IN THE DIPSUTE RESOULUTION PANEL

APPEAL NO.____ OF_____

[AN APPEAL FILED UNDER CLAUSE 8.9. (1) AND

(2) OF THE MARKETING DISCIPLINE GUIDELINES,
2012 FOR THE RESTORATION OF RETAIL OULTLET]

IN THE MATTER OF:

M/s Gagan Automobiles, through proprietor Mr. Kamrunddin S/o Barkat Ali
Mugal, aged about 45 years, R/o Hussian Ali building, Daat ki pul, Dhoswas,
District Ratlam.

…………APPEALLANT

VERSUS

1. Indian Oil Corporation Limited., through Director, Registered Office ‘Oil

Bhavan’,G-9 Aliyavarjung Market, Bandra (East) Mumbai -400051.

2. Indian Oil Corporation Limited., through Chief Divisional Retail Sales

Manager, Indian Oil Bhavan, Indore Divisional Office Marketing Division, Plot
no.-8, Scheme no. 159 (IDA), Kushabhau Thakre Marg, M.R 10, Indore,
Madhya Pradesh.

……..RESPONDENTS

All respondents are contesting respondents.

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AN APPEAL FILED UNDER CLAUSE 8.9. (1) AND (2) OF THE MARKETING
DISCIPLINE GUIDELINES, 2012 FOR THE RESTORATION OF RETAIL
OULTLET WRONGLY TERMINATED

TO,

THE HON’BLE CHAIRPERSON

AND HIS CAMPANION MEMBERS

OF THE DISPUTE RESOULTION PANEL.

THE HUMBLE PETITION OF

THE APPELLANT HEREIN

MOST RESPECTFULLY SHOWETH:

1. This appeal is filed under clause 8.9. (1) and (2) of the marketing discipline
guidelines, 2012 for the restoration of retail outlet wrongly terminated by the
Respondent(s) herein and to protect the fundamental right of the appellant to
practice any profession, or to carry on any occupation, trade or business
guaranteed under Article 19(1)(g) of the Constitution of India.

FACTS THAT CONSTITUTE CAUSE OF ACTION

2. The Appellant submits that he is a licensee of a Retail outlet established by

Indian Oil Corporation Ltd.(hereinafter referred to as ‘IOCL’), under dealership
agreement executed on 28.11.2008 , in the name and style of M/s Gagan
Automobiles at location Dhoswas, District Ratlam (Madhya Pradesh). The
appellant further submits that a sudden and random inspection was carried
out by the Anti Adulteration Cell (hereinafter referred to as ‘AAC’) at his retail
outlet M/s Gagan Automobiles, Dhoswas(hereinafter referred to as ‘RO’),
District Ratlam, on 26/11/2013 at 16:45 hrs.

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3. The Appellant submits that the ‘AAC’ officials, as per practice, immediately
started checking the delivery of all the three nozzles of the Dispensary unit (1
Ms and 2 HSD) and found that all the three nozzles were delivering within
permissible and correct measures. Thereafter the ‘AAC’ officials carried out
tank stock verification and density check which also resulted in favour of the
Appellant, as found within permissible limits. The Appellant further submits
that the report on inspection of M/s Gagan Automobiles (hereinafter referred to
as ‘AAC report’) dated 27.11.2013 corroborates the fact that the delivery check
of all the nozzles of the retail outlet and tank stock variation was found to be
correct.

The true copy of the ‘AAC report’ dated 27.11.2013 is attached herewith and
marked as Annexure P-1 at page 1 to 4.

4. The Appellant submits that ‘AAC’ officials ordered to open the lock of the MS
Dispensary unit of L & T make, Z line Model : GS 74624 sr. no. GW 2877, but
the employees present at the time of inspection replied that the key of the
above said dispensary unit is with the dealer and he is on his way to the retail
outlet. The Appellant further submits that ‘AAC’ officials ordered the employees
of the RO to suspend the sales of the RO until the key is brought to them.
Consequently, the situation at the RO worsened as many customers waiting for
the resumption of the sales repeatedly requested to provide them with
petroleum products. The Appellant further submits that the employees present
at the RO, in order to control the chaos requested the ‘AAC’ officials to resume
the sales stating that their employer/dealer is coming to the RO with the key
anytime soon. But, the ‘AAC’ officials denied the request and situation got
much worst and the employees were forced to provide petroleum products to
the customers yielding to their pressure. The Appellant further submits that
‘AAC’ officials were unhappy of the above act of the employees of the RO and
left the RO in anger.

