Partly allowed

Bhavik Jagdishbhai Kotecha v. State of Gujarat

Gujarat HC22 Aug 2019SCA/2958/2019

Case brief

AI extract

What is this about?

Court dismissed plea to quash show cause notices regarding bio-diesel sale as product falls under petroleum Class C. However, directed release of seized stock to manufacturer for regularisation pending investigation into storage and licence violations.

What did the court decide?

Show cause notices to continue; seized bio-diesel quantity (20,401 liters) released to manufacturer Yamuna Bio Energy Private Limited upon submission of bank security by petitioners.

Bhavik Jagdishbhai Kotecha Vs State of Gujarat — Writ and Judicial Review | Gujarat HC (2019)

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C/SCA/5189/2019 JUDGMENT

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/SPECIAL CIVIL APPLICATION NO. 5189 of 2019 With

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CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019 In R/SPECIAL CIVIL APPLICATION NO. 5189 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 2958 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 17053 of 2018

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FOR APPROVAL AND SIGNATURE:

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HONOURABLE MR.JUSTICE A.Y. KOGJE

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Sd/-

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================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ?	========= No
2 To be referred to the Reporter or not ?	No
3 Whether their Lordships wish to see the fair copy of the judgment ?	No
4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?	No

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================================================================

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JIGNESH KANTIBHAI KOTECHA

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Versus

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STATE OF GUJARAT

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================================================================ Appearance:

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MR BM MANGUKIYA(437) for the Petitioner(s) No. 1 MS BELA A PRAJAPATI(1946) for the Petitioner(s) No. 1 MR DHAWAN JAYSWAL, AGP for the Respondent(s) No. 1,2,3,4

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================================================================

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CORAM: HONOURABLE MR.JUSTICE A.Y. KOGJE

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Date : 22/08/2019

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ORAL JUDGMENT

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Page 1 of 11

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C/SCA/5189/2019 JUDGMENT

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1.RULE. Learned AGP Mr.Dhawan Jayswal waives
service of Rule on behalf of the respondents.

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2.These three petitions are filed essentially
challenging action of the respondent-State issuing show
cause notices and initiating proceedings which include
seizure of goods and sealing of the premises of the
petitioners. The petitioners are related to each other
and are engaged in the business of sale of produce
popularly known as “bio-diesel”. The petitioners are
having distributorship of such product and are receiving

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manufactured product bio-diesel from the main
manufacturer, viz. Yamuna Bio Energy Private Limited and
are selling on retail basis from their respective
premises which are ordered to be sealed under the
impugned action.

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3.Considering the similarities in the contentions
raised and the relief prayed for, with consent, all the
petitions are taken up for joint hearing and disposal.
The facts are recorded from SCA No.5189 of 2019. The
petition is filed for following reliefs:-

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“(A)Be pleased to issue a writ of prohibition
or a writ in the nature of prohibition or
any other appropriate writ, order or
direction and respond the respondents to
forbear from proceedings further the
impugned show cause notice dated March 06,

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Page 2 of 11

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C/SCA/5189/2019 JUDGMENT

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2019 and quash the proceedings undertaken
by the respondents including seizure and
sealing of the premises of the petitioner.

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(B) Pending admission and final disposal of the present petition, be pleased to direct to prohibit the respondents from

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proceeding further with the show cause
notice dated March 06, 2019 and further be
pleased to direct the respondents to
remove the seals of the premises of the
petitioner;”

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3.1 The relief clause is identical in all these

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petitions.

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4.Learned Advocate for the petitioners submitted
that the action of respondent No.3 in singling out the
petitioners in issuing show cause notice and taking
impugned action is arbitrary as the product bio-diesel,
though manufactured by some other party and is only sold

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by the petitioner in the market, no action is
contemplated by the State at any level against such
manufacturer.

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4.1It is submitted that the product bio-diesel is
not a fossil fuel and would not therefore be the
petroleum or petroleum product, to which the provisions
of the Petroleum Act or the Essential Commodities Act
could be made applicable. It is submitted that as the
product does not fall within the definition of petroleum,

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Page 3 of 11

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C/SCA/5189/2019 JUDGMENT

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in view of chemical property /chemical characteristic
product bio-diesel contains and not containing hydro-
carbon as it is evident, the provisions of the Petroleum
Act will not be made applicable and consequently,
provisions of the Essential Commodities Act will also not
be made applicable and hence, the respondents are not
authorized to issue notice under the provisions of the
Essential Commodities Act or notice under Gujarat
Essential Articles Dealers (Regulation) Order, 1977 or
any other Rules in that connection. The impugned notice
therefore requires to be quashed and set aside.

