# PETROLEUM & NATURAL GAS REGULATORY BOARD v. INDRAPRASTHA GAS LIMITED & ORS

- **Citation:** [2015] 7 S.C.R. 215
- **Court:** Supreme Court of India
- **Decided:** 2015
- **Case number:** Civil Appeal No. 4910 of 2015
- **Bench:** Dipak Misra, Uday Umesh Lalit
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/petroleum-natural-gas-regulatory-board-v-indraprastha-gas-limited-ors-30922
- **Pages:** 53

## Headnote

B
Petroleum and Natural Gas Regulatory Board Act,
2008 - ss.20, 22, 61, 11 - Power of the Board -
To fix c
transportation tariff of a consumer of natural gas - Held:
Petroleum and Natural Gas Regulatory Board is not
empowered to fix or regulate the maximum retal1 price at
which gas is to be sold by entities to the consumers- Board
is also not empowered to fix any component of network tariff D
or compression charge for an entity having its own distribution
network -Act does not confer any such power on the Board
and expression "subject to" used in s. 22 makes it a
conditional one - It has to yield to other provisions of the Act
- Since the power to fix the tariff has not been given to the E
Board, the Board cannot frame a Regulation which would
cover the area pertaining to determination of network tariff
for city or local gas distribution network and compression
charge for CNG - As the entire Regulation centres around
the said subject, the Regulation is declared ultra vires ~ F
Petroleum and Natural Gas Regulatory Board
(Determination of Network Tariff for City or Local Natural Gas
Distribution Networks and Compression Charge for CNG)
Regulations, 2008.
G
Dismissing the appeal, the Court
HELD: 1.1 On a reading of the s.20 of the Petroleum and
Natural Gas Regulatory Board Act, 2008, it is clear that
the Board has been conferred with the power to declare H
215
216
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A an existing pipeline for transportation of petroleum,
petroleum products and natural gas or an existing city
or local natural gas distribution network as a common
carrier or contract carrier and regulate or allow access
to such pipeline or network. Sub-Section (4) enables the
B Board to decide on the period of exclusivity to lay, build,
operate or expand a city or local natural gas distribution
network for such number of years. The objectives by
which the Board is to be guided are promoting
competition among entities, avoiding infructuous
C investment, maintaining or increasing supplies or
securing equitable distribution or ensuring adequate
availability of petroleum, etc. Section 21 deals with the
right of first use. The transportation tariff, which finds
0 place in Section 22(1), commences with the words
"subject to the provisions of this Act". The said provision
confers power on the Board to lay down, by regulation,
the transportation tariff for common carriers or contract
carriers or city or local natural gas distribution network
E and the manner of determination of such tariffs. [Paras
16 -19) [243-A-B; 244-G-H; 245-A-B; 247-G-H]
F
G
H
The Commissioner of Wealth Tax, Andhra Pradesh,
Hyderabad v. Trustees of H.E.H. Nizam's Family
(Remainder Wealth Trust),Hyderabad (1977) 3 SCC
362: 1977 (3) SCR 735; Ashok Leyland Ltd. v. State
of T.N. and Anr. (2004) 3 SCC 1: 2004 (1) SCR 306;
K.R.C.S. Balakrishna Chetty and Sons & Co. v. The
State of Madras AIR 1961SC1152: 1961 SCR 736;
South India Corporation (P) Ltd. v. Secretary, Board of
Revenue, T rivandrum and Anr. AIR 1964 SC 207: 1964
SCR 280; B.S. Vadera and another v. Union of India
and Ors. AIR 1969 ~C 118: 1968 SCR 575- referred
to.
.. _,f
PETROLEUM & NATURAL GAS REGULATORY BOARD v. 217
INDRAPRASTHA GAS LIMITED
1.2 Sub-section (e) of Section 11 empowers the A
Board to regulate, by regulations, in respect of certain
aspects. Section 11 (e) (ii) confers power on the Board to
determine transport rates for common carrier or contract
carrier. Sub-section (f) of Section 11 allows the Board to
regulate in respect of notified petroleum, petroleum B
products and natural gas and sub-section (e) (iii) of
Section 11 empowers the Board to regulate, by
regulations, access to city or local natural gas
distribution network so as to ensure fair trade and
competition amongst entities' as per pipeline access C
code. [Para 22) [251-G-H; 252-A-B]
1.3 The analysis of the High Court is in consonance
with s.11 and the expression "subject to" as used in
Section 22 for the said provision makes it graphica

## Text

_Characters 0–39,836 of 95,838. This is a partial read: ask again with offset=39836 for what follows._

[2015] 7 S.C.R. 215
PETROLEUM & NATURAL GAS REGULATORY BOARD
A
v.
INDRAPRASTHA GAS LIMITED & ORS.
(Civil Appeal No. 4910 of 2015)
JULY01,2015
[DIPAK MISRA AND UDAY UMESH LALIT, JJ.]
