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TMI Blog2023 (2) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... nto 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. - Sanjay Kishan Kaul And Abhay S. Oka , JJ. JUDGMENT SANJAY KISHAN KAUL , J. 1. M/s Gas Authority of India Limited (for short GAIL ), the appellant herein, is a Government of India undertaking, incorporated on 16.08.1984, engaged primarily in the activity of providing services for the utilisation of natural or associated gas. Indian Petrochemicals Corporation Ltd. (for short IPCL ), respondent no.1 herein, formerly a public sector undertaking, is engaged in the manufacture of petrochemicals. It ceased to be a public undertaking w.e.f. June 2002, when 26% of its shares were sold to Reliance Petroinvestments Ltd. in line with the Government s disinvestment policy.1 Respondent no. 2 is a shareholder of IPCL and respondent no. 3 is the Union of India. Background 2. On 01.01.1999, the Ministry of Petroleum and Natural Gas, Government of India (hereinafter referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract inter se the parties was signed on 09.11.2001, the challenge was laid to Clauses 10.01 and 4.04 of the contract only on 09.03.2006, i.e. after five years. In this interregnum, IPCL ceased to be a public sector undertaking. 6. The other development is the decision of GAIL to stop levying loss of transportation charges in May 2016. Thus, the total amount collected under the aforesaid clauses is stated to be Rs. 134 crores before it was quashed by the Single Judge and sustained by the Division Bench. 7. In order to understand the contractual context, the relevant two clauses are extracted below: 4.04 The BUYER, in addition to price of GAS mentioned in Article 10, shall pay to the SELLER Rs. 4,16,700/- (Rupees Four Lakh Sixteen Thousand and Seven Hundred) towards fortnightly service charges on account of deployment of manpower by the SELLER for terminal operation and routine maintenance along with applicable taxes / levies thereon, connected with delivery of Gas at the Point of Onward Delivery and receipt of Gas returned by the BUYER at the Point of Return Delivery. The above service charges is exclusive of any material requirements like tools, tackles etc. and also the spares / i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or to be levied in future. By the Central or State Government of Municipality or any other local body or bodies payable on purchase of Gas from ONGCL/Other Producer(s) by the SELLER or on sale from SELLER to the BUYER or on return of the balance quantity of GAS after processing by the BUYER to the SELLER and these shall be borne by the BUYER over and above the aforesaid price. (Emphasis supplied) 8. IPCL challenged the aforesaid clauses primarily on the ground that they were contrary to the 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. Further, the allocation letter by the MoPNG mandated that transportation of gas to IPCL s plant had to be through IPCL s own pipelines from the ONGC Metering Station. Thus, it was contended that recovery of loss of transportation charges by GAIL was arbitrary and unfair. IPCL did not have the option to transport gas through GAIL s pipelines due to the mandate of the contract and the allocation letter. IPCL also challenged the aforesaid clauses on the ground of unequal bargaining power. It was contended that GAIL occupied a monopolistic position in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges following the signing of the contract could not extend the period of limitation. 12. He stated that even if the petition was maintainable, the clauses could not have been invalidated by the High Court. It was pointed out that there were no differences in the bargaining positions of the two organisations where one could be said to be more powerful. Both organisations were public sector enterprises at the relevant time. The contract was stated to be carefully negotiated and reflected the mutual consensus between the parties, as was evident from the inter se communications at the pre-contractual stages. Thus, the clauses could not thus be treated as arbitrary or unfair. IPCL s and the High Court s reliance on Central Inland Water Transport Corporation Limited v. Brojonath Ganguly (1986) 3 SCC 156 was misplaced as a principle applied to a service contract between the employer and the employee could not be imported to a commercial contract, and that too between two public sector enterprises. The alternative plea was that even were the impugned judgments to be sustained, the amount of refund could not be granted beyond the period of limitation, i.e. three years after the signing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aramshi Anr. v. Kotak Investment Advisors Ltd. Anr. (2021) 10 SCC 401 , this Court considered the bargaining capacity of contracting parties in a commercial dispute as there was a seemingly unfair or unreasonable clause in the contract. Discussion : 17. We have considered the arguments and counter arguments of the counsel for the parties, and also examined 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. 18. In our view, the dispute is within the following parameters. First, whether the writ petition filed by IPCL challenging Clauses 4.04 and 10.01 of the contract was maintainable. Second, assuming such a petition was maintainable, whether the High Court could have invalidated the aforementioned clauses on the ground of unequal bargaining power and arbitrariness / unfairness. Third, whether monetary relief in the form of refund could have been granted after the order dated 19.09.2006 was passed. 19. Although the dispute arises from a commercial contract, we find that the writ petition challenging the clauses was maintainable. It is not disputed that GAIL is a Public Sector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of the Gandhar Plant, IPCL had very little choice but to enter into the contract. 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. 22. In fact, the contractual exercise of providing such a clause runs contrary to every commercial and common sense and is manifestly arbitrary, as IPCL is not being charged under any general terms but for a specific purpose. This purpose cannot exist in the contract in view of the master authority, i.e., the Union of India, providing to the contrary. 23. 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 mus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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