Appellate Tribunal For Electricity
Reliance Industries Limited vs Petroleum & Natural Gas Regulatory ... on 6 January, 2014
Appeal No.222 of 2012
Appellate Tribunal for Electricity
(Appellate Jurisdiction)
APPEAL NO.222 of 2012
Dated: 06th Jan.2014
Present:
HON'BLE MR. JUSTICE M KARPAGA VINAYAGAM, CHAIRPERSON
HON'BLE MR. NAYAN MANI BORAH, TECHNICAL MEMBER
In the Matter of:
Reliance Industries Limited,
4th Floor, Maker Chambers IV,
Nariman Point,
Mumbai-400 021
..... Appellant
Versus
1. Petroleum & Natural Gas Regulatory Board
1st Floor, World Trade Centre
Babar Road,
New Delhi-110 001
2. Gujarat State Petronet Limited (GSPL),
3rd Floor, G S P C Bhavan,
Behind Udyog Bhavan,
Sector-11, Gandhi Nagar,
Gujarat-382 011
..... Respondent(s)
Counsel for the Appellant : Dr. Abhishek Manu Singhvi,Sr Adv
Mr. Parag Tripathi, Sr Adv
Mr. Rajat Nair
Mr. K R Sasi Prabhu
Mr. Amit Bhandari
Mr. Gaurav Mitra
Mr. Samreen
Page 1 of 57
Appeal No.222 of 2012
Mr. Kunal Bahri
Counsel for the Respondent(s): Mr. Rakesh Dewan
Mr. Vipul Sharda
Mr. Saurav Aggarwal for R-1
Mr. C S Vaidyanathan,Sr Adv
Mr. Aspi Kapadia
Mr. Piyush Joshi
Ms. Sumiti Yadava
Ms. Nimisha Singh Dutta for R-2
J U D G M E NT
PER HON'BLE M R. JUSTICE M. KARPAGA VINAYAGAM,
CHAIRPERSON
1. The Reliance Industries Limited (Reliance) is the Appellant
herein. Petroleum & Natural Gas Regulatory Board
(Petroleum Board) is the 1st Respondent. M/s. Gujarat State
Petronet Limited (Gujarat Petronet) is the 2nd Respondent.
2. Aggrieved over the Impugned Order dated 11.9.2012
passed by the Petroleum Board (R-1) fixing the provisional
Natural Gas Pipeline Tariff at the rate of Rs.23.99/MMBTU
applying retrospectively from 20.11.2008, instead of from the
date of authorisation i.e. 27.7.2012, the Appellant has filed
this Appeal.
3. The short facts are as follows:
Page 2 of 57
Appeal No.222 of 2012
(a) Reliance, the Appellant, is carrying on the
business of petroleum refining, petrochemical
production and marketing of refinery products/petro
chemicals.
(b) M/s. Gujarat State Petronet Limited (Gujarat
Petronet, R-2) is carrying on the business of laying,
building, operating and expanding natural gas pipelines
for transportation of natural gas.
(c) In terms of the Petroleum and Natural Gas
Regulatory Board Act, 2006 (Petroleum Board Act), the
Petroleum Board (R-1) is entrusted with the
responsibility of authorising entities to lay, build,
operate or expand natural gas pipelines and regulating
and fixing the transportation rates for common carrier
or contract carrier pipelines.
(d) The Petroleum Board notified the Authorising
Regulations, 2008 (Authorising entities to lay, build,
operate or expand natural gas pipelines) on 6.5.2008.
(e) The Petroleum Board also notified the Tariff
Regulations for determining the Tariff for Natural Gas
pipelines on 20.11.2008.
(f) Under the provisions of the Tariff Regulations,
the Petroleum Board (R-1) is required to determine the
Natural Gas Pipeline's tariff on a provisional basis first
Page 3 of 57
Appeal No.222 of 2012
and subsequently to finalise the same considering the
actual cost and data at the end of the Financial Year,
on the basis of audited annual accounts. Thus as per
Tariff Regulations, the overall Tariff fixation comprises
of the following three steps:
i) Existing tariff charged by the entity on
authorization by the Board becomes "on account"
ii) On determination of provisional tariff by the
Board the entity will carry out adjustment with
retrospective effect relating back to the date from
which tariffs were charged "on account" basis.
Stakeholders/customers are entitled to submit
comments/objections to this provisional tariff.
iii) The final step provided in Schedule A: Regulation
9 is that after considering the response of
stakeholders, the provisional tariff shall become
final.
(g) The Gujarat Petronet (R-2) applied to the
Petroleum Board (R-1) for authorisation on 6.12.2008
under the Authorising Regulations for grant of
authorisation for laying, building, operating or
expanding its Grid under the Regulation 18 of the
Authorising Regulations, 2008.
Page 4 of 57
Appeal No.222 of 2012
(h) The Reliance, the Appellant in May, 2009 made
an arrangement by entering into a Gas Transportation
Agreement with Gujarat Petronet (R-2) for
transportation of Gas from Bhadbut for the price of
Rs.12.45/MMBTU and Hazira/Dahej for the price of
Rs.21.63/MMBTU to the Appellant's refinery in
Jamnagar, Gujarat.
(i) The Petroleum Board (R-1) after considering the
Application dated 6.12.2008, filed by the Gujarat
Petronet (R-2) seeking for authorisation, granted the
said authorisation to the Gujarat Petronet for its High
Pressure Gujarat Gas Grid by the order dated
27.7.2012.
(j) As indicated above, under the above
Regulations, the Petroleum Board (R-1) is required to
determine the initial unit natural gas pipelines tariff on
provisional basis first before authorising the tariff after
considering the actual cost and data at the end of the
Financial Year on the basis of audited accounts.
(k) Accordingly, the Petroleum Board (R-1) passed
the impugned order dated 11.9.2012. In this order, the
Petroleum Board decided that the provisional initial unit
natural gas pipelines tariff on a levelised basis for the
Gujarat Petroleum High Pressure Gas Grid network
Page 5 of 57
Appeal No.222 of 2012
shall be Rs.23.99/MMBTU with retrospective effect i.e.
from 20.11.2008 being the date of the Notification of
the Tariff Regulations.
(l) Aggrieved over the retrospectivity aspect of fixing
the tariff from the date of Tariff Regulation i.e.
20.11.2008 instead of the date of authorisation i.e.
27.7.2012, the Appellant has filed this Appeal
challenging the impugned order dated 11.9.2012.
4. The submissions of the Appellant in this Appeal are as
follows:
(a) The Petroleum Board notified the Authorising
Regulations, 2008 on 6.5.2008. Under these
Regulations, the Gujarat Petronet (R-2) applied to the
Petroleum Board for authorisation on 6.12.2008.
(b) In the meantime, the Petroleum Board notified
the Tariff Regulations for determining the tariff for
natural gas pipelines on 20.11.2008. The Petroleum
Board granted authorisation to the Gujarat Petronet
(R-2) for its High Pressure Gujarat Gas Grid under
Regulation 18 of the Authorising Regulations by the
order dated 27.07.2012.
(c) Under the Tariff Regulations, 2008, the
Petroleum Board is required to determine the tariff for
every Financial Year. Accordingly, by the impugned
Page 6 of 57
Appeal No.222 of 2012
order dated 11.9.2012, the Petroleum Board passed
the order fixing the tariff as Rs.23.99/MMBTU giving
retrospective effect from 20.11.2008 being the date of
Notification of the Tariff Regulations instead of giving
effect from the date of the authorisation namely
27.07.2012. The Tariff Regulations by which the tariff
has been fixed would apply to the entity which has
been authorised under the Authorising Regulations. In
the instant case, the Gujarat Petronet has been
authorised only on 27.7.2012. Thus, the tariff
Regulations would be applicable to Gujarat Petronet
from the very same date namely 27.7.2012. So, the
impugned order giving retrospective effect to
applicability of tariff is wrong.
