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2017 DIGILAW 840 (KER)

Indian Oil Corporation Ltd. v. K. M. Jacob

2017-06-05

DEVAN RAMACHANDRAN, K.SURENDRA MOHAN

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JUDGMENT : Devan Ramachandran, J. This appeal has been presented by the appellant, which is a Government of India Oil Marketing Company, engaged in the business of refining and retail sale of petroleum products, assailing the judgment of the learned Single Judge in O.P.No.32997/2002, under which directions were issued to them to release an amount of Rs.2,01,735/-, along with 7.5% interest to the first respondent, holding that recovery of such amounts, effected by the appellant from the first respondent is illegal and unlawful. 2. The original petition was filed by the first respondent against the appellant and the District Collector, Kottayam, who is arrayed as the second respondent, alleging that an amount of Rs.2,01,735/- has been illegally deducted from the amounts due to him from the appellant without any reason or sufficient cause. 3. The first respondent alleges that he was the contractor engaged by the appellant for transportation of petroleum products from Kochi Refineries to the depots of various other oil companies as and when required. He says that he was the registered owner of a lorry bearing Reg.No. KCF 5297, which had the requisite tanker for transportation of petroleum products. The first respondent says that there was an agreement entered into between him and the appellant for a period of three years from 1995 to 1998 for transportation of petroleum products. Even though the first respondent did not produce the agreement along with the writ petition, the same was placed on the files of this case and appended to the original petition as Exhibit R1(a) subsequently by the appellant. 4. The factual circumstances that led to filing of the original petition has its genesis in an incident that took place on 21.10.1997. On that day, the lorry owned by the first respondent was carrying petroleum products for supply to a certain M/s. V.C. Joseph & Co. The vehicle, which is stated to have been carrying both petrol and diesel, was intercepted by the police officers attached to Ettumanoor Police Station on an information that they had received, by way of a written complaint, that the stock of petroleum products contained in the lorry was adulterated by the first respondent and his employees, namely, the driver and cleaner. A case, numbered as Crime No.374/1997 of Ettumanoor Police Station, was registered and the lorry was taken into custody along with the stock and retained in the police station. A case, numbered as Crime No.374/1997 of Ettumanoor Police Station, was registered and the lorry was taken into custody along with the stock and retained in the police station. The driver and cleaner of the vehicle were arrested and produced before the Special Judge, Thrissur for trial of offences under the provisions of the Essential commodities Act, 1955 ('the Act' for short). The offences alleged against the first respondent and his employees were under the provisions of the Motor Spirit and High Speed Diesel (Prevention of Malpractices in Supply and Distribution) Order, 1998 read with Sections 3 and 7(1)(2) (ii) of the Act. On registration of the said crime, a show cause notice was issued to the first respondent and his employees on 29.11.1997 under clause 6B of the Act and all of them offered their explanation on 02.12.21997. 5. In the meanwhile, before clause 6B notice was issued to the first respondent, he issued a letter dated 13.11.1997 to the District Collector, Kottayam to release the seized vehicle along with the stock. At this point of time, on the basis of the directions from the court, the Sub Inspector of Police reported to the District Collector on 28.10.1997 for disposal of the stock, since it was highly inflammable and perishable, as per proceedings dated 11.12.1997. The District Collector issued orders for disposal of the seized stock through auction sale or by handing over to the nearby petrol bunk. However, the Senior Divisional Manager of the appellant objected to this since the stock was adulterated and not worthy of being sold in open market. It was pointed out to the District Collector that no dealer is expected to buy petroleum products from any other source except directly from the oil companies. It was also requested therein that the appellant be permitted to collect samples of petrol and diesel from the vehicles to carry out necessary investigation into the allegation of adulteration. It appears that this request was granted and samples were taken by the officers of the appellant. 6. The pleadings on record indicate that the tests conducted on the samples showed that the stock was adulterated and that the Divisional Manager of the appellant, through his letter dated 11.02.1998, showed their willingness to take back the adulterated stock of petrol and diesel and to transfer the same to the godown at Kochuveli. 