Malappuram District Hindustan Petroleum Corporation Limited Dealers Association and Thrissur District Petroleum Dealers Association v. Hindustan Petroleum Corporation Limited and its Officers (HPCL) – General Manager, South Zone; Chief Regional Manager; Chief Manager Terminal; Chief Regional Manager

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **FRIDAY ,THE 11TH DAY OF JANUARY 2019 / 21ST POUSHA, 1940** ## **WP(C).No. 35729 of 2018** ## **PETITIONERS:** |**1**|**MALAPPURAM DISTRICT HINDUSTAN PETROLEUM**| |---|---| ||**CORPORATION LIMITED DEALERS ASSOCIATION**| ||**HAVING OFFICE AT CHANGUVETTY, KOTTAKKAL-676**| ||**503, REPRESENTED BY ITS SECRETARY**| ||**ABDUL RAHIMAN MUBARAK.M.K.**| |**2**|**MUHAMMED SUHAIL C.P.,**| ||**AGED 38 YEARS**| ||**S/O.C.P.MUHAMMEDKUTTY,**| ||**SEEPEACE FUELS, BYE PASS ROAD,**| ||**KURUPATH, KONDOTTY- 673638.**| ||**BY ADVS.**| ||**SRI.T.SETHUMADHAVAN (SR.)**| ||**SMT.N.DEEPA**| ||**SMT.PREETHI. P.V.**| ||**SRI.M.V.BALAGOPAL**| ## **RESPONDENTS:** |**1**|**THE GENERAL MANAGER,**| |---|---| ||**SOUTH ZONE, HINDUSTAN PETROLEUM CORPORATION**| ||**LIMITED, NO.8, NO.1, THALAMUTHU NATARAJAN**| ||**BUILDING, 4TH FLOOR, GANDHI IRWIN ROAD,**| ||**EGMORE, CHENNAI- 600 008.**| |**2**|**THE CHIEF REGIONAL MANAGER,**| ||**HINDUSTAN PETROLEUM CORPORATION LIMITED,**| ||**TATAPURAM ROAD, ERNAKULAM- 682016.**| W.P.(C).Nos.35729 & 38803/18 2 - **3 THE CHIEF MANAGER, TERMINAL, HINDUSTAN PETROLEUM CORPORATION LIMITED, IRUMPANAM- 682018.** - **4 THE CHIEF REGIONAL MANAGER, HINDUSTAN PETROLEUM CORPORATION LIMITED, ELATHUR, KOZHIKODE- 673004.** **BY ADVS.** **SRI.M.GOPIKRISHNAN NAMBIAR SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM SRI.P.GOPINATH (SR.)** ## **OTHER PRESENT:** ## **SR.ADV. E S NANDAKUMAR FOR RESPONDENTS** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 13.12.2018, ALONG WITH WP(C).38803/2018, THE COURT ON 11.01.2019 DELIVERED THE FOLLOWING:** W.P.(C).Nos.35729 & 38803/18 3 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **FRIDAY ,THE 11TH DAY OF JANUARY 2019 / 21ST POUSHA, 1940** ## **WP(C).No. 38803 of 2018** ## **PETITIONERS:** 1 **THRISSUR DISTRICT PETROLEUM DEALERS ASSOCIATION THRISSUR,HAVING ITS OFFICE AT, 7TH STREET,ISLAND** **AVENUE,POONKUNNAM,THRISSUR.REPRESENTED BY ITS PRESIDENT,P.A.SURESH KUMAR, HPCL PETROLEUM DEALER.** 2. **P.J.JENSON, HPCL PETROLEUM DEALER, PALATHINKAL AUTO FUELS AND SERVICES, THRISSUR ROAD, IRINJALAKUDA.** **BY ADVS. SRI.K.B.GANGESH SMT.ATHIRA A.MENON SMT. FARHA BEEGUM K.M. SMT.SMITHA CHATHANARAMBATH SRI.AMAL S KUMAR** ## **RESPONDENTS:** **1 HINDUSTAN PETROLEUM CORPORATION LTD {HPCL) REPRESENTED BY ITS GENERAL MANAGER SOUTH ZONE,NO.I,NO.1,THALAMUTHU NATARAJAN BUILDING, 4TH FLOOR,GANDHIN IRWIN ROAD,EGMORE,CHENNAI600008.** W.P.(C).Nos.35729 & 38803/18 4 - **2 THE CHIEF REGIONAL MANAGER HINDUSTAN PETROLEUM CORPORATION LTD,TATAPURAM ROAD,KOCHI-682018.** - **3 THE CHIEF MANAGER TERMINAL HINDUSTAN PETROLEUM CORPORATION LTD,IRUMPANAM,KOCHI-682309.** - **4 THE CHIEF REGIONAL MANAGER HINDUSTAN PETROLUEM CORPORATION LTD,ELATHUR,KOZHIKODE-673303.** **BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM SRI.P.GOPINATH (SR.)** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11.01.2019, ALONG WITH WP(C).35729/2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C).Nos.35729 & 38803/18 5 ## **JUDGMENT** 1. These writ petitions are filed challenging clause vii of the tender notification issued by the respondents for road transportation by petroleum dealers for uplifting their own requirement by their tank trucks. W.P.(C).No.35729/18 is filed by the Malappuram District Hindustan Petroleum Corporation Limited Dealers Association and a member thereof, while W.P.(C).No. 38803 of 2018 is filed by the Thrissur District Hindustan Petroleum Corporation Limited Dealers Association. The parties and documents are being referred to in this judgment as in W.P. (C).No.35729 of 2018 for sake of convenience and clarity. 2. Heard Sri.T.Sethumadhavan, the learned Senior Counsel appearing for the petitioner in W.P.(C).No.35729 of 2018 and Sri.K.B.Ganesh, the learned counsel for the petitioner in W.P. (C).No.38803 of 2018 and Sri.E.K.Nandakumar, the learned Senior Counsel appearing for the respondents-Hindustan Petroleum Corporation Limited. 3. It is submitted by the learned counsel for the petitioner in W.P. - (C).No.35729 of 2018 that the petroleum dealers are being W.P.