ADANI GAS LIMITED v. UNION OF INDIA & Ors.

e. It was also held that Adani’s claim is precluded by the principle of approbate-reprobate, as it accepted authorization granted by PNGRB (including 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. It was held, that exclusion of the disputed areas was justified in the overall facts and circumstances. [Para 127][1239-A-H] Adani Gas Ltd. v. Union of India (2019) 3 SCC 641 : 2019 (2) SCALE 213- overruled. Voice of India v. Union of India W.P.(C) 8415/2009, decided on 20.01.2010, Pallavi Resources Ltd. v. Protos Engineering Company Pvt. Ltd. (2010) 5 SCC 196 : [2010] 3 SCR 847, Association of Natural Gas & Ors v. Union of India (2004) 4 SCC 489; Global Energy Ltd v. Central Electricity Regulatory Commission (2009) 15 SCC 570 : [2009] 9 SCR 22; Petroleum & Natural ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1155 Gas Regulatory Board v. Indraprastha Gas Limited & Ors. (2015) 9 SCC 209 : [2015] 7 SCR 215; Kunj Behari Lal Butail v. State of Himachal Pradesh (2000) 3 SCC 40 : [2000] 1 SCR 1054; Mohinder Singh Gill & Anr. v. The Chief Election Commissioner, Delhi & Ors. (1978) 1 SCC 405 : [1978] 2 SCR 272; Moti Lal Padampat Sugar Mills v. State of U.P (1979) 2 SCC 409 : [1979] 2 SCR 641; Petroleum and Natural Gas Regulatory Board v. Indraprastha Gas (2015) 9 SCC 209 : [2015] 7 SCR 215; Shyam Telelink Ltd. v. Union of India (2010) 10 SCC 138; M/s Tafcon Projects [I] (P) Ltd. v. Union of India & Ors. (2004) 13 SCC 788; K. S. Dharmadatam v. Central Government & Ors; (1979) 4 SCC 294; N.K. Sharma v. Abhimanyu (2005) 13 SCC 213 : [2005] 4 Suppl. SCR 207; State of Maharashtra v. Lalji Rajshi Shah & Ors. (2000) 2 SCC 699 : [2000] 1 SCR 1239; Petroleum & Natural Gas Regulatory Board v. Indraprastha Gas Ltd. (2015) 9 SCC 209 : [2015] 7 SCR 215; Keshavlal Khemchand & Sons (P) Ltd. v. Union of India (2015) 4 SCC 770 : [2015] 2 SCR 51; Bharat Sanchar Nigam Ltd v. Telecom Regulatory Authority of India (2014) 3 SCC 222 : [2013] 12 SCR 999; Prakash Gupta v. Securities and Exchange Board of India (2021) SCC OnLine SC 485; M. C. Mehta v. Union of India WP(C) 13029/1985, Voice of India v. Union of India W.P.(C) 8415/2009, decided on 20.01.2010 – referred to. In re Special Reference No. 1 of 2001 (2004) 4 SCC 489 : [2004] 3 SCR 534; Dwarka Prasad v. Dwarka Das Sara (1976) 1 SCC 128 : [1976] 1 SCR 277; S. Sundaram Pillai & Ors. v. V. Pattabiraman & Ors. (1985) 1 SCC 591 : [1985] 2 SCR 643 : [1979] 3 SCR 472; M. Pentiah v. Muddala Veeramallappa & Ors. (1961) 2 SCR 295; Superintendent and Legal Remembrancer of Legal Affairs to Govt. of West Bengal v. Abani Maity (1979) 4 SCC 85 : [1979] 3 SCR 472; K.R.C.S. Balakrishna Chetty v. State of Madras [1961] 2 SCR 736; Ashok Leyland Ltd. v. State of Tamil Nadu (2004) A B C D E F G H 1156 SUPREME COURT REPORTS [2021] 13 S.C.R. A B C D E F 3 SCC 1 : [2004] 1 SCR 306; Sri Sitaram Sugar Company Limited v. Union of India (1990) 3 SCC 223 : [1990] 1 SCR 909; Collector of Customs v. Nathella Sampathu Chett [1962] 3 SCR 786; State of Tamil Nadu & Anr. v. P. Krishnamurthy & Ors. (2006) 4 SCC 517 : [2006] 3 SCR 396; PTC India Ltd. v. Central Electricity Regulatory Commission (2010) 4 SCC 603 : [2010] 3 SCR 609; State of U.P v. Renusagar Power Co. (1988) 4 SCC 59 : [1988] 1 Suppl. SCR 627; Global Energy Ltd. v. Central Electricity Regulatory Commission (2009) 15 SCC 570 : [2009] 9 SCR 22; State of Karnataka v. H. Ganesh Kamath (1983) 2 SCC 402 : [1983] 2 SCR 665; St. Johns Teachers Training Institute v. NCTE (2003) 3 SCC 321 : [2003] 1 SCR 975; Tata Power Co. Ltd. v. Reliance Energy Ltd. (2009) 16 SCC 659 : [2009] 9 SCR 625; Indramani Pyarelal Gupta v. W.R. Natu [1963] 1 SCR 721; Suzuki Parasrampuria Suitings (P) Ltd. v. Official Liquidator (2018) 10 SCC 707 : [2018] 12 SCR 906; Amar Singh v. Union of India (2011) 7 SCC 69 : [2011] 6 SCR 403; Union of India v. Shakuntala Gupta (2002) 10 SCC 694; Union of India v. E.G. Namboodiri (1991) 3 SCC 38 : [1991] 2 SCR 451; Union of India v. Assn. of Unified Telecom Service Providers of India; (2020) 3 SCC 525 : [2019] 16 SCR 672; Air Line Pilots’ Assn. of India v. DG of Civil Aviation (2011) 5 SCC 435 : [2011] 5 SCR 1019; Jal Mahal Resorts (P) Ltd. v. K.P. Sharma (2014) 8 SCC 866 – relied on. Case Law Reference [2004] 3 SCR 534 relied on [2010] 3 SCR 847 [2009] 9 SCR 22 G [2015] 7 SCR 215 referred to referred to referred to [2000] 1 SCR 1054 referred to [1978] 2 SCR 272 referred to Para 8 Para 18 Para 23 Para 23 Para 23 Para 25 H [1979] 2 SCR 641 referred to Para 31 ADANI GAS LIMITED v. UNION OF INDIA & ORS. 1157 [2015] 7 SCR 215 referred to [2005] 4 Suppl. SCR 207 referred to [2000] 1 SCR 1239 referred to [1976] 1 SCR 277 relied on [1985] 2 SCR 643 referred to [1979] 3 SCR 472 [2004] 1 SCR 306 [1990] 1 SCR 909 [2006] 3 SCR 396 [2010] 3 SCR 609 relied on relied on relied on relied on relied on [1988] 1 Suppl. SCR 627 relied on [2009] 9 SCR 22 relied on [2015] 7 SCR 215 referred to [1983] 2 SCR 665 [2003] 1 SCR 975 [2009] 9 SCR 625 relied on relied on relied on [2015] 2 SCR 51 referred to [2013] 12 SCR 999 referred to [2018] 12 SCR 906 [2011] 6 SCR 403 [2011] 5 SCR 1019 [2019] 16 SCR 672 [1991] 2 SCR 451 relied on relied on relied on relied on relied on Para 33 Para 49 Para 49 Para 67 Para 68 Para 74 Para 77 Para 97 Para 102 Para 103 Para 104 Para 104 Para 106 Para 109 Para 109 Para 109 Para 111 Para 111 Para 114 Para 114 Para 114 Para 115 Para 120 CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6008- 6009 of 2021. From the Judgment and Order dated 28.09.2018 of the High Court of Gujarat at Ahmedabad in Special Civil Application No. 9741 of 2016 with Civil Application No. 1 of 2017. A B C D E F G H 1158 SUPREME COURT REPORTS [2021] 13 S.C.R. A With B C D E F Civil Appeal Nos. 6010 and 6011 of 2021. Harish N. Salve, Dhruv Mehta, Sr. Advs., Ms. Ruby Singh Ahuja, Sandeep Singhi, Ms. Deepti Sarin, Ms. Swikriti Singhania, Navandeep Matta, Shamik Bhatt, M/s Karanjawala & Co., Piyush Joshi, Senthil Jagadeesan, Ms. Sumiti Yadava, Ms. Sonakshi Malhan, Utkarsh Sharma, Mohit Budhiraja, Ms. Pinki Mehra, Ms. Shipra Malhotra, Ms. Kaveri Vats, Saurabh Aggarwal, Deepayan Mandal, Anshuman Choudhary, E. C. Agrawala, Raj Bahadur Yadav, Ashish Kumar Tiwari, Ms. Divya Roy, Ms. Madhumita Bhattacharjee, M/s Khaitan & Co., Advs. for the appearing parties. The Judgment of the Court was delivered by S. RAVINDRA BHAT, J.

