Indian Oil Corporation Limited And Others vs. All India Petroleum Dealers Association Registered And Others

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$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI

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% Reserved on: 24 November, 2021
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Pronounced on: 10 January, 2022

+ LPA 24/2021& CM APPL. 1843/2021 (stay)
INDIAN OIL CORPORATION LIMITED
AND OTHERS ..... Appellants
Through: Mr. Tushar Mehta, Solicitor General
with Mr. Parijat Sinha, Mr. Rudra Dutta,
Mrs. Sanyukta Gupta and Mr. Akhil Tewatia,
Advocates

Versus
ALL INDIA PETROLEUM DEALERS ASSOCIATION
REGISTERED AND OTHERS ..... Respondents
Through: Mr. S. B. Upadhyay, Senior Advocate
with Mr. Rajesh Mahale, Advocate for
Respondents No.1 and 2.
Mr.Ripudaman Bhardwaj, Central Government
Standing Counsel with Mr.Kushagra Kumar,
Advocate for Respondent No.3.
Mr. Siddharth Luthra, Senior Advocate with
Mr. G. Sivabala Murgan, Advocate for Intervener.
Dr.Pabitra Pal Chowdhury and Mr. Kumar
Utkarsh, Advocates for Intervener, i.e. North
Bengal Petroleum Dealers Association.

+ LPA 30/2021& CM APPL. 2389/2021 ( stay )
INDIAN OIL CORPORATION
LIMITED AND OTHERS ..... Appellants
Through: Mr. Tushar Mehta, Solicitor General
with Mr. Parijat Sinha, Mr. Rudra Dutta,
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Mrs. Sanyukta Gupta and Mr. Akhil Tewatia,
Advocates

Versus

ALL HARYANA PETROLEUM DEALERS ASSOCIATION
REGISTERED AND OTHERS ..... Respondents
Through: Mr. Ripudaman Bhardwaj, Central
Government Standing Counsel with Mr.Kushagra
Kumar, Advocates for Respondent No.3.

+ LPA 31/2021& CM APPL. 2392/2021 & 12432/2021
INDIAN OIL CORPORATION
LIMITED AND OTHERS ..... Appellants
Through: Mr. Tushar Mehta, Solicitor General
with Mr. Parijat Sinha, Mr. Rudra Dutta,
Mrs. Sanyukta Gupta and Mr. Akhil Tewatia,
Advocates

Versus

BIHAR PETROLEUM DEALERS ASSOCIATION
AND ANOTHER ..... Respondents
Through: Mr. Sanjoy Ghose, Senior Advocate
with Mr. Anuj Aggarwal and Mr.Kumar Utkarsh,
Advocates for Respondent No.1.
Mr. Ripudaman Bhardwaj, Central Government
Standing Counsel with Mr.Kushagra Kumar,
Advocates for Respondent No.3.
Mr. Narender Hooda, Senior Advocate with
Mr. Shanth Kumar V. Mahale, Advocate for
Interveners.


CORAM:
HON’BLE THE CHIEF JUSTICE
HON’BLE MS. JUSTICE JYOTI SINGH

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JUDGMENT
: Per D. N. PATEL, Chief Justice
I. SUMMARIUM
1. Being aggrieved and feeling dissatisfied by the common judgment
and order of the learned Single Judge passed in W.P.(C) No.10334/2017,
W.P.(C) No.10746/2017 and W.P.(C) No.11246/2017 dated 18.03.2020,
Appellants have preferred the present Letters Patent Appeals. Appellants ,
herein, were Respondents No.2 to 4 respectively, in the writ Petitions. For
the sake of convenience, parties are being referred to hereinafter, by their
litigating status before this Court. The prime ground for challenge in the
present Appeals, inter alia, is that by the impugned judgement, the affect of
Amendment, notified in the year 2017, amending the Marketing Discipline
Guidelines, 2012 (hereinafter referred to as “ MDGs ” for the sake of
brevity), has been invalidated and nullified.
II. FACTUAL MATRIX


2. Appellants herein, being Oil Marketing Companies (hereinafter
referred to as “ OMCs ”), in the year 1981-82, for the first time, formulated
and issued the MDG s, for maintaining market discipline and uniformity in
action for operating the network of Petrol and Diesel Retail Outlets
(hereinafter referred to as “ ROs ”) under the OMCs.
3. The MDGs were reviewed and amended from time to time, in view of
changing circumstances as well as to set high customer service benchmarks
for the OMCs as also the Dealers’ network.
4. The MDGs were reviewed and amended again in the year 2012 and
MDG-2012 were issued and made effective from 08.01.2013.
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5. The MDG-2012 were challenged in various High Courts of India.
Allahabad High Court, Delhi High Court, Karnataka High Court, etc. have
passed orders, which shall be adverted to in the later part of the judgment
and have upheld the power, jurisdiction and authority of OMCs to issue the
MDGs.
6. As per the stand of the Appellants, in view of detection of large scale
malpractices in some States at the time of supply and dispensation of
petroleum products to the customers, by manipulating software/hardware, in
the Dispensing Units and with a view to motivate the employees of ROs to
provide better service standards and deliver the assurances to customers in
terms of quality, quantity, cleanliness and behaviour, MDG-12 were
amended in the year 2017. There are communications between the OMCs
and their respective Dealers, in the month of July, 2017, August, 2017 and
September, 2017, wherein highlights of the revisions, sought to be brought
about by the amendment, were set out, particularly with regard to revision in
Dealers’ Margin, to enable the Dealers to make payments of wages to the
manpower, employed in the ROs, at rates higher than the minimum wages,
applicable under Central Minimum Wages or Statutory Minimum Wages, as
notified by the States/UTs, effective from 01.08.2017, as well as benefits
such as PF, Bonus, Gratuity etc. It was also clarified that slab-based margins
had been introduced in respect of ‘Business Return’ and ‘Manpower’ and
the non slab-based margins had two components viz. ‘Fixed Margin’ and
‘Variable Margin’.
7. Communication dated 19.09.2017 issued by the OMCs reiterated the
aforesaid directions to the Dealers. Additionally, it was directed that
payment of wages with effect from August, 2017 were required to be made
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through e-payment and that the Wage Register and e-payment details were
to be kept ready by the RO Dealers, for verification by officials of the
OMCs. Employees of the ROs were henceforth, required to be covered, if
not already covered, under Pradhan Mantri Suraksha Bima Yojana
( PMSBY ) and Pradhan Mantri Jeevan Jyoti Bima Yojana ( PMJJBY ).
8. Accordingly, the OMCs amended MDG-2012 on 03.10.2017,
whereby amended/supplemented Clause Nos. 1.5(x), 5.1.2, 5.1.14(b), 5.1.16,
5.1.18, 8.3(vii, viii, ix) and 8.5.7 were incorporated. The said amendments
were conveyed by OMCs to their respective Dealers, vide communications
dated 03.10.2017, 06.10.2017 and 11.10.2017. OMCs also issued the
Standard Operating Procedure for “Measure Check of Nozzles at ROs”.
9. Writ petition being W.P.(C) No.10334/2017 was preferred before this
Court, challenging inter alia the amendments to MDG-2012. While the writ
petition was pending, two more writ petitions, being W.P.(C) No.
10746/2017 and W.P.(C) No. 11246/2017 were filed and six Intervention
applications were filed in W.P.(C) 10334/2017, pursuant to order dated
27.11.2017, passed by the Hon’ble Supreme Court in Transfer Petition
(Civil) Nos. 2206/2017, 2227/2017, 2230-2234/2017 and 2273-2276/2017,
titled Bharat Petroleum Corporation Ltd. and Ors. vs. Andhra Pradesh
Federation of Petroleum Dealers and Anr .
10. These writ petitions have been decided by the learned Single Judge
vide the impugned judgment dated 18.03.2020, whereby certain clauses
challenged in the petitions have been struck down while the others have
been read down, which according to the Appellants, has the effect of
nullifying/negating/diluting the amendments to MDG-2012, that were issued
in public interest i.e for the benefit of the consumers as well as to protect the
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rights of the employees employed at the ROs and save them from
exploitation. It is this judgment, which is challenged before this Court, by
the Appellants.
III. ARGUMENTS CANVASSED BY LEARNED SOLICITOR
GENERAL APPEARING ON BEHALF OF THE APPELLANTS IN
ALL THE THREE LETTERS PATENT APPEALS

11. We have heard Mr. Tushar Mehta, learned Solicitor General
appearing on behalf of the Appellants. Mr. Mehta submitted that the
Appellants/OMCs have entered into Dealership Agreements with the
Respondents No. 1 and 2 (original Petitioners)/RO Dealers and the
relationship between the OMCs and their respective Dealers is purely
contractual in nature and governed by the terms of Dealership/License
Agreements, executed between the parties. The relationship being in the
nature of principal-agent relationship, is governed by provisions of Section
182 read with Section 211 of the Indian Contract Act, 1872 and thus the
Appellants/OMCs are empowered to issue the MDG, including amendment
to MDG-12, levying penalties and/or issuing such directions to the
respective Dealers, as may be necessary to curb or eliminate malpractices in
the interest of the customers and to ensure high standards in services
rendered as well as to ensure that benefits of beneficial Legislations, such as
the Minimum Wages Act, etc. are made available to the employees,
employed by the Dealers.

12. Since the OMCs are empowered by virtue of the contractual
provisions to issue MDGs, the issue being purely in a contractual domain
cannot be agitated by Respondents No. 1 and 2, by invoking the writ
jurisdiction. It is a settled law that in matters relating to contracts between
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the parties, writ jurisdiction shall not lie and therefore the writ petitions
should have been dismissed at the outset, being not maintainable. This
aspect of the matter has not been correctly appreciated by the learned Single
Judge and the impugned judgment deserves to be quashed and set aside on
this ground alone.
13. OMCs/Appellants, in accordance with the changing market scenario,
have been reviewing, amending and issuing MDGs for the last four decades
in order to maintain discipline and uniformity in action, for operations of the
ROs, throughout the Country. MDG-1995 and MDG-1998 were challenged
before this Court and the writ petitions were dismissed, by a detailed
judgment and order dated 18.08.1999, reported in Delhi Petrol Dealer
Association and Anr. v. Union of India & Ors ., (1999) 81 DLT 400.
Further, amendments in MDG-2012 were also challenged before various
High Courts, and different High Courts have upheld the power and
jurisdiction of the OMCs to issue the MDGs. In this regard, reliance was
placed on the judgment of the High Court of Karnataka in M/S IBP
Company Ltd. and Anr. v. Sri T.A. Jayaprabhu and Ors ., in Writ Appeal
No. 582-597/2010, decided on 22.01.2015.
14. Reliance was also placed upon Clause 43 of the Dealership
Agreement, entered into between the parties to the lis, i.e., OMCs and the
Dealers. It was submitted that by virtue of Clause 43, the Dealers undertake,
faithfully and promptly, to carry out, observe and perform all directions
given or rules formulated, from time to time, by the OMCs, for proper
carrying on of the dealership of the OMCs. It was urged that validity of
Clause 42 of the model agreement, which has been upheld by various High
Courts replicates the contents of Clause 43 of the Dealership Agreement in
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question. Thus, the OMCs clearly have the power not only to formulate and
issue MDGs, but also to amend them and in fact the writ petitioners never
questioned the power and authority of the OMCs to issue these Guidelines.
15. Under Clause 1.5 of the amended MDG, Dealers are bound to make
payment of minimum wages as notified by OMCs, from time to time or
statutory minimum wages as notified by the respective State
Governments/UTs, whichever are higher, to the manpower employed at
ROs. The argument was that the amendment is not contrary to the Minimum
Wages Act, 1948. The aim of the said Act is to ensure that a certain
minimum wage is paid to the workers covered by the Act and there is no bar
under the Act in directing the employer to pay to an employee, a wage,
higher than the minimum wages notified, if one of the contracting party has
the power to so direct the other contracting party, under the terms of the
contract. Certainly, if the direction is to pay wages lesser than the
minimum wages, notified under the Act, it shall amount to violation of
the provisions of the Minimum Wages Act, 1948. The objective and
intent of the Appellants, in issuing such directions, is to benefit the workers
at the grass-root level and Clause 43 obliges the RO Dealers, to comply with
the directions issued by the OMCs.
16. Quite apart that the Dealers are bound by the obligations under the
Dealership Agreement, even otherwise they can raise no objection since the
Appellants while issuing the directions to revise the minimum wages, have
factored the increase in the wages, into the ‘Dealers margins ’, thereby
ensuring that the employees benefit without any pressure on the Dealers.
The Dealers’ margins include element of salaries and wages, payable to the
employees of the ROs and were calculated on the basis of weighted average
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of minimum wages notified by States/UTs, based on latest available State
Government Notifications. Dealers have accepted the revision in Dealers’
margin, without any demur, but are objecting to enhancement of wages,
payable to the employees, which cannot be accepted. Mr. Mehta, learned
Solicitor General had taken this Court to communication dated 19.09.2017,
annexed as ‘Annexure R-2/5’ with the counter affidavit, filed in the writ
petition and submitted that there is a clear revision in the Dealers’ Margin
w.e.f. 01.08.2017. Attention of the Court was also drawn to the fine niceties
of the calculations, placed on record, indicating the difference in the earlier
margins and the present ones, to bring home the point that no burden, by
increase in the minimum wages, is actually passed on the Dealers.
17. It was further submitted that directing payment of ‘ Higher than
Minimum Wages ’ is an open field and thus under a contract an obligation
can always be cast by one party on the other to pay wages higher than the
minimum wages, prescribed under the Notifications by the States/UTs. This
aspect of the matter has not been correctly appreciated by the learned Single
Judge, while passing the impugned judgment and the same thus deserves to
be quashed and set aside.
18. Insofar as short delivery of the products is concerned, the amendment
in 2017 to MDG-2012 provides that even if short/excess delivery of the
Petrol or Diesel is found within permissible limits and the Weights and
Measures Department seals are intact, sales are to be suspended and
recalibration and re-stamping is to be done, before recommencement of
sales, to ensure minimisation of loss to customers as well as the ROs. It was
contended that the aim of Legal Metrology Act, 2009 is to ensure that a
standard is maintained by the Dealers, by providing the maximum
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permissible error in sale and supply of petroleum products and therefore
there is no bar in prescribing higher and stringent standards of sale and
supply, by reducing the margin of error. It was submitted that there is no
penalty, if the short delivery is within permissible limits stipulated by the
Weights and Measures Department, however, only if the variation is
beyond +/- 25ml per 5 litres measure check, it entails imposition of penalty.
By virtue of the amendment, OMCs regulate and ensure that as and when
there is short/excess delivery of the Petroleum products, immediate steps
shall be taken by the ROs to remedy the situation and till then the sales
ought to be suspended. Learned Single Judge has, however, erred in not
appreciating that these measures are in public interest and has further erred
in suggesting that a time-line of 12 hours be fixed, within which
recalibration and re-stamping are to be carried out. This is not only
unreasonable but also beyond the domain and jurisdiction of the Court,
sitting in a judicial review and exercising powers under Article 226 of the
Constitution of India.
19. As far as amendment with respect to payment of salaries and wages to
be made through e-payment mode is concerned, the learned Single Judge
has erred in holding that the Dealers cannot be compelled to do so. It was
submitted by learned Solicitor General that the said amendment is for the
welfare of the employees of the Dealers. It was argued that it is well known
that payment of salaries in cash leads to exploitation of employees and
payments through the electronic mode would ensure that complete salaries
are paid to the workers and would also rule out the commissions that are
paid to the middlemen. Currently, most of the banking transactions are
online and in fact the Dealers also make payments online for purchase of
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products from the Appellants. This amendment is also in line with the
policies of the Central Government to digitize the economy and will go a
long way in making the system of payment to the workers, transparent. To
buttress the argument, it was urged that even the employees working under
the State and Central Government are paid their salaries, etc. through the
electronic mode and no fault can be found with the amendment. Whenever
and wherever new systems are introduced, there are bound to be teething
problems but that cannot be a reason to interfere in the welfare measures
taken in the interest of the larger public good.
20. Defending the amendments with respect to payment of statutory dues,
such as Provident Fund, ESIC benefit, Bonus, Annual leave and Gratuity
including coverage under the Pradhan Mantri Suraksha Bima Yojana
(PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
Schemes, it was argued that these are welfare measures and need to be
enforced. It was pointed out that under the PMSBY, which is an Insurance
scheme, the premium is in the affordable range, being Rs.12/- per employee
per annum and similarly, under the PMJJBY, the premium is Rs.330/- per
employee per annum. Merely by paying the negligible amount towards
subscription/premium, the employees will be entitled to benefit of the
Schemes, which will be in their interest and welfare. The Dealers in any
event can have no objection, since the cost of the welfare measures have
been factored in the revised Dealers’ Margin/Commission, which is evident
from the communication dated 19.09.2017, annexed as ‘Annexure R-2/5’
with the counter affidavit, filed by the Appellant in W.P.(C) 10334/2017. It
was submitted that it is open to the OMCs to issue such directions under the
terms of the Dealership Agreements and having entered into the contracts,
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with open eyes, the ROs Dealers cannot object to meeting the contractual
obligations, till such time the contracts subsist.
21. Learned Single Judge has erred in quashing parts of Clause 8.3,
providing for imposition of penalties on the ROs, holding that OMCs do not
have the power to levy penalties and in case an injury is caused to them by
infraction/breach of any provisions of the Dealership Agreement, it is open
to them to claim reasonable compensation or terminate the agreements.
It was contended that firstly, the OMCs/Appellants are contractually
empowered to impose penalties and secondly, it is not practicable or
logistically possible to terminate dealerships for every violation of the
provisions of the Agreements/Licences, as this would not only affect the
working of the OMCs and the ROs, but would also have an adverse impact
on the public at large. By virtue of the amendment in 2017, monetary
penalties have been provided to avoid subjecting the Dealers to an extreme
penalty of termination and at the same time ensuring that malpractices in the
conduct of business are stopped, in the interest of the customers. It is for this
reason that for irregularities/malpractices or violations of MDGs, penalties
have been provided which include monetary penalties as well as suspension
of sales. The power of the OMCs to terminate the contract, for violation of
any contractual obligation, exists under the Agreement and where there is a
power to impose a major punishment, there is always a power to impose a
lesser punishment.
22. The learned Single Judge has erred in reading down the provisions in
the amended MDGs with respect to Clause 5.1.14(b) which relates to
non-provision of clean toilet facility. It was urged that the learned Single
Judge failed to appreciate that although the RO toilets are essentially meant
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for use by its employees/staff/customers of the RO, access may be given to
walk-in persons, as a matter of courtesy. If the discretion is, however, left to
the Manager of the RO, as directed in the impugned judgment, it is open to
be exercised arbitrarily and may cause grave inconvenience to the public at
large, who are being constantly educated not to befoul public places. It is for
this reason that monetary penalties have been prescribed, as in a case of
violation of this nature, as an example, an extreme penalty of termination
would be highly disproportionate.

