Full Judgment Text
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CASE NO.:
Appeal (civil) 3249-3250 of 2002
PETITIONER:
Nagrik Uphhokta M. Manch etc.
RESPONDENT:
Union of India & Ors. etc.
DATE OF JUDGMENT: 20/04/2004
BENCH:
R.C. LAHOTI & ASHOK BHAN.
JUDGMENT:
J U D G M E N T
I.A. Nos. 4-15
R.C. Lahoti, J.
In the 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.
By 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.
During 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
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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 Court.
The 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:-
"There 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:-
(i) The total amount collected by way of
rounding up charges;
(ii) The amount spent out of it (Districtwise);
and
(iii) The amount as to which recovery is yet to be
made by the Directorate/Collectors of
Districts.
We would also like to know if the audit is
complete or something yet remains to be done for
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want of information made available by the Districts.
I.A. 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 and reported.
The 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.
The 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.
On 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.
The 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.
Thereafter 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
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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
6. 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.
We do 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.
Apart 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.
We do 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.
The 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.
The matters stand disposed of.
All the pending intervention applications be treated as
dismissed.
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