Jawahar Lal Gupta, J.
1. Are the instructions issued by the Government of India vide letters dated September 17, 2001 and October 18, 2001 by which the Public Sector Oil Marketing Companies have been directed to close down the extension counters set-up by the dealers and 'transfer all the consumers enrolled through these counters to the newly-commissioned distributors,' arbitrary, illegal and violative of the principles of natural justice? This is the short question that arises in this petition. The facts may be briefly noticed.
2. The four Oil Companies viz. the Indian Oil Corporation and others have appointed distributors for the sale of Liquefied Petroleum Gas. There are more than 300 distributors in the North-West region. They are the members of the Petitioner-Federation.
3. The Oil Companies allot distributorship to persons belonging to the categories ofEx-servicemen, War Widows, Unemployed Engineers/Graduates, Freedom-fighters, members of Scheduled Castes and Tribes and disabled Army Personnel etc. Each dealer is allotted an area of operation. Even the number of refills which can be supplied by the dealer is regulated by the Company. Ceiling limits on the number of refills have been periodically imposed by the Government of India.To illustrate: vide letter dated April 21, 1995, the ceiling limit was revised and raised to 5000 refills p.m. for a town having population upto 10 lacs. On March 10, 2000, the limit was raised to 8000.
4. The petitioner alleges that its members have been granted the right to distribute 'LPG Cylinders after going through the rigorous mandatory procedure provided by the respondents under different categories....The members.....have invested huge amount ofmoney towards the construction/purchase of the office, godown etc.' After revision of ceiling limits, they expected that 'their are of operation would not be reduced and the number of connections which have been issued to them would neither be reduced nor transferred.' In fact, the distributors 'were allowed by the respondent-authorities to extend their area upto 30 kms.' The involved further expenditure. However, the Government of India 'in violation of the guidelines laid down by them and against the principles of natural justice, equity and fair play, issued a communication dated 17.9.2001 to respondent Nos. 2 to 5 directing them to close the extension counters of the existing distributors in all the areas where new distributors have been appointed.' A copy of this communication has been placed on record as Annexure P.4. The members represented against the circular. The authorities 'instead of taking a sympathetic view.....have beenthreatening to stop the supply of gas meant for refilling.'
5. Aggrieved by the issue of the instructions for closure of the extension units, the petitioner approached this Court through the present writ petition. Subsequently, the Government issued instructions vide letter dated October 18, 2001 pointing out that the Public Sector Oil Marketing Companies had not 'restructured the LPG markets and in view of this, newly-commissioned distributorships are facing difficulties in getting their share of market to make themselves viable.' It was further mentioned that' the ceiling limit concept has lost its relevance after the release of LPG connections on demand by the LPG distributors in all the markets throughout the country and due to this most of the urban/semi-urban areas are almost saturated.' Thus, the Companies were 'advised to effect the transfer of customers....on the basis of the viability norms of each market instead of ceiling limit.' Accordingly, it was directed that the LPG connections be transferred 'from the old distributors to the newly commissioned/unviable LPG distributorships in the all saturated markets.....to ensure the viability of newly commissioned/unviable distributorships within 1st year of its operation. Inter-company transfer of LPG connections may also be effected where the need arises.' The instructions of September 17, 2001 regarding transfer from the extension counters of the old distributors to the newly-commissioned dealers were also reiterated. A copy of this letter has been produced as Annexure P.8.
6. The petitioner alleges that the action of the respondents is violative of Articles 14 and 19(1)(g) of the Constitution. It prays that the instructions issued vide letter dated September 17, 2001 and October 18, 2001 as also the consequential directions issued vide letters dated October 19, 2001 and October 24, 2001, be quashed.
