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SUPREME COURT OF INDIA
V. GOPALA GOWDA, UDAY UMESH LALIT, JJ.
Essar Steel Ltd. – Appellant
Vs.
Union of India & Ors. – Respondents
Civil Appeal Nos. 4610, 4609 & 4657 of 2009
Decided On : 19-04-2016
(b) Administration of Justice – Judicial review – Policy decisions – Tests restated. (Para 30)
(2008) 2 SCC 672 – Relied upon
(c) Constitution of India – Article 136 – Judicial review of policy decision – Court neither having jurisdiction nor the competence to judge viability of such policy decisions enacted after much deliberations – Can be interfered only if enactment in an arbitrary, unreasonable or mala fide manner, or offends the provisions of the Constitution of India. (Para 31)
(2013) 7 SCC 1; (2009) 7 SCC 561; (2000) 10 SCC 664; (1992) 2 SCC 343 – Relied upon
(d) Constitution of India – Article 73 r/w Seventh Schedule, Entry 53 of List I – Union empowered to take policy decisions in relation to the matters pertaining to mineral oil resources and inflammable substances including RLNG – No legislative provision for fixing price of RNLG – Executive policy decision to fill in the vacuum – No infirmity. (Para 32)
(2004) 4 SCC 489 – Relied upon
(e) Constitution of India – Article136 – Judicial review – Policy decision – Raising price of RNLG – For rationalization – Larger public interest of providing RNLG to all customers old and new alike at viable price – Pooling of prices only option to control RNLG prices controlled by global market. (Para 33)
(f) Constitution of India – Article 136 – Policy decision – Price fixation of RNLG – RNLG an essential commodity – Price needs to be controlled – Price fixing a legislative function, but can be delegated and price can be fixed by executive orders as well – Instantly policy decision taken after detailed communication between the Minister of Petroleum and Natural Gas, heads of IOCL, BPCL, ONGC, GAIL and Petronet – Policy decision also duly authenticated by Under Secretary to Government of India – Well within the powers conferred on Under Secretary under Business Transaction Rules, 1961. (Para 37)
(1990) 3 SCC 223 – Relied upon
AIR 1967 SC 1170; AIR 1961 SC 1570; AIR 1967 SC 1836; AIR 1953 SC 215; (1978) 3 SCC 459; (1987) 2 SCC 720; (1970) 3 SCC 400; (2011) 12 SCC 94; AIR 1967 SC 1753; 2015 (13) SCALE 559; (2004) 1 SCC 55; (2010) 6 SCC 303; (2003) 5 SCC 437; (2005) 3 SCC 738; (1997) 5 SCC 536 – Distinguished
(g) Supply agreement – Clause 11.4 – Providing for change in the terms and conditions of the contract consequent upon change in the policy of the Government – No vested right accrues. (Para 38)
(h) Policy decision – Raising RNLG price uniformly – Appellants not suffering any loss – No question of refund of losses. (Para 39)
Facts of the case:
Ras Laffin Natural Gas Company Limited, Qatar sold LNG to Petronet LNG Limited, an Indian company, which was set up as a Joint venture between the Government of India and the key players in the LNG market like Oil and Natural Gas Corporation, Indian Oil Corporation Limited and Bharat Petroleum Corporation Limited. This was done under a Sale Purchase Agreement entered in July, 1999 for a period of 25 years.
Petronet sold the resultant LNG to companies like BPCL, IOCL and GAIL. They in turn, sold it to customers like Essar Steel.
Essar Steel signed contracts with IOCL, BPCL and GSPCL for purchase of RLNG at a fixed price. The price was fixed upto the date 31.12.2008. The Gas Supply Agreements were for the supply of 5 million metric tonnes per annum (MMTPA) at a fixed price of US $ 2.9412 per million metric british thermal unit (MMBTU).
On 06.03.2007, the Central Government issued the impugned policy directive to Petronet.
Letters dated 19.03.2007 and 12.04.2007 were sent from IOCL, BPCL and GAIL to Essar Steel, informing it that in view of the policy decision of the Government to pool RLNG prices, the price of gas under the contract would be revised and increased from Rs. 135 per MMBTU to Rs. 207.02 MMBTU.
