2024 (6) TMI 39 - SC - Indian Laws

Sample Collection and Testing in case of petrol pump - Compliance with Control Order and Agreement Terms - Validity of Termination of Dealership Agreement - HELD THAT - As we have referred to earlier, the appellant(s) have placed strong reliance on the judgment of this Court in R.M. Service Centre 2019 (11) TMI 1828 - SUPREME COURT held that any person who contravenes the Control Order is liable to be punished by the Court. Therefore, for a person to be prosecuted for violating the provisions relating to search and seizure contained in Clause (7) thereof, such a person will have to be brought to the book, particularly, for having violated the said Control Order. In contrast, as has been submitted by the learned counsel for the appellants, the respondent was sought to be prosecuted only for the violation of the terms of the agreement inter se the parties and not for any other alleged violation, if any. Thus, the submission of the respondents that R.M. Service Centre (supra) does not aid the case of the appellants, cannot be accepted. As already noticed, the respondent has not been prosecuted for violation of the Control Order. Reliance on Allied Motors 2011 (12) TMI 789 - SUPREME COURT in our considered opinion, does not help the case of the respondent, for therein, what was alleged and ultimately held proved that the dealership was terminated without a show cause notice and in violation of principles of natural justice. That is not the pleaded case of the respondent herein. In the present facts, the respondents have taken issue with the process of collection of samples, being aggrieved by the fact that a third party, namely, SGS India was appointed to take samples and not with the lack of service of notice or any other such non-compliance of the principles of natural justice. That apart, the observations in National Insurance Company Ltd. v. Pranay Sethi 2017 (10) TMI 1276 - SUPREME COURT tell us that in deference to judicial discipline and decorum, the judgments/orders passed by a coordinate Bench are to be respected by another Bench of co-equal strength. As such, we follow the holding in R.M. Service Centre 2019 (11) TMI 1828 - SUPREME COURT . It stands clarified that we have taken note of and considered all contentions raised across the Bar, however, in view of the discussions, no other point survives for consideration. Consequentially, the appeals are allowed keeping in view that the termination of the agreement inter se the parties was only based on the contravention of the terms of the dealership agreement. Pending application(s), if any, shall stand disposed of.

Summary

Issues Involved:
1. Authority to Conduct Sample Collection and Testing
2. Compliance with Control Order and Marketing Discipline Guidelines
3. Termination of the Dealership Agreement
4. Adherence to Principles of Natural Justice

Detailed Analysis:

1. Authority to Conduct Sample Collection and Testing
The primary issue centered on whether the agency (SGS India) had the authority to collect and test samples from the respondent's petrol pump. The respondent contested the agency's authority, arguing that only specific officers as defined under Clause 7 of the Control Order could collect samples. The Learned Single Judge and Division Bench upheld this view, noting that the agency had "absolutely no authority" to take samples or make any seizure of any product, thereby violating Clause 7 of the Control Order and Section 100 of the Code of Criminal Procedure.

2. Compliance with Control Order and Marketing Discipline Guidelines
The appellant argued that the Marketing Discipline Guidelines (MDG) allowed for agencies authorized by oil companies to draw samples and that the Control Order did not apply since the respondent was not being prosecuted under it. The respondent countered that the MDG, issued under Section 3 of the Essential Commodities Act, 1955, had statutory force and that the procedure under the Control Order had to be adhered to for any termination of the Agreement. The Supreme Court noted that the Control Order's provisions would apply only if the respondent was being prosecuted for its violation, which was not the case here.

3. Termination of the Dealership Agreement
The appellant justified the termination of the dealership based on breaches of specific clauses of the Agreement, including Clauses 26, 27, 44, 58(i), and (m). The respondent argued that the termination was improper due to non-compliance with the Control Order's sample collection procedures. The Supreme Court emphasized that the respondent was prosecuted for violating the terms of the Agreement, not the Control Order. The Court held that the termination was valid under the Agreement's terms.

4. Adherence to Principles of Natural Justice
The respondent argued that the termination violated principles of natural justice, citing Allied Motors Ltd. v. Bharat Petroleum Corporation and other cases. The Supreme Court found that the principles of natural justice were not violated as the respondent was given a show cause notice and an opportunity to respond. The Court distinguished the present case from Allied Motors, where the termination occurred without a show cause notice.

Conclusion:
The Supreme Court allowed the appeals, concluding that the termination of the dealership was based on the contravention of the terms of the dealership agreement and not on any violation of the Control Order. The Court held that the agency's involvement in sample collection did not invalidate the termination, as the respondent was not prosecuted under the Control Order. The principles of natural justice were upheld as the respondent had been given due notice and opportunity to respond. The appeals were allowed, and the termination of the Agreement was upheld. Pending applications were disposed of, and no costs were awarded.