K. Vidyadharan v. Hindustan Petroleum Corporation Ltd and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR** **THURSDAY, THE 29TH DAY OF MARCH 2012/9TH CHAITHRA 1934** **WP(C).No. 2839 of 2012 (D) -------------------------** **PETITIONER:** **-------------** **K.VIDHYADHARAN, AGED 42 YEARS S/O.KUTTY,AGED 42 YEARS,KALAPPALLIL HOUSE THALAYAZHAM P.O,VAIKOM,KOTTAYAM 686607 (PROPRIETOR,M/S.HARI FUELS-HPC DEALER,VAIKOM** **BY ADVS.SRI.P.K.SURESH KUMAR (SR.) SRI.ARUN BASIL SRI.P.K.SURESH KUMAR (SR.) SRI.T.M.RAMAN KARTHA** **RESPONDENT(S):** **--------------** **1. HINDUSTAN PETROLEUM CORPN.LTD REGD.OFFICE AT 17,JAMSHEDJI TATA ROAD,MUMBAI-400020 REPRESENTED BY ITS MANAGING DIRECTOR.** **2. SENIOR REGIONAL MANAGER HINDUSTAN PETROLEUM CORPORATION LTD; ERNAKULAM NORTH, COCHIN-18** **3. UNION OF INDIA REPRESENTED BY THE SECRETARY MINISTRY OF PETROLEUM & NATURAL GAS CENTRAL SECRETARIAT,NEW DELHI.** **R1, R2 BY ADV.SRI.E.K.NANDAKUMAR (SR)** ## **SRI.M.GOPIKRISHNAN NAMBIAR** **SRI.P.GOPINATH SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI R3 BY ADV.SRI.P.PARAMESWARAN NAIR,ASG OF INDIA** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-03-2012, THE COURT ON 29.03.2012 DELIVERED THE FOLLOWING:** **VK** **WP(C).No. 2839 of 2012 (D) --------------------------** ## **APPENDIX** **--------** **PETITIONER'S EXHIBITS ---------------------** **EXT.P1. COPY OF THE APPOINTMENT LETTER DATED 27.1.2006.** **EXT.P2. COPY OF THE LAB REPORT DATED 4.05.2011.** **EXT.P3. COPY OF THE SHOW CAUSE NOTICE DATED 28.5.2011** **EXT.P4. COPY OF THE REPLY DATED 7.6.2011** **EXT.P5. COPY OF THE PROCEEDINGS NO.CRO/RET/MDG DT.30.01.2012 TERMINATING THE DEALERSHIP AGREEMENT.** **EXT.P6. COPY OF THE POLICE COMPLAINT MADE BY THE PETITIONER AGAINST THE EXECUTIVE SALES OFFICER OF THE RESPONDENTS 1 AND 2 WITH ITS ACKNOWLEDGEMENT DT. 21.10.11.** **EXT.P7. COPY OF DOWNLOADS ON THE BEST PRACTICES FOR OIL SAMPLING.** ## **RESPONDENT'S EXHIBITS** **---------------------** **EXT.R1(A). COPY OF THE DEALERSHIP AGREEMENT DATED 27.01.2006** **EXT.R1(B). COPY OF THE COMMUNICATION DATED 13.9.2006 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(C). COPY OF THE COMMUNICATION DATED 18.06.2009 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(D). COPY OF THE COMMUNICATION DATED 18.06.2009 ISSUED TO THE COMPANY BY THE PETITIONER.** **EXT.R1(E). COPY OF THE COMMUNICATION DATED 29.06.2009 ISSUED BY THE COMPANY TO THE PETITIONR.** **EXT.R1(F). COPY OF THE COMMUNICATION DATED 10.07.2009 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(G). COPY OF THE COMMUNICATION DATED 7.8.2009 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(H). COPY OF THE COMMUNICATION DATED 11.3.2010 ISSUED BY THE COMPANY TO THE PETITIONER.** **VK** **WP(C).No. 2839 of 2012 (D) --------------------------** **EXT.R1(I). COPY OF THE COMMUNICATION DATED 10.4.2010 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(J). COPY OF THE COMMUNICATION DATED 23.04.2010 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(K). COPY OF THE COMMUNICATION DATED 7.5.2010 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(L). COPY OF THE COMMUNICATION DATED 10.5.2010 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(M). COPY OF THE COMMUNICATION DATED 11.5.2010 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(N). COPY OF THE COMMUNICATION DATED 13.10.2010 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(O). COPY OF THE COMMUNICATION DATED 18.10.2010 ISSUED BY THE COMPANY TO THE PETITIONER.** **EXT.R1(P). COPY OF THE COMMUNICATION DATED 18.10.2010 ISSUED BY THE PETITIONER TO THE COMPANY.** **EXT.R1(Q). COPY OF THE TEST REPORT DATED 13.06.2010 ISSUED BY THE QUALITY CONTROL LABORATORY, IRUMPANAM TERMINAL.** **EXT.R1(R). COPY OF THE EXTRACT OF THE 'INDIAN STANDARD METHODS OF TEST FOR PETROLEUM AND ITS PRODUCTS' FOR THE IS-1448 TEST USED IN THE PETITIONER'S CASE.** **EXT.R1(S). COPY OF THE LABORATORY TEST REPORT FOR SAMPLE DATED 19.04.2010 ISSUED BY THE QUALITY CONTROL LABORATORY, IRUMPANAM TERMINAL.** **EXT.R1(T). COPY OF THE LABORATORY TEST REPORT FOR SAMPLE DATED 22.04.2010 ISSUED BY THE QUALITY CONTROL LABORATORY IRUMPANAM TERMINAL.** **EXT.R1(U).COPY OF THE LABORATORY TEST REPORT FOR SAMPLE DATED 24.04.2010 ISSUED BY THE QUALITY CONTROL LABORATORY IRUMPANAM TERMINAL.** **EXT.R1(V).COPY OF THE LABORATORY TEST REPORT FOR SAMPLE DATED 28.04.2010 ISSUED BY THE QUALITY CONTROL LABORATORY IRUMPANAM TERMINAL.** **/ TRUE COPY /** **P.A. TO JUDGE** **VK** ## **T.R. Ramachandran Nair, J.** **- - - - - - - - - - - - - - - - - - - - - - - -** ## **W.P.