Vedanta Limited vs Union Of India & Ors.

I N D E X

I. FACTUAL MATRIX

―(5) The Government desires that the Petroleum resources which may exist in the Contract Area be exploited with the utmost expedition in the overall interest of India in accordance with good international petroleum industry practices;

(7)

The Companies have represented that they have the necessary financial and technical resources and the technical and industrial competence and experience necessary for proper discharge and/or performance of all obligations required to be performed under this Contract in accordance with good international petroleum industry practices and each Company will provide a guarantee as required in Article 29 for the due performance of its undertakings hereunder;

(8)

As a result of discussions between representatives of the Government, ONGC and the Companies, the Government and ONGC have agreed to enter into this Contract with the Companies with respect to the said area referred to in paragraph (3) above on the terms and conditions herein set forth.‖

―1.65 ―Participating Interest‖ means in respect of each Party constituting the Contractor, the undivided share expressed as a percentage, of such Party in the rights and obligations under the Contract (including, without limitation, the Party‘s rights and obligations in relation to a Development Area) and the Operating Agreement.‖ by it during operations (this is termed as ―Cost Petroleum‖). What remains after the reduction of the Cost Petroleum is termed as Profit Petroleum, which is divided between the Government and the Contractor Parties, and, thereafter, inter se between the JV Partners, in proportion to their respective Participating Interest.

II. SUBMISSIONS MADE ON BEHALF OF THE PETITIONER

II. SUBMISSIONS MADE ON BEHALF OF THE RESPONDENTS

―25. …this Hon‘ble Court must therefore not insist on the Respondents demonstrating its degrees of satisfaction in considering the Application made by the Petitioner. The Hon‘ble Court should avoid committing an error of jurisdiction by asking questions which do not arise for consideration…‖.

―26. …that even an order directing reconsideration of extension would set an untenable precedent, enabling every unsuccessful or rejected contractor to seek renewal on grounds of alleged ―fairness‖, thereby opening the floodgates of litigation.‖

―32. …the Respondent is not submitting itself to the proposition that the Hon‘ble Court will enter into any justificatory evaluation of the responses.‖

IV. ANALYSIS

A. THE RIGHT WHICH THE PETITIONER SEEKS TO AGITATE

AND THE SCOPE OF ADJUDICATION

―9. At the outset, we are in agreement with the learned senior counsel for the respondents that the petitioner has miserably failed to point out any vested right and/or any other legal right which could be said to be breached in maintaining the present proceedings under Article 226 of the Constitution of India. The petitioner enjoyed rights qua the open land merely as a licensee i.e., to use the plot of land in question although adjoining to its school and which was in addition to the open space which the petitioner school already possesses. In any event such license had expired by efflux of time, as noted by us hereinabove.‖

―23. Thus, in a case like the present, if it is shown that the impugned State action is arbitrary and, therefore, violative of Article 14 of the Constitution, there can be no impediment in striking down the impugned act irrespective of the question whether an additional right, contractual or statutory, if any, is also available to the aggrieved persons.

24.

The State cannot be attributed the split personality of Dr Jekyll and Mr Hyde in the contractual field so as to impress on it all the characteristics of the State at the threshold while making a contract requiring it to fulfil the obligation of Article 14 of the Constitution and thereafter permitting it to cast off its garb of State to adorn the new robe of a private body during the subsistence of the contract enabling it to act arbitrarily subject only to the contractual obligations and remedies flowing from it. It is really the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters. There is a basic difference between the acts of the State which must invariably be in pubic interest and those of a private individual, engaged in similar activities, being primarily for personal gain, which may or may not promote public interest. Viewed in this manner, in which we find no conceptual difficulty or anachronism, we find no reason why the requirement of Article 14 should not extend even in the sphere of contractual matters for regulating the conduct of the State activity.

29.

It can no longer be doubted at this point of time that Article 14 of the Constitution of India applies also to matters of governmental policy and if the policy or any action of the government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. … The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenet and it would be sufficient to refer only to two recent decisions of this Court for this purpose.‖ [Emphasis supplied]

―170. The legal propositions laid down in the instant judgment in Shrilekha Vidyarthi case [(1991) 1 SCC 212 : 1991 SCC (L&S) 742] may be summarised as follows:

170.1.

Firstly, State actions in the contractual field are meant for public good and in public interest and are expected to be fair and just.

170.2.

Secondly, it would be alien to the constitutional scheme to accept the argument of exclusion of Article 14 of the Constitution of India in contractual matters.

170.3.

Thirdly, the fact that a dispute falls in the domain of contractual obligation, would make no difference to a challenge raised under Article 14 of the Constitution of India on the ground that the impugned act is arbitrary, unfair and unreasonable.

170.4.

Fourthly, every State action must be informed of reason and it follows that an act uninformed by reason is arbitrary.

170.5.

Fifthly, where no plausible reason or principle is indicated (or is discernible), and where the impugned action ex facie appears to be arbitrary, the onus shifts on the State to justify its action as fair and reasonable.

170.6.

Sixthly, every holder of public office is accountable to the people in whom the sovereignty vests. All powers vested in a public office, even in the field of contract, are meant to be exercised for public good and for promoting public interest.

170.7.

And seventhly, Article 14 of the Constitution of India applies also to matters of governmental policy even in contractual matters, and if the policy or any action of the Government fails to satisfy the test of reasonableness, the same would be unconstitutional.‖ [Emphasis supplied]

―7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law : A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is ‗fairplay in action‘. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review.‖

―82. We may cull out our conclusions in regard to the points, which we have framed:

***

82.2.

The principle laid down in Bareilly Development Authority [Bareilly Development Authority v. Ajai Pal Singh, (1989) 2 SCC 116] that in the case of a non-statutory contract the rights are governed only by the terms of the contract and the decisions, which are purported to be followed, including Radhakrishna Agarwal [Radhakrishna Agarwal v. State of Bihar, (1977) 3 SCC 457] , may not continue to hold good, in the light of what has been laid down in ABL [ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3 SCC 553] and as followed in the recent judgment in Sudhir Kumar Singh [State of U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706 : 2020 SCC OnLine SC 847] .

82.3.

The mere fact that relief is sought under a contract which is not statutory, will not entitle the respondent State in a case by itself to ward off scrutiny of its action or inaction under the contract, if the complaining party is able to establish that the action/inaction is, per se, arbitrary.

***

82.5.

After the contract is entered into, there can be a variety of circumstances, which may provide a cause of action to a party to the contract with the State, to seek relief by filing a writ petition.

***

82.10.

The reach of Article 14 enables a writ court to deal with arbitrary State action even after a contract is entered into by the State. A wide variety of circumstances can generate causes of action for invoking Article 14. The Court's approach in dealing with the same, would be guided by, undoubtedly, the overwhelming need to obviate arbitrary State action, in cases where the writ remedy provides an effective and fair means of preventing miscarriage of justice arising from palpably unreasonable action by the State.

***

82.12.

In a case the State is a party to the contract and a breach of a contract is alleged against the State, a civil action in the appropriate forum is, undoubtedly, maintainable. But this is not the end of the matter. Having regard to the position of the State and its duty to act fairly and to eschew arbitrariness in all its actions, resort to the constitutional remedy on the cause of action, that the action is arbitrary, is permissible (see in this regard Shrilekha Vidyarthi v. State of U.P. [Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212 : 1991 SCC (L&S) 742] ). However, it must be made clear that every case involving breach of contract by the State, cannot be dressed up and disguised as a case of arbitrary State action. While the concept of an arbitrary action or inaction cannot be cribbed or confined to any immutable mantra, and must be laid bare, with reference to the facts of each case, it cannot be a mere allegation of breach of contract that would suffice. What must be involved in the case must be action/inaction, which must be palpably unreasonable or absolutely irrational and bereft of any principle. An action, which is completely mala fide, can hardly be described as a fair action and may, depending on the facts, amount to arbitrary action. The question must be posed and answered by the Court and all we intend to lay down is that there is a discretion available to the Court to grant relief in appropriate cases.‖

―39. However, the licensor being the Union of India, its discretion to stipulate terms and conditions is regulated by certain constitutional mandates apart from stipulations of any law applicable.

