The Karnataka High Court has ruled in favor of VINP Distilleries and Sugars Pvt Ltd, directing the major oil marketing companies—Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Limited (HPCL), and Indian Oil Corporation Limited (IOCL)—to adhere to an existing agreement for ethanol procurement from a Dedicated Ethanol Plant (DEP). This decision was made in the case VINP Distilleries and Sugars Pvt Ltd v. Union of India & Ors.
Background of the Case
The case was presided over by Justice M Nagaprasanna, who noted that the ethanol plant had a legitimate expectation to supply ethanol exclusively, based on a long-term offtake agreement (LTOA) with the oil marketing companies (OMCs). The judge underscored that the companies’ arbitrary actions could not disguise themselves as discretionary decisions. Justice Nagaprasanna criticized the OMCs’ conduct, highlighting the contractual obligations that should have been honored without prejudice to the petitioner.
Contractual Obligations and Disputes
The petitioner had set up a plant capable of producing 9.90 crore liters of ethanol per annum, following the stipulations laid out in the expression of interest (EOI) and the National Policy on Biofuels 2018. However, a disagreement arose when the OMCs modified the tender in 2025, allowing procurement from non-DEPs, which deviated from the terms of the LTOA and resulted in a reduced allocation for the petitioner from 9.26 crore liters to 1.44 crore liters.
Legal Proceedings
VINP Distilleries approached the High Court, which initially ruled in their favor. The OMCs contested this interim order, but their appeal was dismissed by a Division Bench. The Supreme Court later vacated the interim orders and directed the High Court to make a fresh decision on the matter.
High Court’s Final Ruling
Upon revisiting the case, the High Court found that the OMCs’ selective invocation of contract clauses undermined the contract’s integrity. The judgment emphasized that when a state instrumentality wields monopolistic power, it must act with fairness and reasonableness, which are constitutional mandates. The Court ordered the OMCs to increase ethanol procurement from 1.44 crore to 3.92 crore liters, thereby partially addressing the shortfall and upholding the petitioner’s legitimate expectations.
More Read
Legal Representation
Senior Advocate Prabhuling K Navadgi, alongside Advocates Ajay Kadkol and others, represented the petitioner. The Union of India was represented by Attorney General R Venkataramani and a team of government counsel. BPCL, HPCL, and IOCL were defended by Advocate Kesang Doma, with additional representation for various companies and distilleries by Senior Advocates such as Sajan Poovayya and Udaya Holla.
The Court’s decision underscores the significance of adhering to contractual commitments, especially within monopolistic frameworks, to ensure fairness and legal integrity.
