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Saturday, September 21, 2013

Gas sale Agreement = Whether the Division Bench of the Gujarat High Court was justified in entertaining the writ petition filed by the respondent under Article 226 of the Constitution in the matter of fixation of price of the gas supplied by the appellant and whether a mandamus could be issued requiring the appellant to engage itself with the respondent to arrive at the price of gas effective from 1.1.2014 are the questions which arise for consideration in this appeal. =the remedy of arbitration available to the respondent under paragraph 15.5 of the GSA was an effective alternative remedy and the High Court should not have entertained the petition filed under Article 226 of the Constitution of India. The contents of the GSA, the Price Side Letters and the correspondence exchanged between the appellant and the respondent give a clue of the complex nature of the price fixation mechanism. Therefore, the High Court should have relegated the respondent to the remedy of arbitration and the Arbitral Tribunal could have decided complicated dispute between the parties by availing the services of experts. Unfortunately, the High Court presumed that the negotiations held between the appellant and the respondent were not fair and that the respondent was entitled to the benefit of the policy decision taken by the Government of India despite the fact that it had not only challenged that decision but had also shown disinclination to accept the offer made by the appellant to supply gas at the pooled price and had insisted on mutually agreed price. - In the result, the appeal is allowed, the impugned order is set aside and the Special Civil Application filed by the respondent is dismissed.

           published in http://judis.nic.in/supremecourt/imgst.aspx?filename=40784
                                                  NON-REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION


                       CIVIL APPEAL No.8263   OF 2013
                 (Arising out of SLP (C) No. 21932 of 2013)


GAIL (India) Limited
....Appellant


                                   versus


Gujarat State Petroleum Corporation Limited              ....Respondent



                               J U D G M E N T

G.S. SINGHVI, J.

1.    Leave granted.

2.    Whether the Division Bench of the Gujarat High Court was justified  in
entertaining the writ petition filed by the respondent under Article 226  of
the Constitution in the matter of fixation of price of the gas  supplied  by
the  appellant  and  
whether  a  mandamus  could  be  issued  requiring  the
appellant to engage itself with the respondent to arrive  at  the  price  of
gas effective from 1.1.2014 are the questions which arise for  consideration
in this appeal.

3.    The Government of India constituted Petronet  LNG  Limited  (PLL)  for
marketing  liquefied  natural  gas  (LNG)  imported  from  Qatar  and  other
countries. The Petronet LNG Limited consists of GAIL  (India)  Limited  (the
appellant),  Indian  Oil  Corporation  Limited   (IOC),   Bharat   Petroleum
Corporation Limited (BPCL) and  Oil  and  Natural  Gas  Corporation  Limited
(ONGC).

4.     On  31.7.1999,  Petronet  LNG  Limited  entered  into  Sale  Purchase
Agreement (SPA) with Ras Gas, Qatar for supply of  5  MMTPA  of  LNG  for  a
period of 25  years.  In  August  2006,  the  SPA  was  amended  to  include
additional quantity of 2.5 MMTPA of LNG.

5.    In February 2004, the appellant signed Gas Sale Agreement  (GSA)  with
the respondent for supply of re-gasified liquefied natural gas  (RLNG)  from
out of LNG sourced by Petronet LNG Limited.
The  terms  and  conditions  of
supply were incorporated in GSA dated 7.2.2004, paragraphs 3.1,  3.2,  11.3,
11.6, 15.1, 15.5, 15.6 and 20.9 of which read as under:

      “3.1 This Agreement shall come into force on the date it is signed and
      shall remain in force till 0600  Hours  of   1.1.2019  (herein  called
      "Basic Period") unless terminated earlier as per the provisions of the
      Agreement.


      3.2   Either party may propose to  extend  the  Agreement  beyond  the
      Basic Period by giving notice to the other Party  one  Year  prior  to
      expiry of this Agreement. This Agreement shall be amended  accordingly
      prior to such extension for such period as the  Parties  may  mutually
      agree, (herein called the "Extension Period").

      11.3  The above Contract Price are valid up to 31st December, 2008 and
      shall be reviewed only and to the extent to which Ras Gas (Supplier of
      LNG) agrees for a different price.

      11.6  Buyer and Seller shall mutually discuss for the  Contract  Price
      of Gas to be effective from 1st January 2009. The Seller shall  inform
      not later than 30.06.2008, the  revised  Contract  Price  and  parties
      agree to discuss in good faith and finalize the  new  Contract  Prices
      effective from 1.1.2009 not later than 30.09.2008. In case the Parties
      are unable to agree on the revised Contact Price, the Agreement may be
      terminated by the Buyer by giving a written notice to  the  Seller  to
      this effect.

      15.1  Amicable Settlement

      The Parties shall use their respective reasonable endeavors to  settle
      any Dispute  amicably  through  negotiations.  If  a  Dispute  is  not
      resolved within thirty (30) days after written notice of a Dispute  by
      one Party to the other Party then the provisions of Article 15.5 shall
      apply unless such Dispute is required to be referred to a Sole  Expert
      under Article 15.2.

      15.5 Arbitration

      Any Dispute arising in connection with this  Agreement  which  is  not
      resolved by the Parties pursuant to Article 15.1  within  thirty  (30)
      days of the notice of the Dispute  or  pursuant  to  Article  15.4(b),
      shall be finally settled by arbitration in accordance with the  Indian
      Arbitration and Conciliation Act, 1996 and rules made thereunder, from
      time to time. The procedure for appointment of arbitrators shall be as
      follows.

      15.6  (a) After the thirty (30) day period described in Article  15.5,
      the Dispute shall be referred  to  a  tribunal  comprising  three  (3)
      arbitrators. Each Party to  the  arbitration  shall  appoint  one  (1)
      arbitrator and the two (2) arbitrators thus appointed shall choose the
      third arbitrator who  will  act  as  a  presiding  arbitrator  of  the
      Tribunal (together forming the "Arbitral Tribunal").

      (b)  The decision(s) of the Arbitral Tribunal supported by reasons for
      such decision, shall be final and binding on the Parties.

      (c)   The venue of arbitration shall be Delhi.

      (d)   If as a consequence of award of Sole Expert or Arbitral Tribunal
      and an amount is determined to be payable by Seller to the Buyer, then
      the Buyer shall have  the  option  to  deduct  such  amount  from  the
      succeeding Invoice(s), likewise if the amount is payable by the  Buyer
      to the Seller, the Seller shall have the right to reflect the same  in
      the Invoice in accordance with Article 12.

      20.9 Contract Review

      The Parties agree that the Contract Price applicable on and after  1st
      January 2009 shall be reviewed and agreed by the Parties. In case  the
      Parties are unable  to  agree  on  the  revised  Contract  Price,  the
      Agreement may be terminated by the either Party by  giving  a  written
      notice to the other Party to this effect.

      In the event of assignment of LNG sale directly to Seller by  Ras  Gas
      (i.e. LNG supplier), then the Agreement shall be reviewed to be inline
      with the comfort provided to Seller in the assignment contract.”