6. The pleadings on record indicate that the tests conducted on the samples showed that the stock was adulterated and that the Divisional Manager of the appellant, through his letter dated 11.02.1998, showed their willingness to take back the adulterated stock of petrol and diesel and to transfer the same to the godown at Kochuveli. However, since the stock of petroleum products in the vehicle was involved in a case under the Act and thus subject to proceedings for confiscation, the District Collector directed the first respondent to produce a bank guarantee equal to the value of the of the stock and the vehicle before the stock could be released to the appellant and the vehicle to the first respondent. The first respondent challenged this order by filing O.P.No.4614/1998, which was disposed of by judgment dated 20.05.1998. A learned Single Judge of this Court disposed of the said writ petition directing the District Collector to release the vehicle to the first respondent on his furnishing bank guarantee for an amount equal to the value of the said vehicle. This was so ordered noticing that the stock of petroleum products had already been released to the appellant. In obedience to these directions, the first respondent furnished a bank guarantee for Rs.2 lakhs determined to be the value of the vehicle and thereupon the vehicle was released to him on 16.03.1999. 7. The stock of the petroleum products thus having been handed over to the appellant, an inspection, after de-cantation of the alleged adulterated products, was conducted by the appellant on 10.04.1999. In the said inspection, which was a joint inspection conducted in the presence of the representative of the appellant, the first respondent and the driver of the lorry, it was found that there was a shortage of both petrol and diesel to the value of about Rs.58,123/-. It is so recorded in the report dated 10.04.1993, a copy of which has been produced and marked as Exhibit P2 along with the writ petition. It appears that this amount was thereafter recovered from the first respondent by the appellant, by adjusting it against the bills that were submitted by him for subsequent transportation. 8. It is so recorded in the report dated 10.04.1993, a copy of which has been produced and marked as Exhibit P2 along with the writ petition. It appears that this amount was thereafter recovered from the first respondent by the appellant, by adjusting it against the bills that were submitted by him for subsequent transportation. 8. With respect to the balance of the stock that was found, after the shortage was thus recorded in the report, the appellant purified the same by the process normally employed for such purpose and the stock thus purified was later sold by them. 9. While the matters stood so, the District Collector, Kottayam appears to have addressed a letter, to the Senior Divisional Manager of the appellant, dated 23.02.2000, a copy of which has been produced by the appellant as Exhibit R1(b) in the writ petition along with their counter affidavit, wherein they were asked to remit the amount obtained by sale of the stock entrusted to them as per Exhibit P2 proceedings through a chalan to the Government Treasury without any further delay. In obedience to these directions, the appellant remitted an amount of Rs.1,44,954/-, being the value of the stock after deducting the amounts spent by them for purification and to rid it of adulteration, on 27.06.2001 under their covering letter of the same day. This letter has been produced by the appellant as Exhibit R1(c) along with the counter affidavit in the writ petition. Since the amount remitted under the orders of the District Collector was on account of the proceedings under the Act caused solely due to the transgression committed by the first respondent, the appellant went on to deduct this amount also from the bills of transporting submitted by the first respondent later. The first respondent has produced the statement of account between him and the appellant to show that both amounts, namely Rs.58,123/-, referred to earlier, being the short fall of the stock determined as per Exhibit P2 proceedings and Rs.1,44,954/- that was made over to the District Collector under Exhibit R1(c) letter had been deducted from his account. 10. The first respondent thereafter addressed the appellant through Exhibit P4 letter requesting that these amounts be refunded to him. In the said letter, he virtually admits that there was a short fall and that he is liable to make payment of Rs.58,123/-. 10. The first respondent thereafter addressed the appellant through Exhibit P4 letter requesting that these amounts be refunded to him. In the said letter, he virtually admits that there was a short fall and that he is liable to make payment of Rs.58,123/-. However, as regards the amounts remitted by the appellant to the District Collector under Exhibit R1(a) was concerned, the first respondent, in Exhibit P3, maintains that such adjustment from his account was irregular and illegal. The said letter does not say why the first respondent asserts that this adjustment is illegal and the letter merely alleges that such amounts were deducted from his account without any basis. When the appellant did not cede to the request made by the first respondent in Exhibit P4, he filed the writ petition praying that the amounts of Rs.58,123/- and Rs.1,43,612/- (even though in Exhibit R1(c), the amount paid by the appellant was Rs.1,44,954/-) be paid to him with interest. 11. The learned Single Judge, on an assessment of the pleadings and submissions made, allowed the writ petition directing the appellant to refund the amount or Rs.58,123/- along with Rs.1,43,612/- with 7% interest. As we have indicated above, it is this judgment that is assailed in this appeal. 