In CIVIL APPEAL Nos. 3504-3505 OF 2010-SC- Writ jurisdiction can be exercised when State, even in its contractual dealings, fails to exercise degree of fairness or practices any discrimination: Supreme Court
Justices Sanjay Kishan Kaul & Abhay S. Oka [08-02-2023]

Read Order: M/S. GAS AUTHORITY OF INDIA LIMITED v. M/S. INDIAN PETROCHEMICALS CORP. LTD. & ORS 

Mansimran Kaur

New Delhi, February 10, 2023: Merely because an alternative remedy is available, the Court should not opt out of exercising jurisdiction under Article 226 of the Constitution and relegate the parties to a civil remedy, the Supreme Court has observed.
 

While partly allowing the appeal preferred by the appellant GAIL, the Top Court observed that it was not disputed that GAIL is a Public Sector Undertaking and thus qualifies under the definition of State as per Article 12 of the Constitution. 

A Division bench of Justice Sanjay Kishan Kaul and Justice Abhay S. Oka partly allowed the present appeal by dismissing the appeal(s) qua the aspect of maintainability of the writ petition and the quashing of the clauses dealing with loss of transportation charges in the case of IPCL. However, it deemed fit to restrict the relief to a period of three years insofar as refund was concerned. 

M/s Gas Authority of India Limited , the appellant in the instant matter, was   Government of India undertaking, engaged primarily in the activity of providing services for the utilisation of natural or associated gas. Indian Petrochemicals Corporation Ltd.  the first respondent, formerly a public sector undertaking, was  engaged in the manufacture of petrochemicals. It ceased to be a public undertaking w.e.f. June 2002, when 26% of its shares were sold to Reliance Petroinvestments Ltd. in line with the Government's disinvestment policy. The second respondent was  a shareholder of IPCL and the third respondent  was  the Union of India.

Factual matrix of the case was such that on January 1, 1999 the Ministry of Petroleum and Natural Gas, Government of India, the allocating and price-fixing authority for natural gas, issued a letter for allocation of natural gas to IPCL. IPCL was allotted 0.85 MMSCMD of semi-rich gas on firm basis from Hazira to IPCLs Gandhar Unit (at Dahej) for extraction of C-2 and C-3 fractions. 

Subsequently, IPCL  entered into a contract with GAIL for supply of natural gas. IPCL had set up and installed a plant at Gandhar by investing approximately Rs. 4500 crores. Further, in order to meet the stipulation of the allocation letter, it laid down pipelines between Hazira and Gandhar at a cost of approximately Rs. 354 crores.

As per the contract, the methodology of supply of gas was that GAIL received natural gas from the producer, i.e. ONGC, which procured the same at Hazira from the Bombay High project. Thereafter, the gas was transported from Hazira to IPCLs Gandhar plant through pipelines laid down by IPCL. The unutilised gas was then sent back to Hazira, also using IPCLs pipelines.

It was pertinent to note at this stage, the significance of the manner in which the gas was  carried, as the dispute before this Court  around this particular aspect. On one hand, as per the allocation terms, IPCL had to lay down its own pipelines (which were so laid), and those pipelines alone were utilised for carrying gas. On the other hand, the charge is levied by GAIL for loss of transportation charges in terms of the contract. 

It is this aspect of the contract between the parties which was  subject matter of adjudication in writ proceedings filed by IPCL under Article 226 of the Constitution of India. IPCL succeeded before the Single Judge in terms of the orders dated September 19, 2006 and April 11, 2007 and before the Division Bench in the Letters Patent Appeals vide order dated June 17, 2008. 

It was also noted that though the contract inter se the parties was signed on November 9, 2001, the challenge was laid to Clauses 10.01 and 4.04 of the contract only onMarch 9, 2006 , i.e. after five years. In this interregnum, IPCL ceased to be a public sector undertaking.

The other development was the decision of GAIL to stop levying loss of transportation charges in May 2016. Thus, the total amount collected under the aforesaid clauses is stated to be Rs. 134 crores before it was quashed by the Single Judge and sustained by the Division Bench.

