ONGC Limited Vs. Assn. of Natural Gas Consuming Indus. & Ors  Insc
256 (12 April 2004)
Babu, Dr. Ar. Lakshmanan & G.P. Mathur.
I.A. NOS. 190-200 IN CIVIL APPEAL NOS. 8530-40 OF 1983 [With I.A.Nos.333-343 of
2002 in I.A. 190-200 in C.A. Nos. 8530-40 of 1983] RAJENDRA
BABU, J. :
batch of writ petitions was filed in the High Court of Gujarat challenging the
increase in the price of gas and by an interim order, the High Court directed
ONGC to supply gas at the old rate of Rs.504/- per 1000 M3. Subsequently, by
another order made on 29.10.1982, the price was raised to Rs.1000/- per 1000M3.
By an order made on 30.7.1983, the High Court allowed the writ petitions and
set aside the price which had been determined by ONGC. Pursuant to a certificate
of fitness, appeals were filed in this Court and this Court continued the
interim order granted by the High Court and thereby the respondents in the
appeals received gas for which they paid a price of Rs.1000/- per 1000M3.
Court, on 4.5.1990, by judgment upheld the prices fixed by ONGC and allowed the
appeals. After the appeals were allowed, ONGC became entitled to receive the
difference in the price of gas supplied.
in addition to the said principal amount, also demanded interest thereon in
terms of Clause 5.02 of the contract. When payment was not made in accordance
with their demands, I.A. Nos.1-11 and 23- 33 were filed in this Court and this
Court, by an order made on 6.4.1993, passed the orders for categorising the
respondents into three categories. The first category being where the principal
amount was allowed to be paid in instalments. Where such offer was not made,
this Court made it clear that ONGC was entitled to recover the entire dues. The
third category is of such cases where the companies concerned have become sick
and proceedings were pending before BIFR under the SICA. Subsequently, it was
directed that these IAs will remain pending and would be listed for hearing for
directions regarding payment of interest after the principal amount is paid.
But in some of the cases, there is no dispute that the payment of principal
amount has been made in terms of this Court's order.
applications in I.A.Nos. 190-200 were filed by ONGC claiming interest on the
balance principal amount in terms of this Court's order dated 4.5.1990.
Court, after examining the matter, held as under:
ONGC was under an obligation by virtue of the interim orders to comply with the
terms of the earlier contracts and to supply gas in the manner provided thereunder.
This part of the contract was performed by the ONGC who thus became entitled to
recover from the industries the price which had originally been charged by
them. For the late payment of the amount, the contract in clause 5 had
contemplated payment of interest at the rate and the manner specified therein..."
However, it was made clear therein that the cases of Sarabhai Common Services
and Alembic Chemicals Ltd. [now known as 'Alembic Ltd.'] will be dealt with
separately and now these applications have come up for consideration.
is a serious dispute between ONGC and the applicants as regards the demands
raised by ONGC. It is contended that the ONGC while calculating the arrears of
principal amount has applied for a higher price contrary to the decision of
this Court and hence the arrears of principal amount had to be recalculated by
applying the correct rate/price in accordance with the order of this Court;
that the arrears claimed on account of short-liftment have been calculated by
ONGC using the rates for actual supply which include the element of sales tax
and royalty on the short-lifted quantities; that the money payable for short-liftment
of gas less than the minimum quantity of gas agreed to be purchased is neither
delivered nor supplied and hence cannot be treated as sale and in such a case
neither royalty nor tax is leviable and, therefore, they contend that the
statement of arrears which contained the element of royalty and sales tax will
have to be recalculated by excluding the same; that they had made a request by
a letter dated 24.6.1985 for reduction in the contracted quantity from 60000
cubic meters per day to 50,000 cubic meters per day; that since the matter was
sub-judice before this Court, the change in the contracted quantity could not
they claim that this aspect has to be considered now that the matters have been
disposed of by ONGC and thereafter to re-compute the demands.
addition, it is also contended that the contract provides for force majeure and
strike by workmen and furnace collapse are covered by this clause and ONGC is
required to bill on actual usage quantity during the period of strike and
furnace collapse. Again on the plea that the matter was pending before this
Court, this aspect was not examined by ONGC. In these circumstances, it is
submitted that the applicant is entitled to relief.
similar application has also been made by M/s Sarabhai Common Services
contending that the interest payable by them on the amounts due will have to be
taken note of and there have been representations made by both M/s Sarabhai
Common Services and also by Alembic Ltd. However, in neither of the cases has
ONGC considered the demands made by them effectively and thereafter determined
the amount of arrears due from them without making appropriate adjustments for
the money paid by them pursuant to the orders of this Court or further claims
arising therefrom. The representations made by both these companies have been
dealt with in usual bureaucratic style without due consideration to the points raised.
find that the points raised by them both in regard to the payment of interest
and in regard to other aspects are of substantial nature and cannot be brushed
aside as has been done now but needs to be considered by ONGC appropriately.
as interest is concerned, though this Court stated in the order made on
26.7.2001, that interest is payable in terms of clause 5 of the contract as
contract continued to be in force till the matters were finally disposed of by
this Court, but that was in the normal circumstances arising in this case. We
may notice that these two cases where Sarabhai Common Services and Alembic
Chemicals Ltd. [now known as 'Alembic Ltd.'] are drug manufacturing companies
and prices at which they sell their goods are fixed by the Drug Price Control
Orders, which had taken into consideration the price at which the gas was
supplied, which now gets enhanced by reason of the orders of this Court.
in the totality of the circumstances, we think, interest shall be payable by
these two companies at the rate as stipulated in clause 5 of the contract but
not compoundable but simple rate of interest. To that extent, we allow the
applications filed by Sarabhai Common Services and direct ONGC to reduce their
claim to that extent in the demands made by them. In case of M/s Alembic Ltd.
ONGC shall examine other points raised by them as regards:
exclusion of the royalty and sales tax on the damages for short- liftment;
the effect of their letter seeking for reduction of supply from 60000 cubic
meters per day to 50,000 cubic meters per day; and
Claim made on the basis of force majeure clause and thereafter re- determine
the arrears payable by them along with interest.
applications accordingly stand disposed of in terms of the aforesaid
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