ADANI GAS LIMITED v. UNION OF INDIA & ORS.

The Judgment of the Court was delivered by S. RAVINDRA BHAT, J.

1Copy pinpoint1. Special leave granted. These appeals were heard with the consent of counsel appearing on behalf of the parties. The appeals are directed against a judgment of the Gujarat High Court1 rejecting certain writ petitions.

2Copy pinpoint2. In those proceedings, the main appellant (hereafter called “Adani”) challenged the validity of Regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate E or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 (hereafter called the “CGD Regulations”) as violative of Articles 14 and 19(1)(g) of the Constitution of India, and ultra vires Section 16 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (hereafter called the “PNGRB Act” or “the Act”). Adani had also challenged the F grant of authorization to the third respondent (hereafter called “Gujarat Gas”) for laying and maintaining a gas distribution network. Gujarat Gas had succeeded in securing the authorization in an auction held by the Petroleum and Natural Gas Regulatory Board (hereafter called “PNGRB” or “the Board”). G Background

3Copy pinpoint3. The PNGRB Act came into effect on 1.10.2007, and mandated authorization by the Board for the laying, building, operating or expanding any city or local natural gas distribution network (collectively, “CGD

1 H Dated 28.09.2018.

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activities” and such a network, “CGD network”). On 30.10.2007, the A Board issued a press note directing entities engaged in CGD activities with or without authorization of the Central Government, to submit relevant details. After receiving the petitioner’s details, the Board informed it that recognition and acceptance could be only of a specific and formal authorization by the Central Government, in accordance with Section 17 B of the Act. Accordingly, Adani’s activities were restrained and a direction was given to obtain authorization from the Central Government. The Board eventually granted Adani provisional clearance to carry out certain capital works in the Ahmedabad area, including the disputed areas of Sanand, Bavla, and Dholka (hereafter called “disputed areas”). Adani also submitted an indemnity in favour of the Board. C

4Copy pinpoint4. Section 16, relating to authorization, came into effect on 12.07.2010. On 04.02.2013, the Board granted provisional authorization to Adani’s CGD network in Ahmedabad city and Dascroi area, excluding 18 CNG stations of Hindustan Petroleum Corporation Limited (hereafter called “HPCL”), subject to certain conditions. The disputed areas were D excluded from this provisional authorization. Under protest, Adani accepted the grant of authorization on 09.12.2013, despite certain areas being excluded. On 1.10.2015, the Board invited bids for development of CGD networks in those disputed areas in Ahmedabad. Adani submitted its application-cum-bid documents in respect of these areas. E

5Copy pinpoint5. Feeling aggrieved by the exclusion of these areas from the authorization granted to it, Adani approached the High Court, preferring a petition under Article 226 of the Constitution, seeking several reliefs. The principal relief claimed was the quashing of the grant of authorization to Gujarat Gas, questioning the exclusion of the disputed areas by the earlier authorization dated 28.11.2013, and challenging the vires of F Regulation 18 framed by the Board under the PNGRB Act. Adani also contended that by virtue of Section 16 of the PNGRB Act, it was entitled to be treated as an entity with “deemed authorization”.

6Copy pinpoint6. The PNGRB and Gujarat Gas, who were arrayed as respondents before the High Court, contended that Adani’s petition was G liable to be dismissed on the ground of delays and laches, and availability of alternate remedies. They also contended that Adani was disentitled to claim the reliefs it sought due to its conduct. On merits, PNGRB contended that its letter dated 31.03.2008 to Adani sought necessary details. At that stage, Adani did not challenge the validity of Regulation H

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A 18 and on the contrary, sought authorization under that provision by a letter dated 09.07.2008 without protest. It was contended that although Section 16 of the PNGRB Act was brought into force in 2010, at that time too, Adani did not challenge the validity of the impugned regulation. Furthermore, Adani applied for authorization under Section 17(2) of the PNGRB Act and Regulation 18 without any protest and participated in the hearings fixed by PNGRB. At that stage too, no objection was raised with regard to its entitlement as a “deemed authorized” entity, and Adani furnished the required particulars to PNGRB. The respondents pointed out that on 04.02.2013, PNGRB issued a provisional authorization letter on certain terms and conditions in which the disputed areas were excluded. At that stage too, Regulation 18 was not challenged; Adani, on the other hand accepted the terms and conditions on 28.10.2013. The petition was therefore opposed on the grounds of estoppel, applicability of the principle of approbate-reprobate, as well as delay and on merits.

7Copy pinpoint7. The High Court, after hearing the parties, by its judgment held that Adani had applied for and was granted authorization with respect to Khurja area in Uttar Pradesh in 2012. That authorization was issued under Regulation 18. Adani accepted that authorization and never protested against it; it also accepted the terms and conditions of the letter issued by the PNGRB for Ahmedabad, which excluded the disputed areas. Thereafter, the performance bank guarantee was also submitted by the Adani, and ultimately PNGRB issued the final authorization for Ahmedabad city and Dascroi area, excluding the disputed areas. The Court noticed that the bid for the disputed area was issued on 01.10.2015 and Adani participated in the bidding process, rather than challenging it. The petition was filed only after it was unsuccessful in the bid. The High F Court found that the challenge to Regulation 18 of the CGD Regulations therefore, was only when it suited Adani’s convenience.

8Copy pinpoint8. The impugned judgment then noted that this court, in its judgment reported as In re Special Reference No. 1 of 20012 (hereafter called “Special Reference”), had ruled that in view of Entry 53, List I of the G Seventh Schedule, the Parliament had exclusive legislative competence, and the Central Government, exclusive executive competence on the subject of natural gas, and that State Governments did not have any authority to enact such a legislation or to grant any authorization in respect of the subject of natural gas. The High Court held that: 2 H (2004) 4 SCC 489.

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“The Parliament has, therefore, made provision with regard A to ‘deemed authorization’ under Section 16 of the PNGRB Act subject to the provisions of Chapter IV which includes Section 17 of the PNGRB Act. If the provision contained in Section 17 of the PNGRB Act is seen, it provides for distinction between the entities authorized by the Central Government B and those not so authorized. Further, the entities authorized by the Central Government have to furnish the particulars of their activities before the appointed day to the respondent Board, whereas, the other entities have to apply for authorization under Section 17(2) of the PNGRB Act and Regulation 18 of Regulations of 2008. Thus, the Parliament, C while enacting Section 17(2) of the PNGRB Act, had given a chance to such entities to apply for authorization to respondent Board in respect of the areas in which they were active before the appointed day. At this stage, it is also required to be noted that the petitioner No.1 commenced the work of CGD network in Ahmedabad District on the basis of the interim policy of the Government of Gujarat. The said policy itself provides that as and when the Gas Act or any other relevant regulation is brought into force, the petitioner No.1 will have to meet with the requirements of the Regulation. Further, the NOC granted by the Government of Gujarat is also subject to similar condition. In fact, the Presidential Reference was with regard to the Gujarat Gas Act and ultimately the Hon’ble Supreme Court, in the case of Association of Natural Gas &Ors. (supra), struck down the constitutional validity of Gujarat Gas Act and held that with respect to natural gas, only the Central Government has legislative competence. Thus, from the date of coming into force of PNGRB Act i.e., on 01.10.2007, only the Central Government is having legislative and executive competence and therefore Parliament introduced ‘deemed authorization’ in Section 16 of the PNGRB Act. Therefore, when the Parliament introduced the concept of G ‘deemed authorization’ in Section 16 of the PNGRB Act, it could only be with respect to entities operating under an executive order/authorization from the Central Government. If section 16 of PNGRB Act is interpreted to mean “deemed authorization” even to entities operating without such H