7. The writ petition was initially filed to challenge the instructions issued vide letter dated September 17, 2001. It was posted before the Bench for preliminary hearing. Direction for the issue of notice of motion for March 26, 2002 was given. Subsequently, a prayer for interim stay was made. CM No. 32137 of 2001 was posted before the Bench on November 9, 2001. At the request of the counsel for the parties, the hearing of the writ petition was preponed to December 10, 2001. It was further directed that status quo shall be maintained. Thereafter, application for amendment of the writ petition was filed. Even written statements were filed on behalf of the respondents. At the request of the counsel for the parties, the matter was fixed for arguments on December 14, 2001.
8. Separate written statements have been filed on behalf of the respondents. In the reply filed on behalf of the Union of India (respondent No. 1), certain preliminary objections have been raised. It has been inter alia averred that the petitioner is not a registered body. It is not competent to file the present petition. Necessary parties have not been impleaded. In any case, the 'distributorship agreements provide for arbitration in the event of any dispute.' The petitioner has not exhausted the remedy. The dispute pertains to a commercial contract. It can't be adjudicated in proceedings under Article 226. The agreement provides for termination of distributorship by giving 30 days' notice. Thus, the agreement cannot be specifically enforced. The distributors were allowed to open extension counters 'on an ad hoc basis.' This was done 'primarily because of delay in commissioning of new distributorships in such area.' On appointment of new dealers, it was necessary to order the closure of extension counters and the transfer of the customers to them so as to 'avoid the overlapping of trading areas' and 'for smooth and complaint-free service to the consumers.' The Oil Marketing Companies had allowed the distributors in 'urban areas to release connections on demand.' They had captured all the markets. In this situation, the new distributors are 'not able to enroll the consumers.'
In order to make them viable, it was necessary to issue the impugned instructions. On these premises, the claim made by the petitioner has been controverted.
In the reply filed on behalf of respondent No. 2 viz the Indian Oil Corporation, it has been averred that Liquefied Petroleum Gas is a controlled product. The Government provides about Rs. 92/- as subsidy per cylinder. Thus, the Government is entitled to issue instructions. These are binding on the Oil Companies. The impugned instructions have been issued 'in public interest and for fair, equitable and competitive distribution of LPG across the country without any favour or exception.' Due to improvement in availability of LPG with the commissioning of the Reliance Petroleum Refinery, the Oil Companies were advised by the Ministry of Petroleum and Natural Gas 'to release one crore new connections, thereby wiping out the entire pending waiting list for new connections.' To achieve this target, the Government took various measures 'like giving permission for bursting the then exiting ceiling limits to enable the distributorships to release new connections which otherwise would not have been allowed to them.' The Ministry 'also allowed creation of extension counters in plain area upto a radius of 30 kms. and upto 75 kms. in hilly areas...' These steps were allowed by the Government as 'due to non-operation of Dealer Selection Boards for a considerable period of time, distributorships included in marketing plans of 1994-96, 1996-98 could not be undertaken in time.... Thus, the Companies allowed their existing distributors who were otherwise meant to operate within the urban boundaries as per their selection to go beyond this trading area of urban boundaries and release new connections in rural areas.....' This arrangement was totally ad hoc/temporary On selection of new distributors, the impugned instructions had to be issued. The action is in conformity with law.
Similar replies have also been filed by the other respondents as well.
9. The petitioners has filed a replication to the written statement filed on behalf of respondent No. 2.
10. Counsel for the parties were heard. Mr. M.L. Sarin, counsel for the petitioner contended that the action of the respondents in ordering transfer of consumers to the new distributors was arbitrary and illegal. He further submitted that it violated the principles of natural justice. Thus, the counsel contended that the impugned instructions deserve to be quashed.
11. The claim made on behalf of the petitioner was controverted by the counsel for the respondents. It was pointed out that the extension counters were allowed to be opened on a temporary basis. These were not a part of the contract. The action was fair and in public interest. It was not arbitrary. There was no violation of the rights of the petitioner. The newly-appointed distributors are not parties. Thus, they pray that the writ petition be dismissed.
After hearing counsel for the parties, we find that the following questions arise for consideration:-
(i) Is the action of the respondents illegal, arbitrary and violative of Article 14 ofthe Constitution?
(ii) Have the respondents violated the principals of natural justice?
