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Petitioner: Sindh Petroleum & CNG Dealer Association & Others VS Respondent: Federation of Pakistan & Others
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar, Agha Faisal Title:Sindh Petroleum & CNG Dealer Association & Others vs Federation of
Pakistan & Others Case No.: (1) CPD 7097 of 2018 (2) CPD 7480 of 2018 (3) CPD 7950 of 2018 Date of Judgment:2019-09-03 Reported As: 2019 SHC 334, 2020 CLC 851 Result: application dismissed Judgment Agha Faisal , J: The crux of the determination herein is the challenge to the Notification dated 4 October , 2018 ("Impugned Notification") issued by the Oil and Gas Regulatory Authority ("OGRA"), whereby inter alia the sale price for supply of natural gas sold to various categories of retail consumers by the Sui Southern Gas Company Limited ("SSGC") was determined. The matters to be determined herein comprise of Constitutional petitions challenging the validity of the Impugned Notification and High Court Appeals, whereby SSGC has challenged interim orders rendered by a learned Single Judge of this Court in suits challenging the Impugned Notification. The thread common to all these matters is the price of natural gas notified vide the Impugned Notification, hence, these matters were heard conjunctively and shall be decided by this common judgment. 2. It is appropriate to record at this juncture that the Impugned Notification was earlier challenged before the honorable Peshawar High Court and the honorable Lahore High Court respectively , albeit in reference to the tariff notified in respect of Sui Northern Gas Pipelines Limited ("SNGPL"), upon grounds similar to those invoked before us. The honorable Peshawar High Court dismissed the challenge, in Lucky Cement Limited vs. Federation of Pakistan & Others (Writ Petition 5571-P of 2018 ) and connected petitions, and held that the governing law, being the Oil and Gas Regulatory Authority Ordinance, 2002 ("OGRA Ordinance") and the Natural Gas Tariff Rules ("Tariff Rules"), contained provisions for adequate and efficacious remedies sufficient for the redressal of the grievance of the petitioners, therefore, the said petitions were deemed as not being maintainable. The honorable Lahore High Court, in Khalid Mehmood vs. Federation of Pakis tan & Others (Writ Petition 9466 of 2019 ), determined that OGRA had sufficient authority to determine the price of natural gas and that the pricing structure was intended to benefit the consumers at large, hence, the petition was deemed to be devoid of merit and was dismissed in limine.th
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It is also relevant to record that shortly after conclusion of the hearings herein OGRA revised the natural gas tariff structure on two successive occasions, vide subsequent notifications, and as a consequence thereof the Impugned Notification no longer holds the field. 3. Learned counsel assailed the Impugned Notification on behalf of the respective petitioners and such efforts were supplemented by the arguments of the respondents in the High Court Appeals, subject matter herein. It is considered expedient to distill the essence of the arguments articulated before us and delineate the same herein below: i. OGRA was not properly constituted when the Impugned Notification was issued. ii. It was established by an earlier Division Bench of this Court, in the case of Sui Southern Gas Company Limited vs. Federation of Pakistan & Others reported as PLD 2017 Sindh 733 ("SSGC vs. Pakistan"), that non adherence to the timelines provided in the OGRA Ordinance / Tariff Rules would render the tariff determination exercise a nullity and that the said judgment is binding upon this Court. iii. OGRA notified the same price for consumers of SSGC as that for SNGPL, despite the factoring determinants having been much lower in the case of SSGC, hence, providing a windfall for SSGC. iv. The categorization of retail consumers, and the tarif fs determined to be applicable thereto, was discriminatory . 4. The Additional Attorney General and the respective learned counsel for SSGC and OGRA sought to demonstrate from the record that appreh ensions of the petitioners were unfound ed; OGRA was in fact properly constituted at all material times; SSGC vs. Pakistan was distinguishable in the present contro versy; the pricing formula left SSGC in a deficit so there was no question of a profit let alone a windfall; and that the categorization of consumers was undertaken in the public interest as a policy consideration. 5. We have heard the respective learned counsel and have also examined the documentation to which our scrutiny was solicited. While the findings of the honorable Peshawar High Court, determining that in the presence of a remedial forum, prescribed in the OGRA Ordinance and the Tariff Rules, the challenge to the Impugned Notification in the writ jurisdiction was unmerited, are borne in mind, and it was also noted that the respective petitioners made no attempt to controvert or distinguish the said pronouncement, however, we consider it beneficial to address the issues raised before us, in seriatim, in order to determine this controversy. 