B
Petroleum and Natural Gas Regulatory Board Act,
2008 - ss.20, 22, 61, 11 - Power of the Board -
To fix c
transportation tariff of a consumer of natural gas - Held:
Petroleum and Natural Gas Regulatory Board is not
empowered to fix or regulate the maximum retal1 price at
which gas is to be sold by entities to the consumers- Board
is also not empowered to fix any component of network tariff D
or compression charge for an entity having its own distribution
network -Act does not confer any such power on the Board
and expression "subject to" used in s. 22 makes it a
conditional one - It has to yield to other provisions of the Act
- Since the power to fix the tariff has not been given to the E
Board, the Board cannot frame a Regulation which would
cover the area pertaining to determination of network tariff
for city or local gas distribution network and compression
charge for CNG - As the entire Regulation centres around
the said subject, the Regulation is declared ultra vires ~ F
Petroleum and Natural Gas Regulatory Board
(Determination of Network Tariff for City or Local Natural Gas
Distribution Networks and Compression Charge for CNG)
Regulations, 2008.
G
Dismissing the appeal, the Court
HELD: 1.1 On a reading of the s.20 of the Petroleum and
Natural Gas Regulatory Board Act, 2008, it is clear that
the Board has been conferred with the power to declare H
215
216
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A an existing pipeline for transportation of petroleum,
petroleum products and natural gas or an existing city
or local natural gas distribution network as a common
carrier or contract carrier and regulate or allow access
to such pipeline or network. Sub-Section (4) enables the
B Board to decide on the period of exclusivity to lay, build,
operate or expand a city or local natural gas distribution
network for such number of years. The objectives by
which the Board is to be guided are promoting
competition among entities, avoiding infructuous
C investment, maintaining or increasing supplies or
securing equitable distribution or ensuring adequate
availability of petroleum, etc. Section 21 deals with the
right of first use. The transportation tariff, which finds
0 place in Section 22(1), commences with the words
"subject to the provisions of this Act". The said provision
confers power on the Board to lay down, by regulation,
the transportation tariff for common carriers or contract
carriers or city or local natural gas distribution network
E and the manner of determination of such tariffs. [Paras
16 -19) [243-A-B; 244-G-H; 245-A-B; 247-G-H]
F
G
H
The Commissioner of Wealth Tax, Andhra Pradesh,
Hyderabad v. Trustees of H.E.H. Nizam's Family
(Remainder Wealth Trust),Hyderabad (1977) 3 SCC
362: 1977 (3) SCR 735; Ashok Leyland Ltd. v. State
of T.N. and Anr. (2004) 3 SCC 1: 2004 (1) SCR 306;
K.R.C.S. Balakrishna Chetty and Sons & Co. v. The
State of Madras AIR 1961SC1152: 1961 SCR 736;
South India Corporation (P) Ltd. v. Secretary, Board of
Revenue, T rivandrum and Anr. AIR 1964 SC 207: 1964
SCR 280; B.S. Vadera and another v. Union of India
and Ors. AIR 1969 ~C 118: 1968 SCR 575- referred
to.
.. _,f
PETROLEUM & NATURAL GAS REGULATORY BOARD v. 217
INDRAPRASTHA GAS LIMITED
1.2 Sub-section (e) of Section 11 empowers the A
Board to regulate, by regulations, in respect of certain
aspects. Section 11 (e) (ii) confers power on the Board to
determine transport rates for common carrier or contract
carrier. Sub-section (f) of Section 11 allows the Board to
regulate in respect of notified petroleum, petroleum B
products and natural gas and sub-section (e) (iii) of
Section 11 empowers the Board to regulate, by
regulations, access to city or local natural gas
distribution network so as to ensure fair trade and
competition amongst entities' as per pipeline access C
code. [Para 22) [251-G-H; 252-A-B]
1.3 The analysis of the High Court is in consonance
with s.11 and the expression "subject to" as used in
Section 22 for the said provision makes it graphically D
clear that Section 22 has to yield to Section 11 of the Act
which deals with the powers and functions of the Board.
Section 11 (e) only uses the words "common carrier" or
"contract carrier". Even if one applies the concept of
"subject matter", in essentiality it is the "common carrier" E
and the "contract carrier". The dictionary clause of the
said expression conveys a different meaning and it does
not include an entity which utilizes the pipelines for its
own use. The submission that after exclusivity period is F
over, the Board has the power also cannot be treated to
be correct, for such a power has not been conferred on
the Board under Section 11. As is perceptible the
provision deals with the entity when it engages itself as
a part of its pipeline as a common carrier or contract G
carrier and not the consumers. [Para 23) (253-B-E]
1.4 In the schematic context of the Act and upon
reading the legislative intention and applying the
principle of harmonious construction, inclusion of the H
218
S~REME COURT REPORTS
[2015) 7 S.C.R.
A entities which are not "common carriers" or "contract
carriers" would be permissible, is not perceived. They
have deliberately not been included under Section 11 of
the Act by the legislature and the said non-inclusion does
not lead 10 any absurdity. It cannot be conceived that
B non-conferment of power on the Board, in particular
regard, i~ accidental. The legislative intention is
absolutely clear and simple and, in fact, does not call for
adoption of any other construction to confer any
meaning to the existing words. [Para 30, 32] [260-A-C;
C 261-C]
D
E
F
Surjit Singh Katra v. Union of India (1991) 2 SCC 87:
1991 (1) SCR 364; CST v. Parson Tools and Plants
(1975) 4 SCC 22; Board of Muslim Wakfs v. Radha
Kishan (1846) 6 Moore PC 1: 13 ER 562; CIT v.
