Gujarat State Petroleum Corporation Limited v. GAIL (India) Limited
2013-06-12
Mohinder Pal, Ravi R.Tripathi
body2013
DigiLaw.ai
Judgment Ravi R.Tripathi, J.—The present petition is filed by Gujarat State Petroleum Corporation Ltd. (in short referred as ‘GSPCL’) being aggrieved by the action of respondent - GAIL (India) Ltd., praying that : “(A) to quash and set aside the action/stand of the respondent as contained in its letters dated 4.5.2012 and 24.1.2013 that the Gas Sales Agreement executed between the petitioner and the respondent shall stand terminated with effect from 01.01.2014 and that the parties thereto shall stand relieved of their obligations under the Gas Sales Agreement; (B) to direct the respondent to engage itself in a bona fide manner with the petitioner to arrive at the price of gas to be effective from 01.01.2014.” The petitioner also prayed for corresponding interim relief. 2. Initially, the matter was heard by Division Bench of this Court on 28.2.2013, but as the counsel for the respondent prayed for three weeks time to file affidavit-in-reply and two weeks thereafter is sought by learned counsel for the appellant to file affidavit-in-rejoinder, the matter was ordered to be listed for hearing after five weeks, i.e. 8.4.2013, and it was made clear that the matter will be considered for admission/final disposal. 3. At the request of learned advocates, the matter is heard at length for final disposal. In view of that, formal order of ‘Rule’ and ‘waiver of Rule’ by the learned advocate for the respondent is passed. 4. Learned senior advocate Mr. Mihir Thakore with senior advocate Mr. Mihir Joshi for Mr. Aspi Kapadia appeared for the petitioner–GSPCL and made submissions at length. Learned senior advocate Mr. Harin Raval appeared for respondent [GAIL (India) Ltd.] instructed by Mr. N.L. Ganpati and Mr. Vishwas K. Shah. 4.1 Learned senior advocate Mr. Raval for the respondent did raise a preliminary question about maintainability of the petition on the ground that the question involved in the matter is pertaining to contract between the petitioner on one hand and the respondent on the other. As the matter was being considered for final disposal, the question raised by way of preliminary objection is considered together with other submissions. 5. The facts giving rise to the petition are set out in the petition and to put them in the same words, Paragraphs 1, 2, 3, 4.1, 4.2 and 4.3 of the petition are reproduced below: “1.
As the matter was being considered for final disposal, the question raised by way of preliminary objection is considered together with other submissions. 5. The facts giving rise to the petition are set out in the petition and to put them in the same words, Paragraphs 1, 2, 3, 4.1, 4.2 and 4.3 of the petition are reproduced below: “1. The petitioner by this petition challenges the arbitrary and unreasonable action of the respondent as contained in its letters dated May 04, 2012 and January 24, 2013 that the Gas Sales Agreement executed between the petitioner and the respondent dated February 7, 2004 (hereinafter referred to as “the GSA”) shall stand terminated with effect from January 01, 2014 and that the parties thereto shall stand relieved of their obligations under the GSA. The respondent, being an undertaking of Government of India and being a State or an instrumentality and agency of the State, is obliged to act fairly and reasonably in all its actions. Respondent’s impugned actions are arbitrary and unreasonable and are in fact vindictive in nature as explained hereinbelow and fall within the domain of public law/ administrative law and hence are amenable to the writ jurisdiction of this Hon’ble High Court under Article 226 of the Constitution of India. 2. The petitioner is a Government Company incorporated under the Companies Act, 1956. The petitioner is substantially owned by Government of Gujarat. The Petitioner is engaged in the business of exploration and production of oil and natural gas and marketing of natural gas and re-gasified LNG. 3. The respondent is a Central Government Public Sector Undertaking and is an instrumentality and agency of the State and is amenable to the writ jurisdiction of this Hon’ble Court. The respondent is engaged in the business of marketing of petroleum and petroleum products and purchase of gas from various gas suppliers for marketing, trading and selling to various customers/consumers of gas. 4.1 Petronet LNG Limited (for short ‘Petronet LNG’) is a company incorporated under the Companies Act, 1956 and is a joint venture company promoted by the respondent and Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Petroleum Corporation Limited (BPCL) and Oil & Natural Gas Corporation Limited (ONGC). The aforesaid entities hold 12.5% equity shares each in Petronet LNG.
4.1 Petronet LNG Limited (for short ‘Petronet LNG’) is a company incorporated under the Companies Act, 1956 and is a joint venture company promoted by the respondent and Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Petroleum Corporation Limited (BPCL) and Oil & Natural Gas Corporation Limited (ONGC). The aforesaid entities hold 12.5% equity shares each in Petronet LNG. Petronet LNG is engaged in the business of importing into India of Liquefied Natural Gas (for short ‘LNG’) and regasification thereof at its LNG Terminal at Dahej. The LNG is imported by vessels through sea and is thereafter re-gasified at its re-gasification plant at Dahej. Petronet LNG signed a Sales and Purchase Agreement (for short ‘SPA’) dated July 31, 1999 with Ras Laffan Liquefied Natural Gas Company Ltd., Qatar for supply of LNG through sea cargos to Petronet LNG. Ras Laffan Liquefied Natural Gas Company Limited 9for short ‘Ras Gas’) is situated on the North East coast of Qatar and operates one of the world’s largest ofshore recoverable nonassociated natural gas fields. Under the agreement dated July 31, 1999, Ras Gas has agreed to supply 5 MMTPA of LNG (17.5 MMSCMDC) to Petronet LNG at its terminal at Dahej. In August 2006, Ras Gas and Petronet LNG amended the existing SPA to implement the sale of additional 2.5 MMTPA (8.75 MMSCMD) of LNG completeing a 7.5 MMTPA (26.25 MMSCMD) sales agreement for a period of 25 years. 4.2 Petronet LNG also purchases LNG from Qatar and other countries on spot basis. The spot prices that Petronet LNG has to pay for such purchase have been much higher than the price payable by it under the long term gas purchase contract with Ras Gas. The LNG so supplied to Petronet LNG is regassified by Petronet LNG at its Dahej terminal. Petronet LNG has entered into back to back Gas Sales and Purchase Agreements with the respondent, IOCL & BPCL for sale and purchase of such RLNG. 4.3 respondent, IOCL & BPCL have entered into Gas Sales Agreements dated February 7, 2004, February 12, 2004 and February 16, 2004 with the petitioner respectively for sale and purchase of RLNG which are more or less on same terms. A copy of the GSA is annexed hereto and marked as Annexure-A. However, the GSA does not contain price for sale and purchase of RLNG which is fixed by a separate Price Side Letter.
A copy of the GSA is annexed hereto and marked as Annexure-A. However, the GSA does not contain price for sale and purchase of RLNG which is fixed by a separate Price Side Letter. The First Price Side Letter dated February 7, 2004 for fixation of price is annexed hereto and marked as Annexure-B. All the three GSA’s and the side letters are mostly similar. It is also pertinent to note here that the source of the LNG is same under all the three GSAs, i.e. LNG procured by Petronet LNG from Ras Gas. It is also pertinent to note that price charged under the price side letters by each of respondent, IOCL and BPCL are also the same. The said GSAs are to ramain in force till 0600 hours of January 1, 2019 (Article 3.1 of GSA). The relevant Article of the GSA in relation to the price of the gas is Article 11. The relevant clauses of the said Article are reproduced below for ease of reference: “11.1(a) The contract price which the buyer shall pay for quantities of gas to be sold and purchased pursuant to this Agreement shall be as agreed separately” “11.3 The above contract price are valid upto 31st December, 2008 and shall be reviewed only and to the extent to which Ras Gas (Supplier of LNG) agrees for a different price”. “11.4 Change in Law If at any time due to a change in law or a change in the policy of any Government, including due to the reflagging of any LNG Tanker required by a change in law or a change in policy, or due to any modification to a LNG Tanker arising from a change in the regulations or policies of either of the parts of Ras Laffan, Quatar, or Dahej, Gujarat, India, Seller incurs an increase or decrease in its costs or expenses, or an increase in its net after tax return in any year, Seller may request a revision of the Contract Price to reflect any such increase or decrease.” 6. The Court is of the opinion that the question which arises for consideration of this Court is, whether the present petition is filed seeking enforcement of the right flowing from the contract between the parties, i.e. petitioner on one hand and the respondent on the other.
