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TMI Blog2012 (10) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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., Mr. Gautam Dhamija,Adv., Ms. Heshu Kayina,Adv. For Madhya Pradesh: Mr. Vivek Tankha,Sr.Adv., Mr. B.S. Banthia,Adv., Mr. Vikas Upadhyay,Adv., Mr. Rishabh Sancheti,adv., Mr. Avijit Singh,Adv., Mr. Sumeer Sodhi,Adv., Mr. Kumanan D.,Adv. For Uttarakhand: Ms. Rachana Srivastava,Adv. For Bihar: Mr. Gopal Singh,Adv., Mr. Manish Kumar,Adv., Mr. Chandan Kumar,Adv. For Tripura: Mr. Gopal Singh,Adv. For Orissa: Mr. Radha Shyam Jena,Adv. For Rajasthan: Dr. Manish Singhvi,AAG., Mr. Amit Lubhaya,Adv., Mr. Milind Kumar,Adv. For Kerala: Mr. Ramesh Babu M.R.,Adv. For Maharashtra: Ms. Madhavi Divan,Adv., Mr. Sanjay Kharde,Adv., Mr. Sachin J. Patil,Adv., Ms. Asha G. Nair,Adv. For Jammu & Kashmir: Mr. Sunil Fernandes,Adv., Ms. Vernika Tomar,Adv. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecommunication, 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 initial three years and subsequently based on number of subscribers subject to minimum commitment mentioned in the tender document and licence agreement. The 1994 Licenses issued by GoI mentioned that a cumulative maximum of upto 4.5 MHz in the 900 MHz bands would be permitted based on appropriate justification. There was no separate upfront charge for the allocation of Spectrum to the licensees, who only paid annual Spectrum usage charges, which will be subject to revision from time to time and which under the terms of the license bore the nomenclature "licence fee and royalty". A copy of the 1994 Licenses, along with a table setting out the pre- determined Licence Fee as prescribed by DoT in the Tender, is annexed hereto as Annexure I (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 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 cellular and basic were also required to pay annual Spectrum usage charges. WHEREAS based on NTP 1999, a migration package for migration from fixed license fee to one time entry fee and licence fee based on revenue share regime was offered to all the existing licenses on 22nd July, 1999. This came into effect on 1st August 1999. Under the migration package, the licence period for all the CMTS and FSP licensees was extended to 20 years from the date of issuance of the Licenses. WHEREAS in 1997 and 2000, CMTS Licenses were also granted in 2 and 21 Circles to Mahanagar Telephone Nigam Limited ("MTNL") and Bharat Sanchar Nigam Limited ("BSNL") respectively (the "PSU Licenses"). However, no entry fee was charged f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led 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 hereto as Annexure VII. WHEREAS on 27th October, 2003, TRAI recommended a Unified Access Services Licence ("UASL") Regime. A copy of TRAI's recommendation is annexed hereto as Annexure VIII. WHEREAS on 11.11.2003, Guidelines were issued, specifying procedure for migration of existing operators to the new UASL regime. As per the Guidelines, all applications for new Access Services License shall be in the category of Unified Access Services Licence. Later, based on TRAI clarification dated 14.11.2003, the entry fee for new Unified Licensee was fixed same as the entry fee of the 4th cellular operator. Based on further recommendations of TRAI dated 19.11.2003, spectrum to the new licensees was to be give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 was to be allocated in the case of TDMA based systems (@ 200 KHz per carrier or 30 KHz per carrier) and a maximum of 2.5 MHz + 2.5 MHz was to be allocated in the case of CDMA based systems (@ 1.25 MHz per carrier), on case by case basis subject to availability. It was also, inter-alia, mentioned that additional spectrum beyond the above stipulation may also be considered for allocation after ensuring optimal and efficient utilization of the already allocated spectrum taking into account all types of traffic and guidelines/criteria prescribed from time to time. However, spectrum not more than 5 + 5 MHz in respect of CDMS system and 6.2 + 6.2 MHz in respect of TDMA based system was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 limited review of the Judgment to the extent it impacts generally the method for allocation of national resources by the State. A copy of the Review Petition is annexed hereto and marked as Annexure XX. WHEREAS by the Judgment, this Hon'ble Court directed TRAI to make fresh recommendations for grant of licenses and allocation of Spectrum in the 2G band by holding an auction, as was done for the allocation of Spectrum for the 3G licenses. WHEREAS, in terms of the directions of this Hon'ble Court, GoI would now be allocating Spectrum in the relevant 2G bands at prices discovered through auction. WHEREAS based on the recommendations of TRAI dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 several judgments of the Supreme Court including those of Larger Benches? Q.3 Whether the enunciation of a broad principle, even though expressed as a matter of constitutional law, does not really amount to formulation of a policy and has the effect of unsettling policy decisions formulated and approaches taken by various successive governments over the years for valid considerations, including lack of public resources and the need to resort to innovative and different approaches for the development of various sectors of the economy? Q.4 What is the permissible scope for interference by courts with policy making by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Court, rendered by a bench of two learned Judges on 2nd February, 2012 in Centre for Public Interest Litigation & Ors. Vs. Union of India & Ors.