6. With regard to the first objection taken on behalf of the petitioners, it was submitted by their legal counsel that OGRA consists of a chairman and three additional members and that at the relevant point in time there was a vacancy, being the member gas. While conceding that the quorum for meetings of OGRA is the chairman and two other members, it was submitted that the said prescription was meant to protect the day to day decisions of OGRA and that determination of gas price was not a day to day decision. Learned counsel for SSGC had admitte d that the determination of gas price was not a day to day decision, however , had controverted the argument that the quorum requirement prescribe d in the OGRA Ordinance was merely for such matters. Our attention was drawn to Section 4(4) of the OGRA Ordinance which protects the actions of OGRA despite there being a vacancy therein. 7. It is considered prudent to reproduce the relevant provisions of the OGRA Ordinance prior to entering into a deliberation thereupon: "3. Establishment of Authority : - (1) The Federal Government hereby establishes a regulatory authority , which shall be known as the Oil and Gas Regulatory Authority ... (3) The Authority shall consist of a Chairm an and three additional Members out of whom one shall be designated as Member Gas, one Member as Member Oil and one Member as Member Finance... 4. Meetings of the Authority : - (1) The Chairman and two other Members shall constitute a quorum for a meeting of the Authority requiring a decision by the Authority ... (4) No act, proceeding or decision of the Authority shall be invalid by reason only of the existence of a vacancy in, or defect in the constitution of the Authority ..." 8. It is prima facie apparent from a plain reading of the relevant statutory provisions that the quorum requirements are unqualified. The provisions under scrutiny appear to be grammatically capable of the said meaning only and it is a natural consequence to find that the legal meaning of the provisions corresponds to their grammatical
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meaning. The learned counsel for the petitioners have been unable to point out any constituent of the aforementioned provisions, or that of the main enactment itself, to suggest that anything points away from the plain meaning ascribed thereto. Therefore, it is our considered view that the existence of a vacancy in OGRA did not vitiate the process of determination of gas prices, as denoted vide the Impugned Notification. 9. Prior to addressing the second issue placed before us it is imperative to underscore that the petitioners have themselves taken a position that determination of gas price was not a day to day issue. In addition to the arguments led before us, this stance was also scribed in the written arguments filed on behalf of the petitioners in CP D 8093 and 8229 of 2018. While this argument did not augment the case of the petitioners in the issue dilated upon supra, it will have a significant impact on the question to be determined next. 10. It had been argued on behalf of the petitioners that an earlier Division Bench of this Court, while seized of a High Court Appeal in SSGC vs. Pakistan, had upheld the judgment of a learned Single Judge setting aside the notification fixing gas prices for the year 2014 - 2015, inter alia, on the ground that the timelines prescribed for notification of the gas prices were not adhered to and since such timelines constitute mandatory provisions of the law, and not directory, hence, any determination in transgression of the said timelines is void. Upon reading the aforesaid judgment it is observed that the decision therein was predicated upon the 2014 - 2015 notification having failed at the benchmark set out by the august Supreme Court, in the case of Mustafa Impex Karachi vs. Government of Pakistan & Others reported as PLD 2016 Supreme Court 808 ("Mustafa Impex"), as it was found that the advice of the Federal Cabinet was absent from proceedings culminating in the aforesaid determination. In the present facts and circumstances the decision of the Federal Cabinet, prior in time to the Impugned Notification, had been placed before us and the veracity thereof was not controverted by any of the counsel. It is thus our view that the judgment in SSGC vs. Pakistan is distinguishable in the present facts and circumstances. 