M/S. GAIL (INDIA) LIMITEDversusM/S. INDIAN PETROCHEMICALS CORP. LTD. & ORS.

326                       [2023]
               SUPREME COURT     2 S.C.R. 326
                              REPORTS                       [2023] 2 S.C.R.


A                        M/S. GAIL (INDIA) LIMITED
                                        v.
          M/S. INDIAN PETROCHEMICALS CORP. LTD. & ORS.
                      (Civil Appeal Nos. 3504-3505 of 2010)
B                             FEBRUARY 08, 2023
           [SANJAY KISHAN KAUL AND ABHAY S. OKA, JJ.]
             Constitution of India – Arts. 226, 12, 14 – Commercial Contract
      – Unequal bargaining power – Maintainability of writ petition –
      Ministry of Petroleum and Natural Gas issued a letter for allocation
C
      of natural gas to IPCL (formerly a PSU) – IPCL entered into a
      contract with GAIL for supply of natural gas – As per the allocation
      terms, IPCL had to lay down its own pipelines and those pipelines
      alone were utilised for carrying gas – IPCL laid down pipelines –
      However, GAIL levied charge for ‘loss of transportation charges’
D     in terms of the contract – Clauses of the contract levying such
      charges were challenged by IPCL after five years of entering into
      the contract – Clauses quashed – Justification of – Held: Although
      the dispute arises from a commercial contract, the writ petition was
      maintainable – At the time of entering into contract, GAIL was
      enjoying a monopolistic position w.r.t the supply of natural gas in
E
      the country – IPCL, having incurred a significant expense in setting
      up the appropriate infrastructure, had no choice but to enter into
      agreement with GAIL – Thus, there was a clear public element
      involved in the dealings between the parties – Writ jurisdiction can
      be exercised when the State, even in its contractual dealings, fails
F     to exercise a degree of fairness or practices any discrimination –
      GAIL’s action in levying ‘loss of transportation charges’ was ex
      facie discriminatory, insofar as IPCL was mandated to build its own
      pipeline in terms of the allocation letter and was not using GAIL’s
      pipeline at all – GAIL exercised an unequal bargaining power at
      the time of signing the contract – The contractual exercise of
G
      providing such a clause runs contrary to every commercial and
      common sense and is arbitrary – While, the quashing of the clauses
      is upheld, the refund is restricted to a period of three years prior to
      the date of the filing of the writ petition on account of IPCL’s delay
      in approaching the court.
H
                                       326
M/S. GAIL (INDIA) LTD. v. M/S. INDIAN PETROCHEMICALS                    327
                      CORP. LTD.

      Partly allowing the appeals, the Court                            A
       HELD: 1.1 Although the dispute arises from a commercial
contract, find that the writ petition challenging the clauses was
maintainable. It is not disputed that GAIL is a Public Sector
Undertaking and thus qualifies under the definition of ‘State’ as
per Article 12 of the Constitution. At the time of entering into        B
contract, GAIL was enjoying a monopolistic position with respect
to the supply of natural gas in the country. IPCL, having incurred
a significant expense in setting up the appropriate infrastructure,
had no choice but to enter into agreement with GAIL. Thus, there
was a clear public element involved in the dealings between the
parties. Further, writ jurisdiction can be exercised when the State,    C
even in its contractual dealings, fails to exercise a degree of
fairness or practices any discrimination. In the present case,
GAIL’s action in levying ‘loss of transportation charges’ was ex
facie discriminatory, insofar as IPCL was mandated to build its
own pipeline in terms of the allocation letter and was not using        D
GAIL’s HBJ pipeline at all. Thus, it cannot be said that merely
because an alternative remedy was available, the Court should
opt out of exercising jurisdiction under Article 226 of the
Constitution and relegate the parties to a civil remedy. [Para
19][336-B-E]
                                                                        E
       1.2 It would be extremely unfair and unjust, apart from being
an arbitrary action in violation of Article 14 of the Constitution of
India that IPCL is charged for loss of transportation charges when
it is mandated to lay down its own pipelines and not to transport
the gas through the HBJ pipeline. This action also violates the
principle of non-discrimination enshrined in Article 14. IPCL,          F
which is using its own pipelines, is being treated at par with other
commercial entities who are carrying gas through the HBJ
pipeline laid down by GAIL. This is more so when the pricing
orders by the concerned authority, i.e. MoPNG stipulate a fixed
price for natural gas. On a basic principle, it cannot be doubted       G
that once GAIL has laid down the pipeline, it is entitled to
structure in its cost in the contract. However, the issue is not
simply that. Two public sector enterprises entered into a contract
in pursuance of the allocation made by the MoPNG. There was
also a time constraint for IPCL. After incurring a heavy
                                                                        H
328            SUPREME COURT REPORTS                       [2023] 2 S.C.R.


