# [2012] 9 S.C.R. 311

- **Citation:** [2012] 9 S.C.R. 311
- **Court:** Supreme Court of India
- **Decided:** 2012-09-27
- **Bench:** S.H. Kapadia, D.K. Jain, Jagdish Singh Khehar, Dipak Misra, RANJAN GOGOi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/2012-9-s-c-r-311-28592
- **Pages:** 204

## Headnote

B
CONSTITUTION OF /NOIA, 1950:
Art 143(1) - Power of President to consult Supreme Court
- Scope of - It is not necessary that the question on which the c
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 0
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 E
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 F
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withdrawn and in the recital of Reference, the narration pertains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.
G
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
311
H
312
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A - 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 auc.tion for alienation of natural
B 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
c 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
D 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 - ln"2G case"
the Court was not considering the case of auction in general,
but was specifically evaluating the validity of the methods
E 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
F
Court considered situations requiring a method other than
auction as conct;ivable 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.
G
H
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
RE: SPECIAL REFERENCE N0.1 OF 2012
313
Art.14 - Auction despite being a more preferable method of A
alienation/allotment of natural resources, cannot be held to
be a constitutional requirement or limitarion for alienation of
all natural resources and, therefore, every method other than
auction cannot be struck down as u/tra-vires the Constitution

## Text

_Characters 0–39,618 of 397,614. This is a partial read: ask again with offset=39618 for what follows._

L
[2012] 9 S.C.R. 311
RE: SPECIAL REFERENCE N0.1 OF 2012
A
[Under Article 143(1) of the Constitution of India]
SEPTEMBER 27, 2012
[S.H. KAPADIA, CJI, D.K. JAIN, JAGDISH SINGH
KHEHAR, DIPAK MISRA AND RANJAN GOGOi, JJ.)
B
CONSTITUTION OF /NOIA, 1950:
Art 143(1) - Power of President to consult Supreme Court
- Scope of - It is not necessary that the question on which the c
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 0
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 E
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 F
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.
G
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
311
H
312
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A - 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 auc.tion for alienation of natural
B 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
c 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
D 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 - ln"2G case"
the Court was not considering the case of auction in general,
but was specifically evaluating the validity of the methods
E 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
F
Court considered situations requiring a method other than
auction as conct;ivable 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.
G
H
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
RE: SPECIAL REFERENCE N0.1 OF 2012
313
Art.14 - Auction despite being a more preferable method of A
alienation/allotment of natural resources, cannot be held to
be a constitutional requirement or limitarion for alienation of
all natural resources and, therefore, every method other than
auction cannot be struck down as u/tra-vires the Constitution
- Market price, in economics, is an index of the value that a B
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, c
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 0
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 E
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,
F
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 G
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
H
314
SUPREME COURT REPORTS
[2012) 9 S.C.R.
A
maximization may not always be the best way to subsetVe
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
B
best way to subsetVe 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
c - Public interest litigation - Judicial notice.
D
E
F
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
G
of India, 1950 - Art. 14.
After the decision of the Supreme Court in the case
of Centre for Public Interest Litigation & Ors.1,( 2G Case) the
instant Reference was made by the President of India, in
H
exercise of powers under Clause (1) of Art. 143 of the
RE: SPECIAL REFERENCE N0.1 OF 2012
315
Constitution of India, for consideration and report of the A
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 8
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 C
Court including those of Larger Benches?
Q.3
Q.4
Q.5
Whether the enunciation of a broad principle,
even though expressed as a matter of
constitutional law, does not really amount to 0
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 E
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 F
Government including methods for disposal of
natural resources?
Whether, if the court holds, within the
permissible scope of judicial review, that a G
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?
H
316
A
B
c
SUPREME COURT REPORTS
[2012) 9 S.C.R.
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
D
to be undone?
And specifically
(iii)
Whether the telecom licences granted in
E
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?
F
(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?
G
(vi)
Whether dual technology licences
granted in 2007 and 2008 would be
affected?