On being aggrieved by the judgment of the Single Judge, the GAIL preferred a Letters of Patent Appeal. In the meantime, IPCL also preferred an application for clarification/modification, seeking directions to GAIL to refund loss of transportation charges, as apparently no such specific direction had been passed by the Single Judge. IPCLs application was allowed by an order dated April 11, 2007 predicated on the reasoning that while upholding the claim of IPCL, inadvertently the direction of refund had not been specifically passed. This latter order also came to be assailed before the Division Bench by GAIL.

After considering the rival contentions of the pirates, the Court determined as to whether the present case was a fit one for this Court to exercise jurisdiction under Article 136 of the Constitution of India, albeit leave having been granted.

 In the view of this Court, the dispute was within the following parameters. First, whether the writ petition filed by IPCL challenging Clauses 4.04 and 10.01 of the contract was maintainable. Second, assuming such a petition was maintainable, whether the High Court could have invalidated the aforementioned clauses on the ground of unequal bargaining power and arbitrariness / unfairness. Third, whether monetary relief in the form of refund could have been granted after the order dated September 19, 2006 was passed. 

In view of the same, the Court noted, “Although the dispute arises from a commercial contract, it was found that the writ petition challenging the clauses was maintainable. It is not disputed that GAIL is a Public Sector Undertaking and thus qualifies under the definition of State as per Article 12 of the Constitution”, the Court stated. 

At the time of entering into contract, GAIL was enjoying a monopolistic position with respect to the supply of natural gas in the country. IPCL, having incurred a significant expense in setting up the appropriate infrastructure, had no choice but to enter into agreement with GAIL. 

Thus, there was a clear public element involved in the dealings between the parties. Further, writ jurisdiction can be exercised when the State, even in its contractual dealings, fails to exercise a degree of fairness or practices any discrimination.

In the present case, GAILs action in levying loss of transportation charges was ex facie discriminatory, insofar as IPCL was mandated to build its own pipeline in terms of the allocation letter and was not using GAILs HBJ pipeline at all. Thus, it cannot be said that merely because an alternative remedy was available, the Court should opt out of exercising jurisdiction under Article 226 of the Constitution and relegate the parties to a civil remedy, the Court further remarked. 

Coming onto the validity of the clauses under which loss of transportation charges were levied. In pursuance of the same, the Court stated that it would be extremely unfair and unjust, apart from being an arbitrary action in violation of Article 14 of the Constitution of India that IPCL is charged for loss of transportation charges when it is mandated to lay down its own pipelines and not to transport the gas through the HBJ pipeline. 

This action also violates the principle of non-discrimination enshrined in Article 14. IPCL, which is using its own pipelines, is being treated at par with other commercial entities that are carrying gas through the HBJ pipeline laid down by GAIL. This is more so when the pricing orders by the concerned authority, i.e. MoPNG stipulates a fixed price for natural gas, Court opined. 

On the issue as to whether the whole amount was  to be refunded, the Court stated that  the alternative argument of  the Solicitor General was that the period of limitation, in any case, could not have been expanded in granting the refund. No doubt the issue of loss of transportation charges was flagged by IPCL in various communications exchanged inter se the parties subsequent to the signing of the contract. 

That, however, cannot grant a license to IPCL to approach the court as and when it considers proper. Thus, while upholding the quashing of the clauses, the Court opined that the refund should be restricted to a period of three years prior to the date of the filing of the writ petition on account of IPCLs delay in approaching the court.

Reference was also placed on the cases namely Joshi Technologies International Inc. v. Union of India & Ors. and Lipton India Ltd. & Ors. v. Union of India & Ors.

At the outset, the Court thus stated to dismiss the appeal(s) qua the aspect of maintainability of the writ petition and the quashing of the clauses dealing with loss of transportation charges in the case of IPCL. However, it deemed fit to restrict the relief to a period of three years insofar as refund was concerned from the date of filing of the writ petition, i.e., March 9, 2006.