Pioneer Power Ltd vs Gail India Ltd
2022 Latest Caselaw 2321 Tel

                                                       W.P.No.37418 of 2021

                                    1



     THE HONOURABLE SMT. JUSTICE P.MADHAVI DEVI

              WRIT PETITION No.37418 of 2021

ORDER:

This Writ Petition has been filed seeking a writ of

mandamus declaring the action of the Respondent company in

refusing to execute Gas Sales Agreement with the petitioner and

demanding payments from the petitioner on the ground of non-

payments of alleged disputed amounts under the Gas Sales

Agreement dated 21.02.2011 and 05.01.2016 as arbitrary, illegal

and consequently to direct the Respondent to execute the Gas Sales

Agreement on such lawful terms as may be mutually agreed upon

without insisting for payment of the alleged outstanding dues

payable by the petitioner under the Gas Sales Agreement dated

21.02.2011 and 05.01.2016 and to pass such other orders as this

Court may deem fit and proper in the circumstances of the case.

2. Brief facts leading to filing of this Writ Petition are that

the petitioner is a company incorporated under the provisions of

Companies Act, 1956 and is engaged in the business of generation

of electricity and supply of electricity to end users including the State

Governments. It is submitted that upon receiving the necessary W.P.No.37418 of 2021

sanctions, the petitioner had set up a plant at Ramanathapuram

District, Tamil Nadu for the said purpose. The Respondent, namely

Gas Authority of India Limited (GAIL) is a Public Sector Undertaking

(PSU) under the Ministry of Petroleum & Natural Gas (MoP & NG)

incorporated in the year 1984. It is a Government Company

primarily engaged in the transmission/distribution and marketing of

gas in India and is also engaged in other aspects of gas value chain

including exploration, production, transmission, extraction,

processing of natural gas and its related processes, products and

services.

3. On 21.02.2011, the petitioner and the Respondent

entered into an agreement for purchase of gas at the price as fixed

by the Government under the Administered Pricing Mechanism

(APM) and the agreement is called as Gas Sales Agreement (GSA-I)

and the same was extended from time to time with the last

Addendum dated 29.01.2018 extending the period of agreement till

30.06.2021. There was second Gas Sales Agreement dated

05.01.2016 (GSA-II) whereby the Respondent had agreed to sell

natural gas with the maximum daily contracted quantity (DCQ) being

reckoned as 2,98,000 SCMD sourced from ONGC at the plant and W.P.No.37418 of 2021

the petitioner agreed to purchase the gas at the price as per the

market for the Market Driven Priced (MDP) Gas and the GSA-II was

valid till 05.07.2021. It is submitted that as per the terms of GSA-I

and GSA-II, the petitioner purchased the gas from the Respondent

from time to time as per the terms agreed to between the parties

and made payments towards the same.

4. While the matter stood thus, on 04.06.2020 at around

11.00 PM, a major explosion had occurred at the plant of the

petitioner causing fire in the 110 KV switch yard PT and eventually

resulted in the breakdown of the switch yard. As a result, the power

plant tripped and no power was being generated and the operations

in the plant had to be stopped. Consequently, the petitioner

addressed a letter dated 05.06.2020 to the Respondent informing

that due to the events that transpired on 04.06.2020 and

05.06.2020 which constitute a 'force majeure' event as under the

aforesaid agreement, the petitioner would not be able to accept the

gas supplies for consumption until reinstatement of power

generation equipment in the plant. Vide the said letter, it was also

requested that during the period of shutdown of the plant, the gas

supply will not be eligible for claiming MGO and thus no invoices W.P.No.37418 of 2021

may be raised against MGO i.e. Minimum Guarantee Obligation till

such time, the force majeure event is cleared and the plant goes

into operation. Since there was no response from the Respondent,

the petitioner addressed another letter dated 16.06.2020. In

response to the petitioner's letter dated 05.06.2020, the Respondent

addressed a letter dated 17.06.2020 stating that the breakdown of

the switch yard is not covered under 'Force Majeure' Event and

hence, the request of the petitioner is not acceptable. It was further

informed that the gas supplies to the petitioner shall be resumed

only after clearing all the outstanding dues along with applicable

interest and reinstatement of valid LC in terms of the Agreement.

