Order: In the matter of Bhagyanagar Gas Limited v. Oil and Natural Gas Coprporation Limited & Ors.

2. The Board vide letter dated 12.06.2009 accepted the grant of authorisation to the Complainant for development of CGD network for geographical area of Kakinada which inter-alia includes Samalkot in Andhra Pradesh. The terms and conditions of the authorisation letter was accepted by the Complainant vide letter dated 23.06.2009.

3. The Respondent No.2 has entered into the Gas Supply Agreement (hereinafter referred to as "GSA") with the Respondent No.1 on 27.03.2018 after successfully bidding for bid/tender document dated 16.01.2018 floated by Respondent No.1 for the sale of natural gas from the S1-VA fields of Respondent No.1, which are situated in the subject Area. The term for the Agreement is valid from 01.04.2018 to 01.04.2023.

4. The matter was listed before this Board on various dates, wherein the Board advised the parties to explore the possibility of amicable settlement. As the parties failed to amicably resolve the matter, the Board finally heard the matter on 09.06.2022 and asked the parties to file the written submissions, if any, in support of their arguments. Accordingly, the Complainant and Respondent No.2 filed their written submissions on 16.06.2022.

5. The submissions of the Complainant and Respondents are as under:

5.1 Submissions of the Complainant:

i. It is submitted by the Complainant that, all the authorised entities including the Complainant are governed by PNGRB (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 (hereinafter referred to as the "Authorisation Regulations") and under the said Regulation any customer having requirement of less than 50,000 SCMD is bound to take gas from the Authorised entity. There is a bar for such entity to take gas from any other sources under Regulation 3 of the Authorisation Regulations.

ii. It is submitted by the Complainant that the Respondent No.1 illegally allotted 45,000 SCMD of gas to the Respondent No.2 from the Second tender for S1- Vashishta gas from its eastern offshore asset based at Kakinada. The Respondent No.2 has been using the said gas for its factory at Samalkot in Andhra Pradesh which falls under the Geographical Area of Kakinada where the petitioner is an authorised entity for development of City Gas Distribution Network and distribution of natural gas. The said CGD network was commissioned on

04.06.2017.

iii. The Complainant vide letter dated 05.06.2018 to the Respondent No.1, objected to allotment of 45,000 SCMD S1-VA gas to the Respondent No.2 as there is a statutory bar on the Respondent No.2, which was not responded to.

iv. Since the agreement for supply of gas was entered between the Respondent No.1 and the Respondent No.2, any decision about the Respondent No.2 buying natural gas less than 50,000 SCMD from source other than the Complainant would have direct impact on the business of the Complainant. Thus, the Respondent No.1 is a necessary party to the present proceedings as no effective order can be passed

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without its being arrayed as Respondent. The Complainant relied upon the Judgement of the Hon'ble Supreme Court in J.S. Yadav V State of U.P. (2011) 6 SCC 570, wherein it was held as under:

"31 No order can be passed behind the back of a person adversely affecting him and such an order if passed, is liable to be ignored being not binding on such a party as the same has been passed in violation of the principles of natural justice. The principles enshrined in the proviso to Order I Rule 9 of the Code of Civil Procedure, 1908 provide that impleadment of a necessary party is mandatory and in case of non-joinder of necessary party, the petitioner- plaintiff may not be entitled for the relief sought by him. The litigant has to ensure that the necessary party is before the Court, be it a plaintiff or a defendant, otherwise the proceedings will have to fail…."

v. That the present petition is within limitation as the illegal agreement is still in operation and therefore infringement of right of petitioner is recurring thus, there is continuing cause of action against the respondents. The Complainant relied upon the Judgement of the Hon'ble Supreme Court in Hari Ram Vs Jyoti Prasad (2011)

2 SCC 682 wherein it was held as under:

"16. Any act of encroachment is a wrong committed by the doer. Such an encroachment when made to a public property like encroachment to public road would be a graver wrong, as such wrong prejudicially affects a number of people and therefore is a public wrong. So long any obstruction or obstacle is created to free and unhindered access and movement in the road, the wrongful act continues thereby preventing the persons to use the public road freely and unhindered. Therefore, that being a continuing source of wrong and injury, cause of action is created as long as such injury continues and as long as the doer is responsible for causing such injury.