A     expenditure in the construction of the Gandhar Plant, IPCL had
      very little choice but to enter into the contract. What is of most
      significance is that IPCL was bound to follow the allocation terms
      provided by the principal authority, i.e., MoPNG. Thus, as pleaded
      by IPCL, they were faced with a “Hobson’s choice”, where they
      had to either give up the contract or accept the clauses levying
B
      transportation charges. On a conspectus of the above factors, it
      can be said that GAIL exercised an unequal bargaining power at
      the time of signing the contract. GAIL may have made a huge
      investment in constructing the HBJ pipeline, but at the same
      time IPCL had also made a huge investment in constructing its
C     own pipelines. This was not an option but a mandate of the
      allocation letter issued by the MoPNG. Thus, it is difficult to accept
      that on the one hand IPCL must lay down its own pipelines, and
      simultaneously pay for loss of transportation through the HBJ
      pipeline even without using it. Thus the appeal(s) are dismissed
      qua the aspect of maintainability of the writ petition and the
D
      quashing of the clauses dealing with loss of transportation charges
      in the case of IPCL. However, it is deemed fit to restrict the
      relief to period of three years insofar as refund is concerned from
      the date of filing of the writ petition, i.e., 09.03.2006. [Paras 20-
      23, 26][336-F-H; 337-A-C, E-F, 338-C-D]
E           Joshi Technologies International Inc. v. Union of India
            & Ors. (2015) 7 SCC 728 : [2015] 6 SCR 1042; Lipton
            India Ltd. & Ors. v. Union of India & Ors (1994) 6
            SCC 524 : [1994] 3 Suppl. SCR 600; ABL International
            Ltd. & Anr. v. Export Credit Guarantee Corporation of
F           India & Ors. (2004) 3 SCC 553 – relied on.
             Central Inland Water Transport Corporation Limited
            v. Brojonath Ganguly (1986) 3 SCC 156 : [1986] 2
            SCR 278; Rameshwar & Ors. v. State of Haryana and
            Ors (2018) 6 SCC 215 : [2018] 5 SCR 205; Kalpraj
G           Dharamshi & Anr. v. Kotak Investment Advisors Ltd. &
            Anr. (2021) 10 SCC 401 – referred to.
                             Case Law Reference
      [2015] 6 SCR 1042              relied on                Paras 11
      1994] 3 Suppl. SCR 600         relied on                Paras 11
H
M/S. GAIL (INDIA) LTD. v. M/S. INDIAN PETROCHEMICALS                            329
                      CORP. LTD.

