Genuine policy can become 'illegitimate' if acted unfairly: SC

The Supreme Court, which on Thursday held that auction is not the only permissible method for disposal of natural resources, cautioned that a legitimate policy too can become "illegitimate" if pursued unfairly.

Giving a hypothetical example of coal block allocation, the court said natural resources could be allocated "free of cost" if it subserves the "common good" like providing electricity at low tariff through use of coal. "The legality and constitutionality of a policy is one matter and the manner of its implementation quite another. Even at the implementation stage a forthright and legitimate policy, may take the shape of an illegitimate stratagem," said Justice JS Khehar.

The example assumes significance in the backdrop of the controversy over the coal block allocation as the court explained that the natural resource need not necessarily be auctioned when it is given to companies for power generation.

It stated that the legislative policy incorporated in Section 11A of the Mines and Minerals (Development and Regulation) Act, in short MMDR Act, which provides that a firm can be awarded the coal block without any auction if it promises to generate power.

"If it intends to best subserve the common good, it may well be valid even in a situation where the material resource is being granted free of cost.

"What appears to be free of cost in the proviso in Section 11A of the MMDR Act, is in actuality consideration enmeshed in providing electricity at a low tariff. The aforesaid proviso may be accepted as fair, and may not violate the mandate contained in Article 14 of the Constitution of India," the court said.

The court said, moreover, if the 2G spectrum judgment is to be read as holding auction as the only permissible means of disposal of all natural resources, it would lead to the quashing of a large number of laws that prescribe methods other than the auction, for example the MMRD Act.

As the Presidential reference is not based on any concrete factual situation, it would be appropriate to hypothetically create one, the court said, adding it would help the decision makers "to appreciate the options available to them" in parting with natural resources.

"Section 11A of the MMDR Act has been chosen as the illustrative provision, to demonstrate how a forthright legitimate legislative policy, may take the shape of an illegitimate stratagem," it said.

Therefore, a forthright and legitimate policy, on account of defective implementation, may become unacceptable in law, it added.