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5. The Appellant submits that the ‘AAC’ officials upon reaching the Indore
Divisional Office served the appellant with Fact finding letter dated 27.11.2013
falsely alleging that an additional/unauthorized fitting electronic chip was
found in the pulsar cable of the Dispensary unit of L & T make, Z line Model :
GS 74624 sr. no. GW 2877 and it was further alleged that the ‘AAC’ officials
were abused and physically ill treated. The Appellant further submits that the
sales of the retail outlet were suspended until further orders and ‘AAC report’
dated 27.11.2013 was issued to the Appellant which was created in
afterthought, in such a fashion so as to enable ‘IOCL’ to take action against the
Appellant.

The true copy of the ‘Fact Finding letter’ dated 27.11.2013 is attached herewith
and marked as Annexure P-2 at page 1 to 2.

6. The Appellant submits that ‘IOCL’ issued the Appellant with a show cause
notice dated 15.04.2014, but the Appellant via letter dated 28.04.2014
requested ‘IOCL’ to issue a translated version of the abovesaid show caused
notice in Hindi. The Appellant further submits that IOCL via show cause notice
dated 24.06.2014 provided him with the translated version of the above said
notice in Hindi and the show cause notice dated 24.06.2014, inter alia,
reiterated all the false allegations as mentioned in the ‘AAC’ report dated
27.11.2013 and but, nowhere in the show cause notice dated 24.06.2014 it
was mentioned that the delivery check of the nozzles and tank stock variation
of the RO were found to be correct and within permissible limits by the ‘AAC’.

The true copy of the ‘Show cause notice’ dated 24.06.2014 is attached herewith
and marked as Annexure P-3 at page 1 to 6.

7. The Appellant submits that the reply to the show cause notice dated
24.06.2014 denying all the allegations was provided to ‘IOCL’ on 20.09.2014, in
furtherance to the order dated 10.09.2014 of the Hon’ble Madhya Pradesh High
Court in writ appeal 716/2014. The Appellant further submits that IOCL
without affording proper reasons terminated the dealership of the appellant via

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termination order dated 12.01.2015 without taking into consideration the reply
of the appellant and vital and important facts which resulted in miscarriage of
justice. Hence this petition is filed before the Dispute Resolution Panel.

The true copy of the ‘Notice of Termination Letter’ dated 12.01.2015 is attached
herewith and marked as Annexure P-4 at page 1 to 4.

GROUNDS

8. The Appellant submits that the inspection carried out by the ‘AAC’ at the RO
was sudden and random which left no scope for any prior preparation for the
inspection. The Appellant further submits that if any electronic chip existed
then it would have affected the delivery of the nozzles in order to cheat the
customers. But, the ‘AAC report’ dated 27.11.2013 itself states that the delivery
check of all the nozzles was within permissible limits. The relevant and true
portion of the ‘AAC report’ dated 27.11.2013 which was also the finding of the
‘AAC’ officials itself is reproduced hereinbelow,

‘As per practice, immediately after reaching the RO, AAC officials carried
out the delivery of all the three nozzles (1MS and 2 HSD).The delivery was
found to be within permissible limits for all the three nozzles…………. As
per practice, the team carried out stock verification and density check. Sh.
APM noted the dip and meter readings and Sh. SD was carrying out stock
variation calculation on laptop sitting inside the sales room. The stock
variation was found within limit.’.

9. The Appellant submits that the ‘AAC’ officials were never abused and
physically ill-treated. The ‘AAC’ officials also did not wait for the sales officer to
come to the RO but chose to go in anger and as a result of afterthought the
false allegations were levied at the appellant. The appellant further submits
that the ‘AAC’ officials could have taken recourse of immediate legal action by
registering a F.I.R with the police regarding foul language and physical ill
treatment as alleged but they did not do so which raises serious questions with

5
respect to the credibility of the story of ‘IOCL’. The peculiarity of the matter is
that no photographs of the alleged electronic chip were taken and the same
never recovered/taken in custody as evidence if at all there was any electronic
chip. The Appellant further submits that no photographs and recovery the chip
raises further questions against the alleged version of the ‘IOCL’.

