Courts have limited scope of judicial review in economic policy matters which is ordinarily in the domain and purview of the Government unless the economic policy decision is patently arbitrary, mala fide and /or violative of law, statute and Constitution of India

Small Scale Industrial Manufacturers Association (Regd.) Vs Union of India& Ors. decided on 23.03.2021 by the Hon’ble Supreme Court

FACTS: The present writ petition was preferred under Article 32 of the Constitution of India by the Small-Scale Industrial Manufactures Association, Haryana for an appropriate writ, direction or order directing the Union of India and others to take effective and remedial measures to redress the financial strain faced by the industrial sector, particularly MSMEs due to the Corona Virus Pandemic. Various other writ petitions pertaining to similar reliefs arising out of economic distress caused by the pandemic was also considered by the Hon’ble Supreme Court as a batch matter.

AUTHORITIES RELIED BY THE UNION OF INDIA: The Union of India while contesting the reliefs as prayed for by the Petitioners, relied on the following judgments:

• Arun Kumar Agrawal v. Union of India [(2013) 7 SCC 1] wherein it was observed that the matters relating to economic issues, have always an element of trial and error and so long as a trial and error is bona fide and with best intentions, such decisions cannot be questioned as arbitrary, capricious or illegal.

• Peerless General Finance and Investment Co. Ltd. v. RBI, [(1992) 2 SCC 343], wherein it was observed by this Court the function of the Court is to see that lawful authority is not abused but not to appropriate to itself the task entrusted to that authority. It is further observed that the Courts are not to interfere with economic policy which is the function of experts. It is not the function of the courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies.

• Railway Officers Association v. Union of India (2003) 4 SCC 289, wherein it was observed that on matters affecting policy and requiring technical expertise the court would leave the matter for decision of those who are qualified to address the issues.

• Dhampur Sugar (Kashipur) Ltd. v. State of Uttaranchal, (2007) 8 SCC 418, wherein it was observed by this Court that it is well established that courts are ill-equipped to deal with the policy matters. It is further observed that in complex social, economic, and commercial matters, decisions have to be taken by governmental authorities keeping in view several factors and it is not possible for courts to consider competing claims and conflicting interests and to conclude which way the balance tilts. It is submitted that it is further observed that the court cannot strike down a policy decision taken by the Government merely because it feels that another policy decision would have been fairer or wiser or more scientific or logical. The court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide.

HELD: The Hon’ble Apex Court considering the submissions of the parties on the issue of whether economic and/or policy decisions taken by the Government in their executive capacity are amenable to the jurisdiction of the Courts, observed and held the following:

• Courts have limited scope of judicial review in economic policy matters

From various decisions of the Hon’ble Supreme Court, the Court observed and held as under:

i) The Court will not debate academic matters or concern itself with intricacies of trade and commerce.

ii) It is neither within the domain of the courts nor the scope of judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor are the courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. Wisdom and advisability of economic policy are ordinarily not amenable to judicial review.

iii) Economic and fiscal regulatory measures are a field where Judges should encroach upon very warily as Judges are not experts in these matters.

It was finally held that the legality of the policy, and not the wisdom or soundness of the policy, can be subject of judicial review

• Courts do not play an advisory role to the Government and economic policy decisions should be left to experts

Relying on the judgment of Peerless General Finance and Investment Co. Ltd., it was observed and held by this Court that the function of the Court is to see that lawful authority is not abused but not to appropriate to itself the task entrusted to that authority. It was further observed that a public body invested with statutory powers must take care not to exceed or abuse its power. It must keep within the limits of the authority committed to it. It must act in good faith and it must act reasonably. Courts are not to interfere with economic policy which is the function of experts. It is not the function of the courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. The function of the court is not to advise in matters relating to financial and economic policies for which bodies like RBI are fully competent. The court can only strike down some or entire directions issued by the RBI in case the court is satisfied that the directions were wholly unreasonable or in violative of any provisions of the Constitution or any statute. It would be hazardous and risky for the courts to tread an unknown path and should leave such task to the expert bodies.

