Kerala HC allows OMCs appeal over price of bulk diesel supplied to KSRTC, sets aside earlier order

Adivision bench of Kerala High Court on Friday allowed an appeal filed by the state-run oil marketing companies (OMCs) and set aside its earlier order asking them to provide fuel at retail rates to the Kerala State Road Transport Corporation (KSRTC).

A bench comprising Justices C S Dias and Basant Balaji said KSRTC, a bulk purchaser, falls within a separate class and cannot be treated at par with retail customers.

A single bench of the Kerala High Court had on April 13 said the the price of diesel charged by OMCs from the KSRTC was prima facie ”highly exorbitant” and asked them to provide the fuel at retail rates to the latter.

Citing various orders, the division bench on Friday said ”it is not the function or forte of this Court” to decide the optimal or competitive price at which diesel should be sold to the KSRTC.

The division bench accepted the contention of the OMCs that the KSRTC ”cannot be treated at par with retail customers” because the latter would have to go to a retail outlet and pay for the product then and there.

”On the contrary, petroleum products are supplied to the petitioner at their doorsteps, with credit facilities and other benefits as envisaged in the contract. Therefore, the petitioner, a bulk purchaser, falls within a separate class and cannot be treated at par with retail customers,” the High Court said in its order.

The high court also noted that the single judge has erred in not adverting to the objection raised by the OMCs and in not stating the reason for not relegating the parties to the alternative remedy, dehors the arbitration clause.

Justice N Nagaresh, in his interim order on April 13, had said that if the price levied was pursuant to any agreement, the same was prima facie ”an extremely unconscionable term of bargain”.

The interim order came on a plea by KSRTC challenging the OMCs decision to charge a higher rate from bulk purchasers of diesel as compared to retail prices of the fuel.

The court had, on March 22, declined to stay the OMCs decision to hike the price of bulk diesel purchases or restrict them from further increasing the rates, but had asked them to explain the manner in which their pricing mechanism worked.

KSRTC, in its plea, had contended that it has to pay more than Rs 27 extra per litre for diesel to the OMCs as compared to the rate of the fuel at private retail outlets.

Even the diesel supplied to private bus operators by OMCs was at a lesser rate than that charged from KSRTC, the petition has claimed.

The transport corporation has claimed, in its plea, that it was charged Rs 121.35 per litre for diesel by the OMCs, while the other consumers of the companies were getting it for Rs 91.72 per litre.