[ (2012) 3 SCC 1] (for brevity "2G Case"). On receipt of the Reference, vide order dated 9th May, 2012, notice was issued to the Attorney General for India. Upon hearing the learned Attorney General, it was directed vide order dated 11th May, 2012, that notice of the Reference shall be issued to all the States through their Standing Counsel; on Centre for Public Interest Litigation (CPIL) and Dr. Subramanian Swamy (petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the Reference as framed is of an omnibus nature, seeking answers on hypothetical and vague questions, and therefore, must not be answered. Commending us to In Re: The Special Courts Bill, 1978 (supra) and several other decisions, learned counsel urged that a reference under Article 143(1) of the Constitution for opinion has to be on a specific question or questions. It was asserted that by reason of the construction of the terms of Reference, the manner in which the questions have been framed and the nature of the answers proposed, this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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 of this Court on the questions posed, shows that there is a doubt in the mind of the Executive on those issues. It was stressed that merely because the Reference does not use the word 'doubt' in the recitals, as in other cited cases, does not imply that in substance no doubt is entertained in relation to the mode of alienation of all natural resources, other than spectrum, more so when the questions posed for opinion have far reaching national and international implications. It was urged that the content of the Reference is to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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"), which prescribe a policy of preferential treatment and first come first served, unlike the 2G Case, which according to the learned counsel only mandates auction for all natural resources. He thus, urged this Court to dispel all uncertainties regarding the true position of law after the judgment in the 2G Case, by holding it as per incuriam in light of the provisions of the MMRD Act and other statutes. Mr. Harish Salve, learned senior counsel, appearing on behalf of CII, while supporting the Reference, fer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel, 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 precedent - does not tantamount to reopening the decree. Arguing on similar lines, Mr. C.A. Sundaram, learned senior counsel appearing on behalf of FICCI, contended that if the observations in the 2G Case are read as applying to all natural resources and not limited to spectrum, it would tantamount to de facto policy formulation by the Court, which is beyond the scope of judicial review. He also took a nuanced stance on this Court's power of reconsideration over its precedents. It was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 discretion under Article 143(1); (iii) the language in which the Reference is couched exhibits mala fides on the part of the Executive; (iv) in light of enunciation of law on the point in Cauvery II, entertaining a Presidential reference on a subject matter, which has been decided upon directly and with finality, is barred; (v) the present Reference is an attempt to overturn the judgment of this Court in the 2G Case, which is against the spirit of Article 143(1) of the Constitution and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 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 its authority to refuse to answer a question on a reference, it must be unwilling to exercise its power of refusal "except for good reasons." A similar phrase was used in In Re: The Kerala Education Bill, 1957 (supra) when this Court observed that opinion on a reference under Article 143(1), may be declined in a "proper case" and "for good reasons". In Dr. M. Ismail Faruqui & Ors. (supra), it was added that a reference may not be answered when the Court is not competent to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nternational 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 juncture, reference may profitably be made to the decision in In Re: The Special Courts Bill, 1978 (supra), an opinion by a Bench of seven learned Judges, wherein it was observed as follows: "27. We were, at one stage of the arguments, so much exercised over the undefined breadth of the reference that we were considering seriously whether in the circumstances it was not advisable to return the reference unanswered. But the written briefs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowed 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 relatable to a question of law. It expresses a 'doubt' and seeks the opinion of the Court on that question, besides others. In so far as the impact of filing and withdrawal of the review application by the Union of India, against the decision in the 2G Case on the maintainability of the instant Reference is concerned, it is a matter of record that in the review petition, certain aspects of the grounds for review ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and relied upon in extenso, it would be appropriate to decipher the true ratio of Cauvery II, the lynchpin of the opposition to maintainability of the present Reference. Cauvery II was preceded by State of Tamil Nadu Vs. State of Karnataka & Ors.[ 1991 Supp (1) SCC 240] (hereinafter referred to as "Cauvery I"), which dwelled on the issue whether the Cauvery Water Disputes Tribunal (for short "t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 991. 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 power to grant interim relief, the Central Government would be incompetent to make a reference for the purpose in the first place and the Tribunal in turn would have no jurisdiction to entertain such reference, if made. Dealing with the said submission, after making a reference to the earlier order, this Court observed that once the Central Government had made a reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be said that there is any doubt about the question of law or the same is res integra so as to require the President to know what the true position of law on the question is. The decision of this Court on a question of law is binding on all courts and authorities. Hence under the said clause the President can refer a question of law only when this Court has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expression of the views of the judge." Therefore, references