BASHEER M M Vs. STATE OF KERALA

JUDGEMENT

(1.) THE three Oil Marketing Companies (hereinafter called "OMCs) under the control of the Central Government namely, Indian Oil Corporation, Bharath Petroleum Corporation and Hindustan Petroleum Corporation are engaged in retail marketing of petrol and high speed diesel in Kerala through around 2700 retail outlets. Even after the liberalisation which started two decades back allowing private players in oil exploration, production and marketing, Kerala has relatively an insignificant number of around 70 outlets started by the private operators like Reliance Petroleum, Essar Oil etc. many of which remain closed or are non-operational. THE boom in the automobile market and the increased demand for petroleum products has led to opening up of large number of new retail outlets by the OMCs and the process is continuing. Most of the existing dealers operating retail outlets were appointed during the control regime during which dealers were selected by the Oil Selection Board giving certain preferences to injured in war, war widows, unemployed educated youth, members of the Scheduled Caste and Scheduled Tribe communities etc. Under the present dispensation OMCs are free to open retail outlets anywhere. When publications were made by these companies proposing to start new retail outlets near existing ones, the present operators of retail outlets complained to the Government of Kerala, which convened a meeting of representatives of OMCs and representatives of the Retail Dealers' Association on 28/07/2010 and took a policy decision to instruct the District authority namely, the District Collectors to follow the norms prescribed on 17/09/2010 for issuing No Objection Certificate as required under Rule 144(1) of the Petroleum Rules for commencement of new petroleum outlets. Under the norms prescribed by the Government through Circular dated 31/12/2010 issued by the State Government, the OMCs are required to ensure a minimum guaranteed business to existing operators while considering opening up of new retail outlets. When the OMCs started advertising for starting authorised retail outlets in various centres contrary to the above stated norms prescribed by the State, the existing dealers in the nearby areas approached this Court with writ petitions challenging the opening of such new retail outlets on the ground that the same is in violation of the norms prescribed by the State Government after consultation with the Oil Companies and if new petroleum outlets are allowed to be started indiscretely, the existing outlets will suffer loss leading to even closure of their business. While admitting writ petitions, certain interim orders were issued by Single Judges interdicting the OMCs from proceeding with setting up of some of the new outlets proposed and in some cases stay orders issued were later lifted or modified. Before the learned Single Judge, the OMCs and some of the new applicants who were parties in the writ petitions raised the contention that the State Government has no role in the production and marketing of petroleum products and so much so, the decision taken by the Government in the Circular issued and relied on by the existing operators will have no force of law and will not bind the OMCs. THE OMCs also denied the claim of the Government that the norms were prescribed and circulated by the Government based on the consensus reached among representatives of the OMCs who participated in the meeting arranged by the State Government.

(2.) THE learned Single Judge after hearing all sides including the Government Pleader for the State took the view that the objection raised by the existing retail dealers against setting up of new outlets is essentially to monopolise the business by them, which in the first place cannot be permitted and secondly, existing operators have no right to oppose starting of new outlets which offer competition in business with them. So far as the violation of the norms prescribed by the State Government through the Circular issued by them towards guidelines to District Collectors for issuing NOC under Rule 144 of the Petroleum Rules is concerned, the learned Single Judge accepted the contention of the OMCs that since legislative power in regard to production and marketing of petroleum products is exclusively with the Central Government under Entry 52 of List I of Vllth Schedule to the Constitution, the State has no authority to issue executive orders. Relying on several decisions of the Supreme Court and that of the Madras High Court against the right of business community to oppose competition in the market, the learned Single Judge permitted the OMCs to proceed with setting up of petroleum outlets at their choice and in accordance with their policies. It is against this common judgment of the learned Single Judge rendered in batch of cases filed by existing operators, they have come up with these Writ Appeals. So far as WA No. 966/2011 is concerned, this is filed by the State Government challenging the finding of the learned Single Judge that the State has no authority to interfere with the oil marketing business carried on by the OMCs in the State. THE WP (C)s above referred are cases filed after disposal of the batch cases by the learned Single Judge and the question raised is one and the same. Since common issues are raised in all the cases, we have grouped all these cases together, heard counsel for appellants/ petitioners, common Standing Counsel appearing for HPC Ltd. and BPC Ltd. and Standing Counsel appearing for IOC Ltd., the Government Pleader for the State, Assistant Solicitor General Sri. S. Parameswaran Nair and counsel appearing for dealers selected by the OMCs for starting new retail outlets.

