Delhi High Court
Union Of Inida & Anr vs Vedanta Ltd & Ors on 26 March, 2021
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 2nd February, 2021.
Decided on: 26th March, 2021.
+ LPA 346/2018 & C.Ms.No.25515/2018 (stay), 10335/2020
(modification of order dated 03.07.2018)
UNION OF INDIA & ANR ..... Appellants
Through: Mr. Tushar Mehta, Solicitor General
of India with Mr. Amit Mahajan,
CGSC & Ms. Kanu Aggarwal,
Advocates for Union of India.
Versus
VEDANTA LTD & ORS ..... Respondents
Through: Mr. Harish Salve, Senior Advocate
with Ms. Anuradha Dutt, Mr. Anish
Kapur, Mr. Chetanya Kaushik &
Ms. Priyanka M.P., Advocates for
R-1 to 3.
Mr. K.R. Sasiprabhu with Mr. Tushar
Bhardwaj & Mr. Vinayak Maini,
Advocates for R-4.
CORAM:
HON' BLE THE CHIEF J USTICE
HON' BLE MS. J USTICE J YOTI SINGH
JUDGMENT
: Per D.N.PATEL, Chief Justice
1. Being aggrieved and feeling dissatisfied by the judgment and order of
the learned Single Judge dated 31st May, 2018 in W.P.(C) No.11599/2015,
the original respondent Nos. 1 and 2 have preferred the present Letters
Patent Appeal. Learned Single Judge has vide the impugned judgment
allowed the writ petition and directed appellant No.1 herein/ Union of India
to extend the tenure of the contract in question for a period of 10 years
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beyond its current term i.e. 14th May, 2030 on the same terms and conditions
as existed on 15th May, 1995, when the contract was initially executed. The
contention of the appellants herein, however, was that on extension of the
tenure of the contract, the Government of India (hereinafter referred to as
'GoI') is entitled to 10% increase in the share in 'Profit Petroleum' under the
Production Sharing Contract. As the learned Single Judge has not accepted
the contention of the original respondent Nos. 1 & 2, the present appeal has
been preferred.
2. Extension of the Production Sharing Contract (hereinafter referred to
as 'PSC' for the sake of brevity) dated 15th May, 1995 for Rajasthan Block
(RJ-ON-90/1), and the terms of its extension including interpretation of its
Clauses, especially Article 2.1, is the core issue for consideration before this
Court. For the sake of convenience, original respondent nos. 1 and 2 are
collectively referred to as appellants and Directorate General of
Hydrocarbons (appellant No.2), wherever required to be separately referred
is referred to as DGH. The original petitioners are referred to as petitioners.
Petitioner No.1 in the writ petition was Cairn India Ltd. and is now known
as Vedanta Ltd. and is respondent No.1 herein. Oil and Natural Gas
Corporation Ltd. (respondent No.4) is referred to as ONGC.
BRIEF FACTUAL CONSPECTUS
3. At the outset, it needs to be pointed out that the question involved in
this appeal is an extension of a Production Sharing Contract between the
original petitioner (Respondent herein) and the Government of India with
regard to exploration, exploitation and sale of petroleum and natural gas.
The Production Sharing Contract, by its very nature, is a different nature of
contract where a private party shares the national wealth / natural mineral by
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exploiting, excavating and selling the same and gives to the Government of
India its share called "profit petroleum". This contract, therefore, cannot be
considered as mere regular commercial contract in view of the fact that all
such natural resources are held by the Government of India for and on behalf
of People of India and as a trustee. Undisputedly, the Hon'ble Supreme
Court has read 'public trust doctrine' in case of natural resources which are
'vested' in the Government of India as a trustee.
The following conspectus of facts needs to be borne in mind, which
are not in dispute-
a) The question pertains to a Production Sharing Contract which is
entered into by Union of India in discharge of its sovereign
function and entered into and executed in the name of Hon'ble
President of India as a trustee of the citizens of the country.
b) The term of Production Sharing Contract having the initial
period of 25 years between the Appellant-Union of India and
the respondent company has expired in the year 2020 as the
initial contractual period commenced from the year 1995.
c) There is a provision for extension of tenure / period of this
contract in the Production Sharing Contract.
d) The said extension clause in the Production Sharing Contract
viz. Article 2.1 of PSC makes it clear that any subsequent
extension (after initial period of 25 years) shall be only "subject
to applicable laws".
e) Union of India does not object to the request of the Respondent
for 10 years extension.
f) Government of India, has, however, as a trustee of national
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wealth and natural resources made an all-India policy dated 7th
April, 2017 in which it is stipulated that if a private party seeks
extension of contract in all Production Sharing Contracts after
initial contract period is over, such an extension would be
granted on payment of additional 10% profit to the Government
of India. As per the all-India policy of the Central Government,
in case of an extension after the original contract, extension will
be granted only if the Government gets 10% more of profit
petroleum.
At this juncture, it needs to be noted that under the
Production Sharing Contract, private party is required to pay a
particular percentage to the Government of India which is
called "profit petroleum".
The Government of India, as a national policy applicable to
all extensions of all such blocks in the country after 2017, has
decided to extend the PSCs only if there is an increase in profit
petroleum by 10%.
g) This policy is applicable to all petroleum blocks in the country
and not only to the Respondent herein.
h) The said policy which is framed in exercise of statutory powers
as well as Constitutional powers discussed hereunder, is not
challenged by the original petitioner- respondent herein.
i) Not only the policy is not under challenge, the quantification of
addition in the profit petroleum viz. 10% increase is also not
questioned, either as arbitrary or irrational or even excessive.
j) The only argument canvassed by the original petitioner
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(Respondent herein) and accepted by the learned Single Judge
is that the Respondent herein is entitled to an extension as of
right, without any condition.
In view of the aforesaid position, the question involved is how a
contract involving Government of India, its right to put condition in
larger national interest and as a trustee of natural resources in which
the natural resources "vest" constitutionally needs to be interpreted by
a Constitutional Court.
4. PSC was entered into between The President of India, Government of
India, Oil and Natural Gas Corporation Limited and SHELL India
Production Development B.V. (hereinafter referred to as SHELL) on 15th
May, 1995 with respect to Rajasthan Block (RJ-ON-90/1). The duration of
the PSC was 25 years from the Effective Date i.e. 15th May, 1995. At this
point in time SHELL had 100% participating interest in the Rajasthan
Block. However, vide an Addendum dated 7th June, 2000, SHELL assigned
50% of its participating interest in favour of Cairn Energy India Private
Limited (CEIL). On 27th July, 2004 SHELL assigned remaining 50% of its
participating interest in favour of CEHL and this was captured in
Amendment No.2, to the PSC.
5. Since GoI decided to exercise its back-in-option under the PSC,
ONGC was nominated to hold 30% of the participating interest in the Block
and the participating interests underwent a change where CEHL and CEIL
held 35% each of the participating interest with 30% with ONGC. The
arrangement again underwent a change on 18th October, 2012, whereby
Vedanta and CEHL held 35% participating interest and ONGC held 30%.
6. On 15th January, 2009, petitioners made a representation to DGH to
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extend the PSC by 20 years i.e. up to 14th May, 2040 and in response
thereto, DGH requested petitioners to submit long term production profiles
of the Rajasthan Block to establish that the production line of the said Block
would continue beyond the current tenure of the PSC and to furnish details
of additional investments required to be made. After much correspondence
between the parties with regard to various aspects, on 5th April, 2013,
petitioners wrote to GoI that extension for a period of 10 years, beyond
2020, would suffice and reliance in that regard was placed on Article 2.1 of
the PSC.
7. As per Article 2.1 of the PSC, after the completion of initial period of
25 years from the Effective Date, the contract may be extended upon
mutual agreement between the parties for a period not exceeding 5 years,
provided that in the event of commercial production of Natural Gas expected
to continue beyond the end of the term of the contract, it shall be extended
for such a period upto but not exceeding 35 years from the effective date, as
may be mutually agreed between the parties to permit the Contractor to
maximise production of Natural Gas in accordance with Good Petroleum
Industry Practice.
8. Subsequent thereto several communications were exchanged between
the parties herein, including meetings between the GoI, DGH, petitioners
and the ONGC, as the consent of the ONGC was necessary before the
proposal for extension of the PSC tenure could be accepted by GoI.
Petitioners insisted that extension of the PSC be granted on the existing
terms and conditions as also for an early decision in that regard. Without,
however, waiting for a final decision in the matter, Petitioners filed the writ
petition being W.P.(C) 11599/2015, seeking a mandamus to the appellants to
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issue written confirmation of the extension of the PSC for 10 years beyond
the current term in terms of Article 2.1, as the current term was to expire on
14th May, 2020.
9. Learned Single Judge vide order dated 14th December, 2015 directed
the appellants to furnish to the petitioners a list of further particulars
required by them to take a decision for extension of the PSC with a similar
direction to the ONGC. Petitioners were directed to furnish to the ONGC
within two weeks thereafter the particulars sought for and the ONGC was
directed to take a decision thereon within six weeks. In case of a consensus
between them, the documents were to be forwarded to the GoI and a
direction was issued to the GoI to take a decision thereon within three
months. On an application being filed by the ONGC, vide order dated 5th
May, 2016 time was extended by the Court for taking a decision. After the
decision taken by the ONGC was conveyed to the GoI, it filed an application
being C.M. No. 41397/2016 seeking extension of time for taking a decision
and vide order dated 7th November, 2016 (Annexure A-8 to the memo of
this appeal), the learned Single Judge disposed of the application and
granted further time of two months i.e. upto 6th January, 2017 for
compliance with the order dated 14th December, 2015.
10. Thereafter, further time was given by the learned Single Judge to the
GoI for taking a decision upto 28th February, 2017, vide order dated 31st
January, 2017, in C.M. No.649/2017.
