Karnataka State Petroleum Dealers Welfare Association vs State of Karnataka and Others

D.H. Waghela, C.J.—The petitioner, Karnataka State Petroleum Dealers Welfare Association, has invoked Article 226 and 227 of the Constitution with the grievance that respondent Nos. 2, 3 and 4, petroleum companies were, by their advertisements in the year 2011 and 2012, indiscriminately granting dealerships of petroleum products supplied by them. Even as the petition is styled as Public Interest Litigation, it is prima facie intended to benefit the Members of the petitioner association. It is averred in the petition that petrol outlets established in small towns and rural areas in the State of Karnataka are battling for their survival on account of insufficient turnover/sales. Inspite of that, respondent Nos. 2 to 4 Companies have ventured to open up nearly 3000 to 4000 new petroleum outlets all over the State, forcing the existing outlets to wind up. These averments are not substantiated by any evidence or figures, and therefore remain too vague. The petitioner has mainly relied on a judgment of the Division Bench of Kerala High Court in WA No. 741/2011 and it is further averred that dealers in Himachal Pradesh, Andhra Pradesh, Delhi and Jammu and Kashmir have secured orders banning the Oil Manufacturing Companies (OMCs) from issuing the Letter of Intent without permission of the Court. It was submitted for the petitioner that respondent Nos. 2 to 4 companies are already incurring huge losses and it was clear that spending so-much money on setting up of around 3000 new petrol pumps all over the State would cause more loss, which may ultimately be passed on to the public, either directly or through the Central Government which subsidizes the loss. Under the circumstances, the petitioner is stated to have made a detailed representation which is not duly considered, is the submission of learned Senior Counsel for the petitioner. Learned senior counsel Mr. Anant Mandagi, further vehemently argued that public funds were being wasted by the erroneous policy and investments by the oil companies in opening new outlets for petroleum products, which fact has indirectly been now recognized and necessary directions are now issued by the Ministry of Petroleum and Natural Gas of the Government of India vide its letters dated 03.12.2012 and 26.12.2012, whereby it is decided that henceforth the OMCs would not invest in opening of new retail outlets and the investments are required to be made by prospective dealers only. It was on that basis submitted that dealerships which may be awarded pursuant to the earlier advertisements issued in the year 2011 may still cause huge investment and unfair competition on account of required number of outlets having already been established and they having been running into losses. He also submitted that the clarifications and directions as aforesaid issued by two letters of the Central Government were an attempt at circumventing the interim order of this Court and at creating a defence before this Court after interim relief in the form of direction to maintain status-quo was granted by this Court on 26.02.2013. Learned senior counsel however, fairly conceded that the decision of Division Bench of Kerala High Court on which reliance was mainly placed by the petitioner, was not only stayed, but has now been reversed by the Apex Court vide its order dated 02.04.2013 in SLP (Civil) Nos. 1728-1736/2012. He also fairly conceded in reply to specific queries in that regard that no direct violation of any legal provision could be cited in support of the contentions contained in the petition.

On the other hand, respondent Nos. 2 and 3 have filed detailed statements of objections and applications for vacating the interim relief to point out that the dealerships are not being granted in the way and on the scale apprehended by the petitioner. It is denied that nearly 3000 to 4000 outlets were slated to be established. Even after the advertisement issued in the year 2011, respondent No. 2 had identified 799 locations, out of which, responses were received in respect of 269 locations and out of that only 158 locations were short-listed. After deregulation of the petroleum sector in the year 2002, public sector oil companies are put to challenge in the petroleum market by the private sector. Even as the administered price mechanism was dismantled, every oil company has to make its own survey with regard to potentiality of the area where new retail outlet is required, keeping in view the existing retail outlet of any oil company. In order to cater to the demands of the consumers in the rural areas as well as in towns and cities, the OMCs have to expand the network of dealership and encourage healthy competition which is not detrimental to either public interest or the members of the petitioner-Association.

Respondent No. 3 has stated in its statement of objection that pursuant to the advertisement in question, out of 731 locations advertised, responses were received only in respect of 308 locations and only 153 locations have been short-listed.

Respondent No. 4 Company has categorically stated in its statement of objections that the petitioner claims to be the Registered Association of the existing dealers of the respondent Companies and as its members or as the petitioner they cannot be allowed to adjudicate their grievances in the form of a public interest litigation. In fact, the real motive behind the petition is to protect private monopoly interest of the existing dealers. The petitioner has not)established any statutory violation and the petition is mainly based on apprehended loss of business. It is further submitted that private-sector companies such as Reliance, ESSAR, SHELL etc., have come forward and started exploration as well as marketing of petroleum products and have set up their own retail outlets in various parts of the country. The Public Sector Companies viz., respondent Nos. 2 to 4 have also been given commercial freedom by the Ministry - of Petroleum and Natural Gas to set up retail outlets on their own, so as to face competition from private companies. For a developing country like India, rural areas are vast and development of rural areas are pivotal in the overall economic development of the country. Setting up of retail outlets in rural and interior markets not only benefit rural public, especially farmers, but also contribute to the development of the rural and interior area.

