SC dismisses Adani Gas plea against piped gas distribution award

The Supreme Court has upheld an award for piped gas distribution network in Chennai and Tiruvallur districts in Tamil Nadu to a Gujarat-based firm by the Petroleum and Natural Gas Regulatory Board (PNGRB).

A bench of Justices DY Chandrachud and Hemant Gupta dismissed the appeal filed by Adani Gas Limited and others and justified the action of PNGRB saying that calling the bidders with the highest composite scores cannot be faulted.

The Board had granted the award for piped gas distribution network in Puducherry to AG & P LNG, in Chennai and Tiruvallur districts to Torrent Gas Private Limited and to SKN Haryana in Kanchipuram district in 2018.

The top court said there is no merit in the submission that there was a breach of the principles of “natural justice” in calling only the bidders with the highest composite score to explain the reasonableness of their bids.

“In the present situation, when the Board decided to call the bidders with the highest composite score in order to allow them an opportunity to explain the reasonableness of their bid, the administrative decision taken by the Board cannot be faulted as being in violation of the principles of natural justice,” it said.

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The bench said if the Board Note of July 23, 2018, on the reasonability of bidding parameters was to be construed in the manner in which the applicants had urged, the automatic disqualification of bidders based on a criterion introduced by the Board Note would raise serious doubts about its fairness and legality.

“This is because the Board Note was not notified to bidders as a basis for the evaluation of bids before the date for the submission of the bids had closed. To disqualify a bidder on the basis of a criterion which was not notified and of which bidders had no knowledge would be arbitrary and would constitute an infraction of Article 14.

“The Board was thus correct in determining that the automatic disqualification of a bid on the basis of a criterion specified in the Board Note (which was never notified to the bidders) would not be legally correct. Hence, it would be reasonable to interpret the Board Note dated July 23, 2018, as being the formulation of a guideline for the Board,” the bench said.

The Board Note adopted the Census 2011 data on the total number of households as the basis for computing the minimum and maximum limits for the purpose of determining unreasonably low or unreasonably high quotes.

The apex court said that the course of action, which the Board followed, of calling the bidders with the highest composite scores in different geographical areas to justify their bids in terms of their reasonableness cannot be faulted.

“On the contrary, if the Board had rejected these bids solely on the ground that they were above the limit of 100 per cent of households under the 2011 Census data, the decision would have been seriously flawed for having applied a criterion which was not a part of the Regulations, was not embodied in the Bid Document and in any event, was not notified to bidders before they had submitted their bids,” the bench said.

Torrent Gas Private Limited was declared as the successful bidder for GAs 51, 61 and 62 respectively on August 30, 2018. On September 6, 2018, Adani Gas Limited wrote to the Board requesting a copy of the decision with respect to the issuance of Letter Of Intents (LOIs) for the above three GAs. Subsequently, the Board uploaded the details of the successful bidders under the ninth CGD round on its website on September 14, 2018.

On September 19, 2018, an appeal was filed before the Appellate Tribunal For Electricity (APTEL) by Adani Gas Limited, aggrieved by the decision to award LOIs, in respect of Puducherry, Kanchipuram, Chennai and Tiruvallur districts on the ground that the successful bids were beyond the unreasonably high limit adopted by the Board.

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The appeal also contended that the Board issued the LOIs without uploading the decision on the website and without communicating it to Adani Gas Limited.

Following the proceedings by Adani Gas Limited, IMC Limited also filed proceedings before the APTEL challenging the grant of authorisation by the Board in respect of Kanchipuram district.

On February 28, 2019, the APTEL pronounced a split decision. While the chairperson allowed the appeals filed by Adani Gas Limited and IMC Limited, the Member Technical (Petroleum and Natural Gas) dismissed the appeals.

Due to the divergence of opinion between the Chairperson and Member Technical (Petroleum and Natural Gas), the appeals were referred to the Judicial Member of the APTEL. The Judicial Member recused from hearing the appeal on March 7, 2019, as a result of which proceedings reached the apex court.