ESSAR STEEL LTD. Vs UNION OF INDIA .
Bench: V. GOPALA GOWDA,UDAY UMESH LALIT
Case number: C.A. No.-004610-004610 / 2009
Diary number: 25429 / 2008
Advocates: E. C. AGRAWALA Vs
LAKSHMI RAMAN SINGH
Page 1
1
REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4610 OF 2009
ESSAR STEEL LTD. ……APPELLANT
Vs.
UNION OF INDIA & ORS. ……RESPONDENTS WITH
CIVIL APPEAL NO. 4609 OF 2009 AND
CIVIL APPEAL NO. 4657 OF 2009
J U D G M E N T
V. GOPALA GOWDA, J.
The present appeals arise out of the impugned
common final judgment and order dated 16.05.2008
1
Page 2
2
passed in Special Civil Application No. 4468 of 2008
etc. by the High Court of Gujarat at Ahmedabad,
wherein by a majority of 2:1, a Three Judge bench
upheld the validity of the impugned policy decision
dated 06.03.2007 on the ground that the Union of
India is competent to take the policy decision and
further it has held that it is either arbitrary,
unjust or violative of the fundamental rights of the
appellants herein.
2.Since the facts in all these appeals raise the same
issue for our consideration, for the sake of
brevity, we refer to the facts of Civil Appeal
No.4610 of 2009. The necessary relevant facts
required to appreciate the rival legal contentions
advanced on behalf of the parties are stated in
brief hereunder:
India purchases natural gas from Gulf countries.
Since gas in large quantities cannot be feasibly
2
Page 3
3
transported by pipelines across countries, before
such gas is transported, it is liquefied and
thereafter shipped to India. This liquefied gas is
known as Liquefied Natural Gas (hereinafter referred
to as “LNG”). Once this liquefied gas reaches India,
it is converted into gas again. This is known as
Regasified Liquefied Natural Gas (hereinafter
referred to as “RLNG”).
In the instant case, Ras Laffin Natural Gas
Company Limited, Qatar (hereinafter referred to as
“RasGas”) sold LNG to Petronet LNG Limited
(hereinafter referred to as “Petronet”), an Indian
company, which was set up as a Joint venture between
the Government of India and the key players in the
LNG market like Oil and Natural Gas Corporation
(hereinafter referred to as “ONGC”), Indian Oil
Corporation Limited (hereinafter referred to as
“IOCL”) and Bharat Petroleum Corporation Limited
3
Page 4
4
(hereinafter referred to as “BPCL”). This was done
under a Sale Purchase Agreement entered in July,
1999 for a period of 25 years.
3.Petronet sold the resultant LNG to companies like
BPCL, IOCL and GAIL. They in turn, sold it to
customers like Essar Steel, which is the appellant
in Civil Appeal No. 4610 of 2009.
4.In the immediate context of the present appeals,
Essar Steel signed contracts with IOCL, BPCL and
GSPCL for purchase of RLNG at a fixed price. The
price was fixed upto the date 31.12.2008. The Gas
Supply Agreements were for the supply of 5 million
metric tonnes per annum (MMTPA) at a fixed price of
US $ 2.9412 per million metric british thermal unit
(MMBTU).
4
Page 5
5
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 policy decision of
5
Page 6
6
the Government to pool RLNG prices, the price of
gas under the contract would be revised and
increased from Rs. 135 per MMBTU to Rs. 207.02
MMBTU.
7.Aggrieved, the appellant filed Writ Petition No.
5098 of 2007 before the High Court of Delhi,
challenging the impugned policy decision and the
consequent action of IOCL, BPCL, GAIL and GSPCL in
unilaterally increasing the price of RLNG w.e.f.
01.08.2007, is in contravention of the gas supply
contracts which clearly stipulate the fixed price
of US $ 2.93 per MMBTU of RLNG. Certain other
appellants had also filed Writ Petitions before the
High Court of Gujarat urging various legal grounds
questioning the legality of the impugned policy
decisions and the communications received by them.
In pursuant to which, the High Court passed an
interim order granting stay of the operation of the
6
Page 7
7
impugned policy decision. A Transfer Petition No.
513 of 2007 was filed before this Court seeking for
transfer of Writ Petition No. 5098 of 2007 from the
High Court of Delhi to the Gujarat High Court. Vide
order dated 22.08.2007, this Court vacated the stay
operating on the impugned policy decision and
transferred the Writ Petition No. 5098 of 2007 from
Delhi High Court to Gujarat High Court and directed
the Division Bench of the Gujarat High Court to
hear the batch of Writ Petitions. The judges of the
Division Bench could not concur on the opinion and
vide order dated 28.09.2007, referred the matter to
a third judge. Vide order dated 12.10.2007, the
single judge opined not to grant any interim relief
in favour of the appellants in their writ
petitions. The Chief Justice of the Gujarat High
Court rejected the prayer of the appellants for
stay of the operation of the impugned policy vide
order dated 17.10.2007. The appellants challenged
7
Page 8
8
the correctness of the said order before this Court
by way of filing SLP (C) Nos. 21397-99 of 2007.
