1. Dispute regarding withdrawal of No Objection Certificate and rejection of authorization for city gas distribution networks under the Petroleum and Natural Gas Regulatory Board Act, 2006. (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 14 )
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2019 Supreme(SC) 89
SUPREME COURT OF INDIA
ARUN MISHRA, VINEET SARAN, JJ.
Adani Gas Limited & Anr. – Appellants
Versus
Union of India & Ors. – Respondents
Civil Appeal No. 1261 of 2019 [@ Special Leave Petition [C] No. 21986 of 2015]
Decided On : 29-01-2019
Important Points
IMPORTANT POINT
Clauses (a) to (j) of section 18(2) are not mandatory.
Clauses (a) to (j) of section 18(2) are not mandatory.
Subject
Administrative Law - AUTHORIZATION
Act Referred
Headnote
Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 – Regulation 18 r/w section 16, Petroleum and Natural Gas Regulatory Board Regulations Act, 2006 – Clauses (a) to (j) of section 18(2) – Not mandatory – Application of appellant rejected for non-compliance of clause (d) – Held, Board ought to take into consideration all factors specified in clauses (a) to (j) – Non-compliance of clause (d) ought to have been considered in the light of the press note dated 30.10.2007 – Besides, selection of appellant for laying of City Gas Distribution network, appellant depositing Rs.2 crores towards commitment fee and incurring mammoth expenditure should have been considered by Board – Further, Board ought to consider ‘deemed authorization’ under Proviso (ii) to Section 16. (Para 19, 20, 21)
Facts of the case:
The dispute in this petition is with regard to the Gas Distribution Network in the cities of Udaipur and Jaipur in the State of Rajasthan. Challenging the order dated 18.05.2011 of the Government of Rajasthan whereby No Objection Certificate for laying down of Gas Network pipelines granted in favour of the appellant had been withdrawn (including forfeiture of the commitment fees of Rs. 2 Crore deposited by the appellant), and also the order dated 19.05.2011 of the Board rejecting the application of the appellant for authorisation of its projects in Udaipur and Jaipur, as well as challenging the validity of the Regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 (for short ‘Regulations of 2008’), the appellant had filed Writ Petition No. 10028 of 2011 before the Rajasthan High Court, which has been dismissed.
Finding of the Court:
There was illegality committed by the Board in deciding the application of the appellant while passing the order dated 19.05.2011. The decision of the State Government to revoke the NOC vide order dated 18.05.2011 was also highly unfair and unjust.
Result: Appeal allowed.
Legal Category Hierarchy
Advocates:
Advocate Appeared:
Mr. Gaurav Juneja, Mr. Divyansu, Mr. Aayush Jain, for Khaitan & Co., Mr. Munawwar Naseem, Mr. Palak Mishra, Mr. Utsav Trivedi, for M/S. Karanjawala & Co., Mr. Amit Sharma, Mr. Ankit Raj, Ms. Ruchi Kohli, Ms. Iti Agarwal, Ms. Nikita Choukse, Ms. Rinali Batra, Ms. Ruchi Kohli, Mr. Senthil Jagadeesan, Mrs. Anil Katiyar
Advocate Appeared:
Mr. Gaurav Juneja, Mr. Divyansu, Mr. Aayush Jain, for Khaitan & Co., Mr. Munawwar Naseem, Mr. Palak Mishra, Mr. Utsav Trivedi, for M/S. Karanjawala & Co., Mr. Amit Sharma, Mr. Ankit Raj, Ms. Ruchi Kohli, Ms. Iti Agarwal, Ms. Nikita Choukse, Ms. Rinali Batra, Ms. Ruchi Kohli, Mr. Senthil Jagadeesan, Mrs. Anil Katiyar
Table of Contents
2. Challenge to the validity of Regulation 18 of the 2008 Regulations and the legality of rejecting authorization despite claims of deemed authorization under Section 16. (Para 2 , 7 , 10 , 13 )
3. The Board failed to consider all relevant criteria under Regulation 18(2), ignored the impact of its own press note, and overlooked the provision for deemed authorization. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 )
4. Regulatory criteria phrased as may take into consideration are not mandatory; decisions must be holistic, considering all relevant factors and statutory provisions like deemed authorization. (Para 19 , 20 , 21 )
5. Orders withdrawing the No Objection Certificate and rejecting authorization are quashed; the Board is directed to reconsider the application after providing a hearing. (Para 23 , 24 )
6. When is an entity deemed to have authorization for a city or local natural gas distribution network under the Act of 2006?