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A executive order/authorization, such interpretation would run contrary to the Presidential Reference answered by the Hon’ble Supreme Court. As observed hereinabove, Section 16 of the PNGRB Act is subject to the provisions of Chapter IV which includes Section 17. B 12.1. If we consider the provisions contained in Sections 11, 18, 19 and 61 of the PNGRB Act, it is clear that the respondent Board has been empowered under the Act to either invite applications and or decide applications moved to it from interested parties to lay, build, operate or expand such pipelines or city or local gas distribution network and the said applications have to be decided in transparent and objective manner as provided in the regulations. The function of the respondent Board is defined under Section 11(i) of the PNGRB Act. Further, Section 61 of the PNGRB Act empowers the respondent Board to frame the regulations which are consistent with the PNGRB Act and the Rules made thereunder to carry out the provisions of the PNGRB Act. The regulations of 2008 were therefore framed. Regulation 18(2) empowers the respondent Board to take into consideration various criteria while considering the application for grant of authorization to such entities and one of them is in respect of the actual physical progress made and the financial commitment specifying a physical progress at least twenty five percent and a financial commitment of at least twenty five percent of the capital expenditure identified for the CGD project as per the DFR submitted immediately before the appointed day, may be considered as adequate. If any entity which is already carrying out work before the appointed day, without the authorization of the Central Government, it becomes incumbent upon the respondent Board to see that the quantity of the work and financial commitment is sufficient and therefore the condition as specified in Regulation 18(2)(d) G cannot be said to be ultra vires to the provisions of PNGRB Act. In fact the impugned regulation is in furtherance of the objects of the PNGRB Act. 12.2. Thus, from the combined reading of Sections 16 and 17 of the PNGRB Act and Regulation 18 of the Regulations of H

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2008, it would be clear that other entities can also claim authorization from the respondent Board provided they meet the test of Regulation 18 of the Regulations of 2008. In fact, the aforesaid provisions provide a fair opportunity to unauthorized/other entities also to claim authorization with respect to work already carried out before the appointed day provided the work was completed to a reasonable extent.” In view of this reasoning, the High Court dismissed Adani’s writ petition. Relevant Provisions of the PNGRB Act and Regulations

9Copy pinpoint9. The PNGRB Act, with the exception of Section 16, came into force on 1.10.2007 (“appointed day”). Section 16 was, however, brought into force subsequently, on 12.07.2010. The enactment set up the PNGRB to regulate refining, processing, storage, transport, marketing, distribution and sale of petroleum, petroleum products and natural gas in all parts of the country, and to promote competitive markets. Section 1 (4) of the D Act declares that it applies to “refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas excluding production of crude oil and natural gas.” Section 2 (d) defines “authorized entity” as follows: “(d) “authorised entity” means an entity— E (A) registered by the Board under section 15— (i) to market any notified petroleum, petroleum products or natural gas, or (ii) to establish and operate liquefied natural gas terminals, or (B) authorised by the Board under section 16— (i) to lay, build, operate or expand a common carrier or contract carrier, or (ii) to lay, build, operate or expand a city or local natural gas distribution network;” Section 2(i) of the Act defines a ‘city or local natural gas distribution network’ as:

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A “(i)an interconnected network of gas pipelines and the associated equipment used for transporting natural gas from a bulk supply high pressure transmission main to the medium pressure distribution grid and subsequently to the service pipes supplying natural gas to domestic, industrial or commercial premises and CNG stations situated in a specified geographical area.” Section 2 (l) defines compressed natural gas as follows: “(l) “compressed natural gas or CNG” means natural gas used as fuel for vehicles, typically compressed to the pressure ranging from 200 to 250 bars in the gaseous state.” Section 2 (za) defines “natural gas” as follows: “(za) “natural gas” means gas obtained from bore-holes and consisting primarily of hydrocarbons and includes—

D (i) gas in liquid state, namely, liquefied natural gas and regasified liquefied natural gas, (ii) compressed natural gas, (iii) gas imported through transnational pipelines, including CNG or liquefied natural gas, E (iv) gas recovered from gas hydrates as natural gas (v) methane obtained from coal seams, namely, coal bed methane, but does not include helium occurring in association with such hydrocarbons;”

10Copy pinpoint10. Section 16 of the PNGRB Act requires authorization by the Board for any entity that wishes to lay, build, operate or expand any city or local natural gas distribution network. Section 17 deals with authorization, and Section 18 deals with publicity of applications. The provisions read as follows:

G “16. Authorisation. – No entity shall – (a) lay, build, operate or expand any pipeline as a common carrier or contract carrier; (b) lay, build, operate or expand any city or local natural gas distribution network, without obtaining authorization H under this Act:

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Provided that an entity, - A (i) laying, building, operating or expanding any pipeline as common carrier or contract carrier’ or (ii) laying, building, operating or expanding any city or local natural gas distribution network, B immediately before the appointed day shall be deemed to have such authorisation subject to the provisions of this Chapter, but any change in the purpose or usage shall require separate authorization granted by the Board.

17. Application for authorisation. C (1) An entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand, a pipeline as a common carrier or contract carrier shall apply in writing to the Board for obtaining an authorisation under this Act: Provided that an entity laying, building, operating or expanding any pipeline as common carrier or contract carrier authorised by the Central Government at any time before the appointed day shall furnish the particulars of such activities to the Board within six months from the appointed day. (2) An entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand, a city or local natural gas distribution network shall apply in writing for obtaining an authorisation under this Act: Provided that an entity laying, building, operating or expanding any city or local natural gas distribution network authorised by the Central Government at any time before the appointed day shall furnish the particulars of such activities to the Board within six months from the appointed day. (3) Every application under sub-section (1) or sub-section (2) shall be made in such form and in such manner and shall be accompanied with such fee as the Board may, by regulations, specify. (4) Subject to the provisions of this Act and consistent with the norms and policy guidelines laid down by the Central Government, the Board may either reject or accept an H

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A application made to it, subject to such amendments or conditions, if any, as it may think fit. (5) In the case of refusal or conditional acceptance of an application, the Board shall record in writing the grounds for such rejection or conditional acceptance, as the case may be.

18. Publicity of applications.—When an application for registration for marketing notified petroleum, petroleum products and natural gas, or for establishing and operating a liquefied natural gas terminal, or for establishing storage facilities for petroleum, petroleum products or natural gas exceeding such capacity as may be specified by regulations, is accepted whether absolutely or subject to conditions or limitations, the Board shall, as soon as may be, cause such acceptance to be known to the public in such form and manner as may be provided by regulations.” D

11Copy pinpoint11. Section 17(2) obliges entities to apply to the PNGRB for authorization, and its proviso says that such entities which were authorized by the Central Government at any time before the appointed day, shall furnish the particulars of such activities to the Board within six months from the appointed day. Section 19 provides for the grant of authorizations, E and reads as follows: “19. Grant of authorization. (1) When, either on the basis of an application for authorisation for laying, building, operating or expanding a F common carrier or contract carrier or for laying, building, operating or expanding a city or local natural gas distribution network is received or on suo motu basis, the Board forms an opinion that it is necessary or expedient to lay, build, operate or expand a common carrier or contract carrier between two specified points, or to lay, build, operate or expand a city or G local natural gas distribution network in a specified geographic area, the Board may give wide publicity of its intention to do so and may invite applications from interested parties to lay, build, operate or expand such pipelines or city or local natural gas distribution network. H

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(2) The Board may select an entity in an objective and A transparent manner as specified by regulations for such activities.”

