Holding

Regulation 7 does not prescribe a 2%–100% ceiling linked to the 2011 Census, so the Board’s note is merely a guideline and its process of inviting the highest‑scoring bidders to justify their bids is lawful.

Summary

The Petroleum and Natural Gas Regulatory Board (PNGRB) conducted the ninth round of bidding for city or local natural gas distribution networks (CGD) in 2018. After opening technical bids, the Board introduced an internal note on 23 July 2018 that suggested a 2%–100% range of total households (based on the 2011 Census) as a guideline for evaluating the reasonableness of projected domestic PNG connections, but this note was not notified to bidders. For four geographical areas (GAs 51, 61, 62 and 72) the highest‑scoring bidders had quoted connections exceeding the 100% ceiling, and the Board invited only those bidders to justify their bids before ultimately granting Letters of Intent for GAs 51, 61 and 62 while rejecting the bid for GA 72. Adani Gas Limited and IMC Limited challenged the Board’s authorisations, arguing that the 2%–100% ceiling was a binding condition and that the Board’s selective hearing violated natural‑justice principles and Article 14 of the Constitution. The Supreme Court held that Regulation 7 of the CGD Authorisation Regulations does not contain any ceiling or linkage to the 2011 Census, and that the Board’s note could only be treated as a non‑binding guideline; consequently, calling the highest‑scoring bidders to explain reasonableness was lawful and there was no breach of natural justice. The Court dismissed the appeals, affirming the Board’s authorisations for GAs 51, 61 and 62.

Issues considered

The Board Note of 23 July 2018, which set a 2%–100% household range for PNG connections, is a binding condition under Regulation 7 of the CGD Authorisation Regulations.
Whether the Board’s selective hearing of only the highest‑scoring bidders violates the principles of natural justice.
Whether the Board’s reliance on an un‑notified internal note amounts to arbitrariness infringing Article 14 of the Constitution.

Legislation cited

Code of Civil Procedure, 1908s. 100
Constitution of Indias. Article 14
Electricity Act, 2003s. 110
Petroleum and Natural Gas Regulatory Board Act, 2006s. 30(1), s. 33(6), s. 33(6)(e), s. 33(6)(h)

Subjects

public procurementbidding regulationsnatural justiceArticle 14PNGRBCGD authorisationadministrative lawunreasonable bidcensus dataregulation interpretation

Judgment

108 [2020]REPORTS
SUPREME COURT 8 S.C.R. 108 [2020] 8 S.C.R.

A ADANI GAS LIMITED
v.
PETROLEUM AND NATURAL GAS REGULATORY
BOARD AND ORS.
(Civil Appeal No. 3992 of 2019)
B
FEBRUARY 17, 2020
[DR. DHANANJAYA Y CHANDRACHUD AND
HEMANT GUPTA, JJ.]
Petroleum and Natural Gas Regulatory Board (Authorizing
Entities to Lay, Build, Operate or Expand City or Local Natural
C Gas Distribution Networks) Regulations, 2008:
Regulations 5 and 7 – Ninth round of bidding for city or local
natural gas distribution networks (CGD) – For the years 2018-
2026 – After opening technical bids, Petroleum and Natural Gas
Regulatory Board, by its Note dated 23 July, 2018, in order to bring
D reasonableness to the bidding parameters introduced a criterion
stipulating that 2% of total households in terms of census 2011
data would be regarded as minimum quote and 100% would be
regarded as maximum – The Board Note was not notified to the
bidders – On opening the financial bid of technically eligible
E bidders, it was found that for 4 Geographical Areas i.e. GAs. 51,
61, 62 and 72, the bidders having highest composite score, were
liable to be disqualified on the ground that they had quoted more
than 100% of the total number of households as per 2011 census –
Board decided to give them opportunity to explain – Board thereafter
accepting the quotes of highest bidders in respect of GAs. 51, 61
F and 62 as reasonable issued Letter of Intent (LOI) to them granting
authorisation – In case of GA 72, quote of highest bidder was
rejected as being unreasonable – The appellant who was sixth
highest bidder in GA 51, third highest bidder in GA 61 and second
highest bidder in GA 62 challenged grant of authorisation in respect
G of the three GAs – Second bidder in GA 61 also challenged grant
of authorisation in GA 61 – The Chairperson of the Tribunal allowed
the appeals while the technical member dismissed the same – Since
the Judicial Member of the Tribunal recused himself from the case,
the case was transferred to Supreme Court – Held: Regulation 7
stipulates the bidding criteria – There is no condition in Regulation
H
108
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 109
REGULATORY BOARD

7 regarding ceiling or providing for a linkage with the census date A
of 2011 – A conditionality which was not incorporated in Regulation
7 could not have been introduced by Board Note dated 23 July,
2018 – Hence the Board Note cannot be construed to have laid
down absolute norms by which bids quoting below2% or above
100% of the number of households would automatically be rejected B
as unreasonable – Disqualifying a bidder on the basis of criterion
which was not notified would have been arbitrary and would
constitute infraction of Art. 14 of the Constitution – The Board Note
therefore can be construed as formulation of guideline – Hence the
award of authorisation after calling the highest bidders in respect
of GAs 51, 61 and 62 to justify their bids in terms of their C
reasonableness cannot be faulted – There was also no breach of
principles of natural justice in calling only the highest bidders to
explain reasonableness of their bids as other bidders had no locus
to participate in the process.
Dismissing the appeals, the Court D
HELD: 1.1 The Petroleum and Natural Gas Regulatory
Board (Authorizing Entities to Lay, Build, Operate or Expand
City or Local Natural Gas Distribution Networks) Regulations,
2008 (CGD Authorisation Regulations) postulate that bidders
must submit both technical and financial bids. The procedure
E
specified in Regulation 5 applies to an invitation by the Board for
laying, building, operating or expanding a CGD network.
Regulation 5(6) requires the fulfilment of minimum eligibility
criteria. For a technical bid to pass muster, the minimum eligibility
criteria require the bidder to be qualified both with reference to
technical and financial parameters. This is evident from Regulation F
5(6) under which the Board is to scrutinise the bids of only those
entities which fulfil the minimum eligibility criteria. The minimum
eligibility criteria include the technical capability of the bidding
entity to (i) lay and build; and (ii) operate and maintain a CGD
network. Both of them are defined with reference to qualifying
G
criteria. Besides the technical criteria, the minimum eligibility
requirements under Regulation 5(6)(e) incorporate the financial
ability to execute the project and to operate and maintain it in
the authorised area. The financial criteria are defined with
reference to the minimum net-worth of the bidding entity. The
net-worth required is dependent on the population of the H
110 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Geographical Area (GA) under the 2011 Census. The minimum
net-worth required is specifically defined with reference to 2011
census figures of population for the GA. The bidding entity is
also required to submit a bid bond in the form of a performance
bond guarantee. The quantum of the guarantee is dependent on
the population of the GA. [Para 35][149-D-G]
B
1.2 The Table incorporated in Regulation 7 provides five-
fold criteria for the tabulation and comparison of financial bids.
The five criteria are: (i) ‘Lowness’ of transportation rate for CGD;
(ii) ‘Lowness’ for transportation rate for CNG; (iii) ‘Highness’
of the number of CNG stations to be installed in eight years from
C authorisation; (iv) ‘Highness’ of the number of domestic PNG
connections to be achieved within eight years of authorisation;
(v) ‘Highness’ of inch-kilometre of steel pipeline to be laid within
eight years of authorisation. The third and fourth criteria together
account for 70 per cent of the total composite score. Among them,
D the fourth criterion – ‘highness’ of the number of domestic PNG
connections accounts for 50 per cent of the total composite score.
Significantly, the bidding criteria in Regulation 7 are not linked
to the 2011 Census figures. There are two significant facets of
Regulation 7: (i) The absence of a linkage of the projected number
of domestic PNG connections with the 2011 Census data; (ii) The
E absence of a cap or ceiling on the ‘highness’ norm both in relation
to the third and the fourth criteria. [Para 36][150-A-E]
1.3 The provisions contained in the 2008 CGD Authorisation
Regulations, as amended on 6 April 2018, indicate that where a
specific linkage was sought with reference to the 2011 Census
F data, a clear and categorical provision was made to that effect.
Such provisions are found in regard to the financial capability of a
bidder as part of the minimum eligibility criteria in Regulation
5(6)(e) and the extent of the performance bond in Regulation
5(6)(h). Absent a condition in Regulation 7 linking the ‘highness’
G of the number of PNG connections to be achieved within eight
years from the date of authorisation with the 2011 Census data, it
would be contrary to basic principles of interpretation to read
such a restriction into the CGD Authorisation Regulations. A
conditionality which has not been incorporated in Regulation 7

H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 111
REGULATORY BOARD

cannot be introduced as a matter of construction. The court must A
first and foremost read the Regulation in accordance with its plain
and natural meaning. There is evidently a reason why Regulation
7 did not introduce a ceiling or provide for a linkage with the
Census data of 2011. Consumers or users, as the case may be, in
a CGD network broadly comprise of four categories namely: (i)
B
Domestic; (ii) Commercial; (iii) Industrial; (iv) Vehicular. [Paras
38 and 39][151-A-E]
1.4 The Board is correct that in a model of cross/
subsidisation, the viability of the project has to be perceived from
a twenty- five-year perspective. Gains in one category of users
C
can offset the losses in another category. The CGD Authorisation
Regulations are intended to subserve the object of establishing
the infrastructure necessary for setting up an operational CGD
network. In creating the infrastructure, the successful entity is
contractually bound to set up a project for the future. The
infrastructure so created would be of service to consumers or, as D
the case may be, users. Infrastructural projects cater to future
needs and can legitimately be forward looking. It is from this
perspective that except for the tariff in the first two bidding criteria
of Regulation 7 (the transportation rates for CGD and CNG), no
ceiling was provided by the Board for the criteria set out in
E
Regulation 7. More particularly, Regulation 7(3) provided for a
mandate to tabulate and compare the bids of all entities which
had met the minimum eligibility criteria upon their qualifying in a
competitive bidding process. The Regulations did not
contemplate the disqualification of a bidder with reference to a
norm which would limit a bid to 100 per cent of the population F
figures provided by the 2011 Census data. For the Board to
stipulate an absolute norm to that effect, when it has not been
specifically incorporated in the Regulations would have rendered
the decision making process vulnerable to a challenge on the
ground that it was not consistent with Regulation 7. [Para 40][151-
G
F-H; 152-A-B]
1.5 The main plank of the submissions of the appellants is
that the map contained a reference to population and household
figures on the basis of the 2011 Census. Clause 1.1.3 of the Bid
Document places the responsibility on the bidder to obtain
H
112 SUPREME COURT REPORTS [2020] 8 S.C.R.

A information about the present gas supply availability, the pipeline
connectivity and the existing customers in the GA. Significantly,
the scope of work in Clause 1.2 required bidding entities “to lay,
build, operate or expand the CDG networks” to meet the
requirement of natural gas “in domestic, commercial and
industrial segments including natural gas in the vehicular segment
B
in the said Geographical Area to be authorised.” Bidders are
required under Clause 2.1.1 to examine the contents of the Bid
Document including instructions, terms and conditions and
regulations of the Board. The bidder was required to carefully
study the GA and the charge area before submitting the bid. In
C other words, bidders were on notice of the actions required to be
taken to implement the Regulations. The Bid Document
necessarily had to be in conformity with the CGD Authorisation
Regulations. The map, at best was a compendium of the latest
official record of the GA. The map did not dictate how the number
of domestic PNG connections was to be calculated. There is no
D
such indication particularly in Clause 1 of the Bid Document where
the map is referenced. The mere attachment of a map to the Bid
Document would not result in the imposition of conditions of
eligibility or qualification. These have been provided in the
Regulations which have a statutory character. The depiction of
E the GA in a map attached to the bid document does not over-ride
the specific requirements of the bidding criteria as defined in
Regulation 7. [Para 41][152-C-G]
2.1 The CGD Authorisation Regulations, as amended on 6
April 2018, reveals that the Regulations did not contain any
F stipulation determining a range of 2 to 100 per cent of the number
of households under the 2011 Census as the criterion to evaluate
bids. The Regulations in fact do not link the ‘highness’ factor of
domestic PNG connections to the 2011 Census data. In Clause
4.4.1 of the Bid Document, the Board reserved to itself the right
to reject any unreasonably high or low bid. In Addendum-1 to the
G Bid Document, the Board clarified to all prospective bidders that
the evaluation of whether a bid was unreasonably low or high
would be conducted on a case to case basis at the time of bid
evaluation. It is in the above background that the Board Note
dated 23 July 2018 must be assessed. The Board Note was
H formulated after the last date for the submission of bids. The
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 113
REGULATORY BOARD

criterion which the Board Note proposed had not been notified A
to bidders. Bidders were not on notice that this would be the
basis on which their bid would be evaluated. The Board Note
took notice of Clause 4.4.1 of the Bid Document and stipulated
that since technical bids for some GAs were about to be evaluated,
it was necessary to decide upon the reasonableness of the bidding
B
parameters which constituted the work programme. It was in this
background that the Board Note proposed that; “…2 per cent of
total households (as per the 2011 Census data) may be considered
as minimum”. As regards the maximum, the Board note proposed
that: “beyond 100 per cent households may be treated as
unreasonably quote”. The terminology adopted by the Board C
Note indicates that the 2-100 per cent range was not laid down as
an absolute or inflexible basis for disqualifying bids below the
minimum or in excess of the maximum. On the contrary, the use
of the expression “may be” is one indicator that a bid which was
below 2 per cent or in excess of 100 per cent may trigger the
D
exercise of the power which the Board had reserved to itself in
clause 4.4.1 of the Bid Document. On its plain terms, the Board
Note cannot be construed to have laid down an absolute norm by
which bids quoting below the minimum of 2 per cent or above the
ceiling of 100 per cent of the number of households under the
2011 Census data would automatically be rejected as E
unreasonable. [Paras 43 and 44][155-A-H]
2.2. If the Board Note of 23 July 2018 were to be construed
in the manner in which the appellants urged, the automatic
disqualification of bidders based on a criterion introduced by the
Board Note would raise serious doubts about its fairness and F
legality. This is because the Board Note was not notified to bidders
as a basis for the evaluation of bids before the date for the
submission of the bids had closed. To disqualify a bidder on the
basis of a criterion which was not notified and of which bidders
had no knowledge would be arbitrary and would constitute an
infraction of Article 14. The Board was thus correct in determining G
that the automatic disqualification of a bid on the basis of a criterion
specified in the Board Note (which was never notified to the
bidders) would not be “legally correct”. Hence, it would be
reasonable to interpret the Board Note dated 23 July 2018 as
being the formulation of a guideline for the Board. As a guideline H
114 SUPREME COURT REPORTS [2020] 8 S.C.R.

