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CASE NO.: Transfer Case (crl.)  355-365 of 2002

PETITIONER: M/s ONGC Limited

RESPONDENT: Assn. Of Natural Gas Consuming Indus. & Ors.

DATE OF JUDGMENT: 12/04/2004

BENCH: S. RAJENDRA BABU, DR. AR. LAKSHMANAN & G.P. MATHUR.

JUDGMENT: J U D G M E N T

IN

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.  :

       A 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.   

This 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.  ONGC, 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

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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.   

Thereafter, 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.   This Court, after examining the matter, held as under:

"\005\005\005. 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\005..."

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.

There 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 be done.   Therefore, 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.   In 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.

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A 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.   We 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.   

So far 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.   

Therefore, 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: (i) the exclusion of  the royalty and sales tax on the damages for short- liftment; (ii) the effect of their letter seeking for  reduction of supply from 60000 cubic meters per day to  50,000 cubic meters per day; and (iii) Claim made on  the basis of force majeure clause and thereafter re- determine the arrears payable by them along with  interest.

The applications accordingly stand disposed of in  terms of the aforesaid directions.