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Official Citation: 2024 PLD 217
Court / Jurisdiction: Sindh High Court
Year of Decision: 2021
Decision Date: 2021-12-31
Parties: Shujabad Agro Industries (Pvt.) Ltd. and others vs Federation of Pakistan JUDGMENT
Ruling Summary: This decision was rendered by the Sindh High Court on 2021-12-31, officially reported as 2024 PLD 217. In this matter between Shujabad Agro Industries (Pvt.) Ltd. and others and Federation of Pakistan JUDGMENT, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as PLD 2024 Sindh 217
Court Name: Sindh High Court Judge(s): Adnan Iqbal Chaudhry Title:Shujabad Agro Industries (Pvt.) Ltd. and others vs Federation of Pakistan
JUDGMENT
Reported As: 2022 SHC 94, PLD 2024 Sindh 217 Result: Suit Dismissed Judgment JUDGMENT Adnan Iqbal Chaudhry J. For the purposes of supply of natural gas, the Plaintif fs are classified as General Industries'. They receive gas from the Defendant, Sui Southern Gas Company Ltd. [SSGC] for industrial purposes. Some of the Plaintif fs also use such gas for power-generation for self-consumptio n. The cause of action of these suits is SSGC's gas-closure notice dated 10-12-2021 which announced: "Gas supply to all General Industries (non-export) including their Captive Power Plants shall remain discontinued till further orders, however zero rated export industry including its CPPs along with the fertilizer sector will continue to get the gas." 2. Since the aforesaid gas-closure was in furtherance of a priority order of gas-supply devised by the Federal Government, some of the Plaintif fs have also challenged that priority order as last revised by the Federal Government vide Ministry of Petroleum's notification dated 15-10-2018. The Plaintif fs therefore pray for declarations that SSGC's gas-closure notice dated 10-12-2021, and the Federal Government's notification dated 15-10-2018 are in violation of Fundamen tal Rights and Articles 154 and 158 of the Constitution of Pakistan; for a declaration that under Article 154(1) of the Constitution, it is the Council of Common Interests [CCI] that is competent to make a policy for gas, not the Federal Government; declare that unde r Article 158 of the Constitution, the Plaintif fs are entitled to a precedence over the gas produced in Sindh; and for consequential injunctions in that regard. 3. The supply of natural gas is presently managed under the Natural Gas Allocation & Management Policy , 2005 ['Gas Policy'] made by the Federal Government. The salient features of the Gas Policy are as follows:
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"INTRODUCTION While the Federal Government is making concerted efforts to enhance natural gas supplies to meet growing demand, it is extremely important to establish a natural gas allocation and management plan to promote efficacious utilization of precious depleting natural resource particularly given the dominant role of natural gas in domestic energy landscape. Therefore, the Federal Government has set out these policy guidelines for the purpose in the paragraphs that follow . 2.2. EXISTING DEMAND MANAGEMENT At present, natural gas demand on the system during peak winter load period or short supplies from E&P companies is met through following management programme: (a) Domestic and commercial consumers get continuous gas supply; (b) Fertilizer plants are supplied continuous gas; (c) Gas supply to industries having nine month contracts are curtailed or totally disconnected; (d) Power plants get gas supply after meeting the requirements of domestic, commercial, fertilizer and industrial sectors; and (e) Cement plants are supplied gas on "as and when available" basis. 3. GAS ALLOCA TION CRITERIA 3.1 For provision of new gas connections to consumers from the network system, the Gas Utility Companies will market gas under the following guidelines: 3.1.1 Gas supply to consumer in the Domestic Sector will be as per yearly target determined by the Federal Government. 3.1.2 Gas supply to consumers in Commercial Sector will be encouraged. 3.1.3 Gas allocation for the Fertilizer Sector will be made by the Federal Governme nt keeping in view the domestic needs and gas supply position. 3.1.4 Gas supply to the consumers in the General Industrial Sector will be based on the following criteria: (a) To the extent of process gas, the gas supply will be made on twelve months basis; and (b) Assured gas supply for all other usage s will be for nine months basis and for the remaining period, gas supply will be on the best ef fort basis. 3.1.6 Gas supply to all consumers in Captive Power Sector will be made after first meeting the requirement of Domestic, Fertilizer , Commercial, Industrial, and Power (both WAPDA/KESC and IPPs) Sectors on the following basis: (a) Those dual fired power plants with a capacity of upto 50 MW, which employ combined cycle or cogeneration technology , shall be encouraged for alloca tion of gas. In order to ensure the optimal gas use for power generation, industrial units collectively setting up merchant power plants for self-consumption only will also be included in this category . (b) Gas supply for self-power generation would be on "as and when available basis" at dif ferent locations. 4. PROPOSED LOAD MANAGEMENT POLICY To ensure optimal utilization of natural gas for the best socio-economic development of the country , the merit gas dispatch order outlined in sub-sections below will be observed during high demand and/or short supply periods. 4.1 For the consumers connected to the system, following priority order will be observed by Gas Utility Companies: Sr. No. Category of Consumers Priority Order 1 Domestic and Commercial Sectors First 2 i) Fertilizer Sector; and ii) Industrial Sector to the extent of their process gasSecond 3 Independent Power Plants as well as W APDA and KESC's Power Plants having firm gas supply Commitment under GSAs.Third 4 General Industrial and CNG Sectors Fourth
