V.V.S. Rao, J.
1. The writ petition is filed praying this Court to issue a writ of mandamus declaring the action of Respondent Nos. to 4 in not allocating additional quantity of gas of 0.30 MCMD (Million Standard Cubic Meters Per Day) on firm basis to the petitioner as illegal, arbitrary and unreasonable being violative of Articles 14 and 19(1)(g) of the Constitution of India, and also to set aside the decision of first respondent dated 21.11.2002 insofar as the same denies petitioner allotment of 0.15 MCMD on firm basis and further direct respondents to allot 0.15 MCMD of natural gas on the basis of "first come first served principle". To appreciate the controversy, it is necessary to briefly indicate the procedure adopted by Government of India (GOT) in Ministry of Petroleum and Natural Gas (MPNG) for allotting natural gas produced by Oil and Natural Gas Commission (ONGC) and distributed by Gas Authority of India Ltd. (GAIL). It is also necessary to notice the facts leading to filing of the case by petitioner which are not much in dispute.
2. The petitioner is a company, (hereinafter called, GVK) incorporated in 1991 under the Companies Act, 1956. The Government of India formulated a policy to encourage Independent Power Producers (IPP) and identified eight power projects to be opened in private sector. Applications were invited for proper participation in power generation. These projects were accorded 'fast track status' to enable interested companies to get clearance from the Government expeditiously. The selectee industries were eligible for State Government guarantee of tax payments and counter guarantee from Central Government. Jegurupadu project was one such eight projects. The Andhra Pradesh State Electricity Board (APSEB) which is the predecessor in interest of Transmission Corporation of Andhra Pradesh (AP 'ERANSCO), sixth respondent herein was allocated 1.5 MCMD of gas for setting up of gas based power station of 400 MW (Mega Watts) capacity. Sixth respondent, however, could not ground the project. By letter dated 17-3-1992 addressed to first respondent, sixth respondent sought approval for transfer of allocation of 1.5 MCMD of gas to petitioner company which had been earlier given clearance by the Government, Andhra Pradesh (fifth respondent) to set up 400 MW gas based power plant (later reduced to 200 MW) at Jegurupadu. MPNG by letter dated 9.10.1992 agreed to transfer 0.75 MCMD gas allocation in favour of GVK and 0.75 MCMD to National Thermal Power Corporation (NTPC). The power plant was designed by GVK for dual fuel operation (natural gas/naphtha in the ratio of 80 : 20). In 1996, the unit set up by GVK commenced power production at 200 MW to 235 MW. GVK also plans to set up power plant at Jegurupadu with increased capacity in second phase.
3. GVK had been requesting Gas Authority of India Limited (GAIL), fourth respondent herein for additional quantity of natural gas to meet the requirements of existing plant. The request was considered, and in the view of non-availability of gas in the area, and owing to the fact that long term availability of gas is lesser than overall allocation, GAIL came forward with temporary arrangement under its Demand Management Scheme (DMS). As and when gas was made available due to excessive production by ONGC, allocation of gas on temporary/short-term basis was considered. Under demand management scheme GAIL decided to supply additional quantity of gas for shorter duration on days when additional gas was available over and above existing maximum quantity of 0.75 MCMD. This was as per Article 5.01 of the contract (agreement) entered into by and between GVK and GAIL on 16.2.1993. While reserving right to discontinue supply of additional quantity, GAIL informed GVK by letter dated 8/9.10.1998 that gas is allocated on temporary basis subject to certain conditions and that such temporary allocation would not give the buyer any prescriptive right for any future allocation of gas. Under DMS, 0.30 MCMD was additionally allocated to GVK temporarily. GVK accepted the same and has had been availing additional quantity gas of 0.30 MCMD on temporary basis for the last about four years. It asserts that due to utilization of additional gas resulted in reducing cost of power generation, which benefited consumers of power in terms of lower tariff. It is also stated that as per terms of power purchase agreement (PPA) between GVK and A.P. TRANSCO the entire cost of fuel, be it either natural gas or naphtha, would have to be reimbursed at actuals to the petitioner company by A.P.TRANSCO.
4. Subsequently, M/s. B.S.E.S. Andhra Power Limited, seventh respondent (for short, BSES) and M/s.Lanco Kondapally Power Private Limited, eighth respondent (for short, Lanco) were established as naphtha/gas based power plants subject to availability of natural gas. It is not necessary to go into the details. Suffice to note that BSES which was committed in February, 2002 was allocated 1.00 MCMD on fall back basis, whereas Lanco which commenced in November, 2000 was allocated 1.12 MCMD on firm basis and 0.63 MCMD on fall back basis. Be that as it is the petitioner alleges that first respondent which allegedly promised to consider for enhanced allocation of gas to the petitioner on first come first served basis in arbitrary and mala fide manner made allocations of gas on firm and fall back basis to other concerns who applied much later in point of time.
Gas alloction by MPNG
5. Oil and natural gas exploration, production and marketing was a monopoly enjoyed by ONGC, a Statutory Corporation established under Oil and Natural Gas Commission (Transfer of Undertaking and Repeal) Act, 1993. The natural gas produced by it was found to be of immense utility in production of fertilizers, as a fuel for production of energy besides other direct and indirect uses. The total quantity of gas produced by ONGC was to be distributed through a system of pipelines set up for the purpose by GAIL. Distribution by GAIL is in accordance with allocations made by MPNG of Government of India. So as to ensure equitable allocation and distribution of natural gas to various industrial sectors and to various applicants in each sector, GOI in MPNG by Office Memorandum dated 22.7.1991 established Gas Linkage Committee (GLC), third respondent herein headed by Secretary to GOI in MPNG and consisting of twelve other members drawn from Planning Commission, Department of Economic Affairs in Ministry of Finance and various other Departments like Power, Fertilizers, Steel, Chemicals and Petrochemicals. GLC also consisted of Chairmen of GAIL, ONGC as its members.
6. GLC, third respondent herein, charged with the following responsibilities:
(a) It shall periodically review the progress of implementation of upstream and downstream projects for utilization of natural gas with a view to ensuring maximum and timely synchronization of these facilities;
(b) It shall consider and recommend requests for the allocation of natural gas, including its fractions, by downstream consumers keeping in view the objective of ensuring that the allocation of gas to downstream users is economically efficient;
(c) It shall monitor the progress of downstream units to whom gas had been allocated, and shall make recommendations regarding cancellation or otherwise of gas allocations to downstream units the progress of implementation of which is not satisfactory.
7. As per the Office Memorandum dated 22.7,1991 the recommendations made by GLC shall be subject to approval of MPNG. GLC was established to ensure transparency in allocation of natural gas to various needy industries and was expected to meet once in three months. Besides the above duties, GLC was also responsible for monitoring gas utilization by allottees and recommend for cancellation or enhancement of the gas utilization. The GLC met on 21.11.2002 and decided to convert existing fall back/temporary allocation to GVK on one hand and BSES and Lanco and others on the other hand to allot on firm basis based on average supply of natural gas for six months preceding the date of meeting. In the process GVK which was hitherto getting 0.75 MCMD on firm basis and 0.30 MCMD on temporary basis got an allocation of 0.90 MCMD on firm basis, and 0.15 MCMD on fall back basis. It was decided to allocate 0.64 MCMD on firm basis and 0.36 MCMD on fall back basis to BSES. Lanco was given allocation of 1.46 MCMD on firm basis and 0.29 MCMD on fall back basis. The petitioner was expecting that entire temporary allocation of 0.30 MCMD would be converted into firm basis at 1.05 MCMD. As the decision allegedly went against them, GVK filed the present writ petition.
