Andhra HC (Pre-Telangana)
A.P. Kerosene Wholesale Dealers ... vs Commissioner Of Civil Supplies, ... on 21 March, 2003
Equivalent citations: 2003(4)ALD102
ORDER V.V.S. Rao, J.
1. Andhra Pradesh Kerosene Wholesale Dealers Federation is the petitioner. They seek a Writ of Mandamus declaring the action of respondents in introducing "delivered supply" system of kerosene and the direction to the dealers to have underground storage facility as illegal and void. They also seek a consequential direction to the respondents to continue the existing system of distribution of kerosene. The petitioner claims to be representing 600 of its members, who are wholesale dealers in kerosene. The policy challenged reads as under:
1. The decision of delivering SKO to wholesalers premises will first be implemented for those dealers who have storage tank facility. Metropolitan towns will not be covered at present as presently shortage is not available there.
2. Oil Companies will arrange for necessary fleet of trucks ready in six months time, for which tenders, etc., or negotiations with present tank truck owners should begin at once. Delivered supplies should begin from 1st January, 1994.
3. Dealers who do not have adequate storage will be given notice to build up storage in the next six months.
4. New Dealerships for kerosene will be granted and commissioned only with adequate storage facility.
2. The policy is mainly challenged on the ground that the same is in violation of Articles 14, 19(1)(g) and 300-G of the Constitution of India and that it will result in hardship to the petitioners by imposing unreasonable condition on the dealers.
3. Respondents 1 and 6 have filed separate counter-affidavits. Respondents 2 to 5 have filed common counter-affidavit. It is not necessary to refer to all the counter-affidavits. Suffice to refer to counter-affidavit filed by sixth respondent. In the counter-affidavit filed by sixth respondent, namely, Union of India it is stated that marketing and sale of kerosene under Public Distribution System (PDS) is carried out by kerosene dealers appointed by Oil Companies, respondents 1 to 4 herein. The dealership agreement executed between dealer and Oil Company governs the transaction. The supply of kerosene under PDS is heavily subsidized in the interest of poorer sections of public and therefore controlled and regulated by the Government of India and concerned State Governments. The quantity of kerosene for each dealer for every month is fixed by the public sector oil companies depending on district-wise availability and quantum fixed by the State Government or administration of Union Territory.
4. The Government of India realized that kerosene allotted under PDS for distribution/consumption of public is not reaching the targeted section of the population. It was also realized that kerosene oil is being used for adulteration of high value petroleum products and malpractices like black-marketing are on the increase. Therefore, so as to curb these malpractices on 8.11.1993 a policy decision was taken by the Ministry of Petroleum and Natural Gas directing Food and Civil Supplies Department of the State Governments and Oil Companies to supply kerosene to the dealers under PDS on "delivered supply" basis. The policy was communicated to the State Governments by letter dated 18.11.1993. The policy was formulated to revamp distribution of kerosene to the dealers under PDS, to prevent diversification of kerosene and to ensure that the benefits of PDS are made available to the needy and poorer sections of the population.
5. All the dealers are required to obtain storage licence in Form XI or Form XIII of the Petroleum Rules, 1976 (for short, 'the Rules'). Under the Petroleum Act, 1934 (for short 'the Act') and the Rules it is obligatory on the part of every dealer including those dealers holding Form-XI to store the product in the licensed premises. As Form-XI obtained by licensee is not sufficient to meet the requirements under the new policy the licensees are required to obtain licence in Form-XIII and provide underground storage tank for storing bulk kerosene. There are 601 dealers in Andhra Pradesh and out of which 309 dealers have already obtained Form-XIII licence on 1.1.1994 and the balance of 292 dealers who are not having Form-XIII licence are advised to obtain Form-XIII licence on or before 31.3.1994 to enable them to avail delivered supply of kerosene. The Oil Companies addressed letters to kerosene dealers in September, 1993 to install required storage facilities. A reminder was also sent on 23.12.1993. One such notice was challenged before this Court in Writ Petition No. 213 of 1994 and this Court refused to grant any stay. The petitioner - Federation filed a writ petition suppressing the fact and obtained interim orders.
6. The reason behind the policy is also explained in the counter-affidavit of sixth respondent as follows. It is stated that to implement the delivered supply of Superior Kerosene Oil (SKO) proper storage in bulk is required. A dealer with Form-XI licence will not be able to meet storage requirements for delivered supply of SKO. The dealer is statutorily as well as contractually bound to maintain storage facilities at his premises before he is entitled to receive supply of kerosene oil. The system of "delivered supply" has already been commenced with respect to dealers having underground storage facilities and having appropriate licence. Before taking policy decision objections and suggestions made by oil companies were considered by the Government of India. The system of "delivered supply" of kerosene is intended to ensure flow of benefits under PDS to targeted sections of population and is not against public interest.
