1. Challenge to Regulation 18 of CGD Regulations and the exclusion of specific geographical areas from authorization granted under the PNGRB Act, 2006. (Para 1 , 2 , 3 , 4 , 5 )
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2021 Supreme(SC) 555
SUPREME COURT OF INDIA
UDAY UMESH LALIT, S. RAVINDRA BHAT, HRISHIKESH ROY, JJ.
Adani Gas Limited - Appellant
Versus
Union of India & Ors. - Respondents
Civil Appeal No(s). 2021 (Arising out of SLP (C) No(s). 28192-28193 of 2018) With Civil Appeal No. 2021 (Arising out of SLP (C) No. 30061 of 2018) And Civil Appeal No. 2021 (Arising out of SLP (C) No. 30062 of 2018)
Decided On : 28-09-2021
Important Points
Deemed authorization under Section 16 of the PNGRB Act applies only to entities authorized by the Central Government, not State Governments. Regulation 18 is valid, and the doctrine of approbate and reprobate precludes entities from challenging authorization orders after accepting their benefits and acting upon them.
Subject
Administrative Law - Energy Regulation
Act Referred
CONSTITUTION OF INDIA: Art.14, Art.19(1)(g), Art.226, Art.73, Art.143
ELECTRICITY ACT: S.110
GUJARAT ACT: S.2(g)
PETROLEUM AND MINERALS PIPELINES ACQUISITION OF RIGHT OF USER IN LAND ACT: S.3, S.6, S.7(1)
PETROLEUM AND NATURAL GAS REGULATORY BOARD ACT: S.16, S.17, S.11, S.18, S.19, S.61, S.48, S.27, S.22, S.30, S.33(2)
PETROLEUM AND NATURAL GAS REGULATORY BOARD AUTHORIZING ENTITIES TO LAY, BUILD, OPERATE OR EXPAND CITY OR LOCAL NATURAL GAS DISTRIBUTION NETWORKS REGULATIONS: Reg.18, Reg.18(2), Reg.18(2)(1), Reg.18(8), Reg.18(2)(d), Reg.18(2)(a), Reg.18(2)(b), Reg.18(2)(c), Reg.18(2)(e), Reg.18(2)(f), Reg.18(2)(g), Reg.18(2)(h), Reg.18(2)(i), Reg.18(2)(j)
PETROLEUM RULES: R.89
ELECTRICITY ACT: S.110
GUJARAT ACT: S.2(g)
PETROLEUM AND MINERALS PIPELINES ACQUISITION OF RIGHT OF USER IN LAND ACT: S.3, S.6, S.7(1)
PETROLEUM AND NATURAL GAS REGULATORY BOARD ACT: S.16, S.17, S.11, S.18, S.19, S.61, S.48, S.27, S.22, S.30, S.33(2)
PETROLEUM AND NATURAL GAS REGULATORY BOARD AUTHORIZING ENTITIES TO LAY, BUILD, OPERATE OR EXPAND CITY OR LOCAL NATURAL GAS DISTRIBUTION NETWORKS REGULATIONS: Reg.18, Reg.18(2), Reg.18(2)(1), Reg.18(8), Reg.18(2)(d), Reg.18(2)(a), Reg.18(2)(b), Reg.18(2)(c), Reg.18(2)(e), Reg.18(2)(f), Reg.18(2)(g), Reg.18(2)(h), Reg.18(2)(i), Reg.18(2)(j)
PETROLEUM RULES: R.89
Headnote
Constitution of India,1950 - Articles 14, 19(1)(g), 226 and 143 - Petroleum and Natural Gas Regulatory Board Act, 2006 - Sections 16, 17 , 17(2) , 61 and 17(4) Sought due to its conduct - Application-cum-bid documents in respect of these areas - Seeking quash of the grant of authorization to Gujarat Gas - PNGRB Act came into effect on mandated authorization by the Board for laying, building, operating or expanding any city or local natural gas distribution network - Board issued a press note directing entities engaged in CGD activities with or without authorization of Central Government, to submit relevant details - After receiving the petitioner’s details, Board informed it that recognition and acceptance could be only of a specific and formal authorization by Central Government, in accordance with Section - Activities were restrained and a direction was given to obtain authorization from Central Government - Board eventually granted Adani provisional clearance to carry out certain capital works in the area, including disputed - Disputed areas were excluded from this provisional authorization - Under protest, Adani accepted the grant of authorization despite certain areas being excluded - Board invited bids for development of CGD networks in those disputed areas submitted its application-cum-bid documents in respect of these areas - Exclusion of these areas from authorization granted to it approached the High Court, preferring a petition under Article 226 of Constitution, seeking several reliefs - Principal relief claimed was the quashing of grant of authorization exclusion of the disputed areas by the earlier authorization – Held, Account of expenditure it had maintained during the relevant years; raw material procured, personnel employed for that period, and the periodic progress it had achieved - Materials it furnished together with inspection report and minutes of meeting were considered by PNGRB when it granted authorization by excluding the disputed areas - Apart from fact that these disputes are not fit to be adjudicated in writ proceedings, this Court is also cognizant of fact