Supreme Court should not interfere in genuine economic policy making

Sukumar Mukhopadhyay | Updated on September 10, 2020

The court ruling on telcos’ AGR dues case, in which it reset the payback regime set by the Centre, reflects judicial overreach

TheSupreme Court’s decision to allow telecom companies to clear their adjusted gross revenue (AGR) dues in just 10 years, instead of 20 as the Centre had decided, is problematic on many counts. The Cabinet had arrived at the decision to grant the telcos 20 years considering that forcing them to pay too early would push them into insolvency proceedings, affecting millions of subscribers.

Such a move can also result in massive unemployment and destruction of a competitive telecom service. It was a decision on the economic policy which the honourable Supreme Court nullified by merely calling the 20-year period of instalments “excessive”.

The jurisdiction of the Supreme Court, as decided by several precedents, cannot interfere in the economic policy of the government.

The theory is very clear. Economic policy is not justiceable; it is beyond the jurisdiction of the Supreme Court or High Court, unless the policy is ultra vires to the Constitution.

Constitution matters

A clear and most famous decision on this issue came in the well-known case of Indian Express Newspapers v. UOI (reported in AIR 1986 SC 515), which showed that on an economic policy no judicial intervention is permissible. Here, the Supreme Court interfered to strike down the excessive tax on newsprint because it came to the conclusion that the imposition of the high tax on it was violative of the fundamental right of freedom of speech under Article 19(1) g. On a mere ground of unreasonableness, the imposition of tax even by amendment of notification cannot be challenged, it said. Economic policy is not justiceable unless it violates fundamental rights.

Many judgments followed, which strengthened this conclusion. The Kasinka Trading vs. UOI – 1994(74) ELT 782(SC) and Shrijee, Sales Corporation vs. UOI – 1997(89) ELT 452 (SC) held that taxation policy cannot be pronounced upon by the courts unless there is a violation of the Constitution.

There was a contrary case with two judges, in the case of Dai-Ichi Karkaria Ltd. vs. UOI – 2000(119) ELT 516(SC). However, many judgments such as the three following — Union of India vs. Godhawani Brothers – 2000(141)ELT16(SC); Union of India vs. Bharat Commerce & Industry-2002-TIOL-603-SC-CUS; and Bannari Amman Sugars Ltd. vs. Commercial Tax Officer-2005 (1) SCC 625 — having been delivered after this Karkaria judgement, which are all against the Kataria judgement, this judgment can be taken as set aside.

Law is policy?

Later, in the case of Balco Employees Union vs UOI reported in (2002) 2 SCC 333, the Supreme Court has said: “In a democracy, it is the prerogative of each elected Government to follow its own policy. Often a change in Government may result in the shift in focus or change in economic policies. Any such change may result in adversely affecting some vested interests. Unless any illegality is committed in the execution of the policy or the same is contrary to law or mala fide, a decision bringing about change cannot per se be interfered with by the Court.”

All these cases happened when the government policy was more strict and the affected party asked for leniency. On the other hand in the current telco case, the government tries to be more lenient and that too by going as far as taking a Cabinet decision. The Supreme Court has, on the contrary, gone too strict which amounts to saying the government’s economic policy has been thrown asunder where the Court has no jurisdiction.

A prominent lawyer on one of telco’s side has opined that the government has legitimate ground to feel aggrieved and file a review petition. If the government files a review petition, its main legal plank should be that where there is a well-established precedent laid down unanimously by several Supreme Court judgments over a long period of time, the present court had no jurisdiction to set aside the government’s more liberal economic policy and set an instalment for just 10 years.

Why did the government not argue this point earlier that the precedents have been neglected and jurisdiction has been assumed where there is none, is a matter of about which we can only say that inscrutable are the ways of senior lawyers or possibly there is more than what meets the eye.

The writer is a former Member of the Central Board of Excise and Customs

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Published on September 10, 2020
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