A in the process of evaluation, the decision taken by the Board on
23 July 2018 was not to the effect that every bid below 2 per cent
or above 100 per cent would necessarily stand disqualified.
Consistently with the use of the word ‘may be’, the decision of
the Board meant that the power which the Board reserved to
B itself in Clause 4.4.1 could be invoked if it came to the conclusion
that the bid had not been justified to be reasonable. In other
words, the breaching of the range of 2-100 per cent was a trigger
for the Board to scrutinise the bid and determine whether the
power under Clause 4.4.1 should be invoked. Hence, the course
of action which the Board followed of calling upon the bidders
C with the highest composite scores in GAs 51, 61 and 62 to justify
their bids in terms of their reasonableness cannot be faulted. On
the contrary, if the Board had rejected these bids solely on the
ground that they were above the limit of 100 per cent of
households under the 2011 Census data, the decision would have
D been seriously flawed for having applied a criterion which was
not a part of the Regulations, was not embodied in the Bid
Document and in any event, was not notified to bidders before
they had submitted their bids. [Para 45][156-A-F]
3. It is an incorrect reading of the agenda that note with
respect to GA 62, three out of the four members of the Board
E
had in the Board agenda dated 9 August 2018 recommended that
H1 bidder was not qualified and that H2 bidder i.e. the appellant
be declared as the successful bidder. The agenda note dated 9
August 2018 was a recommendation which was prepared on the
basis of the 2–100 per cent criterion contained in the Board Note
F dated 23 July 2018. Obviously in the light of that decision, a
recommendation was made which was still to be deliberated upon
by the Board as a body. When the Board met on 10 August 2018,
it correctly came to the conclusion that the lower and upper
thresholds were not to be applied mechanically to disqualify
bidders. This decision was justified not only by the terms of the
G
Board Note dated 23 July 2018 but was intrinsic to a fair exercise
of power by the Board. The Board decided that it would call the
bidders with the highest composite score to explain the
reasonableness of their bids. This was a fair opportunity which
was granted to the bidders who had the highest composite score
H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 115
REGULATORY BOARD

to justify the basis of their computation of projected households A
over the eight-contract years. [Para 46][156-G-H; 157-B-D]
4. There was no breach of the principles of natural justice
in calling only the bidders with the highest composite score to
explain the reasonableness of their bids. None of these bidders
was being called upon to revise or improve their bids. In terms B
of the CGD Authorisation Regulations, the bidder with the highest
composite score has to be declared as the successful bidder. If
despite having the highest composite score, a bidder was being
considered for rejection by the Board, it was that bidder who was
justifiably called to explain the reasonableness of the bid. The
other bidders had no locus to participate in the process. It is a C
settled principle of law that the rules of natural justice are
attracted where a decision affects a right of a party against whom
the decision has to be made. After the composite score of all
bidders is calculated, the second highest bidder has no rights
vis-à-vis the highest bidder or the Board unless the method of D
calculating the highest composite score itself is impugned. Calling
upon the bidders with the highest composite score to explain the
reasonableness of their bid did not alter the composite score of
the H1 bidders or any other bidder for the same GA. The question
of hearing any other bidder would have arisen only if the H1 bidder
stood disqualified, and the bidder with the next highest composite E
score also breached the 2-100 per cent range, thereby warranting
scrutiny from the Board. In the present situation, when the Board
decided to call the bidders with the highest composite score in
order to allow them an opportunity to explain reasonableness of
their bid, the administrative decision taken by the Board cannot F
be faulted as being in violation of the principles of natural justice.
[Para 47][157-E-H; 158-A-B]
5. In its minutes dated 29 August 2018, the Board noted
that the four GAs: 51, 61, 62 and 72 were compared with the
upper limit fixed by the agenda note dated 23 July 2018 and G
projected households in 2026. The penetration of PNG domestic
connections based on the upper limit fixed by the Board with
reference to the projected number of households in 2026 varied
from 45 per cent to 59 per cent. However, the penetration of

H
116 SUPREME COURT REPORTS [2020] 8 S.C.R.

A PNG domestic connections based on quoted PNG connections
with reference to the projected number of households in 2026
varied from 55 per cent to 99 per cent. The variation between
the two sets of numbers was between 7 per cent to 54 per cent.
The Board noted that it was in GA 72 where the highest variation
B of 54 per cent took place. The bid submitted by H1 bidder for GA
72 was consequently rejected. The Board observed that the
computation for GA 72 by the H1 bidder was based on untenable
assumptions. According to these assumptions, the PNG domestic
connections quoted by the H1 bidder was 99 per cent of the
projected households by 2026 which was taken as an unreasonably
C high penetration figure. However, for the remaining three GAs,
the variation was between 7 per cent to 23 per cent of the
projected households in 2026, and PNG penetration would be in
the range of 55 per cent to 79 per cent. This exercise was carried
out by the Board to enable it to consider the reasonableness of
D the bids. The Company whose bid was accepted for GA 62, was
however not considered for acceptance for GA 72 since its
computation of the number of projected households and
penetration rate was deemed unreasonable. The Board has
certainly given a possible basis for coming to the conclusion that
the bids submitted by the bidders with the highest composite
E score for GAs 51, 61 and 62 were reasonable and ought not to be
rejected. The decision was taken after hearing the bidders on
whether their bids were reasonable or not. The Board did not
reject all other bidders or presumptively announce these entities
as successful bidders before making a determination as to the
reasonableness of their bids. In light of this chronology of events,
F
at no point did the Board reverse its decision with respect to the
GAs in question. [Paras 49 and 50][158-G-H; 159-A-G]
6. The appeals before APTEL pertained to GAs 51, 61 and
62. The present proceedings were not in the nature of a public
interest litigation instituted under Article 226 of the Constitution
G
before a High Court challenging the entirety of the tendering
process. Both before this Court and APTEL, it was contended
that the Board had rejected bids in other GAs which were not-
qualified on the ground that they were either below 2 per cent or
above 100 per cent of the number of households as per the 2011
H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 117
REGULATORY BOARD

Census figures. On clarification, the Board has stated that there A
were only 9 bids with H-1 bidders quoting below 2% and above
100% limits of 2011 census. These 9 bids were accordingly
highlighted to the Board, and final decisions were taken on these
9 bids by the Board after proper application of mind, hearing the
parties and taking an objective decision. Out of 9 bids, 4 bids
B
having lower than 2% connections were accepted after raising
their bids through discussions with the bidders, otherwise, these
GAs would have gone dry. In GA-37, IOC’s bid was rejected
because of lower than 2% quote, but this decision of the Board
has not been challenged by IOC. Out of the remaining 4 GAs
where H-1 bidders quoted more than 100% of PNG connections C
of 2011 census household numbers for 3 GAs (51, 61 & 62), H-1
bidders were declared successful bidders after hearing them on
their reasonableness of quotes. For GA No. 72, the bid of the H-
1 bidder was rejected having found its bid unreasonable and the
GA was awarded to the next highest bidder and the H-1 bidder
D
had not challenged that decision. This clarification by the Board
as well as the findings which have been recorded by the Member
Technical (Petroleum and Natural Gas) commends itself for
acceptance. [Para 51][159-G-H; 160-A-G]
7. It was also argued that the Compounded Annual Growth
E
Rate considered by the Board for the period between 2001 and
2011 was higher than the actual annual growth rate, leading the
Board to project a higher number of households for 2026 than
may actually exist. For the purpose of projecting the number of
PNG connections within a GA, it is the number of households
and not the overall population that is relevant as each household F
is unlikely to have more than one PNG connection. Moreover, as
neither the CGD Regulations nor the Bid Document required
the number of projected households to be calculated on the basis
of 2011 Census data, the decision of the Board to accept the
justification provided by the bidders cannot be attacked on the
ground that the figures provided did not strictly match the G
numbers extrapolated from the 2011 Census data. [Paras 52 and
53][160-H; 161-A-D]
8. The power granted to the Board under Clause 14.2 of
the Bid Document is an enabling clause that allows the Board to
H
118 SUPREME COURT REPORTS [2020] 8 S.C.R.

A apply its mind to a quote and determine its reasonableness. The
quotes submitted by all bidders with respect to the projected
number of households in 2026 are admittedly estimates. Similarly,
the Board’s own determination of a baseline for comparing the
reasonableness of various quotes is also an estimate. Therefore,
the Board’s use of the baseline figure and its consequent
B
acceptance of the reasonability of a quote cannot be faulted
because it did not strictly adhere to one particular methodology
of arriving at a number of projected households unless the
methodology used is arbitrary, having no correlation with the
result sought to be achieved. Therefore the finding of the Member
C Technical with respect to the calculation of the number of
households is approved. [Para 53][161-G-H; 162-A-B]
9. The Chairperson’s findings are based on three key
assumptions: (i) The Board Note dated 23 July 2018 was binding
on the Board and the agenda note dated 9 August 2018 was
D evidence of the Board Note’s binding nature; (ii) Because the
Board disqualified certain other bidders by applying the 2 – 100
per cent range, it was bound to do so against the successful bidders
in GAs 51, 61 and 52; (iii)Because the assessment of reasonability
was a “subjective assessment”, the Board was obligated to hear
other bidders in the disputed GAs before declaring successful
E bidders. On a bare construction of the Board Note dated 23 July
2018 and the fact that the Board Note was formulated after the
last date for the submission of bids, the Board Note did not set
out absolute criteria for disqualification of bids. The agenda note
dated 9 August merely tabled a proposal to apply the criteria of
F 2-100 per cent range but the Board did not subsequently adopt
this course of action, a decision within its power and indeed
necessary to preserve the integrity of the bidding process. Having
established that the Board Note was not an absolute binding
criteria, and the Tribunal was approached only with respect to
GAs 51, 61 and 62, the Board’s treatment of other GAs cannot
G be decisive in determining the legality of the authorisations
granted in GAs 51, 61 and 62, especially where the Board’s actions
in respect of these other GAs have not been independently
challenged. Lastly, the Chairperson has construed the assessment
of the reasonability of the highest bidder’s quote as a decision
H affecting the rights and liabilities of all other bidders for the GAs,
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 119
REGULATORY BOARD

thus requiring them to be heard. The assessment of the A
reasonability of the bid was a matter solely between the highest
bidder and the Board. Such an assessment would not alter the
scores of the highest bidder vis-à-vis the scores of the other
bidders. The sole question was whether the highest bidder’s
quote was reasonable, and the power to determine such
B
reasonability resided solely with the Board by virtue of Clause
14.2 of the Bid Document. Thus, the presence and hearing of
other bidders was not necessary. [Paras 54 and 55][163-B-H;
164-A]
10. The Court disagrees with the opinion of the Chairperson
and concurs with the view which was taken by the Member C
Technical (Petroleum and Natural Gas) to dismiss the appeals.
[Para 56][164-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3992
of 2019.
D
From the Judgment and Order dated 28.02.2019 of the Appellate
Tribunal for Electricity at New Delhi in Appeal No. 292 of 2018.
With
Civil Appeal Nos. 3234-3235, 3247-3248, 3289, 4527 of 2019, 106 E
of 2020, Transferred Case (Civil) Nos. 27 and 26 of 2019.
Kapil Sibal, P.S. Narasimha, Dr. A.M. Singhvi, Vikash Singh,
Sanjay Sen, Gopal Shankarnarayanan, Paras Kuhad, Sr. Advs., Nitin
Kala, Sumanto Basu, Pukhrambam Ramesh Kumar, Rohan Sareen, Rahul
G. Tanwani, Gaurav Mitra, Rohan Ganapathy, Karun Sharma, Ms. Sheniza F
Farid, Aditi Tripathi, Gaurav Juneja, Aayush Jain, Dibyanshu, Ms. Deepa
Chawan, M/s. Khaitan & Co., Buddy Rangnathan, Mahesh Agarwal,
Ms. Aanchal Mullick, Ms. Deepika Kalia, Shubham Kulshreshtha, E. C.
Agrawala, Ms. Bhargavi Kanan, Ms. Ashwarya Modi, Ms. Nafisa
Khaudeparkar, Parth Chopra, Harpreet Singh Ajmani, Sanjeet Singh,
G
Anish Sethi, Ms. Divya Roy, Prashant Bezboruah, Utkarsh Sharma, Jitin
Chaturvedi, Rakesh Dewan, Shuaib Hussain, Advs. for the appearing
parties.

H
120 SUPREME COURT REPORTS [2020] 8 S.C.R.

