Gauhati HC Sets Aside ₹76.85 Lakh Gas Demand Against Tea Factory, Holding Tea-Output Gap Alone Could Not Override Meter-Based Contract Billing

The petitioner, a tea manufacturer and consumer of natural gas supplied by Assam Gas Company Ltd. (“AGCL”), challenged AGCL’s “Call for Explanation cum Demand Notice” dated 30 August 2023.

The notice alleged that, for May–December 2022, the petitioner had reported 5,92,321 kg less tea production to AGCL than to the Tea Board of India, and demanded ₹76,85,686 as an additional gas consumption bill.

The parties’ Gas Purchase Contract-Agreement provided for billing by gas-meter readings and permitted production-based calculation under Clause 10.08 only in specified circumstances involving the temporary absence or malfunction of the meter.

AGCL also alleged that an inspection on 6 October 2023 had revealed unauthorised tapping points; the Court treated that allegation as a separate, subsequent matter.

During the writ proceedings, the petitioner deposited ₹25,00,000 pursuant to an interim order protecting the gas supply.

Article 14 applies to juristic persons, including companies, and requires State instrumentalities to act fairly, reasonably and without arbitrariness, including in contractual dealings; such action is reviewable under Article 226.

Kumari Shrilekha Vidyarthi v. State of Uttar Pradesh, (1991) 1 SCC 212, establishes that State action does not shed Article 14 obligations merely because it occurs in the contractual sphere; Food Corporation of India v. M/s Kamdhenu Cattle Feed Industries, (1993) 1 SCC 71, and Indian Oil Corporation Ltd. v. Shashi Prabha Shukla, (2018) 12 SCC 85, affirm the duty of public authorities to act fairly and non-arbitrarily; and Noble Resources Ltd. v. State of Orissa, (2006) 10 SCC 236, recognises that contractual disputes may be judicially reviewed where the State’s action violates Article 14.

Under the parties’ contract, billing was based on gas measured by the AGCL-installed meter, while Clause 10.08 allowed a production-based estimate only where the meter was temporarily absent or out of order.

The Court found no allegation that, during the relevant period, the meter was absent, out of service, inaccurate, tampered with or manipulated; nor was there an allegation that the petitioner had failed to pay for gas recorded by the meter.

Although the petitioner had to provide tea-production records under Clause 10.07, the contract did not authorise AGCL to calculate gas charges merely because those records differed from figures reported elsewhere. Clause 10.08 could not be invoked without proof of its specified meter-related conditions.

The demand therefore lacked a foundational and rational basis and was arbitrary under Article 14.

The later allegation of unauthorised tapping did not validate the earlier demand, though AGCL remained free to pursue that separate matter in accordance with due process.

It directed that the ₹25,00,000 deposited in the Court Registry be returned to the petitioner in accordance with due procedure.

AGCL was not precluded from proceeding separately, in accordance with due procedure, on the alleged unauthorised tapping; the Court expressed no view on the merits of that allegation.

No order as to costs.