in Para 85 to "decision" and "view of law" must be severed from each other. The learned Judge observes that in case of a decision, the appellate structure is exhausted after a pronouncement by the Supreme Court. Therefore, the only option left to the parties is of review ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 except where it was necessary to reconsider the correctness of law laid down in that judgment. In fact, the overruling of a principle of law is not an outcome of appellate jurisdiction but a consequence of its inherent power. This inherent power can be exercised as long as a previous decree vis-à-vis lis inter partes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visory 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 General had strenuously challenged the correctness of the decision of the majority of the Federal Court in that case. Inter-alia, observing that the reference was in a way occasioned by that decision, the learned Judge held as follows: "I feel bound to say, with the utmost humility and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted 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 applied because the said view treated all the Fundamental Rights guaranteed by Part III as paramount, and therefore, each one of them could control the provisions of Article 194(3). At that juncture, the Bench stated that in the case of Sharma, contentions urged by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of a particular facet of constitutional law, the comments made in a decision could be treated as not accurate; and further it could be opined that in an earlier judgment there are certain obiter observations. Thus, in Keshav Singh, a seven-Judge Bench, while entertaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Justice of another High Court. The Chief Justice of India should also take into account the views of one or more Supreme Court Judges who are in a position to provide material which would assist in the process of deciding whether o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and it is of great public importance as it deals with allocation/alienation/disposal/ distribution of natural resources. Besides, the question whether the 2G Case is on authoritative pronouncement in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 its own facts; not everything said by a Judge while giving a judgment can be ascribed precedental value. The essence of a decision that binds the parties to the case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: "...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. State of Karnataka & Ors.[ (2003) 6 SCC 697], the Court made the following observations: "The ratio decidendi of a judgment has to be fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 distribution of natural resources. In this regard, the doctrine of equality has two aspects: first, it regulates the rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 awarded or a licence is to be given, the public authority must adopt a transparent and fair m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod 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 ultra vires the Constitution, without allowing every law to be tested on its meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial 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 similarly placed; Article 39(b) which is a Directive Principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortance 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 resources which are by nature meant for public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the people at large. &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, 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 judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s based on an intelligible 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it by Articles 14 and 16. Mala 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Rule of law principle primarily applies to the 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein. Similarly, if an enactment is challenged as violative 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 rath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date under Article 14 of the Constitution of India? We would unhesitatingly answer 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", c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporated in the Constitution. (See: Indira Nehru Gandhi Vs. Raj Narain[1975 (Supp) SCC 1]). The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be correct to construe the word 'distribution' in a purely literal sense so as to mean only division of a particular kind or to particular 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court on the facts of the case. Even in that case, this Court did not evolve economic criteria of its own to achieve the goal of "common good" 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cilities for the purpose of setting up the industry. The State is not obliged to tell such party: "Please wait I will first advertise, wee whether any other offers are 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions necessitating departure from the rule, but then such instances must be justified by compulsions and not by compromise. It must be justified by compelling reasons and not by just convenience." 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 respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en place. It is by now well settled that non-floating of tenders or absence of public auction or invitation alone is no sufficient reason to castigate the move or an action of a public authority 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach is economically and legally sound and sometimes necessary to spur research and development. Similarly, bundling exploration and exploitation contracts may be necessary to spur growth in a specific industry. 