40.

Insofar as the constitutional mandates in the context of a licence under Section 4 of the Telegraph Act are concerned, this Court in 2G Case [Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1] at para 85 held as follows: (SCC p. 56)

―85. As natural resources are public goods, the doctrine of equality, which emerges from the concepts of justice and fairness, must guide the State in determining the actual mechanism for distribution of natural resources. In this regard, the doctrine of equality has two aspects: first, it regulates the rights and obligations of the State vis-à-vis its people and demands that the people be granted equitable access to natural resources and/or its products and that they are adequately compensated for the transfer of the resource to the private domain; and second, it regulates the rights and obligations of the State vis-à-vis private parties seeking to acquire/use the resource and demands that the procedure adopted for distribution is just, non-arbitrary and transparent and that it does not discriminate between similarly placed private parties.‖

(emphasis in original)

41.

The licensor/Union of India does not have the freedom to act whimsically. As pointed out by this Court in 2G Case [Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1] in the above-extracted paragraph, the authority of the Union is fettered by two constitutional limitations: firstly, that any decision of the State to grant access to natural resources, which belong to the people, must ensure that the people are adequately compensated and, secondly, the process by which such access is granted must be just, non-arbitrary and transparent, vis-à-vis private parties seeking such access.

***

43.

In other words, such licences are in the nature of largesse from the State. No doubt, the authority of the State to distribute such largess is always subject to the condition that the State must comply with the conditions of Article 14 of the Constitution i.e. the distribution must be on the basis of some rational policy. Even the language of the proviso to Section 4 of the Telegraph Act, which stipulates that the grant of licence should be ―on such conditions and in consideration of such payments as it thinks fit‖, must necessarily be understood that the conditions must be rational and the payments forming the consideration for the grant of licence must be non-discriminatory. The conditions contained in the licences in question stipulate that the term of the licence could be extended on mutually agreed terms, if the Government of India deems it expedient. The obligations of the Government of India flowing from the Constitution as well as a statute necessarily require the Government of India to grant licences as rightly pointed by the Tribunal (T^DSAT) only ―in public interest and for public good.‖

B. AN INTERPRETATION OF EXTENSION CLAUSES

―Clause 7. Period of Concession

The contract period shall be for a period of 03 years and further extendable for another 02 years subject to satisfactory performance of the firm and as decided by the Commissioner, EDMC and 10% enhancement in awarded MLF from 4th year and also 10% increase on awarded MLF every year during the extended period, if extended by the Commissioner EDMC. After expiry of the contract period, either on account of completion of the concession period or pre-termination of the contract on any account whatsoever, the contractor shall hand over possession of the unipole(s) with complete structures, fittings and fixtures to the Commissioner, EDMC or any other person authorized by him. At the time of handing over of possession to the EDMC, it shall be ensured that the unipoles(s) is/are in proper condition and that no damage is caused by removing the fixtures and fittings, except the advertisement boards.

Clause 15. Extension of Contract

The contract of each cluster will be awarded to the successful H-1 bidder, initially for 3 years only, extendable for 2 terms of one year each, subject to satisfactory performance of contract. However, the contractor may apply for the extension of contract, 3 months prior to completion of three year contract period. Any application made during the last 3 months of contract, will not be entertained by the department. The application for extension of contract does not entitles any right of extension of contract, the commissioner EDMC or any authorized officer by him shall be at liberty to grant or reject request for extension of contract.‖

―23. A party cannot claim anything more than what is covered by the terms of contract, for the reason that contract is a transaction between the two parties and has been entered into with open eyes and understanding the nature of contract. Thus, contract being a creature of an agreement between two or more parties, has to be interpreted giving literal meanings unless, there is some ambiguity therein. The contract is to be interpreted giving the actual meaning to the words contained in the contract and it is not permissible for the court to make a new contract, however reasonable, if the parties have not made it themselves. It is to be interpreted in such a way that its terms may not be varied. The contract has to be interpreted without any outside aid. The terms of the contract have to be construed strictly without altering the nature of the contract, as it may affect the interest of either of the parties adversely. [Vide United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal [(2004) 8 SCC 644 : AIR 2004 SC 4794] and Polymat India (P) Ltd. v. National Insurance Co. Ltd. [(2005) 9 SCC 174 : AIR 2005 SC 286]‖

―17. …Clause 7 of the earlier contract is very clear which enables the contractor to seek extension and also enables the MCD to extend the term, however, in our opinion, satisfactory performance of the contractor is not the only or sole basis for conferment of any right of extension in that contract.

18.

The appearance of the phrase ―subject to satisfactory performance of the work and as decided by the Commissioner‖ assumes importance to arrive at the conclusion that it is not the satisfactory performance of the firm which is the sole basis for taking a decision as to whether the earlier term of the contractor was to be extended or not. Satisfactory performance of the firm is only one such consideration, however, the final decision is vested in the Commissioner on account of the appearance of the phrase ―and as decided by the Commissioner‖.

***

20.

Accordingly, we have no doubt in our mind that satisfactory performance of the appellant was not the only consideration to have weighed to the Commissioner while taking a decision on the prayer made by the appellant seeking extension of time.‖

―41. As seen from the above, the Court held that the large discretion granted to the Commissioner of the MCD means that apart from satisfactory performance of the firm, other relevant aspects could also be considered by the Commissioner while taking a decision on extension of the contract. The clause therein and the one in the matter at hand being the same, the said conclusion would be squarely applicable to the facts of this case.

42.

Further, we have also considered Clause 10 independently and find that the word ―and‖ used between the words ―satisfactory performance of the firm‖ and ―as decided by the Competent Authority‖ makes it clear that the two conditions are independent of each other and have to be read disjunctively. What is being contemplated is a twin condition- satisfactory performance of the firm during the said tenure, and also the satisfaction of the Competent Authority. Even if the performance of the firm is satisfactory, that itself cannot be considered to be the sole factor for the respondents to automatically extend the contract of the petitioners. The construction of the clause has to be interpreted to mean that the Competent Authority is vested with the discretion to take a decision on the extension. If that be so, the petitioners cannot claim extension of the contract solely on the basis that their performance has been satisfactory.‖

C. THE PUBLIC TRUST DOCTRINE AS AN AID OF

INTERPRETATION

(i) The Public Trust Doctrine

―297. Things of value within territorial waters or continental shelf and

resources of the exclusive economic zone to vest in the Union.

(1)

All lands, minerals and other things of value underlying the ocean within the territorial waters, or the continental shelf, or the exclusive economic zone, of India shall vest in the Union and be held for the purposes of the Union.‖

[Emphasis supplied]

―149. One may ask why in a company petition such a discussion of constitutional values has had to come about. Such is the nature of the dispute itself. The company petition, and the scheme of arrangement that it arises from, ostensibly, are to be dealt under Sections 391 through 394 of the Companies Act; but, involve at their foundations, a claim by Reliance Natural Resources Ltd. that it is entitled to receive, on account of a private pact between members of the Ambani family, vast quantities of natural gas, amounting to a significant portion of what would be available for the entire country, at a low price and for a long time, dehors any policy made by the Government of India. It claims that the Government of India has a right to enter into and has actually entered into a contract that allows Reliance Industries Ltd. to produce and decide how to use a precious and a scarce natural resource belonging to the people of this nation without any governmental supervision. Further, RNRL also claims, that its vested interest in such vast quantities of natural gas is such, that subsequently framed governmental policy cannot have a bearing on such an entitlement irrespective of public interest implications.‖

237.