(d) The Petroleum Board Regulations clearly provide
that the retrospective adjustments can only be made
from the date of authorisation. The impugned order
has wrongly been applied in the tariff retrospectively
from the date of the Tariff Regulations which have
come into force namely on 20.11.2008 instead of the
date on which pipeline of the Gujarat Petronet was
authorised by the Petroleum Board i.e. on 27.07.2012.
(e) The Petroleum Board has erred in holding that
the tariff would be applicable from the date of the Tariff
Regulations Notification i.e. 20.11.2008. The action of
Page 7 of 57
Appeal No.222 of 2012
the Petroleum Board is contrary to the Tariff
Regulations and as such it cannot act in contravention
of its own Regulations as settled by various judgments
of Hon'ble Supreme Court and the Appellate Tribunal
for Electricity.
(f) It is a settled position of law that no statute shall
have retrospective effect unless it is specifically
provided. In the present case, Tariff Regulations do not
provide expressly the retrospective effect.
(g) In the present case, the Act and relevant
Regulations do not provide empowering the Petroleum
Board to retrospectively apply the tariff order beyond
the date of authorisation. Such retrospective
application cannot be read into the Act under the garb
of consumer's interests as mandated by the preamble
to the Petroleum Act.
(h) The Petroleum Board is attempting to read
Regulations 18 (1) of the authorising Regulations so as
to include the obligation of an entity to operate as a
common carrier pipeline to be eligible for an
authorisation under the Regulations 18 (1). Thus, the
Petroleum Board is seeking to interpret its own
Regulations to include such obligations when it is not
provided for. This is against the settled principle of
Page 8 of 57
Appeal No.222 of 2012
interpretation when a statute is clear and unambiguous
nothing should be added or read into the statute.
(i) Gujarat Petronet's pipeline network gets
classified as a common carrier network only on the
authorisation of the Board on 27.07.2012. Hence, it is
not to be treated as a common carrier at the time of
application for authorisation filed on 06.05.2008.
(j) In the present case of Gujarat Petronet being
authorised under the Authorising Regulations, the
regulated tariff would be applicable only from the date
of authorisation by the Board and not prior to that.
(k) Before getting authorisation from the Petroleum
Board, the tariff applicable would be the contractual
tariff i.e. the tariff negotiated between Gujarat Petronet
and individual customer depending on various
contractual parameters. Since the Tariff Regulations
expressly provide that the tariff fixed by the Petroleum
Board can be applied only after authorisation, it is a
necessary corollary that prior to date of authorisation,
the tariff fixed by the Petroleum Board cannot apply.
(l) The present statute does not confer any power to
the Petroleum Board to apply the tariffs retrospectively.
It is a well-established principle of law that the
Petroleum Board is a creature of statute and it can only
Page 9 of 57
Appeal No.222 of 2012
exercise such powers as are vested in it by the statute.
If there are no express powers conferred to a statutory
authority, then no such powers can be inferred.
(m) The Appellant is a person aggrieved. Merely
because it did not participate in the proceedings before
the Petroleum Board, its locus-standi, cannot be
questioned.
(n) The impugned order is wrong also on the ground
that the Appellant being aggrieved has not been heard
before passing the impugned order thereby the
Petroleum Board has violated the principles of natural
justice.
(o) A fundamental fallacy of the Petroleum Board's
submission is to equate non-discriminate access (to a
common carrier pipeline) to an obligation to charge
uniform tariff from all its consumers. A regulated tariff is
not a uniform tariff as mistakenly claimed by the
Petroleum Board.
5. In reply to the above submissions, the Petroleum Board
(R-1) as well as the Gujarat Petronet (R-2) have advanced
the following arguments:
(a) The Act mandates the Petroleum Board to
protect the interests of the consumers by fostering fair
trade and competition amongst the entities. Based on
Page 10 of 57
Appeal No.222 of 2012
this mandate, the Petroleum Board can neither
discriminate amongst the customers nor can it allow the
entities to do so.
(b) Once that Gujarat Petronet had applied for an
authorisation as a common carrier under the
Authorising Regulations, the said entity must adhere to
the fundamental requirement to operate on a non-
discriminatory manner even during the pendency of the
authorisation application before the Petroleum Board.
(c) The Appellant does not have a right under the
provisions of the Act to file an Appeal against the
determination of the provisional tariff as the Appellant is
not an aggrieved person as per Section 33 of the Act.
(d) The Petroleum Board Act is an economic
legislation which provides power to the Petroleum
Board to determine the tariff under Tariff Regulations.
The Tariff Regulations provide for the manner in which
it is to be done. It is an established law that economic
Regulations must be read and interpreted strictly. It
cannot be interpreted liberally to include substantial
right where none is substantially listed.
(e) The Appellant is virtually challenging the
framework for determination of tariff established u/s 22
Page 11 of 57
Appeal No.222 of 2012
of the Act read with the Tariff Regulations. The same is
outside the jurisdiction of this Tribunal.
(f) The Gujarat Petronet applied for authorisation in
2008 on the basis that they are operating as a common
carrier network. As a common carrier network, the
Gujarat Petronet is under an obligation to charge
uniform tariff from its customers. Hence, the Gujarat
Petronet must charge a uniform tariff for all its
customers including the Appellant from 2008. Hence,
the question of retrospective date would not arise.
(g) Since the Gujarat Petronet applied for
authorisation as a common carrier, the Gujarat
Petronet ought to have charged uniform tariff from all
its customers. On the other hand, the Gujart Petronet
was charging a varying tariff of Rs.2 - Rs.48/MMBTU.
Therefore, the Petroleum Board, in the process of
rectifying this lacuna has fixed a unform tariff of
Rs.24/MMBTU from the date of Tariff Regulations so as
to achieve the objective of the Petroleum Board Act.
(h) The Appellant has only challenged the
retrospective application of tariff and not the tariff rates.
Thus, the Appeal is not maintainable for the reasons
that the Appellant is not an aggrieved person u/s 33 of
Page 12 of 57
Appeal No.222 of 2012
the Act and hence it has no locus-standi to maintain the
present appeal.
(i) The consumers of the common carrier or contract
carrier have not been given substantive right to
participate in the tariff determination proceedings. The
same cannot be read into the Act or Regulations. The
Appellant has not satisfied the requirement of an
aggrieved person as per Section 33 of the Act.
Therefore, the impugned order does not suffer from any
infirmity. This order is only a provisional order and not
final and as such the point regarding the violation of the
principles of natural justice is misconceived especially
when the consumer of the pipeline does not make any
investment in development, construction and
maintenance of the natural gas pipeline.
(j) Definition of "common carrier" does not require
uniform tariff but only mandates "non-discriminatory
open access". Thus Gujarat Petronet was under no
obligation whatsoever to charge uniform tariff from its
customers from the moment it applied for authorisation
under Regulation 18 of the Authorisation Regulations.
(k) Prior to the date of authorisation, the tariff fixed
and agreed contractually between the parties is the
Page 13 of 57
Appeal No.222 of 2012
tariff chargeable and payable and is incapable of
alteration.
6. In the light of the above rival contentions urged by the
parties, the following questions would arise for
consideration:
(a) Whether the Tariff Regulations can be made
applicable to Gujarat Petronet (R-2) prior to the
grant of authorisation to lay, build, operate or
expand its High Pressure Gujarat Gas Grid under
the provisions of the Regulations 18 of the
Authorising Regulations?
(b) Whether the Petroleum Board was
empowered in law, to make "the provisional initial
unit Natural Gas pipeline tariff" for the High
Pressure Gas Grid by the Gujarat Petronent
retrospectively applicable from the date of the
invocation of the Tariff Regulations i.e. on
20.11.2008, prior to the date of authorisation?
