THE HONBLE SRI JUSTICE RAMESH RANGANATHAN
WRIT PETITION NO.39390 OF 2012
28-01-2015
Independent Gas based Power Producers Association, a society registered under
the Societies Registration Act, 1860 represented by its Secretary & Authorised
representative B. Ramesh Babu. .Petitioner
Union of India represented by its Secretary and others.Respondents
Counsel for the petitioner: Sri S. Niranjan Reddy
Counsel for respondents:Learned Asst. Solicitor General;
Sri P. Wilson, Learned Senior Counsel; Sri R.
Raghunandan,
Learned Senior Counsel; Sri O. Manohar Reddy,;
<GIST:
>HEAD NOTE:
? Citations:
1) (2010) 7 SCC 1
2) (2011) 5 AIR Bom. R. 60
3) (2006) 4 SCC 385
4) (1984) 1 SCC 668
5) AIR 1957 SC 363
6) 2002) 7 SCC 559
7) (1995) 1 SCC 85
8) (2011) DLT 700
9) (1999) 4 SCC 149
10) AIR 1916 PC 78
11) (1974) 2 SCC 151: AIR 1974 SC 749
12) (2000) 3 SCC 350
13) AIR 1965 SC 948
14) AIR 1976 SC 1569
15) (1824) 2 B&C 883: 107 ER 610
16) (1956) 1 WLR 289 WLR at p. 297 (PC)
17) (1952) 2 All ER 767, All ER 771
18) (1939) 62 CLR 464, 553 (Aus HC)
19) AIR 1938 Lah 571
20) (1998) 6 SCC 507
21) (1992) 4 SCC 683
22) (1937) 2 All E.R. 646
23) (1985) 3 SCC 545
24) [1959] Supp. 1 S.C.R. 528 = AIR 1959 SC 149
25) (2000) 3 SCC 588
26) (2007) 6 SCC 120
27) (2004) 7 SCC 166
28) (1998) 7 SCC 66
29) (2003) 5 SCC 437
30) (1993) 1 SCC 71
31) [1990 (64) Australian LJR 327
32) (2005) 13 SCC 287
33) 1992 Supp.(1) SCC 548
34) (1982) 1 SCC 271
35) (2012) 2 SCC 542
36) (1989) 4 SCC 187
37) Judgment in WP (PIL) No.47 of 2011 dated 25.07.2012
38) AIR 1966 SC 334
39) AIR 1962 SC 1210
40) AIR 1973 SC 964
41) (1977) 4 SCC 145
42) (2000) 6 SCC 608
43) 1992 Suppl (1) SCC 323
44) (1986) 2 SCC 68
45) (2007) 8 SCC 418
46) (2011) 13 SCC 383
47) (2000) 10 SCC 664
48) (2002) 2 SCC 333
49) 57 l Ed 730: 228 US 61 (1912)
50) (1986) 4 SCC 566
51) (1974) 1 SCC 19 = AIR 1974 SC 1
52) (2012) 10 SCC 1
53) (1981) 4 SCC 675
54) (2011) 7 SCC 639
55) (1970) 1 SCC 248)
56) (2011) 1 SCC 640
57) 320 US 591, 602 (1944)
58) 311 US 570-577, 85 L. ed. 358,362
59) (1984) 3 SCC 465
60) (1992) 2 SCC 343
61) (1978) 3 SCC 459
62) (2012) 3 SCC 1
63) (1991) 3 SCC 11
64) (1996) 5 SCC 268
65) (1980) 3 SCC 97
66) (2008) 2 SCC 672
67) (2012) 6 SCC 502
68) (1989) Suppl.(2) SCC 364
69) (1990) 3 SCC 223
70) (1996) 10 SCC 304
71) (2005) 13 SCC 495
72) (2006) 4 SCC 162
73) (2007) 8 SCC 1
74) (2006) 10 SCC 1
75) (1898) 2 QB 91
76) (1948) 1 KB 223
77) (1965) AC 735
78) (1962) 1 QB 340
79) [1978] 1 SCC 248
80) (1994) 2 SCC 691
81) (2003) 5 SCC 437
82) (1991) 3 SCC 91: AIR 1991 SC 1153
83) (2012) 10 SCC 352
84) (2004) 4 SCC 489
85) (2006) 3 SCC 549
86) (1997) 1 SCC 388
87) 33 Cali 419
88) 1979 (3) SCC 489
89) (1983) 1 SCC 305
90) (1981) 1 SCC 722
91) (1994) 6 SCC 349
92) AIR 1968 SC 1099
93) AIR 1958 SC 538
94) AIR 1955 SC 191
95) AIR 1956 SC 479
96) 1952 SCR 284
97) (1997) 9 SCC 495
98) (1997) 1 WLR 906
99) (1999) 4 SCC 727
100) (1994) 1 WLR 74
101) AIR 1967 SC 839
102) (2002) 3 SCC 302
103) (2002) 4 SCC 539
104) (2014) 8 SCC 390
105) (1974) 4 SCC 428
106) 1989 Suppl. (1) SCC 116
107) (1994) 3 SCC 569
108) (2004) 3 SCC 609
109) (2010) 3 SCC 314
110) (2011) 2 SCC 575
111) AIR 1990 SC 933
112) AIR 1965 SC 101
113) AIR 1959 SC 459
114) AIR 1952 SC 326
115) AIR 1953 SC 148
116) (1980) 2 SCC 593
117) (1972) 3 SCC 717
118) (1972) 2 SCC 594
119) (1977) 4 SCC 193
120) (1986) 3 SCC 50
121) (2008) 1 SCC 683
122) (2006) 2 SCC 670
123) (2007) 6 SCC 805
124) AIR 1988 (AP) 144
125) (1981) 4 SCC 335
126) (2002) 10 SCC 226
THE HONBLE SRI JUSTICE RAMESH RANGANATHAN
WPMP NO.40245 OF 2013
IN/AND
WRIT PETITION No.39390 OF 2012
ORDER:
The reliefs sought for in this Writ Petition are (i) to direct
respondents 1 & 2 to frame a comprehensive policy / bring a
suitable legislation with regard to energy security of India and
supply of natural gas under NELP as per the directions of the
Hon'ble Supreme Court in Reliance Natural Resources Ltd. v.
Reliance Industries Ltd., ; (ii) to direct respondents 1 & 2 to
modify the EGoM decision dated 24.02.2012 so as to enable supply
of gas to gas based power plants of the members of petitioner on
priority over other consumers of gas in the KG basin, at least till
such time LNG terminals are set up in the east coast of the
country, to enable supply of generated power to the AP DISCOMS;
and (iii) to further direct the 1st respondent to supply 19.72
MMSCMD of Natural Gas from the KG-D6 gas fields, or from any
other source in the KG basin, to the aggrieved independent power
producers (members of the petitioner as listed in Annexure P-2), to
enable them to generate their respective power plants to their full
capacity and supply power to the AP DISCOMS.
When this Writ Petition was pending adjudication before this
Court the Empowered Group of Ministers (EGoM for short)
meetings took place on 17.07.2013 and 23.08.2013, and a policy
decision was taken by the EGoM on 23.08.2013. Thereafter the
petitioners filed an application seeking amendment of the second
prayer in the Writ Petition.
The amended relief sought for is -
"to direct respondents 1 & 2 to modify the EGoM decision dated 24.02.2012,
and the consequent EGOM decision including those dated 17.07.2013 &
23.08.2013 so as to enable supply of gas to gas based power plants in KG
basin of the members of Petitioner on priority over other consumers of Gas in
KG basin at least till such time LNG terminals are set up in the east coast of
the country to supply generated power to AP DISCOMS".
The first petitioner is a society, registered under the Societies
Registration Act, 1860, established for promoting and safeguarding
the common interests of gas based Independent Power Producers
(IPPs for short) located in the KG basin in the State of Andhra
Pradesh. The 2nd petitioner, M/s. GMR Vemagiri Power Generation
Limited, is an IPP and the 3rd petitioner is the authorised signatory
of the 2nd petitioner. The petitioners are aggrieved by the failure of
respondents 1 and 2 in responding to their various representations
for a fair and equitable distribution of gas to operate their power
plants which has resulted not only in their assets, worth more
than Rs.30,000 crores, being rendered idle but also in loss of
generation of electricity.
Respondents 1 and 2 are responsible for allocation and
supply of gas from the KG basin to various sectors/consumers like
power, fertilisers, steel, domestic use etc. The 3rd respondent is
the Government of A.P. Respondents 4 to 7 are the State owned
distribution licencees in the State of A.P. (DISCOMS for short)
which had signed long term Power Purchase Agreements (PPAs)
with the members of the first petitioner association. The 8th
respondent is the co-ordination committee formed by the
Government of A.P to co-ordinate procurement of power by the
State owned DISCOMS. The 9th respondent is the Chambers of
Commerce, a society representing large, medium and small scale
industries in the State of A.P. The 10th respondent is Nagarjuna
Fertilisers and Chemicals Limited, a public limited company
manufacturing fertilisers. The 11th respondent, a non-profit and
non-trading company registered under the Companies Act, is an
association of fertiliser manufacturing units.
The Government of India framed a policy, by its resolution
dated 22.10.1991, to encourage participation of privately owned
enterprises in the field of electricity generation, supply and
distribution. While, conventionally, electricity is generated through
hydro and thermal power plants, some of the thermal plants use
natural gas as an input for producing electricity. Indigenously
produced natural gas can be divided, based on the pricing
mechanism, into four major categories, namely: (i) Administered
Pricing Mechanism (APM) from nominated blocks of Oil and
Natural Gas Corporation (in short ONGC) and Oil India Ltd. (in
short OIL); (ii) non-APM gas produced from new fields of
nominated blocks; (iii) natural gas produced from pre New
Exploration Licensing policy (for short pre-NELP) blocks; and (iv)
natural gas produced from New Exploration Licensing Policy (for
short NELP) blocks. In addition, Liquefied Natural Gas (LNG) is
imported from abroad. All gases are chemically, predominantly,
methane with a small but varying proportion of higher carbon
fractions such as ethane and propane.
Upto the early 90s, i.e., prior to NELP and pre-NELP regime,
natural gas was produced only from fields operated by government
companies, namely, ONGC and OIL out of blocks which were given
to them by the Government on nomination basis, and thereby the
Governments power to regulate the natural gas sector was
absolute. (Reliance Natural Resources Ltd.1). Considering
natural gas as a premium source of fuel and feedstock with a
variety of competing demands, the Ministry of Petroleum and
Natural Gas (MoPNG for short) in the year 1990, formulated the
natural gas use policy. For effective and efficient utilization of
natural gas, the production potential/ availability of natural gas
from various regions was taken into consideration. The potential
demand of natural gas from various sectors, such as Fertilizer,
Power, Sponge Iron, LPG, Industrial use, petro-chemicals, etc. was
also taken into consideration. In order to rationalise allocation of
gas, the Government of India constituted the Gas Linkage
Committee (Committee of Secretaries) in July, 1991. This
Committee was represented by the various user departments
namely, power, fertiliser, steel, chemicals and petrochemicals and
representatives from the Planning Commission, department of
Economic Affairs, department of Expenditure (Ministry of Finance)
and three national oil and gas companies, namely, GAIL, ONGC
and OIL. This committee, headed by the Secretary, Petroleum and
Natural Gas, was entrusted with the following responsibilities (a)
to periodically review the progress of implementation of upstream
and downstream projects for utilization of natural gas to ensure
maximum and timely synchronization of these facilities; (b) to
consider and recommend requests for allocation of natural gas,
including its fractions, by downstream consumers keeping in view
the objective of ensuring that the allocation of gas, to downstream
users, is economically efficient; (c) to monitor the progress of
downstream units to whom gas has been allocated, and make
recommendations regarding cancellation or otherwise of gas
allocations to downstream units the progress of implementation of
which was not satisfactory.
Considering the demand, availability and imputed
economic value of natural gas in various sectors, the Gas
Linkage Committee allocated natural gas to various sectors on a
'firm basis' to ensure that the available gas, and that which was
projected to be available, was fully utilized. Circumstances, such
as when all the consumers with firm allocations were unable to
draw their full quantity leading to a temporary surplus of gas
availability in the system which, in turn, required such surplus
gas available to be used from to time to time, necessitated
allocation of gas on a "fallback - as and when available basis", as a
contingency measure, to ensure optimal utilization of gas.
Priority for supply, against such fallback allocations, was given
only after meeting the requirement of consumers with firm
allocations. There were a few isolated fields whose life was
short and uncertain. In order to utilize the gas available from
such fields, even for short durations, gas was allocated on a
fallback basis, and the consumers were not given any long term
commitment. There were certain gas wells yielding only low pressure
gas for a short term which was required to be compressed before
being put to use in the pipeline system. Such low pressure gas was
also made available on a fallback basis without any long term
commitment.
Subsequently with the availability of APM gas in the country
falling far short of the demand, and the production projected to
decline further in future, no useful role was envisaged for the Gas
Linkage Committee in making gas allocations and, as a result, the
Government wound up the Gas Linkage Committee on November
9, 2005. No APM gas has been allocated since then. Non-APM gas
is any gas discovered from new fields of the nominated blocks.
In the year 2010, the Central Government formulated 'guidelines
for commercial utilization for non-APM gas' with the following
sectoral priority:- (i) gas-based fertilizers plants; (ii) LPG plants; (iii)
Power plants supplying to the grid; (iv) city gas distribution systems
for domestic and transport sectors; (v) steel, refineries &
petrochemicals plants for feedstock purposes; (vi) city gas
distribution systems for industrial & commercial customers; and
(vii) any other customers for captive & merchant power, feedstock
or fuel purposes. No reservation of gas was envisaged for any
sector, and it was allotted to those who were ready to utilize gas at
the time of allotment.
As exploration and production was at the core of energy
security, it was decided to open the gas fields to private sector
investment. (Reliance Natural Resources Ltd.1). During the
mid-1990s, known as the pre-NELP years, private investment was
sought on competition basis and certain blocks were awarded
under a production-sharing contract. Pre-NELP gas is the gas
produced from pre-NELP blocks which is sold by the contractors
in accordance with the provisions of the production sharing
contracts entered into between the Government and the
producers. The pre-NELP regime was further improved to the
NELP regime. New sources of gas were discovered under the NELP
regime and, after its advent, production of indigenous gas
increased substantially. The production from KG-D6 block
under NELP was envisaged at the level of 60 MMSCMD.
Sourcing of investment, technology and efficient operations from
companies within the country and from outside, on a level playing
field with domestic public sector companies, was the main feature
of the NELP regime. (Reliance Natural Resources Ltd.1).
The Executive of the Union of India enjoys constitutional
powers, under Article 73 and Article 77(3) of the Constitution, to
fulfil the objectives of the Directive Principles of State Policy
relating to the distribution of natural gas which is a material
resource under Article 39(b) thereof, including acquisition of
privately owned material resources. Natural gas continues to be
the property of the Government of India till it reaches the delivery
point, and cannot be disposed of without its express approval.
(Reliance Natural Resources Ltd.1). The EGoM was constituted
in August, 2007 under the business rules framed under Article
77(3), and its decisions are treated as the decisions of the union
cabinet itself. It is a policy decision of the government, and has the
force of law since the field is not occupied by parliamentary
legislation. (Reliance Natural Resources Ltd.1). The EGoM was
constituted to examine disputes relating to pricing and commercial
utilisation of gas under the NELP regime. In the EGoM meeting
held on 23.05.2008 the Central Government formulated a gas
utilisation policy which was made applicable only to the gas
available under the NELP regime, and not for gas produced from
the pre-NELP/APM/Non-APM regimes. The gas utilisation policy
empowered the Central Government to regulate and distribute
natural gas through allotments and allocation which would
subserve the best interests of the country. (Reliance Natural
Resources Ltd.1).
In addition to the affidavit filed in support of the Writ
Petition, the petitioners have filed affidavits/rejoinder affidavits on
20.12.2012, January 2013, 16.02.2013, 22.03.2013, August 2013,
10.10.2013, 11.11.2013, 26.11.2013, and 24.01.2014. Besides
the counter-affidavit filed in reply to the main Writ Petition,
additional affidavits/counter-affidavits have been filed on behalf of
respondents 1 and 2 on 11.02.2013, 12.03.2013, 14.04.2013,
September 2013, 09.11.2013, 25.11.2013, 28.11.2013,
03.12.2013, and 24.10.2014. Counter-affidavits have also been
filed on behalf of the 3rd respondent and respondents 4 to 8
supporting the petitioners claim that natural gas from the KG-D6
basin should be supplied to power plants in Andhra Pradesh in
preference to all other sectors including fertilizers. A counter-
affidavit is filed on behalf of respondents 10 and 11 supporting the
stand of respondents 1 and 2, and opposing grant of any relief to
the petitioners.
The petitioners case, in short, is that non-allocation of gas to
power projects in the State of Andhra Pradesh has rendered
Rs.30,000 crores worth investment, in these power projects, idle,
making these assets non-performing; allocation of gas from the KG
basin to power plants and fertilizer plants in the west coast of the
country, although such plants have access to alternative sources of
fuels and the necessary infrastructure therefor in terms of LNG
terminals, is arbitrary; allocation of gas to the fertilizer sector, in
preference to the power sector, is contrary to the National
Electricity Policy framed under the Electricity Act, 2003; the
Government of India should take a comprehensive view of the
changing needs and precarious gas availability, and accord top
priority to gas based power projects in the KG basin ahead of the
fertiliser projects, and power projects outside the State of Andhra
Pradesh, as the southern region is facing a severe power deficit;
gas based power offers substantial environmental benefits, it
requires just 1/10th of the land area as compared to coal, its water
requirements are much lower, and it is 20% more efficient;
fertiliser manufacturing units can use other fuels apart from
natural gas, and can also import gas from abroad; failure to ensure
a level playing field, to gas based IPPs in the KG basin, is in
violation of Articles 14 and 19(1)(g) of the Constitution of India; in
2009, when availability of KG-D6 gas was projected to be in
abundance, the fertilizer sector was accorded top priority in
allocation of gas from KG-D6 fields; the same priorities continued
even though gas production from the KG basin drastically reduced;
as a result of the failure of EGoM, to review the gas utilisation
policy, the fertiliser plants in North and West India are receiving
near full supplies of gas and the IPPs in Andhra Pradesh, which
have been deprived of the requisite gas supplies, face closure; this
would not only result in thousands of people losing employment
but would also affect the general public and farmers in terms of
long power cuts.
The petitioners would also contend that the adhoc method
of reverse priority amongst the core sector, for supply of gas from
the KG basin, prescribed by the MoPNG by proceedings dated
30.03.2011, has caused prejudice and injustice to members of the
petitioner-association; the contention, that not according first
priority to fertilizers would result in a subsidy burden estimated to
be around Rs.70,000 crores, is not correct; the Government of
India, as the custodian of scarce natural resources like natural
gas, is required to balance various public interests, and take a fair
and equitable decision; gas can be imported and supplied to the
fertilizer plants located in the west coast; the policy decision of the
Government of India has failed to provide equal treatment to all
stakeholders, and a level playing field; as an alternative to its
indigenous production, fertilizer can be imported; however there is
very little scope for import of electricity; electricity cannot be
generated in the east coast by using imported gas, as there is no
LNG terminal presently available thereat; production of electricity,
by use of imported gas, is not economical; the public debt of IPPs
in the State of Andhra Pradesh is to the tune of Rs.30,000 crores,
and the unutilized capacity in generation of power is 7000 mega
watts; there is a need to pool all domestically available gas for its
rational and optimum utilization, after taking into consideration
regional and sectoral imbalances; gas-based power plants, in North
and West India, were set up either as dual fuel-based power plants
or relying on gas from other sources including LNG terminals; all
KG-D6 gas cuts have been borne only by the power sector, and the
fertilizer sector is largely left untouched; this has resulted in
inequitable distribution; prior to March, 2011, MoPNG had
stipulated, as was the practice for APM gas, cuts to be enforced on
a pro-rata basis for NELP gas also; this was subsequently changed,
and cuts have been stipulated on a reverse priority basis with the
first to be affected being the power sector; even today, in the case
of APM gas, cuts are imposed on a pro-rata basis; there is no
change in the priority of usage of non-KG-D6 gas because of
reduction of supply from KG D6 gas fields; the reduction in gas
supplies is more from KG-D6, as compared to non-KG-D6 sources;
the east coast power plants have no access to gas from Bombay
High, Hazira and the North East; as all the Regasified Liquid
Natural Gas (RNLG for short) terminals are located in the west
coast, RNLG is being imported and supplied to plants in the
western and northern states; and the respondents have failed to
periodically evaluate the current system of distribution of natural
gas, and in balancing equities between different regions.
The petitioners would further submit that the reverse cut
introduced in March, 2011, when gas production in KG-D6 was 40
MMSCMD, needed immediate and periodic review after a fall in gas
production from the year 2012; both the Writ Petitions before the
Bombay and Delhi High Courts were filed by applicants belonging
to the steel sector which is a non-core sector; the non-core sectors
were entitled to gas allocation only when the gas production
exceeded 40 MMSCMD, that too after the demands of the core
sectors were met; the petitioners before the Bombay and Delhi
High Courts were aggrieved by the allocation of gas to the core
sectors in priority over other industries; the Bombay and Delhi
High Courts upheld the validity of the classification of core and
non-core sectors in prioritising supply of natural gas; the issue of
reservation/priority within the core sector was neither raised nor
decided in those cases; at no point of time, prior to 30.03.2011,
had the EGoM prescribed the application of reverse cut within the
four core-sectors; even after the EGoM meeting held on
23.08.2013, there is no change in the policy decision regarding
allocation of gas; relevant material was not considered before the
EGoM took the decision; the earlier decision to discriminate
against the power sector, and accord priority to the fertilizer sector,
continues; the changed circumstances were not taken into
account, before arriving at the present decision to maintain the
level of supplies of domestic gas to the fertilizer sector at 31.5
MMSCMD, before allocating gas to the power sector; there is no
rational basis for the EGoM decision to prioritize the fertilizer
sector over the power sector; when gas production from KG D6
reached its optimum level during 2009-10, allocation to the
fertilizer sector was 15.7 MMSCMD; this was continued arbitrarily
despite there being a drastic reduction in supply from KG D6; the
first respondent failed to bring the various representations,
submitted by the petitioners to the EGoM, MoP, MoPNG and the
Prime Minister, to the notice of the EGoM; the EGoM has not
considered the projected availability of gas for the years 2013 to
2016; in the absence of information, regarding the projected
estimated availability of KG-D6 gas, the proposed supply of
additional gas (which is subject to availability of gas from the KG
D6 field) is merely an eye wash; the portability factor, affecting
transportation of gas from the non-KG D6 basin, is only a small
portion of the available gas; from the data downloaded from the
website-www.indianpetro.com, which is a news information and
market intelligence provider in Indian oil, gas, power and fertilizer
sectors, it is evident that, from out of 92.76 MMSCMD of available
gas supplied during 2012-13, 81.6 MMSCMD is connected to the
grid, and only 11.16 MMSCMD is not connected; from out of the
total APM and non-APM gas supply of 55.62 MMSCMD, 44.46
MMSCMD is connected to the grid; and the petitioners have been
repeatedly contending before this Court that the portability factor,
affecting transportation of gas from non-KG D6 basin to the KG-D6
basin, is only a small portion of the available gas.
The case of respondents 1 and 2, in brief, is that the Union
of India is empowered to take policy decisions on allocation and
pricing of natural gas; it is entitled to utilize and distribute gas
keeping in view the best interests of the country and the public at
large; the only question before this Court is whether the policy
decision is arbitrary, unjust, in violation of the fundamental rights
under the Constitution or in violation of any statutory right; the
sectoral priority, for allocation of domestic gas, was formulated to
serve larger public interest; the consumption of urea in the country
is 58 million metric tonnes of which 18 million metric tonnes is
produced from domestic natural gas, and 4 million metric tonnes
from LNG; the price of fertilizer is directly and predominantly
determined by the price of gas; one MMSCMD of gas enables
production of around 0.5 MMTPA of urea benefitting millions of
farmers which, if not produced domestically, will have to be
imported at a much higher cost or will have to be produced at a
higher price through RLNG, and then subsidized through the
Union Budget; the annual subsidy on fertilizers ranges between
Rs.60,000 to 70,000 Crores; fertilizer is sold below cost price, and
the entire subsidy burden is borne by the Central Government;
priority to the fertilizer sector fulfils the twin objectives of self-
sufficiency in fertilizers and a lower subsidy burden; domestic LPG
is a subsidized product in which the country is not self-sufficient;
any disruption in supplies of LPG would lead to a public outcry;
the power sector has been given high priority next only to the
fertilizer and LPG sectors; even from the KG-D6 gas, 18 MMSCMD
was allocated to the power sector; as this was not sufficient to
meet the requirements of the power sector, the EGoM decided that
any additional gas would be given to the power sector and, with
increase in production of KG-D6 gas, the allocation to the power
sector was increased to 32 MMSCMD; both compressed natural
gas (CNG) and piped natural gas (PNG) are safer than the presently
used fuels; hence priority was given to the transport and domestic
segments of city gas distribution (CGD) projects; the
industrial/commercial sectors were kept out of priority; within the
four core sectors, CGD (transport and domestic) has been accorded
priority after fertilizer, LPG and power as the end price of CNG and
PNG, by virtue of an increase in the input price of gas, is being
passed on to the consumers; other sectors, such as steel, petro
chemicals, refineries etc have been placed after the CGD (CNG &
PNG) sector as they are in a position to respond to the market
prices of inputs; the policy decision of the Government, endorsed
by the EGoM, has been judicially tested and approved by the
Bombay and Delhi High Courts; the discretion exercised by the
Government of India, in allocation and allotment of gas, is in
public interest and is in accordance with the standards and norms
laid down under the policy and guidelines prescribed by the EGoM
for NELP gas; sectoral priority has been applied even during a fall
in production; the order of the MoPNG dated 30.03.2011 was
informed to the EGoM in its meeting held on 24.02.2012; the
principle underlying these decisions is that a lower priority sector
should face a cut prior to a higher priority sector; though the
RGPPL plant was accorded priority, equivalent to the fertilizer
sector by the EGoM, this decision was kept in abeyance, and
supply of gas to the Ratnagiri Gas Power Plant Limited Dabhol
Power Project (RGPPL for short) is being made on par with the
power sector; the Union of India has not allocated gas to public
sector power plants at the cost of private sector power plants; the
gas utilization policy does not advocate reservation of gas; gas,
being a national asset, has to be allocated on the basis of a
national policy; sufficient imported gas is available as RLNG which
can be procured by the petitioners for running their power plants;
non-APM gas allocation is made to meet the shortfall in APM
allocation followed by new demands in accordance with the
sectoral priority, beginning with the region to which the source of
gas belongs; within a sector, after meeting the shortfall in the
region to which a source of gas belongs, the shortfall of that sector
in other regions is to be met before meeting the new demands from
that sector followed by a shortfall or new demands of the sectors
next in priority; and, at the request of the Government of Andhra
Pradesh, respondents 1 and 2 had allowed swapping of RLNG with
KG-D6 gas for supply to the IPPs in the State of Andhra Pradesh.
According to respondents 1 and 2, the production of gas in
the KG D6 basin reached its peak of 60 MMSCMD in March, 2010
and, thereafter, the production has decreased steadily; gas
production in KG-D6 has fallen so much, that now gas is supplied
only to the fertilizer and LPG sectors, and cuts are being imposed,
in accordance with the same order dated 30.03.2011, on the power
sector; the power producers were also parties to the Writ Petitions
before the Bombay and Delhi High Courts in which the sectors,
below the power sector, had challenged the validity of the MoPNG
order dated 30.03.2011; the power sector had then supported the
order of the Government; the members of the petitioner-association
were agreeable to the authority of the MoPNG to issue the order
dated 30.03.2011, and had never challenged the said order until
the cut order affected them; 20% - 30% of the total urea consumed
in the country is imported, and self-sufficiency can only be
achieved if supply of domestic natural gas, for domestic urea units,
is ensured; the cost of production of urea on R-LNG is even more
than the imported price of urea; the issues which are now sought
to be raised in this Writ Petition have already been raised and, in
any event, could have been raised in the Writ Petitions filed by
Essar Steel Limited and Welspun Maxsteel Limited before the Delhi
and Bombay High Courts; the petitioners herein had supported the
stand of the Central Government in those writ petitions, and have
benefitted thereby; it is not true to state that power plants in the
State of Andhra Pradesh have no access to RLNG; the domestic
gas, available from all sources, cannot be considered as a single
basket as gas produced from all fields cannot be transported to all
consumers in the country due to technical limitations such as the
source of gas, lack of pipeline connectivity etc; gas based power
plants were established without any commitment from the
respondents that additional gas would be allocated to them; they
have taken an unavoidable business risk, along with a
corresponding risk-return profile inherent in any business; and the
respondents cannot be called upon to reduce the petitioners risks
or to improve their returns.
Respondents 1 and 2 would submit that supply from various
domestic sources, and imported R-LNG, has been factored in by
the EGoM while allocating KG-D6 gas to power plants to enable
them to operate at a specified PLF; urea fertiliser plants and LPG
sell their products at controlled rates, and the government has a
huge subsidy burden which will be substantially higher if RLNG is
used instead; the gas produced anywhere in the country must be
utilised as per the sectorial policy; the EGoM has been kept
informed about the decline in production, and has rightly deemed
it not fit to revise its policy against this decline; due to a drastic fall
in supplies, gas is now supplied only to the fertiliser/LPG sectors;
the power sector continued to get gas preferentially till January,
2013 i.e., for a period of around two years by diversion of gas from
sectors lower than them in priority; the petitioners never objected
to the principle of reverse priority cut till they were adversely
affected; the petitioners cannot approbate and reprobate; APM and
non-APM gas cannot be compared with KG-D6 gas; the latter is
produced from a single geographical location situated in AP,
whereas the former is produced from many blocks scattered over
many States viz., Gujarat, Maharashtra, Rajasthan, Andhra
Pradesh, Tamil Nadu, Assam, Tripura etc; the gas available from
KG-D6 is transported through a major single pipeline i.e., the east-
west pipeline which has connectivity with the gas grid for
distribution of gas in Andhra Pradesh, and connectivity with GSPC
and GAILs pipeline network in the western and northern parts of
the country; as APM gas is produced in around 100 scattered fields
it has, historically, been distributed locally due to pipeline
constraints and due to the isolated nature of its pipeline network;
APM gas, produced from some blocks in Gujarat and Andhra
Pradesh, cannot be transported to other parts of the country as
these blocks also do not have connectivity with major pipelines; the
APM gas and KG-D6 gas are completely different classes, and are
not equal; reverse cuts are feasible only in the KG-D6 basin as it is
a large single source of gas; even in the case of APM allocations to
various consumers, the future allocation made against reduction
in production of APM gas are as per the allocation priority, thereby
effectively achieving a near reverse cut regime; the development
of R-LNG terminals depend on the demand and supply situation in
a particular area, and pipeline connectivity with the demand
centre; majority of the LNG terminals were constructed before
availability of gas in the KG-D6 basin; respondents 1 and 2 have
always facilitated swapping of RLNG to ensure supply of gas to the
power plants in Andhra Pradesh by issuing necessary guidelines
and instructions; and the respondents do not have any say in the
sale and purchase of R-LNG as it is freely traded in the market.
Respondents 1 and 2 would further submit that the people of
the entire country have a stake in natural gas, and its benefit has
to be shared by the whole country; if one State alone is allowed to
extract and use natural gas, then the other States would be
deprived of their equitable share; the gas utilisation policy is not
static, but is evolving over a period of time; the reverse priority cut
order is based on the strong rationale of facilitating gas availability
to the core sectors; the reverse priority cut order has, in fact,
improved the supply of KG-D6 gas to the core sectors at the
expense of supply to the non-core sectors; the petitioners have
been the beneficiary of this policy decision taken in supervening
public interest; the principle of level playing field and promoting
competition has been upheld; the note placed by the MoPNG before
the EGoM, in its meeting held on 23.08.2013, contained the views
of both the Ministry of Power and the Ministry of Fertilizers; the
Minister of Power and the Minister of Fertilizers were members of
the EGoM along with other Ministers; the EGoM arrived at a
decision to maintain supplies of domestic gas to the fertilizer sector
at 31.5 MMSCMD, i.e the level of average supply of domestic gas to
the fertilizer sector during 2012-13, and give the sector first
priority in meeting the requirements of any shortfall below the level
of 31.5 MMSCMD from any additional production of NELP gas; it
was further decided that the entire additional NELP gas production
available during the years 2013-14, 2013-14 and 2015-16, after
meeting the supply level of 31.5 MMSCMD to the fertilizer sector,
should be supplied to the power sector; the EGoM has taken a
conscious decision to give the fertilizer sector first priority, and
maintain supplies of domestic gas to the fertilizer sector at the level
of 31.5 MMSCMD; the decision to allocate NELP gas was taken by
EGoM after considering the views of both the Ministry of Power and
the Department of Fertilizers; as against the allocation of 54.18
MMSCMD of domestic gas, the average supply of domestic gas to
the fertilizer sector in the year 2012-13 was 31.5 MMSCMD; the
EGoM noted the concerns of the power sector and, accordingly, put
a cap on the supply of domestic gas to the fertilizer sector at the
level of 31.5 MMSCMD; though two meetings of the EGoM were
held on 17.07.2013 and 23.08.2013, a final decision, regarding
inter-se sectoral priority in supply of NELP gas, was taken by the
EGoM in the meeting held on 23.08.2013; while framing the policy
on gas pricing and commercial utilization of NELP gas, all relevant
factors were taken into consideration by the EGoM; the decision
regarding utilization of natural gas does not suffer from any legal
or constitutional infirmities, and is binding on all the parties; and
the projected gas availability from all categories of domestic gas,
envisaged during the XII Plan period (2012-2017), was placed
before the EGoM which took note of the same before taking a
decision in its meeting held on 23.08.2013.
Respondents 1 and 2 would also submit that the present
total allocation of domestic gas to the fertilizer sector is 54.18
MMSCMD out of which 32.64 MMSCMD is from APM, 2.85
MMSCMD from Pre-NELP, 3.02 MMSCMD from non-APM, and
15.67 MMSCMD from NELP (KG D6); in the year 2012-13, the
fertilizer sector was supplied 31.5 MMSCMD of domestic gas which
included 14.43 MMSCMD of gas from KG D6; the order of MoPNG
dated 30.03.2011 implies that supply from KG D6 would be first
utilized to meet the requirement of the fertilizer sector upto their
total allocation from KG D6 (at present 15.67 MMSCMD) and,
thereafter, any additional production from KG-D6 would be
supplied to the LPG sector, then to the power sector, and then to
the CGD sector for CNG (transport) and PNG (domestic); supply of
NELP gas to the non-priority sector is to be made only after the
requirements of the core/priority sectors are met upto their full
allocation; supply to the fertilizer sector from KG D6, prior to the
decision of EGoM dated 23.08.2013, was limited by the total
allocation from the KG D6 basin to the fertilizer sector (at present
15.67 MMSCMD); however, after the decision of the EGoM dated
23.08.2013, another limit has been imposed and the total supply
of domestic gas (NELP gas plus other domestic gases) to the
fertilizer sector would remain limited to 31.5 MMSCMD against the
total allocation of 54.18 MMSCMD; this implies that if the
requirement of 31.5 MMSCMD is met, even before exhausting the
full allocation of NELP gas to the fertilizer sector, supply from
NELP gas would be restricted to that level; to comply with the
decision of the EGoM dated 23.08.2013 any shortfall, below 31.5
MMSCMD, to the fertilizer sector would be met from the additional
production of NELP gas only to the extent of allocation of NELP gas
to the fertilizer sector of 31.5 MMSCMD; the report down loaded
from the website-www.indianpetro.com is incorrect, its authenticity
is doubtful, and cannot be relied upon; during the period April to
June, 2014, the average domestic gas supplied by various
marketers was 79.48 MMSCMD; while gas from the KG D6 basin
was 12.79 MMSCMD, the non-NELP gas supplied was 66.69
MMSCMD; the entire KG D6 gas was being supplied to the fertilizer
sector, and a part thereof has been utilized for operation of the
East West pipeline; gas is being supplied by several suppliers as
per the provisions of the production sharing agreements, and the
Government has no role to play in the distribution of gas of an
extent of 0.82 MMSCMD; an extent of 0.42 MMSCMD of gas is
being supplied by ONGC, Essar and CEECL from their respective
CBM blocks, and they are not connected to any major inter-state
pipeline grid; this quantity cannot be considered for diversion; an
extent of 2.45 MMSCMD and 5.4 MMSCMD of domestic gas is
directly marketed by ONGC and OIL; these fields are isolated in
nature and cannot be considered for diversion; GAIL is the only
marketeer supplying gas through both the regional and the inter-
state pipeline networks; GAIL supplied 57.62 MMSCMD of
domestic gas during April-June, 2014 out of which 48.88
MMSCMD was to the core sector and 9.14 MMSCMD to the non-
core sector; and, from out of the 9.4 MMSCMD of domestic gas
supplied, 6.48 MMSCMD of gas cannot be diverted to the core
sector because of various factors, including compliance with the
order of the Supreme Court dated 30.12.1996.
Though the Learned Assistant Solicitor General, during the
course of hearing on 24.01.2014, had stated that the respondents
would make available, in the counter-affidavit filed by them, details
of the extent to which gas available in the non-KG D6 basins is
affected by the portability factor, the counter-affidavit filed
thereafter makes no mention of the extent of gas, available in the
non-KG D6 basins, which is affected by the portability factor.
Again, during the course of hearing on 19.09.2014, the Learned
Central Government Standing Counsel sought time to obtain
instructions regarding the extent to which gas available in the non-
KG-D6 basin is affected by the portability factor. Despite repeated
directions, the respondents have not furnished the said
information sought for by this Court.
In the counter-affidavit, filed on behalf of the Government of
A.P, it is stated that eight independent power producers are
supplying power to A.P. Discoms under long term power purchase
agreements; the combined installed capacity of all these projects is
2770 MW; during 1997, these IPPs were selected through
competitive bidding with fuel as naptha/furnace oil; due to the
steep hike in the price of naptha, and due to non-achievement of
financial closure by some of the IPPs, the Government of A.P.
negotiated with the IPPs and permitted their projects to be
operated mainly on natural gas; the Andhra Pradesh Electricity
Regulation Commission, based on the assurances given by MoPNG,
GAIL and ONGC, gave consent to the IPPs, during April 2003, to
use natural gas as the primary fuel; from 2003-2004 onwards
there was a decline in natural gas supplies to AP, and ONGC was
able to supply only 50% of the allocation to four projects; even
though the other projects were ready by 2006, ONGC was not able
to supply any gas to them; the Union Minister for Petroleum and
Natural Gas, by his letter dated 14.12.2004, assured that the total
requirements of the IPPs in AP could be met from the expected
additional availability of gas; there are eleven gas based power
projects in operation, with a total installed capacity of 3356 MW;
the natural gas requirements of these power projects is 15.67
MMSCMD for full generation; new gas based plants, with 3936 MW
capacity, have also come up in the State expecting availability of
natural gas; they are ready for commissioning, and are lying idle
for want of gas; these projects require 19 MMSCMD to make them
functional; the gas allocation to the power sector was zero by
March, 2013; the Government of India was requested to allocate
natural gas from the west coast to the east coast units; no gas was
made available to A.P. projects from other NELP/ONGC blocks in
the west coast, though the East-West pipeline was established; the
power supply position in the State is precarious, mainly because of
unprecedented reduction in KG-D6 gas supplies; due to power
shortage, the maximum power cut is imposed on the industrial
sector and, thereby, the economic activity of the State is severely
affected; the State is being forced to purchase power from the open
market at a high cost to meet power demands in the State; the A.P.
power projects have alone received allocation based on the
availability of gas from the KG basin; the plants located in the
western and northern region were established taking into
consideration other sources of natural gas; these projects also have
access to LNG terminals located in the west coast; to augment
natural gas to AP projects, the Government of India was requested
to allocate natural gas from the west coast to the east coast;
however no gas was made available to A.P. projects, from other
blocks of the west coast, through the East-West pipeline; the
natural gas under APM, produced from the Bombay High and the
North-East to an extent of 45 mmscmd, is being supplied to the
fertiliser and power projects in the western and northern parts of
the country; RLNG, which is being imported and re-gasified in the
LNG terminals situated in the west coast to an extent of 45
mmscmd, is being supplied entirely to the fertilizer and power
projects in the western and northern parts of the country; these
LNG terminals are in an expansion mode and are likely to be
commissioned shortly; these additional capacities would also be
available to projects in the west coast; there is no LNG terminal in
the east coast; though the pipeline, from west to east, has been in
existence from 2007-2008, EGoM has not announced any policy
to provide open access for transporting RLNG from west to east;
the tax dues on transportation have also not been resolved; the
power plants and fertiliser plants, located in the western region,
are operating at comfortable levels since they have multiple
sources of gas whereas AP projects have only one source i.e., the
KG basin; and it would be appropriate to review the gas utilisation
policy, considering the overall availability of natural gas in the
entire country including KG-D6 gas, giving due priority to A.P.
power plants.