#1. Special leave granted. These appeals were heard with the consent of counsel appearing on behalf of the parties. The appeals are directed against a judgment of the Gujarat High Court1 rejecting certain writ petitions.

#2. In those proceedings, the main appellant (hereafter called “Adani”) challenged the validity of Regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 (hereafter called the “CGD Regulations”) as violative of Articles 14 and 19(1)(g) of the Constitution of India, and ultra vires Section 16 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (hereafter called the “PNGRB Act” or “the Act”). Adani had also challenged the grant of authorization to the third respondent (hereafter called “Gujarat Gas”) for laying and maintaining a gas distribution network. Gujarat Gas had succeeded in securing the authorization in an auction held by the Petroleum and Natural Gas Regulatory Board (hereafter called “PNGRB” or “the Board”). G Background

#3. The PNGRB Act came into effect on 1.10.2007, and mandated authorization by the Board for the laying, building, operating or expanding any city or local natural gas distribution network (collectively, “CGD H 1 Dated 28.09.2018. ADANI GAS LIMITED v. UNION OF INDIA & ORS. [S. RAVINDRA BHAT, J.] 1159 activities” and such a network, “CGD network”). On 30.10.2007, the Board issued a press note directing entities engaged in CGD activities with or without authorization of the Central Government, to submit relevant details. After receiving the petitioner’s details, the Board informed it that recognition and acceptance could be only of a specific and formal authorization by the Central Government, in accordance with Section 17 of the Act. Accordingly, Adani’s activities were restrained and a direction was given to obtain authorization from the Central Government. The Board eventually granted Adani provisional clearance to carry out certain capital works in the Ahmedabad area, including the disputed areas of Sanand, Bavla, and Dholka (hereafter called “disputed areas”). Adani also submitted an indemnity in favour of the Board.

#4. Section 16, relating to authorization, came into effect on 12.07.2010. On 04.02.2013, the Board granted provisional authorization to Adani’s CGD network in Ahmedabad city and Dascroi area, excluding 18 CNG stations of Hindustan Petroleum Corporation Limited (hereafter called “HPCL”), subject to certain conditions. The disputed areas were excluded from this provisional authorization. Under protest, Adani accepted the grant of authorization on 09.12.2013, despite certain areas being excluded. On 1.10.2015, the Board invited bids for development of CGD networks in those disputed areas in Ahmedabad. Adani submitted its application-cum-bid documents in respect of these areas.

#5. Feeling aggrieved by the exclusion of these areas from the authorization granted to it, Adani approached the High Court, preferring a petition under Article 226 of the Constitution, seeking several reliefs. The principal relief claimed was the quashing of the grant of authorization to Gujarat Gas, questioning the exclusion of the disputed areas by the earlier authorization dated 28.11.2013, and challenging the vires of Regulation 18 framed by the Board under the PNGRB Act. Adani also contended that by virtue of Section 16 of the PNGRB Act, it was entitled to be treated as an entity with “deemed authorization”.

