New Delhi: Saying that the court’s role is not to lay down an economic policy but to facilitate the Constitution framers’ intent in laying down the foundation for an “economic democracy”, the Supreme Court Tuesday ruled that all private properties cannot be considered “material resources of the community” under Article 39(b) of the Constitution and, consequently, the state cannot take them over in the interests of the “common good”.
Notably, the nine-judge bench ruling marks a significant shift in the court’s approach towards economic policies and elucidates the law for potential government takeovers of private land.
Article 39(b)—a part of the Directive Principles of State Policy—states, “The state shall, in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.” Simply put, the provision places an onus on the state to create a policy towards securing control and ownership of the material resources of a community for redistributing them for the common good.
The court held that private property could fall under Article 39(b)’s ambit if it is a “material resource of the community”. To ascertain whether something qualifies as a “material resource of the community”, its nature, characteristics, and impact on community well-being and scarcity should be kept in mind.
The court also highlighted that different forms of private property have a bearing on community well-being and ecology—such as privately owned forests, large ponds, fragile areas and wetlands. It added that other resources, such as natural gas, airwaves, minerals, and mines—which are scarce and finite—could sometimes be in private control. “Such properties, by their nature, would be included in the phrase, ‘material resources of the community’,” it said.
Citing the words of Dr B.R. Ambedkar, who played a critical role in the Constituent Assembly, which drafted the Indian Constitution, the court said that the intention behind placing the directive principles in the Constitution was not for them to be rigid but for them to change with the circumstances and times.
“In my judgment, the directive principles have a great value, for they lay down that our ideal is economic democracy,” Ambedkar had said during the constituent assembly debates. However, the court pointed out his view of an “economic democracy” was not tied to an economic structure, such as socialism or capitalism, but to instead to the aspiration for a “welfare state”.
In the present case, a nine-judge bench delivered three separate opinions through a 429-page ruling. While soon-to-retire Chief Justice of India D.Y. Chandrachud authored the majority opinion, which six other judges on the bench endorsed, Justice Sudhanshu Dhulia was the sole dissenter. He endorsed Justice Krishna Iyer’s minority view in a seven-judge bench ruling in the 1977 Ranganatha Reddy case—which said the phrase, “material resources of the community”, in Article 39(b) included privately-owned resources.
Apart from this, Justice B.V. Nagarathna, the only female judge on the panel, disagreed with the interpretation of Article 39(b). She authored a second but concurring opinion while saying that not every resource owned by an individual can be considered a “material resource of the community” merely because it meets the qualifier of “material needs”.
The court considered two main questions in the Property Owners’ Association vs. the state of Maharashtra. The first was whether it could interpret the Article 39(b) phrase—”material resources of the community”—to include privately owned resources.
The second was if Article 31C, as upheld in the landmark Kesavananda Bharati case (1973), could remain a part of the Constitution. In its present form, Article 31C aims to protect laws that give effect or force to certain directive principles of state policy—such as the ones relating to redistribution of material resources and prevention of concentration of wealth.
Interpreting ‘material resources’
In the seven-judge bench ruling in the state of Karnataka vs. Ranganatha Reddy case, the court while deciding on the constitutional validity of the Karnataka Contract Carriages (Acquisition) Act, 1976, said that the question of ‘material resources’ was inextricably linked to Article 39(b).
In a 4:3 majority, the Supreme Court, on 11 October, 1977, ruled that private resources fell outside the purview of “material resources of the community”. However, Justice Krishna Iyer dissented, saying that both private and public resources form part of the “material resources of a community” under Article 39(b). In his minority opinion, Justice Iyer said that excluding ownership of private resources would undermine the very purpose of redistribution.
Justice Iyer further said that “material resources” included “all the national wealth”, not just public possessions. “Everything of value or use in the material world is a material resource, and the individual being a member of the community, his resources are part of those of the community,” he said.
Subsequently, this minority opinion by Justice Iyer assumed significance in subsequent decisions by five-judge benches in the Sanjeev Coke Manufacturing Company vs. Bharat Coking Coal (1982) case and the Bhim Singhji vs. Union of India (1985) case.
Thus, one of the factors for consideration in the present case was the need to reconsider the interpretation of Article 39(b) in the (1977).
The majority of the bench held that “material resources” included some, not all, private properties and that a particular economic and socialist ideology of the past had motivated Justice Iyer’s opinion. It also pointed out the “error” in Justice Iyer casting the net wide by holding that the phrase covered all resources that met material needs.