(C) No. 2839 of 2012-D** **- - - - -- - - - - - - - - - - - - - - - - - - - -** ## **Dated this the 29th day of March, 2012** ## **JUDGMENT** The petitioner was appointed as a Dealer of a petroleum retail outlet. He is aggrieved by the termination of the same by the first respondent. The challenge is made on various grounds. 2. The petitioner was appointed as per Ext.P1 appointment order dated 27.1.2006. The present action against him was preceded by an inspection in the outlet and drawing of samples of motor spirit by the Mobile Lab-quality Control of the first respondent, on 4.5.2010. Ext.P2 is the copy of the report of the test result. The petitioner received a show cause notice initially as per Ext.P3, stating that the Retail Outlet's Nozzle sample of MS tested in the Quality Control Laboratory at Irumpanam failed in Final Boiling Point, as the test result is found outside the reproducible/permissible limits with the reference sample and the same amounts to violation of the agreement. The petitioner submitted a reply and finally by Ext.P5 order the agreement was terminated. 3. Heard learned Senior Counsel for appearing the petitioner, Shri P.K. Sureshkumar and Shri T.M. Raman Kartha for the petitioner and WPC.2839/2012 2 Shri E.K. Nandakumar, learned Senior Counsel appearing for respondents 1 and 2 and Shri P. Parameswaran Nair, Asst. Solicitor General appearing for the third respondent. 4. One of the contentions raised by the learned Senior Counsel for the respondents is that there is an effective alternate remedy available to the petitioner by way of arbitration in terms of Clause 40 of Ext.R1(a) agreement and therefore the writ petition is not maintainable. Reliance is also placed on the judgment of a Division Bench of this Court in W.A. No.2923/2009. 5. In answer to the same, learned counsel for the petitioner submitted that this is a case where the dictum laid down by the Apex Court in **Hindustan Petroleum Corporation Limited and others v. Super Highway Services and another** {(2010) 3 SCC 321} squarely applies, as there is gross violation of the principles of natural justice while conducting the test. It is therefore submitted that this Court can consider the said aspect and if it is found in favour of the petitioner, the order Ext.P5 will not survive. Arguments were accordingly heard. 6. Learned Senior Counsel for the petitioner placed reliance on the various documents produced and submitted that the samples were taken on 4.5.2010. Ext.P2 is the test report. The same will not reveal any major WPC.2839/2012 3 defect or adulteration. It is further pointed out that even going by the specifications in the report, it can be seen that the allegation with reference to the Final Boiling Point is not correct, as the same is within the permissible limits. It is submitted that 215[0 ] C is the outer limit, whereas the test result confirmed it as 208[0] C, as evident from Ext.R1(q) report. Therefore, it is submitted that the alleged violation is too technical and termination of the agreement is really arbitrary. It is in that context learned Senior Counsel for the petitioner relied upon the decision of the Apex Court in **Hindustan Petroleum Corporation Ltd.'s case** {(2010)3 SCC 321). The said contention is answered by the learned Senior Counsel for the respondents by pointing out that what is important is the variation in respect of Final Boiling Point which cannot be more than +5 from the reference sample which aspect is clear from the test result itself. This aspect has been made clear in the show cause notice as well as in the order of termination. The supply location sample had Final Boiling Point of 193[0 ] C. It is submitted that it is clearly mentioned in Exts.R1(s) to R1(v) that as per the FBP of the batch formation test of the MS sample of 19.4.2010, 22.4.2010, 24.4.2010 and 28.4.2010, it was 194[0 ] C, 192[0] C, 193[0] C and 192[0] C respectively. It is their case that the final boiling point of the nozzle sample drawn on 4.5.2010 from the petitioner's outlet was 208[0] C , i.e. a variation of WPC.2839/2012 4 15[0 ] C and it is concluded that the petitioner had crossed the permissible limit. 7. In answer to the above contentions, learned Senior Counsel appearing for the petitioner submitted that there was delay in conducting the test after taking samples from the petitioner's outlet and the same also would have contributed to the difference. All these aspects cannot be finally decided by this Court without any supporting scientific and authentic materials and therefore I am not going into the said aspects as the main point urged is the violation of the principles of natural justice. 