Holding

The Union Government’s policy to pool RLNG prices is a valid exercise of its legislative power delegated to the executive and does not violate Article 14, thus the policy stands.

Summary

Essar Steel Ltd. and other off‑takers had long‑term contracts to purchase regasified LNG (RLNG) at a fixed price. In 2007 the Union Government issued a policy directive to pool RLNG prices and apply a uniform, non‑discriminatory price to all long‑term contracts, which raised the price for the appellants. The appellants challenged the policy as arbitrary, violative of Article 14 and as an unlawful interference with their contractual rights. The Supreme Court held that price fixing is a legislative function that may be delegated to the executive, and that under Article 73 read with Entry 53 of List I the Union is competent to take such policy decisions. The Court found the policy was formulated after extensive deliberations, applied uniformly to a defined class of consumers, and served a larger public interest, thus not violating Article 14. Consequently, the appeals were dismissed and the High Court’s judgment upholding the policy was affirmed.

Issues considered

The validity of the Union Government's policy decision to pool RLNG prices under Article 73 and Entry 53 of the Seventh Schedule.
Whether the policy decision violates Article 14 of the Constitution by being arbitrary, discriminatory or unreasonable.
Whether the executive can unilaterally alter contractual price terms in the absence of a specific statutory provision.
Whether the Supreme Court has jurisdiction under Article 136 to review the viability of such policy decisions.

Legislation cited

Allocation of Business Rules, 1961 (Second Schedule)s. Item 2, s. Item 6, s. Item 8
Business Transaction Rules, 1961s. Rule 6, s. Rule 7
Central Excise and Salt Acts. Section 11-B
Constitution of Indias. Art. 14, s. Art. 166, s. Art. 73, s. Schedule VII Entry 53
Essential Commodities Act, 1955
Indian Contract Acts. Section 27, s. Section 60
Milk Acts. Section 15

Subjects

price fixingRLNGessential commoditiesArticle 14Article 73policy decisionjudicial reviewcontractual rightsnon‑discriminatory pricingpublic interest

Judgment

[2016] 4 S.C.R. 326

A ESSAR STEEL LTD.
v.
UNION OF INDIA & ORS.
(Civil Appeal No. 4610 of2009)
B APRIL 19,2016
[V. GOPALA GOWDA AND UDAY UMESH LALIT, JJ.)
Constitution of India - Arts. 14, 73 and Schedule Vil, List I,
Entry 53 - Contract for purchase of Regasified Liquified Natural
Gas (RLNG) atfixed price - Thereafter, policy decision ofthe Central
c Government to pool RLNG prices - Co111munication by the sellers
of RLNG to the purchaser (appellant) infor111ing that pursuant to
the Govern111ent policy, price of the gas under the contract would
be revised - The policy decision found consequent action of
unilaterally increasing the price of RLNG - High Court upheld the
D validity of the policy decision - On appeal, held: Though price
fixing is a legislative fzmction, it can be delegated and can be fixed
by executive orders as well - RLNG is an essential commodity and
parliament having enacted Essential Commodities Act, has left it to
the decision of the executive to take steps for fixing the prices of
essential commodities - The Union, by virtue of Art. 73 r/w Entry 53
E
of List I of Seventh Schedule of the Constitution is competent to
legislate and take policy decision in relation to the matters relating
lo mineral oil resotJ,rces and injlam111able substances, which includes
RLNG - The policy decision was taken after due deliberation, in
the interest of the public at large - The objective of the policy was
F to unifY the price of RLNG on a non-discriminatory basis - Moreover,
the consumers of RLNG through long term contracts are a class by
the111selves for the purpose of Art. 14 of the Constitution - The
i111pug11ed decision was to apply to all the players wjthin this class
uniformly - Thus the policy decision cannot be said to be
discriminatory, arbitrary, illegal, unreasonable or otherwise violative
G
of Ari. 14 of the Constitution - Therefore, the inte1ference with the
impugned policy decision is not called for.
Judicial Review - Of policy decision regarding com111ercial
matters - Permissibility - Held: Court should exercise great caution
and restraint when confronted with matters related to the policy
H
326
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 327

regarding commercial matters of country - Executive policies are A
enacted after much deliberation - Therefore, the courts to interfere
with, only when the policy is enacted in arbitrary unreasonable or
malafide manner or if it offends the provisions of the Constitution.
Constitution of India - Art. 136 - Jurisdiction under - Scope
of - Held: Supreme Court, in exercise of its jurisdiction u/Art. 136, B
does not have competence to judge the viability of policy decision
of the Government.
Dismissing the appeals, the Court
HELD: 1.1 This Court should exercise great caution and
restraint when confronted with matters related to the policy c
regarding commercial matters of the country. Executive policies
are usually enacted after much deliberation by the Government.
Therefore, it would not be appropriate for this Court to question
the wisdom of the same, unless it is demonstrated by the aggrieved
persons that the said policy has been enacted in an arbitrary, D
unreasonable or nut/a.fide manner, or that it offends the provisions
of the Constitution of India. [Para 31) (353-C-D)
Peerless General Finance & Investment Co. Ltd. v.
Reserve Bank of India 1992 (1) SCR 406 : 1992 (2)
sec 343 - followed. E
Arun Kumar Agrawal v. Union of India 2013 (3)
SCR 508 : 2013 (7) SCC 1; Villianur Iyarkkai
Padukappu Maiyam v. Union of India 2009 (9)
SCR 225: 2009 (7) SCC 561; Narmada Bachao
Ando/an v. Union of India 2000 (4) Suppl. SCR 94:
F
2000 (10) sec 664 - relied on.
1.2 Supreme Court neither has the jurisdiction nor the
competence to judge the viability of such policy decisions of the
Government in exercise of its appellate jurisdiction under Article
136 of the Constitution of India. fPara 31] 1351-Dl
G
2.1 By virtue of Article 73 of the Constitution read with
Entry 53 of List I of Seventh Schedule to the Constitution, the
Union has the power to legislate and take policy decisions in
relation to the matters pertaining to mineral oil reso~rces and
inflammable substances, which includes RLNG. There is no
H
328 SUPREME COURT REPORTS [2016] 4 S.C.R.

A existing legislative provision as far as fixing of the price of RLNG
is concerned. Thus, the executive of the Union of India is well
within its right to exercise its powers under the Constitution to
take such decisions by way of policy decisions. [Para 32) [354-
F-G]
Association of Natural Gas v. Union of India 2004
B
(3) SCR 534 = 2004 (4) SCC 489 - referred to.
2.2 The objective of the impugned policy decision dated
06.03.2007 is to unify the prices ofRLNG on a non-discriminatory
basis so that there is no distinction between old customers and
new customers, as far as prices of RLNG in the long term
c contracts is concerned. Thus, the impugned policy decision was
passed in the larger public interest, keeping in view the need to
provide RLNG at viable prices to the existing and new customers
alike. It is further clear that it is nearly impossible to predict or'
even control LNG prices, as the same are controlled by global
D market forces. The only way to have any semblance of control
over the prices ofRLNG was to pool the prices ofRLNG procured
by the off-takers under long term contracts. [Para 33) [354-H;
355-A; 356-A-B]
2.3 It becomes clear from a perusal of the documents
produced on record that the executive policy decision dated
E 06.03.2007 to pool the price of RLNG was arrived at after
elaborative discussions between representatives of Qatar, India,
IOC, BPCL, GAIL, ONGC and other experts in the field. It was
an informed decision taken in the interest of the public at large.
The impugned policy decision dated 06.03.2007 has also been
F duly authenticated by the Under Secretary to the Government of
India, which is well within the powers conferred on the Under
Secretary under the Business Transaction Rules, 1961. [Paras
34, 37] [357-B; 359-F-G]
2.4 Even though price fixing is a legislative function; the
G ~. same can be delegated and can be fixed by way of executive orders
·as well. RLNG, being a petroleum product, is an essential
< '
commodity for the. purpose of the Essential Commodities Act,
1955. While Parliament has enacted the Essential Commodities
Act, it has left it to the discretion of the Executive to take
concrete steps for fixing the prices of essential commodities as
H 'and when necessity arises. [Para 37] 357-E-H]
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 329

Mis Sitaran1 Sugar Co. Ltd. v. Union qf India 1990 (1) A
SCR 909 : 1990 (3) SCC 223 - followed.
2.5 The plea of the appellants that the said policy takes
away their vested right, cannot be accepted in light of Clause
11.4 of the Supply Agreement, which clearly provides for a
situation of change in price ofRLNG under the contract as a result B
of change in the policy of the Government. [Para 381 1359-G-HJ
Delhi Development Authority v. Joint Action Committee,
Allottee of SFS Flats 2007 (13) SCR 811 : 2008 (2)
sec 672 - relied on.
2.6 Except a plea that the policy is for the benefit of one c
entity (RGPPL), the appellants have not presented any evidence
to show that they have been discriminated against, as the policy
has been applied for all players across the board, as far as long
term contracts are concerned. Nothing has been brought on
record to show that the said decision is arbitrary, ma/a fide, D
unreasonable or taken after non application of mind. On the
contrary, the documents produced on record by the respondents,
which is the back and forth of communication and minutes of
meetings between Ministers in Qatar and India, as well
Secretaries of the Government and the representatives of IOCL,
BPCL, GAIL, ONGC and Petronet, would clearly show that the E
impugned decision dated 06.03.2007 was taken after due
deliberation and exploring all other possible alternatives to reduce
the price of RLNG, so as to make it viable for the new entrants in
the market to buy it and run their projects in a feasible manner in
the larger public interest. [Para 39] (360-C-E] F
2.7 The consumers of RLNG through long term contracts
are a class by themselves, for the purpose of Article 14 of the
Constitution of India. The impugned policy decision dated
06.03.2007 was to apply to all the players within this class
uniformly and across the board. Thus, the plea that the appellants G
have been discriminated against, or that the impugned policy
decision was taken in an arbitrary manner, cannot be accepted,
as the said plea is wholly untenable in law. [Para 39] (360-F]
2.8 There being no evidence to suggest that the impugned
policy direction is illegal, arbitrary, unreasonable or otherwise
H
330 SUPREME COURT REPORTS [20 I 6] 4 S.C.R.

