Government Largesse

 To-day the Government, is a welfare State, is the regulator and dispenser of special services and
provider of a large number of benefits, including jobs contracts, licences, quotas, mineral rights etc.
The Government pours forth wealth, money, benefits, services, contracts, quotas and licences. The
valuables dispensed by Government take many forms, but they all share one characteristic. They are
steadily taking the place of traditional forms of wealth.

 Ramana Dayaram Shetty vs. International Airport Authority of India and Ors. (04.05.1979 -
SC) : MANU/SC/0048/1979
 Licences are required before one can engage in many kinds of business or work. The power of giving
licences means power to withhold them and this gives control to the Government or to the agents of
Government on the lives of many people.
 Many individuals and many more businesses enjoy largess in the form of Government contracts.
These contracts often resemble subsidies. It is virtually impossible to lose money on them and many
enterprises are set up primarily to do business with Government.

 Government owns and controls hundreds of acres of public land valuable for mining and other
purposes. These resources are available for utilisation by private corporations and individuals by way
of lease or licence.

 All these means growth in the Government largess and with the increasing magnitude and range of
governmental functions as we move closer to a welfare State, more and more of our wealth consists
of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large
majority of them are in the nature of privileges. But on that account, can it be said that they do not
enjoy any legal protection? Can they be regarded as gratuity furnished by the State so that the State
may withhold, grant or revoke it at its pleasure? Is the position of the Government in this respect the
same as that of a private giver? We do not think so.

 The law has not been slow to recognise the importance of this new kind of wealth and the need to
protect individual interest in it and with that end in view, it has developed new forms of protection.
Some interests in Government largess, formerly regarded as privileges, have been recognised as
rights while others have been given legal protection not only by forging procedural safeguards but
also by confining/structuring and checking Government discretion in the matter of grant of such
largess. The discretion of the Government has been held to be not unlimited in that the Government
cannot give or withhold largess in its arbitrary discretion or at its sweet will.

 It is insisted, as pointed out by Prof. Reich in an especially stimulating article on "The New
Property" in 73 Yale Law Journal 733, "that Government action be based on standards that are not
arbitrary or unauthorised." "The Government cannot be permitted to say that it will give jobs or enter
into contracts or issue quotas or licences only in favour of those having grey hair or belonging to a
particular political party or professing a particular religious faith. The Government is still the
Government when it acts in the matter of granting largess and it cannot act arbitrarily. It does not
stand in the same position as a private individual.

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  The observations of Mathew, J., in V. Punnan Thomas v. State of Kerala MANU/KE/0020/1969 :
AIR1969Ker81 that :
"The Government is not and should not be as free as an individual in selecting the recipients for its
largess. Whatever its activity, the Government is still the Government and will be subject to
restraints, inherent in its position in a democratic society. A democratic Government cannot lay
down arbitrary and capricious standards for the choice of persons with whom alone it will deal".

 when the Government is trading with the public, "the democratic form of Government demands
equality and absence of arbitrariness and discrimination in such transactions. The activities of the
Government have a public element and, therefore, there should be fairness and equality. The State
need not enter into any contract with anyone, but if it does so, it must do so fairly without
discrimination and without unfair procedure." This proposition would hold good in all cases of
dealing by the Government with the public, where the interest sought to be protected is a privilege. It
must, therefore, be taken to be the law that where the Government is dealing with the public, whether
by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms
of largess, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal
with any person it pleases, but its action must be in conformity with standard or norms which is not
arbitrary, irrational or irrelevant.

 The power or discretion of the Government in the matter of grant of largess including award of jobs,
contracts, quotas, licences etc., must be confined and structured by rational, relevant and non-
discriminatory standard or norm and if the Government departs from such standard or norm in any
particular case or cases, the action of the Government would be liable to be struck down, unless it
can be shown by the Government that the departure was not arbitrary, but was based on some valid
principle which in itself was not irrational, unreasonable or discriminatory.

 it is obvious that the Government which represents the executive authority of the State, may act
through the instrumentality or agency of natural persons or it may employ the instrumentality or
agency of juridical persons to carry out its functions.


