ADANI GAS LIMITED v. UNION OF INDIA & ORS.

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A legislative history and the definition of ‘petroleum’, ‘petroleum products’ and ‘mineral oil resources’ contained in various legislations and books and the national interest involved in the equitable distribution of natural gas amongst the States - all these factors lead to the inescapable conclusion that “natural gas” in raw and liquefied form is petroleum product B and part of mineral oil resource, which needs to be regulated by the Union.

46. Natural gas being a petroleum product, we are of the view that under Entry 53 List I, Union Govt. alone has got legislative competence. Going by the definition of gas as given in Section C 2(g) of the Gujarat Act wherein “gas” has been defined as “a matter of gaseous state which predominantly consists of methane”, it would certainly include natural gas also. We are of the view that under Entry 25 List II of the Seventh Schedule, the State would be competent to pass a legislation only in respect of gas and gas-works and having regard to collocation of words ‘gas and gas works’, this Entry would mean any work or industry relating to manufactured gas which is often used for industrial, medical or other similar purposes. Entry 25 of List II, as suggested for the States, will have to be read as a whole. The expressions therein cannot be compartmentally interpreted. The word ‘gas’ in the Entry will take colour from other words ‘gasworks’. In Ballantine’s Law Dictionary, 3rd edition, 1969 ‘Gas Works’ is defined as “a plant for the manufacture of artificial gas”. Similarly in Webster’s New 20th Century dictionary, it is defined as “an establishment in which gas for heating and lighting is manufactured”. In the www.freedictionary.com ‘gas works’ is explained as “a manufactory of gas, with all the machinery and appurtenances; a place where gas is generated.” The meaning of the term ‘gas works’ is well understood in the sense that the place where the gas is manufactured. So it is difficult to accept the proposition that ‘gas’ in Entry 25 of List II includes Natural Gas, which is fundamentally different from manufactured gas in gas works. therefore, Entry 25 of List II could only cover manufactured gas and does not cover Natural Gas within its ambit. This will negative the argument of States that only they have exclusive powers to make laws

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1191 [S. RAVINDRA BHAT, J.]

dealing with Natural Gas and Liquefied Natural Gas. Entry A 25 of List II only covers manufactured gas. This is the clear intention of framers of the Constitution. This reading will no way make that entry a ‘useless lumber’ as feared by the States, because Natural Gas was never intended to be covered by that entry. It is also difficult to accept the argument of States B that all ‘gas’ could be categorized as dangerously inflammable and thus arriving at the conclusion that Natural Gas is also covered in State List because this differentiation is based not on the characteristics of gas, but on the manner of its origin. Entry 25 of List II covers the gas manufactured and used in gas works. In view of this specific Entry 53, for any petroleum and petroleum products, the State Legislature has no legislative competence to pass any legislation in respect of natural gas. To that extent, the provisions-contained in the Gujarat Act are lacking legislative competence.”

56Copy pinpoint56. The Court categorically held that States had no legislative competence to enact laws on the subject of natural gas and liquefied natural gas. It also held that the Gujarat enactment of 2001, insofar as it related to natural gas or liquefied natural gas was without legislative competence and that the act was ultra vires the Constitution. The opinion of the Court was rendered on 25.03.2004. As a result, all activities relating to natural gas that relied upon authorizations by the States became exposed to the vice of illegality. Having regard to the opinion of this Court and the previous policies of the Central Government, Parliament thought it fit to enact the PNGRB Act. Significantly, this Act does not deal with any aspect relating to extraction of petroleum or liquefied natural gas. It deals with what may be termed as “downstream activities “such as refining, processing, storage, transportation, distribution, marketing and sale of petroleum and petroleum products and natural gas. The main aim of the Act is to regulate all these activities in a comprehensive and wide-ranging manner. When parliament enacted the PNGRB Act, it was aware that several entities were in the process of setting up various kinds of networks which the law governed (i.e., transmission, storage, distribution, marketing etc.). Parliament, therefore, devised a uniform standard by which entities that were laying networks or were in the process of setting up such activities had to be considered. The statutory device adopted was through Sections 16 and 17. By virtue of the power conferred by Section1(3) upon the Central Government, all provisions of H

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A the PNGRB Act except Section 16 were brought into force on 01.10.2007. The intention of not bringing into force Section 16 appears to have been to allow some breathing time to entities which were in the process of laying, building and operating any pipeline, to first apply to the PNGRB. If Section 16 were to be brought into force at once, all activities which had started before the enactment of the PNGRB Act would necessarily B have been rendered illegal and would have had to cease. The delayed enforcement of this provision meant that existing entities could do what was required of them in terms of other provisions of the Act and seek necessary authorisation.

57Copy pinpoint57. The non-implementation or absence of enforcement of Section C 16 led to a public interest litigation before the Delhi High Court 24. The High Court declared that by virtue of absence of notification of Section 16, the PNGRB lacked the power to grant authorisation to entities which had applied to it for laying, building, operating or expanding city or local natural gas networks. The judgement was carried in appeal by special D leave25 in which notice was issued. In the meanwhile, pending decision on the Special Leave Petition, the Central Government brought into force Section 16 of the Act by notification dated 12.07.2010 with effect from 15.07.2010.

58Copy pinpoint58. If one considers the background of the enactment, it is evident that the Parliament wished to decisively declare that only entities authorised in accordance with the provisions of the Act by the PNGRB could function. Section 16 by itself does not classify or make any distinction between entities who are permitted or authorised by the Central Government or any other authority. However, by the proviso, it distinguishes two categories of entities, i.e., (i) those laying, building, operating or expanding any pipeline as common carriers or contract carriers and (ii) any city or local natural gas distribution network. The deeming fiction, as it were, in respect of such two classes of entities, by which Adani and other intervenors in its support urge to be unqualified, is created by the expression that such entities “immediately before the appointed date shall be deemed to have such authorization”. However, this deeming provision is expressly made subject to the provisions of this Chapter. The chapter in question is Chapter IV.

24 Voice of India v. Union of India W.P.(C) 8415/2009, decided on 20.01.2010. 25 H SLP 5408/2010

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1193 [S. RAVINDRA BHAT, J.]

59Copy pinpoint59. Parliament enacted the PNGRB Act to regulate refining, processing, storage, transportation, distribution, marketing, and sale of petroleum, petroleum products, and natural gas excluding the production of crude oil and natural gas. The objectives of the enactment are inter alia, setting up of the Board, regulation of refining, storage, processing, transportation, distribution, marketing, and sale of petroleum, petroleum products, and natural gas except for the production of crude oil and natural gas. An important objective is the protection of consumer’s interests in certain activities related to petroleum, its products, and natural gas and ensuring a sufficient and continuous supply of petroleum, its products, and natural gas all around the country. The other important objective is promotion of competitive business. C

60Copy pinpoint60. The PNGRB’s functions are (under Section 11): (a) registration of entities to market notified petroleum and its products that are subject to contract by Central government, and natural gas; D (b) registration of entities establishing and operating LPG terminals; (c) registration to entities to set up storage facilities petroleum, its products, and natural gas, if it exceeds the capacity provided by regulations; E (d) Authorization of entities to lay, build, operate, or expand:

1. A common or contract carrier.

2. City or local natural gas distribution network. (e) Declaring pipelines to be common or contract carriers. F There are other functions too, including regulating access to common or contract carriers to ensure fair trade and competition among the entities, specifying the pipeline access code regulating transportation rates for common or contract carriers and regulating access to city or local natural gas distribution networks to ensure fair trade and competition G among the competitors according to the pipeline access codes.

61Copy pinpoint61. Chapter V of the Act deals with the settlement of disputes. A bench consisting of a member (legal) and one or more member(s) as nominated by the Chairperson of the PNGRB is empowered to settle disputes under the PNGRB Act. Section 24 empowers the Bench to H

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A exercise its power as a Civil Court on matters such as refining, processing, storage, transport, distribution, marketing and sale of petroleum, petroleum products, and natural gas, quality of service and security of supply to the consumers by the entities, and disputes arising under Sections 15 and

19. Under Section 25, complaints can be filed by any person before the Board to refer to the dispute between entities or any matter of the entities B or any other matter relating to the provisions of the Act. The complaint must be filed within sixty days from the date of any contravention, act, or conduct that took place. The complaint shall be accompanied by fees as provided under the regulation. Section 26 empowers the PNGRB to appoint an officer having qualifications and experience, as an C Investigating Officer to investigate in the matters as specified by the regulations. If any person contravenes any directions of the PNGRB, it is empowered to impose a civil penalty on that person and the order passed by the Board can be deemed to be a decree. Section 27 of the PNGRB Act deals with certain factors that the Board takes into account while deciding any dispute. These factors are (a) amount of inappropriate gain and unfair advantage obtained because of a default; (b) amount of loss suffered by an entity because of a default, and (c) the repetitive nature of the default.

62Copy pinpoint62. Adani and the intervenors supporting it argue that the deeming fiction (in Section 16) should be given full effect. To say so, they point out that the deeming fiction should be taken to extend to all entities who were laying, building, or expanding any pipeline, regardless of whether such entities received Central Government authorization or not. In the absence of any distinction, the fullest effect should be given to Parliament’s intent, to ensure that work that had commenced on laying or building, etc. of pipelines, was to be preserved as that was beneficial to the national economy. It is also urged that the expression “subject to the provisions of this chapter” should be harmoniously construed, which means that entities that apply under Section 17 (1) or 17 (2) for authorization should not be denied it without reasonable cause, given that the PNGRB is bound to respect and give effect to the mandate of the deemed authorization clause, which is applicable to all.

