# ADANI GAS LIMITED v. UNION OF INDIA & ORS

- **Citation:** [2021] 13 S.C.R. 1146
- **Court:** Supreme Court of India
- **Decided:** 2021-09-28
- **Case number:** Civil Appeal Nos. 60086009 of 2021
- **Bench:** Uday Umesh Lalit, S. Ravindra Bhat, Hrishikesh Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/adani-gas-limited-v-union-of-india-ors-35236
- **Pages:** 95

## Headnote

Petroleum and Natural Gas Regulatory Board Act, 2006 - ss.
2(d),11,16,17 and 61 - Petroleum and Natural Gas Regulatory
Board (Authorizing Entities to Lay, Build, Operate or Expand City
or Local Natural Gas Distribution Networks) Regulations, 2008 -
Regulation 4 and 18 - Laying and maintaining a gas distribution
network - Regulation of - PNGRB Act came into effect on 1.10.2007
and mandated authorization by the Petroleum and Natural Gas
Regulatory Board for the laying, building, operating or expanding
any city or local natural gas distribution network ("CGD activities"
and "CGD network") - On 30.10.2007, the Board issued press
note directing entities engaged in CGD activities with or without
authorization of the Central Government, to submit relevant details
- After submission of details by appellant-AGL, Board restrained
its activities and issued direction for obtaining authorization from
Central government as per requirement of s. 17 - Board later on
granted provisional clearance to appellant to carry out capital
works in the Ahmedabad area, including the disputed areas - Section
16, relating to authorization, came into effect on 12.07.2010 - On
04.02.2013 - Board granted provisional authorization to Appellant's
CGD network in Ahmedabad city, excluding disputed areas as
appellant lacked authorization from central government - Appellant
accepted the grant of authorization on 09.12.2013 - On 1.10.2015,
the Board invited bids for development of CGD networks in those
disputed areas in Ahmedabad - Appellant submitted its applicationcum-bid documents in respect of these areas - The bid was
unsuccessful - Feeling aggrieved by the exclusion of these areas
from the authorization granted to it - Appellant approached the
High Court - After the petition was unsuccessful before the High
Court appellant approached Supreme Court and submitted that -
(i) It does not require authorization from central government, as by
[2021] 13 S.C.R.1146
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virtue of s. 16 of the PNGRB Act, it was entitled to be treated as an
entity with "deemed authorization" reliance was placed on the case
of AGL v. Union of India (2019) 3 SCC 641: - (ii) Regulation 18
(which provides for the requirement of Board's fresh authorization
to the entities that were carrying out CGD activities prior to the
coming into effect of PNGRB Act, who were not authorized by central
government) gave arbitrary power to the Board in granting
authorization and it is ultra-vires to the PNGRB Act - (iii) Exclusion
of the disputed areas from authorization was unjustified - Held: (i)
Deemed authorization clause under proviso to s. 16 is subjected to
other provisions - s. 17 is one such provision, which provides that
only entities which were previously authorized by central government
could claim deemed authorization - Appellant lacked such
authorization, therefore cannot be treated as entity with deemed
authorization - Adani gas case was overruled as it did not interpret
the law correctly - (ii) All criteria provided under regulation 18
have to be considered, having regard to their inter-linkages -
Therefore, the question of picking and choosing one criterion, and
ignoring others does not arise and moreover it dependent on the
individual facts of the case - This per se does not render the power
arbitrary - Remedy of judicial review is always available in case of
arbitrariness - Further observed, objective for framing Regulation
18, is compatible to the overall objectives of the PNGRB Act -
Regulation 18 is not contraindicated by any specific provision of
the Act - The various factors mentioned in it, provide an objective
basis for the Board to consider the proper method of granting
authorization - Further, as the sectoral regulator, PNGRB is
entrusted with the power to frame appropriate regulations to ensure
the objectives of the Act, therefore, it is not ultra-vires to Act - (iii)
Appellant's claim is precluded by the principle of approbatereprobate, as it accept

## Text

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SUPREME COURT REPORTS
[2021] 13 S.C.R.
ADANI GAS LIMITED
v.
UNION OF INDIA & ORS.
(Civil Appeal No(s). 6008-09 of 2021)
SEPTEMBER 28, 2021
[UDAY UMESH LALIT, S. RAVINDRA BHAT AND
HRISHIKESH ROY, JJ.]
Petroleum and Natural Gas Regulatory Board Act, 2006 - ss.