17. At this stage it would be apposite to refer to and rely upon Section 22 of the Limitation Act, 1963, which reads as follows:

"22. Continuing breaches and torts-In case of a continuing breach of contract or in case of a continuing tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort, as the case may be, continues."

18. This court had the occasion to deal with Section 22 of the Limitation Act, 1963, in Sankar Dastidar v. Banjula Dastidar [(2006) 13 SCC 470:AIR 2007 SC 514], in which the Supreme Court held that when a right of way is claimed whether public or private over a certain land over which the tortfeaser has no right of possession, the breaches would be continuing, to which the provisions of Section 22 of the Limitation Act, 1963, would apply. Therefore, in our considered opinion the plea that the suit is barred by limitation has no merit at all."

vi. The following interim and final reliefs are sought by the Complainant before this Board:

Interim Relief: Direct the Respondent No.1 to stop the supply of natural gas to the Respondent No.2 immediately during the pendency of this petition. Final Relief:

i. Quash the allotment of the natural gas to the Respondent No.2 by the Respondent no.1.

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ii. Direct the Respondent no. 2 to take gas from the Complainant.

iii. Direct the Respondent to compensate the Complainant for the business loss, arsing out of illegal acts of the respondents if operations is not stopped.

iv. Pass any other order that is deemed fit and proper under facts and circumstances of the case.

5.2 Submissions of the Respondent No.1:

vii. The Respondent No.1 has set up large number of wells for harnessing oil and natural gas which are inter alia situated in deep water, ultra-deep water, high pressure and high temperature areas. Further, the Government of India by way of MoP&NG's Notification No. O-22013/27/2012-ONG-D-V (Vol-II) dated 21.03.2016 has given marketing including pricing freedom to Respondent no.1 to sell (monetize) Gas, produced from deep water, ultra deep water, high pressure and high temperature areas. The Tenders were held by ONGC on 26.04.2017, 16.01.2018 and 08.06.2018 for gas at odalarevlu fence. In the said tenders, apart from GAIL and GPPC, four (4) private industries also submitted bids for natural gas including the Respondent No.2.

viii. It is submitted by the Respondent No.1 that the Regulation 3(2) of the Authorisation Regulations is dealing with the specifications of the CGD Network and provides that the design, technical standards and specifications including safety standards should be such as to maintain volumes of supply of natural gas to meet the requirements inter-alia that the customer requirement of natural gas upto 50000 SCMD through CGD Network.

ix. That under Regulation 5 of the PNGRB (Exclusivity for City or Local Natural Gas Distribution Network), 2008 (hereinafter referred to as the "Exclusivity Regulations"), the exclusivity for laying, building or expanding of CGD Network over 25 years is granted to the CGD entity. No other CGD entity can lay, build or expand CGD network in the geographical area in question. However, it is submitted that this exclusivity does not prohibit any other pipeline network to be laid, e.g. dedicated pipeline or common carrier pipeline.

x. That under Regulation 6 of the Exclusivity regulations, exclusivity is provided to the entity from the purview of common carrier or contract carrier for a period of 5 years. Therefore, after period of five (5) years, the entity which has set up CGD Network would be bound to give access as common carrier. Thus, the consumer can purchase gas from other sources by using the network of CGD entity as a common carrier.

xi. That the Gas is being supplied through GAIL network without any manner interacting with the CGD network or using infrastructure of the complainant. Since, the infrastructure other than CGD network is utilised, the complainant has no reasons for any grievance in the matter. Further, ONGC has not set up a CGD network. The consumer in the Geographical area is entitled to purchase gas from

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other sources, if it is commercially viable to the consumer, and may utilize the GAIL network or any other common carrier network.

xii. That conjoint reading of Regulation 3 of the Authorisation Regulations and Regulation 5 and 6 of the Exclusivity regulations imply that there is no prohibition in purchasing gas from other sources to consumer with gas requirement less than

50000 SCMD in the CGD network after 5 years of the date of grant of authorisation. Further, it is further submitted that on number of days in the month of June, 2019, the off take of the consumer RAK ceramics was more than 50000 SCMD.