#6. The PNGRB and Gujarat Gas, who were arrayed as respondents before the High Court, contended that Adani’s petition was liable to be dismissed on the ground of delays and laches, and availability of alternate remedies. They also contended that Adani was disentitled to claim the reliefs it sought due to its conduct. On merits, PNGRB contended that its letter dated 31.03.2008 to Adani sought necessary details. At that stage, Adani did not challenge the validity of Regulation A B C D E F G H 1160 SUPREME COURT REPORTS [2021] 13 S.C.R. A B C D E F G 18 and on the contrary, sought authorization under that provision by a letter dated 09.07.2008 without protest. It was contended that although Section 16 of the PNGRB Act was brought into force in 2010, at that time too, Adani did not challenge the validity of the impugned regulation. Furthermore, Adani applied for authorization under Section 17(2) of the PNGRB Act and Regulation 18 without any protest and participated in the hearings fixed by PNGRB. At that stage too, no objection was raised with regard to its entitlement as a “deemed authorized” entity, and Adani furnished the required particulars to PNGRB. The respondents pointed out that on 04.02.2013, PNGRB issued a provisional authorization letter on certain terms and conditions in which the disputed areas were excluded. At that stage too, Regulation 18 was not challenged; Adani, on the other hand accepted the terms and conditions on 28.10.2013. The petition was therefore opposed on the grounds of estoppel, applicability of the principle of approbate-reprobate, as well as delay and on merits.

#7. The High Court, after hearing the parties, by its judgment held that Adani had applied for and was granted authorization with respect to Khurja area in Uttar Pradesh in 2012. That authorization was issued under Regulation 18. Adani accepted that authorization and never protested against it; it also accepted the terms and conditions of the letter issued by the PNGRB for Ahmedabad, which excluded the disputed areas. Thereafter, the performance bank guarantee was also submitted by the Adani, and ultimately PNGRB issued the final authorization for Ahmedabad city and Dascroi area, excluding the disputed areas. The Court noticed that the bid for the disputed area was issued on 01.10.2015 and Adani participated in the bidding process, rather than challenging it. The petition was filed only after it was unsuccessful in the bid. The High Court found that the challenge to Regulation 18 of the CGD Regulations therefore, was only when it suited Adani’s convenience.

#8. The impugned judgment then noted that this court, in its judgment reported as In re Special Reference No. 1 of 20012 (hereafter called “Special Reference”), had ruled that in view of Entry 53, List I of the Seventh Schedule, the Parliament had exclusive legislative competence, and the Central Government, exclusive executive competence on the subject of natural gas, and that State Governments did not have any authority to enact such a legislation or to grant any authorization in respect of the subject of natural gas. The High Court held that: H 2 (2004) 4 SCC 489. ADANI GAS LIMITED v. UNION OF INDIA & ORS. [S. RAVINDRA BHAT, J.] 1161 the appointed day “The Parliament has, therefore, made provision with regard to ‘deemed authorization’ under Section 16 of the PNGRB Act subject to the provisions of Chapter IV which includes Section 17 of the PNGRB Act. If the provision contained in Section 17 of the PNGRB Act is seen, it provides for distinction between the entities authorized by the Central Government and those not so authorized. Further, the entities authorized by the Central Government have to furnish the particulars of their activities before respondent Board, whereas, the other entities have to apply for authorization under Section 17(2) of the PNGRB Act and Regulation 18 of Regulations of 2008. Thus, the Parliament, while enacting Section 17(2) of the PNGRB Act, had given a chance to such entities to apply for authorization to respondent Board in respect of the areas in which they were active before the appointed day. At this stage, it is also required to be noted that the petitioner No.1 commenced the work of CGD network in Ahmedabad District on the basis of the interim policy of the Government of Gujarat. The said policy itself provides that as and when the Gas Act or any other relevant regulation is brought into force, the petitioner No.1 will have to meet with the requirements of the Regulation. Further, the NOC granted by the Government of Gujarat is also subject to similar condition. In fact, the Presidential Reference was with regard to the Gujarat Gas Act and ultimately the Hon’ble Supreme Court, in the case of Association of Natural Gas &Ors. (supra), struck down the constitutional validity of Gujarat Gas Act and held that with respect to natural gas, only the Central Government has legislative competence. Thus, from the date of coming into force of PNGRB Act i.e., on 01.10.2007, only the Central Government is having legislative and executive competence and therefore Parliament introduced ‘deemed authorization’ in Section 16 of the PNGRB Act. Therefore, when the Parliament introduced the concept of ‘deemed authorization’ in Section 16 of the PNGRB Act, it could only be with respect to entities operating under an executive order/authorization from the Central Government. If section 16 of PNGRB Act is interpreted to mean “deemed authorization” even to entities operating without such A B C D E F G H 1162 SUPREME COURT REPORTS [2021] 13 S.C.R. A B C D E F G H executive order/authorization, such interpretation would run contrary to the Presidential Reference answered by the Hon’ble Supreme Court. As observed hereinabove, Section 16 of the PNGRB Act is subject to the provisions of Chapter IV which includes Section 17.