8. The writ petition was admitted on 10.1.2003. In W.P.M.P. No. 32783 of 2002 this Court gave a direction to fourth respondent to ensure firm supply of 0.90 MCMD to the petitioner and to supply 0.15 MCMD on fall back basis first to petitioner, and if any gas is available thereafter same can be supplied to Respondents 7 to 9. Aggrieved by the same, BSES filed Writ Appeal Nos.379 and 385 of 2003. A Division Bench of this Court by order dated 12.3.2003 dismissed the Writ Appeals observing that the interlocutory applications filed by contesting parties for vacating the interim orders may be disposed of as early as possible. When the interlocutory applications filed by respondent Nos.4, 7 and 8 came up before this Court, with the consent of all contesting parties, main case was heard and is being disposed of finally.
9. Respondent Nos. 1 and 3, and Respondent Nos.4, 7 and 8 have filed separate counter-affidavits. It is not necessary to elaborately refer to these counter-affidavits. To know the stand of the Respondent Nos. 1 and 3 - MPNG and GLC, a brief reference may be made to the counter-affidavit filed by Respondent Nos. 1 and 3. It is stated that GVK planned for establishing 400 MW gas based power project in 1990 which requires 1.5 MCMD of natural gas. The petitioner subsequently reduced the capacity to 235 MW. GLC by its meeting held on 11.5.1992 considered the request of the petitioner for allocation of natural gas and made a firm allocation of 0.75 MCMD. Thereafter, GVK entered into an agreement with the Government of Andhra Pradesh (fifth respondent herein) to operate the plant by using natural gas and naphtha in the ratio of 80:20. In view of this, GVK was allowed to avail 250 tonnes of naphtha per day from Bharat Petroleum Corporation Limited. The project was established with mixed fuel capacity turbines with naphtha as supplementary fuel, and was commissioned in 1996 at Jegurupadu. GVK operated the power plant on the mixed fuel upto 1998. In that year ONGC indicated additional availability of one MCMD of gas due to trial run of their production facilities, and Ravva joint venture also indicated readiness to supply additional 0.2 to 0.3 MCMD of gas. As ONGC required utilization of gas to run gas production facility on trial run, MPNG decided to allow temporary supplies to A.P. TRANSCO, Nagarjuna Fertilizers and Chemicals Limited, GVK and Spectrum Power Generations Limited. A.P. TRANSCO was allotted 0.25 MCMD and other three industries were allotted 0.30 MCMD each on temporary basis.
10. The decision of GAIL, fourth respondent, for supplying 0.30 MCMD of natural gas to GVK was approved by the GOI vide letter dated 8.10.1998 subject to condition that GAIL enters into agreement with the consumer to the effect that additional supply of gas from trial production is purely on temporary basis, that the Government reserves the right to allocate additional quantities to the new parties, and that the consumer shall not have any prescriptive right on the basis of temporary allotment. GVK agreed for the same and informed his consent by letter dated 9.10.1998. Therefore, it cannot claim allotment of 0.30 MCMD of natural gas on firm basis. It is also stated by Respondent Nos. 1 and 3 that GVK has no right for entitlement and therefore the writ petition is not maintainable.
11. The GLC in its meeting held on 21.11.2002 took a decision to convert fall back/temporary allocation into firm allocation on the basis of uniform, rational and equitable criteria adopted by the GOI. Further, seventh respondent was unable to get clearance from financial institutions and State Government. Therefore, GOI decided to convert average supply of last six months of the four companies - GVK, BSES, Lanco and Spectrum into firm allocation. In the process, 0.34 MCMD out of 0.63 MCMD fall back allocation of Lanco was converted into firm allocation. In the case of Specturm as well as GVK, 0.15 fall back/temporary allocation was converted into firm allocation, though all these companies requested for converting their entire fall back or temporary allocation into firm allocation. Insofar as BSES is concerned, GLC recommended for converting 1.0 MCMD fall back allocation on firm allocation, but only 0.64 MCMD was converted to firm basis. The GOI took an equitable decision in following uniform criteria of converting gas supply of last six months to firm allocation.
12. It is also stated by first respondent that Respondent Nos.7 and 8 were having fall back allocations which were partly converted into firm allocations whereas the petitioner was not having any fall back allocation and average supply for the last six months was reckoned by taking into consideration gas supply purely on temporary basis. The petitioner's request was considered in the same proportionate in which the request of three other companies was considered. By the impugned decision on the basis of uniform criteria the petitioner got substantial benefit. The petitioner company also obtained additional allocation of 1.1 MCMD of natural gas for its second phase unit which is yet to be constructed. The petitioner therefore cannot contend that it should be allocated entire gas to the extent of total requirement on the principle of "first come first served" basis. Nobody can claim an allocation as a matter of right as the available gas is a limited quantity which is to be allotted by taking into consideration various factors including present availability and sectoral requirements. The decision of the respondents is not illegal and the petitioner has no basis for claiming conversion of entire 0.30 MCMD fall back allocation into firm allocation. Other respondents filed counter-affidavit opposing the writ petition.
13. Learned Senior Counsel for the petitioner, Sri S.R. Ashok, submits that petitioner being the IPP in the country to generate power and having regard to the circumstances under which it came to be established, Respondents 1 to 5 are bound to allot natural gas to the petitioner company on the basis of first-come-first served. Any extra production by ONGC has to be allocated by the third respondent to the petitioner to meet the growing demand. In that view of the matter, though agreement was entered into between the petitioner and GAIL, Respondents 1 to 5 cannot ignore the increased requirement of gas as the cost of fuel has to be met by sixth respondent. The petitioner has a legitimate expectation that Union of India would adhere to the principle of first-come-first served. Learned Senior Counsel would like this Court to infer such policy from the circumstances like allotment of gas on temporary basis at 0.30 MCMD at the request made by the petitioner. When ONGC's production went up slightly higher, it is the petitioner which came forward to utilize the enhanced production of natural gas. Therefore, the learned Senior Counsel would contend that the petitioner has a substantive legitimate expectation as well. He further urges that though Respondents 7 and 8 were established long after the establishment of the petitioner company and though there was no proper allocation of gas on fall back basis to Respondent No. 7. Respondents 1 to 5 acted improperly and illegally in allocating gas on firm basis to Respondent No. 7. This should be set right so that fairness and transparency would inform the governance by rule of law. He placed reliance on the judgments of the Supreme Court in F.C.L v. Kamdhenu Cattle Feed Industries, , Punjab
Communications v. Union of India, , Omkarall Bajaj v. Union of India, , Union of India v. International
Trading Company, , National Buildings Construction
Corporation v. S.Raghunathan, , in support of his
contention that the petitioner has substantive legitimate expectation, which can be enforced in a Court of law. Learned Senior Counsel also invited the attention of the Court to the decisions of the Supreme Court in B.S. Minhas v. Indian Statistical Institute, , Brij Mohan Sinqh Chopra v. State of Punjab,
, in support of the contention that administrative
instructions are binding on the public authorities.
14. Learned Senior Central Govt. Standing Counsel (SCGSC), Sri T. Suryakaran Reddy, made submissions to the following effect. The writ petition as laid is not maintainable as the petitioner has not specifically challenged the allocation of 1.00 MCMD of gas to BSES on fall back basis. The allocation of 0.64 MCMD on firm basis and 0.36 MCMD on fall back basis to BSES is also not questioned. He would submit that the decision taken by Respondents 1 and 3 is purely an administrative decision and in the absence of any mala fides attributable to public authorities, on settled principles of judicial review, this writ petition is misconceived. He would also urge that the supply of natural gas to petitioner's power plant is governed by a contract. The petitioner's right and obligation flow from such contract and, therefore, in exercise of power under Article 226 of the Constitution, this Court may not incline to enforce such contractual rights nor a writ petition would lie when the petitioner company has no right nor legitimate expectation. The Government of India must aim at balanced growth of industries in all sectors and keeping this in view when a decision is taken by the executive for allocation of natural gas. Every company or person may have a right to request the GOI to consider such application. No person can compel the Government of India to allot natural gas ignoring rival claims. Earlier decision of GAIL to supply 0.30 MCMD to the petitioner is purely temporary and it does not confer any right for conversion of temporary allocation to firm allocation. Learned SCGSC also referred to the relevant documents in support of his contention including office memorandum dated 28.7.2001 on which the learned Senior Counsel for the petitioner placed strong reliance. He would urge that the decision taken by Respondents 1 and 3 to allot extra quantity of gas on firm basis taking into consideration the average supply for a period of six months is a rationale method and does not warrant any interference. He placed reliance on the decisions of the Supreme Court in State of A.P. v. Mc.Dowell and Co., , Tarlochan Dev Sharma v. State of Punjab,
legitimate expectation, if any, cannot be enforced in a writ petition. Learned Central Government Counsel also refuted the faint submissions made by the learned Senior Counsel for the petitioner based on promissory estoppel.
