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SC says it won’t prescribe resource auctions to gov’t in 2G pres ref + 'cheeky' Khehar coalgate dig

Today, blogging live from 2pm on the presidential reference about Supreme Court Justice GS Singhvi’s 2 February judgment that cancelled all awarded 2G licences and said that all natural resources should be allocated by the government by auction.

What you need to know:

Mint published a good summary about the upcoming issues in the reference, as well as an FAQ on what’s at stake here.

We’ve uploaded the original 2G presidential reference here, which helpfully explains much of the 2G case background (12 pages).

And here’s a copy of Singhvi’s original 94-page judgment.

If you’re on Twitter, follow Legally India’s Supreme Court postcard writer and anonymous advocate @Courtwitness1 and @spreadlaw and several other lawyers to get live updates, probably before the TV stations flash the news.

@CourtWitness1 and @Spreadlaw both tweeted that CJI SH Kapadia (who retires tomorrow) won’t be delivering any opinion at 2pm today. Instead Justices DK Jain and Khehar will deliver their opinions.

Court Witness (CW) adds: “Obviously, DK Jain will be writing the majority opinion in the #2gscam prez reference. but interesting to see if Khehar will dissent...”

Kapadia has already said at the start of hearings that they won’t be looking into the issue of the 2G licences specifically, but only into the general principle expounded by the court about mandatory natural resource auctions. However, many lawyers already believe that those statements of Singhvi’s

We’ll see which way it will swing.

We’ll be back with this live blog from 2pm when the session is set to start and we’ll be monitoring Tweets.

2pm: The courtroom is packed and everyone is excited. CW tweets that the attorney general, lawyers for industry, Subramanium Swamy and the entire Supreme Court press corps are there...

213pm: Just received an SMS from a lawyer in court that DK Jain, for the majority, says that paragraphs 94 to 96 of Singhvi’s judgment that refer to allocation of natural resources were obiter. This of course opens the door for today’s bench to elaborate its own stance, if any.

217pm: Everything other than 2G licences needn’t just be auctioned, says my source.

248pm: There is no dissenting judgment, Khehar gave a concurring view.

2:50: Court Witness, who was without mobile reception in court and couldn't live tweet today, summarises that:

Main proposition: auction is not the only constitutional method of disposing natural resources.
Court cannot and will not prescribe any one economic policy as the only constitutionally permissible policy
As long as the resources are distributed in a fair manner that serves common good, court will not strike down such distribution.
However, if natural resources are being handed out for private commercial use, not using auctions may be unconstitutional.
Court refused to say anything about auction of spectrum and did not interfere with the #2g judgement
Court clarified the scope of the #2g judgement and says auction applies only to spectrum as per judgement.
Also, khehar did not dissent. It was a concurring opinion which offered separate reasons for same conclusions as majority

253pm: The opinion is now available for download but the SC website server has crashed for now. We will host a copy when we get it. For now, you can try to get it here.

That link now appears to point to a non-existent document. Maybe it'll still be a while...

15:28 The link is now working by the way. The interesting part of Jain's opinion is on page 143, half way down in paragraph 149:

Regard being had to the aforesaid precepts, we
have opined that auction as a mode cannot be conferred
the status of a constitutional principle. 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 for commercial pursuits of profit
maximizing private entrepreneurs, adoption of means
other than those that are competitive and maximize
revenue may be arbitrary and face the wrath of Article 14
of the Constitution. Hence, rather than prescribing or
proscribing a method, we believe, a judicial scrutiny of
methods of disposal of natural resources should depend
on the facts and circumstances of each case, in
consonance with the principles which we have culled out
above. Failing which, the Court, in exercise of power of
judicial review, shall term the executive action as
arbitrary, unfair, unreasonable and capricious due to its
antimony with Article 14 of the Constitution.

More to come...

334pm: In paragraph 79 and 80 of Jain's opinion, he says that for spectrum, auction is the only correct method:

79. 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
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

80. Moreover, if the judgment is to be read as
holding auction as the only permissible means of disposal
of all natural resources, it would lead to the quashing of a
large number of laws that prescribe methods other than
auction, e.g., the MMRD Act. While dealing with the merits
of the Reference, at a later stage, we will discuss whether
or not auction can be a constitutional mandate under
Article 14 of the Constitution, but for the present, it would
suffice to say that no court would ever implicitly,
indirectly, or by inference, hold a range of laws as ultra
vires the Constitution, without allowing every law to be
tested on its merits. One of the most profound tenets of
constitutionalism is the presumption of constitutionality
assigned to each legislation enacted. We find that the 2G
Case does not even consider a plethora of laws and
judgments that prescribe methods, other than 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, we are convinced that the observations in
Paras 94 to 96 could not apply beyond the specific case of
spectrum, which according to the law declared in the 2G
Case, is to be alienated only by auction and no other

1130pm: Apologies for the lack of recent updates, we've experienced some internet connectivity issues at the worst time, plus of course Allen & Overy's insistence on sending out their press release about their break up with Trilegal in the middle of it all.