that had Adani wished to agitate these issues, it could well have chosen the remedy of an appeal - Its choice of not preferring an appeal, and approaching Court two years after grant of authorization is an important factor that impels this Court to desist from embarking on a factual enquiry - It is relevant to notice here, that appeals against decisions of the PNGRB are provided under Section 33 of the Act before a tribunal - Court would observe that although the position in law was clarified by five judge Constitution Bench ruling in Re Special PNGRB Act, appellant consciously applied for authorization in 2008, later secured temporary authorization to complete certain maintenance works, and was denied authorization in 2013 - Deemed authorization” clause only entities granted authorization by the Central Government, fell in that category - As a sequitur, it is held that entities which had received authorization from States, had to seek authorization under the PNGRB Act - Central Government’s policy, of 2006, and cannot confer any advantage to any entity, which has to seek and be granted specific authorization in terms of PNGRB Act on merits of its application - Objective underlying Regulation 18, is compatible with overall objectives of PNGRB Act. Regulation 18 is not contraindicated by any specific provision of the Act - Sectoral regulator, PNGRB is entrusted with power to frame appropriate regulations to ensure the objectives of Act, and thus the challenge to Regulation 18 cannot succeed - Adani’s claim is precluded by the principle of approbate-reprobate, as it accepted authorization granted by PNGRB furnished the performance bond and even participated in the auction for the excluded areas – Appeals are dismissed.
Legal Category Hierarchy
- constitutional law
- administrative law
- energy law
Advocates appeared:
For the Parties : Mr. Harish N. Salve, Sr. Adv. Mr. Dhruv Mehta, Sr. Adv. Ms. Ruby Singh Ahuja, Adv. Mr. Sandeep Singhi, Adv. Ms. Deepti Sarin, Adv. Ms. Swikriti Singhania, Adv. Mr. Navandeep Matta, Adv. Mr. Shamik Bhatt, Adv. M/s. Karanjawala & Co., AOR Mr. Piyush Joshi, Adv. Mr. Senthil Jagadeesan, AOR Ms. Sumiti Yadava, Adv. Ms. Sonakshi Malhan, Adv. Mr. Utkarsh Sharma, AOR Mr. Mohit Budhiraja, Adv. Ms. Pinki Mehra, Adv. Ms. Shipra Malhotra, Adv. Ms. Kaveri Vats, Adv. Mr. Saurabh Aggarwal, Adv. Mr. Deepayan Mandal, AOR Mr. Anshuman Choudhary, Adv. Mr. E. C. Agrawala, AOR Mr. Raj Bahadur Yadav, AOR Mr. Ashish Kumar Tiwari , AOR Ms. Divya Roy, AOR Ms. Madhumita Bhattacharjee, AOR M/s. Khaitan & Co., AOR
For the Parties : Mr. Harish N. Salve, Sr. Adv. Mr. Dhruv Mehta, Sr. Adv. Ms. Ruby Singh Ahuja, Adv. Mr. Sandeep Singhi, Adv. Ms. Deepti Sarin, Adv. Ms. Swikriti Singhania, Adv. Mr. Navandeep Matta, Adv. Mr. Shamik Bhatt, Adv. M/s. Karanjawala & Co., AOR Mr. Piyush Joshi, Adv. Mr. Senthil Jagadeesan, AOR Ms. Sumiti Yadava, Adv. Ms. Sonakshi Malhan, Adv. Mr. Utkarsh Sharma, AOR Mr. Mohit Budhiraja, Adv. Ms. Pinki Mehra, Adv. Ms. Shipra Malhotra, Adv. Ms. Kaveri Vats, Adv. Mr. Saurabh Aggarwal, Adv. Mr. Deepayan Mandal, AOR Mr. Anshuman Choudhary, Adv. Mr. E. C. Agrawala, AOR Mr. Raj Bahadur Yadav, AOR Mr. Ashish Kumar Tiwari , AOR Ms. Divya Roy, AOR Ms. Madhumita Bhattacharjee, AOR M/s. Khaitan & Co., AOR
Table of Contents
2. Whether Section 16 provides unqualified deemed authorization to all existing entities and whether Regulation 18 is ultra vires and arbitrary. (Para 14 , 15 , 16 , 17 , 18 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 )
3. Deemed authorization is subject to Section 17, distinguishing centrally authorized entities from others; Regulation 18 provides a valid, non-arbitrary evaluation framework for unauthorized entities. (Para 55 , 56 , 58 , 59 , 60 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83 , 84 , 86 , 89 , 90 , 91 , 92 , 93 , 94 , 95 , 96 , 97 , 98 , 99 , 100 , 102 , 103 , 104 , 105 , 106 , 107 , 108 , 109 , 110 , 111 , 112 , 119 , 120 , 121 , 122 , 123 , 124 , 125 )
4. Deemed authorization under Section 16 is subordinate to Section 17, applying only to entities previously authorized by the Central Government, not those authorized by States. (Para 75 , 78 , 85 )
5. Appeals dismissed; challenge to Regulation 18 rejected; exclusion of disputed areas upheld; costs imposed on appellant. (Para 127 , 128 )
6. Does the deemed authorization under the proviso to Section 16 of the PNGRB Act apply to all entities operating before the appointed day?
