When policies go under knife: The Haj Subsidy Decision

The recent incident of review of a policy by the SC was in an interim order of 7th May 2012 relating to Haj subsidy. This was a SLP between UoI and Rafique Shaikh Bikan. The fundamental issue was on the justifiability of the norms of registration of Private Tour Operators ferrying Haj Pilgrims. The SC decided to look into the entire Haj policy and in this leg of the proceeding was reviewing among others the Haj subsidy issue. The court observed the subsidy to be constitutional as it was already found so in an earlier judgment (Prafull Goradia v. UoI) but un-islamic and advised the government to progressively reduce and eliminate the subsidy within a period of ten years. Advised also that the amount so saved shall be employed for the upliftment of the community in education and other social development programmes. The decision has attracted opposing responses for obvious reasons.

I am not intending to enter into the issue visited ad nauseum, whether judiciary can review policy. Rather, I raise the point, how judiciary has reviewed policy in this judgment.

Use of history

The court have extensively used history to understand the reason behind sending goodwill team during Haj before finding it irrelevant as the basic reason no more stands. So also the way the selection to the team is done has less or nothing to do with the objective sought to be achieved.  When it came to the question of Haj subsidy, the court treated it ahistoric and decided that it is something to be discontinued without offering much of reason to hold so.

Haj subsidy was started in 1973 when the government had stopped a cheaper mode of transport that is by sea. To offset the extra cost that the pilgrims will have to bear the subsidy was instituted. That is the reason why even today, the reasonable travel cost is fixed and the over and above killing made by the opportunistic monopoly carrier (Air India) is subsidized by the government. On the lighter side, the subsidy will become irrelevant on the liquidation of Air India, which seems to be much prior to the decade limit kept by the judiciary. The history would have given the judiciary a perspective to understand the policy better.

Reason to discontinue the policy

Ask the court why the policy should be discontinued. Was it adopting a liberal secular stand? (See here for interesting read)  Seems not, nothing to suggest so. On the contrary court apologetically co-opted muslim theology and attempted to establish why should muslims themselves reject subsidy. Apart from this no reason come that easily, let alone legal reason, which anyway will not stand as already a bench of same strength in a writ proceeding had upheld the validity of the subsidy.

Limits of review

This judgment gives an opportunity to visit a frequented area within judicial review scholarship. What is the extent of judicial review to maintain a healthy balance? Though a one-size-fits-all formula is far from desirable, it could safely be said that judicial prescription of alternate policy is far from desirable. The court in the case doles out free advises as how to relocate the resources so saved from discontinuance of Haj subsidy. Were they compelled to be on the safe side to show that though 'we' are withdrawing a privilege 'we' make sure that the community remains to be the beneficiary in another way?

Do we call it justice, sensitivity or appeasement? In any case it does not fall within review.

Break Trust and Be Damned (Even in Government Contracts)

'No trust no more deal' is the commonsense rule of any business. Can the government follow the same line in commercial activities? It should, would be the definite commonsensical answer. The concomitant issue is, can the government act the same way a private person behaves in all aspects of commercial activities. Here the answer starts to branch. Its much more simple and easy for a private person to eliminate a non-trustworthy contract partner for future. One just does not deal with her/firm any more. It is a matter of choice, freedom to contract.

Government contract on the other hand is governed by multiple legal aspects; constitutional and statutory. Art. 298 vests the executive with power to enter into contract with the Union and the State Governments. There are various statutes that regulate the commercial activities of the state. Though contract formation essentially is a private law function the public character of one of the party to the contract, i.e., the government, adds certain extra responsibilities in the contract formation. The government in the deal making is expected to act reasonable, non-arbitrary, and fair so as not to attract the tentacles of Article 14. If that were the case when they break the deal what shall guide them is the question dealt in Patel Engineering v. Union of India, Decided on 11th of May, 2012.

For declining to honour a bid, which was initially been accepted, the Government blacklisted the petitioner for a year. Against which a writ was moved and the rejection of which resulted in the present SLP. The two major arguments of the petitioner were that the government lacked the power to blacklist as it is not incorporated in any of the conditions of tender and the punishment is disproportionate.