10. The Appellant submits that the termination order dated 12.01.2015 is bad
in law as the decision therein was vitiated as the mandatory procedure
provided for critical irregularities as alleged in the present matter in Marketing
Disciplinary guidelines,2012(hereinafter referred to as ‘MDG’) was not
followed. It would be befitting to refer to clause 5.1.4 of ‘MDG’ which states
that,

‘5.1.4 ADDITIONAL / UNAUTHORISED FITTINGS / GEARS FOUND IN

DISPENSING UNITS /TAMPERING WITH DISPENSING UNIT

Any mechanism / fittings / gear found fitted in the dispensing unit which
is likely to manipulate the delivery.

Addition, Removal, replacement or manipulation of any part of the

Dispensing Unit including any mechanism, gear, microprocessor chip /
electronic parts/ OEM software will be deemed as tampering of the
dispensing unit.

In such cases, views and independent opinion of the original equipment

manufacturer would be obtained and suitable decision taken.

In case of this irregularity, sales from the concerned dispensing unit to be

suspended, DU sealed. Samples to be drawn of all the products and sent
to lab for testing’.

A) That the Hon’ble Delhi High Court in Bhatia Service Station v Indian Oil
Corporation Limited, 2015 (3) CLT 453, in para no. 20 to 21 held that,

6
 ‘ 20. The MDG has been enacted for such dealership agreements as the
one involved in the instant case and therefore, I am of the view that these
guidelines need to be strictly construed by both the parties. Further any
dealership agreement cancelled by the respondent corporation cannot be
effected on the basis of dealership agreement itself as the MDG have to
be followed while taking recourse to such action. The respondent
corporation cannot act arbitrarily at its sweet will and, like a private
individual, deal with any person it pleases, but its action must be in
conformity with standards or norms which are not irrational or irrelevant.
Therefore, petitioner cannot be exempted from the application of MDG
merely by following the dealership agreement.

21. In the instant case, the respondent has departed from the standard
norms laid down in the Marketing Discipline Guidelines and the standard
norms of natural justice and fair play and such departure was clearly
unreasonable and discriminatory.’

B) That the Hon’ble Chhattisgarh High Court in the case of Mahamaya

Service Centre v Indian Oil Corporation Limited and others, 2010 Indlaw
CTH 100, in para no. 26 to 28 held that,

26. It is a duty cast on the authorities of the State and the

instrumentalities of the State that they should follow the proper
procedure prescribed in the rules and regulations. The contravention of
the same cannot be permitted. It is uncontroverted legal position that
where a statute requires to do a certain thing in a certain way, the thing
must be done in that way or not at all.

27. A constitution Bench of the Supreme Court in Sukhdev Singh and

others v. Bhagatram Sardar Singh Raghuvanshi and another 1975
Indlaw SC 107, observed that the rules and regulations framed by the
statutory Corporations have the force of law and, as such, the statutory
authorities cannot deviate from the statutory provisions. If there is any

7
 deviation, the Court may invalid such actions in violation of statutory
rules and regulations by a legal sanction of declaration. (See Haresh
Dayaram Thakur v. State of Maharashtra and Others 2000 Indlaw SC
2603 and Prabha Shankar Dubey v. State of Madhya Pradesh 2003
Indlaw SC 1450).

28. In Sukhdev Singh 1975 Indlaw SC 107 (supra), the Supreme Court
observed as under :

"33...These regulations impose obligation on the statutory authorities.

The statutory authorities cannot deviate from the conditions of service.
Any deviation will be enforced by legal sanction of declaration by courts
to invalidate actions in violation of rules and regulations..."

29. In the case on hand, indisputably the provision of cl. 8 of the Order
2005 read with MDG 2005 have not been complied with. Thus, the
respondents cannot claim any sanctity in law and the Court is well
within its jurisdiction to declare such an act illegal and invalid.’

