Allahabad High Court
National Chamber Of Industries & ... vs Gail (India) Ltd. And Others on 12 July, 2013
Bench: Vineet Saran, Mushaffey Ahmad
HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved Civil Misc. Writ Petition No. 34863 of 2012 National Chamber of Industries & Commerce U.P. & others Versus GAIL (India) Ltd. and others Connected with Civil Misc. Writ Petition No. 37099 of 2012 General Traders and others Versus GAIL India Limited and others AND Civil Misc. Writ Petition No. 39367 of 2012 Akash Wani Glass Works & others Versus GAIL India Limited and others Hon'ble Vineet Saran, J Hon'ble Mushaffey Ahmad, J (Delivered by Hon'ble Vineet Saran, J)
1. For running any industry, fuel is the most important component. In the 19th century, the main fuel was coal and coke, which in the 20th century was oil. In the 21st century the main fuel for the industry is, and is likely to continue to be, natural gas.
2. The dispute in the present petitions is primarily with regard to the fixation of price of natural gas, earlier supplied by Gail (India) Ltd. (in short GAIL) and now by Gail Gas Ltd., to the industrial units of Agra and Firozabad falling in the Taj Trapezium Zone (in short TTZ).
3. The history of this litigation stems from a Public Interest Litigation filed by one M.C.Mehta for curtailing the pollution in Agra because emission from the industries of the area was eroding and damaging the grandeur of the Taj Mahal, which is a national monument and is one of the Seven Wonders of the World. The said writ petition (PIL) was filed in the year 1984 and after hearing the parties concerned, as well as seeking reports from the expert committees, namely, Vardharajan Committee and National Environment Engineering Research Institute (NEERI), the Supreme Court, vide its order dated 30.12.1996 passed in M.C.Mehta vs. Union of India AIR 1997 SC 734, gave certain directions to the effect that the polluting industries in TTZ be either closed down, or re-located outside TTZ, or converted to be run by natural gas instead of coal/coke. The directions in this regard have been given in paragraph 29 of the judgment, which are re-produced below:-
"29. We order and direct as under:-
(1) The industries (292 listed above) shall approach/apply to the GAIL before February 15, 1997 for grant of industrial gas-connection.
(2) The industries which are not in a position to obtain gas connections and also the industries which do not wish to obtain gas connections may approach/apply to the Corporation (UPSIDC)/Government before February 28, 1997 for allotment of alternative plots in the industrial estates outside TTZ.
(3) The GAIL shall take final decision in respect of all the applications for grant of gas connections by March 31, 1997 and communicate the allotment letters to the individual industries.
(4) Those industries which neither apply for gas connection nor for alternative industrial plot shall stop functioning with the aid of coke/coal in the TTZ with effect from April 30, 1997. Supply of coke/coal to these industries shall be stopped forthwith. The District Magistrate and the Superintendent of Police shall have this order complied with.
(5) The GAIL shall commence supply of gas to the industries by June 30, 1997. As soon as the gas supply to an industry commences, the supply of coke/coal to the said industry shall be stopped with immediate effect.
(6) The Corporation/Government shall finally decide and allot alternative plots, before March 31, 1997, to the industries which are seeking relocation.
(7) The relocating industries shall set up their respective units in the new industrial estates out-side TTZ. The relocating industries shall not function and operate in TTZ beyond December 31, 1997. The closure by December 31, 1997 is unconditional and irrespective of the fact whether the new unit outside TTZ is completely set up or not.
(8) The Deputy Commissioner, Agra and the Superintendent (Police), Agra shall effect the closure of all the industries on December 31, 1997 which are to be relocated by the date as directed by us.
(9) The U.P. State Government/Corporation shall render all assistance to the industries in the process of relocation. The allotment of plots, construction of factory buildings, etc., and issuance of any licence/permissions, etc., shall be expedited and granted on priority basis.
(10) In order to facilitate shifting of industries from TTZ, the State Government and all other authorities shall set up unified single agency consisting of all the departments concerned to act as a nodal agency to sort out all the problems of such industries. The single window facility shall be set up by the U.P. State Government within one month from today. The Registry shall communicate this direction separately to the Chief Secretary, Secretary (Industries) and Chairman/Managing Director, UPSIDC along with a copy of this judgment. We make it clear that no further time shall be allowed to set up the single window facility.
(11) The State Government shall frame a scheme for the use of the land which would become available on account of shifting/relocation of the industries before June 30, 1997. The State Government may seek guidance in this respect from the order of this Court dated May 10, 1996 in I.A. No. 22 in Writ Petition (Civil ) No. 4677 of 1985.
(12) The shifting industries on the relocation in the new industrial estates shall be given incentives in terms of the provisions of the Agra Master Plan and also the incentives which are normally extended to new industries in new industrial estates.
(13) The workmen employed in the above mentioned 292 industries shall be entitled to the rights and benefits as indicated hereunder:-
(a) The workmen shall have continuity of employment at the new town and place where the industry is shifted. The terms and conditions of their employment shall not be altered to their detriment.
(b) The period between the closure of the industry in Agra and its restart at the place of relocation shall be treated as active employment and the workman shall be paid their full wages with continuity of service.
(c) All those workmen who agree to shift with the industry shall be given one year's wages as 'shifting bonus' to help them settle at the new location. The said bonus shall be paid before January 31, 1998.
(d) The workmen employed in the industries who do not intend to relocate/obtain natural gas and opt for closure, shall be deemed to have been retrenched by May 31, 1997, provided they have been in continuous service (as defined in Section 25-B) of the Industrial Disputes Act, 1947) for not less than one year in the industries concerned before the said date. They shall be paid compensation in terms of Section 25-F(b) of the Industrial Disputes Act. These workmen shall also be paid, in addition, six years' wages as additional compensation.
(e) The compensation payable to the workmen in terms of this judgment shall be paid by the management within two months of the retrenchment.
(f) The gratuity amount payable to any workmen shall be paid in addition."
4. By such directions, the Supreme Court ensured that coal/coke based industries within TTZ, which were the main cause of pollution, were either converted to gas based industries or they be located outside the TTZ or else they may shut down. The concept of use of natural gas for running the industries in the TTZ was itself introduced for the first time through the order dated 30.12.1996 passed by the Supreme Court. The direction of there being no coal/coke based industry in the TTZ was very clear for all industries.
