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Natural Resources and Their Utilization: Who Decides the ‘Common Good’

Basit Zaidi*

The Courts intervention in matters of policy has been a long contested issue. This paper aims to

use the Indian Experience to add to the body of literature on this subject. Over the course of this

paper, the author aims to first trace the evolution of the public trust doctrine in India. In tracing

this genealogy the author aims to examine the nature of ownership over public goods. On arriving

at the conclusion that the government holds them in a fiduciary capacity, this paper analyses the

2G case. It argues that the 2G spectrum bidding process was not done with a bona fide motive by

the state and breached its fiduciary duty to the citizens of the state. Finally this paper critiques the

Courts for not intervening in the matter arguing that the Courts have an obligation to intervene in

matters of public policy when substantial rights are in question.

I. INTRODUCTION

In 2008, Ecuador issued a strong statement when it recognised that nature and everything

contained within it also had constitutionally guaranteed and defined rights that governments and

organisations had to respect while carrying out their operations.1 Bolivia too, has enacted a new law

that gives equal rights to both nature and humans.2 Together, these two nations are leading the

charge to create an international consensus for a declaration that protects nature and all its

constituents from all possible harms, much like the Universal Declaration of Human Rights serves

to protect human beings from a variety of possible exploitative and abusive dangers.3

While such an idea may have seemed absurd 10 years ago, phenomena like global warming and

increasing exploitation of natural resources would actually make such a move not only feasible, butdesirable. It would be interesting to analyse how such initiatives would be treated in India, given

that the increasing pace of urbanisation and industrialisation taking place in India has not only put

its environmental resources in jeopardy but in some cases, has been at the expense of essential

resources and traditional livelihoods of indigenous people.4

These problems bring me to a more fundamental issue that forms the crux of this paper. This

issue relates to the means by which the government chooses to allot and distribute these resources

to individuals and companies for their use. This question, has of late, acquired increased

importance with the recent Comptroller and Auditor General (CAG) reports on the alleged

illegalities in the allocation of the 2G spectrum and the coal blocks by the previous Indian

* Graduate Student, Jindal Global Law School & Associate, Luthra & Luthra Law Offices.1 Andrew Revkin, Ecuador grants rights to nature, N. Y. TIMES (2008).2 If Mountains and Rivers could speak, 47(2) ECONOMIC AND POLITICAL WEEKLY 9 (2012).3 Id .4 ASEEM SHRIVASTAVA & ASHISH K OTHARI, CHURNING THE EARTH: THE MAKING OF A GLOBAL I NDIA (2012).


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government.5 With the release of the reports to the public domain, these allotments have come

under intense scrutiny, particularly with respect to the elements of public policy that are involved in

such allotments.6 Aside from the obvious political rhetoric, these discussions do give rise to some

interesting questions.

Chief among these is the method of distributing these resources in alignment with largergovernmental policy and mandate. The next question that arises is whether the government is

given any space to decide the method of allocation, with the CAG reports primarily advocating an

auction of natural resources as the only fair way to distribute such resources.7 Finally, there remains

the eternal question in administrative and constitutional matters like these – what role do the

Courts have in questioning, modifying or even creating a policy for the government to follow in

such circumstances. A related question to this idea would be the role of legislative instruments in

modifying the manner of allocation of natural resources, particularly the Public Procurement Bill,

2012.

While these questions are by no means exhaustive, another issue that warrants some amount of

scrutiny is the extent of the powers of the CAG to make such recommendations. Within its limited

scope, this paper attempts to critique the challenges of a government’s position on the distribution

of natural resources within the framework of the allocation of the coal blocks and more

importantly, the 2G spectrum, owing to their significance and importance in the public domain

today.8

This paper begins with an analysis of the concept of ownership of such resources. The first section

focuses on the judicial evolution of the principles governing the ownership and distribution of

nat ural resources in the country. Subsequently, I shall examine the ‘public trust doctrine’ created

by the Supreme Court of India (henceforth referred to as ‘the Court’) and the manner in which it

has been applied to the different kinds of natural resources in the country. An examination of the

duties imposed on the government and the consequent precedent it creates for subsequent

decisions on the governance of natural resources in the country.

The second section of the paper will attempt to analyse the context that underpins the coal

allocation controversy by attempting to flesh out a legal mechanism that governs the allocation and

distribution of coal reserves in the country. It will examine the various policy measures that were

taken to harmonize the manner of coal allocations in the country, with a brief glance at the key

5 Performance Audit Report on the Issue of Licenses and Allocation of 2G Spectrum by

the Department of Telecommunications, Ministry of Communications and Information Technology,

Report of the Comptroller and Auditor General of India, available at: http://cag.gov.in/html/reports/civil/2010-

11_19PA/Telecommunication%20Report.pdf; Karan Malik, CAG Performance Audit

Summary: Allocation of Coal Blocks and Augmentation of Coal Production, available at:

http://www.prsindia.org/administrator/uploads/general/1345207063_CAG%20Coal%20Block%20Allocation%20re

port%20summary.pdf.6 What the 2G spectrum is all about, HINDUSTAN TIMES, May 20, 2011, available at:

http://www.hindustantimes.com/india-news/newdelhi/what-the-2g-spectrum-case-is-all-about/article1-699929.aspx.7 Supra note 5.8 The Telecommunication sector is one of the fastest growing sectors in the country today, with both the number of

subscribers and service providers increasing exponentially with every passing quarter. It is poised to grow even

bigger with the advent of newer spectrum technology like the 3G spectrum. See Id., at Chapter 1 for a more detailed

analysis.