While the word ―vest‖ could normally partake of at least a portion of the full bundle of rights associated with ownership, the phrase ―shall vest‖ as used in Article 297 of the Constitution implies a deliberate, and not an incidental, act by a body at the various constitutional moments that have informed our Constitution. That body is the people as a nation. It is now a well-established principle of jurisprudence that the true owners of ―natural wealth and resources‖ are the people as a nation.

238.

The UN General Assembly Resolution 1803 (XVII) of December 1962 states that the ―right of the people and nations to permanent sovereignty over their natural wealth and resources must be exercised in the interest of their national development and the well-being of the people of the State concerned‖. (emphasis supplied) Consequently, we have to hold that it is the people of India, the true owners, who have vested, the inclusive set of potential resources in a particular class of geographic zones, in the Union, and that it is an act of trust and of faith, with a specific set of instructions.

239.

Those instructions are inscribed, nay genetically encoded and hardwired, in the commands ―to be held‖ ―for the purposes of the Union‖. The core and pure purport of the word ―hold‖ is to conserve, to preserve and to keep in place and it only secondarily means ―use‖ or ―disposal‖. The fact that the phrase ―be held‖ is used in Article 297 of the Constitution, whereas in Article 298 of the Constitution, in its immediate neighbourhood, the word ―hold‖ is used in conjunction with abilities to ―acquire‖ and ―dispose‖ is significant and a clear indication of the intent of the supreme drafter of the Constitution—the people. The use of a series of words in a constitutional setting clearly implies that they are being used precisely, so that overlapping meanings are to be set aside and the purer and the core meanings be delineated. The phrase ―be held‖ when viewed along with the phrase ―shall vest‖, which vesting was done by the people as a nation, can only mean that it was used as a lock to conserve, to preserve and to keep in place. And the key to that lock is also there in the same article of the Constitution: ―purposes of the Union‖ which can only mean the integrity, unity and development of the nation.‖

―116. With relation to the public trust doctrine, this Court in M.C. Mehta v. Kamal Nath [(1997) 1 SCC 388] held: (SCC pp. 407 & 413, paras 25 & 34)

―25. The public trust doctrine primarily rests on the principle that certain resources like air, sea, waters and the forests have such a great importance to the people as a whole that it would be wholly unjustified to make them a subject of private ownership. The said resources being a gift of nature, they should be made freely available to everyone irrespective of the status in life. The doctrine enjoins upon the Government to protect the resources for the enjoyment of the general public rather than to permit their use for private ownership or commercial purposes.

34.

Our legal system—based on English common law—includes the public trust doctrine as part of its jurisprudence. The State is the trustee of all natural resources which are by nature meant for public use and enjoyment. Public at large is the beneficiary of the seashore, running waters, air, forests and ecologically fragile lands. The State as a trustee is under a legal duty to protect the natural resources. These resources meant for public use cannot be converted into private ownership.‖ This doctrine is part of Indian law and finds application in the present case as well. It is thus the duty of the Government to provide complete protection to the natural resources as a trustee of the people at large.

***

122.

From the above analysis, the following are the broad sustainable conclusions which can be derived from the position of the Union:

(1)

The natural resources are vested with the Government as a matter of trust in the name of the people of India. Thus, it is the solemn duty of the State to protect the national interest.

(2)

Even though exploration, extraction and exploitation of natural resources are within the domain of governmental function, the Government has decided to privatise some of its functions. For this reason, the constitutional restrictions on the Government would equally apply to the private players in this process. Natural resources must always be used in the interests of the country, and not private interests.

***

(5)

The Government cannot be divested of its supervisory powers to regulate the supply and distribution of gas.‖ [Emphasis supplied]

249.

In light of the public trust elements so intrinsic to resources under the seabed, and the special nature of Article 297, the implications of natural gas for India's energy security, and the imperatives of national development—including the concepts of egalitarianism and promotion of interregional parity, we hold that the Union of India cannot enter into a contract that permits extraction of resources in a manner that would abrogate its permanent sovereignty over such resources. It is not just a matter of mere textual provisions in a contract or a statute. It is a matter of constitutional necessity.

250.

We hold that with respect to the natural resources extracted and exploited from the geographic zones specified in Article 297 the Union may not:

(1)

transfer title of those resources after their extraction unless the Union receives just and proper compensation for the same;

(2)

allow a situation to develop wherein the various users in different sectors could potentially be deprived of access to such resources;

(3)

allow the extraction of such resources without a clear policy statement of conservation, which takes into account total domestic availability, the requisite balancing of current needs with those of future generations, and also India's security requirements;

(4)

allow the extraction and distribution without periodic evaluation of the current distribution and making an assessment of how greater equity can be achieved, as between sectors and also between regions;

(5)

allow a contractor or any other agency to extract and distribute the resources without the explicit permission of the Union of India, which permission can be granted only pursuant to a rationally framed utilisation policy; and

(6)

no end user may be given any guarantee for continued access and of use beyond a period to be specified by the Government.

Any contract including a PSC which does not take into its ambit stated principles may itself become vulnerable and fall foul of Article 14 of the Constitution.‖

(ii) Applying the Public Trust Doctrine to Interpret Contracts and Statutes

D. EXTENSION POLICY

―Policy for the Grant of Extension to the Production Sharing Contracts

signed by Government of India awarding Pre-New Exploration Licensing Policy (PreNELP) Exploration Blocks.

No. O-19025/07/2014-ONG-D-V - The Government of India has approved a policy for granting extension to the Production Sharing Contracts (PSCs) signed by Government of India awarding Pre-New Exploration Licensing Policy (Pre-NELP) Exploration Blocks, to have a transparent and defined framework for granting extension. This will help the operators in planning their investments and operations in these fields which will help in optimal exploitation of the reserves. The salient features of the policy are as follows‖ [Emphasis supplied]

―1. Submission, Consideration and Approval of request for extension of Contract:

The Contractor should submit the application duly approved by the Operating Committee for extension of Contract to Ministry of Petroleum & Natural Gas (MoPNG) at least 2 years in advance of the expiry date of Contract, but not more than 6 years in advance, with a copy to Directorate General of Hydrocarbons (DGH). DGH will make a recommendation to MoPNG within 6 months of submission of application by the contractor. The Government will take a decision on the request for extension within 3 months of receipt of the proposal from DGH.‖

―2. Fiscal Parameters for Extension:

2.1

Government Share: The Government share of Profit Petroleum during the extended period of contract shall be 10% higher for these blocks, than the share as calculated using the normal PSC provisions in any year during the extended period and hence will vary from year to year based on Investment Multiple (IM) /Post Tax Rate of Return (PTRR).

