2019 INSC 0083
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NON­REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.    1261   OF 2019
[@ SPECIAL LEAVE PETITION [C] NO. 21986 OF 2015]
ADANI GAS LIMITED & ANR.       …..APPELLANTS
VERSUS
UNION OF INDIA & ORS.     ……RESPONDENTS
J U D G M E N T
Leave granted.
2. The   appellant   company   is   registered   under   the   Companies   Act,
1956   and   is   involved   in   the   business   of   setting   up   of   Natural   Gas
Distribution Networks within India. The dispute in this petition is with
regard to the Gas Distribution Network (for short ‘GDN’) in the cities of
Udaipur   and   Jaipur   in   the   State   of   Rajasthan.   Challenging   the   order
dated   18.05.2011   of   the   Government   of   Rajasthan   whereby   No
Objection Certificate (for  short ‘NOC’) for  laying  down of Gas Network
pipelines   granted   in   favour   of   the   appellant   had   been   withdrawn
(including   forfeiture   of   the   commitment   fees   of   Rs.   2   Crore   deposited
by   the   appellant),   and   also   the   order   dated   19.05.2011   of   the   Board

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rejecting   the   application   of   the   appellant   for   authorisation   of   its
projects   in   Udaipur   and   Jaipur,   as   well   as   challenging   the   validity   of
the Regulation 18 of the Petroleum and Natural Gas Regulatory Board
(Authorizing   Entities   to   Lay,   Build,   Operate   or   Expand   City   or   Local
Natural   Gas   Distribution   Networks)   Regulations,   2008   (for   short
‘Regulations of 2008’), the appellant had filed Writ Petition No. 10028
of   2011   before   the   Rajasthan   High   Court,   which   has   been   dismissed
on 29.04.2015.  Aggrieved by the same, this Special Leave Petition has
been filed.
3. Brief facts of this case are that on 19.11.2005 the Government of
Rajasthan   invited   parties   to   submit   their   bids   for   laying   of   Gas
Distribution Network in certain cities of Rajasthan, including the said
two   cities   of   Udaipur   and   Jaipur.     In   response   to   the   same,   the
appellant submitted its Expression of Interest for the cities of Udaipur
and   Jaipur.   On   20.03.2006,   the   Government   of   Rajasthan   informed
the   appellant   that   it   intended   to   grant   NOC   to   the   appellant   for
undertaking   Gas   Distribution   in   the   cities   of   Udaipur   and   Jaipur,
which   was   to   be   subject   to   certain   conditions   as   mentioned   in   the
aforesaid   communication   dated   20.03.2006.     Immediately   thereafter
on   22.03.2006,   the   appellant   company   informed   that   it   agreed   to   all

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the   terms   and   conditions   laid   down   by   the   Government   of   Rajasthan
in   its   communication   dated   20.03.2006   whereby   it   intended   to   grant
NOC   to   the   appellant.     Then,   on   24.03.2006,   the   appellant   deposited
the commitment fees of Rs. 2 Crore.  On 27.03.2006, the Government
of   Rajasthan   granted   the   NOC   to   the   appellant   company   for   Gas
Distribution   in   the   cities   of   Udaipur   and   Jaipur.     The   appellant   then
started its work of laying down the City Gas Development Network in
the said two cities. 
4. The   Petroleum   and   Natural   Gas   Regulatory   Board   Regulations
Act,   2006   (for   short   ‘Act   of   2006)   was   notified   on   03.04.2006,   except
for   the   provisions   of   Section   16   of   the   said   Act   relating   to
authorisation.  On 21.07.2007, the appellant company made a request
for authorisation of its City Gas Distribution Project under Act of 2006
to  the Chairman  of Petroleum  and Natural Gas Regulatory  Board (for
short ‘the Board’).   In the said communication, the appellant had also
provided   the   details   of   its   existing   projects   in   the   country,   namely   at
Ahmedabad,   Vadodara,   Faridabad,   Noida,   Khurja,   Lucknow,   Udaipur
and   Jaipur.     The   appellant   had   also   submitted   that   in   terms   of
Sections   15   and   16   of   Chapter   IV   of   the   Act   of   2006,   there   was   a
provision   of   ‘deemed   authorisation’   of   the   existing   City   Gas