5. The supply of natural gas was to be made available by GAIL, for which an obligation was cast on GAIL to ensure such supply to the industries in Agra and Firozabad which opted for conversion to gas as fuel for running their industries instead of coal/coke. The initial supply of gas by GAIL was made to such industries at the administered price mechanism (APM), which included the cost price of natural gas produced by National Oil Companies plus some profit and transportation cost. As would be clear from the communication dated 1.7.2005 of the Government of India, APM gas, which may be termed as domestic natural gas at the administered price, was meant only for priority sectors such as Power and Fertilizer Industries as well as consumers covered under Court orders and Small Scale Consumers having allocation up to 0.05 MMSCMD.
6. With the increase in demand of natural gas for running of industries in the TTZ, gas was imported by the Government of India through GAIL in liquified form, known as re-gasified liquid natural gas (RLNG). This gas is procured at a much higher price than the domestic natural gas procured from National Oil Companies. The initial allocation of gas for TTZ was 0.6 MMSCMD, which was later increased to 1.1 MMSCMD, for supplies to the industries located in TTZ which had agreed to conversion of their industries from coal/coke to natural gas as fuel for running their industries under the orders of the Supreme Court. Such supply of gas was made at APM price fixed by GAIL and as per the orders/instructions/directions of the Government of India.
7. Since the demand for natural gas increased in TTZ, supply beyond 1.1 MMSCMD was made by GAIL at RLNG price, which was higher than the APM price. The units which had converted to gas based industries had initially entered into agreements with GAIL for supply of such gas at a price which is termed as APM. The initial agreements by consenting industries with GAIL were entered in the year 1996, which were renewed from time to time and the last such agreements were entered into by such industries on 31.3.2006 which were valid from 1.4.2006 to 30.9.2010. No fresh agreements were entered thereafter and the supply of gas continued on the basis of temporary extensions.
8. In the meantime, with effect from 29.09.2011, the supply of gas by GAIL was transferred to Gail Gas Ltd., which is a wholly owned subsidiary of Gail (India) Ltd. Representations by other industries (besides the ones which had initially converted to gas based industries under orders of Supreme Court) with regard to supply of gas and discrimination in pricing of gas, were filed before GAIL and Gail Gas Ltd. Thereafter, Gail Gas Ltd., by its order dated 19.7.2012, informed the consumers of natural gas in TTZ that it shall supply commingled gas under the uniform price mechanism (for short 'UPM') to all industrial consumers in the TTZ. It also informed that the commingled gas for supply at UPM was to comprise 1.1 MMSCMD of APM gas and such quantities of RLNG and other gases, as may be sourced, keeping in view the need to fulfill the requirements of the TTZ. It also informed that with effect from 16.7.2012 uniform price of gas at UPM shall be applicable to all industrial customers in Agra and Firozabad regions and for this purpose the customers were required to sign fresh gas supply contracts (GSC) by 31.7.2012. This communication was based on the no objection given by the Union of India on 27.6.2012, which was to the effect that the Ministry had no objection to the proposal of uniform price mechanism (UPM), subject to the condition that the utilisation of APM allocation was limited to the industries located in TTZ.
9. It is at this stage that these three writ petitions had been filed with the prayer for quashing the no objection letter of the Ministry of Petroleum and Natural Gas dated 27.6.2012 and the consequential letter/order of Gail Gas Ltd. dated 19.7.2012. A further prayer has been made for issuance of a writ in the nature of mandamus commanding the respondents to keep in abeyance the implementation of the uniform price mechanism (UPM) with effect from 16.7.2012 on the industrial units of Agra and Firozabad consuming only APM gas. A further prayer has been made for issuance of a mandamus commanding the respondents to extend the renewal of existing gas supply contracts beyond the last extension, and not to implement the uniform price mechanism (UPM) on the industrial units of Agra and Firozabad consuming APM gas allocated to it, and further not to adopt any coercive action against them by encashing Irrevocable Letters of Credit (IRLC) furnished by such industrial units in favour of GAIL.
10. The contracts which were extended from time to time by GAIL and Gail Gas Ltd. were to remain in force till 15.7.2012. Threafter, the industries were to pay for consumption of gas supplied to them at UPM price with effect from 16.7.2012. The time period for entering into fresh contracts was initially upto 31.7.2012 which was extended to 15.8.2012. When the matter initially came up for hearing, Sri Shanti Bhushan, learned senior counsel appearing for GAIL and Gail Gas Ltd. made a statement that the same benefit which had been made applicable till 15.8.2012 would be extended to the petitioners up to 31.8.2012 and the said undertaking has been thereafter continued during the pendency of this writ petition. Leaned counsel for the parties agree that the petitioners are continuing to pay the UPM price for the gas supplied to them since 16.7.2012, without any fresh agreement having been entered into with Gail Gas Ltd.
11. The petitioners in all the three writ petitions have their industries running in the TTZ by converting to gas as its fuel, under orders of the Supreme Court. Civil Misc. Writ Petition No. 34863 of 2012 has been filed by National Chamber of Industries & Commerce U.P. at Agra (espousing the cause of its members who have their industrial units at Agra) and two private industries of Agra. The other two writ petitions, being Civil Misc. Writ Petitions No. 37099 of 2012 and 39367 of 2012, are filed by 31 and 42 industries respectively of Firozabad. All these industries fall within the TTZ. The common respondents in all the writ petitions are Union of India, Gail (India) Ltd. and Gail Gas Ltd. In the first writ petition no. 34863 of 2012, by amendment dated 30.7.2012, 19 industries of Firozabad have also been arrayed as respondents.
12. We have heard Sri S.P.Gupta, learned senior counsel along with S/sri A.K.Goel and Yashwant Varma, learned counsel appearing on behalf of the petitioners in Civil Misc. Writ Petition No. 34863 of 2012; Sri Navin Sinha, learned senior counsel along with Sri Tarun Agarwal, learned counsel for the petitioners in Civil Misc. Writ Petition No. 37099 of 2012; and Sri Nikhil Kumar, learned counsel appearing on behalf of the petitioners in Civil Misc. Writ Petition No. 39367 of 2012.
