- 1 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF SEPTEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE R. NATARAJ WRIT PETITION NO. 55535 OF 2016 (GM-RES) BETWEEN: SRI. K. DINAKAR RAO AGED ABOUT 65 YEARS S/O LATE K. SUBBA RAO PROPRIETOR OF MANGALA GAS DISTRIBUTORS KUDUMBI GARDEN, NEAR DON BOSCO HALL, MANGALURU-575001 …PETITIONER (BY SRI. GIRIDHAR H., ADVOCATE) AND: 1. REGIONAL LPG MANAGER (SOUTH) BHARAT PETROLEUM CORPORATION LTD., SOUTHERN REGION NO.1, RANGANATHAN GARDEN, OFF 11TH MAIN ROAD, P.B.NOS. 1212 AND 1213, ANNANAGAR, CHENNAI-600 040 2. TERRITORY MANAGER (LPG) BHARAT PETROLEUM CORPORATION LTD. MANGALURU TERRITORY OFFICE AND LPG PLANT, BAIKAMPADY, MANGALURU-575 011 …RESPONDENTS (BY SRI. N.J.KUMAR, ADVOCATE FOR RESPONDENT NOS.1 AND 2) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ANNEXURE-AJ ORDER DATED 21.09.2016 MADE BY THE FIRST RESPONDENT CONFIRMING ANNEXURE-AA AND AB ORDERS DATED 06.07.2016 Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 AND 20.07.2016 RESPECTIVELY, CONSEQUENTLY, QUASH ANNEXURES AA AND AB ORDERS DATED 06.07.2016 AND 20.07.2016 MADE BY THE SECOND RESPONDENT THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE R. NATARAJ ORAL ORDER The petitioner has sought for the following reliefs: a) Issue a writ of certiorari quashing the Annexure-AJ order dated 21.09.2016 made by the First Respondent confirming Annexure AA and AB orders dated 06.07.2016 and 20.07.2016 respectively, consequently, quash Annexure AA and AB orders dated 06.07.2016 and 20.07.2016 made by the second Respondent; b) Issue a writ of mandamus directing the first Respondent to compare the observation regarding physical verification of the stocks of the refills and empty cylinders made in Annexure Y and Z Inspection Reports of LPG Distributorship dated 30.01.2016 and 13.05.2016 respectively with that Annexures B to Y Tax Invoices and respective Equipment Return Vouchers and arrive at a proper conclusion regarding shortage of filled cylinders and excess of empty cylinders and proceed further in the matter of irregularities, if any, in terms of Annexure A Revised Marketing Discipline Guidelines 2015; - 3 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 c) Issue a writ of mandamus directing the second Respondent to provide opportunity of personal hearing to the distributors while adjudicating cases of irregularities observed during inspection of LPG Distributors before passing of order thereof; d) Issue a writ of mandamus directing the first Respondent to provide opportunity of personal hearing to the distributors while adjudicating appeal preferred in respect of order made by the subordinate authority in cases of irregularities observed during inspection of LPG Distributors before passing of order thereof; e) Issue a writ of mandamus directing the second Respondent to recover the amount of fine / quantum of irregularity, if any, from the distributors in terms of the General Guidelines (vi) of Chapter 5 of the Annexure A Revised Marketing Discipline Guidelines 2015 and to allow billing of product to the distributors for despatching of loads; f) and to grant such other order or relief to which the Petitioner may be found entitled to under the circumstances of the case in the interest of justice. 2. The petitioner as Proprietor of Mangala Gas Distributors is an authorized distributor of Bharat Gas having been appointed under a Distributorship Agreement dated 10.08.1982. The petitioner was procuring Liquefied Petroleum Gas (LPG) 14.2 Kg. non-subsidized cylinders and LPG 19 Kg - 4 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 filled cylinders for marketing to its customers. These cylinders were received by the petitioner through shipment by road under tax invoices raised by the respondent No.2. The petitioner was expected to return the same number of LPG cylinders to the respondent No.2 through the same truck under the equipment return vouchers with respective invoices and billing reference. The petitioner contends that in order to ensure that the distributors comply with the Marketing Discipline Guidelines 2015 (for short, ‘the Revised Guidelines’), periodic inspections are conducted by the Public Sector Oil Marketing Companies. The respondent No.2 through its inspecting officials of Quality Control Cell (QCC) got conducted inspection of the distributorship of the petitioner on 30.01.2016 and 13.05.2016. The respondent No.2 on the basis of inspection report of LPG Distributorship pertaining to the petitioner’s LPG Distributorship on 13.05.2016, and in the absence of physical verification of the stock of refills and empty cylinders with reference to tax invoices and respective Equipment Return Vouchers and also about stock of Domestic Pressure Regulators (DPRs), accepted nine inspection report serial numbered observations and other three observations in - 5 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 the said report. Amongst the nine inspection report serial numbered observations accepted, the