                                                         (emphasis supplied)



On the same day, the appellant and the respondent executed First Price  Side
Letter (FPSL) which was to form an integral  part  of  the  GSA.  
Paragraphs
11.1(a), 11.1(b), 11.3 and 11.6 of FPSL are extracted below:

      “11.1

      (a) The elements of Contract Price payable by the Buyer to the  Seller
      on account of delivery  of  Gas  under  this  Agreement  shall  be  as
      follows:

      Price elements are:


      |Sr.No  |Elements of Price                 |Rs./MMBTU      |
|1.     |Foreign Currency Component (USD)  |135.10+2.3     |
|2.     |Indian Rupees Component           |29.5           |
|       |Contract Price                    |166.90         |


      Foreign Currency component is calculated considering the Exchange rate
      of 1 US$ = Rs.46.00. However, the actual exchange rate will be as  per
      clause 11.5 below.

      (b) The above Contract Price includes basic custom duty and  exclusive
      of all other Taxes &  Duties.  Buyer  shall  pay/reimburse  Taxes  and
      Duties as applicable in addition to Contract Price from time to time.

      11.3  The above prices are valid up to 31st December, 2008  and  shall
      be reviewed only and to the extent to which Ras Gas (Supplier of  LNG)
      agrees for a different price.

      11.6  Buyer and Seller shall mutually discuss for the  Contract  Price
      of Gas to be effective from 1st January 2009. The Seller shall  inform
      not later than 30.06.2008, the  revised  Contract  Price  and  parties
      agree to discuss in good faith and finalize the new  prices  effective
      from 1.1.2009 not later than  30.09.2008.  In  case  the  Parties  are
      unable to agree on the revised Contract Price, the  Agreement  may  be
      terminated by the Buyer by giving a written notice to  the  Seller  to
      this effect.”
                                                         (emphasis supplied)



6.    The appellant also  sent  letter  dated  7.2.2004  to  the  respondent
confirming the terms agreed between the parties including the following:

      “7. At any time during Contract Period in the event that Seller offers
      to charge a Price for Gas to any Other Gas Buyer that  is  lower  than
      Price for such quantity of Gas, Seller shall offer  the  same  to  the
      Buyer  also.  Price  shall  mean  sum  of   CIF,   Custom   Duty   and
      Regasification Charge.”



7.    After  about  three  years,  the  Government  of  India,  Ministry  of
Petroleum and Natural Gas sent communication dated 6.3.2007 to the  Managing
Director and CEO, Petronet LNG Limited with copies to Chairman,  IOC;  C&MD,
GAIL; and C&MD, BPCL incorporating therein the policy  decision  on  pooling
of RLNG prices. The relevant portion of that letter is reproduced below:

      “The question  of  prices  to  be  charged  for  RLNG  from  different
      customers has  been  under  consideration  of  the  Government.  After
      considering existing practices and  to  avoid  loading  high  cost  of
      additional RLNG being made available to the prospective customers,  it
      has been decided after examination of all aspects, in public interest,
      that the gas prices being charged on supply  of  RLNG  procured  under
      long term contracts  should  be  on  a  non-discriminatory  basis  and
      uniform pooled prices should be charged from all the existing and  new
      consumers.”

8.    The respondent and  other  buyers  of  gas  challenged  the  aforesaid
policy  decision  in  Special  Civil  Application  No.18868/2007  and  batch
matters. All the petitions were dismissed by a Full  Bench  of  the  Gujarat
High Court.  The writ petitioners challenged the judgment of the High  Court
by filing special leave petitions which were converted  into  civil  appeals
and are pending adjudication.

9.    On 2.12.2008, the appellant sent e-mail to the respondent  along  with
draft RLNG contract for discussion indicating that  the  contract  could  be
effective from 1.1.2009. Similar e-mails and draft agreements were  sent  by
the appellant to 150 other buyers. Paragraphs ‘F’ and ‘G’  of  the  preface,
the definition of ‘Basic Term’ and Article 11 of the  draft  agreement  were
as under:

      “F.   The price under the Earlier GSA is valid until 31 December, 2008
      and the Parties have agreed to terminate the  Earlier  GSA  and  enter
      into this Agreement to enable the Buyer to procure, from  the  Seller,
      Gas out of the Sellers share of LNG Quantity for use in  its  plant  /
      premises located at Dahej, Gujarat;

      G.    The Seller and the Buyer accordingly wish  to  enter  into  this
      Agreement to record the terms and conditions on which; (i) the  Seller
      shall sell and deliver at the Delivery  Point,  and  the  Buyer  shall
      purchase, Gas out of the Seller’s share of LNG Quantity; and (ii)  the
      Earlier GSA shall cease to be effective from 1 January,  2009,  except
      for the right and obligations specifically referred herein.”

      “Basic  Term”  means  the  period  beginning  at  0600  hours  on  the
      Commencement Date and, ending at the end of  the  last  Day  of  April
      2028.”

                                 “ARTICLE 11

                                    PRICE

      11.1    The Price for Gas

      (a)   The Price which Buyer shall pay for quantities of Gas to be sold
      and purchased in a Contract Year, shall be as set  out  in  the  Price
      Side Letter, which shall form an integral part of the Agreement

      (b)   The above Price includes only those Taxes and  Duties  expressly
      set out in the Price Side Letter.

      (c)   The Buyer shall also be responsible for, and shall be liable  to
      pay the Seller for any Overdrawn Quantity, as may  be  applicable  and
      determined from time to time in accordance with Article 8.2(f).

      11.2    Change in Law & Other Price Variations

      The Buyer acknowledges and agrees that  the  elements/constituents  of
      the Price set forth in the Price Side Letter have been negotiated  and
      agreed   between   the   Parties   taking   into   consideration   the
      elements/constituents of the price agreed between PLL and the  Seller,
      and   the   Laws   and   policies    of    any    Government    Agency
      applicable/prevailing on the date of this Agreement.

      Accordingly,  the  Buyer   agrees   that   if   at   any   time,   any
      element/constituent of the Price as set forth in the Price Side Letter
      requires any variance/change including because or on account  of,  any
      change  in  Law  (including  any  change  in   judicial/quasi-judicial
      interpretation or application of any  Law),  any  directive  from  any
      Government Agency, changes in the policy  of  any  Government  Agency,
      pooling of LNG prices, decision of  any  court,  and  the  same  shall
      result in a corresponding change in the Price; and, the  Seller  shall
      by written notice inform the Buyer of such change and the Price  shall
      accordingly stand revised to the extent, and  with  effect  from  such
      date as, stated in the Seller's notice, and shall be  payable  by  the
      Buyer. The change in Price  and  the  necessary  adjustment  shall  be
      reflected in the subsequent Invoice.”



