Judgment sc-2012-9-311-514

A and outside the area of permissible considerations, it would amount to mala fide exercise of power and that is hit by Articles 14 and 16. Mala fide exercise of power and arbitrariness are different lethal radiations emanating from the same vice: in fact the latter comprehends the former. B Both are inhibited by Articles 14 and 16."

97Copy pinpoint97. Building upon his opinion delivered in Royappa's case (supra), Bhagwati, J., held in Maneka Gandhi Vs. Union of India & Anr. 39 :

C "The principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non- a rbitra ri ness pervades Article 14 like a brooding omnipresence and the procedure contemplated by Article 21 must answer the test of reasonableness in order to be D in conformity with Article 14. It must be "right and just and fair" and not arbitrary, fanciful or oppressive."

98Copy pinpoint98. In Ajay Hasia & Ors. Vs. Khalid Mujib Sehravardi & 40 Ors. , this Court said that the 'arbitrariness' test was lying E "latent and submerged" in the "simple but pregnant" form of Article 14 and explained the switch from the 'classification' doctrine to the 'arbitrariness' doctrine in the following words:

"16 ... The doctrine of classification which is evolved by the courts is not paraphrase of Article 14 nor is it the objective and end of that article. It is merely a judicial formula for determining whether the legislative or executive action in question is arbitrary and therefore constituting denial of equality. If the classification is not reasonable and does not satisfy the two conditions referred to above, the impugned legislative or executive action would plainly be arbitrary and the guarantee of equality under Article 14 would be breached. Wherever therefore there is arbitrariness in State action whether it be of the legislature

39. (1978) 1 sec 248.

H 40. (1981) 1 sec 722.

RE: SPECIAL REFERENCE N0.1 OF 2012 417 [D.K. JAIN, J.]

or of the executive or of an 'authority' under Article 12, A Article 14 immediately springs into action and strikes down such State action. In fact, the concept of reasonableness and non-arbitrariness pervades the entire constitutional scheme and is a golden thread which runs through the whole of the fabric of the Constitution." B

99Copy pinpoint99. Ramana Dayaram Shetty Vs. International Airport Authority of India & Ors. 41 explained the limitations of Article 14 on the functioning of the Government as follows: -

"12 ... 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 largesse, 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 largesse 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."

100Copy pinpoint100. Equality and arbitrariness were thus, declared "sworn enemies" and it was held that an arbitrary act would fall foul of the right to equality. Non-arbitrariness was equated with the rule of law about which Jeffrey Jowell in his seminal article "The Rule of Law Today" said: -

41. (1979) 3 sec 489: AIR 1979 SC 1628. H

p. 418 Copy page pinpoint

A "Rule of law principle primarily applies to the power of implementation. It mainly represents a state-of procedural fairness. When the rule of law is ignored by an official it may on occasion be enforced by courts."

101Copy pinpoint101. As is evident from the above, the expressions 8 'arbitrariness' and 'unreasonableness' have been used interchangeably and in fact, one has been defined in terms of the other. More recently, in Sharma Transport Vs. Government of A.P. & Ors. 42, this Court has observed thus:

C "25 ... ln order to be described as arbitrary, it must be shown that it was not reasonable and manifestly arbitrary. The expression "arbitrarily" means: in an unreasonable manner, as fixed or done capriciously or at pleasure, without adequate determining principle, not founded in the nature of things, non-rational, not done or acting according to reason or judgment, depending on the will alone."

102Copy pinpoint102. Further, even though the 'classification' doctrine was never overruled, it has found less favour with this Court as compared to the 'arbitrariness' doctrine. In Om Kumar & Ors. Vs. Union of lndia 43, this Court held thus:

"59. But, in E.P. Royappa v. State of T. N. Bhagwati, J laid down another test for purposes of Article 14. It was stated that if the administrative action was "arbitrary", it could be struck down under Article 14. This principle is now uniformly followed in all courts more rigorously than the one based on classification. Arbitrary action by the administrator is described as one that is irrational and not based on sound reason. It is also described as one that is unreasonable."

103Copy pinpoint103. However, this Court has also alerted against the arbitrary use of the 'arbitrariness' doctrine. Typically, laws are

42. c2002) 2 sec 188.

H 43. c2001) 2 sec 386.

RE: SPECIAL REFERENCE N0.1 OF 2012 419 [D.K. JAIN, J.]

struck down for violating Part Ill of the Constitution of India, A legislative incompetence or excessive delegation. However, since Royappa's case (supra), the doctrine has been loosely applied. This Court in State of A.P. & Ors. Vs. McDowell & Co. & Ors. 44 stressed on the need for an objective and scientific analysis of arbitrariness, especially while striking down legislations. Justice Jeevan Reddy observed:

"43 ... The power of Parliament or for that matter, the State Legislatures is restricted in two ways. A law made by Parliament or the legislature can be struck down by courts on two grounds and two grounds alone, viz., (1) lack of legislative competence and (2) violation of any of the fundamental rights guaranteed in Part Ill of the Constitution or of any other constitutional provision. There is no third ground. We do not wish to enter into a discussion of the concepts of procedural unreasonableness and substantive unreasonableness - concepts inspired by the decisions of United States Supreme Court. Even in U.S.A., these concepts and in particular the concept of substantive due process have proved to be of unending controversy, the latest thinking tending towards a severe curtailment of this ground (substantive due process). The main criticism against the ground of substantive due process being that it seeks to set up the courts as arbiters of the wisdom of the legislature in enacting the particular piece of legislation. It is enough for us to say that by whatever name it is characterised, the ground of invalidation must fall within the four corners of the two grounds mentioned above. In other words, say, if an enactment is challenged as violative of Article 14, it can be struck down only if it is found that it is violative of the equality clause/equal protection clause enshrined therein. Similarly, if an enactment is challenged as violative of any of the fundamental rights guaranteed by clauses (a) to (g) of Article 19(1 ), it can be struck down

44. (1996) 3 sec 709. H

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A only if it is found not saved by any of the clauses (s) to (6) of Article 19 and so on. No enactment can be struck down by just saying that it is arbitrary** or unreasonable. Some or other constitutional infirmity has to be found before invalidating an Act. An enactment cannot be struck down B on the ground that court thinks it unjustified. Parliament and the legislatures, composed as they are of the representatives of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them. The court cannot sit in judgment over their c wisdom. In this connection, it should be remembered that even in the case of administrative action, the scope of judicial review is limited to three grounds, viz., (i) unreasonableness, which can more appropriately be called irrationality, (ii) illegality and (iii) procedural impropriety (see Council of Civil Service Unions v. Minister D for Civil Service which decision has been accepted by this Court as well).

**An expression used widely and rather indiscriminately - an expression of inherently imprecise import. The E extensive use of this expression in India reminds one of what Frankfurter, J said in Hattie Mae Tiller v. Atlantic Coast Line Railroad Co., 87 L ED 610 : 318 US 54 (1943). "The phrase begins life as a literary expression; its felicity leads to its lazy repetition and repetition soon establishes it as a legal formula, undiscriminatingly used to express different and sometimes contradictory ideas", said the learned Judge."

104Copy pinpoint104. Therefore, ever since the Royappa era, the conception of 'arbitrariness' has not undergone any significant change. Some decisions have commented on the doctrinal looseness of the arbitrariness test and tried keeping its folds within permissible boundaries. For instance, cases where legislation or rules have been struck down as being arbitrary in the sense of being unreasonable (See: Air India Vs. Nergesh

RE: SPECIAL REFERENCE N0.1 OF 2012 421 [D.K. JAIN, J.] Meerza 45 (SCC at pp. 372-373)] only on the basis of A "arbitrariness", as explained above, have been doubted in McDowell's case (supra). But otherwise, the subject matter, content and tests for checking violation of Article 14 have remained, more or less, unaltered. B

105Copy pinpoint105. From a scrutiny of the trend of decisions it is clearly perceivable that the action of the State, whether it relates to distribution of largesse, grant of contracts or allotment of land, is to be tested on the touchstone of Article 14 of the Constitution. A law may not be struck down for being arbitrary without the pointing out of a constitutional infirmity as C McDowell's case (supra) has said. Therefore, a State action has to be tested for constitutional infirmities qua Article 14 of the Constitution. The action has to be fair, reasonable, non- discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy D competition and equitable treatment. It s.hould conform to the norms which are rational, informed with reasons and guided by public interest, etc. All these principles are inherent in the fundamental conception of Article 14. This is the mandate of Article 14 of the Constitution of India. E

WHETHER 'AUCTION' A CONSTITUTIONAL MANDATE:

106Copy pinpoint106. Such being the constitutional intent and effect of Article 14, the question arises - can auction as a method of disposal of natural resources be declared a constitutional mandate under Article 14 of the Constitution of India? We would unhesitatingly answer it in the negative since any other answer would be completely contrary to the scheme of Article

14. Firstly, Article 14 may imply positive and negative rights for an individual, but with respect to the State, it is only couched in negative terms; like an admonition against the State which prohibits the State from taking up actions that may be arbitrary, unreasonable, capricious or discriminatory. Article 14,

45. (1981) 4 sec 335. H

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A therefore, is an injunction to the State against taking certain type of actions rather than commanding it to take particular steps. Reading the mandate of auction into its scheme would thus, be completely contrary to the intent of the Article apparent from its plain language. B

107Copy pinpoint107. Secondly, a constitutional mandate is an absolute principle that has to be applied in all situations; it cannot be applied in some and not tested in others. The absolute principle is then applied on a case by case basis to see which actions fulfill the requirements of the constitutional principle and which C do not.