(c) Whether the Appellant can be considered as
an aggrieved person and if so, whether the
Petroleum Board was right in passing the
impugned order without following the principles of
natural justice, being violative of Section 13 (3) of
Page 14 of 57
Appeal No.222 of 2012
the Act read with Regulation 14 and Regulation 22
(11) of the Conduct of Business Regulations?
7. Before dealing with the questions (a) and (b) above, it would
be better to deal with the question (c) with regard to the
locus-standi of the Appellant and maintainability of the
Appeal.
8. According to the Appellant, the Appellant is an aggrieved
person and the impugned order has been passed without
hearing the Appellant which is gross violation of the
principles of natural justice that vitiates the impugned order.
9. On the other hand, the Respondents submitted the
following:
The Appellant does not have a right under the
provisions of the Act to file an Appeal against the
determination of provisional tariff for High Pressure
Gujarat Gas Grid. In view of the fact that the
consumers of the common/contract carriers have not
been given a substantive right to participate in the
tariff determination proceedings, the Appellant cannot
be said to be a person aggrieved u/s 33 of the Act
who is bound to satisfy the requirement of an
aggrieved person. Therefore, the Appeal which has
been filed by the person who has no locus-standi, is
not maintainable.
Page 15 of 57
Appeal No.222 of 2012
10. We have carefully considered the submissions made by
both the parties on this issue.
11. It is a settled law that when there is nothing in the statute to
actually prohibit from giving an opportunity to be heard, it is
clear that the nature of the statutory duty imposed itself
would be implied an obligation to hear before deciding the
issue.
12. It is held by the Hon'ble Supreme Court in the Gajendra
Haldia vs GRIDCO (2008) 13 SCC 414 that a "person
aggrieved" must be a person who suffered legal grievance
or legal injury or one who has been unjustly deprived and
denied of something which he would have been entitled to
obtain in usual course.
13. This principle is reiterated in Chhattisgarh State Electricity
Board Vs Chhatisgarh State Commission and Hira Ferro
Alloys Ltd reported in 2007 ELR (APTEL) 746 and GRIDCO
Limited Vs Jindal Stainless Limited (2009) ELR (APTEL)
0459.
14. The scope and ambit of the word "person aggrieved" would
include any person whose interest may be prejudicially
affected by what is taking place. In other words, it includes
any person who has a genuine grievance against something
which has been done which affects him, determines or
Page 16 of 57
Appeal No.222 of 2012
threatens with injury of his rights and obligation which has
been created under a statute.
15. The following are the other decisions:
(a) Northern Plastics Ltd., Vs Hindustan Photo Films
Mfg. Co Ltd., (1997) 4 SCC 452;
(b) United India Insurance Company Ltd V. Shila
Datta (2011) 10 SCC 509;
(c) Bar Council of Maharashtra Vs M. BV Dabholkar
(1975) 2 SCC 702;
(d) Jasbhai Motibhai Desai Vs Roshan Kumar, Haji
Bashir Ahmed (1976) 1 SCC 671;
(e) Thammanna Vs K Veera Reddy reported in
(1980) 4 SCC 62;
(f) S P Gupta vs Union of India, 1981 Supp SCC 87;
(g) Infosys Technologies Limited Vs Jupiter Inforsys
Limited, (2011) 1 SCC 125;
(h) Kanwar Singh Saini Vs High Court of Delhi
(2012) 4 SCC 307;
16. The principles regarding the aspects of the person
aggrieved and his locus-standi have been laid down by the
Hon'ble Supreme Court as referred to above are as follows:
(a) The meaning of the term "person aggrieved" will
have to be ascertained with reference to the purpose
and the provisions of the statute.
(b) A person will be held to be aggrieved by a
decision if the decision is materially adverse to him.
Page 17 of 57
Appeal No.222 of 2012
(c) The term "person aggrieved" are of wide import.
It should not be subject to a restricted interpretation of
possession or denial of legal rights. The test is whether
the words "person aggrieved" includes "a person who
has a genuine grievance because an order has been
passed which prejudicially affects his interests".
(d) In order to have locus-standi to invoke the
extraordinary jurisdiction under the Article 226, an
applicant should ordinarily be one who has a personal
or individual right in the subject matter of the
application. In other words, infringement of some legal
right or prejudice to some legal interest inhering in the
applicant is necessary to give him locus-standi in the
matter.
(e) In exceptional cases even a stranger or a person
who was not a party to the proceedings before the
authority but has a substantial and genuine interest in
the subject matter of the proceedings will be covered
by this Rule.
(f) Normally, a person aggrieved, must be a man
who has suffered legal grievance, a man against whom
a decision has been pronounced which has wrongfully
deprived him of something or wrongfully refused him
something or wrongfully affected his title to something.
Page 18 of 57
Appeal No.222 of 2012
(g) To be an aggrieved person, he must be one
whose interest is affected in some possible way. It
must not be a fanciful suggestion of grievance but a
likelihood of some injury or damage to the Applicant
may make a test of locus standi.
(h) In order to earn a locus standi as a "person
aggrieved", other than the arraigned party before the
adjudicating authority, it must be shown that such a
person aggrieved being third party has a direct legal
interest in the goods involved in the adjudication
process.
(i) The expression "any person aggrieved" will have
to be interpreted in the context in which it appears,
having due regard to the provisions of the act and
scheme. Any person aggrieved, is a person whose
legal rights have been affected, injured or damaged in
a legal sense or who has suffered a legal grievance.
The person is entitled to file an Appeal.
(j) It is one of the fundamental rules of our
constitutional set-up that every citizen is protected
against exercise of arbitrary authority by the statute. If
there is power to decide and determine to the pre-
judice of a person, the duty to act judicially is implicit in
the exercise of such powers. In those cases, the rule
Page 19 of 57
Appeal No.222 of 2012
of natural justice operates. This warrants the hearing
of the party who is likely to get prejudiced of the order
passed by the adjudicating authority.
17. In the light of the above well laid down principles, we shall
now analyse this issue as to whether the Appellant is an
aggrieved person or not.
18. From the perusal of the records available, it is clear that the
Appellant is a customer of the Gujarat Petornet and it utilises
the pipelines of Gujarat Petronet for transportation of natural
gas to its power plants carried out as per the Gas
Transmission Agreement. The Appellant being the
customer/beneficiary of the pipeline of the Gujarat Petronet
bears the transportation charges levied by the Gujarat
Petronet for usage of the natural gas pipeline. Thus, the
Appellant becomes the necessary party in the proceedings
relating to determination of transportation tariff which will be
recovered from the Appellant. Therefore, the Appellant
would become an aggrieved person if the Appellant is
prejudiced by the order determining the transportation tariff
by the parties.
19. In the present case, the impugned tariff order clearly states
that the difference between the tariff charged and that
approved by the Petroleum Board shall be adjusted with the
customer from 20th November, 2008. Thus, the obligation of
Page 20 of 57
Appeal No.222 of 2012
the Gujarat Petronet under the authorised Regulations is to
recover this tariff amount from the consumers including the
Appellant. It is the case of the Appellant that the Petroleum
Board has unlawfully authorised or directed the Gujarat
Petronet to recover the large sums of money from the
consumers like the Appellant. When the entire monetary
liability of the tariff order has to be borne by the customers
like the Appellant, then it is only the Appellant who is
practically and legally aggrieved by the impugned order and
therefore, it has got the locus-standi to file the present
Appeal.
20. As indicated above, The Appellant admittedly, is a customer
of the Gujarat Petronet. It is being charged with the
transportation charges for usage of pipelines for
transportation of gas. Hence, it has vested right to hearing
and transparency in the proceedings of the tariff
determination. Admittedly, the right for hearing the customer
like the Appellant had been denied in the present case. This
entitles the Appellant as an "aggrieved person" to file the
present Appeal u/s 33 of the Act.
