Auctions not only way to allocate resources: SC

The Supreme Court (SC) on Thursday made it clear that public auctions are not the only method for allocating natural resources. It also said the allocation of such resources is a matter of policy which courts cannot interfere with unless it is ‘arbitrary’ or ‘capricious’.

The court was giving its opinion on a presidential reference seeking clarity on a 2G spectrum case judgment delivered by it in February 2012 that said auction should be the way to allocate resources. The five-judge bench led by chief justice SH Kapadia disapproved the 2G judgment saying that it did not consider a plethora of laws and judgments that prescribe methods, other than auction, for disposal of natural resources. The SC, however, clarified that its opinion has no bearing on the 2G order.

While chief justice Kapadia, justices DK Jain, Dipak Misra and Ranjan Gogoi delivered the main opinion, justice JS Khehar made observations in a separate but concurring 50-odd page order.

The verdict comes as a relief to a government that is battling allegations of graft due to the non-competitive allotment of coal blocks to private companies. This came after a CAG report said the decision not to auction coal blocks led to a loss of Rs1.86 lakh crore to the exchequer. Telecom minister Kapil Sibal said institutions like CAG “might have perhaps unwittingly interpreted the SC judgment relating to the 2G case and thought that all natural resources must be auctioned,” he said.

The SC has provided “Constitutional clarity” on the issue and “we welcome it.”

Law minister Salman Khurshid said the verdict was a “vindication” of the government’s stand on the issue. He said it would give the government important guidance as it takes its public policies forward.

Answering only the key issue raised by the president, whether auction of all natural resources is warranted in law, the bench said the methodology pertaining to the disposal of natural resources “is clearly an economic policy”. “It entails intricate economic choices and the court lacks the necessary expertise to make them”. However, if 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 maximisation by private players, it can be scrapped for being violative of Article 14 of the Constitution, the court added.

It said that court can’t mandate one method to be followed in all facts and circumstances. Thus, auction is not a “constitutional mandate”. “Common good” is the “sole guiding factor for distribution of natural resources”, it said. Auctions may be the best way to maximise revenue but revenue maximisation may not always be the best way to serve public good, the judges said.

It also held that there’s no “constitutional imperative” in the matter of economic policies and Article 14 does not redefine any economic policy as a constitutional mandate.
The allegation that a policy decision could have the “potential for abuse” cannot be the basis for striking down a method as ultra vires the Constitution. Judges said the actual abuse must be pinpointed and tested on the anvil of constitutional provisions. The bench warned that the state’s action has to be fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism and favourable of promoting healthy and equitable treatment.

Otherwise, the government’s decision is open for judicial action, the apex court said.