11. In the meantime, Ministry of Petroleum and Natural Gas/ appellant
No.1 herein formulated a Policy for grant of extension of Pre-NELP PSCs
and the same was notified in the Gazette on 7th April, 2017. As per the
appellants, the said policy decision was taken in view of the fact that GoI
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had entered into several PSCs, which were existing and a need was felt to
finalise the terms, which could be uniformly applied to all the contracts with
a Pan India application. GoI intimated DGH to inform ONGC and
petitioners about the Policy and advised them to apply for extension under
the Policy, which now occupied the field. On 3rd May, 2017, GoI filed an
Affidavit placing on record the Policy, before the learned Single Judge. It
was highlighted that GoI was ready and willing to extend the PSC with the
petitioners, but with a condition that Government share of Profit Petroleum
shall be 10% higher. Thus, the prayer of the petitioners to extend the
period of contract for further period of 10 years on the same terms and
conditions as were prevailing on the date of execution of the PSC, was
opposed by the Government. Vedanta filed an Affidavit dated 26th July,
2017, taking a position that the new Policy could not take away its existing
contractual rights.
12. Significantly, under the Policy dated 7th April, 2017, one of the fiscal
parameters for extension of the PSC was that the Government's share of
profit petroleum during the extended period of contract shall be 10% higher
for the Blocks, compared to the earlier years. This Policy decision
according to appellant No.1 was taken to have a transparent and
defined framework for granting extension as also help the operators in
planning their investments and operations, which in turn would help in
optimal exploitation of the reserves and was to have uniform
application, with no discrimination amongst the stakeholders, in
granting extension.
13. Learned Single Judge vide the impugned judgment dated 31st May,
2018 in W.P.(C) No.11599/2015 has allowed the writ petition filed by the
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petitioners and has directed GoI to extend the PSC dated 15th May, 1995 for
a period of 10 years i.e. upto 14th May, 2030, beyond its current term, as
envisaged in Article 2.1, on the initial terms and conditions and assailing the
said decision appellants have approached this Court, by filing the present
appeal.
ARGUMENTS CANVASSED BY MR. TUSHAR MEHTA, LEARNED
SOLICITOR GENERAL OF INDIA
14. Mr. Tushar Mehta, learned Solicitor General of India contended that
the judgment of the learned Single Judge dated 31st May, 2018 (Annexure
A-1 to the memo of this appeal) is against the terms of the PSC, as also in
violation of the provisions of the Policy of the GoI dated 7th April, 2017. It
was submitted that the appellants have no objection to the extension of the
contract for 10 years, however, it was not open to the learned Single Judge
to direct extension of the PSC on the earlier terms and conditions and the
Mandamus issued is beyond the scope of judicial review of the Court,
exercising jurisdiction under Article 226 of the Constitution of India.
15. Learned Solicitor General of India gave a detailed narrative of why
and how the Production Sharing Contracts are entered into between the
Government and the Contractors. It is explained that the Government is the
sole owner of Petroleum and Mineral Resources underlying the contract area
and shall remain the sole owner, except as regards that part of the Crude Oil
or Gas, the title whereof passes to the Contractor under the provisions of the
Contract. Under the PSC, the State as an owner of the mineral resources,
engages a contractor to provide technical and financial services for
exploration and development operations. The contractor acquires an
entitlement to a stipulated share of the oil/ natural gas/ any other mineral
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produced as a reward for the risk undertaken and for the services rendered.
The State, however, it is emphasized by Mr. Mehta, remains the owner of
the petroleum produced subject only to the contractor's share of production.
16. Learned Solicitor General of India has explained in detail the
Legislative framework of the Production Sharing Contract. It is submitted
that exploration, discovery and production of petroleum is governed by
the Oilfields (Regulation and Development) Act, 1948, the Petroleum
and Natural Gas Rules, 1959 (hereinafter referred to as 'PNG Rules'),
made thereunder as well as by the Constitutional Executive Powers of the
Central Government referable to List I of Schedule VII of the Constitution
and the Territorial Waters and Continental Shelf, Exclusive Economic Zone
and Other Maritime Zone Act, 1976. It was further submitted that under
Rule 5 of the PNG Rules, the Central Government is entitled to notify in
Official Gazette, from time to time particulars regarding the basis on which
the Central Government may consider proposals for prospecting or mining
operations in any specified areas. Thus, Production Sharing Contract by the
Union of India is in discharge of its Sovereign functions and entered into
and executed in the name of Hon'ble the President of India as a Trustee of
the Citizens of the country. It is argued that ownership of natural resources,
petroleum and natural gas vests in the Union of India and is held under the
'Public Trust Doctrine'.
17. Mr. Mehta has relied upon the decision rendered by Hon'ble Supreme
Court of India in Association of Natural Gas vs. Union of India reported in
2004 (4) SCC 489 and the decision in Reliance Natural Resources vs.
Reliance Industries Limited reported in 2010 (7) SCC 1, wherein the
Hon'ble Supreme Court held that the Constitutional mandate is that natural
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resources belong to the people of this Country and the word "vest" must be
seen in the context of "Public Trust Doctrine". It was further held that it is
the solemn duty of the State to protect the National interest and the
Government owns the assets such as natural resources for the purposes of
developing them in public interest. Attention is specifically drawn to
paragraphs 114 to 116, 118, 122, 128, 237, 245, 246 and 249 of the decision
in Reliance Natural Resources (supra).
18. Mr. Mehta summarised the following points, which according to him
emerge from a reading of the aforesaid judgments, which are binding under
Article 141 of the Constitution of India: -
i) It is the responsibility and Constitutional obligation of the GoI
to provide complete protection to the natural resources and to
explore / exploit the same as a trustee for benefit of the Nation
and this is a special obligation over and above what is affixed
with respect to resources which are exploited by virtue of
provisions of Article 298 of the Constitution.
ii) It is only due to shortage of funds and technical know-how, that
the GoI has privatised such activities through the mechanism
provided under the PSC.
iii) Even though private parties are employed for exploration and
development purposes of natural resources by GoI, they remain
bound to act within the Constitutional set-up and its framework
and the profit distribution inter-se Union of India and the
private party, must yield to the optimum interest of the citizens
of India instead of subserving private interests.
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iv) Exploitation activities of natural resources by the private parties
under the PSC can only be premised on the sole criteria to
unlock these resources for the purposes of the Union and people
of India, only.
v) The extension clause, i.e., Article 2.1 of PSC starts with
"subject to applicable laws". The "applicable law" would
include the statutory provisions of Oil field (Regulation and
Development) Act, 1948, the petroleum and Natural Gas Rules,
1959, Article 73 of the Constitution of India and the policy
dated 7th April, 2017 made thereunder. The "applicable law"
would also include the law declared by the Supreme Court of
India as per Article 141 of the Constitution of India.
vi) Even otherwise, Article 2.1 of PSC leaves room for putting
conditions in Public interest.
vii) Even if two interpretations are possible the interpretation which
subserves public interest needs more particularly in a contract
where the Government of India outsources a private party to
discharge its sovereign function as a trustee of the citizens of
India.
19. It is thus submitted that the interpretation of the terms of the PSC
regarding extension thereof, ought to have been appreciated by the learned
Single Judge keeping in mind the goal of revenue maximization, especially
in the light of the Policy decision dated 7th April, 2017, which has been
made uniformly applicable to all the Production Sharing Contracts, existing
in the country, including the present PSC, with the petitioners. Conspectus
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of the above mentioned judgments leads to only one conclusion that the
prime aim of the Government in discharge of its sovereign functions to get
natural resources its maximum advantage to the people of India and the
same can only be achieved by maximum revenue generation. Mr. Mehta has
also relied upon the decision rendered by the Supreme Court in Union of
India vs. Association of Unified Telecom Service Providers of India etc.
reported in (2020) 3 SCC 525, especially paragraph 86, wherein Supreme
Court has held that GoI has to "make an effort to get the best price for its
valuable assets and cannot throw them away".
20. Arguing further the learned Solicitor General has taken this Court to
various Articles of the PSC. It is pointed out that Article 2.1 of the PSC
itself stipulates that duration and the terms of the Contract shall be subject to
"applicable laws". The entire Contract including Article 2.1 is subject to
applicable laws which means and connotes "laws of India". Therefore, the
term "applicable laws" would include the Constitution of India, the Statutory
provisions, law laid down by the Supreme Court and the policy dated 7th
April, 2017. He also submitted that as per Article 2.1 of the PSC, the initial
duration of the contract was 25 years, extendable "upon mutual agreement"
and upon such terms as may be finalized, mutually. This clearly implies that
once the initial term/duration of the Contract has come to an end on 14th
May, 2020, the extension cannot be on terms and conditions unilaterally
imposed by the petitioners.
21. Thus, the argument of the appellants is that for extension of the PSC,
the provisions of the Policy, being the applicable law, would cover the field
and the Government is clearly entitled to 10% higher share of the Profit
Petroleum, during the extended period. In this light, the petitioners cannot
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claim a vested right to seek extension on the terms and conditions that
existed when the PSC was initially executed and the learned Single Judge
has gravely erred in issuing a Mandamus to the GoI to extend the contract
on the old terms.
22. It is further submitted that it is settled law that whenever the terms of
the contract are explicitly clear and unambiguous or where there is no scope
of any other interpretation, the Court ought not to interfere with the
"freedom of the parties to the contract". The Court cannot compel one of
the parties to the contract, to extend the term of the contract and that too on
the same terms and conditions as were prevailing, as on the date of
execution of the initial contract. The Hon'ble Supreme Court in DLF
Universal Ltd. v. Town & Country Planning Deptt. reported as (2010) 14
SCC 1 has held that a contract is interpreted according to its purpose and
comprises the joint intent of the parties. Every contract expresses the
autonomy of the contractual parties' private will and cannot be construed as
an intent of a single party. Thus, the attempt of the petitioners to seek
extension on the old terms and conditions is contrary to the contract law and
the observations of the Supreme Court in DLF Universal (supra) and the
impugned judgment directing extension of contract on the earlier terms
overlooking the policy entitling the Government a 10% higher share in the
profit deserves to be set aside.