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Distribution Projects and in terms of the Act of 2006, a brief dealing of
all the projects under its implementation was also enclosed. 
5. Then,   on   24.07.2007,   the   appellant   wrote   to   the   Ministry   of
Petroleum and Natural Gas requesting for authorisation of its City Gas
Distribution   Projects   under   the   Act   of   2006   for   all   its   gas   projects,
including   the   ones   of   Udaipur   and   Jaipur.     The   Act   of   2006   was
although notified on 03.04.2006, but came into force with effect from
01.10.2007, which was its appointed date.  However, Section 16 of the
said   Act,   relating   to   ‘Authorisation’,   was   brought   into   force   only   with
effect from 15.07.2010.  
6. On 30.10.2007 the Petroleum and Natural Gas Regulatory Board
issued a press note, calling upon all the concerned entities involved in
or proposed to the laying, building, operating or expanding of a City or
Local   Gas   Distribution   Network   prior   to   the   appointed   date,   i.e.
01.10.2007,   to   furnish   the   particulars   of   such  activities   to  the   Board
within   six   months   from   the   appointed   date.     It   was   further   provided
that  in cases where no authorisation  was granted to  the  entities that
initiated   the   specified   activities   before   the   appointed   date,   then   such
entities were to apply for authorisation under Section 17 of the Act of

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2006.     The   Government   of   Rajasthan,   then   on   05.12.2007,   intimated
the   appellant   of   the   press   note   dated   30.10.2007   and   required   the
appellant to submit the details, as were prescribed in terms of the said
press   note.     Two   days   thereafter,   on   07.12.2007,   the   appellant
submitted the requisite details for the City Gas Distribution Projects of
Udaipur   and   Jaipur.     Then,   on   11.12.2007,   the   Government   of
Rajasthan   called   upon   the   appellant   to   further   submit   the   details   to
the Board in terms of the press note dated 30.10.2007.  In response to
the   same,   the   appellant   informed   the   Government   of   Rajasthan   that
the said details had already been furnished on 07.12.2007.  
7. On 19.03.2008, the Petroleum and Natural Gas Regulatory Board
Regulations, 2008 were notified. Pursuant thereto, on 31.03.2008 the
Board   issued   a   notice   to   the   appellant   stating   that   the   appellant   did
not   have   the   requisite   authorisation   by   the   Central   Government   in
terms   of   the   proviso   to   Section   17(2)   of   the   Act   of   2006.     The
Regulation  18 of  the  Regulations of  2008  has been  challenged  by   the
appellant on the ground of being ultra vires the Act of 2006.
8. The appellant, however, on 28.08.2008 filed an application under
Regulation 18 of the Regulations of 2008 for grant of authorisation of

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city Gas Distribution Network at Udaipur and Jaipur.   In response to
the same, the Board issued a notice dated 19.11.2008 to the appellant
for oral hearing on 05.12.2008 and in the same meeting, the appellant
presented   the   status   report   as   well   as   the   investment   made   by   the
appellant,  and  expressed its commitment  to the Board to develop  the
project   and   requested   the   Board   to   grant   authorisation   for   the   two
cities   of   Udaipur   and   Jaipur.     The   appellant,   in   the   meantime,
continued   its   development   work   of   laying   down   the   gas   pipelines.
Then, on 12.07.2010, by a notification of the Government, Section 16
of  the   Act  of  2006  was  brought  into   force.     After  coming   into   force  of
Section   16,   the   Board,   on   29.07.2010,   issued   notice   to   the   appellant
to   once   again   appear   before   the   Board   on   04.08.2010   to   show   cause
as to why the application under Regulation 18(1) of the Regulations of
2008 should not be rejected. 
9. In   the   meantime,   though   no   formal   orders   were   passed   by   the
Board, on 28.02.2011, the Government of Rajasthan issued a notice to
the   appellant   stating   that   the   appellant   has   failed   to   fulfil   the
conditions   laid   down   in   the   communications   dated   20.03.2006   and
27.03.2006   issued   by   the   Government   of   Rajasthan   and   thus   the
NOCs   were   liable   to   be   withdrawn   and   the   commitment   amount   also

