The #2G Presidential Reference: An Exercise in Futility

The Supreme Court’s judgment in the #2G Presidential reference case has led the government to claim vindication. Several media outlets sympathetic to the government have also hailed the judgment while its critics have claimed the opposite. So its worth taking a quick look at it.

This reference was quite controversial from the start. Senior lawyers like Soli Sorabjee and others saw this a thinly veiled attempt to try and overturn the earlier two judge bench judgment through the backdoor. When questions were raised about the propriety of filing a reference when the two judge bench was still seized of the review petition, it was withdrawn unconditionally. The other objection was that the reference had not mentioned that there existed any doubt in law unlike previous references and hence could not be entertained.

These issues were all raised during oral arguments and turned down. The court held that it would not go into the bonafides of the authority making the reference, it being made by the President. Absence of the word ‘doubt’ was no reason to reject it, the terms of article 143(1) being broad enough to allow the President to frame it in different language. Finally it held that a reference could be entertained even if the question has not arisen but one that the Executive apprehends might come up in future. This view opened the door to consider hypothetical questions purely in the abstract, a view I consider debatable. As a wise man once said, such an approach “burdens the future” committing that institution to a course it will find difficult to alter when faced with an actual law (or policy) and real circumstances. Thankfully in this instance, the Court’s suitably vague and generic opinion does not tie its hands at all.

The Court did not respond to each of the questions the President raised but gave a common answer to all the ones that did not specifically pertain to #2G. J.Jain’s majority holding as summarized in paragraph 149 is quoted below:

“Regard being had to the aforesaid precepts, we have opined that auction as a mode cannot be conferred the status of a constitutional principle. Alienation of natural resources is a policy decision, and the means adopted for the same are thus, executive prerogatives. However, when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximizing private entrepreneurs, adoption of means other than those that are competitive and maximize revenue may be arbitrary and face the wrath of Article 14 of the Constitution. Hence, rather than prescribing or proscribing a method, we believe, a judicial scrutiny of methods of disposal of natural resources should depend on the facts and circumstances of each case, in consonance with the principles which we have culled out above. Failing which, the Court, in exercise of power of judicial review, shall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution.”

The same thing was summarized succintly in one sentence by J.Khehar in his concurrence:

“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.”

Article 14 of the constitution enjoins the state to “not deny to any person equality before the law or the equal protection of the laws within the territory of India”. The Supreme Court has evolved two tests to determine if this provision has been violated. The first is the “classification test” where it is permissible for a law to be made applicable to a one or more classes of persons or things so long as “the classification is based on differentia having a rational relationship to the object sought to be attained [by the legislation]”. Later in 1974 came the (much criticized) “arbitrariness test” where the state’s actions had to be “based on some valid principle which in itself was not irrational, unreasonable or discriminatory”.

Both these tests have thus been part of the law for decades. So has the public trust doctrine which holds that natural resources are vested in the state and are to be used in such a manner as to promote the public good – a general statement of intent. In stating that auctions were “preferred” but not constitutionally required (para 148) and their suitability/permissibility would be determined against the touchstone of article 14, what did the Court add to our understanding of how article 14 would apply? Absolutely nothing at all. It will depend entirely on the facts and circumstances of each (future) case. If the judge(s) feels a policy other than auction is arbitrary, it will be struck down and vice versa.

The judgment contains a lot of verbiage with lofty principles and pious exhortations but little new, practical guidance as to how the question of reasonableness will be approached in so far as the exploitation of state owned resources are concerned. It was also careful to omit any pronoucement on the legality of the two judge bench’s “preference” for the auction route with respect to #2G spectrum allocation. In the absence of either, the exercise has been largely futile. Both the government and its critics will simply have one more addition to a long list of judgments to quote from in support of their respective stances in future litigation. The government will cite those parts enjoining the Court to stay away from legislating economic policy; its opponents demanding auction will cite other parts insisting vires of the policy or statute can only be determined in light of economics which they will claim are detrimental to the state’s interest thus failing the constitutional test of reasonableness and non-arbitrariness. While the state will argue that the demand for auction has no constitutional mandate, its opponents will point to the statement about auctions being the “preferred” route (para 148).

Thus, opponents of the state will not claim now that auctions are constitutionally required; instead they will attempt to delegitimize any alternative to it in the eyes of both the public and the Court much as it happened the last time with #2G. Of course, only one alternative to auction may be struck down in court at a time but that would be enough just as with #2G: the political cost of a judicial rebuff and the ensuing media recrimination will likely be enough for any government to cut its losses by quickly adopting the favored route.

In effect, the maximalist view of auctions being constitutionally entailed has been rejected and the status quo ante continues. An insipid “victory” indeed.