CONSTITUTION OF INDIA, 1950:

Art 143(1) - Power of President to consult Supreme Court - Scope of - It is not necessary that the question on which the opinion of Supreme Court is sought must have actually arisen - The President can make a reference even at an anterior stage, namely, at the stage when the President is satisfied that the question is likely to arise - The satisfaction whether the question meets pre-requisites of Art. 143(1) is essentially a matter for the President to decide - Upon receipt of a reference under Art. 143(1), the only discretion Supreme Court has is either to answer the reference or respectfully decline to send a report to the President - In the instant Reference, Question no. 1 involves interpretation of a constitutional principle inherent under Art. 14 of the Constitution and it is of great public importance as it deals with allocation/alienation/disposal/distribution of natural resources.

Art. 137 and 143(1) - Review and Reference - Difference between - Explained - Held: Merely because a review of the judgment of Supreme Court in a case had been filed and withdrawn and in the recital of Reference, the narration pertains to the said case, the same would not be an embargo or impediment for exercise of discretion to answer the Reference.

Art. 143 (1) - Presidential Reference - Notice - Practice and procedure.

Art. 143(1) - Presidential Reference subsequent to decision of Supreme Court in "2G Case" - Maintainability of - Held: The Reference is maintainable, notwithstanding its effect on the ratio of 2G Case, as long as the decision in that case qua tis inter partes is left unaffected - By the Reference, Court's opinion is sought on the limited point of permissibility of methods other than auction for alienation of natural resources, other than spectrum - It has been stated on behalf of Government of India that it is not questioning the correctness of directions in 2G Case, in so far as a/location of spectrum is concerned and, in fact, Government is in the process of implementing the same, in letter and spirit - As long as the decision with respect to allocation of spectrum licenses is untouched, the Court is within its jurisdiction to evaluate and clarify ratio of the judgment in 2G Case.

Art. 141 - Law declared by Supreme Court - Held: The 'law declared' in a judgment, which is binding upon courts, is the ratio decidendi of the judgment - It is the principle culled out on the reading of a judgment as a whole in the light of the questions raised upon which the case is decided - In "2G case" the Court was not considering the case of auction in general, but was specifically evaluating the validity of the methods adopted in the distribution of spectrum during the relevant period - The recommendation of auction for alienation of natural resources was never intended to be taken as an absolute or blanket statement applicable across all natural resources - The choice of the word 'perhaps' suggests that the Court considered situations requiring a method other than auction as conceivable and desirable - Observations in 2G Case could not apply beyond the specific case of spectrum, which according to the law declared in 2G Case, is to be alienated only by auction and no other method - Precedents.

Art. 14 - Disposal of natural resources by State - Auctions - Held: Auctions are not the only permissible method for disposal of all natural resources across all sectors and in qi/ circumstances - Auction, as a method of disposal of natural resources cannot be declared a constitutional mandate under Art.14 - Auction despite being a more preferable method of alienation/allotment of natural resources, cannot be held to be a constitutional requirement or limitation for alienation of all natural resources and, therefore, every method other than auction cannot be struck down as ultra-vires the Constitution - Market price, in economics, is an index of the value that a market prescribes to a good - However, this valuation is a function of several dynamic variables; it is a science and not a law - Auction is just one of the several price discovery mechanisms - Since multiple variables are involved in such valuations, auction or any other form of competitive bidding, cannot constitute even an economic mandate, much Jess a constitutional mandate - Therefore, auction, as an economic choice of disposal of natural resources, is not a constitutional mandate - 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 to private entrepreneurs for commercial pursuits of profit maximizing, adoption of means other than those that are competitive and maximize revenue may be arbitrary and face the wrath of Art. 14 of the Constitution.

Art. 14 read with Art. 299 - Government contracts - Held: A State action has to be tested on the touchstone of Art.14 - The action 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 - It should conform to the norms which are rational, informed with reasons and guided by public interest, etc. - All these principles are inherent in the fundamental conception of Art. 14 - This is the mandate of Art. 14.

Arts. 14 and. 39(b) - Equality in allocation of natural resources and "common good" factor - Held: Auctions may be the best way of maximizing revenue but revenue maximization may not always be the best way to subserve public good - "Common good" is the sole guiding factor and a norm under Art. 39(b) for distribution of natural resources - Where revenue maximization is the object of a policy, being considered qua that resource at that point of time to be the best way to subserve the common good, auction would be one of the preferable methods, though not the only method - Where revenue maximization is not the object of a policy of distribution, the question of auction would not arise - Revenue considerations may give way to developmental considerations - Public interest litigation - Judicial notice.