2(d),11,16,17 and 61 - Petroleum and Natural Gas Regulatory
Board (Authorizing Entities to Lay, Build, Operate or Expand City
or Local Natural Gas Distribution Networks) Regulations, 2008 -
Regulation 4 and 18 - Laying and maintaining a gas distribution
network - Regulation of - PNGRB Act came into effect on 1.10.2007
and mandated authorization by the Petroleum and Natural Gas
Regulatory Board for the laying, building, operating or expanding
any city or local natural gas distribution network ("CGD activities"
and "CGD network") - On 30.10.2007, the Board issued press
note directing entities engaged in CGD activities with or without
authorization of the Central Government, to submit relevant details
- After submission of details by appellant-AGL, Board restrained
its activities and issued direction for obtaining authorization from
Central government as per requirement of s. 17 - Board later on
granted provisional clearance to appellant to carry out capital
works in the Ahmedabad area, including the disputed areas - Section
16, relating to authorization, came into effect on 12.07.2010 - On
04.02.2013 - Board granted provisional authorization to Appellant's
CGD network in Ahmedabad city, excluding disputed areas as
appellant lacked authorization from central government - Appellant
accepted the grant of authorization on 09.12.2013 - On 1.10.2015,
the Board invited bids for development of CGD networks in those
disputed areas in Ahmedabad - Appellant submitted its applicationcum-bid documents in respect of these areas - The bid was
unsuccessful - Feeling aggrieved by the exclusion of these areas
from the authorization granted to it - Appellant approached the
High Court - After the petition was unsuccessful before the High
Court appellant approached Supreme Court and submitted that -
(i) It does not require authorization from central government, as by
[2021] 13 S.C.R.1146
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virtue of s. 16 of the PNGRB Act, it was entitled to be treated as an
entity with "deemed authorization" reliance was placed on the case
of AGL v. Union of India (2019) 3 SCC 641: - (ii) Regulation 18
(which provides for the requirement of Board's fresh authorization
to the entities that were carrying out CGD activities prior to the
coming into effect of PNGRB Act, who were not authorized by central
government) gave arbitrary power to the Board in granting
authorization and it is ultra-vires to the PNGRB Act - (iii) Exclusion
of the disputed areas from authorization was unjustified - Held: (i)
Deemed authorization clause under proviso to s. 16 is subjected to
other provisions - s. 17 is one such provision, which provides that
only entities which were previously authorized by central government
could claim deemed authorization - Appellant lacked such
authorization, therefore cannot be treated as entity with deemed
authorization - Adani gas case was overruled as it did not interpret
the law correctly - (ii) All criteria provided under regulation 18
have to be considered, having regard to their inter-linkages -
Therefore, the question of picking and choosing one criterion, and
ignoring others does not arise and moreover it dependent on the
individual facts of the case - This per se does not render the power
arbitrary - Remedy of judicial review is always available in case of
arbitrariness - Further observed, objective for framing Regulation
18, is compatible to the overall objectives of the PNGRB Act -
Regulation 18 is not contraindicated by any specific provision of
the Act - The various factors mentioned in it, provide an objective
basis for the Board to consider the proper method of granting
authorization - Further, as the sectoral regulator, PNGRB is
entrusted with the power to frame appropriate regulations to ensure
the objectives of the Act, therefore, it is not ultra-vires to Act - (iii)
Appellant's claim is precluded by the principle of approbatereprobate, as it accepted authorization granted by PNGRB
(including exclusion of disputed areas), furnished the performance
bond and even participated in the auction for the excluded areas,
and only thereafter challenged authorization when its bid was
unsuccessful.
Dismissing the appeals, the Court
HELD: 1. The following points arose for consideration by
this Court:
ADANI GAS LIMITED v. UNION OF INDIA & ORS.
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(i) The scope of the "deemed authorisation" clause under
the proviso to Section 16 of the PNGRB Act;
(ii) Validity of Regulation 18; and
(iii) Whether the exclusion of the disputed areas from the
authorisation granted to Adani was justified. [Para 54][1187-GH; 1188-A]
The scope of the "deemed authorisation" clause under the
proviso to Section 16 of the PNGRB Act
2. Parliament did not enact the PNGRB Act on a blank slate,
as it were. In the Presidential Reference (Special reference case)
under Article 143 elicited the Court's opinion in the background
of assertions by some States that they had the legislative
competence to deal with natural gas. This Court's unanimous
judgment was categorical, in that it upheld the primacy of
Parliament under Entry 53 List I of the Seventh Schedule of the
Constitution of India. Importantly, this Court also recollected
enactments (including the pre-constitution Petroleum Act of
1934) that dealt with petroleum, natural gas, mineral oils etc. and
sought to regulate various facets and aspects thereof and related
products and their regulations. Given this background, the
Parliament felt the compelling need to enact a comprehensive
legislation that would regulate salient aspects of all activities
pertaining to petroleum products and mineral oils. The PNGRB
Act was thus enacted. As noticed earlier, it regulates all activities
after extraction of petroleum, natural gas and other petroleum
products starting with refining and going right up to distribution
to the ultimate consumer. When Parliament enacted the Act, it
was confronted with a factual situation where several entities had
begun various activities towards laying pipelines and setting up
networks in relation to natural gas. If one read the proviso to
Section 16 in isolation, the inference undoubtedly would be that
every entity which had started laying and building pipelines and
networks was the recipient of the deemed authorization clauseor in the words of appellant, that provision sought to
retrospectively regularize activities by all entities. However, such
a plain and facial construction is unacceptable given that in the
same provision (i.e., proviso to Section 16) the deemed
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authorization is immediately followed by phrase "subject to
provisions of this chapter". Proviso ordinarily carves out a field
of operation, but does not travel beyond the main enacted
provision. Therefore, the golden rule of interpretation is to read
the whole section, inclusive of the proviso, in such a manner that
they mutually throw light on each other and result in a harmonious
construction. [Paras 66, 67][1198-B-G]
3. The enacting part of Section 16 thus prohibits anyone or
any entity from starting or carrying on any activity covered by
the PNGRB Act and requires authorisation from it. The proviso
then is meant to operate in an extremely restricted manner, i.e.,
to deal with entities inter alia that were engaged in laying,
building, operating etc., inter alia, gas pipelines "at the time when
the Act came into force". The proviso, unlike the main part of
Section 16, was not intended to grant authorisation to entities
which had not started any activity thus far. Such entities had to
now apply for authorisation. In any case, by the combined operation
of Sections 16 and 17, the proviso to Section 16 is not unqualified
- the "deemed authorisation" clause is subject to other provisions
of Chapter IV. Section 17 is one such provision under Chapter
IV. This provision brings home clearly that only Central
Government authorised entities were deemed to have been
authorised. The omission of any reference to authorisation in
Section 16 is significant because the qualifier for application of
the proviso is that it was subject to other provisions of the chapter.