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5 i) WAPDA's and KESC Power Plants other than those listed against Sr . No.3 above. ii) Captive Power SectorFifth 6 Cement Sector Sixth 8. IMPLEMENT ATION OF POLICY A committee to be notified by the Federal Government will review/oversee the allocation and management policy set forth in this document on regular basis." 4. It will be seen that clause 4.1 of the Gas Policy laid down a priority order for supply of gas to various categories of consumers. In the year 2013, the Economic Coordination Committee [ECC] of the Federal Cabinet revised that priority order as follows: "No. NG(I)-7(158)/12-LS-V ol-IV Government of Pakistan Ministry of Petroleum and Natural Resources (Policy W ing) Directorate General Gas The Managing Director Sui Northern Gas Pipeline Limited Lahore . Islamabad, the 1st March, 2013 The Managing Director Sui Southern Gas Company Limited Karachi. Subject: NATURAL GAS LOAD MANAGEMENT . Dear Sir(s), I am directed to refer to this Ministry' s letter of even number dated 06.02.2012 and to state the Economic Coordination Committee of the Cabinet vide Case No. ECO-32/04/2013 dated 22nd February 2013, has revised sectoral priority as under: S #Category of Consumers Priority Order 1 Domestic and Commercial Sectors First 2 Power Sector Second 3 General Industrial, Fertilizer and Captive PowerThird 4 Cement Sector including its Captive Power Fourth 5 CNG Sector Fifth Yours sincerely , -sd/- Director General (Gas)" 5. The priority order of gas supply was again revised by the ECC of the Federal Cabinet vide notification dated 15- 10-2018, impugned herein, which is as follows: "No. NG(I)-7(158)/12-LS-V ol-IV Government of Pakistan Ministry of Petroleum and Natural Resources (Policy W ing) Directorate General Gas Islamabad, the 15th October , 2018 1. The Managing Director Sui Northern Gas Pipeline Ltd., Lahore. 2. The Managing Director Sui Southern Gas Company Ltd., Karachi. Subject: GAS ALLOCA TION AND MANAGEMENT POLICY 2005 - REVISION IN PRIORITY ORDER. Dear Sir(s), I am directed to inform that the ECC of the Cabinet in its meeting held on 17.09.2018 vide case No.ECC- 86/17/2018 dated 17.09.2018 while considering a summary submitted by Petroleum Division regarding Natural Gas Sale Pricing inter -alia directed as under: (III) The priority of allocation of system gas will be revised to bring the five zero-rated sectors at second priority along with the power sector . 2. In pursuance of the above ECC decision, the revised priority order under Natural Gas Allocation and Management Policy , 2005 will be as under: S #Category of Consumers Priority Order
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1 Domestic and commercial Sectors First 2 Power Sector, *Zero-Rated General IndustrySecond 3 General Industrial, Fertilizer & Captive PowerThird 4 Cement Sector including its Captive PowerFourth 5 CNG Sector Fifth * Textile (Including jute) carpets, letter , sports and surgical goods Yours truly , sd/- Deputy Director (Gas)" 6. With the onset of the winter season, and deriving mandate from the Gas Policy as revised by the impugned notification dated 15-10-2018, the SSGC, on 10-12-2021, issued the impugned gas-closure notice as follows: "ASGM (Coord)/F-29/2021 10th December , 2021 To, All Industries Associations Subject: 100% CLOSURE BY ALL GENERAL INDUSTRIES (NON EXPOR T) INCLUDING THEIR CAPTIVE POWER UNITS ST ARTING FROM 1 1TH DEC 2021 TILL FUR THER NOTICE. Dear Sir(s), Further to our earlier notification reference No. ASGM (Coord)/F-29/2021 dated 26th Nov 2021 and in adherence to Ministry of Energy (Petroleum Division), Government of Pakistan's priority order for gas load management, where domestic sector tops the list and to serve the domestic customers with even more care and consideration, especially those in Balochistan already experiencing the winter season, therefore, gas supplies to "TO ALL GENERAL INDUSTRIES (NON EXPOR T) INCLUDING THEIR CAPTIVE POWER PLANTS" across Sindh and Balochistan, are being discontinued from 1 1th Dec 2021. The discontinuation of All General Indus tries (Non-Export) including their Captive Power Plants (CPPs) is being exercised under the Gas Sales Agreement (GSA) signed as the very agreement clearly states that "Gas supply will be provided by the Company on as and when available' basis only during the period from March to November each year. The Consumer will make dual firing arrangements to avoid loss of production as and when Gas is not available during March to November and also during December to February when the Company will keep the Consumer's Gas supply disconnected at his cost each year". Gas