TMI Blog2012 (10) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... conferring private benefits on a limited class of persons. If a contract has been entered into, taking in account the interest of the State and the public, the same would not be interfered with by a Court, by assuming the position of an appellate authority. The endeavour to get the State the "full value" of its resources, it has been held, is particularly pronounced in the sale of State owned natural resources, to the private sector. Whenever the State gets less than the full value of the assets, it has been inferred, that the country has been cheated, in a much as, it amounts to a simple transfer of wealth, from the citizens as a whole, to whoever gets the assets at a discount. The mandate contained in the Article 39 (b) of the Constitution of India that all material resources ought to be distributed in a manner which would "best subserve the common good". It is therefore apparent, that governmental policy for distribution of such resources should be devised by keeping in mind the "common good" of the community i.e., the citizens of this country. It has been expressed in the "main opinion", that matters of policy fall within the realm of the legislature or the executive, and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JJ.] Judges For Petitioner(s) Mr. Goolam E. Vahanvati,AG., Ms. Indira Jaising,ASG., Mr. Devadatt Kamat,Adv., Mr. T.A. Khan,Adv., Mr. Anoopam N. Prasad,Adv., Mr. Rohit Sharma,Adv., Mr. Nishanth Patil,Adv., Mr. Anandh Kannan,Adv., Mr. D.S. Mahra,Adv., Ms. Supriya Jain,Adv., Ms. Sonam Anand,Adv., Ms. Jhuma Sen,Adv.,Mr. Nizam Pasha,Adv. For Respondent(s) Mr. Shanti Bhushan,Sr.Adv., For CPIL: Mr. Soli J. Sorabjee,Sr.Adv., Mr. Prashant Bhushan,Adv., Mr. Kartik Seth,Adv. For Uttar Pradesh: Mr. Shakeel Ahmed,Adv., Mr. Gaurav Dhingra,Adv. For Goa: Mr. Bhavanishankar V. Gadnis,Adv., Mr. Gopal Singh,Adv., Ms. A. Subhashini,Adv. For Andhra Pradesh: Mr. G.N. Reddy,Adv.,Mr. C. Kannan,Adv., Mr. S. Nagarajan,Adv. For Chandigarh: Mr. Ashoka Kumar Thakur,Adv., Mr. Anil K. Chopra,Adv., Mr. Imran K. Burney,Adv., Mr. Firasat Ali Sidiqui,Adv. For Manipur: Mr. Khwairakpam Nobin Singh,Adv., Mr. Sapam Biswajit Meitei,Adv. For Assam: Mr. Navnit Kumar,Adv., Ms. Deepika Ghatowar,Adv., for M/s. Corporate Law Group,Advs. For Mizoram: Mr. Biswajit Deb,Sr.Adv., Mr. Pragyan Sharma,Adv., Mr. Rupesh Gupta,Adv., Ms. Mandakini Sharma,Adv., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Adv., (FIMI) (I.A.1) Mr. Sunil Dogra,Adv., Ms. Kiran Suri,Adv., Mr. S.J. Amith,Adv. For Intervenor (s): Mr. Mohit Kumar Shah,Adv. (Centre for Internet and Society) (I.A.4) Dr. Subramanian Swamy,In-Person Mr. Dipak Kumar Jena,Adv., Ms. Minakshi Ghosh Jena,Adv. Mr. Gautam Narayan,Adv. Mr. K.N. Madhusoodhanan,Adv., Mr. T.G.N. Nair,Adv. OPINION D.K. JAIN, J. [FOR S.H. KAPADIA, CJ, HIMSELF, DIPAK MISRA RANJAN GOGOI, JJ.] In exercise of powers conferred under Article 143(1) of the Constitution of India, the President of India has on 12th April, 2012, made the present Reference. The full text of the Reference (sans the annexures) is as follows: "WHEREAS in 1994, the Department of Telecommunication, Government of India ("GOI"), issued 8 Cellular Mobile Telephone Services Licenses ("CMTS Licenses"), 2 in each of the four Metro cities of Delhi, Mumbai, Kolkata and Chennai for a period of 10 years (the "1994 Licenses"). The 1994 licensees were selected based on rankings achieved by them on the technical and financial evaluation based on parameters set out by the GoI in the tender and were required to pay a fixed licence fee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of the license bore the nomenclature "licence fee and royalty". A sample copy of the 1997 BTS Licenses containing the table setting out the license fees paid by the highest bidder is annexed hereto as Annexure III (Colly). WHEREAS in 1997, the Telecom Regulatory Authority of India Act, 1997 was enacted and the Telecom Regulatory Authority of India (the "TRAI") was established. WHEREAS on 1st April, 1999, the New Telecom Policy 1999 ("NTP 1999") was brought into effect on the recommendation of a Group on Telecom ("GoT") which had been constituted by GoI. A copy of NTP 1999 is annexed hereto as Annexure IV. NTP 1999 provided that Cellular Mobile Service Providers ("CMSP") would be granted a license for a period of 20 years on the payment of a one-time entry fee and licence fee in the form of revenue share. NTP 1999 also provided that BTS (Fixed Service Provider or FSP) Licenses for providing both fixed and wireless (WLL) services would also be issued for a period of 20 years on payment of a one-time entry fee and licence fee in the form of revenue share and prescribed charges for spectrum usage, appropriate level of which was to be recommended by TRAI. The licensees both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. A copy of the 2001 Cellular Licenses, along with a table setting out the fees payable by the highest bidder, is annexed hereto as Annexure VI. WHEREAS in 2001, BTS Licenses were also issued for providing both fixed line and wireless basic telephone services on a continual basis (2001 Basic Telephone Licenses). Service area wise one time Entry Fee and annual license fee as a percentage of Adjusted Gross Revenue (AGR) was prescribed for grant of BTS Licenses. The licence terms, inter-alia, provided that for Wireless Access System in local area, not more than 5 + 5 MHz in 824- 844 MHz paired with 869-889 MHz band shall be allocated to any basic service operator including existing ones on FCFS basis. A detailed procedure for allocation of spectrum on FCFS basis was given in Annexure-IX of the 2001 BTS license. There was no separate upfront charge for allocation of spectrum and the Licensees were required to pay revenue share of 2% of the AGR earned from wireless in local loop subscribers as spectrum charges in addition to the one time entry fee and annual license fee. A sample copy of the 2001 Basic Telephone License along with a table setting out the entry fees is annexed heret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case basis and subject to availability. Licensees had to pay annual spectrum usage charges as a percentage of AGR, there being a no upfront charge for allocation of spectrum. A copy of the 2003-2007 License, along with a table setting out the fees payable, is annexed hereto as Annexure XI (Colly). WHEREAS on 28th August 2007, TRAI revisited the issue of new licenses, allocation of Spectrum, Spectrum charges, entry fees and issued its recommendations, a copy of which is annexed hereto as Annexure XII. TRAI made further recommendations dated 16.07.2008 which is annexed hereto as Annexure XIII. WHEREAS in 2007 and 2008, GoI issued Dual Technology Licences, where under the terms of the existing licenses were amended to allow licensees to hold a license as well as Spectrum for providing services through both GSM and CDMA network. First amendment was issued in December, 2007. All licensees who opted for Dual Technology Licences paid the same entry fee, which was an amount equal to the amount prescribed as entry fee for getting a new UAS licence in the same service area. The amendment to the license inter-alia mentioned that initially a cumulative maximum of upto 4.4 MHz + 4.4 MHz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3G spectrum would stand withdrawn if the license stood terminated for any reason. A copy of the standard form of the amendment letter is annexed hereto and marked as Annexure XVII. WHEREAS letters of intent were issued for 122 Licenses for providing 2G services on or after 10 January 2008, against which licenses (the "2008 Licenses") were subsequently issued. However, pursuant to the judgment of this Hon'ble Court dated 2nd February, 2012 in Writ Petition (Civil) No.423 of 2010 (the "Judgment"), the 2008 Licenses have been quashed. A copy of the judgment is annexed hereto and marked Annexure XVIII. WHEREAS the GoI has also filed an Interlocutory Application for clarification of the Judgment, wherein the GoI has placed on record the manner in which the auction is proposed to be held pursuant to the Judgment and sought appropriate clarificatory orders/directions from the Hon'ble Court. A copy of the Interlocutory Application is annexed hereto and marked as Annexure XIX. WHEREAS while the GoI is implementing the directions set out in the Judgment at paragraph 81 and proceeding with a fresh grant of licences and allocation of spectrum by auction, the GoI is seeking a limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions of law of far reaching national and international implications have arisen, including in relation to the conduct of the auction and the regulation of the telecommunications industry in accordance with the Judgment and FDI into this country in the telecom industry and otherwise in other sectors. Given that the issues which have arisen are of great public importance, and that questions of law have arisen of public importance and with such far reaching consequences for the development of the country that it is expedient to obtain the opinion of the Hon'ble Supreme Court of India thereon. NOW THEREFORE, in exercise of powers conferred upon me by clause (1) of Article 143 of the Constitution of India, I, Pratibha Devisingh Patil, President of India, hereby refer the following questions to the Supreme Court of India for consideration and report thereon, namely: Q.1 Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions? Q.2 Whether a broad proposition of law that only the route of auctions can be resorted to for disposal of natural resources does not run contrary to severa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment of Spectrum from time to time at the auction discovered price and in accordance with laid down criteria during the period of validity of the auction determined price? (ii) Impose a ceiling on the acquisition of Spectrum with the aim of avoiding the emergence of dominance in the market by any licensee/applicant duly taking into consideration TRAI recommendations in this regard? Make provision for allocation of Spectrum at auction related prices in accordance with laid down criteria in bands where there may be inadequate or no competition (for e.g. there is expected to be a low level of competition for CDMA in 800 MHz band and TRAI has recommended an equivalence ratio of 1.5 or 1.3X1.5 for 800 MHz and 900 MHz bands depending upon the quantum of spectrum held by the licensee that can be applied to auction price in 1800 MHz band in the absence of a specific price for these bands)? Q.8 What is the effect of the judgment on 3G Spectrum acquired by entities by auction whose licences have been quashed by the said judgment? NEW DELHI; DATED: 12 April 2012 PRESIDENT OF INDIA" A bare reading of the Reference shows that it is occasioned by the decision of this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1947 And The Part C States (Laws) Act, 1950[[1951] S.C.R. 747], In Re: The Berubari Union and Exchange of Enclaves Reference Under Article 143(1) of the Constitution of India[[1960] 3 S.C.R. 250], In Re: The Kerala Education Bill, 195,7 In Reference Under Article 143(1) Of The Constitution of India[[1959] S.C.R. 995], Special Reference No.1 of 1964[[1965] 1 S.C.R. 413] (commonly referred to as "Keshav Singh"), In Re: Presidential Poll[(1974) 2 SCC 33], In Re: The Special Courts Bill, 1978[(1979) 1 SCC 380], In the Matter of : Cauvery Water Disputes Tribunal[1993 Supp (1) SCC 96 (II)] (hereinafter referred to as "Cauvery-II") and Special Reference No.1 of 1998 Re.[ (1998) 7 SCC 739] Next, it was contended by the learned senior counsel that if for any reason, the Executive feels that the 2G Case does not lay down a correct proposition of law, it is open to it to persuade another bench, before which the said judgment is relied upon, to refer the issue to a larger bench for reconsideration. In short, the submission was that an authoritative pronouncement, like the one in the 2G Case, cannot be short circuited by recourse to Article 143(1). Learned counsel also contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Reference is couched, exhibits mala fides on the part of the Executive. He thus, urged that we should refrain from giving an opinion. Dr. Subramanian Swamy, again vehemently objecting to the maintainability of the Reference, on similar grounds, added that the present Reference is against the very spirit of Article 143(1), which, according to the constituent assembly debates, was meant to be invoked sparingly, unlike the case here. It was pleaded that the Reference is yet another attempt to delay the implementation of the directions in the 2G Case. Relying on the decision of this Court in Dr. M. Ismail Faruqui Ors. Vs. Union of India Ors.