5.3 Submissions of the Respondent No.2.

xiii. That the Respondent No. 2 had received infrastructural support/pipeline connection vide GAIL's network in 2009 itself, with the permissions from the Central Government i.e. much before the Complainant had started its operations in this area. Further, a Capacity Tranche (CT) Agreement dated 06.08.2009 was also specifically entered into between GAIL and Respondent No. 2 for the transport of natural gas for a period of five (5) years. Furthermore, a large area of land ad- measuring approximately 1400 M2-35Mx40M, which belonged to Respondent No. 2 was also provided to GAIL so that GAIL could develop the pipeline network and for setting up the GAIL delivery terminal within its premises.

xiv. That the Complainant, which is purportedly authorised to operate the CGD network in the GA, till date does not possess a pipeline network which can be utilised to transport natural gas from the Delivery Point to the point of actual consumption in the Respondent No.2's factory. Therefore, the Respondent No. 2 had merely opted for a commercially viable option, after believing the Representations of Respondent No. 1 and using the already existing pipelines of GAIL to transport the natural gas from the Delivery Point to its factory premises.

xv. That the Respondent No. 2 has not entered into a private/customised Agreement with Respondent No.1, but on the contrary, it had been shortlisted by Respondent No.1 after assessing its bid and other details pursuant to the Notice Inviting Tender (NIT) which clearly represents Respondent No.1 as having the requisite eligibility vide the MoPNG circular to market the natural gas to the Respondent No.2.

xvi. That the Exclusivity of the CGD network of the Complainant has already expired on 11.06.2014 and the Respondent No. 2 entered into the gas supply agreement to take supply of natural gas from Respondent No.1 only in the year 2018 i.e. 4 years after the Complainant's exclusivity came to an end/expired.

xvii. Further, Article 4 of the Agreement provided for the Delivery Point of the natural gas as being odalarevu (East Godaveri Dist. in Andhra Pradesh). It is to be noted that, from this Delivery point, natural gas had to be transported to the Respondent No.2's factory premises by means of a different pipeline. It is further to be noted that the Delivery point falls outside the GA within which the Complainant purportedly claims to have exclusivity.

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That the Complainant has neither served any notice upon the Respondent No.2 nor was any correspondence exchanged regarding the present dispute. Further, the present complaint does not disclose any cause of action against the Respondent No.2. There is no allegation whatsoever or any description contained in the petition of any wrongdoing done by the Respondent No.2, moreover the dispute in the present petition only concerns the purported illegal actions of the Respondent No.1. No Interim Relief was granted when the matter was initially heard by the Board.

6. We have heard the Ld. Counsels appeared on behalf of the Complainant and Respondents and also perused the submissions made by the parties. The issue which falls for our consideration is as under:

i. Whether the present complaint discloses infringement of rights of the complainant which may give rise to any cause of action against the Respondent(s)?

ii. Relief Decision

7. Before proceeding further, it is important to note the relevant provisions of the PNGRB Act, 2006 and extant Regulations in order to decide the present issue.

"Section 2(i) PNGRB Act: "city or local natural gas distribution network" means 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."

"Regulation 3 of CGD Authorisation Regulations: Application.

(1) These regulations shall apply to an entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand a CGD network.

(2) A CGD network shall be designed to operate at a pressure as specified in the relevant regulations for technical standards and specifications, including safety standards for maintaining the volumes of supply of natural gas on a sustained basis to meet the following requirements, namely:-

(a) customers having requirement of natural gas upto 50,000 SCMD shall be supplied through the CGD network; Provided that until CGD Network is ready to supply natural gas to a customer (other than domestic PNG and CNG), such customers shall have right to get the supply of natural gas from any other alternate source or supplier, with prior permission of the Board, and if, once CGD Network is ready to supply natural gas to such customer, then, such customer shall cease to get supply of natural gas from such alternate source or supplier after 30 days of receipt of notice of readiness from the CGD network.]

