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TMI Blog2016 (4) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to provide RLNG at viable prices to the existing and new customers alike. It is further clear that it is nearly impossible to predict or even control LNG prices, as the same are controlled by global market forces. The only way to have any semblance of control over the prices of RLNG was to pool the prices of RLNG procured by the off-takers under long term contracts - it becomes clear from a perusal of the documents produced on record that the executive policy decision dated 06.03.2007 to pool the price of RLNG was arrived at after elaborative discussions between representatives of Qatar, India, IOC, BPCL, GAIL, ONGC and other experts in the field. It was an informed decision taken in the interest of the public at large. There being no evidence to suggest that the impugned policy direction is illegal, arbitrary, unreasonable or otherwise violative of Article 14 of the Constitution of India, we find no reason to interfere with the same - the impugned policy decision dated 06.03.2007 does not suffer from any infirmity in law and is hereby upheld - Appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... n metric british thermal unit (MMBTU). 5.On 06.03.2007, the Central Government issued the impugned policy directive to Petronet in the following terms: "1. The question of prices to be charged for RLNG from different customers has been under consideration of the Government. After considering existing practices and to avoid loading high cost of additional RLNG being made available to the prospective customers, it has been decided, after examination of all aspects, in public interest, that the gas prices being charged on supply of RLNG procured under long term contracts should be on a non discriminatory basis and uniform pooled prices should be charged for all the existing and new customers. 2. You are advised accordingly and requested to give effect to the same immediately." The letter was authenticated by the Under Secretary to the Government of India. 6.In pursuant to the above communication dated 06.03.2007, letters dated 19.03.2007 and 12.04.2007 were sent from IOCL, BPCL and GAIL to Essar Steel, informing it that in view of the policy decision of the Government to pool RLNG prices, the price of gas under the contract would be revised and increased from ₹ 135 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -discriminatory basis and thereby has put under one denomination, consumers of long term contracts and future consumers. Parties to the contract cannot bind Union of India (third party) by terms of contract…Policy of Union of India is not bound by contractual terms of two private parties, on the contrary, contractual terms will be subject to policy decision by Union of India…… As a cumulative effect of the aforesaid facts, reasons and judicial pronouncement, the impugned decision taken by the Union of India dated 06.03.2007, is a policy decision for pooling price of Regasified Liquefied Natural Gas. Union of India is competent to take this policy decision and the same is neither arbitrary, nor it is unjust, nor violative of fundamental rights, nor violative of constitutional rights nor the same is violative of statutory rights of the petitioners and the petitioners have failed to establish that they have borne the burden of increase in price of Regasified Liquefied Natural Gas without passing the same to their further consumers, hence, are not entitle to refund. For getting refund, the aforesaid aspect ought to be established by the petitioners, on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic notice. 67. The stand taken by DDA itself is that the relationship between the parties arises out of the contract. The terms and conditions therefore were, therefore, required to be complied with by both the parties. Terms and conditions of the contract can indisputably be altered or modified. They cannot, however, be done unilaterally unless there exists any provision either in contract itself or in law. Novation of contract in terms of Section 60 of the Contract Act must precede the contract making process. The parties thereto must be ad idem so far as the terms and conditions are concerned. If DDA, a contracting party, intended to alter or modify the terms of contract, it was obligatory on its part to bring the same to the notice of the allocate. Having not done so, it, relying on or on the basis of the purported office orders which is not backed by any statute, new terms of contract could thrust upon the other party to the contract. The said purported policy is, therefore, not beyond the pale of judicial review. In fact, being in the realm of contract, it cannot be stated to be a policy decision as such." 11. The learned senior counsel further contends that executive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n benefitting a single person, namely Ratnagiri Power Project. Thus, this is on a worse footing than single person legislation, as it is a single person executive action. The learned senior counsel places reliance on the decision of a Constitution Bench of this Court in support of the above legal plea urged by him in the case of Ram Prasad Narayan Sahi v. The State of Bihar AIR 1953 SC 215 , wherein it was held as under: "There have been a number of decisions by this court where the question regarding the nature and scope of the guarantee implied in the equal protection clause of the Constitution came up for consideration and the general principles can be taken to be fairly well settled. What this clause aims at is to strike down hostile discrimination or oppression or inequality. As the guarantee applies to all persons similarly situated, it is certainly open to the legislature to classify persons and things to achieve particular legislative objects; but such selection or differentiation must not be arbitrary and should rest upon a rational basis, having regard to the object which the legislature has in view. It cannot be disputed that