What the Supreme Court did NOT say about the 2G fiasco

by Kartikeya Tanna

The government spokespersons have plucked a few statements from the judgment to turn tables on the NDA asking it to apologise for its act of introducing the policy of first-come-first-served (“FCFS”). Without getting into the political slugfest, it is important to dissect the Court’s pronouncement.

Does the court say that the FCFS policy followed by DoT for grant of licenses was invalid under Article 14 of the Constitution which deals with equality before the law?

The Court has not categorically stated that the FCFS policy is unconstitutional or legally impermissible under Article 14 even though that has been the common interpretation.

The Court does state that FCFS policy bears a fundamental flaw and has dangerous implications in as much as it involves an element of pure chance or accident. Those having access to the power corridors may be able to obtain information and apply for licenses, thus being first in the queue. In order to ensure transparency in the process, the Court does opine that a duly publicised auction is “perhaps the best method” and, in a subsequent paragraph (Para 73), states that auction “could be” the only rational transparent method for distribution of national wealth. The only place where the Court is categorical is in Para 76 stating that while transferring or alienating the natural resources, the State is “duty bound” to adopt the method of auction.

However, whether this is the same as unequivocally saying that FCFS policy is in violation of Article 14 and this unconstitutional is doubtful. Does the Court mean that all future allocation of natural resources must be by auction? If MS Dhoni wants land (a scarce finite natural resource) in a prime location for building a cricket academy, what should the concerned Government do? Or is the Court simply holding that the FCFS policy is unconstitutional? Since it does not state so anywhere directly, must that be inferred from this pronouncement?

An additional reason these questions remain unanswered is that the Court in the operative part quotes its earlier judgment in the case of Sachidanand Pandey v State of West Bengal. In that case a PIL opposing the grant of land to a five-star hotel group by the West Bengal government was rejected. The Court said just because the government did not invite tenders or hold a public auction did not automatically invalidate the grant of land. It stated that distributing resources by auction or tenders is one of the methods of securing the larger public interest. The case also states that while an auction or a tender is the ordinary rule, it is not an invariable rule. Any departure from that rule must be in consonance with the basic principles as outlined by the Court:

• There must be a sound, transparent, discernible and well-defined policy made known to the public.
• Such policy must be implemented fairly, equitably, without discrimination and arbitrariness and in larger public good.

So the question becomes can the FCFS policy meet these basic principles? Possibly, it can.

As Arun Shourie, former Telecom Minister in the NDA government, has repeatedly pointed out, the Telecom Ministry tried to invite entities in the auction process back then, but elicited little interest in those days. In the interests of advancing the telecom market, it adopted an alternative route – the FCFS policy – with well-defined transparent parameters.

Press reports have observed, bouncers deployed at the gates of Sanchar Bhavan prevented genuine applicants from entering the former telecom minister's office with all papers ready. AFP

Certainly, in 2007, the telecom market had drastically changed. The Court has rightly criticized the continued use of the FCFS policy in 2007-2008 and, more particularly, its implementation.

Should all prior licenses granted under the FCFS policy now be scrapped?

Some legal experts have opined that in light of the fact that 122 licenses granted by the 2G licensing process in 2007-2008 being scrapped, the licenses granted under the same policy of FCFS since 2001 must also be quashed. It is important to understand the basis of cancellation of 122 licenses in order to understand the possible problems in arguments suggesting cancellation of all previous licenses.

First off, the Supreme Court has not opined either way on the fate of the earlier licenses simply because the challenge brought by petitioners was limited only to the 122 licenses granted in 2008.

Next, the question put before the Court was “whether licenses granted to ineligible applicants and those who failed to fulfill the terms and conditions of the license are liable to be quashed” and not whether licenses granted are liable to be quashed merely because they were granted under an FCFS policy.

The process under which licenses were granted by Raja suffered from various legal and constitutional infirmities which are well-known now from arbitrarily shifting the cut-off date for consideration after the applications were received to spectrum being granted in 2007 at 2001 prices and not consulting the Finance Ministry.  Also as press reports have observed, bouncers deployed at the gates of Sanchar Bhavan prevented genuine applicants from coming in, whereas some of these successful licensees were sitting in Raja’s office with all papers ready.

Therefore, it is the application of the policy in that year that has been found arbitrary, capricious, and in violation of the principle of equality under Article 14.

No evidence has been proffered or suggested indicating that any of the licenses granted prior to 2007-2008 suffer from an arbitrary, capricious or patently wrong implementation of the FCFS policy. No wrongdoing of any kind has been found in granting licenses despite CBI’s interrogation of Arun Shourie and other officials of that time. Based on the facts known so far, there is a clearly discernible difference in the two categories. Thus earlier licenses cannot be cancelled solely because they were granted on the basis of the FCFS policy.

Kartikeya Tanna is a Partner at Tanna Associates Advocates, Ahmedabad. He can be contacted at kartikeya@tannaassociates.com. You can read the full article by Tanna at Bar&Bench.com. Firstpost regularly publishes articles from Bar&Bench.


Updated Date: Feb 03, 2012 13:00 PM

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