C) That the Hon’ble Andhra Pradesh High Court in the case of P. Laxmikanth
Rao and Sons v Union of India Represented by its Secretary, Ministry of
Petroleum and others, 2011 (3) ALT 221, held that,

‘Further, it is stated that the opinion tendered by the manufacturer of the

unit i.e. Larson and Tubro, was not made available to the petitioner.
Failure to supply the same, results in violation of principles of natural
justice. The petitioner cannot be expected to answer certain issues
regarding which he has no information. Viewed from any angle, the
impugned order cannot be sustained in law.’

11. The Appellant submits that ‘IOCL’ neither sought such independent
opinion nor the samples of the products were sent to lab as per MDG. The non
–compliance of the above said procedure goes to the very root of the matter and
against the very spirit of ‘MDG’. It would be very befitting to refer to the
Preamble of ‘MDG’ which states that,

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 ‘2.1 PREAMBLE

The basic objective of the 3-tier sampling procedure is to ensure that MS

and HSD sold by retail outlets is the same product, which has been
supplied to them by their principal oil companies.

To achieve this objective, results of the samples will be interpreted on the

basis of reproducibility/permissible limits for which sampling procedure
has to be followed both at supply locations as well as at retail outlets.

The implementation of this sampling procedure will also help in

establishing whether the malpractice / adulteration, if any, has taken
place at the retail outlet, during transportation or at supply locations.’

12. The Appellant submits that the RO was terminated by affording vague
reasons and the irregularities alleged were never established by ‘IOCL’. The
appellant further submits that the MS Dispensary unit of L & T make, Z line
Model : GS 74624 sr. no. GW 2877 was never subjected to investigation by
IOCL from its manufacturers with respect to the alleged electronic chip inspite
of requesting the same through our reply to the show cause notice dated
24.06.2014.But, ‘IOCL’ did not pay any heed to the appellant’s request and
terminated the dealership which was the bread and butter of the appellant and
gross injustice was done to the appellant. It would be befitting to refer to clause
8.5.2 of ‘MDG’ which states that,

‘8.5.2 All cases of irregularities needs to be established before any action

is taken against a dealer.’

13. The Appellant submits that the critical irregularity which was alleged was
never established by IOCL and no material was ever provided which proved
that the electronic chip was present at all, let alone affecting the delivery of the
dispensary unit. The Appellant further submits that the show cause notice
dated 24.06.2014 itself was suffering from infirmities, since MDG, inter alia, in
clause 8.5.6 provides that,

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 ‘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.’

D) That the Hon’ble Madhya Pradesh High Court in Govind Saraf Kisan Seva
Kendra, Machalpur v. Indian Oil Corporation Ltd., (2017) 1 MP LJ 713,
has held that,

‘Only in respect of fitting of double gear mechanism in the meter unit, the
reply was not found satisfactory. The petitioner submitted the reply to the
effect that he has not installed any double gear in the machine. The entire
machine was installed by the respondent company itself with a
reading of 289035 and there is no shortage of delivery found in the
machine. The respondent did not find the reply, submitted by the
petitioner, satisfactory, but while rejecting the contention of the petitioner,
no reason has been assigned by the Chief Divisional Retail Sales Manager.
The entire contention has been rejected only in three words “not found
satisfactory”. The reply to the second show cause notice was also not
found satisfactory by the respondent and the same was rejected on the
ground that “you did not have any satisfactory reasons”.

15. Before the appellate authority, the petitioner has requested for
investigation by a committee to check whether there is any
shortage of delivery or double gear mechanism is active or dead. The
appellate authority has turned down the said request and believed the
report given by their own investigation team.………7. The aforesaid clause
provides that any machine/fitting/gear fitted in the dispensing unit with
intention of manipulating the delivery. AACording to this clause, there has
to be an intention for manipulating the delivery behind installation of any

10
extra machine/fittings/gear in the dispensing unit. Mere finding of gear in
the dispensing unit is not sufficient, there has to be a material before the
authorities to establish that by insertion of such mechanism/gear, the
delivery of the dispensing unit was affected or reduced.

18. In the present case, there is no such material available on record to

prove that due to double gear mechanism, there was any shortage in
delivery. No finding was recorded by the authority, who has terminated
the agreement as well by the appellate authority. This clause further
provides that in case of those irregularities sale from the concerned
dispensing unit DU would be sealed and send to the laboratory for the
testing. In the present case, the DU was not sealed and did not send to the
laboratory for testing. There is no lab testing report available on the record.
The petitioner's request for obtaining report about short delivery or the gear
is active or dead has been turned down by the authorities, therefore, there
is no material or satisfaction of the authority that because of gear, there
was any intention of manipulating the delivery by the petitioner, coupled
with the fact that the machine was installed by the company itself by
way of transfer from another fuel station.

