Case Brief: Natural Resources Allocation In Re , Special Reference No. 1 of 2012
Court: Hon’ble Supreme Court of India
Bench: S.H. Kapadia, C.J. And D.K. Jain, J.S. Khehar, Dipak Misra and Ranjan Gogoi, JJ
Theme: The issue of commercial use of residential premises
Subject: Environmental laws
In 2012, under a presidential reference, Supreme court was asked to give its opinion on the allocation of natural resources. Reason for the presidential reference on this topic was Centre for public interest litigation v. union of India popularly known as 2g spectrum case. The judgment of that case did not answer a few questions which the president thought shall need to be answered for the common interest of the citizens.
Apart from allocation of radio and spectrums there are various kinds of natural resources like petroleum, minerals, gas etc. the law therefore should not be ambiguous at the time of allocation of the natural resources to the private players in the market.
The distribution of natural resources by the state cannot be arbitrary and discriminatory; a state has to abide itself by article 14 of the constitution at the time of allocation of natural resources. Because there exist a fiduciary relationship between citizens and the government for the safety of natural resources and government cannot just allocate resources in such a way that it only benefits a single person.
When it comes to the classification at the time of allocation of resources, it must also be non-discriminatory and there must be reasonable grounds for distinction, there are various examples given in the case which shows how reasonably a law should applied.
BACKGROUND OF THE CASE
The president of India has power to seek opinion from Supreme court whenever any question of law arises. It is not necessary that the question of law which has arisen must be regarding to the present scenario, the president can also ask questions which are concerned with future of some events which are likely to arise.
The supreme court has also some powers when it comes to answering the questions which are raised by the president, the supreme court can deny to answer the question if it thinks that answering of a specific question would have direct bearing on the previous judgment given by the court or any other reasonable reason.
FACTS OF NATURAL RESOURCES ALLOCATION IN RE
In this case also the president believes that there are still some unanswered questions about the allocation of natural resources which need a concrete answer so that there must not be any ambiguity at state’s end when it comes to the allocation of natural resources.
This ambiguity although was always there in the mind of the government but it increased after the judgment in 2g spectrum case, after the judgment in 2g case which held that perhaps auction is the best possible way to allocate resources so the president raises some questions and uses the power which lies in article 143 of the Indian constitution.
Out of all the questions Supreme court decided to answer the first five questions and the denied to answer last three questions because it had direct bearing on 2g spectrum case. The president has asked following questions to supreme court.
PROCEDURAL HISTORY OF NATURAL RESOURCES ALLOCATION IN RE
Whenever a question of law arises, the president has the power to consult supreme court under Article 143 of Indian constitution. In this case the president has ask question about the allocation of natural resources to supreme court. In case where question of law arises, president always ask the opinion of supreme court only, so there is no procedural history in this case, as it has directly came to the supreme court of India.
ISSUES IN NATURAL RESOURCES ALLOCATION IN RE
- Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?
- Whether a broad proposition of law that only the route of auctions can be restored to for disposal of natural resources does not run contrary to several judgments of the supreme court including those of the large benches?
- 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 formulate and approaches taken by various successive governments over the years for valid consideration, including lack of public resources and the need to resort to innovative and different approaches for the development of various sectors of the economy?
- What is the permissible scope for interference by courts with policy- making by the Government including method of disposal of natural resources?
- Whether, if the court holds, within the permissible scope of judicial review, that a policy is flawed, is the court not obliged to take into account investments under the said policy, including investments made by foreign investors under multilateral/ bilateral agreements?
Application of laws by the judge
Although the case includes dealing with various statutes like MMDR and various articles of Indian constitution. But the main focus in this particular judgment is Article 14 and implementation of article 14 when it comes to the allocation of natural resources. Article 14 which states that the state shall not deny to any person equality before the law.
Equality in each and every aspect is necessary because the essence of equality will diminish if it becomes subjective to the facts and circumstances. Whatever the facts and circumstances of the may be but the principle of equality should always exist and a person must not miss the opportunity just because of the unequal treatment by the state or any instrumentality of the state.