It is further stated that in allotment of retail outlets, the interest of various sections of society is taken care of by reserving dealerships for socially weaker category of people such as SC and ST, physically handicapped, freedom fighters, defence and paramilitary personnel and outstanding sports persons as per the policies and guidelines of Ministry of Petroleum and Natural Gas. While pursuant to the advertisement dated 15.09.2011, offers for 361 locations were invited, 89 locations were ear-marked for special category people and 136 locations among all categories were reserved for women, keeping in view the Government''s thrust on empowerment of women. In the advertisement issued on 15.09.2011, applications were called for 499 locations, out of which, 99 locations were ear-marked for special category people and 179 locations among all categories were reserved for women. When offers were called for 267 locations by the advertisement dated 29.02.2012, 95 locations were reserved for women. Similarly, when offers were invited for 703 locations by the advertisement dated 29.02.2012, 145 locations were ear-marked for special category people and 214 locations among all categories were reserved for women. It is averred that the rural retail outlets are set up under the respondent-Corporation in rural areas with an objective of making available the petroleum products at the door steps of the rural public especially farmers and other essential products for the farmers viz., seeds and pesticides are also made available depending upon the local requirements, so that the farmers get them nearer to their place. As for the business generated at rural retail outlets, it is stated that the average sales volume for rural retail outlet during the financial year was more than the Rural Retail Outlets viability norms of 6 KL Petrol and 40 KL Diesel per month. Therefore, the petitioner''s contention that 80% of the existing petrol pumps were running into loss and were on the verge of closure was baseless and incorrect. It is also stated that respondents have been putting up new retail outlets after assessing the feasibility and on the basis of sales potential and the investment returns. It is submitted that Karnataka is a vast State with majority of the areas covered in rural and interior parts. Whenever dealership is awarded by OMCs to the dealers, they are required to execute a non-statutory contract wherein a clause is provided by which the dealer undertakes not to object against the OMC which has awarded the dealership or other OMC in establishment of more retail outlets in the very vicinity; and hence the petitioner cannot legally prevent OMCs from establishing new retail outlets.

By filing applications for vacating the interim relief, it is further stated on behalf of the OMCs that huge investment and expenditure are already made by respondent companies and by the parties to whom dealerships have been granted, who are not even joined as respondents herein.

In the above conspectus of facts and in absence of any legal argument pointing out violation of any provision of law, the petition is found to be clearly and indirectly calculated to preserve and protect private business interests and monopolistic privilege based on prior allotment secured by the members of petitioner-Association. Such private interest of the members of petitioner-Association could by no stretch be clothed with public interest, particularly when the attempt practically is to deprive the other prospective dealers of petroleum products of their fundamental right to do business in accordance with law. The apprehension of the members of the petitioner-association seems to be that establishment of more number of petroleum outlets would have a direct impact on their business as the dealers receive commission on the basis of the sales made by them. Such an apprehension infact may not be real having regard to the large number of vehicles that are being added everyday. Any apprehension with regard to loss in business on account of rival traders entering the field would not amount to violation of any legal right much less a fundamental right. This apprehension is sought to be justified by a submission that crores of rupees are being invested by the respondent-petroleum companies in establishing new petroleum outlets, which is having an adverse impact on the exchequer. It has also now been. brought to our notice that subsequent to the filing of this writ petition, the Ministry and the concerned authorities have taken a decision not to invest on petroleum outlets to be licenced to private dealers and instead, the dealers themselves would make the investments. If that is the changed position, then the petitioner can have no real grievance at all. Therefore, the petition is required. In public interest and in the interest of justice, to be dismissed with proper strictures and an order of compensatory costs.

In that context, learned senior counsel Mr. Anant Mandagi submitted that the petition was filed with a genuine cause of action and it could not be treated as a frivolous petition; whereas, learned counsel Sri Shashidhar S. Karmadi submitted that the oil companies and the prospective dealers have been put to huge loss on account of the present litigation and that delay is caused in the on-going work of many retail outlets which were under construction during pendency of the petition.

Learned senior counsel Mr. Udaya Holla appearing for respondent Nos. 2 to 4 also submitted that, as graphically depicted in various photographs annexed to the application for vacating interim relief, the construction of retail outlets at various places was underway and the work has come to a standstill, which necessarily results into losses as also legal expenses involved in appearing in the present proceedings.

Learned counsel Mr. Arun Shyam appearing for the applicant who has applied for being impleaded, submitted that the applicant has already fully constructed his retail outlet, opening and operation of which was stayed by the interim order made herein. The same was the submission of learned counsel Sri Pruthvi Wodeyar appearing for another applicant. Having regard to the above facts and circumstances, the petition is dismissed for being an attempt at abusing the process of law and all interim applications made therein are disposed with the direction that the petitioner in W.P. No. 10400 of 2012 shall pay, by way of costs, Rs. 1,00,000/- (Rupees one lakh only) to each of the respondent Nos. 2 to 4 within a period of one month from the date of receipt of a copy of this order.

All interim orders made in the main petition would not survive in view of dismissal of the main petition.