(b) customers having requirement of natural gas more than 50,000 SCMD and upto 100,000 SCMD shall be supplied, at the discretion of customer- (i)through the CGD network; or

(ii) through a pipeline not forming part of the CGD network;

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i. customers having requirement of natural gas more than 100,000 SCMD shall be supplied through a pipeline not forming part of the CGD network."

8. The Board, in exercise of its powers and in order to ensure the uninterrupted supply of natural gas in all parts of country, grants authorization to entities for development of the City Gas Distribution (CGD) network within a geographical area inter-alia through a bidding process. Further, in the event that an entity has been authorized by the Central Government or existing prior to the Appointed Day (01.10.2007), such entity shall furnish the particulars of such authorization to PNGRB and seek acceptance of such Central Government Authorization under the extant Regulations.

9. The Complainant contended that the Respondent No.1 has been supplying gas to Respondent No.2, who has a requirement up to 50,000 SCMD. In support of the same, the Complainant relied on Regulation 3(2)(a) of the Authorisation Regulations. Thus, in terms of above-mentioned Regulation any customer taking gas less than 50,000 SCMD has to compulsorily take gas from the Authorized entity for CGD operation. There is a bar for such entity to take gas from any other sources under Regulation 3 of the Authorisation Regulations. On the contrary, the Respondent No.1 submitted that the Regulation 3 of the Authorisation Regulations and Regulation 5 & 6 of the Exclusivity regulations imply that there is no prohibition in purchasing gas from other sources to consumer with gas requirement less than 50000 SCMD in the CGD network after 5 years of the date of grant of authorisation.

10. It is evident from a bare perusal of the Regulation 3(2)(a) that where the requirement of the customers is up to 50,000 SCMD of natural gas, then the same has to be supplied through the CGD network only. In case the entity, which is authorized to operate the CGD Network by the Board, is unable to meet the demand of CGD customers, due to non-establishment of CGD Network or any other reason, then such customers can meet their necessary requirement from any other alternate source or supplier but only after taking prior permission from the Board. However, once the CGD network is established and the authorized entity is ready and willing to meet the requirement of the CGD customers, then in such cases the CGD customers, whose requirement is up to 50,000 SCMD of natural gas, have to be necessarily serviced and supplied gas from the CGD Network by the entity authorized to operate the Network, in terms of the clear mandate of Regulation 3(2)(a) of the Authorization Regulations.

11. It has been observed that the Complainant is allowed an exclusivity period under the Exclusivity Regulations, in respect of the following:

(a) 300 months from the date of issue of Authorisation for laying, building and expansion of the CGD Network; and

(b) 60 months from the date of issue of Authorisation in terms of an exemption from the purview of common carrier or contract carrier for the CGD network.

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12. It is further submitted by the Respondent No.1 that, it is not laying any infrastructure in the GA of the Complainant and hence, there is no violation of any of the Regulations on its part. Further, it is submitted that, the Gas is being supplied through GAIL's Network without any manner interacting with the CGD network or using infrastructure of the Complainant. Thus, the consumer in the Geographical Area is entitled to purchase gas from other sources, if it is commercially viable to the consumer, and may utilize the GAIL network or any other common carrier network.

13. It is the contention of the Respondent No.2 that, the Complainant till date does not possess a pipeline network which can be utilised to transport natural gas from the Delivery Point to the point of actual consumption in the Respondent No.2's factory. Therefore, the Respondent No. 2 had merely opted for a commercially viable option and using the already existing pipelines of GAIL to transport the natural gas from the Delivery Point to its factory premises. Further, the Respondent No.1 ONGC floated a tender for the sale of natural gas produced by the ONGC from deep water, high pressure and high temperature areas. Thus, ONGC is selling/marketing the Gas to the Respondent No.2. The Respondent No.1 transported the natural gas to Respondent No.2 at its delivery point, which is located at Odalarevu (East Godaveri Dist. in Andhra Pradesh) and the Gas is being supplied through the GAIL's Network (one of the Joint venture Company) to the delivery point of the Respondent No 2 at ONGC Onshore Terminal, Odalaveru . It is further submitted by the Respondent No.1 that on number of days in the month of June, 2019, the off take of the Respondent No.2 was more than 50000 SCMD.