63Copy pinpoint63. The appellants relied upon the judgment in Adani Gas (supra). The controversy in that case was that Adani had applied and obtained NOC with regard to gas distribution network for Udaipur and Jaipur. Adani had, after coming into force of the PNGRB Act, applied for H

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1195 [S. RAVINDRA BHAT, J.]

authorization under Section 17 on 28.08.2008. The PNGRB which was A seized of the applications asked Adani to appear before it on 04.08.2010 (after Section 16 was brought into force on 12.07.2010). The Board required Adani to show-cause as to why its applications should not be rejected. After issuing notice, the State Government on 18.05.2011 withdrew the NOC granted and forfeited the commitment fee given by B Adani. Later the PNGRB rejected the application seeking authorization for Udaipur and Jaipur. Both these actions i.e., withdrawal of NOC and the rejection of the application under Section 17 were challenged along with a challenge to the vires of Regulation 18. This Court in Adani Gas Ltd. (supra) considered the scope of the PNGRB Act and observed as follows: C “15. Section 16 of the 2006 Act, which came into force on 12-7-2010, relates to “authorisation”. It puts an embargo on laying, building, operating or expanding in city or local natural gas distribution network without obtaining authorisation under the Act. Proviso (ii) of the said Section D 16 provides for” deemed authorisation” in case an entity had been 1aying, building, operating or expanding any city or local gas distribution network, immediately before the appointed date, which shall be deemed to have such authorisation. In the present case, the appointed date is 1-10-2007 when the 2006 Act was brought into force, except E the provision contained in Section 16 of the 2006 Act, which came into force on 12-7-2010.

16. The 2008 Regulations were framed before Section 16 of the 2006 Act came into force. Regulation 18 of the 2008 Regulations provides that an entity, not authorised by the F Central Government for laying. building, operating or expanding CGD network before the appointed date, shall apply or obtaining an authorisation in the form as in Schedule I and the Board may take into consideration the criteria for considering the application for grant of authorisation in terms G specified in clauses (a) to (j) of Regulation 18(2).”

64Copy pinpoint64. Then, noticing Regulation 18 and the various requirements spelt out by it which the PNGRB Act took into account, the judgment further held as follows: H

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A “18. It is noteworthy that the language used in Regulation 18(2) is that “the Board may take into consideration... “. As such, the language in which the Regulation has been couched does not make the consideration in the said clauses, including clause (d), to be mandatory, but no doubt the same would be relevant considerations. On a careful perusal of the order passed by Board, we find that the application of the appellant has been rejected for reasons mentioned in para 5 of the impugned order dated 19-5-2011, which are extracted hereunder: “5.The committee found that you do not satisfy the conditions laid down under Regulation 18(1) of the Petroleum and Natural Gas Regulatory Board (Authorising Entities to Lay, build, Operate or Expand City or Local Natural Gas Distribution Networks)Regulations,2008onaccount of the following: D (a) Physical and financial progress achieved by M/s Adani Gas Ltd. before the appointed day in the GA of Jaipur does not satisfy the proviso 18(2)(d) of Regulation 18(1) of the Petroleum and Natural Gas Regulatory Board (Authorising Entities to Lay, Build, Operate or Expand City or Local Natural E Gas Distribution Networks) Regulations, 2008; (b) Even after clear instructions of PNGRB vide Press Note dated 30-10-2007 to stop all incremental activities M/s Adani Energy Ltd. had continued with laying of MDPE pipeline and thus violating the directions of the Board.”

F 19. From the above, it is clear that the application of the appellant has been rejected primarily on the ground of non- compliance with clause (d) of Regulation 18(2) of the 2008 Regulations. It was incumbent on the Board to take into consideration various factors as specified in clauses(a)to (j)of G Regulation 18(2) of the 2008 Regulations, and the same has to be considered in the backdrop of the fact that the press note was issued on 30-10-2007 to stop all incremental activities and as such it was necessary to consider whether the appellant could have been faulted for non-compliance with clause (d) of Regulation 18(2), and whether it was a mandatory H

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1197 [S. RAVINDRA BHAT, J.]

requirement or merely one of the factors to be considered along with all the other factors. Other relevant aspects as contained in the other clauses have not been adverted to by the Board while deciding the application of the appellant, which were also equally significant. It was necessary to consider whether the appellant is compliant with various other factors as provided in clauses (a) to (j) of Regulation 18(2) of the2008 Regulations. The non-compliance, if any, with clause (d) ought to have been considered in the light of the press note dated 30-10-2007 which required stopping of all incremental activities.

20. The peculiar factual position is that the 2006 Act had been notified on 3-4-2006 but came into force on 1-10-2007 and the NOC was issued on 27-3-2006, after the Government of Rajasthan had invited open bids on19-11-2005 for laying of city gas distribution network in the cities of Udaipur and Jaipur, in which the appellant had been selected. Besides D depositing the sum of Rs 2 crores immediately towards commitment fee, the appellant had thereafter incurred mammoth expenditure alter it was successful in the bids, which aspect has not been considered by the Board while deciding the application of the appellant. In our considered view, the same should not have normally been overlooked. Besides the same, in the factual circumstances of the present case, the provision of “deemed authorisation contained in proviso (ii) to Section 16 had also been enforced on 12-7-2010 and it was necessary for the Board to have considered whether it was a case where only certain safeguards were required to be observed in view of the “deemed authorisation”.

65Copy pinpoint65. An overall reading of the judgment (Adani Gas Ltd.) discloses that this Court was not cognizant of the background in which Parliament had enacted the PNGRB Act. This Court did not consider the exclusive legislative competence that Parliament possessed, and as a corollary, executive authority that the Central Government exercised by virtue of Entry 53 List I of the Seventh Schedule of the Constitution. More crucially, the decisive and unanimous opinion of this Court rendered in Special Reference (supra) was not considered or even adverted to. In light of the above circumstances this Court should now consider the correctness H

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A of the approach and view recorded in the previous review i.e., Adani Gas Ltd (supra).

66Copy pinpoint66. Parliament did not enact the PNGRB Act on a blank slate, as it were. In the Presidential Reference [Special Reference (supra)] under Article 143 elicited the Court’s opinion in the background of assertions by some States that they had the legislative competence to deal with natural gas. This Court’s unanimous judgment was categorical, in that it upheld the primacy of Parliament under Entry 53 List I of the Seventh Schedule of the Constitution of India. Importantly, this Court also recollected enactments (including the pre-constitution Petroleum Act of 1934) that dealt with petroleum, natural gas, mineral oils etc. and sought to regulate various facets and aspects thereof and related products and their regulations. Given this background, the Parliament felt the compelling need to enact a comprehensive legislation that would regulate salient aspects of all activities pertaining to petroleum products and mineral oils. The PNGRB Act was thus enacted. As noticed earlier, it regulates all activities after extraction of petroleum, natural gas and other petroleum products starting with refining and going right up to distribution to the ultimate consumer. When Parliament enacted the Act, it was confronted with a factual situation where several entities had begun various activities towards laying pipelines and setting up networks in relation to natural gas. If one read the proviso to Section 16 in isolation, the inference undoubtedly would be that every entity which had started laying and building pipelines and networks was the recipient of the deemed authorization clause- or in the words of Adani, that provision sought to retrospectively regularize activities by all entities. However, such a plain and facial construction is unacceptable given that in the same provision F (i.e., proviso to Section 16) the deemed authorization is immediately followed by phrase “subject to provisions of this chapter”.

67Copy pinpoint67. At this stage, it would be necessary to notice the scope of a proviso. Proviso ordinarily carves out a field of operation, but does not travel beyond the main enacted provision. Therefore, the golden rule of G interpretation is to read the whole section, inclusive of the proviso, in such a manner that they mutually throw light on each other and result in a harmonious construction. This was held in Dwarka Prasad v. Dwarka Das Saraf 26:

26 H (1976) 1 SCC 128.

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1199 [S. RAVINDRA BHAT, J.]

“18. We may mention in fairness to counsel that the following, A among other decisions, were cited at the Bar bearing on the uses of provisos in statutes: Commissioner Income Tax v. Indo- Mercantile Bank Ltd. [1959 Supp (2) SCR 256]; Ram Narain Sons Ltd. v. Commissioner Sales Tax (1955) 2 SCR 483]; Thompson v. Dibdin [1912 AC 533]; R. v. Dibdin [1910 P 57 B (CA)] and Tahsildar Singh v. State of U.P. [1959 Supp (2) SCR

875. The law is trite. A proviso must be limited to the subject- matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. ‘Words are dependent on the principal enacting words to which they are tacked as a proviso. They cannot be read as divorced from their context’ (Thompson v. Dibdin [1912 AC 533]. If the rule of construction is that prima facie a proviso should be limited in its operation to the subject-matter of the enacting clause, the stand we have taken is sound. To expand the enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction.”

68Copy pinpoint68. Later, in S. Sundaram Pillai & Ors. v. V. Pattabiraman & Ors.,27 this Court held as follows: “27. (…) The well-established rule of interpretation of a F proviso is that a proviso may have three separate functions. Normally, a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. In other words, a proviso cannot be torn G apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment.