(vii) Whether it is necessary or obligatory for
H
the Government of India to withdraw the
RE: SPECIAL REFERENCE N0.1 OF 2012
317
Spectrum allocated to all existing A
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 8
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 C
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 0
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
E
or no competition (for e.g. there is F
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 G
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)?
H
318
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A
Q.8 What is the effect of the judgment on 3G
Spectrum acquired by entities by auction
whose licences have been quashed b~i the
said judgment?"
8
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 lndt•st!"y, and the
C Confederation of Indian Industry.
Answering the reference in part, the Court
HELD: Per D.K. Jain, J. (For CJI, himself, Dipak Misra
and Ranjan Gogoi, JJ.)
D MAINTAINABILITY OF THE REFERENCE:
1.1 Art. 143 of the Constitution of India is couched
in broad terms; and from its language, it is plain that it is
not necessary that the question on which the opinion of
E the Supreme Court is sought must have actually arisen.
The President can make a reference under the said
Article 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 the
F
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 function of this Court is to consider the
reference, the question(s) on which the President has
made the reference, on the facts as stated in the
G reference and report to the President its opinion thereon.
Nevertheless, the usage of the word "may" in the latter
part of Art. 143(1) implies that this Court is not bound to
render advisory opinion in every reference and may
refuse to express its opinion for strong, compelling and
H good reasons. [Para 23-24) (373-E-F, G-H; 374-B-C]
RE: SPECIAL REFERENCE N0.1 OF 2012
319
Special Reference No.1 of 1964("Keshav Singh'~ [1965)
A
1 S.C.R. 413; and Re: The Kera/a Education Bill, 1957 In
Reference under Article 143(1) Of the Constitution of India
[1959) S.C.R. 995 - relied on.
In re: A/location of Lands and Buildings Situate in a Chief 8
Commissioner's Province and in the matter of Reference by
the Governor-General under S. 213; Government of India Act,
1935 A.l.R. (30) 1943 FC 13; and Dr. M. Ismail Faruqui &
Ors. vs. Union of India & Ors. 1994 (5) Suppl. SCR 1 = (1994)
6 sec 360 - referred to.
1.3 As far as the allegation of mala fide is concerned, c
it is trite that this Court is neither required to go into the
truth or otherwise of the facts of the recitals nor can it go
into the question of bona tides or otherwise of the
authority making a reference. The constitutional power to o
seek opinion of this Court rests with the President. The
only discretion this Court has is either to answer the
reference or respectfully decline to send a report to the
President. Therefore, the challenge on the ground of mala
fide, as raised, is unsustainable. [Para 34] (379-A-C]
E
Re: Presidential Po// 1975 (1) SCR 504 = (1974) 2 SCC
33 - referred to.
1.4 From the judgment in The Special Courts Bill,
1978, three broad principles emerge: (i) a reference
F
should not be vague, general and Undefined, (ii) this Court
can go through the written briefs and arguments to
narrow down the legal controversies, and (iii) when the
question becomes unspecific and incomprehensible, the
risk of returning the reference unanswered arises. (para
G
30) [377 -D-E]
Re: The Special Courts Bill, 1978 1979 (2) SCR 476 =
(1979) 1 SCC 380; Special Reference No.1 of 1964
("Keshav Singh'?,(1965) 1 S.C.R. 413 - referred to
H
320
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A
1.5 There is no denying the fact that in the entire
Reference the word 'doubt' has not been used. Nor does
Art. 143(1) use the term 'doubt'. No specific format has
been provided in any of the Schedules of the Constitution
as to how a reference is to be drawn. The use of the word
B 'doubt' in a reference is also not a constitutional
command or mandate. Thus, it cannot be said that use
of the word 'doubt' is a necessary condition for a
reference to be maintainable under Art. 143(1). That apart,
Question No.1 of the instant Reference is neither vague
c nor general nor unspecific, but is in the realm of
comprehension which is relatable to a question of law. It
expresses a 'doubt' and seeks the opinion of the Court
on that question, besides others. [Para 27 and 32) [374G-H; 375-A; 378-B]
D
P. Ramanatha Aiyar's, The Major Law Lexicon, 4th Edn.;
Concise Oxford Dictionary (Tenth Edn.); and Black's Law
Dictionary-referred to.
