Investment climate plea may not hold good for maintainability of Presidential Reference, says CJI Kapadia
The ‘2G spectrum judgment’ has created confusion in the minds of foreign investors and made India a laughing stock internationally, Attorney-General G. E. Vahanvati asserted in the Supreme Court on Tuesday.
He made this submission before a Constitution Bench of Chief Justice S. H. Kapadia and Justices D. K. Jain, J. S. Khehar, Dipak Misra and Ranjan Gogoi, hearing the Presidential Reference on the 2G judgment.
“Why can’t this point be raised in the review petition?” the CJI asked the AG. “Investment argument may not hold good.”
The AG said, “The present Reference does not seek to overturn the operative directions contained in the judgment.”
“The problem with the auction rule,” he said, “was with regard to foreign investment. Any foreigner seeking to invest in India will get an opinion that it is not safe to invest in India as auction is the only way of disposing of resources — that if resources are handed out in any other way, they will land in trouble. India will become a laughing stock internationally. What we are saying is the judgment is vague and it will affect investment. We have to go by what is the position regarding foreign investment climate. [U.S.] President Obama has also spoken about the foreign investment climate in the country.”
Justice Kapadia, however, told the AG, “The investment climate argument may not hold good for maintainability.”
The AG said: “It is to be noted that the Public Trust doctrine was not the subject matter of any discussion in court and its extension [in the 2G judgment] to all natural resources and the principle that all natural resources can be disposed of only by auction will have serious impact on FDI into the country.”
Rejecting the argument that the Reference was not maintainable, the AG said: “All that is sought to be done by way of the present Reference is to request this court to clarify the law and give an advisory opinion on the substantial questions of law, whether all natural resources must necessarily be disposed of by way of auction.”
He said: “It cannot be said that without hearing the Reference, it is not maintainable. Undoubtedly, the questions which have been formulated are of great constitutional importance and will impact the development of this country. It cannot be disputed that the questions raised have arisen and are likely to arise, because whenever the government adopts a method for disposal of any natural resource by a method that does not entail maximisation of revenue, the methodology is likely to be challenged on the ground that it runs contrary to the directions contained in para 96 of the judgment. There are important questions of far-reaching public importance that require clarification by this court. Any kind of uncertainty in the law in this regard is bound to destabilise the economy and adversely affect Foreign Direct Investment.”
Appearing for the Federation of Indian Mineral Industries (FIMI), senior counsel T. R. Andhyarujina supported the Reference. “FIMI is particularly concerned in this Reference as the judgment in para 94 condemned the first come, first served policy in [allocation of ] public resources as having inherently dangerous implications, and prescribed auction as a general proposition of law. This is directly contrary to the existing provisions of Sections 1 and 11 of the Mines and Minerals (Development & Regulation) Act, 1957.”
Counsel said: “The judgment, in laying down a universal prescription applicable to all natural resources or public assets and ignoring the statutory provisions like the MMDR Act, 1957, is per incuriam [a decision which a subsequent court finds to be a mistake, and therefore not a binding precedent]. Its propositions regarding the requirement of the state’s duty to adopt a method of auction is applicable as law only to the natural resource under consideration, viz., spectrum.”
He said: “This court could not have a judicially settled policy for all times in the matter of disposal of natural resources in the manner in which it has done in paras 94 to 95 of the judgment. The government policies cannot be fettered by only one method of disposal, viz., to the highest bidder. This would be against the national interest.”
“Nothing final in verdict”
Appearing for the Confederation of Indian Industry, senior counsel Hairsh Salve said that beyond cancelling 122 licences, there was nothing final in the judgment. “Tomorrow the next government can say even the decision on spectrum is not final and seek a reference.”
When Justice Jain wanted to know whether it would not add to confusion, Mr. Salve said, “What is important is the ratio of the judgment cannot be touched in the Reference.”
Arguments will continue on Wednesday.