Gail (India) Ltd. vs Petroleum And Natural Gas ...
2017 Latest Caselaw 1744 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+      W.P.(C) NO. 1189/2016, CM Nos.5215-5217/2016
       GAIL (INDIA) LTD.                            ..... Petitioner
                      Through: Mr.Parag P. Tripathi, Mr.Ramji
                      Srinivasan, Sr.Advocates with Ms.Neelima
                      Tripathi, Mr.Shikhar Khare & Ms.D.D. Majumdar,
                      Advocates

                       Versus

       PETROLEUM AND NATURAL
       GAS REGULATORY BOARD & ANR               ..... Respondents
                   Through: Mr.Sanjay Jain, ASG with Mr.Saurab
                   Agrawal, Ms.Astha Gaur, Advs. for PNGRB.

       CORAM:
       HON'BLE THE CHIEF JUSTICE
       HON'BLE MR. JUSTICE JAYANT NATH
                                  ORDER

11.04.2017

1. The petitioner which is a Public Sector Undertaking is engaged in various activities pertaining to the natural gas sector. This petition has been filed seeking a declaration that the following Regulations made under Section 61 of the Petroleum and Natural Gas Regulatory Board Act, 2006 are unconstitutional and ultra vires the said Act:

(i) Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 (hereinafter referred to as „Authorizing Regulations, 2008‟).

(ii) PNGRB (Determination of Natural Gas Pipeline Tariff) Regulations, 2008 (hereinafter referred to as „Determination of Tariff Regulations, 2008‟).

(iii) PNGRB (Guiding Principles for Declaring or Authorising Natural Gas Pipeline as Common Carrier or Contract Carrier) Regulations, 2009 (hereinafter referred to as „Declaring as Common Carrier/Contract Carrier Regulations, 2009‟).

2. The petitioner also prays for declaring twelve (12) Tariff Orders issued by Petroleum and Natural Gas Regulatory Board (PNGRB) as illegal, void and non-est.

3. We have heard the learned counsel appearing for both the parties.

4. The Petroleum and Natural Gas Regulatory Board Act, 2006 (hereinafter referred to as „the Act‟) has been enacted with an object to provide for establishment of Petroleum and Natural Gas Regulatory Board to regulate the refining, processing, storage, transportation, distribution, marketing and sale 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. The provisions of the said Act have come into force, except Section 16, w.e.f. 01.10.2007. In terms of Section 3(1) of the Act the Central Government has established Petroleum and Natural Gas Regulatory Board (hereinafter referred to as „PNGRB‟) for carrying out the various provisions of the Act.

5. In exercise of the powers conferred by Section 61 of the Act, PNGRB made the impugned regulations. The "Authorizing Regulations" were

published vide Notification dated 06.05.2008; "Determination Regulations" were published vide Notification dated 20.11.2008 and the "Declaring as Common Carrier/Contract Carrier Regulations" were published vide Notification dated 21.04.2009.

6. It is not in dispute that the petitioner is an existing entity i.e. an entity existing before the establishment of PNGRB and is deemed to be an authorised entity under Section 16 of the Act for the purpose of laying, building, operating or expanding any city or local natural gas distribution network.

7. In terms of Regulation 17(1) of the Authorising Regulations, 2008, the petitioner on different dates between 26.11.2008 to 01.06.2010 submitted the requisite information to PNGRB in respect of its thirteen (13) existing natural gas pipelines in the specified form. In turn, PNGRB issued thirteen (13) letters of acceptance in respect of the petitioner‟s thirteen (13) natural gas pipelines between 19.04.2010 to 29.04.2014, provisionally accepting the information submitted by the petitioner subject to the terms and conditions specified therein.

8. By virtue of the said letters of acceptance, PNGRB treated all the existing thirteen (13) pipelines of the petitioner as „Common Carriers‟ with retrospective effect. Further, PNGRB has fixed the provisional tariffs for the thirteen (13) natural gas pipelines of the petitioner by issuing twelve (12) Tariff Orders from time to time in terms of the „Determination of Tariff Regulations, 2008‟.

9. Challenging the said provisional Tariff Orders, the petitioner filed appeals before the Appellate Tribunal for Electricity (hereinafter referred to as „APTEL‟). By a consent order dated 29.05.2015, the said appeals were disposed of with a direction to PNGRB to complete the process of finalization of the provisional Tariff Orders as per the provisions of PNGRB Regulations, making it clear that PNGRB shall consider all submissions of the petitioner including challenges against the findings/observations/conclusions/calculations in the provisional Tariff Orders on merits uninfluenced by the view already taken by it. It was also made clear by APTEL that PNGRB shall complete the process by 31.12.2015 and pass a speaking order in one of the appeals, i.e., Appeal No.161/2013 and in the other appeals the order shall be passed by 31.03.2016 and that in the meantime the provisional tariff already fixed shall continue to apply. The APTEL also made it clear that all contentions of the appellant/petitioner herein are left open and that it would be entitled to challenge the final Tariff Order in accordance with law. It is not in dispute that the order of APTEL has attained finality.