23. It is further argued that the learned Single Judge has rewritten the
contract between the parties, especially Article 2.1, which is impermissible
in law. Government cannot be compelled to extend the contract by another
10 years without increase in the share in the Profit Petroleum. In case the
terms of the Policy are not to the liking or advantage of the petitioners, they
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have the freedom of not extending the contract, but surely they cannot
enforce any right of extension on the earlier terms, which were entered into
25 years ago i.e. nearly a quarter of a Century.
24. Learned Solicitor General of India has read and re-read Article 2.1
and has taken pains to explain the important phrases incorporated therein,
both grammatically and otherwise and has strenuously argued that the
extension of the contract in question can only be on terms mutually agreed
between the parties, applying the applicable laws and there cannot be
extension on terms unilaterally sought to be imposed by the petitioners.
This in effect would render Article 2.1 of the PSC, redundant and otiose.
ARGUMENTS CANVASSED BY MR.HARISH SALVE, LEARNED
SENIOR ADVOCATE APPEARING FOR THE PETITIONERS.
25. Mr. Harish Salve, learned senior counsel appearing for the petitioners
argued that no error has been committed by the learned Single Judge while
deciding the writ petition and passing the impugned judgment dated 31st
May, 2018. He contended that the learned Single Judge has rightly
interpreted Article 2.1 of the PSC, the language of which does not admit of
ambiguity. Taking the Court through the provisions of Article 2.1, it is
submitted that the Article has 3 elements and the first element of the proviso
is not in dispute i.e. parties do not dispute that there is Commercial
Production of Natural Gas and this would continue beyond the end of the
term of the PSC. The second element of the proviso again is in a language
which is unambiguous that "the contract shall be extended for such a period
upto but not exceeding" and uses the word "shall" and is in contrast to the
language in the previous sentence, where there is no commercial production
of Natural Gas and where the word "may" has been used for extension upon
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mutual agreement between the parties for a period not exceeding 5 years.
26. It is submitted that when the PSC was entered into, the Rajasthan
Block was an unexplored area and it was unknown whether any
Hydrocarbon would be found in this area and if so, whether it would in
liquid or gaseous form and thus a separate provision was made in case
Natural Gas was discovered and went into Commercial Production. The
third element i.e. the period of extension has to be "sufficient to permit the
contractor to maximise the production of Natural Gas in accordance with
good petroleum industry practice..." is a matter which is negotiable between
the parties. Increasing the rate of production involves increase capital outlay
and is at times in the interest of the contractor. However, on the other hand,
it is necessary that the contractor produces the Natural Gas at a pace which
does not damage the reservoir. Thus, arriving at a correct rate of production
is a matter of agreement between the parties and in the present case there is
no dispute that the extended period should be upto 2030. Mr. Salve argues
that the appellants have been admittedly willing to extend the term of the
PSC and the only bone of contention between the parties is the demand by
GoI for additional 10% share of Profit Petroleum.
27. It is argued that the learned Single Judge has rightly come to a
conclusion that under the PSC, the contractor had a right to demand
extension of the PSC, until such time he is able to maximise the production,
the maximum period, however, not exceeding 35 years from the effective
date and that the PSC did not entitle the GoI to unilaterally change any of its
terms and conditions. The learned Single Judge has rightly concluded that
extraneous terms now sought to be imposed, based on the policy decision
cannot override a binding contract and attempt to do so would be
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inconsistent with rule of law. There is no law which authorizes the
Government to frame an executive policy by which the contracts like
Production Sharing Contracts can be nullified and more particularly when
huge investments have been made by the petitioners.
28. It is further contended that the stand of the appellants that the terms of
the PSC must give way to the purported New Policy of 7th April, 2017, are
misconceived. The rights of the parties to the PSC are governed by a
statutory contract, and contractual provisions cannot be overridden by the
executive fiat. The Contractor has a right under the PSC to demand an
extension, as clearly, the area of 'mutual agreement' covers the period of
such extension. The purported New Policy does not relate to the 'period of
extension' and on its plain language, proceeds on the premise that the
government is conferring largesse or benefit upon the existing contractor by
allowing the extension. This might be true for other PSC's where the
contractor does not have a right to an extension, or where there may be no
production of Natural Gas, but there may be remaining liquid hydrocarbon,
which could be produced. However, where there is a contractual right in
favour of the contractor, as in the present case, that right cannot be diluted,
much less eviscerated by exercise of executive power.
29. Any executive action, it is argued, that seeks to take away rights or
operates to the prejudice of any person must have the authority of law. It
cannot be gainsaid that the PSC confers valuable rights upon the Contractor.
There is no law which authorises the Government to frame an executive
policy by which these contracts can be nullified. It is a settled law that a
Policy cannot override executive contracts such as the Production Sharing
Contract, which is governed by the provisions of Article 299 of the
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Constitution. Therefore, any attempt by GoI to rely on the purported New
Policy for extending the PSC is misplaced. Reliance in this regard has been
placed on DDA vs. Joint Action Committee, SFS flats reported in (2008) 2
SCC 672, Sime Darby Engg. SDN BHD. vs. Engineers India Ltd. reported
in (2009) 7 SCC 545, and Government of NCT of Delhi vs. Bhushan
Kumar reported in 2008 SCC OnLine De1379.
30. Furthermore, it is argued that Vedanta and CEHL are entitled to
renewal as a matter of right and in this regard reliance is placed on the
observations in the judgment in Bal Sahyog vs. Union of India, 2003 SCC
OnLine Del 951, especially paragraphs 14 & 15 thereof. Reliance is also
placed on the judgment in the case of Bennett Coleman Co. & Ors. vs.
Union of India & Ors. reported as (1972) 2 SCC 788.
31. The next contention of the petitioners is that reference by Mr. Mehta
to the Oilfields (Regulation and Development) Act, 1948, is misconceived.
The said Legislation confers upon the GoI the exclusive right to grant
mining leases. A production sharing contract is not a mining lease - it is an
overarching contract in terms of which the mining leases are granted. The
production sharing contract obliges the contractor to conduct petroleum
operations. In the present case, the Rajasthan Block being an exploration
field, the PSC commenced with exploration operations to discover the
existence of hydrocarbons. After commercial discoveries are made, declared
and approved, a mining lease is separately granted for the Development
Area. Under this mining lease, royalty is payable - and in the present case
would be payable to the State Government, since these are onshore fields,
which vest not in the Union Government, but in the State. The overarching
contract is the Production Sharing Contract and the dispute relates to the rate
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of Profit Petroleum payable under the PSC.
32. It is submitted that the PSC relates to an area in respect of which an
exploration license under the Mines and Minerals (Development and
Regulation) Act, 1957 and the Rules made thereunder had been granted to
the ONGC, and in respect of this area, the last recital in the preamble of the
PSC reads thus: " ... As a result of discussions between the representatives of
the government and SIP D on the proposal of SIP D, the government and
ONGC have agreed to enter into this contract with SIP D with respect to the
said area ... ".
33. Mr. Salve argued that it is clear that the PSC is a lawful contract and
is binding upon the Government of India. There is no statutory basis on
which such a contract can be unilaterally altered by the GoI. Even otherwise,
the Appellants cannot unilaterally alter the binding terms of the statutory
PSC by way of the purported New Policy in view of Article 34.2 of the PSC,
which provides that the terms of the PSC cannot be amended, modified,
varied except by an instrument in writing, signed by all parties. That being
the legal position, the learned Single Judge was right in holding that the
insistence upon a policy which was inconsistent with the terms of the
contract between the GoI and the Contractor, was a violation of the rule of
law and thus unconstitutional.
34. Further, the learned Single Judge had specifically, vide Orders dated
07.11.2016 and 31.01.2017, directed the Appellants not to link the decision
regarding extension of the PSC with formulation of any policy and the
learned Single Judge was thus right in observing that the GoI has attempted
to do exactly the opposite, without assailing the said orders.
35. Arguing on the challenge by the appellants to the maintainability of
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the writ petition, Mr. Salve submits that the challenge is clearly untenable in
law but, in any case, it has now lost its efficacy with the passage of time.
When the writ petition was filed, it was to address on the inaction of the GoI
in taking a decision on the request of the Contractor to extend the PSC. It
cannot be gainsaid that a petition under Article 226 of the Constitution of
India would lie to compel the GoI to take a decision, even if the decision
was to be taken in relation to the contractual rights of a party. The GoI,
however, came back with a purported New Policy decision to grant the
extension only upon the altered terms relating, inter alia, to profit sharing.
Even if this was a breach of the contract, considered in the context of the
rubric rule of law, the attempt of the GoI to compel a contractor to agree to a
term inconsistent with its contractual rights on account of a Policy decision
of the GoI, was clearly a violation of the rule of law and therefore violative
of Article 14 of the Constitution of India.
36. It is a settled law that the rule against interference in contractual
disputes is a rule of discretion and not a limitation on the jurisdiction of a
Constitutional Court. If in the facts of this case, the High Court has
exercised its discretion under Article 226 of the Constitution of India and
interfered, at this distance point of time to unsettle a judgment, which is
otherwise sound in law, solely on the ground of alternative remedy, would
be travesty of justice and the consequences would be to put a project which
is of immense public importance in a state of uncertainty, which would be
untenable in law.