10.   The respondent sent reply e-mail on the  same  day,  i.e.,  2.12.2008,
the relevant portions whereof are extracted below:

      “We refer to your email dated December 2, 2008 on the  subject  matter
      and noted the contents thereof. We have also gone through the  changes
      suggested in the draft GSA attached along with the email.

      In this context, we would like to state that the existing GSA is valid
      till 0600 hours of 1.1.2019. The provision of the  existing  GSA  does
      not contemplate change in the terms of the same except  the  Price  of
      Gas with effect from January 1, 2009. According to Article 11.3 of the
      GSA, the Contract Price agreed between the  Parties  is  valid  up  to
      December 31, 2008 and it can be reviewed only to the extent  to  which
      Ras Gas (Supplier of LNG) agrees for a  different  price.  Apart  from
      such change, which Ras Gas has agreed thereto, no  price  revision  is
      allowed under the GSA.

      In view of the above, GSPC is not  in  a  position  to  agree  to  the
      changes suggested in the draft of the existing GSA except the price of
      Gas which shall be in accordance with Article 11.3 of the GSA.”

11.   On 23.12.2008, the appellant sent proposed Price Side  Letter  to  the
respondent mentioning that the contract would be effective from 1.1.2009  to
1.1.2019. The respondent did not agree to the terms of the  draft  agreement
as also the Draft  Price  Side  Letter  and  returned  the  corrected  draft
agreement indicating that during the period from 1.1.2009 to  30.9.2009  the
foreign currency component shall  be  the  Weighted  Average  Price  of  the
specified quantities of LNG  and  matter  regarding  the  implementation  of
pooled price would depend on the final adjudication  by  the  Supreme  Court
and that the pooled price mechanism provided under Clause 11.4 shall not  be
applicable and the foreign currency component of  contract  price  shall  be
equal to the ex-ship LNG price including customs duty under the SPA. It  was
also  mentioned  that  if  the  Supreme  Court  quashes  the  pooled   price
mechanism,  then  the  appellant   will   have   to   refund/reimburse   the
differential amount.

12.   In the backdrop of disagreement between them on  the  terms  of  draft
contract, the appellant and the respondent agreed to sign fresh  Price  Side
Letter which became part of the GSA.  Paragraphs  11.2,  11.3,  11.4(1)A(g),
11.6 and 11.7 of Price Side Letter dated 31.12.2008 read as under:

      “11.2 The Price for Gas

      a) The Price, which Buyer shall pay for quantities of Gas to  be  sold
      and purchased in a Contract Year, shall be as set out in Article  11.4
      of this Price Side Letter, which shall form an integral  part  of  the
      Agreement.

      b) The above Price includes only those Taxes and Duties expressly  set
      out in this Price Side Letter.

      c) The Buyer shall, in addition to the Taxes and Duties expressly  set
      out in this Price Side Letter, reimburse any other Taxes  and  Duties,
      which may have been paid by the Seller. For avoidance  of  doubt,  the
      Buyer shall indemnify the Seller against  any  other  such  Taxes  and
      Duties which the Seller as a result of any Law or change in Law; is or
      becomes obliged to pay directly or indirectly on sale  or  importation
      of LNG, RLNG or Gas sold as per the terms of this Agreement.

      d) The Buyer shall also be responsible for, and shall be liable to pay
      the Seller for any  Overdrawn  Quantity,  as  may  be  applicable  and
      determined from time to time in accordance with Appendix B.

      11.3 Change in Law & Other Price Variations

      a) The Buyer acknowledges and agrees that the elements/constituents of
      the Price set forth in the Price Side Letter have been mutually agreed
      between the Parties taking into consideration the price agreed between
      PLL and the Seller, the Laws and policies  of  any  Government  Agency
      applicable/prevailing on the date of this Agreement.

      Accordingly,  the  Buyer   agrees   that   if   at   any   time,   any
      element/constituent of the Price as  set  forth  in  this  Price  Side
      Letter requires any variance/change including because of or on account
      of, any change in Law (including any change in judicial/quasi-judicial
      interpretation or application of  any  Law,  any  directive  from  any
      Government Agency, changes in the policy  of  any  Government  Agency,
      pooling of LNG prices, decision of any court or change in Law),  shall
      result in a corresponding change in the Price; and, the  Seller  shall
      by written notice inform the Buyer of such change and the Price  shall
      accordingly stand revised to the extent, and  with  effect  from  such
      date as, stated in the Seller's notice.

      b) The Price shall stand revised from the date such change in  Law  is
      made effective or  implemented  by  the  relevant  Government  Agency.
      Further, the change in Price and the assessment  adjustment  shall  be
      reflected in the subsequent Invoice.

      11.4 Components of Price

      The Price payable by the Buyer to the Seller for supply of RLNG  shall
      consist of (1) Contract Price; (2) Connectivity Charges and (2)  Taxes
      and Duties Charges as detailed below:

      (1) Contract Price

      The Contract Price payable by  the  Buyer  to  the  Seller  under  the
      Agreement shall consist of the following elements/components:

      A. Foreign Currency Component; and

      B. INR Component.

      Each of these elements/components is as follows:

      A.     Foreign Currency Component:

      (g) The indicative Pooled Price for the period  January  to  September
      2009:

      PLL has indicated the Ex-terminal "Pooled  price"  for  the  period  /
      January to September 2009 in the range of USD 6.3 to USD 6.8 per MMBTU
      at a crude price of $70. Even though the above “Pooled Price”  is  Ex-
      Terminal price but as per the procedure adopted by PLL, an  indicative
      "Pooled Price" equivalent to Foreign Currency /Component (FE) will  be
      declared around 15th of the month for the next month and  the  "Pooled
      Price" will be indicated by PLL on first of every month starting  from
      January 2009. The pooled price bands at various levels  of  crude  are
      expected to be as under as provided by PLL:



      |Month   |50       |60         |70       |80       |
|Jan-09  |6.26     |6.26       |6.26     |6.26     |
|Feb-09  |6.34     |6.34       |6.34     |6.34     |
|Mar-09  |6.43     |6.43       |6.43     |6.43     |
|Apr-09  |5.60     |5.93       |6.26     |6.58     |
|May-09  |5.69     |6.02       |6.35     |6.67     |
|Jun-09  |5.78     |6.11       |6.44     |6.77     |
|Jul-09  |5.87     |6.20       |6.53     |6.86     |
|Aug-09  |5.97     |6.30       |6.62     |6.95     |
|Sep-09  |6.06     |6.39       |6.72     |7.05     |


      11.6  The Parties agree that the provisions of this Article  11  shall
      be valid till 31.12.2013  and  that  supply  of  Gas  from  01.01.2014
      onwards shall be subject to parties reaching a fresh agreement on  the
      provisions for  Price  of  Gas  to  be  applicable  with  effect  from
      01.01.2014. The parties further agree  that  the  provisions  of  this
      Article 11 to be applicable  with  effect  from  01.01.2014  shall  be
      mutually discussed and finalized  afresh  no  later  than  31.12.2011,
      failing which, the Agreement shall stand terminated with  effect  from
      01.01.2014 and the  Parties  hereto  shall  stand  relieved  of  their
      respective obligations to supply or receive Gas.

