N Writ Petition Crl No 247 of 1990
Under Article 32 of the Constitution of India
SS Ray Vijay Bahuguna SK Gambhir Sunil Kr
Jain and Vijay Hansaria for the Petitioner
Ashok Desai Solicitor General P parmeshwaran and A Subba Rao for the Respondents
The order of detention was issued by Nisha Sahai Achuthan Joint Secretary to the Government of India who was specially empowered under Section 31 of the Prevention of Illicit Traffic in Narcotic Drugs  Psychotropic Substances Act and it recited that with a view to preventing the peti tioner from engaging in abetting and transportation of narcotic drugs the said Sayyed Farook Mohd  Farooq  Sayyed Farooq Isamuddin  Anand be detained and kept in custody in the Yervada Central Prison Pune
The grounds of detention were also served on the same day ie February 15 1990 immediately after his arrest by the Customs Authori ties
On July 19 1989 the staff of the Preventive Collector ate Customs Bombay impounded two fiat cars bearing Nos
GJV 5440 and MHY 2625
The drivers of the said cars namely Aslam Mohammad Nazir and Mohammad Yakub Sheikh were apprehended
On search of the two cars 100 packets of brown coloured powder purporting to be narcotic drug of Pakistan origin was found out of the dickies of the cars
The narcotic drug recovered from the dickies of the said cars weighed 100 kgs
and its value in the market is about 234 crores
Car No GJV 5440 belonged to the petitioner detenu Syed Farooq Mohammad and the other car No MHY 2625 belonged to one CP Reddy an Officer of international airport who was also apprehended and his statement us 108 of the was recorded
It was revealed from his statement that this car was also used for transporting heroin along with petition er s car
The statements of Aslam Mohammad Nazir and Moham mad Yakub Sheikh who were apprehended as well as the state ment of other person ie Mohd Azam Khan  Wali Mohd Khan  Hameed Khan were also recorded us 108 of the by the Customs Officials
From these statements it appeared that these persons were known to the detenu and they used to visit often the hotel Fisherman  at Worli for disco
The detenu ie Farooq Mohammad also used to go for disco in the said hotel Fisherman  at Worli
It has been stated by Aslam Mohammad Nazir that on July 19 1989 he was sitting in room No 106 2nd Floor Kali Building near Burtan apartment Bombay Central residence of the detenu along with his friend Mohd Yakub Sheikh driver of the other car
Hameed also came there to meet Farooq Mohammad
Hameed asked him and Mohd Yakub Sheikh to go along with him to Kalina
He told them that a truck had come to Kalina with some packets of contraband goods and that they were to take those packets near Jaslok hospital Thereafter he took two fiat cars beating registration Nos
GJV 5440 and MHY 2625 from Farooq
He gave the keys of car No GJV 5440 to him and car No MID2625 to Mohd Yakub
245 Thereafter they drove those two cars to Kalina as per Hameed s instructions and Hameed led them in a red maruti car bearing No BLB 7445 where Hameed showed them one truck wherefrom four gunny bags were unloaded and kept in the dickies of the above said two cars
It further appears from his statement that as per Hameed s instructions after the cars were parked near Jaslok Hospital they handed over the keys of both the cars to Hameed and he told them to contact him again in the evening on telephone No 367373 of RK Hotel From Farooq s place they contacted him over the telephone
Hameed told them to wait there and he was coming there
Thereafter Hameed took them in the Maruti Car to a place near Tejpal Road Gowalia Tank
There he showed them the same two fiat cars bearing Nos
GJV 5440 and MHY 2625
Hameed gave the keys of the car No GJV 5440 to him and car No MHY 2625 to Mohd Yakub Sheikh and asked them to drive the said two cars following his car
Similar statement was made by Mohd Yakub Sheikh which was recorded by the Customs Officials
It has also been stated by them that they were told by Hameed that each of them will get Rs5000 as monetary consideration
Yakub also stated that similar jobs have been done by him on 4 5 occa sions and he received Rs5000 each time from Hameed
From the statement of Hameed recorded by the Customs Officials it appears that on July 19 1989 afternoon he collected two drivers namely Aslam Mohd Nazir and Mohd Yakub Sheikh and two fiat cars from Farooq of Bombay Central
This Farooq was introduced to him by Mohd Nasir a narcotic drug dealer who is now detained m  Rajasthan in connection with a drug case
The detaining authority searched the residence of the detenu on July 20 1989 but nothing incriminating could be found therefrom
After recording the statements of these persons and examining and considering the test reports dated October 13 1989 September 29 1989 and November 15 1989 which mentioned that the brown powder contained in those 100 packets is narcotic drug coming within the Narcotic Drugs and Psychotropic Substances Act the impugned order of detention was made on December 20 1989 and the petitioner was arrested and detained on service of the order of deten tion on February 15 1990
