ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Restoring Fairness

The Supreme Court Verdict on Auctions and Airwaves

Ram Bhat (ram@maraa.in) is with Maraa, a Bangalore-based media collective.

Auction as the only method of alienation of spectrum, and other natural resources, is a dangerous trend. It could potentially result in ignoring the welfare and social orientation of many media and communication policies by narrowly interpreting public interest in terms of revenue maximisation and equality in terms of equal access to bidding, which is not the same as equal access to spectrum.

Although free speech can be exercised in myriad ways, the establishment of airwaves as public property can and did go a long way in furthering the right to free speech. Frank La Rue in his seminal report on freedom of expression, notes that access to the means of communication is itself one of the major and important steps to realising the freedom of expression.

In the early 1990s, after India liberalised the media and communication sector, the burden of creating access was shared both by the government and private service providers. Public broadcasting, through radio and television reach most parts of the country, but they continue to remain one-way media, out of reach for most of us in terms of participation.

In 1995, the Supreme Court gave an extremely important judgment in a case - Cricket Association of Bengal versus the Government of India. The judgment not only established that airwaves are public property but also clarified that due to the nature of the airwaves, they are a limited entity and have to be regulated by a public authority. Therefore airwaves will face limitations which will be in addition to the restrictions imposed by Article 19 (2) of the Constitution. The court did recommend that a public authority be set up immediately to regulate and control use of airwaves. If this latter order from the Court had been followed, today there would probably be no allegations of corruption, nor would there have been a need for debate on methods of allocation.

Since the late 1990s, it has been an informal pattern wherein the public broadcasters and the public corporations such as Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) have the moral burden of creating access in rural areas (even though it may not yield immediate profits), whereas private service providers have focused on creating access and infrastructure in urban areas. The trend continues even today.

However, it is not what is happening informally that we should concern ourselves with, but what is formally the mandate of the government. This is because of the 1995 CAB judgment (among several others) which established that the State holds a fiduciary relationship with the public with respect to natural resources. Once the fiduciary relationship is in place, the State then is mandated to use the natural resources in public interest.

The two main principles that regulate and dictate the distribution of natural resources are Article 14 and Article 39 (b) of the Indian Constitution.

Article 14, a fundamental right, is couched in negative terms and is indeed an admonishment to the State to not deny equality before the law. Article 39 (b) on the other hand is a directive principle of State Policy, which emphasise on the distribution of community resources to subserve the common good.

If one looks at every communication and media-related policy in the past decade, the purpose or stated objective of the policy is very clear. The National Telecom Policy 1994, 1999 and 2012 open with the words, “to promote access to remote, rural and hilly areas.” The National Broadband Plan is couched in similar language. The 2006 Community Radio Policy guidelines have clearly mentioned developmental agendas. The FM radio policy guidelines mention media diversity, plurality and access. Therefore, it is obvious that the primary aim of none of these policies are for commercial exploitation or revenue maximisation.

When the State makes policies with welfarist or social objectives in mind, the courts have made it clear through several judgments that these policies must not violate Article 14 and Article 39(b).

It is this context that the recent 2G case and its developments begin to assume significance in terms of expanding the scope of public interest.

Sometime in early 2011, petitioners Centre for Public Interest Litigation and others filed a case in the Supreme Court. Among the questions they raised, two are of relevance here:

  • (1) Whether the government has the right to alienate, transfer or distribute natural resources/national assets otherwise than by following a fair and transparent method consistent with the fundamentals of the equality clause enshrined in the Constitution?
  • (2) Whether the policy of first-come-first-served followed by the DoT for grant of licenses is ultra vires the provisions of Article 14 of the Constitutions and whether the said policy was arbitrarily changed by the Minister of Communications and Information Technology, without consulting TRAI, with a view to favour the applicants?

Both these questions are of importance because the first one reinstates and frames natural resource alienation within the equality clause, and the second one questions a specific method of allocation, that is, first-come-first-served as ultra vires Article 14.

Although the court could have answered differently, the judgment which came out in February 2012, appears to be quite specific in its recommendations. Of particular concerns are paragraphs 74-76. Paragraph 76 states:

When it comes to alienation of scarce natural resources like spectrum etc., it is the burden of the State to ensure that a non-discriminatory method is adopted for distribution and alienation, which would necessarily result in protection of national/public interest. In our view, a duly publicized auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first-come-first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. In other words, while transferring or alienating the natural resources, the State is duty bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process.

These lines fueled major debates in the media and amongst civil society, as it seemed to comment not just on spectrum, but on the larger category of natural resources, and secondly because it specified the auction method over all other methods of alienation. The question that arose following this judgment was whether auctions would be elevated to become a constitutional mandate?