23. Learned Solicitor General appearing on behalf of the Appellants
relied upon the following decisions:-
(a) Delhi Petrol Dealer Association and Anr. v. Union of India &
Ors ., (1999) 81 DLT 400 .
(b) M/S IBP Company Ltd. and Anr. v. Sri T.A. Jayaprabhu and
Ors . in Writ Appeal No. 582-597/2010 , dated 22.01.2015 (Karnataka
High Court) .
(c) Sam Built Well Pvt. Ltd. v. Deepak Builders & Ors ., (2018) 2
SCC l76 .
(d) Federation of Railway Officers Association & Ors. vs. Union of
India & Ors ., (2003) 4 SCC289 .
(e) BALCO Employees' Union (Regd.) vs. Union of India & Ors .,
(2002) 2 SCC 333 .
24. It was thus submitted that the aforesaid aspects of the matter have not
been correctly appreciated by the learned Single Judge while passing the
impugned judgment and the same deserves to be quashed and set aside.

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IV. ARGUMENTS CANVASSED ON BEHALF OF
RESPONDENTS NO.1AND 2 (ORIGINAL PETITIONERS) IN ALL
THE THREE APPEALS

25. Mr. S.B. Upadhyay, learned Senior Counsel appearing on behalf of
Respondent No.1 herein/All India Petroleum Dealers Association submitted
that amendments in MDG-2012 in the year 2017 tantamount to re-writing
the contract between OMCs and ROs. It was submitted that the Appellants
have no power, jurisdiction or authority to amend the MDG-2012, in
violation of the statutory provisions, especially, directing payments higher
than the minimum wages prescribed in the Notifications issued by
States/UTs. By virtue of the amendment in 2017, OMCs are insisting on
making payments on account of minimum wages, payment of bonus,
gratuity, ESIC, etc. beyond the requirement of the respective Statutes. For
applicability of Payment of Gratuity Act, Payment of Bonus Act and the like
Statutes, minimum number of employees are required to be employed, in the
establishments concerned. It may happen in a given case that a particular RO
Dealer may not have employed the minimum number of employees required
and thus, no statutory obligations can be fastened on such a Dealer. This
aspect of the matter has been correctly appreciated by the learned Single
Judge while deciding the writ petitions and, hence, these Appeals be
dismissed.
26. It was submitted that payment of wages to the employees at the rate
over and above the minimum wages, in accordance with the Statute can at
best be a voluntary offer on the part of the ROs, but the Dealers cannot be
compelled to do so. Minimum wages vary from State to State and therefore
no direction can be passed to pay a uniform wage to the ROs, spread across
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the Country. To prescribe one wage for all the ROs would tantamount to
treating unequals as equals and thus the learned Single Judge has rightly
read down Clause 1.5(x) of the amended MDGs.
27. Insofar as provision of toilet facilities is concerned, the direction in
the MDGs to ensure that the toilets are not locked and that doing so can
entail a penalty is completely illegal and arbitrary. An RO Dealer cannot be
compelled to extend the toilet facility to all the passers-by, who are not
customers, as this may result in a security issue, besides raising the cost of
expenditure to the Dealer. The learned Single Judge has rightly left the issue
at the discretion of the concerned dealer and read down Clause 5.1.14(b) of
the amendment in MDG-2012.
28. The amendment in MDG-2012 w.e.f. 01.08.2017 to the effect that
even where seals are intact, if there is excess or short delivery of the
petroleum products, though within the permissible limit, there shall be
recalibration and re-stamping, before recommencement of the sales, is
contrary to the provision for permissible error under the relevant Statute.
The Legal Metrology Act, 2009 itself provides for +/- 25 ml per 5 litres as a
permissible limit of error. Besides, recalibration and re-stamping by the
OMCs shall take considerable time, for which the ROs or petrol/diesel
dispensing unit shall have to close. This would neither be in the interest of
the ROs nor the public. In a response to an RTI query, the Weights and
Measures Department of Govt. of NCT of Delhi has clearly stated that it is
not mandatory to get dispensing units recalibrated, if the delivery is within
the maximum permissible error and reliance was placed on a document
dated 17.07.2012, annexed as a part of the writ record.
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29. Under Clause 8.3 of the amended MDG-2012, certain penalties have
been prescribed by the OMCs, which is beyond the competence of the
OMCs and the learned Single Judge has therefore rightly interfered in the
matter. The Minimum Wages Act and the other Statues such as ESIC Act
etc. have inbuilt provisions providing penalties for violation of statutory
provisions and the OMCs cannot empower themselves to impose penalties
over and above the Statutes. In many cases the penalties provided are
disproportionate to the violation of any provision of law and if the penal
provisions are allowed to stand, this would open the doors for the Officers of
the OMCs to harass the Dealers, who would then have to live under constant
threat of penal action. It was submitted that even a “cure period” has not
been provided in the amendment, before imposing the penalties, in case of
breach. Importantly, imposition of penalties by virtue of Clause 8.3 of the
amended MDG-2012 has the effect of unilaterally amending the Dealership
Agreement, which is impermissible. It was further submitted that under the
earlier MDGs, there were three categories of irregularities, namely, critical,
minor and major and “cure period notice” was required to be given by
OMCs to ROs, whereas by virtue of the amendment to Clause 5.1.2, the
requirement of “cure period notice”/warning, has been deleted and only
penalties have been prescribed. Thus, Clause 8.3 has been rightly struck
down by the learned Single Judge.
30. OMCs by virtue of the amendment in MDG-2012 w.e.f. 01.08.2017
have mandated e-payments to all the employees of the ROs, which, besides
being arbitrary is impracticable, as several ROs are located in remote areas,
where internet facilities are not available or even if available, there are
serious technical issues of connectivity. In so far as the direction for
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coverage under the PMSBY and PMJJBY Schemes is concerned, by the
very nature, the Schemes are voluntary and no dealer can be compelled to
mandatorily cover its employees under the said Schemes. It is open to the
employees to give their consent to subscribe to the Schemes.
31. Mr. Sanjoy Ghose, learned Senior Counsel appearing on behalf of the
Respondent No.1 in LPA 31/2021 submitted that if the OMCs intended to
amend the Guidelines so as to mandate payment of wages higher than the
statutory minimum wages, there ought to have been stakeholders’
consultation, which admittedly did not take place prior to amendment, in
MDG-2012. Learned Senior Counsel relied upon the decision of the
Hon'ble Supreme Court reported in Central Inland Water Transport
Corporation Ltd & Anr v. Brojo Nath Ganguly & Anr . (1986) 3 SCC 156
and submitted that on account of unequal bargaining powers of the ROs, the
OMCs cannot be permitted to unilaterally amend the MDG-2012. Whenever
any minimum wage is to be prescribed/revised, sectoral consultation is a
must, in accordance with the provisions of the Minimum Wages Act, 1948.
In so far as the e-payment of wages, etc. is concerned, it was pointed out that
mode of payment of salary has been prescribed under Section 6 of the
Payment of Wages Act, 1936 and thus ROs cannot be compelled to make
payments through the electronic mode, contrary to the statutory provision.
Amendment in Payment of Wages Act, 2017 prescribes e-payment mode,
however, the same is yet to be brought into force. Nonetheless, it is fairly
submitted that in so far as Delhi is concerned, State amendment has been
notified in the Payment of Wages Act, making the e-payment compulsory,
however, the same can only apply to the ROs at Delhi and not to those
located outside. Reliance was placed on the decision rendered by the
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Hon'ble Supreme Court reported in Mahabir Auto Stores and Ors. vs.
Indian Oil Corporation and Ors., AIR 1990 SC 1031 , to contend that it is a
reasonable expectation of a citizen from a welfare State that it would act
fairly and OMCs can only issue directions, in accordance with law and the
terms of the contract between the parties and not contrary, thereto.
V. ARGUMENTS CANVASSED BY THE INTERVENERS
32. Interveners had preferred civil miscellaneous applications for
intervention, which were allowed by this Court vide order dated 10.11.2021.
Hence, the interveners were permitted to argue and assist the Court.
33. Mr. G. Sivabala Murgan, learned counsel appearing for one of the
interveners, had taken this Court to the calculations with respect to the
Dealers’ Margins and submitted that the same have not been increased to a
level to cover up the additional expenditure that shall be incurred by the
Dealers on account of payments of higher wages and other dues such as PF,
Bonus etc., as envisaged in the 2017 amendment to MDG-2012. Learned
counsel reiterated that penalties cannot be imposed by virtue of amendment
to MDG-2012, over and above those provided under various Labour
Legislations. Learned counsel adopted the other arguments canvassed by
learned Senior Counsel appearing on behalf of Respondent No.1 herein.
34. Mr. Siddharth Luthra, learned Senior Counsel appearing on behalf of
one of the Interveners submitted that the Dealers cannot be compelled into
making e-payments of the salaries, etc. on account of lack of internet
facilities and/or connectivity issues in various areas of the Country, where
the ROs may be located. Learned Senior Counsel also challenged the
imposition of penalties as being contrary to the terms of the Dealership
Agreement and beyond the powers of the OMCs. It was submitted that under
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the guise of Clause 43 of the Dealership Agreement, the contract cannot be
re-written by the OMCs and that too, unilaterally. On the aspect of higher
wages, it was urged that all the ROs situated in different States cannot be
painted with the same brush and directing every Dealer to pay the same
wage would be treating unequals as equals.
35. Learned Counsel appearing on behalf of North Bengal Petroleum
Dealers Association, submitted that no doubt, the OMCs are empowered to
frame Guidelines, i.e. MDGs, from time to time, deriving power from
clause 43, however, the same cannot be in subrogation of any statute, rules
or regulations, that exist. Any direction which runs contrary to the statutory
provision would be void ab initio and untenable in the eyes of law. It was
further submitted that there is nothing on record to show how the Dealers’
Margins were calculated and factored in, to enable the OMCs to justify the
stand that there will be no extra burden on the Dealers, on account of
payment of higher wages, etc. Learned counsel adopted the arguments put
forth by other counsels on other issues.
36. Learned counsels appearing on behalf of the Interveners and
Respondents No.1 and 2 relied upon the following decisions:-
(i) Rajasthan State Industrial Development & Investment Corpn. v.
Subhash Sindhi Coop. Housing Society, (2013) 5 SCC 427 , Para 26-
28
(ii) Onkarlal Bajaj v. UOI , (2003) 2 SCC 673 , Para 7-8
(iii) HPCL v. Super Highway Services Anr. (2010) 3 SCC 321 , Para
31-36
(iv) Mahabir Auto Stores and Ors. v. Indian Oil Corporation and
Ors . (1990) 3 SCC 752 , Para 18-19
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(v) Swapan Kumar Pal & Ors v. Samitabhar Chakraborty & Ors .
AIR 2001 SC 2353
(vi) B.N. Nagarajan v. State of Mysore, AIR 1966 SC 1942
(vii) Sant Ram Sharma v. State of Rajasthan, AIR 1967 SC 1910
(viii) Ram Ganesh Tripathi v. State of U.P., 1997 (75) FLR 554
(SC) .
VI. REASONS AND ANALYSIS
37. Having heard learned Solicitor General appearing on behalf of the
Appellants, learned Senior Counsels appearing on behalf of the Respondents
No.1 and 2 and learned Senior Counsels/counsels appearing on behalf of
Interveners, we hereby partly, quash and set aside the judgment and order of
the learned Single Judge passed in W.P.(C) No.10334/2017, W.P.(C)
No.10746/2017 and W.P.(C) No.11246/2017 dated 18.03.2020, on account
of facts, reasons and judicial pronouncements, detailed hereinafter.
VI A. CLAUSE 43 OF THE DEALERSHIP AGREEMENT
38. Appellants/OMCs entered into Dealership Agreements with the ROs.
Clause 43 of the Dealership Agreement reads as under:-
“43. The dealer undertakes faithfully and promptly to carry out,
observe and perform all directions or rules give nor made from
time to time by the corporation for the proper carrying on of the
dealership of the corporation.