A violative of Article 14 of the Constitution, there is no reason to
interfere with the same. [Para 40) (360-H; 361-A]
Delhi Development Authority v. Joint Action Committee,
Allottee of SFS Flats 2007 (13) SCR 811 : 2008 (2)
SCC 672; State of Madhya Pradesh v. Thakur Bharat
B Singh 1967 AIR 1170 : 1967 SCR 454; Bishan Das v.
State of Punjab 1961 AIR 1570 : 1962 SCR 69;
Satwant Singh Sawhney v. D. Ramarathnam, Asstt.
Passport Officer 1967 AIR 1836 : 1967 SCR 525; Ram
Prasad Narayan Sahi v. The State of Bihar
1953 AIR 215: 1953 SCR 1129; Prag Ice & Oil Mills
c v. Union of India 1978 (3) SCR 293 : 1978
(3) SCC 459; Union of India v. Cynamide India
Ltd.1981 (2) SCR 841 : 1987 (2) SCC 720; Maganbhai
lshwarbhai Patel v. Union of India 1969 (3) SCR 254
: 1970 (3) SCC 400; Jaipur Development Authority v.
D Vi;ay Kumar Data & Anr: 2011 (7) SCR 242 : 2011 (12)
SCC 94; G.J. Fernandes v. State of Mysore
1967 AIR 1753 : 1967 SCR 636; Lala Ram v. Jaipur
Development Authority 2015 (13) SCALE 559; Central
Dairy Farm v. GI India Ltd. & Ors. 2003 (4) Suppl.
SCR 710 : 2004 (1) SCC 55; Shimnit Utsch India Pvt.
E Ltd. & Anr v. West Bengal Transport Infrastructure
Development Corporation Ltd. & Ors. 2010 (6)
SCRlllO : 2010 (6) SCC 303; Union of India & Am:
v. International Trading Co. & Anr. 2003 (1) Suppl.
SCR 55: 2003 (5) SCC 437; Sahakari Khand Udyog
F Manda! Ltd. v. CCE & Customs 2005 (2) SCR 606 :
2005 (3) SCC 738; Mafatlal Industries Ltd. 1,: Union
of India 1996 (10) Suppl. SCR 585 : 1997 (5) SCC 536
- referred to.
Case loaw Reference
G
2007 (13) SCR 811 relied on Para 10
1967 SCR 454 referred to Para 11
1962 SCR 69 referred to Para 11
1967 SCR 525 referred to Para 12
H
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 331

1953 SCR 1129 referred to Para 13 A
1978 (3) SCR 293 referred to Para 15
1987 (2) SCR 841 referred to Para 15
1969 (3) SCR 254 referred to Para 17
2011 (7) SCR 242 referred to Para 18
B
1967 SCR 636 referred to Para 18
2015 (13) SCALE 559 referred to Para 18
2003 (4) Suppl. SCR 710 referred to Para 20
2010 (6) SCR 1110 referred to Para 22
. 2003 (1) Suppl. SCR 55 referred to Para 22 c
2005 (2) SCR 606 referred to Para 24
1996 (10) Suppl. SCR 585 referred to Para 25
2013 (3) SCR 508 referred to Para 31
2009 (9) SCR 225 relied on Para 31
D
2000 (4) Suppl.SCR 94 relied on Para 31
1992 (1) SCR 406 followed Para 31
2004 (3) SCR 534 referred to Para 32
1990 (1) SCR 909 followed Para 37
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4610 E
of2009.
From the Judgment and Order dated 16.05.2008 of the High Court
of Gujarat atAhmedabad in Special Civil Application No. 4468 of2008
WITH
F
C. A. Nos. 4609 and 4657 of2009.
Ranjit Kumar, SG, Tushar Mehta, ASG, Dr. A.M. Singhvi, Ravindra
Srivastava, Ashok Parija, Nagendra Rai, Gaurav Banerji, Sr. Advs., Pulkit
Tare, MaheshAgarwal, Karan Lahiri, Ms. Neeha Nagpal, Ms. Shashank
Manish, Gopalrao Srikar, Siddharth Srivastava, Raghav Dwivedi, Nitesh
G
Gupta, (For E. C. Agrawala), Aspi Kapadia, Sum it Goel, (For Mis. Parekh
& Co.), S.A. Haseeb, Kaushal Yadav, B. Krishna Prasad, Ritesh Kumar,
K. Parameshwar, Vivek Sharma, N.K. Sharma, Ms. Priyanka Dixit, N.
L. Ganapathi, Jafar Alam, Aditay Mathur, Phaguni N. Lal, Ravi Prakash,
Aditya Dewan, Samir Malik, Lakshmi Raman Singh, Ms. K. V. Bharathi
Upadhyaya, M/s. Parekh & Co., Ms. Bindu Saxena, K.K. Patra, Ms. H
332 SUPREME COURT REPORTS [2016) 4 S.C.R.

A Aparajita Swarup, Shailendra Swarup, Vyom Shah, Ms. Manisha Singh,
P.Y. Yogeshwaran, Avtar Singh Chauhan, Purnima Bhat, Advs. for the
appearing parties.
The Judgment of the Court was delivered by
V. GOPALA GOWDA, J. I. The present appeals arise out of
B the impugned common final judgment and order dated 16.05.2008 passed
in Special Civil Application No. 4468 of2008 etc. by the High Court of
Gujarat at Ahmedabad, wherein by a majority of 2: 1, a Three Judge
bench upheld the validity of the impugned policy decision dated 06.03.2007
on the ground that the Union of India is competent to take the policy
c decision and further it has held that it is either arbitrary, unjust or violative
of the fundamental rights of the appellants herein.
2. Since the facts in all these appeals raise the same issue for our
consideration, for the sake of brevity, we refer to the facts of Civil Appeal
No.4610 of 2009. The necessary relevant facts required to appreciate
D the rival legal contentions advanced on behalf of the parties are stated in
brief hereunder:
India purchases natural gas from Gulf countries. Since gas in large
quantities cannot be feasibly transported by pipelines across countries,
before such gas is transported, it is liquefied and thereafter shipped to.
E India. This liquefied gas is known as Liquefied Natural Gas (hereinafter
referred to as "LNG"). Once this Iiquefied gas reaches India, it is
converted into gas again. This is known as Regasified Liquefied Natural
Gas (hereinafter referred to as "RLNG").
In the instant case, Ras Laffin Natural Gas Company Limited,
Qatar (hereinafter referred to as "RasGas") sold LNG to Petronet LNG
F
Limited (hereinafter referred to as "Petronet"), an Indian company, which
was set up as a Joint venture between the Government oflndia and the
key players in the LNG market like Oil and Natural Gas Corporation
(hereinafte~ referred to as "ONGC"), Indian Oil Corporation Limited
(hereinafter referred to as "IOCL") and Bharat Petroleum Corporation
G Limited (hereinafter referred to as "BPCL"). This was done under a
Sale Purchase Agreement entered in July, 1999 for a period of25 years.
3. Petronet sold the resultant LNG to companies like BPCL, IOCL
and GAIL. They in turn, sold it to customers like Essar Steel, which is
the appellant in Civil Appeal No. 4610 of2009.
H
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 333
[V. GOPALA GOWDA, J.]

4. In the immediate context of the present appeals, Essar Steel A
signed contracts with IOCL, BPCL and GSPCL for purchase ofRLNG
at a fixed price. The price was fixed upto the date 3 I .12.2008. The Gas
Supply Agreements were for the supply of 5 million metric tonnes per
annum (MMTPA) at a fixed price of US $ 2.9412 per million metric
british thermal unit (MMBTU).
B
5. On 06.03.2007, the Central Government issued the impugned
policy directive to Petronet in the following terms:
"I. 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 c
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
for all the existing and new customers. D

2. You are advised accordingly and requested to give effect to the
same immediately."
The letter was authenticated by the Under Secretary to the
Government of India. E
6. In pursuant to the above communication dated 06.03.2007,
letters dated 19.03.2007 and 12.04.2007 were sent from IOCL, BPCL
and GAIL to Essar Steel, informing it that in view of the policy decision
of the Government to pool RLNG prices, the price of gas under the
contract would be revised and increased from Rs. 135 per MMBTU to F
Rs. 207.02 MMBTU. ·- -
7. Aggrieved, the appellant filed Writ Petition No. 5098 of2007
before the High Court of Delhi, challenging the impugned policy decision
and the consequent action of IOCL, BPCL, GAIL and GSPCL in
unilaterally increasing the price of RLNG w.e.f. 01.08.2007, is in
G
contravention of the gas supply contracts which clearly stipulate the
fixed price of US$ 2.93 per MMBTU ofRLNG. Certain other appellants
had also filed Writ Petitions before the High Court of Gujarat urging
various legal grounds questioning the legality of the impugned policy
decisions and the communications received by them. In pursuant to which,
the High Court passed an interim order granting stay of the operation of H
334 SUPREME COURT REPORTS [2016] 4 S.C.R.

