Lubricating Oil Dealers Association and Another vs Union of India and Others

The Legal validity of the West Bengal Lubricating Oil Licensing Order,

1967, (in short, Licensing Order, 1967) and a notification being No. 2864-

FS, dated 3rd August, 2000 are in challenge in this Writ Petition.

Petitioner No. 1 is the Lubricating Oil Dealers'' Association, a society

registered under the West Bengal Society Registration Act, 1961 and the

Petitioner No. 2 is the Vice-precedent of the Association.

The Petitioners say that the Essential Commodities Act, 1955 (in short,

E. C. Act) was enacted at a time when there was acute crisis of some

essential goods requiring the interference of the Government for

maintenance equitable distribution and availability of such essential

goods at a fair price, preventing hoarding black marketing etc. of such

essential commodities. Similarly at one point of time there was a gap

between the demand and supply of Lubricating Oil in the market for

which both the supplies and price used to be controlled by the Central

Government. But subsequently the entire scenario has changed radically.

Several private enterprises, as well as Government undertakings were

permitted to manufacture Lubricating Oil. Import was also allowed and

the control of price was withdrawn resulting in huge supply of the

Lubricating Oil in the market and the market became fully competitive

and in consequence, the consumers are getting wide choices of the

brand like any other consumer goods. So, in view of such a radical

change, whatever necessity was there prior to control of the supply and

price etc. of the Lubricating Oil, no more exists today and since the

Lubricating Oil is now a free trading commodity the licensing order, 1967

is now completely irrelevant. It is the grievance of the Petitioners that

the licensing order, 1967 contains some unnecessary harsh provisions,

not connected with the object stated in the order and the traders of the

Lubricating Oils are constantly subjected to harassment by some

unscrupulous Government officials under the shelter of those useless

provisions. It is further stated in the Writ Petition that in view of the aforesaid reasons there is no such licensing order controlling the trading

of the Lubricating Oil in any State other than the State of West Bengal.

It is the further say of the Petitioners that petroleum and petroleum

products are only covered by the definition of Essential Commodity. The

Licensing Order, 1967 has not defined Lubricating Oil. Lubricating Oil is

not an item included in the definition of petroleum product in the

Petroleum Act or any other Central Act . So, the State has no Legislative

competency to pass the Licensing Order, 1967.

It is the further case of the Petitioners that considering all such facts and

circumstances, being explained by the Petitioners before the authority

concerned, operation of the Licensing Order, 1967 was suspended by the

authority by a notification dated 6th July, 1999 and subsequently the

exemption order was extended. But by a notification dated 1st

September, 2000 the notifications of the exemption were revoked and

operation of the Licensing Order, 1967 was reimposed without any valid

reason whatsoever.

It is also a case of the Petitioners that the Central Government never

authorised the State of West Bengal under Section 3 of the Essential

Commodities Act, 1955 to pass such a control order and the number of

the order delegating such authorisation and mentioned in the preamble

of the Licensing Order, 1967 is not at all in existence.

No Affidavit-in-Opposition against the Writ Petition has been filed by the

Union of India, the Respondent No. 1 or the State/Respondents, i. e., the Respondent Nos. 2 to 5. M/s. Castrol India Ltd., Respondent No. 6, which

is a manufacturer of Lubricating Oil has filed an Affidavit, in which they

supported the Petitioners'' claims.

The first submission of learned Advocate Mr Chatterjee appearing for the

Petitioners is that the Licensing Order, 1967 is stated to have been made

on the basis of power conferred by Section 3 of the E. C. Act, 1955, read

with the Government of India, Ministry of Commerce, S. O. No. 26 (II) -

Com. GEN/ - 66, dated 18th June, 1966. But the said S. O. has not been

produced by the State. So, it has not been proved as to what is the

authority, if any, delegated to the State to introduce such kind of order.

He has further submitted that the S. O. number thus mentioned in the

Licensing Order itself, is mentioned differently in different books. It is

his further view that there is a possibility of there being no such order at

all and according to Mr Chatterjee the enter case of the State should fail

on such ground alone.

Mr Chatterjee has further submitted that ''petroleum'' and ''petroleum

products'' are only described as essential commodities in the Schedule to

the E. C. Act and lubricating oil has not been mentioned as an essential

commodity in the Schedule of the E. C. Act. He has further submitted

that lubricating oil has not been defined in the Petroleum Act, 1934

which is the mother law in connection with petroleum, or in any other

Central Act or orders and the fact being so, the State has no legal

authority to make any Order or Rule to control the trade of lubricating

oil.

It is the further contention of Mr Chatterjee that the several clauses in

the Licensing Order, 1967 are not in confarmity with the object stated in

the order or stated in the object of the E. C. Act.

It is a serious grievance of the Petitioners that although lubricating oil is

not hazardous or inflammable Article but still Licensing Order, 1967

compels the dealers of the lubricating oil for obtaining fire license.

Thus, challenging the legal basis as well as the utility of the Licensing

Order, 1967 the Petitioners pray for striking down of the Licensing Order,

1967 as being ultra vires the E. C. Act and also for cancellation of the

notification reimposing the force of the said Licensing Order, 1967.