12. Reg:
(i)
Admittedly, guide-lines have been laid down for appointment of distributors. Detailed procedure has been prescribed. There is a survey for identification of the location. Then, there is an advertisement and selection. The dealer is appointed for 'an area.' Specimen copies of the letter of intent, appointment and agreement were produced by the counsel for Hindustan Petroleum Corporation. These were taken on record as Mark 'A'. In the letter of 'intent', the 'area of operation' is specified. While appointing the dealer, the 'trading area' is clearly defined. To illustrate: in para 3 of the letter of appointment, it has been stated that the 'area of operation will be within municipal limits of....' Even in the agreement, the area within which the distributor shall distribute the product is specified. Still further, it has been also provided that the area is 'subject to change as may be considered necessary by the Corporation at a later date, even after the distributorship is commissioned.' The appointment letter further stipulates that a particular distributor 'may be required to take over some existing customers of other distributors..... similarly you may be required to surrender some customers to other distributors.'
A perusal of these documents clearly shows that the area of operation is specified. There is no guarantee regarding the number of connections or consumers which shall be allotted to a particular person. It is subject to variation. It could be unilaterally changed. It is on acceptance of this basic condition that the members of the Petitioner-Federation were allotted the rights for distribution. Besides this, each distributor was allotted the area of operation. He had no right to go beyond it However, during a period of about 4 years from 1994 to 1998, the Selection Boards were not functioning. Thus, despite demand, the new distributors were not selected and appointed. There were certain areas which were not even viable. To meet the situation, the instructions for allowing opening of extension counters were issued. A copy of letter dated January 18, 1999 which embodies the guide-lines has been produced as Annexure Rule 5/1 with the written statement filed on behalf of respondent No. 5. In this letter, it was specifically provided as under:-
'Wherever extension counters are working in urban areas and there is a potentialfor setting up a Distributorship, new Distributorship should be planned in that area asper the present policy and the extension counter closed.'
Thereafter, vide letter dated January 8, 2001, a copy of which is at Annexure R-5/3, it was specifically provided that 'the customers in the extended area would be transferred to the new distributor proposed to be appointed in the extended area upon commissioning....' Thus, it is clear that the extension counters were opened to tied over a situation. On appointment of new distributors, the extension counters had to be closed. The consumers were to be allocated to the newly-appointed distributors. This is precisely what the impugned instructions seek to achieve.
A perusal of the letter dated September 17, 2001 shows that the Government of India had noticed that 'in many parts of the country several old LPG distributors are still operating their extension counters in the trading areas of newly commissioned LPG distributors and therefore, the newly commissioned distributorships are finding difficulty in enrolling new consumes resulting into making such new distributorships unviable.' It was to remove this 'anomaly' that the Chairman of the Oil Companies were directed to 'ensure that all extension counters which are operating in the trading areas of newlycommissioned LPG distributorships must be closed down immediately irrespective of the fact that same have been opened with the concurrence of the management of concerned OMCs (Oil marketing Companies) or otherwise.' The consumers who were getting their supplies through these counters were ordered to be transferred to the 'newly commissioned distributorships of respective areas.' The matter was further clarified vide letter dated October 18, 2001. It was pointed out that the ceiling limit concept had 'lost its relevance after the release of LPG connections on demand by the LPG distributors in all the markets throughout the country....' The companies were 'advised to effect the transfer of customers (restructure the markets) on the basis of the viability norms of each market instead of ceiling limit.'
Apparently, the instructions issued through the two letters militate against monopoly. These are calculated to ensure equitable distribution amongst the Distributors. These are not arbitrary. The instructions are wholly just and fair.
Mr. Sarin contended that the instructions are arbitrary. The distributors have invested substantial sums of money. They are hardly making any profits. Thus, the action amounts to denial of equality of opportunity.