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liable   to   be   forfeited.     To   the   said   notice,   the   appellant   submitted   its
reply   to   the   Government   of   Rajasthan   on   16.03.2011.   Then,   by   an
Order   dated   18.05.2011,   the   Government   of   Rajasthan   withdrew   the
NOCs   granted   to   the   appellant   and   forfeited   the   commitment   fees   of
Rs.   2   Crore   deposited   by   the   appellant   on   24.03.2006.     On   the   very
next   date   i.e.   19.05.2011,   by   two   separate   letters,   the   Board   rejected
the   applications   of   the   appellant   for   authorisation   of   projects   at
Udaipur   and   Jaipur,   on   the   ground   that   the   physical   and   financial
progress   achieved   by   the   appellant   did   not   satisfy   the   proviso   of
Regulation   18(2)(d)   of   the   ‘Regulations   of   2008’   and   even   after
instructions   had   been   given   by   the   Board   vide   press   note   dated
30.10.2007,   the   appellant   had   allegedly   continued   with   laying   of
pipelines, in violation of such directions given by the Board in the said
press note.  
10. The appellant, then on 01.07.2011, wrote to the Board to bring to
its   notice   that   the   appellant   has   deemed   authorisation   in   terms   of
proviso   to   Section   16   of   the   Act   of   2006   and   the   letters   of   rejection
dated 19.05.2011 of the Board to the appellant should be withdrawn.
To   the   said   communication,   there   was   no   response   received   by   the
appellant   from   the   Board.   Challenging   the   order   dated   18.05.2011

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issued   by   the   Government   of   Rajasthan   and   the   orders   dated
19.05.2011 issued by the Board as well as the challenging the vires of
Regulation 18 of the ‘Regulations of 2008’, the appellant had filed Writ
Petition   before   the   Rajasthan   High   Court,   which   was   dismissed   on
29.04.2015. The same is under challenge in this appeal.
11. For   proper   appreciation   of   the   issues   involved   in   this   case   the
relevant provisions of the Act of 2006 and the Regulations of 2008 are
reproduced hereunder:
The Petroleum and Natural Gas Regulatory Board Act, 2006
2.   Definitions.   –   In   this   Act,   unless   the
context otherwise requires, ­
(a)…………;
(b)…………;
(c)…………;
(d)  “authorised entity”  means an entity – 
(A)   registered   by   the   Board   under   Section
15—
(i)   to   market   any   notified   petroleum,
petroleum products or natural gas, or
(ii)   to   establish   and   operate   liquefied
natural gas terminals, or
(B)   authorised   by   the   Board   under   section
16—
(i)   to   lay,   build,   operate   or   expand   a
common carrier or contract carrier, or
(ii) to lay, build, operate or expand a city or
local natural gas distribution network;
(e)…………;

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(f)………….;
(g)…………;
(h)…………;
(i)   “city   or   local   natural   gas   distribution
network”   means   an   inter­connected   network
of gas pipelines and the associated equipment
used   for   transporting   natural   gas   from   a   bulk
supply high pressure transmission main to the
medium   pressure   distribution   grid   and
subsequently   to   the   service   pipes   supplying
natural   gas   to   domestic,   industrial   or
commercial   premises   and   CNG   stations
situated in a specified geographical area.
16. Authorisation.  — No, entity shall —
(a) lay,   build,   operate   or   expand   any   pipeline
as a common carrier or contract carrier,
(b) lay,   build,   operate   or   expand   any   city   or
local natural gas distribution network, without
obtaining authorisation under this Act:
Provided that an entity, ­­ 
(i) laying,   building,   operating   or   expanding
any   pipeline   as   common   carrier   or   contract
carrier; or
(ii) laying,   building,   operating   or   expanding
any   city   or   local   natural   gas   distribution
network,
immediately before the appointed day shall be
deemed   to   have   such   authorisation   subject   to
the provisions of this Chapter, but any change
in the purpose or usage shall require separate
authorisation granted by the Board. 
17. Application for authorisation.  – 
(1)   An   entity   which   is   laying,   building,
operating   or   expanding,   or   which   proposes   to
lay,   build,   operate   or   expand,   a   pipeline   as   a
common   carrier   or   contract   carrier   shall   apply
in   writing   to   the   Board   for   obtaining   an