[ (1994) 6 SCC 360], Dr. Swamy submitted that we will be well advised to return the Reference unanswered. Mr. G.E. Vahanvati, the learned Attorney General for India, defending the Reference, submitted that the plea regarding non-maintainability of the Reference on the ground that it does not spell out a 'doubt', is fallacious on a plain reading of the questions framed therein. According to him, Article 143(1) uses the word 'question' which arises only when there is a 'doubt' and the very fact that the President has sought the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain observations made as a statement of law in the said judgment which require to be explicated. Referring to certain observations in Re: The Berubari Union and Exchange of Enclaves (supra), learned counsel submitted that this Court had accepted that a reference could be answered to avoid protracted litigation. Learned Attorney General also contended that withdrawal of the review petition by the Government is of no consequence ; its withdrawal does not imply that the question about the permissible manner of disposal of other natural resources, and the issues regarding the environment for investment in the country, stood settled. Stoutly refuting the allegation that the reference is mala fide, learned counsel submitted that in In Re Presidential Poll (supra), it is clearly laid down that the Court cannot question the bona fides of the President making the reference. Mr. T.R. Andhyarujina, learned senior counsel, voiced concerns arising out of an apparent conflict between provisions of the statutes and the judgment delivered in the 2G Case; specifically with reference to Sections 10 and 11 of the Mines and Minerals (Regulation and Development) Act, 1957 (for short, "MMRD Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red, is equally fallacious. It was argued that the principle of stare decisis and the doctrine of precedent are generally accepted and followed as rules of judicial discipline and not jurisdictional fetters and, therefore, this Court is not prevented from re-examining the correctness of an earlier decision. On the contrary, the precedents support the proposition that this Court can, when exercising its jurisdiction under Article 143(1), examine the correctness of past precedents. According to the learned counsel, in Keshav Singh, this Court did examine the correctness of the judgment in Pandit M.S.M. Sharma Vs. Shri Sri Krishna Sinha Ors.[ [1959] Supp. 1 S.C.R. 806] (hereinafter referred to as "Sharma"). Explaining the ratio of the decision in Cauvery-II, learned counsel submitted that it is clear beyond any pale of doubt that the said pronouncement does not lay down, as an abstract proposition of law, that under Article 143(1), this Court cannot consider the correctness of any precedent. What it lays down is that once a lis between the parties is decided, the operative decree can only be opened by way of a review. According to the learned counsel, overruling a judgment - as a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel appearing on behalf of the State of Chhattisgarh, contended that neither history supports nor reality warrants auction to be a rule of disposal of all natural resources in all situations. He referred to decisions of this Court that unambiguously strike a just balance between considerations of power of the State and duty towards public good, by leaving the choice of method of allocation of natural resources to the State, as long as it conforms to the requirements of Article 14. It was pleaded that the State be allowed the choice of methodology of allocation, especially in cases where it intends to incentivize investments and job creation in backward regions that would otherwise have been left untouched by private players if resources were given at market prices. To sum up, the objections relating to the maintainability of the Reference converge mainly on the following points: (i) the foundational requirement for reference under Article 143(1) viz. a genuine 'doubt' about questions of fact or law that the executive labours under, is absent; (ii) the filing and withdrawal of a review petition whose recitals pertain to the 2G Case would be an impediment in the exercise of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon. Nevertheless, the usage of the word "may" in the latter part of Article 143(1) implies that this Court is not bound to render advisory opinion in every reference and may refuse to express its opinion for strong, compelling and good reasons. In Keshav Singh, highlighting the difference in the phraseology used in clauses (1) and (2) of Article 143, P.B. Gajendragadkar, C.J., speaking for the majority, held as follows: "...whereas in the case of reference made under Article 143 (2) it is the constitutional obligation of this Court to make a report on that reference embodying its advisory opinion, in a reference made under Article 143 (1) there is no such obligation. In dealing with this latter class of reference, it is open to this Court to consider whether it should make a report to the President giving its advisory opinion on the questions under reference." Further, even in an earlier judgment in In re: Allocation of Lands and Buildings Situate in a Chief Commissioner's Province and in the matter of Reference by the Governor-General under S. 213, Government of India Act, 1935[A.I.R. (30) 1943 FC 13], the Federal Court had said that even though the Court is within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as a noun, has been described as under:- "Uncertainty of mind; the absence of a settled opinion or conviction; the attitude of mind towards the acceptance of or belief in a proposition, theory, or statement, in which the judgment is not at rest but inclines alternately to either side." The afore-extracted recitals of the instant Reference state that in the current circumstances, certain questions of law with far reaching national and international implications have arisen, including in relation to conduct of the auction and the regulation of the telecommunications industry in accordance with the judgment (2G Case) that may affect the flow of FDI in the telecom industry and otherwise in other sectors into this country. Thereafter, it is also stated that questions of law that have arisen are of great public importance and are of far reaching consequences for the development of the country and hence, it is thought expedient to obtain the opinion of this Court. Question No.1 of the reference reads as follows:- "Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?" At this jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pined as follows: "...It would thus be seen that the questions so far referred by the President for the Advisory opinion of this Court under Article 143(1) do not disclose a uniform pattern and that is quite clearly consistent with the broad and wide words used in Article 143(1)." An analysis of the afore-noted cases, indicates that neither has a particular format been prescribed nor any specific pattern been followed in framing references. The first principle relates to the 'form' and the second pertains to the 'pattern of content'. Holistically understood, on the ground of form or pattern alone, a reference is not to be returned unanswered. It requires appropriate analysis, understanding and appreciation of the content or the issue on which doubt is expressed, keeping in view the concept of constitutional responsibility, juridical propriety and judicial discretion. Thus, we find it difficult to accept the stand that use of the word 'doubt' is a necessary condition for a reference to be maintainable under Article 143(1). That apart, in our view, question No.1, quoted above, is neither vague nor general or unspecific, but is in the realm of comprehension which is relata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to unsettle and overturn the verdict in the 2G Case, which is absolutely impermissible. The stand of the objectors is that the 2G Case is an authoritative precedent in respect of the principle or proposition of law that all natural resources are to be disposed of by way of public auction and, therefore, the Reference should be held as not maintainable. Emphasis in this behalf was on paragraphs 85 and 94 to 96 of the said judgment. In support of the proposition, heavy reliance was placed on Cauvery II. At the outset, we may note that the learned Attorney General has more than once stated that the Government of India is not questioning the correctness of the directions in the 2G Case, in so far as the allocation of spectrum is concerned, and in fact the Government is in the process of implementing the same, in letter and spirit. Therefore, in the light of the said statement, we feel that it would be unnecessary to comment on the submission that the Reference is an attempt to get an opinion to unsettle the decision and directions of this Court in the 2G Case. Nevertheless, since in support of the aforesaid submission, the opinion of this Court in Cauvery II has been referred to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Karnataka Cauvery Basin Irrigation Protection Ordinance, 1991". Hot on the heels of the Ordinance, the State of Karnataka also instituted a suit under Article 131 of the Constitution against the State of Tamil Nadu for a declaration that the Tribunal's order granting interim relief was without jurisdiction and, therefore, null and void, etc. The Ordinance was replaced by Act 27 of 1991. In the context of these developments, the President made a reference to this Court under Article 143(1) of the Constitution, posing three questions for opinion. The third question of the reference, relevant for the present Reference, was :- "3. Whether a Water Disputes Tribunal constituted under the Act is competent to grant any interim relief to the parties to the dispute." However, while dealing with the reference in Cauvery II, the Court split the question, viz., whether a Water Disputes Tribunal constituted under the Act is competent to grant any interim relief into two parts: (i) when a reference for grant of interim relief is made to the Tribunal, and (ii) when no such reference is made to it. It was contended by the States of Karnataka and Kerala that if the Tribunal did not have po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d equally not be achieved through the process of a reference. The expression, "sitting in appeal" was accurately used. An appellate court vacates the decree (or writ, order or direction) of the lower court when it allows an appeal - which is what this Court was invited to do in Cauvery I. This Court, in that appeal decided earlier, held that the Tribunal had the jurisdiction to pass the interim order sought by the State of Tamil Nadu. To nullify the interim order passed by the Tribunal, pursuant to a direction of the Supreme Court, on the ground that it was without jurisdiction, would necessarily require vacating the direction of the Supreme Court to the Tribunal to exercise its jurisdiction and decide the interim matter. Para 85 of that decision puts the matter beyond any pale of doubt: "85... In the first instance, the language of clause (1) of Article 143 far from supporting Shri Nariman's contention is opposed to it. The said clause empowers the President to refer for this Court's opinion a question of law or fact which has arisen or is likely to arise. When this Court in its adjudicatory jurisdiction pronounces its authoritative opinion on a question of law, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t persuaded to agree with the learned senior counsel. The paragraph has to be read carefully. Sawant J. first considers the case of a "decision" of this Court whereas in the subsequent sentence he considers a "view of law" expressed by the Court, and attempts to explain the difference between the approaches to these two situations. These words are sometimes used interchangeably but not hereinabove. We believe that Justice Sawant consciously draws a difference between the two by using the words "When, further, this Court overrules the view of law..." after discussing the case of a "decision". Black's Law Dictionary defines a "decision" as "a determination arrived at after consideration of facts, and, in legal context, law"; an "opinion" as "the statement by a judge or court of the decision reached in regard to a cause tried or argued before them, expounding the law as applied to the case, and detailing the reasons upon which the judgment is based"; and explains the difference between a "decision" and "opinion" as follows: "Decision is not necessarily synonymous with 'opinion'. A decision of the Court is its judgment; the opinion is the reasons given for that judgment, or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Curative Petition and in no other way. It was in this context that in para 85 of Cauvery II, this Court had stated that the President can refer a question of law when this Court has not decided it. Mr. Harish Salve, learned senior counsel, is right when he argues that once a lis between parties is decided, the operative decree can only be opened in review. Overruling the judgment - as a precedent - does not reopen the decree. The second limitation, a self imposed rule of judicial discipline, was that overruling the opinion of the Court on a legal issue does not constitute sitting in appeal, but is done only in exceptional circumstances, such as when the earlier decision is per incuriam or is delivered in the absence of relevant or material facts or if it is manifestly wrong and capable of causing public mischief. For this proposition, the Court relied upon the judgment in the Bengal Immunity case (supra) wherein it was held that when Article 141 lays down that the law declared by this Court shall be binding on all courts within the territory of India, it quite obviously refers to courts other than this Court; and that the Court would normally follow past precedents save and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference, In Re: Delhi Laws Act, 1912 (supra), the reference was made by reason of a judgment of the Federal Court in Jatindra Nath Gupta Vs. The Province of Bihar Ors.