19. The entire plea of the petitioner was rejected only on the
ground of double gear was found in DU machine. There is no
finding of deliberate insertion or shortage ofdelivery and whether double
gear was active or dead………In view of the above findings, the impugned
action of the respondent is highly arbitrary, harsh and
without application of mind. The orders impugned passed for terminating
the dealership of the petitioner are perverse and there is no material to
support these findings. The entire action has been taken on the
basis of wrong presumptions. Hence, the impugned orders dated 13-3-
2014 and 17-12-2014 are hereby set aside. The dealership of the
petitioner is hereby restored.’

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E)That the Hon’ble High Court Of Andhra Pradesh in the case of Ranjith
Filling Station v. Indian Oil Corporation Limited, 2014 AIR CC 1860, has
held from para 16 that,

‘16. The allegation against the dealer is that on inspection, an

unauthorized electronic item is found in the dispensing unit. However, the
samples taken prior to inspection and after inspection have not shown any
variation in the delivery of fuel from dispensing unit. That being so, the
effect of insertion of external item into the dispensing unit required to be
analyzed to ascertain whether there is a possibility to influence dispensing
of fuel in future, even though no such variation is noticed. The record
discloses that no effort was made to find out the impact of additional part
in the delivery of fuel from the dispensing unit. Unless it is proved that the
insertion of this additional part does impact the delivery of fuel, it cannot
be alleged that dealer has violated clause 5.1.4 of the marketing discipline
guidelines……….

18. The clause 5.1.4 pre-supposes fitting of an external part with an

intention of manipulating the delivery. The manipulation or possibility to
manipulate delivery is not proved. On the contrary, delivery was found to
be AACurate. Thus, this clause is not attracted. Clauses 7(a) & (b), 8(i) and
42 of dealership agreement are general in nature and invoked on the
ground that dealer violated clause 5.1.4 of marketing discipline guidelines.

19. The petitioner dealership was found to be performing its dealership,

responsibilities, all through strictly in terms of the agreement and there
was no complaint whatsoever against the petitioner dealer. The competent
authority has agreed with all the submissions made by the dealer. ……….

The explanation offered by you in this regard is not convincing and

AACeptable as it is the responsibility of the dealer to ensure that the
dispensing units installed in the Retail Outlet must be checked on daily
basis that there will not be any leakage and all other fittings inside the

12
dispensing units are intact. Without the dealer knowledge nothing can be
installed or fitted inside the dispensing unit.

21. As seen from the reading of the order, the only reason assigned for
rejecting the explanation of the petitioner was that it could not have been
possible to insert an unauthorized unit without the consent of the dealer.
However, what is not considered by the competent authority was that at
what point of time this unauthorized unit is inserted into the dispensing
unit and how the dealer is manipulating the distribution of fuel. No
material, much less credible one is brought on record by the respondents to
disclose the unauthorized AACess to the equipment by the petitioner. There
is no allegation that the petitioner has tampered with the seals. It was
specific stand of the petitioner that periodically the Weights and
Measurements Department officials inspected the seals and seals are
found to be intact. Further more, what is the impact on insertion of cable
like item in delivery unit is not disclosed. How the dealer can manipulate
delivery of fuel by inserting such unit is not explained. The only objective of
a dealer to tamper with dispensing unit is to manipulate delivery of fuel. In
this case, the delivery of fuel was found to be AACurate prior to checking
of unit and after the checking. Furthermore, the defence of the petitioner
that it is possible that the supplier himself has supplied that particular
cable is not dealt with; no effort was made to ascertain from the supplier
as to whether there was some significance in insertion of such unit and
whether it was inserted for proper functioning of the unit by supplier
himself. As admitted by the respondent-corporation in the order impugned,
there was a periodical inspection prior to this inspection and that seals are
found to be intact and the fact that no ascertainment is made from the
supplier, it cannot be concluded to hold that petitioner was solely
responsible for insertion of an additional part into the delivery unit. More
particularly when it is proved that by virtue of presence of additional part,
there was no variation in dispensing of fuel. Though, it is an elaborate