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features of the different policy measures. There shall also be a discussion on the issues that various

methods of coal allocation face, and an attempt to reconcile the differences between the two

models. A more detailed discussion of the same would not be possible without allowing the Court

to first pronounce judgement on the matter. However, the subsequent section of the paper, with its

focus on the two cases relating to the allocation of the 2 G spectrum shall perhaps give us an

inkling of what can be expected in terms of the Court’s holding on the issue, since similarquestions are at stake; most notably the issue of whether allocation should be done only through

auctions.

Thirdly, therefore, I focus on the two cases that required the Court to pronounce judgment on the

2G spectrum allocation. While the first arose out of a petition challenging the allotment of

spectrum, the second case was the result of a presidential reference that asked the Court to provide

answers on the key issues that had been created as a result of the 2G spectrum controversy. This

section shall analyse the holdings of both cases in great detail, identifying the evolution and

eventual conclusion of the Court’s decision on the complex issues faced before it.

After an individual analysis of both cases, the section shall then attempt to reconcile the two

judgments and identify the differences and similarities in the Court's reasoning in both cases. After

laying out and establishing the differences in reasoning, it shall then attempt to establish the effect

of these differences on the policy surrounding allocations, in terms of the legal precedent created

by the two consecutive cases. This therefore, sets the stage for the next section that will attempt to

critique the Court’s ruling in the Presidential Reference, and make recommendations for the same.

Subsequently, I shall attempt to critique the Presidential Reference through the lens of a chapter

by Dr. Sandra Fredman, titled “ Justiciability and the Role of Courts. 9 The article argues for a more

deliberative framework that Courts can create to contribute more meaningfully to a democratic

system. Dr. Fredman seeks to outline the fashion in which Courts can directly engage in policy

matters with the legislature and the executive and the executive, subsequently creating a more

holistic democracy in its functioning. This section analyses Dr. Fredman’s claim in great detail andalso lays out the benefits and possible weaknesses of the model proposed by her. It then applies

the principles discussed in the article to the judgment of the Court in the Presidential Reference

and examines whether the Court can or should have employed the deliberative framework of

decision-making in delivering its opinion to the government, and examining the consequences of

such a move by the Court.

The fifth section of the paper then, focuses on the manner in which legislative instruments, like the

Public Procurement Bill, could have streamlined the policy on the allocation of natural resources.

This analysis is focused purely on the Public Procurement Bill, 2012, and it attempts to isolate the

most important parts of the Bill that could have created a more concrete system to govern the

allocation of the 2G spectrum. Apart from examining the possible impacts of certain uniqueprovisions on the circumstances of the 2G spectrum allocation, it also highlights the importance

and role of these provisions in creating a more transparent resource allocation system. This section

9 SANDRA FREDMAN HUMAN R IGHTS TRANSFORMED: POSITIVE R IGHTS AND POSITIVE DUTIES (2009). The chapter

on justifiability and the Role of Courts is particularly useful for the purpose of this paper. Fredman, very cleverly

argues that the distinction between the justifiability of Socio-economic rights and Civil and political rights is no

different as the nature of the duty created is largely the same.


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then also critiques the Bill, identifying the parts of the Bill that could pose problems to the future

of resource allocation and making recommendations to rectify the same.

The paper finally concludes by first establishing the current state of affairs in the realm of resource

allocation, and the role of the governments and the Courts in creating that situation. Furthermore,

this paper will conclude by offering recommendations on the manner in which these events that

could have been handled differently by all the players concerned and the long-term benefits to thelegal framework of resource allocation that could have been created as a result of the alternate

approach suggested in the paper.

II. W HO O WNS N ATURAL R ESOURCES?

Over the years, Indian law and Common law have both come to very determinate answers about

the issue of ownership in such cases and their solution has often come to be known as the ‘Public

trust doctrine. As per this doctrine, there exists a fiduciary responsibility that the State owes to its

people while dealing with public property,10 and in the exercise of this duty, it is subject to the

provisions and jurisprudence of Article 1411of the Constitution of India.

12

American Courts first outlined this doctrine in the Illinois Central Railroad Case 13 and it was

subsequently adopted into Indian jurisprudence in MC Mehta v. Kamal Nath.14 Following the

Courts in the United States, the Indian Supreme Court held that the doctrine of public trust was

based on the principle that certain resources were so valuable that they ought to be preserved and

protected by the State and their use or ownership by private entities must be restricted at all costs.15

This idea of restricting private ownership was first elaborated in the Fomento case.16 In this case,

the Court was concerned with whether access to a public beach could be restricted by private

entities.17 The Court held that the fundamental principle behind whether such resources could be

restricted was that certain public resources were so valuable that they could not be enjoined or

entrusted to private players, and it was the State’s duty to protect and preserve them for the

common good; thus, restricting them from private ownership and having the government hold

them in public interest.18

The Supreme Court of California, in the National Audubon Society 19 had, in laying down the

substance of this doctrine, held that in the context of the State’s duty over these resources, every

10 M.C. Mehta v. Kamal Nath and Ors., (1997) 1 SCC 388 at ¶ 25.11 Article 14 guarantees the Right to Equality under the Constitution of India. “ Article 14: Equality before law The

State shall not deny to any person equality before the law or the equal protection of the laws within the territory of

India Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth.” 12 Reliance Natural Resources Limited v. Reliance Industries Limited, (2010) 7 SCC 1, ¶ 84-87. This effectively

places a deontological imperative on the government to deal with public goods in a method that preserves or bestutilizes them; depending on the situation at hand.13 The Illinois Central Railroad Co. v. The People of the State of Illinois 146 U.S. 387 (1892).14 Supra note 9.15 Id . at ¶ 27.16 Fomento Resorts and Hotels Limited and Anr. v. Minguel Martins and Ors., (2009) 3 SCC 571.17 Id. at ¶ 10.18 Id. at ¶ 40.19 National Audubon Society v. Superior Court of Alpine Country (1983) 33 Cal.3d 419.