12Copy pinpoint12. The CGD Regulations apply to any entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand a CGD network. Regulation 2(c) defines an ‘authorized area’ B as: “(c) “authorised area” means the specified geographical area for a city or local natural gas distribution network (hereinafter referred to as CGD network) authorized under these regulations for laying, building, operating or expanding the C CGD network which may comprise of the following categories, either individually or in any combination thereof, depending upon the criteria of economic viability and contiguity as stated in Schedule A, namely:- (i) geographic area, in its entirety or in part thereof, within a D municipal corporation or municipality, any other urban area notified by the Central or the State Government, village, block, tehsil, sub-division or district or any combination thereof; and (ii) any other area contiguous to the geographical area E mentioned in sub-clause (i);” Regulation 2(g) defines ‘development of a CGD network’: “(g) “development of a CGD network” means laying, building, operating or expanding a city or local natural gas distribution network;” F Regulation 2(2) provides that: “(2) Words and expressions used and not defined in these regulations, but defined in the Act or in the rules or regulations made thereunder, shall have the meanings respectively assigned to them in the Act.” G

13Copy pinpoint13. Regulation 18 of the CGD Regulations pertains to entities not authorized by the Central Government, and provides as follows: “18. Entity not authorized by the Central Government for laying, building, operating or expanding CGD network before H the appointed day.

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A (1) An entity laying, building, operating or expanding CGD network at any time before the appointed day but not duly authorized to do so by the Central Government shall apply immediately for obtaining an authorization in the form as at Schedule I. B (2) The Board may take into consideration the following criteria while considering the application for grant of authorization, namely: - (a) the entity meets the minimum eligibility criteria as specified in clauses (a) to (e) and (i) of sub regulation (6) C of regulation 5 before the appointed date and is possessing all necessary statutory clearances, permissions, no objection certificates from the Central and State Governments and other statutory authorities; (b) an entity which is not registered under the Companies D Act, 1956 at the time of submitting the application for grant of authorization shall undertake to become a company registered under the Companies Act, 1956: Provided that the Board may exempt an entity to register under the Companies Act, 1956 on such conditions as it may deem appropriate; (c) a satisfactory assessment of the actual physical progress made and the financial commitment thereof till immediately before the appointed day in comparison with the entity’s DFR appraised by the financial institution funding the project. In case the project has not been funded by any financial institution, the Board may appraise the DFR. The DFR of the entity should clearly indicate the specified geographical area of the project and also specify the coverage proposed for CNG and PNG. In case upon scrutiny of the DFR by the board by taking into account the geographical area, customer segments, infrastructure requirements, etc. proposed by the entity, the DFR is found to be sub-optimal and unacceptable, the Board may not consider the case of the entity for issuing the authorization; (d) in respect of the actual physical progress made and the financial commitment thereof referred to in clause (c), a

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physical progress of at least twenty five percent and a A financial commitment of at least twenty five percent of the capital expenditure identified for the CGD project as per the DFR immediately before the appointed day may be considered as adequate; (e) the entity should have arranged, by way of acquisition or lease, land for CGS and procured the necessary equipment for erecting the CGS before the appointed day; (f) the Board reserves the right to get the actual physical progress and the financial commitment certified and depending upon the progress achieved, the Board may consider authorizing the entity for the authorized area – i) as per the geographical area in its DFR; ii) as per the geographical area actually covered under implementation till the appointed day; or ii) the geographical area as specified by the Board; (g) in relation to laying, building, operating or expanding the CGD network, it is for the entity to satisfy the Board on the adequacy of its ability to meet the applicable technical standards, specifications and safety standards as specified in the relevant regulations for technical standards and specifications, including safety standards and the quality-of-service standards as specified in regulation 15; (h) assessment of the financial position of the entity in timely and adequately meeting the financial commitments in developing the CGD network project as appraised by a financial institution and an examination of the audited books of accounts of the entity; (i) firm arrangement for supply of natural gas to meet the demand in the authorized area to be covered by the CGD G network; (j) any other criteria considered as relevant by the Board based on the examination of the application.

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A (3) The evaluation of the application in terms of the clauses (a) to (j) shall be done in totality considering the composite nature and the inter-linkages of the criteria. (4) The Board, after examining the application in terms of the criteria under sub-regulation (2) and also taking into account the requirements in other regulations, may form a prima-facie view as to whether the case should be considered for authorization. (5) In case of prima-facie consideration, the Board shall issue a public notice in one national and one vernacular daily newspaper (including web-hosting) giving brief details of the project and seek comments and objections, if any, within thirty days from any person on the proposal. (6) The Board, after examining the comments and objections, if any, under sub-regulation (5), may either consider or reject the case for grant of authorization for the CGD network. (7) In case it is decided to grant authorization, the same shall be in the form at Schedule D. (8) In case of rejection of the application, the Board shall pass a speaking order after giving a reasonable opportunity to the concerned party to explain its case and proceed to select an appropriate entity for the project in terms of Regulation 6. (9) In case the entity is selected for grant of authorization for CGD network- F (a) the network tariff and the compression charge for CNG shall be determined under the Petroleum and Natural Gas Regulatory Board (Determination of Network Tariff for City or Local natural Gas Distribution Networks and compression charge for CNG) Regulations 2008; G (b) the Board may consider grant of exclusivity on such terms and conditions as specified in the Petroleum and Natural Gas Regulatory Board (Exclusivity for City or Local Natural Gas Distribution Networks) Regulations, 2008;

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(c) the entity shall abide by the technical standards, A specifications including safety standards as specified under relevant regulations for technical standards and specifications, including safety standards; (d) the provisions under regulations 9, 13, 14, 15 and 16 shall apply to the entity.” B Contentions of the appellants

14Copy pinpoint14. Mr Harish Salve, learned senior counsel contended that the impugned judgement erroneously interpreted Section 16 of the PNGRB Act and its proviso. Referring to the sequence of events, it was highlighted that the initial proposal for setting-up of the gas pipeline was by the C invitation of the Gujarat Government. Adani made the proposal on 20.08.2001. The State Government framed its policy with effect from 18.07.2002, and Adani applied under that policy. It was after considering commercial and technical feasibility that the Gujarat Government issued the no objection certificate (hereafter called “NOC”) dated 27.04.2003. D Soon thereafter, Adani took steps to develop the three areas in question.

15Copy pinpoint15. Mr. Salve submitted that the issue as to whether the States have the legislative competence and executive authority in respect of natural gas became the subject matter of a reference under Article 143. By its opinion in Special Reference (supra), this Court E answered the reference and held that it was only the Parliament which could, having regard to Entry 53 of List I of the Seventh Schedule to the Constitution, legislate in respect of natural gas and petroleum products, and the Central Government alone could frame suitable policies. It was to give effect to this opinion that the PNGRB Act was enacted. The Act was brought into force on 01.10.2007. Mr. Salve drew the attention of F the Court to a Press Note dated 31.10.2007 seeking applications from interested parties. He then submitted that on 31.03.2008, having regard to the fact that Adani had received state authorization in the past, the PNGRB asked it to apply under Section 17(2) which it did on 26.02.2008.