A The Judgment of the court was delivered by
DR DHANANJAYA Y CHANDRACHUD J.
1. In 2018 the Petroleum and Natural Gas Regulatory Board1
conducted theninth round of bidding for City or Local Natural Gas
B Distribution Networks2. On 14 September 2018, a press release was
placed on the Board’s website notifying details of the successful bidders
in various Geographical Areas3. The contest in the present batch of
appeals has arisen over the grant of authorisation for laying, building,
operating or expanding CGD networks in the following GAs:

C (i) GA 51 - Puducherry District;
(ii) GA 61 - Kanchipuram District; and
(iii) GA 62 – Chennai & Tiruvallur Districts.
2. The Appellate Tribunal for Electricity4wasseized of two appeals
D – Appeal No 292 of 2018, instituted by Adani Gas Limited and Appeal
No 323 of 2018, instituted by IMC Limited. These appeals were instituted
before the APTEL under Section 30(1) of the Petroleum and Natural
Gas Regulatory Board Act 20065. By their separate judgments dated 28
February 2019, the Chairperson and Member Technical (Petroleum and
Natural Gas) rendered divergent findings, following which the
E Chairperson directed that the proceedings in the two appeals be placed
before the judicial member. The judicial member recusedfrom hearing
the appeals on 7 March 2019. This led to the institution of the present
appeals before this Court. Noting that no other judicial member was
available in the APTEL to conduct the hearing, this Court by its order
dated 1 April 2019 admitted the appeals and issued directions in exercise
F
of its powers under Article 142 of the Constitution for the transfer of the
proceedings before the APTEL to this Court in order to bring finality to
the present dispute. In assessing the merits, the Court has had the benefit
of appraising the differing views which have been expressed by the
Chairperson and by the Member Technical (Petroleum and Natural Gas).
G
3. The APTEL has been constituted in terms of sub-Section (1)
of Section 30 of the PNGRB Act which is extracted below:
1
“the Board”
2
“CGD Networks”
3
“GAs”
4
H “APTEL” or “Tribunal”
5
“PNGRB Act”
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 121
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

“30. Appellate Tribunal. (1) Subject to the provisions of this A
Act, the Appellate Tribunal established under section 110 of the
Electricity Act, 2003 (36 of 2003) shall be the Appellate Tribunal
for the purposes of this Act and the said Appellate Tribunal shall
exercise the jurisdiction, powers and authority conferred on it by
or under this Act:
B
Provided that the Technical Member of the Appellate Tribunal for
the purposes of this Act shall be called the Technical Member
(Petroleum and Natural Gas) and shall have the qualifications
specified in sub-section (2) of section 31.”
Section 33 stipulates that any person aggrieved by an order or C
decision of the Board has recourse to an appeal to the Tribunal. The
jurisdiction of the APTEL while hearing an appeal is spelt out in sub-
Section (6) of Section 33 in the following terms:
“33.(6) The Appellate Tribunal may, for the purpose of examining
the legality or propriety or correctness of any order or decision of D
the Board referred to in the appeal filed under sub-section (1),
either on its own motion or otherwise, call for the records relevant
to disposing of such appeal and make such orders as it thinks fit.”
An appeal lies to this Court against an order of the APTEL, other
than an interlocutory order, under Section 37 on the grounds set out in E
Section 100 of the Code of Civil Procedure 1908. With this background,
we now turn to the PNGRB Act under the aegis of which the ninth
round of CGD bidding occurred.
PNGRB Act and regulations
4. The content of the PNGRB Act is summarised by its long title F
as:
“An Act to provide for the establishment of Petroleum and Natural
Gas Regulatory Board to regulate the refining, processing, storage,
transportation, distribution, marketing and sale of petroleum,
petroleum products and natural gas excluding production of crude G
oil and natural gas so as to protect the interests of consumers and
entities engaged in specified activities relating to petroleum,
petroleum products and natural gas and to ensure uninterrupted
and adequate supply of petroleum, petroleum products and natural
gas in all parts of the country and to promote competitive markets
and for matters connected therewith or incidental thereto.” H
122 SUPREME COURT REPORTS [2020] 8 S.C.R.

A The PNGRB Act came into force, in terms of the provisions
contained in Section 1(3) on 1 October 2007, save and except for Section
16. Section 16 which provides for the authorisation for building or
expanding CGD Networks, came into force on 15 July 2010. Section 16,
insofar as is material contains the following stipulations:
B “16. Authorisation.—No entity shall—
(a) lay, build, operate or expand any pipeline as a common carrier
or contract carrier,
(b) lay, build, operate or expand any city or local natural gas
distribution network, without obtaining authorisation under this Act:
C … ’’
Under Section 19 of the PNGRB Act, the Board may grant an
authorisation for a city or local natural gas distribution network either on
the basis of an application or suo moto. Before it does so in a specified
GA, the Board is under a mandate to give wide publicity of its intent to
D do so. Upon inviting applications from interested parties, the Board may
select an entity “in an objective and transparent manner as specified by
regulations for such activities”.
5. On 19 March 2008, the Petroleum and Natural Gas Regulatory
Board (Authorizing Entities to Lay, Build, Operate or Expand City or
E Local Natural Gas Distribution Networks) Regulations 20086 were
notified. The CGD Authorisation Regulations were amended on 21 June
2013, 7 April 2014 and 6 April 2018. The CGD Authorisation Regulations,
as amended in 2018, substituted new criteria for bidding which applied
to the ninth round of bidding with which the present batch of appeals is
F concerned.
6. Regulation 6 of the CGD Authorisation Regulations provides
for the invitation by the Board for laying, building, operating or expanding
of a CGD network in a specific city or GA. The procedure stipulated in
Regulation 5 is to apply, except for those aspects relating to expressions
of interest. Under Regulation 5(6), the Board can scrutinise only those
G
bids which are received in response to an advertisement and from entities
which fulfil certain minimum eligibility criteria. Regulation 5(6)(b) spells
out the criteria, which are designed to ensure that the entity bidding is
technically capable of laying and building a CGD network in the
6
H “CGD Authorisation Regulations”
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 123
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

relevant city or GA. Regulation 5(6)(c) enunciates criteria which ensure A
that the entity is technically capable of operating and maintaining a
CGD network. Besides the technical criteria, the Regulations also spell
out certain financial criteria which potential bidders must satisfy.
Regulation 5(6)(e) provides:
“(6) The Board shall scrutinise the bids received in response to B
the advertisement in respect of only those entities which fulfil the
following minimum eligibility criteria, namely:-
…
(e) the entity has adequate financial strength to execute the
proposed project, operate and maintain the same in the authorised C
area and shall meet the following financial criterion to qualify for
bidding for a single CGD network namely:-
Population in the geographical Minimum net worth of the bidder entity
area as per 2011 Census of
India
(1) (2) D
5 million or more Rs. 1,500 million for a population of 5 million,
plus additiona l Rs. 300 million for each 1
million of population or part thereof, in excess
of 5 million (refer Note-3)
2 million or more but less than 5 Rs.1,000 million
million
1 million or more but less than 2 Rs. 750 million
million E
0.5 million or more but less than Rs. 500 million
1 million
0.25 million or more but less Rs. 250 million
than 0.50 million
0.1 million or more but less than Rs. 100 million
0.25 million
Less than 0.1 million Rs. 50 million
F
’’
The minimum net-worth of the bidding entity is thus linked to the
population of the GAthe entity is bidding for, as set out in2011 Census
data.
G
7. Regulation 7 of the CGD Authorisation Regulations provides
the criteria for determining how the Board should evaluate rival bids for
the same GA. Regulation 7 is quoted below, in its entirety:
“7. Bidding criteria.

H
124 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 1(a) The Board, while considering the proposal for authorisation,
shall tabulate and compare all financial bids meeting the minimum
eligibility criteria, as per the bidding criteria specified below,
namely:-
Sl. Bidding Criteria Weightage Explanation
No %
B 1 Lowness of transportation 10 Bidder is required to quote
rate for CGD – in rupees per transportation rate for CGD
million British Thermal Unit only for the first contract year
(Rs./MMBTU) which shall not be less than
Rs.30/MMBTU. Rates for the
subsequent contract years
shall be derived considering
the quoted rate and escalation
as per Note.
C 2 Lowness of transportation 10 Bidder is required to quote
rate for CNG – in rupees per transportation rate for CNG
kilo gram (Rs./kg) only for the first contract year
which shall not be less than
Rs.2/kg. Rates for the
subsequent contract years
shall be derived considering
the quoted rate and escalation
D as per Note.

3 Highness of number of CNG 20 -
stations (online and
daughter booster stations) to
be installed within 8 contract
years from the date of
authorisation
4 Highness of number of 50 -
E domestic piped natural gas
connections to be achieved
within 8 contract years from
the date of authorisation
5 Highness of inch-kilometre 10 -
of steel pipeline (including
sub-transmission steel
pipelines) to be laid within 8
contract years from the date
F of authorisation
Note – Annual escalation shall be considered from the second contract year and
onwards based on the “Wholesale Price Index (WPI) Data (2011-12 =100)” for “All
Group/ Commodity”, as normally available on the website of the Office of the
Economic Adviser, Government of India, Ministry of Commerce and Industry,
Department of Industrial Policy and Promotion (DIPP) on the link
“http://eaindustry.nic.in/home.asp.”

G Provided that in the case of the geographical areas of (i) Bilaspur,
Hamirpur and Una Districts; (ii) Panchkula (Except area already
authorised), Shimla, Solan and Sirmaur Districts and (iii) Barmer, Jaisalmer
and Jodhpur Districts, it is not mandatory to supply natural gas through
steel-pipes. However natural gas has to reach in all charge areas. The
bidding parameters and their respective weightage will, accordingly, be
H as under:-
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 125
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

A
Sl. Bidding Criteria Weightage Explanation
No %
1 Lowness of transportation 10 Bidder is required to quote
rate for CGD – in rupees transportation rate for CGD
per million British only for the first contract year
Thermal Unit which shall not be less than
(Rs./MMBTU) Rs.30/MMBTU. Rates for the
subsequent contract years B
shall be derived considering
the quoted rate and escalation
as per Note.
2 Lowness of transportation 10 Bidder is required to quote
rate for CNG – in rupees transportation rate for CNG
per kilo gram (Rs./kg) only for the first contract year
which shall into be less than
Rs.2/kg. Rates for the
subsequent contract years C
shall be derived considering
the quoted rate and escalation
as per Note.
3 Highness of number of 25 -
CNGstations (online and
daughter booster stations)
to be installed within 8
contract years from the
date of authorisation
4 Highness of number of 55 -
D
domestic piped natural gas
connections to be achieved
within 8 contract years
from the date of
authorisation
Note: Annual escalation sha ll be considered from the second contract year and
onwards based on the “Wholesale Price Index (WPI) Data (2011-12=100)” for “All
Group / Commodity”, as normally ava ilable on the website of the Office of the
Economic Adviser, Government of India, Ministry of Commerce and Industry, E
Department of Industrial Policy and Promotion (DIPP) on the link
“http://eaindustry.nic.in/home.asp.”

1(b) Successful bidder shall be required to achieve the year-wise
work programme within 8 contract years as per details given below,
namely:-
F
PNG Connections CNG stations Inch-km of steel pipe line
(cumulative ) (cumulative) (cumulative)
By the % of work By the % of work By the % of work
end of programme end of programme end of programme
contract contract contract
year year year
st st
1 Nil 1 Nil 1st 5
nd nd
2 10 2 15 2nd 20
3rd
20 3 rd
30 3rd
40 G
4t h 30 4th 45 4th 60
th th th
5 40 5 60 5 70
6t h 60 6th 75 6th 80
7t h 80 7th 90 7th 90
8t h 100 8th 100 8th 100
Note:- In case derived numbers are in fraction, the same shall be rounded off to the
nearest whole number and fraction 0.5 shall be rounded off to next higher whole
number.
H
126 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Provided that in the case of the geographical areas of (i) Bilaspur,
Hamirpur and Una Districts; (ii) Panchkula (Except area already
authorised), Shimla, Solan and Sirmaur Districts and (iii) Barmer,
Jaisalmer and Jodhpur Districts, successful bidder shall be required
to achieve the year-wise work programme within 10 contract years
as per details given below, namely:-
B
PNG Connections (cumulative) CNG stations (cumulative )

By the end of % of work By the end of % of work programme
contract year programme contract year
1st Nil 1st Nil
nd
2 10 2nd 10
3rd 20 3rd 20
C 4th 30 4th 30
5th 40 5th 40
6th 50 6th 50
th th
7 60 7 60
8th 70 8th 70
9th 80 9th 80
10th 100 10th 100
D Note – In case derived numbers are in fraction, the same shall be rounded off to the
nearest whole number and fraction 0.5 shall be rounded off to next higher whole
number.

