Auction not the only method to allot natural resources: SC

The presidential reference had sought clarity over the February 2 verdict which canceled 122 controversial licences given by the government. The apex court had then said that resources should be allotted through auctions,causing the government to question through the reference if the verdict implied that all natural resources,and not just spectrum,had to be mandatorily auctioned.

“The methodology pertaining to disposal of natural resources is clearly an economic policy. It entails intricate economic choices and the court lacks the necessary expertise to make them. As has been repeatedly said,it cannot,and shall not,be the endeavour of this court to evaluate the efficacy of auction vis-à-vis other methods of disposal of natural resources. The court cannot mandate one method to be followed in all facts and circumstances. Therefore,auction,an economic choice of disposal of natural resources,is not a constitutional mandate,” the bench said.

The bench noted that the 2G case did not deal with modes of allotment for natural resources other than spectrum. It noted that if the 2G judgment was to be read as holding auction as the only permissible means of disposal of all natural resources,it would result in quashing of several laws that prescribed other methods and a court would not do so without allowing every law to be tested on merit.

Meanwhile,in a separately worded concurrent verdict,Justice J S Khehar noted that the presidential reference had not been made to seek an “innocuous advice” when the the central government was already alive to the fact that there are natural resources which can only be disposed of by way of auction.

Khehar also took “judicial note” of the political din in Parliament over allotment of coal blocks following the CAG report which said the government had suffered huge losses due to irregularities in allotments.

“One is compelled to take judicial notice of the fact,that allotment of natural resources is an issue of extensive debate in the country,so much so,that the issue of allocation of such resources had recently resulted in a washout of two sessions of Parliament,” said Khehar.

He added that while the court was not to be a part of the political debate,it appeared the answer to the reference was sought by the government to correctly understand the legal and constitutional parameters so as to avoid such controversies.

Khehar said that when natural resources were to be made available by the state to private persons for commercial exploitation exclusively for their individual gains,the state’s endeavour “must” be towards maximization of revenue returns and auction or competitive bidding could be the way.

“Where revenue maximization is the object of a policy,being considered qua that resource at that point of time to be the best way to subserve the common good,auction would be one of the preferable methods,though not the only method. Where revenue maximization is not the object of a policy of distribution,the question of auction would not arise. Revenue considerations may assume secondary consideration to developmental considerations,” the bench said.

“In our opinion,auction despite being a more preferable method of alienation/allotment of natural resources,cannot be held to be a constitutional requirement or limitation for alienation of all natural resources and therefore,every method other than auction cannot be struck down as ultra-vires the constitutional mandate…alienation of natural resources is a policy decision,and the means adopted for the same are thus,executive prerogatives,” said the court.

The bench however declined to answer four other questions in the reference after noting that these would have a direct bearing on the mode of alienation of spectrum and hence would interfere with the 2G verdict. These questions referred to the scope of judicial review and interference with policy decisions.

Play by ear: what court said

Auction cannot be the only permissible method for disposal of natural resources across all sectors,in all circumstances.

Auction cannot be held to be a constitutional mandate since it is only an economic policy and just one of the several price discovery mechanisms.

Courts lack expertise to conduct a comparative study and prescribe the most efficacious mode of distribution of natural resources,hence it should be left to the executive to decide on a case-to-case basis.

2G verdict laid down auction only for allocation of spectrum and not for other natural resources.

Any method of distribution that can fulfill the purpose of serving common good and does not violate the constitutional principle of equality will be valid.