      11.7  General

      (a)   The Parties  further  agree  to  additional  amendments  to  the
      Agreement as specified at Appendix B.

      (b)   This Price Side Letter forms an integral part of  the  Agreement
      and together  with  the  Agreement  represents  the  entire  agreement
      between the Buyer and the Seller.

      (c)   In the event of any conflict  between  the  provisions  of  this
      Price Side Letter and the provisions stipulated in the Agreement,  the
      provisions of this Price Side Letter shall prevail.

      (d)   Capitalized terms used, but not  defined,  in  this  Price  Side
      Letter,  shall  have  the  same  meaning  as  given  to  them  in  the
      Agreement.”
                                                         (emphasis supplied)

13.   After signing the Price Side Letter,  the  parties  exchanged  letters
dated 1.10.2011, 21.12.2011, 26.12.2011, 28.12.2011 and 6.1.2012.   For  the
sake of reference, these letters are reproduced below:

      “GSPC                      GUJARAT           STATE           PETROLEUM
      CORPORATION LTD.
                             (A Govt. of Gujarat Undertaking)
                                 Regd-     Office     :     GSPC     Bhavan,
                        Behind        Udyog        Bhavan,        Sector-11,
      Gandhinagar-382 010, INDIA.
                             Phone: +91-79-66701001
                             Fax :+91-79-23236375
                             E-mail : gspc@gspc.in


                             GSPCL/COMM/2011/1021
                             1st October 2011


      Shri A.K. Saksena
      Zonal General Manager
      GAIL (India) Limited
      809, Sakar-ll, Opp. Town Hall,
      Near Ellisbridge
      Ahmedabad - 380006




      Sub: Gas Price with effect from 01.01.2014


      Ref: Gas Sales Agreement dated February 7, 2004 between GAIL and GSPCL
      ('GSA') read with the Price Side Letter dated 31.12.2008 ("Price  Side
      Letter")


      Dear Sir,
      This is with reference to Article 11.6 of the above-referred GSA.


      As per the terms of the referred Article, the provisions of Article 11
      as incorporated into the GSA by the Price  Side  Letter  would  remain
      valid till 31.12.2013. Further, the Article also stipulates that GSPCL
      and GAIL shall mutually discuss and finalize, no later  than  December
      31, 2011, a fresh agreement on the provisions for Price of Gas  to  be
      applicable with effect from 01.01.2014.


      In  this  regard,  GSPCL  would  like  to  propose  that  the  current
      arrangements with regards  to  Price  of  Gas,  as  has  already  been
      mutually agreed vide price Side Letter to the  GSA,  be  extended  and
      continued till the expiry of the GSA.


      You are requested to let us know if the above is acceptable.  In  case
      of any clarifications, GSPCL is willing to meet and discuss  the  same
      with GAIL officials at a mutually convenient date and time.


      The same is without prejudice to our rights under the GSA.


                                                            Yours sincerely,


                                                                        Sd/-
                                                            Ravindra Agarwal
                                                             GM (Commercial)



                                                        GAIL (India) Limited
                                         (A Government of India Undertaking)
                                                      Ahmedabad Zonal Office


                                                  Dated: 21st December, 2011

            Ref: GAIL/AZO/MKTG/RLNG/2011/GSPCL

      To
      Sh. Ravindra Agarwal
      GM (Commercial)
      Gujarat State Petroleum Corporation Ltd. (GSPCL)
      GSPC Bhavan, Behind Udyog Bhavan,
      Sector 11, Gandhinagar- 382010 (Gujarat)


                  Subject: Gas Price with effect from 01.01.2014.


      Dear Sir,


      This has reference to the Gas Sale Agreement  (GSA]  dated  07.02.2004
      and Price Side Letter dated 31.12.2008 executed between GAIL and GSPCL
      for supply R-LNG.


      Further, this has reference to your  letter  No.GSPCL/COMM/  2011/1021
      dated 1st October 2011 and our subsequent meeting held  on  14.12.2011
      at Ahmedabad, wherein we conveyed to you that  the  price  offered  by
      GSPCL to continue with the current arrangements is not  acceptable  to
      GAIL for R-LNG supplies beyond 31.12.2013.


      Therefore, it is requested to let us know GSPCL's revised offer on  or
      before 26th December 2011 to enable us to  take  an  appropriate  view
      considering the urgency of the matter. If  you  wish  to  discuss  the
      issue further, we propose to discuss the matter in our Delhi Office at
      your earliest convenience, preferably on 23rd December 2011 to take  a
      final view.


                                                            Yours sincerely,


                                                                        Sd/-
                                                              (A.K. Saksena)
                                                       Zonal General Manager


      GSPC                           GUJARAT         STATE         PETROLEUM
      CORPORATION LTD.
                             (A Govt. of Gujarat Undertaking)
                                 Regd-     Office     :     GSPC     Bhavan,
                        Behind        Udyog        Bhavan,        Sector-11,
      Gandhinagar-382 010, INDIA.
                             Phone: +91-79-66701001
                             Fax :+91-79-23236375
                             E-mail : gspc@gspc.in


                                   GSPCL/COMM/2011


                                   December 26, 2011
      Shri A.K. Saksena
      Zonal General Manager
      GAIL (India) Limited
      809, Sakar-ll, Opp. Town Hall,
      Near Ellisbridge
      Ahmedabad - 380006




            Sub: Gas Price with effect from 01.01.2014


      Ref:
      i.    Gas Sales Agreement dated February  7,  2004  between  GAIL  and
      GSPCL       ('GSA') read with the Price Side Letter  dated  31.12.2008
      ("Price Side     Letter")


      ii.   Letter from GSPC dated October 1, 2011


      Dear Sir,


      Please refer to our earlier communication and your most recent  letter
      dated 21st December, 2011 on the subject matter.


      In connection to the same and  subsequent  to  our  meetings  at  GAIL
      Ahmedabad Zonal Office and New Delhi office on December 14,  2011  and
      December 23, 2011  respectively,  GSPC  would  like  to  resubmit  and
      reiterate that with regards to Price of Gas under the GSA, the current
      arrangements which have been mutually agreed vide Price  Side  Letter,
      be extended and continued with effect from January 1,  2014  till  the
      expiry of the GSA.


      The same is without prejudice to our rights under the GSA.


                                                            Yours sincerely,


                                                                        Sd/-
                                                            Ravindra Agrawal
                                                             GM (Commercial)



                                                        GAIL (India) Limited
                                         (A Government of India Undertaking)
                                                      Ahmedabad Zonal Office


                                              Dated: 28.12.2011


            Ref: GAIL/AZO/MKTG/RLNG/2011/GSPCL
      To
      Sh. Ravindra Agarwal
      General Manager (Commercial)
      Gujarat State Petroleum Corporation Ltd. (GSPCL)
      GSPC Bhavan, B/h Udyog Bhavan,
      Sector -11, Gandhinagar- 382010
      Gujarat


           Subject: Gas Price with effect from 01.01.2014.