respondent No.2 treated observation at Sl. No.1 as ‘critical irregularity’ under clause 2.1 listed as 2.1.5 and 2.1.6 of Chapter-2 of the Revised Guidelines and proceeded to take action under clause 3.1 of Chapter-3 of the Revised Guidelines and imposed fine equivalent to 60% of average monthly distributor’s commission being a sum of Rs.1,05,897/- and damages being a sum of Rs.6,82,386/-. The respondent No.1 accepted five observations in the report dated 13.05.2016 as major irregularities under clause Nos.2.2.7, 2.2.12 and 2.2.14 of the Revised Guidelines and as violations of the Distributorship Agreement. He accepted the remaining three observations in the inspection report dated 13.05.2016 as minor irregularities under clause Nos.2.3.14, 2.3.15 and 2.3.16, 2.3.21 and 2.3.24 of the Revised Guidelines. The respondent No.2 thereafter raised debit notes dated 27.08.2016 for payment of the penalty. 3. The petitioner being aggrieved by the orders dated 06.07.2016 and 20.07.2016 passed by the respondent No.2 and the debit notes, submitted an explanation by letter dated 30.08.2016 to the respondent No.2 and marked a copy to the - 6 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 respondent No.1 seeking its intervention. The petitioner also deposited 25% of the penalty with the respondent No.1 on 01.09.2016 and 03.09.2016. He followed it up by seeking permission for a personal hearing by addressing a letter dated 23.09.2016 to the respondent No.1. The respondent No.1 allegedly without providing an opportunity of personal hearing, proceeded to pass an order dated 21.09.2016 confirming the orders dated 06.07.2016 and 20.07.2016 passed by the respondent No.2. The petitioner is, therefore, before this Court. 4. Learned counsel for the petitioner contended that the respondents have not acted fairly in adjudicating the irregularities allegedly observed in the inspection reports. He contends that even the respondent No.1 without providing an opportunity of being heard to the petitioner passed the impugned order dated 21.09.2016. He contends that the respondents without conducting a physical verification of the stock of refills and empty cylinders, committed an error in treating the observations in the inspection report/s as “critical irregularities”. He, therefore, contends that the impugned order/s passed by the respondent Nos.1 and 2 is/are liable to be set aside. - 7 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 5. The writ petition is opposed by the respondents who have filed a detailed statement of objections contending as follows: i. Respondent No.1 granted a distributorship to the petitioner vide Bharat Gas (Liquefied Petroleum Gas) Distributorship (Domestic and Commercial) Agreement dated 10.08.1982 for sale and distribution of LPG in Mangaluru. It is contended that all Public Sector Oil Marketing Companies have formulated Marketing Discipline Guidelines, which were last revised in the year 2015, setting out operating policies, procedures and practices to be followed by LPG Distributors. It is contended that the distributors are bound to ensure the maintenance of prescribed stock of cylinders, provision of the prescribed amenities at the godown and showroom at all times. Chapter-2 of the Revised Guidelines classifies the irregularities in three categories, namely, i. Critical Irregularities ii. Major Irregularities and iii. Minor Irregularities. Chapter-3 provides for the actions to be taken and the penalties to be imposed in all the aforesaid cases of irregularities committed by a Distributor. It is contended that in order to verify whether the operations of the petitioner are in compliance with the norms - 8 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 prescribed in the Revised Guidelines, the Sales Officer of the respondents inspected the godown and showroom of the petitioner on various occasions and observed the following irregularities a. Difference in stock of cylinders; b. Non-maintenance of stock registers; c. Delays of over 15 days in delivery of refilled cylinders to customers; d. Leakage of cylinders; e. Deliberate non-attendance of complaints of delay in refill and leakage of cylinders, received from customers; and f. violation of various clauses of the Distributorship Agreement. ii. The respondents had issued various cause notices to the petitioner and had imposed penalties as per the norms prescribed in the Revised Guidelines. iii. It is contended that the inspection reports that are questioned in this writ petition relate to the inspection of the showroom and godown conducted on 30.01.2016 by the Sales Officer and the inspection conducted by the Quality Control Cell - 9 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 on 13.05.2016. It is contended that the irregularities observed in the inspection reports dated 30.01.2016 and 13.05.2016 are the same which were observed in the earlier inspection reports. Despite various cautions issued by the respondent No.2, the petitioner continued to