Application of laws with facts
In this case where the president is concerned for the allocation of natural resources amongst the citizens of the country. Allocation of natural resources must be fair, transparent and non discriminatory and a single person must not get the benefit at the cost of the other citizens. In this case it has been stated that distribution of any kind of resource must be tested with principle of equality.
Any kind of allocation which fails to adhere with principle of equality shall be void. In this case it was also held that if the state is making any kind of classification at the time of distribution of resources, that classification must be reasonable should not resist a group of peole to participate in the bidding just because they do not fall under a specific category set by the state.
The suggestions given by Bose, J. about whether the legislation has violated article 14 or not plays a very crucial role while determining at the time of allocation of natural resources to get the insight of discrimination that the state has done amongst the citizens. According to the principle given by Bose, J. a judge must look deeply into each case for considering here as matter of law and not just one fact that do these laws which have been called in question offend a still greater law before which they must even bow.
In this case, the judges of the Supreme Court while considering auction as only option for the allocation of natural resources stated that although auction would help in maximization of profits for the government but it would very inappropriate if we make auction as a constitution mandate because if we do so it would make all the other ways of allocating resources void and mandatory auction might be contrary to economy as well.
JUDGMENT IN NATURAL RESOURCES ALLOCATION IN RE
In the judgment Justice Khehar has held that the state while making contracts with private players the state must not act arbitrarily and must act in a fair and reasonable man. The court held that while making contracts with regards to allocation of resources must act like a prudent businessman which focuses on maximization of profits and the generated profits must be used for the common good and by common good court means that the welfare of public should held utmost importance and benefitting only a single person must not be the target the government should achieve because the resources which lies with the sovereign are the property of each and every individual that live in the state.
In the judgment the court has also referred to the report by CAG which shows the loss incurred by the government because of bad allocation policies. The court held that it cannot decide the best way possible to decide the method of allocation because it depends upon facts and circumstances of each case, in this reference Justice Khehar stated that the court will judge the method when it appears in the court of law.
At the point of auction as best possible method to allocate resources the court held that making auction as a constitution mandate for allocation of resources will make other methods void which would harm the policy of various sates which prefers other ways to allocate resources.
While answering firs question which is related to decide whether auction is the best possible way to allocate resources the court held that president’s reference is not based on concrete factual problem so deciding a method for all the resources would be unjust. The court also held that no part of natural resources cannot be disposed as charity or donation each and every single bit of resource must reciprocate and the consideration of the resources must be use for the public welfare.
It was the ambiguity in the judgment of Centre for public interest litigation v. union of India which gave rise to the first question. The first question which asks that whether auction is the only option for disposal of all natural resources and under all circumstances is the repercussion of the ambiguity in the 2g spectrum judgment.
In that judgment the supreme court in its judgment stated that a duly publicized auction conducted fairly is perhaps the best method to dispose the natural resources. Although there was no mention about auction being the only permissible and intra vires method of disposal of natural resources and that the findings are limited to the case of spectrum but considering a specific method as best among various methods gives impression that if the highest judiciary bench has considered something as best method for allocation of resources, why would the state contradict with the best method at the time of allocation?
The reason that petitioner approached the court in 2g spectrum case by invoking article 32 is because the union had adopted “First come first serve” policy which can have dangerous repercussions and the government cannot be so careless to give away resources on first come first serve basis. But the problem in the judgment was the statement which defines auction as perhaps the best possible way to dispose the natural resources and because of this the state thought that it was duty bound to dispose resources by the way of auction.
In this judgment J.S. Khehar while dealing with rights did not only consider individual rights but also gave equal importance to plural rights and balancing of both. He impeccably linked the concept of plural rights with the case of allocation of natural resources. He stated that the true effect of article 14 in Indian constitution is equal protection of laws not only with the reference to individual rights but by ensuring that the rights of the citizens on the other side shall not be deprived which clearly means that an individual cannot be beneficiary at the cost of all the other remaining citizens.
