RELIANCE INDUSTRIES LTD(RIL) vs UNION OF INDIA

C/SCA/5246/2010 CAV JUDGMENT DATED: 16/10/2026
(GJHC240452152010)
Reserved On : 29/07/2026
Pronounced On : 16/10/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO.5246 of 2010

FOR APPROVAL AND SIGNATURE :


HONOURABLE MR. JUSTICE NIRZAR S. DESAI

=========================================
Approved for Reporting Yes No
YES
=========================================
RELIANCE INDUSTRIES LTD(RIL) & ANR.
Versus
UNION OF INDIA & ORS.
=========================================
Appearance :
MR MIHIR JOSHI, SENIOR COUNSEL ASSISTED BY MR KUNAL NANAVATI,
SHREYANSH SHARMA AND MR. S. K. GUJARATHI FOR NANAVATI
ASSOCIATES for the Petitioners.
MS AISHWARYA REDDY WITH MS NANCY SONI FOR M/S TRIVEDI & GUPTA
for the Respondent Nos.2,3.
MS MAITHILI D MEHTA for the Respondent No.1.
=========================================
CORAM: HONOURABLE MR. JUSTICE NIRZAR S. DESAI


CAV JUDGMENT
By way of this petition, the petitioners have prayed for
the following reliefs :-
“(A) Your Lordships may be pleased to issue a writ
of mandamus or a writ in the nature of mandamus
directing the respondents, their officers, servants
and agents to forebear from acting in a manner
contrary to the Government Pricing Orders dated
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30.01.1987, 31.12.1991, 18.09.1997, 30.09.1997.
20.06.2005 and 19.04.2006.
(B) Your Lordships may be pleased to hold and
declare that the Petitioner company is not liable to
pay the transmission charges for supply of gas,
since the Petitioner company transports the gas to
its plant through its own pipelines.;
(C) Your Lordships may be pleased to hold and
declare that the articles for payment of
transmission charges incorporated in the contracts
dated 30.03.2000 and 31.08.2008 are unfair,
unreasonable, unconscionable and opposed to
public policy and be further pleased to issue a writ
of mandamus or a writ in the nature of mandamus
quashing and setting aside the said articles for
payment of transmission charges and direct the
Respondents Nos. 2 and 3 to refund the
transmission charges paid till date and thereafter
including Service Charge, Sales Tax, Surcharge etc.
pursuant to the same together with interest @ 18%
p.a. from the date of payment by Petitioners till
actual date of refund.
(D) Pending the hearing and final disposal of the
present petition, Your Lordship may be pleased to
direct the Respondent No. 2 and No.3 its officers,
servants and agents to continue to supply gas
without recovering transmission charges.”
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2. In view of relief prayed for, at the time when the
petition was filed, the coordinate Bench of this Court by relying
upon the order dated 17.6.2008 passed by the Division Bench of
this Court in Letters Patent Appeal No.1622 of 2006, whereby the
Division Bench confirmed the judgment and order dated 19.9.2006
rendered by the learned Single Judge in Special Civil Application
No.4887 of 2006, issued Rule in the matter vide order dated
29.4.2010 and while granting ad-interim relief in terms of
paragraph 18 (D) issued notice as to interim relief to the
respondents. The relief granted by the coordinate Bench in terms
of paragraph 18 (D) reads as under :-
“(D) Pending the hearing and final disposal of the
present petition, Your Lordship may be pleased to
direct the Respondent No. 2 and No.3 its officers,
servants and agents to continue to supply gas
without recovering transmission charges.”
3. The aforesaid relief continued to operate from
29.4.2010 in view of the fact that order dated 17.6.2008 passed by
the Division Bench of this Court in Letters Patent Appeal No.1622
of 2006 was pending before the Hon’ble Supreme Court and as the
Hon’ble Supreme Court had granted interim relief in favour of
respondent – GAIL in the said matter, the petition remained
pending and the relief granted vide order dated 29.4.2010 in this
petition continued to operate. Thereafter, another coordinate
Bench of this Court vide order dated 24.11.2010 vacated the
interim relief granted with a clarification and direction that no
transportation charges shall be demanded from the petitioners for
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consumption of gas during the period when interim relief was
operating in favour of the petitioners.
4. The aforesaid order was carried in appeal by way of
Letters Patent Appeal No.53 of 2011 by the petitioners. However,
the same was dismissed vide order dated 18.2.2011 passed in
Letters Patent Appeal No.53 of 2011 by the Division Bench of this
Court.
5. Thereafter, the Hon’ble Supreme Court vide its decision
dated 8.2.2023 in Civil Appeal No.3504-505 of 2010 in the
case of Gas Authority of India Limited v. Indian
Petrochemicals Corporation Limited and others reported in
(2023) 3 SCC 629 dismissed the appeals preferred by GAIL.
However, while dismissing the appeals, the Hon’ble Supreme Court
restricted the relief granted to the petitioners for a period of three
years before the date of filing of the writ petition in light of the
judgment in the case of Lipton India Limited v. Union of India,
reported in (1994) 6 SCC 524. According to the petitioners, the
aforesaid decision of the Hon’ble Supreme Court reported in (2023)
3 SCC 629 squarely covers the issue on hand as the facts are
almost identical and, therefore, in the aforesaid background, the
matter was heard by this Court. After hearing the learned counsels
appearing for the parties, this Court on 29.7.2026, while reserving
the matter for judgment, passed the following order :-
“Heard learned Senior Advocate Mr. Mihir Joshi,
assisted by learned advocate Mr. Kunal Nanavati
and learned advocate Mr. S.K. Gujarathi, with
learned advocate Mr. Shreyansh Sharma for
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Nanavati Associates for the petitioner; learned
advocate Ms. Aishwarya Reddy, with learned
advocate Ms. Nancy Soni, for respondent Nos. 2 and
3; and learned advocate Ms. Maithili Mehta for
respondent No. 1.
Upon conclusion of the arguments, learned advocate
Mr. Kunal Nanavati and learned advocate Ms.
Aishwarya Reddy undertake to submit their written
submissions, along with the judgments upon which
they seek to rely, before this Court on or before
03.08.2026. Arguments concluded.
Reserved for judgment.”
6. The brief facts giving rise to the present petition are
stated as under :-
7. The petitioner No.1 is a Public Limited Company
registered under the provisions of the Companies Act, 1956 and
engaged in the business of manufacture of petrochemicals,
whereas the petitioner No.2 is a shareholder of the petitioner No.1
Company who is vitally interested in the affairs of the petitioner
No.1 Company. The respondent No.1 is a nodal controlling and
regulating authority for allocation and price fixation of Natural Gas
which is a petroleum product falling within the scope of the
Essential Commodities Act and the respondent No.1 i.e. Union of
India has been issuing Pricing Orders fixing the price of Gas in
different regions from time to time. The respondent No.2 – Gas
Authority of India Limited (GAIL) is a Government of India
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undertaking and one of the Navratna Companies formed by Union
of India for augmentation, creation, establishment, setting up of
necessary plants, equipments and infrastructural facilities
including utilities and providing services for the utilization of
natural or associated gas obtained within the country or from the
Sea or Ocean bed in International Waters. The main functions of
respondent No.2 is of marketing and supply of gas. The respondent
No.1 issues directions in the form of Pricing Order that regulates
pricing pattern and the supplier of natural gas is not permitted to
charge a price in excess of price mentioned in the Pricing Order.
8. The Gas which is produced by ONGC and Oil India
Limited and on the basis of assessing needs of consumers in each
region, the respondent No.1 – Union of India fixes the price and the
respondent No.2 which enjoys the monopolistic status with regard
to marketing of natural gas does the marketing of the gas produced
by ONGS and Oil India Limited. The petitioners erstwhile which
was known as Indian Petrochemicals Corporation Limited (IPCL)
was a Public Sector Undertaking at the relevant point of time and
on account of divested by the Government of India in the year
2002, the same was taken over by the petitioners. At the relevant
point of time, Indian Petrochemicals Corporation Limited (now
petitioners) established a Petrochemicals Complex at Dahej upon a
Government of India's Project approval and commitment for supply
of 8-9 MMSCMD of rich gas to extract C2-C3 to use as feed-stock
for its Petrochemical Plant. The said allocation was made by
Government of India in line with its Gas use policy for optimum
economic value of various fractions of Natural Gas. The aforesaid
st
decision was taken in 31 meeting of PIB dated 14.3.1991 and later
dated 26.3.1992.
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9. The petitioners made a huge investment of Rs.4335
Crores in establishing the said petrochemical complex at Dahej, in
view of aforesaid commitment by the Government of India whereby
the petitioners were to receive semi-rich gas for processing and
recovery of C2, C3 components in the gas for Petrochemicals
manufacture and return lean gas to the Respondent No.2. For the
aforesaid purpose, an Agreement dated 30.3.2000 was entered into
between the petitioners and the respondent No.2 and as per Article
4.02 of the said Contract, the petitioners were to initially lay and
maintain pipelines and install all metering equipment at their own
cost for receipt / return of gas from/to ONGC installations. As per
Article 4.03, subsequently, on completion of LPG Plant of
Respondent No.2, the pipelines were to be extended by the
petitioners to the said LPG Plant of Respondent No.2. Accordingly,
the petitioner Company laid two pipelines of 35.4 Kms. each (Total
70.8 Kms), 35.4 Kms. Pipeline in respect of the gas and 35.4 Kms.
Pipeline for return of lean gas from GAIL Gandhar LPG plant to
Dahej at a cost of Rs. 121.25 Crores for transporting semi-rich gas
from LPG recovery Plant of Respondent No.2 and after recovery of
C2, C3 from Gas, return of lean gas to the same LPG plant of
Respondent No.2. According to the petitioners, the aforesaid would
indicate that the petitioner Company is transporting gas at its own
cost through the said pipelines and incurs operation and
maintenance costs also and the respondent No.2 has not set up an
inch of pipeline for the supply of gas to the petitioners. The
petitioner Company also incurred the cost of Rs.10.50 Crores to
install Terminal Station at GAIL Gandhar LPG plant, for metering
and, dispatch of semi-rich gas and receipt of lean gas and the same
has been handed over to Respondent No.2.