• Economic/ fiscal matters exclusively within the domain of Government and RBI

Relying upon the judgment in P.T.R Exports (Madras) P. Ltd., this Court observed as under:

“In matters of economic policy, it is settled law that the Court gives a large leeway to the executive and the legislature. Government would take diverse factors for formulating the policy in the overall larger interest of the economy of the country. The Court therefore would prefer to allow free play to the Government to evolve fiscal policy in the public interest and to act upon the same.”

Applying the said principles, the Hon’ble Apex Court observed that what is best in the national economy and in what manner and to what extent the financial reliefs/packages be formulated, offered and implemented is ultimately to be decided by the Government and RBI on the aid and advise of the experts. The same is a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review.

• Courts not appellate authority over policy decisions of the Government

The Hon’ble Court enunciated that the courts do not and cannot act as an appellate authority examining the correctness, stability and appropriateness of a policy, nor are the courts advisers to the executives on matters of policy which the executives are entitled to formulate. The Court further went on to observe that in assessing the propriety of the decision of the Government the court cannot interfere even if second view is possible from that of the government.

• Fundamental rights enshrined under Part III of the Constitution of India are not absolute

The Hon’ble Court observed that no right could be absolute in a welfare State. Every article one uses is the contribution of many. Hence, every individual right has to give way to the right of the public at large. Not every fundamental right under Part III of the Constitution is absolute and it is to be within permissible reasonable restriction. This principal equally applies when there is any constraint on the health budget on account of financial stringencies.

• Courts cannot strike down a policy decision merely of the reason that its implementation is not efficacious

The Hon’ble Court observed that it is a cardinal principle that it is not within the legitimate domain of the court to determine whether a particular policy decision can be served better by adopting any policy different from what has been laid down and to strike down as unreasonable merely on the ground that the policy enunciated does not meet with the approval of the court regarding its efficaciousness for implementation of the object and purpose of such policy decision.

• Interference by the Courts only when policy decision is patently arbitrary, mala fide and /or violative of law, statutes and Constitution of India

The Hon’ble Apex Court observed that while it is not normally within the domain of any court to weigh the pros and cons of the policy or to scrutinize it and test the degree of its beneficial or equitable disposition for the purpose of varying, modifying or annulling it, based on howsoever sound and good reasoning, only where it is arbitrary and violative of any Constitutional, statutory or any other provisions of law.

Relying on the judgment and ratio as laid down in Permian Basin Area Rate Cases, 20 L Ed (2d) 312, the Government is entitled to make pragmatic adjustments which may be called for by circumstances. The court cannot strike down a policy decision taken by the State Government merely because it feels that another policy decision would have been fairer or wiser or more scientific or logical. The court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide.

Further, the Hon’ble Court time and again noted while laying down principles and limiting the scope of judicial intervention that the Courts cannot turn a blind eye if the economic/ policy decisions are themselves arbitrary, discriminatory and upon investigation opines that the experts who may have arrived at a conclusion have adopted a process which illegal.

Applying the above principles, the Hon’ble Court finally held that no mandamus could be issued to grant some more reliefs/packages considering the submission on behalf of the petitioners that the relief packages which are offered by the UOI/RBI/Bankers/Lenders are not sufficient and some better and/or more reliefs should be offered is concerned. However, the Apex Court granted the relief by waiving charges of interest on interest/compound interest/penal interest for the period during the moratorium from any of the borrowers and further directed that whatever amount was recovered by way of interest on interest/compound interest/penal interest for the period during the moratorium, the same shall be refunded and was to be adjusted/given credit in the next instalment of the loan account. It was observed that by the Hon’ble Court that there was no justification forthcoming from the Union of India on why penal interest/ interest for loans upto Rs 2 crores have only been waived off for the moratorium period and not for amounts above the said limit.