16Copy pinpoint16. It was argued that though the provisions of the PNGRB Act G were brought into force, the Central Government advisedly did not bring into force Section 16 of the Act. This led to a proceeding before the Delhi High Court3, which directed the provision to be brought into force. It was as a consequence of these proceedings that the Central 3 Voice of India v. Union of India W.P.(C) 8415/2009, decided on 20.01.2010. H

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A Government ultimately notified Section 16. Mr Salve urged that the proviso to Section 16 of the PNGRB Act was enacted with the intent to deem authorization, and by that, save and permit the functioning of networks and facilities of all entities who were functioning in the sector, and not only entities authorized by the Central Government. He urged that a narrow interpretation of the proviso, confining benefit of “deemed authorization” to entities that were permitted to operate before the enactment of PNGRB, and who were granted authorization by the Central Government, would be reading something new into the statute that does not exist. It was argued that the proviso to Section 16 of the PNGRB Act was plain and unambiguous and referred to entities which were involved in various activities listed in it before the appointed day and not only entities authorized by the Central Government.

17Copy pinpoint17. It was submitted that Section 17 of the PNGRB Act did not distinguish between entities authorized by the Central Government and others, and merely required entities which did not have central authorization to apply in writing for authorization in terms spelt out by the regulations framed by the PNGRB. The procedural requirement for entities authorized by the Central Government was (as per Section 17 (2) of the PNGRB Act), to intimate relevant details. Therefore Section 16 of the PNGRB Act did not create an artificial distinction between entities authorized by the Central Government and other entities. It was submitted that Parliament was well aware of the debate which took place before the coming into force of the PNGRB Act, especially the fact that several States had authorized entities to construct and lay pipelines and networks, which had come up in the meanwhile. It was urged in this context that the Preamble to the PNGRB Act and the proviso to Section 16 referred to “entities” and not “entities authorized by Central Government”. The proviso to Section16 emphasized on the physical activity of laying, building, operating or expanding any city or local natural gas distribution network and not the factum as to whether authorization for such activity was previously granted by the Central Government or not. It was urged that the lone exception carved out in the proviso to Section 16 was that a separate authorization was required for change in the purpose or usage. Unless there was a change in the purpose or usage, an entity laying, building, operating or expanding any city or local natural gas distribution network before the appointed day (i.e., irrespective of prior authorization by Central Government) shall be deemed to have the authorization under Section16.

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18Copy pinpoint18. Learned counsel submitted that in terms of Section 17(2) of the PNGRB Act, all entities had to apply in writing for authorization in such form and manner as specified in regulation made under Section17(3). In terms of Section 17(4), consideration of applications (made under Section 17(2)) was subject to the provisions of the PNGRB Act, which would include Section 16. Thus, all entities, regardless of past authorization by the Central Government, who were carrying out CGD activities immediately before the appointed day were deemed to have authorization qua the entire area. It was urged that in the absence of any norms and policy guidelines by the Central Government, the reference made to “norms and policy guidelines laid down by the Central Government” in Section 17(4) was rendered insignificant. Adani also disputed the contention that Section16 granted deemed authorisation only to entities authorised by the Central Government. It was urged that accepting that argument would involve reading something new into a statutory provision which was otherwise plain and unambiguous. Learned counsel cited Pallavi Resources Ltd. vs. Protos Engineering Company D Pvt. Ltd.4

19Copy pinpoint19. The appellants disputed that the provisions of the Petroleum Act, 1934 read with the Petroleum Rules framed under it were applicable, and certain authorizations and approvals were necessary before the enactment of the PNGRB Act. It was asserted that those provisions only required approval on the design and route of the pipeline from the E Chief Controller of Explosives. It was urged that the authorities under the Petroleum Rules had no powers to authorize or prohibit a particular entity from transporting petroleum through pipelines as long as the appropriate design/route was adopted.

20Copy pinpoint20. Learned senior counsel further contended that PNGRB’s F justification for Regulation 18was without foundation. Mr Salve placed reliance upon the opinion rendered by this Court in Association of Natural Gas & Ors v Union of India5 which stated that the States lacked legislative competence to enact laws on the subject of natural gas, and therefore, under the PNGRB Act, entities authorized by G the Central Government stood on a different footing as compared to their entities. It was urged that Section 16 of the PNGRB Act read with Section 17 covered only entities authorized by the Central Government 4 (2010) 5 SCC 196. 5 (2004) 4 SCC 489. H

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A to seek a different kind of clearance. The PNGRB Act was enacted two years after the decision rendered by this Court in Special Reference (supra). When it enacted the PNGRB Act, Parliament did not differentiate between entities authorized by the Central Government and other entities, but in fact covered all entities carrying out activities which were the subject matter of the Act before the appointed day under B Section16 of the PNGRB Act, subject to the provisions of Chapter IV of the Act.

21Copy pinpoint21. Learned counsel cited Adani Gas Ltd. vs. Union of India6, and stressed that this recognized the applicability of the provision of “deemed authorization” under Section 16 of the PNGRB Act, even in C respect of an entity not previously authorized by the Central Government. It was pointed out that Adani, in the present case, had started work from 21.4.2003 in Ahmedabad District in terms of the NOC issued by the State Government. The appellant would therefore be deemed to possess authorization in terms of Section 16.

22Copy pinpoint22. It was next argued that Section 17(4) empowered the Board to accept or reject the application, subject to the provisions of the Act and consistent with the norms and policy guidelines laid down by the Central Government. The PNGRB evaluated applications in terms of Regulation 18(2), on behalf of deemed authorized entities under Section E 16 of the PNGRB Act. Regulation 18(2) prescribed eligibility criteria and/or statutory obligations for entities which were deemed to be authorised under Section 16 of the Act. Regulation 18(2)(1) conferred omnibus power to the PNGRB to evolve any other criteria deemed relevant by it. This empowered the Board to conjure up criteria, defeating the parliamentary intent in Section 16. F

23Copy pinpoint23. It was urged that the regulation framing power under Section 61(1) was a general power to carry out the provisions of the Act. Reliance was placed on three decisions of this court, viz. Global Energy Ltd v. Central Electricity Regulatory Commission7, Petroleum & Natural Gas Regulatory Board v. Indraprastha Gas Limited & Ors8 and Kunj G Behari Lal Butail v. State of Himachal Pradesh9, where it was held that the rule making power for carrying out the provisions of the Act 6 (2019) 3 SCC 641. 7 (2009) 15 SCC 570. 8 (2015) 9 SCC 209. 9 H (2000) 3 SCC 40.

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was a general delegation. It was urged that the power could not be A exercised so as to bring into existence substantive rights, obligations, or disabilities not contemplated by the provisions of the Act. It was therefore, urged that Section 61(2)(h) and (n) did not empower the Board to indicate eligibility criteria for entities authorised by the State Government.

24Copy pinpoint24. Counsel contended that Section 17(3) of the PNGRB Act B empowered the Board only to specify the form and manner in which an application may be made by entities under Section 17(1) and Section 17(2) of the Act. Thus, the PNGRB could not have prescribed substantive obligations upon entities by creating the aforesaid artificial distinction, contrary to the provisions of Section 16 of the Act. Learned counsel urged that this court in its judgment in Adani Gas (supra) held that in cases of entities which were deemed to be authorised under Section 16, the Board was empowered only to see if certain safeguards would suffice. It was further held that Regulation 18 was not mandatory. It was urged that to the extent that Regulation 18 provided for reduction of the area (of operation of any existing entity) it was contrary to Section 16, as the area for which an entity was deemed to be authorized could not be bifurcated. Regulation 18 could not whittle down the ambit of the principal provision in Section 16.