breach the norms prescribed under the Revised Guidelines and failed to remedy them. It is further contended that apart from the irregularities recorded in the inspection reports, it was observed that the petitioner was involved in unauthorized sale of cylinders. It is contended that a distributor while receiving the load of filled cylinders, pays only for the quantity of gas and was therefore bound to return the empty cylinders and was bound to maintain a record for the same. It is contended that during the inspection, it was observed that there was a shortage of cylinders in the godown and no proper record was maintained to justify the variance in the stock. It is contended that apart from these irregularities, customers had raised various complaints on the Customer Care System (CCS) portal of the respondents complaining unreasonable delays in supply of refills between 2013 and 2016. The respondent No.2 issued show cause notices dated 26.02.2016 and 23.05.2016 to the petitioner in respect of - 10 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 irregularities observed during the inspection on 30.01.2016 and 13.05.2016 respectively. The petitioner neither responded to the aforesaid show cause notices nor attempted to remedy the irregularities. Thus following the action to be taken and penalty to be imposed for irregularities as prescribed under Chapter-3 of the Revised Guidelines, the respondent No.2 issued an order dated 06.07.2017 imposing penalty of Rs.7,89,183/- for the irregularities observed by the Chief Manager-QCC, South and Manager (QCC), South during the inspection of the distributorship of the petitioner on 13.05.2016 and order dated 20.07.2017 for the irregularities observed by Assistant Manager-Sales (LPG), Mangaluru during the inspection of the distributorship of the petitioner on 30.01.2016 and imposed penalty of Rs.6,61,500/- for shortage of cylinders and Rs.47,308/- for failure to attend the customers complaints. The respondent No.2 called upon the petitioner to remit the penalty amount and report compliance. Since the petitioner failed to remit the aforementioned amounts, the respondent No.2 issued debit notes dated 27.08.2016. iv. It is contended that on account of persistent breach committed by the petitioner, the respondents stopped supply of - 11 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 LPG refills to the petitioner. The petitioner issued a letter dated 30.08.2016 to the respondent No.2 and replied to the show cause notice dated 23.05.2016. He also addressed an appeal dated 30.08.2016 requesting the respondent No.1 to intervene in the matter and to issue directions to the respondent No.2 to restore the supply of LPG refills. He also remitted 25% of the amount of penalties imposed vide orders dated 06.07.2016 and 20.07.2016 passed by the respondent No.2. However, after examining the orders dated 06.07.2016 and 20.07.2016, the respondent No.1 passed an order dated 21.09.2016 rejecting the appeal filed by the petitioner. It is contended that the petitioner has not made the payments as per the aforesaid orders and therefore, the writ petition is not maintainable. 6. Learned counsel for the respondents submitted that the Revised Guidelines are framed by the respondents to ensure that distributors maintained the stocks of cylinders as well as the corresponding records. He contends that the petitioner was in the habit of frequently violating the Revised Guidelines which is evident from the inspection reports dated 08.09.2012, 23.01.2013, 14.03.2013, 02.12.2014, 29.05.2015, 29.09.2015 and 20.11.2015. He contends that even on - 12 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 30.01.2016, the petitioner continued with the breaches and the inspection note dated 13.05.2016 also mentions similar violations. He, therefore, contends that in order to reign in the petitioner, the penalty was imposed as per the orders dated 06.07.2017 and 20.07.2017 passed by the respondent No.2. He contends that the petitioner has deposited 25% of the penalty and has failed to deposit the balance and therefore, no indulgence can be shown to the petitioner in this petition. 7. I have considered the submissions of the learned counsel for the petitioner and the learned counsel for the respondents. 8. The petitioner being a distributor of Liquefied Petroleum Gas (LPG) in Mangaluru for the respondents, he is undoubtedly bound to comply the Revised Guidelines which contain various provisions to ensure that distributors meet the growing customers’ expectations, ensure deliverance of quality products and services and to enforce discipline amongst the distribution network and prevent malpractices. - 13 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 9. The phrase “Critical irregularities” are defined in clause 2.1 of Chapter-2 of the Revised Guidelines which are extracted below: “2.1 Critical Irregularities: Critical Irregularities are those irregularities that are willfully committed on a large scale by the distributor or its staff or representatives (who would operate the distributorship in the absence of nominated distributor) for undue pecuniary (financial) gains. Such irregularities are listed below:- 2.1.1 Proprietor/Partner or his representative or his staff caught/found indulging in transfer of LPG from cylinder to another cylinder or container. 