Arts. 298 and 299 read with Art. 14 - Power of State to trade and execute contracts - Discussed.

ADMINISTRATIVE LAW:

State Policy - Judicial review of - Held: Court cannot conduct a comparative study of various methods of distribution of natural resources and suggest the most efficacious mode - The methodology pertaining to disposal of natural resources is clearly an economic policy - It cannot, and shall not, be the endeavour of the Court to evaluate the efficacy of auction vis-a-vis other methods of disposal of natural resources - When questioned, courts are entitled to analyse legal validity of different means of distribution and give a constitutional answer as to which methods are ultra vires and intra vires the provisions of the Constitution - If a policy or law is patently unfair to the extent that it falls foul of the fairness requirement of Art. 14, Court would not hesitate in striking it down - Legality and constitutionality of State Policy and implementation thereof - Discussed - Constitution of India, 1950 - Art. 14.

After the decision of the Supreme Court in the case of Centre for Public Interest Litigation & Ors., (2G Case) the instant Reference was made by the President of India, in exercise of powers under Clause (1) of Art. 143 of the Constitution of India, for consideration and report of the Supreme Court on the following questions:

Q.1 "Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?

Q.2 Whether a broad proposition of law that only the route of auctions can be resorted to for disposal of natural resources does not run contrary to several judgments of the Supreme Court including those of Larger Benches?

Q.3 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 formulated and approaches taken by various successive governments over the years for valid considerations, including lack of public resources and the need to resort to innovative and different approaches for the development of various sectors of the economy?

Q.4 What is the permissible scope for interference by courts with policy making by the Government including methods for disposal of natural resources?

Q.5 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 made under the said policy including investments made by foreign investors under multilateral/bilateral agreements?

Q.6 If the answers to the aforesaid questions lead to an affirmation of the judgment dated 02.02.2012 then the following questions may arise, viz.

(i) whether the judgment is required to be given retrospective effect so as to unsettle all licences issued and 2G spectrum (800, 900, and 1800 MHz bands) allocated in and after 1994 and prior to 10.01.2008?

(ii) whether the allocation of 2G spectrum in all circumstances and in all specific cases for different policy considerations would nevertheless have to be undone?

And specifically

(iii) Whether the telecom licences granted in 1994 would be affected?

(iv) Whether the Telecom licences granted by way of basic licences in 2001 and licences granted between the period 2003-2007 would be affected?

(v) Whether it is open to the Government of India to take any action to alter the terms of any licence to ensure a level playing field among all existing licensees?

(vi) Whether dual technology licences granted in 2007 and 2008 would be affected?

(vii) Whether it is necessary or obligatory for the Government of India to withdraw the Spectrum allocated to all existing licensees or to charge for the same with retrospective effect and if so on what basis and from what date?

Q.7 Whether, while taking action for conduct of auction in accordance with the orders of the Supreme Court, it would remain permissible for the Government to:

(i) Make provision for allotment of Spectrum from time to time at the auction discovered price and in accordance with laid down criteria during the period of validity of the auction determined price?

(ii) Impose a ceiling on the acquisition of Spectrum with the aim of avoiding the emergence of dominance in the market by any licensee/applicant duly taking into consideration TRAI recommendations in this regard?

(iii) Make provision for allocation of Spectrum at auction related prices in accordance with laid down criteria in bands where there may be inadequate or no competition (for e.g. there is expected to be a low level of competition for CDMA in 800 MHz band and TRAI has recommended an equivalence ratio of 1.5 or 1.3X1.5 for 800 MHz and 900 MHz bands depending upon the quantum of spectrum held by the licensee that can be applied to auction price in 1800 MHz band in the absence of a specific price for these bands)? 

Q.8 What is the effect of the judgment on 3G Spectrum acquired by entities by auction whose licences have been quashed by the said judgment?"

Notice was issued to the Attorney General for India, and after hearing him, it was directed that notice be issued to all the States through their Standing Counsel, the petitioners in 2G Case, the Federation of Indian Chamber of Commerce and Industry, and the Confederation of Indian Industry.