Abstract
The Supreme Court through several cases has widely interpreted the scope and meaning of Article 39(b) of the Constitution. The blogpost will thus, analyse this relationship between natural resources and the Constitution on the backdrop of the intertwining of the Fundamental rights and the Directive Principles of state policy. The first part will discuss the several interpretations of Article 39(b) through the trajectory of cases. The second part will refer to ways in which the Supreme Court has become an interventionist and a policy maker in which it breaches the doctrine of separation of powers and performs the legislature’s functions of making laws and the executive’s functions in enforcing the same. Thus, the blog-post attempts to holistically showcase the relationship of natural resources and its stature in the Constitution.
Introduction
The functions of the State have evolved over time as from an era marked with aggression, where defence and maintenance of law were the major concerns, to a world of welfare state which attempts to promote the prosperity and well-being of the citizens. The Directive Principles of State Policy (‘DPSP’) thus serve as a mechanism created to establish certain socio-economic policies, that the State should strive to achieve. Moreover, these principles take the form of positive obligations, giving directions to the organs of the government to strive to achieve the economic and political state of democracy. The foundation of our Constitution is based on the pillars of the elements mentioned in the Preamble. Thus social, political, and economic justice has been promised to a socialist country like ours.
This part has been borrowed from the Irish Constitution in order to achieve this socialistic goal of democratic polity vis-à-vis to secure the principles of justice, liberty, faith and worship. This part was enacted for furtherance of certain moral concepts and was never intended to be a legal precept. The implementations of these policies were left to the political processes. However, for the explanation of Fundamental Rights, the enforceability of these principles was questioned and from there, the importance of these principles has risen considerably as tools of interpretation.
Many critiques, including H.M. Seervai questions the importance of Directive Principles. Firstly, the harmony and balance between these two parts has been declared to be a part of the basic structure. However, there may be instances where a harmonious construction cannot take place and thus, clarity over the maintainability of these parts is a must. Secondly, if a law violates fundamental rights, it could be declared invalid, but laws violating Directive Principles cannot be unconstitutional and hence a scheme of hierarchy needs to be interpreted. Thirdly, the position of the fundamental rights being the means to the end goal of directive principles is a problem as these rights are an end in themselves. However, these arguments seek to attack the basic premise on which part IV rests.
Constitutional Framework for Resource Management
The jurisprudence of natural resources and the Indian Constitution can be traced to the Directive Principle enshrined in Article 39(b). With a plain reading of the article, certain obvious questions arise such as the meaning of ‘material resources’ and whether it includes the private property of individuals. Additionally, questions regarding the procedures of ‘distribution’ of these resources come into play. Also, the question of whether the term ‘common good’ would encompass a fundamental rights test, for the procedures of distribution will be answered in the course of this paper.
This blogpost aims to critically analyse the stance of the Supreme Court on grounds of interpreting the terms of Article 39(b). Secondly, this blogpost will bring light to the problems revolving around the allocation of the resources with reference to the three imperative cases of Centre for Public Interest Litigation v. UOI (‘First Spectrum Case’), In Re:Special Reference of 2012 (‘Second Spectrum Case’) and ManoharLal Sharma v. Principal Secretary (‘Coalgate’). Thirdly, there will be analysis meted out for the widening of the ambit of Article 14 through the discussion of these cases. Additionally, there would be a demonstration of the problematic approach taken by the Supreme Court in applicability of Article 31-C.
Constitutional Foundations: DPSP and Fundamental Rights in Resource Allocation
In order to understand the meaning of terms mentioned in Article 39(b), it is imperative to look at the legislative history. This article was included as a draft Article 31(ii) and was exactly similar to its present appearance in the Constitution. During the deliberations of the Constituent Assembly, Professor Shah sought to move an amendment to add “of the community” to the term of material resources making it evident that the resources would not include private assets. Dr. Ambedkar rejected this qualification, as he believed that it was quite clear that the resources meant were only of the State and thus, no change was made to the draft article. Hence, the intention of the Constitution makers was to not include property of individuals. However, a seven-judge bench of the Supreme Court held otherwise. Justice Krishna Iyer stated that the term ‘distribution’ included nationalisation of property.
