Are natural resources national assets?

After reading this case analysis, you will learn how the Apex Court upheld the public trust doctrine and recognised that natural resources are national assets. The landmark judgement created a huge uproar in the Indian media and Courts.

 

TITLE  Centre for Public Interest Litigation Vs. Union  of India
CITATION (2012) 3 SCC 1
COURT Supreme Court of India
JUDGES/CORAM Justice G.S. Singhvi and Justice A.K. Ganguly
DATE OF JUDGEMENT  

INTRODUCTION

This PIL arose out of misallocation of licenses / radio spectrum by Ministry of Communications and Information Technology in January 2008 to provide 2G services. The controversy arose because spectrum was allocated on first-come-first-served basis at the price prevailing in 2001. The economic value of the spectrum in 2007-2008 was enormously more. There were several irregularities in the allocation process. Besides, some of the beneficiaries earned huge profits by getting spectrum at a throw-away price and then selling at much higher price. The entire process was perceived as a favour shown to some private parties at the cost to public exchequer. The Comptroller & Auditor General (CAG) had also made adverse comments in his audit report.

FACTS

The facts of the case are as follows: Petitioners questioned the grant of UAS Licenses to private Respondents as whether the Government had right to alienate, transfer or distribute natural resources/national assets otherwise than by following a fair and transparent method consistent with fundamentals of equality clause enshrined in Constitution. Furthermore, whether recommendations made by Telecom Regulatory Authority of India (TRAI) on 28th August, 2007 for grant of Unified Access Service Licence (UAS Licence) with 2G spectrum in 800, 900 and 1800 MHz at price fixed in 2001, which were approved by Department of Telecommunications (DoT), were contrary to decision taken by Council of Ministers on 31st October, 2003.

ISSUES

The main issues in the case were: 

  1. Whether or not exercise undertaken by DoT from September 2007 to March 2008 for grant of UAS Licenses to private Respondents in terms of recommendations made by TRAI was vitiated due to arbitrariness and malafides and was contrary to public interest.
  2. Whether or not the policy of first-come-first-served followed by DoT for grant of licenses was ultra vires provisions of Article 14 of Constitution and whether said principle was arbitrarily changed by Minister of Communications and Information Technology (Minister of C&IT), without consulting TRAI, with a view to favor some of Applicants.
  3. Whether or not the licenses granted to ineligible applicants and those who failed to fulfil terms and conditions of license were liable to be quashed.
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SUMMARY OF COURT DECISION AND JUDGEMENT

The Court held that even though there was no universally accepted definition of natural resources, they were generally understood as elements having intrinsic utility to mankind. They might be renewable or non-renewable. However, a natural resource’s value rests in amount of material available and demand for it. Natural resources belong to people but State legally owned them on behalf of its people. From this point of view, natural resources considered as national assets. Moreover, because State benefits immensely from their value, it was empowered to distribute natural resources. While distributing natural resources, State was bound to act in consonance with principles of equality and public trust. It is the duty of the State to ensure that its action are not detrimental to public interest. Like any other State action, constitutionalism must be reflected at every stage of distribution of natural resources.

ANALYSIS

Spectrum had been internationally accepted as a scarce, finite and renewable natural resource. It was susceptible to degradation in case of inefficient utilization. It had a high economic value in light of demand for it on account of tremendous growth in telecom sector. Although it did not belong to a particular State, right of use had been granted to States as per international norms. 

In India, Courts have given an expansive interpretation to concept of natural resources. They have issued directions time to time by relying upon provisions contained in Articles 38, 39, 48, 48A and 51A(g), for protection and proper allocation/distribution of natural resources. The Courts have repeatedly insisted on compliance of constitutional principles in process of distribution, transfer and alienation to private persons. Natural resources were public goods. Hence, doctrine of equality, which emerged from concepts of justice and fairness, must guide State in determining actual mechanism for distribution of natural resources. 