13. On behalf of the respondents, we have heard Sri Shanti Bhushan, learned senior counsel along with Sri Madhur Prakash, learned counsel appearing for GAIL (India) Ltd. and Gail Gas Ltd. in all the three writ petitions; Sri R.B.Singhal, learned Assistant Solicitor General of India along with Sri S.K.Om, learned counsel appearing on behalf of Union of India in all the three writ petitions; Sri Ravi Kant, learned senior counsel along with Sri Rishabh Agarwal for the private respondents who have been impleaded by order dated 30.7.2012 in Civil Misc. Writ Petition No. 34863 of 2012.
14. Though Civil Misc. Writ Petition 54993 of 2012 Jagjit Industries vs. Union of India and others has not been connected with the present three writ petitions on the ground that Jagjit Industries is located in district Ghaziabad which is outside the TTZ, yet since Sri Sudhir Chandra, learned senior counsel appearing along with S/sri K.K.Arora, Pushpendra Bansal, Kamal Bharadwaj and Aman Gupta, learned counsel for the petitioners in such writ petition asserted that his client would also be affected by the orders passed in these writ petitions, he has also been heard. Besides this, Sri H.N.Singh, learned counsel who has filed an impleadment application on behalf of Dhammamal & Nanumal Glass Industries Pvt. Limited has also been heard under the provisions of Chapter XXII Rule 5A of the Allahabad High Court Rules.
15. Pleadings in these petitions have been exchanged and with consent of learned counsel for the parties, these writ petitions have been heard and are being disposed of at the admission stage itself.
16. The submission of the learned counsel for the petitioners primarily is that as per the order dated 30.12.1996 passed by the Supreme Court in M.C.Mehta case (supra) the petitioners were persuaded to convert their industries, which were being run with the use of coal/coke to natural gas as fuel for running their industries. It has been submitted that initially GAIL was hesitant in supply of gas to the TTZ as they were apprehending that there would not be sufficient customers. It was at this stage that the petitioners agreed to convert their industries to gas based and they were supplied APM gas and as such they cannot now be asked to pay for gas at UPM price (which is higher than APM) as they fall in a separate class, having converted their coal/coke based industries to gas based industries under orders of the Supreme Court. It has thus been contended that the petitioners have a right to be supplied APM gas up to the limit of 1.1 MMSCMD as their right flows from the judgment of the Supreme Court and not from any contractual relationship. It has also been contended that as per the judgment of the Supreme Court, there could neither be any new industry established nor could there be expansion of existing industries in the TTZ, and as such the consumers/industries which had converted as per the order of the Supreme Court ought to be supplied APM gas. It has also been contended that it is not the case of the Government of India that supply of such gas cannot be made to the petitioners. It has thus been submitted that the petitioners are a different class and since no new industry can be set up in the TTZ, the question of providing level playing field for any new industry does not exist and there would be no question of grant of equality with any new industry (which may have been set up after the order of the Supreme Court) with the petitioners. It has also been contended that expansion of existing industries or setting up of new industry cannot, and should not, be permitted as the purpose of the Supreme Court's order is to minimize pollution in the TTZ by use of gas as fuel for running the industries in such area. In this regard, it has been submitted that though by use of gas there is minimum pollution but wherever there is combustion, pollution is bound to be there and if new industries are set up in the area or existing industries are allowed to expand, it will cause further pollution, which would be against the spirit of the order of the Supreme Court in M.C.Mehta case (supra). It has also been urged that fixation of price cannot be done unilaterally by GAIL/Gail Gas Ltd., and the same has to have the sanction of the Government of India, which is not there in the present case, as the no objection granted by the Government of India on 27.6.2012 was only conditional, to the extent that the utilisation of APM allocation was to be limited to industries located in TTZ. The petitioners have thus urged that they may not be compelled for being supplied UPM gas and their contracts for supply of APM gas be renewed/extended and the communications dated 27.6.2012 and 19.7.2012 of Government of India and Gail Gas Ltd. be quashed.
17. On the other hand, the specific case of Shri Shanti Bhushan learned Senior counsel appearing on behalf of GAIL and Gail Gas Ltd. is that the obligation of GAIL, under the orders of the Supreme Court in M.C.Mehta case (supra), was only for supply of gas and that the order does not speak about the fixation of any particular price of such gas. It has thus been contended that since GAIL/Gail Gas Ltd. are ready to supply the requisite gas to the petitioners, there is no breach of the condition/direction given by the Supreme Court. It is further contended that in its order dated 30.12.1996 the Supreme Court did not prohibit setting up of any new industry or expansion of the existing industries in the TTZ. The contention is that the intention of the Government of India is to encourage industry for general growth of the economy, but only after complying with the norms of pollution control, by use of gas as fuel for running the industries in the TTZ area, and that supply of gas (from whatever source) is to be made at such price as may be fixed by the Government of India. It is specifically submitted that the petitioners have no vested right to get the natural gas at a concessional price. Reliance in this regard has been placed on Article 10 of the last contract entered into in March, 2006 between the petitioners and the GAIL, which relates to price of gas. It is submitted that the same provides that the price of gas would be progressively increased over the next 3 to 5 years to reflect the market price and that after 31.3.2006 GAIL shall have the right to fix the price of gas which may be as per directive, instruction, order, etc. of the Government of India, which is likely to be market related in accordance with current policy of liberalization of Government of India, and the consumer shall pay such price to GAIL. It has thus been contended that the petitioners had themselves agreed to the price being gradually increased so as to reflect the market price, meaning thereby that the initial advantage which was given to the petitioners when they switched over to gas as fuel for running their industries, would gradually be brought at par with the market price.
18. Sri R.B.Singhal, learned senior counsel appearing for Union of India, has reiterated the submissions made by Sri Shanti Bhushan with regard to fixation of price and has also submitted that the U.P. Pollution Control Board (UPPCB) has identified about 625 industrial units (other than 292 units mentioned in M.C.Mehta case) for supply of natural gas in TTZ. It has further been submitted that no writ deserves to be issued to supply gas to the petitioners at a particular price. It is also contended that the purpose of the Supreme Court's order was to curtail pollution, for which directions were given to supply gas as fuel for running the industries in TTZ. It did not indicate or direct for supply of gas from a particular source, and also did not give any direction with regard to the price of gas to be supplied.
