1983 (7) TMI 342 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the ONGC is a 'public utility'.
2. Whether the ONGC's price fixation for natural gas was arbitrary and unreasonable.
3. Whether the ONGC discriminated between different consumers in pricing.
4. Whether the ONGC's insistence on a 90% minimum guarantee quantity was justified.
5. Appropriate relief and remedy for the petitioners.

Detailed Analysis:

1. Whether the ONGC is a 'public utility':
The court held that the ONGC, being a statutory corporation established under the Oil & Natural Gas Commission Act, 1959, and engaged in the production and sale of natural gas, qualifies as a 'public utility'. The court emphasized that public resources must benefit the public and cannot be squandered. The ONGC's duty to dispose of gas was inherent in its statutory functions, making it a public utility despite arguments to the contrary.

2. Whether the ONGC's price fixation for natural gas was arbitrary and unreasonable:
The petitioners argued that the ONGC's price escalations from Rs. 50 per 1000 cubic meters in 1971 to Rs. 2400 per 1000 cubic meters in 1982 were arbitrary and lacked transparency. The court noted that the ONGC failed to provide a reasonable basis for these escalations and relied excessively on comparisons with alternative fuels like furnace oil and international prices, which were not directly relevant. The court found the ONGC's actions to be arbitrary and capricious, lacking a transparent and reasonable method for price fixation.

3. Whether the ONGC discriminated between different consumers in pricing:
The petitioners contended that the ONGC practiced discrimination by charging different rates to different consumers, such as the Gujarat Electricity Board and Gujarat State Fertiliser Corporation. The court held that while public bodies could be charged lower rates, the ONGC's overall pricing strategy was arbitrary and lacked a consistent rationale. The court emphasized that the ONGC, as a public utility, must act reasonably and fairly in its pricing.

4. Whether the ONGC's insistence on a 90% minimum guarantee quantity was justified:
The ONGC increased the minimum guarantee quantity from 75% to 90%, which the petitioners challenged. The court accepted the ONGC's argument that due to the nature of natural gas, which cannot be stored and must be consumed or flared, the increase to 90% was necessary and justified. Therefore, this part of the petitioners' grievance was rejected.

5. Appropriate relief and remedy for the petitioners:
The court set aside the prices demanded by the ONGC from the petitioners, deeming them unreasonable. It directed the ONGC to fix new prices based on reasonable and rational norms. The court suggested three possible methods for price fixation:
- Appointment of a Commission by the Central Government.
- Arbitration by an eminent economist.
- ONGC itself deciding the price after considering all relevant factors and hearing the affected parties.

The court emphasized that the ONGC must act transparently and reasonably in future price fixations to avoid further litigation.

Conclusion:
The petitions were partly allowed, and the ONGC was directed to adopt one of the three suggested methods for reasonable price fixation. The interim relief granted earlier was to continue for two months to allow the ONGC to seek further relief from the Supreme Court. The court granted leave under Article 133 of the Constitution of India, recognizing the substantial question of general importance involved.