INDIAN JOURNAL OF LAW &

LIBERTY
VOLUME 1 ISSUE 1 (2015)

Citation: 1 Indian J. L. & Liberty 1 (2015)

iJustice - A Public Interest Law Initiative of Centre for Civil Society

_________________________________
Indian Journal of Law & Liberty
VOLUME 1 ISSUE 1
2015
_________________________________

Editor-in-Chief

Prashant Narang

Executive Editor

Tania Singla

Address: A-69, Hauz Khas, New Delhi - 110 016.

 TABLE OF CONTENTS
1. Law and Liberty: A Tug of War
Abhinav Mishra ………………………….…………….…………..……………..…………………….1

2. Liberty versus Equality: Competitors or Partners?

Eishan Agnihotra & Tanisha Agarwal………………………………………………………………...19

3. The Increasing Importance of Directive Principles of State Policy and Judicial Activism
Saif Rasul Khan…………………………………………………………………………………….….34

4. Ensuring Social Justice: The Way Forward

D.K. Balakrisnan………………………………………………………………………………...…....49

5. Liberty & Activism: The Never Ending Confrontation of Directive Principles over Egalitarianism
Joyeeta Chandra…………………………………………………………………..……………...…...64

6. Fundamental Rights and Directive Principles of State Policy: Co-existence or Conflict?

Anubha Gangal…………………………………………………………………………………..……81

7. Transformation of Indian Economy from Licence Raj to Competition Era

Anjali Rai & Diwanshi Rohatgi………………………………………………………………………..97

8. From Crony Capitalism to Innovation & Liberty: Challenges to the Indian Competition Law Regime
Pragalbha Priyakar…………………………………………………………………………….……114

9. Competition Law: An Aperture to Economic Regulation in a Neo-Legal System

Vanshaj Mehta & Prakhil Mishra……………………………………………………………..……..133

10. Indian Economy: Licensing and the Competition Era

Tanvi Pruthi & Vrinda Joshi………………………………………………………………………………..…149
 1

LAW AND LIBERTY: A TUG OF WAR

Abhinav Mishra*

Law and liberty always conflict with each other. Laws restrict liberty of an individual and absolute
liberty demands absence of laws. However, absolute liberty leads to anarchy and disorder and
therefore, absolute liberty is termed as ‘negative liberty.’ Hence, an individual must surrender
some liberty to the State for the benefit of the society. Thus, with reference to liberty, law can be
termed as a “necessary evil.”

India follows a system of separation of powers between the three wings- Executive, Legislature
and Judiciary .The three wings are on an equal footing and none is superior or inferior to the
other. They are independent and each wing is expected not to interfere in the working of the other
wing. However, recent years have witnessed judicial activism in which judiciary has transgressed
its boundaries and interfered with the working of legislature as well as the executive. There are
several instances to support this view. For example, in the case of Vishakha v. State of Rajasthan,
Supreme Court has given guidelines for the prevention of sexual harassment of women at
workplace as there was no existing law in this regard. These guidelines were to be followed
throughout the country until the Legislature came up with suitable legislation. Thus, judiciary went
beyond its boundaries.

Judicial activism is criticized on the ground that it is nothing but interference in the spheres of the
executive and the legislature. However, it may be seen as a tool to fill the vacuum created due to
the inability of the legislature and the executive. Thus, judicial activism may also be termed as a
“necessary evil” which is required when the legislature and the executive are unable to perform
their functions properly. The scope of this paper shall be limited to a brief study of judicial and
executive overreach in India and its merits and demerits in the present society. The object of this

*
Student of II Year, B.A.LL.B. (Hons.), Damodaram Sanjivayya National Law University, Visakhapatnam. Email:
mabhinav23@gmail.com.
 2

research paper is to analyze the development of the concept of ‘Judicial Activism’ in India in the
light of development of Public Interest Litigations (PIL).

1.1 Law and Liberty

According to Black's Law Dictionary, liberty is an exemption from extraneous control. Liberty
can be broadly classified into two types- positive liberty and negative liberty. Positive liberty is
liberty with restraints whereas negative liberty is liberty without restraints. Negative liberty is also
termed as absolute liberty. Liberty without restraints is dangerous and can lead to serious
consequences whereas liberty with restraints is necessary for the overall development of an
individual. Law puts some restrictions on one's liberty. Law is a tool which turns negative liberty
into positive liberty. A typical example would be Article 21 of the Indian Constitution which states
that no person shall be deprived of his life and liberty except according to the procedure established
by law. It must also be noted that law not only curtails our liberty but also safeguards them. Thus,
with respect to liberty, law is a necessary evil.

2.1 Separation of Powers

There is no liberty where judicial power is not separated from both legislative and
executive power. If judicial and legislative powers are not separated, power over
the life and liberty of citizens would be arbitrary, because the judge would also be
a legislator. If it were not separated from executive power, the judge would have
the strength of an oppressor.

~ Montesquieu

It has been rightly said that “Power corrupts and absolute power corrupts absolutely”. To curb
accumulation of power in one governmental organ, India has a system of separation of powers
among its three wings: Legislature, Executive and Judiciary. All the three wings, in theory, are
independent. Each wing works independently of the others and is expected to work within its
boundaries. All wings ought not to transgress their boundaries and interfere with the working of
the other wing. However, even though the functions of all organs have been sufficiently
differentiated, separation of powers is not rigid. In the words of Shri. K. Hanumanthaiya, a member
of Constituent Assembly:
 3

“Instead of having a conflicting trinity, it is better to have a harmonious government

structure. If we completely separate the executive, judiciary and the legislature,
conflicts are bound to arise between these three departments of Government. In any
country or in any government, conflicts are suicidal to the peace and progress of
the country. Therefore, in a governmental structure, it is necessary to have what is
called “harmony” and not this three- fold conflict.”1

The provisions for relationship between Parliament and the Supreme Court, the basic pattern of
the Court, its composition, powers, jurisdiction, etc., have been mentioned in detail in the
Constitution which cannot be touched by ordinary legislative process. But within the constitutional
framework, the Parliament has some powers vis-à-vis the Court. The minimum number of Judges
has been fixed by the Constitution but the Parliament has the authority to increase the number
Judges even though it cannot decrease this number. The Constitution confers a security of tenure
on the Judges subject to the Parliament moving a motion for the removal of a Judge. The power
thus vested in Parliament cannot be misused owing to several safeguards, viz., charges of
misbehaviour and incapacity against the Judge concerned have to be enquired into and proved, and
special majority is required in the two Houses for the motion to be carried. The salaries of Judges
have been fixed by the Parliament by law but it cannot be reduced during the tenure of a Judge.
Parliament may prescribe the privileges and allowances of a Judge, subject to the condition that it
cannot be varied during the tenure of a Judge. The salaries and allowances of the Judges of the
High Courts and the Supreme Court are charged upon the Consolidated Fund of India, which
means that this item is not subject to vote in the Parliament every year (in the budget) although a
discussion on it is not ruled out. Therefore, it is not possible for the Parliament to starve it of funds,
unless extraordinary circumstances exist.2 Thus, it is evident that Parliament can expand the
powers and jurisdiction of the Supreme Court in several aspects over and above what the
Constitution confers on it. On the other hand, the judiciary under the process of judicial review
examines the laws passed by the Legislature and can declare it unconstitutional if it is violative of
Constitutional provisions. The Constitution of India operates in happy harmony with the
instrumentalities of the executive and the legislature. But to be truly great, the judiciary exercising

1
Constituent Assembly Debates Book No. 2, Volume VII, 2nd ed. 1989, p. 962.
2
M.P. Jain, Indian Constitutional Law, Lexis Nexis, Fifth Edition, 2009, Nagpur.
 4

democratic power must enjoy independence of a high order. Alternatively, independence could
become dangerous and undemocratic unless there is a constitutional discipline with rules of good
conduct and accountability: without these, the robes may prove arrogant.3 The Supreme Court
observed in the Golak Nath case:-

“The constitution creates Legislature, the Executive and the Judiciary. It

demarcates their jurisdiction minutely and expects them to exercise their
respective powers without overstepping their limits. They should function within
the spheres allotted to them”4

An independent judiciary is the sine qua non for a democratic system of government.
Independence of judiciary is necessary so that justice can be delivered without fear or favour. It
must be free from any kind of political pressure. Judicial independence is necessary for Rule of
Law to prevail. The concept of “separation of powers” and “judicial independence” have now been
“elevated to the level of basic structure of the Constitution and are the very heart of constitutional
scheme”.5 Late Chief Justice Ismail Mohamed of South Africa said:

“The independence of judiciary and the legitimacy of its claim to credibility and esteem
must in the last instance rest on the integrity and the judicial temper of the judges, the
intellectual and emotional equipment they bring to bear upon the process of
adjudication, the personal qualities of character they project, and the parameters they
seek to identify on the exercise of judicial power. Judicial power is potentially no more
immune from vulnerability to abuse than legislative or executive power but the
difference is this: the abuse of legislative or executive power can be policed by an
independent judiciary but there is no effective constitutional mechanism to police the
abuse of judicial power. It is therefore crucial for all judges to remain vigilantly alive
to the truth that the potentially awesome breath of judicial power is matched by the
real depth of judicial responsibility. Judicial responsibility becomes all the more

3
www.thehindu.com/opinion/lead/article3785898.ece (last accessed on June 27. 2015).
4
L. C. Golak Nath & Ors. v. State of Punjab & Anr., AIR 1967 SC 1643.
5
State of Bihar v. Bal Mukund Sah, AIR 2000 SC 1296, 1317 : (2000) 4 SCC 640.
 5

onerous upon judges constitutionally protected in a state of jurisprudential solitude

where there is no constitutional referee to review their own wrongs.”

In Supreme Court Bar Association v. Union of India,6 a Constitution Bench of the Supreme Court
held:

“Indeed this Court is not a court of restricted jurisdiction of only dispute- settling. It is
well recognized and established that this court has always been a law maker and its role
travels beyond merely dispute settling. It is a problem solver in the nebulous provisions
dealing with the subject matter of a given case cannot be altogether ignored by this
Court, while making an order under Article 142. Indeed, these constitutional powers
cannot, in any way, be controlled by any statutory provisions but at the same time these
powers are not meant to be exercised when their exercise may come directly in conflict
with what has been expressly provided for in a statute dealing expressly with the
subject.”

3.1 Judicial Activism

According to Black’s Law Dictionary, judicial activism is a “philosophy of judicial decision-

making whereby judges allow their personal views about public policy, among other factors, to
guide their decisions.” Judicial activism can also be defined as when a Court takes some legislative
power away from legislators. Judicial Activism to define broadly, is the assumption of an active
role on the part of the judiciary.7 For example, giving a judgement that gay marriage is a
constitutional right in India would be “judicial activism.”

Judicial activism means going beyond normal constraints of the judiciary. According to Justice
J.S. Verma, judicial activism is an “active process of implementation of the rule of law, essential
for the preservation of a functional democracy”. However, in a vibrant democratic system, it can
also been seen as a phenomenon to curb executive tyranny and legislative misuse of power. The
judicial activism in India can he witnessed with reference to the review power of the Supreme

6
AIR 1998 SC 1895.
7
Chaterjee Susanta, “For Public Administration’ Is judicial activism really deterrent to legislative anarchy and
executive tyranny?”, The Administrator, Vol. XLII, April-June 1997, p. 9.
 6

Court under Article 32 and Article 226 of the Constitution particularly in Public Interest Litigation.
Jurists opine differently over the issue of judicial activism. Few of them are in support of judicial
activism while others are against it.

A few case laws can emphasize over the concept of judicial activism. For example, in the Golak
Nath case8, the Supreme Court by a majority of six against five laid down that the fundamental
rights as enshrined in Part-III of the Constitution are immutable and beyond the reach of the
amendatory process. The power of parliament to amend any provision in Part-III of the
Constitution was taken away.9 In the Kesavananda Bharati case10, a majority of seven against six,
held that under Article 368 of the Constitution, Parliament has amending powers. But the
amendatory power does not extend to alter the basic structure or framework of the Constitution.
The 13-judge Constitutional bench of the Supreme Court deliberated upon the limitations, if any,
of the powers of the elected representatives of the people and the nature of fundamental rights of
an individual. The court held that while the Parliament has wide powers, it did not have the power
to destroy or emasculate the basic elements or fundamental features of the constitution.11

The Supreme Court my exercise its powers in an appropriate way for enforcement of a
Fundamental Right. In the case of Bandhua Mukti Morcha v. Union of India12 , Supreme Court
observed:-

“It is not only the high prerogative writs of mandamus, habeas corpus, prohibition,
quo warranto and certiorari which can be issued by the Supreme Court but also writs
in the nature of these high prerogative writs and therefore even if the conditions for
issue of any of these high prerogative writs are not fulfilled, the Supreme Court would
not be constrained to fold its hands in despair and plead its inability to help the citizen
who has come before it for judicial redress, but would have power to issue any
direction, order or writ including a writ in the nature of any high prerogative writ.
This provision conferring on the Supreme Court power to enforce the fundamental

8
1967 AIR 1643, 1967 SCR (2) 762.
9
DR. BHURE LAL, “Judicial Activism and Accountability”, Siddharth Publications, ISBN : 81-7220-158-3,p38-39
10
His Holiness Kesavananda Bharati Sripadagalvaru and Ors. V. State of Kerala and Anr., (1973) 4 SCC 225
11
"Kesavananda Bharati ... vs State Of Kerala And Anr on 24 April, 1973". Indian Kanoon. para. 787.
Retrieved 2012-06-24.
12
AIR 1984 SC 802.
 7

rights in the widest possible terms shows the anxiety of the Constitution makers not to
allow any procedural technicalities to stand in the way of enforcement of fundamental
rights. The Constitution makers clearly intended that the Supreme Court should have
the amplest power to issue whatever direction, order or writ may be appropriate in a
given case for enforcement of a fundamental right.”

In its activist line, the Supreme Court has also imparted a new vigour to the process of
constitutional interpretation. In Vishaka & Ors. v. State of Rajasthan & Ors., the Supreme Court
held:

“In view of the above, and the absence of enacted law to provide for the effective
enforcement of the basic human right of gender equality and guarantee against sexual
harassment and abuse, more particularly against sexual harassment at work places,
we lay down the guidelines and norms specified hereinafter for due observance at all
workplaces or other institutions, until a legislation is enacted for the purpose. This is
done in exercise of the power available under Article 32 of the Constitution for
enforcement of the fundamental rights and it is further emphasized that this would be
treated as the law declared by this Court under Article 141 of the Constitution.”13

3.1.1 The Basic Structure Doctrine

Besides creating procedural devices, the Supreme Court's activism has enriched jurisprudence with
novel and seminal concepts such as the basic structure doctrine. According to this doctrine, any
amendment that alters the basic structure of the constitution is unconstitutional. The genesis of the
doctrine may be traced back to the case of Sajjan Singh v. State of Rajasthan, in which Justice
Mudholkar pondered thus:

“It is also a matter for consideration whether making a change in a basis feature of
the Constitution can be regarded merely as an amendment or would it be, in effect,
rewriting a part of the Constitution and if the latter, would it be within the purview of
Art. 368?”14

13
AIR 1997 SC 3011.
14
AIR 1965 SC 845.
 8

As if it were answering Justice Mudholkar's query, in Kesavananda Bharati v. State of Kerala,

the Supreme Court held, that the power to amend the Constitution, enshrined in the constitution,
did not comprehend the possibility of amending the most fundamental and essential features of the
constitution; according to the majority, the fundamental features of the constitution are rule of law,
secularism, federalism, equality, and democracy. The basic structure of the constitution cannot not
be altered by any amendment. The Supreme Court further added: “It does not include the power
to alter the basic structure, or framework of the Constitution so as to change its identity."15

3.1.2 History of Judicial Activism in India

As can be the case in the United States of America and the United Kingdom, ideological
confrontation based on the genuine concern for the welfare of the people arose between the
executive and legislature on the one hand and the judiciary on the other. A conservative executive
and a progressive judiciary, or a progressive Parliament and a conservative judiciary coexisting at
the same point of time, form the basis of judicial activism or judicial overreach, as opposed to
executive excesses or executive enthusiasm beyond the bounds of law. The evolution of the theory
of judicial activism in India can be traced back to the late 1960s or early 1970s during the time
when Mrs Indira Gandhi was the Prime Minister of India and an eminent lawyer and legal
luminary, Mohan Kumaramangalam, was the Union Minister. When the late Mrs Gandhi
attempted to introduce progressive socialistic measures in orde to implement her favourite slogan
“garibi hatao” by abolishing Privy Purses and privileges given to the erstwhile rajas and princes
of the princely states of pre-independent India, and nationalizing the 14 major banks so as to serve
the cause of the poorer sections of the society in a more meaningful manner, a conservative
judiciary did not take it kindly and struck down the relevant legislation as unconstitutional. What
happened to President Franklin Roosevelt during the period of the great depression and to his new
deal legislation happened in India to Mrs Gandhi. The judgment of the Supreme Court of India in
the Privy Purse Abolition and Bank Nationalisation cases was considered by Mrs Gandhi to be
judicial overreach, and the reaction was at once strong and unequivocal. It is believed that on the
advice of Mr Kumaramangalam the conservative and most senior judges of the Supreme Court
who participated in the majority judgment in the above cases were passed over for appointment to

15
AIR 1973 SC 1461.
 9

the post of Chief Justice of India. The dissenting judge, Mr A N Ray, who was fourth in the line
of seniority, was appointed, and this resulted in the resignation of the three senior judges (Justices
Hegde, Shelat and Grover). This marked the starting point of the theory of judicial activism that
actually resulted from the stand-off between the executive and the judiciary.16

4.1 Public Interest Litigation

The concept of locus standi has assumed much wider dimensions with the evolution of Public
Interest Litigation (PIL). When there is a question of public interest then a writ petition may be
filed by someone even though he may not be directly involved in that matter. Thus, the expression
Public Interest Litigation means a legal action initiated in a court of law for enforcement of public
interest.

PIL is not a product of any constitutional provision but it is a product of time and circumstances.
It evolved as a need to redress the public grievances. PIL has played a crucial role in the Indian
judicial system by achieving those objectives which had not been achieved through the practice of
conventional private litigation. PIL, for instance, offers a ladder to justice to disadvantaged
sections of society, provides an avenue to enforce diffused or collective rights, and enables civil
society to not only spread awareness about human rights but also allows them to participate in
government decision making. PIL could also contribute to good governance by keeping the
government accountable. In general, these are the cases where Parliament or a State legislature has
failed to address problems affecting the quality of life of the community or certain identifiable
segments of society, or the executive is alleged to have been guilty of non-use or misuse of its
powers touching the fundamental rights of individuals.

4.1.1 Origin of the PIL

Two judges of the Indian Supreme Court (Bhagwati and Iyer JJ.)17 laid down the groundwork in
the period from mid-1970s to early 1980s, for the birth of PIL in India. This included modifying
the traditional requirements of locus standi, liberalizing the procedure to file writ petitions,

16
R Shunmugasundaram, “Judicial activism and overreach in India”, Amicus Curiae, Issue 72, Winter 2007.
17
These two judges headed various committees on legal aid and access of justice during 1970s, which provided a
backdrop to their involvement in the PIL project. See Jeremy Cooper, ‘‘Poverty and Constitutional Justice: The
Indian Experience’’ (1993) 44 Mercer Law Review 611, 614–615.
 10

creating or expanding fundamental rights, overcoming evidentiary problems, and evolving

innovative remedies.18 Modification of the traditional requirement of standing was the sine qua
non for the evolution of PIL and any public participation in justice administration. The need was
more pressing in a country like India where a great majority of people were either ignorant of their
rights or were too poor to approach the court. Realizing this need, the Court held that any member
of public acting bona fide and having sufficient interest has a right to approach the court for
redressal of a legal wrong, especially when the actual plaintiff suffers from some disability or the
violation of collective diffused rights is at stake. Later on, merging representative standing and
citizen standing, the Supreme Court in Judges Transfer case held19:
‘‘Where a legal wrong or a legal injury is caused to a person or to a
determinate class of persons by reason of violation of any constitutional or
legal right . . . and such person or determinate class of persons is by reasons
of poverty, helplessness, or disability or socially or economically
disadvantaged position, unable to approach the Court for any relief, any
member of the public can maintain an application for an appropriate
direction, order or writ.’’

There are several instances when a PIL has resulted in a judgement which could not have been
possible otherwise. In Vineet Narain (I) v. Union of India20 the Court monitored the investigation
of corruption cases revealed through the seizure of the Jain diaries as the CBI and the revenue
authorities had failed to investigate. In Vineet Narain (II) v. Union of India,21 the petitioner
obtained directions from the Supreme Court to make the CBI an independent agency so that it may
function more effectively and investigate crimes and corruption at high places in public life. Both
the cases were brought before the Court through Public Interest Litigations. The Court held that

18
‘‘Poverty and Constitutional Justice’’ (1993) 44 Mercer Law Review 611, 616–632; See Shah,
‘‘Illuminating the Possible in the Developing World’’ (1999) 32 Vanderbilt Journal of Transnational Law 435, 467–
473; Vijayashri Sripati, ‘‘Human Rights in India Fifty Years after Independence’’ (1997) Denver Journal of
International Law and Policy 93, 118–125.
19
Gupta v Union of India (1981) Supp S.C.C. 87, 210.
20
(1996) 2 SCC 199
21
(1998) 1 SCC 226: AIR 1998 SC 889
 11

Vineet Narain had the locus standi to file a PIL to uphold the ‘rule of law’. On behalf of the Court,
Chief Justice Verma observed that “none stands above the law.”22

Ever-widening horizon of Art.21 is illustrated by the fact that the Court has read into it, inter alia,
the right to health, livelihood, free and compulsory education up to the age of 14 years, unpolluted
environment, shelter, clean drinking water, privacy, legal aid, speedy trial, and various rights of
under-trials, convicts and prisoners. Article 21 reads: ‘No person shall be deprived of his life or
personal liberty except according to the procedure established by law’. It has proved to be the
most fertile provision to mean more than mere physical existence; it ‘‘includes right to live with
human dignity and all that goes along with it’’23. It is important to note that in a majority of cases
the judiciary relied upon Directive principles of State Policy for such extension. The judiciary has
also invoked Art.21 to give directions to government on matters affecting lives of general public,
or to invalidate state actions, or to grant compensation for violation of Fundamental rights. The
final challenge before the Indian judiciary was to overcome evidentiary problems and find suitable
remedies for the PIL plaintiffs. The Supreme Court responded by appointing fact-finding
commissioners and amicus curiae.24

In Sheela Barse v. Union of India,25 the Court directed the Central Government to pay to Sheela
Barse, a social worker, a sum of Rs. 10,000/- as expenses, which were incurred during her visit to
different jails to gather information about the detention of children below 18 years. Similarly, in
Jiwan Mal Kochar v. Union of India,26 the Court awarded the cost of litigation to the petitioner
for highlighting the grievances faced by the passengers availing the services of the Indian
Railways. The petitioner himself was a passenger who voiced his grievances on behalf of the other
passengers availing the services of the Indian Railways. Again, in D.C. Wadhwa v. State of
Bihar,27 the Court directed the State of Bihar to pay Rs. 10,000/- to Dr. Wadhwa, a professor of
political science. Dr. Wadhwa had done substantial research regarding the repressive practices

22
(1998) 1 SCC 226, p. 236
23
Francis Coralie v Union Territory of Delhi AIR 1981 SC 746, 753.
24
H. Desai and S. Muralidhar, ‘‘Public Interest Litigation: Potential and Problems’’ in Kirpal et al.,
Supreme but not Infallible, pp.159, 165–167. The Court also held that the power to appoint Commissioners is not
constrained by the Code of Civil Procedure or the Supreme Court Rules.
25
(1986) 3 SCC 596.
26
(1984) 1 SCC 200.
27
AIR 1987 SC 579
 12

followed by the State of Bihar in repromulgating a number of ordinances without getting the
approval of the legislature. Dr. Wadhwa was not a resident of Bihar. But the Court held that the
petitioner as a member of the public has sufficient interest to espouse the cause on behalf of the
people of Bihar.

Justice P.N. Bhagwati observed:

“Whenever there is a public wrong or public injury caused by an act or omission

of the State or a public authority which is contrary to the Constitution or the law,
any member of the public acting bona fide and having sufficient interest can
maintain an action for redressal of such wrong or public injury.”28

Emphasizing the need of PIL, he further stated:

“If public duties are to be enforced and social collective “diffused” rights and
interests are to be protected, we have to utilize the initiative and zeal of public
minded persons and organizations by allowing them to move the court and act for
a general or group interest, even though, they may not be directly injured in their
own rights”29

“Judges have neither the power of sword nor of purse. Yet Judges have now become
roaming knights–errant on white chargers tilting at windmills of injustice to defend
the honour of the Dame of Justice.”30

4.1.2 History of Operation of the PIL

The history of public interest litigation is the history of the last four decades. It represents a
sustained effort on the part of the judiciary in India to provide access to justice for the deprived
and vulnerable sections of Indian humanity. With a legal architecture designed for a colonial
situation and a jurisprudence structured around a free market economy, the Indian judiciary could
not accomplish much in fulfilling the constitutional aspirations of the vast masses of poor and
under privileged segments of the society during the first three decades of freedom. The last two

28
S.P. Gupta v. Union of India, AIR 1982 SC 149: 1981 Supp SCC 190
29
Ibid, at 194
30
Justice B.N. Srikrishna, 8 SCC (J) 3 2005, p. 9
 13

decades judicial activism has opened up a new dimension of the justice process and given new
hope to the justice-starved millions of India. The seeds of the concept of public interest litigation
were initially sown in India by Krishna Iyer J., in 1976 in Mumbai Kamgar Sabha vs. Abdul
Thai31 and was initiated in Akhil Bharatiya Shoshit Karmachari Sangh (Railway) v. Union of
India32 , wherein an unregistered association of workers was permitted to institute a writ petition
under Art.32 of the Constitution for the redressal of common grievances. Krishna lyer J.,
enunciated the reasons for liberalization of the rule of Locus Standi in Fertilizer Corporation
Kamgar Union v. Union of India 33 and the idea of 'Public Interest Litigation' blossomed in S.P.
Gupta and others vs. Union of India34.

In the early days of PIL, most of the cases were related to the rights of disadvantaged sections of
society such as child labourers, bonded labourers, prisoners, mentally challenged, pavement
dwellers, and women. The relief was sought against the action or non-action on the part of
executive agencies which resulting in violations of FRs under the Constitution. The judiciary
responded by recognizing the rights of these people and giving directions to the government to
redress the alleged violations. PIL truly became an instrument of the type of social
transformation/revolution that the founding fathers had expected to achieve through the
Constitution.
During 1990’s, NGOs and lawyers started bringing matters of public interest to the courts on a
much regular basis. The range of issues which were raised in PIL also expanded tremendously—
from the protection of environment to corruption-free administration, right to education, sexual
harassment at the workplace, relocation of industries, rule of law, good governance, and the general
accountability of the Government. The response of the judiciary became much bolder and
unconventional. The courts did not hesitate to come up with detailed guidelines where there were
legislative gaps. For example, in Vishakha v. State of Rajasthan, the Supreme Court gave detailed
guidelines for sexual harassment at workplace. The courts took resort to judicial legislation when
needed, did not hesitate to reach centres of government power, tried to extend the protection of

31
AIR 1976 SC 1455.
32
AIR 1981 SC 298.
33
AIR 1981 SC 344.
34
AIR 1982 SC 149.
 14

FRs against non-state actors, moved to protect the interests of the middle class rather than poor
populace, and sought means to control the misuse of PIL for ulterior purposes.35
In the 21st century, anyone could file a PIL for almost anything. The way courts have reacted to
PIL in India is nothing but a reflection of what people expected from the judiciary at any given
point of time.

4.1.3 Problems of the PIL: Misuse and Overuse

It seems that the misuse of PIL in India, which started in the 1990s, has reached to such a stage
where it has started undermining the very purpose for which PIL was introduced. In other words,
the dark side is slowly moving to overshadow the bright side of the PIL project. This is highlighted
below:
(a) Political benefit: Generally, the opposition uses the PIL as a tool against the government in
power. It uses PIL to instill dissatisfaction in the minds of people against the government.
(b) Personal Gain: PIL is often known as Publicity Interest Litigation because of the fact that it is
used by lawyers and NGO’s for their personal gain and publicity. It is to be noted that-‘‘PIL is
being misused by people agitating for private grievances in the grab of public interest and
seeking publicity rather than espousing public causes.’’36 It is critical that courts do not allow
‘‘public’’ in PIL to be substituted by ‘‘private’’ or ‘‘publicity’’ by doing more vigilant gate-
keeping.
(c) Symbolic justice: Another major problem with the PIL project in India is that PIL cases often
do only symbolic justice. Two facets of this problem are the most prominent. First, judiciary
is often unable to ensure that its guidelines or directions in PIL cases are complied with, for
instance, regarding sexual harassment at workplace (Vishaka case37) or the procedure of arrest
by police (D.K. Basu case38).
No doubt, more empirical research is needed to investigate the extent of compliance and the
difference made by the Supreme Court’s guidelines. But it seems that the judicial intervention

35
Pritam Kumar Ghosh, JUDICIAL ACTIVISM AND PUBLIC INTEREST LITIGATION IN INDIA, Galgotias
Journal of Legal Studies , 2013 GJLS Vol.1, No.1, ISSN. 2321-1997.
36
Upadhyay Videh, Public Interest Litigation in India: Concepts, Cases, Concerns, LexisNexis Butterworths, New
Delhi, 2007.
37
Vishaka v State of Rajasthan AIR 1997 SC 3011
38
D.K..Basu v State of West Bengal AIR 1997 SC 610
 15

in these cases have made little progress in combating sexual harassment of women and in
limiting police atrocities in matters of arrest and detention. The second instance of symbolic
justice is provided by the futility of over conversion of DPSPs into FRs and thus making them
justiciable. Not much is gained by recognizing rights which cannot be enforced or fulfilled. It
is arguable that creating rights which cannot be enforced devalues the very notion of rights as
trump. So, the PIL project might dupe disadvantaged sections of society in believing that
justice has been done to them, but without making a real difference to their situation.
(d) Disturbing the constitutional balance of power: Although the Indian Constitution does not
follow any strict separation of powers, it still embodies the doctrine of checks and balances,
which even the judiciary should respect. However, the judiciary on several occasions did not
exercise self-restraint and moved on to legislate, settle policy questions, take over governance,
or monitor executive agencies. Prof. M. P. Jain cautions against such tendency: ‘‘PIL is a
weapon which must be used with great care and circumspection; the courts need to keep in
view that under the guise of redressing a public grievance PIL does not encroach upon the
sphere reserved by the Constitution to the executive and the legislature.’’39
(e) Overuse- PIL is now being used for frivolous issues also. In order to remain effective, PIL
should not be allowed to become a routine affair which is not taken seriously by the Bench,
the Bar, and most importantly by the masses: ‘‘The overuse of PIL for every conceivable public
interest might dilute the original commitment to use this remedy only for enforcing human
rights of the victimized and the disadvantaged groups.’’40

4.1.4 Probable Solutions to Judicial Activism

Former Solicitor General of India, Mr Dipankar P Gupta, wrote:
“There is a real danger that the activism of the courts may aggravate the activism
of the authorities. Today, inconvenient decisions are left by the executive for the
courts to take. Extensive use of judicial powers in the administrative filed may well,
in the long-run, blunt the judicial powers themselves. This is not a healthy situation.

39
Prof. Jain M.P., Indian Constitutional Law, Volume 2, 6th edn., LexisNexis Butterworths Wadhwa, Nagpur,
2010.
40
Prof. Sathe S.P., Judicial Activism in India: Transgressing Borders and Enforcing Limits, Oxford University
Press, UK, 2003.
 16

“What then is the solution? The task of the court should be to compel the authorities
to act and to pass appropriate executive orders rather than substitute judicial
orders for administrative ones. They must be told how their duties are to be
properly discharged and then commanded to do so. For this, they must be held
accountable to the court.”

The Supreme Court recently noted in Indian Drugs & Pharmaceuticals Ltd v Workmen41 that:
“the Supreme Court cannot arrogate to itself the powers of the executive or
legislature… There is a broad separation of powers under the Constitution of India,
and the judiciary, too, must know its limits”42

The Supreme Court has on various occasions highlighted the importance of judicial restraint for
the maintenance of the delicate balance of power of the different limbs in a democracy. Justice
Markandey Katju observed in Mattoo Priyadarshini’s case has explained thus:
“Under the Constitution, the legislature, the executive and the judiciary have their own broad
spheres of operation. It is, therefore, important that these three organs of the state do not encroach
upon the domain of another and confine themselves to their own, otherwise the delicate balance in
the Constitution will be upset… The judiciary must therefore exercise self-restraint and eschew
the temptation to act as a super legislature. By exercising restraint, it will only enhance its own
respect and prestige… Judicial restraint is consistent with and complementary to the balance of
power among the three independent branches of the state. It accomplishes this in two ways. First
it not only recognizes the equality of the other two branches with the judiciary, it also fosters that
equality by minimizing inter-branch interference by the judiciary… Second, it tends to protect the
independence of the judiciary… If judges act like legislators or administrators it follows that
judges should be elected like legislators or selected and trained like administrators. The touchstone
of an independent judiciary has been its removal from the political and administrative process…
Thus, judicial restraint complements the twin, overarching values of the independence of the
judiciary and the separation of powers.”43

41
(2007) 1 SCC 408.
42
Hindustan Times, June 15, 2007.
43
2005 (3) CTC 449.
 17

In the case of Raja Ram Pal v. Hon’ble Speaker ( Lok Sabha, 2007), a constitution bench of the
Supreme Court has acknowledged the power of the legislature to expel their members, that the
legislature is supreme in its own sphere, and it is the sole authority to deal with and regulate its
internal proceedings and other affairs. The Madras High Court has passed the following order in
the course of dealing with a PIL case which assailed an executive order regarding the free
distribution of colour television sets to eligible families in Tamil Nadu State. “The scheme is with
the proven object of uplift of the poor, needy and under privileged to render social justice, to make
them aware of the worldly happenings. A free hand should be given to the Government in spending
public money for such purposes. Courts cannot poke their nose into each and every activity of the
Government, particularly in the economic activities of the Government, under the garb of judicial
review”44

5.1. Conclusion
When Judges start thinking they can solve all the problems in society and start performing
legislative and executive functions (because the legislature and executive have in their perception
failed in their duties), all kinds of problems are bound to arise. Judges can no doubt intervene in
some extreme cases, but otherwise they neither have the expertise nor resources to solve major
problems in society. 45 When PIL was introduced in our country, it received a warm welcome from
everyone. However, very soon it developed some vices. It also received its share of criticisms. It
was criticized on the grounds that any person could file a PIL for his ulterior motives. The court
was overburdened by hearing PIL’s of every XYZ. Judges were also accused for encroaching upon
the spheres of legislature and the executive. Moreover, there is no mechanism by which court can
get its orders enforced.

However, the good that PILs (and judicial activism through PILs) have done by filling the vacuum
created due to the inability of the legislature and the executive must not be forgotten. It is also used
as a tool to fight for the underprivileged sections of the society. The Supreme Court, by pioneering

44
The Hindu, June 26, 2007.
45
http://www.grkarelawlibrary.yolasite.com/resources/FM-Jul14-LT-2-Jyoti.pdf (last accessed on June 27, 2015).
 18

Public Interest Litigation petitions (PILs), had made constitutional social rights to housing,
education, food, health and livelihood indivisible from the fundamental rights to life, equality and
religion.46 As Justice Krishna Iyer has rightly observed, “Judicial activism gets its highest bonus
when its order wipes some tears from some eyes.”47
At the end, it can be concluded that although there are several drawbacks to judicial activism but
the benefits can’t be ignored. Judicial activism should be prevented from becoming judicial
adventurism. Moreover, recent trends of judicial restraint has given a light of hope. Judicial
activism is a necessary evil which has many side effects but still it is necessary for the people who
may not be able to knock the doors of the court and justice continues to be distant moon for them.

___________________

46
The Hindu, New Delhi, May 4, 2015.
47
Azad Rickshaw Pullers Union v. State of Punjab, AIR 1981 SC 141.
 19

LIBERTY VERSUS EQUALITY: PARTNERS OR

COMPETITORS?
Eishan Agnihotri*

Tanisha Agarwal**

In a modern democratic setup of states, the constitution of any country plays a pivotal role in
shaping the country’s fate. It’s the various elements of the constitution which simultaneously
empower as well as abstain the State and its citizens from doing something. History has shown us
that justice, equality, liberty etc. are more than mere fundamental values, they are perspectives.
Meaning thereby, their interpretation might change for a society over time but none can disregard
their importance. Both the Fundamental Rights (FRs) as well the Directive Principles of State
Policy (DPSPs) enshrined in the constitution of India can be seen as an example of the above
mentioned fact. The researchers intend to portray an analytical description of the changing trends
in the Indian judiciary when it comes to a question of preference between FRs and DPSPs.
Directive principles lay down the various tenets of a welfare state. Whenever friction has arisen
between fundamental rights and directive principles, the judiciary’s answer to this clash has
varied from time to time depending upon the ever changing nature of the society. From strict non-
enforceability, to putting DPSPs at par with FRs and most recently the onset of judicial activism
which has not only adopted principles of harmonious construction and reconciliation but has also
given precedence to directive principles at various instances.

The right to equality guarantees equality before law as well as equal protection of law to all the
citizens of India except under some special circumstances. On the same hand, the right to freedom
empowers an individual to enjoy life according to his own will subject to reasonable restrictions
imposed by law. Looking at the Directive Principles, the principles like equal pay for equal work

*
Student of III Year, B.A.LL.B. (Hons.), Institute of Law, Nirma University. Email: 13bal003@nirmauni.ac.in.
**
Student of III Year, B.A.LL.B. (Hons.), Institute of Law, Nirma University. Email: 13bal064@nirmauni.ac.in.
 20

are a symbol of the same idea of equality that the constitution makers had but the State at all times
is at liberty to not strictly adhere to these principles as they are mere guidelines. This is what
makes them non-enforceable as well. Overall, both the FRs and DPSPs are a reminder of the
various values embarked in the preamble of the Constitution like Justice, Liberty, Equality and
Fraternity. Therefore, it is never a question of whether equality would triumph over liberty or vice
versa but rather their mutual co-existence which leads to the welfare of a society. Although the
ratio of their participation may change from time to time but none of them can be completely
ignored or neglected. This might be one of the reasons why FRs and DPSPs are often collectively
referred to as the “Conscience of the Constitution”. This is the driving force that has led the
researchers to undertake this particular research paper and they wish to depict the same by
analysing various judgments, legislations, judicial principles and the activist judicial trends
prevalent in the recent times.

1.1 Liberty and Equality within the Indian Constitution

“Equality is the soul of liberty; there is, in fact, no liberty without it.”

~ Frances Wright

Since time immemorial, there have existed certain basic fundamental values which have been a
part of every society. Though the understandings of these values have changed over the years, but
what has not changed is the importance of these values. They are a reminder of the fact that values
like justice, equality, liberty etc. are not just words but rather are perspectives and various societies,
regimes and modern states in the contemporary times, over the years have evolved through the
years on the ever evolving understandings of these same values. They can easily be identified in
the basic structure of every modern day democracy.

If looked in the Indian context, these values can be easily and clearly identified in the grund norm1
for every Indian law, i.e. the Constitution of India. The Preamble to the Constitution of India, as
often referred to as “the key to opening the minds of the framers of the constitution”, reflects these
values. The various articles and schedules of the Constitution are also based upon these principles

1
Mridushi Swarup, Kelsen’s Theory of Grundnorm, available at:
http://manupatra.com/roundup/330/Articles/Article%201.pdf.
 21

per se. Be it the question of imparting equality amongst the citizens of status and of opportunity2
or safeguarding their life and personal liberty, these foundational values lay the basis of the
constitutionality of the Indian Constitution.

But before proceeding to what the Constitution has to offer for safeguarding the interests of the
Indian citizens, and how there exists a conflict between some of the principles, it is imperative that
one understands these principles (mainly liberty and equality) correctly as they form a major part
of this research project. Liberty is derived from the Latin word liber, which means free. In other
words, it denotes a state where there exist no restraints.3 It signifies the freedom of the individual
to do whatever he likes but this is not an absolute concept. Without compliance to some common
rules, co-existence amongst people can seem farfetched. Laski has said that: “Historical experience
has evolved for us rules of convenience which promote right living; and to compel obedience to
them is a justifiable limitation to freedom”.4 Liberty, therefore, remains to be an important pre-
requisite in order to provide the individual with an environment, a non-hostile one, where he may
progress according to his wish, needless to say under the reasonable restrictions imposed by the
laws of the state.

