# M/s M.K. Fuel Centre, IOCL Retail Outlet Parwati Bangla Road, Kanpur v. Indian Oil Corporation Ltd. & Ors

- **Citation:** (2024) 2 ILRA 496
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-01-18
- **Case number:** Writ C No. 31629 of 2021
- **Bench:** Mahesh Chandra Tripathi, Prashant Kumar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-m-k-fuel-centre-iocl-retail-outlet-parwati-bangla-road-kanpur-v-indian-oil-51434
- **Pages:** 24

## Headnote

Civil Law - Constitution of India,1950Article 226-Termination of dealershipIOCL terminated the dealership of M.K.
Fuel
based
on
alleged
violations
of
Marketing Discipline Guidelines(MDG) and
terms of the dealership agreement-a show
cause notice was issued months after the
inspection
alleging
tampering
with
dispensing units-The termination violated
the procedural norms, including delay in
issuing the show cause notice beyond 30
days as required under MDG Clause 8.5.6Held the court observed that the show
cause
notice
was
issued
after
an
unexplained delay violating the MDG
guidelines-The petitioner was not given
personal hearing which undermines the
fairness of the termination process-No
substantial evidence of tampering or
manipulation
of
fuel
delivery
was
presented-The
inspection
reports
contradicted the termination grounds-The
dealership agreement alone cannot override
the procedural safeguards in MDG-Hence,
the court set aside the termination orderThe respondents were directed to restore
the dealership.(Para 1 to 37)

The writ petitions are allowed. .( E-6)

List of cases cited:

## Text

_Characters 0–39,905 of 78,925. This is a partial read: ask again with offset=39905 for what follows._

496 INDIAN LAW REPORTS ALLAHABAD SERIES
cable was disconnected by respondent no.3 and
no service was provided, so there is no question
of raising any charges for this period. They
cannot keep charging for 10 years on the
ground that the agreement was not amended
and specially when the delay of these 10 years
was totally attributable to respondent no.3.

65. Accordingly, the demand notice
dated
1.10.2022
and
the
bill
dated
3.10.2022 are quashed.

66. With the aforesaid observations,
the writ petition stands allowed.
----------
(2024) 2 ILRA 496
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 18.01.2024
BEFORE

THE HON'BLE MAHESH CHANDRA
TRIPATHI, J.
THE HON'BLE PRASHANT KUMAR, J.

Writ C No. 31629 of 2021
connected with
Writ C No. 11173 of 2022

M/s M.K. Fuel Centre, IOCL Retail Outlet
Parwati Bangla Road, Kanpur ...Petitioner
Versus
Indian Oil Corporation Ltd. & Ors.
 ...Respondents

Counsel for the Petitioner:
Sri Krishna Dev Vyas, Sri Namit Srivastava

Counsel for the Respondents:
Ms. Archana Singh

Civil Law - Constitution of India,1950Article 226-Termination of dealershipIOCL terminated the dealership of M.K.
Fuel
based
on
alleged
violations
of
Marketing Discipline Guidelines(MDG) and
terms of the dealership agreement-a show
cause notice was issued months after the
inspection
alleging
tampering
with
dispensing units-The termination violated
the procedural norms, including delay in
issuing the show cause notice beyond 30
days as required under MDG Clause 8.5.6Held the court observed that the show
cause
notice
was
issued
after
an
unexplained delay violating the MDG
guidelines-The petitioner was not given
personal hearing which undermines the
fairness of the termination process-No
substantial evidence of tampering or
manipulation
of
fuel
delivery
was
presented-The
inspection
reports
contradicted the termination grounds-The
dealership agreement alone cannot override
the procedural safeguards in MDG-Hence,
the court set aside the termination orderThe respondents were directed to restore
the dealership.(Para 1 to 37)

The writ petitions are allowed. .( E-6)

List of cases cited:

1. M/s Chaudhary Filling Point, Kazipur Vs St. of
UP & ors.. Misc. Bench No. 27043 of 2018

2. M/s Kamal Kant Automobiles & anr. Vs St. of
UP & ors.. Writ C No. 25127 of 2018

3. Delhi Development Authority Vs Durga Chand
Kaushish(1973) 2 SCC 825

4. Hindustan Petroleum Corp. Ltd & ors.. Vs
Super Highway Services & anr. (2010)3 SCC 321

5. M/s Shree Rajendra Agro Service Centre Vs
IOCL & Others S.B. CMWP No. 4160 of 2023

6. D.K. Yadav Vs J.M.A. Industries Ltd(1993) 3
SCC 259

7. Mahamaya Service Centre Vs Indian Oil
Corporation Ltd. & ors.. Writ C No. 1668 of 2009

8. M/s. Hindustan Petroleum Corpn. Ltd. & ors..
Vs Super Highway Services & anr. (2010) 3 SCC
321

9. Bharat Petroleum Corp. Ltd Vs Jagannath &
Co.
&
ors..
(2013)
12
SCC
278
2 All. M/s M.K. Fuel Centre, IOCL Retail Outlet Parwati Bangla Road, Kanpur Vs. Indian
 Oil Corporation Ltd. & Ors.
497
10. Allied Motors Ltd Vs Bharat Petroleum
Corpn. Ltd.(2012) 2 SCC 1

11. Indian Oil Corpn. Ltd & ors.. Vs M/s R.M.
Service Centre & anr.. Civil Appeal No. 8257 of
2019

 (Delivered by Hon'ble Mahesh Chandra
Tripathi, J.)

