CGD authorisation: Supreme Court dismisses appeals of Adani Gas, IMC

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Published: February 18, 2020 2:15:41 AM

The Board, however, disqualified Torrent Gas in respect of the reasonableness of its quote for Medchal, Rangareddy and Vikarabad districts and awarded LoI to Megha Engineering & Infrastructure.

A Bench led by Justice DY Chandrachud dismissed the appeals filed by Adani Gas and IMC, holding that the assessment of the reasonability of the bid was a matter solely between the highest bidder and the Board. A Bench led by Justice DY Chandrachud dismissed the appeals filed by Adani Gas and IMC, holding that the assessment of the reasonability of the bid was a matter solely between the highest bidder and the Board.

The Supreme Court on Monday dismissed appeals by Adani Gas and upheld the Petroleum and Natural Gas Regulatory Board’s decision to grant authorisation for implementation of city gas distribution (CGD) networks in five geographical areas including districts of Puducherry, Kanchipuram, Chennai and Tiruvallur.

A Bench led by Justice DY Chandrachud dismissed the appeals filed by Adani Gas and IMC, holding that the assessment of the reasonability of the bid was a matter solely between the highest bidder and the Board. Such an assessment would not alter the scores of the highest bidder vis-à-vis scores of the other bidders, it said.

There is no merit in the submission (of Adani and IMC) that there was a breach of the principles of natural justice in calling only the bidders with the highest composite score to explain the reasonableness of their bids, the apex court said, while disagreeing with the opinion of the Aptel chairperson who ruled in favour of Adani.

The PNGRB had conducted its the ninth round of bidding for city or local natural gas distribution networks in September 2018 and approved the bids of three bidders – Consortium of SKN Haryana City Gas Distribution for Puducherry, Consortium of AG&P LNG Marketing for Kanchipuram and Atlantic Gulf & Pacific Company of Manila and Torrent Gas for Chennai & Tiruvallur districts.

The Board, however, disqualified Torrent Gas in respect of the reasonableness of its quote for Medchal, Rangareddy and Vikarabad districts and awarded LoI to Megha Engineering & Infrastructure.

However, Adani Gas moved the Aptel challenging the Board’s decision to award LoIs, in respect of the three GAs – Puducherry, Kanchipuram, and Chennai & Tiruvallur Districts – on the ground that the successful bids were beyond the unreasonably high limit adopted by the Board and the action of the Board in issuing the LoIs without uploading the decision on the website and without communicating it to Adani Gas was a breach of natural justice.

IMC also moved the tribunal against the grant of authorisation by the Board in respect of Kanchipuram.

However, Aptel had pronounced a split decision in February 2018. While the chairperson ruled in favour of Adani Gas and IMC, the member technical (petroleum and natural gas) dismissed the appeals. In view of the divergence of opinion, the appeals were referred to the judicial member of Aptel. The judicial member recused from hearing the appeal, as a result of which proceedings were transferred to the SC.

According to the SC judgment, the Board note of July 23, 2018 cannot be construed to have laid down an absolute norm by which bids quoting below the minimum of 2% or above the ceiling of 100% of the number of households under the 2011 census data would automatically be rejected as unreasonable. If the Board note were to be construed in the manner in which Adani and others urged, the automatic disqualification of bidders based on a criterion introduced by the Board note would raise serious doubts about its fairness and legality, it said.

“This is because the Board note was not notified to bidders as a basis for evaluation of bids before the date for the submission of the bids had closed. To disqualify a bidder on the basis of a criterion which was not notified and of which bidders had no knowledge would be arbitrary and would constitute an infraction of Article 14,” Justice Chandrachud said.

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