108Copy pinpoint108. Justice K. Subba Rao in his lectures compiled in a book titled "Some Constitutional Problems''. critically analyzing the trends of Indian constitutional development, stated as follows: D "If the Courts, instead of limiting the scope of the articles by construction, exercise their jurisdiction in appropriate cases, I have no doubt that the arbitrariness of the authorities will be minimised. If these authorities entrusted with the discretionary powers, realize that their illegal E orders infringing the rights of the people would be quashed by the appropriate authority, they would rarely pass orders in excess of their powers. If they knew that not only the form but the substance of the orders would be scrutinized in open court, they would try to keep within their bounds. The F fear of ventilation of grievance in public has always been an effective deterrent. The apprehension that the High Courts would be swamped with writs has no basis."

109Copy pinpoint109. Similar sentiments were expressed by Justice K. K. G Mathew in series of lectures incorporated in the form of a book titled "Democracy, Equality and Freedom" in which it is stated that "the strength of judicial review lies in case to case adjudication." This is precisely why this Court in His Holiness Kesavananda Bharti Sripadagalvaru Vs. State of Kera/a & H

RE: SPECIAL REFERENCE N0.1 OF 2012 423 [D.K. JAIN, J.]

Anr46 . quoting from an American decision, observed as follows: A

"1695 ... The reason why the expression "due process" has never been defined is that it embodies a concept of fairness which has to be decided with reference to the facts and circumstances of each case and also according 8 to the mores for the time being in force in a society to which the concept has to be applied. As Justice Frankfurter said, "due process" is not a technical conception with a fixed content unrelated to time, place and circumstances [See Joint Anti-Fascist Refugee C Committee v. McGrath 341 U.S. 123]".

110Copy pinpoint110. Equality, therefore, cannot be limited to mean only auction, without testing it in every scenario. In The State of West Bengal Vs. Anwar Ali Sarkar47 , this Court, quoting from Kotch Vs. Pilot Comm'rs48 , had held that "the constitutional command for a State to afford equal protection of the laws ·sets a goal not attainable by the invention and application of a precise formula. This Court has never attempted that impossible task". One cannot test the validity of a law with reference to the essential elements of ideal democracy, actually incorporated in the Constitution. (See: Indira Nehru Gandhi Vs. Raj Narain4 9 ). The Courts are not at liberty to declare a statute void; because in their opinion it is opposed to the spirit of the Constitution. Courts cannot declare a limitation or constitutional requirement under the notion of having discovered some ideal norm. Further, a constitutional principle must not be limited to a precise formula but ought to be an abstract principle applied to precise situations. The repercussion of holding auction as a constitutional mandate would be the voiding of every action that deviates from it, including social endeavours, welfare schemes G

46. (1973) 4 sec 225.

47. 1952 SCR 284 at pp. 297.

49. 1975 (Supp) sec 1. H

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A and promotional policies, even though CPIL itself has argued against the same, and asked for making auction mandatory only in the alienation of scarce natural resources meant for private and commercial business ventures. It would be odd to derive auction as a constitutional principle only for a limited set B of situations from the wide and generic declaration of Article

14. The strength of constitutional adjudication lies in case to case adjudication and therefore auction cannot be elevated to a constitutional mandate.

111Copy pinpoint111. Finally, reading auction as a constitutional mandate would be impermissible because such an approach may distort another constitutional principle embodied in Article 39(b). The said article enumerating certain principles of policy, to be followed by the State, reads as follows:

D "The State shall, in particular, direct its policy towards securing -

(b) that the ownership and control of the material E resources of the community are so distributed as best to subserve the common good;

F The disposal of natural resources is a facet of the use and distribution of such resources. Article 39(b) mandates that the ownership and control of natural resources should be so distributed so as to best subserve the common good. Article 37 provides that the provisions of Part IV shall not be G enforceable by any Court, but the principles laid down therein are nevertheless fundamental in the governance of the country and it shall be the duty of the State to cipply these principles in making laws.

112Copy pinpoint112. Therefore, this Article, in a sense, is a restriction on H 'distribution' built into the Constitution. But the restriction is

RE: SPECIAL REFERENCE N0.1 OF 2012 425 [O.K. JAIN, J.]

imposed on the object and not the means. The overarching and underlying principle governing 'distribution' is furtherance of common good. But for the achievement of that objective, the Constitution uses the generic word 'distribution'. Distribution has broad contours and cannot be limited to meaning only one method i.e. auction. It envisages all such methods available for distribution/allocation of natural resources which ultimately subserve the "common good".

113Copy pinpoint113. In State of Tamil Nadu & Ors. Vs. L. Abu Kavur Bai & Ors. 50, this Court explained the broad-based concept of C 'distribution' as follows:

"89 .... The word 'distribution' used in Article 39(b) must be broadly construed so that a court may give full and comprehensive effect to the statutory intent contained in Article 39 (b). A narrow construction of the word 0 'distribution' might defeat or frustrate the very object which the Article seeks to subserve ... "

114Copy pinpoint114. After noting definitions of 'distribution' from different dictionaries, this Court held: E "92. It is obvious, therefore, that in view of the vast range of transactions contemplated by the word 'distribution' as mentioned in the dictionaries referred to above, it will not be correct to construe the word 'distribution' in a purely literal sense so as to mean only division of a particular F kind or to particular persons. The words, apportionment, allotment, allocation, classification, clearly fall within the broad sweep of the word 'distribution'. So construed, the word 'distribution' as used in Article 39(b) will include various facets, aspects, methods and terminology of a G broad-based concept of distribution ... "

115Copy pinpoint115. It can thus, be seen from the afore-quoted paragraphs that the term "distribute" undoubtedly, has wide

50. (1984) 1 sec 515. H

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A amplitude and encompasses all manners and methods of distribution, which would include classes, industries, regions, private and public sections, etc. Having regard to the basic nature of Article 39(b}, a narrower concept of equality under Article 14 than that discussed above, may frustrate the broader concept of distribution, as conceived in Article 39(b). There cannot, therefore, be a cavil that "common good' and "larger public interests" have to be regarded as constitutional reality deserving actualization.

116Copy pinpoint116. Learned counsel for CPIL argued that revenue maximization during the sale or alienation of a natural resource for commercial exploitation is the only way of achieving public good since the revenue collected can be channelized to welfare policies and controlling the burgeoning deficit. According to the learned counsel, since the best way to maximize revenue is through the route of auction, it becomes a constitutional principle even under Article 39(b}. However, we are not persuaded to hold so. Auctions may be the best way of maximizing revenue but revenue maximization may not always be the best way to subserve public good. "Common good" is the sole guiding factor under Article 39(b} for distribution of natural resources. It is the touchstone of testing whether any policy subserves the "common good" and if it does, irrespective of the means adopted, it is clearly in accordance with the principle enshrined in Article 39(b). F

117Copy pinpoint117. In The State of Karnataka and Anr. Vs. Shri Ranganatha Reddy and Anr. 51 , Justice Krishna lysr observed that keeping in mind the purpose of an Article like 39(b), a broad rather than a narrow meaning should be given to the G words of that Article. In his inimitable style, his Lordship opined thus:

"83. Two conclusions strike us as quintessential. Part IV, especially Article 39(b} and (c), is a futuristic mandate to

H 51. (1977) 4 sec 471.

RE: SPECIAL REFERENCE N0.1 OF 2012 427 [D.K. JAIN, J.] the state with a message of transformation of the economic and social order. Firstly, such change calls for collaborative effort from all the legal institutions of the system: the legislature, the judiciary and the administrative machinery. Secondly and consequentially, loyalty to the high purpose of the Constitution, viz., social and economic justice in the context of material want and utter inequalities on a massive scale, compels the court to ascribe expansive meaning to the pregnant words used with hopeful foresight, not to circumscribe their connotation into contradiction of the objectives inspiring the provision. To c be Pharisaic towards the Constitution through ritualistic construction is to weaken the social-spiritual thrust of the founding fathers' dynamic faith."

118Copy pinpoint118. In the case of Bennett Coleman & Co. and Ors. Vs. Union of India and Ors52 ., it has been held by this Court that D "the only norm which the Constitution furnishes for distribution of material resources of the community is elastic norm of common good." Thus "common good" is a norm in Article 39(b) whose applicability was considered by this Court on the facts of the case. Even in that case, this Court did not evolve E· economic criteria of its own to achieve the goal of "common good" in Article 39(b), which is part of the Directive Principles.