This Court vide its order dated 26.02.2008 directed
the High Court of Gujarat to list the Writ
Petitions for final hearing before a Three Judge
bench. Vide impugned judgment and order dated
16.05.2008, by a majority of 2:1, the High Court
upheld the impugned policy decision dated
06.03.2007 and dismissed the Writ Petition filed by
the appellant. The majority judgment opined as
under:
“……Union of India, by Empowered Group of Ministers with advise of experts 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
8
Page 9
9
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, are not entitle to refund. For getting refund, the aforesaid aspect ought to be established by the petitioners, on the basis of evidence on record, either in the suit or in the arbitration. There is no substance in these petitions, and, therefore, all these petitions are hereby dismissed.”
Hence, the present appeals.
8.Mr. Abhishek Manu Singhvi, learned senior counsel
appearing on behalf of the appellant Essar Steel in
Civil Appeal No. 4610 of 2009 has questioned the
correctness of the impugned judgment and order
passed by the High Court. It is contended by him
that the contracts between the appellants and off
9
Page 10
10
takers (IOCL, GPSCL) had three elements, viz.,
fixed price, for a fixed term, in respect of a
fixed basic quantity. The appellant is aggrieved by
the fact that even with this limited five year
period and after having faithfully observed these
frozen and unchangeable contractual parameters of
fixed term, fixed price and fixed quantity for
almost four out of five years, the respondents
reneged and violated these fixed parameters in the
last fourteen months of the contract, all for the
benefit of a single entity, that is the Ratnagiri
Gas and Power Private Limited (hereinafter referred
to as the “Ratnagiri Power Project”).
9.The learned senior counsel further contends that
executive actions of the Union of India which
operates to the prejudice of any person must
necessarily have legislative backing. It is
contended that in the present case, no entity
10
Page 11
11
except the Ratnagiri Power Project was benefited as
a result of the change of policy by the Central
Government.
10. The learned senior counsel in support of his
legal submission places reliance on the decision of
this Court in the case of Delhi Development
Authority v. Joint Action Committee, Allottee of
SFS Flats1, wherein it has held as under:
“62. ……It is well known principle of law that a person would be bound by the terms of the contract subject of course to its validity. A contract in certain situations may also be avoided. With a view to make novation of a contract binding and in particular some of the terms and conditions thereof, the offeree must be made known thereabout. A party to the contract cannot at a later stage, while the contract was being performed, impose terms and conditions which were not part of the offer and which 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
1 (2008) 2 SCC 672
11
Page 12
12
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 judicial review. In fact, being in the realm of contract, it cannot be stated to be a policy decision as such.”
11. The learned senior counsel further contends that
executive action of the Union of India, when it
seeks to prejudice the rights of a person, must
have the backing of a statute. The learned senior
counsel in support of the above contention places
12
Page 13
13
reliance on the decision of a Constitution Bench of
this Court in the case of State of Madhya Pradesh
v. Thakur Bharat Singh2, wherein it was held as
under:
“We have adopted under our Constitution not the continental system but the British system under which the rule of law prevails. Every Act done by the Government or by its officers must, if it is to operate to the prejudice of any person, be supported by some legislative authority.”
Another Constitution Bench of this Court, in the
case of Bishan Das v. State of Punjab3, held as
under:
“As pointed out by this Court in Wazir Chand v. The State of Himachal Pradesh 1954 Cri LJ 1029, the State or its executive officers cannot interfere with the rights of others unless they can point to some specific rule of law which authorises their acts. In Ram Prasad Narayan Sahi v. The State of Bihar [1953]4 SCR 1129 this Court said that nothing is more likely to drain the vitality from the rule of law than legislation which singles out a particular individual from his fellow subjects and visits him with a
2 AIR 1967 SC 1170 3 AIR 1961 SC 1570
13
Page 14
14
disability which is not imposed upon the others.”
12. The learned senior counsel further places
reliance on yet another constitution bench decision
of this Court in the case of Satwant Singh Sawhney
v. D. Ramarathnam, Asstt. Passport Officer4, wherein
it was held as under:
“Article 14 says that the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. This doctrine of equality before the low is a necessary corollary to the high concept of the rule of law accepted by our Constitution. One of the aspects of rule of law is that every executive action, if it is to operate to the prejudice of any person, must be supported by some legislative authority.”
