W.P.(C) 8415/2009 & 9022/2009 Page 1 of 41 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 8415/2009 & CM 5295/2009 VOICE OF INDIA ..... Petitioner Through: Mr. Prashant Bhushan, Advocate. Versus UNION OF INDIA & ORS. ..... Respondents Through: Mr. A.S. Chandhiok, ASG with Mr. Neeraj Chaudhari, Standing Counsel for R-1. Mr. Rajiv Nayar and Mr. Sandeep Sethi, Senior Advocates with Mr. Sidharth Singh, Ms. Divya Roy, Mr. Rakesh Dewan and Mr. Nikhil, Advocates for R-2 and R-3. Mr. K.K. Sharma, Senior Advocate with Mr. Abhay Kumar, Advocate for R-4. AND + W.P.(C) 9022/2009 & CMs 6524-6526/2009 INDRAPRASTHA GAS LTD. ..... Petitioner Through: Mr. K.K. Rai, Senior Advocate with Mr. Shiv Pandey and Mr. Saurav Agarwal, Advocates Versus PETROLEUM & NATURAL GAS REGULATORY BOARD & ANR. ...... Respondents Through: Mr. Sandeep Sethi, Senior Advocate with Mr. Sidharth Singh Ms. Divya Roy, Mr. Rakesh Dewan and Mr. Nihil, Advocates for R-1. Mr. Abhinav Vashisht with Mr. Raman Kumar, Advocates for IOCL. W.P.(C) 8415/2009 & 9022/2009 Page 2 of 41 Reserved on : December 11th, 2009 % Date of Decision : January , 2010 CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN 1. Whether the Reporters of local papers may be allowed to see the judgment? Yes. 2. To be referred to the Reporter or not? Yes. 3. Whether the judgment should be reported in the Digest? Yes. J U D G M E N T MANMOHAN, J : 1. With consent of parties both the writ petitions being W.P.(C) 8415/2009 and 9022/2009 are being disposed of by a common judgment. While W.P.(C) 8415/2009 has been filed in public interest under Article 226 of Constitution challenging the illegal and arbitrary manner in which the affairs of Petroleum and Natural Gas Regulatory Board (hereinafter referred to as “Board”) constituted by the Central Government under the Petroleum and Natural Gas Regulatory Board Act, 2006 (hereinafter referred to as “PNGRB Act”) are being run by its Chairman, W.P.(C) 9022/2009 has been filed seeking quashing of public notice dated 13th February, 2009 inviting bids from interested parties for development of City Gas Distribution (hereinafter referred to as “CGD”) in Ghaziabad and also for quashing of the order/letter dated 19th March, 2009 by virtue of which Indraprastha Gas Limited‟s application for authorisation in Ghaziabad has been rejected. W.P.(C) 8415/2009 & 9022/2009 Page 3 of 41 2. Mr. Prashant Bhushan, learned counsel for petitioner in W.P.(C) 8415/2009 submitted that in the absence of non-notification of Section 16 of the PNGRB Act, the Board constituted under the said Act had no power to grant authorisation to entities which had applied to the Board for Laying, Building, Operating or Expanding City or Local Natural Gas Distribution Networks. Mr. Bhushan drew our attention to Sub- section 3 of Section 1 of PNGRB Act, which stipulated that the said Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. He stated that the said Sub-section clearly postulated that different dates could be appointed for coming into force of different provisions. Sub-section 3 of Section 1 of PNGRB Act reads as under:- ―1. Short title, extent, commencement and application.- xxxx xxxx xxxx xxxx (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint: Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be Construed as a reference to the coming into force of that provision.‖ 3. Mr. Bhushan also drew our attention to the Gazette Notification dated 1st October, 2007 issued by the Ministry of Petroleum & Natural Gas. According to the said Notification, PNGRB Act came into force W.P.(C) 8415/2009 & 9022/2009 Page 4 of 41 on 1st day of October, 2007, except Section 16 thereof. The said Gazette Notification reads as under:- ―MINISTRY OF PETROLEUM AND NATURAL GAS NOTIFICATION New Delhi, the 1st October, 2007 G.S.R.637(E).—In exercise of the powers conferred by Sub-section (3) of Section 1 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006), the Central Government hereby appoints the 1st day October, 2007 as the date on which the provisions of the said Act, except Section 16 thereof, shall come into force. [F. No.P-23011/14/2007-Mkt.] D.N.NARASHIMA RAJU, Jt. Secy.‖ 4. According to Mr. Bhushan, Section 16 read with Section 2(d)(B) of PNGRB Act made it abundantly clear that authorisation could only be given by the Board under Section 16 of the said Act. He submitted that without the exclusive and monopolistic power being conferred on the Board, it had no power to issue any authorisation to any entity. 