28. Craies in his book ‘Statute Law’ (7th Edn.) while explaining the purpose and import of a proviso state at page 218 thus: 27 (1985) 1 SCC 591. H

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A “The effect of an excepting or qualifying proviso, according to the ordinary rules of construction, is to except out of the preceding portion of the enactment, or to qualify something enacted therein, which but for the proviso would be within it...The natural presumption is that, but for the proviso, the enacting part of the section would have included the subject- B matter of the proviso.” ***

30. Sarathi in ‘Interpretation of Statutes’ at pages 294-295 has collected the following principles in regard to a proviso:- C “(a) When one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject-matter of the proviso. (b) A proviso must be construed with reference to the preceding D parts of the clause to which it is appended. (c) Where the proviso is directly repugnant to a section, the proviso shall stand and be held a repeal of the section as the proviso speaks the later intention of the makers. (d) Where the section is doubtful, a proviso may be used as a E guide to its interpretation; but when it is clear, a proviso cannot imply the existence of words of which there is no trace in the section. (e) The proviso is subordinate to the main section. (f) A proviso does not enlarge an enactment except for F compelling reasons. (g) Sometimes an unnecessary proviso is inserted by way of abundant caution. (h) A construction placed upon a proviso which brings it into general harmony with the terms of section should prevail. G (i) When a proviso is repugnant to the enacting part, the proviso will not prevail over the absolute terms of a later Act directed to be read as supplemental to the earlier one. (j) A proviso may sometimes contain a substantive provision.” *** H

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1201 [S. RAVINDRA BHAT, J.]

33. The above case was approved by this court in CIT v. Indo A Mercantile Bank Ltd28., where Kapur, J. held that the proper function of a proviso was merely to qualify the generality of the main enactment by providing an exception and taking out, as it were, from the main enactment a portion which, but for the proviso, would fall within the main enactment. In Shah B Bhojraj Kuverji Oil Mills & Ginning Factory v. Subhash Chandra Yograj Sinha 29 Hidayatullah, J, indicated the parameters of a proviso thus: “As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment, and ordinarily, a proviso is not interpreted as stating a general rule.” *** “37. In short, generally speaking, a proviso is intended to limit the enacted provision so as to except something which would have otherwise been within it or in some measure to modify the enacting clause. Sometimes a proviso may be embedded in the main provision and becomes an integral part of it so as to amount to a substantive provision itself.”

69Copy pinpoint69. The Central Government did not immediately bring into force E Section 16 of the PNGRB Act, as its imperative and negative terms (“no entity shall” lay build, operate a city or local gas network) would have led to a virtual standstill of all network laying or constructing activity. Instead, it notified all provisions, except Section 16, as to grant time to the newly established Board to consider and examine the feasibility of applications for authorization, based on which entities were then laying and constructing networks, the soundness of their scheme in technical and economic terms, etc. Adani and intervenors supporting it, have urged that this Court should give full scope to the proviso, and the fiction of a deemed authorization, since Parliament’s intent was to clearly authorize all entities, subject to certain modalities, because not doing so would result in waste of precious national resources.

70Copy pinpoint70. This Court recollects that while interpreting a proviso, not only should the main provision be kept in mind, but the purpose for enacting 28 [1959] 2 Supp. SCR 256. 29 [1962] 2 SCR 159. H

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A the proviso should not be lost sight of. In N.K. Sharma (supra) this Court rejected an argument that under the Haryana Co-operative Societies Act, 1984, a Managing Director could not be prosecuted without sanction, as he was a deemed public servant. The Court held that Section 123, which created the legal fiction of treating some employees as public servants, was restricted in its application to those engaged in recovery B of loans or those appointed as liquidator or arbitrator. It was held that: “Section 117 of the said Act enumerates offences. Section 118 limits taking of cognizance of offences which come within the purview of the said Act, as would be evident from sub- section (1) thereof, and not under the provisions of the Penal C Code or any other statute. The said provision, therefore, has no application. In terms of Section 123, only an employee who is engaged in the recovery of loans or a person who has been appointed as a liquidator or an arbitrator only shall be treated as a public servant. By reason of the said provision, a D legal fiction has been created. A legal fiction, as is well known, is created for a specific purpose and, thus, applicability thereof cannot be extended for a purpose other than those for which it has been created. As the Managing Director of Haryana State Cooperative Land Development Bank Ltd., the appellant was not engaged in the recovery of loans or appointed as a E liquidator or an arbitrator and in that view of the matter, the limited purpose for which the legal fiction has been created would have no application in the instant case.

71Copy pinpoint71. In Principles of Statutory Interpretation, 14th Edn. G.P. Singh, the author describes the scope of a proviso: F “In interpreting a provision creating a legal fiction, the court is to ascertain for what purpose the fiction is created [State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory, AIR 1953 SC 333; State of Bombay v. Pandurang Vinayak, AIR 1953 SC 244] , and after ascertaining this, the G Court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. [East End Dwellings Co. Ltd. v. Finsbury Borough Council, (1951) 2 All ER 587 (HL); CIT v. S. Teja Singh, AIR 1959 SC 352] But in so construing the fiction it is not to be H extended beyond the purpose for which it is created [Bengal

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Immunity Co. Ltd. v. State of Bihar, AIR 1955 SC A 661; CIT v. Amarchand N. Shroff, AIR 1963 SC 1448] , or beyond the language of the section by which it is created. [CIT v. Shakuntala, AIR 1966 SC 719; Mancheri Puthusseri Ahmed v. Kuthiravattam Estate Receiver, (1996) 6 SCC 185] It cannot also be extended by importing another fiction. B [CIT v. Moon Mills Ltd., AIR 1966 SC 870] The principles stated above are ‘well-settled’. [State of W.B. v. Sadan K. Bormal, (2004) 6 SCC 59] A legal fiction may also be interpreted narrowly to make the statute workable. [Nandkishore Ganesh Joshi v. Commr., Municipal Corpn. of Kalyan and Dombivali, (2004) 11 SCC 417]” C

72Copy pinpoint72. The distinction between Central Government authorized entities and others does not appear in Section 16; however, it clearly does in Section 17, where different regimes and standards of scrutiny are prescribed for the PNGRB in considering applications. This statutory classification is important because it harks back to the genesis of the D PNGRB Act, i.e., Parliament’s intention to enact a comprehensive law to regulate important aspects of the petroleum and natural gas sector of the economy, in the wake of a decisive opinion of this Court that it is the Parliament alone that always had the competence to legislate in the field, and the Central Government, to frame policies. The statutory distinction, which is a classification no less, between Central Government E approved entities and others, therefore, is manifest in Section 17, which occurs after Section 16.

73Copy pinpoint73. The opening words of Section 16 are cast in negative terms (“no entity shall”). In a series of judgments, this Court has ruled that negative words are prohibitory. As held in M. Pentiah F v. Muddala Veeramallappa & Ors30, “Negative imperative words are clearly prohibitory and are ordinarily used as a legislative device to make a statute imperative.” G

74Copy pinpoint74. In Superintendent and Legal Remembrancer of Legal Affairs to Govt. of West Bengal vs. Abani Maity31, this Court observed as follows: 30 (1961) 2 SCR 295. 31 (1979) 4 SCC 85. H

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A “Exposition ex visceribus actus is a long-recognised rule of construction. Words in a statute often take their meaning from the context of the statute as a whole. They are therefore, not to be construed in isolation. For instance, the use of the word ‘may’ would normally indicate that the provision was not mandatory. But in the context of a particular statute, this word B may connote a legislative imperative, particularly when its construction in a permissive sense would relegate it to the unenviable position, as it were, ‘of an ineffectual angel beating its wings in a luminous void in vain’. ‘If the choice is between two interpretations’, said Viscount Simon, L.C. In C Nokes vs. Doncaster Amalgamated Collieries, Ltd. (AC at p. 1022): ‘The narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather D accept the bolder construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result.’”

75Copy pinpoint75. The enacting part of Section 16 thus prohibits anyone or any entity from starting or carrying on any activity covered by the PNGRB E Act and requires authorisation from it. The proviso then is meant to operate in an extremely restricted manner, i.e., to deal with entities inter alia that were engaged in laying, building, operating etc., inter alia, gas pipelines “at the time when the Act came into force”. The proviso, unlike the main part of Section 16, was not intended to grant authorisation to entities which had not started any activity thus far. Such F entities had to now apply for authorisation. In any case, by the combined operation of Sections 16 and 17, the proviso to Section 16 is not unqualified - the “deemed authorisation” clause is subject to other provisions of Chapter IV. Section 17 is one such provision under Chapter IV. As noticed previously, this provision brings home clearly that only Central Government G authorised entities were deemed to have been authorised. The omission of any reference to authorisation in Section 16 is significant because the qualifier for application of the proviso is that it was subject to other provisions of the chapter. The scheme of Section 17 intrinsically classifies the two, i.e. Central Government authorised entities, and others. The underlying basis for this statutory classification is that only entities which H

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had been cleared or authorised by the Central Government prior to the coming into force of the Act were deemed to have authorization under the Act, and therefore, had to furnish certain details. As with regard to the others, i.e., entities not authorised by the Central Government, fresh applications were necessary [Section 17(1) and Section 17(2)] which were to be assessed by the Board on a case-by-case basis and in accordance with uniform standards.

76Copy pinpoint76. The other reason for holding that the deeming fiction of authorization in the proviso to Section 16 does not apply to all entities, is that the clause is “subject to other provisions of this chapter”. This means that not all entities can be termed as “deemed authorized” entities. In K.R.C.S. Balakrishna Chetty v. State of Madras 32 this Court C explained the use of the term “subject to” in the following manner: “The use of the words “subject to” has reference to effectuating the intention of the law and the correct meaning, in our opinion, is “conditional upon”. D

77Copy pinpoint77. In Ashok Leyland Ltd. v. State of Tamil Nadu33 this Court held that “subject to” is an expression of subordination: “93. Furthermore, the expression ‘subject to’ must be given effect to.