The challenge to the detention order had been made in the instant writ petition principally on four grounds which are as under  1  The impugned order of detention has been passed rely ing on 246 the incident which is absolutely stale as the incident is dated July 19 1989 whereas the impugned order has been passed on December 20 1989
2 The statements of the three persons as recorded in the form of statement under section 108 of the came to the respondents on July 20 1989
The order should have been passed immediately on 20th July 1989 but the order has been passed on December 20 1989 ie after five months
The impugned order it is therefore contended is illegal and has been passed on stale ground
3 Since no order of preventive detention has been passed against CP Reddy on the same evidence no order should have been passed against the petitioner as his involvement is of the same nature and to the same extent as that of CP Reddy
4 Assuming that the order rejecting bail application has been considered though not evident from the grounds of detention supplied yet the same has not been supplied to the petitioner
This indicates that a relevant document has not been supplied to the petitioner which affected his right of effective representation guaranteed under Article 225 of the Constitution
The petitioner after grant of bail by an order of this Court appeared before the respondents and applied for making statement us 108 of the 
He was arrested and the order of detention was served on him
This material aspect should have been considered before serving the impugned order
As regards the first ground the counsel for the peti tioner has vehemently urged before this Court that the statements of the two persons ie Aslam Mohd Nazir and Mohd Yakub Sheikh the drivers of the said two cars handed over by the petitioner for carrying narcotic drugs and also the statement of Hameed did not implicate the petitioner in the transportation and smuggling of the drugs and as such there was non application of mind on the part of the detain ing authority in clamping the order of detention on the petitioner
The impugned order of detention is therefore vitiated by non application of mind
The learned counsel referred to certain portions of the statements recorded by the Customs Officials us 108 of the and con tended with great emphasis that there was nothing to say that the petitioner was implicated in the smuggling or transportation of the heroin which has been seized from the dickies of the two cars
247 This contention of the learned counsel is totally devoid of merit in as much as the statements of these three persons as recorded by the Customs Officials us 108 of the clearly implicate the petitioner who knowing fully that these two cars will be used for the purpose of transporta tion of prohibited drugs ie heroin and for selling of the same handed over the keys of the two cars to the said two drivers who were sitting at his residence with Hameed on the asking of Hameed for carrying the contraband goods
In these circumstances it is meaningless to argue that the state ments of these three persons did not implicate the petition er
All the aforesaid three persons were well known to the petitioner and were sitting at the petitioner s residence they were given the keys of the petitioner s car as well as the keys of the car of CP Reddy which was brought to his garrage for repairs by one Ravi Poojari through whom CP Reddy sent his car for repairs
The petitioner knowing fully well that these two cars will be used for the purpose of transporting contraband goods ie heroin from the truck stationed at Kalina from which four gunny bags containing the said heroin were unloaded and placed in the dickies of these two cars handed over the keys of the cars
It is also evident from these statements recorded by the Customs Offi cials that the petitioner along with those three persons used to visit hotel Fisherman  for disco regularly and they were well known to the petitioner In these circumstances it is beyond pale of any doubt that the petitioner knowing fully well that these two cars will be used for transporting contraband goods ie heroin handed over the keys of the cars for the said purpose
Therefore this challenge is wholly without any basis
The next ground of challenge is that the cars were impounded and the contraband goods were seized on July 19 1989 and the statements of these three persons were recorded by the Customs Officials on July 20 1989 and the residen tial premises of the detenu were searched on July 20 1989 but no incriminatory articles  were found
The detaining authority made inordinate delay in passing the impugnedorder of detention against the detenu as late as on December 20 1989 under section 31 of the Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Sub stances Act 1988 to be hereinafter referred to as the said Act 
