1. High Policy Decisions which can make or mar, better or bitter, Centre-State relations are these to be made by the Political Managers of the State chosen by the people in that behalf or by private citizens (even if they are leaders of the elected opposition), is one of the questions which has surfaced in this matter. It has surfaced along with the question whether such private citizens can be permitted to fling a challenge in the name of promoting interest of the State which if successful can ruin the economy of the State and create economic chaos. Such would be the outcome because if the impugned notifications are voided there will exist no legal authority whatsoever for recovering royalty for the crude oil produced in the State (being collected at Rs. 61/- per metric tonne) which it considered lather low by the petitioners. Not only that, even the royalty recovered for several years in the past may well have to be refunded. And yet another important question has also been raised : Whether Article 131 (which excludes the jurisdiction of all Courts except the Supreme Court in regard to suits for resolving disputed claims between State and Centre) of the Constitution of India notwithstanding, this Court should exercise its High Prerogative discretionary jurisdiction virtually in order to enable circumvention thereof. Circumvention at the instance of private citizens not in charge of the running of the affairs of the State, in a sensitive matter where National Interest is pitted against State Interest, and a delicate balancing act of a light rope walker is called for from the forum which undertakes this task.
2. Two opposition members of the Legislative Assembly, one of whom is an ex-Chief Minister (petitioner No. 1) and the other is the Leader of Opposition in the Legislative Assembly, along with the editor of a Weekly known as 'Lok Swaraj' have instituted the present petition under Article 226 of the Constitution of India as in their view royalty paid to the State of Gujarat is extremely low and inadequate. The substantive relief claimed is the prayer contained in para 26 (b) whereby the following notifications issued under the provisions of the Oilfields (Regulation and Development) Act, 1948, have been challenged as illegal, invalid and unconstitutional. The details of the notifications challenged are as follows:--
S 0. 466
February 3, 1973
Under sub-section (4)
8. 0. 600 (E)
September 6, 1976
of section 6 of the
S. 0. 219 (E)
March 26, 1931
8. 8. B. 161
February 3, 1873
Under sections 5 and
G. S R. 792 (E)
6 of the Act.
G. S R. 211 (E)
March 26, 1981
In order to substantiate the challenge to the aforesaid notifications petitioners have challenged the constitutionality of the provisions of the Oilfields (Regulation and Development) Act, 1948 (hereinafter referred to as Oilfields Act) and Rule 14 (1) of the Petroleum and Natural Gas Rules, 1959.
3. Now it is common ground between the parties that a representation has already been made by the State Government to the Central Government in this behalf. In fact, Union of India has placed on record a statement marked Annexure 'X' made by the Minister of Petroleum & Chemicals & Fertilizers on the floor of the Parliament on Aug. 10, 1982 in response to Unstarred Question No. 4875 which shows that the matter is under consideration (see Annexure 'C'). Counsel for the Union of India has therefore raised an objection at the threshold relying on the provision contained in Article 131 of the Constitution of India which provides that subject to the provisions of the Constitution, the Supreme Court shall, to the exclusion of any other Court, have original jurisdiction inter alia in any dispute between Government of India and one or more States if and in so far as the dispute involves any question (whether of law or fact) on which the existence or extent of a legal right depends. In view of the provision contained in Article 131 it is clear that if the State of Gujarat claims a legal right to payment of royalty at a higher rate, the dispute can be resolved only by the Supreme Court to the exclusion of any other Court. It is for the State of Gujarat to decide whether to press its claim for royalty at a higher rate by having a political dialogue with the Central Government in the context of the relevant circumstances, or to approach a legal forum. The State Government can make recourse to that mode of resolution of the dispute which it considers expedient and in the interest of the State and in national interest. If the State of Gujarat is of the opinion that it is a matter wherein it has any legal right which has to be asserted in a judicial forum, recourse has to be made to Article 131 of the Constitution of India by instituting an appropriate proceeding in the Supreme Court. If is a high policy decision which the State Government has to make. The right of the State Government to take such a policy decision cannot be usurped by any citizen claiming to have interest of the State of Gujarat at heart by initiating a proceeding on his own by invoking the jurisdiction of this Court under Article 226. Nor can the option of the State Government to make an appropriate decision be pre-empted or foreclosed by such an approach. In a Parliamentary democracy the interest of the State and management of its affairs is (are?) entrusted to the State Government and it is the State Government which is the custodian of the rights and interests as also of the affairs of the State. In matters pertaining to rights which the State Government claims vis-a-vis the Central Government in the matter of fixation