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State property concerns

March 23, 2013

“CAN governments’ dealings with the assets and properties vested in it [government property] give rise to a claim that such dealings violate fundamental rights?

“Can government be restrained from dealing with government property contrary to the purpose for which such property is vested in government?

“Put plainly, can the union or any state government say ‘We know that this government property is worth Rs5 crores but we will sell it for Rs1 crore’ — a government, like a private individual, can do what it likes with its ‘own’ property?”

H.M. Seervai posed these precise questions over two decades ago in his classic Constitutional Law of India, which is cited as an authority before the supreme courts of Pakistan and India. Every constitution vests the assets and properties in the federal or provincial government for a federal or provincial purpose.

Around this time, Piloo Mody, an MP petitioned the Bombay High Court against three ministers of the Maharashtra government who were responsible for leasing out valuable plots of land in Bombay at a gross undervalue.

The court upheld his plea that the lease was granted mala fide. It directed that either rent be increased by one-third or the land returned to the state of Maharashtra. Resultantly, the state gained an increase of rent of Rs1 crore per year for 99 years.

A case decided by the Indian Supreme Court involved none other than the chief minister of Haryana. It set aside an order of the director of industries, made at his instance, granting a mining lease to a firm for a paltry amount without even informing a rival firm which was the highest bidder in the auction.

It was, the court ruled, “an uncontrolled exercise of executive power” in which the public exchequer was put to a huge loss by “an unsavoury deal” made in secret between the Haryana chief minister Bhajan Lal and the favoured firm.

To whom did one appeal against the chief minister’s decision in a state administration, the court asked. “The cliché of appeal from Caesar to Caesar’s wife can only be bettered by appeal from one’s own order to oneself.”

But it is one thing to set aside a wrong action, another to lay down the principles which would guide the citizen and bind the state. This the Indian Supreme Court did in a case concerning the allotment of restaurants and snack bars by tenders at the Bombay Airport. Its ruling ranks as a leading one because it reckoned with the realities of modern business dealings with the state.

“Today the government is the regulator and dispenser of special services and provider of a large number of benefits, including jobs, contracts, licences, quotas, minerals rights, etc. It pours forth wealth, money, benefits, services, contracts, quotas and licences. They are steadily taking the place of traditional forms of wealth and comprise social security benefits, cash grant for political sufferers and the whole scheme of state and local welfare.

“Thousands of people are employed in the state and the central governments and local authorities. Licences are required before one can engage in many kinds of businesses or work. The power of giving licences means power to withhold them and this gives control to the government or to the agents of government on the lives of many people.

“Many individuals and many more businesses enjoy largesse in the form of government contracts. These contracts often resemble subsidies. It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with government. Government owns and controls hundreds of acres of public land valuable for mining and other purposes.

“The government is still the government when it acts in the matter of granting largesse and it cannot act arbitrarily. … Whatever its activity, the government is still the government and will be subject to restraints, inherent in its position in a democratic society,” said the court.

It added that in the matter of its dealings 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….” Its action must conform with “standard or norms which is not arbitrary, irrational or irrelevant”.

This ruling gave a big fillip to the growing law. It reached its climax in cases relating to the allocation of natural resources by the state. It was an offshoot or a doctrine of environmental law under which natural resources such as air, water, forests, lakes, rivers

and wildlife are public properties “entrusted” to the state for their safe and proper use and protection.

This is the “doctrine of public trust”. The state itself is deemed to be a trustee holding these resources through its ministers in trust for the benefit of the people.

It applies not only to the state but also to its instrumentalities like public corporations. The doctrine of public trust is not, however, limited to natural resources but applies no less to government assets and properties. As a result “a fiduciary relationship with the people” governs the government in its dealings with them.

“Common good” is the sole guiding factor for distribution of natural resources. It is the touchstone of testing whether any policy subserves the “common good”.

Revenue considerations may assume secondary consideration to developmental considerations, the court ruled. The dealings must be transparent, fair and must not violate the citizen’s fundamental right to equality before the law.

These rules on the state as a trustee rest on judicial decisions which are open to modification or even reconsidered. It is very necessary, therefore, to weave them into the constitution. Apart from permanence, this step would be of educative value.

Articles 29 to 40 of the constitution of Pakistan enunciate ‘Principles of Policy’. Articles 36 to 51 of the Indian constitution embody ‘Directive Principles of Policy’. To them can be added one more principle: defining the mighty state as a trustee of the people. They established it after all.

The writer is an author and a lawyer.