The Karnataka High Court has provided relief to VINP Distilleries and Sugars Ltd, instructing state-owned oil marketing companies (OMCs) to review the company's request for increased ethanol procurement under the Ethanol Supply Year 2025-26 program.
Court Orders Consideration of Representation
Justice M Nagaprasanna directed Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) to evaluate VINP Distilleries' representation dated October 27, 2025, within a four-week period.
Background of the Case
The company operates a dedicated ethanol plant at Shiggaon in Haveri district, producing and supplying denatured anhydrous ethanol exclusively to OMCs under a long-term arrangement.
On September 23, 2025, the OMCs issued a tender for the procurement of 1,050 crore litres of ethanol for the 2025-26 supply year. VINP Distilleries bid to supply 9.3 crore litres but was allocated only 3.9 crore litres, resulting in a shortfall of 6.3 crore litres. After its requests for an increase went unanswered, the company approached the high court.
Legal Arguments
The petitioner argued that the denial of the full quantity was arbitrary and caused significant losses due to substantial investments in the dedicated ethanol plant. The OMCs contended that the dispute arose from a contract, making a writ petition not maintainable.
Rejecting this argument, Justice Nagaprasanna noted that the company had invested several hundred crores of rupees based on assurances from the long-term offtake agreement and the consistent conduct of the OMCs over the years.
Court's Observations
“If, after years of adherence to a settled course of conduct, the respondents seek to alter the regime as a bolt from the blue through the impugned Expression of Interest, such deviation cannot evade constitutional scrutiny,” the judge stated.
The court held that the petitioner had a legitimate expectation arising from the agreement and the respondents' past conduct. While the state can change policies, such changes must satisfy the requirements of Article 14 of the Constitution, the judge observed, adding that “arbitrariness can never masquerade as discretion.”
Impact on Dedicated Ethanol Plants
Noting that ethanol demand remains high and that dedicated ethanol plants are contractually barred from manufacturing other products or supplying third parties, the court said such units could not be left “at the short end of the stick.” It held that Clause 6.8 of the agreement could not be invoked selectively and directed the OMCs to decide on the company's representation within four weeks.