 It will thus be seen that there are several factors which may have to be considered in determining
whether a corporation is an agency or instrumentality of Government. We have referred to some of
these factors and they may be summarised as under : whether there is any financial assistance given
by the State, and if so, what is the magnitude of such assistance whether there is any other form of
assistance, given by the State, and if so, whether it is of the usual kind or it is extraordinary, whether
there is any control of the management and policies of the corporation by the State and what is the
nature and extent of such control, whether the corporation enjoys State conferred or State protected
monopoly status and whether the functions carried out by the corporation are public functions closely
related to governmental functions. This particularisation of relevant factors is however not
exhaustive and by its very nature it cannot be, because with increasing assumption of new tasks,
growing complexities of management and administration and the necessity of continuing adjustment
in relations between the corporation and Government calling for flexibility, adapt ability and
innovative skills, it is not possible to make an exhaustive enumeration of the tests which would
invariably and in all cases provide an unfailing answer to the question whether a corporation is
governmental instrumentality or agency. Moreover even amongst these factors which we have
described, no one single factor will yield a satisfactory answer to the question and the court will have

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 to consider the cumulative effect of these various factors and arrive at its decision on the basis of a
particularised inquiry into the facts and circumstances of each case.

 Now, obviously where a corporation is an instrumentality or agency of Government, it would, in the

exercise of its power or discretion, be subject to the same constitutional or public law limitations as
Government. The rule inhibiting arbitrary action by Government which we have discussed above
must apply equally where such corporation is dealing with the public, whether by way of giving jobs
or entering into contracts or otherwise, and it cannot act arbitrarily and enter into relationship with
any person it likes at its sweet will , but its action must be in conformity with some principle which
meets the test of reason and relevance.

 Ramana Dayaram Shetty vs. International Airport Authority of India and Ors. (04.05.1979 -
SC) : MANU/SC/0048/1979
 Whether, State was entitled to deal with its property in any manner it liked or award a contract to any
person it chose, without any constitutional limitations upon it - Held, when 1st Respondent
entertained tender of 4th Respondents despite their inexperience, then, others were denied equality of
opportunity - Thus, acceptance of tender of 4th Respondents was, in circumstances invalid as being
violative of equality clause of Constitution as also of rule of administrative law inhibiting arbitrary
action

 Ramana Dayaram Shetty vs. International Airport Authority of India and Ors. (04.05.1979 -
SC) : MANU/SC/0048/1979
 On or about 3rd January, 1977 a notice inviting tenders for putting up and running a second class
restaurant and two Snack bars at the International Airport at Bombay was issued by the 1st
respondent which is a corporate body constituted under the International Airport Authority Act, 43 of
1971. The notice stated in the clearest terms in paragraph (1) that "Sealed tenders in the prescribed
form are hereby invited from Registered IInd Class Hoteliers having at least 5 years' experience for
putting up and running a IInd Glass Restaurant and two Snack bars at this Airport for a period of 3
years". The 'latest point of time upto which the tenders could be submitted to the 1st respondent was
stipulated in Paragraph 7 of the notice to be 12 p.m. on 25th January, 1977 and it was provided that
the tenders would be opened on the same date at 12.30 hours. Paragraph (8) of the notice made it
clear that "the acceptance of the tender will rest with the Airport Director who does not bind himself
to accept any tender and reserves to himself the right to reject all or any of the tenders received
without assigning any reasons therefore."

 There were six tenders received by the 1st respondent in response to the notice and one of them was
from the 4th respondents of offering a licence fee of Rs. 6666.66 per month, and the others were
from Cafe Mahim, Central Catering Service, one A.S. Irani, Cafe Seaside and Cafe Excelsior
offering progressively decreasing licence fee very much lower than that offered by the 4th
respondents. The tenders were opened in the office of the Airport Director at 12.30 p.m. on 25th
January, 1977 and at that time the 4th respondents were represented by their sole proprietor
Kurnaria. A.S. Irani was present on behalf of himself, Cafe Mahim, Cafe Seaside and Cafe Excelsior
and there was one representative of Central Catering Service. The tenders of Cafe Mahim, Central
Catering Service, Cafe Seaside and Cafe Excelsior were not complete since they were not
accompanied by the respective income tax certificates, affidavits of immovable property and
solvency certificates, as required by Clause (9) of the terms and conditions of the tender form. The
tender of A.S. Irani was also not complete as it was not accompanied by an affidavit of immovable
property held by him and solvency certificates. The only tender which was complete and fully