2.2

Royalty and Gess: During the extended period of Contract, the royalty and cess shall be payable at prevailing rates of nomination regime. Royalty and cess will be payable by all the contractors in proportion to their participating interest.‖

―5. In the event of failure to comply with any of the above conditions, mentioned in clauses 3 and 4 above, Government shall have the option to invite fresh bids for further development of the area and to award the field to the most competitive bid. Government would also take into account pending arbitration while considering extension requests.‖ [Emphasis supplied]

―9. Other conditions:

a)

Government shall have the right to stipulate any further conditions specific to any particular Production Sharing Contract.

b)

Government shall reserve the right not to extend PSC without assigning any reason thereof.

c)

The condition stipulated in this policy will override the existing provision of the PSC.

d)

In case any contractor is not agreeable to this policy then the field will be considered for rebidding, on as is where is basis. Government would also have the right to assign the same to National Oil Companies (NOCs) i.e. ONGC or OIL.‖ [Emphasis supplied]

(i) Whether Clause 5 is the Sole Reservoir of the Union of India’s Power

―118. The courts strongly lean against any construction which tends to reduce a statute to futility. The provision of a statute must be so construed as to make it effective and operative, on the principle ―ut res magis valeat quam pereat‖. It is, no doubt, true that if a statute is absolutely vague and its language wholly intractable and absolutely meaningless, the statute could be declared void for vagueness. This is not in judicial review by testing the law for arbitrariness or unreasonableness under Article 14; but what a court of construction, dealing with the language of a statute, does in order to ascertain from, and accord to, the statute the meaning and purpose which the legislature intended for it. In Manchester Ship Canal Co. v. Manchester Racecourse Co. [(1904) 2 Ch 352 : 16 TLR 429 : 83 LT 274] Farwell J. said: (pp. 360-61)

―Unless the words were so absolutely senseless that I could do nothing at all with them, I should be bound to find some meaning and not to declare them void for uncertainty.‖

119.

In Fawcett Properties Ltd. v. Buckingham County Council [(1960) 3 All ER 503] Lord Denning approving the dictum of Farwell, J., said:(All ER p. 516)

―But when a Statute has some meaning, even though it is obscure, or several meanings, even though there is little to choose between them, the courts have to say what meaning the statute to bear rather than reject it as a nullity.‖

120.

It is, therefore, the court‘s duty to make what it can of the statute, knowing that the statutes are meant to be operative and not inept and the nothing short of impossibility should allow a court to declare a statute unworkable. In Whitney v. IRC [1926 AC 37] Lord Dunedin said: (AC p. 52)

―A statute is designed to be workable, and the interpretation thereof by a court should be to secure that object, unless crucial omission or clear direction makes that end unattainable.‖‖

―1.4 Statute to be Construed to Make it Effective and Workable

The courts strongly lean against a construction which reduces the statute to a futility. A statute or any enacting provision therein must be so construed as to make it effective and operative ―on the principle expressed in the maxim: ut res magis valeat quam pereat.‖ It is an application of this principle that courts while pronouncing upon the constitutionality of a statute start with a presumption in favour of constitutionality and prefer a construction which keeps the statute within the competence of the Legislature. The importance of the principle can be judged from the fact that there is hardly any reported decision, where a statute may have been declared void for sheer vagueness, although theoretically it may be possible to reach such a conclusion in case of ―absolute intractability of the language used‖, or when ―it is impossible to resolve the ambiguity‖, i.e., when the language is absolutely meaningless. As laid down by Farwell J., ―unless the words were so absolutely senseless that I could do nothing at all with them, I should be bound to find some meaning, and not to declare them void for uncertainty‖. Lord Denning approving Farwell J., stated the principle thus:

But when a statute has some meaning even though it is obscure, or several meanings, even though it is little to choose between them, the courts have to say what meaning the statute is to bear, rather than reject it as a nullity.

And it was said by Lord Dunedin:

It is our duty to make what we can of statutes, knowing that they are meant to be operative, and not inept, and nothing short of impossibility should in my judgment allow a judge to declare a statute unworkable.

The principle was reiterated by him in a later case where he observed:

A statute is designed to be workable, and the interpretation thereof by a court should be to secure that object, unless crucial omission or clear direction makes that end unattainable.

The courts will therefore reject that construction which will defeat the plain intention of the Legislature even though there may be some inexactitude in the language used. ―If the choice is between two interpretations‖, stated Viscount Simon, LC ―the narrower of which would fail to achieve the manifest purpose of the legislation we should avoid a construction which would reduce the legislation to futility, and should rather accept the bolder construction, based on the view that Parliament would legislate only for the purpose of bringing about an effective result‖. The courts may complaint that the enactment is “mind twisting” or an “enigma” yet they do not really concede that no meaning can be given to it, and in their comity with the Legislature, they strive hard to give meaningful life to legislative enactments and avoid cadaveric consequences. “It is not an adequate discharge of duty”, said Homes J., “for courts to say: we see what you are driving at, but you have not said it, therefore we shall go on as before.‖….

―40. An Administrative Authority, exercising judicial or a quasi-judicial power, must record reasons for its decision. This is subject to the exception where the requirement has been expressly or by necessary implication done away.

***

43.

No order of an administrative authority communicating its decision is rendered illegal on the ground of absence of reasons ex facie and it is not open to the court to interfere with such orders merely on the ground of absence of any reasons. However, it does not mean that the administrative authority is at liberty to pass orders without there being any reasons for the same. In governmental functioning before any order is issued, the matter is generally considered at various levels and the reasons and opinions are contained in the notes on the file. The reasons contained in the file enable the competent authority to formulate its opinion. If the order as communicated rejecting the representation does not contain any reasons, the order cannot be held to be bad in law. If such an order is challenged in a court of law, it is always open to the competent authority to place the reasons before the court which may have led to the rejection of the representation. It is always open to an administrative authority to produce evidence aliunde before the court to justify its action.‖

(ii) Upon the Expiry of the Timelines does an Automatic Renewal take

―13. Another submission of the learned counsel in connection with the consideration of applications for renewal was that applications made sixty days or more before the date of GOMs No. 1312 (December 2, 1977) should be dealt with as if Rule 8-C had not come into force. It was also contended that even applications for grant of leases made long before the date of GOMs No. 1312 should be dealt with as if Rule 8-C had not come into force. The submission was that it was not open to the government to keep applications for the grant of leases and applications for renewal pending for a long time and then to reject them on the basis of Rule 8-C notwithstanding the fact that the applications had been made long prior to the date on which Rule 8-C came into force. While it is true that such applications should be dealt with within a reasonable time, it cannot on that account be said that the right to have an application disposed of in a reasonable time clothes an applicant for a lease with a right to have the application disposed of on the basis of the rules in force at the time of the making of the application. No one has a vested right to the grant or renewal of a lease and none can claim a vested right to have an application for the grant or renewal of a lease dealt with in a particular way, by applying particular provisions. In the absence of any vested rights in anyone, an application for a lease has necessarily to be dealt with according to the rules in force on the date of the disposal of the application despite the fact that there is a long delay since the making of the application. We are, therefore, unable to accept the submission of the learned counsel that applications for the grant of renewal of leases made long prior to the date of GOMs No. 1312 should be dealt with as if Rule 8-C did not exist.‖ [Emphasis supplied]

―Discussion

Vested right

17.

It is far too settled that there is no right vested over an application made which is pending seeking lease of a government land or over the minerals beneath the soil in any type of land over which the government has a vested right and regulatory control. In other words, a mere filing of an application ipso facto does not create any right. The power of the Government to amend, being an independent one, pending applications do not come in the way. For a right to be vested there has to be a statutory recognition. Such a right has to accrue and any decision will have to create the resultant injury. …‖

―10. Extension of term of petroleum lease.

(1)

The Central Government and the State Government with the prior approval of the Central Government, as the case may be, may extend a petroleum lease till the end of the economic life of the field, in accordance with these rules, in one or more instalments:

***

(4)

The application under sub-rule (3) shall be submitted at any time after the expiry of half of the term or the extended term but not later than six months prior to the expiry of the term or the extended term.

(5)

The application submitted under sub-rule (3) shall be accompanied with a non- refundable processing fee of rupees five thousand.

(6)

The decision of approval or rejection of the application shall be communicated to the lessee, in writing within one hundred and eighty days of receipt of the application.

(7)

In case the State Government does not communicate its decision on the application within ninety days of the receipt of the application, the Central Government at the request of the applicant or of its own accord, shall advise the State Government to expedite the decision on the application.

