Centre for Public Interest Litigation v. Union of India

After reading this case analysis, you will learn how the Apex Court upheld the public trust doctrine and recognized that natural resources are national assets. The landmark judgement created a huge uproar in the Indian media and Courts.
CITATION(2012) 3 SCC 1
COURTSupreme Court of India
JUDGES/CORAMJustice G.S. Singhvi and Justice A.K. Ganguly
DATE OF JUDGEMENT 

Introduction

This PIL arose out of misallocation of licenses/radio spectrum by the Ministry of Communications and Information Technology in January 2008 to provide 2G services. The controversy arose because the spectrum was allocated on a first-come-first-served basis at the price prevailing in 2001 though 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 a spectrum at a throw-away price and then selling at a much higher price. The entire process was perceived as a favor shown to some private parties at the cost to the 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 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 and 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 mala fides 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 favour 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.

Summary of court decision and judgment

It was 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 but a natural resource’s value rest in amount of material available and demand for it. Natural resources belong to people but State legally own them on behalf of its people and from that point of view natural resources were considered as national assets, more so because State benefits immensely from their value and therefore, State was empowered to distribute natural resources and while distributing natural resources, State was bound to act in consonance with principles of equality and public trust and ensure that no action was taken which might be detrimental to public interest. Like any other State action, constitutionalism must be reflected at every stage of distribution of natural resources.

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Analysis

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

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

In this regard, the doctrine of equality had two aspects – First, it regulated rights and obligations of State vis-a-vis its people and demands that people be granted equitable access to natural resources and/or its products and that they were adequately compensated for transfer of resource to the private domain – And second, it regulated rights and obligations of State vis-a-vis private parties seeking to acquire/use resources and demands that procedure adopted for distribution was just, non-arbitrary and transparent and that it did not discriminate between similarly placed private parties. The state was the legal owner of natural resources as a trustee of people and although it was empowered to distribute same, process of distribution must be guided by constitutional principles including the doctrine of equality and the larger public good. The entire approach adopted by TRAI was lopsided and contrary to the decision taken by Council of Ministers and its recommendations became a handle for then Minister of C&IT and officers of DoT who virtually gifted away important national asset at throwaway prices by wilfully ignoring concerns raised from various quarters including Prime Minister, Ministry of Finance and also some of its own officers. This became clear from the fact that soon after obtaining licenses, some of the 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.

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TRAI was an expert body assigned with important functions under the 1997 Act but, it could not make recommendations overlooking basic constitutional postulates and established principles and make recommendations that would deny people from participating in the distribution of national wealth and benefit a handful of persons. Recommendations made by TRAI were flawed in many respects and implementation thereof by DoT resulted in gross violation of the objective of NPT 1999 and decision taken by the Council of Ministers on 31st October 2003. TRAI had decided not to recommend the 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 the decision of Council of Ministers that DoT would discuss the issue of spectrum pricing with the Ministry of Finance along with the issue of incentive for efficient use of spectrum as well as a 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 in as much as it involved an element of pure chance or accident. In matters involving the award of contracts or grants of license or permission to use public property, the 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, the public authority must adopt a transparent and fair method for making selections so that 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 and no attempt should be made to scuttle claim of worthy applicants. When it came to the alienation of scarce natural resources like spectrum etc., it was a burden of State to ensure that a non-discriminatory method was adopted for distribution and alienation, which would necessarily result in protection of national/public interest. A duly publicized auction conducted fairly and impartially was perhaps the best method for discharging this burden and methods like first-come-first-served when used for alienation of natural resources/public property was 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 the method of auction by giving wide publicity so that all eligible persons could participate in the process. The exercise undertaken by officers of DoT between September 2007 and March 2008, under the leadership of the Minister of C&IT was wholly arbitrary, capricious, and contrary to public interest apart from being violative of the doctrine of equality. The material produced before the Court showed that the Minister of C&IT wanted to favor some companies at the 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 the public interest or was violative of constitutional principles, then it was the duty of Court to exercise its jurisdiction in the larger public interest and reject the stock plea of State that scope of judicial review should not be exceeded beyond recognized parameters.

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Conclusion

It became the duty of Court to exercise its power in the larger public interest and ensure that institutional integrity was not compromised by those in whom people had reposed trust and who had taken an oath to discharge duties in accordance with Constitution and law without fear or favor, affection or ill will and who, as any other citizen, enjoy fundamental rights and, at the same time, we’re 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 the spectrum to licensees were declared illegal and were quashed.