SC Opinion on a Presidential Reference Seeking a Clarity on the 2G Verdict

SC - Sans 2G, Presidential Reference Maintainable 

The Supreme Court on Thursday Sep 27,2012 held that the Presidential Reference in the 2G case would be maintainable as long as its decision on allocation of spectrum licences was untouched.

A Constitution Bench headed by Chief Justice S.H. Kapadia said: “What has been enunciated in the 2G case as a proposition of law cannot strike at the root of the maintainability of the Reference. Consequently, we reject the preliminary objection and hold that this Reference is maintainable.”

Appearing for the Centre for Public Interest Litigation, senior counsel Soli Sorabjee, Shanti Bhushan and Prashant Bhushan had argued that the Reference would amount to overruling the 2G judgment.

After a thorough analysis of the verdict, the Bench said: “The recommendation of auction for alienation of natural resources was never intended to be taken as an absolute or blanket statement applicable across all resources, but [was] simply a conclusion made at first blush over the attractiveness of a method like auction. The choice of the word ‘perhaps’ suggests that the learned judges considered situations requiring a method other than auction as conceivable and desirable.”

On Janata Party president Subramanian Swamy’s submission that the Reference was an unnecessary exercise as the government had accepted the Chawla Committee recommendations that all natural resources be auctioned, the SC said “since it [panel report] is pending acceptance by the government, it would be inappropriate for us to place judicial reliance on it.”

 SC - Auction not sole route for allocation of natural resources

The Supreme Court on Sep 27,2012 held that auction is not the only method for allocating natural resources to private companies and made it clear that its 2G verdict was confined to spectrum and not to other resources
Giving its opinion on the Presidential reference arising out of 2G verdict, a 5-judge constitution bench headed by Chief Justice S H Kapadia also said that common good is the touchstone for any policy and if it meets that then any means adopted is in accordance with the constitutional principles.

However, at the same time the court upheld the executive's prerogative to alienate natural resources as a policy matter and reserved the right to strike it down if there was any arbitrariness in the decision.

The apex court was giving its opinion on a Presidential reference seeking a clarity on the 2G verdict delivered by it in February 2 while striking down 122 telecom licences.

The 5 questions raised in the Presidential Reference are -

1. Is auction the only permissible method for disposal of all natural resources across all sectors and in all circumstances?

2. Does not a broad proposition of law that only auctions can be resorted to for disposal of natural resources run contrary to several judgments of the Supreme Court including those of larger Benches?

3. Whether the enunciation of a broad principle, even though expressed as a matter of constitutional law, does not really amount to formulation of a policy and whether it has the effect of unsettling policy decisions formulated and approaches taken by successive governments over the years for valid considerations, including lack of public resources and the need to resort to innovative and different approaches for the development of various sectors of the economy.

4. What is the permissible scope for interference by courts with policymaking by the government, including methods for disposal of natural resources?

5. If the court holds, within the permissible scope of judicial review, that a policy is flawed, is it not obliged to take into account investments made under the said policy including investments made by foreign investors under multilateral/bilateral agreements?

 
The Bench said the state’s action “has to be fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy competition and equitable treatment. It should conform to the norms which are rational, informed by reasons and guided by the public interest, etc. All these principles are inherent in the fundamental conception of Article 14. Such being the constitutional intent and effect of Article 14, the question arises — can auction as a method of disposal of natural resources be declared a constitutional mandate under Article 14? We would unhesitatingly answer it in the negative since any other answer would be completely contrary to the scheme of Article 14.”

"In our opinion, auction despite being a more preferable method of alienation/allotment of natural resources, cannot be held to be a constitutional requirement or limitation for alienation of all natural resources and therefore, every method other than auction cannot be struck down as ultra-vires the constitutional mandate," the SC said.

The bench, which also comprised justices D K Jain, J S Khehar, Dipak Misra and Ranjan Gogoi, said that auctions may be the best way of maximizing revenue.

But, it felt, revenue maximisation may not always be the ultimate motive of the policy and natural resources can be allocated to private companies by other methods for the purpose to subserve public good.

"Common good is the sole guiding factor under Article 39(b) for distribution of natural resources. It is the touchstone of testing whether any policy subserves the common good and if it does, irrespective of the means adopted, it is clearly in accordance with the principle enshrined in the Article," the bench said.