The dealer shall scrupulously observe and comply with all
laws, rules, regulations and requisitions of the Central/State
governments and of all authorities appointed by them or either of
them including in particular the Chief Inspector of Explosives,
Government of India, and/ or Municipal and/ or any other local
authority with regard to the storage and sale of such petroleum
products.”
(emphasis supplied)
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39. Right from the year 1981-82, to maintain discipline in the operation of
retail network of thousands of Petrol (MS) and Diesel (HSD) Retail Outlets
of OMCs/Oil Companies, throughout the country, the Marketing Discipline
Guidelines (MDGs) were formulated and issued. These MDGs have been
reviewed from time to time. Clause 42 of the model agreement, which has
already been upheld by various High Courts, replicates the contents of
Clause 43 of the Dealership Agreement, in question.
40. By virtue of powers conferred by Clause 43, the MDGs have been
issued. Thus, this provision is the source of power of the OMCs to
formulate the MDGs.
41. Power of the OMCs, under the earlier MDGs, was subject matter of
challenge in several writ petitions in various High Courts, including this
Court and was upheld, holding that OMCs have the power and jurisdiction
to issue MDGs, to regulate the ROs and that the RO Dealers are bound by
these Guidelines.
42. This Court in Delhi Petrol Dealer Association and Anr. v. Union of
India & Ors reported in (1999) 81 DLT 400 , held as follows, in paragraphs
18,20,21 and 23:-
“18. The reading of the above will lay down the principles
which necessitated the framing of the guidelines of 1982, 1995
and 1998 respectively. There is no challenge to the guidelines
of 1982 though the challenge is made to 1995 guidelines
alongwith 1998 guidelines in these two petitions. The purpose
of framing the guidelines was to put an end to mal practice and
remedy the breaches which were detected from time-to-time
and are referred to in the vigilance report which has already
been reproduced. It was considered imperative on the basis of
the facts as enumerated above that the guidelines had to be
framed to check malpractice and there is no arbitrary exercise
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of power. The State Machinery is provided ample discretion in
the matter and Clause 43 of the agreement vests in the
Authorities powers to remedy breaches and there is no
violation of the same. In Peerless General Finance and
Investment Co. Ltd. v. Reserve Bank of India, (1992) 2 SCC
343 : AIR 1992 Supreme Court 1033, the Supreme Court
considered the powers of Reserve Bank of India in issuance of
directions providing for manner in which the deposits received
by the residuary non-Banking companies were to be deposited
by them and manner in which such deposits are to be disclosed
in their balance sheet or books of account and whether such
directions were covered under Section 45-K(3) of the Reserve
Bank of India Act. Paragraphs 37, 68, 72 and 73 read as
follows:
xxxx xxxx xxxx xxxx xxxx
20. In the present case, it is contended by the petitioners that
no such power is provided in any of the statutes controlling the
sale and distribution of petrol products but at the same time
one does not have to look to the statutes particularly when the
parties have chosen to enter into contractual obligations. The
power has to be traced from the agreement executed between
the parties. Clause 43 of the agreement clearly spells out that
the dealer shall observe and perform all directions or rules
given or made from time-to-time by the Corporation for the
proper carrying on of the dealership of the Corporation.
Similarly, Clause 56 provides more powers for action when
there is a breach of any of the covenants and stipulations
contained in the agreement and there is failure to remedy such
breach within the period of receipt of the notice by the
Corporation in this regard. In the subsequent judgment
between the same parties in Reserve Bank of India v. Peerless
General Finance and Investment Company Ltd., (1996) 1 SCC
642, the Supreme Court further elaborated the law on the
subject and reiterated the findings earlier recorded that the
Reserve Bank was within its powers to issue directions and the
same were not ultra-vires the powers conferred on the Bank by
Section 45-K(3) of the Reserve Bank of India Act.
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21. The learned Counsel for the petitioners have not denied
that directions could be issued provided the powers are vested
in the authorities in terms of the Agreement entered into
between the parties. Clause 43, it is contended, does not confer
any such powers to impose major and minor penalties
particularly when such action violates the rule of law and
principles of natural justice as no opportunity is provided to
the petitioners to show cause. This argument is misconceived
as more drastic remedy such as termination is provided in the
various statutes and the various clauses of the agreement such
as Clauses 43 and 56 provide ample powers in the respondents
to frame the guidelines as have been framed in the present
case. The reading of the punishments as prescribed for major
and minor penalties could also show that the explanation of
the dealer is always called for and action is only taken when it
is not found to be satisfactory. In appropriate cases the
members of the petitioner association can also ask for a
personal hearing and the same cannot be denied. The mere
absence of the quantum of fines in various statutes will not
make the agreement between the parties redundant on the
ground that no power is vested in the authorities to frame such
guidelines. The guidelines of 1982 and 1995 have operated
satisfactorily and no one came forward on an earlier occasion
to impugn those guidelines as the basic purpose for framing of
the guidelines was to check adulteration, provide better service
to the customers, to check violation of environmental health
and safety regulations.
xxxx xxxx xxxx xxxx xxxx
23. The above provision clearly stipulates that in case there
is any dispute or difference arising between the parties
regarding any right, liability or in relation to the agreement
shall be referred to arbitration. The petitioners are at liberty to
take recourse to this remedy and cannot impugn the guidelines
which admittedly are framed on the basis of the powers vested
in the respondents by the agreement entered into between the
parties and which are framed for public good.”
(emphasis supplied)
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43. Division Bench of Karnataka High Court in the case of M/S IBP
Company Ltd. and Anr. v. Sri T.A. Jayaprabhu and Ors . in Writ Appeal
No. 582-597/2010, vide judgment dated 22.01.2015, held as under:-
“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:

"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."

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
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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.

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

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.


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Dealers’ Margins
45. OMCs had issued a communication dated 31.07.2017 to their
respective Dealers, with respect to revision in Dealers’ Margin w.e.f.
01.08.2017. For ready reference, communication dated 31.07.2017
(“Annexure R-2/2” to the counter affidavit filed by Appellants in W.P.(C)
10334/2017) reads as under:-
“Communication Sent on 31.7.2017
Dear Dealer of ASHISH PETROLEUM
Revision in Dealers’ Margin w.e.f. 1.8.2017
We are pleased to inform you that Dealers’ Margin has been
revised w.e.f. 1.8.2017. The highlights of the revision are as
follows:
1. The Dealers’ Margin has been increased for all category
of dealers i.e. low selling and high selling dealers, A Site (CC
ROs) and B Site (DC ROs)
2. Considering the hardship of ROs selling less than 170
Kl/p.m., special care has been taken to alleviate the same.
3. Central Minimum Wages has been considered for the
revision in Dealers’ Margin. Consequently, all manpower
employed in your retail outlet are required to be paid at least
minimum wages as applicable under Central Minimum Wages
(applicable for Construction workers) or statutory minimum
wages as noticed by State, whichever is higher, effective
1.8.2017. Needless to mention that the order statutory
requirements like PF, Bonus etc. are to be complied with.
4. Enhanced amount of Business Return (in lieu of earlier
known Dealers' remuneration) is included in the Dealers’
Margin.
5. Revision in Return on Net Fixed Assets (NFA - i.e. Return
on investments made in the RO), as recommended by IIM
Bangalore has been implemented. This has resulted in further
increase in Dealers’ Margin.
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6. The recommendation of IIP Dehradun on revision in
HSD Loss norms has been implemented.
7. The operating cost elements are revised based on AICPI.
Electricity cost has been revised on the basis of weighted
average.
8. The Bank charges are revised as per the SBI circular.
In view of the above revisions w.e.f. 1.8.17, you will be
entitled, for a volume given below, an approximate upward
revision of dealer margin as under (net of LFR):

In order to improve customer service standards, we advise you
to ensure that:
a) All employees at the Retail outlet should be covered under
the Pradhan Mantri Suraksha Bima Yojana and Pradhan
Mantri Jeevan Jyoti Bima Yojana by 31.8,17.
b) Wages of Aug 2017 and onwards to the employees must be
paid thru e-payment mode.
c) Retail Outlet Toilet maintenance & cleanliness should get
utmost priority in pursuance of Swachh Bharat Abhiyan.
d) Quality & Quantity is fully assumed to Customers at your
Retail Outlet.
These four aspects shall be subject to verification by Company
officer from time to time.
We advise you for better upkeep and improved customer
service at your Retail Outlet.”
(emphasis supplied)
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46. A further communication was issued on 26.08.2017, by the OMCs to
their respective RO Dealers. For ready reference, the said communication
dated 26.08.2017, issued by the Appellants to Respondent No.1 herein,
annexed as “Annexure R-2/4” to the counter affidavit filed by OMCs in
W.P.(C) 10334/2017, reads as under:-
“Dear BPC Dealer August 26, 2017

Revision in Dealer Margin with effectfrom 1.8.2017

Dear Sir/Madam

Further to our mail dated 31.07.2017&1.8.17 on the subject
and subsequent discussion our Officials/SOs had with you, the
following may please be noted for compliance:

1. You shall make payment of minimum wages to your RO
employees as applicable for scheduled employments in the
Central sphere (applicable for Construction workers) or
statutory minimum wages as notified by State, whichever is
higher. Other statutory benefits shall accordingly be paid.

2. Payment of salary for the month of August 2017 and
onwards is required to be made through e-payment
(RTGS/NEFT etc). To ensure e-payment, bank accounts may
please be opened immediately, if not already done.

3. You are requested to keep the wage register and e-payment
details ready all the time for verification by officials of the
Corporation.


4. Further, your employees of the Retail outlets are to be
covered immediately, if not done already, for the following:

a. PMSBY (Pradhan Mantri Suraksha Bima Yojana).

b. PMJJBY (Pradhan Mantri Jeevan Jyoti Bima Yojana)
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Hope this will motivate your employees and result in improved
customer services at your Retail Outlet.

Thanking you

Yours faithfully,

Team Retail, BPCL”
(emphasis supplied)

47. Reference may be made to another communication dated 19.09.2017,
issued by the OMCs, to their respective RO Dealers, which is annexed as
“Annexure R-2/5” to the counter affidavit filed in W.P.(C) 10334/2017 and
reads as under:-
th
“ 19 September 2017
Dear BPCL Dealer,

Revision in Dealers’ Margin with effect from 1.8.2017 :
Clarification

Dear Madam/Sir,

This is further to our email dated 26.8,2017 on the subject
matter, wherein we had outlined the wage payment to your
retail outlet employees.

We would like to answer the queries received from a number
of dealers in this regard, which are as under:


1. You are required to pay minimum wages and meet other
statutory obligations as notified under Minimum Wages Act
of your State, to all employees of your retail outlet.

2. To motivate the employees of Retail Outlets to provide
better quality of service standards and to deliver the
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assurances given to customers in terms of quality, quantity,
cleanliness and behaviour on forecourt, it has been decided
that you pay BPCL notified, wage [arrived on the basis of
weighted average of Minimum Wages as applicable for
scheduled employments in the Central sphere (applicable
for Construction workers)]. Accordingly, provisions have
been made for BPCL notified wages in the revised Dealer's
Margin w.e.f. 1.8.2017, to compensate the dealers in this
regard.

3. In rare cases, where State Government notified minimum
wages is higher than BPCL notified wages, State notified
minimum wages are payable.

4. In view of the above, BPCL notified wages to be paid to all
employees of your retail outlet w.e.f. 1.8.2017 are as under:

ii. For ROs selling lower volumes, where Dealer
herself/himself may be working as Manager, this
obviously shall not be applicable.)

