Gujarat High Court GAIL Reliance judgment 2026

The Gujarat High Court has struck down clauses in contracts between Reliance Industries Limited (RIL) and GAIL (India) Limited that required RIL to pay gas transmission charges. The court said these clauses were unfair, arbitrary and against policy. GAIL must now refund the charges it collected along with 8% interest per year from the date the payments were made.

AHMEDABAD 

Justice Nirzar S. Desai delivered the judgment on October 16 2026. The decision was made public on October 23 2026. It sets aside the disputed clauses from agreements signed between the two companies on March 30 2000 and August 31 2008.

The case was about gas transmission charges related to Reliance’s petrochemical plant in Dahej, Gujarat. Reliance argued it should not have to pay these charges because it built its pipeline network to move gas from GAIL’s Gandhar facility to its Dahej plant.

Reliance said it spent around ₹121.25 crore to build two pipelines, each about 35.4 kilometres long. It also spent about ₹10.50 crore on a station at GAIL’s Gandhar LPG plant. The company said it paid for constructing, running and maintaining the pipelines. It claimed the contract clauses were unfair because they forced it to pay for services it already provided through its own infrastructure.

Before signing the agreements Reliance had asked GAIL to waive the transmission charges. GAIL refused. That disagreement led to the battle in the High Court.

Why the Court Disagreed with GAIL

GAIL said the terms in the contract had been worked out through negotiation. It also said this case was different from a dispute involving Indian Petrochemicals Corporation Limited (IPCL) because of how GAIL’s systems and delivery terms were arranged.

The High Court did not agree. It followed the Supreme Court ruling in the GAIL–IPCL case. The court said Reliance had invested heavily in its pipeline system.. It had no real choice but to accept the unfair terms. This was because GAIL had a role in gas transmission and Reliance could not go elsewhere.

The court called GAIL’s claim that the terms were negotiated "nothing but an eye-wash." It said the clauses did not stand up in law. The judgment shows that courts can look closely at contracts even when both parties signed them. If there is an imbalance in power the terms may be challenged.

What the Court Ordered

The court gave relief to Reliance.. It also said the refund must follow the rules set by the Supreme Court in earlier cases. That means GAIL has to return the charges it collected. Only for the time allowed by law.

Reliance had asked for 18% interest per year on the refund. The court said no. Instead it ordered GAIL to pay 8% interest each year. The interest starts from the day the payment was made and continues until GAIL returns the money.

This decision gives relief to Reliance. At the time it limits the recovery to what the law allows. It balances fairness with standards.

 What This Ruling Means

This judgment is important for contract law and business disputes where one party has power than the other. It shows that even if a contract is signed the court can still review whether it is fair. Issues like unconscionability, arbitrariness and public policy can be grounds for rejecting parts of a contract.

For companies that depend on infrastructure this ruling is a reminder to check their contracts carefully. The real situation at the time of signing matters. The court will not ignore when one party had no choice but to accept terms.

The decision also shows how courts use past Supreme Court rulings. They apply those principles to cases but they always look at the facts. Each case is judged on its details.

Sources: The Indian Express, “Unfair, arbitrary: Gujarat High Court strikes down GAIL clauses on Reliance,” published October 23, 2026; LawLens, report on the Reliance Industries–GAIL transmission-charge judgment dated October 16, 2026.