Case: ADANI GAS LIMITED  Vs. UNION OF INDIA

3. Brief facts of this case are that on 19.11.2005 the Government of Rajasthan invited parties to submit their bids for laying of Gas Distribution Network in certain cities of Rajasthan, including the said two cities of Udaipur and Jaipur. In response to the same, the appellant submitted its Expression of Interest for the cities of Udaipur and Jaipur. On 20.03.2006, the Government of Rajasthan informed the appellant that it intended to grant NOC to the appellant for undertaking Gas Distribution in the cities of Udaipur and Jaipur, which was to be subject to certain conditions as mentioned in the aforesaid communication dated 20.03.2006. Immediately thereafter on 22.03.2006, the appellant company informed that it agreed to all the terms and conditions laid down by the Government of Rajasthan in its communication dated 20.03.2006 whereby it intended to grant NOC to the appellant. Then, on 24.03.2006, the appellant deposited the commitment fees of Rs. 2 Crore. On 27.03.2006, the Government of Rajasthan granted the NOC to the appellant company for Gas Distribution in the cities of Udaipur and Jaipur. The appellant then started its work of laying down the City Gas Development Network in the said two cities.4. The Petroleum and Natural Gas Regulatory Board Regulations Act, 2006 (for short ‘Act of 2006) was notified on 03.04.2006, except for the provisions of Section 16 of the said Act relating to authorisation. On 21.07.2007, the appellant company made a request for authorisation of its City Gas Distribution Project under Act of 2006 to the Chairman of Petroleum and Natural Gas Regulatory Board (for short ‘the Board?). In the said communication, the appellant had also provided the details of its existing projects in the country, namely at Ahmedabad, Vadodara, Faridabad, Noida, Khurja, Lucknow, Udaipur and Jaipur. The appellant had also submitted that in terms of Sections 15 and 16 of Chapter IV of the Act of 2006, there was a provision of ‘deemed authorisation? of the existing City Gas Distribution Projects and in terms of the Act of 2006, a brief dealing of all the projects under its implementation was also enclosed.5. Then, on 24.07.2007, the appellant wrote to the Ministry of Petroleum and Natural Gas requesting for authorisation of its City Gas Distribution Projects under the Act of 2006 for all its gas projects, including the ones of Udaipur and Jaipur. The Act of 2006 was although notified on 03.04.2006, but came into force with effect from 01.10.2007, which was its appointed date. However, Section 16 of the said Act, relating to ‘Authorisation?, was brought into force only with effect from 15.07.2010.6. On 30.10.2007 the Petroleum and Natural Gas Regulatory Board issued a press note, calling upon all the concerned entities involved in or proposed to the laying, building, operating or expanding of a City or Local Gas Distribution Network prior to the appointed date, i.e. 01.10.2007, to furnish the particulars of such activities to the Board within six months from the appointed date. It was further provided that in cases where no authorisation was granted to the entities that initiated the specified activities before the appointed date, then such entities were to apply for authorisation under Section 17 of the Act of 2006. The Government of Rajasthan, then on 05.12.2007, intimated the appellant of the press note dated 30.10.2007 and required the appellant to submit the details, as were prescribed in terms of the said press note. Two days thereafter, on 07.12.2007, the appellant submitted the requisite details for the City Gas Distribution Projects of Udaipur and Jaipur. Then, on 11.12.2007, the Government of Rajasthan called upon the appellant to further submit the details to the Board in terms of the press note dated 30.10.2007. In response to the same, the appellant informed the Government of Rajasthan that the said details had already been furnished on 07.12.2007.7. On 19.03.2008, the Petroleum and Natural Gas Regulatory Board Regulations, 2008 were notified. Pursuant thereto, on 31.03.2008 the Board issued a notice to the appellant stating that the appellant did not have the requisite authorisation by the Central Government in terms of the proviso to Section 17(2) of the Act of 2006. The Regulation 18 of the Regulations of 2008 has been challenged by the appellant on the ground of being ultra vires the Act of 2006.8. The appellant, however, on 28.08.2008 filed an application under Regulation 18 of the Regulations of 2008 for grant of authorisation of city Gas Distribution Network at Udaipur and Jaipur. In response to the same, the Board issued a notice dated 19.11.2008 to the appellant for oral hearing on 05.12.2008 and in the same meeting, the appellant presented the status report as well as the investment made by the appellant, and expressed its commitment to the Board to develop the project and requested the Board to grant authorisation for the two cities of Udaipur and Jaipur. The appellant, in the meantime, continued its development work of laying down the gas pipelines. Then, on 12.07.2010, by a notification of the Government, Section 16 of the Act of 2006 was brought into force. After coming into force of Section 16, the Board, on 29.07.2010, issued notice to the appellant to once again appear before the Board on 04.08.2010 to show cause as to why the application under Regulation 18(1) of the Regulations of 2008 should not be rejected.9. In the meantime, though no formal orders were passed by the Board, on 28.02.2011, the Government of Rajasthan issued a notice to the appellant stating that the appellant has failed to fulfil the conditions laid down in the communications dated 20.03.2006 and 27.03.2006 issued by the Government of Rajasthan and thus the NOCs were liable to be withdrawn and the commitment