Interpretation of two commission revision orders


Dear Dealer Friends,

The Commission of  Retail Outlets was increased as well the commission of LPG Distributors.

You can find both of the orders in the following links.

http://petroleum.nic.in/order1.pdf

http://petroleum.nic.in/order2.pdf

From the above orders, as per the above order 1, the LPG Distributors received an ad hoc commission before finalization of the commission from July 2009 after formation of commission revision committee of LPG Distributors.

As per the above order 2, the Dealers received an enhancement of commission effective from 1.7.2011.

I found some interesting statistics from the websites of MOPNG (Petroleum Ministry) & MORTH (Transport Ministry) websites and made some interpretations. All information is from sites and all interpretations are mine.

The websites are

http://morth.nic.in/writereaddata/sublink2images/RTYB_2007_096497784135.pdf

http://petroleum.nic.in/petstat.pdf

The interpretations are as follows:

Total number of LPG Distributors inIndiais 9366

Total number of Retail outlets in the country is 34948.

Total Number of Domestic LPG customers in India is 10.56 crores

Total number Vehicles inIndiais 11.50 Crore Vehicles.

On an average, there are 11278 Domestic LPG connections (permanent customers) to an LPG distributor.

On an average, there are only 3290 motor vehicle (non-permanent) customers to a Retail outlet. 

In which two wheeler are of the majority -71.70 % of the total number of registered motor vehicles are two wheelers.

The LPG Distributors’ commission on 14.2 kg Domestic LPG cylinder

is RS 25.83/cylinder which works out to an average commission of 6.55 %.

The Dealer commission is Rs1.49/ Ltr for MS and Rs 0.91/Ltr for HSD which works out to an average commission of 2.15 % 

 The above factors are self explanatory. I present these in addition to the representation to the committee which is available in the following link.

http://petroleumdealers.files.wordpress.com/2010/12/representation_to_the_commitee.pdf

regards,

K.Rajasekaran

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8 Responses to Interpretation of two commission revision orders

  1. pankaj says:

    The Essential Commodities Act, 1955
    Sukhdev Singh & Ors vs Bagatram Sardar Singh … on 21 February, 1975
    Okhla Enclave Plot Holders Wel. Ason. Vs. U O I & Ors on 21 October, 2008
    Hindustan Petroleum Corpn. Ltd. vs Union Of India on 6 September, 1995
    Sumitomo Corporation vs Cdc Financial Services … on 22 February, 2008
    Citedby 1 docs
    Ayush Petrol Pump vs Hindustan Petroleumcorporation … on 14 September, 2010

    Chattisgarh High Court

    Mahamaya Service Centre vs Indian Oil Corporation Limited … on 9 September, 2010
    WRIT PETITION C 1668 OF 2009

    Mahamaya Service Centre

    …Petitioners

    Versus

    Indian Oil Corporation Limited & Others …Respondents

    ! Shri Prateek Sharma

    ^ Shri P S Koshy

    CORAM: Honble Shri Satish K Agnihotri J

    Dated: 09/09/2010

    : JUDGEMENT

    O R D E R

    Writ petitions under Article 226 of the Constitution of India

    1. By this petition, the petitioner seeks to challenge

    the legality and validity of the order dated 09/03/2009

    (Annexure P/1) passed by the Appellate Authority, Indian

    Oil Corporation Limited, Mumbai, whereby the appeal

    preferred by the petitioner against the order dated

    01/09/2008 (Annexure P/15) was dismissed. The Retail

    Outlet (Gramin Sewa Kendra) Dealership at Birra, Distict-

    Janjgir-Champa allotted in favour of the petitioner was

    terminated, by order dated 1/9/2008. The petitioner

    further seeks a direction to the respondents for

    uninterrupted supply of HSD to the petitioner, in

    accordance with law.

    2. The facts, in short, for disposal of the case, are that on 11/12/2006 an agreement was executed between the petitioner and the respondent-Indian Oil Corporation Limited (for short "IOCL") whereby the petitioner was appointed as Dealer of Retail Outlet (Gramin Sewa Kendra) Dealership at Birra, Distict-Janjgir-Champa (for short "RO") for sale of petrol [MS/High Speed Diesel (HSD)] of the IOCL.

    3. According to the petitioner, on 20/10/2007, the officers of the IOCL reached to the RO of the petitioner and demanded money. On refusal, the authorities of the IOCL conducted inspection at about 7.30 p.m. in absence of proper light. Thereafter, the alleged adulterated sample was taken away. On 22/10/2007, a marker test was conducted at Bishrampur, where the petitioner put his signature on the report mentioning that `esjs fglkc ls column No.04085481 dk fjtYV fiad ugha gS’. The marker test report dated 22/10/2007 was prepared (Annexure P/5).

    4. The petitioner received a show cause notice dated 07/11/2007 (Annexure P/6) whereby the petitioner was directed to explain the reasons for not turning up for witnessing the retesting of the sample at Nishatpura Lab, Bhopal on 02/11/2007. The petitioner submitted his reply on 15/11/2007 stating that no notice was served upon him to appear at Nishatpura Lab, Bhopal on 02/11/2007. Again on 13/12/2007 (Annexure P/7) the petitioner was directed to present at Nishatpura Lab, Bhopal on 20/12/2007. The petitioner appeared on the said day, but the testing was not done. The reasons for the same are best known to the authorities of IOCL. The petitioner raised an objection stating that no sample has been given to him and the sample taken by the IOCL is 60 days old, thus, he requested for taking new sample. However, without considering the objection raised by the petitioner and behind the back of the petitioner on 21/12/2007, the test was conducted and the report was prepared (Annexure P/9).

    5. On 28/02/2008 (Annexure P/12) show cause notice was issued to the petitioner regarding the alleged irregularities committed by him and calling upon the petitioner to submit his reply within 10 days. Accordingly, the petitioner submitted his reply dated 11/03/2008 (Annexure P/13). After receipt of the reply, by order dated 10/09/2008 (Annexure P/15), allotment of the RO of the petitioner was terminated.

    6. Being aggrieved by the said termination order, the petitioner preferred an appeal before the appellate authority. The appeal was dismissed by order dated 09/03/2009 in an illegal and arbitrary manner and without appreciating the points raised by the petitioner. Thus, this petition.

    7. Shri Sharma, learned counsel appearing for the petitioner, would submit that the inspection was conducted by the officials of the IOCL on 20/10/2007 in an abnormal atmosphere and without having proper lighting facility. The Bishrampur Lab is not a notified testing lab for conducting marker test of the HSD, as per the requirement of MDG 2005. Shri Sharma would further submit that no proper opportunity of hearing was afforded to the petitioner and even the principles of natural justice has also not been followed in its letter and spirit. The test at Nishatpura Lab was conducted on 21/12/2007 behind the back of the petitioner and without considering the objection submitted by the petitioner on 20/12/2007. While dismissing the appeal of the petitioner, preferred against the termination order dated 10/09/2008, the appellate authority has not considered the points raised by the petitioner.

    8. Shri Sharma would next submit that under the provisions of clause 2.4.2 of the Marketing Discipline Guidelines, 2005 (for short "the MDG, 2005") one sample is to be retained by the dealer out of three samples. Admittedly, no sample was given to the dealer for comparison. Thus, this amounts to denial of proper opportunity of hearing.

