W.P.(C) No.3698/2013 & CM No.6929/2013. Case: Gail (India) Limited Vs Petroleum and Natural Gas Regulatory Board & Ors.. High Court of Delhi (India)
| Case Number | W.P.(C) No.3698/2013 & CM No.6929/2013 |
| Counsel | For Appellant: Mr. Parag P. Tripathi, Sr. Adv. with Mr. Pragyan Pradip Sharma, Ms. Monisha H. Bhargava, Ms. Richa Singh, Advs. and For Respondents: Mr. Saurav Agrawal, Adv. with Mr. Rakesh Dewan, Adv., Mr. Jayant Bhushan, Sr. Adv. with Mr. Sakya Singh Chaudhari, Adv., Mr. Gopal Jain, Sr. Adv. with Mr. Alok Shankar, Adv., Mr. Sumeet Pushkarna, ... |
| Judges | Rajiv Sahai Endlaw, J. |
| Issue | Petroleum and Natural Gas Regulatory Board Act, 2006 - Sections 12(1), 11(e)(ii), 61(2)(e), 2(j), 11(a), 58, 62; Electricity (Supply) Act, 1948 - Section 49; Electricity Act, 2003 - Section 79; Essential Commodities Act, 1955; Delhi Development Act, 1957; Constitution of India - Articles 14, 19(1)(g), 300A |
| Judgement Date | September 11, 2014 |
| Court | High Court of Delhi (India) |
Judgment:
Rajiv Sahai Endlaw, J.
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The petition, (i) impugns the various Guidelines including the Petroleum and Natural Gas Regulatory Board (Development of Model GTA) Guidelines, 2012 (Model GTA Guidelines) issued by the respondent No. 1 Petroleum and Natural Gas Regulatory Board (PNGRB); (ii) impugns the PNGRB (Determination of Natural Gas Pipeline Tariff) Amendment Regulations, 2012 on account of being contrary to the provisions of the Petroleum and Natural Gas Regulatory Board Act, 2006 (PNGRB Act); (iii) seeks a declaration that the various Guidelines including the Model GTA Guidelines issued by the PNGRB are not statutory and cannot be enforced on the petitioner; (iv) impugns the notices dated 26th March, 2013 issued by the PNGRB to the petitioner; and, (v) seeks a declaration that the PNGRB cannot adjudicate disputes between the entities qua transportation where an arbitration agreement exists between the said entities.
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It is the case of the petitioner:-
(a) that it is engaged in the activity of transportation, distribution, marketing and sale of petroleum products and natural gas;
(b) that the petitioner is aggrieved from the issuance by the PNGRB of various Guidelines particularly the Model GTA Guidelines purporting to regulate Gas Transmission Agreement (GTA) between a transporter like the petitioner and a third party shipper;
(c) that the said Guidelines seek to affect the ''Ship-or-Pay Charges''; the Ship-or-Pay Charges are akin to minimum demand charges which, irrespective of whether the shipper ships entire contractual quantity of gas or only a part thereof, has to pay on the basis of Ship-or-Pay quantity;
(d) that the Ship-or-Pay Charges are fixed @ 95% of the tariff for the entire contractual quantity of gas which a shipper is entitled to ship through the pipeline of the transporter under the GTA, irrespective of the number of units actually shipped by the shipper;
(e) that Ship-or-Pay is a standard term in all gas pipeline contracts for transportation of gas, as principally in these GTAs what is really recovered is the regulated tariff as notified by the PNGRB from time to time;
(f) that the impugned Guidelines seek to limit the contractual freedom of the transporter and shipper to determine Ship-or-Pay Charges; the same also seeks to limit the contractual freedom of the transporter and shipper to determine the Force Majeure clause;
(g) that the PNGRB has no power or jurisdiction under the PNGRB Act to issue any Guidelines; in the circumstances, Guidelines if any issued by the PNGRB can at best be advisory or guiding in nature; however the PNGRB, by treating the Guidelines to be mandatory, has sought compliance thereof by the petitioner and issued notices to the petitioner on complaints filed by entities seeking enforcement of the said Guidelines against the petitioner;
(h) that the PNGRB, by issuing the impugned Guidelines imposing the Model terms and making it mandatory to amend the existing GTAs to bring them in consonance with the Model GTA as per the said Guidelines, is encroaching upon the right of the transporter like the petitioner to enter into GTAs on agreed terms;
(i) that the contractual freedom of the petitioner can only be curtailed by a statutory provision i.e. by legislation or at best by a delegated legislation; the impugned Guidelines are neither legislation nor even the result of exercise of delegated legislation; the provision for delegated legislation under the PNGRB Act is the Regulations under Section 61 thereof;
(j) per contra, the Guidelines are simply executive directions issued by the PNGRB, and by executive fiat contractual rights and freedom cannot be curtailed or terminated; the Guidelines are thus ultra vires Articles 14, 19(1)(g) and 300A of the Constitution of India;
(k) that the PNGRB Act does not confer any jurisdiction on the PNGRB to determine the terms of GTA, it only permits fixation of the transportation tariff / rate under Section 22 and for which purpose appropriate Regulations under Section 61 have to be made; as per Section 62, the Regulations so framed have to be placed before the Parliament;
(l) that even if the Ship-or-Pay clause in the GTA is an element of fixation of transportation tariff, the same can only be regulated by Regulations under Sections 61 -- 62, by placing the same before the Parliament;
(m) that the Ship-or-Pay or the Force Majeure clause are not a part of transportation tariff and can never be part of transportation tariff and thus PNGRB has no power even to regulate the same;
(n) that the Guidelines are contrary to the PNGRB (Determination of Natural Gas Pipeline Tariff) Regulations, 2008 (Tariff Regulations) and adversely affect the revenue of the petitioner and take away the right of the petitioner under the GTAs voluntarily entered into between the petitioner and the shipper;
(o) that the shippers have filed complaints before the PNGRB against the petitioner, seeking enforcement of the said Guidelines;
(p) that PNGRB has no jurisdiction to entertain disputes between entities where an arbitration agreement exists with respect to transportation; however the complaints against the petitioner have been entertained;
(q) that as per the scheme of Section 12(1) of the PNGRB Act, PNGRB can entertain and adjudicate disputes inter alia qua transportation; however in case arbitration agreement exists between the parties, the jurisdiction of the PNGRB has been barred by the legislature by putting an embargo thereon.