10. While so, the present petition came to be filed on 04.02.2016 challenging the validity of the impugned regulations and further to declare the twelve (12) Tariff Orders issued by PNGRB fixing tariff for the thirteen (13) natural gas pipelines of the petitioner as illegal, void and non-est.

11. It is pleaded in the petition that pursuant to the order dated 29.05.2015 of APTEL, while the final determination was pending before PNGRB, the Supreme Court on 01.07.2015 decided Petroleum and Natural Gas Regulatory Board vs. Indraprastha Gas Limited and Ors.; (2015) 9 SCC

209 holding that the power of PNGRB to determine and fix transportation rate/tariff under the provisions of the Act is restricted in respect of the usage of pipeline network by other third party entities on Common Carrier/Contract Carrier basis only and not when the entity owning pipeline network is using the pipeline network for its own use for supplying natural gas to its own consumers.

12. It is contended that though the said decision was rendered while dealing with City Gas Distribution Networks, since the provisions of the Act dealing with the pipelines are the same and "Determination of Tariff Regulations, 2008" are pari materia with the provisions of PNGRB (Determination of Network Tariff for City or Local Natural Gas Distribution Networks and Compression Charge for CNG) Regulations, 2008 which were interpreted by the Supreme Court in PNGRB v. Indraprastha Gas Limited (supra), the present case is fully covered by the ratio laid down by the Supreme Court in the said decision. Therefore, the petitioner contends that the impugned „Determination of Tariff Regulations, 2008‟ being ultra vires the Act are liable to be quashed and set aside and consequently all the Tariff Orders passed by PNGRB in relation to the natural gas pipelines of the petitioner are also liable to be quashed and set aside.

13. It is pleaded in the writ petition that in the light of the judgment of the Supreme Court the petitioner vide its letters dated 27.07.2015 and 29.07.2015 informed PNGRB that it lacks jurisdiction to determine tariff for natural gas pipelines unless the existing thirteen (13) natural gas pipelines of the petitioner are declared as Contract Carrier/Common Carrier following

the procedure laid down in Section 20 of the Act. However, PNGRB has not initiated the procedure as envisaged in Section 20 of the Act till date.

14. The petitioner contends that PNGRB cannot proceed to issue Tariff Orders fixing the tariff without following the due procedure prescribed in the „Declaring as Common Carrier/Contract Carrier Regulations, 2009‟ and PNGRB (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010 (hereinafter referred to as „the Capacity Regulations, 2010‟) since the same would be contrary to the provisions of the Act as well as the decision of the Supreme Court in PNGRB v. Indraprastha Gas Limited (supra). It is also contended that without first notifying the said portion of the pipeline as a Common/Contract Carrier, PNGRB cannot impose unjust restrictions upon the right of the petitioner to recover tariff from its own consumers.

15. Per contra, it is contended by Shri Sanjay Jain, the learned ASG that since the order of APTEL has become final and the proceedings for finalization of Tariff Orders in terms of the said order are pending, the present petition is misconceived and liable to be dismissed in limine. The learned ASG has also sought to distinguish the decision in PNGRB v. Indraprastha Gas Limited (supra) contending that the provisions of the Regulations relating to determination of tariff for city or local natural gas distribution networks that were interpreted by the Supreme Court have nothing to do with the case on hand.

16. We have gone through the judgment in PNGRB v. Indraprastha Gas Limited (supra). The question that arose for consideration in the said case was whether PNGRB is empowered to fix or regulate the maximum retail

price at which gas is to be sold by Indraprastha Gas Limited an entity authorized to supply, sell and distribute natural gas to the domestic, commercial and industrial consumers in certain cities including Delhi. In the said case, Indraprastha Gas Limited filed a writ petition before this Court aggrieved by the action of PNGRB in fixing the network tariff under the provisions of PNGRB (Determination of Network Tariff for City or Local Natural Gas Distribution Networks and Compression Charge for CNG) Regulations, 2008. This Court held that PNGRB is not empowered to fix any component of network tariff for an entity having its own distribution network. The contention on behalf of PNGRB that they can fix the transportation rate/transportation tariff was not accepted by this Court. The appeal by PNGRB was dismissed by the Supreme Court vide PNGRB v. Indraprastha Gas Limited (supra) and the decision of this Court was upheld.

17. Coming to the case on hand, the contention of the petitioner is that though its pipeline, which is an existing pipeline, falls within the definition of common carrier under Section 2(j) of the Act, unless and until the said pipeline is declared as a common carrier or contract carrier as provided under Section 20 of the Act read with the provisions of 'Declaring as Common Carrier/Contract Carrier Regulations, 2009', the power to fix tariff is not available to PNGRB. The further contention is that mere furnishing of the particulars of its activities by an existing entity under the proviso to Section 17(1) of the Act does not entitle PNGRB to fix tariff for the said entity. It is also contended that Section 21(2) of the Act which explicitly specifies for payment of transportation rate by a third party entity for use of

common carrier or contract carrier, makes it clear that the PNGRB can exercise the power to regulate the transportation tariff only which is over and above the entity's own requirement under its right of first use subject to the condition that there is a valid declaration under Section 20 of the Act.

