Reliance Built Its Own Gandhar-Dahej Pipelines; Gujarat HC Orders GAIL To Refund Transmission Charges From 3 Years Before Its 2010 Petition, With 8% Interest

The petitioners challenged transmission/service charges imposed by GAIL under gas-supply contracts dated 30 March 2000 and 31 August 2008.

They had laid and maintained two pipelines, totalling approximately 70.8 km, between GAIL’s Gandhar complex and their Dahej plant at their own cost.

GAIL maintained that its own upstream facilities transported and delivered gas to the contractual delivery point, making the charge distinct from the petitioners’ downstream transport costs.

The petition followed an earlier Hazira–Dahej dispute in which similar charges were held invalid; the Supreme Court dismissed GAIL’s appeals in GAIL v. IPCL, limiting refund relief to three years before the writ petition.

1. Whether the transmission/service-charge clauses in the 2000 and 2008 contracts were arbitrary, unconscionable and contrary to public policy, notwithstanding the petitioners’ use of their own pipelines.

2. Whether GAIL v. IPCL, (2023) 3 SCC 629, governed the present Gandhar arrangement or was distinguishable because GAIL claimed to provide upstream transportation and delivery services.

3. Whether the High Court should grant refund and interest in writ jurisdiction, and, if so, for what period and at what rate.

Under Article 226, a writ petition may be entertained in a contractual dispute involving a State instrumentality where the challenged conduct raises a public-law issue, including arbitrariness or discrimination under Article 14; an alternative contractual remedy does not automatically bar relief in such circumstances.

GAIL v. IPCL, (2023) 3 SCC 629, held that imposing transportation charges on IPCL for a pipeline it was required to build and did use, while not using GAIL’s HBJ pipeline, was ex facie discriminatory and arbitrary; unequal bargaining power and the absence of a genuine choice reinforced that conclusion.

The Supreme Court confined refund in that case to three years before the writ petition, applying Lipton India Ltd. v. Union of India, (1994) 6 SCC 524.

The Court also relied on the principle that interest compensates for deprivation of the use of money, as discussed in Dr. Poornima Advani v. Government of NCT.

The Court treated the present dispute as materially analogous to GAIL v. IPCL: the petitioners had invested in and used their own pipelines, had sought waiver of the charges before signing both contracts, and, in the Court’s view, had no practical alternative given GAIL’s monopolistic position and their investment in the plant.

It rejected GAIL’s contention that upstream facilities and a different delivery point made the case distinguishable, concluding that the relevant contractual clauses and the central issue—charging transmission/service fees despite the petitioners’ own pipelines—were sufficiently similar to the clauses invalidated in GAIL v. IPCL.

The Court therefore found the clauses unfair, unconscionable and arbitrary, and held that the availability of contractual remedies did not preclude writ relief.

It declined the claimed 18% interest and set simple interest at 8% per annum, referring to the contractual interest provision and the compensatory purpose of interest.

The transmission-charge provisions in the contracts dated 30 March 2000 and 31 August 2008 were declared unfair, unreasonable, unconscionable and opposed to public policy, and were quashed.

The petitioners were held entitled to a refund for the period described in the operative order as beginning “from 3 years prior” to filing, and then specified as “from 27.4.2010,” the stated registration date, through the period in which charges were paid; the refund was ordered to carry simple interest at 8% per annum from each payment until refund.

The order’s stated start date is internally inconsistent with its description of the period as beginning three years before filing.

Rule was made absolute.