Mint, as ever, has a good summary and some comments on what the judgment means. Mint editor R. Sukumar meanwhile lauded the Supreme Court's stance:

The court’s response also suggests that it realizes there is a need to draw a line between any government policy, and the implementation of this policy. In both the 2G scam and the coal mines allotment controversy, the policy may have been sub-optimal and short-sighted, but the real issue was with the implementation.

Meanwhile, Court Witness has described Khehar's concurring opinion as "cheeky" ("with the fullest respect"):

Khehar understood the sub-text of what the Government was trying to do with the #2g Presidential Reference. ...and in his concurring opinion, has gone and made the Government's life even more difficult in any upcoming challenge to #coalblock case

As @spread_law just pointed out, the govt is celebrating the #prezref opinion without reading it fully. esp khehar's cheeky "concurrence".

Advocate Kartik Seth who also appeared in the case commented that [Khehar] clarified that just because it was ruled that "auction cannot be enunciated as a constitutional principle, [it] should not be understood to mean that auction can never be a valid method for allocation of natural resources".

Quoth Khehar on page 206:

In  a  slightly  changed  factual  scenario,  the  conclusion  may  well  be
different.  If  before  the  holding  the  process  of  auction,  for  the  award  of  a
power project (based on competitive bids for tariff), it is made known to the
contenders,  that  the  successful  bidder  would  be  entitled  to  a  mining  lease
over  an  area  containing  coal,  those  competing  for  the  power  project  would
necessarily  incorporate  the  profit  they  were  likely  to  make  from  such
mining  lease.  While  projecting  the  tariff  at  which  they  would  supply
electricity, they would be in a position to offset such profits from their costs.
This  would  result  in  an  in  an  opportunity  to  the  contenders  to  lower  the
tariff to a level lower than would have been possible without the said lease.
In  such  a  situation  the  gains  from  the  coal  mining  lease,  would  be
enmeshed  in  the  competitive  bidding  for  tariff.  Therefore,  it  would  not  be
just  to  assume  in  the  instant  sequence  of  facts,  that  the  coal  lot  has  been
granted  free  of  cost.  One  must  read  into  the  said  grant,  a  reciprocal
consideration  to  provide  electricity  at  a  lower  tariff.  In  the  instant  factual
scenario,  the  allotment  of  the  mining  lease  would  be  deemed  to  be  aimed
at“subserving  the  common  good” in  terms  of  Article  39(b)  of  the
Constitution of India.  Therefore even the allotment of such a mining lease,
which  appears  to  result  in  the  allocation  of  a  natural  resource  free  of  cost,
may  well  satisfy  the  test  of  fairness  and  reasonableness  contemplated  in
Article 14 of the Constitution of India.  Moreso,  because a fair playing field
having  been  made  available  to  all  those  competing  for  the  power  project,
by  making  them  aware  of  the  grant  of  a  coal  mining  lease,  well  before  the
bidding  process.  The  question  of  favouritism  therefore  would  not  arise.
Would  such  a  grant  of  a  natural  resource,  free  of  cost,  be  valid?  The
answer  to  the  query,  in  the  instant  fact  situation,  may  well  be  in  the

The  policy  of  allocation  of  natural  resources  for  public  good  can  be
defined  by  the  legislature,  as  has  been  discussed  in  the  foregoing
paragraphs.  Likewise,  policy  for  allocation  of  natural  resources  may  also
be  determined  by  the  executive.  The  parameters  for  determining  the
legality  and  constitutionality  of  the  two  are  exactly  the  same.  In  the
aforesaid  view  of  the  matter,  there  can  be  no  doubt  about  the  conclusion
recorded  in  the“main  opinion” that  auction  which  is  just  one  of  the  several
price  recovery  mechanisms,  cannot  be  held  to  be  the  only  constitutionally
recognized  method  for  alienation  of  natural  resources.  That  should  not  be
understood  to  mean,  that  it  can  never  be  a  valid  method  for  disposal  of
natural resources (refer to paragraphs 10 to 12 of my instant opinion).

 Ok, and with that we'll conclude our 2G pres ref live blog for today. Thanks for following!

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