13
 order, it is a non- speaking order on crucial issue. The order AACepts the
defence of the petitioner in all respects except on the availability of
external part in the delivery unit, but does not deal with the principal issue
of when the part was inserted and the impact of a part found in the
dispensing unit in delivery of fuel. In the absence of such crucial
determination, on the only assumption that the external part was found in
the delivery unit of the dealer premises, the petitioner dealer cannot be
visited with severe consequence of termination of dealership. It has severe
civil and evil consequences. Thus, the action of the respondent-
Corporation, in the facts of this case, in terminating the dealership of the
1st petitioner on the sole ground that an external object was found in the
dispensing unit is illegal, unreasonable, excessive and made in arbitrary
exercise of power and hence unsustainable, more particularly when
performance of the petitioner-dealer all along has been appreciated.
AACordingly this writ petition is allowed. No costs.’

F)That the hon’ble High Court of Gujarat in the case of Induben Laxmanbhai
Dudakhiya vs. Bharat Petroleum Corporation Limited, Special Civil
Application No. 7619 of 2011,

Therefore before taking such action for termination of the dealership

agreement, which could have a consequence, at-least there has to be
material and the petitioner ought to have been given an opportunity to
meet with such material. Admittedly, there is no such opportunity given to
the petitioner. The test carried out by MIDCO (manufacturer) is not
informed to the petitioner. The test has been carried out after the
termination of the agreement as and by way of an afterthought for
justification of the action. There is nothing to say that said unit cannot
have a malfunctioning because of some defect without any tampering.
Therefore, what is the basis or foundation to draw inference about
malpractice or irregularity is not available and, therefore, the decision
requires a scrutiny as to whether it is in violation of Rules of natural justice
14
 and/or whether it is arbitrary or not. It is well AACepted that it is not a
decision but decision making process, which is relevant for the purpose of
deciding or arriving at conclusion about the decision. It is well AACepted
that the requirement of recording the reasons is part of the principles of
natural justice, which reflect the decision making process for the purpose
of judicial scrutiny. It is not the decision but it is the decision making
process, which has to appear fair and reasonable inconsonance with the
established principles or law. Law does not permit exercise of power
keeping reasons for the exercise of power undisclosed, which may lead to
arbitrariness’.

G)That the Hon’ble Gujrat High Court in the case of Bharat Petroleum
Corporation Limited and another v Induben Laxmanbhai Dudakhiya,
2016 Indlaw GUJ 1328, had held that,

‘Upon examining all the facts, the learned Single Judge has concluded that
very basis for arriving at a conclusion that there is a malpractice by short
delivery of the fuel by a particular unit is based on a inference because the
termination of dealership is by communication dated 20.08.2010,
whereas, report of the manufacturer of the dispensing unit (MIDCO) is
dated 08.09.2010. Therefore, the Single Judge has rightly held that the
decision to terminate the dealership was taken before the malpractice
could be established. The fact that the test report not provided to the
respondent and therefore, rightly held to be in violation of principles of
natural justice. The Single Judge has therefore, rightly concluded that
exercise of power by keeping the reasons undisclosed from the affected
party leads to arbitrariness, which therefore justifies inference by the
Single Judge. This Court also finds that when in a facts of this case, the
corporation by its impugned action is to deprive the respondent from doing
a legitimate business, particular standard of certainty and conclusiveness
should be attained. This Court is of the view that collecting sample three
times successively and that too in "Flash Mode", is not enough to meet the
15
 standards of certainty. There is nothing on record to establish that each
time the customer arrived for fueling vehicle, delivery from the dispensing
unit was made in "Flash Mode" only. In absence of any complaint from
customers/general public, this Court is not ready to presume that this fact
to support the conclusion of the corporation about the malpractice.’

H) That the Hon’ble High Court in the case of Ram Lal Agarwal v. Indian Oil
Corporation Limited, (2014) 4 ALD 139, has held,

‘27. In W.P. No. 20350 of 2010, dealership was terminated on the ground that
gear of equipment was having 39 numbers as against standard 38. Learned
single judge held as under:

“No attempt has been made to assess as to the possible impact of this. In the
absence of any such material, I am of the opinion that the conclusion drawn by
the 1st respondent - company, that it is the writ petitioner who is responsible for
the foreign gear, is an unsustainable one.