8. The point urged by the learned counsel for the petitioner is that the judgment of the Apex Court in **Hindustan Petroleum Corporation's case** (supra) will show that before the test is conducted, the dealer should be given prior notice. My attention was invited to para 33 of the judgment which reads as follows: “The guidelines being followed by the corporation require that the dealer should be given prior notice regarding the test so that he or his representative also can be present when the test is conducted. The said requirement is in accordance with the principles of natural justice and the need for fairness in the matter of terminating dealership agreement and it cannot be made an empty formality. Notice should be served on the dealer sufficiently early WPC.2839/2012 5 so as to give him adequate time and opportunity to arrange for his presence during the test and there should be admissible evidence for such service of notice on the dealer. Strict adherence to the above requirement is essential, in view of the possibility of manipulation in the conduct of the test, if it is conducted behind the back of the dealer.” A reading of the said paragraph will show that the guidelines considered by the Apex Court required that the dealer should be given prior notice. In fact, the facts of the case detailed in paragraphs 5 and 6 show that on 26.5.2008 a check was conducted at the outlet of respondent No.1 Company, where a sample of high speed diesel (HSD) failed the marker test, which indicated that the same had been contaminated. On the very next day, a notice was given to the first respondent that a nozzle test of HSD was to be conducted at Baraumi Terminal on 29.5.2008. Controversy was there with regard to the service of notice and the telephonic information said to have been conveyed with regard to the test. The respondent was not present and the test was conducted on 29.5.2008. The learned Single Judge of the Patna High Court was of the view that even if there was a refusal to accept the notice it could have been sent by registered post and the testing could have been delayed, and it was concluded that the re-testing had been done without proper notice. In para 11 of the judgment of the Apex Court, WPC.2839/2012 6 the finding of the learned Single Judge are referred to, and the conclusion drawn was that since retesting had been done without proper notice to respondent No.1, as per the marketing discipline guidelines, the same had caused severe prejudice to respondent No.1 and the order of termination of the dealership agreement dated 9.9.2008 could not, therefore, be sustained. 9. Shri E.K. Nandakumar, learned Senior Counsel appearing for respondents 1 and 2 submitted that the non compliance of the principles of natural justice was considered by the Apex Court, as in the said case the guidelines required prior notice. But herein, the guidelines do not provide for a prior notice and it is further submitted that therein the marker test was conducted initially, but herein the final test was conducted in the laboratory. Even after the communication of the result, the petitioner did not seek for a retest of the sample retained by him. 10. On an analysis of the relevant findings of the Apex Court, it can be seen that in para 30 of the judgment the Apex Court was of the view that the petitioner company could not disprove the allegation of the first respondent that the notice alleged to have been tendered to the representative of their company, was not in the manner and the form in which such notice is required to be given to a dealer. The finding that the absence of notice has prejudiced the dealer, was accordingly upheld and in WPC.2839/2012 7 para 33 it was held that the principles of natural justice had to be complied with. Even though learned Senior Counsel for the petitioner submitted that the decision of the Apex Court applies on all fours to the fact situation herein, I cannot agree. The Apex Court, in the opening sentence of para 33 of the judgment, found that the guidelines followed in that case, by the Corporation require that the dealer should be given prior notice of the test. Failure to follow the same, was held as in violation of the principles of natural justice. Therefore, the dictum laid down in that case is in the light of the particulars facts of the case. Herein, there is no plea by the petitioner in the writ petition that the Marketing Discipline Guidelines require a prior notice before the conduct of the test. The grounds in the writ petition show that what is emphasised is the alleged violation of the provisions of Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005. It is further pleaded that there is violation of clauses 7 and 8 of the said Order. Therefore, the plea regarding violation of the principles of natural justice is not traced out to violation of any of the relevant guidelines. 