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2016 DIGILAW 553 (CAL)

Gateway Transport Com. Pvt. Ltd. v. Indian Oil Corporation Ltd.

2016-07-15

SUBRATA TALUKDAR

body2016
JUDGMENT : Subrata Talukdar, J. 1. In this writ petition the writ petitioner no.1, who operates a petroleum retail outlet under the respondents-Indian Oil Corporation Limited (for short IOCL) is represented by its Directors being the writ petitioner nos. 2, 3 and 4 who challenge the order of termination of the retail outlet (for short RO) dated 20th September, 2012 in turn upheld by the Appellate Authority (for short AA) of the IOCL vide order dated 5th of June, 2013. 2. At the heart of the dispute is the failure on the part of the RO to emerge successful in the sample testing of extra premium (XP) petrol drawn from the RO by the Field Officer of IOCL during an inspection on 30th November, 2011. 3. At the inspection on 30th November, 2011 both High Speed Diesel (for short HSD) and XP were drawn. While the HSD sample conformed to the normative specification, in respect of the XP sample which was tested, the original failed to meet the specification of Full Boiling Point (for short FBP) as well as the level of existing gum. Accordingly, supplies of all products to the RO were suspended vide communication dated 15th December, 2011. 4. The suspension of supplies was followed by a show cause notice on the 22nd of December, 2011 and, by reply dated 23rd December, 2011 the petitioners requested for testing of the sample retained by the RO. The RO sample retained with the dealer and the Field Officer were again tested on 10th February, 2012 and, both the retention samples failed to meet the specified norm. 5. A notice of termination was thereafter issued to the RO vide letter of IOCL dated 4th of April, 2012, in which the specific allegation was made against the RO that failure to meet the specification of the samples means adulteration of the product. 6. By reply to the show cause dated 4th of April, 2012, the RO by letter dated 18th April, 2012 purported to admit the fact that at the time the product were unloaded from the tanker on 26th November, 2011 of 4 kilolitres (kls) XP + 8 kls HSD, none of the three Directors of the RO were present at the site. Thus, the product was unloaded by the Duty Manager in presence of the driver of the tanker and helper. 7. Thus, the product was unloaded by the Duty Manager in presence of the driver of the tanker and helper. 7. The reply of the RO further points to the fact that at the time of unloading the tanker on 26th November, 2011 by mistake the disposal pipe of HSD was introduced in the underground tank of XP for some time. Such mistaken insertion of the HSD disposal pipe resulted in the failure of the XP to meet the sample testing norms. 8. Being dis-satisfied with the reply of the RO, IOCL terminated the dealership vide its letter dated 20th September, 2012. The RO preferred an appeal on 19th October, 2012 to which personal hearing as well as opportunity to file written submissions was granted to the RO on 24th of April, 2013. 9. In the appeal the additional point was taken on behalf of the RO that the testing of the XP samples was done on several parameters. It is transparent that there is no difference in respect of the other parameters while, in respect of the FBP alone there was a striking difference. Therefore, in the appeal the RO pressed for testing by an independent laboratory. 10. The AA took cognizance of the fact that in the reply to the show cause the RO had taken the point of mistaken decantation of HSD into the XP tank. The AA also noticed the defence taken by the RO at the show cause stage that the point regarding mistaken decantation was purportedly taken at the behest of the Field Officer of IOCL. 11. The AA further took notice of the fact that not only the FBP and the existing gum content of the XP had failed in the sample test, it is also on record that the density of the RO sample was found to be at variance. Therefore, the combined effect of FBP, existing gum content and density variation pointed towards adulteration of the product. 12. The AA also noticed that the samples drawn from the RO were tested at the Gauripur Regional Laboratory of IOCL at Kolkata and, the IOCL had extended sufficient opportunity to the RO to represent its case. The appeal was therefore rejected and the order of termination of the dealership in terms of Clause 6.1.1. 12. The AA also noticed that the samples drawn from the RO were tested at the Gauripur Regional Laboratory of IOCL at Kolkata and, the IOCL had extended sufficient opportunity to the RO to represent its case. The appeal was therefore rejected and the order of termination of the dealership in terms of Clause 6.1.1. read with Appendix I of the Marketing Discipline Guidelines of IOCL, 2005 (for short MDG, 2005) further read with Clauses 17 and 45 (l) of the Dealership Agreement stood upheld. 13. Sri Bikash Ranjan Bhattarcharyya, Ld. Senior Counsel with Sri Ram Anand Agarwala, Ld. Counsel appearing for the writ petitioners reiterates the fact that the sample drawn from the RO did not fail in all the tests but, purported to fail in the FBP and the existing gum content. Sri Bhattacharyya argues that the RO is operating in terms of an agreement entered into with IOCL in the year 2005 and, the samples were drawn on 30th November, 2011. Ld. Senior Counsel for the writ petitioners points out that for a period of 6 years there was no complaint towards running of the RO. Assuming but not admitting that the mistaken drainage of HSD into the XP tanker had taken place on 26th November, 2011, Sri Bhattacharyya argues that the order of termination is utterly disproportionate to the purported offence. 