(8)

On the expiry of a period of one hundred and eighty days, if the application has not been decided by the Central Government or the State Government, as the case may be, an application filed in respect of an area falling within the territory of the, —

(i)

Central Government, shall be deemed to have been approved by the Central Government and the Central Government shall grant the extension of the petroleum lease in the format specified in Schedule IV; and

(ii)

State Government, shall be deemed to have been rejected by the State Government.‖ [Emphasis supplied]

―5. Grant of registration.

(1)

On receipt of the application under sub-section (1) of section 4, the Authority shall within a period of thirty days.

(a)

grant registration subject to the provisions of this Act and the rules and regulations made thereunder, and provide a registration number, including a Login Id and password to the applicant for accessing the website of the Authority and to create his web page and to fill therein the details of the proposed project; or

(b)

reject the application for reasons to be recorded in writing, if such application does not conform to the provisions of this Act or the rules or regulations made thereunder:

Provided that no application shall be rejected unless the applicant has been given an opportunity of being heard in the matter.

(2)

If the Authority fails to grant the registration or reject the application, as the case may be, as provided under sub-section (1), the project shall be deemed to have been registered, and the Authority shall within a period of seven days of the expiry of the said period of thirty days specified under sub-section (1), provide a registration number and a Login Id and password to the promoter for accessing the website of the Authority and to create his web page and to fill therein the details of the proposed project.‖ [Emphasis supplied]

―Casus omissus

20.1.9

The passage of Lord Greene‘s speech in Hankey v Clavering cited above records that the desirability of supporting the legislative purpose does not permit the courts to supply actual deficiencies and remedy actual errors. This was originally the general approach of the courts to ensure that they did not stray into usurping the legislative function. A specific instance of this approach is the rule that a casus omissus is not to be created or supplied, so that a statute may not be extended to meet a case for which provision has clearly and undoubtedly not been made.

This rule could once be stated in very strong and broad terms. Lord Halsbury said in Mersey Docks v Henderson:

―No case can be found to authorise any court to alter a word so as to produce a casus omissus.‖

And the Judicial Committee of the Privy Council said in Crawford v Spooner:

―We cannot aid the legislature‘s defective phrasing of an Act, we cannot add and mend, and, by construction, make up deficiencies which are left there.‖‖

―m. As Respondent Nos. 1 & 2 failed to act in compliance with the time lines mandated in the 201 7 Policy despite several follow-ups by the Contractor and discussions with Respondent Nos. 1 & 2 in several meetings, Petitioner issued communication dated 10.01.2023 requesting Respondent No. 1 to grant the approval for PSC extension at the earliest to facilitate safe and uninterrupted production operations in the Block. A follow-up communication to Respondent Nos. 1 & 2 was issued by the Contractor Parties jointly on 21.02.2023, specifically referring to the timelines mandated by the 201 7 Policy for deciding the Application. A copy of the Letter dated 10.01.2023 is annexed herewith and marked as Annexure P-5. A copy of the Letter dated 21.02.2023 is annexed herewith and marked as Annexure P-6.‖

―Date: 10 January, 2023

Ref: 2022-23/MoPNG/Out/06

To Shri. Sunil Kumar Joint Secretary (R/E) Ministry of Petroleum & Natural Gas Shastri Bhawan, Dr. Rajendra Prasad Marg New Delhi – 110001

Subject : Grant of extension for CB/OS-2 Block's PSC

Ref. : CB/OS-2 JV Partners' application for grant of PSC extension dated 28 June, 2021

Dear Sir,

The Production Sharing Contract ("PSC") for CB/OS-2 Block ("Block") was signed on 30 June, 1998 (valid till 29 June, 2023) between the President of India, Oil & Natural Gas Corporation Limited ("ONGC"), Vedanta Limited ("Vedanta") and Tata Petrodyne Ltd ("TPL").

CB/OS-2 JV Partners submitted an application dated 28 June, 2021 requesting for extension of the PSC under MoPNG Policy dated 7 April, 2017 for the "Grant of Extension to the Production Sharing Contracts signed by Government awarding Pre-New Exploration Licensing Policy Blocks", for a period of 10 years beyond the existing PSC period (i.e 29 June 2033), to commercially monetize the remaining resources and additional exploration potential in the Block.

The MoPNG Policy dated 7 April, 2017 directs that the contractor should submit the application duly approved by the Operating Committee for extension of PSC to MoPNG at least 2 years in advance of the expiry date of contract, with copy to Directorate General of Hydrocarbons (DGH). DGH will make a recommendation to MoPNG within 6 months of application by the contractor. The Government will take a decision on the request for extension within 3 months of the receipt of the proposal from DGH.

CB/OS-2 Joint Venture Partners submitted the Operating Committee approved application for extension of PSC as per MoPNG Policy guidelines on 28 June, 2021. Contractors have been following-up with MoPNG / DGH in this regard and the matter of PSC Extension has been discussed in various meetings. However, we are yet to receive an update from MoPNG / DGH with regards to the PSC Extension.

In view of above, we hereby request MoPNG's intervention and request for grant of approval for PSC Extension for CB/OS-2 block at the earliest. This is to facilitate safe and uninterrupted production operations from CB/OS-2 Block.

Regards, Sunipa Roy SBU President – Offshore & MC Member‖

―3.2 The application of extension of contract should fulfill the following conditions for consideration: … c) Contractor would submit Field Development Plan/ Revised Field Development Plan (RFDP) for the proposed extension period at the time of submission of application, for exploitation of the remaining reserves. This will include, but not be limited to, the following:

(i)

In place-Oil Initially in Place (OIIP) and Gas Initially in Place (GIIP)

(ii)

Balance 2P/P50 Recoverable Reserves but not be (GIIP)

(iii)

Future Production Profile based on Reservoir Simulation Studies

(iv)

Proposed Work Programme and the estimated expenditure for the proposed extension period.

d)

Such RFDP will be considered by the Management Committee (MC) and where thought fit, the MC will grant conditional approval for such development plan (including the period beyond the current PSC), subject to the condition of extension of PSC being granted by the Government under this policy. Such conditional approval by MC will not confer any right on the Contractor for extension in PSC period.‖

―Agenda No. 1: Approval of Revised Field Development Plan (RFDP) for extension of PSC under GoI Policy dated 07.04.2017

Views of the Contractor/DGH/MoPNG

Contractor's Views:

CB JV Partners submitted application requesting extension of PSC under "GoI Policy dated 7th April 2017 for the Grant of Extension to the Production Sharing Contracts signed by Government awarding Pre-New Exploration Licensing Policy Blocks" for a period of ten years beyond the existing PSC period (i.e. till 29 June 2033), to commercially monetize the remaining resources.

CB JV Partners also submitted RFDP for CB/OS-2 Contract area vide OCR#478 dated 28th June, 2021 as part of document for PSC extension application. The RFDP includes production profile for 10 years, post PSC period.

CB JV Partners had aligned to recommend the reserves estimated by third party (i.e. D&M) for base case along with the application dated 28th June 2021 for the extended period for the purpose of seeking PSC extension for 10 year period w.e.f. 30th June 2023.

Further, DGH requested Contractors to submit updated production profile with economics for PSC Extension period based on the outcome of the recent drilling campaign and same has been submitted by CB JV Partners on 15th June 2023 as requested by DGH. (highlighted)

Summary of the D&M reserve estimate and updated production profile is submitted below for reference.

