Auction not only way to allocate natural resources: Supreme Court

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 court had then held that auction should be the way for allocation of resources.

Top ministers in the government hailed the opinion as giving “constitutional clarity” on the auction issue and hoped that institutions like CAG would no longer use auction as benchmark for computing losses.

The government has been under all round attack after the CAG reports on 2G spectrum which had come out with a presumptive loss of Rs 1.76 lakh crores and on coal block allocations that assumed a gain of Rs 1.86 lakh crore to private companies.

In its opinion,the bench observed that auction despite being a more “preferable method” of allotment of natural resources cannot be held to be a constitutional mandate.

“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 court 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.

It said alienation of natural resources is a policy decision,and the means adopted for the same were thus,executive prerogatives.

“However,when such a policy decision is not backed by a social or welfare purpose,and precious and scarce natural resources are alienated for commercial pursuits of profit maximizing private entrepreneurs,adoption of means other than those that are competitive and maximize revenue may be arbitrary and face the wrath of Article 14 of the Constitution,” the bench said.

“Rather than prescribing or proscribing a method,we believe,a judicial scrutiny of methods of disposal of natural resources should depend on the facts and circumstances of each case,in consonance with the principles. Failing which,the Court,in exercise of power of judicial review,shall term the executive action as arbitrary,unfair,unreasonable and capricious,” the bench said.

The apex court referred to various judgements delivered by it earlier while upholding government’s decision to allocate natural resources through means other than auction.

“It is manifest that there is no constitutional mandate in favour of auction under Article 14. The Government has repeatedly deviated from the course of auction and this Court has repeatedly upheld such actions,” the bench said.

Justice Khehar,who wrote a separate but concurring judgement,said that natural resource should not be dissipated as a matter of charity,donation or endowment,for private exploitation.

“No part of the natural resource can be dissipated as a matter of largess,charity,donation or endowment,for private exploitation. Each bit of natural resource expended must bring back a reciprocal consideration. The consideration may be in the nature of earning revenue or may be to best subserve the common good. It may well be the amalgam of the two.

“There cannot be a dissipation of material resources free of cost or at a consideration lower than their actual worth. One set of citizens cannot prosper at the cost of another set of citizens,for that would not be fair or reasonable,” Justice Khehar said.

The court disagreed with the contention that auction should be the only means of allocation as other methods can be abused by the private companies in connivance with government authorities as happened in 2G case.

“Revenue maximization is not the only way in which the common good can be subserved. Where revenue maximization is the object of a policy,being considered qua that resource at that point of time to be the best way to subserve the common good,auction would be one of the preferable methods,though not the only method.

“Where revenue maximization is not the object of a policy of distribution,the question of auction would not arise.

Revenue considerations may assume secondary consideration to developmental considerations,” the bench said.

It said that the suggestion that disposal of a natural resource for commercial use must be for revenue maximization is based “neither on law nor on logic”.

“Economic logic establishes that alienation/allocation of natural resources to the highest bidder may not necessarily be the only way to subserve the common good,and at times,may run counter to public good.

“Hence,it needs little emphasis that disposal of all natural resources through auctions is clearly not a constitutional mandate,” the 208-page opinion given by the apex court said.

The apex court made it clear that its 2G ruling has not laid down any law,making auction mandatory for all resources.

“We are conscious that a judgment is not to be read as a statute,” said the bench adding “this suggests the recommendation of auction for alienation of natural resources was never intended to be taken as an absolute or blanket statement applicable across all natural resources.”

The bench further said disposal of natural resources is clearly an economic policy and it can not do comparative study of the various methods of distribution of natural resources and suggest the most efficacious mode.

“To summarize in the context of the present Reference,it needs to be emphasized that this court cannot conduct a comparative study of the various methods of distribution of natural resources and suggest the most efficacious mode,if there is one universal efficacious method in the first place.

It respects the mandate and wisdom of the executive for such matters,” the bench said.

“We may,however,hasten to add that the court can test the legality and constitutionality of these methods. When questioned,the courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are ultra vires and intra vires the provisions of the Constitution.

“Nevertheless,it cannot and will not compare which policy is fairer than the other,unless a policy or law is patently unfair to the extent that it falls foul of the fairness,” the bench said.

2G verdict for auction not blanket statement for all resources

The Supreme Court today clarified that its 2G verdict recommending auctioning for allocation of natural resources was only confined to spectrum and it was not a blanket statement applicable across all natural resources.