National Taj Traders (1980) 1 SCC 370; S.P Gupta v.
Union oflndia (1981) Supp. SCC 87: 1982 SCR 365;
..
Bharat Aluminium Co. v. Kaiser Aluminium Technical
Servic~$ lnc. (2012) 9 SCC 552: 2012 (12) SCR 327;
Sarah Mathew v. Institute of Cardio Vascular Diseases
(2014) c2~SCC 62: 2013 (12) SCR 67 4; Shiv Shakti
Coop. Housing Society (2003) 6 SCC 659:2003 (3)
SCR 7J>_1,,,,Bharat Aluminium (2012) 9 SCC 552: 2012
(12) SCR 327 - referred to.
Duport Steels Ltd. (19BO) 1 WLR (1980) 1WLR142referre~d to.·
1.5 Sub-section (1) of s.61(1) stipulates that the
G Board may, by notification, make regulations consistent
with the Act and the Rules made thereunder to carry out
the provisions of the Act. Sub-section (2) of Section 61
stipulates that without prejudice to the generality of the
foregoing power, such Regulations may provide for all
H or any of the following matters and the matters have been
PETROLEUM & NATURAL GAS REGULATORV'BOARD v. 219
INDRAPRASTHA GAS LIMITED
enumerated thereafter. Section 61 (2)(t) deals with A
transportation tariff for "common carrier" and "contract
carrier" or "city or local natural gas distribution network"
and the determination has to be done as per sub-section
(1) of Section 22. In pursuance of the said provision,
Petroleum and Natural Gas Regulatory Board B
(Determination of Network Tariff for City or Local Natural
Gas Distribution Networks and Compression Charge for
CNG) Regulations, 2008 have been framed. [Para 33, 34)
[261-E, G-H; 262-A-B]
c
1.6 The Board has not been conferred such a power
as per Section 11 of the Act That is the legislative intent.
Section 61 enables the Board to frame Regulations to
carry out the purposes of the Act and certain specific
aspects have been mentioned therein. Section 61 has D
to be read in the context of the statutory scheme. If on
reading of the statute in entirety, such a power does not
flow, a delegated authority cannot frame a regulation as
that would not be in accord with the statutory provisions
nor would it be for the purpose of carrying on the E
provisions of the Act. The regulatory provisR>ns, are to
be read and applied keeping in view the nature and
textual context of the enactment as that is the-source of
power. On a scanning of the entire Act arid"'applying F
various principles, it is found that the Act does not confer
any such power on the Board and the e.xpression
"subject to" used in Section 22 makes it a conditional
one. It has to yield to other provisions of the Act The
power to fix the tariff has not been given to the Board. In G
view of that the Board cannot frame a Regulation which
would cover the area pertaining to determination of
network tariff for city or local gas distribution network
and compression charge for CNG. As the entire
Regulation centres around the said subject, the said H
. 220
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A Regulation is declared ultra vires. [Paras 43) [267-C-F]
St. Johns Teachers Training Institute v. National Council
for Teacher Education (2003) 3 SCC 321: 2003 (1)
SCR 975 ; Kunj Behari Lal Butail v. State of H.P. (2000)
B
3 SCC 40: 2000 (1) SCR 1054; State of Kamataka v.
H. Ganesh Karnath (1983) 2 SCC 402: 1983 ( 2) SCR
665; Sukhdev Singh v. Bhagatram Sardar Singh
Raghuvanshi (1975) 1 SCC 421: 1975(3) SCR 619;
General Officer Commanding-in-Chief v. Subhash
c
Yadav (1988) 2 SCC 351: 1988 (3) SCR 62; State of
T.N. v. P Krishnamurthy (2006) 4 SCC 517: 2006 (3)
SCR 396; Union of India v. Srinivasan (2012) 7 SCC
683: 2012 (6) SCR 34; Dr. lndramani Pyarelal Gupta
v. WR. Natu AIR 1963 SC 274: 1963 SCR 721 ; Tata
D
Power Company Limited v. Reliance Energy Limited
(2009) 16 SCC 659: 2009 (9) SCR 625; Academy of
Nutrition Improvement v. Union of India (2011) 8 SCC
274: 2011 (8) SCR 680 - referred to.
E
Case Law Reference
1977 (3) SCR 735
referred to.
Para 20
2004 (1) SCR 306
referred to.
'Para 20
1961SCR736
referred to.
Para 20
F
1964 SCR 280
referred to.
Para 21
1968 SCR 575
referred to.
Para 21
(1975) 4 sec 22
referred to.
Para 25
(1980) 1 sec 370
referred to.
Para 26
G
1982 SCR 365
referred to.
Para 27
2013 (12) SCR 674
referred to.
Para 29
1991 (1) SCR 364
referred to.
Para 29
2003 (1) SCR 975
referred to.
Para 36
H
2000 (1) SCR 1054
referred to.
Para 37
1983 (2) SCR 665
referred to.
