Ms Swastik Gas Distributors through Its Proprietor Bishnu Deo Singh Vs Union of India through the Secretary Marketing Ministry of Petroleum and Natural Gas and Ors.

2025:JHHC:14278

IN THE HIGH COURT OF JHARKHAND AT RANCHI

W.P.(C) No. 5781 of 2016

M/s Swastik Gas Distributors having its office at College Road, P.O. & P.S. & District :- Sahibganj, through its Proprietor Bishnu Deo Singh, S/o Late Sakaldeep Mandal, Resident of Pokharia Sahibganj, P.O. Sahibganj, P.S.-Jirwabari, District - Sahibganj (Jharkhand)

¶5

… … Petitioner

¶6

Versus

¶7

Union of India through the Secretary [Marketing], Ministry of Petroleum and Natural Gas, Shastri Bhawan, Dr. Rajendra Prasad Road, New Delhi :- 110001

¶8

Indian Oil Corporation Ltd., through its Chairman, Indian Oil Bhawan, Bandra (East), Mumbai, Maharastra.

¶9

Executive Director (L.P.G.), Indian Oil Corporation Ltd, Indian Oil Bhawan, Bandra (East), Mumbai, Maharastra.

¶10

General Manager, Indian Oil Corporation Ltd., Lok Nayak Bhawan, 5^th Floor, Dak Bunglow Chowk, P.O.-G.P.O., P.S.- Kotwali, Patna, Bihar.

¶11

Deputy General Manager [L.P.G.], Indian Oil Corporation Ltd., Lok Nayak Bhawan, 5^th Floor, Dak Bunglow Chowk, P.O.-G.P.O., P.S.Kotwali, Patna, Bihar.

¶12

Chief Area Manager, Indian Oil Corporation, Indane Area Office, 2^nd Floor, Pulsar Plaza, Line Tank Road [Jail Road], P.O.:-. G.P.O., P.S.. Kotwali, District :- Ranchi.

¶13

7. Senior Area Manager, Indian Oil Corporation, Indane Area Office, 2^nd Floor, Pulsar Plaza, Line Tank Road [Jail Road], P.O.:-. G.P.O., P.S.. Kotwali, District :- Ranchi … … Respondents

¶14

With

¶15

W.P.(C) No. 3952 of 2011

¶16

M/s. Tara Enterprises, a Partnership Firm having its works and office at Seth Surajmal Jalan Road, Bompass Town, Deoghar, P.O. and P.S. - Deoghar, District - Deoghar, through one of its Partners Ram Pravesh Ram, son of Late Chandra Deep Ram R/o Khorado Road, Bampass Town, B. Deoghar, P.O. and P.S. - Deoghar, District – Deoghar

¶17

… … Petitioner

¶18

Versus

¶19

Union of India through the Secretary (Marketing), Ministry of Petroleum and Natural Gas, Shastri Bhawan, Dr. Rajendra Prasad Road, New Delhi 110001.

¶20

Indian Oil Corporation Ltd., through its chairman- cum-Managing Director, Indian Oil Bhawan, 254-C, Dr. Annie Besant Road, PRABHADEVI, Mumbai - 400025. Maharastra.

¶21

Regional Manager, Indian Oil Corporation Ltd., Eastern Region- I, Shakespeare Sarani, Kolkata - 700016.

¶22

General Manager, Indian Oil Corporation Ltd., Eastern Region- I, Shakespeare Sarani, Kolkata - 700016.

¶23

2025:JHHC:14278

¶24

Deputy General Manager (Sales), Indian Oil Corporation Ltd., Eastern Region- I, Shakespeare Sarani, Kolkata - 700016.

¶25

Senior Area Manager, Indian Oil Corporation, Main Area Office, 1^st Floor, Kamani Centre, Bistupur, Singhbhum East, Jamshedpur.

¶26

Manager- cum- Field Officer, Indian Oil Corporation, Deoghar, Sales Area, Deoghar.

¶27

Engine Tirkey, son of not known Manager- cum- Field Officer, Indian Oil Corporation, Deoghar, Sales Area, Deoghar at present posted at Haldia P.O and P.S Haldia District Haldia as Field Officer Indian Oil Corporation, Haldia. … … Respondents

¶28

With

¶29

W.P.(C) No. 6663 of 2011

¶30

M/s. Kusum Gas Agency, a Firm, having its works and office atBhagalpur Road, P.O. and P.S.- Dumka, District - Dumka 814101, through one of its Partners -Rajendra Kumar Bhagat, son of Late Durga Bhagat, Bhagalpur Road, P.O. and P.S. - Dumka, District - Dumka 814101. … … Petitioner

¶31

Versus

¶32

Union of India through the Secretary (Marketing), Ministry of Petroleum and Natural Gas, Shastri Bhawan, Dr. Rajendra Prasad Road, New Delhi 110001.

¶33

Indian Oil Corporation Ltd., through its Chairman – cum- Managing Director, Indian Oil Bhawan, 254-C, Dr. Annie Besant Road, PRABHADEVI, Mumbai - 400025, Maharastra.

¶34

Regional Manager, Indian Oil Corporation Ltd., Eastern Region- I, Shakespeare Sarani, Kolkata - 700016.

¶35

General Manager, Indian Oil Corporation Ltd., Eastern Region- I, Shakespeare Sarani, Kolkata - 700016.

¶36

Deputy General Manager (Sales), Indian Oil Corporation Ltd., Eastern Region -I, Shakespeare Sarani, Kolkata - 700016.

¶37

Senior Area Manager, Indian Oil Corporation, Main Area Office, 1st Floor, Kamani Centre, Bistupur, Singhbhum East, Jamshedpur.

¶38

Manager - cum - Field Officer, Indian Oil Corporation, Dumka, Sales Area, Dumka.

¶39

Engine Tirkey, son of not known Manager - cum - Field Officer, Indian Oil Corporation, Dumka, Sales Area, Dumka at present posted at Haldia P.O and P.S Haldia District Haldia as Field Officer Indian Oil Corporation, Haldia … … Respondents

¶40

With

¶41

W.P.(C) No. 1295 of 2014

¶42

M/s Swastik Gas Distributors having its office at College Road, P.O. & P.S. & District :- Sahibganj, through its Proprietor Bishnu Deo Singh, S/o Late Sakaldeep Mandal, Resident of Pokharia Sahibganj, P.O. Sahibganj, P.S.- Jirwabari, District - Sahibganj (Jharkhand).

¶43

… … Petitioner Versus

¶44

2

¶45

2025:JHHC:14278

¶46

Union of India through the Secretary [Marketing], Ministry of Petroleum and Natural Gas, Shastri Bhawan, Dr. Rajendra Prasad Road, New Delhi :- 110001

¶47

Indian Oil Corporation Ltd., through its Chairman, Indian Oil Bhawan, Bandra (East), Mumbai, Maharastra.

¶48

Executive Director (L.P.G.), Indian Oil Corporation Ltd, Indian Oil Bhawan, Bandra (East), Mumbai, Maharastra.

¶49

General Manager, Indian Oil Corporation Ltd., Lok Nayak Bhawan, 5^th Floor, Dak Bunglow Chowk. PO-G.P.O., P.S.- Kotwali, Patna, Bihar.

¶50

Deputy General Manager [L.P.G.], Indian Oil Corporation Ltd., Lok Nayak Bhawan, 5^th Floor, Dak Bunglow Chowk, P.O.-G.P.O., P.S.Kotwali, Patna, Bihar.

¶51

Chief Area Manager, Indian Oil Corporation, Indane Area Office, 2^nd Floor, Pulsar Plaza, Line Tank Road [Jail Road], P.O.:-. G.P.O., P.S.. Kotwali, District :- Ranchi.

¶52

Assistant Area Manager, Indian Oil Corporation, Indane Area Office, 2^nd Floor, Pulsar Plaza, Line Tank Road [Jail Road], P.O.:-. G.P.O., P.S.. Kotwali, District :- Ranchi … … Respondents

¶53

¶54

CORAM :HON'BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY

¶55

¶56

For the Petitioners : Mr. Rupesh Singh, Advocate For the IOCL : Mr. Rahul Kr. Gupta, Advocate : Mr. Rahul Lamba, Advocate : Mr. Nilesh Modi, Advocate

¶57

¶58

13 /23.04.2025 Heard the learned counsels appearing on behalf of the parties.

