TMI Blog1990 (5) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by the High Court. The ONGC was initially a Department of the Government of India but, in view of its expanding activities in the search for strategic and vital materials like oil, petroleum and its products it was set up as a body corporate. It is now a statutory corporation constituted by and under the Oil and Natural Gas Commission Act, (Central Act 43 of 1959, hereinafter referred to as 'the Act'). The Act provides for the establishment of a Commission for the development of petroleum and petroleum products produced by it and for matters connected therewith . Section 2(f) of the Act defines 'petroleum' as having the same meaning as in the Petroleum Act, 1934 (Act 30 of 1934) and as including 'natural gas'. The Commission established under the Act took over the previously existing organisation with effect from 18.9.59. Some of the provisions of the Act which are relevant for our present purposes may be set out here. Chapter III which deals with the powers and functions of the Commission consists of Sections 14 and 15. S. 14 reads thus: 14. Functions of the Commission- (1) Subject to the provisions of this Act, the functions of the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have been framed the Oil and Natural Gas Commission Rules, 1960. The only rule relevant for our present purposes is rule 25, dealing with contracts. It reads as follows: 25. Contracts: (1) The Commission may enter into contracts for the purpose of performing its functions under this Act; Provided that provision therefore exists in the budget approved by the Government. (2) Contracts made on behalf of the Commission shah not be binding on it unless they are executed by a person duly authorised by it. (3) A person authorised by the Commission to enter into any contract on its behalf shall not be personally liable for any assurance or contract made on its behalf and any liability arising out of such assurance or contract shall be discharged from the Fund. The statute, it may be observed, neither imposes a specific duty on the O.N.G.C. to supply its products to consumers at large nor contains any provisions regarding the fixation of prices for the commodities made available by the O.N.G.C. for sale. In the course of its drilling and exploration of oil, the ONGC discovered oil-bearing fields in Cambay and Ankleswar region in 1969 and 1961 respectively. In most ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Eventually, public discontent was expressed over the alleged high price that was being charged for gas by the ONGC to these organisations. It was felt that the ONGC was denying to them the advantage they should have obtained by the discovery of gas in the region of their operation. It was also felt that this treatment resulted in discrimination against them in comparison with advantages enjoyed by other States due to the availability of fuel resources such as coal or hydro-power within their areas. In view of these expressions of public feeling, the question of fixing a proper price for the gas was taken up by the Government of Gujarat with the Government of India. Eventually, as no agreement could be arrived at, the disputes was referred to the sole arbitration of Dr. V.K.R.V. Rao who gave his award (hereinafter referred to as 'the award') on 23.9.1967. He determined the price of natural gas at ₹ 50 per unit ex-well-head, to which were added royalty, sales-tax, depreciation and the transport charges. This award was to be enforced for a period of five years i.e. upto 31.3.1971. Between April 1971 and December 1975, the well-head price was increased and fixed at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 382.15 1.4.1978 to 31.03.1979 ₹ 504.00 According to the ONGC, the price demanded from these industries and initially been based on alternative fuel cost i.e., the cost which these industries would have had to pay for fuel oil if no supply of gas had been available. Later, upto December 1975, the price was based on the cost of production, as determined by the award. After the expiry of the period of operation of the award, the basis for calculation of price was revised on the basis of the thermal equivalence of coal price. The rates of supply from 1.4.78 as fixed above from time to time were also made subject to an automatic annual escalation at 5%. The contracts, as already mentioned, were annual and contained no term for renewal. On the expiry of each contract, a fresh contract had to be entered into and, naturally, the new contract stipulated prices for supply that were prevalent at the time of the respective contracts. It may be mentioned that the existing contracts with the various consumers had lapsed by efflux of time on 31.3.79 in some cases, 30.1.80 in some other cases and in 1982 in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court, after pointing out the various difficulties and questions raised by the case thought it would be fit and proper to direct the ONGC not to discontinue the supply of gas but to continue to supply it at the rate of ₹ 1,000 per unit till November 30, 1983 (unless the petition was disposed of in the meanwhile), subject to adjustment being made in case this Court or the machinery evolved at the time of final disposal of the petition determined the price of gas at a different rate. In other words, if, ultimately, the price of gas should be determined at a higher rate, the writ petitioners would be obliged to make good the difference. In case a lower rate should be determined, the ONGC would be obliged to refund the excess amount collected or adjust it against future supplies, as the Court may direct at the time of disposing of the matter finally. A similar order was passed on 29.12.1982 in another batch of cases. When these appeals were filed a Bench of this Court, on 6.10.1983, continued the interim price of ₹ 1,000 per unit without prejudice to the rights and contentions of the parties and directed the appeals to be expedited. It has taken six years since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the judgment. The position, therefore, is that we are not concerned in these