1.6 In so far as the impact of filing and withdrawal of
E the review application by the Union of India, against the
decision in the 2G Case* on the maintainability of the
instant Reference is concerned, there is a dff~erence
between the jurisdiction exercised by this Court in a
review and the discretion exercised in answering a
F reference under Art. 143(1) of the Constitution. A review
is basically guided by the well-settled principles for
review of a judgment and a decree or order passed inter
se parties. But, when an opinion of this Court is sought
by the Executive taking recourse to a constitutional
power, the same stands on a different footing altogether.
G A review is lis specific and the rights of the parties to the
controversy are dealt with therein; whereas a reference
is answered keeping in view the terms of the reference
and scrutinising whether the same satisfies the
requirements inherent in thetanguage employed under
H Art. 143(1) of the Constitution. Therefore, merely because
..
t
RE: SPECIAL REFERENCE N0.1 OF 2012
321
a review had been filed and withdrawn and in the recital
A
the narration pertains to the said case, the same would
not be an embargo or impediment for exercise of
discretion to answer the Reference. [Para 33] [378-C-H]
*Centre for Public Interest Litigation & Ors. vs. Union of 8
India & Ors. (2012) 3 SCR 147=(2012) 3 SCC 1 - referred
to.
1. 7 As regards the objection to the maintainability of
the Reference that it is an indirect endeavour to unsettle
and overturn the verdict in the 2G Case, at the outset it C
may be noted that it has been stated on behalf of the
Government of India that it is not questioning the
correctness of the directions in the 2G Case, in so far as
the allocation of spectrum is concerned and, in fact, the
Government is in the process of implementing the same, D
in letter and spirit. [Para 35- 36] (379-C-D; E-F]
1.8 As regards reconsideration of a decision, there are
two limitations - one jurisdictional and the other selfimposed. The first limitation is that a decision of this Court
can be reviewed only under Art. 137 or a Curative Petition
E
and in no other way. Once a lis between parties is
decided, the operative decree can only be opened in
review. Overruling the judgment - as a precedent - does
not reopen the decree. The second limitation, a selfimposed rule of judicial discipline, was that overruling the
F
opinion of the Court on a legal issue does not constitute
sitting in appeal, but is done only in exceptional
circumstances, such as when the earlier decision is per
incuriam or is delivered in the absence of relevant or
material facts or if it is manifestly wrong and capable of G
causing public mischief. In fact, the overruling of a
principle of law is not an outcome of appellate jurisdiction
but a consequence of its inherent power. This inherent
power can be exercised as long as a previous decree visa-vis lis inter partes is not affected. (Para 45-47] (386-DH
322
SUPREME COURT REPORTS
[2012) 9 S.C.R.
A H; 387-A-C]
Bengal Immunity Company Ltd. v. State of Bihar (1955)
2 SCR 603; In the matter of: Cauvery Water Disputes
Tribunal 1991 (2) Suppl. SCR 497 = 1993 Supp (1) SCC
8 96 (II) ("Cauvery-11"); State of Tamil Nadu vs. State of
Kamataka & Ors. 1991 (2) SCR 501 = 1991 Suppl (1) SCC
240 ("Cauvery 1'1 & Rupa Ashok Hurra vs. Ashok Hurra &
Anr. 2002 (2) SCR 1006 = (2002) 4 SCC 388 - referred to
1.9 From the decisions of this Court, it is
C demonstrable that while entertaining the reference under
Art. 143(1), this Court can look into an earlier decision.
