Case: Petroleum &amp; Natural Gas Regul.Board Vs. Indraprastha Gas Ltd

2. The facts which are essential to be adumbrated are that the respondent invoked the jurisdiction under Article 226 of the Constitution assailing the order dated 9.4.2012 issued by the Board under Section 22 of the Act determining the network tariff and compression charges for CNG in respect of Delhi City Gas Distribution (CGD) network of the petitioner at Rs.38.58 per MMBtu and Rs.2.75 per kg. respectively w.e.f. 01.04.2008 and directing the petitioner therein to recover the said network tariff and compression charges for CNG separately through an invoice, without any premium or discount on a non-discriminatory basis and to appropriately reduce the selling price of CNG from the date of issuance of the order. Be it noted, the Board left the modalities and time frame for refund of differential network tariff and the compression charges for CNG recovered by the petitioner therein w.e.f. 1.4.2008 in excess from its consumers to be decided subsequently. The said order was criticized on many a ground. The principal contention was that the Board does not have the power to direct the writ petitioner, the respondent no. 1 herein, while charging its consumers, to disclose the network tariff and the compression charges and also to fix the said network tariff and compression charges in any particular manner.3. The said stand was resisted by the learned counsel for the Board contending, inter alia, that Regulations 3 and 4 of the Regulations apply to the entities like the writ petitioner; that the Board has the power to ask the writ petitioner, the respondent herein, to submit the network tariff and compression charges for CNG as per the Quality Regulations for approval of the Board; that the entity having accepted the said term as a condition for obtaining exclusivity is bound by the contractual obligation with the Board and is now stopped from challenging the power of the Board; that the objects and reasons of the Act is to protect interests of the consumers and regard being had to the statutory context when an action is taken, no flaw could be found with the same; that Sections 2(i), (m) and (w) of the Act are all intended to ensure that the consumer is not exploited; that Section 2(zn) of the Act defines the transportation rate and in the interpretative expanse, the order passed by the Board is absolutely defensible; that as per Section 11(e), the Board is empowered to regulate, inter alia, the transportation rates; that Section 61(2), especially, clauses (n), (t), (za) empower the Board to make regulations qua transportation tariff and any other matter which is required to be or may be specified by the Regulations or in respect of which provision is to be made by the Regulations; that keeping in view the objective of the Act, the Regulations permit the Board to fix the network tariff and the compression charges and the action of the Board so fixing the network tariff and the compression charges cannot be interfered with; and that the Regulations framed by the Board are consistent with the Act.4. The High Court observed that the question for adjudication was basically whether the Act authorises the Board to pass such an order and whether the intention of the legislature is to confer the power of price fixation on the Board. The High Court referred to Section 11 of the Act and came to holdthus conclude that PNGRB Act does not confer any power on the Board to fix/regulate price of gas as has been done vide the impugned order dated 9th April, 2012. Having held so, we do not deem it necessary to deal with the other Regulations impugned in the writ petition and suffice it is to state that any provision therein having the effect of empowering the Board to fix the price or the network tariff or compression charges for CNG, as long as not transportation rate, is beyond the competence of the Board and ultra vires the PNGRB Act and of noe thus allow this writ petition to the extent of holding that the Petroleum and Natural Gas Regulatory Board is not empowered to fix or regulate the maximum retail price at which gas is to be sold by entities as the petitioner, to the consumers. We further hold that the Board is also not empowered to fix any component of network tariff or compression charge for an entity such as the petitioner having its own distribution network. The provisions of the Regulations (supra) in so far as construed by the Board to be so empowering it are held to be bad/illegal. Accordingly, the order dated 9th April, 2012 to the extent so fixing the maximum retail price or requiring the petitioner to disclose the network tariff and compression charges to its consumers is struck down/quashed.Criticizing the judgment and order passed by the High Court, Mr. Arvind Datar, learned senior counsel for the appellant, has raised the followingThere is a presumption of validity of subordinate legislation, and as long as the parent Act enables the framing of regulations they are valid. When section 2(zn), 22(1), 61(2)(e), 61(2)(t) of the Act empower the Board to frame regulations for all three categories, namely, common carrier, contract carrier and city or local natural gas distribution network, the Regulations are valid. The High Court has incorrectly held that these regulations are ultra vires the parent Act without referring to any specific section or provision. That apart, on a reading of the provisions of the Act it is also noticeable that there is no postulate that the power to frame the transportation rate/transportation tariff can only be exercised only when the city network becomes a common carrier or contract carrier.(b) While the city networks get market exclusivity for 3/5 years, they get infrastructure exclusivity for 25 years with further extension of 10 years at a time and the fixation of transportation rate/transportation tariff has to be determined for the network of pipelines irrespective of whether they are common carriers, contract carriers or city networks. The Act and Regulations contemplate fixation of transportation rate/transportation tariff even at the stage of city network. It is quite clear that when the city network becomes a common carrier after the exclusivity period, the said transportation rate which is determined at the city network stage itself, would apply for carrying the gas of other suppliers under section 21(2).