TMI Blog2016 (4) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... G prices, as the same are controlled by global market forces. The only way to have any semblance of control over the prices of RLNG was to pool the prices of RLNG procured by the off-takers under long term contracts - it becomes clear from a perusal of the documents produced on record that the executive policy decision dated 06.03.2007 to pool the price of RLNG was arrived at after elaborative discussions between representatives of Qatar, India, IOC, BPCL, GAIL, ONGC and other experts in the field. It was an informed decision taken in the interest of the public at large. There being no evidence to suggest that the impugned policy direction is illegal, arbitrary, unreasonable or otherwise violative of Article 14 of the Constitution of India, we find no reason to interfere with the same - the impugned policy decision dated 06.03.2007 does not suffer from any infirmity in law and is hereby upheld - Appeal dismissed. - CIVIL APPEAL NO. 4610 OF 2009 WITH CIVIL APPEAL NO. 4609 OF 2009 AND CIVIL APPEAL NO. 4657 OF 2009 - - - Dated:- 19-4-2016 - Mr. V. GOPALA GOWDA And Mr. UDAY UMESH LALIT, JJ. JUDGMENT V. GOPALA GOWDA, J. The prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... million metric tonnes per annum (MMTPA) at a fixed price of US $ 2.9412 per million metric british thermal unit (MMBTU). 5.On 06.03.2007, the Central Government issued the impugned policy directive to Petronet in the following terms: 1. 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 non discriminatory basis and uniform pooled prices should be charged for all the existing and new customers. 2. You are advised accordingly and requested to give effect to the same immediately. The letter was authenticated by the Under Secretary to the Government of India. 6.In pursuant to the above communication dated 06.03.2007, letters dated 19.03.2007 and 12.04.2007 were sent from IOCL, BPCL and GAIL to Essar Steel, informing it that in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erts and Secretaries of various departments of Union of India, has taken the decision of pooling of price of Regasified Liquefied Natural Gas, on non-discriminatory basis and thereby has put under one denomination, consumers of long term contracts and future consumers. Parties to the contract cannot bind Union of India (third party) by terms of contract Policy of Union of India is not bound by contractual terms of two private parties, on the contrary, contractual terms will be subject to policy decision by Union of India As a cumulative effect of the aforesaid facts, reasons and judicial pronouncement, the impugned decision taken by the Union of India dated 06.03.2007, is a policy decision for pooling price of Regasified Liquefied Natural Gas. Union of India is competent to take this policy decision and the same is neither arbitrary, nor it is unjust, nor violative of fundamental rights, nor violative of constitutional rights nor the same is violative of statutory rights of the petitioners and the petitioners have failed to establish that they have borne the burden of increase in price of Regasified Liquefied Natural Gas without passing the same to their further consumers, hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were based upon unilateral issuance of office orders, but not communicated to the other party to the contract and which were not even the subject matter of a public notice. 67. The stand taken by DDA itself is that the relationship between the parties arises out of the contract. The terms and conditions therefore were, therefore, required to be complied with by both the parties. Terms and conditions of the contract can indisputably be altered or modified. They cannot, however, be done unilaterally unless there exists any provision either in contract itself or in law. Novation of contract in terms of Section 60 of the Contract Act must precede the contract making process. The parties thereto must be ad idem so far as the terms and conditions are concerned. If DDA, a contracting party, intended to alter or modify the terms of contract, it was obligatory on its part to bring the same to the notice of the allocate. Having not done so, it, relying on or on the basis of the purported office orders which is not backed by any statute, new terms of contract could thrust upon the other party to the contract. The said purported policy is, therefore, not beyond the pale of judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y decision of the Union of India has no statutory flavour, as price pooling has been implemented neither through statute nor delegated legislation. 13. The learned senior counsel further contends that the impugned policy decision is an executive action benefitting a single person, namely Ratnagiri Power Project. Thus, this is on a worse footing than single person legislation, as it is a single person executive action. The learned senior counsel places reliance on the decision of a Constitution Bench of this Court in support of the above legal plea urged by him in the case of Ram Prasad Narayan Sahi v. The State of Bihar AIR 1953 SC 215 , wherein it was held as under: There have been a number of decisions by this court where the question regarding the nature and scope of the guarantee implied in the equal protection clause of the Constitution came up for consideration and the general principles can be taken to be fairly well settled. What this clause aims at is to strike down hostile discrimination or oppression or inequality. As the guarantee applies to all persons similarly situated, it is certainly open to the legislature to classify persons and thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 SCC 459, wherein it was held as under: We think that unless, by the terms of a particular statute, or order, price