¶59

2. W.P.(C) No. 5781 of 2016 has been filed for the following reliefs:

¶60

“a. For quashing of the order as contained in Reference RAO/SGD dated 30.08.2016 issued by the Respondent No.7 whereby and whereunder a penalty of Rs.63,669/- [ Rupees Sixty three thousand six hundred sixty nine] has been imposed on the alleged grounds of discrepancies/irregularities in the supply of the L.P.G. Cylinders by the petitioner- Agency purportedly in exercise of powers under "Marketing Discipline Guidelines, 2015" for L.P.G. as approved by the Ministry of Petroleum and Natural Gas, Government of India for taking the penal action in cases of established irregularities by the concerned officer-in-Charge of the area which is wholly arbitrary, in violation of natural justice and in pursuance of Inspection Report dated 27.05.2016;

¶61

b. For direction upon the Official respondent, commanding upon them to act in accordance with law in the matter of imposition of penalty of alleged irregularities against the petitioner after due observance of principles of natural justice and not to act in a vindictive manner on the basis of Inspection Report dated 27.05.2016;

¶62

C. For quashing of the "Marketing Discipline Guidelines, 2015 for L.P.G." issued by the Ministry of Petroleum and Natural Gas, Government of India containing the proposed penalties for major/ minor irregularities by

¶63

3

¶64

2025:JHHC:14278

¶65

L.P.G. Distributors as the said guidelines are arbitrary and without jurisdiction and in the teeth of settled principles laid down by the Hon'ble Supreme Court of India as the penalty proposed to be levied under the said guidelines does not contain any provision for mandatory opportunity of personal hearing to the effected persons before taking any action, no procedure for determining the fault/ irregularities prescribed therein and the said guidelines does not contain any provision of appeal either against the action taken under the impugned guidelines to the aggrieved persons against such punitive action in the nature of quasi penal charge and punishment; thereby being bad in law;.

¶66

AND/OR

¶67

Any other relief or reliefs as Your Lordships may deem fit and proper for which the petitioner is very much entitled under the facts and circumstances of the case.”

¶68

3. W.P.(C) No. 3952 of 2011 has been filed for the following reliefs:

¶69

“(i) For issuance of appropriate writ(s), order(s), direction(s) or writ in the nature of certiorari quashing the Order contained in Letter No. Ref.J/LPG/RMDG/2010-11 /TARA Dated 30.04.2011 issued under the signature of Mr. R.N. Maulick, Senior Area Manager, Indian Oil Corporation Ltd. whereby and whereunder, a penalty of Rs.27,56,418/-(Rs. Twenty Seven Lakh Fifty Six Thousand Four Hundred and Eighteen only) has been imposed on the alleged grounds of discrepancies/ irregularities in the supply of L.P.G. Cylinders by the petitioner agency purportedly in exercise of the powers under "Marketing Discipline Guidelines- 2001 for L.P.G." as approved by the Government of India for taking the penal action in cases of established irregularities by the concerned Officer incharge of the Area/Territory, which is wholly arbitrary, illegal and in violation of principles of natural justice on the malafide report of the private respondent- Mr. Engine Tirkey and based on no established facts.

¶70

(ii) For issuance of appropriate writ(s), order(s), direction(s) upon the official respondents commanding upon the official respondents of the Indian Oil Corporation to act in accordance with law in the matter of imposition of any penalty of alleged irregularities against the petitioner after giving notice and full opportunity of personal hearing and not to act in a vindictive manner against the petitioner on the basis of motivated and unsubstantiated report of the then Field Manager who had personal grudge to settle against the petitioner for objecting to his demand for personal favours.

¶71

(iii) For issuance of appropriate writ(s), order(s), direction(s) or writ in the nature of certiorari quashing the "Marketing Discipline Guidelines - 2001 for L.P.G." issued by the Ministry of Petroleum and Natural Gas, Government of India containing the proposed penalties for established major/ minor irregularities committed by the L.P.G. Distributors as the said Guidelines are arbitrary and without jurisdiction and in teeth of the well settled legal principles laid down by the Hon'ble Supreme Court of India as the penalty proposed to be levied under the said Guidelines against the erring L.P.G. Distributor does not contain any provisions for mandatory opportunity of personal hearing to the person concerned before taking any action, no procedure for determining the fault/irregularities is prescribed

¶72

4

¶73

2025:JHHC:14278

¶74

therein and the said Guidelines do not contain any provision of Appeal either against any action taken under the impugned Guidelines to the aggrieved person against such punitive action in the nature of quasi penal charge and punishment and is therefore, bad in law.

¶75

AND/OR

¶76

(iv) For issuance of any other relief(s) as the petitioner may be found entitled in law.”

¶77

4. W.P.(C) No. 6663 of 2011 has been filed for the following reliefs:

¶78

“(i) For issuance of appropriate writ(s), order(s), direction(s) or writ in the nature of certiorari quashing the Order contained in Letter No. Ref.J/LPG/RMDG/2010-11 /KUSUM Dated 25.04.2011 issued under the signature of Mr. R.N. Maulick, Senior Area Manager, Indian Oil Corporation Ltd. whereby and whereunder, a penalty of Rs. 13,31,771/(Rupees Thirteen Lac Thirty One Thousand Seven Hundred Seventy One only) has been imposed on the alleged grounds of discrepancies/ irregularities in the supply of L.P.G. Cylinders by the petitioner agency purportedly in exercise of the powers under "Marketing Discipline Guidelines - 2001 for L.P.G." as approved by the Government of India for taking the penal action in cases of established irregularities by the concerned Officer incharge of the Area/Territory, which is wholly arbitrary, illegal and in violation of principles of natural justice on the malafide report of the private respondent- Mr. Engine Tirkey and based on no established facts.

¶79

(ii) For issuance of appropriate writ(s), order(s), direction(s) upon the official respondents commanding upon the official respondents of the Indian Oil Corporation to act in accordance with law in the matter of imposition of any penalty of alleged irregularities against the petitioner after giving notice and full opportunity of personal hearing and not to act in a vindictive manner against the petitioner on the basis of motivated and unsubstantiated report of the then Field Manager who had personal grudge to settle against the petitioner for objecting to his demand for personal favours.

¶80

(iii) For issuance of appropriate writ(s), order(s), direction(s) or writ in the nature of certiorari quashing the "Marketing Discipline Guidelines - 2001 for L.P.G." issued by the Ministry of Petroleum and Natural Gas, Government of India containing the proposed penalties for established major/ minor irregularities committed by the L.P.G. Distributors as the said Guidelines are arbitrary and without jurisdiction and in teeth of the well settled legal principles laid down by the Hon'ble Supreme Court of India as the penalty proposed to be levied under the said Guidelines against the erring L.P.G. Distributor does not contain any provisions for mandatory opportunity of personal hearing to the person concerned before taking any action, no procedure for determining the fault/irregularities is prescribed therein and the said Guidelines do not contain any provision of Appeal either against any action taken under the impugned Guidelines to the aggrieved person against such punitive action in the nature of quasi penal charge and punishment and is therefore, bad in law.

AND/OR

5

2025:JHHC:14278

(iv) For issuance of any other relief(s) as the petitioner may be found entitled in law.”

¶85

5. W.P.(C) No. 1295 of 2014 has been filed for the following reliefs:

¶86

“a. For quashing of the order as contained in Reference No.RNC / LPG /601 dated 25.02.2014 issued by the Respondent No.6 whereby and whereunder a penalty of Rs.41,830/- [ Rupees Forty one thousand eight hundred thirty] has been imposed on the alleged grounds of discrepancies/ irregularities in the supply of the L.P.G. Cylinders by the petitioner- Agency purportedly in exercise of powers under "Marketing Discipline Guidelines, 2001" for L.P.G. as approved by the Ministry of Petroleum and Natural Gas, Government of India for taking the penal action in cases of established irregularities by the concerned officer-in-Charge of the area which is wholly arbitrary, in violation of natural justice and in pursuance of joint Inspection Report dated 20.01.2014 under the signature of Assistant Area Manager;

¶87

b. For a direction upon the Official respondent, commanding upon them to act in accordance with law in the matter of imposition of penalty of alleged irregularities against the petitioner after due observance of principles of natural justice and not to act in a vindictive manner on the basis of Joint Inspection Report dated 20.01.2014, which on the face of it does not indicate the alleged irregularities forming the basis of order of penalty dated 25.02.2014;

¶88

c. For quashing of the "Marketing Discipline Guidelines, 2001 for L.P.G." issued by the Ministry of Petroleum and Natural Gas, Government of India containing the proposed penalties for major/ minor irregularities by L.P.G. Distributors as the said guidelines are arbitrary and without jurisdiction and in the teeth of settled principles laid down by the Hon'ble Supreme Court of India as the penalty proposed to be levied under the said guidelines does not contain any provision for mandatory opportunity of personal hearing to the effected persons before taking any action, no procedure for determining the fault/ irregularities prescribed therein and the said guidelines does not contain any provision of appeal either against the action taken under the impugned guidelines to the aggrieved persons against such punitive action in the nature of quashi penal charge and punishment; thereby being bad in law,.

¶89

AND/OR

¶90

Any other relief or reliefs as Your Lordships may deem fit and proper for which the petitioner is very much entitled under the facts and circumstances of the case.”

¶91

Arguments of the Petitioner(s)

¶92

6. The learned counsel for the petitioner(s) has submitted that these cases have been tagged as because the Marketing Discipline Guidelines (hereinafter referred to as the “MDG”) framed by the respondents is under challenge and the only distinguishing feature is that in W.P.(C) No.5781 of 2016, the MDG of the year 2015 is under

¶93

6

¶94

2025:JHHC:14278

¶95

challenge and in rest of the cases, MDG of the year 2001 is under challenge. However, he submits that the validity of MDG, be it of the year 2001 or 2015, is under challenge essentially on the ground that the MDG itself is without jurisdiction inasmuch as the MDG is de hors of the provisions of the Essential Commodities Act, 1955 and the Liquefied Petroleum Gas (Regulation of Supply and Distribution) Order, 2000 and these guidelines are not referrable to any source of power.