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judged on the assumption that the executive or such authority will act in an arbitrary manner in the exercise of the discretion conferred upon it. If the executive or the administrative authority acts in an arbitrary manner, its 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 exploitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch have little relevance in determining the legality of the measure. It is again not for this Court to consider the relative merits of the different political theories or economic policies. The Parliament has under Entry 45, List I the power to legislate 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." & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not the domain of the court to embark upon unchartered ocean of public policy in an exercise to consider as to whether a particular public policy is wise or a better public policy can be evolved. Such exercise must be left to the discretion of the executive and legislative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the function of the courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts." In 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans 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 foul 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 mandat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the subject whereof advice has been sought. The first question in the Presidential reference requires the Supreme Court to tender advice on, "Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances, is by the conduct of auctions?". It is of utmost importance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd correctly be described as tender, tender-cum- auction, or auction. 4. The concept of equality before the law and equal protection of the laws, emerges from the fundamental right expressed in Article 14 of the Constitution of India. Equality is a definite concept. The variation in its understanding may at best have 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts of citizens with reference to natural resources. The right of an individual citizen to those assets, as also, the rights of the remaining citizens of the country, have now emerged on opposite sides in a common litigation. One will endeavour to delineate the legal position expressed in decisions rendered by this Court, 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 decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 3 is valid, insofar as it is intended to be administered only for the benefit of the State, the sale or disposal of Kendu leaves by the Government must also be in the public interest and not to serve the private interest of any person or class of persons. It is true that it is for the Government, having regard to all the circumstances, 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). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under Article 19(1)(g) and Article 14 because the schemes gave rise to a monopoly in the trade in Kendu leaves to certain traders, and singled out other traders for discriminatory treatment. 18. The classification based on the circumstance that certain existing contractors had carried out their obligations in the previous year regularly 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 lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e action shown to be lacking in bona fides. But that conclusion is open to criticism that the Government is not shown to have considered the prevailing prices of Kendu leaves about the time when offers were made, the estimated crop of Kendu leaves, the conditions in the market and the likelihood of offerers at higher prices carrying out their obligations, 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 Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court in E.P. Royappa v. State of Tamil Nadu, (1974) 4 SCC 3, and Maneka Gandhi v. Union of India, (1978) 1 SCC 248, that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non-discriminatory: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracts in its trading activity the State must be guided by relevant principles, and not by extraneous or irrelevant consideration. The same should be based on reasonableness and rationality as well as non- arbitrariness. It came to be concluded, that the State while entering into a contractual relationship, was bound to maintain the standards referred to above. And any departure 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent and Guran Devaya on behalf of the second respondents show that the estimated cost of extraction and collection of resin from these inaccessible areas would be at the least Rs 175 per quintal, though according to Guran Devaya it would be in the neighbourhood of Rs.200 per quintal, but even if we take the cost at the minimum figure of Rs.175 per quintal, the total 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 acces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal under the impugned Order. This argument, plausible though it may seem, is fallacious because it does not take into account the policy of the State not to allow export of resin outside its territories but to allot it only for use in factories set up within the State. It is obvious that, in view of this policy, no resin would be auctioned by the State and there would 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State. It is therefore, that this Court concluded that the impugned order passed by the State in favour of the second respondent could not be said to be disadvantageous to the State and favouring the second respondent. In a manner of understanding, this Court found no infirmity in the impugned order passed by the State Government because the State Government had given effect 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 porti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37. As we look upon the facts of this case, there was an implied obligation in respect of dealings with the tenants/occupants of the Port Trust authority to act in public interest/purpose. That requirement is fulfilled if it is demonstrated that the Port Trust authorities have acted in pursuance of a policy which is referable to public purpose. Once that norm is established 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. In this connection reference may be made to E.P. Royappa 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt with by the State or the instrumentality of the State without informing and taking into confidence, the party whose rights and powers are affected or sought to be affected, into confidence. In such situations most often people feel aggrieved by exclusion of knowledge if not taken into confidence. 