Defining the Scope of Deemed Authorisation under the Pngrb Act: The Landmark Judgment in Adani Gas Ltd. v. Union of India

Introduction

The case of Adani Gas Limited v. Union Of India And Others adjudicated by the Supreme Court of India on September 28, 2021, marks a significant development in the regulatory framework governing natural gas distribution in India. This case revolves around the interpretation and validity of provisions under the Petroleum and Natural Gas Regulatory Board (Pngrb) Act, 2006, particularly focusing on the concept of "deemed authorisation" under Section 16 and the accompanying Regulation 18.

The main parties involved are Adani Gas Limited (the appellant) and the Union of India, along with Gujarat Gas and the Pngrb (the respondents). Adani challenged the validity of Regulation 18, arguing that it unjustly excluded certain areas from its authorised distribution network, thereby violating constitutional provisions and legal precedents.

Summary of the Judgment

The Supreme Court of India, presided over by Justice S. Ravindra Bhat, dismissed the appeals brought by Adani Gas Limited. The Court overruled its previous decision in Adani Gas (2019) 3 SCC 641 and clarified that the "deemed authorisation" clause under the proviso to Section 16 of the Pngrb Act applies solely to entities authorised by the Central Government. The Court held that Regulation 18 is valid, as it aligns with the objectives of the Pngrb Act and is not arbitrary or ultra vires.

Furthermore, the Court emphasized the principle of "approbate and reprobate," asserting that Adani, having accepted the authorisation and acted upon it, is estopped from challenging the exclusion of disputed areas from its authorised network.

Analysis

Precedents Cited

The judgment extensively references prior cases and legal principles to substantiate its conclusions:

Gas, Petroleum and Petroleum Products, In re (2004) 4 SCC 489: Established the exclusive legislative competence of Parliament over natural gas, rendering state authorisations unconstitutional.
Adani Gas (2019) 3 SCC 641: A previous Supreme Court decision which was overruled in this judgment for its incorrect interpretation of "deemed authorisation."
Principles of Statutory Interpretation: The Court delved into established rules regarding the interpretation of provisions and the role of provisos in statutory language.
Doctrine of Approbate and Reprobate: Highlighted in cases like Amar Singh v. Union of India (2011) 7 SCC 69, emphasizing that a party cannot both accept and reject a benefit derived from an instrument.

Legal Reasoning

The Court's reasoning is rooted in a meticulous interpretation of the Pngrb Act, emphasizing the following points:

The proviso to Section 16 must be read in harmony with the main provisions of the Act, particularly Sections 17 and Chapter IV.
"Deemed authorisation" is confined to entities that were authorised by the Central Government prior to the enactment of the Pngrb Act, aligning with constitutional mandates.
Regulation 18, which sets criteria for non-centrally authorised entities, is deemed valid as it serves the regulatory objectives of ensuring fair competition and safeguarding consumer interests.
The principle of estoppel prevents Adani from contesting the regulation after having accepted and acted upon the authorisation with stipulated exclusions.

Impact

This landmark judgment has far-reaching implications:

Centralization of Authority: Reinforces the Central Government's exclusive authority over natural gas distribution, limiting state-level interventions.
Clarification of "Deemed Authorisation": Clearly delineates that only Central Government authorised entities benefit from the "deemed authorisation," excluding those previously authorised by states.
Regulatory Framework Strengthening: Upholds Regulation 18, strengthening the Pngrb's ability to regulate the natural gas sector effectively.
Legal Precedence: Sets a precedent for future cases involving regulatory authorisations and the interpretation of constitutional mandates in sector-specific legislation.

Complex Concepts Simplified

Deemed Authorisation

"Deemed authorisation" refers to a legal provision that automatically grants an entity formal permission to carry out specific activities without undergoing the standard application process. In this case, the proviso to Section 16 of the Pngrb Act provided that entities already engaged in laying, building, operating, or expanding natural gas distribution networks before the Act's enforcement would be considered authorised under certain conditions.

Proviso

A proviso is an exception or qualification to a general statement within a statutory provision. It modifies the main clause, specifying conditions or exclusions. Here, the proviso to Section 16 limits the scope of "deemed authorisation" to entities authorised by the Central Government.

Doctrine of Approbate and Reprobate

This legal principle prevents a party from accepting a benefit from an instrument while simultaneously disputing or rejecting another part of it. Adani, by accepting the provisional authorisation and acting upon it, is estopped from challenging the exclusion of disputed areas.

Estoppel

Estoppel is a legal principle that precludes a party from asserting something contrary to what is implied by a previous action or statement of that party. In this context, Adani cannot challenge Regulation 18 after having benefitted from its provisions.

Conclusion

The Supreme Court's judgment in Adani Gas Limited v. Union Of India And Others decisively clarifies the regulatory landscape for natural gas distribution in India. By confining "deemed authorisation" to Central Government authorised entities and upholding Regulation 18, the Court reinforces the Pngrb Act's framework, ensuring centralized oversight and uniform regulation. The dismissal of Adani's appeals underscores the importance of adhering to statutory mandates and the principles of estoppel in maintaining legal and regulatory consistency. This judgment not only settles the immediate dispute but also sets a robust precedent for future regulatory and constitutional interpretations in the energy sector.