PETROLEUM & NATURAL GAS REGUL.BOARD Vs. INDRAPRASTHA GAS LTD.& ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 4910 of 2015, Judgment Date: Jul 01, 2015
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.4910 OF 2015
[Arising out of SLP (Civil) No. 22273 of 2012]
Petroleum and Natural Gas Regulatory Board … Appellant
Vs.
Indraprastha Gas Limited & Ors. … Respondents
J U D G M E N T
Dipak Misra, J.
The present appeal, by special leave, calls in question the legal
defensibility and the tenability of the judgment and order dated 01.06.2012
passed by the High Court of Delhi in W.P.(C) No. 2034 of 2012 whereby the
Division Bench has ruled that Petroleum and Natural Gas Regulatory Board
(for short, “the Board”) is not empowered to fix or regulate the maximum
retail price at which gas is to be sold by entities such as Indraprastha
Gas Ltd, to the consumers and further the Board is also not empowered to
fix any component of network tariff or compression charge for an entity
having its own distribution network. On the aforesaid foundation, the High
Court has opined that the provisions of Petroleum and Natural Gas
Regulatory Board (Determination of Network Tariff for City or Local Natural
Gas Distribution Networks and Compression Charge for CNG) Regulations, 2008
(hereinafter referred to as “the Regulations”) as far as it is construed to
empower the Board to fix the tariff is unsustainable and accordingly as a
sequitur the order dated 9.4.2012 to the extent of fixing the maximum
retail price or requiring the respondents to disclose the entire tariff and
the compression charges to its consumers, is not in consonance with the
Petroleum and Natural Gas Regulatory Board Act, 2008 (for brevity “the
Act”), and accordingly quashed the same.
2. The facts which are essential to be adumbrated are that the
respondent invoked the jurisdiction under Article 226 of the Constitution
assailing the order dated 9.4.2012 issued by the Board under Section 22 of
the Act determining the network tariff and compression charges for CNG in
respect of Delhi City Gas Distribution (CGD) network of the petitioner at
Rs.38.58 per MMBtu and Rs.2.75 per kg. respectively w.e.f. 01.04.2008 and
directing the petitioner therein to recover the said network tariff and
compression charges for CNG separately through an invoice, without any
premium or discount on a non-discriminatory basis and to appropriately
reduce the selling price of CNG from the date of issuance of the order. Be
it noted, the Board left the modalities and time frame for refund of
differential network tariff and the compression charges for CNG recovered
by the petitioner therein w.e.f. 1.4.2008 in excess from its consumers to
be decided subsequently. The said order was criticized on many a ground.
The principal contention was that the Board does not have the power to
direct the writ petitioner, the respondent no. 1 herein, while charging its
consumers, to disclose the network tariff and the compression charges and
also to fix the said network tariff and compression charges in any
particular manner.
3. The said stand was resisted by the learned counsel for the Board
contending, inter alia, that Regulations 3 and 4 of the Regulations apply
to the entities like the writ petitioner; that the Board has the power to
ask the writ petitioner, the respondent herein, to submit the network
tariff and compression charges for CNG as per the Quality Regulations for
approval of the Board; that the entity having accepted the said term as a
condition for obtaining exclusivity is bound by the contractual obligation
with the Board and is now estopped from challenging the power of the Board;
that the objects and reasons of the Act is to protect interests of the
consumers and regard being had to the statutory context when an action is
taken, no flaw could be found with the same; that Sections 2(i), (m) and
(w) of the Act are all intended to ensure that the consumer is not
exploited; that Section 2(zn) of the Act defines the transportation rate
and in the interpretative expanse, the order passed by the Board is
absolutely defensible; that as per Section 11(e), the Board is empowered to
regulate, inter alia, the transportation rates; that Section 61(2),
especially, clauses (n), (t), (za) empower the Board to make regulations
qua transportation tariff and any other matter which is required to be or
may be specified by the Regulations or in respect of which provision is to
be made by the Regulations; that keeping in view the objective of the Act,
the Regulations permit the Board to fix the network tariff and the
compression charges and the action of the Board so fixing the network
tariff and the compression charges cannot be interfered with; and that the
Regulations framed by the Board are consistent with the Act.
4. The High Court observed that the question for adjudication was
basically whether the Act authorises the Board to pass such an order and
whether the intention of the legislature is to confer the power of price
fixation on the Board. The High Court referred to Section 11 of the Act
and came to hold that:-
“We thus conclude that PNGRB Act does not confer any power on the Board to
fix/regulate price of gas as has been done vide the impugned order dated
9th April, 2012. Having held so, we do not deem it necessary to deal with
the other Regulations impugned in the writ petition and suffice it is to
state that any provision therein having the effect of empowering the Board
to fix the price or the network tariff or compression charges for CNG, as
long as not transportation rate, is beyond the competence of the Board and
ultra vires the PNGRB Act and of no avail.”
And again:-
“We thus allow this writ petition to the extent of holding that the
Petroleum and Natural Gas Regulatory Board is not empowered to fix or
regulate the maximum retail price at which gas is to be sold by entities as
the petitioner, to the consumers. We further hold that the Board is also
not empowered to fix any component of network tariff or compression charge
for an entity such as the petitioner having its own distribution network.
The provisions of the Regulations (supra) in so far as construed by the
Board to be so empowering it are held to be bad/illegal. Accordingly, the
order dated 9th April, 2012 to the extent so fixing the maximum retail
price or requiring the petitioner to disclose the network tariff and
compression charges to its consumers is struck down/quashed.”
5. Criticizing the judgment and order passed by the High Court, Mr.
Arvind Datar, learned senior counsel for the appellant, has raised the
following submissions:-
(a) There is a presumption of validity of subordinate legislation, and as
long as the parent Act enables the framing of regulations they are valid.
When section 2(zn), 22(1), 61(2)(e), 61(2)(t) of the Act empower the Board
to frame regulations for all three categories, namely, common carrier,
contract carrier and city or local natural gas distribution network, the
Regulations are valid. The High Court has incorrectly held that these
regulations are ultra vires the parent Act without referring to any
specific section or provision. That apart, on a reading of the provisions
of the Act it is also noticeable that there is no postulate that the power
to frame the transportation rate/transportation tariff can only be
exercised only when the city network becomes a common carrier or contract
carrier.
(b) While the city networks get market exclusivity for 3/5 years, they
get infrastructure exclusivity for 25 years with further extension of 10
years at a time and the fixation of transportation rate/ transportation
tariff has to be determined for the network of pipelines irrespective of
whether they are common carriers, contract carriers or city networks. The
Act and Regulations contemplate fixation of transportation
rate/transportation tariff even at the stage of city network. It is quite
clear that when the city network becomes a common carrier after the
exclusivity period, the said transportation rate which is determined at the
city network stage itself, would apply for carrying the gas of other
suppliers under section 21(2).
(c) The High Court has erroneously opined that the transportation rate
provided for is the rate to be charged by one entity under the Act from
another for transporting/carrying/moving gas of the other, for such a
conclusion is completely contrary to the definition contained in section 2
(zn). The transportation rate has to be determined even for city networks
under sections 22(1), 61(2)(e) and 61(2)(t) and that is the rate which can
also be claimed from other gas suppliers but that does not mean that no
transportation rate can be determined unless and until the pipeline becomes
a common carrier. The High Court has flawed in holding that any
provision therein having the effect of empowering the Board to fix the
price or the Network Tariff or the Compression Charges for CNG, as long as
not transportation rate, is beyond the competence of the Board and ultra
vires the Act, and it is because though the Board cannot fix the selling
price or monitor the selling price as natural gas has not been notified,
yet the Board has the power, and indeed the duty, to fix the network tariff
and compression charges (which are nothing but the transportation
rate/transportation tariff) under the Act.
(d) The High Court has committed gross illegality in its analysis while
stating that the Board is not empowered to fix any component of Network
Tariff or Compression Charge for any entity such as the respondent herein
having its own distribution network. It has also faulted in opining that
the provisions of the Regulations insofar as construed by the Board to be
so empowering it are illegal. These findings recorded by the Division
Bench are contrary to the provisions of the Act, for the Board can fix the
transportation rate/transportation tariff and the fact that the rate will
become applicable after expiry of the period of exclusivity does not make
the Regulations themselves bad or illegal and it is absolutely clear that
source of power comes from the provisions engrafted under Sections 2(zn),
22(1), 61(2)(e) and 61(2)(t) of the Act as they confer power on the Board
to frame regulations for all three categories.
