Public Trust Doctrine Can’t Override Limitation in Commercial Gas Transactions: Madras HC Dismisses GAIL Appeals in ₹246 Crore Dispute

Posted On - 21 November, 2025 • By - King Stubb & Kasiva

Summary

The Madras High Court dismissed appeals filed by GAIL (India) Limited against five natural gas supplier companies in a ₹246 crore dispute, holding that natural gas supply contracts are purely commercial and the Public Trust Doctrine cannot be invoked to bypass the law of limitation. The Court upheld the Single Judge’s decision restricting GAIL’s claim for differential pricing only prospectively from 16 November 2011.

Case Timeline

  • Gas Supply Contracts (GSCs) were entered between GAIL and five power companies, who procured gas at APM (Administered Pricing Mechanism) rates.
  • After APM dismantling, GAIL alleged misuse of APM benefits by private power generators and raised debit notes for higher non-APM prices.
  • Arbitrations largely upheld GAIL’s claims. The buyers challenged the awards before the High Court.
  • The Single Judge held GAIL’s older claims to be barred by limitation and waiver, permitting non-APM pricing only from 16.11.2011.
  • GAIL appealed, leading to the present Division Bench judgment dated 16 October 2025.

Arguments

Petitioner (GAIL):

  • Claimed buyers were not entitled to APM benefits as they supplied power to captive consumers.
  • Invoked the Public Trust Doctrine, arguing that as a custodian of natural resources, limitation and waiver should not apply.
  • Alleged misrepresentation and unjust enrichment by the buyers.

Respondents (Power Companies):

  • Asserted that the contracts were commercial in nature, governed strictly by contract law.
  • Denied any misrepresentation and argued that no policy distinction existed between captive and public consumers.
  • Maintained that GAIL’s retrospective pricing demand was time-barred and contrary to settled principles of limitation.

Judgment

The Division Bench dismissed all appeals, holding:

  1. The Public Trust Doctrine does not apply to commercial transactions between GAIL and private entities.
  2. Limitation laws and contractual finality cannot be overridden by constitutional doctrines.
  3. No evidence of misrepresentation or unjust enrichment was found.
  4. GAIL can apply non-APM pricing only prospectively from 16 November 2011.

Analysis

This ruling reinforces the separation between regulatory and contractual obligations in the energy sector. This explains that state-owned enterprises are unable to invoke public interest doctrines in order to avoid limitations or reopen already settled commercial contracts. Buildings certainty in commerce, the decision also aligns with previous judicial decisions that protects the finality of arbitral awards. Settling the dispute has confirmed the position of energy companies and public sector undertakings, reiterating that the management of natural resources, must, when entails commercial transactions, also respect the boundaries of the relevant statutes and the provisions of the contracts.