[ [1949-50] F.C.R. 595]. The background of that reference was explained by Mukherjea, J. as under: "The necessity of seeking the advisory opinion of this Court is stated to have arisen from the fact that because of the decision of the Federal Court in Jatindra Nath Gupta v. The Province of Bihar, which held the proviso to sub-section (3) of Section 1 of the Bihar Maintenance of Public Order Act, 1947, ultra vires the Bihar Provincial Legislature, by reason of its amounting to a delegation of its legislative powers to an extraneous authority, doubts have arisen regarding the validity of the three legislative provisions mentioned above, the legality of the first and the second being actually called in question in certain judicial proceedings which are pending before some of the High Courts in India." Justice Das in the same opinion, while noting that reliance was placed by learned counsel for the interveners on the judgment of the Federal Court in Jatindra Nath Gupta (supra), recorded that the learned Attorney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be controlled by Article 19(1)(a) on the ground that Fundamental Rights guaranteed by Part III of the Constitution were of paramount importance and must prevail over a provision like the one contained in Article 194(3) which may be inconsistent with them. The majority decision also commented on the decision in Gunupati Keshavram Reddy Vs. Nafisul Hasan the State of U.P.[ AIR 1954 SC 636] and observed that the said decision was based entirely on a concession and could not, therefore, be deemed to be a considered decision of this Court. The decision in Keshavram Reddy (supra) dealt with the applicability of Article 22(2) to a case falling under the latter part of Article 194(3). It is worth noting that the minority opinion of Sharma treated Keshavram Reddy, as expressing a considered opinion, which was binding on the Court. In Keshav Singh it was opined that in Sharma's case, the majority decision held in terms that Article 21 was applicable to the contents of Article 194(3), but on merits, it came to the conclusion that the alleged contravention had not been proved. Commenting on the minority view it was opined that it was unnecessary to consider whether Article 21 as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered opinion of the Court. But, as we have already pointed out, it was hardly necessary for the majority decision to deal with the point pertaining to the applicability of Article 22(2), because that point did not arise in the proceedings before the Court in Pandit Sharma's case. That is why we wish to make it clear that the obiter observations made in the majority judgment about the validity or correctness of the earlier decision of this Court in Gunupati Keshavram Reddy's case should not be taken as having decided the point in question. In other words, the question as to whether Article 22(2) would apply to such a case may have to be considered by this Court if and when it becomes necessary to do so." From the aforesaid decision it is clear that while exercising jurisdiction under Article 143(1) of the Constitution this Court can look into an earlier decision for the purpose of whether the contentions urged in the previous decision did raise a general issue or not; whether it was necessary to consider the larger issue that did not arise; and whether a general proposition had been laid down. It has also been stated that where no controversy arose with regard to applicability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g made without the recommendation of the Chief Justice of India, these matters are not justiciable on any other ground, including that of bias, which in any case is excluded by the element of plurality in the process of decision-making." In Special Reference No. 1 of 1998, (commonly referred as the "Second Judges Case"), question No. 2 reads as follows: "(2) Whether the transfer of Judges is judicially reviewable in the light of the observation of the Supreme Court in the aforesaid judgment that 'such transfer is not justiciable on any ground' and its further observation that limited judicial review is available in matters of transfer, and the extent and scope of judicial review." While answering the same, the Bench opined thus: "37. It is to our mind imperative, given the gravity involved in transferring High Court Judges, that the Chief Justice of India should obtain the views of the Chief Justice of the High Court from which the proposed transfer is to be effected as also the Chief Justice of the High Court to which the transfer is to be effected. This is in accord with the majority judgment in the Second Judges case which postulates consultation with the Chief J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Article 143(1), has witnessed challenge as to its maintainability on one ground or the other, but all the same, the references have been answered, except in Dr. M. Ismail Faruqui Ors. (supra), which was returned unanswered, mainly on the ground that the reference did not serve a constitutional purpose. From the aforesaid analysis, it is quite vivid that this Court would respectfully decline to answer a reference if it is improper, inadvisable and undesirable; or the questions formulated have purely socio-economic or political reasons, which have no relation whatsoever with any of the provisions of the Constitution or otherwise are of no constitutional significance; or are incapable of being answered; or would not subserve any purpose; or there is authoritative pronouncement of this Court which has already decided the question referred. In the case at hand, it is to be scrutinized whether the 2G Case is a decision which has dealt with and decided the controversy encapsulated in question No. 1 or meets any of the criteria mentioned above. As we perceive, the question involves interpretation of a constitutional principle inherent under Article 14 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'law declared' by a judgment and its true ratio. Article 141 of the Constitution lays down that the 'law declared' by the Supreme Court is binding upon all the courts within the territory of India. The 'law declared' has to be construed as a principle of law that emanates from a judgment, or an interpretation of a law or judgment by the Supreme Court, upon which, the case is decided. [See: Fida Hussain Ors. Vs. Moradabad Development Authority Anr.[ (2011) 12 SCC 615]]. Hence, it flows from the above that the 'law declared' is the principle culled out on the reading of a judgment as a whole in light of the questions raised, upon which the case is decided. [Also see: Ambica Quarry Works Vs. State of Gujarat Ors.[ (1987) 1 SCC 213] and Commissioner of Income Tax Vs. Sun Engineering Works (P) Ltd.[ (1992) 4 SCC 363]]. In other words, the 'law declared' in a judgment, which is binding upon courts, is the ratio decidendi of the judgment. It is the essence of a decision and the principle upon which, the case is decided, which has to be ascertained in relation to the subject-matter of the decision. Each case entails a different set of facts and a decision is a precedent on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous observations made in the judgment..." Recently, in Union of India Vs. Amrit Lal Manchanda Anr.[ (2004) 3 SCC 75], this Court has observed as follows: "...Observations of courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for Judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes." It is also important to read a judgment as a whole keeping in mind that it is not an abstract academic discourse with universal applicability, but heavily grounded in the facts and circumstances of the case. Every part of a judgment is intricately linked to others constituting a larger whole and thus, must be read keeping the logical thread intact. In this regard, in Islamic Academy of Education Anr. Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutionalism must be reflected at every stage of the distribution of natural resources. In Article 39(b) of the Constitution it has been provided that the ownership and control of the material resources of the community should be so distributed so as to best subserve the common good, but no comprehensive legislation has been enacted to generally define natural resources and a framework for their protection..." The learned Judges adverted to the 'public trust doctrine' as enunciated in The Illinois Central Railroad Co. Vs. The People of the State of Illinois[36 L ED 1018 : 146 U.S. 387 (1892)]; M.C. Mehta Vs. Kamal Nath Ors.[ (1997) 1 SCC 388]; Jamshed Hormusji Wadia Vs. Board of Trustees, Port of Mumbai Anr.[ (2004) 3 SCC 214]; Intellectuals Forum, Tirupathi Vs. State of A.P. Ors.[ (2006) 3 SCC 549]; Fomento Resorts And Hotels Limited Anr. Vs. Minguel Martins Ors.[ (2009) 3 SCC 571] and Reliance Natural Resources Limited Vs. Reliance Industries Limited[(2010) 7 SCC 1] and held: "85. As natural resources are public goods, the doctrine of equality, which emerges from the concepts of justice and fairness, must guide the State in determining the actual mechanism for dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate is to ensure that a non- discriminatory method is adopted for distribution and alienation which would necessarily result in the protection of national and public interest. Dealing with Questions No.(iii) and (iv) in paragraphs 94 to 96 of the judgment, the Court opined as follows: "94. There is a fundamental flaw in the first-come-first-served policy inasmuch as it involves an element of pure chance or accident. In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-first-served policy has inherently dangerous implications. Any person who has access to the power corridor at the highest or the lowest level may be able to obtain information from the government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be awarded or a licence or permission is likely to be given, he would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim. 95. This Court has repeatedly held that wherever a contract is to be awarde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e word 'perhaps' suggests that the learned Judges considered situations requiring a method other than auction as conceivable and desirable. Further, the final conclusions summarized in paragraph 102 of the judgment (SCC) make no mention about auction being the only permissible and intra vires method for disposal of natural resources; the findings are limited to the case of spectrum. In case the Court had actually enunciated, as a proposition of law, that auction is the only permissible method or mode for alienation/allotment of natural resources, the same would have found a mention in the summary at the end of the judgment. Moreover, if the 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 auction, e.g., the MMRD Act. While dealing with the merits of the Reference, at a later stage, we will discuss whether or not auction can be a constitutional mandate under Article 14 of the Constitution, but for the present, it would suffice to say that no court would ever implicitly, indirectly, or by inference, hold a range of laws as ultr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are scarce, valuable and are allotted to private entities for commercial exploitation. The learned Attorney General, however, contested this claim and argued that no such proposition was laid down in the 2G judgment. He pointed out that the words "commercial exploitation" were not even used anywhere in the judgment except in an extract from another judgment in a different context. We agree that the judgment itself does not carve out any special case for scarce natural resources only meant for commercial exploitation. However, we feel, despite that, in this Reference, CPIL is not barred from making a submission drawing a distinction between natural resources meant for commercial exploitation and those meant for other purposes. This Court has the jurisdiction to classify the subject matter of a reference, if a genuine case for it exists. Mr. Shanti Bhushan, learned Senior Counsel, in support of his stand that the first question of the Reference must be answered in a way so as to allow auction as the only mode for the disposal of natural resources, submitted that a combined reading of Article 14, which dictates non- arbitrariness in State action and equal opportunity to