supply to all General Industries (Non-Export) including their Captive Power Plants shall remain discontinued till further orders, however zero rated export industry including its CPPs along with the fertilizer sector will continue to get the gas. The volume of gas curtailed from this arrangement would be diverted to domestic customers from them to cater their enhanced gas loads in context of the winter season. It may be noted that in Balochistan, supply of additional gas is a must for the survival of human lives since gas serves as a LIFELINE to scores of popul ace needing to keep themselves warm through water and space heating gas appliances in the extremely low temperatures. SSGC looks forward to all General Industries (Non-Export) for their understanding on the matter and expects their cooperation for serving the domestic customers through uninterrupted gas supplies. With the advent of winter season, SSGC is facing severe shortage in the indigenous gas receipts from producers every passing day resultantly depleting line pack and simultaneously , SSGC is also experiencing increased gas consumption in the Domestic Sector that peak during winter seasons and ultimately causes Low Gas Pressure in the System. Catering to such eventually , as always done SSGC follow the guidelines, as circulated vide Load Management Policy of October 2018 to tackle such situations. Foregoing in view, it is requested to please advise your members to including their henceforth cease 100% consumption of gas in all General Industries (Non-Export) Captive Power Units operative, which is essentially
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required to be done in the larger interest of the general public and the Closure of Gas to all above said all General Industries (Non-Export) including CPPs, however , shall remain effective till further orders. We expect that in appreciation of emerging situation, needed cooperation and support shall be extended to SSGC to smoothly sail across this difficult period. Yours sincerely , for Sui Southern Gas Company Limited -sd/-" 7. In the meantime, the Cabinet Committee on Energy [CCoE] approved the Gas Load Management Plan for Winter 2021-22, which was ratified by the Cabinet on 30-11-2021 and was issued by the Ministry of Energy on 13.12.2021 as follows: "No.NG(I)-7(158)/21-LS Government of Pakistan Ministry of Energy (Petroleum Division) Directorate General Gas First Floor , Petroleum House, G-5/2, Islamabad, the 13th December , 2021 The Managing Director , Sui Northern Gas Pipelines Ltd., Lahore. The Managing Director , Sui Southern Gas Company Ltd., Karachi. Subject: GAS LOAD MANAGEMENT PLAN FOR WINTER 2021-22 Dear Sir , I am directed to refer to the subject cited above and to convey that the Cabinet Committee on Energy (CCoE) considered the summary dated 17th November , 2021, submitted by the Petroleum Division on the subject matter and vide Case No. CCE-1 12/30/2021 dated 18.11.2021 (ratified by the Federal Cabinet vide Case No. 1149/39/2021 dated 30.1 1.2021) has approved as under: i) Gas/RLNG shall be supplied uninterrupted to export oriented industries including the top 50 exporters, in addition to zero rated industry , unless technical constraints in the system. ii) Supply of Gas/RLNG to export oriented captive power plants shall be monitored till 15th December , 2021. It will be readjusted in view of the supply/availability of the gas. iii) The CNG Sector will remain closed with effect from 01.12.20212 to 15.02.2022. iv) General Industry (non-export) shall be provided gas on weekly rotation basis, with one day off, for each sector or zone. Cement Industry will be treated at par with the non-export general industry . v) To boost agricultural productivity , uninterrupted gas supply shall be ensured to Fertilizer Sector . vi) Dedicated consumers of Power Sector shall get uninterrupted gas supply . vii) Power production based on LNG will get 5% extra supply during the winter , as compared to last year's actual consumption. viii) After meeting national requirement of the gas for the critical industries, maximum efforts will be made to accommodate the domestic consumers on priority as already decided by the ECC. 2. In addition to above, the Federal Cabinet also directed to: (i) Re-check and ascertain the gas reserves depletion rate so as to determine how much of it was due to theft, collusion and distribution losses. (ii) Formulate long, medium and short-term plans to face the challenge of fast depleting gas reserves. 3. In order to effectively manage the above Load Management Plan, both Sui Companies, being system operator , to take following measures: i) The above plan to be implemented while remaining within the contours of already ECC' s approved gas supply priority order . ii) A dedicated complaint center (24x7) based on the concept of helpline accessible through mobile app be put in place to redress the complaints of low pressure / non-supply of gas for domestic sector . iii) Subject to improvement in supplies, the restoration of gas may be considered in order of approved priority , under intimation to this Division. iv) The retention of RLNG by SSGCL to be considered at 75 MMCFD and any volume beyond the said retention to be mutually decided by SNGPL and SSGCL considering operational flexibility .