of royalty, the State Government has to exercise its option and take at fully informed decision which in the opinion of the State Government will preserve and promote the interest of the State and national interest. The right to adopt the course which is considered most appropriate and suitable by the State Government elected by the democratic process cannot be taken over from the State Government and exercised by private individuals who claim to have the interest of the Stile at heart. That they themselves are Members of the Legislative Assembly and have held high position in the Government in the past does not alter the situation. In fact, to permit private citizens to institute a legal proceeding in such a matter would by tantamount to permitting circumvention of the constitutional bar created by Article 131 which excludes the jurisdiction of Courts other than the Supreme Court in regard to matters between States and the Government of India. No doubt Article 131 will not be directly attracted when a party other than a State Government initiates proceedings. (See State of Bihar v. Union of India, AIR 1970 SC 1446). But not only the letter but also the spirit of the provision has to be embossed on the mental screen. Why did the Founding Fathers make such a provision in the Constitution? For the obvious reason that in a partly federal structure like that of India, the paramount consideration is that of National Integration and the gravest danger that of Disintegration. To guard against such a danger, disputes between the States and the Centre are required to be resolved in the highest Court of the land which is the ultimate repository of the faith of the nation. And the apex Court, being the custodian of national interest as polarized from provincial or sectional interest, is entrusted with the delicate and sensitive task of striking a balance between two competing goals. On the one hand to ensure that narrow self interest of a State does not overshadow larger good of the nation as a whole. On the other hand to ensure tbat legitimate aspirations of a State are not denied unless the genuine compulsions of National Interest so demand. And that is why the Highest Court has been conferred with the exclusive jurisdiction in this behalf by the Constitution. What the State Government itself cannot do in respect of its right to claim royalty at an enhanced rate, private citizens cannot be permitted to do by initiating proceedings on their own. The prestigious label of public interest litigation notwithstanding, in fact what petitioners are doing is to assert the claim of the State Government vis-a-vis the Government of India (hereinafter referred to as G. O. I.). Whether the proceedings are initiated in the name of the State Government or in the name of private individuals who claim to be doing so by way of a public interest litigation, the lis in substance remains a lis between the State of Gujarat on the one hand and G. O. I on the other, though in form it may not be so. (And what really matters is the substance -- not the form). What cannot be done directly by the State Government cannot be permitted to be done indirectly by circumventing the bar of Article 131 of the Constitution by private citizens claiming to do so on their own in the name of a public interest litigation. This is the first hurdle in the way of the petitioners.
4. The next hurdle in the way of the petitioners is that they want the notifications issued in 1973, 1976 and 1981 whereby the rate of royalty has been fixed at Rs. 15/-, Rs. 42/- and Rs. 61/- per metric tonne respectively to be quashed. If this prayer is granted there will be no authority of law for recovering royalty from the O. N. G. C. If these notifications are held to be void for one reason, or the other then there will be in existence no legal provision which would entitle the State Government to claim royalty from the lessee (O. N. G. C. in this case). Thus the State Government will not be able to recover royalty even at the prevailing rate of Rs. 61/- determined by the notification issued by the Government of India on March 26, 1981. In fact, if these notifications are held to be void even the recoveries made in the past pursuant to the notifications of 1973 and 1976 at the rate of Rs. 15/- and Rs. 42/- respectively would have to be refunded because the royalty amounts would have been recovered from the O. N. G. G. without any authority of law. A petition claiming such a relief which would have disastrous consequences on the revenues of the State Government and which can create chaos cannot be entertained at the instance of private individuals. In a Parliamentary democracy the affairs of the State are entrusted to the elected representatives of the people representing the majority as their custodians. It is they who are entrusted with the management of the affairs of the State and the welfare of the State and it is they who have to decide what would promote the interest of the State. The State Government cannot be prevented from deciding which course would be mow beneficial for the State to adopt. If the State Government considers it to be a matter where it has a legal right which can be asserted, the State Government has to approach the appropriate forum in order to indicate its legal right. The management of the affairs of the State Government and the decision-making and policy-making functions of the State cannot be taken over by private individuals on the plea that they have the interest of the State at heart and that in their opinion the State Government itself is unable to protect the