12.1. If we consider the provisions contained in Sections 11, 18, 19 and 61 of the PNGRB Act, it is clear that the respondent Board has been empowered under the Act to either invite applications and or decide applications moved to it from interested parties to lay, build, operate or expand such pipelines or city or local gas distribution network and the said applications have to be decided in transparent and objective manner as provided in the regulations. The function of the respondent Board is defined under Section 11(i) of the PNGRB Act. Further, Section 61 of the PNGRB Act empowers the respondent Board to frame the regulations which are consistent with the PNGRB Act and the Rules made thereunder to carry out the provisions of the PNGRB Act. The regulations of 2008 were therefore framed. Regulation 18(2) empowers the respondent Board to take into consideration various criteria while considering the application for grant of authorization to such entities and one of them is in respect of the actual physical progress made and the financial commitment specifying a physical progress at least twenty five percent and a financial commitment of at least twenty five percent of the capital expenditure identified for the CGD project as per the DFR submitted immediately before the appointed day, may be considered as adequate. If any entity which is already carrying out work before the appointed day, without the authorization of the Central Government, it becomes incumbent upon the respondent Board to see that the quantity of the work and financial commitment is sufficient and therefore the condition as specified in Regulation 18(2)(d) cannot be said to be ultra vires to the provisions of PNGRB Act. In fact the impugned regulation is in furtherance of the objects of the PNGRB Act.

12.2. Thus, from the combined reading of Sections 16 and 17 of the PNGRB Act and Regulation 18 of the Regulations of ADANI GAS LIMITED v. UNION OF INDIA & ORS. [S. RAVINDRA BHAT, J.] 1163 2008, it would be clear that other entities can also claim authorization from the respondent Board provided they meet the test of Regulation 18 of the Regulations of 2008. In fact, the aforesaid provisions provide a fair opportunity to unauthorized/other entities also to claim authorization with respect to work already carried out before the appointed day provided the work was completed to a reasonable extent.” In view of this reasoning, the High Court dismissed Adani’s writ petition. Relevant Provisions of the PNGRB Act and Regulations

#9. The PNGRB Act, with the exception of Section 16, came into force on 1.10.2007 (“appointed day”). Section 16 was, however, brought into force subsequently, on 12.07.2010. The enactment set up the PNGRB to regulate refining, processing, storage, transport, marketing, distribution and sale of petroleum, petroleum products and natural gas in all parts of the country, and to promote competitive markets. Section 1 (4) of the Act declares that it 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) defines “authorized entity” as follows: “(d) “authorised entity” means an entity— (A) registered by the Board under section 15— A B C D E (i) to market any notified petroleum, petroleum products or natural gas, or (ii) to establish and operate liquefied natural gas terminals, F (B) authorised by the Board under section 16— (i) to lay, build, operate or expand a common carrier or contract carrier, or (ii) to lay, build, operate or expand a city or local natural gas distribution network;” Section 2(i) of the Act defines a ‘city or local natural gas distribution network’ as: G H 1164 SUPREME COURT REPORTS [2021] 13 S.C.R. A B C D E F G H “(i)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.” Section 2 (l) defines compressed natural gas as follows: “(l) “compressed natural gas or CNG” means natural gas used as fuel for vehicles, typically compressed to the pressure ranging from 200 to 250 bars in the gaseous state.” Section 2 (za) defines “natural gas” as follows: “(za) “natural gas” means gas obtained from bore-holes and consisting primarily of hydrocarbons and includes— (i) gas in liquid state, namely, liquefied natural gas and regasified liquefied natural gas, (ii) compressed natural gas, (iii) gas imported through transnational pipelines, including CNG or liquefied natural gas, (iv) gas recovered from gas hydrates as natural gas (v) methane obtained from coal seams, namely, coal bed methane, but does not include helium occurring in association with such hydrocarbons;”

#10. Section 16 of the PNGRB Act requires authorization by the Board for any entity that wishes to lay, build, operate or expand any city or local natural gas distribution network. Section 17 deals with authorization, and Section 18 deals with publicity of applications. The provisions read as follows: “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 authorization under this Act: ADANI GAS LIMITED v. UNION OF INDIA & ORS. [S. RAVINDRA BHAT, J.] 1165 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 authorization granted by the Board.