37. On the basis of these submissions, it is submitted by Mr. Salve that no
error has been committed by the learned Single Judge in deciding W.P.(C)
No.11599/2015 vide judgment and order dated 31st May, 2018. Hence, this
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Letters Patent Appeal may not be entertained by this Court.
ANALYSIS AND FINDINGS.
ISSUE INVOLVED IN THIS APPEAL
38. The Appellants were the original respondent Nos.1 and 2 in W.P.(C)
No.11599/2015 and have impugned the judgment dated 31st May, 2018, in
the present appeal. The core issue that arises in the present appeal is the right
of the petitioners to an extension of the PSC for a further period of 10 years
on the same terms and conditions that existed when the PSC was initially
executed on 15th May, 1995 as well as interpretation of the provisions of
Article 2.1 in that context.
39. By the impugned judgment passed in the writ petition, provisions of
Article 2.1 have been interpreted entitling the petitioners to extension for 10
years on the earlier terms and conditions. In this light, directions have been
passed to the appellants to extend the PSC, without applying the new policy
and on the terms as existed on 15th May, 1995.
40. While it is the contention of the appellants that the PSC can be
extended only upon mutual agreement between the parties and the
Government of India can always extend the term of the contract with a
condition of 10% higher share in Profit Petroleum, in public interest, the
petitioners contend that it is not open to impose any new condition to extend
the PSC and the purported new policy cannot be construed to be "applicable
law" as stipulated in Article 2.1 of the PSC. Thus, according to the
petitioners, the PSC has to be extended for 10 years on the initial terms and
conditions. Before examining the issue that arises for consideration, it would
be significant and useful to understand the nature of the PSC and various
Articles which are a part of the contract.
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WHAT IS PRODUCTION SHARING CONTRACT?
41. Under the Production Sharing Contract, the State as the owner of
mineral resources, engages a Contractor, who provides technical and
financial services for excavation, exploration and development operations.
The Contractor acquires a stipulated share in the petroleum products as a
reward for the risk taken and services rendered. The State, thus, continues to
be the owner of the petroleum products and the Contractor is entitled to its
share in the production.
42. The Production Sharing Contracts, is evident, are distinguishable
from other types of commercial contracts in the following two ways:-
a) The Government continues to be the owner of the petroleum
products and holds them as a trustee for and on behalf of the
people of India as 'custodia legis';
b) The Contractor carries the exploration risk and if no oil is
found, he receives no compensation.
43. It is undisputed between the parties that petitioners are private oil
companies and Respondent No.4 herein/ONGC is a national oil company.
PSC is a contract entered into by the Government of India in discharge of its
sovereign powers and the same is executed in the name of Hon'ble President
of India. The preamble of the PSC unambiguously provides that it has been
entered into for the purpose of "...petroleum resources which may exist in
India be discovered and exploited with utmost expedition in the overall
interest of India....".
44. As per the PSC, the exploration and development activities are carried
out under the supervision of a "Management Committee", which monitors
the proper performance of the PSC and the operations are carried out
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through "Joint Operating Agreements".
45. As rightly brought out by the learned Senior Counsels for the parties,
a PSC has three basic features viz. a). Parties to the contract pay a royalty on
gross production to the Government; b) After the royalty is deducted, the
Private Oil Company is entitled to a pre-specified share (percentage of
which is specified in the PSC subject to the terms of "applicable laws") of
production for cost recovery; c) The remainder of the production, called
'Profit Petroleum', is then shared between the Government and private oil
company at a stipulated share provided in the PSC. The Production Sharing
Contracts are entered into in exercise of the powers conferred under Rule 5
of the PNG Rules. Rule 5(3) of the PNG Rules provides as under:-
"Rule 5 (3) The Central government, if it deems fit, may
from time to time notify in the official Gazette particulars
regarding the basis on which the Central Government
may be prepared to consider proposals for prospecting
or mining operations in any specified areas;"
PUBLIC TRUST DOCTRINE
46. As per the judgments of Hon'ble Supreme Court, Public Trust
Doctrine has been invoked in several cases and it has been held that natural
resources do not merely 'vest' in the Union of India, but, Union of India
'holds' such natural resources, in trust for and on behalf of the people
of the country and the people of the country are the owners of the natural
resources. In Reliance Natural Resources (supra), it has been held as
under:-
"114. It must be noted that the constitutional mandate is
that the natural resources belong to the people of this
country. The nature of the word "vest" must be seen in
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the context of the public trust doctrine (PTD). Even
though this doctrine has been applied in cases dealing
with environmental jurisprudence, it has its broader
application.
115. The Constitution Bench of this Court in Special
Reference No. 1 of 2001, In re (2004) 4 SCC 489, p. 507,
para 42] , while quoting Cauvery Water Disputes
Tribunal, In re [1993 Supp (1) SCC 96 (II) : AIR 1992
SC 522] held that: (Special Reference No. 1 of 2001,In re
[Special Reference No. 1 of 2001, In re, (2004) 4 SCC
489, p.507, para 42] , SCC p. 507, para 42)
"42. In Cauvery Water Disputes Tribunal, In re
[1993 Supp (1) SCC 96 (II) : AIR 1992 SC 522]
the right to flowing water of rivers was described
as a right 'publici juris' i.e. a right of the public.
So also the people of the entire country have a
stake in natural gas and its benefit has to be
shared by the whole country. There should be just
and reasonable use of natural gas for national
development. If one State alone is allowed to
extract and use natural gas, then other States will
be deprived of its equitable share. This position
goes on to fortify the stand adopted by the Union
and will be a pointer to the conclusion that
'natural gas' is included in Entry 53, List I. Thus,
the legislative history and the definition of
'petroleum', 'petroleum products' and 'mineral oil
resources' contained in various legislations and
books and the national interest involved in the
equitable distribution of natural gas amongst the
States--all these factors lead to the inescapable
conclusion that 'natural gas' in raw and liquefied
form is petroleum product and part of mineral oil
resources, which needs to be regulated by the
Union."
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116. With relation to the public trust doctrine, this
Court in M.C. Mehta v. Kamal Nath [(1997) 1 SCC 388]
held: (SCC pp. 407 & 413, paras 25 & 34)
"25. The public trust doctrine primarily rests on
the principle that certain resources like air, sea,
waters and the forests have such a great
importance to the people as a whole that it would
be wholly unjustified to make them a subject of
private ownership. The said resources being a gift
of nature, they should be made freely available to
everyone irrespective of the status in life. The
doctrine enjoins upon the Government to protect
the resources for the enjoyment of the general
public rather than to permit their use for private
ownership or commercial purposes.
xxx xxx xxx
34. Our legal system--based on English common
law--includes the public trust doctrine as part of
its jurisprudence. The State is the trustee of all
natural resources which are by nature meant for
public use and enjoyment. Public at large is the
beneficiary of the seashore, running waters, air,
forests and ecologically fragile lands. The State as
a trustee is under a legal duty to protect the
natural resources. These resources meant for
public use cannot be converted into private
ownership."
This doctrine is part of Indian law and finds application
in the present case as well. It is thus the duty of the
Government to provide complete protection to the
natural resources as a trustee of the people at large.
xxx xxx xxx
118. It is relevant to note that the Constitution
envisages exploration, extraction and supply of gas to
be within the domain of governmental functions. It is
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the duty of the Union to make sure that these resources
are used for the benefit of the citizens of this country.
Due to shortage of funds and technical know-how, the
Government has privatised such activities through the
mechanism provided under the PSC. It would have been
ideal for the PSUs to handle such projects exclusively. It
is commendable that private entrepreneurial efforts are
available, but the nature of the profits gained from such
activities can ideally belong to the State which is in a
better position to distribute them for the best interests of
the people. Nevertheless, even if private parties are
employed for such purposes, they must be accountable
to the constitutional set-up. The statutory scheme of
control of natural resources is governed by a combined
reading of the Oilfields (Regulation and Development)
Act, 1948, the Petroleum and Natural Gas Rules, 1959
and the Territorial Waters, Continental Shelf, Exclusive
Economic Zone and Other Maritime Zones Act.
xxx xxx xxx
128. In a constitutional democracy like ours, the national
assets belong to the people. The Government holds such
natural resources in trust. Legally, therefore, the
Government owns such assets for the purposes of
developing them in the interests of the people. In the
present case, the Government owns the gas till it reaches
its ultimate consumer. A mechanism is provided under
the PSC between the Government and the contractor
(RIL, in the present case). The PSC shall override any
other contractual obligation between the contractor and
any other party.
xxx xxx xxx
237. While the word "vest" could normally partake of at
least a portion of the full bundle of rights associated with
ownership, the phrase "shall vest" as used in Article 297
of the Constitution implies a deliberate, and not an
incidental, act by a body at the various constitutional
moments that have informed our Constitution. That body
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is the people as a nation. It is now a well-established
principle of jurisprudence that the true owners of
"natural wealth and resources" are the people as a
nation.
xxx xxx xxx
245. The statutory matrix dealing with natural gas and
other petroleum resources also clearly indicates the
importance of such permanence of sovereignty. The
Territorial Waters, Continental Shelf, Exclusive
Economic Zone and Other Maritime Zones Act, 1976; the
Oilfields (Regulation and Development) Act, 1948 and
the Petroleum and Natural Gas Rules, 1959, all
emphasise the importance and duty of the GoI to
conserve and develop mineral oils, including natural gas.
