Case Note & Summary
The petitioners, seven LPG distributors of Bharat Petroleum Corporation Limited (BPCL), challenged a circular dated 4 January 2018 and a subsequent communication dated 13 March 2018 that imposed refill ceiling limits on the number of LPG cylinders they could supply. The distributorship agreements, entered into between 1964 and 1999, did not prescribe any maximum number of cylinders. However, due to historical shortages, BPCL had issued circulars from time to time setting ceiling limits, which were periodically increased. The impugned circular sought to impose new, lower ceiling limits. The petitioners argued that BPCL could not unilaterally alter the terms of the agreements without their consent. The court examined the agreements and found no provision allowing BPCL to impose such limits. It held that the impugned circular was arbitrary and violated Article 14 of the Constitution. The court also applied principles of legitimate expectation and promissory estoppel, noting that the distributors had relied on the existing terms. The court quashed the impugned circular and communication, directing BPCL to restore the previous ceiling limits or negotiate new terms with the distributors.
Headnote
A) Contract Law - Unilateral Variation - Distributorship Agreements - BPCL cannot unilaterally impose refill ceiling limits on LPG distributors through circulars when the distributorship agreements do not prescribe any such limits - The impugned circular and communication are arbitrary and violative of Article 14 of the Constitution of India - Held that the agreements are binding and cannot be varied unilaterally (Paras 1-42).
B) Administrative Law - Legitimate Expectation - Promissory Estoppel - Distributors had a legitimate expectation that the terms of the agreements would not be altered unilaterally - BPCL is estopped from imposing new conditions not agreed upon - Held that the circular is invalid (Paras 30-35).
Issue of Consideration
Whether BPCL can unilaterally impose refill ceiling limits on LPG distributors through circulars when the distributorship agreements do not prescribe any such limits.
Final Decision
The impugned circular dated 4 January 2018 and the communication dated 13 March 2018 are quashed and set aside. BPCL is directed to restore the previous ceiling limits or negotiate new terms with the distributors.
Law Points
- Unilateral variation of contract
- Arbitrariness
- Legitimate expectation
- Promissory estoppel
- Section 23 of Indian Contract Act
- 1872
Case Details
2019 LawText (BOM) (09) 42
WRIT PETITION NO. 8753 OF 2018
Akil Kureshi, S.J. Kathawalla
Mr. Venkatesh Dhond, Senior Advocate with Mr. Saket Mone with Mr. Subit Chakrabarti i/by Mr. Abhishek Prabhu, for Petitioners. Mr. Dhanesh R. Shah, for Respondent No.1 – Union of India. Mr. Pradeep Sancheti, Senior Advocate with Mr. Roop Basu, Mr. Ayush Aggarwal i/by The Law Point, for Respondent Nos.2 and 3.
Mrs. Shailaja R. Khanvilkar, Viraj Gas Agency, Shree Agency, Shreedatta Gas Agency, Suraj Gas Agency, Patil Gas Agency, Shreyas Gas Service
Union of India, CGM (Sales), LPG, Bharat Petroleum Corporation Limited
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Nature of Litigation
Writ petition challenging a circular and communication imposing refill ceiling limits on LPG distributors.
Remedy Sought
Quashing of the impugned circular dated 4 January 2018 and communication dated 13 March 2018.
Filing Reason
BPCL unilaterally imposed refill ceiling limits on LPG distributors through circulars, contrary to the distributorship agreements which did not prescribe any such limits.
Issues
Whether BPCL can unilaterally impose refill ceiling limits on LPG distributors through circulars when the distributorship agreements do not prescribe any such limits.
Whether the impugned circular and communication are arbitrary and violative of Article 14 of the Constitution of India.
Submissions/Arguments
Petitioners argued that the distributorship agreements do not provide for any ceiling limits and BPCL cannot unilaterally alter the terms.
Respondents argued that the circulars were issued due to shortage of LPG and were necessary for equitable distribution.
Ratio Decidendi
A party to a contract cannot unilaterally alter its terms without the consent of the other party. Imposing new conditions through circulars when the agreement does not provide for such variation is arbitrary and violative of Article 14.
Judgment Excerpts
The Distributorship Agreements do not prescribe any maximum number of cylinders that can be supplied.
BPCL cannot unilaterally impose refill ceiling limits on LPG distributors through circulars when the distributorship agreements do not prescribe any such limits.
Procedural History
The writ petition was filed in 2018 challenging the circular dated 4 January 2018 and communication dated 13 March 2018. Judgment was reserved on 17 July 2019 and pronounced on 30 September 2019.
Acts & Sections
- Constitution of India: Article 14
- Indian Contract Act, 1872: Section 23
