2019 (11) TMI 1828 - SC - Indian Laws

Violation of Marketing Discipline Guidelines, 2012 - Validity of sample testing and procedural compliance - Applicability of the Control Order and Section 100 of the CrPC - Legality of the termination of dealership - stock variation beyond permissible limits and non-availability of reference density - Dealer's retail outlet was inspected, and samples were drawn, revealing non-conformities. The dealer requested retesting, which confirmed the initial findings. HELD THAT - The Control Order has been issued Under Section 3 of the Act. Such Act has been enacted for control of the production, supply and distribution and trade and commerce, of certain commodities. In respect of High Speed Diesel and Motor Spirit, the Control Order is issued for Regulation of supply and distribution and prevention of the malpractices. Section 6A of the Act provides for confiscation of the essential commodity whereas, Section 7 of the Act makes any person who contravenes any order made Under Section 3 liable for criminal prosecution. Therefore, we find that the effect of issuance of the Control Order is that in the event of violation of such Control Order, any person who contravenes any order made Under Section 3 of the Act i.e. the Control Order, he is liable to be punished by a Court. Therefore, the violation of the Control Order has penal consequences leading to conviction. The provisions of search and seizure contained in Clause 7 read with Section 100 of the Code will come into play only in the event a person is sought to be prosecuted for violation of the provisions of the Control Order. Admittedly, in the present case, the dealer is not sought to be prosecuted for the violation of the Guidelines, therefore, the procedure for drawing of samples which is a necessary pre-condition under the Control Order for prosecuting an offender does not arise for consideration. Since the Guidelines use the time line as a preferred time line, it cannot be said that the time line mentioned has to be strictly adhered to and is mandatory. The language, the purport and the effect of testing do not warrant to read the word 'preferably' as mandatory time line. It is not the case of the dealer that the sample sent after five days will lose its efficacy as the umpire sample would be sent only after the first report is confronted to the dealer. Still further, the dealer has not raised any objections regarding delay in sending the sample in the two replies submitted by him on 17th July, 2013 and 2nd January, 2014. The argument that the umpire sample in the hands of the dealer could not be tested because of sludge and to doubt the other two samples is totally untenable. Such argument is based upon conjectures as the other two samples collected and sealed cannot be permitted to be disputed only because one sample was found with sludge. There is no material to doubt the correctness of the samples taken. The first test report dated 29th May, 2013 was found deficient in the density as also in K.V. @40 degree celsius, sulphur and distillation recovery. Even the report dated 19th August, 2013 is found to be deficient in density, K.V., distillation recovery and sulphur. The result of the second report is almost the same as the sample tested on 29th May, 2013. Thus, the Appellant has rightly terminated the dealership for adulteration of the High Speed Diesel. However, in case of stock variation beyond permissible limits and the sample passing the quality test, it leads to suspension of sale and supply for fifteen days in the first instance, suspension of sale and supply for thirty days in the second instance and termination of dealership in the third instance. In this case, since the stock variation was beyond permissible limits and the sample failed, therefore, the action was rightly taken under Clause 5.1.11 of the Guidelines which is a critical irregularity when read with Sub-clause (i) of Clause 8.2 and Sub-clause (iv) of Clause 8.3 of the Guidelines. The Supreme Court set aside the High Court's order, upheld the termination of the dealership, and dismissed the writ petition, validating the actions taken by the appellants as per the Guidelines.

Summary

Issues Involved:
1. Adherence to Marketing Discipline Guidelines, 2012.
2. Validity of sample testing and procedural compliance.
3. Applicability of the Control Order and Section 100 of the Code of Criminal Procedure.
4. Legality of the termination of dealership.

Summary:

1. Adherence to Marketing Discipline Guidelines, 2012:
The appeal challenges the Division Bench of the Gauhati High Court's order maintaining the Single Bench's decision to set aside the termination of the dealership for violation of the Marketing Discipline Guidelines, 2012 (Guidelines). The dealership was terminated due to stock variation beyond permissible limits and non-availability of reference density, among other violations.

2. Validity of Sample Testing and Procedural Compliance:
The dealer's retail outlet was inspected, and samples were drawn, revealing non-conformities. The dealer requested retesting, which confirmed the initial findings. The High Court found non-compliance with the Guidelines' time limits for sending samples to the laboratory, deeming the time limits mandatory. However, the Supreme Court held that the term "preferably" in the Guidelines indicates a preferred but not mandatory timeline, and the delay in sending samples did not affect their validity.

3. Applicability of the Control Order and Section 100 of the Code of Criminal Procedure:
The dealer argued that the sample collection did not comply with the Control Order and Section 100 of the Code, which require the presence of independent witnesses. The Supreme Court clarified that these provisions apply only when prosecuting an offender, not in contractual disputes like the present case.

4. Legality of the Termination of Dealership:
The Supreme Court found that the dealership agreement and the Guidelines were binding on the dealer. The samples tested showed adulteration, justifying the termination. The Court held that the High Court's interpretation of the Guidelines as mandatory was incorrect and that the termination was in line with the contractual obligations and the Guidelines.

Conclusion:
The Supreme Court set aside the High Court's order, upheld the termination of the dealership, and dismissed the writ petition, validating the actions taken by the appellants as per the Guidelines.