The counter-affidavit filed on behalf of the A.P. Power
Distribution Companies, broadly, reiterates what the Government
of Andhra Pradesh has stated in its counter-affidavit. It is further
stated that, based on the expected gas availability for commercial
operation from ONGC G-1 fields from September, 2011, the Union
Minister for Petroleum and Natural Gas was requested to allocate
natural gas from G-1 and G-15 fields of ONGC to the stranded gas
based power projects in A.P. as per the commitments already made
by MoP&NG; the Central Government had, during September,
2011, allocated a meagre quantity of 0.445 MMSCMD of natural
gas from North West fields to the old IPPs in the State of AP; these
gas supplies have also not commenced till date; ONGC has
reported to MoP&NG about additional availability of 6 MMSCMD of
non-APM gas during 2012-13 and 2013-14, from various fields of
the western and G-1 & G-15 blocks in the eastern region, for
allocation of non-APM gas; in view of the dwindling gas supply
from KG-D6 fields, and the severe power crisis in the State, there
is an urgent need to honour the earlier commitments made by the
MoP&NG to supply gas from the KG basin of G-1 and G-15 fields to
the IPPs in the State; and this Court should direct respondents 1
and 2 to allocate 6 MMSCMD of non-APM gas expected from 2012-
13 and 2013-14, from various fields of the Western and G-1 and
G-15 blocks of ONGC in the eastern region, to the A.P. projects so
that these gas based power plants can operate.
In the counter-affidavit filed on behalf of the 10th respondent,
it is stated that, in its meeting held on 23.05.2008, the EGoM
framed a policy giving priority to certain sectors in allocation of
gas; this policy was formulated on the premise that huge reserves
of natural gas was available in the KG basin; in course of time,
production of natural gas in the KG basin has reduced drastically;
as a result, there is a short fall in the supply of gas as against the
allocation made; the EGoM directed that the entire short fall
should be borne by the sector which was given least priority, and
as the short fall increases it has to be borne by the sectors in the
reverse order of priority; there is a short fall or no supply of gas to
the power sector, whereas the fertilizer sector has suffered a cut to
a large extent; it is the petitioners case that any short fall should
be shared amongst all the sectors on the basis of a pro-rata cut,
instead of the reverse cut, and one sector bearing the brunt of the
short fall and, while the short fall under the APM mechanism is
distributed pro-rata over various sectors, the short fall in the NELP
regime is borne only by the power sector; India is the second
largest consumer of fertilizers only after China; as against the 59
million tonnes of fertilisers consumed in 2011-12 at an imported
cost of Rs.24,564 per tonne, the domestic cost of production, using
a mix of domestic and imported gas, is only Rs.11,000 per tonne;
the farmer buys urea at a statutory price of Rs.5,360 per tonne
and the Government bears a subsidy of Rs.5,640 per tonne on
domestic urea; on imported urea the subsidy is Rs.18,640 per
tonne; this has led to a ballooning of the subsidy estimate of
Rs.70,013 crores; any increase in the cost of fertiliser, as a result
of non-availability of gas, will only push up the cost of urea and
fertilisers which will have a cascading effect on the cost of
agriculture; in order to reduce its subsidy burden, the Government
of India directed the fertiliser manufacturing units to dispense with
the use of naptha and change over to natural gas within a period of
three years; it was made clear that units which did not change over
would not receive any subsidy; a committee was constituted to
facilitate connectivity, and supply of gas to non-gas based units;
the petitioners cannot seek a level playing field between different
sectors; the fertiliser companies have received firm allocation from
the Government of India before setting up their fertiliser plants; in
contrast, the allocations sought for by power producing companies
is only after they were established; the policy enunciated by the
Government of India is well considered after taking into account
the huge short fall in actual production against the estimated
production of natural gas; the EGoM formulated the principle of
priority between various sectors; the MoPNG and EGoM have
adhered to these principles; and the minutes of the meetings show
that EGoM was fully aware of the reduction in production.
Before examining the rival contentions, it is necessary to
refer to the decisions taken by the Government of India, from time
to time, regarding priority in allocation of natural gas to various
sectors, more particularly fertilizers and power. Pursuant to the
EGoM meeting held on 28.05.2008, the MoPNG issued a press note
dated 25.06.2008 which reads as under:
The EGoM recognized the fact that supply of natural gas to power
plants would result in utilisation of idle assets and cheaper incremental
cost of power on account of better utilization of existing assets. Gas
based power plants handle peak loads very well and they are also
preferred for environmental considerations.
The production of natural gas from RILs KG D6 field is expected
to commence from September, 2008 and will initially be about 25
mmscmd. It is further expected that the production would gradually
increase to 40 mmscmd by March, 2009. The EGoM decided that this
gas should be supplied in the following order of priority:
a. Existing gas based urea plants, which are now getting gas below their
full requirement, would be supplied gas so as to enable full capacity
utilization.
b. A maximum quantity of 3 mmscmd would be supplied to existing gas
based LPG plants.
c. Up to 18 mmscmd natural gas, being the partial requirement of gas-
based power plants lying idle/under-utilized and likely to be
commissioned during 2008-09, and liquid fuel plants, which are now
running on liquid fuel and could switch over to natural gas, would be
supplied to power plants.
d. A maximum quantity of 5 mmscmd would be made available to City Gas
Distribution projects for supply of Piped Natural Gas (PNG) to
households and Compressed Natural Gas (CNG) in transport sector.
e. Any additional gas available, beyond categories i) to iv) above, would be
supplied to existing gas-based power plants, as their requirement is more
than 18 mmscmd.
In its subsequent meeting held on 23.10.2008, the EGoM
modified its earlier decision dated 28.05.2008 according priority to
RGPPL along with the fertiliser units.
By its letter dated 30.03.2011, the MoPNG directed its NELP
contractors to enforce pro-rata cuts in the supply of natural gas in
the following manner:
Hence, in modification of the direction mentioned in para 1 above,
supply to fertilisers, LPG, power and CGD (domestic and transport)
sectors, apart from the gas needed for operation of EWPL (East-West
Pipeline) should be entirely met upto the firm allocations. In case gas
availability is insufficient to meet the firm demand of these four sectors,
cuts may be applied in the following order: CGD (domestic & transport),
power, LPG, fertilizers. In view of the reduction in KG D6 production, if
there is a shortfall in meeting the firm demand of the remaining sectors,
pro-rata cuts should be imposed on the same.
In its subsequent meeting held on 24.02.2012, EGoM took
note of the fall in production of KG-D6 gas during the period April,
2010 to January, 2012 and the pro-rata cuts imposed by the
MoPNG in its letter dated 12.10.2010 and 30.03.2011. The
minutes of the EGoM meeting dated 24.02.2012 read as under:-
The EGoM considered the note dated 12.01.2012 and
supplementary note dated 16.02.2012 from the Ministry of Petroleum
and Natural Gas (Petroleum aur Prakritik Gas Mantralaya) and while
noting the contents of paragraphs 16(i), 16(v), 16(viii), 16(xi) and 16(xii) of
the main note, and paragraphs 6(i) and 6(ii) of the supplementary note,
approved the proposals contained in paragraphs 16(ii), 16(iii) and 16(x) of
the main note.
1. The EGoM further noted as under:
(i) that M/s.Wellspun and M/s.Essar Steel have filed petitions in the
Supreme Court challenging the orders of the Mumbai High Court and
Delhi High Court, respectively, in the matter of imposition of cuts in
supply of gas to non-core sectors; and
3. Further, the EGoM directed as under:
(i) the earlier allocation of 0.933 mmscmd to the Pragati Power
Corporation Ltd, (PPCL) Bawana, need not be cancelled, but be reduced
to 0.836 mmscmd, and RIL/NIKO be asked to sign the Gas Sale and
Purchase Agreement (GSPA) for the same so that it gets pro-rata to its
allocation as per orders of the Ministry dated 30.03.2011;
(ii) the proposal to suspend the supply of KG-D6 gas to P&K plants
(Deepak, GSFC and RCF) including the proposal to restrict future
supply only to Urea fertilizer plants be kept in abeyance till 24.05.2012,
during which time, the Department of Fertilizers will finalize the
guidelines mentioned in paragraph 2 of the supplementary note and
thereafter the matter be placed before the EGoM;
(iii) the existing and future allocations of NELP gas to power plants be
subject to the condition that the entire electricity produced from the
allocated gas shall only be sold to the Distribution Licenses at tariffs
determined or adopted (in case of bidding) by the tariff regulator of the
power plant. The gas will be supplied only for the duration of the Power
Purchase Agreement (PPA) and supply of gas will start only after the
signing of PPA. The PPA may initially be for one year (short term PPA)
during which electricity shall be sold at the tariff determined by the
regulator and the subsequent PPA should be for medium term or long
term. The EGoM also authorized the Ministry to cancel the current
allocation of any power plant(s) not complying with the aforesaid
conditions:
(iv) that as M/s.Lanco Kondapalli (Expansion) and GMR Tanir Bawi
have signed the short term PPA till 30.05.2012, the supply to both
these plants need not be suspended till 30.05.2012, after which the
supply would be suspended if they fail to comply with the conditions
specified by the EGoM for supply of domestic; and
(v) the EGoM noted that there is a wide divergence between the
domestic and international prices of gas and import of natural gas at a
high price to meet the domestic shortfall adversely impacts the current
account balance. The EGoM further noted that the gas prices fixed in
2009 were valid for a period of five years and on this ground, the
request of the contractor for revised prices was turned down in 2010
itself, international prices were comparatively lower. After discussions,
the EGoM directed that:
(a) the advice of Ministry of Law and Justice, including the views
of Attorney General of India be obtained in the matter of gas price
revision for consideration of the EGoM; and
(b) the Ministry could suggest an appropriate Regulatory Authority
to aid and advise the EGoM on the issue.
The minutes of the EGoM meeting held on 23rd August, 2013
reads thus:-
The EGoM, in the light of its directions while considering a note
dated 24.06.2013 from the Ministry of Petroleum and Natural Gas
(Petroleum aur Prakritik Gas Mantralaya) in the meeting held on
17.07.2013, considered the note dated 13.08.2013 from the Ministry of
Chemicals and Fertilizers (Rasayan aur Urvarak Mantralaya),
Department of Fertilizers (Urvarak Vibhag) and noted:
(i) the contents of paragraphs 22, 23, 24 and 25 of the note dated
24.06.2013;
(ii) the average supply of domestic gas to the Fertilizer sector
during 2012-13 was 31.5 Million Metric Standard Cubic
Meters Per Day (MMSCMD); and
(iii) the year-wise additional production of all categories of
domestic gas envisaged during the XII Plan Period.
1. In the light of the above, the EGoM decided:
(i) to maintain at 31.5 MMSCMD the level of supplies of domestic gas
to the Fertilizer sector and give the sector first priority in meeting
the requirements of any shortfall below the level of 31.5 MMSCMD
from any additional production of NELP gas;
(ii) the entire additional NELP gas production available during the
years 2013-14, 2014-15 and 2015-16, after meeting the supply
level of 31.5 MMSCMD to the Fertilizer sector, be supplied to the
Power sector. The plant-wise allocation of additional production of
NELP gas available during these years shall be done by the Ministry
of Power; and
(iii) to allow supply of NELP gas to Power plants based on short term
Power Purchase Agreements (PPAs) in all cases where
medium/long-term PPAs are not practicable in view of limited
balance tenure of the Gas Supply and Purchase Agreements
(GSPAs).
Elaborate submissions, both oral and written, were put forth
by Sri S. Niranjan Reddy, Learned Counsel for the petitioners, Sri
P. Wilson, Learned Senior Counsel appearing for respondents 1
and 2, and Sri R. Raghunandan, Learned Senior Counsel
appearing on behalf of respondents 10 and 11. Sri O. Manohar
Reddy, Learned Counsel for respondents 4 to 7, also put forth his
submissions. It is convenient to examine the contentions, urged
by Learned Counsel on either side, under different heads.
I. AMENDMENT OF THE PRAYER:
The petitioners filed WPMP No.40245 of 2013 on 11.11.2013
seeking amendment of the prayer in W.P.No.39390 of 2012 by
adding the words and subsequent EGoM decisions including those dated
17.07.2013 and 23.08.2013 in Part - (ii) of the main prayer. In the
affidavit filed in support thereof, the petitioners stated that they
were informed about the decision taken at these EGoM meetings
only by way of the additional affidavit filed by respondents 1 and 2;
they were not given a copy of the minutes; this application was
filed immediately after they learnt about the decision and after
their efforts, to obtain a copy of the minutes, proved unsuccessful;
the amendment petition does not alter the character of the lis, and
does not prejudice the respondents in any manner; the
amendment is, in fact, formal in nature; and the relief prayed for
flows from the pleadings already on record.
In their counter-affidavit dated 25.11.2013, respondents 1
and 2 submitted that amendment of the prayer, as sought for by
the petitioners, was merely an after thought; it amounted to filing a
new writ petition against the decision of the EGoM dated
23.08.2013, and the amendment should not be allowed. In the
rejoinder filed thereto dated 28.11.2013, the petitioners stated that
hearing of the Writ Petition was deferred by this Court by its order
dated 25.06.2013; they had filed the amendment petition at the
earliest possible time, without any delay, when there were news
reports that EGoM had reconvened, and had taken a decision as
late as on 23.08.2013; the allegation that the amendment petition
is a dilatory tactic on their part is not tenable; the latest decision of
the EGoM dated 23.08.2013 reiterates its earlier decision dated
24.02.2012 in continuing the inter-se priorities for allocation of gas
to various sectors, and is merely its reaffirmation; by way of the
said amendment, no new case or no new pleadings are sought to
be made by them; they are merely seeking to extend their challenge
to the latest policy decision dated 23.08.2013 which, substantially,
continues the same policy decision challenged in the writ petition;
as a result of the latest decision of the EGoM, on inter-se priorities
in allocation of gas, no new policy has come into existence; no
case, therefore, exists for the petitioner to file a fresh writ petition
to challenge the decision of the EGoM dated 23.08.2013; the
objections taken by the first respondent, in opposition to the
amendment petition, are technical in nature; the first respondent
has failed to make out any grounds of prejudice being caused to it
if the amendment is allowed by this Court; the amendment petition
filed by the petitioner would sub-serve an effective adjudication,
save precious judicial time, and help in avoiding further delay in
determining the lis if a fresh writ petition, challenging the latest
EGoM decision, were to be filed separately; and the State, which is
expected to act fairly, cannot be permitted to take technical pleas
to defeat the rights of citizens.
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that the amendment petition ought to be allowed as
the nature of the lis is not altered; the latest EGoM decision dated
23.08.2013 is a continuation of the earlier policy of reverse cut
adopted through the EGoM decision dated 24.02.2012 which is
under challenge in the present writ petition; hence the challenge to
the earlier decision constitutes a challenge to the latest decision
dated 23.08.2013 also; and the Bombay High Court, in Welspun
Maxsteel Limited v. Union of India , had permitted an
amendment, challenging a subsequent decision of the EGoM, by
way of an oral application. On the other hand Sri P. Wilson,
Learned Senior Counsel appearing for respondents 1 and 2, would
submit that amendment of the prayer, as sought for by the
petitioners, is an afterthought and tantamounts to filing a new writ
petition against the decision of EGOM dated 23.08.13; and this
Court should disallow the amendment sought for by the
petitioners.
The real controversy test is the cardinal test, and it is the
primary duty of the Court to decide whether an amendment is
necessary to decide the real dispute between the parties. The
Court may also take notice of subsequent events in order to
shorten the litigation, to preserve and safeguard the rights of both
parties, and to sub-serve the ends of justice. The rule of
amendment is essentially a rule of justice, equity and good
conscience and the power of amendment should be exercised in
the larger interest of doing full and complete justice to the parties
before the Court. (Rajesh Kumar Aggarwal v. K.K.Modi ). The
test for allowing the amendment is to find out whether the
proposed amendment works any serious injustice to the other side.
The Court should be extremely liberal in granting the prayer of
amendment of pleadings unless serious injustice or irreparable
loss is caused to the other side. (Haridas Aildas Thadani v.
Godrej Rustom Kermani ; Pirgonda Hongonda Patil v. Kalgonda
Shidgonda Patil ).
If the basic structure of the Writ Petition is not altered by the
proposed amendment, and what is sought to be changed is the
nature of the relief sought for by the petitioner, it is difficult to
understand, if it is permissible for the petitioner to file an
independent Writ Petition, why the same relief which could be
prayed for in a new Writ Petition cannot be permitted to be
incorporated in the pending Writ Petition when allowing the
amendment would curtail multiplicity of legal proceedings.
(Sampath Kumar v. Ayyakannu ). Since the cause of action for
seeking the amendment arose during the pendency of this Writ
Petition, the proposed amendment ought to be granted because the
basic structure of the Writ Petition has not changed. If it is
permissible for the petitioners to file an independent Writ Petition,
there is no reason why the same relief, which could be prayed for
in the new Writ Petition, cannot be permitted to be incorporated in
the pending proceedings. (Rajesh Kumar Aggarwal3).
When this Writ Petition was pending adjudication before this
Court, the modified policy decision was taken by the EGoM on
23.08.2013. The application, in W.P.M.P. No.40245 of 2013, was
filed on 11.11.2013 less than three months thereafter. While the
EGoM decision dated 23.08.2013 has resulted in fixing the upper
limit for supply of gas to the fertilizer sector at 31.5 mmscmd, the
earlier policy decisions of according priority to the fertilizer sector
over the power sector, imposition of a reverse cut on reduction of
gas supplies from the KG-D6 basin, and a pro-rata cut on
reduction in supply of non-NELP gas, continue to remain in force.
The basic structure of the Writ Petition has not been altered, and
the amendment merely seeks to include a challenge to the latest
EGoM decision dated 23.08.2013. As the subsequent EGoM
decision is not unrelated to the issues which arise for
consideration, and taking notice of these subsequent events would
not only result in shortening the litigation but would also avoid
multiplicity of proceedings, I see no reason to relegate the
petitioner to the remedy of challenging the subsequent EGoM
decision dated 23.08.2013 in separate writ proceedings, more so as
it is not even the case of respondents 1 and 2 that serious injustice
or irreparable loss would be caused to them if a portion of the
prayer in the writ petition is permitted to be amended. The
amendment petition is allowed, and the prayer in the Writ Petition
shall stand amended accordingly.
II. PRELIMINARY OBJECTIONS:
(i) CAN THE PETITIONER ASSOCIATION MAINTAIN THIS
WRIT PETITION
Sri P. Wilson, Learned Senior Counsel appearing on behalf
of respondents 1 and 2, would submit that petitioner association
cannot maintain the present writ petition as no allocation of gas is
made in the name of the association; consequently no enforceable
right arises; and the present writ petition is also not in the nature
of a public interest litigation.
While an Association cannot file a writ petition before the
Supreme Court under Article 32 of the Constitution if it has no
fundamental right, (Mahinder Kumar Gupta v. Union of India ),
Article 226(1) stipulates that, notwithstanding anything in Article
32, every High Court shall have power to issue directions, orders or
writs for the enforcement of any of the rights conferred by Part-III
or for any other purpose. The power conferred on the High Court,
to issue directions, orders or writs under Article 226 of the
Constitution of India, is not confined merely to the enforcement of
fundamental rights under Part-III of the Constitution, but also for
any other purpose. In any event while the first petitioner is an
association, the 2nd petitioner is an independent power producer
which is directly affected by the impugned policy decisions, and
the 3rd petitioner is an individual, who is the authorised signatory
of the 2nd petitioner. It cannot, therefore, be said that the Writ
Petition as filed is not maintainable.
(ii) IS THIS WRIT PETITION BARRED BY THE
PRINCIPLES OF RESJUDICATA
Sri P. Wilson, Learned Senior Counsel appearing on behalf of
respondents 1 and 2, would submit that members of the
petitioner association were also parties to W.P. No.3748/2011
(M/s. Welspun Max Steel Ltd & Anr.) filed before the Bombay High
Court wherein the proceedings of the MoPNG dated 30.03.2011,
which was subsequently incorporated in the minutes of the
EGOM meeting dated 24.02.2012, was under challenge; the
Division Bench of the Bombay High Court, while upholding the
order dated 30.03.2011, dismissed the said writ petition by its
order dated 08.07.2011; the petitioner therein filed SLP
Nos.30392/2011 which is pending before the Supreme Court;
W.P.No.3106/2011 (i.e., M/s. Essar Steel Limited v. Union of
India ) was filed before the Delhi High Court challenging the order
of the MoPNG dated 30.03.2011; some of the members of the
petitioner association were also parties thereto; the Delhi High
Court, after recording the submission of the members of the
petitioner association that the order dated 30.03.2011 of the
MoPNG was agreeable to them, dismissed W.P.No.3106/2011 by
its order dated 29.09.2011; the petitioner therein filed Writ Appeal
before the Division Bench of the Delhi High Court and, thereafter,
filed T.C.No.56/2012 before the Supreme Court which is still
pending; the stand taken by the petitioners in the present writ
petition is contrary to the stand taken by the industries,
represented by the petitioner - association, before the High Courts
of Bombay and Delhi; the petitioner is now challenging the same
MoPNG order dated 30.03.2011 which it had supported earlier
before the Bombay and Delhi High Courts; and the petitioners are
estopped, by the principles of resjudicata, from challenging the
impugned EGOM decisions.
Sri R. Raghunandan, Learned Senior Counsel appearing for
respondents 10 and 11, would submit that the petitioners did not
have any objection to the categorization of consumers into core
and non-core sectors; having accepted this categorisation, it is not
open to them to object to the order of priority set out under that
categorization, as the order of priority is a species of the genus of
categorization into core and non-core sectors; and the rule of res-
judicata would apply as the petitioners had supported and
accepted the categorization of consumers in the earlier two cases
before the Bombay and Delhi High Courts.
On the other hand Sri S. Niranjan Reddy, Learned Counsel
for the petitioners, would submit that before any plea, by the
respondents, can be said to be barred by res-judicata in future
proceedings inter-se such respondents, it must be shown that such
a plea was required to be raised by the respondents to meet the
claim of the petitioner in such proceedings; the issues that arise for
consideration in the present writ petition are distinct and separate
from the issues that were raised and considered by the Bombay
and Delhi High Courts; the Bombay and Delhi High Courts, in
Welspun Maxsteel Ltd2 and Essar Steels Ltd8 respectively, were
called upon to examine the validity of classification of the core and
non-core sectors for supply of natural gas; the issue of reservation
within the core sector was neither raised nor decided in those
proceedings; the issue before this Court is on the reservation of
natural gas and priority within the core sector, more specifically
priority to the fertilizer sector over power; these issues are based
on independent causes of action inter-se the respondents; and,
hence, cannot be said to be barred by the principles of res-
judicata.
The principles of res-judicata are attracted while considering
the question of constructive res-judicata between the petitioner on
the one hand and the respondents on the other who were co-
respondents in the Writ petitions before the Bombay and the Delhi
High Courts. (Ferro Alloys Corpn. Ltd. v. Union of India ). While
the principles of constructive res judicata can be invoked even
inter-se the respondents, before any plea by the respondents can
be said to be barred by constructive res judicata in future
proceedings inter-se such respondents, it must be shown that
such a plea was required to be raised by the respondents to meet
the claim of the petitioner in such proceedings. If such a plea was
not required to be raised by the respondents with a view to
successfully meet the case of the petitioner, then such a plea inter-
se the respondents would remain in the domain of independent
proceedings giving an entirely different cause of action inter-se the
respondents with which the petitioner would not be concerned.
Such pleas, based on independent causes of action inter-se the
respondents, cannot be said to be barred by constructive res
judicata in the earlier proceedings where the lis is between the
petitioner on the one hand and all the respondents on the other. In
other words, when the petitioner is not concerned with the inter-se
disputes between the respondents, such inter-se disputes amongst
the respondents would not give rise to a situation wherein it can be
said that such respondents might and ought to have raised such a
ground of defence or attack for the decision of the Court. (Ferro
Alloys Corpn. Ltd.9).
The application of the rule of res-judicata by Courts should
be influenced by no technical considerations of form but by
matters of substance within the limits allowed by the law.
(Sheoparsan Singh v. Ramnandan Prasad Narayan Singh ;
Ferro Alloys Corpn. Ltd.9; Iftikhar Ahmed v. Syed Meharban
Ali ). If the matter was in issue directly and substantially in a
prior litigation and decided against a party, then the decision
would be res judicata in a subsequent proceeding. However, if a
matter was only collaterally or incidentally in issue and decided
in an earlier proceeding, the finding therein would not, ordinarily,
be res judicata in a latter proceeding where the matter is directly
and substantially in issue. (Sajjadanashin Sayed Md. B.E. Edr. v.
Musa Dadabhai Ummer ). A matter in respect of which relief is
claimed in an earlier suit can generally be said to be a matter
directly and substantially in issue. If the issue was necessary
to be decided for adjudicating the principal issue and was decided,
it would have to be treated as directly and substantially in issue
and, if it is clear that the judgment was in fact based upon that
decision, it would then be res judicata in a latter case. (Ishwer
Singh v. Sarwan Singh and Syed Mohd. Salie Labbai v. Mohd.
Hanifa ; Sajjadanashin Sayed Md. B.E. Edr.12).
A judgment is not conclusive if any matter came collaterally
in question or if any matter was incidentally cognizable.
(Halsburys Laws of England (Vol. 16, para 1538, 4th Edn.), R.
v. Knaptoft Inhabitants ; Heptulla Bros. v. Thakore ; Sanders
(otherwise Saunders) v. Sanders (otherwise Saunders) ;
Sajjadanashin Sayed Md. B.E. Edr.12). A collateral or incidental
issue is one that is ancillary to a direct and substantive issue; the
former is an auxiliary issue and the latter the principal issue. The
expression collaterally or incidentally in issue implies that there
is another matter which is directly and substantially in issue.
(Spencer Bower and Turner on The Doctrine of Res Judicata
(2nd Edn., 1969, p. 181); Australian High Court in Blair v.
Curran ; Halsbury says (Vol. 16, para 1538) (4th Edn.);
Sajjadanashin Sayed Md. B.E. Edr.12).
In order to understand this essential distinction, one has
always to inquire with unrelenting severity is the determination
upon which it is sought to find an estoppel so fundamental to the
substantive decision that the latter cannot stand without the
former Nothing less than this will do. Even where this inquiry is
answered satisfactorily, there is still another test to pass: viz.
whether the determination is the immediate foundation of the
decision as opposed to merely a proposition collateral or
subsidiary only, i.e. not more than a part of the reasoning
supporting the conclusion. A mere step in reasoning is
insufficient. What is required is no less than the determination of
law, or fact or both, fundamental to the substantive decision.
(Sajjadanashin Sayed Md. B.E. Edr.12). For a judgment to operate
as res judicata between or among co-respondents, it is necessary
to establish that (1) there was a conflict of interest between the co-
respondents; (2) it was necessary to decide the conflict in order to
give the relief which the petitioner claimed in the writ proceedings,
and (3) the Court actually decided the question. (Ferro Alloys
Corpn. Ltd. v. Union of India9; Iftikhar Ahmed11).
When gas production was envisaged to be 40 MMSCMD,
allotments were made to the fertilizers, LPG, power and CGD
(domestic and transport) sectors. The steel sector was not
allocated any gas within the first 40 MMSCMD. It is only because
the CGD (transport and domestic) sector was not in a position to
off-take the entire 5 MMSCMD allocated to it by the EGoM was
3.75 MMSCMD of gas, unutilized by the CGD sector, transferred to
the steel sector. As there was a significant reduction in the
production of natural gas from KG-D6, which had led to
substantial cuts being imposed on customers, the MoPNG, by
proceedings dated 30.03.2011, decided to supply gas to the
fertilizers, LPG, power and CGD (domestic and transport) sectors
apart from gas needed for operation of the East West Gas Pipeline
(EWPL for short) to entirely meet their firm allocations. Again by
letter dated 21.04.2011 the MoPNG clarified that, under the Gas
Utilization Policy, allocations from the KG-D6 fields had initially
been made to the core sectors and subsequently, taking into
account the expectation of higher production, allocations had been
made to the non-core sectors; as the gas production from the KG-
D6 basin had decreased to around 50 MMSCMD, it was natural
that the said production be supplied firstly to the core sectors; and
the said directions had been issued pursuant to the Gas Utilization
Policy under the provisions of the production sharing agreement.
The relief sought for by the petitioners before the Bombay
High Court, in Welspun Maxsteel Limited2, was to quash the
directions of the MoPNG dated 30.03.2011 and 21.04.2011; to
direct the first respondent to conduct an exhaustive investigation
into the affairs of respondents 2 and 3 in respect of extraction of
natural gas from the KG-D6 fields; and to issue appropriate
directions to ensure that the maximum production levels from the
KG D6 fields were attained. The Division bench of the Bombay
High Court held that the EGoMs decisions clearly showed that a
very high priority had been accorded to the core/priority sectors
like Fertilizer, Power, CGD (Domestic and Transport) and LPG;
initially the production from KG D-6 basin was expected to be only
25 mmscmd and was, thereafter, expected to gradually increase to
40 mmscmd; the decisions of the EGOM clearly indicated that the
entire supply would be distributed amongst the core sector; any
further supply was to be allocated to the power sector; the priority
to sponge iron plants was kept after the aforesaid four core priority
sectors; the impugned action of curtailing gas supply to non-
priority sectors, so as to ensure that the reduction in supply of gas
to core/priority sectors is kept at the minimum, is eminently in
public interest; the authority was conscious that various
industries/plants had come up in various sectors which were
dependent on gas and it was, therefore, necessary to identify the
sectors where lower price of gas resulted in passing on the benefit
to the public at large; they were also conscious about the difference
between the core sectors and non-core sectors; the non-priority
sectors could pass on their additional financial burden, on account
of procurement of gas from the open market, to their customers;
the core/priority sectors, which operated in a controlled price
regime, were unable to pass on such additional burden to their
customers; it was not possible to hold that either the decision
making process or the decision itself was arbitrary, illegal,
irrational or manifestly unjust; and the Court, exercising
jurisdiction under Article 226 of the Constitution of India, would
not sit in appeal over such a well informed decision on a matter
relating to financial policy involving complex economic factors.
In Essar Steel Limited8, the orders under challenge were
the proceedings of the MoPNG dated 30.03.2011 and 21.04.2011
and the consequential letter dated 04.05.2011 issued by Reliance
Industries Limited intimating the petitioner that, consequent upon
compliance with the directions of the MoPNG, supply of natural
gas to them, in terms of the Gas Sales and Purchase Agreement,
was likely to be affected. The contention of the petitioner before
the Delhi High Court was that the said directions of the MoPNG,
reducing supply of natural gas to them, was in contravention of the
policy/ directions/guidelines framed by the EGoM regarding
allocation of the limited available quantity of gas to the consumers
thereof; as per the decisions of EGoM they were entitled, from the
first 40 mmscmd of gas extracted, to the unutilized gas out of the
allocation of 5 mmscmd to the CGD and CNG sectors, and to
priority in the gas extracted beyond 40 mmscmd; the directions of
EGoM of first giving priority to the steel sector, including the
petitioner, in the allocation of unutilized gas of CGD had thus been
violated; the categorization by MoPNG of core and non-core sectors
was contrary to the decisions of EGoM; and, while the power sector
was getting cheap natural gas, it was free to sell power at the
market rate.
It was contended before the Delhi High Court, on behalf of
the power companies (some of the members of the petitioner
association in the present writ petition), that the steel sector was
not entitled to anything in the first 40 mmscmd of gas
extracted/produced; the decisions of the EGoM did not provide for
any pro-rata cut; a pro-rata cut would be contrary to prioritization;
as per the EGoM, the power sector is to get any additional gas
available within the first 40 mmscmd of gas produced and only if,
after fulfilling the complete requirement of gas based power plants,
there is any unutilized gas is the steel sector entitled to get the
same; in the meeting of EGoM held on 27th October, 2009 it was
decided that KG-D6 gas should be supplied on firm basis to power
plants so as to enable them to operate at 75% PLF; firstly, such
supply had to be made to the power plants; the press note,
regarding the EGoM meeting dated 27th October, 2009, showed
that the firm allocation of the power sector stood at 31 mmscmd
before steel gets any gas; the EGoM decisions do not provide for
any pro-rata cut, and the said argument had also been rejected by
the Bombay High Court; the steel industries had no vested right
and no priority; no priority for steel beyond 40 mmscmd had been
provided; and the discretion in this regard was still with the
Ministry.
The Delhi High Court held that, on the basis of the decisions
of MoPNG, the steel sector was not found entitled to any supply of
gas in production till 40 mmscmd; and, in the production beyond
40 mmscmd, the priority of the steel sector was again only after
the sectors of Fertilizers, LPG, Power, CGD and CNG.
The issues regarding reservation of gas inter-se the core
sector, according priority to the fertilizer sector over the power
sector in the supply of gas, and the imposition of reverse cut in the
supply of NELP gas to the IPPs in the State of Andhra Pradesh
while imposing a pro-rata cut, in the supply of non-NELP gas, to
power producers in Western and Northern India did not arise for
consideration either before the Bombay or the Delhi High Court.
These issues were not even collaterally or incidentally in issue,
much less being directly and substantially in issue in those writ
proceedings. The determination of these issues was neither
fundamental nor the immediate foundation of the decision by the
Bombay and Delhi High Courts. A decision on the aforesaid issues
was wholly unnecessary for deciding the issues which arose for
consideration in Welspun Maxsteel Limited2 and Essar Steel
Limited8. The mere fact that the priority given to the fertiliser
sector over the power sector, and the reverse cut policy, is referable
to the MoPNG letter dated 30.03.2011 which was under challenge
before the Bombay and Delhi High Courts is of no consequence, as
the challenge was evidently to a different facet of these
proceedings. I see no reason, therefore, to non-suit the petitioners
on this ground.
(iii) APPROBATE AND REPROBATE:
Both Sri P. Wilson and Sri R. Raghunandan, Learned Senior
Counsel, would submit that the members of the petitioner
association were hitherto agreeable to the authority of MOPNG
to issue the order dated 30.03.2011, and it was never
challenged until the cut order affected the power sector; their
contention, that the classification of consumers of gas into core
sector and non-core sector is a valid classification but the further
classification of core sector consumers and fixation of priority of
supply of gas to such core sector members is arbitrary, is not
tenable as the petitioners, themselves, have accepted the basic
concept of categorization of consumers and fixation of priority in
the supply of gas on the basis of such categorization; and, having
accepted this principle of categorization and having filed this writ
petition on the basis of such a classification, the petitioners
cannot now turn around and claim or contend that the order of
priority, within that category, should be set aside for violation of
Article 14 of Constitution of India.
The raison dtre of the rule of res-judicata is to confer
finality on decisions arrived at by competent courts between
interested parties after genuine contest; and to allow persons who
had deliberately chosen a position to reprobate it and to blow hot
now, when they were blowing cold before, would be completely to
ignore the whole foundation of the rule. (Ferro Alloys Corpn.
Ltd.9; Iftikhar Ahmed11; Ram Bhaj v. Ahmad Said Akhtar
Khan ). Law does not permit a person to both approbate and
reprobate. This principle is based on the doctrine of election which
postulates that no party can accept and reject the same
instrument and that 'a person cannot say at one time that a
transaction is valid and thereby obtain some advantage, to which
they could only be entitled on the footing that it is valid, and then
turn round and say it is void for the purpose of securing some
other advantage. (P.R. Deshpande v. Maruti Balaram Haibatti ;
R. N. Gosain v. Yashpal Dhir ; Halsbury's Laws of England para
1508 in Vol. 16 of the 4th Edn.). The doctrine of election is
based on the rule of estoppel - the principle that one cannot
approbate and reprobate inheres in it. Doctrine of estoppel by
election is one of the species of estoppel in pais (or equitable
estoppel) which is a rule in equity. By that rule a person may be
precluded by his action or conduct or silence, when it is his duty to
speak, from asserting a right which he otherwise would have had.
(P.R. Deshpande20; Black's Law Dictionary, 5th Edn.). Before
the Bombay and Delhi High Courts, some of the IPPs supported
the decision of the MoPNG dated 30.03.2011 in according priority
to the core sectors over the non-core sectors in the supply of gas
from the KG-D6 fields. The inter-sectoral priority within the core-
sector, and the imposition of a reverse cut in supply of NELP gas to
different sectors within the core sector while imposing a pro-rata
cut to industries within the core sector in the supply of non-NELP
gas was not even in issue, and the petitioners herein cannot be
said to have supported such a stand of the Union of India before
the Bombay and Delhi High Courts.
The principle that one cannot approbate and reprobate is
based on the doctrine of election which, in turn, is based on the
rule of estoppel. It is settled law that the principle of estoppel
cannot impede the constitutional remedy. (P.R. Deshpande20;
Evans v. Bartlam ). The petitioners question the action of
respondents 1 and 2 in according priority to the fertilizer sector
over the power sector, and in imposing a reverse cut in supply of
NELP gas while imposing a pro-rata cut in supply of non-NELP gas
thereby extending benefits to the power sector in West and North
India as compared to IPPs in the East Coast, as arbitrary,
discriminatory and in violation of Article 14 of the Constitution of
India. There can be no estoppel against the Constitution. The
doctrine of estoppel is based on the principle that consistency in
word and action imparts certainty and honesty to human affairs.
This principle can have no application to representations made
regarding the assertion or enforcement of fundamental rights. No
individual can barter away the freedoms conferred upon him by
the Constitution. (Olga Tellis v. Bombay Municipal
Corporation ; Basheshar Nath v. The Commissioner of Income
Tax, Delhi ). Fundamental Rights cannot be compromised nor
can there be any estoppel against the exercise of Fundamental
Rights available under the Constitution. (Nar Singh Pal v. Union
of India ). The contention that the Writ Petition should be
dismissed, on the application of the doctrine of approbate and
reprobate, does not merit acceptance as the petitioners claim of
violation of Article 14 is required to be examined in the present
writ proceedings.
iv. HAVE THE PETITIONERS SUPPRESSED MATERIAL
FACTS
Sri P. Wilson, Learned Senior Counsel appearing on behalf of
respondents 1 and 2, would submit that the petitioners have
suppressed the fact that they were parties to the Writ Petitions
filed by Welspun Maxsteel Limited2 before the Bombay High
Court, and Essar Steel Limited8 before the Delhi High Court; the
very same reverse-cut policy framed by MoPNG by its proceedings
dated 30.03.2011, which was under challenge before the Bombay
and Delhi High Courts, was supported by the petitioners then; the
petitioners have now sought to secure an undue advantage by
suppressing the fact that they were parties to the earlier writ
petitions; and the Writ Petition, as now filed, is an abuse of process
of Court.
On the other hand Sri S. Niranjan Reddy, Learned Counsel for
the petitioners, would submit that the Petitioners have placed all
relevant and material facts including the judgments of the Bombay
and Delhi High Courts on record; in fact the EGoM decision dated
24.02.2012, which is under challenge in this Writ Petition, directly
refers to the said judgments; no question of suppression can arise
as the issues that arose for consideration in the said judgments
are separate and distinct from the issues which fall for
consideration in the present writ petition; and it is not suppression
of any fact, but suppression of material and relevant facts that
would judge the conduct of a party before the Court.