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action of the State in this regard must be held to the highest form of judicial scrutiny and this must

be carried out in two contexts; these being, the responsibility of the State to act for the public good

with regard to these resources, and the State’s position as a trustee of these resources.20 In the

Indian context, the Intellectuals case adopted this doctrine, while modifying it slightly.21 Here, the

Court reimagined the doctrine to imply that the State’s role as trustee would not completely

prohibit the alienation of these resources to private property but imposes a high level of scrutinyover any actions that involve such property. Furthermore, the Court went on to hold that there is a

compulsion on the State to act in the public interest, while dealing with any such property. The

idea of public trust and the common good is also enshrined in Article 39 (b) of the Constitution of

India,22 which as a Directive Principle of State Policy

23 enjoins upon the State a responsibility to

ensure that the management and distribution of natural resources is done so as to best preserve the

‘common good’.

Once the doctrine of public trust (as applied to public goods) has been established, the next

question that arises is the extent of its application. The Courts were forced to consider whether this

doctrine applies only to forests, minerals and sea water, or whether it could be broadened past that.

This question was discussed in the Reliance Infrastructure case 24 where the Court held that there

was a need to broaden the doctrinal application beyond only environmental resources and

jurisprudence; it is important to note that the Court did not undermine the importance of

environmental resources by expanding the scope of the doctrine.25 These views echo a judgment of

the Court in the Cricket Association of Bengal case 26 where the Court held that airwaves were

public property, and the government must allow for their distribution either through a regulating

central authority or by regulating the grant of licenses to certain private bodies for the same

purpose.27 By bringing airwaves within the ambit of ‘public property’, the Court brought all policy

decisions taken with respect to them under the aegis and subject to Articles 19(2) and 14 of the

Indian constitution. Thus the idea of ‘public good’ has been applied by Courts to a variety of

situations, creating a clear nexus between development policies and the environment. The Court,

in particular has endeavoured to ensure that decisions as wide-ranging as airwaves distribution and

fixing fuel prices are subject to potential impacts on the environment. At this juncture, perhaps it would be prudent to note that the application of Article 14 takes centre-stage when one analyses

government involvement in the 2G spectrum allocation, and the Court’s analysis of the same in

both the 2G cases.

20 See generally supra note 9, at ¶ 24, where the Court quotes the relevant portion of the judgment of the Supreme

Court of California.21 Intellectuals Forum, Tirupathi v. State of A.P. and Ors , (2006) 3 SCC 549.22 Constitution of India, Article 39(b) states that “The State shall, in particular, direct its policy towards securing

that the ownership and control of the material resources of the community are so distributed as best to subserve thecommon good.” 23 The Directive Principles of State Policy are guidelines laid down for central and State Governments to follow

while formulating policies in the governance of the country. While they are described as being fundamental to the

governance of the country, they remain expressly non-actionable in a Court of law.24 Reliance Natural Resources Limited v. Reliance Industries Limited (2010) 7 SCC 1.25 Id. at ¶ 191-92.26 Secretary, Ministry of Information & Broadcasting, Govt. of India v. Cricket Assn. of Bengal, (1995) 2 SCC 161.27 Id. at ¶ 24.


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III. THE POLICIES THAT A LLOCATE COAL R ESERVES

Before analysing the 2G cases, it would be pertinent to briefly discuss the policies of the

government which are relevant to the coal controversy. It is also important to facilitate

understanding through the examination of general State policy pertaining to coal and mineral

exploitation. The answers and observations developed through the analysis of the spectrumallocation policies would be crucial to understanding the direction that the Court might take in

delivering its judgment on a policy for coal allocation.

The genesis of coal block allocation by the government to private players lies in the Coal Mines

(Nationalisation) Act, 1973, amended in June 1993. This Act essentially allows companies engaged

in power generation to carry on coal mining for their captive use, and this mining can then be

employed in their captive use in iron and steel production, power generation, and cement

production.28 The context of this legislation may lie in the Constituent Assembly debates, where

Dr. B.R. Ambedkar, along with others called for a categorical clause in the Constitution that

prohibited the use and exploitation of coal mines by private players. While this debate resulted in

the inclusion of Article 39(b) of the Constitution, it did not create a binding mandate on thegovernment, and the idea of preserving and protecting the common good remained in the policy

recommendations for the State in the form of the Directive Principles.29

This idea of serving the ‘common good’ was invoked both in the preamble of the original Coal

Mines (Nationalisation) Act of 1973 and during the recent controversy, when, while justifying the

1993 Amendment, the government used the notion of ‘common good’ to justify its actions.30 The

Government took the position that allowing private players to exploit the coal mines for their

captive use would leave the state in a position to ensure the distribution of these resources so as to

best ‘serve the common good’.31 It is important to note that the original Coal Mines Nationalisation

Act was held to be constitutional by the Court.32

Whether allocating blocks after a screening process (the government’s stand) or auctioning them to

the highest bidder better serves the common good can only be settled by a Court of law.