the legislation in the present case has si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ynamide India Ltd (1987) 2 SCC 720 that: "7.The third observation we wish to make is, price fixation is more in the nature of a legislative activity than any other. It is true that, with the proliferation of delegated legislation, there is a tendency for the line between legislation and administration to vanish into an illusion. Administrative, quasi-judicial decisions tend to merge in legislative activity and, conversely, legislative activity tends to fade into and present an appearance of an administrative or quasi-judicial activity. Any attempt to draw a distinct line between legislative and administrative functions, it has been said, is 'difficult in theory and impossible in practice'. Though difficult, it is necessary that the line must sometimes be drawn as different legal rights and consequences may ensue. The distinction between the two has usually been expressed as 'one between the general and the particular'. 'A legislative act is the creation and promulgation of a general rule of conduct without reference to particular cases; an administrative act is the making and issue of a specific direction or the application of a general rule to a particular c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l character when it relates to acquisition or requisition of goods or property from individuals and it becomes necessary to fix the price separately in relation to such individuals. Such situations may arise when the owner of property or goods is compelled to sell his property or goods to the Government or its nominee and the price to be paid is directed by the legislature to be determined according to the statutory guidelines laid down by it. In such situations the determination of price may acquire a quasi-judicial character. Otherwise, price fixation is generally a legislative activity. We also wish to clear a misapprehension which appears to prevail in certain circles that price-fixation affects the manufacturer or producer primarily and therefore fairness requires that he be given an opportunity and that fair opportunity to the manufacturer or producer must be read into the procedure for price-fixation. We do not agree with the basic premise that price fixation primarily affects manufacturers and producers. Those who are most vitally affected are the consumer public. It is for their protection that price-fixation is resorted to and any increase in price affects them as serious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Governor of the State concerned, as the case may be [Articles 77(1) and 166(1)]. Orders and other instruments made and executed in the name of the President or the Governor of a State, as the case may be, are required to be authenticated in such manner as may be specified in rules to be made by the President or the Governor, as the case may be [Articles 77(2) and 166(2)]. 52. ……Article 166(1) requires that all executive action of the State Government shall be expressed to be taken in the name of the Governor. This clause relates to cases where the executive action has to be expressed in the shape of a formal order or notification. It prescribes the mode in which an executive action has to be expressed. Noting by an official in the departmental file will not, therefore, come within this article nor even noting by a Minister. Every executive decision need not be as laid down under Article 166(1) but when it takes the form of an order it has to comply with Article 166(1). Article 166(2) states that orders and other instruments made and executed under Article 166(1), shall be authenticated in the manner prescribed. While Clause (1) relates to the mode of express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ratnagiri Power Project. There was nothing to say that it was empowered to restructure the prices of gas as well. The Rules of Business requires that executive action is taken in a manner in accordance with the law. The learned senior counsel further draws our attention to the provisions of the Government of India (Transaction of Business) Rules, 1961 (hereinafter referred to as the "Business Rules"), extracted as under: "3. Disposal of Business by Ministries.- Subject to the provisions of these Rules in regard to consultation with other departments and submission of cases to the Prime Minister, the Cabinet and its Committees and the President, all business allotted to a department under the Government of India (Allocation of Business) Rules, 1961, shall be disposed of by, or under the general or special directions of, the Minister-in-charge. 6. Committees of the Cabinet.- (1) There shall be Standing Committees of the Cabinet as set out in the First Schedule to these Rules with the functions specified therein. The Prime Minister may from time to time amend the Schedule by adding to or reducing the numbers of such Committees or by modifying the functions assigned to them. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification for fixation of prices under Section 15 of the Act. As has been pointed out by the State the notification was intended to apply only to respondent Glindia Ltd. as the supplies of cream and paneer were being made to the appellant Central Fairy Farm by the Glindia Ltd. alone." The learned senior counsel further contends that change in policy can be no defence for breaching contract. Similarly, by mere issuance of a policy directive, the government cannot direct parties to breach the terms of the contract negotiated among themselves. As long as the policy directs variation in the existing arrangements or destroys contracts, the same is violative of Article 14 of the Constitution of India. 21. On the other hand, Mr. Ranjit Kumar, learned Solicitor General for India contends that the price of LNG is linked directly to the price of crude oil, the appellants are ignoring the benefit they were getting as a result of the efforts by the Government of India. 