The scheme of Section 17 intrinsically classifies the two, i.e.
Central Government authorised entities, and others. The
underlying basis for this statutory classification is that only entities
which had been cleared or authorised by the Central Government
prior to the coming into force of the Act were deemed to have
authorization under the Act, and therefore, had to furnish certain
details. As with regard to the others, i.e., entities not authorised
by the Central Government, fresh applications were necessary
[Section 17(1) and Section 17(2)] which were to be assessed by
the Board on a case-by-case basis and in accordance with uniform
standards. Therefore, if one reads the proviso to Section 16 with
the proviso to Sections 17(1) and Section 17(2) the former (i.e.,
proviso to Section 16) only states that entities that had been
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previously authorized by the Central Government could claim
deemed authorization. The rationale for this is that the provisos
to Section 17(1) and 17(2) merely require such entities (as were
authorized by the Central Government prior to coming into force
of PNGRB Act) to intimate certain details to the PNGRB but do
not require any fresh authorization. This distinction i.e., between
authorization and intimation is crucial because it states that
entities which received Central Government authorization before
the commencement of the Act, and which had started to lay, build
or operate CGD networks were deemed to be authorized under
the PNGRB Act. [Para 75, 78][1204-E-H]
4. This Court was of the opinion that the previous ruling in
Adani Gas case did not correctly interpret the law. It did not
discuss whether the "deemed authorisation" (in the proviso to
Section 16) was qualified or unqualified. The previous ruling in
Adani Gas case also did not notice the important condition that
the deemed authorization clause applied subject to other
provisions of Chapter IV, including Section 17; and lastly it
overlooked the decisive ruling of a five judge bench in Special
Reference case. Accordingly, the interpretation of Section 16 and
the deemed authorization clause in its proviso, in Adani Gas is
held to be incorrect. The judgment in Adani Gas is therefore
overruled. [Para 85][1210-F-H]
Validity of Regulation 18
5. Regulation 18 pertains to entities that were carrying out
CGD activities prior to the coming into effect of the PNGRB Act,
but were not authorized by the Central Government. Such entities
do not enjoy "deemed authorization" under the Act; they are
required to apply for fresh authorization under the provisions of
Regulation 18. The PNGRB Act and Regulations, thus create
three categories of entities for the different ways in which
authorization can be obtained: (1) Entities authorized by the
Central Government prior to the appointed day, are deemed to
be authorized, and are merely required to submit certain
information in the relevant forms; (2) Entities that were carrying
out CGD activities, but were not authorized by the Central
Government, are required to apply for fresh authorization under
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Regulation 18; (3) Entities that seek to set up CGD activities
after the appointed day, i.e., all entities seeking to set up
operations afresh, after the PNGRB Act came into effect, would
be required to either submit an expression of interest, followed
by participation in the bidding process, or participate in the suomotu invitation of bids by the PNGRB. Regulation 18 is part of
the CGD Regulations framed under Section 61 of the PNGRB
Act. This regulation, on a plain reading, applies to entities not
authorised by the Central Government for laying, building,
operating or expanding pipelines beyond the appointed date.