Placing strong reliance on the cases cited above,
the learned senior counsel contends that the
impugned policy decision of the Union of India has
no statutory flavour, as price pooling has been
4 AIR 1967 SC 1836
14
Page 15
15
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 Bihar5 , 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
5 AIR 1953 SC 215
15
Page 16
16
applies to all persons similarly situated, it is certainly open to the legislature to classify persons and things to achieve particular legislative objects; but such selection or differentiation must not be arbitrary and should rest upon a rational basis, having regard to the object which the legislature has in view. It cannot be disputed that the legislation in the present case has singled out two individuals and one solitary transaction entered into between them and another private party, namely, the Bettiah Wards Estate and has declared the transaction to be a nullity on the ground that it is contrary to the provisions of law, although there has been no adjudication on this point by any judicial tribunal. It is not necessary for our present purpose to embark upon a discussion as to how far the doctrine of 'separation of powers has been recognised in our Constitution and whether the legislature can arrogate to itself the powers of the judiciary and proceed to decide disputes between private parties by making a declaration of the rights of one against the other. It is also unnecessary to attempt to specify the limits within which any legislation, dealing with private rights, is possible within the purview of our Constitution. On one point our Constitution is clear and explicit, namely, that no law is valid which takes away or abridges the fundamental rights guaranteed under Part III of the Constitution. There can be no question, therefore, that it the legislation in the present case comes within the mischief of article 14 of the Constitution, it has got
16
Page 17
17
to be declared invalid.”
14. The learned senior counsel contends that
Government action, more so executive action, which
is not subjected to democratic debate in the
Parliament, benefitting or burdening a single
person or entity ought to be viewed as especially
pernicious and discriminatory, and ought to be
treated as such, especially while scrutinizing such
action under the lens of Article 14 of the
Constitution. It is submitted that in the instant
case, it is not a legislative action which has
marked out the Ratnagiri Power Project for a
special benefit; this is a single person executive
action, which is on an even weaker footing.
15. The learned senior counsel further contends that
price fixation is a legislative function and in
support of this contention he places reliance on
17
Page 18
18
the Seven Judge Bench decision of this Court in the
case of Prag Ice & Oil Mills v. Union of India6,
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 Ltd7 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
6 (1978) 3 SCC 459 7 (1987) 2 SCC 720
18
Page 19
19
between the two has usually been expressed as 'one between the general and the particular'. 'A legislative act is the creation and promulgation of a general rule of conduct without reference to particular cases; an administrative act is the making and issue of a specific direction or the application of a general rule to a particular case in accordance with the requirements of policy'. 'Legislation is the process of formulating a general rule of conduct without reference to particular cases and usually operating in future; administration is the process of performing particular acts, of issuing particular orders or of making decisions which apply general rules to particular cases.' It has also been said "Rule making is normally directed toward the formulation of requirements having a general application to all members of a broadly identifiable class" while, "adjudication, on the other hand, applies to specific individuals or situations". But, this is only a bread distinction, not necessarily always true. Administration and administrative adjudication may also be of general application and there may be legislation of particular application only. That is not ruled out. Again, adjudication determines past and present facts and declares rights and liabilities while legislation indicates the future course of action. Adjudication is determinative of the past and the present while legislation is indicative of the future. The object of the rule, the reach of its application, the rights and obligations arising out of it, its intended effect on
19
Page 20
20
past, present and future events, its form, the manner of its promulgation are some factors which may help in drawing the line between legislative and non-legislative acts. A price fixation measure does not concern itself with the interests of an individual manufacturer or producer. It is generally in relation to a particular commodity or class of commodities or transactions. It is a direction of a general character, not directed against a particular situation. It is intended to operate in the future. It is conceived in the interests of the general consumer public. The right of the citizen to obtain essential articles at fair prices and the duty of the State to so provide them are transformed into the power of the State to fix prices and the obligation of the producer to charge no more than the price fixed. Viewed from whatever 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. Price- fixation 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.
20
Page 21
21
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 the procedure for price-fixation. We do not agree with the basic premise that price fixation primarily affects manufacturers and producers. Those who are most vitally affected are the consumer public. It is for their protection that price-fixation is resorted to and any increase in price affects them as seriously as any decrease does a manufacturer, if not more.”
16. The learned senior counsel further urged that
the impugned policy decision was nothing but a
means to provide subsidized gas to the Ratnagiri
Power Project. If the ultimate intention of the
Union of India was to provide subsidized gas to the
Ratnagiri Power Project, then the cost of the same
should have been borne by Union of India itself and
not by entities like the appellants.
21
Page 22
22
17. Mr. Ravindra Srivastava, learned senior counsel
appearing on behalf of the appellant in Civil
Appeal No. 4657 of 2009 contends that the
government, a third party to the contract, in
purported exercise of its executive power under
Article 73 of the Constitution, cannot interfere
with, much less alter the terms and conditions of
the contract between the two private parties.
18. The learned senior counsel further contends
that the power to unilaterally alter the terms and
conditions of an agreement is not available even to
a party to a contract and such a unilateral
exercise affects the integrity of the contract and
therefore it is illegal. Since the impugned policy
decision directly results in infringement of the
legal rights of a private party governed by the
contract, it can be done only with the support of
22
Page 23
23
validly enacted law. The learned senior counsel
places reliance in support of the above plea on a
Constitution Bench decision of this Court in the
case of Maganbhai Ishwarbhai Patel v. Union of
India8 wherein it was held as under: “If, in consequence of the exercise of executive power, rights of the citizens or others are restricted or infringed, or laws are modified, the exercise of power must be supported by legislation : where there, is no such restriction, infringement of the right or modification of the laws, the executive is competent to exercise the power.”