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 complied with the terms and conditions of the tender form was that of the 4th respondents and the
offer contained in that tender was also the highest amongst all the tenders. Now it is necessary to
point out at this stage that while submitting their tender the 4th respondents had pointed out in their
letter dated 24th January, 1977 addressed to the Airport Director that they had 10 years' experience
in catering to reputed commercial houses, training centers, banks and factories and that they were
also doing considerable outdoor catering work for various institutions. This letter showed that the 4th
respondents had experience only of running canteens and not restaurants and it appeared that they
did not satisfy the description of "registered IInd Class Hotelier having at least 5 years' experience"
as set out in paragraph (1) of the notice inviting tenders. The Airport Officer, therefore, by his letter
dated 15th February, 1977 requested the 4th respondents to inform by return of post whether they
were a "registered IInd Class Hotelier having at least 5 years experience" and to produce
documentary evidence in this respect within 7 days. The 4th respondents pointed out to the Airport
Officer by their letter dated 22nd February, 1977 that they had, in addition to what was set out in
their earlier letter dated 24th January, 1977, experience of running canteens for Phillips India Ltd.
and Indian Oil Corporation and moreover, they held Eating House Licence granted by the Bombay
Municipal Corporation since 1973 and had thus experience of 10 years in the catering line. It appears
that before this letter of the 4th respondents could reach Airport Officer, another letter dated 22nd
February, 197 7 was addressed by the Airport Officer once again requesting the 4th respondents to
produce documentary evidence to show if they were "a registered IInd Class Hotelier having at least
5 years experience". The 4th respondents thereupon addressed another letter dated 26th February,
1977 to the Director pointing out that they had considerable experience of catering for various
reputed commercial houses, clubs, messes and banks and they also held an Eating House Catering
Establishment (Canteen) Licence, as also a licence issued under the Prevention of Food Adulteration
Act. The 4th respondents stated that their sole proprietor Kumaria had started his career in catering
line in the year 1962 at Hotel Janpath, Delhi and gradually risen to his present position and that he
had accordingly "experience equivalent to that of a IInd Class or even 1st Class hotelier." This
position was reiterated by the 4th respondents in a further letter dated 3rd March, 1977 addressed to
the Director. This information given by the 4th respondents appeared to satisfy the 1st respondent
and by a letter dated 19th April, 1977 the 1st respondent accepted the tender of the 4th respondents
on the terms and conditions set out in that letter. The 4th respondents accepted these terms and
conditions by their letter dated 23rd April, 1977 and deposited with the 1st respondent by way of
security a sum of Rs. 39,999.96 in the form of fixed Deposit Receipts in favour of the 1st respondent
and paid to the 1st respondent a sum of Rs. 6666.66 representing licence fee for one month and other
amounts representing water, electricity and conservancy charges. The 4th respondents thereafter
executed and handed over to the 1st respondent an agreement in the form attached to the tender on
1st May, 1977. The 4th respondents also got prepared furniture, counters and showcases as also
uniforms for the staff, purchased inter alia deep freezers, water coolers, electrical appliances, ice
cream cabinets, espre ings and also engaged the necessary staff for the purpose of running the
restaurant and the two Snack bars. But the 1st respondent could not hand over possession of the
requisite sites to the 4th respondents, since A.S. Irani was running his restaurant and snack bars on
these sites under a previous contract with the 1st respondent and though that contract had come to an
end, A.S. Irani did not deliver possession of these sites to the 1st respondent. The 4th respondents
repeatedly requested the 1st respondent and the Airport Director who is the 2nd respondent in the
appeal, to hand over possession of the sites and pointed out to them that the 4th respondents were
incurring losses by reason of delay in delivery of possession, but on account of the intransigence of
A.S. Irani the 1st respondent could not arrange to hand over possession of the sites to the 4th
respondents.