14. It is further submitted by the Respondent No.2 in its written submissions dated 16.06.2022 that the Respondent No1's Delivery point falls outside the GA of the Complainant. However, the said submission has not been captured in its reply dated 15.04.2019 filed before this Board in the present matter. In this regard, we have perused the Articles 4 and 5 of the Agreement dated 27.03.2018 entered between the Respondent No.1 and Respondent No.2, which states as under:

"Article -4: Delivery Point and pressure of Gas

4.01 Gas shall be delivered to the Buyer at a Gas Metering Station located at SELLER's premises at ONGC Onshore Terminal, Odalaveru. Gas will be transported from downstream flange of the pipeline at the outlet of the GAS metering station, hereinafter referred to as the "Delivery Point", by means of pipeline to be provided and maintained by the BUYER."

………………………………………."

"Article-5: Daily Contracted Quantity (DCQ) & Nominations

5.01 Subject always to viability of gas and SELLER's ability to supply gas to the BUYER, the SELLER agrees to sell and deliver the gas at the aforesaid Delivery Point to the BUYER, on fall back basis, as provided here under and as set forth in Schedule D of the agreement:

5.01.1 45,000 SCMD.

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5.02 There could be a maximum of 10 % variation on either side on an hourly basis from the average hourly rate."

On perusal, it has been observed that as per the Article 4, the Gas shall be delivered to the Respondent No.1 at a Gas Metering Station located at ONGC Onshore Terminal, Odalaveru. Further, we have perused the Annexure-1 filed by the Respondent No.1 alongwith the additional reply dated 12.12.2019, it has been observed that the supply to the Respondent No.2 has exceeded more than 50,000 SCMD on number of days ranging from 50,320 to 65,378 SCMD. However, in terms of Article 5 of the said agreement, the Daily Contracted Quantity has been fixed as 45,000 SCMD with a variation of 10% on either side which resulted in the range of 40,500 to 49,500 SCMD.

15. After perusing the record and hearing the parties, we are of the opinion that, it is the spirit of the proviso of the Regulation 3(2)(a) of the CGD Authorization Regulations that in case even after the authorization granted by the Board as per the extant regulation, some of the authorized CGD entities are unable to develop the requisite CGD Network and are not in a position to supply the natural gas to industrial/commercial customers. In such case, until an authorized CGD Network (and not a CGD Entity) is ready to supply gas to customers, such customers shall have the right to get the supply of natural gas from any other alternate source/supplier with prior permission from the Board. Accordingly, such customers are necessarily required to take prior permission from Board by providing necessary details as sought on case to case basis before getting supply from alternate source or supplier, in case the authorized entity is not ready to supply customers with their CGD Network. As it is the responsibility of the customer to take prior permission from the Board in such cases, however, it is also advisable for supplier to ensure that such permission is available with customer before commencement of supply. In the present case, neither the Respondent No.2 has taken prior permission from the Board before getting supply from alternate source nor the Respondent No.1 ensured that whether necessary permissions had been obtained by the Buyer from the Board under Regulation 3(2)(a) of the Authorization Regulations.

16. We are not inclined to accept the submissions made by the Respondent No.1, as mere expiration/cessation of a reasonable term or time period of exclusivity of the entity (exemption from the purview of common carrier or contract carrier for the CGD network) will not by itself create any right in favour or against any entity to carry out activities in the authorized GA unless the CGD network has been declared as common or contract carrier under section 20 of the PNGRB Act. However, the issue which falls for our consideration, is that whether the Respondent No.1 illegally supplying the gas in the authorized GA of the Complainant resulting in violation of any rights of the Complainant.