(e) The omission of ‘city network’ in Section 11(e)(ii) is only
accidental, and if the provisions of the Act are read as a whole, the power
of the Board is clear as crystal for determining the transportation
rate/transportation tariff for all categories. If the contention of the
respondents is accepted, it will amount to rewriting the provision as
“transportation rates after city network becomes a common carrier or
contract carrier”.
(f) The view expressed by the High Court to the extent that the Board is
not empowered to fix any component of Network Tariff or Compression charge
for an entity such as the respondent that has its own distribution network
is fallacious, for the said findings are not in accord with to the
provisions of the Act, and if the submissions are accepted, the Regulations
will become applicable only after the period of exclusivity. The Central
Government had supplied subsidized gas to the authorised entities to ensure
that consumers do not have to pay a high cost for both piped natural gas
(used for domestic purposes) and compressed natural gas (used for
transportation) and has made it mandatory for the respondents to disclose
the break up. Quite apart from that, Section 21(1) that stipulates right
of first use after the exclusivity period and Section 21(2) which provides
that other entities are liable to pay minimum transportation rate for using
the common carrier, do not indicate that the Board has no power to fix the
transportation rate/ tariff during the exclusivity period or that it would
apply to only the gas transported for other entities. The respondent
company is obliged to indicate the transportation rate/tariff as soon as it
is determined. Even if the respondent’s contention is accepted, the
rate/tariff has to be indicated after the exclusivity period not only for
the gas of other entities but also for the gas that is supplied by the
authorised entity itself. Section 20(4) mandates the Board to fully
protect consumer interest while granting exclusivity to the city network
and the consumer interest is protected by the Board determining the
transportation tariff being applicable to and being indicated for all the
gas transported in the city network, whether it belongs to other entities
or to the entity owning and operating the city network.
6. Mr. Harish Salve and Mr. Parag S. Tripathi, learned senior counsels,
resisting the submissions raised by Mr. Datar, learned senior counsel for
the appellant-Board, have raised the following contentions.
(A) As per the schematic intendment of the Act, after the expiry of
period of exclusivity under Section 20(4), the Board, if decides, in
exercise of the statutory powers under Section 20-22, can declare the
network as a common/contract carrier, and then alone, in respect of third
party suppliers of gas, who seek to use the excess capacity in the pipeline
of the network, the Board may fix the transportation rate, which the 1st
respondent may charge from such a third party supplier. The consumers of
natural gas, whether of the first respondent, or of the third party
supplier of gas, does not enter into the scene at all and has no role to
play whatsoever. The transportation in question whether by the network
while supplying to its consumers or by a common/contract carrier in respect
of the third party suppliers are the rates and costs of transportation
relevant only to the owner/supplier of the gas and the said rate has no
meaning or relevance as far as the consumer, who is the purchaser of such
gas, is concerned, other than the fact that the transportation expenses
would also form a part of the consolidated final price which would be
raised and recovered by respondent as also third party supplier from the
respective consumers.
(B). The definition of Common Carrier in Section 2(j) and Contract Carrier
in Section 2(m) postulate certain conditions and the definition of city or
local natural gas distribution network in Section 2(i) does not contain the
said crucial twin conditions. That apart, Section11(a) and Section 11(e)
permit the issuance of regulations which determine access and the
transportation rate for Common Carrier or Contract Carrier, and the said
provision limits the power of the Board to issue regulations only in
respect of access to the network and not for the transportation rate for
the network and, therefore, the stand of the appellant that there is an
accidental omission is unacceptable because the intention of the
legislature is absolutely clear and unambiguous.
(C). The power can only be exercised in respect of common carrier/contract
carrier if it is a network in respect of which the power is sought to be
exercised and then also as a first step the network must be declared or
authorised as a common carrier or a contract carrier within the meaning of
Sections 20-22; and, therefore, as far as a network is concerned, there is
no right to determine transportation rate. Such power is specifically
limited in respect of common/contract carrier under Section 11(e)(ii). The
very concept of transportation rate which is defined in Section 2(zn) makes
it clear that it is the rate for moving each unit of petroleum, petroleum
products or natural gas as may be fixed by the Regulations and Section
21(2) which uses the expression ‘transportation rate’, has three elements,
which makes it clear that the transportation rate has relevance only in
respect of the rates payable by a third party entity, which is utilizing
the excess capacity in the existing pipeline of a common/contract carrier
and the Board does not have the power to determine the transport rate.
(D). The Board has been empowered by Regulations to determine the
exclusivity period under Section 20(4) of any pipeline. The effect of this
declaration of exclusivity is that under Sections 20 – 22, during the
period of exclusivity, the Board is disabled from declaring such pipeline,
whether existing or a new one, as a common/contract carrier; and once a
pipeline is declared to be a common carrier/contract carrier, it is
required to make available its excess capacity as a part of the open access
regime, to any third party supplier of gas. Such a third party may either
be an importer or purchaser or a producer of gas seeking to transport its
gas using the pipeline of any other entity. Therefore, critical scanning
of Section 20 to 22 do not confer any power on the Board to fix the
transportation tariff. Section 22(1) makes it clear that the right to fix
transportation tariff is subject to other conditions of the Act and when
the provisions contained in Sections 2(j), 2(m), 2(i), 2(zn), 11(e),
11(f)(iii), 11(f)(vi) and 22(2) are read in a conjoint manner, it is
graphically clear that the Board has not been conferred the power to fix
the transport tariff by the legislature and, therefore, it cannot do so by
a regulation. The reliance by the Board on Section 61(2) (q) & (t) is
misplaced, for Section 61(1) of the Act permits the Board to make
regulations consistent with the Act and the Act which confers power on the
Board to frame the Regulations does not empower it to do so. That apart,
Section 61 deals with the general regulation making power of the Board in
terms of the Sections specified in the Act; and Section 61(2)(q) and (t)
relate back to Section 22(1) which itself is “subject to” the other
provisions of the Act and, hence, even if Section 61(t) is read with
Section 22(1), it would not override Section 11(e) read with Section 2(zn)
and 21(2) of the Act.
7. In reply to the aforesaid submissions, Mr. Datar, learned senior
counsel has canvassed the following propositions:-
(I) The contentions urged by the respondent are untenable, for the
transportation rate has to be determined on the basis of voluminous data,
which has to be collected, collated and analyzed and unless the rate is
fixed even during the five year period, there will be no rate available for
the common carrier at the end of the exclusivity period and it will be
absurd to suggest that the entire exercise has to begin only after the city
network becomes a common carrier. The transportation rate has to be
determined for a network of pipelines under Section 2(zn) and is not a
separate determination for city networks, common carrier or contact carrier
as the object of determining the rate is also to determine the rate at
which the cost of transportation is permitted to be recovered and it has to
be done in a reasonable manner as mandated under Section 22(2)(b). The
omission of “city or local gas distribution network” in Section 11(e)(ii)
is clearly accidental because in the Act as well as Regulations, three
categories viz. common carrier, contract carrier and city or local gas
distribution network have been used together, and the purpose becomes
manifest on a perusal of Section 61(2)(e) which specifically refers to
Section 11(e).
(II) The Board as a regulator has the obligation to ensure that the
consumers are not exploited and under Section 20(4) the Board grants
monopoly for 25 years with further extension of 10 years at a time and
barring unforeseen circumstances, such a network will have exclusive
infrastructure monopoly for several decades. Therefore, in the factual
matrix, the Board has a duty to ensure that consumer interest is protected
during the monopoly period, as mandated under Section 20(4) and that can be
done by ensuring the investment by the gas company in the transportation
infrastructure of the city network is recovered in a reasonable manner for
all the gas transported in the city network over the economic life of the
network. It is not the stand of the Board that it does not have the
power to monitor the Maximum Retail Price (MRP) however, the transportation
rates/tariff would indicate it is the price charged to the consumer so that
it does not result in excessive profiteering and under these circumstances,
it is the duty of the respondent to reveal the transportation prices to the
Board as well as to the consumers.