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Kasturi Lal Lakshmi Reddy, Represented by its Partner Kasturi Lal, Jammu and Ors. vs. State of
Jammu and Kashmir and Ors. (09.05.1980 - SC) : MANU/SC/0079/1980

The dispute in these writ petitions relates to the validity of an Order dated 27th April, 1979, passed by the
Government of Jammu and Kashmir, allotting to the 2nd respondents 10 to 12 lacs blazes annually for
extraction of resin from the inaccessible chir forests in Poonch Reasi and Ramban Divisions of the State for
a period of 10 years on the terms and conditions set out in the Order.
There is a commodity called Oleo-resin, which we shall hereafter refer shortly as resin which is a forest
produce extracted from certain species of trees popularly known as chir trees. The process of extraction is
called tapping and it involves several steps. Chir trees are annually given one or two wounds which are
technically called blazes and cups and lips are fixed at the bottom of each blaze for collection of resin. The
actual collection of resin starts from 1st April and ends on 31st October every year.
If the Government awards a contract or leases out or otherwise deals with its property or grants any
other largess, it would be liable to be tested for its validity on the touchstone of reasonableness and
public interest and if it fails to satisfy either best, it would be unconstitutional and invalid.

Constitution - validity of Order - Articles 14, 19, 19 (1), 21 and 32 of Constitution of India - dispute
relates to validity of Order passed by Government for allotting blazes to respondents for extraction of
resin from forest - Court cannot assume action taken by Government as unreasonable - Order did not
hand over tapping of entire forest in State exclusively to respondents so as to deny tapping area to
petitioners - no monopoly was created in favour of respondents - Order was in interest of State - State
is free to negotiate with private entrepreneur - Order cannot be assailed invalid as no advertisement
was issued for inviting offers - respondents were superior than petitioners as far as relative merits
were concerned - held, Order was valid.
Though ordinarily a private individual would be guided by economic considerations of self-gain in any
action taken by him, it is always open to him under the law to act contrary to his self-interest or to oblige
another in entering into a contract or dealing with his property. But the Government is not free to act as it
likes in granting largess such as awarding a contract or selling or leasing out its property. Whatever be its
activity, that Government is still the Government and is, subject to restraints inherent in its position in a
democratic society. The constitutional power conferred on the Government cannot be exercised by it
arbitrarily or capriciously or in an unprincipled manner; it has to be exercised for the public good. Every
activity of the Government has a public element in it and it must therefore, be informed with reason and
guided by public interest. Every action taken by the Government cannot act arbitrarily and without reason
and if it does, its action would be liable to be invalidated. If the Government awards a contract or leases out
or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity
on the touch-stone of reasonableness and public interest and if it fails to satisfy either test, it would be
unconstitutional and invalid.

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State of Madhya Pradesh and Ors. v. Nandlal Jaiswal and Ors. MANU/SC/0034/1986 : (1937) 1 SCR 1
it was observed thus:

We must not forget that in complex economic matters every decision is necessarily empiric and it is based
on experimentation or what one may call 'trial and error method' and, therefore, its validity cannot be tested
on any rigid a 'priori' considerations or on the application of any straight-jacket formula. The court must
while adjudging the constitutional validity of an executive decision relating to economic matters grant a
certain measure of freedom or play in the 'joints' to the executive. The Court cannot strike down a policy
decision taken by the State Government merely because it feels that another policy decision would have
been fairer or wiser or more scientific or logical. The Court can interfere only if the policy decision is
patently arbitrary, discriminatory or mala fide. It is against the background of these observations and
keeping them in mind that we must now proceed to deal with the contention of the petitioners based on
Article 14 of the Constitution.

Shri Situram Sugar Co. Ltd. v Union of India, MANU/SC/0249/1990 : [1990]1SCR909 , observed
thus:

It was pointed out that what is best for the industry and in what manner the policy should be formulated and
implemented, bearing in mind the object of supply and equitable distribution of the commodity at a fair price
in the best interest of the general public, is a matter for decision exclusively within the province of the
Central Government and such matters do not ordinarily attract the power of judicial review. It was also held
that even if some persons are at a disadvantage and have suffered losses on account of the formulation and
implementation of the government policy, that is not by itself sufficient ground for interference with the
governmental action. Rejection of the principle of fixation of price unitwise on actual cost basis of each unit
was reiterated and it was pointed out that such a policy promotes efficiency and provides an incentive to cut
down the cost introducing an element of healthy competition among the units.