The Respondent also raised invoices on 10.07.2020 demanding the

payment from the petitioner. The petitioner vide letter dated

18.07.2020 replied explaining as to how the events constituted a

'force majeure' event and how the same was beyond the reasonable

control of the petitioner and the steps being taken by it to preserve

the plant. The petitioner therefore requested the Respondent to

refrain from any invoices/claims till such time, the 'force majeure'

event is cleared.

W.P.No.37418 of 2021

5. On 22.07.2020, the Respondent addressed a letter to

the petitioner stating that the petitioner is in appropriately portraying

the breakdown of switch yard as 'force majeure' event, which is

untenable, unjust and irrational. The petitioner was therefore

requested to take steps to rectify the defect for resumption of gas

supply and that all the contractual obligations including take or

Pay/MGO obligations and invoicing are applicable and that the

petitioner is liable to make payments.

6. The Respondent, thereafter, issued debit notes dated

22.06.2021 informing that the account of the petitioner has been

debited with

a) An amount of Rs.5,25,16,178/- towards Take or Pay

Obligation for MDP Gas for the FY 2020-21.

b) An amount of Rs.2,84,10,302/- towards Take or Pay

Obligation for APM Gas for the FY 2020-21.

7. These debit notes were however, disputed by the

petitioner vide letter dated 26.07.2021 stating that the Debit Notices

cannot be raised due to occurrence of a 'Force Majeure' Event and

that no amounts are liable to be paid. However, the Respondent W.P.No.37418 of 2021

addressed letters dated 05.08.2021 and 08.09.2021 seeking

payment of the invoices raised against the petitioner. The

correspondence between the petitioner and the Respondent with

regard to the above debit notes continued and further on

30.10.2021 the Respondent raised two provisional debit notes

i) for annual MGO-RMD-MDP Gas for FY 2020-21 to the tune of

Rs.6,19,69,090/- and

ii) for annual MGO-RMD-APM Gas for FY 2020-21 to the tune of

Rs.3,35,24,156/-.

8. It is submitted that on 09.12.2021 the petitioner

addressed a letter to Respondent informing that their power plant is

likely to resume operations during January, 2022, thus, requested

the Respondent to initiate necessary steps to resume gas supply to

the power plant. However, the Respondent addressed a letter dated

10.12.2021 to the petitioner calling upon the petitioner to clear the

outstanding dues to the tune of Rs.10,97,92,303/- payable on

account of MGO, interest on delayed payments etc so as to proceed

with signing of new Gas Sales Agreements towards gas sale and

supply. The petitioner replied that fresh/new Gas Sales Agreement

for the upcoming years are independent of the old Gas Sales W.P.No.37418 of 2021

Agreements and the claims made thereunder and any demand on

the petitioner to pay the alleged outstanding dues in order to enter

into fresh Gas Sales Agreements is coercive and arbitrary.

9. It is submitted that the petitioner had suffered great

losses as a result of the explosion that occurred at the plant and

therefore, refusal of the Respondent to execute fresh Gas sales

Agreements for the upcoming years but insisting on payment of the

dues of the earlier years when there was a dispute with regard to

the same is unjust and arbitrary and constitutes an abuse of power.

Challenging the said action of the Respondent in not entering into

fresh Gas Sales Agreements and insisting for payment of the

amounts as raised in the debit notes under the previous

agreements, this Writ Petition has been filed.

10. Learned counsel for the petitioner has drawn attention

of this Court to the earlier agreements i.e. GSA-I and II entered into

by the petitioner with the Respondent and also the request made by

the petitioner for supply of Gas in order to resume the generation of

power by the petitioner.

W.P.No.37418 of 2021

11. Learned standing counsel appearing for the Respondent

raised preliminary objections about the maintainability of this Writ

Petition. It is submitted that as per the GSA-I and II, this Court

lacks territorial jurisdiction. It is submitted that the office of the

Respondent is situated at Delhi and the Gas Sales Agreement in

question was executed in Chennai and the Gas Supply under the

said Agreement shall be made from the Gas Fields from the State of

Tamilnadu and the contract in question was awarded by GAIL,

Chennai. Therefore, according to the learned counsel for the

Respondent, the action impugned in this Writ Petition has taken

place in Chennai. Therefore, no cause of action either in full or in

part has arisen in the State of Telangana over which this Court is

having territorial jurisdiction and therefore, this writ petition is liable

to be dismissed on the very same ground.