The Court is of the opinion that the question which arises for consideration of this Court is, whether the present petition is filed seeking enforcement of the right flowing from the contract between the parties, i.e. petitioner on one hand and the respondent on the other. The Court is of the opinion that the relief sought for by the petitioner is against the action of the respondent which is contended to be unjust and arbitrary and as it is arbitrary, it is violative of Article 14 of the Constitution of India and, therefore, the preliminary objection about non-maintainability of the petition deserves to be rejected by this Court. In this regard, learned senior advocate for the petitioner invited attention of the Court emphasizing the reliefs prayed for and particularly the relief prayed in Clause (B) of Para-9 of the prayer clause. In Clause (B) of para-9 what is prayed by the petitioner is “to direct the respondent to engage itself in a bona fide manner with the petitioner to arrive at the price of gas to be effective from 01.01.2014”. It is the case of the petitioner that the respondent did not give any option to the petitioner to agree for a price, and option, if any which may be contended to have been given by the respondent, was not in such terms which would enable the petitioner to exercise its option. Learned senior advocate for the petitioner invited attention of the Court to the basic facts. The basic facts are that the petitioner is purchasing gas from the respondent and, as mentioned in the contract, that gas is obtained by the respondent from Petronet LNG Ltd, who in turn is purchasing gas from RAS (Quatar) on long term basis under Agreement dated 31.7.1999 which is for a period of 25 years. 7.
The basic facts are that the petitioner is purchasing gas from the respondent and, as mentioned in the contract, that gas is obtained by the respondent from Petronet LNG Ltd, who in turn is purchasing gas from RAS (Quatar) on long term basis under Agreement dated 31.7.1999 which is for a period of 25 years. 7. Learned senior advocate for the petitioner invited attention of the Court to recitals (A) and (C) which read as under: “(A) The Seller has entered into a Gas Sales and Purchase Agreement (GSPA) with Petronet LNG Ltd. (PLL) to purchase Natural Gas (Gas) following regasification of Liquefied Natural Gas (LNG) at PLL’s Terminal, purchased from the LNG supplier (Ras Laffan LNG Ltd.).” (C) The Seller agreed to sell and deliver to the Buyer a part of its share of the Natural Gas, obtained from re-gasification of LNG as purchased from PLL under the GSPA between the Seller and PLL after processing/stripping off heavier components for other uses, if any, hereinafter referred also to as “Gas” on the terms and conditions stated hereunder as mutually agreed to between the Seller and the Buyer.” 8. Learned senior advocate for the petitioner then invited attention of the Court to various terms which are defined in the said document, viz. Basic Period, Contract Period, GSPA, Purchaser etc. Learned senior advocate for the petitioner then invited attention of the Court to Sub-clause (c) to Clause 1.2, pertaining to interpretation, which reads as under: “1.2 Interpretation (c) The Appendices, Schedules, Attachments and Annexes form an integral part of this Agreement. In the event any conflict between any provision of the Articles and any provision of the Appendices, Schedules, Attachments or Annexes, the provision of the Articles shall prevail. (emphasis supplied) 8.1 Learned senior advocate for the petitioner then invited attention of the Court to Article 2, which pertains to sale and purchase. It reads as under: “Article 2 - Sale and Purchase.
(emphasis supplied) 8.1 Learned senior advocate for the petitioner then invited attention of the Court to Article 2, which pertains to sale and purchase. It reads as under: “Article 2 - Sale and Purchase. 2.1 Gas Sale and Purchase The Seller agrees to sell and tender for delivery at the delivery point and the Buyer agrees to purchase and receive at the delivery point and pay for, Gas in the quantities, at the time and at the contract price in accordance with and subject to the terms and conditions of this Agreement.” 8.2 Learned senior advocate for the petitioner submitted that the Court may note that the sale and purchase is at the Contract Price and that Contract Price is defined in the document as under: “Contract Price” means the price of Gas determined in accordance with Article 11.1" 8.3 Learned senior advocate for the petitioner then invited attention of the Court to Article 3, which pertains to duration of the Agreement. Articles 3.1 and 3.2 read as under: “3.1 This Agreement shall come into force on the date it is signed and shall remain in force till 0600 Hours of 1.1.2019 (herein called “Basic Period) unless terminated earlier as per the provisions of the Agreement.” “3.2 Either party may propose to extend the Agreement beyond the Basic Period by giving notice to the other Party one year prior to expiry of this Agreement. This Agreement shall be amended accordingly prior to such extension for such period as the Parties may mutually agree (herein called the “Extension Period”).” 8.4 Learned senior advocate for the petitioner then invited attention of the Court to Article 11.1. Article 11 pertains to price. It reads as under: “11.1 The Per MMBTU Price for Gas (a) The Contract Price which the Buyer shall pay for quantities of Gas to be sold and purchased pursuant to this Agreement shall be as agreed separately. (b) The above Contract Price includes basic custom duty and exclusive of all other taxes & duties.
Article 11 pertains to price. It reads as under: “11.1 The Per MMBTU Price for Gas (a) The Contract Price which the Buyer shall pay for quantities of Gas to be sold and purchased pursuant to this Agreement shall be as agreed separately. (b) The above Contract Price includes basic custom duty and exclusive of all other taxes & duties. Buyer shall pay/reimburse taxes and duties as applicable in addition to Contract Price from time to time.” “11.3 The above Contract Price are valid upto 31st December 2008 and shall be reviewed only and to the extent to which Ras Gas (Supplier of LNG) agrees for a different price.” (emphasis supplied) “11.4 - Change in Law If at any time due to a change in law or a change in the policy of any Government, including due to the re-flagging of any LNG Tanker required by a change in law or a change in policy, or due to any modification to a LNG Tanker arising from a change in the regulations or policies of either of the parts of Ras Laffan, Qatar, or Dahej, Gujarat, India, Seller incurs an increase or decrease in its costs or expenses, or an increase in its net after tax return in any year, Seller may request a revision of the Contract Price to reflect any such increase or decrease.” “11.6 Buyer and Seller shall mutually discuss for the Contract Price to be effective from Ist January 2009. The Seller shall inform not later than 30.06.2008, the revised Contract Price and parties agree to discuss in good faith and finalize the new Contract Prices effective from 1.1.2009 not later than 30.09.2008. In case the Parties are unable to agree on the revised Contract Price, the Agreement may be terminated by the Buyer by giving a written notice to the Seller to this effect.” 8.5 Learned senior advocate for the petitioner submitted that Article 11.6 is important for the purpose of understanding and reaching to the heart of the controversy involved in the matter. 9.
9. Learned senior advocate for the petitioner submitted that Article 15 provides for dispute resolution and Article 15.5 specifically provides for arbitration and the same reads as under: “15.5 Arbitration Any dispute arising in connection with this Agreement which is not resolved by the Parties pursuant to Article 15.1 within thirty (30) days of the notice of the dispute or pursuant to Article 15.4 (b), shall be finally settled by arbitration in accordance with the Indian Arbitration and Conciliation Act, 1996 and rules made thereunder, from time to time. The procedure for appointment of arbitrators shall be as follows: ..........” 9.1 Learned senior advocate for the petitioner submitted that it is the case of the petitioner that the present relief which is sought for is not on account of breach of the agreement, but it is against the arbitrary action of the respondent, more particularly of not giving an opportunity to the petitioner by not engaging itself in a bona fide manner with the petitioner to arrive at the price of gas to be effective from 01.01.2014. Learned senior advocate for the petitioner submitted that that is why the relief sought for is by way of direction to the respondent to engage itself in a bona fide manner with the petitioner to arrive at the price of gas to be effective from 01.01.2014. Learned senior advocate for the petitioner submitted that he is conscious of the fact that had it been a case of seeking relief on account of breach of agreement (contract), the preliminary objection would have a different complex and would have a different effect on the consideration of this Court about maintainability of the petition. But right from the beginning, the case of the petitioner is that the respondent did not act as was expected of the respondent, more particularly when the respondent is very much a ‘State’ within the meaning of the term ‘State’ or “Other Authorities”. Learned senior advocate for the petitioner submitted that the petitioner is also conscious of the fact that purchase and sale of gas may not be a part of the sovereign function, but then it is trite law settled by various decisions of the Hon’ble the Apex Court that the State or other authorities, which are ‘State’ within the meaning of the term ‘State’, have to act bona fide and have to act in a manner which is not arbitrary.