2.1.2 More than 25% of Filled LPG cylinders loaded in a delivery vehicle for delivery to customers found under weight beyond permissible limit prescribed in the Legal Metrology (Packaged Commodities) Rules, 2011 as amended from time to time. 2.1.3 Detection of more than 10 spurious cylinders or domestic pressure regulators or both put together during the inspection or on the date of inspection. 2.1.4 Release of more than 10 Nos of Subsidized/non- subsidized domestic connections to ineligible persons/consumers/household detected during the inspection or on the date of inspection. Such connections will be treated as 'ineligible connections'. - 14 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 'Ineligible connection' means more than one domestic LPG connection provided to a person/consumer/'Household' [('Household' as defined in Liquefied Petroleum Gas (Regulation of Supply and Distribution) Order, 2000 as amended on 10th September 2009 and any further amendments thereto notified by Government], LPG connection released in contravention of the Distributorship Agreement and/or any OMCs guideline in vogue. 2.1.5 Shortage of more than 5 domestic LPG cylinders or domestic pressure regulators or both put together detected during the inspection or on the date of inspection. 2.1.6 Unaccounted sale of more than 50 filled LPG cylinders in 14.2 Kg & 5 Kg (supplied by OMCs at subsidized and non-subsidized domestic LPG rates) detected during the inspection or on the date of inspection. This will include supply of filled cylinders to ineligible customer including customer/s already transferred/terminated/fake/blocked. All refills supplied to such customers will be treated as unaccounted sale. It will also include filled cylinder sale accounted in the name of a genuine customer but not delivered to him and/or selling more than the permitted domestic subsidized 14.2 kg/5 Kg LPG cylinders as per entitlement to household/Non-Domestic Exempted category customers. - 15 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 2.1.7 Tampering / Hacking of the OMCs authorized software used for maintaining the customer data/transactions. 2.1.8 Manipulation of mandatory records including waitlist register, Subscription Voucher (SV)/ Termination Voucher (TV) for pecuniary gains. 2.1.9 Sale of non BIS / Sub Standard equipments including Gas Stove/ LPG Hose (Rubber Tube). 2.1.10 More than 100 cases detected of incorrect recording of 'Aadhaar' number and/or Bank account number against consumer number resulting in advance subsidy /subsidy amount being transferred to wrong person's bank account. 2.1.11 More than 50 cases detected of updating delivery of cylinder for a customer in the OMC software by distributor or his staff whereas cylinder has actually not been delivered to the customer leading to wrong transfer of advance/subsidy to customer's bank account.” 10. The penalties / action to be taken for critical irregularities are contained in Clause 3.1 of the Chapter-3 which read as follows: “3. Action has been prescribed in proportion to the size of Distributorship which is as per refill sale of the distributor and also liable for recovery against quantum of irregularity detected and compensation to customer (if any). - 16 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 Following action is prescribed for different categories of irregularities:- 3.1 Critical Irregularities: i. Ist instance: Fine equivalent to 40% of average monthly distributor's commission based on sale comprising of subsidized & non-subsidized domestic LPG in 14.2 kg & 5 kg cylinders including sale to Non- domestic exempted category customers for the preceding six months from the month of detection of irregularity plus quantum of irregularity ii. 2nd instance: Fine equivalent to 60% of average monthly distributor's commission based on sale comprising of subsidized & non-subsidized domestic LPG in 14.2 kg & 5 kg cylinders including sale to Non- domestic exempted category customers for the preceding six months from the month of detection of irregularity plus quantum of irregularity iii. 3rd instance: Termination plus quantum of irregularity Quantum of irregularity: - • Transfer/pilferage of LPG from cylinder and/or detection of underweight cylinders loaded in a delivery vehicle for delivery to customers - recovery based on RSP of 19 kg NDNE cylinder prevailing at the time of detection of irregularity shall be made for the LPG pilfered/found short. - 17 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 • Unaccounted sale of LPG in 14.2 kg & 5 kg cylinders (supplied by OMCs at subsidized & non- sbusidized domestic LPG rates) - The pro-rated Retail