appeals with the period beyond 30.1.1987 when the jurisdiction to fix prices came to be vested in the Central Government. We are concerned in these matters only with the period from the date of expiry of the contracts in favour of each of the respondents to 30.1.1987 and with the following questions: (a) whether the O.N.G.C. is at liberty to fix its own price for the gas or should be directed to fix the price in any particular manner; (b) whether the O.N.G.C. can be directed to supply data and the break-up for the price charged and to negotiate the price with the parties concerned; (c) whether the O.N.G.C. can be compelled to continue to supply gas to the various petitioners at the interim prices fixed by the court subject to adjustment on fixation of prices determined in accordance with the directions of the court; and (d) whether the minimum guarantee of off-take could be raised by the O.N.G.C. to 90 per cent instead of 75 per cent. It is unnecessary at this stage to set out the various contentions raised by the parties before the High Court as they will have to be discussed in some detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o their consideration all relevant factors and for that purpose they may hear fully and effectively the petitioners and other persons likely to be affected thereby: If the last of the above three courses is adopted by the ONGC for deciding the price structure afresh, it would be in their interest to give hearing to the persons likely to be affected so that the possibility of a new round of litigation is avoided. We reiterate that as far as the petitioners are concerned, they are amenable to any of the three modes which the ONGC may choose to adopt. 37. We accordingly set aside the prices demanded by the ONGC from these petitioners in this group of petitions, leaving it open to the ONGC to deal with the question of price fixation in any one of the three modes suggested by us. The petitions are accordingly partly allowed. Rule is accordingly made absolute in all these petitions with costs. 38. The civil applications, in view of the final decision, do not survive and stand disposed of and till the new price fixation is had, the price charged last from these petitioners under the respective contracts with them shall continue to operate between the parties, subject to adjustments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is in fact being incurred by other industries engaged in the production of similar goods to which the O.N.G.C. is not making any supplies at all. Sri Sen urges that while public sector units and State instrumentalities should not be allowed to exploit the consumers, it is equally necessary to ensure that such units and instrumentalities are enabled to make reasonable profits and made good as commercial enterprises by charging prices which the traffic can bear so that they can also contribute substantially to national development. It is submitted that, as against the respondents who are receiving supplies at the rate of ₹ 1,000 per unit, there are 29 industries paying the Government-fixed price of ₹ 1840 (since 1987), 12 other parties who have earlier signed contracts at the furnace oil equivalent rate and 65 industries which are willing to sign contracts at the aforesaid Government rates. It should not also be overlooked that, even if the cost plus basis were to be contemplated, the prices would require substantial revision considering the huge expenditure incurred by the Government of India in recent years in prospecting for oil and the need for heavy capital in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were ordinary commercial contracts entered into by private treaty between the ONGC and these respondents to sell and buy certain goods produced by the ONGC at the prices stipulated in the contracts. Looked at purely from the contractual angle, the ONGC was perfectly at liberty to stop the supply on the expiry of the relevant contract and refuse to supply further unless a fresh contract could be entered into agreeing upon a price for such supply. Assuming that the ONGC is a State instrumentality and the price demanded by it is susceptible to judicial review, the court may, where a contract has been entered into, consider the sustainability of the price agreed upon or where no contract has been entered into, injunct the ONGC from demanding a price for supply which is found unreasonable. But we doubt whether it is open to the Court to direct the ONGC to continue the supply indefinitely without a contract and without any price fixation. It is clear that, in giving directions as above, the Court was considerably weighed by its conclusion that the ONGC is a public utility undertaking which is bound to supply gas to all who demand such supply subject only to the availability of enough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and under a duty, in terms of a statute, licence or franchise obliging it to supply the commodity to the public at large. Thus, for example, in England the Public Health Act, 1936, the Electricity Act, 1947 and the Gas Act, 1948 provide examples of a duty cast on suppliers of water, electricity or gas. So also, in India, the Indian Electricity Act spells out a duty on the part of the licensee to supply electricity to members of the public. There are also other public utility undertakings providing for water, sewage connections, transport and the like which are under a statutory obligation to supply goods and services to members of the society at large, subject to the fulfilment of reasonable conditions prescribed therefore. The supply of gas by the ONGC, it is urged, has not attained this status yet. As far as we have been able to see, there is no statutory definition of 'public utility' in the context of any Indian enactment that may be relevant for our present propose. There is a definition of public utility service in s. 2(n) of the Industrial Disputes Act, 1947 which, inter alia, covers any industry which supplies power, light or water to the public and certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceable right to demand it, and declare that business to be a public utility which in