In reply, learned Senior Standing Counsel Mr Banerjee appearing for the

State/Respondents has submitted that the Licensing Order, 1967 has

been passed by the State on the strength of delegation of power by the

Central Government and the order has been passed under Section 3 of

the E. C. Act. He has further submitted that such delegation has been

mentioned in S. O. No. 26 (II) - Com. GEN/ - 66, dated 18th June, 1966.

Mr Banerjee has further argued that although the lubricating oil has not

been included in the Schedule of the E. C. Act but it has been described

in many other Central Act s and orders and on the basis of those

provisions the lubricating oil has been described in Schedule - I of the

Licensing Order, 1967. Mr Banerjee has further argued that all the

provisions in the Licensing Order, 1967 including the provision of fire

licenses have been all made for the public interest and the State have the legal authority delegated by the Central Government to make such

orders and hence the Petitioners'' claims are all devoid of any legal basis.

The Licensing Order, 1967 has been passed under Section 3 of the E. C.

Act on the basis of the Government of India, Ministry of Commerce, S. O.

No. 26 (II) - Com. Gen/- 66 as stated in the order itself. But the said

order or its copy has not been produced in the case by the

State/Respondents. Mr Banerjee has submitted that in spite of all sincere

efforts he could not procure a copy of the order from any source. It is his

contention that since the number and description of the order has been

mentioned, its existence cannot be denied. On the contrary Mr

Chatterjee has argued that different numbers of such order are

published in different books. So, he has the reason to suspect the

existence of any such order. Be that as it may, production of the order

was very much essential to look into and ascertain the powers, if any,

delegated to the State Government in respect of the subject matter in

dispute in this case. The failure of the State/Respondents to produce the

order cuts the very root of their claims in the case.

Lubricating oil is not included in the Schedule of the E. C. Act.

Petroleum and petroleum products are there in the Schedule of the E. C.

Act. It is the claim of the State that lubricating oil is a petroleum

product.

The Petroleum Act, 1934 has not defined petroleum product. Section 2

(a) of the Petroleum Act has defined petroleum in the following way.

"Petroleum means any liquid hydrocarbon or mixture of hydrocarbons and any inflammable mixture (liquid, viscous or solid) containing any

liquid hydrocarbon". Accordingly Mr Banerjee lubricating oil is a

petroleum product as it contains hydrocarbon.

Section 2 (b), (bb) and (bbb) have classified petroleum according to

flash-point. The flash-point of any lubricating oil is far above the flush

points mentioned therein. So, the definition does not cover lubricating

oil as argued by Mr Banerjee.

In Schedule - I to the Licensing Order, 1967 there is a list of varieties of

lubricating oil. However, there is no specific definition of lubricating oil

in the orders.

As mentioned earlier, according to Mr Banerjee lubricating oil is a

petroleum product as it contains hydrocarbon. There are innumerable

products containing hydrocarbon. It is, therefore, wrong to say that all

products containing hydrocarbon are petroleum products. According to

Mr Chatterjee lubricating oil is manufactured from crude oil/ base oil. To

show the manufacturing process of lubricating oil, he has produced a

page downloaded from "madehow.com".

Mr Banerjee has submitted that according to the lubricating oils and

greases (processing, supply and distribution regulation) order, 1987,

the lubricating oil is classified under sub-heading 2710.70 of the

Central Excise Tariff Act, 1985. The said sub-clause 2710.70 in the

Central Excise Tariff Act, 1985 says "hydrocarbon oil which has his

flash-point at or above 90 degree Centigrade and is ordinarily used for the batching of Jute Tonne or other fibre". So, the Clause refers to a

particular kind of oil used for a particular purpose, i. e., batching of Jute

Tonne or other fibre which is totally different from the lubricating oil,

used in Automobiles.

In fact, Mr Banerjee could not show any Act or Rule according to which

lubricating oil is a petroleum product. On the other hand, the West

Bengal Fire Services (Fire Licenses) Rules 2004 treats petroleum product

and lubricating oil differently in Schedule- I to the said Rules (Item No.

82, 83 and 128, 129). The Petroleum Products Supply and Distribution)

Order, 1966 is a Central Order. Section 2 (f) of the order defines

petroleum products. Lubricating oil is not included therein.

E. C. Act was enacted at a time when there was a huge shortage and

crisis of some essential commodities in the market. To combat such

situation, the E. C. Act was enacted "in the interests of the general

public, for the control of the production, supply and distribution of, and

trade and commerce in certain commodities". The object of the

Licensing Order, 1967 is also stated "necessary and expedient so to do

for securing equitable, distribution and availability at fair prices of

lubricating oil". The object thus stated is no doubt appreciable, but none

of the provisions in the orders aimed at achieving any of such objects

either in the E. C. Act or in the Licensing Order, 1967.

There might have been crisis, black marketing etc. of lubricating oils in

1960s but the scenario since the last few decades is entirely different.