19. Sri Ravi Kant, learned senior counsel has appeared for the newly impleaded industries of Firozabad, which either did not get the benefit of Supreme Court's order of supply of APM gas or got partial benefit, as they had thereafter expanded their existing industries. 8 such industries, which he represents, had initially converted to gas based industries under order of the Supreme Court and were getting APM gas, plus RLNG gas for their excess requirement as they have subsequently expanded, and the remaining are getting only RLNG gas as they are besides such industries identified by the Supreme Court in its order dated 30.12.1996, but have been identified as industrial units (amongst 625 units) by the U.P. Pollution Control Board for supply of natural gas in the TTZ. It is submitted on their behalf that they are being discriminated by being supplied gas at a higher price than the price of gas at which it is supplied to the petitioners, thereby creating an unhealthy competition in not providing a level playing field to the respondents who have to pay higher price for the fuel (gas), thereby adding to the cost of their production. It has also been contended that the petitioners are resisting switching over from APM to UPM gas as their only motive is to take advantage of price, and to retain market control because of less production cost on account of supply of gas at lesser price to them. According to Sri Ravi Kant, switching from APM gas to UPM gas is nothing but a mode of price fixation of gas which is equitable for all the industries, without there being any advantage to any particular class of industry. It is contended that neither the Supreme Court nor the Government of India has ever debarred entry of new industries or expansion of old industries in the TTZ. It is contended that by introducing UPM, the unfair advantage given to one class of persons (i.e. the petitioners) has been done away with, and that the petitioners, who had been given such protection, cannot now complain of discrimination. In the end, Sri Ravi Kant has submitted that the petitioners are being provided UPM gas since July, 2012 and no such industry has closed down because of such impact of price, and though the profits of such industries may have gone down, yet they have not been driven out of the market.
20. Sri Sudhir Chandra, learned senior counsel, who has also been permitted to assist the Court as intervener, represents the North India Glass Manufacturer Association whose members have manufacturing units of glass containers, bottles, jars, etc. in Ghaziabad, has submitted that there cannot be any discrimination between two similar sets of industries, one situated in TTZ and the other outside TTZ. According to him, if at all, there can be different price structure for supply of gas for industries of different sectors but not of the same kind of industries. It is submitted that 35% of manufacturing cost is of fuel for furnace, and if the fuel (which is gas in the present case) is not supplied at a uniform price, it would amount to an unhealthy competition. It is also submitted that 15 years back, when the supply of gas at APM was introduced, coal/coke and oil were cheaper, and now running the industries by using gas as fuel is more efficient, and supply of gas is also much more than what it was 15 years back and as such, with change in time, and now gas being the main source of fuel for running the industries, there should be uniform policy for pricing of gas for all similar kinds of industry. However, we may mention here that the issue relating to price of gas for industries located outside the TTZ region is not in consideration before us in the three writ petitions being heard by us.
21. All the respondents have vehemently argued that natural gas is a national property, which belongs to the people, and the Government of India has a right to fix the price.
22. We have carefully examined the submissions of learned counsel for the parties and have perused the record.
23. The main thrust of the submissions made on behalf of the petitioners is that the petitioners are protected by the order of the Supreme Court dated 30.12.1996 in the case of M.C. Mehta (supra). Having examined the aforesaid order, what we find is that the Supreme Court, after noticing that use of coke/coal as fuel by the industries emit pollution in the ambient air, in paragraph 25 held that the objective behind the litigation "is to stop the pollution while encouraging development of industry. The old concept that development and ecology cannot go together is no longer acceptable. Sustainable development is the answer. The development of industry is essential for the economy of the country, but at the same time the environment and the eco-system have to be protected. The pollution created as a consequence of development must commensurate with the carrying capacity of our eco-systems."
24. Initially, the Supreme Court was of the view that all the polluting industries in the TTZ should be shifted out but, on consideration of the reports submitted by the Vardhrajan Committee and the NEERI, it came to the conclusion that natural gas is the most economical and appropriate alternate fuel for the running of industries. It thus issued directions in paragraph 29 of the judgment in M.C.Mehta case, which have already been quoted above. After observing that "the relocation of the industries from TTZ is to be resorted to only if the natural gas which has been brought at the doorstep of TTZ is not acceptable/available by/to the industries as a substitute for coke/coal", the Supreme Court was of the view that "the industries operating in TTZ which are given gas connections to run the industries need not relocate. The whole purpose is to stop air pollution by banishing coke/coal from TTZ." (emphasis supplied)
25. It was not only the protection of Taj that the Supreme Court was concerned about, but also of the damaging effect of the pollution on the people living in the TTZ. In paragraph 27, the Supreme Court found that "the emissions generated by the coke/coal consuming industries are air-pollutants and have damaging effect on the Taj and the people living in the TTZ. The atmospheric pollution in TTZ has to be eliminated at any cost. ......... It is, rather, proved beyond doubt that the emissions generated by the use of coke/coal by the industries in TTZ are the main polluters of the ambient air."
26. Though in the said judgment, the Supreme Court (as would be clear from observations made in paragraphs 24 and 34) was dealing with the 292 industries named in paragraph 24 of the said judgment, it was also conscious that there were other industries running in the TTZ, regarding which, in paragraph 30 of the said judgment, it was observed that "before parting with this judgment, we may indicate that the industries in the TTZ other than 292 industries shall be dealt with separately. We direct the Board to issue individual notices and also public notice to the remaining industries in the TTZ to apply for gas connections/relocation within one month of the notice by the Board."