(2) ***********
(3) Bidder entity with the highest composite score, considering
E the criteria under sub-regulation (1) and as illustrated in Schedule
C (1), shall be declared as successful bidder.
Provided that in case of tie in the evaluated composite score, the
successful bidder shall be decided based on the highness of
numbers of PNG connections among the tied bidding entities. In
F case there is tie on number of PNG connections also, highness of
inch-kilometer steel pipeline shall be considered and thereafter in
case of tie in inch-kilometer as well, highness of numbers of CNG
stations shall be considered;”
Under Regulation 7, the Board while considering proposals for
G authorisation,shall tabulate and compare all financial bids which meet
the minimum eligibility criteria in accordance with the bidding criteria set
out as enunciated. The table set out in Regulation 7(1)(a) provides for
the tabulation of all eligible financial bids on the basis of five parameters.
The table enunciates the five bidding criteria and the weightage which is
to be ascribed to each of them. The criteria are as follows:
H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 127
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

(i) The first criterion is the ‘lowness’ of the transportation rate A
for CGD computed in rupees per million for a British
Thermal Unit. The weightage ascribed to this criterion is
10 per cent. The explanation stipulates that a bidder is
required to quote the transportation rate for CGD only for
the first contract year at a rate not less than Rs 30 per
B
MMBTU;
(ii) The second criterion is the ‘lowness’ of the transportation
rate for CNG expressed in rupees per kilogram.The
weightage ascribed to this criterion is 10 per cent. The bidder
is required to quote the transportation rate only for the first
C
contract year at a rate of not less than Rs 2 per kilogram;
(iii) The third criterion is the ‘highness’ of the number of CNG
stations to be installed within eight contract years from the
date of authorisation. The weightage ascribed to this
parameter is 20 per cent;
D
(iv) The fourth criterion is the ‘highness’ of the number of
domestic piped natural gas connections to be achieved within
eight contract years from the date of authorisation. The
weightageascribed to this criterion is 50 per cent; and
(v) The fifth criterion is the ‘highness’ of the inch-kilometre of E
steel pipeline to be laid within eight contract years from the
date of authorisation. The weightage ascribed to this
parameter is 10 per cent.
Regulation 7(1)(b) sets out a year-wise work programme indicating
the progress which must be achieved by the successful bidder every F
year during the course of eight contract years from the date of
authorisation. Under Regulation 7(3), a bidding entity with the highest
composite score, in terms of the criteria contained in sub-regulation (1),
is to be declared as the successful bidder. This is illustrated in Schedule
C(1) of the CGD Authorisation Regulations. Schedule C(1) contains the G
following illustration of the manner in which the weightage for PNG
connections is to be ascribed:
“(E) Number of PNG domestic connections
Let,
H
128 SUPREME COURT REPORTS [2020] 8 S.C.R.

A P1 = Number of PNG domestic connections by the 1st entity
P2 = Number of the PNG domestic connections by the 2nd
entity
P3 = Number of the PNG domestic connections by the 3rd
entity
B
Assume P1 is higher than P2 and P2 is higher than P3.;
The highest number of PNG domestic connections bid (HP1) shall
be given a score of 100% and the number of the other PNG
domestic connections bids shall be given a score in relation to
C HP1 on a pro-rata basis as under :-

HP1 = 100%

HP2 = 100 % x (P2 ÷ P1)
D
HP3 = 100 % x (P3 ÷ P1)

’’
This illustration shows that the entity which has quoted the highest
E number of PNG domestic connections to be achieved is allotted a score
of 100 per cent. The entities below the highest will be assigned a score
in relation to the first entity on a proportionate basis.
8. Under Regulation 9, the grant of an authorisation is to be issued
to a successful entity after it furnishes a performance bond. The quantum
F of the performance bond is based on the population of the GA as
determined with reference to the census data of 2011. Regulation 9
states:
“9. Performance bond.
(1) Grant of authorisation shall be issued to the successful entity
G
after it furnishes the performance bond in the form of demand
draft or pay order or bank guarantee from any scheduled bank
for the amount as per details given below, namely:-

H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 129
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

Serial Population in the Amount of A
Number Geographical Area, as pre Performance
2011 Census of India Bond (Rupees)

1 5 million or more 500 million

2 2 million or more but less 330 million B
than 5 million

3 1 million or more but less 250 million
than 2 million

4 0.5 million or more but less 150 million C
than 1 million

5 0.25 million or more but less 80 million
than 0.50 million
D
6 0.1 million or more but less 30 million
than 0.25 million

7 Less than 0.1 million 15 million
’’ E
Under Regulation 10, the successful entity is to be issued a letter
of intent7 upon the finalisation of the bid. Under the CGD
Authorisation Regulations, the authorised entity must also obtain
financial closure for the projectfrom a bank or financial institution
within 270 days of authorisation.
F
9. The period of implementation of the project under the ninth
round of CGD bidding is 2018 to 2026. The period for commercial
operation is between 2018 and 2043.
10. From an analysis of the CGD Authorisation Regulations, it
becomes evident that the 2011 census figures have been utilised to peg G
the net-worth requirement in Regulation 5(6)(e) and the value of the
performance bond to be submitted to the Board post authorisation in
Regulation 9. Significantly, Regulation 7, which provides a table specifying

7
“LOI” H
130 SUPREME COURT REPORTS [2020] 8 S.C.R.

A the five bidding criteria to evaluate competing bids, does not link the said
criteria with the census figures of 2011.
Facts of the present appeals
11. On 12 April 2018, the Board initiated the bidding process for
authorising entities to lay, build, operate or expand CGD networks for
B the ninth round. The bids were invited by means of an application-cum-
bid-document for each GA.8 The bidding process covered various GAs,
including those of (i) GA 51 - Puducherry District; (ii) GA – 61
Kanchipuram District; and (iii) GA 62 -Chennai-Tiruvallur.
12. Clause 1.1. of the Bid Document was titled ‘Geographical
C area and related information’. Clause 1.1.1 stipulated that the Board
had identified a GA and was accordingly inviting applications-cum-bids
for the grant of authorisation for developing a CGD network in the
GA.Each GA was depicted in a map at Annexure-1 of the Bid Document
for the relevant GA. Under Clause 1.1.3, it was the responsibility of
D each bidder to obtain all information related to the present gas supply
availability, pipeline connectivity and information about existing customers,
if any, in the specified GA. Clause 1.1.3 stated:
“1.1.3.It is the bidder’s responsibility to obtain all
information related to the present gas supply availability
E and pipeline connectivity and also existing customers, if
any, in the specified geographical area. The bidder can also
refer to list of NOCs/Permissions granted by PNGRB to various
entities under the provisions of the Internal Guidelines for grant of
NOC/Permission for (i) supply/distribution of CBM/natural gas
through cascades; and (ii) setting up of CNG/LNG Daughter
F Booster Stations (DBS), in theareas where the Board has not yet
authorized any entity for developing or operating CGD networks
at http://www.pngrb.gov.in/CGD-NOCs.html.”
(Emphasis supplied)

G
The scope of work was defined in Clause 1.2 of the Bid Document:
“The entities bidding for this work shall be required to lay, build,
operate or expand the CGD networks to meet requirement of

8
H With respect to the relevant GA, “Bid Document”
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 131
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

natural gas in domestic, commercial and industrial segments A
including Natural Gas in the vehicular segment in the said
geographical area to be authorized and also comply with the
relevant regulations notified from time to time.
The entities shall be required to carry out the development of
CGD project in line with the regulations laid down by the B
PNGRB.”
13. Clause 2.1.1 required the bidders to examine the contents of
the Bid Document and the regulations of the Board. Clause 2.1.2
described Annexure-1 as the map depicting the GA and charge areas.
Under Clause 2.2.1, any clarifications were required to be obtained from C
the Secretary of the Board on or before the bid closing date. Clause 4.2
stipulated that all financial bids would be tabulated and compared in
accordance with the bidding criteria specified in Regulation 7 and
Schedule-C(1) of the CGD Authorisation Regulations. Moreover, the
bidder with the highest composite score would be declared as successful
in the bid. Under Clause 4.4 of the Bid Document, the Board reserved D
the right to accept or reject any bid which it considered to be
“unreasonably high or low”:
“4.4 PNRGB’S RIGHT TO ACCEPT OR REJECT ANY
OR ALL APPLICATION-CUM-BIDS
E
4.4.1 PNRGB reserves the right to reject any Application-cum-
Bid comprising quoted work programme considered by it to be
unreasonably high or low.”
On 31 May 2018, Addendum-1 to the Bid Documentwas issued
by the Board. Clause 14.2, inserted as a result of Addendum-1, contained F
the following clarification:
“14.2 What should be considered to be the level of “unreasonably
high” or “unreasonably low” quotes shall be decided by Board at
the time of bid evaluation on a case to case basis after considering
the relevant factors.”
G
According to the above stipulation, the Board clarified that the
determination of an unreasonably high or low quote would be made by
the Board at the time of bid evaluation on a case to case basis after
considering the relevant factors.
H
132 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 14. On 10 July 2018, three bid evaluation committees9 were
nominated by the Board for evaluating the bid documents. On 12 July
2018, a press release was issued by the Board setting out the date and
time for the opening of technical bids for different GAs. The technical
bids for GA 51 (Puducherry) were to be opened on 16 July 2018 at
14.00 hours; for GA 61 (Kanchipuram) on 17 July 2018 at 12.30 hours;
B
and for GA 62 (Chennai-Tiruvallur) on 17 July 2018 at 13.30 hours. The
technical bids were opened by the Board in the presence of the bidders’
representatives.
15. On 23 July 2018, a note10 was moved for the approval of the
members of the Board with a view to encourage serious bidders and to
C avoid unrealistic/unreasonable bidding in terms of Clause 4.4.1 of the
Bid Document. The Board Note, insofar as is material provided:
“Subject: Reasonability of Bidding Parameters
Bid evaluation for technical bid is under progress for all 86 GAs.
D Technical bid queries are being issued and it is expected that the
Financial bid opening may be started from this week (24th July
onwards) for various GAs. The bidding parameters have been
completely changed in current round.
In order to promote serious bidders and to avoid any unrealistic/
E unreasonable bidding number committed by entity, PNGRB has
included a rejection clause in Para 4.4.1 of application-cum-bid
documents. The clause is reproduced below:
“PNGRB reserves the right to reject any Application-cum-Bid
comprising quoted work programme considered by it to be
F unreasonably high or law.”
Since technical bids for some of the GAs are about to be concluded,
it is essential to decide upon the reasonability of the bidding
parameters which are constituting work programme. In this regard,
following is proposed:
G 1. No of PNG Domestic connections:
Lower Limit: Ministry of Petroleum and Natural Gas
(MoP&NG) vide letter No L-16021/9/2013-GP-1 (pt.) dated
16th August 2016, constituted a committee to examine the
9
(“BECs”)
10
H “Board Note”
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 133
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

City Gas Distribution (CGD) bidding related issues. The A
committee in its report recommended minimum work
programme (MWP) for inter-alia PNG domestic
connections as 7.5% of within district headquarters/
municipal limit. Prior to 9th round, MWP for PNG domestic
connections was fixed for 5 % total household. Considering
B
above it is proposed that 2 % of total Household (Census
2011 data) may be considered as minimum.
Maximum Limit: In order to reach at maximum value
various possibilities has been discussed in house which
includes conversion of LPG to PNG, maximum penetration
at present in GAs etc. It is proposed to keep maximum C
limit of PNG Domestic connections as 100 % of Household
(Census 2011 data). Beyond 100 % household may be
treated as unreasonable quote.”
The Board Note was approved by the members of the Board
including the Chairperson. Between 24 July 2018 and 18 August 2018, D
the financial bids submitted by the bidders for various GAs were opened
by the Board.
16. The Board Note of 23 July 2018 adopted the Census 2011
data on the total number of households as the basis for computing the
minimum and maximum limits for the purpose of determining E
unreasonably low or unreasonably high quotes. The Board Note stipulated
that 2 per cent of the total households in terms of the Census 2011 data
would be regarded as the minimum quote. Anything below 2 per cent
would be considered unreasonably low. Similarly, on the upper end of
the spectrum, the Board Note proposed that 100 per cent of the total F
households in terms of the Census 2011 data would be regarded as the
maximum. A quotation beyond this upper limit would be construed to be
unreasonably high. Now, two features of the note of the Board Note
dated 23 July 2018 must be noted. First,the Board Note was generated
after the last date for the submission of bids. Second, the Board Note
was an internal document of the Board which was not notified to the G
bidders.
17. The Board commenced the process of opening the financial
bids on 24 July 2018. On 2 August 2018, an agenda note was prepared
for the Board. The agenda note outlined that three BECs were nominated
for evaluating the bids received. Technical bids submitted by the bidders H
134 SUPREME COURT REPORTS [2020] 8 S.C.R.

A were evaluated by ICF, a consultant, based on the requirements of the
Regulations and the Bid Documents. A summary sheet of the technical
bid evaluation was prepared and checked by the BEC. Thirty-eight entities
had submitted bids against 86 GAs. The financial bids of technically
eligible bidders were recommended for opening. The agenda note dated
2 August 2018 spelt out the stipulation contained in paragraph 4.4.1 of
B
the Bid Document, and of the previous decision of the Board, to adopt 2
per cent of the total households as the minimum and 100 per cent as the
maximum, both on the basis of 2011 Census data. The agenda note
contained a tabulation of the bids of technically qualified entities. The
agenda note indicated that for four GAs: 35, 46, 48 and 49 where two
C bids had been received for each, the highest bidder had quoted an
unreasonably low number of projected PNG connections at the end of
eight contract years. Where the bid below 2 per cent was the sole bid
for the GA, the bid was accepted as the GA would have gone ‘dry’
otherwise. The agenda note proposed the adoption of three courses of
action with respect to the remaining bids:
D
(i) Rejection of the bids received for the above four GAs as
being unreasonably low;
(ii) Acceptance of the bids for the four GAs by extending to
them the same logic that was applied for single bid GAs; or
E (iii) Inviting the concerned entities with the highest scores for
each of the GAs for negotiation to improve the quoted work
programme.
18. The agenda note dated 2 August 2018 was presented before
the Board for deliberation on 3 August 2018. In its meeting, the Board
F accepted the proposal for the issuance of LOIs to entities of 48 GAs
mentioned in table 3 of the agenda note. The proposal to invite entities
with the highest scores which had submitted unreasonably low bids for
each of the GAs for negotiations and to improve the quoted work
programme was approved. Accordingly, on 3 August 2018, the Board
G issued a press release recording that it had approved the issuance of
LOIs to 18 successful bidders for 48 GAs. The press release indicated
that the remaining GAs were being evaluated and the outcome would be
notified shortly.
19. On 9 August 2018, an agenda note was issued by the Board
noting that in pursuance of the decisions which were taken by the Board
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on 3 August 2018, letters have been addressed to the entities which had A
obtained the highest composite score but had quoted unreasonably low
PNG connections, to confirm their acceptance of the minimum
requirement of 2 per cent of households as per the 2011 Census data.
Table5 to the agenda note contained a tabulation of bids which were
liable to be rejected due to unreasonably high or as the case may
B
be,unreasonably low quotes. Among these bids were the bids received
from H1 bidders who had quoted unreasonably high PNG connections
for thethreeGAswhich form the subject matter of the present appeals.
These were:
“Table -5
C
Sl No GA Name of GA Name of Quote Remarks
No. bidding
entities

11. GA 61 Kanchipuram Consortium of 114% of 7 other
District AG&P LNG total HH valid bids D
Marketing Pte remains
Ltd. & Atlantic
Gulf & Pacific
Company of
Manila Inc.

