Uphhokta M. Manch Vs. Union of India & Ors  Insc 300
(20 April 2004)
Lahoti & Ashok Bhan.
Nos. 4-15 R.C. Lahoti, J.
States of Madhya Pradesh, kerosene was being distributed and made available for
sale to consumers through public distribution system and by appointing fair
price shops and retailers.
executive instructions, the State of Madhya Pradesh evolved a system called rounding off of the price in the
name of securing distribution of kerosene at uniform prices. The effect of the
system was that the prices for sale by the wholesalers and the retailers were
so strategically appointed as to generate a margin which was collected by
Collectors in several districts and the Director of Civil Supplies at the State
level. Such fixation of prices, based on rounding off, was challenged by filing
writ petitions in the High Court which were dismissed. The matter came up in
appeals by special leave before this Court. This Court allowed the appeals. The
judgment of the High Court was set aside and the system of rounding off of the
prices so as to build up funds available with the Director and the Collectors
was directed to be quashed being ultra vires of Article 265 of the Constitution
and Section 3 of the Essential Commodities Act 1955 and para 2(d) of the
Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993.
the pendency of the writ petition and the appeals, the State of Madhya Pradesh was reorganized into two States by
carving out the State of Chhattisgarh separately from out of the State of
Madhya Pradesh. The State of Chhattisgarh was joined as party to the appeals
in this Court. Huge funds, running into crores of rupees, were found to have
been collected by the two States the figures whereof were brought to the notice
of this Court. However, the collection had continued during the pendency of the
appeals. Vide its judgment dated May 2, 2002 (reported as (2002) 5 SCC 466) apart from striking down the system of
rounding off, the Court made the following further directions:- "However,
on the facts brought to the notice of this Court, the matter cannot be left at
that alone. We have the figures of the collection and utilization of the fund
up to 31-7-2001 brought to our notice. During the pendency
of these appeals, further amount must have been collected and also spent. Some
directions would be required to be made for utilizing the fund so available
with the officers of the State Government. This Court would also like to know
how and for what purpose the fund has been utilized and whether timely audits
of the fund were carried out. For this purpose we request the
Accountant-General of Madhya Pradesh to carry out the audit of the fund as
available with the Director and the Collectors of the districts in the States
of Madhya Pradesh and Chhattisgarh, the latter State having been carved out and
formed during the pendency of these special leave petitions. Apart from
carrying out the usual audit, we request the Accountant-General of Madhya
Pradesh to compile the expenditure under different heads and sub-heads so as to
clearly indicate for what purpose the fund has been utilized. We hope the audit
will be completed in a period of 4 months from the date of communication of
this order to the Accountant-General of Madhya Pradesh. On receipt of the
report of the Accountant-General, the same shall be laid before the Court
soliciting further directions. Till then, the amount collected in the said fund
by the Director of Food and Civil Supplies and the Collectors of the districts
shall stand frozen." The Principal Accountant-General of Madhya Pradesh
has carried out the audit in terms of the directions made by this Court. It was
a voluminous task and could not be completed within the appointed period of
four months and, therefore, the time was extended. In February, 2003, the
report has been filed on behalf of the Principal Accountant-General (Audit)-I
of Madhya Pradesh, Gwalior after carrying out the audit of
funds available with the two Directorates of Food and Civil Supplies and with
the Collectors of 61 districts in the States of Chhattisgarh and Madhya
Pradesh. We record our appreciation of the commendable work done by the office
of the Principal Accountant-General (Audit)-I abovesaid within a reasonable
time and very expeditiously. The report satisfies the directions made by this
States of Madhya Pradesh and Chhattisgarh, on having been furnished with the
copies of the audit reports, have filed responses. They took time for
completing the process of reconciliation, recovery and adjustments in the light
of the audit report and to carry out the directions made by this Court. On
10.11.2003, after hearing the Advocates General for the States of Madhya
Pradesh and Chhattisgarh, the Court made the following directions:-
is substantial amount collected and lying unspent the recovery whereof by the
Directorate and Collectors of several Districts has been held to be illegal.
Such amount must be available to be utilized consistently with the directions
to be made by this Court. For this purpose before passing further orders, we
would like to have the following information filed in a tabulated form,
supported by affidavit within three weeks:-
The total amount collected by way of rounding up charges;
The amount spent out of it (Districtwise); and
The amount as to which recovery is yet to be made by the Directorate/Collectors
would also like to know if the audit is complete or something yet remains to be
done for want of information made available by the Districts.