The court found the power to blacklist is located in the executive power of the state to carry on trade and business. To decline to do business due to legitimate reasons need not flow from any statute as long as state act rationally, non-arbitrarily and for legitimate purposes. The legitimate purpose is to be determined depending on the facts and circumstances.

The crucial question is of blacklisting. The bid document does not confer any power nor does the corresponding statute, the National Highway Authorities Act. The court still finds the power to blacklist with the state in the following way. " … in our opinion, the failure to mention blacklisting to be one of the probable actions that could be taken against the delinquent bidder does not, by itself, disable the 2nd respondent from blacklisting a delinquent bidder, if it is otherwise justified. Such power is inherent in every person legally capable of entering into contracts."

While concluding the judgment Justice Chelameswar even said that the punishment though was argued to be disproportionate cannot be held so. Rather it is setting an example for future delinquents who may behave the same way with the government. Making an example of the one in hand for the future rest has been the order of the old day that still continues.

Blacklisting by a private person has limited to nil consequence compared to blacklisting by governments. This raises certain issues. In commercial matters should the government be treated at par with private players? Should bigger consequence of being blacklisted by government prescribe a different course of action in a commercial activity? Answer to the first seems to be a conditional yes, as long as they act within the precincts of constitutional restrictions. For the second, though consequence in itself cannot prescribe course of action in commercial activities, the shadow of first answer will take care of the concern in the second.

Notice of Dispute Issued Against the Retrospective Amendments by Vodafone International Holdings BV

News reports suggested that Vodafone International Holdings BV (Vodafone) invoked arbitration under the Agreement between the Republic of India and the Kingdom of the Netherlands for the Promotion and Protection of Investments (India-Netherlands BIT-pdf) in relation to the proposed amendment in the Income Tax Act, 1961 to retrospectively alter the law pertaining to capital gains through indirect transfers of Indian assets  (Livemint).

Vodafone has served a Notice of Dispute invoking Article 9(1) of the India-Netherlands BIT, which reads:

"Any dispute between an investor of one Contracting Party and the other Contracting Party in connection with an investment in the territory of the other Contracting Party shall, as far as possible, be settled amicably through negotiations between the parties to the dispute. The party intending to resolve such dispute through negotiation shall give notice to the other of its intentions."

The purpose of the said Notice of Dispute as it suggests is to settle the dispute in an amicable way. Further, it states that the failure of the Government to respond to the Notice of Dispute or to withdraw the complained amendments to the Act “would establish that the Government of India is not interested in amicable resolution…”

In the Notice, Vodafone has complained that the retrospective amendment to the Income Tax Act, 1961 violated the following provisions of the India-Netherlands BIT:

• Breach of obligation to accord fair and equitable treatment and fill protection and security to the Investment [Article 4(1)]
• Breach of obligation to accord to the Investment treatment not less favourable than that accorded either to investments of its own or investments of investors of any third state, whichever is more favourable to the investor concerned [Article 4(2)]
• Breach of obligation not to subject the Investment to expropriation or measures having the effect equivalent thereto except in the public interest in accordance with law, on a non-discriminatory basis and against compensation [Article 5(1)]

The Notice of Dispute dated 17.04.2012 can be accessed from here.

The Cartoon Politics

Suhas Palshikar responds in today's The Hindu. He raises one plus five thought provoking issues in this piece. Concludes by pointing out the transformation of the understanding of the study of politics from statistical and historical information to dynamic notion of politics in the following words.

Politics is about creating and running institutions; politics is about power and about power being used for various collective purposes; politics is not a sanitised anthem of democracy but a shrill and not so sweet mix of different sounds. This politics produces governance — and sometimes may even fail to produce governance. Politics is ‘good' and ‘bad' — unlike the romantic movie, there are men and women in politics rather than sanitised heroes and heroines and villains and side villains. Is this not a robust and democratic depiction of politics?