fixation is made a quasi-judicial function for specified purposes or cases, it is really legislative in character . Further, it was held in the case of Union of India v. Cynamide India Ltd (1987) 2 SCC 720 that: 7.The third observation we wish to make is, price fixation is more in the nature of a legislative activity than any other. It is true that, with the proliferation of delegated legislation, there is a tendency for the line between legislation and administration to vanish into an illusion. Administrative, quasi-judicial decisions tend to merge in legislative activity and, conversely, legislative activity tends to fade into and present an appearance of an administrative or quasi-judicial activity. Any attempt to draw a distinct line between legislative and administrative functions, it has been said, is 'difficult in theory and impossible in practice'. Though difficult, it is necessary that the line must sometimes be drawn as different legal rights and consequences may ensue. The distinction between the two ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver angle, the angle of general application the prospectively of its effect, the public interest served, and the rights and obligations flowing therefrom, there can be no question that price fixation is ordinarily a legislative activity. Pricefixation may occasionally assume an administrative or quasi-judicial character when it relates to acquisition or requisition of goods or property from individuals and it becomes necessary to fix the price separately in relation to such individuals. Such situations may arise when the owner of property or goods is compelled to sell his property or goods to the Government or its nominee and the price to be paid is directed by the legislature to be determined according to the statutory guidelines laid down by it. In such situations the determination of price may acquire a quasi-judicial character. Otherwise, price fixation is generally a legislative activity. We also wish to clear a misapprehension which appears to prevail in certain circles that price-fixation affects the manufacturer or producer primarily and therefore fairness requires that he be given an opportunity and that fair opportunity to the manufacturer or producer must be read into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not make it a policy decision. Reliance is placed on the decision of this Court in the case of Jaipur Development Authority v. Vijay Kumar Data Anr. (2011) 12 SCC 94, wherein it was held as under: 49. It is trite to say that all executive actions of the Government of India and the Government of a State are required to be taken in the name of the President or the Governor of the State concerned, as the case may be [Articles 77(1) and 166(1)]. Orders and other instruments made and executed in the name of the President or the Governor of a State, as the case may be, are required to be authenticated in such manner as may be specified in rules to be made by the President or the Governor, as the case may be [Articles 77(2) and 166(2)]. 52. Article 166(1) requires that all executive action of the State Government shall be expressed to be taken in the name of the Governor. This clause relates to cases where the executive action has to be expressed in the shape of a formal order or notification. It prescribes the mode in which an executive action has to be expressed. Noting by an official in the departmental file will not, therefore, come within this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the same time where however, a power or authority is conferred with a direction that certain regulation or formality shall be complied with, it would neither be unjust nor incorrect to exact a rigorous observance of it as essential to the acquisition of the right of authority. 19. The learned senior counsel contends that the Empowered Group of Ministers (EGOM) was supposed to recommend the restructuring of the Ratnagiri Power Project. There was nothing to say that it was empowered to restructure the prices of gas as well. The Rules of Business requires that executive action is taken in a manner in accordance with the law. The learned senior counsel further draws our attention to the provisions of the Government of India (Transaction of Business) Rules, 1961 (hereinafter referred to as the Business Rules ), extracted as under: 3. Disposal of Business by Ministries.- Subject to the provisions of these Rules in regard to consultation with other departments and submission of cases to the Prime Minister, the Cabinet and its Committees and the President, all business allotted to a department under the Government of India (Allocation of Business) Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 15 of the Milk Act is merely an enabling one, and it is not obligatory for State Government in all circumstances to fix the prices. In the instant case, the prices of cream and paneer were fixed through mutual negotiations between authorised representatives of the two companies and with the assistance of the authorities of the state. Such binding terms of agreement reached between the two companies could not be frustrated by statutory intervention of the State by issuance of notification for fixation of prices under Section 15 of the Act. As has been pointed out by the State the notification was intended to apply only to respondent Glindia Ltd. as the supplies of cream and paneer were being made to the appellant Central Fairy Farm by the Glindia Ltd. alone. The learned senior counsel further contends that change in policy can be no defence for breaching contract. Similarly, by mere issuance of a policy directive, the government cannot direct parties to breach the terms of the contract negotiated among themselves. As long as the policy directs variation in the existing arrangements or destroys contracts, the same