For the purpose of validity of a reference, suffice it to say,
dwelling upon an earlier judgment is permissible. That
apart, one cannot be oblivious of the fact that the scope
o of limited judicial review, in the Second Judges Case,
which otherwise is quite restricted, was slightly
expanded in the Court's opinion to th_e Presidential
reference. [Para 58] [395-D-E]
In re: The Special Courts Bill, 1978 1979 (2) SCR 476
E = (1979) 1 SCC 380, In Re: The Delhi Laws Act, 1912, the
Ajmer-Merwara (Extension of Laws) Act, 1947 And The Part
C States (Laws) Act, 1950 [1951] S.C.R. 747, Jatindra Nath
Gupta vs. The Province of Bihar & Ors. [1949-50] F.C.R. 595,
Special Reference No. 1 of 1964 [1965] 1 S.C.R.
F 41 ("Keshav Singh"), Gunupati Keshavram Reddy vs.
Nafisul Hasan & the State of U.P. AIR 1954 SC 636, Pandit
M. S. M. Sharma vs. Shri Sri Krishna Sinha & Ors. [1959]
Supp. 1 S.C.R. 806 ("Sharma"), Supreme Court Advocateson-Record Association and Ors. vs. Union of India (1993) 4
G SCC 441, Special Reference No. 1 of 1998 Re. 1998 (2)
Suppl. SCR 400 = (1998) 7 SCC 739 ('Second Judges
Case'1, & Dr. M. Ismail Faruqui & Ors. vs. Union of India &
Ors. (1994) 6 SCC 360 - referred to.
H
1.10 From the analysis of the decisions of this Court,
RE: SPECIAL REFERENCE N0.1 OF 2012
323
it is quite vivid that this Court would respectfully decline A
to answer a reference if it is improper, inadvisable and
undesirable; or the questions formulated have purely
socio-economic or political reasons, which have no
relation whatsoever with any of the provisions of the
Constitution or otherwise are of no constitutional B
significance; or are incapable of being answered; or
would not subserve any purpose; or there is authoritative
pronouncement of this Court which has already decided
the question referred. [Para 60] [395-H; 396-A-B]
1.11 In the case at hand, the Reference states that in C
the current circumstances, certain questions of law with
far reaching national and international implications have
arisen, including in relation to conduct of the auction and
the regulation of the telecommunications industry in
accordance with the judgment (2G Case) that may affect D
the flow of FOi in the telecom industry and otherwise in
other sectors into this country. The Reference also states
that the questions of law that have arisen are of great
public importance and are of far reaching consequences
for the development of the country and, therefore, it is E
thought expedient to obtain the opinion of this Court.
Question No. 1 of the Reference involves interpretation
of a constitutional principle inherent under Art. 14 of the
Constitution and it ls of -great public importance as it
deals with allocation/alienation/disposal/ distribution of F
natural resources. [Para 28 and 61] [375-H; 376-A-C]
1.12 This Court is, therefore, of the view that as long
as the decision with respect to the allocation of spectrum
licenses is untouched, this Court is within its jurisdiction
to evaluate and clarify the ratio of the judgment in the 2G G
Case. Therefore, the fact that the Reference may require
the Court to say something different to what has been
enunciated in the 2G Case as a proposition of law, cannot
strike at the root of the maintainability of the Reference.
Consequently, this Court holds that the Reference is H
324
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A
maintainable, notwithstanding its effect on the ratio of the
2G Case, as long as the decision in that case qua lis inter
partes is left unaffected. [Para 62] [396-E-G]
B
ON MERITS
2.1 Art. 141 of the Constitution lays down that the
'law declared' by the Supreme Court is binding upon all
the courts within the territory of India. The 'law declared'
has to be construed as a principle of law that emanates
from a judgment, or an interpretation of a law or judgment
C by the Supreme Court, upon which, the case is decided.