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10. The respondent No.2 receives Natural Gas from ONGC
located at a very close proximity to its LPG plant at Gandhar. The
respondent No.2 processes the said rich gas received from ONGC
at the installation for recovery of LPG. After recovery of LPG, the
respondent No.2 is supplying resultant semi-rich gas to petitioners
at outlet of the Terminal station installed by petitioners at their
own cost at LPG Recovery Plant of Respondent No.2 and thereafter,
the same is transported to and from petitioners plant at Dahej
through two pipelines of 35.4 Kms each laid by petitioners
themselves at their own costs. The entire controversy is that
though the respondent No.2 is not involved or responsible for
transportation of gas as both the pipelines are laid by the
petitioners only at Dahej Plant, the respondent No.2 is still
charging transmission charges in view of Articles No.4.02 and 4.03
of the Contract dated 30.03.2000. Though Article 4.7 of the said
contract dated 30.03.2000 and Article 4.6 of Contract dated
31.08.2008 specifically transfers the liability and ownership of gas,
the moment it crosses the 'Point of onward delivery'. According to
the petitioners, the aforesaid term of the Contract would clearly
evidence from the fact that the gas once crosses the point of
onward delivery, the same would stand transferred in the name of
and would become liability of the petitioners and hence, for the
transportation of the same, the respondent No.2 has nothing to do
further. Despite that, the respondent No.2 is charging
transportation charges from the petitioners for which the
petitioners also raised concern vide letter dated 13.10.2008.
11. The aforesaid Clauses which provides for payment of
transportation charges from the petitioners, are challenged by the
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petitioners by way of this petition and has also prayed for an
interest @ 18% p.a. According to the petitioners, till the petition
was preferred, the petitioners paid a sum of Rs.66.81 Crores
including Service Tax, Sales Tax, Surcharge etc. from 19.11.1999 to
31.3.2010 and interest @ 18% was considered and the amount of
interest comes to Rs.67.16 Crores as per the calculation made by
the petitioners upto 31.3.2010. However, the ad-interim relief
which was granted to the petitioners was vacated subsequently, the
petitioners had continued to pay the transportation charges to the
respondent No.2 and, therefore, the amount of transportation
charges paid by the petitioners has increased and, therefore, the
entire calculation has changed.
12. A similar controversy had taken place in the past in
respect of almost identical issue whereby the petitioners same
Dahej Petrochemical Plant also receives semi-rich gas and return
the lean gas from respondent No.2 at Hazira under a separate
Contract dated 9.11.2001. The dispute between the same line
arose in respect of gas supplies from the respondent No.2 from
Hazira to Dahej Unit through the petitioners’ own pipeline and for
transportation charges being levied on the same. The petitioners
challenged the aforesaid action by way of Special Civil Application
No.4887 of 2006 which was allowed vide judgment dated 19.9.2006
and the learned Single Judge of this Court held that the levy of
transportation charges is not permitted under Pricing Order as the
petitioners are transporting gas through its own pipeline and is not
using the pipeline network of the respondent No.2. The coordinate
Bench has considered that the petitioner has invested huge amount
of approximately 4500 Crores and approximately 354 Crores for
laying down the pipeline having 97 Km of length, considering the
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monopolistic status of the respondent No.2, as the petitioners
cannot afford to lose sight of natural gas, they were compelled to
sign the Agreement. The learned Single Judge of this Court
quashed and set aside the clause of term of contract which
compelled the petitioners to pay transportation charges by
declaring it unfair, unconscionable and by holding the same against
the Public Policy.
13. Thereafter, though the learned Single Judge quashed
the aforesaid terms of contract, the order was silent about refund.
The petitioners preferred Misc. Civil Application (For Direction)
No.270 of 2007 and the learned Single Judge vide order dated
11.4.2007 directed the respondents to refund the transportation
charges paid by the petitioners within a period of six weeks from
the date of the order.
14. The aforesaid judgment and order were carried in
appeal by the respondents by preferring Letters Patent Appeal
No.1622 of 2006 which was filed challenging judgment and order
dated 19.9.2006 Special Civil Application No.4887 of 2006, along
with Letters Patent Appeal No.1012 of 2007 which was filed
challenging order dated 11.4.2007 passed in Misc. Civil Application
No.270 of 2007. Both the appeals came to be dismissed by the
Division Bench of this Court vide judgment dated 17.6.2008.
15. The respondent No.2 challenged aforesaid judgment by
way of Civil Appeal No.3504 – 505 of 2010 before the Hon’ble
Supreme Court, but the Hon’ble Supreme Court vide its judgment
dated 8.2.2023 in Civil Appeal No.3504-505 of 2010 in the
case of Gas Authority of India Limited v. Indian
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Petrochemicals Corporation Limited and others reported in
(2023) 3 SCC 629 dismissed the appeals preferred by the
respondent No.2 – GAIL. However, the Hon’ble Supreme Court
restricted the period of refund for a period of three years.
15. According to the petitioners, as in that litigation, the
issue was about levy of transportation charges in respect of
pipeline set up by the petitioners themselves from Hazira to Dahej
and this is the case where the question is about levy of
transportation charges from Gandhar to Dahej Terminal, the issue
is identical and the same is required to be considered in light of the
decision of the Hon’ble Supreme Court reported in (2023) 3 SCC
629 (Supra) whereby in respect of different route, the Hon’ble
Supreme Court held those terms of contract to be unjust,
unreasonable, arbitrary and contrary to the Public Policy and
directed the respondents to refund the amount of transportation
charges paid by the petitioners for a period of three years from the
date of petition.
16. In view of above factual background, the matter was
argued by Mr. Mihir Joshi, learned Senior Counsel assisted by Mr.
Kunal Nanavati, Mr. Shreyansh Sharma and Mr. S. K. Gujarathi for
Nanavati Associates for the petitioners, Ms. Aishwarya Reddy with
Ms. Nancy Soni for M/s. Trivedi & Gupta for the respondent Nos.2
and 3 and Ms. Maithili D. Mehta, learned Senior Central
Government Standing Counsel for respondent No.1.
For Union of India – respondent No.1, Ms. Maithili
Mehta had submitted that Union of India is a formal respondent.
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17. The matter was extensively heard and the main
submission of learned Senior Counsel Mr. Mihir Joshi on behalf of
the petitioners was that the present petition is squarely covered by
the decision of the Hon’ble Supreme Court in the case of Gas
Authority of India Limited v. Indian Petrochemicals
Corporation Limited and others reported in (2023) 3 SCC
629 (Supra), whereas learned advocate Ms. Aishwarya Reddy
appearing for respondent Nos.2 and 3 opposed the petition on the
ground that there is a factual difference between the decision upon
which reliance is placed by the petitioners (GAIL v. IPCL) and
though the petitioners had the judgment of learned Single Judge
available with it, even before the second contract of 2008 was
signed, despite that they signed the contract on 31.8.2008 which
would amount to waiver on the part of the petitioners.
18. Both the parties i.e. the petitioner as well as
respondent Nos.2 and 3 submitted their respective written
submissions which are reproduced as under :-
19. Written Submission of the Petitioners :-
PETITIONER'S CONTENTIONS :
The Petitioner has principally two contentions:
I. Unconscionable contract
II. Binding precedent laid down in (2023) 3 SCC 629
1. Unconscionable contract/clauses.
1. GAIL enjoyed monopolistic position in so far as supply of
gas is concerned (Please see (2023) 3 SCC 629 – para 23).
The Petitioner sought waiver of transportation charges at
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both times when the contracts were to be signed. (please
see pg. 112, letter dated 01.02.2000 and pg. 114, letter
dated 13.10.2008). At both times, GAIL refused the
request for waiver of the transportation charges (Please
see pg. 111 – Annexure – D, letter dated 28.03.2000 and
pg. 229, Annexure – H Letter dated 24.10.2008. Since Gail
was the only supplier of gas in the country (page 25,
Ground F), the Petitioner had no alternative but to sign the
contract.
2. The contract required the Petitioner to install 2 pipelines,
from delivery to the Petitioner’s plant as the incoming
pipeline and from the Petitioner’s plant to sellers LPG
Plant in Gandhar as the outgoing pipeline, as a
precondition to supply (clause 4.01 -4.03 at page 34 in
contract dated 30.03.2000 and clause 4.01 and 4.02 at
page 66 in contract dated 31.08.2008 The Petitioner, in
compliance thereof, laid down both pipelines at a cost of
Rs. 121.25 Crores. Consequently, the Gas consumed by the
Petitioner was carried and transported through the
Petitioners’ pipeline.
3. Despite the above fact, the petitioner had no alternative
but to install the said pipelines and agree to the conditions
laid down by GAIL because of its monopolistic position
enjoyed in the supply of gas (Page 19, para 11.6 and 12).
4. The fact that respondent GAIL enjoys a monopolistic
position is also declared by the Hon’ble Supreme Court in
its judgment passed and reported in (2023) 3 SCC 629, at
para 21. The Hon’ble Supreme Court specifically held that
it is a "Hobson's choice". The Hon'ble Supreme Court
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found on identical facts: "IPCL, having incurred a
significant expense in setting up the appropriate
infrastructure, had no choice but to enter into agreement
with GAIL" [para 21]; "they had to either give up the
contract or accept the clauses levying transportation
charges... GAIL exercised an unequal bargaining power at
the time of signing the contract" [para 24]. The
Petitioner's weak position, evidenced by its conduct both
pre and post signing on both Contracts, fortifies this fact.
5. The petitioner suffered from an unequal bargaining power,
considering the monopoly enjoyed by the respondent. As a
result, it could not secure a contract on equal terms and
had to yield to terms that were one-sided, despite
objections taken by it.
6. The Respondent has contended that the transportation
charges are levied for the 20 km pipeline laid by the
Respondents (@pg 386, part of para 4, and @pg 389, para
5). The petitioner has denied the contention that the 20-
kilometer pipeline has been laid for the petitioner, and the
petitioner is receiving supplies of gas through it. As a
matter of fact, the pipeline has been laid for the utilization
of gas to recover LPG in its plant and thus the charges
cannot be charged from the customers (pg. 314 at para
15). The Respondent has also specifically contended in its
affidavit (pg. 247, para 6 and pg. 386, para 4) that
transportation charges are levied for gas transported up to
delivery point. The fact that, from the delivery point, the
petitioner has laid its own pipeline clearly belies the
argument put forth by the respondents when the purpose
of 20 km pipeline laid by it is considered.
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7. Respondent No. 2 has itself averred, at Para 6, Pg. 247
(Ann. II @ Pg. 300) of its Affidavit-in-Reply, that it is "only
levying and collecting transportation charges for the
services being provided till the delivery point." This, read
with the binding Government Pricing Orders, which fixes a
composite price for natural gas inclusive of cost recovery
up to that very point, this admission is fatal to Respondent
No. 2's defence. The price already payable by the
Petitioner for the gas covers the cost of delivery up to the
delivery point; a further, separate charge for that same
segment is an illegal and unconscionable recovery not
contemplated by, and contrary to, the binding Pricing
Orders (annexed at Annexure G (Colly), from page 214
onwards). Thus, on admission, for a pipeline that supplies
gas to a station that, in turn, supplies gas to various other
parties, the respondent cannot claim that expenses need
to be recovered from the Petitioner by way of
transportation charge, especially in light of the
contractual clauses that specifically stipulate the point of
delivery for the petitioner [clauses [4.02 and 4.03] in the
first contract [Pg. 34] and clause 4.2 [Pg. 66] in the second
contract]. More particularly, since the pipelines leading
from the point of delivery to the petitioner are installed
and maintained by the petitioner itself.