¶96

7. The learned counsel has also submitted that so far as MDG for LPG of 2001 is concerned, the same reveals that it was circulated after approval of the Government of India vide letter dated 10.05.2001 addressed to all the Indane Distributors of respondent Indian Oil Corporation. He submits that once the MDG is approved by the Government of India, then it has to have some source of power ingrained in any statute which governs the distribution of LPG or directly under the Constitution of India. He submits that the distribution of LPG is governed by the Essential Commodities Act, 1955 or the order framed thereunder and since MDG are not referrable to the Essential Commodities Act, 1955 and/or the order framed thereunder, the MDG are wholly without jurisdiction. He has relied upon the judgement passed by the Hon’ble Supreme Court, reported in (2014) 10 SCC 673 (Gulf Goans Hotels Company Limited and Anr. Vs. Union of India and Ors.) , paragraphs 15, 16, 19 and 21, to submit that the executive action has to be undertaken in terms of the provisions of the Constitution of India, and submits that the aforesaid MDG are not backed by any source of law, and therefore, any action taken under MDG as involved in all these cases, are also without jurisdiction.

¶97

8. The learned counsel has submitted that if the MDG, which are under challenge in all these writ petitions are set aside, then all the proceedings which have been undertaken thereunder leading to termination of dealership of the petitioners would also not survive.

¶98

9. The learned counsel has further submitted that the show-cause notices which have been issued to the petitioners were malicious,

¶99

7

¶100

2025:JHHC:14278

¶101

motivated, and not specific, and the responses which were submitted by the individual petitioners to the show-cause notices were also not appropriately appreciated and dealt with all fairness and transparency. It has also been submitted that the respondent-Indian Oil Corporation has not led any documentary or oral evidence in support of the allegations made in the concerned show-cause notices.

¶102

10. The learned counsel has submitted that there has been violation of principles of natural justice and the petitioners have not been treated fairly by the respondent-Indian Oil Corporation. Therefore, the writ petitions are otherwise also maintainable irrespective of the alternative remedy of arbitration provided under the agreement entered into between the parties. The learned counsel has also submitted that so far as MDG is concerned, there is no arbitration clause mentioned therein.

¶103

11. The learned counsel has placed the provisions of Essential Commodities Act, 1955 and referred to Section 3, which deals with “power to control production, supply, distribution, etc. of essential commodities” and submits that the said section deals with all the circumstances relating to maintaining or increasing supplies of any essential commodity or for securing equitable distribution at fair price and takes care of all the relevant aspects for the purposes of dealing with essential commodities and it also has the provisions for delegation of power and has the power for confiscation. He has in particular referred that the violation of the provisions of Essential Commodities Act, 1955 results in imposition of penalty by way of fine and there is also provision for imprisonment, etc.

¶104

12. The learned counsel has also referred to the Liquefied Petroleum Gas (Regulation of Supply and Distribution) Order, 2000 [hereinafter referred to as LPG Order] , which has been framed under Section 3 of Essential Commodities Act, 1955 and submitted that under clause 11(4) - Schedule VII [Paragraph 6] of the LPG Order there is a provision of MDG titled “ Marketing Discipline and Guidelines proposed to be adopted”. He submits that MDG is contemplated under the provision of Essential Commodities Act, 1955

¶105

8

¶106

2025:JHHC:14278

¶107

read with the LPG Order, and therefore, the MDG framed and imposed by the respondents is not sustainable in the eyes of law.

¶108

13. The learned counsel has submitted that the MDG lacks legislative competence and authority and is not enforceable. He submits that MDG for LPG of the year 2001 does not even contain a provision of appeal whereas the MDG for LPG of the year 2015 provides for an appeal only in exceptional cases i.e., in case of termination of dealership or distributorship. He has further submitted that in MDG of the year 2001, there is no requirement for the respondent-Indian Oil Corporation to furnish documents in support of the charges made in show cause notice and there is no procedure for any personal hearing to the affected party before imposition of penalty in the nature of fine which is ex-proprietary and confiscatory in nature and such fine is recoverable by the respondent-Indian Oil Corporation from the security deposit or advance deposit made by the dealers like the petitioners.

¶109

14. The learned counsel has also submitted that the respondentIndian Oil Corporation have sought to justify the MDG by referring to the ‘faithful performance clause’ , but such reference is not permissible in the eyes of law as the respondents are not competent to impose penalty which imposition is essentially quasi-criminal in the form of fines. He has further submitted that the breach of any agreement may result in civil consequences in the form of damages, recovery of loss, compensation, etc., but so far as imposition of penalty is concerned, the same is in the nature of fine and has roots in Section 53 of Indian Penal Code being one of the punishments for the offences committed therein, and therefore, the respondents do not have any jurisdiction to impose penalty in the nature of fine. A reliance has been placed upon the judgment passed by the Hon’ble Supreme Court reported in (1965) SCC OnLine SC 18 (S.A.L. Narayan Row v. Ishwarlal Bhagwandas) by submitting that it has been held in the aforesaid judgment that criminal proceeding ordinarily concludes by imposition of sentence and fine or forfeiture of property is also prescribed sentence under the Criminal

¶110

9

¶111

2025:JHHC:14278

¶112

Jurisprudence, but so far as civil proceedings are concerned, the same is followed by payment of debt, damages, compensation, and delivery of a specific property. He has further referred to the judgment passed by the Hon’ble Supreme Court reported in (1975) 2 SCC 22 [Khemka & Co. (Agencies) (P) Ltd. v. State of Maharashtra] to submit that, it has been held that imposition of pecuniary liability is comparable to a punishment for commission of an offence and, in the instant case, penalty is in the nature of fine which has been created by the respondents themselves through MDG which is not backed by any enactment and, therefore, the provision of penalty in the nature of fine in MDG is itself wholly without jurisdiction.

¶113

15. He has submitted that under the provisions of Essential Commodities Act,1955 there is clear provision for imposition of fine or even sentence for violation and the case is to be tried by a court of Judicial Magistrate and LPG Order is a delegated legislation under Section 3 of the Essential Commodities Act and the LPG Order and Essential Commodities Act taken altogether prescribes for action which are permissible and which are not permissible, both by the distributors and oil companies, dealing with petroleum products including LPG.

¶114

16. By again referring to the aforesaid judgment reported in (2014) 10 SCC 673 (Gulf Goans Hotels Co. Ltd. v. Union of India) , the learned counsel has submitted that it has been clearly held that any executive action must conform to the prescription of Article 77 or Article 166 of the Constitution of India to have a recourse of law and all executive action of the Government either at the Union or the State level are to be taken in the name of the President or the Governor as the case may be and is required to be published in the Official Gazette. He has further submitted that in absence of any publication in the Official Gazette, such MDG are otherwise also not enforceable. However, during the course of argument, the learned counsel has fairly submitted that the point regarding requirement of publication of MDG in Official Gazette has not been taken in the writ petitions or in any of the pleadings filed in this case.

¶115

10

¶116

2025:JHHC:14278

¶117

17. The learned counsel has further referred to the judgment reported in 1967 SCC Online SC 21 (Satwant Singh Sawhney v. D. Ramarathnam) to submit that every executive action has to be supported by some legislative authority and the Essential Commodities Act, 1955 read with the LPG Order clearly covers the field when a distributor can be punished with imposition of penalty in the nature of fine and has laid down the procedure to be adopted for such infliction of punishment. However, the MDG has given a complete go-by to the procedure which has been prescribed under the Essential Commodities Act, 1955 and the LPG Order. He has submitted that what legislature could not do, even the executive cannot do. If the legislature could not impose a penalty of fine without adhering to the procedure contained in the Essential Commodities Act, 1955 the respondent-Indian Oil Corporation also cannot impose penalty of fine on the basis of MDG.

¶118

18. The learned counsel has also referred to the judgement passed by the Hon’ble Supreme Court reported in (1969) 2 SCC 262 (A.K. Kraipak v. Union of India) to submit that all quasi-judicial enquiry must be held in good faith, without bias, and what particular rules of natural justice should apply to a given case would depend to a great extent on the facts and circumstances of each case. The learned counsel has submitted that there is no legal framework to support the MDG and the respondent-Indian Oil Corporation has usurped upon themselves the power and authority to carry out the exercise of imposition of punishment of fine. He submits that the fine being punishment in criminal jurisprudence could not be enforced under any civil dispute arising out of alleged violation of MDG and cannot be relatable to ‘faithful performance clause’ of the contract governing the parties.