Therefore, the 'law declared' 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. Thus,
the 'law declared' in a judgment, which is binding upon
D
courts, is the ratio decidendi of the judgment. It is the
essence of a decision and the principle upon which, the
case is decided, which has to be ascertained in relation
to the subject-matter of the decision. [Para 66] [397-E-H;
398-A]
E
F
Fida Hussain & Ors. Vs. Moradabad Development
Authority & Anr. 2011 (9) SCR 290 = (2011) 12 SCC 615;
Ambica Quarry Works Vs. State of Gujarat & Ors. 1987 (1)
SCR 562 = (1987) 1 SCC 213 and Commissioner of Income
Tax Vs. Sun Engineering Works (P) Ltd. 1992 (1) Suppl. SCR
732 = 1992 (4) SCC 363; Islamic Academy of Education &
Anr. Vs. State of Karnataka & Ors. (2003) 6 SCC 697 - relied
on
Union of India Vs. Amrit Lal Manchanda & Anr. (2004) 3
G SCC 75; State of Orissa & Ors. Vs. Md. /lliyas 2005 (5) Suppl.
SCR 395 = 2006 (1) SCC 275 - referred to.
''The Nature of Judicial Process" by Justice Benjamin
Cardozo - referred to.
H
2.2 On a reading paragraphs 85 and 89 of the
RE: SPECIAL REFERENCE N0.1 OF 2012
325
judgment in 2G Case, it can be noticed that while referring
to the concept of 'public trust doctrine', emphasis was
laid on the doctrine of equality, larger public good,
adoption of a transparent and fair method, opportunity of
competition; and avoidance of any occasion to scuttle
the claim of similarly situated applicants. While dealing
with alienation of natural resources like spectrum, it was
stated that it is the duty of the State to ensure that a nondiscriminatory method is adopted for distribution and
alienation which would necessarily result in the
protection of national/public interest. Paragraphs 94 and
95 suggest that the Court was not considering the case
of auction in general, but specifically evaluating the
validity of those methods adopted in the distribution of
spectrum from September 2007 to March 2008. It is also
pertinent to note that reference to auction is made in the
subsequent paragraph (96) with the rider 'perhaps'. It has
been observed that "a duly publicized auction conducted
fairly and impartially is perhaps the best method for
discharging this burden." It is true that a judgment is not
to be read as a statute, but at the same time, when it is
argued with vehemence that the judgment lays down
auction as a constitutional principle, the word "perhaps"
gains
significance.
This
suggests
that
the
recommendation of auction for alienation of natural
resources was never intended to be taken as an absolute
A
B
c
D
E
F
or blanket statement applicable across all natural
resources, but simply a conclusion made at first blush
over the attractiveness of a method like auction in
disposal of natural resources. The choice of the word
'perhaps' suggests that the Court considered situations
requiring a method other than auction as conceivable
G
and desirable. Further, the final conclusions summarized
in paragraph 102 of the judgment (SCC) make no mention
about auction being the only permissible and intra vires
method for disposal of natural resources; the findings are
limited to the case of spectrum. In case the Court had
H
326
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A actually enunciated, as a proposition of law, that auction
is the only permissible method or mode for alienation/
allotment of natural resources, the same would have
found a mention in the summary at the end of the
judgment. [Para 75,76,78 and 79] [402-G; 403-A-B; 404-GB H; 405-A-E]
M.C. Mehta Vs. Kamal Nath & Ors. 1996 (10) Suppl.
SCR 12 =1997 (1) SCC 388; Jamshed Hormusji Wadia Vs.
Board of Trustees, Port of Mumbai & Anr. 2004 (1) SCR 483
C = 2004 (3) SCC 214; Intellectuals Forum, Tirupathi Vs. State
of A.P. & Ors. 2006 (2) SCR 419 = 2006 (3) sec 549;
Fomento Resorts And Hotels Limited & Anr. Vs. Mingue/
Martins & Ors. 2009 (3) SCR 1 = (2009) 3 SCC 571 and
Reliance Natural Resources Limited Vs. Reliance Industries
Limited 2010 (5) SCR 704 = 2010 (7) SCC 1; Akhil Bhartiya
D Upbhokta Congress vs. State of Madhya Pradesh & Ors.