12. The second objection taken by the learned counsel for

the Respondent is that under Article 15 of the GAS, there is a clause

for arbitration for settlement of any dispute arising out of the said

agreement, if the same cannot be resolved amicably in conciliation

proceedings and the venue of the said arbitration shall be at New

Delhi. Therefore, according to him, since the contract was signed in W.P.No.37418 of 2021

Chennai and the territory of the State of Telangana has no

connection with the agreement in question or its performance or the

disputes arising thereunder, hence, this Court is not having territorial

jurisdiction to entertain the present Writ Petition or to adjudicate the

dispute raised by the petitioner. It is also submitted that earlier, the

petitioner filed Arbitration Application No.35 of 2020 in this Court

under Section 11 of the Arbitration & Conciliation Act, 1996 for

appointment of an Arbitrator for resolution of alleged dispute arising

out of the Gas Transmission Agreement dated 05.04.2017 and by

order dated 28.12.2020, this Court dismissed the said Application on

the ground that this Court has no territorial jurisdiction to entertain

the said application. The copy of the said order is filed and marked

as Ex.R1. Therefore, according to the learned counsel for the

Respondent, viewing from any angle, this Writ Petition is not

maintainable in this Court. The Respondent therefore, raised the

above preliminary objections. A copy of the above mentioned order

of this Court is also filed before this Court.

13. Learned counsel for the Respondent also placed reliance

upon the following two other decisions:

W.P.No.37418 of 2021

i) Nagarjuna Cerachem (P) Ltd., Hyderabad v. GAIL (India) Ltd.,

Hyderabad reported in 2004 (6) ALD 259 (DB)

ii) Consortium of Sai Rama Engineering Enterprises and Megha

Engineering and Infrastructures Ltd., Hyderabad v. Oil and

Natural Gas Corporation Ltd., New Delhi and others reported

in 2016 (2) ALD 495.

14. Learned counsel for the petitioner, on the other hand,

disputed the argument of the Respondent stating that this Court has

territorial jurisdiction over the issues raised in the present Writ

Petition as the registered office of the petitioner is situated in

Hyderabad and principal place of business of the petitioner is placed

in Hyderabad and further that all the communication from the

Respondent was received by the petitioner in Hyderabad at its

registered office and therefore, the cause of action arose partly

within the territorial jurisdiction of this Court. In this regard, he

placed reliance upon the judgment of this Court dated 25.10.2018 in

Writ Appeal No.1430 of 2018. It is submitted that the jurisdiction of

a High Court to issue Writs is not restricted only to the territories in

relation to which it exercises jurisdiction and the writs can as well be

issued to any Government, authority or person situated/resided W.P.No.37418 of 2021

beyond its territorial limits provided, the cause of action, wholly or in

part has arisen within the territory in relation to which it exercises

jurisdiction and that even if a small fraction of cause of action arises

within the territory in relation to which the High Court exercises

jurisdiction, it shall have jurisdiction to entertain the Writ Petition

notwithstanding the fact that the situs of the office of all the

Respondents is situated outside its territorial jurisdiction. He placed

reliance upon the decision of this Court in United Shippers Ltd., vs.

Volta Impex P.Ltd. and Ors., reported in 2008 (4) ALD 665. He

further submitted that in respect of the earlier agreements and the

disputes relating thereto, the petitioner has already invoked the

arbitration clause and the arbitration proceedings are pending, but

this being an application made for fresh supply of gas, under a fresh

agreement, he submits that the earlier clause of arbitration would

not apply to the present circumstances.

15. Learned counsels for both the parties vehemently

contested the issue. Having regard to the rival contents and the

material on record, this Court finds that at the outset, the

preliminary objection of the Respondent has to be considered and

decided.

W.P.No.37418 of 2021

16. Admittedly, the registered office of the Respondent is at

Chennai and the agreement has also been signed at Chennai and

the supply of gas is also from Chennai. In so far as the arbitration

application is concerned, this Court has considered that the

arbitration clause in the agreement itself contains the venue of

arbitration and therefore irrespective of where the cause of action

has arisen, as the place is mentioned in the arbitration clause, the

Courts in which the arbitration is to be carried on have the territorial

jurisdiction of appointing the arbitrator. New Delhi was the venue as

mentioned in the arbitration clause, therefore, this Court has held

that this Court has no territorial jurisdiction to appoint the arbitrator

to resolve the dispute between the parties. This Court however,

finds that the said order would not ipso facto apply to the case on

hand.