7. Sri N. Siva Reddy, learned Counsel for the petitioner, contends that under relevant Rules an option is given to the kerosene dealer either to obtain Storage permission in Form-XI or in Form-XIII of the Rules. When the dealership was given by the Oil Companies, they were aware of the permission obtained by each of the dealers. By reason of the policy the dealer is now compelled to obtain permission in Form-XIII to store SKO in bulk. This amounts to unreasonable restriction on the right of the petitioner-members under Article 19(1)(g) of the Constitution of India. Secondly, he would submit that the policy is arbitrary and irrational and therefore it violates Article 14 of the Constitution.
8. Though all the respondents filed counters, the learned Standing Counsel for the Central Government, the learned Standing Counsel for various Oil Companies, and the learned Government Pleader for Civil Supplies Department, are absent and there is no representation. Therefore, this Court is constrained to proceed on the basis of the contentions raised in the counter-affidavits. Be it noted, in the counter affidavit filed by sixth respondent as well as respondents 2 to 5 a reference is made to the decisions of the Supreme Court in Radha Krishna Agarwal v. State of Bihar, AIR 1977 SC 1496, L.I.C. v. Escorts, , and In Re. Amritsar Gas Service Ltd., , in support of the submission that the dealers of the Oil Companies are governed by the terms and conditions of the dealership agreement and therefore writ petition would not be maintainable. A contention is also raised that all the disputes between the dealer and the Oil Companies as per the agreement are referred to arbitration and writ petition is not maintainable on that ground.
9. After hearing the learned Counsel for the petitioner at some length, the controversy can be resolved by considering two questions; whether it is permissible for this Court to review the policy decision of the Union of India, and whether the policy decision impugned is arbitrary and irrational. As the two questions are inter-related, both can be considered together.
10. As noticed, the Government of India took a policy decision on 8.11.1993 and the same was communicated by Joint Secretary (Marketing), Government of India in Ministry of Petroleum and Natural Gas by letter dated 18.11.1993 to the Secretary to the Government of Andhra Pradesh in Food and Civil Supplies Department. The reasons and rationale for the policy are explained thus:
... As you are aware, PDS is being strengthened and revamped with a view to ensuring that the benefits of the PDS flow to the targeted sections of the society. In this connection, we have already addressed the State Governments to study the present system of distribution of SKO and rationalize it to prevent diversion and ensure supply of prescribed quantities to the consumers through the retailers. Government of India feel greatly concerned at the reports of diversion of kerosene from the PDS. Most of the reports indicate that the diversion of kerosene is taking place both between the oil company Depots and wholesalers' godowns as well as at the retailers level.
With a view to strengthening the Public Distribution System, the Government have decided that Oil Companies should begin delivered supplies of kerosene with effect from 1.1.1994 from their Main Installation/ Depots in the first instance to those dealers, which are having storage facilities in bulk (storage licence in form XIII). Presently, kerosene supplies are made by the oil companies on ex-Main Installation/Depot basis to their dealers. The transportation charges at actuals are permitted by the District Authorities to the dealers for transportation of kerosene from Oil Companies Main Installation/Depots to dealers premises (wholesalers' premises).
11. Kerosene is essential commodity and majority of the people of poorer sections use kerosene as fuel for cooking as well as for lighting the lamps. Government of India realised that malpractices in marketing of kerosene and public distribution are rampant. As disclosed in the counter-affidavits filed by sixth respondent, as well as respondents 2 to 5, kerosene is being used for adulterating high cost petroleum products and is diverted to black-market. As seen from the excerpt above, the Government of India, based on several reports, came to the conclusion that diversion of kerosene (presumably to black-market) is taking place both between the Oil Company Depots and wholesaler godowns as well as at the retailer level. The Government, in its wisdom thought that the diversification of kerosene to untargeted people and areas can be prevented to a major extent by introducing "delivered supply" system. Be it noted that it was the dealer who used to go to the Oil Company Depot and lift the kerosene (SKO). Under the new system as and when intended, the oil company will deliver SKO at the place of the wholesale dealer. It is also on record that unless a wholesale dealer has facilities in bulk storage in Form-XIII, it is not possible for him to store bulk kerosene. Indeed, in the counter affidavit filed by the sixth respondent it has been stated with reference to City of Hyderabad, that quota allotted to Hyderabad at 9,286 kilo litres per month and all the forty two kerosene dealers will get on average of 220 kilo litres per month. This Court is not able to comprehend as to how a dealer can store such a huge quantity of oil without having storage facilities in bulk and without storage licence in Form-XIII. To appreciate mis, a reference to some of the provisions of the Petroleum Act and the Petroleum Rules is necessary.
