Adani Gas Limited Vs Union of India - Supreme Court Judgment 2021 PDF

MANU/SC/0720/2021

Equiv alent/Neutral Citation: AIR2021SC 5521, 2021 INSC 558, 2021(11)SC ALE451, (2022)5SC C 210, 2022 (2) SC J 29, [2021]13SC R1146

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 6008-6009 of 2021 (Arising out of SLP (C) Nos. 28192-28193 of

2018), Civil Appeal No. 6010 of 2021 (Arising out of SLP (C) No. 30061 of 2018) and

Civil Appeal No. 6011 of 2021 (Arising out of SLP (C) No. 30062 of 2018) +

Decided On: 28.09.2021

Adani Gas Limited Vs. Union of India (UOI) and Ors. ..(+)

Hon'ble Judges/Coram:

U.U. Lalit, S. Ravindra Bhat and Hrishikesh Roy, JJ.

Counsels:

For Appearing Parties: Harish N. Salve, Sr. Adv., Dhruv Mehta, Sr. Adv., Ruby Singh

Ahuja, Sandeep Singhi, Deepti Sarin, Swikriti Singhania, Navandeep Matta, Shamik Bhat,

Advs., Karanjawala & Co., AOR, Piyush Joshi, Adv., Senthil Jagadeesan, AOR, Sumiti

Yadav, Sonakshi Malhan, Advs., Utkarsh Sharma, AOR, Mohit Budhiraja, Pinki Mehra,

Shipra Malhotra, Kaveri Vats, Saurabh Agrawal, Advs., Deepayan Mandal, AOR,

Anshuman Chowdhary, Adv., E.C. Agrawala, AOR, Raj Bahadur Yadav, AOR, Ashish

Kumar Tiwari , AOR, Divya Roy, AOR, Madhumita Bhattacharjee, AOR and Khaitan & Co.,

AOR

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

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

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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

authorization under that provision by a letter dated 09.07.2008 without protest. It was

contended that although Section 16 of the PNGRB Act was brought into force in 2010, at

that time too, Adani did not challenge the validity of the impugned regulation.

Furthermore, Adani applied for authorization Under Section 17(2) of the PNGRB Act and

Regulation 18 without any protest and participated in the hearings fixed by PNGRB. At

that stage too, no objection was raised with regard to its entitlement as a "deemed

authorized" entity, and Adani furnished the required particulars to PNGRB. The

Respondents pointed out that on 04.02.2013, PNGRB issued a provisional authorization

letter on certain terms and conditions in which the disputed areas were excluded. At

that stage too, Regulation 18 was not challenged; Adani, on the other hand accepted

the terms and conditions on 28.10.2013. The petition was therefore opposed on the

grounds of estoppel, applicability of the principle of approbate-reprobate, as well as

delay and on merits.

7 . The High Court, after hearing the parties, by its judgment held that Adani had

applied for and was granted authorization with respect to Khurja area in Uttar Pradesh

in 2012. That authorization was issued Under Regulation 18. Adani accepted that

authorization and never protested against it; it also accepted the terms and conditions

of the letter issued by the PNGRB for Ahmedabad, which excluded the disputed areas.

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Thereafter, the performance bank guarantee was also submitted by the Adani, and

ultimately PNGRB issued the final authorization for Ahmedabad city and Dascroi area,

excluding the disputed areas. The Court noticed that the bid for the disputed area was

issued on 01.10.2015 and Adani participated in the bidding process, rather than

challenging it. The petition was filed only after it was unsuccessful in the bid. The High

Court found that the challenge to Regulation 18 of the CGD Regulations therefore, was

only when it suited Adani's convenience.

8. The impugned judgment then noted that this Court, in its judgment reported as In re

Special Reference No. 1 of 2001 MANU/SC/0267/2004 : (2004) 4 SCC 489 (hereafter

called "Special Reference"), had ruled that in view of Entry 53, List I of the Seventh

Schedule, the Parliament had exclusive legislative competence, and the Central

Government, exclusive executive competence on the subject of natural gas, and that

State Governments did not have any authority to enact such a legislation or to grant any

authorization in respect of the subject of natural gas. The High Court held that:

The Parliament has, therefore, made provision with regard to 'deemed

authorization' Under Section 16 of the PNGRB Act subject to the provisions of

Chapter IV which includes Section 17 of the PNGRB Act. If the provision

contained in Section 17 of the PNGRB Act is seen, it provides for distinction

between the entities authorized by the Central Government and those not so

authorized. Further, the entities authorized by the Central Government have to

furnish the particulars of their activities before the appointed day to the

Respondent Board, whereas, the other entities have to apply for authorization

Under Section 17(2) of the PNGRB Act and Regulation 18 of Regulations of

2008. Thus, the Parliament, while enacting Section 17(2) of the PNGRB Act, had

given a chance to such entities to apply for authorization to Respondent Board

in respect of the areas in which they were active before the appointed day. At

this stage, it is also required to be noted that the Petitioner No. 1 commenced

the work of CGD network in Ahmedabad District on the basis of the interim

policy of the Government of Gujarat. The said policy itself provides that as and

when the Gas Act or any other relevant Regulation is brought into force, the

Petitioner No. 1 will have to meet with the requirements of the Regulation.