12. GA 62 Chennai & Torrent Gas 157.00% of 9 other E
Tiruvallur Private Limited total HH valid bids
Districts remains

13. GA 63 Coimbatore IMC Limited 107.06% of 12 other
District total HH valid bids
remains

… F

From the above Table-5, it can be seen that in 3 GAs have
unreasonably High PNG Connections quoted have been received
& also happens to be H1 bidder and are liable for rejection.”
20. At this stage it may also be necessary to note that table4 G
contained a tabulation of bids among them being those of bidders who
were treated as not “Not-Qualified”. The agenda note recommended
that in threeGAs, the bids of the highest bidders were liable to be rejected
since they had quoted an unreasonably high number of PNG connections
to be achieved at the end of eight contract years. Consequently, the
H
136 SUPREME COURT REPORTS [2020] 8 S.C.R.

A names of the entities which were to be declared as successful bidders
were tabulated in table 6 of the agenda note. According to the agenda
note, after the names of the entities with the highest bids were removed,
IMC Limited was recommended for being declared as the successful
bidder for GA 61 (Kanchipuram District). Similarly, for GA 62 (Chennai
& Tiruvallur Districts), Adani Gas Limited was recommended to be the
B
successful bidder after the highest bid was declared as “Not Qualified”.
The agenda note was prepared by the Authorisation Division and records
that it was concurred with by the Member (I&T) and Member (C&M)
and was approved by the Chairperson “for deliberations and approval of
the Board”.
C 21. On 10 August 2018, a meeting was held by the Board. The
minutes of the Board meeting recorded that out of four cases where the
quotes for projected PNG domestic connections were higher than 100
per cent of the households under the 2011 Census, one of the bidders for
GA 63 was not under consideration as its composite score was not the
D highest amongst the bids received for the GA. The other three bidders
who had quoted more than 100 per cent of the households for PNG
domestic connections were reflected in the following table:
“
Sl GA GA name Bidding Entity Quoted for PNG
No. No. Domestic
E connections as %
of households as
per 2011 census
1. 61 Kanchipuram Distt. Consortium of
114%
AG&P LNG
marketing Pte Ltd.
and Atlantic Gulf
F & Pacific
Company of
Manila Inc.
2. 62 Chennai & T iruvallur Torrent Gas Pvt 157%
Districts Ltd.
3. 72 Medchal, Torrent Gas Pvt 220%
Rangareddy&Vikarabad Ltd.
G Districts

’’
The minutes of the meeting went on to record that:
“During deliberations in the Board, the Board referred to clause
H 4.4.1 of ACBD which reads, “PNGRB reserves the right to
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reject any application cum bid comprising quoted work program A
considered by it to be unreasonably high or low.” In terms of
this clause vide note dated 23.07.2018 (i) lower and upper limits
were decided for PNG domestic connections (ii) lower limits
was decided for CNG Stations and (iii) no limit (higher or lower)
was decided for Inch-KM of Steel pipeline. The Board
B
deliberated that though lower and upper households were
decided, the same need not be a mechanical exercise and an
opportunity be given to affected entities to explain
reasonableness of their quotes.”
22. The Board thus took a decision that the disqualification of
bidders on the basis of the lower and upper thresholds of 2 per cent and C
100 per cent of the 2011 households which it had decided earlier “need
not be a mechanical exercise”. Hence, a decision was taken to offer to
the three affected entities for GAs 61, 62 and 72, an opportunity to
present their case on why their bids should not be rejected for being
unreasonably high. The Board appears to have done so on the basis that D
the rejection of their bids, without an opportunity to present their case
would not be “legally correct”. This is reflected in the following decision
which was taken by the Board on 10 August 2018:
“(a) To call the bidding entities for GA- 61, GA-62 and GA-72
which quoted for PNG domestic connections higher than fixed E
vide note that 23.07.2018 for discussion on 14.08.2018 to present
their case as to why the bids submitted by them for PNG domestic
connections be not considered unreasonably high. The Board also
decided that under these circumstances, it would not be legally
correct to reject their bids without providing them a chance to
present their case.” F

23. On 10 August 2018, a press release was issued by the Board.
In pursuance of the decision which was taken by the Board, on 14 August
2018 presentations were made before it by the three entities for GAs61,
62 and 72 which had quoted more than 100 per cent of the number of
2011 households. Apart from the above three GAs, the financial bid for G
Puducherry (GA 51) was opened on 18 August 2018. The bidder with
the highest composite score for GA 51 had also quoted more than 100
per cent of the total 2011 households and was called on 23 August 2018
for a presentation before the Board.
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138 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 24. On 28 August 2018, an agenda note was prepared with respect
to the Board’s decision on four GAs: 51, 61, 62 and 72. The agenda note
contained a summation of the submissions made by each of the four
bidders who had been called upon to explain why their bids in excess of
100 per cent of the total number of households as per 2011 Census data
should not be considered unreasonably high. The agenda note contained
B
a tabulation of the percentage of PNG penetration in the projected
households in 2026 with respect to the number of households as per the
2011 Census. The comparative table is extracted below:

Sl No. G GA PNG HH as Projected PNG PNG
A connection pe r 2011 HH in pe netration pe netration
C ID s quoted by Census 2026* in 2026 as in 2026 as
the bidde r i.e . Upper pe r pe r H1
Limit of PNGRB bidder
PNG uppe r limit
Connecti
ons fixe d
by
PNGRB
D
A B C D E F G=(E/F) H=(D/F)

*100 *100

1 51 Puducherry 2,75,000 2,31,513 3,91,852 59% 70%

2 61 Kanchipuram 11,51,111 10,06,245 20,89,765 48% 55%

E 3 62 Chennai 12,70,391 20,87,729

Tiruvallur 10,63,109 21,34,971

Total (Chennai & 33,00,000 23,33,500 41,87,734 56% 79%
Tiruvallur)

4 72 Ranga Reddy 10,05,300 4,56,557 10,17,097 45% 99%
(except authorised
F area) Presently,
Medhchal,
Rangareddy&Vikar
abad Districts

25. The Board held a meeting on 29 August 2018. During the
meeting, the Board approved the submission of the following three bidders
G who had made presentations before the Boardwith respect to the
reasonableness of their quotes:
“GA-51: Consortium of SKN Haryana City Gas Distribution Pvt.
Ltd.

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GA-61: Consortium of AG&P LNG Marketing Pte Ltd. & Atlantic A
Gulf & Pacific Company of Manila Inc.
GA-62: Torrent Gas Private Limited.”
The Board however rejected the submission of Torrent Gas Private
Limited in respect of the reasonableness of its quote for GA72 and
decided to award the LOI to Megha Engineering & Infrastructure Private B
Limited, the entity with the highest composite score after Torrent Gas
Private Limited was disqualified. The basis of the decision of the Board
is contained in the following extracts from the minutes of 29 August
2018 meeting:
“2. The Board further deliberated as under: C

(a) Following the earlier decisions, the three bidders i.e. Torrent
Gas Private Limited, Consortium of AG&P LNG and SKN
Haryana City Gas Private Limited were called for discussion
on 14th and 23rd August 2018 to explain reasonableness of
high PNG connections quoted by them for the above GAs. D
(b) The Board referred to table in Para 15 of the agenda note
wherein quoted PNG domestic connections for the above four
GAs were compared with the upper limit fixed vide noted
dated 23.07.2018 and projected households in 2026
(considering the number of households as per 2011 Census E
and the historical growth rate during 2001 to 2011 as per census
data of 2001 to 2011). It was observed that penetration of
PNG domestic connections based upon upper limit fixed by
PNGRB with reference to projected number of households
in 2026 varied from 45% to 59%. However, penetration of F
PNG domestic connections based upon quoted PNG
connections with reference to projected number of households
in 2026 varied from 55% to 99%. The variation between two
sets of numbers is 7% to 54%.
(c) The Board observed that the highest variation of 54% is in
G
GA-72, which is based on untenable assumptions made by
the bidder as described in Para 14.3 of the agenda note. Due
to this, 10,05,300 PNG domestic connections quoted by the
bidder are 99% of the projected households by PNGRB in
2026, which is unreasonably high. It was also observed that
for the remaining 3 GAs, the variation between two sets of H
140 SUPREME COURT REPORTS [2020] 8 S.C.R.

A numbers given in para 15 of the Agenda note is 7% to 23% of
projected number of households in 2026 and PNG penetration
would be in the range of 55% to 79%.
(d) The Board also referred to regulation 16(2) of CGD
Authorisation Regulations, which provides for rates of pre-
B determined penalty for shortfall in achieving cumulative work
program targets for each contract year. The entities bidding
aggressive number of PNG domestic connections would be
liable to pay pre-determined penalties under afore-mentioned
regulation 16(2).
C (e) In view of the above, it was decided to accept the quoted
PNG domestic connections and award the Chennai &
Tiruvallur District GA (GA-62) to Torrent Gas Private Limited,
Kanchipuram District GA (GA-61) to Consortium of AG & P
LNG Marketing Pte. Ltd & Atlantic Gulf & Pacific Co. of
Manila Inc. and Puducherry District GA (GA-51) to
D Consortium of SKN Haryana City Gas Distribution Pvt. Ltd.
and Chopra Electricals to the bidders with highest composite
score for respective GAs, where the variation in two sets of
numbers is in the range of 7 to 23%. Regarding Medchal,
Rangareddy (except area already authorised) & Vikarabad
E District GA (GA-72), where the variation is around 54% and
the bid by Torrent Gas Pvt. Ltd. is based on untenable
assumptions and incorrect map, the bid of the entity with
highest composite score may be considered as unreasonably
high and rejected in terms of Clause 4.4.1 of ACBD.
Accordingly, the GA may be awarded to the bidder with second
F highest composite score and LOI may be issued to Megha
Engineering & Infrastructure Pvt. Ltd. Subsequently, on receipt
of PBG, authorisation letter (Schedule D) may be issued to
the above entities.”
The Board issued LOIs to SKN Haryana City Gas Distribution
G Private Limited and Chopra Electricals11, AG&P LNG Marketing Private
Limited and Atlantic Gulf & Pacific Company of Manila12 and Torrent
Gas Private Limited on 30 August 2018 as successful bidders for GAs
51, 61 and 62 respectively. On 6 September 2018 Adani Gas Limited
11
“SKN Haryana”
H 12
“AG & P LNG”
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 141
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wrote to the Board requesting a copy of the decision with respect to the A
issuance of LOIs for the above three GAs. Subsequently, the Board
uploaded the details of the successful bidders under the ninth CGD round
on its website on 14 September 2018.
26. On 19 September 2018, Appeal No 292 of 2018 was instituted
before the APTEL by Adani Gas Limited, aggrieved by: B
(i) The decision to award LOIs, in respect of the three GAs –
51 (Puducherry District), 61 (Kanchipuram District), and
62 (Chennai & Tiruvallur Districts) on the ground that the
successful bids were beyond the unreasonably high limit
adopted by the Board; and C
(ii) The action of the Board in issuing the LOIs without uploading
the decision on the website and without communicating it
to Adani Gas Limited.
Following the institution of proceedings by Adani Gas Limited,
IMC Limited also instituted proceedings before the APTEL (Appeal No D
323 of 2018) challenging the grant of authorisation by the Board in respect
of GA 61. The prayers in both appeals were identical and the Tribunal
heard both appeals together.
27. During the pendency of the appeal, by an order dated
11 October 2018 the APTEL directed the Board to file an affidavit E
explaining its decision taken on 23 July 2018 and the reasons on the
basis of which bids were rejected, including on the ground of high and
low quotes. In pursuance of the above order, the Board filed an affidavit
by which it disclosed the Board Note dated 23 July 2018 together with a
compilation of documents containing board agenda notes, minutes of F
meetings and press releases. On a perusal of the documents submitted
by the Board, the competing standing of the various bidders is summarised
below for convenience:

GA No Are a H1 Bidder H2 Bidde r
G
Torrent Gas Private
51 Puducherry SKN Haryana
Limited

61 Kanchipuram AG&P LNG IMC Limited

62 Chennai – Tiruvallur Torrent Gas Private Limited Adani Gas Limited
H
142 SUPREME COURT REPORTS [2020] 8 S.C.R.

A In GA 51, Adani Gas Limited was the sixth highest bidder and in
GA 61 Adani Gas Limited was the third highest bidder. In Appeal No
292 of 2018 Adani Gas Limited challenged the grant of authorisation in
GAs 51, 61 and 62 and in Appeal No 323 of 2018 IMC Limited challenged
the grant of authorisation in GA 61.
B 28. On 28 February 2019, the APTEL pronounced a split decision.
While the Chairperson allowed the appeals filed by Adani Gas Limited
and IMC Limited, the Member Technical (Petroleum and Natural Gas)
dismissed the appeals. In view of the divergence of opinion between the
Chairperson and Member Technical (Petroleum and Natural Gas), the
appeals were referred to the Judicial Member of the APTEL. The Judicial
C Member recused from hearing the appeal on 7 March 2019, as a result
of which proceedings were instituted before this Court. As noted earlier,
the appeals pending before the APTEL have been transferred to this
Court.
Analysis
D
29. Having set out the facts, we now turn to the issues raised by
the present dispute before this Court. The first aspect which forms the
subject matter of the controversy is the relevance of the 2011 Census
data in the bidding process. The primary plank on which the appellants
contend that the 2011 Census data was relevant to the bidding process
E was the reference to population/household figures derived from 2011
Census data in the map annexed to the Bid Document.
30. Dr A M Singhvi, learned Senior Counsel appearing on behalf
of Adani Gas Limited, submitted that:

F (i) The map which was attached to the Bid Document did not
only describe the land area but also the population and
households comprised in it;
(ii) The rationale for this was that the authorisation is to lay the
CGD network in a defined land area and to service the
defined households in that area;
G
(iii) The figures for population and number of households in the
map attached to the Bid Document were drawn from the
2011 Census;

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(iv) In several areas out of the 86 GAs which were a part of A
the ninth round of bidding, certain parts of the GAs were
excluded from the zone of authorisation;
(v) Whenever certain parts of the GAs were excluded from
the zone of authorisation, the population/household number
was proportionally reduced to reflect the population/ B
households as per the reduced area. Examples of the above
are Surendranagar (GA-8); and Medchal-Ranga
Reddy(GA-72).
(vi) In GA 72, Medchal-Ranga Reddy:
(a) The original map attached to the Bid Document showed C
the entire district with a corresponding number of
households of 13,47,118 according to the 2011 Census;
(b) The Bid Document was amended to exclude the area
in which an existing entity was already laying a CGD
network as a result of which not only was the land D
area reduced but even the number of households was
reduced to 4,56,557;
(c) Torrent Gas Limited Private Limited, which was the
highest bidder for the reduced area had bid 10,05,300
PNG connections, which worked out to 74.6 per cent E
of the original number of households (13,47,118) and
220 per cent of the reduced number of households
(4,56,557);
(d) The Board, at its meeting on 29 August 2018 rejected
the H1 bidder for GA 72 on the ground that the bid of F
220 per cent of the households was unreasonably high;
and
(e) The bid of the H1 bidder for GA 72 was in fact 99 per
cent of the estimated households for 2026 but was yet
rejected as the ‘unreasonably high’ norm was with G
reference to the 2011 census and not 100 per cent of
the 2026 estimate because if it was the latter, the H1
bidder would have been declared to be successful.

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144 SUPREME COURT REPORTS [2020] 8 S.C.R.

A (vii) The map annexed to the Bid Document depicted not only
the land area but also the population/number of households
which were intrinsically intertwined in the bid parameters;
(viii) Clause 1.1.3 of the Bid Document mandated bidders to look
at the “existing population”. Hence, it is incorrect to suggest
B that the bidders had to keep in mind the population in the
GAs in 2018. On the contrary, Clause 1.1.1 required bidders
to bear in mind the population/households as given in the
map annexed to the Bid Document; and
(ix) The reference to ‘charge areas’ in Clause 1.1.2 of the Bid
C Document means designated sub-areas which are part of
the authorised GAs. The designation of ‘charge areas’ is
only to facilitate the Board in determining whether the
authorised entity has created its network in all the GAs for
which it is authorised.
D 31. Opposing the above submissions, Mr Paras Kuhad, learned
Senior Counsel appearing on behalf of the Board submitted a written
note, explaining the amendments that were made to the CGD
Authorisation Regulations after they were notified initially on 19 March
2008:

E (A) 2008 CGD Authorisation Regulations:
Regulation 7 of the 2008 CGD Authorisation Regulations
prescribed a four-fold criterion for bidding:
(i) Criteria (a) was the lowness of the present value of
the overall unit network tariff with a weightage of 40
F per cent;
(ii) Criteria (b) prescribed the lowness of the present
value of the compression charge for CNG for
dispensing in the CNG stations with a weightage of
10 per cent;
G (iii) Criteria (c) prescribed the highness of the present
value of the inch-kilometre of steel pipelines proposed
to be laid in the CGD network during the period of
exclusivity with a weightage of 20 per cent; and

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(iv) Criteria (d) prescribed the highness of the present A
value of the number of domestic customers proposed
to be connected by PNG with a weightage of 30 per
cent.
Under the Regulations, no upper or lower ceiling was provided
for bidding inrespect of the Criteria (a) to (d) of Regulation 7. B
(B) 2013 Amendment to the CGD Authorisation
Regulations13:
(i) The 2013 amendment amended criteria (a) and (b)
and substituted bidding criteria (c) and (d) with criteria
(c); C

(ii) The successful bidder was required to achieve a
Minimum Work Programme14 in respect of the PNG
domestic connections and inch-kilometres of steel
pipeline;
D
(iii) The minimum number of PNG domestic connections
to be achieved within the first five years of
authorisation was to be worked out by the Board.
This was based on the total number of households to
be calculated as per the basic data sheet of the
respective districts of the GA and the population E
according to the latest census data;
(iv) The weightage of bidding was shifted to 70 per cent
for criteria (a) and 30 per cent for criteria (b). No
weightage was given to PNG domestic connections
and inch-kilometres of pipeline; and F
(v) The successful bidder was to achieve a target of 15
per cent by the second year, 50 per cent by the third
year, seventy per cent by the fourth year and 100
per cent by the fifth year.
(C) 2014 Amendment to the CGD Authorisation G
Regulations15:

13
21 June 2013
14
“MWP”
15
7 April 2014 H
146 SUPREME COURT REPORTS [2020] 8 S.C.R.

A (i) The 2014 amendment substituted criteria (c) once
again;
(ii) Under the 2014 amendment, the Board was to work
out the target for infrastructure for PNG domestic
connections as 5 per cent of the households of the
B respective GAs to be achieved by the successful
bidder during the first five years from the grant of
authorisation; and
(iii) No weightage was given to criteria (c) – PNG
domestic connections and inch-kilometres.
C (D) On 16 August 2016, the Ministry of Petroleum and Natural
Gas constituted a committee to examine alternative models
for the bidding criteria to grant authorisation for CGD
networks. The committee in its report recommended a MWP
for PNG domestic connections at 7.5 per cent, within district
D headquarters/municipal limits. Prior to the ninth round, the
MWP was fixed at 5 per cent of the total households.
(E) 2018 Amendment to the CGD Authorisation
Regulations16:
(i) The 2018 amendment substituted new criteria for
E bidding applicable to the ninth round. The present
batch of appeals deals with the ninth round of bidding;
and
(ii) Under the new criteria applicable to the ninth round
of CGD bidding, 50 per cent weightage was given to
F PNG domestic connections. Moreover, no minimum
or maximum limits were set for PNG domestic
connections in the 2018 amendment.
Responding to the appellant’s submissions on the binding nature
of the Board Note dated 23 July 2018 and the legality of the Board’s
G decision tohear only the highest bidder, Mr Paras Kuhad urged
that:
(i) The agenda note dated 9 August 2018 is not binding
on the Board as itclearly states that the contents of

16
H 6 April 2018
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REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

the agenda note aresubject to the deliberations and A
approval of the Board;
(ii) Regulation 7 sets out five parameters on which the
bids are to be evaluated.Once a bidder fulfils the
criteria set out in Regulations 5 and 7 and emerges
as the highest bidder, they have a statutory right to B
be selected;
(iii) The CGD Authorisation Regulations do not set out
criteriafor determining “unreasonably high or low”
bids and no such criteria can be read into the
Regulations and enforced on the Board; C
(iv) Clause 4.4.1 read with Addendum 1 explicitly states
that the Board’s power to determine “unreasonably
high or low” bids would be exercised on a “case to
case basis after considering the relevant factors”;
(v) The challenge made by the appellants is an adversarial D
challenge and not a Public Interest Litigation. The
appellants cannot try and advance their case by
relying on decisions taken in relation to separate GAs
which are not presently under challenge; and
(vi) The calculations made by the appellantswith respect E
to the growth rate and projected number of
households are based on irrelevant factors.
32. Mr Gopal Subramanium, learned Senior Counsel appearing
on behalf of Torrent Gas Private Limited, supported the arguments urged
by the Board and further submitted that: F
(i) Torrent Gas Limited has attended the hearing before
the Board, explained its methodology in calculating
its quoted number of PNG connections, and the
quoted figure has been accepted by the Board as
reasonable; G
(ii) The Board Note dated 23 July 2018 had been
formulated subsequent to the submission of bids.At
the time of submitting its bid, the only criteria known
to Torrent Gas Private Limited were those specified
in Regulation 7 and the Bid Document, which did not H
148 SUPREME COURT REPORTS [2020] 8 S.C.R.

A prescribe a maximum number of PNG connections;
and
(iii) There is no condition in either the CGD Authorisation
Regulations or the Bid Document which require the
quoted number of PNG connections to be calculated
B on the basis of 2011 Census data.
33. Mr Gopal Sankaranarayanan, learned Senior Counsel appearing
on behalf of SKN Haryana, urged that:
(i) Adani Gas Limited was neither the second nor third
placed bidder in GA 51on the basis of the composite
C score, and therefore has no standing to challenge the
LOI granted to SKN Haryana for GA 51;
(ii) Clause 14.2 of the First Addendum makes it clear
that there were no fixed parameters on which an
“unreasonably high or low” bid would be determined,
D and specified that such determination would take place
on a case to case basis; and
(iii) According to the calculation of composite scores in
Schedule C(1), the bidder with the highest number
of PNG connections is at 100% and all other bidders
E are reduced in proportion to the highest bidder’s score.
If 100% of the 2011 Census data was a ‘hard upper
limit’ on the quoted number of PNG connections, the
calculation in Schedule C(1) would be rendered
redundant.
F 34. Mr Kapil Sibal, learned Senior Counsel appearing on behalf of
AG & P LNG, submitted as follows:
(i) AG & P had quoted a figure of 11.51 lakh in its bid
for GA 61. According to the 2011 Census figures,
the number of households in GA 61 was only 10.06
G lakhs. However, the Tamil Nadu Generation &
Distribution Corporation Limited (the state electricity
board) noted that as of 2018, there existed 15.91 lakh
households in GA 61;
(ii) In GA 37, Indian Oil Corporation had quoted a number
H of PNG connections below the 2% threshold and was
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 149
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

the highest bidder. The Board awarded the GA to A
Bharat Gas Resource Limited, which had quoted
above the 2% threshold. However, Indian Oil
Corporation has not challenged this decision of the
Board before the APTEL or any court, therefore the
appellants cannot rely on the case of GA 37; and
B
(iii) Each GA is a separate tender having its own unique
geographical and socio-economic factors. Therefore,
one cannot compare cases of other GAs with the
GA of Kanchipuramwhere AG & P LNG has been
awarded the authorisation.
C
35. The submission which has been urged on behalf of the
appellants in regard to the relevance of the 2011 census data must first
and foremost be assessed in the context of the CGD Authorisation
Regulations as amended on 6 April 2018. The Regulations postulate that
bidders must submit both technical and financial bids. The procedure
specified in Regulation 5 applies to an invitation by the Board for laying, D
building, operating or expanding a CDG network. Regulation 5(6) requires
the fulfilment of minimum eligibility criteria. For a technical bid to pass
muster, the minimum eligibility criteria require the bidder to be qualified
both with reference to technical and financial parameters. This is evident
from Regulation 5(6) under which the Board is to scrutinise the bids of E
only those entities which fulfil the minimum eligibility criteria. The
minimum eligibility criteria include the technical capability of the bidding
entity to (i) lay and build; and (ii) operate and maintain a CGD network.
Both of them are defined with reference to qualifying criteria. Besides
the technical criteria, the minimum eligibility requirements under
Regulation 5(6)(e) incorporate the financial ability to execute the project F
and to operate and maintain it in the authorised area. The financial criteria
are defined with reference to the minimum net-worth of the bidding
entity. The net-worth required is dependent on the population of the GA
under the 2011 Census. The minimum net-worth required is specifically
defined with reference to the 2011 census figures of population for the G
GA. The bidding entity is also required to submit a bid bond in the form
of a performance bond guarantee. The quantum of the guarantee is
dependent on the population of the GA.
36. Regulation 7 requires the Board to tabulate all financial bids
which meet the minimum eligibility criteria, in accordance with the bidding H
150 SUPREME COURT REPORTS [2020] 8 S.C.R.

A criteria specified in the table. The Table incorporated in the Regulation
provides five-fold criteria for the tabulation and comparison of financial
bids. The five criteria are:
(i) ‘Lowness’ of transportation rate for CGD;
(ii) ‘Lowness’ for transportation rate for CNG;
B
(iii) ‘Highness’ of the number of CNG stations to be installed in
eight years from authorisation;
(iv) ‘Highness’ of the number of domestic PNG connections to
be achieved within eight years of authorisation; and
C (v) ‘Highness’ of inch-kilometre of steel pipeline to be laid within
eight years of authorisation.
The third and fourth criteria together account for 70 per cent of
the total composite score. Among them, the fourth criterion – ‘highness’
of the number of domestic PNG connections accounts for 50 per cent of
D the total composite score. Significantly, the bidding criteria in Regulation
7 are not linked to the 2011 Census figures.There are two significant
facets of Regulation 7:
(i) The absence of a linkage of the projected number of
domestic PNG connections with the 2011 Census data; and
E (ii) The absence of a cap or ceiling on the ‘highness’ norm
both in relation to the third and the fourth criteria (iii and iv
above).
37. Regulation 7 (1)(b) requires the successful bidder to achieve
the target in terms of an annual work programme within eight contract
F years. The programme is distributed between the first and eighth years
for PNG connections’, CNG stations’ and Inch-kilometres of steel
pipelines. For PNG connections, the successful bidder must complete
10 per cent of the work programme at the end of the second year, 20 per
cent at the end of the third year, 30 per cent at the end of fourth year, 40
G per cent at the end of the fifth year, 60 per cent at the end of the sixth
year, 80 per cent at the end of the seventh year and 100 per cent at the
end of the eighth year. Under Regulation 7(3), a bidding entity with the
highest composite score in terms of the criteria specified in sub-regulation
(1) of Regulation 7 is to be declared as the successful bidder.