The contention is misconceived. Each distributor had been allowed an area of operation. It was not entitled to go beyond the limits of that area. On account of the peculiar situation created by the delay in selection of new distributors, there was relaxation. The distributors were permitted to open extension counters. In the very nature of things, the permission was of a temporary nature. It was an ad hoc arrangement. It was to last till the appointment of distributors for the concerned areas. The new distributors having been appointed, the old distributors were being restricted to the area which had been initially allotted to them. The action is in conformity with the terms of appointment. It violates no rule. It causes no injustice. There is no element of arbitrariness.
Mr. Sarin submitted that the distributors had incurred expense. They had spend money in the hope that they would be allowed to continue in the extended area of operation. The respondents cannot stifle the legitimate expectation that the petitioner had entertained.
There appears to be no basis for any expectation whatsoever. Each distributor was allotted an area of operation. It could even be reduced. But it has not been even suggested that there was any reduction in the assigned area of operation. To meet the peculiar situation, the respondents had permitted opening of extension counters. There was no promise of continuity. In fact, in the letter of appointment, it had been specifically stipulated that the number of consumers allotted to a particular distributor can be varied. It could be increased or decreased. The respondents had acted according to the situation. As for expense, it may only be mentioned that no details have been furnished. There is nothing to show that the members of the Petitioner-Federation had really spent any substantial sum of money. In any case, the newly-appointed dealers have had to spend much more. They have not only constructed godowns but also other facilities like office etc. They have employed staff. Their expense is bound to be many times more than that incurred by the old distributors on the opening of extension counters. The equity is clearly in favour of the newly-appointed distributors. The claim of legitimate expectation is wholly illegitimate.
Mr. Anil Malhotra, learned counsel appearing for respondent No. 3 pointed out that the newly-appointed dealers are not even parties. He appears to be right. Only two of them had volunteered to appear and contest the claim of the petitioner. The majority are not before this court. No order to their prejudice can be passed in their absence.
It was pointed out by Mr. Puneet Bali, Advocate that the newly-appointed dealer was the widow of a Kargil martyr. She was not being allowed to operate while the other distributors were making huge profits.The contention is symbolic of the injustice which is sought to be perpetuated by themembers of the Petitioner-Federation. While the old dealers are operating the extension counters, the widow of a Kargil martyr is getting no return despite having spent a substantial amount. Nothing could be more unfair.
Mr. Sarin contended that the distributors had not crossed the ceiling limits. The Government of India had changed the norm from the ceiling limit to viability. The action was unfair. Is it so?
Admitedly, the number of consumers of LPG has multiplied manifold. The number of dealers had not increased proportionately. The State is always under a duty to ensure that there is equitable distribution of resources. Its actions have to conform to the rule of law. These cannot be arbitrary and discriminatory. Rules of fair play have to govern every action of the State and its instrumentalities. The rule in this behalf was clearly enunciated in Mahabir Auto Stores and Ors. v. Indian Oil Corporation and Ors., AIR 1990 SC 1031. It is precisely to ensure compliance with this dictum that the impugned instructions have been issued by the Union of India.
The country faces a crisis of numbers. ?The primary problem is created by the increase in population. The facilities are scarce. The demand is more. In case of LPG, the Government has been able to release additional connections. It appears that there was a plan to release one crore thirty lacs connections during the year 2000. The members of the Petitioner-Federation got more than a fair share. They stretched their area of operation by opening extension counters. Normally, new dealers had to be appointed in the areas where extension counters were opened. This was necessary to ensure proper distribution and to promote the interests of the consumers. This is precisely the reason for which the impugned instructions were issued. The action promotes public interests. It is true that initially ceiling limits had been fixed for different areas. But with the release of a corer or more connections in the year 2000, the limits had been 'busted' in many cases. Such instances have been given by the respondents. In this situation, the Government of India had taken the view that each 'distributorship' should be made 'viable.' It was in conformity with the terms of appointment governing the dealers. Not contrary thereto. Under the agreement, the area of operation and the number of consumers could be varied. The present action does not even violate the number as initially enrolled with the 'dealers'.
