Appeal No. 211 Of 2016 And Ia No.457 Of 2016, Ia No.458 Of 2016 & Ia No.521 Of 2016. Case: H-Energy Private Limited Vs Petroleum And Natural Gas Regulatory Board. APTEL (Appellate Tribunal for Electricity)

Case NumberAppeal No. 211 Of 2016 And Ia No.457 Of 2016, Ia No.458 Of 2016 & Ia No.521 Of 2016
CounselFor Appellant: Mr. Ramji Srinivasan, Sr. Adv., Mr. Atul Chitale, Sr. Adv., Mr. R. Sudhinder, Mr. Siladitya Chatterjee, Ms. Prerna Amitabh, Mr. Vivek Paul Oriel, Mr. Tushar Bhardwaj, Mr. Gurjyog Sethi, Ms. Akansha Ghosel, Advs. and For Respondents: Mr. Prashant Bezboruah, Mr. Saurav Agarwal, Mr. Sumit Kishore, Mr. Rakesh Dewan, Ms. Ashta Gaur, ...
JudgesMrs. Ranjana P. Desai, Chairperson and Mr. B.N. Talukdar, Technical Member (P&NG)
IssueElectricity Law
Judgement DateMay 02, 2017
CourtAPTEL (Appellate Tribunal for Electricity)


In this appeal, the Appellant H-Energy Private Ltd. has challenged order dated 15/07/2016 passed by the Petroleum and Natural Gas Regulatory Board ("the Board"). By the impugned order the Board has cancelled the entire bid process initiated for grant of authorization for laying building, operation and expanding of a 715 kms long natural gas pipeline ("Pipeline Project") through State of West Bengal and Odisha. The Appellant being the lowest bidder (L-1) was declared the successful bidder for the Pipeline Project. The bid process was cancelled inter alia on the ground that the tariff bid submitted by the Appellant is found to be leading to negative cash flows during the prescribed project life of 25 years and therefore the Pipeline Project is not viable on standalone basis. While cancelling the bid the Board expressed as under:

"(iii) Based on the tariff quoted by HEPL and corresponding cash in-flows for the subject pipeline project against the capex and opex planned to be incurred, the subject pipeline project on its own is not economically viable. This is the first instance where the Board has received such type of bid in respect of natural gas pipeline. Since the current regulations have no checks to avoid such bid outcomes, necessary review of Regulation and bid document shall be undertaken to facilitate re-bidding of the pipeline so as to avoid recurrence of such type of bidding by the entities."

2. Mr. Ramji Srinivasan learned counsel appearing for the Appellant has assailed the impugned order on number of grounds. The gist of his submissions is as under:

(a) In a statutory appeal it is incumbent upon the court to hear the matter on merits on question of law and fact (UOI v. K.V. Lakshman & Ors1 ).

(b) As per Regulations 7(4) and 9(1) of the PNGRB (Authorising Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations 2008 ("Authorisation Regulations")the Board was under a statutory obligation to award letter of authorization to the Appellant.

(c) The Board''s action of bid cancellation relying on a provision of the bid document without any such power being present in Authorisation Regulations, amounts to exercise of discretion which is not contemplated in law. (Vodafone International Holdings B V v. Union of India & Anr2).

(d) IRR/Cash flows/economic viability cannot be a bidding parameter. Rejection of the Appellant''s bid on the ground of negative cash flow has no statutory backing. (Dutta Associates (P) Ltd v. Indo Merchantiles (P) Ltd3; Orion Security Solutions Pvt. Ltd v. Govt of NCT of Delhi & Ors.4 ; Om Detective Security Services v. District Collector and Chairman, Selection Committee and Anr5)

(e) Any provision of bid document which happens to be inconsistent with statutes or regulations is void. Statutory provisions must prevail over executive institutions. (Smart Chip Limited & Anr v. State of UP & Ors.6,Virender Singh Hooda v. State of Haryana7; Union of India V. Arun Kumar Roy8 ; Union of India, v. Madras Telephone SC & ST Social Welfare Association9; Shish Ram v. State of H.P. 10).

(f) Requirement of IRR to remain positive throughout the authorisation is imported in the old requirement subsequent to opening of financial bids. (g) There is a violation of principles of natural justice in this case. Economic viability is not prescribed as a relevant criterion for CGD projects...

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