(c) The High Court has erroneously opined that the transportation rate provided for is the rate to be charged by one entity under the Act from another for transporting/carrying/moving gas of the other, for such a conclusion is completely contrary to the definition contained in section 2 (zn). The transportation rate has to be determined even for city networks under sections 22(1), 61(2)(e) and 61(2)(t) and that is the rate which can also be claimed from other gas suppliers but that does not mean that no transportation rate can be determined unless and until the pipeline becomes a common carrier. The High Court has flawed in holding that any provision therein having the effect of empowering the Board to fix the price or the Network Tariff or the Compression Charges for CNG, as long as not transportation rate, is beyond the competence of the Board and ultra vires the Act, and it is because though the Board cannot fix the selling price or monitor the selling price as natural gas has not been notified, yet the Board has the power, and indeed the duty, to fix the network tariff and compression charges (which are nothing but the transportation rate/transportation tariff) under the Act.(d) The High Court has committed gross illegality in its analysis while stating that the Board is not empowered to fix any component of Network Tariff or Compression Charge for any entity such as the respondent herein having its own distribution network. It has also faulted in opining that the provisions of the Regulations insofar as construed by the Board to be so empowering it are illegal. These findings recorded by the Division Bench are contrary to the provisions of the Act, for the Board can fix the transportation rate/transportation tariff and the fact that the rate will become applicable after expiry of the period of exclusivity does not make the Regulations themselves bad or illegal and it is absolutely clear that source of power comes from the provisions engrafted under Sections 2(zn), 22(1), 61(2)(e) and 61(2)(t) of the Act as they confer power on the Board to frame regulations for all three categories.(e) The omission of ‘cityin Section 11(e) (ii) is only accidental, and if the provisions of the Act are read as a whole, the power of the Board is clear as crystal for determining the transportation rate/transportation tariff for all categories. If the contention of the respondents is accepted, it will amount to rewriting the provision asrates after city network becomes a common carrier or contractThe view expressed by the High Court to the extent that the Board is not empowered to fix any component of Network Tariff or Compression charge for an entity such as the respondent that has its own distribution network is fallacious, for the said findings are not in accord with to the provisions of the Act, and if the submissions are accepted, the Regulations will become applicable only after the period of exclusivity. The Central Government had supplied subsidized gas to the authorised entities to ensure that consumers do not have to pay a high cost for both piped natural gas (used for domestic purposes) and compressed natural gas (used for transportation) and has made it mandatory for the respondents to disclose the break up. Quite apart from that, Section 21(1) that stipulates right of first use after the exclusivity period and Section 21(2) which provides that other entities are liable to pay minimum transportation rate for using the common carrier, do not indicate that the Board has no power to fix the transportation rate/ tariff during the exclusivity period or that it would apply to only the gas transported for other entities. The respondent company is obliged to indicate the transportation rate/tariff as soon as it is determined. Even if thecontention is accepted, the rate/tariff has to be indicated after the exclusivity period not only for the gas of other entities but also for the gas that is supplied by the authorised entity itself. Section 20(4) mandates the Board to fully protect consumer interest while granting exclusivity to the city network and the consumer interest is protected by the Board determining the transportation tariff being applicable to and being indicated for all the gas transported in the city network, whether it belongs to other entities or to the entity owning and operating the city

Court's reasoning:
23. The aforesaid analysis of the High Court is in consonance with the provision and the expressionas used in Section 22 for the said provision makes it graphically clear that Section 22 has to yield to Section 11 of the Act which deals with the powers and functions of the Board. Section 11 (e) only uses the words. We have referred to the aforesaid passage as the Constitution Bench has given emphasis on primary purpose of construction of statute to ascertain the intention of the legislature, harmonious construction of the various provisions of the CrPC and for ensuring that the interpretation does not lead to any absurdity. That apart, the Court has also categorically observed that it is not a case where it can be said that legislature has kept a lacuna which the Court is trying to fill up by judicial interpretative process so as to encroach upon the domain of the legislature. In the case at hand, in the schematic context of the Act and upon reading the legislative intention and applying the principle of harmonious construction, we do not perceive inclusion of the entities which are notwould be permissible. They have deliberately not been included under Section 11 of the Act by the legislature and the saiddoes not lead to any absurdity and, therefore, there is no necessity to think of any adventure.Having dealt with this facet, it is appropriate to refer to Section 61, which deals with the power of the Board to make Regulations.(1) of Section 61 stipulates that the Board may, by notification, make regulations consistent with the Act and the Rules made thereunder to carry out the provisions of the Act.(2) of Section 61 stipulates that without prejudice to the generality of the foregoing power, such Regulations may provide for all or any of the following matters and the matters have been enumerated thereafter.In the case at hand, the Board has not been conferred such a power as per Section 11 of the Act. That is the legislative intent. Section 61 enables the Board to frame Regulations to carry out the purposes of the Act and certain specific aspects have been mentioned therein. Section 61 has to be read in the context of the statutory scheme. The regulatory provisions, needless to say, are to be read and applied keeping in view the nature and textual context of the enactment as that is the source of power. On a scanning of the entire Act and applying various principles, we find that the Act does not confer any such power on the Board and the expressioned in Section 22 makes it a conditional one. It has to yield to other provisions of the Act. The power to fix the tariff has not been given to the Board. In view of that the Board cannot frame a Regulation which will cover the area pertaining to determination of network tariff for cityor local gas distributionnetwork and compression charge for CNG. As the entire Regulation centres around the said subject, the said Regulation deserves to be declared ultra vires, and we do so.