A person invoking the discretionary jurisdiction of the court
cannot be allowed to approach it with unclean hands. (Arunima
Baruah v. Union of India ). The rule, that suppression of a
material fact by a litigant disqualifies him from obtaining any
relief, has been evolved to deter a litigant from abusing the process
of court by deceiving it. To enable the court to refuse to exercise
its discretionary jurisdiction, suppression must be of a material
fact, in the sense that, had it not been suppressed, it would have
had an effect on the merits of the case. It must be a matter which
was material for the consideration of the court, whatever view the
court may have taken. Material fact would mean material for the
purpose of determination of the lis, the logical corollary whereof
would be whether the same was material for grant or denial of the
relief. If the fact suppressed is not material for determination of the
lis between the parties, the court may not refuse to exercise its
discretionary jurisdiction. What would be a material fact,
suppression whereof would disentitle the petitioner to obtain a
discretionary relief, would depend upon the facts and
circumstances of each case. (Arunima Baruah26; S.J.S. Business
Enterprises (P) Ltd. v. State of Bihar ).
The EGoM proceedings dated 24.02.2012 which is under
challenge in the present proceedings, and a copy of which has been
filed along with the Writ Petition, records that M/s. Welspun
Maxsteel Limited2 and Essar Steel Limited8 had filed petitions in
the Supreme Court challenging the orders of the Mumbai and
Delhi High Courts. As noted hereinabove, the issues which arose
for consideration before the Mumbai and Delhi High Courts are
distinct and different from those which arise for consideration in
the present Writ Petition. As the fact, that writ petitions were filed
before the Mumbai and Delhi High Courts, is not material for
determination of the lis before this Court, the petitioners cannot be
held guilty of suppression of material facts necessitating dismissal
of the present writ petition. While the petitioners would have been
well advised to refer to these proceedings in their writ affidavit, the
mere fact that they did not, would not justify dismissal of the
present writ petition on this score.
III. LEGITIMATE EXPECTATION:
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that gas based power plants in Andhra Pradesh were
established, and their capacity increased, only on the basis of
definite scientific data made available to them by the first
respondent projecting sufficient gas availability to feed these
industries atleast upto the year 2017; if the said projection of the
first respondent, which was always claimed to be accurate, has not
come true then there is a duty cast upon them to ensure
availability of gas to the power generating units set up in the State
of Andhra Pradesh; the members of the petitioner association have
a legitimate expectation to be supplied gas upto atleast 75% PLF
which was the assurance given by the EGoM in the year 2009,
based on which these units were set up; the projected availability
of gas was pegged at 80 mmscmd upto the year 2017, after which
alone was it estimated that production of gas would start to fall;
and, if the first respondent had not made such a prediction of
availability of gas till 2017, the members of the petitioner
association would have either waited to set up their plants after
creation of terminals in the east coast, or terminals would have
been planned to come up in the east coast so as to become
operational in the year 2011-2012, if it had been known that
availability of gas will dwindle from the said year.
On the other hand Sri P. Wilson, Learned Senior Counsel
appearing for respondents 1 and 2, would submit that, when the
power plants were established, no assurance was given to them of
supply of NELP gas; theirs is a business risk as NELP gas cannot
be the sole source, more so as there is no guaranteed supply;
except the allocation order, there is no agreement between the
Government of India and the power plants; apart from the policy
taken from time to time, and the projections given by contractors
based on which supply or allocation was made, there is no written
contract/ statute governing assured supply/ allocation; allocation of
natural gas does not guarantee or assure that, during the period of
availability of gas from that source, the allottees will be supplied
gas equal to their allocation; allocation merely acts as the basis to
determine the actual quantity of supply of gas from a particular
source based on actual availability; the gas utilization policy does
not advocate any reservation of gas allocation; a plant must be
ready to consume gas whenever gas is available; the power
producers have established gas based power plants based on
future "projections" without any commitment from respondents 1
and 2 that additional gas would be allocated to their plants; the
respondent cannot be asked to reduce the risks to improve their
returns in case of adversity; alternate source of gas like imported
R-LNG, albeit costlier, is available in the market which the
petitioner can utilize; merely on the basis of legitimate expectation,
the petitioner cannot maintain this writ petition; and, moreover,
there cannot be a legitimate expectation as against the policy of the
government.
A claim based on legitimate expectation requires reliance
on representations and resulting detriment to the claimant in the
same way as claims based on promissory estoppel. (National
Buildings Construction Corpn. v. S. Raghunathan ). Doctrines
of promissory estoppel and legitimate expectation cannot come in
the way of public interest which must prevail over private interest.
(Union of India v. International Trading Co. ). Legitimacy of an
expectation can be inferred only if it is founded on the sanction of
law. (International Trading Co.29). Whether the expectation of
the claimant is reasonable or legitimate in the context is a question
of fact in each case. Whenever the question arises, it is to be
determined not according to the claimants perception but in larger
public interest wherein other more important considerations may
outweigh what would otherwise have been the legitimate
expectation of the claimant. A bona fide decision of the public
authority reached in this manner would satisfy the requirement of
non-arbitrariness and withstand judicial scrutiny. (Food
Corporation of India v. Kamdhenu Cattle Feed Industries ).
The decision to impose a reverse cut in supply of NELP gas to
different sectors within the core sector, and to accord priority to
fertilizer and LPG over the power sector, is a matter of economic
policy. As has been submitted by Sri P. Wilson, Learned Senior
Counsel appearing for respondents 1 and 2, neither was any
assurance given to the IPPs nor was any agreement entered into
with them for supply of a specified quantity of NELP gas. The mere
fact that the availability of gas was predicted to increase till the
year 2017, which prediction later turned out to be highly
exaggerated, does not, by itself, confer any right on the petitioners
to claim that they should be supplied gas upto their allocated
quantity even if the genuine claims of other sectors within the core
sector are denied thereby.
To strike at the exercise of administrative power, solely on
the ground of avoiding the disappointment of the legitimate
expectations of an individual, would be to set the courts adrift on a
featureless sea of pragmatism. Moreover, the negation of a
legitimate expectation (falling short of a legal right) is too nebulous
to form the basis for invalidating the exercise of a power when its
exercise otherwise accords with law. 'If a denial of legitimate
expectation in a given case amounts to denial of a guaranteed right
or is arbitrary, discriminatory, unfair or biased or is a gross abuse
of power, the same can be questioned on the well known grounds
attracting Article 14 but a claim based on mere legitimate
expectation, without anything more, cannot ipso facto give a right
to invoke these principles. It can be one of the grounds to consider,
but the court must lift the veil and see whether the decision is
violative of the principles warranting interference. (International
Trading Co.29; Attorney General for New Southwale v. Quin ).
While their contention regarding the EGoM decisions failing the
test of Article 14 shall be examined hereinafter, the petitioners
cannot claim priority in supply of gas on the specious plea of their
having established their units based solely on the predictions of
increased availability and production of gas. The petitioners have
taken an unavoidable business risk in establishing their power
plants and, in the absence of any contractually guaranteed supply,
cannot rest their case solely on the ground of legitimate
expectation.
IV. CAN THE UNION GOVERNMENT BE DIRECTED TO
FRAME A POLICY
Sri S. Niranjan Reddy, Learned Counsel for the petitioner,
would submit that the Union of India has failed in its duty to frame
an equitable gas distribution policy as mandated by the Supreme
Court; as a result, there is no level playing field either amongst the
power units situated in various parts of the country or for the
power units vis--vis fertilizer units situated in different areas; the
Government of India also failed to undertake a review of the policy
decision qua any regional/sectoral preferences as mandated by the
Supreme Court; and any departure, from the directions of the
Supreme Court, has to be consciously made after being alive to the
additional preferences accorded in the previous exercise.
On the other hand both Sri P. Wilson and Sri R.
Raghunandan, Learned Senior Counsel, would submit that the
prayer, seeking enforcement of the order of Supreme Court, is not
maintainable as no such direction was given by the Supreme Court;
the Supreme Court cautiously made an observation and a
reminder, as no direction could be given to enforce rights under
Part-IV of the Constitution of India; an observation made by the
Supreme Court cannot now be sought to be issued as a direction
in the present writ petition; such a prayer cannot be countenanced
in law; and, even otherwise, a writ petition seeking a direction to
frame a policy or to bring in legislation is not maintainable.
In Reliance Natural Resources Ltd.1 B. Sudershan Reddy,
J, in his separate opinion, observed:-
Before we part with the case, we consider it appropriate to observe and
remind the GoI that it is high time it frames a comprehensive
policy/suitable legislation with regard to energy security of India and
supply of natural gas under Production Sharing Contracts..
While Sri S. Niranjan Reddy, Learned Counsel for the
petitioner, would contend that the aforesaid observations are
reflected in a concurring opinion, Sri R. Raghunandan, Learned
Senior Counsel appearing for respondents 10 and 11, would
submit these observations form part of the minority opinion with
which the majority disagreed. He would draw attention of this
Court to the opinion of Justice P. Sathasivam who, while speaking
for himself and Chief Justice K.G. Balakrishnan (as he then was),
held that he had the benefit of reading the erudite judgment of B.
Sudershan Reddy J, but was unable to share the view expressed
by him on some points and must respectfully dissent.
It is wholly unnecessary for this Court to examine whether
the afore-extracted observations form part of a concurring opinion
or a minority opinion as what Sri B. Sudeshan Reddy, J observed
was a reminder to the Government to frame a comprehensive
policy or to make suitable legislation. These observations cannot
be understood as a direction to the Central Government, for it is
settled law that no court can direct a legislature to enact a
particular law or frame a particular policy. Similarly, the executive
cannot be asked to enact a law under their delegated legislative
authority. (Suresh Seth v. Commr., Indore Municipal Corpn., ;
State of J&K v. A.R. Zakki ; A.K. Roy v. Union of India ; V.K.
Naswa v. Union of India ; Supreme Court Employees Welfare
Assn. v. Union of India ). In any event the petitioners remedy, to
question the failure of the Government to frame a policy or to make
a law based on the aforesaid observations, is to approach the
Supreme Court. It would be wholly inappropriate for this Court to
decide whether or not the aforesaid observations obligated the
Government of India to frame a policy or to make a law.
V. NO DIRECTION CAN BE ISSUED TO THE CENTRAL
GOVERNMENT TO SUPPLY GAS TO THE PETITIONERS:
Sri P. Wilson, Learned Senior Counsel appearing on behalf of
respondents 1 and 2, would submit that the 3rd prayer seeking "a
direction to supply 19.72 MMSCMD of natural gas from KG D6 gas field or
from any other source in the KG basin to the petitioners members" cannot
be countenanced in law and is, therefore, not maintainable; the
distribution of material resources forms part of the directive
principles of state policy (Article (39(b)), and this Court would not
direct its enforcement; no person has a right to seek a mandamus
to supply natural gas from a particular source; public interest and
priority have to be taken into consideration while distributing
material resources, such as natural gas; the petitioners have no
enforceable right much less a statutory or a legal right; there is no
public interest in the claim of the petitioners, and only commercial
interest looms large; and this Court would not exercise its
discretionary jurisdiction when competing public interests require
it to refrain.
It is no doubt true, as contended on behalf of the petitioners,
that the Division bench of the Gujarat High Court, in Dhrangadhra
Prakruti Mandal v. Union of India , issued a mandamus
directing the Government of India to allot natural gas for domestic
and vehicular usage in the city of Ahmedabad at the same rate at
which it was supplied to Delhi and Mumbai; and not to
discriminate between CGDs promoted by the Central Public Sector
Undertakings and other CGDs, and also among Gujarat based
CGDs, in the matter of allocation of natural gas. The Division
bench opined:
.. In such circumstances, discrimination of excess allotment at
cheaper rate to Delhi and Mumbai in comparison to that of Ahmedabad
definitely violates Article 14 of the Constitution of India. We, therefore,
find that in the facts of the present case, the Government of India should
be directed to allot natural gas for domestic and vehicular usage at the
same rate at which the same is supplied to Delhi and Mumbai. There is
no justification of supplying the gas to those two cities at a cheaper rate
in comparison to the one at which it is supplied to Ahmedabad when the
level of air-pollution is no less than that prevailing in those two cities.
There should be, at any rate, the same yardstick for measuring the peril
of public health throughout the vulnerable cities of the country.
The second prayer of the above writ-application is for a direction
upon the Government of India to prioritize and diversity unutilized
natural gas from non-priority sector to the CGDs for their domestic and
vehicular usage as directed by the Supreme Court of India in the case of
M.C.Mehta v. Union of India : (2002) 4 SCC 356..
On consideration of the materials on the record, we find that the
policy that has been adopted by the Union of India is not strictly in
conformity with the above direction of the Supreme Court of India, and
the Union of India has violated such norms as it appears from the Chart
at paragraph 8.2.1 of this order at page-50 ..
.We are also convinced that the respondent No.1 has not only
discriminated between CGDs promoted by the Central PSUs and other
CGDs but also among Gujarat based CGDs. For instance, the
respondent no.1 in paragraph-15 of its affidavit-in-reply has submitted
that allocation of 2 Lac MMSCMD gas from KG D6 has been made to
Adani Gas Limited. However, even though gas has been allotted to Adani
Gas Limited from KG D6, the other CGDs, e.g., GSPC Gas Company Ltd.
and Charotar Gas Ltd. were denied the same though they also could
have been allocated gas on the same principle.
As indicated earlier, within the narrow scope of Article 226 of
the Constitution, as pointed out by us above, we, therefore, dispose
of these two writ-applications by passing the following directions:-
1. The Government of India is directed to allot natural gas for
domestic and vehicular usage at the same rate to the city of
Ahmedabad at which the same is supplied to Delhi and Mumbai to
enforce the right of equality.
2. The respondent no.1 for the same reason is directed not only to
discriminate between CGDs promoted by the Central PSUs and other
CGDs but also among Gujarat based CGDs in the matter of allocation
of natural gas.
3. State of Gujarat is directed to pass necessary order compelling the
owners of all the vehicles having registration in the State of Gujarat
to use natural gas and, if necessary, even at the higher prices within
a shortest possible period, at any rate, not exceeding one year from
today for protection of the lives of the citizens living in this State.
4. For the purpose of prevention of wastage of the natural gas, it is for the
State Government to decide whether it would impose additional tax upon
the sale of natural gas for the use of private owners of motor vehicle and
utilize that additional amount available on such taxation, by selling the
natural gas to those who are the owners of public vehicle at a cheaper
rate. At the same time, taking into consideration the fact that by taking
advantage of cheaper price of the natural gas, those owners of the public
vehicles do not misuse the same and the end-benefit goes to the ordinary
public who avails of public transport facility, it is for the State
Government to decided whether it would fix a fare-structure at a
reasonable rate in consultation with the experts as it thinks fit.
5. So long such restriction to make it compulsory for all the vehicles plying
in the State by natural gas instead of other types of fuel is not enforced,
necessary order imposing stringent restriction be passed for reducing the
pollution by fixing the level of emission to the minimum in accordance
with one approved by experts at the international level. Let such
decision be taken within two months from today. (emphasis
supplied).
It is however settled law that, in order that mandamus may
issue to compel the authorities to do something, it must be shown
that there is a statute which imposes a legal duty and the
aggrieved party has a legal right under the statute to enforce its
performance. (Lekhraj Satramdas Lalvani v. N.M.Shah, Deputy
Custodian-cum-Managing Officer ; Rai Shivendra Bahadur (Dr)
v. Governing Body of the Nalanda College and Umakant Saran
(Dr) v. State of Bihar ; Bihar Eastern Gangetic Fishermen
Coop. Society Ltd. v. Sipahi Singh ). The petitioners claim is
not founded on a constitutional, statutory or a legal right. They
are not entitled, therefore, to seek a mandamus that the Central
Government be directed to supply them a specified quantity of gas.
Whether, and to what extent, gas should be supplied to the
IPPs in Andhra Pradesh is not an exercise which this Court would
undertake in proceedings under Article 226 of the Constitution of
India as these are all matters in the executive realm. Granting the
relief which the petitioners seek as prayer No.3 would deprive both
the fertilizer and the LPG sectors of much needed gas. It is not in
the province of this Court to confer a benefit to one sector while
depriving other sectors of the limited natural resources available.
If the relief sought for is granted by this Court to benefit the
petitioners, it would result in amending the existing government
policy by way of a judicial order, and would amount to extending
benefits to persons to whom the policy was not intended to apply,
(Principal, Madhav Institute of Technology & Science v.
Rajendra Singh Yadav ; and Union of India v. Deoki Nandan
Aggarwal ), or beyond what was intended.
The petitioners are, therefore, not entitled to the reliefs
sought for as prayers (i) and (iii). The question which necessitates
examination is whether, and to what extent, the petitioners are
entitled to be granted the relief sought for as the amended prayer
No.(ii) in this Writ Petition
VI. IS THE DECISION MAKING PROCESS OF THE UNION OF
INDIA VITIATED FOR NOT TAKING ALL RELEVANT
FACTORS INTO CONSIDERATION
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that there are two facets to the policy decisions of
the UoI i.e., (i) a sectoral priority being accorded to the fertilizer
industry, and (ii) the mode of allocation of gas from KG-D6 in the
event of reduction in supply; both these facets are inter-twined and
inter-connected; the mode of allocation of KG-D6 gas by the EGoM
is not insulated from the mode of allocation of gas in the non KG-
D6 sector; supply to the fertilizer industry, from the KG-D6 basin,
has always been linked to supplies from the non-KG-D6 fields as
KG D6 was a top-up gas to meet the shortfall in supply of gas; this
policy continues in the same form even after the EGoM meeting
held on 23.08.2013 whereby KG-D6 continues to be a top-up gas
upto the newly imposed ceiling limit of 31.5 mmscmd; in taking
the policy decision dated 23.08.2013, the UOI failed to consider
all relevant and germane factors that ought to have been
considered; the UoI was swayed by irrelevant considerations; the
following would be the relevant factors in any decision making
process relating to allocation of natural gas (a) the total availability
of gas on the date of the decision and projected availability or
reduction in future, if any; (b) the demand for supply of gas,
including existing allocations made and pending applications, if
any; (c) peculiar factors in relation to the available gas (such as
portability issues); (d) any peculiar and special circumstances
attendant to any applicant distinguishing it and prioritizing its
claims for gas over others; and (e) the overall Governmental policy
including any discernible legislative policy or larger policy pursued;
the decisions of EGOM from time to time, including that of
23.08.2013, suffer from a non-consideration of all the above; it
appears that EGOM dealt with antiquated facts relating to the gas
availability average for the year 2012-13, that too on a misleading
'average availability' factor; though the decision was made in the
meeting held on 23.08.2013, the current availability figures and
month-wise gas availability figures, from April to July, 2013, were
not placed before the EGoM which did not also advert to the
existing allocation policy in respect of non-NELP gas; and thereby
the decision making process stands vitiated.
On the other hand Sri P. Wilson, Learned Senior Counsel
appearing on behalf of respondents 1 and 2, would submit that
the final decision regarding inter-se sectoral priority, in supply of
NELP gas, was taken by the EGoM in the meeting held on
23.08.2013; the EGoM was informed of the various
representations received from the Ministry of Power, the Chief
Minister of Andhra Pradesh, Parliament, the members of the
power producers association, and individual power companies; the
EGoM noted the concerns of the power sector and, accordingly,
put a cap on the supply of domestic gas to the fertilizer sector at
the level of 31.5 MMSCMD, and took a decision to supply
additional production of NELP gas to the power sector in the years
2013-14, 2014-15 and 2015-16; this decision was taken after
considering the views of both the Ministry of Power and the
Department of Fertilizers; while 54.18 MMSCMD of gas is
allocated to the fertilizer sector, the average supply of gas to the
fertilizer sector in the year 2012-13 was 31.5 MMSCMD; the
projected gas availability, from all categories of domestic gas
envisaged during the XII Plan Period (2012-2017), which
corresponds to other NELP Blocks discoveries expected to go in
for production during the XII plan period, was placed before
EGoM; and the demands of the petitioners were duly considered.
Sri R. Raghunandan, Learned Senior Counsel appearing on
behalf of respondents 10 and 11, would submit that the EGoM
decisions, ever since its first meeting, are based on availability of
gas, the projected availability and the subsequent fall in
production of gas; the note, which was considered by EGoM in
these meetings, have been produced by the UoI before this Court;
and the contention that EGoM had taken the decision, without
considering relevant material, is not correct.
The note dated 24.06.2013 submitted to the EGoM, to
consider the inter-se priority between the core sectors for
allocation of gas under NELP, records that there has been a sharp
decline in production of KG-D6 gas from a peak production of 61
MMSCMD to 15.01 MMSCMD in May, 2013; this had resulted in a
drastic cut in gas supply to the power plants necessitating a review
in priorities for gas allocation; some other associated matters were
also required to be placed before the EGoM for a decision; the
overall gas production in the country peaked in 2010-11 at 143.1
MMSCMD, mainly due to increase in production from Pvt./JV
fields (KG-D6); it had declined thereafter to 130 MMSCMD in 2011-
12, and then to 111.44 MMSCMD in 2012-13; the projected
availability of gas in 2013-14 was pegged at 105.3 MMSCMD, and
hence the present problem especially in the power sector; and the
overall gas production scenario in the country from 2008-09 to
2012-13 is as under:
Source
2008-
08
2009-
10
2010-
11
2011-
12
2012-
13
2013-14
(Projected)
ONGC
22.486
23.109
23.095
23.316
23.55
23.44
OIL
2.269
2.415
2.352
2.633
2.64
2.739
Pvt./JV
8.09
21.985
26.774
21.609
14.49
12.271
Total
(BCM)
32.845
47.51
52.22
47.56
40.68
38.45
Total
(MMSCMD)
90
130.2
143.1
130
111.44
105.3
The Note dated 24.06.2013 also refers to the allocation of
KG-D6 gas for a total quantity of 93.337 MMSCMD (firm plus fall
back) of which 15.67 MMSCMD was allocated to the fertilizer
sector, 2.59 MMSCMD to the LPG sector, and 44.58 MMSCMD to
the power sector (32.58 MMSCMD firm allocation plus 12
MMSCMD in future fall back allocation). The said Note also
discloses that supply of gas from KG-D6 reached its maximum of
55.35 MMSCMD in 2010-11, thereafter it fell to 42.33 MMSCMD in
2011-12, and 25.74 MMSCMD in 2012-13; and, consequently
during May 2013, the actual KG-D6 supply to the fertilizers sector
was 14.10 MMSCMD, 0.67 MMSCMD to the LPG sector and the
power sector not getting any gas from KG-D6. The Note dated
24.06.2013 also records that, as per projections, the indigenous
gas availability is not going to increase substantially in the next
couple of years; and the year-wise projected availability is as
follows:
Source
2013-14
2014-15
Pre NELP /CBM
13.72
16.32
KG-D6
18.22
16.53
ONGC
55
58
OIL
9
10
Total availability
from domestic
source (MMSCMD)
95.94
100.85
DGH has calculated gas availability assuming 95% of production available
for
sale as per past data.
While the availability of gas in the entire country is projected
as 95.94 MMSCMD for 2013-14 and 100.85 MMSCMD for 2014-
15, the projected supply of gas from KG-D6 is quantified as 18.22
MMSCMD in 2013-14 and 16.53 MMSCMD for 2014-15. The
availability of gas from non-KG-D6 gas fields as projected for 2013-
14 is 77.72 MMSCMD, and 84.32 MMSCMD for 2014-15.
The note dated 24.06.2013 assesses the impact if power and
fertilizer sectors are given equal priority, and states that a decrease
in supply to fertilizer plants of 9.41 MMSCMD would result in an
additional subsidy burden of Rs.5,372 crores per annum; and, if
the same quantity is produced from imported R-LNG, the annual
subsidy burden would be around Rs.8,595 crores; an increase in
the supply of gas to the power sector by 9.74 MMSCMD would
result in additional production of about 16,624 million kilo watts
per annum; the additional production cost, using domestic gas,
would be Rs.11,300 crores per annum lower than where the same
energy is produced using imported R-LNG; an increase in supply to
the power sector in Andhra Pradesh by 3 MMSCMD would result
in additional production of 4,763 MKWs per annum; and the
additional production cost using domestic gas would be Rs.3,535
crores per annum lower than where the same energy is produced
using imported R-LNG gas. The following proposals were placed for
consideration/approval of the EGoM.
(i) In respect of the inter-se sectoral priority for allocation of NELP gas to
the core sector, approval is sought for one of the following options:-
a) To maintain status quo in the sectoral priority for allocation of NELP gas;
OR
b) To accord equal priority to all core sectors viz., fertilizers, LPG, power
and
CGD for domestic and transport; and re-distribute the available NELP gas
amongst the core sector users, prorated based on the signed GSAs;
OR
c) To accord equal priority to fertilizer and power sectors and re-distribute
the
available NELP gas among the two sectors, prorated based on their signed GSAs.
(ii) In case the EGoM approves the option under para 27(i) (a), RGPPL
may be accorded the same priority as the fertilizer sector, reiterating the
decision taken by EGoM in its meeting held on 23.10.2008;
(iii) to take note of the contents of Para.22 and issue approrpaite
directions;
(iv) To take note of contents of Para.23 and 24 and allow supply of NELP
gas to power plants based on short term PPAs in all such cases where
medium/long term PPAs are not practicable in view of the limited
balance tenure of the GSPAs.
(v) To take note of the contents of Para.25.
The record placed before this Court contains the views of the
Ministry of Power regarding change in the sectoral priority for
allocation of gas, and that highest priority be given to the power
sector along with the fertilizer sector for allocation/supply of
domestic gas including KG-D6 gas. The views of the Member
(Energy), Planning Commission are also noted as suggesting that a
balance be struck between the requirements of the fertilizer sector
and the power sector so that there are no non-performing assets,
and that the economy also grows. The record also contains the
views of the department of fertilizers that replacement of domestic
gas with imported RLNG would cost the exchequer about Rs.1,000
crores for each one MMSCMD of domestic gas.
While the EGoM was appraised of the representations
received from different quarters, and the supply of NELP gas in
May, 2013, there are certain other relevant factors which were not
considered by the EGoM in its meeting held on 23.08.2013.
Details thereof shall be referred to, and its consequences dealt
with, hereinafter.
VII. IS THE EGOM POLICY, OF GIVING HIGHER PREFERENCE
TO THE FERTILISER SECTOR OVER THE POWER
SECTOR, IRRATIONAL AND ARBITRARY
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that the sectoral preference given to fertilizers over
power is irrational, arbitrary and discriminatory as essentially all
industries are alike, and are entitled to equal treatment under Article
14; the impugned policy decision discriminates the power industry
qua the fertilizer industry; the initial burden of showing that the
policy withstands the test of Article 14 is not discharged by the
UoI; the solitary goal of reducing the financial/subsidy burden
cannot constitute a legal object justifying a classification; the
sectoral preference given to fertilizers over power is rendered
irrational and arbitrary as relevant factors have not been taken
into account qua the competing claims of the fertilizers and the
power sectors; the EGOM was predominantly and unjustifiably
swayed by only one factor i.e. subsidy implications on the
Government of India; quite like contractual matters where the
State is an interested party, an executive policy pursued by the
State may render it an interested party; as the State is the
custodian of natural resources, the doctrine of public trusteeship
would require their actions to be subjected to greater scrutiny by
Courts; the financial interest of the Union of India, as an
interested party, does not equate to an overarching public
interest; as it is required for industrial and agricultural
development of the country, electricity should be given the highest
priority next only to CNG; if KG-D6 gas were to be supplied to the
petitioner, the annual cost of generation of 7000 MW would be
Rs.10,165 Crores; the resultant savings, to the people of the State
of Andhra Pradesh and to the nation, would be Rs.35,600 crores
each year; the power sector should be given higher priority as (a)
fertilizers can be imported with a very minimal differential price
whereas there is no scope for importing power to meet the present
shortfall in supply; (b) fertilizer units, which are situated largely in
Western and Northern India, can be operated on imported gas
available from the terminals on the West Coast, whereas there is
no such terminal in the East Coast and it is therefore not possible
to operate power plants on imported gas; (c) 20% of the electricity
generated is used in the agricultural sector and, without power,
agriculturist would not be in a position to gainfully utilize
fertilizers due to lack of irrigation provided by electrically operated
pump sets; (d) power is considered the world over as a basic
industrial sector need essential for all round economic
development of the area; (e) providing subsidy is also a part of the
policy of the Government and cannot, per-se, justify grant of a
better status to the fertilizer industry as compared to the power
industry; and (f) availability of fertilizers, without availability of
power, will not result in an increase in agricultural production.
On the other hand Sri P. Wilson, Learned Senior Counsel
appearing for respondents 1 and 2, would submit that Article 14
is not attracted as fertilizer producers cannot be placed on the
same footing as power producers; unequals cannot be treated as
equals and, hence, discrimination does not arise; the price of
fertilizer is directly and predominantly determined by the price of
gas; giving first priority to the fertilizer sector, in the supply of
domestic gas, fulfils the twin objectives of self-sufficiency in
fertilizers and a lower subsidy burden; domestic LPG is a
subsidized product in which the country is not self-sufficient; any
disruption in supplies of LPG would lead to a public outcry in the
country; the EGoM also decided that higher fractions should be
extracted from gas and, accordingly, the LPG sector should get full
supply of gas; the EGoM includes the Minister of Power and the
Minister of Fertilizers who have individually presented the case of
their respective sectors; the EGoM has taken a considered
decision after taking into account all facts and circumstances; the
power sector continued to get KG-D6 gas preferentially, as per the
MoPNG order dated 30.3.2011, till January 2013 (i.e., for a period
of nearly two years), by diversion of KG-D6 gas from sectors lower
than them in priority; by way of the 2nd prayer, the petitioner
seeks to substitute the existing Government policy with a new
policy to be framed by this Court; a policy can be struck down,
but cannot be re-written by way of judicial review; save the policy
being unconstitutional, or in violation of any statutory provision,
the Courts would not compel the Government to change its policy;
considering the demand and supply need, and to subserve the
best interests of the country, the Government may bring in a new
policy or change the existing policies; Courts refrain from striking
down a policy merely because another policy would be fairer or
wiser or more scientific or more logical; the Government cannot be
divested of its supervisory power to regulate supply and
distribution of gas; and the EGOM decisions have the force of law.
Sri R. Raghunandan, Learned Senior Counsel appearing for
respondents 10 and 11, would submit that, in the present case,
the facts staring at the EGoM were that the available gas was
insufficient to meet the demand, and supply of gas would further
dwindle in the foreseeable future; in these circumstances, EGoM
took the decision to protect the fertilizer industry as its first
priority and, thereafter, the other three categories of consumers;
the decision, on this broad parameter, cannot be challenged on the
alleged ground that the EGoM did not consider the minute details
of allotment; in the present case, the object sought to be achieved
is allocation of scarce gas in a manner which would best sub-serve
the national interest; the differentia applied, to achieve this object,
is the nature of the manufacturing activity of the consumer; and
as long as the policy decision of EGoM is not totally unreasonable
or arbitrary the Court, in the exercise of its power of judicial
review, would defer to the wisdom of the executive in framing a
policy even if it results in hardship to some sections of society.
(a). COURTS DO NOT SIT IN APPEAL OVER POLICIES
MADE BY THE GOVERNMENT:
The earlier decision of MoPNG dated 30.03.2011 and the
decisions of EGoM dated 24.02.2012 and 23.08.2013 are policy
decisions whereby priority in supply of gas has been given to the
core sector vis--vis the non-core sectors; and inter-se the core
sector priority has been accorded to the fertiliser and LPG sectors
over the power sector. The scope of judicial review of an executive
policy is limited. The court cannot impinge upon the judgment of
the executive as to the priorities. (State of H.P. v. Umed Ram
Sharma ). Public authorities must have liberty and freedom in
framing policies. While the discretion is not absolute, unqualified,
unfettered or uncanalised, and the judiciary has control over all
executive actions, Courts are ill-equipped to deal with these
matters. In complex economic and commercial matters, decisions
are taken by the government keeping in view several factors, and it
is not possible for Courts to consider competing claims and
conflicting interests, and conclude which way the balance tilts.
There are no objective, justiciable or manageable standards to
judge the issues nor can such questions be decided on a priori
considerations. (Dhampur Sugar (Kashipur) Ltd. v. State of
Uttaranchal ). It is neither desirable nor advisable for the Court
to direct or sermonise the Government to adopt a particular policy
which it deems fit or proper, as it does not have effective means to
decide which alternative, out of the many competing ones, is the
best in the circumstances. (State of Jharkhand v. Ashok Kumar
Dangi ). In respect of public policies of the Government, the
Court should not become the approval authority. When two or
more options or views are possible, and after considering them the
Government takes a policy decision, it is then not the function of
the court to examine the matter afresh or sit in appeal over such a
policy decision. (Narmada Bachao Andolan v. Union of India ;
BALCO Employees Union (Regd.) v. Union of India ).
(b). THE EXECUTIVE IS ENTITLED FOR SOME PLAY IN
THE JOINTS IN FRAMING AN ECONOMIC POLICY:
In complex economic matters every decision is necessarily
empiric and is based on experimentation. Its validity cannot be
tested on the application of any straitjacket formula. The Court
must, while adjudging the constitutional validity of an executive
decision relating to economic matters, grant a certain measure of
freedom or play in the joints to the executive. Mere errors of the
government are not subject to judicial review. It is only its palpably
arbitrary exercise which can be declared void. The court cannot
strike down a policy decision taken by the Government merely
because it feels that another policy decision would have been fairer
or wiser or more scientific or logical. (Dhampur Sugar (Kashipur)
Ltd.45; Metropolis Theater Co. v. State of Chicago ; State of
M.P. v. Nandlal Jaiswal ). The Government has, while taking a
policy decision, the right to trial and error as long as both trial
and error are bona fide and within the limits of authority. (BALCO
Employees Union (Regd.)48). Reform must begin somewhere if it
has to begin at all and, therefore, the administrator who has
complex problems to solve must be allowed the freedom to proceed
tentatively, step by step. (State of J & K v. Triloki Nath Khosa ).
(c). WISDOM AND ADVISABILITY OF POLICIES ARE,
ORDINARILY, NOT AMENABLE TO JUDICIAL
REVIEW:
It is not for the courts to examine the relative merits of
different economic policies, and consider whether a wiser or better
one can be evolved. Nor are Courts inclined to strike down a policy
merely because it is urged that a different policy would have been
fairer or wiser or more scientific or more logical. (BALCO
Employees Union (Regd.)48). It is not in the domain of the Court
to embark upon the unchartered ocean of public policy. Greater
judicial deference must be shown towards a policy relating to
economic activities. The fact that an economic policy may be
troubled by crudities, inequities, uncertainties or the possibility of
abuse cannot form the basis for striking it down. (Natural
Resources Allocation, In Re, Special Reference No.1 OF 2012 ;
R.K. Garg v. Union of India ).
The judiciary cannot engage in an exercise of comparative
analysis of the fairness, logical or scientific basis, or wisdom of a
policy. The wisdom and advisability of policies are, ordinarily, not
amenable to judicial review unless the policies are contrary to
statutory or constitutional provisions or is arbitrary or irrational or
an abuse of power. (Natural Resources Allocation, In Re, Special
Reference No.1 of 201252; State of M.P. v. Narmada Bachao
Andolan ). The Court is not the forum where conflicting policy
claims may be debated, as it is only required to adjudicate the
legality of a measure which has little to do with the relative merits
of different economic theories. (Natural Resources Allocation, In
Re, Special Reference No.1 of 201252; Rustom Cavasjee Cooper
v. Union of India ).
(d). COURTS DEFER TO THE WISDOM OF EXPERTS IN
FRAMING A POLICY, AND DO NOT SUBSTITUTE
THEIR VIEWS FOR THAT OF THE EXPERTS:
Judges should encroach warily in economic regulatory
measures, as they are not experts in these matters. (Bajaj
Hindustan Ltd. v. Sir Shadi Lal Enterprises Ltd., ). Nothing in
the Constitution warrants a rejection of expert conclusions. Nor,
on the basis of intrinsic skills and equipment, are the Courts
qualified to set their independent judgment on such matters
against that of the chosen state authorities. (Federal Power
Commission v. Hope Gas Co., ; Railroad Commission of Texas
v. Rowan & Nichols Oil Company ). Expertise in public matters
is necessary before one may engage in the making, or in the
criticism, of a policy. Courts do not possess the expertise and are,
consequently, incompetent to pass judgment on the appropriateness
or the adequacy of a particular policy. (Dhampur Sugar (Kashipur)
Ltd.45; Liberty Oil Mills v. Union of India ). The Court does not
supplant the "feel of the expert" by its own views. (Federal Power
Commission57). Matters of economic policy must necessarily be
left to experts. Economic policies are often matters of prediction of
ultimate results on which even experts can seriously err and,
doubtlessly, differ. Courts cannot be expected to decide them
without even the aid of experts. (Natural Resources Allocation, In
Re, Special Reference No.1 of 201252; BALCO Employees
Union (Regd.)48; Peerless General Finance and Investment Co.
Ltd. v. Reserve Bank of India ; M/s. Prag Ice Oil Mills v. Union
of India ). Due respect should be given to the wisdom of those
who are entrusted with the task of framing policies. (Centre for
Public Interest Litigation v. Union of India ). The methodology,
pertaining to disposal of natural resources, is an economic policy
which entails intricate economic choices and the Court lacks
expertise to make them. It would, therefore, not make a
comparative study of the various methods of distribution of natural
resources and suggest the most efficacious mode, if there is one
universal efficacious method in the first place. The wisdom of the
executive must be respected in such matters. (Natural Resources
Allocation, In Re, Special Reference No.1 of 201252). These
factors must, necessarily, be borne in mind while examining the
validity of the impugned policy decisions.
(e). THE POWER TO MAKE A POLICY INCLUDES THE
POWER TO WITHDRAW, CHANGE OR REVISE IT:
While no Court can compel the Government to change its
policy involving expenditure, (Union of India v. Tejram
Parashramji Bombhate ), the policies of the Government ought
not to remain static. What may have been in the public interest at
a point of time may no longer be so. (BALCO Employees Union
(Regd.)48). The earlier policy decisions of the MoPNG dated
30.03.2011, and the EGoM decision dated 24.02.2012, have been
modified, albeit to a limited extent, by the policy decision of the
EGoM dated 23.08.2013. The power to lay policy by executive
decisions includes the power to withdraw the earlier policy or to
change it. (Bajaj Hindustan Ltd.56). The action of the Government
cannot be declared illegal, arbitrary or ultra vires the provisions of
the Constitution merely on the ground that the earlier policy had
been given up, changed or not adhered to. It cannot also be
attacked on the plea that the earlier policy was better suited to the
prevailing situation. (Dhampur Sugar (Kashipur) Ltd.45).
Whether the policy should be altered or not is a matter for
the Government to decide. (Federal Power Commission57). When
the Government is satisfied that a change in the policy is
necessary in the public interest, it would be entitled to revise the
policy and lay down a new policy. It is equally entitled to issue or
withdraw or modify the policy. The Court would not bind the
Government with a previous policy. (P.T.R. Exports (Madras) Pvt.
Ltd. v. Union of India ). The Court cannot strike down a policy
merely because there is a variation. Consistency is not always a
virtue. What is important is to know whether irrational and
extraneous factors foul. There can be no quarrel if a policy is
revised. The wisdom of yesterday may obsolesce into the folly of
today, even as the science of old may sour into the superstition
now, and vice versa. (Tamil Nadu Education Deptt. Ministerial &
General Subordinate Services Assn. v. State of T.N. ).
(f). GROUNDS ON WHICH A POLICY DECISION IS
SUBJECT TO JUDICIAL REVIEW:
While the scope for interference is limited, policy decisions
are, nonetheless, not beyond the pale of judicial review. The
Court would not lay its judicial hands off merely because a plea is
raised that the decision is a policy decision. Interference by the
Court in such matters is not without jurisdiction as a policy
decision is also subject to judicial review. Broadly, a policy
decision is subject to judicial review on the following grounds: (a) if
it is unconstitutional; (b) if it is dehors the provisions of the Act
and the regulations; (c) if the delegatee has acted beyond its power
of delegation; (d) if the executive policy is contrary to a statutory or
a larger policy. (DDA v. Joint Action Committee, Allottee of SFS
Flats ). When it is demonstrated that the policy framed by the
State and/or its implementation is contrary to public interest, or is
violative of the constitutional principles, it is the duty of the Court
to exercise its jurisdiction in larger public interest and reject the
plea of the State that the scope of judicial review should not be
exceeded beyond recognised parameters. (Centre for Public
Interest Litigation62).