#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 A B C D E F G H 1166 SUPREME COURT REPORTS [2021] 13 S.C.R. 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.

#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.”

#11. Section 17(2) obliges entities to apply to the PNGRB for authorization, and its proviso says that such entities which were authorized 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. Section 19 provides for the grant of authorizations, and reads as follows: “19. Grant of authorization. (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. A B C D E F G H ADANI GAS LIMITED v. UNION OF INDIA & ORS. [S. RAVINDRA BHAT, J.] 1167 (2) The Board may select an entity in an objective and transparent manner as specified by regulations for such activities.”

#12. The CGD Regulations apply to any entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand a CGD network. Regulation 2(c) defines an ‘authorized area’ as: “(c) “authorised area” means the specified geographical area for a city or local natural gas distribution network (hereinafter referred to as CGD network) authorized under these regulations for laying, building, operating or expanding the CGD network which may comprise of the following categories, either individually or in any combination thereof, depending upon the criteria of economic viability and contiguity as stated in Schedule A, namely:- (i) geographic area, in its entirety or in part thereof, within a municipal corporation or municipality, any other urban area notified by the Central or the State Government, village, block, tehsil, sub-division or district or any combination thereof; A B C D (ii) any other area contiguous to the geographical area mentioned in sub-clause (i);” E Regulation 2(g) defines ‘development of a CGD network’: “(g) “development of a CGD network” means laying, building, operating or expanding a city or local natural gas distribution network;” Regulation 2(2) provides that: “(2) Words and expressions used and not defined in these regulations, but defined in the Act or in the rules or regulations made thereunder, shall have the meanings respectively assigned to them in the Act.”