those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, sea, waters and the forests have such a great importance to the people as a whole that it would be wholly unjustified to make them a subject of private ownership. The said resources being a gift of nature, they should be made freely available to everyone irrespective of the status in life. The doctrine enjoins upon the Government to protect the resources for the enjoyment of the general public rather than to permit their use for private ownership or commercial purposes. According to Professor Sax the Public Trust Doctrine imposes the following restrictions on governmental authority: 'Three types of restrictions on governmental authority are often thought to be imposed by the public trust: first, the property subject to the trust must not only be used for a public purpose, but it must be held available for use by the general public; second, the property may not be sold, even for a fair cash equivalent; and third the property must be maintained for particular types of uses'." The learned Judge further observed:- "34. Our legal system - based on English common law - includes the public trust doctrine as part of its jurisprudence. The State is the trustee of all natural re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e public trust doctrine as follows: "52. The matter deserves to be considered from another angle. The public trust doctrine which has been invoked by Ms Indira Jaising in support of her argument that the beach in question is a public beach and the appellants cannot privatise the same by blocking/ obstructing traditional access available through Survey No. 803 (new No. 246/2) is implicitly engrafted by the State Government in Clause 4(ix) of the agreement. That doctrine primarily rests on the principle that certain resources like air, sea, waters and the forests have such a great importance to the people as a whole that it would be wholly unjustified to make them a subject of private ownership. These resources are gift of nature, therefore, they should be freely available to everyone irrespective of one's status in life." In Reliance Natural Resources (supra), it has been observed that even though the doctrine of pubic trust has been applied in cases dealing with environmental jurisprudence, "it has broader application". Referring to Kamal Nath (supra), the Court held that it is the duty of the Government to provide complete protection to the natural resources as a trustee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir authority, jurisdiction and powers from the Constitution and owe allegiance to it". Further, the notion that the Parliament is an agent of the people was squarely rebutted in In Re: Delhi Laws Act, 1912 (supra), where it was observed that "the legislature as a body cannot be seen to be an agency of the electorate as a whole" and "acts on its own authority or power which it derives from the Constitution". In Municipal Corporation of Delhi Vs. Birla Cotton, Spinning and Weaving Mills, Delhi Anr.[ [1968] 3 SCR 251] this Court held that "the doctrine that it (the Parliament) is a delegate of the people coloured certain American decision does not arise here" and that in fact the "Parliament which by a concentration of all the powers of legislation derived from all the three Legislative Lists becomes the most competent and potent legislature it is possible to erect under our Constitution." We however, appreciate the concern of Mr. Shanti Bhushan that the lack of any such power in the hands of the people must not be a sanction for recklessness during disposal of natural resources. The legislature and the Executive are answerable to the Constitution and it is there where the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elligible differentia and displayed a rational nexus with the ultimate objective of the policy. Budhan Choudhry Ors. Vs. State of Bihar[AIR 1955 SC 191] referred to in Shri Ram Krishna Dalmiya Vs. Shri Justice S.R. Tendolkar and Ors.[ [1959] 1 SCR 279] explained it in the following terms: "It is now well established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and, (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well established by the decisions of this Court that article 14 condem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fide exercise of power and arbitrariness are different lethal radiations emanating from the same vice: in fact the latter comprehends the former. Both are inhibited by Articles 14 and 16." Building upon his opinion delivered in Royappa's case (supra), Bhagwati, J., held in Maneka Gandhi Vs. Union of India Anr.[ (1978) 1 SCC 248]: "The principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non- arbitrariness pervades Article 14 like a brooding omnipresence and the procedure contemplated by Article 21 must answer the test of reasonableness in order to be in conformity with Article 14. It must be "right and just and fair" and not arbitrary, fanciful or oppressive." In Ajay Hasia Ors. Vs. Khalid Mujib Sehravardi Ors.[ (1981) 1 SCC 722], this Court said that the 'arbitrariness' test was lying "latent and submerged" in the "simple but pregnant" form of Article 14 and explained the switch from the 'classification' doctrine to the 'arbitrariness' doctrine in the following words: "16...The doctrine of classification which is evolved by the courts is not paraphrase of Article 14 nor is it the objective and end of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power of implementation. It mainly represents a state of procedural fairness. When the rule of law is ignored by an official it may on occasion be enforced by courts." As is evident from the above, the expressions 'arbitrariness' and 'unreasonableness' have been used interchangeably and in fact, one has been defined in terms of the other. More recently, in Sharma Transport Vs. Government of A.P. Ors.[ (2002) 2 SCC 188], this Court has observed thus: "25...In order to be described as arbitrary, it must be shown that it was not reasonable and manifestly arbitrary. The expression "arbitrarily" means: in an unreasonable manner, as fixed or done capriciously or at pleasure, without adequate determining principle, not founded in the nature of things, non-rational, not done or acting according to reason or judgment, depending on the will alone." Further, even though the 'classification' doctrine was never overruled, it has found less favour with this Court as compared to the 'arbitrariness' doctrine. In Om Kumar Ors. Vs. Union of India[(2001) 2 SCC 386], this Court held thus: "59. But, in E.P. Royappa v. State of T. N. Bhagwati, J laid down another test for purposes of Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any of the fundamental rights guaranteed by clauses (a) to (g) of Article 19(1), it can be struck down only if it is found not saved by any of the clauses (s) to (6) of Article 19 and so on. No enactment can be struck down by just saying that it is arbitrary** or unreasonable. Some or other constitutional infirmity has to be found before invalidating an Act. An enactment cannot be struck down on the ground that court thinks it unjustified. Parliament and the legislatures, composed as they are of the representatives of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them. The court cannot sit in judgment over their wisdom. In this connection, it should be remembered that even in the case of administrative action, the scope of judicial review is limited to three grounds, viz., (i) unreasonableness, which can more appropriately be called irrationality, (ii) illegality and (iii) procedural impropriety (see Council of Civil Service Unions v. Minister for Civil Service which decision has been accepted by this Court as well). **An expression used widely and rather indiscriminately - an expression of inherently imprecise impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er it in the negative since any other answer would be completely contrary to the scheme of Article 14. Firstly, Article 14 may imply positive and negative rights for an individual, but with respect to the State, it is only couched in negative terms; like an admonition against the State which prohibits the State from taking up actions that may be arbitrary, unreasonable, capricious or discriminatory. Article 14, therefore, is an injunction to the State against taking certain type of actions rather than commanding it to take particular steps. Reading the mandate of auction into its scheme would thus, be completely contrary to the intent of the Article apparent from its plain language. Secondly, a constitutional mandate is an absolute principle that has to be applied in all situations; it cannot be applied in some and not tested in others. The absolute principle is then applied on a case by case basis to see which actions fulfill the requirements of the constitutional principle and which do not. Justice K. Subba Rao in his lectures compiled in a book titled "Some Constitutional Problems", critically analyzing the trends of Indian constitutional development, stated as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Courts are not at liberty to declare a statute void, because in their opinion it is opposed to the spirit of the Constitution. Courts cannot declare a limitation or constitutional requirement under the notion of having discovered some ideal norm. Further, a constitutional principle must not be limited to a precise formula but ought to be an abstract principle applied to precise situations. The repercussion of holding auction as a constitutional mandate would be the voiding of every action that deviates from it, including social endeavours, welfare schemes and promotional policies, even though CPIL itself has argued against the same, and asked for making auction mandatory only in the alienation of scarce natural resources meant for private and commercial business ventures. It would be odd to derive auction as a constitutional principle only for a limited set of situations from the wide and generic declaration of Article 14. The strength of constitutional adjudication lies in case to case adjudication and therefore auction cannot be elevated to a constitutional mandate. Finally, reading auction as a constitutional mandate would be impermissible because such an approach may dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icular persons. The words, apportionment, allotment, allocation, classification, clearly fall within the broad sweep of the word 'distribution'. So construed, the word 'distribution' as used in Article 39(b) will include various facets, aspects, methods and terminology of a broad-based concept of distribution..." It can thus, be seen from the afore-quoted paragraphs that the term "distribute" undoubtedly, has wide amplitude and encompasses all manners and methods of distribution, which would include classes, industries, regions, private and public sections, etc. Having regard to the basic nature of Article 39(b), a narrower concept of equality under Article 14 than that discussed above, may frustrate the broader concept of distribution, as conceived in Article 39(b). There cannot, therefore, be a cavil that "common good' and "larger public interests" have to be regarded as constitutional reality deserving actualization. Learned counsel for CPIL argued that revenue maximization during the sale or alienation of a natural resource for commercial exploitation is the only way of achieving public good since the revenue collected can be channelized to welfare policies and controllin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " in Article 39(b), which is part of the Directive Principles. The norm of "common good" has to be understood and appreciated in a holistic manner. It is obvious that the manner in which the common good is best subserved is not a matter that can be measured by any constitutional yardstick - it would depend on the economic and political philosophy of the government. Revenue maximization is not the only way in which the common good can be subserved. 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. Therefore, in conclusion, the submission that the mandate of Article 14 is that any disposal of a natural resource for commercial use must be for revenue maximization, and thus by auction, is based neither on law nor on logic. There is no constitutional imperative in the matter of economic policies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forthcoming and then after considering all offers, decide whether I should let you set up the industry"...The State must be free in such a case to negotiate with a private entrepreneur with a view to inducing him to set up an industry within the State and if the State enters into a contract with such entrepreneur for providing resources and other facilities for setting up an industry, the contract cannot be assailed as invalid so long as the State has acted bona fide, reasonably and in public interest. If the terms and conditions of the contract or the surrounding circumstances show that the State has acted mala fide or out of improper or corrupt motive or in order to promote the private interests of someone at the cost of the State, the court will undoubtedly interfere and strike down State action as arbitrary, unreasonable or contrary to public interest. But so long as the State action is bona fide and reasonable, the court will not interfere merely on the ground that no advertisement was given or publicity made or tenders invited." In Sachidanand Pandey (supra) after noticing Kasturi Lal's case (supra), it was concluded as under: "40. On a consideration of the relevant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvenience." Here, the Court added to the previous decisions and said that a blithe deviation from public disposal of resources would not be tolerable; such a deviation must be justified by compelling reasons and not by just convenience. In M.P. Oil Extraction and Anr. Vs. State of M.P. Ors.