fact serves such a substantial part of the public as to make its operations a matter of public concern. This view is in close accord with what has been termed the historic basis of classification of some businesses as public callings, that is, economic conditions, or the importance of the business to the public. While the terms public service corporation and quasipublic corporation are used to describe public utility corporations, and the term public service commission to describe the body regulating such utilities, some courts distinguish between a public sector corporation and a public utility on the basis that the latter is required to serve the public generally, whereas the former may be required to serve members only. The mere fact that a corporation declares itself to be a public utility does not make it such. In determining whether or not a company is a public utility, the law looks at what is being done, not what it asserts it is doing. Nor will the legislative declaration that a certain business shall be deemed a public utility make it such if, in fact, the business as conducted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and refers to persons or corporations charged with the duty to supply the public with the use of property or facilities owned or furnished by them. Euder v. First Nat. Bank in St. Louis, C.C.A. Mo., 16 F. 2d 990, 992. To constitute a true public utility , the devotion to public use must be of such character that the public generally, or that part of it which has been served and which has accepted the service, has the legal right to demand that that service shall be conducted, so long as it is continued, with reasonable efficiency under reasonable charges. The devotion to public use must be of such character that the product and service is available to the public generally and indiscriminately, or there must be the acceptance by the utility of public franchises or calling to its aid the police power of the State ' ' The Corpus Juris Secundum (Vol. 73, p990) also carries like definitions. Once a concern is found to be a public utility, at least two consequences follow. One is a general duty to serve which is described in American Jurisprudence thus: 16. General duty to serve The primary duty of a public utility is to serve on reasonable terms all those who desire the ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade of the service. However, neither by common law nor by statute is a public utility required to serve all; the conduct prohibited on the part of a public utility is unjust discrimination, unfair rates or practices, or unreasonable rules. The second constraint is in regard to the rates that can be charged by such an undertaking: A public utility may, in the absence of a legislative prescription or limitation of rates, fix and exact reasonable rates for services furnished, in which respect the reasonableness of the rate is to be considered in relation to the value of the property used by the utility in the public service. Thus, in the absence of legislation, carriers are ordinarily entitled to establish such rates and to adopt such policy of ratemaking as they may deem best. They may voluntarily render service for less than they could be compelled to accept. The right of a public utility or carrier to set its own rates is subject to the limitation that such rates must be nondiscriminatory and reasonable. xxx xxxxxx This obligation to furnish service at a reasonable price is implied by law and is incurred by acceptance of the franchise and privilege to serve the public. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the oil sector in recent years, including the recent construction of the HBJ pipeline, will eventually require the ONGC to set up and devise a rational and equitable scheme of distribution and supply of gas to various types of consumers situate over various parts of India. But, as yet, the ONGC has not embarked on any such scheme. It has been supplying gas to certain consumers on the basis of individual contracts and it is in regard to these consumers alone that the question of price has been raised before us. We do not, however, think that it is at all necessary for us to delve further into the above concept or express any final opinion as to whether the ONGC is a public utility or not because the claim of the respondents is for a continuance of the present system followed by the ONGC of supplying gas to select customers on the basis of contracts entered into with them. They only want the price to be regulated by the court; they do not challenge, for obvious reasons, the system of distribution thus far adopted by the ONGC. If the argument that the ONGC is a public utility is accepted, then the first consequence to follow will be that gas should be made available by it to all per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a declaration that they are entitled to the supply of gas at a reasonable price. It is sufficient, for disposing of this claim, to deal with this aspect of the matter and the larger aspect of ONGC being a public utility undertaking should be left out of account. We, therefore, do not express any final opinion on the issue except to say, prima facie, that it cannot be placed on par with a public utility undertaking. In this context, we should like to point out once again that the ONGC does not dispute that the price to be charged by it for gas supply should have some basis and not be arbitrary or unconscionable. Their stand before the High Court (vide para 29 of the judgment) and before us has been that the prices are fixed by them from time to time on a well-recognised principle viz. on the basis of the alternative fuel cost which the consumers may have to incur had they not been in receipt of gas supply. Assuming this to be correct, is there any illegality in the procedure adopted by them?