#13. Regulation 18 of the CGD Regulations pertains to entities not authorized by the Central Government, and provides as follows: “18. Entity not authorized by the Central Government for laying, building, operating or expanding CGD network before the appointed day. F G H 1168 SUPREME COURT REPORTS [2021] 13 S.C.R. A B C D E F G H (1) An entity laying, building, operating or expanding CGD network at any time before the appointed day but not duly authorized to do so by the Central Government shall apply immediately for obtaining an authorization in the form as at Schedule I. (2) The Board may take into consideration the following criteria while considering the application for grant of authorization, namely: - (a) the entity meets the minimum eligibility criteria as specified in clauses (a) to (e) and (i) of sub regulation (6) of regulation 5 before the appointed date and is possessing all necessary statutory clearances, permissions, no objection certificates from the Central and State Governments and other statutory authorities; (b) an entity which is not registered under the Companies Act, 1956 at the time of submitting the application for grant of authorization shall undertake to become a company registered under the Companies Act, 1956: Provided that the Board may exempt an entity to register under the Companies Act, 1956 on such conditions as it may deem appropriate; (c) a satisfactory assessment of the actual physical progress made and the financial commitment thereof till immediately before the appointed day in comparison with the entity’s DFR appraised by the financial institution funding the project. In case the project has not been funded by any financial institution, the Board may appraise the DFR. The DFR of the entity should clearly indicate the specified geographical area of the project and also specify the coverage proposed for CNG and PNG. In case upon scrutiny of the DFR by the board by taking into account the geographical area, customer segments, infrastructure requirements, etc. proposed by the entity, the DFR is found to be sub-optimal and unacceptable, the Board may not consider the case of the entity for issuing the authorization; (d) in respect of the actual physical progress made and the financial commitment thereof referred to in clause (c), a ADANI GAS LIMITED v. UNION OF INDIA & ORS. [S. RAVINDRA BHAT, J.] 1169 physical progress of at least twenty five percent and a financial commitment of at least twenty five percent of the capital expenditure identified for the CGD project as per the DFR immediately before the appointed day may be considered as adequate; (e) the entity should have arranged, by way of acquisition or lease, land for CGS and procured the necessary equipment for erecting the CGS before the appointed day; (f) the Board reserves the right to get the actual physical progress and the financial commitment certified and depending upon the progress achieved, the Board may consider authorizing the entity for the authorized area – i) as per the geographical area in its DFR; ii) as per the geographical area actually covered under implementation till the appointed day; or ii) the geographical area as specified by the Board; (g) in relation to laying, building, operating or expanding the CGD network, it is for the entity to satisfy the Board on the adequacy of its ability to meet the applicable technical standards, specifications and safety standards as specified in the relevant regulations for technical standards and specifications, including safety standards and the quality-of-service standards as specified in regulation 15; (h) assessment of the financial position of the entity in timely and adequately meeting the financial commitments in developing the CGD network project as appraised by a financial institution and an examination of the audited books of accounts of the entity; (i) firm arrangement for supply of natural gas to meet the demand in the authorized area to be covered by the CGD network; (j) any other criteria considered as relevant by the Board based on the examination of the application. A B C D E F G H 1170 SUPREME COURT REPORTS [2021] 13 S.C.R. (3) The evaluation of the application in terms of the clauses (a) to (j) shall be done in totality considering the composite nature and the inter-linkages of the criteria. (4) The Board, after examining the application in terms of the criteria under sub-regulation (2) and also taking into account the requirements in other regulations, may form a prima-facie view as to whether the case should be considered for authorization. (5) In case of prima-facie consideration, the Board shall issue a public notice in one national and one vernacular daily newspaper (including web-hosting) giving brief details of the project and seek comments and objections, if any, within thirty days from any person on the proposal. (6) The Board, after examining the comments and objections, if any, under sub-regulation (5), may either consider or reject the case for grant of authorization for the CGD network. (7) In case it is decided to grant authorization, the same shall be in the form at Schedule D. (8) In case of rejection of the application, the Board shall pass a speaking order after giving a reasonable opportunity to the concerned party to explain its case and proceed to select an appropriate entity for the project in terms of Regulation 6. (9) In case the entity is selected for grant of authorization for CGD network- (a) the network tariff and the compression charge for CNG shall be determined under the 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; (b) the Board may consider grant of exclusivity on such terms and conditions as specified in the Petroleum and Natural Gas Regulatory Board (Exclusivity for City or Local Natural Gas Distribution Networks) Regulations, 2008; A B C D E F G H ADANI GAS LIMITED v. UNION OF INDIA & ORS. [S. RAVINDRA BHAT, J.] 1171 (c) the entity shall abide by the technical standards, specifications including safety standards as specified under relevant regulations for technical standards and specifications, including safety standards; (d) the provisions under regulations 9, 13, 14, 15 and 16 shall apply to the entity.” Contentions of the appellants

#14. Mr Harish Salve, learned senior counsel contended that the impugned judgement erroneously interpreted Section 16 of the PNGRB Act and its proviso. Referring to the sequence of events, it was highlighted that the initial proposal for setting-up of the gas pipeline was by the invitation of the Gujarat Government. Adani made the proposal on 20.08.2001. The State Government framed its policy with effect from 18.07.2002, and Adani applied under that policy. It was after considering commercial and technical feasibility that the Gujarat Government issued the no objection certificate (hereafter called “NOC”) dated 27.04.2003. Soon thereafter, Adani took steps to develop the three areas in question.

#15. Mr. Salve submitted that the issue as to whether the States have the legislative competence and executive authority in respect of natural gas became the subject matter of a reference under Article 143. By its opinion in Special Reference (supra), this Court answered the reference and held that it was only the Parliament which could, having regard to Entry 53 of List I of the Seventh Schedule to the Constitution, legislate in respect of natural gas and petroleum products, and the Central Government alone could frame suitable policies. It was to give effect to this opinion that the PNGRB Act was enacted. The Act was brought into force on 01.10.2007. Mr. Salve drew the attention of the Court to a Press Note dated 31.10.2007 seeking applications from interested parties. He then submitted that on 31.03.2008, having regard to the fact that Adani had received state authorization in the past, the PNGRB asked it to apply under Section 17(2) which it did on 26.02.2008.