It has been submitted that if there was any urgent necessity to prevent the petitioner the order should have been passed immediately on 20th July 1989 but it has been passed on December 20 1989 ie after five months
The impugned order is therefore illegal being passed on stale ground
This contention is in our considered opinion devoid of any 248 substance as we have stated hereinbefore that the two cars were impounded on July 19 1989 and brown sugar weighing 100 kgs
was recovered from the dickies of these two cars on that day
The said three persons ie Aslam Mohd Nazir Mohammad Yakub Sheikh and Hameed were examined and their statements were recorded by the Customs Officials on the next day ie July 20 1989
It is also evident that samples of the said contraband drugs were taken from each of the 100 packets and the same were sent for chemical examination
The test reports dated October 13 1989 September 29 1989 and November 15 1989 were received by the Customs Department and the Customs Officials screened all these things and the detaining authority after considering all these passed the order of detention on December 20 1989
In these circum stances it cannot be said that the delay of five months in making the impugned order of detention rendered the deten tion illegal and bad as it was made on stale ground
The detention order has been made with promptitude considering the relevant and vital facts proximate to the passing of the impugned order of detention
This ground of challenge is therefore totally unsustainable
The third ground of challenge is that the relevant document ie bail application of the petitioner and order made there on which might have been considered by the de taining authority were not supplied to the petitioner and as such his right of making effective representation guaranteed under Article 225 of the Constitution of India has been seriously prejudiced
This ground is without any substance because firstly there is nothing to show from the grounds of detention that the rejection of this bail application by the Sessions Judge Greater Bombay on January 5 1990 was con sidered by the detaining authority before passing the im pugned order of detention and as such this being not re ferred to in the grounds of detention the documents had not been supplied to the petitioner and it therefore cannot be urged that non supply of this document prejudiced the petitioner in making effective representation against the order of detention
Article 225 of the Constitution undoubtedly mandates that all the relevant documents re ferred to in the grounds of detention and which are consid ered by the detaining authority in coming to his subjective satisfaction for clamping an order of detention are to be supplied to the detenu
The said document was not considered by the detaining authority in coming to his subjective satisfaction and in making the impugned order of detention
The non furnishing to the detenu of the said document ie the bail application and the order passed thereon does not affect in any manner whatsoever the detenu s right to make an effective representation in compliance with the provi sions of Article 225 of 249 the Constitution of India
This ground therefore is wholly untenable
It has been contented in this connection by referring to the order made by this Court on January 22 1990 in the Special Leave Petition filed by the petitioner before this Court against the rejection of his application of anticipa tory bail whereon this Court made an interim order while issuing show cause notice on the Special Leave Petition and directing that in the meantime the petitioner shall not be arrested that the impugned order of detention is illegal
This order was made in the Special Leave Petition which did not challenge the impugned order of detention but questioned the rejection of the application for anticipatory bail
The order of detention was made on December 20 1989 ie prior to the passing of the said order dated January 22 1990
The said order of this Court has therefore nothing to do with the subjective satisfaction arrived at by the detaining authority in passing the order of detention in question
It has been urged in this connection that the facts in between the passing of the detention order and implementing the detention order have to be taken into account for consider ing whether the detention order should be served on the detenu even after passing of the order by this Court dated January 22 1990 stating that the petitioner shall not be arrested in the meantime
The counsel for the petitioner referred the case of Binod Singh vs District Magistrate Dhanbad Bihar and Ors Wherein the detenu was served with the order of detention us 32 of the National Scurity Act while he was in jail custody in connection with the criminal charge us 302 IPC
