Unfair, arbitrary: Gujarat High Court strikes down GAIL clauses on Reliance - Gujarat High Court has set aside clauses in contracts requiring Reliance Industries Ltd to pay GAIL (India) Limited transmission charges for natural gas even though it had laid its own pipeline network, holding that provisions were unfair, arbitrary, and against public policy and could not be sustained.
RIL argued that it should not have to pay transmission charges for transporting natural gas to its plant through pipeline network it built at its own expense. Company had laid 70.08-km pipeline and sought waivers from GAIL through letters dated February 1, 2000, and October 13, 2008, respectively. Despite RIL's objections and investment in its own infrastructure, company had no other option but to succumb to unfair and arbitrary clause of the contract, court observed, citing GAIL's dominant market position.
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Ruling, delivered by Justice Nirzar S Desai on October 16 and made available Thursday, came two days after another dispute over government land allotted for its special economic zone (SEZ) project in Jamnagar. In gas transmission dispute, court set aside contested clauses in two contracts between RIL and GAIL, executed on March 30, 2000, and August 31, 2008. It rejected 14,07,392 shown as expenditure on repairs to the official residence of then SSP Sanjeev Gandhi at Southwood... Records of prior permission and requisite approvals from competent authority were not found during audit, police officer said.
Rejecting allegations, Gandhi said, “Southwood ... is not my personal property; it is government property... I contested notice issued to me by officiating DGP Ashok Tewari over penal rent and other penalties. The state government put that notice in abeyance last month.”
On refund, Gujarat High Court applied principle laid down by Supreme Court in GAIL-IPCL dispute, limiting recovery to legally permissible period rather than entire contract duration. It rejected RIL's request for interest at 18% and directed GAIL to pay simple interest at 8% per annum from payment dates until refund.
Case concerns transmission charges imposed by GAIL for supplying natural gas to RIL's Dahej petrochemical complex, which RIL challenged as unfair, unreasonable, unconscionable and contrary to public policy. RIL's predecessor, Indian Petrochemicals Corporation Ltd, established complex after receiving government approval and assurance of about 8-9 million metric standard cubic metres per day of rich gas.
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Court described GAIL's defence as nothing but an eye-wash, observing that RIL had invested in its own pipeline infrastructure but had no alternative but to accept disputed terms because of GAIL's monopolistic position. Judgment said clauses can be termed as unfair, unconscionable, arbitrary and against public policy and could not be sustained. RIL should not have to pay transmission charges for transporting natural gas to its plant through pipeline network it built at its own expense.
Analytically, Gujarat HC ruling checks GAIL's monopoly - similar to Haryana power discom monopoly. For Reliance, refund with 8% interest helps, but principle that company cannot be forced to pay for its own pipeline sets precedent for open access in gas.
If GAIL loses, other users like IPCL may claim refunds.
Tags: #GujaratHighCourt #GAIL #Reliance #Pipeline #TransmissionCharges #Monopoly #RIL #IPCL #NaturalGas