    9. On the other hand, Shri Koshy, learned counsel appearing for the respondents would submit that the allegation regarding demand of money by the officers of the IOCL is absolutely baseless and false. On a routine inspection carried out by the officials, they found that the HSD was adulterated. Shri Koshy would further submit that the petitioner was noticed for being present in the sample test which was to be carried at Nishatpura Lab, Bhopal on 02/11/2007 vide letter dated 30/10/2007. Apart from the letter of intimation, the petitioner and the transporter were verbally instructed by the field officer to come at Nishatpura Lab on 02/11/2007, but the petitioner did not turn up. Though the petitioner reached to Nishatpura Lab on 20/12/2007 but he refused to witness the re-testing of the sample. The full clinical test was conducted on 21/12/2007 and it was established that the RO sample did not meet with the specification with respect to sulphur test, whereas the TT/Depot Sample did meet such specification. Therefore, it was confirmed that the product being sold at the RO of the petitioner was adulterated. After considering all the aspects of the matter, the termination order of allotment of RO was passed. Even the appellate authority after considering the matter from all angles rightly rejected the appeal of the petitioner and the same does not warrant any interference by this Court.

    10. Shri Koshy would next submit that challenging the validity of the marker test procedure and its consequences, a number of petitions have been filed before many High Courts, after considering its purpose and all other relevant aspects, it has been found valid, just and in accordance with law. Thus, there is no illegality or irregularity in the marker test procedure, which had been performed by the IOCL. The subject matter of the same is a contractual dispute under the contract dated 11/12/2006. The petitioner, being a dealer of the IOCL is duty bound to maintain the requisite standard of the product supplied by the IOCL in order to assure the growth in business and also to maintain the goodwill of the IOCL but the petitioner has failed to do the same.

    11. Shri Koshy would also submit that clause 8 of the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005 (for short "the Order, 2005") has been amended by notification dated 12/1/2007 and new control Order namely; Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Amendment Order, 2007 (for short "the Amendment Order, 2007") was brought in force w.e.f. 12/1/2007 (Annexure – R/1).

    12. I have heard learned counsel appearing for the parties, perused the pleadings and the documents appended thereto.

    13. There is no dispute with regard to date of inspection of RO on 20/10/2007. It is further not in dispute that one sample of HSD collected from RO was not given to the dealer (the petitioner). In the test conducted at Bishrampur on 22/10/2007, which was attended by the petitioner, the result showing pink was doubted by the petitioner. Thereafter, notice dated 13/12/2007 (Annexure – P/7) was issued directing the petitioner to remain present at Nishatpura Lab, Bhopal on 20/12/2007 for witnessing the test. It is also not in dispute that pursuant to the said notice, the petitioner appeared on 20/12/2007, but the test was not conducted on the said date and the same was conducted on the next date i.e. 21/12/2007 without informing the petitioner. The test was conducted on 21/12/2007 at Nishatpura Lab, Bhopal, without giving information to the petitioner and at the back of the petitioner. Thus, unhesitatingly I hold that the test on 21/12/2007 was not conducted in presence of the petitioner.

    14. The purpose of retaining a sample by the dealer is that in case of sample failure and in the event of request for testing by the dealer, the same is to be considered by the State Office/ Regional Office / Zonal General Manager of the concerned oil company as provided under 2.5 (D) of the MDG, 2005.

    15. Clause 2.5 (D) of the MDG, 2005 reads as under : "2.5 General Points to be observed in all cases

    xxx xxx xxx

    xxx xxx xxx

    xxx xxx xxx

    D) In case of sample failure, in the event of request for

    testing by the dealer, the

    same to be considered on

    merits by the State Office/

    Regional / Zonal General

    Manager of the concerned Oil

    Company. If approved by GM,

    the sample of retail outlet

    retained by the dealer along

    with the counter sample

    retained with the Field

    Office/ Oil Company are to be

    tested as per the guidelines,

    preferably in presence of the

    Field Officer, RO dealer/

    representative & representative of QC Dept. of

    the Oil Co. after due

    verification of the samples.

    All the 3 samples should be

    tested only in the same lab,

    and if possible by the same

    person to ensure repeatability

    and reproducibility. The

    expenditure incurred for such

    testing should be recovered

    from the dealer. The decision

    of the GM, which would be

    based on the test results of

    all the 3 samples would be

    decisive and binding on all."

    16. MDG, 2005 have been framed in accordance with the

    provisions of the Order 2005. Thus, it appears that

    retention of a sample by the dealer is necessary to cross-

    check the report prepared by the officials on the basis of

    the sample retained by the dealer.

    17. In the case on hand, admittedly the sample collected by the IOCL was tested at Nishatpura Lab, Bhopal on 21/12/2007 behind the back of the petitioner, as there was no notice to the petitioner to remain present on 21/12/2007 to witness the testing of sample. Thus, retention of a sample by the dealer becomes necessary. In such a situation it cannot be ruled out that the testing conducted by the IOCL officials was proper, as the other obligations as provided under clause 8 of the Order 2005 read with clause 2.5 (D) of the MDG 2005 was not followed in its letter and spirit.

    18. Reliance of the learned counsel appearing for the respondents upon the decisions of the High Court of Jharkhand in Jharkhand Petroleum Dealers Association v. Union of India and Others1, High Court of Jammu & Kashmir in Kashmir Valley Tank Owners v. UOI and Others2 and High Court of Madhya Pradesh in Bhopal Petroleum Multipurpose Dealers, M.P. v. Union of India and Others3, are not relevant to the facts of the case on hand, as there is no challenge to the marker test or there is no demand for supply of marker test kit by the petitioner in the instant petition.

    19. The next contention of the respondents that the statutory requirement to give one sample to the dealer as provided under the clause 8 of the Order 2005 has been dispensed with by amendment Order, 2007 is not correct on the face of it.

    20. Original clause 8 of the Order 2005 reads as under : "8. Sampling of Product.-(1) The authorized under clause 7 shall draw the sample from the tank, nozzle, vehicle or receptacle, as the case may be, in clean aluminum containers to check whether density and other parameters of the product conform to the requirements of Bureau of Indian Standards specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively. Where samples are drawn from retail outlet, the relevant tank-truck sample retained by the dealer as per clause 3 (b) would also be collected for laboratory analysis.

    (2) The authorized officer shall take and seal six samples of 1 litre each of the motor spirit or three samples of 1 litre each of the high speed diesel. Two samples of motor spirit or one of high speed diesel would be given to the dealer or transporter or concerned person under acknowledgment with instruction to preserve the sample in his safe custody till the testing or investigations are completed. Two samples of Motor Spirit or one of High Speed Diesel shall be kept by the concerned oil company or department and the remaining two samples of Motor spirit or one of High Speed Diesel would be used for laboratory analysis;

    (3) The sample label shall be jointly signed by the authorized officer who has drawn the sample, and the dealer or transporter or concerned person or his representative and the sample label shall contain information as regards the products, name of retail outlet, quantity of sample, date, name of the authorized officer, name of the dealer or transporter or concerned person or his representative;

    (4) The authorized officer shall forward the sample of the product taken within ten days to any of the laboratories mentioned in Schedule III or to any other such laboratory when it may be notified by the Government in the Official Gazette for this purpose, for analysing with a view to checking whether the density and other parameters of the product conform to the requirements of Bureau of Indian Standard specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively.

    (5) The laboratory mentioned in sub-clause (4) shall furnish the test report to the authorized officer within twenty days of receipt of sample at the laboratory.

    (6) The authorized officer shall communicate the test result to the dealer or transporter or concerned person and the oil company, as the case may be, within five days of receipt of test results from the laboratory for appropriate action."

    21. Clause 8 of the Amendment Order 2007 published by

    notification dated 12/1/2007 reads as under :

    "G.S.R. 18 (E).-In exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (10 of 1955) the Central Government hereby makes the following order to amend the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005, namely;

    1.(1) This Order may be

    called the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Amendment Order, 2007.