Saying that such an interpretation ignored considerations, such as whether such resources were “material” and “of the community”, the court said that the words “of the community” must be understood as distinct from the “individual”. If Article 39(b) was meant to include all resources owned by an individual, it would state that “ownership and control of resources is so distributed as best to subserve the common good.”
Moreover, the court held that there was a deliberate framing of Article 39(b) in the “broadest possible terms” to leave enough room for future governments to determine the best way of achieving “economic democracy”.
Departing from the majority’s view, Justice Dhulia, however, upheld Justice Iyer’s view, adding that “There should be no confusion that the expression “material resources of the community” used in Article 39(b) includes privately owned resources.”
Ambedkar’s vision
Saying that the constituent assembly debates reflected Dr Ambedkar’s foresight, the court Tuesday said, the “Constitution was framed in broad terms to allow succeeding governments to experiment with and adopt a structure for economic governance which would subserve the policies for which it owes accountability to the electorate”.
The court said that Dr Ambedkar believed if the Constitution laid down a particular form of economic and social organisation, it would curtail people’s liberty to decide the social organisation they wanted.
Finally, the court said that after Independence, in the 1950s and 1960s, the government focused on planning, a mixed economy, heavy industries, and import substitution policies. Subsequently, in the late 1960s-70s, there was a shift to “socialist” reforms and policies, followed by a shift to a policy of market-based reforms in the liberalisation years of the 1990s.
“Today, the Indian economy has transitioned from the dominance of public investment to the co-existence of public and private investment,” the court said, adding that Justice Iyer’s decision had come in the prevailing economic mood of the past—one of greater state control.
Ushering in a constitutional vision that imposes a single economic theory, “which views the acquisition of private property by the state as the ultimate goal”, would undermine the very fabric and principles of the constitutional framework, the court said.
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On Article 31C
Article 31C was inserted by the 25th constitutional amendment in 1971 and was part of the 42nd constitutional amendment in 1976.
According to Article 31C, no law “giving effect to the policy of the state towards securing all or any” of the directive principles in Article 39(b) and (c) can be declared void simply because it is inconsistent with Article 14 and Article 19, conferring the rights to equality and free speech, respectively.
The second part of Article 31C protects such laws from a challenge. However, in the 1973 Kesavananda Bharati case, a seven-judge SC bench struck down the second part.
Then in 1976, the Parliament passed the 42nd amendment, expanding the ambit of Article 31C to all directive principles as opposed to just the ones in Article 39(b) and (c).
Four years later, a five-judge SC bench struck down this widening of Article 39(c)’s ambit in the landmark Minerva Mills vs. Union of India (1980) ruling.
In the present case, the question before the court was whether Article 31C would remain a part of the Constitution after the 1980 ruling struck down its amended form.
On this aspect, the court ruled that Article 31C remains in force to the extent that the Kesavananda Bharati case upheld it, pointing out that the SC struck down the expansion of Article 31C to all directive principles in the 1980 landmark decision.
Origins of the case
The SC bench delivered its judgment on 5 November, this year, acting on a challenge to the Maharashtra Housing and Area Development Act by property owners following a 1986 amendment.
In 1986, a new chapter was inserted in the Act to allow for the acquisition of properties by the state for preservation purposes. This takeover was subject to the state paying a hundred times the monthly rent of a property if 70% of the building’s occupiers applied to this end.
The new chapter declared that the amendments in the housing law intended to give effect to Article 39(b) of the Constitution, allowing the state to make policies for controlling, owning, and redistributing a community’s material resources for the public good.
This addition led the property owners in Mumbai to move the court to challenge this provision, saying it violated their right to equality and suffered from arbitrariness.
On the other hand, the Maharashtra government contended that the state could take over run-down buildings and redistribute them.
After a two-judge bench of the Bombay HC dismissed the case, it landed before a three-judge SC bench. In 1996, the three-judge bench ruled that since benches of five judges delivered the Minerva Mills and Sanjeev Coke decisions, it was undisputed that Article 31C is in force and that it would be appropriate to refer the matter to a larger five-judge bench.
Then in 2001, a five-judge bench said the interpretation of Article 39(b) required reconsideration.
Subsequently, the case landed before a seven-judge bench, before which, the Centre relied on the majority opinion in the Mafatlal Industries Ltd vs. Union of India case (1993). The seven-judge bench said that “the material resources of the community are not confined to public resources but include all resources, natural and man-made, public, and private owned” and that the court has repeatedly affirmed the same in various decisions.
This led the court to remark in 2002 that there was “some difficulty in sharing the broad view” that material resources owned by the community include privately owned resources. It was this 2002 ruling that led to the present question before the nine-judge bench of the Supreme Court.
(Edited by Madhurita Goswami)
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