The essence of judicial review is a constitutional
fundamental. (Narmada Bachao Andolan47; BALCO Employees
Union (Regd.)48). Keeping in view its constitutional duty, and the
constitutional rights of citizens, the Court is duty-bound to extend
its arm in accordance with the principle est boni judicis ampliare
justiciam non-jurisdictionem. The argument that matters of policy
are, as a rule, beyond the power of judicial review has to be
dispelled. The Court would ensure that the rule of law prevails
and the constitutional goals are not defeated by inaction when the
policy is so arbitrary that it defeats the larger public interest. (Brij
Mohan Lal v. Union of India ). The scope of judicial review of a
government policy is to scrutinize whether it violates the
fundamental rights of the citizens or is opposed to the provisions of
the Constitution of India or to any statutory provision or is
manifestly arbitrary. The legality, and not the wisdom or
soundness, of the policy is subject to judicial review. (Asif Hameed
v. State of J & K. ; Shri Sitaram Sugar Co. Ltd. v. Union of
India ; Khoday Distilleries v. State of Karnataka ; BALCO
Employees Union48; State of Orissa v. Gopinath Dash and
Akhil Bharat Goseva Sangh v. State of Andhra Pradesh ;
Dhrangadhra Prakruti Mandal37). The basic test is to see whether
the decision-maker has understood correctly the law that regulates
his decision- making power and he must give effect to it otherwise
it may result in illegality. The grounds upon which administrative
action is subjected to control by judicial review are classifiable
broadly under three heads, namely illegality, irrationality and
procedural impropriety. All errors of law are jurisdictional errors.
(Reliance Energy Ltd. v. Maharashtra State Road Development
Corpn. Ltd. ; Reliance Airport Developers (P) Ltd. v. Airports
Authority of India ).
Courts interfere when the economic policy is demonstrated
to be violative of constitutional or legal limits on power or is
abhorrent to reason, (BALCO Employees Union (Regd.)48), or if it
is patently arbitrary, discriminatory or mala fide. (Dhampur Sugar
(Kashipur) Ltd.45; Metropolis Theater Co.49; Nandlal Jaiswal50).
Any act of the repository of power, whether legislative or
administrative or quasi-judicial, is open to challenge if it is in
conflict with the Constitution or the general principles of law or it
is so arbitrary or unreasonable that no fair minded authority could
ever have made it. (Shri Sitaram Sugar Co. Ltd.69; Kruse v.
Johnson ; Associated Provincial Picture Houses Ltd. v.
Wednesbury Corporation ; Chertsey UDC v. Mixnam
Properties Ltd., ; Commissioners of Customs and Excise v.
Cure and Deeley Ltd., ). The doctrine of judicial review implies
that the repository of power acts within the bounds of the
delegated power, and does not abuse it. He must act reasonably
and in good faith. (Maneka Gandhi v. Union of India ; Shri
Sitaram Sugar Co. Ltd.69; Natural Resources Allocation, In Re,
Special Reference No.1 of 201252; Premium Granites v. State of
T.N. ). The Courts may interfere where a decision, made in the
purported exercise of power, is such that a repository of the power,
acting reasonably and in good faith, could not have made it.
(Union of India v. International Trading Co. ; G.B. Mahajan v.
Jalgaon Municipal Council ).
(g). COURTS WILL STRIKE DOWN A POLICY, INVOLVING
DISTRIBUTION OF NATURAL RESOURCES, IF IT
FALLS FOUL OF ARTICLE 14:
As they constitute public property/national assets, the State,
while distributing natural resources, is bound to act in consonance
with the principles of equality and public trust and ensure that no
action is taken which may be detrimental to public interest.
(Centre for Public Interest Litigation62; Natural Resources
Allocation, In Re, Special Reference No.1 of 201252; Natural
Resources Allocation, In re ). The Court can test the legality
and constitutionality of the methods of distribution of natural
resources, analyse the legal validity of different means of
distribution, and give a constitutional answer as to which methods
are either ultra vires or intra vires the provisions of the
Constitution. If a policy or law is patently unfair to the extent that
it falls foul of the fairness requirement of Article 14 of the
Constitution, the Court would not hesitate in striking it down.
(Natural Resources Allocation, In Re, Special Reference No.1 of
201252). As natural resources are public goods, the doctrine of
equality, which emerges from the concepts of justice and fairness,
must guide the State in determining the actual mechanism for its
distribution. In this regard, the doctrine of equality has two
aspects: first, it regulates the rights and obligations of the State
vis--vis its people and demands that the people be granted
equitable access to natural resources and/or its products and that
they are adequately compensated for the transfer of resource to the
private domain; and second, it regulates the rights and obligations
of the State vis-a-vis private parties seeking to acquire/use the
resource, it demands that the procedure adopted for distribution is
just, non- arbitrary and transparent, and does not discriminate
between similarly placed private parties. (Natural Resources
Allocation, In Re, Special Reference No.1 OF 201252; Natural
Resources Allocation, In re83).
(h): DOCTRINE OF PUBLIC TRUST:
In a constitutional democracy like ours, the national assets,
such as natural gas, belong to the people. The people of the entire
country have a stake in natural gas, and its benefit has to be
shared by the whole country. There should be a just and
reasonable use of natural gas for national development. (Special
Reference No. 1 of 2001, In re ; Reliance Natural Resources
Ltd.1). The natural resource i.e., gas is vested in the UOI to be
held in trust on behalf of the people. The State is the trustee of all
natural resources which are, by nature, meant for public use and
enjoyment. (Intellectuals Forum v. State of A.P., ; Natural
Resources Allocation, In re, Special Reference No. 1 of 201252;
M.C. Mehta v. Kamal Nath ). The Government owns the gas till
it reaches its ultimate consumer. It has supervisory powers to
regulate the supply and distribution of gas. (Reliance Natural
Resources Ltd.1).
The broader notion of public trust is that the sovereign
rights of the Nation-States over certain environmental resources
are not proprietary, but fiduciary. (Reliance Natural Resources
Ltd.1). The idea of public trusteeship rests upon three related
principles. First, that certain interests have such importance to the
citizenry as a whole that it would be unwise to make them the
subject of private ownership. Second, that they partake so much of
the bounty of nature, rather than of individual enterprise, that
they should be made freely available to the entire citizenry, without
regard to economic status. And finally, that it is a principal
purpose of the Government to promote the interests of the general
public rather than to redistribute public goods from public uses to
restricted private benefits. (Reliance Natural Resources Ltd.1).
Public trust is an affirmation of the duty of the State to
protect the peoples common heritage surrendering the right only
in those rare cases when the abandonment of the right is
consistent with the purposes of the trust. (Intellectuals Forum85;
National Audubon Society v. Superior Court of Alpine
Country ; Natural Resources Allocation, In re, Special
Reference No. 1 of 201252). When the State holds a resource that
is freely available for the use of the public, it provides for a high
degree of judicial scrutiny on any action of the Government that
attempts to restrict such free use. To properly scrutinise such
actions of the Government, the courts must make a distinction
between the Governments general obligation to act for the public
benefit, and the special, more demanding, obligation which it may
have as a trustee of certain public resources (Intellectuals
Forum85; Joseph L. Sax The Public Trust Doctrine in Natural
Resource Law: Effective Judicial Intervention; Michigan Law
Review, Vol. 68, No. 3 (Jan. 1970) pp. 471-566]. Three types of
restrictions on governmental authority are often thought to be
imposed by the public trust doctrine (1) the property subject to the
trust must not only be used for a public purpose, but it must be
held available for use by the general public; (2) the property may
not be sold, even for fair cash equivalent; (3) the property must be
maintained for particular types of use (i) either traditional uses, or
(ii) some uses particular to that form of resources. (Intellectuals
Forum85). The public trust doctrine is a specific doctrine with a
particular domain and has to be applied carefully. (Natural
Resources Allocation, In re, Special Reference No. 1 of 201252).
(i). THE TWIN TESTS TO BE SATISFIED FOR A
CLASSIFICATION TO BE HELD REASONABLE
UNDER ARTICLE 14 OF THE CONSTITUTION:
The mere fact that the fertilizer sector and the power sector
are two different categories of consumers of gas would not, by
itself, mean that the priority given to the former over the latter is
not ultra-vires Article 14 of the Constitution. The equality doctrine
in Article 14 permits reasonable classification which satisfies the
twin tests of being founded on an intelligible differentia which
distinguishes persons or things that are grouped together from
those that are left out of the group, and that differentia must have
a rational nexus to the object sought to be achieved. Executive
action may, accordingly, be sustained if it satisfies the twin tests of
a reasonable classification and the rational principle correlated to
the object sought to be achieved. The twin tests can only be
satisfied if it is established that the principle on which
classification is founded is rational, and it correlates to the objects
sought to be achieved. (Ramana Dayaram Shetty v. International
Airport Authority of India ; D.S. Nakara v. Union of India ).
Article 14 is violated where equals are treated differently without
any reasonable basis. (Ajay Hasia v. Khalid Mujib Sehravardi ;
D.S. Nakara89).
A person, setting up a grievance of denial of equal treatment,
must establish that, between persons similarly circumstanced,
some were treated to their prejudice and the differential treatment
has no reasonable relation to the object sought to be achieved.
(Gauri Shanker v. Union of India ; Western U.P. Electric Power
& Supply Co. Ltd. v. State of U.P. ). The classification may be
founded on different basis. What is necessary is that there must
be a nexus between the basis of classification and the object of the
policy under consideration. (Gauri Shanker91; Ram Krishna
Dalmia v. Justice S.R. Tendolkar ; Budhan Choudhry v. State
of Bihar ). The classification must rest upon a real and
substantial distinction bearing a reasonable and just relation to
the thing in respect to which the classification is made; and
classification made without any reasonable basis should be
regarded as invalid. (Bidi Supply Co. v. Union of India ; State
of West Bengal v. Anwar Ali Sarkar ).
If the policy decision is demonstrably capricious or arbitrary
or it suffers from the vice of discrimination, the policy decision can
be struck down. A public policy can be tested in the context of
illegality and unconstitutionality. (Krishnan Kakkanth v. Govt. of
Kerala ). If the policy of the Government fails to satisfy the test of
reasonableness, it would be unconstitutional. What is imperative
and implicit in terms of Article 14 is that a policy is made fairly,
and not arbitrarily. The basic requirement of Article 14 is fairness
in action by the State, and non-arbitrariness in essence and
substance is the heart beat of fair play. Actions are amenable, in
the panorama of judicial review, to the extent that the State must
act validly for a discernible reason, not whimsically for any ulterior
purpose. (International Trading Co.81). The exercise of discretion
is impeachable on well accepted grounds such as 'ultra vires' or
'unreasonableness'. (Shri Sitaram Sugar Co. Ltd.69). The ultimate
test is whether, on the touchstone of reasonableness, the policy
decision comes out unscathed. (Internatinal Trading Co.81).
If the policy of the government fails to satisfy the test of
"reasonableness", then such a decision would be unconstitutional.
(Reliance Energy Ltd.73). A policy, or a change in it, can only be
justified on the Wednesbury test of reasonableness. (R. v. Secy. of
State for the Home Deptt., ex p Hargreaves ; Punjab
Communications Ltd. v. Union of India ; R. v. Secy. of State
for Transport, ex p Richmond upon Thames London BC ;
Punjab Communications Ltd.99). The Wednesbury principle of
reasonableness is that an administrative decision is unlawful if it
is so outrageous in its defiance of logic or of accepted moral
standards that no sensible person, who had applied his mind to
the question to be decided, could have arrived at it. (R. v. Secy. of
State for the Home Deptt., ex p Hargreaves98; Punjab
Communications Ltd.99).
These principles must be borne in mind while examining
whether the policy decisions of the Government of India, in
according priority to fertilizers over power, satisfy the requirements
of a valid classification under Article 14 of the Constitution of
India. Before doing so, it is necessary to examine whether the
onus lies on the petitioner or on the Union of India to establish the
validity or otherwise of the classification.
(j). BURDEN TO PROVE THE VALIDITY OR OTHERWISE
OF A CLASSIFICATION:
In order to establish that the protection of the equality
clause has been denied to them, it is not enough for the petitioners
to say that they have been treated differently from others, not even
enough that a differential treatment has been accorded to them in
comparison with others similarly circumstanced. Discrimination is
the essence of classification and does violence to the constitutional
guarantee of equality only if it rests on an unreasonable basis. It is
for the petitioners to show that the classification is unreasonable
and bears no rational nexus with its purported object. (Triloki
Nath Khosa51). The person assailing the classification "carries the
heavy burden of making a convincing showing that it is invalid
because it is unjust and unreasonable in its consequences, (Shri
Sitaram Sugar Co. Ltd.69; Federal Power Commission57), or that
there has been a clear transgression of the constitutional
principles. (Ram Krishna Dalmia93; Gauri Shanker91). Where a
party seeks to impeach the validity of a policy made by a
competent authority on the ground that they offend Article 14, the
burden is on him to plead and prove the infirmity, to set out facts
necessary to sustain the plea of discrimination, and to adduce
cogent and convincing evidence to prove those facts for there is
a presumption that every factor which is relevant or material has
been taken into account in formulating the classification. Unless
the classification is unjust on the face of it, the onus lies upon the
party attacking the classification to show, by pleading and placing
the necessary material before the Court, that the said classification
is unreasonable and is violative of Article 14 of the Constitution.(
Triloki Nath Khosa51; G.D. Kelkar v. Chief Controller of
Imports and Exports ). While this is ordinarily the rule, the
doctrine of public trust, which requires the Court to undertake a
stricter judicial scrutiny in matters involving distribution of scarce
natural resources, constitutes an exception thereto, warranting the
initial onus being placed on the State to justify the classification,
instead of on persons impeaching its validity.
As noted hereinabove the IPPs (members of the first
petitioner association), the Government of A.P. and the A.P.
DISCOMS claim that the power sector should be given priority over
the fertilizer sector in the supply of NELP gas. They claim that gas
based power offers substantial environmental benefits; it requires
just 1/10th of the land area as compared to coal; its water
requirements are much lower, and it is 20% more efficient;
fertiliser manufacturing units can use other fuels apart from
natural gas, and can also import gas from abroad; as an
alternative to its indigenous production, fertilizer can be imported;
however there is very little scope for import of electricity; electricity
cannot be generated in the east coast by using imported gas, as
there is no LNG terminal presently available thereat; production of
electricity, by use of imported gas, is not economical; at no point of
time, prior to 30.03.2011, had the EGoM applied the reverse cut
within the four core-sectors; when gas production from KG D6
reached its optimum level during 2009-10, allocation to the
fertilizer sector was 15.7 MMSCMD; and this was continued
arbitrarily despite there being a drastic reduction in supply from
KG D6.
On the other hand both the Union of India, and the fertilizer
Association, contend that the fertilizer sector has been justifiably
given priority over the power sector in the supply of NELP gas.
They claim that the consumption of urea in the country is 58
million metric tonnes of which 18 million metric tonnes is
produced from domestic natural gas, and 4 million metric tonnes
from LNG; the price of fertilizer is directly and predominantly
determined by the price of gas; 20% - 30% of the total urea
consumed in the country is imported, and self-sufficiency can only
be achieved if supply of domestic natural gas, for domestic urea
units, is ensured; the cost of production of urea, on the use of R-
LNG, is even higher than the imported price of urea; India is the
second largest consumer of fertilizers only after China; as against
the 59 million tonnes of fertilisers consumed in 2011-12, at an
imported cost of Rs.24,564 per tonne, the domestic cost of
production, using a mix of domestic and imported gas, is only
Rs.11,000 per tonne; the farmer buys urea at a statutory price of
Rs.5,360 per tonne, and the Government bears a subsidy of
Rs.5,640 per tonne on domestic urea; the subsidy on imported
urea is Rs.18,640 per tonne; this has led to a ballooning of the
subsidy estimate of Rs.70,013 crores; urea fertiliser plants sell
their products at controlled rates; if not produced domestically,
urea will have to be imported at a much higher cost or will have to
be produced at a higher price through RLNG, and then subsidized
through the Union Budget; the huge subsidy burden will be
substantially higher if RLNG is used instead; any increase in the
cost of fertiliser, as a result of non-availability of gas, will only
push up the cost of urea and fertilisers which will have a cascading
effect on the cost of agriculture; in order to reduce its subsidy
burden, the Government of India directed the fertiliser
manufacturing units to dispense with the use of naptha, and
change over to natural gas, within a period of three years; it was
made clear that units, which did not change over, would not
receive any subsidy; the fertiliser companies have received firm
allocation from the Government of India before setting up their
fertiliser plants; in contrast, the allocations sought for by power
producing companies is only after they were established; fertilizer
is sold below cost price, and the entire subsidy burden is borne by
the Central Government; and priority to the fertilizer sector fulfils
the twin objectives of self-sufficiency in fertilizers and a lower
subsidy burden on the Union of India.
The fertiliser sector, which consists of urea and fertiliser
manufacturing units, forms a distinct and separate class from the
power sector which consists of electricity generating units. The
differentia between the fertiliser sector and the power sector is
intelligible. The stated objects, in according priority to the fertilizer
sector over the power sector, are self-sufficiency in domestic
fertilizer production and reduction in the subsidy burden of the
Union of India of around Rs.70,000/- crores per annum. The
differentia between the fertiliser and the power sector has a
reasonable nexus to the object sought to be achieved. In examining
the validity of a classification, on the touchstone of Article 14, it is
not prudent or pragmatic to insist on a mathematically accurate
classification covering diverse situations and all possible
contingencies in view of the inherent complexities involved. (State
of Karnataka v. Mangalore University Non-Teaching Employees
Association ). The Government enjoys considerable latitude,
and exercises its power of classification enriched by its experience
and taking into consideration myriad circumstances. (Ombalika
Das v. Hulisa Shaw ). Precision and arithmetical accuracy will
not exist in any categorisation, and such precision and accuracy is
not what Article 14 contemplates. As long as the broad features of
the categorisation are identifiable and distinguishable, and the
categorisation is reasonably connected with the object targeted,
Article 14 does not forbid such a course of action. (Subramanian
Swamy v. Raju ; Murthy Match Works v. CCE ; Roop Chand
Adlakha v. DDA ; Kartar Singh v. State of Punjab ; Basheer
v. State of Kerala ; B. Manmad Reddy v. Chandra Prakash
Reddy and Transport and Dock Workers Union v. Mumbai
Port Trust ). It is evident that the classification between the
fertilizer sector and the power sector, in according priority in
supply of NELP gas to the former over the latter, satisfies the twin
tests of a reasonable classification and cannot, therefore, be said to
be in violation of Article 14 of the Constitution.
While the anguish of gas based power plants in Andhra
Pradesh (whose cause is also supported by the Government of A.P.
and the A.P. DISCOMS), may necessitate ameliorative measures
being taken to ensure effective utilization of public assets of
around Rs.30,000 crores, and an unutilised power generation
capacity of 7000 MW, this Court must bear in mind that these are
all matters of balancing equities between two vital sectors of the
economy. While the stricter judicial scrutiny test, applicable to
cases attracting the doctrine of public trust, may justify the initial
onus, of establishing that the subject classification does not violate
Article 14, being placed on the UoI instead of the petitioners, that
does not, however, mean that this Court can act as an appellate or
approving authority and dissect the decision making process of the
EGoM to determine whether priority should be given to the
fertiliser sector or the power sector in the supply of natural gas.
Suffice it to hold that, on the application of the wednesbury test of
reasonableness, it cannot be said that according priority to the
fertiliser sector over the power sector, to achieve the twin objects of
self sufficiency in domestic fertilizer production and to avoid a
higher subsidy burden on the Union of India, is neither so
outrageous in its defiance of logic nor is it so unreasonable as to
violate Article 14 of the Constitution of India. Further, as it is ill-
equipped to examine these complex issues, this Court would defer
to the wisdom of experts and not sit in judgment over the policy
decisions of the Union of India in this regard.
VIII. IS THE DIFFERENTIAL TREATMENT ACCORDED TO
POWER PLANTS IN THE WEST COAST, AS AGAINST
POWER PLANTS IN THE EAST COAST, DISCRIMINATORY
AND IN VIOLATION OF ARTICLE 14 OF THE
CONSTITUTION OF INDIA
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that the policy of distribution and allocation of
natural gas, adopted by the UoI, must be uniform for both KG-D6
and non-KG-D6 gas, failing which it would be arbitrary thereby
violating Article 14; two agencies of the UoI viz. EGoM and MoPNG
have been constituted and entrusted with the task of enacting a
policy in respect of allocation of the same commodity, being natural
gas, in two separate dispensations; that does not justify
differentiation since the commodity sought to be distributed, as well
as the decision maker, is one and the same; any such distinction or
differentiation must have a rational basis failing which it would
attract the vice of arbitrariness; the policy decisions of EGoM and
MoPNG, in respect of gas in KG D6 and non-KG-D6 gas, are non-
uniform; there is no intelligible classification for such
differentiation; the said policy decision of the UoI is, therefore,
violative of Article 14 of the Constitution; natural gas should be
considered a single basket throughout the country; there is no
uniform policy for supply of APM, non-APM, and KG-D6 gas; in
respect of APM and non-APM gas pro-rata cuts are being imposed,
as a result of which both fertilizer and power units get reduced
supply depending on their allocation; a reverse cut is applied in
KG-D6 and, unlike APM and Non-APM gas, there is no pro-rata cut
in supply of gas to the power sector and the fertilizer sector;
resultantly, power plants on the West Coast are in a much better
position as compared to the petitioners power plants; the sole
justification, for such discriminatory treatment, is that non-KG-D6
Gas is produced in many scattered blocks and lacks portability and
connectivity to the gas pipeline; from out of 66.22 mmscmd
available gas in non-KG D6, there are portability issues only in
relation to 11 mmscmd which is not supplied to the pipeline grid;
in respect of the remaining extent, natural gas must be treated as
one for the purpose of allocation; the petitioners have filed their
affidavit dated 23.01.2014 placing the same on record; the UoI has
not placed any data on record to the contrary; in any event, no
such material was placed for consideration before the EGoM, and
the EGoM did not consider this relevant aspect while framing a
divergent policy on behalf of the same UoI in respect of KG D6;
resultantly the supply of gas to the petitioners power plants has
been reduced to zero since March 2013; these plants have been
lying idle ever since, as opposed to power plants in the West Coast
which are still operational; the policy (and the mode of allocation
being intertwined with it) results in discrimination between
industries within the power sector itself as the Union of India has
not disputed its obligation to treat all power industries alike; they
did not also dispute the contention that RGGPL is similar to any
other power plant and is, therefore, not entitled to a higher
preference in allotment of gas; as it is the public trustee of gas no
differentiation can be made by the UoI with regards gas
finds/discoveries in different regions unless an intelligible
distinction can be made; otherwise all gas discoveries must be
treated as falling within one basket; the submission that, in non-
KG D6, MoPNG is achieving a "near" reverse cut regime is a tacit
acknowledgement of the requirement of maintaining parity in the
manner of allocation; there is no uniformity in the supply of gas
even within the power sector; while there is no alternate supply of
fuel to members of the petitioner-association, because of the lack
of a terminal in the East Coast, yet no priority has been accorded
to them vis--vis power generating units situated in Western and
Northern India which are not only being supplied domestic gas but
have access also to imported gas because of availability of
terminals, to store and supply such gas, in Western India.
On the other hand Sri P. Wilson, Learned Senior Counsel
appearing on behalf of respondents 1 and 2, would submit that
the Government can regulate and distribute natural gas, through
allotments and allocation, in a manner which would sub-serve the
best interests of the country; framing of the "gas utilization
policy", identifying the priority sectors, allocating the requisite
quantities in accordance with the needs of the said sectors, and
subjecting marketing freedom to the order of priority and the
guidelines framed, is in accordance with law; all gas allocations
made so far by the Government are strictly in accordance with
the aforesaid policy; the discretion exercised by the UoI, in the
allocation and allotment of gas, is in public interest and is in
accordance with the standards and norms prescribed under the
policy laid down by the EGoM for NELP gas; the first respondent
is following the policy decisions of the EGoM, and is supplying gas
as per the priorities decided by them; APM & non-APM gas cannot
be compared with KG-D6 gas; while KG-D6 gas is produced from a
single geographical location in Andhra Pradesh, APM gas is
produced from many blocks scattered over many States; the
peculiarities of APM gas are localised supplies, distributed
production from several fields etc; APM gas and KG-D6 gas are
completely different classes, and are not equal; the petitioners
have wrongly submitted that East coast power plants do not have
access to imported R-LNG; on the request of APTRANSCO,
respondents 1 and 2 have allowed swapping of R-LNG with KG-D6
gas for supply of R-LNG to Andhra Pradesh IPPs; transportation of
gas is a natural corollary of finding gas in a certain region and,
being a national asset, gas has to be allocated to everybody based
on a national policy keeping in view public interest.
Sri R. Raghunandan, Learned Senior Counsel appearing for
respondents 10 and 11, would submit that the premise that the
differential treatment meted out to power plants, under different
gas allocation regimes of APM, non-APM, Pre-NELP and NELP,
would result in violation of Article 14 of Constitution of India is
unfounded; differential treatment, under different regimes, is a by-
product of the manner in which gas has been allocated over a
period of time; allocation of gas, under various regimes, came to be
made in circumstances existing at the time of allocation of gas;
industries were not only established on the basis of such
allocation, but are also functioning on such a basis; and treating
all the gas available in the country as forming one pool, to be
equally distributed, would itself result in violation of Article 14 of
Constitution of India as such a policy would not only disrupt
existing allocations which have been acted upon, but would also
amount to discrimination under Article 14 of Constitution of India
as un-equals would be treated as equals under this system of
allocation.
The amended second prayer, as sought for by the petitioners,
is to direct respondents 1 and 2 to modify the EGoM decision dated
24.02.2012 and the subsequent EGoM decisions including those
dated 17.07.2013 and 23.08.2013 so as to enable supply of gas to
gas based power plants of the members of the petitioner on priority
over other consumers of gas in the KG-basin, at least till such time
LNG Terminals are set up in the east coast of the country to enable
supply of generated power to AP DISCOMS. The Court cannot
rewrite, recast or reframe the legislation/policy as it has no power
either to legislate or frame a policy. Courts decide what the law is
and not what it should be. (Deoki Nandan Aggarwal43; P.K. Unni
v. Nirmala Industries ; Mangilal v. Suganchand Rathi ; Sri
Ram Ram Narain Medhi v. State of Bombay ; Hira Devi (Smt)
v. District Board, Shahjahanpur ; Nalinakhya Bysack v.
Shyam Sunder Haldar ; Gujarat Steel Tubes Ltd. v. Gujarat
Steel Tubes Mazdoor Sabha ; G. Narayanaswami v. G.
Pannerselvam ; N.S. Vardachari v. G. Vasantha Pai ; Union
of India v. Sankal Chand Himatlal Sheth ; and CST v. Auriaya
Chamber of Commerce, Allahabad ).
Courts do not stray into the executive domain or in matters
of policy. The Court cannot, by a judicial order, first create a law or
frame a policy, and then seek to enforce it. (Aravali Golf Club v.
Chander Hass ; Deoki Nandan Agarwal43; Vemareddy
Kumaraswamy Reddy v. State of A.P ; Suresh Seth32; and Bal
Ram Bali v. Union of India ). No mandamus can, therefore, be
issued to respondents 1 and 2 to modify the EGoM decisions. The
Court can however modify the relief, and grant the petitioner the
modified relief, as long as the relief granted does not go beyond the
relief sought for in the Writ Petition. Article 226 of the
Constitution empowers the High Court to issue orders for any
other purpose, apart from Writs for the enforcement of any of the
rights conferred by Part III of the Constitution of India. This Court,
in Writ proceedings under Article 226 of the Constitution, has the
power to mould the relief taking into account the totality of the
circumstances, and the exigencies of the situation. It is the duty of
this Court to ensure that ends of justice are not allowed to be
frustrated, and the discretion to mould the relief should be so
exercised as to ensure substantial justice. (D. Satyanarayana v.
N.T. Rama Rao ).
With respect to the natural resources, extracted and
exploited from the geographic zones specified in Article 297, the
UoI may not, among others, allow a situation to develop wherein
the various users in different sectors could potentially be deprived
of access to such resources; allow the extraction and distribution
without periodic evaluation of the current distribution and making
an assessment of how greater equity can be achieved, as between
sectors and also between regions; and no end user may be given
any guarantee for continued access and of use beyond a period to
be specified by the Government. Any arrangement which does not
take within its ambit, the afore-stated principles, may fall foul of
Article 14 of the Constitution. (Reliance Natural Resources Ltd.1).
Whether the policy is framed by the MoPNG, or the EGoM,
they are policy decisions of the Union of India. Natural gas is a
national resource of which the UoI is the trustee. As natural gas is
a national asset it must be made available for use by citizens all
over the country, and no State can claim preference on the ground
that the gas fields fall within its territorial limits. The claim by
IPPs in the Andhra Pradesh, of being entitled to preference in the
supply of gas from the KG-D6 gas fields located within the State of
Andhra Pradesh on the ground that their power plants are also
located within Andhra Pradesh, does not, therefore, merit
acceptance. By the same analogy, power plants in the North and
West of India cannot claim priority in allotment of non-KG-D6 gas
merely on the basis of the location of the gas fields from where gas
is supplied. In all fairness it must be stated that respondents 1
and 2, in their counter-affidavits filed before this Court, do not
make any such assertion.
While examining whether the classification, of power plants
in the north and west of the country, and power plants in the East
coast, is founded on an intelligible differentia, it must be borne in
mind that, even if there be one class having several categories with
different attributes and incidents, such a category becomes a
separate class by itself and no difference or discrimination between
such category and the general members of the other class would
amount to discrimination or to denial of the equality clause, (Air
India v. Nergesh Meerza ). However Sri P. Wilson, Learned
Senior Counsel appearing on behalf of respondents 1 and 2, has
not been able to show, from the material on record, the different
attributes and incidents, if any, between power plants in the North
and West of India and those on the East coast. It is evident,
therefore, that gas based power plants all over the country form a
homogenous class. As such, the first of the twin tests of a
reasonable classification is not satisfied.
KG-D6 gas is produced from a single geographical location
situated in AP. However APM and non-APM gas are produced from
many blocks scattered over many States. Natural gas under APM
was allocated to units located in the western and northern parts of
the country prior to 2007-2008 when there was no pipeline
infrastructure to carry gas from west to east. The east and west
pipeline infrastructure was completed in the year 2007-2008. The
gas available from KG-D6 is transported through a major single
pipeline i.e., the east-west pipeline which has connectivity with the
gas grid for distribution of gas in Andhra Pradesh, and connectivity
with GSPC and GAILs pipeline network in the western and
northern parts of the country. Prior to March, 2011, MoPNG had
stipulated, as was the practice for APM gas, cuts to be enforced on
a pro-rata basis even in the KG-D6 basin. By the order of the
MoPNG dated 30.03.2011, cuts have been stipulated on a reverse
priority basis in KG-D6 basin, with the first to be affected being the
power sector. However, in the case of non-KG-D6 gas, cuts are
still being imposed on a pro-rata basis and there is no change in
the priority of usage of non-KG-D6 gas because of reduction of
supply from KG D6 gas fields. No gas has been made available to
A.P. projects, from gas fields in the west coast, through the East-
West pipeline though it has been in existence from 2007-2008. As
all the RNLG terminals are located in the west coast, RNLG is
being imported and supplied to plants in the western and northern
States. There is no LNG terminal in the east coast. The
production of gas in the KG D6 basin reached its peak of 60
MMSCMD in March, 2010 and, thereafter, the production has
decreased steadily. The steep fall in production at KG-D6 has
resulted in gas being supplied only to the fertilizer and LPG
sectors, and KG-D6 gas is not being supplied to the power sector
from Feb/March, 2013.
Prior to the decision of EGoM dated 23.08.2013, supply of
gas was limited by the total allocation from the KG D6 basin to the
fertilizer sector at 15.67 MMSCMD. The limit imposed by the
decision of the EGoM dated 23.08.2013 restricting supply of
domestic gas, (NELP gas plus other domestic gases), to the fertilizer
sector to 31.5 MMSCMD, against their total allocation of 54.18
MMSCMD, is of no avail to the IPPs in Andhra Pradesh as, even
according to respondents 1 and 2, the average domestic gas
supplied from the KG D6 basin, during the three month period
from April to June 2014, was only 12.79 MMSCMD, the entire KG
D6 gas was being supplied to the fertilizer sector, and a part
thereof has been utilized for operation of the East West pipeline.
In view of the pro-rata cut in non-NELP gas it is highly unlikely
that the requirement of 31.5 MMSCMD of the fertilizer sector
would be met before exhausting the full allocation of 15.67
MMSCMD of KG-D6 gas to them. As against the three month
average supply of gas from KG-D6, between April to June 2014 of
12.79 mmscmd, the note dated 24.06.2013, placed before the
EGoM in its meeting held on 23.08.2013, projects the availability
of KG-D6 gas for 2013-14 as 18.22 mmscmd and for 2014-15 at
16.53 mmscmd. As the allocation of KG-D6 gas to the fertilizer
sector is 15.67 mmscmd and is 2.59 mmscmd to the LPG sector,
i.e a total of 18.26 mmscmd, which is more than the projected
availability of KG-D6 gas for the years 2013-14 and 2014-15, the
submission of Sri S. Niranjan Reddy, Learned Counsel for the
petitioners, that the proposed supply of additional gas to the power
sector as per the EGoM decision dated 23.08.2013 (which is
subject to availability of gas from the KG D6 field) is merely an eye
wash, is not unjustified.
While fertilizer units are said to be receiving 100% of the
available KG-D6 gas, the supply of KG-D6 gas to the power sector
is zero. However, because of the pro-rata cuts, supply of non-KG-
D6 gas to the fertilizer sector is said to be 30%, and the power
sector is said to be receiving 50% of the available non-KG-D6 gas.
Depletion in availability of gas in the KG-D6 basin has resulted in
zero supply of gas to the power sector (IPPs in Andhra Pradesh) as
the gas supply from the KG-D6 basin is insufficient to meet the
entire allocation of gas of the fertilizer and LPG sectors. However
the pro-rata cut imposed in the supply of non-NELP gas has only
resulted in a pro-rata reduction in supply of gas to the fertilizer,
LPG and power sectors and, thereby, the power plants located in
the Northern and Western parts of the country continue to be
supplied gas, albeit of a reduced extent.
The justification given by respondents 1 and 2, for adopting
a different criteria for power plants in western and northern parts
of the country on the one hand and those on the east coast on the
other, is that non-KG-D6 gas fields are scattered over many States,
and its supply is affected by the portability factor. While inability
to transport gas, from the several gas fields in the non-KG-D6
basins, may justify supplying gas only to proximately located
consumers, the petitioners contend that, from out of 92.76
mmscmd of available gas supplied during 2012-13, 81.6 mmscmd
is connected to the grid, and only 11.16 is not; and from out of the
total APM and non-APM gas supply of 55.62 mmscmd, 44.46
mmscmd is connected to the grid. Their submission, in effect, is
that it is only a small portion of non-KG-D6 gas which is affected
by the portability factor, and a major portion thereof is connected
to the grid. If this submission of the petitioners is true then the
classification of power plants between those located in the west
and northern parts of the country on the one hand and the East
coast on the other, and in imposing a pro-rata cut on the former
and a reverse cut on the latter, has no rational nexus with the
object sought to be achieved which is to ensure greater equity in
supply of gas to power plants in different regions and an equitable
distribution of gas which is a scarce natural resource. It would,
then, be discriminatory and fall foul of Article 14 of the
Constitution of India.
IX. CONCLUSION:
As noted hereinabove despite repeated directions by this
Court, respondents 1 and 2 have not furnished any information
regarding the extent to which gas, available in the non-KG-D6
basin, is affected by the portability factor. It is evident from the
records placed before this Court that the MoPNG did not take note
of the extent to which the portability factor necessitated gas
supplies being restricted only to end users located in proximity to
the source of supply, resulting in their inability to maintain parity
between power plants in north and west of the country and power
plants in the east coast. Neither did the MoPNG, in its note dated
24.06.2013, refer to this disparity in imposing a pro-rata cut in
supply of non-KG-D6 gas to power plants in the North and West of
India, and in imposing a reverse cut in supply of KG-D6 gas to
power plants in the East Coast, nor did the EGoM consider this
issue in its meeting held on 23.08.2013. As information, regarding
the portability factor, was not even placed before it in the meeting
held on 23.08.2013, it is evident that the EGoM was not apprised
of the extent to which the portability factor affected non-KG-D6 gas
supplies to the power sector. In the absence of such information
being made available to them, the EGoM was disabled from taking
a considered decision on whether the policy of imposing a reverse
cut for gas based power plants in the KG-D6 basin, while providing
a pro-rata cut on gas based power plants in the non-KG-D6 basin,
should be continued or must be changed bringing about a parity
among all gas based power plants in the country irrespective of
their location or their proximity to the source of supply of gas.
Even if a case for interference with a policy decision has
been made out, in that it is not in accordance with the law, the
only direction which can be issued by the court is for the
Government to consider the matter afresh. (Union of India v.
Kannadapara Sanghatanegala Okkuta & Kannadigara ).
Respondents 1 and 2 are, therefore, directed to examine whether
parity can be restored between gas based power plants all over the
country, to the extent supply of non-KG-D6 gas is not affected by
the portability factor; and then take a decision, or place the matter
before the EGoM for its decision, in accordance with law.
While there is no principle of natural justice which requires
prior notice and hearing to persons who are generally affected as a
class by an economic policy decision of the Government, (BALCO
Employees Union (Regd.)48, it is desirable, as a matter of good
governance and administration, that, whenever policy decisions are
taken, there should be a wide range of consultations including
considering any representations which may have been made.
(BALCO Employees Union (Regd.)48). As any policy decision
taken by the Union of India, in allocation and supply of gas to
power plants located in different regions, will have far reaching
consequences, it is but appropriate that the petitioners,
respondents 3 to 11 and other stake holders are permitted to
submit their representations in this regard to respondents 1 and 2.
I have no reason to doubt that, if any such representations are
made within six weeks from today, the matter shall be examined
by respondents 1 and 2, in accordance with law, at the earliest
preferably within four months thereafter.
X. FOOT NOTE:
Before parting with the case, the needless burden placed on
this Court, in having to examine the voluminous records all by
itself without assistance from the Learned Counsel on either side
on account of the claim of privilege by respondents 1 and 2, must
be placed on record. Sri S. Niranjan Reddy, Learned Counsel for
the petitioner, submitted that the UoI had shielded information
from the petitioner regarding the material that was considered by
the EGoM in arriving at the present policy decision; the UoI has
not placed on record the material on the basis of which the EGoM
had taken the said policy decision, and the same had not been
made available to the Petitioner inspite of filing a petition for
inspection of the same, citing privilege; and, though privilege of
documents was initially claimed by the UoI before the Delhi High
Court (Essar Steel Limited8), it was later given up and all
relevant documents were produced.
In the exercise of its powers under Article 225 of the
Constitution of India, the High Court of Andhra Pradesh made the
Writ Proceeding Rules, 1977, to regulate proceedings under Article
226 of the Constitution of India. Rule 15 of the said Rules
stipulates that the party to the proceedings under the Rules shall
be entitled to inspect the records called for, and relating to the
proceedings, on a request made in writing in that behalf to the
Government Pleader or the Standing Counsel concerned; and, if
such a request is refused, the party shall be entitled to apply to the
Court for directions. While W.P.M.P. No.42588 of 2013 was filed
by the petitioners on 27.11.2013, to permit them to inspect the
records, in terms of Rule 15 of the Writ Proceeding Rules, 1977,
the respondents claimed privilege over the records.
With a view to avoid any further delay in adjudicating the lis,
hearing of which spread over a period of more than one and half
years, the records were not permitted to be perused either by the
petitioners or their Counsel, and this Court under took the ardous
task of examining the voluminous records all by itself. While
maintenance of secrecy may, possibly, be justified before a decision
is taken, the claim of privilege, after the decision is taken, does not
stand to reason, more so as the records were produced before the
Court to enable it to examine whether the contentions urged by
Counsel on either side are borne out from the record. All that has
been achieved, by this specious plea of privilege, is to needlessly
waste the precious time of the Court which could have been easily
avoided if Counsel on either side had been permitted to put forth
their submissions after perusing the records. I do not wish to say
more.
The Writ Petition is disposed of accordingly. The
Miscellaneous petitions pending, if any, shall also stand disposed
of. However, in the circumstances, without costs.
_____________________________
RAMESH RANGANATHAN, J
Date: 28-01-2015.
