Termination of dealership upheld due to established adulteration despite allegations of procedural impropriety.

ORDER

This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for the sake of brevity, hereinafter referred to as 'the Act') challenging the Award dated 12.07.2021, passed by the Sole Arbitrator.

2.The petitioner markets its petroleum products through its dealers. The respondent was one such dealer appointed for dispensing and sale of Motor Spirit (Petroleum), High Speed Diesel and other petroleum products under a Dispensing Pump and Selling License (DPSL) renewed on 20.01.2017 for a period of five years. The respondent has been a dealer of the petitioner for over six decades.

3.On 04.09.2020, the respondent placed an indent for 4000 litres of motor spirit and 8000 litres of high-speed diesel, which were despatched on the same day and unloaded into the underground tanks at the respondent’s retail outlet. The petitioner’s executives drew samples for testing in accordance with the Marketing and Discipline Guidelines (MDG). Six samples of one litre each were drawn from the underground tank located in the retail outlet, out of which two samples were given to the respondent and two samples were given to the laboratory for testing.

4.The Laboratory Report of the samples failed to meet the parameters prescribed with respect to the Final Boiling Point (FBP) and Research Octane Number (RON). The report, dated 19.09.2020, stated that the retail outlet sample did not confirm to IS2796:2017 Specification for Motor Gasoline BS VI with respect to Final Boiling Point, which was 220˚C instead of maximum 210˚C and the RON was 90.6 instead of 91.

5.On receipt of this report, the petitioner initiated action for adulteration in terms of Chapter 5 of MDG against the respondent and stopped the supply and sale of petrol and diesel in the retail outlet with immediate effect.

6.The Show Cause Notice dated 24.09.2020 was issued by the petitioner to the respondent to initiate action for adulteration under DPSL Clause 10(g) and in terms of Chapter 5 of the MDG. The respondent issued a reply denying the allegations made in the Show Cause Notice and sought for withdrawal of the suspension of supply.

7.The respondent filed O.A.No.538 & 539 of 2020 under Section 9 of the Act ,seeking for an order of interim junction against the decision taken by the petitioner to suspend the supply of petrol and diesel to the petitioner. An order was passed on 21.02.2020, granting interim injunction and directed the petitioner to resume the supply of diesel and conduct an enquiry on the Show Cause Notice after hearing the respondent. Accordingly, the petitioner resumed the supply of diesel.

8.On 05.11.2020, the interim order was made absolute and directed the petitioner to complete the enquiry within 15 days and restrained the petitioner from terminating the dealership until the enquiry is concluded.

9.In compliance with the order passed by this Court, the petitioner conducted a hearing before the Regional Head of Southern Region and the termination was also approved by a Three Member Committee on 18.11.2020. Pursuant to the same, an Ad hoc dealer was appointed on 25.11.2020. The Termination Order was issued on 27.11.2020, and the next day, the retail outlet was handed over to the Ad hoc dealer.

10.The respondent filed O.A.No.635 of 2020 for an interim injunction restraining the petitioner from enforcing the Termination Order. An interim order was passed on 28.11.2020. Since the order was not complied with, Cont.P.No.1114 of 2020 was filed by the respondent.

11.A common order came to be passed on 19.02.2021 and a direction was given to the petitioner to handover the retail outlet to the respondent and to recommence the supply on the same day. A