SREE BRUNDAVAN BHARAT GAS SERVICES V. The Union Of India

WP/25793/2021

AI Insights

The case revolves around the termination of an LPG distributorship held by the petitioners with Bharat Petroleum Corporation Ltd. (BPCL). The petitioners challenged the termination and subsequent appellate decision, arguing that the actions taken by the respondents were without jurisdiction, arbitrary, and violated their fundamental rights under the Constitution of India. The court examined the procedural adherence to the Marketing Discipline Guidelines, 2018, particularly focusing on the principles of natural justice, the right to a fair hearing, and the requirement for the supply of documents during the appellate process.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 722042 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 27-04-2023
• Assessment Year: misc
• Other Referred Cases: M/s. Nuthan Gas Service Vs. The Indian Oil Corporation Ltd., Natwar Singh Vs. Directorate of Enforcement & Anr
• Laws Referred To: Article 226 of the Constitution of India, Marketing Discipline Guidelines, 2018, Fundamental Rights under Articles 14, 16, 19, and 21 of the Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Inspection Report; Jurisdiction; Natural Justice; Penalty; Termination of distributorship; Appeal process
• Section: 3(6); 3.11(3)

Judgement Text

"THE HON’BLE SRI JUSTICE RAVI CHEEMALAPATI WRIT PETITION No.25793 of 2021 ORDER: The present Writ Petition is filed by the petitioners under Article 226 of the Constitution of India, seeking the following relief: “…..declaring the action of the 7th respondent in passing the impugned proceedings dated 6092021 confirming the termination orders passed by the 5th respondent vide its proceedings No.KNL:TERR:LPG: Brindavan Bharatgas, Gooty dated 01.08.2020 without having any jurisdiction as contemplated in the clause No.3.11(3) of Marketing Discipline Guidelines, 2018 as illegal, arbitrary, without jurisdiction malafide and violative of the Fundamental Rights guaranteed to the Petitioner under Art. 14, 16, 19 and 21 of Constitution of India and violative of the Principles of Natural Justice and consequently set aside the orders passed by the 5th and 7th respondents respectively and pass such order or orders…..” 2. The case of the petitioners is that the petitioners entered into LPG dealership with respondent-Corporation on 14.03.2015 for distribution of cylinders to household consumers and commercial customers and the said agreement has been renewed on 10.03.2020 for a period of five years and which comes to an end on 09.03.2025. 2 3. It is further case of the petitioners that the petitioners are effectively discharging the dealership functions to the satisfaction of the respondent-Corporation. On 26.09.2017, the officials conducted inspection and found critical, major and minor irregularities and issued a report on 03.10.2017 to the petitioners calling for their explanation and Territory Manager issued show-cause notice on 18.10.2017 instructing the petitioners to pay penalty of Rs.1,27,821.35/- as against critical and major irregularities. 4. It is further case of the petitioners that petitioners submitted their explanation and thereby, the Corporation issued revised show cause notice on 27.10.2017 reducing penalty amount of Rs.55,769/- which is contrary to their own regulations and guidelines. It is further case that, the respondent authorities once again inspected petitioners’ showroom and godown on 22.06.2018 and in the inspection report certain remarks are made and gave instructions to the petitioners to comply and though complied the instructions, the territory manager issued a letter dated 3 01.08.2018 referring the ambiguous and false remarks earlier recorded by the Assistant Sales Manager characterizing the circulation with consumers as critical irregularities and imposed penalty of Rs.77,096/- thereby, issued proceedings dated 24.10.018 directing the petitioner to pay the said penalty amount, without providing fair opportunity. 5. It is further case of the petitioners that, aggrieved by the same, the petitioners filed W.P No.39747 of 2018 before the Composite State, High Court and the said Writ Petition is disposed of on 05.11.2018 with a direction to take recourse of alternative remedy, as per the revised marketing disciplinary proceedings guidelines, 2015. Accordingly, the petitioners filed an Appeal, but without giving opportunity to the petitioner, the appellate authority confirmed the penalty order. 6. It is further case of the petitioners that thereafter, the respondent officials inspected the showroom and godown on 29.12.2018 and thereby issued show cause notice dated 07.01.2019 and took action dated 20.02.2019 on same 4 alleged irregularities by levying Rs.1,10,624/- and subsequently once again inspected the petitioners showroom and godown on 29.06.2019 and again on similar irregularities issued another notice and for which petitioners filed their detailed explanation on 11.07.2019. Pursuant to the same the respondent officials in their letter dated 12.07.2019 recorded the minutes of the meeting and threatened to terminate the agency of the petitioners, if the home deliveries are not provided regularly. 