Meanwhile, another key development in the government’s coal and mineral allocation policy was

28 Preamble, Coal Mines Nationalisation Act, 197; See also V Krishna Ananth, Coalgate: A skewed debate, 47(40)

ECONOMIC AND POLITICAL WEEKLY 22 (2012).29 Id .30 Id.31

Prime Minister Manmohan Singh said, “ Allocation of coal blocks to private companies for captive usecommenced in 1993, after the Coal Mines (Nationalisation) Act, 1973 was amended. This was done with the

objective of attracting private investments in specified end uses. As the economy grew in size, the demand for coal

also grew and it became evident that Coal India Limited alone would not be able to meet the growing demand ”. For

a full text of the statement, see http://pmindia.nic.in/speech-details.php?nodeid= 1208 (last visited Oct. 4, 2012). See

also Id . 32 The Court upheld the nationalisation of coal mines as being in line with the law of the land and in conjunction

with the government’s stated aims of ensuring that the mines and the resources within it are distributed keeping in

mind the greater good See Sanjeev Coke Manufacturing Company vs Bharat Coking Coal Limited, AIR 1983 SC

239 at ¶ 20-23.


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the release of the Hoda Committee report on mining reforms.33 The Committee was tasked with

finding ways to make the mining sector more efficient for domestic and foreign investors, and the

report has laid the foundation for the National Mineral Policy, 2008 and the subsequent draft

Mines and Minerals Development and Regulation Bill, (MMDR) 2011. The National Mineral

Policy identifies the need for legal reform to encourage greater investment in the mining sector34

and the MMDR could possibly be seen as an attempt to implement these aims.

35

Thus, coal and mineral mining in India as a field contains several far-reaching policy measures

dealing with a variety of issues as mentioned earlier. Which of these policies becomes the

dominant discourse, if at all, remains to be seen, and it is interesting to see if the Court can and will

take that decision, when the time comes.

IV. THE SUPREME COURT’S STAND ON THE 2G DEBACLE

The 2G spectrum allocations, the subsequent auction of the 3G spectrum and the alleged illegality

of the former are events that have the potential to shape Indian jurisprudence and policy on the

telecom industry and airwaves for decades. The primary issue in the 2G spectrum allocation wasarbitrary action by the government in allotting the spectrum to favoured players and violating

Article 14 in the process. The Court dealt with the issue in the Tata Cellular case 36 where the Court

held that the government’s right to choose the best possible tender for a particular telecom

operation did not violate the provisions of Article 14 by virtue of being arbitrary, since the

government was in a position to ask bidders to meet certain requirements. While not identical to

the 2G case, this judgment provides an insight into the power of governments to allocate spectrum

and the conditions that they must fulfil while doing so.

The 2G spectrum allocation prima facie appears to be an innocuous exercise in the government’s

policy to exert its inherent power. Significantly, however, this spectrum was not just a standard

allocation process that had certain pre-set criteria and mandated companies to comply with a range

of requirements. The sequence of events that resulted in the decision to allot the spectrum to

certain companies was the reason for the ensuing confusion and controversy. DoT opened a

sudden window for spectrum allotment without prior notice, and, had, at the last moment,

mandated the submission of new documents and demand drafts within 45 minutes to be

considered eligible for the spectrum. Further, the policy was based on a first come first serve basis

and gave rise to the idea that it was designed to only benefit companies that had prior knowledge of

the change in requirements, implying corruption and nepotism. Additionally, certain

inconsistencies in the manner in which certain companies were given spectrum despite not meeting

33 Government of India Planning Commission, National Mineral Policy: Report of the High Level Committee

(December 2006), available at: mines.nic.in/writereaddata/Filelinks/46ff58f0_rep_nmp.pdf.34 National Mineral Policy §2.1, Ministry of Mines, Government of India (2008).35 From a comparative perspective, this provision seems to mimic some of the provisions of a South African bill on a

similar subject, the Mineral and Petroleum Resources Development Act, 2002 and the Black Economic

Empowerment Act, 2003 Act, a move which might not be best suited for a number of reasons. See Charles Maddox,

Jonathan Burton-Macleod, Jason Jackson & Charles Maddox, Influence of South African Legislation on India’s

Mines and Minerals Bill: Problems and Perils, 47(40) ECONOMIC AND POLITICAL WEEKLY 74, (2012). This article

provides a detailed discussion on why the South African legislations may not be the appropriate reference point for

an Indian framework.36 Tata Cellular v. Union of India, 1994 SCC (6) 651.


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the requirements conferred greater legitimacy to such claims of foul play.37 The first 2G case

38 was

filed by Mr Subramaniam Swamy, among others, against the Government of India, where the

Court analysed the above mentioned fact pattern, and was asked to scrutinise relevant government

policy.

The Court while, looking at the entire process, first relied on EP Royappa

39

to hold that anyarbitrary action of the government with respect to a policy was completely antithetical to the ideas

of equality and fair treatment, and therefore ought to be struck down for being unconstitutional.

The Court sought to analyse the government’s actions in the allocation of the spectrum on this

basis, combined with the enunciation of the public trust doctrine. The Court relied on the doctrine

first established in the RD Shetty 40 case to hold that any state action had to be backed by a fair,

equitable and transparent procedure in which such largesse was distributed, subject to the

provisions of the Constitution. It also relied on the Sachidanand Pandey 41 case to hold that

property held by the State as a trustee of the people could not be distributed arbitrarily by the

executive without adhering to the principles of justice and fairness.