12. The Petroleum Act in pith and substance deals with the law relating to import, transport, storage, production, refining and blending of petroleum. Section 29 of the Act empowers the Central Government to make Rules inter alia providing for storage of petroleum products. In exercise of such powers; the Government of India promulgated the Petroleum Rules, 1976. As per Rule 2(xv) of the Rules "petroleum in bulk" means the petroleum contained in a tank irrespective of the quantity of the petroleum contained therein. The term "tank" is defined in Rule 2(xxii) as receptacle for petroleum exceeding 1,000 litres in capacity. Rule 3 provides that no person shall deliver or dispatch any petroleum to" anyone in India other than the holder of a storage licence issued under these rules. Rule 116 lays down that no person shall store petroleum except under and in accordance with a licence granted under these Rules. First Schedule to the Rules enumerates authorities who can grant licence. Licence to carry petrol by land on mechanically propelled vehicles is to be granted by the Chief Controller or a Controller of Explosives in Form-IX. The licence to import and store petroleum products in bulk in quantity not exceeding 25,000 litres i.e., (25 kilo litres) is to be in Form XI, as defined in Rule 2(ix) either by the Commissioner of Police or District Magistrate. The licence to import and store petrol an installation is to be granted by the Chief Controller or Controller of Explosives in Form XIII. An "installation" as per Rule 2(xiv) means any premises wherein any place has been specially prepared for the storage of petroleum in bulk. In view of this legal framework, it stands to reason that unless a dealer obtain licence in Form-XIII, he will not be able to store bulk kerosene exceeding 25 kilo litres.
Question of Irrationality:
13. It is not denied that all the petitioners have obtained licence in Form-IX without which they could not have carried the petroleum by land in tankers. It is also not denied that all of them have also obtained licence in Form-XI which enables them to store petroleum in quantities not exceeding 25,000 litres (25 kilo litres). When once the Oil Companies start deliveries under "delivered supply" system as per the policy of the Government, by reason of First Schedule to Rules, it must be held that it would not be possible for any dealer to store petroleum in bulk unless he has an installation (underground storage facility) in the premises after obtaining licence in Form-XIII. Therefore, the policy of "delivered supply" of kerosene has inseparable connection with the decision that the dealer should have Form-XIII licence. As an illustration, in City of Hyderabad, at the relevant time, 221 kilo litres of SKO per month and a person with Form-XI licence could not be able to store kerosene in excess of 25 kilo litres and hence obtaining Form-XIII is necessary. There cannot be any doubt that lot of thinking has gone into before the Government came out with the present policy. The Government called for various reports and having regard to the fact that diversion of kerosene to untargeted areas is taking place, wanted to plug the loopholes. There is no irrationality in the same.
Whether restrictions are unreasonable:
14. The perceived hardship of the businessmen with a policy can never be treated as unreasonable restriction. The reasonable restrictions under Article 19(6) of the Constitution have definite connotations. In State of Madras v. V.G. Row, , the Supreme Court considered this aspect of the matter and laid down;
It is important in this context to determine that the test of reasonableness wherever prescribed should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict.
15. In Nalgonda District Oil Millers Association v. Government of India, , this Court considered this aspect and after referring to - State of Madras v. V.G. Row (supra), Mineral Development Ltd. v. State of Bihar, ; Collector of Customs v. Nathella Sampathu. Chetty, , V. Rajilal M. and Co. v. State of M.P., , Laxmi Khandsari v. State of U.P., , Dalmia Cement (Bharat) Ltd v. Union of India, , M.R.F. Ltd v. Inspector, Kerala Government, , and laid down as under:
It is also settled law that individual hardship to businessman is not the test to be applied for examining the reasonableness of restriction under Article 19(1) (g) of the Constitution. The test to be applied is as to whether the restrictions are in the interest of general public. The impugned Control Order cannot be said to be not in the interest of general public. The Government is conferred with the power to exempt any edible oil from the purview of the Control Order.
