9911796707
TMI Blog2004 (3) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... ng referred to as "Gujarat Act"), which came into force w.e.f. 19th December, 2000. The object of the enactment is to provide for regulation of transmission, supply and distribution of gas, in the interests of general public and to promote gas industry in the State, and for that purpose, to establish Gujarat Gas Regulatory Authority and for matters connected therewith and incidental thereto. The term "Gas" has been defined in the Gujarat Act under Section 2(h) as follows:- "Gas" means a matter in gaseous state which predominantly consists of methane." 2. The State legislature passed the said enactment by tracing its legislative competence under Entry No. 25 of List II of the Seventh Schedule of the Constitution. The Parliament has passed various enactments under Entry No. 53 of List I dealing with the matters of petroleum and petroleum products. The Entry No. 53 of List I of the Seventh Schedule reads as follows:- "Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be dangerously inflammable." 3. Entry No. 25 of List II rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them. The Association of Natural Gas Consuming Industries of Gujarat and others filed Civil Writ Petition before the High Court of Gujarat wherein they challenged the legislative competence of the Union to make laws on "gas and gas works." Therefore, the question arose whether "Natural Gas" is a Union subject or State subject and whether the State of Gujarat and the other States have the legislative competence to make laws on the subject of "Natural Gas." it is in this background, the following questions were referred to this Court under Clause 1 of Article 143 of the Constitution of India: (1) Whether natural gas in whatever physical form including Liquefied Natural Gas (LNG) is a Union subject covered by Entry 53 of List I and the Union has exclusive legislative competence to enact laws on natural gas. (2) Whether States have legislative competence to make laws on the subject of natural gas and Liquefied Natural Gas under Entry 25 of List II of the Seventh Schedule to the Constitution. (3) Whether the State of Gujarat had legislative competence to enact Gujarat Gas (Regulation of Transmission, Supply and Distribution) Act 2001. 6. After the rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Entry 25 of List II. It was further contended that the provisions of the Gujarat Act seek to trench upon the field reserved for the Union. It was submitted that the Gujarat Act confers authority upon the State Government to regulate the business of distribution and transmission of gas and the provisions of that Act, ex facie, provide for taking over the mineral oil fields and intermeddle in the activities relating to the drilling for oil, etc. It was also pointed out that some other provisions of the said enactment, inter-alia, deal with the licensing and distribution of gas and these provisions are ultra vires of the legislative competence of the State. 8. The learned Counsel for the State of Gujarat, Shri Ashok Desai contended that the expression "gas" used in Entry 25 of List II would include all types of gases and, therefore, any legislation related to "gas and gas works" is perfectly within the legislative competence of the State. It was submitted that in Calcutta Gas Company (Proprietary) Ltd. v. State of West Bengal and Ors. , the scope and ambit of Entry 25 of List II had been authoritatively pronounced by this Court and this Court held that the fie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laces like Pingri, Thangakhat, Chubua, Jorajan, gases were extracted not in association with any other substance and it is distinct from petroleum and oil. It was also pointed out that in a federal structure like ours, a natural resource like gas is fundamental to the very economic existence and prosperity of a State and consistent with the principles of federalism, the State shall not be denied the opportunity to exploit the natural resources. It was submitted, relying on the observation in Sir Byramji Jeejibhai v. Province of Bombay (1939) 3 FLJ (HC) 25 at 31, that the Courts must, if possible, reconcile conflicting items in the Central and Provincial Lists before falling back to the non obstante clause in Section 100 of the Government of India Act, and in applying that principle the Court may restrict the general words of the Federal list so as not to nullify a particular power contained in the Provincial list. 11. Learned senior Counsel Mr. P. Chidambaram appearing for the Common Carriers Company contended that any industrial activities connected to "gas and gas works" are beneficial to the State and the State must be given power to legislate on the subject. The expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gas Regulatory Authority. The authority shall consist of a Chairperson and two other members to be appointed by the State Government. The qualifications and the mode in which vacancies are to be filled up are prescribed under Section 8 and 9 of the Act. The functions and powers of authority are mentioned in Chapter