2012 Supreme(SC) 671

SUPREME COURT OF INDIA
S.H. KAPADIA, CJI, D.K. JAIN, DIPAK MISRA, RANJAN GOGOI, JAGDISH SINGH KHEHAR, JJ.
Re : [Under Article 143(1) of the Constitution of India]
Special Reference No.1 of 2012
Decided on : 27-09-2012.

IMPORTANT POINTS
Auctions are not the only permissible method for disposal of all natural resources across all sectors and in all circumstances.
No part of the natural resource can be dissipated as a matter of largess, charity, donation or endowment, for private exploitation.

Headnote:(a) Constitution of India – Article 143(1) – Not necessary that the question must have actually arisen – Question likely to arise can also be referred – Satisfaction about pre-requisites of Article is that of the President – Supreme Court is not bound to render advisory opinion in every reference and may refuse to express its opinion for strong, compelling and good reasons. (Para 23, 24)

       [1965] 1 S.C.R. 413; A.I.R. (30) 1943 FC 13; [1959] S.C.R. 995; (1994) 6 SCC 360 – Relied upon

       (b) Constitution of India – Article 143(1) – Maintainability – Doubt – May be as to fact or law – No format prescribed for drawing Reference – Questions of law having great public importance and far reaching consequences stated to have arisen – However reference should not be vague, general and undefined – Use of the word ‘doubt’ is not necessary condition for a reference to be maintainable. (Para 27, 28, 30, 32)

       (1979) 1 SCC 380; [1965] 1 S.C.R. 413 – Relied upon

       (c) Constitution of India – Article 143(1) r/w Article 137 and Rule 1 of Order 40 of the Supreme Court Rules, 1966 – 2G case – Review filed and withdrawn – Reference – Some of the grounds of Review petition also forming part of instant reference – Jurisdiction of Review under Article 137 and Rule 1, Order XL and reference under Article 143 being vastly different, filing and withdrawal of Review petition would not be embargo or impediment for exercise of discretion to answer the Reference. (Para 33)

       (d) Constitution of India – Article 143(1) – Reference – Mala fides – Court cannot go into truth or otherwise of facts – Court can also not go into bona fides of authority making reference. (Para 34)

       (1974) 2 SCC 33 – Relied upon

       (e) Constitution of India – Article 143(1) – Reference objected being indirect endeavour to unsettle and overturn the verdict in the 2G Case – Objection rejected in view of submission that Government is in the process of implementing the judgment, in letter and spirit. (Para 35, 36)

       1991 Supp (1) SCC 240; 1993 Supp (1) SCC 96 – Referred

       (f) Constitution of India – Article 143(1) – Decision and opinion – Decision is judgment – Opinion is reasons given for the judgment – Both are not necessarily synonymous – After decision appellate structure gets exhausted – Only option available is curative jurisdiction – Thereafter decision becomes final for eternity – ‘View of law’ on the other hand can be overruled under inherent power of the Court – Article 137 is jurisdictional limitation – Operative portion or decree cannot be reopened except in review – Overruling the judgment as a precedent does not reopen the decree – Done in exceptional circumstances – This is self imposed limitation – Under Article 143(1) Supreme Court have the power to overrule a previous view delivered by it. (Para 44, 45, 46, 47, 49, 52)

       (2002) 4 SCC 388; (1955) 2 SCR 603; (1979) 1 SCC 380; [1951] S.C.R. 747; [1965] 1 S.C.R. 413 – Relied upon

       [1949-50] F.C.R. 595; AIR 1954 SC 636; [1959] Supp. 1 S.C.R. 806 – Referred

       (g) Constitution of India – Article 143(1) – While entertaining a reference, Court can analyse the principles enunciated in the earlier judgment and make modifications – a (Para 58)

       (1998) 7 SCC 739 – Relied upon

       (1993) 4 SCC 441 – Referred

       (h) Constitution of India – Article 143(1) – Reference can be declined in such conditions – Reference is improper, inadvisable and undesirable – Questions formulated have purely socio-economic or political reasons having no relation whatsoever with any of the provisions of the Constitution or are of no constitutional significance – Incapable of being answered – Would not subserve any purpose – There is authoritative pronouncement which has already decided the question referred. (Para 60)

       (i) Constitution of India – Article 143(1) – Question no. 1 – Involves interpretation of a constitutional principle inherent under Article 14 – Having great public importance – 2G case ratio can be evaluated and clarified without touching the allocation of spectrum already decided – Reference held maintainable. (Para 61, 62)

       (j) Constitution of India – Article 141 – ‘Law declared’ – Principle culled out on the reading of a judgment as a whole, in light of the questions raised – Ratio decidendi – a (Para 65. 66, 67, 70)

       (2011) 12 SCC 615; (1987) 1 SCC 213; (1992) 4 SCC 363; (2006) 1 SCC 275; (2004) 3 SCC 75; (2003) 6 SCC 697 – Relied upon