(C).Nos.35729 & 38803/18 6 permitted to transport petroleum products from the filling terminals to their own outlets using the tank trucks owned by them which meet the specifications prescribed by the company. In case of dealers who do not own tank trucks, transportation is arranged by the company by engaging general transporters at rates to be fixed in public auction. It is contended that the practice hitherto following by the respondent-Corporation and other public sector petroleum companies was by providing a minimum range within which a petroleum dealer who owned a tank truck was permitted to quote for transportation using their own trucks. Exhibits P1 and P2 which are tenders submitted in respect of the periods 2014-2018 and 2010-2014 are produced in evidence of this fact. It is stated that Exhibit P3 expression of interest dated 15.10.2018 was invited by the respondentCorporation for road transportation by dealers for uplifting their own requirements by their tank trucks. Clause vii of the terms and conditions in Exhibit P3 provided as follows:- “vii)The L-1 rates arrived at, during the finalization of the subject public tender (for the location (Irumpanam Terminal) for the General Transporters category against the Public Tender shall be made applicable for RO Dealers/Direct consumers/SKO Resellers offering TTs through this EOI process. The RO dealers/direct W.P.(C).Nos.35729 & 38803/18 7 customers/SKO resellers shall not have right to question the L-1 rates arrived in the General Transporter tender. In case of any delay in finalization of L-1 rate, lower price band rate will be applicable on provisional basis till finalization of L-1 rate. However, after finalization of L-1 rate, same will be applicable from the date of agreement.” 4. The learned Senior Counsel appearing for the petitioner in W.P. (C).No.35729/2018 would submit that the said clause is an arbitrary exercise of power by the respondent-Corporation and the dealers are being forced to accept the rates quoted in a public tender in which they have no right to participate. It is submitted that the very reason for permitting dealer-cumtransporters to operate their own tank trucks is to bring about greater efficiency in the management of retail outlet operations with the ultimate objective of delivering products of right quality and correct quantity to their end users/customers. It is submitted that after permitting the dealers to avail of professed preferential terms and conditions, the oppressive clause in Exhibit P3 actually imposes unwarranted conditions on their right to participate in the expression of interest. It is stated that even in the case of general transporters, there is a provision for carrying out the transportation at L-2 or the higher rates if the W.P.(C).Nos.35729 & 38803/18 8 adequate number of trucks quoted at L-1 rates are not available. Thus even the general transporters are not held down with L-1 rates, the dealers would have to submit to the L-1 rates arrived at in a tender, where they have absolutely no participation. Relying on the decisions of the Apex Court in **United India Insurance Company Limited v. Manubhai Dharmasinhbhai Gajera and other** s [(2008) 10 SCC 404], **ABL International Ltd. and another v. Export Credit Guarantee Corporation of India Ltd. and others** [(2004) 3 SCC 553], **Jagdish Mandal v. Sate of Orissa and others** [(2007) 14 SCC 517], the learned Senior Counsel would contend that where a condition in a notice inviting tenders is arbitrary and irrational, this Court would have the jurisdiction to entertain a writ petition against such a clause. Relying on the decision in **United India Insurance Company Limited's case** (supra), it is contended that where bargaining power is unequal or where a contract is not a negotiated one and/or is based on the standard form contract between unequals, an authority which answers the definiton of State under Article 12 of the Constitution of India should act fairly and where it fails to do so, the restrictive clauses of the tender notice would be vitiated. W.P.(C).Nos.35729 & 38803/18 9 5. The learned counsel for the petitioner in W.P.(C).No. 38803 of 2018 where Exhibit P2 is the notice inviting tender adopts the contentions of the learned Senior counsel and seeks quashing of Clause vii of Exhibit P2 in his case. It is contended that the absence of any provision for quoting a price in the Expression of Interest is oppressive in nature and is unsustainable. It is further submitted that general transporters are eligible for negotiation of rates in case of shortage of vehicles and this benefit is also denied to the dealers. 