is violative of Article 14 of the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for a discernible reasons, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualized than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness. The learned Solicitor General has also sought to explain the reason for the change in policy. He has taken us through the history of the two Sale Purchase Agreements between Petronet and RasGas. On the First Agreement, it has been stated in the Reply filed by Petronet as under: 3.3 The first LNG SPA was signed on 31.07.1999 for supply of 5 MMTPA of LNG for a period of 25 years commencing from January 2004. Originally, the foreign currency component (FCC) of the LNG price under the First LNG SPA was intended to be market driven and hence variab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Second GSPA would also have been USD 8-9 per MMBTU However, in view of the uniform price pooling directive, which was binding on the Off-takers, FCC under the Second GSPA has been fixed at USD 4.32 per MMBTU. The uniform pooled price of USD 4.32 per MMBTU was arrived at by taking the weighted average of the FCC of USD 2-3 for 5 MMTPA and USD 8-9 for 1.5 MMTPA. The answering respondent has facilitated implementation of the policy by pooling the RLNG prices under the First and Second GSPA s vis- -vis the Off-takers. 23. Mr. Gourab Banerji, the learned senior counsel appearing on behalf of respondent-GAIL in Civil Appeal No. 4610 of 2009 contends that not only Ratnagiri Power Limited, but several other Public Sector Undertakings would benefit as a result of the pooling of prices. Thus, it is the larger public interest which must be considered. 24. The learned senior counsel further contends that the claim of the appellants cannot be sustained in law as they have already passed the burden of the increase in the price on to their customers. The learned senior counsel places reliance on the decision of this Court in the case of Sahakari Khand Udyog Mandal Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 - would insist upon the said condition being satisfied before ordering refund. Unless the claimant for refund establishes that he has not passed on the burden of duty to another, he would not be entitled to refund, whatever be the proceeding and whichever be the forum. Section 11-B/Section 27 are constitutionally valid, as explained by us hereinbefore. They have to be applied and followed implicitly wherever they are applicable. 26. The learned Additional Solicitor General further contends that there is nothing on record to suggest that the appellants had suffered any loss during the relevant period. It is further submitted that the Union of India is well within its right to take a policy decision in public interest. This policy decision has been taken after taking into consideration all relevant factors and is in consonance with the principles enshrined in Article 14 of the Constitution of India. The learned ASG further contends that the uniform price pooling policy is within the executive powers vested with the Union of India under Articles 73 and 246 read with Entry 53 of List I of Seventh Schedule of the Constitution of India, as also Rules 2 3 (1) and Items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licy, or substitute one by the other but it will not be correct to contend that the court shall like its judicial hands off, when a plea is raised that the impugned decision is a policy decision. Interference therewith on the part of the superior court would not be without jurisdiction as it is subject to judicial review. Broadly, a policy decision is subject to judicial review on the following grounds: (a) if it is unconstitutional; (b) if it is de'hors the provisions of the Act and the Regulations; (c) if the delegatee has acted beyond its power of delegation; (d) if the executive policy is contrary to the statutory or a larger policy. 31. Thus, we will test the impugned policy on the above grounds to determine whether it warrants our interference under Article 136 or not. Further, this Court neither has the jurisdiction nor the competence to judge the viability of such policy decisions of the Government in exercise of its appellate jurisdiction under Article 136 of the Constitution of India. In the case of Arun Kumar Agrawal v. Union of India (2013) 7 SCC 1, this Court has further held as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration. In a democracy welfare of the people at large, and not merely of a small section of the society, has to be the concern of a responsible Government. If a considered policy decision has been taken, which is not in conflict with any law or is not mala fide, it will not be in Public Interest to require the Court to go into and investigate those areas which are the function of the executive. For any project which is approved after due deliberation the Court should refrain from being asked to review the decision just because a petitioner in filing a PIL alleges that such a decision should not have been taken because an opposite view against the undertaking of the project, which view may have been considered by the Government, is possible. When two or more options or views are possible and after considering them the Government takes a policy decision it is then not the function of the Court to go into the matter afresh and, in a way, sit in appeal over such a policy decision. (emphasis laid by this Court) A similar sentiment was echoed by a Constitution Bench of this Court in the case of Peerless General Finance Investment Co. Ltd. v. Reserve B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Latin term petra-oleum. (petrameans rock or stone and oleum-means oil). Thus, Natural Gas could very well be comprehended within the expression 'petroleum' or 'petroleum product Under Entry 53 of List I, Parliament