"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Tuesday, February 2, 2010

Voice of India v. Union of India & Ors.

The Delhi High Court, in a recent decision (Voice of India v. Union of India  & Ors.), has held that the Petroleum and Natural Gas Regulatory Board (PNGRB) does not have any power to grant authorisation for laying, building, operating or expanding any natural gas pipeline or local or city gas distribution network. The fundamental rationale of the decision seems to be that Section 16 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (Act), which is the substantive provision prohibiting any entity from laying, building, operating or expanding any natural gas pipeline or local or city gas distribution network without PNGRB authorisation, was not notified by the Central Government. Despite the non-notification, the PNGRB proceeded to grant authorisation by construing Ss 17-19 of the Act as prohibiting an entity from laying, building, operating or expanding any natural gas pipeline or local or city gas distribution network unless authorised by the PNGRB.

Relevant portions of the statute are quoted below:  

"Section 1(3)
It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

Section 16 - Authorisation
No entity shall--
(a) lay, build, operate or expand any pipeline as a common carrier or contract carrier,
(b) lay, build, operate or expand any city or local natural gas distribution network, without obtaining authorisation under this Act:
Provided that an entity,--
(i) laying, building, operating or expanding any pipeline as common carrier or contract carrier; or
(ii) laying, building, operating or expanding any city or local natural gas distribution network,
immediately before the appointed day shall be deemed to have such authorisation subject to the provisions of this Chapter, but any change in the purpose or usage shall require separate authorisation granted by the Board.

Section 17 - Application for authorisation
(1) An entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand, a pipeline as a common carrier or contract carrier shall apply in writing to the Board for obtaining an authorisation under this Act:
Provided that an entity laying, building, operating or expanding any pipeline as common carrier or contract carrier authorised by the Central Government at any time before the appointed day shall furnish the particulars of such activities to the Board within six months from the appointed day.
(2) An entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand, a city or local natural gas distribution network shall apply in writing for obtaining an authorisation under this Act:
Provided that an entity laying, building, operating or expanding any city or local natural gas distribution network authorised by the Central Government at any time before the appointed day shall furnish the particulars of such activities to the Board within six months from the appointed day.
(3) Every application under sub-section (1) or sub-section (2) shall be made in such form and in such manner and shall be accompanied with such fee as the Board may, by regulations, specify.
(4) Subject to the provisions of this Act and consistent with the norms and policy guidelines laid down by the Central Government, the Board may either reject or accept an application made to it, subject to such amendments or conditions, if any, as it may think fit.
(5) In the case of refusal or conditional acceptance of an application, the Board shall record in writing the grounds for such rejection or conditional acceptance, as the case may be.

Section 18 - Publicity of applications
When an application for registration for marketing notified petroleum, petroleum products and natural gas, or for establishing and operating a liquefied natural gas terminal, or for establishing storage facilities for petroleum, petroleum products or natural gas exceeding such capacity as may be specified by regulations, is accepted whether absolutely or subject to conditions or limitations, the Board shall, as soon as may be, cause such acceptance to be known to the public in such form and manner as may be provided by regulations.

Section 19 - Grant of authorisation
(1) When, either on the basis of an application for authorisation for laying, building, operating or expanding a common carrier or contract carrier or for laying, building, operating or expanding a city or local natural gas distribution network is received or on suo motu basis, the Board forms an opinion that it is necessary or expedient to lay, build, operate or expand a common carrier or contract carrier between two specified points, or to lay, build, operate or expand a city or local natural gas distribution network in a specified geographic area, the Board may give wide publicity of its intention to do so and may invite applications from interested parties to lay, build, operate or expand such pipelines or city or local natural gas distribution network.
(2) The Board may select an entity in an objective and transparent manner as specified by regulations for such activities."

The relevant portions of the decision are below:

"39. We are of the opinion that Section 16 is the source of power as it gives statutory mandate to the Board to issue authorizations. Section 16 also confers monopoly on the Board to issue authorizations. Without notification of Section 16, Board does not have the power to issue authorizations, inasmuch as there would be no ban on other entities from laying, building, operating or expanding CGD Networks.

40. We are further of the view that Sections 17, 18 and 19 of the PNGRB Act are all procedural Sections in aid of Section 16. In fact, Sections 17 to 19 lay down the procedure to be adopted by the Board for inviting applications from entities and selecting the best amongst them. These Sections do not give the Board the power to grant authorisation to an entity which has applied to it. This power is specifically provided under Section 16 of the Act and in absence of non-notification of the same, the Board cannot issue LOI‟s to any of the entities selected by it..."


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