Regulation 18(1) requires such entities (who did not possess
Central Government authorisation as on the appointed date) to
apply immediately for obtaining authorisation in the format
prescribed in Schedule I to the CGD Regulations. Regulation
18(2) then prescribes that the PNGRB "may" take into
consideration the criteria or conditions spelt out in clauses (a) to
(j). In the present case, having regard to the contextual setting
of Regulation 18, the expression "may take into consideration"
cannot be placed in the straightjacket of either a mandate or a
directory rule. There are numerous decisions which hold that
"may" could mean "shall" and vice versa; much depends upon
the context and object of the provision as well as its statutory
setting. [Paras 89, 90, 91, 98][1211-H; 1212-A; 1212-B-F; 1218F]
6. In the present case, Regulation 18(3) specifically states
that "evaluation of the application in terms of the Clauses (a) to
(j) shall be done in totality considering the composite nature and
inter-linkages of the criteria." This, coupled with the listing of
"any other criteria considered as relevant by the Board based on
the examination of the application." (Regulation 18 (2) (j)), in the
opinion of this Court, brings more precision to the task of
evaluation of applications (preferred by entities which did not
possess Central authorization when the Act came into force) by
the PNGRB. All these mean that the PNGRB is to be guided by
the composite of factors enumerated in Regulation 18(2) while
evaluating applications for authorization; how important one factor
is, and the appropriate weightage to be given to it, depends, as
required by Regulation 18(3) on the "totality" of all facts
"considering the composite nature and inter-linkages of the
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criteria." It is therefore, held that all clauses of Regulation 18(2)
have to be considered, and wherever necessary, "any other
relevant criteria" (Reg. 18 (2) (j)) which means factors relevant
for the purposes of the Act, having regard to its objects and
purposes. The PNGRB also has to consider the composite nature
and inter-linkages of the criteria. [Para 99][1219-A-G]
7. In regard to the validity of Regulation 18(2), the
appellant's argument is that the regulation is ultra vires, because
there is no substantive provision giving guidance, leaving the
power to reject applications at the whims of the PNGRB, which
can pick and choose any or some criterion and ignore the rest.
As far as the latter aspect goes, this Court has held above, that
all criteria have to be considered, having regard to their interlinkages. Therefore, the question of picking and choosing one
criterion, and ignoring others does not arise. Much would depend
on the individual facts of the case, the weight given to one or a
set of criteria. This per se does not render the power (under
Regulation 18 (2)) arbitrary. In the particular facts of any case, it
is open to an aggrieved applicant to show the exercise of power
is arbitrary, and seek judicial review. [Para 100][1219-G-H; 1220A-B]
8. Sections 11 and 61 of the PNGRB Act contain regulation
making powers. Under Section 11(c)(ii) the Board has power to
authorize entities to "lay, build, operate or expand city or local
natural gas distribution networks". By Section 11(e)(iii) PNGRB
is empowered to frame regulations to "access to city or local
natural gas distribution network so as to ensure fair trade and
competition amongst entities as per pipeline access code". By
Section 11(f)(iv) it is enjoined to ensure "equitable distribution
of petroleum and petroleum products". All these regulatory
powers, coupled with the general power under Section 61(1) to
frame regulations are, in the opinion of this court, sufficiently
wide to clothe PNGRB with the power to frame Regulation 18.
Furthermore, Regulation 18 is to be considered as applicable to
a specific class of entities- by their nature, dwindling in numbers,
i.e., entities which had not secured Central Government
authorization or approval before the PNGRB Act came into force.
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The regulation is meant to guide the Board to deal with
applications of such categories of entities, which fall under proviso
to Section 16 read with Section 17 (2), and apply uniform standards.
These considerations further the objectives of the whole of
PNGRB Act as well as enable the PNGRB to objectively perform
its task, while deciding applications, exercising its powers under
Section 17 (4). [Para 105][1224-F-H; 1225-B-D]
9. This Court was of the opinion that as the sectoral
regulator, PNGRB is entrusted with the power to frame
appropriate regulations to ensure the objectives of the Act, and
also bring about fairness in the marketplace. It has sought to
achieve that, through Regulation 18. It was is held that the
challenge to Regulation 18 cannot succeed; Adani's arguments
on this aspect were accordingly rejected. [Para 112][1229-G-H]
Whether the exclusion of the disputed areas from the
authorisation granted to Adani was justified
10. The grant of authorization to Adani, and its acceptance
of that authorization, furnishing of performance bond, and
proceeding to act upon it, even participating in the auction for
the excluded areas there can be no manner of doubt that it
acquiesced to the action of the PNGRB, and after having
unsuccessfully entered its bid, sought to challenge the
authorization. Clearly, this conduct amounts to approbating and
reprobating. Adani's arguments about its lack of knowledge about
its true rights, in the opinion of this Court, cannot be countenanced,
because it knew and conformed to the procedure under the
PNGRB Act, specifically, the requirements of the regulations,
and Regulation 18, when it applied and obtained authorization in
other areas in the country. [Para 118][1234-D-F]
11. To sum up, the points of consideration raised by
appellant were answered as follows:
a. On the scope of the "deemed authorisation" clause under
the proviso to Section 16 of the PNGRB Act, the decision in Adani
Gas case was held to have laid down the law incorrectly, and is
hereby overruled.
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b. It was held that the "deemed authorization" clause under
proviso to Section 16 is subject to other provisions of Chapter
IV, including Section 17 and, further, that only entities granted
authorization by the Central Government, fell in that category.