Para 37
PETROl:..EUM & NATURAL GAS REGULATORY BOARD v. 221
INDRAPRASTHA GAS LIMITED
1975(3) SCR 619
referred to.
Para 38
A
1988 (3) SCR 62
referred to.
Para 39
2006 (3) SCR 396
-referred to.
Para 40
2012 (6) SCR 34
referred to.
Para 40
1963 SCR 721
referred to.
Para 41
B
2009 (9) SCR 625
referred to.
Para 41
2011 (8) SCR 680
referred to.
Para 42
CIVILAPPELLATE JURISDICTION : CIVILAPPEAL NO.
4910 of2015
c
From the Judgment and Order dated 01.06.2012 of the
High Court of Delhi in W. P. (C) No. 2034 of 2012
Arvind Datar, Suchindran B. N., Rakesh Dewan, Liz
Mathew for the Appellant.
D
Pinky Anand, ASG, Harish N. Salve, Parag Tripathi,
Ashok Panda, K. K. Venugopal, V. Giri, B. A. Ranganathan,
Ruby Singh Ahuja, Deepti Sarin, Neha Gupta, Manik
Karanjawala,Anisha Mitra,Avinash Ganguli (For Karanjawala E
& Co.), Sunita Rani Singh, B. K. Prasad, Debal Banerjee,
Trinath Tadkamalla, Mrinal Ojha, Ridhi Sancpeti, for the
Respondents and Caveator-in-person.
The Judgment of the Court was delivered by
DIPAK MISRA, J. 1. The present appeal, by special
leave, calls in question the legal defensibility and the tenability
F
of the judgment and order dated 01.06.2012 passed by the
High Court of Delhi in W.P.(C) No. 2034 of2012 whereby the G
Division Bench has ruled that Petroleum and Natural Gas
Regulatory Board (for short, "the Board") is not empowered to
fix or regulate the maximum retail price at which gas is to be
sold by entities such as lndraprastha Gas Ltd, to the consumers
and further the Board is also not empowered to fix an'y H
222
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A component of network tariff or compression charge for an entity
having its own distribution network. On the aforesaid
foundation, the High Court has opined that the provisions of
Petroleum and Natural Gas Regulatory Board (Determination
of Network Tariff for City or Luca! Natural Gas Distribution
B Networks and Compression Charge for CNG) Regulations,
2008 (hereinafter referred to as "the Regulations") as far as it
is construed to empower the Board to fix the tariff is
unsustainable and accordingly as a sequitur the order dated
9.4.2012 to the extent of fixing the maximum retail price or
C requiring the respondents to disclose the entire tariff and the
compression charges to its consumers, is not in consonance
with the Petroleum and Natural Gas Regulatory Board Act,
2008 (for brevity "the Act"), and accordingly quashed the same.
D
2. The facts which are essential to be adumbrated are
that the respondent invoked the jurisdiction under Article 226
of the Constitution assailing the order dated 9.4.2012 issued
by the Board under Section 22 of the Act determining the
network tariff and compression charges for CNG in respect of
E Delhi City Gas Distribution (CGD) network of the petitioner at
Rs.38.58 per MMBtu and Rs.2.75 per kg. respectively w.e.f.
01.04.2008 and directing tlie petitioner therein to recover the
said network tariff and compression charges for CNG
F separatelythrough an invoice, without any premium or discount
on a non-discriminatory basis and to appropriately reduce the
selling price of CNG from the date of issuance of the order.
Be it noted, the Board left the modalities and time frame for
refund of differential network tariff and the compression
G charges for CNG recovered by the petitioner therein w.e.f.
1.4.2008 in excess from its consumers to be decided
subsequently. The said order was criticized on many a ground.
The principal contention was that the Board does not have the
power to direct the writ petitioner, the respondent no. 1 herein,
H while charging its consumers, to disclose the network tariff and
PETROLEUM & NATURAL GAS .REGULATORY BOARD v. 223
INDRAPRASTHA GAS LIMITED [DIPAK MISRA, J.]
the compression charges and also to fix the said network tariff A
and compression charges in any particular manner.
3. The said stand was resisted by the learned counsel
for the Board contending, inter alia, that Regulations 3 and 4
of the Regulations apply to the entities like the writ petitioner; B
that the Board has the power to ask the writ petitioner, the
respondent herein, to submit the network tariff and
compression charges for CNG as per the Quality Regulations
for approval of the Board; that the entity having accepted the
said term as a condition for obtaining" exclusivity is bound by C
the contractual obligation with the B~,ard and is now estopped
from challenging the power of the Board; that the objects and
reasons of the Act is to protect interests of the consumers and
regard being had to the statutory context when an action is
taken, no flaw could be found with the same; that Sections D
2(i), (m) and (w) of the Act are all intended to ensure that the
consumer is not exploited; that Section 2(zn) of the Act defines
the transportation rate and in the interpretative expanse, the
order passed by the Board is absolutely defensible; that as
per Section 11(e), the Hoard is empowered to regulate, inter E
alia, the transportation rates; that Section 61 (2), especially,
clauses (n), (t), (za) empower the Board to make regulations
qua transportation tariff and any other matter which is required
to be or may be specified by the Regulations or in respect of F
which provision is to be made by the Regulations; that keeping
in view the objective of the Act, the Regulations permit the
Board to fix the network tariff and the compression charges
and the action of the Board so fixing the network tariff and the
compression charges cannot be interfered with; and that the G
Regulations framed by the Board are consistent with the Act.
