Economic Policy beyond judicial determination: Supreme Court

Setting aside the decision of the Allahabad High Court, the Supreme Court recently in Bajaj Hindustan Ltd. v. Sir Shadi Lal Enterprises Ltd. declared that the interference of a court in a matter relating to economic policy of the Government was unwarranted. The High Court had granted relief to a party finding flaw in the 'Press Note on De-licensing of Sugar industry' and the Notification issued under the 'Industries (Development and Regulations) Act, 1951' relating to sugar. The Supreme Court was, however, not impressed.

Holding that the judicial review of economic policies of the Government was uncalled for and that it required restraint on the part of the judiciary in this arena, the Supreme Court reversed the decision,inter alia observing as under;

22. It is settled law that in the areas of economics and commerce, there is far greater latitude available to the executive than in other matters. The Court cannot sit in judgment over the wisdom of the policy of the legislature or the executive.

23. Thus in Balco Employees’ Union (Regd.) vs. Union of India and Ors. 2002(2) SCC 333 it was observed (vide paragraph 92 and 93) : 

“92. 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.

93. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved."

24. In the same decision in paragraph 39 it was observed : 

“39. In Premium Granites vs. State of T.N., 1994(2) SCC 691 while considering the Court’s powers in interfering with the policy decision, it was observed at page 715 as under: (SCC para 54) 

“54. It is not the domain of the Court to embark upon the unchartered ocean of public policy in an exercise to consider as to whether a particular public policy is wise or a better public policy can be evolved. Such exercise must be left to the discretion of the executive and legislative authorities as the case may be.”

25. In paragraph 42 of the aforesaid decision this Court quoted from its earlier decision in M.P. Oil Extraction vs. State of M.P. 1997(7) SCC 592 as follows :

“……………………The executive authority of the State must be held to be within its competence to frame a policy for the administration of the State. Unless the policy framed is absolutely capricious and, not being informed by any reason whatsoever, can be clearly held to be arbitrary and founded on mere ipse dixit of the executive functionaries thereby offending Article 14 of the Constitution or such policy offends other constitutional provisions or comes into conflict with any statutory provision, the Court cannot and should not outstep its limit and tinker with the policy decision of the executive function of the State. This Court, in no uncertain terms, has sounded a note of caution by indicating that policy decision is in the domain of the executive authority of the State and the Court should not embark on the unchartered ocean of public policy and should not question the efficacy or otherwise of such policy so long the same does not offend any provision of the statute or the Constitution of India. The supremacy of each of the three organs of the State i.e. legislature, executive and judiciary in their respective fields of operation needs to be emphasized. The power of judicial review of the executive and legislative action must be kept within the bounds of constitutional scheme so that there may not be any occasion to entertain misgivings about the role of the judiciary in outstepping its limit by unwarranted judicial activism being very often talked of in these days. The democratic set-up to which the polity is so deeply committed cannot function properly unless each of the three organs appreciate the need for mutual respect and supremacy in their respective fields.” 

26. The same view has been taken by this court in Ugar Sugar Works Ltd. vs. Delhi Administration and Ors. (2001) 3 SCC 635 (vide para 18), Bhavesh D. Parish and Ors. vs. Union of India and Anr. (2000) 5 SCC 471 (vide para 23 and 24), Netai Bag and Ors. vs. State of West Bengal and Ors. (2000) 8 SCC 262 (vide para 20), etc.

27. In P.T.R. Exports (Madras) Pvt. Ltd. vs. Union of India and Ors. 1996(5) SCC 268 (vide para 3 and 5) this Court held that the power to frame a policy by executive or legislative decision included the power to withdraw the same.

28. In the present case the de-licensing has been done under Section 29B of the Act and we see no illegality in the same.

xxx

38. In his dissenting judgment in New State Ice Co. vs. Liebmann 285 U.S. 262 (1932) Mr. Justice Brandeis, the celebrated Judge of the U.S. Supreme Court, observed that the Government must be left free to engage in social experiments. Progress in the social sciences, even as in the physical sciences, depends on “a process of trial and error” and Courts must not interfere with necessary experiments. In the same decision Justice Brandeis also observed :

“To stay experimentation in things social and economic is a grave responsibility. Denial of the right to experiment may be fraught with serious consequences to the Nation.” (See also ‘The Legacy of Holmes and Brandeis’ by Samuel Konefsky).