    (2) It shall come into force

    on the date of its publication in the Official Gazette.

    xxx xxx xxx

    xxx xxx xxx

    xxx xxx xxx

    (3) In the said order, in clause

    8.—

    (a) for the heading "sampling of product", the heading

    "sampling of product and

    testing" shall be

    substituted.

    (b) after the heading and

    before the sub-clause

    (1), the following sub-

    clause shall be inserted,

    namely :-

    "(1A) The authorized

    officer under clause 7

    shall draw the sample

    from the tank, nozzle,

    vehicle or receptacle, as

    the case may be, in the

    test kit and test the

    product with the aid of

    test kit, to check

    whether the product

    contains any traces of

    marker. If such traces

    are found in the product,

    the authorized officer

    shall record the same in

    triplicate which shall be

    jointly signed by him and

    the dealer or transporter

    or concerned person or

    his representative, as

    the case may be, and give

    one copy of such

    recording to the dealer

    or transporter or

    concerned person or his

    representative and

    another copy to the oil

    company concerned, as the

    case may be".

    (c) in sub-clause (1), for

    the words, "the

    authorized", the

    following shall be

    substituted, namely :-

    "Where the product does

    not contain marker under

    sub-clause (1A), the

    authorized officer".

    "G.S.R. 19 (E).-In exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (10 of 1955) the Central Government hereby makes the following order further to amend the Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993, namely :–

    1.(1) This Order may be

    called the Kerosene (Restriction on Use and Fixation of Ceiling Price) Amendment Order, 2007 .

    (2) It shall come into force

    on the date of its publication in the Official Gazette.

    xxx xxx xxx

    xxx xxx xxx

    xxx xxx xxx

    (3) In the said order, after

    clause 8, the following clause shall be inserted, namely :-

    "8A. Kerosene to be blended with marker-All kerosene sold

    in India, whether under the

    public distribution system or

    parallel marketing system,

    shall be blended with marker

    at five parts per million

    (ppm) concentration with the

    objective of preventing its

    diversion or adulteration of

    other petroleum products."

    22. Clause 8 of the Order 2005 was amended to the effect

    for the heading `sampling of product’ was substituted by

    the heading `sampling of product and testing’. After sub-

    clause (1), sub-clause (1A) was inserted. There is no

    change/amendment in sub-clause (2) of clause 8 of the

    Order 2005, which provides for giving of one sample of

    High Speed Diesel to the dealer. Clause 8A has also been

    inserted dealing with Kerosene to be blended with maker

    without any amendment in sub-clause (2) of clause 8 of the

    Order, 2005. Thus, sub-clause (2) of clause 8 of the

    Order, 2005 remains un-amended and the same ought to have

    been given full effect to.

    23. In Hindustan Petroleum Corporation Limited and Others v. Super Highway Services and Another4, while considering the termination of dealership the Supreme Court observed as under :

    "31. The cancellation of dealership agreement of a party is a serious business and cannot be taken lightly. In order to justify the action taken to terminate such an agreement, the authority concerned has to act fairly and in complete adherence to the rules/guidelines framed for the said purpose. The non-service of notice to the aggrieved person before the termination of his dealership agreement also offends the well- established principle that no person should be condemned unheard. It was the duty of the petitioner to ensure that Respondent No.1 was given a hearing or at least serious attempts were made to serve him with notice of the proceedings before terminating his agreement.

    33. The guidelines being followed by the Corporation require that the dealer should be given prior notice regarding the test so that he or his representative also can be present when the test is conducted. The said requirement is in accordance with the principles of natural justice and the need for fairness in the matter of terminating the dealership agreement and it cannot be made an empty formality. Notice should be served on the dealer sufficiently early so as to give him adequate time and opportunity to arrange for his presence during the test and there should be admissible evidence for such service of notice on the dealer. Strict adherence to the above requirement is essential, in view of the possibility of manipulation in the conduct of the test, if it is conducted behind the back of the dealer."

    24. With regard to the contention of the respondents that

    the disputed had arising out of a contract is noticed to

    be rejected on a simple ground that the IOCL has been held

    as an organ or instrumentality of the State as

    contemplated under the provisions of Article 12 of the

    Constitution of India. (See Mahabir Auto Stores and others

    v. Indian Oil Corporation and Others5). Thus, the

    arbitrariness, discrimination and unreasonableness

    exercised on the part of respondent Corporation can be

    examined by this Court under the writ jurisdiction.

    25. The test conducted on 21/12/2007 and the report of

    the same was intimated to the petitioner on 28/2/2008,

    which was also in contravention of the provisions of sub-

    clause (6) of clause 8 of the Order 2005.

    26. It is a duty cast on the authorities of the State and the instrumentalities of the State that they should follow the proper procedure prescribed in the rules and regulations. The contravention of the same cannot be permitted. It is uncontroverted legal position that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all.

    27. A constitution Bench of the Supreme Court in Sukhdev Singh and others v. Bhagatram Sardar Singh Raghuvanshi and another6, observed that the rules and regulations framed by the statutory Corporations have the force of law and, as such, the statutory authorities cannot deviate from the statutory provisions. If there is any deviation, the Court may invalid such actions in violation of statutory rules and regulations by a legal sanction of declaration. (See Haresh Dayaram Thakur v. State of Maharashtra and Others7 and Prabha Shankar Dubey v. State of Madhya Pradesh8).

    28. In Sukhdev Singh (supra), the Supreme Court observed as under :

    "33…These regulations impose obligation on the statutory authorities. The statutory authorities cannot deviate from the conditions of service. Any deviation will be enforced by legal sanction of declaration by courts to invalidate actions in violation of rules and regulations…"

    29. In the case on hand, indisputably the provision of

    clause 8 of the Order 2005 read with MDG 2005 have not

    been complied with. Thus, the respondents cannot claim

    any sanctity in law and the Court is well within its

    jurisdiction to declare such an act illegal and invalid.

    30. For the reasons mentioned hereinabove, the impugned order dated 9/3/2009 (Annexure – P/1) passed by the Appellate Authority, Indian Oil Corporation Limited, Mumbai, is not sustainable in the eye of law and the same is hereby quashed. Consequently, the termination order dated 10/09/2008 (Annexure P/15) also stands quashed.

    31. In the result, the writ petition is allowed.

    32. There shall be no order asto costs.

    J u d g e

  2. pankaj says:

    Section 138 in The Negotiable Instruments Act, 1881
    Mahamaya Service Centre vs Indian Oil Corporation Limited … on 9 September, 2010
    The Negotiable Instruments Act, 1881
    Mahabir Auto Stores & Ors vs Indian Oil Corporation & Ors on 6 March, 1990
    Article 12 in The Constitution Of India 1949

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    Chattisgarh High Court

    Ayush Petrol Pump vs Hindustan Petroleumcorporation … on 14 September, 2010
    WRIT PETITION C 7518 of 2009

    Ayush Petrol Pump

    …Petitioners

    Versus

    Hindustan PetroleumCorporation Limited & Others …Respondents

    ! Shri Sanjay K Agrawal, Shri J Pali

    ^ Shri P S Koshy,Shri N N Roy

    CORAM: Honble Shri Satish K Agnihotri J

    Dated: 14/09/2010

    : JUDGEMENT

    O R D E R

    WRIT PETITION UNDER ARTICLE 226/227 OF THE CONSTITUTION OF INDIA

    1. Challenge in this petition is to the order dated

    21.12.2009 (Annexure P/1) whereby the dealership of the

    petitioner-firm has been terminated on the ground that the

    petitioner has committed breach of clause 42, 44, 55(G)

    alongwith clause 10, 11, 12, 43 and 55(K). It is further

    prayed that consequently, the respondent No. 1 and 2 be

    directed to restore the suspended supply of Motor Spirit

    (for short `the M.S.) and High Speed Diesel (for short

    `the H.S.D.’).