17. Learned counsel for the petitioner has placed reliance

upon the judgment of this Court in the case of Writ Appeal No.1430

of 2018 the relevant portion of the said judgment is as reproduced

hereunder:

"7. The Apex Court in Nawal Kishore Sharma case (supra 1), after exhaustively taking note of binding precedents on Article W.P.No.37418 of 2021

226(2) of Constitution of India, has held that if part or fraction of cause of action arises within the territorial jurisdiction of High Court, then, the writ petition is maintainable before the High Court where the fraction of cause of action has arisen. The Apex Court in Nawal Kishore Sharma case (supra 1), was dealing with a fact situation where the rejection order was received by the petitioner, where he was residing at the time of communication. The operative portion of the judgment reads thus;

"The interpretation given by this Court in the aforesaid decisions resulted in undue hardship and inconvenience to the citizens to invoke writ jurisdiction. As a result, Clause 1(A) was inserted in Article 226 by the Constitution (15th) Amendment Act, 1963 and subsequently renumbered as Clause (2) by the Constitution (42nd) Amendment Act, 1976. The amended Clause (2) now reads as under:-

"226. Power of High Courts to issue certain writs

-

(1) Notwithstanding anything in article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose.

(2) The power conferred by Clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within W.P.No.37418 of 2021

which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories.

On a plain reading of the amended provisions in Clause (2), it is clear that now High Court can issue a writ when the person or the authority against whom the writ is issued is located outside its territorial jurisdiction, if the cause of action wholly or partially arises within the Court's territorial jurisdiction. Cause of action for the purpose of Article 226 (2) of the Constitution, for all intent and purpose must be assigned the same meaning as envisaged under Section 20(c) of the Code of Civil Procedure. The expression cause of action has not been defined either in the Code of Civil Procedure or the Constitution. Cause of action is bundle of facts which is necessary for the plaintiff to prove in the suit before he can succeed. The term 'cause of action' as appearing in Clause (2) came for consideration time and again before this Court".

In Kusum Ingots & Alloys Ltd. vs. Union of India and Another, (2004) 6 SCC 254, this Court elaborately discussed Clause (2) of Article 226 of the Constitution, particularly the meaning of the word 'cause of action' with reference to Section 20(c) and Section 141 of the Code of Civil Procedure and observed:-

"9. Although in view of Section 141 of the Code of Civil Procedure the provisions thereof would not apply to writ proceedings, the phraseology used in Section 20(c) of the Code of Civil Procedure and clause (2) of Article 226, being in pari materia, the decisions of this Court rendered on interpretation of Section 20(c) CPC shall apply to the writ proceedings also. Before proceeding W.P.No.37418 of 2021

to discuss the matter further it may be pointed out that the entire bundle of facts pleaded need not constitute a cause of action as what is necessary to be proved before the petitioner can obtain a decree is the material facts. The expression material facts is also known as integral facts.

10. Keeping in view the expressions used in clause (2) of Article 226 of the Constitution of India, indisputably even if a small fraction of cause of action accrues within the jurisdiction of the Court, the Court will have jurisdiction in the matter."

Their Lordships further observed as under:- "29. In view of clause (2) of Article 226 of the Constitution of India, now if a part of cause of action arises outside the jurisdiction of the High Court, it would have jurisdiction to issue a writ. The decision in Khajoor Singh has, thus, no application.

30. We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens."

8. In the case on hand, the petitioner received letter dated 01.08.2018 within the territorial jurisdiction of this Court and hence it cannot be held that only the Courts in Delhi have jurisdiction to entertain the writ petition. The decision relied on by 1st Respondent is distinguishable on fact and the legal principles considered and decided by the Apex Court.

W.P.No.37418 of 2021

18. In the above judgment, this Hon'ble Court has held that

even if a part or fraction of cause of action arises within the

territorial jurisdiction of a High Court, then the writ petition is

maintainable before the said High Court, where the fraction of cause

of action has arisen. As seen from the above facts, the Apex Court

in Nawal Kishore Sharma was dealing with a situation where the

rejection order was received by the petitioner, where he was

residing at the time of communication, therefore, it was held that

the place where the petitioner received the letter of rejection is

within the territorial jurisdiction and hence can entertain the Writ

Petition.