25Copy pinpoint25. It was submitted that the authorization order dated 28.11.2013, excluding the disputed areas was a non-speaking order, and violative of the principles of natural justice; it was also contrary to the provisions of Section 17(5) of the PNGRB Act requiring reasons to be set out in such order. Such a non-speaking order was also in breach of Regulation 18(8). Counsel submitted that the reasons for the exclusion were given for the first time in PNGRB’s affidavit dated 17.11.2016 which was impermissible as no order could be supported by subsequent affidavits. F Learned senior counsel relied on Mohinder Singh Gill & Anr. v. The Chief Election Commissioner, Delhi & Ors10 in this regard. It was further stated that PNGRB, in its affidavit, placed reliance upon a report dated 18.2.2011 to say that Adani did not have a presence in the said areas as on the date of inspection. That report was not provided at the G time of the order, i.e., 28.11.2013 and was for the first time provided on 6.6.2017. Thus, it was contended that the order is violative of principles of natural justice.

10 (1978) 1 SCC 405. H

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26Copy pinpoint26. Adani was granted an NOC by the State Government for the entire Ahmedabad District, including the disputed areas under the policy of the State Government. Such area could not have been curtailed by relying on a power under the CGD Regulations. Further, that the said areas were put up for auction on 1.10.2015 with a far larger area, clearly showed that the disputed areas were not economically viable on a B standalone basis, and the basis for exclusion of those areas from Adani’s authorized area was unfounded.

27Copy pinpoint27. Learned senior counsel submitted that the report dated 18.2.2011 was factually incorrect, as it stated that as on the date of inspection, Adani had not undertaken any activity in the said areas, when in fact it had an operational network as on the date of inspection catering to various customers. Adani had augmented its network in the said areas of Ahmedabad by undertaking urgent capital works pursuant to PNGRB’s permission dated 11.6.2009. The details of Adani’s investments in the disputed areas of Ahmedabad prior to the date of that report also reflect that it had a presence in those areas. None of those particulars were considered by the High Court.

28Copy pinpoint28. It was argued that the impugned authorization was inconsistent with Regulation 18. Under that regulation, to evaluate actual physical progress and financial commitment, presence as on the appointed day is to be seen in the entire Ahmedabad District, and not apart of it by curtailing the ambit of Section16. It was submitted that the authorization order dated 28.11.2013 omitted to say how Adani did not fulfil the criteria under Regulation 18. On the contrary, the minutes of the meeting of 27.8.2010 reveal that Adani’s application fulfilled the grant of authorization under Regulation 18 in respect of the geographical area, which covered Ahmedabad city and contiguous areas and Dascroi. It was urged that Adani also fulfilled the criteria of 25% physical progress in terms of Regulation 18, for the entire Ahmedabad District. PNGRB overlooked that as well as the fact that initiation of development work for any CGD network, including in the Ahmedabad District, always started from one point i.e., in linear progression, generally, where a city gas station was first established for inlet gas, which then extended to the whole of the area. Even under the current PNGRB norms, an authorized entity was given at least 8 years to develop charge areas. Therefore, PNGRB wrongfully carved areas out of the Ahmedabad District and tested each such area in terms of Regulation 18, which was not permissible.

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1177 [S. RAVINDRA BHAT, J.]

29Copy pinpoint29. It was argued that Adani, in accepting a restricted authorization, or in participating in the tender process later in 2015 did not acquiesce or waive its rights. It protested immediately against the exclusion of the disputed areas. Provisions of the PNGRB Act came into force on 1.10.2007, with the exception of Section 16 (which came into force on 12.7.2010). In the interregnum, entities like Adani were constrained to apply under Regulation 18. In respect of Khurja in Uttar Pradesh, PNGRB accepted Adani’s application under Regulation 18. There was no cause of action to challenge Regulation18 in respect of the authorization granted in Khurja.

30Copy pinpoint30. It was pointed out that in the case of Ahmedabad, Adani’s initial Detailed Feasibility report (hereafter called “DFR”) inadvertently failed to specify the said areas and Dascroi but the mistake was soon rectified, and those areas were made part of the amended DFR. The PNGRB, in its meeting held on 12.8.2010 also recognized the inclusion of the said areas in the DFR. Ultimately, PNGRB included Dascroi within the scope of authorization, but excluded the disputed areas. Adani had immediately protested against such exclusion and had never given up its protest. It was however, constrained to participate in the auction not only to protect its investments already made in the disputed areas, but also because it was desirous of developing CGD networks in the other areas of Ahmedabad. E

31Copy pinpoint31. Learned counsel urged that acquiescence to certain facts or waiver was an intentional relinquishment of a known right. The correct interpretation of Section 16 and Section 17 of the PNGRB Act was debated and unsettled. Consequently, it is incorrect to rely upon the doctrine of acquiescence or waiver to deny relief to Adani. Learned counsel relied on Moti Lal Padampat Sugar Mills v. State of U.P.11 F Learned counsel further submitted that mere delay did not amount to waiver and that there was no estoppel against provisions of a statute. The so-called delay, waiver, or acquiescence on Adani’s part would not have any bearing on the maintainability of the writ petition in relation to the reliefs sought. G

32Copy pinpoint32. Mr. Dhruv Mehta, learned senior counsel argued in addition to Mr. Salve that an overall reading of provisions of the Act - especially Sections 16 and 17 - would show that Parliament made no classification as far as entities were concerned. The classification was in respect of 11 (1979) 2 SCC 409, paras 6-7. H

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A authorization granted by the Central Government. It was submitted that all applications under Section 17 had to be decided in a uniform manner while applying the same yardstick. The learned counsel relied upon Section 17(4), which empowered the Board to either accept or reject the application, consistent with the provisions of the Act and consistent with norms, and policy guidelines prescribed by the Central Government. It B was thus argued that every application or intimation received by the PNGRB had to be treated in the same manner, regardless of Central Government authorization. Consequently, the deeming authorization clause in Section 16 had to be given primacy.

33Copy pinpoint33. Learned counsel relied upon Section 61(2) (e), (h) and (n). It C was argued that the PNGRB’s power to frame Regulations under Section 61 was general. As contrasted with this, it was inherent in the nature of PNGRB’s function that it had to function through regulations, many aspects in terms of Section11. Learned senior counsel relied on Adani Gas (supra) to urge that Regulation 18 was not mandatory and that the D PNGRB could decide to apply any one or the set of criteria specified in that provision. It was urged that in the absence of any norm or existing statutory guidance in the form of specific provisions in the Act, the PNGRB could not have framed Regulation 18 to arm itself with extreme power to pick and choose any standard at its whim. Learned senior counsel emphasized that if the Board were to so wish, it could apply E some of the standards spelt out in Regulation 18 in case of one entity and only one or none in the case of another entity, while examining applications under Section 17. It was urged therefore that Regulation 18 had discriminatory potential and could not be sustained. Learned senior counsel relied on the decision of this Court in Petroleum and Natural F Gas Regulatory Board v Indraprastha Gas 12 and urged that there was no statutory guidance to the PNGRB, in regard to regulation framing, with respect to evaluation of applications under Section 17.

34Copy pinpoint34. Dr. A.M. Singhvi, learned senior counsel appearing for an intervenor, Haryana Gas adopted the arguments made on behalf of Adani, G with respect to the interpretation of provisions of the PNGRB Act. It was submitted that there were no legal impediments before the coming into force of the PNGRB Act, preventing any entity from starting the business of laying, maintenance and operation of a gas pipeline or network. Given this legal position, Parliament’s intent while enacting the “deemed 12 H 2015 (9) SCC 209.