4. The High Court observed that the question for
adjudication was basically whether the Act authorises the
Board to pass such an order and whether the intention of the H
224
SUPREMECOURT~EPORTS
[2015] 7 S.C.R.
A legislature is to confer the power of price fixation on the Board.
The High Court referred to Section 11 of the Act and came to
hold that:-
"We thus conclude that PNGRBAct does not confer any
B
power on the Board to fix/regulate price of gas as has
been done vidP the impugned order dated gth April, 2012.
Having held so, we do not deem it necessary to deal
with the other Regulations impugned in the writ petition
and suffice it is to state that any provision therein having
C
the effect of empowering the Board to fix the price or the
network tariff or compression charges for CNG, as long
as not transportation rate, is beyond the competence of
the Board and ultra vires the PNGRBAct and of no avail."
D
And again:-
"We thus allow this writ petition to the extent of holding
that the Petroleum and Natural Gas Regulatory Board is
not empowered to fix or regulate the maximum retail price
E
at which gas is to be sold by entities as the petitioner, to
the consumers. We further hold that the Board is also
not empowered to fix any component of network tariff or
compression charge for an entity such as the petitioner
having its own distribution network. The provisions of
F
the Regulations (supra) in so far as construed by the Board
to be so empowering it are held to be bad/illegal.
Accordingly, the order dated 91h April, 2012 to the extent
so fixing the maximum retail price or requiring the
petitioner to disclose the network tariff and compression
G
charges to its consumers is struck down/quashed."
H
5. Criticizing the judgment and order passed by the High
Court, Mr. Arvind Datar, learned senior counsel for the
appellant, has raised the following submissions:-
PETROLEUM & NATURAL GAS REGULATORY BOARD v. 225
INDRAPRASTHA GAS LIMITED [DIPAK MISRA, J.]
(a) There is a presumption of validity of subordinate
legislation, and as long as the parent Act enables the
framing of regulations they are valid. When section 2(zn),
22(1), 61 (2)(e), 61 (2)(t) of the Act empower the Board to
frame regulations for all three categories, namely,
common carrier, contract carrier and city or local natural
gas distribution network, the Regulations are valid. The
High Court has incorrectly held that these regulations are
ultra vires the parent Act without referring to any specific
section or provision. That apart, on a reading of the
provisions of the Act it is also noticeable that there is no
postulate that the power to frame ~tie transportation rate/
transportation tariff can only be exercised only when the
city network becomes a common carrier or contract
carrier.
(b) While the city networks get market exclusivity for 3/5
years, they get infrastructure exclusivity for 25 years with
further extension of 10 years at a time and the fixation of
transportation rate/ transportation tariff has to be
determined for the network of pipelines irrespective of
whether they are common carriers, contract carriers or
city networks. The Act and Regulations contemplate
fixation of transportation rate/transportation tariff even at
the stage of city network. It is quite clear that when the
city network becomes a common carrier after the
exdusivity period, the said transportation rate which is
determined at the city network stage itself, would apply
for carrying the gas of other suppliers under section 21 (2).
(c)The High Court has erroneously opined that the
transportation rate provided for is the rate to be charged
by one entity under the Act from another for transporting/
carrying/moving gas of the other, for such a conclusion
is completely contrary to the definition contained in
A
B
c
D
E
F
G
H
226
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2015] 7 S.C.R.
section 2 (zn). The transportation rate has to be
determined even for city networks under sections 22( 1 ),
61 (2)(e) and 61 (2)(t) and that is the rate which can also
be claimed from other gas suppliers but that does not
mean that no transportation rate can be determined
unless and until the pipeline becomes a comnion carrier.
The High Court has flawed in holding that any provision
therein having the effect of empowering the Board to fix
the price or the Network Tariff or the Compression
Charges for CNG, as long as not transportation rate, is
beyond the competence of the Board and ultra vires the
Act, and it is because though the Board cannot fix the
selling price or monitor the selling price as natural gas
has not been notified, yetthe Board has the power, and
indeed the duty, to fix the network tariff and compression
charges (which are nothing but the transportation rate/
transportation tariff) under the Act.
(d) The High Court has committed gross illegality in its
analysis while stating that the Board is not en:ipowered
to fix any component of Network Tariff or Compression
Charge for any entity such as the respondent herein
having its own distribution network. It has also faulted in
opining that the provisions of the Regulations insofar as
construed by the Board fo be so empowering it are illegal.
These findings recorded by the Division Bench are
contrary to the provisions of the Act, for the Board can fix
the transportation rate/transportation tariff and the fact
that the rate will become applicable after expiry of the
period of exclusivity does not make the Regulations
themselves bad or illegal and it is absolutely clear that
source of power comes from the provisions engrafted
under Sections 2(zn), 22(1), 61 (2)(e) and 61 (2)(t) of the
Act as they confer power on the Board to frame
regulations for all three categories.