A the impugned policy decision. A Transfer Petition No. 513 of2007 was
filed before this Court seeking for transfer of Writ Petition No. 5098 of
2007 from the High Court of Delhi to the Gujarat High Court. Vide order
dated 22.08.2007, this Court vacated the stay operating on the impugned
policy decision and transferred the Writ Petition No. 5098 of2007 from
Delhi High Court to Gujarat High Court and directed the Division Bench
B
of the Gujarat High Court to hear the batch of Writ Petitions. The judges
of the Division Bench could not concur on the opinion and vide order
dated 28.09.2007, referred the matter to a third judge. Vi de order dated
12.10.2007, the single judge opined not to grant any interim relief in
favour of the appellants in their writ petitions. The Chief Justice of the
c Gujarat High Court rejected the prayer of the appellants for stay of the
operation of the impugned policy vide order dated 17.10.2007. The
appellants challenged the correctness of the said order before this Court
by way of filing SLP (C) Nos. 21397-99 of 2007. This Court vide its
order dated 26.02.2008 directed the High Court of Gujarat to list the
Writ Petitions for final hearing before a Three Judge bench. Vide
D
impugned judgment and order dated 16.05.2008, by a majority of2: 1, the
High Collli upheld the impugned policy decision dated 06.03 .2007 and
dismissed the Writ Petition filed by the appellant. The majority judgment
opined as under:
" ...... Union of India, by Empowered Group of Ministers with
E advise of expe1is and Secretaries of various depaiiments of Union
of India, has taken the decision of pooling of price of Regasified
Liquefied Natural Gas, on non-discriminatory basis and thereby
has put under one denomination, consumers of long term contracts
and future consumers. Parties to the contract cannot bind Union
F of India (third party) by terms of contract ... Policy of Union of
India is not bound by contractual terms of two private parties, on
the contrary, contractual terms will be subject to policy decision
by Union oflndia ..... .
As a cumulative effect of the aforesaid facts, reasons and judicial
pronouncement, the impugned decision taken by the Union oflndia
G
dated 06.03.2007, is a policy decision for pooling price of
Regasified Liquefied Natural Gas. Union oflndia is competent to
take this policy decision and the same is neither arbitrary, nor it is
unjust, nor violative of fundamental rights, nor violative of
constitutional rights nor the same is violative of statutory rights of
H the petitioners and the petitioners have failed to establish that they
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 335
[V. GOPALA GOWDA, J.]

have borne the burden of increase in price ofRegasified Liquefied A
Natural Gas without passing the same to their further consumers,
hence, are not entitle to refund. For getting refund, the aforesaid
aspect ought to be established by the petitioners, on the basis of
evidence on record, either in the suit or in the arbitration. There is
no substance in these petitions, and, therefore, all these petitions
B
are hereby dismissed."
Hence, the present appeals.
8. Mr. Abhishek Manu Singhvi, learned senior counsel appearing
on behalf of the appellant Essar Steel in Civil Appeal No. 4610 of2009
has questioned the correctness of the impugned judgment and order c
passed by the High Court. It is contended by him that the contracts
between the appellants and off takers (IOCL, GPSCL) had three
elements, viz., fixed price, for a fixed term, in respect of a fixed basic
quantity. The appellant is aggrieved by the fact that even with this limited
five year period and after having faithfully observed these frozen and
unchangeable contractual parameters of fixed term, fixed price and fixed D
quantity for almost four out of five years, the respondents reneged and
violated these fixed parameters in the last fourteen months of the contract,
all for the benefit of a single entity, that is the Ratnagiri Gas and Power
Private Limited (hereinafter referred to as the "Ratnagiri Power
Project"). E
9. The learned senior counsel further contends that executive
actions of the Union of India which operates to the prejudice of any
person must necessarily have legislative backing. It is contended that in
the present case, no entity except the Ratnagiri Power Project was
benefited as a result of the change of policy by the Central Government. F
10. The learned senior counsel in support of his legal submission
places reliance on the decision of this Court in the case of Del/ti
Development Authority 1( Joint Action Committee, Allottee of SFS
Flats 1, wherein it has held as under: '
"62 ....... Itis well known principle oflaw that a person would be G
bound by the terms of the contract subject of course to its validity.
A contract in certain situations may also be avoided. With a view
to make novation of a contract binding and in particular some of
the terms and conditions thereof, the offeree must be made.known
'(2008) 2 sec 672 H
336 SUPREME COURT REPORTS [2016] 4 S.C.R.

A thereabout. A party to the contract cannot at a later stage, while
the contract was being performed, impose terms and conditions
which were not pa1i of the offer and which were based upon
unilateral issuance of office orders, but not communicated to the
other party to the contract and which were not even the subject
matter of a public notice.
B
67. The stand taken by DOA itself is thatthe relationship between
the parties arises out of the contract. The terms and conditions
therefore were, therefore, required to be complied with by both
the parties. Terms and conditions of the contract can indisputably
be altered or modified. They cannot, however, be done unilaterally
c unless there exists any provision either in contract itself or in law.
Novation of contract in terms of Section 60 of the Contract Act
must precede the contract making process. The parties thereto
must be ad idem so far as the terms and conditions are concerned.
If ODA, a contracting party, intended to alter or modify the terms
D of contract, it was obligatory on its part to bring the same to the
notice of the allocate. Having not done so, it, relying on or on the
basis of the purported office orders which is not backed by any
statute, new terms of contract could thrust upon the other party to
the contract. The said purported policy is, therefore, not beyond
the pale ofjudicial review. In fact, being in the realm of contract,
E it cannot be stated to be a policy decision as such."
I I. The learned senior counsel fmiher contends that executive
action of the Union of India, when it seeks to prejudice the rights of a
person, must have the backing ofa statute. The learned senior counsel
in support of the above contention places reliance on the decision ofa
F Constitution Bench of this Cou1i in the case of Stme o_(Madhya Pradesh
v. Thakur Bharat Singlz 1, wherein it was held as under:
"We have adopted under our Constitution notthe continental system
but the British system under which the rule oflaw prevails. Every
Act done by the Government or by its officers must, if it is to
G operate to the prejudice of any person, be supported by some
legislative authority."
Another Constitution Bench of this Court, in the case of Bis/um Das v.
State of Punjab 3, held as under:
2 AIR 1967 SC 1170

H 3
AIR 1961SC1570
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 337 .
[V. GOPALA GOWDA, J.]

"As pointed out by this Court in Wazir Chand v. The State of A
Himachal Pradesh 1954 Cri LJ 1029, the State or its executive
officers cannot interfere with the rights of others unless they can
point to some specific rule of law which authorises their acts. In
Ram Prasad Narayan Sahi v. The State of Bihar [I 953]4 SCR
1129 this Court said that nothing is more likely to drain the vitality
B
from the rule of law than legislation which singles out a particular
individual from his fellow subjects and visits him with a disability
which is not imposed upon the others."
12. The learned senior counsel further places reliance on yet
another constitution bench decision of this Court in the case of Satwm1t
Singh Sawlmey 1~ D. Ranuirat/11um1,Asstt. Passport Officer, wherein c
it was held as under:
"Article 14 says thatthe State shall not deny to any person equality
before the law or the equal protection of the laws within the
territory of India. This doctrine of equality before the low is a
necessary corollary to the high concept of the rule oflaw accepted D
by our Constitution. One of the aspects of rule of law is that
every executive action, if it is to operate to the prejudice of any
person, must be supported by some legislative authority."
Placing strong reliance on the cases cited above, the learned senior
counsel contends that the impugned policy decision of the Union oflndia E
has no statutory flavour, as price pooling has been implemented neither
through statute nor delegated legislation.
13. The learned senior counsel further contends that the impugned
policy decision is an executive action benefitting a single person, namely
Ratnagiri Power Project. Thus, this is on a worse footing than single F
person legislation, as it is a single person executive action. The learned
senior counsel places reliance on the decision of a Constitution Bench of
this Court in support of the above legal plea urged by him in the case of
Ram Prasad Narayan Sa/ti v. Tlte State of Bilwr', wherein it was
held as under:
G
"There have been a number of decisions by this court where the
question regarding the nature and scope of the guarantee implied
in the equal protection clause of the Constitution came up for
consideration and the general principles can be taken to be fairly
'AIR 1967 SC 1836
'AIR 1953 SC 215 H
338 SUPREME COURT REPORTS [2016) 4 S.C.R.