WRIT PETITION NO.39390 OF 2012
28-01-2015
Independent Gas based Power Producers Association, a society registered under
the Societies Registration Act, 1860 represented by its Secretary & Authorised
representative B. Ramesh Babu. .Petitioner
Union of India represented by its Secretary and others.Respondents
Counsel for the petitioner: Sri S. Niranjan Reddy
Counsel for respondents:Learned Asst. Solicitor General;
Sri P. Wilson, Learned Senior Counsel; Sri R.
Raghunandan,
Learned Senior Counsel; Sri O. Manohar Reddy,;
<GIST:
>HEAD NOTE:
? Citations:
1) (2010) 7 SCC 1
2) (2011) 5 AIR Bom. R. 60
3) (2006) 4 SCC 385
4) (1984) 1 SCC 668
5) AIR 1957 SC 363
6) 2002) 7 SCC 559
7) (1995) 1 SCC 85
8) (2011) DLT 700
9) (1999) 4 SCC 149
10) AIR 1916 PC 78
11) (1974) 2 SCC 151: AIR 1974 SC 749
12) (2000) 3 SCC 350
13) AIR 1965 SC 948
14) AIR 1976 SC 1569
15) (1824) 2 B&C 883: 107 ER 610
16) (1956) 1 WLR 289 WLR at p. 297 (PC)
17) (1952) 2 All ER 767, All ER 771
18) (1939) 62 CLR 464, 553 (Aus HC)
19) AIR 1938 Lah 571
20) (1998) 6 SCC 507
21) (1992) 4 SCC 683
22) (1937) 2 All E.R. 646
23) (1985) 3 SCC 545
24) [1959] Supp. 1 S.C.R. 528 = AIR 1959 SC 149
25) (2000) 3 SCC 588
26) (2007) 6 SCC 120
27) (2004) 7 SCC 166
28) (1998) 7 SCC 66
29) (2003) 5 SCC 437
30) (1993) 1 SCC 71
31) [1990 (64) Australian LJR 327
32) (2005) 13 SCC 287
33) 1992 Supp.(1) SCC 548
34) (1982) 1 SCC 271
35) (2012) 2 SCC 542
36) (1989) 4 SCC 187
37) Judgment in WP (PIL) No.47 of 2011 dated 25.07.2012
38) AIR 1966 SC 334
39) AIR 1962 SC 1210
40) AIR 1973 SC 964
41) (1977) 4 SCC 145
42) (2000) 6 SCC 608
43) 1992 Suppl (1) SCC 323
44) (1986) 2 SCC 68
45) (2007) 8 SCC 418
46) (2011) 13 SCC 383
47) (2000) 10 SCC 664
48) (2002) 2 SCC 333
49) 57 l Ed 730: 228 US 61 (1912)
50) (1986) 4 SCC 566
51) (1974) 1 SCC 19 = AIR 1974 SC 1
52) (2012) 10 SCC 1
53) (1981) 4 SCC 675
54) (2011) 7 SCC 639
55) (1970) 1 SCC 248)
56) (2011) 1 SCC 640
57) 320 US 591, 602 (1944)
58) 311 US 570-577, 85 L. ed. 358,362
59) (1984) 3 SCC 465
60) (1992) 2 SCC 343
61) (1978) 3 SCC 459
62) (2012) 3 SCC 1
63) (1991) 3 SCC 11
64) (1996) 5 SCC 268
65) (1980) 3 SCC 97
66) (2008) 2 SCC 672
67) (2012) 6 SCC 502
68) (1989) Suppl.(2) SCC 364
69) (1990) 3 SCC 223
70) (1996) 10 SCC 304
71) (2005) 13 SCC 495
72) (2006) 4 SCC 162
73) (2007) 8 SCC 1
74) (2006) 10 SCC 1
75) (1898) 2 QB 91
76) (1948) 1 KB 223
77) (1965) AC 735
78) (1962) 1 QB 340
79) [1978] 1 SCC 248
80) (1994) 2 SCC 691
81) (2003) 5 SCC 437
82) (1991) 3 SCC 91: AIR 1991 SC 1153
83) (2012) 10 SCC 352
84) (2004) 4 SCC 489
85) (2006) 3 SCC 549
86) (1997) 1 SCC 388
87) 33 Cali 419
88) 1979 (3) SCC 489
89) (1983) 1 SCC 305
90) (1981) 1 SCC 722
91) (1994) 6 SCC 349
92) AIR 1968 SC 1099
93) AIR 1958 SC 538
94) AIR 1955 SC 191
95) AIR 1956 SC 479
96) 1952 SCR 284
97) (1997) 9 SCC 495
98) (1997) 1 WLR 906
99) (1999) 4 SCC 727
100) (1994) 1 WLR 74
101) AIR 1967 SC 839
102) (2002) 3 SCC 302
103) (2002) 4 SCC 539
104) (2014) 8 SCC 390
105) (1974) 4 SCC 428
106) 1989 Suppl. (1) SCC 116
107) (1994) 3 SCC 569
108) (2004) 3 SCC 609
109) (2010) 3 SCC 314
110) (2011) 2 SCC 575
111) AIR 1990 SC 933
112) AIR 1965 SC 101
113) AIR 1959 SC 459
114) AIR 1952 SC 326
115) AIR 1953 SC 148
116) (1980) 2 SCC 593
117) (1972) 3 SCC 717
118) (1972) 2 SCC 594
119) (1977) 4 SCC 193
120) (1986) 3 SCC 50
121) (2008) 1 SCC 683
122) (2006) 2 SCC 670
123) (2007) 6 SCC 805
124) AIR 1988 (AP) 144
125) (1981) 4 SCC 335
126) (2002) 10 SCC 226
THE HONBLE SRI JUSTICE RAMESH RANGANATHAN
WPMP NO.40245 OF 2013
IN/AND
WRIT PETITION No.39390 OF 2012
ORDER:
The reliefs sought for in this Writ Petition are (i) to direct
respondents 1 & 2 to frame a comprehensive policy / bring a
suitable legislation with regard to energy security of India and
supply of natural gas under NELP as per the directions of the
Hon'ble Supreme Court in Reliance Natural Resources Ltd. v.
Reliance Industries Ltd., ; (ii) to direct respondents 1 & 2 to
modify the EGoM decision dated 24.02.2012 so as to enable supply
of gas to gas based power plants of the members of petitioner on
priority over other consumers of gas in the KG basin, at least till
such time LNG terminals are set up in the east coast of the
country, to enable supply of generated power to the AP DISCOMS;
and (iii) to further direct the 1st respondent to supply 19.72
MMSCMD of Natural Gas from the KG-D6 gas fields, or from any
other source in the KG basin, to the aggrieved independent power
producers (members of the petitioner as listed in Annexure P-2), to
enable them to generate their respective power plants to their full
capacity and supply power to the AP DISCOMS.
When this Writ Petition was pending adjudication before this
Court the Empowered Group of Ministers (EGoM for short)
meetings took place on 17.07.2013 and 23.08.2013, and a policy
decision was taken by the EGoM on 23.08.2013. Thereafter the
petitioners filed an application seeking amendment of the second
prayer in the Writ Petition.
The amended relief sought for is -
"to direct respondents 1 & 2 to modify the EGoM decision dated 24.02.2012,
and the consequent EGOM decision including those dated 17.07.2013 &
23.08.2013 so as to enable supply of gas to gas based power plants in KG
basin of the members of Petitioner on priority over other consumers of Gas in
KG basin at least till such time LNG terminals are set up in the east coast of
the country to supply generated power to AP DISCOMS".
The first petitioner is a society, registered under the Societies
Registration Act, 1860, established for promoting and safeguarding
the common interests of gas based Independent Power Producers
(IPPs for short) located in the KG basin in the State of Andhra
Pradesh. The 2nd petitioner, M/s. GMR Vemagiri Power Generation
Limited, is an IPP and the 3rd petitioner is the authorised signatory
of the 2nd petitioner. The petitioners are aggrieved by the failure of
respondents 1 and 2 in responding to their various representations
for a fair and equitable distribution of gas to operate their power
plants which has resulted not only in their assets, worth more
than Rs.30,000 crores, being rendered idle but also in loss of
generation of electricity.
Respondents 1 and 2 are responsible for allocation and
supply of gas from the KG basin to various sectors/consumers like
power, fertilisers, steel, domestic use etc. The 3rd respondent is
the Government of A.P. Respondents 4 to 7 are the State owned
distribution licencees in the State of A.P. (DISCOMS for short)
which had signed long term Power Purchase Agreements (PPAs)
with the members of the first petitioner association. The 8th
respondent is the co-ordination committee formed by the
Government of A.P to co-ordinate procurement of power by the
State owned DISCOMS. The 9th respondent is the Chambers of
Commerce, a society representing large, medium and small scale
industries in the State of A.P. The 10th respondent is Nagarjuna
Fertilisers and Chemicals Limited, a public limited company
manufacturing fertilisers. The 11th respondent, a non-profit and
non-trading company registered under the Companies Act, is an
association of fertiliser manufacturing units.
The Government of India framed a policy, by its resolution
dated 22.10.1991, to encourage participation of privately owned
enterprises in the field of electricity generation, supply and
distribution. While, conventionally, electricity is generated through
hydro and thermal power plants, some of the thermal plants use
natural gas as an input for producing electricity. Indigenously
produced natural gas can be divided, based on the pricing
mechanism, into four major categories, namely: (i) Administered
Pricing Mechanism (APM) from nominated blocks of Oil and
Natural Gas Corporation (in short ONGC) and Oil India Ltd. (in
short OIL); (ii) non-APM gas produced from new fields of
nominated blocks; (iii) natural gas produced from pre New
Exploration Licensing policy (for short pre-NELP) blocks; and (iv)
natural gas produced from New Exploration Licensing Policy (for
short NELP) blocks. In addition, Liquefied Natural Gas (LNG) is
imported from abroad. All gases are chemically, predominantly,
methane with a small but varying proportion of higher carbon
fractions such as ethane and propane.
Upto the early 90s, i.e., prior to NELP and pre-NELP regime,
natural gas was produced only from fields operated by government
companies, namely, ONGC and OIL out of blocks which were given
to them by the Government on nomination basis, and thereby the
Governments power to regulate the natural gas sector was
absolute. (Reliance Natural Resources Ltd.1). Considering
natural gas as a premium source of fuel and feedstock with a
variety of competing demands, the Ministry of Petroleum and
Natural Gas (MoPNG for short) in the year 1990, formulated the
natural gas use policy. For effective and efficient utilization of
natural gas, the production potential/ availability of natural gas
from various regions was taken into consideration. The potential
demand of natural gas from various sectors, such as Fertilizer,
Power, Sponge Iron, LPG, Industrial use, petro-chemicals, etc. was
also taken into consideration. In order to rationalise allocation of
gas, the Government of India constituted the Gas Linkage
Committee (Committee of Secretaries) in July, 1991. This
Committee was represented by the various user departments
namely, power, fertiliser, steel, chemicals and petrochemicals and
representatives from the Planning Commission, department of
Economic Affairs, department of Expenditure (Ministry of Finance)
and three national oil and gas companies, namely, GAIL, ONGC
and OIL. This committee, headed by the Secretary, Petroleum and
Natural Gas, was entrusted with the following responsibilities (a)
to periodically review the progress of implementation of upstream
and downstream projects for utilization of natural gas to ensure
maximum and timely synchronization of these facilities; (b) to
consider and recommend requests for allocation of natural gas,
including its fractions, by downstream consumers keeping in view
the objective of ensuring that the allocation of gas, to downstream
users, is economically efficient; (c) to monitor the progress of
downstream units to whom gas has been allocated, and make
recommendations regarding cancellation or otherwise of gas
allocations to downstream units the progress of implementation of
which was not satisfactory.
Considering the demand, availability and imputed
economic value of natural gas in various sectors, the Gas
Linkage Committee allocated natural gas to various sectors on a
'firm basis' to ensure that the available gas, and that which was
projected to be available, was fully utilized. Circumstances, such
as when all the consumers with firm allocations were unable to
draw their full quantity leading to a temporary surplus of gas
availability in the system which, in turn, required such surplus
gas available to be used from to time to time, necessitated
allocation of gas on a "fallback - as and when available basis", as a
contingency measure, to ensure optimal utilization of gas.
Priority for supply, against such fallback allocations, was given
only after meeting the requirement of consumers with firm
allocations. There were a few isolated fields whose life was
short and uncertain. In order to utilize the gas available from
such fields, even for short durations, gas was allocated on a
fallback basis, and the consumers were not given any long term
commitment. There were certain gas wells yielding only low pressure
gas for a short term which was required to be compressed before
being put to use in the pipeline system. Such low pressure gas was
also made available on a fallback basis without any long term
commitment.
Subsequently with the availability of APM gas in the country
falling far short of the demand, and the production projected to
decline further in future, no useful role was envisaged for the Gas
Linkage Committee in making gas allocations and, as a result, the
Government wound up the Gas Linkage Committee on November
9, 2005. No APM gas has been allocated since then. Non-APM gas
is any gas discovered from new fields of the nominated blocks.
In the year 2010, the Central Government formulated 'guidelines
for commercial utilization for non-APM gas' with the following
sectoral priority:- (i) gas-based fertilizers plants; (ii) LPG plants; (iii)
Power plants supplying to the grid; (iv) city gas distribution systems
for domestic and transport sectors; (v) steel, refineries &
petrochemicals plants for feedstock purposes; (vi) city gas
distribution systems for industrial & commercial customers; and
(vii) any other customers for captive & merchant power, feedstock
or fuel purposes. No reservation of gas was envisaged for any
sector, and it was allotted to those who were ready to utilize gas at
the time of allotment.
As exploration and production was at the core of energy
security, it was decided to open the gas fields to private sector
investment. (Reliance Natural Resources Ltd.1). During the
mid-1990s, known as the pre-NELP years, private investment was
sought on competition basis and certain blocks were awarded
under a production-sharing contract. Pre-NELP gas is the gas
produced from pre-NELP blocks which is sold by the contractors
in accordance with the provisions of the production sharing
contracts entered into between the Government and the
producers. The pre-NELP regime was further improved to the
NELP regime. New sources of gas were discovered under the NELP
regime and, after its advent, production of indigenous gas
increased substantially. The production from KG-D6 block
under NELP was envisaged at the level of 60 MMSCMD.
Sourcing of investment, technology and efficient operations from
companies within the country and from outside, on a level playing
field with domestic public sector companies, was the main feature
of the NELP regime. (Reliance Natural Resources Ltd.1).
The Executive of the Union of India enjoys constitutional
powers, under Article 73 and Article 77(3) of the Constitution, to
fulfil the objectives of the Directive Principles of State Policy
relating to the distribution of natural gas which is a material
resource under Article 39(b) thereof, including acquisition of
privately owned material resources. Natural gas continues to be
the property of the Government of India till it reaches the delivery
point, and cannot be disposed of without its express approval.
(Reliance Natural Resources Ltd.1). The EGoM was constituted
in August, 2007 under the business rules framed under Article
77(3), and its decisions are treated as the decisions of the union
cabinet itself. It is a policy decision of the government, and has the
force of law since the field is not occupied by parliamentary
legislation. (Reliance Natural Resources Ltd.1). The EGoM was
constituted to examine disputes relating to pricing and commercial
utilisation of gas under the NELP regime. In the EGoM meeting
held on 23.05.2008 the Central Government formulated a gas
utilisation policy which was made applicable only to the gas
available under the NELP regime, and not for gas produced from
the pre-NELP/APM/Non-APM regimes. The gas utilisation policy
empowered the Central Government to regulate and distribute
natural gas through allotments and allocation which would
subserve the best interests of the country. (Reliance Natural
Resources Ltd.1).
In addition to the affidavit filed in support of the Writ
Petition, the petitioners have filed affidavits/rejoinder affidavits on
20.12.2012, January 2013, 16.02.2013, 22.03.2013, August 2013,
10.10.2013, 11.11.2013, 26.11.2013, and 24.01.2014. Besides
the counter-affidavit filed in reply to the main Writ Petition,
additional affidavits/counter-affidavits have been filed on behalf of
respondents 1 and 2 on 11.02.2013, 12.03.2013, 14.04.2013,
September 2013, 09.11.2013, 25.11.2013, 28.11.2013,
03.12.2013, and 24.10.2014. Counter-affidavits have also been
filed on behalf of the 3rd respondent and respondents 4 to 8
supporting the petitioners claim that natural gas from the KG-D6
basin should be supplied to power plants in Andhra Pradesh in
preference to all other sectors including fertilizers. A counter-
affidavit is filed on behalf of respondents 10 and 11 supporting the
stand of respondents 1 and 2, and opposing grant of any relief to
the petitioners.
The petitioners case, in short, is that non-allocation of gas to
power projects in the State of Andhra Pradesh has rendered
Rs.30,000 crores worth investment, in these power projects, idle,
making these assets non-performing; allocation of gas from the KG
basin to power plants and fertilizer plants in the west coast of the
country, although such plants have access to alternative sources of
fuels and the necessary infrastructure therefor in terms of LNG
terminals, is arbitrary; allocation of gas to the fertilizer sector, in
preference to the power sector, is contrary to the National
Electricity Policy framed under the Electricity Act, 2003; the
Government of India should take a comprehensive view of the
changing needs and precarious gas availability, and accord top
priority to gas based power projects in the KG basin ahead of the
fertiliser projects, and power projects outside the State of Andhra
Pradesh, as the southern region is facing a severe power deficit;
gas based power offers substantial environmental benefits, it
requires just 1/10th of the land area as compared to coal, its water
requirements are much lower, and it is 20% more efficient;
fertiliser manufacturing units can use other fuels apart from
natural gas, and can also import gas from abroad; failure to ensure
a level playing field, to gas based IPPs in the KG basin, is in
violation of Articles 14 and 19(1)(g) of the Constitution of India; in
2009, when availability of KG-D6 gas was projected to be in
abundance, the fertilizer sector was accorded top priority in
allocation of gas from KG-D6 fields; the same priorities continued
even though gas production from the KG basin drastically reduced;
as a result of the failure of EGoM, to review the gas utilisation
policy, the fertiliser plants in North and West India are receiving
near full supplies of gas and the IPPs in Andhra Pradesh, which
have been deprived of the requisite gas supplies, face closure; this
would not only result in thousands of people losing employment
but would also affect the general public and farmers in terms of
long power cuts.
The petitioners would also contend that the adhoc method
of reverse priority amongst the core sector, for supply of gas from
the KG basin, prescribed by the MoPNG by proceedings dated
30.03.2011, has caused prejudice and injustice to members of the
petitioner-association; the contention, that not according first
priority to fertilizers would result in a subsidy burden estimated to
be around Rs.70,000 crores, is not correct; the Government of
India, as the custodian of scarce natural resources like natural
gas, is required to balance various public interests, and take a fair
and equitable decision; gas can be imported and supplied to the
fertilizer plants located in the west coast; the policy decision of the
Government of India has failed to provide equal treatment to all
stakeholders, and a level playing field; as an alternative to its
indigenous production, fertilizer can be imported; however there is
very little scope for import of electricity; electricity cannot be
generated in the east coast by using imported gas, as there is no
LNG terminal presently available thereat; production of electricity,
by use of imported gas, is not economical; the public debt of IPPs
in the State of Andhra Pradesh is to the tune of Rs.30,000 crores,
and the unutilized capacity in generation of power is 7000 mega
watts; there is a need to pool all domestically available gas for its
rational and optimum utilization, after taking into consideration
regional and sectoral imbalances; gas-based power plants, in North
and West India, were set up either as dual fuel-based power plants
or relying on gas from other sources including LNG terminals; all
KG-D6 gas cuts have been borne only by the power sector, and the
fertilizer sector is largely left untouched; this has resulted in
inequitable distribution; prior to March, 2011, MoPNG had
stipulated, as was the practice for APM gas, cuts to be enforced on
a pro-rata basis for NELP gas also; this was subsequently changed,
and cuts have been stipulated on a reverse priority basis with the
first to be affected being the power sector; even today, in the case
of APM gas, cuts are imposed on a pro-rata basis; there is no
change in the priority of usage of non-KG-D6 gas because of
reduction of supply from KG D6 gas fields; the reduction in gas
supplies is more from KG-D6, as compared to non-KG-D6 sources;
the east coast power plants have no access to gas from Bombay
High, Hazira and the North East; as all the Regasified Liquid
Natural Gas (RNLG for short) terminals are located in the west
coast, RNLG is being imported and supplied to plants in the
western and northern states; and the respondents have failed to
periodically evaluate the current system of distribution of natural
gas, and in balancing equities between different regions.
The petitioners would further submit that the reverse cut
introduced in March, 2011, when gas production in KG-D6 was 40
MMSCMD, needed immediate and periodic review after a fall in gas
production from the year 2012; both the Writ Petitions before the
Bombay and Delhi High Courts were filed by applicants belonging
to the steel sector which is a non-core sector; the non-core sectors
were entitled to gas allocation only when the gas production
exceeded 40 MMSCMD, that too after the demands of the core
sectors were met; the petitioners before the Bombay and Delhi
High Courts were aggrieved by the allocation of gas to the core
sectors in priority over other industries; the Bombay and Delhi
High Courts upheld the validity of the classification of core and
non-core sectors in prioritising supply of natural gas; the issue of
reservation/priority within the core sector was neither raised nor
decided in those cases; at no point of time, prior to 30.03.2011,
had the EGoM prescribed the application of reverse cut within the
four core-sectors; even after the EGoM meeting held on
23.08.2013, there is no change in the policy decision regarding
allocation of gas; relevant material was not considered before the
EGoM took the decision; the earlier decision to discriminate
against the power sector, and accord priority to the fertilizer sector,
continues; the changed circumstances were not taken into
account, before arriving at the present decision to maintain the
level of supplies of domestic gas to the fertilizer sector at 31.5
MMSCMD, before allocating gas to the power sector; there is no
rational basis for the EGoM decision to prioritize the fertilizer
sector over the power sector; when gas production from KG D6
reached its optimum level during 2009-10, allocation to the
fertilizer sector was 15.7 MMSCMD; this was continued arbitrarily
despite there being a drastic reduction in supply from KG D6; the
first respondent failed to bring the various representations,
submitted by the petitioners to the EGoM, MoP, MoPNG and the
Prime Minister, to the notice of the EGoM; the EGoM has not
considered the projected availability of gas for the years 2013 to
2016; in the absence of information, regarding the projected
estimated availability of KG-D6 gas, the proposed supply of
additional gas (which is subject to availability of gas from the KG
D6 field) is merely an eye wash; the portability factor, affecting
transportation of gas from the non-KG D6 basin, is only a small
portion of the available gas; from the data downloaded from the
website-www.indianpetro.com, which is a news information and
market intelligence provider in Indian oil, gas, power and fertilizer
sectors, it is evident that, from out of 92.76 MMSCMD of available
gas supplied during 2012-13, 81.6 MMSCMD is connected to the
grid, and only 11.16 MMSCMD is not connected; from out of the
total APM and non-APM gas supply of 55.62 MMSCMD, 44.46
MMSCMD is connected to the grid; and the petitioners have been
repeatedly contending before this Court that the portability factor,
affecting transportation of gas from non-KG D6 basin to the KG-D6
basin, is only a small portion of the available gas.
The case of respondents 1 and 2, in brief, is that the Union
of India is empowered to take policy decisions on allocation and
pricing of natural gas; it is entitled to utilize and distribute gas
keeping in view the best interests of the country and the public at
large; the only question before this Court is whether the policy
decision is arbitrary, unjust, in violation of the fundamental rights
under the Constitution or in violation of any statutory right; the
sectoral priority, for allocation of domestic gas, was formulated to
serve larger public interest; the consumption of urea in the country
is 58 million metric tonnes of which 18 million metric tonnes is
produced from domestic natural gas, and 4 million metric tonnes
from LNG; the price of fertilizer is directly and predominantly
determined by the price of gas; one MMSCMD of gas enables
production of around 0.5 MMTPA of urea benefitting millions of
farmers which, if not produced domestically, will have to be
imported at a much higher cost or will have to be produced at a
higher price through RLNG, and then subsidized through the
Union Budget; the annual subsidy on fertilizers ranges between
Rs.60,000 to 70,000 Crores; fertilizer is sold below cost price, and
the entire subsidy burden is borne by the Central Government;
priority to the fertilizer sector fulfils the twin objectives of self-
sufficiency in fertilizers and a lower subsidy burden; domestic LPG
is a subsidized product in which the country is not self-sufficient;
any disruption in supplies of LPG would lead to a public outcry;
the power sector has been given high priority next only to the
fertilizer and LPG sectors; even from the KG-D6 gas, 18 MMSCMD
was allocated to the power sector; as this was not sufficient to
meet the requirements of the power sector, the EGoM decided that
any additional gas would be given to the power sector and, with
increase in production of KG-D6 gas, the allocation to the power
sector was increased to 32 MMSCMD; both compressed natural
gas (CNG) and piped natural gas (PNG) are safer than the presently
used fuels; hence priority was given to the transport and domestic
segments of city gas distribution (CGD) projects; the
industrial/commercial sectors were kept out of priority; within the
four core sectors, CGD (transport and domestic) has been accorded
priority after fertilizer, LPG and power as the end price of CNG and
PNG, by virtue of an increase in the input price of gas, is being
passed on to the consumers; other sectors, such as steel, petro
chemicals, refineries etc have been placed after the CGD (CNG &
PNG) sector as they are in a position to respond to the market
prices of inputs; the policy decision of the Government, endorsed
by the EGoM, has been judicially tested and approved by the
Bombay and Delhi High Courts; the discretion exercised by the
Government of India, in allocation and allotment of gas, is in
public interest and is in accordance with the standards and norms
laid down under the policy and guidelines prescribed by the EGoM
for NELP gas; sectoral priority has been applied even during a fall
in production; the order of the MoPNG dated 30.03.2011 was
informed to the EGoM in its meeting held on 24.02.2012; the
principle underlying these decisions is that a lower priority sector
should face a cut prior to a higher priority sector; though the
RGPPL plant was accorded priority, equivalent to the fertilizer
sector by the EGoM, this decision was kept in abeyance, and
supply of gas to the Ratnagiri Gas Power Plant Limited Dabhol
Power Project (RGPPL for short) is being made on par with the
power sector; the Union of India has not allocated gas to public
sector power plants at the cost of private sector power plants; the
gas utilization policy does not advocate reservation of gas; gas,
being a national asset, has to be allocated on the basis of a
national policy; sufficient imported gas is available as RLNG which
can be procured by the petitioners for running their power plants;
non-APM gas allocation is made to meet the shortfall in APM
allocation followed by new demands in accordance with the
sectoral priority, beginning with the region to which the source of
gas belongs; within a sector, after meeting the shortfall in the
region to which a source of gas belongs, the shortfall of that sector
in other regions is to be met before meeting the new demands from
that sector followed by a shortfall or new demands of the sectors
next in priority; and, at the request of the Government of Andhra
Pradesh, respondents 1 and 2 had allowed swapping of RLNG with
KG-D6 gas for supply to the IPPs in the State of Andhra Pradesh.
According to respondents 1 and 2, the production of gas in
the KG D6 basin reached its peak of 60 MMSCMD in March, 2010
and, thereafter, the production has decreased steadily; gas
production in KG-D6 has fallen so much, that now gas is supplied
only to the fertilizer and LPG sectors, and cuts are being imposed,
in accordance with the same order dated 30.03.2011, on the power
sector; the power producers were also parties to the Writ Petitions
before the Bombay and Delhi High Courts in which the sectors,
below the power sector, had challenged the validity of the MoPNG
order dated 30.03.2011; the power sector had then supported the
order of the Government; the members of the petitioner-association
were agreeable to the authority of the MoPNG to issue the order
dated 30.03.2011, and had never challenged the said order until
the cut order affected them; 20% - 30% of the total urea consumed
in the country is imported, and self-sufficiency can only be
achieved if supply of domestic natural gas, for domestic urea units,
is ensured; the cost of production of urea on R-LNG is even more
than the imported price of urea; the issues which are now sought
to be raised in this Writ Petition have already been raised and, in
any event, could have been raised in the Writ Petitions filed by
Essar Steel Limited and Welspun Maxsteel Limited before the Delhi
and Bombay High Courts; the petitioners herein had supported the
stand of the Central Government in those writ petitions, and have
benefitted thereby; it is not true to state that power plants in the
State of Andhra Pradesh have no access to RLNG; the domestic
gas, available from all sources, cannot be considered as a single
basket as gas produced from all fields cannot be transported to all
consumers in the country due to technical limitations such as the
source of gas, lack of pipeline connectivity etc; gas based power
plants were established without any commitment from the
respondents that additional gas would be allocated to them; they
have taken an unavoidable business risk, along with a
corresponding risk-return profile inherent in any business; and the
respondents cannot be called upon to reduce the petitioners risks
or to improve their returns.
Respondents 1 and 2 would submit that supply from various
domestic sources, and imported R-LNG, has been factored in by
the EGoM while allocating KG-D6 gas to power plants to enable
them to operate at a specified PLF; urea fertiliser plants and LPG
sell their products at controlled rates, and the government has a
huge subsidy burden which will be substantially higher if RLNG is
used instead; the gas produced anywhere in the country must be
utilised as per the sectorial policy; the EGoM has been kept
informed about the decline in production, and has rightly deemed
it not fit to revise its policy against this decline; due to a drastic fall
in supplies, gas is now supplied only to the fertiliser/LPG sectors;
the power sector continued to get gas preferentially till January,
2013 i.e., for a period of around two years by diversion of gas from
sectors lower than them in priority; the petitioners never objected
to the principle of reverse priority cut till they were adversely
affected; the petitioners cannot approbate and reprobate; APM and
non-APM gas cannot be compared with KG-D6 gas; the latter is
produced from a single geographical location situated in AP,
whereas the former is produced from many blocks scattered over
many States viz., Gujarat, Maharashtra, Rajasthan, Andhra
Pradesh, Tamil Nadu, Assam, Tripura etc; the gas available from
KG-D6 is transported through a major single pipeline i.e., the east-
west pipeline which has connectivity with the gas grid for
distribution of gas in Andhra Pradesh, and connectivity with GSPC
and GAILs pipeline network in the western and northern parts of
the country; as APM gas is produced in around 100 scattered fields
it has, historically, been distributed locally due to pipeline
constraints and due to the isolated nature of its pipeline network;
APM gas, produced from some blocks in Gujarat and Andhra
Pradesh, cannot be transported to other parts of the country as
these blocks also do not have connectivity with major pipelines; the
APM gas and KG-D6 gas are completely different classes, and are
not equal; reverse cuts are feasible only in the KG-D6 basin as it is
a large single source of gas; even in the case of APM allocations to
various consumers, the future allocation made against reduction
in production of APM gas are as per the allocation priority, thereby
effectively achieving a near reverse cut regime; the development
of R-LNG terminals depend on the demand and supply situation in
a particular area, and pipeline connectivity with the demand
centre; majority of the LNG terminals were constructed before
availability of gas in the KG-D6 basin; respondents 1 and 2 have
always facilitated swapping of RLNG to ensure supply of gas to the
power plants in Andhra Pradesh by issuing necessary guidelines
and instructions; and the respondents do not have any say in the
sale and purchase of R-LNG as it is freely traded in the market.
Respondents 1 and 2 would further submit that the people of
the entire country have a stake in natural gas, and its benefit has
to be shared by the whole country; if one State alone is allowed to
extract and use natural gas, then the other States would be
deprived of their equitable share; the gas utilisation policy is not
static, but is evolving over a period of time; the reverse priority cut
order is based on the strong rationale of facilitating gas availability
to the core sectors; the reverse priority cut order has, in fact,
improved the supply of KG-D6 gas to the core sectors at the
expense of supply to the non-core sectors; the petitioners have
been the beneficiary of this policy decision taken in supervening
public interest; the principle of level playing field and promoting
competition has been upheld; the note placed by the MoPNG before
the EGoM, in its meeting held on 23.08.2013, contained the views
of both the Ministry of Power and the Ministry of Fertilizers; the
Minister of Power and the Minister of Fertilizers were members of
the EGoM along with other Ministers; the EGoM arrived at a
decision to maintain supplies of domestic gas to the fertilizer sector
at 31.5 MMSCMD, i.e the level of average supply of domestic gas to
the fertilizer sector during 2012-13, and give the sector first
priority in meeting the requirements of any shortfall below the level
of 31.5 MMSCMD from any additional production of NELP gas; it
was further decided that the entire additional NELP gas production
available during the years 2013-14, 2013-14 and 2015-16, after
meeting the supply level of 31.5 MMSCMD to the fertilizer sector,
should be supplied to the power sector; the EGoM has taken a
conscious decision to give the fertilizer sector first priority, and
maintain supplies of domestic gas to the fertilizer sector at the level
of 31.5 MMSCMD; the decision to allocate NELP gas was taken by
EGoM after considering the views of both the Ministry of Power and
the Department of Fertilizers; as against the allocation of 54.18
MMSCMD of domestic gas, the average supply of domestic gas to
the fertilizer sector in the year 2012-13 was 31.5 MMSCMD; the
EGoM noted the concerns of the power sector and, accordingly, put
a cap on the supply of domestic gas to the fertilizer sector at the
level of 31.5 MMSCMD; though two meetings of the EGoM were
held on 17.07.2013 and 23.08.2013, a final decision, regarding
inter-se sectoral priority in supply of NELP gas, was taken by the
EGoM in the meeting held on 23.08.2013; while framing the policy
on gas pricing and commercial utilization of NELP gas, all relevant
factors were taken into consideration by the EGoM; the decision
regarding utilization of natural gas does not suffer from any legal
or constitutional infirmities, and is binding on all the parties; and
the projected gas availability from all categories of domestic gas,
envisaged during the XII Plan period (2012-2017), was placed
before the EGoM which took note of the same before taking a
decision in its meeting held on 23.08.2013.
Respondents 1 and 2 would also submit that the present
total allocation of domestic gas to the fertilizer sector is 54.18
MMSCMD out of which 32.64 MMSCMD is from APM, 2.85
MMSCMD from Pre-NELP, 3.02 MMSCMD from non-APM, and
15.67 MMSCMD from NELP (KG D6); in the year 2012-13, the
fertilizer sector was supplied 31.5 MMSCMD of domestic gas which
included 14.43 MMSCMD of gas from KG D6; the order of MoPNG
dated 30.03.2011 implies that supply from KG D6 would be first
utilized to meet the requirement of the fertilizer sector upto their
total allocation from KG D6 (at present 15.67 MMSCMD) and,
thereafter, any additional production from KG-D6 would be
supplied to the LPG sector, then to the power sector, and then to
the CGD sector for CNG (transport) and PNG (domestic); supply of
NELP gas to the non-priority sector is to be made only after the
requirements of the core/priority sectors are met upto their full
allocation; supply to the fertilizer sector from KG D6, prior to the
decision of EGoM dated 23.08.2013, was limited by the total
allocation from the KG D6 basin to the fertilizer sector (at present
15.67 MMSCMD); however, after the decision of the EGoM dated
23.08.2013, another limit has been imposed and the total supply
of domestic gas (NELP gas plus other domestic gases) to the
fertilizer sector would remain limited to 31.5 MMSCMD against the
total allocation of 54.18 MMSCMD; this implies that if the
requirement of 31.5 MMSCMD is met, even before exhausting the
full allocation of NELP gas to the fertilizer sector, supply from
NELP gas would be restricted to that level; to comply with the
decision of the EGoM dated 23.08.2013 any shortfall, below 31.5
MMSCMD, to the fertilizer sector would be met from the additional
production of NELP gas only to the extent of allocation of NELP gas
to the fertilizer sector of 31.5 MMSCMD; the report down loaded
from the website-www.indianpetro.com is incorrect, its authenticity
is doubtful, and cannot be relied upon; during the period April to
June, 2014, the average domestic gas supplied by various
marketers was 79.48 MMSCMD; while gas from the KG D6 basin
was 12.79 MMSCMD, the non-NELP gas supplied was 66.69
MMSCMD; the entire KG D6 gas was being supplied to the fertilizer
sector, and a part thereof has been utilized for operation of the
East West pipeline; gas is being supplied by several suppliers as
per the provisions of the production sharing agreements, and the
Government has no role to play in the distribution of gas of an
extent of 0.82 MMSCMD; an extent of 0.42 MMSCMD of gas is
being supplied by ONGC, Essar and CEECL from their respective
CBM blocks, and they are not connected to any major inter-state
pipeline grid; this quantity cannot be considered for diversion; an
extent of 2.45 MMSCMD and 5.4 MMSCMD of domestic gas is
directly marketed by ONGC and OIL; these fields are isolated in
nature and cannot be considered for diversion; GAIL is the only
marketeer supplying gas through both the regional and the inter-
state pipeline networks; GAIL supplied 57.62 MMSCMD of
domestic gas during April-June, 2014 out of which 48.88
MMSCMD was to the core sector and 9.14 MMSCMD to the non-
core sector; and, from out of the 9.4 MMSCMD of domestic gas
supplied, 6.48 MMSCMD of gas cannot be diverted to the core
sector because of various factors, including compliance with the
order of the Supreme Court dated 30.12.1996.
Though the Learned Assistant Solicitor General, during the
course of hearing on 24.01.2014, had stated that the respondents
would make available, in the counter-affidavit filed by them, details
of the extent to which gas available in the non-KG D6 basins is
affected by the portability factor, the counter-affidavit filed
thereafter makes no mention of the extent of gas, available in the
non-KG D6 basins, which is affected by the portability factor.
Again, during the course of hearing on 19.09.2014, the Learned
Central Government Standing Counsel sought time to obtain
instructions regarding the extent to which gas available in the non-
KG-D6 basin is affected by the portability factor. Despite repeated
directions, the respondents have not furnished the said
information sought for by this Court.
In the counter-affidavit, filed on behalf of the Government of
A.P, it is stated that eight independent power producers are
supplying power to A.P. Discoms under long term power purchase
agreements; the combined installed capacity of all these projects is
2770 MW; during 1997, these IPPs were selected through
competitive bidding with fuel as naptha/furnace oil; due to the
steep hike in the price of naptha, and due to non-achievement of
financial closure by some of the IPPs, the Government of A.P.
negotiated with the IPPs and permitted their projects to be
operated mainly on natural gas; the Andhra Pradesh Electricity
Regulation Commission, based on the assurances given by MoPNG,
GAIL and ONGC, gave consent to the IPPs, during April 2003, to
use natural gas as the primary fuel; from 2003-2004 onwards
there was a decline in natural gas supplies to AP, and ONGC was
able to supply only 50% of the allocation to four projects; even
though the other projects were ready by 2006, ONGC was not able
to supply any gas to them; the Union Minister for Petroleum and
Natural Gas, by his letter dated 14.12.2004, assured that the total
requirements of the IPPs in AP could be met from the expected
additional availability of gas; there are eleven gas based power
projects in operation, with a total installed capacity of 3356 MW;
the natural gas requirements of these power projects is 15.67
MMSCMD for full generation; new gas based plants, with 3936 MW
capacity, have also come up in the State expecting availability of
natural gas; they are ready for commissioning, and are lying idle
for want of gas; these projects require 19 MMSCMD to make them
functional; the gas allocation to the power sector was zero by
March, 2013; the Government of India was requested to allocate
natural gas from the west coast to the east coast units; no gas was
made available to A.P. projects from other NELP/ONGC blocks in
the west coast, though the East-West pipeline was established; the
power supply position in the State is precarious, mainly because of
unprecedented reduction in KG-D6 gas supplies; due to power
shortage, the maximum power cut is imposed on the industrial
sector and, thereby, the economic activity of the State is severely
affected; the State is being forced to purchase power from the open
market at a high cost to meet power demands in the State; the A.P.
power projects have alone received allocation based on the
availability of gas from the KG basin; the plants located in the
western and northern region were established taking into
consideration other sources of natural gas; these projects also have
access to LNG terminals located in the west coast; to augment
natural gas to AP projects, the Government of India was requested
to allocate natural gas from the west coast to the east coast;
however no gas was made available to A.P. projects, from other
blocks of the west coast, through the East-West pipeline; the
natural gas under APM, produced from the Bombay High and the
North-East to an extent of 45 mmscmd, is being supplied to the
fertiliser and power projects in the western and northern parts of
the country; RLNG, which is being imported and re-gasified in the
LNG terminals situated in the west coast to an extent of 45
mmscmd, is being supplied entirely to the fertilizer and power
projects in the western and northern parts of the country; these
LNG terminals are in an expansion mode and are likely to be
commissioned shortly; these additional capacities would also be
available to projects in the west coast; there is no LNG terminal in
the east coast; though the pipeline, from west to east, has been in
existence from 2007-2008, EGoM has not announced any policy
to provide open access for transporting RLNG from west to east;
the tax dues on transportation have also not been resolved; the
power plants and fertiliser plants, located in the western region,
are operating at comfortable levels since they have multiple
sources of gas whereas AP projects have only one source i.e., the
KG basin; and it would be appropriate to review the gas utilisation
policy, considering the overall availability of natural gas in the
entire country including KG-D6 gas, giving due priority to A.P.
power plants.