    2. The brief facts, in nutshell, as projected by the petitioner is that the proprietor namely Dr. Mukesh Kumar Agrawal (hereinafter referred to as `the proprietor’), of the petitioner-firm namely Ayush Petrol Pump, is also a proprietor of a nursing home namely, Agrawal Nursing Home at Bhilai, and operates through other qualified staff for charity purposes. According to the petitioner, the role of proprietor in the said nursing home is only of a care taker for smooth functioning of the nursing home and no income is derived from the said nursing home. The petitioner- firm was appointed as dealer of the respondent No. 1 and 2-Corporation for sale of petroleum products including MS and HSD, w.e.f. 23.03.2005 (Annexure P/2). The petitioner was under an obligation to pay full price of delivery to be made on the supplies received at the depot effecting the sale of the products. Accordingly, the petitioner left several cheque books containing several signed cheque leaves with the depot of the Corporation in good faith anticipating that the Corporation authorities would fill in the correct amounts and dates on such cheque leaves against supplies to be made to the petitioner. On account of ill health of the father of the proprietor, the petitioner could not reconcile the account and his father died on 30.07.2009. The petitioner received a notice on 01.08.2009 (Annexure P/5) for payment of the amount to the tune of Rs. 26,33,033.94 immediately, followed by another notice dated 07.08.2009 (Annexure P/6) to pay a sum of Rs. 15,58,498.92 towards the principal amount and Rs. 30,000/- towards balance interest for the dishonored cheques. The petitioner immediately deposited a sum of Rs. 27,81,487.45 during the period from 03.08.2009 to 05.08.009. The petitioner submitted its reply on 25.08.2009 (Annexure P/7) stating the reasons for non-reconciling the account, however, made it clear that he had already submitted demand drafts against the returned cheques. After receipt of the entire amount alongwith interest, the respondent No. 1 and 2/Corporation decided to issue show cause notice to the petitioner on 25.08.2009 (Annexure P/8) for showing cause asto why necessary action may not be taken against the petitioner as deemed fit in terms of clauses 10, 11, 12, 42, 43, 55(g) and 55(k) of the Dealership Agreement dated 24.02.2005. The time to submit reply was 7 days from the date of receipt of the notice. The petitioner replied to the said notice on 27.8.2009 (Annexure P/9). Thereafter, the impugned order 21.12.2009 (Annexure P/1) was passed. Thus, this petition.

    3. Shri Sanjay K. Agrawal, learned counsel appearing for the petitioner with Shri Jitendra Pali, would submit that the petitioner had deposited the entire amount alongwith interest before issuance of the show cause notice for termination of the petitioner’s dealership stating, inter- alia, that the dishonor of cheques had been taking place for a long time and the petitioner continued to lift the product from HPCL depot without taking corrective measures. Shri Agrawal would further submit that the account could not be reconciled due to prolonged illness of the father of the proprietor of the petitioner-firm, as well as for the reason that the petitioner was never informed before 01.08.2009. Shri Agrawal would next submit that clause 55(g) of the dealership agreement clearly provides that if the dealer, for any reason makes default to make payment to the Corporation in full or his outstanding as appearing in the corporation books of account beyond 4 days of demand by the corporation, the corporation shall be at liberty to terminate the agreement. It is further provided that if there is any breach of any of the covenants and stipulation contained in the agreement, and fail to remedy such breach within four days of the receipt of a written notice from the corporation in that regard, the dealership would be terminated. In the case on hand, the respondent No. 1 and 2/Corporatoin has not given any such notice to remedy any alleged breach of the clause of agreement within the stipulated period and even the show cause notice which was given after deposit of the entire amount also, does not disclose that if there was any breach, the dealer was under obligation to remedy the same within a period of four days of the receipt of written notice from the Corporation in that regard. Thus, the act of the respondent No. 1 and 2/Corporation is contrary to the provisions of the agreement, unreasonable, arbitrary and discriminatory. In the instant case, no such notice of four days as provided in section 55-A of the dealership agreement, was ever issued to the petitioner for remedying the alleged breach of clauses 10, 11, 12, 42, 43, 555(J) and 55(K)

    4. Shri Agrawal, in support of his contention would rely on Hindustan Petroleum Corporation Limited & Others v. Super Highway Services & another1, handed down by the Supreme Court and a decision of this Court in M/s. Sai Service Station v. Indian Oil Corporation & Others2 and the latest decision of this Court in Mahamaya Service Centre v. Indian Oil Corporation Limited & Others3.

    5. Shri Agrawal would further contend that no cause of action has arisen under the provisions of Negotiable Instrument Act, 1881 (for short `the act, 1881′) as section 138 of the Act, prescribes that to constitute an offence, six ingredients are required to be fulfilled to say that person who had drawn the cheques can be deemed to have committed an offence of the dishonor of cheques within the meaning of section 138 of the Act, 1881. No notice or demand was issued for the payment of dishonor of cheques providing 15 days time as contemplated under section 138 of the Act, 1881 and as such, the same is not available to the respondent No. 1 and 2/Corporation.

    6. Per contra, Shri Koshy, learned counsel appearing for the respondent No. 1 and 2/Corporation would submit that the impugned order was passed on the ground of violation of clauses clause 42, 44, 55(G) along with clause 10, 11, 12, 43 and 55(K) of the dealership agreement dated 24.02.2005 (Annexure P/3). Shri Koshy would further submits that this petition filed under Article 226 of the Constitution of India, is to enforce a civil liability arising out of breach of contract to pay the amount due to the respondent-Corporation and as such, the same is not maintainable, on the ground of availability of an alternative remedy in terms of arbitration agreement as per clause 66 of the dealership agreement. The supplies were stopped by the respondent No. 1 and 2/Corporation, when it was found that there were financial irregularities on the part of the petitioner by not paying the dues. Thereafter, paying back the money does not absolve the petitioner from the wrong committed by it and the same amounts to violation of the dealership agreement. There is no public element involved in this case. It is a matter of breach of contract which can be agitated before the Civil Court of competent jurisdiction. An ad hoc dealer has been appointed in place of the petitioner. It is a case where the payment of post-dated cheques have been stopped by the petitioner. The petitioner was a habitual defaulter in making payment as the cheques were not dishonored once, but on several occasions. The petitioner was informed about the dishonor of cheques through telephonic communication. There is no mandatory requirement of issuance of the show cause notice before suspension of sales and supplies of MS/HSD as per the existing norms. Suspension was due to the outcome of non-transfer of funds to the respondent No. 1 and 2/Corporation. Shri Koshy would further submit that the petitioner has paid the balance amount after a much delay of demand. Accordingly, after ensuring full payment, the show cause notice was issued.

    7. Having considered the rival submissions made by learned counsel for the parties, the facts involved in the case on hand are indisputable. There is no dispute that the petitioner failed in honoring the cheques issued by him for supply of MS and HSD and failed to make regular payment for supply of MS and HSD. Thereafter, a notice was issued on 01.08.2009 and subsequently, the entire amount i.e. the principal sum with interest, as demanded, was paid before 25.08.2009. Thus, there is no dispute involved in the instant writ petition.

    8. The relevant clauses of the dealership agreement viz.

    10, 11, 12, 42, 43, 44, and clause 55 reads as under:

    10. The corporation will deliver its said products to the dealer at the rates therefor ruling on the date of delivery, the corporation will make delivery of products to the dealer against payment in cash or by demand draft. The corporation may, however, as its sole discretion agree to give such credit/cheque facilities as it deems fit to the dealer from time to time and for such period or periods as the corporation considers appropriate and may cancel or vary the same at any time without assigning any reason therefor and without giving any advance notice. In the event that the corporation shall agree to extend any such credit facility, the dealer shall settle all bills punctually within the period of credit allowed without any deduction whatsoever and without claiming to set off against the amount of such bills any amount admittedly due or alleged to be due by the corporation to the dealer. In the event of the amount of any bill or part thereof preferred by the corporation upon the dealer remaining unpaid for a period of four days. The corporation shall be at liberty to refuse supply any further product to the dealer and also to forthwith treat this agreement as being repudiated by the dealer.