--that is the question. The respondents contend, and the High Court has held, that there is. According to them, a public sector undertaking must supply its goods at a price which will cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o parties arrayed before the arbitrator and set out in sections IV and V of the award also covered a very wide ground. The award starts with a discussion of certain general considerations and while doing so, dealing with a contention comparing the price fixation in Assam and Gujarat, the award says: The Gujarat contention that in fixing the price of gas in Gujarat, note should be taken of the price fixed by Oil India for the sale of Assam gas to the Assam Electricity Board at 25 paise per cubic foot cannot be dismissed as lightly as the O.N.G.C. seem to have done. Nor can it be contended by Gujarat that if a mistake has been made once in one area, that therefore it should be extended to other areas. It must be added also that the price of gas in Assam and in Gujarat is not on all fours for the reasons that I shall mention later. All the same, one cannot ignore the relevance of the Assam gas price, even though the remedical action required is perhaps more on the Assam side than on the ONGC attitude in Gujarat. I shall have something to say on the question later on in this report, though it is not strictly within the terms of reference given to the arbitrator. I am not prepare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. Above all it has always been the practice in India, when prices are fixed. to base it on the cost of production plus a reasonable profit and this has been what the Tariff Commission has been doing all these yeas in regard to other commodities. Under the circumstances, while the price of substitutes is undoubtedly a relevant (factor?) in the fixation of the price of gas, I have no doubt that it cannot be treated as the primary factor under the Indian circumstances referred to earlier. Again, at p. 18, the basic formula is expounded as follows: I have already indicated my thinking on the question of ..... prices of substitute materials on the basis of thermal equivalence in the concluding para of the previous section. Gas pricing in relation to the prices of substitute materials understandable in foreign countries, where gas has been deliberately pushed into the fuel market by pipe line companies which have constructed long and expensive pipe lines and sold gas at a price lower than that of alternative fuels in order to capture and retain the market. In fact, the price of gas in the initial stage was much less than that of competing alternative fuels and not on par with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, it is my considered judgment that formula of fixing the price of gas on the basis of the thermal equivalence and price of substitute fuel or feedstock should not be accepted, though the price resulting from such a formula certainly is a relevant consideration as indicating the ceiling below which the price of gas should be fixed by the Arbitrator. I would therefore reject the ONGC proposal that the formula to be used for the price of gas should be based on the price of the available alternative fuels or feedstock. The only other basic formula is the one advanced by the Gujarat Government, namely, that the only rational approach to the pricing of gas is via the cost plus profits formula . And it is the cost plus profit formula that I propose to adopt as the primary base for determining my award on the price of gas in Gujarat. Having said this, I must hasten to add that this does not mean my acceptance either of the connotation that the Gujarat Government gives to this formula in terms of the content postulated for the cost of production and profit or the figures they have put forward for the price of gas on the basis of their interpretation of the content of cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing those essential purposes. Secondly, Dr. Rao also agrees that the thermal equivalence basis is a recognised method for fixation of price, that it has a relevance and that it has to be taken into account in determining the price for gas supply. We also wonder whether, in the present set up of the ONGC with a vast expansion of its exploratory activities, enough data are available to work out a price on the cost plus basis. Any such computation will have to provide adequately for future explorations, infructuous expenditure, expenditure on modern uptodate machinery and research and above all expenditure that will be necessary to reach the gas to the consumers. In these circumstances, the cost plus basis fixed by Shri Rao in the background of the real nature of the dispute before him three decades ago cannot be taken as conclusive in the present situation. Here we are dealing with a price to be fixed under a contract between the ONGC and one set of industries in the State who wish to make a change over from the furnace oil system to that of gas supply with a view to increase their own profitability and gain an advantage, if possible, over other industries in the State. In this conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it ignores 'demand or fails to adequately reflect competition or is based upon a concept of cost which is not solely relevant for pricing decision in all cases. What is essential is not so much of current of past costs but forecast of future cost with accuracy ..... Generally pricing should be such as to increase production and sales and secure an adequate return on capital employed. Again, in a somewhat different context in relation K, a State transport undertaking, this Court observed, in Venkatachalam v. Deputy Transport Commissioner, [1977] 2 SCR 392: ..... the special status of a Government owned transport undertaking is obvious ..... Its functional motto is not more profits at any cost but service to citizens first and, in a far larger measure than private companies and individuals, although profitability is also a factor even in public utilities. (emphasis added) These passages indicate that cost plus is not a satisfactory basis in all situations. The basis may need to be made more stringent in some situations and more broad-based in others. May be the cost plus is an ideal basis where the commodity supplied is the product of a monopoly vital' to human nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h upon all the details. It is sufficient, for our present purposes, to say