      Dear Sir,


      This has reference to our meeting on 23.12.2011 on the Price of Gas to
      be applicable from 01.01.2014 under the R-LNG GSA.


      During the discussion held on 23.12.2011, GAIL sought GSPCL's proposal
      on the price to be applicable w.e.f. 01.01.2014. However, no  specific
      proposal for revising the price was made by GSPCL.  In  this  context,
      GAIL suggested that it would be fair to align future  price  of  R-LNG
      with the market conditions prevalent. We further suggested that  GSPCL
      may propose  certain  principles  based  on  which  the  price  to  be
      applicable in future can be further discussed, especially since  GSPCL
      is also sourcing LNG cargoes internationally.


      The current pricing arrangement is valid till 31.12.2013 and supply of
      Gas from 01.01.2014  onwards  shall  be  subject  to  GAIL  and  GSPCL
      reaching a fresh agreement regarding the price to be  applicable  with
      effect from 01.01.2014. Further, the price applicable with effect from
      01.01.2014  is  required  to  be  finalized  afresh  no   later   than
      31.12.2011. It may be recalled that such clause for price  review  was
      included at the request of GSPCL.


      It is therefore requested to revert  on  above  at  the  earliest  for
      finalizing the price that would be  applicable  for  the  supply  from
      01.01.2014 onwards.


                                                            Yours sincerely,


                                                                        Sd/-
                                                              (A.K. Saksena)
                                                       Zonal General Manager




      “GSPC                      GUJARAT           STATE           PETROLEUM
      CORPORATION LTD.
                             (A Govt. of Gujarat Undertaking)
                                 Regd-     Office     :     GSPC     Bhavan,
                        Behind        Udyog        Bhavan,        Sector-11,
      Gandhinagar-382 010, INDIA.
                             Phone: +91-79-66701001
                             Fax :+91-79-23236375
                             E-mail : gspc@gspc.in


                             GSPCL/COMM/2012/21


                             January 6, 2012


      Shri A.K. Saksena
      Zonal General Manager
      GAIL (India) Limited
      809, Sakar-ll, Opp. Town Hall,
      Near Ellisbridge
      Ahmedabad - 380006




            Sub: Gas Price with effect from 01.01.2014


      Ref:


      i.    Gas Sales Agreement dated February  7,  2004  between  GAIL  and
      GSPCL ('GSA') read with the Price Side Letter dated 31.12.2008 ("Price
      Side Letter")


      ii.   Letter from GSPC dated October 1, 2011


      iii.  GAIL letter dated December 21, 2011


      iv.   Letter from GSPC dated December 26, 2011


      v.    GAIL letter dated December 28, 2011




      Dear Sir,


      In relation to your above referred letter dated December 28, 2011,  it
      should be noted that it is  incorrect  to  state  that  GAIL  has  not
      received any specific proposal for revising the price from  GSPCL.  In
      fact  GSPCL  vide  its  letter  dated  1.10.2011  had   proposed   the
      continuation of the existing framework stated in the Price Side Letter
      for the remainder of the Term of the  GSPCL-GAIL  GSA  dated  7.2.2004
      ("GSPCL-GAIL GSA"), which has been reiterated by GSPCL in the  meeting
      held on 23.12.2011 as well as vide its letter dated 26.12.2011.


      Please note that the GSPCL-GAIL GSA is specifically for  the  delivery
      of RLNG sourced from the regasification of the LNG  sourced  from  the
      identified LNG Supplier i.e. Ras Laffan LNG Limited and regasified  at
      an identified  LNG  Terminal  i.e.  the  Petronet  LNG  Limited  Dahej
      Terminal. This is clear  from  the  provisions  of  Recital  A  (which
      identifies Ras Laffan LNG Limited to be the LNG supplier),  read  with
      Clause 6.7 (which also identifies the LNG supplier to be Ras Gas)  and
      Clause 19.1 (which provides for the termination of the GSPCL-GAIL  GSA
      in the event the GSPA between PLL and GAIL is terminated).


      We have already indicated that we are agreeable to the continuation of
      the existing gas price framework as provided in the present Price Side
      Letter. The existing Price  Side  Letter  is  already  meeting  GAIL's
      requirement of aligning the price of RLNG with the price of LNG  being
      sourced.


      We would like to point out that in seeking to renegotiate the Price of
      gas under the GSPCL-GAIL GSA, other agreed provisions of the GSA  such
      as sourcing of LNG, regassification  from  PLL's  Dahej  LNG  Terminal
      cannot be sought to be changed.


      It should be noted that proposals for revision of Gas price have to be
      within the overall framework of the GSPCL-GAIL GSA and cannot seek  to
      change the basic framework of the GSPCL-GAIL GSA itself.


      We reiterate that the existing framework under the Price  Side  Letter
      is already covering point sought to be raised by GAIL vide its  letter
      dated 28.12.2011 of having the price of RLNG reflect market conditions
      of LNG being sourced for  the  GSPCL-GAIL  GSA  and  we  have  already
      submitted our proposal to continue with the existing  arrangement  for
      the entire Term of the GSPCL-GAIL GSA.


      The same is without prejudice to our rights under the GSA.


                                                            Yours sincerely,
                                                                        Sd/-
                                                            Ravindra Agrawal
                                                            GM (Commercial)”

                                                         (emphasis supplied)



14.   By letter dated 27.1.2012, the respondent acknowledged the receipt  of
various communications exchanged between the  parties  and  noted  that  the
appellant’s proposal for aligning the  price  of  RLNG  with  the  prevalent
market conditions was analogous to its own proposal.

15.   Thereafter, the appellant sent communication  dated  4.5.2012  to  the
respondent mentioning therein  Article  11.6  of  Price  Side  Letter  dated
31.12.2008 and pointed out that if the parties are not able to agree on  the
issue of price of gas applicable from 31.12.2011, the agreement shall  stand
terminated with effect from 1.1.2014. The relevant portions of  that  letter
are reproduced below:

      “Further, as per the Article 11.6 in the  above  referred  Price  Side
      Letter dated 31.12.2008, the current pricing arrangement is valid till
      31.12.2013; and supply of gas from 01.01.2014 onwards was  subject  to
      GAIL and GSPCL reaching a fresh agreement regarding the  price  to  be
      applicable with effect from 01.01.2014. Further, the price  applicable
      with effect from 01.01.2014 was required to  be  finalized  afresh  no
      later than 31.12.2011. It may be recalled, that such clause for  price
      review was included at the request of GSPCL. In the event, the  market
      conditions would have been adverse, such clause provided GSPCL with an
      option to exit from the GSA.