“The recommendation of auction for alienation of natural resources was never intended to be taken as an absolute or blanket statement applicable across all natural resources,but simply a conclusion made at first blush over the attractiveness of a method like auction in disposal of natural resources,” said a five-judge bench headed by Chief Justice S H Kapadia.

“We are conscious that a judgement is not to be read as a statute,but at the same time,we cannot be oblivious to the fact that when it is argued with vehemence that the judgement lays down auction as a constitutional principle,the word perhaps gains significance,” it said.

“The choice of the word perhaps suggests that the learned judges considered situations requiring a method other than auction as conceivable and desirable,” the bench said.

AUCTION-CHRONOLOGY

Following is the chronology of events leading to the pronouncement of opinion by the Supreme Court today on the issue of allocation of natural resources arising out of the 2G spectrum judgement.

* Feb 2,2012: SC cancels 122 licences granted during former Telecom Minister A Raja’s tenure and directs auctioning of radio waves by holding first-come-first-served policy as flawed.

* Mar 1: The Government moves SC seeking review of 2G verdict holding auction as the only mode of allocation of natural resources. Private telecom companies also join the Government.

* Mar 16: SC sets up special bench to deal with 2G cases.

* Apr 3: SC takes up review petitions in 2G case.

* Apr 4: SC dismisses all review petitions on the issue of mode of allocation of natural resources.

* Apr 10: The Union Cabinet,chaired by Prime Minister Manmohan Singh,clears the Telecom Ministry’s proposal to seek Supreme Court’s opinion through Presidential Reference on issues arising out of the February 2 judgement on allocation of natural resources.

* Apr 12: Presidential reference filed in SC.

* Apr 13: SC admits government’s review plea.

* May 10: SC allows the Centre to withdraw its review plea on 2G verdict.

* May 11: The apex court decides to hear the Centre’s Presidential Reference from Jul 10.

* Jul 10: SC commences hearing on Presidential Reference.

* Aug 16: SC reserves opinion on Presidential Reference.

* Sep 27: SC says auction cannot be only route for allocation of natural resources.

SC judgement vindicates govt stance: Sibal

Hailing Supreme Court judgement on auction of natural resources,Telecom Minister Kapil Sibal today said the apex court has brought “constitutional clarity” on the issue.

Stating that the Court has upheld the government’s stand,Sibal said it has opined that auction was not the only way for allocating natural resources.

Institutions like CAG “might have perhaps unwittingly,erroneously interpreted the SC judgement relating to the 2G case and thought that all natural resources must be auctioned,” he said. “The SC has provided Constitutional clarity today and we welcome it.”

Welcoming the SC decision,Commerce Minister Anand Sharma said the judgement “vindicates” the position that the government had taken.

“When a state has to take decisions,public good has to be kept in mind… The SC has also upheld,that it is public good which is important,and revenue maximisation is subservient to that,not the other way round,” he said. “And all national resources (are) not meant to be auctioned.”

Sharma said there has been lot of confusion,some deliberately created,and also fed by some elements of political forces who are opposed to the government.

“…there was never any doubt in my mind,or in the mind of my colleagues of the government,(that) there was no constitutional mandate for auction,” he added.

SC opinion a relief: Khurshid

Terming the Supreme Court verdict on Presidential Reference on auction of natural resources as a relief,Law Minister Salman Khurshid today said it will help the government take forward its public policy.

He also said the verdict of the five-judge bench was a “vindication” of what the government has been saying on the issue of 2G spectrum allocation.

“Today,it is clear that what we did was right,therefore,it is a relief…it is comforting,” Khurshid told reporters after the verdict.

Replying to a volley of questions on the attack mounted by the Opposition on the issue of 2G against the government,he said,”the opposition parties should respect the courts. Nobody would listen to us. They attacked us after the (February,2012) judgement,now our stand has been vindicated… people,including the Opposition had put question mark on the decisions of the government.”

He also said in a lighter vein that had the apex court “said otherwise,we would have been roasted alive…now would the opposition go back on what they had said.”

He said the verdict will give the government important guidance as it moves forward and enable the Centre take forward its public policies.

In a word of caution,he also said that the chapter is “not closed” as curative petitions filed by affected companies were still pending in the Supreme Court.

He said the verdict will provide enough material for judges who go through the curative petitions.

The verdict,he said,does not mean that the government has the “freedom to act in the way we like. It has to be under the parameters of judicial review.”

He said the verdict has further enforced the principle of separation of powers between the judiciary and the executive.