The Supreme Court on Thursday ruled that auction process cannot be the only method for allocated natural resources.

A division bench was giving its advisory opinion on the presidential reference moved by the Centre on whether all natural resources be auctioned in line with its 2G spectrum judgement or the directive be confined to spectrum alone.

The five-judge constitution bench headed by Chief Justice S.H. Kapadia and comprising of Justices D.K. Jain, J.S. Khehar, Dipak Misra and Ranjan Gogoi held that that the policy of auction has not got constitutional mandate.

Further, the ruling said profit maximisation cannot be only basis for allocating natural resources.

The bench clarified the auction process for 2G spectrum has no bearing on other natural resources.

The apex court made it clear that the 2G verdict was confined to allocation of spectrum and has not laid down any rule for other resources.

The division bench ruled that the allocation of natural resources is a policy decision which should be backed by social and welfare measures.

Further, the ruling said it cannot prescribe or proscribe method of allocation of natural resources but can undertake judicial scrutiny on case to case basis.

The government had on April 12 moved the reference signed by the then President Pratibha Patil in which eight questions have been raised including whether there could be judicial interference in policy matters, vis-a-vis disposal of natural resources and investments made by foreign investors under multi and bilateral agreements.

"Whether the judgement lays down that the permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auction," the Reference has stated.

"Whether the court holds that within the permissible scope of judicial review that the policy is flawed, is the court not obliged to take into account investment made under the said policy including the investment made by foreign investors under the multi and bilateral agreements," it said.

It sought the court's opinion on "whether the judgement is required to be given retrospective effect so as to unsettle the licences issued for 2G spectrum and allocated after 1994 till 2008."

The reference also touched upon the 3G spectrum allocated through 'auction' and wanted to know the implications of the judgement on it.

"Whether 3G spectrum acquired through the auction in 2010 by entities whose (2G) licences have been quashed in the judgement stands withdrawn," it asked.

A meeting of the Union cabinet, chaired by Prime Minister Manmohan Singh, had on April 10 cleared the telecom ministry's proposal to seek the Supreme Court's opinion on various issues arising out of the February 2 judgement.

The two-judge bench, in its verdict, had also observed that auction was best suited route for allocating natural resources like telecom spectrum because the policy of first-come-first-serve was flawed.

The bench had on May 11 issued notices to the state governments and industrial chambers FICCI and CII and sought their responses on behalf of the private industries.

The court had also issued notices to the NGO, Centre for Public Interest Litigation (CPIL) and Janata Party president Subramanian Swamy on whose petitions a bench comprising justices G.S. Singhvi and A.K. Ganguly (since retired) had delivered a judgement on February 2, cancelling all 122 telecom licences by holding that the first-come-first-served policy was illegal and unconstitutional.

The bench headed by Justice Singhvi had held that all natural resources should be allocated through auction.