1. Heard Shri Krishna Dev Vyas,
learned counsel for the petitioner; Ms.
Archana Singh, learned counsel for Indian
Oil Corporation Ltd. and Shri O.P. Singh,
learned Senior Advocate assisted by Shri
Indrajeet
Singh,
learned
counsel
for
respondent no.6.

2. In leading Writ C No.31629 of
2021, the petitioner has sought the
following reliefs:-

"I. Issue a writ, order or direction
in the nature of certiorari, or appropriate
writ for setting aside the impugned Show
Cause Notice dated 04.01.2021 issued by
the Respondent no. 4 (Annexure No.-9 to
the writ petition) and quashing the
proceedings initiated vide the impugned
notice dated 04.01.2021;

II. Issue a writ, order or direction
in the nature of certiorari, or appropriate
writ for setting aside the impugned Order
dated 15.11.2021 issued by the respondent
no. 2 (Annexure No.-15 to the writ
petition);

III. Issue a writ order or direction
in the nature of mandamus commanding
and directing the respondents not to take
any coercive steps against the petitioner
pursuant to the impugned order dated
15.11.2021;

IV. Issue a writ order or direction
in the nature of mandamus commanding
and directing the respondents and their
agents to restore the dealership agreement
dated 10.03.2004 and to forthwith restore
the supply of the diesel and petrol to the
petrol pump of the Petitioner."

3. In the connected Writ C No.11173
of 2012 the petitioner has prayed for
quashing the appointment letter dated
15.01.2022 issued by the respondent no.3
and the notice/letter dated 26.03.2022
issued by the respondent no.3 for taking
over the petrol pump from the petitioner.
Further prayer is made to issue direction in
the nature of mandamus commanding the
respondents to handover the possession of
the petrol pump to the petitioner.

4. Both writ petitions arise out of
similar set of facts and seek to raise
challenge to termination order dated
15.11.2021. Accordingly, with the consent
of the parties, the petitions have been heard
together and are being disposed of by
means of a common order.

5. Brief background of the case, as
reflected from the record, is that M/s M.K.
Fuel Centre (petitioner) is a partnership
firm and a retail outlet of Indian Oil
Corporation
Limited1.
A
dealership
agreement was executed between the
petitioner and IOCL on 10.03.2004 and the
petitioner continued to operate the petrol
pump for last 17 years without any
complaint.
The
Marketing
Discipline
Guidelines, 20122 have been issued by the
Government of India w.e.f. 08.01.2013 and
are applicable to all Public Sector Oil
Marketing Companies and are required to
be strictly followed, before any action of
suspension or termination of dealership is
resorted to. The marketing guidelines also
provide a detailed procedure for checking
irregularities at retail outlets.
498 INDIAN LAW REPORTS ALLAHABAD SERIES

6. On 11.06.2020 a routine annual
inspection was done by the team of Weight
and Measurement (W&M) department for
annual calibration and stamping of all the
dispensing
units
and no
irregularity,
discrepancy or any tampering was reported
in any of the Dispensing Units (DUs).
Another inspection was held on 10.07.2020
by the Sales Inspection Team, which also
found no discrepancies. The retail outlet
was working as per the normal standards.
Again on 14.07.2020, an inspection was
carried out by the Sales Officer, Kanpur-II
RSA and an inspection and analysis report
was prepared, wherein no discrepancy was
found in the stock. All seals were found
intact and there was no variation in the
dispensing units. Since certain errors had
occurred in one of the Dispensing Unit, as
such
again
on
16.07.2020,
a
joint
inspection was carried out by a team
constituted by the Chief Divisional Retail
Sales Manager in the presence of the
dealers and the Inspectors from the Weight
and Measurement Department, wherein no
discrepancy was found in any of the
Dispensing Units. The W&M seal and the
totalizer seal of the pump were found intact
and the delivery from the pump was also
found to be correct. In the inspection
analysis report, it was reported that no extra
fittings were found during the inspection
and there was need of upgrading the
software.