246. As we have noted above, Article 297 of the
Constitution is a special provision which leads us to
conclude that the powers granted to the Union to hold
the resources for purposes of the Union cast special
obligations over and above what are normally affixed
with respect of all other resources that the Union may be
permitted to act upon pursuant to Article 298. We hold
that under Article 297 of the Constitution, the Union of
India can indeed enter into contracts for the
identification, development and extraction of resources
in the geographic zones specified therein. However, such
activities can only be premised on the key therein to
unlock those resources: for the purposes of the Union.
xxx xxx xxx
249. In light of the public trust elements so intrinsic to
resources under the seabed, and the special nature of
Article 297, the implications of natural gas for India's
energy security, and the imperatives of national
development--including the concepts of egalitarianism
and promotion of interregional parity, we hold that the
Union of India cannot enter into a contract that permits
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extraction of resources in a manner that would abrogate
its permanent sovereignty over such resources. It is not
just a matter of mere textual provisions in a contract or a
statute. It is a matter of constitutional necessity."
(emphasis supplied)
47. In view of the aforesaid decision, the duty of the Government of India
is to provide complete protection to the natural resources as a Trustee of the
public at large and as observed by the Hon'ble Supreme Court, the Union of
India cannot enter into a contract that permits extraction of resources in a
manner that would abrogate its permanent sovereignty over such resources
and this is not just a matter of mere textual provisions in a contract or a
Statute but is a matter of Constitutional necessity.
48. The obligations of the Government as a Trustee of Natural Resources
has been recognized by the Hon'ble Supreme Court of India in Union of
India v. Association of Unified Telecom Service Providers of India
Etc.(supra) in the following words:-
"86. DOT has urged that the Central Government has
exclusive privilege under section 4 of the Telegraph Act;
thus, it is bound to get the best price for natural
resources. To part with the exclusive privilege under the
revenue sharing regime is extremely beneficial to the
licensees. Thus, the State must get the price for its
valuable right as mandated under Article 14. In our
opinion, there is no doubt that the State is a trustee of the
natural resources and is obliged to hold it for the benefit
of the citizens but also to ensure equal distribution to
sub-serve the common good as observed under Article 39
of the Constitution of India in Re: Natural Resources
Allocation, (2012) 10 SCC 1. The Government being the
sole repository of all the resources in the country, also
has the exclusive power to determine the licence
conditions at which it parts with the exclusive right to the
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resources. Government has to make an effort to get the
best price for its valuable rights and cannot throw them
away, and there would be no arbitrariness in the same."
(Emphasis Supplied)
49. In view of the aforesaid decisions of the Hon'ble Supreme Court
which are binding dicta, there cannot be a doubt that the Government of
India is mandated to make every possible effort to get the best price for the
valuable mineral resources and maximize the revenue generation, as rightly
contended by the appellants.
INTERPRETATION OF ARTICLE 2.1 OF THE PRODUCTION
SHARING CONTRACT
50. Article 2.1 of the Production Sharing Contract reads as under:-
"2.1. The term of this Contract, subject to the terms hereof and
the applicable laws, shall be for a period of twenty five
(25) years from the Effective Date, unless the Contract is
terminated earlier in accordance with its terms, but may
be extended upon mutual agreement between the Parties
for a further Period not exceeding five (5) years;
provided that in the event of Commercial Production of
Natural Gas, which is expected to continue beyond the
end of the term of the Contract, the Contract shall be
extended for such a period up to but not exceeding thirty
five (35) years from the Effective Date, as may be
mutually agreed between the Parties to be sufficient to
permit the Contractor to maximise the production of
Natural Gas in accordance with good petroleum industry
practice. If the production of Crude Oil or of Natural
Gas is expected to continue beyond the end of the
relevant period referred to above, the Parties may agree
to extend this Contract for a further period upon such
terms as may be mutually agreed."
(emphasis supplied)
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51. The aforesaid Article has been read and re-read by the learned Senior
Counsels for the parties herein and has also been interpreted by the learned
Single Judge. In our considered view, interpretation of the provisions of
Article 2.1 would have to take colour from the "Public Trust Doctrine",
implying that it cannot be overlooked that natural resources like petrol and
petroleum products are owned by the State, who is their repository and holds
the same in trust for and on behalf of the people of the country. As affirmed
and re-affirmed by the Hon'ble Supreme Court in several judgments, the
resources have to be utilized and the contracts with respect to them have to
be entered, keeping in mind factors which subserve the National interest,
which as a corollary, would have to overweigh the private interests. There is
no gainsaying that applying the said Doctrine, the Government has to make
efforts to optimise the revenue generated when it enters into the PSCs
concerned with the natural resources.
52. Much has been argued on both sides with regard to the interpretation
of the words "...applicable laws..." in Article 2.1. The provisions of the
Article clearly provide that "the terms of the Production Sharing
Contract are subject to the terms and conditions mentioned in the
contract and are further subject to the applicable laws....". The question
that arises at this stage is on the meaning and interpretation of "...applicable
laws...".
53. In order to answer this question, it would be useful to allude to Article
32.1 of the PSC which provides that the Contract shall be governed and
interpreted in accordance with laws of India. Article 32.1 reads as follows:-
"32.1 This Contract shall be governed and
interpreted in accordance with the laws of India,
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together with applicable principles of international law,
insofar as they are not inconsistent with the laws of
India."
Article 2.1 itself stipulates that the duration and the term of the
Contract would be subject to the "applicable laws". This clearly implies that
the entire contract including Article 2.1 of PSC is subject to the "laws of
India". Thus, read there cannot be a doubt that the PSC is subject to the
applicable laws which would include:-
a) the Constitution of India;
b) the statutory provisions;
c) the law propounded by the Hon'ble Supreme Court of India (As
per Article 141 of the Constitution of India), and
d) The policy of the Government of India.
54. The Central Government has formulated a Pan India extension policy
for grant of extension to the existing PSCs in respect of all the "Pre-NELP
Exploration Blocks" stipulating therein that during the extended period it
shall have 10% higher share of Profit Petroleum. The policy has been issued
under Rule 5(3) of the PNG Rules and thus, by virtue of Article 32.1 of the
PSC would fall under the term "applicable laws".
55. The executive power of the Government to regulate and distribute the
manner of sale of Natural Resources has been upheld by the Hon'ble
Supreme Court in several decisions. Under Entry No.53 of List-I of
Schedule VII read with Article 39(b) of the Constitution of India, the Union
has the power, jurisdiction and authority to take a policy decision as has
been done in the present case by issuing the policy decision dated 7th April,
2017, to subserve the common good. Article 39(b) of the Constitution of
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India is extracted hereinunder for ready reference:-
"39. Certain principles of policy to be followed by the
State. - The State shall, in particular, direct its policy
towards securing -
(a) xxx xxx xxx
(b) That the ownership and control of the material
resources of the community are so distributed as best to
subserve the common good;"
56. It has been held by Hon'ble Supreme Court in Reliance Natural
Resources Ltd. v. Reliance Industries Ltd. (supra) in paragraphs 77 and 78
as under:-
"77. In the light of the above, the executive of the Union
of India enjoys its constitutional powers under Article 73
and Article 77(3) in order to fulfil the objectives of the
Directive Principles of State Policy relating to
distribution of natural gas. This natural gas is a material
resource under Article 39(b). In view of this, along with
the contemplation of the Government's policy for the
utilisation of natural gas under Article 21.1 and the
decision of this Court referred to above, the executive
decided that distribution would include within its ambit
acquisition, including acquisition of privately owned
material resources. The framing of the "gas utilisation
policy" in identifying the priority sectors, and allocating
the requisite quantities in accordance with the needs of
the said sectors and subjecting marketing freedom to
the order of priority and guidelines framed is very much
in accordance with law. Consequently, Article 21.1 and
Article 21.3 should be read in consonance with the gas
utilisation policy and the latter is neither inconsistent
with the provisions of the Constitution, nor the Oilfields
(Regulation and Development) Act, 1948; the
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Petroleum and Natural Gas Rules, 1959 and the articles
of the Production Sharing Contract referred to above.
78. To put it clearly, both in terms of the gas utilisation
policy and the Production Sharing Contract, the
Government in the capacity as the executive of the
Union can regulate and distribute the manner of sale of
natural gas through allotments and allocation which
would subserve the best interests of the country."
(Emphasis supplied)
57. Further, in Energy Watchdog vs. CERC, reported as (2017) 14 SCC
80, in paragraphs 48 and 57, Supreme Court held as under:-
"Change in law
48. It has been submitted on behalf of the counsel for the
respondents, that the guidelines of 19-1-2005, as
amended by the 18-8-2006 Amendment, make it clear
that any change in law, either abroad or in India, would
result in the consequential rise in price of coal being
given to the power generators. Since various provisions
of the guidelines as well as the power purchase
agreements are referred to, we set them out herein:
xxx xxx xxx
57. Both the letter dated 31-7-2013 and the revised
Tariff Policy are statutory documents being issued under
Section 3 of the Act and have the force of law. This being
so, it is clear that so far as the procurement of Indian
coal is concerned, to the extent that the supply from Coal
India and other Indian sources is cut down, the PPA read
with these documents provides in Clause 13.2 that while
determining the consequences of change in law, parties
shall have due regard to the principle that the purpose of
compensating the party affected by such change in law is
to restore, through monthly tariff payments, the affected
party to the economic position as if such change in law
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has not occurred. Further, for the operation period of the
PPA, compensation for any increase/decrease in cost to
the seller shall be determined and be effective from such
date as decided by the Central Electricity Regulation
Commission. This being the case, we are of the view that
though change in Indonesian law would not qualify as a
change in law under the guidelines read with the PPA,
change in Indian law certainly would."
(emphasis supplied)
58. We were informed by the Solicitor General that the policy which is
applicable uniformly to all the PSCs entered into by the Government was
framed after due consideration with the stakeholders, including the
respondents herein. The policy has been framed under the Rules of Business
under Article 166 of the Constitution of India and under the aegis of the
Cabinet Committee of Economic Affairs. Thus, in view of the source of
power to issue the policy and the aforesaid judgments, we find force in the
contention of the appellants that the policy decision of the Union of India
dated 7th April, 2017 has statutory force.