The question arose whether in such cases where the detention order which was passed before the detenu surrendered before the Court and was taken into custody in a criminal case should be served on the detenu after he has surrendered in the criminal case and was in jail as an under trial prison er
It has been held by this Court that    the power of directing preventive detention given to the appropriate authorities must be exercised in excep tional cases as contemplated by the various provisions of the different statutes dealing with preventive detention and should be used with great deal of circumspection
There must be awareness of the facts necessitating preventive custody of a person for social defence
If a man is in custody and there is no imminent possibility of his being released the power of preventive detention should not be exercised    250 This ruling as well as the ruling in Suraj Pal Sahu vs State of Maharashtra and Ors  relied upon by the counsel for the petitioner have no application to the instant case in as much as in the instant case the detenu was not arrested and imprisoned in jail till February 15 1990 when the order of detention was served on him and he was arrested by the Customs Authorities
Considering all these this ground of challenge is also wholly untenable
The next ground of challenge is that the detenu appeared before the respondents and applied to them to record his statement us 108 of the 
He was then arrested and the order of detention was served on him
It is relevant to mention in this connection the averments made in para 10 of the counter affidavit filed on behalf of the respondents which is to the effect that in fact when the petitioner presented himself his statement was recorded on February 15 1990 and it was only after the recording of the state ment that the petitioner was detained in pursuance of the detention order
It has also been stated in para 11 of the said affidavit that there existed sufficient grounds which impelled the detaining authority to pass the detention order against the petitioner
It has also been stated in para 12 of the said affidavit that a detention order under the Prevention of Illicit Traffic in Narcotic Drugs and Psycho tropic Substances Act 1988 can be legally issued even if there is a single and solitary case against a person
It has also been stated that the detaining authority carefully scrutinised all the relevant documents and facts of the case and arrived at his subjective satisfaction that preventive order of detention of the petitioner is necessary to prevent him from smuggling and transporting contraband goods and as such the impugned order of detention is not at all illegal or bad and the same is not vitiated by non application of mind or non consideration of relevant materials
This ground therefore is not sustainable
The last ground of challenge is that there has been inordinate delay in arresting the detenu and in serving the detention order ie on February 15 1990 after a lapse of 1 month and 25 days and no serious attempt was made to arrest the petitioner and to serve the order of detention on him in accordance with the provisions of Section 8 of the said Act which specially provides for enforcing the provisions of Section 82 83 84 and 85 of the Code of Criminal Procedure
It has been urged in this connection that this unusual delay in arresting the petitioner shows that there was no real and genuine apprehension in the mind of the detaining authority regarding the necessity of detention of the petitioner and as such continued detention of the petitioner is 251 illegal and contrary to law
It is apropos to refer in this connection to the averments made on behalf of the respond ents in para 7 of the counter affidavit
It has been stated therein that the Department served two notices one of which was accepted by his mother and the second by his brother Nizamuddin for handing over the same to the petitioner as the petitioner was not available in the house
It has been submitted that the petitioner deliberately avoided making himself available to the Department and thus delayed comple tion of investigation of the case
Instead of appearing before the Department the petitioner applied to the Ses sions Judge for anticipatory bail which was rejected on 511990
Thereafter the petitioner approached this Court for anticipatory bail which was granted on 2211990
It is therefore evident that the petitioner absconded and tried to evade arrest pursuant to the order of detention even though he knew the passing of such an order by the detaining authority
It is relevant to mention here the observations of this Court in Shafiq Ahmad vs District Magistrate Meerut and Ors 1989 4 SCC 556 to the follow ing effect   
We are however unable to accept this contention