    Sales tax, surcharges and other

    levies or charges, applicable from time to time, shall be extra, should there be any change in the incidence, rates, charge or levy of such taxes, surcharges and other levies or charges, on account of any change in the basis of levy or in the interpretation of law for any reason whatsoever, all such taxes, surcharges, levies or charges shall be payable by the dealer to the corporation in accordance with such changes from the date of such a change is in force and/or made effective on all sales of the products made hereunder, notwithstanding that such sales were made before the date of such change.

    In the event of the corporation has to supply the products to a dealer in another State, the corporation shall dispatch the products to the dealer with the corporation as the consignor and the dealer as consignee. The dealer shall issue necessary declarations as prescribed under the central sales tax act and the rules made thereunder to enable the corporation to charge concessional rate of tax in respect of such sales.

    11. Notwithstanding that credit may be given for the payment of the price of the products. The corporation shall be entitled, without assigning any reason thereof, to resume and keep possession of the goods until payment.

    12. In addition to any right of lien to which the corporation may by law or under this agreement be entitled, the corporation shall be entitled to have a first charge or lien on all goods of the dealer for the unpaid price of any goods sold and delivered to the dealer by the corporation under this agreement.

    42. The dealer undertakes faithfully and promptly to carry out, 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. The dealer shall scrupulously observe and comply with all laws, rules regulations and requisitions of the Central/State Government and of all authorities appointed by them by either of them including in particular the Chief Controller 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.

    43. The dealer shall indemnify and save harmless, the corporation from all losses, damages, claims, suits or actions which may arise out of result from any injury to any person or property or from violations of any statutory enactments, rules and regulations or other written orders or other laws or caused by or resulting from non-observance by the dealer of the provisions of this agreement.

    44. It shall be a paramount condition of the agreement that the dealer himself (if he be an individual) or both partners of the dealer firm (if the dealer is a partnership firm consisting of two partners only) by the majority of the partners of the dealer firm (if the dealer is a firm consisting of more than two partners) or the majority of the members of the dealer co-operative society (if the dealer is a co-operative society) as the case may be shall take active part in the management and running of the retail outlet and shall personally supervise the same and shall not under any circumstances do so through any other person, firm or body.

    55. Notwithstanding anything to the contrary herein contained, the corporation shall be at liberty to terminate this agreement forthwith upon or at any time after the happening of any of the following, namely:-

    (A) If the dealer shall commit a breach of any of the covenants and stipulation contained in the agreement, and fail to remedy such breach within four days of the receipt of a written notice from the corporation in that regard.

    (B) Upon

    (i) The death or a adjudication as insolvent of the dealer, if he be an individual;

    (ii) The dissolution of the partnership of the dealer’s firm or the death of adjudication as insolvent of any partner of the firm, if the dealer be a firm;

    (iii) The liquidation, whether voluntary or otherwise or the passing of an effective resolution of the winding up, if the dealer be a company or co-operative 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.

    (D) If the dealer of 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 or of any member of the dealer co- operative society.

    (F) The licence issued to the dealer by the relevant authorities for the storage of petroleum and other 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 books of account beyond 4 days of demand by the corporation.

    (H) If 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’s products or otherwise. (I) If the dealer shall contaminate or tamper with the quality of any of the products, supplied by the corporation. (J) If the dealer shall sell the product, supplied by the corporation at prices higher than those fixed by the corporation/statutory authority.

    (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 Chief/Senior Regional Manager/Regional Manager of the Corporation for the time being in whose decision shall be final, is prejudicial to the interest or good name of the corporation or its products the Chief/Senior Regional Manger/Regional Manager shall not be bound to give reason for such decision. (L) If any information given by the dealer in his application for appointment as a dealer shall be found to be untrue or incorrect in any material respect.

    The corporation’s right to terminate this agreement under the terms or 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 products by the corporation to the dealer, pending expiry of any 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 licence granted hereunder.

    9. In the show cause notice dated 25.08.2009 (Annexure

    P/8) the respondent No. 1 and 2/Corporation has stated the

    irregularities on the part of the petitioner by violating

    the terms and conditions of the dealership agreement,

    which reads as under:

    "While you are expected to carry out the business to the satisfaction of the Corporation you have not been doing so far the past several months. We were quite surprised to note that the dishonour of your cheques have taken place for a quite long period and neither you have intimated Corporation nor you have taken any corrective action at your end. Above all, you continued to lift product from Mandir Hasaud Depot without paying for earlier supplies and without taking corrective action.

    It is regretted to note that you have never brought to our knowledge of your own about above series of dishonor of cheques. You have not taken any corrective action of your own and to pay for the outstanding amount. You kept lifting product from our depots without bothering to pay for the earlier supplies. Even though local cheque facility was extended to you for depositing the same at Bhilai COD, you have deliberately given the outstation cheques at Mandir Hasaud while the same facility was never extended to you."

    10. The petitioner, within a period of two days,

    responded to the said notice explaining his conduct. The

    same reads as under:

    "Sir as advised we have cleared the MS/HSD and Lubes account as of date and there are no dues pending from our side. In addition above we have also deposited additional amount of Rs. 1,25,000/- in our MS/HSD account.

    I also beg to state that the amount of Rs. 8071008.07, including interest was deposited by us as soon corporation advised us regarding dishonored instruments I would like to state that I am sole proprietor of M/s. Ayush Petrol Pump and from its inception the sale of MS/HSD and lubes are on continued to grow day by day. Due to my fathers prolonged illness, I am not able to reconcile my Bank Account and I am totally unaware of any dishonoring of instruments presented to HPCL from M/s. Ayush Petrol Pump till date the corporation informed about above matter.

    Sir we did not have any intent of not honoring payment which was due from us to HPCL, and we will be always loyal to HPCL in future also and it can also be reflected from the fact that we had immediately paid all outstanding amount including the interest to the corporation as soon it was advised by the HPCL and immediately hereafter we are reconciling our all the accounts with HPCL and without our Bankers and all the due care is taken that no such incident will occur in future.

    The details of the outstanding payment made to the HPCL is given below:

    SN CHQ NO CHQ DATE AMOUNT DD NO. DD DATE AMOUNT 1 615738 26/08/200 445447.4 739870 05/08/0 445447.42 8 2 9

    2 615741 27/08/200 460216.2 739871 05/08/0 460216.25 8 5 9

    3 615742 30/08/200 491162.7 739877 08/08/0 491162.76 8 6 9

    4 615743 01/09/200 445447.4 739869 05/08/0 445447.42 8 2 9

    5 615744 02/09/200 610268.6 739872 08/08/0 610269.00 8 8 9

    6 419552 04/05/200 393437.5 739851 30/07/0 393437.5 9 0 9

    7 419555 05/05/200 414295.9 739852 30/07/0 414295.95 9 5 9

    8 419563 16/05/200 421248.7 739853 30/07/0 421248.77 9 7 9

    9 419564 18/05/200 421248.7 739854 30/07/0 421248.77 9 7 9

    10 419569 20/05/200 107590.0 739855 31/07/0 107590 9 0 9

    11 419592 22/06/200 403108.9 739856 30/07/0 403108.95 9 5 9

    12 421006 04/07/200 457067.9 739889 17/08/0 457068.00 9 2 9

    13 421015 15/07/200 484268.1 739868 04/08/0 484268.11 9 1 9

    14 421016 17/07/200 484268.1 739859 31/07/0 484268.11 9 1 9

    15 421019 20/07/200 946108.2 739866 04/08/0 946108.25 9 5 9

    16 421025 28/07/200 484268.1 739862 31/07/0 484480.16 9 1 739867 9

    04/08/0

    9

    115451 17/08/0 2600

    9

    TOTAL 7469452. TOTAL 7472265.4 97 2

    598742.65

    Interes

    t 8071008.0

    TOTAL 7

    We have also received letter from corporation regarding receiving of all the outstanding payment along with interest which was due from us on account of dishonored instruments.

