Appeal No. 196 Of 2016 & Ia Nos. 418, 419 Of 2016 & Appeal No. 197 Of 2016 & Ia Nos. 420, 421 Of 2016. Case: Ms. Jay Madhok Energy Private Limited Vs Petroleum & Natural Gas Regulatory Board. APTEL (Appellate Tribunal for Electricity)
| Case Number | Appeal No. 196 Of 2016 & Ia Nos. 418, 419 Of 2016 & Appeal No. 197 Of 2016 & Ia Nos. 420, 421 Of 2016 |
| Counsel | For Appellant: Mr. Parag P. Tripathi, Sr. Adv., Mr. Atul Y. Chitale, Sr. Adv., Mr. Vineet Malhotra, Mr. Mohit Paul, Mr. Vishal Gohri, Mr. Shubhendu Kaushik, Ms. Tanvi Kakar and Ms. Akansha Ghosh, Advs. and For Respondents: Ms. Aparna Vohra, Mr. Prashant Bezboruah and Mr. Saurav Aggarwal, Advs. |
| Judges | Mrs. Ranjana P. Desai, Chairperson and Mr. B.N. Talukdar, Technical Member (P&NG) |
| Issue | Petroleum and Natural Gas Regulatory Board Act, 2006; Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 - Article 13 |
| Judgement Date | April 28, 2017 |
| Court | APTEL (Appellate Tribunal for Electricity) |
Order:
Mr. B.N. Talukdar, Technical Member (P&NG)
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In the Appeal Nos. 196 of 2016 and 197 of 2016, the Appellant M/s Jay Madhok Energy Pvt. Ltd. ha s challenged the Impugned Orders dated 15.07.2016 passed by the Respondent, the Petroleum and Natural Gas Regulatory Board ( the Boar d) cancelling the authorizations granted to the Appellant for City Gas Distribution (CGD) network for the geographical areas of Kutch (East) and Ludhiana respectively and encashing the entire 100% of the performance bank guarantees submitted by the Appellant in both the authorizations. Since facts in both the appeals are similar and issues are same, both were heard in this tribunal together and accordingly dealt with in this common order. Appeal No. 196 of 2016 will be treated as a lead appeal. Counsel for the parties are agreed that judgment in Appeal No. 196 of 2016 will cover and decide Appeal No. 197 of 2016.
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The Appellant is a company who started as a trading and distribution company in 1985, later strategically, it integrated into oil and gas exploration, production and city gas distribution activities.
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The Respondent, Petroleum and Natural Gas Regulatory Board (the Board) is a statutory body constituted under the provisions of the Petroleum and Natural Gas Regulatory Board Act, 2006 ("PNGRB Act") to regulate "the refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas excluding production of crude oil and natural gas so as to protect the interests of consumers and entities engaged in specified activities relating to petroleum, petroleum products and natural gas and to ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country and to promote competitive markets and for matters connected therewith or incidental thereto".
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The background of the appeal s and the gist thereof as understood from the learned counsel of the Appellant and the documents submitted by the Appellant are as under: - The Respondent on 23.07.2010, under the provisions of the Petroleum and Natural Gas Regulatory Board (Authorizing entities to lay, build, operate or expand city or local natural gas distribution network) Regulations, 2008 (hereinafter "Authorization Regul ations ") invited bids for the geographical areas of Kutch (East) and Ludhiana along with 5 other areas for grant of authorization for laying, building and operating etc. for the CGD network in respect of these areas. On 18.02.2011, the Appellant submitted its bids for the geographical areas of Ludhiana, Jallandhar and Kutch (East) and on 06.09.2013, the Appellant was first granted the said authorization for the geographical area of Jallandhar. Subsequently, the Appellant was granted authorization for CGD ne twork of Kutch (East) on 12.03.2015 and for Ludhiana on 25.06.2015. The instant case referred as Appeal No.196 of 2016 pertains to geographical area of Kutch (East) and the case referred as Appeal No. 197 of 2016 pertains to geographical area of Ludhiana.
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As per the Appellant, after receiving the authorization for the geographical area of Jalandhar on 06.09.2013 the Appellant came to know about the pendency of a Public Interest Litigation being Civil Writ Petition No. 13490 of 2008 before the High Court of Punjab and Haryana at Chandigarh involving the issue whether Compressed Natural Gas (CNG) station is a part of CGD network or not. Before the High Court of Punjab and Haryana M/s GAIL Gas gave a stand that CNG station is not a part of CGD network where as the bids of CGD network were invited by the Board on the basis of the fact that CNG stations are an integral part of CGD network. The Scope of Work mentioned in the bid document included CNG station as a part of CGD network.
