LPG Distributor Who Agreed to Pay Rs.10.77 Lakh Penalty in Instalments Can’t Challenge It, Gauhati HC Holds

In brief

The question

Whether the petitioner could challenge the penalty after requesting and accepting permission to pay it in instalments, and then paying the amount.

The court held

The Court held that the petitioner was not entitled, in light of his conduct, to maintain the challenge to the penalty order.

It also directed

The writ petition was dismissed, with no order as to costs.

01Facts

On 11 August 2018, Indian Oil Corporation Ltd. (IOCL) inspected the petitioner’s LPG godown and recorded that 391 cylinders and 57 pressure regulators were missing.

¶ 3

After issuing a show-cause notice, IOCL imposed a penalty of ₹9,13,550 plus GST, totalling ₹10,77,989, by order dated 22 October 2018; the petitioner’s appeal was dismissed on 26 March 2019.

¶ 4–6

The petitioner then requested permission to pay in instalments and declared that he would pay the penalty on the terms imposed.

¶ 7–9

He paid the amount in twelve instalments, including payments made after filing the writ petition, but later asserted that payment was under protest.

¶ 7–9, 13

He challenged the penalty on the grounds that his show-cause reply had not been considered and that Clause 2.1 of the Marketing Disciplinary Guidelines (MDG) had not been specified in the show-cause notice.

¶ 14–15

02Issues

i.Whether the petitioner could challenge the penalty after requesting and accepting permission to pay it in instalments, and then paying the amount.

¶ 20–23

ii.Whether the penalty was liable to be interfered with on the pleaded grounds that the petitioner’s reply was not considered and that Clause 2.1 of the MDG was not specified in the show-cause notice.

¶ 14–15, 21

03Law Applied

The Court applied the doctrine of approbate and reprobate, a species of estoppel grounded in the doctrine of election: a party who knowingly accepts and obtains the benefit of an order or transaction cannot later deny its validity or binding effect to secure a different advantage.

¶ 22

The doctrine must be applied consistently with equity and good conscience and cannot operate contrary to statute.

¶ 22

The Court relied on Union of India v. N. Murugesan, (2022) 2 SCC 25, which discusses this doctrine and cites, among other authorities, Nagubai Ammal v. B. Shama Rao, State of Punjab v. Dhanjit Singh Sandhu, and Rajasthan State Industrial Development & Investment Corpn. v. Diamond & Gem Development Corpn. Ltd.

¶ 22

The penalty was imposed under Clause 3.1 of the MDG.

¶ 2

04Reasoning

The Court found that, after the appeal was dismissed, the petitioner unequivocally sought permission to pay the penalty in instalments and declared himself willing to comply with the terms imposed.

¶ 20

IOCL granted that request, and the petitioner paid the penalty in instalments; he had not stated at the time that payment was under protest or without prejudice to his rights.

¶ 20, 22

Nor had he sought the Court’s leave to make the remaining payments during the writ proceedings without prejudice.

¶ 20

In those circumstances, the petitioner had accepted the benefit of the instalment arrangement and could not, by subsequently challenging the penalty, approbate and reprobate.

¶ 21–23

The Court therefore held that his conduct disentitled him from maintaining the challenge, without separately deciding the merits of the alleged procedural defects.

¶ 21–23