M/S Cls Limited & Anr vs Union Of India & Ors
2023 Latest Caselaw 5517 Cal

24.08.2023
Court-42
Item-9



                                 WPA/20391/2023

                              M/s CLS Limited & Anr.
                                        Vs
                               Union of India & Ors.

             For the Petitioner:
                          Mr. Debabrata Saha Roy, Adv.,
                          Mr. Neil Basu, Adv.,
                          Mr. Rahul Kumar Singh, Adv.,
                          Mr. Sankha Biswas, Adv.

             For the Respondent No. 2 to 4:

Mr. Biswanath Chatterjee, Adv., Mr. Sobhan Kumar Pathak, Adv.

For the State:-

Mr. Supratim Dhar, Adv., Mr. Parikshit Goswami, Adv

Affidavit of service be taken on record.

The petitioner No.1 is a private limited company represented by its director, petitioner No.2 herein.

The writ petition registers a challenge to a circular dated 4th January, 2018 issued by the CGM (LPG sales) of Hindustan Petroleum Corporation Limited.

It is not in dispute that the petitioner No.1 company has been working as a distributor of Liquefied Petroleum Gas (LPG) under the respondent No.2 Hindustan Petroleum Corporation Limited since 27th February, 2012. It is the case of the petitioners that though the distribution agreement did not prescribe any maximum number of cylinders which can be supplied, however, from the very beginning of distributorship there was

acute shortage of cylinders and the customers had to wait for a long time to get LPG connection as well as gas cylinders. Respondent No.2 from the very beginning issued circulars prescribing ceiling limits (refill ceiling limits). Gradually, the problem of shortage of LPG was overcome and the intending customers are in a position to get LPG connection and cylinders on demand. Therefore, the refill ceiling limits prescribed were never really implemented. The number of customers increased in respect of existing LPG distributors and they had to cater the increased number of customers. For such purpose, the distributors including the petitioner had to extend the size of their godown, increase number of man power and augment infrastructural facilities including networking system to cater excess number of customers. In order to meet unreasonable targets set up by the respondent No.2 corporation, the petitioner had to alter its position frequently, employ more sales representative to interact with the customers and explore more customers within the area of operation. The condition was so precarious that the petitioner was compelled to make representations before the respondent on 7th June, 2023 when the policies and targets became unbearable for them. Due to the compulsive deliveries by the respondent corporation, the godowns of the petitioners are filled to its brink and the petitioners have compelled to sell the cylinders even at a loss to clear the stock.

In the year 2016 "Unified Selection Guidelines" (USG) were propounded as selection criteria for new distributorship. On 4th January, 2018 the respondent No.2 issued a circular under the title "Market Restructuring - Transfer of Customers". This circular sought to restructure the

LPG market by transferring customers of the existing distributors both prior and subsequent to promulgation of USG 2016 without any prior consultation or any consent from any existing distributors. The circular is in two parts. Part A lays down the modalities which would govern distributorships awarded prior to USG 2016 and part B lays down distributorships awarded post USG 2016. For existing distributors, the Oil Marketing Companies fixed formula, wherein refill sales in excess of 75% of the ceiling limit would stand transferred to new/non-performing distributors to achieve purported market viability of 50% of the ceiling limit for such new/non- performing distributors. In short, the circular contemplated a compulsory detagging of customers of existing distributors up to 75% of the ceiling limit and transferred them to those distributors who have lesser customers till they reach 50% of the ceiling limit.

It is the case of the petitioner that the circular dated 4th January, 2018 was unilateral and arbitrary. It is stipulated that within three months of a new distributor being appointed, he will get 50% of the refill ceiling limit either on account of his own exertions or on account of migration of customers from existing distributors. Therefore, the said circular forced the existing distributors to give up their existing customers to new distributors. It is submitted by the petitioners that new distributors are to be appointed based on the growth potential available in a particular region. Appointment of new distributors where there exists sizable numbers of distributors who are offering satisfactory service, does not stand to reason and the attempt of the respondents having introduced such new