7. On some suspicion and automation
error reports, seals of the aforenoted
dispensing unit were broken by the
respondents and the CPU card was sent to
the Gilbarco Veeder-Root India3 for testing
and analysis on the errors. Thereafter, the
controller
card
was
sent
seeking
authentication and reports over the E9 and
E28 errors found in the DU Log. The
concerned dispensing unit was sealed and
the sales from the said dispensing unit were
suspended. The respondent no.4 had issued
a letter on 23.9.2020 to witness the process
of opening the sealed parcel of control card
of GVR-DU and the dealers duly attended
the video conferencing held on 20.9.2020.
Thereafter the impugned show cause notice
was issued to the petitioner on 04.01.2021
for
termination
of
the
retail
outlet
dealership and calling for an explanation
within 15 days, alleging violation of clause
5.1.4 read with clause 8.2(iv) of the
Marketing Discipline Guidelines-2013. The
petitioner submitted a detailed reply on
19.01.2021 denying the allegations made in
the show cause notice for using any
external device by removing E-cal cable
connection so as to manipulate the delivery.

8. After six months, the petitioner
received a letter dated 14.07.2021 from the
Corporation for
personal
hearing
on
15.7.2021 and one of the partner of the
petitioner firm attended the same but the
hearing was adjourned on the said date. A
letter was again issued by the respondent
Corporation on 05.10.2021 informing the
date and time of the next hearing through
video conference on 06.10.2021 at 11.30
hrs. A reply/objection dated 05.10.2021
was filed by the petitioner on 06.10.2021
reiterating the earlier reply and specific
objection was taken with regard to the
procedural impropriety in issuing the show
cause notice and the vague report submitted
by the (OEM) GVR on the basis of which
the Chief Divisional Retail Sales Manager,
Kanpur
Divisional
Office,
Kanpur
(respondent no.4) had formed reason to
believe that the dispensing unit was
deliberately tampered for manipulating the
delivery. After receiving the letter dated
05.10.2021, the petitioner came to know
about the termination proceedings as per
Clause 8.6 of the MDG. Immediately, the
2 All. M/s M.K. Fuel Centre, IOCL Retail Outlet Parwati Bangla Road, Kanpur Vs. Indian
 Oil Corporation Ltd. & Ors.
499
petitioner filed a Writ Petition bearing Writ
C No.30089 of 2021 challenging the show
cause notice dated 04.01.2021. After filing
the said writ petition, the petitioner firm
was served with the impugned termination
order dated 15.11.2021 on 16.11.2021.
Since certain subsequent events had taken
place after filing the said writ petition, the
writ petition was dismissed as withdrawn
with liberty to the petitioner to file a fresh
petition
with
better
particulars
on
23.11.2021. Thereafter, the petitioner had
filed leading writ petition challenging the
order of termination, which was heard on
the
ground
of
maintainability
on
07.01.2022 and the matter was reserved for
orders. A detailed order was passed by this
Court on 16.02.2022 admitting the writ
petition to be maintainable and for
exchange of pleadings. The order dated
16.02.2022 is reproduced hereunder:-

"A preliminary objection has
been raised by counsel for the respondents
regarding the maintainability of the writ
petition. It has been submitted that
challenge to a show cause notice is not
tenable. In any case consequent to the show
cause
notice
and
after
hearing
the
petitioner, the dealership of the petitioner
has been terminated.

Against the order of termination,
an appeal lies which alternative remedy the
petitioner has not availed.

It is also submitted that under the
dealership contract, there is a arbitration
clause, which also can be invoked by the
petitioner. On account of the aforesaid, the
writ petition is liable to be dismissed as not
maintainable. She has relied upon the
judgement dated 20.11.2017 in Writ - C
No.
46927
of
2015,
M/s
Pravin
Automobiles Vs. Indian Oil Corporation &
Others and Judgement Dated 25.02.2015 in
Writ - C No. 64114 of 2014, M/s Harish
Filling Station Vs. Union of India & Others
in support of her objection.

The show cause notice dated
04.01.2021 has been issued by the
respondent no. 4 and the petitioner prays
for quashing of this show cause notice and
also the proceedings drawn in consequence
thereof including the termination of the
dealership on the ground that there was
clear cut violation of the clauses 8.5.6 and
8.5.8
of
the
Marketing
Discipline
Guidelines. The afore-noted clauses of the
marketing discipline guidelines read as
follows:-

"8.5.6 In respect of all cases of
irregularities, a show cause notice, within
30 days from the date of inspection will be
issued to the dealer indicating all the
irregularities. However, in case samples of
MS/HSD were drawn during inspection
then the show cause notice will be issued
within 30 days of test results. The show
cause notice should be issued along with all
reports and other documents, etc. which
forms the basis of the notice.

8.5.8 Upon receipt of the reply to
the show cause notice, the authorized
officer of the OMC will review the charges
leveled and the reply received and pass a
speaking order preferably within a period
of 45 days from the receipt of the reply.
The speaking order shall indicate complete
details of the irregularities committed, the
reply of the dealer and detailed reasons as
to why the reply is acceptable / not
acceptable to the official."

