TMI Blog2004 (3) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... came into force w.e.f. 19th December, 2000. The object of the enactment is to provide for regulation of transmission, supply and distribution of gas, in the interests of general public and to promote gas industry in the State, and for that purpose, to establish Gujarat Gas Regulatory Authority and for matters connected therewith and incidental thereto. The term Gas has been defined in the Gujarat Act under Section 2(h) as follows:- Gas means a matter in gaseous state which predominantly consists of methane. 2. The State legislature passed the said enactment by tracing its legislative competence under Entry No. 25 of List II of the Seventh Schedule of the Constitution. The Parliament has passed various enactments under Entry No. 53 of List I dealing with the matters of petroleum and petroleum products. The Entry No. 53 of List I of the Seventh Schedule reads as follows:- Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be dangerously inflammable. 3. Entry No. 25 of List II reads as follows:- Gas and gas works 4. Article 248 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the High Court of Gujarat wherein they challenged the legislative competence of the Union to make laws on gas and gas works. Therefore, the question arose whether Natural Gas is a Union subject or State subject and whether the State of Gujarat and the other States have the legislative competence to make laws on the subject of Natural Gas. it is in this background, the following questions were referred to this Court under Clause 1 of Article 143 of the Constitution of India: (1) Whether natural gas in whatever physical form including Liquefied Natural Gas (LNG) is a Union subject covered by Entry 53 of List I and the Union has exclusive legislative competence to enact laws on natural gas. (2) Whether States have legislative competence to make laws on the subject of natural gas and Liquefied Natural Gas under Entry 25 of List II of the Seventh Schedule to the Constitution. (3) Whether the State of Gujarat had legislative competence to enact Gujarat Gas (Regulation of Transmission, Supply and Distribution) Act 2001. 6. After the receipt of the Reference, notices were served on the States and the Union Territories. The learned Attorney General for India appeared fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the Gujarat Act confers authority upon the State Government to regulate the business of distribution and transmission of gas and the provisions of that Act, ex facie, provide for taking over the mineral oil fields and intermeddle in the activities relating to the drilling for oil, etc. It was also pointed out that some other provisions of the said enactment, inter-alia, deal with the licensing and distribution of gas and these provisions are ultra vires of the legislative competence of the State. 8. The learned Counsel for the State of Gujarat, Shri Ashok Desai contended that the expression gas used in Entry 25 of List II would include all types of gases and, therefore, any legislation related to gas and gas works is perfectly within the legislative competence of the State. It was submitted that in Calcutta Gas Company (Proprietary) Ltd. v. State of West Bengal and Ors. , the scope and ambit of Entry 25 of List II had been authoritatively pronounced by this Court and this Court held that the field of entire industry, dealing with gas and gas works would fall under Entry 25 of List II. It was further submitted that the entries in the three Lists were only legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral resource like gas is fundamental to the very economic existence and prosperity of a State and consistent with the principles of federalism, the State shall not be denied the opportunity to exploit the natural resources. It was submitted, relying on the observation in Sir Byramji Jeejibhai v. Province of Bombay (1939) 3 FLJ (HC) 25 at 31, that the Courts must, if possible, reconcile conflicting items in the Central and Provincial Lists before falling back to the non obstante clause in Section 100 of the Government of India Act, and in applying that principle the Court may restrict the general words of the Federal list so as not to nullify a particular power contained in the Provincial list. 11. Learned senior Counsel Mr. P. Chidambaram appearing for the Common Carriers Company contended that any industrial activities connected to gas and gas works are beneficial to the State and the State must be given power to legislate on the subject. The expression gas mentioned in Entry 25 of List II takes within its ambit 'natural gas' which is to be considered as equivalent to electricity and water. It was argued that natural gas is defined as a naturally occurring mixture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority are mentioned in Chapter IV, which include, inter alia, the function of regulating transmission, supply and distribution of gas, to promote gas industry in the State in accordance with the direction given by the State Government, to give directions to a licensee for ensuring compliance of terms and conditions of a licence held by him. Under Section 18 of