The counter-affidavit filed on behalf of the A.P. Power
Distribution Companies, broadly, reiterates what the Government
of Andhra Pradesh has stated in its counter-affidavit. It is further
stated that, based on the expected gas availability for commercial
operation from ONGC G-1 fields from September, 2011, the Union
Minister for Petroleum and Natural Gas was requested to allocate
natural gas from G-1 and G-15 fields of ONGC to the stranded gas
based power projects in A.P. as per the commitments already made
by MoP&NG; the Central Government had, during September,
2011, allocated a meagre quantity of 0.445 MMSCMD of natural
gas from North West fields to the old IPPs in the State of AP; these
gas supplies have also not commenced till date; ONGC has
reported to MoP&NG about additional availability of 6 MMSCMD of
non-APM gas during 2012-13 and 2013-14, from various fields of
the western and G-1 & G-15 blocks in the eastern region, for
allocation of non-APM gas; in view of the dwindling gas supply
from KG-D6 fields, and the severe power crisis in the State, there
is an urgent need to honour the earlier commitments made by the
MoP&NG to supply gas from the KG basin of G-1 and G-15 fields to
the IPPs in the State; and this Court should direct respondents 1
and 2 to allocate 6 MMSCMD of non-APM gas expected from 2012-
13 and 2013-14, from various fields of the Western and G-1 and
G-15 blocks of ONGC in the eastern region, to the A.P. projects so
that these gas based power plants can operate.
In the counter-affidavit filed on behalf of the 10th respondent,
it is stated that, in its meeting held on 23.05.2008, the EGoM
framed a policy giving priority to certain sectors in allocation of
gas; this policy was formulated on the premise that huge reserves
of natural gas was available in the KG basin; in course of time,
production of natural gas in the KG basin has reduced drastically;
as a result, there is a short fall in the supply of gas as against the
allocation made; the EGoM directed that the entire short fall
should be borne by the sector which was given least priority, and
as the short fall increases it has to be borne by the sectors in the
reverse order of priority; there is a short fall or no supply of gas to
the power sector, whereas the fertilizer sector has suffered a cut to
a large extent; it is the petitioners case that any short fall should
be shared amongst all the sectors on the basis of a pro-rata cut,
instead of the reverse cut, and one sector bearing the brunt of the
short fall and, while the short fall under the APM mechanism is
distributed pro-rata over various sectors, the short fall in the NELP
regime is borne only by the power sector; India is the second
largest consumer of fertilizers only after China; as against the 59
million tonnes of fertilisers consumed in 2011-12 at an imported
cost of Rs.24,564 per tonne, the domestic cost of production, using
a mix of domestic and imported gas, is only Rs.11,000 per tonne;
the farmer buys urea at a statutory price of Rs.5,360 per tonne
and the Government bears a subsidy of Rs.5,640 per tonne on
domestic urea; on imported urea the subsidy is Rs.18,640 per
tonne; this has led to a ballooning of the subsidy estimate of
Rs.70,013 crores; any increase in the cost of fertiliser, as a result
of non-availability of gas, will only push up the cost of urea and
fertilisers which will have a cascading effect on the cost of
agriculture; in order to reduce its subsidy burden, the Government
of India directed the fertiliser manufacturing units to dispense with
the use of naptha and change over to natural gas within a period of
three years; it was made clear that units which did not change over
would not receive any subsidy; a committee was constituted to
facilitate connectivity, and supply of gas to non-gas based units;
the petitioners cannot seek a level playing field between different
sectors; the fertiliser companies have received firm allocation from
the Government of India before setting up their fertiliser plants; in
contrast, the allocations sought for by power producing companies
is only after they were established; the policy enunciated by the
Government of India is well considered after taking into account
the huge short fall in actual production against the estimated
production of natural gas; the EGoM formulated the principle of
priority between various sectors; the MoPNG and EGoM have
adhered to these principles; and the minutes of the meetings show
that EGoM was fully aware of the reduction in production.
Before examining the rival contentions, it is necessary to
refer to the decisions taken by the Government of India, from time
to time, regarding priority in allocation of natural gas to various
sectors, more particularly fertilizers and power. Pursuant to the
EGoM meeting held on 28.05.2008, the MoPNG issued a press note
dated 25.06.2008 which reads as under:
The EGoM recognized the fact that supply of natural gas to power
plants would result in utilisation of idle assets and cheaper incremental
cost of power on account of better utilization of existing assets. Gas
based power plants handle peak loads very well and they are also
preferred for environmental considerations.
The production of natural gas from RILs KG D6 field is expected
to commence from September, 2008 and will initially be about 25
mmscmd. It is further expected that the production would gradually
increase to 40 mmscmd by March, 2009. The EGoM decided that this
gas should be supplied in the following order of priority:
a. Existing gas based urea plants, which are now getting gas below their
full requirement, would be supplied gas so as to enable full capacity
utilization.
b. A maximum quantity of 3 mmscmd would be supplied to existing gas
based LPG plants.
c. Up to 18 mmscmd natural gas, being the partial requirement of gas-
based power plants lying idle/under-utilized and likely to be
commissioned during 2008-09, and liquid fuel plants, which are now
running on liquid fuel and could switch over to natural gas, would be
supplied to power plants.
d. A maximum quantity of 5 mmscmd would be made available to City Gas
Distribution projects for supply of Piped Natural Gas (PNG) to
households and Compressed Natural Gas (CNG) in transport sector.
e. Any additional gas available, beyond categories i) to iv) above, would be
supplied to existing gas-based power plants, as their requirement is more
than 18 mmscmd.
In its subsequent meeting held on 23.10.2008, the EGoM
modified its earlier decision dated 28.05.2008 according priority to
RGPPL along with the fertiliser units.
By its letter dated 30.03.2011, the MoPNG directed its NELP
contractors to enforce pro-rata cuts in the supply of natural gas in
the following manner:
Hence, in modification of the direction mentioned in para 1 above,
supply to fertilisers, LPG, power and CGD (domestic and transport)
sectors, apart from the gas needed for operation of EWPL (East-West
Pipeline) should be entirely met upto the firm allocations. In case gas
availability is insufficient to meet the firm demand of these four sectors,
cuts may be applied in the following order: CGD (domestic & transport),
power, LPG, fertilizers. In view of the reduction in KG D6 production, if
there is a shortfall in meeting the firm demand of the remaining sectors,
pro-rata cuts should be imposed on the same.
In its subsequent meeting held on 24.02.2012, EGoM took
note of the fall in production of KG-D6 gas during the period April,
2010 to January, 2012 and the pro-rata cuts imposed by the
MoPNG in its letter dated 12.10.2010 and 30.03.2011. The
minutes of the EGoM meeting dated 24.02.2012 read as under:-
The EGoM considered the note dated 12.01.2012 and
supplementary note dated 16.02.2012 from the Ministry of Petroleum
and Natural Gas (Petroleum aur Prakritik Gas Mantralaya) and while
noting the contents of paragraphs 16(i), 16(v), 16(viii), 16(xi) and 16(xii) of
the main note, and paragraphs 6(i) and 6(ii) of the supplementary note,
approved the proposals contained in paragraphs 16(ii), 16(iii) and 16(x) of
the main note.
1. The EGoM further noted as under:
(i) that M/s.Wellspun and M/s.Essar Steel have filed petitions in the
Supreme Court challenging the orders of the Mumbai High Court and
Delhi High Court, respectively, in the matter of imposition of cuts in
supply of gas to non-core sectors; and
3. Further, the EGoM directed as under:
(i) the earlier allocation of 0.933 mmscmd to the Pragati Power
Corporation Ltd, (PPCL) Bawana, need not be cancelled, but be reduced
to 0.836 mmscmd, and RIL/NIKO be asked to sign the Gas Sale and
Purchase Agreement (GSPA) for the same so that it gets pro-rata to its
allocation as per orders of the Ministry dated 30.03.2011;
(ii) the proposal to suspend the supply of KG-D6 gas to P&K plants
(Deepak, GSFC and RCF) including the proposal to restrict future
supply only to Urea fertilizer plants be kept in abeyance till 24.05.2012,
during which time, the Department of Fertilizers will finalize the
guidelines mentioned in paragraph 2 of the supplementary note and
thereafter the matter be placed before the EGoM;
(iii) the existing and future allocations of NELP gas to power plants be
subject to the condition that the entire electricity produced from the
allocated gas shall only be sold to the Distribution Licenses at tariffs
determined or adopted (in case of bidding) by the tariff regulator of the
power plant. The gas will be supplied only for the duration of the Power
Purchase Agreement (PPA) and supply of gas will start only after the
signing of PPA. The PPA may initially be for one year (short term PPA)
during which electricity shall be sold at the tariff determined by the
regulator and the subsequent PPA should be for medium term or long
term. The EGoM also authorized the Ministry to cancel the current
allocation of any power plant(s) not complying with the aforesaid
conditions:
(iv) that as M/s.Lanco Kondapalli (Expansion) and GMR Tanir Bawi
have signed the short term PPA till 30.05.2012, the supply to both
these plants need not be suspended till 30.05.2012, after which the
supply would be suspended if they fail to comply with the conditions
specified by the EGoM for supply of domestic; and
(v) the EGoM noted that there is a wide divergence between the
domestic and international prices of gas and import of natural gas at a
high price to meet the domestic shortfall adversely impacts the current
account balance. The EGoM further noted that the gas prices fixed in
2009 were valid for a period of five years and on this ground, the
request of the contractor for revised prices was turned down in 2010
itself, international prices were comparatively lower. After discussions,
the EGoM directed that:
(a) the advice of Ministry of Law and Justice, including the views
of Attorney General of India be obtained in the matter of gas price
revision for consideration of the EGoM; and
(b) the Ministry could suggest an appropriate Regulatory Authority
to aid and advise the EGoM on the issue.
The minutes of the EGoM meeting held on 23rd August, 2013
reads thus:-
The EGoM, in the light of its directions while considering a note
dated 24.06.2013 from the Ministry of Petroleum and Natural Gas
(Petroleum aur Prakritik Gas Mantralaya) in the meeting held on
17.07.2013, considered the note dated 13.08.2013 from the Ministry of
Chemicals and Fertilizers (Rasayan aur Urvarak Mantralaya),
Department of Fertilizers (Urvarak Vibhag) and noted:
(i) the contents of paragraphs 22, 23, 24 and 25 of the note dated
24.06.2013;
(ii) the average supply of domestic gas to the Fertilizer sector
during 2012-13 was 31.5 Million Metric Standard Cubic
Meters Per Day (MMSCMD); and
(iii) the year-wise additional production of all categories of
domestic gas envisaged during the XII Plan Period.
1. In the light of the above, the EGoM decided:
(i) to maintain at 31.5 MMSCMD the level of supplies of domestic gas
to the Fertilizer sector and give the sector first priority in meeting
the requirements of any shortfall below the level of 31.5 MMSCMD
from any additional production of NELP gas;
(ii) the entire additional NELP gas production available during the
years 2013-14, 2014-15 and 2015-16, after meeting the supply
level of 31.5 MMSCMD to the Fertilizer sector, be supplied to the
Power sector. The plant-wise allocation of additional production of
NELP gas available during these years shall be done by the Ministry
of Power; and
(iii) to allow supply of NELP gas to Power plants based on short term
Power Purchase Agreements (PPAs) in all cases where
medium/long-term PPAs are not practicable in view of limited
balance tenure of the Gas Supply and Purchase Agreements
(GSPAs).
Elaborate submissions, both oral and written, were put forth
by Sri S. Niranjan Reddy, Learned Counsel for the petitioners, Sri
P. Wilson, Learned Senior Counsel appearing for respondents 1
and 2, and Sri R. Raghunandan, Learned Senior Counsel
appearing on behalf of respondents 10 and 11. Sri O. Manohar
Reddy, Learned Counsel for respondents 4 to 7, also put forth his
submissions. It is convenient to examine the contentions, urged
by Learned Counsel on either side, under different heads.
I. AMENDMENT OF THE PRAYER:
The petitioners filed WPMP No.40245 of 2013 on 11.11.2013
seeking amendment of the prayer in W.P.No.39390 of 2012 by
adding the words and subsequent EGoM decisions including those dated
17.07.2013 and 23.08.2013 in Part - (ii) of the main prayer. In the
affidavit filed in support thereof, the petitioners stated that they
were informed about the decision taken at these EGoM meetings
only by way of the additional affidavit filed by respondents 1 and 2;
they were not given a copy of the minutes; this application was
filed immediately after they learnt about the decision and after
their efforts, to obtain a copy of the minutes, proved unsuccessful;
the amendment petition does not alter the character of the lis, and
does not prejudice the respondents in any manner; the
amendment is, in fact, formal in nature; and the relief prayed for
flows from the pleadings already on record.
In their counter-affidavit dated 25.11.2013, respondents 1
and 2 submitted that amendment of the prayer, as sought for by
the petitioners, was merely an after thought; it amounted to filing a
new writ petition against the decision of the EGoM dated
23.08.2013, and the amendment should not be allowed. In the
rejoinder filed thereto dated 28.11.2013, the petitioners stated that
hearing of the Writ Petition was deferred by this Court by its order
dated 25.06.2013; they had filed the amendment petition at the
earliest possible time, without any delay, when there were news
reports that EGoM had reconvened, and had taken a decision as
late as on 23.08.2013; the allegation that the amendment petition
is a dilatory tactic on their part is not tenable; the latest decision of
the EGoM dated 23.08.2013 reiterates its earlier decision dated
24.02.2012 in continuing the inter-se priorities for allocation of gas
to various sectors, and is merely its reaffirmation; by way of the
said amendment, no new case or no new pleadings are sought to
be made by them; they are merely seeking to extend their challenge
to the latest policy decision dated 23.08.2013 which, substantially,
continues the same policy decision challenged in the writ petition;
as a result of the latest decision of the EGoM, on inter-se priorities
in allocation of gas, no new policy has come into existence; no
case, therefore, exists for the petitioner to file a fresh writ petition
to challenge the decision of the EGoM dated 23.08.2013; the
objections taken by the first respondent, in opposition to the
amendment petition, are technical in nature; the first respondent
has failed to make out any grounds of prejudice being caused to it
if the amendment is allowed by this Court; the amendment petition
filed by the petitioner would sub-serve an effective adjudication,
save precious judicial time, and help in avoiding further delay in
determining the lis if a fresh writ petition, challenging the latest
EGoM decision, were to be filed separately; and the State, which is
expected to act fairly, cannot be permitted to take technical pleas
to defeat the rights of citizens.
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that the amendment petition ought to be allowed as
the nature of the lis is not altered; the latest EGoM decision dated
23.08.2013 is a continuation of the earlier policy of reverse cut
adopted through the EGoM decision dated 24.02.2012 which is
under challenge in the present writ petition; hence the challenge to
the earlier decision constitutes a challenge to the latest decision
dated 23.08.2013 also; and the Bombay High Court, in Welspun
Maxsteel Limited v. Union of India , had permitted an
amendment, challenging a subsequent decision of the EGoM, by
way of an oral application. On the other hand Sri P. Wilson,
Learned Senior Counsel appearing for respondents 1 and 2, would
submit that amendment of the prayer, as sought for by the
petitioners, is an afterthought and tantamounts to filing a new writ
petition against the decision of EGOM dated 23.08.13; and this
Court should disallow the amendment sought for by the
petitioners.
The real controversy test is the cardinal test, and it is the
primary duty of the Court to decide whether an amendment is
necessary to decide the real dispute between the parties. The
Court may also take notice of subsequent events in order to
shorten the litigation, to preserve and safeguard the rights of both
parties, and to sub-serve the ends of justice. The rule of
amendment is essentially a rule of justice, equity and good
conscience and the power of amendment should be exercised in
the larger interest of doing full and complete justice to the parties
before the Court. (Rajesh Kumar Aggarwal v. K.K.Modi ). The
test for allowing the amendment is to find out whether the
proposed amendment works any serious injustice to the other side.
The Court should be extremely liberal in granting the prayer of
amendment of pleadings unless serious injustice or irreparable
loss is caused to the other side. (Haridas Aildas Thadani v.
Godrej Rustom Kermani ; Pirgonda Hongonda Patil v. Kalgonda
Shidgonda Patil ).
If the basic structure of the Writ Petition is not altered by the
proposed amendment, and what is sought to be changed is the
nature of the relief sought for by the petitioner, it is difficult to
understand, if it is permissible for the petitioner to file an
independent Writ Petition, why the same relief which could be
prayed for in a new Writ Petition cannot be permitted to be
incorporated in the pending Writ Petition when allowing the
amendment would curtail multiplicity of legal proceedings.
(Sampath Kumar v. Ayyakannu ). Since the cause of action for
seeking the amendment arose during the pendency of this Writ
Petition, the proposed amendment ought to be granted because the
basic structure of the Writ Petition has not changed. If it is
permissible for the petitioners to file an independent Writ Petition,
there is no reason why the same relief, which could be prayed for
in the new Writ Petition, cannot be permitted to be incorporated in
the pending proceedings. (Rajesh Kumar Aggarwal3).
When this Writ Petition was pending adjudication before this
Court, the modified policy decision was taken by the EGoM on
23.08.2013. The application, in W.P.M.P. No.40245 of 2013, was
filed on 11.11.2013 less than three months thereafter. While the
EGoM decision dated 23.08.2013 has resulted in fixing the upper
limit for supply of gas to the fertilizer sector at 31.5 mmscmd, the
earlier policy decisions of according priority to the fertilizer sector
over the power sector, imposition of a reverse cut on reduction of
gas supplies from the KG-D6 basin, and a pro-rata cut on
reduction in supply of non-NELP gas, continue to remain in force.
The basic structure of the Writ Petition has not been altered, and
the amendment merely seeks to include a challenge to the latest
EGoM decision dated 23.08.2013. As the subsequent EGoM
decision is not unrelated to the issues which arise for
consideration, and taking notice of these subsequent events would
not only result in shortening the litigation but would also avoid
multiplicity of proceedings, I see no reason to relegate the
petitioner to the remedy of challenging the subsequent EGoM
decision dated 23.08.2013 in separate writ proceedings, more so as
it is not even the case of respondents 1 and 2 that serious injustice
or irreparable loss would be caused to them if a portion of the
prayer in the writ petition is permitted to be amended. The
amendment petition is allowed, and the prayer in the Writ Petition
shall stand amended accordingly.
II. PRELIMINARY OBJECTIONS:
(i) CAN THE PETITIONER ASSOCIATION MAINTAIN THIS
WRIT PETITION
Sri P. Wilson, Learned Senior Counsel appearing on behalf
of respondents 1 and 2, would submit that petitioner association
cannot maintain the present writ petition as no allocation of gas is
made in the name of the association; consequently no enforceable
right arises; and the present writ petition is also not in the nature
of a public interest litigation.
While an Association cannot file a writ petition before the
Supreme Court under Article 32 of the Constitution if it has no
fundamental right, (Mahinder Kumar Gupta v. Union of India ),
Article 226(1) stipulates that, notwithstanding anything in Article
32, every High Court shall have power to issue directions, orders or
writs for the enforcement of any of the rights conferred by Part-III
or for any other purpose. The power conferred on the High Court,
to issue directions, orders or writs under Article 226 of the
Constitution of India, is not confined merely to the enforcement of
fundamental rights under Part-III of the Constitution, but also for
any other purpose. In any event while the first petitioner is an
association, the 2nd petitioner is an independent power producer
which is directly affected by the impugned policy decisions, and
the 3rd petitioner is an individual, who is the authorised signatory
of the 2nd petitioner. It cannot, therefore, be said that the Writ
Petition as filed is not maintainable.
(ii) IS THIS WRIT PETITION BARRED BY THE
PRINCIPLES OF RESJUDICATA
Sri P. Wilson, Learned Senior Counsel appearing on behalf of
respondents 1 and 2, would submit that members of the
petitioner association were also parties to W.P. No.3748/2011
(M/s. Welspun Max Steel Ltd & Anr.) filed before the Bombay High
Court wherein the proceedings of the MoPNG dated 30.03.2011,
which was subsequently incorporated in the minutes of the
EGOM meeting dated 24.02.2012, was under challenge; the
Division Bench of the Bombay High Court, while upholding the
order dated 30.03.2011, dismissed the said writ petition by its
order dated 08.07.2011; the petitioner therein filed SLP
Nos.30392/2011 which is pending before the Supreme Court;
W.P.No.3106/2011 (i.e., M/s. Essar Steel Limited v. Union of
India ) was filed before the Delhi High Court challenging the order
of the MoPNG dated 30.03.2011; some of the members of the
petitioner association were also parties thereto; the Delhi High
Court, after recording the submission of the members of the
petitioner association that the order dated 30.03.2011 of the
MoPNG was agreeable to them, dismissed W.P.No.3106/2011 by
its order dated 29.09.2011; the petitioner therein filed Writ Appeal
before the Division Bench of the Delhi High Court and, thereafter,
filed T.C.No.56/2012 before the Supreme Court which is still
pending; the stand taken by the petitioners in the present writ
petition is contrary to the stand taken by the industries,
represented by the petitioner - association, before the High Courts
of Bombay and Delhi; the petitioner is now challenging the same
MoPNG order dated 30.03.2011 which it had supported earlier
before the Bombay and Delhi High Courts; and the petitioners are
estopped, by the principles of resjudicata, from challenging the
impugned EGOM decisions.
Sri R. Raghunandan, Learned Senior Counsel appearing for
respondents 10 and 11, would submit that the petitioners did not
have any objection to the categorization of consumers into core
and non-core sectors; having accepted this categorisation, it is not
open to them to object to the order of priority set out under that
categorization, as the order of priority is a species of the genus of
categorization into core and non-core sectors; and the rule of res-
judicata would apply as the petitioners had supported and
accepted the categorization of consumers in the earlier two cases
before the Bombay and Delhi High Courts.
On the other hand Sri S. Niranjan Reddy, Learned Counsel
for the petitioners, would submit that before any plea, by the
respondents, can be said to be barred by res-judicata in future
proceedings inter-se such respondents, it must be shown that such
a plea was required to be raised by the respondents to meet the
claim of the petitioner in such proceedings; the issues that arise for
consideration in the present writ petition are distinct and separate
from the issues that were raised and considered by the Bombay
and Delhi High Courts; the Bombay and Delhi High Courts, in
Welspun Maxsteel Ltd2 and Essar Steels Ltd8 respectively, were
called upon to examine the validity of classification of the core and
non-core sectors for supply of natural gas; the issue of reservation
within the core sector was neither raised nor decided in those
proceedings; the issue before this Court is on the reservation of
natural gas and priority within the core sector, more specifically
priority to the fertilizer sector over power; these issues are based
on independent causes of action inter-se the respondents; and,
hence, cannot be said to be barred by the principles of res-
judicata.
The principles of res-judicata are attracted while considering
the question of constructive res-judicata between the petitioner on
the one hand and the respondents on the other who were co-
respondents in the Writ petitions before the Bombay and the Delhi
High Courts. (Ferro Alloys Corpn. Ltd. v. Union of India ). While
the principles of constructive res judicata can be invoked even
inter-se the respondents, before any plea by the respondents can
be said to be barred by constructive res judicata in future
proceedings inter-se such respondents, it must be shown that
such a plea was required to be raised by the respondents to meet
the claim of the petitioner in such proceedings. If such a plea was
not required to be raised by the respondents with a view to
successfully meet the case of the petitioner, then such a plea inter-
se the respondents would remain in the domain of independent
proceedings giving an entirely different cause of action inter-se the
respondents with which the petitioner would not be concerned.
Such pleas, based on independent causes of action inter-se the
respondents, cannot be said to be barred by constructive res
judicata in the earlier proceedings where the lis is between the
petitioner on the one hand and all the respondents on the other. In
other words, when the petitioner is not concerned with the inter-se
disputes between the respondents, such inter-se disputes amongst
the respondents would not give rise to a situation wherein it can be
said that such respondents might and ought to have raised such a
ground of defence or attack for the decision of the Court. (Ferro
Alloys Corpn. Ltd.9).
The application of the rule of res-judicata by Courts should
be influenced by no technical considerations of form but by
matters of substance within the limits allowed by the law.
(Sheoparsan Singh v. Ramnandan Prasad Narayan Singh ;
Ferro Alloys Corpn. Ltd.9; Iftikhar Ahmed v. Syed Meharban
Ali ). If the matter was in issue directly and substantially in a
prior litigation and decided against a party, then the decision
would be res judicata in a subsequent proceeding. However, if a
matter was only collaterally or incidentally in issue and decided
in an earlier proceeding, the finding therein would not, ordinarily,
be res judicata in a latter proceeding where the matter is directly
and substantially in issue. (Sajjadanashin Sayed Md. B.E. Edr. v.
Musa Dadabhai Ummer ). A matter in respect of which relief is
claimed in an earlier suit can generally be said to be a matter
directly and substantially in issue. If the issue was necessary
to be decided for adjudicating the principal issue and was decided,
it would have to be treated as directly and substantially in issue
and, if it is clear that the judgment was in fact based upon that
decision, it would then be res judicata in a latter case. (Ishwer
Singh v. Sarwan Singh and Syed Mohd. Salie Labbai v. Mohd.
Hanifa ; Sajjadanashin Sayed Md. B.E. Edr.12).
A judgment is not conclusive if any matter came collaterally
in question or if any matter was incidentally cognizable.
(Halsburys Laws of England (Vol. 16, para 1538, 4th Edn.), R.
v. Knaptoft Inhabitants ; Heptulla Bros. v. Thakore ; Sanders
(otherwise Saunders) v. Sanders (otherwise Saunders) ;
Sajjadanashin Sayed Md. B.E. Edr.12). A collateral or incidental
issue is one that is ancillary to a direct and substantive issue; the
former is an auxiliary issue and the latter the principal issue. The
expression collaterally or incidentally in issue implies that there
is another matter which is directly and substantially in issue.
(Spencer Bower and Turner on The Doctrine of Res Judicata
(2nd Edn., 1969, p. 181); Australian High Court in Blair v.
Curran ; Halsbury says (Vol. 16, para 1538) (4th Edn.);
Sajjadanashin Sayed Md. B.E. Edr.12).
In order to understand this essential distinction, one has
always to inquire with unrelenting severity is the determination
upon which it is sought to find an estoppel so fundamental to the
substantive decision that the latter cannot stand without the
former Nothing less than this will do. Even where this inquiry is
answered satisfactorily, there is still another test to pass: viz.
whether the determination is the immediate foundation of the
decision as opposed to merely a proposition collateral or
subsidiary only, i.e. not more than a part of the reasoning
supporting the conclusion. A mere step in reasoning is
insufficient. What is required is no less than the determination of
law, or fact or both, fundamental to the substantive decision.
(Sajjadanashin Sayed Md. B.E. Edr.12). For a judgment to operate
as res judicata between or among co-respondents, it is necessary
to establish that (1) there was a conflict of interest between the co-
respondents; (2) it was necessary to decide the conflict in order to
give the relief which the petitioner claimed in the writ proceedings,
and (3) the Court actually decided the question. (Ferro Alloys
Corpn. Ltd. v. Union of India9; Iftikhar Ahmed11).
When gas production was envisaged to be 40 MMSCMD,
allotments were made to the fertilizers, LPG, power and CGD
(domestic and transport) sectors. The steel sector was not
allocated any gas within the first 40 MMSCMD. It is only because
the CGD (transport and domestic) sector was not in a position to
off-take the entire 5 MMSCMD allocated to it by the EGoM was
3.75 MMSCMD of gas, unutilized by the CGD sector, transferred to
the steel sector. As there was a significant reduction in the
production of natural gas from KG-D6, which had led to
substantial cuts being imposed on customers, the MoPNG, by
proceedings dated 30.03.2011, decided to supply gas to the
fertilizers, LPG, power and CGD (domestic and transport) sectors
apart from gas needed for operation of the East West Gas Pipeline
(EWPL for short) to entirely meet their firm allocations. Again by
letter dated 21.04.2011 the MoPNG clarified that, under the Gas
Utilization Policy, allocations from the KG-D6 fields had initially
been made to the core sectors and subsequently, taking into
account the expectation of higher production, allocations had been
made to the non-core sectors; as the gas production from the KG-
D6 basin had decreased to around 50 MMSCMD, it was natural
that the said production be supplied firstly to the core sectors; and
the said directions had been issued pursuant to the Gas Utilization
Policy under the provisions of the production sharing agreement.
The relief sought for by the petitioners before the Bombay
High Court, in Welspun Maxsteel Limited2, was to quash the
directions of the MoPNG dated 30.03.2011 and 21.04.2011; to
direct the first respondent to conduct an exhaustive investigation
into the affairs of respondents 2 and 3 in respect of extraction of
natural gas from the KG-D6 fields; and to issue appropriate
directions to ensure that the maximum production levels from the
KG D6 fields were attained. The Division bench of the Bombay
High Court held that the EGoMs decisions clearly showed that a
very high priority had been accorded to the core/priority sectors
like Fertilizer, Power, CGD (Domestic and Transport) and LPG;
initially the production from KG D-6 basin was expected to be only
25 mmscmd and was, thereafter, expected to gradually increase to
40 mmscmd; the decisions of the EGOM clearly indicated that the
entire supply would be distributed amongst the core sector; any
further supply was to be allocated to the power sector; the priority
to sponge iron plants was kept after the aforesaid four core priority
sectors; the impugned action of curtailing gas supply to non-
priority sectors, so as to ensure that the reduction in supply of gas
to core/priority sectors is kept at the minimum, is eminently in
public interest; the authority was conscious that various
industries/plants had come up in various sectors which were
dependent on gas and it was, therefore, necessary to identify the
sectors where lower price of gas resulted in passing on the benefit
to the public at large; they were also conscious about the difference
between the core sectors and non-core sectors; the non-priority
sectors could pass on their additional financial burden, on account
of procurement of gas from the open market, to their customers;
the core/priority sectors, which operated in a controlled price
regime, were unable to pass on such additional burden to their
customers; it was not possible to hold that either the decision
making process or the decision itself was arbitrary, illegal,
irrational or manifestly unjust; and the Court, exercising
jurisdiction under Article 226 of the Constitution of India, would
not sit in appeal over such a well informed decision on a matter
relating to financial policy involving complex economic factors.
In Essar Steel Limited8, the orders under challenge were
the proceedings of the MoPNG dated 30.03.2011 and 21.04.2011
and the consequential letter dated 04.05.2011 issued by Reliance
Industries Limited intimating the petitioner that, consequent upon
compliance with the directions of the MoPNG, supply of natural
gas to them, in terms of the Gas Sales and Purchase Agreement,
was likely to be affected. The contention of the petitioner before
the Delhi High Court was that the said directions of the MoPNG,
reducing supply of natural gas to them, was in contravention of the
policy/ directions/guidelines framed by the EGoM regarding
allocation of the limited available quantity of gas to the consumers
thereof; as per the decisions of EGoM they were entitled, from the
first 40 mmscmd of gas extracted, to the unutilized gas out of the
allocation of 5 mmscmd to the CGD and CNG sectors, and to
priority in the gas extracted beyond 40 mmscmd; the directions of
EGoM of first giving priority to the steel sector, including the
petitioner, in the allocation of unutilized gas of CGD had thus been
violated; the categorization by MoPNG of core and non-core sectors
was contrary to the decisions of EGoM; and, while the power sector
was getting cheap natural gas, it was free to sell power at the
market rate.
It was contended before the Delhi High Court, on behalf of
the power companies (some of the members of the petitioner
association in the present writ petition), that the steel sector was
not entitled to anything in the first 40 mmscmd of gas
extracted/produced; the decisions of the EGoM did not provide for
any pro-rata cut; a pro-rata cut would be contrary to prioritization;
as per the EGoM, the power sector is to get any additional gas
available within the first 40 mmscmd of gas produced and only if,
after fulfilling the complete requirement of gas based power plants,
there is any unutilized gas is the steel sector entitled to get the
same; in the meeting of EGoM held on 27th October, 2009 it was
decided that KG-D6 gas should be supplied on firm basis to power
plants so as to enable them to operate at 75% PLF; firstly, such
supply had to be made to the power plants; the press note,
regarding the EGoM meeting dated 27th October, 2009, showed
that the firm allocation of the power sector stood at 31 mmscmd
before steel gets any gas; the EGoM decisions do not provide for
any pro-rata cut, and the said argument had also been rejected by
the Bombay High Court; the steel industries had no vested right
and no priority; no priority for steel beyond 40 mmscmd had been
provided; and the discretion in this regard was still with the
Ministry.
The Delhi High Court held that, on the basis of the decisions
of MoPNG, the steel sector was not found entitled to any supply of
gas in production till 40 mmscmd; and, in the production beyond
40 mmscmd, the priority of the steel sector was again only after
the sectors of Fertilizers, LPG, Power, CGD and CNG.
The issues regarding reservation of gas inter-se the core
sector, according priority to the fertilizer sector over the power
sector in the supply of gas, and the imposition of reverse cut in the
supply of NELP gas to the IPPs in the State of Andhra Pradesh
while imposing a pro-rata cut, in the supply of non-NELP gas, to
power producers in Western and Northern India did not arise for
consideration either before the Bombay or the Delhi High Court.
These issues were not even collaterally or incidentally in issue,
much less being directly and substantially in issue in those writ
proceedings. The determination of these issues was neither
fundamental nor the immediate foundation of the decision by the
Bombay and Delhi High Courts. A decision on the aforesaid issues
was wholly unnecessary for deciding the issues which arose for
consideration in Welspun Maxsteel Limited2 and Essar Steel
Limited8. The mere fact that the priority given to the fertiliser
sector over the power sector, and the reverse cut policy, is referable
to the MoPNG letter dated 30.03.2011 which was under challenge
before the Bombay and Delhi High Courts is of no consequence, as
the challenge was evidently to a different facet of these
proceedings. I see no reason, therefore, to non-suit the petitioners
on this ground.
(iii) APPROBATE AND REPROBATE:
Both Sri P. Wilson and Sri R. Raghunandan, Learned Senior
Counsel, would submit that the members of the petitioner
association were hitherto agreeable to the authority of MOPNG
to issue the order dated 30.03.2011, and it was never
challenged until the cut order affected the power sector; their
contention, that the classification of consumers of gas into core
sector and non-core sector is a valid classification but the further
classification of core sector consumers and fixation of priority of
supply of gas to such core sector members is arbitrary, is not
tenable as the petitioners, themselves, have accepted the basic
concept of categorization of consumers and fixation of priority in
the supply of gas on the basis of such categorization; and, having
accepted this principle of categorization and having filed this writ
petition on the basis of such a classification, the petitioners
cannot now turn around and claim or contend that the order of
priority, within that category, should be set aside for violation of
Article 14 of Constitution of India.
The raison dtre of the rule of res-judicata is to confer
finality on decisions arrived at by competent courts between
interested parties after genuine contest; and to allow persons who
had deliberately chosen a position to reprobate it and to blow hot
now, when they were blowing cold before, would be completely to
ignore the whole foundation of the rule. (Ferro Alloys Corpn.
Ltd.9; Iftikhar Ahmed11; Ram Bhaj v. Ahmad Said Akhtar
Khan ). Law does not permit a person to both approbate and
reprobate. This principle is based on the doctrine of election which
postulates that no party can accept and reject the same
instrument and that 'a person cannot say at one time that a
transaction is valid and thereby obtain some advantage, to which
they could only be entitled on the footing that it is valid, and then
turn round and say it is void for the purpose of securing some
other advantage. (P.R. Deshpande v. Maruti Balaram Haibatti ;
R. N. Gosain v. Yashpal Dhir ; Halsbury's Laws of England para
1508 in Vol. 16 of the 4th Edn.). The doctrine of election is
based on the rule of estoppel - the principle that one cannot
approbate and reprobate inheres in it. Doctrine of estoppel by
election is one of the species of estoppel in pais (or equitable
estoppel) which is a rule in equity. By that rule a person may be
precluded by his action or conduct or silence, when it is his duty to
speak, from asserting a right which he otherwise would have had.
(P.R. Deshpande20; Black's Law Dictionary, 5th Edn.). Before
the Bombay and Delhi High Courts, some of the IPPs supported
the decision of the MoPNG dated 30.03.2011 in according priority
to the core sectors over the non-core sectors in the supply of gas
from the KG-D6 fields. The inter-sectoral priority within the core-
sector, and the imposition of a reverse cut in supply of NELP gas to
different sectors within the core sector while imposing a pro-rata
cut to industries within the core sector in the supply of non-NELP
gas was not even in issue, and the petitioners herein cannot be
said to have supported such a stand of the Union of India before
the Bombay and Delhi High Courts.
The principle that one cannot approbate and reprobate is
based on the doctrine of election which, in turn, is based on the
rule of estoppel. It is settled law that the principle of estoppel
cannot impede the constitutional remedy. (P.R. Deshpande20;
Evans v. Bartlam ). The petitioners question the action of
respondents 1 and 2 in according priority to the fertilizer sector
over the power sector, and in imposing a reverse cut in supply of
NELP gas while imposing a pro-rata cut in supply of non-NELP gas
thereby extending benefits to the power sector in West and North
India as compared to IPPs in the East Coast, as arbitrary,
discriminatory and in violation of Article 14 of the Constitution of
India. There can be no estoppel against the Constitution. The
doctrine of estoppel is based on the principle that consistency in
word and action imparts certainty and honesty to human affairs.
This principle can have no application to representations made
regarding the assertion or enforcement of fundamental rights. No
individual can barter away the freedoms conferred upon him by
the Constitution. (Olga Tellis v. Bombay Municipal
Corporation ; Basheshar Nath v. The Commissioner of Income
Tax, Delhi ). Fundamental Rights cannot be compromised nor
can there be any estoppel against the exercise of Fundamental
Rights available under the Constitution. (Nar Singh Pal v. Union
of India ). The contention that the Writ Petition should be
dismissed, on the application of the doctrine of approbate and
reprobate, does not merit acceptance as the petitioners claim of
violation of Article 14 is required to be examined in the present
writ proceedings.
iv. HAVE THE PETITIONERS SUPPRESSED MATERIAL
FACTS
Sri P. Wilson, Learned Senior Counsel appearing on behalf of
respondents 1 and 2, would submit that the petitioners have
suppressed the fact that they were parties to the Writ Petitions
filed by Welspun Maxsteel Limited2 before the Bombay High
Court, and Essar Steel Limited8 before the Delhi High Court; the
very same reverse-cut policy framed by MoPNG by its proceedings
dated 30.03.2011, which was under challenge before the Bombay
and Delhi High Courts, was supported by the petitioners then; the
petitioners have now sought to secure an undue advantage by
suppressing the fact that they were parties to the earlier writ
petitions; and the Writ Petition, as now filed, is an abuse of process
of Court.
On the other hand Sri S. Niranjan Reddy, Learned Counsel for
the petitioners, would submit that the Petitioners have placed all
relevant and material facts including the judgments of the Bombay
and Delhi High Courts on record; in fact the EGoM decision dated
24.02.2012, which is under challenge in this Writ Petition, directly
refers to the said judgments; no question of suppression can arise
as the issues that arose for consideration in the said judgments
are separate and distinct from the issues which fall for
consideration in the present writ petition; and it is not suppression
of any fact, but suppression of material and relevant facts that
would judge the conduct of a party before the Court.
