"Prima facie exorbitant:" Kerala High Court orders oil companies to temporarily sell bulk diesel to KSRTC at retail rate

The Kerala High Court on Wednesday issued an interim order directing state-owned Oil Marketing Companies (OMCs) to sell High Speed Diesel (HSD) to the Kerala State Road Transport Corporation (KSRTC) at the same rate charged at retail outlets [Kerala State Road Transport Corporation v Union of India & Ors.]..Justice N Nagaresh opined that the rate levied by the OMCs was prima facie "highly exorbitant". Even if the price was charged in accordance with some contract, the Court opined that it would still prima facie be an unconscionable term of bargain. "Whatever be the mechanism adopted by the respondents 2 to 5 in fixing the rates for bulk supply to consumer pumps, prima facie the rate levied is highly exorbitant. If it is in pursuance of any agreement, the same is prima facie, an extremely unconscionable term of bargain," the Court said in its interim order..Therefore, it directed the OMCs to provisionally provide HSD to KSRTC at a rate on par with that charged at retail outlets."In the facts of the case, there will be an interim order directing the respondents 2-4 to levy the price for HSD for the petitioner at par with the price available at retail pumps. The interim order is provisional and will be subject to the outcome of the writ petition," the order stated. .Senior Advocate Dushyant Dave appeared for KSRTC while Senior Advocate Parag Tripathi for the OMCs. .The Court was considering a petition moved by KSRTC through advocate Deepu Thankan, challenging the decision of the OMCs to increase the price of HSD sold in bulk to the KSRTC which is at a higher rate than the market price of diesel.It was pointed out that the KSRTC requires 300-400 KL of HSD per day for operating its daily schedules and has 72 consumer pumps across the State on the basis of separate agreements entered upon with each of the State-owned OMCs.While the KSRTC was initially given a subsidy, it was withdrawn in 2013 and a non-subsidised market-determined price was fixed which was usually less than the price of HSD at retail pumps, the petition stated.However, it was pointed out that the price difference between retail and consumer pump prices gradually decreased and by the first week of February 2022, the bulk HSD price reached ₹121.35 from ₹88, ₹21 more than the price fixed for retail customers as of March 17, 2022..Senior Advocate Dushyant Dave, appearing for KSRTC, argued that the fixation of price for a public body such as KSRTC at a higher price than the retail outlet is arbitrary and capricious.He said that regardless of whether there exists an arbitration clause in KSRTC's contract with the OMCs, where there is such a blatant violation of the right to equality under Article 14 that the High Court is empowered to intervene under Article 226. However, Senior Advocate Parag Tripathi, appearing for the respondent OMCs, challenged the maintainability of the petition on the ground of the limited jurisdiction of the Court when there is a contractual agreement as opposed to a statutory requirement. He also pointed out that the oil market is a deregulated one and that price fixation is arguably not the domain or forte of courts. He argued that the rights under Article 14 also provide that 'unequals' must be treated unequally and since there is a clear differentiation between a bulk consumer such as KSRTC and a regular retail consumer, the differential pricing cannot be said to be arbitrary. .The Court, however, opined that KSRTC being a public entity requiring a huge quantity of diesel to ply over 5,000 vehicles each day, HSD is an essential commodity. Moreover, it opined that prima facie, even if the price is fixed on the basis of a contract, the same would be an unconscionable term of contract. It, therefore, passed an interim order directing the OMCs to sell HSD to KSRTC at the retail price. The Court clarified that the same is provisional and subject to the outcome of the case. .[Read Order]