If in a situation the person concerned is not available or cannot be served then the mere fact that the action under Section 7 of the Act has not been taken would not be a ground to say that the detention order was bad In Bhawarlal Ganeshmalji vs State of Tamil Nadu  Anr  an order of detention was made against the appellant us 31 of COFEPOSA Act in December 1974
It could not be executed because the detenu was absconding and could not be apprehended despite a proclamation made under Section 7 of the Act
More than three years after the order was passed the appellant surrendered in February 1978
It was held that there must be a live and proximate link  between the grounds of detention and the avowed purpose of detention
But in appropriate cases the Court can assume that the link is snapped  if there is a long and unex plained delay between the date of the order of detention and the arrest of the detenu
Where the delay is not only ade quately explained but is found to be the result of the detenu s recalcitrant or retractory conduct in evading arrest there is warrant to consider the link  not snapped but strengthened
It was therefore held that the delay in serving the order of detention on the detenu does not viti ate the order
In the instant case it has been clearly averred in the affidavit that two notices were served one on the petition er s mother and another 252 on the petitioner s brother directing the petitioner to appear before the detaining authority
The petitioner it has been stated has intentionally absconded and thereby evaded arrest
These averments have not been denied by the petitioner
In these circumstances it cannot be said that the delay was not explained and the rink between the grounds of detention and the avowed purpose of detention has been snapped
Reference may also be made in this connection to the decision in TA Abdul Rahman vs State of Kerala and Ors  This ground of challenge is there fore devoid of any merit
It has also been submitted on behalf of the petitioner that the representation made by the detenu on February 28 1990 both to the Chairman Advisory Board as well as to the Central Government were not disposed of till March 29 1990 when the said representation was rejected by the Central Government
It has been submitted that this long delay of one month made the continued detention of the petitioner invalid and illegal
The counsel for the respondents has produced before this Court the relevant papers from which it is evident that after receipt of the representation of the petitioner it was sent to the detaining authority for his comments and immediately after the comments of the detaining authority were received the same were processed and put up before the Minister concerned who rejected the representa tion after considering the comments of the detaining author ity and the State Government
It has been urged on behalf of the petitioner that the comments were not duly considered
This submission is not at all tenable in as much as it is evident from the relevant papers produced before this court that the Central Government passed the order after consider ing the comments of the detaining authority
So this submis sion is without any substance and the same is rejected
It has been further submitted that the counter affidavit was sworn not by the detaining authority but by one Shri AK Roy Under Secretary in the Ministry of Finance De partment of Revenue New Delhi and as such this affidavit cannot be taken into consideration and the averments made therein are not relevant to explain the unusual delay in serving the order of detention as well as in rejecting the representation
In this connection some rulings of this Court have been cited at the bar
In Madan LaI Anand vs Union of India and Ors
  the counter affidavit filed on behalf of the respondents had been af firmed by Kuldip Singh Under Secretary to the Government and not by the detaining authority himself
It was urged that the counter affidavit being not sworn by the detaining authority the averments made therein should not be taken notice of
It was held 253 that there being no personal allegation of mala fide or bias made by the detenu against the detaining authority in per son the omission to file affidavit in reply by itself is no ground to sustain the allegation of mala fides or non appli cation of mind
Similar observation has been made by this Court in Mohinuddin vs District Magistrate Beed and Ors
  which is to the following effect   
In return to a rule nisi issued by this Court or the High Court in a habeas corpus petition the proper person to file the same is the District Magistrate who had passed the impugned order of detention and he must explain his subjective satisfaction and the grounds therefore and if for some good reason the District Magistrate is not available the affidavit must be sworn by some responsible officer like the Secretary or the Deputy Secretary to the Government in the Home Department who personally dealt with or processed the case in the Secretariat or submitted it to the Minister or other officer duly authorised under the Rules of Business framed by the Government under Article 166 of the Constitution to pass orders on behalf of the govern ment in such matters