59. The next question that arises for consideration is if the petitioners are
entitled to an extension of 10 years on the same terms and conditions that
existed when the initial PSC was executed on 15th May, 1995 or are the
appellants entitled to apply the provisions of the policy and claim an
increase in the share of Profit Petroleum. Answer to this question would
again lie in examining the provisions of Article 2.1 of the PSC. Article 2.1
of the PSC is in three parts:-
a) Firstly, the period of PSC shall be 25 years from effective date
unless the contract is terminated earlier, but, may be extended
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upon mutual agreement between the parties for further
period not exceeding 5 years.
b) Provided that in the event of Commercial Production of
natural gas, which is expected to continue beyond the end of the
term of contract, the contract shall be extended for such a
period up to but not exceeding 35 years from the "Effective
Date", as may be mutually agreed between the parties to be
sufficient to permit the Contractor to maximize the production
of Natural Gas in accordance with good petroleum industry
practice.
c) If the production of Crude Oil or of Natural Gas is expected to
continue beyond the end of the relevant period referred to
above, the Parties may agree to extend this Contract for a
further period upon such terms as may be mutually agreed.
60. It is evident from a reading of the provisions of the Article that the
term of the PSC was 25 years from the effective date and it is presumed that
there shall be commercial discovery and exploitation of the Crude Oil or
Natural Gas in the contract area and is rightly contended by the appellants
the said interpretation is fortified by the words "unless the contract is
terminated earlier in accordance with its terms". By virtue of Article 2.1, in
case of no discovery, the contract could come to an end before the expiry of
25 years. Further, whenever discovery of the Crude Oil takes place, Article
2.1 provides that contract can be extended for a further period, not
exceeding five years, however, only by a mutual agreement between the
parties. For Natural Gas, PSC has a different provision and the latter part of
Article 2.1 provides that in the event of commercial production of Natural
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Gas, which is expected to continue beyond the end of the term of the
contract, the contract shall be extended for such period upto but not
exceeding 35 years from the effective date as may be mutually agreed
between the parties. In the present case we are concerned with the latter
eventuality.
61. From the narrative of the facts of the present case, it is clear that there
is no dispute that the PSC was entered into on 15th May, 1995 for a period of
25 years i.e. upto 14th May, 2020, during which period the Contractor has
excavated petroleum and petroleum products and has enjoyed its share in the
"Profit Petroleum" for 25 long years. The question whether the petitioners
are entitled to extension need not detain this Court any further as the parties
are ad-idem that the appellants have in principle no objection to grant of
extension of the PSC for a further period of 10 years. Therefore, the issue
that remains is in a narrow compass and relates to the terms and conditions
during the extended period. As already noted above, the Central
Government has already taken a Policy Decision that the extension of the
PSCs shall be on a pre-condition that Government shall be entitled for
additional 10% share in Profit Petroleum. Looking to the provisions of
Article 2.1 of the PSC and the afore-mentioned judgments, at the cost of
repetition, we reiterate our view that Article 2.1 would have to be interpreted
in the backdrop of the Public Trust Doctrine and the Policy dated 7th April,
2017, as rightly contended by the appellants. So interpreted, no embargo can
be placed on the right of the Government to extend the contract on terms
which are at variance with the initial terms of the PSC, so long as they are in
public interest and subserve the purpose of maximising revenue generation.
If the Government has taken a policy decision, based on various
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considerations and taking into the views and suggestions of the stakeholders,
including the respondents herein that the share of the State needs to be
increased during the extended tenure of the PSC, in public interest, it
deserves no interference, more particularly, when there is no challenge to the
policy decision.
62. It also needs to be noticed in this context that by incorporating the
words "as may be mutually agreed between the parties", in Article 2.1 of
the PSC, the parties had agreed that the Government could revisit the period
of the Contract as well as the terms thereof. The interpretation sought to be
given by the petitioners that the Government has no power or authority to
change the terms of the PSC or its duration is not to be found in the
provisions of Article 2.1 and per contra the use of words "mutually agreed"
furthers the interpretation of the appellants. The terms of the PSC have to be
read conjointly and reading of Articles 2.1 and 32.1 in the light of Article
39(b) of the Constitution of India leads us to hold that the Government has
the power to impose a condition, in view of the policy decision, for a higher
share in the Profit Petroleum, during the extended period.
63. It is also to be kept in mind that the demand of the Government for
10% higher share is after 25 years of the effective date and cannot by any
stretch be termed as unreasonable or arbitrary and we also do not see how
the same would hinder the contractor in maximising the production of
Natural Gas during the extended period of contract. Rather, in our view, by
upholding the decision of the Government for increase in the share of Profit
Petroleum, we would only take forward the Constitutional mandate of
achieving the maximum revenue in public interest.
64. We cannot lose sight of the fact that in contracts concerning natural
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resources, which are held by the State in Trust on behalf of the people, the
contractual provisions are to be interpreted in the backdrop of public interest
and Constitutional goals. In this context, it would be useful to allude to the
judgment of Hon'ble Supreme Court in Bharti Airtel Ltd. vs. Union of
India reported as (2015) 12 SCC 1, wherein the Court held as under:-
"26. TDSAT recorded that "the right to extension of the
licence is undeniably a valuable right of the licensee" but
held that such a right is not an absolute right. If the
licensor (Union of India) does not deem it expedient to
grant such licence, it is under no such obligation to grant
such extension. The expression "expedient" in the
context of the licences only means "public interest and
for public good". Therefore, the Tribunal opined that it is
open to the Central Government to refuse the extension if
it is of the opinion that the grant of extension would not
be in public interest or subserve public good. The
Tribunal also opined that:
"... for the purpose of grant of extension it is
Central Government alone that is the judge of
public interest and public good. The Central
Government may frame a policy or revise an
existing policy in larger public interest and in case
the extension of the existing licences militates
against the new policy it would be a valid and
acceptable ground for refusing extension".
The Tribunal also opined that the absence of the
employment of the expression "if deemed expedient" in
the relevant clause of the UAS licence, made no
difference insofar as the authority of the Government of
India for rejecting the extension of the licences
xxx xxx xxx
35. If the licences in question are nothing but contracts,
the next question would be, is there any right of extension
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of licence created in favour of licensee under the
contract?
36. From the language of the relevant clauses of the
licences which are noted earlier, it is clear that the
licensees have no automatic right of renewal/extension
on the expiry of the original tenure of the licence. The
contract only provided for extension of the period of
licence at the sole discretion of the licensor subject to the
condition that the licensee makes an application seeking
an extension during the 19th year of the currency of the
licence. It appears that all of the licensees did make such
an application.
37. The question which requires examination is -- What
are the obligations of the licensor on receipt of such an
application? The obligations of the licensor flow from
two sources, (i) from the contract, (ii) from the
Constitution of India and the relevant provisions of the
statute (Indian Telegraph Act, 1885). In the event of any
conflict between the said two sets of obligations, the
further question would be which one of the conflicting
obligations prevail?
38. Under the terms of the licence, the licensor is
required to extend the licence only on "mutually agreed
terms and conditions", if such an extension is sought in
the 19th year of the currency of the licence. To test the
correctness of the submission that under the contract,
the licensor is under an obligation to consider the
extension of licence, we take an example of a case
where the licensee does not make an application in the
19th year but makes it just a few days before the expiry
of the 20th year. Does the licensee still have a right of
consideration? In our opinion, the answer should be
"No" for two reasons; (i) that such a claim is plainly
unsupported by the text of the contract, (ii) the failure
to seek extension in the 19th year, makes the
continuance of the service to the public uncertain. The
Government of India cannot afford to remain waiting
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without making alternative arrangements, because the
disruption in the communication in the modern world
may lead to many undesirable consequences apart from
causing inconvenience to the public. Take the
alternative possibility of the licensee not making an
application for extension at all because he is not
interested in the extension (a very unlikely scenario).
Can the licensor insist that the licensee should continue
to offer the service either on the same economic
considerations or otherwise? The answer seems to be
plain and "No". The language of the contract--
"mutually agreed terms"--clearly indicates so. Though
it requires an examination whether the licensor i.e. the
State can compel the licensee in a given case in exercise
of its authority either legislative or executive. Therefore,
under the contract neither the licensor nor has the
licensee a right to insist that other party should
continue with the contract even if such other party is
not willing to continue except on such terms and
conditions on which the other party may desire to
continue. Such terms and conditions obviously include
terms and conditions regarding the economic
stipulations subject to which either of the parties is
willing to be in the contract.
39. However, the licensor being the Union of India, its
discretion to stipulate terms and conditions is regulated
by certain constitutional mandates apart from
stipulations of any law applicable.
40. Insofar as the constitutional mandates in the
context of a licence under Section 4 of the Telegraph
Act are concerned, this Court in 2G Case [Centre for
Public Interest Litigation v. Union of India, (2012) 3
SCC 1] at para 85 held as follows: (SCC p. 56)
"85. As natural resources are public goods, the
doctrine of equality, which emerges from the
concepts of justice and fairness, must guide the
State in determining the actual mechanism for
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distribution of natural resources. In this regard,
the doctrine of equality has two aspects: first, it
regulates the rights and obligations of the State
vis-à-vis its people and demands that the people be
granted equitable access to natural resources
and/or its products and that they are adequately
compensated for the transfer of the resource to the
private domain; and second, it regulates the rights
and obligations of the State vis-à-vis private
parties seeking to acquire/use the resource and
demands that the procedure adopted for
distribution is just, non-arbitrary and transparent
and that it does not discriminate between similarly
placed private parties."
41. The licensor/Union of India does not have the
freedom to act whimsically. As pointed out by this Court
in 2G Case [Centre for Public Interest Litigation v.