The relevant facts which are the
basis of the argument raised by Shri Anurag
Khanna are as follows:-

The petitioner is a partnership
firm and a retail outlet of Indian Oil
Corporation. A dealership agreement was
executed between the petitioner and Indian
Oil Corporation on 10.03.2004 and the
petitioner continued to operate without any
500 INDIAN LAW REPORTS ALLAHABAD SERIES
complaint.
The
Marketing
Discipline
Guidelines, 2012 have been issued by the
Government of India w.e.f. 08.01.2013 and
are applicable to all public sector oil
marketing companies and are required to be
strictly followed, before any action of
suspension or termination of dealership is
resorted to. The marketing guidelines also
provide a detailed procedure for checking
irregularities at retail outlets.

It is also stated that a routine
annual inspection was held on 10.06.2020
by
the
Weight
and
Measurement
Department
and
no
irregularities,
discrepancies or tampering were reported
after inspection.

Another inspection was held on
10.07.2020 by the Sales Inspection Team,
which also found no discrepancies.

Again
on
14.07.2020,
an
inspection was carried out by the fifth
respondent and an inspection and analysis
report was prepared. No discrepancy was
found in the stock. The various seals were
found intact and there was no variation in
the dispensing units.

Again on 16.07.2020, a joint
inspection was carried out by a team
constituted by the fourth respondent in the
presence of the dealer and an Inspector
from
the
Weight
and
Measurement
Department. The petitioner received a letter
dated 16.07.2020 pointing out certain errors
as per the DU Log in one dispensing unit.

It appears that on some suspicion
and with the permission of the Inspector,
seals of the afore-noted dispensing unit
were broken and the CPU and DU were
taken out. Thereafter, the controller card
was sent seeking authentication and reports
over the E9 and E28 errors found in the DU
Log. On 04.01.2021 a show cause notice
was issued to the petitioner for termination
of
the
retail
outlet
calling
for
an
explanation
within
15
days
alleging
violation of clause 5.1.4 read with clause
8.2(iv)
of
the
Marketing
Discipline
Guidelines. The subsequent facts alleged in
the writ petition are not relevant for
deciding the question of maintainability of
this writ petition and are therefore not
being alluded to.

The contention of Shri Anurag
Khanna, is that in case of an irregularity
being discovered by the respondents, they
were required to issue a show cause notice
within 30 days. This has not been done.
The inspection was made on 16.07.2020
while a notice has been issued on
04.01.2021 well after the period of 30 days
had elapsed. Even the lab report from the
original equipment manufacturer of the
controller card was received by the
respondents on 19.11.2020. Even if the
limitation of 30 days is to be calculated
from this date, there is clear violation of the
Marketing Discipline Guidelines, which
provide that the show cause notice has to
be issued within 30 days.

Prima-facie we find that the
submission of learned counsel for the
petitioner has substance. The show cause
notice dated 04.01.2021 has not been
issued within the time specified therefor
under clause 8.5.6.

Under the circumstances, it is
difficult to hold that the petition is not
maintainable inasmuch as the respondents
have
failed
to
follow
the
statutory
guidelines issued by the Union of India
having failed to proceed within the time
prescribed. This is so especially in view of
the decision of this Court in Writ - C No.
25127
of
2018,
M/s
Kamal
Kant
Authorities & Another Vs. Hindustan
Petroleum Corporation Ltd. & Others,
wherein it has been held that a writ petition
is maintainable as relief for restoration of
dealership can be granted by the writ court
and not by the arbitrator or the civil court.
2 All. M/s M.K. Fuel Centre, IOCL Retail Outlet Parwati Bangla Road, Kanpur Vs. Indian
 Oil Corporation Ltd. & Ors.
501
It would be relevant to note that in M/s
Kamal Kant (supra), it was also found that
there was non-compliance of the Marketing
Discipline Guidelines and the dealership
was restored relying upon the decision of
the Apex Court in Allied Motors Ltd. Vs.
Bharat Petroleum Ltd. (2012) 2 SCC 1. The
objection of counsel for the respondents is
therefore, rejected, even though it has been
submitted by counsel for the respondents
that a show cause notice had been issued
within days of the inspection in July, 2020.
This plea is unacceptable as this alleged
show cause notice does not mention the
reasons on which the dealership has been
terminated.

Accordingly, the writ petition is
held to be maintainable.

The respondents may file a
counter affidavit within three weeks.
Petitioner will have a week thereafter to file
rejoinder affidavit.

List
this
petition
for
admission/final disposal on the expiry of
the aforesaid period."

9. The impugned notice/letter was
received on the email ID of the petitioner
firm on 26.03.2022 at 5:32 am for taking
over and handing over of the retail outlet
and immediately the possession of the
petrol pump was taken over by the
respondent authorities on the same day at 7
am. Consequently, the respondent no.3 vide
letter dated 15.01.2022 appointed the
respondent no.6 as an Adhoc Dealer for
selling and handling petroleum products of
the Corporation on temporary basis, subject
to the outcome of Writ C No.30089 of 2021
filed by the petitioner, which was already
dismissed as withdrawn on 23.11.2021.
Thereafter, the petitioner was constrained
to file the connected Writ C No.11173 of
2022 challenging the adhoc appointment
letter dated 15.01.2022 as well as the notice
dated 26.03.2022.