As a sequitur, it is held that entities which had received
authorization from States, had to seek authorization under the
PNGRB Act, in terms of Section 17(2), and in compliance with
the conditions spelt out under the CGD Regulations.
c. The role of the State in granting NOC is only supportive
or collaborative, in terms of the Central Government's policy, of
2006, and cannot confer any advantage to any entity, which has to
seek and be granted specific authorization in terms of the PNGRB
Act on the merits of its application.
d. It was held that Regulation 18 is neither arbitrary, nor
ultra vires. The objective underlying Regulation 18, is compatible
with the overall objectives of the PNGRB Act. Regulation 18 is
not contraindicated by any specific provision of the Act. Further,
as a sectoral regulator, PNGRB is entrusted with the power to
frame appropriate regulations to ensure the objectives of the Act,
and thus the challenge to Regulation 18 cannot succeed.
e. It was also held that Adani's claim is precluded by the
principle of approbate-reprobate, as it accepted authorization
granted by PNGRB (including exclusion of disputed areas),
furnished the performance bond and even participated in the
auction for the excluded areas, and only thereafter challenged
authorization when its bid was unsuccessful. It was held, that
exclusion of the disputed areas was justified in the overall facts
and circumstances. [Para 127][1239-A-H]
Adani Gas Ltd. v. Union of India (2019) 3 SCC 641 :
2019 (2) SCALE 213- overruled.
Voice of India v. Union of India W.P.(C) 8415/2009,
decided on 20.01.2010, Pallavi Resources Ltd. v.
Protos Engineering Company Pvt. Ltd. (2010) 5 SCC
196 : [2010] 3 SCR 847, Association of Natural Gas &
Ors v. Union of India (2004) 4 SCC 489; Global Energy
Ltd v. Central Electricity Regulatory Commission (2009)
15 SCC 570 : [2009] 9 SCR 22; Petroleum & Natural
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Gas Regulatory Board v. Indraprastha Gas Limited &
Ors. (2015) 9 SCC 209 : [2015] 7 SCR 215; Kunj
Behari Lal Butail v. State of Himachal Pradesh (2000)
3 SCC 40 : [2000] 1 SCR 1054; Mohinder Singh Gill
& Anr. v. The Chief Election Commissioner, Delhi & Ors.
(1978) 1 SCC 405 : [1978] 2 SCR 272; Moti Lal
Padampat Sugar Mills v. State of U.P (1979) 2 SCC
409 : [1979] 2 SCR 641; Petroleum and Natural Gas
Regulatory Board v. Indraprastha Gas (2015) 9 SCC
209 : [2015] 7 SCR 215; Shyam Telelink Ltd. v. Union
of India (2010) 10 SCC 138; M/s Tafcon Projects [I]
(P) Ltd. v. Union of India & Ors. (2004) 13 SCC 788;
K. S. Dharmadatam v. Central Government & Ors;
(1979) 4 SCC 294; N.K. Sharma v. Abhimanyu (2005)
13 SCC 213 : [2005] 4 Suppl. SCR 207; State of
Maharashtra v. Lalji Rajshi Shah & Ors. (2000) 2 SCC
699 : [2000] 1 SCR 1239; Petroleum & Natural Gas
Regulatory Board v. Indraprastha Gas Ltd. (2015) 9
SCC 209 : [2015] 7 SCR 215; Keshavlal Khemchand
& Sons (P) Ltd. v. Union of India (2015) 4 SCC 770 :
[2015] 2 SCR 51; Bharat Sanchar Nigam Ltd v. Telecom
Regulatory Authority of India (2014) 3 SCC 222 :
[2013] 12 SCR 999; Prakash Gupta v. Securities and
Exchange Board of India (2021) SCC OnLine SC 485;
M. C. Mehta v. Union of India WP(C) 13029/1985, Voice
of India v. Union of India W.P.(C) 8415/2009, decided
on 20.01.2010 - referred to.
In re Special Reference No. 1 of 2001 (2004) 4 SCC
489 : [2004] 3 SCR 534; Dwarka Prasad v. Dwarka
Das Sara (1976) 1 SCC 128 : [1976] 1 SCR 277; S.
Sundaram Pillai & Ors. v. V. Pattabiraman & Ors. (1985)
1 SCC 591 : [1985] 2 SCR 643 : [1979] 3 SCR 472;
M. Pentiah v. Muddala Veeramallappa & Ors. (1961) 2
SCR 295; Superintendent and Legal Remembrancer of
Legal Affairs to Govt. of West Bengal v. Abani Maity
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Balakrishna Chetty v. State of Madras [1961] 2 SCR
736; Ashok Leyland Ltd. v. State of Tamil Nadu (2004)
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3 SCC 1 : [2004] 1 SCR 306; Sri Sitaram Sugar
Company Limited v. Union of India (1990) 3 SCC 223
: [1990] 1 SCR 909; Collector of Customs v. Nathella
Sampathu Chett [1962] 3 SCR 786; State of Tamil Nadu
& Anr. v. P. Krishnamurthy & Ors. (2006) 4 SCC 517 :
[2006] 3 SCR 396; PTC India Ltd. v. Central Electricity
Regulatory Commission (2010) 4 SCC 603 : [2010] 3
SCR 609; State of U.P v. Renusagar Power Co. (1988)
4 SCC 59 : [1988] 1 Suppl. SCR 627; Global Energy
Ltd. v. Central Electricity Regulatory Commission (2009)