Further, the NOC granted by the Government of Gujarat is also subject to

similar condition. In fact, the Presidential Reference was with regard to the

Gujarat Gas Act and ultimately the Hon'ble Supreme Court, in the case of

Association of Natural Gas and Ors. (supra), struck down the constitutional

validity of Gujarat Gas Act and held that with respect to natural gas, only the

Central Government has legislative competence. Thus, from the date of coming

into force of PNGRB Act i.e., on 01.10.2007, only the Central Government is

having legislative and executive competence and therefore Parliament

introduced 'deemed authorization' in Section 16 of the PNGRB Act. Therefore,

when the Parliament introduced the concept of 'deemed authorization' in

Section 16 of the PNGRB Act, it could only be with respect to entities operating

under an executive order/authorization from the Central Government. If Section

16 of PNGRB Act is interpreted to mean "deemed authorization" even to entities

operating without such executive order/authorization, such interpretation would

run contrary to the Presidential Reference answered by the Hon'ble Supreme

Court. As observed hereinabove, Section 16 of the PNGRB Act is subject to the

provisions of Chapter IV which includes Section 17.

12.1. If we consider the provisions contained in Sections 11, 18, 19 and 61 of

the PNGRB Act, it is clear that the Respondent Board has been empowered

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Overview

Adani Gas Limited Vs Union of India - Supreme Court Judgment 2021

The Supreme Court judgment in the case of Adani Gas Limited vs. Union of India addresses critical legal issues surrounding gas distribution regulations and the authority of the Petroleum and Natural Gas Regulatory Board. Decided on September 28, 2021, this ruling clarifies the interpretation of statutory provisions and the scope of regulatory powers in the gas sector. Legal professionals and students studying administrative law will find this judgment particularly relevant, as it discusses precedents and principles of statutory interpretation. The case involves multiple appeals and highlights the interplay between state and central regulations in the energy sector. Key Points Analyzes the Supreme Court's interpretation of gas distribution regulations in India. Clarifies the authority…

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FAQs

What was the main legal issue in Adani Gas Limited Vs Union of India?

The main legal issue in the case of Adani Gas Limited Vs Union of India revolved around the validity of Regulation 18 of the Petroleum and Natural Gas Regulatory Board (CGD Regulations). Adani challenged this regulation as being violative of Articles 14 and 19(1)(g) of the Constitution of India and claimed it was ultra vires Section 16 of the PNGRB Act. The Supreme Court examined the applicability of 'deemed authorization' under Section 16 and the implications of Regulation 18 on entities not authorized by the Central Government.

What did the Supreme Court conclude about Regulation 18?

The Supreme Court concluded that Regulation 18 is not arbitrary or ultra vires the PNGRB Act. It held that the regulation serves to provide a uniform standard for evaluating applications from entities not authorized by the Central Government. The Court emphasized that the criteria outlined in Regulation 18 are relevant considerations for the PNGRB when assessing applications for authorization, thus ensuring fair trade and competition in the sector.

How did the Court interpret the 'deemed authorization' clause?

The Court interpreted the 'deemed authorization' clause under the proviso to Section 16 as being subject to other provisions of Chapter IV, particularly Section 17. It clarified that only entities authorized by the Central Government prior to the appointed day could claim deemed authorization. The ruling emphasized that entities with state-level authorizations must seek fresh authorizations under the PNGRB Act, highlighting the exclusive legislative competence of Parliament over natural gas regulation.

What was Adani's argument regarding its authorization?

Adani argued that it had been granted an authorization for the entire Ahmedabad District, including the disputed areas, based on a State Government policy. It contended that the exclusion of these areas from its authorization was unjustified and that it had fulfilled the necessary criteria for authorization. Adani claimed that the development work it had undertaken in these areas should have been recognized by the PNGRB.

What principle did the Court apply regarding Adani's conduct?

The Court applied the principle of approbate and reprobate, which prevents a party from accepting the benefits of a decision while simultaneously challenging its validity. Adani had accepted the authorization granted by the PNGRB, including the exclusion of disputed areas, and later participated in the bidding process for those areas. The Court held that this conduct precluded Adani from contesting the exclusion after benefiting from the authorization.

What were the implications of the Supreme Court's ruling for future cases?

The implications of the Supreme Court's ruling are significant for future cases concerning the regulation of natural gas distribution. It reinforces the exclusive legislative authority of Parliament in this domain and clarifies the process for entities seeking authorization under the PNGRB Act. The ruling also establishes that entities must adhere to the regulatory framework set forth by the PNGRB and cannot rely on state-level authorizations to bypass these requirements.

What was the outcome of the appeals made by Adani?

The Supreme Court dismissed the appeals made by Adani Gas Limited, upholding the validity of the PNGRB's regulations and the exclusion of certain areas from Adani's authorization. The Court ordered that Adani would bear the costs quantified at ₹10 lakhs, payable to the Union of India, thereby reinforcing the regulatory framework established by the PNGRB.