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v) Any abrupt change in supply or demand to be reported along with mitigation plan to this Division. Yours truly , Assistant Director (NG-I)" Issues: 8. It is in the above backdrop that these suits are before this Court. At the hearing on 11-01-2022, all learned counsel agreed that these suits can be heard for final determination on the basis of admitted documents already on the record and by deciding common questions of law. Therefore, the following issues were settled for determination of these suits:- (i) Whether SSGC's gas closure notice dated 10-12-2021 for General Industries (non-export), including their CPPs, is contrary to the Gas Load Management Plan for Winter 2021-2022 approved by the Federal Government on 13.12.2021? If so, to what ef fect? (ii) Whether SSGC's gas closure notice dated 10-12-2021, and the priority order for gas allocation set by the Federal Government vide notification dated 15-10-2018, are in violation of Article 25 and/or Article 158 of the Constitution of the Pakistan, 1973? (iii) In view of the domain of the CCI under Article 154 of the Constitution of Pakistan, whether the Federal Government was legally competent to make revision vide notification dated 15-10-2018 in the Gas Allocation & Management Policy , 2005? If so, to what ef fect? (iv) What is the ef fect of the Gas Supply Agreements between the Plaintif fs and the SSGC? (v) To what relief, if any , are the Plaintif fs entitled to, and what should the decree be? Arguments of counsel: 9. On behalf of the Plaintif fs, submissions were led by Mr. Abid S. Zuberi Advocate. He submitted that under clause 4.1 of the Gas Policy , the Plaintif fs, classified as the General Industrial sector , were placed at priority No.2(ii); that such priority order was revised by the Federal Government by the impugned notification dated 15.10.2018 to drop the General Industrial sector to priority No.3, and at the same time certain zero-rated export industries were retained at priority No.2, thus discriminating against the Plaintif fs. He submitted that if zero-rated export industries brought foreign exchange to the country , the non-exporting Plaintif fs saved foreign exchange for the country , and thus the separate classification of the two infringed Article 25 of the Constitution. Learned counsel then pointed to the Gas Load Management Plan for Winter 2021-22 and submitted that clause 1(iv) thereof clearly provided that gas would be provided to the General Industry (non-export) on a weekly rotation basis with only one day off; that such Gas Load Management Plan was issued by the Federal Government on being satisfied that sufficient gas was available in the system to cater to both domestic consumers and the General Industry; that said Gas Load Management Plan was being followed by the SNGPL in Punjab, and therefore SSGC' s gas-closure notice dated 10.12.2021 was not only discriminatory but also contrary to the Gas Load Management Plan. Learned counsel then submitted that under Article 154(1) of the Constitution, read with Entry No.2, Part-II of the Federal Legislative List, the authority to make policy for gas vested exclusively in the CCI, as it did for electricity and as so held by the Supreme Court in Gadoon Textile Mills v. WAPDA (1997 SCMR 641), and therefore, the Gas Policy and its revision by the Federal Government under notification dated 15.10.2018 was without lawful authority . Further , learned counsel relied on Engro Fertilizers Ltd. v. Islamic Republic of Pakistan (PLD 2012 Sindh 50) and Lucky Cement Ltd. v. Federation (PLD 2011 Peshawar 57) to submit that under Article 158 of the Constitution the Plaintif fs were entitled to uninterrupted supply of gas as a precedence over other Provinces inasmuch as Sindh was producing more than suf ficient gas for its requirements. Mr. Annas Makhdoom, learned counsel for the Plaintif fs emphasized that frequent disruptions in gas supply have caused a tremendous loss to the General Industrial sector which relies on gas as the primary source of energy; therefore, the Plaintif fs are compelled to seek the enforcement of Article 158 of the Constitution for uninterrupted supply of gas. In support of the argument that gas policy was the domain of the CCI and not the Federal Government, learned counsel also cited Qurban Ali Shah v . Federation of Pakistan ( PLD 2020 Sindh 242 ). Mr. Nabeel Kolachi, learned counsel for the Plaintif fs added that some of the Plaintif fs, though primarily engaged in local production, also made some exports, but the impugned notification dated 15-10-2018 did not clarify how such