15. Learned Senior Counsel, Sri E. Manohar, for GAIL opposes the writ petition on behalf of fourth respondent herein. Be it noted that gas is allocated to BSES by MPNG as per the decision of the third respondent. The gas is, however, delivered by GAIL, which is entrusted with marketing of natural gas through a wide network of underground pipeline. The fourth respondent has no say in allocation though there is a representative of the respondent serving on GLC. Learned Senior Counsel, Sri Manohar firstly contends that Respondents 1 to 5 never promised the petitioner to allocate 1.5 MCMD of gas. Therefore, considerations of promissory estoppel and legitimate expectation would not arise. The petitioner's legitimate expectation if any was not defeated. Secondly, he would urge that the petitioner has failed to demonstrate any right and hence no writ petition would lie. Thirdly, impugned decision is beneficial to the petitioner, in that the earlier firm allocation of 0.75 MCMD to petitioner has now been enhanced to 0.90 MCMD. Fourthly, substantive legitimate expectation would arise only when a right vested in a person is sought to be defeated by the change of the policy. In the absence of any policy to allocate enhanced production of gas on the "principle of first-come-first served" and in the absence of any clause in the agreement between the petitioner and Respondents 1 to 5 conferring such right, no legitimate expectation, either procedural or substantive, can be inferred.
16. Learned Counsel for BSES, Sri Milind Gokhale submits that the petitioner is working on two gas turbines and one Naptha turbine. His client came into existence after its competitive bid to establish power plant was accepted by GoAP. By allotting natural gas to Respondent No. 7 either on firm basis or on fall back basis, Government is facilitating production of electricity energy at Rs. 1.65 p. per unit, at average fixed cost per unit Rs. 0.99 p. and fuel cost Rs. 0.79 p., whereas the fixed cost and fuel cost of energy produced by GVK is assessed at Rs. 1.35 p. and Rs. 0.85 p. respectively, thus making the production cost per unit Rs. 2.50 p. He also opposes the writ petition on the ground that in the absence of any allegation of illegality, irregularity and irrationality, the writ petition would not lie. Reliance is placed on the judgment of Court of Appeal in Associated Provincial Picture House v. Wednesbury Corporation, 1947 (2) All. ER 68 (CA), and the judgments of the Supreme Court in Tata Cellular v. Union of India, , Central for PJL v. Union of India,
, and Indian Railway Construction Co. Ltd. v. Ajay
17. Learned Counsel for the eighth respondent, Sri T. Rajendra Prasad, adopts the submissions made by the other learned Counsel and contends that there is no illegality in allocating 1.46 MCMD on firm basis and 0.69 MCMD on fall back basis to Lanco.
Points for consideration
The following questions would fall for consideration in the background facts and rival submissions.
(1) Whether the first respondent has a policy to allot increased availability of natural gas on the principle of first-come-first served ? If the answer to this is in negative, whether any person who is allotted natural gas over and above the agreement allotment, on temporary/fall back basis, acquires the right for conversion of the entire temporary/fall back allocation into firm allocation? and
(2) Whether the petitioner has any legitimate expectation which is denied by the impugned decision of Respondents 1 and 3?
18. The first point for consideration will give rise to many questions. These will be dealt with one after the other.
(i) A short note on judicial review
19. The power of judicial review is extraordinary power vested in a superior Court as a check on the exercise of power by public authorities; either statutory or quasi judicial or under administrative instructions. This power is not intended to assume supervisory role or don the robes of omnipotence, omniscient and omnipresence. The power is intended to review an administrative decision given such decision is brought before the Court by a person who is aggrieved by such decision. It is judicial review of an administrative decision and it is certainly not judicial review of administration. In discharging administrative functions public authorities take various decisions. They should be allowed sufficient elbow space for proper exercise of discretion. All these decisions and method and manner of arriving at such decision cannot be subjected to judicial review. There should be an aggrieved party with proper locus standi to impeach the administrative decision for the Court to take up such decision for judicial review.
20. The observations made by the Supreme Court in Narmada Bacho Andolan v. Union of India, , support the above principle. It was held therein:
At the same time, in exercise of its enormous power the Court should not be called upon to or undertake governmental duties or functions. The Courts cannot run the Government nor can the administration indulge in abuse or non-use of power and get away with it. The essence of judicial review is a constitutional fundamental. The role of the higher judiciary under the Constitution casts on it a great obligation as the sentinel to defend the values of the Constitution and the rights of Indians. The Courts must, therefore, act within their judicially permissible limitations to uphold the rule of law and harness their power in public interest. It is precisely for this reason that it has been consistently held by this Court that in matters of policy the Court will not interfere. When there is a valid law requiring the Government to act in a particular manner the Court ought not to, without striking down the law, give any direction which is not in accordance with law. In other words, the Court itself is not above the law.
(ii) Scope of judicial review
21. In India, by reason of power conferred on the Supreme Court under Articles 32 and 136 and on the High Court under Article 226 of the Constitution, these Courts have power of judicial review and no other Court. This power can be exercised for the purpose of judicially reviewing an Act of Legislature, or a decision of an administrator, an order of quasi judicial authority and/or in a given case, a decision of a judiciary. The power is not intended either to review the entire governance under the rule of law nor this Court steps into the area exclusively reserved by the suprema lex to two other organs of the State, the Legislature/Parliament and the Executive. Likewise, decisions and actions which do not have adjudicative disposition are not justiciable before judicial review Court.
(iii) Dynamics of judicial review
22. In judicially reviewing a decision, the Court subjects such decision to test of illegality, test of impropriety and test of irregularity. 'Illegality' connotes that the decision makers must understand the law correctly that regulates decision making and must give effect to it. 'Irrationality' deals with the question whether any decision maker had applied to the question to be decided in a reasonable manner. This has a characteristic of Wednesbury unreasonableness following the decision of Associated Provincial Picture House v. Wednesbury Corporation (supra). 'Procedural impropriety', the third ground of judicial review means that decision maker should follow such procedure which is fair and conforms to statute. The power of judicial review is subject to reasonable restrictions. The Court does not sit as appellate authority nor the Court is concerned with the merits of the case. It is essentially concerned with the decision making process. If disputed questions of fact are involved or the petitioner has other remedies, an application for judicial review would be improper.
(iv) First-come-first served principle
23. Learned Senior Counsel for the petitioner, Sri S.R. Ashok submits that GVK is first IPP in the country. Even when ONGC was able to produce more natural gas from trial run wells, the petitioner was preferred to others for supply of gas. The unit was established due to encouragement given by the State and Central Governments. Even after the establishment of the factory, the GoAP and the Chief Minister of Andhra Pradesh addressed the Central Government to give priority treatment to the petitioner company. From all this, the Senior Counsel would like this Court to draw an inference that the State Government and Central Government adopted the "principle of first-come-first served basis" in allocating natural gas to various end user industries. Learned Senior Counsel relied on the communication sent by the State Government in the early nineties and the communication from the State Government to the Central Government. He also relies on the various letters addressed by the petitioner company from 1997 to 2001 requesting for more allocation of gas.