…

** Production profile attached in Annexure-I

DGH views:

Contractor submitted RFDP on 28.06.2021 for PSC extension of CB-OS/2 as per PSC extension policy dated 07.04.2017. The RFDP was examined at DGH. However, looking at ongoing Drilling campaign in the block, Contractor was suggested to include updated production profile in the RFDP. The post-drill profile and techno-economics have been examined and agreed at DGH with recoverable reserves of 11.868 MMBL oil and 24.34 BCF (NANG+ANG) gas in next 10 years (till 29.06.2033) with existing wells. Final agreed STOIIP of 199.16 MMBBL (19% increase from 2021 submission) and NANG of 30.3 BCF (0.86 BCM, 53.2% decrease from 2021 submission). The estimated Capex is 11.5 MUSD (Laxmi- 8.5, Gauri-3.0). The updated post-drill techno-economics have been examined and found positive in all scenarios (Crude oil @ 50/65/75/85 USD/bbl & for Gas @ 6/8/10/11 USD/MMBTU) with/without levies. The agreed production profile is attached as Annexure-I.‖

E. THE OFFENDING ACTION OF THE PETITIONER

―Sir, I am directed to refer to the subject mentioned above and to say that this Ministry is in receipt of your letters referred hereinabove.

The Issues raised in the above references have been examined in this Ministry in consultation with Directorate General of Hydrocarbons (DGH).

It has been decided with the approval of Competent Authority in this Ministry that:-

i.

By way of the aforesaid letters, you have requested us to provide a confirmation on your proposal to adjust the amount payable towards Special Additional Excise Duty ("SAED") with the Central Excise Department from the dues payable to the Government of India on account of Profit Petroleum. In addition, in your letter dated 12th August 2022, you have made an alternate request for suggesting a mechanism to adequately restore the Contractor parties to what is purported to be their original position. Such request is untenable and misconceived. Further, your reliance on Article 16.7 of the subject PSC in support of this request, is equally misconceived.

***

iii.

As mentioned earlier, it is stated that your reliance on Article 16.7 of the PSC, is misplaced. Given the unambiguous and unequivocal language of Article 16.7, your reliance on the said provision is untenable and contrary to the terms of the PSC and has no basis, either in law or in facts.

***

v.

Therefore, Article 16.7 of the PSC categorically sets out certain pre-conditions/pre requisites that are required to be necessarily fulfilled, for the provision to be invoked/made applicable. Your letters/communications do not disclose as to how the imposition of SAED has materially changed the pre-conditions with respect to expected economic benefits. As such, your purported invocation of Article 16.7 of the PSC is wholly misplaced and does not merit any consideration.

vi.

Without prejudice to the above, Article 16.7 of the PSC does not authorize contractor/Parties to make any adjustment, much less an adjustment from the dues to the Government of India on account of Profit Petroleum. The proposal is not in consonance with the provisions of the PSC and is rejected. Article 16.7 requires the contractor to establish the material change to the expected economic benefit, as envisaged and submitted by the contractor in accordance with the provisions of the PSC.

vii.

As you are aware, the PSC is a contract related to the exploration and exploitation of a natural resource which is vested with the Union of India under Article 297 of the Constitution of India. Thus, there is an inherent character of national and public interest in the implementation of the PSC. This Ministry understands that SAED has been imposed on domestic crude producers to curb the windfall gains accrued on account of sale on international parity prices. This is applicable across all the oil and gas contracts awarded by the Government of India, subject to the conditions contained in the notification related to SAED and not just to the present PSC. Therefore, your unilateral request for adjustment from the dues to the Government of India on account of Profit Petroleum is unreasonable and untenable.

viii.

In the event the Contractor parties proceed to adjust the amount paid under SAED from the dues on account of Profit Petroleum, such action will be in breach of the provisions of the PSC and accordingly, the Government of India reserves its rights to take appropriate steps in accordance with law in this regard.

ix.

The present letter is without prejudice to any of Government of India's rights and Government of India specifically reserves all its rights and remedies under the PSC as well as under law, equity or otherwise, in respect of the matters referred to in this reply or even otherwise. … Yours faithfully, Sd/-(Awdhesh Kumar Mehta) Under Secretary to the Govt. of India‖

―DIRECTORATE GENERAL OF HYDROCARBONS Ministry of Petroleum & Natural Gas Government of India DGH/CF/CB-0S/2/SAED/2024-25/01 Date: 28-01-2025 Shri Rakesh Agiwal, Chief Policy and & Regulatory Officer Vedanta Limited 4th Floor, ASF Centre, Block A Plot No. 362-363, Udyog Vihar Phase IV, Gurugram-122016 (Haryana) Subject: Short Paid GOI share of PP on account of adjustment of Special Additional Excise Duty (SAED) in Block-CB-OS/2.

Dear Sir, Your attention is invited to the above captioned subject, whereby DGH/GOI has directed you to pay the short paid GOI share of PP on account of adjustment of Special Additional Excise Duty (SAED) while remitting the GOI share of PP. However, till date the said amount has not been deposited.

This conduct of Vedanta is serious breach of the agreed terms and conditions of the PSC causing huge financial losses to Central Exchequer.

Vedanta / CEHL is once again called upon to deposit the short paid GOI share of PP amounting to USD 10.13 MM along with applicable interest on account of SAED adjustment made while remitting the GOI share of PP till 30.09.2024 within 7 days of the receipt of this letter. In case the amount is not paid within 7 days GOI may initiate actions under Article 30 of the PSC.

The forgoing is without prejudice to the GOI's right under the PSC and applicable law.

Yours Sincerely Sd/-(Uttam Paul) HOD-Contract Finance, Directorate General of Hydrocarbons, Ministry of Petrolem & Natural Gas, Govt. of India, OIDB Bhawan, Tower-A, Plot No.2, Sector-73, NOIDA-201301. INDIA

Copy to: JS (Exp), MoP&NG.‖

―16.7 Changes to Indian Laws

If any change in or to any Indian Law, rule or regulation dealing with income tax or other corporate tax, export/import tax, excise, customs duty, or any other levies, duties or taxes imposed on Petroleum or dependent upon the value of Petroleum results in a material change to the expected economic benefits accruing to any of the Parties after the Effective Date of the Contract, the Parties shall consult promptly in good faith to make necessary revisions and adjustments to the Contract in order to maintain such economic benefits to each of the Parties, provided however, that the expected economic benefits to the Parties shall not be reduced as a result of the operation of this Article.

―33.1 The Parties shall use their best efforts to settle amicably all disputes, differences or claims arising out of or in connection with any of the terms and conditions of this Contract or concerning the interpretation or performance thereof.

33.2

Except for matters which, by the terms of this Contract, the Parties have agreed to refer to a Sole Expert and any other matters which the Parties may agree to so refer, any dispute, difference or claim arising between the Parties hereunder which cannot be settled amicably may, subject to Article 33.11, be submitted by any Party to arbitration pursuant to Article 33.3. Such Sole Expert shall be an independent and impartial person of international standing with relevant qualifications and experience appointed by agreement between the Parties. Any Sole Expert appointed shall be acting as an expert and not as an arbitrator and the decision of the Sole Expert on matters referred to him shall be final and binding on the Parties and not subject to arbitration. If the Parties are unable to agree on a Sole Expert, the matter may be referred to arbitration.

33.3

Subject to the provisions herein, the Parties hereby agree that any unresolved dispute, difference or claim which cannot be settled amicably within a reasonable time may, except for those referred to a Sole Expert under Article 33.2 and subject to Article 33.11, be submitted to an arbitral tribunal for final decision as hereinafter provided.‖

―5. In accordance with Article 15 of the PSC read with Clause 2.1 of the 2017 Policy, the Government is currently entitled to 65% of the Profit Petroleum from Gauri Field and 55% of Profit Petroleum from the Lakshmi Field. Profit Petroleum is calculated by subtracting the Contract Costs, i.e. the costs incurred on Exploration, Development and Production Operations, from the revenue generated from sale of Crude Oil and Gas (Article 1.23 read with Article 1.72 of the PSC).‖

―122. … (2) Even though exploration, extraction and exploitation of natural resources are within the domain of governmental function, the Government has decided to privatise some of its functions. For this reason, the constitutional restrictions on the Government would equally apply to the private players in this process. Natural resources must always be used in the interests of the country, and not private interests.‖

(i) Whether the Offending Action can be Considered as a Ground to

―44. We are also of the view that the High Court has committed a grave error in taking the view that the order of the Board could be judged only on the basis of the reasons stated in the impugned order based on the report of Vigilance and not on the subsequent materials furnished by CBI. Possibly, the High Court had in mind the Constitution Bench judgment of this Court in Mohinder Singh Gill v. Chief Election Commr. [(1978) 1 SCC 405]

45.