27. From the aforesaid observations of the Apex Court, what we find is that the main consideration for directing the industries in the TTZ to either convert to natural gas based units or relocate themselves outside the TTZ or shut down, was because of air pollution caused by the running of the industries by use of coke/coal, which was damaging the grandeur of the Taj Mahal, and was also hazardous to public health. It cannot be said that the Supreme Court was wanting to curb the industrial growth of the TTZ, as it itself observed that the old concept that development and ecology cannot go together is no longer acceptable, and that sustainable development is the only answer, as it is essential for the growth of economy of the country, but with the caveat that the environment and the eco-systems have to be protected. By its further observation in paragraph 30 of the judgment that other industries located in TTZ (besides 292 industries) shall be dealt with separately (for which notices were directed to be sent to such remaining industries in the TTZ to apply for gas connections/relocation) goes to show that the Supreme Court was not averse to any expansion of existing industries in the TTZ, or further conversion of industries to gas based units, or even setting up of new non-polluting industries in the TTZ which adhered to the norms of the UP Pollution Control Board. It may be true that in certain communications or pleadings before the Supreme Court the authorities may have observed that no new industries or expansion of existing industries in the TTZ would be permitted, but nowhere in the judgment of the Supreme Court has the same been accepted or mentioned that expansion of existing industries or setting up of new industries or conversion of existing industries to use gas as fuel in the TTZ would not be permitted. It may be mentioned here that the question of setting up of new industries or expansion of the existing ones is not a matter directly under consideration in these writ petitions. What is in dispute in the present petitions is the issue relating to supply of UPM or APM gas, which in effect is the question relating to pricing of the supply of natural gas in the TTZ. It may only be observed that neither the Supreme Court nor any order of the Government of India has imposed any such ban on expansion or setting up of new industries in the TTZ.
28. As such, the submission of the learned counsel for the petitioners, that expansion of existing industries or setting up of new industries in the TTZ is not permissible as per the judgment of the Supreme Court, is not acceptable. Further, the contention of the petitioners that allocation of gas to the industries in the TTZ as per the order of the Supreme Court could not be increased, and thus the supply of APM gas to the petitioners was a constant quantity, which could not be varied, is also thus not acceptable.
29. The other submission of the petitioners that the industries using gas for running their industry also pollute, as pollution is bound to be there where there is combustion, and thus there should be no expansion of existing industries permitted or new industries be prohibited to come up in the area, is a double-edged argument. If that be so, then even the existing units running on APM gas should also be closed down so that pollution is totally controlled. But that cannot be said to be the intention of the order of the Supreme Court, as it has observed that a balance between industrial growth and ecology has to be struck, so that along with ecology, prosperity of the nation may not suffer. Thus, in our view, with this in mind that growth of industrialization should not be stopped and pollution in the area should be controlled as far as possible, the viable solution considered by the Supreme Court was to direct the industries to switch over to gas as a fuel instead of the previous century fuel of coke/coal or oil, which were major pollutants.
30. Even otherwise, if there is any objection with regard to expansion of existing industries or setting up of new industries in the TTZ, it is for the party concerned to approach the Supreme Court for such clarification.
31. The next question relates to the price for the supply of gas to the petitioners, who claim that they are protected by the judgment of the Supreme Court in M.C. Mehta case and that they should be supplied gas at the APM price. Their main contention is that they had converted their existing industries running on coke/coal to gas only on the directions of the Supreme Court and because of the same, since they were offered APM gas under the directions of the Supreme Court, they ought to be supplied APM gas and the supply of UPM gas to the petitioners, which is at a higher price, is wholly unjustified.
32. For this purpose, we may first examine the difference between the supply of APM gas and UPM gas to the industries. As we have already observed earlier, APM and UPM gas is nothing but fixation of the price of gas. It is the same kind of gas which is supplied, but the source of gas is different and hence the difference in price. APM gas is the natural gas produced by the National Oil Companies. The other gas is RLNG, spot RLNG, etc. which are imported. The price of gas from National Oil Companies is lesser than the price of imported gas. The price of APM gas is the price of gas of National Oil Companies plus some profit and transportation cost, whereas the price of UPM gas is average price of commingled gas (i.e. gas from National Oil Companies and imported gas) plus some profit and transportation cost. The supply of APM gas is at a lesser price, whereas because UPM gas is commingled gas, its price is higher. The gas supplied in both the cases is of the same nature and the difference is only in the price because of the source of the gas.
33. What the petitioners claim is that they are entitled to supply of gas at APM as the same was fixed by the Apex Court in the case of M.C. Mehta.
34. Having gone through the aforesaid order of the Supreme Court dated 30.12.1996, what we find is that the GAIL and the Union of India were required to ensure supply of gas to the industries in the TTZ for running the industries. Although it has been emphatically argued by the learned counsel for the petitioners that the price and the economy of fuel were the major factors under consideration of the Supreme Court while issuing directions in the M.C. Mehta case, but from the judgment, we do not find that the Supreme Court made any observations with regard to the price of gas which was to be supplied to the industries in the TTZ. It is true that at the initial stage, when the direction was made by the Supreme Court to supply natural gas to the industries of TTZ, the GAIL may have had apprehensions as to whether there would be sufficient consumers of such gas in the area, and for that purpose it may have advertised the comparative prices and heat equivalent of various fuels in the newspapers circulated in Agra and Firozabad to enable the industries, who were prospective consumers of gas, to evaluate to the economics of conversion to gas, but the same would not mean that such industries, if converted to gas as fuel for running industries at that stage, would be supplied gas at the same rates for all times to come.
35. Indian economy is a progressing economy with more and more industries coming up, and fair competition and level playing field is to be provided to all similarly situated industries. An advantage, once given to a particular class of industries for certain reasons, can also vary with time. By adopting Uniform Price Mechanism (UPM), the GAIL/Gail Gas Ltd. has done away with the undue advantage of price of gas which was once given to the petitioners. By now ensuring supply of UPM gas to all industries, such advantage to a particular class of industries has been done away with, thereby creating an atmosphere of encouraging healthy competition. Thus, the dominance of petitioners which may have been there in the market because of lower production cost than their other competitors (because of being supplied APM gas as against the RNLG gas price at which the other similarly situated industries were supplied gas) would no longer be there. Those who already have had advantage for more than 15 years in the pricing of gas cannot now complain of discrimination, when uniform pricing policy has come up for supply of gas at the same price to all similarly situated industries in the TTZ.