21. Further, Section 13 (3) of the Act, read with the definition of
"Petition", "Proceedings" in Regulation 2 and Regulation 14
and Regulation 22 (11) of the Conduct of Business
Regulations would clearly reflect that the Petroleum Board is
Page 21 of 57
Appeal No.222 of 2012
mandated to adhere to the principle of natural justice in the
course of conducting any proceeding.
22. The principles of natural justice include the right to hearing
in this case. Admittedly, there is no notice and no hearing.
23. Thus, the contention regarding absence of locus-standi of
the Appellant does not merit consideration especially when
the Gujarat Petronet would generate the revenue by
charging the tariff from the customers including the
Appellant on its network. Accordingly, the Appellant being a
major customer of the Gujarat Petronet is to be considered
as an aggrieved person.
24. Had the Petroleum Board issued public notice inviting
suggestions from public who were likely to be affected for
participating in the tariff determination process, then such
entities or the members of the public including the
customers like the Appellant would have assisted the
Petroleum Board by objecting with the reasonings to the
proposal made by the Petroleum Board. Admittedly, this
was not done. Therefore, the Appellant who is affected and
aggrieved by the order, has the right to approach this
Tribunal by filing an Appeal, as the Appellant has got the
locus standi. In that view of the matter we hold that the
Appeal is maintainable. Thus, 3rd question (para 6 (c) above
refers) is answered accordingly.
Page 22 of 57
Appeal No.222 of 2012
25. Let us now go into the other questions (a) and (b) as
referred to in Para-6. As both these questions are
interconnected, these issues are being taken-up together
for discussion and decision.
26. Before analysing these issues, it would be proper to refer to
the impugned findings rendered by the Petroleum Board
with reference to the applicability of the tariff under the Tariff
Regulations. The same is quoted as below:
"9.4 IMPUGNED FINDING:
"3.2.3 Tariff Effectiveness:
(i) GSPL has mentioned that tariff determination
cannot precede authorisation of the entity and
consequently tariff should be made effective only on a
prospective basis as there is no provision in the
PNGRB Act, 2006 for retrospective fixation of tariff.
GSPL has further mentioned that provisions of the
relevant tariff Regulations do not cover GSPL in light
of the fact that at that point in time, GSPL was not an
entity falling under any of the categories specified in
Regulation 3 of the PNGRB (Determination of Natural
Gas Pipeline Tariff), Regulations, 2008.
(ii) The substance of the argument made by GSPL is
that absence of grant of authorization to them by the
Board would keep them completely outside regulatory
oversight in respect of items like transportation tariff
and it is in that context that the applicability of tariff
has been proposed by them to be on a prospective
basis i.e from the date of grant of authorization and
Board cannot seek to implement tariffs from
Page 23 of 57
Appeal No.222 of 2012
20.11.2008 onwards as during that period GSPL had
not been authorised by the Board.
(iii) The reasoning given by GSPL has been examined
and it is not considered tenable due to the following
factors:-
(a) It is a misnomer that the Board is seeking to
impose retrospective application of tariff; rather
what is being sought by the Board is
implementation of tariffs from the date when the
tariff regulations titled PNGRB (Determination of
Natural Gas Pipelines Tariff) Regulations, 2008
were notified and brought into force from
20.11.2008 onwards in respect of all entities who
were laying, building, operating or expanding
natural gas pipelines before the appointed day.
(b) From a plain reading of the PNGRB Act,
2006, it is unambiguously evident that the said
Act contains separate and distinct provisions for
authorization and tariff i.e. Section 16 and
Section 22 respectively. Section 22 which
contains specific provisions on transportation
tariffs has been in force since 01.10.2007 which
is the appointed day. Undoubtedly, since all
provisions of the Act are inter-woven, regulations
notified by the Board have an applicability clause
which states that it would be applicable to entities
authorized by the Central Government or by the
Board. However, GSPL by either own admission
as given in their annual report of 2008-09 have
stated thus:-
The company owns and operates one of the
largest natural gas transmission networks in
India. The Company is the first pure natural
gas transmission Company in India for
transmission of natural gas on an "open
access" basis, which means that the
Page 24 of 57
Appeal No.222 of 2012
Company makes gas transmission capacity
available to any shipper on non
discriminatory basis. The unique business
model of "Pure Transmission Services and
Open Access" adopted by the Company are
in line with the spirit of new regulatory
regime.
(c) It is not GSPLs case that they were not
operating a natural gas pipeline before the
appointed day as by virtue of their own statement
mentioned above they have confirmed operating
such an "open access" pipeline network. Even
the authorization granted by the Board to GSPL
is for their pipeline network which the entity was
operating before the appointed day. Under these
circumstances, there would appear to be no
option for an in-operation "open access" or
common carrier natural gas pipeline before the
appointed day but to fall within the purview of
said regulatory framework specifically created for
the purpose of transportation tariff determination
drawing powers from the provisions of Section 61
(2) (t) of the PNGRB Act, 2006 i.e., the PNGRB
(Determination of Natural Gas Pipeline Tariff)
Regulations, 2008 which have come into force
from the date of their Notification on 20.11.2008.
Any arguments to the contrary citing absence of
authorisation would be legally unsustainable as
no entity can claim to have operated in violation
of the legislative and regulatory framework which
was already in force.
(d) If GSPLs stand is allowed to prevail that the
tariff to be determined by the Board would be
applicable to them only prospectively from the
date of grant of authorisation to them, it would
amount to discriminatory application of the
relevant tariff regulations notified by the Board for
Page 25 of 57
Appeal No.222 of 2012
entities laying, building, operating or expanding
common or contract carrier natural gas pipelines
before the appointed day either authorized by the
Central Government (which authorisation has
been formally accepted by the Board later) or
authorized by the Board.
(iv) In view of the above, there can be no doubt that
transportation tariff to be determined by the
Board in respect of GSPLs network should also
be equally made applicable to them from the date
of Notification of the relevant tariff Regulations
i.e. 20.11.2008".
27. The above findings in the impugned order would make it
clear that the Petroleum Board fixed the tariff which would
be applicable from the date of the Notification of the Tariff
Regulation i.e. 20.11.2008.
28. In this Appeal, the Appellant has not challenged the tariff
rate. The claim of the Appellant is that the pipeline tariff of
the Gujarat Petronet as approved by the Petroleum Board
ought to have been made applicable only from the date of
the authorisation namely 27.07.2012 and not from
20.11.2008 i.e. the date of Tariff Regulations.
29. The following aspects have been brought to our notice by
the Appellant in order to substantiate its plea that
retrospective effect should not have been given to the tariff:
(a) Regulation 3(2) of the Tariff Regulations states
that the Tariff Regulations will apply to an entity laying,
building, operating or expanding a natural gas pipeline
Page 26 of 57
Appeal No.222 of 2012
before the appointed day (01.10.2007) and authorised
by the Respondent No.1 for such activities under
Regulation 18 of the Authorising Regulations.
(b) At the time of filing, Gujarat Petronet was not
covered under Regulation 3 of the Tariff Regulations;
therefore, the Tariff Regulations have no applicability
prior to the date of authorisation.
(c) Subsequently, during the course of Tariff
Determination, authorisation was granted to Gujarat
Petronet by the Petroleum Board on 27.07.2012.
(d) However, the Petroleum Board failed to take note
of the fact that Tariff Regulation shall apply from the
date of authorisation but instead it held that the tariff
would be applicable from the date of Notification of the
Tariff Regulations.
(e) The action of Petroleum Board is contrary to the
Tariff Regulations. The Petroleum Board cannot act in
contravention to its own Regulations as settled by
various judgments of the Supreme Court and Appellate
Tribunal.
30. In the light of the above aspects, the issues are to be
analysed. The following facts are not disputed:
Page 27 of 57
Appeal No.222 of 2012
(a) On 6.5.2008, the Petroleum & Natural Gas
(Authorising Entities to lay, build, operate or expand
Natural Gas Pipelines) Regulations 2008 (Authorising
Regulations) came into force.