ARGUMENTS
OF
THE
PETITIONER

10. Sri Krishna Dev Vyas, learned
counsel for the petitioner while pressing the
reliefs
sought
in
the
writ
petitions
submitted that the IOCL granted the retail
outlet of petroleum products to the
petitioner
on
10.03.2004.
The
joint
inspection was made at the retail outlet on
16.07.2020 and the inspection report was
prepared, wherein it was reported that all
the dispensing units were in working
condition Subsequently, the show-cause
notice dated 04.1.2021 was issued to the
petitioner to which the petitioner submitted
reply on 19.1.2021 denying the allegations
made in the show cause notice. Finally, the
Corporation had terminated the dealership
of the petitioner on 15.11.2021.

11. Learned counsel for the petitioner
submitted that the objection with regard to
the procedural impropriety in issuing the
show cause notice was duly taken by the
petitioner in its reply dated 19.01.2021. At
the time of inspection, testing of all the
dispensing units were done and the same
were found to be correct. There was no
short delivery in supply and no stock
variation was found. All the weight and
measurement seals were found intact and
no tampering, whatsoever, was found. In
case of an irregularity being discovered by
the respondents, they were required to issue
a show cause notice within 30 days. The
inspection was made on 16.07.2020, while
a notice was issued on 04.01.2021, much
after the period of 30 days. There was clear
violation of the MDG, which provides that
the show cause notice has to be issued
within 30 days.
502 INDIAN LAW REPORTS ALLAHABAD SERIES

12. It was next submitted that the
petitioner had not received any speaking
order as per Clause 8.5.8 after filing reply
dated 19.01.2021 in response to the show
cause notice and thus, the respondents have
exceeded its authority by issuing notices
under Clause 8.6 of the MDG and finally
passing of the termination order. As per
Clause 8.6 of the MDG, in case of critical
irregularities leading to termination, the
Head
of
the
State
Office/Regional
Office/Zonal Office of the concerned OMC
or
their
nominee
before
recommending/approving the termination
of dealership will provide a personal
hearing to the signatories of the dealership,
the entire action was in fragrant violation of
the said clause. In support of his
submission, he had placed reliance on the
judgments of this Court in M/s Chaudhary
Filling Point, Kazipur vs. State of UP
and
ors4
and
M/s
Kamal
Kant
Automobiles and another vs. State of UP
and ors5.

13. It was further submitted that GVR
India
gave
its
report
on
primary
investigation of the hardware component
level
and
secondary
analysis,
which
specified that on both visual & functional
inspection of Controller Card, there was no
rework, modifications or damage and
further there was no track cut, unauthorized
fitting and rework found in any of the
hardware peripherals. The GVR gave a
clean chit to the retail outlet on the
hardware part. The joint inspection analysis
report confirms that no extra fittings were
found during the inspection rather there
was requirement of software upgradation. It
was submitted that without using external
device and without breaking the seals of the
weight and measurement department, it
was not possible to tamper the software of
the dispensing unit. It was stated that the
OEM report/opinion cannot be read in a
piecemeal
and
the
general
rule
of
interpretation of a deed or document is to
read the document itself as a whole and not
in piecemeal. The reports are only an
opinion of the OEM, which are not binding
upon the respondents and the respondent
authorities are required to take decision
independently,
according
to
its
own
evaluation as per Clause 8.5.2 of the MDG,
which
provides
that
all
cases
of
irregularities need to be established before
any action is taken against a dealer. There
is no finding of short delivery by the
petitioner. He has placed reliance on the
judgment of the Apex Court in Delhi
Development Authority vs. Durga Chand
Kaushish6 and Hindustan Petroleum
Corporation Limited and others vs.
Super Highway Services and another7,
wherein it is held that the cancellation of
dealership agreement of a party is a serious
business/civil consequence, which cannot
be taken lightly. In order to justify the
action taken by the Corporation to
terminate such an agreement, the concerned
authority has to act fairly and in complete
adherence to the rules/guidelines framed
for the said purpose.

ARGUMENTS
OF
THE
RESPONDENTS

14. Per contra, Mrs. Archana Singh,
learned
counsel
for
the
respondent
Corporation vehemently argued that the
petitioner had not taken any ground in his
reply regarding the delay of service of the
notice as per Clause 8.5.6 of MDG, which
provides that in respect of all cases of
irregularities, a show cause notice will be
issued to the dealer within 30 days from the
date of inspection indicating all the
irregularities. Once the petitioner submitted
his reply to the show cause notice and also
2 All. M/s M.K. Fuel Centre, IOCL Retail Outlet Parwati Bangla Road, Kanpur Vs. Indian
 Oil Corporation Ltd. & Ors.
503
participated in the proceedings of inquiry,
then the petitioner has no right to challenge
the legality of delay in service of the show
cause notice. The statutory provision under
Clause 8.9 of MDG is available to the
petitioner to file an appeal against the
termination order, and instead of filing the
appeal, the petitioner has straightway filed
the
writ
petitions,
which
are
not
maintainable, in view of the alternative
forum. She submitted that on 14.07.2020 a
mail on LEAD through Vishleshan for
Exception (DU Logs-critical) for the
aforesaid retail outlet was generated with
analyst remarks as under:-

"AtDU#4-Pump#1,
Nozzle#1HSD total 171 events of DU Log for E-09
(Low Voltage Error) followed by E-28
(ECAL Card Connectivity Error) had
occurred on across 67 days. The highest
occurrence is between 7:00 to 8:30 Hrs."

