In CWP-21228-2018 (O&M)-PUNJ HC- P&H HC declares order of cancellation of dealership of Punjab Motor Store to be ‘patently illegal’ as allegations of tampering with holographic seals and dispensing unit were not proved Justice Sudhir Mittal [27-04-2022]

Read Order: M/s Punjab Motor Store v. Union of India and Others

Monika Rahar

Chandigarh, April 28,2022:  While dealing with a case wherein the dealership of M/s Punjab Motor Store (petitioner) was canceled by the oil company on the ground that the petitioner tampered with and replaced holographic seals and also tampered with a dispensing unit, the Punjab and Haryana High Court has held the termination of its dealership patently illegal. 

The Bench of Justice Sudhir Mittal reached this conclusion on the ground that an RTI reply to the petitioner revealed that the allegedly tempered holographic seal was in fact issued in the name of one of the employees of the oil company who was also a member of the team which came for inspection of the petitioner.  

Further, on the allegation of tampering with the dispensing unit, the Court added,  “I have already found that there was no tampering with the dispensing unit nor was there any attempt made to tamper therewith. Thus, the petitioner cannot be held liable for making short deliveries or for violating safe practices or marketing discipline. The termination of its dealership is patently illegal.”

In the retail outlet established in the name and style of the petitioner, an inspection was carried out in October 2013 wherein everything was found to be in order. The only observation made was in the column of ‘upkeep and maintenance of equipments’ and the same was that one dispensing unit required replacement.

This was followed by another inspection, where, in the column of ‘delivery check’, it was recorded that seals of all dispensing units were found intact, however, it was suspected that double gear was installed in one nozzle of M/s Midco, Sr. No. 8F751A/B because short delivery of 220 ml. in a measure of 05 liters was detected in 03 separate samples. Thus, the sale from that particular nozzle was suspended and a meter reading was recorded.

Sealing was done with holographic seals (with No. AAC0015230 to AAC0015249 i.e. 19 seals in all). Another joint inspection was conducted and it was found that five of these holographic seals were tampered with and 06 of them were replaced by holographic seals bearing Sr. Nos. AAC0015912, AAC0015913, AAC0015914, AAC0015915, AAC0015918 and AAC0015919. The weights and measures seals were found intact.

To conclusively determine short delivery, the control card and pulsar assembly of that particular dispensing unit were removed for being examined, however, without waiting for the test report, a notice was issued seeking an explanation regarding suspected tampering in one nozzle and tampering/replacement of holographic seals. The petitioner stated in his reply that the holographic seals shine at night and could have been tampered with by any other person or child after closing the retail outlet.

It was also stated that all the weights and measures seals were found intact and that the representative of the petitioner was not informed when the holographic seals were affixed nor was he directed to supervise the same. Finding the reply unsatisfactory, a notice for termination of the dealership was issued. The grounds taken therein were short delivery from a particular nozzle, tampering with 05 holographic seals and replacement of 06 holographic seals. This was stated to be covered by the definition of tampering with the dispensing unit as mentioned in Clause 5.1.4 of MDG-2012.

Clause 34 of the same agreement stipulated that no short delivery was to be made and Clause 42 stipulated that the dealer would diligently observe all instructions given by the oil company regarding safe practices and marketing discipline. An appeal was also against the dismissal but the same was dismissed. Meanwhile, the petitioner had filed a consumer complaint before the District Consumer Disputes Redressal Forum, Ferozepur. 

This was decided and the oil company was directed to restore the sale from the nozzle that had been sealed. The oil company appealed against this order and the same was partly accepted. Direction to restore the supply was set aside with liberty to the oil company to take appropriate action on the basis of the inspection report. 

The petitioner as well as the oil company filed revision petitions against the appellate order which were decided by a common order. The revision filed by the oil company succeeded and the impugned orders were set aside as it was found that the petitioner was not covered under the definition of ‘consumer’. 

It was also noted that the Midco Laboratory prepared a test report and concluded that the pulsar assembly and the metering unit passed the functional testing procedure of Midco standards and there was no deviation in standard. The petitioner had also sought information regarding the holographic seals under the Right to Information Act, 2005. From a reply against this information sought, it was clarified that the replaced seals totalling 06 in number were issued to an official of the oil company before the first inspection was done and the said official was a member of the joint inspection team which conducted the inspection in October 2013.  

It was argued by the petitioner’s counsel that the replaced seals were issued to a member of the inspection team and it was quite possible that members of the inspecting team had themselves replaced 06 seals and tampered with 05 of them and that the weights and measures seals were found intact and thus, there was no question of the petitioner having tampered with one nozzle. 

On the other hand, the oil company argued that the petitioner is guilty of tampering with holographic seals and of replacing them. Further, it was argued that the test report did not detect any tampering as the device used for tampering had already been removed by the petitioner after the second inspection and before the parts of the dispensing unit could be retrieved. 

After considering the rival submissions, the Court observed that the test report of the metering assembly of the nozzle was unambiguous and clear in its conclusion that the pulsar assembly and metering unit had passed the functional testing procedure and there was no deviation in standard. The control card could not be tested as it did not fit onto the test jig. It thus appeared to the Court that there was no tampering by the petitioner with the metering assembly of that nozzle. 

Further, the Court noted that during the first inspection all the seals were found in order and the same was the finding during the second inspection. Even after the third inspection, the weights and measures seals were found intact. Thus, the Court opined that the metering assembly of the nozzle allegedly giving short delivery was beyond the access of the petitioner and there was thus, no question of tampering with the metering assembly. 

Interestingly, the Court noted that the RTI reply revealed that the replaced seals were issued to an employee of the oil company and a member of the inspecting team, before the third inspection. 

The Court noted that the dealership has been terminated on account of tampering with the dispensing unit as well as violation of Clauses 34 and 42 of the dealership agreement dated 24.08.2011 read in conjunction with Clause 8.2 (iv) of MDG-2012. From a perusal of these provisions, the Court concluded that the question which arose was whether the petitioner tampered with a dispensing unit and whether he violated instructions regarding safe practices and marketing discipline by making short deliveries. 

Since the Court already found that there was no tampering with the dispensing unit nor there was any attempt made to tamper therewith, thus, the petitioner held that the petitioner could not be held liable for making short deliveries or for violating safe practices or marketing discipline. 

The termination of its dealership was thus held to be patently illegal. 

On the issue of tampering with the holographic seals, the Court held that it was more than likely that the holographic seals had been tampered with and replaced by the inspecting team itself in order to frame the petitioner. 

Further, the Court observed that even if such action was done by the petitioner, this would not have amounted to tampering with a dispensing unit nor to making short deliveries or violating marketing discipline.

In view of the above, the writ petition was allowed.