Union of India, (2012) 3 SCC 1] in the above-extracted
paragraph, the authority of the Union is fettered by two
constitutional limitations: firstly, that any decision of
the State to grant access to natural resources, which
belong to the people, must ensure that the people are
adequately compensated and, secondly, the process by
which such access is granted must be just, non-
arbitrary and transparent, vis-à-vis private parties
seeking such access.
xxx xxx xxx
43. In other words, such licences are in the nature of
largesse from the State. No doubt, the authority of the
State to distribute such largess is always subject to the
condition that the State must comply with the conditions
of Article 14 of the Constitution i.e. the distribution
must be on the basis of some rational policy. Even the
language of the proviso to Section 4 of the Telegraph
Act, which stipulates that the grant of licence should be
"on such conditions and in consideration of such
payments as it thinks fit", must necessarily be
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understood that the conditions must be rational and the
payments forming the consideration for the grant of
licence must be non-discriminatory. The conditions
contained in the licences in question stipulate that the
term of the licence could be extended on mutually
agreed terms, if the Government of India deems it
expedient. The obligations of the Government of India
flowing from the Constitution as well as a statute
necessarily require the Government of India to grant
licences as rightly pointed by the Tribunal (TDSAT)
only "in public interest and for public good".
44. This Court in 2G Case [Centre for Public Interest
Litigation v. Union of India, (2012) 3 SCC 1] after
elaborate discussion on the nature of the State's
authority to deal with the natural resources held that:
(SCC p. 54, para 77)
"77. Spectrum has been internationally accepted
as a scarce, finite and renewable natural resource
which is susceptible to degradation in case of
inefficient utilisation. It has a high economic value
in the light of the demand for it on account of the
tremendous growth in the telecom sector. Although
it does not belong to a particular State, right of use
has been granted to the States as per international
norms."
45. While recognising the power of the State to distribute
natural resources, this Court held that the State is bound
to
"act in consonance with the principles of equality
and public trust and ensure that no action is taken
which may be detrimental to public interest". (2G
Case [Centre for Public Interest Litigation v.
Union of India, (2012) 3 SCC 1] , SCC p. 53, para
75)
46. In para 89, the Court concluded as follows: (2G
Case [Centre for Public Interest Litigation v. Union of
India, (2012) 3 SCC 1] , SCC p. 58)
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"89. In conclusion, we hold that the State is the
legal owner of the natural resources as a trustee of
the people and although it is empowered to
distribute the same, the process of distribution
must be guided by the constitutional principles
including the doctrine of equality and larger
public good."
47. This Court further held: (SCC pp. 59-60, para 95)
"95. ... the State and its agencies/instrumentalities
must always adopt a rational method for disposal
of public property ... it is the burden of the State to
ensure that a non-discriminatory method is
adopted for distribution and alienation, which
would necessarily result in national/public
interest."
This Court opined that a "duly publicised auction
conducted fairly and impartially is perhaps the best
method for discharging the burden of the State to ensure
protection of public interest".
48. The conditions of licences/contracts in whatever
language provided for consideration for the extension
of a licence are necessarily required to be interpreted in
consonance with the obligation of the licensor/Union of
India under the Constitution and the laws. Otherwise,
the contract would be rendered void for being
inconsistent with public policy, the principle expressly
incorporated under Section 23 of the Contract Act,
1872.
49. The decision of the licensor to conduct an auction for
granting access to spectrum, obviously, complies with the
second of the requirements specified by this Court in
para 85 of 2G Case [Centre for Public Interest Litigation
v. Union of India, (2012) 3 SCC 1] judgment. The
question whether such a decision also complies with the
requirements of the first of the two facets mentioned
therein is the issue in this batch of matters. In other
words, the adequacy of compensation which the
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Government of India seeks to derive by holding an
auction for allowing access to spectrum is just and fair in
the circumstances.
xxx xxx xxx
53. At this stage, we must also deal with certain
submissions made by Shri K.K. Venugopal, learned
Senior Counsel appearing for one of the appellants. The
phrase "if deemed expedient" occurring in Clause 4.1 of
the licence must be understood in the light of the
interpretation of the expression "expedient" in Hotel Sea
Gull v. State of W.B. [Hotel Sea Gull v. State of W.B.,
(2002) 4 SCC 1] wherein it was held by this Court to
mean "whatever is suitable and appropriate for any
reason for the accomplishment of the specified object"
(SCC p. 13, para 25). It is argued that the question of
extension of licence must be decided by the Government
of India on the basis of objective and rational criteria by
taking into account relevant materials and eschewing
irrelevant material. The learned Senior Counsel in his
written submission [ It is submitted that through the past
19 years and even now on a continuing basis, the writ
petitioners have been faithfully operating their UAS
licence and have, as of 30-6-2014, invested over Rs
19,545 crores setting up a state-of-the-art mobile
network in these 6 circles; in three months' period
between April and June of Financial Year 2014-2015
alone, the investments made by the petitioner was Rs 544
crores; the petitioners are providing world-class service
to over 717 lakh subscribers as of June 2014; the
petitioner has built an average subscriber market share
of 23% (average for six circles--the shares range
between 19% and 32% for various circles), the petition is
offering affordable tariffs and innovative services to
consumers; the petitioner is providing direct and indirect
employment to thousands of people, in last 3.5 years
alone the petitioner has contributed over Rs 11,035
crores to the government exchequer by way of licence
fee, spectrum charges, direct and indirect taxes, etc.
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between Financial Year 2011-2012 and Financial Year
2014-2015 (up to June 2014). The petitioners have thus
altered their position and invested thousands of crores
based on government promise/contract.] gave certain
facts and figures which according to him are relevant in
coming to a conclusion whether it would be expedient to
extend the period of licence. It is also submitted that the
phrase "on terms mutually agreed" must also be
understood to mean that the Government of India's
decision for extension of the licences be based only on
relevant and objective criteria such as
"the quality, affordability, reach of the services
provided by the petitioner and the investments
made by it during the initial 20 year period, being
satisfactory, the licence would be extended by 10
years at one time". (Written submission)
54. We are of the opinion that the submissions of Shri
Venugopal must carry a great weight if the licensor's
(Government of India) obligations are regulated purely
by the terms of the contract. But as already noticed by
us, the licensor's obligations are not simply confined to
the contract/licence. They also flow from the
Constitution and the laws of the land. Obviously, the
obligations flowing from the Constitution stand on a
higher footing and it is the Government of India's duty
to satisfy the obligations flowing from the Constitution
and the laws of the land in preference to obligations
flowing from a contract. It is a well-settled principle of
law that where there is a conflict between obligations
flowing from a contract and those flowing from the law,
the obligations flowing from the contract must
necessarily yield to obligations flowing from the
Constitution and laws. We, therefore, reject the
submission of Shri Venugopal."
(emphasis supplied)
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65. In view of the aforesaid dicta of the Hon'ble Supreme Court, it can be
safely held by us that "right to extension of a contract is a valuable right
of the Contractor but such a right is not an absolute right". The words
"as may be mutually agreed between the parties" used in Article 2.1 of
the PSC very obviously include the right of the State to grant extension of
the period of contract with an additional/ varied condition/ economic
stipulation, subject, however, to the other party willing to agree to the said
condition and needless to state, if the other party does not wish to agree to
the changed term, it has the freedom to refuse extension of the contract.
66. The terms of the PSC therefore clearly entail change of terms and
conditions of the PSC during the extended period and it is not open to the
Courts in a judicial review under Article 226 of the Constitution of India to
rewrite the contract between the parties or revisit its terms and conditions.
The Courts, as held by the Hon'ble Supreme Court, cannot substitute their
own understanding or wisdom for the understanding of the commercial
terms of the parties to the contract which is explicit in the provisions of the
contract. The learned Single Judge has by the impugned judgment directed
extension of the tenure of the PSC for a further period of 10 years, on same
terms as existed earlier, overlooking the power of the State to vary the
condition. This is impermissible in the eyes of law.
67. We find merit in the contention of the appellants that the Government
may enter into various contracts, some may have public element and some
may be purely in the realm of private contracts, but, while entering into a
contract with respect to natural resources, the Constitutional imperative and
the public interest will outweigh the contractual stipulations. The Policy
dated 7th April, 2017 provides that it applies to "all existing PSCs" and also
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provides a mechanism for their extension. The direction in the impugned
judgment is, therefore, contrary to the policy, which is unchallenged.
Likewise, there is also merit in the contention that the petitioners do not
have an unfettered right to demand extension of the PSC on unilateral terms
which suit their interest, overlooking the interest of the State, which is a
Trustee of the natural resources under a Constitutional mandate.
68. It has been held by Hon'ble the Supreme Court of India in Shin
Satellite Public Co. Ltd. vs. Jain Studios Ltd., (2006) 2 SCC 628 as well as
recently in the case of Nabha Power Ltd. vs. Punjab SPCL, (2018) 11 SCC
508, as under:-
"Our view
49. We now proceed to apply the aforesaid principles
which have evolved for interpreting the terms of a
commercial contract in question. Parties indulging in
commerce act in a commercial sense. ... Needless to say
that the application of these principles would not be to
substitute this Court's own view of the presumed
understanding of commercial terms by the parties if the
terms are explicit in their expression. The explicit terms
of a contract are always the final word with regard to
the intention of the parties. The multi-clause contract
inter se the parties has, thus, to be understood and
interpreted in a manner that any view, on a particular
clause of the contract, should not do violence to another
part of the contract."