¶119

19. He has further referred to the judgement passed by the Hon’ble Supreme Court reported in (1981) 1 SCC 664 (Swadeshi Cotton Mills Vs. Union of India) to submit that prior hearing is better than the subsequent hearing, but subsequent hearing is better than no hearing at all. The learned counsel has also submitted that the judgment passed

¶120

11

¶121

2025:JHHC:14278

¶122

by the Hon’ble Supreme Court which has been relied upon by the respondents reported in (2019) 19 SCC 662 (Indian Oil Corpn. Ltd. v. R.M. Service Centre) is not applicable to the facts of the present case inasmuch as in paragraph 15 of the said judgment, the parties to litigation before the Hon’ble Supreme Court never disputed that they were not governed by MDG as applicable upon them. The learned counsel submits that the respondent-Indian Oil Corporation cannot be permitted to run a parallel governance in the garb of MDG and impose punishment in the nature of fine falling under the criminal jurisprudence. Such action is without authority of law and legislative competence and there is absence of any clear and unambiguous statutory declaration of power to that effect. The respondents cannot be permitted to impose quasi criminal penalty of fine by way of exproprietary ‘confiscation’ followed by extraction from the security deposit and advances.

¶123

20. The learned counsel has stated that the alternative remedy of arbitration is not applicable to MDG as the MDG by itself does not contain any arbitration clause. The arbitration clause is there in the agreement between the parties. The learned counsel has also submitted that the law is well settled that the action may have both civil and criminal wrong but the penalty being in the nature of fine is criminal in nature and therefore the respondents did not have any power and jurisdiction to impose fine and such fine is only covered by the provisions of Essential Commodities Act, 1955 and the orders framed thereunder.

¶124

Arguments of the Respondents

¶125

21. The learned counsel appearing on behalf of the respondents while opposing the prayer has submitted that the MDG has root to the ‘faithful performance clause’ which has been provided in the agreement itself. They have further submitted that essentially the dispute arises out of contract between the respondent-Indian Oil Corporation and the petitioners, and therefore, for framing and applying MDG, there is no need for any statutory backing. MDG is arising out of ‘faithful performance clause’ and some uniformity is

¶126

12

¶127

2025:JHHC:14278

¶128

maintained amongst the persons dealing with LPG through MDG which is applicable to all the distributors of LPG- an essential commodity.

¶129

22. The learned counsel has also submitted that the petitioners have signed the agreement between the parties with open eyes, conscious of the fact that there is a ‘faithful performance clause’ in the agreement and the MDG of the year 2015 has specifically referred to ‘faithful performance clause’ and mutual obligation of the respective parties. He has referred to the introduction to MDG as annexed in the records of writ petition being W.P.(C) No. 5781 of 2016. The learned counsel has further submitted that merely because MDG of the year 2001 was ultimately said to have been approved by the Government of India, the same does not mean that it is beyond the contractual liabilities of the parties arising out of agreement. He has submitted that there is no legal bar in government entering into the contract and the contractual liabilities are not governed by the provisions of Articles 77, 162 and 166 of the Constitution of India and therefore neither any plea has been raised in the writ petition in connection with publication of MDG nor there is any such requirement. He has submitted that there is no pleading of the petitioners in connection with the requirement of any publication nor the petitioners have raised any objection in connection with any violation of Articles 77, 162 or 166 of the Constitution of India.

¶130

23. The learned counsel has also submitted that the point of alternative remedy has been specifically kept open vide order dated 18.01.2023. The learned counsel submits that so far as legality of MDG is concerned, the same may not have alternative remedy but if this Court finds that MDG does not call for any interference and is otherwise valid in the eyes of law, then so far as merits of individual cases are concerned, where there are different show cause notices on the basis of different sets of allegations, and response by each of the parties were called for which is followed by final order, the petitioners can still avail the remedy in accordance with law and in terms of the

¶131

13

¶132

2025:JHHC:14278

¶133

arbitration clause which has been provided in all the agreements involved in these cases.

¶134

24. The learned counsel has submitted that MDG need not have a separate arbitration clause as the relationship between the parties is essentially guided by the agreement entered into between the parties having ‘faithful performance clause’ and the petitioners are distributors by virtue of the agreement and not by virtue of MDG.

¶135

25. The learned counsel has submitted that so far as MDG of the year 2001 is concerned, the same does not have a remedy of appeal and MDG of the year 2015 has a remedy of appeal but all the agreements admittedly have the remedy through arbitration. 26. The learned counsel has further submitted that so far as the argument of the petitioners that LPG order as well as the MDG cover the same field and there is some overlap with regards to nature of violation is concerned, they operate in different fields and accordingly have different impacts; violation of the LPG Order is visited with fine/imprisonment, whereas the purpose of MDG is to impose monetary consequences by way of penalty to regulate and discipline the distributors so that the LPG consumers ultimately get timely and quality service. The learned counsel has thereafter referred to the Section 3 of the Essential Commodities Act, 1955 and submitted that the MDG and the LPG Order serve different purpose altogether and the purpose of MDG is as under:

¶136

a) MDG guidelines have been issued for regulating the large network of LPG distributors in the country so that they can give quality services to the ultimate consumer.

¶137

b) MDG guidelines provides as to how Government Oil Company would deal with its LPG distributors whereas LPG Order is general in nature.

¶138

c) MDG guideline is part of the contract by reference. Legislature cannot be expected to make law even as to how the government oil companies would be dealing with their distributors.

¶139

d) MDG guidelines are part of the agreement itself whereas LPG order is part of the statute.

¶140

e) MDG guidelines only provides for monetary consequences or termination of distributorship agreement in order to

¶141

14

¶142

2025:JHHC:14278

¶143

regulate or maintain discipline amongst the distributors whereas LPG order provides for punishment in the shape of imprisonment.

¶144

f) Essentially, MDG guidelines provides for a civil wrong and the LPG Control Order provides for a criminal wrong.

¶145

g) Most of the irregularities/wrongs provided in the MDG are not provided in the LPG Order. Chart detailing the same is available.

¶146

h) It is only few irregularities/wrongs provided in the MDG which are provided in the LPG Order. But that by itself does not make the MDG as illegal or without authority.

¶147

i) There is no prohibition in law that a criminal wrong cannot be a civil wrong. On the contrary it is a settled law that a wrong can be both a criminal wrong and civil wrong.

¶148

j) Thus, merely there are some wrongs, which are provided in the LPG order (Criminal Wrong) and also provided in the MDG Order (Civil Wrong), cannot make the MDG as illegal or without authority.

¶149

27. The learned counsel has submitted that on the face of Section 3 of the Essential Commodities Act, 1955, under which the LPG Order has been issued, it is meant for maintaining or increasing supplies of any essential commodities at fair price and for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein. The learned counsel submits that so far as the MDG is concerned, it is to ensure that the public at large are served properly and the distributors work within the four corners of law.

¶150

28. The learned counsel has relied upon the judgement passed by Hon’ble Supreme Court reported in (2019) 19 SCC 662 (supra) and submitted that the judgement is to be read as a whole and in the said judgement, since the dealer was not being prosecuted for violation of the provisions of Essential Commodities Act, 1955 and was being proceeded on account of violation of MDG, the Hon’ble Supreme Court was of the view that the provision of search and seizure is applicable for the Control Order and Section 3 of the Essential Commodities Act, 1955, and the provisions of Code of Criminal Procedure as applicable for search and seizure are not required to be followed when it comes to violation of MDG. The learned counsel has

¶151

15

¶152

2025:JHHC:14278

¶153

submitted that the Hon’ble Supreme Court has kept the violation under MDG distinct and different from that of violation under the Essential Commodities Act, 1955 and the orders framed thereunder. The learned counsel has also referred to paragraph 15 thereof and has submitted that it has been held that the dealer having entered into agreement, it was not disputed that dealer was bound by MDG issued by public sector oil marketing companies. The learned counsel submits that the dealer having entered into the agreement is certainly bound by MDG in the matter of distribution and marketing of LPG gas cylinder which is an essential commodity. He has also referred to paragraph 16 of the aforesaid judgment to submit that some of the provisions of MDG have been considered and it has been observed that the guidelines are to streamline the functioning i.e., the oil companies should not send the sample for testing at their sweet will , arbitrarily or without any justification.

¶154

29. The learned counsel has also referred to paragraph 14 of the aforesaid judgment to submit that the effect and consequence of the Control Order and the violation of the provision of Essential Commodities Act, 1955 has been duly considered and the consequence is to have penal consequences leading to conviction and in the said case the dealer was not sought to be prosecuted for violation of Essential Commodities Act or orders framed thereunder. The learned counsel has submitted that for the purposes of proceeding for violation of MDG, the Essential Commodities Act is not attracted. 30. The learned counsel has submitted that if MDG are upheld by this Court, then under such circumstances other issues may not be gone into as they involve disputed questions of facts and arbitrator is the appropriate authority to deal with it if the petitioners choose to invoke the arbitration clause. The learned counsel has also submitted that in all the cases, the principles of natural justice have been complied, inasmuch as, show cause notice was issued, the response was taken and then the appropriate order was passed considering the response furnished by the petitioners and since there was no request for personal hearing, no personal hearing was granted. He has referred

¶155

16

¶156

2025:JHHC:14278

¶157

to the judgment reported in (2012) 11 SCC 257 (Patel Engg. Ltd. v. Union of India) (paragraph 38).

¶158

Findings of this Court

¶159

31. Since similar points are involved in all the cases, the arguments have been primarily advanced from the records of W.P.(C) No. 5781 of 2016.