A well settled. What this clause aims at is to strike down hostile
discrimination or oppression or inequality. As the guarantee applies
to all persons similarly situated, it is certainly open to the legislature
to classify persons and things to achieve particular legislative
objects; but such selection or differentiation must not be arbitrary
and should rest upon a rational basis, having regard to the object
B
which the legislature has in view. It cannot be disputed that the
legislation in the present case has singled out two individuals and
one solitary transaction entered into between them and another
private party, namely, the Bettiah Wards Estate and has declared
the transaction to be a nullity on the ground that it is contrary to
c the provisions oflaw, although there has been no adjudication on
this point by any judicial tribunal. It is not necessaryforour present
purpose to embark upon a discussion as to how far the doctrine of
'separation of powers has been recognised in our Constitution
and whether the legislature can arrogate to itself the powers of
the judiciary and proceed to decide disputes between private parties
D
by making a declaration of the rights of one against the other. It is
also unnecessary to attempt to specify the limits within which any
legislation, dealing with private rights, is possible within the purview
of our Constitution. On one point our Constitution is clear and
expli_sit, namely, that no law is valid which takes away or abridges
E the fundamental rights guaranteed under Part III of the Constitution.
There can be no question, therefore, that it the legislation in the
present case comes within the mischief of article 14 of the
Constitution, it has got to be declared invalid."
14. _The learned senior counsel contends that Government action,
F more so executive action, which is not subjected to democratic debate in
the Parliament, benefitting or burdening a single person or entity ought
to be viewed as especially pernicious and discriminatory, and ought to be
treated as such, especially while scrutinizing such action under the lens
ofArticle 14 of the Constitution. It is submitted that in the instant case, it
is not a legislative action which has marked out the Ratnagiri Power
G Project for a special benefit; this is a single person executive action,
which is on an even weaker footing.
15. The learned senior counsel further contends that price fixation
is a legislative function and in support of this contention he places reliance
on the Seven Judge Bench decision of this Court in the case of Prag Ice
H
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 339
[V. GOPALA GOWDA, J.]

& Oil Mills v. Union of Indi<t6, wherein it was held as under: A
"We think that unless, by the terms of a particular statute, or order,
price fixation is made a quasi-judicial function for specified
purposes or cases, it is really legislative in character. ... "
Further, it was h.eld in the case of Union of India v. Cynamide
India Ltd7 that: B
"7 .The third observation we wish to make is, price fixation is more
in the nature of a legislative activity than any other. It is true that,
with the proliferation of delegated legislation, there is a tendency
for the line between legislation and administration to vanish into
an illusion. Administrative, quasi-judicial decisions tend to merge c ,•

in legislative activity and, conversely, legislative activity tends to
fade into and present an appearance of an administrative or quasi-
judicial activity. Any attempt to draw a distinct line between
legislative and administrative functions, it has been said, is 'difficult
in theory and impossible in practice'. Though difficult, it is D
necessary that the line must sometimes be drawn as different
legal rights and consequences may ensue. The distinction between
the two has usually been expressed as 'one between the general
and the particular'. 'A legislative act is the creation and
promulgation of a general rule of conduct without reference to
particular cases; an administrative act is the making and issue of E
a specific direction or the application of a general rule to a
particular case in accordance with the requirements of policy'.
'Legislation is the process of formulating a general rule of conduct
without reference to particular cases and 'usually operating in
future; administration is the process of performing particular acts, F
of issuing particu tar orders or of making decisions which apply
general rules to particular cases.' It has also been said "Rule
making is normally directed toward the fonnulation ofreq~irements.
having a general application to all members ofa broadly identifiable
class" while, "adjudication, on the other hand, applies to specific
individuals or situations". But, this is only a bread distinction, not G
necessarily always true. Administration and administrative
adjudication may also be of general application and there may be
legislation of particular application only. That is not ruled out. Again,
'1978) 3 sec 459
1
(1987)2 sec no H
340 SUPREME COURT REPORTS [2016] 4 S.C.R.

A adjudication determines past and present facts and declares rights
and liabilities while legislation indicates the future course of action.
Adjudication is determinative of the past and the present while
legislation is indicative of the future. The object of the rule, the
reach of its application, the rights and obligations arising out of it,
its intended effect on past, present and future events, its form, the
B
manner of its promulgation are some factors which may help in
drawing the line between legislative and non-legislative acts. A
price fixation measure does not concern itself with the interests
of an individual manufacturer or producer. It is generally in relation
to a particular commodity or class of commodities or transactions.
c It is a direction of a general charaCter, not directed against a
particular situation. It is intended to operate in the future. It is
conceived in the interests of the general consumer public. The
right of the citizen to obtain essential articles at fair prices and the
duty of the State to so provide them are transformed into the
power of the State to fix prices and the obligation of the producer
D
to charge no more than the price fixed. Viewed from whatever
angle, the angle of general application the prospectively of its
effect, the public interest served, and the rights and obligations
flowing therefrom, there can be no question that price fixation is
ordinarily a legislative activity. Price-fixation may occasionally
E assume an administrative or quasi-judicial character when it relates
to acquisition or requisition of goods or property from individuals
and it becomes necessary to fix the price separately in relation to
such individuals. Such situations may arise when the owner of
property or goods is compelled to sell his property or goods to the
Government or its nominee and the price to be paid is directed by
F
the legislature to be detennined according to the statutory guidelines
laid down by it. In such situations the determination of price may
acquire a quasi-judicial character. Otherwise, price fixation is
generally a legislative activity. We also wish to clear a
misapprehension which appears to prevail in certain circles that
G price-fixation affects the manufacturer or producer primarily and
therefore fairness requires that he be given an opportunity and
that fair opportunity to the manufacturer or producer must be
read into the procedure for price-fixation. We do not agree with
the basic· premise that price fixation primarily affects
manufacturers and producers. Those who are most vitally affected
H
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 341
[V. GOPALA GOWDA, J.]

are the consumer public. It is for their protection that price-fixation A
is resorted to and any increase in price affects them as seriously
as any decrease does a manufacturer, if not more."
16. The learned senior counsel fmther urged that the impugned
policy decision was nothing but a means to provide subsidized gas to the
Ratnagiri Power.Project. If the ultimate intention ofthe Union of India B
was to provide subsidized gas to the Ratnagiri Power Profect, then the
cost of the same should have been borne by Union oflndia jtself and not
by entities like the appellants.
17. Mr. Ravindra Srivastava, learned senior counsel appearing on
behalf of the appellant in Civil Appeal No. 4657 of2009 contends that c
the government, a third pa1ty to the contract, in purported exercise of its
executive power under Article 73 of the Constitution, cannot interfere
with, much less alter the terms and conditions of the contract between
the two private parties.
18. The learned senior counsel further contends that the power to
unilaterally alter the terms and conditions of an agreement is not available
D
even to a party to a contract and such a unilateral exercise affects the
integrity of the contract and therefore it is illegal. Since the impugned
policy decision directly results in infringement of the legal rights of a
private party governed by the contract, it can be done only with the
support of validly enacted law. The learned senior counsel places reliance E
in support of the above plea on a Constitution Bench decision of this
Court in the case of Maganbhai Ishwarblwi Patel v. Union of India 8
wherein it was held as under:
"If, in consequence of the exercise of executive power, rights of
the citizens or others are restricted or infringed, or laws are F
modified, the exercise of power must be supported by legislation
: where there, is no such restriction, infringement of the right or
modification of the laws, the executive is competent to exercise
the power."
The learned senior counsel further contends that the communication
G
dated 06.03 .2007 is not a policy decision and merely attaching the label
of 'policy' and therefore, it does not make it a policy decision. Reliance
is placed on the decision of this Court in the case of Jaipur Development
Authority v. Vi}ay Kumar Data & Anr. 9 , wherein it was held as under:
"(1970) 3 sec 400
• (2011) 12 sec 94 H
342 SUPREME COURT REPORTS [2016] 4 S.C.R.

A "49. It is trite to say that all executive actions of the Government
oflndiaand the Government of a State are required to be taken in
the name of the President or the Governor of the State concerned,
as the case may be [Articles 77( 1) and 166( I)]. Orders and other
instruments made and executed in the name of the President or
the Governor of a State, as the case may be, are required to be
B
authenticated in such manner as may be specified in rules to be
made by the President or the Governor, as the case may be
[Articles 77(2) and 166(2)].
52 ....... Article 166(1) requires that all executive action of the
State Government shall be expressed to be taken in the name of
c the Governor. This clause relates to cases where the executive
action has to be expressed in the shape of a formal order or
notification. It prescribes the mode in which an executive action
has to be expressed. Noting by an official in the departmental file
will not, therefore, come within this article nor even noting by a
D Minister. Every executive decision need not be as laid down under
Article 166( I) but when it takes the form of an order it has to
comply with Article 166( 1). Article 166(2) states that orders and
other instruments made and executed under Article 166(1 ), shall
be authenticated in the manner prescribed. While Clause (1) relates
to the mode of expression, Clause (2) lays down the manner in
E which the order is to be authenticated and Clause (3) relates to
the making of the rules by the Governor for the more convenient
transaction of the business of the Government. A study of this
article, therefo~e, makes it clear that the notings in a file get
culminated into an order affecting right of parties only when it
F reaches the head of the department and is expressed in the name
of the Governor, authenticated in the manner provided in Article
166(2).
53. lt is thus clear that unless an order is expressed in the name of
the President or the Governor and is authenticated in the manner
prescribed by the rules, the same cannot be treated as an order
G made on behalf of the Government. A reading of letter dated
6.12.200 I shows that it was neither expressed in the name of the
Governor nor it was authenticated manner prescribed by the Rules.
That letter merely speaks of the discussion made by the Committee
and the decision taken by it. By no stretch of imagination the
H same can be treated as a policy decision of the Government within
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 343
[V. GOPALA GOWDA, J.]