interest of the State, In fact, counsel for the petitioners is unable to contend that the State Government is apathetic to protect the interest of the State. It is conceded that the State Government has made a representation to the G. O. I. and the matter is under consideration at the political level. A very embarrassing situation could be created if the Court were to entertain a petition when a serious dialogue at the political level is in progress. Even though Article 131 does not exclude the jurisdiction of this Court under Article 226 of the Constitution of India at the instance of private citizens, this Court would be loathe to quash the notifications under which royalty has been recovered in the past pursuant to the notifications of 1973 and 1976 and the notifications of 1981 pursuant to which royalty is being recovered now. If we accede to this request at the instance of the petitioners the State Government will be deprived of a very large and substantial source of revenue since there would be no legal authority to recover royalty from O. N. G. C. Counsel for petitioners has not been able to point out any provision under which the State Government can recover royalty from the lessee (O. N. G. C. in this case) in the absence of the impugned notifications. Would it then be open to this Court in exercise of discretionary powers under Article 226 to entertain a petition which would have disastrous consequences on the State revenue at the instance of private individuals In fact, if these notifications are quashed the O. N. G. C. may well institute proceedings for refund of the amounts already paid. We are therefore afraid that we cannot entertain a petition of this nature at the instance of private citizens merely because they believe it to be in the interest of the State.
5. Now a word or two in regard to the challenge is proper. The Oilfields Act of 1948 has been challenged in its entirety in the sense that it is contended that the entire Act is ultra vires. The said Act was enacts ed on Sept. 8, 1948 prior to the commencement of the Constitution of India in 1950. Authority was derived from the Government of India Act of 1935 which held the field at the material time. Counsel contended that the Oilfields Act is an Act whereby property belonging to a Province had been acquired and that this was beyond the legislative competence of the Government of India. The Seventh Schedule to the Government of India Act, List I pertains to Federal Legislative List. Entry 36 therein is in the following terms :
'Regulation of mines and oilfields and mineral development to the extent to which such regulation and development under Federal control is declared by Federal Law to be expedient in the public interest.' It corresponds to Entry 53 in the Union List of the Constitution of India which reads thus : 'Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be dangerously inflammable.'
It will be observed that regulation of oilfields and mineral development to the extent to which such regulation and development is declared by Federal Law to be expedient in the public interest is a subject on which the Federal Government and the Federal Legislature could legislate. The Preamble to the Oilfields Act shows that it has been enacted inasmuch as it is considered expedient in the public interest to provide for regulation of oilfields and development of mineral oil resources. Section 4 thereof provides that no mining lease shall be valid unless it is in accordance with the rules made under the Act. Section 5 provides that power to make rules with respect to mining leases is vested in the Central Government. Section 6 provides that the Central Government may by notification in the Official Gazette make rules for the conservation and development of minerals. (This expression was replaced by the expression 'mineral oils' in 1957). It may be stated that the definition contained in Section 3(c) makes it clear that the expression 'minerals' (which was subsequently replaced by the expression 'mineral oils' in 1957 includes natural gas and petroleum. Thus the Central Government retained unto itself the power to regulate and develop oilfields. All these provisions are challenged as ultra vires on the ground that these are provisions which in reality and in effect pertain to the acquisition of Provincial property, namely, oilfields belonging to the Provinces. Counsel has argued that even after thirty years these provisions can be challenged on the ground that the Federal Legislature had no competence to pass a legislation pertaining to acquisition. In the first place, it is not possible to accede to the argument that regulation of oilfields (which is a national asset) by making a provision that no lease shall be valid unless it is in accordance with the Act or the Rules framed thereunder would tantamount to acquisition of Provincial property. Acquisition connotes extinguishment of the rights of the Province in the oilfields. Mere regulation of the manner in which lease can be granted or oilfields can be developed cannot be said to be tantamount to acquisition. Counsel places reliance on Section 299 of the Government of India Act of 1935 which provides that person shall be deprived of his property in British India save by authority of law and which provides that neither the Federal nor a Provincial Legislature shall have power to make any law authorising the compulsory acquisition etc. Obviously this provision, pertains to acquisition of property belonging to a citizen by either the Federal or the Provincial Legislature and has therefore no application.