17. The Complainant has a right to approach the Customer if the necessary infrastructure has been developed to supply the Gas. However, if the necessary infrastructure is not ready to supply the Gas, then in that case the Customer cannot be forced to take the gas from the authorised entity. Further, It is important to understand that Regulation 3(2) (a) provides

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provisions for supply of the natural gas, which in light of the framework of the PNGRB Act, 2006 is transportation of gas from one point to other by either CGD network or through a pipeline not forming a part of CGD network. Respondent No.1 is not a transporter in the instant case but a seller of natural gas by selling its natural gas through a competitive bidding process to the Respondent No.2 at a location outside the GA.

18. The present complaint has been filed without identifying the facts and issues, required to be decided by the Board as the Complainant has not advanced any submissions warranting grant of the relief qua the Respondent No.2. It is pertinent to mention that, in order to seek a relief, it is necessary to traverse the conduct of the party and how the rights of the Complainant are violated/infringed by the Respondent No.2. However, the Complainant without any substantive evidence(s) and without impleading a necessary/proper party to the present Complaint has preferred this complaint alleging illegal supply of Gas by the Respondent No.1. It is the case of the Respondent No.1 that, the tender was issued inviting bids from parties interested in purchasing natural gas from Respondent No. 1's S1-VA fields. Wherein the successfully parties entered into the Agreement for gas from the S1- VA field for marketing in terms of the MoP&NG's Notification No. O-22013/27/2012- ONG-D-V (Vol-II) dated 21.03.2016. The Respondent is neither transporting nor laying any CGD network in the GA of the Complainant resulting in any violation of the said Regulations.

In this regard, it is pertinent to mention that ONGC is marketing the Gas, wherein the Respondent No.2 purchases the Gas from the ONGC and the Gas is being supplied through GAIL's Network. Thus, we are of the considered view that, there is no such cause of action arises resulting in violation of any rights of the Complainant by the Respondent No.1.

19. We have analysed the above-mentioned provisions and submissions made by the learned counsel for the Complainant and learned counsel for the Respondents and also perused the text of various judgments relied upon by the Complainant. We are not inclined to agree with the submissions made by the Complainant as the Complainant has not raised any allegations against the Respondent No.2. As the Respondent No.2 is purchasing the Gas from the Respondent No.1 outside the GA of the Complainant and the gas is transported to the Respondent No2 by another entity, which is not made a party to the present case. Further, it is pertinent to mention that the Respondent No.2, in terms of Regulation 3(2)(a) is required to take prior permission from the Board before getting supply of gas from the alternate source. However, as the Complainant has not raised any objection in this regard, therefore the same is not deliberated by the Board.

Therefore, we are of the considered view that, there is no violation of any rights of the Complainant by the Respondent(s). In view of the deliberation, we are inclined to hold that the Complaint does not disclose any cause of action against the Respondent(s) warranting grant of the relief claimed.

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20. As observed hereinabove, the allegations made in the complaint or the submissions advanced before this Board in support, fails to make out any case against the respondents. However, we must add that, the Customer who is opting for alternate resource in case the authorized CGD entity unable to develop the requisite CGD Network and are not in a position to supply the natural gas to industrial/commercial customers, then such Customer is required to take prior permissions from the Board in terms of Regulation 3 (2)(a) of the Authorisation Regulations before getting supply of gas. Further, it is also advisable to the ONGC who provides the Gas to such customers through bidding or any other mode is required to ensure that requisite prior permission has been obtained by such customers from the Board.

In view of the above deliberations and reasons, we are inclined to hold that the present complaint does not succeed. The Complaint is accordingly dismissed.

ORDER

The Board is of the view that the Complaint is devoid of any merits and accordingly liable to be dismissed.

No order to costs

PRONOUNCED IN THE OPEN COURT ON THIS 4TH DAY OF JULY, 2022.

Sd/- Sd/- Sd/-

Gajendra Singh A.K. Tiwari A.K. Pande

(Member-I) (Member-II) Member (Legal)

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