5. Mr. Bhushan contended that the Chairman had illegally appropriated the core powers of Members of the Board to himself in order to get a free hand in taking all the important decisions on matters involving several thousands of crores of rupees. According to him, the Chairman had delegated onto himself the powers of the Board to authorise entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks, the core powers and functions of the Board, without first obtaining any general or special order in writing W.P.(C) 8415/2009 & 9022/2009 Page 5 of 41 as provided by Section 58 of the PNGRB Act. Section 58 of PNGRB Act reads as under :- “58. Delegation- The Board may, by general or special order in writing, delegate to any member or officer of the Board subject to such conditions, if any, as may be specified in the order, such of its powers and functions under this Act (except the power to settle a dispute under Chapter VI and to make regulations under section 61), as it may deem necessary.‖ 6. Mr. Bhushan further stated that the Chairman in 12th Board Meeting held on 11th September, 2008 delegated the power of authorisation onto himself despite strong dissent by two of the Board Members. Mr. Bhushan stated that the members of the Board who opposed the proposal of Chairman to delegate all the powers in relation to authorisation, were not present in that particular meeting and the decision to delegate their powers was taken in their absence. According to Mr. Bhushan, while PNGRB Act envisaged collegiate decision- making by a multi-member Board, all the important decisions of the Board were taken by the Chairman individually without referring the same to other members of the Board. Mr. Bhushan stated that minutes of meetings were also manipulated by the Chairman. He stated that Chairman did not even record the dissent notes of members who objected to his arbitrary decisions. He further stated that respondent nos. 2 and 3 in their Counter Affidavit had admitted this fact when they stated that “it is totally in consonance with the universal practice which is followed everywhere else that the dissent notes are not appended to the minutes of the Board meeting….‖ According to Mr. Bhushan, W.P.(C) 8415/2009 & 9022/2009 Page 6 of 41 affairs of the Regulatory Board had been turned by the Chairman into a one man show with other members virtually having no powers in day to day affairs of the Board. He contended that important issues that should have been decided by the Board were invariably discussed in informal meetings of which no minutes or records were maintained. According to him, dissent or objections raised by members during these informal meetings were never recorded. He stated that when any issue was taken up in a Board meeting, no voting procedure was adopted although the PNGRB Act expressly provided for voting on issues on which there was disagreement, thus, all matters that came up before the Board were claimed to be unanimous even when there was disagreement amongst Board members. According to him, even written dissent notes circulated by the members were not taken on record. Further, as per Section 11 of the PNGRB Act, all the authorisations had to be given by the Board consisting of all its members and could not have been delegated to the Chairman. He submitted that the Supreme Court in a catena of cases has held that the core/essential functions cannot be delegated by the Legislature. According to Mr. Bhushan, the same principle also applied where a statutory authority had been constituted under a Statute to undertake specific functions, and such statutory functions which formed the basis of the creation of such a statutory body could not have been delegated. Mr. Bhushan submitted that the Supreme Court in the case of Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. Vs. The Asstt. Commissioner of Sales Tax and Ors. reported in (1974) 4 SCC 98 while discussing the law laid down on the issue of W.P.(C) 8415/2009 & 9022/2009 Page 7 of 41 delegation of essential legislative functions had held that delegation of the same cannot be permitted. The relevant portion of the said judgment reads as under : ―A review of these authorities therefore leads to the conclusion that so far as this Court is concerned the principle is well established that essential legislative function consists of the determination of the legislative policy and its formulation as a binding rule of conduct and cannot be delegated by the Legislature. Nor is there any unlimited right of delegation inherent in the legislative power itself. This is not warranted by the provisions of the Constitution. The Legislature must retain in its own hands the essential legislative functions and what can be delegated is the task of subordinate legislation necessary for implementing the purposes and objects of the Act. Where the legislative policy is enunciated with sufficient clearness or a standard is laid down, the Courts should not interfere. What guidance should be given and to what extent and whether guidance has been given in a particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to deal including its preamble. Further it appears to us that the nature of the body to which delegation is made to also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation.‖ 7. Mr. Bhushan further stated that the Chairman of the Board had delegated the powers of hearing complaints to officers of the Board. He stated that complaints had been heard and decided upon by the Secretary of the Board. Mr. Bhushan further submitted that the Secretary of the Board was incompetent to decide the applications/complaints filed by the entities to the Board as Section 24(1) of the PNGRB Act specifically provided that any complaint/dispute referred to the Board had to be adjudicated upon by a Bench comprising Member (Legal) and one or more members of the Board. Section 24(1) reads as under: ―24. Board to settle disputes - (1) Save as otherwise W.P.(C) 8415/2009 & 9022/2009 Page 8 of 41 provided for arbitration in the relevant agreements between entities or between an entity or any other person, as the case may be, if any dispute arises, in respect of matters referred to in sub-section (2) among entities or between an entity and any other person, such dispute shall be decided by a Bench consisting of the Member (Legal) and one or more Members nominated by the Chairperson.‖ 8. Mr. Bhushan further submitted that Section 58 of the PNGRB Act strictly prohibited delegation of power conferred under Section 24(1) of the PNGRB Act to any other authority. He submitted that despite this, most of the applications/complaints had been heard and decided upon by the Secretary of the Board who after passing an order placed the same before the Chairman of the Board for his approval. According to him, the PNGRB Act nowhere authorised Secretary or any other officer of the Board to adjudicate upon the applications/complaints filed by the entities before the Board. This power was only vested with the Members of the Board, it being their core function, and as such could only have been exercised by them. 9. Mr. Bhushan further contended that respondent no. 4, Mr. B.S. Negi, had abused his position as Member (Technical/Infrastructure) of the Board as his son was running a parallel consultancy services for the entities which applied to the Board for authorisation of various city gas distribution networks. In this context, he pointed out that on 23rd and 24th January, 2008 Euro-Asian Conference Cum Exhibition for city gas distributors in Delhi was jointly organised by National Engineering & General Industries (NEGI) and two other companies. He stated that the W.P.(C) 8415/2009 & 9022/2009 Page 9 of 41 said Company „NEGI‟ belonged to the son of Mr. B.S. Negi who under the guidance of his father had been running a consultancy Company which provided consultancy services to entities which applied to the Board for authorization to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks. The conference was sponsored by oil and gas companies which fell under the regulatory purview of the Board of which Mr. B.S. Negi was Member (Technical). He stated that the Company profile, which had been downloaded by the petitioner from the website of the abovementioned company, clearly established that the said Company was directly involved in the business of providing consultancy to companies who had or were looking forward to apply to the Board for authorisation to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks. In fact, in the Company profile, the Company had boastfully stated that it had high contacts in the Government departments. 10. Mr. Bhushan further stated that the Board in its letter dated 25th August, 2009 addressed to Director (GP) of the Ministry of Petroleum and Natural Gas had admitted that abovementioned ―consultancy firm had provided market survey on non-exclusive basis for the GA of Chandigarh to a company and for GA of Allahabad (both covered in the second round), to a consultant‖. This, according to Mr. Bhushan, amounted to a serious conflict of interest in the functioning of the Board and thus an inquiry, as stipulated under Section 7 of the PNGRB W.P.(C) 8415/2009 & 9022/2009 Page 10 of 41 Act, be initiated against Mr. B.S. Negi for abusing his position as a member of the Board. Section 7 of the said Act reads as under :- ―7. Removal of Chairperson or any other member from office.