IV, which include, inter alia, the function of regulating transmission, supply and distribution of gas, to promote gas industry in the State in accordance with the direction given by the State Government, to give directions to a licensee for ensuring compliance of terms and conditions of a licence held by him. Under Section 18 of the Act, the Authority, for the purposes of any inquiry under the Act, have been given powers of a civil court. Chapter VI of the Act specifically says that no person other than a specified company and a person referred to in Sub-section (1) of Section 55 shall carry on the business of transmission in the State and that subject to the rules, if any, a specified company shall carry on the business of transmission in the State. Section 25(2) says that no person shall lay pipelines for distribution in the State unless he is a licensee. Chapter IX o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. XIV of 1938 1939 ELR 18 at page 42-44 observed: "A grant of the power in general terms, standing by itself, would no doubt be construed in the wider sense, but it may be qualified by other express provisions in the same enactment, by the implication of the context and even by considerations arising out of what appears to be the general scheme of the Act." 16. It was further observed : ".....an endeavour must be made to solve it, as the Judicial Committee have said by having recourse to the context and schemes of the Act, and a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary modifying the language of the one by that of the other. If indeed such a reconciliation should prove impossible, then, and only then, will the non-obstante clause operate and the federal power prevail." 17. Although Parliament cannot legislate on any of the Entries in the State List, it may do so incidentally while essentially dealing with the subject coming within the purview of the Entry in the Union list. Conversely, State Legislature also while making legislation may incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or in that." Their Lordships agree that this passage correctly describes the grounds on which the rule is founded, and that it applies to Indian as well as to Dominion legislation." 20. The learned counsel for the State of Gujarat submitted that Entry 25 of List II of the Seventh Schedule gives power to the State Legislature to make legislation on any subject relating to gas and gas-works and that this was considered by this Court in Calcutta Gas Company (Proprietary) Limited (supra) and the Act passed by the State legislature, namely, the Oriental Gas Company Act, 1960 was held to be constitutionally valid. The brief facts of the case are : The Oriental Gas Company was registered in England. It was empowered to lay pipes in Calcutta and its suburbs and to excavate the streets for the said purpose. A firm carrying a business in India purchased 98 per cent of the shares of the said Oriental Gas Company and floated a limited liability company named the Calcutta Gas Company (Proprietary) Limited. By an agreement, the Calcutta Gas Company was appointed as the Manager of the Oriental Gas Company, The West Bengal Legislature passed an Act whereby the State Government took ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of List I of the Seventh Schedule would take in its compass the natural gas or its derivative forms. The above question could be considered by properly understanding these terms. The parties on either side produced the extracts from various authoritative books on the subject. 23. In Kirk-Othomer Encyclopedia of Chemical Technology, (Third Edition], Vol. 11 page 630, 'Natural gas' is defined as a naturally occurring mixture of hydro-carbon and non-hydrocarbon gases found in the porous geologic formations beneath the earth's surface, often in association with petroleum. 24. To obtain a marketable product, the raw natural gas flowing from gas or oil wells must be processed to remove water vapor, inert or poisonous constituents, and condensable hydrocarbons. The processed gas is principally methane, with small amounts of ethane, propane butane, pentane, carbon dioxide and nitrogen. This gas can easily be transported from the producing areas to the market in underground pipelines under pressure or liquefied at low temperatures and transported in specially designed ocean-going tankers. 25. Natural gas is found in areas of the earth that are covered with sedimentary rocks. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is quite varied and, presumably, was similarly varied when the petroleum precursors were formed. 31. As per 'The New Book of Popular Science' Vol. 2, petroleum is an oily, inflammable, liquid made up mostly of hydrocarbons - compounds containing only hydrogen and carbon. The hydrogen content of petroleum ranges from 50 per cent to 98 per cent. The rest is made up chiefly of organic compounds containing oxygen, nitrogen, or sulphur. 