119Copy pinpoint119. The norm of "common good" has to be understood and appreciated in a holistic manner. It is obvious that the manner in which the common good is best subserved is not a matter that can be measured by any constitutional yardstick - it would depend on the economic and political philosophy of the government. Revenue maximization is not the only way in which the common gooq can be subserved. Where revenue maximization is the object of a policy, being considered qua that resource at that point of time to be the best way to subserve the common good, auction would be one of the preferable methods, though not the only method. Where revenue s2. (1972) 2 sec 788. H

p. 428 Copy page pinpoint

A maximization is not the object of a policy of distribution, the question of auction would not arise. Revenue considerations may assume secondary consideration to developmental considerations.

120Copy pinpoint120. Therefore, in conclusion, the submission that the 8 mandate of Article 14 is that any disposal of a natural resource for commercial use must be for r>·venue maximization, and thus by auction, is based neither on law nor on logic. There is no constitutional imperative in ti1e matter of economic policies- Article 14 does not pre-define any economic policy as a C constitutional mandate. Even the mandate of 39(b) imposes no restrictions on the means adopted to subserve the public good and uses the broad term 'distribution', suggesting that the methodology of distribution is not fixed. Economic logic establishes that alienation/allocation of natural resources to the D highest bidder may not necessarily be the only way to subseNe the common good, and at times, may run counter to public good. Hence, it needs little emphasis that disposal of all natural resources through auctions is clearly not a constitutional mandate. E LEGITIMATE DEVIATIONS FROM AUCTION

121Copy pinpoint121. As a result, this Court has, on a number of occasions, delivered judgments directing means for disposal of natural resources other than auction for different resources in different F circumstances. It would be profitable to refer to a few cases and appreciate the reasons this Court has adopted for deviating from the method of auction.

122Copy pinpoint122. In M/s Kasturi Lal Lakshmi Reddy Vs. State of G Jammu & Kashmir & Anr. 53 , while comparing the efficacy of auction in promoting a domestic industry, P.N. Bhagwati, J. observed: -

"22 .... If the State were giving tapping contract simpliciter

H 53. (1980) 4 sec 1.

RE: SPECIAL REFERENCE N0.1 OF 2012 429 [D.K. JAIN, J.] there can be no doubt that the State would have to auction or invite tenders for securing the highest price, subject, of course, to any other relevant overriding considerations of public weal or interest, but in a case like this where the State is allocating resources such as water, power, raw materials etc. 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. The State may choose to do so, if it thinks fit and c in a given situation, it may even turn out to be advantageous for the State to do so, but if any private party comes before the State and offers to set up an industry, the State would not be committing breach of any 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, wee whether any other offers are forthcoming and then after considering all offers, decide whether I should let you set up the industry" ... The State must be free in such a case to negotiate with a private entrepreneur with a view to inducing him to set up an industry within the State and if the State enters into a contract with such entrepreneur for providing resources and other facilities for setting up an industry, the contract cannot be assailed as invalid so long as the State has acted bona fide, reasonably and in public interest. If the terms and conditions of the contract or the surrounding circumstances show that the State has acted mala fide or out of improper or corrupt motive or in order to promote the private interests of someone at the cost of the State, the court will undoubtedly interfere and strike down State action as arbitrary, unreasonable or contrary to public interest. But so long as the State action is bona fide and reasonable, the court will not interfere merely on H

p. 430 Copy page pinpoint

A the ground that no advertisement was given or publicity made or tenders invited."

123Copy pinpoint123. In Sachidanand Pandey (supra) after noticing Kasturi Lal's case (supra), it was concluded as under:

B "40. On a consideration of the relevant cases cited at the Bar the following propositions may be taken as well established: State-owned or public-owned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to be observed. C Public interest is the paramount consideration. One of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. Though that is the ordinary rule, it is not an invariable rule. There D may be situations where there are compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination. Appearance of public justice is as important as doing justice. Nothing should be done which gives an appearance of bias, jobbery or nepotism."

124Copy pinpoint124. In Haji T.M. Hassan Rawther Vs. Kera/a Financial Corpn. 54, after an exhaustive review of the law including the decisions in Kasturi Lal (supra) and Sachidanand Pandey (supra), it was held that public disposal of State owned properties is not the only rule. It was, inter-alia, observed that:

"14. The public property owned by the State or by any instrumentality of the State should be generally sold by public auction or by inviting tenders. This Court has been insisting upon that rule, not only to get the highest price for the property but also to ensure fairness in the activities of the State and public authorities. They should undoubtedly act fairly. Their actions should be legitimate. Their dealings

H 54. (1988) 1 sec 166.

RE: SPECIAL REFERENCE N0.1 OF 2012 431 [D.K. JAIN, J.]

should be aboveboard. Their transactions should be without aversion or affection. Nothing should be suggestive of discrimination. Nothing should be done by them which gives an impression of bias, favouritism or nepotism. Ordinarily these factors would be absent if the matter is brought to public auction or sale by tenders. That is why the court repeatedly stated and reiterated that the State- owned properties are required to be disposed of publicly. But that is not the only rule. As 0. Chinnappa Reddy, J. observed "that though that is the ordinary rule, it is not an invariable rule". There may be situations necessitating c departure from the rule, but then such instances must be justified by compulsions and not by compromise. It must be justified by compelling reasons and not by just convenience."

Here, the Court added to the previous decisions and said D that a blithe deviation from public disposal of resources would not be tolerable; such a deviation must be justified by compelling reasons and not by just convenience.

125Copy pinpoint125. In M.P. Oil Extraction and Anr. Vs. State of M.P. & E 55 Ors. , this Court held as follows:

"45. Although to ensure fair play and transparency in State action, distribution of largesse by inviting open tenders or by public auction is desirable, it cannot be held that in no case distribution of such largesse by negotiation is permissible. In the instant case, as a policy decision protective measure by entering into agreements with selected industrial units for assured supply of sal seeds at concessional rate has been taken by the Government. The rate of royalty has also been fixed on some accepted principle of pricing formula as will be indicated hereafter. Hence, distribution or allotment of sal seeds at the determined royalty to the respondents and other units

55. (1997) 1 sec 592. H

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A covered by the agreements cannot be assailed. It is to be appreciated that in this case. distribution by public auction or by open tender may not achieve the purpose of the policy of protective measure by way of supply of sal seeds at concessional rate of royalty to the industrial units covered by the agreements on being selected on valid and objective considerations."

126Copy pinpoint126. In Netai Bag & Ors. Vs. State of WB. & Ors. 56, this Court observed that non- floating of tenders or not holding of public auction would, not in all cases, be deemed to be the result of the exercise of the executive power in an arbitrary manner. It was stated:

"19 .... There cannot be any dispute with the proposition that generally when any State land is intended to be transferred or the State largesse decided to be conferred, resort should be had to public auction or transfer by way of inviting tenders from the people. That would be a sure method of guaranteeing compliance with the mandate of Article 14 of the Constitution. Non-floating of tenders or not holding of public auction would not in all cases be deemed to be the result of the exercise of the executive power in an arbitrary manner. Making an exception to the general rule could be justified by the State executive, if challenged in appropriate proceedings. The constitutional courts cannot be expected to presume the alleged irregularities, illegalities or unconstitutionality nor the courts can substitute their opinion for the bona fide opinion of the State executive. The courts are not concerned with the ultimate decision but only with the fairness of the decision- making process. G This Court once again pointed out that there can be exceptions from auction; the ultimate test is only that of fairness of the decision making process and compliance with Article 14 of the Constitution.

H 56. c2000) a sec 262.

RE: SPECIAL REFERENCE N0.1 OF 2012 433 [D.K. JAIN, J.]

127Copy pinpoint127. In M & T Consultants, Secunderabad Vs. S. Y. A Nawab 57 , this Court again reiterated that non- floating of tenders does not always lead to the conclusion that the exercise of the power is arbitrary:

"17. A careful and dispassionate assessment and 8 consideration of the materials placed on record does not leave any reasonable impression, on the peculiar facts and circumstances of this case, that anything obnoxious which requires either public criticism or condemnation by courts of law had taken place. It is by now well settled that non- floating of tenders or absence of public auction or invitation alone is no sufficient reason to castigate the move or an action of a public authority as either arbitrary or unreasonable or amounting to mala fide or improper exercise or improper abuse of power by the authority concerned. Courts have always leaned in favour of sufficient latitude being left with the authorities to adopt their own techniques of management of projects with concomitant economic expediencies depending upon the exigencies of a situation guided by appropriate financial policy in the best interests of the authority motivated by public interest as well in undertaking such ventures."

128Copy pinpoint128. In Villianur lyarkkai Padukappu Maiyam Vs. Union of India & Ors. 58, a three Judge Bench of this Court was concerned with the development of the Port of Pondicherry F where a contractor had been selected without floating a tender or holding public auction. It was held as under:

"164. The plea raised by the learned counsel for the appellants that the Government of Pondicherry was arbitrary and unreasonable in switching the whole public G tender process into a system of personal selection and, therefore, the appeals should be accepted, is devoid of

57. (2003) a sec 100.

58. (2009) 7 sec 561. H

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A merits. It is well settled that non-floating of tenders or not holding of public auction would not in all cases be deemed to be the result of the exercise of the executive power in an arbitrary manner.