8. The contract, therefore, in the submission of the
petitioner, has to be declared as unconscionable insofar as
it requires the petitioner to pay transportation charges for
transporting gas using its own pipeline.
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II. Binding Nature of precedent in (2023) 3 SCC 629.
1. In the above judgment, the Hon’ble Supreme Court was
dealing with an identical situation between the same parties
(as Reliance had purchased IPCL) and having identical
clauses. In that case of IPCL the Hon'ble Supreme Court has
already held that Gail is not entitled to levy transportation
charges where IPCL had laid its own pipeline to transport
gas. The Hon'ble Supreme Court rejected GAIL's contention
that charges could be levied because it had laid its pipeline;
for users generally.
2. The Hon’ble Supreme Court has turned down GAIL’s right to
demand transportation charges on a materially identical
clause. The Hon'ble Supreme Court held that levying
transportation charges on a party required to lay and use its
own pipeline is ex facie discriminatory and arbitrary under
Article 14 [paras 22–23].
3. The petitioner submits that the Hon’ble Supreme Court had
also considered the contention raised by the respondent with
respect to maintainability of the petition, considering that
first contracted dated 30.03.2000 provide for Arbitration
Clause (Clause - 13 at page 45). Considering the fact that the
Supreme Court, in this very judgment, had declared that, in
light of the facts that it was appreciating, the petition was
maintainable, and since the present issue involves identical
facts, the contention with respect to maintainability of the
petition becomes unsustainable. Moreover, the respondent is
a state within the meaning of Article 12 and is obligated with
a duty to remain fair despite enjoying a monopolistic position,
which in the present case it clearly has not. The petitioner
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has approached this Hon’ble Court seeking a remedy from
the unconscionable behavior of a monopolistic giant against
which it has no bargaining power.
4. Moreover, the arbitration itself becomes a futile exercise
since the arbitrator is a creature of the contract itself and
therefore is bound by the terms of the contract, which he
would have no power to overturn or declare as
unconscionable.
5. The petitioner therefore submits that it is only this court that
can declare such clauses as unconscionable. Resultantly, the
contention of the respondent with respect to maintainability
also fails.
6. The respondent has also contended that the objection to levy
of transportation charges is an afterthought as it was a
negotiated contract, in spite of the fact that the petitioner
already had an existing judgment in its hand of the Supreme
Court declaring such levy as unconscionable and illegal in
2023 (3) SCC 629. This also has no merit, since this clearly
indicates a monopolistic position enjoyed by the respondent
by virtue of the fact that the petitioner, in spite of a favorable
judgment in its hand, was unable to impress upon the
respondent to change its mind. Moreover, the record itself
suggests that the petitioner attempted to negotiate for waiver
of transportation charges even before the first contract was
signed, by way of letter dated 01.02.2000 at Pg. 112 which
the respondent rejected by way of letter dated 28.03.2000 at
Pg. 111.
7. Moreover, this argument was also canvassed and rejected in
(2023) 3 SCC 629, that there was no unequal bargaining
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positions, that the contract was carefully negotiated and
reflected mutual consensus evident from inter se pre-
contractual communications [para 12 of that judgment]. The
Hon'ble Supreme Court rejected this, holding that a
"Hobson's choice" and unequal bargaining power existed
notwithstanding the formal consensual character of the
contract [paras 21, 24].
8. Therefore, in light of above submissions, the Petitioner
submits that the Petitioner is entitled to receive refund for
transportation charges paid by the Petitioner to GAIL as per
the Judgment passed by the Supreme Court as mentioned
above for past 3 years from the date of filing of this Petition
i.e. 17.04.2010 and also from the date of vacating stay i.e.
24.11.2010 till the final disposal of this Petition along with
the Interest, Service Tax and Sales Tax.
20. Written Submission of the Respondent Nos.2 & 3
1. These written submissions are tendered on behalf of
Respondent Nos. 2 and 3, collectively referred to as “GAIL”.
The Petition challenges the transmission/service-charge
provisions contained in the contracts dated 30 March 2000
and 31 August 2008 and seeks refund for the period from
19.11.1999 to 31.03.2010, together with interest at 18% per
annum.
2. It is submitted that the Petition proceeds upon a
fundamentally incorrect ground that because the Petitioners
own and maintain two pipelines of approximately 35.4 km
each between GAIL’s Gandhar complex and the Petitioners’
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Dahej complex, GAIL is said to have rendered no
transportation or service whatsoever. The contractual and
physical record shows that the Petitioners’ pipelines
commence downstream of the agreed Delivery Point. Before
that point, GAIL’s separate upstream pipelines and facilities
carry, process and deliver the gas to the outlet of GAIL’s
Gandhar Gas Processing Complex.
3. The present case is therefore materially different from the
case of GAIL v. Indian Petrochemicals Corporation Ltd.,
(2023) 3 SCC 629, which concerned a “loss of transportation”
charge in respect of the HBJ pipeline when that pipeline was
admittedly not used. In the present case, GAIL’s upstream
infrastructure is actually used up to the contractual Delivery
Point. Indeed, paragraph 21 of the said judgment recognises
the applicable principle : once GAIL has laid the pipeline, it
is entitled to structure its cost in the contract.
4. Accordingly, it is submitted that the Petition deserves to be
dismissed both on merits and in the exercise of this Hon’ble
Court’s discretionary jurisdiction under Article 226. It is
submitted that the disputed engineering, functional,
accounting and invoice questions must be left to the
contractual forum.
I. CONTRACTUAL AND FACTUAL FRAMEWORK
5. It is submitted that under the contract dated 30.03.2000, the
Petitioners’ pipelines were to extend downstream of the
Points of Onward Delivery/GAIL’s LPG plant and return to the
same interface. Article 4.05 separately required payment of
Rs. 269 per 1,000 SCM “towards transmission/service
charges”, in addition to the price of gas, with the agreed
escalation. Article 10.01 expressly treated the Government-
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fixed gas price as exclusive of service/transportation charges
and statutory levies.
6. Further, the contract dated 31.08.2008 is even more explicit.
“Seller’s Facilities” include pipelines from the source/field to
the Delivery Point and the associated plant, machinery and
metering facilities. “Transmission Charges” are defined with
reference to transmission and delivery by GAIL up to the
Delivery Point. Article 4.2 fixes the Delivery Point at the
outlet of GAIL’s Gas Processing Complex at Gandhar and
records that the Petitioners’ pipeline begins downstream
thereof. Article 10.2 provides for a transmission/service
charge of Rs. 351 per 1,000 SCM, in addition to the gas
price under Article 10.1.
7. It is submitted that the Petitioners repeatedly equate the
transmission/service charge with pipeline rental. However,
that premise is fundamentally incorrect. The parties
deliberately agreed upon the wider expression "Seller's
Facilities", which encompasses the entire seller-side
infrastructure necessary to deliver gas at the agreed
Delivery Point. The contractual charge therefore
compensates the integrated delivery system and not merely
the use of a particular stretch of pipeline.
8. The 2008 contract further provides that invoices include the
transmission charges; prescribes a time-bound mechanism
for an invoice claim; requires prior consultation/notice before
proceedings; supersedes previous negotiations; records that
the parties’ obligations are private and commercial acts; and
expressly declares that the parties read and understood the
contract and entered it by free will and consent.
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9. It is submitted that the physical arrangement is shown in
GAIL’s route/comparison drawing. GAIL has pleaded separate
upstream pipelines of about 20 km and associated facilities
through which gas is brought from the ONGC-side
installations to GAIL’s processing and delivery complex. The
Petitioners’ two 35.4 km pipelines thereafter carry the semi-
rich gas from Gandhar to Dahej and return the lean gas. The
two systems are successive legs; they are not substitutes for
one another.
10. The 18.09.1997 Pricing Order also maintains the distinction
between commodity price and transportation. Paragraph (vii)
states that, in addition to the fixed gas price, transportation
charges, royalty, taxes, duties and other statutory levies on
production, transportation and sale of natural gas are
payable by consumers.
11. Further, the contemporaneous correspondence demonstrates
negotiation of the commercial structure. GAIL’s letter dated
28 March 2000 records discussions and offered alternative
rates: Rs. 343 per 1,000 SCM, or the reduced rate of Rs. 269
per 1,000 SCM if IPCL bore the stated terminal cost. The
contract incorporating the reduced structure was executed
on 30 March 2000.
12. Further, after this Hon’ble Court’s judgments in the distinct
Hazira/HBJ dispute, the Petitioners executed a fresh and
detailed contract on 31.08.2008 containing the Delivery
Point, Seller’s Facilities, transmission/service charge, entire-
agreement and free-consent provisions. The subsequent
protest letters cannot by themselves displace those agreed
terms.
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II. SUBMISSIONS
A. The assertion that GAIL rendered no transportation or
service is contrary to the record
13. It is submitted that the Petition repeatedly asserts that “not
an inch” of GAIL’s pipeline is utilised. It is submitted that the
assertion considers only the post-delivery Gandhar- Dahej leg
and disregards the upstream movement and facilities by which
the gas reaches GAIL’s Gandhar outlet.
14.More importantly, the Petitioners’ rejoinder does not maintain
the absolute factual denial. While dealing with GAIL’s pleaded
infrastructure supplies, the Petitioners acknowledge the
approximately 20 km pipelines/facility between ONGC-side
premises and GAIL’s LPG plant, but contend that the facility is
for GAIL’s LPG recovery and that its cost should not be charged
to the Petitioners.
15. It is submitted that the case of the Petitioner thus changes from
an alleged charge for a non-existent service to a dispute
concerning the purpose, benefit and allocation of the cost of an
existing upstream system. Whether that system is dedicated,
common-use or dual-purpose; what gas streams and services it
handles; and what costs are reasonably attributable to
transmission and delivery are technical and accounting
questions requiring evidence.
16. The Petitioners’ expenditure on their own downstream pipelines
does not negate the transmission charge. That expenditure may
show that the Petitioners bear the cost of the post-delivery leg;
it does not establish that GAIL must bear, without contractual
recovery, the source-to-Gandhar and delivery-side infrastructure
falling within Seller’s Facilities.
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B. The transmission/service charge is expressly referable to
actual upstream facilities and the agreed Delivery Point
17. It is submitted that the Delivery Point is the contractual
dividing line. GAIL is responsible for transmission and delivery
up to the outlet of its Gandhar Gas Processing Complex. The
Petitioners’ pipeline begins after that outlet. A charge for GAIL’s
performance up to the outlet does not duplicate the Petitioners’
transport after delivery.
18. The contractual expression is “transmission/service charges”. It
is not a kilometer-for-kilometre rental for use of the Petitioners’
pipelines. It covers the seller-side chain and delivery interface
described in the contracts. It is submitted that the agreed
volumetric rate is a commercial cost-recovery mechanism and
cannot be retrospectively replaced in writ jurisdiction by a
judicial rate-setting exercise.
