Court rejects objection on maintainability, deems termination arbitrary, mandates negotiation for gas pricing

The court rejected the respondent's objection on the maintainability of the petition, finding the relief sought against arbitrary action violative of the Constitution. The respondent's termination of the Gas Sales Agreement was deemed arbitrary, not aligning with Ministry directives. Failure to negotiate in good faith and introducing new pricing concepts led to the court directing negotiations for gas pricing. The court quashed the respondent's communications, mandating negotiations in good faith to determine the gas price, with no costs awarded.

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Issues Involved:
1. Maintainability of the petition.
2. Arbitrary and unreasonable action by the respondent.
3. Enforcement of contractual rights and obligations.
4. Direction to negotiate gas price in good faith.

Summary:

1. Maintainability of the Petition:

The respondent raised a preliminary objection regarding the maintainability of the petition, arguing that the dispute pertains to a contract between the petitioner and the respondent. The court held that the relief sought is against the arbitrary action of the respondent, which is violative of Article 14 of the Constitution of India. Therefore, the preliminary objection about non-maintainability of the petition was rejected.

2. Arbitrary and Unreasonable Action by the Respondent:

The petitioner, Gujarat State Petroleum Corporation Ltd. (GSPCL), challenged the respondent, GAIL (India) Ltd.'s letters dated 4.5.2012 and 24.1.2013, which stated that the Gas Sales Agreement (GSA) would stand terminated with effect from 01.01.2014. The court found that the respondent's action was arbitrary and not in line with the directive of the Ministry of Petroleum & Natural Gas regarding pooling of RLNG prices.

3. Enforcement of Contractual Rights and Obligations:

The petitioner argued that the respondent did not engage in bona fide negotiations to determine the gas price effective from 01.01.2014, as required under the GSA. The court noted that the respondent failed to respond to the petitioner's communication dated 01.10.2011 until 21.12.2011 and introduced a new concept of "aligning future price of RLNG with market conditions prevalent," which was not part of the original agreement.

4. Direction to Negotiate Gas Price in Good Faith:

The court directed the respondent to engage in bona fide negotiations with the petitioner to arrive at the gas price effective from 01.01.2014. The petitioner is to approach the respondent by 15.07.2013, and the respondent must complete the negotiation within three months from the receipt of the petitioner's communication.

Conclusion:

The court quashed and set aside the respondent's communications dated 04.05.2012 and 24.01.2013 and directed the respondent to engage in bona fide negotiations with the petitioner to determine the gas price effective from 01.01.2014. Rule was made absolute with no order as to costs.

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