(III) Section 20(4) gives the right to the Board to grant exclusivity to
the city or local natural gas distribution network for such period as the
Board may decide and once it has the power to give exclusivity to a city or
local natural gas distribution network owning entity so that only it can
lay, build and operate such network in a geographical area and under these
circumstances it becomes the duty of the Board and as per the stipulations
under Section 20(4) it has to be done in a transparent manner protecting
the consumer interest. In addition to it, the duty is cast on the Board
under Section 20(5) to be guided by the objectives of promoting competition
among the entities, avoiding infructuous investment, maintaining or
increasing supplies or for securing equitable distribution or ensuring
adequate availability of natural gas throughout the country and, therefore,
the Board can determine the transportation rate/tariff. If the stand of
the respondent is accepted, the consumers would never know the
transportation rate, since it is possible that in many cases there may not
be any other gas supplier who is using the network of pipelines after the
exclusivity period.
8. Having enumerated the submissions in reply by the first respondent,
we must record the submissions of the second respondent, that is, Union of
India. The following proponements have been urged by Ms. Pinky Anand,
learned ASG.
(i) There is no legislative intent for allowing the Board to determine
the pricing of gas, i.e. the price which the entity charges from the
ultimate customers. The Act, while protecting the interests of the
consumers, has not empowered the Board to fix the price at which the
entities will sell the petroleum products or natural gas to the consumers,
for the MRP is to be fixed by the entity.
(ii) As regards the applicability of transportation tariff determined
through the Regulations, it is clear from the provisions of the Act that
such transportation tariff is applicable only in respect of an outside
entity that is willing to use the CGD network and that such tariff is
payable by that entity to CGD network operator. The transportation tariff
notified through the Board Regulations is not applicable for CGD entity
when it transports its own gas for supply to individual customers.
(iii) The Board is merely authorised to monitor prices and is required to
ensure fair competition amongst entities that are supplying CNG or PNG to
the end consumers. The Act provides for fair competition by allowing entry
to a third party for supplying gas to the end consumers on a non-
discriminatory open access basis and in the said process the third party is
required to pay transportation tariff to the CGD operator at the rates
notified by the Board. The purpose of notification of the said rate is to
prevent the CGD operator from putting up any kind of entry barrier in the
form of a higher transportation tariff for the third party.
(iv) Section 22 of the Act read with Section 20, 21 and 2(zn) of the Act,
the Board is empowered to regulate the transportation rate or
transportation tariff only for a city or local natural distribution network
subject to the provisions as provided in the Act. When such city or local
natural gas distribution network is declared as a common carrier or a
contract carrier by the Board and it is used by any other entity on common
carrier or contract carrier basis, then only as per the provisions of the
Act, the Board is only entitled to fix, by regulations, the transportation
rate or the transportation tariff which the entity owning and operating as
a city or local natural gas distribution network would charge from other
entities which use its network on common carrier or contract carrier basis
for transporting their gas.
(v) The Board is not empowered to fix the price at which entities will
market or sell the notified petroleum products or natural gas. The MRP is
to be fixed by the entity. The Board shall only monitor the prices and
take corrective measures to prevent restrictive trade practices by the
entities. As regards regulation of the activities of transmission and
distribution of petroleum products and natural gas, the Board will oversee
access to pipelines and city or local natural gas distribution networks on
non-discriminatory, common carrier/contract carrier principle for ensuring
a level playing field for all entities. That apart, the concept of
allowing capacity in a city or local natural gas distribution network to be
used by any third party entity on non-discriminatory common
carrier/contract carrier principle shall incetivize emergence of
independent marketers of natural gas. Such independent marketers shall
enter into transportation contracts with the entity, owning and operating
the city or local natural gas distribution network for transportation of
their gas. This, in turn, will foster fair trade and competition in
marketing amongst entities
(vi) The Board is entitled to fix the transportation rate for gas
transmission and distribution in all cases where gas is transported on
common carrier or contract carrier principle. The transportation rate so
fixed by regulator shall be paid by the third party entities to the entity,
owning and operating the city or local natural gas distribution network for
transporting their gas on common carrier/contract carrier principle.
Thus, by observing non-discriminatory open access to pipelines and city or
local natural gas distribution networks on common carrier/ contract carrier
principle at the transportation rates fixed by regulations, a level playing
field shall be ensured for all the entities engaged in marketing and sale
of natural gas. In such a market condition, gas-on-gas competition and the
inter-fuel competition will lead to emergence of fair trade and competition
amongst entities, which in turn, will protect the interest of consumers.
9. Mr. K.K. Venugopal, learned senior counsel appearing for the
intervenor, Central U.P. Gas Ltd., has contended that the Board does not
have the power to fix MRP and the distribution entity has a fundamental
right to carry on the trade, subject to restriction under Article 19(1)(g)
of the Constitution and in the case at hand, the Act, does not confer any
power on the Board to fix the MRP, but on the other hand, it expressly
provides for the MRP to be fixed by the entity themselves as per Section
2(x) of the Act. Learned senior counsel would contend that once the Board
has no jurisdiction/ authority to fix the MRP, it is not entitled to fix
any element/ component of the MRP as it would bring an anomalous situation.
The submission of the Board that the distribution entity can charge the
MRP, but it has the power to regulate the component, that is, the
transportation charges is a futile exercise, a brutum fulmen, for the
simple reason that however low may be the component of MRP determined by
the Board, the authorised entity can virtually ignore the same. It is
argued by him that the Board is a creature of the Act and it can only
exercise its functions in accordance with and within the four corners of
the said Act and it cannot prescribe what it calls network tariff and
compression charge under the Regulations, because the statute refers to
fixation of “transportation tariff/ transportation rate” but does not
mention of ‘network tariff’ or ‘compression charges’. In the absence of
any power conferred under the Act to frame regulations in that regard, the
Regulations clearly transgress the enactment and hence, the Regulations to
that extent are ultra vires. It is urged by him that ‘network tariff’ is
not the same as ‘transportation rate’ and the Board cannot assume such an
authority by employing a different analogy. Placing reliance on Section
11(e)(ii), it is argued by the learned senior counsel that the said
provision which provides for Board’s function and empowers the Board to
frame regulations, employs the words ‘transportation rates for common
carrier or contract carrier’ and they remotely do not purport to fix rates
for ‘network tariff’ or ‘compression charges’ for city gas distribution
network. In addition, it is propounded by him that reliance on Sections
21(2) and 22(1) and all other provisions are absolutely misconceived and
the assumption that the Board as a regulator to look after consumer
interests, cannot travel beyond the statutory limit.
10. Dr. Jatin Thukral, who has been allowed to intervene, has referred to
the background of the Act and on that foundation has canvassed that
“transportation rate” is inseparably related to open access for every
commercial gas distribution entities to either common carrier or contract
carrier or city or local natural gas distribution regard being had to the
manner in which the said words have been employed by the legislature in
various provisions of the Act. It is his further submission that Section
61(2)(t) is controlled by sub-section 22(1) which in turn is guided by
Section 22(2) and all the provisions are associated with common or contract
carriers only and by no stretch of imagination, it confers any power on the
Board to fix transportation rate, as it is only referable to the rate
charged by one commercial entity from any commercial entity for using its
gas transportation networks. In essence, his submission is that the appeal
is devoid of merit and deserves to be dismissed.
11. Before we proceed to appreciate the rivalised contentions raised at
the Bar, it is seemly to state that in terms of Section 22 of the Act, the
Board has framed the Regulations. Placing reliance on the Regulations, the
Board has issued the order dated 9.4.2012, which deals with the Network
Tariff for City or Local Natural Gas Distribution Network and Compression
Charge for CNG in respect of the Delhi CGD Network of Indraprastha Gas
Limited (IGL). Clause 1 deals with the Regulatory Framework. Clause 1.1
reads as follows:-
“1.1 In terms of Sections 22 of the PNGRB Act, 2006, the Board is entrusted
with the responsibility to lay down the transportation tariff for city or
local natural gas distribution network. As per the relevant provisions of
the PNGRB (Authorizing Entities to Lay, Build, Operate or Expand City or
Local Natural Gas Distribution Networks) Regulations, 2008 read with the
said statutory provisions, the Board is empowered to determine the Network
Tariff and Compression Charge for CNG to be charged by the entity laying,
building, operating or expanding City or Local Natural Gas Distribution
Network either before the appointed day or on a day subsequent thereto.”