16. In Krishnan Kakkanth v. Government of Kerala, , the Government of Kerala issued an order that pumpsets should be purchased from the Kerala Agro Industries Corporation. The same was challenged by manufacturers of other pumpsets on the ground that the Government order amounts to unreasonable restriction on the fundamental right under Article 19(1)(g) of the Constitution to trade in Agro machinery as all the farmers were compelled to buy pumpsets from Kerala Agro Industries Corporation. It was brought to the notice of the Court that the dealers in pumpsets had issued bills under comprehensive coconut development programme demanding money without actually effecting sales which enabled fraudulent drawal of loans and subsidies from the Government. In view of widespread manipulation and irregularities, the Government decided to curb the activities of various dealers of pumpsets. The Supreme Court found that the Government order did not impose any restriction on the trading activity. It was held:
...No restriction has been imposed on the trading activity of dealers in pumpsets in the State of Kerala including northern region comprising eight districts. Even in such an area, a dealer is free to carry on his business. Such dealer, even in the absence of the said circular, cannot claim as a matter of fundamental right guaranteed under Article 19(1)(g) that a farmer or Agriculturist must enter into a business deal with such trader in the matter of purchase of pumpsets. Similarly, such trader also cannot claim that the Government should also accept him as an approved dealer of the Government. The trading activity in dealership of pumpsets has not been stopped or even controlled or regulated generally. The dealer can deal with purchasers of pumpsets without any control imposed on him to carry on such business. The obligation to purchase from approved dealer has been fastened only to such farmer or agriculturist who has volunteered to accept financial assistance under the scheme on various terms and conditions.
17. The Supreme Court further observed:
To ascertain unreasonableness and arbitrariness in the context of Article 14 of the Constitution, it is not necessary to enter upon any exercise for finding out the wisdom in the policy decision of the State Government. It is immaterial whether a better or more comprehensive policy decision could have been taken. It is equally immaterial if it can be demonstrated that the policy decision is unwise and is likely to defeat that purpose for which such decision has been taken. Unless the policy decision is demonstrably capricious or arbitrary and not informed by any reason whatsoever or it suffers from the vice of discrimination or infringes any statute or provisions of the Constitution, the policy decision cannot be struck down. It should be borne in mind that except for the limited purpose of testing a public policy in the context of illegality and unconstitutionality, Courts should avoid "embarking on uncharted ocean of public policy."
18. By the impugned policy the business of members of petitioner is in no way curtailed. They may be asked to switch over to "delivered supply" system and to effectively utilize the same should have underground storage facilities after obtaining licence in Form-XIII. Their business rights have not been affected and their guaranteed right has not been restricted. No proper reasons are given as to how it is going to cause hardship to them. Therefore, the submission must be rejected.
Judicial review of a policy:
19. It is well settled that the Court of judicial review would be slow to interfere with the policy decision of the Government. Any policy decision taken after weighing pros and cons, and advantages and disadvantages, is bound to have supporters and objectors. Given the fact, every policy decision requires delicate balancing and consideration of complex, economic and other issues, the judicial review is ordinarily ruled out. Every policy decision is not justiciable.
20. In Dalmia Cement (Bharat) Ltd. v. Union of India (supra) the Supreme Court was considering constitutional validity of Jute Packaging Material (Compulsory Use in Packing Commodities) Act, 1987. The petitioners who are manufacturers of cement, sugar and other commodities and plastic bags challenged the said Act as imposing unreasonable restriction on the petitioners' fundamental right under Article 19(1)(g) of the Constitution. The Court rejected the submission and held that it is for the Central Government to decide as executive policy as to what percentage of jute bags is required to be used and whether or not such measure is required to protect the jute industry. It was further held:
It would, thus, be clear that the Court is not well equipped to adjudge crudities and inequities emerging from economic legislation. The legislature is empowered to experiment on economic legislation in its attempt to remove inequalities in income or status or to provide facilities and opportunities to improve economic status or provide social and economic justice to the society or a particular discernible segment of society or to remove the defect where the Legislature felt most acute. There is always presumption in favour of constitutionality. The Legislature appreciates the needs of the people and directs the laws to the problems made manifest by experience and discrimination is based on adequate grounds. The Court does not supplant the feel and experiment of the expert by its own views. Court in deference to legislative judgment, impose self-restraint to adjudge on crudities and experiment but concern on core constitutionality.
21. In State of Punjab v. Ram Lubhaya Bagga, , the Supreme Court considered scope of judicial review of a policy decision and laid down:
....So far as questioning the validity of governmental policy is concerned in our view it is not normally within the domain of any Court, to weigh the pros and cons of the policy or to scrutinize it and test the degree of its beneficial or equitable disposition for the purpose of varying, modifying or annulling it, based on howsoever sound and good reasoning, except where it is arbitrary or violative of any constitutional, statutory or any other provision of law. When Government forms its policy, it is based on a number of circumstances on facts, law including constraints based on its resources. It is also based on expert opinion. It would be dangerous if Court is asked to test the utility, beneficial effect of the policy or its appraisal based on facts set out on affidavits. The Court would dissuade itself from entering into this realm which belongs to the executive.