H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 151
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38. The provisions contained in the 2008 CGD Authorisation A
Regulations, as amended on 6 April 2018, indicate that where a specific
linkage was sought with reference to the 2011 Census data, a clear and
categorical provision was made to that effect. Such provisionsare found
in regard to the financial capability of a bidder as part of the minimum
eligibility criteria in Regulation 5(6)(e) and the extent of the performance
B
bond in Regulation 5(6)(h).
39. Absent a condition in Regulation 7 linking the ‘highness’ of the
number of PNG connections to be achieved within eight years from the
date of authorisation with the 2011 Census data, it would be contrary to
basic principles of interpretation to read such a restriction into the CGD
Authorisation Regulations. A conditionality which has not been C
incorporated in Regulation 7 cannot be introduced as a matter of
construction.The court must first and foremost read the Regulation in
accordance with its plain and natural meaning. There is evidently a reason
why Regulation 7 did not introduce a ceiling or provide for a linkage with
theCensus data of 2011. Consumers or users, as the case may be, in a D
CGD network broadly comprise of four categories namely:
(i) Domestic;
(ii) Commercial;
(iii) Industrial; and E
(iv) Vehicular.
40. The Board has submitted with justification that in a model of
cross/subsidisation, the viability of the project has to be perceived from
a twenty- five-year perspective.Gains in one category of users can offset
the losses in another category. The CGD Authorisation Regulations are F
intended to subserve the object of establishing the infrastructure necessary
for setting up an operational CGD network. In creating the infrastructure,
the successful entity is contractually bound to set up a project for the
future.The infrastructure so created would be of service to consumers
or, as the case may be, users. Infrastructural projects cater to future
G
needs and can legitimately be forward looking. It is from this perspective
that except for the tariff in the first two bidding criteria of Regulation 7
(the transportation rates for CGD and CNG), no ceiling was provided by
the Board for the criteria set out in Regulation 7. More particularly,
Regulation 7(3) provided for a mandate to tabulate and compare the
bids of all entities which had met the minimum eligibility criteria upon H
152 SUPREME COURT REPORTS [2020] 8 S.C.R.

A their qualifying in a competitive bidding process. The Regulations did not
contemplate the disqualification of a bidder with reference to a norm
which would limit a bid to 100 per cent of the population figures provided
by the 2011 Census data. For the Board to stipulate an absolute norm to
that effect, when it has not been specifically incorporated in the
Regulations would have rendered the decision making process vulnerable
B
to a challenge on the ground that it was not consistent with Regulation 7.
41. Now it is in this background, that it becomes necessary to
evaluate the Bid Document. Clause 1.1.1 incorporates a reference to
the GA as depicted in the map set out inAnnexure-1, forwhich the Board
was inviting bids for the grant ofan authorisation to develop a CGD
C network. The main plank of the submissions of the appellants is that the
map contained a reference to population and household figures on the
basis of the 2011 Census. Clause 1.1.3 places the responsibility on the
bidder to obtain information about the present gas supply availability, the
pipeline connectivity and the existing customers in the GA. Significantly,
D the scope of work in Clause 1.2 required bidding entities “to lay, build,
operate or expand the CDG networks” to meet the requirement of natural
gas “in domestic, commercial and industrial segments including natural
gas in the vehicular segment in the said Geographical Area to be
authorised.” Bidders are required under Clause 2.1.1 to examine the
contents of the Bid Document including instructions, terms and conditions
E and regulations of the Board. The bidder was required to carefully study
the GA and the charge area before submitting the bid. In other words,
bidders were on notice of the actions required to be taken to implement
the Regulations. The Bid Document necessarily had to be in conformity
with the CGD Authorisation Regulations. The map, at best was a
F compendium of the latest official record of the GA. The map did not
dictate how the number of domestic PNG connections was to be
calculated. There is no such indication particularly in Clause 1 of the Bid
Document where the map is referenced. The mere attachment of a
map to the Bid Document would not result in the imposition of conditions
of eligibility or qualification. These have been provided in the Regulations
G which have a statutory character. The depiction of the GA in a map
attached to the bid document does not over-ride the specific requirements
of the bidding criteria as defined in Regulation 7.
42. The next basis of the challenge by the appellants is that the
decision which was taken in the form of the Board Note dated 23 July
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ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 153
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2018 had categorically stipulated a range of 2 per cent to 100 per cent of A
the number of households as per the 2011 Census as the minimum/
maximum thresholds to judge the reasonableness of the bids. It has been
urged that despite this, the decision of the Board dated 10 August 2018
virtually reversed the earlier decision recorded in the Board Note of 23
July 2018, thereby tainting the decision-making process with arbitrariness.
B
The nuances to this challenge have been brought out in the submissions
of Dr AM Singhvi, Mr Vikas Singh, learned Senior Counsel on behalf of
Adani Gas Limited and Mr KV Vishwanathan and Mr Buddy
Ranganathan, learned Senior Counsel on behalf of IMC Limited and
can broadly be catalogued in the form of the following points:
(i) The 2- 100 per cent criterion based on the 2011 Census C
datais the basis on which the bids for 79 out of 86 GAs
were evaluated;
(ii) In respect of the bids for four GAs (out of the
remainingseven GAs) where the highest bidder had bid a
number of PNG connections below 2 per cent of the number D
provided by the 2011 Census, those four bidders were
furnished with an opportunity to improve their bids and
match the 2 per cent threshold;
(iii) It is only for the three bidders with the highest composite
scores in GAs 51,61 and 62 that the bids were evaluated E
with reference tothe projected number of households in
2026;
(iv) For example, in GA-62 (Chennai-Tiruvallur), there were
ten bidders of whom the bids of nine were evaluated with
reference to the 2011 Census data on the number of F
households, whereas the bid of one bidder (Torrent Gas
Private Limited) has been evaluated with reference to the
number of projected households in 2026;
(v) The agenda note dated 9 August 2018 which was approved
by three out of the four Board members recommended that G
Torrent Gas Private Limited was not qualified and Adani
Gas Limited be declared as the successful bidder.Yet on 10
August 2018, the four Board members including the three
who had approved the Board Note concluded that, though
the lower and upper thresholds were decided “the same
H
need not be a mechanical exercise”;
154 SUPREME COURT REPORTS [2020] 8 S.C.R.

A (vi) Neither the Bid Document nor the CGD Authorisation
Regulations contain any provision allowing the Board to call
upon bidders to improve their bids;
(vii) The Board Note dated 23 July 2018 which defined the
minimum and maximum threshold (2-100 per cent of the
B number of households as per the 2011 Census) without any
caveat or provision for relaxation has been virtually reversed
on 10 August 2018, thereby upsetting the level playing field
between bidders;
(viii) The only reason for the reversal of the decision, which is
C that the criterion need not be a mechanical exercise is not
supported by reasons and this volte face introduced un-
canalized subjectivity in the process which was earlier
considered to be objective and definite;
(ix) The Board decision dated 28 August 2018 wrongly adopts
D the 2011 Census number as 23,33,500 whereas in the Board
Note, the number of households as per the 2011 census is
21,01,931;
(x) There has been a breach of the principles of natural justice
for the following reasons:
E (a) In the Board decision dated 10 August 2018, it was decided
to give a hearing to all affected parties;
(b) The Board undertook the exercise of hearing only Torrent
Gas Limited, AG&P LNG and SKN Haryana; and
(c) The violation of natural justice lies in the fact that these
F
“not-qualified” bidders were heard on why their bids were
reasonable despite being above 100 per cent of the 2011
Census household data. Neither Adani Gas Limited nor any
of the other unsuccessful bidders were heard on why the
bids of the “not-qualified” bidders were actually
G unreasonable.
(xi) This Court is justified in reviewing the process adopted by
the Board in evaluating the bids for the ninth round of CGD
bidding. It is well settled that judicial review cannot be denied
even in contractual matters to prevent arbitrariness.
H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 155
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43. Our analysis of the CGD Authorisation Regulations, as A
amended on 6 April 2018, as explained earlier, reveals that the Regulations
did not contain any stipulation determining a range of 2 to 100 per cent
of the number of households under the 2011 Census as the criterion to
evaluate bids. The Regulations in fact do not link the ‘highness’ factor of
domestic PNG connections to the 2011 Census data. In Clause 4.4.1 of
B
the Bid Document, the Board reserved to itself the right to reject any
unreasonably high or low bid. In Addendum-1 to the Bid Document, the
Board clarified to all prospective bidders that the evaluation of whether
a bid was unreasonably low or high would be conducted on a case to
case basis at the time of bid evaluation.
44. It is in the above background that the Board Note dated 23 C
July 2018 must be assessed. The Board Note was formulated after the
last date for the submission of bids. The criterion which the Board Note
proposed had not been notified to bidders. Bidders were not on notice
that this would be the basis on which their bid would be evaluated. The
Board Note took notice of Clause 4.4.1 of the Bid Document and D
stipulated that since technical bids for some GAs were about to be
evaluated, it was necessary to decide upon the reasonableness of the
bidding parameters which constituted the work programme. It was in
this background that the Board Note proposed that; “…2 per cent of
total households (as per the 2011 Census data) may be considered as
minimum”. As regards the maximum, the Board note proposed that: E

“beyond 100 per cent households may be treated as unreasonably
quote”
(Emphasis supplied)
The terminology adopted by the Board Note indicates that the 2- F
100 per cent range was not laid down as an absolute or inflexible basis
for disqualifying bids below the minimum or in excess of the maximum.
On the contrary, the use of the expression “may be” is one indicator that
a bid which was below 2 per cent or in excess of 100 per cent may
trigger the exercise of the power which the Board had reserved to itself G
in clause 4.4.1 of the Bid Document. On its plain terms, the Board Note
cannot be construed to have laid down an absolute norm by which bids
quoting below the minimum of 2 per cent or above the ceiling of 100 per
cent of the number of households under the 2011 Census data would
automatically be rejected as unreasonable.
H
156 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 45. If the Board Note of 23 July 2018 were to be construed in the
manner in which the learned Senior Counsel for the appellants urged,
the automatic disqualification of bidders based on a criterion introduced
by the Board Note would raise serious doubts about its fairness and
legality. This is because the Board Note was not notified to bidders as a
basis for the evaluation of bids before the date for the submission of the
B
bids had closed. To disqualify a bidder on the basis of a criterion which
was not notified and of which bidders had no knowledge would be arbitrary
and would constitute an infraction of Article 14. The Board was thus
correct in determining that the automatic disqualification of a bid on the
basis of a criterion specified in the Board Note (which was never notified
C to the bidders) would not be “legally correct”. Hence, it would be
reasonable to interpret the Board Note dated 23 July 2018 as being the
formulation of a guideline for the Board.As a guideline in the process of
evaluation, the decision taken by the Board on 23 July 2018 was not to
the effect that every bid below 2 per cent or above 100 per cent would
necessarily stand disqualified. Consistently with the use of the word
D
‘may be’, as already noticed, the decision of the Board meant that the
power which the Board reserved to itself in Clause 4.4.1 could be invoked
if it came to the conclusion that the bid had not been justified to be
reasonable. In other words, the breaching of the range of 2-100 per cent
was a trigger for the Board to scrutinise the bid and determine whether
E the power under Clause 4.4.1 should be invoked. Hence, the course of
action which the Board followed of calling upon the bidders with the
highest composite scores in GAs 51, 61 and 62 to justify their bids in
terms of their reasonableness cannot be faulted. On the contrary, if the
Board had rejected these bids solely on the ground that they were above
the limit of 100 per cent of households under the 2011 Census data, the
F
decision would have been seriously flawed for having applied a criterion
which was not a part of the Regulations, was not embodied in the Bid
Document and in any event, was not notified to bidders before they had
submitted their bids.
46. Another limb of the submission is that, with respect to GA 62,
G three out of the four members of the Board had in the Board agenda
dated 9 August 2018 recommended that Torrent Gas Private Limited
was not qualified and that Adani Gas Limited be declared as the
successful bidder. This, in our view, is an incorrect reading of the agenda
note. What this submission misses is the last paragraph of the Board
H agenda note which states:
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 157
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

“20. This Agenda note has been prepared by Authorization A
Division, concurred by Member (I&T) & Member (C&M) and
approved by Chairperson for deliberations and approval of the
Board.”
(Emphasis supplied)
The agenda note dated 9 August 2018 was a recommendation B
which was prepared on the basis of the 2–100 per cent criterion contained
in the Board Note dated 23 July 2018. Obviously in the light of that
decision, a recommendation was made which was still to be deliberated
upon by the Board as a body. When the Board met on 10 August 2018,
it correctly came to the conclusion that the lower and upper thresholds C
were not to be applied mechanically to disqualify bidders. This decision,
as we have indicated earlier, was justified not only by the terms of the
Board Note dated 23 July 2018 but was intrinsic to a fair exercise of
power by the Board. The Board decided that it would call the bidders
with the highest composite score to explain the reasonableness of their
bids. This was a fair opportunity which was granted to the bidders who D
had the highest composite score to justify the basis of their computation
of projected households over the eight-contract years.
47. There is no merit in the submission that there was a breach of
the principles of natural justice in calling only the bidders with the highest
composite score to explain the reasonableness of their bids. None of E
these bidders was being called upon to revise or improve their bids. In
terms of the CGD Authorisation Regulations, the bidder with the highest
composite score has to be declared as the successful bidder. If despite
having the highest composite score, a bidder was being considered for
rejection by the Board, it was that bidder who was justifiably called to F
explain the reasonableness of the bid. The other bidders had no locus to
participate in the process. It is a settled principle of law that the rules of
natural justice are attracted where a decision affects a right of a party
against whom the decision has to be made. After the composite score of
all bidders is calculated, the second highest bidder has no rights vis-à-vis
the highest bidder or the Board unless the method of calculating the G
highest composite score itself is impugned. Calling upon the bidders with
the highest composite score to explain the reasonableness of their bid
did not alter the composite score of the H1 bidders or any other bidder
for the same GA. The question of hearing any other bidder would have
arisen only if the H1 bidder stood disqualified, and the bidder with the H
158 SUPREME COURT REPORTS [2020] 8 S.C.R.