6. Be it realised that the purpose of regulation of oilfields etc. is a subject of vital concern to the Nation. The object is not to acquire the property of the State. The eye is on the regulation of a National asset. Entry 36 of Government of India Act and Entry 53 of the Constitution of India have therefore with deliberation retained in the domain of the Centre the vital question regarding legislation pertaining to development of oilfields -- a very vital asset of the Nation. It is a National asset and the entire Nation has a stake in it. Supposing a State were to lease it to a hostile foreign Government? The State may be given a fabulous amount as lease money and the lessee (who does not want India to prosper or be self-sufficient in the most vital sphere of a rare energy resource on the development of which the very freedom of the Nation may well depend) does not develop the oilfields. And developing oilfields is not a path strewn with roses (fragrant colourful roses). Millions of rupees collected from the toiling millions of Indians (of all States) have to be sunk in the exploration. When oil is struck it is not the happy end of the story. A refinery has to be built at the National cost. Then the oil-well may dry up or blow up. Provisions have to be made for these hazards. And when there is war, it has to be protected by the three wings of the Armed Forces financed by the Nation and manned by the Nation. Reserves have to be set apart and ploughed buck for exploration of oil in other parts of she country so that self-sufficiency is attained and frontiers and freedom of the Nation are protected. And the oil has to be sold at a price which does not disrupt the National economy and does not result in the cost of the National product being go high that it is rendered non-com petit; we and pushed out of the export market. What is more, a rise in oil price can push up the cost of every product and service and have a chain reaction giving further impetus to inflation at the National level. One may benefit a little as a citizen of a State (Gujarat) but the very same citizen may face disaster in his capacity as a citizen of India. The questions then stare one in the eyes --who benefits? How? The regulation of the oilfields is therefore a matter of great concern for the Nation as a whole. The pith and substance of this Entry is regulation of oilfields (by the Centre as distinguished from the State) and not the acquisition of land or property belonging to the State by the Centre. So also the legislation (Oilfields Act) has this end in view and not the acquisition of land.
7. We are unable to accede to the argument that the Oilfields Act is in substance a piece of legislation enacted with a view to acquire the Stale property and therefore ultra vires of Government of India Act, 1935.
8. After the commencement of the Constitution in so far as regulation and development of oilfields is concerned Entry 53 in the Union List in the Seventh Schedule is in pari materia with Entry 36 of the Government of India Act. It authorises the Union Government to legislate in regard to regulation and development of oilfields, mineral oils resources, petroleum gas, etc. As to acquisition one has to turn to Entry 42 in List III which is the Concurrent List. The Entry pertains to acquisitioning and requisitioning of property. And the Entry is wide enough to empower the Central Government to acquire a property belonging even to a State Government, as has been held in State of West Bengal v. Union of India : 1SCR371 . We therefore do not see any substance in the contention that Sections 4. 5 and 6 of the Oilfields Act when it was enacted in 1948 were still-born and that they are unconstitutional even after the commencement of the Constitution of India.
9. Counsel has also challenged the validity of Rule 14 (1) of the Petroleum and Natural Gas Rules made by the Central Government in exercise of powers conferred by Ss. 5 and 6 of the Oilfields Act. The said Rule is in the following terms :
'14. Royalty on petroleum and furnishing of return and particulars :
(1) (a) Notwithstanding anything in any agreement, a lessee shall --
(i) where the lease has been granted by the Central Government, pay to that Government, and
(ii) where the lease has been granted by the State Government, pay to that Government a royalty at Rs. 42/- per metric tonne of crude oil and casing-head condensate and at (en per cent of the value at welt-head of natural gas obtained by the lessee;
Provided that the Central Government or, as the case may be, the State Government with the approval of the Central Government, may direct that such royalty be paid in petroleum and natural gas;
Provided further that royalty shall not he payable in respect of any crude oil. casing head condensate or natural gas which is unavoidably lost or is returned to the reservoir or is used for drilling or other operations relating to the production of petroleum or natural gas or both.