32. According to a widely held theory, the remains of countless small marine animals and plants dropped to the ocean bottom and were covered over by mud. Many layers of mud and plant and animal remains accumulated in the course of time. These sediments were subjected to great pressure and heat, and were often squeezed and distorted as the earth's crust moved. Gradually they were converted into layers of sedimentary rock. The plant and animal remains contained within them were transformed into petroleum and natural gas. The details of this transformation are not quite clear. 33. Gas and oil are found in huge subterranean caverns. They both occur in minute pores of such rocks as sandstone and limestone. They are held captive under great pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objected, was the gas contained in a cap situated on top of the petroleum and also any gas which was in solution in the petroleum under his land or might be withdrawn from under his land. Therefore, the problem arose when they proceeded to bore for oil, but before they reached the container, the appellant, maintaining that their working would remove his gas, whether free or in a solution, applied for, and obtained, an interim injunction inhibiting them from penetrating into the chamber. At the same time, he brought an action claiming a declaration that he was the owner of the natural gas within his lands . It was decided that although the right to work the petroleum granted in the lease to the second respondent was a right which had been in the original conveyance, the absence of such a clause did not abrogate or limit the powers of the respondent. The second respondent had direct grant of petroleum whereas the appellant had merely such residual rights as remained in him subject to the grant to the respondents and it was held that respondents were under no obligation to conserve the free gas within the appellant's land with the consequent denial of their right to recover the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislative practice of the State which has conferred the power." In Walace Brothers & Co. Ltd. v. Commissioner of Income-tax, Bombay City and Bombay Suburban District, Lord Uthwatt observed : "Where Parliament has conferred a power to legislate on a particular topic it is permissible and important in determining the scope and meaning of the power to have regard to what is ordinarily treated as embraced within that topic in the legislative practice of the United Kingdom. The point of the reference is emphatically not to seek a pattern to which a due exercise of the power must conform. The object is to ascertain the general conception involved in the words in the enabling Act." 40. A survey of the various legislations on the topic would show that the term 'petroleum' or 'petroleum products' has been given a wide meaning to include natural gas and other similar products. 41. In the Pipelines Act, 1962 of the United Kingdom, 'petroleum' has been defined as follows : "Petroleum includes any mineral oil or relative hydrocarbon and natural gas existing in its natural condition in strata, whether or not it has undergone any processing; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; 3(n) "petroleum product" means any commodity made from petroleum or natural gas and shall include refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas gasoline, naphtha, distillate, gasoline, kerosene, waste oil, blended gasoline, lubricating oil, blends or mixture of oil with one or more liquid products or by-products derived from oil condensate, gas or petroleum hydrocarbons, whether herein enumerated or not." 5. The Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 2. (c) "petroleum" has the same meaning as in the Petroleum Act, 1934, and includes natural gas and refinery gas." 6. The Oil Industry (Development) Act, 1974 2. (h). "mineral oil" includes petroleum and natural gas." 2. (m). "petroleum product" means any commodity made from petroleum or natural gas and includes refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude "oil residuum, casing head gasoline, natura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petroleum product and part of mineral oil resource, which needs to be regulated by the Union. 46. Natural gas being a petroleum product, we are of the view that under Entry 53 List I, Union Govt. alone has got legislative competence. Going by the definition of gas as given in Section 2(g) of the Gujarat Act wherein "gas" has been defined as "a matter of gaseous state which predominantly consists of methane", it would certainly include natural gas also. We are of the view that under Entry 25 List II of the Seventh Schedule, the State would be competent to pass a legislation only in respect of gas and gas-works and having regard to collocation of words 'gas and gas works', this Entry would mean any work or industry relating to manufactured gas which is often used for industrial, medical or other similar purposes. Entry 25 of List II, as suggested for the States, will have to be read as a whole. The expressions therein cannot be compartmentally interpreted. The word 'gas' in the Entry will take colour from other words 'gasworks'. In Ballantine's Law Dictionary, 3rd edition, 1969 'Gas Works' is defined as "a plant for the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