So if the government is entering into contract with a private enterprise it should act as a prudent businessman and should keep the idea of common good in mind at the time of entering into a contract, because the consideration of the contract i.e. natural resources belongs to each and every individual of the state.
So instead of benefitting a single person, it is the duty of the state to think and care about the rights of the other citizen as well. With remaining citizens the judge has also taken care of the rights of businessman who are involved in trading with the government. In this presidential reference, J.S. Khehar has ensure that the executive should give fair opportunity to all the eligible persons and for allocating the contracts the executive should adopt a rational approach which is fair and non-discriminatory.
While deciding upon various factors and moving forward towards answering the questions raised in presidential reference, there were various cases which were cited to create an analogy between the two situations.
The one important case which shows that the discriminatory acts done by the state at the time of allocation of resources must be considered void.
In Rashbihari Panda v. State of Orissa the state government decide to invite the same old contractors for tender for Kendu leaves. The validity of the scheme in this case must be adjudged in the light of Article 19(1)(g) and article of Indian constitution. The traders who wanted to deal in Kendu leaves and those who wanted to start business in Kendu leaves were not allowed to even participate in the tender process which was violative to Article 19(1)(g).
The court held that the contracts made by the state government till now cannot be considered as void but the future contracts that the state will make shall include all the businessman who want to trade in kendu leaves and any kind of discrimination among old contractors and new contractors must be avoided.
This judgment which was cited in this very case gives an insight about the discrimination made by the government within the traders. The state did not abide itself with article 14 of Indian constitution and discriminate among the traders. Agreeing with the judgment in this case as it held this policy as void and also did not make the previous contracts void.
In the fourth debatable question raised by the President which concerns with permissible interference by court in government policy making with respect to allocation of resources. Justice Khehar has tremendously written that the court can only test the legality of the method chosen by the government and will decide whether it is intra vires or ultra vires and the court will not compare which policy is fairer than the other policies that exist. If we compare the judgment of this particular case with Centre for public interest litigation v. union of India.
This case dose not prescribes the “best” method for allocation of resources and totally leaves this authority to the government to chose the best method for allocation of resources like in the case of Centre for public interest litigation v. union of India. In this case supreme court held that auction is perhaps the best method for allocation of natural resources which somehow bound the state government to allocate the resources in that particular manner.
Justice Khehar adopted a liberal approach while dealing with this case and leaves it to the government to to choose the best possible method to adopt for allocation of resources. Justice Khehar in his judgment closes each and every door for any malpractice being commit by the state by stating that the resources that lies in the state belongs to every citizen and even a small piece of resource cannot be given as charity to anyone which bans the policy which supports favoritism and nepotism which amazingly answers the questions which was raised by the president.
In this case after citing various judgment regarding to allocation of resources the court removes the ambiguity which was there in the country that which is the best method to allocate the resources and in this case held that there is no prescribe method to chose for the allocation of resources and court will only check its validity when it will to the court of law. In this case the main focus was given on Article 14 of Indian constitution and was held that the government a single person cannot become beneficiary at the cost of other people of the country and there must be fairness at the time of allocation of resources. In this case there were certain tests which were given to verify the violation of article 14.
This case revolves around the questions which was asked by the president to the supreme court about the allocation of natural resources. After the 2g spectrum case there was a mindset in each and every state auction is perhaps the best method for allocation of resources. The court in this case clarify various principles which shall be applied by the government at the time of allocation of resources. The court held that it is not the concern of the court that which policy is adopted by the government for allocation of resources but the important aspect is the in every method government should abide itself with Article 14 of Indian Constitution.
If the government is making classifications amongst the people, the classifications must also be rational an every step taken by government towards the allocation of resources must be profit oriented and should on maximization of profits which shall be used for common good. The case also clarify that government has no right to donate the resources to any individual because each and individual has equal right on the resources.
 Indian Const. Art. 143
 Natural resources allocation in re, special reference no. of (2012) 10 SCC
Contributed by: Jaspreet Singh Gulat and Naman Pareek (Student, Institute of Law , Nirma University)