18. Thus, it is sought to be contended by Sh.Parag Tripathi, the learned Senior Counsel appearing for the petitioners that fixation of tariff of the pipelines owned by the petitioner being beyond the jurisdiction of PNGRB, the proceedings in progress for determination of tariff pursuant to the order of APTEL cannot be allowed to go on.

19. We are unable to agree with the submissions of the learned Senior Counsel.

20. A reading of Section 11(d) together with Section 20 of the Act makes it clear that it is for PNGRB to declare an existing pipeline or an existing city or local natural gas distribution network as a common carrier or contract carrier if it is of the opinion that it is necessary or expedient to declare as such.

21. In PNGRB vs. Indraprastha Gas Limited (supra), the Supreme Court held:

"18. ....There is a noticeable difference between common carrier pipeline and contract carrier pipeline on one hand and "a city of local natural gas distribution network" on the other. On a perusal of the definitions of the common carrier and contract carrier, it is demonstrable that they refer to pipelines for transportation of petroleum or petroleum products and natural gas by more than one entity. The definition "city or local gas distribution network" means an interconnected network of gas

pipelines and the associated equipment used for transporting natural gas from a bulk supply high pressure transmission main to the medium pressure distribution grid and subsequently to the service pipes supplying natural gas to domestic, industrial or commercial premises and CNG stations situated in a specified geographical area. It deals with specified geographical area. It does not refer to a pipeline or transport of natural gas. It is specifically a pipeline network for transport of natural gas to its own consumers....."

22. After analysing the language of Sections 20 to 22 of the Act, the Supreme Court further held that PNGRB has the power to provide, by Regulations, the transportation tariff for common carrier or contract carrier or city or local natural gas distribution network and the manner of distribution of such tariff.

23. So far as the power of the Board to regulate, by making regulations, the access to common carrier or contract carrier is concerned, the Supreme Court referred to Section 11(e) of the Act and observed that it only deals with access to common carrier or contract carrier but not the city or local natural gas distribution network. It is also pointed out that Section 11(e) only uses the words "common carrier or contract carrier". The Supreme Court thus concluded:

"37. ....In the case at hand, in the schematic context of the Act and upon reading the legislative intention and applying the principle of harmonious construction, we do not perceive inclusion of the entities which are not "common carriers" or "contract carriers" would be permissible. They have deliberately not been included under Section 11 of the Act by the legislature and the said non-inclusion does not lead to any

absurdity and, therefore, there is no necessity to think of any adventure.

xxx xxx xxx

53. In the case at hand, the Board has not been conferred such a power as per Section 11 of the Act. That is the legislative intent. Section 61 enables the Board to frame Regulations to carry out the purposes of the Act and certain specific aspects have been mentioned therein. Section 61 has to be read in the context of the statutory scheme. The regulatory provisions, needless to say, are to be read and applied keeping in view the nature and textual context of the enactment as that is the source of power. On a scanning of the entire Act and applying various principles, we find that the Act does not confer any such power on the Board and the expression "subject to" used in Section 22 makes it a conditional one. It has to yield to other provisions of the Act. The power to fix the tariff has not been given to the Board. In view of that the Board cannot frame a Regulation which will cover the area pertaining to determination of network tariff for city or local gas distribution network and compression charge for CNG. As the entire Regulation centres around the said subject, the said Regulation deserves to be declared ultra vires, and we do so."

24. After perusing the averments in the case on hand and the material placed on record, it appears to us that the ratio laid down in PNGRB vs. Indraprastha Gas Ltd. (supra) has no application at all. We are also unable to accept the contention of the petitioner that the provisions of the Act dealing with the pipelines and the provisions of the Determination of Tariff Regulations, 2008 are pari materia with the provisions of PNGRB (Determination of Network, Tariff for City or Local Natural Gas Distribution Networks and Compression Charges for CNG) Regulations, 2008 which were interpreted by the Supreme Court in PNGRB vs.

Indraprastha Gas Ltd. (supra). Hence, the reliance placed upon the said decision by the petitioner is misplaced.

25. The law is also well settled that a Writ Court would not determine a Constitutional question in a vacuum. [Vide Kusum Ingots & Alloys Ltd. v. Union of India & Anr.; (2004) 6 SCC 254]. We found that the present writ petition did not disclose any cause of action for challenging the vires of the impugned Regulations, which are of the year 2008 and 2009, at this point of time. On that ground also, the writ petition cannot be entertained.

26. The writ petition is according dismissed.

CHIEF JUSTICE

JAYANT NATH, J.

APRIL 11, 2017 kks