The learned senior counsel further contends that
the communication dated 06.03.2007 is not a policy
decision and merely attaching the label of ‘policy’
and therefore, it 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.9, wherein it was held as
under: 8 (1970) 3 SCC 400 9 (2011) 12 SCC 94
23
Page 24
24
“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 article nor even noting by a Minister. Every executive decision need not be as laid down under Article 166(1) but when it takes the form of an order it has to comply with Article 166(1). Article 166(2) states that orders and other instruments made and executed under Article 166(1), shall be authenticated in the manner prescribed. While Clause (1) relates to the mode of expression, Clause (2) lays down the manner in which the order is to be authenticated and Clause (3) relates to the making of the rules by the Governor for the more convenient transaction of the business
24
Page 25
25
of the Government. A study of this article, therefore, makes it clear that the notings in a file get culminated into an order affecting right of parties only when it reaches the head of the department and is expressed in the name of the Governor, authenticated in the manner provided in Article 166(2). 53. It is thus clear that unless an order is expressed in the name of the President or the Governor and is authenticated in the manner prescribed by the rules, the same cannot be treated as an order made on behalf of the Government. A reading of letter dated 6.12.2001 shows that it was neither expressed in the name of the Governor nor it was authenticated manner prescribed by the Rules. That letter merely speaks of the discussion made by the Committee and the decision taken by it. By no stretch of imagination the same can be treated as a policy decision of the Government within the meaning of Article 166 of the Constitution.”
Further reliance has been placed by him on a
Three Judge bench decision of this Court in the case
of G.J. Fernandes v. State of Mysore10, wherein it
was held as under:
“12……Of course, under such executive power, the State can give administrative instructions to its servants how to act in certain circumstances; but that will not
10 AIR 1967 SC 1753
25
Page 26
26
make such instructions statutory rules which are justifiable in certain circumstances. In order that such executive instructions have the force of statutory rules it must be shown that they have been issued either under the authority conferred on the State Government by some statute or under some provision of the Constitution providing therefore.”
More recently, this Court has observed in the case
of Lala Ram v. Jaipur Development Authority11 as
under:
“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
11 2015 (13) SCALE 559
26
Page 27
27
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) Rules, 1961, shall be disposed of by, or under the general or special directions of, the Minister-in-charge.
6. Committees of the Cabinet.- (1) There shall be Standing Committees of the Cabinet as set out in the First Schedule to these Rules with the functions specified therein. The Prime Minister may from time to time amend the Schedule by adding to or reducing the numbers of such Committees or by modifying the functions assigned to them. (2) Each Standing Committee shall consist of such Ministers as the Prime Minister may from time to time specify. (3) Subject to the provisions of rule 7, each Standing
27
Page 28
28
Committee shall have the power to consider and take decisions on matters referred to it by order of the Minister concerned or by the Cabinet.”
The learned senior counsel contends that the
policy directives have been issued by the Union of
India in violation of the Business Rules. Under the
said Business Rules, the power of disposal of
business of the Department is vested in the
Minister-in-charge. The EGOM is neither a Committee
of Cabinet nor Standing Committee within the meaning
of Rule 6 of the Business Rules. The learned senior
counsel contends that nothing has been placed on
record either before the High Court or this Court to
show any ‘authorisation’ to the EGOM for taking
decision on the matters of price fixation. The EGOM
did not have the mandate to decide as regards the
price of the LNG under the existing contract.
20. Mr. Shyam Diwan, the learned senior counsel
appearing on behalf of GSPCL in Civil Appeal No.
28
Page 29
29
4609 of 2009 contends that the power to issue the
impugned policy decision by the Central Government
is an independent one and it does not depend on the
individual contracts between the parties. In the
instant case, the impugned directive issued to
Petronet has resulted in a domino effect, all the
way down to the last purchaser. The learned senior
counsel contends that the impugned policy decision
affects the rights of the consumers without any
statutory backing and is therefore bad in law
liable to be quashed. The learned senior counsel
places reliance on the decision of this Court in
the case of Central Dairy Farm v. GI India Ltd. &
Ors.12, wherein it was held as under :-
“The power of State Government to fix prices of milk and milk products by issuance of notification under 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
12 (2004) 1 SCC 55
29
Page 30
30
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
Constitution of India.
21. On the other hand, Mr. Ranjit Kumar, learned
Solicitor General for India contends that the price
30
Page 31
31
of LNG is linked directly to the price of crude
oil, the appellants are ignoring the benefit they
were getting as a result of the efforts by the
Government of India.
22. The learned Solicitor General contends that a
policy cannot be vitiated only on the ground of
change. Reliance in placed on the decision of a
Three Judge bench of this Court in the case of
Shimnit Utsch India Pvt. Ltd. & Anr v. West Bengal
Transport Infrastructure Development Corporation
Ltd. & Ors13, wherein it was held as under:
“52…The courts have repeatedly held that government policy can be changed with changing circumstances and only on the ground of change, such policy will not be vitiated. The government has discretion to adopt a different policy or alter or change its policy calculated to serve public interest and make it more effective. Choice in the balancing of the pros and cons relevant to the change in policy lies with the authority. But like any discretion exercisable by the government or public authority, change in
13 (2010) 6 SCC 303
31
Page 32
32
policy must be in conformity with Wednesbury reasonableness and free from arbitrariness, irrationality, bias and malice.”