24. It is not necessary to refer to these communications in detail for two reasons. First, the existence of any such policy is categorically denied by Respondents 1 and 2. In the reply affidavit filed by the petitioner company, this aspect of the matter is not adverted to with proper substantiation. It is well settled by reason of the judgments of the Supreme Court in C.S. Rowji v. State of A.P., , Bharat Singh v. State of Haryana, , and Naseem Bhanu v. State of U.P., 1993 Supp (4) SCC 46, that unrebutted affidavit averments must be taken as admitted. Applying this principle, I must hold that the petitioner also admits that there is no such policy enabling Respondents 1 to 4 to allocate natural gas to a needy industry on the principle of first-come-first served. Secondly, I have perused the correspondence between State Government and Central Government as well as the representations made by the petitioner. Though in some of the letters, the petitioner requested to allocate gas on priority, there is no request by State Government or the concurrence by Central Government accepting allotment of gas on first-come-first served principle. Thirdly, natural gas is wealth of the nation. In distributing wealth, the State has to adopt a rationale and unarbitrary principle. In so doing, the competing interests of various sectors and competing interests of the industries in the same sector have to be balanced for a holistic growth and development of gas based industry. Natural gas is utilized in the manufacturing of fertilizers, production of electricity, chemicals and as a boiler fuel for automobiles and many industries. When such is the potential and the State is required to treat all industries and sectors equally, there cannot be any policy to permit the authorities to allocate gas by pick and choose method. Even if such policy exists, the same cannot answer the test of Article 14 of the Constitution of India.
(iv) Whether the decision is illegal?
25. The concept of illegality has been explained hereinabove. An administrative decision is illegal if it contravenes or exceeds the terms of the power which authorizes making of the decision or if it pursues an objective other than that for which the power was conferred (See Principles of Judicial Review (1999) by De Smith and Woolf). Whether the administrative authority has reached correct conclusion regarding principles of law and whether the administrator has applied such law to the facts of a particular case need an enquiry to deal with attack of illegality.
26. There is no law or statutory rules or regulations governing the allocation of natural gas to user industries. We have only the Government of India's Memorandum dated 22.7.1991 whereunder GOI directed constitution of GLC with 13 members which / is entrusted with the task of periodically reviewing the progress of implementation of upstream and downstream projects for utilization of natural gas and to recommend the request for the allocation of natural gas by downstream consumers. GLC also monitors the progress of downstream units to whom gas is allocated. As can be seen from this Memorandum, these responsibilities are to be discharged by GLC with a view to ensuring maximum and timely synchronization of gas projects with an object of ensuring of economic efficiency in allocation of gas to downstream industries. There was no directive to adhere to policy of first-come-first served nor was there any idea to prefer power sector to other sectors. Proper utilization of natural gas and economic efficiency are two guiding factors that should inform the decision making by GLC.
27. Learned Senior Counsel for the petitioner has relied on a communication dated 28.11.2001 from the Government of India, Ministry of Power addressed to the Director in the MPNG wherein after examining proposals from GVK, BSES and two other gas based power plants in Andhra Pradesh, MPNG requested "to ensure full firm allocation to the commissioned projects and that inadequate supply of gas to the petitioner and other industries is bound to affect the quantum of generation and the power tariff. It was also suggested therein that gas linkage to new projects/expansion projects can continue in case MPNG is able to ensure firm supply to the existing projects. The advice of the MPNG to ensure supply of natural gas on firm basis to make them fully operational and reduce power shortage, it is submitted, being in the nature of instructions, they are binding on GLC and other respondents as well. He also relied on case law to the effect that administrative instructions are also binding. It is not necessary to refer to all of them. It is well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation for violation of them; He that takes the procedural sword shall perish with the sword.
28. In Narendra Kumar v. Union of India, , the Supreme Court lucidly explained this principle of administrative law. The relevant portion in the said judgment is as under:
We would also like to refer to one more aspect of the enforceability of the guidelines by persons in the position of the petitioners in these cases. Guidelines are issued by Governments and statutory authorities in various types of situations. Where such guidelines are intended to clarify or implement the condition and requirements precedent to the exercise of certain rights conferred in favour of citizens or persons and a deviation therefrom directly affects the rights so vested the persons whose rights are affected have a clear right to approach the Court for relief. Sometimes guidelines control the choice of persons competing with one another for the grant of benefits largesses or favours and, if the guidelines are departed from without rhyme or reason, an arbitrary discrimination may result which may call for judicial review. In some other instances (as in the Ramanna Shetty case) , the guidelines may
prescribe certain standards or norms for the grant of certain benefits and a relaxation of, or departure from, the norms may affect persons, not directly but indirectly, in the sense that though they did not seek the benefit or privilege as they were not eligible for it on the basis of the announced norms, they might also have entered the fray had the relaxed guidelines been made known. In other words, they would have been potential competitors in case any relaxation or departure were to be made. In a case of the present type, however, the guidelines operate in a totally different field. The guidelines do not affect or regulate the right of any person other than the company applying for consent. The manner of application of these guidelines, whether strict or lax, does not either directly or indirectly, affect the rights or potential rights of any others or deprive them, directly or indirectly, of any advantages or benefits to which they were or would have been entitled. In this context, there is only a very limited scope for judicial review on the ground that the guidelines have not been followed or have been deviated from. Any member of the public can perhaps claim that such of the guidelines as impose controls intended to safeguard the interests of members of the public investing in such public issues should be strictly enforced and not departed from : departure therefrom will take away the protection provided to them. The scope for such challenge will necessarily be very narrow and restricted and will depend to a considerable extent on the nature and extent of the deviation.
............................. A Court, however, would be reluctant to interfere simply because one or more of the guidelines have not been adhered to even where there are substantial deviations, unless such deviations are, by nature and extent such as to prejudice the interests of the public which it is their avowed object to protect. Per contra, the Court would be inclined to perhaps overlook or ignore such deviations, if the object of the statute or public interest warrant, justify or necessitate such deviations in a particular case. This is because guidelines, by their very nature, do not fall into the category of legislation, direct, subordinate or ancillary. They have only an advisory role to play and non-adherence to or deviation from them is necessarily and implicitly permissible if the circumstances of any particular fact or law situation warrants the same. Judicial control takes over only where the deviation either involves arbitrariness or discrimination or is so fundamental as to undermine a basic public purpose which the guidelines and the statute under which they are issued are intended to achieve.
29. After going through the communication from the MPNG and the correspondence between the fifth respondent and the first respondent, this Court is not able to discern any guidelines or administrative instructions which compel the GLC to adhere to a fixed pattern of ensuring continuous supply of gas to power sector in general and to GVK in particular. Even if a reading of these communications leads to the inference, as commended by the learned Senior Counsel, it is well settled that the notings in the office file and the internal correspondence between one Department and another do not confer any enforceable right on the person. A reference may be made to the decision of the Supreme Court in Puranjit Singh v. Union Territory of Chandigarh, .
(v) Adequate or inadequate supply of gas
30. Learned Senior Counsel for the petitioner contends that the petitioner's generating unit was established on the assurance given by Respondents 5 and 6 as well as Respondents 1 and 3 to supply 1.5 MCMD of natural gas. So as to operate to its full capacity of 235 M.W., the petitioner requires 1.05 MCMD and, therefore, the entire temporary allocation of 0.30 MCMD on firm basis ought to have been considered by GLC and GOI. In not doing so, it amounts to illegality. This submission lacks merit. A reference to various documents which came into existence during the initial stages in the establishment of petitioner's unit would belie any such contention.
31. The petitioner was incorporated under the Companies Act some time in 1992. The object of the petitioner was to establish initially 235 MW dual fuel based (natural gas/naptha) combined cycle power plant at Jegurupadu. By that time, Government of Andhra Pradesh had decided to set up 400 MW gas based power plant through the then APSEB, the predecessor of the sixth respondent. The Government of India allocated 1.5 MCMD gas. APSEB could not be ground the project due to various reasons. Therefore, considering the proposal of GVK, the Government requested GVK to send the application in format along with the project report. The offer was made by the GoAP subject to policy conditions of the Government of India for private participation in the power sector. These conditions were annexed to a letter of the principal Secretary to the Government of A.P. in Energy, Forests, Environment, Science and Technology Department, dated 14-2-1992, which read as under.
