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Drawing a fine line

The government misreads the court’s opinion on the 2G case as a victory

Written by Arun Jaitley |
October 1, 2012 11:54:54 pm

The government misreads the court’s opinion on the 2G case as a victory

The Supreme Court has expressed its opinion on a reference of the president under Article 143(1) of the Constitution of India. The court’s opinion was sought on eight different questions. Most of these questions arose from the observations and directions of the court in the 2G spectrum case wherein the court had mandated that whenever a contract is to be awarded,a licence is to be given or any largesse is to be distributed,the public authority must adopt a transparent and fair method to make the selection so that all eligible persons get a fair opportunity. The court further mandated that when it came to allocation of the scarce natural resources like spectrum,the state must ensure that a non-discriminatory method is adopted for allocation. The court opined that a duly publicised auction,conducted fairly,is the best available method for distributing natural resources. Policies like “first-come-first served” whenever used are likely to be misused by private parties for maximising benefits. The court imposed a duty on the government to adopt the method of auction by giving wide publicity for such alienation.

The presidential reference sought the opinion of the court on eight questions. The court has expressed two opinions — one on behalf of four judges and authored by Justice D.K. Jain,which has been referred to as the “main opinion” and the other a broadly concurring opinion authored by Justice J.S. Khehar. The main opinion confines itself to the question of whether auctions are the only method of disposal of natural resources (paragraph 150). It chose not to answer the other questions raised,including some other sub-questions that relate to the allocation of 2G spectrum. The court decided not to interfere with the spectrum judgment in view of the concession made by the government itself.

The evolution of the right to equality in India underwent a transformation in 1974 when the Supreme Court,in E.P. Royappa v. State of Tamil Nadu,decided to liberate Article 14 from the limited “cribbed,cabined and confined” limits of equality. The Supreme Court observed — “From a positivistic point of view,equality is antithetic to arbitrariness. In fact,equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other to the whim and caprice of an absolute monarch. Where an act is arbitrary it is implicit in it that it is unequal,both according to political logic and constitutional law,and therefore violative of Article 14”.

On behalf of my party,the Bharatiya Janata Party,I had,on August 26,2012,commented in an article on the party website,on the coal block allocations and the reference pending before the court:

“The whole process of allocation of coal blocks stinks. This raises a larger question of how the Indian state should allocate natural resources. A rudderless government suffering from policy paralysis has sought advisory opinion of the Supreme Court on this larger question. Allocation of natural resources is an issue squarely within the policy domain. Formulation of policy is an executive function; it is not a judicial function. The court can merely strike down a policy if it is arbitrary or unconstitutional. The court cannot frame a policy. Which tangible natural resources should be auctioned and which could be allotted on some alternative fair criteria is an issue to be decided by the government. The courts are an institution empowered to judicially review a decision of the government. If government formulates a policy that opens the floodgates for corruption,the courts can strike down the policy. What would happen if the courts were to advise the formulation of such an arbitrary policy?”

The main opinion of the court has held in paragraph 148 and 149 as under:

148. 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.

149. Regard being had to the aforesaid precepts,we have opined that such auction as a mode cannot be conferred the status of a constitutional principle. Alienation of natural resources is a policy decision,and the means adopted for the same are thus,executive prerogatives. However,when such a policy decision is not backed by a social or a welfare purpose,and precious and scarce natural resources are alienated for commercial pursuits of profit maximising private entrepreneurs,adoption of means other than those that are competitive and maximise revenue may be arbitrary and face the wrath of Article 14 of the Constitution. Hence,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 which we have culled out above. Failing which,the Court,in exercise of power of judicial review,shall term the executive action as arbitrary,unfair,unreasonable and capricious due to its antimony with Article 14 of the Constitution.”

The ratio and meaning of the opinion as understood is as follows:

* There is no constitutional requirement that auction is the only methodology of allocating resources.

* If allocation is made to individuals for commercial exploitation,auction and maximisation of revenue is the rule.

* Deviation from the rule of auction and revenue maximisation is possible only when there is a social or welfare purpose.

* Even when there is a social or welfare purpose,the allocation can be made on the basis of stringent guidelines and the same is required to be tested on a case-to-case basis.

Some ministers have hailed this opinion on a question of law as the government’s victory against the CAG who had severely indicted the government in the 2G spectrum and coal block allocations. Were not both these allocations entirely for a commercial purpose? Did the government not follow a pick-and-choose policy and cause huge loss of revenue?

The concurring opinion of Justice Khehar further restricts the discretions for the social and welfare allocations that are made through a procedure other than auction. The opinion realises the danger of the allocation on a case-to-case basis transforming to a “suitcase-to-suitcase basis”. Justice Khehar advises a clear,transparent and objective criteria or procedure which furthers public interest,public good and public purpose. A public authority is ordained to act reasonably and fairly. The judge deals with a possible allocation of coal. After analysing the current provisions,he categorically opines that “no process other than auction can therefore be adopted for the grant of coal mining lease.” The Supreme Court’s opinion has incorporated the principles of fairness as antithetical to arbitrariness in the allocation of natural resources. This opinion is contrary to what the government did in the 2G spectrum and coal block allocations. Yet some ministers call it a victory of the government.

The writer is leader of the opposition in the Rajya Sabha

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