- The Central Government may remove from office the Chairperson or any other member, who-- (a) has been adjudged as insolvent; or (b) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or (c) has become physically or mentally incapable of acting as a member; or (d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a member; or (e) has so abused his position as to render his continuance in office prejudicial to the public interest: Provided that no Chairperson or other member shall be removed from office under clause (d) or clause (e) unless the Central Government, after holding an inquiry by any person appointed or authority constituted for the purpose and in accordance with such procedure as may be prescribed in this behalf, is satisfied that such person ought on such ground or grounds to be removed.‖ 11. Mr. K.K. Rai, learned senior counsel appearing for Indraprastha Gas Limited (hereinafter referred to as “IGL”) in W.P.(C) 9022/2009 stated that IGL had on the direction of Environment Pollution (Prevention and Control) Authority (hereinafter referred to as “EPCA”), a statutory authority constituted under Section 3 of the Environment Protection Act (Protection) 1986, prepared a plan to introduce CNG in Delhi and neighbouring NCR areas including Ghaziabad. In this connection, he referred to the following W.P.(C) 8415/2009 & 9022/2009 Page 11 of 41 observations of the Supreme Court in M.C. Mehta Vs. Union of India & Ors. reported in (2002) 4 SCC 356 wherein the Supreme Court has held that, “the Environment Pollution (Prevention and Control) Authority is a statutory authority constituted under Section 3 of the Environment (Protection) Act, 1986, and its directions are final and binding on all persons and organisations concerned. This position has been reiterated by this Court in Sector 14 Residents‘ Welfare Assn. v. State of Delhi : (1999) 1 SCC 161. It is this authority which had directed the phasing out of non-CNG buses. It is the Bhure Lal Committee which had also recommended the conversion to CNG mode and issued directions that non-CNG buses should be phased out‖. Mr. Rai further stated that EPCA has been issuing periodic directions to IGL to expedite the work of supply of CNG in Ghaziabad. In this connection, Mr. Rai referred to the minutes of various meetings held by EPCA. The relevant portion of the Minutes of the EPCA Meeting held on 31st October, 2009 reads as under :- ―EPCA asked IGL to expedite the work in order to ensure early supply of CNG in Ghaziabad and other NCR towns as this is important for ensuring seamless movement of CNG vehicles in NCR. EPCA desired that IGL should regularly pursue concerned government agencies of U.P. and Haryana for speedy progress in their expansion programme in Ghaziabad/Noida/Greater Noida and Faridabad/ Gurgaon. EPCA also requested NCRPB to write to Ghaziabad Authorities for helping IGL for early implementation of Ghaziabad CNG supply project.‖ 12. Mr. Rai stated that prior to coming into force of the PNGRB Act, petitioner-IGL had not only conducted a detailed feasibility report at a W.P.(C) 8415/2009 & 9022/2009 Page 12 of 41 cost of Rs.28 lacs but had also after depositing Rs.1,50,00,000/-(Rupees one crore and fifty lacs) obtained a „No Objection Certificate‟ for development gas distribution pipeline for Ghaziabad. He pointed out that petitioner-IGL had on 24th January, 2006 even entered into an agreement with GAIL for supply of Re-gasified Liquified Natural Gas (RLNG) for the city of Ghaziabad. 13. Mr. Rai further stated that the pipeline through Ghaziabad was integral and contiguous to the East-Delhi network of IGL and was essential to cater to the demand of the upcoming Common Wealth Games. According to him, the CGD networks in Delhi and Ghaziabad was essentially a unified and integrated network with a common City Gate Station and Steel main pipeline. 14. Mr. Rai pointed out that prior to IGL‟s rejection for authorisation, IGL had not only completed two CNG Stations namely, Mohan Nagar Filling Station and Sharma Filling Station but had also purchased land for filling stations at Sanjay Nagar and Vaishali. He stated that IGL‟s twelve CNG stations were in advanced stages of completion and could start supplying CNG as soon as three months. 15. Mr. Rai submitted that the impugned public notice dated 13th February, 2009 inviting bids for Ghaziabad in accordance with Regulation 5(5) was illegal as the same had been issued prior to rejection of IGL‟s application for authorization under Regulation 18(8). According to him, prior issuance of public notice, showed that IGL‟s W.P.(C) 8415/2009 & 9022/2009 Page 13 of 41 authorisation application had been rejected with a pre-determined mind. Mr. Rai further submitted that in the absence of notification of Section 16 of the PNGRB Act, Regulations issued in 2006 were illegal being inconsistent with the said Act inasmuch as the Regulations which were subordinate legislation could not have been used to empower the Board to usurp the power of authorization. 