has got power to make legislation for regulation and development of oil fields, mineral oil resources; petroleum, petroleum products, other liquids and substances declared by Parliament by law to be dangerously inflammable. Natural gas product extracted from oil wells is predominantly comprising of methane. Production of natural gas is not independent of the production of other petroleum products; though from some wells the natural gas alone would emanate, other products may emanate from subterranean chambers of earth. But all oil fields are explored for their potential hydrocarbon. therefore, the regulation of oil fields and mineral oil resources necessarily encompasses the regulation as well as development of natural gas. For free and smooth flow of trade, commerce and industry throughout the length and breadth of the country, natural gas and other petroleum products play a vital role Natural gas being a petroleum prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would lead to the shut-down of the Dabhol power plant. This would mean more than ₹ 10,000 crores of public money going down the drain. The answering respondent has a duty to prevent such a catastrophic effect, as it is bound to have a cascading effect on the overall economy of India. However, the prevalent cost of LNG is very high (about USD 8-9 per MMBTU), and if RGPPL had to purchase RLNG based on such market price, it would result in exponential increase in the cost of power, produced by the plant. Such cost of power would be prohibitively expensive and would have no buyers, making the entire Dabhol project unviable. In the circumstances, the answering respondent was of the view that the high cost of RLNG should not be loaded on to new customers alone and attempts should be made to provide RLNG to all the customers, whether existing or new, including RGPPL at a uniform average pooled price. (emphasis laid by this Court) A perusal of the above paragraph would show that the respondent-Union of India passed the impugned policy decision dated 06.03.2007 in the larger public interest, keeping in view the need to provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, it becomes clear from a perusal of the documents produced on record that the executive policy decision dated 06.03.2007 to pool the price of RLNG was arrived at after elaborative discussions between representatives of Qatar, India, IOC, BPCL, GAIL, ONGC and other experts in the field. It was an informed decision taken in the interest of the public at large. 35. The impugned policy decision dated 06.03.2007 has also been duly authenticated by the Under Secretary to the Government of India. 36. The next major contention advanced on behalf of the appellants is that since the communication dated 06.03.2007 is not a legislative action, hence price of RLNG could not have been fixed by virtue of that, and that it must be viewed more suspiciously as it is for the benefit of only one entity, viz, RGPPL. We are unable to agree with this contention. Various cases have been cited by the appellants to show that price fixing is a legislative function. The same does not come to the rescue of the appellants, because they have not appreciated in their entirety in a proper perspective. 37. RLNG, being a petroleum product, is an essential commodity for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders establishing new towns or airports etc. He asks: And what of 'directions of a general character' given by a minister to a nationalised industry? Are these various orders legislative or administrative? Wade says that the correct answer would be that they are both. He says: ...there is an infinite series of gradations, with a large area of overlap, between what is plainly legislation and what is plainly administration . Courts, nevertheless, for practical reasons, have distinguished legislative orders from the rest of the orders by reference to the principle that the former is of general application. They are made formally by publication and for general guidance with reference to which individual decisions are taken in particular situations. 33. According to Griffith and Street, an instruction may be treated as legislative even when they are not issued formally, but by a circular or a letter or the like. What matters is the substance and not the form, or the name. The learned authors say: ...where a Minister (or other authority) is given power in a statute or an instrument to exercise executive, as opposed to legislative, powers-as, for example, to req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, however, be done unilaterally unless there exists any provision either in contract itself or in law. In the instant case, clause 11.4 in the Supply Agreement is the provision of the contract which provides for a change in the terms and conditions of the contract. 39. Further, except a strong contention urged by the learned senior counsel for the appellants that the policy is for the benefit of one entity (RGPPL), the appellants have not present any evidence to show that they have been discriminated against, as the policy has been applied for all players across the board, as far as long term contracts are concerned. Nothing has been brought on record to show that the said decision is arbitrary, mala fide, unreasonable or taken after non application of mind. On the contrary, the documents produced on record by the respondents, which is the back and forth of communication and minutes of meetings between Ministers in Qatar and India, as well Secretaries of the Government and the representatives of IOCL, BPCL, GAIL, ONGC and Petronet, would clearly show that the impugned = decision dated 06.03.2007 was taken after due deliberation and exploring all other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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