22. The learned Solicitor General contends that a policy cannot be vitiated only on the ground of change. Reliance in placed on the decision of a Three Judge bench of this Court in the case of Shimnit Utsch India Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes it really satisfy the test of reasonableness." The learned Solicitor General has also sought to explain the reason for the change in policy. He has taken us through the history of the two Sale Purchase Agreements between Petronet and RasGas. On the First Agreement, it has been stated in the Reply filed by Petronet as under: "3.3……The first LNG SPA was signed on 31.07.1999 for supply of 5 MMTPA of LNG for a period of 25 years commencing from January 2004. Originally, the foreign currency component (FCC) of the LNG price under the First LNG SPA was intended to be market driven and hence variable. However, Respondent No.1 took up the issue with the State of Qatar and brought about a fixed FCC for a period of five years ending 31.12.2008, whereby FCC under First LNG SPA was fixed at USD 2-3 upto 31.12.2008 based on crude price of USD 20 per barrel. This has been agreed between RasGas and the answering respondent by way of a Side Letter dated 26.09.2003 to the First LNG SPA. A new price regime would come into effect from 01.01.2009 under which the LNG price would have a link to the market prices, and would vary each month. 3.4 The answering respondent has an ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-GAIL in Civil Appeal No. 4610 of 2009 contends that not only Ratnagiri Power Limited, but several other Public Sector Undertakings would benefit as a result of the pooling of prices. Thus, it is the larger public interest which must be considered. 24. The learned senior counsel further contends that the claim of the appellants cannot be sustained in law as they have already passed the burden of the increase in the price on to their customers. The learned senior counsel places reliance on the decision of this Court in the case of Sahakari Khand Udyog Mandal Ltd. v. CCE & Customs (2005) 3 SCC 738 ,wherein the concept of unjust enrichment was elaborated as under: "Stated simply, 'Unjust enrichment' means retention of a benefit by a person that is unjust or inequitable. 'Unjust enrichment' occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else. The doctrine of 'unjust enrichment', therefore, is that no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of 'unjust enrichment' arises where retention of a benefit is considered co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to take a policy decision in public interest. This policy decision has been taken after taking into consideration all relevant factors and is in consonance with the principles enshrined in Article 14 of the Constitution of India. The learned ASG further contends that the uniform price pooling policy is within the executive powers vested with the Union of India under Articles 73 and 246 read with Entry 53 of List I of Seventh Schedule of the Constitution of India, as also Rules 2 & 3 (1) and Items 2, 6 and 8 in the Second Schedule to the Government of India Allocation of Business Rules, 1961. The learned Additional Solicitor General further contends that there is no vested right in price, that it cannot be raised at all. It was infact only the intervention of the government that ensured availability of the natural resources at a lower rate. The policy also provides for a level playing field and a non discriminatory regime. 27. We have heard the learned counsel appearing on behalf of the parties. The main issue which arises for our consideration is whether impugned policy decision dated 06.03.2007 is bad in law, and if so, whether the appellants are entitled to any refund of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terference under Article 136 or not. Further, this Court neither has the jurisdiction nor the competence to judge the viability of such policy decisions of the Government in exercise of its appellate jurisdiction under Article 136 of the Constitution of India. In the case of Arun Kumar Agrawal v. Union of India (2013) 7 SCC 1, this Court has further held as under: "This Court sitting in the jurisdiction cannot sit in judgment over the commercial or business decision taken by parties to the agreement, after evaluating and Assessing its monetary and financial implications, unless the decision is in clear violation of any statutory provisions or perverse or for extraneous considerations or improper motives. States and its instrumentalities can enter into various contracts which may involve complex economical factors. State or the State undertaking being a party to a contract, have to make various decisions which they deem just and proper. There is always an element of risk in such decisions, ultimately it may turn out to be a correct decision or a wrong one. But if the decision is taken bona fide and in public interest, the mere fact that decision has ultimately proved to be a wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court to go into the matter afresh and, in a way, sit in appeal over such a policy decision." (emphasis laid by this Court) A similar sentiment was echoed by a Constitution Bench of this Court in the case of Peerless General Finance & Investment Co. Ltd. v. Reserve Bank of India (1992) 2 SCC 343 , wherein it was observed as under: "Courts are not to interfere with economic policy which is the function of experts. It is not the function of the Courts to sit in Judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts." A perusal of the above mentioned judgments of this Court would show that this Court should exercise great caution and restraint when confronted with matters related to the policy regarding commercial matters of the country. Executive policies are usually enacted after much deliberation by the Government. Therefore, it would not be appropriate for this Court to question the wisdom of the same, unless it is demonstrated by the aggrieved persons that the said policy has been enacted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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…… Natural gas being a petroleum product, we are of the view that under Entry 53 List I, Union Govt. alone has got legislative competence." (emphasis laid by this Court) Thus, by virtue of Article 73 of the Constitution of India read with Entry 53 of List I, the Union has the power to legislate and take policy decisions in relation to the matters pertaining to mineral oil resources and inflammable substances, which includes RLNG. Further, as has been correctly recorded in the impugned judgment and order, there is no existing legislative provision as far as fixing of the price of RLNG is concerned. Thus, the executive of the Union of India is well within its right to exercise its powers under the Constitution to take such decisions by way of policy decisions. 