94. In Black’s Law Dictionary, Fifth Edition at page 1278 the E expression “Subject to” has been defined as under: “Liable, subordinate, subservient, inferior, obedient to; governed or affected by; provided that; provided, answerable for. Homan v. Employers Reinsurance Corporation, 345 Mo. 650, 136 S.W. 2d 289, 302” F

78Copy pinpoint78. Therefore, if one reads the proviso to Section 16 with the proviso to Sections 17(1) and Section 17(2) the former (i.e., proviso to Section 16) only states that entities that had been previously authorized by the Central Government could claim deemed authorization. The rationale for this is that the provisos to Section 17(1) and 17(2) merely G require such entities (as were authorized by the Central Government prior to coming into force of PNGRB Act) to intimate certain details to the PNGRB -but do not require any fresh authorization. This distinction 32 1961 (2) SCR 736. 33 (2004) 3 SCC 1. H

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A i.e., between authorization and intimation is crucial because it states that entities which received Central Government authorization before the commencement of the Act, and which had started to lay, build or operate CGD networks were deemed to be authorized under the PNGRB Act. This is the only logical and reasonable construction, given this Court’s declaration in Special Reference (supra), that States did not have the competence to enact any laws or frame policies in respect of natural gas. It was the Parliament alone that could do so. The Court also declared ultra vires the Gujarat enactment, in light of this reasoning. Parliament was conscious that authorizations for CGD networks were being granted by the Central Government, and it sought to save only these authorizations, which had the support of the Constitution. Authorizations granted by state governments were not legal and did not have the support of the Constitution, and such authorizations were to be obtained afresh, under the regime put in place by the PNGRB Act.

79Copy pinpoint79. The appellant’s reliance on Section 17(4), to urge that the D PNGRB has limited options and can either reject an application seeking authorization or allow it, and that there is no statutory indication apart from the deemed authorization under the proviso to Section 16, is without basis. In the overall scheme of the PNGRB Act, what appears clearly is that: E (1) After coming into force of the PNGRB Act, all activities covered by it (refining, processing, storage, transportation, distribution, marketing and sale of petroleum products and natural gas) can be carried out only with the authorization of the PNGRB, in accordance with provisions of the Act;

F (2) The PNGRB’s functions are delineated in Section 11 which include granting authorization to entities to lay, build, operate or expand common carriers, contract carriers or local natural gas distribution network; (3) The PNGRB’s functions also include the control through G regulation, access to city or local natural gas distribution network to ensure fair trade and competition amongst entities; (4) The PNGRB has adjudicatory powers under Section 12 and 24; (5) The PNGRB has regulation making powers under Sections 11 H and 61;

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1207 [S. RAVINDRA BHAT, J.]

(6) Pursuant to its regulatory powers, and regulation making powers, PNGRB in fact has framed several regulations 34, including the CGD Regulations of 2008; (7) Sections 16 and 17 are of crucial importance because they manifest Parliament’s intention of meting out uniform treatment, in regard to entities that were in the process of laying, building, operating or expanding any city or local natural gas distribution network or any pipeline as a common carrier or contract carrier; and (8) Section 17 (4) itself alludes to the policies of the Central Government, which are to apply and guide the PNGRB, while considering applications under Section 17 (2).

80Copy pinpoint80. As discussed earlier, petroleum was always within the exclusive domain of the Parliament and Central Government. The enactment of the Petroleum Act, 1934 (pre-Constitutional law) and more importantly, the Petroleum and Natural Gas Rules, 1959 (hereafter called “the 1959 D Rules”) shows that Union primacy always existed in this field. The 1959 Rules, by Rule 3(i) defined “natural gas” as gas obtained from bore- holes and consisting primarily of hydrocarbons. Importantly, “petroleum” in Rule 3(k) is defined as “naturally occurring hydrocarbons in a free State whether in the form of natural gas or in a liquid viscous or solid form.” By Rule 4, all prospecting or mining except under a E license or a lease was prohibited. The Petroleum Rules, 2002in Part V brought in a regime (Rules 87-101) for regulation and transportation of petroleum, again defined broadly to include natural gas. Rule 89 is cast in negative terms and expressly prohibits pipelines without prior approval: “89. Approval of the design and route of the pipeline-No F pipeline shall be laid without the prior written approval of the Chief Controller of the route of the pipeline, and of the design, construction and working thereof.” 34 Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008; Petroleum and Natural G Gas Regulatory Board (Procedure for Development of Technical Standards and Specifications including Safety Standards) Regulations, 2009; Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Petroleum and Petroleum Products Pipelines) Regulations, 2010; Petroleum and Natural Gas Regulatory Board (Procedure for Development of Technical Standards and Specifications including Safety Standards) Regulations, 2009; Petroleum and Natural Gas Regulatory Board (Gas Exchange)Regulations, 2020 H

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81Copy pinpoint81. Rule 90 provides certain technical specifications with respect to design of the pipeline as well as location; Rule 91 states that pipelines are to be laid in the most favourable route, avoiding obstructions and areas which have no unusual external conditions. Other criterion such as hydrostatic testing, protection against corrosion, laying pipelines underground, shutting down of pipelines, checking of gauges, provisions for alterations, additions, repairs and maintenance, and the power of inspection and examination as well as obligation to report accidents are provided for.

82Copy pinpoint82. The Policy for Development of Natural Gas Pipeline and City or Local Natural Gas Distribution Network, 2006 was framed by the Central Government. In para 1.3, the policy’s objective is to promote public and private sector investment in natural gas pipelines and city or local natural gas distribution networks to facilitate open access to all entities to the pipeline network on a non-discriminatory network, promotion of competition amongst entities to prevent abuse of dominant position and to secure consumer interest in terms of gas availability and reasonable tariff for natural gas pipeline and city or local natural gas distribution networks. Para 6.1 states that any entity wanting to build, operate or expand common or contract carrier gas pipelines has to undertake that if it has business interest in related areas of gas marketing or city or local gas distribution network or has a related entity E (a parent company, group company, JV, subsidiary etc.), it would ensure an arm’s length relationship between pipeline activity and those activities. Such entities were obliged to follow an Affiliate Code of Conduct, and the PNGRB had the right to enquire about managerial structure/ownership patterns and accounts of the authorized entity and its related entities to ensure that such relationship is at arm’s length. Para 6.2 envisions that authorized entities will have transportation of natural gas as their sole business activity and not have any business interests in gas marketing or city or local gas distribution networks. Para 6.3 aims at ensuring that pipeline ownership would not provide any competitive advantage to any gas seller and abuse of market power in establishing an efficient gas grid with open access on a non-discriminatory basis. By reason of para 7.1, gas grid connectivity “[I]s with a view to harmonizing the operations and providing interconnectivity to different gas pipelines. For the development of the gas sector in India, including the H

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1209 [S. RAVINDRA BHAT, J.]

establishment of Gas Grid with open market access for all A players on a non-discriminatory basis, a comprehensive set of technical requirements and safety standards as well as a code for gas grid connectivity, to be developed by the Board, is necessary to ensure operational compatibility. Adherence to such standards and codes will be an integral condition of B Authorization for gas pipelines as well as city or local natural gas distribution networks. The Board may refuse access to the gas grid on technical considerations.” In para 9, the Central Government or PNGRB, in consultation with the Oil Industry Safety Directorate (hereafter called “OISD”), has to C

“[R]eview the existing rules & standards, their applicability and develop a comprehensive set of technical & HSE standards in respect of natural gas transmission & distribution pipelines and city or local natural gas distribution network. These standards shall cover technical & HSE parameters in design, laying, operation & maintenance of natural gas pipelines and city or local natural gas distribution networks including associated facilities & equipment considering, inter alia gas grid connectivity issues. The Board shall lay down the standards as per Section 11 (i) of the Act to ensure seamless development of natural gas pipeline & distribution infrastructure in the country.”

83Copy pinpoint83. All these- the objectives and the provisions of the PNGRB Act and the Policy of 2006 - afford sufficient guidance to the Board, along with the regulations framed by it, for deciding which applicant entities can be granted authorization, and if so, to what extent of their respective projects. The decision by the PNGRB under Section 17(4) therefore, to decide upon any authorization application is not based on its consideration of the subjective factors relating to each application, but on an overall analysis of all the above relevant factors. G

84Copy pinpoint84. Adani’s contention as indeed that of the interveners with respect to orders of this Court (especially made in the public interest litigation, in M.C. Mehta) or authorizations granted by the State cannot be read as overriding or in any manner undermining the provisions of the PNGRB Act in terms of the opinion of this Court, in In re. Special H

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A Reference 2001 as well as the decision in Association of Natural Gas &Ors. (supra). Parliament had exclusive competence to enact laws and the Union had the corresponding sole executive powers to frame policies in relation to petroleum and petroleum products. As noticed in the previous part of the judgment, though the Petroleum Act, 1934 continued as a “law in force”, was used several times by framing specific rules in relation to various aspects, containing a legal regime for regulation of laying of gas pipelines, etc. for which Central authorities always exercised exclusive control prior to the enactment of the PNGRB Act. The Act creates a modern-day regulation intended to create All-India guidelines and policies for due implementation, ensuring that market dominance in the field is not abused and fairness in dealings of various entities takes place. PNGRB Act was intended to have primacy in regard to grant of authorizations on the subject over which it exercises jurisdiction. To facilitate due exercise of its jurisdiction, same role or space has been accorded to the States – which is indicated again in clear terms under the Central Government’s policy of 2006. The role of the states in granting no objection is limited taking into account local factors - no more no less. In these circumstances, any contention on behalf of Adani or the intervenors to the effect that no objection had been granted to them by a State authority or orders of Court had permitted any entity to either function or continue to function does not per se amount to an authorization in terms of the PNGRB Act. E It does not also follow that authorization of the Central Government can be assumed. Such entities had to secure authorization, under the PNGRB Act, in respect of any area, after coming into force of the Act.