It is inclusive of various types of liberties, be it natural liberty, referring to which Rousseau rightly
said: “What a man loses in his social contract is his natural liberty and an unlimited right to
anything which tempts him, which he can obtain”5, or civil liberty, whose importance was rightly
recognized during what a lot of people over the years have referred to as ‘the darkest hour of the
Indian democracy’, the period of emergency. The principles of liberty therefore, were embedded
even more firmly than before after this period when the Indians realized that the constitution is not
a dead document of almost zero significance for the general masses but can rather act as a weapon
to serve one’s interest in a “legal and democratic manner’. The Indian constitution also speaks of
the political liberty of the citizens also referred to as “constitutional liberty” by Leacock6, i.e. the
right of the people to choose their government.

2
Preamble, the Constitution of India.
3
ANUP CHAND KAPUR, PRINCIPLES OF POLITICAL SCIENCE 269 (S.Chand & Co. Ltd; 12 th Ed.) (1950).
4
LASKI, A GRAMMAR OF POLITICS 143 (HarperCollins Publishers Ltd; 5th ed. 1967) (1925).
5
Dick Arneson, Notes on Rousseau, The Social Contract 3 available at:
http://philosophyfaculty.ucsd.edu/faculty/rarneson/Courses/NotesonRousseauSocialContract.pdf.
6
LEACOCK, ELEMENTS OF POLITICAL SCIENCE, CHAPTER V (1906).
 22

The Declaration of the Rights of Man (1789) issued by the National Assembly of France quoted
that “Men are born, and always continue, free and equal in respect of their rights”7. A somewhat
similar statement can be found in the American Declaration of Independence: “We hold these
truths to be self-evident, that all men are created equal”8. The principle of equality lays a very
basic yet extremely powerful proposition that everyone falling under the same authority, usually a
state in the modern context, will be treated equally and no special privileges be it on the grounds
of caste, race, religion, sex, divine authority etc. will be offered to anyone. It can be seen that it in
a way eliminates the perks that anyone might receive on the basis of his ascribed status. Be it
Dicey’s Rule of law9 is also a portrayal of the same where he tends to suggest both equality before
law and equal protection of law, a linchpin of the Indian constitution firmly and suitably placed
under article 14 of the Constitution of India. 10

But what makes them extremely crucial in the case of democracies like India is not the presence
of these values individually but rather a web of interdependence amongst them. Liberty and
equality are not the rivals of each other; on the contrary they are complementary to each other and
the presence of one facilitates the functioning and effectiveness of the other. As rightly said by
Tawney, “a large measure of equality, so far being inimical to liberty, is essential to it”11. What
is meant actually is that it is never the question of which one of the two will triumph over the other
but rather it is their optimum co-existence that leads to welfare in the true sense in a welfare state.

With all said about these values, in order to achieve these ideals enshrined in the preamble and to
be a welfare state, one of the most important provisions are the Fundamental Rights (hereinafter
FRs) and The Directive Principles of State Policy (hereinafter DPSPs) contained in Part III and IV
of the Constitution respectively. They are an inseparable part of the Indian constitution and it is
almost impossible to imagine how the history of the Indian administrative system would have
been, had the FRs and the DPSPs been any different from what they are. The Constitution of India
has mainly laid two mandates to the Parliament, the Legislatures of the States and to all institutions

7
The Declaration of Rights of Man (1789).
8
The American Declaration of Independence (1776).
9
A.V. DICEY, INTRODUCTION TO THE STUDY OF THE LAW OF CONSTITUTION (London and New York,
Macmillan and co.) (1885).
10
INDIAN CONST. Art 14: Equality before law The State shall not deny to any person equality before the law or
the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion,
race, caste, sex or place of birth.
11
R.H. TAWNEY, EQUALITY, 245 (HarperCollins Publishers Ltd, 1965) (1931).
 23

of the government (as only a govt. Institution can be held accountable for the violation of the
fundamental rights12). They are:

1) Not to take away or abridge certain rights thereby imposing negative obligations on the
state (the FRs); and
2) To apply certain principles while looking after the policy formation of a state and
overlooking it’s functioning. (the DPSPs)

As discussed earlier, both the FRs as well as the DPSPs, contain the essence of the values
mentioned earlier. Let’s devote our attention to liberty first. For instance, Article 21 of the
Constitution13, perhaps the most crucial important FR, has been interpreted in recent years in a
manner which has led to the inclusion of a lot of aspects under the right to life. Cases like those of
Nargesh Meerza14 have taken it to such an extent that the right of a married woman to be
autonomous to decide her pregnancy is also a part of this immensely vast and often extremely
liberal principle. Another example in the same regard of liberty from the side of the DPSPs can be
taken to be Article 43-A of the constitution which gives the state a directive to ensure of the
participation of workers in the management of industries, in a way giving them the liberty to be a
part of the managerial aspects of the organizations they work in.15.

Coming to equality, Article 14 of the constitution16 is the linchpin of this principle in the context
of the Indian Constitution. It embarks upon the Rule of law propagated by Dicey, which mentions
that the citizens be subject to both equality before law, i.e. everybody be equal in the eyes of law,
as well as, equal protection of law meaning thereby that irrespective of the differences that may be
amongst the various classes of the society, law will safeguard the interests of all the citizens in an

12
INDIAN CONST. art. 12: Definition In this part, unless the context otherwise requires, the State includes the
Government and Parliament of India and the Government and the Legislature of each of the States and all local or
other authorities within the territory of India or under the control of the Government of India.
13
INDIAN CONST. art. 21: Protection of life and personal liberty No person shall be deprived of his life or
personal liberty except according to procedure established by law.
14
Air India Etc. Etc. v. Nargesh Meerza & Ors. Etc. Etc. SCR (1) (1982) 438.
15
INDIAN CONST. Art 43-A: Living wage, etc, for workers The State shall endeavour to secure, by suitable
legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a
living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and
cultural opportunities and, in particular, the State shall endeavour to promote cottage industries on an individual or
co operative basis in rural areas.
16
INDIAN CONST. Art 14: Equality before law The State shall not deny to any person equality before the law or
the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion,
race, caste, sex or place of birth.
 24

equal manner. The same can be said for Article 39-A17, as it provides for equal justice and free
legal aid.

The main purpose for pointing out that these various FRs and DPSPs are laid down upon the
foundation of the principles of liberty and equality is to point out to the reader that it is not a
competition or a race amongst the FRs or the DPSPs. Both of them have played an important part
in the process of law making as well as governance of India. This is the reason why Chandrachud
C.J. in the landmark judgement in the case of Minerva Mills18 opined that “the Fundamental Rights
are not an end in themselves, but are, means to an end”. Further it has also been said that the FRs
and the DPSPs together constitute the conscience of the constitution.

In the same case itself, the court took a view that the Indian Constitution relies heavily upon the
balance between both the FRs as well as the DPSPs. Furthermore, the court also held that to give
primacy of one over the other will disturb the harmony among the two which is considered to be
the basic feature of the Indian Constitution. Meaning thereby, the court clearly identified the
complementary nature of the two parts and recognized them at being at par with each other rather
that the strict principle that the DPSPs aren’t enforceable in a court of law.

This in itself, in a way, is the proof of the fact that both the provisions rely heavily on each other.
But this isn’t always the case. Over the years, the judiciary has struggled and given different takes
upon thes questions: What will be the outcome when the two, i.e. FRs and the DPSPs stand in
contradiction to one another? Will the judiciary stick to the literal and strict interpretation or will
it consider the true essence of the constitution?

2.1 Judicial Trends

There has been a perpetual controversy pertaining to the constitutional relationship between
Fundamental Rights and Directive Principles of State Policy. Whenever fundamental rights and
directive principles have been put against each other in the past, the judiciary’s attitude has varied
and evolved itself over time. Can a directive principle be given primacy over a fundamental right

17
INDIAN CONST. Art. 39- A: The State shall secure that the operation of the legal system promotes justice, on a
basis of equal opportunity, and shall, in particular, provide free legal aid, by suitable legislation or schemes or in any
other way, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or
other disabilities.
18
Minerva Mills v. Union of India, AIR (1980) SC 1789
 25

when they both come into conflict with each other? Or is the non-enforceability of directive
principles to be emphasized and accordingly they are to be subordinated? Or can both of them be
put at par and treated as co-equals? The answers to these questions given by the judiciary have
ranged from irreconcilability and supremacy of fundamental rights, to harmonious construction
and integration, and in some of the more recent cases the directive principles have been given
primacy. The genesis of this debate came from the question of enforceability. While Part III is
enforceable in a court of law, Article 37 expressly states that Part IV is not enforceable in court.19
This non-enforceability was stressed upon and it was advocated that DPSPs are not law and if the
State fails to enforce them, there cannot be any legal consequences. Any law passed which gives
effect to the directive principles, has to keep in mind all the constitutional limitations like the
fundamental rights and in case it does not do so, then it is unconstitutional.20

Early Supreme Court decisions gave paramount importance to fundamental rights based on this
constitutional provision. Soon after the Constitution came into force, in the case of State of Madras
v. Champakam Dorairajan,21 a Brahmin filed an application to the High Court under Article 226
of the Constitution for protection of her fundamental rights under Article 15(1) and Article 29(2)
as she was denied a seat in the medical college on the ground that there were 2 seats reserved for
Brahmins which were already filled. It was held that Article 37 expressly states that directive
principles are unenforceable and therefore cannot override the fundamental principles contained
in Part III. The Chapter of Fundamental Rights is sacrosanct and cannot be curtailed by any
legislative or executive act or order, except to the extent provided in the Articles under Part III.
The directive principles should obey, and run subsidiary to the fundamental rights. That same year,
Parliament amended the Constitution to introduce Article 15(4), specifically allowing for
affirmative action in educational institutions. In Venkataraman v. State of Madras22, which is the
companion case to, the petitioner who was a Brahmin contended that the Public Service
Commission had not considered his application for the post of district munsif on merits but applied
the rule of communal rotation. It was held by the Supreme Court that the Madras government’s

19
INDIAN CONST., art. 37; V. N. SHUKLA, CONSTITUTION OF INDIA (Eastern Book Company, 12th ed.
2013).
20
H.M. SEERVAI, CONSTITUTIONAL LAW OF INDIA Vol. 2, Chap. XVII (Universal Law Pub Co. Ltd. 4 th
Ed., 2013) (1993).
21
AIR 1951 SC 226.
22
AIR 1951 SC 229.
 26

order to give preference to the Harijans and backward classes was unconstitutional for it was
discriminatory in relation to other backward classes.

In 1967, came Golak Nath’s case23 where again, it was reiterated that fundamental rights cannot
be diluted to implement the directive principles. Subsequently, in the 24th Amendment Act, 1971
the Parliament amended Article 13 and Article 368 of the Constitution. By this amendment, it was
held that the Parliament had the power to amend any part of the constitution including the
fundamental rights and the word ‘law’ used in Article 13 does not include constitutional
amendments.

Slowly and gradually, the Supreme Court’s view on the relation between Part III and Part IV began
to change. It started giving value to the directive principles and harmonizing the two. Even though
it maintained that directive principles are not enforceable, it was observed that “Where two judicial
choices are available, the construction in conformity with the social philosophy of the Directive
Principles has preference.”24 Thus, the courts started actually implementing the directive principles
and thus prevented them from becoming a dead rope of sand. Of course, the directive principles
were imbibed in the constitution by our constitution makers because they wanted them to be
implemented and did not intend for them to become redundant. Although it was maintained that
directive principles are subordinate to fundamental rights, it was a step forward from the previous
views of they being strictly non-enforceable.

The doctrine of harmonious construction came to be introduced as a new approach to resolve the
conflict. The doctrine follows a simple rule that whenever two or more laws are in conflict with
each other, they should be read as a whole and in such a manner so that effect can be given to both.
In Mohd. Hanif Qureshi v. State of Bihar25, the court quashed a prohibition on the slaughter of
all cattle, on the ground that it was an unreasonable restriction on the right to carry on a butcher’s
business, as guaranteed by Article 19(1)(g), notwithstanding the Directive under Article 41.
However, it was stated that the Constitution has to be read harmoniously, and the Directive
principles must be enforced, but it must not be done in such a way that its laws takes away or
abridges the fundamental rights.

23
1967 AIR 1643.
24
Mumbai Kangar Sabha v. Abdulbhai, AIR 1976 SC 1455.
25
1958 AIR 731.
 27

A similar view was taken in In Re Kerala Education Bill26 where the court held that a law which
sought to force minority education institutions for children not to charge fees would infringe the
fundamental right guaranteed to such institution by Article 30, even though the State was charged
by Article 45 with the duty to provide free education for children below 14. However, Das C.J.
said that the courts must not entirely ignore the Directive Principles and the principle of
harmonious construction should be embraced to give effect to both Fundamental Rights and
Directive Principles as much as possible. It was indicated that while interpreting a statute, the
courts would look for the light to the ‘lode star’ of Directive Principles.

Thus, without making the directive principles making completely justifiable, the judiciary started
to implement the values underlying them to the extent that it was possible. The Supreme Court
realized that there is no need to think that there is a conflict on the whole between FRs and DPSPs.
They are complementary and supplementary to each other.27 Since then, the judicial view towards
directive principles has become more positive and affirmative in nature. They came to be regarded
as co-equals.

In Kesavananda Bharti v. State of Kerala28, Justice Hegde and Justice Mukherji29 observed that
“the fundamental rights and directive principles constitute the ‘conscience of the constitution’.
There is no antithesis between the fundamental rights and directive principles and one supplements
the other.”

In State of Kerala v. N.M Thomas30, it was held that the Directive Principles and Fundamental
rights should be interpreted in harmony with each other and every attempt should be made by the
court to resolve any apparent in consistency between them.

In Pathumma v. State of Kerala31, the Supreme Court has highlighted that the object of the
directive principles is to fix certain socio-economic goals for immediate accomplishment by

26
AIR 1958 SC 956.
27
Chandra Bhavan Boarding and Lodging, Bangalore v. State of Mysore, AIR 1970 SC 2042 at 2050.
28
AIR 1973 SC 1461.
29
Id. at 1641.
30
AIR 1976 SC 490.
31
AIR 1978 SC 771.
 28

bringing about a non-violent social revolution. The constitution aims at bringing about synthesis
between Fundamental rights and the Directive principles.

Subsequently, in Ashoka Kumar Thakur v. Union of India,32 it was opined by Chief Justice
Balakrishna said that no discrimination can be made between the two parts of the Constitution.
The Fundamental rights embody political and civil rights whereas directive principles stand for
social and economic rights. Just because directive principles are non-justiciable does not mean that
they are of subordinate importance.

Chief Justice Chandrachud, in Minerva Mills Limited v/s Union of India33 held that the
constitution was established on the bed-rock of balance between part III and part IV. To give
complete primacy to one over the other was to disturb the harmony of the constitution. This
harmony and balance between fundamental rights and the directive principles is a crucial part of
the basic structure of the constitution. Both the fundamental rights and directive principles of the
state policy are exemplifying the philosophy of our constitution, the philosophy of justice- social,
economic and political. They are “the two wheels of the chariot as an aid to make social and
economic democracy a truism.”34

In Bandhua Mukti Morcha v/s Union of India35, the practice of following strict legalism in the
application of laws implementing directive principles, which in turn endorse fundamental rights,
has strengthened the role of directive principles in the inter-relationship doctrine.

In Unnikrishnan v. state of Andhra Pradesh36, Justice Jeevan Reddy held that the fundamental
rights and directive principles are supplementary and complimentary to each other, and not
exclusionary of each other, and that the fundamental rights are but a means to achieve the goal
indicated in the directive principles that “fundamental rights must be construed in the light of the
directive principles.”37

32
(2008) 6 SCC 1, at page 515.
33
1980 AIR 1789.
34
Id.
35
1984 AIR 802.
36
1993 AIR 2178.
37
Id.
 29

In Dalmia Cement’s case38, it has been emphasized that the core of the obligation of the
constitution to the social revolution through rule of law lies in effectuation of the fundamental
rights and directive principles as supplementary and complementary to each other. The preamble
to the constitution, fundamental rights and directive principles-‘the trinity’-are the conscience of
the constitution.

Thus, the new phase that emerged in the Indian judiciary is of integration of the fundamental rights
and directive principles. They are no longer regarded as being exclusionary to one another, but
supplementary and complementary to each other. Thus, so far we have seen stages ranging from
irreconcilability to giving some importance to the directive principles and the values they are based
upon, to harmonious construction and treating them as co-equals which are exclusive of each other.
Both of them have to be read together. Directive principles are now used to define the scope of
and broaden the fundamental rights. The biggest beneficiary of this new trend is Article 21. By
reading Article 21 with the directive principles, the Supreme Court has derived numerous
fundamental rights. Few of these are- The Right to live with human dignity, Right to enjoy
pollution free water and air and environment, Right to shelter, Right to education and Right to
Privacy.

Directive principles have also come to be regarded as relevant for determining the scope of
‘reasonable restrictions’ under Article 19. A restriction that promotes any of the objects of the
directive principles is reasonable.

In Laxmi Khandsari v. State of Uttar Pradesh39, the Supreme Court has stressed that an
importance consideration which the courts must keep in mind in determining the reasonableness
of a restriction is that it should not disregard the directive principles. The directive principles intend
to establish an egalitarian society so as to bring about a welfare state and these principles should
be kept in mind when deciding whether or not the restrictions are reasonable under Article 19.

Ban on slaughter of cows, bulls and bullocks to make sure that the public has a sufficient supply
of milk, and to safeguard availability of sufficient number of draught cattle for agricultural tasks

38
(1996) 10 SCC 104.
39
1981 AIR 873.
 30

was held reasonable under Art 19(6) in view of the directive principle contained in Articles 47 and
48.

In Welfare Assn., A.R.P. v. Ranjit P. Gohil40, the term “transfer of property” in entry 6 and the
term “contrast” in entry 7 of list III were broadly construed relying on the directive principles of
state policy especially those contained in Article 38 and 39 of the constitution.

In short, read with several directive principles, Article 21 has emerged into a multi-dimensional
fundamental right. Article 14 and Article 39(d), when read together, have resulted in the
development of the principle of equal pay for equal work.

Lastly, reference may be made to Article 31C. Article 31C as ratified in 1972, through the
constitution (twenty-fifth) amendment act sought to give pre-eminence to Articles 39(b) and (c)
over the fundamental rights contained in Articles 14, 19 and 31. The Supreme Court declared the
Amendment valid in the Kesavananda case. The court stressed that there is no conflict between
the directive principles and the fundamental rights as they complement each other in targeting at
the same goal of bringing about a social revolution and the creation of a welfare state, which is
visualized in the preamble. The courts therefore have a obligation to interpret the constitution as
to guarantee implementation of the directive principles and to blend the social objectives
underlying therein with individual rights. Justice Mathew went farthest in assigning to the directive
principle, a substantial place in the constitutional structure. According to him, “In building up a
just social order it is sometimes imperative that the fundamental rights should be subordinate to
directive principles. Economic goals have an incontestable claim for priority over ideological ones
on the ground that excellence comes only after existence. It is only if men exist that there can be
fundamental rights.”41

The courts off late have played an active role in assisting socio-economic development at a large
level which requires work at the ground level. Thus, in light of the advantage of the society at
large, the Directive Principles may be used to determine the scope of public interest to limit the
magnitude of Fundamental Rights. However, this does not mean that the directive principles
should be given preference over the fundamental rights. It is the opinion of many that directive

40
(2003) 9 SCC 358, at Page 381.
41
Supra note 10.
 31

principles were enacted to show the way in which fundamental rights should be enforced. The
cases should be decided in such a manner that both these parts are put to their best use and their
underlying values are highlighted. Only then, will our country succeed in achieving its goal of
socio-economic development and moving towards a welfare state. In the words of Justice Krishna
Iyer, “Indian humanity, having given to itself a Constitution, has, by that act, dedicated itself to
progress through law, the content and conscience of which in the contemporary context is gathered
from Part IV thereof.”42

3.1 Conclusion

Since there has been a substantive amount of discussion regarding what this situation of the tussle
or rather a stand-off between the fundamental rights and directive principles, it is very much
important to find a path where both of these principles whose harmonious co-existence is
considered to be one of the basic features of the Indian Constitution, actually co-exist. Hence, these
are the suggestions which might help the judiciary to give the country a much more clear
perspective when it comes to a conflict between the two:

(a) It is almost impossible to develop a straitjacket formula which works as a panache in each
and every case. It ultimately should come down to what the need of a particular case is.
For instance, if restricting the Directive Principles to being non-enforceable in a particular
case serves the cause of justice and welfare in that scenario then they should remain non-
enforceable for that particular case. What actually should be prevented is developing this
into a formula and applying it to every case.
(b) There should be a separate forum for listening to such matters. Jurists like Upendra Baxi
have agreed over the years that every judge is not fit for every scenario. A special tribunal
or forum should be constituted which specifically listens to matters of such nature.
(c) The biggest problem in this regard remains the fact that this particular issue is still viewed
with the nomenclature of “Fundamental Rights v. Directive Principles” when it should
actually be “Fundamental Rights and Directive Principles”. The constitution makers have
kept both the provisions with the objective and the aspiration that they will serve both. The
government as well as the people. Hence, it is the responsibility of the appropriate

42
V.R. KRISHNA IYER, THE LEGAL PROCESS AND PLANNED DEVELOPMENT, 7 JCPS, 2 (1973).
 32

authorities to make sure that a harmonious co-existence amongst them is possible. As

discussed earlier, in terms of liberty and equality, fundamental rights and directive
principles as well are complementary to each other. They facilitate each other’s working
in a manner which pushes them to their highest potential. Hence, preferring one over the
other is just underutilizing a vast resource.

It is not the case that attempt to make the DPSPs justifiable hasn’t been made. An amendment had
been moved in the constituent assembly in regard for the same. This step although wasn’t
successful and was turned down, claiming that there was no use in getting carried away by
“sentiments”. This remains the fact that a court of law cannot strictly speaking enforce a DPSP,
but this wasn’t the original concept that gave strength to this provision. It was thought to be the
opinion of the public that gave this provision its teeth. The basic idea was that since they are the
principles of governance that more or less make sure of the welfare of the people, every
government in power will follow them. Elections which would be held regularly would have made
sure that if the above laid proposition lies in vain, then the culprit government be not allowed to
enjoy governance for the next tenure.

Pandit Jawharlal Nehru, while pointing out on the issue of a state of conflict between the directive
principles and the fundamental rights observed that:

“The Directive Principles of State Policy represent a dynamic move towards a certain
objective. The Fundamental Rights represent something static to preserve certain
rights which exist. Both again are rights. But somehow and sometime, it might so
happen that the dynamic movement and the static standstill do not quite fit into each
other.”43

Hence, what it means is, in case of a conflict the judiciary has to take due notice of the Directive
Principles of State Policy.

Judges like Bhagawati and V.R. Krishna Iyer can be viewed as what one might refer to as the
activist judges. By activist judges what is meant is that the judges who are willing to add new
dimensions and be interpretative in their approach while adhering to a particular matter in question.

43
LSD (1951) II Cols. 8822-23.
 33

What becomes here of the utmost importance is these activist judges only, over the years, through
their interpretations have given such a wide dimension to our Constitution.

What one might say in the end regarding this particular debate in regard to the question of
delivering a preferential treatment to either of the two, i.e. the FRs or the DPSPs, is that there must
have existed a rationale behind making both, Fundamental Rights and directive Principles part of
the Indian Constitution. If talked in terms of a welfare state, the concept of welfare cannot be truly
realized until and unless both, the citizens and the sovereign in power are assigned with their
respective rights and duties. For a citizen, fundamental rights offer him a blanket and guarantee
him certain inalienable rights. Directive Principles on the other hand, actually strengthen the
citizen’s case by ensuring that a fair government with fair policies will govern him in a fair manner.
Hence, the question of liberty or equality or rather Fundamental Rights or Directive Principles is
in itself a false proposition. A body cannot function properly without the presence of all of its
senses. If one is taken out, the entire body suffers. Similarly, the Constitution of India which is
often referred to as a “living document” because of its ever evolving nature is served by senses
like Fundamental Rights and Directive Principles. Choosing one over the other will not only be
erroneous but will also be a hindrance to making a society where the Constitution works at its
optimum level. Hence what is really needed to be done is finding a mid-way to this conflict which
leads to a welfare state in the true sense. These provisions are of no use if the only thing that they
deliver is a sense of superiority over the other. It is not a race where the powerful will be rewarded
and the weak will be consoled, but is rather a joint venture that aims towards a satisfied customer
of the justice delivery system. Hence, as once Frances Wright rightly once rightly said, “Equality
is the soul of liberty; there is, in fact, no liberty without it.” Meaning thereby, the existence of one
depends upon the uninterrupted services of the other. Let both of them complement each other,
you will have a swift and satisfied society within an efficient justice delivery system.

_________________
 34

THE INCREASING IMPORTANCE OF THE DIRECTIVE

PRINCIPLES OF STATE POLICY AND JUDICIAL
ACTIVISM
Saif Rasul Khan*

1.1 Introduction
The Constitution of India is the most important document for independent India. The Preamble in
the Constitution of India states a number of goals and ideals. In order to achieve the same
enshrined and to establish a welfare state, Fundamental Rights and the Directive Principles of State
Policy (“DPSP”) have been provided for in the Constitution. The Fundamental Rights are
enumerated in Part III, Articles 12 to 35 and the DPSPs are stated in Part IV, Articles 36 to 51.
Fundamental Rights are the most important and crucial rights for any citizen. A human being
cannot survive in dignified manner in a civilized society without these rights. Fundamental Rights
are known as “basic rights” which every citizen is entitled to by virtue of the Constitution. They
are justiciable, i.e. they can be referred to as a matter of right in the Court of law. They are also
called as “individual rights or negative rights” and impose negative obligations on the state not to
encroach upon individual liberty.

Part-IV of the Constitution deals with Directive Principles of State Policy. They are positive rights
and impose positive obligations on the state. They are not justiciable and thus citizens cannot
demand the rights, unlike Fundamental Rights. These are the recommendations to the state in
Legislative, Executive and Administrative matters. (State means Legislative and Executive organs
of the Central and State governments, all local authorities and all other public authorities in the
country). In GOI (Government of India) Act, 1935 “Instruments of Instructions” enumerated and
in the Indian Constitution, they are called Directive Principles of State Policy. DPSP embody the

*
Student of V Year, B.A.LL.B. (Hons). Government Law College, Mumbai. Email: saifrasulkhan@gmail.com.
 35

concept of a welfare state. Many of the provisions in Part IV correspond to the provisions of the
international Covenant on Economic Social and Cultural Rights (ICESCR).

At the time of drafting of the Constitution, it was initially felt that all of the rights in the DPSP
should be made justiciable. However, a compromise had to be struck between those who felt that
the DPSPs could not possibly be enforced as rights and those who insisted that the Constitution
should reflect a strong social agenda. Consequently, Article 37 of the Constitution declares that
the DPSP, “shall not be enforceable by any court, but the principles therein laid down are
nevertheless fundamental in the governance of the country and it shall be the duty of the state to
apply these principles in making laws”.

2.1 Fundamental Rights versus DPSPs

Right from the time the Constitution came into force, there has been a situation of legal conflict
between Fundamental Rights and duty of State to implement the DPSPs. The very first case being
that of enactment of laws for Zamindari Abolition which came into direct conflict with
Fundamental Right of Property which was subsequently removed from Part III of the constitution
and placed under Article 300A. The Supreme Court in the case of Champakam Dorairajan v.
State of Madras 1(1951) held that DPSPs cannot override the provisions of Part III of the
constitution. The DPSPs have to run subservient to the Fundamental Rights and the DPSPs must
be in conformity with the Fundamental Rights:

“The Directive Principles of the State Policy, which by Article 37 are expressly
made unenforceable by a court cannot override the provisions found in part III
(Fundamental Rights) which, notwithstanding other provisions, are expressly
made enforceable by appropriate writs, orders or directions under Article 32. The
chapter on fundamental rights is sacrosanct and not liable to be abridged by any
legislative or executive act or order, except to the extent provided in the
appropriate Article in part III. The Directive Principles of state policy have to
conform to and run as subsidiary to the chapter on Fundamental Rights.”2

1
Champakam Dorairajan v. State of Madras, AIR 1951 SC 226.
2
Id.
 36

With the passage of time, the Supreme Court came to adopt the view that although Directive
Principles, as such, were legally non-enforceable, nevertheless, while interpreting a statute, the
courts could look for light to the “lode star” of the Directive Principles. “Where two judicial
choices are available, the construction in conformity with the social philosophy” of the Directive
Principles has preference. The courts therefore could interpret a statute to implement Directive
Principles instead of reducing them to mere theoretical ideas. This is on the assumptions that the
lawmakers are not unmindful or obvious of the Directive Principles. Further, the courts also
adopted the view that in determining the scope and ambit of Fundamental Rights, the Directive
Principles should not be completely ignored and that the courts should adopt the principles of
harmonious construction and attempt to give effect to both as far as possible. Thus, Supreme Court
in the Re Kerala Education Bill (1957)3 had propounded the Doctrine of Harmonious
Construction to avoid a situation of conflict while enforcing DPSPs and the Fundamental Rights.
As per this doctrine the court held that there is no inherent conflict between Fundamental Rights
and DPSPs and the courts while interpreting a law should attempt to give effect to both as far as
possible i.e. should try to harmonize the two as far as possible. The court further said that where
two interpretation of the law are possible, and one interpretation validates the law while other
interpretation makes the law unconstitutional and void, then the first interpretation, which validates
the law, should be adopted. However, if only one interpretation is possible which leads to conflict
between DPSPs and Fundamental Rights, the court has no option but to implement Fundamental
Rights in preference to DPSPs. The Parliament responded by amending and modifying various
Fundamental Rights which were coming in conflict with DPSPs. The Supreme court, however, in
the Golaknath Case4(1967) pronounced that Parliament cannot amend the Fundamental Rights to
give effect to the DPSPs. The Parliament responded again by bringing 25th Amendment Act of
the constitution, which inserted Article 31C in Part, III. Article 31 C contained two provisions:

a. If a law is made to give effect to DPSPs in Article 39(b) and Article 39(c) and in the process,
the law violates Article 14, Article 19 or Article 31, and then the law should not be declared as
unconstitutional and void merely on this ground.

b. Any such law that contains the declaration that it is to give effect to DPSPs in Article 39(b)

3
Re Kerala Education Bill, 1959 1 SCR 995.
4
Golaknath v. State of Punjab, AIR 1967 SC 1634.
 37

c. Article(c) shall not be questioned in a court of law.

The above Amendment was challenged in the Keshavananda Bharati Case5(1973). In this case,
the second clause of Article 31C was as declared as unconstitutional and void as it was against the
Basic Structure of the constitution propounded in this case itself. However, the SC upheld the first
provision of the Article 31C. In Keshavananda Bharti v. State of Kerala, Judges Hegde and
15
Mukherjee observed that:

“the fundamental rights and directive principles constitute the “conscience of the
constitution” there is no antithesis between the fundamental rights and directive
principles and one supplements the other.”

Judges Shelat and Grover observed in their judgment that:

“both parts III (fundamental rights) and IV (directive principle) have to be

balanced and a harmonized then alone the dignity of the individual can be
achieved they were meant to supplement each other”.

The 42nd Amendment added new Directive Principles, viz. Article 39A, Article 43A and Article
48A. The 42nd Amendment gave primacy to the Directive Principles, by stating, “No law
implementing any of the Directive Principles could be declared unconstitutional on the grounds
that it violated any of the Fundamental Rights”. It extended the scope of above first provision of
Article 31C by including within its purview any law to implement any of the DPSPs specified in
Part IV of the constitutional and not merely Article 39(b) or (c). However, this extension was
declared as unconstitutional and void by the Supreme Court in the Minerva Mills Case6(1980). In
its judgement, the Supreme Court declared two provisions of the 42nd Amendment, which prevent
any constitutional amendment from being “called in question in any Court on any ground”, and
accord precedence to the Directive Principles of State Policy over the Fundamental Rights of
individuals respectively, as unconstitutional. Justice Chandrachud said that the Fundamental
Rights “are not an end in themselves but are the means to an end.” The end is specified in the
Directive Principles. It was further observed in the same case that the Fundamental Rights and

5
Keshavnanda Bharti v. State of Kerala, (1973) 4 SCC 225.
6
Minerva Mills v. Union of India, AIR 1980 SC 1789.
 38

Directive Principles together “constitute the core of commitment to social revolution and they,
together, are the conscience of the constitution.” The Indian constitution is founded on the bedrock
of “balance” between the two.

Maneka Gandhi v. Union of India7 was a landmark case. The case involved the refusal by the
Government to grant a passport to the petitioner, which thus restrained her liberty to travel. In
answering the question whether this denial could be sustained without a pre-decisional hearing,
the Court proceeded to explain the scope and content of the right to life and liberty. The question
posed and the answer given now was: ‘Is the prescription of some sort of procedure enough or
must the procedure comply with any particular requirements? Obviously the procedure cannot be
arbitrary, unfair or unreasonable’. Once the scope of Article 21 had been explained, the door was
open to its expansive interpretation to include various facets of life.

In 1981, in Francis Coralie Mullin v. The Administrator8, the Supreme Court declared that,

“The right to life includes the right to live with human dignity and all that goes
with it, namely, the bare necessaries of life such as adequate nutrition, clothing
and shelter and facilities for reading, writing and expressing oneself in diverse
forms, freely moving about and mixing and commingling with fellow human beings.
The magnitude and components of this right would depend upon the extent of
economic development of the country, but it must, in any view of the matter, include
the bare necessities of life and also the right to carry on such functions and
activities as constitute the bare minimum expression of the human self.”

The Supreme Court said in State of Kerala v. N.M Thomas9, that the Directive Principles and
Fundamental rights should be construed in harmony with each other and every attempt should be
made by the court to resolve any apparent in consistency between them.

In Pathumma v. State of Kerala10, the Supreme Court has emphasized that the purpose of the
directive principles is to fix certain socio-economic goals for immediate attainment by bringing

7
Maneka Gandhi v. Union of India, 1978 SRC (2) 621
8
Francis Coralie Mullin v. The Administrator, AIR 1981 SC 746.
9
State of Kerala v. N.M Thomas, AIR 1976 SC 490: (1976) 2 SCC 310
10
Pathumma v. State of Kerala, AIR 1978 SC 771 : (1978) 2 SCC 1
 39

about a non-violent social revolution. The Constitution aims at bringing about synthesis between
Fundamental Rights and the Directive principles.

The present position is that only Article 39 (b) and Article 39 (c) can be given precedence over
Article 14, 19 and not all the Directive Principles. The Directive Principles and Fundamental
Rights are not regarded as exclusionary of each other. They are regarded as supplementary and
complementary to each other. In course of time, the judicial attitude has veered from
irreconcilability to integration of the Fundamental Rights and the Directive Principles. The
Directive Principles which have been declared to be “fundamental” in the governance of the
country cannot be isolated from Fundamental Rights. The Directive Principles have to be read into
the Fundamental Rights. The “right to education” furnishes an example of such relationship.

3.1 Judicial Activism

3.1.1 The Origin of the PIL

The internal emergency that was in force between 1975 and 1977 and its consequences contributed
extensively to the change in the judiciary’s insight of its role in the working of the
Constitution. The period of the emergency witnessed major violations of basic rights of life and
liberty. There were also manifest violations of the right to freedom of speech and expression. The
popularly elected government was weak and it did not last very long. It collapsed by 1978/1979,
which was when the judiciary initiated the public-interest litigation (PIL) movement. The
development of the jurisprudence of Economic, Social and Cultural Rights is inextricably
connected to this noteworthy progress. The post-emergency period provided the accurate setting
for the judiciary to redeem itself as a protector and enforcer of the rule of law. PIL was the
necessary tool and this development helped the judiciary to reach out to the vast majority of the
citizens, differing in social and economic status. The insuperable walls of procedure were taken
apart and the doors of the Supreme Court were made open to people and issues that had never
reached there before. By relaxing the rules of standing and procedure to the point where even a
postcard could be treated as a writ petition, the judiciary ushered in a new phase of activism where
litigants were freed from the unnecessary formalities. This development contributed significantly
to raise the status of DPSPs in our country. A number of social issues were taken up the Court,
which under the cover of Fundamental Rights helped in the implementation of DPSPs. The
 40

combined effect of the expanded interpretation of the right to life and the use of PIL as a tool led
the court into areas where there was a crying need for social justice. These were areas where there
was a direct interaction between law and poverty, as in the case of bonded labor and child labor,
and crime and poverty, as in the case of under trials in jails. In reading several of these concomitant
rights of dignity, living conditions, health into the ambit of the right to life, the court overcame the
difficulty of justiciability of these as economic and social rights. These rights were hitherto, in
their manifestation as DPSP, considered non-enforceable. Directive Principles have been used to
broaden, and to give depth to some Fundamental Rights and to imply some more rights there from
for the people over and above what are expressly stated in the Fundamental Rights.

3.1.2 The Transformation of Fundamental Rights

That biggest beneficiary of this approach has been Article 21. Reading Article 21, with the
Directive Principles, the Supreme Court has derived many rights, which are stated in some form
in the DPSPs.

Further, Article 39-A of the Indian constitution provides for “Equal Justice and free legal Aid”. It
(39-A) was inserted/added by the Constitution (Forty Second Amendment) Act, 1976. It came into
force from 3.1.1977 and reads as follows:“The state shall secure that the operation of the legal
system promote justice, on the basis of equal opportunities and shall, in particularly, provide free
legal aid, by suitable legislation or schemes or in any other way, to ensure that opportunities for
securing justice are not denied to any citizen by reason of economic or other disabilities”.

This Article was added to the constitution pursuant to the new policy of the government to give
legal aid to economically backward classes of people. As such, ‘Legal aid’ and ‘speedy trial’ have
now been held to be Fundamental Rights under Article 21 of the constitution available to all
prisoners and enforceable by the courts. The state is under the duty to provide lawyer to a poor
person and it must pay to the lawyer, his fees as fixed by the court.

In M Hoskot v. State of Maharashtra and Hussainara Khatoon v Home Secretary, State of

Bihar11, the court held that the legal aid and speedy trial are Fundamental Rights under Article 21
of the constitution which are available to all detainees. Further, it ruled that the state is under a

11
M Hoskot v State of Maharastra and Hussainara Khatoon v Home Secretary, State of Bihar, AIR 1979 SC 1322
 41

duty to provide a lawyer to a poor person, and it must pay to the lawyer his fees as fixed by the
court.

In Center of Legal Research v State of Kerala12, the court held that in order to achieve the
objectives in Article 39-A, the state must encourage and support the participation of voluntary
organizations and social action groups in operating the legal aid programmes. Further, legal aid
schemes, which are meant to bring social justice to the people, cannot remain confined to
traditional or litigation-orientation attitudes, and must take into account the socio-economic
conditions prevailing in the country, and adopt more dynamic approaches. The voluntary
organizations must be involved and supported for implementing the legal aid programme, and they
should be free from government control.

In Abdul Hassan v. Delhi Vidyut Board13, the Supreme Court commended the system of Lok
Adalats set up by the Parliament by enacting the Legal Services Authority Act 1987. The court
directed that most authorities ought to set up such adalats.

In State of Maharastra v. Manubhai Bagaji Vashi14, the Supreme Court held that Article 21 read
with Article 39-A casts a duty on the state to offer grants-in-aid to recognized private law colleges,
which qualify for receipt of the grant. The previously mentioned duty cast on the state cannot be
whittled down in any manner, either by pleading paucity of funds, or otherwise.

Article 41 of the Constitution provides that the State shall within the limits of its economic capacity
and development; make effective provision for securing the right to work, to educa-tion and to
public assistance in cases of unemployment, old age, sickness and disablement, and in other cases
of undeserved want. Article 38 states that the state shall strive to pro-mote the welfare of the people
and Article 43 states it shall endeavor to secure a living wage and a decent standard of life to all
workers. In Bandhua Mukti Morcha v. Union of India,15 a PIL by an NGO highlighted the
deplorable condition of bonded laborers in a quarry in Haryana, not very far from the Supreme
Court. A host of protective and welfare-oriented labor legislation, including the Bonded Labour

12
Center of Legal Research v State of Kerala, AIR 1986 SC 1322
13
Abdul Hassan v. Delhi Vidyut Board, AIR 1999 DEL 88
14
State of Maharastra v Manubhai Bagaji Vashi, 1995 5 SCC 730
15
Bandhua Mukti Morcha v. Union of India, AIR 1984 SC 802, 811-812 : (1984) 3 SCC 161
 42

(Abolition) Act and the Minimum Wages Act, were being observed in the breach. The court said
that,

“The right to live with human dignity enshrined in Article 21 derives its life breath
from the Directive Principles of State Policy and particularly clauses (e) and (f) of
Article 39 and Article 41 and 42 and at the least, therefore, it must include
protection of the health and strength of workers, men and women, and of the tender
age of children against abuse, opportunities and facilities for children to develop
in a healthy manner and in conditions of freedom and dignity, educational
facilities, just and humane conditions of work and maternity relief.”