that the monograph points out, a propos such pricing policy, that several state undertakings are already earning profits and the general policy has been accepted that the maximum economic returns should be secured from all public enterprises, whether these are operated by the Central or State Governments directly or through corporation or companies and that the surplus of public enterprises will have to play an increasing part in financing economic development under the various National Plans. It proceeds to say (at p. 173): A growing source of governmental revenue in many countries is the profits of public undertaking. In under developed countries public enterprises fostered on public revenues are expected to play a more positive role in financing the countries' development than similar enterprises do in developed economies. In determining the price policies of these undertakings considerations of maximising revenue will not play as important a part as profits do in private enterprises, but within the limits set by the necessity to foster economic development, their price policies are designed to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a decrease in the cost production and in turn this would lead to the emergence of a surplus within the economic price itself and that would be a surplus which will represent a measure of the nation's increase in productivity this surplus would not be the result of the policies laid down at national level as in the case of difference between the economic price and the social price. On the contrary, it would represent the result of the motivations and efforts of a larger number of persons engaged in productive activity. Hence the importance of arranging for proper incentive to stimulate the creation of this kind of surplus. That is the reason why in socialist societies now-adays, individual enterprises are permitted to retain a larger share of such surpluses as they may create by an increase in productivity, this larger share to be used by them partly for increasing individual incomes of those engaged in the enterprises and partly for giving an opportunity to the enterprises in question to build up the financial resources needed to following their own independent investment policies. Public enterprise must be carried on a profitmaking basis, not only in the sense that public ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion that it would not be right to insist that the ONGC should fix oil prices only on cost plus basis. Indeed, its policy of pricing should be based on the several factors peculiar to the industry and its current situation and so long as such a policy is not irrational or whimsical, the court may not interfere. The question of fixation of a fair and reasonable price for goods placed on the market has come up for consideration of Parliament and Courts in different contexts. Price fixation, it is common ground, is generally a legislative function. But Parliament generally provides for interference only at a stage where in pursuance of social and economic objectives or to discharge duties under the Directive Principles of State Policy, control has to be exercised over the distribution and consumption of the material resources of the community. Thus while Parliament has enacted the Essential Commodities Act, it has left it to the discretion of the Executive to take concrete steps for fixing the prices of essential commodities as and when necessity arises, by promulgating Control Orders in exercise of the powers vested in the Act. Various types of foodgrains, sugarcane and drugs hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of law which inhibits arbitrary action by the government (See Rohtas Industries v. Bihar State Electricity Board, [1984] 3 SCR 59). It is a public utility monopoly undertaking which may not be driven by pure profit motive--not that profit is to be shunned but that service and not profit should inform its actions. It is not the function of the Board to so manage its affairs as to earn the maximum profit; even as a private corporate body may be inspired to earn huge profits with a view to paying large dividends to its shareholders. But it does not follow that the Board may not and need not earn profits for the purpose of performing its duties and discharging its obligations under the statute. It stands to common sense that the Board must manage its affairs on sound economic principles. Having ventured into the field of commerce, no public service undertaking can afford to say it will ignore business principles which are an essential to public service undertakings as to commercial ventures. (See Lord Scarman in Bromely v. Greater London Council, [1982] 1 All ER 129). If the Board borrows sums either from the government or from other sources or by the issue of debentures and bonds, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of minimum profit to be earned being such as may be specified by the State Government. 8. Shri Potti, learned counsel for the consumers placed great reliance on the observations of this Court in Kerala State Electricity Board v. Indian Aluminium Co., [1976] 1 SCR 552; Bihar State Electricity Board v. Workmen, [1976] 2 SCR 42 and P. Nalla Thampy Thera v. Union of India to contend that the Electricity Board was barred from conducting its operations on commercial lines so as to earn a profit. We do not think that any of these observations is in conflict with what we have said. Pure profit motive, unjustifiable according to us even in the case of a private trading concern, can never be the sole guiding factor in the case of a public enterprise. If profit is made not for profit's sake but for the purpose of fulfilling, better and more extensively, the obligation of the services expected of it cannot be said that the public enterprise acted beyond its authority. The observations in the first case which were refined to us merely emphasised the fact that the Electricity Board is not an ordinary trading corporation and that as a public utility undertaking its emphasis should be on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extravagant. The court will then refrain from touching