36. It is well settled law that what may have been reasonable at one stage may, with the change in circumstances and passage of time, become unreasonable and thus need to be changed. The Supreme Court has, in the case of Malpe Vishwanath Acharya vs. State of Maharashtra (1998) 2 SCC 1, in paragraph 8, held that "with the passage of time a legislation which was justified when enacted may become arbitrary and unreasonable with the change of circumstances." Earlier also, the Apex Court in the case of State of M.P. vs. Bhopal Sugar Industries AIR 1964 SC 1179, while dealing with a question whether geographical classification due to historical reasons would be valid, observed that "by the passage of time, considerations of necessity and expediency would be obliterated, and the grounds which justified classification of geographical regions for historical reasons may cease to be valid."
37. In the present case, the benefit of supply of APM gas was accorded to the petitioners to ensure that pollution was controlled in the TTZ so that damage to the Taj Mahal, which is a national heritage, may be checked and also for the good of the public health. At that time, coal/coke was the main fuel for the industry. With the change in time and the growth of industry and technology, and with the growth of use of natural gas as fuel for running the industry, use of coal/coke or oil has become obsolete and gradually gas based industries are coming up. The advantage once given to a set of industries for certain reasons cannot be perpetuated and a level playing field for all the industries has to be provided, so as to ensure that proper growth of non-polluting industries is maintained.
38. What may be justifiable at one point of time may turn out to be a case of hostile discrimination. As we see in the present case, the situation in 1996 was different when industries had to be driven to switch over to gas as its fuel, but after a lapse of more than one and half decade, since gas has now turned out to be the main fuel for running the industries, the situation has changed, requiring reconsideration of fixation of price of gas so as to be equitable to all the similarly situated industries in the TTZ region. Thus, this Court is of the considered view that the petitioners cannot claim to have monopoly over APM gas for all times and create a class in themselves, and continue to have an edge over other similarly situated industries in pricing of its fuel. If the petitioners are given such protection of price of gas for all times to come, then any new industry set up in the area will be at a disadvantage, which may create a monopoly like situation in favour of the petitioners, thus creating an unreasonable classification favouring the petitioners as against new competitors.
39. The Supreme Court has also, in the case of M.C.Mehta, clearly observed that the development of industry is essential for the economy of the country and the old concept, that development and ecology cannot go together, is no longer acceptable. Thus, it can be safely gathered that the Supreme Court has not discouraged the growth of industry in the TTZ. If that be so, new industries are to be given a level playing field and the protection once given to the petitioners, is not to be perpetuated. Fixation of price of gas by Government of India or the Public Sector Undertakings should be in such a manner so as to sub serve the common good. The same is achieved by adopting the UPM method of pricing, so that equal opportunity in business is given to all similarly situated industries.
40. The protective discrimination of supply of APM gas was made in favour of the petitioners for a particular purpose so that use of natural gas, which was the most economical and appropriate fuel for running the industries, be encouraged. Such advantage cannot be perpetuated, and all similarly situated industries in a particular area have to be given a level playing field for running the industries. By introducing UPM, the unfair advantage given to one class of persons (i.e. the petitioners) has been done away with. The protection once given to the petitioners for certain reasons in the year 1996 cannot be permitted to continue for all times to come, even after such circumstances requiring grant of such protection no longer exist. The petitioners, who were given such protection, cannot now complain of discrimination when equality in pricing of gas is being provided for all.
41. The Supreme Court in the case of Reliance Energy Ltd. vs. Maharashtra State Road Development Corporation Ltd. (2007) 8 SCC 1 has, in paragraph 36, held that "When article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of "level playing field". ..............Decisions or acts which result in unequal and discriminatory treatment would violate the doctrine of "level playing field" embodied in Article 19(1)(g)."
42. While dealing with a case where the existing transport operators had challenged the grant of fresh transport permits, the Supreme Court in the case of Mithilesh Garg vs. Union of India AIR 1992 SC 443 has in paragraph 47, held that "....... As mentioned above the petitioners are permit holders and are existing operators. They are plying their vehicles on the routes assigned to them under the permits. They are in the full enjoyment of their fundamental right guaranteed to them under Article 19(1)(g) of the Constitution of India. There is no threat of any kind whatsoever from any authority to the enjoyment of their right to carry on the occupation of transport operators. There is no complaint of infringement of any of their statutory rights. Their only effort is to stop the new operators from coming in the field as competitors. We see no justification in the petitioners' stand. More operators mean healthy competition and efficient transport system........". What we notice is that the petitioners herein also want to have their upper hand in business by getting the benefit of APM gas and not permit healthy competition amongst all similar industries of the TTZ region by being provided a level playing field with all being supplied UPM gas.
43. In the case of Reliance Natural Resources Ltd. vs. Reliance Industries Ltd. (2010) 7 SCC 1 the Supreme Court held that the natural resources are vested with the Government as a matter of trust in the name of the people and that it is the solemn duty of the State to protect the national interest. It also held that the Government cannot be divested of its right to regulate the supply and distribution of gas. It categorically held that national resources belong to the people of country and that the Government of India continues to be the owner of gas upto the delivery point. The Supreme Court reiterated the same in the case of Centre for Public Interest Litigation vs. Union of India (2012) 3 SCC 1 where in paragraph 74 it held that "natural resources belong to the people but the State legally owns them on behalf of its people and from that point of view natural resources are considered as national assets, more so because the State benefits immensely from their value." So it is clear that if the Government of India owns the gas (which is a natural resource), it will have a right to fix its price in a just and equitable manner and what has been done is uniform pricing of gas for all similarly situated industries of the TTZ region which, in the facts of this case, cannot be termed as unjustified, unconstitutional or against the spirit of the order dated 30.12.1996 in the case of M.C.Mehta.
44. Even otherwise, this Court would not like to enter into the merits of the arena of price fixation, which is a matter to be decided by GAIL/Gail Gas Ltd. under the guidance/instructions of the Government of India, which has, vide its communication dated 27.6.2012 permitted the pricing of UPM, with the only condition that the utilization of APM allocation should be limited to industries located in TTZ.