2011 (5) SCR 77 = (2011) 5 SCC 29, Sachidanand Pandey
& Anr. vs. State of West Bengal & Ors. 1987 (2) SCR 223 =
(1987) 2 sec 295 - referred to.
E
The Illinois Central Railroad Co. Vs. The People of the
State of Illinois 36 LED 1018: 146 U.S. 387 (1892) - referred
to
2.3 The 2G Case does not even consider other laws
and judgments that prescribe methods, other than
F auction, for dispensation of natural resources; something
that it would have done, in case, it intended to make an
assertion as wide as applying auction to all natural
resources. Therefore, the observations in Paras 94 to 96
could not apply beyond the specific case of spectrum,
G which according to the law declared in the 2G Case, is
to be alienated only by auction and no other method.
Thus, 2 G case does not deal with modes of allocation
for natural resources, other than spectrum. [Para 80-81]
[405-H; 406-A-C]
H
L
RE: SPECIAL REFERENCE N0.1 OF 2012
327
3.1 By the Reference this Court's opinion is sought A
on the limited point of permissibility of methods other
than auction for alienation of natural resources, other
than spectrum. [Para 82] [406-D-E]
3.2 As regards the objection pertaining to the 8
classification of resources made in the 2G Case, suffice
it to say that the judgment itself does not carve out any
special case for scarce natural resources only meant for
commercial exploitation. However, this Court has the
jurisdiction to classify the subject matter of a reference, C
if a genuine case for it exists. [Para 83] [406-G-H; 407-AB-D]
3.3 In the 2G Case, two concepts namely, "public trust
doctrine" and "trusteeship" have been adverted to. This
Court in M.C. Mehta vs Kamal Nath, as explained in D
Intellectuals Forum, has held that when the affirmative
duties are set out from a nugatory angle, the doctrine
does not exactly prohibit the alienation of property held
as a public trust, but mandates a high degree of judicial
scrutiny. [Para 85 and 87] [407-G-H; 409-E; 410-8]
E
M.C. Mehta vs. Kamal Nath & Ors. 1996 (10) Suppl.
SCR 12 = (1997) 1 SCC 388, Intellectuals Forum, Tirupathi
vs. State of A.P. & Ors. (2006) 3 SCC 549-referred to
The Illinois Central Railroad Co. Vs. The People of the
F
State..JJfJJ/inois 36 LED 1018: 146 U.S. 387 (1892) - referred
to
3.4 The public trust doctrine is a specific doctrine
with a particular domain and has to be applied carefully. G
[Para 90] [411-C]
"The Public Trust Doctrine in Natural Resource Law:
Effective Judicial Intervention" by Joseph. L. Sax;
and Changing Conceptions of Property and
Sovereignty in Natural Resources: Questioning the H
328
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A
Public Trust Doctrine" by Richargd J. Lazarus, -
referred to
3.5 The legislature and the Executive are answerable
to the Constitution and it is there where the judiciary, the
8
guardian of the Constitution, must find the contours to the
powers of disposal of natural resources, especially Art.
14 and Art. 39(b). [Para 92] (413-A-B]
Municipal Corporation of Delhi Vs. Bir/a Cotton, Spinning
and Weaving Mills, Delhi & Anr. [1968] 3 SCR 251 - relied
C on.
D
Raja Ram Pal Vs. Hon'b/e Speaker, Lok Sabha & Ors.
(2007) 3 sec 184- referred to.
·In Re: Delhi Laws Act, 1912- referred to
MANDATE OF Art. 14:
4.1 The underlying object of Art. 14 of the Constitution
of India is to secure to all persons, citizens or nonE citizens, the equality of status and opportunity referred
to in the preamble to Constitution. The right to equality
before law is secured from all legislative and executive
tyranny by way of discrimination since the language of
Art.14 uses the word "State" which as per Art.12, includes
F
the executive organ. Besides, Art.14 is expressed in
absolute terms and its effect is not curtailed by
restrictions like those imposed on Art.19(1) by Arts.19(2)-
(6). However, notwithstanding the absence of such
restrictions, certain tests, e.g. classification test,
'arbitrariness' doctrine have been devised through
G judicial decisions to test if Art.14 has been violated or not.