amount also liable to be forfeited. To the said notice, the appellant submitted its reply to the Government of Rajasthan on 16.03.2011. Then, by an Order dated 18.05.2011, the Government of Rajasthan withdrew the NOCs granted to the appellant and forfeited the commitment fees of Rs. 2 Crore deposited by the appellant on 24.03.2006. On the very next date i.e. 19.05.2011, by two separate letters, the Board rejected the applications of the appellant for authorisation of projects at Udaipur and Jaipur, on the ground that the physical and financial progress achieved by the appellant did not satisfy the proviso of Regulation 18(2)(d) of the ‘Regulations of 2008? and even after instructions had been given by the Board vide press note dated 30.10.2007, the appellant had allegedly continued with laying of pipelines, in violation of such directions given by the Board in the said press note.10. The appellant, then on 01.07.2011, wrote to the Board to bring to its notice that the appellant has deemed authorisation in terms of proviso to Section 16 of the Act of 2006 and the letters of rejection dated 19.05.2011 of the Board to the appellant should be withdrawn. To the said communication, there was no response received by the appellant from the Board. Challenging the order dated 18.05.2011 issued by the Government of Rajasthan and the orders dated 19.05.2011 issued by the Board as well as the challenging the vires of Regulation 18 of the ‘Regulations of 2008?, the appellant had filed Writ Petition before the Rajasthan High Court, which was dismissed on 29.04.2015. The same is under challenge in this appeal.

Reasoning: 14. It is not disputed that in pursuance to the Government of Rajasthan having, on 19.11.2005, invited bids for laying of Gas Distribution Network, the appellant had applied for the two cities of Udaipur and Jaipur and after acceptance of its application, the appellant was granted NOC by the Government of Rajasthan on 27.03.2006. It is also not disputed that pursuant thereto, the appellant has laid approximately 75 kms of pipeline in both the cities of Udaipur and Jaipur, and in the process, spent a huge amount of money relying on the NOC granted in its favour for such purpose.From the above, it is clear that the application of the appellant has been rejected primarily on the ground of non¬compliance of clause (d) of Regulation 18(2) of the Regulations of 2008. It was incumbent on the Board to take into consideration various factors as specified in clauses (a) to (j) of Regulation 18(2) of the Regulations of 2008, and the same has to be considered in the back drop of the fact that the press note was issued on 30.10.2007 to stop all incremental activities and as such it was necessary to consider whether the appellant could have been faulted for non-compliance of clause (d) of Regulation 18(2), and whether it was a mandatory requirement or merely one of the factors to be considered along with all the other factors. Other relevant aspects as contained in the other clauses have not been adverted to by the Board while deciding the application of the appellant, which were also equally significant. It was necessary to consider whether the appellant is compliant of various other factors as provided in clauses (a) to (j) of Regulation 18(2) of the Regulations of 2008. The non¬ compliance, if any, of clause (d) ought to have been considered in the light of the press note dated 30.10.2007 which required stopping of all incremental. The peculiar factual position is that the Act of 2006 had been notified on 03.04.2006 but came into force on 01.10.2007 and the NOC was issued on 27.03.2006, after the Government of Rajasthan had invited open bids on 19.11.2005 for laying of City Gas Distribution network in the cities of Udaipur and Jaipur, in which the appellant had been selected. Besides depositing the sum of Rs. 2 Crores immediately towards commitment fee, the appellant had thereafter incurred mammoth expenditure after it was successful in the bids, which aspect has not been considered by the Board while deciding the application of the appellant. In our considered view, the same should not have normally been over looked. Besides the same, in the factual circumstances of the present case, the provision of ‘deemed authorisation? contained in Proviso (ii) to Section 16 had also been enforced on 12.07.2010 and it was necessary for the Board to have considered whether it was a case where only certain safeguards were required to be observed in view of the ‘deemed authorisation?.22. We are of the firm view that it was also necessary for the Board to have considered all these aspects and thereafter to have decided the application relating to authorisation/conditions to be imposed under the Act, if any, required. Besides this, detailed replies had been submitted by the appellant before the Board, which also ought to have been considered. Further, the requirement under the Act/Regulations is for grant of personal hearing to the appellant before deciding its application and if personal hearing was given, to have discussed the same in the order, which aspect has also been ignored by the Board.23. In view of the aforesaid discussion, we are of the opinion that there was illegality committed by the Board in deciding the application of the appellant while passing the order dated 19.05.2011, and as such the same deserves to be quashed. We also hold that in the aforesaid factual background, the decision of the State Government to revoke the NOC vide order dated 18.05.2011 was also highly unfair and unjust in as much as the reply of the petitioner dated 16.03.2011 in response to the notice dated 26.02.2011 has not been dealt with by the Government of Rajasthan while passing the said impugned order dated 18.05.2011. As such, the same does not stand to reason, which also deserves to be quashed.