A person invoking the discretionary jurisdiction of the court
cannot be allowed to approach it with unclean hands. (Arunima
Baruah v. Union of India ). The rule, that suppression of a
material fact by a litigant disqualifies him from obtaining any
relief, has been evolved to deter a litigant from abusing the process
of court by deceiving it. To enable the court to refuse to exercise
its discretionary jurisdiction, suppression must be of a material
fact, in the sense that, had it not been suppressed, it would have
had an effect on the merits of the case. It must be a matter which
was material for the consideration of the court, whatever view the
court may have taken. Material fact would mean material for the
purpose of determination of the lis, the logical corollary whereof
would be whether the same was material for grant or denial of the
relief. If the fact suppressed is not material for determination of the
lis between the parties, the court may not refuse to exercise its
discretionary jurisdiction. What would be a material fact,
suppression whereof would disentitle the petitioner to obtain a
discretionary relief, would depend upon the facts and
circumstances of each case. (Arunima Baruah26; S.J.S. Business
Enterprises (P) Ltd. v. State of Bihar ).
The EGoM proceedings dated 24.02.2012 which is under
challenge in the present proceedings, and a copy of which has been
filed along with the Writ Petition, records that M/s. Welspun
Maxsteel Limited2 and Essar Steel Limited8 had filed petitions in
the Supreme Court challenging the orders of the Mumbai and
Delhi High Courts. As noted hereinabove, the issues which arose
for consideration before the Mumbai and Delhi High Courts are
distinct and different from those which arise for consideration in
the present Writ Petition. As the fact, that writ petitions were filed
before the Mumbai and Delhi High Courts, is not material for
determination of the lis before this Court, the petitioners cannot be
held guilty of suppression of material facts necessitating dismissal
of the present writ petition. While the petitioners would have been
well advised to refer to these proceedings in their writ affidavit, the
mere fact that they did not, would not justify dismissal of the
present writ petition on this score.
III. LEGITIMATE EXPECTATION:
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that gas based power plants in Andhra Pradesh were
established, and their capacity increased, only on the basis of
definite scientific data made available to them by the first
respondent projecting sufficient gas availability to feed these
industries atleast upto the year 2017; if the said projection of the
first respondent, which was always claimed to be accurate, has not
come true then there is a duty cast upon them to ensure
availability of gas to the power generating units set up in the State
of Andhra Pradesh; the members of the petitioner association have
a legitimate expectation to be supplied gas upto atleast 75% PLF
which was the assurance given by the EGoM in the year 2009,
based on which these units were set up; the projected availability
of gas was pegged at 80 mmscmd upto the year 2017, after which
alone was it estimated that production of gas would start to fall;
and, if the first respondent had not made such a prediction of
availability of gas till 2017, the members of the petitioner
association would have either waited to set up their plants after
creation of terminals in the east coast, or terminals would have
been planned to come up in the east coast so as to become
operational in the year 2011-2012, if it had been known that
availability of gas will dwindle from the said year.
On the other hand Sri P. Wilson, Learned Senior Counsel
appearing for respondents 1 and 2, would submit that, when the
power plants were established, no assurance was given to them of
supply of NELP gas; theirs is a business risk as NELP gas cannot
be the sole source, more so as there is no guaranteed supply;
except the allocation order, there is no agreement between the
Government of India and the power plants; apart from the policy
taken from time to time, and the projections given by contractors
based on which supply or allocation was made, there is no written
contract/ statute governing assured supply/ allocation; allocation of
natural gas does not guarantee or assure that, during the period of
availability of gas from that source, the allottees will be supplied
gas equal to their allocation; allocation merely acts as the basis to
determine the actual quantity of supply of gas from a particular
source based on actual availability; the gas utilization policy does
not advocate any reservation of gas allocation; a plant must be
ready to consume gas whenever gas is available; the power
producers have established gas based power plants based on
future "projections" without any commitment from respondents 1
and 2 that additional gas would be allocated to their plants; the
respondent cannot be asked to reduce the risks to improve their
returns in case of adversity; alternate source of gas like imported
R-LNG, albeit costlier, is available in the market which the
petitioner can utilize; merely on the basis of legitimate expectation,
the petitioner cannot maintain this writ petition; and, moreover,
there cannot be a legitimate expectation as against the policy of the
government.
A claim based on legitimate expectation requires reliance
on representations and resulting detriment to the claimant in the
same way as claims based on promissory estoppel. (National
Buildings Construction Corpn. v. S. Raghunathan ). Doctrines
of promissory estoppel and legitimate expectation cannot come in
the way of public interest which must prevail over private interest.
(Union of India v. International Trading Co. ). Legitimacy of an
expectation can be inferred only if it is founded on the sanction of
law. (International Trading Co.29). Whether the expectation of
the claimant is reasonable or legitimate in the context is a question
of fact in each case. Whenever the question arises, it is to be
determined not according to the claimants perception but in larger
public interest wherein other more important considerations may
outweigh what would otherwise have been the legitimate
expectation of the claimant. A bona fide decision of the public
authority reached in this manner would satisfy the requirement of
non-arbitrariness and withstand judicial scrutiny. (Food
Corporation of India v. Kamdhenu Cattle Feed Industries ).
The decision to impose a reverse cut in supply of NELP gas to
different sectors within the core sector, and to accord priority to
fertilizer and LPG over the power sector, is a matter of economic
policy. As has been submitted by Sri P. Wilson, Learned Senior
Counsel appearing for respondents 1 and 2, neither was any
assurance given to the IPPs nor was any agreement entered into
with them for supply of a specified quantity of NELP gas. The mere
fact that the availability of gas was predicted to increase till the
year 2017, which prediction later turned out to be highly
exaggerated, does not, by itself, confer any right on the petitioners
to claim that they should be supplied gas upto their allocated
quantity even if the genuine claims of other sectors within the core
sector are denied thereby.
To strike at the exercise of administrative power, solely on
the ground of avoiding the disappointment of the legitimate
expectations of an individual, would be to set the courts adrift on a
featureless sea of pragmatism. Moreover, the negation of a
legitimate expectation (falling short of a legal right) is too nebulous
to form the basis for invalidating the exercise of a power when its
exercise otherwise accords with law. 'If a denial of legitimate
expectation in a given case amounts to denial of a guaranteed right
or is arbitrary, discriminatory, unfair or biased or is a gross abuse
of power, the same can be questioned on the well known grounds
attracting Article 14 but a claim based on mere legitimate
expectation, without anything more, cannot ipso facto give a right
to invoke these principles. It can be one of the grounds to consider,
but the court must lift the veil and see whether the decision is
violative of the principles warranting interference. (International
Trading Co.29; Attorney General for New Southwale v. Quin ).
While their contention regarding the EGoM decisions failing the
test of Article 14 shall be examined hereinafter, the petitioners
cannot claim priority in supply of gas on the specious plea of their
having established their units based solely on the predictions of
increased availability and production of gas. The petitioners have
taken an unavoidable business risk in establishing their power
plants and, in the absence of any contractually guaranteed supply,
cannot rest their case solely on the ground of legitimate
expectation.
IV. CAN THE UNION GOVERNMENT BE DIRECTED TO
FRAME A POLICY
Sri S. Niranjan Reddy, Learned Counsel for the petitioner,
would submit that the Union of India has failed in its duty to frame
an equitable gas distribution policy as mandated by the Supreme
Court; as a result, there is no level playing field either amongst the
power units situated in various parts of the country or for the
power units vis--vis fertilizer units situated in different areas; the
Government of India also failed to undertake a review of the policy
decision qua any regional/sectoral preferences as mandated by the
Supreme Court; and any departure, from the directions of the
Supreme Court, has to be consciously made after being alive to the
additional preferences accorded in the previous exercise.
On the other hand both Sri P. Wilson and Sri R.
Raghunandan, Learned Senior Counsel, would submit that the
prayer, seeking enforcement of the order of Supreme Court, is not
maintainable as no such direction was given by the Supreme Court;
the Supreme Court cautiously made an observation and a
reminder, as no direction could be given to enforce rights under
Part-IV of the Constitution of India; an observation made by the
Supreme Court cannot now be sought to be issued as a direction
in the present writ petition; such a prayer cannot be countenanced
in law; and, even otherwise, a writ petition seeking a direction to
frame a policy or to bring in legislation is not maintainable.
In Reliance Natural Resources Ltd.1 B. Sudershan Reddy,
J, in his separate opinion, observed:-
Before we part with the case, we consider it appropriate to observe and
remind the GoI that it is high time it frames a comprehensive
policy/suitable legislation with regard to energy security of India and
supply of natural gas under Production Sharing Contracts..
While Sri S. Niranjan Reddy, Learned Counsel for the
petitioner, would contend that the aforesaid observations are
reflected in a concurring opinion, Sri R. Raghunandan, Learned
Senior Counsel appearing for respondents 10 and 11, would
submit these observations form part of the minority opinion with
which the majority disagreed. He would draw attention of this
Court to the opinion of Justice P. Sathasivam who, while speaking
for himself and Chief Justice K.G. Balakrishnan (as he then was),
held that he had the benefit of reading the erudite judgment of B.
Sudershan Reddy J, but was unable to share the view expressed
by him on some points and must respectfully dissent.
It is wholly unnecessary for this Court to examine whether
the afore-extracted observations form part of a concurring opinion
or a minority opinion as what Sri B. Sudeshan Reddy, J observed
was a reminder to the Government to frame a comprehensive
policy or to make suitable legislation. These observations cannot
be understood as a direction to the Central Government, for it is
settled law that no court can direct a legislature to enact a
particular law or frame a particular policy. Similarly, the executive
cannot be asked to enact a law under their delegated legislative
authority. (Suresh Seth v. Commr., Indore Municipal Corpn., ;
State of J&K v. A.R. Zakki ; A.K. Roy v. Union of India ; V.K.
Naswa v. Union of India ; Supreme Court Employees Welfare
Assn. v. Union of India ). In any event the petitioners remedy, to
question the failure of the Government to frame a policy or to make
a law based on the aforesaid observations, is to approach the
Supreme Court. It would be wholly inappropriate for this Court to
decide whether or not the aforesaid observations obligated the
Government of India to frame a policy or to make a law.
V. NO DIRECTION CAN BE ISSUED TO THE CENTRAL
GOVERNMENT TO SUPPLY GAS TO THE PETITIONERS:
Sri P. Wilson, Learned Senior Counsel appearing on behalf of
respondents 1 and 2, would submit that the 3rd prayer seeking "a
direction to supply 19.72 MMSCMD of natural gas from KG D6 gas field or
from any other source in the KG basin to the petitioners members" cannot
be countenanced in law and is, therefore, not maintainable; the
distribution of material resources forms part of the directive
principles of state policy (Article (39(b)), and this Court would not
direct its enforcement; no person has a right to seek a mandamus
to supply natural gas from a particular source; public interest and
priority have to be taken into consideration while distributing
material resources, such as natural gas; the petitioners have no
enforceable right much less a statutory or a legal right; there is no
public interest in the claim of the petitioners, and only commercial
interest looms large; and this Court would not exercise its
discretionary jurisdiction when competing public interests require
it to refrain.
It is no doubt true, as contended on behalf of the petitioners,
that the Division bench of the Gujarat High Court, in Dhrangadhra
Prakruti Mandal v. Union of India , issued a mandamus
directing the Government of India to allot natural gas for domestic
and vehicular usage in the city of Ahmedabad at the same rate at
which it was supplied to Delhi and Mumbai; and not to
discriminate between CGDs promoted by the Central Public Sector
Undertakings and other CGDs, and also among Gujarat based
CGDs, in the matter of allocation of natural gas. The Division
bench opined:
.. In such circumstances, discrimination of excess allotment at
cheaper rate to Delhi and Mumbai in comparison to that of Ahmedabad
definitely violates Article 14 of the Constitution of India. We, therefore,
find that in the facts of the present case, the Government of India should
be directed to allot natural gas for domestic and vehicular usage at the
same rate at which the same is supplied to Delhi and Mumbai. There is
no justification of supplying the gas to those two cities at a cheaper rate
in comparison to the one at which it is supplied to Ahmedabad when the
level of air-pollution is no less than that prevailing in those two cities.
There should be, at any rate, the same yardstick for measuring the peril
of public health throughout the vulnerable cities of the country.
The second prayer of the above writ-application is for a direction
upon the Government of India to prioritize and diversity unutilized
natural gas from non-priority sector to the CGDs for their domestic and
vehicular usage as directed by the Supreme Court of India in the case of
M.C.Mehta v. Union of India : (2002) 4 SCC 356..
On consideration of the materials on the record, we find that the
policy that has been adopted by the Union of India is not strictly in
conformity with the above direction of the Supreme Court of India, and
the Union of India has violated such norms as it appears from the Chart
at paragraph 8.2.1 of this order at page-50 ..
.We are also convinced that the respondent No.1 has not only
discriminated between CGDs promoted by the Central PSUs and other
CGDs but also among Gujarat based CGDs. For instance, the
respondent no.1 in paragraph-15 of its affidavit-in-reply has submitted
that allocation of 2 Lac MMSCMD gas from KG D6 has been made to
Adani Gas Limited. However, even though gas has been allotted to Adani
Gas Limited from KG D6, the other CGDs, e.g., GSPC Gas Company Ltd.
and Charotar Gas Ltd. were denied the same though they also could
have been allocated gas on the same principle.
As indicated earlier, within the narrow scope of Article 226 of
the Constitution, as pointed out by us above, we, therefore, dispose
of these two writ-applications by passing the following directions:-
1. The Government of India is directed to allot natural gas for
domestic and vehicular usage at the same rate to the city of
Ahmedabad at which the same is supplied to Delhi and Mumbai to
enforce the right of equality.
2. The respondent no.1 for the same reason is directed not only to
discriminate between CGDs promoted by the Central PSUs and other
CGDs but also among Gujarat based CGDs in the matter of allocation
of natural gas.
3. State of Gujarat is directed to pass necessary order compelling the
owners of all the vehicles having registration in the State of Gujarat
to use natural gas and, if necessary, even at the higher prices within
a shortest possible period, at any rate, not exceeding one year from
today for protection of the lives of the citizens living in this State.
4. For the purpose of prevention of wastage of the natural gas, it is for the
State Government to decide whether it would impose additional tax upon
the sale of natural gas for the use of private owners of motor vehicle and
utilize that additional amount available on such taxation, by selling the
natural gas to those who are the owners of public vehicle at a cheaper
rate. At the same time, taking into consideration the fact that by taking
advantage of cheaper price of the natural gas, those owners of the public
vehicles do not misuse the same and the end-benefit goes to the ordinary
public who avails of public transport facility, it is for the State
Government to decided whether it would fix a fare-structure at a
reasonable rate in consultation with the experts as it thinks fit.
5. So long such restriction to make it compulsory for all the vehicles plying
in the State by natural gas instead of other types of fuel is not enforced,
necessary order imposing stringent restriction be passed for reducing the
pollution by fixing the level of emission to the minimum in accordance
with one approved by experts at the international level. Let such
decision be taken within two months from today. (emphasis
supplied).
It is however settled law that, in order that mandamus may
issue to compel the authorities to do something, it must be shown
that there is a statute which imposes a legal duty and the
aggrieved party has a legal right under the statute to enforce its
performance. (Lekhraj Satramdas Lalvani v. N.M.Shah, Deputy
Custodian-cum-Managing Officer ; Rai Shivendra Bahadur (Dr)
v. Governing Body of the Nalanda College and Umakant Saran
(Dr) v. State of Bihar ; Bihar Eastern Gangetic Fishermen
Coop. Society Ltd. v. Sipahi Singh ). The petitioners claim is
not founded on a constitutional, statutory or a legal right. They
are not entitled, therefore, to seek a mandamus that the Central
Government be directed to supply them a specified quantity of gas.
Whether, and to what extent, gas should be supplied to the
IPPs in Andhra Pradesh is not an exercise which this Court would
undertake in proceedings under Article 226 of the Constitution of
India as these are all matters in the executive realm. Granting the
relief which the petitioners seek as prayer No.3 would deprive both
the fertilizer and the LPG sectors of much needed gas. It is not in
the province of this Court to confer a benefit to one sector while
depriving other sectors of the limited natural resources available.
If the relief sought for is granted by this Court to benefit the
petitioners, it would result in amending the existing government
policy by way of a judicial order, and would amount to extending
benefits to persons to whom the policy was not intended to apply,
(Principal, Madhav Institute of Technology & Science v.
Rajendra Singh Yadav ; and Union of India v. Deoki Nandan
Aggarwal ), or beyond what was intended.
The petitioners are, therefore, not entitled to the reliefs
sought for as prayers (i) and (iii). The question which necessitates
examination is whether, and to what extent, the petitioners are
entitled to be granted the relief sought for as the amended prayer
No.(ii) in this Writ Petition
VI. IS THE DECISION MAKING PROCESS OF THE UNION OF
INDIA VITIATED FOR NOT TAKING ALL RELEVANT
FACTORS INTO CONSIDERATION
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that there are two facets to the policy decisions of
the UoI i.e., (i) a sectoral priority being accorded to the fertilizer
industry, and (ii) the mode of allocation of gas from KG-D6 in the
event of reduction in supply; both these facets are inter-twined and
inter-connected; the mode of allocation of KG-D6 gas by the EGoM
is not insulated from the mode of allocation of gas in the non KG-
D6 sector; supply to the fertilizer industry, from the KG-D6 basin,
has always been linked to supplies from the non-KG-D6 fields as
KG D6 was a top-up gas to meet the shortfall in supply of gas; this
policy continues in the same form even after the EGoM meeting
held on 23.08.2013 whereby KG-D6 continues to be a top-up gas
upto the newly imposed ceiling limit of 31.5 mmscmd; in taking
the policy decision dated 23.08.2013, the UOI failed to consider
all relevant and germane factors that ought to have been
considered; the UoI was swayed by irrelevant considerations; the
following would be the relevant factors in any decision making
process relating to allocation of natural gas (a) the total availability
of gas on the date of the decision and projected availability or
reduction in future, if any; (b) the demand for supply of gas,
including existing allocations made and pending applications, if
any; (c) peculiar factors in relation to the available gas (such as
portability issues); (d) any peculiar and special circumstances
attendant to any applicant distinguishing it and prioritizing its
claims for gas over others; and (e) the overall Governmental policy
including any discernible legislative policy or larger policy pursued;
the decisions of EGOM from time to time, including that of
23.08.2013, suffer from a non-consideration of all the above; it
appears that EGOM dealt with antiquated facts relating to the gas
availability average for the year 2012-13, that too on a misleading
'average availability' factor; though the decision was made in the
meeting held on 23.08.2013, the current availability figures and
month-wise gas availability figures, from April to July, 2013, were
not placed before the EGoM which did not also advert to the
existing allocation policy in respect of non-NELP gas; and thereby
the decision making process stands vitiated.
On the other hand Sri P. Wilson, Learned Senior Counsel
appearing on behalf of respondents 1 and 2, would submit that
the final decision regarding inter-se sectoral priority, in supply of
NELP gas, was taken by the EGoM in the meeting held on
23.08.2013; the EGoM was informed of the various
representations received from the Ministry of Power, the Chief
Minister of Andhra Pradesh, Parliament, the members of the
power producers association, and individual power companies; the
EGoM noted the concerns of the power sector and, accordingly,
put a cap on the supply of domestic gas to the fertilizer sector at
the level of 31.5 MMSCMD, and took a decision to supply
additional production of NELP gas to the power sector in the years
2013-14, 2014-15 and 2015-16; this decision was taken after
considering the views of both the Ministry of Power and the
Department of Fertilizers; while 54.18 MMSCMD of gas is
allocated to the fertilizer sector, the average supply of gas to the
fertilizer sector in the year 2012-13 was 31.5 MMSCMD; the
projected gas availability, from all categories of domestic gas
envisaged during the XII Plan Period (2012-2017), which
corresponds to other NELP Blocks discoveries expected to go in
for production during the XII plan period, was placed before
EGoM; and the demands of the petitioners were duly considered.
Sri R. Raghunandan, Learned Senior Counsel appearing on
behalf of respondents 10 and 11, would submit that the EGoM
decisions, ever since its first meeting, are based on availability of
gas, the projected availability and the subsequent fall in
production of gas; the note, which was considered by EGoM in
these meetings, have been produced by the UoI before this Court;
and the contention that EGoM had taken the decision, without
considering relevant material, is not correct.
The note dated 24.06.2013 submitted to the EGoM, to
consider the inter-se priority between the core sectors for
allocation of gas under NELP, records that there has been a sharp
decline in production of KG-D6 gas from a peak production of 61
MMSCMD to 15.01 MMSCMD in May, 2013; this had resulted in a
drastic cut in gas supply to the power plants necessitating a review
in priorities for gas allocation; some other associated matters were
also required to be placed before the EGoM for a decision; the
overall gas production in the country peaked in 2010-11 at 143.1
MMSCMD, mainly due to increase in production from Pvt./JV
fields (KG-D6); it had declined thereafter to 130 MMSCMD in 2011-
12, and then to 111.44 MMSCMD in 2012-13; the projected
availability of gas in 2013-14 was pegged at 105.3 MMSCMD, and
hence the present problem especially in the power sector; and the
overall gas production scenario in the country from 2008-09 to
2012-13 is as under:
Source
2008-
08
2009-
10
2010-
11
2011-
12
2012-
13
2013-14
(Projected)
ONGC
22.486
23.109
23.095
23.316
23.55
23.44
OIL
2.269
2.415
2.352
2.633
2.64
2.739
Pvt./JV
8.09
21.985
26.774
21.609
14.49
12.271
Total
(BCM)
32.845
47.51
52.22
47.56
40.68
38.45
Total
(MMSCMD)
90
130.2
143.1
130
111.44
105.3
The Note dated 24.06.2013 also refers to the allocation of
KG-D6 gas for a total quantity of 93.337 MMSCMD (firm plus fall
back) of which 15.67 MMSCMD was allocated to the fertilizer
sector, 2.59 MMSCMD to the LPG sector, and 44.58 MMSCMD to
the power sector (32.58 MMSCMD firm allocation plus 12
MMSCMD in future fall back allocation). The said Note also
discloses that supply of gas from KG-D6 reached its maximum of
55.35 MMSCMD in 2010-11, thereafter it fell to 42.33 MMSCMD in
2011-12, and 25.74 MMSCMD in 2012-13; and, consequently
during May 2013, the actual KG-D6 supply to the fertilizers sector
was 14.10 MMSCMD, 0.67 MMSCMD to the LPG sector and the
power sector not getting any gas from KG-D6. The Note dated
24.06.2013 also records that, as per projections, the indigenous
gas availability is not going to increase substantially in the next
couple of years; and the year-wise projected availability is as
follows:
Source
2013-14
2014-15
Pre NELP /CBM
13.72
16.32
KG-D6
18.22
16.53
ONGC
55
58
OIL
9
10
Total availability
from domestic
source (MMSCMD)
95.94
100.85
DGH has calculated gas availability assuming 95% of production available
for
sale as per past data.
While the availability of gas in the entire country is projected
as 95.94 MMSCMD for 2013-14 and 100.85 MMSCMD for 2014-
15, the projected supply of gas from KG-D6 is quantified as 18.22
MMSCMD in 2013-14 and 16.53 MMSCMD for 2014-15. The
availability of gas from non-KG-D6 gas fields as projected for 2013-
14 is 77.72 MMSCMD, and 84.32 MMSCMD for 2014-15.
The note dated 24.06.2013 assesses the impact if power and
fertilizer sectors are given equal priority, and states that a decrease
in supply to fertilizer plants of 9.41 MMSCMD would result in an
additional subsidy burden of Rs.5,372 crores per annum; and, if
the same quantity is produced from imported R-LNG, the annual
subsidy burden would be around Rs.8,595 crores; an increase in
the supply of gas to the power sector by 9.74 MMSCMD would
result in additional production of about 16,624 million kilo watts
per annum; the additional production cost, using domestic gas,
would be Rs.11,300 crores per annum lower than where the same
energy is produced using imported R-LNG; an increase in supply to
the power sector in Andhra Pradesh by 3 MMSCMD would result
in additional production of 4,763 MKWs per annum; and the
additional production cost using domestic gas would be Rs.3,535
crores per annum lower than where the same energy is produced
using imported R-LNG gas. The following proposals were placed for
consideration/approval of the EGoM.
(i) In respect of the inter-se sectoral priority for allocation of NELP gas to
the core sector, approval is sought for one of the following options:-
a) To maintain status quo in the sectoral priority for allocation of NELP gas;
OR
b) To accord equal priority to all core sectors viz., fertilizers, LPG, power
and
CGD for domestic and transport; and re-distribute the available NELP gas
amongst the core sector users, prorated based on the signed GSAs;
OR
c) To accord equal priority to fertilizer and power sectors and re-distribute
the
available NELP gas among the two sectors, prorated based on their signed GSAs.
(ii) In case the EGoM approves the option under para 27(i) (a), RGPPL
may be accorded the same priority as the fertilizer sector, reiterating the
decision taken by EGoM in its meeting held on 23.10.2008;
(iii) to take note of the contents of Para.22 and issue approrpaite
directions;
(iv) To take note of contents of Para.23 and 24 and allow supply of NELP
gas to power plants based on short term PPAs in all such cases where
medium/long term PPAs are not practicable in view of the limited
balance tenure of the GSPAs.
(v) To take note of the contents of Para.25.
The record placed before this Court contains the views of the
Ministry of Power regarding change in the sectoral priority for
allocation of gas, and that highest priority be given to the power
sector along with the fertilizer sector for allocation/supply of
domestic gas including KG-D6 gas. The views of the Member
(Energy), Planning Commission are also noted as suggesting that a
balance be struck between the requirements of the fertilizer sector
and the power sector so that there are no non-performing assets,
and that the economy also grows. The record also contains the
views of the department of fertilizers that replacement of domestic
gas with imported RLNG would cost the exchequer about Rs.1,000
crores for each one MMSCMD of domestic gas.
While the EGoM was appraised of the representations
received from different quarters, and the supply of NELP gas in
May, 2013, there are certain other relevant factors which were not
considered by the EGoM in its meeting held on 23.08.2013.
Details thereof shall be referred to, and its consequences dealt
with, hereinafter.
VII. IS THE EGOM POLICY, OF GIVING HIGHER PREFERENCE
TO THE FERTILISER SECTOR OVER THE POWER
SECTOR, IRRATIONAL AND ARBITRARY
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that the sectoral preference given to fertilizers over
power is irrational, arbitrary and discriminatory as essentially all
industries are alike, and are entitled to equal treatment under Article
14; the impugned policy decision discriminates the power industry
qua the fertilizer industry; the initial burden of showing that the
policy withstands the test of Article 14 is not discharged by the
UoI; the solitary goal of reducing the financial/subsidy burden
cannot constitute a legal object justifying a classification; the
sectoral preference given to fertilizers over power is rendered
irrational and arbitrary as relevant factors have not been taken
into account qua the competing claims of the fertilizers and the
power sectors; the EGOM was predominantly and unjustifiably
swayed by only one factor i.e. subsidy implications on the
Government of India; quite like contractual matters where the
State is an interested party, an executive policy pursued by the
State may render it an interested party; as the State is the
custodian of natural resources, the doctrine of public trusteeship
would require their actions to be subjected to greater scrutiny by
Courts; the financial interest of the Union of India, as an
interested party, does not equate to an overarching public
interest; as it is required for industrial and agricultural
development of the country, electricity should be given the highest
priority next only to CNG; if KG-D6 gas were to be supplied to the
petitioner, the annual cost of generation of 7000 MW would be
Rs.10,165 Crores; the resultant savings, to the people of the State
of Andhra Pradesh and to the nation, would be Rs.35,600 crores
each year; the power sector should be given higher priority as (a)
fertilizers can be imported with a very minimal differential price
whereas there is no scope for importing power to meet the present
shortfall in supply; (b) fertilizer units, which are situated largely in
Western and Northern India, can be operated on imported gas
available from the terminals on the West Coast, whereas there is
no such terminal in the East Coast and it is therefore not possible
to operate power plants on imported gas; (c) 20% of the electricity
generated is used in the agricultural sector and, without power,
agriculturist would not be in a position to gainfully utilize
fertilizers due to lack of irrigation provided by electrically operated
pump sets; (d) power is considered the world over as a basic
industrial sector need essential for all round economic
development of the area; (e) providing subsidy is also a part of the
policy of the Government and cannot, per-se, justify grant of a
better status to the fertilizer industry as compared to the power
industry; and (f) availability of fertilizers, without availability of
power, will not result in an increase in agricultural production.
On the other hand Sri P. Wilson, Learned Senior Counsel
appearing for respondents 1 and 2, would submit that Article 14
is not attracted as fertilizer producers cannot be placed on the
same footing as power producers; unequals cannot be treated as
equals and, hence, discrimination does not arise; the price of
fertilizer is directly and predominantly determined by the price of
gas; giving first priority to the fertilizer sector, in the supply of
domestic gas, fulfils the twin objectives of self-sufficiency in
fertilizers and a lower subsidy burden; domestic LPG is a
subsidized product in which the country is not self-sufficient; any
disruption in supplies of LPG would lead to a public outcry in the
country; the EGoM also decided that higher fractions should be
extracted from gas and, accordingly, the LPG sector should get full
supply of gas; the EGoM includes the Minister of Power and the
Minister of Fertilizers who have individually presented the case of
their respective sectors; the EGoM has taken a considered
decision after taking into account all facts and circumstances; the
power sector continued to get KG-D6 gas preferentially, as per the
MoPNG order dated 30.3.2011, till January 2013 (i.e., for a period
of nearly two years), by diversion of KG-D6 gas from sectors lower
than them in priority; by way of the 2nd prayer, the petitioner
seeks to substitute the existing Government policy with a new
policy to be framed by this Court; a policy can be struck down,
but cannot be re-written by way of judicial review; save the policy
being unconstitutional, or in violation of any statutory provision,
the Courts would not compel the Government to change its policy;
considering the demand and supply need, and to subserve the
best interests of the country, the Government may bring in a new
policy or change the existing policies; Courts refrain from striking
down a policy merely because another policy would be fairer or
wiser or more scientific or more logical; the Government cannot be
divested of its supervisory power to regulate supply and
distribution of gas; and the EGOM decisions have the force of law.
Sri R. Raghunandan, Learned Senior Counsel appearing for
respondents 10 and 11, would submit that, in the present case,
the facts staring at the EGoM were that the available gas was
insufficient to meet the demand, and supply of gas would further
dwindle in the foreseeable future; in these circumstances, EGoM
took the decision to protect the fertilizer industry as its first
priority and, thereafter, the other three categories of consumers;
the decision, on this broad parameter, cannot be challenged on the
alleged ground that the EGoM did not consider the minute details
of allotment; in the present case, the object sought to be achieved
is allocation of scarce gas in a manner which would best sub-serve
the national interest; the differentia applied, to achieve this object,
is the nature of the manufacturing activity of the consumer; and
as long as the policy decision of EGoM is not totally unreasonable
or arbitrary the Court, in the exercise of its power of judicial
review, would defer to the wisdom of the executive in framing a
policy even if it results in hardship to some sections of society.
(a). COURTS DO NOT SIT IN APPEAL OVER POLICIES
MADE BY THE GOVERNMENT:
The earlier decision of MoPNG dated 30.03.2011 and the
decisions of EGoM dated 24.02.2012 and 23.08.2013 are policy
decisions whereby priority in supply of gas has been given to the
core sector vis--vis the non-core sectors; and inter-se the core
sector priority has been accorded to the fertiliser and LPG sectors
over the power sector. The scope of judicial review of an executive
policy is limited. The court cannot impinge upon the judgment of
the executive as to the priorities. (State of H.P. v. Umed Ram
Sharma ). Public authorities must have liberty and freedom in
framing policies. While the discretion is not absolute, unqualified,
unfettered or uncanalised, and the judiciary has control over all
executive actions, Courts are ill-equipped to deal with these
matters. In complex economic and commercial matters, decisions
are taken by the government keeping in view several factors, and it
is not possible for Courts to consider competing claims and
conflicting interests, and conclude which way the balance tilts.
There are no objective, justiciable or manageable standards to
judge the issues nor can such questions be decided on a priori
considerations. (Dhampur Sugar (Kashipur) Ltd. v. State of
Uttaranchal ). It is neither desirable nor advisable for the Court
to direct or sermonise the Government to adopt a particular policy
which it deems fit or proper, as it does not have effective means to
decide which alternative, out of the many competing ones, is the
best in the circumstances. (State of Jharkhand v. Ashok Kumar
Dangi ). In respect of public policies of the Government, the
Court should not become the approval authority. When two or
more options or views are possible, and after considering them the
Government takes a policy decision, it is then not the function of
the court to examine the matter afresh or sit in appeal over such a
policy decision. (Narmada Bachao Andolan v. Union of India ;
BALCO Employees Union (Regd.) v. Union of India ).
(b). THE EXECUTIVE IS ENTITLED FOR SOME PLAY IN
THE JOINTS IN FRAMING AN ECONOMIC POLICY:
In complex economic matters every decision is necessarily
empiric and is based on experimentation. Its validity cannot be
tested on the application of any straitjacket formula. The Court
must, while adjudging the constitutional validity of an executive
decision relating to economic matters, grant a certain measure of
freedom or play in the joints to the executive. Mere errors of the
government are not subject to judicial review. It is only its palpably
arbitrary exercise which can be declared void. The court cannot
strike down a policy decision taken by the Government merely
because it feels that another policy decision would have been fairer
or wiser or more scientific or logical. (Dhampur Sugar (Kashipur)
Ltd.45; Metropolis Theater Co. v. State of Chicago ; State of
M.P. v. Nandlal Jaiswal ). The Government has, while taking a
policy decision, the right to trial and error as long as both trial
and error are bona fide and within the limits of authority. (BALCO
Employees Union (Regd.)48). Reform must begin somewhere if it
has to begin at all and, therefore, the administrator who has
complex problems to solve must be allowed the freedom to proceed
tentatively, step by step. (State of J & K v. Triloki Nath Khosa ).
(c). WISDOM AND ADVISABILITY OF POLICIES ARE,
ORDINARILY, NOT AMENABLE TO JUDICIAL
REVIEW:
It is not for the courts to examine the relative merits of
different economic policies, and consider whether a wiser or better
one can be evolved. Nor are Courts inclined to strike down a policy
merely because it is urged that a different policy would have been
fairer or wiser or more scientific or more logical. (BALCO
Employees Union (Regd.)48). It is not in the domain of the Court
to embark upon the unchartered ocean of public policy. Greater
judicial deference must be shown towards a policy relating to
economic activities. The fact that an economic policy may be
troubled by crudities, inequities, uncertainties or the possibility of
abuse cannot form the basis for striking it down. (Natural
Resources Allocation, In Re, Special Reference No.1 OF 2012 ;
R.K. Garg v. Union of India ).
The judiciary cannot engage in an exercise of comparative
analysis of the fairness, logical or scientific basis, or wisdom of a
policy. The wisdom and advisability of policies are, ordinarily, not
amenable to judicial review unless the policies are contrary to
statutory or constitutional provisions or is arbitrary or irrational or
an abuse of power. (Natural Resources Allocation, In Re, Special
Reference No.1 of 201252; State of M.P. v. Narmada Bachao
Andolan ). The Court is not the forum where conflicting policy
claims may be debated, as it is only required to adjudicate the
legality of a measure which has little to do with the relative merits
of different economic theories. (Natural Resources Allocation, In
Re, Special Reference No.1 of 201252; Rustom Cavasjee Cooper
v. Union of India ).
(d). COURTS DEFER TO THE WISDOM OF EXPERTS IN
FRAMING A POLICY, AND DO NOT SUBSTITUTE
THEIR VIEWS FOR THAT OF THE EXPERTS:
Judges should encroach warily in economic regulatory
measures, as they are not experts in these matters. (Bajaj
Hindustan Ltd. v. Sir Shadi Lal Enterprises Ltd., ). Nothing in
the Constitution warrants a rejection of expert conclusions. Nor,
on the basis of intrinsic skills and equipment, are the Courts
qualified to set their independent judgment on such matters
against that of the chosen state authorities. (Federal Power
Commission v. Hope Gas Co., ; Railroad Commission of Texas
v. Rowan & Nichols Oil Company ). Expertise in public matters
is necessary before one may engage in the making, or in the
criticism, of a policy. Courts do not possess the expertise and are,
consequently, incompetent to pass judgment on the appropriateness
or the adequacy of a particular policy. (Dhampur Sugar (Kashipur)
Ltd.45; Liberty Oil Mills v. Union of India ). The Court does not
supplant the "feel of the expert" by its own views. (Federal Power
Commission57). Matters of economic policy must necessarily be
left to experts. Economic policies are often matters of prediction of
ultimate results on which even experts can seriously err and,
doubtlessly, differ. Courts cannot be expected to decide them
without even the aid of experts. (Natural Resources Allocation, In
Re, Special Reference No.1 of 201252; BALCO Employees
Union (Regd.)48; Peerless General Finance and Investment Co.
Ltd. v. Reserve Bank of India ; M/s. Prag Ice Oil Mills v. Union
of India ). Due respect should be given to the wisdom of those
who are entrusted with the task of framing policies. (Centre for
Public Interest Litigation v. Union of India ). The methodology,
pertaining to disposal of natural resources, is an economic policy
which entails intricate economic choices and the Court lacks
expertise to make them. It would, therefore, not make a
comparative study of the various methods of distribution of natural
resources and suggest the most efficacious mode, if there is one
universal efficacious method in the first place. The wisdom of the
executive must be respected in such matters. (Natural Resources
Allocation, In Re, Special Reference No.1 of 201252). These
factors must, necessarily, be borne in mind while examining the
validity of the impugned policy decisions.
(e). THE POWER TO MAKE A POLICY INCLUDES THE
POWER TO WITHDRAW, CHANGE OR REVISE IT:
While no Court can compel the Government to change its
policy involving expenditure, (Union of India v. Tejram
Parashramji Bombhate ), the policies of the Government ought
not to remain static. What may have been in the public interest at
a point of time may no longer be so. (BALCO Employees Union
(Regd.)48). The earlier policy decisions of the MoPNG dated
30.03.2011, and the EGoM decision dated 24.02.2012, have been
modified, albeit to a limited extent, by the policy decision of the
EGoM dated 23.08.2013. The power to lay policy by executive
decisions includes the power to withdraw the earlier policy or to
change it. (Bajaj Hindustan Ltd.56). The action of the Government
cannot be declared illegal, arbitrary or ultra vires the provisions of
the Constitution merely on the ground that the earlier policy had
been given up, changed or not adhered to. It cannot also be
attacked on the plea that the earlier policy was better suited to the
prevailing situation. (Dhampur Sugar (Kashipur) Ltd.45).
Whether the policy should be altered or not is a matter for
the Government to decide. (Federal Power Commission57). When
the Government is satisfied that a change in the policy is
necessary in the public interest, it would be entitled to revise the
policy and lay down a new policy. It is equally entitled to issue or
withdraw or modify the policy. The Court would not bind the
Government with a previous policy. (P.T.R. Exports (Madras) Pvt.
Ltd. v. Union of India ). The Court cannot strike down a policy
merely because there is a variation. Consistency is not always a
virtue. What is important is to know whether irrational and
extraneous factors foul. There can be no quarrel if a policy is
revised. The wisdom of yesterday may obsolesce into the folly of
today, even as the science of old may sour into the superstition
now, and vice versa. (Tamil Nadu Education Deptt. Ministerial &
General Subordinate Services Assn. v. State of T.N. ).
(f). GROUNDS ON WHICH A POLICY DECISION IS
SUBJECT TO JUDICIAL REVIEW:
While the scope for interference is limited, policy decisions
are, nonetheless, not beyond the pale of judicial review. The
Court would not lay its judicial hands off merely because a plea is
raised that the decision is a policy decision. Interference by the
Court in such matters is not without jurisdiction as a policy
decision is also subject to judicial review. Broadly, a policy
decision is subject to judicial review on the following grounds: (a) if
it is unconstitutional; (b) if it is dehors the provisions of the Act
and the regulations; (c) if the delegatee has acted beyond its power
of delegation; (d) if the executive policy is contrary to a statutory or
a larger policy. (DDA v. Joint Action Committee, Allottee of SFS
Flats ). When it is demonstrated that the policy framed by the
State and/or its implementation is contrary to public interest, or is
violative of the constitutional principles, it is the duty of the Court
to exercise its jurisdiction in larger public interest and reject the
plea of the State that the scope of judicial review should not be
exceeded beyond recognised parameters. (Centre for Public
Interest Litigation62).