(emphasis supplied)
69. In the case of Adani Power (Mundra) Ltd. vs. Gujarat ERC, (2019)
19 SCC 9, Hon'ble Supreme Court at paragraph 19 held as under:-
"19. This Court in Rajasthan State Industrial
Development & Investment Corpn. v. Diamond & Gem
Development Corpn. Ltd. [Rajasthan State Industrial
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Development & Investment Corpn. v. Diamond & Gem
Development Corpn. Ltd., (2013) 5 SCC 470 : (2013) 3
SCC (Civ) 153] observed thus: (SCC pp. 483-84, paras
23-24)
"23. A party cannot claim anything more than
what is covered by the terms of contract, for the
reason that contract is a transaction between the
two parties and has been entered into with open
eyes and understanding the nature of contract.
Thus, contract being a creature of an agreement
between two or more parties, has to be interpreted
giving literal meanings unless, there is some
ambiguity therein. The contract is to be interpreted
giving the actual meaning to the words contained
in the contract and it is not permissible for the
court to make a new contract, however reasonable,
if the parties have not made it themselves. It is to
be interpreted in such a way that its terms may not
be varied. The contract has to be interpreted
without any outside aid. The terms of the contract
have to be construed strictly without altering the
nature of the contract, as it may affect the interest
of either of the parties adversely. [Vide United
India Insurance Co. Ltd. v. Harchand Rai
Chandan Lal [United India Insurance Co. Ltd. v.
Harchand Rai Chandan Lal, (2004) 8 SCC 644]
and Polymat (India) (P) Ltd. v. National Insurance
Co. Ltd. [Polymat (India) (P) Ltd. v. National
Insurance Co. Ltd., (2005) 9 SCC 174] ]
24. In DLF Universal Ltd. v. Town & Country
Planning Deptt. [DLF Universal Ltd. v. Town &
Country Planning Deptt., (2010) 14 SCC 1 :
(2011) 4 SCC (Civ) 391] , this Court held: (SCC
pp. 14-15, paras 13-15)
"13. It is a settled principle in law that a
contract is interpreted according to its
purpose. The purpose of a contract is the
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interests, objectives, values, policy that the
contract is designed to actualise. It
comprises the joint intent of the parties.
Every such contract expresses the autonomy
of the contractual parties' private will. It
creates reasonable, legally protected
expectations between the parties and
reliance on its results. Consistent with the
character of purposive interpretation, the
court is required to determine the ultimate
purpose of a contract primarily by the joint
intent of the parties at the time of the
contract so formed. It is not the intent of a
single party; it is the joint intent of both the
parties and the joint intent of the parties is
to be discovered from the entirety of the
contract and the circumstances
surrounding its formation."
14. As is stated in Anson's Law of Contract:
"a basic principle of the common law of
contract is that the parties are free to
determine for themselves what primary
obligations they will accept.... Today, the
position is seen in a different light. Freedom
of contract is generally regarded as a
reasonable, social, ideal only to the extent
that equality of bargaining power between
the contracting parties can be assumed and
no injury is done to the interests of the
community at large".
15. The Court assumes:
"that the parties to the contract are
reasonable persons who seek to achieve
reasonable results, fairness and efficiency....
In a contract between the joint intent of the
parties and the intent of the reasonable
person, joint intent trumps, and the Judge
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should interpret the contract accordingly".
(emphasis supplied)
70. It has been held by Hon'ble Supreme Court in Kuldeep Singh vs.
Govt. of NCT of Delhi, (2006) 5 SCC 702, especially in paragraph 15 as
under:-
"15. The appellants filed applications for grant of license
pursuant to the policy decision adopted by the State.
They might have invested a huge amount, but did not
thereby derive any accrued or vested right. The matter
relating to grant of license for dealing in liquor is
within the exclusive domain of the State. If the State
had the right to adopt a policy decision, they
indisputably had a right to vary, amend or rescind the
same. The effect of a policy decision taken by the State is
to be considered having regard to the provisions
contained in Article 47 of the Constitution of India as
also its power of regulation and control in respect of the
trade in terms of the provisions of the Excise Act."
(emphasis supplied)
71. The learned Solicitor General had also contended that indirectly and
subtly the prayers of the petitioners in the writ petition were based upon
principles of promissory estoppel and legitimate expectation, and were
misconceived as in Government contracts, wherein overwhelming public
interest is involved, concerning the utilization of natural resources held
in public trust, the said doctrines, viz, promissory estoppels and
legitimate expectations cannot be invoked. We are in complete agreement
with the contentions raised by the learned Solicitor General, especially when
the decision of Union of India for the extension of the period of PSC on the
condition of 10% higher Government share in Profit Petroleum is by way of
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Policy Decision, uniformly applicable to all PSCs in the Country and has its
genesis in public interest and Constitutional mandate.
72. The judgment in the case of DDA vs. Joint Action Committee (supra)
relied upon by the petitioners is clearly distinguishable from the present
case. In the said case, a self financing scheme was floated by the DDA and
an estimated cost of the flats as well as the rights and the liabilities of the
parties were laid down in the allotment letter. Subsequently, however, the
DDA sought to levy certain additional amounts over and above the price in
the allotment letter and which was challenged by the allottees. In this
context, the Hon'ble Supreme Court held that the relationship of the parties
arose out of the contract, whose terms and conditions were to be complied
by both the parties. In case the DDA intended to alter or modify the terms of
the contract, it was obligatory to bring the same to the notice of the allottee
and having not done so, it could not have thrust new terms of the contract
and, therefore, the policy under which the DDA sought to do so was not
beyond the pale of judicial review. In the present case, the appellants have
not taken any action which amounts to changing the terms of the PSC in as
much as Article 2.1 gives an initial duration of the Contract and permits
extension on terms mutually agreed between the parties. There is no term in
the Contract which mandates the appellants to extend the same on the initial
terms. Had that been the intent of the parties, the same would have been
spelt in so many words in the PSC itself. Rather, the use of the words "on
mutual agreement" shows the contra-intent of the parties that the terms of
the extension of the PSC, if any, were to be formalised at the time of
consideration for extension.
73. The judgment in the case of Sime Darby (supra) relied upon by the
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petitioners also, in our view, does not further their case. The judgment was
passed in a petition filed under Section 11 of the Arbitration and
Conciliation Act, 1996 for appointment of the Arbitral Tribunal. The
controversy involved in the said case was on the number of Arbitrators to be
appointed to adjudicate the disputes between the parties. The Arbitration
Clause between the parties was silent about the number of Arbitrators.
While it was the contention of the petitioner that in terms of the Arbitration
Clause, only a Sole Arbitrator could be appointed, it was contended by the
respondent that the Arbitral Tribunal must comprise of three Arbitrators, one
to be nominated by each party and the third to be chosen by the nominated
Arbitrators. Respondent had placed reliance on a policy decision that in
matters involving high stakes above Rs.10 crores, the arbitration would be
referred to a Committee or a panel of Arbitrators. The Hon'ble Supreme
Court referred to the Arbitration Clause between the parties which was silent
as to the number of Arbitrators and placed reliance on Section 10(2) of the
Arbitration and Conciliation Act, 1996 and held that the Arbitral Tribunal
would consist of a Sole Arbitrator as the policy decision could not change
the contractual clause. As noted above, there is no provision in the PSC
which bars the GoI from extending the Contract on fresh terms and
conditions and, therefore, the policy decision, which we have held to be the
"applicable law" can be relied upon by the appellants to form the basis of
the terms and conditions governing the parties during the extended period of
the PSC.
74. For the reasons mentioned above by us, which we are not repeating,
the judgment in GNCTD v. Bhushan Kumar (supra) is also of no avail to
the petitioners. In the said case, the Government of NCTD had invited the
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applications through industrial units situated in non-conforming areas, for
allotment of plots for relocation in terms of a scheme formulated by it and a
certain area of the plot was offered and applied for by the respondents
therein. Subsequently, however, there was a dispute with regard to the
measurement of the plots in question. The Government supported its action
of downsizing the plot by alleging that there was scarcity of land and also
that the decision was in consonance with a policy decision approved by the
Cabinet. In these facts, the Hon'ble Supreme Court considered the issue
involved as to whether the binding contract could be modified, novated or
cancelled, once it stood concluded and the parties were bound and governed
by its terms and conditions. It was held that a policy by itself is not law
which has the effect of thrusting new terms and conditions upon a
contracting party. We repeat and reiterate that the appellants herein are not
imposing a condition which has the effect of novation of a contract as the
parties had willingly incorporated a term in the PSC that the extension
beyond the current term would be on mutually agreed terms. Despite
strenuous arguments, learned Senior Counsel for the petitioners has been
unable to show any provision in the PSC binding the contracting parties
thereto into extension of the duration of the PSC, on the same terms and
conditions of the share of Profit Petroleum, as existed on 15th May, 1995.
75. For all the aforesaid reasons, we hold that there cannot be extension
of the Production Sharing Contract unconditionally, on the same terms
and conditions which were prevailing 25 years ago i.e. on 15th May,
1995, the effective date. By issuing a mandamus to the contrary, the learned
Single Judge has erred in law and the impugned judgment deserves to be set
aside.
Signature Not Verified
Digitally Signed
By:PANKAJ KUMAR
Signing Date:26.03.2021
11:32
76. As a cumulative effect of the aforesaid facts, reasons, provisions of
the PSC and the judicial pronouncements, we hereby set aside the impugned
judgment of the learned Single Judge dated 31st May, 2018 in W.P.(C)
No.11599/2015.
77. It needs to be recorded that the parties have addressed the arguments
on merits and had categorically submitted that objections/grounds regarding
maintainability of the petition were not pressed.
78. The Appeal is accordingly allowed.
79. All the pending applications also stand disposed of.
CHIEF JUSTICE
JYOTI SINGH, J
MARCH 26, 2021
'anb'
Signature Not Verified
Digitally Signed
By:PANKAJ KUMAR
Signing Date:26.03.2021
11:32
