Good law,poor economics

Good law,poor economics

What the Supreme Court’s 2G judgment portends for judicial activism

What the Supreme Court’s 2G judgment portends for judicial activism

Fortunately for the nation,Indian-style judicial activism is,unlike 2G spectrum,not subject to norms of “first-come-first-served” or available on “public auction”,although it does often appear as a form of constitutional lottery. The victims of the Bhopal catastrophe were denied the blessing of judicial activism when they challenged the amount of compensation,even when the Supreme Court agreed that it erred grievously in denying them natural justice when it announced a settlement. The public-spirited petitioners in the 2G case now fare better.

The judicial achievement of the 2G decision stands eclipsed by its appropriation by political parties for their own ends. The 24×7 media coverage also fails to highlight this achievement. The five issues that the court specifies do not concern moral turpitude or criminal liability of key policy actors; nor do they concern any governance failure — the court primarily examines the issue of whether 122 2G licences were sanctioned in accordance with law and policy. It proceeds to invalidate these in a judicious manner. Justices Singhvi and Ganguly,in leaving issues of criminal liability for the relevant courts and declining the invitation to rely on the CAG report (because it was before Parliament for further deliberation) suggest that the court will expect,and if necessary,exact the same constitutional discipline from a Lokpal-to-come. Further,the effect of the decision is that future Lokpal decisions shall remain subject to judicial hospitality so expansively extended to public interest petitioners.

Natural resources as public goods: In a sense,the 2G decision remains inherently investor-friendly in its insistence that spectrum allocations procedures should be “just,non-arbitrary and transparent” and ought not discriminate against “similarly placed private parties”. The court now exemplifies the constitutional meaning of “level playing field”.


More important remains the judicial elaboration of the notion of trusteeship. The court holds that the state is the legal owner of the natural resources,but acts only as “a trustee of the people”; in its power to deal with such resources,the state “must be guided by the constitutional principles including the doctrine of equality and larger public good”. More particularly,because “natural resources are public goods”,the state should ensure “equitable access to natural resources and/or its products” for the people and that “they are adequately compensated for the transfer of the resource to the private domain”.

This significant judicial pronouncement is obviously not “news”. Yet,it calls for an urgent,reasoned national debate about a comprehensive framework of natural resources law,policy,administration and governance.

Perplexities: The court rules that the first-come-first served principle is fundamentally flawed and “has inherently dangerous implications” because it may tend to favour the few who have access the “power corridor at the highest or the lowest level”. It insists on “a rational method for disposal of public property” avoiding all attempts to “scuttle the claim of worthy applicants”.

If so,it is not clear why the prior transactions from 2001 were not also rendered invalid. The court says that these beneficiaries were not parties before the court! Given their vastly extended empire of judicial review based on the power under Article 142,constitutional power to do “complete justice”,the court could have served notices to them and heard their cause. Obviously,this was not done so as to upset completed commercial transactions. Yet,as many as 122 licences are now invalidated!

The 2G justices do not take kindly to A. Raja’s conduct; he declined to construct inter-ministerial cooperation as casting a veto power over his ministerial decisions. In so doing,says the court,the minister “stage-managed” the eventual outcome,yet it stops short of any judicial finding of mala fides. The very last paragraph of the judgment insisting that all accused parties,investigating agencies,and CBI court judges “shall decide the matter uninfluenced by this judgment” remains fraught with many a future due process complication; surely a conviction based on no additional evidence than before the 2G court may be contested on the ground that the 2G justices had already prejudiced the accused.

Constitutional economics: The constitutional condemnation of the first-come-first-served principle raises several concerns. First,myriad governmental agencies across the nation may never take recourse to this principle. Second,all laws,regulations,and administrative polices that ordain the now discredited principle will have to be fully revised. Third,public auction is to now constitute the sovereign acceptable norm at all levels of micro-governance,even panchayati raj institutions,government-aided educational institutions and public dispensaries,clinics and hospitals,for example. It is not clear that public auction is necessarily a cost-effective process always and everywhere,even in relation to natural resources — an expression wide enough to include even minor forest produce!

The decision illustrates that our adjudicatory ways may make good law but poor economics. The most eminent of our leaders of the bar,including the Attorney General of India,and all our justices,lack grounding in economic theory. Therefore,they had no means in the 2G case to understand the economic implications of their decision. The court would have been assisted better by the special economic adviser,Kaushik Basu,say,on matters such as modelling various rational choices for allocation of public resources,or measuring the transaction costs of auction as the only available “rational” principle,or about the economic effect of any decision in so vastly vital and volatile a sector as the telecom industry. Even when the justices may have preferred to reach the same result eventually,their decision would not have been as poorly informed.

In conclusion,the 2G decision may have some unintended impacts. No matter how the ongoing state polls or the 2014 general election affect the balance of political forces,the already existing proposals to revert to executive supremacy over the appointment of high court and Supreme Court justices will be back on the active political agenda. This power was wrested by the apex court unto itself through the device of a judicial collegium,with final say over elevations. In reverting to an earlier constitutional position,there would be,thus,no direct attempt at framing limits curbing judicial activism; however,the executive will have the power to elevate justices more susceptible to the logic of financial globalisation.

I have no crystal ball to predict the prospects of judicial activism. Regardless,a consequence of the 2G decision is to precisely open up this agendum,this time driven by communities of direct foreign investment and MNCs guided by political consensus.

The writer is professor of law,University of Warwick,and former vice chancellor of Universities of South Gujarat and Delhi