    Besides above payment we had also paid additional Rs. 1,25,000 as informed by sales officer.

    From above it was very clear that we do not have any wrong intention towards not paying our dues and we are always remain loyal with the corporation. If we came to know about dishonoring of the instruments at the earlier we definitely taken the corrective action itself and no such instances would happened. Honestly it only happened because I am totally unaware of the dishonoring of the instruments paid to the HPCL at Mandir Hasaud since my bank did not informed about the same nor I have received any earlier intimation fro supply Depot.

    Regarding submitting the Outstation Cheque at Mandir Hasaud I would like to state that from several months COD operator was refused to accepts the instruments from us towards MS/HSD load although we had given the facility for submitting the Local Cheques with Bhilai COD, the matter was well informed to the corporation. Due to non acceptance of Cheques at Bhilai COD we have not left out no other option to deposit the Cheques at Supply Depot at Mandir Hasaud for uplifting the MS/HSD load. Since the Depot has accepted the instruments, we thought the facility of Cheque deposition at Mandir Hasaud may have extended to us."

    11. In show cause notice, except mention of the clauses,

    no details with regard to specific breaches under other

    clauses have been mentioned and as such, there was no

    opportunity available to the petitioner to respond to the

    same.

    12. Clause 55(G) is a non obstante clause. The respondent No. 1 and 2/Corporation has liberty to terminate the agreement on happening of certain processes. In case of clause 55(G), there is a provision to make a demand and if the payment is not made within four days, the Corporation may terminate the agreement immediately. Clause 55(K) provides that if there is any breach in the opinion of the Chief/Senior Regional Manager/Regional Manager, the decision of the Corporation shall be final.

    13. The respondent No. 1 and 2/Corporation could have taken a decision when the first cheque was dishonored after demanding the amount and in the event of non-payment within a period of four days. The respondent No. 1 and 2/Corporatoin has not taken any steps till all the payments have been made. Thus, it cannot be held that the officers of respondent No. 1 and 2/Corporation have exercised their power under the provisions of the agreement in accordance with its letter and spirits. Thus, it may safely be held that the decision of the respondent No. 1 and 2/Corporation was not in exercise of its power under clause 55(G) of the dealership agreement. The order appears to be arbitrary and unreasonable.

    14. In Kisan Sahkari Chini Mills Limited & Others v. Vardan Linkers & Others4, relied on by the respondent No. 1 and 2/Corporation, the Supreme Court has held that in exercise of a writ jurisdiction, if the High Court finds that the exercise of power in passing an order was not arbitrary and unreasonable, it should normally desist from giving any finding on disputed or complicated question of fact asto whether there was a contract, and relegate the petitioner to the remedy of a civil suit. In the case on hand, there is no dispute with regard to the existence of an agreement in dispute or complicated question of facts. The facts are admitted and the impugned order was passed not in accordance with the agreement, but the same was passed in an unreasonable and arbitrary manner. Thus, this Court has jurisdiction to entertain the dispute even if there is a provision for reference of dispute to the Arbitrator under agreement clause No. 66.

    15. With regard to the contention of the respondents that

    the disputed had arising out of a contract is noticed to

    be rejected on a simple ground that the IOCL has been held

    as an organ or instrumentality of the State as

    contemplated under the provisions of Article 12 of the

    Constitution of India. (See Mahabir Auto Stores and others

    v. Indian Oil Corporation and Others5). Thus, the

    arbitrariness, discrimination and unreasonableness

    exercised on the part of respondent No. 1 and

    2/Corporation can be examined by this Court under the writ

    jurisdiction.

    16. The Supreme Court, in Hindustan Petroleum Corporation Limited & Others (supra), while considering termination of dealership observed as under:

    "31. The cancellation of dealership agreement of a party is

    a serious business and cannot be

    taken lightly. In order to justify

    the action taken to terminate such

    an agreement, the authority

    concerned has to act fairly and in

    complete adherence to the

    rules/guidelines framed for the

    said purpose. The non-service of

    notice to the aggrieved person

    before the termination of his

    dealership agreement also offends

    the well-established principle

    that no person should be condemned

    unheard. It was the duty of the

    petitioner to ensure that

    Respondent No.1 was given a

    hearing or at least serious

    attempts were made to serve him

    with notice of the proceedings

    before terminating his agreement.

    33. The guidelines being followed

    by the Corporation require that

    the dealer should be given prior

    notice regarding the test so that

    he or his representative also can

    be present when the test is

    conducted. The said requirement

    is in accordance with the

    principles of natural justice and

    the need for fairness in the

    matter of terminating the

    dealership agreement and it cannot

    be made an empty formality. Notice

    should be served on the dealer

    sufficiently early so as to give

    him adequate time and opportunity

    to arrange for his presence during

    the test and there should be

    admissible evidence for such

    service of notice on the dealer.

    Strict adherence to the above

    requirement is essential, in view

    of the possibility of manipulation

    in the conduct of the test, if it

    is conducted behind the back of

    the dealer."

    17. In the case on hand, the respondent No. 1 and

    2/Corporation has failed to exercise its power in

    accordance with the provisions of clause 55(G) or (K) of

    the dealership agreement as the power could have been

    exercised immediately after notice, if on demand of

    notice, payment was not made. Here, payment with interest

    was made and thereafter, the show cause notice was issued.

    So far as other grounds in respect of cause of action

    under the provisions of the Act, 1881 is concerned, it is

    not necessary to go into the cause of action arising under

    the provisions of the Act, 1881 as the said issue is not

    in question in this petition.

    It is a case of acquiescence and implied

    waiver of rights on the part of the respondent

    No. 1 and 2/Corporation.

    18. As regards allotment of the dealership to other

    person on ad hoc basis is concerned, the allotment

    has not been made on permanent basis. The allotment was

    simply an ad hoc arrangement which does not confer any

    right on the ad hoc allottee.

    19. For the reasons stated hereinabove, the impugned order dated 21.12.2009 (Annexure P/1) is quashed. However, it is made clear that it is open to the respondent No. 1 and 2/Corporation to take appropriate action, if there is any breach of agreement, in accordance with the provisions of the agreement, rules and guidelines, if so advised, in future.

    20. Accordingly, the writ petition is allowed. No order asto costs.

    J U D G E

  3. pankaj says:

    UPA on overdrive after season of ‘policy paralysis’
    Nivedita Mookerji / New Delhi July 24, 2011, 0:27 IST
    Just when “policy paralysis” was fast turning into a catch phrase, the government has sprung into an overdrive taking many decisive steps. Experts and industry watchers agree the UPA government seems to have woken up from its policy slumber, which it had slipped into while coping with corruption charges in 2G telecom spectrum scam and Commonwealth Games.

