Introduction

The landmark judgment in Adani Gas Limited (S) v. Union Of India And Others (S). (2021 INSC 558) delivered by the Supreme Court of India on September 28, 2021, has significant implications for the regulatory framework governing the laying, building, operating, or expanding of city or local natural gas distribution networks (CGD networks) in India. This case primarily dealt with the interpretation of the Petroleum and Natural Gas Regulatory Board Act, 2006 (PNGRB Act), specifically focusing on the scope of \"deemed authorization\" under Section 16 and the validity of Regulation 18.

The main appellant, Adani Gas Limited (hereafter referred to as "Adani"), challenged the validity of Regulation 18 of the PNGRB Regulations, 2008 (CGD Regulations) and the authorization granted to Gujarat Gas, contesting the exclusion of certain disputed areas from its authorization. The Supreme Court's judgment not only overruled the previous interpretation in Adani Gas Ltd. v. Union of India (2019) but also clarified crucial aspects of the regulatory provisions, ensuring compliance with constitutional mandates.

Summary of the Judgment

The Supreme Court granted special leave to hear the appeals contested against the Gujarat High Court's judgment, which had upheld the PNGRB's decision to exclude certain disputed areas from Adani's authorization. The central issues revolved around:

• The interpretation of \"deemed authorization\" under the proviso to Section 16 of the PNGRB Act.
• Validity and scope of Regulation 18, which sets criteria for granting authorization to entities not previously authorized by the Central Government.
• Whether the exclusion of disputed areas from Adani's authorization was justified.

Key findings of the Supreme Court include:

• The Court overruled the previous Adani Gas (2019) judgment, clarifying that \"deemed authorization\" under Section 16 applies exclusively to entities authorized by the Central Government, excluding those previously authorized by State Governments.
• Regulation 18 was upheld as valid, emphasizing its non-arbitrary application based on a comprehensive evaluation of criteria.
• Adani's challenge was dismissed based on the doctrine of approbate and reprobate, precluding it from contesting aspects of an authorization it had accepted and acted upon.

Analysis

Precedents Cited

The judgment extensively referenced pivotal cases that shaped the interpretation of statutory provisions and regulatory frameworks:

• In re Special Reference No. 1 of 2001 (2004) 4 SCC 489: This case established that natural gas regulation falls exclusively under the legislative purview of Parliament, reinforcing the Central Government's authority over State Governments in this domain.
• Pallavi Resources Ltd. v. Protos Engineering Company Pvt. Ltd. (2010) 5 SCC 196: Highlighted the non-mandatory nature of certain regulatory provisions unless explicitly stated.
• Shiromani Akali Dal v. Union of India (1984) 4 SCC 116: Addressed the doctrine of approbate and reprobate, emphasizing that one cannot derive benefits and subsequently challenge parts of an instrument granting those benefits.
• Various judgments on the interpretation of provisos and the scope of delegated legislative powers, including principles from Dwarka Prasad v. Dwarka Das Saraf and Saraswati Industrial Syndicate Ltd. v. Union of India.
• International principles from English case law, such as Moti Lal Padampat Sugar Mills v. State of U.P., reinforcing general doctrines like estoppel and non-contravention of expressed statutory provisions.

Legal Reasoning

The Court's legal reasoning was multifaceted, focusing on statutory interpretation, constitutional mandates, and established legal doctrines:

• Interpretation of Section 16 Proviso: The Court emphasized that the proviso to Section 16 of the PNGRB Act is not an unqualified blanket authorization for all entities engaged in CGD activities prior to the Act's enforcement. Instead, it is subject to the provisions of Chapter IV, notably Section 17, which mandates that only those entities previously authorized by the Central Government qualify for \"deemed authorization\".
• Validity of Regulation 18: Regulation 18 was scrutinized for its compliance with the PNGRB Act. The Court held that Regulation 18, which outlines criteria for authorizing entities not previously sanctioned by the Central Government, is valid. The regulation's provisions were deemed to align with the Act's objectives, ensuring that only viable and compliant projects receive authorization.
• Doctrine of Approbate and Reprobate: The Court applied this principle to prevent Adani from challenging the PNGRB's decision after having accepted and acted upon the authorization granted, including participation in the subsequent bidding process.
• Proviso and Subordinate Legislation: Through comprehensive statutory interpretation, the Court maintained that provisos cannot expand legislative power beyond the enacting provisions. Regulation 18 was interpreted as a necessary subordinate legislation to operationalize Section 17, ensuring uniformity and adherence to national policies.

Impact

This judgment has far-reaching implications for the natural gas distribution sector in India:

• Clarity on Regulatory Authority: Reinforces the Central Government's exclusive authority over natural gas regulation, limiting State Governments' roles and preventing them from invalidly authorizing CGD networks.
• Strengthening of PNGRB's Framework: Validates Regulation 18, providing PNGRB with the authority to enforce stringent criteria for authorization, thereby enhancing market competitiveness and ensuring compliance with national standards.
• Legal Precedent on Estoppel: Upholds the principle that entities cannot benefit from an authorization and later challenge its validity, promoting fairness and consistency in administrative actions.
• Discouragement of Arbitrary Regulatory Decisions: By upholding Regulation 18, the Court dissuades arbitrary decision-making by regulatory bodies, ensuring decisions are grounded in statutory provisions and established criteria.
• Guidance for Future Litigation: Provides a clear framework for how similar disputes should be approached, emphasizing the importance of adhering to procedural requirements and statutory interpretations.

Complex Concepts Simplified

Deemed Authorization

Deemed authorization refers to a legal provision where certain entities are automatically considered authorized under specific conditions without undergoing the standard authorization process. In the context of the PNGRB Act, Section 16's proviso allows entities previously authorized by the Central Government to continue their operations without reapplication, provided they comply with further regulations.

Proviso Interpretation

A proviso is a clause that modifies or limits the main provision of a statute. The Supreme Court emphasized that a proviso must be read in harmony with the main enactment and cannot extend beyond the legislative intent. Therefore, the proviso to Section 16 was interpreted as subject to other provisions of the Act, specifically Section 17.

Doctrine of Approbate and Reprobate

This legal doctrine prevents a party from accepting a benefit under a law or contract and subsequently challenging the terms that confer that benefit. In this case, Adani accepted the authorization granted by PNGRB and thus could not later contest aspects of that authorization.

Regulation 18

Regulation 18 sets out the criteria and procedures for granting authorization to entities not previously authorized by the Central Government. It ensures that only entities meeting specific technical, financial, and operational standards can receive authorization, thereby maintaining a regulated and competitive market.

Conclusion

The Supreme Court's judgment in Adani Gas Limited (S) v. Union Of India And Others serves as a pivotal reference in the regulatory landscape of India's natural gas sector. By clarifying the scope of \"deemed authorization\" and upholding Regulation 18, the Court reinforces the Central Government's supremacy in regulating natural gas distribution. The affirmation of the doctrine of approbate and reprobate ensures that entities engaging with regulatory bodies adhere to procedural and statutory frameworks without exploiting loopholes.

This decision not only overrules the previous Adani Gas (2019) judgment but also sets a clear precedent for future cases, emphasizing the importance of statutory compliance and the limitations of subordinate legislation. Entities operating in the natural gas sector must now navigate the PNGRB's regulatory framework with a precise understanding of authorization processes, ensuring alignment with national policies and regulatory criteria.

In essence, the judgment fortifies the regulatory mechanisms governing natural gas distribution, promoting transparency, fairness, and adherence to constitutional mandates, thereby contributing to the sector's sustainable and competitive growth.