7. It is further case of the petitioners that on the fifth instance the sales manager conducted inspection on 21.05.2020 and filed a report alleging therein, that no home deliveries were made at Pamidi Mandal and surrounding villages and consumers were overcharged and cash memos were not issued. On these allegations, it was recommended to territory manager to transfer consumers to the nearest distributor and take action against petitioners as per MDG rules. 8. It is further case of the petitioners is that, aforesaid inspection was conducted surprisingly during the lockdown 5 period and Territory Manager issued show cause notice on 21.05.2020 and also on 17.07.2020 and the petitioners have given their explanations. The authorities have transferred 3148 customers from their agency, without any notice and without giving any inspection report. 9. It is further case of the petitioners is that, the 2nd petitioner always raised a strong voice against the attitude of the Corporation officials and on 03.06.2020, the respondent officials issued notice and took vindictive steps questioning the 2nd petitioner about the press meet conducted by him on 29.05.2020 and without following the process, the respondent-Corporation terminated the distributorship of the petitioners on 01.08.2020 on the ground of violation of MDG Rules, 2018. Aggrieved by the illegal termination, the petitioner filed W.P No.14893 of 2020 and wherein, this Court on 08.03.2021 has passed an order leaving it open to the petitioner to pursue the remedy of appeal under Revised Marketing Disciplinary Guidelines, 2017 before the concerned appellate authority. 6 10. It is further case of the petitioners that, pursuant to the said order, they filed an appeal before the Executive Director (LPG) appellate authority and also got filed Writ Appeal No.349 of 2021 against the order passed in Writ Petition No.14893 of 2020, wherein, the Division Bench disposed of the appeal on withdrawal, providing that respondent No.2 shall dispose of the appeal within a period of one month from today. 11. It is further case of the petitioners that, though the Executive Director is the appellate authority as per the Marketing Discipline Guidelines 2017 and Marketing Discipline Guidelines 2018, the personal hearing as part of the appeal process was arranged with the Director (Marketing), the authority above the Executive Director – LPG, seeking the consent of the petitioner towards the same. The said appeal filed by the petitioner has been dismissed by the Marketing Director, the Bharat Petroleum Corporation LTD on 06.09.2021, aggrieved thereby the present Writ Petition is filed. 7 12. The 5th respondent filed his counter denying the allegations inter alia contending that the petitioners having agreed that the Appeal can be heard and disposed of by the Director (Marketing) is estopped by conducting and questioning the same and the act of the Corporation in entrusting the matter to the Director (Marketing) to decide the appeal is perfectly legal and the said act is in consonance of the principles of natural justice as the Executive Director, who has taken decision to terminate the distributorship of the petitioner. Accordingly, prayed to dismiss the Writ Petition. 13. Heard Dr. T. Anup Kumar, learned counsel for the petitioners and Mr. V.V Satish, learned Standing Counsel for the 5th respondent. 14. Learned counsel for the petitioner in elaboration to what has been contended in the affidavit submitted that, distributorship of agency was given on 14.03.2015 and it was renewed on 10.03.2020 till 09.03.2025. A show cause notice has been issued on 21.05.2020 for which the 8 petitioner has submitted his explanation, pursuant to the same the termination order has been passed which is a major punishment and the same can only be done at the 4th instance. He further contend that, the alleged 4th instance is a created one wherein, the authorities purported to have conducted inspection on 19.05.2020 wherein, the covid is in its peak and there is no possibility of such an inspection but the authorities have created the said inspection and got issued a show cause notice. He further contended that, though the petitioner has asked to supply the documents and the reports but the authorities have not supplied, but have given a finding that the petitioner has not asked. He further contended that, the appellate authority though raised a ground that there is a procedural violation with regard to the guidelines, but the Appellate Authority did not consider the same. 15. The learned counsel for the petitioners has drawn the attention of this Court to the order impugned, which is placed on record and contented that the said authority has observed that before submission of the petitioners’ reply to 9 the respondent-corporation, the appellant never demanded any such document from the respondent-Corporation and only after receipt of termination letter, the appellant came up with this excuse of non receiving the documents earlier and thus, non sharing of documents is an afterthought, not borne by facts and therefore not tenable. This itself shows that the petitioner was not furnished with the documents relied on by the respondents and thus violation of principles of natural justice is apparent. 