85Copy pinpoint85. Having regard to all these, this Court is of the opinion that the previous ruling in Adani Gas (supra) did not correctly interpret the law. F It did not discuss whether the “deemed authorisation” (in the proviso to Section 16) was qualified or unqualified. The previous ruling in Adani Gas(supra)also did not notice the important condition that the deemed authorization clause applied subject to other provisions of Chapter IV, including Section 17; and lastly it overlooked the decisive ruling of a five-judge bench in Special Reference (supra). G Accordingly, the interpretation of Section 16 and the deemed authorization clause in its proviso, in Adani Gas is held to be incorrect. The judgment in Adani Gas is therefore overruled. For the same reasons, the submissions of the appellants as well as the supporting interveners are rejected. H

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1211 [S. RAVINDRA BHAT, J.]

Re Point No. 2: Validity of Regulation 18 A

86Copy pinpoint86. As discussed in the previous section of this judgment, by virtue of Sections 16 and 17, only those entities that were carrying out CGD activities, which had been authorized prior to the appointed day, are deemed to be authorized under the PNGRB Act. Section 19 provides that the Board may grant authorization either on the basis of an application B for authorization, or on a suo motu basis, where the Board finds it necessary or expedient to lay, build, operate or expand a city or local natural gas distribution network in a specified geographic area.

87Copy pinpoint87. In respect of entities that seek to set up such operations after the Act came into effect, Regulation 4 provides as follows: C “4. Initiation of proposal through expression of interest route or suo-motu by Board. (1) An entity desirous of laying, building, operating or expanding a CGD network shall submit an expression of interest to the Board in the form of an application at Schedule D B alongwith an application fee as specified under the Petroleum and Natural Gas Regulatory Board (Levy of Fee and Other Charges) Regulations, 2007. (2) The Board may suo-motu invite bids from entities interested in laying, building, operating or expanding a CGD network E for any specified geographical area.

88Copy pinpoint88. Therefore, such entities are required to either submit an expression of interest, followed by acceptance of the proposal and invitation of bids by the Board (under Regulation 5(5)), or bid for authorization when such bids are invited suo-motu by the Board (under F Regulation 6). Entities that satisfy all the requisite conditions shall be granted authorization, under Regulation 10.

89Copy pinpoint89. Regulation 17 provides for the further monitoring and regulation of entities that have prior authorization by the Central Government, which are deemed to be authorized under the PNGRB Act. The regulation G imposes requirements to comply with all terms and conditions of the authorization, and relevant technical standards and specifications, etc. The Board may grant exclusivity to such entities; the Board also fixes transportation tariffs. Regulation 18 pertains to entities that were carrying out CGD activities prior to the coming into effect of the PNGRB Act, H

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A but were not authorized by the Central Government. Such entities do not enjoy “deemed authorization” under the Act; they are required to apply for fresh authorization under the provisions of Regulation 18.

90Copy pinpoint90. The PNGRB Act and Regulations, thus create three categories of entities for the different ways in which authorization can be obtained: B (1) Entities authorized by the Central Government prior to the appointed day, are deemed to be authorized, and are merely required to submit certain information in the relevant forms; (2) Entities that were carrying out CGD activities, but were not authorized by the Central Government, are required to apply for fresh authorization under Regulation 18; (3) Entities that seek to set up CGD activities after the appointed day, i.e., C all entities seeking to set up operations afresh, after the PNGRB Act came into effect, would be required to either submit an expression of interest, followed by participation in the bidding process, or participate in the suo-motu invitation of bids by the PNGRB.

91Copy pinpoint91. Regulation 18 is part of the CGD Regulations framed under D Section 61 of the PNGRB Act. This regulation, on a plain reading, applies to entities not authorised by the Central Government for laying, building, operating or expanding pipelines beyond the appointed date. Regulation 18(1) requires such entities (who did not possess Central Government authorisation as on the appointed date) to apply immediately for obtaining authorisation in the format prescribed in Schedule I to the CGD Regulations. Regulation 18(2) then prescribes that the PNGRB “may” take into consideration the criteria or conditions spelt out in clauses (a) to (j). Regulation 18(2)(a) speaks of the minimum eligibility criteria specified in Regulation 5(6)(a) to (e) and (i); Regulation 18(2)(b) states that entities which were not registered as companies at the time of coming into force of the Regulations were to undertake to become companies; Regulation 18(2)(c) states that a satisfactory assessment of the actual physical progress made and the financial commitment in respect of it immediately before the appointed date in comparison with the entities DFR appraised by the financial institutions funding the project may be taken into consideration by the PNGRB for grant of authorization. If the project is not funded, the Board could appraise the DFR which had to clearly indicate the specific geographical area of the project and also specify the coverage for CNG and PNG. Regulation 18(2)(d) prescribes that the actual physical progress and the financial demand referred to in clause (c) would mean at least 25% of the capital H

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1213 [S. RAVINDRA BHAT, J.]

expenditure identified for the CGD Project in terms of DFR immediately A before the appointed date. Apart from these, the entity should have arranged by way of acquisition or lease, lands for the next project (Clause (e)). The PNGRB reserves the right to have the actual physical progress certified and, having regard to the progress achieved, authorise the entity only for the authorised area as per the (i) geographical area in its DFR; B or (ii) geographical area actually covered under implementation till the appointed day; or (iii) any area as specified by the Board(Clause (f)). The Board has to be satisfied of the adequacy of the entities ‘capacities to meet the applicable technical standard and safety standards specified in the regulations or the technical standards, including the quality of safety standards. Clause (g) also refers to Clause 15. Regulation 18(3) is C important because it obliges overall evaluation and is in the following terms: “Regulation 18 (3) - the evaluation of the application in terms of the Clauses (a) to (j) shall be done in totality considering the composite nature and inter-linkages of the criteria.” D

92Copy pinpoint92. Apart from sub-regulation (3), it is also noteworthy that Regulation 18 applies only to one category, i.e., entities which were not authorised by the Central Government prior to coming into force of the PNGRB Act. These were a limited number of entities, a vanishing species, so to say, as they were not expected to continue without authorization. E There is some logic in interpreting Regulation 18 in the light of the proviso to Section 16 and the main parts of Section 17. Before the coming into force of the PNGRB Act, the existing norms for grant of approval or authorisation evolved by the Central Government were found in the Petroleum Act, Petroleum Rules as well as the existing policies, i.e. the policy of 2002 and the later policy of 2006. Keeping this in mind, F Regulation 18 was meant to cater to an extremely limited class of applicants and the intention of framing this regulation was to apply it to those entities whose projects existed and whose projects were unknown to the central government. The ruling in Special Reference (supra) was only a declaration of what always was the correct legal G position, i.e., that Parliament had exclusive legislative competence to enact laws in relation to petroleum, mineral oil and oil and natural gas and that the Central Government had exclusive control over the subject matter. The infraction of this constitutional position by the States, some of which had granted authorizations, would mean that such entities which H

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A had been authorised by the State but not the Central Government, in all likelihood would not have conformed to the overall policy of the Central Government with respect to inter alia laying, operating, and building of natural gas pipelines and city or local natural gas distribution networks.

93Copy pinpoint93. Regulation 18 was meant to provide a uniform standard B whereby such State authorised entities’ projects could be evaluated and granted authorization, if need be. Apart from technical and safety standards which the regulation necessitated, final standards were prescribed; common yardstick of 25% of actual physical progress with corresponding financial commitment was, therefore, insisted upon.

94Copy pinpoint94. The PNGRB has been granted the flexibility of either approving the entire project or curtailing it or approving that part of the project which is actually performed. In the opinion of this Court, this discretion is essential inasmuch as the PNGRB had to consider the overall position of not only the area or areas in question, but the feasibility of the concerned network and its integration with the state and national network. D Regulation 18 is to be seen, therefore, as a special feature to deal with the applications made by entities not authorised by the Central Government. With the coming into force of Section 16 and the conclusion of evaluation of all those existing entities, there would be little or no scope for applying Regulation 18. This is also evident from Regulation E 17 which reads as follows: “17. Entity authorized by the Central Government for laying, building, operating or expanding CGD network before the appointed day. (1) The entity shall submit relevant information along with supporting documents in the form as in Schedule H within a period of one hundred and eighty days from the appointed day. (2) The entity shall abide by the terms and conditions of the authorization by the Central Government including obligations, if any, imposed by the Central Government. (3) The entity shall abide by the relevant regulations for technical standards and specifications, including safety standards and the quality of service standards****.

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1215 [S. RAVINDRA BHAT, J.]

(4) The Board may consider grant of exclusivity on such terms A and conditions as per the provisions in the Petroleum and Natural Gas Regulatory Board (Exclusivity for City or Local Natural Gas Distribution Networks) Regulations, 2008. (5) The transportation tariff shall be as determined by the Board as per regulation under section 22 of the Petroleum B and Natural Gas Regulatory Board Act, 2006. (6) The activities of the entity may be subject to such other regulations as may be applicable as per the provisions of the Act.”

95Copy pinpoint95. The ruling cited, i.e., Adani Gas(supra) in support of the submission noticed in the previous part of the judgement stated that Regulation 18(2) is not couched in mandatory terms and it held that: “…but no doubt the same would be relevant considerations having regard to the express terms of regulation 18(3) which clearly spelt out that PNGRB has to take into consideration an application and test whether all criteria are satisfied having regard to their inter-linkages. There can be no room for doubt that these conditions were meant to be mandatory.” In view of the above scheme of the regulations, this Court would first consider whether the phrase “may take into consideration” in E Regulation 18 (2), before setting out the various criteria, is compulsive or only by way of guidance. In Adani Gas (supra), this Court held that the term was not mandatory, and that the PNGRB had to nevertheless be generally guided by the various criteria in clauses (a) to (j).