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Notice of the petition was issued and vide order dated 30th May, 2013, PNGRB was restrained from passing any final orders on the complaints against the petitioner and which are the subject matter of the petition.
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Lanco Kondapalli Power Limited filed an application for impleadment and which was allowed vide order dated 30th May, 2013 on the ground of the complaint against the petitioner being at the instance of the said Lanco Kondapalli Power Limited (Lanco). Thereafter, GMR Energy Limited (GMR Energy), GMR Vemagiri Power Generation Limited (GMR Vemagiri) and Tata Power Delhi Distribution Limited (Tata) also applied for impleadment and were allowed to be impleaded vide order dated 24th October, 2013. Vide order dated 25th November, 2013, Union of India (UOI) was also ordered to be impleaded as a respondent to the writ petition. PNGRB, Lanco and UOI have filed their counter affidavits and GMR Energy, GMR Vemagiri and Tata have relied on the contents of their impleadment applications in opposition to the writ petition.
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We have heard the senior counsel for the petitioner, the counsel for the PNGRB, the senior counsel for Lanco and the senior counsel for GMR Energy, GMR Vemagiri and Tata. The counsel for UOI has supported the petition. Opportunity for filing written submissions was given and has been availed of by the counsels for the petitioner, PNGRB and Lanco.
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The senior counsel for the petitioner has explained:-
(I) that the petitioner is engaged inter alia in the business of transmission/processing of natural gas and owns and operates natural gas pipelines/processing plants;
(II) that the respondents Lanco, GMR Energy, GMR Vemagiri and Tata have separately entered into GTAs with the petitioner for transportation of their gas through the pipelines of the petitioner; in the said GTAs, the petitioner is called the ''Transporter'' and Lanco, GMR Energy, GMR Vemagiri and Tata are respectively called as ''Shipper'';
(III) that the shipper, under the GTAs have agreed to pay transmission and other charges to the petitioner, being the transporter, on the terms as provided therein and for the allocated quantity of gas which the shipper is entitled to transport through the pipelines of the petitioner;
(IV) that it is further a term of the GTAs that even if the shipper does not transport the allocated quantity of gas through the pipelines of the petitioner, the shipper would still pay transportation charges equal to the charges for transportation of 95% of the allocated quantity of gas; such a clause, known as the ''Ship-or-Pay'' was inserted by the petitioner in the GTAs because the petitioner is required to reserve its pipeline for the allocated quantity of gas i.e. the maximum quantity of gas which the shipper is entitled to transport under the GTA irrespective of whether the shipper actually transports such quantity of gas or not;
(V) that the GTAs also provide for settlement of disputes if any, by arbitration in the manner provided therein;
(VI) however, the Model GTA Guidelines issued by the PNGRB entitle a transporter as the petitioner to under such Ship-or-Pay clause, recover only 90% instead of 95% of the booked capacity and further provide that a transporter shall not be entitled to the said 90% also, if the failure of the shipper to transport the allocated quantity is for reasons beyond the control of shipper and which includes failure on account of shipper''s entitlement to gas having been reduced by the Government;
(VII) that owing to the fall in gas production, the Government has reduced the entitlement of shippers to gas and under the Model GTA Guidelines, the transporter is not entitled to Ship-or-Pay Charges even to the extent of 90% of the allocated quantity from the shippers for the said reasons;
(VIII) attention is invited to Section 11(e)(ii) of the PNGRB Act to contend that the PNGRB is entitled to regulate by Regulations transportation rates for common carriers or contract carriers;
(IX) attention is next invited to Section 61(2)(e) of the PNGRB Act empowering the PNGRB to, by making Regulations consistent with the Act and the Rules made thereunder, regulate open access to and transportation rate for the common carrier or contract carrier or city or local natural gas distribution network inter alia referred to in Section 11(e);
(X) attention is next invited to Section 62 to contend that the Regulations so framed are required to be laid before the Parliament;
(XI) attention is next...
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