It is only after navigating through the anger of unrepentant telecom firms and the grief of stricken investors and employees facing an uncertain future that one encounters the real impact of the Supreme Court judgment cancelling 122 illegal telecom licences last week.
Its immediate, most obvious impact is a strong judicial attack on the opaque spectrum allocation process used by the government since 2001, first on a subscriber-linked criterion and later, on a first come, first served basis, which was exploited in 2008 in the worst possible manner by jailed ex-Telecom Minister A. Raja.
The uncertainties that follow will be confined to the medium term, culminating in the delivery of tangible justice the reassignment of licences and spectrum at a market-determined price.
REVERBERATION IN OTHER SECTORS
The reverberations of the judgment actually extend far beyond telecom, crushing the subjective power of the government to issue licences and contracts in any sector like power, coal, minerals, mines, land, and even special economic zones (SEZ), that allocates scarce national resources. This effectively attacks the fountainhead of all large corruption linked to government contracts.
The first irrefutable principle of the judgment is on the issue of ownership and control of natural resources provided under Article 39(b) of the Constitution: The ownership and control of natural resources of a community should be distributed so as to best sub-serve the common good but no comprehensive legislation has been enacted to generally define natural resources and a framework for their protection. With the government dithering on such specific legislation, the judgment has become the de facto law in the matter.
Recognising that while the state is deemed to have a proprietary interest in natural resources, it must act as a guardian and trustee, the judgment affirms that the people are the designated owners of natural resources in any country.
Acknowledging the high economic value of natural resources, the judgment recognises that these national assets are scarce, finite, and susceptible to degradation in case of inefficient utilisation.
Highlighting the issue of public trust, the judgment quotes from several international judgments, including the famous American one, of Illinois Central R. Co. vs Illinois, and the ones in India such as M.C. Mehta vs Kamal Nath to make the point that: Public interest doctrine enjoins upon the government to protect the resources for the enjoyment of the general public rather than permit its use for private ownership or commercial purposes. At the heart of the public trust doctrine is the limits and obligations upon government agencies as administrators on behalf of all people, especially future generations.
HITS GOVERNMENT STAND
This shatters the government's stand that the allocation of natural resources is its sole preserve, and such policy' decisions should not be open to public or legal scrutiny. Traditionally, courts have been reluctant to review government policies' as they are considered an exclusive prerogative of the executive and formed after considering expert opinion.
Invoking the doctrine of equality deals the hardest blow to the opaque allocation procedures for natural resources that are in use for award of Central and State government contracts. The judgment states that the doctrine of equality which emerges from the concept of justice and fairness must guide the state in determining the actual mechanism of distribution of natural resources. This has two aspects: first, it regulates the rights and obligations of the state vis-a-vis its people and demands that the people be granted equitable access to natural resources and/or its products, and that they be adequately compensated for the transfer of resources to the public domain. This considerably debilitates the government's line in applying subjective criteria such as first come, first served or beauty parades when allocating natural resources in the future. Additionally, it requires the national exchequer to place a value on a natural resource before granting any party the privilege of using it.
The second part of the equality doctrine is explained as the need to regulate the rights and obligations of the state vis-a-vis private parties seeking to acquire/use resources and demands that the procedure adopted for distribution is just, non-arbitrary and transparent and that it does not discriminate between similarly-placed parties. This specifically addresses legacy issues of changing the goalpost after the game has begun such as tampering with cut-off dates or altering the qualifying criteria after applications have been submitted or bids placed.
Overall, it ensures that every party has an equal chance of transparently acquiring the asset, based on the rational value that it believes can be derived from the acquisition. The judgment specifically tears apart the first come, first served system, firmly re-establishing auctions as a preferred option.
Auctions can do much more than just raising revenue. They are quicker, more efficient and more economical than administrative allocation; ensure equitable access to natural resources; protect public trust; and protect equality as upheld in Article 14 of the Constitution. The telecom experience shows us that those who pay a market price base it on their expectation of revenue generation. Therefore, they are the first to rollout networks, best serving the objectives of tele-density, affordability and competition.
The judgment is unbending in its view that licences or natural resources given through devious and unconstitutional means cannot plead equities, investment or consumer interest even if they have not been a party to an unconstitutional and arbitrary allocation. Bidders with the slightest hint of ongoing mischief must now walk away, rather than participate. The fact that licences awarded illegally can be cancelled four years after they were allocated should send the fear of god in the minds of those who believe that investment and consumer interest will sway the courts once time has lapsed.
Simply put, the judgment gives judicial muscle to the message that from now on, offenders will be punished irrespective of political status, financial power and the time or money that may have been invested in an act that was illegal to begin with.
Striking a blow against corruption by empowering all those non-governmental organisations, enlightened citizens and activists fighting big corruption, this landmark judgment carries the potential of fast-tracking the pace of administrative reforms and governance in India in a manner not witnessed in the past.