96Copy pinpoint96. As noticed earlier, the PNGRB Act is intended to regulate all activities post extraction – i.e., refining, processing, storage, transport, distribution, marketing and sale. Power, when conferred, has to be construed in the overall context of the parent statute, and the specific powers conferred on the regulatory agency. Section 11 and Section 61 of the PNGRB Act confer regulation making powers on the Board. It is in the exercise of this power that Regulation 18 was framed, for the application of uniform criteria to consider applications for authorization, made by entities which did not have Central Government authorization on the appointed date. It is in this context that one has to consider the interpretation of the phrase “may take into consideration”. H

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97Copy pinpoint97. In Sri Sitaram Sugar Company Limited v. Union of India 35, this Court had to consider and interpret the expression “having regard to” in the statute, which conferred power upon the government to determine the price of sugar. This Court observed as follows: “29. (….) Be that as it may, the expression “having regard to” must be understood in the context in which it is used in the statute. See Union of India v. Kamlabhai Harjiwandas Parekh [(1968) 1 SCR 463, 471]. These words do not mean that the government cannot, after taking into account the matters mentioned in clauses (a) to (d), consider any other matter which may be relevant. The expression is not “having regard only to” but “having regard to”. These words are not a fetter; they are not words of limitation, but of general guidance to make an estimate. The government must, of course, address itself to the questions to which it must have regard, and, having done so, it is for the government to determine what it is empowered to determine with reference to what it reasonably considers to be relevant for the purpose. The Judicial Committee in CIT v. Williamson Diamonds Ltd. [LR 1958 AC 41, 49 : (1957) 3 WLR 663] observed with reference to the expression “having regard to”: (AC p. 49) E “The form of words used no doubt lends itself to the suggestion that regard should be paid only to the two matters mentioned, but it appears to their Lordships that it is impossible to arrive at a conclusion as to reasonableness by considering the two matters mentioned isolated from other relevant factors. Moreover, the statute does not say F “having regard only” to losses previously incurred by the company and to the smallness of the profits made. No answer, which can be said to be in any measure adequate, can be given to the question of “unreasonableness” by considering these two matters alone.” G See CIT v. Gungadhar Banerjee and Co. (P) Ltd. [(1965) 3 SCR 439, 444-45 : AIR 1965 SC 1977 : 57 ITR 176] See also Saraswati Industrial Syndicate Ltd. v. Union of India [(1974) 2 SCC 630, 633 : (1975) 1 SCR 956, 959]. In State of Karnataka v. Ranganatha Reddy [(1977) 4 SCC 471, 488 35 H (1990) 3 SCC 223.

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1217 [S. RAVINDRA BHAT, J.]

: (1978) 1 SCR 641, 657-58] this Court stated: (SCC p. 488, A para 23 : SCR pp. 657-58) “The content and purport of the expressions “having regard to” and “shall have regard to” have been the subject matter of consideration in various decisions of the courts in England as also in this country. We may refer only to a few. B In Illingworth v. Walmsley [(1900) 2 QB 142 : 16 TLR 281] it was held by the Court of Appeal, to quote a few words from the judgment of Romer C.J. at page 144: “All that clause 2 means is that the tribunal assessing the compensation is to bear in mind and have regard to the average weekly wages earned before and after the accident respectively. Bearing that in mind, a limit is placed on the amount of compensation that may be awarded ....” **** “29. (…) It is worthwhile to quote a few words from the judgment of Fletcher Moulton, L.J. at page 458. Under the phrase ‘Regard may be had to’ the facts which the courts may thus take cognizance of are to be ‘a guide, and not a fetter’. This Court speaking through one of us (Beg, J., as he then was), has expressed the same opinion in the case of Saraswati E Industrial Syndicate Ltd. v. Union of India [(1965) 3 SCR 439, 444-45 : AIR 1965 SC 1977 : 57 ITR 176]. Says the learned Judge at page 959 (SCC p. 633, para 3):‘The expression “having regard to” only obliges the government to consider as relevant data material to which it must have regard’.” F In State of U.P. v. Renusagar Power Co. [(1988) 4 SCC 59: AIR 1988 SC 1737] , one of us (Mukharji, J., as he then was) observed: “The expression “having regard to” only obliges the government to consider as relevant data material to which G it must have regard...”. In O’May v. City of London Real Property Co. Ltd. [(1982) 1 All ER 660, 665 : (1982) 2 WLR 407 (HL)], Lord Hailsham stated: H

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A “A certain amount of discussion took place in argument as to the meaning of ‘having regard to’ in Section 35. Despite the fact that the phrase has only just been used by the draftsman of Section 34 in an almost mandatory sense, I do not in any way suggest that the court is intended or should in any way attempt to bind the parties to the terms B of the current tenancy in any permanent form....”.

30. The words “having regard to” in the sub-section are the legislative instruction for the general guidance of the government in determining the price of sugar. They are not strictly mandatory, but in essence directory. The C reasonableness of the order made by the government in exercise of its power under sub-section (3-C) will, of course, be tested by asking the question whether or not the matters mentioned in clauses (a) to (d) have been generally considered by the government in making its estimate of the price, but the D court will not strictly scrutinise the extent to which those matters or any other matters have been taken into account. There is sufficient compliance with the sub-section, if the government has addressed its mind to the factors mentioned in clauses (a) to (d), amongst other factors which the government may reasonably consider to be relevant, and has come to a E conclusion, which any reasonable person, placed in the position of the government, would have come to. (…)”

98Copy pinpoint98. In the present case, having regard to the contextual setting of Regulation 18, the expression “may take into consideration” cannot be placed in the straightjacket of either a mandate or a directory rule. F There are numerous decisions which hold that “may” could mean “shall” and vice versa; much depends upon the context and object of the provision as well as its statutory setting. As discussed by this Court in Shri Sitaram Sugar Company (supra) the phrase “having regard to” followed by enumeration of criteria, is the legislature’s or rule maker’s G indicator of how discretion is to be exercised. Likewise, the terms “may consider” or “may take into consideration” or even the enumeration of criteria prefaced by the phrase “it shall be lawful to consider” are methods by which the law or rule maker would like the authority to exercise discretion, taking into consideration certain criteria while discharging its duties. H

ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1219 [S. RAVINDRA BHAT, J.]

99Copy pinpoint99. In the present case, Regulation 18(3) specifically states that A “evaluation of the application in terms of the Clauses (a) to (j) shall be done in totality considering the composite nature and inter- linkages of the criteria.” This, coupled with the listing of “any other criteria considered as relevant by the Board based on the examination of the application.”(Regulation 18 (2) (j)), in the opinion of this Court, brings more precision to the task of evaluation of applications (preferred by entities which did not possess Central authorization when the Act came into force) by the PNGRB. If one keeps in mind the fact that all enumerated criteria deal with distinct matters, some of them technical, and others with financial capability of the applicant entity, the PNGRB is duty bound to further consider how and to what extent the applicant’s project- ongoing, or at a nascent stage - had progressed. This is because “laying, building, operating or expanding”, covers all stages i.e., from conceptualization and initial work, to advanced execution of a project, with deployment of optimal men, material and resources. Therefore, one criterion prescribed is the 25% threshold for execution of ongoing work, as well as expending such percentage of finance. The flexibility given to the PNGRB at the stage of evaluation is evident from Regulation 18(2)(f)(iii) which empowers it to specify the geographical area for which authorization is to be given to an entity, irrespective of the area specified in the DFR, or even the actual area “covered under implementation till the appointed day”. All these mean that the PNGRB is to be guided by the composite of factors enumerated in Regulation 18(2) while evaluating applications for authorization; how important one factor is, and the appropriate weightage to be given to it, depends, as required by Regulation 18(3) on the “totality” of all facts “considering the composite nature and inter- F linkages of the criteria.” It is therefore, held that all clauses of Regulation 18(2) have to be considered, and wherever necessary, “any other relevant criteria” (Reg. 18 (2) (j)) which means factors relevant for the purposes of the Act, having regard to its objects and purposes. The PNGRB also has to consider the composite nature and inter- linkages of the criteria. G

100Copy pinpoint100. In regard to the validity of Regulation 18(2), the appellant’s argument is that the regulation is ultra vires, because there is no substantive provision giving guidance, leaving the power to reject applications at the whims of the PNGRB, which can pick and choose any or some criterion and ignore the rest. As far as the latter aspect H

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A goes, this Court has held above, that all criteria have to be considered, having regard to their inter-linkages. Therefore, the question of picking and choosing one criterion, and ignoring others does not arise. Much would depend on the individual facts of the case, the weight given to one or a set of criteria. This per se does not render the power (under Regulation 18 (2)) arbitrary. In the particular facts of any case, it is open to an aggrieved applicant to show the exercise of power is arbitrary, and seek judicial review. As held by this Court in Collector of Customs v Nathella Sampathu Chetty36: “The possibility of abuse of a statute otherwise valid does not impart to it any element of invalidity. The converse must also follow that a statute which is otherwise invalid as being unreasonable cannot be saved by its being administered in a reasonable manner. The constitutional validity of the statute would have to be determined on the basis of its provisions and on the ambit of its operation as reasonably construed. If D so judged it passes the test of reasonableness, possibility of the powers conferred being improperly used is no ground for pronouncing the law itself invalid and similarly if the law properly interpreted and tested in the light of the requirements set out in Part III of the Constitution does not pass the test it cannot be pronounced valid merely because it is administered E in a manner which might not conflict with the constitutional requirements.”

101Copy pinpoint101. The challenge to the regulation on the ground of arbitrariness, and violation of Article 14, therefore, fails.

F Point No. 2 Whether Regulation 18 is ultra vires the PNGRB Act

102Copy pinpoint102. The next question is with respect to whether Regulation 18 is ultra vires the PNGRB Act. In State of Tamil Nadu & Anr. v P. Krishnamurthy & Ors.37 this Court recollected the following principles G while adjudging the validity of subordinate legislation, including regulations: “15. There is a presumption in favour of constitutionality or validity of a subordinate legislation and the burden is upon him who attacks it to show that it is invalid. It is also well 36 (1962) 3 SCR 786. 37 H (2006) 4 SCC 517.