Learned senior advocate for the petitioner submitted that it is the case of the petitioner that the petition is maintainable because the relief sought for by the petitioner is not for breach of the contract simplicitor, but it is for the purpose of getting relief against the arbitrary action of the respondent. 9.2 Learned senior advocate for the petitioner then invited attention of the Court to Article 20 of the agreement, which is titled as “Miscellaneous”. Article 20.1 defines ‘Entire Agreement’ as under: “20.1 Entire Agreement This Agreement shall constitute the full Agreement between the Parties and shall supersede all prior negotiations, representations, proposals and Agreement, whether oral or written, regarding the subject matter of this Agreement.” Article 20.9 – Contract Review reads as under: “The Parties agree that the Contract Price applicable on and after 1st January 2009 shall be reviewed and agreed by the Parties. In case the Parties are unable to agree on the revised Contract Price, the Agreement may be terminated by the either Party by giving a written notice to the other Party to this effect. In the event of assignment of LNG sale directly to Seller by Ras Gas (i.e. LNG supplier), then the Agreement shall be reviewed to be in line with the comfort provided to Seller in the assignment contract.” 10. Learned senior advocate for the petitioner then invited attention of the Court to Annexure-B to the petition, which is mentioned in the subject Clause as under: “Sub: Side Letter for Article 11 of the GSA between GAIL (India) Ltd. And M/s. Gujarat State Petroleum Corporation Ltd.” 10.1 It is under this document that price was agreed upon. Learned senior advocate for the petitioner submitted that incidentally it is required to be noted that this side letter for Article 11 of the GSA is even dated (the Agreement is dated 07.02.2004 and this letter is also dated 07.02.2004). Learned senior advocate for the petitioner submitted that Article 11.1 as set out in this letter deals with the elements of ‘contract price’ payable by the Buyer to the Seller on account of delivery of Gas under this Agreement.
Learned senior advocate for the petitioner submitted that Article 11.1 as set out in this letter deals with the elements of ‘contract price’ payable by the Buyer to the Seller on account of delivery of Gas under this Agreement. Article 11.3 provides as under: “11.3 The above prices are valid upto 31st December, 2008 and shall be reviewed only and to the extent to which Ras Gas (Supplier of LNG) agrees for a different price.” In Article 11.4, it is provided that: “11.4 Change in Law If at any time due to a change in law or a change in the policy of any Government, including due to the re-flagging of any LNG Tanker required by a change in law or a change in policy, or due to any modification to a LNG Tanker arising from a change in the regulations or policies of either of the parts of Ras Laffan, Quatar, or Dahej, Gujarat, India, Seller incurs an increase or decrease in its costs or expenses, or an increase in its net after tax return in any year, Seller may request a revision of the Contract Price to reflect any such increase or decrease.” 10.2 Last but not least, learned senior advocate for the petitioner invited attention of the Court to Article 11.6. Learned senior advocate submitted that this will be important for the purpose that it provides for the price to be determined between the parties. Article 11.6 reads as under; “11.6 Buyer and Seller shall mutually discuss for the Contract Price of Gas to be effective from Ist January 2009. The Seller shall inform not later than 30.6.2008 the revised Contract Price and parties agree to discuss in good faith and finalize the new prices effective from 1.1.2009 not later than 30.9.2008. In case the Parties are unable to agree on the revised Contract Price, the Agreement may be terminated by the Buyer by giving a written notice to the Seller to this effect.” 10.3 Learned senior advocate for the petitioner submitted that it is required to be noted that it is specifically provided in this Article that the Buyer and the Seller shall mutually discuss for the ‘contract price’ of gas to be effective from 1.1.2009. Learned senior advocate for the petitioner submitted that it further provides that the Seller shall inform not later than 30.6.2008 the revised ‘contract price’.
Learned senior advocate for the petitioner submitted that it further provides that the Seller shall inform not later than 30.6.2008 the revised ‘contract price’. Learned senior advocate for the petitioner submitted that the parties did have exchange of another communication dated 7.2.2004 which indicates the points on which the Seller and the Buyer, i.e. GAIL -respondent and GSPCL – petitioner, agreed. The ‘subject’ is “Gas Sales Agreement (the Agreement) dated 7th February 2004 between GAIL (India) Ltd. and Gujarat State Petroleum Corporation Limited (GSPCL).” Learned senior advocate for the petitioner submitted that opening part of this communication is important and it reads as under: “With respect to the Agreement, we are writing to confirm that GAIL and GSPCL have agreed as follows : ...................” (emphasis supplied) 10.4 Learned senior advocate for the petitioner submitted that in fact the points on which the Seller and the Buyer agreed are important for the purpose to appreciate the case of the petitioner to the effect that for the reasons best known to the respondent-Seller-GAIL, they decided to act in a manner which can be described by no other words than the word “arbitrariness”. Points No.1 and 2 on which the Seller and the Buyer agreed read as under: “1. In the event of Seller being charged lower price than agreed in the Agreement for the commissioning Gas, such lower price shall also be charged to the buyer. “2. GSPC would offer gas to GAIL from its sources in KG Basin for marketing/ transportation at mutually agreed terms and conditions, the quantities of such gas would be equal to the quantities of gas being purchased by the buyer from the Seller pursuant to Agreement.” (emphasis supplied) 10.5 Learned senior advocate for the petitioner submitted that Point No. 2 is suggestive of the fact that initially the Buyer and the Seller did have cordial relations reflected by the said Point No. 2. It is only at a later stage that their relations got strained and reasons for that are known to the Seller only. Point No. 5 reads as under: “5. GAIL and GSPCL shall mutually discuss and agree for sharing of end consumers, including in the markets of North/North West of Vadodara (including Vadodara).” 10.6 Learned senior advocate for the petitioner submitted that Point No.7 is again very important and it reads as under: “7.
Point No. 5 reads as under: “5. GAIL and GSPCL shall mutually discuss and agree for sharing of end consumers, including in the markets of North/North West of Vadodara (including Vadodara).” 10.6 Learned senior advocate for the petitioner submitted that Point No.7 is again very important and it reads as under: “7. At any time during Contract Period, in the event that Seller offers to charge a price for gas to any other gas buyer that is lower than price for such quantity of gas, Seller shall offer the same to the buyer also. Price shall mean sum of CIF, Custom Duty and Regasification Charge.” (emphasis supplied) 11. Learned senior advocate for the petitioner submitted that things were going on smoothly until the Ministry of Petroleum & Natural Gas issued communication dated 06.3.2007, a copy of which is produced as part of Annexure-D (second price side letter dated 31.12.2008 at page 99). It is under the signature of Under Secretary to the Government of India and it is addressed to the Managing Director & CEO, Petronet LNG Ltd. The subject of the letter is “Policy decision as to pooling of RLNG prices.” (RLNG – Regasified Natural Gas). It will be appropriate to reproduce the contents of the said letter, which are as under: “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 nondiscriminatory basis and uniform pooled prices should be charged from all the existing and new consumers. ................” 11.1 Learned senior advocate for the petitioner submitted that two things are important: one is that RLNG procured under long term contract was to be given at ‘uniform pooled price’, and second, it was to be given on a ‘non-discriminatory basis’. Learned senior advocate for the petitioner also informed this Court that this communication was the subject-matter of challenge before this High Court in SCA No. 18868 of 2007 and other matters. Learned senior advocate for the petitioner submitted that the petitioner was also one of the challengers to the said circular/letter.