Conditions to be stipulated for Private participation in Power Generation
1. The entire funding of the project in accordance with the guidelines of Minister of Power, Government of India, will be the responsibility of the promoting company.
2. That the promoting company will have collaboration with the reputed manufacturers of generating equipment. They should also preferably provide for equity participation by the Foreign Collaborators to ensure success of the project.
3. That the power generated shall be distributed through the distribution channel of the A.P. State Electricity Board.
4. That the price per unit of electricity supply shall be settled through an agreement with the APSE Board.
5. That the promoters shall comply with all the conditions of Electricity (Supply) Act and shall be responsible for obtaining necessary clearances from the Government of India for the establishment of the proposed plant.
6. That the promoters shall raise at least 20% of the total outlay as equity of which 11% shall be promoters contribution. 40% shall be by way of loans from financial institutions and the remaining 40% to be raised by way of public contribution.
7. That the promoters shall enter into an agreement with the Oil and Natural Gas Commission for supply of gas required for the project.
8. That the promoters shall make their own arrangement for acquisition of necessary land, power, water supply and requirements for the project.
9. That the promotes shall abide by as such other conditions as may be prescribed by the State Government from time to time in the interests of the implementation of the project.
32. The above conditions, apart from stipulating that the power generated by IPP should be distributed to the APSEB at a price as per the power purchase agreement, categoricaliy disown any responsibility for assured supply of required amount of gas. Indeed, it stipulates that the promoters should make their own arrangements for acquiring infrastructure. Never the State Government or the Central Government assured to supply of 1.5 MCMD natural gas for 400 MW Jegurupadu gas based thermal station. Be that as it is, the Member Secretary, APSEB, by letter dated 17-3-1992 requested MPNG to transfer the allocation of 1.5 MCMD natural gas of APSEB to GVK. It was also endorsed by the Minister of Power in letter dated 17-7-1992 addressed to the Joint Secretary, MPNG. However, when the matter was considered by MPNG, which is the Ministry administering the petroleum and natural gas, it was considered to allocate Only 0.75 MCMD to the petitioner and balance of 0.75 MCMD to NTPC power plant. It was accordingly communicated by the Director (Natural Gas), MPNG to the Secretary in the Ministty of Power by Office Memorandum dated 9.10.2002, which reads as under.
In continuation of this Ministry's O.M. or even number dated 4th September, 1990 and with reference to Department of Power letter No. 844/92-IPC dated 9-10-1992, the undersigned is directed to say that allocations for gas-based power projects in K.G. basin have been approved as follows, in supersession of the earlier allocations made to APSEB and NTPC respectively:
1. M/s. GVK Industries-0.75 MMS CMD
2. M/s. NTPC - 0.75 MMS CMD
This allocation would be subject to signing of the gas supply contract by the above mentioned parties with GAIL within 60 days of issue of this letter failing which the allocation is liable to be cancelled. Schedule of supply would have to be negotiated with GAIL, and settled along with the Gas Supply Contract. The power plants are required to provide dual fuel capacity.
33. The above Office Memorandum belies the contention that the petitioner was made to believe that it would be allowed run the project mainly on natural gas. While allotting 0.75 MCMD natural gas, it was made clear that gas supplied and schedule of supply will be in accordance with the agreement/contract to be entered by the petitioner with GAIL. It was further clarified that GVK's power plant should have dual fuel capacity. The petitioner, therefore, cannot complain about any inadequate supply of natural gas.
(vi) Right under the contract
34. Pursuant to the allotment made by MPNG, an agreement was entered into on 16.2.1993 wherein it was agreed by GAIL to supply natural gas to GVK at Jegurupadu subject to the covenants contained in the contract. Article 5 of the contract deals with quantity of gas to be supplied by GAIL. It contains three sub-clauses and read as under;
Article- 5 Quantity of Gas
5.01 Subject to availability of GAS and SELLERS ability to supply GAS the SELLER agrees to sell and deliver the GAS at the aforesaid point of delivery to the BUYER as per requirement of the BUYER subject to the maximum of 7,50,000 (Seven lakhs and Fifty Thousand) standard cubic meters per day. Provided during the first one year of GAS supply the BUYER shall give to the SELLER quarterly forecast of the quantity of GAS required for each month at least one month in advance. Provided further the BUYER shall build dual fuel capabilities for their fuel requirement.
5.02 During the first year of GAS supply, the BUYER guarantee to pay to the SELLER for actual quantity of the GAS supplied by the SELLER to the BUYER subject to minimum of 80% of monthly forecast quantities. Thereafter for the remaining period of the CONTRACT, the BUYER shall pay to the SELLER for the actual quantity of GAS supplied by the SELLER to the BUYER subject to minimum quantity of GAS obtained by multiplying 80% of the daily maximum quantity mentioned in clause 5.01 by the number of days in the month. Upon the BUYER failing to lift the aforesaid minimum guaranteed quantities of GAS during any month, the BUYER undertakes to pay for the said minimum guaranteed monthly quantity for such month. In case the SELLER is unable to supply 80% of the quantity of gas mentioned in clause 5.01 on any day(s) during any month the minimum guaranteed quantity for the month shall be worked out by adding the actual quantity of GAS supplied on such day (s) and the quantity obtained by multiplying 80% quantity of gas mentioned in clause 5.01 by remaining number of day(s) during such month and the BUYER undertakes to pay such minimum guaranteed quantity or for actual quantity of GAS supplied during the month whichever is higher,
5.03 The BUYER shall draw and SELLER shall supply daily the quantity of GAS agreed to in Articles 5.01 and 5.02 above at an uniform rate spread over a period of 24 (Twenty four) hours. Subject to availability of GAS and SELLER'S ability to supply the same to the BUYER.
35. A reading of the above clauses would show that though 0.75 MCMD gas was allocated by the first respondent to be supplied by GAIL, what was assured was 80% of 0,75 MCMD. The fact that 80% of 0.75 MCMD was only assured is also accepted by the petitioner as can be seen from the letter of its Technical Director dated 21.2.1994 addressed to the Secretary, MPNG. While admitting this position, the Technical Director informed that the power generation units are designed to operate with mixed fuel upto 20% by Naptha and are in a position to uitlise small quantities of extra gas over and above the existing 0.75 MCMD in the first phase so as to reduce Naptha consumption. Technical Director requested the MPNG to consider the requirement of the petitioner as first priority as and when extra gas is made available from Ravva and Kakinada basins. The same was taken note of by MPNG and accordingly informed by letter dated 10.5.1994 addressed by the Director (NG) to the Technical Director of GVK. The same reads as under.
Please refer to your letter No. GIL/CO/MPNG/ 202 dated February 21, 1994 addressed to, Secretary, Petroleum and Natural Gas regarding supply of natural gas to the gas based power plant at Jegurupadu in Andhra Pradesh. We have taken note of your request for an allocation of 1.5 MMSCMD as against the present allocation of 0.75 MMSCMD. The request will be taken up for consideration as and when the availability of gas in the region improves.
36. It is thus clear that be it at the stage of setting up power plant or be it at the stage of allocation of natural gas, or at the stage of entering into agreement or subsequently, there has been a clear understanding between GVK and the GOI in MPNG that former would be supplied 0.75 MCMD gas and what was assured was 80% of the quantity agreed to be supplied under the agreement dated 16.2.1993. When a request was made for allocation of 1.5 MCMD, the same was not accepted and the first respondent clearly informed that the request will be considered as and when the availability of gas in the region improves. When the availability position improved due to operation of two facilities on trial run basis under Demand Management Scheme, GVK was allocated 0.30 MCMD gas temporarily. More about this aspect of the matter would be dealt with when second point is considered. In view of the discussion thus-far, I am convinced that there is no illegality in decision making process, no law was violated and no binding guidelines were flouted. There was no breach of any convention or violation of customary right or statutory right.