Also, there was a Fundamental Rights test done in spite of the protection under Article 31-C. This judgement is similar to the school of thought used by Justice Chinappa Reddy who held that the scope of material resources are not only limited to natural resources but also assets of individuals. The properties of the resources could also be either immovable or movable in nature. For the interpretation of ‘material resources’, the Court has even included, under it, things that are capable of producing wealth or profit for the society, widening the scope of this article.
However, the stance of ‘distribution’ including nationalisation is problematic on many levels. Here, the corollary of Krishna Iyer’s argument would be that the ‘collection of assets’ would be deemed as the distribution of resources. Take the example of the material resources to be – tax. With the extension of the above argument, the protection of Article 39(b), read with Article 31-C will have to be applied to only the collection of tax and not the distribution of government proceeds. Whereas a fundamental rights test would not be done to collection, which is not in consonance with the realities. This approach is ridiculous as literally, distribution means ‘to emit or give out’ and not to collect.
Policy Shaping by the Supreme Court: Lessons from Spectrum Allocation and Coalgate
Through the course of the three cases of the First, Second Spectrums and Coalgate, the Supreme Court takes a step ahead of its power and picks up a method of allocation of resources that it deems appropriate. This part will critically analyse the Court’s over-reach of judicial review and bring light to the principle used, of invention rather than interpretation.
The facts of the First Spectrum case involved the facts of the state, allocating certain spectrums to telecommunication corporates on the basis of first-come first-serve basis. This process was streaked with many problems including the arbitrary extension of the deadline for tenders. The question arose of whether the Government had the right to alienate resources by a method that was in harmony with the equality principle stated under Article 14. This question itself was inherently flawed as it allowed the Court to determine the contours of the government’s right ‘generally’ to alienate or transfer assets. Hence, making it a question of policy that was outside the scope and ambit of the Court. Additionally, the substitution of the ‘public interest’ doctrine to be the premise of all non-discriminatory actions of the State calls for criticism.
The Court in order to strike the procedure used the doctrines of equality, public trust and public interest. But tied all the doctrines under the wider umbrella of non-discrimination. The ‘public trust’ doctrine was defined to be the State acting as a trustee while transferring resources. An extension of this was also made, by stating that the object of this public trust should be ‘public good’ and hence be a facet of equality. Secondly, the public interest doctrine casts a heavy burden on the state to prove that for alienation of resources, a non-discriminatory method is used, which dilutes the power of the executive. However, here the Court goes one step forward and even recommends the usage of the ‘public auction’ method to be used to distribute resources, as it does not provide for imposition of hegemonic power and allows for wide participation. The Court thus strikes down the procedure of first come first serve to be ‘arbitrary’ on grounds of Article 14. Here, the major consideration is that apart from declaring a policy to be unconstitutional for violation of equality, does the Court have the power to cast an obligation on the State to follow a mandated procedure?
The above imposition of a public auction is a transgression of the separation of powers. The Court cannot enforce its values of equity, public trust, and interest on the State. The government ought to do a lot of things, however the Courts aren’t competent to decide the same. The State has the power of the electorate and is best equipped to understand their needs and work for their interest. As unelected institutions, the Courts can only interpret policies and not frame and impose policies on the State. Also, it is always possible that auctions may be streaked with corruption or nepotism. Statistics have also shown that profit maximisation and social welfare are in conflict and include a fear of reduction of participation and competition. Courts henceforth have even allowed negotiations to take place rather than auctions to secure public interest while accepting the fact that the judiciary can only check the impartiality of the process and not the appropriateness of the procedure. Here, thus the Court only had the power to adjudicate the method used by the State and not invent methods of transfer.
