Institutional Hearing Is No Violation of Natural Justice: Kerala High Court Upholds BPCL’s Termination of Decades-Old Petroleum Dealership

“Delay By Itself Does Not Vitiate a Decision Unless Prejudice Is Demonstrated”, The Kerala High Court, in a significant ruling on administrative law principles governing petroleum dealership terminations, reaffirmed that “institutional hearing is a recognised exception to the rule that one who hears must decide” and that mere delay in passing a termination order does not invalidate the decision unless specific prejudice is shown.

On 02 March 2026, a Division Bench comprising Justice Anil K. Narendran and Justice Muralee Krishna S, dismissed a writ appeal challenging the termination of a petroleum dealership by Bharat Petroleum Corporation Ltd. (BPCL). The Court upheld the judgment of the learned Single Judge and sustained the termination, holding that the decision was in accordance with the Marketing Discipline Guidelines (MDG) and the Dispensing Pump and Selling Licence (DPSL) Agreement.

The appellants were partners of M/s. K. Jamal Kutty Hajee and Son, a petroleum retail outlet in Malappuram district operating under BPCL since 1980, with family association dating back to the 1940s. The dealership agreements were periodically renewed, the last one being executed in August 2014.

On 25 September 2014, BPCL’s Quality Control Cell conducted an inspection and detected two “critical irregularities” under the Marketing Discipline Guidelines: the Weights & Measures (W&M) seal was found broken/tampered and additional non-standard fittings were detected in the keypad of the dispensing unit. A show cause notice was issued on 18 October 2014, to which the petitioners submitted a reply denying deliberate tampering and attributing issues to old machinery, voltage fluctuation, and continuous usage.

A personal hearing was conducted on 11 March 2015 at BPCL’s Chennai office. However, no immediate order followed. Four years later, on 21 May 2019, BPCL issued a termination notice (Ext.P6), stating that the dealership stood terminated with immediate effect.

The petitioners approached the High Court under Article 226 challenging the termination on grounds of delay, violation of natural justice, and mala fide intention to appoint an ad hoc licensee.

The learned Single Judge dismissed the writ petition but granted liberty to make a representation seeking continuance of agency. Aggrieved, the petitioners preferred the present writ appeal under Section 5(i) of the Kerala High Court Act, 1958.

The central issues before the Division Bench were whether the delay of four years between personal hearing and termination order vitiated the decision, whether the principle “one who hears must decide” was violated, whether non-supply of internal materials such as expert committee approval and Legal Metrology clarifications breached natural justice, and whether execution of a fresh agreement during pendency of the writ petition amounted to condonation.

On the allegation that the officer who conducted the personal hearing did not pass the final order, the Court relied heavily on the Division Bench ruling in Baby Girija v. Indian Oil Corporation Ltd., 2025 (2) KLT 17, which in turn relied on Supreme Court precedents including Kalinga Mining Corporation v. Union of India and Local Government Board v. Arlidge.

The Court quoted with approval the principle that “Institutional hearing is a well-recognised exclusion to the general rule – ‘one who heard should decide’.” It emphasized that termination of dealership is not an individual decision but an “institutional decision” involving appraisal at multiple administrative levels. Therefore, the fact that the Territory Manager communicated the termination while the hearing was conducted by another officer did not invalidate the decision.

On the issue of delay, the Court reaffirmed that “Unless an explicit case of any flaw being caused on account of delay is made out, delay as such cannot be accepted as a reason to find fault with the decision taken.” The appellants failed to plead or establish any change of circumstances or omission in consideration of their contentions due to the time gap. In absence of demonstrable prejudice, delay alone was held insufficient to vitiate the order.

Addressing the contention that internal expert committee opinions and clarifications from the Legal Metrology Department were not supplied, the Court held that such materials were part of the internal administrative process. Since Ext.P6 was a detailed, reasoned order dealing with the petitioners’ explanation point by point, there was no denial of fair hearing. The Court clarified that internal decision-making notes “cannot be said as collection of additional material or evidence” requiring independent disclosure.

On the argument that a fresh agreement (Ext.P9) executed in August 2019 amounted to renewal and condonation of alleged irregularities, the Court accepted BPCL’s explanation that the agreement was executed solely to comply with the interim status quo order of the High Court. It held that such execution did not imply renewal on merits or waiver of termination.

Marketing Discipline Guidelines and Agreement Obligations

The Court noted that under Clause 7(a) and 7(c) of the DPSL Agreement, the dealer is duty-bound to ensure proper functioning and accuracy of dispensing pumps and to report defects forthwith. The breakage of the W&M seal was treated as a “critical irregularity” under Clause 5.1.2(b) and 5.1.4 of the MDG.

The Court did not find any arbitrariness in the termination process, observing that the decision was approved by an Expert Committee comprising the Zonal Head and two General Managers, strictly in accordance with the MDG framework.

Importantly, the Court observed that the petitioners did not establish that they were denied opportunity during personal hearing or that any of their explanations were ignored in the final order.

Scope of Appellate Interference in Writ Appeal

While exercising appellate jurisdiction under Section 5(i) of the Kerala High Court Act, the Division Bench held that no perversity or patent illegality was demonstrated in the judgment of the learned Single Judge. In the absence of such infirmity, appellate interference was unwarranted.

The writ appeal was accordingly dismissed.

The judgment reinforces key administrative law principles: institutional decision-making is a valid exception to the rule that “one who hears must decide,” delay does not automatically invalidate administrative action unless prejudice is shown, and internal administrative deliberations need not be independently supplied when the final order is reasoned and comprehensive.

For petroleum dealers and public sector undertakings alike, the ruling underscores that compliance with Marketing Discipline Guidelines and contractual obligations will be strictly enforced, and technical objections based on procedural delay or institutional hierarchy will not succeed unless real prejudice is demonstrated.

The liberty granted by the learned Single Judge permitting the appellants to make a representation for continuance of agency remains undisturbed.

Date of Decision: 02 March 2026