No. 14-15/2003 (filed by the State of Chhattisgarh) The State Government shall
take steps for recovery of rounding off charges lying deposited with the
wholesalers so as to bring them into the funds available for utilization in
accordance with the orders passed by this Court." Compliance has been made
question that remains to be decided is as to the utilization of the crores of
rupees lying available with the two States consisting of the principal, the interest
and the recoveries effected consequent upon the directions made by this Court.
two States have submitted that the funds which have been frozen under the
orders of this Court may be released respectively to them for the purpose of
utilization by them to strengthen the public distribution systems in the two
States. The traders (wholesalers and retailers) have desired that the amount be
refunded to them as it was contributed by them.
25.3.2004, an affidavit sworn in by Shri P.G. George, Under Secretary in the
Ministry of Petroleum and Natural Gas, New Delhi, has been filed wherein it is
stated, inter alia, as under:- "5. That the Central Government vide
resolution No. PPD/OPC/IR/75 dated 14.7.1975 had decided to setup Oil
Coordination Committee for administering the Pool Account, deciding on
allocation of crude oil and monthly production patterns; and coordinating
transportation arrangements for crude oil imports and coastal movements.
Secretary, Ministry of Petroleum and Natural Gas, Government of India, was the
Chairman of the OCC.
subsidy on Public Distribution system of Kerosene was borne by the Oil Pool
Account till 31.3.2002. The subsidy on Public Distribution System on Kerosene
was funded by way of cross subsidy on Petrol and Aviation Turbine Fuel and
surcharges on petroleum products. The Central Government vide resolution No.
P-20029/22/2001- PP dated 28.3.2002 had decided to dismantle Oil Coordination
Committee w.e.f. 1.4.2002 and Oil Pool Accounts have been wound up. The Central
Government has also decided that the outstandings of the Oil Companies from the
Oil Pool Account would be taken over by it. The liability of Oil companies
would be discharged through issue of Special Government Bonds. The Oil
Companies have already been issued Special Government Bonds for Rs.9000/- crores
and balance outstandings would be liquidated after the completion of CAG's
Audit which is in progress.
the Central Government, has also decided vide resolution number No.P-
20029/18/2001-PP dated 28.1.2003 that subsidy on Public Distribution System
Kerosene and domestic LPC effective 1.4.2002 would be borne by fiscal budget.
The budgetary allocation for the subsidy on Public Distribution System Kerosene
and Domestic LPG is as follows: Rs./Crores 2002-03 4,495.80 2003-04 6,300.00
That from the resume of the facts, it would be in the interest of justice that
the State Governments, that is, Madhya Pradesh and Chhattisgarh are directed to
deposit all this amount in the General Receipts of the Central Government as
kerosene subsidy is being funded by the Central Government." We have heard
the learned Addl. Solicitor General appearing for the Union of India, Advocates
General/Standing Counsel for the States of Madhya Pradesh and Chhattisgarh and
the learned counsel appearing for the several interveners. We do not find any
merit in the claim of the traders. Whatever amount they have contributed to the
funds generated by the State Governments in the name of rounding off, the
burden thereof has been passed on to the hundreds and thousands of consumers. A
refund to them would amount to their unjust enrichment and would not reach the
ultimate consumers who have really parted with the amount.
not also see any merit in the claims of the two State Governments. Firstly,
they were responsible for illegally collecting the fund. The information made
available by the two State Governments and the facts collected by the report of
the Principal Accountant- General reveal misutilisation of the funds and
several irregularities ___ some of them termed serious. To a large extent
recoveries have been effected which would not have been possible but for the
Court's intervention. Substantial amounts have ceased to be recoverable.
from suggesting that the amount of the fund would be utilized for strengthening
the public distribution system, the State Governments have not come out with
any concrete plan suggesting utilization of funds. We do not think the claims
of the State Governments can be countenanced.
find merit in the submission made on behalf of the Central Government. The most
appropriate thing to do, in our opinion, is to direct the funds lying with the
two State Governments to be made over to the Central Government so that the
same can be utilised by way of general receipts of the Central Government as
the Central Government is funding the kerosene subsidy.
States of Madhya Pradesh and Chhattisgarh are directed to makeover the amount
of fund lying frozen with them, including the principal and interest, alongwith
such recoveries as have been effected or may be effected hereafter to the
Ministry of Petroleum and Natural Gas, New Delhi to be utilized for the purpose
of funding kerosene subsidy by the Central Government. Funds available at hand
shall be handed over in six weeks. Amounts, which are in the process of being
recovered, shall be so recovered and handed over to the Central Government in 4
months from today.
matters stand disposed of.
the pending intervention applications be treated as dismissed.
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