Delhi HC Division Bench upholds OMCs' penal guidelines for oil retailers

Minimum wage mandate most contentious for retailers

A division bench of the Delhi High Court has upheld the Marketing Discipline Guidelines (MDG) 2017, formulated by Oil Marketing Companies (OMCs) for maintaining market discipline and uniformity in action for operating the network of petrol and diesel retail outlets (ROs).  Under the guidelines, heavy penalties are imposed on petrol pump dealers for malpractices such as short delivery of petroleum products, among others.

Petrol pump dealers had alleged that MDG 2017 gives arbitrary powers to officers of OMCs and makes their business unviable due to high-compliance burden. The aggrieved dealers had approached the Delhi High Court and a single-judge bench had passed an order striking down MDG 2017. The division bench on Monday overturned the decision, and ruled in favour of the OMCs by giving its nod to all but one provision of the guidelines.

The dealers were represented by the All India Petroleum Dealers Association (AIPDA). Officials from the association told Business Standard that they plan to chart out their future course of action this week after consultation with state heads.

This means that petroleum dealers will continue to face stringent penal action for offences involving short delivery of products, operating automated dispensing units on manual mode, and improper maintenance of toilets. The dealers have also been directed to pay minimum wages as notified by the OMCs or those laid down by the respective state governments, whichever is higher.

Petrol pump owners said that the minimum wage stipulation is one of the most contentious issues in MDG 2017, as it directly affects their margins.

With respect to toilets, the division bench agreed with the concerns raised by petrol pump dealers. The division bench of the Delhi High Court observed that allowing everyone to use toilets in petrol pumps, with no restrictions whatsoever, can be a safety hazard. The court gave pump operators the right to exercise their discretion with respect to who may use the toilets at their premises.

OMCs formulated and issued the MDGs for the first time in 1981-82. The guidelines are reviewed and amended from time to time, in view of changing circumstances as well as to set high customer service benchmarks for the OMCs as also the dealers’ network. The MDGs were reviewed and amended again in the year 2012 and MDG-2012 were issued and made effective from January 8, 2013.

The MDG-2012 was challenged in various high courts, following which the Allahabad High Court, the Delhi High Court and the Karnataka High Court, among others, upheld the power, jurisdiction and authority of OMCs to issue the MDGs.

According to the oil companies, MDG 2012 was amended in 2017 following detection of large-scale malpractices in some states at the time of supply and dispensation of petroleum products. This was being done by manipulating software or hardware in the dispensing units. The amendments were also aimed at motivating the employees of ROs to provide better services and deliver the assurances in terms of quality, quantity, cleanliness and behaviour.

To ensure that dealers were adhering to minimum wage directives, the OMCs in September 2017 reiterated that payment of salaries with effect from August 2017 were required to be made through e-payment. A Wage Register and e-payment details were also to be kept ready by the retail outlets for verification by OMC officials.

TIMELINE

October 2017: Amendments to MDG 2012 incorporated

March 18: Single judge bench of Delhi HC strikes down amendments to MDG 2012

January 10: Division bench of Delhi HC upholds amendments to MDG 2017