“Since the Directive Principles of State Policy contained in clauses (e) and (f) of
Article 39, Articles 41 and 42 are not enforceable in a court of law, it may not be
possible to compel the State through the judicial process to make provision by
statutory enactment or executive fiat for ensuring these basic essentials which go
to make up a life of human dignity, but where legislation is already enacted by the
State providing these basic requirements to the workmen and thus investing their
right to live with basic human dignity, with concrete reality and content, the State
can certainly be obligated to ensure observance of such legislation, for inaction on
the part of the State in securing implementation of such legislation would amount
to denial of the right to live with human dignity enshrined in Article 21, more so in
the context of Article 256 which provides that the executive power of every State
shall be so exercised as to ensure compliance with the laws made by Parliament
and any existing laws which apply in that State.”

Thus, the court converted what seemed a non-justiciable issue into a justiciable one by invoking
the wide sweep of the enforceable Article 21.

There is no reference to a fundamental right to Shelter in Part III of the Constitution of India. This
right has been seen as forming part of Article 21 itself. However, the Court has never really
acknowledged a positive obligation on the State to provide housing to the homeless. In Olga Tellis
v. Bombay Municipal Corporation16, the court held that the right to life included the right to

16
Olga Tellis v. Bombay Municipal Corporation (1985) 3 SCC 545.
 43

livelihood. The petitioners contended that since they would be deprived of their livelihood if they
were evicted from their slum and pavement dwellings, their eviction would be tantamount to
deprivation of their life and hence be unconstitutional. The Court did not go that far and thus,
denied that contention, by stating that:

“No one has the right to make use of a public property for a private purpose without
requisite authorisation and, therefore, it is erroneous to contend that pavement
dwellers have the right to encroach upon pavements by constructing dwellings
thereon . . . If a person puts up a dwelling on the pavement, whatever may be the
economic compulsions behind such an act, his use of the pavement would become
unauthorised.”

In Municipal Corporation of Delhi v. Gurnam Kaur,17the court held that the

Municipal Corpo-ration of Delhi had no legal obligation to provide pavement squatters alternative
shops for rehabilitation as the squatters had no legal enforceable right. In Sodan Singh v.
NDMC18, a constitution bench of the Supreme Court reiterated that the question whether there can
at all be a fundamental right of a citizen to occupy a particular place on the pavement where he
can squat and engage in trade must be answered in the negative.

The right to health has been perhaps the least difficult area for the court in terms of justiciability,
but not in terms of enforceability. Article 47 of DPSP provides for the duty of the state to improve
public health. However, the court has always recognized the right to health as being an integral
part of the right to life.19 In Consumer Education and Research Centre v. Union of India,20 the
court, in a PIL, tackled the problem of the health of workers in the asbestos industry. Noticing
that long years of exposure to the harmful chemical could result in debilitating asbestosis, the court
mandated compulsory health insurance for every worker as enforcement of the worker’s
fundamental right to health.

17
Municipal Corporation of Delhi v. Gurnam Kaur, (1989) 1 SCC 101.
18
Sodan Singh v. NDMC, (1989) 4 SCC 155.
19
Parmanand Katara v. Union of India (1989) 4 SCC 286.
20
Consumer Education and Research Centre v. Union of India, (1995) 3 SCC 42.
 44

The Supreme Court in the affirmative in Mohini Jain v. State of Karnataka21 answered the
question whether the right to education was a fundamental right and enforceable as such. The
judgement of the Supreme Court of India in Unnikrishnan J. P. v. State of Andhra Pradesh22,
resulted in the insertion of Article 21-A in Part III of the Indian Constitution in 2002. The Article
provides for the fundamental right of education to all children between the ages of 6 and 14. The
case pertained to the charging of ‘capitation’ fees from students seeking admission, by private
medical and engineering colleges. The college managements were seeking enforcement of their
right to do business. The court expressly negated this claim and proceeded to examine the nature
of the right to education. The court refused to accept the non-enforceability of DPSP and the
margin of appreciation claimed by the State for its progressive realization. The Court asked:

“It is a noteworthy that among the several Articles in Part IV, only Article 45 speaks
of a time-limit; no other Article does. Has it no significance? Is it a mere pious wish,
even after 44 years of the Constitution? Can the State flout the said direction even
after 44 years on the ground that the Article merely calls upon it to endeavor to
provide the same and on the further ground that the said Article is not enforceable
by virtue of the declaration in Article 37. Does not the passage of 44 years – more
than four times the period stipulated in Article 45 – convert the obligation created
by the Article into an enforceable right? In this context, we feel constrained to say
that allocation of available funds to different sectors of education in India discloses
an inversion of priorities indicated by the Constitution. The Constitution
contemplated a crash programme being undertaken by the State to achieve the goal
set out in Article 45. It is relevant to notice that Article 45 does not speak of the
“limits of its economic capacity and development” as does Article 41, which inter
alia speaks of right to education. What has actually happened is – more money is
spent and more attention is directed to higher education than to – and at the cost of
– primary education. (By primary education, we mean the education, which a
normal child receives by the time he completes 14 years of age). Neglected more so
are the rural sectors, and the weaker sections of the society referred to in Article 46.
We clarify, we are not seeking to lay down the priorities for the Government – we

21
Mohini Jain v. State of Karnataka, (1992) 3 SCC 666.
22
Unnikrishnan J. P. v. State of Andhra Pradesh, (1993) 1 SCC 645.
 45

are only emphasizing the constitutional policy as disclosed by Articles 45, 46 and
41. Surely the wisdom of these constitutional provisions is beyond question…”23

The issue of recurrent famines in some of the drought-prone regions of India has received a mixed
reaction in courts. When a PIL case concerning starvation deaths in some of the poorest districts
in the state of Orissa was taken up for consideration, the reaction of the Supreme Court in 1989
was to defer to the subjective opinion of the executive Government that the situation was being
tackled effectively. In the early 1990s, civil society groups to take action approached the National
Human Rights Commission (NHRC), but its intervention also had only limited success. The Indian
Supreme Court’s engagement, again in a PIL case, which confronted the paradox of food scarcity
while the State’s silos overflowed with food grains in the midst of starvation, has been a contrast
to the earlier response.

3.1.3 The Special Bench of the Supreme Court on Social Justice

The Chief Justice of India, Justice H.L. Dattu ordered the constitution of a Special Bench titled as
“Social Justice Bench” to deal with issues troubling the common-man in daily life. This is the first
time that the Supreme Court has set up a dedicated bench to hear cases pertaining to public interest.
The Social Justice Bench will not only hear the pending matters but also all fresh PILs filed before
it. Currently, such cases are scattered over different Benches. The said Special Bench will hear the
matters relating to society and its members, in order to secure social justice, one of the ideals of
the Indian Constitution. This Bench started functioning from 12 December,' 2014 and in order to
ensure that the matters are monitored on regular basis, it will continue to sit on every working
Friday at 2.00 p.m. The Bench comprises of Hon'ble Mr. Justice Madan B. Lokur and Hon'ble Mr.
Justice Uday U. Lalit. With the establishment of the Social Justice Bench, the Hon’ble Supreme
Court has captured the essence of social justice, recreating focus on the principle of ‘justice for
all’ and the primary effect will be that cases with a strong social component will be heard and
judgment will be delivered at a much faster pace than what has been the trend so far. This is bound
to have a salutary effect on the overall conflict-management scenario. Keeping in mind the same,
the efforts taken up by the Hon'ble Supreme Court is highly commendable. This Bench has
committed itself to the issues of social justice and this will result in a further push to the ideals

23
Id.
 46

enumerated in Part IV of the Indian Constitution. Out of around 200 such cases pending in the
court, 65 cases have been identified to begin with and the cases, already pending before other
benches, may be transferred to the special bench on the directions of the Chief Justice of India.
Some of the cases identified are-

 Release of surplus food grains for people affected by natural calamities;

 Framing a comprehensive scheme for public distribution;
 Rehabilitation of sex workers;
 Prevention of untimely death of pregnant women and children due to malnourishment or
lack of medical care;
 Hygienic mid-day meal;
 Shelter homes for the destitute and homeless;
 Education for the children;24

Prominent cases taken up by the Bench

(a) Narmada Bachao Andolan Petition

The Special Social Justice Bench constituted by the Hon’ble Chief Justice of the Supreme
Court of India, heard the Narmada Bachao Andolan's petition challenging the unlawful
decision of the Narmada Control Authority in June 2014 to raise the height of the Sardar
Sarovar dam by 17 meters. It was the first case heard by the newly constituted Bench, presided
by Hon’ble Justice M. B. Lokur and Hon’ble Justice U. Lalit. The special bench asked the
parties, including N.B.A. activist Medha Patkar, to file short synopsis by December 24 as it
did not want to waste time going through records running into thousands of pages. “So all of
you should have your brief ready on or before December 24. The time shall not be extended…
We want the matter to be pushed…,” it said.

(b) Welfare of Tribals

24
Official notification on set up of the Special Social Justice Bench, released by the Supreme Court of India;
Document available at supremecourtofindia.nic.in
 47

The Court then heard a 2005 petition filed by Akhil Bhartiya Vanvasi Kalyan Ashram seeking
welfare of tribals and the Court asked the Centre to file a comprehensive affidavit on the issues
arising out of the Public Interest Litigation.

(c) Child Labour

After briefly hearing the issues arising in matters like child labour, child trafficking and child
bondage, the Bench directed the Ministry of Women and Child Welfare to act as a nodal agency
and convene a meeting of secretaries of concerned States and Union territories to ensure
compliance of its directions. It also directed the Secretary of Union Ministry of Women and
Child Welfare to hold meetings with other central ministries concerned like MHA, Ministry of
Labour.

(d) Separate Hostels for SC/ST students

A Public Interest Litigation was filed highlighting the poor condition of hostels and lack of
remedial measures. The Special Bench, while issuing notices to all States and Union Territories
(UTs), questioned the need of separate hostels for SC/ST students. "Why should they be
segregated from the mainstream?" the Bench asked.

(e) Night Shelters

The specially constituted Social Justice Bench of the Supreme Court ordered the Centre and
the Delhi government to provide adequate number of night shelters for the homeless before the
winter got harsher. The Bench directed the National Mission Management Unit to hold
meetings on or before December 31 with the Chief Secretaries of all states to set up night
shelters.25

4.1 Conclusion

Thus, it is clear that the Economic, Social and Cultural rights are no less important than
Fundamental Rights in the Constitution. They are enforceable when they are estimated as
supplying the content of a Fundamental Right, but not just by themselves. The judiciary has played

25
News Article, DNA Newspaper dated December 12, 2014, titled “Social Justice Bench of Supreme Court starts
hearing PILs.
 48

an incredibly efficient role in protecting not only the Fundamental Rights of the citizens but have
also pinned the state to its obligations towards the citizens by referring to the DPSP. Such
obligation, the court has explained in the context of right to environment, can confer corresponding
rights on the citizen:

“It need hardly be added that the duty cast on the State under Articles 47 and 48-A in particular
of Part IV of the Constitution is to be read as conferring a corresponding right on the citizens and,
therefore, the right under Article 21 at least must be read to include the same within its ambit. At
this point of time, the effect of the quality of the environment on the life of the inhabitants is much
too obvious to require any emphasis or elaboration.”26

The Economic, Social and Cultural rights that the DPSP symbolize must be read as forming a part
of the Fundamental Rights and thus must be implemented effectively. The State must necessary
take all the steps to ensure that the constitutional mandate referred to in Part IV is implemented to
the letter. The State must be constantly reminded of its obligation and duties to its citizens and this
can be shaped to a considerable extent by a creative and activist judiciary. Thus, there is no tussle
between the concepts of Liberty and Equality. They are on an equal footing and one supplements
the other. It is only by their inter-dependence that we can truly set up a welfare nation, as envisaged
by the Constitutional framers and realize the expectations of our citizens.

__________________

26
M. C. Mehta v. Union of India (1998) 9 SCC 591 para. 6.
 49

LIBERTY & ACTIVISM: THE NEVER ENDING

CONFRONTATION OF DIRECTIVE POLICIES OVER
EGALITARIANISM
Joyeeta Chandra*

The version of liberty that the preachers of an equitable society seek is somewhat blurred or rather
only a part of the facet of reality. Liberty as much associated with libertarianism probes for how
there is need for non-aggressive government as well as the civilians not coercing each other.
However in a tradition ridden country like India where every faction demands for its sanction
liberty can never confide with equality. It has been an existent fact since the inception of the
constitution that equality shall only exist among equals and but liberty is practiced among all
factions, because the right to free will is something that is executed by all equally. However such
can’t be the case with equality because not everyone has equal opportunities which plays a vital
role but cannot be rebutted as being inequality.

Therefore, the purpose of this paper is to probe as how equality and liberty are independent and
interdependent on each other. This paper shall also have a magnifying research as to how these
two slit each other. The paper shall also research on how various factors play their part in these
elements while at the same time comparing the issue in hand with other sovereigns. The paper
shall relate the notion of equality with liberalism and how it encompasses different group and
ideological movements such as feminism, while at the same time relating it to the concept of liberty.
The second part of the paper shall deal with how over the years judicial activism has turned into
judicial chauvinism and changed the complete platform of the Indian constitution. The hearsay
that what is more rudimentary to life should be given prevalence over what forms the social welfare
state because it is that the faction that forms it have been proved rather just like an obiter dicta of
a case. Therefore, the paper shall probe on how the instrument of judicial review attacks on the
fundamental rights and despite the fact of its primary need, sometimes the directive principles hold

*
Student of II Year, B.A.LL.B. (Hons.), MATS Law School, MATS University. Email: jetacool13@gmail.com.
 50

authority. The paper shall probe on those issues whereby the DPSP have been given more
importance than what the fundamental rights bar. The paper shall individually probe on these
directive policies and dissect them in lieu to their contradiction with equality. Hence, “to stop a
battle, one must prevent the internal war on law”.

1.1 The Idea of Liberty and its Dimensions

From where the inception of the term “liberty” took is hard to place. However, if it only signifies
free will then arguably the birth of the Indian constitution should be the right time to place it. But
what is this free will, what is its purpose? The very question poses a big threat to the notion of free
will because free will to murder someone might not encompass the very periphery of liberty. The
very purpose for such could not be reprimanded.

In philosophical terms, liberty involves free will which itself encompasses the concepts of advice,
persuasion, deliberation, guilt and sin. This is how a course of action is limited but is this in
execution in the Indian constitution? Or rather the preachers are worshipping a mirage of liberty?
In India, the most applicable definition of liberty would be, “social and political freedom enjoyed
by all civilians”. For the protection of such freedom the constitution provides Article 21 of the
Indian constitution which clearly states for “No person shall be deprived of his life or personal
liberty except according to procedure established by law.” Article 21 secures for Indian citizens
same rights which the British citizens derive from the famous Magna Carta. Art. 21 imposes an
obligation on the executive to observe the forms and rules of law when depriving individuals of
their rights to life or liberty.

The basic ideology that underlies any sovereign constitution is that all men were created equal,
even though not born equally in wealth, status or their opportunities. This is the basic framework
of the law of nature and rule of law function since as regards to rule of law it has to uphold that it
is in harmony with the concepts of generality, equality and certainty. Therefore, not gaining similar
or equal opportunities may not be the base for coercing the government to formulate laws for
equalisation of conditions. Now another debatable issue that comes into the picture is when the
factions make two parallel lines, intersecting lines, the parallel lines being “freedom” and “liberty”.
It is vital that the one has his books clear on how different of a concept “freedom” is. The recent
movie Gabbar focused on how a civilian distressed over the present corruption conditions and
 51

governmental functioning and takes charge into his hand to remove corruption. This may certainly
be perceived as dramatic but in fact it is where one could extract the meaning of the two terms.
Liberty is the condition wherein individuals behave according to their will and govern themselves,
taking responsibility for their actions and behaviour .Then again it could be positive or negative,
“positive liberty” wherein individuals act on their own will without being influenced by any social
restrictions. Then again liberty is derived from freedom which could be defined as the state of
being free to enjoy political, social, and civil liberties. It is the power to decide one’s actions, and
the state of being free from restraints or confinement. Thus, by analysing the above example, it
was the protagonist’s freedom to choose a more morally sound method in his road to reform
“corruption” while it was his liberty, that he chose to take a villainous-heroic role without any
restraints. However in either case one has to be bound by what is morally and ethically sound.

Through the lens of history one can only find India in much custom-tradition ridden form, so why
is liberty such a fallacious belief in such a large democracy? When the society is disintegrated into
several linguistic, caste etc. based hierarchies, it is unlikely that liberty and equality could come
later than the demands for individualism. In the past, caste has played a dominant role in both the
Indian legislature and society, holding the very roots of Indian democracy .Caste in its own form
played both for the better or worse, however seeing back it is leant towards the worse. With caste
still as one of the major factors in the technology era , liberty is miles apart because to act according
to one’s will should include the right to choose one’s partners wherein as being suggested the right
to equality also plays its role. But the immense number of cases decked for “honour killing” proves
our notions of liberty are yet to be reached and so is equality. Much accepted fact that equality can
never exist among unequal’s but can caste be the deciding factor for who equals whom since much
is said that “each person is born equal”.1

2.1 Ideological belief and race towards the Apex - Equality v. Liberty

If we seek to discuss it in the truest sense of its notion then, what do these values apply for in the
normal or daily legislative instances? Before turning pages to the ideological belief, it is vital to
understand as to what challenges the lawmakers face when they weigh the two notions. In this que
the first one which has posed a major threat to the country’s legal system could be “right to die or

1
Pete Didonato, Equality vs. Liberty, The Federalist Papers, http://www.thefederalistpapers.org/current-
events/equality-vs-liberty.
 52

committing suicide”. As fast paced the life becomes , the much more the criminal mind becomes
and affects the psychology of a man with resulting to the final question “ I have right over my
body, so I can choose to do what I want with it” , much affected by the prowess of the media and
gaining awareness. In such situations the legal fraternity comes into the grey area of law, when
several factions demand the same in lieu of their right to equality and liberty to do so. The High
Court of Bombay in State of Maharashtra v. Maruti Sripati Dubal2., held that the right to life
guaranteed under Article 21 includes right to die, and the Hon’ble High Court struck down section
309 IPC which provides punishment for attempt to commit suicide by a person as unconstitutional.
In P. Rathinam v. Union of India3 however, a Division Bench of the Supreme Court while
supporting the decision of the High Court of Bombay in the previous case held that under Article
21 right to life also include right to die and laid down that section 309 of Indian Penal Court which
deals with ‘attempt to commit suicide is a penal offence’ as unconstitutional. However, this issue
was raised again before the court in Gian Kaur v. State of Punjab. In this case, a five-judge
Constitutional Bench of the Supreme Court overruled the P. Ratinam’s case4 and held that Right
to Life under Article 21 of the Constitution does not include Right to die or Right to be killed and
there is no ground to hold that the section 309, IPC is constitutionally invalid.

This being the legal perspective, but by passing the issue through the lens of ideological belief, the
thoughts of libertarianism and liberalism should be mentioned. In the right words, it comes under
the philosophy of suicide. In this the liberalism asserts that a person's life belongs only to them,
and no other person has any right to force their own ideals that life must be lived. Rather, only the
individual involved can make such a decision, and whatever decision they make should be
respected. Philosopher Thomas Szasz goes further, arguing that suicide is the most basic right of
all. If freedom is self-ownership, it is ownership over one's own life and body, then so is the right
to end that life which is the most basic of all. “If others can force you to live, you do not own
yourself and belong to them”. Now here comes a very prudent question, if all people have
ownership over their being, then they should all have equal rights in judging what to do with their
being, in such a case a sovereign doesn’t needs law to govern. Seemingly the picture doesn’t fits
straight. The law prohibits “suicide” because if every person were allowed this right and be

2
1987 (1) Bom CR 499.
3
1994 AIR 1844.
4
Id.
 53

justified then there would be no room for criminal codes. However one also does not completely
complies with this notion. Liberty is where equality cannot exist and equality is where liberty
cannot exist.

As much as libertarianism thought is applied, it is to be understood that free will without restraint
is to be exercised imbibed with ethnic principles with non-aggressive form. One if demands
equality and in the process exercises his free will to achieve something it is not to be done by
coercing one another’s liberty. One of the most prudent example for such could be male
chauvinism which took its inception during World War II. After the war ended and men returned
home to find jobs in the workplace, male chauvinism was on the rise. Men who had been the main
source of labour, and they expected to come back to their previous employment, found women had
stepped into many of their positions to fill their positions.

On one hand, it is reiterated through the voice of the statutes that there is no gender proclivity and
existing legislature could put up with the rising demands of the feminist faction, while on the other
with the chauvinistic remarks the judges still make about the rights of women make us wonder
whether equality in gender roles is a reality or not. Ideology may inhibit difference of opinion but
the fact that the two contradict, can never be overturned.

3.1 Feminism and Libertarianism – Accounting for liberty

Libertarianism association with the feminist movement began with the ideology of “free thought”.
It was traced in anarchism resulting to anarcha-feminism beginning with Josiah Warren who laid
great stress upon the women’s rights .They had an initial battle for the provisions and removal of
suppressions from marriage laws for women’s. Anarcha-feminism developed as a fusion of radical
feminism and anarchism, and viewed “patriarchy” as a fundamental manifestation of compulsory
government. Anarcha-feminists, like other radical feminists, criticised and advocated the abolition
of traditional conceptions of family, education and gender roles. Here the concept of equality was
widely applied, while at the same time not waiving the concept of liberty. The fire spread when
the debate began as to how the laws for “women related issues” were made by men, rather than
women. The structural and functional perspective of gender defined roles also arose the issues of
the traditional concepts and much relations of equality. However much was yet to come in forms
of cyber- crimes and the Medical Termination of Pregnancy (MTP) Act ,because from the act arose
 54

the issues of sex selective abortions which was an issue of gender equality which split the concept
of a woman’s autonomy and existence itself. Although on occasions, it was contended that liberty
to do with one’s body resides within a soul, but it must be rebutted with the fact that the “life and
equality both are to be safeguarded”.

4.1 Equality and liberty on a different plane- Hijack of Nations to the Battle

The above said examples much deal with either what the Indian laws are presently facing in its
tussle against the liberty-equality war or what the individual battle has been facing, but a common
nexus where the present century has ended in its grey area in which even the apex of courts or the
biggest of the nation’s find hard to deal would be “same sex marriage” or precisely LGBT rights.
Beginning with the United Nations, the issue of the conflict between religion and same-sex
marriages was debated in Maine, where a referendum held it invalidated and so the legislation
recognizing same-sex marriage. People who were not in the support of same-sex marriage argued,
inter alia, that the legislation should be removed because of its impact on religious liberty. That
argument would have been denied then, had the original legislation provided meaningful religious
liberty protection. In many states where same-sex marriage was on the lawmakers list, proponents
of same-sex marriage had vigorously opposed any religious exemption beyond the religious
institution ceremony provision. In New Hampshire, for example, the governor had insisted on
broad religious liberty protection as one of the condition for signing same-sex marriage legislation.
The legislature originally complied with it, including protection that roughly followed what the
proposed statute above urged. But, under intense pressure from supporters of same-sex marriage,
the legislature retreated to a far restricted and mostly meaningless protection for religious
institutions. The governor did not insisted on the original version, and now the New Hampshire
statute legalizes same-sex marriage at the expense of religious liberty.

One of the judgements for the same happened in Employment Division v. Smith5 , in which the
Supreme Court held that facially neutral, generally applicable laws which burdened religion, need
no special legislative justification and, therefore, would not be subject to compelling (or other
heightened) interest analysis. Laws that mandate the acceptance of the validity of same-sex
marriage would be neutral laws of general applicability and, hence, would require no special

5
494 U.S. 872(1990).
 55

justification to fulfil the federal constitutional guarantee of free exercise of religion. On the other
hand, such indirect burdens on religious practices might violate state constitutional religious liberty
guarantees in those states departing from the rule introduced in Smith.

However, the question here doesn’t merely concern religious liberty for if asked any man of
antecedent generation and even in this generation they may have a hundred marks for
heterogeneous relationship for that is the only way to achieve the ends. But because the “law of
nature “ and religious sanction provide a better reason to back one’s reasoning it is right way to
place it .If the question is only about “liberty” then , the landmark supreme court judgement,

Lawrence v. Texas 6 in which the 6–3 ruling the Court struck down the sodomy law in Texas and,
by extension, invalidated sodomy laws Lawrence7 explicitly overruled Bowers8, holding that it
had viewed the liberty interest too narrowly., making same-sex activity legal in every U.S. state
and territory. However, it is not concerned merely with liberty because, the basic rights to be
treated equally could not be equally denied. Since it is a stated fact that, every person belonging to
either gender is human and has been born equally only to be treated as an equal civilian in the
vision of law. Here is where one has to find what should be the correct balance between these, and
purport what could be the outcome of any actions .To claim equal citizenship over bare religious
liberty claims should be foremost.

The Indian plane for this issue is also not set on a different foot, because the civilians of India,
value culture and religion more than the preaching’s of liberty and equality, for which one would
not be sarcastic, because since, the ages religion has played a vital role in the Indian history and
judiciary. For the proponents of the issue this system would not make sense, and it would be
deemed as a transgression of the boundaries of liberty and equality, but at the end of the day, it is
an individualistic issue. The offence of homosexuality is read under this section as an Unnatural
Offence. The major provisions of criminalisation of same-sex acts is found in the Section 377 of
the Indian Penal Code (IPC) of 1860.However if by any means one can draw an absolute line
between what weighs the most, “liberty” or “equality”, then the question remains unanswered and

6
539 U.S. 558 (2003)
7
Id.
8
478 U.S. 186 (1986)
 56

in ambiguous position, for every faction shall demand it individually and sometimes maybe even
at the expense of another. But to carefully choose as to what would not harm the shield of a welfare
state and help achieving one’s rights, lies in the person’s judgement.

4.1 Judicial Activism and Fundamental Rights-The Battle of Benches

4.1.1 Judicial activism turned chauvinism – retaliating course of law

It is fascinating as to how over the years the judiciary has gained the undeniable powers to almost
form a retaliating shield for the lawmakers. But where does the inception of judicial activism lest
chauvinism takes place? Since independence, judiciary has been very actively playing a role in
dispensing the justice since the case of A K Gopalan v. State of Madras9 case followed by
Shankari Prasad case10, etc. However, judiciary remained submissive till the 1960s however its
assertiveness started in 1973 when the Allahabad High Court rejected the candidature of Indira
Gandhi and introduction of public interest litigation by Justice P N Bhagwati further expanded the
scope of judicial activism. From the stream of activism flew chauvinist methodology which
became a part of much accepted judicial procedure, however in the landmark decision of Minerva
Mills Ltd. and Ors. v. Union of India and Ors11 used the word in the lieu of regional superiority
and depicted regional chauvinism. Judicial activism is a way through which relief is provided to
the underprivileged and aggrieved citizens. Judicial activism is a way of providing a base for policy
making in competition with the legislature and executive. However over the past decades the eyes
of factions have only witnessed the harsher side of judiciary. It is a stated fact that what the law
purports is for a better integrated society, however when self –inflicted emotions control the senses
of a decision maker then it is liable to cause transgression of the basic structure. But what is this
basic structure and why are the law sealers taking a villainous role for the act of interpretation?
The basic structure could take various forms as every soul has different perspective, so he shall
count on different notes, however without equal status and free restraints, life is next to a heinous
beast.

4.1.2 Rudimental or obligatory – backdrop of judicial review

9
1950 AIR 27.
10
AIR 1951 SC 455.
11
AIR 1980 SC 1789.
 57

The basic object for any legislation or judiciary is to understand whether the statute in
inappropriate in its constitution is rudimental or obligatory? Or the rights incorporated fall in which
of the two? To understand rudimental is something without which one thing cannot survive whilst
the latter speak of which is required but can be managed with. So the war between fundamental
rights and the directive principles of state policies is not a new issue but took inception since back.
So what infuriated it? Why is there a strain? Which is superior?

The Directive Principles of State Policy (DPSP) are contained in part IV, from the articles 36 to
50, of the Indian Constitution. Many of the provisions correspond to the provisions of the
International Covenant on Economic, Social and Cultural Rights (ICESCR).12 For instance,
article 43 provides that the state shall venture to secure, by suitable legislation or economic
organization or in any other way, to all the workers, agricultural, industrial or otherwise, work, a
living wage, conditions of work ensuring a decent standard of life and full enjoyment of respite
and social and cultural opportunities, and in particular the state shall venture to promote cottage
industries on an individual or cooperative basis in the rural areas. This corresponds more or less
to articles 11 and 15 of the International Covenant on Economic, Social and Cultural Rights
(ICESCR). However, some of the International Covenant on Economic, Social and Cultural
Rights (ICESCR) rights, for instance, the right to health (article 12), have been interpreted by the
Indian Supreme Court to form a part of the right to life under article 21 of the Constitution, thus
making it directly enforceable and justiciable. As a party to the ICESCR, the Indian lawmakers
has enacted laws giving effect to some of its treaty obligations and these laws are in turn
enforceable in and by the courts.

Now since the concept itself is so dynamic and viable that a lot references could be used, such as
the differences between the Economic, social and cultural rights and The International Covenant
on Civil and Political Rights (ICCPR), whereby both initiated from United Nations General
Assembly, but are much similar to the concept of fundamental rights and directive principles of
state policy. Of the two, which is more rudimental, be it one’s right to “life” included in the latter
or the right to education in the earlier. Here is where one draws a line between rudimentary and
obligatory. However being a chain reaction both affect each other, since without proper health a

12
Justifiability of ESC Rights-the Indian Experience,
http://www1.umn.edu/humanrts/edumat/IHRIP/circle/justiciability.htm.
 58

faction cannot exist and to attain such level of medical advancement, one needs education. But
which is superior? With all voices in sync, the faction would support to what supports the branches
of life, but then overwhelming the waves of essential rights would be, whether the right to housing
be given consideration. However, synonymous to the concept of liberty and equality, both are
weighed on a different scale, “no life to live with the right heath in the houses”.

Similarly the two parts of the Indian constitution, the fundamental rights (Part III) and the directive
principles of state policy (Part IV) are considered on a different scale, because what is elementary
for the sound living of the factions must be what should be considered most prime in “judicial
activism”. It is not rebutted that there may be instances where the state needs to divert from its
notions of understanding of basic importance and may apply differently to fit the mould. However,
it is not implied that must be done so as to completely quash the horizons of judicial review. Such
became evident when a series a judgement took place over the tussle, first being State of Madras
v. Champakam Dorairajan13 whereby the Supreme Court first, the court said, “The directive
principles have to conform to and run subsidiary to the chapter on fundamental rights”. Much
related to issues of equality but dealing with the two constituents, the case was by the
Fundamental Rights Case14, in which the majority opinions reflected the view that “what is
elementary in the governance of the country cannot be less significant than what is significant in
the life of the individual”. Another judge constituting the majority in the similar case said- “In
building up of a just social order, it is sometimes imperative that the fundamental rights should be
subordinated to directive principles.” This view, that the fundamental rights and directive
principles of state policy are complementary to each other, “neither part being superior to the
other,”15 has held the ground firm since.

Articles 39(a) and 39 (b) provide that-

The State shall, in particular, direct its policy towards securing-

(a) That the citizens, men and women equally, have the right to an adequate means to livelihood.

13
(1951) SCR 525.
14
Mathew, J. in the Fundamental Rights case, note 1 above, SCC para. 1707, p. 879.
15
V .R. Krishna Iyer, J. in State of Kerala v. N. M.. Thomas (1976) 2 SCC 310 at para. 134, p. 367.
 59

(b) That the ownership and control of the material resources of the community are so distributed
as best to sub serve the common good.

Articles 31B and 31C of the Constitution were introduced by the 1st and 25th amendments in the
Indian Constitution. In fact the Fundamental Rights case concerned with the constitutional validity
of article 31C of the Constitution, in which the court has retained its power of judicial review to
examine if, in fact, the legislation has intended to achieve very the objective of articles 39(b) and
(c), and whether the legislation is an amendment to the Constitution, whether it violates the basic
structure of the constitution. Many a times courts have protected itself from any menace against
the riot of violation, if in cases there is violation against “right to equality”, so as to bring agrarian
reforms or other cultural reforms. Similarly, courts have used directive principles of state policy
to uphold the constitutional validity of statutes that apparently impose restrictions on the
fundamental rights. So is the verdict being overruled by the judiciary’s own verdict or is it to fix
the mould, as the interpreters would wish for? In a traditional country like India, from the birth of
child he is taught about the virtues and morals, but not about what fundamental rights he is going
to inherit as a person. One is taught to be more moral then a law bound and learned civilian,
because it is an assumption that with morality comes all the aspect being a good lawful citizen.
These two dynamic concepts are still mid- air because morality plays a major part in our legal
system. The directive principles of state policy derives its major ideology from the concept of
morality. To presume that what is based on the value or virtues or moral of a person is still deemed
higher to what breathes in the soul of a person is a hypocrite remark. The Fundamental rights case
raised the similar issue on the concept of fundamental rights having no originating base, however
if even being empty as they were, they still had scope for further developing the base and moreover
had since time of its inception provided people a backbone for what was elementary to them, if
not in all, rather than the policies which built on the moral grounds.

4.1.3 The Eventual battle against the Rights

In several of the decisions passed by the apex court, it was ruled as to how running both the
fundamental rights and directive principles together was vital, but throughout out the cases the
ratio decidendi changed and the above became mere obiter dicta. Numerous cases were lined in a
row to fit the mould of judicial “activism”. It is rightful to have a magnifying research on each
individual directive policies and how they overruled the elementary rights
 60

(a) Right to Shelter

In Shanti Star Builders v. Narayan K. Totam16, the court has recited its word in an envisaging
manner that, “The right to life . . . would take within its sweep the right to food . . . and a reasonable
accommodation to live in.” Unlike certain other Economic, Social and Cultural rights, the right to
shelter, which forms part of the right to an adequate standard of living under article 11 of the
International Covenant on Economic, Social and Cultural Rights, finds no similar expression in
the Directive Policies. This right has been seen as forming part of Article 21 itself.

Similarly some of the other Fundamental rights include many other directive policies such as again
witnesses in the landmark case of Olga Telis v. Bombay Municipal Corporation17 the court held
that the right to life also included the “right to livelihood”. The petitioners contended that since
they would be deprived of their livelihood if they were ousted from their slum and pavement
dwellings, their expulsion would be next to deprivation of their life, and hence would be
unconstitutional.18 The court, however, was not prepared to go to that extent. It denied that
contention, by saying that:

“No one has the right to make use of a public property for a private purpose without
requisite authorisation and, therefore, it is erroneous to contend that pavement
dwellers have the right to encroach upon pavements by constructing dwellings
thereon . . . If a person puts up a dwelling on the pavement, whatever may be the
economic compulsions behind such an act, his use of the pavement would become
unauthorised”.

However tracing back to the time of John Rawls and his Justice theory which has one of the
postulates beginning from “the most disadvantaged section should be given the greatest benefit”,
keeping harmonious with the first principle of “each person is to have an equal right to the most
extensive basic liberty”. As already reiterated several times that each person is born equal but does
not have equal opportunities’, so for those disadvantaged sections , if not equal wealth then, to

16
(1990) 1 SCC 520.
17
(1985) 3 SCC 545.
18
Justifiability of ESC Rights—the Indian Experience,
http://www1.umn.edu/humanrts/edumat/IHRIP/circle/justiciability.htm.
 61

provide sound economic and social conditions is the job of the constitution .Just by evicting these
factions and passing up the statutes would not help the situations. Here since fundamental right is
inclusive of the directive policies, so either both should run parallel or what is in best need of the
civilians of the country should be chosen .And for strengthening such rudimentary rights the
prevalence of morality should not be taken, but what is going to create a “social welfare state”
must be taken into count.

(b) Right to Work

Article 6 of The International Covenant on Economic, Social and Cultural Rights (ICESCR) which
firmly states for, work, under "just and favourable conditions" is quite synonymous to Article 41
of the Indian constitution stating, “the State shall within the limits of its economic capacity and
development, make effective provision for securing the right to work, to education and to public
assistance in cases of unemployment, old age, sickness and disablement, and in other cases of
undeserved want.” Article 38 states that “the state shall strive to promote the welfare of the people”
and article 43 states “it shall endeavour to secure a living wage and a decent standard of life to all
workers”. One of the cases in which the problem of enforceability of such a right was posed before
the apex Court was of large-scale abolition of posts of village officers in the State of Tamil Nadu
in India. Afters this case began the intersection of the policies and rights and war of laws began
for the right to work provision. It was only after this case that the court had felt much more
independent to interfere even in areas which would have been considered to be in the domain of
the policy of the “executive”. Where the issue was of regularizing the services of a large number
of casual (non-permanent) workers in the posts and telegraphs department of the government, the
court has not hesitated to invoke the directive principle of state policies to direct such
regularization.

Then again by the instrument of Public Interest Litigation 19, the court breathed life into the fact
that the fundamental rights derive its soul from the directive principles and without it cannot stand
firm and by the virtue of judicial activism, article 21 was spoken to be the part of clauses (e) and
(f) of Article 39 and Article 41 and 42, the court converting what seemed a non-justiciable issue
into a justiciable one by invoking the wide streak of the enforceable article 21.

19
Bandhua Mukti Morcha v. Union of India, (1984) 3 SCC 161.
 62

(c) Right to Education

This right is a right which has its position on both the cliffs, as mentioned above the Economic,
social and cultural rights and International Covenant on Economic, Social and Cultural Rights
(ICESCR) are also in mid -way battle. But for such, this rights position for one, is disputed. Article
45 of the directive principles of state policy, which corresponds to article 13(1) of the ICESCR,
states, “The State shall endeavour to provide, within a period of ten years from the commencement
of this Constitution, for free and compulsory education for all children until they complete the age
of fourteen years.” Now the question arises as to whether the right to education was a fundamental
right and enforceable, such was answered by the Supreme Court in the affirmative in Mohini Jain
v. State of Karnataka.20 The correctness of this decision was examined by a larger bench of five
judges in Unnikrishnan J.P. v. State of Andhra Pradesh21. For as such the above ratio goes it
was the view that the policies flow from the fundamental rights and that they derive their decisions
with the base of it , however if in the above example article 21 was used to supplement the other
the directive policies then the similar should be applied with the other judgements. It is true that
right to education is a much demanded and required need for any civilian a sovereign for
sustainable and industrial development. But to fit the mould of law and fluctuating from either will
make both lose their initial status. The parameters of life and liberty included in Article 21 is not
exhaustive but inclusive of all the traits found in the legislation.

5.1 Conclusion

It can never be said that a person requires either liberty or needs only to at an equal frequency with
another. Their battle is a confrontation which has went since decades, but the question at the
present moment should be, whether one can survive without either of the two? The answer in all
sync would be “no”. For one person to be in an equal plane with the other factions might be difficult
but it is not really difficult to obtain liberty and decide one’s course of action. It is impossible for
every person to achieve equal status and impose upon the government the conditions for equality
and also not possible to achieve another’s wealth, but one can always decide his political and social
22
actions according to the course of actions. Equality is not fundamental to liberty. It is its

20
(1992) 3 SCC 666
21
(1993) 1 SCC 645
22
Julian Glover, Liberty is equality's intractable opposite, The guardian, Wednesday 24, February, 2010.
 63

intractable opposite. It wouldn’t be wrong to say “more equality and less liberty, or more liberty
and less equality. However to find a mid –way balance between the both is the job of judiciary and
the lawmakers and for the past decades several statutes and several acts has worked towards that
direction. Whether that was achieved or not, is only for the future generations to witness.

Equality and liberty, are the concepts not much left out in the judicial provisions which act through
judicial activism. According to Professor Upendra Baxi, judicial activism is an inscriptive term. It
means different things to different people. While some may define the term by describing it as
judicial creativity, dynamism of the judges, bringing a revolution in the field of human rights and
social welfare through enforcement of public duties etc., while others have criticized this term by
describing it as judicial extremism, judicial terrorism, and transgression into the domains of the
other organs of the State negating the constitutional spiritedness. There were different periods,
which activism witnessed however during the post–emergency period, it was found that there were
three forms of judicial activism which were observed in India. The first form of judicial activism
was the evolution of human rights jurisprudence. The second form of judicial activism were the
procedural innovations through Public Interest Litigations. The third form was doctrinal activism
through the concept of rule of law. Matters of policy of government became subject to the Court’s
scrutiny. Distribution of food-grains to then people below poverty line was monitored, which even
made the Prime Minister remind the Court that it was interfering with the complex food
distribution policies of government.

If this wasn’t the only activism phase of judiciary, it prevailed on the battle between the
fundamental rights and the directive principles of state policy. Though at first the view that the
fundamental rights is superior prevailed, however it didn’t take long for the policies to find its way
upwards. One believes that fundamental rights are rudimentary and should be always have the first
seat but if the things fall into consideration then the policies should only act as supplements to the
rights. It can’t be denied that the directive policies form a part for the welfare state but it should
also not be overlooked that fundamental rights are the life supports of that welfare state. What one
does supports would be the fact that “activism is beneficial only when it doesn’t becomes
chauvinism”. Hence, “to create a new era of realism and mindful jurisprudence, one has to oust
the aging chauvinism”.