¶160

32. After hearing the learned counsel for the parties, this Court finds that in this batch of cases, the petitioners are dealers under Indian Oil Corporation and all of them have entered into separate agreements with Indian Oil Corporation (hereinafter referred to as “IOC”) and such agreements have been placed on record. The common feature of all the agreements is that the agreement itself reveals the status of respondent – Indian Oil Corporation Limited as a company registered under the Companies Act, 1956 having its registered office at Mumbai and the petitioners and respondent – Indian Oil Corporation Limited have entered into different dealership agreements. The agreements deal with various aspects of the relationship between the parties and also deal with their mutual obligations and also enable the respondent -IOC to terminate the agreement on account of violation of the clauses of the agreement. One more important feature which has been relied upon by both the learned counsel for the parties is the ‘faithful performance clause’ which is present in all the agreements involved in this batch of cases and the ‘faithful performance clause’ has been placed from the writ petition being W.P.(C) No. 5781 of 2016 which reads as under:

¶161

“The Distributor undertakes faithfully and promptly to carry out, observe and perform all directions and orders or rules made from time to time by the Corporation or its representatives for the proper carrying on of the distributorship of the Corporation.”

¶162

33. Another clause of the agreement which has been placed by learned counsel for both the parties and which has also been relied upon by the respondents is the clause dealing with resolution of dispute between the parties. The agreement clearly stipulates that all questions, disputes and differences arising under or in relation to the

¶163

17

¶164

2025:JHHC:14278

¶165

agreement shall be referred to sole arbitration of the Director (Marketing) of the corporation and the provision in connection with arbitration is quoted as under:

¶166

“All questions, disputes and differences arising under or in relation to the Agreement shall be referred to the sole arbitration of the Director (Marketing) of the Corporation. If such Director (Marketing) is unable or unwilling to act as the sole arbitrator, the matter shall be referred to the sole arbitration or some other officer of the Corporation by such Director (Marketing) in his place, who is willing to act as such sole arbitrator. It is known to the parties herein that the Arbitrator appointed here under is an employee of the Corporation and may be Shareholder of the Corporation. The arbitrator to whom the matter is originally referred, whether the Director (Marketing) or Officer, as the case may be, on his being transferred or vacation his office or being unable to act, for any reason the Director (Marketing) shall designate any other person to act as arbitrator in accordance with the terms of the Agreement and such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also the term of this Agreement that no person other than the Director (Marketing) or the person designated by the Director (Marketing) as aforesaid shall act as arbitrator. The award of the Arbitrator so appointed shall be final, conclusive and binding on all the parties to the Agreement and provisions of the Arbitration & Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the Rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause.

¶167

The parties hereby agree that the court in city of Ranchi alone shall have Jurisdiction to entertain any application or any award/s made by the Sole Arbitrator or other proceedings in respect of anything arising under this Agreement.”

¶168

34. So far as W.P.(C) No. 5781 of 2016 is concerned, the writ petition was filed before this Court on 30.09.2016 and the cause of action to file the writ petition was the order of fine imposed upon the petitioner by referring to the MDG of 2015 whereby a fine of Rs. 63,669/- has been imposed vide order dated 30.08.2016 issued by respondent no. 7. The order of fine was preceded by an inspection, a show-cause notice and also reply to show-cause notice. After discussing the response of the petitioner, the operative portion of the

¶169

18

¶170

2025:JHHC:14278

¶171

order of fine has been given in a tabular form and specific reference has been made to MDG of 2015 and the nature of irregularities has been mentioned. In the order of fine, all the irregularities have been found to be first major irregularity or first minor irregularity. The nature of irregularities for which the fine has been imposed is quoted as under:

¶172

S/N	Clause no.	Established Irregularities	Type
1	2.2.11	Unapproved/Unauthorized non home delivery of filled cylinder	1^st Major Irregularities
2	2.2.7	Overcharging or refill delivery	1^st Major Irregularities
3	2.3.3	Unauthorized out of turn delivery of refill excluding normal bunching of refills or for backlog clearance as approved by Field Officer/ Sales Officer of OMC	1^st Minor Irregularities
4	2.3.22	Non-Display of updated Standard Notices as communicated from time to time	1^st Minor Irregularities
5	2.3.9	Non-placement of timely and sufficient indents at Bottling Plants to cover demand for each type of filled cylinders.	1^st Minor Irregularities
6	2.3.18	Showroom staff/Mechanic/Delivery man found not in uniform.	1^st Minor Irregularities

¶173

35. Date of filing of each of the writ petition and the date of the order impugned in each of the cases is as under:

¶174

Case Number	Date of filing	Date of impugned order
W.P.(C)No. 5781 of 2016	30.09.2016	30.08.2016
W.P.(C)No. 3952 of 2011	16.07.2011	30.04.2011
W.P.(C)No. 6663 of 2011	19.11.2011	25.04.2011
W.P.(C)No. 1295 of 2014	04.03.2014	25.02.2014

¶175

19

¶176

2025:JHHC:14278

¶177

36. It is further not in dispute that in all these writ petitions in this batch, similar tabular form has been mentioned by referring to the concerned LPG Marketing Discipline Guideline. In other cases, it is MDG of the year 2001. The petitioners being aggrieved by the orders of fine have moved this Court challenging the legality and validity of MDG of 2015 for LPG or MDG of 2001 for LPG, as the case may be, alleging that the MDF are without jurisdiction and in contravention to the provisions of the LPG Order of 2000 and also section 3 of Essential Commodities Act, 1955. It has also been alleged that the said MDG are violative of Articles 14 and 21 of the Constitution of India.

¶178

37. The records of W.P.(C) No. 5781 of 2016 further reveal that the same petitioner has filed another writ petition being W.P.(C) No. 1295 of 2014 wherein a reference has been made to the judgment passed by Hon’ble Karnataka High Court in Writ Petition No. 37175 of 1999 (GM-RES) and analogous cases (Sri. G.V. Bhushan and Another and Union of India and others). In the aforesaid judgment, it was held that the Marketing Discipline Guidelines, 2001 lack legislative competence and therefore, it has been asserted in the said writ petition that the imposition of fine vide order dated 25.02.2014 which is subject matter of dispute in the said writ petition being W.P.(C) No. 1295 of 2014 is without jurisdiction. The order issuing notice in the said writ petition has been placed in the records of W.P.(C) No. 5781 of 2016 at Annexure-5 which is dated 22.08.2014. The said writ petition being W.P.(C) No. 1295 of 2014 is also a part of the present batch of cases.

¶179

38. So far as the judgment passed by Hon’ble Karnataka High Court in Writ Petition No. 37175 of 1999 (GM-RES) and analogous cases (Supra) is concerned, the respondents have referred to the Division Bench judgment in the compilation of judgements filed by them and the learned counsel for the respondents has submitted that against the order passed by the learned Single Judge in Writ Petition No. 37175 of 1999 (GM-RES) and analogous cases (Supra), appeal was filed and the judgment passed by Hon’ble Division Bench has been reported in 2015 SCC OnLine Karnataka 2947 (M/s. IBP

¶180

20

¶181

2025:JHHC:14278

¶182

Company Ltd. and others Vs. Sri. T.A. Jayaprabhu and others) . He has referred to paragraphs 11 to 14 of the said judgment passed by Hon’ble Division Bench wherein the appeals were allowed and the order of the learned Single Judge was modified holding that the MDG framed on 2005 was binding upon all the dealers where Clause 42 of the model agreement was incorporated in the dealership agreement and MDG was not applicable in respect of the dealers in whose case Clause 42 of the model agreement was not incorporated in the dealership agreement. Clause 42 of the agreement referred to in that judgment was also quoted in the judgment itself which was essentially dealing with the obligation cast upon the dealer that they at all times faithfully, promptly and diligently observe and perform and carry out at all times all the directions, instructions, guidelines and orders issued by the corporation on safe practices and marketing discipline and/or for the proper carrying on of the Dealership of the Corporation. The clause 42 in the said judgement was Pari Materia to the faithful performance clause involved in all the agreements in these batch of cases. Thus, the judgment which has been relied upon in the writ petition being W.P.C. No. 1295 of 2014 does not help the petitioners in light of the different view taken by the Hon’ble Division Bench of Karnataka High Court in the judgment reported in 2015 SCC OnLine Karnataka 2947 (Supra) wherein the applicability of MDG has been upheld.