The Court then analysed the various decisions taken by the Telecom Regulation Authority of

India (TRAI) and the DoT to hold that the nature and manner in which these decisions were

taken were contrary to the decisions of the Council of Ministers and were thus to be considered

illegal. It also severely criticised the first come first serve policy that the DoT had adopted, and

held that such a policy had dangerous implications insofar as it allowed companies and entities that

were privy to government dealings and inside decisions to take an undue advantage at worst, and

resulted in companies being allotted resources by mere chance or accident at best. Expanding the

principle discussed in their earlier judgement,42 the Court held that the allocation of resources such

as spectrum should be done by the government in a fair and transparent manner. To this end, the

Court invalidated the allocation of the spectrum carried out by the DoT and passed orders for the

spectrum to be allocated properly through an auction, as had been done in the allocation of the 3G

spectrum.

It is crucial to note that the Court constantly relied on the assumption that auctioning the spectrum

was the best possible way to achieve the public good without really explaining why it had adopted

that particular position. It comes across as a mere assertive declaration by the Court that an auction

is the best possible route. It is because of this that the final order perhaps does not seem as

legitimate given the lack of reasoning behind this principle. Additionally while analysing the issues

in the context of Article 14, the Court did not subject either the auction, or the ‘first come first

serve’ policy to scrutiny under the two-fold test of reasonable equality, particularly the aim sought

37 See Paranjoy Guha Thakurta, Akshat Kaushal, Underbelly of the Great Indian Telecom Revolution, 49(45)

ECONOMIC & POLITICAL WEEKLY EPW 49 (2010). This article may be referred to for a detailed analysis of the facts

leading up to the alleged 2G scam. 38 Centre for Public Interest Litigation and Ors. v. Union of India and Ors, (2012) 3 SCC 1.39 E.P. Royappa v. State of Tamil Nadu and Anr., (1974) 4 SCC 3.40 Ramana Dayaram Shetty v. International Airport Authority of India and Ors, (1979) 3 SCC 489.41 Sachidanand Pandey and Anr. v. State of West Bengal and Ors , (1987) 2 SCC 295.42 Centre for Public Interest Litigation and Ors. v. Union of India and Ors., (2012) 3 SCC 1 at ¶ 71-76.


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to be achieved through particular policy of “reasonable” classification.43 This judgement can also be

criticised on the basis of the Balco 44 case, where the Court held that it had no jurisdiction to rule on

matters of policy since that domain was the expertise of the executive. Given that Balco dealt with

the divestment of a company, it is rather curious as to how the Court refrained from ruling on

government policy in that regard, but saw no problems with making policy recommendations when

it came to the question of allocation of resources.

Most of these questions were answered in the 2G Presidential Reference ,45 where the President of

India, in exercise of her powers under Article 143(1)46 of the Constitution asked the Court to

provide an opinion on certain questions of law that had arisen in the aftermath of its earlier

judgement. These questions revolved fundamentally around whether an auction was the only way

to allot natural resources, and if so, whether such a call could be taken by the Court, given that it

was interfering directly in policy matters.

Through the Presidential Reference , the Court largely vindicated the Government’s stand,

particularly on the issue of auctions, the manner of resources and the appropriate domain of policy

matters, particularly in the realm of distribution of resources. It once again scrutinised the public

trust doctrine in great detail along with the mandate of Article 14 of the Constitution to reiterate

the settled law that the State had to act in a fair and equitable manner in distributing natural

resources, given its position as a trustee of the resources on behalf of the people.47 It further delved

into the realm of legitimacy in policy-making and relied on the Delhi Science Forum 48 case in

addition to BALCO . In Delhi Science Forum, the Court had held that the appropriate forum for

discussing the merits and demerits of a particular Government policy was the Parliament, and that

the Court’s jurisdiction could not be invoked unless the legality of the policy was disputed, and that

it could not, of its own volition, issue directions and orders.49 Therefore, the Court held that it

could not rule on policy matters and, hence, could not mandate an auction as the best and only

possible way to distribute natural resources.50 The Court held that auction as a policy move could

not be judged to be the best possible measure since it had its own demerits, and further, it could

not be declared as a constitutional mandate under Article 14. 51 To illustrate the inadequacy ofauction, the Court took an example of the allocation of coal blocks under the MMRD Act.

52 It was

held that a policy of first come first serve, however dangerous it may seem, could not be struck

down in favour of auctions on the grounds of the possibility of misuse since according to the Court,

43 The test of ‘reasonable classification’ was created under the ambit of arti cle 14 of the Constitution as a means of

ensuring that policies did not violate the guarantee of equality under the Constitution. Under this test, any

discriminatory measure that created a ‘different’ policy for a certain class of individuals or groups had to be justified

on a two-fold basis: i) that the classification which creates this exception is reasonable, and ii) that the classification

is in consonance with a legitimate policy aim and will help achieve said aim.44

BALCO Employees' Union (Regd.) v. Union of India and Ors. (2002) 2 SCC 333.45 In Re: Special Reference No. 1 of 2012, (2012) 10 SCC 1. Hereinafter ‘Presidential Reference’. 46 Article 143(1), Constitution of India.47 Supra note 45, at ¶ 104-105.48 Delhi Science Forum and Ors. v. Union of India and Anr. (1996) 2 SCC 405.49 Supra note 45, at ¶ 140-144.50 Id . ¶ 146-148.51 Id. at ¶ 115-120.52 Id. at ¶ 80 135.