Learned senior advocate for the petitioner also informed this Court that this communication was the subject-matter of challenge before this High Court in SCA No. 18868 of 2007 and other matters. Learned senior advocate for the petitioner submitted that the petitioner was also one of the challengers to the said circular/letter. Learned senior advocate submitted that those group of petitions came to be decided by Full Bench of this Court by judgment and order dated 16.5.2008, which is reported in 2008 (3) GLR 2057 . Learned senior advocate for the petitioner submitted that the said judgment of Full Bench, which by majority upheld the circular, is binding to all parties, meaning thereby the same is binding to the present petitioner as well as the respondent. Learned senior advocate for the petitioner submitted that the petitioner being aggrieved by the said judgment and order of Full Bench of this Court has filed SLP before the Hon’ble Apex Court, which is admitted and pending. Learned senior advocate for the petitioner submitted that this has some bearing in the present case as, during pendency of the said SLP, the petitioner received a communication dated 02.12.2008 by which a Draft RLNG Contract was sent to be effective from 01.01.2009 for discussion. Learned senior advocate for the petitioner submitted that in the said draft, Article 11.2 pertains to ‘Price for Gas’. It was mentioned in Clause (b): “The above price includes only those taxes and duties expressly set out in this Price Side Letter.” This price side letter is also sent to the petitioner, a copy of which is found at page 245. In the said side letter, the contract price is mentioned to be: “1. Contract Price. The Contract Price payable by the Buyer to the Seller under the Agreement shall consist of the following elements/ components: (a) Foreign Currency Component, and (b) INR Component.” It is thereafter the Foreign Currency Component is detailed and INR Component is detailed separately in paragraphs 1.1 and 1.2. 11.2 The petitioner – GSPCL conveyed their inability to agree to this draft agreement by communication dated 02.12.2008. The exact words in which their inability is conveyed to the respondent are as under: “We refer to your email dated December 2, 2008 on the subject matter and noted the contents thereof. We have also gone through the changes suggested in the draft GSA attached along with the email.
The exact words in which their inability is conveyed to the respondent are as under: “We refer to your email dated December 2, 2008 on the subject matter and noted the contents thereof. We have also gone through the changes suggested in the draft GSA attached along with the email. In this context, we would like to state that the existing SA is valid till 0600 hours of 1.1.2009. The provision of the existing GSA does not contemplate change in the terms of the same except the price of gas with effect from January 1, 2009. According to Article 11.3 of the GSA, the Contract Price agreed between the Parties is valid upto December 31, 2008 and it can be reviewed only to the extent to which Ras Gas (Supplier of LNG) agrees for a different price. Apart from such change, which Ras Gas has agreed thereto, no price revision is allowed under the GSA. In view of the above, GSPC is not in a position to agree to the changes suggested in the draft of the existing GSA except the price of Gas which shall be in accordance with Article 11.3 of the GSA......................” 11.3 Learned senior advocate for the petitioner submitted that the said inability was conveyed to the respondent-Seller- GAIL in light of the fact that, under the original Agreement only price Clause could have been reviewed and that could have been reviewed only to the extent to which Ras Gas (Supplier of LNG) agrees for a different price. In view of that, the petitioner had no reason to agree to the draft agreement sent by the Seller. 12. After the said communication, the Seller-respondent herein sent a price side letter proposed to be executed with GSPCL asking the GSPCL to indicate a convenient date for execution of the same. This communication was replied by GSPCL by its communication dated 26.12.2008 and conveyed to the Seller that: “We have reviewed the draft of the price side letter sent by you and have indicated our changes in the draft in track change mode. Further, certain provisions were not related to price. For including the same, we are suggesting a draft of the Amendment Agreement to the GSA. A draft of the same is enclosed herewith.
Further, certain provisions were not related to price. For including the same, we are suggesting a draft of the Amendment Agreement to the GSA. A draft of the same is enclosed herewith. We look forward to hearing from you on the matter so as the same may be executed at the earliest......” A copy of the suggested changes sent by the petitioner is found at page 261 with the title “Price side letter dated (blank) to the Gas Sales Agreement dated 7th Feb 2004 between GAIL (India) Ltd. (“Seller”) and Gujarat State Petroleum Corporation Ltd. (“GSPCL-Buyer”)”. Learned senior advocate for the petitioner invited attention of the Court to the changes suggested by the petitioner in Article 11.1.1 pertaining to Contract Price. In Clause (b), it was mentioned that: “11.1.1 Contract Price (b) During the period with effect from January 1, 2009 till September 30, 2009 (both dates inclusive), the Foreign Currency Component shall be the weighted average price of the following quantities of LNG being sourced by PLL (“Pooled Price”)..............” 12.1 Learned senior advocate for the petitioner submitted that the period aforesaid was mentioned with a hope that the SLP filed before the Hon’ble the Apex Court will be heard and decided and in the event the petitioner succeeds before the Hon’ble the Apex Court, the petitioner will be entitled to get the gas at the price at which it was contracted. Therefore, only with a view to avoid a situation of SLP being rendered infructuous, the petitioner expressed its willingness for a limited period from 01.01.2009 to 30.09.2009. Learned senior advocate for the petitioner submitted that to show the bona fides of the petitioner, Article 11.5 about price review was also a part of the suggested changes. It was in the following terms: “11.5 Price Review: Buyer and Seller shall mutually discuss for the Contract Price of LNG to be effective from 1st October 2009. The Seller shall inform the revised contract price not later than 30.9.2009 and Parties agree to discuss in good faith and finalize the new prices effective from 1st October 2009 not later than 15.9.2009.
The Seller shall inform the revised contract price not later than 30.9.2009 and Parties agree to discuss in good faith and finalize the new prices effective from 1st October 2009 not later than 15.9.2009. In case the parties are unable to agree on the revised Contract Price, the Agreement may be terminated by the Buyer by giving a written notice to the Seller to this effect.” 12.2 After exchange of the aforesaid suggested changes from the petitioner, the petitioner was communicated Price Side Letter dated 31.12.2008 to the Gas Sales Agreement dated 07.4.2008 between GAIL (India) Ltd. (Seller) and GSPCL (Buyer). A copy of the same is produced as Annexure-D at page 89. Learned senior advocate for the petitioner submitted that in the opening part of this communication, it is mentioned that: “This price side letter (“Price Side Letter”) refers to the Gas Sales Agreement dated 7th Feb 2004 between GAIL (India) Ltd. (“Seller”) and Gujarat State Petroleum Corporation Ltd. (“Buyer”) (hereinafter referred to as the “Agreement’) for supply of Gas. In consideration of mutual covenants contained in the Agreement, the Seller and the Buyer hereby agree as follows: Notwithstanding anything to the contrary contained in the GSA, the Parties agree that from 1st January 2009, the provisions contained in the Article 11 - “Price” of the GSA, shall stand deleted in its entirety and substituted by the following terms and conditions relating to Price............” 12.3 Learned senior advocate for the petitioner submitted that what is important is that, by the side letter dated 31.12.2008 what was sought to be deleted was the price part only, i.e. Article 11. But that it in any way affected the points on which the Buyer and the Seller had agreed by the GSA (Agreement dated 7.2.2004) by letter dated 7.2.2004 (Annexure-C). Learned senior advocate for the petitioner submitted that, by that agreement the petitioner continued to have the right to get the benefit of lower price (which the Seller charges from any other buyer). Similarly the petitioner continued to have the right to get the gas at the price at which the Seller offers gas to any other buyer of the gas in view of Point No. 7 of the agreement.