       (k) Legal Interpretation – Interpretation of Judgments – Judgment should be read as a whole – Every part of a judgment is intricately linked to others – Must be read keeping the logical thread intact. (Para 70)

       (2003) 6 SCC 697 – Relied upon

       (l) Public Trust Doctrine – State is the legal owner of the natural resources as a trustee of the people – Distribution of natural resources must be guided by non-discriminatory, fair and transparent methods – a (Para 75)

       (2012) 3 SCC 1; 36 L ED 1018 : 146 U.S. 387 (1892); (1997) 1 SCC 388; (2004) 3 SCC 214; (2006) 3 SCC 549; (2009) 3 SCC 571; (2010) 7 SCC 1; (2011) 5 SCC 29; (1987) 2 SCC 295 – Relied upon

       (m) Interpretation of Judgment – 2G case, (2012) 3 SCC 1 – Para 96 and 102 – Auction of natural resources – Use of rider ‘perhaps’ in para 96 – Not laid down as constitutional principle – Recommendation of auction not absolute applicable to all natural resources – Findings limited to spectrum – Use of word ‘perhaps’ signifies consideration of other methods also. (Para 78, 79, 80)

       (n) Interpretation of statute – No law can be held ultra vires constitution even implicitly, indirectly, or by inference without testing it on its merit. (Para 80)

       (o) Public Trust Doctrine – People of the Country are the sovereign and the executive their agent – Executive holds natural resources in trust – It cannot use or alienate it recklessly –However, doctrine does not prohibit alienation of property held as a public trust – It mandates a high degree of judicial scrutiny which will elaborately discuss applicability of Article 14 of the constitution. (Para 87, 90, 91, 92)

       36 L ED 1018 : 146 U.S. 387 (1892); (1997) 1 SCC 388; (2006) 3 SCC 549; Fomento; (2010) 7 SCC 1; (2007) 3 SCC 184; [1968] 3 SCR 251 – Relied upon

       (p) Constitution of India – Article 14 – Equality – Tests – Old classification test giving way to arbitrariness test – Arbitrariness and unreasonableness – Interchangeable – An action or Act may be struck down for being arbitrary or unreasonable – However, ‘arbitrariness doctrine’ should not be used loosely or arbitrarily –A law should not be struck down without the pointing out of a constitutional infirmity – All State actions : distribution of largesse, grant of contracts or allotment of land – Should be fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy competition and equitable treatment. (Para 103, 105)

       1959 Supp (1) SCR 528; AIR 1955 SC 191; [1959] 1 SCR 279; (1974) 4 SCC 3; (1978) 1 SCC 248; (1981) 1 SCC 722; [41] (1979) 3 SCC 489 : AIR 1979 SC 1628; (2002) 2 SCC 188; (2001) 2 SCC 386; (1996) 3 SCC 709; (1981) 4 SCC 335 – Relied upon

       (q) Constitution of India – Article 14 – Method of disposal of natural resources – Auction – Whether can be constitutional mandate – Article 14 is couched in negative language – It is injunction to State from doing certain things or taking certain types of actions – It does nit command State to take particular steps – Reading auction as mandate of Article 14 would be completely contrary to the scheme of Article 14 – Equality cannot be limited to mean only auction – If auction is elevated to status of constitutional mandate then every action including social endeavours, welfare schemes and promotional policies deviating from auction would be void – Further, auction as constitutional mandate would be contrary to Article 39(b). (Para 106, 110, 111)

       (1973) 4 SCC 225; [47] 1952 SCR 284; 330 U.S. 552; (1984) 1 SCC 515 – Relied upon

       (r) Constitution of India – Article 14 – Validity of law – Testing with reference to elements of ideal democracy even though incorporated in Constitution – Constitutional principle ought to be abstract applied to precise situations. (Para 110)

       1975 (Supp) SCC 1 – Relied upon

       (s) Constitution of India – Article 39(b) – Distribution of natural resources – “Common good’ and “larger public interests”, not revenue maximization – Sole guiding factor – Auction would be ruled out where revenue maximization is not the object of a policy of distribution – Means to subserve public good cannot be limited to auction or any other method (Para 117 to 120)

       (1977) 4 SCC 471; (1972) 2 SCC 788 – Relied upon

       (t) Constitution of India – Article 14 – There is no constitutional mandate for auction – It can be deviated from if the policy object is not revenue maximization. (Para 129, 130)

       (1980) 4 SCC 1; (1987) 2 SCC 295; (1988) 1 SCC 166; (1997) 7 SCC 592; (2000) 8 SCC 262; (2003) 8 SCC 100; (2009) 7 SCC 561 – Relied upon

       (u) Constitution of India – Article 14 – Distribution of natural resources – Auction – Other methods – Potential of abuse – Any method of distribution cannot be held merely because of the potential of its abuse. (Para 135)

       (1981) 4 SCC 675; (1986) Supp SCC 20 – Relied upon

       (v) Administration of Justice – Judicial Review – Policy decisions – Methodology of distribution of natural resources – Economic policy – Court cannot suggest one or the other method – However, Court will not hesitate to strike down a method if it falls foul of the fairness requirement of Article 14. (Para 146)

       (1970) 1 SCC 248; (1981) 4 SCC 675; (1994) 2 SCC 691; (1996) 2 SCC 405; (2002) 2 SCC 333; (1992) 2 SCC 343; (1978) 3 SCC 459; (2011) 7 SCC 639 – Relied upon

       Per Jagdish Singh Khehar, J.