11. It is also to be considered that SSGC vs. Pakistan had maintained a decision of a learned Single Judge of this Court, in Suit 1978 of 2015 being Pakistan Beverage (Private) Limited vs. Federation of Pakistan & Others and connected matters ("Pak Beverage"), albeit upon the premise that the gas price notification then under scrutiny did not qualify upon the yardstick of Mustafa Impex. It is pertinent to observe that that the judgment in Pak Beverage is also distinguishable based upon the import of Section 230 of the Elections Act 2017, promulgated subsequent in time, since the purported delay in issuance of the Impugned Notification or the alleged non-adherence to the timelines is said to have occurred during the period that a caretaker government was in place, i.e. after the expiration of the tenure of an elected government and prior to the assumption of office of the subsequent elected government. The learned counsel for the petitioners had argued that the process leading to the determination of gas prices is governed by a schedule and that the issuance of the Impugned Notification did not adhere to the said timelines. It was argued that the timeline in respect of the process of filings was not followed, however, upon production of relevant waivers / extensions, by the learned counsel for SSGC, permissible under the law the angle of challenge was narrowed to the assertion that the forty day period, given to the Federal Government to advise OGRA regarding the minimum charges / sale price of each category of retail consumer, was exceeded. We will endeavor to address the issue of whether the prescription of time is mandatory or otherwise further down, however, it is imperative to first consider the implication of Section 230 of the Elections Act 2017. 12. Section 230 of the Elections Act 2017 reads as follows: "230. Functions of caretaker Government. (1) A caretaker Government shall - (a) perform its functions to attend to day-to-day matters which are necessary to run the af fairs of the Government; (b) assist the Commission to hold elections in accordance with law; (c) restrict itself to activities that are of routine, non-controversial and urgent, in the public interest and reversible by the future Government elected after the elections; and (d) be impartial to every person and political party . (2) The caretaker Government shall not - (a) take major policy decisions except on urgent matters; (b) take any decision or make a policy that may have effect or pre-empt the exercise of authority by the future elected Government; ..."(Underline added for emphasis.)
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A precursor to the restraints placed upon a caretaker government vide the Elections Act 2017 was the judgment of the honorable Supreme Court in the case of Khawaja Muhammad Asif vs. Federation of Pakistan & Others reported as 2013 SCMR 1205 ("Khawaja Asif Case ") wherein it was held that the caretaker cabinet / prime minister , appointed under Article 224(1)(2) or 224A as the case may be, is empowered to carry out only day to day affairs of the State and that policy decisions should be left to be made by the incoming government in view of the provisions of Constitution that the af fairs of the State are to be run by the chosen representatives of the people. 13. As emphasized supra, the learned counsel for the petitioners had themselves argued that determination of the prices of natural gas was not a day to day issue. Without entering into an independent assessment of whether determination of gas prices falls within the domain of day to day business or otherwise, going by the position taken by the petitioners in such regard any delay occasioned by the Federal Government in rendering its advice with regards to gas pricing would be exceptionable as a caretaker government would be precluded from taking such actions. Since the issue of an intervening caretaker government was not before the learned Single Judge while deciding Pak Beverage , therefore, the import of the Khawaja Asif Case coupled with Section 230 of the Election Act 2017 would be suf ficient cause to consider Pak Beverage distinguishable in the present facts and circumstances. 14. While we have found that the authority relied upon by the petitioners is distinguishable in the present facts and circumstances, however, we consider it appropriate to independently determine whether the non-conformity with the timeline prescribed vide the OGRA Ordinance / Tariff Rules for determination of gas prices would be fatal to such a determination. We remain cognizant that resolution of questions of fact are discouraged in the writ jurisdiction, therefore, we shall circumscribe the determination herein upon admitted facts. 15. There are two aspects to the timeline prescribed culminating in the notification of gas prices. The first aspect is the process of application by the licensee itself (being SSGC in the present case). It was contended that the schedule for such an application process, prescribed inter alia vide Rule 4 of the Tariff Rules, was not adhered to by the SSGC. It remains an admitted position that the filing supposed to have been done by SSGC by 1 December 2017 was not undertaken until 28 February 2018. Learned counsel for the petitioners contended that such a delay was fatal to the determination under scrutiny. Learned counsel for the OGRA drew the Court's attention to Rule 22 of the Tariff Rules which prescribes that the authority (OGRA) may extend any time limit prescribed by the said rules or specified by the authority