19. The evidence on record further demonstrates that the
transmission/service charge is not merely a charge for
movement of gas through a pipeline. GAIL invested in creating
and maintaining the upstream infrastructure required to make
gas available at the agreed Delivery Point, including
approximately 20 km of upstream pipeline, linking facilities with
the upstream source, delivery interface infrastructure and
metering facilities. The Petitioners do not dispute the existence
of these facilities; their case is only that the cost ought not to be
recovered from them. Once the existence and utilisation of these
facilities are accepted, the challenge is no longer one of absence
of service but merely one of contractual allocation of
infrastructure costs.
20. The rational basis for the rate is also evident from the 2000
correspondence. GAIL offered a higher tariff or a lower tariff
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linked to the Petitioners’ predecessor bearing the terminal cost.
The reduced tariff was selected and incorporated in the
contract. The charge is therefore neither opaque nor
unsupported by a commercial rationale.
21. It is submitted that in the absence of a statutory prohibition,
Article 14 does not authorize the Court to re-price a long-term
commercial contract merely because one party later contends
that the negotiated volumetric recovery exceeds a selected
capital-cost figure. Such a comparison would require the
complete cost base, useful life, capacity, common-use allocation,
operating expenditure, terminal and plant functions, and invoice
evidence.
C. The Government Pricing Orders expressly permit
transportation charges in addition to the gas price
22. The Petitioners’ contention that the impugned charge travels
beyond the Pricing Orders is contrary to the text of paragraph
(vii) of the Pricing Order dated 18.09.1997, which expressly
makes transportation charges payable in addition to the fixed
commodity price.
23. The contracts faithfully adopt that two-part structure. The 2000
contract states that the Government gas price is exclusive of
service/transportation charges. The 2008 contract separately
sets out the gas price under Article 10.1 and the
transmission/service charge under Article 10.2.
24. Further, the Petitioner has failed to identify any Pricing Order
requiring GAIL to absorb all source-to-delivery infrastructure in
the commodity price, or mandating a nil transmission/service
charge merely because the buyer owns a different downstream
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pipeline. The alleged illegality therefore depends entirely upon
the disputed factual plea of “no service”.
D. The case of GAIL v. Indian Petrochemicals Corporation
Ltd., (2023) 3 SCC 629, is factually distinguishable and
supports GAIL on the present record
25. In the 2023 judgment, the Hon’ble Supreme Court considered
the Hazira/HBJ arrangement. The charge in the said case was
specifically justified as “loss of transportation” even though
IPCL had been mandated to lay its own pipeline and was not
using GAIL’s HBJ pipeline at all. The Court found the levy ex
facie discriminatory on that undisputed fact. (paras 19-20 and
22-23) of the judgment.
26. The present Gandhar arrangement is materially different. GAIL
does not claim a notional loss for non-use of HBJ. It relies upon
its actual upstream pipelines, processing/delivery facilities and
the contractual charge up to the Gandhar Delivery Point. The
Petitioners’ downstream lines perform a separate leg.
27. The distinction is recognised in paragraph 21 of the judgment
itself: “once GAIL has laid down the pipeline, it is entitled to
structure in its cost in the contract .” The vice found in that case
arose because the relevant HBJ transportation did not occur.
Here the pleaded and partly acknowledged upstream facilities
do exist and are used before delivery. It is submitted that the
present case falls squarely within this principle. GAIL is not
seeking compensation for a pipeline which was never utilised. It
seeks recovery of the agreed contractual charge for
infrastructure which was actually created, maintained and
utilised for supplying gas up to the Delivery Point.
28. It is submitted that the identity of corporate parties cannot
substitute for identity of issues. The two matters involve (i)
different physical configurations, (ii) different relevant pipelines,
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(iii) different charge rationales and (iv) materially different
contractual provisions. It is submitted that the rule against
charging for transportation that did not occur does not prohibit
recovery for transportation and service that do occur.
29. The maintainability conclusion at paragraph 19 of the said
judgment also rested upon an ex facie discriminatory no-use
charge. In the present case, the existence, role, benefit and
allocation of the upstream facilities are disputed. The
exceptional factual basis for summary writ intervention is
therefore absent. The disputed technical and monetary claim
ought not to be tried under Article 226.
30. It is submitted that it is not our case that a contractual writ is
not maintainable. The jurisdiction is plenary but discretionary.
Reliance is placed on the case of ABL International Ltd. v.
Export Credit Guarantee Corporation of India Ltd., (2004) 3
SCC 553, para 28, where the Hon’ble Supreme Court
recognised that the High Court ordinarily will not exclude other
available remedies unless the State action is shown to be
arbitrary and unreasonable in the constitutional sense.
31. Further, in the case of Joshi Technologies International Inc. v.
Union of India, (2015) 7 SCC 728, paras 69-70, identifies the
considerations that ordinarily justify refusal of writ jurisdiction:
a contractual mode of dispute resolution, serious and complex
disputed facts requiring evidence, element of public law and a
monetary claim arising from contractual obligations. Each
consideration is present here.
32. It is submitted that the adjudication sought for in the present
petition would require evidence concerning the route and flow
of gas; ownership, commissioning and operation of each facility;
the processing and delivery functions; common or dual use;
capital and operating cost allocation; quantity and tariff
calculations; and invoice-wise objections. Those matters cannot
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fairly be resolved through competing affidavits.
33. It is submitted that the parties also selected contractual forums.
Article 13 of the 2000 contract contains an arbitration
mechanism. Article 15 of the 2008 contract requires
consultation and notice and identifies the agreed court forum.
While, these provisions do not oust Article 226, they are highly
material to the discretionary exercise in a private commercial
refund dispute.
34. It is also relevant to rely upon the case of GAIL (India) Ltd. v.
Gujarat State Petroleum Corporation Ltd., (2014) 1 SCC 329,
paras 27-28, where the Hon’ble Supreme Court disapproved of
writ adjudication of a complex gas-pricing dispute where the
contract provided an arbitral remedy. The same approach is
warranted here, where the Petitioners seek, in substance, an
invoice-by-invoice money decree over more than ten years.
35. It is submitted that the Petition can therefore be dismissed on
the short ground that the pleaded Article 14 violation is not
established and that any surviving contractual claim must be
pursued before the agreed forum, subject to GAIL’s defences on
limitation, waiver, proof, tax incidence, unjust enrichment and
set-off.
F. The negotiation, renewal, invoice-waiver and delay
record fails to establish the plea of an unconscionable
bargain
36. The pre-contract correspondence are relied upon to show that
the transmission/service charge was discussed and that
alternative commercial structures were offered. The Petitioners’
predecessor accepted the reduced Rs. 269 structure. The
reduction of the transmission charge from Rs.343 to Rs.269 per
1000 SCM was itself linked to allocation of capital expenditure
between the parties, demonstrating that the transmission
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charge represented negotiated recovery of infrastructure costs
rather than an arbitrary levy. It is submitted that this record
cannot be reconciled with the suggestion that the provision was
unexplained or inserted without negotiation.
37. The fresh 2008 contract is especially material. By then, the
present petitioner was the contracting party and this Hon’ble
Court had already decided the earlier Hazira dispute. Yet the
petitioner executed a detailed agreement (i) fixing the Gandhar
Delivery Point, (ii) defining Seller’s Facilities and Transmission
Charges, (iii) prescribing Rs. 351 per 1,000 SCM, (iv)
superseding prior negotiations, and (v) recording free will and
consent.
38. It is submitted that the Petitioners’ post-contract protests
establish knowledge of the issue but not constitutional invalidity.
The written contract and its entire agreement provision
continue to govern unless avoided in an appropriate proceeding
upon proof.
39. The invoice-dispute provisions are equally relevant. Article
11.03 of the 2000 contract requires a quantified invoice claim
within 14 days and treats failure as waiver. Article 12.4 of the
2008 contract prescribes a 30-day claim mechanism after
payment. The Petitioners cannot obtain an aggregate refund
without proving compliance, invoice by invoice.
40. Further, the claim made in the present petition, reaches back to
19.11.1999 although the Petition was filed in April, 2010. It is
submitted that mere correspondence cannot keep every
payment alive indefinitely. The 2023 judgment between the
parties itself rejects that proposition and confines refund relief
to three years preceding the writ petition. GAIL v. Indian
Petrochemicals Corporation Ltd., (2023) 3 SCC 629, paras 25-
27; Lipton India Ltd. v. Union of India, (1994) 6 SCC 524.
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G. WITHOUT PREJUDICE: ANY REFUND MUST BE STRICTLY
CONFINED
41. Without prejudice to the primary submission that no refund is
due, it is submitted that any relief cannot extend beyond three
years immediately preceding the filing of the Petition. GAIL v.
Indian Petrochemicals Corporation Ltd., (2023) 3 SCC 629,
paras 25-26.
42. It is submitted that the aggregate schedule at pages 233-239
cannot by itself sustain a decree. The Petitioners must prove
each invoice, quantity, contractual rate and escalation,
payment, objection within the contractual period, credit or
adjustment, and the amount actually borne.
43. It is submitted that the applicable Service tax, sales tax,
surcharge and other statutory components cannot automatically
be directed to be refunded by GAIL. It must first be established
whether each amount was retained or remitted to the revenue,
whether the statute provides a refund/credit route, and whether
the Petitioners passed on the incidence. It is submitted that a
refund without such proof would risk unjust enrichment. The
claim for interest at 18% per annum is untenable. In the 2023
judgment, the Supreme Court directed payment within a
stipulated period, declined interest if payment was made within
that period, and imposed 8% only upon default thereafter.
Therefore, no historical interest at 18% should be granted. GAIL
v. Indian Petrochemicals Corporation Ltd., (2023) 3 SCC 629,
para 27. It is submitted that any quantification must also
preserve GAIL’s rights of set-off and adjustment and its defences
concerning waiver, limitation, proof and unjust enrichment. It is
submitted that no aggregate monetary direction may be issued
without a complete accounting before the appropriate forum.
44. For the foregoing reasons, it is respectfully prayed that this
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Hon’ble Court may be pleased to:
(a) dismiss Special Civil Application No. 5246 of 2010 with
costs;
(b) in the alternative, leave the Petitioners to pursue such
remedy as may be available under the contracts and in law, with
all contentions and defences expressly kept open; and
(c) if any monetary relief is nevertheless considered, confine it
in accordance with paragraphs 39 to 43 above, including
limitation, invoice-wise proof, contractual waiver, tax incidence,
unjust enrichment, set-off and interest.”
21. I have heard learned counsel for the parties and
perused the record. I have also considered the written submissions
submitted by learned counsel for the parties. Learned counsel for
the petitioner based the entire submission on mainly two grounds,
(i) unconscionable contract / clauses, (ii) binding precedent laid
down by the Hon’ble Supreme Court in the case of Gas Authority
of India Limited v. Indian Petrochemicals Corporation
Limited and others reported in (2023) 3 SCC 629 .