16. The learned counsel for the petitioners draw the attention of this Court to the guidelines 3.6 and contended that show cause notice should be issued along with all reports and other documents, which forms the basis of the notice, when such is the case, the appellant authority cannot state that the petitioner has not asked for such documents, it is bounded duty on the part of the respondent-Corporation to issue such documents along with show cause notice and there is no necessity in asking the same, the said observation of the appellate authority is erroneous and contrary to their own guidelines. 10 17. The learned counsel for the petitioners further submitted that, for imposing any major penalty at the 4th instance, termination of the distributorship will come into play and draw the attention of the Court to the 3.11 Appellate proceedings. 18. In the present case, the 4th instance has been created and alleged that the same was done on 19.05.2020 as stated during the peak of Covid period, wherein the said inspection cannot be done so, but only to deny the petitioners dealership the same has been created by the officials and taken the said instance as 4th instance and issued major penalty thereby terminating the petitioners distributorship/services. 19. The learned counsel for the petitioners submitted that, though various grounds have been raised before the appellate authority, the appellate authority has not considered the same and in mechanical way dismissed the Appeal. 11 20. The learned counsel further submitted that, as per the changed guidelines, all cases of irregularities need to be established before any action is taken against the distributor, while carrying out inspection/investigation, the investigating Officer will collect documentary evidence, circumstantial evidence including written statements/feedbacks, which will help in establishing the irregularity and every action is taken only after show cause notice is issued and giving the distributor the minimum prescribed time to submit his explanation. He further submitted that, in the present case, the preliminary authority as well as the appellate authority failed to take into consideration that, the respondent-Corporation did not take the consumer statements in any of the inspections that took place and without there being any complaint and without there being any statements from them, they find fault with the petitioners distributorship. He further submitted that, though the guidelines prescribes that a minimum prescribed time has to be given for submitting 12 explanation, the authority have not given even breathing time for submitting explanation. 21. The learned counsel for the petitioners further submitted that, the inspection report dated 21.05.2020 purported to have been done was given along with termination order, but not along with show cause notice dated 21.05.2020. The said termination order was placed on record and has drawn the attention of this Court to the same. In view of the non supplying of documents, the said inspection report along with show cause notice clearly shows that the authorities have created the said inspection report only to terminate the petitioners distributorship and further inspection reports does not reveal anything about the statement obtained from the consumers. 22. The learned counsel for the petitioners further submitted that, without giving a fair opportunity to the petitioners, a major penalty of termination of distributorship was imposed basing on the inspection reports and on the documents given by the inspection authority that too without supplying them to the petitioners, particularly 13 having relied on the said documents while terminating the distributorship. The learned counsel submitted that, as per the Guidelines of Marketing Disciplinary 2018, the appellate authority is the Executive Director, but in the present case, the Marketing Director has dealt with the case as appellate authority, as such, the same is unsustainable. 23. He further submitted that, the corporation also did not supply the enclosures of the inspection report to the petitioners which forms part of report along with Show- Cause-Notice, which is contrary to the settled principles of natural justice. In view of these irregularities, the order of termination is unsustainable and the appellate authority has miserably failed to give an opportunity of personal hearing to the petitioners before passing orders and the appellate Court did not deal the appeal in a right perspective and no ground was answered, though several grounds were raised. In support of his contentions, the learned counsel for the petitioners relied on the Judgment of the Patna High Court in M/s. Nuthan Gas Service Vs. The Indian Oil 14 Corporation Ltd., and accordingly and prayed to allow the Writ Petition. 24. On the other hand, Mr. V.V Sathish, learned counsel for the respondents contended that the authorities have rightly dealt with the petitioners case and in the 4th instance only, the authorities have terminated the petitioners distributorship as the petitioner has not changed its attitude in respect of the earlier three instances and petitioner never asked for supply of any of the said documents and as an afterthought, now raised the said ground. The Appellate authority has rightly dealt with the petitioners appeal. Since, the Executive Director was part of the committee that terminated the distributorship, he cannot sit as appellate authority. As such after acquiring prior consent of the petitioner, the appeal has been heard by the Marketing Director who is superior to Executive Director. As such, now petitioner cannot plead such a ground and accordingly prayed to dismiss the Writ Petition. 