distributors to artificially create market viability for such new distributors is arbitrary and detrimental to the petitioners. The said circular is violative of Article 14, 19 and 21 of the Constitution. Petitioner has also demonstrated the cascading effect of the circular dated 4th January, 2018 in paragraph 16 of the writ petition. In view of such circumstances, the petitioner has prayed for the following reliefs:-

a) Dispense with Rule 26 of the Writ Rules framed under Article 226 of the Constitution of India for this Hon'ble Court;

b) A declaration do issue declaring that the Circular bearing Ref No.SL/1601 dated 4th January 2018 is not applicable in the State of West Bengal in view of the fact that the said circular has already been set aside by the Hon'ble Division Bench of the Hon'ble Bombay High Court in Writ Petition No.6735 of 2018 and the Hon'ble Madurai Bench of the Hon'ble Madras High Court in W.P (MD) No.24844 of 2019;

      c) A   Writ    of     and/or       in     the    nature    of
         Mandamus           do     issue        directing       the

respondents, their men, agents, servants, assignees specifically the Respondents No.2 to 4 cancel/revoke/rescind/recall/set aside the Email dated 18th May 2023 being Annexure "P-10"; the Memo dated 8th August 2023 being Annexure "P-12" and the Email dated 19th August 2023 being Annexure "P-14";

      d) A   Writ    of     and/or       in     the    nature    of
         mandamus           do     issue        directing       the

respondents, their men, agents, servants, assignees specifically the Respondents

No.2 to 4 not to give effect or further effect to the Email dated 18th May 2023 being Annexure "P-10"; the Memo dated 8th August 2023 being Annexure "P-12" and the Email dated 19th August 2023 being Annexure "P-14';

e) A    Writ    of     and/or       in    the   nature    of
   mandamus            do    issue         directing     the

respondents, their men, agents, servants, assignees specifically the Respondents No.2 to 4 to transfer back 1429 customers to your Petitioner who were initially transferred vide Email dated 19th August 2023;

f) A    Writ    of     and/or       in    the   nature    of
   mandamus            do    issue         directing     the

respondents, their men, agents, servants, assignees specifically the Respondents No. 2 to 4 not to take any coercive step against your Petitioner;

g) A Writ and/or in the nature of Certiorari do issue directing the respondents and/or their men/agents/servants to transmit all records relating to and/or forming the basis of the issuance of the Circular dated 4th January 2018 being Annexure "P-4", Email dated 18th May 2023 being Annexure "P-10", the impugned Memo dated 8th August 2023 being Annexure "P-12", and the Email dated 19th August 2023 being Annexure "P-14" and to certify the same and on being so certified quash the same so that conscionable justice may be rendered;

h) Rule NISI in terms of prayers (b) to (g) as above and to make the Rule absolute if no

cause and/or insufficient is shown in reply cause thereto;

i) An order do issue staying operation of the Circular dated 4th January 2018, being Annexure "P-4", Email dated 18th May 2023 being Annexure "P-10", the Memo dated 8th August 2023 being Annexure "P- 12", and the Email dated 19th August 2023 being Annexure "P-14" hereto till disposal of this Writ Petition;

j) An order do issue directing the respondents not to give effect or further effect to the Email dated 18th May 2023 being Annexure "P-10", the Memo dated 8th August 2023 being Annexure "P-14" hereto till disposal of the Writ Petition;

k) An order do issue directing the respondents and/or their men, agents, servants, assignees to transfer back 1429 customers to your Petitioner who were initially transferred vide Email dated 19th August 2023;

l) An Order do issue directing the respondents and/or their men, agents, servants, assignees not to terminate the LOA and Dealership Agreement issued to the Petitioner till disposal of this Writ Petition;

m) Ad-interim order in terms of prayers (i), (j) and (k) above;

n) Pass such other or further order or orders and/or direction or directions as Your Lordships would deem fit and proper.

Mr. Debabrata Saha Roy, learned Advocate for the petitioners submits that the circular dated 4th

January, 2018 was issued simultaneously by three oil corporations owned by the Government of India. The identical circular issued by Bharat Petroleum Corporation Limited was challenged by a group of distributors before the High Court of Judicature at Bombay in Writ Petition No.8753 of 2018. By a judgment dated 30th September, 2019 the Division Bench of the Bombay High Court was pleased to hold that the impugned circular is arbitrary and suffers from Wednesbury unreasonableness, is irrational and in the least, violates the petitioner's vested rights whilst providing for benefits accruing to new distributors in the absence of any intelligible differentia. Therefore, the impugned circular was quashed and set aside.