H
The expressions 'arbitrariness' and 'unreasonableness'
have been used interchangeably and in fact, one has
been defined in terms of the other. [Para 94 and 101] [413D-F; 414-A; 418-B-C]
RE: SPECIAL REFERENCE N0.1 OF 2012
329
Basheshar Nath Vs. The Commissioner of Income Tax,
A
Delhi & Rajasthan & Anr. 1959 Supp (1) SCR 528; Budhan
Chaudhry & Ors. Vs. State of Bihar AIR 1955 SC 191; Shri
Ram Krishna Dalmiya Vs. Shri Justice S.R. Tendolkar and
Ors. [1959) 1 SCR 279; E.P. Royappa Vs. State of Tamil
Nadu & Anr. 1974 (2) SCR 348 = (1974) 4 SCC 3; Maneka
B
Gandhi vs. Union of India & Anr. 1978 (2) SCR 621 = (1978)
1 SCC 248 Sharma Transport Vs. Government of A.P. & Ors.
2001 (5) Suppl. SCR 390 = (2002) 2 SCC 188; Om Kumar
& Ors. Vs. Union of India 2000 (4) Suppl. SCR 693 = (2001)
2 SCC 386; Air India Vs. Nergesh Meerza 1982 (1) SCR 438 c
= (1981) 4 SCC 335; Ajay Hasia & Ors. Vs. Khalid Mujib
Sehravardi & Ors. 1981 (2) SCR 79 = (1981) 1 SCC 722; and
Ramana Dayaram Sheffy Vs. International Airport Authority
of India & Ors. 1979 (3) SCR 1014 = (1979) 3 SCC 489: AIR
1979 SC 1628 - referred to.
D
4.2 From a scrutiny of the trend of decisions it is
clearly perceivable that the action of the State, whether it
relates to distribution of largesse, grant of contracts or
allotment of land, is to be tested on the touchstone of
Art.14. A law may not be struck down for being arbitrary E
without pointing out a constitutional infirmity. Therefore,
a State action has to be tested for constitutional infirmities
qua Art.14. The action has to be fair, reasonable, nondiscriminatory, transparent, non-capricious, unbiased,
without favouritism or nepotism, in pursuit of promotion
F
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. [Para 105) [421-B-E] G
State of A.P. & Ors. vs. McDowell & Co. & Ors. 1996 (3)
SCR 721 = (1996) 3 SCC 709 - referred to.
WHETHER 'AUCTION' A CONSTITUTIONAL MANDATE:
4.3 Auction as a method of disposal of natural H
330
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A resources cannot be declared a constitutional mandate
under Art.14 of the Constitution of India. Firstly, Art.14
may imply positive and negative rights for an individual,
but with respect to the State, it is only couched in negative
terms; like an admonition against the State which
B
prohibits the State from taking up actions that may be
arbitrary, unreasonable, capricious or discriminatory. Art.
14, therefore, is an injunction to the State against taking
certain type of actions rather than commanding it to take
particular steps. Reading the mandate of auction into its
c scheme would thus, be completely contrary to the intent
of the Article apparent from its plain language. Secondly,
a constitutional mandate is an absolute principle that has
to be applied in all situations; it cannot be applied in
some and not tested in others. The absolute principle is
0
then applied on a case by case basis to see which
actions fulfill the requirements of the constitutional
principle and which do not. [Para 106-107] [421-F-H; 422A-C]
"Some Constitutional Problems" by Justice K. Subba
E Rao; "Democracy, Equality and Freedom" by Justice K. K.