25. Perused the record. 15 26. It is not in dispute that the petitioner’s distributorship was terminated at the 4th instance. The main allegation of the petitioner is that, the 4th instance had never taken place, and during Covid period they have created alleged inspection and thereby created a false report, such a termination order has been passed on several grounds. 27. Relevant portion of 3.11.3 guidelines of Appellate proceedings reads as follows:- “3. In the case of termination of the LPG distributor other than SC/ST category, the appellate authority will be the ED (LPG) in the Head Office of the respective OMCs. In the case of termination of SC/ST category distributorship, the appellant authority will be Director (HR) of the OMC.” 28. It is also the specific contention that there is clear violation of 3.6 guidelines, it is relevant to extract the same:- “In respect of all cases of irregularities, a show cause notice will be issued by the concerned Area Manager (AM)/Territory Manager (TM)/Regional Manager (RM) to the Distributor, within 30 days from the date of report of inspection/investigation, indicating all the irregularities. The show cause notice should be issued along with all reports and other documents, etc. which forms the basis of the notice.” 16 29. When such is the rule position, non-supplying the said documents before taking any action against the petitioners is not proper and justifiable. Though grounds has been raised to the said effect, the appellate authority had simply stated that, only after receipt of the letter. the appellant came up with this excuse of non-receiving of the documents which is an afterthought. The said finding is unsustainable and contrary to the settled principles of law and also contrary to their own guidelines. 30. In Natwar Singh Vs. Directorate of Enforcement & Anr1 and the relevant portion reads as follows: “The right to fair hearing is a guaranteed right. Every person before an Authority exercising the adjudicatory powers has a right to know the evidence to be used against him. This principle is firmly established and recognized by this Court in Dhakeswari Cotton Mills Ltd. Vs. Commissioner of Income Tax, West Bengal. However, disclosure not necessarily involves supply of the material. A person may be allowed to inspect the file and take notes. Whatever mode is used, the fundamental principle remains that nothing should be used against the person which has not brought to his notice. If relevant material is not disclosed to a party, there is prima facie unfairness irrespective of whether the material in 1 (2010) 13 SCC 255 17 question arose before, during or after the hearing. The law is fairly well settled if prejudicial allegations are to be made against a person, he must be given particulars of that before hearing so that he can prepare his defense. However, there are various exceptions to this general rule where disclosure of evidential material might inflict serious harm on the person directly concerned or other persons or where disclosure would be breach of confidence or might be injurious to the public interest because it would involve the revelation of official secrets, inhibit frankness of comment and the detection of crime, might make it impossible to obtain certain clauses of essential information at all in the future [See R Vs. Secretary of State for Home Department, ex. p. H].” 31. The respondent-Corporation did not choose to file any material with regard to the complaints received against petitioner or the inspection reports along with the counter. 32. When the authority wants to take any action by relying on certain documents, it is their duty to supply the same on the delinquent before taking any action against him, which is a right conferred on the delinquent as the right to fair hearing is a guaranteed right. Without supplying the said documents thereby terminating the petitioners distributorship by relying on the said documents and further confirming the said termination orders by the 18 appellate authority is contrary to the settled principles of Law and also contrary to their own guidelines and against the fundamental right guaranteed to the petitioners. The Judgment referred supra is clearly applicable to the facts of the case. In these circumstances the order impugned is liable to be set aside. 33. Accordingly the Writ Petition is allowed setting aside the impugned proceedings dated 01.08.2020 and the order of the appellate authority dated 06.09.2021. This order does not preclude the authorities from taking steps against the petitioners by following due procedure and the guidelines. There shall be no orders as to costs. Miscellaneous applications, pending if any, shall stand closed. ___________________________________ JUSTICE RAVI CHEEMALAPATI 27th April, 2023 GVK 19 216 HON’BLE SRI JUSTICE RAVI CHEEMALAPATI WRIT PETITION No.25793 of 2021 27th April, 2023 GVK "