      Further,  with  reference  to  your  letters  dated   06.01.2012   and
      27.01.2012, GAIL reiterates that the offer and  understanding  of  the
      basis on which future supply could have been envisaged  was  that  the
      price  should  be  a  discoverable  market  price  having  regard   to
      international prices of LNG. In  fact  the  attempts  to  prescribe  a
      method to achieve the same failed.

      In view of the fact that no agreement could be  reached  between  GAIL
      and GSPCL by 31.12.2011 regarding the price of gas  to  be  applicable
      with effect from 01.01.2014,  the  agreement  shall  stand  terminated
      w.e.f. 01.01.2014 and the parties hereto shall stand relieved of their
      obligation under the Agreement.”

                                                         (emphasis supplied)




16.   In its reply dated 3.7.2012, the respondent rejected the offer of  the
appellant for maintaining  future  supply  at  the  market  price  and  also
accused it of acting in a mala fide manner.  Paragraphs  4  and  5  of  that
letter read as under:

      “4. You may recall the background in which the  GSA  dated  07.02.2004
      has been executed. The GSA was executed between GAIL and GSPC pursuant
      to a long term gas supply contract entered into between  Petronet  LNG
      Limited (PLL) and Ras Gas. The GSA has been executed by  GAIL  as  Gas
      marketer of PLL. You may please note that the provisions  of  the  GSA
      dated 07.02.2004 and the provisions  of  the  subsequent  Side  Letter
      dated 31.12.2008 provide for price of RLNG which  is  split  into  two
      components. One is the Foreign Currency Component and  the  second  is
      the Indian Rupee Component. Article 11.4  of  the  Side  Letter  dated
      31.12.2008 provides that the Foreign Currency Component shall  be  the
      weighted average price of all RLNG quantities procured  by  PLL  under
      various  long  term  contracts,  as  required  by  the  letter   dated
      06.03.2007 of the Ministry  of  Petroleum  and  Natural  Gas.  Article
      11.4(l)A(b) further provides that during the  Term  of  the  GSA,  the
      Foreign Currency Component shall be the weighted average price of  the
      specified quantities sourced by PLL. It is to be noted that  the  term
      of the GSA is till 0600 hours  of  01.01.2019.  The  Foreign  Currency
      Component is a pass through. The Indian  Rupee  Component  inter  alia
      contains the marketing margin  of  GAIL.  Please  also  refer  to  the
      supplemental agreement  as  recorded  in  the  letter  of  GAIL  dated
      07.02.2004 wherein clause 7 stipulates that at  any  time  during  the
      Contract Period, in the event that Seller offers to charge a Price for
      Gas to any other gas buyer that is lower than price for such  quantity
      of gas, Seller shall offer the same to the Buyer also.

      In the aforesaid background it is stated that it was for GAIL  to  act
      in a fair and reasonable manner and make genuine efforts to  agree  on
      the price  of  RLNG  payable  from  01.01.2014.  The  date  31.12.2011
      stipulated in the Article 11.6 of the Side Letter dated 31.12.2008  is
      with intent to  facilitate  an  early  agreement  on  price  mechanism
      between the parties and a mandatory inflexible  adherence  thereto  is
      not intended by the parties. .

      5. Under the present price arrangement between  the  parties,  gas  is
      required to be sold to GSPC by GAIL at the price under the Price  Side
      Letter, or, if GAIL is selling gas of comparable quality and volume to
      any other buyer at a lower price (as compared to the price  under  the
      Price Side Letter) then the sale to GSPC shall also be at lowest price
      (such lowest other price being the 'Price Cap'). In view of GAIL never
      having offered to GSPC a price lower  than  the  price  as  determined
      under the Price Side Letter, it is GSPC's bona fide  belief  that  the
      price offered to GSPC under the Price Side Letter is equal to or lower
      than the Price Cap. Therefore, we state that even  if  GSPC  and  GAIL
      were unable to arrive at a new price side letter, albeit on account of
      the failure and the unreasonable conduct of GAIL, GSPC and GAIL  still
      have a continuing agreement as to Price Cap, and therefore the sale of
      RLNG could nevertheless be continued at such Price Cap.”

17.   The appellant responded to that communication by sending letter  dated
24.1.2013 and refuted the  allegations  of  malafides.  The  appellant  also
pointed out that the respondent had not accepted its proposal to sign a  GSA
based on  uniform pooled price in terms of  letter  dated  6.3.2007  of  the
Government of India and agreed  only  to  sign  a  Price  Side  Letter.  The
relevant portions of that letter are as under:

      “GAIL had signed fresh long term GSAs in December 2008  with  all  its
      downstream customers, except GSPCL, which are governed by the  uniform
      pooled price in terms of the MOPNG directive dated 06.03.2007, and all
      such GSAs are valid till April 2028. There is no provision in  any  of
      these GSAs for reopening the price before the term ends in April  2028
      unless there is a change in law or policy. It may be recalled that  at
      the time of review for the gas price to be  valid  w.e.f.  01.01.2009,
      GAIL had offered to sign a GSA with GSPCL to be valid till April  2028
      based on the uniform pooled price in terms of MoP&NG  directive  dated
      06.03.2007 as had been done by GAIL  with  all  its  other  downstream
      customers. However, GSPCL did not accept the GSA proposed by GAIL  and
      agreed only to sign a new Price Side Letter, and also  insisted  on  a
      provision for price review for the period 01.01.2014 to 31.12.2018  in
      such Price Side Letter. Hence, the allegation of GSPCL that  GAIL  has
      conducted itself in an unfair and arbitrary manner is not correct.

      It was on the insistence of GSPCL that Article 11.6  was  incorporated
      in Price Side Letter dated 31.12.2008 which  expressly  provided  that
      "……supply of Gas from 01.01.2014 onwards shall be subject  to  Parties
      reaching a fresh agreement on the provisions of Price  of  Gas  to  be
      applicable from 01.01.2014……". Therefore, the term of the contract  is
      determined by Article 11.6 of the Price Side Letter dated  31.12.2008.
      By virtue of the said provision for price review that was included  at
      its sole insistence, GSPCL kept for itself the option to exit from the
      GSA after 31.12.2011, had the price for the period 01.01.2014  onwards
      not been acceptable to GSPCL.

      The consequence of failure to arrive at a mutually  agreed  price  has
      been expressly provided in Art.11.6 itself, and is not something which
      has been left to the discretion of either party.  Having  insisted  on
      incorporating  such  a  condition  in  the  Price  Side  Letter  dated
      31.12.2008, thereby making it an obligatory condition on both parties,
      GSPCL has to abide by the said condition.