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no policy was without flaws.53 Further, the Court observed that having a uniform one size fit all

policy would hinder other alternate government policies, like the MMRD Act.54 It finally held that

such a decision was ultimately the domain of the Government which was in the best place to

decide the best method to follow, given the nature of the policy and the resource in question.55

The Presidential Reference judgment essentially ‘remedied’ the apparent flaws in the earlier judgement, and the holding allowed the Government to gain some much-needed legitimacy in the

entire debacle surrounding the allocation. The Court did not however, reverse the orders in the

earlier judgment stating that it did not intend to challenge the ‘correctness’ of the earlier

judgement. At the same time, the judgment nullified nearly every substantive justification that the

2G case had employed while declaring that auctions were the best solution. Thus, while not

directly militating against the Court’s earlier holding, the judgment essentially discredited auctions

as a legitimate or desirable means of allocation of resources, particularly in the framework within

which it had been envisioned earlier. It therefore, practically destroyed the precedential value of

the Court’s reasoning in the 2G case.56 As a result, while the policy to carry out mandatory auctions

for the allocation of radio spectrum stayed in place as per the directions of the earlier case, the

reasons behind such policy were completely nullified by the decision of the Court in the

Presidential Reference, creating a rather confusing legal position on the allocation of spectrum.

Simultaneously, the revised 2G auction that subsequently took place turned out to nothing short of

anti-climactic with exceedingly low bids and resultantly low revenue returns,57 once again casting

doubt on the CAG’s stand and vindicating the government’s position.

Thus, while the question of whether an auction is the best possible route to distribute natural

resources has arguably been settled by recent events, the question as to the final arbiter on policies

that are to be adopted still remains, and it is in that context that this paper seeks to critique the

Presidential Reference judgment.

V. DR . FREDMAN AND THE P ATH THAT THE COURT COULD H AVE CHOSEN

Owing to this conservative approach taken by the Indian Supreme Court, it would perhaps be

prudent to analyse the work of Sandra Fredman. Dr. Fredman argues that courts must take a more

proactive role in policy making, particularly with respect to the preservation of economic and social

rights. This is in direct contrast to the approach of the Indian Courts and it might be one that they

should consider adopting. Dr. Fredman seeks to establish a new paradigm for Courts and the state

in the context of policy-making by reinventing the present system of democracy to confer more

room to the judiciary in the realm of carrying out positive duties (also often referred to as

economic and social rights). Dr. Fredman makes the argument that in the current paradigm,

53 Id. at ¶ 135.54 Id. at ¶ 80.55 Id. at ¶ 146-148.56 Sudhir Krishnaswamy , The Supreme Court on 2G: signal and noise, available at: http://india-

seminar.com/2013/642/642_sudhir_krishnaswamy.htm.57 2G Auction heads for a washout as govt. falls Rs 30,000 crore short of target , IBN LIVE,

Nov. 13, 2012, available at: http://ibnlive.in.com/news/2g-auction-heads-for-a-washout-as-the-govt-rs-30000-cr-

short-of-its-target/305344-7.html.


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Courts operate as an adversarial forum where their primary role is to adjudicate over disputes

between parties that involve questions of law.58 It is the settlement of these disputes that gives rise to

what evolves into the law on the subject. However, this system does not in any way allow for a

positive role to be ascribed to the Courts, ascribing no positive duties to the judiciary. She argues

that any attempt by Courts to go beyond their assigned roles and assume positive duties of policy-

making has been met with a great deal of hostility.

59

Fredman envisions a framework where the present system of participative democracy granting

legislative supremacy to the Parliament is replaced by one where governments are prepared to

negotiate and debate their policy aims with a variety of stakeholders. She argues that Courts ought

to have the power to enforce such a system. This has the implication of Courts creating law

through this process.60

The focus of her analysis lies on the manner in which Courts normally seek to enter into the realm

of law-making. She begins this understanding by first explaining the dynamic of rights protection

and the manner in which Courts and Parliament approach the protection of positive and negative

rights.61 Before delving into the role of Courts in a deliberative framework, she first tackles the

various oppositions to an increased role of a Court in a democratic framework before carving out

her vision of creating a more democratic role for Courts. She makes a number of comparisons to

the South African judicial decisions to show how Courts can in fact, create a paradigm for

deliberative democracy.62

Dr. Fredman’s vision of a deliberative system hinges on establishing three core features:

Accountability, Participation and Equality.63 In keeping with the spirit of these values and their role

in a legal system, she does not expect Courts to completely challenge or overturn legislative

policies. Rather, her emphasis is on the requirement of legislators to justify their policies and

decisions before the Courts in order to ensure coherence with the law.64 In this context, therefore,

accountability would mean that the legislators must explain to the Court the manner in which they

have arrived at a particular decision. Similarly, the element of participation is achieved when theCourt in assessing the decision requires input from multiple stakeholders to ensure that all possible

concerns are addressed in a particular forum.65 In this same transaction, the element of equality is

best achieved when the Courts consider the best interests of all possible groups in society, from the

strongest to the weakest, in ensuring the validity of a particular decision or law.66 She finds this third

aspect of equality the most problematic to actually implement, owing to the fact that Courts may

sometimes exist as elitist institutions, and consequently display lack of accessibility. According to

her, this may create a scenario where all interested parties are not necessarily given equal

58

Supra note 9 at 3.59 Id. at 4.60 Id .61 Id. at 6-8.62 Id . at 21.63 Id. at 11.64 Id. at 13.65 Id. at 15.66 Id. at 16.