37. The right of the petitioner is purely contractual as evidenced by the agreement between the petitioner and the first respondent dated 16.2.1993. The agreement cannot even be termed as statutory agreement. As held by the Supreme Court in Asst. Excise Commissioner v. Issac Peter, , even where the agreement is entered by public authority in exercise of statutory power, enforcement of any rights and duties have to be with reference to the agreement and complaint of arbitrariness and unfairness cannot be countenanced. It was also held therein that the remedy provided under Article 226 of the Constitution cannot be resorted to wriggle out of contractual obligations entered into by the parties. The relevant observations made by the Supreme Court are as under.
.................... In short, the duty to act fairly is sought to be imported into the contract to modify and alter its terms and to create an obligation upon the State which is not there in the contract. We must confess, we are not aware of any such doctrine of fairness or reasonableness. Nor could the learned Counsel bring to our notice any decision laying down such a proposition. Doctrine of fairness or the duty to act fairly and reasonably is a doctrine developed in the administrative law field to ensure the rule of law and to prevent failure of justice where the action is administrative in nature. Just as principles of natural justice ensure fair decision where the function is quasi-judicial, the doctrine of fairness is evolved to ensure fair action where the function is administrative. But it can certainly not be invoked to amend, alter or vary the express terms of the contract between the parties. This is so, even if the contract is governed by statutory provisions, i.e., where it is a statutory contract - or rather more so. It is one thing to say that a contract - every contract - must be construed reasonably having regard to its language. But this is not what the licensees say. They seek to create an obligation on the other party to the contract, just because it happens to be the State. They are not prepared to apply the very same rule in converse case, i.e., where the State has abundant supplies and wants the licensees to lift all the stocks. The licensees will undertake no obligation to lift all those stocks even if the State suffers loss. This one sided obligation, in modification of express terms of the contract, in the name of duty to act fairly, is what we are unable to appreciate. The decisions cited by the learned Counsel for the licensees do not support their proposition. In Dwarkadas Marfatia v. Board of Trustees of the Port of Bombay, , it was
held that where a public authority is exempted from the operation of a statute like Rent Control Act, it must be presumed that such exemption from the statute is coupled with the duty to act fairly and reasonably. The decision does not say that the terms and conditions of contract can be varied, added or altered by importing the said doctrine...........................
38. In view of the above, I hold that the impugned decision is not illegal and does not suffer from any vice of arbitrariness or unfairness. First point is accordingly answered against the petitioner.
39. Though the doctrine of promissory estoppel was raised, learned Senior Counsel for the petitioner however, laid much emphasis only on the doctrine of legitimate expectation. He would urge that in view of the fact that initially APSEB was allocated 1.5 MCMD gas in whose place petitioner's project was accepted, the petitioner had legitimate expectation that gas allocation and gas supply would be made so as to enable the petitioner company to operate power generating units at 100% capacity. He would also urge that the petitioner was allocated 0.30 MCMD of additional gas on fall back basis and hence the petitioner has substantive legitimate expectation to receive same quantity of 0.30 MCMD of gas on firm basis. The same has been denied without any notice and in an arbitrary manner.
40. Before dealing with this aspect, it is necessary briefly to refer to the doctrine of legitimate expectation as laid down by the Supreme Court in a catena of decisions. Legitimate expectation comes into play in public law only when a person claiming it was given assurance by explicit or implied conduct of the decision-maker. The assurance can be in relation to the contract or in relation to some benefits conferred as a privilege or as a licence. Public law doctrine of legitimate expectation is evolved to curb arbitrary denial of promise or undertaking given to persons by public authorities. In its early stages of evolution, legitimate expectation was held to give rise to a right to a post-decisional notice before legitimate expectation is denied. A person who had legitimate expectation was only entitled to a notice and nothing more. However, as seen from decided cases, administrative law also evolved the principle of substantive legitimate expectation, which presupposes that legitimate expectation gives a right which cannot be denied in an arbitrary or unreasonable and illegal manner. The denial of legitimate expectation should answer the test of equality as well.
41. In F.C.I, v. Kanidhenu Cattle Feed Industries, , the Supreme Court observed as under:
In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. ........................The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant '$ perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent.
42. In Union of India v. Hindustan Development Corporation, , Supreme Court of India referred to paragraph 151 of Halsbury's Laws of England [Fourth Edn., Vol. 1(1)] and Administrative Law by H.W.R. Wade, and Council of Civil Service Unions v. Minister for Civil Service, (1984) 3 All ER 935, R v. Secretary of State for the Home Department, ex parts Ruddock, (1987) 2 All ER 518, Findlay v. Secretary of State for the Home Department, (1984) 3 AH ER 801, Attorney General for New South Wales v. Quin, 1990 (64) Aus LJR 327, and laid down that legitimate expectation gives the applicant sufficient locus standi. The doctrine of legitimate expectation is confined mostly to right of fair hearing before a decision which results in negativing a promise or withdrawing an undertaking. The apex Court observed as under:
....................... The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words where a person's legitimate expectation is not fulfilled by taking a particular decision then decision- maker should justify the denial of such expectation by showing some overriding public interest. Therefore even if substantive protection of such expectation is contemplated that does not grant an absolute right to a particular person. It simply ensures the circumstances in which that expectation may be denied or restricted. A case of legitimate expectation would arise when a body by representation or by past practice aroused expectation which it would be within its powers to fulfil. The protection is limited to that extent and a judicial review can be within those limits. But as discussed above a person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus has locus standi to make such a claim. In considering the same several factors which give rise to such legitimate expectation must be present. The decision taken by the authority must be found to be arbitrary, unreasonable and not taken in public interest. If it is a question of policy, even by way of change of old policy, the Courts cannot interfere with a decision. In a given case whether there are such facts and circumstances giving rise to a legitimate expectation, it would primarily be a question of fact. If these tests are satisfied and if the Court is satisfied that a case of legitimate expectation is made out then the next question would be whether failure to give an opportunity of hearing before the decision affecting such legitimate expectation is taken, has resulted in failure of justice and whether on that ground the decision should be quashed. If that be so then what should be the relief is again a matter which depends on several factors,
43. It was specifically held that legitimate expectation may come in various forms. It owes its existence to different kinds of circumstances like distribution of largesse by the Government, giving promotion to employees and in awarding contracts. It was held that grant of licence and awarding contracts though is only discretionary, there is a reasonable expectation in every aspirant for licence or renewal thereof. It was further laid down as under.
..............................If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well-known grounds attracting Article 14 but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles. It can be one of the grounds to consider but the Court must lift the veil and see whether the decision is violative of these principles warranting interference. It depends very much on the facts and the recognised general principles of administrative law applicable to such facts and the concept of legitimate expectation which is the latest recruit to a long list of concepts fashioned by the Courts for the review of administrative action, must be restricted to the general legal limitations applicable and binding the manner of the future exercise of administrative power in a particular case. It follows that the concept of legitimate expectation is "not the key which unlocks the treasury of natural justice and it ought not to unlock the gates which shuts the Court out of review on the merits", particularly when the element of speculation and uncertainty is inherent in that very concept.............................