[ (1997) 7 SCC 592], this Court held as follows: "45. Although to ensure fair play and transparency in State action, distribution of largesse by inviting open tenders or by public auction is desirable, it cannot be held that in no case distribution of such largesse by negotiation is permissible. In the instant case, as a policy decision protective measure by entering into agreements with selected industrial units for assured supply of sal seeds at concessional rate has been taken by the Government. The rate of royalty has also been fixed on some accepted principle of pricing formula as will be indicated hereafter. Hence, distribution or allotment of sal seeds at the determined royalty to the respondents and other units covered by the agreements cannot be assailed. It is to be appreciated that in this case, distribution by public auction or by open tender may not achieve the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as either arbitrary or unreasonable or amounting to mala fide or improper exercise or improper abuse of power by the authority concerned. Courts have always leaned in favour of sufficient latitude being left with the authorities to adopt their own techniques of management of projects with concomitant economic expediencies depending upon the exigencies of a situation guided by appropriate financial policy in the best interests of the authority motivated by public interest as well in undertaking such ventures." In Villianur Iyarkkai Padukappu Maiyam Vs. Union of India Ors.[(2009) 7 SCC 561], a three Judge Bench of this Court was concerned with the development of the Port of Pondicherry where a contractor had been selected without floating a tender or holding public auction. It was held as under: "164. The plea raised by the learned counsel for the appellants that the Government of Pondicherry was arbitrary and unreasonable in switching the whole public tender process into a system of personal selection and, therefore, the appeals should be accepted, is devoid of merits. It is well settled that non-floating of tenders or not holding of public auction would not in all cases be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustry. Similar deviation from auction cannot be ruled out when the object of a State policy is to promote domestic development of an industry, like in Kasturi Lal's case, discussed above. However, these examples are purely illustrative in order to demonstrate that auction cannot be the sole criteria for alienation of all natural resources. Potential of Abuse It was also argued that even if the method of auction is not a mandate under Article 14, it must be the only permissible method, due to the susceptibility of other methods to abuse. This argument, in our view, is contrary to an established position of law on the subject cemented through a catena of decisions. In R.K. Garg Vs. Union of India Ors.[(1981) 4 SCC 675], Justice P. N. Bhagwati, speaking for a Constitution Bench of five learned Judges, held: "8....The Court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry"; "that exact wisdom and nice adaption of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts action would be bad in law and liable to be struck down by the courts but the possibility of abuse of power or arbitrary exercise of power cannot invalidate the statute conferring the power or the power which has been conferred by it." Therefore, a potential for abuse cannot be the basis for striking down a method as ultra vires the Constitution. It is the actual abuse itself that must be brought before the Court for being tested on the anvil of constitutional provisions. In fact, it may be said that even auction has a potential of abuse, like any other method of allocation, but that cannot be the basis of declaring it as an unconstitutional methodology either. These drawbacks include cartelization, "winners curse" (the phenomenon by which a bidder bids a higher, unrealistic and unexecutable price just to surpass the competition; or where a bidder, in case of multiple auctions, bids for all the resources and ends up winning licenses for exploitation of more resources than he can pragmatically execute), etc. However, all the same, auction cannot be called ultra vires for the said reasons and continues to be an attractive and preferred means of disposal of natural resources es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislate in respect of banking and other commercial activities of the named banks necessarily incidental thereto: it has the power to legislate for acquiring the undertaking of the named banks under Entry 42, List III. Whether by the exercise of the power vested in the Reserve Bank under the pre-existing laws, results could be achieved which it is the object of the Act to achieve, is, in our judgment, not relevant in considering whether the Act amounts to abuse of legislative power. This Court has the power to strike down a law on the ground of want of authority, but the Court will not sit in appeal over the policy of the Parliament in enacting a law. The Court cannot find fault with the Act merely on the ground that it is inadvisable to take over the undertaking of banks which, it is said by the petitioner, by thrift and efficient management had set up an impressive and efficient business organization serving large sectors of industry." In R.K. Garg (supra), this Court even observed that greater judicial deference must be shown towards a law relating to economic activities due to the complexity of economic problems and their fulfillment through a methodology of trial and error ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislative authorities as the case may be. The court is called upon to consider the validity of a public policy only when a challenge is made that such policy decision infringes fundamental rights guaranteed by the Constitution of India or any other statutory right..." In Delhi Science Forum Ors. Vs. Union of India Anr.[ (1996) 2 SCC 405] a Bench of three learned Judges of this Court, while rejecting a claim against the opening up of the telecom sector reiterated that the forum for debate and discourse over the merits and demerits of a policy is the Parliament. It restated that the services of this Court are not sought till the legality of the policy is disputed, and further, that no direction can be given or be expected from the courts, unless while implementing such policies, there is violation or infringement of any of the constitutional or statutory provisions. It held thus: "7. What has been said in respect of legislations is applicable even in respect of policies which have been adopted by Parliament. They cannot be tested in Court of Law. The courts cannot express their opinion as to whether at a particular juncture or under a particular situation prevailing in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an earlier case in M/s Prag Ice Oil Mills Anr. Vs. Union of India[[1978] 3 SCC 459], this Court had observed as under: (SCC p. 478, Para 24) "We do not think that it is the function of this Court or of any court to sit in judgment over such matters of economic policy as must necessarily be left to the government of the day to decide. Many of them, as a measure of price fixation must necessarily be, are matters of prediction of ultimate results on which even experts can seriously err and doubtlessly by differ. Courts can certainly not be expected to decide them without even the aid of experts." In State of Madhya Pradesh Vs. Narmada Bachao Andolan Anr.[ (2011) 7 SCC 639], this Court said that the judiciary cannot engage in an exercise of comparative analysis over the fairness, logical or scientific basis, or wisdom of a policy. It held that the Court cannot strike down a policy decision taken by the Government merely because it feels that another decision would have been fairer, or more scientific or logical, or wiser. The wisdom and advisability of the policies are ordinarily not amenable to judicial review unless the policies are contrary to statutory or constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oul of the fairness requirement of Article 14 of the Constitution, the Court would not hesitate in striking it down. Finally, market price, in economics, is an index of the value that a market prescribes to a good. However, this valuation is a function of several dynamic variables; it is a science and not a law. Auction is just one of the several price discovery mechanisms. Since multiple variables are involved in such valuations, auction or any other form of competitive bidding, cannot constitute even an economic mandate, much less a constitutional mandate. 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. Regard being had to the aforesaid precepts, we have opined that auction as a mode cannot be conferred the status of a constitutional principle. Alienation of natural resources is a policy decision, and the means adopted for the same are thus, executive prerogatives. However, when such a policy dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to understand, the tenor of the first question in the Presidential reference. Take for instance a hypothetical situation where, the legality of 100 instances of disposal of different types of natural resources is taken up for consideration. If the first question is taken in its literal sense, as to whether the method of disposal of all natural resources in all circumstances is by auction alone, then, even if 99 out of the aforesaid 100 different natural resources are such, which can only be disposed of by way of auction, the answer to the first question would still be in the negative. This answer in the negative would give the erroneous impression, that it is not necessary to dispose of natural resources by way of auction. Surely, the Presidential reference has not been made, to seek such an innocuous advice. The instant reference has been made despite the Central Government being alive to the fact, that there are natural resources which can only be disposed of by way of auction. A mining lease for coal under Section 11A of the Mines and Minerals (Development and Regulation) Act, 1957 can be granted, only by way of selection through auction by competitive bidding. Furthermore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to the maturity and evolution of the nation's thought. To start with, breach of equality was a plea advanced by individuals claiming fair treatment. Challenges were raised also on account of discriminatory treatment. Equality was sought by those more meritorious, when benefits were bestowed on those with lesser caliber. Gradually, judicial intervention came to be sought for equitable treatment, even for a section of the society put together. A jurisdiction, which in due course, came to be described as public interest litigation. It all started with a demand for the basic rights for respectable human existence. Over the years, the concept of determination of societal rights, has traversed into different directions and avenues. So much so, that now rights in equity, sometimes even present situations of conflict between individual rights and societal rights. The present adjudication can be stated to be a dispute of such nature. In a maturing society, individual rights and plural rights have to be balanced, so that the oscillating pendulum of rights, fairly and equally, recognizes their respective parameters. For a country like India, the pendulum must be understood to balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on issues relatable to disposal of resources by the State, to determine whether the instant issue stands settled, by law declared by this Court. 