RANGANATHAN - (1.) THESE are eleven appeals preferred by the Oil and Natural Gas Commission (ONGC, for short) from a judgment and order, dated 30/07/1983, of a Division Bench of the High Court of Gujarat at Ahmedabad in a batch of writ petitions, since reported in 1983 (2) 24 Gij LR 1437. The appeals are pursuant to a certificate of fitness granted by the High Court.
(2.) THE ONGC was initially a Department of the Government of India but, in view of its expanding activities in the search for strategic and vital materials like oil, petroleum and its products it was set up as a body corporate. It is now a statutory corporation constituted by and under the Oil and Natural Gas Commission Act, (Central Act 43 of 1959, hereinafter referred to as 'the Act'). THE Act provides for the establishment of a Commission "for the development of petroleum and petroleum products produced by it and for matters connected therewith". Section 2(f) of the Act defines 'petroleum' as having the same meaning as in the Petroleum Act, 1934 (Act 30 of 1934) and as including natural gas'. THE Commission established under the Act took over the previously existing organisation with effect from 18-9-59. Some of the provisions of the Act which are relevant for our present purposes may be set out here. Chapter III which deals with the powers and functions of the Commission consists of Sections 14 and 15. S. 14 reads thus: "14. Functions of the Commission (1) Subject to the provisions of this Act, the functions of the Commission shall generally be to plan, promote, organise and implement programmes for the development of petroleum resources and the production and sale of petroleum and petroleum products produced by it and to perform such functions as the Central Government may, from time to time, assign to the Commission. (2) In particular and without prejudice to the generality of the foregoing provision, the Commission may take such steps as it thinks fit- (a) for the carrying out of geological and geophysical surveys for exploration of petroleum; (e) for the transport and disposal of natural gas and refinery gases produced by the Commission Provided that no industry, which will use any of these gases as a raw material, shall be set up by the Commission without the previous approval of the Central Government. (h) to perform any other function which is supplemental, incidental or consequential to any of the functions aforesaid or which may be prescribed." Section 15 empowers the Commission to exercise all such, powers as may be necessary or expedient for the purpose of carrying out its functions under the Act. Such powers include the disposal of any property, right or privilege, the original or book value of which exceeds such amount as may be prescribed, or where no such amount has been prescribed, exceeds ten lakhs of rupees and this power could be exercised after obtaining the previous approval of the Central Government (Clause (c)). Chapter IV of the Act deals with finance, accounts, audit and reports. Sections 16 and 17 deal with the capital of the Commission and the vesting, in the Commission, of the previous set up in this regard. Section 23 of the Act requires the Commission to furnish to the Central Government such returns and statements and such particulars in regard to any proposed or existing programme for the development of petroleum resources and the production and sale of petroleum and petroleum products produced by the Commission as the Central Government may, from time to time, require. Section 24 in Chapter V (Miscellaneous) enacts that any land required by the Commission for carrying out its function under the Act shall be deemed to be needed for a public purpose and such land can be acquired by the Commission under the provisions of the Land Acquisition Act, 1894. S. 31 confers rule making powers on the Central Government, in pursuance of which have been framed the Oil and Natural Gas Commission Rules, 1960. The only rule relevant for our present purposes is Rule 25, dealing with contracts. It reads as follows: "25. Contracts: (1) The Commission may enter into contracts for the purpose of performing its functions under this Act; Provided that provision therefor exists in the budget approved by the Government. (2) Contracts made on behalf of the Commission shall not be binding on it unless they are executed by a person duly authorised by it. (3) A person authorised by the Commission to enter into any contract on its behalf shall not be personally liable for any assurance or contract made on its behalf and any liability arising out of such assurance or contract shall be discharged from the Fund." The statute, it may be observed, neither imposes a specific duty on the O.N.G.C. to supply its products to consumers at large nor contains any provisions regarding the fixation of prices for the commodities made available by the O.N.G.C. for sale. In the course of its drilling and exploration of oil, the ONGC discovered oilbearing fields in Cambay and Ankleswar region in 1959 and 1961 respectively. In most of the Oil fields situated in Gujarat, gas comes out along with crude oil and is commonly known as "associated gas". In Cambay area, gas is unaccompanied by crude oil and is known as "free gas". This is easily combustible and can be used as domestic as well as industrial fuel. We are concerned here with both these commodities which are generally known as "natural gas" and we shall refer to them compendiously as 'gas'.
(3.) IN October, 1961, ONGC first thought of the idea of using natural gas in addition to fuel oil in industries. It had detailed discussions with the Gujarat State Electricity Board (GSEB) and it was agreed between them that gas should be supplied to the GSEB at a price related to fuel oil price on the basis of thermal value equivalence. On this basis, an agreement was entered into between them in March, 1963 whereunder the price of fuel oil was fixed at Rs. 77.26 per tonne including rail freight; and, based on this price and thermal value equivalence, the price of Cambay gas was fixed at Rs. 80.14 per 1000 cubic metres (hereinafter referred to as 'the Unit') and of Ankleshwar gas at Rs. 106.66 per unit, rounded off to Rs. 80 and Rs. 100/- per unit respectively. The ONGC began to supply gas from Cambay region to Dhruvan Power Station in 1964 and from Ankleshwar to Uttaran Power Station in 1965. The ONGC also entered into discussions with the Gujarat State Fertiliser Corporation (GSFC) and ultimately it was agreed, on the footing of the price of Rs. 76 per tonne in respect of Koyali Naphtha, that associated gas should be supplied to the GSFC at between Rs. 88 and Rs. 90 per unit on the principle of thermal equivalence. This was in 1966. It may be mentioned here that the three parties concerned viz. the ONGC, GSEB and GSFC, had more or less. agreed to the principle of determining the price of gas on the basis of thermal equivalence with an alternative fuel or feedstock emanating from the processing of crude oil. There was no reference to the cost of production of gas as such. Despite the above agreements, however, the concerned parties were not all very happy. The GSFC resented the fact that discount was not given to them as bulk purchasers and that the prices charged for the Trombay fertiliser factory and power house at Bombay were substantially lower than the prices that the ONGC charged them. Eventually, public discontent was expressed over the alleged high price that was being charged for gas by the ONGC to these organisations. It was felt that the ONGC was denying to them the advantage they should have obtained by the discovery of gas in the region of their operation. It was also felt that this treatment resulted in discrimination against them in comparison with advantages enjoyed by other States due to the availability of fuel resources such as coal or hydro-power within their areas. In view of these expressions of public feeling, the question of fixing a proper price for the gas was taken up by the Government of Gujarat with the Government of India. Eventually, as no agreement could be arrived at, the dispute was referred to the sole arbitration of Dr. V. K. R.V. Rao who gave his award (hereinafter referred to as ' the award') on 23-9-1967. He determined the price of natural gas at Rs. 50.00 per unit ex-well-head, to which were added royalty, sales tax, depreciation and the transport charges. This award was to be enforced for a period of five years i.e. up to 31-3-1971. Between April 1971 and December 1975, the well-head price was increased and fixed at Rs. 66/ - per unit, we are all told, on the intervention of the then Gujarat Governor. These prices were revised subsequently. The supply to GSEB was revised to Rs. 155 and the rate of supply to GSFC was revised to Rs. 320 per unit.;