the meaning of Article 166 of the Constitution." A
Further reliance has been placed by him on a Three Judge bench
decision of this Court in the case of GJ. Fernandes v. State ofMysore' 0,.
wherein it was held as under:
"12 ...... Of course, under such executive power, the State can
give administrative instructions to its servants how to act in certain B
circumstances; but that will not make such instructions statutory
rules which are justifiable in certain circumstances..-ln order that
such executive instructions have the force of statutory rules it
must be shown that they have been issued either under the authority
conferred on the State Government by some statute or under some c
provision of the Constitution providing therefore."
More recently, this Com1 has observed in the case of Lala Ram
v. Jaipur Development Authority" as under:
"At the same time where however, a power or authority is
conferred with a direction that certain regulation or formality shall D
be complied with, it would neither be unjust nor incorrect to exact
a rigorous observance of it as essential to the acquisition of the
right of authority."
19. The learned senior counsel contends that the Empowered Group
of Ministers (EGOM) was supposed to recommend the restructuring of E
the Ratnagiri Power Project. There was nothing to say that it was
empowered to restructure the prices of gas as well. The Rules ofBusiness
requires that executive action is taken in a manner in accordance with
the law. The learned senior counsel further draws our attention to the
provisions of the Government oflndia (Transaction of Business) Rules,
F
1961 (hereinafter referred to as the "Business Rules"), extracted as
under:
'.'3. Disposal of Business by Ministries.- Subject to the provisions
of these Rules in regard to consultation with other departments
and submission of cases to the Prime Minister, the Cabinet and its
Committees and the President, all business allotted to a department G
under the Government of India (Allocation of Business) Rules,
1961, shall be disposed of by, or under the general or special
directions of, the Minister-in-charge.
10
AIR 1967 SC 1753
II 2015 (13) SCALE 559 H
344 SUPREME COURT REPORTS [2016] 4 S.C.R.

A 6. Committees of the Cabinet.- (I) There shall be Standing
Committees of the Cabinet as set out in the First Schedule to
these Rules with the functions specified therein. The Prime Minister
may from time to time amend the Schedule by adding to or reducing
the numbers of such Committees or by modifying the functions
assigned to. them. (2) Each Standing Committee shall consist of
B
such Ministers as the Prime Minister may from time to time specify.
(3) Subjectto the provisions of rule 7, each Standing Committee
shall have the powerto consider and take decisions on matters
referred to it by order of the Minister concerned or by the Cabinet."
The learned senior counsel contends thatthe policy directives have
c been issued by the Union oflndia in violation of the Business Rules.
Under the said Business Rules, the power of disposal of business of the
Department is vested in the Minister-in-charge. The EGOM is neither a
Committee of Cabinet nor Standing Committee within the meaning of
Rule 6 of the Business Rules. The learned senior counsel contends that
D nothing has been placed on record either before the High Court or this
Com1 to show any 'authorisation' to the EGOM for taking decision on
the matters of price fixation. The EGOM did not have the mandate to
decide as regards the price of the LNG under tbe existing contract.
20. Mr. Shyam Diwan, the learned senior counsel appeai'ing on
E behalf of GSPCL in Civil Appeal No. 4609 of 2009 contends that the
power to issue the impugned policy decision by the Central Government
is an independent one and it does not depend on the individual contracts
between the parties. In the instant case, the impugned directive issued
to Petronet has resulted in a domino effect, all the way down to the last
purchaser. The learned senior counsel contends that the impugned policy
F decision affects the rights of the consumers without any statutory backing
and is therefore bad in law liable to be quashed. The learned senior
counsel places reliance on the decision of this Court in the case of Ce11tml
Dairy Farm v. GI India Ltd. & Ors.12, wherein it was held as under :-
"The power of State Government to fix prices of milk and milk
G products by issuance of notification under Section 15 of the Milk
Act is merely an enabling one, and it is not obligatory for State
Government in all circumstances to fix the prices. In the instant
case, the prices of cream and paneer were fixed through mutual
negotiations between authorised representatives of the two
H " (2004 J 1 sec 55
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 345
[V. GOPALA GOWDA, J.]

companies and with the assistance of the authorities of the state. A
Such binding terms of agreement reached between the two
companies could not be frustrated by statutory intervention of the
State by issuance of notification for fixation of prices under Section
15 of the Act. As has been pointed out by the State the notification
was intended to apply only to respondent Glindia Ltd. as the supplies
B
of cream and paneer were being made to the appellant Central
Fairy Farm by the Glindia Ltd. alone."
The learned senior counsel further contends that change in policy
can be no defence for breaching contract. Similarly, by mere issuance
of a policy directive, the government cannot direct parties to breach the
terms of the contract negotiated among themselves. As long as the policy c
directs variation in the existing arrangements or destroys contracts, the
same is violative of Article 14 of the Constitution oflndia.
21. On the other hand, Mr. Ranj it Kumar, learned Solicitor General
for India contends that the price of LNG is linked directly to the price of
crude oil, the appellants are ignoring the benefit they were getting as a D
result of the effotis by the Government oflndia.
22. The learned Solicitor General contends that a policy cannot be
vitiated only on the ground of change. Reliance in placed on the decision
of a Three Judge bench of this Court in the case of Sltimnit Utsc/1
India Pvt. Ltd. & Anr v. West Bengal Transport Infrastructure E
Development Corporation Ltd. & OrsH, wherein it was held as under:
"52 ... The courts have repeatedly held that government policy can
be changed with changing circumstances and only on the ground
of change, such policy will not be vitiated. The government has
discretion to adopt a different policy or alter or change its policy F
calculated to serve public interest and make it more effective.
Choice in the balancing of the pros and cons relevant to the change
in policy lies with the authority. But like any discretion exercisable
by the government or public authority, change in policy must be in
conformity with Wednesbury reasonableness and free from G
arbitrariness, irrationality, bias and malice."
In the case of Union of India. & Anr. v. International Trading
Co. &Anr.'\ this Court held as under:
" (2010i 6 sec 303
" <2003l s sec 437 H
346 SUPREME COURT REPORTS [2016] 4 S.C.R.

A "14. It is trite law that Article 14 of the Constitution applies also to
matters of governmental policy and ifthe policy or any action of
the Government, even in contractual matters, fails to satisfy the
test of reasonableness, it would be unconstitutional.
15. While the discretion to change the policy in exercise of the
B executive power, when not trammelled by any statute or rule is
wide enough, what is imperative and implicit in terms of Article
14 is that a change in policy must be made fairly and should not
give impression that it was so done arbitrarily on by any ulterior
criteria. The wide sweep of Article 14 and the requirement of
every State action qualifying for its validity on this touchstone
c irrespective of the field of activity of the State is an accepted
tenet. The basic requirement of Article 14 is fairness in action by
the state, and non-arbitrariness in essence and substance is the
heart beat of fair play. Actions are amenable, in the panorama of
judicial review only to the extent that the State must act validly
D for a discernible reasons, not whimsically for any ulterior purpose.
The meaning and true import and concept ofarbitrariness is more
easily visualized than precisely defined. A question whether the
impugned action is arbitrary or not is to be ultimately answered on
the facts and circumstances of a given case. A basic and obvious
test to apply in such cases is to see whether there is any discernible
E principle emerging from the impugned action and if so, does it
really satisfy the test of reasonableness."
The learned Solicitor General has also sought to explain the reason for
the change in policy. He has taken us through the history of the two Sale
J>urchase Agreements between Petronet and RasGas. On the First
F Agreement, it has been stated in the Reply filed by Petronet as under:
"3.3 ...... The first LNG SPA was signed on 31.07.1999 for supply
of5 MMTPAofLNG for a period of25 years commencing from
January 2004. Originally, the foreign currency component (FCC)
of the LNG price under the First LNG SPA was intended to be
.G market driven and hence variable. However, Respondent No. I
took up the issue with the State of Qatar and brought about a
fixed FCC for a period of five years ending 31.12.2008, whereby
FCC under First LNG SPA was fixed at USO 2-3 upto 31.12.2008
based on crude price ofUSD 20 per barrel. This has been agreed
H between RasGas and the answering respondent by way of a Side
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 347
[V. GOPALA GOWDA, J.]