6(a) First of all reference was made to the decision of this Court in S.G. Jaisinghani Vs. Union of India Ors., AIR 1967 SC 1427, wherein this Court observed as under: "14. In this context it is important to emphasize that the absence of arbitrary power is the first essential of the rule of law upon which our whole constitutional system is based. In a system governed by rule of law, discretion, when conferred upon executive authorities, must be confined within clearly defined limits. The rule of law from this point of view means that decisions should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizen should know where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis of a decision taken in accordance with the Rule of law. (See Dicey - Law of the Constitution - 10th Edn., Introduction cx). "Law has reached its finest moments," stated Douglas, J. in United States v. Wunderlich, (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, to act as a prudent businessman would, and to sell or otherwise dispose of Kendu leaves purchased under the monopoly acquired under Section 3, but the profit resulting from the sale must be for the public benefit and not for private gain. Section 11 which provides that out of the net profits derived by the Government from the trade in Kendu leaves an amount not less than one half is to be paid to the Samitis and Gram Panchayats emphasises the concept that the machinery of sale or disposal of Kendu leaves must also be quashed to serve the public interest. If the scheme of disposal creates a class of middlemen who would purchase from the Government Kendu leaves at concessional rates and would earn large profits disproportionate to the nature of the service rendered or duty performed by them, it cannot claim the protection of Article 19(6)(ii). 16. Section 10 leaves the method of sale or disposal of Kendu leaves to the Government as they think fit. The action of the Government if conceived and executed in the interest of the general public is not open to judicial scrutiny. But it is not given to the Government thereby to create a monopoly in favour of third parties f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly and to the satisfaction of the Government is not based on any real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved i.e. effective execution of the monopoly in the public interest. Exclusion of all persons interested in the trade, who were not in the previous year licensees is ex facie arbitrary, it had no direct relation to the object of preventing exploitation of pluckers and growers of Kendu leaves, nor had it any just or reasonable relation to the securing of the full benefit from the trade to the State. 19. Validity of the law by which the State assumed the monopoly to trade in a given commodity has to be judged by the test whether the entire benefit arising therefrom is to enure to the State, and the monopoly is not used as a cloak for conferring private benefit upon a limited class of persons. The scheme adopted by the Government first of offering to enter into contracts with certain named licensees, and later inviting tenders from licensees who had in the previous year carried out their contracts satisfactorily is liable to be adjudged void on the ground that it unreasonably excludes traders in Kendu leaves from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, and whether it was in the interests of the State to invite tenders in the open market from all persons whether they had or had not taken contracts in the previous year. If the Government was anxious to ensure due performance by those who submitted tenders for purchase of Kendu leaves, it was open to the Government to devise adequate safeguards in that behalf. In our judgment, the plea that the action of the Government was bona fide cannot be an effective answer to a claim made by a citizen that his fundamental rights were infringed by the action of the Government, nor can the claim of the petitioners be defeated on the plea that the Government in adopting the impugned scheme committed an error of judgment. 22. That plea would have assisted the Government if the action was in law valid and the objection was that the Government erred in the exercise of its discretion. It is unnecessary in the circumstances to consider whether the Government acted in the interest of their party-men and to increase party funds in devising the schemes for sale of Kendu leaves in 1968. 23. During the pendency of these proceedings the entire year for which the contracts were given has expire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry: it must not be guided by any extraneous or irrelevant considerations, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory. This principle was recognised and applied by a Bench of this Court presided over by Ray, C.J., in Erusian Equipment and Chemicals Ltd. v. State of West Bengal (supra) where the learned Chief Justice pointed out that- "the State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parture from the said standards would be invalid unless the same is supported by good reasons. (d) Our attention was also invited to the decision rendered in Kasturi Lal Lakshmi Reddy Vs. State of Jammu Kashmir Anr., (1980) 4 SCC 1, wherein the factual background as well as, the legal position came to be expressed in paragraph 19 of the judgment which is being set out below: "19. It is clear from the backdrop of the facts and circumstances in which the impugned Order came to be made and the terms and conditions set out in the impugned Order that it was not a tapping contract simpliciter which was intended to be given to the second respondents. The second respondents wanted to be assured of regular supply of raw material in the shape of resin before they could decide to set up a factory within the State and it was for the purpose of ensuring supply of such raw material that the impugned Order was made giving tapping contract to the second respondents. It was really by way of allocation of raw material for running the factory that the impugned Order was passed. The terms of the impugned Order show beyond doubt that the second respondents were under an obligation to set up a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al cost of extraction and collection would come to Rs.87,50,000 and on this investment of Rs.87,50,000 required to be made by the second respondents the amount of interest at the prevailing bank rate would work out to about Rs.13,00,000. Now, as against this expenditure of Rs 87,50,000 plus Rs.13,00,000 the second respondents would be entitled to claim from the State, in respect of 1500 metric tonnes of resin to be delivered to it only at the rate sanctioned by the Forest Department for the adjoining accessible forests which were being worked on wage-contract basis. It is stated in the counter-affidavits of Ghulam Rasul and Guran Devaya and this statement is not seriously challenged on behalf of the petitioners, that the cost of extraction and collection as sanctioned by the Forest Department for the adjoining accessible forests given on wage- contract basis in the year 1978-79 was Rs.114 per quintal and the second respondents would, thus, be entitled to claim from the State no more than Rs.114 per quintal in respect of 1500 metric tonnes to be delivered to it and apart from bearing the difference between the actual cost of extraction and collection and the amount received from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be no question of sale of resin in the open market and in this situation, it would be totally irrelevant to import the concept of market price with reference to which the adequacy of the price charged by the State to the 2nd respondents could be judged. If the State were simply selling resin, there can be no doubt that the State must endeavour to obtain the highest price subject, of course, to any other overriding considerations of public interest and in that event, its action in giving resin to a private individual at a lesser price would be arbitrary and contrary to public interest. But, where the State has, as a matter of policy, stopped selling resin to outsiders and decided to allot it only to industries set up within the State for the purpose of encouraging industrialisation, there can be no scope for complaint that the State is giving resin at a lesser price than that which could be obtained in the open market. The yardstick of price in the open market would be wholly inept, because in view of the State policy, there would be no question of any resin being sold in the open market. The object of the State in such a case is not to earn revenue from sale of resin, but to promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a policy which would "best subserve the common good" of the inhabitants of the State (as in Article 39(b) of the Constitution of India) while assigning a material resource, though no reference was made to Article 39(b) of the Constitution of India in the judgment. What is also of importance is, that this Court expressly noticed, that if the State Government was simply selling resin, it was obliged to obtain the highest possible price. (e) Reference was then made to Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay, (1989) 3 SCC 293, wherein the case of the respondent was, that in his evidence it had been mentioned by Katara that the plot had been allotted to Dhanji Mavji since it was the policy of the Bombay Port Trust to allot a reconstituted plot to a person occupying a major portion of such plot. It was further asserted, that there was no challenge to this evidence in cross-examination. It was also asserted, that there was no evidence on the alleged policy of the Port Trust of giving plots on joint tenancy to all the occupants. According to learned counsel for the respondent, in the letters addressed by the Port Trust and in the letters by and on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d whether that policy is the best policy or whether another policy was possible, is not relevant for consideration. It is, therefore, not necessary for our present purposes to dwell on the question whether the obligation of the Port Trust authorities to act in pursuance of a public purpose was a public law purpose or a private law purpose. Under the constitutional scheme of this country the Port Trust authorities were required by relevant law to act in pursuance of public purpose. We are satisfied that they have proceeded to so act. (emphasis is mine) In the instant matter, even though the controversy pertained to a tenancy issue, this Court held, that a public body was bound to act in public interest. (f) In chronological sequence, learned counsel then cited Mahabir Auto Stores Ors. Vs. Indian Oil Corporation Ors. (1990) 3 SCC 752. Relevant observations made therein, with reference to the present controversy, are being placed below: "12. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appa v. State of Tamil Nadu, (1974) 4 SCC 3, Maneka Gandhi v. Union of India, (1978) 1 SCC 248, Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722, R.D. Shetty v. International Airport Authority of India, (1979) 3 SCC 489, and also Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay, (1989) 3 SCC 293. It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case. ..... ..... 17. We are of the opinion that in all such cases whether public law or private law rights are involved, depends upon the facts and circumstances of the case. The dichotomy between ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State. It may be contractual or statutory but in a situation of transaction between the parties for nearly two decades, such procedure should be followed which will be reasonable, fair and just, that is, the process which normally be accepted (sic is expected) to be followed by an organ of the State and that process must be conscious and all those affected should be taken into confidence. 20. Having regard to the nature of the transaction, we are of the opinion that it would be appropriate to state that in cases where the instrumentality of the state enters the contractual field, it should be governed by the incidence of the contract. It is true that it may not be necessary to give reasons but, in our opinion, in the field of this nature fairness must be there to the parties concerned, and having regard to the large number or the long period and the nature of the dealings between the parties, the appellant should have been taken into confidence. Equality and fairness at least demands this much from an instrumentality of the State dealing with a right of the State not to treat the contract as subsisting. We must, however, evolve such process which will work. ..... ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be fair and just? We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. In our opinion, it would be alien to the constitutional scheme to accept the argument of exclusion of Article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals. 22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters. There is a basic difference between the acts of the State which must invariably be in pubic interest and those of a private individual, engaged in similar activities, being primarily for personal gain, which may or may not promote public interest. Viewed in this manner, in which we find no conceptual difficulty or anachronism, we find no reason why the requirement of Article 14 should not extend even in the sphere of contractual matters for regulating the conduct of the State activity. 