12. We have heard Sri. Poulose, learned counsel for the petitioner, Sri. V.V. Nandagopal Nambiar, learned counsel for the first respondent and the learned Government Pleader for the second respondent. 13. It is conceded to by the parties that the first respondent was engaged as a contractor for transportation of petroleum products. As per Exhibit R1(a) agreement between them, the contractor is responsible for delivering the correct quantity and quality of the product and it is the duty of the contractor or his driver to satisfy themselves regarding the quality and quantity of the stock carried in the vehicle. Paragraph 20 of the said agreement is very clear that in the event of any loss of the product recorded at the destination, the cost of such shortage will be either debited against the contractor's bills or by making good the loss directly by the contractor. When the stock was jointly inspected as per the proceedings recorded in Exhibit P2, it was seen that there was a shortage of 2860 litres of petrol and 7630 litres of diesel. When the stock was jointly inspected as per the proceedings recorded in Exhibit P2, it was seen that there was a shortage of 2860 litres of petrol and 7630 litres of diesel. The value of this shortage was determined to be Rs.58,123/-, calculated at the rate of that day and it was this amount that was debited from the account of the first respondent. We do not think that the first respondent can legitimately have any case against such debit because the shortage was noticed in the stock that his vehicle was carrying. Of course, we see that the petitioner had tried feebly to present a case that when the vehicle was being driven from the police station to court after its interception, it met with an accident, thereby causing spillage of the stock contained in it. This is certainly too far fetched since, there is nothing on record to establish such a spillage or that the vehicle met with an accident of such a gravity so as to cause spillage of the petroleum products contained in it. 14. The first respondent further says that even though the vehicle was intercepted on 21.10.1997, the stock contained therein was measured only on 10.04.1999, as is evident from Exhibit P2. He says that this long delay could have been sufficient cause for the stock to get evaporated thus reducing its quantity. This again is a bald statement of the first respondent which is not supported by any cogent or reliable evidence on record. The joint inspection was done in the presence of the representative of the first respondent but he had no case of any such loss being occasioned on account of the delay. In any event of the matter, even in Exhibit P4 letter issued by the first respondent on 16.10.2002, which was nearly three years after Exhibit P2, the first respondent did not have a case of the alleged accident or of the loss on account of efflux of time and evaporation. On the contrary, Exhibit P4 would indicate that he had accepted this shortage as being caused from his side. 15. As regards the amount of Rs.1,43,612/- is concerned, this represents the value that was remitted by the appellant under Exhibit R1(c) letter to the District Collector in obedience to the requisition made in Exhibit R1(b) proceedings. On the contrary, Exhibit P4 would indicate that he had accepted this shortage as being caused from his side. 15. As regards the amount of Rs.1,43,612/- is concerned, this represents the value that was remitted by the appellant under Exhibit R1(c) letter to the District Collector in obedience to the requisition made in Exhibit R1(b) proceedings. Since the stock was found to be adulterated, the provisions of the Act would apply and obviously therefore, such adulterated stock is liable for confiscation under the provisions of Section 6 of the Act. The District Collector had issued notice under Section 6B of the Act to the first respondent and his employees on 29.11.1997 and they had submitted their explanation on 02.12.1997. The investigation conducted by the appellant clearly showed that the stock was adulterated. Since the stock was seized from the vehicle owned by the first respondent, it can only lead to the irresistible conclusion that adulteration was caused at the hands of the first respondent or his employees. 16. The learned Single Judge, in the judgment in appeal, has recorded that the driver of the vehicle, who was accused No.1 in the criminal case before the Judicial First Class Magistrate Court, Ettumanoor died, thus abating proceedings against him and that the first respondent, who was arrayed as the third accused, has been acquitted under Section 248(1) of the Code of Criminal Procedure. It is also seen recorded in the judgment that the Cleaner of the vehicle is absconding and the case is still continuing after it was split up, presumably to complete the proceedings against other accused. The learned Judge seems to have been influenced by these factors while allowing the writ petition. 