Case Analysis: 2G Spectrum Scam – Centre for Public Interest Litigation & Ors. v. Union of India & Ors.

Case Title: Centre for Public Interest Litigation & Ors. v. Union of India & Ors.
Citation: (2012) 3 SCC 1
Court: Supreme Court of India
Date of Judgment: 2 February 2012
Bench: Justice G.S. Singhvi and Justice A.K. Ganguly
Petitioner: Centre for Public Interest Litigation (CPIL) and other Public Interest Organisations, represented through advocate Prashant Bhushan
Respondent: Union of India, Department of Telecommunications, and various private telecom operators

Important Legal Provisions Involved

• Article 14, Constitution of India: Equality before the law; prohibition of arbitrariness.
• Article 19(1)(g), Constitution of India: Right to practice any profession, or to carry on any occupation, trade, or business (subject to reasonable restrictions).
• Article 39(b), Constitution of India: Directive Principle mandating that the ownership and control of material resources be distributed to subserve the common good.
• Public Trust Doctrine: A constitutional principle evolved by judicial interpretation, holding that the State is the trustee of natural resources for the benefit of the people.

Background

The 2G Spectrum Scam emerged as one of the largest corruption controversies in India’s post-liberalisation era.

In 2008, the Department of Telecommunications (DoT), headed by the then Telecom Minister, allotted 122 licences for 2G mobile spectrum. The method adopted was the so-called “first-come, first-served” basis, whereby companies that applied first were granted licences first.

• The licence fee was based on 2001 rates, despite the fact that by 2008 the telecom industry had expanded enormously, and spectrum had become far more valuable.
• Several companies that were ineligible or inexperienced in the telecom sector were nonetheless granted licences.
• Licences were issued in haste, with the cut-off date for applications being arbitrarily advanced, enabling favoured entities to secure spectrum.
• The CAG later estimated a presumptive loss of approximately ₹1.76 lakh crore, though the figure itself became contested.

The episode quickly gained notoriety in the media as the “2G Spectrum Scam”, sparking parliamentary deadlock, resignation of the Telecom Minister, and the initiation of Public Interest Litigations (PILs) before the Supreme Court.

Facts of the Case

• The petitioners alleged that the Union Government’s process of spectrum allocation was arbitrary, non-transparent, and unconstitutional.
• They contended that the first-come, first-served policy lacked any statutory basis and was manipulated to benefit select private players.
• In contrast, several genuine applicants were deliberately excluded or disadvantaged.
• The PILs sought cancellation of the illegally granted licences and demanded that spectrum, being a scarce public resource, be allocated only through transparent auction procedures.

Issues

1. Whether the first-come, first-served policy for allocation of spectrum violated Article 14 by being arbitrary and discriminatory.
2. Whether the government holds natural resources such as spectrum in public trust, and whether it has a constitutional duty to distribute them fairly.
3. Whether the 122 licences granted in January 2008 were valid or required to be quashed.
4. To what extent the Court may intervene in policy decisions of the executive relating to natural resource allocation.

Contentions

Petitioner Submissions

• Spectrum is a scarce national asset belonging to the people. The State, as trustee, must allocate it in a manner consistent with public interest.
• The first-come, first-served principle had no rational basis and was manipulated to benefit private parties.
• By using outdated 2001 pricing, the Government caused an enormous loss to the exchequer.
• The procedure violated the principle of equality under Article 14, as similarly placed applicants were treated unequally.
• The only constitutionally permissible method was auctioning, which ensures transparency, fairness, and maximisation of revenue.

Respondent Submissions

• Allocation of natural resources is a matter of policy discretion; the judiciary cannot sit in judgment over executive policy choices.
• The first-come, first-served policy was an established practice, and its adoption was not illegal.
• The alleged loss estimated by the CAG was only presumptive; there was no concrete evidence of actual loss.
• Judicial interference would create uncertainty in the telecom sector, undermine investor confidence, and trespass into the policy domain.

Judgment of the Court

On 2 February 2012, the Supreme Court delivered a landmark judgment, holding:

1. The grant of 122 licences in 2008 was arbitrary, unconstitutional, and violative of Article 14.
2. The first-come, first-served policy was not founded on any rational principle and amounted to abuse of discretionary power.
3. The State is bound by the Public Trust Doctrine, and natural resources must be allocated only in a manner that serves the larger public good.
4. The licences were quashed with immediate effect.
5. Future allocation of spectrum must be conducted through public auctions, which the Court held to be the most transparent method.

Rationale

• The Court reiterated that arbitrariness is antithetical to equality, and any arbitrary action by the State automatically violates Article 14.
• In allocating natural resources, the State acts as a trustee of the people. Therefore, any distribution that is unfair or motivated by extraneous considerations cannot be sustained.
• The Court rejected the contention that policy decisions are immune from judicial scrutiny, clarifying that judicial review extends to policy where constitutional mandates are breached.
• Auctions were emphasised as the preferred method to ensure transparency and equal opportunity.

Defects of the Law

1. Absence of statutory clarity: At the time, no comprehensive legislation mandated the manner in which spectrum should be allocated, leaving excessive room for ministerial discretion.
2. Weak regulatory oversight: The Department of Telecommunications exercised unchecked authority without sufficient checks from independent regulators.
3. Presumptive loss controversy: The CAG’s estimate, while useful for highlighting irregularities, lacked binding evidentiary value, creating confusion.
4. Criminal law gap: While the allocation was quashed for arbitrariness, later CBI trials ended in acquittals (2017) due to lack of proof beyond reasonable doubt, revealing a mismatch between administrative law standards (reasonableness) and criminal law standards (proof of guilt).

Conclusion

The 2G Spectrum Case remains a defining moment in India’s legal and political history. By quashing 122 licences, the Supreme Court demonstrated the judiciary’s resolve to uphold constitutional governance, transparency, and accountability.

The case entrenched the principle that natural resources are public assets and their allocation must conform to fairness, equality, and public interest.

Yet, the case also highlighted systemic deficiencies in law and regulation, and the subsequent acquittals in criminal trials exposed the challenge of aligning administrative law remedies with criminal law standards of proof.

Despite its controversies, the judgment stands as a landmark precedent on Article 14, judicial review, and the public trust doctrine, and is frequently cited in discussions on governance reforms and anti-corruption jurisprudence.

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