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4.2It is vehemently submitted that the respondent
authorities have targeted the family members of the
petitioners as only the premises from where the
petitioner and or his cousin are doing business of sale
of bio-diesel have been targeted. It is submitted that
in another petition filed by the cousin of the petitioner
being SCA No.2958 of 2019, while issuing notice, interim
relief was granted in terms of para-53(B) and proceedings
pursuant to show cause notice dated 07.01.2019 in case of
one Bhavik Jagdishbhai Kotecha, cousin of the petitioner
were ordered to be stayed. Still, in thorough disregard
of the order of this Court, the respondent authorities
have proceeded against cousin of the petitioner and also
have targeted the petitioner.

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Page 4 of 11

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C/SCA/5189/2019 JUDGMENT

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4.3It is submitted that the proceedings pursuant

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to the show cause notice under the provisions of the
Essential Commodities Act are not maintainable and
therefore, show cause notice and consequential
proceedings are required to be quashed and set aside.

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5.As against this, learned AGP, relying upon the
affidavit of one Mr.Deepak Satani, District Supplies
Officer, submitted that the product bio-diesel which was
taken as a sample was not matching the parameters of the
product being bio-diesel. The FSL report indicated the
flash point of the product was not the standard flash
point prescribed for the product bio-diesel and
therefore, stand of the petitioner of the product not
being petroleum product and not attracting the provisions
of the Essential Commodities Act cannot be accepted.

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5.1It is further submitted that the petitioners
have approached this Court at the stage of show cause
notice and therefore, all the contentions which the
petitioners desire to raise not to be examined by the
concerned authorities including technical questions
raised by the petitioners.

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6.Having considered the rival submissions of the

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parties and having perused documents on record, it
appears that the petitioners are dealing in free trade of

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Page 5 of 11

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C/SCA/5189/2019 JUDGMENT

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the product bio-diesel which is manufactured by Yamuna
Bio Energy Private Limited. The word “petroleum” is
defiled under Section 2(a) of the Petroleum Act, 1934
which reads as under:-

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“2(a)“petroleum”meansanyliquid
hydrocarbon or mixture of hydrocarbon, and any
inflammable mixture (liquid, viscous or solid)
containing any liquid hydrocarbon;”

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6.1The word “hydrocarbon” means any class of

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organic chemical compounds, composed only of the elements
carbon and hydrogen.

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7.Bio-diesel is a product which is produced by
transesterification of vegetable oil or animal fat
feedstock, and other non-edible raw materials, such as
frying oil, etc. There are several methods for carrying
out this transesterification reaction including the
commonbatchprocess,heterogeneouscatalysts,
supercritical processes, ultrasonic methods, and even
microwave methods. Chemically, transesterified bio-
diesel comprises a mix of mono-alkyl esters of long chain
fatty acids. The most common form uses methanol
converted to (sodium methoxide) to produce methyl esters
(commonly referred to as Fatty Acid Methyl Ester-FAME) as
it is the cheapest alcohol available, though ethanol can
be used to produce any ethyl ester (commonly referred to

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Page 6 of 11

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C/SCA/5189/2019 JUDGMENT

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as Fatty Acid Ethyl Ester-FAEE) biodiesel and higher
alcohols, such as isopropanol and butanol have been used.

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8.From the above, it is apparent that the
petroleum of a fossil fuel which is having main element
of hydrocarbon and is a natural product extracted from
earth whereas bio-diesel is a man-made product.

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9.The Court's attention is drawn to the report of

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the Directorate of Forensic Sciences, which is produced
at Annexure-R-9 to submit on behalf of the petitioners
that petroleum hydrocarbon oil is not found in the sample
and therefore, not a petroleum product to be covered
under the Essential Commodities Act.

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10.On a closure look to the report of the DFS, it
is found as under:-

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“Opinion:

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The sample liquid, a petroleum hydro-carbon
oil, does not fulfill the criteria of Sr. no. 2
of the aforementioned characteristics as per IS
15607/2005 (specification for biodiesel-B100)
blend stock for diesel fuel.“

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10.1The aforesaid has to be construed in terms of

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the parameters mentioned in the report and it is in
connection with the parameters in the report with the
opinion is given about only one parameter, viz. flash

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Page 7 of 11

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C/SCA/5189/2019 JUDGMENT

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point which does not match with the requirement of
petroleum hydrocarbon, but does not necessarily rule out
that the sample is devoid of petroleum hydrocarbon.

