Kerala High Court Dismisses Pleas Against Unilateral Change In Distributorship Of LPG Cylinders By Oil Marketing Corporations

The Kerala High Court on Thursday held that the transfer of consumers from one LPG distributor to another by Oil Marketing Corporations was in pursuance of the policy adopted in this regard, and the consumers had no right to challenge the same and contend that they are entitled to continue with the existing distributors.

The Division Bench comprising of Chief Justice S. Manikumar and Justice Shaji P. Chaly, while holding so, observed, 

"...the guidelines and the agreement executed by and between the Oil Marketing Corporations and the distributors would show that the consumers are under the direct supervision and control of the Oil Marketing Corporations and the consumer cannot turn around and say that they are entitled to continue with the existing distributors".

It added that, 

"...such a course of action adopted by the Government and the Oil Marketing Corporations would only enure to the benefit of the consumers, and by no stretch of imagination, it can be visualised and presumed that the shifting of consumer from one distributor to another, would, in any manner, prejudice the consumer".

Background

Three writ petitions were filed in the instant case before the High Court- two of them were filed by two organizations said to be constituted to protect the interest of the gas consumers; and third by an individual consumer seeking transfer of LPG connections to the nearest distributor of consumers by implementing the Unified Guidelines for Selection of LPG Distributor 2016, and the Ministry of Petroleum and Natural Gas, Government of India Order 16.02.2018, whereunder appropriate directions had been issued to the Oil Marketing Corporations to close down the existing extension counters in various places, including the State of Kerala by 31.03.2018 and to transfer the existing customers to the nearby distributor through intra company or inter company, as the case may be. 

Arguments by Petitioners

On behalf of the Consumer Associations, it was contended that the respondents had no authority to transfer the LPG Connections from one distributor to another without the knowledge of the consumers, as this right is for the consumers to exercise. The petitioners further submitted that consequent to the porting of the consumers, abnormal delay had occurred in respect of refilling the cylinders, which resulted in delay of supply of cylinders thus creating a major problem for the consumers.

It was contended that the right to continue or not with a dealer is crystalized with the policy decision of the Union Government. The petitioners emphasized that the rights crystallized to a consumer could not be taken away by the orders of the Government or the Oil Marketing Corporations, but only through legislative intervention.

It was further argued that the Government as well as the Oil Marketing Corporations are liable to remove the difficulties faced by the consumers with respect to the access to LPG and that the consumers, especially from hill area, are unable to reach out their distributors which are functioning far away from their houses. It was further pointed out that the cylinders are not distributed directly to the houses of the consumers, but are stored at some shops of the area and therefore, the consumers are forced to make additional payment to the shop owners for receiving the cylinders. Added to this was that distributors also charged unauthorized transportation fees.

Arguments by Oil Corporations

On the other hand, it was contended by the Oil Marketing Corporations that the right of the Public Sector Oil Marketing Companies to transfer the consumers of their LPG cylinders from one distributorship to another has been upheld in various decisions. Additionally, it was contended that in clause 2.(b)(ii) of Ext. R4(a)LPG Dealership Agreement, and all other similar agreements the Corporation reserves the right to appoint one or more additional distributors within the territory of the existing distributor and also to reduce, restrict, modify or alter the area of distribution of the existing distributors.

It was submitted that the reduction in the area of operation would automatically result in reducing the number of consumers registered with the dealer. It was further submitted that adequate safeguards have been provided while undertaking the transfer for protecting the interest of customers.

The counsels also pointed out that LPG is a controlled item, an essential commodity under the provisions of the Essential Commodity Act, 1955 and the entire production, distribution and sale of LPG is controlled by various orders passed under the provisions of Section 3 of the Act, 1955 and multiple policies formulated by the Government of India, and in this light it was submitted that the distribution was not affected in any manner. It was contended that the appointment of new distributorship and transfer of customers from existing distributors was also done in public interest. It was their submission that even when so transferred, the same would result in reducing cost for procuring the LPG cylinders for those customers, and further that there could not be any grievance since against the same since the consumers are, as unaffected by such transfer due to the door to door delivery of the LPG cylinders. 

Findings

The Court in the instant case noted the order issued by the Ministry of Petroleum & Natural Gas on 16.02.2018, whereby it has been specified that the extension counters which are operating in various States as well as Union Territories, including Kerala, shall be closed by 31.03.2018 and the existing customers would be transferred to the nearby distributors, which clearly indicates how the existing distributors were managing the supply and serving the customers by devising a mechanism of starting extension counters.

Apart from this, the Court also found that as per one of the agreements, the Oil Marketing Corporation is at liberty to appoint one or more additional dealers in the same territory as referred to in Clause 1(a) and such additional dealer or dealers shall be entitled to sell gas in the same territory without any objection from the dealer and the dealer shall not be entitled to claim any overriding remuneration, commission or allowances for the purpose. The Court further found that as per the well-structured guidelines, measures had been taken to render better services to the consumers of LPG connections.

"When the distribution of the LPG cylinders is regulated and controlled under the Essential Commodity Act, 1955, and the Oil Marketing Corporations are controlling the appointment of the distributors and the supply of LPG Gas cylinders; it is for the Oil Marketing Corporations to take into account the necessary and required viable aspects for effectively and safely supplying gas cylinders and rendering services to the consumers", it was observed.

The Court added that no right was vested with the consumer in objecting to the porting done by the Oil Marketing Corporations/Government of India under any guidelines issued with respect to the LPG portability.

"...merely because such a provision is made in the Inter-company Portability Guidelines, that cannot be, in any manner, interpreted as a right conferred on the consumer to object to the porting done by the Oil Marketing Companies, when new distributors are appointed".

The Court also found merit in the contention of the respondents that the consumers were not affected in any manner by the distribution of the LPG Cylinders, since it was supplied by the distributors at their door steps. It added that since this was a policy decision by the Government, interference by Courts could be done only if any arbitrariness or illegality, or whimsicality was detected in the process of drawing up and implementing the policy, and since the same was not found in the instant case in the action of the Government of India and the Oil Marketing Corporations porting the consumers from one distributor to another, the Court found that the first two writ petitions were liable to be dismissed.

It however disposed the third writ petition with direction to the Oil Marketing Corporations to implement the Unified Guidelines and orders issued by the Government of India dated 23.06.2016 and 16.02.2018 respectively, at the earliest possible, if it is not already done.

Advocates Blaze K. Jose, Nivea Liz Peter Fernandez, and Sheenamol Varghese appeared for Petitioner in WP (C) 26014 of 2019; Advocates Jawahar Jose, Cissy Mathews, Sarun Rajan and Senior Advocate K. Jaju Babu appeared for Petitioner in W.P. (C) 27010 of 2019.

Advocates M. Gopikrishnan Nambiar, Central Government Counsel B. Pramod, Veena Hari, K. John Mathai, Assistant Solicitor General S. Manu, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, Nirmal S., T.B. Hood, C.R. Rekhesh Sharma, M. Isha, ASG of India P. Vijayakumar, Adarsh Kumar, Raja Kannan, K.M. Aneesh, K. Santhosh Kumar (Kaliyanam), and Shashank Devan appeared for the various respondents in the three writ petitions.

Case Title: Kasim P.H. v. Union of India & Ors., and other connected matters

Citation: 2022 LiveLaw (Ker) 489

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