An arbitrary decision, simply put, is one which lacks a reasonably sustainable

basis. If the material available on record, does not necessarily lead to the
conclusion that the tampering and tinkering has taken place at the hands of the
writ petitioner, it will be totally unjust to penalize himself. It is a fundamental
principle of law that no innocent person should be penalized, for no fault of his.
That would be contrary to cannons of justice. In the absence of linkage of the
presence of the additional gear with 39 teeth in the equipment at the premises of
the retail outlet run by the petitioner to him, it will not be safe to infer that he is
guilty of tampering with the equipment. If there is no reasonable substratum to a
conclusion that the petitioner is guilty of tampering with the equipment, no
adverse action of termination of his dealership agreement could have been
drawn against him. The petitioner therefore could not have been faulted
unnecessarily.

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28. In P. Laxmikantha Rao and Sons v. Union of India rep.by its Secretary,
Ministry of Petroleum10, this Court held as under:

“If however the seal is found to be in tact, the dealer cannot be held liable for the
malfunctioning of the unit. If at all any one, it is manufacturer or the oil company
that have to explain such discrepancy.”

29. In W.A. No. 318 of 2011 against judgment in Laxmikantha Rao, Bench of two
learned Judges held as under:

“Since the HSD vended by the dealer is clearly found to be in short supply and
that is an undisputed fact, and since a spurious gear having 39 teeth instead of
38 was also found embedded inside the HSD Unit, the conclusion is irresistible
in a world governed by physical laws that someone or some agent introduced a
nonstandard gear into the HSD Unit. But from this fact to take a logical leap to
infer that it was introduced by the dealer, is irrational. The chain of
circumstances is not complete and merely because the dealer alone would stand
to benefit from the short supply, no such inference could legitimately be drawn.
….

As the supplier of the gear, which was found to be nonstandard, is an agent of

the appellants by the same standards of preponderance of probabilities the
possibility of a defective or spurious gear having being supplied cannot be
excluded. This is the implication as well as the expressed reason, on the basis of
which the writ petition was allowed.”

30. The facts on record disclose that no variation was noticed in the quantity of
fuel discharged from the dispensing unit. As seen from the extracted portion of
the order of termination of dealership, plea of petitioner was rejected on possible
effect of presence of double gear. It is not proved as to when such double gear
was inserted. Order does not record a finding of deliberate insertion and actual
manipulation of delivery of fuel. Order proceeds as if mere existence of double

17
gear in dispensing unit is sufficient to terminate the dealership. Whereas,
AACording to Clause 5.1.4, existence of double gear is a critical irregularity if
there was intention to manipulate the delivery. Thus, as held by this court in
W.P. No. 20350 of 2010, the irregularity alleged against the petitioner does not
amount to critical irregularity. Unless what is proved is critical irregularity, it
does not result is termination of dealership. As held in W.A. No. 318 of 2011,
mere existence of external part in the dispensing unit of petitioner outlet that it
was introduced by dealer is irrational and merely because petitioner would alone
stand to benefit from the short supply, no adverse inference can be drawn
against petitioner. In an issue which results in penal consequences, no adverse
inference can be drawn on assumptions and presumptions. It is appropriate to
notice that no variation in dispensing of fuel was noticed by the inspecting team.
Thus, findings recorded are ex facie illegal and amounts to arbitrary exercise of
power.’
14. The Appellant submits that the show cause notice dated 24.06.2014 merely
contained the alleged irregularities but no documents or reports were provided
which formed the basis for the above said notice. It is germane to mention that
the previous surprise inspections conducted by the concerned sales officer at
the RO never resulted into any irregularity whatsoever. The Appellant further
states that inspection report dated 16.05.2013 states that the delivery, density
check and stock variation was correct, weight and measurement department
seals found intact and no additional fittings was found in the dispensary unit.

The true copy of the ‘Inspection report’ dated 16.05.2013 is attached herewith
and marked as Annexure P-5 at page 1 to 2.