6. A detailed counter affidavit has been placed on record in W.P. (C).No.35729 of 2018 by the respondents, wherein it is submitted that there is no public law element involved in the writ petition and that the same is not maintainable. It is stated that the issue raised is purely contractual in nature and this Court ought not to interfere, unless the condition is found to be totally arbitrary, perverse and _mala fide_ . It is stated that the Patna High Court by a judgment in Civil Writ Jurisdiction in Case No.476 of 2017 and connected cases dated 12.9.2017 held that the decision of Oil Marketing companies in calling for Expression of Interest from in existing dealers and making L-1 rate arrived at in public auction W.P.(C).Nos.35729 & 38803/18 10 for general transporters applicable to such dealer transporters also is perfectly valid and not violative of the rights of the dealers. It is stated that Exhibit P3 evidences a change in policy from Exhibits P1 and P2 where tenders for dealers and general transporters were simultaneously finalised in same tender process. It is stated that to avoid conflict of interest, the company decided to demarcate the area which could be occupied by dealers who show expression of interest in the first instance and to make available the leftover areas for general transporters. The decision to make L-1 rates to be arrived at in the tender in respect of general transporters applicable to dealer transporters also is a perfectly rational decision taken by the company, taking note of all the relevant factual aspects of the matter. It is stated that the retail outlet dealers are given many advantages in the matter of tender for transportation and the rates at which they should be permitted to operate the contracts is a matter of policy to be taken by the company. 7. The learned Senior counsel appearing for the respondentCorporation would contend that the respondents have taken a policy decision to procure expressions of interest from dealers W.P.(C).Nos.35729 & 38803/18 11 who own tank trucks for transportation so that the field available for general transporters is clear and demarcated before their tender is called for. It is stated that several advantages are also made available to dealers wishing to engage in transport of petroleum products to their own outlets as per the policy of the company. Unless the policy to hold down the dealer to the L-1 rate which is to be arrived in a competitive tender is shown to be so arbitrary, irrational or _mala fide,_ this Court would not be justified in interfering with the conditions which are prescribed by the company in the notice inviting tender. 8. The learned Senior Counsel appearing for the respondentCorporation relies on the decisions of the Apex Court in **Michigan Rubber (India) Ltd.v. State of Karnataka and others** [(2012) 8 SCC 216], **Arun Kumar Agrawal v. Union of India and others** (2013) 7 SCC 1 and **JSW Infrastructure Ltd. v. Kakinada Seaports Ltd.** [(2017) 4 SCC 170] in support of his contention that unless the conditions are shown to be arbitrary, discriminatory, _mala fide_ or actuated by bias, this Court would not be justified in interfering in the eligibility criteria fixed by the in notice inviting tenders. W.P.(C).Nos.35729 & 38803/18 12 9. A detailed reply affidavit has been placed on record stating that the purpose of Exhibit P3 being to meet the ultimate object of delivering products to right quality and correct quantity to end users and customers, there is definitely an element of public interest involved. It is further contented that any decision or condition in a notice inviting tender issued by a public authority has to meet the conditions of fairness and lack of arbitrariness. 10.I have considered the contentions advanced on either side. The condition complained of is to the effect that the retail outlet dealers owning tanker trucks and wish to transport petroleum products to their retail outlet, using those trucks, will have to abide by the L1 rates arrived at in the case of general transporters. It is not in dispute that the respondent company, being a public sector undertaking, is duty bound to function in a fair and transparent manner even in the matter of entering into contracts, which are purely commercial in nature. What is essentially under challenge is a condition prescribed in a notice inviting tender. It is not in dispute that the tender inviting authority is the best judge of the requirements and is the appropriate authority to fix the conditions as well as the rates at W.P.