[1986] 2 SCR 278                  referred to                Paras 12           A
[2018] 5 SCR 205                  referred to                Para 14
(2004) 3 SCC 553                  relied on                   Para 15
(2021) 10 SCC 401                 referred to                 Para 16
      CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.3504-                     B
3505 of 2010.
      From the Judgment and Order dated 17.06.2008 of the High Court
of Gujarat at Ahmedabad in LPA Nos.1622 of 2006 and 1012 of 2007.
      Tushar Mehta, SG, Sanyat Lodha, Ms. Surbhi Arora, Pratyush
Shrivastava, Advs. for the Appellant.                                           C
      Dr. A. M. Singhvi, Sr. Adv., Raghav Shankar, Avishkar Singhvi,
Snehal Kakrania, Prateek Kumar, Sanjeev Kapoor, Keyur Gandhi,
Raheel Patel, Amit Bhandari, Ms. Melanie D’Souza, Rohit Ghosh, M/s.
Khaitan & Co., Advs. for the Respondents.
      The Judgment of the Court was delivered by                                D
      SANJAY KISHAN KAUL, J.
       1. M/s. GAIL (India) Limited (for short ‘GAIL’), the appellant
herein, is a Government of India undertaking, incorporated on 16.08.1984,
engaged primarily in the activity of providing services for the utilisation
of natural or associated gas. Indian Petrochemicals Corporation Ltd.            E
(for short ‘IPCL’), respondent no.1 herein, formerly a public sector
undertaking, is engaged in the manufacture of petrochemicals. It ceased
to be a public undertaking w.e.f. June 2002, when 26% of its shares
were sold to Reliance Petroinvestments Ltd. in line with the Government’s
disinvestment policy. Respondent no. 2 is a shareholder of IPCL and             F
respondent no. 3 is the Union of India.
      Background
      2. On 01.01.1999, the Ministry of Petroleum and Natural Gas,
Government of India (hereinafter referred to as ‘MoPNG’), the allocating
and price-fixing authority for natural gas, issued a letter for allocation of   G
natural gas to IPCL. IPCL was allotted 0.85 MMSCMD of semi-rich
gas on firm basis from Hazira to IPCL’s Gandhar Unit (at Dahej) for
extraction of C-2 and C-3 fractions. The same was made subject to the
following conditions:
                                                                                H
330             SUPREME COURT REPORTS                             [2023] 2 S.C.R.


A            “(i) Signing of gas supply contract with GAIL.
             (ii) The pipelines require to transport semi-rich gas from Hazira
             to IPCL Unit at Gandhar and to transport the lean gas back to
             Hazira shall be laid by M/s IPCL.

B            2. You are requested to enter into necessary gas supply contract
      with GAIL within 60 days of issue of this letter failing which above
      allocation will be liable for allocation.”
              Looking to the significance of the time period in the letter, the
      parties began negotiating the terms of the gas supply contract. IPCL
C     thus entered into a contract with GAIL on 09.11.2001 for supply of natural
      gas. IPCL had set up and installed a plant at Gandhar by investing
      approximately Rs. 4500 crores. Further, in order to meet the stipulation
      of the allocation letter, it laid down pipelines between Hazira and Gandhar
      at a cost of approximately Rs. 354 crores.
D            3. As per the contract, the methodology of supply of gas was that
      GAIL received natural gas from the producer, i.e. ONGC, which procured
      the same at Hazira from the Bombay High project. Thereafter, the gas
      was transported from Hazira to IPCL’s Gandhar plant through pipelines
      laid down by IPCL. The unutilised gas was then sent back to Hazira,
      also using IPCL’s pipelines.
E
             4. We may flag at this stage itself the significance of the manner
      in which the gas is carried, as the dispute before us revolves around this
      particular aspect. On one hand, as per the allocation terms, IPCL had to
      lay down its own pipelines (which were so laid), and those pipelines
F     alone were utilised for carrying gas. On the other hand, the charge is
      levied by GAIL for ‘loss of transportation charges’ in terms of the
      contract. It is this aspect of the contract between the parties which has
      been the subject matter of adjudication in writ proceedings filed by IPCL
      under Article 226 of the Constitution of India. IPCL succeeded before
      the learned Single Judge in terms of the orders dated 19.09.2006 and
G     11.04.2007, and before the Division Bench in the Letters Patent Appeals
      vide order dated 17.06.2008.
              5. We may note that though the contract inter se the parties was
      signed on 09.11.2001, the challenge was laid to Clauses 10.01 and 4.04
      of the contract only on 09.03.2006, i.e. after five years. In this interregnum,
H     IPCL ceased to be a public sector undertaking.
M/S. GAIL (INDIA) LTD. v. M/S. INDIAN PETROCHEMICALS                           331
         CORP. LTD. [SANJAY KISHAN KAUL, J.]