The appellant filed Writ Petition before the High Court of Delhi, challenging the impugned policy decision and the consequent action of IOCL, BPCL, GAIL and GSPCL in unilaterally increasing the price of RLNG w.e.f. 01.08.2007.
Certain other appellants had also filed Writ Petitions before the High Court of Gujarat.
The Writ Petition from Delhi High Court was transferred to Gujarat High Court.
Vide impugned judgment and order dated 16.05.2008, by a majority of 2:1, the High Court upheld the impugned policy decision dated 06.03.2007 and dismissed the Writ Petition filed by the appellant.
Finding of the Court:
The impugned policy decision dated 06.03.2007 does not suffer from any infirmity in law.
Result: Appeals disposed of.
JUDGMENT :
V. Gopala Gowda, J.
The present appeals arise out of the impugned common final judgment and order dated 16.05.2008 passed in Special Civil Application No. 4468 of 2008 etc. by the High Court of Gujarat at Ahmedabad, wherein by a majority of 2:1, a Three Judge bench upheld the validity of the impugned policy decision dated 06.03.2007 on the ground that the Union of India is competent to take the policy decision and further it has held that it is either arbitrary, unjust or violative of the fundamental rights of the appellants herein.
2. Since the facts in all these appeals raise the same issue for our consideration, for the sake of brevity, we refer to the facts of Civil Appeal No.4610 of 2009. The necessary relevant facts required to appreciate the rival legal contentions advanced on behalf of the parties are stated in brief hereunder:
India purchases natural gas from Gulf countries. Since gas in large quantities cannot be feasibly transported by pipelines across countries, before such gas is transported, it is liquefied and thereafter shipped to India. This liquefied gas is known as Liquefied Natural Gas (hereinafter referred to as “LNG”). Once this liquefied gas reaches India, it is converted into gas again. This is known as Regasified Liquefied Natural Gas (hereinafter referred to as “RLNG”).
In the instant case, Ras Laffin Natural Gas Company Limited, Qatar (hereinafter referred to as “RasGas”) sold LNG to Petronet LNG Limited (hereinafter referred to as “Petronet”), an Indian company, which was set up as a Joint venture between the Government of India and the key players in the LNG market like Oil and Natural Gas Corporation (hereinafter referred to as “ONGC”), Indian Oil Corporation Limited (hereinafter referred to as “IOCL”) and Bharat Petroleum Corporation Limited (hereinafter referred to as “BPCL”). This was done under a Sale Purchase Agreement entered in July, 1999 for a period of 25 years.
3. Petronet sold the resultant LNG to companies like BPCL, IOCL and GAIL. They in turn, sold it to customers like Essar Steel, which is the appellant in Civil Appeal No. 4610 of 2009.
4. In the immediate context of the present appeals, Essar Steel signed contracts with IOCL, BPCL and GSPCL for purchase of RLNG at a fixed price. The price was fixed upto the date 31.12.2008. The Gas Supply Agreements were for the supply of 5 million metric tonnes per annum (MMTPA) at a fixed price of US $ 2.9412 per million metric british thermal unit (MMBTU).
5. On 06.03.2007, the Central Government issued the impugned policy directive to Petronet in the following terms:
“1. The question of prices to be charged for RLNG from different customers has been under consideration of the Government. After considering existing practices and to avoid loading high cost of additional RLNG being made available to the prospective customers, it has been decided, after examination of all aspects, in public interest, that the gas prices being charged on supply of RLNG procured under long term contracts should be on a non discriminatory basis and uniform pooled prices should be charged for all the existing and new customers.
2. You are advised accordingly and requested to give effect to the same immediately.”
The letter was authenticated by the Under Secretary to the Government of India.
6. In pursuant to the above communication dated 06.03.2007, letters dated 19.03.2007 and 12.04.2007 were sent from IOCL, BPCL and GAIL to Essar Steel, informing it that in view of the policy decision of the Government to pool RLNG prices, the price of gas under the contract would be revised and increased from Rs. 135 per MMBTU to Rs. 207.02 MMBTU.
7. Aggrieved, the appellant filed Writ Petition No. 5098 of 2007 before the High Court of Delhi, challenging the impugned policy decision and the consequent action of IOCL, BPCL, GAIL and GSPCL in unilaterally increasing the price of RLNG w.e.f. 01.08.2007, is in contravention of the gas supply contracts which clearly stipulate the fixed pri
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