PETROLEUM & NATURAL GAS REGULATORY BOARD v. 227
INDRAPRASTHAGAS LIMITED [DIPAK MISRA, J.]
(e) The omission of 'city network' in Section 11 {e)(ii) is
only accidental, and if the provisions of the Act are read
as a whole, the power of the Board is clear as crystal for
determining the transportation rate/transportation tariff
for all categories. If the contention of the respondents is
accepted, it will amount to rewriting.the provision as
"transportation rates after city network becomes a
common carrier or contract carrier" .
. ..
(f) The view expressed by the High Court to the extent
that the Board is not empowered to fix any component of
Network Tariff or Compression charge for an entity such
as the respondent that has its bwn distribution network
is fallacious, for the said findings are not in accord with
to the provisions of the Act, and if the submissions are
accepted, the Regulations will become applicable only
after the period of exclusivity. The Central Government
had supplied subsidized gas to the authorised entities
to ensure that consumers do not have to pay a high cost
for both piped natural gas (used for domestic purposes)
and compressed natural gas (used for transportation)
and has made it mandatory for the respondents to
disclose the break up. Quite apart from that, Section
21 (1) that stipulates right of first use afterthe exclusivity
period and Section 21 (2) which provides that other
entities are liable to pay minimum transportation rate for
using the common carrier, do not indicate that the Board
has no power to fix the transportation rate/ tariff during
the exclusivity period or that it would apply to only the
gas transported for other entities. The respondent
company is obliged to indicate the transportation rate/
tariff as soon as it is determined. Even if the respondent's
contention is accepted, the rate/tariff has to be indicated
after the exclusivity period not only for the gas of other
entities but also for the gas_ that is supplied by the
A
B
c
D
E
F
G
H
228
A
B
SUPREME COURT REPORTS
[2015] 7 S.C.R.
authorised entity itself. Section 20(4) mandates the
Board to fully protect consumer interest while granting
exclusivity to the city network and the consumer interest
is protected by the Board determining the transportation
tariff being applicable to and being indicated for all the
gas transported in the city network, whether it belongs to
other entities or to the entity owning and operating the
city network.
6. Mr. Harish Salve and Mr. Parag S. Tripathi, learned
C senior counsels, resisting the submissions raised by Mr. Datar,
learned senior counsel for the appellant-Board, have raised
the following contentions.
D
E
F
G
H
(A) As per the schematic intendment of the Act, after
the expiry of period of exclusivity under Section 20(4),
the Board, if decides, in exercise of the statutory powers
under Section 20-22, can declare the network as a
common/contract carrier, and then alone, in respect of
third party suppliers of gas, who seek to use the excess
capacity i11 the pipeline of the network, the Board may fix
the transportation rate, which the 1s1 respondent may
charge from such a third party supplier. The consumers
of natural gas, whether of the first respondent, or of the
third party supplier of gas, does not enter into the scene
at all and has no role to play whatsoever. The
transportation in question whether by the network while
supplying to its consumers or by a common/contract
carrier in respect of the third party suppliers are the rates
and costs of transportation relevant only to the owner/
supplier of the gas and the said rate has no meaning or
relevance as far as the consumer, who is the purchaser
of such gas, is concerned, other than the fact that the
transportation expenses would also form a part of the
consolidated final price which would be raised and
PETROLEUM & NATURAL GAS REGULATORY BOARD v. 229
INDRAPRASTHA GAS LIMITED [DIPAK MISRA, J.]
recovered by respondent as also third party supplier from
the respective consumers.
(B). The definition of Common Carrier in Section 20) and
Contract Carrier in Section 2(m) postulate certain
conditions and the definition of city or local natural gas
distribution network in Section 2(i) does not contain the
said crucial twin conditions. That apart, Section11(a)
and Section 11(e) permit the issuance of regulations
which determine access and the transportation rate for
Common Carrier or Contract Carrier, and the said
provision limits the power of the Board to issue
regulations only in respect of access to the network and
not for the transportation rate for the network and,
therefore, the stand of the appellant that there is an
accidental omission is unacceptable because the
intention of the legislature is absolutely clear and
unambiguous.
(C). The power·can only be exercised in respect of
common carrier/contract carrier if it is a network in
respect of which the power is sought to be exercised
and then also as a first step the network must be declared
or authorised as a common carrier or a contract carrier
· withinthe meaning of Sections 20-22; and, therefore, as
far as a network is concerned, there is no right to
determine transportation rate. Such power is specifically
limited in respect of common/contract carrier under
Section 11 (e)(ii). The very concept of transportation rate
which is defined in Section 2(zn) makes it clear that it is
the rate for moving each unit of petroleum, petroleum
products or natural gas as may be fixed by the Regulations
and Section 21 (2) which uses the expression
'transportation rate', has three elements, which makes it
clear that the transportation rate has relevance only in
A
B
c
D
E
F
G
H
230
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2015] 7 S.C.R.
respect of the rates payable by a third party entity, which
is utilizing the excess capacity in the existing pipeline of
a common/contract carrier.and the Board does not have
the power to determine the transport rate.