If auction was the sole method to be followed for all alienation of spectrum, much less other natural resources, even then it was an extremely dangerous trend. It would have the potential of ignoring the welfare and socially oriented nature of several media and communication policies and instead narrowly interpret public interest in terms of revenue maximization, and further narrowly interpret equality in terms of equal access to bidding, which is the not the same as equal and substantive access to spectrum.

In April 2012, the president made a reference to the Supreme Court with a list of eight questions, of which five were to be taken up immediately, and the rest would be taken up later. Of these five questions, the relevant question was:

Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?

As a response to this reference, a five-member bench of the apex court gave an opinion, which was published on the 27 September 2012. The opinion can be considered a landmark one on several counts, as it reaffirms one’s faith in the judiciary as upholder of public interest, and in the matter of distribution of resources through broader principles of justice, fairness, equality and rationality. Some of the arguments are analysed below:

Ratio as Law Declared

It is clearly obvious that paragraphs 94 to 96 in the 2G judgment, are the repository of the ratio vis-à-vis disposal of natural resources (Paragraph 65).

Further Article 141 of the Constitution lays down that the ‘law declared’ by the Supreme Court is binding upon all the courts within the territory of India. However, the Court also makes it very clear that the ‘law declared’ in a judgment, which is binding upon courts, is the ratio decidendi of the judgment (Paragraph 66).

The court goes on to say that each case entails a different set of facts. Not everything said by a judge while giving a judgment can be ascribed precedental value. The court also says that it is important to read a judgment as a whole keeping in mind that it is not an abstract academic discourse with universal applicability, but heavily grounded in the facts and circumstances of the case (Paragraph 70).

Thus it would be wrong to isolate the repository of the ratio and attempt to universally apply it to all natural resources or even all parts of the spectrum. It is clear that the 2G case is specifically talking about allocation of 2G spectrum by A. Raja, the then Minister of Communications and Information Technology.

The court also clearly mentions that the use of the word ‘perhaps’ suggests that the recommendation of auction for alienation of natural resources was never intended to be taken as an blanket statement applicable across all natural resources, but simply a conclusion made at first blush. Further, the court says that if the judgement had actually enunciated auction as the only permissible method, then it would have found a mention in the summary of the judgment, which it has not (Paragraph 78 and 79).

On Article 14

The court recognises that the objective of Article 14 is to secure to all persons equality of status and opportunity referred to in the preamble of the Constitution. However, the language of Article 14 is couched in negative terms and is in form, an caution addressed to the State. It does not confer any right on any person directly, unlike other articles, such as Article 19. Article 14, therefore, is an injunction to the State against taking certain types of actions rather than commanding it take particular steps. Thus, reading the mandate of auctions into its scheme would be completely contrary to the intent of the Article. Secondly a constitutional mandate is an absolute principle that would have to be applied in all situations (Paragraph 106 & 107).

This is an important interpretation by the court which prevents any one specific method of allocation of natural resources being elevated to the status of a Constitutional mandate.

On Article 39(b)

The court notes that Article 39 (b) is, in a sense, a restriction on ‘distribution’ built into the Constitution. But the restriction is imposed on the object, and not on the means. The overarching and underlying principle governing ‘distribution’ is furtherance of common good (paragraph 112). The court goes on to say that auctions may be the best way of maximising revenue, but that revenue maximisation may not always be the best way to serve the public good (paragraph 116).

It has also been noted (in paragraph 119) that where revenue maximisation is not the object of a policy of distribution, the question of auction would not arise. Revenue consideration may assume secondary consideration to developmental considerations.

In summarising this thread, the court concludes (in paragraph 120) that the submission that the mandate of Article 14 is that any disposal of a natural resource for commercial use must be for revenue maximisation, and thus by auction, is based neither on law nor on logic.

Conclusion

It is troubling that the Attorney General, on behalf of the government of India, has accepted the correctness of the 2G verdict on the issue of spectrum and only bothered to question it on allocation of other natural resources. However, the truth of the matter is that right from telecom to a small sector like community radio, the states policy objectives have never been revenue maximisation, but instead focused on developmental considerations, be it access or community development. While all of these policies depend on the use of spectrum for deployment, the method of allocating spectrum within the framework of these policies, should be the prerogative of the executive, as has been duly noted by the Supreme Court. One hopes that in the future, the issue of spectrum allocation will be seen from the perspective of the stated policy objective and not necessarily always from the perspective of notional loss to the exchequer or from the perspective of revenue maximisation.

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