171. In a case like this where the State is allocating B resources such as water, power, raw materials, etc. for the purpose of encouraging development of the port, this Court does not think that the State is bound to advertise and tell the people that it wants development of the port in a particular manner and invite those interested to come up c with proposals for the purpose. The State may choose to do so if it thinks fit and in a given situation it may turn out to be advantageous for the State to do so, but if any private party comes before the State and offers to develop the port, the State would not be committing breach of any constitutional obligation if it negotiates with such a party and agrees to provide resources and other facilities for the purpose of development of the port."

129Copy pinpoint129. Hence, it is manifest that there is no constitutional mandate in favour of auction under Article 14. The Government has repeatedly deviated from the course of auction and this Court has repeatedly upheld such actions. The judiciary tests such deviations on the limited scope of arbitrariness and fairness under Article 14 and its role is limited to that extent. F Essentially whenever the object of policy is anything but revenue maximization, the Executive is seen to adopt methods other than auction.

130Copy pinpoint130. A fortiori, besides legal logic, mandatory auction may be contrary to economic logic as well. Different resources may require different treatment. Very often, exploration and exploitation contracts are bundled together due to the requirement of heavy capital in the discovery of natural resources. A concern would risk undertaking such exploration and incur heavy costs only if it was assured utilization of the resource discovered; a prudent business venture, would not like

RE: SPECIAL REFERENCE N0.1 OF 2012 435 [D.K. JAIN, J.] to incur the high costs involved in exploration activities anu then compete for that resource in an open auction. The logic is similar to that applied in patents. Firms are given incentives to invest in research and development with the promise of exclusive access to the market for the sale of that invention. Such an approach is economically and legally sound and sometimes necessary to spur research and development. Similarly, bundling exploration and exploitation contracts may be necessary to spur growth in a specific industry.

131Copy pinpoint131. Similar deviation from auction cannot be ruled out when the object of a State policy is to promote domestic development of an industry, like in Kasturi Lal's case, discussed above. However, these examples are purely illustrative in order to demonstrate that auction cannot be the sole criteria for alienation of all natural resources. D POTENTIAL OF ABUSE

132Copy pinpoint132. It was also argued that even if the method of auction is not a mandate under Article 14, it must be the only permissible method, due to the susceptibility of other methods E to abuse. This argument, in our view, is contrary to an established position of law on the subject cemented through a catena of decisions.

133Copy pinpoint133. In R.K. Garg Vs. Union of India & Ors. 59, Justice P. N. Bhagwati, speaking for a Constitution Bench of five learned F Judges, held:

"8 .... The Court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many G problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry"; "that exact wisdom and nice adaption of remedy are not always

59. (1981) 4 sec 675. H

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A possible" and that "judgment is largely a prophecy based on meager and uninterpreted experience". Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot B provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States c Supreme Court in Secretary of Agriculture v. Central Reig Refining Company6° be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature Gan always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues." G

134Copy pinpoint134. Then again, in D. K. Trivedi & Sons & Ors. Vs. State of Gujarat & Ors. 61 , while upholding the constitutional validity

60. 94 L Ed 381 : 338 US 604 (1950).

H 61. (1986) Supp sec 20.

RE: SPECIAL REFERENCE N0.1 OF 2012 437 [D.K. JAIN, J.] of Section 15(1) of the MMRD Act, this Court explained the principle in the following words:

"50. Where a statute confers discretionary powers upon the executive or an administrative authority, the validity or constitutionality of such power cannot be judged on the assumption that the executive or such authority will act in an arbitrary manner in the exercise of the discretion conferred upon it. If the executive or the administrative authority acts in an arbitrary manner, its action would be bad in law and liable to be struck down by the courts but the possibility of abuse of power or arbitrary exercise of power cannot invalidate the statute conferring the power or the power which has been conferred by it."

135Copy pinpoint135. Therefore, a potential for abuse cannot be the basis for striking down a method as ultra vires the Constitution. It is the actual abuse itself that must be brought before the Court for being tested on the anvil of constitutional provisions. In fact, it may be said that even auction has a potential of abuse, like any other method of allocation, but that cannot be the basis of declaring it as an unconstitutional methodology either. These E drawbacks include cartelization, "winners curse" (the phenomenon by which a bidder bids a higher, unrealistic and unexecutable price just to surpass the competition; or where a bidder, in case of multiple auctions, bids for all the resources and ends up winning licenses for exploitation of more resources than he can pragmatically execute), etc. However, all the same, auction cannot be called ultra vires for the said reasons and continues to be an attractive and preferred means of disposal of natural resources especially when revenue maximization is a priority. Therefore, neither auction, nor any other method of disposal can be held ultra vires the Constitution, merely because of a potential abuse.

JUDICIAL REVIEW OF POLICY DECISIONS

136Copy pinpoint136. The learned Attorney General also argued that H

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A dictating a method of distribution for natural resources violates the age old established principle of non-interference by the judiciary in policy matters. Even though the contours of the power of judicial review of policy decisions has become a trite subject, as the Courts have repeatedly delivered opinions on B it, we wish to reiterate some of the principles in brief, especially with regard to economic policy choices and pricing.

137Copy pinpoint137. One of the earliest pronouncements on the subject came from this Court in Rustom Cavasjee Cooper Vs. Union of lndia 62 (commonly known as "Bank Nationalization Case") C wherein this Court held that it is not the forum where conflicting policy claims may be debated; it is only required to adjudicate the legality of a measure which has little to do with relative merits of different political and economic theories. The Court observed: D "63. This Court is not the forum in which these conflicting claims may be debated. Whether there is a genuine need for banking facility in the rural sector, whether certain classes of the community are deprived of the benefit of the resources of the banking industry, whether administration by the Government of the commercial banking sector will not prove beneficial to the community and will lead to rigidity in the administration, whether the Government administration will eschew the profit-motive, and even if it be eschewed, there will accrue substantial benefits to the public, whether an undue accent on banking as a means of social regeneration, especially in the backw~rd areas, is a doctrinaire approach to a rational order of priorities for attaining the national objectives enshrined in our Constitution, and whether the policy followed by the G Government in office or the policy propounded by its opponents may reasonably attain the national objectives are matters which have little relevance in determining the legality of the measure. It is again not for this Court to

H 62. (1970) 1 sec 248.

RE: SPECIAL REFERENCE N0.1 OF 2012 439 [D.K. JAIN, J.] consider the relative merits of the different political theories A or economic policies. The Parliament has under Entry 45, List I the power to legislate in respect of banking and other commercial activities of the named banks necessarily incidental thereto: it has the power to legislate for acquiring the undertaking of the named banks under Entry 42, List B Ill. Whether by the exercise of the power vested in the Reserve Bank under the pre-existing laws, results could be achieved which it is the object of the Act to achieve, is, in our judgment, not relevant in considering whether the Act amounts to abuse of legislative power. This Court has the c power to strike down a law on the ground of want of authority, but the Court will not sit in appeal over the policy of the Parliament in enacting a law. The Court cannot find fault with the Act merely on the ground that it is inadvisable to take over the undertaking of banks which, it is said by 0 the petitioner, by thrift and efficient management had set up an impressive and efficient business organization serving large sectors of industry."

138Copy pinpoint138. In R.K. Garg (supra), this Court even observed that greater judicial deference must be shown towards a law relating E. to economic activities due to the complexity of economic problems and their fulfillment through a methodology of trial and error. As noted above, it was also clarified that the fact that an economic legislation may be troubled by crudities, inequities, uncertainties or the possibility of abuse cannot be the basis for striking it down. The following observations which refer to a couple of American Supreme Court decisions are a limpid enunciation on the subject :

"8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with H

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A complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to B be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than c in Morey v. Doud63 where Frankfurter, J., said in his inimitable style:

'In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The D legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the E experts, and the number of times the judges have been overruled by events - self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability' ... "

139Copy pinpoint139. In Premium Granites & Anr. Vs. State of TN. & Ors. 64 this Court clarified that it is the validity of a law and not its efficacy that can be challenged:

"54. It is not the domain of the court to embark upon unchartered ocean of public policy in an exercise to G consider as to whether a particular public policy is wise or a better public policy can be evolved. Such exercise must be left to the discretion of the executive and

H 64. (1994) 2 sec 691.

RE: SPECIAL REFERENCE N0.1 OF 2012 441 [D.K. JAIN, J.] legislative authorities as the case may be. The court is A called upon to consider the validity of a public policy only when a challenge is made that such policy decision infringes fundamental rights guaranteed by the Constitution of India or any other statutory right..." B

140Copy pinpoint140. In Delhi Science Forum & Ors. Vs. Union oflndia & 5 Anfl . a Bench of three learned Judges of this Court, while rejecting a claim against the opening up of the telecom sector reiterated that the forum for debate and discourse over the merits and demerits of a policy is the Parliament. It restated that the services of this Court are not sought till the legality of C the policy is disputed, and further, that no direction can be given or be expected from the courts, unless while implementing such policies, there is violation or infringement of any of the constitutional or statutory provisions. It held thus: D "7. What has been said in respect of legislations is applicable even in respect of policies which have been adopted by Parliament. They cannot be tested in Court of Law. The courts cannot express their opinion as to whether at a particular juncture or under a particular situation E prevailing in the country any such national policy should have been adopted or not. There may be views and views, opinions and opinions which may be shared and believed by citizens of the country including the representatives of the people in Parliament. But that has to be sorted out in F Parliament which has to approve such policies ... "

141Copy pinpoint141. In BALCO Employees' Union (Regd.) Vs. Union of India & Ors. 66 , this Court further pointed out that the Court ought to stay away from judicial review of efficacy of policy matters, not only because the same is beyond its jurisdiction, but also G because it lacks the necessary expertise required for such a task. Affirming the previous views of this Court, the Court

65. (1996) 2 sec 405.