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1179 [S. RAVINDRA BHAT, J.]

authorization” provision under the proviso to Section 16 was to save networks that had been set up, or were under construction. Doing otherwise, and holding that all entities who did not obtain Central Government authorization could not operate after the enactment of the PNGRB, meant that such networks, put up at great expense, which constituted national assets, would have gone waste. It was further submitted that the requirement of Section 17(2) had to be considered in the light of the PNGRB’s power under Section 17(4), which had to necessarily be exercised in the light of the “deemed authorization” provision enacted by Section 16. Contentions of respondents C

35Copy pinpoint35. The learned Attorney General for India contended that before the opinion of the Supreme Court of India in Special Reference (supra), State Governments proceeded on the basis that the distribution of natural gas for consumption in cities would fall under Entry 25 of List II, and that their executive power enabled grant of authorizations or licenses to lay pipelines and undertake distribution of natural gas in cities. However, D once this Court rendered its opinion on 25.03.2004, the position in law was clarified by the Court holding that Parliament alone was competent to legislate in regard to natural gas, by reason of Entry 53 of List I. States were bereft of legislative competence as well as executive power to issue authorizations or licenses for setting up natural gas distribution E networks.

36Copy pinpoint36. Once the Constitutional demarcation of legislative powers was clearly enunciated by this court, the result was that all licenses or authorizations granted by States for operating natural gas distribution networks were rendered null and void, and had no legal effect whatsoever. F It was argued that it was this background in which the PNGRB Act was enacted. Section 11 set out the functions of the Board, which included the power to authorize entities to lay, build, operate or expand city or local natural gas distribution networks. Although Section 16 was not brought in force on 01.10.2007, Section 17 which was in effect on that date, empowered PNGRB to authorize CGD activities. Section 17 also G mandated that an application for authorization “shall” be made in writing to the Board and that the Board may allow or reject any application.

37Copy pinpoint37. It was urged that the scheme devised by Section 17(2) was that a written application was to be made for authorization under the Act. As Section 11 empowered the Board to grant authorization, H

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A applications had to be made to PNGRB. The proviso expressly dealt with the laying and operating of city or local natural gas distribution networks that had been authorized by the Central Government before the PNGRB Act came into force. The Central Government alone was competent under Article 73 of the Constitution to issue such licenses or authorizations. They were valid in the eye of law, in view of the opinion B of this Court in Special Reference (supra). Entities with the Central Government’s authorization, only had to furnish particulars of their activities to the PNGRB within six months from the date when the Act came into force, and, were entitled to operate natural gas distribution networks in terms of those authorizations. However, Sections 17(3), (4) C and (5) dealt with cases where, under Sections 17(1) or (2), applications were made directly to the PNGRB for grant of authorization to lay, build, operate or expand a pipeline or a network. These applicants could fall into two categories. The first were entities laying or operating natural gas networks immediately before the appointed date without any authorization by the Central Government, but on the basis of authorizations given by State Governments which had no validity whatsoever. The second category was for those new entrants who sought authorizations for laying, building, operating or expanding gas pipelines or networks. The PNGRB was entitled to consider applications from both these categories of applicants, and either accept them or reject them by applying, inter alia, the norms and policy guidelines prescribed by the Central Government.

38Copy pinpoint38. It was highlighted that Section 16, which came into force on 15.07.2010 dealt with two categories. One, a new entrant which proposed to carry out CGD activities, which had to obtain authorization from the F PNGRB. If there was more than one applicant for the same city or local area, a transparent process (i.e., competitive bidding) was to be resorted to under the Act and the Regulations. There was a second category, i.e., entities, who had been carrying out CGD activities prior to the appointed date in a legally valid manner, i.e., under authorization by the Central Government and not by the State Government. The Attorney G General also pointed out that the proviso to Section 16 clearly stated that entities who were laying or operating natural gas distribution networks immediately before the appointed day shall be deemed to have such authorization “subject to the provisions of this Chapter”. This meant subject to the provisions of Section 17 too. Therefore, “deemed authorization” under the proviso to Section 16 would apply only to entities

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1181 [S. RAVINDRA BHAT, J.]

which had the authorization of the Central Government prior to the appointed date.

39Copy pinpoint39. It was urged that the interpretation adopted by this Court in Adani Gas (supra), i.e., that deemed authorizations covered entities authorized by the state government, and that the requirements of Regulation 18 were directory, was erroneous. It was submitted that the B Bench in Adani Gas (supra)did not take into account the binding, five judge bench opinion in Special Reference (supra), by reason of which it was clear that the legislative competence to regulate all aspects relating to petroleum and petroleum products (including natural gas) was that of Parliament, and the executive power to frame policies, that of the Central Government. C

40Copy pinpoint40. Mr. Paras Kuhad, learned senior counsel appearing for the second respondent PNGRB, argued that at all times since 1974, by virtue of the combined effect of the Petroleum Act, 1934, (hereafter called “the Act of 1934”), the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 (hereafter called “the Act of 1962”), D the Petroleum Rules, 1976 (hereafter called “Rules of 1976”), and the Petroleum Rules, 2002 (hereafter called “Rules of 2002”), enacted by Parliament and framed under those laws (by the Central Government) pursuant to Entry 53 List I, in relation to laying of pipelines for transportation of petroleum (with natural gas being a part of petroleum - E as held in para 40 of Special Reference), a regulatory regime with the Central Government as the regulator had existed. Thus, pipelines for transportation of petroleum and natural gas could be laid only upon the satisfaction of the Central Government to the effect that it was necessary to lay such a pipeline between two specified points (by virtue of Sections 3 and 6 of the Act of 1962), after taking into account various factors like F approval of the route, design, construction and working of the pipeline, by the Chief Controller of the Central Government. The satisfaction was based on a comprehensive Project Report, (by reason of Rule 89 of Rules of 1976 and the Rules of 2002), subsequent to issuance of an authorization by Central Government, and affirmation by the State G Government, pursuant to issuance of an order by the Central Government in favour of the State Government or Corporation, directing the vesting in the latter of the right of user in land for laying pipelines (Section 7(1) read with Section 6(4) of Act of 1962).

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41Copy pinpoint41. It was submitted that taking note of these facts, Section 17(1) and (2) of the PNGRB Act made it obligatory for all “under-construction” pipelines or networks to obtain an authorization under the Act, except for the pipelines or networks already authorized by the Central Government. Section 48 of the PNGRB Act criminalized the construction or operation of pipelines without obtaining authorization. B

42Copy pinpoint42. It was urged on behalf of PNGRB that Section 16 of the PNGRB Act was to be interpreted in the light of Sections 17 and 48 and thus, Section 16 did not clothe every “under-construction” pipeline, legal or illegal, with the imprimatur of “deemed authorization”. The mandatory applicability of the regulatory regimen of Section17 was reiterated by C Section 16, by stating that deemed authorizations shall be subject to the provisions “of this Chapter”. Upon Section 16 becoming operative, entities with under-construction pipelines which had applied for authorization under Section 17, but whose work was under suspension, owing to Section 48, became entitled to restart construction activities at D their own risk and cost, pending a final decision on their application for authorization. The fiction created by Section 16 was for this limited purpose. It was submitted that illegal pipelines laid in contravention of the Act of 1934 were not intended to be granted deemed authorization. Secondly, in any case, such deemed authorization could have no bearing on the requirement of ‘obtaining authorization under this Act’. The E proviso to Section 16 stated in unambiguous terms that its operation was “subject to the provisions of this Chapter”. The final regimen, uniformly applicable, was that created by the “provisions of the Act” i.e., the PNGRB Act. Thus, every entity laying a pipeline, other than an entity authorized by the Central Government had to obtain an authorization F under the Act of 2006 in terms of Section17(4), with the attributes of such regimen provided under the PNGRB Act and Regulations which were: (a) Competitive selection of an entity in accordance with Regulations (Section 19); G (b) Discovery of transportation tariff and commitment to build pipeline/network infrastructure through a competitive bidding process (Regulation 7 of Authorization Regulations of 2008); (c) Applicability of open access regimen to all pipelines/networks after the expiry of the period of exclusivity/monopoly granted to them (Section 21 read with Section 20 (1) & (4));

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1183 [S. RAVINDRA BHAT, J.]