In the case of Union of India & Anr. v.
International Trading Co. & Anr.14, this Court held
as under:
“14. It is trite law that Article 14 of the Constitution applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. 15. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give impression that it was so done arbitrarily on by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the state, and non-arbitrariness in essence and substance is the heart beat of fair play.
14 (2003) 5 SCC 437
32
Page 33
33
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 variable. However, Respondent No.1 took up the
33
Page 34
34
issue with the State of Qatar and brought about a fixed FCC for a period of five years ending 31.12.2008, whereby FCC under First LNG SPA was fixed at USD 2-3 upto 31.12.2008 based on crude price of USD 20 per barrel. This has been agreed between RasGas and the answering respondent by way of a Side Letter dated 26.09.2003 to the First LNG SPA. A new price regime would come into effect from 01.01.2009 under which the LNG price would have a link to the market prices, and would vary each month. 3.4 The answering respondent has an obligation to sell RLNG, produced from imported LNG under the First LNG SPA, to the Off-takers for onward sale to the downstream customers. Hence, corresponding to the First LNG SPA, the answering respondent also signed separate GSPAs with each of the three off-takers, viz, GAIL, IOC and BPCL ON 26.09.2003 for the sale of 5 MMTPA of RLNG. FCC under the First GSPA was also fixed at USD 2-3 per MMBTU.”
Since the new price regime was to come into
effect on 01.01.2009, Petronet started negotiating
with RasGas from 2007 for additional supply of LNG
under a term contract. The new Agreement was signed
on 03.07.2007. The FCC of the LNG prices under this
agreement was fixed at USD 8-9 per MMBTU for a total
34
Page 35
35
of 1.5 MMTPA and was to remain so until 31.12.2008.
The benefit of the executive policy direction dated
06.03.2007 has been explained in the following
terms:
“3.5 In early 2007, the answering respondent was negotiating with RasGas for additional supplies of LNG under a term contract. Pursuant thereto a fresh LNG SPA was signed between RasGas and the answering respondent on 03.07.2007 for additional supply of 1.5 MMTPA of LNG. The FCC of the LNG price under the Second LNG SPA is USD 8-9 per MMBTU and will remain so until 31.12.2008. 3.6 In the meantime, GOI had issued its policy directive by communication dated 06.03.2007. In terms of the said policy directive, RLNG procured under long term contracts is to have a uniform non- discriminatory pooled price based on weighted average which is binding on the Off-takers. The only long term RLNG contracts upstream as on this date, was between the answering respondent and the Off-takers under the First GSPA. 3.7 ……In the absence of the price pooling policy, the FCC of 1.5 MMTPA of RLNG under the 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
35
Page 36
36
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-à-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
36
Page 37
37
Khand Udyog Mandal Ltd. v. CCE & Customs15,wherein
the concept of unjust enrichment was elaborated as
under:
“Stated simply, 'Unjust enrichment' means retention of a benefit by a person that is unjust or inequitable. 'Unjust enrichment' occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else.
The doctrine of 'unjust enrichment', therefore, is that no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of 'unjust enrichment' arises where retention of a benefit is considered contrary to justice or against equity.”
25. Mr. Tushar Mehta, learned Additional Solicitor
General appearing on behalf of the respondents in
Civil Appeal Nos. 4609 and 4657 of 2009 contends
that the pooled prices came into effect on
29.08.2007 and remained in effect till 31.12.2008.
What is under consideration in the present appeals
is the impact of the pooling price policy supplied 15 (2005) 3 SCC 738
37
Page 38
38
to the consumers between 29.08.2007 and 31.12.2008.
The only relief that the appellants in the present
case can claim is that of refund of the
differential prices paid by them. The learned
Additional Solicitor General contends that this
claim also cannot succeed, since the appellants
already passed on the burden to the consumers and
payment of differential prices to them would result
in unjust enrichment. The learned ASG places
reliance on the nine judge bench decision of this
Court in the case of Mafatlal Industries Ltd. v.
Union of India16, wherein it was held as under:
“105. It would be evident from the above discussion that the claims for refund under the said two enactments constitute an independent regimen. Every decision favourable to an assessee/manufacturer, whether on the question of classification, valuation or any other issue, does not automatically entail refund. Section 11-B of the Central Excises and Salt Act and Section 27 of the Contract Act, whether before or after 1991 Amendment - as interpreted by us herein - make every refund claim subject to
16 (1997) 5 SCC 536
38
Page 39
39
proof of not passing-on the burden of duty to others. Even if a suit is filed, the very same condition operates. Similarly, the High Court while examining its jurisdiction under Article 226 - and this Court while acting under Article 32 - 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
39
Page 40
40
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 2, 6 and 8 in the Second Schedule to the
Government of India Allocation of Business Rules,
1961. The learned Additional Solicitor General
further contends that there is no vested right in
price, that it cannot be raised at all. It was
infact only the intervention of the government that
ensured availability of the natural resources at a
lower rate. The policy also provides for a level
playing field and a non discriminatory regime.
