TMI Blog2013 (6) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural 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 (for short 'Ras Gas') is situated on the North East coast of Qatar and operates one of the world's largest of shore recoverable non-associated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rease 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure-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. 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 du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions came to be decided by Full Bench of this Court by judgment and order dated 16.5.2008, which is reported in 2008 (3) G.L.R. 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 peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ).... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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. 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial 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 questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. v. 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 v. Union of India, reiterated the observations made by it in that case, which read as under: 9. In Tata Cellular v. 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 doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, 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 v. 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 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in the matter of State of U.P. v. 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. 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 v. 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 v. State of Bihar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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 to be entertained'. But then it also provides that, 'when the contractual dispute involves a public 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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