66. (2002) 2 sec 333. H

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A observed that while dealing with economic legislations, the Courts, while not jettisoning its jurisdiction to curb arbitrary action or unconstitutional legislation, should interfere only in those cases where the view reflected in the legislation is not possible to be taken at all. The Court went on to emphasize 8 that unless the economic decision, based on economic expediencies, is demonstrated to be so violative of constitutional or legal limits on power or so abhorrent to reason, that the courts would decline to interfere.

142Copy pinpoint142. In BALCO (supra), the Court took notice of the judgment in Peerless General Finance and Investment Co. Ltd. & Anr. Vs. Reserve Bank of lndia 67 and observed that some matters like price fixation are based on such uncertainties and dynamics that even experts face difficulty in making correct projections, making it all the more necessary for this Court to exercise non- interference:

"31. The function of the Court is to see that lawful authority is not abused but not to appropriate to itself the task entrusted to that authority. It is well settled that a public body invested with statutory powers must take care not to exceed or abuse its power. It must keep within the limits of the authority committed to it. It must act in good faith and it must act reasonably. Courts are not to interfere with economic policy which is the function of experts. It is not the function of the courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts."

143Copy pinpoint143. In an earlier case in M/s Prag Ice & Oil Mills & Anr. Vs. Union of lndia68 , this Court had observed as under: (SCC p. 478, Para 24)

67. (1992) 2 sec 343.

H 68. [19781 3 sec 459.

RE: SPECIAL REFERENCE. N0.1 OF 2012 443 [D.K. JAIN, J.]

"We do not think that it is the function of this Court or of any court to sit in judgment over such matters of economic policy as must necessarily be left to the government of the day to decide. Many of them, as a measure of price fixation must necessarily be, are matters of prediction of ultimate results on which even experts can seriously err and doubtlessly by differ. Courts can certainly not be expected to decide them without even the aid of experts."

144Copy pinpoint144. In State of Madhya Pradesh Vs. Narmada Bachao Ando/an & Anr. 69 , this Court said that the judiciary cannot engage in an exercise of comparative analysis over the fairness, logical or scientific basis, or wisdom of a policy. It held that the Court cannot strike down a policy decision taken by the Government merely because it feels that another decision would have been fairer, or more scientific or logical, or wiser. The wisdom and advisability of the policies are ordinarily not amenable to judicial review unless the policies are contrary to statutory or constitutional provisions or arbitrary or irrational or an abuse of power.

145Copy pinpoint145. Mr. Subramanian Swamy also brought to our notice E a Report on Allocation of Natural Resources, prepared by a Committee, chaired by Mr. Ashok Chawla (hereinafter referred to as the "Chawla Committee Report"), which has produced a copious conceptual framework for the Government of India on the allocation and pricing of scarce natural resources viz. coal, minerals, petroleum, natural gas, spectrum, forests, land and water. He averred to observations of the report in favour of auction as a means of disposal. However, since the opinion rendered in the Chawla Committee Report is pending acceptance by the Government, it would be inappropriate for us to place judicial reliance on it. Besides, the Report conducts an economic, and not legal, analysis of the means of disposal of natural resources. The purpose of this Reference would be

69. (2011) 7 sec 639. H

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A best served if this Court gave a constitutional answer rather than economic one.

146Copy pinpoint146. To summarize in the context of the present Reference, it needs to be emphasized that this Court cannot conduct a comparative study of the various methods of 8 distribution of natural resources and suggest the most efficacious mode, if there is one universal efficacious method in the first place. It respects the mandate and wisdom of the executive for such matters. The methodology pertaining to disposal of natural resources is clearly an economic policy. It entails intricate economic choices and the Court lacks the necessary expertise to make them. As has been repeatedly said, it cannot, and shall not, be the endeavour of this Court to evaluate the efficacy of auction vis-a-vis other methods of disposal of natural resources. The Court cannot mandate one method to be followed in all facts and circumstances. Therefore, auction, an economic choice of disposal of natural resources, is not a constitutional mandate. We may, however, hasten to add that the Court can test the legality and constitutionality of these methods. When questioned, the Courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are ultra vires and intra vires the provisions of the Constitution. Nevertheless, it cannot and will not compare which policy is fairer than the other, but, if a policy or law is patently unfair to the extent that it falls foul of the fairness requirement of Article 14 of the Constitution, the Court would not hesitate in striking it down.

147Copy pinpoint147. Finally, market price, in economics, is an index of the value that a market prescribes to a good. However, this valuation is a function of several dynamic variables; it is a science and not a law. Auction is just one of the several price discovery mechanisms. Since multiple variables are involved in such valuations, auction or any other form of competitive bidding, cannot constitute even an economic mandate, much less a constitutional mandate. H

RE: SPECIAL REFERENCE N0.1 OF 2012 445 [D.K. JAIN, J.]

148Copy pinpoint148. In our opinion, auction despite being a more A preferable method of alienation/allotment of natural resources, cannot be held to be a constitutional requirement or limitation for alienation of all natural resources and therefore, every method other than auction cannot be struck down as ultra-vires the constitutional mandate. B

149Copy pinpoint149. Regard being had to the aforesaid precepts, we have opined that auction as a mode cannot be conferred the status of a constitutional principle. Alienation of natural resources is a policy decision, and the means adopted for the same are C thus, executive prerogatives. However, when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximizing private entrepreneurs, adoption of means other than those that are competitive and maximize revenue may be arbitrary and face the wrath of Article D 14 of the Constitution. Hence, rather than prescribing or proscribing a method, we believe, a judicial scrutiny of methods of disposal of natural resources should depend on the facts and circumstances of each case, in consonance with the principles which we have culled out above. Failing which, the Court, in exercise of power of judicial review, shall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution.

150Copy pinpoint150. In conclusion, our answer to the first set of five questions is that auctions are not the only permissible method for disposal of all natural resources across all sectors and in all circumstances.

151Copy pinpoint151. As regards the remaining questions, we feel that answer to these questions would have a direct bearing on the mode of alienation of Spectrum and therefore, in light of the statement by the learned Attorney General that the Government is not questioning the correctness of judgment in the 2G Case, H

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A we respectfully decline to answer these questions. The Presidential Reference is answered accordingly.

152Copy pinpoint152. This opinion shall be transmitted to the President in accordance with the procedure prescribed in Part V of the 8 Supreme Court Rules, 1966.

JAGDISH SINGH KHEHAR, J. 1. I have had the privilege of perusing the opinion rendered by my esteemed brother, D.K. Jain, J. Every bit of the opinion (which shall hereinafter be referred to by me, as the "main opinion") is based on settled propositions of law declared by this Court. There can, therefore, be no question of any disagreement therewith. I fully endorse the opinion expressed therein.

2. The first question posed in the Presidential reference, is in fact the reason, for my having to record, some other nuances on the subject whereof advice has been sought. The first question in the Presidential reference requires the Supreme Court to tender advice on, "Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances, is by the conduct of auctions?". It is of utmost importance to understand, the tenor of the first question in the Presidential reference. Take for instance a hypothetical situation where, the legality of 100 instances of disposal of different types of natural resources is taken up for consideration. If the first question is taken in its literal sense, as to whether the method of disposal of all natural resources in all circumstances is by auction alone, then, even if 99 out of the aforesaid 100 different natural resources are such, which can only be disposed of by way of auction, the answer to the first question would still be in the negative. This answer in the negative would give the erroneous impression, that it is not necessary to dispose of natural resources by way of auction. Surely, the Presidential reference has not been made, to seek such an innocuous advice. The instant reference ·H has been made despite the Central Government being alive to

RE: SPECIAL REFERENCE N0.1 OF 2012 447 [JAGDISH SINGH KHEHAR, J.] the fact, that there are natural resources which can only be A disposed of by way of auction. A mining lease for coal under Section 11A of the Mines and Minerals (Development and Regulation) Act, 1957 can be granted, only by way of selection u.rough auction by competitive bidding. Furthermore, the learned Attorney General for India informed us, about a B conscious decision having been taken by the Central Government to henceforth allot spectrum only through competitive bidding by way of auction. Such instances can be multiplied. It is therefore obvious, that Government is alive to the fact, that disposal of some natural resources have to be c made only by auction. If that is so, the first question in the reference does not seek a literal response. The first question must be understood to seek this Court's opinion on whether there are circumstances in which natural resources ought to be disposed of only by auction. Tendering an opinion, without a D response to this facet of the matter, would not make the seeker of advice, any wiser. It is this aspect alone, which wiH be the main subject of focus of my instant opinion.