The lubricating oil is now a decontrolled commodity and there is no restriction of its manufacture. Import is also now free and it is now an

OGL item. Right now, there are several companies manufacturing

lubricating oil and the market of lubricating oil is now very much

competitive providing wide choice to the consumers. Sometimes

manufacturer give incentives to the retailer as it is found in

uncontroverted Annexure P- 3 (page 58, to the Writ Petition). So, the

necessity for such order is no more there at present.

Some of the provisions in the Licensing Order, 1967 is supposed to

cause serious troubles to the traders. For instance, according to Rule 12

of the Order a dealer has to specify the specific address from where he

shall conduct sells and also where he is supposed to store the goods. The

lubricating oil is now governed by market forces because of which the

dealers has to change their policies of purchase, sell and storage of the

goods time to time. Hence, it is surely difficult to conduct business from

a particular place of storage. There is a provision of search and seizure

in the Licensing Order, 1967 which is harsh. Para- 16 of the Licensing

Order, 1967 authorises the Director in Kolkata and the District

Magistrates, to interfere with the business of a dealer of lubricating oil.

The most controversial point raised by the Petitioners in this case is the

provision of fire license in the Licensing Order, 1967. The order itself

does not say about any fire licenses being essential for running the

business of lubricating oil. Form- B is a specified form of application for

License. According to condition 6 in the form, License under the West Bengal Fire Services Act, 1960 is needed for storage of any quantity of

lubricating oil in any building or place.

Section 12 of the West Bengal Fire Services Act, 1950 puts bar to use

premises for storing or processing ''hazardous substances'' without

license. Condition 6 in form- B of the Licensing Order, 1967 relates to

this provision.

Now comes the question, what is ''hazardous substance''. Section 2 (h)

of the West Bengal Fire Services Act, 1950 has defined hazardous

substance as follows:-

{(h) ''hazardous substance'' means-

(i) Such explosive within the meaning of the Indian Explosives Act, 1884

(4 of 1884), or

(ii) Such explosive substance within the meaning of the Explosive

Substances Act, 1908 (6 of 1908), or

(iii) Such dangerously inflammable substance within the meaning of

the inflammable Substances Act, 1952 (20 of 1952), or

(iv) Such combustible substances, or

(v) Such toxic substance,

As the State Government may, by notification, specify;}

Lubricating oil is not an explosive substance. It is not a ''dangerously

inflammable'' under Section 3 of the Inflammable Substances Act, 1952.

According to the Bureau of Indian Standards (marked with letter P- 8)

in the Writ Petition and also according to a certificate issued by Castrol Indian Ltd. Which is a leading manufacturer of Lubricating Oils, the

Lubricating Oils have flash-point above 190 degree centigrade and

lubricating oils are not inflamable. So, it is not a combustible substance

also. Lubricating oil is not a toxic substance. So, under no circumstances

lubricating oil can be termed as ''hazardous substances''. The fact being

so, no license under Section 12 of the West Bengal Fire Services Act,

1950 is required for the storage of lubricating oils. It is not, therefore,

understandable as to why such a license is prescribed as essential in

Form- B in the Licensing Order, 1967.

Thus, the Licensing Order, 1967 have put some unfair and

unreasonable restrictions in the trade of lubricating oils. Such

restrictions and unfettered powers given to different authorities have

the tendency to breed corruption and unnecessary harassments to the

traders as has been alleged in this case by the Petitioners.

The Hon''ble Apex Court in a decision reported in (2006) 4 SCC 327

(Kerala Samsthana Chethu Thozhilali Union- versus - State of Kerala

and Others) have laid down that making a Rule for a purpose which is

not the object of the main Act amounts to unreasonable exercise of Rule

making power and that the Rules must be framed to carry out the

purposes of the main Act. It has been further held in the judgment that

the State is not free to impose any condition it desires, if such condition

is against the spirit of the Article 14 of the Constitution of India. The

Licensing Order, 1967 does not satisfy such principles, laid down by the

Hon''ble Apex Court.

To conclude, the delegation of power to make Licensing Order, 1967 by

the State has not been proved. The provisions in the Licensing Orders are

not in tune with the object of the E. C. Act. Those are not in tune even

with the object stated in the order itself. The object stated in the order

has become irrelevant in view of the radical change of the scenario and

as such the purpose no more exists today. The Licensing Order have

imposed some unnecessary, unreasonable and illegal conditions in the

trade of lubricating oil which are violative of the provision in Article 19

(1) (g) of the Constitution of India. So, for this reasons and decisions

mentioned above, the West Bengal Lubricating Oil Licensing Order, 1967

is hereby declared ultra vires the provisions of the Essential Commodities

Act, 1955 and as such not enforceable in law.

The Writ Petition is accordingly allowed without any order as to costs.

Urgent certified photocopies of this judgment, if applied for, be given

to the learned Advocates for the parties upon compliance of all

formalities.

After passing of the judgment, Mr Dhar, learned Advocate appearing for

the State respondents prays for stay of the operation of the judgment and order passed today. Mr Karmakar, learned Advocate appearing for

the Petitioners strongly opposes the prayer.

Considered. Prayer of Mr Dhar is rejected.