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attention.67 At the same time, she argues that Courts functioning in such a system may then look

beyond the interests of the litigants themselves and they would necessary accommodate large

interests in any decisions scrutinising the acts of the legislature or executive.68 Further, her emphasis

on the deliberative aspect of this system means that Courts don’t simply disqualify acts of the

governments; rather they create an arena where such acts are questioned, discussed, heard and

finally, a decision is taken on the efficacy of the discussion.

This holistic process and the increased influence of Courts that comes with it, allows for the entire

process of decision-making to be more inclusive, and opens up the process to a wider range of

concerns. A process that does not allow for this kind of increased engagement with the Court

would create an insular system that may not necessarily allow for effective policy-making to take

place. The fact that parliament is only answerable to the electorate once in a period of 4-5 years,

and immune from judicial or any other form of oversight would severely isolate its decision-making

process from a substantive point of view. For instance, in the case of resource allocation, a

deliberation process with the Court would allow for multiple competing interests to be considered,

before deciding on a particular method of resource allocation. The Court would be more likely to

understand the impact of such a decision on vulnerable individuals and ask the state to explain the

manner in which these individuals would be taken care of, and the resultant consequences. In the

absence of such a forum however, the government may not be as willing to consider such a

diversity of interests, especially if they are not politically relevant.

At the same time, this kind of increased judicial role also runs the risk of judicial activism that may

encroach on the parliament’s power and freedom to make laws. As Dr. Fredman herself notes,

through her observation of the South African experience, that part of the reason behind the South

African success was the Court’s willingness to respect the parliament’s authority and not stray too

far into the realm of judicial activism.69 Other systems however, may not be as effective in ensuring

a clear demarcation of functions, especially when there is such a wide inter-mixing of functions

across sectors. Secondly, the long decision time would also result in policies being unnecessarily

delayed, which may not be desirable for a government that needs certain policies to be effectivelyand quickly dispatched. Once again, in the resource allocation example, Courts may end up

making decisions that are influenced by variables not related to the specific question of the

particular policy in question. The contentious nature of the question of resource allocation may

also force the Court to contend with a variety of competing interests, which might lead to a kind of

paralysis of policy with regard to the harvesting of the resource.

That being said, a system of democracy with the involvement of the Courts in policy making (with

respect to economic and social rights) does hold a lot of value for the kind of multi-dimensional

framework that it is able to provide.70 The manner of functioning does not necessarily have to be in

67 Id. at 18.68 Id . at 19.69 Id. at 27.70 Id . Allocating a 2G spectrum in many senses warrants the same kind of intervention as the intervention required in

Economic and Social Rights. The intervention is almost identical, as in both cases, it deals with the court intervening

in an issue of governmental policy in order to preserve a positive right to a certain good. Here it is the positive right

to a spectrum, a clean environment or more generally to things considered the commons. In the case of Economic

and social rights, the Court protects a positive right towards housing, food etc. It warrants an identical intervention

into the realm of public policy by the Court.


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a tiered setup, it is enough that the Court is able to review the government’s decision on a variety of

grounds. In the context of the 2G controversy for instance, with competing views and theories

flying around, and the government coming under fire for the decisions it had ostensibly taken, the

Court could perhaps have used this opportunity to employ a more deliberative process in deciding

the merits of the policy in question.

The system of the Presidential Reference therefore, needs some examination, specifically with

regard to the claim that Courts currently do not have as active a role in the current framework. The

Presidential Reference case was a proceeding initiated solely at the request of the President and its

purpose was in fact, to bring about clarity on a matter of law which was the subject of wide

speculation and controversy. Under Article 143(1) of the Constitution, the Court can specifically

be asked for its opinion on a matter of law by the President. In this situation, not only is the

traditional adversarial system of justice dispensed with, the Court also has the power to seek

stakeholder inputs, in formulating its opinion. This is similar to the framework suggested by Dr.

Fredman, and most interestingly, the pronouncement in this unique situation will be a point of law

that has been settled, conferring on the Court an active role in law making.

As a result, the Court in the Presidential Reference should have taken a more proactive stand

instead of being deferential to the Government’s policy, given the specific circumstances. The

Court had a larger mandate assigned to it by the reference, and it was incumbent upon it to live up

to its mandate. Under this, the Court could have, and arguably should have consulted stakeholders

to arrive at a definitive answer to the question of whether, i) there should have been a uniform

policy for the allocation of natural resource; and ii) if yes, what should it have been and who should

have been considered the final arbiter of this policy (whether it should have been only the

Government, or the Courts and the government working together); and finally iii) if not, then

again, who would decide the policy (the Government in its entirety or the Courts, given the

resources are largely public goods). These questions could have allowed the Court to legitimately

assume an active role in the Indian law making framework and allowed for a definitive policy to be

created.

VI. THE PUBLIC PROCUREMENT BILL: A N A TTEMPT AT LEGISLATIVE ORDER

A MIDST THE CHAOS

In terms of creating such a policy, The Public Procurement Bill, 2012 (henceforth referred to as

‘the Bill’) is another variable that may have shed some clarity on methods of resource allocation. A

number of provisions in the Bill could have been used to avert the mess that was created by the 2G

spectrum allocation. Firstly, the Bill prescribed “Open Competitive Bidding” as the preferred

mode of allocation, while leaving room for other methods that may be adopted by the government.

The other methods in question have also been detailed in a separate schedule provided for in the

Bill.71 A policy framework such as this could actively ensure greater clarity on the manner of

allocation of resources, and possibly avoid the confusion created by the Courts in the 2G debacle.