itself. Our surveillance was also drawn to SSGC's letter dated 30 January 2018 seeking extension of time up until 28 February 2018 and OGRA's letter dated 15 February 2018 acceding to the said request and granting the desired extension of time and it was thus demonstrated that the filings of the licensee / petitioner (SSGC) were within the relaxation of time granted thereto and duly permissible under the Tariff Rules. Learned counsel for the petitioners did not press this aspect of the delay further and preferred to concentrate their challenge to the second aspect of the delay, being that since the relevant advice of the Federal Government was not received within the forty day period scribed in such regard, vide Section 8(3) of the OGRA Ordinance read with Rules 18(2) of the Tariff Rules, and the gas price was not notified within three days hence, as prescribed by Rule 18(3) of the Tariff Rules, therefore, any subsequent determination in such regard, being the Impugned Notification, was void. 16. Prior to deliberating upon this issue it may be prudent to detail the relevant facts; namely that the pertinent OGRA determination was dated 21 June 2018; the advice of the Federal Government was required to be rendered within forty days; the caretaker federal cabinet did not render the advice sought and instead thereof, vide its letter dated 27 July 2018, the Ministry of Petroleum advised OGRA that since the revision / increase in gas prices was a major policy decision, therefore, the same shall be taken by the elected government upon its assumption of office; the new prime minister was notified on 18 August 2018 and the new cabinet rende red the pertinent advice on 27 September 2018, where after , the Impugned Notification was issued. It is also pertinent to record at this juncture that, pursuant to Section 8(4) of the OGRA Ordinance, in the event that the Federal Government fails to render the relevant advice within the stipulated time period, OGRA itself is empowered to notify the price determined by itself in respect of natural gas, provided that the rates determined are higher than the most recently notified sale prices. It is borne from the record that the prescribed timeline was not adhered to by the Federal Government and further that no notification was issued by OGRA on its own accord. It is thus to be determined whether such timelines arest th th th th st th th th
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mandatory in nature and whether non-compliance of the same would be fatal to a determination of gas prices. 17. It may be prudent to highlight the precepts of gas price determination in order to address this controversy . Section 6(2)(s) of the OGRA Ordinance empowers OGRA to prescribe, review , approve and regulate tariffs for regulated activities pertaining to natural gas and operations of the licensees for natural gas. Sections 7 and 21 of the OGRA Ordinance, read with Rule 21 of the Tariff Rules, provide the criteria for determination, approval, modification and revision of tarif fs. A licensee applies for the tariff based upon the estimated revenue requirements after incorporating the actual changes in well head prices. The aggregate of the cost of gas sold, cost of services and the development surcharge, if any, constitutes the consumer tariff. A few months down the road a new petition is filed, termed the review of estimated requirements, based inter alia upon actualization of well head prices. At the end of the year a final petition for total revenue requirement is preferred. The authority determines the total revenue requirement so as to ensure that the licensee achieves the rate of return provided in its license. Any shortfall in revenue is aggregated to reflect in a subsequent application. Per learned counsel for SSGC, a licensee is only entitled to the quantum of return provided in its license and excess, if any, is repatriable to the Federal Government in the form of development surcharge, pursuant to the Natural Gas (Development Surcharge) Ordinance 1967 ("Surcharge Ordinance"). It is thus demonstrated that while the return of a licensee remains fixed, the revision in prices is a corollary of the variation in the cost of gas and services ancillary thereto. If a valid determination is held up on any account then the necessary consequence is a snow-balled increase in the next round, which would also take into account the cost of there not having been a timely increase. Prior to the determination under scrutiny, being for the year 2018-19, the previous determination took place in 2016 and was set aside, therefore, for all intents and purposes the revision envisaged vide the Impugned Notification took into account the rising costs since 2013. It was not the case of the petitioners that the rise in tariff was incongruent with the rise of the underlying costs, however, the basic argument was that since the timelines had not been adhered to, therefore, the determination was void. 18. The issue of the timeline has to be considered in its present perspective. The delay occasioned in presentation of the petition / application by SSGC stood condoned by the relevant authority, therefore, the issue remains that the Federal Government did not render its advice in time and that OGRA did not unilaterally notify the prices despite being empowered to do so. It would thus be fair to observe that any delay attributable to SSGC stood condoned, however, delay upon which SSGC had no control was required to be treated as fatal to the determination of gas prices. 