Similarly the petitioner continued to have the right to get the gas at the price at which the Seller offers gas to any other buyer of the gas in view of Point No. 7 of the agreement. 12.4 Learned senior advocate for the petitioner, while inviting attention of the Court to other relevant part of this side letter, invited attention of the Court to Article 11.4, which pertains to Components of Price, of which Clause (1) is Contract Price, of which sub-clause (A) is Foreign Currency Component and that Foreign Currency Component is specifically mentioned as under: “(a) In accordance with the Ministry of Petroleum and Natural Gas letter No.L-11012/1/06-GP-II/Vol.II dated 6 March 2007 as per Appendix A to this Price Side Letter, the Foreign Currency Component shall be the weighted average price of all RLNG quantities being procured by PLL under various long term contracts. (emphasis supplied) 12.5 Learned senior advocate for the petitioner submitted that, it goes without saying that so far as foreign currency component is concerned, that was beyond ‘negotiation’ between the Buyer and the Seller. But so far as INR component is concerned, it consists of (a) re-gasification charges, (b) connectivity charges and (c) other charges. Learned senior advocate for the petitioner submitted that the other charges include ‘marketing margin’ and on this aspect there was scope for negotiation between the Buyer and the Seller. 12.6 Learned senior advocate for the petitioner then invited attention of the Court to Article 11.6, which now reads as under: “11.6 The parties agree that the provisions of this Article 11 shall be valid till 31.12.2013 and that supply of gas from 1.1.2014 onwards shall be subject to the parties reaching a fresh agreement on the provisions of Price of Gas to be applicable with effect from 1.1.2014. The parties further agree that the provisions of this Article 11 to be applicable with effect from 1.1.2014 shall be mutually discussed and finalized afresh not later than 31.12.2011, failing which the Agreement shall stand terminated with effect from 1.1.2014 and the parties hereto shall stand relieved of their respective obligations to supply or receive gas.” 11.7 Learned senior advocate for the petitioner submitted that it was under this Clause that the parties were to mutually discuss and finalize afresh the price of gas chargeable from 01.01.2014 and for that the last date prescribed was 31.12.2011.
It is in this context that the petitioner-GSPCL addressed communication dated 01.10.2011 to the respondent - GAIL (India) Ltd., a copy of which is produced at Annexure-E. The relevant paragraphs of this communication read as under: “As per the terms of the referred Article, the provisions of Article 11 as incorporated into the GSA by the Price Side Letter would remain valid till 31.12.2013. Further, the Article also stipulates that GSPCL and GAIL shall mutually discuss and finalize, no later than December 31, 2011, a fresh agreement on the provisions for Price of Gas to be applicable with effect from 01.01.2014. In this regard, GSPCL would like to propose that the current arrangements with retard to Price of Gas, as has already been mutually agreed vide Price Side Letter to the GSA, be extended and continued till the expiry of the GSA. You are requested to let us know if the above is acceptable. In case of any clarifications, GSPCL is willing to meet and discuss the same with GAIL officials at a mutually convenient date and time. The same is without prejudice to our rights under the GSA....” 11.8 Learned senior advocate for the petitioner submitted that it is surprising that despite the fact that the last date prescribed was 31.12.2011, letter dated 01.10.2011 was not replied until GAIL addressed letter dated 21.12.2011 besides the contents of the letter are suggestive of the fact that GAIL was in no mood of mutually discussing and finalizing the price to be charged with effect from 01.01.2014. The letter dated 21.12.2011 was to the effect that: “This has reference to the Gas Sale Agreement (GSA) dated 07.02.2004 and Price Side Letter dated 31.12.2008 executed between GAIL and GSPCL for supply of RLNG. Further, this has reference to your letter No. GSPCL/COMM/2011/1021 dated 1st October 2011 and our subsequent meeting held on 14.12.2011 at Ahmedabad, wherein we conveyed to you that the price offered by GSPCL to continue with the current arrangements, is not acceptable to GAIL for RLNG supplies beyond 31.12.2013. Therefore, it is requested to let us know GSPCL’s revised offer on or before 26th December 2011 to enable us to take an appropriate view considering the urgency of the matter.
Therefore, it is requested to let us know GSPCL’s revised offer on or before 26th December 2011 to enable us to take an appropriate view considering the urgency of the matter. If you wish to discuss the issue further, we propose to discuss the matter in our Delhi office at your earliest convenience, preferably on 23rd December, 2011 to take a final view.....” 12. Learned senior advocate for the petitioner then invited attention of the Court to communication dated 26.12.2011 from GSPCL to GAIL, wherein it was mentioned that: “....In connection to the same and subsequent to our meetings at GAIL Ahmedabad Zonal Office and New Delhi office on December 14, 2011 and December 23, 2011 respectively, GSPCL would like to resubmit and reiterate that with regards to Price of Gas under the GSA, the current arrangements which have been mutually agreed vide Price Side Letter, be extended and continued with effect from January 1, 2014 till the expiry of the GSA...” 13. It is in response to this letter the respondent wrote letter dated 28.12.2011 and by that communication GAIL came out with altogether a new case, found in Para 2 of that communication, which reads as under: “....During the discussion held on 23.12.2011, GAIL sought GSPCL’s proposal on the price to be applicable w.e.f. 01.01.2014. However, no specific proposal for revising the price was made by GSPCL. In this context, GAIL suggested that it would be fair to align future price of RLNG with the market conditions prevalent. We further suggested that GSPCL may propose certain principles based on which the price to be applicable in future can be further discussed, especially since GSPCL is also sourcing LNG cargoes internationally. The current pricing arrangement is valid till 31.12.2013 and supply of Gas from 01.01.2014 onwards shall be subject to GAIL and GSPCL reaching a fresh agreement regarding the price to be applicable with effect from 01.01.2014. Further, the price applicable with effect from 01.01.2014 is required to be finalized afresh no later than 31.12.2011. It may be recalled, that such Clause for price review was included at the request of GSPCL.
Further, the price applicable with effect from 01.01.2014 is required to be finalized afresh no later than 31.12.2011. It may be recalled, that such Clause for price review was included at the request of GSPCL. It is, therefore, requested to revert on above at the earliest for finalizing the price that would be applicable for the supply from 01.01.2014 onwards.” (emphasis supplied) 13.1 Learned senior advocate for the petitioner submitted that there was not a whisper as to why the direction given by the Ministry of Petroleum & Natural Gas by communication dated 06.3.2007 (page 99 part of Annexure-D) was given a go-bye and whether it was open for GAIL to give a go-bye to the said direction. It is also not mentioned that as GAIL is not having any long term contract and therefore it is not possible for GAIL to continue to have the pooled price. Learned senior advocate for the petitioner submitted that in fact the petitioner was entitled to get gas at the price which was agreed upon between the parties initially. It was only by the circular of Ministry of Petroleum & Natural Gas that pooled price was imposed upon which was challenged by the petitioner, wherein the petitioner failed in the High Court and now the matter is subjudice before the Hon’ble the Apex Court. Asking the petitioner to agree to “the revised price of RLNG with the market conditions prevalent” was as vague as possible and its ordinary meaning could be only the spot price of RLNG, which was not contemplated either under the original GSA dated 7.2.2004 or under the revised Side Letter dated 31.12.2008. It is in this background that the GSPCL – petitioner wrote letter dated 06.01.2012 to GAIL. Subsequently, it also wrote a letter dated 27.01.2012 but that was all in vain and GAIL, without giving any reasonable opportunity to the petitioner, indicated its decision dated 04.05.2012, a copy of which is produced at Annexure-K. Being aggrieved of that, the petitioner is before this Court praying that the same be quashed and set aside along with further communication dated 24.01.2013. The communication dated 04.5.2012 makes an interesting reading inasmuch as it reiterates about ‘aligning future price of RLNG with market conditions prevalent’. For ready perusal, relevant part of that communication is reproduced hereunder: “. . . . . . . .
