India Court to Hear Presidential Reference in Telecom Ruling July 10

India's Supreme Court Friday agreed to a government request for several clarifications related to its Feb. 2 cancellation of 122 telecom licenses, in a move that has big implications for the allocation, both past and future, of the country's natural resources.

The government, through a legal instrument known as a presidential reference, asked whether the court's stand could unsettle policy decisions "formulated and approaches taken by various successive governments over the years."

It also asked the judges' opinion on what is the permissible scope for interference by courts with the government's policy-making functions.

The government sought the court's opinion on the consequences of the February judgment, including on the investments made by foreign operators who bought stakes in local companies that received licenses in 2008.

The court will begin hearing the presidential reference on July 10.

Policy uncertainty is one of the main complaints of foreign investors in India, who say they want rules to be clear for them to continue investing billions of dollars.

The Feb. 2 judgment ordering the cancellation -- following charges of corruption in the allotment process -- of all licenses issued without auction after 2008 shocked foreign companies such as Norway's Telenor ASA TEL.OS -0.86% .

Telenor has since written down 4.2 billion Norwegian krone ($715 million) in relation to licenses and goodwill in India, and it plans another write-down of 3.9 billion Norwegian krone.

In the Feb. 2 judgment, the Supreme Court told the government to conduct auctions to allocate all natural resources. It said the first-come first-served policy adopted in 2008 for telecom license sales was "arbitrary and unconstitutional."

Through the presidential reference, the Indian government has asked the Supreme Court's opinion on whether the appropriate way to allocate natural resources "across all sectors and in all circumstances" is through auctions.

Since the judgment, there have been concerns about how the ruling will affect previous government deals in sectors such as oil and gas and mining, as well as telecom.

Currently, India allots mining leases for minerals, metals and coal without auction. However, oil and gas blocks are allotted through an auction in which both domestic and overseas companies take part. The latest telecom bandwidth allotment -- held in 2010 for third-generation services -- was also through auctions.

While the court has agreed to give its opinion initially on these issues, Chief Justice S.H. Kapadia, who is heading the five-judge bench looking into the presidential reference, said it will subsequently also take up the question of the status of telecom licenses and bandwidth given without an auction process from 1994 until 2008.

The Supreme Court had earlier partially accepted another plea from the government seeking clarification on the timeline for conducting auctions of bandwidth that will be vacated due to the cancellation of the 122 telecom licenses. Last month, it extended the deadline for the auctions to Aug. 31 from June 2.

Meanwhile, the government Thursday withdrew another plea asking the Supreme Court to review its ruling on the appropriateness of the "first-come, first-served" policy adopted in 2008.

Under the Indian constitution, the president can refer a judgment to the Supreme Court to seek its opinion on issues of public importance, though the court has the option of not giving an opinion.

(courtesy:wsj.com)