Thursday, September 27, 2012

2G Presidential reference and SC reply - Only answering the questions not a verdict or victory for any parties

Supreme Court Of India

Chinese think tanks, while explaining their raising defence expenditure, used to compare their defence budget with two countries - India and US. While comparing with India, they will take the parameter 'percentage of GDP' both countries are spending on defence; while comparing with US they will state exactly how much billion USD both countries allocating for defence. In this way, they will explain to the world that, they are spending much less on defence compared to these two countries. Politicians also used to do the same trick, if they lost elections, the very first exercise will be, how to whitewash the defeat.

People are neither right nor wrong here; they are cleverly interpreting the numbers, in a manner suitable to them. So, before people interpret Supreme Court (SC) judgement on '2G presidential reference' to their benefit, we have to check what SC said.

Interestingly, SC's judgement doesn't prove government right or wrong. It merely answered some questions raised by government and validated president's power to go for a reference.

Supreme Court's judgement on presidential reference

I am here by giving the relevant passages from SC judgement,

"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 methodology pertaining to disposal of natural resources is clearly an economic policy. It entails intricate economic choices and the Court lacks the necessary expertise to make cannot, and shall not, be the endeavour of this Court to evaluate the efficacy of auction vis-à-vis other methods of disposal of natural resources. 

The Court cannot mandate one method to be followed in all facts and circumstances. Therefore, auction, an economic choice of disposal of natural resources, is not a constitutional mandate...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, but, if a policy or law is patently unfair to the extent that it falls foul of the fairness requirement of Article 14 of the Constitution, the Court would not hesitate in striking it down

...valuation is a function of several dynamic variables; it is a science and not a law...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...

...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 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. 

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, inconsonance 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.

In conclusion, our answer to the first set of five questions is that auctions are not the only permissible method for disposal of all natural resources across all sectors and in all circumstances.

As regards the remaining questions, we feel that answer to these questions would have a direct bearing on the mode of alienation of Spectrum and therefore, in light of the statement by the learned Attorney General that the Government is not questioning the correctness of judgment in the 2G Case, we respectfully decline to answer these questions.

First five questions in Presidential reference

Q1 Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?

Q2 Whether a broad proposition of law that only the route of auctions can be resorted to for disposal of natural resources does not run contrary to several judgments of the Supreme Court including those of Larger Benches?

Q3 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 has the effect of unsettling policy decisions formulated and approaches taken by various 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?

Q4 what is the permissible scope for interference by courts with policy making byte Government including methods for disposal of natural resources?

Q5 Whether, if the court holds, within the permissible scope of judicial review, that a policy is flawed, is the court not obliged to take into account investments made under the said policy including investments made by foreign investors under multilateral/bilateral agreements?


I don’t believe that profit maximizing through auction is advisable in all cases. In telecom, government has the right over spectrum, companies required government's permission to buy/ rent and use it. Look at the 3G auction, telecom service providers almost emptied their chest by spending everything for getting a license. And do you think they will sell the services cheap, after spending so much for license? Policy should be directed towards getting a reasonable price for natural resources, while contributing towards the development of India.

Finally, 2G scam was not a yes or no question on whether auction was the best option for selling the spectrum. It was about fairness, equality and government's neutrality on selling natural resources and the judgement is yet to come.



1. Supreme Court of India
2. First Post
3. SC opinion on presidential reference brings constitutional clarity : Sibal - Zee News
4. Auction not sole method for allocating natural resources - Business Standard
5. SC judgement vindicates govt stance: Sibal - First Post

Photo Courtesy: Supreme Court of India

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