Selling Price (RSP) of 19 kg NDNE (Non Domestic Non Essential) cylinder to be applied for the unaccounted category of cylinders. To arrive at the amount to be recovered, the difference between the pro-rated RSP as given above and RSP of the category of cylinder established as unaccounted is to be applied. In both the cases, the RSP as applicable at the time of detection of the irregularity should be considered. • Detection of spurious equipment- recovery at penal rate as applicable and prevailing at the time of detection of irregularity would be levied for the spurious equipment along with confiscation of equipment. • LPG connection releases to ineligible consumers - Rs.5000/- multiplied by number of such connections released. • Shortage of equipment - penal rate as applicable at the time of detection of irregularity would be levied. • Recording of incorrect Aadhaar number against consumer number - recovery of the amount transferred to wrong person's bank account. • Updating delivery of cylinder for a customer in the OMC software by distributor and his staff whereas cylinder has actually not been delivered to the customer - recovery of the amount transferred to wrong person's bank account." - 18 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 10. The inspection report dated 30.01.2016 shows the following critical irregularities: Sr No. Insp Report Sr. No. Irregularities observed MDG 2015 August Clause Irregularity as defined in MDG September 2014 Severity 1 1 System Stock / Stock Register Stock and physical stock are not matching as per details given below:- (1) shortage of 289 Nos. of 14.2 Kg full cylinders (2) excess of 133 Nos. 14.2 Kg empty cylinders (3) shortage of 1 No. 19 Kg full cylinder (4) shortage of 244 Nos. 19 Kg empty cylinders (5) shortage of 28 Nos. of 5 Kg full domestic cylinders (6) shortage of 1 No. 35 Kg full domestic 2.1.5 2.1.6 Shortage of more than 5 domestic LPG cylinders or domestic pressure regulators or both put together detected during the inspection or on the date of inspection Unaccounted sale of more than 50 filled LPG cylinder in 14.2 Kg & 5 Kg (supplied by OMCs at subsidised a Critical - 19 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 cylinder (7) excess of 1 No. 35 Kg empty domestic cylinder Likewise, the inspection report dated 13.05.2016 showed the following critical irregularities: Sr No. Insp Report Sr. No. Irregularities observed MDG Aug 2015 Clause Irregularity as defined in MDG August 2015 Severity 1 1 There is a stock difference as under - 14.2 Kg full Cyls - 346 short 14.2 Kg Empty - 117 excess Total 14.2 Kg total - 229 short DPR Sound - 1016 short DPR defective - 270 excess Total DPR Sound - 746 short 2.1.5 2.1.6 Shortage of more than 5 domestic LPG cylinders or domestic pressure regulators or both put together detected during the inspection or on the date of inspection. Unaccounted sale of more than 50 filled LPG cylinders in 14.2 Kg & 5 Kg (supplied by OMCs at subsidised and non- Critical - 20 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 subsidised domestic LPG rates) detected during the inspection or on the date of inspection 11. Clause 1.3 of Chapter-1 of the Guidelines reads as follows: “1.3 STOCK/PRICE CONTROLS i) Distributor to display opening stock and Retail Selling Prices of products / various categories of cylinders. ii) Distributor to maintain a daily stock-register for filled, empty and defective cylinders for all types/categories of cylinders.” 12. The petitioner has not placed on record any document to show that he had maintained a daily stock register for filled, empty and defective cylinders for all types/categories of cylinders. Even in this writ petition also, no attempt is made by the petitioner to place those documents. Therefore, the critical irregularities pointed out by the respondent No.2 in the impugned orders cannot be disbelieved. The documents enclosed by the respondents in their statement of objections - 21 - HC-KAR NC: 2025:KHC:35747 WP No. 55535 of 2016 show that several such inspections of the distributorship of the petitioner were made earlier where several irregularities were found. Therefore, this Court cannot go into disputed questions of fact as to whether the petitioner had maintained proper registers/records as required under the Revised Guidelines. If at all the petitioner had maintained the registers, he must have placed them before the respondent No.2 at the time of inspection. Under the circumstances, there is no error in the impugned orders dated 06.07.2016 and 20.07.2016 passed by the respondent No.2, which were upheld by the respondent No.1 in terms of the order dated 21.09.2016, warranting interference by this Court. Accordingly, this writ petition is dismissed. However, if the petitioner pays up the penalty and interest thereon, the respondents may reconsider restoring the distributorship of the petitioner for supply of Liquefied Petroleum Gas (LPG) cylinders. Sd/- (R. NATARAJ) JUDGE SMA/List No.: 1 Sl No.: 35