      6. The other development is the decision of GAIL to stop levying         A
loss of transportation charges in May 2016. Thus, the total amount
collected under the aforesaid clauses is stated to be Rs. 134 crores
before it was quashed by the Single Judge and sustained by the Division
Bench.
      7. In order to understand the contractual context, the relevant          B
two clauses are extracted below:
      “4.04 The BUYER, in addition to price of GAS mentioned in Article
      10, shall pay to the SELLER Rs. 4,16,700/- (Rupees Four Lakh
      Sixteen Thousand and Seven Hundred) towards fortnightly service
      charges on account of deployment of manpower by the SELLER               C
      for terminal operation and routine maintenance along with
      applicable taxes / levies thereon, connected with delivery of Gas
      at the Point of Onward Delivery and receipt of Gas returned by
      the BUYER at the Point of Return Delivery. The above service
      charges is exclusive of any material requirements like tools, tackles    D
      etc. and also the spares / items / equipments to maintain the terminal
      in operable condition. Any interruptions in supply of gas to any
      consumers on account of such material requirement shall be at
      the risk and cost of the BUYER. The above Service charges
      shall be increased by 3 (Three) percent per annum on yearly rest
      basis with effect from 1st April following the scheduled date of         E
      commencement of gas supply mentioned under article 2.01
      hereinabove. In addition to the above, the BUYER shall also pay
      to the SELLER transportation charges, as applicable from time to
      time along the HBJ pipeline system for the quantity of GAS utilized
      / shrinkage as per formula provided under Article 5.02 or for the        F
      difference in quantity of gas measured at the Point of Onward
      Delivery at Metering Station No. – I (after adjusting the quantity
      of Gas Bye Passed as mentioned under Article 4.03 hereinabove)
      and Point of Return Delivery at Metering Station No. – II,
      whichever is higher. The BUYER shall pay above charges to the
      SELLER in addition to invoice for supply of gas to be raised as          G
      per Article 11 hereinafter along with all applicable taxes / levies
      thereon. Provided that in case above charges are not paid by the
      BUYER within 3 (Three) working days of presentation of the
      invoice, the SELLER will present the invoice for the same to the
      Bank against Letter of Credit and draw the amount. The BUYER             H
332            SUPREME COURT REPORTS                           [2023] 2 S.C.R.


A           will make arrangements with the Bank in a manner that in such
            an eventuality the full L/C amount gets automatically reinstated.
            ….            ….             ….            ….            ….
            ARTICLE 10-PRICE OF GAS
B
            10.01 Present price of 1000 (One Thousand) Standard Cubic
            meters of GAS w.e.f. 1.10.1997 is applicable as per Government
            Pricing Order No. L-12015/3/94-GP dated 18.9.1997 (Annexure-
            IV) after which the SELLER shall have right to fix the price of
            GAS which may be as per directive, instruction, order, etc. of the
C           Government of India which is likely to be market related in
            accordance with current policy of liberalisation of the Government
            of India and the BUYER shall pay to the SELLER such price of
            GAS. In addition to the above, the BUYER shall also pay to the
            SELLER transportation charges, as applicable from time to time
            along the HBJ pipeline system, for the quantity of GAS utilised/
D           shrinkage. Provided further, the price of GAS so fixed is exclusive
            of Royalty, Taxes, Duties, Service/Transportation charges and all
            other statutory levies as applicable at present or to be levied in
            future. By the Central or State Government of Municipality or
            any other local body or bodies payable on purchase of Gas from
E           ONGCL/Other Producer(s) by the SELLER or on sale from
            SELLER to the BUYER or on return of the balance quantity of
            GAS after processing by the BUYER to the SELLER and these
            shall be borne by the BUYER over and above the aforesaid price.”
                                                            (Emphasis supplied)
F
             8. IPCL challenged the aforesaid clauses primarily on the ground
      that they were contrary to the Government pricing orders dated
      30.01.1987, 31.12.1991, 18.09.1997, 30.09.1997 and 20.06.2005, whereby
      the price of natural gas was fixed. Further, the allocation letter by the
      MoPNG mandated that transportation of gas to IPCL’s plant had to be
G     through IPCL’s own pipelines from the ONGC Metering Station. Thus,
      it was contended that recovery of ‘loss of transportation charges’ by
      GAIL was arbitrary and unfair. IPCL did not have the option to transport
      gas through GAIL’s pipelines due to the mandate of the contract and the
      allocation letter. IPCL also challenged the aforesaid clauses on the ground
      of unequal bargaining power. It was contended that GAIL occupied a
H
    M/S. GAIL (INDIA) LTD. v. M/S. INDIAN PETROCHEMICALS                      333
             CORP. LTD. [SANJAY KISHAN KAUL, J.]