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authorisation under this Act:
Provided   that   an   entity   laying,   building,
operating   or   expanding   any   pipeline   as
common carrier or contract carrier authorised
by the Central Government at any time before
the   appointed   day   shall   furnish   the
particulars   of   such   activities   to   the   Board
within Six months from the appointed day. 
(2)   An   entity   which   is   laying,   building,
operating   or   expanding,   or   which   proposes   to
lay,   build,   operate   or   expand,   a   city   or   local
natural gas distribution network shall apply in
writing   for   obtaining   an   authorisation   under
this Act:
Provided   that   an   entity   laying,   building,
operating   or   expanding   any   city   or   local
natural gas distribution network authorised by
the Central Government at any time before the
appointed   day   shall   furnish   the   particulars   of
such   activities   to   the   Board   within   six   months
from the appointed day. 
(3)   Every   application   under   sub­section   (1)   or
sub­section (2) shall be made in such form and
in   such   manner   and   shall   be   accompanied
with   such   fee   as   the   Board   may,   by
regulations, specify.
(4)   subject   to   the   provisions   of   this   Act   and
consistent   with   the   norms   and   policy
guidelines   laid   down   by   the   Central
Government,   the   Board   may   either   reject   or
accept   and   application   made   to   it,   subject   to
such   amendments   or   conditions,   if   any,   as   it
may think fit. 
(5)   In   the   case   of   refusal   or   conditional
acceptance   of   an   application,   the   Board   shall

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record in writing the grounds for such rejection
or conditional acceptance, as the case may be.  
The   Petroleum   and   Natural   Gas   Regulatory   Board   Regulations,
2008 :
“ 18.     Entity   not   authorized   by   the   Central
Government   for   laying,   building,   operating   or
expanding   CGD   network   before   the   appointed
day . – 
(1)   An   entity   laying,   building,   operating   or
expanding   a   CGD   network   at   any   time   before
the   appointed   day   but   not   duly   authorized   to
do   so   by   the   Central   Government   shall   apply
immediately   for   obtaining   an   authorization   in
the form as at Schedule I. 
(2)   The Board may take into consideration the
following   criteria   while   considering   the
application for grant of authorization, namely  :­
(a) the   entity   meets   the   minimum   eligibility
criteria as 16[***] specified  in clauses  (a) to (e)
and   (i)   of   sub­regulation   (6)   of   regulation   5
before   the   appointed   date   and   is   possessing
all   necessary   statutory   clearances,
permissions,   no   objection   certificates   from   the
Central   and   State   Governments   and   other
statutory authorities:
(b) an  entity  which  is  not  registered  under  the
Companies Act, 1956 at the time of submitting
the   application   for   grant   of   authorization   shall
undertake   to   become   a   company   registered
under the Companies Act, 1956:
Provided that the Board may exempt an entity
to   register   under   the   Companies   Act,   1956   on
such conditions as it may deem appropriate;
(c) a   satisfactory   assessment   of   the   actual

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physical   progress   made   and   the   financial
commitment  thereof   till  immediately  before  the
appointed  day in  comparison with  the  entity’s
DFR   appraised   by   the   financial   institution
funding the project. In case the project has not
been   funded   by   any   financial   institution,   the
Board may appraise the DFR.   The DFR of the
entity   should   clearly   indicate   the   specified
geographical   area   of   the   project   and   also
specify   the   coverage   proposed   for   CNG   and
PNG.     In   case   upon   scrutiny   area,   customer
segments,   infrastructure   requirements,   etc.
proposed by the entity, the DFR is found to be
sub­optimal and unacceptable, the  Board  may
not   consider   the   case   of   the   entity   for   issuing
the authorization;
(d)   in   respect   of   the   actual   physical   progress
made   and   the   financial   commitment   thereof
referred to in clause (c), a physical progress of
at   least   twenty   five   percent   and   a   financial
commitment   of   at   least   twenty   five   percent   of
the   capital   expenditure   identified   for   the   CGD
project   as  per  the   DFR  immediately  before   the
appointed   day   may   be   considered   as
adequate ;
(e) the entity should have arranged, by way of
acquisition   or   lease,   land   for   CGS   and
procured  the   necessary equipment   for  erecting
the CGS before the appointed day;
(f) the   Board   reserves   the   right   to   get   the
actual   physical   progress   and   the   financial
commitment   certified   and   depending   upon   the
progress   achieved,   the   Board   may   consider
authorizing the entity for the authorized area—
(i) as per the geographical area in its DFR,
(ii) as   per   the   geographical   area   actually
covered   under   implementation   till   the
appointed day; or
(iii) the   geographical   area   as   specified   by   the
Board;