Letter dated 26.09 .2003 to the First LNG SPA. A new price regime A
would come into effect from 01.01.2009 under which the LNG
price would have a link to the market prices, and would vary each
month.
3.4 The answering respondent has an obligation to sell RLNG,
produced from imported LNG under the First LNG SPA, to the B
Off-takers for onward sale to the downstream customers. Hence,
corresponding to the First LNG SPA, the answering respondent
also signed separate GSPAs with each of the three off-takers,
viz, GAIL, IOC and BPCL ON 26.09.2003 for the sale of 5
MMTPA of RLNG. FCC under the First GSPA was also fixed at
USD 2-3 per MMBTU."
c
Since the new price regime was to come into effect on 01.01.2009,
Petronet started negotiating with RasGas from 2007 for additional supply
of LNG under a term contract. The new Agreement was signed on
03.07.2007. The FCC of the LNG prices under this agreement was
fixed at USD 8-9 per MMBTU for a total of 1.5 MMTPA and was to D
remain so until 31.12.2008. The benefit of the executive policy direction
dated 06.03 .2007 has been explained in the following terms: ·
"3 .5 In early 2007, the answering respondent was negotiating with
RasGas for additional supplies of LNG under a term contract.
Pursuant thereto a fresh LNG SPA was signed between RasGas E
and the answering respondent on 03 .07 .2007 for additional supply
of 1.5 MMTPA of LNG. The FCC of the LNG price under the
Second LNG SPA is USD 8-9 per MMBTU and will remain so
until 31.12.2008.
3.6 In the meantime, GOI had issued its policy directive by F
communication dated 06.03.2007. In terms of the said policy
directive, RLNG procured under long term contracts is to have a
uniform non-discriminatory pooled price based on weighted
average which is binding on the Off-takers. The only long term
RLNG contracts upstream as on this date, was between the G
answering respondent and the Off-takers under the First GSPA.
3.7 ...... In the absence of the price pooling policy, the FCC of 1.5
MMTPA ofRLNG under the Second GSPA would also have been
USD 8-9 per MMBTU ... However, in view of the uniform price
pooling directive, which was binding on the Off-takers, FCC under
H
348 SUPREME COURT REPORTS [2016] 4 S.C.R.

A the Second GSPA has been fixed at USD 4.32 per MMBTU.
The uniform pooled price ofUSD 4.32 per MMBTU was arrived
at by taking the weighted average of the FCC of USD 2-3 for 5
MMTPA and USD 8-9 for 1.5 MMTPA. The answering
respondent has facilitated implementation of the policy by pooling
the RLNG prices under the First and Second GSPA's vis-a-vis
B
the Off-takers."
23. Mr. Gourab Banerji, the learned senior counsel appearing on
behalf ofrespondent-GAIL in Civil Appeal No. 4610 of2009 contends
that not only Ratnagiri Power Limited, but several other Public Sector
Undertakings would benefit as a result of the pooling of prices. Thus, it
c is the larger public interest which must be considered.
24. The learned senior counsel further contends that the claim of
the appellants cannot be sustained in law as they have already passed
the burden of the increase in the price on to their customers. The learned
senior counsel places reliance on the decision of this Court in the case of
D Saltakari Kltand Udyog Manda/ Ltd. v. CCE & Customs 15 ,wherein
the concept of unjust enrichment was elaborated as under:
"Stated simply, 'Unjust enrichment' means retention ofa benefit
by a person that is unjust or inequitable. 'Unjust enrichment' occurs
when a person retains money or benefits which injustice, equity
E and good conscience, belong to someone else.
The doctrine of 'unjust enrichment', therefore, is that no person
can be allowed to enrich inequitably at the expense of another. A
right ofrecovery under the doctrine of'unjust enrichment' arises
where retention of a benefit is considered contrary to justice or
F against equity."
25. Mr. Tushar Mehta, learned Additional Solicitor Ge_neral
appearing on behalf of the respondents in Civil Appeal Nos. 4609 and
4657 of 2009 contends that the pooled prices came into effect on
29.08.2007 and remained in effect till 31.12.2008. What is under
G consideration in the present appeals is the impact of the pooling price
policy supplied to the consumers between 29.08.2007and3I:12.2008.
The only relief that the appellants in the present case can claim is that of
refund of the differential prices paid by them. The learned Additional
Solicitor General contends that this claim also cannot succeed, since the

H "(2005 J J sec 738
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 349
[V. GOPALA GOWDA, J.]

appellants already passed on the burden to the consumers and payment A
of differential prices to them would result in unjust enrichment. The
learned ASG places reliance on the nine judge bench decision of this
Court in the case of M£!fat/al Industries Ltd. v. Union of lndia 16 ,
wherein it was held as under:
"I 05. It would be evident from the above discussion that the claims B
for refund under the said two enactments constitute an independent
regimen. Every decision favourable to an assessee/manufacturer,
whether on the question of classification, valuation or any other
issue, does not automatically entail refund. Section 11-B of the
Central Excises and Salt Act and Section 27 of the Contract Act,
whether before or after 1991 Amendment - as interpreted by us
c
herein - make every refund claim subject to proof of not passing-
on the burden of duty to others. Even if a suit is filed, the very
same condition operates. Similarly, the High Court while examining
its jurisdiction under Article 226 - and this Court while acting under
Article 32 - would insist upon the said condi_tj9n being satisfied D
before ordering refund. Unless the claimant for refund establishes
that he has not passed on the burden of duty to another, he would
not be entitled to refund, whatever be the proceeding and whichever
be the forum. Section 11-B/Section 27 are constitutionally valid,
as explained by us hereinbefore. They have to be applied and
E
followed implicitly wherever they are applicable."
26. The learned Additional Solicitor General further contends that
there is nothing on record to suggest that the appellants had suffered
any loss during the relevant period. It is further submitted that the Union
oflndia is well within its right to take a policy decision in public interest.
This policy decision has been taken after taking into consideration all F
relevant factors and is in consonance with the principles enshrined in
Article I 4 of the Constitution oflndia. The learned ASG further contends
thatthe unifonn price pooling policy is within the executive powers vested
with the Union oflndia under Articles 73 and 246 read with Entry 53 of
List I of Seventh Schedule of the Constitution oflndia, as also Rules 2 & G
3 ( 1) and Items 2, 6 and 8 in the Second Schedule to the Government of
India Allocation of Business Rules, 1961. The learned Additional Solicitor
General further contends that there is no vested right in price, that it
cannot be raised at all. It was infact only the intervention of the

" ( 1997) s sec 536 H
350 SUPREME COURT REPORTS [2016] 4 S.C.R.

A government that ensured availability of the natural resources at a lower
rate. The policy also provides for a level playing field and a non
discriminatory regime.
27. We have heard the learned counsel appearing on behalf of the
parties. The main issue which arises for our consideration is whether
B impugned policy decision dated 06.03 .2007 is bad in law, and if so, whether
the appellants are entitled to any refund of the amount paid by them as a
result of increase in price of RLNG after the impugned policy decision
dated 06.03.2007.
28. Before we examine the val id ity of the impugned pol icy decision
c dated 06.03.2007, it is important to examine clause I 1.4 of the Supply
Agreement between IOCL and Essar Steel which reads as under:
"I I .4 Change in Law
If at any time due to a change in law or a change in the policy of
any Government. ........... seller incurs am increase or decrease
D in its costs or expenses, the seller may request a revision of the
Contract Price to reflect any such increase or decrease and the
Contract Price shall stand so increased or decreased. Such
increased or decreased Contract Price shall be reflected in the
immediate following Invoice."
E A similar clause has been incorporated in the other agreements as
well.
29. It becomes clear from a perusal of the aforementioned clause
that price revision on account of change in government policy is a situation
which had been envisaged by the parties themselves at the time of
F entering into the Supply Agreement.
30. Before we can examine the validity of the impugned policy
decision dated 06.03.2007, it is crucial to understand the extent of the
power vested with this Court to review policy decisions.
In the case of Delhi Development Authority (supra) on issue of
G judicial review of policy decisions, the power of the court is examined
and observed as under:
"An executive order termed as a policy decision is not beyond the
pale of judicial review. Whereas the superior courts may not
interfere with the natty grittiest of the policy, or substitute one by
H
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 351
[V. GOPALA GOWDA, J.]

the other but it will not be correct to contend that the court shall A
like its judicial hands off, when a plea is raised that the impugned
decision is a policy decision. Interference therewith on the part of
the superior court would not be without jurisdiction as it is subject
tojudicial review.
Broadly, a policy decision is subject to judicial review on the B
following grounds:
(a) if it is unconstitutional;
(b) if it is de 'hors the provisions of the Act and the Regulations;
(c) ifthe delegatee has acted beyond its power of delegation;
(d) ifthe executive policy is contrary to the statutory or a larger c
policy."
31. Thus, we will test the impugned policy on the above grounds
to determine whether it warrants our interference under Article 136 or
not. Further, this Court neither has the jurisdiction nor the competence to
judge the viability of such policy decisions of the Government in exercise D
of its appellate jurisdiction under Article 136 of the Constitution oflndia.
In the case of Arun Kumar Agrawal " Union of lmlia 17, this Court
has further held as under:
"This Court sitting in the jurisdiction cannot sit in judgment over
the commercial or'business decision taken by parties to the E
agreement, after evaluating and Assessing its monetary and
financial imp,lications, unless the decision is in clear violation of
any statutory provisions or perverse or for extraneous
considerations or improper motives. States and its instrumentalities
can enter into various contracts which may involve complex
economical factors. State or the State undertaking being a party F
to a contract, have to make various decisions which they deein
just and proper. There is always an element of risk in such
decisions, ultimately it may turn out to be a 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 a G
wrong, that itself is not a ground to hold that the decision was
mala fide or done with ulterio1,motives."
(emphasis laid by this Court)

17
(2013)7SCC I
H
352 SUPREME COURT REPORTS [2016] 4 S.C.R.