5. As you are aware, besides the above monthly wages, the
following are payable as per statutory provisions to
employees working at your retail outlet, viz, PF (13.15%),
ESIC (4.75%), Bonus (8.33%), Earned/annual Leave
(4.81%) and Gratuity (4.81%).

We would like to reiterate:

a. Payment of wages for the month of August 2017 and
onwards is required to be made through e-payment
(RTGS/NEFT etc). To ensure e-payment, bank
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accounts may please be opened immediately, if not
already done.
b. You are requested to keep the wage register and e-
payment details ready all the time for verification by
officials of the Corporation.
c. Further, employees of your Retail outlet are to be
covered immediately, if not done already, for the
following:
i. PMSBY (Pradhan Mantri Suraksha Bima Yojana).
ii. PMJJBY (Pradhan Mantri Jeevan Jyoti Bima
Yojana).
In case the wages paid to employees for August 2017 is
less than the amount notified by BPCL, as per the
foregoing, the differential amount may please be paid
latest by 26.9.17, positively.
Trust this will motivate your employees and shall result in
improved customer services at your Retail Outlet”
(emphasis supplied)
48. From a combined reading of the aforesaid communications, it is
evident that four directions were issued :-
(a) Payment of wages, as notified by OMCs from time to time or
statutory minimum wages as notified by the respective State
Governments/UTs, whichever is higher.
(b) Payment of salary through e-payment mode.
(c) To maintain the wage register and e-payment details and
(d) The employees of ROs be covered under:-
(1) Pradhan Mantri Suraksha Bima Yojana ( PMSBY )
(2) Pradhan Mantri Jeevan Jyoti Bima Yojana ( PMJJBY )

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49. It is further evident that in order to maintain the marketing discipline
in operations of the retail network of licenses of Petrol and Diesel outlets,
OMCs had contemplated amendment in MDG-2012 and at the same time the
communications also reveal that due care was taken to ensure that the
Dealers are duly compensated and do not suffer losses, due to increase in
wages, etc., by factoring the revisions in the Dealers’ margins, effective
from 01.08.2017.

50. A tabular representation was furnished by the Appellants, as
“Annexure R-2/3” with the counter affidavit in W.P.(C) 10334/2017. The
chart was referred to and explained by the learned Solicitor General, during
the course of arguments, to support the stand, that while issuing directions to
pay higher wages, the OMCs had factored the rise in wages in the Dealers’
margin. By providing for higher wages, on one hand, it was ensured that the
employees are motivated to work and consequently quality service shall be
provided to the customers and on the other hand due care was taken that the
Dealers do not feel the pressure or burden of the rise in wages. We entirely
agree with the submission made on behalf of the Appellants. The chart
clearly reflects that there was an increase in the Dealers’ margin so that no
burden of increase in wages, etc. is passed on to the Dealers and at the same
time disbursement of higher wages to the employees motivates them to
render quality services to the customers. This aspect is in addition to the
legal argument made on behalf of the Appellants, with which also this Court
agrees, that the relationship between the OMCs and the Dealers is governed
by the Dealership Agreements, under which, more particularly Clause 43
thereof, the Dealers have undertaken to be bound and to comply with the
rules and regulations of the Government, including the directives issued by
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OMCs and thus the MDGs formulated by the OMCs, are binding on the
Dealers. It is thus open to the Appellants to enforce the MDGs and
amendments thereto and no fault can be found in this action. We also find
merit in the stand of the Appellants that the Dealers are adequately
compensated by raise in their margins, which includes element of salaries
and wages, payable to the employees, which element was calculated on the
basis of weighted average of Minimum Wages notified by the States/UTs,
based on latest available State Government Notifications. The Dealers
accepted the revision in the Dealers’ margin without any demur and as
rightly contended by the Appellants, cannot now object to the enhanced
wages, which have been duly factored in the margins. For a ready reference,
the tabular chart is as under:-

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Net increase % 23.98 28.07 31.83 38.31
(emphasis supplied)

Amendments to MDGs-2012
51. Before analysing the rival contentions, it would be useful to refer to
the amendments to MDG-2012, which are the bone of contentions between
the parties. For ready reference, the amendments are as under:-

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“Ref: DDO/RS/MDG Date: 03/10/2017

To:
All Petrol Pump Dealers of Indian Oil
Under Delhi Divisional Office

Sub: Amendment to Marketing Discipline Guidelines2012

Dear Madam/Sir,

We wish to advise that the Marketing Discipline Guidelines
2012 have been amended, as per details given below, with
immediate effect.

DETAILS OF AMENDMENTS TO MARKETING
DISCIPLINE GUIDELlNES-2012

1. CLAUSE NO. 5.1.2. SHORT DELIVERY OF
PRODUCTS

a) With Weights & Measures Department Seals intact

Sales through the concerned dispensing unit to be
suspended forthwith and recalibration and re-stamping
to be done before recommencement of sales.

(Even if short/excess delivery is found within permissible
limit, recalibration and re-stamping to be done before
recommencement of sales.)
Penalty in case of short delivery beyond permissible
limit:

ii. First instance: Rs. 25,000/- per nozzle found
delivering short beyond permissible limit as
specified in Legal Metrology Act/Rule.
iii. Second instance within one year of 1st instance:
Rs. 50,000/- per nozzle found delivering short
beyond permissible limit as specified in Legal
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Metrology Act/Rule & suspension of Sales and
supplies for 15 days.
iv. Third instance within one year of 1st instance:
Termination of the dealership.

CLAUSE NO.5.1.16 : AUTOMATED ROS

(a) Dealer Operating the automated RO in Manual mode
without authorization

Where automation has been completed at a Retail outlet
and if any dispensing unit/MPD there has been found to
be operating in manual mode without .proper
authorization from the competent authority it will be
treated under this irregularity.

(b) In case ATG is switched off / non-operational without
authorization from the competent authority.

(c) Any deliberate action on the part of Dealership or
their staff or any other agency to make any component of
automation system (excluding MPDs / Dispensing Units
/ATGs) dysfunctional, partly or fully without
authorization from competent authority.

(Authorization through e-mail be signed letter from
Company official only will be admissible.)

Penalty in case (a), (b) & (c) above:
i. Penalty of Rs.1,00,000/- (one lakh only) for the
first irregularity.
ii. Second offence would lead to suspension of sales
and supplies for 7days and penalty of Rs.2,00,000/-
(two lakhs only).
iii. Third offence would lead to termination of the
dealership.

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2. CLAUSE NO. 5.1.14(b) NON PROVISION OF CLEAN
TOILET FACILITY

Dealers should check daily and ensure the following;-

a) Toilets are clean all the time.
b) Proper lighting is available.
c) Flush (wherever provided) is working properly.
d) Water is available.
e) Working latch is available on the toilet door.
f) Signage is available.
g) Toilet door found to be locked.

The above protocol is to be prominently displayed near the
toilet. Maintenance sheet is to be maintained and displayed.

If OMC officials observe during the inspection that (a) Toilet
is found to be not clean or (b) Water is not available or (c)
Latch on the toilet door is not available/not working or (d)
Toilet door found to be locked at any outlet, a photograph of
the toilet shall be taken and letter shall be issued instantly
listing the penalty as per MDG.

Penalty in case of Non-provision of Clean Toilet facility:

Penal action will be taken in case during the inspection (a)
Toilet is found to be not clean or (b) Water is not available or
(c) Latch on the toilet door is not available/not working or (d)
Toilet door found to be locked.

i. First instance Rs. 15,000/-
ii. Second instanceRs.25,000/-
iii. Third instance (a) Rs. 35,000/- or 45% of the
monthly dealer commission (based on average of
last 6 months), whichever is higher and
b) suspension of Sales and supplies for 7 days or
rectification of the defect in toilet, whichever is
later.
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3. CLAUSE NO. 1.5 OBSERVANCE OF STATUTORY
AND OTHER REGULATIONS

x) Dealers shall make payment of minimum wages as
notified by Oil Marketing Companies (OMCs) from time
to time or statutory minimum wages as notified by the
respective State Government, whichever is higher to the
manpower employed at ROs, Other benefits as notified by
OMCs/Statute shall also be paid to the manpower
employed at ROs.

4. CLAUSE NO. 5.1.18 : PAYMENT OF WAGES

Dealers shall make payment of minimum wages as
notified by Oil Marketing Companies (OMCs) from time
to time or statutory minimum wages as notified by the
respective State Government, whichever is higher to the
manpower employed at ROs. Other benefits viz. PF,
ESIC, Bonus, Earned/Annual Leave and Gratuity as
notified by OMC/Statute shall also be paid.

Dealers to ensure that:

a) Salaries & Wages are paid through e-Payment.
b) PF, ESIC, Bonus, Earned/Annual Leave and Gratuity are
paid as notified by OMCs/Statute.
c) All Employees are covered under:

i. Pradhan Mantri Suraksha Bima Yojana (PMSBY)
ii. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

Dealers are required to maintain records and records should
be made available at the retail outlet for inspection at all
times.

Penalty in case of Non-payment of minimum wages as
applicable

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Clause8.3 (ix) : Non-payment of Salary, Wages, other Benefits
&Insurance as per clause5.1.18 for the manpower employed at
ROs.

Action in case of 8.3 (ix) would be as under:-

i. First instance : 20% of the monthly dealer margin (based on
average of last 3 months);
ii. Second instance : 30% of the monthly dealer margin (based
on average of last 3 months);
iii. Third & subsequent instances : 40% of the monthly dealer
margin (based on average of last 3 months) & suspension of
sales and supplies for 15 days.

5. CLAUSE NO. 8.5.7:

The dealer would have a period of 10 days to reply from the
date of issuance of Show Cause notice.”
(emphasis supplied)
VI B. CLAUSE 1.5

52. Looking to the arguments canvassed by the learned Senior Counsels
appearing for the Respondents, the main grievance ventilated is that the RO
Dealers cannot be compelled to pay wages to their employees at a rate
higher than the minimum wages notified by the respective States/UTs. The
said contention cannot be accepted for the following reasons :-
(a) As per Clause 1.5 of the amendment to MDG-2012 w.e.f.
01.08.2017, especially, sub-Clause (x) thereof, which mandates
observance of Statutory and other Regulations, it is obligatory for the
RO Dealers to make payment of minimum wages, as notified by the
OMCs, from time to time or statutory minimum wages, as notified by
the respective State Governments, whichever is higher and as per
Clause 5.1.18, which specifically deals with payment of wages,
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Dealer shall make the payment of minimum wages as notified by
OMCs, from time to time or statutory minimum wages as notified by
respective State Government, whichever is higher.
(b) Having perused the aforesaid provisions, we are of the view
that these are not violative of the provisions under the Minimum
Wages Act, 1948, under which there is no bar against the employer
being directed to pay wages higher than the prescribed minimum
wages. The said field is therefore open to a contracting party to direct
the other party to the contract to pay higher wages. It is always open
to the Dealers to enter or not to enter into a Dealership Agreement, if
the terms thereof are not suitable, but it is not open to seek a direction
to make a contract tailor made to suit the Dealers. Certainly, a party
can challenge an action of an employer, if the wages paid to the
employee are lesser than the prescribed minimum wages as in that
case there will be a clear violation of the Statutory provisions under
the Minimum Wages Act, which is not the case here.
(c) As mentioned hereinabove, Clause 43 of the Dealership
Agreement, empowers and enables the OMCs to issue Marketing
Discipline Guidelines to regulate the functioning of the ROs and the
directives issued under these MDGs bind the RO Dealers and can be
legally enforced by the Appellants. This Court finds no reason to
interfere with the direction in the amended MDGs to pay the wages,
as directed. This is in the realm of a contractual relationship under the
Dealership Agreements, consciously entered into by the RO Dealers
and calls for no interference.
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(d) The matter can be looked at from yet another angle, in order to
deal with the contention of the Respondents that OMCs are not privy
to the contractual relationships and service contracts between the RO
Dealers and their employees and thus cannot dictate the service
conditions and terms of the employees. The framers of the
Constitution of India have framed the Directive Principles, which are
regarded as the soul of the Constitution and become particularly
important in our Country, which is a welfare State. As held by the
Hon’ble Supreme Court in K.T. Plantation (P) Ltd. vs. State of
Karnataka , (2011) 9 SCC 1 , Directive Principles of State Policy lay
down the Fundamental Principles for governance of the Country and
through these principles, State is required to take steps to sub-serve
the common good. In this context, Article 43 of the Constitution of
India is relevant and reads as under:-
“ 43. Living wage, etc., for workers. – The State shall
endeavour to secure, by suitable legislation or economic
organisation or in any other way, to all workers,
agricultural, industrial or otherwise, work, a living wage,
conditions of work ensuring a decent standard of life and
full enjoyment of leisure and social and cultural
opportunities and, in particular, the State shall
endeavour to promote cottage industries on an individual
or co-operative basis in rural areas.”