monopolistic position in respect of supply of gas at the time of entering     A
into the contract. Additionally, IPCL had a limited time frame to enter
into the contract, particularly as a hefty investment had been made in
setting up the gas cracker plant. As a consequence, IPCL claimed refund
of the ‘loss of transportation charges’ paid by them. The Single Judge
quashed these clauses vide order dated 19.09.2006 as being contrary to
                                                                              B
the pricing orders, and thus unfair and unconscionable.
       9. GAIL, being aggrieved by the said judgment, preferred a Letters
Patent Appeal. In the meantime, IPCL also preferred an application for
clarification/modification, seeking directions to GAIL to refund loss of
transportation charges, as apparently no such specific direction had been
passed by the learned Single Judge. IPCL’s application was allowed by         C
an order dated 11.04.2007, predicated on the reasoning that while
upholding the claim of IPCL, inadvertently the direction of refund had
not been specifically passed. This latter order also came to be assailed
before the Division Bench by GAIL.
       10. The Division Bench affirmed the Single Judge’s observations        D
vide order dated 17.06.2008, thereby leading to the present appeal by
GAIL.
       GAIL’s Plea:
       11. At the outset, Mr. Tushar Mehta, learned Solicitor General,
appearing for GAIL, contested the very maintainability of the writ petition   E
filed by IPCL. He contended that the parties had provided for arbitration
before the Permanent Machinery of Arbitrators in the Bureau of Public
Enterprises under Clause 13.1 of the contract. Further, the matter was
stated to be purely contractual in nature, involving the enforceability and
validity of the terms of the contract, and no case was made out for
violation of Fundamental Rights. The presence of a public law element         F
was a sine qua non for the exercise of writ jurisdiction, as elucidated in
Joshi Technologies International Inc. v. Union of India & Ors.1.
The endeavour of IPCL, by invoking such writ jurisdiction, was alleged
to be an attempt to bypass the law of limitation, as the contract had been
signed way back in 09.11.2001. In any case, the writ petition was also        G
barred by limitation, having been filed on 09.03.2006, i.e. after a period
of five years. Reliance was placed on Lipton India Ltd. & Ors. v.
Union of India & Ors2 to contend that communications between the
1   (2015) 7 SCC 728.
2   (1994) 6 SCC 524.
                                                                              H
334                SUPREME COURT REPORTS                         [2023] 2 S.C.R.


A     parties about levy of transportation charges following the signing of the
      contract could not extend the period of limitation.
             12. He stated that even if the petition was maintainable, the clauses
      could not have been invalidated by the High Court. It was pointed out
      that there were no differences in the bargaining positions of the two
B     organisations where one could be said to be more powerful. Both
      organisations were public sector enterprises at the relevant time. The
      contract was stated to be carefully negotiated and reflected the mutual
      consensus between the parties, as was evident from the inter se
      communications at the pre-contractual stages. Thus, the clauses could
      not thus be treated as arbitrary or unfair. IPCL’s and the High Court’s
C     reliance on Central Inland Water Transport Corporation Limited v.
      Brojonath Ganguly3 was misplaced as a principle applied to a service
      contract between the employer and the employee could not be imported
      to a commercial contract, and that too between two public sector
      enterprises. The alternative plea was that even were the impugned
D     judgments to be sustained, the amount of refund could not be granted
      beyond the period of limitation, i.e. three years after the signing of the
      contract.
             13. The basic defence and justification for levy of loss of
      transportation charges was that GAIL had made a huge investment in
E     constructing its own infrastructure, i.e. the HBJ pipeline (Hazira - Bijaipur
      - Jagdishpur). GAIL had a limited number of opportunities to supply gas
      to consumers and, thus, an equally limited number of opportunities to
      levy transportation charges to recover its legitimate maintenance costs.
      The allotment had pre-supposed the imposition of such transportation
      costs.
F
             14. Finally, it was emphasized that the learned Single Judge had
      become functus officio having pronounced the judgment dated
      19.09.2006. Thus, there was no question of directing a refund through a
      clarification/modification application. Such a refund raised questions of
      unjust enrichment, as IPCL would have passed on the ‘loss of
G
      transportation charges’ paid by them to their own customers. As to what
      constituted unjust enrichment, the Solicitor General sought to refer to
      Rameshwar & Ors. v. State of Haryana and Ors4.
      3   (1986) 3 SCC 156.
      4    (2018) 6 SCC 215.
H
    M/S. GAIL (INDIA) LTD. v. M/S. INDIAN PETROCHEMICALS                          335
             CORP. LTD. [SANJAY KISHAN KAUL, J.]