A next highest composite score also breached the 2-100 per cent range,
thereby warranting scrutiny from the Board. In the present situation,
when the Board decided to call the bidders with the highest composite
score in order to allow them an opportunity to explain reasonableness of
their bid, the administrative decision taken by the Board cannot be faulted
as being in violation of the principles of natural justice.
B
48. At the 82nd meeting of the Board, which was held on 29 August
2018, the reasonableness of the bids submitted for GAs 51,61,62 and 72
came up for consideration. In GA 62 (Chennai-Tiruvallur) Torrent Gas
Private Limited, relied on the current LPG domestic connections
(41,73,073) according to the statistics of the Tamil Nadu government.
C This was extrapolated until 2026 taking the growth rate at 5 per cent per
annum. On this basis, Torrent Gas Private Limited as the H1 bidder
justified before the Board its quoted figure of PNG connections of thirty-
three lakhs. For GA 61 (Kanchipuram), AG & P LNG explained that its
computation was based on:
D (i) The urbanisation rates in the Kanchipuram district;
(ii) Extrapolations of the number of households based on historical
growth rates;
(iii) The twin city status of Chennai and Kanchipuram; and
E (iv) The per capita income growth in Kanchipuram district.
On this basis, AG & P LNG justified its number for projected
PNG connections. For GA-51 (Puducherry), SKN Haryana based its
computation on the compound yearly growth of households in the previous
twenty years. Based on this growth rate, the bidder calculated the
F projected households till 2026 and accordingly presented this computation
to the Board when called upon.
49. In its minutes dated 29 August 2018, the Board noted that the
four GAs: 51, 61, 62 and 72 were compared with the upper limit fixed by
the agenda note dated 23 July 2018 and projected households in 2026.
G The penetration of PNG domestic connections based on the upper limit
fixed by the Board with reference to the projected number of households
in 2026 varied from 45 per cent to 59 per cent. However, the penetration
of PNG domestic connections based on quoted PNG connections with
reference to the projected number of households in 2026 varied from 55
per cent to 99 per cent. The variation between the two sets of numbers
H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 159
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was between 7 per cent to 54 per cent. The Board noted that it was in A
GA 72 where the highest variation of 54 per cent took place.The bid
submitted by Torrent Gas Private Limited for GA 72 was consequently
rejected. The Board observed that the computation for GA72 by Torrent
Gas Private Limited was based on untenable assumptions as described
in para 14.3 of the agenda note. According to these assumptions, the
B
PNG domestic connections quoted by the Torrent Gas Private Limitedwas
99 per cent of the projected households by 2026 which was taken as an
unreasonably high penetration figure. However, for the remaining
threeGAs, the variation was between 7 per cent to 23 per cent of the
projected households in 2026, and PNG penetration would be in the range
of 55 per cent to 79 per cent. This exercise was carried out by the C
Board to enable it to consider the reasonableness of the bids. Torrent
Gas Limited, whose bid was accepted for GA 62, was however not
considered for acceptance for GA 72 since its computation of the number
of projected households and penetration rate was deemed unreasonable.
In our view, the Board has certainly given a possible basis for coming to
D
the conclusion that the bids submitted by the bidders with the highest
composite score for GAs 51, 61 and 62 were reasonable and ought not
to be rejected.
50. The agenda note dated 9 August 2018 merely tabled discussion
on the disputed GAs. The highest bidders for GAs 61 and 62 were heard
by the Board on 14 August 2018. The highest bidder for GA 51 was E
heard by the Board on 23 August 2018. The final decision to award
authorisation in GAs 51, 61 and 62 to AG & P LNG, Torrent Gas Private
Limited and SKN Haryana (the highest bidders) respectively was finally
taken by the Board in its meeting on 29 August 2018. This decision was
taken after hearing the bidders on whether their bids were reasonable or F
not. The Board did not reject all other bidders or presumptively announce
these entities as successful bidders before making a determination as to
the reasonableness of their bids. In light of this chronology of events, at
no point did the Board reverse its decision with respect to the GAs in
question.
G
51. The appeals before APTEL pertained to GAs 51, 61 and 62.
The present proceedings were not in the nature of a public interest litigation
instituted under Article 226 of the Constitution before a High Court
challenging the entirety of the tendering process. Both before this Court
and APTEL, it was contended that the Board had rejected bids in other
H
160 SUPREME COURT REPORTS [2020] 8 S.C.R.

A GAs which were not-qualified on the ground that they were either below
2 per cent or above 100 per cent of the number of households as per the
2011 Census figures. The Member Technical (Petroleum and Natural
Gas) at APTEL examined the submission in paragraph 60 of the decision
and held:
B “60. Though the appeal pertains to only GAs, 51, 61 & 62, the
Appellant also submits that the Board rejected 37 numbers of
bids which were not qualified because their bids were below 2%
and higher than 100% of 2011 census figures as per the Board’s
Press Release dated 10.08.2018 uploaded in its website. Though,
the instant appeal also strictly pertains to only highness of PNG
C domestic connections, still for the sake of completeness, let me
understand the status of these bids. On clarification, the Board
has stated that there were only 9 bids with H-1 bidders quoting
below 2% and above 100% limits of 2011 census. These 9 bids
were accordingly highlighted to the Board, and final decisions were
D taken on these 9 bids by the Board after proper application of
mind, hearing the parties and taking an objective decision. Out of
9 bids, 4 bids having lower than 2% connections were accepted
after raising their bids through discussions with the bidders,
otherwise, these GAs would have gone dry. In GA-37, IOC’s bid
was rejected because of lower than 2% quote, but this decision of
E the Board has not been challenged by IOC. Out of the remaining
4 GAs where H-1 bidders quoted more than 100% of PNG
connections of 2011 census household numbers for 3 GAs (51, 61
& 62), H-1 bidders were declared successful bidders after hearing
them on their reasonableness of quotes. For the 4th GA (GA No.
F 72), the bid of the H-1 bidder who is the R-2 in the instant case
was rejected having found its bid unreasonable and the GA was
awarded to the next highest bidder and the H-1 bidder has not
challenged this decision.”
This clarification by the Board as well as the findings which have
G been recorded by the Member Technical (Petroleum and Natural
Gas) commends itself for acceptance.
52. In addition to their submissions with respect to the binding
nature of the 2 – 100 per cent range set out in the Board Note dated 23
July 2018, the appellants also argued that the Compounded Annual
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ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 161
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Growth Rate17 considered by the Board for the period between 2001 A
and 2011 was higher than the actual annual growth rate, leading the
Board to project a higher number of households for 2026 than may actually
exist. It was alleged that the Board used the figure of 23,33,500 as the
number of households existing in 2011 instead of 21,01,931 in calculating
the growth rate, resulting in an inflated growth rate. This high growth
B
rate, according to the appellants, led the Board to accept the submissions
made by Torrent Gas Private Limited in justifying an “unreasonably high”
quote for the number of households for the year 2026.
53. In his judgement, the Member Technical noted that the appellant
had in fact calculated the CAGR using overall population growth instead
of using household growth. Evidently, for the purpose of projecting the C
number of PNG connections within a GA, it is the number of households
and not the overall population that is relevant as each household is unlikely
to have more than one PNG connection. Moreover, as neither the CGD
Regulations nor the Bid Document required the number of projected
households to be calculated on the basis of 2011 Census data, the decision D
of the Board to accept the justification provided by the bidders cannot
be attacked on the ground that the figures provided did not strictly match
the numbers extrapolated from the 2011 Census data. Lastly, the Member
Technical (Petroleum and Natural Gas) observed:
“51. … Moreover, the calculations have been done by an expert E
body (the Board) which has been constituted as per Statutory
Act. In addition, the estimates on future PNG domestic
connections made by the 3 bidders based on various
parameters are only estimates. These are not meant to be
arrived at by any specified formula or direct mathematical
precision. The power to weed out unreasonably high or low F
quote is only an enabling power and not a yardstick or
parameter for evaluation.”
(Emphasis supplied)
The power granted to the Board under Clause 14.2 of the Bid G
Document is an enabling clause that allows the Board to apply its mind
to a quote and determine its reasonableness. The quotes submitted by all
bidders with respect to the projected number of households in 2026 are
admittedly estimates. Similarly, the Board’s own determination of a
17
“CAGR” H
162 SUPREME COURT REPORTS [2020] 8 S.C.R.

A baseline for comparing the reasonableness of various quotes is also an
estimate. Therefore, the Board’s use of the baseline figure and its
consequent acceptance of the reasonability of a quote cannot be faulted
because it did not strictly adhere to one particular methodology of arriving
at a number of projected households unless the methodology used is
arbitrary, having no correlation with the result sought to be achieved.
B
We therefore approve of the finding of the Member Technical with
respect to the calculation of the number of households.
54. The present batch of appeals arises from two divergent opinions
of the Chairperson and the Member Technical (Petroleum and Natural
Gas) of the APTEL. Several arguments urged by the appellants before
C us find voice in the opinion of the Chairperson. Therefore, for the sake
of completeness it is necessary to briefly advert to the opinion of the
Chairperson allowing the appeals. The Chairperson observed as follows:
“136. … On 23.07.2018 certain criteria/parameters were indicated
by this so called Evaluation Committee in the Agenda Note. …
D This indicates that the exercise so far as criteria/ parameters was
uniform for all the bids. …. The report on Agenda Note dated
09.08.2018, in fact, recommended that the highest bidders
of GA 51, 61, and 62 were disqualified since their quote of
PNG connections were beyond 100% of the total households of
E 2011 census. … However, the Minutes of the Board dated
10.08.2018 indicate that the four members of the Board out of
which three had approved Agenda Note, changed their opinion so
far as disqualification of highest bidder of these three GAs 51, 61
and 62. It’s also noticed from the affidavit of the Board filed
09.11.2018 that the Board has correctly applied the
F unreasonable low criteria to all the bidders whose bid was
below 2%, but surprisingly the bids which were beyond the
limit of 100% of 2011 census, the Board thought it fit to
relax the criteria by calling the high bidders for negotiation. If
the Board thought it fit to hear the affected parties, then it
G ought to have invited all the affected parties of the said GA
i.e., all the bidders who stand to lose the bid, since such
procedure was exercised so far as unreasonably low criteria to
all bidders who quoted below 2% of 2011 census. Assessment
of reasonability of a bid cannot be equated with the concept
of rejection of a bid as not qualified for a particular criteria.
H
ADANI GAS LTD. v. PETROLEUM AND NATURAL GAS 163
REGULATORY BOARD [DR. DHANANJAYA Y CHANDRACHUD J.]

Reasonability of a bid has reference to subjective assessment/ A
satisfaction. The assessment of a bid based on the available material
would amount to objective assessment.”
(Emphasis supplied)
It is evident from the above extract that the Chairperson’s findings
are based on three key assumptions: B

(i) The Board Note dated 23 July 2018 was binding on the
Board and the agenda note dated 9 August 2018 was
evidence of the Board Note’s binding nature;
(ii) Because the Board disqualified certain other bidders by C
applying the 2 – 100 per cent range, it was bound to do so
against the successful bidders in GAs 51, 61 and 52; and
(iii) Because the assessment of reasonability was a “subjective
assessment”, the Board was obligated to hear other bidders
in the disputed GAs before declaring successful bidders. D
55. As noted previously, on a bare construction of the Board Note
dated 23 July 2018 and the fact that the Board Note was formulated
after the last date for the submission of bids, the Board Note did not set
out absolute criteria for disqualification of bids. The agenda note dated 9
August merely tabled a proposal to apply the criteria of 2-100 per cent
E
range but the Board did not subsequently adopt this course of action, a
decision within its power and indeed necessary to preserve the integrity
of the bidding process. Having established that the Board Note was not
an absolute binding criteria, and the Tribunal was approached only with
respect to GAs 51, 61 and 62, the Board’s treatment of other GAs cannot
be decisive in determining the legality of the authorisations granted in F
GAs 51, 61 and 62, especially where the Board’s actions in respect of
these other GAs have not been independently challenged. Lastly, the
Chairperson has construed the assessment of the reasonability of the
highest bidder’s quote as a decision affecting the rights and liabilities of
all other bidders for the GAs, thus requiring them to be heard. As noted
G
previously, the assessment of the reasonability of the bid was a matter
solely between the highest bidder and the Board. Such an assessment
would not alter the scores of the highest bidder vis-à-vis the scores of
the other bidders. The sole question was whether the highest bidder’s
quote was reasonable, and the power to determine such reasonability
resided solely with the Board by virtue of Clause 14.2 of the Bid H
164 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Document. Thus, the presence and hearing of other bidders was not
necessary.
56. For the above reasons, we disagree with the opinion of the
Chairperson and concur with the view which was taken by the Member
Technical (Petroleum and Natural Gas) to dismiss the appeals. The
B Appeals are accordingly dismissed. Transferred Cases Nos 27 of 2019
and 26 of 2019 are disposed of. There shall no order as to costs.
57. Pending application(s), if any, shall stand disposed of.

C Kalpana K. Tripathy Appeals dismissed.

D

E

F

G

H