15 SCC 570 : [2009] 9 SCR 22; State of Karnataka v.
H. Ganesh Kamath (1983) 2 SCC 402 : [1983] 2 SCR
665; St. Johns Teachers Training Institute v. NCTE
(2003) 3 SCC 321 : [2003] 1 SCR 975; Tata Power
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(P) Ltd. v. Official Liquidator (2018) 10 SCC 707 :
[2018] 12 SCR 906; Amar Singh v. Union of India (2011)
7 SCC 69 : [2011] 6 SCR 403; Union of India v.
Shakuntala Gupta (2002) 10 SCC 694; Union of India
v. E.G. Namboodiri (1991) 3 SCC 38 : [1991] 2 SCR
451; Union of India v. Assn. of Unified Telecom Service
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672; Air Line Pilots' Assn. of India v. DG of Civil Aviation
(2011) 5 SCC 435 : [2011] 5 SCR 1019; Jal Mahal
Resorts (P) Ltd. v. K.P. Sharma (2014) 8 SCC 866 -
relied on.
Case Law Reference
[2004] 3 SCR 534
relied on
Para 8
[2010] 3 SCR 847
referred to
Para 18
[2009] 9 SCR 22
referred to
Para 23
[2015] 7 SCR 215
referred to
Para 23
[2000] 1 SCR 1054
referred to
Para 23
[1978] 2 SCR 272
referred to
Para 25
[1979] 2 SCR 641
referred to Para 31
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[2015] 7 SCR 215
referred to
Para 33
[2005] 4 Suppl. SCR 207
referred to
Para 49
[2000] 1 SCR 1239
referred to
Para 49
[1976] 1 SCR 277
relied on
Para 67
[1985] 2 SCR 643
referred to
Para 68
[1979] 3 SCR 472
relied on
Para 74
[2004] 1 SCR 306
relied on
Para 77
[1990] 1 SCR 909
relied on
Para 97
[2006] 3 SCR 396
relied on
Para 102
[2010] 3 SCR 609
relied on
Para 103
[1988] 1 Suppl. SCR 627 relied on
Para 104
[2009] 9 SCR 22
relied on
Para 104
[2015] 7 SCR 215 referred to
Para 106
[1983] 2 SCR 665
relied on
Para 109
[2003] 1 SCR 975
relied on
Para 109
[2009] 9 SCR 625
relied on
Para 109
[2015] 2 SCR 51
referred to
Para 111
[2013] 12 SCR 999
referred to
Para 111
[2018] 12 SCR 906
relied on
Para 114
[2011] 6 SCR 403
relied on
Para 114
[2011] 5 SCR 1019
relied on
Para 114
[2019] 16 SCR 672
relied on
Para 115
[1991] 2 SCR 451
relied on
Para 120
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 60086009 of 2021.
From the Judgment and Order dated 28.09.2018 of the High Court
of Gujarat at Ahmedabad in Special Civil Application No. 9741 of 2016
with Civil Application No. 1 of 2017.
ADANI GAS LIMITED v. UNION OF INDIA & ORS.
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With
Civil Appeal Nos. 6010 and 6011 of 2021.
Harish N. Salve, Dhruv Mehta, Sr. Advs., Ms. Ruby Singh Ahuja,
Sandeep Singhi, Ms. Deepti Sarin, Ms. Swikriti Singhania, Navandeep
Matta, Shamik Bhatt, M/s Karanjawala & Co., Piyush Joshi, Senthil
Jagadeesan, Ms. Sumiti Yadava, Ms. Sonakshi Malhan, Utkarsh Sharma,
Mohit Budhiraja, Ms. Pinki Mehra, Ms. Shipra Malhotra, Ms. Kaveri
Vats, Saurabh Aggarwal, Deepayan Mandal, Anshuman Choudhary, E.
C. Agrawala, Raj Bahadur Yadav, Ashish Kumar Tiwari, Ms. Divya
Roy, Ms. Madhumita Bhattacharjee, M/s Khaitan & Co., Advs. for the
appearing parties.
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
1. Special leave granted. These appeals were heard with the
consent of counsel appearing on behalf of the parties. The appeals are
directed against a judgment of the Gujarat High Court1 rejecting certain
writ petitions.
2. In those proceedings, the main appellant (hereafter called
"Adani") challenged the validity of Regulation 18 of the Petroleum and
Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate
or Expand City or Local Natural Gas Distribution Networks) Regulations,
2008 (hereafter called the "CGD Regulations") as violative of Articles
14 and 19(1)(g) of the Constitution of India, and ultra vires Section 16
of the Petroleum and Natural Gas Regulatory Board Act, 2006 (hereafter
called the "PNGRB Act" or "the Act"). Adani had also challenged the
grant of authorization to the third respondent (hereafter called "Gujarat
Gas") for laying and maintaining a gas distribution network. Gujarat Gas
had succeeded in securing the authorization in an auction held by the
Petroleum and Natural Gas Regulatory Board (hereafter called
"PNGRB" or "the Board").