As against that, the respondents based their entire case
broadly on following grounds :-
A. The assertion that GAIL rendered no transportation or
service is contrary to the record.
B. The transmission/service charge is expressly referable
to actual upstream facilities and the agreed Delivery Point.
C. The Government Pricing Orders expressly permit
transportation charges in addition to the gas price.
D. The case of GAIL v. Indian Petrochemicals Corporation
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Ltd., (2023) 3 SCC 629, is factually distinguishable and supports
GAIL on the present record.
E. The disputed technical and monetary claim ought not to
be tried under Article 226.
F. The negotiation, renewal, invoice-waiver and delay
record fails to establish the plea of an unconscionable bargain.
G. Without prejudice, any refund must be strictly confined.
22. One of the contention that is raised by the respondents
is that the facts of the case of GAIL v. IPCL (Supra) is factually
distinguishable. The entire defence of the respondents in support
of the aforesaid contention is based on the fact that in the aforesaid
matter, the subject matter of dispute was altogether a different
pipeline and the present Gandhar arrangement is materially
different. The respondents have tried to distinguish both the cases
factually by submitting that both the matters are different because
both matters involve (i) different physical configuration, (ii)
different relevant pipelines, (iii) different charge rationals and (iv)
materially different contractual provisions. By making the above
submission, it was contended that in view of the aforesaid
distinguishable facts, the issue on hand cannot be said to be a
covered issue by the decision of GAIL v. IPCL (Supra) .
23. Therefore, in order to consider the submissions made
by the rival parties, first of all, I need to consider as to whether the
legal question that arises for determination by this Court can be
said to be based on similar questions and similar facts and law or
not and whether the facts and law involved in the present case are
distinguishable from the facts of already decided case in the case of
GAIL v. IPCL (Supra) or not.
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24. Therefore, first facts of both cases are required to be
compared. In respect of the decision relied upon by the petitioner
in the case of GAIL v. IPCL (Supra) , in order to understand what
was the dispute before the Hon’ble Supreme Court, which was
considered in favour of the petitioner, the facts narrated in the said
decision in paragraphs 2 to 10 are reproduced as under :-
“ Background
2. On 01.01.1999, the Ministry of Petroleum and
Natural Gas, Government of India (hereinafter
referred to as ‘MoPNG’), the allocating and price-
fixing authority for natural gas, issued a letter for
allocation of natural gas to IPCL. IPCL was allotted
0.85 MMSCMD of semi-rich gas on firm basis from
Hazira to IPCL’s Gandhar Unit (at Dahej) for
extraction of C-2 and C-3 fractions. The same was
made subject to the following conditions :-
“(i) Signing of gas supply contract with GAIL.
(ii) The pipelines require to transport semi-rich gas
from Hazira to IPCL Unit at Gandhar and to
transport the lean gas back to Hazira shall be laid
by M/s IPCL.
2. You are requested to enter into necessary gas
supply contract with GAIL within 60 days of issue of
this letter failing which above allocation will be
liable for allocation.”
3. Looking to the significance of the time period
in the letter, the parties began negotiating the
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terms of the gas supply contract. IPCL thus entered
into a contract with GAIL on 09.11.2001 for supply
of natural gas. IPCL had set up and installed a plant
at Gandhar by investing approximately Rs.4500
Crores. Further, in order to meet the stipulation of
the allocation letter, it laid down pipelines between
Hazira and Gandhar at a cost of approximately
Rs.354 crores.
4. As per the contract, the methodology of
supply of gas was that GAIL received natural gas
from the producer, i.e. ONGC, which procured the
same at Hazira from the Bombay High project.
Thereafter, the gas was transported from Hazira to
IPCL’s Gandhar plant through pipelines laid down
by IPCL. The unutilised gas was then sent back to
Hazira, also using IPCL’s pipelines.
5. We may flag at this stage itself the
significance of the manner in which the gas is
carried, as the dispute before us revolves around
this particular aspect. On one hand, as per the
allocation terms, IPCL had to lay down its own
pipelines (which were so laid), and those pipelines
alone were utilised for carrying gas. On the other
hand, the charge is levied by GAIL for ‘loss of
transportation charges’ in terms of the contract. It
is this aspect of the contract between the parties
which has been the subject matter of adjudication
in writ proceedings filed by IPCL under Article 226
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of the Constitution of India. IPCL succeeded before
the learned Single Judge in terms of the orders
dated 19.09.2006 and 11.04.2007, and before the
Division Bench in the Letters Patent Appeals vide
order dated 17.06.2008.
6. We may note that though the contract inter se
the parties was signed on 09.11.2001, the challenge
was laid to Clauses 10.01 and 4.04 of the contract
only on 09.03.2006, i.e. after five years. In this
interregnum, IPCL ceased to be a public sector
undertaking.
7. The other development is the decision of
GAIL to stop levying loss of transportation charges
in May 2016. Thus, the total amount collected
under the aforesaid clauses is stated to be Rs. 134
crores before it was quashed by the Single Judge
and sustained by the Division Bench.
8. In order to understand the contractual
context, the relevant two clauses are extracted
below :-
“4.04 The BUYER, in addition to price of
GAS mentioned in Article 10, shall pay to
the SELLER Rs. 4,16,700/- (Rupees Four
Lakh Sixteen Thousand and Seven
Hundred) towards fortnightly service
charges on account of deployment of
manpower by the SELLER for terminal
operation and routine maintenance
along with applicable taxes / levies
thereon, connected with delivery of Gas
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at the Point of Onward Delivery and
receipt of Gas returned by the BUYER at
the Point of Return Delivery. The above
service charges is exclusive of any
material requirements like tools, tackles
etc. and also the spares / items /
equipments to maintain the terminal in
operable condition. Any interruptions in
supply of gas to any consumers on
account of such material requirement
shall be at the risk and cost of the
BUYER. The above Service charges shall
be increased by 3 (Three) percent per
annum on yearly rest basis with effect
from 1st April following the scheduled
date of commencement of gas supply
mentioned under article 2.01
hereinabove. In addition to the above,
the BUYER shall also pay to the SELLER
transportation charges, as applicable
from time to time along the HBJ pipeline
system for the quantity of GAS utilized /
shrinkage as per formula provided under
Article 5.02 or for the difference in
quantity of gas measured at the Point of
Onward Delivery at Metering Station No.
– I (after adjusting the quantity of Gas
Bye Passed as mentioned under Article
4.03 hereinabove) and Point of Return
Delivery at Metering Station No. – II,
whichever is higher. The BUYER shall
pay above charges to the SELLER in
addition to invoice for supply of gas to
be raised as per Article 11 hereinafter
along with all applicable taxes / levies
thereon. Provided that in case above
charges are not paid by the BUYER
within 3 (Three) working days of
presentation of the invoice, the SELLER
will present the invoice for the same to
the Bank against Letter of Credit and
draw the amount. The BUYER will make
arrangements with the Bank in a manner
that in such an eventuality the full L/C
amount gets automatically reinstated.
.. …. …. ….
9. ARTICLE 10-PRICE OF GAS
“10.01 Present price of 1000 (One
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Thousand) Standard Cubic meters of
GAS w.e.f. 1.10.1997 is applicable as per
Government Pricing Order No. L-
12015/3/94-GP dated 18.9.1997
(Annexure-IV) after which the SELLER
shall have right to fix the price of GAS
which may be as per directive,
instruction, order, etc. of the
Government of India which is likely to be
market related in accordance with
current policy of liberalisation of the
Government of India and the BUYER
shall pay to the SELLER such price of
GAS. In addition to the above, the
BUYER shall also pay to the SELLER
transportation charges, as applicable
from time to time along the HBJ pipeline
system, for the quantity of GAS utilised/
shrinkage. Provided further, the price of
GAS so fixed is exclusive of Royalty,
Taxes, Duties, Service/Transportation
charges and all other statutory levies as
applicable at present or to be levied in
future. By the Central or State
Government of Municipality or any other
local body or bodies payable on purchase
of Gas from ONGCL/Other Producer(s)
by the SELLER or on sale from SELLER
to the BUYER or on return of the
balance quantity of GAS after processing
by the BUYER to the SELLER and these
shall be borne by the BUYER over and
above the aforesaid price.”
(Emphasis supplied)”
10. IPCL challenged the aforesaid clauses
primarily on the ground that they were contrary to
the Government pricing orders dated 30.01.1987,
31.12.1991, 18.09.1997, 30.09.1997 and
20.06.2005, whereby the price of natural gas was
fixed. Further, the allocation letter by the MoPNG
mandated that transportation of gas to IPCL’s plant
had to be through IPCL’s own pipelines from the
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ONGC Metering Station. Thus, it was contended
that recovery of ‘loss of transportation charges’ by
GAIL was arbitrary and unfair. IPCL did not have
the option to transport gas through GAIL’s pipelines
due to the mandate of the contract and the
allocation letter. IPCL also challenged the aforesaid
clauses on the ground of unequal bargaining power.
It was contended that GAIL occupied a monopolistic
position in respect of supply of gas at the time of
entering into the contract. Additionally, IPCL had a
limited time frame to enter into the contract,
particularly as a hefty investment had been made in
setting up the gas cracker plant. As a consequence,
IPCL claimed refund of the ‘loss of transportation
charges’ paid by them. The Single Judge quashed
these clauses vide order dated 19.09.2006 as being
contrary to the pricing orders, and thus unfair and
unconscionable.”
25. The reproduction of the aforesaid paragraphs would
indicate that the aforesaid dispute was in respect of a pipeline laid
by IPCL from Hazira to IPCL’s Gandhar Plant for transportation of
gas and the unutilized gas was then sent back to Hazira also using
IPCL’s pipeline. As per the facts of that case, IPCL has set up and
installed a Plant at Gandhar by investing approximately Rs.4500
Crores and the pipeline between Hazira and Gandhar was set up by
IPCL at a cost of approximately Rs.354 Crores.
26. Despite the fact that as IPCL had set up the pipeline for
transportation of Gas between Hazira and Gandhar at a cost of
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Rs.354 Crores, GAIL used to charge a levy under the head of loss of
transportation charges from IPCL in view of Clause 4.04 and 10.01
of the Contract entered into between the parties and the present
petitioner challenged the aforesaid action and Clauses by filing
Special Civil Application No.4887 of2006 which was decided in
favour of the petitioner vide judgment dated 19.9.2006 which was
carried in appeal by GAIL by filing Letters Patent Appeal No.1622
of 2006 vide CAV common judgment dated 17.6.2008 against which
GAIL approached the Hon’ble Supreme Court by preferring Civil
Appeal No.3504-505 of 2010 which was also dismissed vide order
dated 8.2.2023. The said decision was reported in (2023) 3 SCC
629 in case of GAIL v. IPCL (Supra) .
27. In the above backdrop, the facts of the present petition
is required to be considered to determine as to whether the facts of
the present case is distinguishable from the facts of earlier case or
not.