       (w) Words and Phrases – Auction – May be read as means to maximize revenue returns – Includes tender, tender-cum- auction, or auction. (Para 3)

       (x) Administrative Law – Administrative action – Lack of transparency – Renders it arbitrary. (Para 6)

       AIR 1967 SC 1427 – Relied upon

       (y) Constitution of India – Article 14 – Fairness, reasonableness, non-arbitrariness and transparency – Hallmarks of administrative action – While reasonable classification is permitted, power to pick and chose arbitrarily from the same class is not permitted. (Para 7)

       (z) Constitution of India – Article 14 – State exercising executive power in matters of trade or business including making of contracts – Should be mindful of public interest, public purpose and public good – Trading agreement of State – Validity – Criteria – Entire benefit should come to State – Use of natural resources – Only in the common public interest – Not for private interest. (Para 8, 9)

       AIR 1967 SC 1427; (1969) 1 SCC 414; (1979) 3 SCC 489; (1980) 4 SCC 1; (1989) 3 SCC 293; (1990) 3 SCC 752; (1991) 1 SCC 212; (1994) 1 SCC 243; (1996) 6 SCC 530; (2009) 6 SCC 171; (2010) 7 SCC 1; (2011) 5 SCC 29 – Relied upon

       (aa) Constitution of India – Article 14 – Natural resources made available to private persons for commercial exploitation exclusively for their gain – State must maximize revenue return. (Para 10)

       (bb) Constitution of India – Article 14 – Does not countenance discretionary power exercisable arbitrarily – Criteria should be transparent and objective. (Para 11)

       (1996) 6 SCC 530 – Relied upon

       Facts of the case:

       This is Presidential reference under Article 143(1) on Cellular Mobile Telephone Services Licenses (“CMTS Licenses”). The reference occasioned by Public Interest Litigation v. Union of India, (2012) 3 SCC 1 raised the following questions:

        Q.1 Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?

        Q.2 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?

        Q.3 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?

        Q.4 What is the permissible scope for interference by courts with policy making by the Government including methods for disposal of natural resources?

        Q.5 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?

        Q.6 If the answers to the aforesaid questions lead to an affirmation of the judgment dated 02.02.2012 then the following questions may arise, viz.

        (i) whether the judgment is required to be given retrospective effect so as to unsettle all licences issued and 2G spectrum (800, 900, and 1800 MHz bands) allocated in and after 1994 and prior to 10.01.2008?

        (ii) whether the allocation of 2G spectrum in all circumstances and in all specific cases for different policy considerations would nevertheless have to be undone? And specifically

        (iii) Whether the telecom licences granted in 1994 would be affected?

        (iv) Whether the Telecom licences granted by way of basic licences in 2001 and licences granted between the period 2003-2007 would be affected?

        (v) Whether it is open to the Government of India to take any action to alter the terms of any licence to ensure a level playing field among all existing licensees?

        (vi) Whether dual technology licences granted in 2007 and 2008 would be affected?

        (vii) Whether it is necessary or obligatory for the Government of India to withdraw the Spectrum allocated to all existing licensees or to charge for the same with retrospective effect and if so on what basis and from what date?

        Q.7 Whether, while taking action for conduct of auction in accordance with the orders of the Supreme Court, it would remain permissible for the Government to:

        (i) Make provision for allotment of Spectrum from time to time at the auction discovered price and in accordance with laid down criteria during the period of validity of the auction determined price?

        (ii) Impose a ceiling on the acquisition of Spectrum with the aim of avoiding the emergence of dominance in the market by any licensee/applicant duly taking into consideration TRAI recommendations in this regard?

        (iii) Make provision for allocation of Spectrum at auction related prices in accordance with laid down criteria in bands where there may be inadequate or no competition (for e.g. there is expected to be a low level of competition for CDMA in 800 MHz band and TRAI has recommended an equivalence ratio of 1.5 or 1.3X1.5 for 800 MHz and 900 MHz bands depending upon the quantum of spectrum held by the licensee that can be applied to auction price in 1800 MHz band in the absence of a specific price for these bands)?

        Q.8 What is the effect of the judgment on 3G Spectrum acquired by entities by auction whose licences have been quashed by the said judgment?

       

       Finding of the Court:

       Auctions are not the only permissible method for disposal of all natural resources across all sectors and in all circumstances.

       No part of the natural resource can be dissipated as a matter of largess, charity, donation or endowment, for private exploitation.