(b) The Tariff Regulations came into force on
20.11.2008. The Gujarat Petronet applied for
authorisation before the Petroleum Board on
6.12.2008. The said authorisation was granted by the
Petroleum Board to the Gujarat Petronet under the
Authorising Regulations on 27.07.2012. However, the
Petroleum Board passed the impugned order on
11.09.2012 fixing the tariff w.e.f from 20.11.2008 i.e.
the date of the Notification of the Tariff Regulations. In
this context, it would be appropriate to refer to the
applicable provisions of the Act as well as the
provisions of the Tariff Regulations. Section 2 (j)
would define the term 'common carrier'. The same is
as follows:
"2. Definitions:
(j) "Common Carrier" means such pipelines for
transportation of petroleum, petroleum products
and natural gas by more than one entity as the
Board may declare or authorise from time to time
on a non-discriminatory open access basis under
Page 28 of 57
Appeal No.222 of 2012
Sub section (3) of Section 20, but does not
include pipelines laid to supply.
.........
Explanation-for purposes of this clause, a contract carrier shall be treated as a common carrier, if-
(i) such contract carrier has surplus capacity over and above the firm contracts entered into; or
(ii) the firm contract period has expired,"
(c) The functions of the Petroleum Board has been provided in Section 11 (e) which is as under:
Section 11 (e) "11. Functions of the Board- The Board shall-
......
(e) regulate, by regulations-
(i) access to common carrier or contract carrier so as to ensure fair trade and competition amongst entities for that purpose specify pipelines access code;
(ii) Transportation rates for common carrier or contract carrier,"
(d) Section 20(3) would refer to the procedure for giving authorisation which reads as under:
Section 20 (3) Page 29 of 57 Appeal No.222 of 2012 "20. Declaring, laying, building, etc., of common carrier or contract carrier and city or local natural gas distribution network.
.....
(3) The Board may, after following the procedure as specified by regulations under Section 19 and sub-section (1) and (2), by notification-
(a) declare a pipeline or city or local natural gas distribution network as a common carrier or contract carrier; or
(b) authorise an entity to lay, build, operate or expand a pipeline as a common carrier or contract carrier; or
(c) Allow access to common carrier or contract carrier or city or local natural gas distribution network,
(d) Authorise an entity to lay, build, operated or expand a city or local natural gas distribution network,"
(e) The applicability of the Regulations to an entity has been given in the Regulations 3 (2) of the Tariff Regulations which is as under:
"Regulation 3(2) of the Tariff Regulations "3. Application: These Regulations shall apply to an entity:-:
(2) Laying, building, operating or expanding a natural gas pipeline before the appointed day and authorised by the Board for such activities under Regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Page 30 of 57 Appeal No.222 of 2012 Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008".
(f) In regard to the data to be submitted by the Entity for determination of the tariff is given in Section 5 (2) of the Tariff Regulations which is as under:
Regulation 5(2) of the Tariff Regulations:
"5. Form for data submission by entity for determination of natural gas pipeline tariff- Every entity shall submit to the Board the financial costs and other data in the form at Attachment 1 of Schedule A, if as on the day of the notification of these Regulations, the natural gas pipeline-
(2) Is already in operation, then, in relation to an entity referred to in-
(a) Clause (1) of Regulation 3, within ninety days of the notification of these Regulations;
(b) Clause (2) of Regulation 3 within ninety days of the grant of authorisation by the Board or;
(c) Clause (3), within ninety days of the date of authorisation by the Board;
Provided that the entity shall charge initial unit natural gas pipeline tariff "on account basis"
based on these regulations from the date of commission of natural gas pipeline referred to in clause (1) of Regulation 3 or the date of authorisation by the Board of natural gas pipeline referred to in clause (2) or clause (3) of Regulation 3, as the case may be, till the Page 31 of 57 Appeal No.222 of 2012 date the Board provisionally fixes the initial unit natural gas pipeline tariff;
Provided further that the entity shall carry out adjustments, with a retrospective effect with the customers for the difference between the initial unit natural gas pipeline tariff that the entity had so charged and that provisionally fixed by the Board."
(g) The Regulations 9 (2) of the Tariff Regulations would provide for the determination of the initial unit natural gas pipeline tariff as under:
Regulation 9 (2) of Schedule A of the Tariff Regulations:
"9. Determination of initial unit natural gas pipeline tariff and review of unit natural gas pipeline tariff ................
(2) The initial unit natural gas pipeline tariff including its apportioning over all tariff zones shall be determined based on provisional computations."
(h) Regulations 18 (9) (a) (d) provide for the determination of the tariff for the entity not authorised by the Central Government which reads as under:
Regulation 18 (9) (a) and (d):
"18. Entity not authorised by the Central Government for laying, building, operating or expanding natural gas pipeline before the appointed day.Page 32 of 57 Appeal No.222 of 2012
......
(9) In case the entity is selected for grant of authorisation for laying, building, operating or expanding natural gas pipeline,
(a) the natural gas pipeline tariff shall be determined under the Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff for Natural Gas Pipelines) Regulations, 2008:
.....
(d) the entity shall abide by the provisions under the relevant regulations on access code and declaring natural gas pipelines as common carrier or contract carrier."
31.The above provisions would make it evident that Regulation 3(2) of the Tariff Regulations, 2008 mandates that the Tariff Regulations are applicable only to those entities which have already been granted authorisation under the Authorising Regulations. These provisions do not refer to anything with reference to retrospective effect.
32. It is settled law that an Act or Regulation has to provide expressly for retrospective application for such Act or provisions to be enforced in a retrospective manner. The Act and the relevant Regulations do not contain any provision which empower the Petroleum Board to retrospectively apply the tariff order. Such retrospective application cannot be read into the Act under the garb of consumer's interests. The Petroleum Board has invoked Page 33 of 57 Appeal No.222 of 2012 Regulations 18 of the Authorising Regulations. Regulations 18 of the Authorising Regulations are reproduced below:
"18. Entity not authorised by the Central Government for laying, building, operating or expanding CGD network before the appointed day."
33. The reading of the above Regulation would reveal that it does not provide for a pre-requisite condition that an entity must operate as a common carrier to seek authorisation under this Regulation. The relevant Regulation for applicability of tariff determined by the Petroleum Board is only Regulations 3 (2) of the Tariff Regulations.
34. The Petroleum Board has invoked Regulation 18 (1) of the Authorisation Regulations in order to include the obligation of an entity to operate as a common carrier to be eligible for Regulations into Regulations 18 (1). The interpretation of the Regulations to include such obligation is not correct. Admittedly, the Authorisation Regulations could not provide to include the requirement of an entity to operate as a common carrier to apply for authorisation under the said Regulations. There is no mandatory obligation for an entity to operate as a common carrier under the said Regulations. Therefore, such obligation cannot be read into Regulations which are plain and unambiguous by the very same authority that has drafted the Regulations.
Page 34 of 57 Appeal No.222 of 201235. Regulations 18 of the Authorising Regulations provide that if an entity is authorised, its tariff shall be determined under the Tariff Regulations. Regulations 2 (1) (e) (ii) of the Tariff Regulations provides that Provisional Initial Unit Natural Gas Pipelines Tariff is the tariff which will be applicable for a period commencing from the date of commissioning of natural gas pipeline within the purview of the Tariff Regulations and ending on the last date of the Financial Year.
36. Regulations 3(2) of the Tariff Regulations makes it clear that the tariff regulations will apply to an entity that has been authorised under Regulations 18 of the Authorising Regulations. Thus, it is clear that no tariff fixed by the Petroleum Board can be made applicable for any period prior to the authorisation for pipeline coming within the purview of the Tariff Regulations.