It could have allowed the Court to question the government’s decision to opt for a method other

71 Alok Rewat and Nithin Nemani, Legislative Brief the Public Procurement Bill, 2012, PRS LEGISLATIVE

R ESEARCH available at: http://www.prsindia.org/uploads/media/Public%20Procurement/Legislative%20Brief

%20Public%20Procurement%20Bill,%202012.pdf.


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than open bidding while also qualifying the other possible methods on grounds of efficacy and

possible success.

Secondly, the Bill also mandates the creation of a central portal where all bid-related information

must be provided for the perusal of all parties concerned, along with a dispute redressal forum for

aggrieved unsuccessful bidders.

72

This feature could perhaps have been the most crucial element intackling the ostensibly partisan behaviour exhibited by the DoT in the allocation of the 2G

spectrum controversy. By forcing the government to make all bid related information widely

accessible, the information asymmetry that allowed certain companies to benefit would be near-

impossible to accomplish, and the Court would have clear grounds to identify the corruption

involved in the allocation, rather than rel ying on speculation. Finally, the Bill identifies a “code of

integrity” for all parties involved in the bidding process. The purpose of this code is to create an

umbrella term that clearly prohibits a range of acts that may interfere with the bidding process and

makes those acts actionable. Once again, the actions of the government in the 2G allocation could

be linked to at least two of the acts mentioned in the Bill, clearly providing an avenue for

investigating agencies and Courts to find concrete instances of wrongdoing by the government in

the realm of resource allocation. A clear-cut, organised allocation would significantly reduce the

chances of manipulation of the system to serve the whims of a few, and avoid the ‘blame game’

adopted by various players in the coal allocation controversy 73.

However, certain flaws in the Bill must be noted before wholeheartedly endorsing it as a solution

to resource allocation problems. Firstly, the Bill allows the government a fairly wide berth in

exempting a number of procurements from the scope of the Bill. Such a wide berth could allow

the government to abuse the allocation system by escaping the elaborate measures suggested by the

Bill, and the resultant allocation would be subject to the vagaries of government functioning at the

prime root of the 2G spectrum controversy. There is no provision in the Bill for the demarcation

of certain resources as being mandatorily under the scope of the provisions laid out in the Bill,

which might run the risk of defeating the purpose of having a uniform, effective resource allocation

policy. Secondly, the Bill leaves several crucial terms like “open competitive bidding”; “fair andequitable treatment” and even the “code of integrity” undefined, which widens the scope for

ambiguit y. The term ‘code of integrity’ aside from laying down certain acts which must be included

within its ambit, leaves it to the Central Government to prescribe actions within the definition of

the term. Given that the Central Government was at the centre of both the 2G spectrum and the

coal allocation controversy, it seems rather counter-intuitive that they be the authority that decides

the nature of acts that may hurt the ‘integrity’ of the bidding process. As for the terms like ‘fair and

equitable treatment’ and ‘competitive bidding’, the lack of any specific definition means that they

are open to interpretation by Courts, and even governmental authorities, again militating against

the need for a uniform allocation model. The Bill therefore, suffers from the lack of an

independent existence of its own. With a number of crucial features and terms of the Bill open to

governmental interpretation and modification, the Bill runs the risk of being diluted bygovernments over the course of its operation. The Bill would have been in a far stronger position

had there been an independent authority that could interpret and mould the provisions of the Bill

as per the specific circumstances of resource allocation, while also being able to impose limits on

72 Id.73 Aman Malik, Coal block controversy: A news round-u p, LIVE MINT, 2012, available at:

http://www.livemint.com/Politics/tJIXT99jAiQNyBfPbjmmkJ/Coal-block-controversy-A-news-roundup.html.


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governmental authority in the exercise of distribution of important natural resources. At the very

least, the Bill could have benefited from lesser room given to the Central Governments to modify

and limit its scope.

Thus, the Bill may have been a viable solution to a number of issues plaguing resource allocation

that have been laid bare by the 2G and the coal allocation controversies, as it created a frameworkin which these issues could have been better analysed. A structured process that requires the

government to subject all its natural resource procurements to the scope of the Bill could allow for

a better realisation of the notion of “public good” in the exploitation of natural resources, and

ensure that the spirit of the Bill is not compromised. While it may have lapsed for now, and the

arrival of the new government casting uncertainty over its return, it does serve as a fascinating

template for any future legislative attempts to codify the process of natural resource allocation.

VII. CONCLUSION

The questions posed before the Court in the Reference could have had far-reaching implications

for other realms of resource distribution, particularly the coal allocation for instance, and allowedfor greater clarity in the law. The absence of a comprehensive legislation such as the Public

Procurement Bill meant that the Court could have provided some much needed direction to the

murky area that is the law governing the allocation of natural resources. While the legislature took

a welcome step in attempting to bring some organisation to the subject, it was an attempt that was

only half-hearted, and while it may still come back and improve the situation, the current status

quo is likely to remain unchanged. The Court could even have taken some cues from the bill and

attempted to suggest some policy manoeuvres that may have resolved the ambiguity in the resource

allocation paradigm. Instead, it chose to create a dichotomous policy stance that has only added to

the confusion about the ‘right’ legal approach on deciding how best to allocate the natural

resources of the country. The opinion may have been tendered to the President but the Court has

not overturned or questioned the legality of the earlier judgment, leading to confusion on similar

matters that could be brought before the Court in this regard. They had the potential to usher in a

new era of policymaking and jurisprudence and allow the Court to ensure perhaps a more effective

mechanism for resource utilisation and over time, create a more detailed and nuanced definition

of the vague term that has come to be known as the ‘common good’.

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Documents

Natural Resource Project 1