27. We have heard the learned counsel appearing on
behalf of the parties. The main issue which arises
for our consideration is whether impugned policy
decision dated 06.03.2007 is bad in law, and if so,
40
Page 41
41
whether the appellants are entitled to any refund
of the amount paid by them as a result of increase
in price of RLNG after the impugned policy decision
dated 06.03.2007.
28. Before we examine the validity of the impugned
policy decision dated 06.03.2007, it is important
to examine clause 11.4 of the Supply Agreement
between IOCL and Essar Steel which reads as under:
“11.4 Change in Law If at any time due to a change in law or a change in the policy of any Government………… seller incurs am increase or decrease in its costs or expenses, the seller may request a revision of the Contract Price to reflect any such increase or decrease and the Contract Price shall stand so increased or decreased. Such increased or decreased Contract Price shall be reflected in the immediate following Invoice.”
A similar clause has been incorporated in the other
agreements as well.
41
Page 42
42
29. It becomes clear from a perusal of the
aforementioned clause that price revision on
account of change in government policy is a
situation which had been envisaged by the parties
themselves at the time of entering into the Supply
Agreement.
30. Before we can examine the validity of the
impugned policy decision dated 06.03.2007, it is
crucial to understand the extent of the power
vested with this Court to review policy decisions.
In the case of Delhi Development Authority
(supra) on issue of judicial review of policy
decisions, the power of the court is examined and
observed as under:
“An executive order termed as a policy decision is not beyond the pale of judicial review. Whereas the superior courts may not interfere with the natty grittiest of the policy, 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
42
Page 43
43
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 India17, this Court has further
held as under:
“This Court sitting in the jurisdiction 17 (2013) 7 SCC 1
43
Page 44
44
cannot sit in judgment over the commercial or business decision taken by parties to the agreement, after evaluating and Assessing its monetary and financial implications, unless the decision is in clear violation of any statutory provisions or perverse or for extraneous considerations or improper motives. States and its instrumentalities can enter into various contracts which may involve complex economical factors. State or the State undertaking being a party to a contract, have to make various decisions which they deem just and proper. There is always an element of risk in such decisions, ultimately it may turn out to be a correct decision or a wrong one. But if the decision is taken bona fide and in public interest, the mere fact that decision has ultimately proved to be a wrong, that itself is not a ground to hold that the decision was mala fide or done with ulterior motives.”
(emphasis laid by this Court) In the case of Villianur Iyarkkai Padukappu Maiyam
v. Union of India18, it was held as under:
“It is neither within the domain of the courts nor the scope of judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor are the courts inclined to strike down a policy at the behest of a Petitioner merely
18 (2009) 7 SCC 561
44
Page 45
45
because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. Wisdom and advisability of economic policy are ordinarily not amenable to judicial review. In matters relating to economic issues the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona fide and within the limits of the authority. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts.”
(emphasis laid by this Court)
A Three Judge bench of this Court in the case of
Narmada Bachao Andolan v. Union of India19 cautioned
against Courts sitting in appeal against policy
decisions. It was held as under: “234.In respect of public projects and policies which are initiated by the Government the Courts should not become an approval authority. Normally such decisions are taken by the Government after due care and consideration. 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
19 (2000) 10 SCC 664
45
Page 46
46
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 Bank of
India20, wherein it was observed as under:
“Courts are not to interfere with economic policy which is the function of experts. It is not the function of the Courts to sit in Judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ.
20 (1992) 2 SCC 343
46
Page 47
47
Courts cannot be expected to decide them without even the aid of experts.”
A perusal of the above mentioned judgments of this
Court would show that this Court should exercise
great caution and restraint when confronted with
matters related to the policy regarding commercial
matters of the country. Executive policies are
usually enacted after much deliberation by the
Government. Therefore, it would not be appropriate
for this Court to question the wisdom of the same,
unless it is demonstrated by the aggrieved persons
that the said policy has been enacted in an
arbitrary, unreasonable or malafide manner, or that
it offends the provisions of the Constitution of
India.
32. Entry 53 of List I of Seventh Schedule to the
Constitution of India reads thus:
“53. Regulation and development of oilfields and mineral oil resources petroleum and petroleum products; other liquids and substances declared by
47
Page 48
48
Parliament by law to be dangerously inflammable.”