3. Before venturing into the area of consideration expressed in the foregoing paragraph, it is necessary to record, E that there was extensive debate during the course of hearing, on whether, maximization of revenue must be the sole permissible consideration, for disposal of all natural resources, across all sectors and in all circumstances. During the course of this debate, the learned Attorney General for India F acknowledged, that auction by way of competitive bidding, was certainly an indisputable means, by which maximization of revenue returns is assured. It is not as if, one would like to bind the learned Attorney General to the acquiesced proposition. During the course of the days and weeks of erudite debate, G learned counsel emphasized, that disposal of assets by processes of tender, tender-cum-auction and auction, could assure maximization of revenue returns. Of course, there are a large variety of tender and auction processes, each one with its own nuances. And we were informed, that a rightful choice, H

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A would assure maximization of revenue returns. The term "auction" expressed in my instant opinion, may therefore be read as a means to maximize revenue returns, irrespective of whether the means adopted should technically and correctly be described as tender, tender-cum-auction, or auction. B

4. The concept of equality before the law and equal protection of the laws, emerges from the fundamental right expressed in Article 14 of the Constitution of India. Equality is a definite concept. The variation in its understanding may at best have reference to the maturity and evolution of the nation's thought. To start with, breach of equality was a plea advanced by individuals claiming fair treatment. Challenges were raised also on account of discriminatory treatment. Equality was sought by those more meritorious, when benefits were bestowed on those with lesser caliber. Gradually, judicial intervention came to be sought for equitable treatment, even for a section of the society put together. A jurisdiction, which in due course, came to be described as public interest litigation. It all started with a demand for the basic rights for respectable human existence. Over the years, the concept of determination of societal rights, has traversed into different directions and avenues. So much so, that now rights in equity, sometimes even present situations of conflict between individual rights and societal rights. The present adjudication can be stated to be a dispute of such nature. In a maturing society, individual rights and plural rights have to be balanced, so that the oscillating pendulum of rights, fairly and equally, recognizes their respective parameters. For a country like India, the pendulum must be understood to balance the rights of one citizen on the one side, and 124, 14,91,960 (the present estimated population of India) G citizens of the country on the other. The true effect of the Article 14 of the Constitution of India is to provide equality before the law and equal protection of the laws not only with reference to individual rights, but also by ensurinQ that its citizens on the other side of the balance are likewise not deprived of their right to equality before the law, and their right to equal protection of

RE: SPECIAL REFERENCE N0.1 OF 2012 449 [JAGDISH SINGH KHEHAR, J.]

the laws. An individual citizen cannot be a beneficiary, at the cost of the country (the remaining 124, 14,91,960 citizens) i.e., the plurality. Enriching one at the cost of all others would amount to deprivation to the plurality i.e., the nation itself. The gist of the first question in the Presidential reference, raises the issue whether ownership rights over the nation's natural resources, vest in the citizens of the country. An answer to the instant issue in turn would determine, whether or not it is imperative for the executive while formulating a policy for the disposal of natural resources, to ensure that it subserves public good and public interest. c

5. The introduction and acceptance of public interest litigation as a jurisprudential concept is a matter of extensive debate in India, and even more than that, outside India. This concept brings into focus the rights of the plurality (as against individual's right) specially when the plurality is, for one or the other reason, not in a position to seek redressal of its grievances. This inadequacy may not always emerge from financial constrains. It may sometimes arise out of lack of awareness. At other times merely from the overwhelming might of executive authority. The jurisprudential thought in this country, after the emergence of public interest litigation, is seeking to strike a balance between individual rights and the rights of the plurality. After all, all natural resources are the nation's collective wealth. This Court has had the occasion over the last few decades, to determine rights of citizens with reference to natural resources. The right of an individual citizen to those assets, as also, the rights of the remaining citizens of the country, have now emerged on opposite sides in a common litigation. One will endeavour to delineate the legal position expressed in decisions rendered by this Court, on issues relatable to disposal of resources by the State, to determine whether the instant issue stands settled, by law declared by this Court.

6(a) First of all reference was made to the decision of this Court in S.G. Jaisinghani Vs. Union of India & Ors., AIR 1967 H

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A SC 1427, wherein this Court observed as under:

"14. 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, B 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 c citizen should know where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis of a decision taken in accordance with the Rule of law. (See Dicey - Law of the Constitution - 10th Edn., Introduction ex). "Law has reached its finest moments," stated Douglas, J. in United States v. Wunderlich, (1951) 342 US 98, ''when it has freed man from the unlimited discretion of some ruler .... Where discretion, is absolute, man has always suffered." It is in this sense that the rule of law may be said to be the sworn enemy of caprice. Discretion, as Lord Mansfield slated it in classic terms in the case of John Wilkes, (1770) 4 Burr 2528 at p. 2539 "means sound discretion guided by law. It must be governed by Rule, not by humour: it must not be arbitrary, vague, and fanciful." F (emphasis is mine)

In the aforesaid case, it came to be emphasized that executive action should have clearly defined limit~ and should be predictable. In other words, the man on the street should G know why the decision has been taken in favour of a particular party. What came to be impressed upon was, that lack of transparency in the decision making process would render it arbitrary.

H (b) Also cited for our consideration was the judgment in

RE: SPECIAL REFERENCE N0.1 OF 2012 451 [JAGDISH SINGH KHEHAR, J.] Rashbihari Panda etc. Vs. State of Orissa (1969) 1 SCC 414. A In this case it was canvassed on behalf of the appellants, that the machinery devised by the Government for sale of Kendu leaves in which they had acquired a trade monopoly, was violative of the fundamental rights guaranteed under Articles 14 and 19(1 )(g) of the Constitution. It was pointed out, that in the B scheme of events the purchasers were merely nominees of the agents. It is also contended, that after the Supreme Court had struck down the policy under which the agents were to carry on business in Kendu leaves on their own and to make profit for themselves, the Government to help their party-men set up a c body of persons who were to be purchasers to whom the monopoly sales were to be made at concessional rates and that the benefit which would have otherwise been earned by the State would now get diverted to those purchasers. It was held:

"15. Section 10 of the Act is a counterpart of Section 3 D and authorises the Government to sell or otherwise dispose of Kendu leaves in such manner as the Government may direct. If the monopoly of purchasing Kendu leaves by Section 3 is valid, insofar as it is intended to be administered only for the benefit of the State, the sale or disposal of Kendu leaves by the Government must also be in the public interest and not to serve the private interest of any person or class of persons. It is true that it is for the Government, having regard to all the circumstances, to act as a prudent businessman would, and to sell or otherwise dispose of Kendu /eaves purchased under the monopoly acquired under Section 3, but the profit resulting from the sale must be for the public benefit and not for private gain. Section 11 which provides that out of the net profits derived by the Government from the trade in Kendu leaves ari amount not less than one half is to be paid to the Samitis and Gram Panchayats emphasises the concept that the machinery of sale or disposal of Kendu leaves must also be quashed to serve the public interest. If the scheme of disposal creates a class of middlemen H

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A who would purchase from the Government Kendu leaves at concessional rates and would earn large profits disproportionate to the nature of the service rendered or duty performed by them, it cannot claim the protection of Article 19(6)(ii). B

16. Section 10 leaves the method of sale or disposal of Kendu leaves to the Government as they think fit. The action of the Government if conceived and executed in the interest of the general public is not open to judicial scrutiny. But it is not given to the Government thereby to c create a monopoly in favour of third parties from their own monopoly.

17. Validity of the schemes adopted by the Government of Orissa for sale of Kendu leaves must be adjudged in the light of Article 19(1)(g) and Article 14. Instead of inviting tenders the Government offered to certain old contractors the option to purchase Kendu leaves for the year 1968 on terms mentioned therein. The reason suggested by the Government that these offers were made because the purchasers had carried out their obligations in the previous year to the satisfaction of the Government is not of any significance. From the affidavit filed by the State Government it appears that the price fetched at public auctions before and after January 1968, were much higher than the prices at which Kendu leaves were offered to the old contractors. The Government realised that the scheme of offering to enter into contracts with the old licensees and to renew their terms was open to grave objection, since it sought arbitrarily to· exclude many persons interested in the trade. The Government then decided to invite offers for advance purchases of Kendu leaves but restricted the invitation to those individuals who had carried out the contracts in the previous year without default and to the satisfaction of the Government. By the new scheme instead of the Government making an offer, H

RE: SPECIAL REFERENCE N0.1 OF 2012 453 [JAGDISH SINGH KHEHAR, J.] the existing contractors were given the exclusive right to A make offers to purchase Kendu leaves. But insofar as the right to make tenders for the purchase of Kendu leaves was restricted to those persons who had obtained contracts in the previous year the scheme was open to the same objection. The right to make offers being open to B a limited class of persons it effectively shut out all other persons carrying on trade in Kendu leaves and also new entrants into that business. It was ex facie discriminatory, and imposed unreasonable restrictions upon the right of persons other than existing contractors to carry on c business. In our view, both the schemes evolved by the Government were violative of the fundamental right of the petitioners under Article 19(1)(g) and Article 14 because the schemes gave rise to a monopoly in the trade in Kendu leaves to certain traders, and singled out other 0 traders for discriminatory treatment.