_____________________
 64

ENSURING SOCIAL JUSTICE: THE WAY FORWARD

D.K. Balakrisnan*

Pt. Jawahar Lal Nehru had once said “First work of this assembly is to make India independent
by a new constitution through which starving people will get complete meal and cloths, and each
Indian will get best option that he can progress himself”. Therefore, the provisions of directive
principles of state policy and fundamental rights were incorporated in the constitution. The
fundamental rights stand for ensuring liberty to the individuals and are justiciable whereas the
directive principles are the set of principles that are needed for the good governance of the
country. The directive principles of state policy largely say about reducing the inequities (social,
economic and cultural). However these guidelines cannot be enforced in the court of law.

India is a very poor country where a large mass of the population reside in slums and don’t get
even two square meals a day. What is the meaning of fundamental rights to those people who
remain in starvation? Hobson had rightly said that “What god is freedom to a starving man”.
Equality is the basis for liberty and if there is no equality then ensuring liberty to the citizens is a
complete hoax. As directive principles are non-justiciable, the Supreme Court in the Champakam
Dorairajan case had clearly declared directive principles are non-justiciable and cannot be
enforced in the court of law. However the trends started to change in the mid 1970’s with the
growth of judicial activism. In cases like Olga Tellis v. Bombay Municipal Corporation the judges
with the help of directive principles of state policy expanded the scope of fundamental rights.
Although implementing Directive principles is the function of legislature and executive still then
the judiciary has intervened time to time when the legislature was found wanting on its duties to
make laws. For example when there were no sufficient laws on sexual harassment the Supreme
Court intervened and provided for guidelines in the case of Vishakha v State Of Rajasthan. It
also intervened when there were no proper guidelines for arrest the Supreme Court intervened

*
Student of II Year, B.A.LL.B. (Hons.), Damodaram Sanjivayya National Law University. Email:
dkbalkrisnan90@gmail.com.
 65

with the case of D.K. Basu v. State of West Bengal and provided eleven guidelines for the
procedure of arrest.

The scope of my paper will be restricted to explain the relationship of equality and liberty with
reference to an in depth analysis of the cases of Supreme Court and the attempt by the judges of
the Supreme Court to ensure social justice.

1.1 Introduction

The directive principles of the state policy are contained in Articles 36-51 of the constitution of
India. The idea to have such principles in the constitution has been borrowed from the Irish
constitution. They are a set of guidelines which are considered fundamental for the governance of
the country. Originally, the directive principles were more akin to moral, rather than to legal,
precepts as they did not have much value from a legal point of view. The main idea underlying
this principle was that they would serve an educational purpose and may also acts as a restraint
as the political party that comes into power. Therefore Article 37 says it clearly that directive
principles cannot be enforced in the court of law but they serve as fundamental principles for
governance to the ruling party. However the trend is changing and the directive principles are now
getting enforced by the courts.

The difference between the Fundamental Rights and the Directive Principles of the State policy
are that the fundamental rights are enforceable whereas the directive principles are not enforceable.
In addition to it the fundamental rights are more of a political right whereas the directive principles
are socio - economic rights. The fundamental rights are the tools which act as protectors of the
citizens from the oppression of the ruling party. It acts as a check on the existing government. The
directive principles on the other hand are the socio - economic rights that ought to be given to the
citizens by necessary state action.

2.1 Traditional view on Directive Principles of the State Policy and Fundamental Rights

The Directive Principles of State Policy were supposed to act as the guidelines to the government
while framing its laws and policies. In the constituent assembly debates eminent scholars like
Professor K. T. Shah had argued that the directive principles were as important as the fundamental
rights and should be made justiciable in the court of law. However, Dr B. R. Ambedkar said that
 66

the DPSP needed to be unenforceable keeping in the view the condition of the country. At that
time India had still not recovered from the losses by partition and the 200 years of systematic
colonial exploitation. To enforce the directive principles the country needed a lot of resources and
at that point of time almost half of the country’s population lived in poverty.

Therefore the directive principles were made as non-justiciable and left to the option of the
government in power to enforce those principles or not. The principle behind this was that the
sanction behind the enforcement of directive principles would be the electorates and not the courts
of law. The courts too were of the view that they would not enforce any directive principle as they
did not create any fundamental right in favour of an individual. In the case of Ranjan Diwedi v
Union of India1 it was held by the Supreme Court that it would not issue the writ of mandamus for
the enforcement of directive principles.

During the framing of the fundamental rights the memories of brutal suppression of the basic
human rights of the individuals were alive in the minds of the framers. As early as the
establishment of the Indian National Congress the implementation of fundamental rights was high
on the agenda. The first formal demands for a bill of rights were incorporated in the Constitution
of India Bill, 1886. This shows the mindset of the framers while drafting the fundamental rights.

The fundamental rights therefore in contrary to the directive principles were made enforceable and
justiciable in nature. They create negative obligations on the state, i.e. the state is required to refrain
from doing something, and it is easier to enforce through a court a negative, as compared to a
positive, obligation. Accordingly Article 13 also declares that a law inconsistent with a
fundamental right is void. But there has never been any provision in the constitution as regards the
directive principles. Therefore a law inconsistent with a directive principle cannot be declared
invalid.

3.1 Judicial Discretion and the “Democratic Objection”

The judiciary, led by the Supreme Court, it has come up with new policies sending a signal that
the law needs to change according to the needs of the society. According to the horizontal power
sharing in the constitution power is distributed amongst the three organs of the government

1
AIR 1983 SC 624.
 67

(judiciary, legislature and the executive). Therefore the court has sought to replace the division of
powers among three branches of government “with a 'Unitarian' claim of formal judicial
supremacy”.

This supremacy emerged out of both substantive and procedural developments in the Indian
Supreme Court's jurisprudence. The directive principles in Part IV of the Constitution were drafted
as non-justiciable guidelines, but have become justiciable rights under the right to "live with
dignity" in Article 21.2

The Right to Food litigation exemplifies this transformation and shows how the Supreme Court
has become a major player in formulating national socioeconomic policy. As of 2005, the Court
in that case had issued forty-four interim orders and appointed two Commissioners charged with
“monitoring and reporting to this Court of the implementation by the respondents of the various
welfare measures and schemes.”3 This sort of judicial policymaking calls forth a serious
democratic objection. The Court today constrains democratic decision making on a wide range-
and potentially indefinite-set of policy issues, this sort of judicial policymaking calls forth a serious
democratic objection. The Court today constrains democratic decision making on a wide range-
and potentially indefinite-set of policy issues, leading many commentators to declare it the "most
powerful court in the world."4

The court’s role in Indian political life is difficult to compare with that of a Rawlsian liberal
conception of democracy. The theory propounds the concept of a loose “horizontal” separation of
powers. In the present context the Michelman’s theory seems to be more apt. Michelman does not
rely or even accept the very concept of the separation of powers trope, in which legislatures make
policy choices without regard to law and courts appear later to review the legality of legislative
action. In fact, he argues that the democratic objection, which grows out of this view, "trades on a
particular, contestable and indeed poor, conception of democracy.5 Therefore the society need not
accept this narrow conception of separation of powers or the very idea that the norms which are

2
Mullin v. Adm'r, Union Territory of Delhi, (1981) 2 S.C.R. 516 (India).
3
http://www.righttofoodindia.org/orders/interimorders.html seen on 30.07.2015.
4
Alexander Fischer, Higher Law Making as a Political Resource: Constitutional Amendments and the Constructive
Fragmentation of Sovereignty in India, in SOVEREIGNTY AND DIVERSITY 186 (Miodrag Jovanovi6 & Kristin
Henrard eds. 2008).
5
JOHN RAWLS, POLITICAL LIBERALISM 217 (1993).
 68

not enforceable in the court of law should not be a part of the constitutional law. In fact, Michelman
puts forth a different conception-one in which constitutional law figures prominently in the
"conduct of public affairs," constraining the acts of the executive and legislature.

This view relies on a framing of socioeconomic guarantees as directive principles guiding

legislative action toward certain societal goals, and not as judicially enforceable rights. Even if
courts are kept away from adjudicating socioeconomic rights, there is still value in placing these
rights within a Constitution. The value lies in a subtle but important effect that constitutional status
confers-it would create a "certain pressure on the frame of mind" of citizens and their
representatives to consider principles of socioeconomic justice in their deliberations and public
policy decisions. These principles would not overly constrain democratic policymaking but give a
"certain inflection to political public reason.”

This is what the framers of the constitution had in my mind when they separated Fundamental
Rights from the Directive Principles by making the fomer justiciable and the latter as non-
justiciable.

Firstly as a result of this the court started the expansive interpretation of the fundamental rights.
For example in Maneka Gandhi v Union of India6 the court had given an expansive interpretation
of Article 21. In the case of Mullin v. Adm'r, Union Territory of Delhi7, the Supreme Court
declared that Article 21 meant right to “live with dignity” which included “the bare necessities of
life like nutrition, clothing and shelter” overhead. However the court placed no limits to the
expansive interpretation of this fundamental right. The "Right to Food" litigation is emblematic of
that growth-it began as a case about the supply and distribution of food to famine-affected
populations, but now encompasses issues of homelessness, maternity, and child development. In
another recent case, the Supreme Court declared that even the “right to sleep” falls within the ambit
of Article 21. According to the Court, “sleep is essential . . . to maintain the delicate balance of
health necessary for its very existence and survival.”8

6
1978 AIR 597.
7
(1981) 2 S.C.R. 516.
8
In Re Ramlila Maidan Incident Dt. 4/5.06.2011 v. Home Sec'y, Union of India, 2012 STPL (Web) 124 S.C.
(India) at 76.
 69

Cases like this suggest that the right to “live with dignity” has potentially infinite scope. It calls to
mind W.E. Forbath's right to “social citizenship” that would provide assurances to all citizens that
they can make a decent living through forms of social participation that provide the opportunity
for self-improvement, material interdependence, and security for all.9

A second way in which the Indian Supreme Court has increased its influence on socioeconomic
policy is by liberalizing the procedures and relaxing the requirement of locus standi”. It has
informally created a new kind of jurisdiction named as “epistolary jurisdiction”. This has made it
easy for the common people to approach the court. It has largely come to the aid of the NGO’s,
where they can voice their grievances on behalf of the large segments of the population, and in
process, obtain relief against the government.

For example in the case of PUCL v. Union of India10, PUCL filed a writ petition on the grounds
of article 32 alleging right to food. It had filed a writ petition on behalf of thousands affected by
the famine, even though the NGO was directly not affected. However the court accepted the
petition although it did not fulfill the requirements of “locus standi” in strict sense. Over time, the
case expanded to include all Indian states as respondents, meaning that the Supreme Court's interim
orders could potentially impact all Indian citizens.

Finally, a third and related means toward greater policymaking authority for the Indian Supreme
Court is a series of procedural innovations; this includes the continuing mandamus and the
appointment of special commissions that enable it to monitor compliance with its orders. The
"Right to Food" litigation has continued for more than eleven years, with the Court having issued
forty-four interim orders by 2005 and several more since then.11 More strikingly, the Court
instructed both central and state governments on how to allocate resources under various
socioeconomic policy schemes and instituted timelines for their completion. The Court also
appointed special commissioners to monitor and report whether government actors are complying
with the Court's orders.

9
W.E. Forbath, Constitutional Welfare Rights: A History, Critique and Reconstruction, 69 FORDHAM L. REv.
1821, 1887-88 (2001) [hereinafter Forbath, Constitutional Welfare Rights].
10
Writ Petition (Civil) No. 196 (2001) (India).
11
http://www.righttofoodindia.org/orders/interimorders.html, seen at 31.07.2015.
 70

Together, these developments illustrate the judiciary's rise as a policymaking institution and call
forth a serious democratic objection. The fact that socioeconomic rights are couched in very broad
terms under Article 21 is problematic in the Indian context, but need not be per se. For instance,
the Indian Supreme Court continued to locate a number of rights within the right to "live with
dignity," but instead of formulating and enforcing its own policy prescriptions to remedy violations
of those rights, it simply held government policies to a reasonableness standard. In this scenario,
a “constitutionally declared right . . . of social citizenship would leave just about every major issue
of public policy still to be decided.”

Going forward, the Indian Supreme Court would lessen the democratic objection if it were to
clearly prescribe limits on the “right to live with dignity” and set forth a standard of review for
socioeconomic policy schemes. However, this seems unlikely in light of judicially-created
procedural innovations at every stage of litigation that have allowed the Court to transform itself
into a policymaking institution capable of affecting change on a large scale.12

4.1 The Contractarian Objection to Constitutional Socioeconomic Rights in India

The contractarian objection focuses on the difficulty of measuring government compliance with
socioeconomic rights. Social contractarians maintain that a citizen will only agree to abide by a
constitution-which provides the government coercive power to compel her to act in prescribed
ways and the ability to make policy choices with which she disagrees-if she sees other citizens and
her government also complying with this constitution.13 This ability to observe others abiding by
the constitution is essential. It allows each citizen to confirm that the constitution's provisions,
entailing commitments that make it universally acceptable, are in fact real.14

The Indian Supreme Court has assumed an increasingly prominent role in the formulation and
enforcement of socioeconomic policy through both substantive and procedural shifts in its
jurisprudence. But has it set forth publicly acceptable reasons to justify its decisions to relax
procedural requirements under Article 32 of the Constitution and to make socioeconomic rights

12
Clark D. Cunningham, Public Interest Litigation in Indian Supreme Court: A Study in the Light of American
Experience, 29 J. INDIAN L. INST, 522-23 (1987).
13
Frank I. Michelman, The Constitution, Social Rights, and Liberal Political Justification, in EXPLORING
SOCIAL RIGHTS: BETWEEN THEORY AND PRACTICE 35-36.
14
JOHN RAWLS, A THEORY OF JUSTICE (rev. ed. 1999); RAWLS, JUSTICE AS FAIRNESS.
 71

justiciable under Article 21? This is the central question posed by the contractarian objection. It
shifts our focus from the Court's role in India's constitutional framework to the legitimacy of its
decision-making process.

The contractarian objection begins with the premise that a constitution's legitimacy requires, at a
minimum, that rational citizens (acting reasonably) understand its terms and can agree to be
governed by them.15 If citizens cannot understand the terms or are unable to determine if their
government or fellow citizens are complying with constitutional principles, they will not regard
the constitution as a legitimate source of political authority.16 To put this objection in the context
of socioeconomic rights, recall that Rawls clearly differentiates between the first principle of
justice that sets out a scheme of basic liberties that are “constitutionally essential,” and the second
principle, which pertains to non-constitutionally essential questions of social and economic
policy.17 A constitutional system can be legitimate if it complies with a range of basic liberties,
but nonetheless unjust for failing to pursue socioeconomic justice.18

While the second principle is not constitutionally essential, it nonetheless pertains to what Rawls
calls “basic justice” and is therefore governed by the constraint of public reason.19 This requires
citizens and their public institutions to present each other with publicly acceptable reasons for their
political views, to be willing to listen to others, and to display “fair-mindedness in deciding when
accommodations to their views should reasonably be made.” This requires citizens and their public
institutions to present each other with publicly acceptable reasons for their political views, to be
willing to listen to others, and to display “fair-mindedness in deciding when accommodations to
their views should reasonably be made.” The constraint of public reason applies more stringently
to the Supreme Court. In many democratic societies, including India's, the Supreme Court is the
final arbiter of constitutional interpretation. Its justices must articulate the best interpretation of
the Constitution through reasoned opinions that are grounded in political values that reflect their
best understanding of the public conception of justice. Unlike ordinary citizens or their elected

15
Frank I. Michelman, The Constitution, Social Rights, and Liberal Political Justification, in EXPLORING
SOCIAL RIGHTS: BETWEEN THEORY AND PRACTICE,35,(Daphne Barak-Erez & Aeyal M. Gross eds.,
2007).
16
Ibid at 36.
17
Supra, note 15, at 46.
18
See Michelman, Justice as Fairness, supra note 14, at 1414.
19
RAWLS, POLITICAL LIBERALISM, supra note 15, at 214; see Michelman, supra note 14, at 37-38.
 72

representatives who deliberate on a range of policy issues, the justices are concerned with the
higher (constitutional) law and matters of basic justice, and therefore must only use public reasons
to explain their decisions. The need for the Court to explain its decisions through public reasons is
heightened with regard to socioeconomic rights. These rights "lack the trait of transparency," as it
is difficult to measure if they are being realized at any given moment. This lack of transparency
accounts for one of the primary distinctions between the first and second principles. Rawls believes
that in comparison to the second principle, it is far easier to tell whether . . . [Constitutional]
essentials are realized.” He states that the realization of the second principle is “always open to
reasonable differences of opinion …[it] depends on inference and judgment in assessing complex
social and economic information." Thus, Rawls argues that the first principle should apply "at the
stage of the constitutional convention," while issues of socioeconomic justice should be decided
by elected representatives after the basic constitutional structure is in place. In essence, this is the
structure adopted by the framers of the Indian Constitution. They set forth a scheme of basic
liberties in Part III of the Constitution, followed by non-justiciable Directive Principles of State
Policy in Part IV. The Indian Supreme Court altered this constitutional structure by interpreting
Articles 21 and 32 to make socioeconomic rights justiciable and allow the Court to assume a central
role in their enforcement.

As the “exemplar of public reason,” the Supreme Court's decisions must reasonably comport with
the text of the Constitution, constitutional precedents, and political understandings of the
Constitution to articulate “a coherent constitutional view over the whole range of their decisions.”
If its decisions do not meet these criteria, citizens might lose confidence that public reason applies
to decisions of socioeconomic justice and the “extant system of positive legal ordering is unjust.”
More broadly, if citizens cannot understand what constitutionally essential provisions require, they
will doubt the legitimacy of the whole constitutional system.

With respect to Article 32, the Court's decisions appear to fit within the constraint of public reason.
As a preliminary matter, the text of Article 32 sets forth a flexible standard rather than a fixed rule
that allows the Court some interpretive discretion. It states that citizens may petition the Supreme
Court via “appropriate proceedings” to obtain relief for violations of fundamental rights. As
discussed in Part III, supra, the term “appropriate proceedings” originally limited standing to
petitioners directly affected by a challenged law. Yet, over time the Court loosened this
 73

requirement to accommodate petitions from any member of the public on behalf of disadvantaged
individuals or groups. This interpretation is within the bounds of public reason because the phrase
“appropriate proceedings” clearly sets forth a standard rather than a rule. All mainstream theories
of constitutional interpretation, with the exception of what Jack Balkin calls “original expected
application,” would accept that the phrase “appropriate proceedings” can (or even should) evolve
over time. The Court is also quite clear in its reasoning on this question of interpretation. For
instance, in Bandhua Mukti Morcha20, Justice Bhagwati states,

“There is no limitation in regard to the kind of proceeding envisaged in clause (1)

of Article 32 except that the proceeding must be "appropriate" and this requirement
of appropriateness must be judged in the light of the purpose for which the
proceeding is to be taken, namely, enforcement of a fundamental right.”

Justice Bhagwati also described the changing nature of litigation, where “Public Interest litigation
is not in the nature of adversary litigation but it is a challenge and an opportunity to the
government.” Here, Justice Bhagwati defends the Court's evolving interpretation of Article 32 on
the grounds that “appropriate proceedings” should be interpreted according to the purpose of the
litigation in question, and the purpose of public interest litigation, particularly in a country like
India, is to allow ordinary citizens to approach the Court to hold the government accountable on
matters of social justice.

While this justification does not lessen (and might even reinforce) the democratic objection, it
overcomes the contractarian objection. The Court has interpreted Article 32 in a manner consistent
with the text that recognizes the framers' broader goals of social revolution, as well as the real need
for PIL in India. This fulfills the constraint of public reason: the Court's reasoning is transparent,
clearly articulated, and is accessible to all Indian citizens in light of their own reasons.

The Court's reasoning with regard to Article 21 is more problematic. The Court has interpreted the
right to life expansively to include a right to “live with dignity” which includes a range of
socioeconomic rights. However, the structure of the Indian Constitution clearly demarcates
fundamental rights in Part III and directive principles in Part IV. More importantly, Article 37 of
the Constitution states that directive principles "shall not be enforceable by any court" even though

20
1984 AIR 802.
 74

these principles are “fundamental in the governance of the country and it shall be the duty of the
State to apply these principles in making laws.” Unlike Article 32, which uses a flexible standard,
Article 37 sets forth a clear rule. The text of Article 37 is unambiguous and does not permit any
deviation. Indeed, no major theory of constitutional interpretation would endorse a judicial
interpretation of a bright-line rule that deviates from the plain meaning of the language of the text.

The Indian Supreme Court therefore has a heavy burden in justifying its deviation from the text of
Article 37. In the seminal cases that transformed the meaning of Article 21 into a broader right to
live with dignity, the Court's reasoning is inadequate-it either sidesteps or completely ignores the
clear textual command of Article 37.

In the Maneka Gandhi Case, the Court first first set out a broader interpretation of Article 21, the
Court included substantial dicta about the right to life without providing any justification for these
pronouncements. It says, for instance, that fundamental rights in Part III of the Constitution
“represent the basic values cherished by the people of this country since the Vedic times and they
are calculated to protect the dignity of the individual and create conditions in which every human
being can develop his personality to the fullest extent.”

It then builds on these broad assertions in Francis Coralie, proclaiming that the right to life
“includes the right to live with human dignity and all that goes along with it, namely, the bare
necessities of life such as adequate nutrition, clothing and shelter and facilities for reading, writing
and expressing oneself in diverse forms, freely moving about and mixing and commingling with
fellow human beings.”

As with the excerpt from Maneka Gandhi, this definition of the right to life appears to be invented
out of whole cloth, without reference to any precedent, constituent assembly debate, or other
source of law. Moreover, both the Maneka Gandhi and the Francis Coralie decisions fail even to
mention Article 37, much less explain how the Court got past the plain meaning of Article 37 when
it reinterpreted Article 21 to make socioeconomic rights justiciable.

Justice Bhagwati provided some hints as to the Court's reasoning on this issue in the. First, he
acknowledges that directive principles “are not enforceable in a court of law” and the Court
therefore cannot compel the government to pass laws or executive orders to meet socioeconomic
goals. Still, he adds that if the state has already passed legislation impacting socioeconomic justice,
 75

state actors “can certainly be obligated to ensure observance of such legislation for inaction on the
part of the State in securing implementation of such legislation would amount to denial of the right
to live with human dignity enshrined in Article 21.”

The distinction drawn here is illusory. Article 37 does not merely state that courts cannot compel
the state to pass laws or orders; it flatly prohibits the enforcement of directive principles. Justice
Bhagwati does not put forth evidence to support his view that Article 37 is not intended to apply
to judicial review of existing laws. Further, even if the Court is permitted to review existing laws
affecting socioeconomic policy, it has never clearly stated (in this case or otherwise) exactly to
what standard the government is held. Additionally, as the "Right to Food" litigation demonstrates,
the Court does not confine itself to a “reasonableness” or “minimum core” standard, but actually
imposes its own policy prescriptions and timelines for completion on elected officials.

Justice Bhagwati's opinion in Bandhua Mukti Morcha also states that certain directive principles
(Articles 39, 41, and 42) provide Article 21 with its "life breath." These articles direct the state to
secure, inter alia, a fair economic system, adequate livelihood, education, public health access, and
humane working conditions for all citizens. According to Justice Bhagwati, these principles
constitute "the minimum requirements which must exist in order to enable a person to live with
human dignity." The Court therefore implies a degree of interplay between Parts III and IV of the
Constitution. It uses the directive principles to determine the scope and meaning of fundamental
rights. Thus, Part IV of the Constitution is not justiciable on its own, but plays an important role
in defining what the "right to life" encompasses.

5.1 Fundamental Rights and Directive Principles are Complementary

The next phase in the battle between fundamental rights and directive principles was characterized
by efforts to interpret them in such a way that they are seen as complementary and supplementary
to each other. The new approach was motivated by the criticism that previous decisions
emphasized fundamental rights to such an extent that very little came from implementing the
directive principles. Sharma observes that it is tragic to note that the judiciary, when it comes to
social change, has “failed to appreciate the insights of the Constitution and needs of society and
 76

has not shown evidence of foresight of the inevitable, futuristic projections”.21 He argues as
follows:

“Our judiciary has unwillingly allowed itself to be unduly obsessed by static

jurisprudential concepts, procedural technicalities and rules of construction born
and grown in foreign soil and appropriate to other developed societies.”22

One of the first cases in which the Supreme Court adopted a more conciliatory approach was that
of Sajjan Singh v. State of Rajasthan.23 In this case the court heard that if the chapter on
fundamental rights were not amended, there was a great danger that the much needed
socioeconomic reforms would not be able to take place. The court stressed the fact that the
fundamental rights and directive principles formed the basis of the Constitution and that they
should therefore be interpreted harmoniously.24 Although the court maintained that the
fundamental rights were not amendable, a new attitude was initiated, namely that these rights
should be interpreted in the light of the ideals set by the directive principles.

An important case in the development of the relationship between fundamental rights and directive
principles, was Chandra Bhawan Boarding and Lodging Bangalore v The State of Mysore.25 In
this case the petitioner challenged the provisions of the Minimum Wage Act, 1948 on the basis
that it violated Art 14 of the Constitution. He alleged that the act conferred 'unguided and
uncontrolled' discretion to the government to fix minimum wages, which interfered with the
freedom of trade. The state replied that in terms of the directive principles it was its duty to provide
a basis for minimum wages.

The court ruled that there was no conflict between the fundamental rights and directive principles
and that they were 'complementary and supplementary'. Directive principles enable the state to
place various duties on its citizens, and if such duties are not fulfilled the 'hopes and aspirations
aroused by the Constitution will be belied if the minimum of the lowest of our citizens are not
met'. The court concluded as follows:

21
S K Sharma Justice and Social Order in India (1984) at 26.
22
Ibid.
23
AIR 1965 SC 845.
24
Supra at 846.
25
1970 SCR 600.
 77

'Freedom to trade does not mean freedom to exploit. The provisions of the Constitution are not
erected as barriers to progress. They provide a plan for orderly progress towards the social order
contemplated by the preamble to the Constitution . . . While rights conferred under Part 3 are
fundamental, the directives given under Part 4 are fundamental in the governance of the country.
We see no conflict on the whole between the provisions contained in Part 3 and Part 4. They are
complementary and supplementary to each other.'

This equality of status of the chapters on fundamental principles and directive principles was
formulated as follows in Keshavananda Bharati v. State of Kerala26:

“Perhaps the best way of describing the relationship between the fundamental
rights of individual citizens, which imposed corresponding obligations upon the
State and the directive principles, would be to look upon the directive principles as
laying down the path of the country's progress towards the allied objectives and
aims stated in the Preamble, with fundamental rights as the limits to that path,
which could be mended or amended by displacements, replacements or
curtailments of enlargements of any part according to the needs of those who had
to use the path.”

The second phase was thus characterized by the Supreme Court's view that instead of the
fundamental rights and directive principles being contrary to each other they were complementary
in nature. The reasoning in this phase was as follows:

 The duty of the court is to establish and maintain a balance between the interests of the
individual and the obligation of the state to undertake socio-economic programmes for the
benefit of all the people.
 Rather than asking which of the sets of principles carries more weight, the directive principles
should be used as an instrument to interpret and better understand the scope of fundamental
rights.
 The courts were inclined to be more pragmatic in comparison with the previous dogmatic
stance, which left very little room for the state to fulfil its constitutional duties.

26
1973 4 SCC 225.
 78

6.1 Directive Principles as the Spirit of the Constitution

The current phase of development in the relationship between fundamental rights and directive
principles is characterized by the activist role that the courts are playing in effecting socio-
economic change. This approach is based on primarily two arguments. The first is that it was the
intention of the framers of the Constitution that the state should not only be aware of what was
expected of it, but that it should have constitutional support for undertaking certain socio-economic
projects. The second is that, due to the conservative approach of the courts through the years, the
state has not succeeded in effectively fulfilling its obligations as formulated in the directive
principles. The desperate conditions, in which millions of people still found themselves,
necessitated a joint approach by the legislature, the executive and the judiciary to address the
intense socio-economic disparities.

The new philosophy was reflected in the watershed case in 1977 of Maneka Gandhi v. Union of
India.27 Since this case the courts have been taking an increasingly active position in addressing
the plight of the underprivileged. The Supreme Court held that the preamble and the directive
principles represented the contours and parameters of public interest and that state action could
limit certain individual rights if this was in the public interest.

Fundamental to this new approach is the belief that the function of the courts is not only to interpret
the law but 'to make it by imaginatively sharing the passion of the Constitution for social justice'.
The active role of the courts since the Maneka Gandhi case has gained such momentum that 'by-
an affirmative action the courts are trying to force the government to create favourable conditions
for effective realisation of the new individual, collective, diffuse rights'.

The status of the directive principles was enhanced by Art 31c, which was included in the Twenty-
Fifth Amendment in 1971. This amendment and the Forty-Second Amendment in 1976 gave
primacy to the directive principles in certain circumstances over fundamental rights. The
amendments were introduced by the Congress Government in the belief that it was the only way
to give effect to the directive principles without their being restricted by fundamental rights. The
early 1980s witnessed a resurgence of the debate on fundamental rights and directive principles
with the case of Minerva Mills Ltd v. Union of India. The petitioners owned a textile company

27
1978 1 SCC 248.
 79

which had been nationalized under the Sick Textile Undertaking (Nationalization) Act, 1974. The
petitioners questioned the constitutional validity of the act as well as the amendment to the
Constitution. Section 55 of the amendment stated that no amendment to the Constitution could be
called into question by any court and that there was no limitation on the power of parliament to
amend the Constitution. The court held that the amendment was void due to the fact that parliament
could not distort the Constitution out of recognition by amending it. The petitioners argued that
fundamental rights could not be infringed and that the disputed Art 31c 'virtually abrogates and
destroys fundamental rights in normal times'.

The court declared that parliament had not the power to 'destroy' the guarantees of the fundamental
rights to achieve the goals set by the directive principles.28 It concluded that:

“The goals set out in Part 4 (directive principles), have therefore, to be achieved
without the abrogation of the means provided for by Part 3 (fundamental rights).
It is in this sense that Parts 3 and 4 together constitute the core of our Constitution
and combine to form its conscience. Anything that destroys the balance between
the two parts will ipso facto destroy an essential element of the basic structure of
our Constitution.”

The court concluded that parliament had acted outside its authority by giving precedence to the
directive principles over the fundamental rights of Arts 14 and 19.

This decision was questioned and overruled by the Supreme Court in Sanjiev Coke Mfg Co v M/s
Bharat Coking Coal Ltd.29 The court suggested that the part of the Minerva case which dealt with
Art 31c was an obiter dictum and therefore not binding. The court therefore ruled that the Coking
Coal Mines (Nationalization) Act, 1972 was protected by Art 31c of the Constitution and had
preference over the fundamental rights on the basis that it gave effect to Art 39(6)105 of the
directive principles. The decision of the court in Sanijiev Coke supports the argument that “the
fundamentalness of the directives is based on natural law and they are equally fundamental along
with fundamental rights”.

28
AIR 1980 SC 1789.
29
AIR 1983 SC 239.
 80

The uncertainty of the two conflicting decisions by the Supreme Court was settled in State of
Tamil Nadu v. L. Abu Kavier Bai.30 In this case the court held that although the directive principles
were not enforceable, it was the duty of the court to make a real attempt to harmonize them with
the fundamental rights. The court referred to the decision of the Constituent Assembly to provide
for two separate chapters:

“We must appreciate that the reason why the founding fathers of our Constitution
did not advisedly make these principles enforceable was perhaps due to the vital
consideration of giving the Government sufficient latitude to implement these
principles from time to time according to capacity, situations and circumstances
that may arise.”

7.1 Conclusion

Therefore, it can be concluded that liberty and equality are complementary to each other and are
not contradictory. In our constitution basically the “fundamental rights” represent the
characteristics of liberty and “directive principles” represent the characteristics of equality.
Although the directive principles may be unenforceable in nature still then they are very important
for the interpretation of fundamental rights. In the paper itself it has been seen that in most of the
cases that the fundamental rights are read with the directive principles of the state policy in order
to understand the meaning of the fundamental rights.

The main reason for which the framers of the Constituent Assembly made the directive principles
unenforceable was that the economy of the nation was at a very pitiable condition. However now
with the rapid growth of the Indian economy it can be said that the government has enough
resources to make the directive principles enforceable. Therefore the judiciary has stepped up to
give preference to the directive principles over fundamental rights in order to ensure justice.

_____________________

30
AIR 1984 SC 725.
 81

FUNDAMENTAL RIGHTS AND DIRECTIVE PRINCIPLES

OF STATE POLICY: CO-EXISTENCE OR CONFLICT?

Anubha Gangal*

Fundamental rights and directive principles of state policy as enshrined in the Indian constitution
denote the inalienable rights and duties of an individual. The idea of constitutionally embodied
fundamental rights emerged in India in 1928 itself. The concept of Directive Principles embedded
in the Constitution was inspired by and based on Article 45 of the Irish Constitution. The
fundamental rights as enlisted in Part III of the constitution are a direction to the state regarding
its obligations towards the individuals, while the directive principles of state policy in Part IV
reflect the ideals and socio-economic goals that the state should aim to achieve in its governance.
The fundamental rights are justifiable and guaranteed by the constitution, while the directive
principles of state policy are directives to the state and the government machinery which are
unenforceable in courts of law.

Time and again the conflict between the enforceability of fundamental rights and directive
principles of state policy has come to the fore. The reason behind the conflict seems to be the
phraseology of the provisions with respect to the enforceability of both the parts and their
interpretation by the courts of the land. Part III of the constitution is explicitly said to be
enforceable in a court of law and Part IV is merely directive in nature, which suggests its
unenforceability. In State of Madras v. Srimathi Champakam, the apex court held that “directive
principles of state policy have to conform to and run as subsidiary to the Chapter of Fundamental
Rights”.

The legislature had expressed its disappointment regarding the judiciary’s blatant interpretation
and emphasis on the fundamental rights while ignoring the scope of directive principles of state
policy. It was felt that a balanced emphasis is required to be given to both fundamental rights and

*
Student of II Year, B.A.LL.B., Amity Law School Delhi, GGSIP University. Email: anubha.gangal@gmail.com.
 82

the directive principles of state policy. Cases like Chandra Bhawan Boarding and Lodging
Bangalore v State of Mysore, Kesavanda Bharati v State of Kerala and Minerva Mills Ltd. v
Union of India stressed on the harmonious relation between Part III and Part IV of the
constitution and encompassed that they were in fact supplementary to each other.

Thus to ensure development not only on micro level, but on macro level; the guardians of the
constitution need to harmoniously interpret and apply the provisions related to fundamental rights
and the directive principles of state policy. This paper seeks to understand the relation between
these two constitutional provisions and their application in order to achieve balanced growth of
human relations. It seeks to understand the rationale behind activist judges giving precedence to
directive principle of state policy over fundamental rights. Through this paper the author aims to
reflect over recent case laws and trace the development of this ideology.

1.1 Introduction

Rights that do not flow from duty well performed are not worth having. - Mohandas Gandhi

Fundamental rights and directive principles of state policy as enshrined in the Indian constitution
denote the inalienable rights and duties of an individual. The fundamental rights as enlisted in Part
III of the constitution are a direction to the state regarding its obligations towards the individuals,
while the directive principles of state policy in Part IV reflect the ideals and socio-economic goals
that the state should aim to achieve in its governance. The fundamental rights are justifiable and
guaranteed by the constitution, while the directive principles of state policy are directives to the
state and the government machinery which are unenforceable in courts of law. The important
question is whether there is in fact a conflict between the two parts of the constitution or a
conceptual overlapping. This paper seeks to understand the relation between these two
constitutional provisions and their application in order to achieve balanced growth of human
relations. It seeks to understand the rationale behind activist judges giving precedence to directive
principle of state policy over fundamental rights.

Part III of the constitution contains a long list of fundamental rights. This chapter of the
constitution of India has very well been described as the Magna Carta of India. The inclusion of
the chapter on fundamental rights in the constitution of India is in accordance with the modern
 83

democratic thought, which ideally seeks to preserve which is an indispensable condition of a free
society. The aim of having a declaration of fundamental rights is that certain elementary rights,
such as, right to life, liberty, freedom of speech, freedom of faith and so on, should be regarded as
inviolable under all conditions and that the shifting majority in legislature of the country should
not have a free hand in interfering with these fundamental rights. 1

The Supreme Court has time and again emphasized the importance of fundamental rights (Articles
14-32) and how they are not a gift from the state to the citizens, but a confirmation of their
existence and protection. 2 In Maneka Gandhi v. Union of India, the Supreme Court held that the
provisions of Part III should be given widest possible interpretation. 3

The directive principles of state policy contained in Part IV of the constitution (Articles 36-51) set
out the aims and objectives to be taken up by the States in the governance of the country. The
concept of Directive Principles embedded in the Constitution was inspired by and based on Article
45 of the Irish Constitution.4 Nigeria had the opportunity of experiencing Directive Principles
of State Policy in 1970 with the introduction of the chapter on Fundamental Objectives and
Directive Principles of State Policy to their Constitution. It is stated that the ideology that
underlies the Directive Principles of State Policy is to develop the “political ideals as to how
society can be organized and ruled to be the best advantage of all”5. Parts III and IV of the Indian
Constitution were once described by CJ. Chandrachud to be, ‘the conscience of the Constitution.”6

The idea of constitutionally embodied fundamental rights emerged in India in 1928 itself. The
Motilal Committee Report of 1928 clearly envisaged inalienable rights derived from the Bill of
7
Rights enshrined in the American Constitution to be accorded to the individual. The directive
principles are the ideals which the union and state governments must keep in mind while they
formulate policy or pass a law. They lay down certain social, economic and political principles,

1
A. K. Gopalan v. Union of India, AIR 1950 SC 27
2
M. Nagraj v. Union of India, AIR 2007 SC 71
3
AIR 1978 SC 597
4
Maureen Callahan Vandermay, The Role of the Judiciary in India's Constitutional Democracy, 20 HASTINGS
INT'L & COMP. L. REV.103, [1996-1997]
5
Akande J.O, Fundamental Objectives and Directive Principles of State Policy within the Framework of a Liberal
Economy, ;Vol. 4, THE ADVOCATE: A JOURNAL OF CONTEMPORARY LEGAL ISSUES at p. 691 (2000)
6
Minerva Mills v Union of India [1980] 2 SCC 591
7
Vuayashri Sripat, 'Toward Fifty Years of Constitutionalism and Fundamental Rights in India: Looking Back to See
Ahead (1950-2000)', 14 Am. U. INT'L L. REV, 428 (1998).
 84

suitable to peculiar conditions prevailing in India. In the words of Sri G.N. Joshi “they constitute
a very comprehensive political, social and economic programme for a modern democratic state.”
8

Dr. B R Ambedkar in the constituent assembly emphasized on the objective to bring about
economic democracy and the idea to achieve it. He said that:

“Having regard to the fact there are various ways by which economic democracy
may be brought about, we have deliberately introduced in the language that we
have used, in the directive principles, something which is not fixed or rigid. We
have left enough room for people of different ways of thinking, with regard to the
reaching of the idea of economic democracy, to strike in their own way, to persuade
the electorates that it is the best way of reaching economic democracy, the fullest
opportunity to act in the way in which they want to act. It is no use giving a fixed,
rigid form to something which is not rigid, which is fundamentally changing. It is
therefore, no use saying that the directive principles have no value. In any judgment
the directive principles have a great value; for they lay down that our ideal is
economic democracy.”9

Part IV of the Constitution commences with Article 37, which states: “The provisions contained
in this Part shall not be enforceable by any court, but the principles therein laid down are
nevertheless fundamental in the governance of the country and it shall be the duty of the State to
apply these principles in making laws.”

This article on subsequent readings highlights three underlying principles, first – non-
enforceability means that no one can ask the court to strike down a law that stands in contravention
to the directive principles; unlike fundamental rights. But does non-enforceability also bar the
Courts from using the Directive Principles in considering, interpreting and adjudicating upon other
laws? Second –Part III of the constitution guarantees rights that are ‘fundamental’, while part IV
lays down principles that are ‘nevertheless fundamental in the governance of the country’. Does
‘fundamental’ as a prefix to the rights under part III and as a characteristic in part IV, imply

8
DR. J.N. PANDEY, CONSTITUTIONAL LAW OF INDIA 435, (51 st ed 2014)
9
Constituent Assembly Debates, Vol. III. At p. 494-95.
 85

conceptual overlapping? And third – what is the nature of the ‘duty’ that Article 37 imposes upon
the State? Is it a constitutional duty, a legal duty or a moral duty?

2.1 The Early Notions of Judicial Interpretation

According to Article 37, the directive principles, though they are fundamental in the governance
of the country and it shall be the duty of the state to apply these principles in making law, they are
expressly made non-justifiable. On the other hand, fundamental rights are enforceable by the courts
(Article 32) and the courts are bound to declare as void any law that is inconsistent with the
fundamental rights.