25. In Wade: Administrative Law (6th edn.) after indicating that 'the powers of public authorities are essentially different from those of private persons', it has been succinctly stated at pp. 400-01 as under: "... The whole conception of unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good. There is nothing paradoxical in the imposition of such legal limits. It would indeed be paradoxical if they were not imposed. Nor is this principle an oddity of British or American law: it is eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, howsoever conferred, are possessed 'solely in order that it may use them for the public good'. The only exception limiting the same is to be found in specific cases where such exclusion may be desirable for strong reasons of public policy. This, however, does not justify exclusion of reviewability in the contractual field involving the State since it is no longer a mere private activity to be excluded from public view or scrutiny. 27. Unlike a private party whose acts uninformed by reason and influenced by personal predilections in contractual matters may result in adverse consequences to it alone without affecting the public interest, any such act of the State or a public body even in this field would adversely affect the public interest. Every holder of a public office by virtue of which he acts on behalf of the State or public body is ultimately accountable to the people in whom the sovereignty vests. As such, all powers so vested in him are meant to be exercised for public good and promoting the public interest. This is equally true of all actions even in the field of contract. Thus, every holder of a public office is a trustee whose highest duty is to the people of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient to refer only to two recent decisions of this Court for this purpose. ..... ..... 33. No doubt, it is true, as indicated by us earlier, that there is a presumption of validity of the State action and the burden is on the person who alleges violation of Article 14 to prove the assertion. However, where no plausible reason or principle is indicated nor is it discernible and the impugned State action, therefore, appears to be ex facie arbitrary, the initial burden to prove the arbitrariness is discharged shifting onus on the State to justify its action as fair and reasonable. If the State is unable to produce material to justify its action as fair and reasonable, the burden on the person alleging arbitrariness must be held to be discharged. The scope of judicial review is limited as indicated in Dwarkadas Marfatia case (supra) to oversee the State action for the purpose of satisfying that it is not vitiated by the vice of arbitrariness and no more. The wisdom of the policy or the lack of it or the desirability of a better alternative is not within the permissible scope of judicial review in such cases. It is not for the courts to recast the policy or to substitute it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no plausible reason or principle is indicated (or is discernible), and where the impugned action ex facie appears to be arbitrary, the onus shifts on the State to justify its action as fair and reasonable. Sixthly, every holder of public office is accountable to the people in whom the sovereignty vests. All powers vested in a public office, even in the field of contract, are meant to be exercised for public good and for promoting public interest. And Seventhly, Article 14 of the Constitution of India applies also to matters of governmental policy even in contractual matters, and if the policy or any action of the government fails to satisfy the test of reasonableness, the same would be unconstitutional. (h) Thereafter our attention was invited to the decision rendered in Lucknow Development Authority Vs. M.K. Gupta, (1994) 1 SCC 243. Seriously, the instant judgment has no direct bearing to the issue in hand. The judgment determines whether compensation can be awarded to an aggrieved consumer under the Consumer Protection Act, 1986. It also settles who should shoulder the responsibility of paying the compensation awarded. But all the same it has some interesting observations which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered as it was additional expenditure for alternative site allotted to him. No misfeasance was found. The moment the authority came to know of the mistake committed by it, it took immediate action by alloting alternative site to the respondent. It was compensation for exact loss suffered by the respondent. It arose in due discharge of duties. For such acts or omissions the loss suffered has to be made good by the authority itself. But when the sufferance is due to mala fide or oppressive or capricious acts etc. of a public servant, then the nature of liability changes. The Commission under the Act could determine such amount if in its opinion the consumer suffered injury due to what is called misfeasance of the officers by the English Courts. Even in England where award of exemplary or aggravated damages for insult etc. to a person has now been held to be punitive, exception has been carved out if the injury is due to, 'oppressive, arbitrary or unconstitutional action by servants of the Government' (Salmond and Heuston on the Law of Torts). Misfeasance in public office is explained by Wade in his book on Administrative Law thus: "Even where there is no ministerial duty as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outlook. Wade in his book Administrative Law has observed that it is to the credit of public authorities that there are simply few reported English decisions on this form of malpractice, namely, misfeasance in public offices which includes malicious use of power, deliberate maladministration and perhaps also other unlawful acts causing injury. One of the reasons for this appears to be development of law which, apart, from other factors succeeded in keeping a salutary check on the functioning in the government or semi-government offices by holding the officers personally responsible for their capricious or even ultra vires action resulting in injury or loss to a citizen by awarding damages against them. Various decisions rendered from time to time have been referred to by Wade on Misfeasance by Public Authorities. We shall refer to some of them to demonstrate how necessary it is for our society. In Ashby v. White, (1703) 2 LD Raym 938, the House of Lords invoked the principle of ubi jus ibi remedium in favour of an elector who was wrongfully prevented from voting and decreed the claim of damages. The ratio of this decision has been applied and extended by English Courts in various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with law. It is, therefore, necessary that the Commission when it is satisfied that a complainant is entitled to compensation for harassment or mental agony or oppression, which finding of course should be recorded carefully on material and convincing circumstances and not lightly, then it should further direct the department concerned to pay the amount to the complainant from the public fund immediately but to recover the same from those who are found responsible for such unpardonable behaviour by dividing it proportionately where there are more than one functionaries." (emphasis is mine) The judgment brings out the foundational principle of executive governance. The said foundational principle is based on the realization that sovereignty vests in the people. The judgment therefore records that every limb of the constitutional machinery is obliged to be people oriented. The fundamental principle brought out by the judgment is, that a public authority exercising public power discharges a public duty, and therefore, has to subserve general welfare and common good. All power should be exercised for the sake of society. The issue which was the subject matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of India. While Article 14 permits a reasonable classification having a rational nexus to the objective sought to be achieved, it does not permit the power to pick and choose arbitrarily out of several persons falling in the same category. A transparent and objective criteria/procedure has to be evolved so that the choice among the members belonging to the same class or category is based on reason, fair play and non-arbitrariness. It is essential to lay down as a matter of policy as to how preferences would be assigned between two persons falling in the same category. If there are two eminent sportsmen in distress and only one petrol pump is available, there should be clear, transparent and objective criteria/procedure to indicate who out of the two is to be preferred. Lack of transparency in the system promotes nepotism and arbitrariness. It is absolutely essential that the entire system should be transparent right from the stage of calling for the applications up to the stage of passing the orders of allotment. The names of the allottees, the orders and the reasons for allotment should be available for public knowledge and scrutiny. Mr Shanti Bhushan has suggested that the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant to allotment of 2 plots of land. For the said purpose the appellant invited tenders from interested persons. In response the respondent submitted its tender. After the allotment of one of the plots to the respondent, the respondent raised an objection that the appellant had fixed the reserved price of the second plot at a rate much higher than its adjoining plots. The respondent assailed the action of the appellant in issuing a fresh advertisement for the allotment of the second plot. In the course of determination of the aforesaid controversy this Court held: "26. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated it must be unconditional; must be in the proper form, the person by whom tender is made must be able to and willing to perform his obligations. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. However, a limited judicial review may be available in cases where it is established that the terms of the invitation to tender were so tailor-made to suit the convenience of any particular person with a view to eliminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner could of course have refused with impunity. Nor may a local authority arbitrarily release debtors, and if it evicts tenants, even though in accordance with a contract, it must act reasonably and 'within the limits of fair dealing'. The whole conception of unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good.", Administrative Law, 9th Edn. H.W.R. Wade and C.F. Forsyth. 40. There is no difficulty to hold that the authorities owe a duty to act fairly but it is equally well settled in judicial review, the court is not concerned with the merits or correctness of the decision, but with the manner in which the decision is taken or the order is made. The court cannot substitute its own opinion for the opinion of the authority deciding the matter. 41. The distinction between appellate power and a judicial review is well known but needs reiteration. By way of judicial review, the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. The courts have inherent limitations on the scope of any such enquiry. If the contract has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nation slips away. (k) Also cited for our consideration was the judgment in Reliance Natural Resources Ltd. Vs. Reliance Industries Ltd. etc., (2010) 7 SCC 1. The Court's attention was invited to the following: "33. Mr R.F. Nariman, learned Senior Counsel appearing for RIL concentrated his argument with reference to Sections 391 to 394 of the Companies Act. According to him, Section 392 of the Act had no predecessors either in English law or in the Companies Act of 1913. The reason why the legislature appears to have felt the necessity of enacting Section 392 is to bring Section 391 on a par with Section 394. Section 394 applies only to companies which are reconstructing and or amalgamating, involving the transfer of assets and liabilities to another company. It is thus, applicable to a species of the genus of company referred to under Section 391. Section 394, sub-section 1 specifically gives the Company Court the power not merely to sanction the compromise or arrangement but also gives the Company Court the power, by a subsequent order, to make provisions for "such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur Constitution is not such that it permits the reading of each of the Directive Principles of State Policy, that have been framed for the achievement of conditions of social, economic and political justice in isolation. The structural lines of logic, of ethical imperatives of the State and the lessons of history flow from one to the other. In the quest for national development and unity of the nation, it was felt that the "ownership and control of the material resources of the community" if distributed in a manner that does not result in common good, it would lead to derogation from the quest for national development and the unity of the nation. Consequently, Article 39(b) of the Constitution should be construed in light of Article 38 of the Constitution and be understood as placing an affirmative obligation upon the State to ensure that distribution of material resources of the community does not result in heightening of inequalities amongst people and amongst regions. In line with the logic of the constitutional matrix just enunciated, and in the sweep of the quest for national development and unity, is another provision. Inasmuch as inequalities between people and regions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of this Court in Akhil Bhartiya Upbhokta Congress Vs. State of Madhya Pradesh Ors., (2011) 5 SCC 29: 65. What needs to be emphasised is that the State and/or its agencies/instrumentalities cannot give largesse to any person according to the sweet will and whims of the political entities and/or officers of the State. Every action/decision of the State and/or its agencies/instrumentalities to give largesse or confer benefit must be founded on a sound, transparent, discernible and well-defined policy, which shall be made known to the public by publication in the Official Gazette and other recognised modes of publicity and such policy must be implemented/executed by adopting a non-discriminatory and non-arbitrary method irrespective of the class or category of persons proposed to be benefited by the policy. The distribution of largesse like allotment of land, grant of quota, permit licence, etc. by the State and its agencies/instrumentalities should always be done in a fair and equitable manner and the element of favouritism or nepotism shall not influence the exercise of discretion, if any, conferred upon the particular functionary or officer of the State. 