The
Supreme Court on Tuesday, November 5, ruled that the State cannot take over
private property solely under the pretext of serving the "common
good". The ruling, held by a majority of 8:1, adds that private property
does not qualify as "material resources of the community" as defined
under Article 39(b) of the Indian Constitution.
This
decision, reached by a nine-judge Constitution bench, marks a pivotal moment in
India’s legal landscape on property rights and State powers.
The case was brought forward by the Mumbai-based
Property Owners Association, challenging the constitutionality of Chapter VIIIA
of the Maharashtra Housing and Area Development Act 1976. This chapter allows
the State to acquire private property with compensation set at one hundred
times the monthly rent. The petitions were initially filed in 1992 and referred
to a nine-judge bench in 2002, finally being heard in 2024 after more than two
decades.
In
a 1978 case -- State of Karnataka v. Ranganatha Reddy & Anr. -- two
judgments were delivered. The judgment delivered by Justice Krishna Iyer stated
that material resources of the community covered all resources -- natural and
man-made, publicly and privately owned. The other judgment, delivered by
Justice Untwalia, did not consider it necessary to express any opinion with
regard to Article 39(b).
Later,
The view taken by Justice Iyer was affirmed by a Constitution Bench in the case
of Sanjeev Coke Manufacturing v. Bharat Coking Coal Ltd. (1982). This was also
affirmed by a judgment in the case of Mafatlal Industries Ltd. v. Union of
India.
Article
39(b) of the Indian Constitution directs the State to work towards
redistributing resources to best serve the public interest. However, the
Supreme Court’s recent ruling clarifies that private property cannot be
classified as "material resources of the community" merely because it
may meet a certain social or economic criterion. The majority opinion, led by
Chief Justice of India DY Chandrachud, asserts that taking private assets in
the name of the common good requires a more rigorous justification.
The
Chief Justice stated, “Not every resource owned by an individual can be
considered a material resource of a community only because it meets the
qualifier of material needs.” He further added that determining whether a
resource falls within this category requires evaluating factors such as the
resource's nature, its impact on public welfare, scarcity, and the consequences
of it being privately held.
The
8-1 majority opinion, authored by Chief Justice DY Chandrachud, found that
Justice Krishna Iyer’s 1978 ruling, which suggested that all private properties
could be considered community resources, is “unsustainable.” The majority bench
contended that while certain privately held resources may potentially be
included under Article 39(b), this should be assessed on a case-by-case basis
rather than through a blanket application.
However,
Justice BV Nagarathna partially dissented, while Justice Sudhanshu Dhulia fully
dissented, suggesting that there could be instances where private property
might indeed align with the goals of Article 39(b) if it serves a clear
communal benefit.
The Supreme Court bench acknowledged that India’s
economic outlook has shifted significantly since the 1960s, when earlier legal
philosophies favouring nationalisation were more prevalent. The Supreme Court
noted, "India’s dynamic economic policies over the past three decades have
contributed to the country’s rapid growth, positioning it among the world’s
fastest-growing economies." Consequently, the bench reasoned that a rigid
interpretation of “community resources” could hinder private ownership and
entrepreneurial growth.
Article
31C protects laws formulated under Articles 39(b) and 39(c), allowing the State
to acquire resources essential to the community’s welfare. However, the recent
ruling introduces a nuanced perspective, suggesting that this provision cannot
be used as a justification for the wholesale appropriation of private property
without assessing the community impact.
Article
31C was introduced by the 25th Amendment in 1971. Its purpose was to safeguard
the Directive Principles of State Policy (DPSP) outlined in clauses (b) and (c)
of Article 39, which detail certain policies the State should follow.
The
25th Amendment was opposed in the notable Kesavananda Bharati case. In this
case, a thirteen-judge bench of the Supreme Court ruled that the Constitution
has a basic structure that cannot be changed through amendments.
However,
the 42nd Amendment modified Article 31C during the Emergency. This amendment
prioritised all DPSPs, rather than just those specified in Article 39 (b) and
(c).