SC rejects Adani Gas plea for gas distribution right in parts of Gujarat

By: |
September 29, 2021 2:16 AM

With this ruling, the apex court has also upheld the Gujarat High Court’s September 2018 judgment that paved the way for the supply of natural gas as a clean and green fuel in the three areas of outer Ahmedabad region by state-run gas distributor Gujarat Gas, which had complained to the regulator accusing Adani of unauthorised expansion of its gas distribution network in these locations.

The PPA termination notice was challenged by the GUVNL before the Gujarat Electricity Regulatory Commission which had held the termination as illegal.The PPA termination notice was challenged by the GUVNL before the Gujarat Electricity Regulatory Commission which had held the termination as illegal.

In a setback to Adani Gas, the Supreme Court on Tuesday rejected its appeal seeking authorisation for distribution of natural gas to commercial and industrial units in the areas of Sanand, Bavla and Dholka of Ahmedabad district of Gujarat.

With this ruling, the apex court has also upheld the Gujarat High Court’s September 2018 judgment that paved the way for the supply of natural gas as a clean and green fuel in the three areas of outer Ahmedabad region by state-run gas distributor Gujarat Gas, which had complained to the regulator accusing Adani of unauthorised expansion of its gas distribution network in these locations.

A Bench comprising justices UU Lalit, S. Ravindra Bhat and Hrishikesh Roy said that the Central Government alone was competent under Article 73 of the Constitution to issue such licenses or authorizations, therefore 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.

According to the apex court, the role of the state in granting NOC is only supportive or collaborative, in terms of the Central Government’s policy, of 2006, and cannot confer any advantage to any entity, which has to seek and be granted specific authorization in terms of the PNGRB Act on the merits of its application.

The judges also ruled that the “deemed authorization” clause under proviso to Section 16 of the PNGRB Act is subject to other provisions of Chapter IV, including Section 17 and, further, that only entities granted authorization by the Central Government, fell in that category. “As a sequitur, it is held that entities which had received authorization from states, had to seek authorization under the PNGRB Act, in terms of Section 17(2), and compliance with the conditions spelt out under the CGD Regulations,” it said.

Rejecting Adani’s plea stand, the judgment held that Regulation 18 of the PNGRB (Authorising Entities to Lay, Build, Operate or Expand City or Local Natural gas Distribution Networks) Regulations, 2008 is “neither arbitrary nor ultra vires” Article 14, 19 (i)(g) of the Constitution of India and Section 16 of the PNGRB Act. “The objective underlying Regulation 18 is compatible with the overall objectives of the PNGRB Act. Regulation 18 is not contraindicated by any specific provision of the Act,” Justice Bhat, writing the judgment, said.

The company had taken a stand that Section 17 did not distinguish between entities authorized by the Central Government and others, and merely required entities that did not have central authorization to apply in writing for authorization in terms spelt out by the regulations framed by the PNGRB. Therefore Section 16 of the PNGRB Act did not create an artificial distinction between entities authorized by the Central Government and other entities, it added.

While imposing a cost of Rs 10 lakh on Adani, which will be paid to the Central government, the Bench also held that Adani’s claim is precluded by the principle of approbate-reprobate, as it accepted authorisation granted by PNGRB (including the exclusion of disputed areas), furnished the performance bond and even participated in the auction for the excluded areas, and only thereafter challenged authorization when its bid was unsuccessful.

“Clearly, this conduct amounts to approbating and reprobating. Adani’s arguments about its lack of knowledge about its true rights… cannot be countenanced, because it knew and conformed to the procedure under the PNGRB Act…,” according to the judgment.

Adani Gas had challenged the PNGRB June 2016 decision to grant authorisation to Gujarat Gas to develop infrastructure for the supply of PNG, CNG and natural gas to commercial and industrial units in the three areas of the Ahmedabad district. The Ahmedabad Auto Rickshaw Drivers Union and industrial consumers led by Rajeshwari Metal Printers had also supported Adani, saying that the HC order had virtually left them in a dire state as “their interests vis-à-vis uninterrupted and smooth gas supply has been jeopardised.”

PNGRB had argued that Adani having unequivocally accepted and acted upon the grant of authorization and exclusivity for Ahmedabad City and Dascroi in 2013, and denial of the authorization for Sanand, Bavla and Dholka, could not while enjoying the fruits of the order for Ahmedabad City, question another part of the same order to the extent it limited the authorization to the said area.

Adani had claimed that it had been carrying an operating gas distribution network in Gujarat, particularly in the Ahmedabad District, since 2003 and had made a substantial investment to the tune of `356 crore in laying down city gas distribution network. However, the PNGRB had excluded the three areas while granting authorisation to Adani in November 2013.

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