Mathew - referred to
4.4 Equality cannot be limited to mean only auction,
without testing it in every scenario. One cannot test the
F validity of a law with reference to the essential elements
of ideal democracy, actually incorporated in the
Constitution. [Para 11 O] [423-0-E]
His Holiness Kesavananda Bharti Sripadagalvaru Vs.
State of Kera/a & Anr. 1973 Suppl. SCR 1 = (1973) 4 SCC
G 225; The State of West Bengal Vs. Anwar Ali Sarkar 1952
SCR 284; Indira Nehru Gandhi Vs. Raj Narain 1976 SCR 347
= 1975 (Supp) SCC 1 - referred to
Kotch Vs. Pilot Comm'rs 330 U.S. 552 - referred to.
H
RE: SPECIAL REFERENCE N0.1 OF 2012
331
4.5 Courts are not at liberty to declare a statute void,
A
because in their opinion it is opposed to the spirit of the
Constitution. Courts cannot declare a limitation or
constitutional requirement under the notion of having
discovered some ideal norm. Further, a constitutional
principle must not be limited .to a precise formula but
B
ought to be an abstract principle applied to precise
situations. [Para 11 O] [423-F]
4.6 The repercussion of holding auction as a
constitutional mandate would be the voiding of every C
action that deviates from it, including social endeavours,
welfare schemes and promotional policies. It would be
odd to derive auction as a constitutional principle only
for a limited set of situations from the wide and generic
declaration of Art.14. The strength of constitutional
adjudication lies in case to case adjudication and,
D
therefore, auction cannot be elevated to a constitutional
mandate. [Para 110] [423-F-G; 424-A-B]
4.7 Finally, reading auction as a constitutional
mandate would be impermissible because such an
approach may distort another constitutional principle
embodied in Art.39(b), which mandates that the
ownership and control of natural resources should be so
distributed as to best subserve the common good. Art.37
provides that the provisions of Part IV shall not be
enforceable by any court, but the principles laid down
therein are nevertheless fundamental in the governance
of the country and it shall be the duty of the State to
apply these principles in making laws. "[Para 111] [424-C- ·
G]
4.8 Therefore, Art.39(b) in a sense, is a restriction on
'distribution' built into the Constitution. But the restriction
is imposed on the object and not the means. The
overarching and underlying principle governing
'distribution' is furtherance of common good. But for the
E
F
G
H
332
SUPREME COURT REPORTS
[2012] 9 S.C.R.
A achievement of that objective, the Constitution uses the
generic word 'distribution'. Distribution has broad
contours and cannot be limited to meaning only one
method i.e. auction. It envisages all such methods
available for distribution/allocation of natural resources
B which ultimately subserve the "common good". [Para
112] [424-H; 425-A-B]
4.9 The term "distribute" undoubtedly, has wide
amplitude and encompasses all manners and methods
C of distribution, which would include classes, industries,
regions, private and public sections, etc. Having regard
to the basic nature of Art.39(b), a narrower concept of
equality under Art.14 may frustrate the broader concept
of distribution, as conceived in Art. 39(b). There cannot,
therefore, be a cavil that "common good' and "larger
D public interests" have to be regarded as constitutional
reality deserving actualization. [Para 115] [425-H; 426-AC]
State of Tamil Nadu & Ors. Vs. L Abu Kavur Bai & Ors.
E 1984 (1) SCR 725 = (1984) 1 SCC 515 - referred to
4.10 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
F distribution of natural resources. It is the touchstone of
testing whether any policy subserves the "common
good" and if it does, irrespective of the means adopted,
it is clearly in accordance with the principle enshrined in
Art. 39(b). The norm of "common good" has to be
G understood and appreciated in a holistic manner. It is
obvious that the manner in which the common good is
best subserved is not a matter that can be measured by
any constitutional yardstick - it would depend on the
economic and political philosophy of the government.
H Revenue maximization is not the only way in which the
RE: SPECIAL REFERENCE N0.1 OF 2012
333
common good can be subserved.