¶183

39. A reference has also been made by the respondents to the Division Bench Judgment of High Court of Delhi in the matter of “Indian Oil Corporation Limited Vs. All India Petroleum Dealers Association” reported in 2022 SCC OnLine Del 77 (paragraph 37 to 44) to submit that even Hon’ble Delhi High Court has upheld the validity of MDGs vide Paragraph 44 of the judgment and the ‘faithful performance clause’ in the connected agreement was clause no. 43. In the said judgment, the Division Bench judgment of Hon’ble Karnataka High Court reported in 2015 SCC OnLine Karnataka 2947 (Supra) has been followed and a reference to that effect has been made in paragraph 43 of the said judgment. Paragraphs 43 and 44 of the

¶184

21

¶185

2025:JHHC:14278

¶186

judgment passed by Hon’ble Delhi High Court in the case of Indian Oil Corporation Limited (Supra) are quoted as under:

¶187

“ 43. Division Bench of Karnataka High Court in the case of IBP Company Ltd. v. Sri T.A. Jayaprabhu in Writ Appeal No. 582597/2010, vide judgment dated 22.01.2015, held as under:—

¶188

“ 11. The relationship between the oil corporations and the writ petitioners as dealers of their products, is not in dispute. It is also not in dispute that the dealers have executed a dealership agreement in favour of the corporations and terms and conditions of the agreement is binding upon both the parties. Copy of Clause 42 of model agreement produced before the Court reads as under:

¶189

“ 42. The Dealer shall at all times faithfully, promptly and diligently observe and perform and carry out at all times all directions, instructions, guidelines and orders given or as may be given from time to time by the Corporation or its representative(s) on safe practices and marketing discipline and/or for the proper carrying on of the Dealership of the Corporation. The dealer shall also scrupulously observe and comply with all lays, rules, regulations and requisitions of the Central/State Government and of all authorities appointed by them or either of them including particular the Chief Controller of Explosives. Government of India and/or any other local authority with regard to the safe practices.”

¶190

12. Learned counsel for the contesting respondents (dealers) is not disputing the incorporation of Clause 42 of model agreement in most of the dealership agreement. The writ petitioners have also produced certain dealership agreements, which shows Clause 42 of the model agreement is also included. Such dealers cannot contend before the Court that the oil corporations have no power to issue instructions, directions, guidelines from time to time on safe practices and marketing discipline for the purpose of carrying on of the dealership of the corporations. It is also mentioned in Clause 42 of the model agreement that the dealers were scrupulously observed and comply with all laws, rules, regulations and requisitions of the Central/State Government and all authorities appointed by them or either of them which includes the corporations, which granted licence. The learned Single Judge without considering the effect of Clause 42 of the said agreement has allowed the writ petitions in toto, which according to us is an error committed by the learned Single Judge.

¶191

13. In the dealership agreement, if Clause 42 of the model agreement is included, in such circumstance,

¶192

22

¶193

2025:JHHC:14278

¶194

dealers cannot contend that in-house mechanism of the oil corporations in issuing directions by way of marketing guidelines is not binding on them, cannot be accepted. This legal issue is not disputed by Sri. S. Subhash, learned counsel for the dealers. We could appreciate the contention of dealers only when if Clause 42 of model agreement is not incorporated in any of the agreement. In such circumstance, this court can only say that issuance of Marketing Discipline Guidelines, which is questioned in the writ petitions, does not bind such dealers only. We are also of the view that if Clause 42 of model agreement is not incorporated in the dealership agreement, it is always open for the corporations to include such clause whenever the dealership licence is required to be renewed.” (emphasis supplied)

¶195

44. In view of the aforesaid decisions and after perusing and examining Clause No. 43 of the Dealership Agreement, between OMCs and RO Dealers, this Court is of the clear opinion that OMCs have the power, jurisdiction and authority to issue MDGs, which would include making amendments thereto and are binding upon the RO Dealers, who have consciously and out of free will entered into the Dealership Agreements.”

¶196

40. Thus, by making reference to the aforesaid judgment passed by Hon’ble Delhi High Court in the case of Indian Oil Corporation Limited (Supra) and the Division Bench judgment passed by Hon’ble Karnataka High Court reported in 2015 SCC OnLine Karnataka 2947 (Supra) , this Court finds that both the High Courts have upheld the validity and legality of MDG where ‘Faithful Performance Clause’ is available in the agreement between the parties. In the present case, it is not in dispute that all the agreements have the ‘Faithful Performance Clause’ . This Court also finds that no distinguishable feature has been brought to the notice of this Court by the learned counsel appearing for the petitioners so far as the aforesaid judgment passed by Hon’ble Delhi High Court in the case of Indian Oil Corporation Limited (Supra) and also the judgment passed by Hon’ble Karnataka High Court reported in 2015 SCC OnLine Karnataka 2947 (Supra) are concerned. This Court further finds that during the course of arguments the learned counsel for the petitioners has also submitted that the MDG of 2015 or MDG of 2001, as the case may be, is also violative of Articles 77 and 166 of the Constitution of

¶197

23

¶198

2025:JHHC:14278

¶199

India. He has also submitted that these guidelines have not been published in the official gazette and therefore, they do not acquire the status of law and are unenforceable in the eyes of law. However, during the course of argument and even while dictating this judgment in open Court, the learned counsel for the petitioners has not ben able to show any such ground having been taken in these writ petitions. This Court further finds that so far as Article 166 of the Constitution of India is concerned, the same falls under Part VI of the Constitution of India dealing with “The States” and it falls under Part VI Chapter II dealing with “The Executive”. In the present case, the State Government has no role to play and therefore, there is no scope of any argument by referring to Article 166 of the Constitution of India.

¶200

41. So far as Article 77 of the Constitution of India is concerned, the same falls under the executive power of the Union and it falls under Part V dealing with the Union. Chapter I of Part V deals with “The Executive” and it deals with the conduct of business of the Government of India. It also provides that all the executive action of the Government of India shall be expressed to be taken in the name of the President.

¶201

42. This Court also finds that Article 299 of the Constitution of India deals with “Contracts” and it has been mentioned therein that all contracts made in exercise of the executive power of the Union or of a State, shall be expressed to be made by the President or the Governor of the State, as the case may be. The very perusal of the agreements involved in the present cases, which have been placed on record, reveals that the agreements are between a company registered under the Companies Act, 1956 and the respective petitioner. Though the Indian Oil Corporation is a government company, but the status of IOC is that of a company. The agreement has not been entered into by or on behalf of the Hon’ble President of India. The perusal of the agreements reveals that they are essentially within the contractual domain of the parties and the agreements cannot be said to be governed by the provisions of Article 77 of the Constitution of India

¶202

24

¶203

2025:JHHC:14278

¶204

and accordingly, Article 77 of the Constitution of India has no role to play in the matter.

¶205

43. The aforesaid findings have been recorded in view of the fact that the learned counsel for the petitioners has raised the point during the course of argument with regard to Article 77 of the Constitution of India without any foundational pleadings in the writ petitions and consequently, the respondents including Union of India had no occasion to respond to such an argument advanced on behalf of the petitioners through the counter affidavits filed in the case. However, it has been argued by the learned counsel for the respondents that Article 166 and 77 have no applicability to the facts and circumstances of this case.

¶206

44. This Court also finds that the agreements involved in these cases being contractual in nature, this Court would not have entertained a writ petition arising out of contractual dispute between the parties merely because the respondent is a government company. However, since the validity of MDG was under challenge, the writ petitions were entertained and the initial writ petition which was entertained being W.P.(C) No. 1295 of 2014 was referring to the judgment passed by Hon’ble Karnataka High Court wherein the MDG of 2001 was set-aside on account of lack of legislative competence and in the present cases, the fine has been imposed by referring to the MDG.

¶207

45. At this stage, it is also important to note that the respondents, though have not filed any petition under section 8 of Arbitration and Conciliation Act, 1996, but they have raised serious objection with regard to maintainability of the writ petitions so far as the legality and validity of the action taken under MDG is concerned. However, they have argued their case supporting the legality and validity of MDG.

¶208

46. The respondents have specifically taken the point regarding alternative dispute resolution in terms of arbitration and the said point was kept open for consideration vide order dated 18.01.2023 passed in W.P.(C) No. 5781 of 2016 and in all the counter-affidavits, the plea

¶209

25

¶210

2025:JHHC:14278

¶211

regarding availability of alternative remedy through arbitration has been taken.

¶212

47. The learned counsel for the petitioners has referred to the provisions of section 3 of Essential Commodities Act, 1955 and has also referred to the LPG Order, 2000 which is an Order framed under section 3 of Essential Commodities Act. He has further referred to Schedule VII of the LPG Order, 2000 to submit that under clause 11(4) - Schedule VII [Paragraph 6], there is a provision regarding MDG proposed to be adopted and therefore, the MDG ought to have been adopted in terms of the provisions of Essential Commodities Act, 1955 and the manner in which the MDG has been framed and applied in these cases, is dehors the provision of Essential Commodities Act, 1955.

¶213

48. This Court finds that so far as Schedule- VII of LPG Order, 2000 is concerned, the same is referable to Clause 11(4) of the LPG Order, 2000 which deals with “Assessment and Certificate Rating of parallel marketeers” . Paragraph 6 of Schedule-VII refers to “Marketing Discipline and Guidelines proposed to be adopted”. Essentially, the provisions of Clause 11 read with Schedule VII including paragraph 6 of Schedule- VII is referrable to parallel marketeers and has got no applicability so far as the petitioners are concerned, who certainly do not fall within the meaning of “parallel marketeers” as defined under LPG Order, 2000 Clasue 2(j) and 2(k)

¶214

which are quoted as under:

¶215

“2(j) “parallel marketeer” means any person, firm, company, institution, association of persons, co-operative society or organisation carrying on any or all of the business of importing, storing, bottling, marketing, distributing and/or selling liquefied petroleum gas under the parallel marketing system;

¶216

2(k) “parallel marketing system” means the system other than the public distribution system, under which a parallel marketeer carries on any or all of the business of importing, storing, bottling, distribution or selling in bulk or in retail, packed or filled in cylinder, liquefied petroleum gas under his own arrangement;”

¶217

26

¶218

2025:JHHC:14278

¶219

49. In view of the aforesaid facts and circumstances, this Court is of the view that the reference made to Schedule- VII framed under Clause- 11 (4) of LPG Order, 2000 read with paragraph 6 thereof has no relevance in the facts and circumstances of this case.

