeking a declaration that the Marketing Discipline Guidelines , 2018 (hereinafter referred to as ”MDG”) on the basis of which penalty was imposed as above, is not having any force of law and as beyond the purview of the agreements entered into with the respondent Corporation.

2. The short facts as culled out from W.P(C) No.9331 of 2020 are as under:

The petitioners were engaged by the respondent Corporation as their distributors to carry out LPG distribution in specified areas pursuant to Ext.P1 series agreements. By Ext.P2 series communications, various monetary penalties have been imposed on the petitioners by the respondent Corporation. The afore orders have been issued pursuant to the show cause notices issued by the respondent Corporation (Ext.P4 series) to which detailed replies have been filed by the petitioners (Ext.P5 series). It is in the afore circumstances that the petitioners have filed the captioned writ petition seeking the reliefs as noticed above.

3. The factual situation and contentions raised by the petitioners in the connected writ petitions are also more or less the same.

4. I have heard Sri.Adarsh Kumar and Sri.R.Surendran, the learned counsel on behalf of the petitioners and Sri.E.K.Nandakumar, the learned senior counsel assisted by Smt.Ramola Nayanpally for the respondent Corporation.

5. Sri.Adarsh Kumar, the learned counsel for some of the petitioners would contend that:

i. The penalties imposed in the instant cases were on account of the violation of Chapter IV of the MDG. He points out Clause 4.2(viii) and contends that a show cause notice for violation of Chapter IV has to be issued within 30 days of the completion of the preceding quarter. In the case at hand, such notices have been issued beyond the period prescribed, and hence, the proceedings leading to the levy of monetary penalty are without any justification.

ii. He relies on Clause 4.2(x) and contends that a “speaking order” ought to have been issued if the reply submitted to the show cause notices were not acceptable. However, no such speaking orders have been issued, in these cases.

iii. He points out that the respondent Corporation has adopted a “pick and choose” approach among the distributors, and hence, the proceedings cannot be sustained.

6. Sri.Surendran, the learned counsel for some of the petitioners would contend that:

i. The MDG is not having any legal authority and hence, the respondent Corporation cannot rely on the same and impose penalty.

ii. The imposition of penalty under the MDG with reference to the average commission amount is without any justification and illegal since the commission earned is on the performed part, and penalty is levied on the non-performance.

iii. More than 95% of active customers have double cylinders against their name and therefore, there is no necessity to supply refill cylinders within 2 to 7 days.

iv. With reference to Clause 4.1, providing for the pattern of rating, it is contended that there is ambiguity. According to him, if 85% of delivery is affected in 2 days and the remaining 15% is done after 8 days, then a case would fall under both “Excellent” and “Poor”.

7. I have considered the rival submissions and the connected records.

8. The following questions arise for consideration in these writ petitions:

i. Is the respondent Corporation entitled to impose monetary penalty with reference to the provisions of MDG?

ii. Is the time limit pr