(0). The Board has been empowered by Regulations to
determine t~e exclusivity period under Section 20(4) of
any pipeline. The effect of this declaration of exclusivity
' is that under Sections 20 - 22, during the period of
exclusivity, the Boar.d is disabled from declaring such
pipeline, whether existing or a new one, as a common/
contract carrier; and once a pipeline is declared to be a
common carrier/contract carrier, it is required to make
available its excess capacity as a part of the open access
regime, to any third party supplier of gas. Such a third
party may either be an importer or purchaser or a
producer of gas seeking to transport its gas using the
pipeline of any other entity. Therefore, critical scanning
of Section 20 to 22 do not confer any power on the Board
to fix the transportation tariff. Section 22( 1) makes it clear
that the right to fix transportation tariff is subject to other
conditions of the Act and when the provisions contained
in Sections 20), 2(m), 2(i), 2(zn), 11 (e), 11 (f)(iii), 11 (f)(vi)
and 22(2) are read in a conjoint manner, it is graphically
clear that the Board has not been conferred the power to
fix the transport tariff by the legislature and, therefore, it
cannotdo so by a regulation. The reliance by the Board
on Section 61 (2) (q) & (t) is misplaced, for Section 61 (1)
of the 'Act permits the Board to make regulations
consistent with the Act and the Act which confers power
on the Board to frame the Regulations does not empower
it to do so. That apart, Section 61 deals with the general
regulation making power of the Board in terms of the
Sections specified in the Act; and Section 61 (2)( q) and
(t) relate back to Section 22(1) which itself is "subject to"
PETROLEUM & NATURAL GAS. REGULATORY BOARD v. 231
INDRAPRASTHAGAS LIMITED [DIPAK MISRA, J.]
the other provisions of the Act and, hence, even if Section
A
61(t) is read with Section 22(1), it would not override
Section 11(e) read with Section 2(zn) and 21(2) of the '
Act.
7. In reply to the aforesaid submissions, Mr. Datar, B
learned senior counsel has canvassed the following
propositions:-
(I) The contentions urged by the respondent are
untenable, for the transportation rate has to be determined
on the basis of voluminous data, which has to be
collected, collated and analyzed and unless the rate is
, fixed even during the five year period, there will be no
; rate available for the common carrier at the eQ_d of the
exclusivity period and it will be absurd to suggest that
the entire exercise has to begin only after the ci!Y}].~twork
becomes a common carrier. The transportation rate has
to be determined for a network of pipelines under ~ection
2(zn) and is not a separate determination Jor city
networks, common carrier or contact carrier as t~e, object
of determining the rate is also to determine the rate at
which the cost of transportation is permitted to be
recovered and it has to be done in a reasonable manner
as mandated under Section 22(2)(b). The omission of
"city or local gas distribution network" in Section 11 (e)(ii)
is clearly accidental because in the Act as. well as
Regulations, three categories viz. common carrier,
contract carrier and city or local gas distribution network
have been used together, and the purpose becomes
manifest on a perusal of Section 61 (2)(e) which
specifically refers to Section 11 (e).
(II) The Board as a regulator has the obligation to ensure
that the consumers are not exploited and under Section
20(4) the Board grants monopoly for 25 years with further
c
D
E
F
G
H
232
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2015] 7 S.C.R.
extension of 1 O years at a time and barring unforeseen
circumstances, such a network will have exclusive
infrastructure monopoly for several decades. Therefore,
in the factual matrix, the Board has a duty to ensure that
consumer interest is protected during the monopoly
period, as mandated under Section 20(4) and that can
be done by ensuring the investment by the gas company
in the transportation infrastructure of the city network is
recovered in a reasonable manner for all the gas
transported in the city network.over the economic life of
the network.
It is not the stand of the Board that it
· does not have the power to monitor the Maximum Retail
Price (MRP) however, the transportation rates/tariff would
indicate it is the price charged to the consumer so that it
does not result in excessive profiteering and under these
circumstances, it is the duty of the respondent to reveal
the transportation prices to the Board as well as to the
consumers.
(Ill) Section 20(4) gives the right to the Board to grant
exclusivity to the city or local natural gas distribution
network for such period as the Board may decide and
once it has the power to give exclusivity to a city or local
natural gas distribution network owning entity so that only
it can lay, build and operate such network in a
geographical area and under these circumstances it
becomes the duty of the Board and as per the stipulations
under Section 20(4) it has to be done in a transparent
manner protecting the consumer interest. In addition to
it, the duty is cast on the Board under Section 20(5) to
be guided by the objectives of promoting competition
among the entities, avoiding infructuous investment,
maintaining or increasing supplies or for securing
equitable distribution or ensuring adequate availability
of natural gas throughout the country and, therefore, the
PETROLEUM & NATURAL GAS REGULATORY BOARD v. 233
INDRAPRASTHA GAS LIMITED [DIPAK MISRA, J.]
Board can determine the transportation rate/tariff. If the
A
stand of the respondent is accepted, the consumers
would never know the transportation rate, since it is
possible that in many cases there may not be any other
gas supplier who is using the network of pipelines after
the exclusivity period.
B
8. Having enumerated the submissions in reply by the
first respondent, we must record the submissions of the second
respondent, that is, Union of India. The following proponements
have been urged by Ms. Pinky Anand, learnedASG.