A In the case of Vi/liwmr lyarkkai Padukappu Maiyam v. Union
of I11dia 18, it was held as under:
"It is neither within the domain of the courts nor the scope of
judicial review to embark upon an enquil)' as to whether a particular
public policy is wise or whether better public policy can be evolve.d.
Nor are the courts inclined to strike down a policy at the behest of
B
a Petitioner merely because it has been urged that a different
policy would have been fairer or wiser or more scientific or more
logical. Wisdom and advisabi 1ity of economic pol icy are ordinarily
not amenable to judicial review. In matters relating to economic
issues the Government has, while taking a decision, right to "trial
c and error" as long as both trial and error are bona fide and within
the limits of the authority. For testing the correctness of a pol icy,
the appropriate forum is Parliament and not the courts."
(emphasis laid by this Court)
A Three Judge bench of this Court in the case of Narmada
Baclzao Ando/an v. Union of Imlia 19 cautioned against Courts sitting
D
in appeal against policy decisions. It was held as under:
"234.ln respect of public projects and policies which are initiated
by the Government the Courts should not become an approval
authority. Normally such decisions are taken by the Government
after due care and consideration. In a democracy welfare of the
E people at large, and not merely of a small section of the society,
has to be the concern of a responsible Government. If a considered
policy decision has been taken, which is not in conflict with any
law or is not mala fide, it will not be in Public Interest to require
the Court to go into and investigate those areas which are the
function of the executive. For any project which is approved after
F due deliberation the Court should refrain from being asked to review
the decision just because a petitioner in filing a PIL alleges that
such a decision should not have been taken because an opposite
view against the unde11aking of the project, which view may have
been considered by the Government, is possible. When two or
G more options or views are possible and after considering them the
Government takes a policy decision it is then not the function of
the Court to go into the matter afresh and, in a way, sit in appeal
over such a policy decision."
(emphasis laid by this Court)
"(2009J 7 sec 56 I
H " (2000) 1osec 66~
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 353
[V. GOPALA GOWDA, J.]

A similar sentiment was echoed by a Constitution Bench of this A
Court in the case of Peerless General Finance & l11vestment Co.
Ltd. v. Reserve Bank of India", wherein it was observed as under:
"Courts are not to interfere with economic policy which is the
function of experts. It is not the function of the Courts to sit in
Judgment oyer matters ofeconomic policy and it must necessarily B
be left to the expert bodies. In such matters even experts can
seriously and doubtlessly differ. Courts cannot be expected to
decide them without even the aid of expe1is."
A perusal of the above mentioned judgments of this Court would show
that this Court should exercise great caution and restraint when c
confronted with matters related to the policy regarding commercial matters
of the country. Executive policies are usually enacted after much
deliberation by the Government. Therefore, it would not be appropriate
for this Court to question the wisdom of the same, unless it is demonstrated
by the aggrieved persons that the said policy has been enacted in an
arbitrary, unreasonable or malafide manner, or that it offends the provisions D
of the Constitution oflndia.
32. Entry 53 of List I of Seventh Schedule to the Constitution of
India reads thus:
"~3. Regulation and development of oilfields and mineral oil
E
resources petroleum and petroleum products; other liquids and
substances declared by Parliament by law to be dangerously
inflammable."
In the case of Association of Natural Gas v. Union of bulia10,
the question which arose for consideration of this Court was whether
F
liquefied natural gas is a petroleum product or not. After adverting to
several authorities on the subject, this Court concluded as under:
"All the materials produced before us would only show that the
natural gas is a petroleum product. It is also important to note that
in various legislations covering the field of petroleum and petroleum
products, eitherthe word 'petroleum' or 'petroleum products' has G
been defined in an inclusive way, so as to include natural gas. In
Encyclopaedia Britannica, 15th Edn. Vol. 19, page 589 ( 1990), it
is stated that "liquid and gaseous hydrocarbons are so intimately
" (I 992) 2 sec 343
20
(2004 l 4 sec 489 H
354 SUPREME COURT REPORTS (2016] 4 S.C.R.

A associated in nature that it has become customary to shorten the
expression 'petroleum and natural gas' to 'petroleum' when
referring to both." The word petroleum literally means 'rock oil'.
It originated from the Latin term petra-oleum. (petra-means rock
or stone and oleum-means oil). Thus, Natural Gas could very well
be comprehended within the expression 'petroleum' or 'petroleum
B
product. .....
Under Entry 53 of List r, Parliament has got power to make
legislation for regulation and development of oil fields, mineral oil
resources; petroleum, petroleum products, other liquids and
substances declared by Parliament by law to be dangerously
c inflammable. Natural gas product extracted from oil wells is
predominantly comprising of methane. Production ofnatural gas
is not independent of the production of other petroleum products;
though from some wells the natural gas alone would emanate,
other products may emanate from subterranean chambers of earth.
D But all oil fields are explored for their potential hydrocarbon.
therefore, the regulation of oil fields and mineral oil resources
necessarily encompasses the regulation as well as development
of natural gas. For free and smooth flow of trade, commerce and
industry throughout the length and breadth of the country, natural
gas and other petroleum products play a vital role ......
E Natural gas being a petroleum product, we are of the view that
under Entry 53 List I, Union Govt. alone has got legislative
competence."
(emphasis laid by this Court)
Thus, by virtue ofArticle 73 of the Constitution oflndia read with Entry
F 53 of List I, the Union has the power to legislate and take policy decisions
in relation to the matters pertaining to mineral oil resources and
inflammable substances, which includes RLNG. Further, as has been
correctly recorded in the impugned judgment and order, there is no existing
legislative provision as far as fixing of the price ofRLNG is concerned.
G Thus, the executive of the Union oflndia is well within its right to exercise
its powers under the Constitution to take such decisions by way of policy
decisions.
33. The objective ofthe impugned policy decision dated 06.03.2007
is to unify the prices of RLNG on a non-discriminatory basis so that
H there is no distinction between old customers and new customers, as far
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 355
[V. GOPALA GOWDA, J.]

as prices ofRLNG in the long term contracts is concerned. In the counter A
affidavit filed by the respondent-Union of India, the rationale behind
unifying the prices ofRLNG has been explained as under:
"The power sector continues to be one of the major consumers of
Natural Gas. The intent of the answering respondent is to ensure
power generation costs are maintained at reasonable rate. In this B
regard, a brief reference to the Dabhol power project and the
Pragati II & III Power Projects, which are gas based power
projects is relevant. The answering respondent has attached a lot
of importance to the revival of the Dabhol power project and has
constituted an Empowered Group of Ministers for this purpose.
RGPPL was formed to take over and revive the Dabhol project. C
It was recognized that the pricing of gas is a critical factor in
revival of the project, which was beset with a number of
complexities. A huge sum of Rs. I 0,038 crores of public money
has already gone into the Dabhol project ......... The Dabhol project
on which more than Rs. I 0,000 crores of public money is riding, D
has been restructured in larger public interest ......... the viability
of the project is dependent on RLNG being available at affordable
prices. If RLNG, which is the base fuel for the Dabhol power
project, is not made available to RGPPL at a reasonable price, the
power produced would be unaffordable and consequently, would
lead to the shut-down of the Dabhol power plant. This would E
mean more than Rs. I 0,000 crores of public money going down
the drain. The answering respondent has a duty to prevent such a
catastrophic effect, as it is bound to have a cascading effect on
the overall economy of India .
...... However, the prevalent cost of LNG is very high (about USD F
8-9 per MMBTU), and if RGPPL had to purchase RLNG based
on such market price, it would result in exponential increase in the
cost of power, produced by the plant. Such cost of power would
be prohibitively expensive and wou Id have no buyers, making the
entire Dabhol project unviable.
In the circumstances, the answering respondent was of the view G
that the high cost of RLNG should not be loaded on to new
customers alone and attempts should be made to provide RLNG
to all the customers, whether existing or new, including RGPPLat
a uniform average pooled price."
(emphasis laid by this Court) H
356 SUPREME COURT REPORTS [2016] 4 S.C.R.