19. Such transaction should continue as an administrative decision with the organ of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amental rights guaranteed in Part III for protection against excesses of State action, to realise the vision in the Preamble. This being the philosophy of the Constitution, can it be said that it contemplates exclusion of Article 14 - non-arbitrariness which is basic to rule of law - from State actions in contractual field when all actions of the State are meant for public good and expected 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 differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and remedies flowing from it. It is really the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that contractual powers should generally be reviewable is indicated, even though the Court of Appeal faltered at the last step and refrained from saying so. It is significant to note that emphasis now is on reviewability of every State action because it stems not from the nature of function, but from the public nature of the body exercising that function; and all powers possessed by a public authority, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenet and it would be sufficient 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 judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution of India in contractual matters. Thirdly, the fact that a dispute falls in the domain of contractual obligation, would make no difference, to a challenge raised under Article 14 of the Constitution of India on the ground that the impugned act is arbitrary, unfair and unreasonable. Fourthly, every State action must be informed of reason and it follows that an act uninformed by reason is arbitrary. Fifthly, where 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from those who were responsible for it? Compensation as explained includes both the just equivalent for loss of goods or services and also for sufferance of injustice. For instance in Civil Appeal No. ... of 1993 arising out of SLP (Civil) No. 659 of 1991 the Commission directed the Bangalore Development Authority to pay Rs 2446 to the consumer for the expenses incurred by him in getting the lease-cum-sale agreement registered 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 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damaging than the feeling of helplessness. An ordinary citizen instead of complaining and fighting succumbs to the pressure of undesirable functioning in offices instead of standing against it. Therefore the award of compensation for harassment by public authorities not only compensates the individual, satisfies him personally but helps in curing social evil. It may result in improving the work culture and help in changing the 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns are regulated by grant of statutory powers. The test of permissive form of grant is over. It is now imperative and implicit in the exercise of power that it should be for the sake of society. When the court directs payment of damages or compensation against the State the ultimate sufferer is the common man. It is the tax payers' money which is paid for inaction of those who are entrusted under the Act to discharge their duties 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations. None of these cases fall within the categories placed before this Court in Centre for Public Interest Litigation v. Union of India, 1995 Supp. (3) SCC 382, but even if we assume for argument sake that these cases fall in some of those or similar guidelines the exercise of discretion was wholly arbitrary. Such a discretionary power which is capable of being exercised arbitrarily is not permitted by Article 14 of the Constitution 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity to arbitrarily pick and choose out of several persons falling in the same category, according to the above decision would be arbitrary, and as such violative of Article 14 of the Constitution of India. (j) Out of the more recent judgments our attention was invited to Meerut Development Authority Vs. Association of Management Studies & Anr. etc., (2009) 6 SCC 171. The controversy adjudicated upon in this case emerges from the decision of 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things unless it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. So a city council acted unlawfully when it refused unreasonably to let a local rugby football club use the city's sports ground, though a private owner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority is ordained to act, reasonably and in good faith and upon lawful and relevant grounds of public interest. Most importantly it was concluded, that the State "must" get the "full value" of the resources, specially when State owned assets are passed over to private individuals/entities. Not stopping there the Court added further, that whoever pays less than the full value, get the assets belonging to the citizens "at a discount", and as such the wealth that belongs to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natural resources in trust. Legally, therefore, the Government owns such assets for the purposes of developing them in the interests of the people. In the present case, the Government owns the gas till it reaches its ultimate consumer. A mechanism is provided under the PSC between the Government and the contractor (RIL, in the present case). The PSC shall override any other contractual obligation between the contractor and any other party. ..... ..... 