39. In the Constitution bench decision of the Supreme Court in Shri Sitaram Sugar Co. Ltd. vs. Union of India AIR 1990 SC 1277 it was observed :

“What is best for the sugar industry and in what manner the policy should be formulated and implemented, bearing in mind the fundamental object of the statute viz. supply and equitable distribution of essential commodity at fair prices in the best interest of the general public is a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review.”

40. It was held in the above decision as well as in India Cement Ltd. vs. Union of India AIR 1991 SC 724 that even if some persons are at a disadvantage and suffered losses on account of formulation and implementation of the Government policy that is not by itself sufficient ground for interference by the Court. 

41. In Secretary of Agriculture vs. Central Roig Refining Co. (1949) 338 US 604 (617): 94 Law Ed. 381 to 392, Mr. Justice Frankfurter of the U.S. Supreme Court observed :

“Congress was confronted with the formulation of policy peculiarly within its wide swath of discretion. It would be a singular intrusion of the judiciary into the legislative process to extrapolate, restrictions upon the formulation of such an economic policy from those deeply rooted notions of justice which the Due Process Clause expresses………….”

42. We should not be understood to have meant that the judiciary should never interfere with administrative decisions. However, such interference should be only within narrow limits e.g. when there is clear violation of the statute or a constitutional provision, or there is arbitrariness in the Wednesbury sense. It is the administrators and legislators who are entitled to frame policies and take such administrative decisions as they think necessary in the public interest. The Court should not ordinarily interfere with policy decisions, unless clearly illegal.

43. Economic and fiscal regulatory measures are a field where Judges should encroach upon very warily as Judges are not experts in these matters. The impugned policy parameters were fixed by experts in the Central Government, and it is not ordinarily open to this Court to sit in appeal over the decisions of these experts. We have not been shown any violation of law in the impugned notification or Press Note.

44. The power to lay policy by executive decisions or by legislation includes power to withdraw the same unless it is by mala fide exercise of power, or the decision or action taken is in abuse of power. The doctrine of legitimate expectation plays no role when the appropriate authority is empowered to take a decision by an executive policy or under law. The court leaves the authority to decide its full range of choice within the executive or legislative power. In matters of economic policy, it is settled law that the court gives a large leeway to the executive and the legislature. Granting licences for import or export is an executive or legislative policy. The Government would take diverse factors for formulating the policy in the overall larger interest of the economy of the country. When the Government is satisfied that change in the policy was necessary in the public interest it would be entitled to revise the policy and lay down a new policy. 

45. In Prag Ice & Oil Mills vs. Union of India AIR 1978 SC 1296 the Supreme Court observed :

“We do not think that it is the function of the Court to sit in judgment over such matters of economic policy as must necessarily be left to the government of the day to decide. Many of them are matters of prediction of ultimate results on which even experts can seriously err and doubtlessly differ. Courts can certainly not be expected to decide them without even the aid of experts.”

46. In Shri Sitaram Sugar Co. Ltd. vs. Union of India (1990) 3 SCC 223 the Supreme Court observed :

“Judicial review is not concerned with matters of economic policy. The Court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the view of experts by its own views.”

It must be remembered that certain matters are by their nature such as best be left to experts in the field. This Court does not have the technical and administrative expertise in this respect.

47. In the words of Chief Justice Neely : 

“I have very few illusions about my own limitations as a Judge. I am not an accountant, electrical engineer, financer, banker, stockbroker or system management analyst. It is the height of folly to expect Judges intelligently to review 5000 page record addressing the intricacies of a public utility operation. It is not the function of a Judge to act as a super board, or with the zeal of a pedantic school master substituting its judgment for that of the administrator.”

48. In our opinion there should be judicial restraint in fiscal and economic regulatory measures. The State should not be hampered by the Court in such measures unless they are clearly illegal or unconstitutional. All administrative decisions in the economic and social spheres are essentially ad hoc and experimental. Since economic matters are extremely complicated this inevitably entails special treatment for distinct social phenomena. The State must therefore be left with wide latitude in devising ways and means of imposing fiscal regulatory measures, and the Court should not, unless compelled by the statute or by the Constitution, encroach into this field.

49. In our opinion, it will make no difference whether the policy has been framed by the legislature or the executive and in either case there should be judicial restraint. The Court can invalidate an executive policy only when it is clearly violative of some provisions of the Statute or Constitution or is shockingly arbitrary but not otherwise.

50. As held by this Court in Divisional Manager, Aravali Golf Club & Anr. vs. Chander Hass & Anr. JT (2008) 3 SC 221, the Court must maintain judicial restraint and not ordinarily encroach in the domain of executive or legislature.

Have a look at the decision.