Background
3. The PNGRB Act came into effect on 1.10.2007, and mandated
authorization by the Board for the laying, building, operating or expanding
any city or local natural gas distribution network (collectively, "CGD
1 Dated 28.09.2018.
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activities" and such a network, "CGD network"). On 30.10.2007, the
Board issued a press note directing entities engaged in CGD activities
with or without authorization of the Central Government, to submit
relevant details. After receiving the petitioner's details, the Board informed
it that recognition and acceptance could be only of a specific and formal
authorization by the Central Government, in accordance with Section 17
of the Act. Accordingly, Adani's activities were restrained and a direction
was given to obtain authorization from the Central Government. The
Board eventually granted Adani provisional clearance to carry out certain
capital works in the Ahmedabad area, including the disputed areas of
Sanand, Bavla, and Dholka (hereafter called "disputed areas"). Adani
also submitted an indemnity in favour of the Board.
4. Section 16, relating to authorization, came into effect on
12.07.2010. On 04.02.2013, the Board granted provisional authorization
to Adani's CGD network in Ahmedabad city and Dascroi area, excluding
18 CNG stations of Hindustan Petroleum Corporation Limited (hereafter
called "HPCL"), subject to certain conditions. The disputed areas were
excluded from this provisional authorization. Under protest, Adani
accepted the grant of authorization on 09.12.2013, despite certain areas
being excluded. On 1.10.2015, the Board invited bids for development
of CGD networks in those disputed areas in Ahmedabad. Adani submitted
its application-cum-bid documents in respect of these areas.
5. Feeling aggrieved by the exclusion of these areas from the
authorization granted to it, Adani approached the High Court, preferring
a petition under Article 226 of the Constitution, seeking several reliefs.
The principal relief claimed was the quashing of the grant of authorization
to Gujarat Gas, questioning the exclusion of the disputed areas by the
earlier authorization dated 28.11.2013, and challenging the vires of
Regulation 18 framed by the Board under the PNGRB Act. Adani also
contended that by virtue of Section 16 of the PNGRB Act, it was entitled
to be treated as an entity with "deemed authorization".
6. The PNGRB and Gujarat Gas, who were arrayed as
respondents before the High Court, contended that Adani's petition was
liable to be dismissed on the ground of delays and laches, and availability
of alternate remedies. They also contended that Adani was disentitled to
claim the reliefs it sought due to its conduct. On merits, PNGRB
contended that its letter dated 31.03.2008 to Adani sought necessary
details. At that stage, Adani did not challenge the validity of Regulation
ADANI GAS LIMITED v. UNION OF INDIA & ORS.
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18 and on the contrary, sought authorization under that provision by a
letter dated 09.07.2008 without protest. It was contended that although
Section 16 of the PNGRB Act was brought into force in 2010, at that
time too, Adani did not challenge the validity of the impugned regulation.
Furthermore, Adani applied for authorization under Section 17(2) of the
PNGRB Act and Regulation 18 without any protest and participated in
the hearings fixed by PNGRB. At that stage too, no objection was raised
with regard to its entitlement as a "deemed authorized" entity, and Adani
furnished the required particulars to PNGRB. The respondents pointed
out that on 04.02.2013, PNGRB issued a provisional authorization letter
on certain terms and conditions in which the disputed areas were
excluded. At that stage too, Regulation 18 was not challenged; Adani, on
the other hand accepted the terms and conditions on 28.10.2013. The
petition was therefore opposed on the grounds of estoppel, applicability
of the principle of approbate-reprobate, as well as delay and on merits.
7. The High Court, after hearing the parties, by its judgment held
that Adani had applied for and was granted authorization with respect to
Khurja area in Uttar Pradesh in 2012. That authorization was issued
under Regulation 18. Adani accepted that authorization and never
protested against it; it also accepted the terms and conditions of the
letter issued by the PNGRB for Ahmedabad, which excluded the disputed
areas. Thereafter, the performance bank guarantee was also submitted
by the Adani, and ultimately PNGRB issued the final authorization for
Ahmedabad city and Dascroi area, excluding the disputed areas. The
Court noticed that the bid for the disputed area was issued on 01.10.2015
and Adani participated in the bidding process, rather than challenging it.
The petition was filed only after it was unsuccessful in the bid. The High
Court found that the challenge to Regulation 18 of the CGD Regulations
therefore, was only when it suited Adani's convenience.
8. The impugned judgment then noted that this court, in its judgment
reported as In re Special Reference No. 1 of 20012 (hereafter called
"Special Reference"), had ruled that in view of Entry 53, List I of the
Seventh Schedule, the Parliament had exclusive legislative competence,
and the Central Government, exclusive executive competence on the
subject of natural gas, and that State Governments did not have any
authority to enact such a legislation or to grant any authorization in respect
of the subject of natural gas. The High Court held that:
2 (2004) 4 SCC 489.
