NATURAL RESOURCES: Supreme Court's opinion

ON September 27, the Supreme Courts five-judge Constitution Bench headed by the outgoing Chief Justice, Justice S.H. Kapadia, gave a unanimous opinion on a reference from the President on the best way to allocate natural resources. On February 2, the courts two-judge Bench had cancelled 122 telecom licences issued on a first come, first served basis (FCFS) while allocating spectrum in the 2G band. It had held that the FCFS principle was inherently non-transparent and unfair and that auction was the only transparent method for the distribution of national wealth.

In its September 27 opinion, the Bench clarified that the 2G case did not deal with allocation of natural resources other than spectrum. Secondly, it held that auction may be the best way to maximise revenue, but revenue maximisation may not always be the best way to subserve the public good while distributing natural resources. Again, even if revenue maximisation was the object of a policy as the best way to subserve the common good, auction would be one of the preferable methods, the Bench clarified.

It said the methodology for disposal of natural resources was clearly a matter of economic policy, which entailed making intricate choices, for which the court did not have the expertise.

The alienation of natural resources, the Bench said, was a policy decision and adopting the means for the same was the prerogative of the executive. However, it said that when such a policy decision was not backed by a social or welfare purpose, adoption of means other than those that were competitive and that maximised revenue may be arbitrary. The court warned that if the executive action failed this test, then it could, in exercise of the power of judicial review, quash it as arbitrary, unfair, unreasonable and capricious.

Critics of the government interpreted the opinion to suggest that the court disapproved of any method other than auction if the natural resources were made available by the state to private persons for commercial exploitation exclusively for individual gain. They also drew attention to the concurring opinion of Justice J.S. Khehar, one of the five judges, suggesting that allocation of coal blocks to private companies for commercial use without auction would be invalid.

V. Venkatesan