66. We may add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraphs 95 and 96 of the judgment. The aforesaid paragraphs are being extracted hereinbelow: "95. This Court has repeatedly held that wherever a contract is to be awarded or a licence is to be given, the public authority must adopt a transparent and fair method for making selections so that all eligible persons get a fair opportunity of competition. To put it differently, the State and its agencies/instrumentalities must always adopt a rational method for disposal of public property and no attempt should be made to scuttle the claim of worthy applicants. When it comes to alienation of scarce natural resources like spectrum etc., it is the burden of the State to ensure that a non-discriminatory method is adopted for distribution and alienation, which would necessarily result in protection of national/public interest. 96. In our view, a duly publicized auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first-come-first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall pay cost of Rs. 5 crores each. Respondent Nos. 4, 6, 7 and 10 shall pay cost of Rs. 50 lakhs each because they too had been benefited by the wholly arbitrary and unconstitutional exercise undertaken by the DoT for grant of UAS Licences and allocation of spectrum in 2G band. We have not imposed cost on the Respondents who had submitted their applications in 2004 and 2006 and whose applications were kept pending till 2007. (vi) Within four months, 50% of the cost shall be deposited with the Supreme Court Legal Services Committee for being used for providing legal aid to poor and indigent litigants. The remaining 50% cost shall be deposited in the funds created for Resettlement and Welfare Schemes of the Ministry of Defence. (vii) However, it is made clear that the observations made in this judgment shall not, in any manner, affect the pending investigation by the CBI, Directorate of Enforcement and Ors. agencies or cause prejudice to those who are facing prosecution in the cases registered by the CBI or who may face prosecution on the basis of chargesheet(s) which may be filed by the CBI in future and the Special Judge, CBI shall decide the matter uninfluenced by this jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy competition and equitable treatment. The judgments referred to, endorse all those requirements where the State, its instrumentalities, and their functionaries, are engaged in contractual transactions. Therefore, all "governmental policy" drawn with reference to contractual matters, it has been held, must conform to the aforesaid parameters. While Article 14 of the Constitution of India permits a reasonable classification having a rational nexus to the object sought to be achieved, it does not permit the power of pick and choose arbitrarily out of several persons falling in the same category. Therefore, a criteria or procedure has to be adopted so that the choice among those falling in the same category is based on reason, fair play and non-arbitrariness. Even if there are only two contenders falling in the zone of consideration, there should be a clear, transparent and objective criteria or procedure to indicate which out of the two is to be preferred. It is this, which would ensure transparency. 8. Another aspect which emerges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Natural Resources Ltd.'s case (supra), the Union of India adopted the position, that natural resources are vested in the State as a matter of trust, for and on behalf of the citizens of the country. It was also acknowledged, that it was the solemn duty of the State, to protect those natural resources. More importantly, it was accepted, that natural resources must always be used in the common interest of the citizens of the country, and not for private interest. 10. Based on the legal/constitutional parameters/requirements culled out in the preceding three paragraphs, I shall venture an opinion on whether there are circumstances in which natural resources ought to be disposed of only by ensuring maximum returns. For this, I shall place reliance on a conclusion drawn in the "main opinion", namely, "Distribution of natural resources is a policy decision, and the means adopted for the same are thus, executive prerogatives. However, when 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 maximizing private entrepreneurs, adoption of means other than those that are competitiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutional mandate, in the nature of an absolute principle which has to be applied in all situations. And as such, auction cannot be read into Article 14 of the Constitution of India, so as to be applied in all situations (refer to paragraph 107 of the "main opinion"). Auction is certainly not a constitutional mandate in the manner expressed, but it can surely be applied in some situations to maximize revenue returns, to satisfy legal and constitutional requirements. It is, therefore, that I have chosen to express the manner of disposal of natural resources by using the words "maximization of revenue" in place of the term "auction", in the foregoing two paragraphs. But it may be pointed out, the Attorney General for India had acknowledged during the course of hearing, that auction by way of competitive bidding was certainly an indisputable means, by which maximization of revenue returns is assured (in this behalf other observations recorded by me in paragraph 3 above may also be kept in mind). In the aforesaid view of the matter, all that needs to be stated is, that if the State arrives at the conclusion, in a given situation, that maximum revenue would be earned by auction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fourth question, namely, "What is the permissible scope for interference by courts with policy making by the Government including methods for disposal of natural resources?" On this the advice tendered in the "main opinion" inter alia expresses, "We may, however, hasten to add that the Court can test the legality and constitutionality of these methods. When questioned, the Courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are ultra vires and intra vires the provisions of the Constitution. Nevertheless, it cannot and will not compare which policy is fairer than the other, but, if a policy or law is patently unfair to the extent that it falls fouls of the fairness requirement of Article 14 of the Constitution, the Court would not hesitate in striking it down.", (refer to paragraph 146 of the "main opinion"). While fully endorsing the above conclusion, I wish to further elucidate the proposition. Before adverting to anything else, it is essential to refer to Article 39 (b) of the Constitution of India. "39. Certain principles of policy to be followed by the State - The State shall in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as the present controversy is concerned, the parameters for distribution of natural resources must be examined under these two heads separately. Coal is a natural resource. It shall constitute the illustrative natural resource for the present consideration. Let us assume a governmental decision to allocate coal lots for private commercial exploitation. First, the legislative policy angle. Reference may be made to the Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as, the MMDR Act). The enactment deals exclusively 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. The choice of Section 11A aforesaid is on account of the fact that it was added to the MMDR Act only on 13.2.2012, and as such, there may not have been, as of now, any actual allocation of coal lots based thereon. Section 11A of the MMDR Act, is being placed hereunder : "11A. Procedure in respect of coal or lignite - The Central Government may, for the purpose of granting reconnaissance permit, prospecting licence or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a legal or constitutional provision. As expressed in the "main opinion" the facts of each individual case, will be the deciding factor for such determination. In the absence of any such challenge, the legislative policy would be binding and enforceable. In such an eventuality, those who do not fall within the zone of consideration, would be precluded from the process of competitive bidding for a mining lease over an area having coal deposits. In the process of auction through competitive bidding, if the objective is to best subserve the common good (as in Article 39(b) of the Constitution of India) the legislative policy would be fully legitimate. If however, the expressed legislative policy has no nexus to any legitimate objective, or it transgresses the mandate of distribution of material resources to "best subserve the common good", it may well be unfair, unreasonable or discriminatory. For an effective analysis, Section 11A of the MMDR Act needs a further closer examination. Section 11A aforesaid, as an exception to the legislative policy referred to in the foregoing paragraph, also provides for the grant of a mining lease for coal to a private player, without following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tariff has been held, and the said bidding process has taken place without the knowledge, that a coal mining lease would be allotted to the successful bidder, yet the successful bidder is awarded a coal mining lease. Would such a grant be valid? In the aforesaid fact situation, the answer to the question posed, may well be in the negative. This is so because, the competitive bidding for tariff was not based on the knowledge of gains, that would come to the vying contenders, on account of grant of a coal mining lease. Such a grant of a coal mining lease would therefore have no nexus to the "competitive bid for tariff". Grant of a mining lease for coal in this situation would therefore be a windfall, without any nexus to the object sought to be achieved. In the bidding process, the parties concerned had no occasion to bring down the electricity tariff, on the basis of gains likely to accrue to them, from the coal mining lease. In this case, a material resource would be deemed to have been granted without a reciprocal consideration i.e., free of cost. Such an allotment may not be fair and may certainly be described as arbitrary, and violative of the Article 14 of the Constitution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy for allocation of natural resources may also be determined by the executive. The parameters for determining the legality and constitutionality of the two are exactly the same. In the aforesaid view of the matter, there can be no doubt about the conclusion recorded in the "main opinion" that auction which is just one of the several price recovery mechanisms, cannot be held to be the only constitutionally recognized method for alienation of natural resources. That should not be understood to mean, that it can never be a valid method for disposal of natural resources (refer to paragraphs 10 to 12 of my instant opinion). I would therefore conclude by stating that no part of the natural resource can be dissipated as a matter of largess, charity, donation or endowment, for private exploitation. Each bit of natural resource expended must bring back a reciprocal consideration. The consideration may be in the nature of earning revenue or may be to "best subserve the common good". It may well be the amalgam of the two. There cannot be a dissipation of material resources free of cost or at a consideration lower than their actual worth. One set of citizens cannot prosper at the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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