¶220

50. Further argument of the petitioners is that the entire gamut of affairs in connection with essential commodity of LPG is governed by section 3 of Essential Commodities Act read with LPG Order, 2000 and the violations mentioned therein have penal consequences in terms of imprisonment and also imposition of fine. Accordingly, their further case is that once there is provision for imposition of fine under Essential Commodities Act, 1955, there can be no imposition of fine under MDG and therefore, the petitioners cannot be subjected to double penalties; one under Essential Commodities Act, 1955 and another under MDG.

¶221

51. The aforesaid arguments advanced on behalf of the petitioners is not acceptable in view of the fact that the provision of Essential Commodities Act, 1955 are dealing with criminal liability arising out of the violations mentioned therein; penalty is prescribed under section 7 for violation of any order made under section 3 of Essential Commodities Act which provides for imprisonment which may extend up to 7 years and also fine and it also provides that any property in respect of which the order has been contravened shall be forfeited to the government. This Court finds that the prescription for imposition of imprisonment and fine arises out of a criminal liability created under the Essential Commodities Act, 1955. In the present cases, as held by Hon’ble Delhi High Court and also held by Division Bench of Hon’ble Karnataka High Court, the MDG is referable to ‘Faithful Performance Clause’ and the purpose of framing MDG of 2015 has itself been mentioned in the introduction to MDG of 2015 which has been placed on record by the petitioners in W.P.(C) No. 5781 of 2016 which reads as follows:

¶222

“INTRODUCTION-

¶223

Liquefied Petroleum Gas (LPG) marketing commenced in India during the year 1955 at (Bombay) Mumbai by then M/s Burma

¶224

27

¶225

2025:JHHC:14278

¶226

Shell. Since then LPG market in India has evolved over the last five decades or more from a miniscule level to the present position of around 18.8 crore customers on Industry basis. LPG marketing activities are expected to grow further because of the focus on expansion in rural areas.

¶227

There is a network of over 16,500 LPG distributors in the country to meet the requirement of LPG consumers. LPG marketing is unique. LPG consumers are tied to LPG distributor with very little freedom to choose their distributors. Such a vast and complex marketing activity requires proper discipline among the LPG distributors from whom the entire LPG customers are serviced.

¶228

LPG distributorships are appointed by Public Sector Oil Marketing Companies (OMCs) and are governed by the terms & conditions of agreement entered into between the OMCs & the Distributors. The various clauses of the distributorship agreement spell out the several responsibilities that have to be performed by the distributorships as well as by the OMCs. Besides the responsibilities spelled out in the distributorship agreement, there are operating policies, procedures and practices that are required to be followed by the distributors to serve the LPG consumers. Further there are prohibited activities that have to be avoided by the distributors. In order to ensure that distributors follow operating policies, procedures and practices, various actions to be taken against erring distributors are made which are called Marketing Discipline Guidelines (MDG). MDG form part & parcel of the instructions as issued from time to time under relevant clause on 'Faithful Performance’ of the Distributorship/Dealership Agreement. These guidelines do not preclude any action under the Distributorship Agreement.

¶229

The MDG for LPG distributorships has been in existence for over 30 years. The 1^st MDG for LPG distributorships was introduced in 1982. It was subsequently revised in 1988, 1994, 2001 and thereafter in 2014.

¶230

These guidelines need to be constantly updated to meet challenges of IT, the growing customer expectations, ensuring quality of product and services, enforcing discipline amongst the distributorship network and prevent malpractices in the sale of petroleum products.”

¶231

52. Upon perusal of very purpose of MDG which has been provided by way of introduction to MDG, this Court finds that the

¶232

28

¶233

2025:JHHC:14278

¶234

same have been framed to meet the requirements of the LPG consumers as the LPG marketing is unique; LPG consumers are tied up to LPG distributors with very little freedom to choose their distributors and the MDG itself refers to the ‘Faithful Performance Clause’ . It has been mentioned in the introduction of MDG itself that LPG distributorships are appointed by Public Sector Oil Marketing Companies (OMCs) and are governed by the terms & conditions of agreement entered into between the OMCs & the Distributors; the various clauses of the distributorship agreement spell out the several responsibilities that have to be performed by the distributorships as well as by the OMCs; Besides the responsibilities spelled out in the distributorship agreement, there are operating policies, procedures and practices that are required to be followed by the distributors to serve the LPG consumers; Further there are prohibited activities that have to be avoided by the distributors. In order to ensure that distributors follow operating policies, procedures and practices, various actions to be taken against erring distributors are made which are called Marketing Discipline Guidelines (MDG). MDG form part & parcel of the instructions as issued from time to time under relevant clause on 'Faithful Performance’ of the Distributorship/Dealership Agreement and these guidelines do not preclude any action under the Distributorship Agreement. In nut-shell, MDG has been framed to meet the challenges of growing customers’ expectation, ensuing quality of product and services, enforcing discipline amongst the distributors’ network and prevent malpractices in the sale of petroleum products.

¶235

53. This Court also finds from the perusal of MDG that various categories of minor and major irregularities including critical irregularities have been enumerated and the consequences have also been prescribed as regards 1^st instance, 2^nd instance, 3^rd instance and so on. These details of the nature of irregularities and the consequence flowing therefrom, be it 1^st , 2^nd , 3^rd and subsequent irregularities, has not been detailed and described in the main agreements and this MDG

¶236

29

¶237

2025:JHHC:14278

¶238

is essentially by way of guidelines to both the distributors and the oil companies.

¶239

54. Chapter - 3 of MDG deals with action to be taken under the Marketing Discipline Guidelines and clause 3 thereof provides that action has been prescribed in proportion to the size of the Distributorship which is as per refill sale of the distributor and also liable for recovery against quantum of irregularity detected and compensation to customer (if any). Under clause 3, different actions have been prescribed for different categories of irregularities/quantum of irregularities /compensation to customers :

¶240

“3.1 Critical Irregularities:

¶241

i. I^st instance…

¶242

ii.2^nd instance…

¶243

iii. 3^rd instance…

¶244

Quantum of irregularity-…

¶245

3.2 Major Irregularities:

¶246

i. I^st instance…

¶247

ii.2^nd instance…

¶248

iii. 3^rd instance…

¶249

iv. 4^th instance…

¶250

Compensation to the Customer- refund of excess amount charged from the customer including applicable rebate on nonhome delivery of refill/free replacement of underweight cylinder if supplied to the customer.

¶251

Quantum of irregularity-…

¶252

3.3 Minor Irregularities:

¶253

i. I^st instance…

¶254

ii.2^nd instance…

¶255

iii. 3^rd instance…

¶256

iv. 4^th instance or more…

¶257

Quantum of irregularity-…

¶258

3.4 Treatment in case of Multiple Irregularities: …

30

2025:JHHC:14278

3.5….

3.6. Process of imposition of action: …

3.7…

3.8…

3.9…

3.10. Authority for imposition of action to be taken: …

¶267

3.11. Appellate proceedings: …”

¶268

55. This Court is of the considered view that the MDG is essentially referable to the ‘Faithful Performance Clause’ as per its introduction itself and the contents of the MDG also serve the purpose to ensure that the parties act in terms of the ‘Faithful Performance Clause’ and the sole purpose is to meet the challenges of growing customers’ expectation, ensuing quality of product and services, enforcing discipline amongst the distributors’ network and prevent malpractices in the sale of petroleum products which is fully regulated and customers do not have much choices in the matter of getting supply of LPG.

¶269

56. The learned counsel for the petitioners has also referred to the MDG of 2001 in W.P.(C) No. 3952 of 2011. By referring to the said writ petition, a reference has been made to letter dated 10.05.2001 (Annexure-7) which has been issued by Indian Oil Corporation by stating that the revised Marketing Discipline Guidelines, 2001 for LPG was being circulated as approved by Government of India. This Court also finds that under the MDG of 2001, a chart has been prescribed giving the details of the irregularities and the proposed action arising therefrom to be imposed in terms of the MDG. Under the MDG of 2001, no provision of appeal has been proposed by referring to the existing provision under the agreement which is said to be sufficient. This Court is of the considered view that merely because the MDG of 2001 refers to the approval of the Government of India, the same does not make any difference with regard to the nature of MDG which is essentially referable to the ‘Faithful Performance Clause’ of the agreement. So far as the right of appeal is concerned, it essentially depends upon the agreement between the parties and the

¶270

31

¶271

2025:JHHC:14278

¶272

right and remedies are governed by the agreement and in the present cases, there is a provision of arbitration.