28. In the facts of the present case, there are two contracts
entered into between the parties on 30.3.2000 and 31.8.2008
whereby the petitioner was to lay down two pipelines of
approximately Rs.35.04 Km. each between GAIL’s Gandhar Plant
and petitioner’s Dahej Plant. The aforesaid pipeline was to be laid
down in view of the fact that GAIL is said to have rendered no
transportation or service whatsoever and the entire pipeline was to
be laid down by the petitioner from the petitioner’s Plant at Dahej
to carry process and deliver the gas to Seller GAIL’s LPG Plant in
Gandhar for which the petitioner had spent the cost of around
Rs.121.25 Crores. The gas consumed by the petitioner was carried
and transported through the petitioner’s pipeline.
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29. The aforesaid arrangement had taken place in view of
the fact that as GAIL is enjoying a monopolistic position in so far as
supply of gas is concerned and, therefore, though the petitioner’s
sought waiver of transportation charges, before signing both the
Contracts vide letters dated 1.2.2000 and 13.10.2008, GAIL refused
to waive and refund the transportation charges vide letters dated
28.3.2000 and 24.10.2008 respectively and as GAIL was the only
supplier of gas in the country, the petitioner had no alternative but
to sign the Contract. Accordingly, the petitioner was compelled to
sign the contract on both the occasions and had to agree to all the
conditions laid down by GAIL because of its monopolistic position.
30. It is in view of monopolistic position enjoyed by GAIL
and as GAIL did not accede to the request to waive the
transportation charges made by GAIL, IPCL challenged the
relevant provisions of the Contract by way of this petition which
are similar in nature if the same is compared to the Clauses under
challenge in the earlier round of litigation which were subject
matter of earlier litigation in respect of controversy decided by the
Hon’ble Supreme Court in case of GAIL v. IPCL (Supra) . The
relevant Clauses of the Contract dated 30.3.2000 are Clause
Nos.4.02, 4.05 and 10.01 which are reproduced as under :-
“4.02 During Phase One, GAS shall be
delivered by the SELLER to the BUYER from two
locations viz: GGS-IV and Gandhar-CPF of ONGC.
Gas shall be delivered at the outlet of the Gas
Metering Station No:1 located in the ONGC's GGS-
IV and at the outlet of the Gas Metering Station No:
2 located in the ONGC's Gandhar-CPF. The pipeline
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required to transport Gas from the downstream
flange of the pipeline at the outlet of the Gas
Metering Station No.1 and of the Gas Metering
Station No.2 (hereinafter referred to as Points of
Onward Delivery) to the BUYER's premises at
Dahej, shall be provided and maintained by the
BUYER. The BUYER shall process GAS, delivered by
the SELLER at the aforesaid Points of Onward
Delivery, for extraction of C2 & C3 fractions after
removal of CO2 in its plant and subject to the
provision of article 4.09 hereinafter, shall deliver
back to the SELLER the balance quantity of GAS at
the downstream flange of the pipeline at the outlet
of the Gas Metering Station No. 3 located in the
ONGC's Gandhar (hereinafter referred to as points
of Return Delivery). The pipeline required to
transport Gas from BUYER's plant to the Metering
Station No.3 shall be provided and maintained by
the BUYER. Provided further that the arrangements
provided for delivery /receipt of gas under this
Article shall be discontinued immediately upon
commencement of supply of GAS to the BUYER
from the SELLER's LIPG plant at Gandhar under
Phase Two.”
Clause No.4.02 provides that the pipeline
required to transport gas from the downstream
flange of the pipeline at the outlet of the Gas
Metering Station No.1 and of the Gas Metering
Station No.2 to the buyer’s premises at Dahej
shall be provided and maintained by the Buyer.
4.05 The BUYER, in addition to price of GAS
mentioned in Article 10, shall pay to the SELLER
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Rs.269 (Two Hundred and Sixty Nine) per thousand
Standard Cubic Meters towards
transmission/service charges, along with applicable
taxes/levies thereon, for the quantity of GAS utilised
for process / shrinkage as per formula provided
under article 5.02 or for the difference in quantity
of gas measured at the Points of Onward Delivery
and Points of Return Delivery or for the MGO
quantity as per article 5.03 whichever is higher. The
above service charges shall be increased by 3
(Three) percent per annum on yearly rest basis with
st
effect from 1 April Two Thousand (01.04.2000),
The BUYER he shall pay above charges in addition
to invoice for supply of gas to be raised as per
Article 10 & 11 hereinafter along with all applicable
taxes/levies thereon. Provided that in case above
charges are not paid by the BUYER within 3 (Three)
working days of presentation of the invoice, the
SELLER will present the invoice for the same to the
Bank against Letter of Credit and draw the amount.
The BUYER will make arrangements with the Bank
in a manner that in such an eventuality the full L/C
amount gets automatically reinstated.
ARTICLE - 10 PRICE OF GAS
10.01 Present price of 1000 (One Thousand)
Standard Cubic meters of GAS w.c.f 1.10.1997 is
applicable as per Government Pricing Order No. L-
12015/3/94-GP dated 18.9.1997 (Annexure-VI).
After 31.3.2000 the SELLER shall have right to fix
the price of GAS which may be as per directive,
instruction, order, etc. of the Government of India
which is likely to be market related in accordance
with current policy of liberalisation of the
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Government of India and the BUYER shall pay to
the SELLER such price of GAS. Provided further,
the price of GAS so fixed is exclusive of Royalty.
Taxes. Duties. Service/Transportation charges and
all other statutory levies as applicable at present or
to he levied in future by the Central or State
Government or Municipality or any other local body
or bodies payable on purchase of GAS from
ONGC/Other Producer(s) by the SELLER or on sale
from SELLER to the BUYER or on return of the
balance quantity of GAS after processing by the
BUYER to the SELLER and these shall be borne by
the BUYER over and above the aforesaid price.”
31. Similarly, in the second contract executed between the
parties, the following Clauses i.e. Clause Nos.4.2, 4.3, 10.1 and
10.2 are similar to the controversy which has already been decided
by the Hon’ble Supreme Court in the case of GAIL v. IPCL
(Supra) which is reproduced as under :-
“4.2 Gas shall be delivered by the SELLER to the
BUYER at the outlet of the gas metering station
located in the SELLER's Gas Processing Complex at
Gandhar (hereinafter referred to as Point of Onward
Delivery) for supply of Gas by the SELLER to the
BUYER. The pipeline required to transport Gas
from the downstream flange of the pipeline at the
outlet of the gas metering station to the BUYER's
premises at Dahej has been provided and being
maintained by the BUYER. The BUYER shall
process Gas, delivered by the SELLER at the Point
of Onward Delivery, for extraction of C2 & C3
fractions after removal of CO2 in its plant and shall
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deliver back to the SELLER, the balance quantity of
Gas, subject to the provision of Article 4.8
hereinafter, at the downstream flange of the
pipeline at the outlet of the gas metering station
located in the SELLER's Gas Processing Complex at
Gandhar (hereinafter referred to as Point of Return
Delivery). The pipeline required to transport Gas
from BUYER's plant to the gas metering station has
been provided and being maintained by the BUYER.
4.3 Gas metering stations have been set up by
the SELLER at the cost of the BUYER at the
SELLER's Gas Processing Complex at Gandhar. The
BUYER has paid to the SELLER a sum of Rupees
Ten Crore Fifty Lakh towards the said metering
stations. Provided further that the said metering
stations shall be operated and maintained by the
SELLER and that the SELLER shall have the right
to use these locations for effecting supplies of Gas
to other consumers in the area.
In the aforesaid Contract, Clause in respect of Price
and Transmission of Gas are also relevant for the
purpose. Clause Nos.10.1 and 10.2 are reproduced
as under :-
10.1 Gas Price
(a) For the supply of Gas against the quantity
under Article 5,2, the price of US$ 4.75/net
MMBTU of Gas with effect from 01.04.2006 is
applicable as per Office Memorandum No.L-
12015/1/05-GP dated 19.04.2006 (Annexure - IV) of
Ministry of Petroleum and Natural Gas, GOI.
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[The conversion in Rs. shall be based on RBI
reference rate on the date of invoice]
(b) Notwithstanding Article 10.1(a), the SELLER
shall have right to fix the Gas Price at any time in
future as per directive, instruction, order, etc. of.
GOI issued from time to time and the BUYER shall
pay to the SELLER such price of Gas fixed by the
SELLER.
10.2 In addition to Gas Price as mentioned
under Article 10.1 above, the BUYER shall pay
to the SELLER the following charges (as
applicable):
(a) The transmission/service charges at the
unit rate of Rs: 351/- (Rupees Three Hundred
and Fifty One only) per thousand SCM.
The above transmission/service charges
as mentioned at Article 10.2(a) shall be
escalated by 03 (Three) percent on yearly basis
with effect from 01.04.2009 (First April Two
Thousand and Nine).
The above unit rate transmission/service
charges are exclusive of
replacement/modifications of the existing
pipeline and associated. facilities (including
compression facility) wholly/partly for supply
of Gas to the BUYER at the Delivery Point. Cost
of such additional facility shall be applicable
from the date of notice/agreement of such
replacement/modification.”
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32. Perusal of above Clauses of both the Contracts dated
30.3.2000 and 31.8.2008 would indicate that the aforesaid Clauses
are very much similar to the Clauses which were the subject matter
of challenge in case of GAIL v. IPCL and which was held to be
unfair, unconscionable, arbitrary and against the public policy by
the learned Single Judge of this Court and the aforesaid view was
confirmed by the Hon’ble Supreme Court. Therefore, upon
comparison of the facts as well as the controversy involved in the
case relied upon by the petitioner in case of GAIL v. IPCL and the
facts of the present case as well as the controversy in the present
case cannot be said to be distinguishable when compared with the
decision of the Hon’ble Supreme Court in the case of GAIL v. IPCL.
Hence, the submission of the respondents that the case of GAIL v.
IPCL (Supra) is factually distinguishable is outrightly rejected.
33. Considering the above factual matrix as well as the
subject matter of challenge, as the facts of this case cannot be said
to be distinguishable from the case of GAIL v. IPCL (Supra), the
submissions of the learned counsel is required to be considered by
keeping the aforesaid facts in mind.
