Auction route better but not only way to allocate spectrum: SC

NEW DELHI: The Supreme Court today said that the auction route is not the only method for allocating natural resources like spectrum.

Responding to a Presidential Reference following the verdict on the 2G spectrum allocation earlier this year, the five-judge apex court bench headed by Chief Justice S H Kapadia said auction could be a better option where the aim is maximisation of revenue, but then "every method other than auction of natural resources cannot be shut down".

Justice D K Jain said "auction could not be elevated as a constitutional mandate".

However, the Court said it cannot go into the wisdom of the executive in policy matters and decide on which is the most suitable method of allocating natural resources. The court said it does not have the expertise to decide which method is suitable for the disposal of a particular natural resource.

The economic policy of the government can only be struck down if it is found to be arbitrary and capricious, the court said.
In a separate but concurring judgment, Justice J S Kehar gave his additional reasons in respect on question one and four of the presidential reference.

The court did not answer three questions relating to the 2G verdict of February 2012 by which it had cancelled 121 2G licences.

Telecom Minister Kapil Sibal said later that the apex court has brought "constitutional clarity" on the issue.

Institutions like CAG "might have perhaps unwittingly, erroneously interpreted the S C judgment relating to the 2G case and thought that all natural resources must be auctioned," he said. "The SC has provided constitutional clarity today and we welcome it."

Commerce Minister Anand Sharma said the judgment "vindicates" the position that the government had taken. "When a state has to take decisions, public good has to be kept in mind... The SC has also upheld, that it is public good which is important, and revenue maximisation is subservient to that, not the other way round," he said. "And all national resources (are) not meant to be auctioned."

The presidential reference on the judgment of of 2 February was filed on 12 April and hearing on it began on 11 May.

Of the 12 questions raised in the reference, the government sought the court‘s opinion on whether auctioning was the only permissible method for the disposal of all natural resources.

The reference asked whether following the auction route for the disposal of natural resources was not contrary to earlier judgments of the Supreme Court.

In the 2 February judgment canceling 122 licences issues by then Telecom Minister A Raja, the apex court had said if scarce natural resources like spectrum were to be alienated by the state, then the only legal method was transparent public auction. The apex court, while holding that ‘first come, first served‘ policy was flawed, cancelled the licences.

FICCI welcomed the Judgment on the Presidential Reference. FICCI Vice President Sidharth Birla said, "While we have yet to read the full Judgment, prima facie FICCI‘s stand on allocation of natural resources is today vindicated by the Supreme Court. We are now looking forward to a more predictable policy environment for allocation of natural resources as many projects were pending for the want of clear direction on allocation principles for natural resources in the wake of this Judgment"

In the affidavit filed in the Supreme Court, FICCI had submitted that auctions can play a valuable role in the price discovery process when price discovery is the sole consideration in making such sale of resources. "However, we had also said that while auctions are indeed a valuable method of allocating natural resources but they are not the only methods and can be complemented with various other allocation methods", said Birla.

"We hope that subsequent to this Judgment, irrespective of the method followed, essential criteria namely transparency, clear regulatory and licensing framework, non-discretionary procedures are adhered to so as to obtain the maximum benefit arising from the allocation of nation‘s wealth of natural resources", said Birla.

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