15. The Appellant submits that as per convention and practice the copy of the
inspection report is given to the dealer immediately after the inspection but, in
the present matter the AAC report of inspection at the appellant’s RO was
never given to the appellant along with the show cause notice dated

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24.06.2014. The ‘ACC report’ was submitted by IOCL in reply to the writ
petition before the hon’ble Madhya Pradesh High Court in W.P No. 3539/2014
which gives an occasion to safely infer that the version of the IOCL is on
Account of afterthought to justify their action against the appellant. The
appellant further submits that the termination order dated 12.01.2015, was
passed without taking into consideration nor was it even mentioned in the said
order that the delivery check of all the nozzles were delivering correct measures
and tank stock variation was within permissible limit. The above said vital facts
were omitted and the order was passed in afterthought in synchronization with
the false version of the IOCL to penalize the appellant.

I) That the Hon’ble Supreme Court in the case of Baldev Raj Chadha v.
Union of India, (1980) 4 SCC 321, in para no.16 has held that,

‘Any order which materially suffers from the blemish of overlooking or

ignoring, wilfully or otherwise, vital facts bearing on the decision is bad
in law. Likewise, any action which irrationally digs up obsolete
circumstances and obsessively reaches a decision based thereon, cannot
be sustained. Legality depends on regard of the totality of material facts
viewed in a holistic perspective.’

J) That the Hon’ble Andhra Pradesh High Court in the case of P. Laxmikanth
Rao and Sons v Union of India Represented by its Secretary, Ministry of
Petroleum and others, 2011 (3) ALT 221, held that,

‘The petitioner made an elaborate reference to the previous inspections, the

condition of seals etc. In the impugned order, it is stated that a duplicate
gear was implanted by the petitioner. Not a word is said about the seal
being in tact. Therefore, it is a case of non-application of mind.’

16. The Appellant submits the dispensary unit in question has been changed
by the IOCL with new dispensary units and the said retail outlet has been
given on ad – hoc basis to some person which is being managed in the name

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and style of Vijay automobiles. The appellant further submits that IOCL
unjustly removed the dispensary units without subjecting them to investigation
from its manufacturer, but tried to destroy the evidence when the present
matter is disputed and contested by all the parties. Hence the present appeal
has been filed to protect the fundamental right to profess any trade, business
guaranteed under Article 19(1)(g) of the constitution.

PRAYER

Under these circumstances, the Appellant respectfully prays this Hon’ble

Dispute Resolution Panel may be please to

1. Issue an order, or direction declaring that the Termination order dated

12.01.2015 is illegal, arbitrary and has been passed without application of
mind.

2. Issue an order, or direction to Indian Oil Corporation Ltd. to restore the

dealership of the appellant.

3. Issue an order, or direction declaring that the show cause notice dated
24.06.2014 was invalid and bad in law.

4. Quash or set aside Termination order dated 12.01.2015

5. Quash or set aside Termination order dated show cause notice dated
24.06.2014

6. Issue an order, or direction declaring that the entire decision was vitiated for
want of mandatory procedure compliance.

7. award of compensation to be award as deemed fit along with refund of the

fees paid for the present appeal.

8. Pass such other Order or Orders as are deemed fit and necessary in the

interests of justice.

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AND FOR THIS ACT OF KINDNESS THE PETITIONER SHALL IN DUTY
BOUND EVER PRAY.

FILED BY: Mr. Kamrunddin S/o Barkat Ali Mugal

FILED ON:

SIGNATURE OF THE APPELLANT

Copy to :

1. Indian Oil Corporation Limited., through Director, Registered Office ‘Oil

Bhavan’,G-9 Aliyavarjung Market, Bandra (East) Mumbai -400051.

2. Indian Oil Corporation Limited., through Chief Divisional Retail Sales

Manager, Indian Oil Bhavan, Indore Divisional Office Marketing Division, Plot
no.-8, Scheme no. 159 (IDA), Kushabhau Thakre Marg, M.R 10, Indore,
Madhya Pradesh.

VERIFICATION

I, Kamrunddin S/o Barkat Ali Mugal,residing Hussian Ali building, Daat ki pul,
Dhoswas, District Ratlam., Appellant above named do hereby state and declare
on solemn affirmation that whatever stated herein above in the foregoing paras
of this appeal is true and correct to my knowledge and belief.

Solemnly affirmed at _____________

On ____________

APPELLANT

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