TaxTMI 
TaxTMI 
2016 (4) TMI 1366
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....urchases natural gas from Gulf countries. Since gas in large quantities cannot be feasibly 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 (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 li....
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....is 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 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 Hig....
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....lmost 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 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 Flats (2008) 2 SCC 672, 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 off....
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....desh 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 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 Officer AIR 1967 SC 1836 , 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." Placin....
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....e 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 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 the Seven Judge Bench decision of this C....
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....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 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 ....
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....nsel 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 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 India (1970) 3 SCC 400 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 ....
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....thenticated 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 Mysore AIR 1967 SC 1753, 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 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 Authority 2015 (13) SCALE 559 as under: "At the same time where however, a power or authority is conferred with ....
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....r 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. 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. (2004) 1 SCC 55 , 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....
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....& Anr. (2003) 5 SCC 437, 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. 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 imp....
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....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 nondiscriminatory 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 4.32 per MMBTU was arrived at b....
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....nch decision of this Court in the case of Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536 , 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 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 constitutionall....
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....well. 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 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....
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....t 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 India (2000) 10 SCC 664 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 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 beca....
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....rious 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. (petrameans rock or stone and oleum-means oil). Thus, Natural Gas could very well be comprehended within the expression 'petroleum' or 'petroleum product...... 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....
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....mber 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 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 answe....
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....in 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 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 suspiciously as it is for th....
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....he 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 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 ....
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.... 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 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 Mini....