The communication dated 04.5.2012 makes an interesting reading inasmuch as it reiterates about ‘aligning future price of RLNG with market conditions prevalent’. For ready perusal, relevant part of that communication is reproduced hereunder: “. . . . . . . . This has reference to our meeting on 14.12.2011 at Ahmedabad and on 23.12.2011 at New Delhi, wherein we discussed the matter, on the Price of Gas to be applicable from 01.01.2014 under the above-mentioned GSA, in detail with GSPCL. It was mentioned then that the price offer made by GSPCL to continue with the current arrangements, is not acceptable to GAIL for RLNG supplied beyond 31.12.2013 and it will be fair to align the future price of RLNG with market conditions prevalent. Further, as per the Article 11.6 in the above referred Price Side Letter dated 31.12.2008, the current pricing arrangement is valid till 31.12.2013, and supply of Gas from 01.01.2014 onwards was subject to GAIL and GSPCL reaching a fresh agreement regarding the price to be applicable with effect from 01.01.2014. Further, the price applicable with effect from 01.01.2014 was required to be finalized afresh no later than 31.12.2011. It may be recalled, that such Clause for price review was included at the request of GSPCL. In the event the market conditions would have been adverse, such Clause provided GSPCL with an option to exit from the GSA. Further, with reference to your letters dated 06.01.2012 and 27.01.2012, GAIL reiterates that the offer and understanding of the basis on which future supply could have been envisaged, was that the price should be a discoverable market price having regard to international prices of LNG. In fact the attempts to prescribe a method to achieve the same failed. In view of fact that no agreement could be reached between GAIL and GSPCL by 31.12.2011 regarding the price of gas to be applicable with effect from 01.01.2014, the agreement shall stand terminated w.e.f. 01.01.2014 and the parties hereto shall stand relieved of their obligation under the agreement......” (emphasis supplied) 13.2 Learned senior advocate for the petitioner submitted that the above letter of GAIL gives an impression that it is a profiteering concern, rather than a government undertaking falling within the term ‘State’ under Article 12 of the Constitution of India.
Learned senior advocate for the petitioner submitted that— (i) Letter dated 01.10.2011 was not responded until 21.12.2011; (ii) The concept of ‘aligning future price of RLNG with market conditions prevalent’ was altogether a new concept brought in; (emphasis supplied) (iii) There was no whisper nor any reason was set out for giving a go-bye to the directive of the Ministry of Petroleum & Natural Gas regarding pooling of price dated 6.3.2007 and there is no mentioning as to why pooling of price is not possible or practicable for the respondent-Seller-GAIL. (iv) As set out in Para 4.9 of the reply of the respondent, the respondent has signed long term agreement to new customers for supplying RLNG upto April 2028 at a uniform pooled price for whom RLNG supply was to commence from 01.01.2010 onwards. It is further set out in the said para that in furtherance of that offer, the respondent has signed long term gas sale agreements with about 150 downstream customers. The price of RLNG fixed under all these long term contracts is the uniform pooled price in terms of the GOI policy as per the MOP&NG letter dated 06.03.2007 and there is absolutely no provision for price review during the contract period. 13.3 Learned senior advocate for the petitioner submitted that this shows biased approach of the respondent towards the petitioner. In this regard, learned senior advocate for the petitioner invited attention of the Court to the averments made in Para 5.15 of the petition, which is reproduced for ready reference: “5.15 The petitioner suspects and has reason to believe that respondent has been conducting itself vindictively against the petitioner on account of various litigations that have been going on between them where respondent has lot the action against petitioner and/or its group company, Gujarat State Petronet Ltd., in most of the matters and is therefore harboring animosity towards petitioner.
The various litigations, in brief, are stated below:— (a) Petitioner had filed a complaint to the Petroleum and Natural Gas Regulatory Board (for short ‘PNGRB’) constituted under the Petroleum and Natural Gas Regulatory Board Act, 2006 (for short ‘PNGRB Act’) against respondent and others seeking relief against the ongoing restrictive trade practices and anti competitive measures being adopted by respondent and the abuse of its dominant position in relation to the sale of RLNG from Dahej LNG Terminal owned by Petronet LNG Limited, under the GSA in as much as it was forcing petitioner to use a short interconnectivity of respondent and making it pay huge interconnectivity charges to it. The three member bench of PNGRB was pleased to allow the complaint. However, the Chairman has delivered a separate judgment dated September 13, 2011 (copy at Annexure-N hereto) where the other two members have delivered a separate judgment dated October 10, 2011 (copy at Annexure-O hereto). PNGRB has observed that respondent deliberately and unfairly blocked off direct connectivity to the terminal for commercial reasons and thus indulged in restrictive trade practices. It was also observed that respondent has in fact abused its monopoly position to block direct connectivity to Dahej terminal. The Board unanimously directed respondent to forthwith desist from requiring petitioner to use interconnectivity of respondent. Against the decision of PNGRB, respondent has filed an Appeal No. 5 of 2012 to the Appellate Tribunal for Electricity, New Delhi under the provisions of the PNGRB Act. Respondent had also filed an Interlocutory Application No. 4 of 2012 in the Appeal for seeking stay of the operation of the decision of the PNGRB. After hearing, the Appellate Tribunal by its order dated January 23, 2012 (copy at Annexure-P hereto) did not grant the prayer of stay as prayed for by respondent and instead permitted petitioner to take direct connectivity to the Dahej Terminal. However, as interim arrangements certain directions were issued with regard to the past and future payments. (b) Appeal No. 205 of 2010 filed by respondent against Gujarat State Petronet Ltd. (for short GSPL) which is a subsidiary and a group company of petitioner: Before the PNGRB Act was enacted in the year 2006, respondent enjoyed monopoly as a Central Government PSU for laying cross country gas pipelines for transmission of gas.
(b) Appeal No. 205 of 2010 filed by respondent against Gujarat State Petronet Ltd. (for short GSPL) which is a subsidiary and a group company of petitioner: Before the PNGRB Act was enacted in the year 2006, respondent enjoyed monopoly as a Central Government PSU for laying cross country gas pipelines for transmission of gas. After the PNGRB Act was brought into force with effect from October 01 2007, no entity is permitted to lay any gas pipeline except upon specific authorization from the PNGRB. The provisions of the Act and the regulations framed thereunder provide for a bidding process for obtaining authorization for laying the pipeline. The bids from interested entities were called for by PNGRB for the following three pipeline projects, on October 16 2009 and October 23, 2009: (1) Mehsana (Gujarat) – Bhatinda (Punjab) pipeline, length 1670 kms. Project cost App. Rs.7143 crores. (2) Bhatinda (Punjab) – Jammu Srinagar pipeline, length 740 kms. Project cost App. 1837 crores. (3) Mallavaram (AP) – Bhilwara (Rajasthan) pipeline, length 1585 kms. Project cost app. Rs. 8908 crores. The Consortium of GSPL submitted bids for the aforesaid three pipeline projects. Respondent also submitted its bids for the projects nos.2 and 3. The consortium of GSPL was declared successful in all the three bids and has been granted authorization by the PNGRB. The total project cost of the three pipeline projects is approximately Rs.18,000 crores. Being aggrieved, respondent filed Appeal No.205 of 2010 against Gujarat State Petronet Ltd. and its consortium members before the Appellate Tribunal For Electricity, under the provisions of the PNGRB Act challenging the bid of GSPL of the Mallavaram (AP) – Bhilwara (Rajasthan) pipeline project, on the ground that the same is not technically qualified. The Appellate Tribunal for Electricity by its order dated February 6, 2012 has been pleased to dismiss the appeal filed by respondent. Respondent has against approached the Supreme Court against the judgment of APTEL vide Civil Appeal under Section 37 of PNGRB Act. The said Civil Appeal is recently admitted by Supreme Court of India. However, no interim relief has been granted to the respondent and the GSPL led Consortium has been allowed to continue with the pipeline project subject to outcome of the Civil Appeal. (c) Various Interlocutory Applications filed by respondent in Special Leave Petition No. 5408 of 2010 before the Hon’ble Supreme Court.