      The undisputed position is that representatives of GAIL and GSPCL  met
      on 14.12.2011 and 23.12.2011  and  also  exchanged  correspondence  to
      arrive at the mutually agreed gas price for the period  01.01.2014  to
      31.12.2018 as contemplated under Art.11.6. It is  also  an  undisputed
      position that GSPCL was insisting  on  continuation  of  the  existing
      pricing mechanism under the Price Side Letter dated 31.12.2008 and was
      not open to any other pricing mechanism. GAIL was not for continuation
      of the existing pricing mechanism and had suggested a mechanism  based
      on prevalent market conditions. As such, there was no meeting of minds
      as on 31.12.2011 on the price of gas to be applicable with effect from
      01.01.2014. It is a matter of record that GAIL, by  its  letter  dated
      28.12.2012 had reminded GSPCL  that  the  price  was  required  to  be
      finalized "no later than 31.12.2011"; however, GSPCL did not choose to
      act with diligence. Hence, the allegations  of  GSPCL  in  the  letter
      dated 03.07.2012 that GAIL had not acted  in  a  fair  and  reasonable
      manner and had abused its  so  called  dominant  market  position  are
      incorrect.”

                                                         (emphasis supplied)



18.   The respondent challenged communications dated 4.5.2012 and  24.1.2013
in Special Civil Application No. 2362/2013 filed  before  the  Gujarat  High
Court and prayed that a direction be  issued  to  the  appellant  to  engage
itself in a bona fide manner to arrive at the price of gas to  be  effective
from 1.1.2014. In the affidavit filed on behalf of the  respondent,  it  was
averred that even though  Article  15.5  of  the  GSA  contains  arbitration
clause, the same was not being resorted to because  its  complaint  did  not
relate to any breach of the agreement but was against the  arbitrary  action
of the appellant in fixing the price of  gas.  The  respondent  referred  to
letter dated 6.3.2007 of the Government of  India,  the  Second  Price  Side
Letter, the correspondence exchanged between the parties in 2011,  2012  and
January, 2013 and pleaded that  the  action  of  the  appellant  seeking  to
terminate the GSA is violative of Articles 14, 19(1)(g)  and  301-A  of  the
Constitution. The respondent further pleaded that the price  of  gas  should
be based on the  pooled  price  mechanism  prescribed  by  the  Ministry  of
Petroleum and Natural Gas.

19.   In the counter affidavit filed on behalf  of  the  appellant,  several
objections  were  taken  to  the  maintainability  of  the   Special   Civil
Application including the following:

a)    The subject matter of the Special Civil Application is  in  the  realm
      of a private contract and is not amenable  to  judicial  review  under
      Article 226 of the Constitution.

b)    The GSA signed by the parties is purely a commercial contract and  the
      dispute emanating  from  the  GSA  can  be  decided  only  by  way  of
      arbitration.

20.   On merits, it was pleaded that  the  appellant  had  offered  to  sign
fresh long term Gas Sale Agreement with  all  existing  customers  including
the respondent for supplying RLNG up to April, 2028 at uniform pooled  price
in terms of the  policy  decision  of  the  Government  of  India,  but  the
respondent did not accept the offer and insisted on signing only  the  Price
Side Letter effective  from  1.1.2009.   According  to  the  appellant,  the
respondent also insisted that the  Price  Side  Letter  should  provide  for
review of RLNG price before the expiry of the 5 years’  term  on  31.12.2013
and the price applicable  from  1.1.2014  to  1.1.2019  should  be  mutually
agreed by the parties.  Along with  the  counter  affidavit,  the  appellant
enclosed draft Price Side Letter forwarded by  the  respondent  vide  e-mail
dated 26.12.2008.

21.   The Division Bench of the High Court extensively noted  the  arguments
of the learned counsel for the parties (pages 27-59 of the impugned  order),
referred to the precedents cited by them  and  held  that  though  the  High
Court will not entertain a matter where the petitioner  is  seeking  damages
for breach of contract or  specific  performance  of  contract  by  invoking
Article 226 of the Constitution,   the  power  of  judicial  review  can  be
exercised when the contractual dispute involves a public law  element.   The
Division Bench then proceeded to observe:

           “This Court, as stated hereinabove, is of the  opinion  that  on
           perusal of the relief sought for, the petitioner is  approaching
           this Court, not for any damages for breach of contract  nor  for
           any specific performance  of  contract,  but  it  is  seeking  a
           direction directing the respondent to engage itself  in  a  bona
           fide manner with the petitioner to arrive at the price of gas to
           be effective from 01.01.2014.  From  the  facts  above,  learned
           senior advocate appearing for the petitioner could convince this
           Court that the conduct of the respondent was  not  found  to  be
           befitting to 'State' or 'an instrumentality of State'. Otherwise
           there was no reason for the respondent not to respond to  letter
           dated 01.10.2011 till 21.12.2011. Not only that,  there  was  no
           reason for the respondent to all of a sudden change the criteria
           for fixing the price of gas from 'pooling  price'  to  'aligning
           future price of RLNG with  market  conditions  prevalent'.  This
           gives reason to draw a conclusion that the  respondent  was  not
           acting  in  a  manner  which  can  be  said  to  be  free   from
           arbitrariness  and,  therefore,  the  matter  requires   to   be
           allowed.”




22.    On  the  aforesaid  premise,  the  Division  Bench  finally   quashed
communications dated 4.5.2012 and 14.1.2013 and directed  the  appellant  to
engage itself with the respondent to arrive  at  the  price  of  gas  to  be
effective from 1.1.2014.

23.   Shri R.F. Nariman, learned senior counsel for the  appellant  referred
to the  pleadings  of  the  parties  and  the  documents  produced  by  them
including letter dated 6.3.2007  sent  by  the  Ministry  of  Petroleum  and
Natural Gas, Government of India and  e-mails  dated  2.12.2008  and  argued
that the High Court committed serious  error  by  entertaining  the  Special
Civil Application ignoring that the  parties  had  unequivocally  agreed  to
resolve the disputes arising in connection  with  the  GSA  by  arbitration.
Shri Nariman emphasized that the Price Side Letters executed by the  parties
were integral part of the GSA and every dispute relating  to  the  price  of
gas has to be resolved by arbitration in terms of Para 15.5 of the  GSA  and
the remedy of arbitration is  an  effective  remedy.   In  support  of  this
argument,  Shri  Nariman  relied  upon  the  judgments  in  Life   Insurance
Corporation of India v. Escorts Ltd. (1986) 1 SCC 264, Bareilly  Development
Authority v. Ajai Pal Singh (1989) 2 SCC 116 and  Kerala  State  Electricity
Board v. Kurien E. Kalathil  (2000)  6  SCC  293.   Learned  senior  counsel
further argued that the appellant had not discriminated  the  respondent  in
the matter of fixation of the  price  of  gas.   He  pointed  out  that  the
appellant  had  made  identical  offer  to  all  the  buyers  including  the
respondent for supply of gas at the pooled price determined by  the  Central
Government but, the respondent declined to accept the offer and insisted  on
fresh agreement being signed on mutually agreed price and  argued  that  the
High Court committed serious error by directing the appellant  to  negotiate
the price with  the  respondent.   Shri  Nariman  then  argued  that  having
challenged the policy decision of the Central  Government  before  the  High
Court and this Court, it was not open to the respondent to seek a  direction
for implementation of that decision.