After so stating, the Board has proceeded to provide the methodology
for determination of the network tariff and compression charge for the CGD
network which has been stipulated in the Regulation dated 19.3.2008. The
relevant part of the order, we may profitably reproduce:-
“3.19 As per the provisions of the PNGRB (Determination of Network
Tariff for City or Local Natural Gas Distribution Networks and Compression
Charge for CNG) Regulations, 2008 the actual performance with respect to
the capital and operating costs during the previous review period against
the identified parameters shall be monitored and the variations shall be
adjusted in the calculations on a prospective basis considering the
remaining period of economic life of the CGD project.
3.20 After the above mentioned adjustments, the reconciliation of
which is provided in Annexure-2, the network tariff and compression charge
for CNG in respect of the Delhi CGD network of IGL is given in the table
below:
|Sl No.|Particulars |Network Tariff|Compression Charge |
| | |(Rs/MMBTU) |for CNG (Rs./Kg) |
|1 |Submitted by IGL|104.05 |6.66 |
|2 |As determined by|38.58 |2.75 |
| |the Board after | | |
| |moderations | | |
4. Decision
4.1 While the PNGRB (Determination of Network Tariff for City or Local
Natural Gas Distribution Networks and Compression Charge for CNG)
Regulations, 2008 were notified on 19th March 2008, for the purpose of ease
in calculations, the applicable network tariff and compression charge for
CNG determined by the Board shall be applicable from 1st April, 2008.
Accordingly, the Network Tariff and the Compression Charge for CNG in
respect of the Delhi CGD Network of IGL shall be Rs.38.58 per MMBTU and
Rs.2.75 per KG respectively with effect from 1st April, 2008.
4.2 As per the provisions of the PNGRB (Authorizing Entities to Lay,
Build Operate or Expand City or Local Natural Gas Distribution Networks)
Regulations, 2008, IGL shall recover the Network Tariff and Compression
Charge for CNG separately through an invoice without any premium of
discount on a non-discriminatory basis. Further, in conformity with the
decision conveyed vide letter dated 23.5.2011 mentioned in para 2.3 above,
the difference between the Network Tariff and Compression Charge for CNG
submitted by IGL and that determined by the Board as given in the table
above would be reflected through appropriate reduction in selling prices
from the date of issuance of this Order. The modalities and time frame for
refund of differential Network Tariff and the Compression Charge for CNG
for the period from 01.4.2008 till the date of issuance of this Order shall
be decided and advised by the Board subsequently.”
12. As the factual matrix uncurtains, the issuance of the said order
compelled the 1st respondent to approach the High Court seeking its
quashment principally on the ground that such a power has not been
conferred by the Act and the Board, by framing the resolutions cannot
arrogate such power to itself in the absence of the source of power. That
was the substratum of challenge before the High Court where the Board
failed to support and sustain its order and the 1st respondent succeeded in
its assail and the contentions raised before this Court are fundamentally
embedded on the said fulcrum. Mr. Datar, learned senior counsel, apart
from many a provision, has also commended us to the objects and reasons of
the Act to highlight the role of the Board as a regulator. In view of the
said submission, we think it apt to refer to the objects and reasons of the
Act. It reads as follows:-
“An Act to provide for the establishment of Petroleum and Natural Gas
Regulatory Board to regulate the refining, processing, storage,
transportation, distribution, marketing and sale of petroleum, petroleum
products and natural gas excluding production of crude oil and natural gas
so as to protect the interests of consumers and entities engaged in
specified activities relating to petroleum, petroleum products and natural
gas and to ensure uninterrupted and adequate supply of petroleum, petroleum
products and natural gas in all parts of the country and to promote
competitive markets and for matters connected therewith or incidental
thereto.”
13. Bearing the purpose of the Act in mind, we shall refer to the
relevant provisions of the Act. Section 1(4) provides that the Act applies
to refining, processing, storage, transportation, distribution, marketing
and sale of petroleum, petroleum products and natural gas excluding
production of crude oil and natural gas. Section 2(d) of the Act defines
authorised entity to mean that any entity registered by the Board under
Section 15 to market any notified petroleum, petroleum products or natural
gas, or to establish and operate liquefied natural gas terminals.
14. Section 2(i) of the Act on which emphasis has been laid defines “city
or local natural gas distribution network”, relevant part of it reads as
under:-
“2(i) “city or local natural gas distribution network” means an
interconnected network of gas pipelines and the associated equipment used
for transporting natural gas from a bulk supply high pressure transmission
main to the medium pressure distribution grid and subsequently to the
service pipes supplying natural gas to domestic, industrial or commercial
premises and CNG stations situated in a specified geographical area.”
15. Section 2(j) and 2(m) define ‘common carrier’ and ‘contract carrier’
respectively. They read as follows:-
“2(j) “common carrier” means such pipelines for transportation of
petroleum, petroleum products and natural gas by more than one entity as
the Board may declare or authorise from time to time on a nondiscriminatory
open access basis under sub-section (3) of section 20, but does not include
pipelines laid to supply-
petroleum products or natural gas to a specific consumer; or
crude oil;
Explanation – For the purposes of this clause, a contract carrier shall be
treated as a common carrier, if –
such contract carrier has surplus capacity over and above the firm
contracts entered into; or
the firm contract period has expired.
2(m) “contract carrier” means such pipelines for transportation of
petroleum, petroleum products and natural gas by more than one entity
pursuant to firm contracts for at least one year as may be declared or
authorised by the Board from time to time under sub-section (3) of section
20.”
16. The aforesaid definitions basically deal with pipelines and they are
regulated under the Act. The dictionary clause speaks of the nature of
activity. There is a noticeable difference between common carrier pipeline
and contract carrier pipeline on one hand and “a city of local natural gas
distribution network” on the other. On a perusal of the definitions of the
common carrier and contract carrier, it is demonstrable that they refer to
pipelines for transportation of petroleum or petroleum products and natural
gas by more than one entity. The definition “city or local gas
distribution network” means an interconnected network of gas pipelines and
the associated equipment used for transporting natural gas from a bulk
supply high pressure transmission main to the medium pressure distribution
grid and subsequently to the service pipes supplying natural gas to
domestic, industrial or commercial premises and CNG stations situated in a
specified geographical area. It deals with specified geographical area.
It does not refer to a pipeline or transport of natural gas. It is
specifically a pipeline network for transport of natural gas to its own
consumers. This being the position, as per the dictionary clause, it is
pertinent to refer to Section 20 that provides for declaring, laying,
building, etc. of common carrier or contract carrier and city or local
natural gas distribution network. The said provision is as follows:-
“20 Declaring, laying, building, etc., of common carrier or contract
carrier and city or local natural gas distribution network:-
If the Board is of the opinion that it is necessary or expedient, to
declare an existing pipeline for transportation of petroleum, petroleum
products and natural gas or an existing city or local natural gas
distribution network, as a common carrier or contract carrier or to
regulate or allow access to such pipeline or network, it may give wide
publicity of its intention to do so and invite objections and suggestions
within a specified time from all persons and entitles likely to be affected
by such decision.
For the purposes of sub-section (1), the Board shall provide the entity
owning, the pipeline or network an opportunity of being heard and fix the
terms and conditions subject to which the pipeline or network may be
declared as a common carrier or contract carrier and pass such orders as it
deems fit having regard to the public interest, competitive transportation
rates and right of first use.
The Board may, after following the procedure as specified by regulations
under section 19 and sub-sections (1) and (2), by notification,-
declare a pipeline or city or local natural gas distribution network as a
common carrier or contract carrier; or
authorise an entity to lay, build, operate or expand a pipeline as a common
carrier or contract carrier; or
allow access to common carrier or contract carrier or city or local natural
gas distribution network; or
authorise an entity to lay, build, operate or expand a city or local
natural gas distribution network.