It is also pointed out by Mr. Saha Roy that Bharat Petroleum Corporation Limited moved the Hon'ble Supreme Court challenging the aforesaid order passed by the Hon'ble High Court at Judicature at Bombay and subsequently the special leave was withdrawn.

The identical circular issued by the Indian Oil Corporation Limited was challenged before the Madurai Bench of Madras High Court in WP (MD) Nos.24844 - 24849 of 2019 and the Hon'ble Bench of Madurai Bench of Madras High Court held as hereunder:-

"Admittedly, on 30.09.2019, the impugned circular has been quashed by the High Court of Bombay and it is non-est in the eye of law. and the matter is subjudice before the Honourable Supreme. It is not in dispute the said circular was applied across the Country. The validity of the circular was upheld when it was alive and operative. Now that the Division Bench of High Court of Bombay has quashed the circular. In that event, it cannot be construed to be operative within this region as

per the Division Bench orders passed prior to 30.09.2019. Till the Honourable Supreme Court takes a decision as to the validity of the circular, which has been struck down, the circular cannot be operated upon. Considering the same, there shall be an order of interim injunction restraining the respondents from transferring the existing customers of the petitioner to new distributors."

Learned Advocate for the HPCL, respondent No.2 herein submits, on the contrary that the circular issued by BPCL or IOCL in the State of Maharashtra and Madras may be quashed and set aside, but the decision of the High Court of Judicature at Bombay and Madurai Bench of Madras High Court are not applicable in the State of West Bengal. I am surprised at hearing such submission made by the learned Advocate for the respondent No.2. While judgment of a Coordinate Bench of another High Court has a persuasive value, judgment of a Division Bench of another High Court is binding upon the Single Bench of another High Court if on the similar point there is no precedent of this High Court. Moreover, the vitality of the said circular is under the consideration of the Hon'ble Supreme Court. Till the Supreme Court takes a decision as to the validity of the circular, and it has been struck down by the Division Bench of Bombay High Court, the circular cannot be operated upon.

The learned Advocate for the respondents further draws my attention to the agreement executed by and between the petitioners and the respondent No.2. Clause 2(b)(iv) states that the dealer will during the continuance of the agreement confine himself to effect the sales in the area or

territory specified hereinabove, but, the corporation shall be entitled without the consent of the dealer to enlarge, reduce, increase or modify such area or territory to such other place as may from time to time be authorized by the corporation in writing. He also refers to a letter dated 19th August, 2023 wherein the respondent No.2 wanted to transfer only 1429 consumers from the shop of the petitioners to another shop, namely, OM HP Gas Gramin Vitrak. It is contended if only 1429 numbers of consumers are transferred from the distributorship of the petitioners to another distributor for better service, the petitioner will not suffer any financial loss.

Having heard the learned Counsels for the parties and on careful perusal of the entire materials on record this Court is of the view that the impugned circular did not consider the consequences of deduction of 75% of the existing customers from the existing distributors. Non consideration of such consequences demonstrates the arbitrary and high handed manner in which the impugned circular was issued. The policy decision is irrational, arbitrary and violative of Article 14 and 19 of the Constitution.

In view of such circumstances, this Court has no other alternative but to rely on the decisions passed by the Bombay High Court in WP 8753 of 2018 and Madurai Bench of Madras High Court in WP (MD) Nos.24844 - 24849 of 2019.

This Court is however not unmindful to note that the judgment of the Bombay High Court is under challenge by the Oil Corporation before the Hon'ble Supreme Court. In view of such circumstances, the respondent No.2, 3 and 4 are restrained from giving effect to the impugned

circular dated 4th January, 2018 till disposal of the Special Leave Petition No.2425 of 2020 pending before the Hon'ble Supreme Court.

The parties are at liberty to mention the matter after disposal of the Special Leave petition by the Hon'ble Supreme Court.

(Bibek Chaudhuri, J.)