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11.It is not in dispute that the product bio-

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diesel is a product which is sold in the open market and
that manufacturing of bio-diesel is carried out by Yamuna
Bio Energy Private Limited. It has come on record that

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insofar as this product is concerned, no action is
initiated or contemplated against said Yamuna Bio Energy
Private Limited or any other distributor or retailer who

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are engaged in sale of bio-diesel, meaning thereby the
said product is not a product which is completely banned
from manufacturing or trading. In that eventuality, when

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nothing is coming on record with regard to product being
clearly defined under the provisions of the Essential
Commodities Act and the parameters of the product being
prescribed by any provision of law, the Court, at this
stage, cannot come hastily to the conclusion that the

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product is outside the definition of petroleum and

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therefore, no action to be initiated under the provisions
of the Essential Commodities Act. At the same time,
considering the fact that the quantity of the product
which is seized being 20401 liters under the seizure
order cannot lie as it is in sealed condition considering
the nature of the product and quality of which is bound

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Page 8 of 11

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C/SCA/5189/2019 JUDGMENT

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to deteriorate with passage of time and therefore, it
would be appropriate for the Court to remove the seizure
and permit the petitioner to repatriate the product bio-
diesel back to the original manufacturer so that
discrepancy in parameters, if any, can be permitted to be
rectified and thereafter made available in the open
market as per the required parameters.

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12.The Court has also taken into consideration

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that blended bio-diesel is considered as petroleum class
'C' and the petitioner had applied for the storage

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licence in the office of Deputy Chief Controller of the
Explosives, Vadodara by application dated 05.03.2017 as
per Rule 140 of the Petroleum Rules, 2002. That

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communication clearly states that the petitioner is
relying on the aforesaid rule regarding storage of 40 KL
of petroleum Class 'C' in his premises and the
authorities drew attention of the petitioner that he will
have to apply for a licence if storage of Class 'C'

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exceeds 45 KL at any one time. But, according to the
stock register for the months of January 2019 and
February 2019, it was found that the petitioner was
having storage of the stock exceeding 45 KL and for the

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same, no storage licence was produced by the petitioner
till date. Hence, it was proved that the petitioner had
stored the exceeding quantity of stocks without storage

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Page 9 of 11

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C/SCA/5189/2019 JUDGMENT

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licence and therefore, the question was required to be
put on the petitioner that where and how exceeding
quantity of petroleum product has been stored by the
petitioner. It is also taken into consideration that the

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petitioner has been engaged with this business from
29.04.2017 and therefore, from the analysis report of
FSL, it clearly established that the petitioner was

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selling Class 'C' petroleum product since the

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abovementioned date. Therefore, petitioner has to obtain
Retail Sale Licence from the District Authority. But, no
such licence has been applied by the present petitioner
and hence, it is proved beyond reasonable doubt that the
petitioner was selling this petroleum product illegally
since the abovementioned date.

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13.In view of the aforesaid, the Court is of the

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view that case is not made out for setting aside the
proceedings initiated under the show cause notices and
the show cause notices have to proceed further and to be
brought to logical conclusion by affording an opportunity

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of hearing to the petitioners. However, the Court is
also of the view that no useful purpose would be served
by keeping the product bio-diesel under sealed and seized
condition as the sample of the product has already been
drawn and tested. It is therefore directed that the show

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cause notices have to proceed further. However, the

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Page 10 of 11

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C/SCA/5189/2019 JUDGMENT

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quantity of the product bio-diesel under the respective
panchnamas in all these petitions is ordered to be
released and the petitioners be permitted to repatriate
the product bio-diesel back to the original manufacturer,
viz. Yamuna Bio Energy Private Limited in terms of their
respective contracts. The petitioner shall submit
statement of accounts to the respondent No.3 with regard
to repatriation of the product bio-diesel back to the
original manufacturer. The petitioners shall furnish
security commensurating with the quantity of the product
bio-diesel to the respondent No.3.

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14.The petitions stand allowed in the aforesaid
terms. Rule is made absolute to the aforesaid extent.
No order as to costs.

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15.In view of the order passed in the main matter,

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Civil Application does not survive. Disposed of

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accordingly.

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Sd/(A.Y. KOGJE, J)

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SHITOLE

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Page 11 of 11

Bhavik Jagdishbhai Kotecha v. State of Gujarat

Case brief

What is this about?

What did the court decide?

Bhavik Jagdishbhai Kotecha v. State of Gujarat

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Parties & counsel

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