 Reference has also been made therein to the cases of Niran jan Singh vs State of Madhya Pradesh   Habibullah Khan vs State of West Bengal  Jagdish Prasad vs State of Bihar  and Mohd Alam vs State of West Bengal  In the instant case the counter affidavit has been filed by Shri AK Roy Under Secretary to the Government Ministry of Finance Department of Revenue New Delhi al though the order of detention was made by Nisha Sahai Achu than Joint Secretary to the Government of India Ministry of Finance
It is evident that the said Under Secretary was dealing with the papers relating to the particular order of detention and he placed those papers before the Minister concerned
In these circumstances the counter affidavit filed on behalf of the respondents cannot but be considered and there is no allegation of mala fide or malice or extra neous consideration personally against the detaining author ity in making the impugned order of detention
This conten tion is therefore not tenable
254 In the premises aforesaid we dismiss the writ petition and hold that the impugned order of detention is quite in accordance with law and the same is valid
The observations made herein are confined to this application
TNA Petition dismissed


Summary:
The appellant Oil  Natural Gas Commission
is a statu tory corporation constituted by and under the Oil and Natu ral Gas Commission Act 1959
In most of its oil fields situated in Gujarat gas comes out along with crude oil as free gas
The appellant had agreed to supply this gas to the Gujarat State Electricity Board GSEB and the Gujarat State Fertiliser Corporation GSFC at a price related to fuel oil price on the basis of thermal value equivalence without any reference to the cost of production of gas as such
Public discontent over the alleged high price charged was expressed and eventually the dispute was referred to the sole arbitra tion of Dr VKRV Rao who gave his award
Dr Rao made the cost plus method the basis of his award in preference to the basis of thermal equivalence of alternate fuel thermal equivalence basis
In July 1967 the supply of gas to some of the indus tries in and around Vadodara city was started on the basis of individual annual contracts
Aggrieved by the steady rise in the prices the respondents Association of Natural Gas Consuming Industries and Others moved the Bombay High Court in March 1979 by way of a writ petition In the petition it was inter alia prayed that the ONGC be directed i to 158 continue to supply the gas to the respondents despite the contracts in their favour having lapsed ii to discuss and negotiate a fair reasonable and just price for supply of gas iii to stop charging discriminatory prices for the supply of gas to the respondents in comparison with the price charged to public sector undertakings and iv to restrict the minimum guaranteed quantity of offtake
The High Court passed an interim order directing the ONGC to continue the supply of gas to the respondents at the existing rate of Rs504 per unit which was later raised by the Court to Rs 1000 per unit
The High Court held i The Oil and Natural Gas Commission is a public Utility Undertaking and has a duty to supply gas to anyone who requires it so long as there is enough supply available ii Price fixation is generally a legislative function
But the Oil and Natural Gas Commission being a State instrumentality is bound to act reasonably in the matter of fixation of price such price is bound to be determined by following any one of the modalities suggested in the judgment of the High Court iii There was no dis crimination by the Oil and Natural Gas Commission between the public sector undertakings on the one hand and the respondents  undertakings on the other in charging differen tial prices and iv The clause regarding minimum guaran teed offtake was valid and enforceable
Before this Court
the appellant primarily challenged the finding of the High Court that the ONGC was a public utility undertaking  which was bound to supply gas at the request of any member of the public at large
The appellant also contested the correctness of the High Court s conclu sion that the price of gas must be determined on the basis of cost of production plus a reasonable return for the investment made
The appellant submitted that i the prices under the contracts entered into with the respondents had been determined on the basis of a wellknown principle
viz the ruling prices for an alternate fuel and this could not be said to be either arbitrary or unreasonable particularly when a large number of industries were willing to take the supply of gas at the prices fixed on that basis ii while public sector units and State instrumentalities ought not to be allowed to exploit the consumers