45. In the light of the aforesaid, we are of the opinion that the use of natural resource, which is gas for the case in hand, is to be dealt with by Government of India. Pricing of the same has also to be determined by the Government of India. In the present case, GAIL/Gail Gas Ltd. is the agency of the Government of India through which the distribution of gas is maintained. A request in this regard for adoption of UPM in the TTZ was made to the Government of India by Gail Gas Ltd. on 4.5.2012 and on considering the same, a no objection was given by the Government of India on certain condition, which has been complied with by Gail Gas Ltd. The no objection accorded by the Government of India cannot be said to be unjustified. It only ensures equitable distribution of gas at a uniform price to all the similarly situated industries and thereby doing away with the dominance, because of price advantage, which was given to a particular class of similar industries, which had the edge in the market because of supply of APM gas, which was at a lesser price. That advantage has now been done away with by the UPM gas supply to all.
46. The argument that the adoption of UPM does not have the sanction of the Government of India is also not acceptable. From the record it is clear that prior to the implementation of UPM, approval of the Government of India was obtained on 27.6.2012, which reads as under:
"I am directed to refer to GAIL Gas Limited letter of May 4,2012 on the subject mentioned above and to say that the Ministry has no objection to the proposal for Uniform Price Mechanism subject to the condition that the utilization of APM allocation is limited to industries located in TTZ."
47. The said approval was given on the request of the Gail Gas Ltd. made on 4.5.2012. A perusal of the said letter goes to show that the Government of India had transferred the APM gas allocation of 1.1 MMSCMD to GAIL Gas Ltd. for supply of natural gas to downstream industries in the TTZ region. It was also mentioned therein that the additional demand of gas in the TTZ region was there, which could be met only through outsourcing of RLNG, since the domestic supplies were constrained, and for additional supply, GAIL had already completed the network capacity augmentation in Firozabad to meet the demand up to 2.5 MMSCMD. The Gail Gas Ltd. had also pointed out that the U.P. Pollution Control Board had identified around 629 industries for supply of natural gas in TTZ region, which supply could not be made due to limited APM allocation, and because of huge price difference with regard to RLNG, all the industries could not be converted to natural gas, and that the competition within the industries having APM allocation makes RLNG/spot RLNG unaffordable in the market. The letter also pointed out that the growth prospects of the local glass/choori industries were diminishing as the other fuel was not permitted for use in the TTZ region. The Gail Gas Ltd. also mentioned that for implementation of City Gas Distribution Project in TTZ, spanning approximately 10500 Sq. Kms. (covering Mahamayanagar, Bharatpur, Fatehpur-Sikri, Vrindawan, Gowardhan, Koshi etc.) it was desirable that all industrial customers were provided the opportunity of using gas on a uniform and non-discriminatory basis in the TTZ region. The letter also pointed out that because of wide price difference in the gas from different sources, i.e. APM gas and RLNG/spot RLNG gas, being supplied in the Agra-Firozabad region, several litigation in various courts had been initiated seeking additional APM gas and new APM gas connections. Advocating UPM method of pricing, the Gail Gas Ltd. had written that with uniform pricing, gas distribution business in the TTZ region would get the requisite impetus as the same would be a workable solution for all issues, and will provide a level playing field for all industries, and that gas would be available to a larger customer base at an equitable and affordable price, thereby encouraging healthy competition and growth in the region. It also mentioned that UPM would also be helpful to curb the internal trading of APM gas by industries having APM allocation. On such basis, Gail Gas Ltd. proposed to implement the Uniform Price Mechanism for all types of gas (APM, RLNG and Spot RLNG etc.) available from different sources, to meet the market demand of TTZ.
48. It was on such request of Gail Gas Ltd. made on 4.5.2012, that the Government of India accorded its no objection to the proposal for Uniform Price Mechanism, subject to the condition that the utilization of APM allocation is limited to industries located in TTZ.
49. The petitioners have argued that the no objection given by the Government of India on 27.6.2012 being conditional, they be allowed to be supplied APM gas to the limit of 1.1 MMSCMD, as the condition provided for utilization of APM allocation to industries located in TTZ and that they (the petitioners) were the industries which switched to gas under the order of the Supreme Court, and if any further supplies of gas in the TTZ are to be made, the same be done at the RLNG price, be it for industries which have expanded or for new industries set up in the TTZ region.
50. From a reading of the no objection given by the Government of India on 27.6.2012, what we notice is that the condition was that utilization of APM would be limited to industries in TTZ. The UPM also provides for the same, as after pooling of the APM gas for TTZ with RLNG gas etc., a uniform price is fixed for the gas to be supplied to all the consumers in the TTZ. The utilization of APM allocation is not intended to be made by industries located outside TTZ. From a joint reading of the letter dated 4.5.2012, as well as no objection letter dated 27.6.2012, it is clear that the entire consideration is for the TTZ region and not outside it. The APM gas for TTZ is to be pooled in with other gases for supply in the TTZ region alone and then the price of UPM gas is to be determined. In its communication dated 1.7.2005 the Government of India had decided that APM gas would be supplied only to the industries of (i) Power sector; (ii) Fertilizer sector; (iii) consumers covered under Court orders; and (iv) consumers having allocation of less than 0.05 MMSCMD. The supply of APM gas to the petitioners would be covered under the third category of "consumers covered under Court orders". APM gas could be supplied to the other sectors also. On a joint reading of no objection of the Government of India dated 27.6.2012 along with communication of the Government of India dated 1.7.2005, it would be clear that no objection for UPM given by Government of India was only for TTZ region (i.e. consumers/industries in the TTZ) and not for other sectors like power, fertilizer and consumers having less allocation. Thus, it would be clear that APM gas consumers of four categories, as mentioned in the communication dated 1.7.2005, would now be only for the three remaining categories and UPM would be for the consumers covered under Court orders in the TTZ area. The free market gas would be available for all other remaining consumers. As such, instead of two categories earlier i.e. gas priced under APM and non APM (free market gas), price of gas would now be of three categories i.e. gas priced under APM, gas priced under UPM and free market gas. APM gas would now be for Power/Fertilizer sector, court mandated consumers except TTZ region and consumers having less allocation of gas. UPM gas would be for industries in TTZ region and free market gas for rest of the industries/consumers. In such facts, we are of the clear view that the stand of the petitioners that it was a conditional no objection granted by the Government of India, which is being violated, does not have force.
