Writ of mandamus lies against OMCs to honor preferential ethanol allocation based on legitimate expectation.

The Petitioner, a Dedicated Ethanol Plant (DEP), was established exclusively to manufacture and supply ethanol to Oil Marketing Companies (OMCs/Respondents 2-4) under the 'Ethanol Blended Petrol Programme'.

Pursuant to an Expression of Interest (EOI) in 2021, the Petitioner entered into a Long-Term Offtake Agreement (LTOA) on 13.01.2022.

The LTOA mandated that the Petitioner supply its entire production exclusively to OMCs and recognized its design capacity as 9.90 crore liters.

While the initial annual offtake was fixed at 1.44 crore liters (Clause 6.2), Clause 6.8 provided for preferential allocation for additional quantities up to the plant's design capacity.

In September 2025, the OMCs floated a new tender (No. 22376) which included a clause stating that additional quantities beyond the LTOA would no longer receive "preferential allocation" and would be treated on par with non-dedicated plants.

Consequently, the Petitioner was allotted only 3.92 crore liters against its bid of 9.26 crore liters for ESY 2025-26. The Petitioner challenged this as a violation of the LTOA and the doctrine of legitimate expectation.

1. Whether a writ petition under Article 226 is maintainable and entertainable against State instrumentalities in matters arising out of contractual obligations.

2. Whether the action of the OMCs in curtailing the preferential allocation of ethanol violates the doctrines of Promissory Estoppel and Legitimate Expectation.

Article 12 and 14 of the Constitution regarding the definition of 'State' and the mandate of non-arbitrariness.

The court relied on ABL International Ltd. v. Export Credit Guarantee Corp. to hold that writ courts can interdict arbitrary State action even in the realm of contract.

Doctrine of Promissory Estoppel as defined in Motilal Padampat Sugar Mills v. State of U.P., where a party alters its position based on a clear promise by the State.

Doctrine of Legitimate Expectation as discussed in Union of India v. Hindustan Development Corp., requiring the State to act fairly relative to established practices or representations.

The Court reasoned that Respondents 2-4 are "State" under Article 12 and exercise a virtual monopoly over ethanol procurement.

The Petitioner established its plant with massive capital investment solely based on the OMCs' assurance in the LTOA that it would have "preferential allocation" for its full design capacity, provided it remained a "dedicated" unit prohibited from selling to third parties.

The Court found that the OMCs' sudden change in policy via the 2025 tender was a volte-face that defeated the Petitioner's legitimate expectation.

Since the Petitioner is contractually barred from selling to anyone else, the OMCs' refusal to honor the preferential allocation clause (Clause 6.8) was deemed arbitrary and violative of Article 14.

The Court noted that the OMCs had selectively invoked Clause 6.8 to increase allotment partially (from 1.44 to 3.92 crore liters) but could not arbitrarily stop there without considering the full capacity promised under the agreement.

It allowed the Writ Petition and issued a Writ of Mandamus directing Respondents 2-4 to consider the Petitioner’s representation dated 27.10.2025 for an enhancement of allotment.

The Court ordered that this consideration must be based on Clause 6.8 of the LTOA and the observations made in the judgment, and must be completed within four weeks, prior to final decisions on the new tender.