In State of Madras v. Srimathi Champakam Dorairajan, 10the Supreme Court observed that “The
directive principles of state policy which by Article 37 are expressly made unenforceable by courts
cannot override the provisions of Part III which, notwithstanding other provisions, are expressly
made enforceable by appropriate writs, orders or directions under Article 32. Directive principles
of state policy have to conform to and run as subsidiary to the Chapter of Fundamental Rights.” It
held the chapter on fundamental rights as sacrosanct and in case of any conflict between
fundamental rights and directive principles, the fundamental rights would prevail.

The Court’s attitude in this case reflected the strict adherence to the enforceability of fundamental
rights and unenforceability of directive principles. It reinstated the non-rigid nature of directive
principles in the constitution and highlighted their major drawback; that of non-justifiability. The
Champakam Dorairajan case defined the status of the directive principles as subordinate to that
of fundamental rights.

Conclusively a holistic reading of Article 37 reads as, first – the non-enforceability clause is
limited to just that: citizens may not move the Court seeking remedies for either breach of a
directive principle, or for requiring Parliament to enact a directive principle into law. The objective
of the framers was to protect the government from numerous litigation complications and instead
focus on the issues at hand. The second and third parts – that highlight the fundamental nature of
the Principles and the duty of the State to apply them; emphasize the importance of these principles
and the constitutional obligation to observe them. Article 37, thus, is Pecksniffian as it creates a

10
AIR 1951 SC 228.
 86

protected dimension with respect to the enforceability of directive principles, which renders their
application a constitutional impossibility. While within the same dimension it highlights their
indispensible characteristic.

This strict approach continued in Muir Mills v. Suti Mills Mazdoor Union11, where the Directive
principles were invoked in argument over workmen’s rights to bonus payments. Muir Mills was
not even a question of enforcement, as it involved only a question of interpretation. Nonetheless,
the Court refused to use the Principles even as interpretive guides, preferring to adhere instead to
traditional common law employment concepts of wages and bonuses. Various state High Courts
followed the Supreme Court’s lead, taking the non-enforcement clause as evidence that the
Principles had no role whatsoever to play in the judicial task. In Jaswant Kaur v. State of
Bombay12 , the Bombay High Court refused to let the directive principles guide its interpretation
of the Bill of Rights, holding categorically that “any article conferring fundamental rights cannot
be whittled down or qualified by anything that is contained in part IV of the Constitution.” 13

In this early phase of the Court’s history, therefore, the Directive Principles were a classic example
of what James Madison referred to as “parchment barriers”. In the case of, Mohd. Hanif Quareshi
& Others v. The State Of Bihar 14 the petitioners, who were engaged in the butcher's trade and its
subsidiary undertakings, challenged the constitutional validity of three Acts that together put a ban
on the slaughter of animals; cows and her progeny; cows, buffaloes, heifers, bullocks and bulls,
respectively. No exception was made in these Acts for bona fide religious practices. The three Acts
were enacted in pursuance of the directive principle of state policy contained in Article 48 of the
constitution. The petitioners challenged the validity of the Acts on the ground that they were
violative of their fundamental rights under Articles 14, 19(1) (g) and 25 of the constitution. The
court held that the directive principles laid down in Part IV of the constitution have to conform to
and run subsidiary to the fundamental rights in Part III.

The approach of the court in dealing with matters relating to conflicts between fundamental rights
and directive principles was rigid. The principles applied by the courts around that time were

11
1955 SCR (1) 991.
12
AIR 1952 Bomb. 461.
13
Ibid [4] (Chagla C.J.).
14
1958 AIR 731, 1959 SCR 629.
 87

streamlined to strictly interpret Article 37 and make a clear stand on the supremacy of the
fundamental rights. The court’s attitude reflected the stiff and rigid ideology of the judiciary of
that time which was not willing to encourage free interpretations. The judiciary was going by the
book, in the literal sense. This approach makes us question the real intention of the constituent
assembly in including the directive principles of state policy in the constitution.

In his initial constituent assembly speech Dr. Ambedkar repudiated the objection that the Directive
principles were no more than pious wishes, arguing that no legal force did not imply no binding
force. Ambedkar’s use of the word “binding” (as opposed to “political” or “moral”), a word that
is equally at home in both a legal and a non-legal context, seems to indicate that the Principles,
while falling well short of enforceability, were not meant to be legally irrelevant either.15

Even in the recent case of Lily Thomas and Ors. v. Union of India and Others16, the Supreme
Court has reiterated that it has no power to give direction for enforcement of the Directive
Principles of State Policy and those do not create any judiciable right and are, thus, not enforceable
by the courts.

3.1 The Transformation in the Outlook of the Judges

The Courts’ attitude underwent a change in the subsequent years as it revised the yardsticks for
determining the validity of the directive principles. The development of a broad minded and open
ended outlook took time to develop and was not uniform initially. The development should be
traced chronologically to best understand the revolution in the judiciary’s mindset.

In State of Bombay v. Balsara, 17the Supreme Court gave weight to Article 47 which directs the
state to bring about prohibition of consumption of intoxicating drink except for medical purposes
to support its decision that the restriction imposed by the Bombay Prohibition Act was a reasonable
restriction on the right to engage in any profession or carry on any trade. This was a positive step
towards recognizing the importance of directive principles in the governance of the country while
achieving humanitarian objectives.

15
Constituent Assembly Debates, Vol. VII.
16
AIR 2000 SC 1650.
17
AIR 1951 SC 318 at pg. 329.
 88

When the court dealt with Zamindari abolition cases its attitude was considerably modified. In
State of Bihar v. Maharajadhiraja Sir Kameshwar Singh18, the court held that our Constitution
gives protection to the right of private property by article 19(1)(f) not absolutely but subject to
reasonable restrictions to be imposed by law in the interest of the general public under clause (5)
and grants the State the power, if it may so exercise , under Article 31, to deprive the owner of his
property by authority of law subject to payment of compensation if the deprivation is by way of
acquisition or requisition of the property by the State. It is thus quite clear that a fresh outlook
which places the general interest of the community above the interest of the individual pervades
our Constitution. it further observed that ‘it cannot be overlooked that the directive principles set
forth in Part IV of Constitution are not merely the policy of any particular political party but are
intended to be principles fixed by the Constitution for directing the State policy whatever party
may come into power.’

In Re Kerala Education Bill19, the Supreme Court observed that though the directive principles
cannot override the fundamental rights, the court should not completely ignore them in their
interpretation of fundamental rights. While reaffirming the primacy of the fundamental rights, the
Court nonetheless opened the gates for Directive principles to play a tangible ,if subsidiary role in
interpretation, holding that the “scope and ambit” of the fundamental rights should be determined
in such a harmonious way, that full effect is given both to Part III and Part IV.

Part IV comprises of “goals”, and Part III contains “rights” that the government must respect in
pursuit of its goals. This, according to the Courts is the a priori distinction between Part III and
Part IV, which ought to inform the judicial approach to issues involving fundamental rights and
DPSPs. In the aftermath of In Re Kerala Education Bill, the Court made the Directive principles
an integral part of any enquiry into the validity of fundamental rights restrictions. Jugal Kishore
v. Labour Commissioner20 referred to directive principles of state policy, citing no less than three
of the Principles to hold that notice requirements and other restrictions upon employers’ discretion
were restrictions in interests of the general public. Similarly, in Chandrabhawan Boarding &
Lodging Bangalore v. State of Mysore21, the Court upheld state minimum wage legislation,

18
AIR 1952 SC 352.
19
AIR 1957 SC 956.
20
AIR 1958 Pat 442.
21
1970 SCR (2) 600.
 89

cursorily dismissing the 19(1) (g) claims of the employers by stating that ‘Freedom of trade does
not mean freedom to exploit.’ Chandrabhawan is also noticeable in that it came at the end of the
60s, and marked another shift in the Court’s jurisprudence by abandoning the “subordinate-but-
relevant” doctrine of In Re Kerala Education Bill. In Chandrabhawan, the Court observed that the
bill of rights and the directive principles were “complementary and supplementary” to each other.

In Kesavanda Bharti v. State of Kerala22, the Supreme Court said that fundamental rights and
directive principles aim at the same goal of bringing about a social revolution and establishment
of a welfare state and they can be interpreted and applied together. They are supplementary and
complimentary to each other. It can well be said that directive principles prescribed the goal to be
attained and the fundamental rights laid down the means by which that goal is to be achieved. The
same sentiments were echoed in the case of Minerva Mills v. Union of India23, where it was stated
that there is no conflict between the directive principles and the fundamental rights. They were
said to be complementary to each other. It is not necessary to sacrifice one for the other.
Chandrachud J. speaking for the majority observes:

“But just as the rights conferred by Part III would be without a radar and a
compass if they were not geared to an ideal, in the same manner, the attainment of
the ideals set out in Part IV would become a pretence or tyranny if the price to be
paid for achieving that ideal human freedoms.”24

In view of this, the courts took over the responsibility to interpret the provisions of the constitution
in such a way so as to ensure the implementation of the directive principles and to harmonize the
social objectives underlying the directives with the individual rights. This was understood to be
the mandate of the Constitution not to the Legislature and the Executive only, but to the Courts as
well.25

The judgment in Minerva Mills was reduced to the status of obiter which later created confusion
regarding the validity of directive principles. The confusion was removed by the Supreme Court

22
AIR 1973 SC 1461.
23
AIR 1980 SC 1789.
24
Ibid at 1807.
25
Ranjan Dwivedi v. Union of India, AIR 1983 SC 624.
 90

in State of Tamil Nadu v. L. Abu Kavur Bai26. The Court held that although the directive principles
are not enforceable yet the Court should make a real attempt at harmonizing and reconciling the
directive principles and the fundamental right and any collision between the two should be avoided
as far as possible. In Grih Kalyan Kendra Workers Union v. Union of India27, the Supreme Court
has enforced the provisions of Article 39(d) by giving the directive principles the status of
fundamental rights.

In Tamil Nadu Freedom Fighters v. The Government Of Tamil Nadu 28 the court made an
interesting observation when a registered society moved the court seeking to restrain the State of
Tamil Nadu from manufacturing and thereby doing business or trade in the so-called cheap liquor
inspired by Article 47. ‘The question in the instant case is not whether the court can direct the State
to implement the directive principle of State policy but whether the State can ignore the directive
principle and make a law which is opposed to the State policy. There can be no State policy which
is opposed to public interest. Everything which is in consonance with the directive principle of
State policy in Part 4 of the Constitution must ordinarily be in the public interest.’ This case
reflected the progressive mindset of the judiciary. Directive principles were no longer left to be
dead letters in the constitution, but were now being recognized for their indispensible nature in the
process of governance. The court highlighted the need for the State to conform to directive
principles in its law making process. The focus was shifted from the court’s responsibility of
determining the status of the directive principles to the State’s responsibility of not ignoring them.
Public interest was yet again emphasized to be the driving force in all legislations and public
dealings.

In Kanaka Durga Wines and Ors. vs Govt. Of A.P. And Ors29 the court observed that the directive
principles of State policy embodied in Article 47 and other directives contained in Part IV are
fundamental in the governance of the State. A case similar to Mohd. Hanif Qureshi case came to
light in the year 2006- State of Gujarat v. Mirazpur Moti Kureshi Kassab Jamat30. However this
case was principally different in terms of the judgment as the Court did not degrade directive

26
AIR 1984 SC 626.
27
AIR 1991 SC 1173.
28
1992 1 MLJ 582.
29
1995 (3) ALT 228.
30
AIR 2006 SC 212.
 91

principles to a status subsidiary to that of fundamental rights. Instead the 7 Judge constitutional
Bench of the Supreme Court following its number of earlier decisions held that directive principles
are relevant in considering the reasonability of restrictions imposed on fundamental rights. It is a
constitutional mandate under Article 37 that in making laws the state shall apply the directive
principles. The opinion of the judges in this case was in sharp contrast to that opined by judges in
Mohd. Hanif Qureshi case. It definitely was a welcome change.

The mandate of Article 37 of the Constitution, that while the directive Principles of State Policy
shall not be enforceable by any Court, the principles are 'nevertheless fundamental in the
governance of the country' and ‘it shall be the duty of the State to apply these principles in making
laws’. Addressed to Courts, what the injunction means is that while Courts are not free to direct
the making of legislation, Courts are bound to evolve, affirm and adopt principles of interpretation
which will further and not hinder the goals set out in the Directive Principles of State Policy. This
command of the Constitution must be ever present in the minds of Judges when interpreting
statutes which concern themselves directly or indirectly with matters set out in the Directive
Principles of State Policy.31

With the development of the judicial ideology regarding the status of directive principles over the
years, some directive principles were elevated to the status of fundamental rights. Such a change
is nothing short of a judicial miracle in a country where during the drafting of the constitution,
directive principles were being considered to be scrapped altogether. The development process
was a slow and dragged one but the end result has been worth the constitutional struggle. The
changed approach was developed by a new judicial technique of construing the provisions
contained in Part III of the Constitution. The technique was of giving fundamental rights a wider
scope with the help of the concepts contained in directive principles. The court began to integrate
the concepts of Part IV of the constitution with the fundamental rights, thereby creating a wide
dimension which focused on delivering justice and equality in totality. The Courts were no longer
focused on just the fundamental rights, but a creative combination of directive principles and
fundamental rights. In this process, the Court infused the concept of social justice into fundamental
rights and did away with the rigid conception of them being only individual rights.

31
Smt. Mala Banerjee vs The State Of West Bengal And Ors. 2008 (1) CHN 979.
 92

Articles 38 and 39 embody the jurisprudential doctrine of ‘distributive justice’. The constitution
permits and even directs the State to administer what may be termed ‘distributive justice’. The
concept of distributive justice in the sphere of law-making connotes, inter alia, the removal of
economic inequalities rectifying the injustice resulting from dealings and transactions between
32
unequals in society. Article 38(1) provides that the State shall strive to promote the welfare of
the people by securing and protecting as effectively as it may, a social order in which justice-
social, economic and political-shall inform all the institutions of national life. This directive only
reaffirms what has already been said in the Preamble according to which the function of the
33
Republic is to secure to all its citizens social, economic and political justice. In Air India
Statutory Corporation v. United Labour Union34, the Supreme Court explained the concept of
Social justice. “The concept of social justice consists of diverse principles essential for the orderly
growth and development of personality of every citizen.” “The constitution, therefore mandates,
the State to accord justice to all members of the society in all facets of human activity.” In Nair
Service Society v. State of Kerala35, the Court reinstated the fact that the ‘equality before law’ has
many facets and is a dynamic concept. The law seeking to achieve the said purpose is to be
interpreted not only on anvil of articles 14, 16 but also having regards to international laws. Social
justice was, inter alia suggested to be carried out by economic empowerment of the weaker
sections36 and regularization of daily wage workers.37

Legal aid and speedy trial were held to be the fundamental rights under Article 21 of the
constitution available to all prisoners and enforceable by the courts38. Article 39-A directs the state
to ensure that the operation of the legal system promote justice, on a basis of equal opportunities
and shall, in particular, provide free legal aid, by suitable legislation or in any other way, to ensure
that opportunities for securing justice are not denied to any citizen by reason of economic or other
disabilities. This was a progressive step in constitutional history. Hussainara Khatoon v. Home
Secretary, State of Bihar39 a case which moved for the release of under-trial prisoners in Bihar,

32
Central Inland Water Transport Corporation v. Brojo Nath Ganguly, (1986) 3 SCC 156.
33
J.N. PANDEY, CONSTITUTIONAL LAW OF INDIA 437 (51 st ed 2014).
34
AIR 1997 SC 645.
35
AIR 2007 SC 2891.
36
Charan Singh v. State of Punjab, AIR 1997 SC 1052.
37
Gujarat Agricultural University v. Rathod Labhu Bechar, AIR 2001 SC 706.
38
H.M Hoskot v. State of Maharashtra, AIR 1978 SC 1548.
39
AIR 1979 SC 1360.
 93

some of whom had been imprisoned as under-trials for terms longer than the maximum punishable
imprisonment period under the law, waiting for the trial procedure led to the introduction of the
Legal Aid Services Programme for Free Legal Aid to under-trials. There was no express provision
in the constitution under the fundamental rights to provide free legal aid and speedy trial to under-
trials. But, inspiration was drawn from the directive principles to serve justice to those who had
suffered at the harsh ends of law. Had it not been for the progressive thinking of the judges, the
40
right to equality before law and equal protection of the laws and the right to life and personal
liberty41 In Kishore v. State of Himachal Pradesh it was held that legal aid may be treated as part
of the right created under Article 21.42 An important impact of Article 39-A read with Article 21
43
has been to reinforce the right of a person involved in a criminal proceeding to legal aid. Its
impact has not just been unilateral, this article has also been used to interpret and even expand the
right conferred by Section 304 of the Code of Criminal Procedure, 1973, as can be seen in State
of Harayana v. Smt. Darshana Devi 44and Sukh Das v. Union territory. 45

In a notable judgment in State of Maharashtra v. Manubhai Bagaji Vashi46, the Supreme Court
held that Article 21 read with Article 39-A casts a duty on the State to afford grants-in-aid to
recognized private law colleges, similar to other faculties, which qualify for receipt of the grant.
The aforesaid duty cast on the State cannot be whittled down in any manner, either by pleading
paucity of funds or otherwise. The Court’s strict dictation signifies the recognition of this directive
principle as a fundamental right.

Pursuant to Article 39 (d), Parliament enacted the Equal Remuneration Act, 1976. The directive
principle contained in Article 39 (d) and the Act passed thereto could be judicially enforced by the
47
court. The Supreme Court in Randhir Singh v. Union of India48 observed that though not a
fundamental right, without the right to equal pay for equal work, the concept of equality as a

40
Const. art.14 reads as “The State shall not deny to any person equality before the law or the equal protection of the
laws within the territory of India.”
41
Const. art.21 provides, “No person shall be deprived of his life or personal liberty except according to the
procedure established by law.
42
AIR 1990 Cr LJ 2289.
43
P.M BAKSHI, THE CONSTITUTION OF INDIA 104 (Universal Law Publishing; 12th ed. 2013).
44
AIR 1979 SC 855.
45
AIR 1986 SC 991.
46
(1995) 5 SCC 730.
47
J.N. PANDEY, CONSTITUTIONAL LAW OF INDIA 438 (51st ed. 2014).
48
AIR 1982 SC 879.
 94

fundamental right would be meaningless. Dealing with the plea of equal pay for equal work, the
Court observed:

“But, it certainly is a constitutional goal... Directive Principles, as have been

pointed out in some of the judgments of this Court have to be read into fundamental
right as a matter of interpretation... To the vast majority of the people the equality
clause will have some substance if equal work means equal pay.”

The court therefore construed Article 14 and 16 in the light of the preamble and Article 39 (d) and
held that “pay for equal work is deducible from those Articles and may be applied properly applied
to cases of unequal scales of pay based on no classification or wrong classification..” The same
sentiments were echoed in cases like D.S.Nakara v. Union of India49 and R.K Ramchandran Iyer
v. Union of India 50. Subsequently it was held in cases like Surinder Singh v. Engineer-in-Chief,
C.P.W.D 51 and Dhirendra Chamoli v. State of U.P52that the doctrine of equal pay for equal work
is equally applicable to persons employed on a daily wage basis. They are also entitled to the same
wages as other permanent employees in the department employed to do the identical work. 53

In an extension of its objective to deliver social justice, provisions of articles 39(e), 39(f), 41 and
54
47 were suggested to be read together to make suitable provisions regarding child labour.
Accordingly, the Supreme Court in M.C.Mehta v. State of Tamil Nadu55issued directions to the

49
AIR 1983 SC 130.
50
AIR 1984 SC 541.
51
AIR 1986 SC 534.
52
(1986) 1 SCC 637.
53
Daily Rated Casual Labour v. Union of India, (1988) 1 SCC 122
54
Const. art.39(e) reads as- “that the health and strength of workers, men and women, and the tender age of children
are not abused and that citizens are not forced by economic necessity to enter avocations unsuited to their age or
strength”
Const. art.39(f) reads as-“ that children are given opportunities and facilities to develop in a healthy manner and in
conditions of freedom and dignity and that childhood and youth are protected against exploitation and against moral
and material abandonment.”
Const. art. 41 reads as- “Right to work, to education and to public assistance in certain cases The State shall, within
the limits of its economic capacity and development, make effective provision for securing the right to work, to
education and to public assistance in cases of unemployment, old age, sickness and disablement, and in other cases
of undeserved want.”
Const. art. 47 reads as- “Duty of the State to raise the level of nutrition and the standard of living and to improve
public health The State shall regard the raising of the level of nutrition and the standard of living of its people and
the improvement of public health as among its primary duties and, in particular, the State shall endeavour to bring
about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are
injurious to health.”
55
AIR 1997 SC 699.
 95

state to see that an adult member of the family whose child is in employment in a factory, mine or
hazardous employment gets employment anywhere, in lieu of the child. This was a step to protect
the constitutional right of these children guaranteed by Article 24, which was being grossly
violated and the Court was requested to issue appropriate directions to the Government to take
steps to abolish child labour. 56

In another landmark judgment, Unnikrishnan v. State of A.P.57, the Supreme Court held that the
‘Right to education’ up to the age of 14 years is a fundamental right within the meaning of Article
21 of the constitution, but thereafter the obligation of the State to provide education is subject to
the limits of its economic capacity. The Court declared that “the right to education flows directly
from right to life.” The Constitution (86th Amendment) Act, 2002 substituted a new article for
Article 45 which provides that “the State shall endeavour to provide early childhood care and
education for all children until they complete the age of six years.” This has been necessitated as
a result of making the right to education of children up to 14 years of age a fundamental right.
Through this judgment the court raised the status of a directive principle to that of a fundamental
right, essentially signifying its fundamental importance in achieving social justice.

Under Article 48-A, the state is burdened with the responsibility of making an endeavour to protect
and improve the environment and to safeguard the forest and wildlife of the country. Under Article
51-A, there is duty of citizens to protect and improve the natural environment including forests,
lakes, rivers and wildlife to have compassion for living creature.58 Justice Kuldip Singh of the
Supreme Court in M.C Mehta v. Kamal Nath 59referred to a legal theory of ‘Doctrine of Public
Trust” developed by the ancient Roman Empire that certain common properties such as air, sea,
water and forests are of immense importance to the people in general and they must be held by the
Government as a trustee for the free and unimpeded use by the general public and it would be
wholly unjustified to make them a subject of private ownership. The doctrine enjoins upon the
Government to protect the resources for the enjoyment of the general public rather than to permit

56
Const. art.24 reads as- “Prohibition of employment of children in factories, etc No child below the age of fourteen
years shall be employed to work in any factory or mine or engaged in any other hazardous employment.”
57
(1993) 1 SCC 645.
58
Association for Environmental Protection v. State of Kerala, AIR 2013 SC 2500.
59
1997 (1) SCC 388.
 96

their use for private ownership or commercial exploitation to satisfy the greed of the few. Subhash
Kumar v. State of Bihar60 held that Articles 14, 21 and 51A (g) are to be read together.

4.1 Conclusion

The judiciary took time, but it did eventually broaden its perspective in order to achieve the
constitutional goals enshrined as ‘Directive Principles of State Policy’. The journey was not a
smooth one with cases like Champakam Dorairajan, Mohd. Hanif Qureshi and the likes;
completely disregarding the importance of the directive principles. But a paradigm shift in the
judiciary’s approach was seen with the cases like in Re Kerala Education Bill, Abu Kavar Bai,
Kesavananda Bharti etc. Directive principles were eventually recognized, not as mere strings of
words in the constitution, but as a catalyst to achieve social, political and economic goals. Cases
like H.M. Hoskot, Hussainara Khatoon, M.C. Mehta, etc elevated the status of directive principles
to that of fundamental rights. Elevated to inalienable fundamental rights they became enforceable
by themselves. The Directives in our Constitution are forerunner of the UNO Convention of Right
to Development as inalienable human right and every person is entitled to participate in, contribute
to and enjoy economic, social, cultural and political development in which all human rights,
fundamental freedom would be fully realized. 61 This new trend and the decisions show that activist
judges are not letting orthodox ideologies dictate their decision making. Instead of becoming a
stumbling block the judiciary has now taken itself the responsibility of implementing the Directive
Principles.62

_____________________

60
AIR 1991 SC 420.
61
J.N. PANDEY, CONSTITUTIONAL LAW OF INDIA 455 (51 st ed 2014).
62
Ibid Pg. 457.
 97

TRANSFORMATION OF INDIAN ECONOMY FROM

LICENCE RAJ TO COMPETITION ERA
Anjali Rai*

Diwanshi Rohatgi**

Indian economy had made an attempt to move from command and control regime to the regime
based on free market principles thus, unleashed the latent and suppressed energy of our people
and with the aim to promote the interests of consumers and to ensure freedom of trade carried on
by other participants in the market. It has been an exemplar shift, in approach to economic
policies, in the external sector, foreign direct investment, and the financial sector.

Paper throws light on shift from the post-Independence socialist-style economy to the world’s
largest free market economy i.e., three modes of economic administration. These are the planned
economy till the end of the 1970s where government has final authority to take decisions regarding
production, consumption and distribution. The licence raj system was result of planned economy,
to start a business, one has to obtain approximately 80 licences, which are resultant into disinterest
in taking new initiative and also somehow increased the corruption rate and fraud that lead to
downfall in growth. Secondly, limited liberalisation period of 1980s made a sea change in terms
of licensing policy in favour of large business houses, making them free from the provisions of
MRTP ACT and FERA. Thirdly, the post-reform period beginning in early 1990s to unshackle the
Indian economy from cobwebs of unnecessary bureaucratic control and to introduce liberalisation
focusing on economic freedom, free trade policies, foreign investment in the form of FII and FDI.

There has been radical change in our trade situation since 1991 is perhaps unprecedented in
Indian economic history since independence. With the emergence of new economic policy of 1991,

*
Student of III Year, B.A.LL.B. (Hons.), Chanakya National Law University Patna. Email:
anjalirai995@gmail.com.
**
Student of III Year, B.B.A.LL.B. (Hons.), Chanakya National Law University Patna. Email:
diwa.me3@gmail.com.
 98

a need was felt for promoting competition in domestic market, technological up-degradation and
modernisation hence COMPETITION ACT of 2000 was passed. The objectives are to prevent anti-
competition practices, to promote and sustain competition in markets, to protect the interests of
consumers, and to ensure freedom of trade for all participants in the markets in India. Despite of
positive elements which will lead to desired level of competition, the negative elements in this act
will reduce or eliminate any obstacle that stand in a way of fuller competition.

The main questions authors would discuss in this paper is how in the present milieu of competitive
environment, competition is key to survival of a business which is surrounded by rivals from within
and without? What are the economic challenges India still faces in pushing ahead with reforms so
that it remains not just the world's biggest free market democracy, but so that it becomes the most
exciting and dynamic one, are largely political?

1.1 Pre-1991 Economy

Economy of India in pre-British era had been self-sufficient agricultural and rural in character.
Country was prominent in the world for its handicraft industries in cotton and silk textiles, metal
and precious stone works etc.1 At the drawn of the independence from the British colonial rule,
Indian economy was in shattering, state mass population of poor, illiterate and unemployed
sections of the society was looking towards the national leaders of that period for building a new
India which could provide positive hopes to them.2

Indian economic environment after centuries of external subjugation has unwaveringly undergone
a drastic change due to the government policies. The Indian national congress under the inspiration
of charismatic Prime Minister Pt. Jawaharlal Nehru was in favour of a greater role of government
in all activities of development for achieving social justice. He paved the way for creation of a
large base and scope for public sector by introducing the First Industrial Policy Resolution in 1948
and sets up the national planning committee which advocated that state should own and control all
means of production.3 This could lift up the socio- economic and growth of the country as

1
Dutt & Sundharam, “Indian Economy”, (63rd ed ).
2
Subhojit Goswami, “Development in India after Independence”, http://www.mapsofindia.com/my-
india/india/development-in-india-after-independence, 20th July 2015, 5:10pm IST
3
Shodhganga, “Growth of public sector in India in pre and post liberalisation period”,
http://shodhganga.inflibnet.ac.in/bitstream/10603/4474/7/07_chapter%202.pdf, 20th july 2015, 5:20pm IST
 99

enshrined in 2nd five year plan (the Nehru-Mahalanobis strategy of industrial development through
capital goods and heavy industries), this strategy emphasised investment in the heavy industries to
achieve industrialisation which was assumed to be the basic condition for rapid economic
development. Hence, planned industrialization became a major doctrine for tackling economic
backwardness in developing countries.4 The planners felt that immense natural and human
resources of the country was ideally suited for industries, resources should therefore be applied
more towards development of industry rather than to agriculture sector. Indian agriculture was
suffering from heavy population pressure on land. Marginal productivity of labour on land was
zero and negative. This pressure on land could reduce by shifting surplus population to industrial
sector. The setting up and expansion of the industrial sector became necessary condition for raising
national product. Rapid industrialisation was an essential condition for the development of not
only agriculture sector but also the other sectors. With the expansion of industrial sector and the
shifting of labour from rural to urban areas, the demand of food grains and agriculture raw
materials would increase. At the same time increased production and supply of fertilizers,
pesticides, agricultural machinery etc. would help in the expansion of agriculture production.
Hence the growth of industrialisation and expansion of market there would be expansion of trade
and commerce in transportation, in banking and finance etc.5

Although the Nehru model of development provided a tremendous role for public sector
undertakings but also left some field for private sector to bloom. Since the adoption of first
Industrial Policy Resolution in 1948 significant development took place in India. According to this
policy industries were be kept under three- public sector, private sector and the joint sector. Hence,
it contemplated a mixed economy. Later on, in the second industrial policy replacing policy of
1956 gave a new classification of industries. The first category comprised industry which would
be solely owned by the state i.e., 17 industries under state control –arms and ammunitions, atomic
energy, iron and steel, heavy casting and forgoing of iron and steel; machinery required for iron
and steel production, for minings, for machine tool manufactures etc, heavy electrical industries,
coal; mineral oils, mining; iron ore and other important minerals like copper, lead and zinc;

4
2nd Five year plan, http://planningcommission.gov.in/plans/planrel/fiveyr/2nd/2planch2.html, 20th july 2015,
6:15pm IST
5
Dutt & Sundharam, “Indian Economy”, (63rd ed).
 100

aircraft; air transport, railways, ship building; telephone, telegraph and wireless equipment;
generation and distribution of electricity.

The second category consisted of industries which the private sector could supplement the efforts
of the state sector, with the state taking sole responsibility for starting new units; there were twelve
industries – other mining industries, aluminium and other non ferrous metals not included in
category 1; machine tools, ferroalloys and tool steels, the chemical industry; antibiotics and other
essential drugs; fertilizers; synthetic rubber, carbonization of coal; chemical pulp; road transport
and sea transport.

The third category consisted of remaining industries which were to be in private sector. Despite of
having a separate category of private sector yet it was kept under the state control through licenses.
Under the Industries (development and regulation) act 1951 which was passed to implement the
industrial policy resolution of 1948 and to empower the government to take necessary steps to
regulate the pattern of industrial development through licensing.

Licence raj was the outcome of Indian planned economy where each and every aspect is controlled
by states and central government. It was required to (i) establish a new factory, (ii) carry on
business in an existing unlicensed factory (iii) significantly expand an existing factory capacity,
(iv) start a new product line and (iv) change location.6 No new industry was allowed unless a
license was obtained from the government. This policy was used to promote industries in backward
areas, it was easier to obtain license if the industrial unit was established in backward area. Apart
from this they also got concessions such as tax benefits and electricity at lower tariff. Even the
existing industries have to obtain license to expand its production or to diversify their activities.
This was basically meant to keep check that quantity of goods produced should not be more than
it is required in the economy i.e., licensing became the key means of allocating production targets
set out in the 2nd five year plan and in 3rd year plan which continued on the same strategy with
tremendous investment in heavy industries, but the deficiency of target operated a failure of
planning. However, the point that needs to be highlighted is that industrial targets influenced
industrial growth significantly but they could not determine it. Shortfall in available inputs and
foreign exchange, delayed execution, exigencies of the licensing procedure itself and similar

6
Philippe Aghion, Robin Burgess, Stephen Redding & Fabrizio Zilibotti,” The Unequal Effects of Liberalization:
Evidence from Dismantling the License Raj in India”, http://sticerd.lse.ac.uk/dps/de/DEDPS45pdf, 23rd JULY 2015.
 101

factors often held up fulfilment of targets by holding up licensing or installation of licensed

capacities or their utilization to achieve target levels of production. The reliance on licensing could
restrict but not encourage investments by the private sector in fulfilment of the targets.7

Applications for industrial licenses were made to the Ministry of Industrial Development and then
reviewed by an inter-ministerial Licensing Committee. The bureaucratic nature of licensing policy
imposed a substantive administrative burden on firms and increased corruptions. There was also
considerable uncertainty that whether license application would be approved within the time frame
or not. For example 35% of licenses were rejected between 1959 and 1960. Delays in approval
process were common and of indefinite length. The Licensing Committee reviewed applications
on a sequential, first-come, first-served basis, and since the 2nd-year plans laid down targets or
ceilings for industrial capacity, this provided an incentive for pre-emptive license applications.
This system favoured the larger industrial houses (e.g. Birla, J.K. and Tata) which were better
informed, organized and submitted multiple early applications as a means of foreclosing on plan
capacity as per the reports of Hazari committee.8 After this, Government of India appointed a
committee under the chairmanship of Mr. Subimal Dutt in 1967 known as industrial licensing
policy inquiry committee basically to inquiry the working of licensing system in India. The Dutt
Committee recognised the fact that industrial licensing which was specifically meant to implement
industrial policy of government, but it failed to achieve the objective of planned economic
development. It was a negative instrument. The committee while accepting the fact that other
monetary and fiscal instruments be pressed into service to achieve the goal of the development,
still voted for the continuance of the licensing system as to make it perfect instrument of industrial
growth.9

Between 1950s and 1980s the economy of India stagnated around 3.5% and there was low annual
growth rate.10 There was a large public sector and losses were incurred by state-owned enterprises.
Government sought to restrict the scope and the growth of private sector through industrial policies

7
T. P Bhatt, “Growth and structural changes in Indian industry”, http://isidev.nic.in/pdf/WP1302.pdf, 22nd July
2015.
8
Chirashree Das Gupta, Globalisation, Corporate Legal Liability and Big Business Houses in India, ,
http://www.cisd.soas.ac.uk/Editor/assets/chirashreedasgupta_final.pdf, 23rd July 2015, 12:30 pm IST.
9
Smriti Chand, “Dutt committee on industrial licensing”, , http://www.yourarticlelibrary.com/industries/dutt-
committee-on-industrial-licensing/23446/, 23rd july 2015, 1:15 pm IST.
10
Political economy of India, http://business.mapsofindia.com/india-economy/political.html, 24th july 2015, 2 pm
IST.
 102

of 1948 and 1956 along with the licensing procedures hence monopoly of public sector was created
ultimately leads to poor infrastructure investment. Many large enterprises in the private sector
carried their operations through virtual monopoly and oligopoly. Taking advantage of the absence
of foreign competitions, these entered into collusion and eliminated internal competition openly
or secretly. They got effective control over the market and exploited the innocent consumers. Many
enterprises created artificial scarcities of the products and gave the impression of excessive
demand of their products. These enterprises even influenced government policies to their own
advantage and ensured favourable tax measure, fiscal incentives for export and foreign
collaborations agreements. They raised huge financial resources from financial institutions.
Consequently they enjoyed their monopoly power and hence there were restrictive trade practices
and to overcome these practices MRTP act of 1970 was passed. 11

Recognition of the problems in economy environment of India because of prevailing licensing

system led to various reforms undertaken in 1970s which made an attempt to consolidate the
application process and to boost exemption and expansion limits. The Industrial Policy Statement
of 1973 culled high-priority industries where investment from large industrial houses and foreign
companies would be permitted and Industrial Policy Statement of 1977 set emphasis on
decentralisation and development of small-scale and cottage industries.12

Before 1980s witnessed that economy was largely based on central planning, set out the private
sector at periphery of the economy. But 1980s onwards, Indira Gandhi and his son Rajiv Gandhi
began a process of liberalising. The general assembly brought about the industrial policy statement
of 1980. Main gist of industrial policy was to regularise the excess capacity installed over and
above the license capacity .Apart from this government also proposed to adopt privileges of
automatic expansion of capacity to all industries so that there would be full utilisation of capacity
and maximization of production. In pursuance of this policy a new licensing policy was adopted
which aimed at reviving the economic infrastructure inhabited by infrastructural gaps and
inadequacies in performance. The objective of new licensing policy reflected a thirst for the yields
of industrialisation and economic progress .This policy exempted the licensing requirement for an
existing licensed undertaking to substantially increased production capacity on the existing lines,

11
Dutt & Sundharam, “Indian Economy”, (63rd ed).
12
Statement on industrial policy, http://dipp.nic.in/English/Policies/Industrial_policy_statement.pdf, 25th july 2015,
3:15pm IST.
 103

If the total investment does not exceed at 3 crore and if it does not require foreign exchange in
excess of 10%of ex- factory value of output or rupees 25 lakh whichever is less. No new license
was required to manufacture a new item and no license should be obtained for small scale units to
produce any of the items reserved for the sector under the following conditions-

1. Unit must not belong to any dominant undertaking as defined in MRTP act.

2. The unit and other interconnected unit must not possess asset exceeding rupees 20 crore.

3. In respect of foreign ownership, there must not be over 40% of equity owned by foreign
companies or subsidies or foreign individual.

4. The item must not fall under schedule A of industrial policy of 1980.13

To sum up, the industrial policy of 1980 had liberalised licensing for large and big business houses
but by blurring the distinction between small scale and large scale industries it sought to promote
latter at the cost of former.

2.1 1991 First Generation Reforms

Dr. Manmohan Singh was appointed to the position of Finance Minister in 1991 under Prime
Minister P.V. NarasimhaRao. He faced the crucial 1991 Balance of Payments crisis.India’s foreign
reserves barely amounted to US$1 billion, enough to pay for a few weeks of imports.

In 1991, Singh ushered in the dramatic, first generation economic reforms. They were dramatic in
that they were “structural”, dismantling many post-Partition socialist-style policies.14 The changes
aimed to unshackle Indian firms and entrepreneurs from red tape, foster competition, and open
India to the global economy. Singh started the process of simplification and rationalisation of the
tax system. Many controls and regulation on the industry were removed, which meant the death of
the Permit Raj and a free rein to entrepreneurs.

The reforms may be put into three broad categories: External Sector Reforms, Foreign Direct
Investment (FDI) Reforms, and Financial Sector Reforms. Each is discussed in turn below, with

13
The monopolies and restrictive trade practices act , 1969.
Anne O. Krueger &Sajjid Z. Chinoy, Introduction, in Reforming India’s External, Financial, and Fiscal Policies ,
14

Standford University Publication.

 104

greatest emphasis on the first category. Across all three categories were three common
denominators: de-regulation, privatisation and rationalisation.

2.1.1 External Sector Reforms

The “external sector” includes not only to international trade (imports and exports), but also to
exchange rates and capital flows. Indian reforms on trade were particularly impressive, even
dramatic. The foreign trade policy in India was made very restrictive after initiation of the
programme of industrialisation in the Second Plan. Only import of capital equipment, machinery,
components, spare parts, industrial raw material was allowed. Import of all inessential items was
strictly controlled. In order to rectify the situation, devaluation was carried out. It was followed by
announcement of new foreign trade policy and foreign trade reforms.

There are some of the major measures which have been undertaken to reform the external sector
of the nation:

(a) Exchange Rate Stabilisation

The rupee was overvalued for most of the period prior to 1991 thus adversely affecting exports.
The rupee was devalued twice in July, 1991 amounting to cumulative devaluation of about 19
precent.India also dismantled the dual exchange rate system it had created to cope with the 1991
BOP crisis, eliminated foreign exchange licensing, and requirements concerning export-based
imports and import compression.15

The RBI used to control the foreign exchange in accordance with the Foreign Exchange Regulation
Act, 1973, as amended periodically. By 1993, and since then, the rupee was freely convertible for
all current account transactions (i.e., for purposes of Article VIII of the Articles of Agreement of
the International Monetary Fund).16 To be sure, the float is a managed one, but that is hardly
peculiar to India. And full capital account liberalisation has yet to occur, which again is not an
expectation unique to India. It was in 1994 that various types of current account transactions were
liberalised from exchange control regulations with some indictive limits. Certain capital account

15
Anne O. Krueger &Sajjid Z. Chinoy, Introduction, in Reforming India’s External, Financial, and Fiscal Policies.
 105

transactions were also freed from exchange controls. India is moving towards fuller capital account
convertibility in a phased manner.

