Supreme Court Affirms HPCL’s Termination of Dealership Agreement for Breach of Terms by Dealer
Case Name: M/s. Hindustan Petroleum Corporation Limited & Ors. v. Dharamnath Singh & Ors.
Case No.: Civil Appeal Nos.6509-6510 Of 2024
Dated: May 17, 2024
Quorum: Justice J K Maheshwari and Justice Sanjay Karol
FACTS OF THE CASE:
By virtue of a Dealership Agreement1 dated February 1, 1997, the respondent was designated as a dealer for the appellant(s)’ petrol, diesel, motor oil, grease and other like products. On August 18, 2007, some representatives of SGS India2, purporting to be an organisation designated by the appellant(s), showed up to the respondent’s petrol station and collected samples of Motor Spirit (MS) and High Speed Diesel (HSD).
On August 20, 2007, the respondent received a show cause notice from the appellant, requesting that they provide a response to the alleged irregularities within seven days.The reply was notified of the supply suspension with immediate effect by the Senior Sales Officer of the Durgapur Sales Area, based on the Preliminary Test Report.
The respondent at the appellant(s)’ regional office questioned the Agency’s authority to carry out such a sample collection. On the other hand, it is claimed that the identical Marker Test was performed on these samples without consideration. The writ petition that ultimately led to the current proceedings was filed because the petitioner felt unfairly treated by the order of suspension of supply.
LEGAL PROVISIONS:
- Section 100 of the Code of Criminal Procedure- Before making a search under this Chapter, the officer or other person about to make it shall call upon two or more independent and respectable inhabitants of the locality in which the place to be searched is situate or of any other locality if no such inhabitant of the said locality is available or is willing to be a witness to the search, to attend and witness the search and may issue an order in writing to them or any of them so to do.
CONTENTIONS OF THE APPELLANTS:
The learned counsel for the appellants fiercely and strongly argued that it was argued that Clause 4 of the Agreement stipulates that a licence is immediately terminated upon (a) the Agreement’s termination or (b) any of the terms of the Agreement that are outlined in Clause 58.
It was argued that the Agency was entitled to carry out the tests in question because mobile labs and “agencies authorised by oil companies,” in addition to officials from the oil companies, were allowed to draw samples under Clause 2.2.2. of the Marketing Discipline Guidelines, which were released by the Government of India on August 1, 2005.
Since the respondent is not being prosecuted for violating the Control Order and the Agreement is being terminated due to breach of terms and conditions, the provisions of the Control Order do not apply to this particular situation.
CONTENTIONS OF THE RESPONDENTS:
The arguments put forward by the learned counsel for the appellants were sharply and passionately rejected by the learned counsel for the respondents that the MDGs have legal force because they are issued in accordance with Section 3 of the Essential Commodities Act, 1955.
According to the aforementioned, the respondent’s supply was suspended. It cannot decide to abide by the parts of the law that best serve its interests. It was not possible to terminate the Agreement without following the Control Order’s inspection procedures. The word “duly authorised representative” is used in Clause 39 of the Agreement, however it is not defined there. Only “authorised officers,” as defined by the Control Order’s Clause 2(b), are granted the authority to search and seize materials in accordance with Clause 7.
It was also contended that The agreement does not specify how samples should be collected, how tests should be conducted, or how to handle any other situation involving suspected product adulteration. Both the 1998 decree and the 2005 Control decree would impose obligations on an oil manufacturing business. Consequently, it would be necessary to adhere to the process outlined in Clause 7 of the Control Order.
COURT’S ANALYSIS AND JUDGMENT:
The court said that What may be inferred from the foregoing excerpt is that the court has the authority to punish anyone who violates the Control Order. Consequently, in order to prosecute an individual for breaching the search and seizure restrictions outlined in Clause (7) thereof, the individual in question must be brought to justice, specifically for having broken said Control Order.
On the other hand, as the appellants’ learned counsel has argued, the respondent was only supposed to face prosecution for breaking the terms of the agreement inter se the parties, not for any other purported infraction.
The main takeaway from the aforementioned ruling is that, in order to terminate a dealership agreement, it must be done so strictly in accordance with the guidelines and rules established in that respect. A dealer must be informed in advance of a sampling test so that arrangements can be made for his or her representative to attend. In the current situation, the respondents have objected to the sample collection procedure because they were upset that SGS India, a third party, was chosen to take samples rather than because there was a notice gap or any other instance of a violation of the natural justice principles covered in the aforementioned ruling.
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Judgment reviewed by Riddhi S Bhora.