14. Sri Bhattacharyya further points out that no mens rea can be attributed to the RO on account of such mistaken drainage of HSD into the XP tank. Additionally, the XP sample did not fail on every count and that would be evident from the test results made available by IOCL itself. Sri Bhattacharyya accordingly submits that the order impugned of termination dated 20th November, 2012 as well as the order of the AA dated 5th June, 2013 deserves to be set aside. 15. Arguing for IOCL, Sri M.S. Yadav, Ld. Counsel questions the very basis of the assumed mistake claimed by the RO. Sri Yadav submits that it is an issue of fact whether a mistake was committed or, it was a deliberate act of adulteration. 16. Further taking this Court to the facts of the case, Sri Yadav argues that the test reports on the samples are not at variance. Sri Yadav submits that it is an issue of fact whether a mistake was committed or, it was a deliberate act of adulteration. 16. Further taking this Court to the facts of the case, Sri Yadav argues that the test reports on the samples are not at variance. The test reports are ad idem on the point that the XP sample has failed the parameters of testing on the grounds of FBP and existing gum content. The plea of mistake, according to Sri Yadav, is merely an afterthought. The bona fides of the testing process is evident from the fact that the HSD sample did not fail the test contrary to the XP sample. Drawing the attention of this Court to the Memorandum of Agreement (for short MOA) entered into between the RO and IOCL, particularly Clauses 17 and 45(l) thereof, Sri Yadav submits that the result of the samples lead to the conclusion of adulteration. The punishment for adulteration under the MDG, 2005 is termination. The question of mistake in the decantation process, if challenged, requires to be examined on evidence. IOCL does not admit of the plea of mistake in the decantation process. 17. Therefore, heavily relying upon the judgments of the Hon’ble Apex Court reported in 2008 (8) SCC 172 in the matter of Pimpri Chinchwad Municipal Corporation & Ors. vs. Gayatri Construction Company & Anr., 2007 (14) SCC 680 in the matter of Empire Jute Company Ltd. & Ors. vs. Jute Corporation of India Ltd. & Anr. (at paras 14, 15, 18 and 22) and 2004 (3) SCC 5532 in the matter of ABL International Ltd. & Anr. vs. Export Credit Guarantee Corporation of India Ltd. & Ors. (at para 16), Sri Yadav argues that the remedy of the writ petitioners is only by way of arbitration and, such arbitration clause can be found in the agreement itself at Clause 61 thereof. 18. Relying on AIR 1996 SC 3515 in the matter of State of U.P. & Ors. vs. Bridge & Roof Co. (India) Ltd. (at paras 15, 16, 17, 18 and 21), Sri Yadav argues that the relation between the parties is governed by the contract vide the MOA dated 28th March, 2005 and, the Writ Court will not readily interfere in the realm of a contract. vs. Bridge & Roof Co. (India) Ltd. (at paras 15, 16, 17, 18 and 21), Sri Yadav argues that the relation between the parties is governed by the contract vide the MOA dated 28th March, 2005 and, the Writ Court will not readily interfere in the realm of a contract. Further relying on 1991 (1) SCC 533 in the matter of Indian Oil Corporation Ltd. vs. Amritsar Gas Service & Ors., Sri Yadav submits that the specific relief arising out of the contract lies by way of a claim to damages by the petitioners. Accordingly, Ld. Counsel for IOCL emphasises, the writ petition is not maintainable. 19. It is also the submission of Sri Yadav that the writ petitioners were extended adequate opportunity by IOCL to present their defence and, there is no inadequacy in the institutional hearing granted up to the appellate level. In support of the now legally recognized principle of institutional hearing, Sri Yadav relies upon 2013 (5) SCC 252 in the matter of Kalinga Mining Corporation vs. Union of India & Ors. (at paras 47, 49, 62, 63, 70 and 74). Therefore, Sri Yadav argues that the orders of termination and of the AA impugned in the writ petition do not admit of interference. 20. Having heard the parties and considering the materials on record this Court arrives at the following conclusions:- (A) That the drawal and testing of samples from the RO, once challenged, are essentially questions of fact. Such facts have been presented on either side both by the writ petitioners and on behalf of IOCL. (B) The results of such testing by IOCL at its regional laboratory, once challenged, is also a factual issue. Whether the HSD was decanted into the XP tank on 20th November, 2011 as raised by the petitioners is again a question of fact. (C) In the considered view of this Court the issue of facts which have presented themselves for adjudication through this petition cannot be gone into elaborately by the Writ Court and the remedy lies in arbitration. In this connection the observations of the Hon’ble Apex Court in 2007 (14) SCC 680 in the matter of Empire Jute Company Ltd. & Ors. vs. Jute Corporation of India Ltd. & Anr. at Paragraphs 18 to 24, can be usefully reproduced:- “18. In this connection the observations of the Hon’ble Apex Court in 2007 (14) SCC 680 in the matter of Empire Jute Company Ltd. & Ors. vs. Jute Corporation of India Ltd. & Anr. at Paragraphs 18 to 24, can be usefully reproduced:- “18. The power of judicial review vested in the superior courts undoubtedly has wide amplitude but the same should not be exercised when there exists an arbitration clause. The Division Bench of the High Court took recourse to the arbitration agreement in regard to one part of the dispute but proceeded to determine the other part itself. It could have refused to exercise its jurisdiction leaving the parties to avail their own remedies under the agreement but if it was of the opinion that the dispute between the parties being covered by the arbitration clause should be referred to arbitration, it should not have proceeded to determine a part of the dispute itself. 