¶273

57. So far as the judgment relied upon by the petitioners reported in (1975) 2 SCC 22 [Khemka & Co. (Agencies) (P) Ltd. v. State of Maharashtra] is concerned, the issue involved in the said case was as to whether the assessees could be made liable for penalty under the provisions of State Sales Tax Act. In the said case, the penalty was imposed under the State Act for default in payment of taxes. The context of imposition of taxation and consequent imposition of penalty under taxation was under consideration in the said case and it was held that the imposition of penalty gives rise to a substantive liability which could be viewed either as an additional tax or as a fine for the infringement of law and that the imposition of pecuniary liability which takes the form of a penalty or fine for breach of a legal obligation, cannot be relegated to the region of mere procedure and machinery for realization of tax. It has also been held that, neither a pecuniary liability can be imposed nor an offence created by mere implication. It was also held that such liabilities must be created by clear, unambiguous and express enactment and reliance was made also to Article 265 of the Constitution of India which clearly provides that no tax shall be levied or collected except by authority of law.

¶274

58. This Court is of the considered view that the said judgment has no applicability to the facts and circumstances of this case in view of the fact that this Court finds that the imposition of fine through the MDG is essentially a civil liability created under the MDG and the guidelines are themselves referable to ‘Faithful Performance Clause’ of the agreement. The liability is essentially a contractual liability and not a penal provision arising out of criminal liability requiring mens rea under criminal justice system.

¶275

59. In the judgment passed by Hon’ble Supreme Court reported in (2019) 19 SCC 662 (Supra) , the termination of dealership by referring to MDG was set-aside by the High Court and IOC was in appeal before the Hon'ble Supreme Court. In the said case, an argument was advanced that the IOC was required to follow the procedure under the

¶276

32

¶277

2025:JHHC:14278

¶278

Control Order of 2005 read with Section 100 of Code of Criminal Procedure and a reference was also made to section 3 of the Essential Commodities Act, 1955. Such plea was categorically rejected by the Hon'ble Supreme Court and the Hon'ble Supreme Court observed that the dealer in the case was not sought to be prosecuted for violation of the guidelines and therefore, the procedure for drawing the sample which was necessary pre-condition under the Control Order for prosecuting an offender did not arise.

¶279

Paragraphs 14 to 16, 18 and 19 of the aforesaid judgment reported in (2019) 19 SCC 662 (Supra) are quoted as under:

¶280

“14. The first issue required to be examined is whether the appellants were required to follow the procedure under the Control Order read with Section 100 of the Code. 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 6-A 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 precondition under the Control Order for prosecuting an offender does not arise for consideration.

¶281

15. The dealer has entered into an agreement on 20-12-1995. It is not disputed that the dealer is bound by the Guidelines issued by the Public Sector Oil Marketing Companies. Clause 2.4.4 of the Guidelines provides for procedure for drawing of samples. Note (2) provides that the samples drawn should reach the laboratory for testing “preferably within ten days of the collection of the samples”. Similarly, sub-clause (A) of Clause

¶282

33

¶283

2025:JHHC:14278

¶284

2.5 of the Guidelines provides that all samples should be suitably coded before sending them to the laboratory for testing “preferably” within ten days of drawing the samples. Subclause (I) of Clause 2.5 of the Guidelines is that the purpose of mentioning time-frame for various activities such as sending samples to the laboratory preferably within ten days is to streamline the system and is in no way related to quality/result of the product. In view of the language of the Guidelines, the findings recorded by the High Court that the timeline is to be strictly adhered to cannot be sustained.

¶285

16. The Guidelines as mentioned in sub-clause (I) of Clause 2.5 of the Guidelines is to streamline the functioning i.e. the oil companies should not arbitrarily or without any justification send the sample for testing at their sweet will. The sample in this case was drawn on 6-5-2013 and was sent for testing on 22-5-2013 i.e. there was a delay of 5 days. Since the Guidelines use the timeline as a preferred timeline, it cannot be said that the timeline 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 timeline. 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 17-7-2013 and 2-1-2014. 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.

¶286

17. …

¶287

18. There was variation in stock beyond permissible limits. In case of positive stock variation beyond permissible limits and on account of failure of sample, action in line with that of adulteration is to be initiated. The adulteration in these circumstances is a critical irregularity falling in Clause 8.2 of the Guidelines and the action required to be taken is termination of the dealership. 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

¶288

34

¶289

2025:JHHC:14278

¶290

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.

¶291

19. The judgments referred to by the learned counsel for the dealer are not applicable to the facts of the present case as in both the cases, the action taken by the oil company was found to be in violation of the principle of natural justice as no notice was served upon the dealer but, in the present case, after failure of the first sample in the test report dated 29-5-2013, the dealer was informed, who opted for testing of umpire sample in his possession. The said sample along with the sample in possession of the Field Survey Officer was sent for testing and in the report dated 19-8-2013, the sample was found to have the same deviations as in the first sample tested on 29-5-2013. The dealer was informed of the result of the second test and was also given a show-cause notice as to why the dealership should not be terminated. Therefore, the action taken against the dealer is in terms of the Guidelines, as a consequence of contractual obligations by the dealer.”

¶292

60. Thus, the Hon'ble Supreme Court made a clear distinction in the circumstances where the IOC could choose to prosecute a person under the Control Order issued under the Essential Commodities Act, 1955 and otherwise choose to proceed for violation of the MDG. Thus, essentially the criminal liability under Essential Commodities Act, 1955 and contractual liability under MDG operate in different fields and have different contours of applicability and also have different purpose to meet. Criminal liability under Essential Commodities Act, 1955 is to prosecute the offender and liability for violation of MDG is to meet the challenges of growing customers’ expectation, ensuing quality of product and services, enforcing discipline amongst the distributors’ network and prevent malpractices in the sale of petroleum products as fully discussed above. It also provides for compensation to consumers (if any).

¶293

61. This Court finds that there could be overlapping instances of a criminal liability arising out of Essential Commodities Act, 1955 and a civil liability for imposition of fine under the MDG referrable to ‘Faithful Performance Clause’ , but they certainly operate in different fields. This Court is of the view that merely because there is a provision for prosecution and imposition of fine by way of criminal

¶294

35

¶295

2025:JHHC:14278

¶296

liability under Essential Commodities Act, 1955, it cannot be said that fine cannot be imposed upon the dealer by referring to MDG and in particular ‘Faithful Performance Clause’ of the agreement.

¶297

62. This Court finds that so far as the challenge to MDGs is concerned, the same does not call for any interference and the MDGs impugned in the present batch of writ petitions are upheld and held to be an integral part of the contract between the parties referrable to ‘Faithful Performance Clause’ of the agreement. The action taken against the dealers in terms of the MDG under an agreement having ‘Faithful Performance Clause’ , is a consequence of violation of contractual obligations by the petitioners under the agreement between the parties and liability to pay fine and /or question of any action under MDG arises only when there is a violation of contractual obligations of faithful performance. The imposition of fine is primarily based on failure to perform faithfully in terms of the agreements. The liability does not arise out of any criminal intent and no mens rea as such is involved in calling for imposition of fine so as to deprive or prevent the respondents from imposition of fine in the matter of violation of contractual obligations. The imposition of fine has nothing to do with the criminal liability involved in connection with violation of section 3 of the Essential Commodities Act and the orders issued thereunder which calls for prosecution / imposition of fine if a person is found guilty in a court of law.

¶298

63. So far as the imposition of fine under the MDG with respect to violation under MDG of the year 2001 or MDG of the year 2015 is concerned, this Court is not inclined to interfere with the same on account of availability of alternative remedy through arbitration and also in view of involvement of disputed questions of facts with regards to the merits of each case which cannot be adjudicated under writ jurisdiction. However, it will be open to the petitioners to avail their remedy through arbitration in view of the specific clause in the agreement for resolution of dispute through arbitration as quoted above.

¶299

36

¶300

2025:JHHC:14278

¶301

64. Thus, the legality and validity of the MDG of the year 2001 and MDG of the year 2015 are upheld. So far as merit of the fine is concerned, it will be open to the petitioners to avail their remedy through arbitration in accordance with law and as may be permissible under law.

¶302

65. These writ petitions are disposed of with aforesaid observations.

¶303

66. Pending interlocutory application, if any, is closed.

¶304

(Anubha Rawat Choudhary, J.)

¶305

Pankaj

¶306

37

Ms Swastik Gas Distributors through Its Proprietor Bishnu Deo Singh v. Union of India through the Secretary Marketing Ministry of Petroleum and Natural Gas and Ors.

Case brief

What is this about?

What did the court decide?

Ms Swastik Gas Distributors through Its Proprietor Bishnu Deo Singh v. Union of India through the Secretary Marketing Ministry of Petroleum and Natural Gas and Ors.

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

Statutes considered

Procedural history

Parties & counsel

Coram

Case details

Similar cases

Peelu Alias Zubaida Khatoon Vs MD Illiyas Ansari

Akhilesh Yadav Vs Union Of India Through The Ministry Of Home Affairs And Ors.

Mohan Ahir Vs Muni Devi

Dilip Kumar Vs the State of Jharkhand

Ms Swastik Gas Distributors Through Its Proprietor Bishnu Deo Singh Vs Union Of India Through The Secretary Marketing Ministry Of Petroleum And Natural Gas And Ors.

Sarfaraj Ahmad Vs MD Nizamuddin Ansari