(C).Nos.35729 & 38803/18 13 which the contract is liable to be entered into. 11.Though it is true that the dealer-operators, whom the petitioners represent, do not participate in the tender for general transporters, the L1 rates arrived at in the public auction to be held cannot be said to be a condition which is so arbitrary and irrational so as to vitiate the presumptions. The learned Senior Counsel appearing for the respondent-Corporation would contend that it is only if sufficient number of L-1 transporters are not available that the corporation would negotiate with L2 L3 and L4 for transportation and in the majority of cases, the transportation is being carried out at L-1 rates itself by general transportation. Therefore, the ground raised that the general transporters themselves are not held down to L1 rates and negotiation is carried on by the company with persons who quoted higher rates also cannot, by itself, be a reason to hold that the provision in Exhibit P3 that retail dealers should operate their trucks at L-1 rates is arbitrary or irrational. This is more so in view of the fact that there are preferential conditions offered to retail outlet dealers in the matter of transportation contracts as well. W.P.(C).Nos.35729 & 38803/18 14 12.The Patna High Court has in the decision referred to by the learned counsel for the respondent-corporation, considered the factual and legal aspects of the matter _in extenso_ to find that the condition that retail outlet dealers are liable to engage in transport contracts at L-1 rates arrived at in the auction held for general transporters does not suffer from the vice of arbitrariness. 13.Having considered the entire aspects of the matter, I am of the opinion that Clause (vii) of Exhibit P3 notice inviting tender cannot be said to be arbitrary or irrational as contended by the learned counsel for the petitioners. The rate at which contracts are to be awarded is a matter to be decided by the tender inviting authority. The impugned clause being only a method of price fixation, the same cannot be assailed on the ground that it is 'unfair' or unwarranted. These writ petitions fail and are accordingly dismissed. Sd/- **Anu Sivaraman, Judge** sj W.P.(C).Nos.35729 & 38803/18 15 ## **APPENDIX OF WP(C) 35729/2018** ## **PETITIONERS' EXHIBITS:** **EXHIBIT P1** **TRUE COPY OF THE SPECIMEN TENDER FORM FOR TRANSPORTATION OF THE BULK PETROLEUM PRODUCTS BY ROAD ISSUED FROM THE ELATHUR DEPOT IN FAVOUR OF SREERAM AUTO FUELS, NILAMBUR ROAD, NELLIPARAMBA, MANJERI FOR THE YEAR 2014 TO 2018.** **EXHIBIT P2 TRUE COPY OF THE PRICE BID TENDER FOR THE YEAR 2010 TO 2014.** - **EXHIBIT P3 TRUE COPY OF THE BASIC INFORMATION OF TENDER PUBLISHED ON 15TH OCTOBER 2018 WITH TENDER NO.18000035-HA-11761.** - **EXHIBIT P4 TRUE COPY OF THE TABLE SHOWING THE TANK TRUCK CAPACITY BEING INTRODUCED PURSUANT TO EXT.P3.** - **EXHIBIT P5 TRUE COPY OF THE LETTER MADE BY P.T.FUEL VENGAD, VALANCHERY.** - **EXHIBIT P6 TRUE COPY OF THE REPRESENTATION SUBMITTED BY THE 1ST PETITIONER TO THE 4TH RESPONDENT DATED 10/11/2018** - **EXHIBIT P7 TRUE COPY OF THE COMPARATIVE FIGURES OF RATE PER KILO METER FOR THE BUILK TRANSPORTATION FOR THE MONTH OF SEPTEMBER 2018 SUBMITTED BY A TRUCK OWNER WHO IS HAVING A RETAIL OUTLET AT VALANCHERY.** **EXHIBIT P8 TRUE COPY OF THE LIST OF MEMBERS OF PETITIONERS' ASSOCIATION.** W.P.(C).Nos.35729 & 38803/18 16 ## **RESPONDENT'S/S EXHIBITS:** **EXHIBIT R1 A** A COPY OF THE RELEVANT PAGE OF THE TENDER FOR ROAD TRANSPORTATION OF BUILK POL PRODUCTS, MS/HSD/SKO AND BRANDED FUELS RX-IRUMPANAM BEARING NO. HOCL/SZ/BULK/POL/2013-14/05 SHOWING THE STANDARD SIZE OF COMPARTMENTS OF THE TANK TRUCK. **EXHIBIT R2** A COPY OF THE RELEVANT PAGE OF THE TENDER FOR ROAD TRANSPORTATION OF BUILK POL PRODUCTS, MS/HSD/SKO AND BRANDED FUELS EX-ELATHUR DEPOT BEARING NO. HPCL/SZ/BULK/POL/2013-14/08 SHOWING THE STANDARD SIZE OF COMPARTMENTS OF THE TANK TRUCK. W.P.(C).Nos.35729 & 38803/18 17 ## **APPENDIX OF WP(C) 38803/2018** **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1** **A STATEMENT DETAILING THE ACTUAL EXPENSE INCURRED FOR TRANSPORTATING AND THE CHARGE PAID BY THE COMPANY TO THE 2ND PETITIONER.** **EXHIBIT P2** **A TRUE COPY OF THE BASIC IFORMATION OF TENDER PUBLISHED ON 15.10.2018 WITH TENDER NO.18000035-HA-11761.** **EXHIBIT P3** **TRUE COPY OF THE TABLE SHOWING TANKER TRUCK CAPACITY THAT HAS INTRODUCED BY THE 1ST RESPONDENT PURSUANT TO EXT.P2.** True copy PS to Judge