15. She further stated that the GVR in
its report dated 10.10.2020 has concluded
that abnormal E-28 errors were observed in
DU automation error. History report points
out to non-standard DU declaration.
However, in the secondary investigation, it
was established that the observations in the
report can lead to manipulation of delivery
from the dispensing unit and vide e-mail
dated 19.11.2021, GVR has mentioned that
in various tamper modus operandi were
seen in the field. HW analysis did not show
anomaly but SW Logs did. Sometimes SW
Log analysis is sufficient to ascertain, if
tampering was active at specific dispensing
unit. In case of the petitioner's retail outlet,
as per GVR (OEM) log analysis it was
established
a
periodic
non-standard
operation
by
removing
ECAL
cable
connection and using an external device for
manipulation of delivery from dispensing
unit.
The
SW
analysis
had
shown
abnormality
in
the
functioning
of
dispensing unit. There was no illegality or
irregularity in process on the part of the
Corporation in passing the impugned order
and therefore, the petitioner is not entitled
to get any relief. She had placed reliance on
the judgment of High court of Rajasthan at
Jodhpur in in M/s Shree Rajendra Agro
Service Centre vs. IOCL and others8.

16.

We
have
considered
the
submissions of learned counsel for the
parties and perused the record.

REASONING AND CONCLUSION

17. Indian Oil Corporation Ltd. is a
public sector undertaking of the Central
Government engaged in the production &
distribution of petrol, diesel & other
petroleum products through its retail outlet
dealership. The IOC has framed Marketing
Discipline Guidelines initially in the year
1981-82 and thereafter, revised/amended
from
time
to
time. All
the
retail
outlets/dealers selected and appointed by
the IOC are bound to follow the ''MDG'' in
order to maintain the discipline and ethics
in the sale of oil products. The petitioner
firm was given a license to own and run a
retail outlet established at location Parwati
Bangla Road, Kanpur and the agreement
was executed on 10.03.2004.

18.

The
aforesaid
Marketing
Discipline Guidelines-2012 promulgated by
the Government of India for regulating the
inspections of Retail Outlet and standards
of maintenance of uniform standards of
quality and dispensation of fuel are
uniformly binding in respect of any
raids/inspections conducted at the retail
outlets/petrol pumps under the dealership
of all the Oil Marketing Companies and are
also to be strictly followed before taking
504 INDIAN LAW REPORTS ALLAHABAD SERIES
any action of suspension or termination of
sales/supplies
or
dealership.
These
guidelines contain the complete procedure
for various aspects of functioning of a retail
outlet/petrol pump. Relevant Clause 8 of
the MDG is reproduced herein under:-

"8. Action to be taken by OMC
under
the
Marketing
Discipline
Guidelines

8.1 All irregularities (mentioned
in Chapter - 5) are classified into three
categories, i.e. Critical, Major and Minor.

8.2 Critical Iregulartities: The
following irregularities are classified as
criticial irregularities:-

i.
Adulteration
of
MS/HSD
(5.1.1)

ii. Seals of the metering unit
found tampered in the dispensing pumps
(5.1.2 (b)
iii. Totalizer seal of dispensing unit
tampered or deliberately making the
totalizer non-functional or not reporting to
the company if totalizer is not working
(5.1.3 read with 5.1.2)

iv.
Additional/Unauthorized
fittings/gears/electronic component found
in
dispensing
units/tampering
with
dispensing unit (5.1.4 (a), (b), (c)

v. Unauthorized storage facilities
(5.1.5)

vi. Unauthorized purchase/sales
of produces (5.1.6)

vii.
Tank
lorry
carrying
unauthorized
product
found
under
decantation at the RO (5.1.7)

Action:

Termination
at
the
FIRST
instance will be imposed for the above
irregularities.

8.3 Major Irregularities:

The following irregularities are
classified as major irregularities:-

i. Refusal by the dealer to allow
drawl of samples/carry out inspections.
(5.1.8)

ii. Non-availability of reference
density at the time of inspection. (5.1.9).
iii. Selling of normal MS/HSD as branded
fuels. (5.1.10)

iv.
Stock
variation
beyond
permissible limits but sample passing
quality tests. (5.1.11)

v. Non-maintenance of records
since last inspection. (5.1.12)

vi.
Overcharging
of
MS/HSD/CNG/Auto LPG (5.1.13)\

vii. Non provision of clean toilet
facility. (5.1.14.b).

viii. Automated Retail outlets:
5.1.16 (a), (b), (c)

ix.
Non-payment
of
Salary,
Wages and other benefits (as per clause
5.1.18) to the manpower employed at the
ROs.

x. Short delivery of products with
W&M seals intact: 5.1.2(a)

Action: Except in case of (iii),
(vii), (viii), (ix) & (x) above.