17. The judgment also says that since no confiscation order was passed under Section 6A(1) of the Act by the District Collector, the sale proceeds of the stock shall be paid only to the first respondent, being the owner of the same. The learned Judge has also concluded that the appellant company is not under a duty to sell and deposit the amounts obtained by it by sale of the petroleum products seized from the vehicle of the first respondent. On such mentation, the learned Single Judge allowed the writ petition holding that the first respondent cannot be made liable for these amounts and his involvement in the alleged adulteration of the petroleum products does not stand proved. On such mentation, the learned Single Judge allowed the writ petition holding that the first respondent cannot be made liable for these amounts and his involvement in the alleged adulteration of the petroleum products does not stand proved. 18. We have examined the impugned judgment in great detail. We have assessed the materials on record and the submissions made by the counsel on either side very carefully, especially because we are of the view that the judgment suffers from an error which will warrant allowing of this appeal for the reasons that we will state presently. 19. It is virtually conceded by the first respondent in Exhibit P4 letter that he is liable to make good the shortage detected against him and recorded in Exhibit P2 proceedings. Even if it is not so, he would be certainly liable for the same since the stock was carried by his vehicle from the appellant company and it was the responsibility of the first respondent and his employees to ensure that the stock delivered was intact and in full quantity. The stock of petrol and diesel, under Exhibit R1(a) agreement, belongs to the appellant company and not to the first respondent. The first respondent's obligation is only to transport the same from one point to the other and be paid for such transport. When there is a shortage in such stock, obviously, the first respondent would be legally and contractually obligated to pay to the appellant, the value of such shortage. In this case, even though the first respondent tried to explain the shortage alleging the accident as aforementioned and probabilities of evaporation by efflux of time, such contentions or allegations have not been proved by him by cogent and reliable methods. We are unable to accede to this contentions and we have no other option but to repel the same. As regards the amount remitted by the appellant, they did so only under the orders of the District Collector issued under the provisions of the Act. The stock of the petroleum products having been found to be adulterated, even by the tests conducted by the appellant, and since they were under a legal obligation pursuant to Exhibit R1(b) order of the District Collector, they had no other option but to remit the same which they did as early as on 05.06.2001. The stock of the petroleum products having been found to be adulterated, even by the tests conducted by the appellant, and since they were under a legal obligation pursuant to Exhibit R1(b) order of the District Collector, they had no other option but to remit the same which they did as early as on 05.06.2001. The first respondent filed the writ petition only on 07.11.2002, which is more than three years after the short fall was detected and more than one year and three months after the amounts were remitted by the appellant into Government account under the orders of the District Collector. 20. As we have already indicated above, even in Exhibit P4, which was a letter issued by the first respondent on 16.10.2002, he has not stated that he is not liable for these amounts but it appears to show that he is occluded completely to what happened and thus maintaining, in a very casual manner, that the adjustment made from his account to cover these amounts were done without any basis. The stock of the petrol and diesel, obtained from the vehicle of the first respondent, having been found to be adulterated and the appellant being obligated to remit the amounts legally under the provisions of the Act and since the stock carried by the vehicle of the first respondent being owned by the appellant at all times, we cannot find any justification in the conclusion of the learned Single Judge that the appellant is liable for all these payments and that it cannot be recovered from the first respondent. We are afraid that we cannot bring ourselves to be in agreement with the views of the learned Single Judge on this count. We are guided to a firm opinion that the transgression having been committed by the first respondent and his employees, the appellant cannot be mulcted with any burden for the resultant loss occasioned to them and they were justified in adjusting all such amounts against the bills presented by the first respondent relating to transportation charges under Exhibit R1(a) contract. 21. 21. The over all view of what we have stated above is that the first respondent could not have succeeded in the writ petition and the judgment of the learned Single Judge allowing the same and directing the appellant to make payment to the first respondent is forensically incompetent and liable to be interfered with. In such circumstances, we allow this appeal and set aside the judgment of the learned Single Judge dated 18.02.2009 in O.P.No.32997/2002, which is impugned in this appeal and confirm the action of the appellant in having deducted an amount of Rs.58,123/- and Rs.1,44,954/- from the account of the first respondent. In the peculiar facts and circumstances of this case, we deem it appropriate not to make any order as to costs and the parties are directed to suffer their respective costs.