18. The classification based on the circumstance that certain existing contractors had carried out their obligations in the previous year regularly and to the satisfaction of the Government is not based on any real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved i.e. effective execution of the monopoly in the public interest. Exclusion of all persons interested in the trade, who were not in the previous year licensees is ex facie arbitrary, it had no direct relation to the object of preventing exploitation of pluckers and growers of Kendu leaves, nor had it any just or reasonable relation to the securing of the full benefit from the trade to the State. G

19. Validity of the Jaw by which the State assumed the monopoly to trade in a given commodity has to be judged by the test whether the entire benefit arising therefrom is to enure to the State, and the monopoly is not used as a cloak for conferring private benefit upon a limited class H

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A of persons. The scheme adopted by the Government first of offering to enter into contracts with certain named licensees, and later inviting tenders from licensees who had in the previous year carried out their contracts satisfactorily is liable to be adjudged void on the ground B that it unreasonably excludes traders in Kendu leaves from carrying on their business. The scheme of selling Kendu leaves to selected purchasers or of accepting tenders only from a specified class of purchasers was not "integrally and essentially" connected with the creation of the c monopoly and was not on the view taken by this Court in Akadasi Padhan case, (1963) Supp. 2 SCC 691, protected by Article 19(6)(ii): it had therefore to satisfy the requirement of reasonableness under the first part of Article 19(6). No attempt was made to support the scheme on the ground that it imposed reasonable restrictions on D the fundamental rights of the traders to carry on business in Kendu leaves. The High Court also did not consider whether the restrictions imposed upon persons excluded from the benefit of trading satisfied the test of reasonableness under the first part of Article 19(6). The E High Court examined the problem from the angle whether the action of the State Government was vitiated on account of any oblique motive, and whether it was such as a prudent person carrying on business may adopt.

F 20. No explanation has been attempted on behalf of the State as to why an offer made by a well known manufacturer of bidis interested in the trade to purchase the entire crop of Kendu leaves for the year 1968 for rupees three crores was turned down. If the interests of G the State alone were to be taken into consideration, the State stood to gain more than rupees one crore by accepting that offer. We are not suggesting that merely because that offer was made, the Government was bound to accept it. The Government had to consider, as prudent businessman, whether, having regard to the H

RE: SPECIAL REFERENCE N0.1 OF 2012 455 [JAGDISH SINGH KHEHAR, J.]

circumstances, it should accept the offer, especially in the A lioht of the financial position of the offeror, the security which he was willing to give and the effect which the acceptance of the offer may have on the other traders and the general public interest. B

21. The learned Judges of the High Court have observed that in their view the exercise of the discretion was not shown to be arbitrary, nor was the action shown to be lacking in bona tides. But that conclusion is open to criticism that the Government is not shown to have considered the prevailing prices of Kendu leaves about the time when offers were made, the estimated crop of Kendu leaves, the conditions in the market and the likelihood of offerers at higher prices carrying out their obligations, and whether it was in the interests of the State to invite tenders in the open market from all persons whether they had or had not taken contracts in the previous year. If the Government was anxious to ensure due performance by those who submitted tenders for purchase of Kendu leaves, it was open to the Government to devise adequate safeguards in that behalf. In our judgment, the plea that the action of the Government was bona fide cannot be an effective answer to a claim made by a citizen that his fundamental rights were infringed by the action of the Government, nor can the claim of the petitioners be defeated on the plea that the Government F in adopting the impugned scheme committed an error of judgment.

22. That plea would have assisted the Government if the action was in law valid and the objection was that the G Government erred in the exercise of its discretion. It is unnecessary in the circumstances to consider whether the Government acted in the interest of their party-men and to increase party funds in devising the schemes for sale of Kendu leaves in 1968. H

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A 23. During the pendency of these proceedings the entire year for which the contracts were given has expired. The persons to whom the contracts were given are not before us, and we cannot declare the contracts which had been entered into by the Government for the sale of Kendu B leaves for the year 1968 unlawful in these proceedings. Counsel for the appellants agrees that it would be sufficient if it be directed that the tenders for purchase of Kendu leaves be invited by the Government in the next season from all persons interested in the trade. We trust c that in accepting tenders, the State Government will act in the interest of the general public and not of any class of traders so that in the next season the State may get the entire benefit of the monopoly in the trade in Kendu leaves and no disproportionate share thereof may be diverted to any private agency. Subject to these D observations we make no further order in the petitions out of which these appeals arise."

(emphasis is mine)

E A perusal of the observations made by this Court reveal, that the Government must act as a prudent businessman, and that, the profit earned should be for public benefit and not for private gains. A plea of reasonable restriction raised under Article 19(6) of the Constitution of India to save the governmental action was rejected on the ground that the scheme created middlemen who would earn large disproportionate profits. This Court also held the action to be discriminatory because it excluded others like the petitioners from the zone of consideration. Finally, a direction came to be issued by this Court requiring the Government to act in the interest of the general public and to invite tenders so that the State may earn the entire benefit in a manner that no disproportionate profits are diverted to any private agency.

(c) Reliance was also placed on Ramana Dayaram Sheffy H

RE: SPECIAL REFERENCE N0.1 OF 2012 457 [JAGDISH SINGH KHEHAR, J.] Vs. International Airport Authority of India & Ors., (1979) 3 A sec 489, wherein this Court held as under:

"21. This rule also flows directly from the doctrine of equality embodied in Article 14. It is now well-settled as a result of the decisions of this Court in E.P. Royappa v. 8 State of Tamil Nadu, (1974) 4 SCC 3, and Maneka Gandhi v. Union of India, (1978) 1 SCC 248, that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non- discriminatory: it must not be guided by any extraneous or irrelevant considerations, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discrfminatory. This principle was recognised and applied by a Bench of this Court presided over by Ray, C.J., in Erusian Equipment and Chemicals Ltd. v. State of West Bengal (supra) where the learned F Chief Justice pointed out that-

"the State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by G the State is subject to Part Ill of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there H

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A the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity B in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting .... A citizen has a right to claim equal treatment to enter into a c ccntract which may be proper, necessary and essential to his lawful calling .... It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods". D It must, therefore follow as a necessary corollary from the principle of equality enshrined in Article 14 that though the State is entitled to refuse to enter into relationship with any one, yet if it does so, it cannot arbitrarily choose any person it likes for entering into such relationship and discriminate between persons similarly circumstanced, but it must act in conformity with some standard or principle which meets the test of reasonableness and non-discrimination and any departure from such standard or principle would be invalid unless it can be supported or justified on some rational and non discriminatory ground.

22. It is interesting to find that this rule was recognised and applied by a Constitution Bench of this Court in a case of sale of kendu leaves by the Government of Orissa in Rashbihari Panda v. State of Orissa, (1969) 1 SCC 414 ..... This decision wholly supports the view we are taking in regard to the applicability of the rule against arbitrariness in State action."

H (emphasis is mine)

RE: SPECIAL REFERENCE N0.1 OF 2012 459 [JAGDISH SINGH KHEHAR, J.] An analysis of the aforesaid determination by this Court A would lead to the inference that the State has the right to trade. In executing public contracts in its trading activity the State must be guided by relevant principles, and not by extraneous or irrelevant consideration. The same should be based on reasonableness and rationality as well as non-arbitrariness. It B came to be concluded, that the State while entering into a contractual relationship, was bound to maintain the standards referred to above. And any departure from the said standards would be invalid unless the same is supported by good reasons.

(d) Our attention was also invited to the decision rendered c in Kasturi Lal Lakshmi Reddy Vs. State of Jammu & Kashmir & Anr., (1980) 4 SCC 1, wherein the factual background as well as, the legal position came to be expressed in paragraph 19 of the judgment which is being set out below: D "19. It is clear from the backdrop of the facts and circumstances in which the impugned Order came to be made and the terms and conditions set out in the impugned Order that it was not a tapping contract simpliciter which was intended to be given to the second respondents. The E second respondents wanted to be assured of regular supply of raw material in the shape of resin before they could decide to set up a factory within the State and it was for the purpose of ensuring supply of such raw material that the impugned Order was made giving tapping contract to F the second respondents. It was really by way of allocation of raw material for running the factory that the impugned Order was passed. The terms of the impugned Order show beyond doubt that the second respondents were under an obligation to set up a factory within the State and that 3500 G metric tonnes of resin which was permitted to be retained by the second respondents out of the resin extracted by them was required to be utilised in the factory to be set up by them and it was provided that no part of the resin extracted should be allowed to be removed outside the State. The whole object of the imi'.)ugned Order was to H