53. The Constitution framers kept the wordings of Article 43 expansive
by including the phrase “ or in any other way”. This expression allows the
State and its Instrumentalities to secure the ideals enshrined in Article 43
viz. living wage and in our view, would apply to the OMCs. The Appellants
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are thus justified in their endeavour to achieve the goals of the Directive
Principles, through the amendment in 2017 in the MDG-2012.
54. At this juncture, relevant would it be to refer to a passage from the
judgment of the Hon’ble Supreme Court in Bijay Cotton Mills v. State of
Ajmer, AIR 1955 SC 33, which is as follows:-
“4. It can scarcely be disputed that securing of living wages
to labourers which ensure not only bare physical subsistence
but also the maintenance of health and decency, is conducive to
the general interest of the public. This is one of the Directive
Principles of State Policy embodied in Article 43 of our
Constitution. It is well known that in 1928 there was a
Minimum Wages Fixing Machinery Convention held at Geneva
and the resolutions passed in that convention were embodied in
the International Labour Code. The Minimum Wages Act is
said to have been passed with a view to give effect to these
resolutions [Vide SI Est etc. v. State of Madras, (1954) 1 MLJ
518 at page 521]. If the labourers are to be secured in the
enjoyment of minimum wages and they are to be protected
against exploitation by their employers, it is absolutely
necessary that restraints should be imposed upon their freedom
of contract and such restrictions cannot in any sense be said to
be unreasonable. On the other hand, the employers cannot be
heard to complain if they are compelled to pay minimum wages
to their labourers even though the labourers, on account of
their poverty and helplessness are willing to work on lesser
wages.”
(emphasis supplied)

55. In the light of the Directive under Article 43 of the Constitution and
the aforementioned judgment, there is no merit in the contention of the
Respondents that OMCs, not being privy to the contracts between R.O.
Dealers and their employees, cannot dictate the terms of their service
conditions. In the light of the Directive Principles, reasonable conditions/
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Regulations/Guidelines can certainly be issued by the Appellants to ensure
that the employees do not suffer and larger public good is sub-served.
56. At this stage, we may also refer to a judgment of the Hon’ble
Supreme Court in The U.P. State Electricity Board and Another v. Hari
Shankar Jain and Others , AIR 1979 SC 65, wherein it was held that the
Courts are also bound to evolve, affirm and adopt principles of
interpretation, which will further and not hinder the goals set out in the
Directive Principles of State Policy and that this command of the
Constitution must be ever present in the minds of Judges when interpreting
Statutes which concerns themselves directly or indirectly with matters set
out in the Directive Principles. Relevant passage is as under :
“5. Before examining the rival contentions, we remind
ourselves that the Constitution has expressed a deep concern
for the welfare of workers and has provided in Article 42 that
the State shall make provision for securing just and humane
conditions of work and in Article 43 that the State shall
endeavour to secure, by suitable legislation or economic
organisation or in any other way, to all workers agricultural,
industrial or otherwise, work, a living wage, conditions of work
ensuring a decent standard of life and full enjoyment of leisure
etc. These are among the “Directive Principles of State
Policy”. The mandate of Article 37 of the Constitution is that
while the Directive Principles of State Policy shall not be
enforceable by any Court, the principles are ‘nevertheless
fundamental in the governance of the country’ and ‘it shall be
the duty of the State to apply these principles in making laws’.
Addressed to Courts, what the injunction means is that while
Courts are not free to direct the making of legislation, Courts
are bound to evolve, affirm and adopt principles of
interpretation which will further and not hinder the goals set
out in the Directive Principles of State Policy. This command
of the Constitution must be ever present in the minds of judges
when interpreting statutes which concern themselves directly or
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indirectly with matters set out in the Directive Principles of
State Policy.”
(emphasis supplied)

57. We may allude to a few other judgments in relation to fixation of
wages. In Chandra Bhavan Boarding & Lodging, Bangalore v. The State
of Mysore and Another, (1969) 3 SCC 84 , the Hon’ble Supreme Court held
as under:
“9. We have earlier noticed the circumstances under which the
Act came to be enacted. Its main object is to prevent sweated
labour as well as exploitation of unorganised labour.
It proceeds on the basis that it is the duty of the State to see that
at least minimum wages are paid to the employees irrespective
of the capacity of the industry or unit to pay the same. The
mandate of Article 43 of the Constitution is that the State
should endeavour to secure by suitable legislation or economic
organisation or in any other way, to all workers, agricultural,
industrial or otherwise work, a living wage, conditions of work
ensuring a decent standard of life and full enjoyment of leisure
and social and cultural opportunities. The fixing of minimum
wages is just the first step in that direction. In course of time
the State has to take many more steps to implement that
mandate. As seen earlier that resolutions of the Geneva
Convention of 1928, which had been accepted by this country
called upon the covenanting States to fix minimum wages for
the employees in employments where the labour is unorganised
or where the wages paid are low. Minimum wages does not
mean wage just sufficient for bare sustenance. At present the
conception of a minimum wage is a wage which is somewhat
intermediate to a wage which is just sufficient for bare
sustenance and a fair wage. That concept includes not only the
wage sufficient to meet the bare sustenance of an employee and
his family, it also includes expenses necessary for his other
primary needs such as medical expenses, expenses to meet
some education for his children and in some cases transport
charges etc., see Unnicheyi and Others v. State of Kerala
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[(1962) 1 SCR 946]. The concept of minimum wage is likely to
undergo a change with the growth of our economy and with the
change in the standard of living. It is not a static concept. Its
concomitants (sic) must necessarily increase with the progress
of the society. It is likely to differ from place to place and from
industry to industry. That is clear from the provisions of the Act
itself and is inherent in the very concept. That being the case it
is absolutely impossible for the legislature to undertake the task
of fixing minimum wages in respect of any industry much less in
respect of an employment. That process must necessarily be left
to the Government. Before minimum wages in any employment
can be fixed it will be necessary to collect considerable data.
That cannot be done by the legislature. It can be best done by
the Government. The legislature has determined the legislative
policy and formulated the same as a binding rule of conduct.
The legislative policy is enumerated with sufficient clearness.
The Government is merely charged with the duty of
implementing that policy. There is no basis for saying that the
legislature had abdicated any of its legislative functions. The
legislature has prescribed two different procedures for
collecting the necessary data, one contained in Section 5(1)(a)
and the other in Section 5(1)(b). In either case it is merely a
procedure for gathering the necessary information. The
Government is not bound by the advice given by the committee
appointed under Section 5(1)(a). Discretion to select one of the
two procedures prescribed for collecting the data is advisedly
left to the Government. In the case of a particular employment,
the Government may have sufficient data in its possession to
enable it to formulate proposals under Section (5)(1)(b).
Therefore it may not be necessary for it to constitute a
committee to tender advice to it but in the case of another
employment it may not be in possession of sufficient data.
Therefore it might be necessary for it to constitute a committee
to collect the data and tender its advice. If the Government is
satisfied that it has enough material before it to enable it to
proceed under Section 5(1)(b) it can very well do so. Which
procedure should be adopted in any particular employment
depends on the nature of the employment and the information
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the Government has in its possession about that employment.
Hence the powers conferred on the Government cannot be
considered as either unguided or arbitrary. In the instant case
as seen earlier the question of fixing wages for the various
categories of employees in residential hotels and eating houses
was before the Government from 1960 and the Government had
taken various steps in that regard. It is reasonable to assume
that by the time the Government published the proposals in
pursuance of which the impugned notification was issued it had
before it adequate material on the basis of which it could
formulate its proposals. Before publishing those proposals, the
Government had consulted the advisory committee constituted
under Section 7. Under those circumstances we are unable to
accede to the contention that either the power conferred under
Section 5(1) is an arbitrary power or that the same had been
arbitrarily exercised.”
(emphasis supplied)

58. In Y.A.Mamarde and Nine Others and Ghanshyam and Eight
Others v. Authority under the Minimum Wages Act, (Small Causes Court)
Nagpur and Another ; (1972) 2 SCC 108 , the Hon’ble Supreme Court has
held as under :
“13. Let us first deal with this question. The Act which was
enacted in 1948 has its roots in the recommendation adopted by
the International Labour Conference in 1928. The object of the
Act as stated in the preamble is to provide for fixing minimum
rates of wages in certain employments and this seems to us to
be clearly directed against exploitation of the ignorant, less
organised and less privileged members of the society by the
capitalist class. This anxiety on the part of the society for
improving the general economic condition of some of its less
favoured members appears to be in supersession of the old
principle of absolute freedom of contract and the doctrine of
laissez faire and in recognition of the new principles of social
welfare and common good. Prior to our Constitution this
principle was advocated by the movement for liberal
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employment in civilised countries and the Act which is a pre-
Constitution measure was the offspring of that movement.
Under our present Constitution the State is now expressly
directed to endeavour to secure to all workers (whether
agricultural, industrial or otherwise) not only bare physical
subsistence but a living wage and conditions of work ensuring a
decent standard of life and full enjoyment of leisure. This
Directive Principle of State Policy being conducive to the
general interest of the public and, therefore, to the healthy
progress of the nation as a whole, merely lays down the
foundation for appropriate social structure in which the labour
will find its place of dignity, legitimately due to it in lieu of its
contribution to the progress of national economic prosperity.
The Act has since its enactment been amended on several
occasions apparently to make it more and more effective in
achieving its object which has since secured more firm support
from the Constitution. The present rules under Section 30, it
may be pointed out, were made in October 1950, when the State
was under a duty to apply the Directive Principles in making
laws. No doubt the Act, according to its preamble, was enacted
to provide for fixing minimum rates of wages, but that does not
necessarily mean that the language of Rule 25 should not be
construed according to its ordinary, plain meaning, provided of
course, such construction is not inconsistent with the provisions
of the Act and there is no other compelling reason for adopting
a different construction. A preamble though a key to open the
mind of the Legislature, cannot be used to control or qualify the
precise and unambiguous language of the enactment. It is only
in case of doubt or ambiguity that recourse may be had to the
preamble to ascertain the reason for the enactment in order to
discover the true legislative intendment. By using the phrase
“double the ordinary rate of wages” the rule-making authority
seems to us to have intended that the worker should be the
recipient of double the remuneration which he, in fact,
ordinarily receives and not double the rate of minimum wages
fixed for him under the Act. Had it been intended to provide for
merely double the minimum rate of wages fixed under the Act
the rule-making authority could have so expressed its intention
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in clear and explicit words like “double the minimum rate of
wages fixed under the Act”. This intendment would certainly
have been stated in the explanation added to Rule 25(1) in
which the expression “ordinary rate of wages” has been
explained. The word “ordinary” used in Rule 25 reflects the
actuality rather than the worker's minimum entitlement under
the Act. To accept Dr Barlingay's suggestion would virtually
amount to recasting this phrase in Rule 25 for which we find no
justification. This rule calls for practical construction which
should ensure to the worker an actual increase in the wages
which come into his hands for his use and not increase
calculated in terms of the amount assured to him as a minimum
wage under the Act. The interpretation suggested on behalf of
the respondents would have the effect of depriving most of the
workers who are actually getting more than the minimum
wages fixed under the Act of the full benefit of the plain
language of Rule 25 and in case those workers are actually
getting more than or equal to double the minimum wages fixed,
this provision would be of no benefit at all. This construction
not only creates a mere illusory benefit but would also deprive
the workers of all inducement to willingly undertake overtime
work with the result that it would to that extent fail to advance
and promote the cause of increased production. We are,
therefore, clearly of the view that Rule 25 contemplates for
overtime work double the rate of wages which the worker
actually receives, including the casual requisites and other
advantages mentioned in the explanation. This rate, in our
opinion, is intended to be the minimum rate for wages for
overtime work. The extra strain on the health of the worker for
doing overtime work may well have weighed with the rule-
making authority to assure to the worker as minimum wages
double the ordinary wage received by him so as to enable him
to maintain proper standard of health and stamina. Nothing
rational or convincing was said at the bar while fixing the
minimum wages for overtime work at double the rate of wages
actually received by the workmen should be considered to be
outside the purpose and object of the Act. Keeping in view the
overall purpose and object of the Act and viewing it
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harmoniously with the general scheme of industrial legislation
in the country in the background of the Directive Principles
contained in our Constitution the minimum rates of wages for
overtime work need not as a matter of law be confined to
double the minimum wages fixed but may justly be fixed at
double the wages ordinarily received by the workmen as a fact.
The Bombay High Court has no doubt held in Union of
India v. B.D. Rathi (supra), that “ordinary rate of wages” in
Rule 25 means the minimum rate for normal work fixed under
the Act. The learned Judges sought support for this view from
Section 14 of the Act and Rule 5 of the Railway Servants (Hours
of Employment) Rules, 1951. The workers there were
employees of the Central Railway. With all respect we are
unable to agree with the approach of the Bombay High Court.
Section 14 of the Act merely lays down that when the employee,
whose minimum rate of wages is fixed by a prescribed wage
period, works in excess of that period the employer shall pay
him for the period so worked in excess at the overtime rate
fixed under the Act. This section does not militate against the
view taken by us. Nor does a provision like Rule 5 of the
Railway Rules which merely provides for fifty-four hours
employment in a week on the average in any month go against
our view. The question is not so much of minimum rate as
contrasted with the contract rate of wages as it is of how much
actual benefit in the form of receipt of wages has been intended
to be assured to the workman for doing overtime work so as to
provide adequate inducement to them willingly to do overtime
work for increasing production in a peaceful atmosphere in the
industry. The problem demands a liberal and rational approach
rather than a doctrinaire or technical legalistic approach. The
contract rate is not being touched by holding that Rule 25
contemplates double the rate of wages which actually come into
the workman's hands any more than it is touched by fixing the
minimum rate of wages under Sections 3, 4 and 5 of the Act.
The decision of the Mysore High Court in Municipal Borough,
Bijapur v. Gundawan (M.N.) and Others [AIR 1965 Mys 317]
and of the Madras High Court in Chairman of the Madras Port
Trust v. Claims Authority and Others [AIR 1957 Mad 69] also
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take the same view as the Bombay High Court does. We need
not, therefore, deal with them separately.”
(emphasis supplied)

59. In M/s. Polychem Ltd. v. R.D. Tulpule, Industrial Tribunal ,
Bombay, (1972) 1 SCC 885 , the Hon’ble Supreme Court held as under:
“7. Wage policy relating to workmen appears to be a complex
and sensitive area of public policy. The reason is plain. The
relative status of workmen in the society, their commitment to
industry and their attitude towards the management, their
motivation towards productivity and their standard and way of
life, are all conditioned by wages. It is accordingly not a purely
economic policy in which the employer and the employee alone
are interested. Besides the worker and the management, the
consumer and the society at large and a fortiorari the State, are
also vitally interested, and no wage policy can ever be applied
in vacuum in disregard of the realities of the social and
economic conditions in our country. Considering the question
of wages in the background of the directive principles
enshrined in our Constitution a wage structure should serve to
promote, a fair remuneration to labour ensuring due social
dignity, personality and security, a fair return to capital, and
strengthen incentives to efficiency, without being unmindful of
the legitimate interest and expectation of the consumer in the
matter of prices. Guided by this principle, if the financial
capacity of the industry permits, the workers should, broadly
speaking, be allowed their due share in the prosperity of the
industry, to which they have contributed by their labour, so as
to enable them, within reasonable limits, to improve their
standard of living.”