(3.) THE appellants have challenged the findings of the learned Single Judge on the locus standi of the appellants to challenge the setting up of the new retail outlets. THE learned Single Judge relying on decisions of this Court in M/s. Reliance Industries Ltd. and Another v. Commissioner of Land Revenue and Others reported in ILR 2007 (2) Ker. 193 and that of the Madras High Court in Nataraja Agencies v. THE Secretary, Ministry of Petroleum and Natural Gas reported in 2005 (1) CTC 394 held that an existing business concern has no locus standi to challenge the setting up of new business in competition with his business. We have already noticed that business competition has no relevance so far as sale of petroleum products at the same price all over the State is concerned. So far as the decision of our High Court relied on by the learned Single Judge is concerned, we notice that the petroleum outlet started in that case was that of a large private company and probably private players in the market along with Public Sector Companies may certainly benefit the consumers both quantitatively, qualitatively and pricewise. Unfortunately private sector oil marketing in India is still a non-starter and benefits of market competition in petroleum products remain a dream for the customers. THErefore, this decision cannot be made applicable in the case of distribution of petroleum products by Public Sector companies at price controlled by the Government or at uniform price fixed by them. We are also unable to find any basis in the observation of the Madras High Court in the above decision that competition will lead to improvement in quality of the product because all the OMCs in Kerala are essentially marketing the petrol and diesel produced by the very same Refinery in Kochi which is under the control of BPCL. THE learned Single Judge further proceeded to hold that the appellants' relation with the OMCs. is only contractual and unless the agreement provides for restriction clause binding the OMCs. against starting new retail outlets nearby areas, appellants have no right to oppose the same. Further finding of the learned Single Judge is that if there is any breach of contract of any provision, express or implied, the remedy of the appellants is only before Civil Court, that too, for damages and not against setting up of new petroleum outlets. We are unable to uphold any of the finding because in our view, the Petroleum Act and Rules have inherent limitations, the most important of which is that OMCs should not indiscretely start retail petroleum outlets leading to loss for themselves which in turn is adverse to public interest because OMCs are funded with public money. Further, we have already noted that business loss of OMCs are recouped by the Exchequer through subsidies and unless business is run in a healthy manner by these OMCs, the same will lead to loss and consequent increase in sale price affecting public interest. Under Rule 161 of the Petroleum Rules, the Central Government is admittedly authorised to issue norms and guidelines in the setting up of retail outlets in the country and in exercise of the powers Government has in fact issued Circular referred above wherein viability of the business for the proposed new retail outlets should be the concern of the OMC while starting it. We also find force in the contention of the existing dealers who have been given allotments on certain priorities for starting retail business in petroleum wherein there is implied guarantee that the OMCs. which are Public Sector Companies which made the allotments, will not act detrimental to the interest of the existing dealers. It is worthwhile to note that Article 46 provides for economic upliftment of the downtrodden, particularly of the Scheduled Caste and Scheduled Tribe community. THErefore, there is force in the contention raised by the appellants in respect of 6 outlets presently operated by members of Scheduled Caste community that the very purpose of giving a benefit to them through allotment of retail dealership will be defeated, if in the nearby areas new retail outlets are started leading to complete loss and closure of the existing outlets. We, therefore, feel that the existing dealers have locus standi to have their grievance redressed in this Court, if the OMCs act against the letter and spirit of the Petroleum Act and Rules in the setting up of new retail outlets.