37. In the instant case, as mentioned above, the Gujarat Petronet has been authorised only on 27.07.2012.
38. In view of the above, the Tariff Regulations would be applicable to the Gujarat Petronet only from the date of authorisation. This date, being the date on which the pipeline network of Gujarat Petronet came under the purview of the Tariff Regulations, it should also be the date Page 35 of 57 Appeal No.222 of 2012 as per the Regulations 2 (1) (e) (ii) of the Tariff Regulations from which the tariff can be fixed by the Petroleum Board.
39. In addition to this, Regulation 5(2) (b) of the Tariff Regulations provides for the entities to provide financial cost and other data to the Petroleum Board within 90 days of the grant of authorisation by the Board. Thus, the relevant date by all counts is the date when the pipeline became authorised.
40. In fact, the first proviso to Regulation 5 (2) of the Tariff Regulations provides that the entity shall charge initial unit natural gas pipeline tariff "on account basis" from the date of authorisation by the Board of the pipeline referred to in Regulation 3(2) of Tariff Regulations till the date the Petroleum Board provisionally fixed the initial unit natural gas pipeline tariff.
41. The second proviso to Regulation 5(2) of the Tariff Regulations also provides that adjustments will be carried out with retrospective effect with the customers for the difference that the entity so charged and that provisionally fixed by the Petroleum Board.
42. This would make it clear that on determination of the provisional tariff by the Petroleum Board, the entity will carry out adjustments with retrospective effect relating back to the date from which the tariff were charged on account basis. In Page 36 of 57 Appeal No.222 of 2012 other words, the Regulations clearly provide that the retrospective adjustments can be only from the date of authorisation and not from the date of Tariff Regulations. Thus, the impugned order has wrongly applied the Tariff Regulations from the date of the Tariff Regulations namely 20.11.2008 in respect of the date on which the pipelines were fixed by the Board i.e. on 27.07.2012.
43. If the draftsman wanted the tariff to apply retrospectively beyond the date of authorisation, he would have framed those Regulations in such a way that it expressly provided for this. For the entities which are covered by Regulation 17 i.e. entities authorised by the Central Government, the Regulations expressly provided that the tariff shall be retrospectively applied from the date of commissioning of natural gas pipe lines. But, such a provision has not been made in the Regulations relating to the Gujarat Petronet Limited (R-2).
44. As such, the differential treatment is evident from the reading of the Regulations 2 (1) (e) (ii), Regulation 3(ii), Regulation 5(ii) of the Tariff Regulations as well as the Regulations 17 and 18 of the Authorisation Regulations. Thus, the differential treatment between the entities approved by the Central Government as compared to the entities authorised by the Petroleum Board is not only permissible but actively contemplated and provided for.
Page 37 of 57 Appeal No.222 of 201245. As stated earlier, if the intent had been that the tariff to be applied retrospectively for all cases, the same would have been so stated. If that is so, it must have been provided in the Regulations that tariff would apply retrospectively from the date of the application for authorisation or the date of commencing of the pipelines as in the case of pipelines authorised under Regulation 17 or the date of Notification of the Tariff Regulations. But, that is not the case here.
46. Being cognizant that procedure under Regulation 18 contemplates a time gap between application and authorisation, the tariff regulations specifically provide that Tariff Regulations shall apply to pipelines authorised under Authorization Regulation 18 only from the date of authorization and not from any other date.
47. Further, Section 11, Clause (e) of the Act states "regulate by Regulations". It implies that there can be no determination of Tariff in any other manner. Section 62 of the Act also provides that Rules and Regulations have to be laid before the Parliament and it would come into effect only thereafter with such a modification as may be approved.
48. From the careful perusal of these provisions, it is clear that the Petroleum Board cannot regulate prior to the date of the Regulations. In other words, the scheme of the Act does not permit one to go beyond the statute and to pass the orders.
Page 38 of 57 Appeal No.222 of 2012In other words, once, the Regulations had been framed with respect to determination of tariff and authorisation of entities, then the order of the Petroleum Board necessarily has to conform to such Regulations.
49. In this context, two other provisions of the Act have to be taken note of. They are Section 20(3) and Section 63 of the Act.
50. Section 20(3) of the Act provides that the power exercised by the Petroleum Board is prospective. The provision of Section 20(3) uses the language "the Board may after following the procedure as specified by regulations...". This indicates that the procedure is provided in the Regulations. Therefore, the power to impose tariff can only be prospective in accordance with the Act read with Regulations.
51. Section 63 of the Act is a provision relating to transitional arrangements. This provides that the Petroleum Board may monitor the contracts entered into between the parties before coming into force of the Act and approved by the Central Government. The scope of Section 63 of the Act is also limited to certain type of contracts only and it does not relate to all types of contracts. Therefore, it is amply clear that if the Act does not provide for such transitional arrangements before the coming into force of the Regulatory Page 39 of 57 Appeal No.222 of 2012 regime, then the transactions between the parties shall be covered by the contractual arrangement under the law of contract.
52. According to the learned Counsel for the Petroleum Board, the Gujarat Petronet applied for authorisation in the year 2008 on the basis that they are operating as a common carrier network and as a common carrier network, the Gujarat Petronet was under an obligation to charge uniform tariff from all customers and under those circumstances, the tariff shall be fixed retrospectively.
53. This submission, in our view, is misconceived.
54. The Gujarat Petronet got classified as a common carrier network only on authorisation by the Board in 2012. Till then, the Gujarat Petronet cannot be treated as a common carrier merely because the application for authorisation was filed in 2008.
55. In this context, the following Sections are to be quoted for understanding this concept. These provisions emphasise the factum of the Petroleum Board's authorisation or declaration as a common carrier which is to be a condition precedent for conferring that status. They are as follows:
56. Section 2 (j) of the PNGRB Act is as follows:
Page 40 of 57 Appeal No.222 of 2012"Common Carrier" means such pipelines for transportation of petroleum, petroleum products and natural gas by more than one entity as the Board may declare or authorise from time to time on a non- discriminatory open access basis under Sub section (3) of Section 20...".
57.Section 11 of the PNGRB Act lays down the functions of the Board. The relevant provisions are as follows:
Section 11 (e) "The Board shall-
(a) protect the interest of consumers by fostering fair trade and competition amongst the entities;
(b)......
(c) authorize entities to-
(i) lay, build, operate or expand a common carrier or contract carrier
(d) declare pipelines as common carrier or contract carrier;
(e) Regulate, by regulations:-
(i) Access to common carrier or contract carrier so as to ensure fair trade and competition among entities and for that purpose specify pipeline access code;
(ii) Transportation rates for common carrier or contract carrier."
58.Section 16 (a) of the PNGRB Act provides as follows:
Page 41 of 57 Appeal No.222 of 2012"No entity shall lay, build, operate or expand any pipeline as a common carrier or contract carrier without obtaining authorization under this Act....".
59.Section 17 (1) of the PNGRB Act provides as follows:
"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...".
60.Section 19 of the PNGRB Act provides for grant of authorisation:
"19 (1) When either on the basis of an application for authorisation for laying, building, operating or expanding a common carrier or contract carrier or for laying, building, operating or expanding a city or local natural gas distribution network is received or on suo motu basis the Board forms an opinion that it is necessary or expedient to lay, build, operate or expand a common carrier or contract carrier between two specified points, or to lay, build, operate or expand a city or local natural gas distribution network in a specified geographic area, the Board may give wide publicity of its intention to do so and may invite applications from interested parties to lay, build, operate or expand such pipelines or city or local natural gas distribution network.
(2) The Board may select an entity in an objective and transparent manner as specified by Regulations for such activities."
61.Section 20 of the PNGRB Act lays down the process for declaration of a pipeline as a common carrier pipeline:
Page 42 of 57 Appeal No.222 of 2012"20(1) If the Board is of the opinion that it is necessary or expedient to declare an existing pipeline for transportation of petroleum, petroleum products and natural gas or an existing city or local natural gas distribution network as a common carrier or contract carrier or to regulate or allow access to such pipeline or network, it may give wide publicity of its intention to do so and invite objections and suggestions within a specified time from all persons and entities likely to be affected by such decision.