The essence of judicial review is a constitutional
fundamental. (Narmada Bachao Andolan47; BALCO Employees
Union (Regd.)48). Keeping in view its constitutional duty, and the
constitutional rights of citizens, the Court is duty-bound to extend
its arm in accordance with the principle est boni judicis ampliare
justiciam non-jurisdictionem. The argument that matters of policy
are, as a rule, beyond the power of judicial review has to be
dispelled. The Court would ensure that the rule of law prevails
and the constitutional goals are not defeated by inaction when the
policy is so arbitrary that it defeats the larger public interest. (Brij
Mohan Lal v. Union of India ). The scope of judicial review of a
government policy is to scrutinize whether it violates the
fundamental rights of the citizens or is opposed to the provisions of
the Constitution of India or to any statutory provision or is
manifestly arbitrary. The legality, and not the wisdom or
soundness, of the policy is subject to judicial review. (Asif Hameed
v. State of J & K. ; Shri Sitaram Sugar Co. Ltd. v. Union of
India ; Khoday Distilleries v. State of Karnataka ; BALCO
Employees Union48; State of Orissa v. Gopinath Dash and
Akhil Bharat Goseva Sangh v. State of Andhra Pradesh ;
Dhrangadhra Prakruti Mandal37). The basic test is to see whether
the decision-maker has understood correctly the law that regulates
his decision- making power and he must give effect to it otherwise
it may result in illegality. The grounds upon which administrative
action is subjected to control by judicial review are classifiable
broadly under three heads, namely illegality, irrationality and
procedural impropriety. All errors of law are jurisdictional errors.
(Reliance Energy Ltd. v. Maharashtra State Road Development
Corpn. Ltd. ; Reliance Airport Developers (P) Ltd. v. Airports
Authority of India ).
Courts interfere when the economic policy is demonstrated
to be violative of constitutional or legal limits on power or is
abhorrent to reason, (BALCO Employees Union (Regd.)48), or if it
is patently arbitrary, discriminatory or mala fide. (Dhampur Sugar
(Kashipur) Ltd.45; Metropolis Theater Co.49; Nandlal Jaiswal50).
Any act of the repository of power, whether legislative or
administrative or quasi-judicial, is open to challenge if it is in
conflict with the Constitution or the general principles of law or it
is so arbitrary or unreasonable that no fair minded authority could
ever have made it. (Shri Sitaram Sugar Co. Ltd.69; Kruse v.
Johnson ; Associated Provincial Picture Houses Ltd. v.
Wednesbury Corporation ; Chertsey UDC v. Mixnam
Properties Ltd., ; Commissioners of Customs and Excise v.
Cure and Deeley Ltd., ). The doctrine of judicial review implies
that the repository of power acts within the bounds of the
delegated power, and does not abuse it. He must act reasonably
and in good faith. (Maneka Gandhi v. Union of India ; Shri
Sitaram Sugar Co. Ltd.69; Natural Resources Allocation, In Re,
Special Reference No.1 of 201252; Premium Granites v. State of
T.N. ). The Courts may interfere where a decision, made in the
purported exercise of power, is such that a repository of the power,
acting reasonably and in good faith, could not have made it.
(Union of India v. International Trading Co. ; G.B. Mahajan v.
Jalgaon Municipal Council ).
(g). COURTS WILL STRIKE DOWN A POLICY, INVOLVING
DISTRIBUTION OF NATURAL RESOURCES, IF IT
FALLS FOUL OF ARTICLE 14:
As they constitute public property/national assets, the State,
while distributing natural resources, is bound to act in consonance
with the principles of equality and public trust and ensure that no
action is taken which may be detrimental to public interest.
(Centre for Public Interest Litigation62; Natural Resources
Allocation, In Re, Special Reference No.1 of 201252; Natural
Resources Allocation, In re ). The Court can test the legality
and constitutionality of the methods of distribution of natural
resources, analyse the legal validity of different means of
distribution, and give a constitutional answer as to which methods
are either ultra vires or intra vires the provisions of the
Constitution. If a policy or law is patently unfair to the extent that
it falls foul of the fairness requirement of Article 14 of the
Constitution, the Court would not hesitate in striking it down.
(Natural Resources Allocation, In Re, Special Reference No.1 of
201252). As natural resources are public goods, the doctrine of
equality, which emerges from the concepts of justice and fairness,
must guide the State in determining the actual mechanism for its
distribution. In this regard, the doctrine of equality has two
aspects: first, it regulates the rights and obligations of the State
vis--vis its people and demands that the people be granted
equitable access to natural resources and/or its products and that
they are adequately compensated for the transfer of resource to the
private domain; and second, it regulates the rights and obligations
of the State vis-a-vis private parties seeking to acquire/use the
resource, it demands that the procedure adopted for distribution is
just, non- arbitrary and transparent, and does not discriminate
between similarly placed private parties. (Natural Resources
Allocation, In Re, Special Reference No.1 OF 201252; Natural
Resources Allocation, In re83).
(h): DOCTRINE OF PUBLIC TRUST:
In a constitutional democracy like ours, the national assets,
such as natural gas, belong to the people. The people of the entire
country have a stake in natural gas, and its benefit has to be
shared by the whole country. There should be a just and
reasonable use of natural gas for national development. (Special
Reference No. 1 of 2001, In re ; Reliance Natural Resources
Ltd.1). The natural resource i.e., gas is vested in the UOI to be
held in trust on behalf of the people. The State is the trustee of all
natural resources which are, by nature, meant for public use and
enjoyment. (Intellectuals Forum v. State of A.P., ; Natural
Resources Allocation, In re, Special Reference No. 1 of 201252;
M.C. Mehta v. Kamal Nath ). The Government owns the gas till
it reaches its ultimate consumer. It has supervisory powers to
regulate the supply and distribution of gas. (Reliance Natural
Resources Ltd.1).
The broader notion of public trust is that the sovereign
rights of the Nation-States over certain environmental resources
are not proprietary, but fiduciary. (Reliance Natural Resources
Ltd.1). The idea of public trusteeship rests upon three related
principles. First, that certain interests have such importance to the
citizenry as a whole that it would be unwise to make them the
subject of private ownership. Second, that they partake so much of
the bounty of nature, rather than of individual enterprise, that
they should be made freely available to the entire citizenry, without
regard to economic status. And finally, that it is a principal
purpose of the Government to promote the interests of the general
public rather than to redistribute public goods from public uses to
restricted private benefits. (Reliance Natural Resources Ltd.1).
Public trust is an affirmation of the duty of the State to
protect the peoples common heritage surrendering the right only
in those rare cases when the abandonment of the right is
consistent with the purposes of the trust. (Intellectuals Forum85;
National Audubon Society v. Superior Court of Alpine
Country ; Natural Resources Allocation, In re, Special
Reference No. 1 of 201252). When the State holds a resource that
is freely available for the use of the public, it provides for a high
degree of judicial scrutiny on any action of the Government that
attempts to restrict such free use. To properly scrutinise such
actions of the Government, the courts must make a distinction
between the Governments general obligation to act for the public
benefit, and the special, more demanding, obligation which it may
have as a trustee of certain public resources (Intellectuals
Forum85; Joseph L. Sax The Public Trust Doctrine in Natural
Resource Law: Effective Judicial Intervention; Michigan Law
Review, Vol. 68, No. 3 (Jan. 1970) pp. 471-566]. Three types of
restrictions on governmental authority are often thought to be
imposed by the public trust doctrine (1) the property subject to the
trust must not only be used for a public purpose, but it must be
held available for use by the general public; (2) the property may
not be sold, even for fair cash equivalent; (3) the property must be
maintained for particular types of use (i) either traditional uses, or
(ii) some uses particular to that form of resources. (Intellectuals
Forum85). The public trust doctrine is a specific doctrine with a
particular domain and has to be applied carefully. (Natural
Resources Allocation, In re, Special Reference No. 1 of 201252).
(i). THE TWIN TESTS TO BE SATISFIED FOR A
CLASSIFICATION TO BE HELD REASONABLE
UNDER ARTICLE 14 OF THE CONSTITUTION:
The mere fact that the fertilizer sector and the power sector
are two different categories of consumers of gas would not, by
itself, mean that the priority given to the former over the latter is
not ultra-vires Article 14 of the Constitution. The equality doctrine
in Article 14 permits reasonable classification which satisfies the
twin tests of being founded on an intelligible differentia which
distinguishes persons or things that are grouped together from
those that are left out of the group, and that differentia must have
a rational nexus to the object sought to be achieved. Executive
action may, accordingly, be sustained if it satisfies the twin tests of
a reasonable classification and the rational principle correlated to
the object sought to be achieved. The twin tests can only be
satisfied if it is established that the principle on which
classification is founded is rational, and it correlates to the objects
sought to be achieved. (Ramana Dayaram Shetty v. International
Airport Authority of India ; D.S. Nakara v. Union of India ).
Article 14 is violated where equals are treated differently without
any reasonable basis. (Ajay Hasia v. Khalid Mujib Sehravardi ;
D.S. Nakara89).
A person, setting up a grievance of denial of equal treatment,
must establish that, between persons similarly circumstanced,
some were treated to their prejudice and the differential treatment
has no reasonable relation to the object sought to be achieved.
(Gauri Shanker v. Union of India ; Western U.P. Electric Power
& Supply Co. Ltd. v. State of U.P. ). The classification may be
founded on different basis. What is necessary is that there must
be a nexus between the basis of classification and the object of the
policy under consideration. (Gauri Shanker91; Ram Krishna
Dalmia v. Justice S.R. Tendolkar ; Budhan Choudhry v. State
of Bihar ). The classification must rest upon a real and
substantial distinction bearing a reasonable and just relation to
the thing in respect to which the classification is made; and
classification made without any reasonable basis should be
regarded as invalid. (Bidi Supply Co. v. Union of India ; State
of West Bengal v. Anwar Ali Sarkar ).
If the policy decision is demonstrably capricious or arbitrary
or it suffers from the vice of discrimination, the policy decision can
be struck down. A public policy can be tested in the context of
illegality and unconstitutionality. (Krishnan Kakkanth v. Govt. of
Kerala ). If the policy of the Government fails to satisfy the test of
reasonableness, it would be unconstitutional. What is imperative
and implicit in terms of Article 14 is that a policy is made fairly,
and not arbitrarily. The basic requirement of Article 14 is fairness
in action by the State, and non-arbitrariness in essence and
substance is the heart beat of fair play. Actions are amenable, in
the panorama of judicial review, to the extent that the State must
act validly for a discernible reason, not whimsically for any ulterior
purpose. (International Trading Co.81). The exercise of discretion
is impeachable on well accepted grounds such as 'ultra vires' or
'unreasonableness'. (Shri Sitaram Sugar Co. Ltd.69). The ultimate
test is whether, on the touchstone of reasonableness, the policy
decision comes out unscathed. (Internatinal Trading Co.81).
If the policy of the government fails to satisfy the test of
"reasonableness", then such a decision would be unconstitutional.
(Reliance Energy Ltd.73). A policy, or a change in it, can only be
justified on the Wednesbury test of reasonableness. (R. v. Secy. of
State for the Home Deptt., ex p Hargreaves ; Punjab
Communications Ltd. v. Union of India ; R. v. Secy. of State
for Transport, ex p Richmond upon Thames London BC ;
Punjab Communications Ltd.99). The Wednesbury principle of
reasonableness is that an administrative decision is unlawful if it
is so outrageous in its defiance of logic or of accepted moral
standards that no sensible person, who had applied his mind to
the question to be decided, could have arrived at it. (R. v. Secy. of
State for the Home Deptt., ex p Hargreaves98; Punjab
Communications Ltd.99).
These principles must be borne in mind while examining
whether the policy decisions of the Government of India, in
according priority to fertilizers over power, satisfy the requirements
of a valid classification under Article 14 of the Constitution of
India. Before doing so, it is necessary to examine whether the
onus lies on the petitioner or on the Union of India to establish the
validity or otherwise of the classification.
(j). BURDEN TO PROVE THE VALIDITY OR OTHERWISE
OF A CLASSIFICATION:
In order to establish that the protection of the equality
clause has been denied to them, it is not enough for the petitioners
to say that they have been treated differently from others, not even
enough that a differential treatment has been accorded to them in
comparison with others similarly circumstanced. Discrimination is
the essence of classification and does violence to the constitutional
guarantee of equality only if it rests on an unreasonable basis. It is
for the petitioners to show that the classification is unreasonable
and bears no rational nexus with its purported object. (Triloki
Nath Khosa51). The person assailing the classification "carries the
heavy burden of making a convincing showing that it is invalid
because it is unjust and unreasonable in its consequences, (Shri
Sitaram Sugar Co. Ltd.69; Federal Power Commission57), or that
there has been a clear transgression of the constitutional
principles. (Ram Krishna Dalmia93; Gauri Shanker91). Where a
party seeks to impeach the validity of a policy made by a
competent authority on the ground that they offend Article 14, the
burden is on him to plead and prove the infirmity, to set out facts
necessary to sustain the plea of discrimination, and to adduce
cogent and convincing evidence to prove those facts for there is
a presumption that every factor which is relevant or material has
been taken into account in formulating the classification. Unless
the classification is unjust on the face of it, the onus lies upon the
party attacking the classification to show, by pleading and placing
the necessary material before the Court, that the said classification
is unreasonable and is violative of Article 14 of the Constitution.(
Triloki Nath Khosa51; G.D. Kelkar v. Chief Controller of
Imports and Exports ). While this is ordinarily the rule, the
doctrine of public trust, which requires the Court to undertake a
stricter judicial scrutiny in matters involving distribution of scarce
natural resources, constitutes an exception thereto, warranting the
initial onus being placed on the State to justify the classification,
instead of on persons impeaching its validity.
As noted hereinabove the IPPs (members of the first
petitioner association), the Government of A.P. and the A.P.
DISCOMS claim that the power sector should be given priority over
the fertilizer sector in the supply of NELP gas. They claim that gas
based power offers substantial environmental benefits; it requires
just 1/10th of the land area as compared to coal; its water
requirements are much lower, and it is 20% more efficient;
fertiliser manufacturing units can use other fuels apart from
natural gas, and can also import gas from abroad; as an
alternative to its indigenous production, fertilizer can be imported;
however there is very little scope for import of electricity; electricity
cannot be generated in the east coast by using imported gas, as
there is no LNG terminal presently available thereat; production of
electricity, by use of imported gas, is not economical; at no point of
time, prior to 30.03.2011, had the EGoM applied the reverse cut
within the four core-sectors; when gas production from KG D6
reached its optimum level during 2009-10, allocation to the
fertilizer sector was 15.7 MMSCMD; and this was continued
arbitrarily despite there being a drastic reduction in supply from
KG D6.
On the other hand both the Union of India, and the fertilizer
Association, contend that the fertilizer sector has been justifiably
given priority over the power sector in the supply of NELP gas.
They claim that the consumption of urea in the country is 58
million metric tonnes of which 18 million metric tonnes is
produced from domestic natural gas, and 4 million metric tonnes
from LNG; the price of fertilizer is directly and predominantly
determined by the price of gas; 20% - 30% of the total urea
consumed in the country is imported, and self-sufficiency can only
be achieved if supply of domestic natural gas, for domestic urea
units, is ensured; the cost of production of urea, on the use of R-
LNG, is even higher than the imported price of urea; India is the
second largest consumer of fertilizers only after China; as against
the 59 million tonnes of fertilisers consumed in 2011-12, at an
imported cost of Rs.24,564 per tonne, the domestic cost of
production, using a mix of domestic and imported gas, is only
Rs.11,000 per tonne; the farmer buys urea at a statutory price of
Rs.5,360 per tonne, and the Government bears a subsidy of
Rs.5,640 per tonne on domestic urea; the subsidy on imported
urea is Rs.18,640 per tonne; this has led to a ballooning of the
subsidy estimate of Rs.70,013 crores; urea fertiliser plants sell
their products at controlled rates; if not produced domestically,
urea will have to be imported at a much higher cost or will have to
be produced at a higher price through RLNG, and then subsidized
through the Union Budget; the huge subsidy burden will be
substantially higher if RLNG is used instead; any increase in the
cost of fertiliser, as a result of non-availability of gas, will only
push up the cost of urea and fertilisers which will have a cascading
effect on the cost of agriculture; in order to reduce its subsidy
burden, the Government of India directed the fertiliser
manufacturing units to dispense with the use of naptha, and
change over to natural gas, within a period of three years; it was
made clear that units, which did not change over, would not
receive any subsidy; the fertiliser companies have received firm
allocation from the Government of India before setting up their
fertiliser plants; in contrast, the allocations sought for by power
producing companies is only after they were established; fertilizer
is sold below cost price, and the entire subsidy burden is borne by
the Central Government; and priority to the fertilizer sector fulfils
the twin objectives of self-sufficiency in fertilizers and a lower
subsidy burden on the Union of India.
The fertiliser sector, which consists of urea and fertiliser
manufacturing units, forms a distinct and separate class from the
power sector which consists of electricity generating units. The
differentia between the fertiliser sector and the power sector is
intelligible. The stated objects, in according priority to the fertilizer
sector over the power sector, are self-sufficiency in domestic
fertilizer production and reduction in the subsidy burden of the
Union of India of around Rs.70,000/- crores per annum. The
differentia between the fertiliser and the power sector has a
reasonable nexus to the object sought to be achieved. In examining
the validity of a classification, on the touchstone of Article 14, it is
not prudent or pragmatic to insist on a mathematically accurate
classification covering diverse situations and all possible
contingencies in view of the inherent complexities involved. (State
of Karnataka v. Mangalore University Non-Teaching Employees
Association ). The Government enjoys considerable latitude,
and exercises its power of classification enriched by its experience
and taking into consideration myriad circumstances. (Ombalika
Das v. Hulisa Shaw ). Precision and arithmetical accuracy will
not exist in any categorisation, and such precision and accuracy is
not what Article 14 contemplates. As long as the broad features of
the categorisation are identifiable and distinguishable, and the
categorisation is reasonably connected with the object targeted,
Article 14 does not forbid such a course of action. (Subramanian
Swamy v. Raju ; Murthy Match Works v. CCE ; Roop Chand
Adlakha v. DDA ; Kartar Singh v. State of Punjab ; Basheer
v. State of Kerala ; B. Manmad Reddy v. Chandra Prakash
Reddy and Transport and Dock Workers Union v. Mumbai
Port Trust ). It is evident that the classification between the
fertilizer sector and the power sector, in according priority in
supply of NELP gas to the former over the latter, satisfies the twin
tests of a reasonable classification and cannot, therefore, be said to
be in violation of Article 14 of the Constitution.
While the anguish of gas based power plants in Andhra
Pradesh (whose cause is also supported by the Government of A.P.
and the A.P. DISCOMS), may necessitate ameliorative measures
being taken to ensure effective utilization of public assets of
around Rs.30,000 crores, and an unutilised power generation
capacity of 7000 MW, this Court must bear in mind that these are
all matters of balancing equities between two vital sectors of the
economy. While the stricter judicial scrutiny test, applicable to
cases attracting the doctrine of public trust, may justify the initial
onus, of establishing that the subject classification does not violate
Article 14, being placed on the UoI instead of the petitioners, that
does not, however, mean that this Court can act as an appellate or
approving authority and dissect the decision making process of the
EGoM to determine whether priority should be given to the
fertiliser sector or the power sector in the supply of natural gas.
Suffice it to hold that, on the application of the wednesbury test of
reasonableness, it cannot be said that according priority to the
fertiliser sector over the power sector, to achieve the twin objects of
self sufficiency in domestic fertilizer production and to avoid a
higher subsidy burden on the Union of India, is neither so
outrageous in its defiance of logic nor is it so unreasonable as to
violate Article 14 of the Constitution of India. Further, as it is ill-
equipped to examine these complex issues, this Court would defer
to the wisdom of experts and not sit in judgment over the policy
decisions of the Union of India in this regard.
VIII. IS THE DIFFERENTIAL TREATMENT ACCORDED TO
POWER PLANTS IN THE WEST COAST, AS AGAINST
POWER PLANTS IN THE EAST COAST, DISCRIMINATORY
AND IN VIOLATION OF ARTICLE 14 OF THE
CONSTITUTION OF INDIA
Sri S. Niranjan Reddy, Learned Counsel for the petitioners,
would submit that the policy of distribution and allocation of
natural gas, adopted by the UoI, must be uniform for both KG-D6
and non-KG-D6 gas, failing which it would be arbitrary thereby
violating Article 14; two agencies of the UoI viz. EGoM and MoPNG
have been constituted and entrusted with the task of enacting a
policy in respect of allocation of the same commodity, being natural
gas, in two separate dispensations; that does not justify
differentiation since the commodity sought to be distributed, as well
as the decision maker, is one and the same; any such distinction or
differentiation must have a rational basis failing which it would
attract the vice of arbitrariness; the policy decisions of EGoM and
MoPNG, in respect of gas in KG D6 and non-KG-D6 gas, are non-
uniform; there is no intelligible classification for such
differentiation; the said policy decision of the UoI is, therefore,
violative of Article 14 of the Constitution; natural gas should be
considered a single basket throughout the country; there is no
uniform policy for supply of APM, non-APM, and KG-D6 gas; in
respect of APM and non-APM gas pro-rata cuts are being imposed,
as a result of which both fertilizer and power units get reduced
supply depending on their allocation; a reverse cut is applied in
KG-D6 and, unlike APM and Non-APM gas, there is no pro-rata cut
in supply of gas to the power sector and the fertilizer sector;
resultantly, power plants on the West Coast are in a much better
position as compared to the petitioners power plants; the sole
justification, for such discriminatory treatment, is that non-KG-D6
Gas is produced in many scattered blocks and lacks portability and
connectivity to the gas pipeline; from out of 66.22 mmscmd
available gas in non-KG D6, there are portability issues only in
relation to 11 mmscmd which is not supplied to the pipeline grid;
in respect of the remaining extent, natural gas must be treated as
one for the purpose of allocation; the petitioners have filed their
affidavit dated 23.01.2014 placing the same on record; the UoI has
not placed any data on record to the contrary; in any event, no
such material was placed for consideration before the EGoM, and
the EGoM did not consider this relevant aspect while framing a
divergent policy on behalf of the same UoI in respect of KG D6;
resultantly the supply of gas to the petitioners power plants has
been reduced to zero since March 2013; these plants have been
lying idle ever since, as opposed to power plants in the West Coast
which are still operational; the policy (and the mode of allocation
being intertwined with it) results in discrimination between
industries within the power sector itself as the Union of India has
not disputed its obligation to treat all power industries alike; they
did not also dispute the contention that RGGPL is similar to any
other power plant and is, therefore, not entitled to a higher
preference in allotment of gas; as it is the public trustee of gas no
differentiation can be made by the UoI with regards gas
finds/discoveries in different regions unless an intelligible
distinction can be made; otherwise all gas discoveries must be
treated as falling within one basket; the submission that, in non-
KG D6, MoPNG is achieving a "near" reverse cut regime is a tacit
acknowledgement of the requirement of maintaining parity in the
manner of allocation; there is no uniformity in the supply of gas
even within the power sector; while there is no alternate supply of
fuel to members of the petitioner-association, because of the lack
of a terminal in the East Coast, yet no priority has been accorded
to them vis--vis power generating units situated in Western and
Northern India which are not only being supplied domestic gas but
have access also to imported gas because of availability of
terminals, to store and supply such gas, in Western India.
On the other hand Sri P. Wilson, Learned Senior Counsel
appearing on behalf of respondents 1 and 2, would submit that
the Government can regulate and distribute natural gas, through
allotments and allocation, in a manner which would sub-serve the
best interests of the country; framing of the "gas utilization
policy", identifying the priority sectors, allocating the requisite
quantities in accordance with the needs of the said sectors, and
subjecting marketing freedom to the order of priority and the
guidelines framed, is in accordance with law; all gas allocations
made so far by the Government are strictly in accordance with
the aforesaid policy; the discretion exercised by the UoI, in the
allocation and allotment of gas, is in public interest and is in
accordance with the standards and norms prescribed under the
policy laid down by the EGoM for NELP gas; the first respondent
is following the policy decisions of the EGoM, and is supplying gas
as per the priorities decided by them; APM & non-APM gas cannot
be compared with KG-D6 gas; while KG-D6 gas is produced from a
single geographical location in Andhra Pradesh, APM gas is
produced from many blocks scattered over many States; the
peculiarities of APM gas are localised supplies, distributed
production from several fields etc; APM gas and KG-D6 gas are
completely different classes, and are not equal; the petitioners
have wrongly submitted that East coast power plants do not have
access to imported R-LNG; on the request of APTRANSCO,
respondents 1 and 2 have allowed swapping of R-LNG with KG-D6
gas for supply of R-LNG to Andhra Pradesh IPPs; transportation of
gas is a natural corollary of finding gas in a certain region and,
being a national asset, gas has to be allocated to everybody based
on a national policy keeping in view public interest.
Sri R. Raghunandan, Learned Senior Counsel appearing for
respondents 10 and 11, would submit that the premise that the
differential treatment meted out to power plants, under different
gas allocation regimes of APM, non-APM, Pre-NELP and NELP,
would result in violation of Article 14 of Constitution of India is
unfounded; differential treatment, under different regimes, is a by-
product of the manner in which gas has been allocated over a
period of time; allocation of gas, under various regimes, came to be
made in circumstances existing at the time of allocation of gas;
industries were not only established on the basis of such
allocation, but are also functioning on such a basis; and treating
all the gas available in the country as forming one pool, to be
equally distributed, would itself result in violation of Article 14 of
Constitution of India as such a policy would not only disrupt
existing allocations which have been acted upon, but would also
amount to discrimination under Article 14 of Constitution of India
as un-equals would be treated as equals under this system of
allocation.
The amended second prayer, as sought for by the petitioners,
is to direct respondents 1 and 2 to modify the EGoM decision dated
24.02.2012 and the subsequent EGoM decisions including those
dated 17.07.2013 and 23.08.2013 so as to enable supply of gas to
gas based power plants of the members of the petitioner on priority
over other consumers of gas in the KG-basin, at least till such time
LNG Terminals are set up in the east coast of the country to enable
supply of generated power to AP DISCOMS. The Court cannot
rewrite, recast or reframe the legislation/policy as it has no power
either to legislate or frame a policy. Courts decide what the law is
and not what it should be. (Deoki Nandan Aggarwal43; P.K. Unni
v. Nirmala Industries ; Mangilal v. Suganchand Rathi ; Sri
Ram Ram Narain Medhi v. State of Bombay ; Hira Devi (Smt)
v. District Board, Shahjahanpur ; Nalinakhya Bysack v.
Shyam Sunder Haldar ; Gujarat Steel Tubes Ltd. v. Gujarat
Steel Tubes Mazdoor Sabha ; G. Narayanaswami v. G.
Pannerselvam ; N.S. Vardachari v. G. Vasantha Pai ; Union
of India v. Sankal Chand Himatlal Sheth ; and CST v. Auriaya
Chamber of Commerce, Allahabad ).
Courts do not stray into the executive domain or in matters
of policy. The Court cannot, by a judicial order, first create a law or
frame a policy, and then seek to enforce it. (Aravali Golf Club v.
Chander Hass ; Deoki Nandan Agarwal43; Vemareddy
Kumaraswamy Reddy v. State of A.P ; Suresh Seth32; and Bal
Ram Bali v. Union of India ). No mandamus can, therefore, be
issued to respondents 1 and 2 to modify the EGoM decisions. The
Court can however modify the relief, and grant the petitioner the
modified relief, as long as the relief granted does not go beyond the
relief sought for in the Writ Petition. Article 226 of the
Constitution empowers the High Court to issue orders for any
other purpose, apart from Writs for the enforcement of any of the
rights conferred by Part III of the Constitution of India. This Court,
in Writ proceedings under Article 226 of the Constitution, has the
power to mould the relief taking into account the totality of the
circumstances, and the exigencies of the situation. It is the duty of
this Court to ensure that ends of justice are not allowed to be
frustrated, and the discretion to mould the relief should be so
exercised as to ensure substantial justice. (D. Satyanarayana v.
N.T. Rama Rao ).
With respect to the natural resources, extracted and
exploited from the geographic zones specified in Article 297, the
UoI may not, among others, allow a situation to develop wherein
the various users in different sectors could potentially be deprived
of access to such resources; allow the extraction and distribution
without periodic evaluation of the current distribution and making
an assessment of how greater equity can be achieved, as between
sectors and also between regions; and no end user may be given
any guarantee for continued access and of use beyond a period to
be specified by the Government. Any arrangement which does not
take within its ambit, the afore-stated principles, may fall foul of
Article 14 of the Constitution. (Reliance Natural Resources Ltd.1).
Whether the policy is framed by the MoPNG, or the EGoM,
they are policy decisions of the Union of India. Natural gas is a
national resource of which the UoI is the trustee. As natural gas is
a national asset it must be made available for use by citizens all
over the country, and no State can claim preference on the ground
that the gas fields fall within its territorial limits. The claim by
IPPs in the Andhra Pradesh, of being entitled to preference in the
supply of gas from the KG-D6 gas fields located within the State of
Andhra Pradesh on the ground that their power plants are also
located within Andhra Pradesh, does not, therefore, merit
acceptance. By the same analogy, power plants in the North and
West of India cannot claim priority in allotment of non-KG-D6 gas
merely on the basis of the location of the gas fields from where gas
is supplied. In all fairness it must be stated that respondents 1
and 2, in their counter-affidavits filed before this Court, do not
make any such assertion.
While examining whether the classification, of power plants
in the north and west of the country, and power plants in the East
coast, is founded on an intelligible differentia, it must be borne in
mind that, even if there be one class having several categories with
different attributes and incidents, such a category becomes a
separate class by itself and no difference or discrimination between
such category and the general members of the other class would
amount to discrimination or to denial of the equality clause, (Air
India v. Nergesh Meerza ). However Sri P. Wilson, Learned
Senior Counsel appearing on behalf of respondents 1 and 2, has
not been able to show, from the material on record, the different
attributes and incidents, if any, between power plants in the North
and West of India and those on the East coast. It is evident,
therefore, that gas based power plants all over the country form a
homogenous class. As such, the first of the twin tests of a
reasonable classification is not satisfied.
KG-D6 gas is produced from a single geographical location
situated in AP. However APM and non-APM gas are produced from
many blocks scattered over many States. Natural gas under APM
was allocated to units located in the western and northern parts of
the country prior to 2007-2008 when there was no pipeline
infrastructure to carry gas from west to east. The east and west
pipeline infrastructure was completed in the year 2007-2008. The
gas available from KG-D6 is transported through a major single
pipeline i.e., the east-west pipeline which has connectivity with the
gas grid for distribution of gas in Andhra Pradesh, and connectivity
with GSPC and GAILs pipeline network in the western and
northern parts of the country. Prior to March, 2011, MoPNG had
stipulated, as was the practice for APM gas, cuts to be enforced on
a pro-rata basis even in the KG-D6 basin. By the order of the
MoPNG dated 30.03.2011, cuts have been stipulated on a reverse
priority basis in KG-D6 basin, with the first to be affected being the
power sector. However, in the case of non-KG-D6 gas, cuts are
still being imposed on a pro-rata basis and there is no change in
the priority of usage of non-KG-D6 gas because of reduction of
supply from KG D6 gas fields. No gas has been made available to
A.P. projects, from gas fields in the west coast, through the East-
West pipeline though it has been in existence from 2007-2008. As
all the RNLG terminals are located in the west coast, RNLG is
being imported and supplied to plants in the western and northern
States. There is no LNG terminal in the east coast. The
production of gas in the KG D6 basin reached its peak of 60
MMSCMD in March, 2010 and, thereafter, the production has
decreased steadily. The steep fall in production at KG-D6 has
resulted in gas being supplied only to the fertilizer and LPG
sectors, and KG-D6 gas is not being supplied to the power sector
from Feb/March, 2013.
Prior to the decision of EGoM dated 23.08.2013, supply of
gas was limited by the total allocation from the KG D6 basin to the
fertilizer sector at 15.67 MMSCMD. The limit imposed by the
decision of the EGoM dated 23.08.2013 restricting supply of
domestic gas, (NELP gas plus other domestic gases), to the fertilizer
sector to 31.5 MMSCMD, against their total allocation of 54.18
MMSCMD, is of no avail to the IPPs in Andhra Pradesh as, even
according to respondents 1 and 2, the average domestic gas
supplied from the KG D6 basin, during the three month period
from April to June 2014, was only 12.79 MMSCMD, the entire KG
D6 gas was being supplied to the fertilizer sector, and a part
thereof has been utilized for operation of the East West pipeline.
In view of the pro-rata cut in non-NELP gas it is highly unlikely
that the requirement of 31.5 MMSCMD of the fertilizer sector
would be met before exhausting the full allocation of 15.67
MMSCMD of KG-D6 gas to them. As against the three month
average supply of gas from KG-D6, between April to June 2014 of
12.79 mmscmd, the note dated 24.06.2013, placed before the
EGoM in its meeting held on 23.08.2013, projects the availability
of KG-D6 gas for 2013-14 as 18.22 mmscmd and for 2014-15 at
16.53 mmscmd. As the allocation of KG-D6 gas to the fertilizer
sector is 15.67 mmscmd and is 2.59 mmscmd to the LPG sector,
i.e a total of 18.26 mmscmd, which is more than the projected
availability of KG-D6 gas for the years 2013-14 and 2014-15, the
submission of Sri S. Niranjan Reddy, Learned Counsel for the
petitioners, that the proposed supply of additional gas to the power
sector as per the EGoM decision dated 23.08.2013 (which is
subject to availability of gas from the KG D6 field) is merely an eye
wash, is not unjustified.
While fertilizer units are said to be receiving 100% of the
available KG-D6 gas, the supply of KG-D6 gas to the power sector
is zero. However, because of the pro-rata cuts, supply of non-KG-
D6 gas to the fertilizer sector is said to be 30%, and the power
sector is said to be receiving 50% of the available non-KG-D6 gas.
Depletion in availability of gas in the KG-D6 basin has resulted in
zero supply of gas to the power sector (IPPs in Andhra Pradesh) as
the gas supply from the KG-D6 basin is insufficient to meet the
entire allocation of gas of the fertilizer and LPG sectors. However
the pro-rata cut imposed in the supply of non-NELP gas has only
resulted in a pro-rata reduction in supply of gas to the fertilizer,
LPG and power sectors and, thereby, the power plants located in
the Northern and Western parts of the country continue to be
supplied gas, albeit of a reduced extent.
The justification given by respondents 1 and 2, for adopting
a different criteria for power plants in western and northern parts
of the country on the one hand and those on the east coast on the
other, is that non-KG-D6 gas fields are scattered over many States,
and its supply is affected by the portability factor. While inability
to transport gas, from the several gas fields in the non-KG-D6
basins, may justify supplying gas only to proximately located
consumers, the petitioners contend that, from out of 92.76
mmscmd of available gas supplied during 2012-13, 81.6 mmscmd
is connected to the grid, and only 11.16 is not; and from out of the
total APM and non-APM gas supply of 55.62 mmscmd, 44.46
mmscmd is connected to the grid. Their submission, in effect, is
that it is only a small portion of non-KG-D6 gas which is affected
by the portability factor, and a major portion thereof is connected
to the grid. If this submission of the petitioners is true then the
classification of power plants between those located in the west
and northern parts of the country on the one hand and the East
coast on the other, and in imposing a pro-rata cut on the former
and a reverse cut on the latter, has no rational nexus with the
object sought to be achieved which is to ensure greater equity in
supply of gas to power plants in different regions and an equitable
distribution of gas which is a scarce natural resource. It would,
then, be discriminatory and fall foul of Article 14 of the
Constitution of India.
IX. CONCLUSION:
As noted hereinabove despite repeated directions by this
Court, respondents 1 and 2 have not furnished any information
regarding the extent to which gas, available in the non-KG-D6
basin, is affected by the portability factor. It is evident from the
records placed before this Court that the MoPNG did not take note
of the extent to which the portability factor necessitated gas
supplies being restricted only to end users located in proximity to
the source of supply, resulting in their inability to maintain parity
between power plants in north and west of the country and power
plants in the east coast. Neither did the MoPNG, in its note dated
24.06.2013, refer to this disparity in imposing a pro-rata cut in
supply of non-KG-D6 gas to power plants in the North and West of
India, and in imposing a reverse cut in supply of KG-D6 gas to
power plants in the East Coast, nor did the EGoM consider this
issue in its meeting held on 23.08.2013. As information, regarding
the portability factor, was not even placed before it in the meeting
held on 23.08.2013, it is evident that the EGoM was not apprised
of the extent to which the portability factor affected non-KG-D6 gas
supplies to the power sector. In the absence of such information
being made available to them, the EGoM was disabled from taking
a considered decision on whether the policy of imposing a reverse
cut for gas based power plants in the KG-D6 basin, while providing
a pro-rata cut on gas based power plants in the non-KG-D6 basin,
should be continued or must be changed bringing about a parity
among all gas based power plants in the country irrespective of
their location or their proximity to the source of supply of gas.
Even if a case for interference with a policy decision has
been made out, in that it is not in accordance with the law, the
only direction which can be issued by the court is for the
Government to consider the matter afresh. (Union of India v.
Kannadapara Sanghatanegala Okkuta & Kannadigara ).
Respondents 1 and 2 are, therefore, directed to examine whether
parity can be restored between gas based power plants all over the
country, to the extent supply of non-KG-D6 gas is not affected by
the portability factor; and then take a decision, or place the matter
before the EGoM for its decision, in accordance with law.
While there is no principle of natural justice which requires
prior notice and hearing to persons who are generally affected as a
class by an economic policy decision of the Government, (BALCO
Employees Union (Regd.)48, it is desirable, as a matter of good
governance and administration, that, whenever policy decisions are
taken, there should be a wide range of consultations including
considering any representations which may have been made.
(BALCO Employees Union (Regd.)48). As any policy decision
taken by the Union of India, in allocation and supply of gas to
power plants located in different regions, will have far reaching
consequences, it is but appropriate that the petitioners,
respondents 3 to 11 and other stake holders are permitted to
submit their representations in this regard to respondents 1 and 2.
I have no reason to doubt that, if any such representations are
made within six weeks from today, the matter shall be examined
by respondents 1 and 2, in accordance with law, at the earliest
preferably within four months thereafter.
X. FOOT NOTE:
Before parting with the case, the needless burden placed on
this Court, in having to examine the voluminous records all by
itself without assistance from the Learned Counsel on either side
on account of the claim of privilege by respondents 1 and 2, must
be placed on record. Sri S. Niranjan Reddy, Learned Counsel for
the petitioner, submitted that the UoI had shielded information
from the petitioner regarding the material that was considered by
the EGoM in arriving at the present policy decision; the UoI has
not placed on record the material on the basis of which the EGoM
had taken the said policy decision, and the same had not been
made available to the Petitioner inspite of filing a petition for
inspection of the same, citing privilege; and, though privilege of
documents was initially claimed by the UoI before the Delhi High
Court (Essar Steel Limited8), it was later given up and all
relevant documents were produced.
In the exercise of its powers under Article 225 of the
Constitution of India, the High Court of Andhra Pradesh made the
Writ Proceeding Rules, 1977, to regulate proceedings under Article
226 of the Constitution of India. Rule 15 of the said Rules
stipulates that the party to the proceedings under the Rules shall
be entitled to inspect the records called for, and relating to the
proceedings, on a request made in writing in that behalf to the
Government Pleader or the Standing Counsel concerned; and, if
such a request is refused, the party shall be entitled to apply to the
Court for directions. While W.P.M.P. No.42588 of 2013 was filed
by the petitioners on 27.11.2013, to permit them to inspect the
records, in terms of Rule 15 of the Writ Proceeding Rules, 1977,
the respondents claimed privilege over the records.
With a view to avoid any further delay in adjudicating the lis,
hearing of which spread over a period of more than one and half
years, the records were not permitted to be perused either by the
petitioners or their Counsel, and this Court under took the ardous
task of examining the voluminous records all by itself. While
maintenance of secrecy may, possibly, be justified before a decision
is taken, the claim of privilege, after the decision is taken, does not
stand to reason, more so as the records were produced before the
Court to enable it to examine whether the contentions urged by
Counsel on either side are borne out from the record. All that has
been achieved, by this specious plea of privilege, is to needlessly
waste the precious time of the Court which could have been easily
avoided if Counsel on either side had been permitted to put forth
their submissions after perusing the records. I do not wish to say
more.
The Writ Petition is disposed of accordingly. The
Miscellaneous petitions pending, if any, shall also stand disposed
of. However, in the circumstances, without costs.
_____________________________
RAMESH RANGANATHAN, J
Date: 28-01-2015.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.