2001 (10) TMI 1177 - SC - Companies Law

Supreme Court Upholds Decision Canceling Petroleum Dealerships - Emphasizes Transparency and Public Interest

V. Purushotham Rao Versus Union of India and ors.

V. Purushotham Rao Versus Union of India and ors. - TMI Issues Involved:1. Legality of discretionary allotments of petroleum dealerships and LPG distributorships.2. Application of constructive res judicata in public interest litigations.3. Impact of three Judge Bench judgment on the legality of discretionary allotments.4. Necessity for remitting appeals to the High Court for reconsideration.5. Equitable considerations for appellants who invested and operated businesses for years.6. Consideration of germane materials by the High Court.7. Requirement of notice under Order I Rule 8 CPC in public interest litigations.8. Validity of verification by Oil Company versus Minister's verification.9. Applicability of principles from Civil Appeal No. 6840 of 2001 to the present case.Detailed Analysis:1. Legality of Discretionary Allotments:The Supreme Court examined the legality of discretionary allotments made by the Minister of Petroleum for retail outlets, LPG distributorships, and SKO dealerships. It was found that prior to 1995, these allotments were made without prescribed norms, leading to arbitrary and discriminatory practices. The Court had previously issued guidelines to regulate such allotments to ensure they conform to the rule of law and minimize discretion. The Delhi High Court's decision to cancel these allotments was challenged, but the Supreme Court upheld the cancellations, emphasizing that the allotments were made without proper verification and often for extraneous considerations.2. Constructive Res Judicata in Public Interest Litigations:The Court addressed whether the principle of constructive res judicata barred the High Court from examining the legality of the allotments. It was argued that the earlier Supreme Court judgment in the Center for Public Interest Litigation case impliedly approved previous allotments by not cancelling them. However, the Court rejected this argument, noting that the earlier judgment only laid down future guidelines and did not approve past allotments. The principle of constructive res judicata was deemed inapplicable in public interest litigations, which are not adversarial and aim to protect public interest.3. Impact of Three Judge Bench Judgment:The appellants argued that the three Judge Bench judgment in Captain Satish Sharma's review petition overruled the Common Cause case, thereby invalidating the High Court's decision. The Supreme Court clarified that the review petition only addressed the directions for criminal prosecution and exemplary damages against the Minister, not the legality of the allotments themselves. The judgment did not overrule the Common Cause case, and the High Court's examination of the allotments was valid.4. Necessity for Remitting Appeals:The Court found no need to remit the appeals to the High Court for reconsideration in light of the three Judge Bench judgment. The review judgment focused on specific directions against the Minister and did not affect the merits of the individual allotments examined by the High Court.5. Equitable Considerations:The appellants argued for equitable relief, citing substantial investments and years of operation. The Court rejected this plea, emphasizing that the allotments were made arbitrarily and the appellants were beneficiaries of such arbitrary actions. Granting relief on equitable grounds would be misplaced sympathy and contrary to public interest.6. Consideration of Germane Materials:The Supreme Court reviewed the High Court's judgment and found that it had thoroughly examined each individual case, considering the original files and responses from the allottees. The High Court cancelled allotments only where there was no material to justify the Minister's discretion. The Supreme Court found no evidence of non-consideration of germane materials by the High Court.7. Requirement of Notice under Order I Rule 8 CPC:The appellants contended that the High Court should have issued notice under Order I Rule 8 CPC, which pertains to representative suits. The Supreme Court held that in public interest litigations, individual notices to affected parties were sufficient. The High Court had issued individual notices, allowing allottees to inspect files and respond, thus complying with principles of natural justice.8. Validity of Verification by Oil Company:The appellants argued that verification by the Oil Company was sufficient. The Supreme Court disagreed, stating that the Minister's initial discretion must be based on proper verification. Subsequent verification by the Oil Company cannot rectify an arbitrary exercise of discretion by the Minister.9. Applicability of Principles from Civil Appeal No. 6840 of 2001:The appellants sought to apply principles from a case involving discretionary land allotments in Haryana, where past allotments were protected by prospective application of stricter guidelines. The Supreme Court found this inapplicable, as the present case involved arbitrary allotments without any guiding principles. The principles from the Haryana case could not be extended to protect the arbitrary allotments in question.Conclusion:The Supreme Court dismissed the appeals, upholding the Delhi High Court's decision to cancel the discretionary allotments. The appellants were allowed to wind up their businesses by December 31, 2001. The Court emphasized the need for transparency and adherence to the rule of law in the disposal of public property.