(2) For the purposes of sub section (1), the Board shall provide the entity owning, the pipeline or network an opportunity of being heard and fix the terms and conditions subject to which the pipeline or network may be declared as common carrier or contract carrier and pass such orders as it deems fit having regard to the public interest, competitive transportation rates and right of first use. (3) The Board may, after following the procedure as specified by regulations under Section 19 and sub- section (1) and (2), by notification:-
(a) declare a pipeline or city or local natural gas distribution network as a common carrier or contract carrier; or
(b) authorise an entity to lay, build, operate or expand a pipeline as a common carrier or contract carrier; or
(c) Allow access to common carrier or contract carrier or city or local natural gas distribution network,
(d) Authorise an entity to lay, build, operated or expand a city or local natural gas distribution network,"Page 43 of 57 Appeal No.222 of 2012
62. The conjoint reading of the above provisions of the Act would make it evident that the declaration of authorisation by the Board is required for the pipeline to become a common carrier pipeline. In other words, the concept of common carrier was introduced by the Act which provides for natural gas pipeline to become classified as a common carrier pipeline on authorisation by the Petroleum Board.
63. Gujarat Petronet has been operating on an existing natural gas pipeline even prior to the Act coming into force. The Gujarat Petrolnet applied for grant of authorisation under Regulation 18 of the Authorising Regulations on 6.12.2008. As mentioned earlier, this authorisation was ultimately granted by the Petroleum Board on 27.07.2012. Hence, the condition precedent for the authorisation issued by the Board, only stood fulfilled on 27.07.2012 and as such, the Gujarat Petronet gets classified as a common carrier network only on this date, namely, 27.07.2012.
64. The learned Counsel for the Petroleum Board has stated that since the Gujarat Petronet applied for authorisation as a common carrier, the Gujarat Petronet as per the definition of the common carrier ought to have charged and collected uniform tariff from all its customers whereas, in fact, it was charging varying tariff from various customers and, therefore, the Petroleum Board in order to rectify this, fixed the uniform tariff of Rs.24/MMBTU from the date of the Tariff Page 44 of 57 Appeal No.222 of 2012 Regulations so as to achieve the objectives of the Petroleum Board Act.
65. We have carefully considered this submission made by the learned Counsel for the Petroleum Board on this issue, but we find no substance in this.
66. Once a pipeline is classified as a common carrier network on authorisation, there is an obligation to allow non- discriminatory access but, as far as tariff is concerned, there is no requirement to charge uniform tariff. So, the Petroleum Board cannot equate non-discriminatory access with uniform tariff for the following reasons:
(a) The issue of discrimination can arise only after the date of authorisation;
(b) Even in the post-authorisation/declaration, the discrimination focused on by the scheme of the Act is access or lack of access. That means the right of all shippers to get access to the pipeline network without any discrimination.
(c) As far as the tariff after authorisation is concerned, it would be the statutory tariff as per the Tariff Regulations. This means the regulated tariff.
(d) Crucially, the regulated tariff is not a uniform tariff as claimed by the Petroleum Board. This means that Page 45 of 57 Appeal No.222 of 2012 different zones will have invariably non-uniform tariffs, depending on various parameters.
67. Section 2(j) of the Petroleum Act only refers to non- discriminatory open access basis. There is no provision requiring uniform tariff from all customers.
68. Section 11(e) of the Act also draws a distinction between access and tariff. Section 11 (e) (i) of the Act provides that the Petroleum Board shall regulate access to common carrier network through the Regulations to ensure fair trade and competition. Thus, the reason for non-discriminatory access is to foster a competitive market environment. This is distinct from Section 11 (e)(ii). This Section provides that the Petroleum Board shall provide for the transportation tariff for common carrier networks through Regulations. Thus, there is no requirement for charging uniform tariff which can be read into this Section.
69. Under the Tariff Regulations itself, the transporter is entitled to charge different tariffs depending upon parameters like the length of the pipeline used by the customer etc.. It is noticed that for the Gujarat Petornet's network itself, the Petroleum Board approved tariff ranging from Rs.18/MMBTU to Rs.37/MMBTU depending on the zone in the network.
Page 46 of 57 Appeal No.222 of 201270. Various provisions of the Act and Regulations provide for the regulated tariff. Section 21(1) of the Petroleum Board Act provides as under:
"Subject to the provisions of this Act, the Board shall lay down, by regulations, the transportation tariffs for common carriers and contract carriers or city or local natural gas distribution network and the manner of determining such tariffs."
71. Similarly, Regulation 18 and sub-Regulation 9 of the Authorising Regulations clearly provide that in case, the entity is selected for authorisation, the tariff shall be determined under the Tariff Regulations. Therefore, the condition precedent of the authorisation has to be fulfilled before a regulated tariff is applied. This is natural because Regulation 18 provides extensive scrutiny by the Petroleum Board which includes assessment of the progress of the network, verification of supporting documentation, public consultation etc., to finalize the facilities in the network which would be considered for granting authorisation. Only upon grant of authorisation, the entity comes to know which assets are regulated and the value of that will be used for tariff determination in line with the relevant regulations.
72. In fact, the Tariff Regulations stipulate the manner and extent to which such regulated tariff would be applied to various entities. In the present case, the regulated tariff for the Gujarat Petronet being authorised under Regulation 18 Page 47 of 57 Appeal No.222 of 2012 of the Authorising Regulations would be applicable from the date of the authorisation by the Petroleum Board.
73. It is argued by the learned Counsel for the Petroleum Board that till the time Gujarat Petronet is authorised, the Petronet cannot operate in a vacuum.
74. This submission also does not deserve acceptance.
75. The statutory regime for the Gujarat Petronet pipeline network only came into existence on 27.07.2012. Till then, neither law nor commercial reality can operate in a vacuum. This means prior to authorisation, it is the contractual rate, which would apply. Admittedly, the Gujarat Petronet has been operating a gas pipeline network from 2001 onwards. Therefore, the contractual arrangements must be given full play for the period prior to the statutory regime kicking in.
76. In other words, before getting authorisation from the Petroleum Board, the tariff applicable would be the contractual tariff i.e. the tariff negotiated between the Gujarat Petronet and each customer depending upon the volumes that are committed, length of the network that is being used to deliver gas and time period of agreement etc.
77. Since the Tariff Regulations expressly provide that the tariff fixed by the Petroleum Board can be applied only after authorisation, it is a necessary corollary that before the date Page 48 of 57 Appeal No.222 of 2012 of authorisation the tariff fixed by the Petroleum Board cannot apply.
78. It is a well established principle of law that in the absence of expressed provision, a statute or regulation cannot apply retrospectively. When the law is silent on this point, then that statute/regulation will only apply prospectively. These are the decisions in this regard:
(a) Shakti Tubes Limited Vs State of Bihar : (2009) 7 SCC 673 paras 24-25;
(b) Binani Zinc Limited Vs Kerala State Electricity Board (2009) 11 SCC 244 para 36;
(c) Kusumam Hotels Private Ltd Vs Kerala State Electricity Board & Ors: (2008) 13 SCC 213 paras 23,24, 36;
(d) Meghalaya SEB vs Meghalaya SERC & Byrnihat Industries Association: 2010 ELR (APTEL) 0940, paras 14,35-38;
(e) Nani Sha vs State of Arunachal Pradesh (2007) 15 SCC 406, at page 413 (Para 13);
(f) Union of India vs Kartick Chandra Mondal (2010) 2 SCC 422, at page 426 (para 15);
(g) Anil Chandra v Radha Krishna Gaur (2009) 9 SCC 454, at page 461 (para 19);
(h) Keshavan Madhava Menon v. State of Bombay, 1951 SCR 228;
(i) Dayawati v Inderjit (1966) 3 SCR 275 (para 9);
(j) Subodh S Salaskar v Jayaprakash M Shah (2008) 13 SCC 689 at page 700;
Page 49 of 57 Appeal No.222 of 2012(k) Workmen v Firestone Tyre & Rubber Co. of India (P) Limited., (1973) 1 SCC 813, at page 839;
(l) Ahmedabad Mfg. and Calico Printing Co Ltd., v S G Mehta, ITO, 1963 Supp (2) SCR 92;
(m) LIC v Escorts Ltd., (1986) 1 SCC 264, at page 317;
(n) Zile Singh v State of Haryana (2004) 8 SCC 1, at page 9 (Paras 13, 14 and 15);
79. The guidelines and principles with the ratio laid down in these cases with reference to retrospectivity is as follows:
(a) In order to make a provision applicable with retrospective effect, it has to be specifically expressed in the provision.