We are of the view that the decision-maker can always rely upon subsequent materials to support the decision already taken when larger public interest is involved. This Court in Madhyamic Shiksha Mandal, M.P. v. Abhilash Shiksha Prasar Samiti [(1998) 9 SCC 236] found no irregularity in placing reliance on a subsequent report to sustain the cancellation of the examination conducted where there were serious allegations of mass copying. The principle laid down in Mohinder Singh Gill case [(1978) 1 SCC 405] is not applicable where larger public interest is involved and in such situations, additional grounds can be looked into to examine the validity of an order. The finding recorded by the High Court that the report of CBI cannot be looked into to examine the validity of the order dated 4-6-2004, cannot be sustained.‖

―5. …It is well settled that the exercise of a power, if there is indeed a power, will be referable to a jurisdiction, when the validity of the exercise of that power is in issue, which confers validity upon it and not to a jurisdiction under which it would be nugatory, though the section was not referred, and a different or a wrong section of different provisions was mentioned. See in this connection the observations in Pitamber Vajirshet v. Dhondu Navlapa [ILR (1888) 12 Bom 486, 489] . See in this connection also the observations of this Court in the case of L. Hazari Mal Kuthiala v. ITO, Special Circle, Ambala Cantt. [AIR 1961 SC 200 : (1961) 1 SCR 892 : (1961) 41 ITR 12, 16 : (1961) 1 SCJ 617] This point has again been reiterated by this Court in the case of Hukumchand Mills Ltd. v. State of M.P. [AIR 1964 SC 1329 : (1964) 6 SCR 857 : (1964) 52 ITR 583 : (1964) 1 SCJ 561] where it was observed that it was well settled that a wrong reference to the power under which action was taken by the Government would not per se vitiate that action if it could be justified under some other power under which Government could lawfully do that act. See also the observations of the Supreme Court in the case of Nani Gopal Biswas v. Municipality of Howrah [AIR 1958 SC 141 : 1958 SCR 774, 779 : 1958 SCJ 297 : 1958 Cri LJ 271].‖

―9. It is well settled that if an authority has a power under the law merely because while exercising that power the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be traced to a source available in law.‖

―10. With regard to the contention of the Petitioner that the Impugned Rejection letter was issued on the basis of irrelevant conditions, it is most pertinent to clarify that the Rejection letter was issued on primarily the grounds of unilateral deductions of the Profit Petroleum and…

11.

Therefore the Impugned Rejection letter in clear terms communicated the decision of the GoI to reject the Application for extension on grounds of violation of the 2017 Policy, breach of the PSC, and most importantly, breach of trust…‖

(ii) The Grounds to Challenge a Rejection of an Extension

―107. From a scrutiny of the trend of decisions it is clearly perceivable that the action of the State, whether it relates to distribution of largesse, grant of contracts or allotment of land, is to be tested on the touchstone of Article 14 of the Constitution. A law may not be struck down for being arbitrary without the pointing out of a constitutional infirmity as McDowell case [(1996) 3 SCC 709] has said. Therefore, a State action has to be tested for constitutional infirmities qua Article 14 of the Constitution. The action has to be fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy competition and equitable treatment. It should conform to the norms which are rational, informed with reasons and guided by public interest, etc. All these principles are inherent in the fundamental conception of Article 14. This is the mandate of Article 14 of the Constitution of India.

―85. As natural resources are public goods, the doctrine of equality, which emerges from the concepts of justice and fairness, must guide the State in determining the actual mechanism for distribution of natural resources. In this regard, the doctrine of equality has two aspects: first, it regulates the rights and obligations of the State vis-à-vis its people and demands that the people be granted equitable access to natural resources and/or its products and that they are adequately compensated for the transfer of the resource to the private domain; and second, it regulates the rights and obligations of the State vis-à-vis private parties seeking to acquire/use the resource and demands that the procedure adopted for distribution is just, non-arbitrary and transparent and that it does not discriminate between similarly placed private parties.‖

―36. The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that ‗be you ever so high, the laws are above you‘. This is what men in power must remember, always.‖

―75. We would, therefore, sum up as to when an act is to be treated as arbitrary. The Court must carefully attend to the facts and the circumstances of the case. It should find out whether the impugned decision is based on any principle. If not, it may unerringly point to arbitrariness. If the act betrays caprice or the mere exhibition of the whim of the authority it would sufficiently bear the insignia of arbitrariness. In this regard supporting an order with a rationale which in the circumstances is found to be reasonable will go a long way to repel a challenge to State action. No doubt the reasons need not in every case be part of the order as such. If there is absence of good faith and the action is actuated with an oblique motive, it could be characterised as being arbitrary. A total non-application of mind without due regard to the rights of the parties and public interest may be a clear indicator of arbitrary action. A wholly unreasonable decision which is little different from a perverse decision under the Wednesbury doctrine would qualify as an arbitrary decision under Article 14. Ordinarily visiting a party with the consequences of its breach under a contract may not be an arbitrary decision.‖

―11. Further, none of these commercial claims were asserted or claimed [except for SAED, which was paid to Respondent No. 1 on 12.09.2025 under protest and subject to arbitration]…

***

14.

…

(a)

Respondent Nos. 1 & 2 neither asserted these commercial claims nor put the Contractor to notice in respect thereof (other than SAED which has already been paid under protest)‖

―P. For that the dispute regarding SAED recovered by the Contractor also arose after the date of the Application and cannot be a ground for denying extension of the PSC term. The SAED of USD 9.33 Million was recovered by the Contractor pursuant to mandatory provisions of the PSC, viz. Article 16.7, entitling the Petitioner to the same. On the insistence of GOI, the amount recovered was paid to Respondent No.1 on 12.09.2025 on a without-prejudice basis and subject to adjudication of the issue through arbitration. The legitimate difference of opinion between the parties on the said issue cannot be the basis for rejection of the Application.‖

F. REMAINING CONTENTIONS OF THE PETITIONER

(i) The Argument of Legitimate Expectation

― ***

2.

Pending the decision on your application for extension of PSC of the subject Block and other operational issues, the Contractor is hereby permitted in the public interest, to continue petroleum operations in CB-OS/2 Block till the execution of the Addendum to PSC or for three (3) months from 30.06.2023, whichever is earlier, subject to the following conditions:

a)

This shall be purely interim measure of facilitation to continue petroleum operations pending the decision on Contract extension and signing of Addendum to PSC, and shall not be construed as the government giving effect to the extension of the PSC.

***

c)

The government shall bear no liability, whatsoever on this account, in the event of Contract is not extended beyond 29.06.2023.‖

(i) The Issue of the Petitioner being “recommended” by the DGH

―Sir, Production Sharing Contract (PSC) for CB/OS-2 Block was signed on 30th June 1998 and the same is due to expire on 29th June 2023. Contractor, vide letter dated 29.06.2021(Annexure-1), has applied for extension of the term of PSC under the PSC Extension Policy for Pre-NELP blocks dated 07.04.2017 for a period of 10 years beyond the existing PSC period (i.e. till 29 June 2033).