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A make available 3500 metric tonnes of resin to the second respondents for the purpose of running the factory to be set up by them. The advantage to the State was that a new factory for manufacture of rosin, turpentine oil and other derivatives would come up within its territories offering B more job opportunities to the people of the State increasing their prosperity and augmenting the State revenues and in addition the State would be assured of a definite supply of at least 1500 metric tonnes of resin for itself without any financial involvement or risk and with this c additional quantity of resin available to it, it would be able to set up another factory creating more employment opportunities and, in fact, as the counter-affidavit of Ghulam Rasul, Under-Secretary to the Government filed on behalf of the State shows the Government lost no time in taking steps to set up a public sector resin distillation plant D in a far-flung area of the State, namely, Sundarbani, in Rajouri District. Moreover, the State would be able to . secure extraction of resin from these inaccessible areas on the best possible terms instead of allowing them to remain unexploited or given over at ridiculously low royalty. E We cannot accept the contention of the petitioners that .under the impugned Order a huge benefit was conferred on the second respondents at the cost of the State. It is clear from the terms of the impugned Order that the . second respondents would have to extract at least 5000 F . metric tonnes of resin from the blazes allotted to them in order to be entitled to retain 3500 metric tonnes. The counter-affidavit of Ghulam Rasul on behalf of the first respondent and Guran Devaya on behalf of the second respondents show that the estimated cost of extraction and G collection of resin from these inaccessible areas would be at'the least Rs 175 per quintal, though according to Guran Devaya it would be in the neighbourhood of Rs.200 per . quintal, but even if we take the cost at the minimum figure of .Rs.175 per quintal, the total cost of extraction and H ·c011~ction would come to Rs.87 ,50,000 and on this

RE: SPECIAL REFERENCE N0.1 OF 2012 461 [JAGDISH SINGH KHEHAR, J.] investment of Rs.87,50,000 required to be made by the second respondents the amount of interest at the prevailing bank rate would work out to about Rs.13,00,000. Now, as against this expenditure of Rs 87,50,000 plus Rs.13,00,000 the second respondents would be entitled to claim from the State, in respect of 1500 metric tonnes of resin to be delivered to it only at the rate sanctioned by the Forest Department for the adjoining accessible forests 'JVhich were being worked on wage-contract basis. It is stated in the counter-affidavits of Ghulam Rasul and Guran Devaya and this statement is not seriously challenged on c behalf of the petitioners, that the cost of extraction and collection as sanctioned by the Forest Department for the adjoining accessible forests given on wage-contract basis in the year 1978-79 was Rs.114 per quintal and the second respondents would, thus, be entitled to claim from the State no more than Rs.114 per quintal in respect of 1500 metric tonnes to be delivered to it and apart from bearing the difference between the actual cost of extraction and collection and the amount received from the State at the rate of Rs.114 per quintal in respect of 1500 metric tonnes, the second respondents would have to pay the price of the remaining 3500 metric tonnes to be retained by them at the rate of Rs.350 per quintal. On this reckoning, the cost of 3500 metric tonnes to be retained by the second respondents would work out at Rs.474 per quintal. The result would be that under the impugned Order F the State would get 1500 metric tonnes of resin at the rate of Rs.114 per quintal while the second respondents would have to pay at the rate of Rs.474 per quintal for the balance of 3500 metric tonnes retained by them. Obviously, a large benefit would accrue to the State under the impugned G Order. If the State were to get the blazes in these inaccessible areas tapped through wage contract, the minimum cost would be Rs.175 per quintal, without taking into account the additional expenditure on account of interest, but under the impugned Order the State would get H

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A 1500 metric tonnes of resin at a greatly reduced rate of Rs.114 per quintal without any risk or hazard. The State would also receive for 3500 metric tonnes of resin retained by the second respondents price or royalty at the rate of Rs.474 per quintal which would be much higher than the B rate of Rs.260 per quintal at which the State was allotting resin to medium scale industrial units and the rate of Rs.320 per quintal at which it was allotting resin to small scale units within the State. It is difficult to see how on these facts the impugned Order could be said to be c disadvantageous to the State or in any way favouring the second respondents at the cost of the State. The argument of the petitioners was that at the auctions held in December 1978, January 1979 and April 1979, the price of resin realised was as much as Rs.484, Rs.520 and Rs.700 per quintal respectively and when the market price was so high, it was improper and contrary to public interest on the part of the State to sell resin to the second respondents at the rate of Rs.320 per quintal under the impugned Order. This argument, plausible though it may seem, is fallacious because it does not take into account the policy of the State net to allow export of resin outside its territories but to allot it only for use in factories set up within the State. It is obvious that, in view of this policy, no resin would be auctioned by the State and there would be no question of sale of resin in the open market and in this situation, it would be totally irrelevant to import the concept of market price with reference to which the adequacy of the price charged by the State to the 2nd respor.dents could be judged. If the State were simply selling resin, there can be no doubt that the State must endeavour to obtain the highest price subject, of course, to any other overriding considerations of public interest and in that event, its action in giving resin to a private individual at a lesser price would be arbitrary and contrary to public interest. But, where the State has, as a matter of policy, stopped selling resin to outsiders and decided to allot it only to industries

RE: SPECIAL REFERENCE N0.1 OF 2012 463 [JAGDISH SINGH KHEHAR, J.]

set up within the State for the purpose of encouraging industrialisation, there can be no scope for complaint that the State is giving resin at a lesser price than that which could be obtained in the open market. The yardstick of price in the open market would be wholly inept, because in view of the State policy, there would be no question of any resin being sold in the open market. The object of the State in such a case is not to earn revenue from sale of resin, but to promote the setting up of industries within the State. Moreover, the prices realised at the auctions held in December 1978, January 1979 and April 1979 did not c reflect the correct and genuine price of resin, because by the time these auctions came to be held, it had become known that the State had taken a policy decision to ban export of resin from its territories with effect from 1979-80 and the prices realised at the auctions were therefore o scarcity prices. In fact, the auction held in April 1979 was the last auction in the State and since it was known that in future no resin would be available for sale by auction in the open market to outsiders, an unduly high price of Rs. 700 per quintal was offered by the factory owners having their factories outside the State, so that they would get as much resin for the purpose of feeding their industrial units for some time. The counter-affidavits show that, in fact, the average sale price of resin realised during the year 1978- 79 was only Rs.433 per quintal and as compared to this price, the 2nd respondents were required to pay price or royalty at a higher rate of Rs.474 per quintal for 3500 metric tonnes of resin to be retained by them under the impugned Order. It is in the circumstances impossible to see how it can at all be sa_id that any benefit was conferred on the second respondents at the cost of the State. The G first head of challenge against the impugned Order must, therefore, be rejected."

(emphasis is mine) H

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A An examination of the factual position of the controversy dealt with in the judgment extracted above reveals, that the State Government formulated a policy to set up a factory within the State, which would result in creation of more job opportunities for the people of the State. The setting up of the B said factory would assure the State of atleast 1500 metric tones of resin without any financial involvement. This in turn would enable the State to set up another factory creating further employment opportunities for the people of the State. It is therefore, that this Court concluded that the impugned order c passed by the State in favour of the second respondent could not be said to be disadvantageous to the State and favouring the second respondent. In a manner of understanding, this Court found no infirmity in the impugned order passed by the State Government because the State Government had given effect to a policy which would "best subserve the common 0 good" of the inhabitants of the State (as in Article 39(b) of the Constitution of India) while assigning a material resource, though no reference was made to Article 39(b) of the Constitution of India in the judgment. What is also of importance E is, that this Court expressly noticed, that if the State Government was simply selling resin, it was obliged to obtain the highest possible price.

(e) Reference was then made to Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay, (1989) 3 F sec 293, wherein the case of the respondent was, that in his evidence it had been mentioned by Katara that the plot had been allotted to Dhanji Mavji since it was the policy of the Bombay Port Trust to allot a reconstituted plot to a person occupying a major portion of such plot. It was further asserted, that there was no challenge to this evidence in cross- examination. It was also asserted, that there was no evidence on the alleged policy of the Port Trust of giving plots on joint tenancy to all the occupants. According to learned counsel for the respondent, in the letters addressed by the Port Trust and in the letters by and on behalf of the appellant and/or their

RE: SPECIAL REFERENCE N0.1 OF 2012 465 [JAGDISH SINGH KHEHAR, J.] alleged associate concerns they had specifically admitted, that there was a policy of the Port Trust to allot plots to the occupants of the major portions thereof and in fact a grievance was made by them, that in accordance with the said policy of the Bombay Port Trust, a plot was not being allotted to the associates of the appellant. In that view of the matter it was contended, that the issue whether the plot should have been given on joint tenancy or not, could not have been gone into by the court in exercise of its jurisdiction of judicial review. Reliance was placed on the observations of Lord Justice Diplock in Council of Civil Service Unions v. Minister for the Civil Service, (1984) c 3 All ER 935, 950, where the learned Lord Justice classified 3 grounds subject to control of judicial review, namely, illegality, irrationality and procedural impropriety. In the aforesaid factual background this Court concluded as under:

"21. We are unable to accept the submissions. Being a D public body even in respect of its dealing with its tenant, it must act in public interest, and an infraction of that duty is amenable to examination either in civil suit or in writ jurisdiction. E

28. Learned Additional Solicitor General reiterated on behalf of the respondent that no question of mala fide had been alleged or proved in these proceedings. Factually, F he is right. But it has to be borne in mind that governmental policy would be invalid as lacking in public interest, unreasonable or contrary to the professed standards and this is different from the fact that it was not done bona fide. It is true as learned Additional Solicitor General contended that there is always a presumption that G a governmental action is reasonable and in public interest. It is for the party challenging its validity to show that the action is unreasonable, arbitrary or contrary to the professed norms or not informed by public interest, and the burden is a heavy one. H