BREAKING| Kerala High Court Sets Aside Interim Order In Favour Of KSRTC In Bulk Diesel Price Case

The Kerala High Court on Friday allowed the appeals moved by state-owned oil marketing companies (OMC) challenging the interim order issued in favour of Kerala State Road Transport Corporation (KSRTC) wherein the OMCs have been directed to levy the price of High Speed Diesel (HSD) at par with the price available at retail pumps temporarily.

A vacation bench of Justice C.S Dias and Justice Basant Balaji thereby set aside the impugned interim order passed in a petition moved by KSRTC through Advocate Deepu Thankan citing that there was an arbitration clause in the agreement between the parties. 

"This Court finds that the petitioner has not represented their alleged grievance to the OMCs; instead has rushed to this Court. Therefore, no inaction can be alleged against the respondents 2 to 4, warranting the issuance of a writ of mandamus. Furthermore, the final relief sought in the writ petition has been granted as an interim measure, which again is impermissible"

Further, it was held that when a party invokes the plenary power of the High Court to issue a prerogative writ under Article 226 of the Constitution of India, notwithstanding the arbitration clause contained in an inter-party contract, and the opposite party objects to the maintainability of the writ petition, the High Court is bound to consider the objection and be satisfied that it is a fit case to exercise its discretion instead of relegating the parties to the alternative remedy.

"the discretionary power of this Court to entertain a writ petition filed under Article 226 of the Constitution of India, instead of relegating the parties to an alternative remedy, is separated by a narrow line."

In the appeal, it was the case of the oil companies that KSRTC is a bulk customer of HSD and inherently different from a retail consumer, therefore they form separate categories. The appellants also pointed out that KSRTC had approached the Court for similar reliefs in 2013, but the Supreme Court had dismissed the petition holding that this was a matter of policy and that no interim order could have been passed by the High Court in such matters.

It has been argued that while KSRTC admits that it has not procured diesel from consumer pumps after the price hike, it has not disclosed the source or manner in which it has been obtaining HSD to run its schedules smoothly, thereby evidencing that no actual loss or injury has been differed by the Corporation.

Further, the oil companies submitted that KSRTC owes significant dues to the oil marketing companies for the bulk diesel already supplied which shows that the balance of convenience is clearly in favour of them. On the strength of settled law, it was urged that arbitration is an effective alternative remedy and that price fixation is not the forte of the courts while adding that the scope of judicial review in non-statutory price fixation matters was extremely limited.

The appellants have contended that despite all these contentions, the Single Judge proceeded to pass the impugned interim order and that they are gravely and adversely affected by the same. It has been prayed that the same may be vacated since if allowed to stand, it would occasion a travesty of justice and cause severe hardship to the appellants.

• Arguments On Behalf Of Oil Companies

Senior Advocate Parag Tripathi appeared for the appellants and argued that the impugned interim order did not prima facie deal with the points raised by them, particularly the issue of maintainability. He argued that the contract between KSRTC and the oil companies includes an arbitration clause, so the maintainability of the plea itself is a question. Similarly, commercial disputes are not amenable to writ jurisdiction. But the interim order does not address the question of maintainability.

It was also pointed out that the bulk price of crude oil jumped internationally after the Ukraine conflict, which has inevitably led to a hike in fuel prices across the globe. The senior counsel submitted that the balance of convenience in favour of the appellants has not been dealt with either in the interim order.

It was further contended that the Single Judge should not have interfered since there was an arbitration clause, the issue is in the realm of contract and it is a matter of policy. It was further pointed out that the Single Judge had not taken a prima facie view in its order on the issue of maintainability which they had argued at great length.

Further, the Senior Counsel argued that KSRTC owes over 123 crore rupees to the three OMCs for the diesel already supplied to them which has not yet been paid. Another point they had argued before the Single Judge but does not find a mention in the order was that retail and bulk consumers are not equals under Article 14 of the Constitution for KSRTC to claim equal treatment.

On these grounds, he sought for a stay on the implementation of the interim order.

• Arguments On Behalf Of KSRTC

Senior Advocate Dushyant Dave appeared for KSRTC and submitted that this appeal was one without any merit and was liable to be dismissed. He argued that the Supreme Court had authoritatively held that an appeal against the exercise of discretionary power by the Single Judge cannot be entertained unless they can show that the exercise of discretion was arbitrary, capricious or perverse.

It was contended that the oil marketing companies were abusing their monopolistic position, in complete contradiction to their contract with KSRTC. Further, the Counsel argued that KSRTC was not seeking a subsidised price but merely that the OMCs supply diesel to them at the same price they charge the private buses.

"In my 43 years of practice, I have never come across a situation where a public entity is charged more than a private entity. The private buses in Kerala are charged the market price for diesel but we are charged market+k price."

It was also clarified that after 2018, the subsidy which was earlier available to private entities was removed. Thereafter, the OMCS and KSRTC entered into fresh agreement where it was agreed that the prices would be in consonance with the market price. He admitted that KSRTC was given small discounts till February, but that was not a subsidy.

"We don't even want this discount anymore. We just want to be charged the same market price. They can only charge the market price. We are suffering Rs. 85 lakh loss every day and the burden is growing. The appeal is liable to be dismissed."

Case Title: Bharat Petroleum Corporation Ltd. v. Kerala State Road Transport Corporation & connected matters.

Citation: 2022 LiveLaw (Ker) 211

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