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recognized that a subordinate legislation can be A challenged under any of the following grounds: (a) Lack of legislative competence to make the subordinate legislation. (b) Violation of fundamental rights guaranteed under the Constitution of India. B

(c) Violation of any provision of the Constitution of India. (d) Failure to conform to the statute under which it is made or exceeding the limits of authority conferred by the enabling Act. C (e) Repugnancy to the laws of the land, that is, any enactment. (f) Manifest arbitrariness/unreasonableness (to an extent where the court might well say that the legislature never intended to give authority to make such rules) D

16. The court considering the validity of a subordinate legislation, will have to consider the nature, object and scheme of the enabling Act, and also the area over which power has been delegated under the Act and then decide whether the subordinate legislation conforms to the parent statute. Where a rule is directly inconsistent with a mandatory provision of the statute, then, of course, the task of the court is simple and easy. But where the contention is that the inconsistency or non- conformity of the rule is not with reference to any specific provision of the enabling Act, but with the object and scheme of the parent Act, the court should proceed with caution before declaring invalidity.”

103Copy pinpoint103. This Court, in PTC India Ltd. v. Central Electricity Regulatory Commission38, characterised regulation making as legislative: “49. On the above analysis of various sections of the 2003 Act, we find that the decision-making and regulation-making functions are both assigned to CERC. Law comes into existence not only through legislation but also by regulation and litigation. Laws from all three sources are binding. According to Professor Wade, “between legislative and administrative 38 (2010) 4 SCC 603. H

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A functions we have regulatory functions”. A statutory instrument, such as a rule or regulation, emanates from the exercise of delegated legislative power which is a part of administrative process resembling enactment of law by the legislature whereas a quasi-judicial order comes from adjudication which is also a part of administrative process B resembling a judicial decision by a court of law. (See Shri Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3 SCC 223])

104Copy pinpoint104. In State of U.P v Renusagar Power Co.39 this Court held that C “If the exercise of power is in the nature of subordinate legislation, the exercise must conform to the provisions of the statute.” In Global Energy Ltd. v. Central Electricity Regulatory Commission40, a rule disqualifying a company or entity from applying for a license under the Electricity Act, 2003, was impugned as ultra vires. The rule, setting out disqualifications inter alia, precluded an entity whose partners, promoters, directors or associates were “involved in any legal proceedings, and in the opinion of the Commission grant of licence in the circumstances, may adversely affect the interest of the electricity sector of the consumers”; or “is not considered a fit and proper person for the grant of licence for any other reason to be recorded in writing” from the applying. The phrase “not considered fit” was amplified in the explanation to include “(i) financial integrity of the applicant; (ii) his competence; (iii) his reputation and character; and (iv) his efficiency and honesty.” This Court F proceeded to analyse the challenge to the rule, and observed as follows: “38. When a disqualification is provided, it is to operate at the threshold in respect of the players in the field of trading in electricity. When, however, a regulatory statute is sought to be enforced, the power of the authority to impose G restrictions and conditions must be construed having regard to the purpose and object it seeks to achieve. Dealing in any manner with generation, distribution and supply and trading in electrical energy is vital for the economy of the country.

39 (1988) 4 SCC 59. H 40 (2009) 15 SCC 570.

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The private players who are permitted or who are granted licence in this behalf may have to satisfy the conditions imposed. No doubt, such conditions must be reasonable. Concededly, the doctrine of proportionality may have to be invoked.

39. The superior courts would ensure that the subordinate legislation has been framed within the four corners of the Act and is otherwise valid. The issue therefore which arises for our consideration is as to whether the delegation having been made for the purpose of carrying out the object, could the limitation be imposed for ascertaining as to whether the applicant is fit and proper person and disregarding his creditworthiness. There cannot be any doubt whatsoever that a statute cannot be vague and unreasonable. ******** ********* ******

41. The question, which, however, falls for our consideration is as to whether the purported legislative policy is valid or not. Such a question did not arise for consideration in Clariant [(2004) 8 SCC 524]. ******** ********* ******

43. A legislative policy providing for qualification or disqualification of a person for obtaining a trading licence should not be vague or uncertain. Parameters must be laid down therefor for determining the financial integrity, reputation, character, efficiency and honesty of the applicant. An Explanation appended to clause (f) of Regulation 6-A F points out various aspects that may be considered while determining the said criteria. However, what should be the criteria in regard to financial integrity, character, reputation, etc. have not been defined. How and in what manner the said criteria are required to be ascertained have not been laid down, the criteria are subjective ones. G ******** ********* ******

44. A disqualifying statute, in our opinion, must be definite and not uncertain; it should not be ambiguous or vague. Requisite guidelines in respect thereof should be laid down H

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A under the statute itself. It is well settled that essential legislative function cannot be delegated. ******** ********* ******

47. The factors enumerated in the Explanation appended to clause (f) of Regulation 6-A are unlimited. For determining the question as to whether the applicant is a fit and proper person, a large number of factors may be taken into consideration. It for all intent and purport would be more than the technical requirement, capital adequacy requirement and creditworthiness for being an “electricity trader” as envisaged under Section 52 of the Act. An applicant usually would be a new applicant. It is possible that there had been no dealings by and between the applicant and the licensor. Each one of the criteria laid down in the Explanation refers to creditworthiness. D ******** ********* ******

51. Regulation 6-A in effect confers powers/discretion on matters of licensing even in public hearing. Such relevant factors which provide for the criteria laid down in Regulation 6-A could be brought on record. Section 15, however, E empowers the Commission to specify the form and manner of the application and the fees that is required to be attached. The parliamentary object must be read in the context of the Preamble.”

105Copy pinpoint105. Sections 11 and 61 of the PNGRB Act contain regulation making powers. Under Section 11(c)(ii) the Board has power to authorize entities to “lay, build, operate or expand city or local natural gas distribution networks”. By Section 11(e)(iii) PNGRB is empowered to frame regulations to “access to city or local natural gas distribution network so as to ensure fair trade and competition amongst entities G as per pipeline access code”. By Section 11(f)(iv) it is enjoined to ensure “equitable distribution of petroleum and petroleum products”. Section 11(i) empowers the Board to: “(i) lay down, by regulations, the technical standards and specifications including safety standards in activities relating H

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to petroleum, petroleum products and natural gas, including the construction and operation of pipeline and infrastructure projects related to downstream petroleum and natural gas sector.” All these regulatory powers, coupled with the general power under Section 61(1) to frame regulations are, in the opinion of this court, sufficiently wide to clothe PNGRB with the power to frame Regulation

18. Furthermore, Regulation 18 is to be considered as applicable to a specific class of entities- by their nature, dwindling in numbers, i.e., entities which had not secured Central Government authorization or approval before the PNGRB Act came into force. The regulation is meant to guide the Board to deal with applications of such categories of entities, which fall under proviso to Section 16 read with Section 17 (2), and apply uniform standards. These considerations further the objectives of the whole of PNGRB Act as well as enable the PNGRB to objectively perform its task, while deciding applications, exercising its powers under Section 17 (4). D

106Copy pinpoint106. In Petroleum & Natural Gas Regulatory Board v. Indraprastha Gas Ltd.41 the issue involved was whether the PNGRB was empowered to fix or regulate the maximum retail price at which gas could be sold by entities such as Indraprastha Gas Ltd., to the consumers and further if the Board was empowered to fix any component E of network tariff or compression charge for an entity having its own distribution network. This Court noticed the difference between city and local gas distribution networks. This Court considered the combined impact of Section 20 (declaring, laying, building, etc., of common carrier or contract carrier and city or local natural gas distribution network); F Section 21(the right of first use by entities laying, building, operating or expanding a pipeline for transportation of petroleum and petroleum products or local natural gas distribution networks) and Section 22 (the Board’s power to fix transportation tariff). This Court noted that Section 22 i.e., the power to fix tariff is “subject to” other provisions of the Act, including Section 11. Having regard to the specific provisions of Sections G 22 and 11, it was then held that the Board lacks the power to fix tariffs, regulating maximum retail price at which gas could be sold to ultimate consumers. In that context, this Court, noticing the general regulation making power of the Board, under Section 61, held that 41 (2015) 9 SCC 209. H

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A “53. In the case at hand, the Board has not been conferred such a power as per Section 11 of the Act. That is the legislative intent. Section 61 enables the Board to frame Regulations to carry out the purposes of the Act and certain specific aspects have been mentioned therein. Section 61 has to be read in the context of the statutory scheme. The B regulatory provisions, needless to say, are to be read and applied keeping in view the nature and textual context of the enactment as that is the source of power. On a scanning of the entire Act and applying various principles, we find that the Act does not confer any such power on the Board and the expression “subject to” used in Section 22 makes it a conditional one. It has to yield to other provisions of the Act. The power to fix the tariff has not been given to the Board. In view of that the Board cannot frame a Regulation which will cover the area pertaining to determination of network tariff for city or local gas distribution network and compression charge for CNG. As the entire Regulation centres around the said subject, the said Regulation deserves to be declared ultra vires, and we do so.”

107Copy pinpoint107. This Court is of the opinion that the above decision is of no assistance; on the contrary the observations with regard to the term “subject to provisions of this Act” in Section 22 - which are in pari materia with proviso to Section 16, reinforce the conclusions recorded previously. The power to fix tariffs, was held to extend only to inter se relationship between parties, to foster competition and fairness, and did not extend to regulating relationship between the entities and the end consumers. The observations with respect to Section 61 not authorizing the Board to make regulations relating to the tariff at which gas could be sold to customers, was made having regard to the specific manner in which tariffs were dealt with under Section 22, and the general objectives, of the enactment, i.e., to frame common standards to regulate the sector, promote competition and fairness. In the present case, the proviso to Section 16 is subject to other provisions, notably Section 17. The power to consider and make appropriate orders on applications for authorizations, are dependent upon the policies of the Central Government, in addition to the objectives of the Act.

