Deemed authorisation for city gas networks requires holistic regulatory review and a fair hearing before rejecting applications.

A statutory scheme conferring deemed authorisation on existing city gas network operators requires the regulator to assess applications under the authorising regulations in a holistic manner, treating the listed criteria as relevant considerations rather than isolated disqualifications. A rejection based only on limited physical and financial progress, without considering prior NOCs, investment already made, commencement of work, the press note, written submissions and hearing, is unsustainable. Withdrawal of NOCs and forfeiture of commitment fee likewise must account for the affected party's reply and the surrounding factual and equitable circumstances before adverse action is taken.

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Issues: (i) Whether the Board was justified in rejecting the appellant's application for authorisation for the city gas distribution networks at Udaipur and Jaipur under Section 17 of the Petroleum and Natural Gas Regulatory Board Act, 2006 read with Regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008, after Section 16 of the Act had come into force and conferred deemed authorisation on entities already laying or building such networks before the appointed day; (ii) Whether the State Government was justified in withdrawing the NOCs and forfeiting the commitment fee without considering the appellant's reply and the surrounding factual matrix.

Issue (i): Whether the Board was justified in rejecting the appellant's application for authorisation under Section 17 of the Petroleum and Natural Gas Regulatory Board Act, 2006 read with Regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008, after Section 16 of the Act had come into force and conferred deemed authorisation on entities already laying or building such networks before the appointed day.

Analysis: Section 16 created a deeming protection for entities already engaged in laying, building, operating or expanding a city or local natural gas distribution network immediately before the appointed day. Regulation 18 was required to be applied in that setting, and the criteria under Regulation 18(2) were only relevant considerations, not mandatory disqualifications in isolation. The Board rejected the application mainly on the ground of inadequate physical and financial progress under Regulation 18(2)(d), but did not examine the other relevant criteria in totality, nor did it adequately consider the appellant's prior NOC, the investment already made, the circumstances in which work had been commenced, the effect of the press note, or the appellant's written submissions and hearing.

Conclusion: The rejection of the appellant's authorisation applications was unsustainable and liable to be quashed.

Issue (ii): Whether the State Government was justified in withdrawing the NOCs and forfeiting the commitment fee without considering the appellant's reply and the surrounding factual matrix.

Analysis: The NOCs had been granted after the bid process and the appellant had acted upon them by incurring substantial expenditure and commencing work. The order withdrawing the NOCs was passed without proper consideration of the appellant's reply and without dealing with the factual and equitable circumstances bearing on the dispute. In those circumstances, the withdrawal and forfeiture order was found to be unfair and unjust.

Conclusion: The withdrawal of the NOCs and forfeiture of the commitment fee was liable to be quashed.

Final Conclusion: The appeal succeeded, the impugned orders were quashed, and the matter was sent back for fresh consideration by the Board after granting an opportunity of hearing and bearing in mind deemed authorisation and the relevant circumstances.

Ratio Decidendi: Where a statutory scheme confers deemed authorisation on existing network operators, the regulator must assess an application by considering all relevant criteria in totality and must pass a reasoned decision after affording a fair hearing; rejection on a single factor without such holistic consideration is unsustainable.

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