Retrospectively, this is not the first time that the Courts have imposed policy measures. The Court while adjudicating on whether one-third weightage to the interview method was arbitrary decided that the written method allowed for impartiality and struck the importance given to the oral examination. However, the Court didn’t stop there but suggested that anything above 15 percent would be deemed arbitrary. Here, again the Court breached the Executive’s realm.
The Second Spectrum was a Presidential Reference in lieu of clarification of the previous case. The five-judge bench limited the scope of the applicability of a public auction to be specific and limited to the facts of distribution of spectrums. Thus, implicitly agreeing to the contention that the court lacked the competency to do a detailed comparison between procedures of allocation of resources. Sadly, this case also carries with it issues relating to applicability of the arbitrariness doctrine under Article 14.
Here, the Court held that, “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 maximising private entrepreneurs, adoption of means other than those that are competitive and maximise revenue may be arbitrary and face the wrath of Article 14 of the Constitution.” Prima facie, this inclusion of public welfare in the arbitrariness doctrine is problematic. If the State adopts a method that does not directly aim at improving social welfare but implicitly wants to increase profit maximisation , then this procedure will attract Article 14. However, it went on to say that in some cases the State could have revenue increasing goals but developmental activities must be the priority, and, in such cases, public auctions would defeat the objective of the scheme. The Court now gets the opportunity to define what is a ‘social welfare’ scheme as well as what may be construed as ‘developmental activities. It has the option to now include this subjectivity in its already subjective rule of arbitrariness.
Contrary to this opinion, looking at these cases through the lens of the Court, there is a lot of jurisprudence to suggest that subjective interpretation of Article 14 is the only recourse present. For example, in the case of a dispute over economic fixation of gas prices, the Court used the public trust doctrine under the ambit of equality to put an embargo on the government from entering into a contract that extracts minerals and resources in such a manner in order to dilute the sovereignty over those assets. Additionally, it could only be allowed to do so provided that a fair and just compensation was achieved. Here, apart from including the international law doctrine of public trust the court had a very narrow solution left.
From the above trajectory of cases, it is evident that the Court suffered from two major issues. One, was widening the ambit of Article 14 and reading principles of public trust, welfare and interest into it. Secondly, the Supreme Court was creating policies for the government, believing that the public, as owners of natural resources, deserved to know and believe that the executive was distributing these assets fairly. Here, the Court in the end kept the reins with itself to interpret policies based on parameters that it deemed appropriate.
Regarding the discussion on the inter-relationship of natural resources and the Constitution, the discourse cannot be complete without analysis of the magnum opus, the case of Coalgate. The three-judge bench of the Supreme Court affirms the ratio of the Second spectrum case by stating that during the era of liberalisation, the conditions of the coal industry required that distribution through auctions were not effectually carried out. However, while analysing all the screening committee meetings and discussions, the Court holds the distribution of coal blocks to be unconstitutional as violative of Article 14. There was a lack of guidelines or regulations that helped determine the inter se merit amongst applicants. Also, there was very little discussion before awarding allocations and even the little guidelines that were present were being constantly changed.
Judicial Scrutiny: Guidelines, Auctions, and Jurisdictional Boundaries
However, scholars like Gautam Bhatia have criticised the above approach, as the Court ought to examine the adequacy of the guidelines i.e quality over quantity of rules. Moreover, they should analyse the factual assessment of the merit policy used by the State and use these two to adjudicate the allocation of coal blocks.
The jurisprudence behind the procedure of scrutiny of the guidelines are very similar to that of the S.R. Bommai case. In order to not provide with much power and discretion to the President, the court implemented the Sarkaria Commission report. Here, the President could declare an emergency if he had material or reports from the government which were sufficient enough to portray the aggravated circumstances. The major criticism to this judgement was that only the presence of a report allowed the President to do so. The presence of a report barred attacks on the question of ‘satisfaction’. In the present case, the Court mandated that the process was arbitrary on the grounds of absence of guidelines and not the content of those rules. Hence, in the future if a company decided to allocate resources on the basis of flawed guidelines, contentions could be raised to the distribution being valid due to the presence of guidelines. According to the ratio in Coalgate, the content wasn’t given importance to but its mere presence. Thus, the Court has kept this avenue of subjectivity open, in order to have the last say in the matter.