(d) Subjection of all pipelines/networks to stringent qualifying standards, including that of safety and pre & post-commissioning conditions/standards/obligations. (CGD Authorization Regulations of 2008).

43Copy pinpoint43. It was urged that the grant of authorization for Ahmedabad city and denial of authorization for disputed areas, i.e., Sanand, Bavla B and Dholka were in the same order dated 28.11.2013. Adani had the choice to accept or reject it. Having unequivocally accepted and acted upon the grant of authorization and exclusivity for Ahmedabad City and Dascroi, and denial of the authorization for Sanand, Bavla and Dholka, it could not, while enjoying the fruits of the order for Ahmedabad City, question another part of the same order to the extent it limited the authorization to the said area. This Court has repeatedly held that a person taking advantage under an instrument, which both grants a benefit and imposes a burden, cannot take the former without complying with the latter. Reliance was placed on Shyam Telelink Ltd. v. Union of India 13.It was submitted that Adani acquiesced to the terms and conditions of the bidding process by participating in it without any demur and was now stopped from challenging the same. Reliance was also placed on M/s Tafcon Projects [I] (P) Ltd. vs Union of India & Ors14.

44Copy pinpoint44. It was further highlighted that Adani accepted authorizations awarded to it by following the procedure which it now challenged, without asserting its “deemed authorization” status at any stage, with Khurja geographical area 15 being an example. Now however, Adani has challenged the validity of Regulation 18 when its application for authorization was rejected in respect of Lucknow GA, Udaipur GA, Jaipur GA and in the present case. It was submitted that Adani was estopped by its conduct from raising a challenge to Regulation 18. F

45Copy pinpoint45. It was contended that pipeline construction only on the strength of NOCs issued by the States, was not recognized by Parliament as worthy of being saved. The CGD Regulations sought to save, after scrutiny, such of these pipelines as were viable, optimal, safe, capable of implementation, and actually under construction. It was contended that G Regulation 18 of the 2008 Regulations, obliged every “under construction” pipeline (except Central Government authorized pipelines), 13 (2010) 10 SCC 138. 14 2004 (13) SCC 788. 15 Authorization granted on 4.12.2012. H

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A to compete in the selection process and succeed therein, based on its competitive tariff bid and competitive bid for construction of infrastructure. It was emphasized that the power to accept or reject an application for authorization (Section 17(4), the power to prescribe the process of selection (Section 19(2) and the power to grant authorization for laying pipelines/networks (Section 20(3)), is a discretionary power B of the Board. Its exercise is subject to the legislative objectives stated in Section 20(5), of avoiding “infructuous investment” and of “securing distribution of natural gas across the country”. The PNGRB submitted that Regulation 18 of the Regulations of 2008 primarily sought to evaluate the following: C (a) Managerial, technical and financial competence of the applicant entity to implement the Project (Regulation 18(2)(a)); (b) Viability of the Project, in the context of its route/geographical area, customer segments (industrial, commercial, domestic, transport etc.) and infrastructure requirements (steel inch-km pipelines, CNG Stations, PNG connections etc.) and the pipelines/ networks design and construction, being inconformity with the applicable technical and safety standards (Regulation 18(2)(e) & (g)); (c) The pipelines/networks, actually under construction, those in the process of being laid and built, the commencement of construction - demonstrated by the availability of land, clearances and permissions, erection equipment, financial capacity (net-worth), minimal financial commitment (25%) etc. (Regulation 18(2)(d) & (e)).

46Copy pinpoint46. In terms of Section 19(1), the applicable schedule and regulatory standards, the Board determined the geographical area to be authorized. Regulation 18 of the 2008 Regulations provided for evaluation of the existence of these factors, which alone could demonstrate that it was not a proposed pipeline/network, but a pipeline/network that was actually G being laid or built and was viable, optimal and safe in terms of the objectives of the PNGRB Act.

47Copy pinpoint47. Mr. P.S. Narasimha, appearing for Gujarat Gas, reiterated the submissions made by the Attorney General. It was submitted that the doctrine of approbate and reprobate applied to prevent Adani from complaining of arbitrariness. H

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1185 [S. RAVINDRA BHAT, J.]

48Copy pinpoint48. It was urged that the proviso to Section16 of the PNGRB Act A did not validate NOCs or authorisations issued by the State Government; it only provided a framework whereby entities that were carrying out CGD activities immediately prior to the appointed date were permitted a chance to obtain authorisation under the PNGRB Act. It was Section17 that proceeded to categorise entities as those with a Central Government B authorisation and without it. Learned counsel urged that Sections 16, 17, and 19 of the PNGRB Act read with Regulation18 of the CGD Regulations provided the framework by which an authorisation under the Act could be obtained by an entity which was laying CGD networks without a Central Government authorisation before the appointed date. Section 16 of the PNGRB Act did not grant or vest authorisation, but was “subject to the provisions of this Chapter” and thereby subject to provisions requiring the obtaining of authorisation under the Chapter. The process of obtaining authorisation was governed by Section 17 and 19 read with Regulation 18. Adani’s argument that Section 16 of the PNGRB Act preserved the entire “project” which the entity had intended to implement (and hence it claimed “deemed” authorisation for the entire Ahmedabad District) was outside the scope of the specific language of the proviso to Section 16, which applied only to an entity “laying, building, operating or expanding” a CGD network “immediately before the appointed day shall be deemed to have such authorisation subject to the provisions of this Chapter”. It did not refer to any E “intention” of the entity. Therefore, the scope of the deeming provision was limited to the specific work of laying, building, operating or expanding a CGD network immediately before the appointed day; it was not as expansive as to cover “intended” works. It was pointed out that the PNGRB’s Site Inspection Report dated 18.02.2011 stated that the work at site had not been carried out at the disputed areas.

49Copy pinpoint49. Mr. Narasimha refuted Adani’s interpretation of the proviso to Section 16 and submitted that the deeming fiction it enacted was meant to save only central government authorized entities. He urged that having regard to the express terms of Section 16, which was subjected to other provisions (including Section 17), the only feasible interpretation would be that it covered those entities that had been granted authorization by the central government, which had exclusive jurisdiction to do so. It was submitted that a deeming fiction had to be limited, and could not be extended beyond the purpose for which it was enacted; he placed reliance H

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A on K.S. Dharmadatam v. Central Government & Ors16; N.K. Sharma v. Abhimanyu17 and State of Maharashtra v Lalji Rajshi Shah & Ors 18 .