it was equally neces sary to ensure that such units and instrumentalities were enabled to make reasonable profits iii in the context of the integrated activity of production of crude oil and gas
it was almost impossible to work out the cost in respect of any particular area or of a particular bye product iv the cost plus basis was fixed by the Award several years ago and that too in the context of supply to certain State 159 undertakings which in turn supplied essential commodities like electricity and fertilizers and v the onus of show ing that the prices charged were unreasonable or arbitrary was on the respondents and they had done nothing to dis charge this onus
On behalf of the respondents it was contended that a public utility undertaking could not arbitrarily discontinue its supply or services merely because the customer was unwilling to pay the price asked for as unconscionable and unreasonable
It was further contended that the price fixed must be reasonable and fair so as to give the undertaking a reasonable return on the capital employed and that there could not be any discrimination against industrial consum ers
According to the respondents
this was the only reason able way of price fixation and referred to the Award in support of this proposition The respondents further urged that to allow Oil and Natural Gas Commission to sell gas at a higher price than this merely because
otherwise
but for the availability of gas the consumers would have to spend more for their sources of energy
will really amount to introduction an irrelevant element in the process of price fixation and result in allowing the Oil and Natural Gas Commission to make unreasonable profits at the expense of unhappy consumers
It was argued that these principles were applicable with greater force in the context of the consti tutional discipline over state instrumentalities under Article 38  39 of the Constitution
Bolt vs Stennett CJ ER__Revised p
1572 Allnutt vs Inglis CIV ER Revised p 206 Ira Y Munn vs People  United Fuel Gas Co vs Railroad Commission 73L Ed 390 Los Angeles Gas  Electric Corporation vs Railroad Commission   Leo Nabbia vs People
78 LEd 940 Harold E West vs Chesapeake  Potomac Telephone Com   Federal Power Commission vs Hope Natural Gas Co   premier Automobiles vs Union   Panipat Cooperative Sugar Mills vs Union 1973 2 SCR 860 Shree Meenakshi Mills vs Union  Saraswati Industrial Syndicate vs Union   Prag Ice and Oil Mills vs Union   Union of India vs Cynamide India Ltd 1987 2 SCC 720 relied upon
Allowing the appeals and upholding the prices charged by the Oil and Natural Gas Commission this Court HELD 1 The Oil and Natural Gas Commission does not satisfy the primary conditions for being a public utility undertaking as it has not so far held itself out or under taken or been obliged by any law to 160 provide gas supply to the public in general or to any par ticular crosssection of the public
The proviso to Section 141e of the Act which lays down that the setting up of industries to be run with the aid of gas was not to be undertaken by the Oil and Natural Gas Commission without the Central Government s approval also gives an indication that the supply of gas to various industries on a general basis was not in the immediate contemplation of the Act but was envisaged as a future expansion to be initiated with Central Government s approval
Perhaps a stage in the developmental activities of the Oil and Natural Gas Commission will soon come when such an obligation could be inferred but at present the Oil and Natural Gas Commission supplies gas only to certain selected contractees
181E G 2 It is however not necessary in this case to express any final opinion on the issue whether the ONGC was a public utility undertaking except to say prima facie that it could not be placed on par with a public utility undertak ing
All that the respondents wanted was a declaration that they were entitled to the supply of gas at a reasonable price
It was sufficient for disposing of this claim to deal with this aspect of the matter and the larger aspect of Oil and Natural Gas Commission being a public utility under taking could be left out of account
183E F 3 The treatment of the Oil and Natural Gas Commission as a public utility undertaking for the supply of gas will raise innumerable basic questions totally inconsistent with the present system of selective supply which the respondents want to be continued
It will transpose the area of contro versy to a totally different and wider plane
The Court would then be constrained to hold that the present system of supply was inconsistent with public law and the constitu tional requirements of a public utility undertaking
183C D 4 The main activity of the Oil and Natural Gas Commis sion is that of exploration and prospecting for petroleum and petroleum products