24.    Shri  Andhyarujina,  learned  senior  counsel  for   the   respondent
supported the order under challenge and argued that the High Court  did  not
commit any error by entertaining and allowing the Special Civil  Application
because the parties are State agencies  and  refusal  of  the  appellant  to
supply gas at pooled price was totally arbitrary and  unjustified.   Learned
senior counsel submitted that  though  the  respondent  had  challenged  the
pooled price mechanism enshrined in letter  dated  6.3.2007,  the  appellant
cannot discriminate the respondent and charge more than  the  pooled  price.
Learned senior counsel submitted that  the  decision  of  the  appellant  to
insist for determination of  price  through  market  mechanism  was  totally
uncalled for, arbitrary and unjustified and the Division Bench of  the  High
Court did not commit any  error  by  directing  it  to  enter  into  a  fair
negotiation  with  the  respondent.   Shri  Andhyarujina  relied  upon   the
judgments in Dwarkadas Marfatia and sons v. Board of Trustees  of  the  Port
of Bombay (1989) 3 SCC 293,   Mahabir Auto Stores and others v.  Indian  Oil
Corporation and others  (1990) 3 SCC 752,  Kumari  Shrilekha  Vidyartha  and
others v. State of U. P. and others  (1991) 1 SCC  212,   ABL  International
Ltd. and another v. Export Credit Guarantee Corporation of  India  Ltd.  and
others (2004) 3 SCC 553 and Harbanslal Sahnia  and  another  v.  Indian  Oil
Corporation  Ltd.  and  others   (2003)  2  SCC  107  and  argued  that  the
arbitration clause contained in the GSA cannot  operate  as  a  bar  to  the
entertaining of petition under Article 226 of the Constitution.

25.   We have considered the respective arguments.
At the  outset,  we  may
mention that vide e-mail dated 2.12.2008, the appellant had offered to  sign
fresh long term sale agreement with all  the  existing  customers  including
the respondent for supply of RLNG upto  April,  2028  at  a  uniform  pooled
price in terms of the policy decision of the Government of India.   
This  is
evident from the averments contained in  paragraphs  4.9  and  4.10  of  the
counter affidavit filed on behalf of the appellant before  the  High  Court,
which remained uncontroverted.  
A reading of the  draft  RLNG  contract  and
Price Side Letter sent by the appellant to the respondent  also  shows  that
the appellant had offered to supply gas to  the  respondent  at  the  pooled
price but the latter did not agree  and  insisted  on  negotiation  for  the
contract price of RLNG to be effective from 1.10.2009.

26.   As many as 150 existing buyers had signed long  term  agreements  with
the appellant without any provision for review of price during the  currency
of contract. However, the respondent did not accept the offer  and  did  not
sign long term sale agreement.
Instead, it agreed to sign the second  Price
Side Letter which contained a provision  for  review  of  the  price  before
expiry of 5 years term on 31.12.2013.  
The  respondent  also  insisted  that
RLNG price for the period from  1.4.2014  to  1.1.2019  should  be  mutually
agreed between the parties.  
These terms  were  incorporated  in  the  Price
Side Letter sent by the  respondent  to  the  appellant  vide  e-mail  dated
26.12.2008.   
The Price Side Letter which was finally signed by the  parties
indicate that the  price  of  gas  had  been  mutually  agreed  between  the
parties.  This was also mentioned in letters dated 1.10.2011 and  26.12.2011
sent by the respondent to the appellant. 
Therefore,  the  premise  on  which
the High  Court  recorded  the  conclusion  that  the  appellant  had  acted
arbitrarily was non-existent and  on  this  ground  alone  the  order  under
challenge is liable to be set aside.

27.   We also agree  with  Shri  Nariman  that
the  remedy  of  arbitration
available to  the  respondent  under  paragraph  15.5  of  the  GSA  was  an
effective alternative remedy and the High Court should not have  entertained
the petition filed under Article 226  of  the  Constitution  of  India.  
The
contents  of  the  GSA,  the  Price  Side  Letters  and  the  correspondence
exchanged between the appellant and  the  respondent  give  a  clue  of  the
complex nature of the price fixation mechanism. 
Therefore,  the  High  Court
should have relegated the respondent to the remedy of  arbitration  and  the
Arbitral  Tribunal  could  have  decided  complicated  dispute  between  the
parties by availing the services of experts. 
 Unfortunately, the High  Court
presumed  that  the  negotiations  held  between  the  appellant   and   the
respondent were not fair  and  that  the  respondent  was  entitled  to  the
benefit of the policy decision taken by the Government of India despite  the
fact that it had not only  challenged  that  decision  but  had  also  shown
disinclination to accept the offer made by the appellant to  supply  gas  at
the pooled price and had insisted on mutually agreed price.

      28.   In Arun Kumar Agrawal v. Union of India and others (2013) 7  SCC
1,
this Court was called upon to consider the scope of  judicial  review  of
complex economic decision taken by the State or its instrumentalities.   
The
Government of India, ONGC  and  Shell  entered  into  a  production  sharing
contract with a private  enterprise  for  exploration  and  exploitation  of
crude oil and natural gas in respect of  the  Rajasthan  Block.
 After  due
deliberation, the Government of India endorsed the decision taken  by  ONGC.
While refusing to interfere with the decision of the Government, this  Court
observed:

      “We notice that ONGC and  the  Government  of  India  have  considered
      various commercial and technical aspects flowing from the PSC and also
      its advantages that ONGC would derive if the Cairn  and  Vedanta  deal
      was approved. This Court sitting in the  jurisdiction  cannot  sit  in
      judgment over the commercial or business decision taken by parties  to
      the  agreement,  after  evaluating  and  assessing  its  monetary  and
      financial implications, unless the decision is in clear  violation  of
      any  statutory  provisions  or  perverse  or  taken   for   extraneous
      considerations or improper motives. States and  its  instrumentalities
      can enter into various contracts which may  involve  complex  economic
      factors. State or the State undertaking being a party to  a  contract,
      have to make various decisions which they deem just and proper.  There
      is always an element of risk in such decisions, ultimately it may turn
      out to be correct decision or a wrong one.  But  if  the  decision  is
      taken bona fide and in public interest, the mere  fact  that  decision
      has ultimately proved to be wrong, that itself is not a ground to hold
      that the decision was mala fide or taken with ulterior motives.”





29.   In view of the aforesaid conclusions, we do not consider it  necessary
to deal with the judgments relied upon by learned counsel for  the  parties.
Suffice it to say that  each  case  was  decided  in  the  backdrop  of  the
peculiar facts and the Court did not lay down a proposition which  could  be
universally applied to all the cases.









30.   In the result, the appeal is allowed, the impugned order is set  aside
and the Special Civil Application filed by the respondent is dismissed.


                                       …………………………J.
                                             (G.S.SINGHVI)


                                                             …………………………J.
                                             (V. GOPALA GOWDA)


NEW DELHI;
SEPTEMBER 17, 2013.







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