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108Copy pinpoint108. In the present case, this Court notices no express provision of the kind which the Court in Petroleum and Natural Gas Regulatory Board (supra) had to deal with. Section 22 had to be construed restrictively, as not conferring the power to fix tariffs for products, delivered to the ultimate consumers, having regard to the objectives of the Act. On the other hand, Regulation 18 is essential for giving effect to the scheme of the Act, particularly Sections 16 and 17.

109Copy pinpoint109. It is a well-established principle that the rule or regulation making authority cannot travel beyond the scope of the enabling parent Act. (State of Karnataka v. H. Ganesh Kamath42 ; St. Johns Teachers Training Institute v. NCTE43; Tata Power Co. Ltd. v. Reliance Energy C Ltd.44). In the decision reported as Indramani Pyarelal Gupta v. W.R. Natu 45 this Court observed that the proper test applicable would be to consider whether the rule or subordinate legislation is “incompatible” with the purpose for which the body was created or the particular power is contra-indicated by a specific provision: D “[T]he proper rule of interpretation would be that unless the nature of the power is such as to be incompatible with the purpose for which the body is created, or unless the particular power is contra-indicated by any specific provision of the enactment bringing the body into existence, any power which would further the provisions of the Act could be legally E conferred on it.”

110Copy pinpoint110. In the present case, the purpose and objective for framing Regulation 18, is compatible to the overall objectives of the PNGRB Act. The various factors mentioned in it, provide an objective basis for the Board to consider the proper method of granting authorization, under F Section 17 (2); in their absence, the PNGRB would have experienced difficulty in dealing with every application for authorization, on a case- by-case basis. More importantly the content of Regulation 18 is not contraindicated by any specific provision of the Act. G

111Copy pinpoint111. It is recognized, in certain decisions, by this Court, that regulations and rules framed in exercise of statutory empowerment, by 42 1983 (2) SCC 402. 43 2003 (3) SCC 321. 44 (2009) 16 SCC 659. 45 1963 (1) SCR 721. H

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A expert statutory bodies, and regulatory authorities, should be interpreted deferentially, with the foreknowledge that such bodies know their task and are best equipped for it. In Keshavlal Khemchand & Sons (P) Ltd. v. Union of India46 the validity of an amendment, in 2004 to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, defining, by Section 2 (o) “non-performing B assets” was challenged, on the ground of excessive delegation, as it left the matter of defining what could be such non-performing assets, to the discretion of the Reserve Bank of India (hereafter called “RBI”).After noting that the modern financial system is complex and requires

C “[C]onstant monitoring on daily basis sometime even on minute to minute basis. In lieu of the importance and complexities, the Reserve Bank, the prime regulator of the Indian economy and banking system, has been issuing guidelines and directions from time to time not only to the banks but to various other financial institutions which are amenable to its jurisdiction.” This Court upheld the amendment, as empowering an expert body, which is experienced and knowledgeable in the sector, to issue appropriate guidelines, and notifications.47 In Bharat Sanchar Nigam Ltd v Telecom Regulatory Authority of India48 this Court, dealing with the powers and functions of the Telecom Regulatory Authority of India (hereafter called “TRAI”) observed as follows: “The TRAI Act speaks of many players like the licensors and users, who do not come within the ambit of the term “service provider”. If TRAI has to discharge its functions qua the licensors or users, then it will have to use powers under provisions other than Sections 12(4) and 13. Therefore, in exercise of power under Section 36(1), TRAI can make regulations which may empower it to issue directions of general character applicable to service providers and others and it cannot be said that by making regulations under Section

46 (2015) 4 SCC 770. 47 A similar approach was adopted by the Court in Transmission Corporation of Andhra Pradesh Limited Vs. Rain Calcining Limited and Ors. 2019 SCC OnLine SC 1537. 48 H 2014 (3) SCC 222.

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36(1) TRAI has encroached upon the field occupied by A Sections 12(4) and 13 of the TRAI Act.

100. In view of the above discussion and the propositions laid down in the judgments referred to in the preceding paragraphs, we hold that the power vested in TRAI under Section 36(1) to make regulations is wide and pervasive. The exercise of this power is B only subject to the provisions of the TRAI Act and the rules framed under Section 35 thereof. There is no other limitation on the exercise of power by TRAI under Section 36(1). It is not controlled or limited by Section 36(2) or Sections 11, 12 and 13.” A like approach is visible in the recent ruling in Prakash Gupta v C Securities and Exchange Board of India49 where it was observed, in relation to the Securities Exchange Board of India (hereafter called “SEBI”) that: “SEBI, as the regulator, is entrusted with diverse roles and functions including the power to regulate the securities’ D market, make regulations and to enforce the provisions of the Act. Its functions have been recognized in a panoply of statutory provisions. Independent of initiating a prosecution, SEBI has been entrusted with wide ranging powers and functions including the power to investigate, to issue directions and levy penalties and make cease and desist orders. While the statute has entrusted the powers of compounding offences to SAT or to the Court, as the case may be, before which the proceedings are pending, the view of SEBI as an expert regulator must necessarily be borne in mind by the SAT and the Court, and would be entitled to a degree of deference.”

112Copy pinpoint112. In the present case too, this Court is of the opinion that as the sectoral regulator, PNGRB is entrusted with the power to frame appropriate regulations to ensure the objectives of the Act, and also bring about fairness in the marketplace. It has sought to achieve that, through Regulation 18. For the above reasons, it is held that the challenge to Regulation 18 cannot succeed; Adani’s arguments on this aspect are accordingly rejected.

49 2021 SCC OnLine SC 485. H

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A Re Point No. 3:On whether the exclusion of the disputed areas from the authorisation granted to Adani was justified.

113Copy pinpoint113. Gujarat Gas has urged before this Court that Adani should not be allowed to urge this aspect, since it took chances on multiple occasions, was always aware of its rights, and even availed itself of the B opportunity to participate in the bidding for the disputed (excluded) areas, and therefore, cannot be allowed to question the decision of PNGRB to grant a license to it, for some areas. It was urged that having derived benefits from the authorization, it was not open to Adani to question the same order, after unsuccessfully bidding for the excluded areas. Adani C countered this argument, by saying that the interpretation of provisions of the PNGRB Act, were in a state of flux, and that until the law was clearly laid down, it could not be said that Adani was aware of its legal rights so as to preclude its claims for the disputed areas.

114Copy pinpoint114. The doctrine of approbate and reprobate is based on the principle of estoppel. Paraphrased, it implies that one cannot challenge a decision, from which an advantage is enjoyed. As was tersely stated in another context, an order “cannot be partly good and partly bad like the curate’s egg” 50. In Suzuki Parasrampuria Suitings (P) Ltd. v Official Liquidator51 this Court described the principle as one which does not permit a litigant to “take contradictory stands in the same case. A party cannot be permitted to approbate and reprobate on the same facts and take inconsistent shifting stands.” In Amar Singh v Union of India52this Court said held that “50. This Court wants to make it clear that an action at law is not a game of chess. A litigant who comes to court and invokes its writ jurisdiction must come with clean hands. He cannot prevaricate and take inconsistent positions.” In Joint Action Committee of Air Line Pilots’ Assn. of India v. DG of Civil Aviation53 it was observed that G ‘‘12. The doctrine of election is based on the rule of estoppel —the principle that one cannot approbate and reprobate

50 Union of India v Shakuntala Gupta,(2002) 10 SCC 694. 51 (2018) 10 SCC 707. 52 (2011) 7 SCC 69. H 53 (2011) 5 SCC 435.

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inheres in it. The doctrine of estoppel by election is one of the A species of estoppels in pais (or equitable estoppel), which is a rule in equity. … Taking inconsistent pleas by a party makes its conduct far from satisfactory. Further, the parties should not blow hot and cold by taking inconsistent stands and prolong proceedings unnecessarily.” B

115Copy pinpoint115. These decisions, applying the principle of “approbate and reprobate” precluding a party, which derives advantage from an order or statutory instrument, or even a contract, from assailing a part of it, later, have been applied in other judgments of this court, as well.54 In MBP v LGK55, the Queen’s Bench Division (Technology and Construction C Court), held that: “53. Codrington v Codrington 1875 LR 7 HL at 866, Lord Chelmsford referred to the doctrine in these terms: “He who accepts a benefit under an instrument must adopt the whole of it, confirming to all its provisions and renouncing D every right inconsistent with it. …….. ……

56. More recently, the doctrine has been expressed more generally and in broader terms. Notably, in Express E Newspapers Plc v News (UK) Ltd & others [1990] 1 WLR 1320, a breach of copyright case concerned with mutual copying of news stories, the Court held that the claimant’s resistance to judgment on the counterclaim was wholly inconsistent with its own claim and that on the basis of the doctrine of approbation and reprobation the claimant was not permitted to put forward two inconsistent cases. When giving judgment, Sir Nicolas Browne-Wilkinson VC put the doctrine in these terms: “The fact is that if the defences now being put forward by the defendants in relation to the “Daily Star” article are good defences to the Ogilvy case, they were and are equally good 54 Union of India v. Assn. of Unified Telecom Service Providers of India, (2020) 3 SCC 525; Jal Mahal Resorts (P) Ltd. v. K.P. Sharma (2014) 8 SCC 866. 55 [2020] EWHC 90 (TCC). H

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