    The Committee of Secretaries (CoS)’ recommendation on Friday to allow up to 51 per cent foreign direct investment (FDI) in multi-brand retail is the latest forward-looking action in the UPA regime. The same day, the Cabinet Committee on Economic Affairs (CCEA) cleared a mega deal involving an FDI component of $7.2 billion. Reliance Industries (RIL) in February had announced its proposal to sell 30 per cent interest in 21 oil and gas blocks to BP, but the CCEA nod came only now.

    read more

    http://www.business-standard.com/india/news/upaoverdrive-after-seasonpolicy-paralysis-/443706/

  4. pankaj says:

    Some Questions still unanswered
    India
    UK firm gets contract; India gets bad deal
    Sumon K Chakrabarti , CNN-IBN

    http://ibnlive.in.com/news/uk-firm-gets-contract-india-gets-bad-deal/101885-3.html

    Click to play video
    New Delhi: The Petroleum Ministry wrongly favoured a company in the United Kingdom for supplying fuel markers that were to be used by Indian authorities in detecting fuel adulteration, a CNN-IBN investigation has found.
    The Ministry in October 2006 started a project to dye kerosene with a non-removable marker to detect adulteration of automobile fuel. The marker was supplied by the Authentix company, which claims to be a global leader in authentication, at an annual cost of Rs 200 crore.
    Within 15 months the project was scrapped and the Central Vigilance Commission (CVC) allegedly found irregularities in the deal with Authentix.
    The Central Bureau of Investigation (CBI) last month received a CVC report which points to a high-level scam within the Petroleum Ministry. The report alleges the Authentix marker was selected though tests had revealed that the company’s marker could be tampered with.
    The CVC report alleges Authentix was selected for the project arbitrarily and by disregarding norms for issuing contracts. A tender was issued on 28th April 2004 but 20 days before that, on 8th April 2004, three companies were already rejected because their marker was allegedly not tamper-proof.
    Authentix was allowed to increase its rates by 55 percent and it was selected for the project–international competitive prices were allegedly never checked.
    The cost of the earlier fuel marker was Rs 2,550 per litre, but Authentix sold its product for Rs 13,219 per litre.
    The CVC have found that Authentix earlier operated under the name Biocode, which the Petroleum Ministry had rejected because its product failed to meet standard requirements.
    The CVC has found that it was decided that the Authentix marker was to be first tried out in New Delhi, but the then Petroleum Secretary M Srinivasan allegedly gave abrupt and oral orders that it would be used across India. The order was allegedly given though marker had failed in the trial stage.
    Srinivasan and R S Pandey, who is the current Petroleum Secretary, refused to comment on the allegations against the Ministry. CNN-IBN has learnt that the CBI is planning to question senior Ministry officials about the deal with Authentix.
    (Follow IBNLive.com on Facebook and on Twitter for updates that you can share with your friends.)
    #Authentix #Petroleum Ministry #Authentix contract scam #M Srinivasan #CNN-IBN Investigation #CNN-IBN Investigations

  5. pankaj says:

    Marker system in India-I: Ministry defends earlier decision to award contract to Authentix

    Nov 10: Although the validity period of the British marker system — supplied by Authentix –expired on September, 30, 2008, the petroleum ministry is still facing flak for its decision to allow oil marketing companies (OMCs) to award the contract for detection of adulteration — of diesel and petrol by kerosene — to Authentix on a nomination basis. It is pertinent to note that Authentix was given the mandate to develop a marker system in late 2006 by the OMCs, following findings by the National Council of Applied Economic Research (NCAER) that there was large scale adulteration of petrol (MS) and diesel (HSD) with kerosene (SKO) diverted from the public distribution system.
    8The ministry claims that the program was indeed a success and had proved to be a superior detection method in comparison to the prevalent methods of checking for adulteration. To bolster its point, it pointed out that during the period from February, 2007 to March, 2008, a total of 99,170 inspections were carried out at retail outlets (ROs) using the Authentix marker system and adulteration was detected at 391 ROs. Thus the strike rate of the system worked out to 0.39%. However, through the conventional BIS tests, the OMCs strike rate against a total inspection of 85,660 ROs, during the same period, was a mere 69 cases, or just 0.08% proven cases vis-a-vis inspection.
    8Furthermore, during the April-December 2008, period, the Authentix marker system detected 186 cases against 76,302 inspections carried out. The strike rate worked out to 0.24% which was far higher than the strike rate of OMCs (0.02%) achieved during the same period through the conventional system.

    Marker system in India-II: Chronology of introduction of various marker systems

    Nov 10: The first initiative to check adulteration of fuels in India, through a marker system, was introduced in 1993. Since then, flirtations with different marker systems have proved to be a roller coaster ride. The website carries here, for reference purposes, the chronology of introduction of marker system in India, in fuel as well as in adulterants, which includes:
    8Marking of PDS kerosene with blue dye (1993)
    8Marking of adulterant with furfural (1997)
    8Marking of fuel with Oronite D-Tect of Biocode of UK (2000)
    8Marking of fuel with Spectrace MD 510 of Rohm & Hass of UK (2004)
    8Authentix marker system (2006)

    Marker system in India-III: Q&A

    Nov 10: The petroleum ministry is not only facing flak for award of the marker contract to Authentix on a nomination basis, but on a whole range of other issues. To clear the air, the ministry has tried to answer the following questions which were put before it.
    8What were the reasons for switching of the program from `doping of fuels` to `doping of adulterants`?
    8As various marker programs were abandoned earlier, what was the cost implication of abandoning these programs?
    8The programme of marking fuel oils was experimented on a pilot basis in Mumbai in 2003. What were the results of these trials — carried out by HPCL — in Mumbai? Was the system introduced in Delhi? If so, what were the results?
    8In 2003, IOC — which was appointed as the marker coordinator on behalf of the industry — had floated enquiries for markers. How many parties were identified and how? What happened to the global tender? Why were parties contacted directly?
    8Why were marker systems of larger countries like USA not studied?
    8Authentix was supplying its marker to very small countries and that too in small quantities. Were the credentials and capabilities of the company evaluated?
    8Why Rohm & Hass was not considered when the party was successful in earlier trials and had the approval of IOC`s R&D Centre?
    8What was the protocol for testing the efficiency of the marker and how and why the proposals of some parties were rejected?
    8Why the Anti Adulteration Cell (AAC) was canvassing for Authentix, requesting the ministry to agree to a presentation by them, when it was the responsibility of IOC`s R&D Centre to take this process forward?
    8Did IOC and BPCL conduct joint lab study on the marker systems of Johnson Matthey and SGS and were they allowed to demonstrate their systems to the industry?
    8How was the proposal of Authentix accepted when the joint evaluation had found that:
    –the marker system was easily launderable?
    –quantitative estimation was not done due to the fact that the equipment was not provided by the party
    –evaluation team was unable to detect the markers in MS or HSD containing 5% of the laundered adulterants, thus belying the claim of the party that the marker system could not be removed easily and could detect adulteration up to 1%.
    8An Indian team had visited Kenya and UK to study the marker system there.
    –What was the basis for selection of countries like Kenya and UK?
    –What was the cost effectiveness of the systems in Kenya and UK?
    –What scientific and other tests were conducted in Kenya and UK before recommending the marker system of Authentix?
    8In 2006, a decision was taken to implement field trials of PDS kerosene in Andhra Pradesh which was later dropped in favour of introduction of the marker system all over the country. Was it not necessary to conduct field trials before placing an order worth Rs 200 crore?
    8How was the reasonableness of price assessed before the final orders were placed?
    8Why was it decided to place orders on Authentix for one year and then extend the same for another year instead of ordering for two years at one go?
    8Was any comparative study of prices done vis-a-vis the earlier marker system of Rohm & Hass introduced in Mumbai?
    8How many reviews of the performance of the systems (Authentix) were carried out? Was any cost-benefit analysis conducted to assess the usefulness and efficacy of the project?