So far as gas which is a bye product is concerned the Oil and Natural Gas Commission has not so far been able to voluntarily or constrained statutorily to harness and utilise its production for con sumption by the public
181H 182A 5 There is no doubt that Dr Rao made the cost plus method the basis of his award in preference to the basis of thermal equivalence of alternate fuel thermal equivalence basis
But the cost plus basis fixed by Dr Rao in the background of the real nature of the dispute before him three decades ago could not be taken as conclusive in the present 161 situation
Dr Rao was concerned primarily with an issue raised by the public of Gujarat as against the Oil and Natural Gas Commission
He was really adjudicating upon the price which the Oil and Natural Gas Commission should charge to public sector undertakings catering to the essential needs of the State
In that context his objective was understandably to fix the price as low as possible
The consumer under consideration by him represented the public need of the State of Gujarat and as against such public interest the Oil and Natural Gas Commission s profit re quirements paled into insignificance
189C G D E 6 Here the Court is dealing with a price to be fixed under a contract between the Oil and Natural Gas Commission and one set of industries in the State who wish to make a change over from the furnance oil system to that of gas supply with a view to increase their own profitability and gain an advantage if possible over other industries in the State
In this context Oil and Natural Gas Commission is entitled to a larger latitude and charge a price which the market can bear
The only restriction is that being a State instrumentality it should not be a whimsical or capricious price but should be one based on relevant considerations and on some recognised basis
189H 190A 7 Cost plus is not a satisfactory basis in all situa tions
May be the cost plus is an ideal basis where the commodity supplied is the product of a monopoly vital to human needs
In that context the price fixed should be minimum possible as the customer or consumer must have the commodity for his survival and cannot afford more than the minimum
Per Contra there can be situations where the need of the consumer is not so vital and the requirements of the economic scene are such that the needs of the producer should be given greater consideration
In such situations the plus element in the cost plus basis namely the allowable profit margin should not be confined to a rea sonable return on the capital but should be allowed to have a much larger content depending on the circumstances
Given a favourable area of operation commercial profits need not be either anathema or forbidden fruit even to public sector enterprises 191D E G H Anakapallee Case   Venkatachalam vs Deputy Transport Commissioner   referred to
8 It would not be right to insist that the Oil and Natural Gas Commission should fix oil prices only on cost plus basis
Indeed its policy of pricing should be based on the several factors peculiar to the industries and its current situation
and so long as such a policy is not 162 irrational or whimsical the court may not interfere
195D 9 Price fixation 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 distribu tion and consumption of the material resources of the commu nity
195F Ms Shri Sitaram Sugar Company Ltd  Anr
vs Union JT  Jagadamba Paper Industries vs Har yana State Electricity Board   Kerala State Electricity Board etc
vs Ms SN Govinda Prabhu  Bros  Ors
  referred to
10 It cannot be said that the Oil and Natural Gas Commission has acted arbitrarily in fixing the prices on the thermal equivalence basis the fact that it has not done it on cost plus basis does not vitiate the price fixation
The only question to be considered is as to whether the Oil and Natural Gas Commission has fixed a price based on relevant materials and on some known principle
200C 11 The manufacture distribution and consumption of gas has yet not attained the status of an essential commodi ty till recently
At present the industry is in the penum bral region where the commodity is free to be distributed at the manufacturer s choice but yet where such manufacturer being a State instrumentality has to conform to Articles 14 and 19 of the Constitution
At this stage of development of the industry a much wider latitude is permissible in the fixation of prices than the imposition of a no profit no loss basis or a cost plus basis on the producer
200E G 12 It is now well settled that a favourable treatment of public sector organisations particularly ones dealing in essential commodities or service would not be discriminato ry
No tangible material has been brought to the Court s notice which would support the plea of unfair discrimina tion
203E F 13 The High Court rightly upheld the Oil and Natural Gas Commission s right to insist on a munimum off take guar antee
202G Amalgamated Electricity Co Ltd vs Jalgaon Borough Municipality  163