19. Learned counsel for SSGC had submitted that where a provision of a statute related to the performance of a public duty and where there was inconvenience or injustice to persons, who have no control over those entrusted with the duty, without promoting the essential aims and objects of the maker thereof, such prescriptions were generally considered to be directory (reliance placed upon Reference 01 of 1988 PLD 1989 SC 75). Contrarily, learned counsel for the petitioners had sought to distinguish the said proposition / authority on the premise that the same was applicable only in the context of elections and that the said principle did not have a general application. 20. In the present facts and circumstances it is apparent that SSGC had no control over the actions of the Federal Government, caretaker or otherwise. It is also apparent that it was never the case of failure of the Federal Government to advise; as the first advice of the Federal Government (caretaker) was to hold prices pending a decision by the incoming elected government and the same was followed by the advice (elected Government) to notify prices. There is no cavil to the fact that fixation of gas prices is a public duty and it is also apparent that any failure or delay in the performance of this duty causes inconvenience / injustice to persons (licensee / consumers) who have no control over those (Govt. / OGRA) entrusted with the duty. Even if a price determi nation is delayed the licensee is at liberty to account for the shortfall and any costs associated herewith in the next assessment. The detriment to the consumer will be that instead of an increase being staggered, over the period that it was occasioned, the entire impact is borne at one go when the compounded cost is taken into account. Therefore, in the case of increasing prices any delay or denial of an increase in a year shall compound the quantum in the following year, which is prima facie undesirable from a consumer point of view .
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21. It may be illustrative to consider the analysis delineated supra in the present perspective. The learned counsel for the petitioners argued that SSGC had initially applied for a much lower increase in price then provisionally determined in respect thereof eventually by OGRA. On the other hand learned counsel for SSGC / OGRA demonstrated from the record that the period under scrutiny saw the sharpest devaluation of currency in history and inter alia it was for this reason that the provisional determination was made. Per learned counsel, OGRA was required to consider the increase in underlying prices per Rule 17 of the Tariff Rules, even if the same had not been pleaded there before. The rationale is that a determination is required to reflect the prevailing ground reality as much as possible. However , the increase may also be considered empirically . Per OGRA determination the aggregated return to SSGC was reported to have been computed at Rs. 589.09 / MMBTU. Per the Impugned Notification, the amount allowed to SSGC was Rs. 554.63 / MMBTU, thus, it is apparent that despite the incremental tariff there remained a shortfall of Rs. 34.46 / MMBTU, translating in to a loss of over 12.33 billion. These figures, provided by the learned counsel for SSGC and not controverted by the learned counsel for the petitioners, are also reinforced by the decision taken by OGRA, dated 27 February 2019, in the matter of SSGC's review petition for estimated revenue requirements for the said year wherein the average prescribed price sought, after taking into account the accumulated shortfall, was Rs. 623.86 / MMBTU. It is thus borne from the uncontroverted record that the tariff allowed to SSGC vide the Impugned Notification was below the required threshold. 22. It is in this context that we must perceive the implication of non-adherence to the timeline prescribed by the Tariff Rules. Compliance with the prescr ibed timeline would have meant that the incremental rates would have come into effect from 01 July 2018. The delay in issuance of the notification also delayed the implementation of the new prices, therefore, the consumers benefitted from the lower tariffs from almost three months than had the notification been issued as per timeline. It would thus appear that the end user / consumer has only benefitted from the delay in issuance of a price revision notification. The licensee on the other hand has suffered an additional carrying cost, in additio n to…
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