The Board may decide on the period of exclusivity to lay, build, operate or
expand a city or local natural gas distribution network for such number of
years as it may by order, determine in accordance with the principles laid
down by the regulations made by it, in a transparent manner while fully
protecting the consumer interests.
For the purposes of this section, the Board shall be guided by the
objectives of promoting competition among entities, avoiding in fructuous
investment, maintaining or increasing supplies or for securing equitable
distribution or ensuring adequate availability of petroleum, petroleum
products and natural gas throughout the country and follow such principles
as the Board may, by regulations, determine in carrying out its functions
under this section.”
On a reading of the aforesaid provision, it is clear as day that the
Board has been conferred with the power to declare an existing pipeline for
transportation of petroleum, petroleum products and natural gas or an
existing city or local natural gas distribution network as a common carrier
or contract carrier and regulate or allow access to such pipeline or
network. Sub-Section (1) prescribes for giving wide publicity of the
Board’s intention. Sub-Section (2) stipulates affording of opportunity of
hearing to the pipeline or network for fixing terms and conditions subject
to which pipeline or network be declared as common carrier or contract
carrier. The Board has been authorised, after following due procedure as
specified by Regulations under Section 19 and under sub-Sections (1) and
(2) by notification to declare a pipeline or city or local natural gas
distribution network as a common carrier or contract carrier and do certain
acts. Sub-Section (4) enables the Board to decide on the period of
exclusivity to lay, build, operate or expand a city or local natural gas
distribution network for such number of years. The objectives by which the
Board is to be guided are promoting competition among entities, avoiding
infructuous investment, maintaining or increasing supplies or securing
equitable distribution or ensuring adequate availability of petroleum, etc.
17. Section 21 deals with right of first use, etc. The said provision
reads as follows:-
“21. Right of first use, etc.:-
The entity laying, building, operating or expanding a pipeline for
transportation of petroleum and petroleum products or laying, building,
operating or expanding a city or local natural gas distribution network
shall have right of first use for its own requirement and the remaining
capacity shall be used amongst entities as the Board may, after issuing a
declaration under section 20, determine having regard to the needs of fair
competition in marketing and availability of petroleum and petroleum
products throughout the country: Provided that in case of an entity engaged
in both marketing of natural gas and laying, building, operating or
expanding a pipeline for transportation of natural gas on common carrier or
contract carrier basis, the Board shall require such entities to comply
with the affiliate code of conduct as may be specified by regulations and
may require such entity to separate the activities of marketing of natural
gas and the transportation including ownership of the pipeline within such
period as may be allowed by the Board and only within the said period, such
entity shall have right of first use.
An entity other than an entity authorised to operate shall pay
transportation rate for use of common carrier or contract to the entity
operating it as an authorised entity.
An entity authorised to lay, build, operate or expand a pipeline as
contract carrier or to lay, build, operate or expand a city or local
natural gas distribution network shall be entitled to institute proceedings
before the Board to prevent, or to recover damages for, the infringement of
any right relating to authorization.
Explanation:- For the purposes of this sub-section, “infringement of any
right” means doing of any act by any person which interferes with common
carrier or contract carrier or causes prejudice to the authorised entity.”
The aforesaid provision stipulates the right of first use and also
prescribes certain conditions.
18. Section 22 on which reliance has been placed deals with
transportation tariff. The said provision is reproduced below:-
“22. Transportation tariff:-
Subject to the provisions of this Act, the Board shall lay down, by
regulations, the transportation tariffs for common carriers or contract
carriers or city or local natural gas distribution network and the manner
of determining such tariffs.
For the purposes of sub-section (1), the Board shall be guided by the
following, namely:-
the factors which may encourage competition, efficiency, economic use of
the resources, good performance and optimum investments;
safeguard the consumer interest and at the same time recovery of cost of
transportation in a reasonable manner;
the principles rewarding efficiency in performance;
the connected infrastructure such as compressors, pumps, metering units,
storage and the like connected to the common carriers or contract carriers;
benchmarking against a reference tariff calculated based on cost of
service, internal rate of return, net present value or alternate mode of
transport;
policy of the Central Government applicable to common carrier, contract
carrier and city or local distribution natural gas network.”
On a plain reading of the aforesaid, it is manifest that the Board
has the power to provide by Regulations the transportation tariff for
common carrier or contract carrier or city or local natural gas
distribution network and the manner of distribution of such tariffs.
19. The question that arises for consideration is whether reading of the
aforesaid provisions namely, Sections 20 to 22 of the Act, it can be
construed that they confer any power on the Board to fix the transportation
tariff of a consumer of natural gas. We have also referred to sub-Section
(4) of Section 20 which confers the power on the Board to decide the period
of exclusivity and the network of a common/contract carrier. Section 21,
as indicated earlier, deals with the right of first use. The
transportation tariff, which finds place in Section 22(1), commences with
the words “subject to the provisions of this Act”. The said provision
confers power on the Board to lay down, by regulation, the transportation
tariff for common carriers or contract carriers or city or local natural
gas distribution network and the manner of determination of such tariffs.
20. At this stage, it is necessary to appositely understand the said
expression. In The Commissioner of Wealth Tax, Andhra Pradesh, Hyderabad
v. Trustees of H.E.H. Nizam’s Family (Remainder Wealth Trust), Hyderabad[1]
this Court was dealing with the expression “subject to” in the context of
the Wealth Tax Act, 1957. Section 3 of the said Act imposed the charge of
wealth tax subject to other provisions of the Act. In that context, the
Court opined that Section 3 has to be made expressly subject to Section 21
and it must yield to that Section insofar as the latter makes a special
provision for assessment of a trustee of a trust. In Ashok Leyland Ltd. v.
State of T.N. and Another[2], it has been held that “subject to” is an
expression whereby limitation is expressed. In K.R.C.S. Balakrishna Chetty
and Sons & Co. v. The State of Madras[3], this Court was interpreting
Section 5 of the Madras General Sales Tax Act, 1939 wherein the Legislature
had appended the expression “subject to” and while interpreting the said
words, the Court ruled that they are meant to effectuate the intention of
law and the correct meaning of the expression is “conditional one”.
21. In South India Corporation (P) Ltd. v. Secretary, Board of Revenue,
Trivandrum and another[4], the Constitution Bench has ruled that the
expression “subject to” in the context convey the idea of a provision
yielding place to another provision or other provision to which it was made
subject to. In B.S. Vadera and another v. Union of India and others[5],
this Court while dealing with the expression “any rule so made shall have
effect, subject to provisions of any Act occurring in the proviso to
Article 309” ruled that:-
“24. It is also significant to note that the proviso to Article 309,
clearly lays down that ‘any rules so made shall have effect, subject to the
provisions of any such Act'. The clear and unambiguous expressions, used in
the Constitution, must be given their full and unrestricted meaning, unless
hedged-in, by any limitations. The rules, which have to be ‘subject to the
provisions of the Constitution, shall have effect, ‘subject to the
provisions of any such Act'. That is, if the appropriate legislature has
passed an Act, under Article 309, the rules, framed under the proviso, will
have effect,-subject to that Act; but, in the absence of any Act, of the
appropriate legislature, on the matter, ‘in our opinion, the rules, made by
the President, or by such person as he may direct, are to have full effect,
both prospectively, and, retrospectively. Apart from the limitations,
pointed out above, there is none other, imposed by the proviso to Article
309, regarding the ambit of the operation of such-rules.”