34. The submission made by the respondent that the
disputed technical and monetary claim ought not to be tried under
Article 226 is based on the submission that the High Court
ordinarily will not exclude other available remedies unless the said
action is shown to be arbitrary is concerned and in support of that,
reliance is placed by the respondents on the decision of the Hon’ble
Supreme Court in the case of Joshi Technologies International Inc.
v. Union of India, reported in (2015) 7 SCC 728 by stating that
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although writ jurisdiction is not barred in contractual matters, it
should ordinarily not be exercised where adjudication involves
disputed questions of fact, appreciation of evidence or purely
contractual issues, unless arbitrariness or violation of Article 14 is
clearly established is concerned, it is noteworthy that the decision
in the case of Joshi Technologies was considered by the Hon’ble
Supreme Court as the same contention was raised before the
Hon’ble Supreme Court as well which is noted by the Hon’ble
Supreme Court while recording the submission made on behalf of
GAIL in paragraph Nos.13 to 15 which is reproduced as under :-
“ GAIL’s Plea :
13. At the outset, Mr. Tushar Mehta, learned
Solicitor General, appearing for GAIL, contested the
very maintainability of the writ petition filed by
IPCL. He contended that the parties had provided
for arbitration before the Permanent Machinery of
Arbitrators in the Bureau of Public Enterprises
under Clause 13.1 of the contract. Further, the
matter was stated to be purely contractual in
nature, involving the enforceability and validity of
the terms of the contract, and no case was made
out for violation of Fundamental Rights. The
presence of a public law element was a sine qua
non for the exercise of writ jurisdiction, as
elucidated in Joshi Technologies International Inc. v.
Union of India & Ors.1. The endeavour of IPCL, by
invoking such writ jurisdiction, was alleged to be an
attempt to bypass the law of limitation, as the
contract had been signed way back in 09.11.2001.
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In any case, the writ petition was also barred by
limitation, having been filed on 09.03.2006, i.e.
after a period of five years. Reliance was placed on
Lipton India Ltd. & Ors. v. Union of India & Ors. to
contend that communications between the parties
about levy of transportation charges following the
signing of the contract could not extend the period
of limitation.
14. The learned Solicitor General stated that even if
the petition was maintainable, the clauses could not
have been invalidated by the High Court. It was
pointed out that there were no differences in the
bargaining positions of the two organizations where
one could be said to be more powerful. Both
organizations were public sector enterprises at the
relevant time. The contract was stated to be
carefully negotiated and reflected the mutual
consensus between the parties, as was evident from
the inter se communications at the pre-contractual
stages. Thus, the clauses could not thus be treated
as arbitrary or unfair. IPCL’s and the High Court’s
reliance on Central Inland Water Transport
Corporation Limited v. Brojonath Ganguly3 was
misplaced as a principle applied to a service
contract between the employer and the employee
could not be imported to a commercial contract,
and that too between two public sector enterprises.
The alternative plea was that even were the
impugned
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judgments to be sustained, the amount of refund
could not be granted beyond the period of
limitation, i.e. three years after the signing of the
contract.
15. The basic defence and justification for levy of
loss of transportation charges was that GAIL had
made a huge investment in constructing its own
infrastructure, i.e. the HBJ pipeline (Hazira -
Bijaipur - Jagdishpur). GAIL had a limited number of
opportunities to supply gas to consumers and, thus,
an equally limited number of opportunities to levy
transportation charges to recover its legitimate
maintenance costs. The allotment had pre-supposed
the imposition of such transportation costs.”
35. The aforesaid submission was countered by the present
petitioner and the submission made on behalf of the petitioner was
also incorporated by the Hon’ble Supreme Court in paragraphs 17
and 18 which is reproduced as under :-
“IPCL’s Defence:
17. Dr. A.M. Singhvi, learned Senior Counsel,
sought to defend the impugned order and the
maintainability of writ proceedings with respect to
a private contract. The transportation charges were
alleged to have a discriminatory effect as IPCL was
being treated on par with consumers who were
using the HBJ pipeline, whereas IPCL was
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transporting the gas through its own pipelines. That
being the plea, it was urged that the writ
jurisdiction was the appropriate remedy as there
were questions of arbitrary state action violating
the mandate of Article 14. This was notwithstanding
the fact that the issue arose from a contract
between the parties, as was also the case in ABL
International Ltd. & Anr. v. Export Credit Guarantee
Corporation of India & Ors. It is in these
circumstances that the High Court exercised its
writ jurisdiction notwithstanding the availability of
an alternative remedy, i.e. the arbitration clause or
through the civil suit. ABL International was also
relied on to show that consequent monetary relief
could be granted where such a writ petition was
successful.
18. With respect to striking down a contractual
clause, Dr. Singhvi was at pains to point out that the
ambit of Brojonath Ganguly’s case had been
expanded and was not only restricted to service
disputes. In Kalpraj Dharamshi & Anr. v. Kotak
Investment Advisors Ltd. & Anr., this Court
considered the bargaining capacity of contracting
parties in a commercial dispute as there was a
seemingly unfair or unreasonable clause in the
contract.”
36. However, considering the above submissions, the
Hon’ble Supreme Court while dismissing the Civil Appeal in the
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case of GAIL v. IPCL (Supra) wherein the facts were almost
similar, as stated in the foregoing paragraphs, observed in
paragraphs 20 to 26 ss under :-
“20. In our view, the dispute is within the following
parameters. First, whether the writ petition filed by
IPCL challenging Clauses 4.04 and 10.01 of the
contract was maintainable. Second, assuming such a
petition was maintainable, whether the High Court
could have invalidated the aforementioned clauses
on the ground of unequal bargaining power and
arbitrariness / unfairness. Third, whether monetary
relief in the form of refund could have been granted
after the order dated 19.09.2006 was passed.
21. Although the dispute arises from a
commercial contract, we find that the writ petition
challenging the clauses was maintainable. It is not
disputed that GAIL is a Public Sector Undertaking
and thus qualifies under the definition of ‘State’ as
per Article 12 of the Constitution. At the time of
entering into contract, GAIL was enjoying a
monopolistic position with respect to the supply of
natural gas in the country. IPCL, having incurred a
significant expense in setting up the appropriate
infrastructure, had no choice but to enter into
agreement with GAIL. Thus, there was a clear public
element involved in the dealings between the
parties. Further, writ jurisdiction can be exercised
when the State, even in its contractual dealings,
fails to exercise a degree of fairness or practices any
discrimination. We are fortified in our view by this
Court’s decision in ABL Enterprises9 and Joshi
Technologies. In the present case, GAIL’s action in
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levying ‘loss of transportation charges’ was ex facie
discriminatory, insofar as IPCL was mandated to
build its own pipeline in terms of the allocation
letter and was not using GAIL’s HBJ pipeline at all.
Thus, it cannot be said that merely because an
alternative remedy was available, the Court should
opt out of exercising jurisdiction under Article 226
of the Constitution and relegate the parties to a civil
remedy.
22. In the present case, GAIL’s action in levying
‘loss of transportation charges’ was ex facie
discriminatory, insofar as IPCL was mandated to
build its own pipeline in terms of the allocation
letter and was not using GAIL’s HBJ pipeline at all.
Thus, it cannot be said that merely because an
alternative remedy was available, the Court should
opt out of exercising jurisdiction under Article 226
of the Constitution and relegate the parties to a civil
remedy.
23. Now, we come to the validity of the clauses
under which ‘loss of transportation charges’ were
levied. In our view, it would be extremely unfair and
unjust, apart from being an arbitrary action in
violation of Article 14 of the Constitution of India
that IPCL is charged for loss of transportation
charges when it is mandated to lay down its own
pipelines and not to transport the gas through the
HBJ pipeline. This action also violates the principle
of non-discrimination enshrined in Article 14. IPCL,
which is using its own pipelines, is being treated at
par with other commercial entities who are carrying
gas through the HBJ pipeline laid down by GAIL.
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This is more so when the pricing orders by the
concerned authority, i.e. MoPNG stipulate a fixed
price for natural gas.
24. On a basic principle, it cannot be doubted that
once GAIL has laid down the pipeline, it is entitled
to structure in its cost in the contract. However, the
issue is not simply that. We are faced with a
scenario where two public sector enterprises
entered into a contract in pursuance of the
allocation made by the MoPNG. There was also a
time constraint for IPCL. After incurring a heavy
expenditure in the construction of the Gandhar
Plant, IPCL had very little choice but to enter into
the contract. What is of most significance is that
IPCL was bound to follow the allocation terms
provided by the principal authority, i.e., MoPNG.
Thus, as pleaded by IPCL, they were faced with a
“Hobson’s choice”, where they had to either give up
the contract or accept the clauses levying
transportation charges. On a conspectus of the
above factors, it can be said that GAIL exercised an
unequal bargaining power at the time of signing the
contract.
25. In fact, the contractual exercise of providing
such a clause runs contrary to every commercial and
common sense and is manifestly arbitrary, as IPCL is
not being charged under any general terms but for a
specific purpose. This purpose cannot exist in the
contract in view of the master authority, i.e., the
Union of India, providing to the contrary.
26. GAIL may have made a huge investment in
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constructing the HBJ pipeline, but at the same time
IPCL had also made a huge investment in
constructing its own pipelines. This was not an
option but a mandate of the allocation letter issued
by the MoPNG. Thus, it is difficult for us to accept
that on the one hand IPCL must lay down its own
pipelines, and simultaneously pay for loss of
transportation through the HBJ pipeline even
without using it. We do not accept GAIL’s contention
that the charges could be levied merely because
GAIL had laid the HBJ pipeline for users generally.”
37. The petitioner’s entire case is based on the fact that the
Clauses of the present contract dated 30.3.2000 and 31.8.2008 are
also having Clauses which can be termed as unfair, unconscionable,
arbitrary and against the public policy as those Clauses are similar
to the Clauses which are already struck down by this Court which
is confirmed by the Hon’ble Supreme Court in the case of GAIL v.
IPCL (Supra) and, therefore, the petitioner’s entire case is
covered by the said decision.
38. I have considered the submissions made by the parties
and upon perusal of the Clauses of the present contract executed
on 30.3.2000 and 31.8.2008 with the contract which was Clause
Nos.4.04 and 10.01 which was subject matter of dispute in GAIL v.
IPCL (Supra) , I found that not just facts, the relevant Clauses are
also similar when compared with each other. In case of GAIL v.
IPCL (Supra) , despite the fact that the petitioner Company had
born the cost and spent huge amount in setting up the pipeline and
for constructing infrastructural facilities, by way of disputed
Clauses in the contract, they were asked to pay the loss of
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transportation charges despite the fact that the petitioners were
not using the pipeline laid down by GAIL. In the instant case also, it
is an undisputed fact that the entire pipeline of 70.08 Kms. is set by
the petitioner at its own cost and despite the aforesaid facts,
merely because the respondents are enjoying a monopolistic
position, despite the petitioner’s resistance to sign the contract
which can be seen from the correspondence entered into between
the parties, as the petitioner had requested for waiver of
transportation charges vide its letters dated 1.2.2000 and
13.10.2008 which were rejected by the respondents vide their
letters dated 28.3.2000 and 24.10.2008 would indicate that the
petitioners’ request to waive the transportation charges was not
considered by the respondents as they were enjoying a
monopolistic position in respect of supply of gas. The ground taken
by the respondents that the contract was executed after due
deliberation, negotiation, renewal and invoice waiver, is nothing
but an eye-wash as the respondents were not only enjoying a
monopolistic position in the field of supply of gas, but the petitioner
also had made a huge investment for transportation of gas and,
therefore, after having made a huge investment, they had no other
option but to succumb to the unfair and arbitrary clause of the
contract and, therefore, considering the fact that the facts and
dispute in respect of present case is similar and almost identical to
the case relied upon by the petitioner in the case of GAIL v. IPCL
(Supra) , the relevant Clauses of the contract which are under
challenge can be termed as unfair, unconscionable, arbitrary and
against the public policy and, therefore, the same are required to
be quashed and set aside.