33. The objective of the impugned policy decision dated 06.03.2007 is to unify the prices of RLNG on a non-discriminatory basis so that there is no distinction between old customers and new customers, as far as prices of RLNG in the long te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above paragraph would show that the respondent-Union of India passed the impugned policy decision dated 06.03.2007 in the larger public interest, keeping in view the need to provide RLNG at viable prices to the existing and new customers alike. It is further clear that it is nearly impossible to predict or even control LNG prices, as the same are controlled by global market forces. The only way to have any semblance of control over the prices of RLNG was to pool the prices of RLNG procured by the off-takers under long term contracts. 34. We have perused the documents marked as Annexures R-3 to R-15, which are the letters containing the communication between the government and RasGas. Annexure R-6 is the minutes of meeting dated 05.06.2002 regarding finalization of the General Sale Purchase Agreement, held in the office of the Secretary, Ministry of Petroleum and Natural Gas. The meeting was attended by representatives of Ministry of Petroleum and Natural Gas, ONGC, IOCL, BPCL, GAIL and Petronet. One of the points discussed in the meeting was: "It was also recognized that there is a need for Government to provide certain relief for LNG so that it can be competitive and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in their entirety in a proper perspective. 37. RLNG, being a petroleum product, is an essential commodity for the purpose of the Essential Commodities Act, 1955. In the case of M/S Sitaram Sugar Co. Ltd. v. Union of India (1990) 3 SCC 223, a Constitution Bench of this Court deliberated as to who has the power to fix prices of essential commodities. It held as under: "The question of fixation of a fair and reasonable price for goods placed on the market has come up for consideration of Parliament and Courts in different contexts. Price fixation, it is common ground, is generally a legislative function. But Parliament generally provides for interference only at a stage where in pursuance of social and economic objectives or to discharge duties under the Directive Principles of State Policy, control has to be exercised over the distribution and consumption of the material resources of the community. Thus while Parliament has enacted the Essential Commodities Act, it has left it to the discretion of the Executive to take concrete steps for fixing the prices of essential commodities as and when necessity arises, by promulgating Control Orders in exercise of the powers vested in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utive, as opposed to legislative, powers-as, for example, to requisition property or to issue a licence-and delegates those powers generally, then any instructions which he gives to his delegates may be legislative". Where an authority to whom power is delegated is entitled to subdelegate his power, be it legislative, executive or judicial, then such authority may also give instructions to his delegates and these instructions may be regarded as legislative." On the power of delegated legislation, it was held as under: "47. Power delegated by statute is limited by its terms and subordinate to its objects. The delegate must act in good faith, reasonably, intra vires the power granted, and on relevant consideration of material facts. All his decisions, whether characterised as legislative or administrative or quasijudicial, must be in harmony with the Constitution and other laws of the land. They must be "reasonably related to the purposes of the enabling legislation"……" Accepting the interpretation of 'legislative function' advanced by the learned senior counsel on behalf of the appellants, would be giving it too narrow and restrictive a meaning. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all other possible alternatives to reduce the price of RLNG, so as to make it viable for the new entrants in the market to buy it and run their projects in a feasible manner in the larger public interest. The consumers of RLNG though long term contracts are a class by themselves, for the purpose of Article 14 of the Constitution of India. The impugned policy decision dated 06.03.2007 was to apply to all the players within this class uniformly and across the board. Thus, the contention that the appellants have been discriminated against, or that the impugned policy decision was taken in an arbitrary manner cannot be accepted as the said contention is wholly untenable in law. Since the legality of the executive decision dated 06.03.2007 has been upheld, the question of refund of the amount of losses suffered by the appellants as a result of increase in the price of RLNG in their contract as urged on their behalf, does not arise for consideration at all by us. 40. There being no evidence to suggest that the impugned policy direction is illegal, arbitrary, unreasonable or otherwise violative of Article 14 of the Constitution of India, we find no reason to interfere with the same. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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