BREAKING| Kerala High Court Grants Interim Relief To KSRTC, Directs Oil Companies To Supply High Speed Diesel At Retail Prices
A vacation bench of the Kerala High Court on Wednesday granted interim relief in the plea moved by the Kerala State Road Transport Corporation (KSRTC) challenging the decision of State-owned Oil Marketing Companies to increase the price of diesel sold to the Corporation, which is allegedly much higher than the market price.Justice N. Nagaresh directed the respondents to levy the price of...
A vacation bench of the Kerala High Court on Wednesday granted interim relief in the plea moved by the Kerala State Road Transport Corporation (KSRTC) challenging the decision of State-owned Oil Marketing Companies to increase the price of diesel sold to the Corporation, which is allegedly much higher than the market price.
Justice N. Nagaresh directed the respondents to levy the price of High Speed Diesel (HSD) at par with the price available at retail pumps while clarifying that this relief was subject to the outcome of the petition.
"The agreement says that the respondents are bound to supply HSD at competent rates. Whatever be the mechanism adopted by the respondents in fixing the rates for bulk supply to consumer pumps, prima facie the price levied is highly exorbitant. If it is in pursuance of any agreement, the same is prima facie, an extremely unconscionable term of the bargain," reads the interim order.
Arguments:
When the matter was taken up today, Senior Advocate Parag Tripathi appearing for the oil companies submitted four main arguments.
1. Pricing based on a commercial policy is not amenable to writ jurisdiction. Oil prices are currently very high. There is nothing perverse in my commercial call and it cannot be challenged in a writ.
2. Petitioner cannot seek equal treatment with retail consumers under Article 14 of the Constitution. Article 14 requires equals to be treated equally and unequals to be treated unequally. Bulk consumers and retail consumers are unequal. High-speed diesel is a different category. Bulk category customers get credit while retail category customers do not. Therefore, they can't argue that they are treated differently and that it is a violation of Article 14.
3. When there is an arbitration clause in the agreement between the parties, the Court can interfere under Article 226 only in exceptional cases. But there is no such public interest or extraordinary circumstances in this case that warrants interference under Article 226.
4. Pricing is neither the concern nor the forte of a writ court. Price fixation is not within the expertise of the court. There is no statutory requirement for price fixation since it is a deregulated market and it is purely contractual. Contractual obligations can only be examined by a court if they fall in the public law domain.
Responding to these arguments, Senior Advocate Dushyant Dave appearing for KSRTC submitted that the respondents are state instrumentalities and that it's too late to say they are not amenable to writ jurisdiction. He persistently sought interim relief to direct them to levy the price for HSD at par with that charged to retail consumers.
It was also argued that the respondents cannot assert that Article 14 does not apply here on the ground that they are unequal because the agreement between them has no whisper to that effect. It does not differentiate between retail or bulk consumers. Therefore, he argued that KSRTC was entitled to be supplied diesel at a competitive price.
The petitioner further contended that Supreme Court has reaffirmed that despite an arbitration clause, one can approach the court.
The OMCs' behaviour is completely arbitrary and capricious, the counsel pointed out while arguing that government-owned oil companies cannot act like obsolete monarchs.
Background:
The petition was filed through Advocates Deepu Thankan, Ummul Fida, Lakshmi Sreedhar, R. Rajanandini Menon and Shahnas K.P.
The Court had earlier refused to grant interim relief on the plea moved by Kerala State Road Transport Corporation (KSRTC) challenging the decision of State-owned Oil Marketing Companies to increase the price of diesel sold to the Corporation, which is allegedly much higher than the market price. The Oil Marketing Companies were directed to file a statement explaining the present pricing mechanism by the next posting date.
KSRTC earlier submitted that this price hike was merely a marketing strategy devoid of any logic. The Counsel further argued that if an interim stay was not granted, the Corporation would have to shut down since it was already running on massive losses. When this was refused, he urged that a direction be issued to the effect that the present price may not be further increased.
The primary grievance of KSRTC is that the decision of the Oil Marketing Companies to increase the price of diesel sold in bulk only to the Corporation is discriminatory, arbitrary and violative of Article 14 of the Constitution of India.
"Supply of HSD (High-Speed Diesel) to the KSRTC alien at a higher price than available in the retail outlets for others would amount to discrimination and thus violative of Article 14 of the Constitution. The increase in the price of HSD to the KSRTC will force them to cancel the schedules to manage the cost of services," the plea reads.
The petitioner had argued that KSRTC required around 300-400 litres of diesel on a daily basis. Petroleum corporations offer exclusive storage and handling facilities to bulk customers like the petitioner, which are commonly called consumer pumps. Being a bulk consumer, KSRTC has 72 such consumer pumps across the State.
Although the State was in charge of fuel prices in the beginning, it was entirely deregulated in 2002 with petroleum corporations being empowered to fix the prices. According to the petitioner, this led to the oil companies fixing the tariff on unreasonable grounds.
Meanwhile, in 2013, the subsidy granted to KSRTC was withdrawn, and a non-subsidized market-determined price was fixed for the corporation. It was pointed out that the diesel available at consumer pumps was sold at lesser prices than at the retail outlets initially. However, this gap started gradually decreasing in January 2022.
The complication arose when the price of diesel at the consumer pumps unexpectedly skyrocketed in February 2022 from Rs. 88 to Rs. 121. Aggravating the situation, it was noticed that this price was Rs. 21 higher than the price of diesel sold at the retail outlets. This implies that private bus operators who are competitors of the petitioner operating with the same fare tariff fixed by the State were getting diesel at lesser prices.
It has also been pointed out that the Petroleum and Natural Gas Regulatory Board Act, 2006 was introduced to prevent the exploitation of consumers in the deregulated scenario, no action has been taken by the Centre yet to bring all petroleum products under the Act despite several recommendations.
Notably, the petitioner had approached the Apex Court in March 2022 with a similar plea. However, while orally criticising the State's policy, the Supreme Court had granted KSRTC liberty to approach the High Court.
Case Title: Kerala State Road Transport Corporation v. Union of India & Ors.
Citation: 2022 LiveLaw (Ker) 175