In this regard, doctrine of equality had two aspects. Firstly, it regulated rights and obligations of State vis-a-vis its people. The doctrine expounds that people should have equitable access to natural resources and/or its products. They should be adequately compensated for transfer of resource to private domain. Secondly, it regulates rights and obligations of State vis-a-vis private parties seeking to acquire/use resources. It demands that procedure adopted for distribution is just, non-arbitrary and transparent. It should not discriminate between similarly placed private parties.

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State was the legal owner of natural resources as a trustee of people. Although it was empowered to distribute the same, the process of distribution must be guided by constitutional principles including doctrine of equality and larger public good. TRAI’s entire approach was lopsided and contrary to decision taken by Council of Ministers. TRAI’s recommendations became a handle for then Minister of C&IT and officers of DoT who virtually gifted away important national assets at throw away prices. They willfully ignored concerns raised from various quarters including Prime Minister, Ministry of Finance and also some of its own officers. This became clear from fact that soon after obtaining licences, some of beneficiaries off-loaded their stakes to others, in name of transfer of equity or infusion of fresh capital by foreign companies, and thereby made huge profits.

TRAI was an expert body assigned with important functions under 1997 Act but, it could not make recommendations overlooking basic constitutional postulates. Such recommendations deny people from participating in distribution of national wealth and benefit a handful of persons. Recommendations made by TRAI were flawed in many respects. The implementation of thereof by DoT, resulted in gross violation of objective of NPT 1999 and the decision taken by Council of Ministers on 31st October, 2003. TRAI had decided not to recommend standard option for pricing of spectrum in 2G bands keeping in view level playing field for new entrants. It was impossible to approve the decision taken by DoT to act upon those recommendations.

Recommendations made by TRAI in this regard were contrary to decision of Council of Ministers that DoT would discuss issue of spectrum pricing with Ministry of Finance along with issue of incentive for efficient use of spectrum as well as disincentive for sub-optimal usages. Being an expert body, it was incumbent upon TRAI to make suitable recommendations even for 2G bands.

There was a fundamental flaw in first-come-first-served policy inasmuch as it involved an element of pure chance or accident. In matters involving award of contracts or grant of license or permission to use public property, invocation of first-come-first-served policy had inherently dangerous implications. Wherever a contract was to be awarded or a license was to be given, public authority must adopt a transparent and fair method for making selections. This way all eligible persons get a fair opportunity of competition. State and its agencies/instrumentalities must always adopt a rational method for disposal of public property. No attempt should be made to scuttle claim of worthy applicants. When it came to alienation of scarce natural resources like spectrum etc., it was the burden of State to ensure that a non-discriminatory method was adopted for distribution and alienation. Such a method would necessarily result in protection of national/public interest.

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A duly publicized auction conducted fairly and impartially is perhaps the best method for discharging this burden. Methods like first-come-first-served when used for alienation of natural resources/public property were likely to be misused by unscrupulous people who were only interested in garnering maximum financial benefit and had no respect for constitutional ethos and values .

While transferring or alienating natural resources, State was duty bound to adopt method of auction by giving wide publicity so that all eligible persons could participate in process. The decision of officers of DoT between September, 2007 and March 2008, under leadership of then Minister of C&IT was wholly arbitrary, capricious and contrary to public interest. It apart violated the doctrine of equality . Material produced before Court showed that Minister of C&IT wanted to favour some companies at cost of Public Exchequer. When it was clearly demonstrated that policy framed by State or its agency/instrumentality and/or its implementation was contrary to public interest or was violative of constitutional principles, then it was the duty of Court to exercise its jurisdiction in larger public interest and reject stock plea of State that scope of judicial review should not be exceeded beyond recognized parameters. 

CONCLUSION

It became the duty of Court to exercise its power in larger public interest. The Courts have to ensure that institutional integrity is not compromised by those in whom people repose trust and who take oath to discharge duties in accordance with Constitution and law without fear or favour, affection or ill will and who, as any other citizen, enjoy fundamental rights and who at the same time, were bound to perform duties enumerated in Article 51A of Constitution. Licenses granted to private Respondents on or after 10th January, 2008 and subsequent allocations of spectrum to licensees were declared illegal and quashed. 

–END OF CASE COMMENT–