the Act, the Authority, for the purposes of any inquiry under the Act, have been given powers of a civil court. Chapter VI of the Act specifically says that no person other than a specified company and a person referred to in Sub-section (1) of Section 55 shall carry on the business of transmission in the State and that subject to the rules, if any, a specified company shall carry on the business of transmission in the State. Section 25(2) says that no person shall lay pipelines for distribution in the State unless he is a licensee. Chapter IX of the Act deals with offences and penalties and Section 34(1) and (2) states that whoever Carries on business of transmission in contravention of Clause (a) of Sub-section (1) of Section 23 or of Clause (a) or (b) of Sub-section (2) of Section 55 or whoever carries on business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d even by considerations arising out of what appears to be the general scheme of the Act. 16. It was further observed : .....an endeavour must be made to solve it, as the Judicial Committee have said by having recourse to the context and schemes of the Act, and a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary modifying the language of the one by that of the other. If indeed such a reconciliation should prove impossible, then, and only then, will the non-obstante clause operate and the federal power prevail. 17. Although Parliament cannot legislate on any of the Entries in the State List, it may do so incidentally while essentially dealing with the subject coming within the purview of the Entry in the Union list. Conversely, State Legislature also while making legislation may incidentally trench upon the subject covered in the Union List. Such incidental encroachment in either event need not make the legislation ultra vires of the Constitution. The doctrine of pith and substance is sometimes invoked to find out the nature and content of the legislation. However, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to make legislation on any subject relating to gas and gas-works and that this was considered by this Court in Calcutta Gas Company (Proprietary) Limited (supra) and the Act passed by the State legislature, namely, the Oriental Gas Company Act, 1960 was held to be constitutionally valid. The brief facts of the case are : The Oriental Gas Company was registered in England. It was empowered to lay pipes in Calcutta and its suburbs and to excavate the streets for the said purpose. A firm carrying a business in India purchased 98 per cent of the shares of the said Oriental Gas Company and floated a limited liability company named the Calcutta Gas Company (Proprietary) Limited. By an agreement, the Calcutta Gas Company was appointed as the Manager of the Oriental Gas Company, The West Bengal Legislature passed an Act whereby the State Government took over for a period of five years the management and control of the Oriental Gas Company. The appellant Calcutta Gas Company (Proprietary) Limited filed a petition under Article 226 of the Constitution challenging the constitutional validity of the said Act. The State Government contended that by virtue of Entry 25 of List II, the West Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n], Vol. 11 page 630, 'Natural gas' is defined as a naturally occurring mixture of hydro-carbon and non-hydrocarbon gases found in the porous geologic formations beneath the earth's surface, often in association with petroleum. 24. To obtain a marketable product, the raw natural gas flowing from gas or oil wells must be processed to remove water vapor, inert or poisonous constituents, and condensable hydrocarbons. The processed gas is principally methane, with small amounts of ethane, propane butane, pentane, carbon dioxide and nitrogen. This gas can easily be transported from the producing areas to the market in underground pipelines under pressure or liquefied at low temperatures and transported in specially designed ocean-going tankers. 25. Natural gas is found in areas of the earth that are covered with sedimentary rocks. These sediments were first laid down during the Cambrian period, ca 500 million years ago, and this process continued until the end of the Tertiary period ca 100 million years ago. These sediments contain the organic source materials from which natural gas and petroleum were produced. Gas and petroleum, being less dense than the water present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent to 98 per cent. The rest is made up chiefly of organic compounds containing oxygen, nitrogen, or sulphur. 32. According to a widely held theory, the remains of countless small marine animals and plants dropped to the ocean bottom and were covered over by mud. Many layers of mud and plant and animal remains accumulated in the course of time. These sediments were subjected to great pressure and heat, and were often squeezed and distorted as the earth's crust moved. Gradually they were converted into layers of sedimentary rock. The plant and animal remains contained within them were transformed into petroleum and natural gas. The details of this transformation are not quite clear. 