(emphasis supplied)

60. From the above-stated judicial pronouncements, the following
conclusions can be drawn :
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i. State can impose reasonable conditions/restrictions in
freedom of contract and trade .
ii. Courts are duty bound to affirm and adopt principles of
interpretation which will further and not hinder the goals set out in the
Directive Principles of State Policy.
iii. Article 43 of the Constitution mandates that the State should
endeavour to secure by a suitable Legislations or economic
organization or in any other way, to all workers, a living wage and
fixing of the minimum wage is the first step in that direction.
Minimum wage does not mean wage just sufficient for bare
sustenance but includes other expenses necessary for the primary
needs of the workman and his family such as medical, education,
transport, etc.
iv. MDG is a Guideline issued by the OMCs, Instrumentalities
of the State to regulate the R.O. Dealers and the direction to pay
higher wages is thus a step in the right direction of taking forward
the mandate of Article 43 of the Constitution of India .
v. OMC’s, being the Instrumentalities of State and having control
over monopolistic goods such as oil , which they sell to general
public, through R.O. Dealers, are under a Constitutional obligation to
ensure a “living wage” for the workers employed by the R.O
Dealers . In any event, Dealers have no reason to object, having
accepted the revisions in their margins, which is plainly evident from
the tabular chart, referred to above, which reflects the difference in
the Dealers’ margins, pre-01.08.2017 and post-01.08.2017.
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vi. The nature of the amendment directing payment of higher
wages is for the welfare of the employees of the ROs. It is in the
nature of a fair wage, which can be prescribed as a term of the
contract. In the present case, interest of the RO Dealers has been
adequately protected by increase in the “ Dealers’ Margin ”. It would
not be wrong to hold that if the Dealers do not disburse the higher
wages after having received higher margins, it would amount to
“ Unjust Enrichment” on the part of the Dealers .
vii. The aforesaid aspects of the matter, in our view, have not been
correctly appreciated by the learned Single Judge and there is merit in
the contentions raised by the Appellants.

VI C. CLAUSE 5.1.2 – SHORT DELIVERY OF PRODUCTS
61. Learned Solicitor General and learned Senior Counsels representing
the respective sides have read and re-read Clause 5.1.2 of the amendment in
2017 in MDG-2012. While the contention of the Appellants is that even
where the Weights & Measures Department Seals are intact and there is
short/excess delivery, though within the permissible limit, the sales of the
concerned Dispensing Unit are to be suspended and recalibration and re-
stamping is to be done, before recommencement of sales, Respondents
urged that where the dispensation is within the permissible limit, there
cannot be suspension of sales, especially when no time limit is prescribed
for recalibration and re-stamping in the MDGs. In order to appreciate the
argument, it is pertinent to refer to Clause 5.1.2, which is extracted
hereunder for ready reference :-


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“Clause 5.1.2

a) With Weights & Measures Department Seals intact

Sales through the concerned dispensing unit to be suspended
forthwith and recalibration and re-stamping to be done before
recommencement of sales.

(Even if short/excess delivery is found within permissible limit,
recalibration and re-stamping to be done before
recommencement of sales.)

Penalty in case of short delivery beyond permissible limit:

i. First instance : Rs. 25,000/- per nozzle found delivering short
beyond permissible limit as specified in Legal Metrology
Act/Rule.
ii. Second instance within one year of 1st instance : Rs.
50,000/- per nozzle found delivering short beyond permissible
limit as specified in Legal Metrology Act/Rule & suspension of
Sales and supplies for 15 days.
iii. Third instance within one year of 1st instance :
Termination of the dealership.”

62. Having examined the rival contentions, we are of the view that the
stand of the Respondents cannot be accepted for the following reasons :-
(a) The objective of the Legal Metrology Act, 2009 is clearly to
ensure that a certain standard is maintained by the RO Dealers and for
this reason, there is a provision of maximum permissible error in sale
and supply of petroleum products. There is no bar under the Statute in
prescribing higher standards of sale and supply by reducing the
margin of error. It was sought to be explained on behalf of the
Appellants that even though under the aforesaid Act, there is a
permissible error of +/- 25 ml per 5 litres, the Statute does not prohibit
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the OMCs from prescribing and stipulating higher and stringent
standards to safeguard the interest of the consumers and therefore,
recalibration is required to be done when the error is above +/- 10 ml
per 5 litres. Further, when the permissible error prescribed by the
OMCs is not just (-)10 ml per 5 litres but also (+)10 ml per 5 litres i.e.
when the dispensing units dispense more than the desired quantity of
sale, causing loss to the Dealers, even their recalibration is provided
for as the OMCs do not want even the Dealers to suffer any loss. We
find force in the said argument of the Appellants. There is no reason
why the OMCs should be deprived of their right to impose stringent
standards to ensure that the errors are minimized.
(b) Clause 43 of the Dealership Agreement enables the Appellants
to issue the Marketing Discipline Guidelines and amendments thereto.
Thus, the obligations cast on the Dealers by the directions issued in
the form of MDGs are in the nature of a contractual relationship and
the terms of contract, needless to state, are binding on the parties to
the contract. By amending the MDGs and directing the RO Dealers to
maintain higher standards of delivery of products in larger public
interest, failing which the sales shall be suspended, followed by
recalibration and re-stamping, before recommencement of sales, in
our view, Appellants have not violated any Statutory provision and in
fact it only furthers the objective of the Legal Metrology Act, which is
to ensure that a certain standard is maintained by the Dealers. In this
context, we may allude to the judgment of the Hon’ble Allahabad
High Court (Lucknow Bench) in Dr. Ashok Nigam and Anr. v. State
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of UP and Ors. in PIL(C) No. 10652/2017 dated 30.05.2017, relevant
paragraphs of which are as follows :-
“2. A wide spread open crime on the part of Petrol Pump
Operators, licensed by respondent Nos. 5, 6 and other
oil companies affecting entire public at large at large
throughout the State, was unearthed by Special Task
Force (hereinafter referred to as, ‘STF’) when it made
surprise checking on certain petrol pumps at capital city,
Lucknow, in State of Uttar Pradesh and has
detected a chain of crime, which involve a very large number of
persons, different agencies, wings and also the departments of
Government, continuing with impunity, defrauding and
cheating the innocent customers of oil in the State.

18. Dr. Ashok Nigam pointed out that as a result of aforesaid
indication given by State Government, things immediately
slowed down. STF went on back foot. It is in this backdrop, we
find it really difficult to appreciate how Government, which is
expected to show a rock like strength in such situation, so as to
give a clear and straight message to all wrong doers that there
is no tolerance whatsoever at the end of a welfare of State, is
tolerating and even giving relaxations to the persons indulged
in cheating with people at large. Hence on 22.05.2017, we
passed following order:

“1. A disturbing and disappointing picture has emerged
from so-called affidavit of compliance filed by State of
U.P. through Sri Gaya Prasad Kamal, Special Secretary,
Department of Food and Civil Supplies. It appears that
credit of entire success of nabbing Petrol Pumps,
who were indulged in short supply of fuel by using an
electronic device in dispensing unit in their Petrol
Pumps, goes to Special Task Force
but thereafter there is an effort on the part of State
and, that too, at the highest level, to
dilute/hush up the matter in different way, like by issuing
certain Government Orders after diluting entire exercise.
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One of such Government order dated 02.05.2017 has
been placed before us which shows that now, instead of
Special Task Force, checking of Petrol Pumps/Diesel
Pumps shall be made by a Committee which shall be
constituted by concerned District Magistrate in
every District and it shall consist of one
Executive Magistrate, District Supply Officer, Supply
Inspector, a Police Officer not below the rank of
Inspector, Senior Inspector/Inspector Weight and
Measurement Department and one officer of concerned
Oil Company.

2. The role of Weight and Measurement Officer and
Supply Officer is already suspicious when electronic
devices were found in the dispensing units of Petrol
Pumps inasmuch such chips could not have been
installed without opening machine and disturbing
seals put by Weight and Measurement Department
etc. Therefore, prima facie their collusion was already
there and yet they have been made part of checking team.

3. The most interesting thing is that now Chief Secretary
has directed all the Officers in State of U.P. that in case
electronic device or short supply of fuel or any other kind
of irregularity is found at a Petrol Pump, only concerned
dispensing unit shall be sealed and no other dispensing
units. Meaning thereby, no action shall be taken against
concerned Petrol Pump owner/occupier though licence is
given to run Petrol Pump and not to a particular
dispensing unit. If its owner has committed some
illegality or offence, he is liable for cancellation of
licence itself and action for such illegality cannot be
confined to only dispensing unit. Apparently illegal act of
offence doers is being compromised or compounded. This
direction issued by Chief Secretary is really unfortunate.
We find that there is a clear lack of will on the part of
respondent-state in taking a strict, tough and law
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enforcing action so that a message should go to all such
persons not to indulge in such activities.

4. Let Chief Secretary himself appear on 25.05.2017
alongwith a personal affidavit stating, why this kind of
direction has been issued (like Government Order dated
02.05.2017)that no action shall be taken against Petrol
Pump owners/occupiers but only concerned dispensing
unit(s) shall be sealed. It appears that at some level,
there is something wrong on the part of Government also
and somebody is trying to protect erring Petrol Pump
owners by avoiding/deferring strict action against them.

5. Respondent Oil Companies, respondents 5 and 6, have
also not disclosed as to what action they have taken in
the matter against erring Petrol Pump owners.

6. Let respective counsels appearing for respondents-
5 and 6 also inform about the steps taken by them as also
the time schedule within which entire matter shall be
dealt with and concluded.

7. Dr. L.P. Mishra, learned counsel appearing for
respondent 5 expressed his apprehension that Petrol
Pump owners may create a panic by closing Petrol
Pumps, as they had done earlier also, and that is how
creating a huge chaos and public inconvenience and it is
probably for this reason, State has taken lenient view in
the matter.

8. To avoid any such kind of blackmailing or
illegal activities on the part of Petrol Pumps, we direct to
State Government that to meet out eventuality, if
any such action or threat etc. is taken/shown by one or
more Petrol Pump, State Government shall issue a
direction to all District Magistrates concerned to ensure
running of Petrol Pumps by appointing Receiver(s)and in
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no case any Petrol Pump owners will be allowed to
blackmail people by such activities.

9. Put up this matter on 25.05.2017.

10. Copy of this order shall be made available to learned
Standing Counsel for communication to concerned
authorities and compliance, by tomorrow.”

30. It is true that oil companies in majority are owned and
controlled by Central Government but in this case
their involvement also cannot be excluded since they are under
the obligation, under terms and conditions of marketing
disciplines, for a regular periodical inspection. But here also
we find an attempt to show a self disclosure of cleanliness
instead of nabbing erratic and offending officials who do not
work impartially, objectively and judiciously. They are indulged
in nefarious criminal acts. We can understand frustration and
helplessness which officials of STF must be facing. Though in
the affidavit filed by Chief Secretary, it is stated that STF’s
hands have not been tied or stopped, but language and message
of order dated 02.05.2017 is self speaking and
explainable, fortified from the fact that from 03.05.2017 and
onward, we find no registration of FIR against any erring
petrol pumps.

That has been done in words and what has been instructed
between the lines, is evident and easily discernible. Any person
of ordinary prudence can easily decipher message underlying
therein. Still whatever has been left, it is our duty to take hold
of the stock of situation, so as to compel forthwith action and
application of mind to the State authorities. Let them wake up,
realize their public duty and trust and statutory obligations they
have, and take action effectively, speedily and in such a
manner so as to leave a clear but bold message to all
those who indulged in the act of cheating
helpless public at large that none will be spared. Everyone
shall be punished adequately.”
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63. We may, at this stage, deal with the finding of the learned Single
Judge that the OMCs would do well to provide a defined timeline by which
recalibration and re-stamping are carried out, failing which, they should
permit RO Dealers to recommence sales, if the error in delivery is within the
permissible limits and that a period of 12 hours from the time the defect is
noticed, should be ideal.
64. Clause 5.1.2 of the amended MDGs provides that in case of
short/excess delivery within permissible limit, after suspension of the sale,
recalibration and re-stamping is required to be done. It is true that no time
limit has been provided in the MDGs, within which the said action is
required to be carried out and as a sequitur, there is no provision permitting
the Dealers to recommence sales, prior to completion of recalibration and
re-stamping. The reason for not providing defined timelines, is not far to see.
It is rightly pointed out by the Appellants that if the timeline is stipulated, it
would give a handle to the Dealers to put any time of defect, since it would
be the Dealer who would be the first to notice the defect and would perhaps
be the one to note the timing. In such an event, whenever an issue would
arise of short/excess delivery, the Dealer would insist on recommencing the
sale on expiry of the timeline, as per the time noted by the Dealer. It is not
difficult to foresee that this would open gates for the Dealers to manipulate
the timings, to suit their convenience and further encourage malpractices.
There is also merit in the contention of the Appellants that several ROs are
located in remote corners of the Country and it would be logistically and
practically impossible to uniformly implement the timelines. Therefore, in
our opinion, the finding of the learned Single Judge that the OMCs should
provide timelines for recalibration and re-stamping and further suggesting a
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timeline of 12 hours cannot be sustained. There is yet another aspect of the
matter. Once the Dealers are aware that there are no time limits prescribed
for recalibration and re-stamping, after the sales are suspended, the Dealers
would make every endeavour to ensure that the dispensing units work
efficiently and there are least possible errors in dispensing the petroleum
products. This is the normal and expected human conduct. Non-provision of
the timeline, therefore, in our opinion, will act as a deterrent and would
bring greater discipline amongst the RO Dealers, which is the very purpose
of the MDGs.
65. The OMCs with their expertise in the field have taken a conscious
decision to refrain from stipulating any timelines and the logic explained by
the Appellants does not seem unreasonable. Each case would depend on its
own facts and circumstances and fixation of a time limit would complicate
matters and make the system unworkable. Once the Expert Bodies, after due
deliberation, have framed Clause 5.1.2, it is not for this Court, exercising
jurisdiction in judicial review to frame the Guidelines for the working of the
RO Dealers or suggest a time limit and re-write the clause. Clause 5.1.2(a)
cannot thus be termed as unreasonable or arbitrary and the learned Single
Judge has erroneously struck down the said provision.
66. Having said so, we may, however, add a caveat. While there are no
timelines stipulated in the MDGs, yet in our opinion the OMCs should not
delay the process of recalibration and re-stamping and steps must be taken to
ensure that as soon as the sale is suspended in a given RO, the next process
must start as one cannot overlook the fact that prolonged suspension of sales
would not only affect the business of the RO Dealers but would also have a

deleterious effect on the consumers.
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VI D. CLAUSE 5.1.18–PAYMENT OF WAGES
67. For ready reference, Clause 5.1.18 of the amendment in MDG-2012
made effective from 01.08.2017 reads as under:-
“Dealers shall make payment of minimum wages as notified by
Oil Marketing Companies (OMCs) from time to time or
statutory minimum wages as notified by the respective State
Governments, whichever is higher, to the manpower employed
at ROs. Other benefits viz. PF, ESIC, Bonus, Earned/Annual
Leave and Gratuity as notified by OMCs/Statute shall also be
paid.

