2019 (2) TMI 546 - SC - Indian Laws

Gas Distribution Network (GDN) - Projects under implementation - deemed authorisation under the new provision - Vires of the Regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 - grant of authorisation of projects in Udaipur and Jaipur - laying down of Gas Network pipelines. Whether the Board was justified in rejecting the application filed by the appellant under Section 17 of the Act of 2006 read with Regulation 18 of the Regulations of 2008, after the provisions contained in Section 16 of the Act of 2006 came into force on 12.07.2010 granting deemed authorisation to those entities which had inter alia started laying and building local Natural Gas Distribution Network prior to the appointed date, i.e. 01.10.2007? Held that - The application of the appellant has been rejected primarily on the ground of noncompliance of clause (d) of Regulation 18(2) of the Regulations of 2008. It was incumbent on the Board to take into consideration various factors as specified in clauses (a) to (j) of Regulation 18(2) of the Regulations of 2008, and the same has to be considered in the back drop of the fact that the press note was issued on 30.10.2007 to stop all incremental activities and as such it was necessary to consider whether the appellant could have been faulted for noncompliance of clause (d) of Regulation 18(2), and whether it was a mandatory requirement or merely one of the factors to be considered along with all the other factors. Other relevant aspects as contained in the other clauses have not been adverted to by the Board while deciding the application of the appellant, which were also equally significant. It was necessary to consider whether the appellant is compliant of various other factors as provided in clauses (a) to (j) of Regulation 18(2) of the Regulations of 2008. The noncompliance, if any, of clause (d) ought to have been considered in the light of the press note dated 30.10.2007 which required stopping of all incremental activities. Besides depositing the sum of ₹ 2 Crores immediately towards commitment fee, the appellant had thereafter incurred mammoth expenditure after it was successful in the bids, which aspect has not been considered by the Board while deciding the application of the appellant. In our considered view, the same should not have normally been over looked. Besides the same, in the factual circumstances of the present case, the provision of deemed authorisation contained in Proviso (ii) to Section 16 had also been enforced on 12.07.2010 and it was necessary for the Board to have considered whether it was a case where only certain safeguards were required to be observed in view of the deemed authorisation . It was also necessary for the Board to have considered all these aspects and thereafter to have decided the application relating to authorisation/conditions to be imposed under the Act, if any, required. There was illegality committed by the Board in deciding the application of the appellant while passing the order dated 19.05.2011, and as such the same deserves to be quashed - Appeal allowed.

Summary

Issues Involved:
1. Validity of the withdrawal of the No Objection Certificate (NOC) by the Government of Rajasthan.
2. Rejection of the appellant's application for authorization by the Petroleum and Natural Gas Regulatory Board (PNGRB).
3. Challenge to the validity of Regulation 18 of the Petroleum and Natural Gas Regulatory Board Regulations, 2008.

Issue-Wise Detailed Analysis:

1. Validity of the Withdrawal of the No Objection Certificate (NOC) by the Government of Rajasthan:
The appellant company, engaged in setting up Natural Gas Distribution Networks, was granted an NOC by the Government of Rajasthan on 27.03.2006 for the cities of Udaipur and Jaipur. The appellant had complied with the conditions, deposited ?2 Crore as commitment fees, and commenced work on the project. However, on 18.05.2011, the Government of Rajasthan withdrew the NOC and forfeited the commitment fees, citing non-fulfillment of conditions. The Supreme Court found that the Government's decision was "highly unfair and unjust" as the appellant's reply to the notice was not considered. Thus, the order dated 18.05.2011 was quashed.

2. Rejection of the Appellant's Application for Authorization by the PNGRB:
The appellant applied for authorization under the Act of 2006, which came into force on 01.10.2007, with Section 16 (relating to authorization) effective from 12.07.2010. The PNGRB rejected the application on 19.05.2011, stating non-compliance with Regulation 18(2)(d) of the Regulations of 2008, which required 25% physical and financial progress before the appointed date. The Supreme Court noted that Regulation 18(2) uses the term "may take into consideration," implying the criteria are not mandatory but relevant. The Board failed to consider other significant factors and the peculiar factual position, including the appellant's substantial investment and the "deemed authorization" provision under Section 16. The rejection was deemed illegal, and the order was quashed.

3. Challenge to the Validity of Regulation 18 of the Petroleum and Natural Gas Regulatory Board Regulations, 2008:
The appellant challenged Regulation 18 as ultra vires the Act of 2006. The Supreme Court did not explicitly rule on the validity of Regulation 18 but emphasized that the Board should consider all relevant factors and the "deemed authorization" provision. The Board's decision should not solely rely on Regulation 18(2)(d) but also account for the appellant's compliance with other criteria and the substantial progress made before the press note dated 30.10.2007, which halted incremental activities.

Conclusion:
The Supreme Court quashed the orders dated 18.05.2011 by the Government of Rajasthan and 19.05.2011 by the PNGRB. The Board was directed to reconsider the appellant's application within four weeks, taking into account the "deemed authorization" provision and other relevant factors, after providing an opportunity for a hearing. The appellant was allowed to submit fresh written submissions within ten days. No orders as to costs were made.