In the case of Association of Natural Gas v. Union
of India21, the question which arose for
consideration of this Court was whether liquefied
natural gas is a petroleum product or not. After
adverting to several authorities on the subject,
this Court concluded as under:
“All the materials produced before us would only show that the natural gas is a petroleum product. It is also important to note that in various legislations covering the field of petroleum and petroleum products, either the word 'petroleum' or 'petroleum products' has been defined in an inclusive way, so as to include natural gas. In Encyclopaedia Britannica, 15 th Edn. Vol. 19, page 589 (1990), it is stated that "liquid and gaseous hydrocarbons are so intimately associated in nature that it has become customary to shorten the expression 'petroleum and natural gas' to 'petroleum' when referring to both." The word petroleum literally means 'rock oil'. It originated from the Latin term petra-oleum. (petra- means rock or stone and oleum-means oil). Thus, Natural Gas could very well be comprehended within the expression 'petroleum' or 'petroleum product……
21 (2004) 4 SCC 489
48
Page 49
49
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 product, we are of the view that under Entry 53 List I, Union Govt. alone has got legislative competence.”
(emphasis laid by this Court)
Thus, by virtue of Article 73 of the Constitution of
India read with Entry 53 of List I, the Union has
the power to legislate and take policy decisions in
relation to the matters pertaining to mineral oil
49
Page 50
50
resources and inflammable substances, which includes
RLNG. Further, as has been correctly recorded in the
impugned judgment and order, there is no existing
legislative provision as far as fixing of the price
of RLNG is concerned. Thus, the executive of the
Union of India is well within its right to exercise
its powers under the Constitution to take such
decisions by way of policy decisions.
33. The objective of the impugned policy decision
dated 06.03.2007 is to unify the prices of RLNG on
a non-discriminatory basis so that there is no
distinction between old customers and new
customers, as far as prices of RLNG in the long
term contracts is concerned. In the counter
affidavit filed by the respondent-Union of India,
the rationale behind unifying the prices of RLNG
has been explained as under:
“The power sector continues to be one of the major consumers of Natural Gas. The intent of the answering respondent is to ensure power
50
Page 51
51
generation costs are maintained at reasonable rate. In this regard, a brief reference to the Dabhol power project and the Pragati II & III Power Projects, which are gas based power projects is relevant. The answering respondent has attached a lot of importance to the revival of the Dabhol power project and has constituted an Empowered Group of Ministers for this purpose. RGPPL was formed to ta ke over and revive the Dabhol project. It was recognized that the pricing of gas is a critical factor in revival of the project, which was beset with a number of complexities. A huge sum of Rs. 10,038 crores of public money has already gone into the Dabhol project………The Dabhol project on which more than Rs. 10,000 crores of public money is riding, has been restructured in larger public interest………the viability of the project is dependent on RLNG being available at affordable prices. If RLNG, which is the base fuel for the Dabhol power project, is not made available to RGPPL at a reasonable price, the power produced would be unaffordable and consequently, would lead to the shut-down of the Dabhol power plant. This would mean more than Rs. 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
51
Page 52
52
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 provide RLNG
at viable prices to the existing and new customers
alike. It is further clear that it is nearly
impossible to predict or even control LNG 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.
52
Page 53
53
34. We have perused the documents marked as
Annexures R-3 to R-15, which are the letters
containing the communication between the government
and RasGas.
Annexure R-6 is the minutes of meeting dated
05.06.2002 regarding finalization of the General
Sale Purchase Agreement, held in the office of the
Secretary, Ministry of Petroleum and Natural Gas.
The meeting was attended by representatives of
Ministry of Petroleum and Natural Gas, ONGC, IOCL,
BPCL, GAIL and Petronet. One of the points discussed
in the meeting was:
“It was also recognized that there is a need for Government to provide certain relief for LNG so that it can be competitive and acceptable to the end users. For the purpose declaring natural gas “Declared Goods” under Central Sales Tax Act maybe considered by the government……with the pooling mechanism……price of regasified LNG shall become more competitive.”
Annexures R-7, R-8, R-9, R-10 contain communications
53
Page 54
54
between the Minister of Finance, Qatar and
representatives of the Indian Ministry of Petroleum
and Natural Gas as well as RasGas between June and
July 2002. The abovesaid communication would show
the efforts that were being made at Ministry level
to secure supply of LNG from Qatar to India. The
most significant is Annexure R-10, which is the
record note of discussion of the meeting dated
22.09.2002, between the then Indian Minister of
Petroleum and Natural Gas and the Minister of Energy
and Industry, Qatar, held in Japan, where several
concerns were flagged by Qatar, including the non-
fulfillment of certain promises by India, including
negotiating of contracts between Petronet and the
downstream consumers of RLNG. Pursuant to this,
several meetings took place between representatives
of Ministry of Petroleum and Natural Gas, ONGC,
IOCL, BPCL, GAIL and Petronet and other experts,
during the course of which several options were
54
Page 55
55
explored, including the pooling of LNG with ONGC,
which was to be considered as the last option.
