A Division Bench of the Kerala High Court had set aside the interim order passed by a Single Judge staying the increase of the price for bulk supply of diesel by state-run oil companies to the Kerala State Road Transport Corporation (KSRTC).

The Bench has held that the Court was bound to consider the objection of the oil companies regarding the existence of the Artibration Clause and be satisfied that it is a fit case to exercise its discretion instead of relegating the parties to the alternative remedy.

"In the case at hand, the learned Single Judge has erred in not adverting to the objection raised 2nd respondent and in not stating the reason for not relegating the parties to the alternative remedy, dehors the arbitration clause", a Bench of Justice C. S. Dias and Justice Basant Balaji held.

Senior Advocate Parag P. Tripathi appeared for the appellant oil companies and Senior Advocate Dushyant Dave appeared for the KSRTC.

The Bench noted that a similar issue between the same parties had been decided against the KSRTC in a previous round of litigation resulting in a judgment of the Supreme Court of the year 2017 in the matter of Indian Oil Corporation Ltd. v. Kerala SRTC.

The Court noted that despite that Judgment, the KSRTC continued to purchase petroleum products from the oil companies as a bulk purchaser at the prices fixed by them.

"The petitioner has on its free will and volition, renewed Exhibit P-1 with the 2nd respondent, not once but twice, on the same terms and conditions. Thus, it is beyond any semblance of doubt that the petitioner is fully conscious that the fixation of the price for petroleum products is exclusively within the domain of the OMCs, and the petitioner has no say in the matter. Moreover, after the passing of the common order in 2017, the petitioner has not complained about the price fixation, instead has enjoyed the benefits under the contract, especially the credit facility", the Court held.

The Court held that the KSRTC is estopped from approbating and reprobating on the contract terms.

The Court also held that 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 Court held.

The Division Bench held that it is not the "function or forte" of the Court to decide the optimal or competitive price at which diesel should be sold to the KSRTC. The Court also noted that KSRTC had not represented their alleged grievance to the oil companies and instead rushed to the Court.

The Court allowed the appeal of oil companies while holding that "the observations of the Hon'ble Supreme Court in its order dated 16.09.2013 in S.L.P (Civil) No.19996/2013 squarely apply to the case at hand. The petitioner has not made out a prima facie case, and the balance of convenience is in favour of the OMCs."

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