New Delhi: The Supreme Court on Thursday reiterated that it is for the government to decide the mode of allotment of scarce natural resources, whether this be through auction or otherwise.
The clarification removes the ambiguity surrounding the government’s right to frame policy on the allotment of resources and arising from the Supreme Court’s February verdict in the 2G case.
Still, the court has also clarified that it does have the power to oversee implementation of the policy.
“Auction may be best for revenue maximization, but not always best way to subserve common good,” the Supreme Court said in response to a presidential reference filed by the government on the court’s 2G ruling.
The government has already clarified that its reference didn’t have any bearing on its desire and willingness to implement the court’s 2 February ruling cancelling 122 licences of telcos and re-auctioning spectrum. In effect, Thursday’s response by the court doesn’t affect that judgement in any way, but reiterates the powers of the government to make policy.
The 2G scam—irregularities in the allotment of spectrum to telcos on favourable terms in 2008—and the ongoing coal controversy (irregularities in the allotment of captive coal mines to power and steel companies) have captured public imagination apart from paralysing Parliament. Unfortunately, the noise around the controversies has also blurred the line between policy (that can always be improved) and irregularities in the implementation of the policy (that needs to be investigated and punished). The Thursday ruling redraws that line.
“The court cannot go into the economic wisdom of a policy, but can examine the means and implementation of a particular policy. The potential for misuse will always be there, but the court can only strike down a policy if there has been misuse in its implementation,” said Soli Sorabjee, a former attorney general of India.
“The legality and constitutionality of policy is one matter, and the manner of implementation is quite another,” said the response, read out by justice J.S. Khehar in a packed courtroom.
The opinion was delivered by the five-member constitutional bench headed by Chief Justice S.H. Kapadia (who retires Friday) and came after the government sought a clarification on a 2 February ruling that said the process of first-come-first-served followed in awarding spectrum and licences was flawed and which then extended this to argue that all natural resources should be allotted through auctions.
An economist welcomed the court’s opinion that an auction can’t be the best way to allot resources unless the only objective was to maximize the government’s revenue.
“If revenue maximization is not an objective, then clearly auction is not going to be the best route for the allocation of natural resources. I can think of things like water, for instance, or even land in certain cases, where auction may not be the best route because it will have implications for the downstream users of that resource,” said Rajat Kathuria, director and chief executive at the Indian Council for Research on International Economic Relations.
The court’s emphasis on the greater good, a lawyer insisted, was a guideline for government policy (although the ruling itself clearly says it is not in the judiciary’s job description to frame policy).
Under this judgement, the court has expanded the scope of a judicial review to hold that even though the allocation of natural resources is a policy decision, it must be guided by a social and welfare purpose. The policy itself could be reviewed on the touchstone of Article 14. This is a departure from the complete hands-off policy,” said Pallavi Shroff, senior partner, Amarchand Mangaldas.
While the predominant response to the court’s ruling was positive (and, indeed, in many cases, laudatory for reaffirming the definitions of the roles of the executive and judiciary laid out in the constitution), there were a few negative voices, largely arising from the government misusing its powers.
“It is the prerogative and function of the government to form and implement policy. This is not the work of judiciary. In my opinion, all natural allocations should be allocated through a fair and transparent manner. The fair manner could be of competitive bidding. If you leave this to the discretion of political leaders, there are chances of corruption,” said Arun Jaitley, a lawyer and also a senior leader of the Bharatiya Janata Party.
A similar concern was expressed by Ramesh Vaidyanathan, partner, Advaya Legal. “The Supreme Court opinion on the 2G reference is a rather cautious and disappointing one. While no one can quarrel with the court’s logic that policymaking is the domain of the executive, there are serious worries about the executive treating this judicial blessing as carte blanche.”
The United Progressive Alliance’s initial response was circumspect, though it signalled that the apex court’s opinion had provided it with some political ammunition to deal with the contentious allegations levelled by the Comptroller and Auditor General in its reports on the allotment of captive coal blocks.
“Governments are not meant to gloat over decisions. The Supreme Court’s decision applies to all consitutional authorities,” said Kapil Sibal, minister for telecom, in a press briefing.
Jacob P. Koshy and Kian Gianz also contributed to this story.
Link to the verdict: http://supremecourtofindia.nic.in/outtoday/op27092012.pdf- -