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(g) in   relation   to   laying,   building,   operating   or
expanding the CGD network, it is for the entity
to   satisfy   the   Board   on   the   adequacy   of   its
ability   to   meet   the   applicable   technical
standards,  specification  and  safety standards
as   specified   in   the   relevant   regulations   for
technical   standards   and   specifications,
including   safety   standards   and   the   quality   of
service   standards   as   specified   in   regulation
15:
(h)   assessment  of the  financial position of  the
entity   in   timely   and   adequately   meeting   the
financial   commitments   in   developing   the   CGD
network   project   as   appraised   by   a   financial
institution   and   an   examination   of   the   audited
books of accounts of the entity;
(i) firm  arrangement  for  supply  of  natural  gas
to   meet   the   demand   in   the   authorized   area   to
be covered by the CGD network;
(j) any other criteria considered as relevant by
the   Board   based   on   the   examination   of   the
application.
(3) The evaluation of the application in terms of
the   clauses   (a)   to   (j)   shall   be   done   in   totality
considering the composite nature and the inter­
linkages of the criteria.
(4)   The   Board,   after   examining   the   application
in terms of the criteria under sub­regulation (2)
and   also   taking   into   account   the   requirements
in   other   regulations   may   form   a   prima­facie
view   as   to   whether   the   case   should   be
considered for authorization.
(5)   In   case   of   prima­facie   consideration,   the
Board   shall   issue   a   public   notice   in   one
national   and   one   vernacular   daily   newspaper
(including   webhosting)   giving   brief   details   of
the project and seek comments and objections,

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if   any,   within   thirty   days   from   any   person   on
the proposal. 
(6)   The   Board,   after   examining   the   comments
and objections, if any under sub­regulation (5),
may either consider or reject the case for grant
of authorization for the CGD network. 
(7) In case it is decided to grant authorization,
the same shall be in the form at Schedule D;
(8)   In   case   of   rejection   of   the   application,   the
Board shall pass a speaking order after giving
a   reasonable   opportunity   to   the   concerned
party to explain its case  and  proceed to select
an appropriate entity for the project in terms of
regulation 6 .
(9)   In   case   the   entity   is   selected   for   grant   of
authorization for CGD network, ­­ 
(a) the   network   tariff   and   the   compression
charge for CNG shall be determined under the
Petroleum   and   Natural   Gas   Regulatory   Board
(Determination   of   Network   Tariff   for   city   or
Local   Natural   Gas   Distribution   Networks   and
Compression   Charge   for   CNG),   Regulations
2008;
(b) the Board may consider grant of exclusivity
on   such   terms   and   conditions   as   specified   in
the   Petroleum   and   Natural   Gas   Regulatory
Board   (Exclusivity   for   City   or   Local   Natural
Gas Distribution Networks) Regulations, 2008;
(c) the   entity   shall   abide   by   the   technical
standards,   specifications   including   safety
standards   as   specified   under   relevant
regulations   for   technical   standards   and
specifications, including safety standards;
(d) the   provisions   under   regulations   9,   13,   14,
58 [***] and 16 shall apply to the entity.”
(emphasis supplied)

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12.   We   have   heard   the   learned   Counsel   for   the   parties   and   have
perused the material on record. 
13.   The   main   issue   for   consideration   in   this   appeal   is   whether   the
Board   was   justified   in   rejecting   the   application   filed   by   the   appellant
under   Section   17   of   the   Act   of   2006   read   with   Regulation   18   of   the
Regulations   of   2008,   after   the   provisions   contained   in   Section   16   of
the   Act   of   2006   came   into   force   on   12.07.2010   granting   deemed
authorisation to those entities which had inter alia started laying and
building local Natural Gas Distribution Network prior to the appointed
date, i.e. 01.10.2007.
14.   It   is   not   disputed   that   in   pursuance   to   the   Government   of
Rajasthan   having,   on   19.11.2005,   invited   bids   for   laying   of   Gas
Distribution   Network,   the   appellant   had   applied   for   the   two   cities   of
Udaipur   and   Jaipur   and   after   acceptance   of   its   application,   the
appellant   was   granted   NOC   by   the   Government   of   Rajasthan   on
27.03.2006.   It   is   also   not   disputed   that   pursuant   thereto,   the
appellant has laid approximately 75 kms of pipeline in both the cities