First instance:
Suspension of
sales and supplies for 15 days.

Second instance: Suspension of
sales and supplies for 30 days.

Third instance:

Termination of the dealership.

Action in case of (iii) above
would be as under:-

First instance:
Penalty
of
recovery of differential price since last
inspection

Second instance: Termination
of the dealership.

Action in case of (vii) above
would be as under:-

First
instance:
Penalty
of
Rs.15000/- (Rupees fifteen thousand)
2 All. M/s M.K. Fuel Centre, IOCL Retail Outlet Parwati Bangla Road, Kanpur Vs. Indian
 Oil Corporation Ltd. & Ors.
505

Second
instance
Penalty
of
Rs.25000 (Rupees Twenty Five thousand)

Third & subsequent instances: (a)
Rs.35,000/- or 45% of the monthly dealer
margin (based on average of last 6 months)
whichever is higher; and

(b) Suspension of sales and
supplies for 7 days or rectification of the
defect in toilet, whichever is later.

Action in case of (viii) above
would be as under:-

First instance:
Penalty
of
Rs.1,00,000/- (Rupees one lakh only)

Second instance: Penalty
of
Rs.2,00,000/- (Rupees two lakhs only) and
suspension of sales and supplies for 7 days.

Third instance: Termination of
the dealership.

Action in case of (ix) above
would be as under:-

First instance:
 Penalty
of
20% of the monthly dealer margin

(based on average of last 3
months)

Second instance: Penalty
of
30% of the monthly dealer margin

(based on average of last 3
months).

Third & subsequent instances:
Penalty of 40% of the monthly dealer
margin

(based on average of last 3
months) &

suspension of sales and supplies
for 15 days.

Action in case of (x) above
would be as under:-

First instance:
 Rs.25,000/-
(Rupees twenty five thousand only) per
nozzle found delivering short beyond
permissible limit as specified in Legal
Metrology Act/Rule

Second instances

(within one year of 1st instance):
Rs.50,000 (Rupees fifty thousand only) per

nozzle found delivering short
beyond permissible limit as specified in
Legal Metrology Act/Rule & suspension of
Sales and supplies for 15 days.

Third instance

(within one year of 1st instance):
Termination of the dealership

8.4. Minor Irregularities: The
following irregularities are classified as
minor irregularities:

i. Non-maintenance of specified
records where records from last inspection
are maintained but prior records are not
available (5.1.12)

ii. Non-provision of facilities like
air, telephone and first aid box (5.1.14.1)

iii. Miscellaneous.

a) Non-display of authorized
Retail
Selling
prices
of
MS/HSD/CNG/AUTO LPG (5.1.15)

b)
Non-display
of
density,
opening stock of the day, sticker ensuring
Zero before delivery on dispensing unit,
name of product on each nozzle of MDP,
contact details of authorized persons to be
contacted
in
case
of
Complaint/Grievance/Emergency. (5.1.17)

c) Non-maintenance of complaint
book or not providing the same when
demanded by the customer. (5.1.17)

d) Poor housekeeping. (5.1.17)

e) Driveway Salesmen at the ROs
not in uniform/wearing badges. (5.1.17)

(One or more irregularity under
the above category a, b, c, d or e will be
considered as one irregularity only for the
purpose of taking action).

Action:- Warning-cum-guidance
letter in the first instance, Rs.10000/- per
irregularity
on
second
instance
and
Rs.25,000/-
per
irregularity
on
third
instance onwards.

8.5.1. The above are general
guidelines and the actions prescribed in
MDG 2012 are minimum. The competent
506 INDIAN LAW REPORTS ALLAHABAD SERIES
authority of the concerned Oil Company
can however take appropriate higher action
against the erring dealer, if deemed,
necessary including termination in the first
or any instance in line with the provisions
of the Agreement.

8.5.2. All cases of irregularities
needs to be established before any action
is taken against a dealer.

8.5.3. In case, two or more
irregularities are detected at the same time
at the same RO,

a. Each of the irregularities
should be accounted as an instance against
the respective class of irregularity.

b. Suitable action will be taken
for that specific irregularity and also for
that specific instance.

c. Suitable action will be taken
for each of the irregularity thereby giving a
compounding effect.

8.5.4. In case of irregularities not
specifically mentioned/covered above, the
competent/appropriate authority of the
concerned Oil Company will take suitable
action after enquiry and in accordance with
the principles of natural justice.

8.5.5. The cycle of calculating
second and third instance shall be five
years starting from the date of first
irregularity. In other words if an irregularity
is established as on date, records of
previously 5 year period from this date will
be examined to determine whether the
present irregularity is the first, second or
the
third
instance
of
irregularity.
Irregularities under the previous MDG
within the 5 years period will be counted as
instances.