        IPCL’s Defence:                                                           A
       15. Dr. A.M. Singhvi, learned Senior Counsel, sought to defend
the impugned order and the maintainability of writ proceedings with
respect to a private contract. The transportation charges were alleged
to have a discriminatory effect as IPCL was being treated on par with
consumers who were using the HBJ pipeline, whereas IPCL was                       B
transporting the gas through its own pipelines. That being the plea, it
was urged that the writ jurisdiction was the appropriate remedy as there
were questions of arbitrary state action violating the mandate of Article
14. This was notwithstanding the fact that the issue arose from a contract
between the parties, as was also the case in ABL International Ltd. &             C
Anr. v. Export Credit Guarantee Corporation of India & Ors.5 It is
in these circumstances that the High Court exercised its writ jurisdiction
notwithstanding the availability of an alternative remedy, i.e. the arbitration
clause or through the civil suit. ABL International6 was also relied on
to show that consequent monetary relief could be granted where such a
writ petition was successful.                                                     D

       16. With respect to striking down a contractual clause, Dr. Singhvi
was at pains to point out that the ambit of Brojonath Ganguly’s7 case
had been expanded and was not only restricted to service disputes. In
Kalpraj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. &
Anr.8, this Court considered the bargaining capacity of contracting parties       E
in a commercial dispute as there was a seemingly unfair or unreasonable
clause in the contract.
        Discussion:
         17. We have considered the arguments and counter arguments of            F
the counsel for the parties, and also examined whether the present case
is a fit one for this Court to exercise jurisdiction under Article 136 of the
Constitution of India, albeit leave having been granted.
       18. In our view, the dispute is within the following parameters.
First, whether the writ petition filed by IPCL challenging Clauses 4.04           G
and 10.01 of the contract was maintainable. Second, assuming such a
5 (2004)3 SCC 553.
6
   (supra).
7 (supra).

8 (2021)10SCC401.
                                                                                  H
336                   SUPREME COURT REPORTS                    [2023] 2 S.C.R.


A     petition was maintainable, whether the High Court could have invalidated
      the aforementioned clauses on the ground of unequal bargaining power
      and arbitrariness / unfairness. Third, whether monetary relief in the form
      of refund could have been granted after the order dated 19.09.2006 was
      passed.
B            19. Although the dispute arises from a commercial contract, we
      find that the writ petition challenging the clauses was maintainable. It is
      not disputed that GAIL is a Public Sector Undertaking and thus qualifies
      under the definition of ‘State’ as per Article 12 of the Constitution. At
      the time of entering into contract, GAIL was enjoying a monopolistic
C     position with respect to the supply of natural gas in the country. IPCL,
      having incurred a significant expense in setting up the appropriate
      infrastructure, had no choice but to enter into agreement with GAIL.
      Thus, there was a clear public element involved in the dealings between
      the parties. Further, writ jurisdiction can be exercised when the State,
      even in its contractual dealings, fails to exercise a degree of fairness or
D     practices any discrimination. We are fortified in our view by this Court’s
      decision in ABL Enterprises9 and Joshi Technologies10. In the present
      case, GAIL’s action in levying ‘loss of transportation charges’ was ex
      facie discriminatory, insofar as IPCL was mandated to build its own
      pipeline in terms of the allocation letter and was not using GAIL’s HBJ
E     pipeline at all. Thus, it cannot be said that merely because an alternative
      remedy was available, the Court should opt out of exercising jurisdiction
      under Article 226 of the Constitution and relegate the parties to a civil
      remedy.
             20. Now, we come to the validity of the clauses under which ‘loss
F     of transportation charges’ were levied. In our view, it would be extremely
      unfair and unjust, apart from being an arbitrary action in violation of
      Article 14 of the Constitution of India that IPCL is charged for loss of
      transportation charges when it is mandated to lay down its own pipelines
      and not to transport the gas through the HBJ pipeline. This action also
      violates the principle of non-discrimination enshrined in Article 14. IPCL,
G     which is using its own pipelines, is being treated at par with other
      commercial entities who are carrying gas through the HBJ pipeline laid
      down by GAIL. This is more so when the pricing orders by the concerned
      authority, i.e. MoPNG stipulate a fixed price for natural gas.
      9
          (supra).
      10
H          (supra).
 M/S. GAIL (INDIA) LTD. v. M/S. INDIAN PETROCHEMICALS                              337
          CORP. LTD. [SANJAY KISHAN KAUL, J.]