11. Learned Senior Counsel for respondents 1 and 2 produced for perusal the Marketing Discipline Guidelines, 2005. Para 2.10 relates to “Sample Testing and Results”. There are no identical provisions therein to WPC.2839/2012 8 that of the provisions relied upon by the Apex Court in Hindustan Petroleum Corporation's case (supra) requiring prior notice. 12. Therefore, I am of the view that the dictum laid down by the Apex Court in the above judgment cannot apply to the facts of this case. 13. Then, the matter has to be considered on the plea of availability of adequate and effective alternate remedy. Herein, learned Senior Counsel for respondents 1 and 2 submitted that the Division Bench, in W.A. No.2923/2009 was of the view that the clause for arbitration is an effective remedy and the writ petition is not the remedy at all. In fact, in the said judgment, in para 17, after referring to the contentions of the parties, the Division Bench observed thus: “Even then, according to us, failure on the part of the Company to scrupulously follow the procedure prescribed, (once again we presume that there was a failure without actually deciding the question), in our opinion, does not entitle the appellant to have his contractual rights adjudicated by this Court and seek a relief from this Court in exercise of its jurisdiction under Article 226 of the Constitution of India. Merely because the Company chose to adopt certain procedure prescribed by a Statute, the alleged infraction of the right resulting from the alleged violation of such a procedure does not convert the litigation emanating from such a violation into a litigation falling within the ambit of public law. The rights and WPC.2839/2012 9 obligations still continue to be rights and obligations arising out of a contract between the parties, the remedies for breach of any such contractual rights or obligations, in our opinion, are necessarily in the realm of private law.” After referring to the clause for arbitration, viz. clause 66 therein, which is similar to clause 40 of Ext.R1(a) herein, the Bench was of the view that the remedy of arbitration is an effective one. In para 20 it was held thus: “From a reading of the abovementioned clause it is very clear that every kind of dispute arising out of the rights and obligations created by the contract are amenable to adjudication by an arbitrator. The question is whether such a dispute is required to be examined in exercise of our jurisdiction under Article 226 of the Constitution. It is settled law that normally this Court will not adjudicate the rights and obligations of parties arising out of a contract, even in a case where one of the parties to the contract is the State. Apart from that the current jurisprudential trend and the States litigation policy is professedly to encourage alternative dispute resolution mechanisms in order to reduce the pressure on the judicial system and ensure a speedy resolution of the disputes. In our opinion, they are relevant factors in deciding the question whether the discretionary jurisdiction under Article 226 is to be exercised or not in a given case.” In fact, the facts of the said case will show that the writ petition was dismissed by this Court which was challenged in appeal by the dealer. WPC.2839/2012 10 14. Learned Senior Counsel for the petitioner submitted that in a matter like this, the clause for arbitration may not be an effective remedy. I cannot agree. The Division Bench in para 20 of the above judgment itself, made clear that the dispute arising out of the rights and obligations created by the contract are amenable to adjudication by an arbitrator. Herein, as per sub clause (a) of clause 40 of Ext.R1(a), any dispute or difference of any nature will come within the purview of the arbitration clause and can be referred for arbitration. Herein, we are concerned with various aspects of the sampling tests conducted and the reasons stated in the show cause notice and the order resulting in termination of the agreement. All these are matters that can be subject to arbitration. Therefore, I am not going into the merits of the various contentions raised by the parties, as the petitioner can resort to the remedy of arbitration. The writ petition is hence dismissed without prejudice to the remedy of the petitioner to resort to clause 40 of Ext.R1(a) for arbitration. No costs. ## **(T.R. Ramachandran Nair, Judge.)** ## **kav/**