19. In the case of M/s.United Shippers Ltd., vs. Volta Impex

P.Ltd. and Ors., reported in 2008 (4) ALD 665 also it was held that

the High Court within whose jurisdiction the cause of action arises

wholly or in part, would also have jurisdiction to entertain an

application under Article 226 and to issue a Writ to any Government

authority or person irrespective of the fact that the seat of said

government or authority was located beyond its territorial

jurisdiction.

W.P.No.37418 of 2021

20. On the other hand, the Respondent has relied upon the

judgment of this court in the case of Nagarjuna Cerachem (P) Ltd.,

Hyderabad v. GAIL (India) Ltd., Hyderabad. In the said case, the

question before the court was whether a writ was maintainable

when there was a clause for arbitration in the agreement. It was

held that, admittedly when there was an arbitration clause in the

agreement, the dispute will have to be referred to arbitration and it

is not permissible to entertain the writ petition. The other judgment

relied upon by the respondent is in the case of Consortium of Sai

Rama Engineering Enterprises and Megha Engineering and

Infrastructures Ltd., Hyderabad v. Oil and Natural Gas Corporation

Ltd., New Delhi and others. In this case, the issue was with regard

to territorial jurisdiction of the High Court of judicature of Hyderabad

for the State of Telangana and for the State of Andhra Pradesh,

where bank guarantee was given at Hyderabad but since it was

conditional and there being no allegation of breach of contract, it

was held that the same cannot be invoked and further there was no

pleading as to how part of cause of action has arisen within the

territorial jurisdiction of High Court at Hyderabad. Therefore, both

these judgments are not exactly on similar issue before this Court.

W.P.No.37418 of 2021

21. In the case on hand, as rightly pointed out by the

learned counsel for the petitioner, the petitioner has requested the

respondent for entering into a fresh agreement for supply of gas and

for this purposes, there is no agreement which is signed yet and

therefore, there was no arbitration clause and further, even in the

letter of the Respondent dated 10.12.2021, the petitioner was

informed that unless the outstanding dues payable by the petitioner

on account of MGO, interest on delayed payments etc., which as on

date is Rs.10,97,92,303/- is paid, the Respondent will not be able to

proceed for signing the requisite agreements towards start of gas

supplies, is received in the Hyderabad. Therefore, it is a fresh cause

of action and the situs of cause of action being in Hyderabad, this

Writ Petition is maintainable. It is pertinent to mention that vide

letter dated 10.12.2021, the Respondent themselves have

mentioned that old agreements (GSA/Term Sheet) have expired in

July, 2021 and new GSTA has to be signed for commencement of

gas supplies. Therefore, both the petitioner as well as the

Respondent have understood the request of the petitioner as a fresh

application for supply of gas and also that fresh terms and

conditions have be negotiated and fresh agreements have to be

signed. In view thereof, the dues which are payable by the W.P.No.37418 of 2021

petitioner under the old agreements are subject to the arbitration

clauses and the decision of this Court in Arbitration Application

No.35 of 2020 would be applicable and both the parties would have

to approach the concerned Court having territorial jurisdiction with

regard to arbitration.

22. In view thereof, this Court finds that this Writ Petition is

maintainable and accordingly, the preliminary objections of the

Respondent are rejected.

23. As regards, the issue, it is seen that the present case

with regard to entering into fresh agreement of sale of gas. This

Court finds that the Respondent cannot insist on payment of old

dues for entering into a fresh agreement. It is not disputed that the

GAIL is having 70% share in the market for supply of gas and is

therefore trying to pressurize the petitioner to make the payments of

disputed amounts for entering into fresh gas supply agreement.

24. In view of the same, the Respondent is directed to

consider the application of the petitioner independent of the earlier

agreements and take a decision on the application of the petitioner

expeditiously i.e. preferably within a period of thirty (30) days from W.P.No.37418 of 2021

the date of receipt of copy of this order and communicate the same

to the petitioner.

25. The Writ Petition is accordingly allowed. No order as to

costs.

26. Miscellaneous applications, if any pending, shall also

stands closed.

_________________________ JUSTICE P.MADHAVI DEVI Date: 06.06.2022 ns