Governance in parochial sense has always been understood as process by which the institutions of the Government make and implement rules and laws. Courts on the other hand have been viewed, outside the governance process, as the adjudicatory fora to which recourse is to be had only in case of a dispute. However, this has not been so always with ‘Expanding judiciary’.  The concept is neither novel nor alien to India. There have been several documented instances right through Golak Nath, Kesavananda Bharati, Minerva Mills cases etc. where the judiciary in exercising its power of judicial review have gone beyond merely setting aside unconstitutional actions of Government.  In fact courts have regularly adorned upon themselves the role of governance and policy making.

While conformist may view this as intrusion into the rule making power exclusive to legislature & executive, the reality is that the ‘Court Governance’ is integral to overarching Policy & legal framework in the country. In fact in the recent times courts have increasingly become emboldened to overrule even the sectoral regulators to set to naught any mischief or misconduct perceived in the functioning of the sectors.  

The glaring dashes of pro-active role played by the judiciary in the field of ‘Governance’ could be found in the telecom sector in India, where the Supreme Court has been in the fore in redefining the contours of governance. With the 2G Judgment, which lead to complete shift in the spectrum allocation policy, and to the not so recent Supreme Court judgment permitting CAG audit of the telecom companies; the apex court has emerged pivot of governance in the sector. Last few years the spotlight clearly has been on the judiciary with major policy, legal, and regulatory issues ending up in courts. 

The famous 2G judgment is an avowed example of active governance exercised by the Supreme Court in as much as it set aside the then extant Government First-Come-First-Serve (FCFS) policy for spectrum allocation in holding that all public resources and assets are a matter of public trust and they can only be transferred or alienated by auction. Not only did the apex court set aside the extant policy of the Government and cancelled 122 licenses allotted thereunder but also perceived to have forayed into policy making by holding auction to be ‘the policy’ for transfer of all natural resources. The original expanse of the 2G Judgment was so wide that it led to Presidential Reference under Article 143 of the Constitution. Ultimately the Supreme Court had to clarify that auction was not the only permissible method of allocating natural resources. However, in so far as spectrum is concerned the Supreme Court refused to reconsider the 2G Judgment as it was beyond the scope of reference under Article 143.  What is also noteworthy is that while setting aside the policy of FCFS, the Supreme Court even overruled certain recommendations of TRAI, which is the regulator body for telecommunications in India.

In fact the buck doesn’t stop with the 2G Judgment, last few years the Telecom sector has been witness to other several important decisions of the Supreme Court vastly impacting the Telecom Industry and perceived having definitive impact on other sectors of the economy. Beginning with the telecom license fee Judgment i.e. the AGR Judgment where the Supreme Court, while called upon to decide about the scope of definition of Aggregate Gross Revenue (AGR) in the License Agreement for the purpose of payment of license fee, expressly excluded the jurisdiction of the Telecom Disputes Settlement & Appellate Tribunal (TDSAT), being the expert disputes settlement & appellate body for telecommunications in India, in deciding the validity of the terms of the license.  By this Judgment the Supreme Court overruled the earlier Judgments of the TDSAT and TRAI recommendations restricting AGR to include only revenue arising from licensed activity. Though, there is still no finality on the licensed fee issue as the telecom operators have challenged the very definition of the Adjusted Gross Revenue (AGR), which is now before the Supreme Court.  

In another Judgment in the Interconnect Usage Charges/Port Charges matters, the Supreme Court in dealing with the question of power vested in TRAI under Section 36 of the TRAI Act to frame regulations has held such power to be wide and pervasive.  According to the Judgment the powers under Section 36 of the TRAI Act are legislative and not administrative. Being in the nature of subordinate legislation, the regulations have to be laid before both the houses of Parliament which can alone annul or modify the same. On the question of whether the TDSAT has jurisdiction to entertain challenge to such regulations, it has held in negative. The Supreme Court has held that TDSAT does not have jurisdiction to entertain challenge to the regulations. The impact of the Judgment is that regulations can now only be challenged before the High Court in writ jurisdiction and not before TDSAT. The Supreme Court has greatly deviated from the earlier judgments of Cellular Operators Association of India Vs. UoI and UoI Vs. Tata Teleservices (Maharashtra) Limited where the Supreme Court had held TDSAT as a specialized tribunal having exclusive & wide jurisdiction to deal with proceedings arising under the TRAI Act and restrained from imposing any restrictions and limitation under the judge made law.  The judgment has already raised concerns about how equipped High Courts would be to decide upon regulations and protracted nature of judicial proceedings.  

Continuing with the above trend, the Supreme Court in the Judgment on the issue of Comptroller & Auditor General of India (CAG) audit of telecom companies, has recognized the power of CAG to audit accounts of the telecom companies to ascertain whether the Government of India was getting its due share by way of license fee and spectrum charges. The court has held  that it is the duty of the CAG to audit all transactions of the Union & State as also to audit all receipts payable to the Consolidated Fund of India. The Supreme Court has observed that CAG's examination of the accounts of private telecom service providers in a revenue sharing contract is extremely important to ascertain whether there is an unlawful gain to the service provider and an unlawful to loss to the Union.  Though the Judgment is for the telecom sector, it is believed to have widespread  implication for other sectors of the economy  like power, mining, roadways, ports and airports, in which private companies either share revenues with Government or partner it under the public-private partnership (PPP) model.  

The above judgments could clearly be viewed as examples of governance by court and this isn’t idiosyncratic of telecom sector alone. The cancellation of coal block allocations by the Supreme Court  is yet another of many such examples of active governance practiced by the judiciary in other sectors. In the coal judgment the Supreme Court found that the approach of Government in allocating the coal blocks between 1993 to 2010 to be ad-hoc and casual, lacking in fairness, transparency & objectivity as also arbitrary, unreasonable and stained with nepotism; all of which resulting in unfair distribution of the national wealth.  The judgment only reinforces exercise of governance by court, much of which could be attributable to manner in which Government has been conducting business, which more often than not is in derogation of constitutional ethos.      

Thus, one sees an emergent trend where the judiciary is having the final say on all aspects of sectoral governance, including the regulatory & policy aspects. Courts have increasingly become integral to governance overall. Whether it is the challenge to regulations, orders or directions passed by the sectoral regulator and/or policy of Government including executive fiats, courts are having the final say and in some cases courts are even known to have exercised suo motto powers. Courts have shown little hesitation in setting aside long-standing policies of Government, after having been deemed unconstitutional by the courts, and also quashing any benefit derived under such policies. From the investor perspective, it has never been so important as it is today to get an independent check on the policies or decisions of the Government, particularly to check whether such policies or decisions will stand the test of judicial scrutiny. This is so as courts with the intent to infuse more accountability in the functioning of Government and its institutions are increasingly taking upon themselves pro-active role in governance. The past practice of perceiving judiciary extrinsic to the governance has proved to be fatal. The message for the stakeholders is loud and clear and which is that whenever the institutions are found lacking or compromising with good governance, the judiciary will step in.