Under the proviso to Section 16, an entity laying, building, operating, or expanding such a network immediately before the appointed date is deemed to have authorization, subject to the provisions of the relevant chapter. (Para 16 , 21 )
7. Are the criteria listed in Regulation 18(2) of the 2008 Regulations mandatory for the Board to follow when granting authorization?
No. Because the regulation states the Board may take into consideration these criteria, they are relevant factors for a holistic evaluation rather than mandatory requirements. (Para 19 , 20 )
8. What procedural requirements must a regulatory board satisfy when rejecting an application for authorization?
The board must consider all relevant factors, address the applicant's detailed replies, and provide a personal hearing before passing a speaking order. (Para 22 , 23 )
JUDGMENT :
Leave granted.
2. The appellant company is registered under the Companies Act, 1956 and is involved in the business of setting up of Natural Gas Distribution Networks within India. The dispute in this petition is with regard to the Gas Distribution Network (for short ‘GDN’) in the cities of Udaipur and Jaipur in the State of Rajasthan. Challenging the order dated 18.05.2011 of the Government of Rajasthan whereby No Objection Certificate (for short ‘NOC’) for laying down of Gas Network pipelines granted in favour of the appellant had been withdrawn (including forfeiture of the commitment fees of Rs. 2 Crore deposited by the appellant), and also the order dated 19.05.2011 of the Board rejecting the application of the appellant for authorisation of its projects in Udaipur and Jaipur, as well as challenging the validity of the Regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 (for short ‘Regulations of 2008’), the appellant had filed Writ Petition No. 10028 of 2011 before the Rajasthan High Court, which has been dismissed on 29.04.2015. Aggrieved by the same, this Special Leave Petition has been filed.
3. Brief facts of this case are that on 19.11.2005 the Government of Rajasthan invited parties to submit their bids for laying of Gas Distribution Network in certain cities of Rajasthan, including the said two cities of Udaipur and Jaipur. In response to the same, the appellant submitted its Expression of Interest for the cities of Udaipur and Jaipur. On 20.03.2006, the Government of Rajasthan informed the appellant that it intended to grant NOC to the appellant for undertaking Gas Distribution in the cities of Udaipur and Jaipur, which was to be subject to certain conditions as mentioned in the aforesaid communication dated 20.03.2006. Immediately thereafter on 22.03.2006, the appellant company informed that it agreed to all the terms and conditions laid down by the Government of Rajasthan in its communication dated 20.03.2006 whereby it intended to grant NOC to the appellant. Then, on 24.03.2006, the appellant deposited the commitment fees of Rs. 2 Crore. On 27.03.2006, the Government of Rajasthan granted the NOC to the appellant company for Gas Distribution in the cities of Udaipur and Jaipur. The appellant then started its work of laying down the City Gas Development Network in the said two cities.
4. The Petroleum and Natural Gas Regulatory Board Regulations Act, 2006 (for short ‘Act of 2006) was notified on 03.04.2006, except for the provisions of Section 16 of the said Act relating to authorisation. On 21.07.2007, the appellant company made a request for authorisation of its City Gas Distribution Project under Act of 2006 to the Chairman of Petroleum and Natural Gas Regulatory Board (for short ‘the Board’). In the said communication, the appellant had also provided the details of its existing projects in the country, namely at Ahmedabad, Vadodara, Faridabad, Noida, Khurja, Lucknow, Udaipur and Jaipur. The appellant had also submitted that in terms of Sections 15 and 16 of Chapter IV of the Act of 2006, there was a provision of ‘deemed authorisation’ of the existing City Gas Distribution Projects and in terms of the Act of 2006, a brief dealing of all the projects under its implementation was also enclosed.
5. Then, on 24.07.2007, the appellant wrote to the Ministry of Petroleum and Natural Gas requesting for authorisation of its City Gas Distribution Projects under the Act of 2006 for all its gas projects, including the ones of Udaipur and Jaipur. The Act of 2006 was although notified on 03.04.2006, but came into force with effect from 01.10.2007, which was its appointed date. However, Section 16 of the said Act, relating to ‘Authorisation’, was brought into force only with effect from 15.07.2010.
6. On 30.10.2007 the Petroleum and Natural Gas Regulatory Board issued a press note, callin