(b) FDI Reforms

Amidst the first generation reforms were legal and policy changes to encourage FDI. Egregious
regulations were wiped away in favour of aggressive inducements to attract multinational
corporations (MNCs) to open, expand, and operate production facilities in India, and hire Indian
workers. Three such clusters of measures stood out.17

1. India relaxed investment (equity share ownership) limits on foreign direct investment (FDI)
in certain sectors, such as telecommunications. In particular, reversing pre-1991 strictures,
India dropped its insistence on restricting FDI entry to government-determined priority
sectors, and eliminated its 40 percent cap on foreign equity participation in joint ventures
(JVs).18
2. India eliminated trade-related FDI restrictions. No longer was a foreign direct investor
obligated to export a certain percentage of its production. That obligation had been as high
as 100 percent in some sectors, and was manifestly designed to protect Indian producers of
like products. India also dropped domestic production content obligations, so foreign
investors could source inputs and intermediate items from the most efficient suppliers,
whether they were Indian or not. Again, the pre-1991 rule had been designed to protect
domestic suppliers.
3. India created Special Economic Zones (SEZs). They were modelled loosely after the
famous SEZs in China inaugurated in the late 1970s in the Deng Xiaoping era.
4. India began improving its intellectual property (IP) regime. Foreign direct investors (as
well as exporters) look carefully at the state of intellectual property rights (IPRs) as a factor
in deciding where to place an investment: they expect not only protection at least at
internationally-acceptable levels, but also actual IPR enforcement by legal and judicial
authorities. And they do not want to be forced to transfer patents, trademarks, copyrights,

17
.T.N. Srinivasan, Integrating India with the World Economy: Progress, Problems, and Prospects, in Reforming
India’s External, Financial, and Fiscal Policies.
18
RamachandraGuha, The Delhi Dilemma, Financial Times, http://www.ft.com/cms/s/2/c49f2894-e597-11e2-ad1a-
00144feabdc0.html, 5th july 2015, 1pm IST.
 106

or trade secrets to local firms. As the 1998 WTO Appellate Body Report in the India Patent
dispute India emerged from the Uruguay Round (1986-1994) of multilateral trade
negotiations with a sub-par record on enactment and enforcement of IP laws.19 So, with the
1991 reforms, India loosened requirements about technology transfer. It extended patent
protection to pharmaceuticals, agricultural chemicals, and certain food products.

(c) Financial Sector Reforms

Financial sector reforms aimed to liberalize commercial and investment banking markets and
institutions operating in India. Three market reforms were key: partial freeing of interest rates;
promotion of competition among commercial and investment banks; and creation of a new
securities exchange for equities trading.20 The reforms also included technological innovations,
such as electronic trading and un-certificated securities, and greater efficiencies in clearing and
settlement.

Underlying all three categories was a shift in economic ideology from the era of Prime Minister
Nehru and his daughter, Prime Minister Indira Gandhi: away from central planning, and toward
the market. Trade was not to be discouraged, but promoted. Foreign investment was not to be
regarded with suspicion, much less hostility, but to be pursued. Finance was not to be a backward
and inefficient sector, but rather a dynamic, innovative link between savings and investment.
Among the many indicators of the paradigmatic shift was the shrinkage in the size of the Indian
government. The central government fiscal deficit as a percentage of GDP dropped from 7.7 to 5.5
percent between 1990-1991 and 1992-1993.

The reforms worked quickly. Spurred by a private sector unshackled from government strictures,
real annual growth in Indian GDP exceeded 6 percent in the mid-1990s. In 1996, the share of
exports in Indian GDP rose to 9.2 percent, and between 1993 and 1996, Indian merchandise exports

19
India–Patent Protection for Pharmaceutical and Agricultural Chemical Products,
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds50_e.htm, 5th july 2015, 1:30pm IST.
20
Anne O. Krueger &Sajjid Z. Chinoy, Introduction, in Reforming India’s External, Financial, and Fiscal Policies ,
Standford University Publication.
 107

and imports (measured in U.S. dollar value terms) grew at an average rate of 20 percent per
annum.21 The share of India in the growth of world exports increased. So:

Together with deregulation of industry and fiscal stabilisation, these external sector reforms
yielded exceptionally good results by the mid-1990s. Export growth soared to 20 percent in three
successive years, inward remittances quadrupled to $8 billion by 1994-95, foreign investment rose
from negligible amounts to over $6 billion by 1996-97, foreign exchange reserves climbed steeply
from the precarious levels of 1991 to over $26 billion by the end of 1996-97, and the debt-service
ratio was halved over the decade.

3.1 Competition Policy Era

LPG model liberated the industry from the shackles of the licensing system, reduced the role of
public sector and encouraged foreign private participation due to which India became a global
which expanded the scope of international and intercultural relationships The modern organisation
is a global organisation that has to compete in global prospective. Hence, Indian markets now have
to face competition from within the country and outside. After financial crisis highlighted the
importance of healthy and effective competition thereby firms would innovate more and keep their
prices down for consumers and ultimately improves productivity.22 Increased competition gave
the customers wider choice in purchasing better quality goods and services Competition helped
the firms to utilise the capacity to produce, it increases the efficiency and optimum allocation of
resources so that productivity can be improved. Competition act of 2000 was passed removing the
MRTP act as it was not in tune with liberalisation policy, to promote ensure freedom for all
participants in market, promote and sustain all types of competition, prevent and discontinue those
practices which are against policy of competition, to prevent the dominant power in the market
and to regulate amalgamations and acquisitions which are likely to reduce competitions. 23

22
Ranjana iyer “Competition law and policy : A brief overview of the Indian perspective”
http://lawquestinternational.com/competition-law-and-policy-brief-overview-indian-perspective,30th july 2015,
5:34pm IST
23
Competition act 2000
 108

3.1.1 New Needs for Competition Policy

The Indian corporate sector has utilized a variety of strategies in the post-reform period to cope
with the increasing competitive pressures due to internal and external liberalisation. With the
maturing of the Indian oligopolies, the competition policy needs of the country are also undergoing
changes. Some salient aspects of the changes in the Indian industrial sector are:

a. The Indian corporate sector is vigorously restructuring itself. Restructuring is mainly

geared towards consolidation in few chosen areas to correct the inefficiencies created by
over-diversification in the pre-reform era.
b. MNCs have actively participated in the merger and acquisition process to get market entry
or to strengthen their presence. Acquisitions have been used by MNCs to quickly get access
to various complementary assets.
c. MNCs are better placed for domestic firms in the acquisition game because of their deep
pockets and relatively cheaper access to capital. The intentions to invest in India by MNCs
are significantly influenced by these differences in the cost of capital.
d. The reliance of the Indian corporate sector on foreign technology purchase has increased.
More and more technology flows are now tied with equity. Purchase of technology
(especially foreign) is taking precedence over R and D; in house technology generation has
taken a backseat. Besides, a large variety of inter-firm alliances are taking place.
e. Firms are making efforts to improve manufacturing capability. This is being done through
building alliances as well as through initiatives within the firm. Quality upgradation seems
to be an important priority. These efforts at improving manufacturing capability may still
prove to be inadequate to meet the competitive challenges. These inadequacies may also
adversely affect India’s chances of efficiency seeking FDI, the need for which has been
emphasised.
f. Product differentiation strategy seems to be dominating over strategies of building
distribution and marketing related complementary assets. Such a strategy helps Indian
firms to stand up to transnationals with their strong and internationally recognised brands.
Yet, because of inadequate attention to R and D and manufacturing, which have significant
pay off but in the long run, the long-term competitiveness of many Indian corporates is in
 109

doubt. Besides, interestingly, distribution and marketing related expenditures (and not
advertising) seem to have led to higher margins and profitability in the 1990s.
g. Export based growth strategies are being adopted by some of the corporate sector firms but
such strategies are not widespread; export orientation increased appreciably in the early
years of reform but have seen a major collapse since 1997-98. Overall, exposure to the
international market is still inadequate to put the Indian firms on higher growth and
learning trajectories.
h. Overall, concentration levels in most Industrial groups have either shown no trend
(increase/decrease) or have declined during the 1990s. In very few product groups a trend
increase was observed during the post-reform period. However, a large number of
industries remain very concentrated even in the late 1990s.
i. While no significant trend was observed in the price cost margins for most of the industries
profitability rates were positively affected by product group specific concentration levels
in the 1990s. The fact that a similar relationship has been observed for the 1970s and 1980s
suggests stability of the links between concentration and profitability.

The policy initiatives will need to encourage investments in R&D and in complementary assets
like manufacturing, etc. It would also have to ensure rapid increases in exports. The cost of capital
advantage of the MNCs is real and needs to be tackled squarely. Else, the Indian corporate sector
may not be able to win the battle in spite of all the strategic initiatives mentioned earlier. At the
moment, the MNCs seem to hold an unfair advantage over domestic firms in the M&A game.
Despite the fact that there is no increase in concentrations in most industries, they remain high in
many industry groups. While it is difficult to ascertain whether higher profitability in concentrated
industries is a result of collusion or higher efficiency, given the positive link between profitability
and concentration, a competition policy focus on concentrated industries is unavoidable. However,
as Indian oligopolies mature with a wide range of non-price competitive strategies, the task of
competition authorities to distinguish between market power and efficiency related influences will
become increasingly difficult.

4.1 Current Scenario and Challenges Faced by Indian Economy

From the beginning of the second decade of the present century, the bad phase of Indian economy
started where the GDP growth rate remained below 5 percent for the two consecutive years in
 110

2012-13 and 2013-14.24 This below 5 percent growth rate for two consecutive years was last
witnessed way back in 1986-87 and 1987-88. However, in the current financial years i.e. 2014-15,
Indian economy started showing the signs of recovery and is poised to overcome the below percent
growth rate witnessed for the last two years. This moderation of growth after achieving three
consecutive years of above 9 percent growth rate between 2005-06 and 2007-08 is the fall out of
failure of Indian economy to cope with several external and internal challenges.

In the external sector, persistent uncertainty in global outlook caused by crisis in Euro area and
general slowdown in global economy compounded by structural constraints and inflationary
pressures in domestic economy resulted in protracted slowdown. In order to cope with the external
challenges like global slowdown, country should have adequate foreign exchange reserves,
sustainable level of current account deficit (CAD), stable exchange rate, etc.

However, things have improved a little now as the year 2013-14 ended with the CAD of 1.7 percent
of GDP, exchange rate after plummeting to INR68 per US$ in August 2014 improved to INR 60.49
foreign exchange reserves raised to USD314.9 billion dollars in June 2014. These developments
on external account have generated some optimism that Indian economy is now better prepared to
confront the challenges in external economy.

In the domestic arena also, improvement is observed on fiscal front as fiscal deficit declined from
5.7 percent of GDP in 2011-12 to 4.5 percent in 2013-14. Much of this improvement on fiscal
front is achieved by reduction in expenditure rather than improvement in revenue. Nevertheless,
the corrections in fiscal and current account deficit augur well for macroeconomic stabilization.

Despite the improvement in twin deficits, some structural challenges are enumerated by Economic
Survey 2013-14 which were responsible for current economic slowdown in India –

 Difficulties in taking quick decisions on project proposals have affected the ease of doing
business. This has resulted in project delays and insufficient complementary decisions.

 Ill-targeted subsidies cramp the fiscal space for public investment and distort allocation of
resources.

24
http://thegreatlittleblog.blogspot.in/2015/01/current-scenario-of-indian-economy.html,20th july 2015, 1:30pm
IST.
 111

 Low manufacturing base, especially of capital goods and low value addition in
manufacturing. Manufacturing growth and exports could be facilitated with simplified
procedures, easy credit and reduced transaction cost.

 Presence of large informal sector and inadequate labour absorption in the formal sector.
Absence of required skills is considered as an important reason.

 Sustaining high economic growth is difficult without robust agriculture growth. Low
agricultural productivity is hampering the economic turnaround.

 Issued related to significant presence of intermediaries in different tiers of marketing,

shortage of storage and processing infrastructure, interstate movement of agriculture
produce needed to be addressed.

Other challenges faced by Indian economy which hamper the movement towards higher growth
trajectory includes energy, infrastructure, growth inequalities, policy paralysis, slow
employment growth, disappointing manufacturing sector growth, slowdown in services
particularly internal trade transport and storage etc.

For the revival of sustainable growth of over 8 percent in the coming years, a multi-pronged
approach is required to correct the structural anomalies. Growth and employment generation can
be improved directly by increasing the investment rate. But investment cannot be increased by
merely manipulating the interest rate. If an investor didn’t find the atmosphere conducive to make
adequate returns on expenditure, low interest rates can’t force to invest savings. Thus the foremost
challenge before the new government is to create an environment which is investment friendly and
which can attract capital not from just domestic sources but from the foreign sources as well.

5.1 Conclusion: The Way Forward

We have highlighted some of the major dilemmas faced by economies in transition in the context
of competition policy, and argued that some of the solutions to these dilemmas are not simple.
Broadly, competition policy is essential for an economy in transition as it complements other
liberalising initiatives. However, the scope, sequencing and timing of competition and other
policies will have to be determined by each economy according to its on compulsions and needs.
 112

Like other countries, India will have to explicitly take into account its historical and the socio-
economic context while contemplating competition policy reforms. Many of the extant distortions
in the market have been caused by earlier policies/institutions. In such a scenario, simultaneous
dismantling and creation of institutions to safeguard competitive forces is a difficult task. There
are different perceptions about the major competition related problems facing the country today.
Consequently, developing a consensus on competition issues will remain a complex task. The
analysis strongly suggests that significant efforts are required at the policy level to explicitly
recognise the links between policies relating to competition, trade and investment on the one hand
and macroeconomic policy initiatives on the other.

It is time that the ministries of finance, industry, commerce and Law work together! It also needs
to be recognised that due to contextual and other differences, no single institutional model is
applicable everywhere. While such differences will remain, certain basic principles in institution
building like independence of the competition agency, adequate resource availability, significant
analytical skills and transparency of its actions would be crucial for deterring anti-competitive
behaviour in all countries. Selection of personnel is one of the most important parts of institution
building. It may also be crucial to ensure that the regulators do not become over-enthusiastic, resort
to over-regulation and misuse their powers. Capture of the competition agency by the regulators
is as likely as the capture by the regulated. Such a fear seems more real in de-regulating
environments like India. Ill-defined jurisdictions only facilitate such over-enthusiastic regulation.

At last we want to conclude, in India protection and controls are being replaced by a competitive
and de-regulated open economic system. In the pre-reform era, various restraints to competition
existed:

(i) investment restraints (licensing); (ii) control over acquisition of economic power through
Monopolies and Restrictive Trade Practices Act (MRTP); (iii) public sector reservation for
infrastructure and other industries creating monopolies in various areas; (iv) product reservation
for the small-scale sector; (v) government procurement policies favouring public and small-scale
sectors; (vi) trade restrictions and high tariffs; and (vii) restrictions on foreign direct investment.

The new economic policy has both the positive as well as negative results for India. Because of
the globalisation opportunity to access global market, high technology, and increased possibility
 113

of large industries of developing countries to become important players in International era. On

the other hand it compromised welfare and identity of people belonging to poor countries and
widened the scope of economic disparities among people and nations. Market economy has
increased the consumption of high income groups and growth has been only in service sector such
as telecommunications, information technology, finance. Entertainment, travel,real estate etc as a
result important sectors like agriculture and manufacturing Industries which provided livelihood
to millions of people in the country.

Reforms have not benefitted agriculture and industrial sector as there had been decline in public
investment in this sector. Industrial sector has slowed down due to availability of cheap imports
and lower investments. Free market competition ensured capitalist justice. Every factor of
production is paid according its contribution and there is no exploitation. Secondly economic
efficiency by making price equal to marginal cost and resources use efficiency is maintained.There
is complete freedom at market place - freedom to choose, freedom to take decisions and free
opportunities to follow. It breaks up monopolies. According to global competitiveness index India
is ranked very low however it has law of competition to punish the firm's that violates the rules of
competition. The world capitalist countries and international institutions are pressing hard for
further reduction in tariffs and duties so that it became more accessible to foreign firms. Indian
firms are becoming more mobile.

_____________________
 114

FROM CRONY CAPITALISM TO INNOVATION &

LIBERTY: CHALLENGES TO THE INDIAN COMPETITION
LAW REGIME
Pragalbha Priyakar*

Serving as an essential hand maiden to efficient trade, the Competition Law Policy of India aimed
at reforming a rigorous legal system to one that promotes equilibrium between the producers,
consumers and social interests of the nation. As opposed to the much prevalent ‘License-Permit
Raj’ which had suggestions of crony capitalism, the new legal regime was a breakthrough from
the tradition of consumer protection through countless restrictions, licenses and labyrinths of
procedures causing near stagnation of research output and innovation in India. Though, the
transition towards a free economy from one which prevented freedom of decision of sellers
requires no regulation. However, the Competition Law Policy of India came into effect for
containing the failures and distortions of market from imparting a crooked effect on the
competitive spirit. Significantly, after all these years of economic reforms, India stands at the
crossroads. While one road leads it to economic prosperity and glory, the other leads to social
inequality. With near ignorance of the latter, it is anticipated that the day is near when the very
purpose for which the reforms were started, will lose their significance rapidly and would throw
the country back into the ‘unionist’ era.

Set in this background, the present paper analyses the varied contours of the Indian Competition
Law Policy which was perceived as a panacea to all the ailments of a growing Indian economy.
Also, it examines the emergence of various sectoral regulators and policy frameworks by

*
Student of IV Year, B.A.LL.B. (Hons.), National Law University Odisha. Email: pragalbhapriyakar@gmail.com.
 115

governments both at the state and federal level which have impeded the market process and
distorted competition at a sub-national level. More so, amidst the discussion focusing on trade
liberalisation, the paper also delves into the concerns for a global competition policy, and which
has been on the international agenda for too short a time for its significance to be appreciated.
While contrasting between the past and present, the deliberations also target the Competition Law
Policy in India as an active interpretational exercise which leads to suggestions towards a
chicken-and-egg situation as to what came first, the law or the policy. Focus on extra-territorial
application of the Indian Competition Law and its impacts are also evaluated in the backdrop of
an increasing globalisation of cross-border business activities. Alongside, the unsung hurdles
which Competition Commission faces in its struggle for greater autonomy and lesser intervention
from other sectoral regulators are also sought from the deliberative exercise.

Having undergone the rigours of colonial capitalism, India, in the past, had embraced a Legal
framework which premised its commercial arm on the principles of ‘caveat emptor’ and protection
of consumers. This might be both, a response to the futuristic apprehensions of the law makers as
well as a stimulus to a torturous past. Regarding the protection of consumer interests to be of
crucial significance and as a modality to capacitate its domestic producers, a plethora of
legislations saw light of the day and regulated the reigns of economy. But, as this normative giant
grew in India, it started eating away its own roots. Much evidently, its repressive nature made the
native producers extremely weak in terms of innovation and development quotient – which beyond
doubt are assets quintessential to strengthen the spine of any economy1. This gets affirmed by post-
liberalisation statistical records which indicate that in the duration from 1995 to 2009, the country
climbed by just one position from 12th to 11th in terms of contribution of research articles2.
Whereas, during the same period, China climbed from 14th position to second position and U.S.
continued to have the largest number of absolute researchers in the world. Moreover, since the
government agencies were the repositories of large scientific data during the repressive regulatory

1
Aghion et. Al., Competition and Growth with Step-by-Step Innovation: An Example, EUROPEAN ECONOMIC
REVIEW, PAPERS AND PROCEEDINGS XLI (1997), 771–782. The authors have suggested an inverted-U relationship
between product market competition and innovation by outlining the significance of Innovation and development in
accelerating the economic progress in any economy. See also Aghion, Philippe et. al., Competition and Innovation:
An Inverted-U Relationship, 2010 QUARTERLY JOURNAL OF ECONOMICS 704.
2
Infra note 64.
 116

regime, it resulted in obstacles for Indian research, making it less attractive and with scuttling
research output.

1.1 Competition Law Policy and the Economic Transition

‘License-Permit Raj’ was the term which became a general sobriquet for this period in Indian
politico-economy, which saw the rise of bureaucratic control and autocratic poitical regimes. One
of its products was the Monopolies and Restrictive Trade Practices Act of 1969 which was enacted
with an objective to prevent the accumulation of economic power in the hands of a few and to
ensure that aspirations of a growing consumer band are safeguarded. However, as the wave of
economic liberalisation went past the country, legislations such as the Act of 1969 dismantled and
became obsolete. Much was also contributed by the international economic developments relating
to competition law and India’s commitment at international fora to liberalise trade barriers3. Some
scholars even suggest that the economic reforms of the early 1990’s unleashed an explosion of
pent-up commercial energy from the Indian economic fabric when the period saw tariff ramparts
being torn down4. The ‘Licence Raj’ system, as per them, did lent a way to private dynamism that
was forced to compete with the world’s best5. However, as the wave of liberalisation stretched its
span in India, each sector ranging from industry to finance and from trade to infrastructure - all
stood decimated to facilitate and usher a favourable investment climate. Though this has been a
heated theme for debate across times, what requires a greater attention under this paper is an assessment of
this transition.

2.1 Consumer Welfare & Un-notching the Markets: Is that All?

As we trace the roadmap to a modern Competition era in India, we witness the withering away of
the Trade Restrictive setup which primarily based itself on a perception that markets necessarily
failed. As the reforms unfolded and the perception changed, ‘License Raj’ came to an end. It indeed

3
Blonigen, Bruce A and Yuka Ohno, Endogenous protection, Foreign Direct Investment and Protection ‐Building
trade, JOURNAL OF INTERNATIONAL ECONOMICS 46 (2) 1998: 205‐27.
4
Raju, K D, The Inevitable Connection between Intellectual Property & Competition Law: Foreign Jurisprudence
and Lessons for India, 2013 JOURNAL OF INTELLECTUAL PROPERTY RIGHTS 18(2): 111-122.
5
Bhattacharjea, Aditya, Competition Policy: India and the WTO, 36 ECONOMIC AND POLITICAL WEEKLY 51 4710-
4713.
 117

was culmination of a period which had become an object of steamy opprobrium, a regime where
the concerns were more on curbing monopoly than on promoting competition6. Taking a cue from
this proposition, we would be at much ease as to analyse the very foundations of the modern
Competition era in India. Prima facie, it might seem as a measure to discharge the onus on state
for promoting welfare. But, on the contrary, equilibrium between the producers, consumers and
social interests of the nation is what the Competition Act of 2002 aims at7. To be appropriate in
terms, these aspects of economic and social planning along with an aim to regulate combinations
which defeat the competitive spirit and aspiration of the Indian Consumer Band; as enshrined
under Entry 20 read with Entry 21 of List III, Schedule VII to the Indian Constitution becomes the
most authentic backbone for the regime in place. This is indubitably; a departure from the
protectionist approach fabricated through a morass of restrictive procedures which India gripped
up to, while catering to the much voiced provisions of the Directive Principles of State Policy
under the Act of 1969. Thus, the march towards a free and liberalised economy mutated the much
outmoded vision to one where experience of state failures and market failures has weighed in
favour of the markets8.

Though, a detail of this transmutation which shaped the Indian legal scenario indicates flavours of
smoothness and regularity, the void which had resulted due to the incommensurate regime,
remained for a decade. It was during this time that the discussions focusing on a need to have a
Competition Law Policy for India commenced. One side of the debate held their focus to the issues
of laissez faire and vilting away of all restrictions leaving the markets to cure their own pitfalls
whereas the other wing, delved into the dialectics between the producers with unequal bargaining
position and the issues concerning safeguarding of the consumers9.

3.1 Need for the Indian Competition Law Policy: Questioning the Hypocritical Hypothesis

6
Ibid.
7
VINOD DHALL, ESSAYS ON COMPETITION LAW AND POLICY IN INDIA, NEW DELHI, 2007.
8
Singh, Vijay Kumar, Competition Law and Policy in India: The Journey in a Decade, 4 NUJS L. REV. 523 (2011).
The author arguing in favour of the economic reforms illustrates the fashion in which they opened up the floodgates
for competition in India which even passed over to revamp other policies as well. See also Hart, Oliver, The Market
Mechanism as an Incentive Scheme, BELL JOURNAL OF ECONOMICS, XIV (1983), 366–382.
9
Ibid.
 118

The commonly acknowledged perception of Competition Law policy indicates its prime objective
as promotion and preservation of the competitive process in order to foster allocative efficiency
which ensures the effective allocation of resources, internal efficiency which ensures that costs of
production are kept at a minimum and dynamic efficiency which promotes innovative practices 10.
Much simply, it encompasses all policies which promote competition and facilitate efficient
allocation of resources and those governmental measures that directly affect behaviour of
enterprises and structure of the industry11. Consequently, it’s the competition which becomes the
modality to reap the outcome of efficiency under the setup.

Here, a note may be taken of the fact that though the never ending saga of policy and Law which
is akin to the chicken-and-egg situation12 has dominated the legal thought for centuries altogether,
but, in the present paper we use the term Competition Law Policy so as to be more precise with
respect to the intended reference due to two prime causes. One, in India, the Competition Policy
of the country saw a tacit expression only in the year 2011-12, while the Competition Law was
already in place after the enactment of the Act of 2002. Secondly and much evidently, since the
Act of 2002 was more of a stimuli-response to an ongoing overhaul operational over the Indian
Legal and economic framework at that time, it had features of a policy as well and as a result,
appears much detailed than its counterparts in other nations across the globe. Even today, traces
as to the veracity of this proposition can be witnessed from the provisions of the Act of 2002 which
not only lays down a substantive schema but also serves as guidance to its very own
implementation.

Despite having purposed for a freer economy which is devoid of any regulations or procedures and
having made claims in that regard; it might seem quite dialectical to have in place a Competition

10
Competition Commission of India v. SAIL &Anr., 2011 COMP L R 0061. J. Swatanter Kumar stated, “The main
objective of competition law is to promote economic efficiency using competition as one of the means of assisting
the creation of market responsive to consumer preferences. The advantages of perfect competition are threefold:
allocative efficiency, which ensures the effective allocation of resources, productive efficiency, which ensures that
costs of production are kept at a minimum and dynamic efficiency, which promotes innovative practices”.
11
Khemani, R.S. and Mark A. Dutz, The Instruments of Competition Policy and their Relevance for Economic
Policy (PSD OCCASIONAL PAPER NO. 26, WORLD BANK, WASHINGTON DC, 1996).
12
Ibid. See also JONES, ALISON AND BRENDA SURFIN, EU COMPETITION LAW: TEXT, CASES AND MATERIALS (2011).
There are, however, contrary views which say competition law and policy are not synonymous.
 119

Law Policy for India. However, a deeper musing into the issue would suggest that for any
economy, measures like de-regulation, liberalisation and privatisation are crucial and might even
be much more than desired, but they are no assurance of an efficient functioning of markets 13. A
typical illustration to this would be a case of an incumbent producer who may gain sufficient
market power that might even hinder market access to new firms or producers. Complementing to
this, the very potentiality of prevailing market forces to thwart the competitive spirit against the
producers with a penurious bargaining power and in order to ensure that the consumers benefit the
most from such market-places, makes the Policy framework an even greater necessity. While trade
policies may eliminate barriers that restrict entry and exit, it is the competition policy only which
can target business conduct that reduces actual and potential competition14. Adding to this, the
ground-reality indicates that a significant number of monopolies remain in place and are highly
unlikely to be remedied by market liberalisation. Such arrangements are required to be regulated
in order to preclude them from abusing their dominant position and incurring in monopolistic
practices in concerned sectors15. This assumes an even greater significance in the current Indian
scenario where the possibility of permitting private investment in certain sectors is under
consideration and for those which have been in scanner for long due to evidences of cartelisation
like Airlines, banks, cement and telecom sectors16. Thus, it becomes quite obvious that bereft of
an efficacious competition policy, the new investors will not be capacitated enough to compete in
the same conditions as their fellows are, at present.

In addition, a stringent Competition Law policy also bears much merit owing to the possible
permutations of private arrangements between producers which may be anti-competitive in spirit
and are sufficiently potent to deter market efficiency – for both the consumers, as well as fellow
producers. With implications ranging from entry-exit barriers to elimination of players from a
particular sector, these practices have emerged in the recent past, to be particularly harmful for

13
Chunrong Ai and Xiaohong Chen, Efficient Estimation of Models with Conditional Moment Restrictions
Containing Unknown Functions, ECONOMETRICA, LXXI (2003) 1795–1843.
14
Supra note 7.
15
Brander, J. A. and B. Spencer, Tariffs and the extraction of foreign monopoly rents under potential entry. IN J. N.
BHAGWATI (ED.), INTERNATIONAL TRADE: SELECTED READINGS, MIT–PRESS, (1997, CAMBRIDGE (MA)) 141–160.
16
Supra note 13.
 120

small and medium size firms17. For instance, the ever-rising number of international cartels has
distorted international trade and investment flow that calls for a pan-national coordinated
competition policy18. Moreover, even the domestic cartels would also definitely start proliferating
provided there is an absence of a body entrusted with regulation of market practices and
behaviour19. Once, the competitive spirit is cultivated, it leads to innovation and drives the
concerned sector towards its respective development goals as firms operate under a continuous
fear of being thrown out of business in case they do not innovate. A befitting illustration to this
effect would be from the Telecom sector where Nokia Inc. became the ace producer in India for
14 years by attending to the unique needs of every Indian customer through the distinct features
on its handsets. Now, it has lost the market share to Samsung Inc. as it didn’t envision the furisitc
competition goals and radical innovations20.

Here, we must note that the aspect of innovation is not only restricted to technology and products
but also covers a firm’s business model, work practices, functions, logistics, processes and
principles that define any business or trade institution21. Dell’s supply chain management,
Toyota’s Global Production System, Wal-Mart’s inventory management, Starbucks’s re-
imagining of the coffee shop have all been game-changing and revolutionary innovations in the
recent past22. Hence, the vision of modern competition era in India to holistically club the
suppression of monopolies and promotion of competition becomes crucial in the backdrop of
evolution of products & companies23. The only alleged flip-side to promotion of such ventures that

17
Aggarwal, Aradhna, Macro Economic Determinants of Antidumping: A Comparative Analysis of Developed and
Developing Countries, 32 WORLD DEV. 1043 (2004).
18
Ibid.
19
Blundell, Richard and James Powell, Endogeneity in Nonparametric and Semiparametric Regression Models. In
M. DEWATRIPONT, L. P. HANSEN, EDS., ADVANCES IN ECONOMICS AND ECONOMETRICS, VOL. II, ECONOMETRIC
MONOGRAPH SERIES 36 (2006, CAMBRIDGE: CAMBRIDGE UNIVERSITY PRESS, 2003). The author in this article,
emphaises that even through all barriers are done away with, despite that dsome sort of regulatory mechanism must
always exist so as to curb cartelization and monopolistic distortions.
20
Supra note 1. See also Aghion, Philippe, Christopher Harris, Peter Howitt, and John Vickers, Competition,
Imitation and Growth with Step-by-Step Innovation, REVIEW OF ECONOMIC STUDIES, LXVIII (2001) 467–492.
21
Winslow, Terry, Competition Law and Policy: Preventing Market Abuses and Promoting Economic Efficiency,
Growth and Opportunity, OECD JOURNAL OF COMPETITION LAW AND POLICY (2004) 7, 42.
22
Supra note 18.
23
Nariman, Fali S., Law and Economics In VINOD DHALL (ED.), COMPETITION LAW TODAY: CONCEPTS, ISSUES,
AND THE LAW IN PRACTICE (2007). C.f. Komninos, Assimkis P, Relationship between Public and Private
Enforcement: quod Dei Deo, quod Caesaris Caesari, SSRN 1870723 (2011). The latter scholarly opinion indicates
 121

aim at innovation are Patent rights which particularly being a state-granted monopoly in the form
of time-limited property rights are sought after significant amounts are invested in R&D. A reward
to this endeavour comes as grant of exclusivity to the inventors over their respective inventions
for a certain time so as to en-cash the first-mover advantage in the market. Though, it might be
argued that patents may deter rivals and may lead to higher costs through licensing by the rights
holder, most scholars approve of their existence as diluting patent rights through competition law
would again be a disincentive to innovation – an aspect which is often aimed at by competition
laws for a healthy economy.

Notwithstanding this, the arena which still remains most deliberated is the retail sector; where the
ramparts of the old rigorous framework still stand to glory. Volumes of literature are available on
themes which boast of restricting the entry of foreign players into retail. However, it gets more or
less crystal clear that the prohibition on entry of foreign players into retail is only to facilitate and
allow higher valuations for the existing Indian retail outlet owners at a later stage, when they can
cash out24. Earlier, businessmen used to corner various licences, permits and quotas but now,
though some thrive on of entry restrictions this nature, the others stoop on the ambiguity of Press
Note 1825.

4.1 Competition Era and Issues of Trade Liberalisation

The discussions on modern Competition era taking its shape in India and replacing the ‘License-
Permit Raj’ would be parsimonious if no reference is afforded to the international trade
considerations and related commitments which were made by India at the international fora.
Significantly, it was a key issue and a prime cause behind the ongoing phase of transition amidst
the other concernments striving to ensure and manage competition and to derive the most out of
liberalisation26. An account of that period is illustrative to the fact that this task was all the more

that the drive to open up the gates for foreign Direct Investment has now shifted the control of establishing
monopolies from the government to private players.
24
Harsha, J., Needed dismantling of data ‘License-Permit Raj’ to boost research and innovation in India, 105
CURRENT SCIENCE 9 (2013) 1207.
25
Supra note 13.
26
RAMAPPA, T., COMPETITION LAW IN INDIA: POLICY, ISSUES AND DEVELOPMENTS, (2006, OXFORD UNIVERSITY
PRESS, NEW DELHI) 15.
 122

cumbersome as the nation was not starting afresh due to various institutional mechanisms which
already stood in place. Moreover, attempts at freeing and de-regulating were being taken up at a
time when the global economic environment was also witnessing a transformation owing to the
coming into existence of GATT (General Agreement on Trade & Tariffs) and subsequently, the
negotiations to establish WTO/ITO (World Trade Organisation/International Trade
Organisation)27. As a result, it was highly anticipated that rules of the game vis-a-vis world trade
would also change once these institutions get operational with their peculiar implications on
domestic policymaking28. In addition to this, no measures based on static welfare analysis could
have proved adequate for third world countries like India29. In this backdrop, this section analyses
the aspects of trade liberalisation and its nexus with emergence of a Global Competition Policy.

5.1 Competition Policy & Trade Policy: Foes or Amigos?

Primarily, it has been suggested that trade liberalisation nullifies the need for a competition policy
as anti-competitive practices are seen to be prevalent only in an economic setup with concentrated
markets30. A rationale behind this is that all domestic paradigms lose their potency to exercise
market power due to a threat of potential competition irrespective of the share of imports in the
domestic market31. An empirical backing to this proposition is lent by scholars who tend to find
distinct degrees of convergence between domestic and international prices with the removal of

27
Staiger, Robert W and Alan Sykes, Currency Manipulation and World Trade, 9 WORLD TRADE REV. 583 (2010).
See also MARRAKESH AGREEMENT ESTABLISHING THE WORLD TRADE ORGANIZATION, ART. X, APR. 15, 1994, 1897
U.N.T.S. 154, 160.
28
FINGER, J. MICHAEL, MERLINDA D. INGCO & ULRICH REINCKE, THE URUGUAY ROUND: STATISTICS ON TARIFF
CONCESSIONS GIVEN AND RECEIVED (1996). As the WTO came into existence much after the idea of trade
liberalization was professed by GATT since 1947, it did not sought to provide any concessions to the contracting
states in matters relating to any protectionist restriction adopted by them.
29
Ramappa, T., Repeal of the MRTP Act, 1969 – Reducing the Twilight Period, available at
http://www.lawyersclubindia.com/articles/Repeal-of-the-MRTP-Act-1969-Reducing-the-Twilight-Period-1409.asp
(Last visited on June 25, 2015).
30
Infra note 30.
31
Zach, Roger and Adrian Kunzler, Freedom to Compete or Consumer Welfare: The Goal of Competition Law
according to Constitutional Law. In THE DEVELOPMENT OF COMPETITION LAW: GLOBAL PERSPECTIVES (2010) 61,
71. See also Kovacic, William E., How Does your Competition Agency Measure Up?, 2011 EUROPEAN
COMPETITION JOURNAL 25.
 123

trade barriers and a negative relationship between price and cost or profit margins and imports32.
However, there are yet others who bring forth a flip side to this issue. They illustrate as to how any
competition policy which encapsulated trade liberalisation as its crucial agenda, was perceived as
a panacea to the ailments of any economy, mostly in the developing countries like India and the
manner in which it has disappointed the legal visionaries33.

This also raises questions as to the exclusivity of the two. In a time where both trade liberalisation
as well as the competition policy have failed to even put it over their respective visions, neither of
them could be a remedy to the other’s concerns. In simple terms, a liberalised trade policy cannot
stand as a substitute for a competition policy and the two must always complement each other in
their purport to promote trade, market access, global economic efficiency and consumer welfare34.
Necessarily, Competition Law and Policy is desired even where trade has been significantly
liberalised. However, it is always the alignment between enforcing Competition Laws and other
liberalisation initiatives which is to be taken into account for enabling the economy yield its
intended outcome35.

When we gauge the Indian Transition through this perspective, it appears extremely confounding
to note that India was dosed both with the economic liberalisation measures and its commitments
at WTO around the same time. While the former had much to bear with the socialistic objectives
of the country by promoting consumer welfare and enhancing the competitive spirit amongst the
domestic producers, the latter focused on its attempt to weaken down the trade barriers and enable
the country to participate equally in the global market and that too, without its protectionist cloak
getting on. The late enactment of the Act of 2002 could thus, be of no significance as soon after
the economic reforms in the early 1990s, the Act of 1969 proved dysfunctional and rendered the

32
BHAGWATI, JAGDISH, TERMITES IN THE TRADING SYSTEM: HOW PREFERENTIAL AGREEMENTS UNDERMINE FREE
TRADE (2008); C.f. Bagwell, Kyle and Robert W. Staiger, A Theory of Managed Trade, 1990 AMERICAN ECONOMIC
REVIEW 80 (4): 779‐795.
33
Aghion, Philippe, Robin Burgess, Stephen Redding and Fabrizio Zilibotti, The Unequal Effects of Liberalization:
Evidence from Dismantling the License Raj in India, NATIONAL BUREAU OF ECONOMIC RESEARCH WORKING PAPER
12031.
34
Topalova, Petia, Trade Liberalization, Poverty, and Inequality: Evidence from Indian Districts, NATIONAL
BUREAU OF ECONOMIC RESEARCH WORKING PAPER 11614 (2005). See also COMPETITION, COMPETITIVENESS AND
DEVELOPMENT: LESSONS FROM DEVELOPING COUNTRIES, UNCTAD/DITC/CLP/2004/1.
35
Ibid.
 124

legal framework devoid of what it most crucially required then. This prevailing gap of almost a
decade in essence was without any policy or a vision in place which at that instance, could have
held the reigns tight and would have assimilated the Indian policy framework on some common
grounds. What could have been avoided much simply was embraced with much desperation and
this has indeed parked the nation to be at cross-roads in the present times. While one road leads it
to economic prosperity and glory, the other ends at social inequality36. With mere reforms being
proposed in the existing models and an absolute ignorance as to suggestions to a remedy for the
socio-political accident which eventualised, it is anticipated that the day is near when the very
purpose for which the reforms were started, will lose their significance rapidly and would throw
the country back into the unionist era.

The discourse above carves out in much intrinsic terms, the basic handicaps which are faced by
governments in transition economies. In all such instances, the political setup must always figure
out an optimal way of stitching the trade and competition policy together37. In this regard, the only
consideration to be borne in mind is that if the accompanying economic policies and in particular,
the exchange rate strategy is not correct, the remedial nature of trade liberalisation would reverse
and would raze down the market scenario to be one of a skewed playing field that disfavours
domestic production and stands completely averse to competition38. In addition, exploitation of
the extra-territorial nature of settlement process governing trade disputes, to weed out the out-of-
border anti-competitive practices, has added to the peril39.

More so, the interface between these two realms has also acquired much rhythm and importance
owing to the deliberative exercise taking place in the WTO forums relating to the same. Recent

36
Sen, Kumkum, Old Wine in New Bottle – 2011 Competition Policy, BUSINESS STANDARD (NEW DELHI) AUGUST
29, 2011. The author has argued as to how even the modern Competition law has not been able to keep up to the
expectations of the law-makers and has made the entire play dismal by armouring the wealthier producers and those
who have a greater say in the economy.
37
Ram Mohan, T. T., Competition Policy Dilemmas, ECONOMIC & POLITICAL WEEKLY (July 2000).
38
Melitz, Marc, The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity, 2003
ECONOMETRICA 71(6): 1695-725.
39
Recent cases before WTO involving U.S. like the Shrimp-Turtle cases and the Tuna-Dolphin cases have
witnessed an argument that its only the WTO provisions which have an extra-territorial application. They cannot be
used as a modality to extend the scope of national laws as that would tumble down the balance of obligations which
culminated into the negotiations.
 125

cases at the WTO highlight issues that are relevant for countries which have either enacted or are
modifying their competition policies. The obduracy for any country, particularly the developing
ones can be enormous owing to the complexities, data and resource requirements for dealing with
trade disputes of such a genre through the WTO mechanism40. It requires an utmost degree of
coordination between cells dealing in trade liberalisation issues and the authorities concerned with
competition policy. However, if the settlements are struck with political support through a bilateral
negotiation, it might further worsen the situation by introducing provisions such as Voluntary
Export/Import restrictions which again, would be violative to the commitments of the concerned
nations for trade liberalisation41. In addition, since almost all policy initiatives in a particular
member nation to WTO can be questioned as a ‘trade dispute’ before WTO, it would necessarily
be questioning not only a state’s freedom to institute policies in place domestically but also, as to
the conduct of domestic firms in organizing their activities. This was exhibited at a much clearer
level in the famous Kodak-Fuji case42 and the General case of Japanese Keiretsu43 which
accustomises us to the intensity of threats, an inter-country difference may pose to the international
competition, trade and market access in the course of economic organisation. However, as far as
India is concerned, the analysis leads us to some quintessential results which indicate that trade
policy and its implementation must always be seen to have a concern with access to markets and
therefore, to remove all artificial barriers to markets. Whereas, on the other hand, the Competition
Law Policy must efficiently limit itself to prescribe the rules under which firms compete with one
another in markets.