2.

The extension application has been duly examined at DGH in line with the PSC Extension Policy dated 07.04.2021 (Annexure-II) including Para 1, Para 3.2 and other relevant provisions under the Policy. In this context, it may be noted that Para 3.2 of the Policy stipulates that certain conditions are required to be fulfilled for consideration of PSC extension application. One of these conditions is as under.

Quote

3.2

(g) All the statutory dues and payment due to Government should have been cleared and the contractor should not be a defaulter to the Government on any account.

Unquote

3.

It is observed that the extension application submitted by the contractor does not conform to Para 3.2 (g) of the Policy as there are statutory dues on account of short paid royalty and penal royalty to the tune of INR 4,55,24,27,628 (provisional as of 30.06.2021), which has been duly notified to the Contractor from time to time by DGH. The latest notifications have been issued on 13.09.2021 and 21.09.2021 (Annexure- III). However, the Contractor is yet to pay pending dues to Gol.

4.

Therefore, it is recommended that the Contractor may be directed to forthwith clear the pending statutory dues and fulfill the prescribed conditions under the said Policy for consideration of application for extension of PSC submitted by the Contractor.‖

G. WHETHER OTHER GROUNDS FOR REJECTION NEED TO BE DELVED INTO

―17. What is known as ―useless formality theory‖ has received consideration of this Court in M.C. Mehta v. Union of India [(1999) 6 SCC 237] . It was observed as under : (SCC pp. 245-47, paras 22-23)

―22. Before we go into the final aspects of this contention, we would like to state that cases relating to breach of natural justice do also occur where all facts are not admitted or are not all beyond dispute. In the context of those cases there is a considerable case-law and literature as to whether relief can be refused even if the court thinks that the case of the applicant is not one of ‗real substance‘ or that there is no substantial possibility of his success or that the result will not be different, even if natural justice is followed. See Malloch v. Aberdeen Corpn. [(1971) 2 All ER 1278 : (1971) 1 WLR 1578 (HL)] (per Lord Reid and Lord Wilberforce), Glynn v. Keele University [(1971) 2 All ER 89 : (1971) 1 WLR 487] , Cinnamond v. British Airports Authority [(1980) 2 All ER 368 (CA)] and other cases where such a view has been held. The latest addition to this view is R. v. Ealing Magistrates' Court, ex p Fannaran [(1996) 8 Admn LR 351] (Admn LR at p. 358) (see de Smith, Suppl. p. 89) (1998) where Straughton, L.J. held that there must be ‗demonstrable beyond doubt‘ that the result would have been different. Lord Woolf in Lloyd v. McMahon [(1987) 1 All ER 1118 : 1987 AC 625 : (1987) 2 WLR 821 (CA)] (WLR at p. 862) has also not disfavoured refusal of discretion in certain cases of breach of natural justice. The New Zealand Court in McCarthy v. Grant [1959 NZLR 1014] however goes halfway when it says that (as in the case of bias), it is sufficient for the applicant to show that there is ‗real likelihood — not certainty — of prejudice‘. On the other hand, Garner Administrative Law (8th Edn., 1996, pp. 271-72) says that slight proof that the result would have been different is sufficient. On the other side of the argument, we have apart from Ridge v. Baldwin [1964 AC 40 : (1963) 2 All ER 66 : (1963) 2 WLR 935 (HL)] , Megarry, J. in John v. Rees [(1969) 2 All ER 274 : 1970 Ch 345 : (1969) 2 WLR 1294] stating that there are always ‗open and shut cases‘ and no absolute rule of proof of prejudice can be laid down. Merits are not for the court but for the authority to consider. Ackner, J. has said that the ‗useless formality theory‘ is a dangerous one and, however inconvenient, natural justice must be followed. His Lordship observed that ‗convenience and justice are often not on speaking terms‘. More recently, Lord Bingham, has deprecated the ‗useless formality‘ theory in R. v. Chief Constable of the Thames Valley Police Forces, ex p Cotton [1990 IRLR 344] by giving six reasons. (See also his article ‗Should Public Law Remedies be Discretionary?‘ 1991 PL, p. 64.) A detailed and emphatic criticism of the ‗useless formality theory‘ has been made much earlier in ‗Natural Justice, Substance or Shadow‘ by Prof. D.H. Clark of Canada (see 1975 PL, pp. 27-63) contending that Malloch [(1971) 2 All ER 1278 : (1971) 1 WLR 1578 (HL)] and Glynn [(1971) 2 All ER 89 : (1971) 1 WLR 487] were wrongly decided. Foulkes (Administrative Law, 8th Edn., 1996, p. 323), Craig (Administrative Law, 3rd Edn., p. 596) and others say that the court cannot prejudge what is to be decided by the decision-making authority. De Smith (5th Edn., 1994, paras 10.031 to 10.036) says courts have not yet committed themselves to any one view though discretion is always with the court. Wade (Administrative Law, 5th Edn., 1994, pp. 526-30) says that while futile writs may not be issued, a distinction has to be made according to the nature of the decision. Thus, in relation to cases other than those relating to admitted or indisputable facts, there is a considerable divergence of opinion whether the applicant can be compelled to prove that the outcome will be in his favour or he has to prove a case of substance or if he can prove a ‗real likelihood‘ of success or if he is entitled to relief even if there is some remote chance of success. We may, however, point out that even in cases where the facts are not all admitted or beyond dispute, there is a considerable unanimity that the courts can, in exercise of their ‗discretion‘, refuse certiorari, prohibition, mandamus or injunction even though natural justice is not followed. We may also state that there is yet another line of cases as in State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364 : 1996 SCC (L&S) 717] , Rajendra Singh v. State of M.P. [(1996) 5 SCC 460] that even in relation to statutory provisions requiring notice, a distinction is to be made between cases where the provision is intended for individual benefit and where a provision is intended to protect public interest. In the former case, it can be waived while in the case of the latter, it cannot be waived.

23.

We do not propose to express any opinion on the correctness or otherwise of the ‗useless formality‘ theory and leave the matter for decision in an appropriate case, inasmuch as, in the case before us, ‗admitted and indisputable‘ facts show that grant of a writ will be in vain as pointed out by Chinnappa Reddy, J.‖‖

―15. …The principle underlying these decisions appears to be this. An administrative or quasi-judicial order based on several grounds, all taken together, cannot be sustained if it be found that some of the grounds are non-existent or irrelevant, and there is nothing to show that the authority would have passed the order on the basis of the other relevant and existing grounds. On the other hand, an order based on several grounds some of which are found to be non-existent or irrelevant, can be sustained if the court is satisfied that the authority would have passed the order on the basis of the other relevant and existing grounds, and the exclusion of the irrelevant or non-existent grounds could not have affected the ultimate opinion or decision.

16.

Now the opinion of the State Government that the corporation was not competent to perform the duties imposed on it by or under the Act, was based on two grounds one of which is relevant and the other irrelevant. Both the grounds as also other grounds were set out in paras 1 and 2 read with the Annexures 1 and 2 of the show-cause notice dated July 21, 1965. Para 3 of the show-cause notice stated, ―And whereas the grounds aforesaid jointly as well as severally appear serious enough to warrant action under Section 408(1) of the said Act‖. The order dated September 29, 1965 read with the notice dated July 21, 1965 shows that in the opinion of the State Government the second ground above was serious enough to warrant action under Section 408(1) and was sufficient to establish that the corporation was not competent to perform its duties under the Act. The fact that the first ground mentioned in the order is now found not to exist and is irrelevant, does not affect the order. We are reasonably certain that the State Government would have passed the order on the basis of the second ground alone. The order is, therefore, valid and cannot be set aside.‖

V. CONCLUSION

VI. ORDER