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On 18.09.2013, when the PIL w as listed before the High Court of Punjab and Haryana, the Union of India through Ministry of Petroleum and Natural Gas (MoPNG) filed an affidavit supporting the stand of M/s GAIL Gas that CNG station is not a part of CGD network. The Division Bench of the High Court of Punjab and Haryana while passing the order on 18.09.2013 in CWP No. 13490 of 2008 noted as under: "The affidavit has been filed by the Ministry of Petroleum and Natural Gas affirmed on 13.09.2013. the affidavit seeks to suggest that CNG station is not an integral part of City Gas Distribution (CGD) network as envisaged under the Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006 (hereinafter referred to as the Act) and, thus, no authorization from PNGRB is required for setting up of CNBG stations. A copy of this affidavit has, however, not been handed over to the PNGRB/respondent No.95. Learned counsel appearing for the said authority disputes this position and submits that the CNG stations cannot be carved out of the CGD network and in eight cities tenders have been so aw2arded and accepted by GAIL, as the GAIL has been the successful tenderer in four such cities. It is, thus, sought to be suggested that this issue has been raised by GAIL qua Jalandhar city as the GAIL has not be en the successful tenderer. The original records have been produced before us which show that there was an opinion obtained by the Ministry of Petroleum and Natural Gas from the Ministry of Law and Justice, Department of Legal Affairs to support its vie w as formulate4d on record. The result of the aforesaid is that this Court would have to consider this question as to the scope of the power of PNGRB keeping in mind the provision of the said Act.
" 7. As the said dispute was pending before the High Court of Punjab and Haryana, the Appellant wrote several letters to the Board seeking clarity on the said situation without any response from the Board.
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The Board filed its affidavits on 08.01.2013 and 03.07.2013 before the High Court of Punjab and Haryana sta ting the implications of non -inclusion of CNG station in the CGD network in this bid for Jalandhar. Thereafter, on March 05, 2015, Govt. of India issued draft guidelines asking for comments from various entities proposing that CNG stations are not part of CGD network and no authorization from PNGRB is required for setting up of CNG station. It was also proposed that CNG station can be set -up by any entity. The Appellant sent a representation on 19.03.2015 to MoPNG stating that the said guidelines may not be approved as they would infringe upon the rights of the parties to whom the Board had already granted authorization. On the same subject, the Appellant also w rote to the Board on 20.03.2015 but without any response.
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The Regulation 11 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 stip ulate s inter alia the following conditions.
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The grant of authorization is subject to the entities achieving financial closure and natural gas tie -up within the time period specified under Regulation 11. Under Regulations 11 (3) and 11(4), the time period prescribed for achieving financial closure is 180 days from the date of grant of authorization. Under Regulation 11 (1), the entity is required to enter into a firm natural gas supply agreement or Heads of Gas Supply Agreement (HOA/Memorandum of Understanding ( MOU)) for gas supply with natural gas producer/ marketer within 120 days of the date of issue of authorization. Under Regulation 11(3), however, a time limit of 180 days is prescribed for obtaining financial closure alongwith a firm natural gas supply agreement.
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In addition to above, the Board is also authorized under Article 13 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 to monitor the physical progress of the activities of the authorized CGD network and take remedial action as per the provisions of the said regulations. This monitoring is in respect of the progress made against the physical targets quoted by the entity while bidding for the CGD network and as agreed by the Board to achieve during the exclusivity period. The physical targets are in terms of number of natural gas domestic connections, inch- kilometer of steel pipelines etc.
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On monitoring the progress of both the CGD network projects for Ludhiana and Kutch (East), the Board not being satisfied w ith the progress, served a show -cause notice on 02.06.201 6 to the Appellant. In the show -cause notice, the Board mentioned that even after more than 180 days of authorization, the Appellant could not meet the requirements of regulatory provisions for Financial Closure (FC) and Gas Supply Agreement (GSA) as per Regulation 11 which att racted the provisions of Regulations 16 dealing with consequences of default and termination of authorization procedure. By this notice, the Appellant was asked to appear before the Board on 04.07.2016 to present their cause. The Appellant responded to thi s notice on 08.06.2016 stating that they had achieved the Financial Closure and enclosed a copy of minutes of their Board meeting dated 28.03.2016 stating that the company would fund the project through internal accruals and a committed financial proposal from Deutsche Bank AG. The Board in turn on 15.06.2016 sent a letter to the Appellant asking for details of the Financial submitted the Gas Supply Agreement entered with Indian Oil Corporation on 11.07.2016 to the Respondent Board.
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The Board, however, not being satisfied with the replies and documents submitted by the Appellant in respect of FC and GSA, passed the impugned order on 15.07.2016 relying on the findings that the Appellant failed to meet the requirements of Regulations 11(1) to (4) of the Petro leum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 and to comply...
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