Dealers to ensure that:

a) Salaries & wages are paid through e-Payment.

b) PF, ESIC Bonus, Annual Leave and Gratuity are paid
as notified by OMCs/Statute.

c) All Employees are covered under:

i) Pradhan Mantri Suraksha Bima Yojana
(PMSBY),

ii) Pradhan Mantri Jeevan Jyoti Bima Yojana
(PMJJBY),

Dealers are required to maintain records and the records
should be made available at the retail outlet for inspection, at
all times.”

68. First part of this Clause concerns payment of higher wages, which has
been dealt with in the earlier part of the judgment.
69. In so far as second part of Clause 5.1.18 is concerned, it creates a
contractual obligation on the RO Dealers to disburse the salaries and wages
of their employees, though the mode of e-payment . Two-fold arguments
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were addressed on behalf of the Respondents, assailing the said direction.
Firstly, that on account of lack of internet facilities or connectivity issues at
the ROs, more particularly, those located in remote parts of the Country, it is
not practically feasible or possible to make e-payments and secondly, the
OMCs have no privity of contract with the employees of the ROs and cannot
dictate the terms of their service conditions.
70. None of the two contentions, in our view, merit acceptance for the
following reasons :-

(a) It bears repetition to state that by virtue of Clause 43 of the Dealership
Agreement, the Dealers have undertaken to faithfully and promptly carry
out, observe and perform all directions made by the Corporation, from time
to time for proper carrying out of the dealership. Respondents cannot
therefore escape the contractual obligations cast upon them coupled with the
assurance and undertaking to scrupulously and faithfully follow all
directions issued by the Appellants, in furtherance of the Dealership
Agreement.
(b) Payment of salaries and wages by e-payment mode is a welfare
measure since it ensures that complete wages are disbursed to the
employees, as reflected in the books of accounts and the employees do not
suffer on account of any malpractice on the part of the Dealers of paying
lesser wages than due. Payment through the electronic mode would make
the system transparent and certainly reduce the chances of exploitation of
the employees at hands of the RO Dealers.
(c) Payment of salaries and wages by e-payment mode would go a long
way in resolving several issues under the Labour Law Legislations such as
Industrial Disputes Act in case any disputes arise between the employees
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and the Dealers, vis-a-vis their status as a ‘workman’ or the amount of
wages.
(d) Insofar as the practical difficulty of lack of internet facilities or
technical issues in the network, is concerned, suffice would it be to state that
most of the transactions are carried out by the Dealers, online, including
payments made by them for purchase of products from the Appellants, as
brought out by the learned Solicitor General. Surely, if online transactions
can be done for the other purposes, the salaries can also be disbursed online.
In any case, every RO Dealer would have a bank account and most of the
Banks in the current times have online facilities. The Dealers can therefore
easily transact and make e-payments through their bankers. There may be
certain remote areas in the Country where the Dealers may not have access
to internet facilities and in such exceptional cases, it will always be open to
the concerned Dealer to find an alternate method of payment after due
intimation to and exemption from the Appellants. This, however, will only
be an exception and not the Rule. Payments through electronic mode is a
step forward for the welfare of the employees of the ROs with the
advancement of technology and this Court finds no reason to interfere in the
said mandate.
(e) Clause 5.1.18(b) directs the RO Dealers to disburse the benefits of
Provident Fund, Employees State Insurance Bonus, Annual Leave and
Gratuity to their respective employees. Challenge to the same, in our view,
is untenable in law. First and foremost, the obligation clearly arises out of
the Dealership Agreements and the assurance given by the Dealers under
Clause 43 thereof. It needs no reiteration that payments towards PF, ESIC
benefits, etc. are beneficial and welfare measures. While perusal of the writ
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petitions indicates that the Respondents have laid no serious challenge to the
applicability of the Statutes in this regard, however, a subtle argument was
made before the learned Single Judge that in certain cases the ROs may not
employ the minimum number of employees so as to be covered under the
provisions of the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952 and similar Statutes. It may well be that in certain cases the ROs
may not employ the number of employees considered as a threshold under
the respective Statutes to be covered by the concerned Acts, however, in
such exceptional cases the contract between the parties, being the Dealership
Agreements, will hold the field, enabling the Appellants to issue directions
to pay Provident Fund, etc. in the interest and welfare of the employees, as is
sought to be done by them. Thus, even in the absence of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952, Payment of
Bonus Act, 1965 and Payment of Gratuity Act, 1972 being applicable, the
objective that the said Statutes seek to achieve can be adopted by the
Appellants including the methodology of calculations of the dues
there-under. In so far as the argument of privity of contract, strenuously
urged by the Respondents, is concerned, suffice would it be to state that the
Appellants are an Instrumentality of the State and as brought out in the
earlier part of the judgment, it is their Constitutional obligation, as enshrined
in Article 43 of the Constitution of India, to enforce the Directive Principles
of State Policy and ensure that the employees employed by the RO Dealers
are given the benefits of Provident Fund, etc. as the wage cannot mean a
wage for bare sustenance.
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(f) So far as Clause 5.1.18(c) is concerned, the amended Guidelines cast
an obligation upon the RO Dealers to ensure that all employees are covered
under –
i. Pradhan Mantri Suraksha Bima Yojana ( PMSBY ) and
ii. Pradhan Mantri Jeevan Jyoti Bima Yojana ( PMJJBY ).
(g) Dealers are also required to maintain the records which are to be made
available at the ROs for inspection, at all times.
(h) The grievance of the Respondents in this regard is that the Schemes
are voluntary in nature and in case the employees refuse to subscribe under
them, the Dealers cannot compel them to be members of the Schemes. This
contention also cannot be accepted for the following reasons :-
(i) As per Clause 5.1.18(c), the Dealer is required to ensure
that the employees are covered under the two Schemes, namely
PMSBY and PMJJBY. Appellants have taken a categorical stand
in the tabulation presented to the Court during the course of
hearing and which was not rebutted by the Respondents that the
cost towards the premium under the two Schemes has been
factored in the revised Dealers’ Margin/Commission and is as
under :-
“Further, the Pradhan Mantri Suraksha Bima Yojana
(PMSBY) is an insurance scheme with affordable
premium of just Rs.12 per employee per annum and the
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is
an insurance having a premium of Rs.330 per employee
per annum. It is submitted that the direction to ensure
that the employees are covered under the said two
insurance schemes is merely a welfare measure. In fact,
the cost for the said welfare measure has been factored in
the revised Dealers’ margin/commission.”
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(ii) This is also supported by Annexures R-2/2, R-2/3, R-2/4
and R-2/5 annexed to the counter affidavit, filed by the Appellants
herein, in the writ petition. Annual premium for PMSBY is
Rs.12/- per employee per annum and under the PMJJBY is
Rs.330/- per employee per annum. Once the Schemes are for the
welfare of the employees of the ROs and the premiums payable
are not only affordable but also covered under the “Dealers’
Margin”, subscription of the employees to the Schemes cannot be
termed as unreasonable. The revision in the margins has been
gladly accepted by the Dealers and thus it is imperative that they
pay the premiums towards subscriptions under the Schemes.
(iii) Moreover, learned Solicitor General had also pointed out
that not a single employee has approached the OMCs, resisting
coverage under the PMSBY or PMJJBY Schemes. Learned Single
Judge while agreeing with the fact that the object of the provision
is altruistic, was of the view that making the coverage compulsory,
is problematic in law and the premiums being on the lower side
would make no difference. The learned Single Judge also opined
that the same purpose would be achieved, if the OMCs were to
call for the details of the employees and hand over the consent
forms to enable them to join the Schemes. Wherever the
employees consented, the OMCs can directly make the annual
contribution on their behalf to enable them to join the Schemes.
Having considered the said part of the judgment, we cannot agree
with the learned Single Judge. As brought out above, the
premiums payable under the Schemes have already been factored
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in the Dealers’ margin and the benefits of the revision have been
reaped by the Dealers and non-disbursement of the amounts would
be unjust enrichment. Secondly, being in the nature of insurance
Schemes, with premiums in the affordable range, they would go a
long way towards the welfare of the employees of the ROs and
secure their tenure and future. With regard to the alternative
methodology suggested by the learned Single Judge, we find merit
in the contention of the Appellants that it would be more feasible
to implement the Schemes through the RO Dealers rather than by
the OMCs, for whom it would be impracticable and logistically
impossible to implement, for every RO, situated across the
Country.
(iv) Payment of premium under PMSBY and PMJJBY Schemes
is a welfare measure in the interest of the employees of the RO
Dealers. The Dealers/Respondents are dealing in sale of petroleum
products and in a way have a monopoly in the business. In order to
maintain minimum standards of the ROs coupled with balancing
the measures for welfare of the employees to motivate them in
rendering quality services, we are of the view that under the
Dealership Agreements, contractual obligations can always be cast
on the Dealers in the nature of directions issued under Clauses
5.1.18(a), (b) and (c).
(v) In our view, the directions issued in Clauses 5.1.18(a), (b)
and (c) are a step forward in the direction of welfare of the
employees of the ROs at the same time balancing the same with
the interest of the Dealers by ensuring that Dealers’ Margins are
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increased and no loss is caused. This Court finds no reason to
strike down the said Clause.

VI E. CLAUSE 8.3 – MAJOR IRREGULARITIES
71. For ready reference, Clause 8.3, as amended, reads as under:-
“ Clause 8.3:-

8.3 Major Irregularities:

The following irregularities are classified as major
irregularities:

i. Refusal by the dealer to allow drawl of samples/carry out
inspections.(5.1.8)

ii. Non availability of reference density at the time of
inspection. (5.1.9)

iii. Selling of normal MS/HSD as branded fuels. (5.1.10)

iv. Stock variation beyond permissible limits but sample passing
quality tests (5.1.11)

v. Non maintenance of records since last inspection. (5.1.12)

vi. Overcharging of MS/HSD/CNG/Auto LPG (5.1.13)

vii. Non provision of clear toilet facility. [5.1.14 (b)].

vii. Automated Retail outlets: 5.1.16 (a), (b), (c)

ix. Non-payment of Salary, Wages and other benefits (as per
clause 5.1.18)to the manpower employed at the ROs.

x. Short delivery of products with W&M seals intact: 5.1.2(a)

Action: Except in case of(iii), (vii), (viii), (ix) & (x) above:
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First instance: Suspension of sales and supplies for15days.

Second instance: Suspension of sales and supplies for30days.

Third instance: Termination of the dealership.

Action in case of(iii) above would be asunder:-

First instance: Penalty of recovery of differential price
since last inspection.

Second instance: Termination of the dealership.

Action in case of(vii) above would be asunder:-

First instance: Penalty ofRs.15,000 (Rupees Fifteen
Thousand).

Second instance: Penalty ofRs.25,000 (Rupees Twenty Five
Thousand)

Third & subsequent instances: (a) Rs.35,000 or 45% of the
monthly dealer margin (based
on average of last 6 months),
whichever is higher; and
(b)Suspension of Sales and
supplies for 7 days or
rectification of the defect in
toilet, whichever is later.

Action in case of (viii) above would be as under:-

First instance: Penalty of Rs. 1,00,000 (Rupees one lakh
only)

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Second instance: Penalty of Rs. 2,00,000 (Rupees two lakhs
only) and suspension of sales and supplies
for 7 days.

Third instance: Termination of the dealership.

Action in case of (ix) above would be as under:-

First instance: Penalty of 20% of the monthly dealer
margin (based on average of last 3 months).

Second instance: Penalty of 30% of the monthly dealer
margin (based on average of last 3 months).

Third & subsequent instances: Penalty of 40% of the monthly
dealer margin (based on
average of last 3 months) &
suspension of sales and
supplies for 15 days.

Action in case of (x) above would be as under:

First instance: Rs.25,000 (Rupees twenty five thousand
only) per nozzle found delivering short
beyond permissible limit as specified in
Legal Metrology Act/Rule.

Second instance:
(within one year of
st
1 instance): Rs.50,000 (Rupees fifty thousand only) per
nozzle found delivering short beyond
permissible limit as specified in Legal
Metrology Act/Rule & suspension of Sales
and supplies for 15 days.

Third instance
(within one year of
st
1 instance): Termination of the dealership.”
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72. Much was argued by learned Senior Counsel appearing for the
Respondents and Interveners that Appellants have no power, jurisdiction and
authority to levy the monetary penalties, for violation of the directions
issued under various Clauses of the MDGs and/or committing major
irregularities thereunder. It was also contended that Section 74 of the Indian
Contract Act, 1872 prohibits imposition of penalties and in case of breach of
any of the provisions of the Dealership Agreement, the OMCs can seek
compensation/damages, if the breach is established.