8.5.6. In respect of all cases of
irregularities a show cause notice, within
30 days from the date of inspection will
be issued to the dealer indicating all the
irregularities. However, in case samples
of
MS/HSD
were
drawn
during
inspection then the show cause notice
will be issued within 30 days of test
results. The show cause notice should be
issued alongwith all reports and other
documents etc. which forms the basis of
the notice.

8.5.7. The dealer would have a
period of 10 days to reply from the date of
issuance of show cause notice.

8.5.8 Upon receipt of the reply
to the show cause notice, the authorized
officer of the OMG will review the
charges levelled and the reply received
and pass a speaking order preference
within a period of 45 days from the
receipt of the reply. The speaking order
shall indicate complete details of the
irregularities committed, the reply of the
dealer and detailed reasons as to why the
reply is acceptable/not acceptable to the
official.

8.6
In
case
of
Critical
irregularities leading to termination, the
Head
of
the
State
office/Regional
office/Zonal office of the concerned
OMC
or
their
nominee
before
recommending/approving
the
termination of dealership will provide a
personal hearing to the signatories to the
dealership or their nominee(s). However,
if signatories to the dealership or their
nominee (s) fail to attend the hearing on
an appointed date, one more chance will
be given and after that the case may be
processed ex-parte based on available
facts.

8.7 Under existing laws, Control
Orders, Acts/Rules, etc. various authorities
of Central Government/State Government,
in addition to Oil Company Officers, are
empowered to carry out checks of the
dealership for determining and securing
compliance with such laws/Control Order.
If any "malpractice or irregularity" is
established
by
such
authorities
after
2 All. M/s M.K. Fuel Centre, IOCL Retail Outlet Parwati Bangla Road, Kanpur Vs. Indian
 Oil Corporation Ltd. & Ors.
507
checking, the same would also be taken as
a "malpractice or irregularity" under these
guidelines and prescribed action would be
taken by the Oil Company, on receipt of
advice from such authority.

In cases of action taken for some
of Major/Minor irregularities where there is
only fine and no suspension of sales and
supplies involved, such fine should be paid
by the concerned dealers within a period of
30 days from the date of notice by the
company. If not paid within this period, the
action of suspension of sales and supplies
would be taken from the 31st day for a
period of 15 days. The fine should be paid
within this suspension period failing which
the suspension would be extended for
another 15 days. If fine is not paid within
the
extended
suspension
period,
the
dealership would be terminated.

8.8. Authority to take action:

i) The action of termination and
all other critical irregularities will be
approved
by
Regional
head/State
head/Zonal head of the concerned oil
company (General Manager and above).
However, in respect of SC/ST category
dealerships termination will be approved by
the Director (Marketing) HQ.

ii)
In
respect
of
major
irregularities,
the
approving
authority
would be an auhtorized office not below
the rank of Dy. General Manager at
State/Region/Zonal level.

iii)
In
respect
of
minor
irregularities the approving authority would
be
the
head
of
Territory/Regional/Divisional office.

8.9. Appellate proceedings:

1. In case of termination arising
out of invocation of MDG, the dealer will
have the right to appeal within a period of
30 days from the date of receipt of order
before the Appellate Authority through the
concerned
Divisional/Territory/Regional
office of the Oil Marketing Company
(OMC).
The
Appellate
Authority
is
empowered to decide the matter and the
appeal shall be disposed of preferably
within 90 days from the date of filling the
appeal in the Divisional/Territory/Regional
office of the concerned Oil Marketing
Company (OMC).

2. For all appeals in case of
termination arising out of invocation of
MDG, the Appellate Authority will be the
Dispute Resolution Panel (DRP) nominated
by the OMG.

The Dispute Resolution Panel
(DRP) will comprise of the following
members:-

i) A retired Judge of the High
Court - Member-1.

ii) A retired Government servant
who held post not below the rank of Joint
Secretary in Govt. of India or equivalent
rank - Member-2.

iii) A retired official of PSU Oil
Marketing Companies who held the post
not below the rank of Director - Member-3.

The Retired Judge of the High
Court in the Committee will be the
Chairperson.

3.
The
terminated
dealer
preferring appeal would be required to
deposit Non-refundable Appeal fee of Rs.5
lakhs alongwith their appeal to the
concerned OMG. In case of SC/ST dealer,
Rs.2 lakhs non-refundable Appeal fee is
required to be paid alongwith their appeal.

However, if appeal results in
verdict in restoration of the Dealership,
50% of Appeal fee amount shall be
refunded."

(emphasis supplied)

19. Chapter 5 of the MDG deals with
the provisions relating to irregularities at
retail outlets/petrol pumps, wherein a
detailed
procedure
is
prescribed
for
508 INDIAN LAW REPORTS ALLAHABAD SERIES
checking 'short delivery of products' when
the tampering of seals are found by the
department of W & M and also when
unauthorized fittings in dispensing units are
found during inspection.