16. Mr. Rai pointed that the PNGRB had acted contrary to the specific opinion of the then Solicitor General who had opined that in view of non-notification of Section 16 of the PNGRB Act, the power of the Board to grant authorisation had not come into force and in fact, the Board‟s insistence on grant of authorisation was unreasonable and without jurisdiction. He further stated that despite the Member (Legal) of the Board having brought to the notice of the Chairman the aforesaid opinion and having asked the Chairman not to proceed with the grant of authorisation in the absence of notification of Section 16, the Chairman had continued to issue authorisations. 17. Mr. Rai also submitted that the impugned letter/order dated 19th March, 2009 of the respondent-Board rejecting IGL‟s application for grant of authorization for Ghaziabad was in violation of principles of natural justice inasmuch as IGL had not been heard by the Board constituted under the PNGRB Act and the impugned decision had been taken by the Secretary of the Board who was merely a facilitator. Mr. Rai lastly submitted that the essential function of the Board including W.P.(C) 8415/2009 & 9022/2009 Page 14 of 41 the power to grant or reject authorization to entities could not have been delegated by the Board to its Chairman and assuming so, it could be done, the Chairman certainly could not have sub-delegated its power to the Secretary of the Board. He stated that inspection of the file rejecting IGL‟s application for authorization showed that the impugned order had never been placed before the PNGRB Board and the order prepared by the Secretary had been approved by the Chairman in the name of the Board with two minor changes. 18. Mr. A.S. Chandhiok, learned ASG appearing for Union of India submitted that in view of non-notification of Section 16, the Board was not empowered to issue authorisations for laying, building, operating or extending any pipeline as a city or local natural gas distribution networks. He stated that the Board was free to undertake preparatory work and the applications could be processed till the stage of issuance of letters of intent. 19. Regarding the delegations of powers, Mr. Chandhiok submitted that the Board was a multi-member body and it could not divest itself of its core functions by delegating the same to the Chairman. 20. As far as the allegation against Shri B.S. Negi was concerned, Mr. Chandhiok stated that the Central Government had called for comments from the Board with regard to the specific allegations against respondent no.4. He stated that the comments had been received from W.P.(C) 8415/2009 & 9022/2009 Page 15 of 41 the Board vide letter dated 03rd August, 2009 and the same were under consideration of the concerned Ministry. 21. On the other hand, Mr. Rajiv Nayar, learned senior counsel for the Board submitted that Section 19 of PNGRB Act was a stand-alone Section and even Section 17 read with Sections 23, 24 and 48 of PNGRB Act were independent substantive provisions. Sections 17, 19, 23, 24 and 48 read as under :- “17. Application for authorization-(1) An entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand, a pipeline as a common carrier or contract carrier shall apply in writing to the Board for obtaining an authorisation under this Act: Provided that an entity laying, building, operating or expanding any pipeline as common carrier or contract carrier authorised by the Central Government at any time before the appointed day shall furnish the particulars of such activities to the Board within six months from the appointed day. (2) An entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand, a city or local natural gas distribution network shall apply in writing for obtaining an authorisation under this Act: Provided that an entity laying, building, operating or expanding any city or local natural gas distribution network authorised by the Central Government at any time before the appointed day shall furnish the particulars of such activities to the Board within six months from the appointed day. (3) Every application under sub-section (1) or sub- section (2) shall be made in such form and in such manner and shall be accompanied with such fee as the Board may, by regulations, specify. (4) Subject to the provisions of this Act and consistent with the norms and policy guidelines laid down by the Central Government, the Board may either reject or W.P.(C) 8415/2009 & 9022/2009 Page 16 of 41 accept