22. In Delhi Science Forum v. Union of India, , the Supreme Court dealing with the question whether a policy is suitable to effect a situation, the Supreme Court observed:
...The Courts cannot express their opinion as to whether at a particular juncture or under a particular situation prevailing in the country any such national policy should have been adopted or not. There may be views and views, opinions and opinions which may be shared and believed by citizens of the country including the representatives of the people in Parliament. But that has to be sorted out in Parliament which has to approve such policies. Privatization is a fundamental concept underlying the questions about the power to make economic decisions. What should be the role of the State in the economic development of the nation? How the resources of this country shall be used ? How the goals fixed shall be attained ? What are to be the safeguards to prevent the abuse of the economic power ? What is the mechanism of accountability to ensure that the decision regarding privatization is in public interest ? All these questions have to be answered by a vigilant Parliament. Courts have their limitations -because these issues rest with the policy-makers for the nation.
23. In a recent judgment in Balco Employees Union (Regd.) v. Union of India, , the Supreme Court considered the question whether the economic policies of the Government are amenable to judicial review. After referring to earlier decisions in - R.C. Cooper v. Union of India, , Fertilizer Corporation Kamgar Union v. Union of India, , R,K.Garg v. Union of India, AIR 1981 SC 2138, State of M.P. v. Nandlal Jalswai, , G.B. Mahajan v. Jalgaon Municipal Council, , Peerless General Finance And Investment Co. Ltd. v. Reserve Bank of India, , Premium Granites v. State of Tamil Nadu, , N.P.Oil Extraction v. State of M.P., AIR 1998 SC 145 = (1998) 7 SCC 592, State of Punjab v. Ram Lubhaya Bagga (supra), Bhavesh D. Parish v. Union of India, and Narmada Bachao Andolan v. Union of India, , the Supreme Court summarized the law as under:
...It is evident from the above that it is neither within the domain of the Courts nor the scope of the judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor are our Courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical..... The Courts have consistently refrained from interfering with economic decisions as it has been recognized that economic expediencies lack adjudicative disposition and unless the economic decision, based on economic expediencies, is demonstrated to be so violative of constitutional or legal limits on power or so abhorrent to reason, that the Courts would decline the interfere. In matters relating to economic issues, the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona fide and within limits of authority.
24. In view of settled position of law, the policy decision of the Government of India challenged in the writ petition cannot be subjected to judicial review, especially when the petitioners have failed to prove any irrationality or arbitrariness. The submission that it imposed unreasonable restriction is devoid of any merits.
25. The learned Counsel for the petitioner has brought to my notice communication of the General Manager (Sales) of Indian Oil Corporation Limited, dated 24.9.1998 addressed to Executive Director of Delhi State Office, General Manager, Rajasthan, Deputy General Manager, Uttar Pradesh and Punjab and also to their respective offices at Agra, Delhi, Lucknow, Chandigarh, Jodhpur, Karnal and other places. It refers to a meeting of the representatives of the Federation of All India Petroleum Dealers and All India Kerosene Dealers' Federation with the Hon'ble Minister of State for Petroleum and Natural Gas on 4.9.1998. It appears, the Hon'ble Minister assured the representatives of those Federations that the scheme of "delivered supply" of kerosene would be discussed threadbare with the State/Uttar Pradesh Government and the Oil Companies, and in the light of the submissions made by the dealers to the Minister. Until then, the Scheme will be kept in abeyance. Based on that, the General Manager (Sales), Indian Oil Corporation advised all the regions not to implement the "delivered supply" scheme until further orders. The learned Counsel, therefore, submits that the respondents cannot implement the same. He, however, did not place before me any order passed as such by the Government of India keeping the earlier policy in abeyance. Be that as it may, the letter dated 24.9.1998 addressed by the General Manager (Sales) to various Regional Offices is not addressed to the Regional or Divisional Office in Andhra Pradesh. It is very much doubtful whether the order keeping the policy in abeyance apply to State of Andhra Pradesh. It is, however, open to the petitioner to make representation to the sixth respondent seeking any clarification.
26. In the result, for the above reasons, the writ petition fails and is accordingly dismissed. The interim orders granted on 23-2-1994 shall stand vacated. There shall be no order as to costs.