22. Regard being had to the aforesaid interpretation, we have to scan the
anatomy of Section 11 of the Act, for it has immense signification. The
said provision deals with the functions and powers of the Board. The said
provision is extracted below:-
“11 Functions and powers of the Board
The Board shall-
protect the interest of consumers by fostering fair trade and competition
amongst the entities;
register entities to-
market notified petroleum and petroleum products and, subject to the
contractual obligations of the Central Government, natural gas;
establish and operate liquefied natural gas terminals;
establish storage facilities for petroleum, petroleum products or natural
gas exceeding such capacity as may be specified by regulations;
authorise entities to-
lay, build, operate or expand a common carrier or contract carrier;
lay, build, operate or expand city or local natural gas distribution
network;
declare pipelines as common carrier or contract carrier;
regulate, by regulations,-
access to common carrier or contract carrier so as to ensure fair trade and
competition amongst entities and for that purpose specify pipeline access
code;
transportation rates for common carrier or contract carrier;
access to city or local natural gas distribution network so as to ensure
fair trade and competition amongst entities as per pipeline access code;
in respect of notified petroleum, petroleum products and natural gas-
ensure adequate availability;
ensure display of information about the maximum retail prices fixed by the
entity for consumers at retail outlets;
monitor prices and take corrective measures to prevent restrictive trade
practice by the entities;
secure equitable distribution for petroleum and petroleum products;
provide, by regulations, and enforce, retail service obligations for retail
outlets and marketing service obligations for entities;
monitor transportation rates and take corrective action to prevent
restrictive trade practice by the entities;
levy fees and other charges as determined by regulations;
maintain a data bank of information on activities relating to petroleum,
petroleum products and natural gas;
lay down, by regulations, the technical standards and specifications
including safety standards in activities relating 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;
perform such other functions as may be entrusted to it by the Central
Government to carry out the provisions of this Act.”
Sub-section (e) of Section 11 of the Act is pertinent to appreciate
the controversy. It empowers the Board to regulate, by regulations, in
respect of certain aspects. Section 11(e) (ii) confers power on the Board
to determine transport rates for common carrier or contract carrier. Sub-
section (f) of Section 11 allows the Board to regulate in respect of
notified petroleum, petroleum products and natural gas and sub-section (e)
(iii) of Section 11 empowers the Board to regulate, by regulations, access
to city or local natural gas distribution network so as to ensure fair
trade and competition amongst entities as per pipeline access code. It is
relevant to note here that the High Court, while appreciating the language
employed in the said provision has held that:-
“We are of the opinion that none of the aforesaid clauses can be construed
as prescribing price control/regulation as a function of the Board. Clause
(a) supra while prescribing protection of interest of consumers limits the
same to, by fostering fair trade and competition amongst entities engaged
in distributing, dealing, transporting, marketing gas. The function of the
Board thereunder is of regulating the inter se relationship of entities
under the Act and not to regulate/control the relationship between the
entities under the Act and the consumers. Similarly, Clause (f) while
prescribing function of monitoring prices limits the same to taking
corrective measures to prevent restrictive trade practices by the entities.
Thus only if the Board finds that the marketers of gas in a particular
area have formed a cartel or are indulging in any other restrictive trade
practices, is the Board empowered to monitor prices. Such is not the case
of the Board in the present instance. The petitioner even though till date
the exclusive marketer of gas in Delhi, has not been accused of any
restrictive trade practice and the power exercised also is not in the name
of monitoring price. Another sub-clause of clause (f) of Section 11
confers function on the Board to ensure display of information about
Maximum Retail Price. Again, had the intent of the legislature been to
confer the power on the Board to fix the Maximum Retail Price, nothing
prevented the legislature from providing so expressly. Instead, functions
of enforcing retail service obligations and marketing service obligations
only have been conferred by the legislature. The definition of retail
service obligations and marketing service obligations in Sections 2(zk) and
(w) also do not include obligation to sell at the prices fixed by the
Board.”
23. The aforesaid analysis of the High Court is in consonance with the
provision and the expression “subject to” as used in Section 22 for the
said provision makes it graphically clear that Section 22 has to yield to
Section 11 of the Act which deals with the powers and functions of the
Board. Section 11 (e) only uses the words “common carrier” or “contract
carrier”. Even if one applies the concept of “subject matter”, in
essentiality it is the “common carrier” and the “contract carrier”. The
dictionary clause of the said expression conveys a different meaning and it
does not include an entity which utilizes the pipelines for its own use.
The submission of Mr. Datar is that after exclusivity period is over, the
Board has the power also cannot be treated to be correct, for such a power
has not been conferred on the Board under Section 11. As is perceptible
the provision deals with the entity when it engages itself as a part of its
pipeline as a common carrier or contract carrier and not the consumers. It
is submitted by the learned senior counsel appearing for the respondent
that a person owning his own carrier, after the exclusivity period may have
the potentiality to enter into business of the “common carrier” or
“contract carrier” and at that juncture to maintain the competitive
prospects, regard being had to the consumer interest, the Board may
determine the price of the same, but a significant one, that does not
clothe the Board with the power to command the entity to put/reflect it as
a part of the bill to the consumer. It is urged that the Board does not
have the power to fix the tariff charges in that regard.
24. Mr. Datar, learned senior counsel would submit that when the Board is
established under a statute and has the power to regulate solely because
there is no mention of entity that owns its own pipeline, it is inapposite
to say that the Board cannot determine the price and indicate the cost
incurred in this regard in the bill given to the consumer. It is his
further submission that the consumer has a right to know. Learned senior
counsel would go to the extent of saying that it is a casus omissus and,
therefore, the court must adopt the principle of purposive interpretation
and it can do so filling up the gap to have the necessitous fruitful
interpretation. Mr. Salve and Mr. Tripathi, per contra, would submit that
the legislature has deliberately not done it and, in any case, the Court
should not read such a concept into it. Ms. Pinky Anand, learned ASG
relying on the affidavit filed by the Union of India, would submit that the
legislature has not given the said power to the Board. It is seemly to
state that even if a stand is taken by the Union of India, in respect of an
interpretation of a statutory provision, that does not mean that the same
is the correct interpretation because it is well settled in law that no one
can speak on behalf of the legislature. It is the court which is the final
interpreter. Keeping that in view, we have to scrutinize whether in such a
situation this Court can implant words in the provision, as canvassed by
Mr. Datar.
25. In this regard we may, with profit, refer to certain authorities in
the field. In CST v. Parson Tools and Plants[6], the Court has held that
if the legislature wilfully omits to incorporate something of an analogous
law in a subsequent statute, or even if there is a casus omissus in a
statute, the language of which is otherwise plain and unambiguous, the
court is not competent to supply the omission by engrafting on it or
introducing in it, under the guise of interpretation, by analogy or
implication, something what it thinks to be a general principle of justice
and equity. To do so ‘would be entrenching upon the preserves of
legislature’. In Board of Muslim Wakfs v. Radha Kishan, it has been
observed that:-
“While it is true that under the guise of judicial interpretation the court
cannot supply casus omissus, it is equally true that the courts in
construing an Act of Parliament must always try to give effect to the
intention of the legislature. In Crawford v. Spooner[7] the Judicial
Committee said:
“We cannot aid the legislature’s defective phrasing of an Act, we cannot
add and mend and by construction, make up deficiencies which are left
there.”
To do so would be to usurp the function of the legislation. At the same
time, it is well settled that in construing the provisions of statute the
courts should be slow to adopt a construction which tends to make any part
of the statute meaningless or ineffective. Thus, an attempt must always be
made to reconcile the relevant provisions so as to advance the remedy
intended by the statute.”
26. In this context, we may usefully refer to the authority in CIT v.
National Taj Traders[8] wherein it has been clearly laid down that two
principles of construction i.e. one relating to casus omissus and the other
in regard to reading of the statute as a whole have been well settled. The
Court has reproduced few passages from Maxwell on Interpretation of
Statutes at pages 33 and 47, as has been stated in Canada Sugar Refining
Co. Ltd. v. R., by Lord Davey[9] and proceeded to state thus:-
“In other words, under the first principle a casus omissus cannot be
supplied by the Court except in the case of clear necessity and when reason
for it is found in the four corners of the statute itself but at the same
time a casus omissus should not be readily inferred and for that purpose
all the parts of a statute or section must be construed together and every
clause of a section should be construed with reference to the context and
other clauses thereof so that the construction to be put on a particular
provision makes a consistent enactment of the whole statute. This would be
more so if literal construction of a particular clause leads to manifestly
absurd or anomalous results which could not have been intended by the
Legislature. “An intention to produce an unreasonable result”, said
Danckwerts, L.J., in Artemiou v. Procopiou (1966 1 QB 878), “is not to be
imputed to a statute if there is some other construction available”. Where
to apply words literally would “defeat the obvious intention of the
legislation and produce a wholly unreasonable result” we must “do some
violence to the words” and so achieve that obvious intention and produce a
rational construction. [Per Lord Reid in Luke v. IRC (1966 AC 557) where at
p. 577 he also observed: “this is not a new problem, though our standard of
drafting is such that it rarely emerges”.] In the light of these principles
we will have to construe sub-section (2)(b) with reference to the context
and other clauses of Section 33-B.”