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"The Parliament has, therefore, made provision with regard
to 'deemed authorization' under Section 16 of the PNGRB
Act subject to the provisions of Chapter IV which includes
Section 17 of the PNGRB Act. If the provision contained in
Section 17 of the PNGRB Act is seen, it provides for distinction
between the entities authorized by the Central Government
and those not so authorized. Further, the entities authorized
by the Central Government have to furnish the particulars of
their activities before the appointed day to the
respondent Board, whereas, the other entities have to apply
for authorization under Section 17(2) of the PNGRB Act and
Regulation 18 of Regulations of 2008. Thus, the Parliament,
while enacting Section 17(2) of the PNGRB Act, had given a
chance to such entities to apply for authorization to respondent
Board in respect of the areas in which they were active before
the appointed day. At this stage, it is also required to be noted
that the petitioner No.1 commenced the work of CGD network
in Ahmedabad District on the basis of the interim policy of
the Government of Gujarat. The said policy itself provides
that as and when the Gas Act or any other relevant regulation
is brought into force, the petitioner No.1 will have to meet
with the requirements of the Regulation. Further, the NOC
granted by the Government of Gujarat is also subject to
similar condition. In fact, the Presidential Reference was with
regard to the Gujarat Gas Act and ultimately the Hon'ble
Supreme Court, in the case of Association of Natural Gas
&Ors. (supra), struck down the constitutional validity of
Gujarat Gas Act and held that with respect to natural gas,
only the Central Government has legislative competence. Thus,
from the date of coming into force of PNGRB Act i.e., on
01.10.2007, only the Central Government is having legislative
and executive competence and therefore Parliament introduced
'deemed authorization' in Section 16 of the PNGRB Act.
Therefore, when the Parliament introduced the concept of
'deemed authorization' in Section 16 of the PNGRB Act, it
could only be with respect to entities operating under an
executive order/authorization from the Central Government.
If section 16 of PNGRB Act is interpreted to mean "deemed
authorization" even to entities operating without such
ADANI GAS LIMITED v. UNION OF INDIA & ORS.
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executive order/authorization, such interpretation would run
contrary to the Presidential Reference answered by the
Hon'ble Supreme Court. As observed hereinabove, Section
16 of the PNGRB Act is subject to the provisions of Chapter
IV which includes Section 17.
12.1. If we consider the provisions contained in Sections 11,
18, 19 and 61 of the PNGRB Act, it is clear that the respondent
Board has been empowered under the Act to either invite
applications and or decide applications moved to it from
interested parties to lay, build, operate or expand such
pipelines or city or local gas distribution network and the
said applications have to be decided in transparent and
objective manner as provided in the regulations. The function
of the respondent Board is defined under Section 11(i) of the
PNGRB Act. Further, Section 61 of the PNGRB Act empowers
the respondent Board to frame the regulations which are
consistent with the PNGRB Act and the Rules made
thereunder to carry out the provisions of the PNGRB Act. The
regulations of 2008 were therefore framed. Regulation 18(2)
empowers the respondent Board to take into consideration
various criteria while considering the application for grant
of authorization to such entities and one of them is in respect
of the actual physical progress made and the financial
commitment specifying a physical progress at least twenty five
percent and a financial commitment of at least twenty five
percent of the capital expenditure identified for the CGD
project as per the DFR submitted immediately before the
appointed day, may be considered as adequate. If any entity
which is already carrying out work before the appointed day,
without the authorization of the Central Government, it
becomes incumbent upon the respondent Board to see that
the quantity of the work and financial commitment is sufficient
and therefore the condition as specified in Regulation 18(2)(d)
cannot be said to be ultra vires to the provisions of PNGRB
Act. In fact the impugned regulation is in furtherance of the
objects of the PNGRB Act.
12.2. Thus, from the combined reading of Sections 16 and 17
of the PNGRB Act and Regulation 18 of the Regulations of
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2008, it would be clear that other entities can also claim
authorization from the respondent Board provided they meet
the test of Regulation 18 of the Regulations of 2008. In fact,
the aforesaid provisions provide a fair opportunity to
unauthorized/other entities also to claim authorization with
respect to work already carried out before the appointed day
provided the work was completed to a reasonable extent."
In view of this reasoning, the High Court dismissed Adani's writ
petition.
Relevant Provisions of the PNGRB Act and Regulations
9. The PNGRB Act, with the exception of Section 16, came into
force on 1.10.2007 ("appointed day"). Section 16 was, however, brought
into force subsequently, on 12.07.2010. The enactment set up the PNGRB
to regulate refining, processing, storage, transport, marketing, distribution
and sale of petroleum, petroleum products and natural gas in all parts of
the country, and to promote competitive markets. Section 1 (4) of the
Act declares that it applies to "refining, processing, storage,
transportation, distribution, marketing and sale of petroleum,
petroleum products and natural gas excluding production of crude
oil and natural gas." Section 2 (d) defines "authorized entity" as follows:
"(d) "authorised entity" means an entity-
(A) registered by the Board under section 15-
(i) to market any notified petroleum, petroleum products or
natural gas, or
(ii) to establish and operate liquefied natural gas terminals,
or
(B) authorised by the Board under section 16-
(i) to lay, build, operate or expand a common carrier or
contract carrier, or
(ii) to lay, build, operate or expand a city or local natural
gas distribution network;"
Section 2(i) of the Act defines a 'city or local natural gas
distribution network' as:
ADANI GAS LIMITED v. UNION OF INDIA & ORS.
[S.