New Delhi: The Supreme Court Tuesday ruled that not all private properties can be considered “material resources of the community” under Article 39(b) of the Constitution and taken over by the State in the interests of the “common good”. In the nine-judge ruling in Property Owners Association vs State of Maharashtra, one of the main questions for the court’s consideration was whether the phrase “material resources of the community” in Article 39(b) could be interpreted to include privately owned resources.
However, the question of interpreting Article 39(b) in the present case first arose from the minority opinion given by Justice Krishna Iyer in State of Karnataka vs. Shri Ranganatha Reddy in 1977, where a seven-judge bench of the apex court was deciding on the constitutional validity of the Karnataka Contract Carriages (Acquisition) Act, 1976. The court had come to the conclusion that this question was inextricably linked to Article 39(b) of the Constitution.
In a 4:3 majority, the Supreme Court held in October 1977 that private resources fell outside the purview of “material resources of the community”. Justice Krishna Iyer, however, had dissented and authored the minority opinion in the case to say that both private and public resources are part of the “material resources of a community” under Article 39(b). He had reasoned that “to exclude ownership of private resources from its coils” would undermine the “purpose of redistribution in a socialist way”.
Subsequently, Justice Iyer’s opinion was cited again in key decisions of the top court in different five-judge bench rulings, such as Sanjeev Coke Manufacturing Company vs Bharat Coking Coal Limited (1982) and Maharao Sahib Shri Bhim Singhji vs Union of India (1985).
Key citations of Justice Iyer’s opinion
In the Sanjeev Coke case, a challenge was brought to various laws, including the Coking Coal Mines (Emergency Provisions) Act, 1971, which vested the management of coking coal mines and coke oven plants with the State, the Coking Coal Mines (Nationalisation) Act, 1972, which resulted in nationalisation of certain coking coal mines, the Coal Mines (Taking Over of Management) Act, 1973, and finally, the Coal Mines (Nationalisation) Act, 1973, which together resulted in nationalisation of all coal mines, irrespective of whether they were coking coal mines or not.
The petitioners had argued that the State had discriminated between certain coke oven plants and theirs. In response, the Centre had contended that these legislations were immunised against challenge as they were protected by Article 31-C, which shields laws that give effect or force to certain Directive Principles of State Policy, like the ones related to redistribution of material resources and prevention of concentration of wealth.
Finally, on 10 December, 1982, a constitution bench of the top court relied on the minority opinion authored by Justice Krishna Iyer in State of Karnataka vs Ranganatha Reddy to uphold the validity of the Coking Coal Mines (Nationalisation) Act, 1972.
“A Directive to the State with a deliberate design to dismantle feudal and capitalist citadels of property must be interpreted in that spirit and hostility,” the court had said, citing the minority opinion, according to which everything of value or use in the material world is a material resource, and since the individual is a member of the community, his resources are also part of it.
“To exclude ownership of private resources from the coils of Article 39(b) is to cipherise its very purpose of redistribution the socialist way,” the court had said, citing Justice Iyer.
On the other hand, in the Bhim Singh case, a five-judge bench of the Supreme Court had upheld the Urban Land (Ceiling and Regulation) Act, 1976, saying that it gave effect to the Directive Principles in clauses (b) and (c) of Article 39 of the Constitution. The 1976 Act was challenged on the grounds that it sought to inhibit the concentration in ownership of urban land and did not further the mandate of Article 39(b).
In this case, Justice Iyer, concurring with (then) Chief Justice Y.V. Chandrachud and Justice Bhagwati in the majority ruling, said, “The purpose of the enactment, garnered from the preamble, is to set a ceiling on vacant urban land, to take over the excess and to distribute it on a certain basis of priority.” The bench also added that the presence of Article 39(b) created an emphasis on the “common good” being the guiding factor for such distribution.
The present case before the court
It was in this backdrop, along with the housing problem in Mumbai—one of the most densely populated cities in the world, suffering from the persistent problem of several old, dilapidated and unsafe buildings being inhabited without proper repair—that certain property owners moved the Bombay High Court in 1991, challenging Chapter 8 of the Maharashtra Housing and Area Development Act (MHADA), 1976, which allowed for the acquisition of properties by the State for preservation purposes, citing Article 39(b).
However, their plea was dismissed by a division or two-judge bench of the high court on 13 December, 1991, causing them to challenge this decision before the Supreme Court the very next year.
In its order, the court noted that although every year before monsoon, the Mumbai Building Repairs and Reconstruction Board issued a list of dangerous buildings unfit for human inhabitation and eviction notices to people living there so they could vacate them, despite which the city was still grappling with a lack of safe and secure housing for its residents.As the scarcity of housing accommodation became more acute over the decades, along with an unprecedented increase in rents, rent control laws were introduced, the court noted, while pointing to the example of the Bombay Repairs and Reconstruction Board Act, 1969, which set up a board for generating cess for reconstruction and repairs of “dangerous buildings”.
When this law was also found inadequate due to the sheer scale of the problem and the lack of financial resources, another law—Maharashtra Housing and Area Development Act (MHADA), 1976—was enacted, which aimed to unify, consolidate and amend the laws related to housing, repairing and reconstructing dangerous buildings, and for carrying out improvement in slum areas. This Act repealed all other earlier laws, like the 1948 Bombay Housing Board Act and the 1969 Act.
However, on February 26, 1986, a new chapter (VIIIA) was inserted in the Act to allow for acquisition of properties by the State for preservation purposes through an ordinance, but such takeovers were subject to the State paying a hundred times the monthly rent of a property, if 70 percent of the building’s occupants made an application for the same.
The new chapter also declared that amendments in the housing law were to give effect to Article 39(b), which allows the State to make policies for controlling, owning and redistributing a community’s material resources for the public good.
Consequently, this new addition to the law had caused the property owners in Mumbai to move the high court in 1991 to challenge this provision on the grounds that it violated their right to equality and suffered from arbitrariness.
Meanwhile, the Maharashtra government contended that run-down buildings could be taken over by the State and redistributed, with the aid of Article 39(b).
From the Bombay High Court, where their plea was initially dismissed in December 1991, the case made its way to the Supreme Court’s three-judge bench, which ruled in 1996 that since the decisions in Sanjeev Coke and other cases were all delivered by a bench of five judges, it would be appropriate to refer the matter to a larger five-judge bench.
In 2001, the court again said that the interpretation of Article 39(b) required reconsideration and referred the case to another larger bench.
Subsequently, the case came before a seven-judge bench, which, in 2002, remarked 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 by a seven-judge bench that gave rise to the present reference before the nine-judge bench.
In Tuesday’s ruling, the court said that interpretation of Article 39(b) adopted in these judgments is rooted in a particular economic ideology and the belief that an economic structure, which prioritises the acquisition of private property by the State, is beneficial for the nation. “Not every resource owned by an individual can be considered a ‘material resource of the community’ because it meets the qualifier of ‘material needs’, ” the court ruled in its majority opinion.
(Edited by Mannat Chugh)