By Kartikeya Tanna
Earlier this week, on 27 June, the Gujarat government’s stand on the allotment of land for industrial purposes was vindicated with the Gujarat High Court passing a favourable verdict in one case of land allotment to Archean Chemicals. This case had gained prominence due to the fact that one of the promoters of Archean Chemicals is allegedly related to senior BJP leader Venkaiah Naidu.
In a crucial way, this seems to accord approval to the Gujarat government’s biennial investment summits—the Vibrant Gujarat summits —as a fair, rational and equitable alternative to public auctions insofar as allotment of natural resources like land is concerned.
Alleging that the Gujarat government had allotted around 24,000 hectares of land on lease to Archean Chemicals at a “throwaway” price of Rs 150 per hectare per annum, the complainant, a non-governmental organisation (NGO) stated that the government had no right in law to alienate, transfer or distribute the land “without following a fair and transparent method consistent with article 14 of the Constitution of India”.
The NGO relied on the recent judgment by the Supreme Court in the “2G case” where the general inference has been that states can allot natural resources only through public auctions in order to fulfill the principles of fairness, equality and non-discrimination under article 14 of the Constitution. Writing for Firstpost earlier, the author has disagreed with this general inference.
Desirous of manufacturing salt-based marine chemicals, Archean Chemicals had applied to the Gujarat government to allot suitable land in Kutch after pledging investment of Rs 1,200 crore during the Vibrant Gujarat Summit of 2005 – where the state government invites entities and investors of the world at large to invest in Gujarat.
The Gujarat High Court rejected the NGO’s argument that the “2G case” was distinguishable from the unique facts of this case and the salt sector. Firstly, since the time of the British Empire till now, the government of India and Gujarat have been allotting land on lease basis for salt-related production without auction.
Secondly, while Gujarat charged Rs 150 per annum per hectare from Archean Chemicals as of 2000, other states charged considerably lesser amounts of rent at that time. For example, Tamil Nadu charged merely Rs 12.35 per hectare and Maharashtra Rs 49.40 per hectare.
Thirdly, it wasn’t even the case that other applicants for land in the same area were left high and dry by the Gujarat government. After a meeting with all applicants (including Archean Chemicals) and hearing representatives of various salt associations, the Gujarat government allotted around 24,021 hectares to Archean Chemicals (it had applied for 40,000 hectares), 26,746 hectares to Solaris Chemtec (it had applied for 30,000 acres) and 17,975 hectares to Agrocel Industries (it had applied for 18,000 acres).
Most importantly, the high court stated that it was not Archean that preferred an application for allotment of land based on which the government took the decision to allot the land. On the contrary, “it was the state government who (sic) invited people from all over the country (in Vibrant Gujarat summits) interested to start an industry or a project within the state of Gujarat“. And, pursuant to such invitation, Archean signed the MOU.
The Gujarat High Court quoted from a Supreme Court judgment of 1980 (and the same view was expressed in another judgement as recently as in 2009) that “in a case where the state is allocating resources for the purpose of encouraging setting up of industries within the state, we do not think the state is bound to advertise and tell the people that it wants a particular industry to be set up within the state and invite those interested to come up with proposals for the purpose – if any private party comes before the state and offers to set up an industry, the state would not be committing any breach of constitutional or legal obligation if it negotiates with such party and agrees to provide resources and other facilities for the purpose of setting up the industry.
The state is not obliged to tell such party: “Please wait I will first advertise, see whether any offers are forthcoming and then, after considering all offers, decide whether I should let you set up the industry.”
This judgement comes on the heels of the government of India saying no to auction as the only method of distributing even scarce natural resources like coal, oil and spectrum in response to a Special Presidential Reference being heard in the Supreme Court. The Special Reference contains certain questions arising pursuant to the 2G judgement which require clarification from a larger bench of the Supreme Court.
As the author has stated earlier, the guiding principle enunciated even in the 2G judgment is that there must be a rational, sound, transparent, discernible and well-defined policy for allotment of natural resources which is implemented fairly, equitably and without discrimination.
Whether the recent coal-block allocations by Prime Minister Manmohan Singh have been done pursuant to a sound and rational policy is seriously debatable. Firstpost has questioned the decision quoting a BusinessLine report that “all was far from well in this highly subjective selection process”. The then Coal Secretary has also questioned the process.
The Gujarat High Court has, however, through its judgement, made it clear that Vibrant Gujarat summits held under the leadership of Narendra Modi meet these guiding principles as required under article 14 of the Constitution for allotment of a resource like land for industrial purposes. The Modi government, which is facing an inquiry commission investigating into such allegations and severe political opposition, has something significant to cheer about.