243. The structure of our 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government, as a matter of trust, in the name of the people of India. And that, it was the solemn duty of the State to protect the national interest. The most significant assertion expressed on behalf of the Union was, that natural resources must always be used in the interest of the country and not in private interest. It is in the background of the stance adopted by the Union, that this Court issued the necessary directions extracted above. (l) Last of all reference was made to the decision 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-discrimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either need any summarization, nor any further elaboration. (m) Surely, there cannot be any escape from a reference to the judgment rendered by this Court in Centre for Public Interest Litigation and others v. Union of India & Ors., (2012) 3 SCC 1, which according to the preamble of the Presidential reference, seems to be the reason why the reference came to be made. During the course of hearing extensive debate, between rival parties, ensued on the effect of the observations recorded by this Court in paragraphs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectrum in 3G band. (iv) The Central Government shall consider the recommendations of TRAI and take appropriate decision within next one month and fresh licences be granted by auction. (v) Respondent Nos. 2, 3 and 9 who have been benefited at the cost of Public Exchequer by a wholly arbitrary and unconstitutional action taken by the DoT for grant of UAS Licences and allocation of spectrum in 2G band and who off-loaded their stakes for many thousand crores in the name of fresh infusion of equity or transfer of equity 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible persons can participate in the process. 7. The parameters laid by this Court on the scope of applicability of Article 14 of the Constitution of India, in matters where the State, its instrumentalities, and their functionaries, are engaged in contractual obligations (as they emerge from the judgments extracted in paragraph 6 above) are being briefly paraphrased. For an action to be able to withstand the test of Article 14 of the Constitution of India, it has already been expressed in the "main opinion" that it has 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. And in that sense, it has been concluded, the wealth that belongs to the nation is lost. In Reliance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n some public purpose, the choice is limited to a set of private persons, amongst whom alone, the State has decided to dispose of natural resources. Herein again, in my opinion, if the participation of private persons is for commercial exploitation exclusively for their individual gains, then the State's endeavour to maximize revenue alone, would satisfy the constitutional mandate contained in Articles 14 and 39(b) of the Constitution of India. 12. In the "main opinion", it has been concluded, that auction is not a 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent debate, rival political parties have made allegations against those responsible, which have been repudiated with counter allegations. This Court is not, and should never be seen to be, a part of that debate. But it does seem, that the Presidential reference is aimed at invoking this Court's advisory jurisdiction to iron out the creases, so that legal and constitutional parameters are correctly understood. This would avoid such controversies in future. It is therefore, that an opinion is also being rendered by me, on 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as a reference to any similar real life situation(s)/circumstance(s). The focus in the instant consideration is limited to allocation of natural resources for private commercial exploitation, i.e., where a private player will be the beneficiary of such allocation, and will exploit the natural resource to make personal profits therefrom. The illustration chosen will be used to express an opinion on matters which are governed by statutory provisions, as also, those which are based on governmental policy. This is so because in 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 illustrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an activity notified by the Central Government. Only those satisfying the legislatively prescribed zone of eligibility, are permitted to compete for a coal mining lease. For the sake of fairness, and to avoid arbitrariness, the provision contemplates, that the highest bidder amongst those who participate in the process of competitive bidding, would succeed in obtaining the concerned coal mining lease. The legislative policy limiting the zone of consideration could be subject matter of judicial review. It could be assailed, in case of violation 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would such a grant satisfy the test of being fair, reasonable, equitable and impartial. The answer to the instant query would depend on the facts of each individual case. Therefore, the answer could be in the affirmative, as well as, in the negative. Both aspects of the matter are being explained in the succeeding paragraph. Going back to the hypothetical illustration based on Section 11A of the MMDR Act. One would add some further facts so as to be able to effectively project the legal point of view. If the bidding process to determine the lowest 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause a fair playing field having been made available to all those competing for the power project, by making them aware of the grant of a coal mining lease, well before the bidding process. The question of favouritism therefore would not arise. Would such a grant of a natural resource, free of cost, be valid? The answer to the query, in the instant fact situation, may well be in the affirmative. The policy of allocation of natural resources for public good can be defined by the legislature, as has been discussed in the foregoing paragraphs. Likewise, 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 ..... 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