M/S O.N.G.C. LTD. versus ASSN. OF NATURAL GAS CONSUMING INDUSTRIES AND ORS.

Citation: [2004] SUPP. 1 S.C.R. 1 · Decided: 12-04-2004 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: IA disposed

Judgment (excerpt)

MIS O.N.G.C. LTD. 
v 
ASSN. OF NATURAL GAS CONSUMING INDUSTRIES AND ORS. 
APRIL 12, 2004 
(S. RAJENDRA BABU, DR. AR. LAKSHMANAN 
AND G.P. MA THUR, JJ.] 
A 
B 
Natural gas-Price fixation by ONGC-Upheld by Court-Interest on 
differential amount-Two drug manufacturing companies disputing calculation C 
of arrears of principal amount-Held, demands made by applicants have not 
been considered effectively by ONGC-Interest to be paid by them would be 
payable at stipulated rate but at simple rate of interest and not compoundable-
<~ 
ONGC shall also examine the other points raised by applicants-Interest. 
+ 
Appellant-ONGC increased the price of gas which gave rise to a D 
number of writ petitions before the High Court. Pending ,litigation, gas 
price was regulated by interim orders of the High Court and the Supreme 
Court. Ultimately, the price fixed by ONGC was upheld by the Supreme 
Court. As regards the claim of ONGC for interest on the late payment of 
differential amount, the Court held that interest would be paid at the rate 
and manner specified in the contract. However, it was made clear that E 
the case of the two drug manufacturing companies, namely, 'SCS' and 
'AL' would be dealt with separately. The two companies filed the present 
IAs. disputing the demands raised by the ONGC. 
It was contended for the applicants that the ONGC while calculating 
the arrears of principal amount applied a higher rate of price contrary F 
to the decision of the Court. It was contended for applicant 'AL' that 
arrears derived on account of short liftment were calculated by ONGC 
using rate for actual supply which included the sales tax and royalty on 
short-lifted quantity; that ONGC failed to consider their request for 
reduction of contracted quantity from 60,000 cubic meters to 50,000 cubic G 
meters per day, therefore, ONGC should recompute the demand in this 
regard, and that as per the force majeure clause in the contract, ONGC 
was required to bill on actual usage quantity during the period of strike 
and furnace collapse. 
H 
2 
SUPREME COURT REPORTS (2004] SUPP. I S.C.R. 
A 
Disposing of the I.As, the Court 
HELD: 1. In neither of the cases has ONGC considered the demands 
made by the applicants effectively, and determined the amount of arrears 
due from them without making appropriate adjustments for the money 
• 
paid by them. The representations made by both these companies have 
B been dealt with in usual bureaucratic style without due consideration to 
the points raised. The points raised by them both in regard to the payment 
of interest and in rega'rd to other aspects are of substantial nature and 
cannot be brushed aside but need to be considered by ONGC 
appropriately. (5-C-E] 
c 
2. So far as interest is concerned, though this Court stated in the 
order made on 26.7.2001, that interest is payable in terms of clause 5 of 
the contract but that was in the normal circumstances arising in the case. 
.. 
The two applicants are drug manufacturing companies and prices at which 
they sell their goods are fixed by the Drug Price Control Orders, which 
.., 
D had taken into consideration the price at which the gas was supplied, which 
} 
now gets enhanced by reason of the orders of this Court. Therefore, in 
the totality of the circumstances, interest shall be payable by these two 
companies at the rate as stipulated in clause 5 of the contract but at simple 
rate of interest and not compoundable. ONGC would reduce their claim 
E 
to that extent in the demands made by them. (5-E-H] 
3. In case of 'AL', ONGC shall also examine the points raised as 
regards (i) the exclusion of the royalty and sales tax on the damages for 
short liftment; (ii) the effect of their letter seeking for reductfon of supply 
from 60,000 cubic meters to 50,000 cubic meters per day; and (iii) claim 
F made on the basis of force majeure clause; an~ thereafter redetermine the 
arrears payable by them along with interest. [6-A] 
CIVIL APPELLATE JURISDICTION : I.A. Nos. 355-365 of 2002. 
IN 
G 
I.A. Nos. 190-200. 
IN 
.. 
Civil Appeal, Nos. 8530-40 of 1983. 
H 
From the Judgment and Order dated 30.7.83 of the Gujarat High Court. 
O.N.G.C. LTD.'"· ASSN. OF NATIJRAL GAS CONSUMING INDUS. [RAJENDRA BABU,J.] 
3 
in S.C.A. Nos. 883, 913/79, 1897/81, 2316, 2384, 2445, 2470, 2977, 4194, A 
4520, and 2542 of 1982. 
With I.A. Nos. 333-343/2002 in I.A. Nos. 190-200 in C.A. Nos. 8530-
40 of 1983. 
~ 
Raju Ramachandran, Additional Solicitor General, Mahendra Anand,

Excerpt shown. Read the full judgment & AI analysis in Lexace.