51. The initial contract for supply of gas to the petitioners and other similarly situated industries, which have switched over to gas as a fuel for running their industry, was entered into in the year 1996. It is not disputed that since then, the price of gas has been gradually increased from time to time. The last contracts between the petitioners and GAIL were entered into in March, 2006. A copy of one such contract/agreement dated 31.3.2006 has been filed as Annexure-5 to Writ Petition No. 34863 of 2012, on which the petitioners, as well as respondents, have both relied. Under Article 1.10 of the agreement, "gas" or "Natural gas" has been defined to be RLNG, commingled gas or domestic gas from National Oil Companies. Article 2 of the said agreement provided for the period of contract to be 1.4.2006 to 30.9.2010. Thereafter the same was temporarily extended till 15.7.2012. The parties which had entered into the contract were being supplied APM gas and thereafter from 16.7.2012 onwards they are being supplied UPM gas. Under interim orders passed by this Court, they are continuing with the said arrangement. The extension of the contract was provided for under Article 3 of the said agreement, which could be on such terms and conditions as may be mutually agreed upon.
52. Article 10 of the agreement dealt with the price of gas and for ready reference, the relevant Articles 10.01 (a) and 10.01 (b) are reproduced below:
"10.01(a). Government of India vide its Order No. L-12015/5/04-GP dated 20.06.2005 notified that Power and Fertilizer sectors, the specific end users committed under Court order/small scale customers having allocation upto 50000 (Fifty Thousand) Standard Cubic Meters Per Day are to be priority sector and all available APM gas would be supplied to such above mentioned customers against their allocation at the revised APM price @ Rs. 3200/- per thousand standard cubic meters. This price would be linked to a calorific value of 10000 Kcal/SCM. The natural gas price for APM gas for transport sectors (CNG), Agra-Firozabad small industries and other small scale customers having allocation upto 50000 (Fifty Thousand) standard cubic meters per day would be progressively increased over the next 3 to 5 years to reflect the market price. Customers other than Fertilizer, Power and specific end users committed under Court Orders/Small Scale customers having allocations upto 50000 (Fifty Thousand) standard cubic meters per day would be supplied natural gas at market related price depending on the price being paid to joint venture (Panna-Mukta/Tapti/Ravva) and private operators at landfall point subject to ceiling of ex-Dahej RLNG (Regasified LNG) price of USS 3.86 per net MMBTU for the current year i.e. 2006-06."
"10.01 (b) In consideration of 10.01 (a) herein above the Price of 1000 (one thousand) standard Cubic meters of GAS w.e.f. 01.07.2005 applicable to the BUYER as per aforesaid Government Pricing Order shall be Rs. 3200/MCM for period upto 31.3.2006. After 31.3.2006 the SELLER shall have right to fix the price of Gas which may be as per directive, instruction, order, etc. of Government of India etc. which is likely to be market related in accordance with current policy of liberalization of the government of India and the BUYER pay to the SELLER such price of gas. Provided further, the price of gas so fixed is exclusively of Royalty, Taxes, Duties, Service/Transportation (Transmission) charges, marketing cost (as may be applicable) and all other statutory levies as applicable at present or to be levied in future by central or state Government or Municipality or any other Local body or bodies payable on purchase of GAS from ONGCL/Other Producers (s) by the SELLER or on sale from SELLER to the BUYER and these shall be borne by the BUYER over and above the aforesaid price."
53. From the aforesaid clauses it was clear to the parties that the price of natural APM gas was to be progressively increased to reflect the market price. It was also provided that the seller (i.e. GAIL/Gail Gas Ltd.) shall have the right to fix the price of gas, which was to be as per directives, instructions, orders etc. of the Government of India, which was likely to be market related in accordance with the existing policy of the Government of India. From the above, it emerges that the protection of the price of APM gas was to be gradually done away with and was to be made market related. What Gail Gas Ltd. has now done is that uniform pricing of gas, in the form of Uniform Price Mechanism, has been introduced, so that the price of gas supplied to all the similarly situated industries in the TTZ remains uniform and reflects the market price. In its order dated 30.12.1996, the only obligation cast on GAIL was to ensure supply of natural gas for running of industries in the TTZ. Although it has been argued that the economy and price of fuel was a factor weighing in the mind of the Supreme Court, but the same is not reflected from any observation made in its order dated 30.12.1996.
54. We are thus of the opinion that after the no objection has been given by the Government of India on 27.6.2012, it would be clear that the UPM is being implemented with the approval and clear instructions of the Government of India, as required by Clause 10.01 (b) of the contract. As we have already observed above, in the facts of the present case, the no objection given by Government of India is perfectly legal and justified. Thus, interference with, or quashing the communications of the Government of India or the Gail Gas Ltd. dated 27.6.2012 and 19.7.2012, respectively is not warranted.
55. For the reasons given hereinabove, no case for interference in these three writ petitions is made out. The writ petitions are devoid of merit and are, accordingly, dismissed. No order as to cost.
56. In the end, we may observe that by the communication dated 19.7.2012, Gail Gas Ltd. had required the petitioners to enter into fresh gas supply contract (GSC) by 31.7.2012, which date has already expired. Supply of gas is continuing to the petitioners under the interim arrangement made between the parties and continued by this Court during pendency of these cases on the undertaking given by Sri Shanti Bhushan, learned senior counsel appearing for GAIL/Gail Gas Ltd. In such view of the matter, we provide that the petitioners may enter into fresh gas supply contracts with Gail Gas Ltd. within one month from today and till such period, the interim arrangement for supply of gas shall continue. In case any of the petitioners does not enter into a fresh contract by the said date, the Gail Gas Ltd. shall be at liberty to stop the supply of gas to such petitioners.
Date: July 12, 2013
dps
(Mushaffey Ahmad, J) (Vineet Saran, J)
Let a copy of this order be placed on the record of connected writ petitions no. 37099 of 2012 and 39367 of 2012.
(Mushaffey Ahmad, J) (Vineet Saran, J)
Date: July 12, 2013
dps