50Copy pinpoint50. Mr. Saurav Agrawal, Advocate, appearing on behalf of an intervenor, M/s Green Gas Ltd., contended that historically, for 22 areas, B entities had been authorized by the Central Government. All such entities were Central PSU promoted entities, in which Gas Authority of India Ltd. (hereafter called “GAIL”) was a stakeholder since GAIL was handling the administered pricing mechanism (hereafter called “APM”) natural gas under the directions of the concerned Union Petroleum and Natural Gas Ministry. Likewise, other Central Government owned C Oil Marketing Companies (Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd., and HPCL) were also stakeholders and provided the established distribution network (e.g., retail stations, pipelines, etc.) along with technical knowledge and experience of handling such products. All the aforesaid entities had APM gas allocation from the Central D Government. All such entities had to be accorded necessary local permissions as well as were deemed authorized entities under the PNGRB Act.

51Copy pinpoint51. In some areas of Gujarat, a State PSU (M/s Gujarat Gas Limited) was historically (i.e., much before the Special Reference) E operating under permissions from the State Government and the Central Government. The entity had Central Government ratification for those areas. It applied for grant of authorization to PNGRB under Section 17(2) and was granted such authorization. It was urged that after the decision in Special Reference (supra) on 25.03.2004 and in the teeth of the said decision, other state governments framed policies in regard to F natural gas distribution and issued local permissions to private entities of their choice, in the face of the Central Government having already authorized PSU-promoted entities to undertake distribution of natural gas. So, on one hand, there were PSU-promoted Central Government authorized entities with gas allocation awaiting local permissions from G State Government to implement the CGD project. On the other hand, the State Government did not grant local permissions to such entities and instead permitted private entities of their choice to setup the CGD infrastructure, albeit without any gas allocation. 16 1979 (4) SCC 294. 17 2005 (13) SCC 213. H 18 2000 (2) SCC 699.

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1187 [S. RAVINDRA BHAT, J.]

52Copy pinpoint52. Learned counsel referred to an affidavit by the Central A Government filed in I.A. No.270/2008 in the larger batch matter in M.C. Mehta v. Union of India19, seeking clarification and declaration that all such State Government NOCs/permissions were unconstitutional in view of Special Reference (supra). That application (I.A. No.270/2008) was disposed of by the court’s order dated 07.04.2017, in the following terms: B “The primary prayer made in this application is for a declaration that the Central Government is exclusively empowered to formulate and implement policy with regard to all matters pertaining to Natural Gas, including transmission and supply of Natural Gas, City Gas Distribution, etc. C Learned Solicitor General says that in view of the decision of this Court in Presidential Reference in Special Reference No.1 of 2001 reported in (2004) 4 SCC 489 as well as the provisions of the Petroleum and Natural Gas Regulatory Board Act, 2006, no further orders are required to be passed in this application and the application is accordingly disposed of in terms of the decision of this Court as well as the Act.”

53Copy pinpoint53. Mr. Agarwal contested as erroneous, the submission of Adani that the “deemed authorization” provision in Section 16 was conceived in larger public interest, to save all existing entities who were operating. It was urged that an entity selected by the State Government, without following any due process and without any authority under law, could not be saved merely because of the investments made or the lapse of time as it was plainly contrary to public policy. All private entities which were selected by the State Governments were so selected without following any due process and most, if not all were given NOC or gas allocation by the Central Government. If such entities were conferred “deemed authorization” status, then it would be tantamount to legalizing an illegal action. Points for consideration

54Copy pinpoint54. The following points arise for consideration by this Court: G (i) The scope of the “deemed authorisation” clause under the proviso to Section 16 of the PNGRB Act; (ii) Validity of Regulation 18; and 19 WP(C) 13029/1985. H

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A (iii) Whether the exclusion of the disputed areas from the authorisation granted to Adani was justified. Analysis & Conclusions Re: Point No. 1: The scope of the “deemed authorization” clause under the proviso to Section 16 of the PNGRB Act B

55Copy pinpoint55. The PNGRB Act came in the wake of declaration of law by the opinion of this Court20 under Article 143 of the Constitution of India. This Court held that Entry 53, List I of the Seventh Schedule shall regulate the development of oil fields and mineral oil resources, petroleum and petroleum products, other liquids, and substances declared by Parliament C by law to be “dangerously inflammable”, and that this entry exclusively enabled Parliament alone, to the exclusion of state legislatures to enact laws in relation to natural gas. The Special Reference became necessary due to the states asserting that by Entry 25 of List II21, state legislatures had exclusive domain over the subject of natural gas. The Presidential D reference was also made with respect to the competence of the Gujarat state legislature to enact a law regulating transmission, supply and distribution of gas22.This Court, in its opinion, noted that several laws relating to petroleum and petroleum products had been enacted both before and after the Constitution came into force23. This Court, after examining the previous decisions with respect to interpretation of E legislative entries in the context of rival claims to exclusive power, proceeded to consider what was meant by the expression “petroleum and petroleum products” and “mineral oil resources” in Entry 53 of List I. After examining various technical encyclopaedias and reference books this Court held: F “38. All the materials produced before us would only show that the natural gas is a petroleum product. It is also important to note that in various legislations covering the field of petroleum and petroleum products, either the word ‘petroleum’ or ‘petroleum products’ has been defined in an G 20 Special Reference No.1/2001. 21 Relating to ‘gas and gas works’. 22 Gujarat Gas (Regulation, Transmission, Supply and Distribution Act, 2001 23 Notably the Petroleum Act, 1934; the Mines Act, 1952; Mines and Minerals (Development) Act, 1957; Oil Fields (Regulation and Development) Act, 1948; Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962; Oil and H Natural Gas Development Act, 1974; Petroleum and Natural Gas Rules, 1959.

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1189 [S. RAVINDRA BHAT, J.]

inclusive way, so as to include natural gas. In Encyclopaedia A Britannica, 15th Edn. Vol. 19, page 589 (1990), it is stated that “liquid and gaseous hydrocarbons are so intimately associated in nature that it has become customary to shorten the expression ‘petroleum and natural gas’ to ‘petroleum’ when referring to both.” The word petroleum literally means ‘rock B oil’. It originated from the Latin term petra-oleum. (petra- means rock or stone and oleum-means oil). Thus, Natural Gas could very well be comprehended within the expression ‘petroleum’ or ‘petroleum product’.” ********** C “44. Under Entry 53 of List I, Parliament has got power to make legislation for regulation and development of oil fields, mineral oil resources, petroleum, petroleum products, other liquids and substances declared by Parliament by law to be dangerously inflammable. Natural gas product extracted from oil wells is predominantly comprising of methane. Production D of natural gas is not independent of the production of other petroleum products; though from some wells the natural gas alone would emanate, other products may emanate from subterranean chambers of earth. But all oil fields are explored for their potential hydrocarbon. therefore, the regulation of E oil fields and mineral oil resources necessarily encompasses the regulation as well as development of natural gas. For free and smooth flow of trade, commerce and industry throughout the length and breadth of the country, natural gas and other petroleum products play a vital role. F

45. In Re: Cauvery Water Dispute Tribunal MANU/SC/0097/ 1992: AIR1992SC522, the right to flowing water of rivers was described as a right ‘publici juris’, i.e., a right of public. So also the people of the entire country has a stake in the natural gas and its benefit has to be shared by the whole country. There should be just and reasonable use of natural G gas for national development. If one State alone is allowed to extract and use natural gas, then other States will be deprived of its equitable share. This position goes on to fortify the stand adopted by the Union and will be a pointer to the conclusion that “natural gas’ is included in Entry 53 of List I. Thus, the H