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of   Udaipur   and   Jaipur,   and   in   the   process,   spent   a   huge   amount   of
money relying on the NOC granted in its favour for such purpose. The
appellant   asserts   that   is   has   completed   the   following   activities   in   the
two projects of Udaipur and Jaipur:
“Udaipur:
a) Received  permission to cut roads  vide  letter
dated   4.6.2007,   made   payment   of
Rs.14,28,900   towards   road   cutting   bill   and
provided   Bank   Guarantee   to   the   Municipal
Council of Udaipur in this respect;
b) Purchase   of   material   and   services   for   the
project, amounting to Rs.452.99 lacs;
c) The Petitioners appointed M/s. International
Certification Services (Asia) Pvt. Ltd., for the
independent   verification,   inspection,
certification   of   the   work   done   of   the   gas
distribution   pipeline.   This   agency   was
subsequently   also   authorised   by   the   Board
vide communication dated 6.4.2010.
d) The   Petitioner   had   achieved   mechanical
completion   on   various   phases   of   the   project
and   accordingly   has   received   Mechanical
Completion Certificated in this respect. 
e) The   Petitioner   has   successfully   laid   30093
mtrs. of gas distribution pipeline in Udaipur.
“Jaipur”:
a) The   Petitioner   has   received   provisional
permission   vide   letter   dated   7.3.2008   from
RIICO   for   laying   41.1   KM   of   the   gas
distribution pipeline in Jaipur;
b) Towards the provisional permission received
from   RIICO   the   Petitioner   has   deposited
Rs.54,95,500.00 with RIICO; and
c) Purchase   of   material   and   services   for   the

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project, amounting to Rs.393.22 lacs:
d) The   Petitioner   has   successfully   laid   22610
mtrs. of gas distribution pipeline in Jaipur.”
15.   Section   17   of   the   Act   of   2006,   which   Act   was   notified   on
03.04.2006   (except   Section   16)   and   came   into   force   on   01.04.2007,
provides   that   an   entity   which   is   laying,   building,   operating   or
expanding   City   or   Local   Natural   Gas   Distribution   Network,   or   which
proposes to do so, has to apply in writing to the Board for obtaining an
authorisation   under   the  Act   of   2006.   However,  the   entity  authorised
by   the   Central   Government   for   such   activities   would   be   required   to
furnish the particulars of such activities to the Board within 6 months
from   the   appointed   date.   Sub   Section   4   of   Section   17   empowers   the
Board either to reject or accept such application, which power  has to
be   exercised   consistent   with   the   norms   and   policy   guidelines.     Sub
Section 5 provides that in case of refusal or conditional acceptance of
an   application,   the   Board   shall   record   reasons   in   writing   for   such
rejection or conditional acceptance.
16.   Section   16   of   the   Act   of   2006,   which   came   into   force   on
12.07.2010, relates to ‘Authorisation’. It puts an embargo to lay, build,
operate   or   expand   in   City   or   Local   Natural   Gas   Distribution   Network

18
without obtaining authorisation under the Act.   The Proviso (ii) of the
said   section   16   provides   for   ‘deemed   authorisation’   in   case   an   entity
had   been   laying,   building,   operating   or   expanding   any   City   or   Local
Gas   Distribution   Network,   immediately   before   the   appointed   date,
which   shall   be   deemed   to   have   such   authorisation.     In   the   present
case,   the   appointed   date   is   01.10.2007   when   the   Act   of   2006   was
brought into force, except the provision contained in the Section 16 of
the Act of 2006, which came into force on 12.07.2010. 
17.   The Regulations of 2008 were framed before Section 16 of the Act
of   2006   came   into   force.   Regulation   18   of   the   Regulations   of   2008
provides that an entity, not authorised by the Central Government for
laying,   building,   operating   or   expanding   CGD   network   before   the
appointed date, shall apply for obtaining an authorisation in the form
as   in   Schedule   I   and   the   Board   may   take   into   consideration   the
criteria   for   considering   the   application   for   grant   of   authorisation   in
terms specified in clauses (a) to (j) of Regulation 18(2). 
18.   Regulation   18(2)(a)   requires   the   entity   to   meet   the   minimum
eligibility   criteria   and   other   necessary   clearances,   as   well   as   the
requisite   NOCs.   Clause   (b)   provides   that   the   entity,   if   not   registered