6.1 Global Markets and the clamour for Global Competitiveness

All markets have an endogenous structure where the firms through their explicit conduct not only
sketch out their relevant geographic market but also do assist in shaping the design of the markets,
as such44. This leaves us to distinguish with much precision between the markets which haven’t
adhered to reciprocal liberalisation of trade and those which though, have made efforts to open up

40
Supra note 37.
41
Wendy L. Hansen, The International Trade Commission and the Politics of Protectionism, 84 AM. POL. SCI. REV.
21, 28 (1990).
42
Kodak v. Fuji, WT/DS 44 AND WT/DS 45.
43
The General case of Japanese Keiretsu, WT/DS 44/R 478.
44
Supra note 18.
 126

their economy, still march forth with a pseudo-protectionist approach. This seems appropriate for
developing nations such as India where complementary assets relating to marketing and
distribution provide some additional benefits to domestic firms vis-à-vis the Multi-Nationals45. In
a typical situation where the market conditions favour the latter more, inclusion of inter-enterprise
linkages in trade disputes will render a double blow to the domestic players, and hence to the spirit
of competition in the long run46. This is complemented by the widely acknowledged understanding
that any competition policy does not lend itself very easily to incremental changes 47.

It does not therefore, comes as astonishment, that the U.S. despite its clamour for negotiating an
agreement on competition issues right from the Uruguay rounds is still reluctant to pursue its anti-
trust objectives through the WTO. Though, the U.S. policymakers are well aware of the fact that
business practices are better covered by anti-trust regime than by trade law but they fear the
dilution of long established anti-trust rules in the process of multi-lateral negotiations48. A similar
apprehension is shared even for the government-condoned private business practices that are
potent to create barriers to trade by restricting parallel importation – which might as well come
under closer scrutiny49. Consequently, notwithstanding the acknowledgement that anti-dumping
interventions and government support for parallel importing prohibitions appear as sources of
contingent protection from trade and price competition, there are several political obstacles to
reduce the scope of these provisions50.

45
Chakravarthy, S., Metamorphosis of Indian Competition Law. In THE DEVELOPMENT OF COMPETITION LAW:
GLOBAL PERSPECTIVES 109 (2010).
46
Supra note 19.
47
TOWARDS A FUNCTIONAL COMPETITION POLICY FOR INDIA: AN OVERVIEW (PRADEEP S. MEHTA ED., 2005).
48
MAVROIDIS, PETROS C, ET AL., THE LAW AND ECONOMICS OF CONTINGENT PROTECTION IN THE WTO 265-80
(2008). See also UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES, ART.
11.3, APR. 15, 1994, MARRAKESH AGREEMENT ESTABLISHING THE WORLD TRADE ORGANIZATION, ANNEX 2, LEGAL
INSTRUMENTS— RESULTS OF THE URUGUAY ROUND, 33 I.L.M. 112 (1994).
49
Ibid.
50
Chakravarthy, S., New Indian Competition Law on the Anvil (RGICS WORKING PAPER SERIES NO. 22, 2001)
available at http://www.rgics.org/pdf1/wpn-22.pdf (Last visited on July 5, 2015).
 127

In this regard, it is worth mentioning that U.S. has been much proficient in giving life to these
provisions in the recent past and that too, much extensively51. Besides, it has recently won a major
case where the WTO panel has held that the provisions of the U.S. Trade Act of 1974 (which was
designed to take unilateral action against the country’s trade partners) violates the commitment
taken by it under the WTO52. In this backdrop, it is highly unlikely that the U.S. would aspire to
drag issues related to competition policy under the ambit of WTO deliberations. As a result, in
such a scenario it does not make sense for countries like India to agree to multilateral disciplines
on competition policy unless it is agreed that prohibition on anti-dumping and unilateral sanctions
would follow the adoption of common competition policies53. This hypothesis carries much
relevance in the present times when all such maladies are being proposed to be cured by emergence
of a global competition policy, the confabulations regarding which has been on the international
agenda only quite lately, and thus, award not much room to us for its importance to be appreciated.

Trade liberalisation in India has resulted in severe competition in the context of countries like
China, Taiwan, South Korea, Malaysia and Thailand which pursue export-led growth with policies
that favour exportable and importable goods production via. inter alia strategically undervalued
currencies54. The only modality through which the domestic industry can be given a chance to
respond to their challenge is to precisely follow these countries in strategically undervaluing the
native currency and not just its devaluation55.

6.1 Moving Out of the Bounds: Implications of the Effects Doctrine

51
GUAY, TERRENCE, THE UNITED STATES AND THE EUROPEAN UNION: THE POLITICAL ECONOMY OF A
RELATIONSHIP 39 (1999). C.f. Irwin, Douglas A, Changes in US Tariffs: The Role of Import Prices and Commercial
Policies, 88 AM. ECON. REV. 1015, 1017–18 (1998).
52
Ibid. See also United States — Sections 301–310 of the Trade Act 1974, WT/DS152/R.
53
Infra note 53. See also Krishna, Pravin, and Devashish Mitra, Trade Liberalization, Market Discipline and
Productivity Growth: New Evidence from India, 1990 JOURNAL OF DEVELOPMENT ECONOMICS, 56(2): 447-62.
54
Bown, Chad P, Emerging Economies and the Emergence of South‐South Protectionism, WORLD BANK POLICY
RESEARCH WORKING PAPER (AUGUST 2012). See also Bown, Chad P and Patricia Tovar, Trade Liberalization,
Antidumping and Safeguards: Evidence from India's Tariff Reform, 2011 JOURNAL OF DEVELOPMENT ECONOMICS 96
(1): 115‐125.
55
Ibid.
 128

As an indicia to the exposition made above, it would be purposeless to reiterate the role of the Act
of 2002 in upkeeping the competitive spirit and the wave of liberalization. Its provisions while
holding fast with its intent to prevent inequity and to ensure a free and ethical trade environment
to the participants in the market, award the regulator i.e., the CCI (Competition Commission of
India) – with powers to monitor anti-competitive behaviour taking place within the country. So
also, it has been entrusted to take cognisance of an act in such connection taking place outside
India but having an adverse effect on competition in country56. The Act of 2002 by allowing CCI
to exercise extra-territorial jurisdiction has also made it possible for the regulator to take action
against such anticompetitive conduct involving imports and foreign cartels which may adversely
affect the Indian market57.

As we delve into this special provision which is much akin in nature to the extra-territorial nature
of the provisions dealing with settlement of trade disputes before WTO, it’s observed that an
increase in globalisation of business along with the global acceptance of this provision under the
Act of 2002 – often referred to as the ‘effects doctrine’, has lead to expansion of the scope of
national competition laws to cross-border business activities58. The principles of extra-territorial
jurisdiction can be bifurcated in two parts i.e., the subject matter - jurisdiction and enforcement -
jurisdiction. For the purpose of subject matter - jurisdiction, the territorial and nationality
principles are sufficient to undertake a great number of infringement of competition laws59.
Whereas, for giving effect to the enforcement – jurisdiction, it is understood that without entering
into bilateral or multilateral agreements, the provisions of the Act of 2002 may not be given its
due effect60. Thus, the CCI must endeavour to enter into bilateral or multi-lateral agreements with
other competition regulators in this regard61.

56
SEC. 32, THE INDIAN COMPETITION ACT OF 2002.
57
Supra note 52.
58
Haridas Exports v. All India Float Glass Mfrs. Association and Ors. [2002] 111 COMP CAS 617 (SC).
59
Basant, Rakesh and Morris, Sebastian, Competition Policy in India: Issues for a Globalising Economy, ECONOMIC
AND POLITICAL WEEKLY (JULY 2000) 2735.
60
Maheshwari, Kartik and Simone Reis, Extraterritorial Application of the Competition Act and Its Impact,
COMPETITION LAW REPORTS (JANUARY 2012) 144.
61
The arrangements to be made as specified have been warranted for and provided under Sec. 18, The Indian
Competition Act of 2002.
 129

Notwithstanding that the effects doctrine is a common provision in the competition laws of other
nations and even existed in the Act of 1969 as well, the difference in modality and efficiency with
which the latter and the Act of 2002 deal with it, becomes a subject of greater relevance to us for
analysing the transition. An illustration under the doctrine would mean that Country B could
prosecute Country A’s firm in B’s own courts on the basis of the laws prevalent in B. This however,
frequently runs into problems of gathering evidence and enforcing penalties and could also be
interpreted as infringing the sovereignty of country A which could only be tackled through the
principle of Comity of nations. Under positive comity, authorities in A will entertain complaints
from B and proceed against the firm in their jurisdiction on the basis of their own laws. This has
worked reasonably well between the European Union and the United States in recent years62.
However, it requires similar regulatory frameworks and philosophies in the two jurisdictions.

Although, the administration of the Act of 1969 while dealing with this issue exhibited a lack of
technical expertise with long delays in delivering judgments making it hardly likely for India to
succeed in obtaining the benefits of reciprocal positive comity. Contrary to this, the modern
competition regime has remedied these deficiencies and adopts an approach much similar to the
one relating to positive comity, as discussed above63. However, it may be noted that a reciprocal
implication of this effects doctrine are absent in respect to Indian firms as many of the restrictive
business practices such as export and import cartels and exclusionary vertical arrangements that
restrict market access to imports are not practised on a significant scale by the Indian firms.

Moreover, during the period of transition which witnessed an almost absence of law guiding the
Indian markets, much of the pitfalls of the Act of 1969 continued to haunt the economic scenario.
This in turn, had a great repercussion on the perception of foreign players which has still not been
reversed by the new Competition regime, operational for more than a decade now. The United
States Trade Representative’s (USTR) Report64 which invariably comes down hard on any policy
that impedes market access to American firms did then, ended up exonerating India on this score.
Both state-owned and private Indian firms were reported to engage in most kinds of anti-

62
MASSIMO MOTA, COMPETITION POLICY: THEORY AND PRACTICE 30 (2004).
63
RICHARD WHISH, COMPETITION LAW 13 (2009, OXFORD UNIVERSITY PRESS).
64
OFFICE OF THE U. S. TRADE REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT, NATIONAL TRADE
ESTIMATE REPORT ON FOREIGN TRADE BARRIERS 61–62 (2010).
 130

competitive practices with little or no fear of reaction from government overseers or actions from
a clogged court system65. It again hinted India to be suffering from the shackles of a slow
bureaucracy and over-intervention of sectoral regulators despite having done away with its
protectionist proclivity in the early 90’s.

Consequently, the present legal framework needs to focus a great deal on revamping the Indian
image in the global marketplace. One idea in this regard would have been to bring into force
various provisions of the new Act at staggered intervals, as provided for in the Act itself, and to
implement them aggressively against foreign firms, and then offer to bring them under
international disciplines in exchange for suitable concessions. Now that this strategy has been met,
a further analysis needs to be taken as to its implications.

7.1 Challenges to the Incumbent & the Road Ahead

Though the modern Competition era in India is much lauded for its holistic vision and has been
often over-estimated to be a panacea for all glitches in the economic setup of the nation, it faces
stark challenges from its very own foundation. As is well known, inter alia the rationale behind
withering away of MRTPC (Monopolies & Restrictive Trade Practices Commission) was that it
lacked adequate functional autonomy66. A similar impediment is encountered even by CCI
(Competition Commission of India) as established under the Act of 2002. It grapples with
limitation over its jurisdiction in various matters and suffers from a lack of authority for the
purpose of recruiting its workforce. Though several representations have been made in this regard
to the government, the response from the Administrative chambers remains much cold where the
control over the rules for employment of workforce rests till now.

This falls under the auspices of the legislation of 2002, which entrusts the government to take a
decision on the number, qualification and salary structure of the employees to be hired and thus,
leaves a little room for the Competition regulator to take a call suiting its requirements67. However,

65
Ibid.
66
Supra note 45.
67
Supra note 55, Secs. 10 and 14
 131

scholarly opinions on this matter of immediate importance categories it to be a structural issue by

emphasising the need for professionals and full-time employees well conversant with competition
regulations to be a part of the Commission68. Also, much criticism is attracted with respect to
appointment of officials on deputation which evidently, weakens the professional standing of the
regulator. A felicitous consequence of this proposition can be witnessed in the frequency at which
several orders passed by the regulator have been challenged in the courts. Notwithstanding this,
yet another encumbrance to the regime in place comes from the limited powers of the Director
General (Inspection), which though has the powers to conduct search and seizures under the Act
of 2002, but it gets limited to only such cases where he has obtained a warrant from the magistrate
in that regard69. This proves fatal to the fragile nature of evidences in competition matters, half of
which, may not be amicable to admissibility in courts owing to an extremely wide ambit of terms
like ‘agreement’ under the Act70. The conundrum becomes even more evident, if we compare the
Indian Legislative setup with its European counterparts which have inspired the framework in the
former. The latter do award the powers to search and dawn raids on the investigative wing for the
purpose of gathering documentary evidence in a probe71.

8.1 Conclusion
Tracing its journey between ideologies, the deliberations made above signified the major dilemma
which India faced while traversing between the ‘License-Permit Raj’ to Competition era. Broadly,
it was comprehended that the need for this transition was much voiced as the protectionist approach
which India had adopted, by that time started mutating into a draconian rigour. As the investment
rate started to stoop low and India’s image as an unfavourable destination grew, the government
took immediate measures and opened up the roof to Indian economic setup. As this allowed for a
competitive spirit to sprout from the domestic market, the increasing pressure for trade
liberalisation around the same time started reversing the progression which India was about to
embrace with much desperation. Despite this, the comprehensive architecture of the Competition

68
AGHION, PHILIPPE AND RACHEL GRIFFITH, COMPETITION AND GROWTH (2005, CAMBRIDGE: MIT PRESS).
69
Supra note 66, Sec. 41.
70
Ibid., Sec. 2(b). It defines an agreement to include any arrangement or understanding or actions in concert – (i)
whether or not, such arrangement, understanding or action is formal or in writing; and (ii) whether or not such
arrangement, or understanding or action is intended to be enforceable by legal proceedings.
71
Supra note 62.
 132

Law regime which entered into the arena in 2002, commenced to effectually treat these pitfalls
and started revamping the face of Indian economy with much strength and vigour.

Though the regime in place has been accused for alienating itself with its objective due to the
dynamics with other policy frameworks in place, but, the situation can be very well improvised
with regular reforms. Here, like other advanced nations, India will have to explicitly take into
account the historical and the socio-economic context before contemplating or introducing any
Competition Law Policy reforms. Since many of the extant distortions in the market have been
caused by earlier institutions which remained operational for a long stretch, undoing the scars is
no doubt a cumbersome task and would only reach closer to accomplishment as we continue
express our reliance on the present structures while acknowledging the quintessence of the spirit
of competition. In addition, an approach to harmonize the competition policy with other sectoral
regulations can ease much of the pressure. This would be much feasible and desired as the mutual
interference and interaction of all such sectoral regulators with CCI is optimum and in the recent
past, has been a cause of concern for the policy analysts.

_____________________
 133

COMPETITION LAW: AN APERTURE TO ECONOMIC

REGULATION IN NEO-LEGAL SYSTEM

Vanshaj Mehta*
Prakhil Mishra**

India, in its formative years of freedom, laid down the seeds of socialistic approach towards
economic development. Five-year plans were designed with the aim of self-reliance and self-
sufficiency of the Indian industry. In this process of indigeneity, focus was laid on strong
governmental regime to ensure equal and prosperous distribution of resources. One such attempt
of the state resulted in the enactment of the MRTP Act, 1969 with the basic aim of comprehensive
control over direction, pattern and quantum of investment to ensure that wealth is not concentrated
in the hands of the few.

Law has to be dynamic as conceptualised by father of sociology ‘Auguste Comte’. In order to

adjust with the changes promulgating in the society it is important for law to go into transition.
The libertarianism theory is giving an orifice to individual choice through the prism of rule of law
and personal liberty. It edifices government’s role to fortify personal liberty by providing space
for freedom of trade and markets. The very basic idea behind the approach is to flourish markets
by inducing license free trade practice and refurbish the fabric of law with the evolution of society.

This paper would show the journey about the transition in Indian economic regulatory system
through the MRTP Act, 1969 towards Competition Act, 2002 and its enforcement in August 2009.
The voyage from a closed market era to an open market epoch with realistic laws, which can be
contemplated with the New Economic Policy of 1991 and give birth to a system that enables free
markets for the ennoblement of fair competition, entrepreneurship and individual choice. This

*
Student of III Year, B.A.LL.B. (Hons.), Institute of Law, Nirma University. Email: 13bal087@nirmauni.ac.in.
**
Student of III Year, B.A.LL.B. (Hons.), Institute of Law, Nirma University.Email: 13bal027@nirmauni.ac.in.
 134

paper instills the reasons as to why the Indian Economy was starving for the introduction of a new
Competition Law regulator. In addition, it will endeavor to focus upon the outlets in
implementation of the new law.

The deliberation is upon the premise that ‘license free rule is more apposite for the modern day
India.’ the discourse would cover keen questions regarding whether the new policy is being
successful in its course? What could be done to ameliorate the dismantled plight? And why this
new approach has been devised?

1.1 Introduction

“Democracy no longer means what it was meant to. It has been taken back into the
workshop. Each of its institutions has been hollowed out, and it has been returned to us as a
vehicle for the free market, of the corporations. For the corporations, by the corporations.”
- Arundhati Roy

With the inception of human life, liberty has been considered and acknowledged as a prime virtue
for its existence. It is a cradle to a developed and organised human society within the social and
economic framework as it is a cardinal part of the natural law. Henceforth, the man made law does
not instil power to curb the liberty as that would not cave in natural law principles. John Locke,
the stalwart of libertarian theory, has asserted that having natural liberty is the most superior virtue
and no other grander power should curtail the same.1 His thoughts have laid down the impression
of ideal governance. It envisages the imperativeness of liberty to conform to the individual freedom
and its nourishment.

In the present paper, the cardinal contention covers the essentiality of liberty of markets in a
democratic politics, as it is the highest form of it. It stresses upon free-markets approach, which
infuse competition, individual choice and entrepreneurship. The father of economics, Adam Smith,
emulated that ‘invisible hand’2 in an economy would fortify that free-markets, which are left to its

1
John Locke on Liberty and Freedom by DTC, available at http://www.forfreedomssake.com/blog/2009/02/john-
locke-on-liberty-and-freedom/
2
Emma Rothschild , Adam Smith and the Invisible Hand , AER, Vol. 84, No. 2, Papers and Proceedings of the
Hundred and Sixth Annual Meeting of the American Economic Association (May, 1994), pp. 319-322, Published
by: American Economic Association , available at http://www.jstor.org/stable/2117851
 135

own running would be accruing to more benefits than intervention by the State on every venture.
It is indeed very important to have regulations for the assurance of healthy competition in the
market but those regulations should not be burdensome upon the constructive growth of an
economy. Even the legislators of UK have ascertained the constitutive principle of liberty for the
markets through the enlargement of their ambit by amending anti-trust laws. Therefore, for a
fruitful and effective growth it is viable to adopt libertarianism as an approach towards
development.

India is a country, which has always inclined towards a socialistic form of governance as it is being
considered the most holistic pursuit by the stalwarts of the Constitution of India.3 Article 38 and
39 of the Indian Constitution enshrine the directive principles for the State that it should take care
of the distribution of wealth and the concentration of wealth is not in the hands of few. It is because
of these principles that from the inception of post-independence era, there has been induction of
several Industrial Resolutions, such as Resolution of 1948 and 1956, which have given a
framework to Indian economic regulations. Moreover, the introduction of Industries (development
and regulation) Act, 1951 for regulating private sector and Monopolies and Restrictive Trade
Practices Act, 1969 for the annulment of concentration of wealth in the hands of few have been
legislated. In continuation of this Foreign Exchange Regulation Act was also enacted, whereby
there was intervention by the Government for allowing the participation of the foreign companies.

All the enactments have been endured for the augmentation of the industries and better economic
welfare of the people for a fundamental growth of the country. However, these measures have
failed in achieving the objectives laid down for them. In Addition, they promoted a number of
inefficiencies, distortions and rigidities in the system.4

There is always a protocol, which has to be accoutred for the implementation and enforcement of
any policy. The idea for the MRTP Act, to be repealed was to pursue a libertarian approach, as
devised by the great thinkers like John Locke and Adam Smith that with less governmental

3
Surendra Prasad Narain Singh, Democratic Socialism: An Indian Approach, IJPS, VOL.26, No.4, CONFERENCE
NUMBER: XXVII INDIAN POLITICAL SCIENCE CONFERENCE: MYSORE, 28th, 29th, & 30th DECEMBER,
1965 (October-December,1965), pp. 142-149, Published by Indian Political Science Association, available at
http://www.jstor.org/stable/41854100
4
S.K. MISRA AND V.K. PURI, INDIAN ECONOMY- IT’S DEVELOPMENT EXPERIENCE, Himalaya
Publishing House, 27Th Edition, pp 430-438
 136

intervention there would be more growth in the market sector and that too with higher
developmental aspects. It has been thought about that there would not be regulative law reforms
rather competitive legislations, which increase the virile competition and give opportunity for the
new start-ups to be settled in the Indian market economy.5 This would definitely magnify more
development of the country with respect to economic advancements.

Consumer Protection Act, 1986 and Indian Competition Act, 2002 are the major attributes to the
approach of evicting the anti-competitive environment in the country. By protecting, the
consumers form the ill treatment of the business enterprises and by giving opportunity to the
markets to enlarge without having any strict regulatory framework for entering into it. The whole
approach was to mould a holistic environment for the business in India through these both
legislations, as “they are two wings of the same house”.6 Both incline towards securing the
consumer deception and fostering the prelation of the competition in the markets through stifling
the stringent regulatory norms. This paper is an effort to show how in India the license permit raj
has taken its course and its metamorphosis to the competition era and to a mixed economy. The
liberty of markets has to be fortified and the regulations, which have been imposed to keep check
over the market in India, should assist government in delving upon a constitutive formula for
giving room to the markets to grow and sustain effectively.7 Moreover, India’s inability in
structuring its growth and converting it into the development8 is a key discourse of the paper.

2.1 Orifice to the Licensing Era

After independence, it was the greatest challenge for the Indian Government to edifice a proper
channel for economic regulations in order to have proper supervision and adjudication of the
disputes arising out of these pursuits. The foremost step into this arena was devised through
Industrial Resolution of 19489 when certain industrial aspects have been discussed for the first
time and both public and private enterprises have been considered thoroughly. The highlight of

5
Supra note 2
6
Thomas B. Leary, Competition Law And Consumer Protection law: Two Wings Of The Same House, ALJ, Vol. 32
pp. 1147-1151
7
Devendra G. Kodwani, Economic Regulation of Utility Industries, EPW, Vol. 35, NO.30 (Jul. 22-28,2000), pp.
2657-2661, Published by: Economic and Political Weekly, available at:
http://www.jstor.org.elibrary.nirmauni.ac.in/stable/4409534
8
Id.
9
R.L. Varshney, Government-Business Relations in India, BHR, Vol. 38, No. 1, International Government-
Business Issue (spring, 1964), pp. 22-57, Published by: The President and Fellows of Harvard College, available at
://www.jstor.org.elibrary.nirmauni.ac.in/stable/3112486
 137

the policy unfolds the industries where state is a monopoly. In addition, there was a provision of
mixed sector in six different industries of strategic importance, there was also a pool of eighteen
industries only pointed out for the governmental control and rest of the industries were being left
for the exploration of private players. Then came the Industrial policy 195610, in this policy the
more emphasis was being given on the small and cottage industries and also the ambit for the
industries coming under the state was widened. In addition, the mutual dependence of private and
public sectors has been expanded, as only four industries have not been allowed for private
functioning.11 Nevertheless, the major step in regulating the economy was being taken through the
enactment of Industries (Development and Regulation) Act, 1951. This Act was specifically
dealing with providing license to the upcoming industries and enshrining certain guidelines for the
strict measures of adjudication. The major emphasis was given on the following:

1. Maximum Governmental intervention in every facet,

2. Registration and licensing of industrial undertakings, enquiry of industries listed in the
schedule of registration and cancellation of registration and license if found working out of the
permitted ambit (restrictive provisions)
3. Direct regulation and control by the Government, Control on price, distribution, supply, etc
and some constructive measures (reformative provisions)

These were the certain modulations brought by the enactment in regulating the economic affairs
of the country. It was the first step towards infusing licensing measures on the industries, which
further led to many extraneous consequences.12

The cardinal points of criticism regarding this particular Act have been pointed out by the several
commissions’ reports, appointed by the government itself such as Monopolies Enquiry
Commission in 1964 (also famously known as Das Gupta Commission)13, Dr. R.K. Hazari
Commission in 196514 and Dutt Commission is 196715. The very basic loophole founded by all

10
Id.
11
Supra Note 4
12
Supra Note 9.
13
J B Monterio, Commissions of enquiry their limitations, EPW, July 1964, pp. 1137-1142, available at
http://www.epw.in/system/files/pdf/1964_16/28/commissions_of_inquirytheir_limitations.pdf
14
Industrial Planning and Licensing Policy: Summary of the Hazari Report, EPW, Vol. 2, no. 16 (Apr. 22, 1967),
pp. 746-748, Published by: Economic and Political Weekly, available at ://www.jstor.org/stable/4357835.
15
Aurobindo Ghose, Joint Sector and ‘Control’ of Indian Monopoly, EPW, Vol. 9, No. 23 (Jun. 8, 1974), pp. 906-
916 Published by: Economic and Political Weekly, available at : http://www.jstor.org/stable/436371.
 138

these commissions was in the very strategy of the government. They stipulated their major enquiry
upon the fact that licensing measures have been failed to fulfil their objectives and concurrently
failed in their quest (what government had actually planned).

The underlying idea was to decide and ensure the capacities according to plan priorities and targets.
However, the licenses have not been allocated according to the prescribed approach and perchance,
private companies ended up investing into only profitable area of their interests. Likewise, there
was discretionary allocation done by the government without any transparency and due to the same
licensing, concentration of power was also heightened up in the hands of few. In addition, there
were several imbalances referring to regional biases, the Dutt committee has pointed out that few
states like Maharashtra, Gujrat, Tamil Nadu and West Bengal had the most of the benefits. The
whole approach turned out to be a mess during the strict licensing era, which has led to surfeit of
repercussions.

3.1 Advent of Mahalanobis Committee and the MRTP era

The Mahalanobis Committee has made the most effective observations, as it has delved upon the
adversities caused by the earlier enactments and policies vouched out by the government and
prescribed certain mending. In pursuance of this, Monopolies and Restrictive Trade Practices Act
was adopted in the year 1969 in order to curb the increasing concentration in the industrial sector.
This Act has hooded national monopolies (covered by Section 20(a) of the Act as ‘single large
undertakings’) and product monopolies (covered by Section 20(b) of the Act as ‘dominant
undertakings’)16. These two categories have been made in order to have a control over the
production capacity of big industries (although, this particular part was severed after 1985). The
Act also included Restrictive Trade Practices (RTP) and Monopolistic Trade Practices (MTP).17
At a larger glance, the Act had devised approach towards curbing the monopolistic trade practices
because until 1984 the Act was only looking after the monopolistic trade practices and not the
unfair trade practices. The major concern for good governance should be increasing of the virile
competition rather restricting only the monopolies in order to engulf a healthy economy.

16
Ryutaro Komiya, A Note on Professor Mahalanobis’ Model of Indian Economic Planning, The Review of
Economics and Statistics, Vol. 41, No. 1 (Feb. 1959), pp 29-35, Published by : The MIT Press, available at
http://www.jstor.org/stable/1925455.
17
Pulapre Balakrishnan, The Recovery of India: Economic Growth in the Nehru Era, EPW, Vol. 42, No. 45/46
(Nov. 10 - 23, 2007), pp. 52-66 Published by: Economic and Political Weekly, available at
http://www.jstor.org/stable/40276833.
 139

MRTP Act superficially included18:

Monopolistic Trade Practices: Section 2(i) is talking about the same and it bears the responsibility
for checking that the concentration of wealth is not there to the detriment of the public and it
supervises that no company or enterprise should use the dominant position in order to abuse the
market. It has been considered that such kinds of companies, who are taking unduly advantage of
their position, should be penalized for consumer welfare.

Restrictive Trade Practices: it enshrines all the irregular and illegal activities, carried out by the
companies in order to obstruct the business of some other companies. It is made to stifle such
activities, which are anti-competitive in nature and should be restricted.

Unfair Trade Practices: Sachar Committee has recommended this particular provision and it is
being added through Section 36-A of the Act. It was majorly included in order to evict the practices
related to misrepresentation and misleading through the advertisements, unfulfilled guarantees and
false promises of utility, quality and efficacy of the products.

This Act was being enacted keeping in mind the Directive Principles, given in the Constitution of
India (Article 38 and 39), which state that the wealth should be distributed equally among the
citizens and there ought not to be any disparities in it.

In order to adjudicate over the matters pertaining to the same there had been making of an MRTP
Commission19, under the aegis of Section- 5 of the Act. It has to look after the matters pertaining
to the restrictive trade practice, monopolistic trade practice and unfair trade practice and regarding
the imports, whether it has been done in the correct procedure or not and it has to submit its findings
to the government. There are some of the judgements delivered by the Commission pertaining to
the same.

In M/s Shyam Gas Company v. State of UP20, the gas agency was the sole proprietor of providing
gas services in that area of the state. It took advantage of its position and favoured the condition
that for having a gas connection, customers have to buy the gas stove from the company only. This

18
MRTP Act: Rise Fall and Need for Change: Eco Legal Analysis, available at
http://www.ukessays.com/essays/economics/mrtp-act-rise-fall-and-need-for-change-eco-legal-analysis-economics-
essay.php.
19
N. Ranganatha Samy, Monopolies Commission and Misleading Advertisements, EPW, Vol. 21, No. 41 (Oct. 11,
1986), p.1772, Published by: Economic and Political Weekly, available at http://www.jstor.org/stable/4376197.
20
AIR (1991) ALL 129
 140

particular act was being adjudged as a restrictive trade practice and the same was penalized. In
another case of Bal Krishna Khurana, the seller was selling the sub-standard goods to the
consumers, which has been found out to be an unfair trade practice by the commission and the
same has been restrained from trading.

These were the few judgements, which portray a constitutive growth but slowly and gradually with
the initiation of the new policy of 1991, the commission had given many foul judgements, which
were not apt for the public interest at large.

4.1 Malfunctioning of the License-Permit Raj

In the last chapter we learned about the reasons of inception of the Monopolies and Restrictive
Trade Practices Act, 1969. Also, we read about the handy Foreign Exchange Regulation Act, 1973.
Just as there are pros and cons of everything, the same notion has been established in case of the
MRTP Act, 1969. There are pros and cons of every legislation. The difference between any other
Act which is still a law in our country and MRTP or any repealed Act is that the Repealed Acts
have more cons than its pros, hence leading a way towards the malfunctioning of the system. These
kinds of acts work as constant speed-breakers and never allow the economy to run free from all
kinds of glitches. It is very pertinent to understand the reasons as to why this License Permit Raj
(MRTP Act, 1969) was repealed completely and the Indian economy was starving for a new law
in command. In spite of laudable objectives of the MRTP Act, it was unable to achieve its
objectives both in terms of enforcement of the law and enforcement of its rulings. From the
jurisprudential perspective the MRTP Commission took a fairly narrow view of private contractual
view. However, in spite of notable rulings from the Supreme Court under the MRTP Act, from a
regulation and enforcement perspective, the MRTP Act failed to achieved its objectives. Against
this background, the Finance Minister of India in its budget speech in February, 1999 made the
following statement in regards to the then existing MRTP Act –

“The MRTP Act, has become obsolete in certain areas in the light of international
economic developments relating to competition law. We need to shift our focus
from curbing monopolies to promoting competition. The Government has decided
 141

to appoint a committee to examine these range of issues and propose a modern

competition law suitable for our condition”21.

The MRTP Act was passed at a time of strict regulation and licensing of Industries which was
aimed at achieving the objectives of the MRTP Act, namely, to prevent (a) Economic Power
concentration in a few hands and curbing monopolistic behavior, (b) prohibition of monopolistic,
unfair or restrictive traded practices. The intention behind this was both to protect consumers as
well as to avoid concentration of wealth.22 The MRTP Act, was enacted at a time when India had
the policy of ''Command and Control'' paradigm for the administration of the economic activities
of the country. Most of the process attributes of competition, such as entry, price, scale, location
etc. were regulated. Thus, the MRTP Act, had very little influence over these process attributes of
competition, as they were part of a separate set of decisions and policies of the Government. As
the new paradigm of economic reforms, namely, LPG took root in the mid 80s and intensively
from the early 90s, the MRTP Act, was hardly adequate as a tool and a law to regulate the market
and ensure the promotion of competition therein. The MRTP Act, though a competition law, could
not be effective in the absence of other governmental policies inhering the element of
competition23. The MRTP Act conceived and legislated more than 30 years ago, was a
consequence of “Command-and-Control” policy approach of the Government. The so call MRTP
firms with assets more than Rs. 100 crores (about US $ 22 million) were prohibited from entering
and expanding in any sector except those listed in Appendix I of the Industrial (Development and
Regulation) Act, 1951. Even, in respect of such listed sectors, the MRTP firms were required to
obtain MRTP clearances in addition to the usual industrial licenses. In other words, the MRTP
firms, generally considered big in size, were allowed to grow only under Government supervision.
Size, therefore, was a pejorative factor in the thinking of the Government, the premise being “big

21
Ananth Desai ,The Competition Act - Overview, Nishith Desai Associates.
22
Subsequent to the 1991 amendment to the MRTP Act, there was a shift in emphasis towards prohibition of
monopolistic, unfair or restriction trade practice rather than on concentration of wealth and control of monopolies.
See Jaivir Singh, Monopolistic Trade Practices and Concentration of Wealth : Some Conceptual Problems of MRTP
Act, Economic and Political Weekly, Vol. 35 No. 50 (Dec. 9-15, 2000) Page- 4437-4444.
23
Dr. S Chakravarthy, Why India Adopted a New Competition Law-MRPT Act metamorphoses into competition act,
CUTS International, 2009, available at www.cuts-international.org.
 142

becoming bigger is ugly”24. Yet another reason of failing of the MRTP Act, 1969 was the absence
of definition or even mention of certain offending trade practices such as :

 Abuse of Dominance
 Cartels, Collusion and Price Fixing
 Bid Rigging
 Boycotts and Refusal to Deal
 Predatory pricing
The adoption of the economic reforms programme in 1991 was followed by pleas for scrapping
the MRTP Act. The argument put forward was that the MRTP Act had lost its relevance in the
new liberalized and global competitive scenario. It was said that only large companies could
survive in the new global competitive markets and therefore 'size' should not be a restraint. Thus,
there was a need to shift the focus from curbing monopolies to promoting competition. In this
view, the government appointed an expert committee headed by S.V.S. Raghavan to examine the
whole issue. The Raghavan Committee submitted its Report to the Government on Mat 22, 2000
where it proposed the adoption of a new competition law and doing away with the MRTP Act 25.
Under the MRTP Act, all firms with assets above a certain size were classified as MRTP firms.
Such firms were permitted to enter selected industries only and this also on a case-by-case approval
basis. In addition to control through industrial licensing, such large firms for any investment
proposals required separate approvals. The government felt that this was having a deleterious
effect on many large firms in their plans for growth and diversification. Then there was
introduction of new industrial policy with respect of MRTP and dominant undertakings. These
firms will now be at par with others, and not require prior approvals from the government for
investment in the de-licensed amended Act gave more emphasis to the prevention and control of
monopolistic, restrictive and unfair trade practices so that consumers are adequately protected from
such practices. Moreover, there was a need of a commission, which would regulate these trade
practices. Perchance, the inception of the Monopolies and Restrictive Trade Practices Commission
was there (MRTPC)26. In spite of laudable objectives of the MRTP Act, it was unable to achieve

24
Id.
25
Supra Note 4.
26
Supra Note 23.
 143

its objectives in terms of both enforcement of the law and enforcement of its rulings27. The
Supreme Court of India upheld restrictive clauses in agreements28 and applied the test of rule of
reason in respect of such clauses in agreement29. There are plethora of cases judged by the Supreme
Court, which show signs of malfunctioned MRTP Act. In September 1996, on a complaint by the
Alkali Manufacturers' Association of India (AMAI), the MRTP Commission granted an ex parte
interim injunction order against the American Natural Soda Ash Corporation (ANSAC),
restraining it from exporting soda ash to India. The commission in March 2000 confirmed this.
Meanwhile, in September 1998, the All India Float Glass Manufacturers' Association30 (AIFGMA)
filed a somewhat similar complaint against three Indonesians. Both cases went in appeal to the
Supreme Court, the appellants being ANSAC in the first case, and Haridas Exports (the Indian
importer of the float glass consignment) in the second. Both cases involved allegations of predatory
pricing, although that part of the complaint was not pressed by AMAI, which based its arguments
mainly on the allegation that ANSAC was a cartel. In the float glass case, on the other hand, the
question of predatory pricing was central. As it turned out, the Supreme Court did not go into either
of these allegations. Instead, its judgment in Haridas Exports vs All India Float Glass
Manufacturers' Association31, which also subsumed the ANSAC vs AMAI case, set aside both the
injunctions because the MRTP Commission lacked jurisdiction.32 Taken together with Haridas
Exports, these cases show that the MRTP Commission has displayed a tendency to issue orders
against business practices or prices that it regards as 'unfair'. However, the proper role for a

27
Supra Note 21.
28
TELCO vs Registrar of RT Agreement 2SCC 55 (1977) and M & M Limited v. Union Of India 2 SCC 529
(1979)
29
The Supreme Court propounded the following ratio : ''The definition of restrictive trade practice is an exhaustive
and not an inclusive one. The decision whether a trade practice is restrictive or not has to be arrived at by applying
the rule of reason and not on the doctrine that any restriction as to area or price will per se be a restrictive trade
practice, every trade agreement restrains or binds persons or places or prices. The question is whether the restraint is
such as regulates and thereby promotes competition or whether it is such as may suppress or even destroy
competition. To determine this question three matters are to be considered. First, what facts are peculiar to the
busmen to which the restraint is applied. Second, what was the condition before and after the restraint was applied.
Third, what is the nature of the restraint and what is its actual and probable effect”.
30
All India Float Glass Manufacturers 'Association vs P T Mulia Industrindo and Others, 2000 CTJ 252 (MRTPC),
para 21 of the chairman's order.
31
(2002) 6 SCC 600.
32
Aditya Bhattacharje, India's Competition Policy: An Assessment, EPW, Vol. 38, No. 34 (Aug. 23-29, 2003), pp.
3561-3563+3565-3574, Published by Economic and Political Weekly available at
http://www.jstor.org/stable/4413938
 144

competition authority, as rightly enunciated by the Supreme Court in setting most of these orders
aside, is to restrain business practices that endanger competition.33

5.1 New Policy and Liberalization - Competition Era

Since attaining Independence in 1947, India, for the better part of half a century thereafter, adopted
and followed policies comprising what are known as “Command-and-Control” laws, rules,
regulations and executive orders. The competition law of India, namely, the Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP Act, for brief) was one such. It was in 1991 that
widespread economic reforms were undertaken and consequently the march from “Command-and-
Control” economy to an economy based more on free market principles commenced its stride. As
is true of many countries, economic liberalisation has taken root in India and the need for an
34
effective competition regime has also been recognised. In the setting of the new monetary
strategy ideal model, India has decided to sanction another law called the Competition Act, 2002
(Act, for brief). The MRTP Act has transformed into the new law, Competition Act, 2002. The
new law is intended to nullify the surviving MRTP Act. Measures adopted by many countries are
essentially designed to open competition in strategic sectors such as telecommunications, air lines,
electricity generation and distribution etc. Such measures are a part of a tripod architecture with
the three vertices, one may christen as Liberalisation, Privatisation, and Globalisation (LPG). A
veneer running common to the LPG measures is the element of competition. The LPG syndrome
seeks to make competition a driving force in the economic and commercial activities of the world.
The law needed to yield to the changed and changing scenario on the economic and trade front.
This was one important reason why a new competition law had to be framed. How difference and
better was the new competition law as compared with the MRTP Act, 1969? Earlier in the paper
it has been identified that there have been terms and issues about which there has not been any
reference in the MRTP Act. The Competition Act, 2002 explicitly defines the offences of Abuse
of Dominance, Cartels, Bid Riggings and Predatory Pricing. These definitions were not mentioned
in the former Act. The Act explicitly mentions the criteria to measure if an unfair competition is
being practiced. The MRTP Act, 1969 was rather ambiguous and subjective35 by not giving any
constructive measure to ascertain if any such things are being practiced or not. MRTP Act, 1969

33
Id.
34
Supra Note 23
35
Id.
 145

has also failed to define what is a restrictive trade practice or a monopolistic trade practice. Next,
the Act mandates the Competition Commission of India shall not be bound by the provisions
established in the Code of Civil Procedure, 1908. In this case, the MRTP Commission would be
free of the provisions of CPC and would not be bound to abide by the said provisions which would
be a miscarriage of Justice. Hence, in the year 1999, a committee was devised to decide the fate of
the MRTP Act. The Committee was to decide on amendment or devising a new Act altogether.
The central Government made a committee, which was headed by Mr. S.V.S Raghavan. This
committee is also known as the Raghavan Committee36. Other dignitaries of this committee were
the Chairman Of Hindustan Lever Limited, a Consumer Activist, a Chartered Accountant and an
Advocate. There were about 80 different competition laws of different countries at that time, which
were available. No particular Competition Law of any country was taken as a model but features
of different Competition Laws were considered relevant for the report of the Raghavan Committee.
As India adopted the 1991 LPG policy it was contended that the MRTP Act, 1969 had outlived its
utility. It was contended that a new Competition Law was required for the country as the country
had adopted a new industrial policy which opened the gate for foreign companies to trade in and
with India. The Finance Minister of India in 1999 at a parliamentary session went to the extent of
saying that '' The MRTP Act has become obsolete in certain areas in the light of International
economic developments relating to Competition Law. We need to shift our focus from curbing
monopolies to promoting competition. The Government has decided to appoint a committee to
examine the range of issues and propose a modern Competition Law suitable for its conditions.''
After considering the recommendations of the Standing Committee and effecting some
refinements, the Parliament, on Dec 2002 passed the new law, namely, Competition Act, 2002.
The bill was introduced in parliament in August 2001, and was referred to the standing committee
on home affairs. The committee submitted its report in August 2002, but because parliament was
not in session, it was not tabled in parliament until November 21. Thereafter, the government
moved with alacrity: the Lok Sabha passed an amended bill on December 16, by the Rajya Sabha
on December 20, and the resulting Competition Act 2002 received the presidential assent on
January 13, 2003.37 Adoption of liberalization policy invited a situation in which the MRTP Act

36
Raghavan Committee Report, available at http://www.noragging.com/analysis/CR-
2007_07_16_AnalysisRaghavanCommitteReport.pdf .
37
Supra Note 32.
 146

was not efficient anymore. India adopted Liberalization and invited foreign companies to trade
and do business within India. This would mean that there would not be restriction of foreign
companies to carry their trade in Indian soil. This change invited problems and clashes in the
MRTP Act. The principles of Liberalization are totally opposing the MRTP rules. The new
Competition Act, 2002 is not part of the Indian Jurisprudence. It has been made effective by the
Government of India notification on March 31st, 2003. A staff has been appointed and the
commission was running successfully. Nevertheless, like every other thing there are some lacunas
in this act as well. There are still things, which are left to be rectified and are still left to be identified
by the commission so that the running of the system could be more smoothened.