It is, therefore, clear that the principle of fixation of a uniform price for the industry is an accepted principle
and this has to be done by axing a uniform price on the basis of the cost of a reasonably efficient and
economic representative cross-section of manufacturing units and not with reference to the cost in relation to
each unit. Obviously, such a practice is in larger public interest and also promotes efficiency in the industry
providing an incentive to the uneconomic units to achieve efficiency and to reduce their cost.

Akhil Bhartiya Upbhokta Congress v. State of Madhya Pradesh and Ors. MANU/SC/0345/2011 :
(2011) 5 SCC 29:

65. What needs to be emphasised is that the State and/or its agencies/instrumentalities cannot give largesse
to any person according to the sweet will and whims of the political entities and/or officers of the State.
Every action/decision of the State and/or its agencies/instrumentalities to give largesse or confer benefit
must be founded on a sound, transparent, discernible and well-defined policy, which shall be made known to
6|Page
the public by publication in the Official Gazette and other recognised modes of publicity and such policy
must be implemented/executed by adopting a nondiscriminatory and non-arbitrary method irrespective of
the class or category of persons proposed to be benefited by the policy. The distribution of largesse like
allotment of land, grant of quota, permit licence, etc. by the State and its agencies/instrumentalities should
always be done in a fair and equitable manner and the element of favouritism or nepotism shall not influence
the exercise of discretion. if any, conferred upon the particular functionary or officer of the State.

66. We may add that there cannot be any policy, much less, a rational policy of allotting land on the basis of
applications made by individuals, bodies, organisations or institutions dehors an invitation or advertisement
by the State or its agency/instrumentality. By entertaining applications made by individuals, organisations or
institutions for allotment of land or for grant of any other type of largesse the State cannot exclude other
eligible persons from lodging competing claim. Any allotment of land or grant of other form of largesse by
the State or its agencies/instrumentalities by treating the exercise as a private venture is liable to be treated
as arbitrary, discriminatory and an act of favouritism and/or nepotism violating the soul of the equality
clause embodied in Article 14 of the Constitution.

67. This, however, does not mean that the State can never allot land to the institutions/organisations engaged
in educational, cultural, social or philanthropic activities or are rendering service to the society except by
way of auction. Nevertheless, it is necessary to observe that once a piece of land is earmarked or identified
for allotment to institutions/organisations engaged in any such activity, the actual exercise of allotment must
be done in a manner consistent with the doctrine of equality. The competent authority should, as a matter of
course, issue an advertisement incorporating therein the conditions of eligibility so as to enable all similarly
situated eligible persons, institutions/organisations to participate in the process of allotment, whether by way
of auction or otherwise. In a given case the Government may allot land at a fixed price but in that case also
allotment must be preceded by a wholesome exercise consistent with Article 14 of the Constitution.

Centre for Public Interest Litigation and Ors. vs. Union of India (UOI) and Ors. (02.02.2012 - SC) :
MANU/SC/0089/2012

The important questions which arise for consideration in these petitions, one of which has been filed by
Centre for Public Interest Litigation, a registered Society formed by Shri V.M. Tarkunde (former Judge of
this Court) for taking up causes of public interest and conducting public interest litigation in an organised
manner, Lok Satta, a registered Society dedicated to political governance, reforms and fight against
corruption, Telecom Watchdog and Common Cause, both Non-Governmental Organisations registered as
Societies for taking up issues of public importance and national interest, Sarva Shri J.M. Lingdoh, T.S.
Krishnamurthi and N. Gopalasamy, all former Chief Election Commissioners, P. Shanker, former Central
Vigilance Commissioner, Julio F. Ribero, former member of the Indian Police Service, who served as
Director General of Police, Gujarat, Punjab and C.R.P.F. and Commissioner of Police, Mumbai, P.R. Guha,
an eminent Senior Journalist and visiting faculty member of various institutions including IIMs, IITs, FTII,
IIFT, Delhi University, Jawaharlal Nehru University and Jamia Milia Islamia University and Admiral R.H.
Tahiliyani, former Chief of Naval Staff, former Governor and former Chairman of Transparency
International India and the other has been filed by Dr. Subramanian Swami, a political and social activist,
are:

7|Page
(i) 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?