33. Gas and oil are found in huge subterranean caverns. They both occur in minute pores of such rocks as sandstone and limestone. They are held captive under great pressure by surrounding rock formations that are impervious to seepage. Finally they are released when the shifting of the earth's surface cracks the cap rock. 34. 'Natural gas' has been defined in the Webster's new 20th Century dictionary, unabridged second edition, as follows : Natural Gas : A mixture of ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld remove his gas, whether free or in a solution, applied for, and obtained, an interim injunction inhibiting them from penetrating into the chamber. At the same time, he brought an action claiming a declaration that he was the owner of the natural gas within his lands . It was decided that although the right to work the petroleum granted in the lease to the second respondent was a right which had been in the original conveyance, the absence of such a clause did not abrogate or limit the powers of the respondent. The second respondent had direct grant of petroleum whereas the appellant had merely such residual rights as remained in him subject to the grant to the respondents and it was held that respondents were under no obligation to conserve the free gas within the appellant's land with the consequent denial of their right to recover the petroleum In the usual way. 37. In that case, the question was whether the lease-holder had the right to extract petroleum without causing loss of the natural gas embedded in the earth's crust. That question arose because of the nature of conveyance obtained by the lease-holder and the specific lease granted to the lease-holder. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power to have regard to what is ordinarily treated as embraced within that topic in the legislative practice of the United Kingdom. The point of the reference is emphatically not to seek a pattern to which a due exercise of the power must conform. The object is to ascertain the general conception involved in the words in the enabling Act. 40. A survey of the various legislations on the topic would show that the term 'petroleum' or 'petroleum products' has been given a wide meaning to include natural gas and other similar products. 41. In the Pipelines Act, 1962 of the United Kingdom, 'petroleum' has been defined as follows : Petroleum includes any mineral oil or relative hydrocarbon and natural gas existing in its natural condition in strata, whether or not it has undergone any processing; but does not include coal or bituminous shales or other stratified deposits from which oil can be extracted by destructive distillation. 42. Petroleum has been variously defined in different Acts, noted hereinbelow: Petroleum (Production) Act 1934 (UK) Petroleum includes any mineral oil or relative hydro-carbon and natural gas existing in its natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iquid products or by-products derived from oil condensate, gas or petroleum hydrocarbons, whether herein enumerated or not. 5. The Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 2. (c) petroleum has the same meaning as in the Petroleum Act, 1934, and includes natural gas and refinery gas. 6. The Oil Industry (Development) Act, 1974 2. (h). mineral oil includes petroleum and natural gas. 2. (m). petroleum product means any commodity made from petroleum or natural gas and includes refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas, gasoline, naphtha, distillate gasoline, kerosene, bitumen, asphalt and tar, waste oil, blended gasoline, lubricating oil, blends or mixture of oil with one or more liquid products or by products derived from oil or gas and blends or mixtures of two or more liquid products or byproducts derived from oil condensate and gas or petroleum hydrocarbons not specified hereinbefore. 44. Under Entry 53 of List I, Parliament has got power to make legislation for regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 25 List II of the Seventh Schedule, the State would be competent to pass a legislation only in respect of gas and gas-works and having regard to collocation of words 'gas and gas works', this Entry would mean any work or industry relating to manufactured gas which is often used for industrial, medical or other similar purposes. Entry 25 of List II, as suggested for the States, will have to be read as a whole. The expressions therein cannot be compartmentally interpreted. The word 'gas' in the Entry will take colour from other words 'gasworks'. In Ballantine's Law Dictionary, 3rd edition, 1969 'Gas Works' is defined as a plant for the manufacture of artificial gas . Similarly in Webster's New 20th Century dictionary, it is defined as an establishment in which gas for heating and lighting is manufactured . In the www.freedictionary.com 'gas works' is explained as a manufactory of gas, with all the machinery and appurtenances; a place where gas is generated. The meaning of the term 'gas works' is well understood in the sense that the place where the gas is manufactured. So it is difficult to accept the proposition that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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