19. Similar question arose for consideration in M/s. Bisra Stone Lime Co. Ltd. etc. Vs. Orissa State Electricity Board and another [ AIR 1976 SC 127 ] wherein it was held that the High Court may refuse to exercise its jurisdiction, if there exists a valid arbitration clause stating; 24. It is then submitted that this Court should not use its discretion in favour of arbitration in a matter where it is a pure question of law as to the power of the Board to levy a surcharge. This submission would have great force if the sole question involved were the scope and ambit of the power of the Board under Sections 49 and 50 of the Act to levy a surcharge, as it was sought to be initially argued. The question in that event may not have been within the content of clause 23 of the agreement. But all questions of law, one of which may be interpretation of the agreement, need not necessarily be withdrawn from the domestic forum because the court has discretion under Section 34 of the Arbitration Act or under Article 226 of the Constitution and that the court is better posted to decide such questions. The arbitration clause 23 is a clause of wide amplitude taking in its sweep even interpretation of the agreement and necessarily, therefore, of clause 13 therein. The arbitration clause 23 is a clause of wide amplitude taking in its sweep even interpretation of the agreement and necessarily, therefore, of clause 13 therein. We are therefore, unable to accede to the submission that we should exercise our discretion to withhold the matter from arbitration and deal with it ourselves. 20. A similar view was taken by this Court in Sanjana M. Wig (Ms) Vs. Hindustan Petroleum Corpn. Ltd. (2005) 8 SCC 242 holding: 12. The principal question which arises for consideration is as to whether a discretionary jurisdiction would be refused to be exercised solely on the ground of existence of an alternative remedy which is more efficacious. Ordinarily, when a dispute between the parties requires adjudication of disputed question of facts where for the parties are required to lead evidence both oral and documentary which can be determined by a domestic forum chosen by the parties, the Court may not entertain a writ application (See Titagarh Paper Mills Ltd. v. Orissa SEB and Bisra Stone Lime Co. Ltd. v. Orissa SEB). 13. However, access to justice by way of public law remedy would not be denied when a lis involves public law character and when the forum chosen by the parties would not be in a position to grant appropriate relief. 21. Relying on some of the earlier decisions of this Court, this Court held: “18. It may be true that in a given case when an action of the party is dehors the terms and conditions contained in an agreement as also beyond the scope and ambit of the domestic forum created therefore, the writ petition may be held to be maintainable; but indisputably therefore such a case has to be made out. It may also be true, as has been held by this Court in Amritsar Gas Service and E. Venkatakrishna that the arbitrator may not have the requisite jurisdiction to direct restoration of distributorship having regard to the provisions contained in Section 14 of the Specific Relief Act, 1963; but while entertaining a writ petition even in such a case, the court may not lose sight of the fact that if a serious disputed question of fact is involved arising out of a contract qua contract, ordinarily a writ petition would not be entertained. A writ petition, however, will be entertained when it involves a public law character or involves a question arising out of public law functions on the part of the respondent.” 22. The legal position has undergone a substantial change, having regard to Section 5 of the Arbitration and Conciliation Act, 1996 vis-a-vis provisions of Arbitration Act, 1940. The said provision reads as under:- “5. Extent of judicial intervention. – Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.” 23. In terms of 1940 Act, even a civil suit could have been entertained subject of course to exercise of the court’s jurisdiction under Section 21 thereof. Section 5 of 1996 Act takes away the jurisdiction of the Court. There cannot be any doubt whatsoever, the provision of the 1996 Act must be given effect to. 24. As the disputed facts as also the law are required to be determined by the Arbitrator, we are of the opinion that all disputes between the parties should be directed to be resolved upon taking recourse to the arbitration agreement contained in clause 9.0 of the Sale Order.” (D) This Court also notices that there is no infraction of the principles of natural justice on the part of IOCL qua the writ petitioners and, none has been raised at the Bar. At every stage the petitioners were extended the opportunity of showing cause and, factually IOCL found the result of the sample testing not in conformity with the norms. The clash inter se the parties is intrinsically factual and the Writ Court, in the facts of this case, is circumscribed by its limitations. 21. In the backdrop of the above discussion WP 21379(W) of 2013 fails and, is accordingly dismissed. 22. There will be, however, no order as to costs. 23. Urgent certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.