However, no interim relief has been granted to the respondent and the GSPL led Consortium has been allowed to continue with the pipeline project subject to outcome of the Civil Appeal. (c) Various Interlocutory Applications filed by respondent in Special Leave Petition No. 5408 of 2010 before the Hon’ble Supreme Court. In the Special Leave Petition No.5408 of 2010 filed by PNGRB against Indraprastha Gas Ltd. & others, GSPL and respondent were subsequently impleaded as parties. In the said SLP, various Interlocutory Applications were filed by respondent against GSPL seeking orders from the Supreme Court for cancellation of the authorizations issued by PNGRB in favour of GSPL for the aforesaid three pipeline projects and for restraining GSPL from proceeding ahead with the construction of the said projects. Despite various efforts, respondent was unsuccessful in getting any restraining order against GSPL, restraining it from proceeding ahead with the construction of the said projects. Further, the said SLP along with all the IAs has been recently disposed off by the Supreme Court vide its order dated January 8, 2013. The said order of Supreme Court disposing off the SLP along with IAs is attached herewith and marked as Annexure-Q.” 14. The petition is strenuously contested by learned senior advocate Mr. Rawal for the respondent. As stated above, learned senior advocate for the respondent did raise a preliminary question about maintainability of the petition. Even at the cost of repetition it may be reiterated that the Court did not find the preliminary objection about maintainability of the petition acceptable because in the opinion of the Court ‘the relief sought for is not on account of breach of contract between the parties’. The relief sought for is ‘on account of arbitrary conduct of the respondent’. The Court therefore deemed it proper to proceed further with the hearing of the matter. After hearing the matter at length, the present judgment and order is passed. Learned senior advocate for the respondent at the outset submitted that, ‘the instruction issued by the Ministry of Petroleum & Natural Gas on 06.3.2007 is no more applicable to the supply of gas to the petitioner as there are no more long term contracts subsisting and, therefore, there is no question of pooling of price’. The Court found this submission not acceptable in light of the averments made by the deponent – Mr.
The Court found this submission not acceptable in light of the averments made by the deponent – Mr. A.K. Saxena, son of G.P. Saxena, working at GAIL (India) Ltd. In its Ahmedabad Zonal Office. in Para 4.9 wherein the deponent has stated that: “4.9 In December 2008, the respondent offered to sign fresh long term gas sale agreements with all the existing downstream customers for supplying RLNG upto April 2028 at a uniform pooled price applicable to long term contract in terms of the GOI policy decision. Further, the respondent also offered to sign the above standard long term agreement to new customers for supplying RLNG upto April 2028 at a uniform pooled price for whom RLNH supply was to commence from 01.01.2010 onwards. In furtherance of the said offer, the respondent has signed long term gas sale agreements with about 150 downstream customers. The price of RLNG fixed under all these long term contracts is the uniform pooled price in terms of the GOI policy as per the MOP & NG letter dated 06.03.2007 and there is absolutely no provision for price review during the contract period. The pricing mechanism can be varied if, and only if, there is a change in law or policy of the Government....” 15. Learned senior advocate for the respondent emphasized on the aspect of non-maintainability of this petition. In this regard, he relied upon a Full Bench decision of this Court in the matter of Gujarat State Petroleum Corporation Ltd. vs. Union of India reported in 2008 (3) GLR 2057 wherein it is held by Full Bench of this Court in clear terms that, ‘the petitioner does not have a fundamental right to receive gas, more particularly on a particular price and that being so, petition cannot be entertained for any of the reliefs prayed for by the petitioner’. Learned senior advocate for the respondent relied upon a decision of the Hon’ble the Apex Court in the matter of Tejas Constructions and Infrastructure Pvt. Ltd. vs. Municipal Council, Sendhwa reported in (2012) 6 SCC 464 and submitted that the Hon’ble the Apex Court has, in Para 9, while discussing its earlier judgment in Tata Cellular vs. Union of India, reiterated the observations made by it in that case, which read as under: “9.
In Tata Cellular vs. Union of India, (1994) 6 SCC 651 , this Court emphasized the need to find the right balance between administrative discretion to decide matters on the one hand and the need to remedy any unfairness on the other and observed: “(1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative, decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative or quasiadministrative sphere. However, the decision can be tested by the application of the "Wednesbury principle" of reasonableness and the decision should be free from arbitrariness, not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” Learned senior advocate for the respondent submitted that in the present matter, none of the criteria is fulfilled and, therefore, the petition is required to be dismissed in limine. 16. Learned senior advocate for the respondent invited attention of the Court to recital (B) of the GSA, which reads as under: “(B) The Buyer is primarily engaged in the business of Exploration and Production and Marketing of Oil and Gas and desires to purchase Gas (as hereinafter defined) from the Seller for marketing, trading and selling it to various customers/ consumers of Gas in Gujarat.” (emphasis supplied) 16.1 Learned senior advocate for the respondent submitted that the aforesaid description clearly brings out that the petitioner is nothing more than ‘a private trading entity’ which conducts its affairs for earning profit. It is not serving any public interest for which the demand of the petitioner can be held to be ‘justified’.
It is not serving any public interest for which the demand of the petitioner can be held to be ‘justified’. Learned senior advocate for the respondent submitted that from the aforesaid description of the petitioner, it is clear that the dispute between the parties (petitioner and respondent) is purely of commercial nature. Therefore, the petitioner should not be allowed to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India and it should be relegated to the remedy available under the general law. 17. As discussed hereinabove, this Court is not entertaining this petition, and has not entertained this petition, so as to grant any relief for breach of contract. The petition is entertained because in the opinion of the Court the respondent as State or as an instrumentality of State is under an obligation to act in all fairness and must not have any arbitrariness in its conduct. It is only because the Court has found that the respondent is guilty of acting in an arbitrary manner, the petition is required to be entertained in light of the law laid down by the Hon’ble the Apex Court in the matter of Jamshed Hormusji Wadia vs. Board of Trustees, Port of Mumbai reported in AIR 2004 SC 1815 , wherein the Hon’ble the Apex Court has very succinctly articulated the position of law as under: “18. In our opinion, in the field of contracts the State and its instrumentalities ought to so design their activities as would ensure fair competition and non-discrimination. They can augment their resources but the object should be to serve the public cause and to do public good by resorting to fair and reasonable methods. The State and its instrumentalities, as the landlords, have the liberty of revising the rates of rent so as to compensate themselves against loss caused by inflationary tendencies. They can - and rather must - also save themselves from negative balances caused by the cost of maintenance, and payment of taxes and costs of administration. The State, as landlord, need not necessarily be a benevolent and good charitable Samaritan. The felt need for expanding or stimulating its own activities or other activities in the public interest having once arisen, the State need not hold its hands from seeking eviction of its lessees.
The State, as landlord, need not necessarily be a benevolent and good charitable Samaritan. The felt need for expanding or stimulating its own activities or other activities in the public interest having once arisen, the State need not hold its hands from seeking eviction of its lessees. However, the State cannot be seen to be indulging in rack-renting, profiteering and indulging in whimsical or unreasonable evictions or bargains”. “19. A balance has to be struck between the two extremes. Having been exempted from the operation of rent control legislation the courts cannot hold them tied to the same shackles from which the State and its instrumentalities have been freed by the legislature in their wisdom and thereby requiring them to be ruled indirectly or by analogy by the same law from which they are exempt. Otherwise, it would tantamount to defeating the exemption Clause consciously enacted by the Legislature. At the same time the liberty given to the State and its instrumentalities by the statute enacted under the Constitution does not exempt them from honouring the Constitution itself. They continue to be ruled by Article 14. The validity of their actions in the field of landlord-tenant relationship is available to be tested not under the rent control legislation but under the Constitution. The rent control legislations are temporary, if not seasonal; the Constitution is permanent and all time law.” (emphasis supplied) 18. It will be appropriate to mention at this stage the observations made by the Hon’ble Apex Court in the matter of Kumari Shrilekha Vidyarthi vs. State of U.P. reported in AIR 1991 SC 537 , wherein Hon’ble Apex Court articulated its view point in the following words: “22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party, Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality.
