'Drop-In Fuel' Akin To Petroleum & An Essential Commodity, Centre's 2005 Order Regulating Retail Sale Will Apply: Rajasthan High Court
The Rajasthan High Court has observed that drop-in bio fuels fall under the definition of petroleum and petroleum products, and would classify as essential commodities and would be subject to application of Central Government's Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005.
The Control Order empowered the Central Government to permit the direct sale of bio-diesel for blending with High Speed Diesel to all consumers only as per the limits and standards prescribed by the Bureau of Indian Standards.
One of the petitioner's–My Own Eco Energy Private Limited produces 'Indizel'–a form of renewable diesel or a "drop-in bio fuel" which is made from non-fossil sources. It claimed that drop-in fuel, which is a non-bituminous fuel, is not an essential commodity under the Essential Commodities Act.
It thus sought a direction to declare that provisions of the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005 passed by the Central Government by invoking powers under Essential Commodities Act are inapplicable to the drop-in fuel manufactured by petitioner.
Drop-in bio-fuel falls under definition of petroluem product
Justice Munnuri Laxman in its order observed that under the Petroleum Act a petroleum product is defined as a hydrocarbon liquid wherein hydrocarbons are organic compounds made up of only hydrogen and carbon atoms which can exist as gases, liquids, solids, or polymers. It thereafter said that as per the 2005 Control Order Motor Spirit and High Speed Diesel are products of petroleum.
"A conjoint reading of the definitions of “Products,” “Motor Spirit,” and “High Speed Diesel” as defined under the Petroleum Act and the Control Order, 2005, show that bio-diesel cannot be said to be non-essential commodity. Drop-in fuel, which is a biofuel, also contains hydrocarbons in liquid form and shares similar properties with petroleum and petroleum products, which are conventional in nature. Both have similar compositions of organic compounds but differ in the percentage of carbon content...After considering the above provisions of the Essential Commodities Act, the Control Order, 2005, and the Petroleum Act, 1934, it cannot be said that drop-in fuel is not petroleum or a petroleum product. Both conventional fuels and non-conventional fuels like drop-in fuel contain organic compounds made up of hydrogen and carbon. Drop-in fuels also fall within the definition of petroleum and petroleum products as defined under the Petroleum Act and the Control Order, 2005".
The Court was hearing two petitions by India's largest manufacturer of drop-fuel, My Own Eco Energy Private Limited, which had challenging seizure and confiscation order passed by the Additional Collector in respect of the drop-in fuel, under Section 6(A) of the Act on the ground that drop-in fuel was not an essential commodity and hence the Control Order passed under the Act was not applicable to it.
The Central authorities argued that drop-in fuel was a hydrocarbon liquid, similar to the conventional petroleum products obtained naturally from fossils. Under the definition of petroleum adopted under the Control Order from the 1934 Act, all hydrocarbon liquids were defined as petroleum.
Drop-in fuel an essential commodity, Control order will apply
The court observed that the according to the Petroleum Act all liquids hydrocarbons are treated as petroleum or petroleum products. It observed that definitions of Motor Spirit and High Speed Diesel also make it clear that hydrocarbon oil, excluding mineral oil, is treated as Motor Spirit.
"Indisputably, drop-in fuels are hydrocarbon oils. However, the source of extraction is different. The classification is based on the chemical composition of hydrocarbons, not on the source from which such hydrocarbon compounds are derived. Thus, the argument of the learned counsel for the petitioners that drop-in fuel is not an essential commodity and is not required to comply with the provisions of the Control Order, 2005, has no merit and is hereby rejected," it added.
Company had no license to sell directly to consumers, violated control order
The court further said that the petitioner-Company did not hold a license to sell directly to consumers, and its action of selling drop-in fuel directly to consumers through retail outlets amounts to non-compliance with Regulations 3, 4, and 5 of the Control Order, 2005.
It said that any action in violation of the Control Order enables the authorities to take action of seizure and consequential confiscation by the competent authority.
"The facts in the present case show that the competent authority under the Essential Commodities Act found that the sale of drop-in fuel by the petitioner-Company, through its dealers directly, was in violation of the Control Order and therefore impermissible. Such action rightly resulted in the assumption of jurisdiction by the competent authority to seize essential commodities and initiate proceedings under Section 6A of the Essential Commodities Act, 1955, and such action cannot be said to be an act without jurisdiction," the court said dismissing the plea.
Title: M/s My Own Eco Energy Private Limited v Union of India & Ors.
Citation: 2025 LiveLaw (Raj) 226