Karnataka High Court Directs Oil Marketing Companies To Consider Distillery's Plea For Enhanced Ethanol Supply Allocation

The Karnataka High Court has directed various Oil Marketing Companies (OMCs) to consider and decide a representation submitted by a distillery seeking enhancement of ethanol allocation for the Ethanol Supply Year (ESY) 2025–26. [2026 LiveLaw (Kar) 213]The OMCs in question are Bharat Petroleum Corporation Limited, Hindustan Petroleum Corporation Limited and Indian Oil Corporation Limited. Justice N Nagaprasanna allowed the plea filed by M/S Vinp Distilleries and Sugar Private Limited, a dedicated ethanol manufacturer, challenging the reduced allocation of ethanol supply despite having established a dedicated ethanol plant. It was the distilleries' case that although its plant had a production capacity of approximately 9.90 crore litres annually, it was allotted only 3.92 crore litres for ESY 2025–26, while its bid was of 9.26 crore litres. The company argued that such reduction violated Clause 6.8 of the Long-Term Offtake Agreement (LTOA), which provided preferential allocation for dedicated ethanol plants.Opposing the plea, the Attorney General of India submitted that preferential allocation and best endeavour basis cannot become a right to the petitioner company to seek a mandamus upon the OMCs to act in terms of the agreement entered into between the parties.It was also argued that Clause 6.8 of the agreement was only directory and could not be seen to be mandatory for the petitioner to seek writ in the nature of mandamus.AGI also submitted that OMCs are required to operate within the national ethanol procurement framework governed by the guidelines issued by the Ministry and that any judicial order that would be passed in the matter should not override the deficit State getting adequate ethanol and sufficient State getting excess of ethanol. Therefore, the representation if considered in favour of the petitioner would amount to modification of the Government policy itself, which cannot be permitted in law, he said. Allowing the plea, the Court held that the petitioner company had a legitimate expectation of continuance of the prevailing policy, which arose directly from the agreement entered between the parties and the consistent past conduct of the OMCs. “Dedicated Ethanol Plants, which have hitherto supplied ethanol exclusively to the OMCs and which are contractually prohibited from either manufacturing anything else or supplying ethanol to any third party, cannot now be relegated to the short end of the stick, thereby visiting them with grave and manifest prejudice,” the Court said. It added that the petitioner was entitled to issuance of a writ of mandamus directing the concerned OMCs to act in consonance with Clause 6.8 of the agreement, particularly when they themselves invoked the clause to enhance procurement from 1.44 crore litres to 3.92 crore litres. “There cannot be selective or partial invocation of Clause 6.8 by denying 9.90 crore liters as sought for. If such conduct were to be countenanced, operation of the clause would be reduced to the whims and fancies of respondents 2 to 4, an eventuality wholly antithetical to law. In that view of the matter, the writ petition deserves to succeed,” the Court said.It thus directed the OMCs to consider the representation of the petitioner for enhancement of procurement, bearing in mind the observations made in the order. “The consideration should precede the decision on the tender now issued. Appropriate order on the representation shall be passed within four weeks from the date of receipt of a copy of this order,” the Court said.Title: M/S.VINP DISTILLERIES AND SUGARS PVT. LTD v. UNION OF INDIA & ORSClick here to read orderCitation: 2026 LiveLaw (Kar) 213

Karnataka High Court Directs Oil Marketing Companies To Consider Distillery's Plea For Enhanced Ethanol Supply Allocation

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Karnataka High Court Directs Oil Marketing Companies To Consider Distillery's Plea For Enhanced Ethanol Supply Allocation

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