2023 (2) TMI 366 - SC - Indian Laws

Maintainability of petition - Levy of Loss of transportation charges - In contradiction to 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 - whether the present case is a fit one for this Court to exercise jurisdiction under Article 136 of the Constitution of India, albeit leave having been granted? - HELD THAT - Although the dispute arises from a commercial contract, it is found 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 - 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. Validity of the clauses under which loss of transportation charges were levied - HELD THAT - 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. This is more so when the pricing orders by the concerned authority, i.e. MoPNG stipulate a fixed price for natural gas. 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. GAIL may have made a huge investment in 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 - GAIL s contention cannot be accepted that the charges could be levied merely because GAIL had laid the HBJ pipeline for users generally - further the direction for refund vide order dated 11.04.2007 arose as a consequence of quashing of the clauses. It was in the nature of a sequitur and, thus, we do not find any reason to interfere with the same. Time limitation - HELD THAT - No doubt the issue of loss of transportation charges was flagged by IPCL in various communications exchanged inter se the parties subsequent to the signing of the contract. That, however, cannot grant a license to IPCL to approach the court as and when it considers proper. Thus, while upholding the quashing of the clauses, we are of the view that the refund should be restricted to a period of three years prior to the date of the filing of the writ petition on account of IPCL s delay in approaching the court - strength drawn from judgement in Lipton India Limited Ors. 1994 (9) TMI 309 - SUPREME COURT , which observed that the writ petition was entertained because of the plea of discrimination but then the relief was restricted to what would have been claimed in the suit. The appeal(s) dismissed qua the aspect of maintainability of the writ petition and the quashing of the clauses dealing with loss of transportation charges in the case of IPCL. However, it is deemed fit to restrict the relief to period of three years insofar as refund is concerned from the date of filing of the writ petition, i.e., 09.03.2006 - also, this refund should be made within a period of two months from today, failing which it will carry interest at 8 per cent per annum from the date it became due. If the refund is made within the stipulated time, we are not inclined to levy interest on the amount due. Appeal allowed.

Summary

Issues Involved:
1. Maintainability of the writ petition filed by IPCL.
2. Validity of Clauses 4.04 and 10.01 of the contract on grounds of unequal bargaining power and arbitrariness.
3. Entitlement to monetary relief in the form of a refund after the order dated 19.09.2006.

Detailed Analysis:

1. Maintainability of the Writ Petition:
The Supreme Court held that the writ petition filed by IPCL challenging Clauses 4.04 and 10.01 of the contract was maintainable. Despite the commercial nature of the dispute, GAIL, being a Public Sector Undertaking, qualifies as "˜State' under Article 12 of the Constitution. At the time of entering into the contract, GAIL held a monopolistic position concerning the supply of natural gas, and IPCL had no choice but to enter into the agreement after incurring significant expenses in setting up the infrastructure. The court emphasized that writ jurisdiction can be exercised when the State, even in its contractual dealings, fails to exercise fairness or practices discrimination. The court found GAIL's action in levying "˜loss of transportation charges' discriminatory, as IPCL was mandated to build its pipeline and was not using GAIL's HBJ pipeline. Thus, the court decided that the availability of an alternative remedy did not preclude the exercise of writ jurisdiction.

2. Validity of Clauses 4.04 and 10.01:
The Supreme Court found Clauses 4.04 and 10.01 of the contract, which levied "˜loss of transportation charges,' to be unfair, unjust, and arbitrary. The court noted that IPCL was mandated to lay down its pipelines and was not using GAIL's HBJ pipeline, making the imposition of such charges discriminatory and in violation of Article 14 of the Constitution. The court recognized that IPCL had to enter into the contract under a time constraint after incurring heavy expenditure in constructing the Gandhar Plant, thus facing a "Hobson's choice."� The court concluded that GAIL exercised unequal bargaining power at the time of signing the contract, and the clauses were manifestly arbitrary as they contradicted the directives of the Union of India.

3. Entitlement to Monetary Relief:
The Supreme Court upheld the direction for refund issued by the Single Judge, which was a consequence of quashing the clauses. However, the court restricted the refund to a period of three years prior to the date of filing the writ petition (09.03.2006), citing IPCL's delay in approaching the court. The court drew strength from the judgment in Lipton India Limited & Ors. case, which observed that while the writ petition was entertained due to discrimination, the relief was restricted to what could have been claimed in a suit.

Conclusion:
The Supreme Court dismissed the appeal regarding the maintainability of the writ petition and the quashing of the clauses dealing with loss of transportation charges. However, it restricted the refund to a period of three years from the date of filing the writ petition. The court directed that the refund should be made within two months, failing which it will carry interest at 8 percent per annum from the date it became due. If the refund is made within the stipulated time, no interest will be levied. The appeals were allowed in these terms, with parties bearing their own costs.