39. As far as the prayer about refund and interest is
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concerned, considering the fact that the petitioners have prayed for
refund of transmission / transportation charges paid by the
petitioners till the date of filing of the petition and thereafter along
with interest @ 18% p.a. is concerned, in view of the fact that in
case of GAIL v. IPCL (Supra) , by taking into consideration the
decision in the case of Lipton India Limited v. Union of India, 1994
(6) SCC 524, the Hon’ble Supreme Court has confined the refund to
be paid from a period three years prior to the date of filing of the
petition. The same would be applicable in the facts of the present
case as well as the contracts were executed on 30.3.2000 and
31.8.2008 between the petitioner and GAIL, whereas the petition
was filed in the year 2010. Therefore, the amount of refund would
be payable to the petitioner only from the period i.e. 3 years prior
to the date of filing of this petition till the amount of transmission /
transportation charges are paid.
40. The petitioners have annexed the judgment in respect
of the contract executed between the same parties in respect of
transportation charges in respect of pipeline from Meter Station of
the respondent GAIL to the factory premises of the petitioner at
Gandhar Complex being Special Civil Application No.4887 of 2006
and 1622 of 2006 as well as Letters Patent Appeal. However, upon
perusal of judgment as well as upon perusal of order dated
11.4.2007 passed in Misc. Civil Application (for direction) No.270
of 2007, I could find that the prayer made in the main petition is
not stated in any of those judgments. Therefore, I am not in a
position to ascertain as to whether in that litigation, the petitioner
had prayed for interest or not. However, in this petition, the
petitioner has specifically prayed for interest by incorporating
following prayer in this petition :-
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“(C) Your Lordships may be pleased to hold and
declare that the the articles for payment of
transmission charges incorporated in the contracts
dated 30.03.2000 and 31.08.2008 are unfair,
unreasonable, unconscionable and opposed to
public policy and be further pleased to issue a writ
of mandamus or a writ in the nature of mandamus
quashing and setting aside the said articles for
payment of transmission charges and direct the
Respondents Nos. 2 and 3 to refund the
transmission charges paid till date and thereafter
including Service Charge, Sales Tax, Surcharge etc.
pursuant to the same together with interest @ 18%
p.a. from the date of payment by Petitioners till
actual date of refund.”
41. Therefore, when I am quashing the impugned
Clauses / Articles of the Contract entered into between the parties
and as the Hon’ble Supreme Court has also awarded refund of the
amount in similar litigation between the same parties in GAIL v.
IPCL (Supra) , I am required to consider the aforesaid prayer in
light of submissions made by the parties.
42. As regards the interest, in view of the fact that I
propose to direct the respondents to refund the amount of
transmission / transportation charges already charged from the
petitioners, prior to three years from the date of filing of the
petition till the amount is actually paid to the respondents, the
respondents have taken a stand in their written submissions that
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the claim for interest @ 18% p.a. is untenable and they have stated
that in view of decision of the Hon’ble Supreme Court whereby the
Hon’ble Supreme Court directed payment within a stipulated
period and declared interest, if payment was made and imposed
8% interest only upon default thereafter, as per the written
submissions. It is also submitted that in paragraph 27 of the said
judgment, the Hon’ble Supreme Court has made observation about
the refund.
43. As far as the interest on the amount of refund is
required to be granted as prayed for or not is concerned, the legal
position about interest as emerges from the recent decision of the
Hon’ble Supreme Court in the case of Dr. Poornima Advani and
another v. Government of NCT and another, in Civil Appeal
No.2643 of 2025 in its decision dated 18.2.2025 wherein the
Hon’ble Supreme Court in paragraph Nos.16 and 17 has observed
as under :-
“16. The concept of awarding interest on
delayed payment has been explained by this
Court in the case of Authorised Officer
Karnataka Bank v. M/s R.M.S. Granites Pvt.
Ltd. & Ors. In Civil Appeal No. 12294 of 2024,
we quote the following observations :-
“It may be mentioned that there is
misconception about interest. Interest is not a
penalty or punishment at all, but it is the
normal accretion on capital. For example if A
had to pay B a certain amount, say ten years
ago, but he offers that amount to him today,
then he has pocketed the interest on the
principal amount. Had A paid that amount to B
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ten years ago, B would have invested that
amount somewhere and earned interest
thereon, but instead of that A has kept that
amount with himself and earned interest on it
for this period. Hence equity demands that A
should not only pay back the principal amount
but also the interest thereon to B. [See: Alok
Shanker Pandey v. Union of India : AIR 2007
SC 1198.]”
17. Thus, when a person is deprived of the
use of his money to which he is legitimately
entitled, he has a right to be compensated for
the deprivation which may be called interest or
compensation. Interest is paid for the
deprivation of the use of money in general
terms which has returned or compensation for
the use or retention by a person of a sum of
money belonging to other.”
In paragraph 24 of the said judgment, the Hon’ble
Supreme Court has observed as under :-
“24. In the case of Hello Minerals Water (P) Ltd. v.
Union of India, (2004) 174 ELT 422, (paras 15 and
16), a Division Bench of the Allahabad High Court
explained the concept of interest as under :-
“15. We may mention that we are passing the
direction for interest since interest is the normal
accretion on capital. Often there is misconception
about interest. Interest is not a penalty or
punishment at all.
16. For instance, if A had to pay a certain sum of
money to B at a particular time, but he pays it after
a delay of several years, the result will be that the
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money remained with A and he would have earned
interest thereon by investing it somewhere. Had he
paid that amount at the time when it was payable
then B would have invested it somewhere, and
earned interest thereon. Hence, if a person has
illegally retained some amount of money then he
should ordinarily be directed to pay not only the
principal amount but also the interest earned
thereon. Money doubles every six years (because of
compound interest). Rs. hundred in the year 1990
would become Rs. two hundred in the year 1996
and it will become Rs. 400 in the year 2002. Hence,
if A had to pay B a sum of rupees 100 in the year
1990 and he pays that amount only in the year
2002, the result will be that A has pocketed Rs. 300
with himself. This clearly cannot be justified
because had he paid that amount to B in the year
1990, B would be having Rs. 400 in the year 2002
instead of having only Rs.100/-. Hence, ordinarily
interest should always be awarded whenever any
amount is detained or realized by someone,
otherwise the person receiving the amount after
considerable delay would be losing the entire
interest thereon which will be pocketed by the
person who managed the delay, it is for this reason
that we have ordered for payment of interest
alongwith the amount realized as export pass fee.”
44. In view of the fact that in the contract executed
between the parties dated 31.3.2008, Article 12 in respect of
Billing and Payment, in Clause 12.5, there is a provision for interest
for delayed payment @ SBI Standard PLR applicable to the working
capital which will be taken as base and an additional 2% was
required to be charged over and above PLR as applicable for the
period of delay. For calculating the interest for the delayed
payment, as per Clause 12.5, SBI PLR shall be the highest one
during the delay period and any payment made after period of 30
days was considered to be delayed period as per Article 12.
45. For ready reference, Articles 12.4 and 12.5 are
reproduced herein as under :-
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“12.4 In case of any discrepancy/dispute
regarding the invoices, the BUYER shall
not return the bills or withhold or disallow
part or full payment. After making the full
payment, the BUYER shall lodge a
quantified claim with the SELLER within
the period of 30 (Thirty) days from the
date of receipt of the related invoice. To
the extent the claim is admitted by the
SELLER, the SELLER shall issue a credit
note in favour of the BUYER and adjust
the same in the next invoice to be raised.
The SELLER undertakes to consider the
claim of the BUYER within a period of 30
(Thirty) days from the receipt of such
claim, if found acceptable. Failure of the
BUYER to put forward any claim within
the time above specified shall be an
absolute waiver of any claim.
12.5 The BUYER shall always, during
validity of the Contract, keep an
Irrevocable Standby Revolving L/C
operative as stipulated in Articles 12.1 &
12.2 above. In case payment is made after
the due date, an interest at the rate of SBI
Standard PLR applicable to working
capital will be taken as a base and an
additional 2% be charged over and above
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PLR as applicable for the period of delay.
For calculating interest for any delayed
payment, SBI PLR shall be the highest one
during the delay period. Delayed payment
means any payment not received within
the period provided in Article 12.2 above.
In case of default in making payments by
the BUYER or failure of BUYER to keep
L/C operative, without prejudice to other
rights under the Contract the SELLER
shall be at liberty to stop/regulate supply
of Gas without any further notice and such
supplies may not be resumed till all
payments are made and L/C restored. The
provisions of Article 5.3 would be
applicable for billing and payment for the
period during which the supply of Gas is
stopped on account of delayed payment or
L/C not being reinstated by the BUYER.”
46. Considering the fact that even the respondents have
not disputed during the course of argument nor have stated
anything in the written submissions that the petitioners have not
paid any transmission / transportation charges to the respondents
or that there is any outstanding amount that the petitioner is
required to pay towards the transmission / transportation charges.
47. Therefore, it can be presumed that the petitioner has
paid all applicable transmission / transportation charges to the
respondents which has remained with the respondents right from
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the date it is paid and, therefore, the same was available with the
respondents for utilizing that money which was paid by the
petitioner althroughout during this period.
48. Considering the fact that this is a commercial contract
which provides for an interest to be paid by 2% higher than SBI’s
highest PLR rate, to simplify the rate of interest, considering the
fact that althroughout the respondents have utilized the aforesaid
amount of transportation charges paid by the petitioner, the
interest of justice would serve if the respondents are directed to
pay simple interest @ 8% p.a. from the date of petitioner’s
entitlement till it is paid.
48. In view of above discussion, following directions are
issued :-
(I) The articles providing for payment of transmission
charges incorporated in the contracts dated 30.03.2000 and
31.08.2008 are declared unfair, unreasonable, unconscionable and
opposed to public policy and hence, the said articles for payment of
transmission charges are quashed and set aside.
(II) The petitioners are held entitled for refund for a period
starting from 3 years prior to the date of filing of this petition i.e.
from 27.4.2010 i.e. the date of registration as per the record of the
petition till the period during which the amount of transmission /
transportation charges are paid by the petitioners and the same
shall carry a simple interest @ 8% from the date of payment made
by the petitioner till the amount of refund is paid.
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49. With the above observation and direction, the petition
is allowed. Rule is made absolute.
(NIRZAR S. DESAI,J)
SAVARIYA
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