The first question under scrutiny was whether the allocation of coal was to be done only through a public auction. While hearing the contention of the government that an auction would lead to ‘cascading of the economy’ and to a ‘concentration of industries’ and a ‘supply-demand mismatch’. These arguments were basically economic considerations that the government had taken while deciding policies of allocations. The Court holds that they lacked the competency to compare the distributive methods and mandatorily make one method applicable. Also, the administrative decisions of policies of the executive didn’t warrant any judicial interference. Thus, the Court takes a departure from its position in Sachidanand Pandey where it held that for maintenance of public interest, paramount consideration has to be given to auctions. A small window of exception was provided where if reasons were ‘compelling enough’ certain departures could be made. Here, the Court clarifies that it doesn’t have the power to go into the foray of policy decisions and methods of implementations. This is a huge breakthrough from the First Spectrum case.
The Second Spectrum case to a certain extent had allowed to not use the public auction method on grounds of revenue maximisation. In the Coalgate case, the Court did not enter the bullpen of whether the result of the decision of allotment was arbitrary or in the question whether the guidelines were meritorious but instead based its judgement on the pillars of the guidelines and its competency to award the deserving applicants. Here, the Court looked at whether the distribution has led to any obstructions to the principle of fairness, transparency and equality. Hence, limiting its jurisdiction to interpretation rather than invention.
Conclusion
Through the course of this blogpost, an in-depth analysis of the intertwining of natural resources and the Indian Constitution has been portrayed. The relationship of fundamental rights and directive principles has been touched upon with a mention of the criticisms that have been meted out for that position taken by the Court. The first part describes the various interpretations Article 39(b) has taken through the trajectory of cases. Moreover, it describes the level of filters that the Court has applied in order to clarify the terms of ‘material resources’ and ‘distribution’. This has led to a severe widening of the scope and ambit of this directive principle. Additionally, reference to the incorrect applicability of Article 31-C has been discussed with reference to its usage with Article 39(b). The second part leads to the entire discourse on the arbitrariness doctrine and the distribution of resources. The analysis of the spectrum and Coalgate analysis along with constitutional questions raise various jurisprudential issues. The First Spectrum case witnessed the Supreme Court make mandatory policies for the executive and conveniently, breaching the separation of power doctrine. This case highlighted the Court as an interventionist and a policy maker. The Second Spectrum case sought for an analysis on the arbitrariness principle used under Article 14. With its already established wide ambit, the Court even added doctrines like public interest, trust, and welfare to it.
However, rectification for the compulsory method of public auctions was held to be only restricted to the facts of the above case. Here, the Court even accepted the contention of the State that some welfare schemes could be for profit maximisation but imposed the necessity of fairness and transparency in its implementation and conduction. The Coalgate case saw the Supreme Court clarifying the previous two decisions and laying down a very reasoned judgement. However, certain flaws could be garnered which have been explained in the course of the latter part. The dependency on only the presence of guidelines could be as destructive as the emergency SR Bommai case. This was even looked through the lens of the Court and a holistic perspective was elucidated. Hence, through the trajectory of these cases we have seen the Court correcting its flaws and maintaining the separation between the organs of the government, which is extremely imperative for the peaceful functioning of any country.
Disclaimer
The views and or opinions expressed by the author herein are solely those of the author and does not reflect those of the institution and or organisation they are associated with.
About the Author:
Anshul Dalmia is a Bachelor of Civil Law (BCL) Candidate at the University of Oxford. He holds a B.A. LL.B, from NUJS, Kolkata.
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