A A perusal of the above paragraph would show that the respondent-Union
oflndia passed the impugned policy decision dated 06.03.2007 in the
larger public interest, keeping in view the need to provide RLNG at
viable prices to the existing and new customers alike. It is further clear
that it is nearly impossible to predict or even control LNG prices, as the
same are controlled by global market forces. The only way to have any
B
semblance of control over the prices of RLNG was to pool the prices of
RLNG procured by the off-takers under long term contracts.
34. We have perused the documents marked as Annexures R-3 to
R-15, which are the letters containing the communication between the
government and RasGas.
c
Annexure R-6 is the minutes of meeting dated 05.06.2002 regarding
finalization of the General Sale Purchase Agreement, held in the office
of the Secretary, Ministry of Petroleum and Natural Gas. The meeting
was attended by representatives of Ministry of Petroleum and Natural
Gas, ONGC, IOCL, BPCL, GAIL and Petronet. One of the points
D discussed in the meeting was:
"It was also recognized that there is a need for Government to
provide certain relief for LNG so that it can be competitive and
acceptable to the end users. For the purpose declaring natural
gas "Declared Goods" under Central Sales Tax Act maybe
E considered by the government.. .... with the pooling
mechanism ...... price of regasified LNG shall become more
competitive." ;
Annexures R-7, R-8, R-9, R-10 contain communications between the
Minister of Finance, Qatar and representatives of the Indian Ministry of
F Petroleum and Natural Gas as well as RasGas between June and July
2002. The abovesaid communication would show the efforts that were
being made at Ministry level to secure supply of LNG from Qatar to
India. The most significant is Annexure R-10, which is the record note
of discussion of the meeting dated 22.09.2002, between the then Indian
Minister of Petroleum and Natural Gas and the Minister of Energy and
G
Industry, Qatar, held in Japan, where several concerns were flagged by
Qatar, including the non-fulfillment of certain promises by India, including
negotiating of contracts between Petronet and the downstream
consumers of RLNG. Pursuant to this, several meetings took place
between representatives of Ministry of Petroleum and Natural Gas,
H ONGC, IOCL, BPCL, GAIL and Petronet and other experts, during the
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 357
[V. GOPALA GOWDA, J.]

course of which several options were explored, including the pooling of A
LNG with ONGC, which was to be considered as the last option.
Thus, it becomes clear from a perusal of the documents produced
on record that the executive policy decision dated 06.03.2007 to pool the
price of RLNG was arrived at after elaborative discussions between
representatives of Qatar, India, IOC, BPCL, GAIL, ONGC and other B
experts in the field. It was an informed decision taken in the interest of
the public at large.
35. The impugned policy decision dated 06.03 .2007 has also been
duly authenticated by the Under Secretary to the Government oflndia.
36. The next major contention advanced on behalf of the appellants c ,•
is that since the communication dated 06.03.2007 is not a legislative
action, hence price ofRLNG could not have been fixed by virtue of that,
and that it must be viewed more suspiciously as it is for the benefit of
only one entity, viz, RGPPL. We are unable to agree with this contention.
Various cases have been cited by the appellants to show that price fixing D
is a legislative function. The same does notcome to the rescue of the
appellants, because they have not appreciated in their entirety in a proper
perspective.
3 7. RLNG, being a petroleum product, is an essential commodity
for the purpose of the Essential Commodities Act, l 955. In the case of E
MIS Sitaram Sugar Co. Ltd. v. Union ofl1Ulia 21 , a Constitution Bench
of this Court deliberated as to who has the power to fix prices of essential
commodities. It held as under:
"The question of fixation of a fair and reasonable price for goods
placed on the market has come up for consideration of Parliament F
and Courts in different contexts. Price fixation, it is common ground,
is generally a legislative function. But Parliament generally
provides for interference only at a stage where in pursuance of
social and economic objectives or to discharge duties under the
Directive Principles of State Policy, control has to be exercised
over the distribution and consumption of the material resources of G
the community. Thus while Parliament has enacted the Essential
Commodities Act, it has left it to the discretion of the Executive to
take concrete steps for fixing the prices of essential commodities
as and when necessity arises, by promulgating Control Orders in
21
<1990)3 sec 223 H
358 SUPREME COURT REPORTS [2016] 4 S.C.R.

A exercise of the powers vested in the Act. Various types of
foodgrains, sugarcane and drugs have come under the purview of
such control orders and the modalities of fixation of fair prices
there under have also come up for consideration of the Courts."
(emphasis laid by this Court)
B This Court also deliberated in detail as to what constitutes a legislative
function:
"32 .... to distinguish clearly legislative and administrative functions
is "difficult in theory and impossible in practice". Referring to
these two functions, Wade says:
c
"They are easy enough to distinguish at the extremities of the
spectrum: an Act of Parliament is legislative and a deportation
order is administrative. But in between is a wide area where either
label could be used according to taste, for example where ministers
make orders or regulations affecting large numbers of people ...."
D
Wade points out that legislative power is the power to prescribe
the law for people in general, while administrative power is the
power to prescribe the law for them, or apply the law to them, in
particular situations. A scheme for centralising the electricity supply
undertakings may be called administrative, but it might be just as
E well legislative. Same is the case with ministerial orders establishing
new towns or airports etc. He asks: "And what of 'directions of a
general character' given by a minister to a nationalised industry?
Are these various orders legislative or administrative?" Wade says
that the correct answer would be that they are both. He says:"
F ... there is an infinite series of gradations, with a large area of
overlap, between what is plainly legislation and what is plainly
administration". Courts, nevertheless, for practical reasons, have
distinguished legislative orders from the rest of the orders by
reference to the principle that the former is of general application.
They are made formally by publication and for general guidance
G with reference to which individual decisions are taken in particular
situations.
33. According to Griffith and Street, an instruction may be treated
as legislative even when they are not issued formally, but by a
circular or a letter or the like. What matters is the substance and
H
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 359
[V. GOPALA GOWDA, J.].

not the form, or the name. The learned authors say: " ... where a A
Minister (or other authority) is given power in a statute or an
instrument to exercise executive, as opposed to legislative,
powers-as, for example, to requisition property or to issue a
licence-and delegates those powers generally, then any
instructions which he gives to his delegates may be legislative".
B
Where an authority to whom power is delegated is entitled to sub-
delegate his power, be it legislative, executive or judicial, then
such authority may also give instructions to his delegates and these
instructions may be regarded as legislative."
On the power of delegated legislation, it was held as under:
c
"47. Power delegated by statute is limited by its terms and
subordinate to its objects. The delegate must act in good faith,
reasonably, intra vires the power granted, and on relevant
consideration of material facts. All his· decisions, whether
characterised as legislative or administrative or quasi-judicial, must
be in harmony with the Constitution and other laws of the land. D
They must be "reasonably related to the purposes of the enabling
legislation" ...... "
Accepting the interpretation of'legislative function' advanced by
the learned senior counsel on behalf of the appellants, would be giving it
too narrow and restrictive a meaning. It becomes clear from a perusal E
of the case law discussed above that even though price fixing is a
"'" ,legislative function; the same can be delegated and can be fixed by way
of executive orders as well. In the instant case, the policy decision dated
06.03.2007 has been taken after detailed communication between the
then Minister of Petroleum and Natural Gas, as well as the then heads F
of IOCL, BPCL, ONGC, GAIL and Petronet. The impugned policy
decision dated 06.03 .2007 has also been duly authenticated by the Under
Secretary to the Government oflndia, which is well within the powers
conferred on the Under Secretary under the Busine'ss Transaction Rules,
1961.
G
38. The contention advanced on behalf of the appellants that the
said policy takes away their vested right cannot be accepted in light of
Clause 11.4 of the Supply Agreement, which clearly provides for a
situation of change in price of RLNG under the contract as a result of
change in the policy of the Government. The case of Delhi Development
H

..
'\--.
360 SUPREME COURT REPORTS [2016] 4 S.C.R.

A Authority (supra), felied upon by the appellants on the point also does
not come to their rescue. It was held in that case as under:
"Terms and conditions of the contract can indisputably be altered
or modified. They cannot, however, be done unilaterally unless
there exists any provision either in contract itself or in law."
B In the instant case, clause 11.4 in the Supply Agreement is the provision
of the contract which provides for a change in the terms and conditions
of the contract.
39. Further, except a strong contention urged by the learned senior
counsel for the appellants that the policy is for the benefit of one entity
C · (RGPPL), the appellants have not present any evidence to show that
they have been discriminated against, as the policy has been applied for
all players across the board, as far as long term contracts are concerned.
Nothing has been brought on record to show that the said decision is
arbitrary, mala fide, unreasonable or taken after non application of mind.
D On the contrary, the documents produced on record by the respondents,
which is the back and forth of communication and minutes of meetings
between Ministers in Qatar and India, as well Secretaries of the
Government and the representatives of IOCL, BPCL, GAIL, ONGC
and Petronet, would clearly show that the impugned decision dated
06.03.2007 was taken after due deliberation and exploring all other
E possible alternatives to reduce the price ofRLNG, so as to make it viable
for the new entrants in the market to buy it and run their projects in a
feasible manner in the larger public interest. The consumers ofRLNG
though long term contracts are a class by themselves, for the purpose of
- Article 14 of the Constitution of India. The impugned policy decision
F dated 06.03 .2007 was to apply to al I the players within this class uniformly
and across the board. Thus, the contention that the appellants have been
discriminated against, or that the impugned policy decision was taken in
an arbitrary manner cannot be accepted as the said contention is wholly
untenable in law.

G Since the legality of the executive decision dated 06.03.2007 has
been upheld, the question ofrefund of the amount of losses suffered by
the appellants as a result of increase in the price of RLNG in their contract
as urged on their behalf, does not arise for ~onsideration at all by us.
40. There being no evidence to suggest that the impugned policy
direction is illegal, arbitrary, unreasonable orotherwise violative ofArticle
H
ESSAR STEEL LTD. v. UNION OF INDIA & ORS. 361
[V. GOPALA GOWDA, J.]

14 of the Constitution of India, we find no reason to interfere with the A
same. The impugned judgment and order dated 16.05.2008 passed by
the High Court of Gujarat is upheld as the same is in accordance with
the provisions of the Constitution and law laid down by this Court in
catena of cases as stated supra. Therefore, the impugned policy decision
dated 06.03.2007 does not suffer from any infirmity in law and is hereby
B
upheld. For the foregoing reasons, the appeals are accordingly dismissed.
All pending applications are disposed of.
Kalpana K. Tripathy Appeals dismissed.