  6. pankaj says:

    July 31, 2011

    Page: 8/44
    Home > 2011 Issues > July 31, 2011

    FUEL PRICE HIKE
    Bad economics, worse politics
    By Adhitya Srinivasan

    A few weeks ago, Union Minister for Petroleum and Natural Gas, Jaipal Reddy had announced that fuel prices would be increased.Subsequently diesel price was increased by Rs 3; kerosene by Rs 2 and LPG by Rs 50. The Petroleum Minister supported this policy on grounds of continuing the policy on deregulation of fuel prices, saving the oil companies from huge losses and reducing the government’s subsidy burden. This was the first time that the government had deregulated the prices of diesel and kerosene. Fuel prices have always been a sensitive issue in Indian politics and when managed poorly, it has invariably invited a fair deal of criticism.

    During the course of this announcement, Jaipal Reddy also hoped that the states would reduce taxes on fuel products so that the consumers would have some relief. Shortly thereafter, the Union Finance Minister, Pranab Mukherjee wrote to the Chief Ministers of all states, urging them to reduce levies on diesel, kerosene and LPG. Most Congress-ruled states and some BJP-ruled states such as Uttarakhand and Himachal Pradesh reduced VAT on fuel. Some other states such as Madhya Pradesh have not reduced VAT on fuel. This is the point at which politics took over. The Congress protested against BJP governments which had not reduced VAT and accused the BJP of neglecting the woes of the aam admi.

    The Congress-led UPA has accomplished the unique feat of messing up both the politics and economics of fuel prices. In fact, if one were to take the following analysis to its logical conclusion, the economic aptitude of this government becomes questionable. At another level, the policy announcement coupled with the Finance Minister’s written request and the irrational protests by the Congress are attempts to clamp down on the federal structure that was envisaged by the authors of the Constitution. The State of Madhya Pradesh, currently ruled by the BJP, is the perfect illustration of all these effects.

    The brand of federalism enshrined in the Constitution leans heavily in favour of the Centre. The Centre is empowered to collect tax revenue in a host of areas including income, corporate profits and services. On the other hand, the State’s ability to collect tax revenue is limited to a few areas such as agricultural income and sale of goods. Consequently, the states become dependent on the Centre for finances. In a purely equitable system, the Centre would release sufficient funds to the states. But party politics often scuttles every notion of equitable and just distribution of finances to the states.

    The Centre’s directive to reduce VAT on fuel products is in the nature of an indirect tax on the states. Just as producers pass on the tax burden on to their consumers, so too is the Centre passing the burden of providing relief to the common man to the States after having caused the problem! The Centre is thus able to protect its revenues but it expects the states to bear the brunt of the fuel price hike by lowering its taxes. This is the worst kind of hypocrisy.

    This hypocrisy turns into downright immorality when one considers the facts and figures. Out of the total tax revenue for Madhya Pradesh for the year 2011-12, the State’s own taxes amount to 23,118 crore rupees whereas theState’s share in Central taxes is only 17,029 crore rupees. For the year 2010-2011, the tax revenue stood at 18,670 crore rupees (State’s taxes) and 11,047 crore rupees (State’s share in Central taxes). The figures were 17,273 crore rupees and 11,077 crore rupees for 2009-10 and 13,614 crore rupees and 10,767 crore rupees for 2008-09. In other words, the major source of revenue for the State is the revenue generated by its own taxes. The Centre has consistently made a paltry contribution. Despite this, the Centre expects the states to reduce VAT and thereby lower its ability to generate revenues!

    There are at least two possible fallouts of reducing VAT. Firstly, the State government, in view of lower revenues, is unable to fully implement its welfare programmes. For instance, in Madhya Pradesh, a number of important programmes such as the Ladli Laxmi Yojana, Kanyadhan Yojana and Janani Suraksha Yojna have caught the imagination of the people. These programmes cannot be implemented if State’s revenues decrease. Secondly, in order to make up for the depreciated revenues, the State government will increase taxes on other commodities. Either way, the common man will suffer. The UPA in its short-sightedness might have believed that reducing VAT would help the common man. On the contrary, it will compound his problems manifold.

    None of this would have arisen had it not been for the UPA government’s decision to hike fuel prices. So it becomes important to evaluate the need for such a policy. Decontrolling fuel price might be a desirable policy. But for a government that claims competence in economic affairs, the timing of the fuel price hike was terrible. There is no sense in hiking fuel prices in an inflationary economy. Diesel is a universal intermediate and a hike in diesel price would trigger a rise in the prices of other commodities. Perhaps, the government could have increased fuel prices by small amounts on a periodic basis as opposed to knee-jerk hikes so as to give consumers some leeway for management.

    But does this really solve the problem? In a 2006 an article written in The New Indian Express, (Petrol at Rs. 30 a litre? Possible, but …) S. Gurumurthy identifies an incorrect exchange-rate management policy as being responsible for the high fuel prices in India. He argues that despite the appreciation of the rupee in real terms, the Finance Ministry and the RBI have constantly intervened to keep the value of the rupee below its real value. Crude oil is imported from abroad in dollars but is sold in India by way of refined petrol and diesel in rupees. This means that if the rupee were allowed to reflect its real value, the import cost of crude would be significantly lower and consequently the fuel prices in India would be lower. This would not only bring genuine relief to the common man but also allow the government to fully decontrol fuel prices. Perhaps, the government should learn to think differently.

  7. pankaj says:

    Corruption, favourtism, controversy dog oil ministry
    Last updated on: July 25, 2011 12:41 IST

    http://www.rediff.com/business/slide-show/special-slide-show-1-corruption-favourtism-controversy-dogs-oil-ministry/20110725.htm

    Jyoti Mukul in New Delhi

    Sometime in the 1990s, a paper napkin kept on an empty plate at a fancy party turned out to be worth a few crores.
    It carried a handwritten note from the minister of petroleum recommending allotment of a fuel station. Becoming a retailer for the state-owned refiners was the shortest route to untold riches; the profit margins were low, but the huge volumes more than made up for that.

    And sifarish was essential to unlock the fortune. Grapevine has it that the napkin was duly attached to a file in the ministry as evidence of the minister’s directive.

    The petroleum ministry, housed in the second floor of Shastri Bhawan, an uninspiring Soviet-style building in downtown Delhi, is – perhaps with the exception of telecommunications – the favourite child of controversy.

    Probes, hectic lobbying, muckraking – these are all part of the petroleum ministry’s corridors.

    It is no surprise then that in the 49 years since the ministry was set up in 1962, there have been 41 ministers.

    Ram Naik of the Bharatiya Janata Party claims that he is the only petroleum minister to last the full five years at a stretch (1999 to 2004).

    Click NEXT to read more…

    I

  8. Kamaljeet says:

    Dealer Friends, A few queries are being made by me, as a dealer, Now that Petrol has been deregulated/decontrolled and APM had been dismantled several years ago, what is the role of the Govt. in fixing dealer commissions? Why do we still have to negotiate with the relevant ministry and not our parent oil company which now ought to be more sensitive to its dealers plight.If every oil company is giving the same/similar commissions and the selling price is virtually the same, is this not a cartel? Why is the CCI not being approached? Even transport contracts were negotiated by the oil companies jointly. I do think we must meet the respective heads of our oil companies and request them to reconsider our margins, at least on petrol, to begin with.The current increase [ alms] given to us have been almost entirely absorbed by the increase in minimum wages and bank charges.The Govt has paid us much less than what was recommended by its own committee, I think we all must change our attitudes and plan a sustained campaign to change our fate. If one considers the evaporation losses then the commission is much less than what is being allowed us, the LPG dealers do not have this problem. Please urge your local associations to force our Federation to consider this issue and make all attempts to convince our OMCs.
    Kamaljeet.

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