Introduction
Can one judgement bring the functioning of the regulator of a whole sector to a standstill? The answer to this question is surprisingly yes, if we see the impact M/s GAIL (India) Limited & Ors vs Gujarat Gas Limited & Ors has had on the powers and functioning of the Petroleum and Natural Gas Regulatory Board (Board).
The crux of the whole issue revolves around the question of what powers of the Board need to be necessarily exercised with the presence of a Member (Legal) i.e. a person who has substantial experience in the practice of law. This question has arisen because of the position taken by the Supreme Court (SC) in State of Gujarat Vs. Utility Users’ Welfare Association where it was categorically held that State Commissions under the Electricity Act, 2003 had trappings of the court and performed judicial functions. Thus, while performing these adjudicatory functions, the presence of a legal member having the knowledge of the law was necessary.
The Appellate Tribunal for Electricity (APTEL) had to centrally decide which functions of the Board are “adjudicatory” in nature and thus mandatorily require a Member (Legal) and which functions are administrative/ministerial in nature and do not require the presence of such a member. The aim of this article is to analyse the voluminous 200-page decision and delineate the shortcomings in its legal reasoning.
Where Did the APTEL Go Wrong?
The APTEL begins by relying on the SC case of Jamal Uddin Ahmad v. Abu Saleh Najmuddin to differentiate between judicial and ministerial functions. Judicial functions were defined to include interpretation of the law and its application by rule or discretion to the facts of particular cases whereas ministerial functions were defined to be those performed in a given state of facts in obedience to the mandate of a legal authority without any element of discretion.
The APTEL correctly held that ministerial functions like calling for information, issuing notices, etc do not require the presence of a Member (Legal). Further, ruling in line with the State of Gujarat case, it held that administrative functions as provided under Section 15 (grant of registration to entities) and Section 19 (grant of authorization to entities) of the Petroleum and Natural Gas Regulatory Board Act, 2006 (PNGRB Act) also do not require the presence of a Member (Legal)
However, the analysis of the judgement becomes convoluted from this point onwards. The PNGRB Act provides the Board the power to deal with disputes and complaints. Section 24 gives the Board the powers of a civil court to resolve a dispute and explicitly mentions that any dispute shall be decided by a bench mandatorily consisting of the Member (Legal). However, the interesting point is that Section 25, which provides the process of resolution of a complaint does not mandate the presence of a Member (Legal).
The APTEL committed a two-fold fallacy in interpreting Section 25. Firstly, the stance of the APTEL itself is contradictory at different places in the judgment. In paragraph 180, the APTEL clearly remarks that both the preliminary scrutiny of a complaint and the preliminary fact-finding exercise, whether an inquiry or investigation, are administrative actions. It is only after a party is called to explain its conduct, that the proceedings turn quasi-judicial. A clear ruling from the above stance should’ve been that the first two stages under Section 25(3) in relation to prima facie opinion and investigation/inquiry do not require a Member (Legal). However, in Paragraph 236(xxxiv), the APTEL proceeds to conclude that it is impermissible for the Board to discharge any of its responsibilities under Section 12(1)(a) and (b) r/w Sections 24 and 25 if there is a vacancy in the office of the Member (Legal). The conclusion inherently goes against the remarks of the Board regarding the first two stages of Section 25(3) to be administrative in nature.
Secondly, the APTEL has failed to consider the clear mandate of Section 25(3) and flipped the process prescribed on its head. Section 25(3) clearly divides the process of a complaint into 3 phases. First, the Board will decide whether a prima facie case is made out, second, the Board may either conduct an inquiry or refer the matter to the investigation, then finally on receipt of a report from such Investigating Officer, the Board may decide whether the complaint amounts to a dispute and decide the same under Section 24(2) or pass any such orders as it may deem fit.
The processes under Section 25(3) proceed in a step-by-step manner. If we see the term on receipt of, it clearly shows that only after a report has been received from the investigating officer, can the Board form an opinion regarding the complaint being dealt with as a dispute under Section 24(2).
Similar interpretations may also be found under Section 128(6) of the Electricity Act which provides that on receipt of any report under sub-section (1) or sub-section (5), the Appropriate Commission may require the generating company to take any action. The above provision was interpreted by the SC in Maharashtra Electricity Regulatory Commission Vs. Reliance Energy Ltd. which involved the commission directing the licensees to review their billing policies on the basis of certain consumer complaints. The Court clearly held that no report under Section 128(1) or 128(5) was received by the commission and the aforesaid direction could only be given after getting a report of the investigation agency.
However, the APTEL has held that the stages under Section 25(3) may roll into one if directions in the nature envisaged in Section 24 like ad interim injunctions are issued. The APTEL further concluded that the decision regarding dealing with the complaint under Section 24needs to be taken at the earliest and it is only after the Board decides that the matter does not fall within the purview of Section 24 that it may proceed further for inquiry/investigation. However, the section mandates that it is only after a report is received from the investigating officer, that the Board may make a decision regarding treating the dispute as a complaint. It clearly follows that stage two of conducting an enquiry/investigation, needs to precedestage three but the APTEL has erroneously merged the first and third stages and placed the second stage after them.
Finally, the APTEL has failed to concretely adjudicate upon the interpretation of Section 23 and 28 as well. The APTEL has correctly held suspension/cancellation of an authorization under Section 23 and the imposition of a civil penalty for contravention of any direction of the Board under Section 28 to be quasi-judicial. Cancellation of licenses and imposition of civil penalty have been held to be quasi-judicial in a plethora of SC cases including Organo Chemical Industries vs. UOI and City Corner vs. Personal Assistant to Collector, Nellore. The clear conclusion from the above stance should’ve been that since both these functions are quasi-judicial, there is a necessary requirement for a Member (Legal) to exercise them. But the APTEL again concluded contradictorily by stating that the inquiry leading to suspension or cancellation or authorization or imposition of civil penalty may be undertaken without a Member (Legal) if there is no element of dispute under Section 24 or the consequences as intended under Section 24 do not follow.
The APTEL has tried to establish a relationship between Section 23 and 28 along with Section 24 when the PNGRB Act does not mandate any such relation whatsoever. Since the PNGRB Act explicitly mentions that a Member (Legal) must be present under Section 24, the APTEL has erroneously tried to interpret Section 23, 25 and 28 in a manner that if any action which is similar to Section 24, is taken under these 3 sections, then a Member (Legal) needs to be necessarily present on the Board. However, neither the PNGRB Act nor the State of Gujarat Judgement intended for such a linkage to be read amongst various sections of the PNGRB Act.
Concluding Remarks
The aforesaid decision has completely choked the functioning of the Board considering that the post of Member (Legal) has been vacant for 5 years since March 2020. Thus essentially, the Board has been unable to take any action against the delinquent entities violating the PNGRB Act or the rules framed thereunder.
The M/s GAIL India judgement has failed to clearly delineate the powers of the Board which further exacerbates the already precarious situation. There is no clarity as to what processes the Board needs to follow under Section 25(3), what stages of this process can be followed without a Member (Legal), what actions can the Board take under Section 23 and 28 without the presence of a Member (Legal), can a Show Cause Notice be issued by the Board without the presence of a Member (Legal), amongst others.
Considering the importance and scale of the investments in the petroleum and natural gas sector, it is imperative that the Board’s powers are effectively and precisely delineated to prevent the reduction of the regulator into a toothless entity.
This blog is written by Udai Yashvir Singh and Payal Aggarwal, Fifth-year student at National Law University Delhi and Fourth-year student at Ideal Institute of Management and Technology, School of Law respectively.