27. In S.P. Gupta v. Union of India[10], after referring to various
authorities, it has been held:-
“Thus, on a full and complete consideration of the decisions classified
under the various categories, the propositions that emerge from the decided
cases of this Court and other foreign courts are as follows:
“Where the language of a statute is clear and unambiguous, there is no room
for the application either of the doctrine of casus omissus or of pressing
into service external aids, for in such a case the words used by the
Constitution or the statute speak for themselves and it is not the function
of the court to add words or expressions merely to suit what the courts
think is the supposed intention of the legislature. …””
28. In Bharat Aluminium Co. v. Kaiser Aluminium Technical Services
Inc.[11] it has been opined thus:
“...... that it is not the function of the court to supply the supposed
omission, which can only be done by Parliament. In our opinion, legislative
surgery is not a judicial option, nor a compulsion, whilst interpreting an
Act or a provision in the Act. The observations made by this Court in
Nalinakhya Bysack[12] would tend to support the aforesaid views, wherein it
has been observed as follows:
“9. … It must always be borne in mind, as said by Lord Halsbury in
Commissioners for Special Purposes of Income Tax v. Pemsel[13], that it is
[pic]not competent to any court to proceed upon the assumption that the
legislature has made a mistake. The court must proceed on the footing that
the legislature intended what it has said. Even if there is some defect in
the phraseology used by the legislature the Court cannot, as pointed out in
Crawford v. Spooner[14], aid the legislature’s defective phrasing of an Act
or add and amend or, by construction, make up deficiencies which are left
in the Act. Even where there is a casus omissus, it is, as said by Lord
Russell of Killowen in Hansraj Gupta v. Official Liquidators of Dehra Dun-
Mussoorie Electric Tramway Co. Ltd.[15], for others than the courts to
remedy the defect.””
After so stating the Court has referred to the observations made by
Lord Diplock in Duport Steels Ltd.[16] wherein it has been ruled thus:
“… the role of the judiciary is confined to ascertaining from the words
that Parliament has approved as expressing its intention what that
intention was, and to giving effect to it. Where the meaning of the
statutory words is plain and unambiguous it is not for the Judges to invent
fancied ambiguities as an excuse for failing to give effect to its plain
meaning because they themselves consider that the consequences of doing so
would be inexpedient, or even unjust or immoral. In controversial matters
such as are involved in industrial relations there is room for differences
of opinion as to what is expedient, what is just and what is morally
justifiable. Under our Constitution it is Parliament’s opinion on these
matters that is paramount.”
(emphasis supplied)
29. Recently, in Sarah Mathew v. Institute of Cardio Vascular
Diseases[17], while interpreting Section 468 CrPC, the Court has opined:-
“It is argued that a legislative casus omissus cannot be supplied by
judicial interpretation. It is submitted that to read Section 468 CrPC to
mean that the period of limitation as period within which a
complaint/charge-sheet is to be filed, would amount to adding words to
Sections 467 and 468. It is further submitted that if the legislature has
left a lacuna, it is not open to the court to fill it on some presumed
intention of the legislature. Reliance is placed on Shiv Shakti Coop.
Housing Society[18], Bharat Aluminium[19] and several other judgments of
this Court where doctrine of casus omissus is discussed. In our opinion,
there is no scope for application of doctrine of casus omissus to this
case. It is not possible to hold that the legislature has omitted to
incorporate something which this Court is trying to supply. The primary
purpose of construction of the statute is to ascertain the intention of the
legislature and then give effect to that intention. After ascertaining the
legislative intention as reflected in the Forty-second Report of the Law
Commission and the Report of the JPC, this Court is only harmoniously
construing the provisions of Chapter XXXVI along with other relevant
provisions of the Criminal Procedure Code to give effect to the legislative
intent and to ensure that its interpretation does not lead to any
absurdity. It is not possible to say that the legislature has kept a lacuna
which we are trying to fill up by judicial interpretative process so as to
encroach upon the domain of the legislature. The authorities cited on
doctrine of casus omissus are, therefore, not relevant for the present
case.”
30. We have referred to the aforesaid passage as the Constitution Bench
has given emphasis on primary purpose of construction of statute to
ascertain the intention of the legislature, harmonious construction of the
various provisions of the CrPC and for ensuring that the interpretation
does not lead to any absurdity. That apart, the Court has also
categorically observed that it is not a case where it can be said that
legislature has kept a lacuna which the Court is trying to fill up by
judicial interpretative process so as to encroach upon the domain of the
legislature. In the case at hand, in the schematic context of the Act and
upon reading the legislative intention and applying the principle of
harmonious construction, we do not perceive inclusion of the entities which
are not “common carriers” or “contract carriers” would be permissible.
They have deliberately not been included under Section 11 of the Act by the
legislature and the said non-inclusion does not lead to any absurdity and,
therefore, there is no necessity to think of any adventure.
31. We must take note of certain situations where the Court in order to
reconcile the relevant provision has supplied words and the exercise has
been done to advance the remedy intended by the statute. In Surjit Singh
Kalra v. Union of India[20], a three-Judge Bench perceiving the anomaly,
held:-
“True it is not permissible to read words in a statute which are not there,
but “where the alternative lies between either supplying by implication
words which appear to have been accidentally omitted, or adopting a
construction which deprives certain existing words of all meaning, it is
permissible to supply the words” (Craies Statute Law, 7th edn., p. 109).
Similar are the observations in Hameedia Hardware Stores v. B. Mohan Lal
Sowcar[21] where it was observed that the court construing a provision
should not easily read into it words which have not been expressly enacted
but having regard to the context in which a provision appears and the
object of the statute in which the said provision is enacted the court
should construe it in a harmonious way to make it meaningful. An attempt
must always be made so to reconcile the relevant provisions as to advance
the remedy intended by the statute. (See: Sirajul Haq Khan v. Sunni Central
Board of Waqf[22].)”
32. We have referred to the aforesaid authority as Mr. Datar has
respectfully urged that omission in Section 11 is accidental. The test
that has been laid down in Surjit Singh Kalra (supra) and other decisions
of this Court, we are afraid, do not really support the submission of Mr.
Datar. By no stretch of imagination, we can conceive that non-conferment
of power on the Board, in particular regard, is accidental. The
legislative intention is absolutely clear and simple and, in fact, does not
call for adoption of any other construction to confer any meaning to the
existing words. Thus, the said submission leaves us unimpressed.
33. Having dealt with this facet, it is appropriate to refer to Section
61, which deals with the power of the Board to make Regulations. Sub-
section (1) of Section 61 stipulates that the Board may, by notification,
make regulations consistent with the Act and the Rules made thereunder to
carry out the provisions of the Act. Sub-section (2) of Section 61
stipulates that without prejudice to the generality of the foregoing power,
such Regulations may provide for all or any of the following matters and
the matters have been enumerated thereafter. Mr. Datar has emphasised on
Section 61(2)(t), which reads as follows:-
“(t) the transportations tariffs for common carriers or contract carriers
or city or local natural gas distribution network and the manner of
determining such tariffs under sub-section (1) of section 22.”
34. On a scrutiny of the said provision, we notice that it deals with
transportation tariff for “common carrier” and “contract carrier” or “city
or local natural gas distribution network” and the determination has to be
done as per sub-section (1) of Section 22. Be it noted, in pursuance of
the said provision, regulations, namely, Petroleum and Natural Gas
Regulatory Board (Determination of Network Tariff for City or Local Natural
Gas Distribution Networks and Compression Charge for CNG) Regulations, 2008
which we have already referred to as “the Regulations” have been framed.
Emphasis has been laid on Regulation 2(e) and 2(g), which read as follows:-
“(e) “compression charge for CNG” means a charge (excluding statutory taxes
and levies) in Rs./Kg for online compression of natural gas into compressed
natural gas (hereinafter referred to as CNG) for subsequent dispensing to
consumers in a CNG station.
