VidhiSangh

Supreme Court of India · 08/02/2023

M/S. GAIL (INDIA) LIMITED versus M/S. INDIAN PETROCHEMICALS CORP. LTD. & ORS.

[2023] 2 S.C.R. 326 · 2023 INSC 103

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Summary

The Petroleum Ministry's 1999 gas allocation required IPCL to lay its own pipelines from Hazira, yet its 2001 supply contract with GAIL levied transportation charges for GAIL's HBJ pipeline, which IPCL never used; about Rs. 134 crores was collected. The Gujarat High Court quashed the clauses in a 2006 writ petition and ordered a refund. The Supreme Court upheld maintainability and the quashing: GAIL is 'State' with a monopoly, IPCL faced a Hobson's choice after heavy investment under a government allocation, and charging for a pipeline it was forbidden to use was discriminatory and manifestly arbitrary under Article 14; but as IPCL moved five years after the contract, the refund was confined to the three years preceding the writ petition, payable within two months failing which with 8 per cent interest.

Issues

  1. Whether a writ petition under Article 226 was maintainable to challenge clauses of a commercial gas supply contract between a public sector undertaking and its customer, despite an arbitration clause and delay.
  2. Whether clauses levying HBJ pipeline transportation charges on a buyer mandated to transport gas through its own pipelines were arbitrary and liable to be struck down, and to what extent a refund could be ordered.

Provisions considered

Held

Result

Appeals partly allowed with parties bearing their own costs; Gujarat High Court judgment dated 17.06.2008 affirmed on the maintainability of the writ petition and the quashing of clauses 4.04 and 10.01 insofar as they levied loss of transportation charges on IPCL, but refund restricted to the three years preceding 09.03.2006, to be paid within two months failing which with interest at 8 per cent per annum from the date it became due.

Judgment PDF: Supreme Court of India, [2023] 2 S.C.R. 326.