6.1 Liberalizing Trends and the New Law’s Outlets

The government has passed the new law by keeping in view that with the inception of liberalization
era, there would be more responsibility of managing the economic affairs. There were several
changes made to the anti-trust laws of the country as discussed in the earlier discourse and all the
changes were being made for the better growth of the economic condition of the country. 38 The
major concern still revolves around the effective way of implementation of the law. The biggest
setback in the whole process was that the cardinal operation of the law kicked off in 2009 and that
too with not very commendable precision. There have been additions and modifications to the new
law. For example, the addition of the dominant position to the Section 4 of the new law and the
provision that the firms and companies ‘should match up the competition’ would render at last the
happening of most anti-competitive practices because the big firms would somehow
unintentionally deter the new start-ups. They, in order to match up with the rivals would bring their
prices down for the marginal sales and this would affect the whole sale of the new start-ups.39

Moreover, the new law has replaced the MRTP commission set up by the previous enactment and
because of this earlier, a writ petition was filed for not giving the functional status to the
Competition Commission of India because it was vouched to be headed by bureaucrats and a judge
headed MRPT Commission. The Amendment Act of 2007 revived the whole concept of
Competition Commission of India and it has finally replaced the MRPT commission.

38
Arun Ghosh, Who’s Afraid of Liberalisation? , EPW, Vol. 30, No. 1 (Jan. 7, 1995), pp. 12-14, Published by
Economic and Political Weekly, available at http://www.jstor.org/stable/4402220.
39
Supra Note 32.
 147

In addition, after the amendment of the new Act, there was a critical view taken for the new law
by many observers of the industry that the law mainly ponders when it comes to collaboration with
the foreign company upon finding of the domestic nexus of the particular business in India. This
is under the scope of regulation by the commission under the garb of doctrine of acquisitions.
Thus, if the acquirer is a foreign company and there is no domestic nexus when it comes to
acquisition then the competition Act trigger would not apply due to these provisions.40
Furthermore, there was a condition kept by the new law that acquisition formally would not take
place until 210 days and that would render a very long period for the formal gestation of the
companies. This long period of gestation would be a big hectic matter for the companies
undergoing coupling and will raise certain uncertainty and ambiguity in transaction. There were
certain implications and repercussions of this uncertainty as stated by the Dalal in his Article:41

 Perception among the customers

 Uncertainty as regards the ‘identity’ of the enterprise could create reluctance among the
customers who could choose to shift to a more ‘stable’ competitor.
 Inability to make strategic and operational decisions as strategic business issues could remain
in limbo.
 Human resources: in any acquisition or merger, the human resource element is crucial. This
has dimensions relating to alignment of titles, roles and responsibilities. A long period of
uncertainty could seriously dent moral and enhance attrition.
 Enterprise value (s): As a result of the uncertainty, the market could be dented due to ling
period gestation, causing highly negative factors for the market.

Therefore, the new law was made and formed with the view to bring a boost to the pedantic
industrial policy. However, the law provided certain peculiarities, which even Adam Smith would
not be supportive of. There have been ample of changes regarding the correct formation of the law.
Nevertheless, very few fruitful results have been conceived.

7.1 Conclusion and Analysis

As John Locke had said, “democracy in its purest form is most successful when accompanied with
libertarianism”. It is a well established notion that liberty gives man a power to flourish without

40
Ketan Dalal, Competition Act Amendment may be a Deterrent for M&A’s, September 17, 2007, p. 18
41
Id.
 148

any restrictions and it transcends every horizon. Likewise, at the same time law is an integral aspect
of human life. It governs him throughout life and gives a framework as to how to follow the general
pattern of the society. If we go for Law v. Liberty, it would be highly contestable to opt for one
because both go hand in hand. The paper has formulated an approach and showed a transition as
to how strict regulations were harmful for the growth of the country and not feasible for an
economy to grow and how a new law has taken place in the same shoes thereon. The researchers
in this paper have humbly attempted through different research methodologies to understand and
keep a clear picture of the Economic changes, which started, from Pre-1991 Era, through the
License Permit Raj System until the extinction of the ''Command and Control'' laws and inception
of the new competition law.

The new law has its foundation in the policy of the 1991 and the suggestions given by Raghavan
Committee. The basic idea has been to bring old law under the transit and to undergo some
essential changes for the suitability of new legal and economic fabric of the country. The basic
hypotheses of the paper unfolds that libertarianism is a holistic approach to achieve basic and
cardinal goals of the democratic governance has been established.

Liberty always vouches for a higher responsibility and the researchers would forward the views as
to what could be done to make this competition era more efficacious:

 The limits set by the new law for gestation period of the coupling of the companies should be
revised and lowered down.
 The Supreme Court should take into the view that it is necessary to keep check over the CCI
in order to ensure the smooth functioning and justice deliverance.
 Moreover, it is suggestive that the domestic nexus rule should be relaxed to certain extent for
the better foreign investment.

Liberty has its own course to bring the flare of independence for any developing country and free
markets are necessary for giving rise to individual voice and entrepreneurship.

_____________________
 149

INDIAN ECONOMY: LICENSING AND COMPETITION

ERA
Tanvi Pruthi*

Vrinda Joshi**

Kumar Mangalam Birla has rightly stated, “The License Raj in India was a time when, to set up
an industry, you needed a license. This made the government an omnipresent and sort of all-
pervasive authority.” Competition policy seeks to prevent restrictive business and market
structures that significantly lessen competition. The objective of such a policy is to maintain and
encourage competition in order to foster greater efficiency in resource allocation and maximize
consumer welfare.

In order to study in detail the effect of License Raj Permit on Indian Economy, the paper shall be
divided into three parts, based on the categorization of the Companies – i) incorporated prior to
1956 , ii) incorporated between 1956 and 1980, iii) incorporated after 1980. The first era includes
the period upto 1956, before the Industrial Policy Resolution was passed, when the newly
independent India emphasized the importance to the economy of securing a continuous increase
in production and its equitable distribution, and pointed out that the State must play of
progressively active role in the development of Industries. The second era is actually called the
era of “License Raj” between 1956 and 1980, when emphasis was laid on socialistic pattern of
society. Thus industrial development was confined mostly to public sector or the state and
economic concentration in private hands was prevented, following the prolongation of industrial

*
Student of IV Year, B.A.LL.B. (Hons.) University Institute of Legal Studies, Panjab University, Chandigarh.
**
Student of IV Year, B.A.LL.B. (Hons.) University Institute of Legal Studies, Panjab University, Chandigarh.
 150

policy. After 1980, the era when role of free market forces, competition and private
entrepreneurship were recognized as the chief components for industrial development.

In India, law governing competition policy was Monopolistic and Restrictive Trade Practice Act,
1969 which was enacted with the objective of controlling monopolies and preventing economic
concentration. This act was later repealed and replaced by Competition Act, 2002 which
establishes a Commission to prevent practices having adverse effect on competition, to promote
and sustain free markets and to protect freedom of trade and welfare of consumers. Both of these
acts shall be discussed in detail in the paper. The paper will contribute by providing solutions
advanced by various scholars to the License Raj in the Competitive era with personal inputs from
the authors keeping into account the historical background of Indian economy and problems faced
by the Indian economy currently.

1.1 Introduction- Beginning of the License Era

“Socialism is not only a way of life, but a certain scientific approach to social and economic
problems”.

~ Jawaharlal Nehru

Under the leadership of India’s first Prime Minister Pandit Jawaharlal Nehru, India chose to
become a Socialist Republic. He was greatly impressed by USSR’s centralized planning and its
emergence as a superpower. However, planning growth and development of newly independent
India was not merely economics for him. He saw planning as "partnership of the people in a mighty
enterprise & of being fellow travelers towards the next goal”. India was a new country racked by
the pains of partition, huge country with millions and millions of poor, a primary source of raw
materials for Great Britain with no industries of note; most people dependent on rain-fed
agriculture for their livelihoods, poor infrastructure and no money in the treasury to build more.

Industrialization is considered as sine qua non of the economic development and a panacea for the
vicious problem of economic backwardness.1 Indian leadership believed in the same and during
the post-World War II period India was probably the first non-communist developing country to

1
Dinesh Narain Awasthi (1991) Regional Patterns of Industrial Growth in India, Concept Publishing Company.
 151

have instituted a full-fledged industrial policy.2 This policy was formulated and overseen by the
first Prime Minister along with the statistician Prasanta Chandra Mahalanobis. Policy tended
towards protectionism, with a strong emphasis on import substitution, industrialization under state
monitoring, state intervention at the micro level in all businesses especially in labor and financial
markets, a large public sector, business regulation, and central planning.3 This policy held sway
for three decades, from 1950-1980. Jawaharlal Nehru said “The forces in a capitalist society, if left
unchecked, tend to make the rich richer and the poor poorer.”

There was a widespread belief that without increasing the role of the state, it was not possible
either to accelerate the process of growth or to create on industrial base for sustained economic
development of the country4. Also it is an accepted fact that most of the private sector growth in
the developed countries is based on a great deal of government intervention, protection and
patronage. Even countries like Singapore and Taiwan followed a similar model of low intervention
and high tariffs to provide protection to infant industries.

Thus, to make the private sector in consonance with the desired economic goals, certain measures
were resorted, such as-

 Foreign Investment Policy- Investment by multinationals was subjected to draconian

regulations as compared to national companies.
 Controlled Prices- The Government secured prices for a variety of essential products, for
example, steel, sugar, aluminum, etc.
 Subsidization of Exports- Policies such as ‘Import Entitlement Scheme’ were introduced
to mitigate the adverse effect of import quotas and tariffs on the exporting industries.
 Import Control Regulations- All the products for which imports were restricted was listed
in a book called ‘Red Book’ to protect domestic industries from foreign competition.
 Industrial Licensing- Under this, it was made mandatory for any industry that wished to
manufacture any product or wanted to expand its existing capacity had to obtain a license
from the Government.

2
Ajit Singh (2008) The Past, Present And Future of Industrial Policy In India: Adapting to The Changing Domestic
And International Environment, Centre for Business Research, University of Cambridge.

3
Kelegama, Saman and Parikh, Kirit (2000) "Political Economy of Growth and Reforms in South Asia", Second
Draft.
4
Ruddar Dut, K.P.M. Sundharam, Indian Economy, S. Chandand Company Ltd., New Delhi, 2009, p.226.
 152

All these measures helped by providing a quick start to the India’s infant economy. However, some
believe that the deteriorating situation of the India’s economy in the 1960’s, 1970’s and 1980’s
was the consequence of such policies. This led to bitter criticism of India’s initial planning
schemes, out of which, licensing was condemned the most.

The economists were extremely critical of the policy –

“The hopes of 1947 have been betrayed. India, despite all its advantages and a
generous supply of aid from the capitalist West (whose ‘wasteful’ societies it
deplored), has achieved less than 2 virtually any comparable third-world country.
The cost in human terms has been staggering. Why has Indian development gone
so tragically wrong? The short answer is this: the state has done far too much and
far too little. It has crippled the economy, and burdened itself nearly to breaking
point, by taking on jobs it has no business doing.” 5

Bradford DeLong, professor of Economics at UC Berkeley, wrote -

“The conventional narrative of India's post-World War II economic history begins

with a disastrous wrong turn by India's first Prime Minister, Jawaharlal Nehru,
toward Fabian socialism, central planning, and an unbelievable quantity of
bureaucratic red tape. This "license raj" strangled the private sector and led to
rampant corruption and massive inefficiency.”6

The term ‘License Raj’ was coined by Indian statesman Chakravarthi Rajagopalachari, who firmly
opposed it for its potential for political corruption and economic stagnation and founded
the Swatantra Party to oppose these practices.7 Kumar Mangalam Birla has rightly stated, “The
License Raj in India was a time when, to set up an industry, you needed a license. This made the
government an omnipresent and sort of all-pervasive authority.”

In order to study in detail the effect of License Raj Permit on Indian Economy, the paper is divided
into three parts, based on the categorization of the firms – i) incorporated prior to 1956 , ii)

5
The Economist, "A Survey of India", May 4, 1991, p.9.
6
J. Bradford DeLong , India Since Independence: An Analytic Growth Narrative, 2001.
7
The Swatantra Party and Indian Conservatism. Cambridge University Press. 2007. p. 131. ISBN 978-0-521-04980-
1.
 153

incorporated between 1956 and 1980, iii) incorporated after 1980. The paper also discusses the
MRTP Act, 1969 and the Competition Act, 2002. The paper throws light on various views
expounded by scholars on the system of licensing followed by a conclusion.

2.1 Incorporated Prior to 1956

The Europeans and the British initially came to India as traders. The Industrial Revolution in the
Great Britain resulted in increasing demand for raw materials for their factories and a market to
sell their finished goods. India provided such a perfect platform to them to fulfill all their needs.
Shashi Tharoor in his speech at Oxford University pointed out:

“India’s share of the world economy when Britain came to our shores was 23%.
By the time the British left, it was down to less than 4%. Why? Simply due to the
fact that India was governed for Britain’s benefit. Britain’s rise in two centuries
was financed by its depredation of India.”

Prior to independence there was virtually any public sector in Indian economy. The only instances
worthy of mention were the Railways, The Posts and Telegraphs, the Post Trusts, the Ordinance
and Aircraft Factories and a few state managed undertakings like the government salt factories,
quinine factories etc.8 Even such existing public sector undertakings weren’t working for the
development of Indians , their sole agenda was to flourish Britain.

Thus after independence, the new lawmakers of India felt the need to frame such policies that shall
benefit all the masses. The major agenda of all policies was social welfare and less importance was
given to economic growth and development. This was achieved through industrial licensing and
import licensing, to substitute imports with aboriginal industrial development. The Industrial
Policy Resolutions and the five year plans model are considered as the rationale of evolution and
growth of Public Sector in India. These policies provide for the co-existence of Public sector and
Private sector within their distinguished areas but with a bigger role for the public sector. Prior to
1956, Industrial Policy Resolution of 1948 was passed.

8
Rudder Dutt, K.P.M. Sundharam, n. 1 p. 203
 154

The main purpose of Industrial Policy Resolution of 1948 was to classify the industries into four
categories which are as follows –

 Defense and Strategic industries such as arms and ammunition, control and production of
atomic energy and the ownership and management of Railways were to be the exclusive
monopoly of Central Government.
 The second category included coal, iron and steel, aircraft manufacture, ship building,
manufacture of telephone, telegraphs and wireless (apparatus (excluding radio receiving
sets) and mineral oils. New undertakings in this category could henceforth be undertaken
only by the State. However the existing old enterprises were to be continued to run by
private entrepreneurs till the question of their nationalization was decided by the State.
 The third category included industries like chemicals, fertilizers, rubber manufactures,
cement, paper, newsprint, automobiles, electric engineering etc. which the Central Gov-
ernment would feel necessary to plan and regulate.
 The fourth category comprised of the ‘other industries’ which were left open to private
undertaking, individual as well as co-operative with overall general control by the
Government.

This marked the beginning of establishment of substantial industries in India. However,

government felt the need to maintain sufficient powers in order to regulate industries in a number
of ways. Thus Industrial (Development & Regulation) Act, 1951 was passed to promote planned
industrial development in accordance with the Industrial Policy Resolution of 1948 by introducing
licensing of certain specified industries. First Schedule of the Act specified licensing of all the
major manufacturing industries which could be broadly classified as metallurgical industries, fuels,
boilers and steam generating plants, prime movers( other than electrical generators), electrical
equipment, telecommunications, transportation, industrial machinery, machine tools, agricultural
machinery, earth moving machinery, miscellaneous mechanical and engineering industries,
commercial-office-household equipments, medical and surgical appliances, industrial instruments,
scientific instruments, mathematical-surveying-drawing instruments, fertilizers, chemicals (other
than fertilizers), photographic raw film and paper, dye stuffs, drugs and pharmaceuticals, textiles
(including those dyed, printed or otherwise processed), paper and pulp including paper products,
sugar, fermentation industries, food processing industries, vegetable oil and vanaspathi, soaps-
 155

cosmetics-toilet preparations, rubber goods, leather-leather goods and pickers, glue and gelatin,
glass, ceramics, cement and gypsum products, timber products, defense industries and other
miscellaneous industries such as cigarettes, oil stoves, etc.

Thus all the major production industries were subject to licensing. Also while giving licenses to
the new undertakings government could lay down conditions regarding location, size, number of
units, etc. as the government may deem fit. Government could also take over industries which fail
to comply with the instructions given by them. This clearly indicates that the development of
private industries was in the hold of the central government, restrictions on private industries
increased after Industrial (Development & Regulation) Act, 1951 and so private industries could
not prosper independently. Though this helped India achieve rate of economic growth two to three
times high as compared to the British Era. But these policies were also put through certain
criticism. Lack of co-ordination between public and private sector deprived India from the benefit
of mixed economy. A noted economist A.H. Hanson expressed that, at that time Government was
more interested in the control of private enterprises than in the public- private balance.9

Nevertheless, Industrial Policy Resolution, 1948 and Industrial (Development & Regulation) Act,
1951 were the seeds of Industrial policies and framework in India. Until 1991, the entire industrial
policy was based on these two with certain modifications that were made timely which are
discussed below.

3.1 Incorporated between 1956-1980

The draft of Second Five Year Plan (1956) stated, "the adoption of the socialist pattern of the
society as the national objective, as well as the need for planned and rapid development, require
that all industries of basic and strategic importance, or in nature of publics utility services, should
be in public sector................The state has therefore, to assume direct responsibility for the future
development of industries over a wider area."10

9
Changing Face of India’s Industrial Policies: A Look, Dr. Babita Thakur, Rozika Gupta, Rajesh Singh,
International Journal of Scientific and Research Publications, Volume 2, Issue 12, December 2012 1 ISSN 2250-
3153
10
Planning Commission, Second Five Year Plan (1956), Government of India Publication, New Delhi, P. 29.
 156

Thus to achieve this goal, Industrial Policy Resolution of 1956 was passed. The Industrial Policy
of year 1956 is known as ‘Economic Constitution’ of the country11. As per the IPR, 1956, the
industrial sector was divided into three schedules. Schedule A reserved 17 important industries
exclusively for state enterprises. These included- Arms and ammunition and allied items of defense
equipment; Atomic energy; Iron and Steel; Heavy castings and forgings of iron and steel; Heavy
plant and machinery required for iron and steel production, for mining, for machine tool
manufacture and for such other basic industries as may be specified by the Central Government;
Heavy electrical plant including large hydraulic and steam turbines; Minerals specified in the
Schedule to the Atomic Energy (Control of Production and Use) Order,
1953; Aircraft; Air transport; Railway Transport; Ship Building; Telephones and telephone cables,
telegraph and wireless apparatus (excluding radio receiving sets); Generation and distribution of
electricity; Coal and lignite; Mineral oils; Mining of iron ore, manganese ore, chrome-ore, gypsum,
sulphur, gold and diamond; Mining and processing of copper, lead, zinc, tin, molybdenum and
wolfram.
Schedule B included 12 important industries where state enterprises were to acquire dominant
positions. They were - all other minerals (except minor minerals); Aluminium and other non-
ferrous metals not included in schedule A; Machine tools; Ferroe- alloys and steel tools; Basic and
intermediate products required by chemicals industries such as manufacture of drugs; Anti-
biscuits and other essential drugs; Fertilizers; Synthetic rubber; Carbonization of coal; Chemical
pulp; Road transport; and Sea transport.

Schedule C - All industries not included in Schedule A or B was to be included in this category.

The Industrial Policy Resolutions of 1948 and 1956 desired to achieve self sufficiency in industrial
production for India. Domestic production was encouraged to curb the insufficient foreign
investment. Huge investments by the State in heavy industries were designed to put the Indian
industry on the path of a higher long-term growth. This strategy guided industrialization until the
mid-1980s.

The following table illustrates the growth of investment in CPSE’s –

11
https://en.wikipedia.org/wiki/Industrial_Policy_Resolution_of_1956
 157

Year (As on march 31) No. of units Total Investment (in crores)

1951 5 29

1961 47 950

1980 179 18,150

1990 244 99,330

2001 242 2,74,198

2007 247 4,21,089

2008 214 7,63,815

2009 213 7,93,096

2010 217 (operating survey) 9,08,842

Source – Public Enterprises Survey (2009-2010)

This era is called the “License Era”, the policy of state being the dominant industrializer was
followed. Private sector was occasionally granted license to produce items that were reserved for
the public sector. However public sector could enter at its will wherever private sector played the
dominant role.

During this period, the main focus of the industrial policy was shifted from development oriented
to regulation oriented. Also with the change in time, new kinds of industries and a variation in the
new range of products was witnessed. The IRDA, 1951 lost its prospective during this time and a
new broader act was passed to regulate industries. The Monopolies and Restrictive Trade Practices
Act came into existence on 27th December, 1969. The preamble to this act provided it to be that
the operation of the economic system does not result in the concentration of the economic power
to the common detriment, for the control of monopolies, for the prohibition of monopolistic and
 158

restrictive trade practices and for matters connected therewith or incidental thereto. The act is
discussed in detail in the next section.

Industrial Policy Notification of 1973 made licensing mandatory for all industries with investment
above a certain level. Schedule IV and V specified certain industries where licensing was
compulsory irrespective of size and a list comprising of specified small scale industries was
reserved. Industrial policy statement was issued in the same year, Appendix I of which specified
industries to which business houses and foreign companies were to be confined.
In order to setup an industry back then, a number of steps had to be gone through by an
entrepreneur to obtain a license. Government controlled and monitored each and every step in
order to maintain the state monopoly. These included, inter-alia, procedures relating to acquiring:
a letter of intent, capital goods imports clearances, foreign-technology collaboration clearances,
capital issue clearances, capital issue clearances, raw materials import clearances, essentially
clearances, indigenous non-availability of equipment and materials clearances, monopolies
clearances, small-scale sector clearances and clearances for locating in non-municipal areas.12

The government did introspect the license raj oriented industrial policy. Two key bodies were set
up to study the effect of heavy licensing over Indian economy. They were – (i) the Monopolies
Inquiry Commission of 1965 and (ii) the Industrial Licensing Policy Inquiry Committee in the year
1969. Both the committees declared that the system has failed practically on all accounts.
No steps were taken during the Indira Gandhi regime due to the fact that a large nexus was created
among the bureaucrats, industrialists and managers, who wanted the license raj system to stay. A
new attribute was added to this era – ‘corrupt’. These bureaucrats and managers used to take certain
amount/commission/rent to grant license to these industrialist.

Desperation on the part of the government to maintain the monopoly and frequent changes made
in laws resulted in a baffled system of industrial licensing. Some actions taken by the government
were anti-policy related decisions. For instance, ‘Siemens’ was embraced in India by the

12
The hidden hand and the license raj: age and the growth of firms in India, Sumit K Majumdar, Pradeep K
Chibbar, working paper #9705-14, Research Support, University of Michigan Business School.
 159

administration for power generation projects whereas multinational corporations like ‘IBM’ and
‘Coca-Cola’ were walked off at the same time.
Certain initial steps for liberalization were made during the short lived government of Morarji
Desai (1977-1979), however they failed miserably. Agricultural development was the forte of the
even shorter lived Charan Singh Government (1979-1980), not much thought was given to
industrial policy.

3.1.1 Monopolistic and Restrictive Trade Practices Act, 1969

Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India. These
Articles are a part of the Directive Principles of State Policy. Pegging on the Directive Principles,
the first Indian competition law was enacted in 1969 and was christened the Monopolies and
Restrictive Trade Practices Act (MRTP Act). The MRTP Act is regarded as the Competition law
of India, because it defines a restrictive trade practice to mean a trade practice, which has, or may
have the effect of preventing, distorting or restricting competition in any manner. Premises on
which the MRTP Act rests are unrestrained interaction of competitive forces, maximum material
progress through rational allocation of economic resources, availability of goods and services of
quality at reasonable prices and finally a just and fair deal to the consumers.
Three areas informed till 1991 (when the MRTP Act was amended) the regulatory provisions of
the MRTP Act, namely, concentration of economic power, competition law and consumer
protection. The statute, till 1991 regulated growth but did not prohibit it. Even in its regulatory
capacity, it controlled the growth only if it was detrimental to the common good. In terms of
competition law and consumer protection, the objective of the MRTP Act is to curb Monopolistic,
Restrictive and Unfair Trade Practices which disturb competition in the trade and industry and
which adversely affect the consumer interest (Monopolistic, Restrictive and Unfair Trade Practices
are described later in this paper) The regulatory provisions in the MRTP Act apply to almost every
area of business – production, distribution, pricing, investment, purchasing, packaging,
advertising, sales promotion, mergers, amalgamations and take over of undertakings (provisions
relating to mergers, amalgamations and take-overs were deleted in the MRTP Act by the 1991
amendments to it).
 160

The principal objectives sought to be achieved through the MRTP Act are:

i) prevention of concentration of economic power to the common detriment;

ii) control of monopolies;
iii) prohibition of Monopolistic Trade Practices (MTP);
iv) prohibition of Restrictive Trade Practices (RTP);
v) prohibition of Unfair Trade Practices (UTP).

4.1 Incorporated after 1980

With the return of the Indira Gandhi government in 1980, the industrial policy of 1980 was passed
on 23 July which aimed at restoring faith in the public sector. It mainly focused on the promoting
competition in the domestic market and the efficient working of public enterprises. But it could
not bring out the Indian economy which got stuck in a vicious circle of low productivity and poor
growth. Jagdish Bhagwati summarized India’s economy failure as:
“I would divide them into three major groups: extensive bureaucratic controls over
production, investment and trade; inward-looking trade and foreign investment
policies; and conventional confines of public utilities and infrastructure. The
former two adversely affected the private sector’s efficiency. The last, with the
inefficient functioning of public sector enterprises, impaired additionally the public
sector enterprises’ contribution to the economy. Together, the three sets of policy
decisions broadly set strict limits to what India could get out of its investment.”13

Certain steps were taken by the Rajiv Gandhi government (1984-1989) to deregulate the industrial
licensing. Through the Industrial Policy Announcemnt, 1985 restrictions on business houses to
Appendix I industries were removed so long as they entered specified industrially backward areas.
Secondly, the minimum asset limit defining industrial houses was raised from Rs.200 Million to
Rs. 1 Billion. Though Rajiv Gandhi never came up with an official industrial policy relating to the
growth of private enterprises. Nevertheless, he paved the initial path of liberalization for lessening
the burden on the government and in order to provide a fair chance to the private enterprises but
deeply stressed the importance of socialist pattern of society and the key role of the public

13
Jagdish Bhagwati (1992) Pg 13.
 161

enterprises. While delivering a speech in the Lok Sabha he declared public sector to be, “key to
our development and a pathfinder to take the country to the 21st century.”14

After his assassination in the year 1989, the veteran Congress leader PV Narasimha Rao became
the Prime Minister of India and it was during his term that India witnessed a drastic change in the
economic policies. “Depleted official reserves, large deficits in balance of payments, and sharp
decline in GDP growth which was reflected in similar declines in almost all sectors of the economy
demanded urgent attention.”15

Thus to bring out the country from economic difficulty and to speed up the development, Dr.
Manmohan Singh, finance minister in the Narsimha Rao Government took the charge . In an
interview to PBS (2001), Singh said:
“I said to him (P V Narsimha Rao) it is possible that we will still collapse, but there
is a chance that if we take bold measures we may turn around, and that, I said, is
an opportunity. We must convert this crisis into an opportunity to build a new India,
to do things which many people before us have thought and said should be done,
but somehow were never done.”

This policy is popularly known as the ‘Liberalisation, Privatisation and Globalisation’. While
presenting these reforms in the parliament budget session, Singh quoted Victor Hugo- “No power
on earth can stop an idea whose time has come”. The policy could be summarized as follows:

(i) Liberalisation- It basically means to emancipate the economy from bureaucratic cobweb
to make it more competitive. Economic liberalism, in the classic rather than the American
sense, refers to policies that reduce government constraints on economic behavior and
thereby promote economic exchange: ‘‘marketization.’’16 Following are its key features-
 To do away with the requisite of having a license for most of the industries.

14
Rajiv Gandhi's speech in Lok Sabha dated December 18th 1985.
15
Sunanda Sen, "State, Society and the Market", in Hashim, Rao, Ranganathan, Murthy (Eds.), Indian
Industrial Development and Globalisation, Academic Foundation, New Delhi, 2009, p. 545.
16
Introduction: the diffusion of liberalization, Beth Simmons, Frank Dobbin, and Geoffrey Garrett, //FS2/CUP/3-
PAGINATION/GDM/2-PROOFS/3B2/9780521878890C01.3D
 162

 Freedom to determine the scale of business activities.

 Removal of restrictions for the movement of goods and services from one place to
another.
 Freedom for fixation of prices for goods and services.
 Simplification of Import-Export Procedure
 Simplifying the path for foreign capital and technology.

(ii) Privatisation- To bring public sector undertaking either partially or wholly under the
private ownership is called privatization. It follows that privatization in principle means
the process of transfer of ownership, sometimes also of permanent or long-term usership,
of a formerly common or public good to individuals and/or groups operating for private
profit, i.e., its passage from public to segregated owner- and/or usership17. Chief features
are-
 Reducing the role of public sector and increasing the role of private sector
 Reducing budgetary burden of the government
 Improving management of enterprises
 Reducing the pressure of government and increase in government treasury
 Increase in competition, following the path of mixed economy.

(iii) Globalization- Globalization refers to the process of integrating the economy of one’s
country with the rest of the world. Jan Aart Scholte states that “globalization stands out for
quite a large public spread across the world as one of the defining terms of late twentieth
century social consciousness.18 Its key features include-
 Free flow of goods and services all over the world.
 Free flow of capital globally.
 Free flow of information and technology in all the countries.
 Free movement of people for jobs, encouraging ‘outsourcing’.

17
http://fsi.stanford.edu/sites/default/files/Privatization.pdf.
“Globalisation and Modernity,” Jan Aart Scholte, Paper presented at the International Studies.
18

Association Convention, San Diego, 15–20 April 1995.

 163

In a major move to liberalize the economy, the new industrial policy abolished all industrial
licensing, irrespective of the level of investment, except for a short list of 18 industries (security
and strategic, social reasons, hazardous chemicals and overriding environmental reasons and items
of elitist consumption. In April 1993, further 3 more industries were delicensed (Motor cars, white
goods, skins and leathers). In the year 1996-1997 6 major industries were delicensed.
(Entertainment and electronic industry, animal fats and oils, tanned or dressed fur skins, chamois
leather, asbestos and asbestos- based products, plywood and other wood and paper and newsprint).
In 1998-99, coal and lignite, petroleum products and sugar were delicensed. Currently only 3
industries are exclusively PSUs. They are – atomic energy, Railway transport and substances
specified in the schedule to the notification of the Government of India in the Department of
Atomic Energy number S. O. 212(E), dated the 15th March, 1995.
The aftermath benefits of these reforms could be summarized into following points-

 Improvement in Performance of the Economy: The economy’s performance in the post

reform era has been quite impressive. The reforms started in year 1991 and if one leaves
out 1991-92, which was exceptionally a bad year, the average annual growth rate between
1992-93 and 1999-2000 was 6.3%.
 Growth in employment opportunities and better salaries: Employment opportunities have
remarkably increased due to coming up of many new Multinational Corporations (MNCs)
as well as Domestic Corporate Companies. Many of the foreign companies are now
outsourcing their jobs to India thereby increasing the job opportunities available in the
country at high salaries.
 Better performance after privatization: Many public sector enterprises got privatized after
1991 and their performances substantially improved, by providing better customer
facilities and higher pay to the employees.
 Remarkable growth in foreign trade and rise in the foreign exchange reserves:
Undoubtedly, tremendous growth after the reforms was witnessed in the external sphere.
After independence, India could not accumulate foreign exchange reserve, however after
the reforms, Indian foreign exchange reserve increased substantially. With globalization,
import/export with foreign countries benefitted our economy.
 164

 Check on inflation due to competition: Prices of the final products are generally pushed up
by the increase in prices of the raw materials. However, globalization and privatization
increase competition and help to hold or even cut down the prices of final products even
when the prices of raw materials go up. This is because competition raises productivity and
thereby helps manufacturers to hold the prices at the same level or even reduce them.
 Increase in foreign direct investment: After the reforms, foreign investors have shown great
enthusiasm in investing in India. India has become a popular choice for foreign
corporations due to availability of cheap raw materials and manpower. Even investment in
domestic private undertakings has increased by leaps and bounds.

And not just economically, these reforms have brought a sea change in the lifestyle and living
standards of the people of India. However, with rise in competition, business giants used to enter
into anti-competitive agreements such as cartels, abuse of dominance, tying agreements, predatory
pricing, etc. To maintain a healthy competition in the market, need was felt for a competition
watchdog and for enforcing competition law.
On 27 February, 1999, Yashwant Sinha, Finance minister, made the following announcement in
his budget speech:
“The Monopolies and Restrictive Trade Practices Act has become obsolete in
certain areas in the light of international economic developments relating to
competition laws. We need to shift our focus from curbing monopolies to promoting
competition. Government has decided to appoint a Committee to examine this
range of issues and propose a modern Competition Law suitable for our
condition.”
And thus Competition Act of 2002 was passed as the MRTP Act was beyond repair and could not
serve the purpose of the new competitive era. The act has been discussed in detail in the next
section.

4.1.1 Competition Act, 2002

In October, 1999, the Government of India appointed a High Level Committee on Competition
Policy and Competition Law to advise a modern competition law for the country in line with
international developments and to suggest a legislative framework which may entail a new law or
 165

appropriate amendments to the MRTP Act. After some refinements, following extensive
consultations and discussions with all interested parties, the Parliament passed in December 2002
the new law, namely, the Competition Act, 2002. There are three areas of enforcement that provide
the focus for most competition laws in the world today. 19

 Agreements among enterprises

 Abuse of dominance
 Mergers or, more generally, combinations among enterprises

The rubric of the new law, Competition Act, 2002 (Act, for brief) has essentially four
compartments:

 Anti - Competition Agreements

 Abuse of Dominance
 Combinations Regulation
 Competition Advocacy

The Act posits the factors that would have to be considered by the adjudicating Authority in
determining the “Relevant Product Market” and the “Relevant Geographic Market”, reproduced
herein below:

RELEVANT PRODUCT MARKET

 physical characteristics or end-use of goods;

 price of goods or service;
 consumer preferences;
 exclusion of in-house production;
 existence of specialised producers;
 classification of industrial products

19
Although it does not directly form a part of competition law, legislation regarding various Regulatory Authorities
falls under the larger ambit of competition policy.
 166

RELEVANT GEOGRAPHIC MARKET

 regulatory trade barriers;

 local specification requirements;
 national procurement policies;
 adequate distribution facilities;
 transport costs;
 language;
 consumer preferences;
 need for secure or regular supplies or rapid after-sales services
The determination of ‘relevant market’ by the adjudicating Authority has to be done, having due
regard to the ‘relevant product market’ and the ‘relevant geographic market’.

5.1 Conclusion

In this paper the authors have analyzed the journey of India’s industrial licensing policy, from its
beginning before independence, Nehru’s influence, perspective of different governments
regarding the same and finally the post reforms era. From industrial policy 1948 till competition
act, 2002, India has come a long way. Today India is the second largest developing economy in
the world after China and even a longer road awaits India to achieve the target of becoming a
developed nation. The Indian economy has the potential to become the world's 3rd-largest
Economy by next decade and one of the largest economies by mid-century.20 The Industry sector
has held a constant share of its economic contribution (26% of GDP in 2013-14).21

India lacks in taking up daring economic reforms or risks. Only when other countries have
successfully adopted a model, India follows the lead. Montek Singh Ahluwalia wrote:

“India was a latecomer to economic reforms, embarking on the process in earnest

only in 1991, in the wake of an exceptionally severe balance of payments crisis.
The need for a policy shift had become evident much earlier, as many countries in

20
[ https://www.linkedin.com/pulse/20141021025537-47732347-india-world-s-largest-economy-by-2050-citi-report
The Linkedin].
21
Share of different sector in Indian GDP.
 167

East Asia achieved high growth and poverty reduction through policies which
emphasized greater export orientation and encouragement of the private sector.
India took some steps in this direction in the 1980s, but it was not until 1991 that
the government signaled a systemic shift to a more open economy with greater
reliance upon market forces, a larger role for the private sector including foreign
investment, and a restructuring of the role of government.”

Also our economic policymakers are mostly politicians from non-economic backgrounds and lack
expertise. India needs more experienced people for formulating efficient policy measures.

_____________________
About iJustice
iJustice, a public interest legal advocacy initiative of the Centre for Civil Society (CCS), was
started in the year 2013. It aims at advancing laws promoting personal, social and economic
liberties, and at the same time imposing limits on the powers exercised by the State, through
strategic litigation and legal advocacy.

Vision:

iJustice envisions an India where every individual can enjoy the right to life, liberty and property.

Mission:

To advance the rule of law based on individual freedom and economic liberty through litigation
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Core focus areas:

1. Right to Education: iJustice advocates for an education market where all can avail
education of their choice.
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iJustice is focusing on effective implementation of the Street Vendors (Protection of
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About Centre for Civil Society

Centre for Civil Society advances social change through public policy. Our work in education,
livelihood, and policy training promotes choice and accountability across private and public
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University of Pennsylvania.

CCS envisions a world where each individual leads a life of choice in personal, economic and
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Currently, our focus is on reshaping the school education policy landscape—shifting the focus to
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