19
under   Companies   Act,   1956,   shall   undertake   to   become   a   company
registered   under   the   Companies   Act,   1956.     The   other   factors   in
clauses   (c)   and   (d)   as   enumerated,   relate   to   actual   physical   progress
made and the financial commitment thereon, and requires a physical
progress   of   at   least   25   percent   of   capital   expenditure   before   the
appointed   date,   which   may   be   considered   as   adequate.     Clauses   (e)
and (f) provide that the entity should have arranged and procured the
necessary   equipment   for   erecting   the   City   Gas   Distribution   network
before the appointed date. Clause (g) provides for  the entity to satisfy
the   Board   on   the   adequacy   of   its   ability   to   meet   the   applicable
technical   standards,   specifications   and   safety   standards   as   specified
in   the   relevant   Regulations.   Clause   (h)   provides   for   assessment   of
financial   position   of   the   entity   and   Clause   (i)   provides   for   supply   of
natural gas to meet the demand in the authorised area to be covered
by   City   Gas   Distribution   network.   The   last   clause   (j)   provides   for   the
Board to consider any other relevant criteria based on the examination
of   the   application.     All   the   aforesaid   clauses   are   relevant   factors   and
the   one   which   is   put   for   consideration   in   the   present   case   is   Clause
(d),   on   which   ground,   the   Central   Government   has   primarily   rejected
the application of the appellant. 

20
19. It   is   noteworthy   that   the   language   used   in   Regulation   18(2)   is
that   “the   Board   may   take   into   consideration…………”.   As   such,   the
language   in   which   the   Regulation   has   been   couched   does   not   make
the   consideration   in   the   said   clauses,   including   Clause   (d),   to   be
mandatory, but no doubt the same would be relevant considerations.
On a careful perusal of the order passed by the Board, we find that the
application   of   the   appellant   has   been   rejected   for   reasons   mentioned
in   para   5   of   the   impugned   order   dated   19.05.2011,   which   are
extracted hereunder: 
“5.     The   committee   found   that   you   do   not
satisfy   the   conditions   laid   down   under   the
Regulation   18(1)   of   the   Petroleum   and   Natural
Gas   Regulatory   Board   (Authorizing   Entities   to
Lay,   Build,   Operate   or   Expand   City   or   Local
Natural   Gas   Distribution   Networks)
Regulations 2008 on account of the following:
a) Physical   and   financial   progress   achieved
by   M/s.   Adani   Gas   Limited   before   the
appointed   day   in   the   GA   of   Jaipur   does
not   satisfy   the   proviso   18(2)(d)   of   the
Regulation 18(1) of Petroleum and Natural
Gas   Regulatory   Board   (Authorizing
Entities   to   Lay,   Build,   Operate   or   Expand
City   or   Local   Natural   Gas   Distribution
Networks) Regulations 2008;
b) Even   After   clear   instructions   of   PNGRB
vide   Press   Note   Dated   30 th
  October,   2007
to stop all incremental activity M/s. Adani
energy  Limited  had  continued  with laying

21
of   MDPE   Pipeline   and   thus   violating   the
directions of the Board.”
20.   From   the   above,   it   is   clear   that   the   application   of   the   appellant
has been rejected primarily on the ground of non­compliance of clause
(d)  of  Regulation  18(2)  of  the  Regulations  of  2008.   It  was  incumbent
on the Board to take into consideration various factors as specified in
clauses (a) to (j) of Regulation 18(2) of the Regulations of 2008, and the
same has to be considered in the back drop of the fact that the press
note   was   issued   on   30.10.2007   to   stop   all   incremental   activities   and
as such it was necessary to consider whether the appellant could have
been faulted for non­compliance of clause (d) of Regulation 18(2), and
whether it was a mandatory  requirement or  merely  one of the factors
to   be   considered   along   with   all   the   other   factors.     Other   relevant
aspects as contained in the other clauses have not been adverted to by
the Board while deciding the application of the appellant, which were
also   equally   significant.   It   was   necessary   to   consider   whether   the
appellant  is compliant  of  various  other  factors as provided in  clauses
(a)   to   (j)   of   Regulation   18(2)   of   the   Regulations   of   2008.     The   non­
compliance, if any, of clause (d) ought to have been considered in the
light of the press note dated 30.10.2007 which required stopping of all
incremental activities.  