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consumers are placed in the priority order of gas-supply; that the words non-export' have also not been defined in SSGC's gas-closure notice; thus, he subm itted that the priority order in the impugned notification dated 15-10-2018 and SSGC's gas closure notice are not intelligent classification. All other learned counsel for the Plaintif fs adopted the above arguments. 10. Mr. Kashif Hanif, learned counsel for the SSGC submitted that the Gas Policy has been made by the Federal Government in exercise of executive authority under Article 97 of the Constitution of Pakistan read with the Rules of Business, 1973 made under Article 99(3) of the Constitution. He submitted that the Gas Policy clearly stipulates: (a) that gas supply to the General Industrial sector would only be for nine (09) months, excluding the winter months of December , January and February; (b) that in order to give priority to the domestic and commercial sector , gas supply to the General Industrial sector can be discontinued; and (c), that gas supply to industries for self-generation of power shall be on as and when available basis'. He pointed out that said provisions of the Gas Policy are incorporated in the General Supply Agreements [GSAs] between the SSGC and the Plaintif fs, and thus the Plaintif fs cannot set-up a case contrary to their contract; that though it would be more lucrative for the SSGC to give priority to the General Industrial sector given their higher tariff, the SSGC is bound by the Gas Policy and the GSAs; that none of the Plaintif fs pray that the Gas Policy or the GSAs be declare d unlawful or contrary to Article 158 of the Constitution of Pakistan, rather they have only challenged the revision made in the priority order of gas- supply . He placed reliance on Rashid Silk Mills v. Federation of Pakistan (PLD 2019 Sindh 189) to submit that SSGC's gas closure notice dated 10-12 -2021 did not violate Article 158 of the Constitution. Learned counsel emphasized that the SSGC was only a distributor of gas and can only supply the gas it receives from the source; that during the winter months, not only does the demand of gas increase, but also the supply from the well-heads decreases, thus the need to divert gas to the domestic sector which has been given priority under the Gas Policy , in particular to Balochistan which experiences harsh winters, and hence temporary gas-closure for the General Industry . He submitted that it is a misconc eption to argue that industries in Punjab are getting more gas than Sindh, for in Punjab the supply of indigenous gas is reinforced by a far greater input of RLNG which is a far more expensive fuel. As regards the reliance placed by the Plaintif fs on clause 1(iv) of the Gas Load Management Plan for Winter 2021-22, Mr. Kashif Hanif submitted that the same was being cited by the Plaintif fs out of context, as clause 3(i) thereof clearly stated that such Gas Load Management Plan was subject to the priority order already provided in the Gas Policy . 11. Mr. Kashif Sarwar Paracha, learned Additional Attorney General submitted that load management of natural gas is done every year by the Federal Government to manage the ever increasing demand of natural gas on depleting gas reserves; that the Federal Government is legally competent to frame policy with regards to allocation and management of natural gas; that the domain of the CCI to make policy with regards to gas pursuant to Article 154(1) of the Constitution is primarily to resolve an issue between Provinces, or a Province and the Federal Government, and not to make policy for frequent load management of natural gas. For that submission, the learned Additional Attorney General too relied upon Gadoon Textile Mills v. WAPDA (1997 SCMR 641), and he further cited Khalid Mahmood v. Federation of Pakistan (PLD 2003 Lahore 629), and Amin Ahmed v. Ministry of Production (PLD 1996 Kar 27). Regards the effect of Article 158 of the Constitution, he submitted that said Article cannot be read in isolation but has to be construed harmoniously with Article 172(3) of the Constitution. He submitted that for domestic consumers the supply of gas was a fundamental right to life, whereas the Plaintif fs can at best plead a fundamental right to business, which is always subject to qualifica tions prescribed by law; that the notification dated 15-10-2018 whereby certain zero-rated export industries are given priority over non-exporting industries, is a reasonable classification and not in violation of Article 25 of the Constitution; and that similar submissions as the ones now being advanced by the Plaintif fs have already been rejected by a learned single Judge of this Court in Fimcotex Industries (Pvt.) Ltd. v . Pakistan ( PLD 2018 Sindh 641 ). 12. In rebuttal, Mr. Ayan Mustafa Memon, learned counsel for the Plaintif fs submitted that Article 172(3) of the Constitution deals only with the ownership of natural gas and has no bearing on Article 158 which clearly stipulates that the "requirements" of the Province take precedence; that the…
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