Thus, 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
55
Page 56
56
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 the purpose of the Essential
Commodities Act, 1955. In the case of M/S Sitaram
Sugar Co. Ltd. v. Union of India22, a Constitution
Bench of this Court deliberated as to who has the
power to fix prices of essential commodities. It
held as under:
“The question of fixation of a fair and reasonable price for goods placed on the market has come up for consideration of Parliament and
22 (1990) 3 SCC 223
56
Page 57
57
Courts in different contexts. Price fixation, it is common ground, is generally a legislative function. But Parliament generally provides for interference only at a stage where in pursuance of social and economic objectives or to discharge duties under the Directive Principles of State Policy, control has to be exercised over the distribution and consumption of the material resources of the community. Thus while Parliament has enacted the Essential Commodities Act, it has left it to the discretion of the Executive to take concrete steps for fixing the prices of essential commodities as and when necessity arises, by promulgating Control Orders in exercise of the powers vested in the Act. Various types of foodgrains, sugarcane and drugs have come under the purview of such control orders and the modalities of fixation of fair prices there under have also come up for consideration of the Courts.”
(emphasis laid by this Court)
This Court also deliberated in detail as to what
constitutes a legislative function:
“32.… to distinguish clearly legislative and administrative functions is "difficult in theory and impossible in practice".
57
Page 58
58
Referring to these two functions, Wade says: “They are easy enough to distinguish at the extremities of the spectrum: an Act of Parliament is legislative and a deportation order is administrative. But in between is a wide area where either label could be used according to taste, for example where ministers make orders or regulations affecting large numbers of people....” Wade points out that legislative power is the power to prescribe the law for people in general, while administrative power is the power to prescribe the law for them, or apply the law to them, in particular situations. A scheme for centralising the electricity supply undertakings may be called administrative, but it might be just as well legislative. Same is the case with ministerial orders 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
58
Page 59
59
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 requisition property or to issue a licence—and delegates those powers generally, then any instructions which he gives to his delegates may be legislative". Where an authority to whom power is delegated is entitled to sub- delegate his power, be it legislative, executive or judicial, then such authority may also give instructions to his delegates and these instructions may be regarded as legislative.”
On the power of delegated legislation, it was held
as under:
“47. Power delegated by statute is limited by its terms and subordinate to its objects. The delegate must act in good faith, reasonably, intra vires the power granted, and on relevant
59
Page 60
60
consideration of material facts. All his decisions, whether characterised as legislative or administrative or quasi- judicial, must be in harmony with the Constitution and other laws of the land. They must be "reasonably related to the purposes of the enabling legislation"……”
Accepting the interpretation of ‘legislative
function’ advanced by the learned senior counsel on
behalf of the appellants, would be giving it too
narrow and restrictive a meaning. It becomes clear
from a perusal of the case law discussed above that
even though price fixing is a legislative function;
the same can be delegated and can be fixed by way of
executive orders as well. In the instant case, the
policy decision dated 06.03.2007 has been taken
after detailed communication between the then
Minister of Petroleum and Natural Gas, as well as
the then heads of IOCL, BPCL, ONGC, GAIL and
Petronet. The impugned policy decision dated
06.03.2007 has also been duly authenticated by the
Under Secretary to the Government of India, which is
60
Page 61
61
well within the powers conferred on the Under
Secretary under the Business Transaction Rules,
1961.
38. The contention advanced on behalf of the
appellants that the said policy takes away their
vested right cannot be accepted in light of Clause
11.4 of the Supply Agreement, which clearly
provides for a situation of change in price of RLNG
under the contract as a result of change in the
policy of the Government. The case of Delhi
Development Authority (supra), relied upon by the
appellants on the point also does not come to their
rescue. It was held in that case as under:
“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.”
In the instant case, clause 11.4 in the Supply
Agreement is the provision of the contract which
61
Page 62
62
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
62
Page 63
63
decision dated 06.03.2007 was taken after due
deliberation and exploring all other possible
alternatives to reduce the price of RLNG, so as to
make it viable for the new entrants in the market
to buy it and run their projects in a feasible
manner in the larger public interest. The consumers
of RLNG though long term contracts are a class by
themselves, for the purpose of Article 14 of the
Constitution of India. The impugned policy decision
dated 06.03.2007 was to apply to all the players
within this class uniformly and across the board.
Thus, the contention that the appellants have been
discriminated against, or that the impugned policy
decision was taken in an arbitrary manner cannot be
accepted as the said contention is wholly untenable
in law.
Since the legality of the executive decision
dated 06.03.2007 has been upheld, the question of
63
Page 64
64
refund of the amount of losses suffered by the
appellants as a result of increase in the price of
RLNG in their contract as urged on their behalf,
does not arise for consideration at all by us.
40. 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 judgment and
order dated 16.05.2008 passed by the High Court of
Gujarat is upheld as the same is in accordance with
the provisions of the Constitution and law laid
down by this Court in catena of cases as stated
supra. Therefore, the impugned policy decision
dated 06.03.2007 does not suffer from any infirmity
in law and is hereby upheld. For the foregoing
reasons, the appeals are accordingly dismissed. All
pending applications are disposed of.
64
Page 65
65
………………………………………………………… J.
[V. GOPALA GOWDA
…………………………………………………………J. [UDAY UMESH LALIT]
New Delhi, April 19, 2016
65