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21. The   peculiar   factual   position   is   that   the   Act   of   2006   had   been
notified   on   03.04.2006   but   came   into   force   on   01.10.2007   and   the
NOC   was   issued   on   27.03.2006,   after   the   Government   of   Rajasthan
had   invited   open   bids   on   19.11.2005   for   laying   of   City   Gas
Distribution network in the cities of Udaipur and Jaipur, in which the
appellant   had   been   selected.     Besides   depositing   the   sum   of   Rs.   2
Crores   immediately   towards   commitment   fee,   the   appellant   had
thereafter   incurred   mammoth   expenditure   after   it   was   successful   in
the   bids,   which   aspect   has   not   been   considered   by   the   Board   while
deciding   the   application   of   the   appellant.   In   our   considered   view,   the
same should not have normally been over looked. Besides the same, in
the factual circumstances of the present case, the provision of ‘deemed
authorisation’   contained   in   Proviso   (ii)   to   Section   16   had   also   been
enforced   on   12.07.2010   and   it   was   necessary   for   the   Board   to   have
considered whether   it was  a case where only  certain  safeguards  were
required to be observed in view of the ‘deemed authorisation’.
22.   We are of the firm view that it was also necessary for the Board to
have   considered   all   these   aspects   and   thereafter   to   have   decided   the
application   relating   to   authorisation/conditions   to   be   imposed   under

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the   Act,   if   any,   required.     Besides   this,   detailed   replies   had   been
submitted by the appellant before the Board, which also ought to have
been considered. Further, the requirement under the Act/Regulations
is   for   grant   of   personal   hearing   to   the   appellant   before   deciding   its
application   and   if   personal   hearing   was   given,   to   have   discussed   the
same in the order, which aspect has also been ignored by the Board.  
23.  In   view   of   the   aforesaid   discussion,   we   are   of   the   opinion   that
there was illegality committed by the Board in deciding the application
of   the   appellant   while   passing   the   order   dated   19.05.2011,   and   as
such   the   same   deserves   to   be   quashed.   We   also   hold   that   in   the
aforesaid factual background, the decision of the State Government to
revoke   the   NOC   vide   order   dated   18.05.2011   was   also   highly   unfair
and unjust in as much as the reply of the petitioner dated 16.03.2011
in response to the notice dated 26.02.2011 has not been dealt with by
the   Government   of   Rajasthan   while   passing   the   said   impugned   order
dated 18.05.2011. As such, the same does not stand to reason, which
also deserves to be quashed.
24.   Accordingly,   we   allow   this   appeal   to   the   extent   that   the   order
dated   18.05.2011   passed   by   the   Government   of   Rajasthan   and   the

24
order dated 19.05.2011 passed by the Board are quashed.  The Board
is directed to take a fresh decision in the matter within 4 weeks from
today, in the light of the provision of ‘deemed authorisation’ and other
observations made hereinabove, after  giving  opportunity of hearing to
the   appellant.     The   appellant   is   given   liberty   to   file   fresh   written
submissions before the Board within 10 days from today. 
No orders as to cost. 
………………………..J.
[ARUN MISHRA]
………………….…….J.
[VINEET SARAN]
New Delhi
29 th
 January, 2019

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ITEM NO.1501               COURT NO.5               SECTION XV
               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS
Petition for Special Leave to Appeal (C) No. 21986 of 2015
ADANI GAS LIMITED  & ANR.                          Appellant(s)
                                VERSUS
UNION OF INDIA  & ORS.                             Respondent(s)
Date : 29-01-2019 This matter was called on for Judgment today. 
Counsel for the 
parties Mr. Gaurav Juneja, Adv. 
Mr. Divyansu, Adv. 
Mr. Aayush Jain, Adv. 
for Khaitan & Co. 
Mr. Munawwar Naseem, Adv. 
Mr. Palak Mishra, Adv. 
Mr. Utsav Trivedi, Adv. 
for M/S. Karanjawala & Co.
Mr. Amit Sharma, Adv. 
Mr. Ankit Raj, Adv. 
Ms. Ruchi Kohli, Adv. 
Ms. Iti Agarwal, Adv. 
Ms. Nikita Choukse, Adv. 
Ms. Rinali Batra, Adv. 
for DSK Legal
                    Ms. Ruchi Kohli, AOR
                    Mr. Senthil Jagadeesan, AOR
                    Mrs. Anil Katiyar, AOR
                    
 
Hon’ble Mr. Justice Vineet Saran pronounced the non-reportable
Judgment   of   the   Bench   comprising   Hon’ble   Mr.   Justice   Arun   Mishra
and His Lordship.
Leave granted. 
The application(s) for intervention is/are dismissed.

26
 
The   appeal   is   allowed   to   the   extent   indicated   in   the   signed
non-reportable Judgment.   
Pending   interlocutory   application(s),   if   any,   is/are   disposed
of.   
(JAYANT KUMAR ARORA)                            (JAGDISH CHANDER)
  COURT MASTER                           BRANCH OFFICER
(Signed non-reportable Judgment is placed on the file)