C
(i) There is no legislative intent for allowing the Board to
determine the pricing of gas, i.e. the price which the entity
charges from the ultimate customers. The Act, while
protecting the interests of the consumers, has not
o
empowered the Board to fix the price at which the entities
will sell the petroleum products or natural gas to the
consumers, for the MRP is to be fixed by the entity.
(ii)As regards the applicability of transportation tariff
E
determined through the Regulations, it is clear from the
provisions of the Act that such transportation tariff is
applicable only in respect of an outside entity that is willing
to use the CGD network and that such tariff is payable by
that entity to CGD network operator. The transportation
F
tariff notified through the BoC1rd Regulations is not
applicable for CGD entity when it transports its own gas
for supply to' individual customers.
(iii) The Board is merely authorised to monitor prices
G
and is required to ensure fair competition amongst
entities that are supplying CNG or PNG to the end
consumers. The Act provides for fair competition by
allowing entry to a third party for supplying gas to the end
consumers on a non-discriminatory open access basis
H
234
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2015] 7 S.C.R.
and in the said process the third party is required to pay
transportation tariff to the CGD operator at the rates
notified by the Board. The purpose of notification of the
said rate is to prevent the CGD operator from putting up
any kind of entry barrier in the form of a higher
transportation tariff for the third party.
(iv) Section 22 of the Act read with Section 20, 21 and
2(i:n) of the Act, the Board is empowered to regulate the
transportation rate or transportation tariff only for a city
or local natural distribution network subject to the
provisions as provided in the Act. When such city or local
natural gas distribution network is declared as a common
carrier or a contract carrier by the Board and it is used
by any other entity on common carrier or contract carrier
basis, then only as per the provisions of the Act, the Board
is only. entitled to fix, by regulations, the transportation
rate or the transportation tariff which the entity owning
and operating as a city or local natural gas distribution
network would charge from other entities which use its
network on common carrier or contract carrier basis for
transporting their gas.
(v) The Board is not empowered to fix the price at which
entities will market or sell the notified petroleum products
or natural gas. The MRP il? to be fixed by the entity. The
Board shall only monitor the prices and take corrective
measures to prevent restrictive trade practices by the
entities. As regards regulation of the activities of
transmission and distribution of petroleum products and
natural gas, the Board will oversee access to pipelines
and city or local natural gas distribution networks on nondiscriminatory, common carrier/contract carrier principle
for ensuring a level playing field for all entities. That apart,
the concept of allowing capacity in a city or local natural
PETROLEUM & NATURAL GAS REGULATORY BOARD v. 235
INDRAPRASTHAGAS LIMITED [DIPAK MISRA, J.]
gas distribution network to be used by any third party
entity on non-discriminatory common carrier/contract
carrier principle shall incetivize emergence of
independent marketers of natural gas. Such independent
marketers shall enter into transportation contracts with
the entity, owning and operating the city or local natural
gas distribution network for transportation of their gas.
This, in turn, will foster fair trade and competition in
marketing amongst entities
(vi) The Board is.entitled to fix the transportation rate for
gas transmission and distribution in all cases where gas
is transported on common carrier or contract carrier
principle. The transportation rate so fixed by regulator
shall be paid by the third party entities to the entity,-0wning
and operating the city or local natural gas distribution
network for transporting their gas on common.carri~r/
contract carrier principle.
Thus, by observing nondiscriminatory open access to pipelines and city or local
natural gas distribution networks on common carrier/
contract carrier principle at the transportation rates fixed
by regulations, a level playing field shall be ensured for
all the entities engaged in marketing and sale of natural
gas. In such a market condition, gas-on-gas competition . '
and the inter-fuel competition will lead to emergence of
fair trade and competition amongst entities, which in turn,
will protect the interest of consumers.
'
1
•
A
B
c
D
E
F
9. Mr. K.K. Venugopal, learned senior counsel appearing
for the intervenor, Central U.P. Gas Ltd., has contended that
the Board does not have the power to fix MRP and the G
distribution entity has a fundamental right to carry on the trade,
subject to restriction under Article 19( 1 )(g) of the Constitution
and in the case at hand, the Act, does not confer any power
on the Board to fix the MRP, but on the other hand, it expressly H
236
SUPREME COURT REPORTS
[2015) 7 S.C.R.
A provides for the MRP to be fixed by the entity themselves as
per Section 2(x) of the Ad. Learned senior counsel would
contend that once the Board has no jurisdiction/ authority to fix
the MRP, it is not entitled to fix any element/ component of the
MRP as it would bring an anomalous situation. The submission
B of the Board that the distribution entity qan charge the MRP,
but it has the power to regulate the component, that is, the
transportation charges is a futile exercise, a brutum fulmen,
for the simple reason that however low may be the component
of MRP determined by the Board, the authorised entity can
C virtually ignore the same. It is argued by him that the Board is
a creature of the Act and it can only exercise its functions in
accordance with and within the four corners of the said Act
and it cannot prescribe what it calls network tariff and
0 compression charge under the Regulations, because the
statute refers to fixation of "transportation tariff/ transportation
rate" but does not mention of 'network tariff or 'compression
charges'.