No. The deeming fiction is subject to Chapter IV, specifically Section 17, which distinguishes between centrally authorized entities and others. Only entities that were authorized by the Central Government prior to the appointed day are deemed to have authorization under the Act. (Para 58 , 72 , 75 , 78 , 85 )
7. Is Regulation 18 of the CGD Regulations ultra vires the PNGRB Act or arbitrary?
No. Regulation 18 provides a uniform, objective standard for evaluating entities not centrally authorized. It is compatible with the Act's objectives, not contraindicated by any specific provision, and its criteria must be considered in totality. (Para 91 , 93 , 100 , 105 , 110 , 112 )
8. How does the doctrine of approbate and reprobate apply to an entity accepting a conditional authorization?
An entity cannot accept the benefits of an authorization, such as furnishing a performance bond and acting upon the grant, and subsequently challenge the same order's restrictions after an unsuccessful bid for excluded areas. (Para 114 , 115 , 116 , 117 , 118 )
9. Which authority has the legislative and executive competence to regulate natural gas in India?
Parliament has exclusive legislative competence and the Central Government has exclusive executive competence under Entry 53, List I of the Seventh Schedule. Consequently, authorizations granted by State Governments for natural gas distribution are void. (Para 55 , 56 , 78 , 84 )
JUDGMENT :
S. RAVINDRA BHAT, J.
1. Special leave granted. These appeals were heard with the consent of counsel appearing on behalf of the parties. The appeals are directed against a judgment of the Gujarat High Court,1[Dated 28.09.2018.] rejecting certain writ petitions.
2. In those proceedings, the main appellant (hereafter called “Adani”) challenged the validity of 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 (hereafter called the “CGD Regulations”) as violative of Articles 14 and 19(1)(g) of the Constitution of India, and ultra vires Section 16 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (hereafter called the “PNGRB Act” or “the Act”). Adani had also challenged the grant of authorization to the third respondent (hereafter called “Gujarat Gas”) for laying and maintaining a gas distribution network. Gujarat Gas had succeeded in securing the authorization in an auction held by the Petroleum and Natural Gas Regulatory Board (hereafter called “PNGRB” or “the Board”).
Background
3. The PNGRB Act came into effect on 1.10.2007, and mandated authorization by the Board for the laying, building, operating or expanding any city or local natural gas distribution network (collectively, “CGD activities” and such a network, “CGD network”). On 30.10.2007, the Board issued a press note directing entities engaged in CGD activities with or without authorization of the Central Government, to submit relevant details. After receiving the petitioner’s details, the Board informed it that recognition and acceptance could be only of a specific and formal authorization by the Central Government, in accordance with Section 17 of the Act. Accordingly, Adani’s activities were restrained and a direction was given to obtain authorization from the Central Government. The Board eventually granted Adani provisional clearance to carry out certain capital works in the Ahmedabad area, including the disputed areas of Sanand, Bavla, and Dholka (hereafter called “disputed areas”). Adani also submitted an indemnity in favour of the Board.
4. Section 16, relating to authorization, came into effect on 12.07.2010. On 04.02.2013, the Board granted provisional authorization to Adani’s CGD network in Ahmedabad city and Dascroi area, excluding 18 CNG stations of Hindustan Petroleum Corporation Limited (hereafter called “HPCL”), subject to certain conditions. The disputed areas were excluded from this provisional authorization. Under protest, Adani accepted the grant of authorization on 09.12.2013, despite certain areas being excluded. On 1.10.2015, the Board invited bids for development of CGD networks in those disputed areas in Ahmedabad. Adani submitted its application-cum-bid documents in respect of these areas.
5. Feeling aggrieved by the exclusion of these areas from the authorization granted to it, Adani approached the High Court, preferring a petition under Article 226 of the Constitution, seeking several reliefs. The principal relief claimed was the quashing of the grant of authorization to Gujarat Gas, questioning the exclusion of the disputed areas by the earlier authorization dated 28.11.2013, and challenging the vires of Regulation 18 framed by the Board under the PNGRB Act. Adani also contended that by virtue of Section 16 of the PNGRB Act, it was entitled to be treated as an entity with “deemed authorization”.
6. The PNGRB and Gujarat Gas, who were arrayed as respondents before the High Court, contended that Adani’s petition was liable to be dismissed on the ground of delays and laches, and availability of alternate remedies. They also contended that Adani was disentitled to claim the reliefs it sought due to its conduct. On merits, PNGRB contended that its letter dated 31.03.2008 to Adani sought necessary details. At that stage, Adani did not challenge the validity of Regulation 18 and on the contrary, sought au