44. In Ghaziabad Development Authority v. Delhi Auto and General Finance Private Limited, , after referring to F.C.I, v. Kamdhenu Cattle Feed Industries (supra), the Apex Court observed as under:
........................ The basic principles in this branch relating to 'legitimate expectation were enunciated by Lord Diplock in Council of Civil Service Unions v. Minister of the Civil Services, 1985 AC 374 (408-409). It was observed in that case that for a legitimate expectation to arise, the decisions of the administrative authority must affect the person by depriving him of some benefit or advantage which either (i) he had in the past been permitted by the decision maker to enjoy and which he can legitimately expect to be permitted to continue to do until there has been communicated to him some rational grounds for withdrawing it on which he has been given an opportunity to comment; or (ii) he has received assurance from the decision maker that they will not be withdrawn without giving him first an opportunity or advancing reasons for contending that they should not be withdrawn. The procedural part of it relates to a representation that a hearing or other appropriate procedure will be afforded the decision is made. The substantive part of the principle is that if a representation is made that a benefit of a substantive nature will be granted or if the person is already in receipt of the benefit that it will be continued and not be substantially varied, then the same could be enforced. In the above case, Lord Frasser accepted that the civil servants had a legitimate exception that they would be consulted before their trade union membership was withdrawn because prior constitution in the past was the standard practice whenever conditions of service were significantly altered. Lord Diplock went a little further, when he said that they has a legitimate expectation, that they would continue to enjoy the benefit of the trade union membership. The interest in regard to which a legitimate expectation could be had must be one which was protectable. An expectation could be based on an express promise or representation or by established past action of settled conduct. The representation must be clear and unambiguous. It could be a representation to the individual or generally to a class of person,
45. In M.P. Oil Extraction v. State of M.P., , the
Apex Court observed that the doctrine of legitimate expectation constitutes a substantive and enforceable right. It was further observed:
.......................Whether protection by way of supply of sal seeds under the terms of agreement requires to be continued for a further period, is a matter for decision by the State Government and unless such decision is patently arbitrary, interference by the Court is not called for. In the fact of the case, the decision of the State Government to extend the protection for further period cannot be held to be per se irrational, arbitrary or capricious warranting judicial review of such policy decision. Therefore, the High Court has rightly rejected the appellant's contention about the invalidity of the renewal clause. The appellants failed in earlier attempts to challenge the validity of the agreement including the renewal clause. The subsequent challenge of the renewal clause, therefore, should not be entertained unless it can be clearly demonstrated that the fact situation has undergone such changes that the discretion in the matter of renewal of agreement should not be exercised by the State................... The doctrine of the "legitimate expectation" has been judicially recognised by thin Court in a number of decisions. The doctrine of "legitimate expectation" operates in the domain of public law and in an appropriate case constitutes a substantive and enforceable right,
46. In National Buildings Construction Corporation v. S. Raghunathan, , the Supreme Court laid down thus:
The doctrine of "Legitimate Expectation" has its genesis in the field of administrative law. The Government and its departments, in administering the affairs of the country, are expected to honour their statements of policy or intention and treat the citizens with full personal consideration without any iota of abuse of discretion. The policy statements cannot be disregarded unfairly or applied selectively. Unfairness in the form of unreasonableness is akin to violation of natural justice. It was in this context that the doctrine of "Legitimate Expectation" was evolved which has today become a source of substantive as well as procedural rights. But claims based on "Legitimate Expectation" have been held to require reliance on representations and resulting detriment to the claimant in the same way as claims based on promissory estoppel.
47. In State of West Bengal v. Niranjan Sinha, (2001) 2 SCC 326 = 2000 AIR SCW 4547, the Supreme Court reiterated the principle in F.C.I, v. Kamdhenu Cattle Feed Industries (supra) and observed as under.
..............................If it is a case of extension of the existing agreement on the same terms and conditions and such consideration gives rise to a question of legitimate expectation being a part of the concerned agreement, economic consideration of getting higher bid for the same period would be a relevant consideration. If the Governmental authorities had found that it would be feasible to have the agency, as in the present case, on fresh terms by enhancing the amount payable to the Government, it would be a relevant factor and in such a case it cannot be said that the legitimate expectation of the respondent had been affected because the public interest would out-weigh the extension of the period of the agreement. The doctrine of "legitimate expectation" is only an aspect of Article 14 of the Constitution in dealing with the citizens in a non-arbitrary manner and thus, by itself, docs not give rise to an enforceable right but in testing the action taken by the Government authority whether arbitrary or otherwise it would be relevant. The decision in Food Corporation of India v. Kamdhenu Cattle Feed Industries (supra) does not lay down any principle which detracts from what we have stated now. In a case where the agency is granted for collection of toll or taxes, as in the present case, it can "be easily discerned that the claim of the respondent for extension of the period of the agency would not come in the way of the Government if it is economically more beneficial to have a fresh agreement by enhancing the consideration payable to the Government. In such an event, it cannot be said that the action of the Government inviting fresh bids is arbitrary. Moreover, the respondent can also participate in the tender process and get his bid considered...........
48. In Punjab Communications Ltd. v. Union of India, , the Apex Court considered the relevant case law on doctrine of legitimate expectation. After referring to the judgments of House of Lords in Council of Civil Service Unions v. Minister for the Civil Service (supra), Pleasure v. Secretary of State, (1997) 3 All ER 577 (HL), and its earlier judgments in Navjyoti Co-operative Group Housing Society v. Union of India, , Food Corporation of India v. Kamdhenu Cattle Feed Industries (supra), Union of India v. Hindustan Development Corporation (supra), Madras City Wine Merchants' Association v. State of Tamil Nadu, , M.P. Oil
Extraction v. State of M.P. (supra) and National Buildings Construction Corporation v. S. Raghunathan (supra), the Apex Court held that substantive legitimate expectation permits the Court to find out whether the change of policy resulting in defeating or denying legitimate expectation is irrational or unreasonable. The following principles were laid down by the apex Court:
(i) For a legitimate expectation to arise, the decisions of administrative authority must affect the person by depriving him of some benefit or advantage, which he had in the past or been permitted by the decision maker, which the person can legitimately expect to be permitted to continue and the person received assurances from the decision maker that the benefit will not be withdrawn without giving him an opportunity of advancing reasons;
(ii) The procedural aspect of legitimate expectation relates to representation for hearing or other appropriate procedure;
(iii) Substantive part of the principle is that, representation made for a benefit of substantive nature, will be granted or if the person is already in receipt of the benefit, it will be continued and not varied;
(iv) The decision makers permitting to change the policy in public interest, cannot be fettered by the application of principle of substantive legitimate expectation;
(v) If the authority proposes to defeat a person's legitimate expectation, the authority should afford the person an opportunity to make a representation in the matter. From this point of view, the doctrine imposed a duty to act fairly by taking into consideration all relevant factors relating to such legitimate expectation;
(vi) The protection of legitimate expectation do not require the fulfilment of legitimate expectation, where an overriding public interest required otherwise;
(vii) If a person is denied the benefit by virtue of a legislative enactment or change in the statutory rules, it is always taken that the result of a change in the policy by Legislation, does not give rise to legitimate expectation;
(viii) The principle of legitimate expectation certainly gives the person sufficient locus standi to seek judicial review; and
(ix) The substantive legitimate expectation merely permits the Courts to find out if the change of policy resulting in defeating legitimate expectation was irrational or unreasonable.
49. To appreciate the contention, it is to be seen whether the decision of the first respondent to convert a part of temporary/ fall back allocation into firm allocation based on six months average supply by the fourth respondent, has resulted in defeating the legitimate expectation; and the said denial is irrational or unreasonable.
50. A reference has already been made to the pre-contract correspondence among the petitioner, GoAP and GOI in MPNG. Nowhere, the petitioner was given any assurance that he would be supplied natural gas over and above 0.75 MCMD. Here, deviating a little, a reference may be made to paragraph 3 of the counter-affidavit filed by Lanco Respondent No. 8 which is as follows.
.................... The petitioner claimed to have obtained approval to set up a 400 MW Power Plant and the Government of India allocated 1.5 Million Cubic Meters Per Day (hereinafter called MCMD) of natural gas taking into consideration of 400 MW. In the affidavit filed by the petitioner it is stated that it has established the Power Plant with a capacity of 235 MW only. The case of the petitioner is that he was allowed to operate 80% on Gas by the Government. Therefore, for 235 MW project if it runs 100% on Gas, it required 0.88 MCMD of Gas only; and if 80% out of 0.88 MCMD is taken into consideration the petitioner is entitled to only 0.704 MCMD of Gas. Now the petitioner has been allocated 0.90 MCMD on 'Firm' basis which is much more than his entitlement even though only 0.88 MCMD is enough for 100% operation of the petitioner plant as per the ratio fixed by the Government as shown by the petitioner. Since the petitioner was allotted 0.90 on 'Firm' basis for a plant of 235 MW he has no right whatsoever to claim more than its eligibility. Further it is submitted that the petitioner was able to finally set up only 216 MW at site conditions and not 235 MW. Therefore, the natural gas required as per above ratio shall be only 0.81 MCMD.