The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes failing within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also fails within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non-arbitrariness at the hands of the State in any of its actions.” (emphasis supplied) 18.1 In view of the aforesaid observations as stated hereinabove, this Court is of the opinion that it will be in the fitness of things to entertain this petition and grant necessary relief as prayed for, because not entertaining the petition may amount to endorsing the arbitrary action on the part of the respondent. 19. Learned senior advocate for the respondent vehemently submitted that the latest position of law on the question of maintainability of writ petition is stated in the decision of the Hon’ble the Apex Court in the matter of Noble Resources Ltd. vs. State of Orissa reported in (2006) 10 SCC 236 . Learned senior advocate for the respondent submitted that, in fact, this decision is almost in the nature of an encyclopedia on the aspect of maintainability of writ petition. In this regard he invited attention of the Court to the list of cases cited before the Hon’ble the Apex Court which the Hon’ble the Apex Court considered while delivering the judgment.
Learned senior advocate for the respondent submitted that, in fact, this decision is almost in the nature of an encyclopedia on the aspect of maintainability of writ petition. In this regard he invited attention of the Court to the list of cases cited before the Hon’ble the Apex Court which the Hon’ble the Apex Court considered while delivering the judgment. Learned senior advocate for the respondent submitted that you name a judgment on the point of maintainability of a writ petition and the same will be found in the said list of cases. For example, the judgments in the matter of (i) ABL International Ltd. vs. Export Credit Guarantee Corporation of India Ltd., (ii) Mahabir Auto Stores vs. Indian Oil Corporation, (iii) Bareilly Development Authority vs. Ajai Pal Singh, (iv) LIC of India vs. Escorts Ltd., (v) Radhakrishna Agarwal vs. State of Bihar, and so on. Learned senior advocate for the respondent invited the attention of the Court to Paragraphs 2, 15, 19, 24, 25, 27, 27, 29, 33, 43 and 45 of the judgment and submitted that the Hon’ble the Apex Court, while concluding the judgment, was pleased to observe in Para 45, as under: “45. For the reasons aforementioned, we are of the opinion that although the approach of the High Court was not entirely correct, its ultimate decision to refuse to exercise its discretionary jurisdiction cannot be faulted with.” 19.1 As discussed hereinabove, this Court is entertaining this petition ‘not for breach of contract’, but to redress the grievance of the petitioner about ‘the arbitrariness on the part of the respondent’ and, therefore, this Court is of the opinion that the aforesaid decision will not be applicable to the facts of the present case. 19.2 Learned senior advocate for the respondent relied upon a decision of the Hon’ble the Apex Court in the matter of State of U.P. vs. Bridge & Roof Company (India) Ltd. reported in (1996) 6 SCC 22 in support of his submission that once there is an arbitration clause, petition is not to be entertained. Learned advocate for the respondent relied upon the observations made by the Hon’ble the Apex Court in Paragraphs 16 & 17 and emphatically submitted that as there is an arbitration clause, the petition is not to be entertained.
Learned advocate for the respondent relied upon the observations made by the Hon’ble the Apex Court in Paragraphs 16 & 17 and emphatically submitted that as there is an arbitration clause, the petition is not to be entertained. This Court is not able to understand the above submission made by learned senior advocate for the respondent because arbitration Clause cannot be a remedy to the arbitrary action of the respondent. In view of the very fact that this Court has come to the conclusion that the action of the respondent was arbitrary in nature, the arbitration Clause in the agreement cannot give any relief to the petitioner. 19.3 Learned senior advocate for the respondent next relied upon a decision of the Hon’ble the Apex Court in the matter of Kulchhinder Singh vs. Hardayal Singh Brar reported in AIR 1976 SC 2216 . Learned senior advocate also relied upon a decision of the Hon’ble the Apex Court in the matter of Radhakrishna Agarwal vs. State of Bihar reported in (1977) 3 SCC 457 and last but not the least decision of the Hon’ble the Apex Court in the matter of THDC India Ltd. vs. Voith Hydro GMBH Co. reported in (2011) 4 SCC 756 . Learned senior advocate for the respondent emphasized the observations made by the Hon’ble the Apex Court in para 28 of the judgment, more particularly in reply to the averments about the mala fides and prejudices made by the petitioner. This Court is of the opinion that the same will not be of any help to the respondent, more particularly when this Court is going into the allegations of mala fides and prejudices made by the petitioner against the respondent. But, as discussed hereinabove, this Court is of the opinion that even de hors the aforesaid allegations, the conduct of the respondent was found to be not free from arbitrariness. 19.4 Learned senior advocate for the respondent next relied upon a decision of the Hon’ble the Apex Court in the matter of Kisan Sahkari Chini Mills Ltd. vs. Vardan Linkers reported in (2008) 12 SCC 500 .
19.4 Learned senior advocate for the respondent next relied upon a decision of the Hon’ble the Apex Court in the matter of Kisan Sahkari Chini Mills Ltd. vs. Vardan Linkers reported in (2008) 12 SCC 500 . Learned senior advocate for the respondent invited attention of the Court to Paragraphs 18, 19.2 and 23 and submitted that the Hon’ble the Apex Court, after considering the earlier judgments in the matter of Mahavir Auto Stores v. Indian Oil Corporation (Supra) and others, has held that, ‘a writ petition cannot be entertained in the matter of grievance arising from a contract’. In this regard, learned senior advocate for the respondent strenuously pressed into service the observations made by the Hon’ble the Apex Court in Para 18, which reads as under: “18. Ordinarily, the remedy available for a party complaining of breach of contract lies for seeking damages. He will be entitled to the relief of specific performance, if the contract is capable of being specifically enforced in law. The remedies for a breach of contract being purely in the realm of contract are dealt with by Civil Courts. The public law remedy, by way of a Writ Petition under Article 226 of the Constitution of India, is not available to seek damages for breach of contract or specific performance of contract. However, where the contractual dispute has a public law element, the power of judicial review under Article 226 of the Constitution of India may be invoked. .....” 19.5 On careful consideration, this Court is of the opinion that the aforesaid decision of the Hon’ble the Apex Court makes it clear that, ‘in a matter where party is seeking damages for breach of contract or for specific performance of contract by invoking the discretionary jurisdiction of this Court under Article 226 of the Constitution of India, petition is not to be entertained’. But then it also provides that, ‘when the contractual dispute involves a pubic law element, the power of judicial review under Article 226 of the Constitution of India can always be invoked’.
But then it also provides that, ‘when the contractual dispute involves a pubic law element, the power of judicial review under Article 226 of the Constitution of India can always be invoked’. 19.6 This Court, as stated hereinabove, is of the opinion that on perusal of the relief sought for, the petitioner is approaching this Court, ‘not for any damages for breach of contract nor for any specific performance of contract, but it is seeking a direction directing the respondent to engage itself in a bona fide manner with the petitioner to arrive at the price of gas to be effective from 01.01.2014’. From the facts above, learned senior advocate appearing for the petitioner could convince this Court that the conduct of the respondent was not found to be befitting to ‘State’ or ‘an instrumentality of State’. Otherwise there was no reason for the respondent not to respond to letter dated 01.10.2011 till 21.12.2011. Not only that, there was no reason for the respondent to all of a sudden change the criteria for fixing the price of gas from ‘pooling price ‘to ‘aligning future price of RLNG with market conditions prevalent’. This gives reason to draw a conclusion that the respondent was not acting in a manner which can be said to be free from arbitrariness and, therefore, the matter requires to be allowed. 20. In view of the aforesaid discussion, this Court is of the opinion that the petitioner deserves the relief prayed for and hence the communication dated 04.05.2012 and 24.01.2013 are hereby quashed and set aside and the respondent is directed to engage itself in a bona fide manner with the petitioner to arrive at the price of gas to be effective from 01.01.2014. Taking into consideration the fact that time at the disposal of the parties is short, it is directed that the petitioner shall approach the respondent by writing a letter as early as possible, but not later than 15.07.2013, seeking the aforesaid exercise. The respondent is directed to undertake the exercise soon after receipt of such letter from the petitioner and complete the same as early as possible, but not later than three months from the date of receipt of such communication. Rule is made absolute with no order as to costs.