The court upheld that obligations under gas supply contracts are subject to government directives, affirming the validity of pricing based on regulatory compliance.

JUDGMENT :

SUBRAMONIUM PRASAD, J.

1. The challenge in the present petitions being O.M.P. (COMM) 301/2023, O.M.P. (COMM) 302/2023, O.M.P. (COMM) 303/2023, O.M.P. (COMM) 304/2023 and O.M.P. (COMM) 305/2023, is to the Award dated 29.07.2023 passed by the Ld. Sole Arbitrator in Arbitration Case Nos.501/2019, 502/2019, 503/2019, 504/2019 and 500/2019.

2. The parties to the present petitions had entered into the following five contracts, whereunder the Respondent/GAIL was sourcing gas from various oil fields and supplying the same to the Petitioner/GSFCL:

(a) Gas Sales and Transmission Contract dated 05.07.2008, whereunder the Respondent supplies Gas sourced from Panna-Mukta-Tapti fields. The Agreement is referred to as PMT-PSC Contract, which is dealt with in O.M.P. (COMM) 301/2023;

(b) Gas Sales and Transmission Contract dated 05.07.2008, whereunder the Respondent supplies Gas sourced from Panna- Mukta-Tapti fields. The Agreement is referred to as PMT-APM Contract, which is dealt with in O.M.P. (COMM) 303/2023;

(c) Term Sheet / Agreement dated 29.12.2011, whereunder the Respondent supplies Gas sourced from Western Offshore fields of ONGC, which is dealt with in O.M.P. (COMM) 305/2023.

(d) Gas Sales Agreement dated 27.01.2016, whereunder the Respondent supplies Gas sourced from Gandhar (South Gujarat Low Pressure Gas). The Agreement is referred to as Gandhar Supplies Contract, which is dealt with in O.M.P. (COMM) 302/2023;

(e) Gas Sales Agreement dated 27.01.2016, whereunder the Respondent supplies Gas sourced from HVJ. The Agreement is referred to as HVJ Contract, which is dealt with in O.M.P. (COMM) 304/2023;

3. For the sake of clarification, the five contracts enumerated above shall be collectively referred to as “contracts in question,” except where otherwise required.

4. Apart from certain differences in the terms of Contracts, since the contesting parties are common, the issues are common and largely common arguments have been advanced by both sides, all the petitions are being disposed of by a common judgment. Be that as it may, any separate issue arising out of any of the contracts in question, shall be dealt with separately.

5. The facts, in brief, leading to the filing of the present petitions are as under:

i. The Petitioner is a Public Limited Company incorporated under the Companies Act, 1956, engaged in the business of manufacturing of fertilizers and chemicals. The Petitioner is a company promoted by the Government of Gujarat and several other Government promoted companies are shareholders of the Petitioner.

ii. The Respondent is a Government of India Undertaking company incorporated under Companies Act, 1956, engaged in distribution and marketing of gas in India and also engaged in several other aspects of gas chain, including exploration, production, transmission, extraction, processing of natural gas and its related process, products and services.

iii. The Respondent, in its capacity as Government nominee procures and markets Domestic Gas from the various fields of M/s ONGC, OIL, Tapti, Panna-Mukta and Ravva Agreement area as well as other sources in India. The Respondent owns and operates pipeline network and other associated facilities for supplying and distributing gas.

iv. On 20.06.2005, the Ministry of Petroleum and Natural Gas [“MoPNG”] prioritized a policy for allocation and pricing of natural gas and issued a pricing order to ONGC, Respondent/GAIL and OIL, the entities who were authorised and were having rights for production, sale and distribution of natural gas. In the said policy, MoPNG recognized the fact that power and fertilizer sectors were critical to the economical development of the country and that output price