(b) It is a well settled principle of law that the court cannot read anything into a statutory provision which is plain and unambiguous. The language employed in a statute is the determinative factor of the legislative intent. If the language of the enactment is clear and unambiguous, it would not be proper for the courts to add any words thereto and evolve some legislative intent not found in the statute.
(c) If a rule/notification/circular claims to be retrospective in nature, it has to expressly specify as per the rules of interpretation of statutes.Page 50 of 57 Appeal No.222 of 2012
(d) Every statute is prima facie prospective unless it is expressly or by necessary implications made to have retrospective operation.
(e) A substantive law, as it is well settled, in absence of an express provision, cannot be given a retrospective effect or retroactive operation.
(f) All laws that affect substantive rights generally operate prospectively and there is a presumption against their retrospectivity if they affect vested rights and obligations unless the legislative effect may be given where there are express words giving retrospective effect or where the language used necessarily implies that such retrospective operation is intended.
(g) The question whether a statutory provision has retrospective effect or not depends primarily on the language in which it is couched. If the language is clear and unambiguous, effect will have to be given to the provision in question in accordance with its tenor. If the language is not clear then the court has to decide whether in the light of the surrounding circumstances, retrospective effect should be given to it or not.
(h) The general rule is that all statute other than those which are merely declaratory or which relate only Page 51 of 57 Appeal No.222 of 2012 to matters of procedure or of evidence are prima facie prospective; and retrospective effect is not to be given to them unless by express words or necessary implication, it appears that this was the intention of the legislature.
(i) It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation.
80. If we apply these principles and guidelines to the present case, it is clear that there is no indication or provision conferring powers to the Petroleum Board to give a retrospective effect. When such being the case, the effect of retrospectivity, cannot be given.
81. Consequently, we hold that the conclusion arrived at by the Petroleum Board in the impugned order with reference to the retrospectivity, is totally wrong. Therefore, the same is liable to be set aside.
82. Consequently, we hold that the tariff fixed in the present case, would be applicable only from the date of authorisation i.e. on 27.07.2012 and not from the date of tariff Regulations i.e. on 20.11.2008.
Page 52 of 57 Appeal No.222 of 201283. Summary of Our Findings
(a) The Appellant, admittedly, is a consumer of the Gujarat Petronet. It utilises the pipeline of Gujarat Petronet for transportation of Natural Gas to its Power Plants carried out as per the Gas Transmission Agreement. The Appellant, being the customer/ beneficiary of the pipeline of the Gujarat Petronet, has to bear the transportation charges levied by the Gujarat Petronet for usage of the natural gas pipeline. Thus, the Appellant becomes a necessary party in the proceedings relating to the determination of the transportation charges. This tariff will be recovered from the customers like the Appellant. Therefore, it is the case of the Appellant that the Petroleum Board has unlawfully directed the Gujarat Petronet to recover the large sums of money from the consumers like the Appellant. When this being the case, the Appellant becomes the Aggrieved party. Therefore, the Appellant has vested right for hearing and transparency in the tariff determination process. Had the Petroleum Board issued public notice inviting suggestions from the public like the customers who are likely to be affected, then such members of the public would have assisted the Page 53 of 57 Appeal No.222 of 2012 Petroleum Board by objecting with the reasonings to the proposal made by the Petroleum Board. This was not done in this case. Hence, the Appeal is maintainable.
(b) On 6.5.2008, the Petroleum and Natural Gas (Authorising Entities to lay, build, operate or expand Natural Gas Pipelines) Regulations, 2008 came into force. The Tariff Regulations came into force on 20.11.2008. The Gujarat Petronet applied for the authorisation before the Petroleum Board on 6.12.2008 under Regulation 18 of the Authorising Regulations. The said authorisation was granted by the Petroleum Board to the Gujarat Petronet under the Authorising Regulations on 27.07.2012. The Tariff Regulations, 2008 provides that the Tariff Regulations are applicable only to those entities which have been granted authorisation under the Authorising Regulations, 2008. These provisions do not refer to anything with respect to the retrospective effect. In other words, the Act and the relevant Regulations do not contain any provision which empower the Petroleum Board to apply the tariff order retrospectively. In the present case, the Gujarat Petronet has been authorised only on 27.07.2012.
Page 54 of 57 Appeal No.222 of 2012In view of the above, the above Regulations will be applicable to the Gujarat Petronet only from the date of the authorisation, i.e. 27.07.2012 and not prior to that. Section 20 (3) of the Act provides that the power to be exercised by the Petroleum Board is prospective. This section uses the language "the Board may after following the procedure as specified by the Regulations....". This indicates that the procedure is provided in the Regulations. As per the Regulations and the Act, the power to impose tariff can only be prospective and not retrospective.
(c) Gujarat Petronet has been operating an existing natural gas pipeline even prior to the Act came into force. The Gujarat Petronet applied for grant of authorisation under Authorising Regulations on 6.12.2008. This authorisation was ultimately granted by the Petroleum Board on 27.07.2012. Hence the condition precedent for the authorisation issued by the Petroleum Board only stood fulfilled on 27.07.2012. As such, the Gujarat Petronet gets classified as a common carrier network on this date i.e. 27.07.2012. Hence, finding by the Tribunal in regard to the retrospectivity is patently wrong.
Page 55 of 57 Appeal No.222 of 201284. In view of our above findings, the Appeal is allowed. The impugned order on this issue is set aside. The Petroleum Board will pass consequential orders in terms of the findings given in this judgment. Hence, there is no order as to costs.
85. Before parting with this case, we deem it appropriate to issue some directions with regard to necessity to allow in future the Customers/Consumers of common carrier or contract carrier to participate in the tariff determination proceedings.
a) In the present case, we have held that the Appellant the customer, who is likely to be the affected party, should have been heard before determining the Tariff so that opportunity could be given to the Customers to put forth their views and this was not done in this case.
b) While defending the same, the learned counsel for the Petroleum Board contended that the Customers have not been given substantive right under the Regulation to participate in the Provisional Initial Tariff determination proceedings and therefore the opportunity was not given to them.
c) We recognize that to allow consumers like the Appellant to participate in the Provisional Initial Page 56 of 57 Appeal No.222 of 2012 Tariff determination proceedings by the Petroleum Board is not a procedural requirement under the existing Tariff Regulations. Hence, our judgment in the current case is not pivoted on the fact that the Appellant was not given an opportunity to participate in the Provisional Initial Tariff determination proceedings by the Petroleum Board.
d) But, we are of the considered opinion that since the consumers would ultimately become real aggrieved parties, they must be heard before deciding the Provisional Initial Tariff. In view of our above conclusion, we direct the Petroleum Board to frame necessary Regulation providing a fair opportunity for the Consumers and the public to participate in the Provisional Initial Tariff determination proceedings by way of issuing public notice etc. in the future, so that tariff determination would be made in accordance with law.
(Nayan Mani Borah ) (Justice M. Karpaga Vinayagam)
Technical Member Chairperson
Dated: Jan.2014.
√REPORTABLE/NON-REPORTABALE
Page 57 of 57