73. Per contra , learned Solicitor General urged that for every
irregularity/breach, termination of the Dealership Agreement, which is an
extreme penalty, cannot be resorted to.
74. We agree with the stance of the Appellants that “Termination of a
Dealership Agreement” is a major and extreme penalty and could be
disproportionate in a given case for a given irregularity/breach. It is for this
reason that Clause 8.3 not only classifies the major irregularities but also
enumerates the monetary penalties. Perusal of the said Clause, clearly
reveals that with due deliberation, the penalties have been provided for and
termination of the Dealership is only at the stage when the irregularities
reach the third stage after first and second stage of monetary penalties
including suspension of sales. This Court finds merit in the contention of the
Appellants that termination for every breach would be an extreme and harsh
step and would perhaps lead to termination of all dealerships or atleast to a
large extent, which is an avoidable situation.
75. In any case, it hardly needs a mention that once the Competent
Authority has the power to impose a major penalty, it would have the power
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and jurisdiction to impose lesser penalties. In this context, we may refer to
the judgment of the Hon’ble Supreme Court in State of Madhya Pradesh v.
Ram Ratan , 1980 Supp SCC 198, relevant paras of which are as under :-
“7. In service jurisprudence for different types of misconduct
various penalties are prescribed in service rules. 1966 Rules
prescribe as many as 9 penalties which can be awarded for
good and sufficient reasons. In the list of penalties the first
three are styled as “minor penalties” and the remaining six
are styled as “major penalties”. Compulsory retirement is one
of the major penalties. Similarly, removal from service which
shall not be a disqualification for future appointment in
Government service and dismissal from service which shall
ordinarily be a disqualification for future employment under
the Government are the other two major penalties. The
disciplinary authority keeping in view the gravity of
misconduct committed by the Government servant will
tentatively determine the penalty to be imposed upon the
delinquent Government servant. Degree of seriousness of
misconduct will ordinarily determine the penalty keeping in
view the degree of harm that each penalty can inflict upon the
Government servant. Before serving the second show-cause
notice the disciplinary authority will determine tentatively the
penalty keeping in view the seriousness of misconduct. But this
is a tentative decision. On receipt of representation in response
to notice, the disciplinary authority will apply its mind to it,
take into account any extenuating or mitigating circumstances
pleaded in the representation and finally determine what
should be the penalty that would be commensurate with the
circumstances of the case. Now, if a major penalty was
tentatively decided upon and a lesser or minor penalty cannot
be awarded on the view taken by the High Court because this
was not the specified penalty, the Government servant to whom
a notice proposing major penalty is served would run the risk
of being awarded major penalty because it would not be open
to award a lesser or a minor penalty than the one specified in
the show-cause notice. Such a view runs counter to the
principle of penology. In criminal and quasi-criminal
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jurisprudence where the penalties are prescribed it is implicit
thereunder that a major penalty would comprehend within its
fold the minor penalty. If a major penalty is proposed looking
to the circumstances of the case, at that stage, after taking into
consideration the representation bearing on the subject and
having an impact on the question of penalty a minor penalty
can always be awarded. In penal statute maximum sentence for
each offence is provided, but the matter is within the discretion
of the judicial officer awarding sentence to award such
sentence within the ceiling prescribed by law as would be
commensurate with the gravity of the offence and the
surrounding circumstances except where minimum sentence is
prescribed and court's discretion is by legislation fettered. This
is so obvious that no authority is needed for it but if one is
needed, a Constitution Bench of this Court in Hukum Chand
Malhotra v. Union of India [AIR 1959 SC 536 : 1959 Supp 1
SCR 892 : 1959 SCJ 419] dealt with this very aspect. Relevant
portion of the second show-cause notice which was before this
Court may be extracted:
“On a careful consideration of the report, and in particular of
the conclusions reached by the Enquiry Officer in respect of
the charges framed against you the President is provisionally
of opinion that a major penalty viz. dismissal, removal or
reduction should be enforced on you...”
Ultimately, after taking into consideration the representation
made by the concerned Government servant penalty of removal
from service was imposed upon him. It was contended before
this Court that in view of the decision of the Privy Council
in High Commissioner for India and High Commissioner for
Pakistan v. I.M. Lall [AIR 1948 PC 121 : (1948) 75 IA 225]
and Khem Chand v. Union of India [AIR 1958 SC 300 : 1958
SCR 1080 : (1959) 1 LLJ 167] it is well-settled that the
punishing authority must either specify the “actual
punishment” or “particular punishment” in the second show-
cause notice otherwise the notice would be bad. Repelling this
contention this Court observed as under:
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“Let us examine a little more carefully what consequences will
follow if Article 311(2) requires in every case that the “exact”
or “actual” punishment to be inflicted on the Government
servant concerned must be mentioned in the show-cause notice
issued at the second stage. It is obvious, and Article 311(2)
expressly says so, that the purpose of the issue of a show-cause
notice at the second stage is to give the Government servant
concerned a reasonable opportunity of showing cause why the
proposed punishment should not be inflicted on him; for
example, if the proposed punishment is dismissal, it is open to
the Government servant concerned to say in his representation
that even though the charges have been proved against him, he
does not merit the extreme penalty of dismissal but merits a
lesser punishment, such as removal or reduction in rank. If it is
obligatory on the punishing authority to state in the show-
cause notice at the second stage the “exact” or “particular”
punishment which is to be inflicted, then a third notice will be
necessary if the State Government accepts the representation
of the Government servant concerned. This will be against the
very purpose for which the second show-cause notice was
issued.
.. If in the present case the show-cause notice had merely
stated the punishment of dismissal without mentioning the
other two punishments, it would still be open to the punishing
authority to impose any of the two lesser punishments of
removal or reduction in rank and no grievance could have
been made either about the show-cause notice or the actual
punishment imposed.
….
10 . The fact situation in this appeal is that in the notice dated
February 12, 1970, the disciplinary authority stated that it was
tentatively proposed to impose major penalty viz. removal from
service. Original notice is in Hindi language. Its translation in
English language is placed on record. It clearly transpires
from the notice that the punishing authority tentatively
proposed to impose a major penalty of removal from service.
Ultimately, after taking into consideration the representation
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of the respondent the disciplinary authority imposed penalty of
compulsory retirement. In relation to penalty of removal from
service the penalty of compulsory retirement inflicts less harm
and, therefore, it is a lesser penalty compared to removal from
service. Compulsory retirement results in loss of service for
certain years depending upon the date of compulsory
retirement and the normal age of superannuation, but the
terminal benefits are assured. In removal from service there is
a further disqualification which may have some repercussion
on terminal benefits. It was not disputed before us that in
comparison to removal from service compulsory retirement is
a lesser penalty. Therefore, when in the second show-cause
notice major penalty of removal from service was tentatively
proposed, it did comprehend within its fold every other minor
penalty which can be imposed on the delinquent Government
servant. That having been done, no exception can be taken to
it.”
(emphasis supplied)

76. The relationship between the Dealers and the Appellants is guided by
Dealership Agreement subsisting between them. The said agreement
provides for certain obligations on the part of Dealers and in terms of breach
of such terms, the Appellants have a right to take action, including
termination of Dealership Agreement. The civil right under the agreement is
obviously in addition to and not in substitution to right of various State
Authorities or their Instrumentalities to take action against the Dealers for
violation of the terms of the Agreement or the directions issued to them
under the MDGs.
77. Appellants have formulated common Guidelines to provide for
uniform and consistent practices and action against the Dealers in the form
of MDGs. The provisions of MDGs are essentially between the Appellants
and the Dealers, covering their rights and obligations, on various counts
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such as, methodology of sampling, filling and decantation of tank lorries,
maintenance of equipment at Retail Outlets and other aspects of purely
commercial nature and linked with the Dealership Agreement.
78. The MDGs for Retail Outlets/SKO Dealerships, which have been in
existence for last 3 decades, facilitate marketing of petroleum products
(MS/HSD/SKO) by the Dealers on the principles of highest business ethics
and excellent customer service.
79. These Guidelines are updated/amended from time to time to meet the
growing customer expectations, ensuring quality & quantity of products and
service, enforcing discipline amongst the Dealers’ network and preventing
malpractices in the sale of petroleum products. MDGs aim to bring
consistency amongst the OMCs with respect to implementation of various
marketing practices and different cases of malpractices for taking civil
action under dealership agreements.
80. Penalties are imposed where malpractices and/or violation of
Guidelines are established as the Dealers are expected to carry on business
on the principles of highest business ethics and excellent customer service,
complying with the Guidelines.
81. Appellants brought out that it was noticed that in some cases, the RO
Dealers were involved in Chip manipulation, short delivery, not maintaining
toilets, etc. which was adversely affecting not only the image of the
Appellants but also the consumers. Short delivery of product, non-provision
of customer convenience facilities, selling of normal Petrol & Diesel as
branded products, etc. was affecting the brand image of the Appellants and
directly hitting the sales volume. In addition, the unwary customers are
short-changed. In view of the aforesaid, we agree with the Appellants that it
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was imperative that some sort of monetary penalties are provided for in the
MDGs, which would help in curbing the malpractices and be a deterrent, at
the same time falling short of the extreme penalty of terminating the
Dealership Agreement.
82. It bears repetition to state that once Clause 56 of Dealership
Agreement, entitles the OMCs to terminate the agreement, it is implicit that
the Appellants have the power to impose lesser penalties, as has been
stipulated in Clause 8.3 of the MDG-2017. For ready reference, Clause 56 of
the Dealership Agreement is extracted hereunder:-
“56. Notwithstanding anything to the contrary herein
contained the Corporation shall be at liberty to terminate this
Agreement upon or at any time after the happening of any of
the following events namely:-

a. If the dealer shall commit a breach of any of the
covenants and stipulations contained in the agreement and fail
to remedy such breach within four days of the receipts of a
written notice from the Corporation in that regard.

b. Upon
i. The death or adjudication as insolvent of the dealer if he
an individual.
ii. The dissolution of the partnership of the dealer’s firm or
the death or adjudication as insolvent of any partner of the
firm if the dealer be a firm.
iii. The liquidation whether voluntary or otherwise of the
passing of an effective resolution for winding up, if the dealer
be a company or co-operation society.

c. If any attachment is levied and continued to be levied for
a period of seven days upon the effects of the dealer or any
individual partner for the time being of the Dealer’s firm or
any member of the dealer Co-operative society.

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d. If the Dealer or any partner in the dealer's firm or any
member of the Co-operative society appointed as dealer
hereunder shall be convicted of a criminal offence.

e. If a receiver shall be appointed of any property or assets of
the dealer or of any partner in the dealer's firm of any member
of the dealer Co-operative society.

f. If the license issued to the dealer by the relevant authorities
for the storage of petroleum products supplied by the
corporation is cancelled or revoked.

g. If the dealer shall for any reason make default in payment to
the corporation in full or his outstanding as appearing in
corporation's books of account beyond 4days of demand by the
corporation.

h. lf the dealer does not adhere to the instructions issued from
time to time by the corporation in connection with safe
practices to be followed by him in the supply/storage of the
corporation products or otherwise.

i. If the dealer shall deliberately contaminate of temper with
the quality of any of the corporation's products.

j. If the dealer shall sell the corporation's products at prices
higher than those fixed by the corporation.

k. If the dealer shall either by himself or by his servants or
agents commit or suffer to be committed any act which in the
opinion of the General Manager of the corporation from the
time being in whose decision's shall be final, is prejudicial to
the interest or good name of the corporation or its products
the General Manager shall not be bound to give reasons for
such decision.

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l. If any information given by the dealer in his application for
appointment as a dealer shall be found to untrue or in correct
in any material respect.

The corporation right to terminate this Agreement under the
terms of this clause shall be without prejudice to any of its
other rights and remedies against the dealer. In the event of
the corporation terminating this agreement under the
provisions of this Clause, it shall not be liable to pay for any
loss or compensation in respect of such termination provided
that the supply of any petroleum by the corporation to the
dealer, pending expiry of an notice of termination or after any,
act, contravention or omission by the Dealer entitling the
corporation to terminate this agreement shall have become
known to the corporation shall not in any way prejudice or
affect the right of the corporation to revoke and/or enforce the
termination of this agreement and the license and the license
granted hereunder.”
(emphasis supplied)

VI F. CLAUSE 5.1.14(b) – NON-PROVISION OF CLEAN TOILET
FACILITY

83. Clause 5.1.14(b), which is incorporated by an amendment to
MDG-2012 w.e.f. 01.08.2017 reads as under:-
“ CLAUSE 5.1.14 (b): NON PROVISION OF CLEAN
TOILET FACILITY

Dealers should check daily and ensure the following:

a) Toilets are clean at all time.
b) Proper lighting is available.
c) Flush (whenever provided) is working properly.
d)Water is available.
e) Working latch is available on the toilet door.
f) Signage is available.
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g) Toilet door found to be locked.

The above protocol is to be prominently displayed near the
toilet. Maintenance sheet is to be maintained and displayed.

If OMC officials observe during the inspection that (a) Toilet
is found to be not clean or (b) Water is not available or (c)
Latch on the toilet door is not available/not working or (d)
Toilet door found to be locked at any outlet, a photograph of
the toilet shall be taken and letter shall be issued instantly
listing the penalty as per MDG.”


84. Learned counsels appearing on behalf of the Respondents and the
Interveners submitted that the RO Dealers cannot be compelled to extend
toilet facilities to persons other than employees/staff or the customers. This
Clause has been read down by the learned Single Judge to the extent that
access to RO toilet facility to persons other than employees/staff and other
customers would be at the discretion of the concerned RO Dealer and/or its
Manager. The RO Dealer/Manager will employ his/her discretion, keeping
in mind the security and safety of the RO. The RO Dealer/Manager will
have the right to deny access if he/she finds that the person is a dodgy
character or is carrying inflammable article(s) which he/she does not wish to
surrender, before making use of the toilet facility. Learned Solicitor General
did not seriously oppose the contention and in fact submitted that the toilet
facilities at the ROs are essentially provided for the use of the Dealer’s
employees/staff and the customers/consumers.
85. We are in complete agreement with the learned Single Judge that this
is a matter which is best left to the discretion of the ROs Manager, who, we
are sanguine, would be best suited to decide to whom the facility is to be
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extended. To this extent, the reading down of Clause 5.1.14(b) of the MDG-
2017, by the learned Single Judge, is upheld.
VII. CONCLUSION:
86. As a cumulative effective of aforesaid facts, reasons and judicial
pronouncements, we hereby uphold the amendments to MDG-2012,
incorporated on 03.10.2017, except to the limited extent as mentioned in
paragraph 85, hereinabove and set aside the impugned judgment, passed by
the learned Single Judge in W.P.(C) No.10334/2017, W.P.(C)
No.10746/2017 and W.P.(C) No.11246/2017, dated 18.03.2020.
87. The Appeals are partly allowed. All pending applications are
accordingly disposed of.


CHIEF JUSTICE



JYOTI SINGH, J
JANUARY 10, 2022
kks

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