#16. It was argued that though the provisions of the PNGRB Act were brought into force, the Central Government advisedly did not bring into force Section 16 of the Act. This led to a proceeding before the Delhi High Court3, which directed the provision to be brought into force. It was as a consequence of these proceedings that the Central 3 Voice of India v. Union of India W.P.(C) 8415/2009, decided on 20.01.2010. A B C D E F G H 1172 SUPREME COURT REPORTS [2021] 13 S.C.R. A B C D E F G H Government ultimately notified Section 16. Mr Salve urged that the proviso to Section 16 of the PNGRB Act was enacted with the intent to deem authorization, and by that, save and permit the functioning of networks and facilities of all entities who were functioning in the sector, and not only entities authorized by the Central Government. He urged that a narrow interpretation of the proviso, confining benefit of “deemed authorization” to entities that were permitted to operate before the enactment of PNGRB, and who were granted authorization by the Central Government, would be reading something new into the statute that does not exist. It was argued that the proviso to Section 16 of the PNGRB Act was plain and unambiguous and referred to entities which were involved in various activities listed in it before the appointed day and not only entities authorized by the Central Government.

#17. It was submitted that Section 17 of the PNGRB Act did not distinguish between entities authorized by the Central Government and others, and merely required entities which did not have central authorization to apply in writing for authorization in terms spelt out by the regulations framed by the PNGRB. The procedural requirement for entities authorized by the Central Government was (as per Section 17 (2) of the PNGRB Act), to intimate relevant details. Therefore Section 16 of the PNGRB Act did not create an artificial distinction between entities authorized by the Central Government and other entities. It was submitted that Parliament was well aware of the debate which took place before the coming into force of the PNGRB Act, especially the fact that several States had authorized entities to construct and lay pipelines and networks, which had come up in the meanwhile. It was urged in this context that the Preamble to the PNGRB Act and the proviso to Section 16 referred to “entities” and not “entities authorized by Central Government”. The proviso to Section16 emphasized on the physical activity of laying, building, operating or expanding any city or local natural gas distribution network and not the factum as to whether authorization for such activity was previously granted by the Central Government or not. It was urged that the lone exception carved out in the proviso to Section 16 was that a separate authorization was required for change in the purpose or usage. Unless there was a change in the purpose or usage, an entity laying, building, operating or expanding any city or local natural gas distribution network before the appointed day (i.e., irrespective of prior authorization by Central Government) shall be deemed to have the authorization under Section16. ADANI GAS LIMITED v. UNION OF INDIA & ORS. [S. RAVINDRA BHAT, J.] 1173

#18. Learned counsel submitted that in terms of Section 17(2) of the PNGRB Act, all entities had to apply in writing for authorization in such form and manner as specified in regulation made under Section17(3). In terms of Section 17(4), consideration of applications (made under Section 17(2)) was subject to the provisions of the PNGRB Act, which would include Section 16. Thus, all entities, regardless of past authorization by the Central Government, who were carrying out CGD activities immediately before the appointed day were deemed to have authorization qua the entire area. It was urged that in the absence of any norms and policy guidelines by the Central Government, the reference made to “norms and policy guidelines laid down by the Central Government” in Section 17(4) was rendered insignificant. Adani also disputed the contention that Section16 granted deemed authorisation only to entities authorised by the Central Government. It was urged that accepting that argument would involve reading something new into a statutory provision which was otherwise plain and unambiguous. Learned counsel cited Pallavi Resources Ltd. vs. Protos Engineering Company Pvt. Ltd.4

#19. The appellants disputed that the provisions of the Petroleum Act, 1934 read with the Petroleum Rules framed under it were applicable, and certain authorizations and approvals were necessary before the enactment of the PNGRB Act. It was asserted that those provisions only required approval on the design and route of the pipeline from the Chief Controller of Explosives. It was urged that the authorities under the Petroleum Rules had no powers to authorize or prohibit a particular entity from transporting petroleum through pipelines as long as the appropriate design/route was adopted.

#20. Learned senior counsel further contended that PNGRB’s justification for Regulation 18was without foundation. Mr Salve placed reliance upon the opinion rendered by this Court in Association of Natural Gas & Ors v Union of India5 which stated that the States lacked legislative competence to enact laws on the subject of natural gas, and therefore, under the PNGRB Act, entities authorized by the Central Government stood on a different footing as compared to their entities. It was urged that Section 16 of the PNGRB Act read with Section 17 covered only entities authorized by the Central Government