(b) Every lessee shall pay to the State Government, where the lease has been granted by that Government, royalty for the period of the lease before the 1st Nov., 1962, at the rate specified in the lease deed.'
Rule 14 (1) of the Rules as they stood prior to 1973 provides that notwithstanding anything contained in the agreement the lessee shall pay to the State Government, where lease has been granted by the State Government, royalty at the specified rate per metric tonne of crude oil, the rate specified being Rs. 10/-. By. a notification of Feb. 3, 1973 Sub-rule (1) of Rule 14 was amended by substituting the figure of Rs. 15/- for Rs. 10/-, and by the notification dated Sept. 8, 1976 words 'Rs. 42/-' were substituted in place of 'Rs. 15/-'. By a further amendment brought about under notification dated March 26, 1981 the rules were further amended and Sub-rule (1) of Rule 14 was amended by substituting the words 'Rs. 61/-' for the words 'Rs. 42/-'. Thus from tjme to time these rules have been amended and royalty at Rs. 61/- has been made payable. These roles are challenged on the ground that the source of the power to make rates is to be found in Section 6A of the Oilfields Act of 1948 and that the said section does not provide any guidelines and suffers from the vice of excessive delegation. Clause (4) of Section 6A provides that the Central Government may, by notification in the Official Gazette, amend the schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral oil with effect from such date as may be specified in the notification, provided that the Central Government shall not (a) fix the rate of royalty in respect of any mineral oil so as to exceed twenty per cent of the sale price of the mineral oil at the oilfields or the oil wellhead, as the case may be, or (b) enhance the rate of royalty in respect of any mineral oil more than once during any period of four years. It is argued that the Central Government has been given powers to enhance or reduce the rate of mineral oil without indicating any guidelines as to the manner in which this can be done and that is why the rules framed thereunder suffer from the vice of excessive delegation as per the law laid down by the Supreme Court in Delhi Laws case (In re. Article 143 of the Constitution of India and Delhi Laws Act (1912) etc.), AIR 1951 SC 332 and the subsequent deci-eions. We do not propose to examine this submission having regard to the circumstances indicated earlier, namely, that if the rules are struck down and the notifications whereby the rate of royalty has been enhanced from time to time are struck down, there will be no legal authority for claiming royalty from the lessee and the State Government will suffer considerable economic loss. Petitioners cannot therefore be permitted to challenge these rules in the name of protection of interest of the State Government and the State property. When this aspect was pointed out, Counsel for petitioners contended that the Court should issue a writ of mandamus to the Central Government to determine the rates requiring the Central Government to fix the rates of royalty by applying its mind judicially and reasonably to the question of fixation of rates of royalty having regard to prevailing International price of crude oil as prayed in Clause (c) of paragraph 26 of the prayer clause. But then after striking down these rules the Central Government would have no authority to determine the rates of royalty at all. Petitioners have claimed that the third respondent lessee (O.N.G.C.) should be directed to pay to the second respondent (State Government) the difference between Ihe higher rates fixed by the Central Government pursuant to the mandamus issued by this Court with retrospective effect from 1973 onwards. If the notifications are struck down and Section 6A read with the Schedule as amended from time to time and the Rules are struck down as prayed by the petitioners, the Court cannot direct the Central Government to fix the rate of royalty. The Court cannot indicate as to how rates should be fixed. Fixing of rates is in a way to some extent political and to some extent economic question pertaining to national economy. It is not a justiciable question. It may also be realised that to issue such a directive with retrospective effect from 1973 onwards would jeopardise the enlire economic structure of O. N. G. C. and would result in great detriment to the national interest and national economy. Be that as it may, for the reasons indicated earlier we do not think that petitioners can invoke our jurisdiction under Article 226 in the circumstances of the case.
10. Petition therefore fails and is rejected.