In view of the above, it is held that the instructions are not arbitrary, unfair or unjust. These do not violate any provision of law. These are not contrary to the guarantee enshrined in Article 14 of the Constitution.
The first question is, accordingly, answered against the petitioner.
13. Reg:
(ii)
Mr. Sarin contended that the action of the respondents affects the petitioner's rights. It has civil consequences. Thus, it was incumbent on the respondents to follow the principles of natural justice The claim made on behalf of the petitioner was controverted by the counsel for the respondents.
As already noticed, no details regarding the expense incurred or the likely loss to be suffered by any of the members of the Petitioner-Federation have been given. In the absence of the data, it is difficult to say that the petitioner would actually suffer any loss. However, it appears to be reasonable to assume that in view of the closure of extension counters, the number of consumers registered with different distributors would be reduced. Since the distributors had been permitted to open extension counters only as a temporary measure, they did not have any indefeasible right to continue to have the additional consumers with them. In any case, the increase or decrease in number of consumers allocated to a distributor was clearly governed by the terms of appointment. It was permissible. Just as the Oil Company could increase the number of consumers, it was also entitled to decrease it. It is in the background of this factual position that the applicability of 2 the principles of natural justice has to be considered.
The principles of natural justice cannot be subjected to 'legal strait-jackets'. These principles belong more to 'the common consciousness of mankind than to juridical science. These are general principles of law common to civilised communities.' Simply put, the rules of natural justice are no more than the principles of fair-play. These are meant to promote justice. To ensure fairness of procedure. The requirements vary with the circumstances of each case. The basic requirement is that a party should not 'suffer in person or in purse without an opportunity.' However, in a situation requiring promptitude, the application of principles of natural justice can be limited.
In the present case, it is clear that there was no violation of any contractual or legal right of the petitioner. The action of the respondents is in conformity with the terms of appointment. The agreement signed by the two sides limited the area of operation. The petitioner or its members had no right to operate in the area beyond the prescribed limits. The agreement/agency could be terminated by 30 days notice. No opportunity of hearing was required to be given for such an action. In this situation, we are satisfied that principles of natural justice were not attracted.
Resultantly, even the second question is answered against the petitioner.No other point was raised.
14. In view of the above, it is held that:-
(i) The members of the Petitioner-Federation had been allotted distributorships forspecific areas. The area was clearly defined in the respective letter of appointment;
(ii) The area and the number of consumers with each dealer could be varied by theOil Marketing Company. Even the right to transfer 'consumers' from one distributorto another had been duly reserved;
(iii) During the period from 1994 to 1998, the Selection Boards were notfunctioning. The new distributors could not be appointed. Thus, the existingdistributors were permitted to open extension counters. However, it was only atemporary arrangement. There was no promise of continuity. The expectation, it any,was wholly illegitimate and not legitimate;
(iv) In the year 2000, a large number of new connections were released. A figure of 1.30 crores has been given. Thus, the ceiling limits had lost relevant. Viability of each distributorship had become the dominant consideration for the government;
(v) New distributors had been selected and appointed. They had created the necessary infrastructure. In this situation, continuance of extension counters would have resulted in loss to the newly appointed dealers. It was, thus, directed that the extension counters be closed so that the consumers may be available to the new dealers and their agencies could become viable;
(vi) the instructions issued by the government ensure equitable distribution. These are not arbitrary, unfair or unjust. In fact, the instructions promote equality. These are founded on consideration of equity and fair-play. The instructions conform to the terms of appointment. These are not illegal or violative of Article 14 of the Constitution. In fact, the directions are calculated to promote public interest;
(vii) the respondents had the right to terminate the agency or vary the area of operation. No hearing was required to be given. In this situation, the principles of natural justice were not attracted.
(viii) The newly-appointed dealers have not been impleaded as parties. No ordercan be passed to their prejudice without hearing them.
In view of the above, we find no merit in this writ petition. It is, consequently, dismissed. The interim order shall stand vacated. Civil Miscellaneous Applications are disposed of in the above terms. No costs.