       21. On a basic principle, it cannot be doubted that once GAIL has           A
laid down the pipeline, it is entitled to structure in its cost in the contract.
However, the issue is not simply that. We are faced with a scenario
where two public sector enterprises entered into a contract in pursuance
of the allocation made by the MoPNG. There was also a time constraint
for IPCL. After incurring a heavy expenditure in the construction of the
                                                                                   B
Gandhar Plant, IPCL had very little choice but to enter into the contract.
What is of most significance is that IPCL was bound to follow the
allocation terms provided by the principal authority, i.e., MoPNG. Thus,
as pleaded by IPCL, they were faced with a “Hobson’s choice”, where
they had to either give up the contract or accept the clauses levying
transportation charges. On a conspectus of the above factors, it can be            C
said that GAIL exercised an unequal bargaining power at the time of
signing the contract.
       22. In fact, the contractual exercise of providing such a clause
runs contrary to every commercial and common sense and is manifestly
arbitrary, as IPCL is not being charged under any general terms but for            D
a specific purpose. This purpose cannot exist in the contract in view of
the master authority, i.e., the Union of India, providing to the contrary.
       23. GAIL may have made a huge investment in constructing the
HBJ pipeline, but at the same time IPCL had also made a huge investment
in constructing its own pipelines. This was not an option but a mandate            E
of the allocation letter issued by the MoPNG. Thus, it is difficult for us to
accept that on the one hand IPCL must lay down its own pipelines, and
simultaneously pay for loss of transportation through the HBJ pipeline
even without using it. We do not accept GAIL’s contention that the
charges could be levied merely because GAIL had laid the HBJ pipeline              F
for users generally.
       24. Further, we may note that the direction for refund vide order
dated 11.04.2007 arose as a consequence of quashing of the clauses. It
was in the nature of a sequitur and, thus, we do not find any reason to
interfere with the same.                                                           G
       25. We, however, now turn to whether the whole amount is to be
refunded. The alternative argument of the learned Solicitor General was
that the period of limitation, in any case, could not have been expanded
in granting the refund. No doubt the issue of loss of transportation charges
was flagged by IPCL in various communications exchanged inter se the               H
338                   SUPREME COURT REPORTS                     [2023] 2 S.C.R.


A     parties subsequent to the signing of the contract. That, however, cannot
      grant a license to IPCL to approach the court as and when it considers
      proper. Thus, while upholding the quashing of the clauses, we are of the
      view that the refund should be restricted to a period of three years prior
      to the date of the filing of the writ petition on account of IPCL’s delay in
      approaching the court. Here we draw strength from judgement in Lipton
B
      India Limited & Ors.11 case referred to aforesaid, which observed
      that the writ petition was entertained because of the plea of discrimination
      but then the relief was restricted to what would have been claimed in
      the suit.

C                Conclusion:
             26. We thus dismiss the appeal(s) qua the aspect of maintainability
      of the writ petition and the quashing of the clauses dealing with loss of
      transportation charges in the case of IPCL. However, we deem it fit to
      restrict the relief to period of three years insofar as refund is concerned
D     from the date of filing of the writ petition, i.e., 09.03.2006.
             27. We are also of the view that this refund should be made within
      a period of two months from today, failing which it will carry interest at
      8 per cent per annum from the date it became due. If the refund is made
      within the stipulated time, we are not inclined to levy interest on the
E     amount due.
             28. The appeals are allowed in the aforesaid terms leaving the
      parties to bear their own costs.


F     Divya Pandey                                            Appeals partly allowed.
      (Assisted by : Roopanshi Virang, LCRA)




G




H
      11   (supra).