(g) “Network tariff” means the weighted average unit rate of tariff
(excluding statutory taxes and levies) in rupees per million British
Thermal Units (Rs./MMBTU for all the categories of consumers of natural gas
in a CGD Network.”
35. Regulation 4 reads as follows:-
“4. Determination of network tariff and compression charge for CNG.
The network tariff and compression charge for CNG in respect of an entity
covered clause (a) or clause (b) of sub-regulation (1) of regulation 3
shall be determined as per the procedure at Schedule A.”
In addition to the aforesaid there are various Regulations dealing
with the procedure of determination. Mr. Datar, learned senior counsel,
would submit that Section 61 of the Act has to be read in consonance with
the objects and reasons of the Act and when the Board has the power to
frame regulations to carry out the purposes of the Act, it has framed the
Regulations in accordance with the legislation and the High Court has
totally flawed in declaring it as ultra vires.
36. We have already dealt with the purport of Section 11, adverted to the
facet how the words “subject to” have to be interpreted, functions of the
Board, and provisions relating to exclusivity, definitions of “common
carrier” and the “contract carrier”. Section 61 is a provision that
enables the Board to frame Regulations. If on reading of the statute in
entirety, such a power does not flow, a delegated authority cannot frame a
regulation as that would not be in accord with the statutory provisions nor
would it be for the purpose of carrying on the provisions of the Act.
In St. Johns Teachers Training Institute v. National Council for Teacher
Education[23] it has been observed that:-
“A regulation is a rule or order prescribed by a superior for the
management of some business and implies a rule for general course of
action. Rules and regulations are all comprised in delegated
legislations. The power to make subordinate legislation is derived from
the enabling Act and it is fundamental that the delegate on whom such a
power is conferred has to act within the limits of authority conferred by
the Act. Rules cannot be made to supplant the provisions or the enabling
Act but to supplement it. What is permitted is the delegation of ancillary
or subordinate legislative functions, or, what is fictionally called, a
power to fill up details.”
37. In Kunj Behari Lal Butail v. State of H.P.[24] it has been ruled
that it is very common for the legislature to provide far a general rule-
making power to carry out the purpose of the Act. When such a power is
given, it may be permissible to find out the object of the enactment and
then see if the rules framed satisfy the test of having been so framed as
to fall within the scope of such general power confirmed. If rule-making
power is not expressed in such a usual general form then it shall have to
be seen if the rules made are protected by the limits prescribed by the
parent Act. In State of Karnataka v. H. Ganesh Kamath[25] it has been
stated that it is a well-settled principle of interpretation of statutes
that the conferment of rule-making power by an Act does not enable the rule-
making authority to make a rule which travels beyond the scope of the
enabling Act or which is inconsistent therewith or repugnant thereto.”
38. In Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi[26]
“....statutory bodies cannot use the power to make rules and regulations to
enlarge the powers beyond the scope intended by the legislature. Rules and
regulations made by reason of the specific power conferred by the stature
to make rules and regulations establish the pattern of conduct to be
followed”.
39. In General Officer Commanding-in-Chief v. Subhash Yadav[27], it has
been held as follows:-
“.....before a rule can have the effect of a statutory provision, two
conditions must be fulfilled, namely, (1) it must conform to the provisions
of the statute under which it is framed; and (2) it must also come within
the scope and purview of the rule-making power of the authority framing the
rule. If either of these two conditions is not fulfilled, the rule so
framed would be void.”
40. Similar view has been expressed in State of T.N. v. P.
Krishnamurthy[28] and in Union of India v. Srinivasan[29] wherein it has
been held that:-
“...If a rule goes beyond the rule-making power conferred by the statue,
the same has to be declared ultra vires. If a rule supplants any provision
for which power has not been conferred, it becomes ultra vires. The basic
test is to determine and consider the source of power which is relatable to
the rule. Similarly, a rule must be in accord with the parent statute as
it cannot travel beyond it.”
41. In Dr. Indramani Pyarelal Gupta v. W.R. Natu[30], the Court has held
that one of the tests to determine whether a statutory body is vested with
a particular power is to see whether exercise of such power is contra-
indicated by any specific provision of the enactment bringing such
statutory body into existence. In Tata Power Company Limited v.
Reliance Energy Limited[31], it has been ruled that save and except for the
exercise of regulatory power which is specifically recognized by the
statute, it is not open to the regulatory body to exercise a power which is
not incorporated in the statute.
42. In this context, it is fruitful to refer to the authority in Academy
of Nutrition Improvement v. Union of India[32]. The two-Judge Bench was
dealing with the issue of constitutional validity of Prevention of Food
Adulteration (Eighth Amendment) Rules, 2005. After discussing at length
from various angles, the Court held that:-
“Statutes delegating the power to make rules follow a standard pattern. The
relevant section would first contain a provision granting the power to make
rules to the delegate in general terms, by using the words “to carry out
the provisions of this Act” or “to carry out the purposes of this Act”.
This is usually followed by another sub-section enumerating the
matters/areas in regard to which specific power is delegated by using the
words “in particular and without prejudice to the generality of the
foregoing power, such rules may provide for all or any of the following
matters”. Interpreting such provisions, this Court in a number of decisions
has held that where power is conferred to make subordinate legislation in
general terms, the subsequent particularisation of the matters/topics has
to be construed as merely illustrative and not limiting the scope of the
general power. Consequently, even if the specific enumerated topics in
Section 23(1-A) may not empower the Central Government to make the impugned
rule (Rule 44-I), making of the rule can be justified with reference to the
general power conferred on the [pic]Central Government under Section 23(1),
provided the rule does not travel beyond the scope of the Act.
“But even a general power to make rules or regulations for carrying out or
giving effect to the Act, is strictly ancillary in nature and cannot enable
the authority on whom the power is conferred to extend the scope of general
operation of the Act. Therefore, such a power ‘will not support attempts to
widen the purposes of the Act, to add new and different means to carrying
them out, to depart from or vary its terms’.”
Rule 44-I is not a rule made or required to be made to carry out the
provisions of the Act, having regard to its object and scheme. It has
nothing to do with curbing of food adulteration or to suppress any social
or economic mischief.”
On the basis of the aforesaid analysis, the Court opined that:-
“We have already noticed that as at present there is no material to show
that universal salt iodisation will be injurious to public health (that is
to the majority of populace who do not suffer from iodine deficiency). But
we are constrained to hold that Rule 44-I is ultra vires the Act and
therefore, not valid.”
43. 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 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.
44. Ex consequenti, we find no substance in this appeal and accordingly
the same stands dismissed without any order as to costs.
.................................J.
[Dipak Misra]
..................................J.
[Uday Umesh Lalit]
New Delhi
July 1, 2015
-----------------------
[1]
[2] (1977) 3 SCC 362
[3]
[4] (2004) 3 SCC 1
[5]
[6] AIR 1961 SC 1152
[7]
[8] AIR 1964 SC 207
[9]
[10] AIR 1969 SC 118
[11]
[12] (1975) 4 SCC 22
[13]
[14] (1846) 6 Moore PC 1 : 13 ER 562
[15]
[16] (1980) 1 SCC 370
[17]
[18] 1898 AC 735
[19]
[20] (1981) Supp. SCC 87
[21]
[22] (2012) 9 SCC 552
[23]
[24] AIR 1953 SC 148
[25]
[26] 1891 AC 531, at p. 549 (HL)
[27]
[28] (1846-49) 6 Moo PC 1 : 13 ER 582 : 4 MIA 179 : 18 ER 667
[29]
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[31]
[32] (1980) 1 WLR 142 : (1980) 1 All ER 529 (HL)
[33]
[34] (2014) 2 SCC 62
[35]
[36] (2003) 6 SCC 659
[37]
[38] (2012) 9 SCC 552
[39]
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[41]
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[43]
[44] 1959 SCR 1287 : AIR 1959 SC 198
[45]
[46] (2003) 3 SCC 321
[47]
[48] (2000) 3 SCC 40
[49]
[50] (1983) 2 SCC 402
[51]
[52] (1975) 1 SCC 421
[53]
[54] (1988) 2 SCC 351
[55]
[56] (2006) 4 SCC 517
[57]
[58] (2012) 7 SCC 683
[59]
[60] AIR 1963 SC 274
[61]
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[63]
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