the tariffs. After all, as has been said by this Court often enough price fixation is neither the forte nor the function of the court. We are not called upon here, in the view we take, to decide whether the cost plus basis or the thermal equivalence basis is more appropriate. All that we wish to say is that, having regard to the basis on which the claims of the respondents have proceeded thus far, our task is a very limited one. We cannot say, for reasons set out below, that the ONGC has acted arbitrarily in fixing the prices on the thermal equivalence basis; the fact that it has not done it on cost plus basis does not vitiate the price fixation. The only question we have to address ourselves to is as to whether the O.N.G.C. has fixed a price based on relevant materials and on some known principle. At the outset, one must notice that the price is not directly and specifically related to or based on any unreasonable margin of profit. There is nothing to indicate that the ONGC was prompted, in fixing its prices, on the one and only consideration of deriving maximum profits for itself. On the other hand, it appears to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and Price Policy where, dealing with the basis of fixation of gas price by negotiation between the British Gas Commission and companies producing North Sea gas, it is pointed out hat the price is set by the nearest alternative fuel, usually fuel oil. This was also the basis, it will be remembered, on which initially the GSEB and GSFC had agreed to receive supplies from the ONGC. Thus this is a basis of fixation of price that is recognised in this field. Fixation of price on this basis is, therefore, a logical and appropriate one in the circumstances We should once again like to emphasise that different considerations may perhaps have to prevail if the treatment of ONGC as a public utility is taken to its logical conclusion but that is not the basis on which the present writ petitions can be decided. Even at present the ONGC is supplying to public sector undertakings at a much lower price. That has not been challenged by those organisations and the differentiation has also been upheld, in principle, by the High Court, rightly in our opinion. Fortunately, with the discovery of more and more oil wells in various parts of the country the economy of the country is booming and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and supply as of right, without contracts. But, as they have in fact had the benefit of the supplies under interim orders of the Court, this question does not survive and all that we can declare is that the prices demanded by the ONGC are not unreasonable or capricious and are binding on the respondents. Having dealt with the principal issue, we may now refer to certain subsidiary matters touched upon in the course of arguments: (i) A point was made about the ONGC's right to insist on a minimum offtake guarantee to the extent of 90%. This has been upheld by the High Court and there is no appeal (the crossappeals having been dismissed as time barred) by the respondents. There can, however, be no doubt that the High Court was right in its conclusion on this issue. If any authority regarding the rationale of such a clause is needed, it is to be found in the decision of this Court in Amalgamated Electricity Co. Ltd. v. Jalgaon Borough Municipality, [1976] 1 SCR 636. (ii) A statement was filed before us to show that if the prices had been determined on the basis of the thermal equivalence of coal, they would have been much smaller. This statement has been filed before us fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a basic need of society and stands on no different footing from Electricity Boards or Fertiliser Corporations or Municipal Corporations. The instance of the Amul Dairy cannot, therefore, be treated as an index of the unreasonableness of the price charged from the respondents, particularly when the basis of fixation has been explained and is an intelligible and rational one. (v) Reference has been made to the price of gas in Assam and U.S.A. So far as the former is concerned, the High Court has, rightly in our view, discarded the comparison. So far as the latter is concerned, the point made by the ONGC was that Dr. Rao had fixed the price of gas in India in 1967 at 15% below the then U.S. price and that on the same basis the price of ₹ 2000 per unit today could not be said to be unreasonable as prices in U.S.A. have also shot up about thirty fold in the meantime. We find no effective reply to this argument. The High Court has just brushed it aside by reiterating that the well-head prices alone would be the reasonable basis for fixation of price. (vi) The High Court in its judgment has observed: if the ONGC were acting fairly and reasonably, there was nothing to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice and implement the direction. Instead, the High Court appears to have, by its directions in para 36, left the matter at large for it asks the ONGC to get the price fixed according to the reasonable and rational norms . We do not also see any justification for providing that the price fixation should be done in consultation with, or after giving an opportunity to the respondents. It is for the ONGC to fix the prices and there can be no requirement of a prior consultation with the present respondents or with prospective customers. In such cases of price fixation, as in the case of price fixations by Government (see Cynamide case, [1987] 2 SCC 720), the only remedy of aggrieved consumers can perhaps be to have some sort of post-decisional reconsideration by the ONGC after heating the view points of those affected. But this question does not arise now in the view we have taken to the ONGC's obligations in this regard. We should also like to add that, now that the prices have been fixed by the Government since 30.1.1987 and gas has already been supplied to the respondents till then on the basis of interim prices, the implementation of the directions contained in this paragraph w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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