51. The petitioner has not denied it though a rejoinder was filed on 26.8.2003. As seen from the undisputed averments made in the counter-affidavit of Lanco, to enable it to operate the power plant, GVK needs 0.81 MCMD only. That is sufficient to run 235 MW project. If we see Office Memorandum of GOI as well as the letter of GVK dated 21.2.1994 GOI approved the allocation of 0.75 MCMD to the petitioner requiring them to provide dual fuel capacity. The petitioner in its letter dated 21.2.1994 categorically admitted that, first stage of unit was designed to operate with dual fuel up to 20% Naptha. Therefore, to operate the power plant up to 80% with gas, as stated by Lanco, petitioner requires only 0.704 MCMD. This is an important circumstance which cannot be ignored while considering the question of denial of legitimate expectation. The petitioner has no legitimate expectation to establish entirely gas based power plant. It may be remembered that legitimate expectation to be enforceable and protectable must be clear and unambiguous. It is not claimant's protection but larger public interest that should inform determination of legitimate expectation by the Court.
52. What is the position after Respondents 1 and 4 came forward to supply additional quantity on temporary basis under Demand Management Scheme ? A reference may be made to the correspondence between the petitioner and the first respondent in this regard. In their letter dated 21.2.1994, GVK requested the first respondent to register request for additional available gas from Ravva and Kakinada basin "so that 400 MW originally planned power station can be executed to tide over the power shortage in the State". By a communication dated 10.5.1994, the Director (NG) in MPNG replied stating that request of the petitioner for allocation of 1.5 MCMD as against the allocation of 0.75 MCMD has been taken note of and that the same will be taken up for consideration as and when the availability of gas in the region improves. The GOAP through its Secretary addressed a letter to the Secretary to GOI in the Ministry of Power requesting to take up the matter with MPNG to allocate additional quantity of 0.20 MCMD to first phase project of GVK. This letter shows that the petitioner's requirement was an additional 0.20 MCMD to enable first phase of project to run at 100% capacity and it is not 0.30 MCMD. Be that as it is, by another letter, State Government requested GOI in Ministry of Power to recommend to MPNG to allocate 0.30 MCMD to GVK.
53. On 22.4.1997, Mr. Rakesh Kakkar, an official in the Ministry of Power, GOI addressed a D.O. letter to the Joint Secretary in MPNG to allocate additional gas of 0.20 MCMD to first phase project of the petitioner. GATL considered the request by letter dated 8/9.10.1998 and while referring to Article 5.01 of agreement (contract) dated 16.2.1993 informed as under (relevant portion is extracted).
The above request was examined vis-a-vis availability of natural gas in K.G. Basin area. Although long term availability of gas in the area is lesser than overall allocation there may be occasions when additional gas becomes available on temporary/short term basis. During such period if it becomes possible, GAIL may consider within the permissible limit, to supply additional quantity of gas for shorter duration on days when such additional gas is available over and above the existing maximum contracted quantity of 0.750 MMSMD as mentioned in Article 5.01 of the contract dated 16.2.1993.
It may please be noted that such additional supply of gas to your plant under above circumstances would be purely a "TEMPORARY" arrangement under GAIL's Demand Management Scheme. This would not in any way be regarded as giving any preferential rights to you/your company towards any future allocation/distribution of gas supply and it should not be construed as an allocation or even an assurance for such supply or a continuing supply for such additional gas or for the purpose of any fresh allocation of supply of gas in future. GAIL reserves the right to discontinue the supply of such additional quantity and to allot the same in favour of any other party at its sole discretion.
It should further be noted that GAIL will have unrestricted right to discontinue the above "TEMPORARY" arrangements of supply without notice, and in such event the supply of gas would be restricted to the maximum quantity of 0.750 MMSCMD under Article 5.01 of the existing contract dated 16.2.1993. (emphasis and underlining supplied)
54. A reading of the above letter would show that additional gas was allotted to the petitioner purely on temporary basis without conferring any right and subject to right of GAIL. The petitioner company was asked to accept the temporary allocation subject to conditions. The Director of GVK company, acting for and on behalf of the petitioner, accepted the conditions imposed by GAIL for supply of additional 0.30 MCMD on temporary basis. That is to say, whatever additional allocation was made, it was made purely on temporary basis subject to availability and subject to unrestricted right of the fourth respondent to discontinue temporary arrangement under demand management scheme. No assurance was ever given and no right was conferred on the petitioner to seek conversion of 0.30 MCMD temporary allocation into firm allocation. The petitioner who enjoyed extra temporary allocation of 0.30 MCMD for the last about a decade without any demur cannot turn ground and cannot be heard to contend that it had legitimate expectation of conversion of 0.30 MCMD temporary allocation to firm allocation. Therefore, it is not possible to accept that GVK was expressly or impliedly given any assurance or undertaking for converting 0.30 MCMD into firm allocation.
55. It is not denied that under Demand Management System, petitioner was allowed 0.30 MCMD till first respondent took decision to convert 0.15 MCMD (out of 0.30 MCMD) temporary allocation into firm allocation. After the impugned decision, petitioner's firm allocation of 0.75 MCMD has now been substantially increased to 0.90 MCMD firm allocation and the balance of 0.15 MCMD which was earlier additional allocation purely on temporary basis got converted into fall back allocation. In view of the requirements of petitioner for its first phase 235 MW power plant, it is now in an advantageous position. The petitioner was not put to any detriment nor any such detriment is pleaded or proved before this Court. As noticed hereinabove, Lanco (respondent No. 8) has given GVK's total requirement for its first phase and these figures are not denied by the petitioner. Thus, the petitioner is in advantageous position by reason of the impugned decision. As rightly contended by the learned Senior Counsel for fourth respondent Sri E. Manohar, the petitioner's case is not affected by legitimate expectation and no question would arise for consideration. Indeed the petitioner cannot be said to have any grievance to seek redressal in these proceedings under Article 226 of the Constitution of India. Be it noted that pigment of imagination or wishful thinking or hope for allocation of more quantity of natural gas cannot partake a claim for legitimate expectation of the petitioner to get 0.30 MCMD temporary allocation into firm allocation. The decision/ of first respondent based on the recommendation of third respondent can never be termed as arbitrary or irrational or one amounting to denial of legitimate expectation.
56. In the scheme of things after the constitution of GLC, initially the recommendation for allocation of natural gas produced by ONGC and distributed by GAIL has to be made by GLC. The ultimate authority to allocate the gas sector wise or industry wise is MPMG. It is contended vehemently that the allocation of 1.00 MCMD gas on fall back basis in favour of BSES made by MPNG is illegal and arbitrary. It is also contended that allocation of 0.64 MCMD of gas on firm basis in favour of seventh respondent taking into consideration the average supply (fall back allocation), is also illegal. This submission does not hold water. After perusing the memoranda under which GLC was constituted, it is not possible to draw an inference that the ultimate authority vested with GLC. The ultimate authority vested with MPNG headed by Minister for Petroleum and Natural Gas. Therefore in allocating the gas on firm basis to BSES considering the average supply for six months cannot be irrational or arbitrary. Indeed as noticed hereinabove 0.30 MCMD additional allocation in favour of petitioner was only temporary allocation and not even fall back allocation. Inspite of the same, petitioner was given additional 0.15 MCMD as firm allocation. The action taken by Respondents 1 to 3 therefore is reasonable and satisfies the tests of equality and fairness. I hold on Point No. 2 accordingly against the petitioner.
57. In the result, for the above reasons, the writ petition is devoid of merit and is accordingly dismissed with costs. The interim order passed by this Court stands vacated.