(ii) Whether the recommendations made by the Telecom Regulatory Authority of India (TRAI) on 28.8.2007
for grant of Unified Access Service Licence (for short 'UAS Licence') with 2G spectrum in 800, 900 and
1800 MHz at the price fixed in 2001, which were approved by the Department of Telecommunications
(DoT), were contrary to the decision taken by the Council of Ministers on 31.10.2003?

(iii) Whether the exercise undertaken by the DoT from September 2007 to March 2008 for grant of UAS
Licences to the private Respondents in terms of the recommendations made by TRAI is vitiated due to
arbitrariness and malafides and is contrary to public interest?

(iv) Whether the policy of first-come-first-served followed by the DoT for grant of licences is ultra vires the
provisions of Article 14 of the Constitution and whether the said principle was arbitrarily changed by the
Minister of Communications and Information Technology (hereinafter referred to as 'the Minister of C&IT'),
without consulting TRAI, with a view to favour some of the applicants?

(v) Whether the licences granted to ineligible applicants and those who failed to fulfil the terms and
conditions of the licence are liable to be quashed?

When it was clearly demonstrated that policy framed by State or its agency/instrumentality and/or its
implementation was contrary to public interest or was violative of constitutional principles, then it was duty
of Court to exercise its jurisdiction in larger public interest and reject stock plea of State that scope of
judicial review should not be exceeded beyond recognised parameters - It became duty of Court to exercise
its power in larger public interest and ensure that institutional integrity was not compromised by those in
whom people had reposed trust and who had taken oath to discharge duties in accordance with Constitution
and law without fear or favour, affection or ill will and who, as any other citizen, enjoy fundamental rights
and, at same time, were bound to perform duties enumerated in Article 51A of Constitution - Licences
granted to private Respondents on or after 10th January, 2008 and subsequent allocation of spectrum
to licensees were declared illegal and were quashed - Petitions allowed

In Re: Special Reference No. 1 of 2012 (27.09.2012 - SC) : MANU/SC/0793/2012

8|Page
The Government of India has received various notices from companies based in other countries,
invoking bilateral investment agreements and seeking damages against the Union of India by reason
of the cancellation/threat of cancellation of the licenses.

AND WHEREAS in the circumstance certain questions of law of far reaching national and international
implications have arisen, including in relation to the conduct of the auction and the regulation of the
telecommunications industry in accordance with the Judgment and FDI into this country in the
telecom industry and otherwise in other sectors.

Given that the issues which have arisen are of great public importance, and that questions of law have arisen
of public importance and with such far reaching consequences for the development of the country that it is
expedient to obtain the opinion of the Hon'ble Supreme Court of India thereon.

NOW THEREFORE, in exercise of powers conferred upon me by clause (1) of Article 143 of the
Constitution of India, I, Pratibha Devisingh Patil, President of India, hereby refer the following questions to
the Supreme Court of India for consideration and report thereon, namely:
Q.1 Whether the only permissible method for disposal of all natural resources across all sectors and in all
circumstances is by the conduct of auctions?
Q.2 Whether a broad proposition of law that only the route of auctions can be resorted to for disposal of
natural resources does not run contrary to several judgments of the Supreme Court including those of Larger
Benches?
Q.3 Whether the enunciation of a broad principle, even though expressed as a matter of constitutional law,
does not really amount to formulation of a policy and has the effect of unsettling policy decisions formulated
and approaches taken by various successive governments over the years for valid considerations, including
lack of public resources and the need to resort to innovative and different approaches for the development of
various sectors of the economy?
Q.4 What is the permissible scope for interference by courts with policy making by the Government
including methods for disposal of natural resources?
Q.5 Whether, if the court holds, within the permissible scope of judicial review, that a policy is flawed, is
the court not obliged to take into account investments made under the said policy including investments
made by foreign investors under multilateral/bilateral agreements?
Q.6 If the answers to the aforesaid questions lead to an affirmation of the judgment dated 02.02.2012 then
the following questions may arise, viz.
(i) whether the judgment is required to be given retrospective effect so as to unsettle all licences issued and
2G spectrum (800, 900, and 1800 MHz bands) allocated in and after 1994 and prior to 10.01.2008?
(ii) whether the allocation of 2G spectrum in all circumstances and in all specific cases for different policy
considerations would nevertheless have to be undone?
And specifically
(iii) Whether the telecom licences granted in 1994 would be affected?

