Cancellation of Dealership Agreement of petrol bunk – notice should be served on the dealer sufficiently early – Petroleum Act

CANCELLATION OF DEALERSHIP AGREEMENT OF PETROL BUNK/ Notice should be served on the dealer sufficiently early/ SECTION 20 OF PETROLEUM ACT

EXCERPTS FROM THE JUDGEMENT: Bharat Petroleum Corporation Ltd. Vs. M_s Jagannath and Co. and Others’

In terms of Section 20 of the Petroleum Act, 1934 the contesting respondents had a right to have fresh samples drawn and get the same re-tested within seven days of intimation of the test results.
the absence of container numbers in the report raises a doubt as to whether the laboratory has tested the same samples as had been sealed and counter signed by the dealer or some other contaminated samples.[para 8]

10) It is rightly pointed out that the samples were not tested in any government laboratory and these tests were conducted in the company’s laboratory itself. Therefore, in order to satisfy the conscience of the dealer about the authenticity of the tests so conducted, it has been contemplated in the Guidelines that on the request of the dealer, the test(s) could be conducted in his presence.

Cases refered and the point of law involved:
1. Hindustan Petroleum Corporation Ltd. and Ors. vs. M/s Super Highway Services and Anr., M_s Hindustan Petroleum Corpn. Ltd. & Others Vs. M_s. Super Highway Services & Another’,
this Court held that the Guidelines being followed by the Corporation require that the dealer should be given prior notice regarding the test so that he or his representative also can be present when the test is conducted. The said requirement is in accordance with the principles of natural justice and the need for fairness in the matter of terminating the dealership agreement and it cannot be made an empty formality. Notice should be served on the dealer sufficiently early so as to give him adequate time and opportunity to arrange for his presence during the test and there should be admissible evidence for such service of notice on the dealer. Strict adherence to the above requirement is essential, in view of the possibility of manipulation in the conduct of the test, if it is conducted behind the back of the dealer.

It was further held that the cancellation of dealership agreement of a party is a serious business and cannot be taken lightly. As pointed out in the said decision, in order to justify the action taken to terminate such an agreement, the authority concerned has to act fairly and in complete adherence to the rules/guidelines framed for the said purpose.

Conclusion:  The High Court, after considering all the above specific claims of the contesting respondents, rightly interfered with the order of termination of the dealership agreement/licence dated 18.01.2006 and quashed the same.

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