9|Page
(iv) Whether the Telecom licences granted by way of basic licences in 2001 and licences granted between
the period 2003-2007 would be affected?
(v) Whether it is open to the Government of India to take any action to alter the terms of any licence to
ensure a level playing field among all existing licensees?
(vi) Whether dual technology licences granted in 2007 and 2008 would be affected?
(vii) Whether it is necessary or obligatory for the Government of India to withdraw the Spectrum allocated
to all existing licensees or to charge for the same with retrospective effect and if so on what basis and from
what date?
Q.7 Whether, while taking action for conduct of auction in accordance with the orders of the Supreme Court,
it would remain permissible for the Government to:
(i) Make provision for allotment of Spectrum from time to time at the auction discovered price and in
accordance with laid down criteria during the period of validity of the auction determined price?
(ii) Impose a ceiling on the acquisition of Spectrum with the aim of avoiding the emergence of dominance in
the market by any licensee/applicant duly taking into consideration TRAI recommendations in this regard?
(iii) Make provision for allocation of Spectrum at auction related prices in accordance with laid down
criteria in bands where there may be inadequate or no competition (for e.g. there is expected to be a low
level of competition for CDMA in 800 MHz band and TRAI has recommended an equivalence ratio of 1.5
or 1.3X1.5 for 800 MHz and 900 MHz bands depending upon the quantum of spectrum held by the licensee
that can be applied to auction price in 1800 MHz band in the absence of a specific price for these bands)?
Q.8 What is the effect of the judgment on 3G Spectrum acquired by entities by auction whose licences have
been quashed by the said judgment?

Held:
The policy of allocation of natural resources for public good can be defined by the legislature, as has been
discussed in the foregoing paragraphs. Likewise, policy for allocation of natural resources may also be
determined by the executive. The parameters for determining the legality and constitutionality of the two are
exactly the same. In the aforesaid view of the matter, there can be no doubt about the conclusion recorded in
the "main opinion" that auction which is just one of the several price recovery mechanisms, cannot be held
to be the only constitutionally recognized method for alienation of natural resources. That should not be
understood to mean, that it can never be a valid method for disposal of natural resources (refer to paragraphs
10 to 12 of my instant opinion).

I would therefore conclude by stating that no part of the natural resource can be dissipated as a matter of
largess, charity, donation or endowment, for private exploitation. Each bit of natural resource expended must
bring back a reciprocal consideration. The consideration may be in the nature of earning revenue or may be
to "best subserve the common good". It may well be the amalgam of the two. There cannot be a dissipation
of material resources free of cost or at a consideration lower than their actual worth. One set of citizens
cannot prosper at the cost of another set of citizens, for that would not be fair or reasonable.

10 | P a g e
S.G. Jaisinghani v. Union of India and Ors. MANU/SC/0361/1967 : AIR 1967 SC 1427,
wherein this Court observed as under:

In this context it is important to emphasize that the absence of arbitrary power is the first essential of the rule
of law upon which our whole constitutional system is based. In a system governed by rule of law, discretion,
when conferred upon executive authorities, must be confined within clearly defined limits. The rule of law
from this point of view means that decisions should be made by the application of known principles and
rules and, in general, such decisions should be predictable and the citizen should know where he is.

Lucknow Development Authority v. M.K. Gupta MANU/SC/0178/1994 : (1994) 1 SCC 243.

Under our Constitution sovereignty vests in the people. Every limb of the constitutional machinery is
obliged to be people oriented. No functionary in exercise of statutory power can claim immunity, except to
the extent protected by the statute itself. Public authorities acting in violation of constitutional or statutory
provisions oppressively are accountable for their behaviour before authorities created under the statute like
the commission or the courts entrusted with responsibility of maintaining the rule of law.

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