Amid an era of privatisations and government policy orientation toward encouragement to private business sector and FDI, the Supreme Court of India through its recent judgment on the definition of “material resources” has realigned judiciary’s approach toward laws impacting private property.
With its declaration that not all private properties can be designated as “material resources” as mentioned in Article 39(b) of the Constitution, the top court’s judgment in the Property Owners Association vs State of Maharashtra has loosened the protective shield and enables challenge to laws that let the state stake its claim over private properties to subserve “common good.”
Article 39(b) states that “the government should ensure that the ownership and control of the community’s material resources are distributed to serve the common good.” It is part of the Directive Principles of State Policy (DPSP) that are not justiciable, but serve as a guiding tool to the government to frame its policies.
Last week’s judgment overrules a more than four-decade-old Supreme Court decision that was the law till now on “material resources.” Going by this 42-year-old verdict in the Sanjeev Coke case, all private properties constituted “material resources.”
The new interpretation that not all private resources will be counted as “material resources” came upon a reference made to the larger bench after doubts were raised on the Sanjeev Coke judgment for embracing a minority view in the State of Karnataka vs Ranganatha Reddy case of 1977. Authored on behalf of two judges and himself, Justice Krishna Iyer in the Ranganatha Reddy verdict opined that all private properties, irrespective of their nature, would fall within the ambit of “material resources.”
‘Material resources’
The SC bench raised apprehension over the correctness of the decision in Sanjeev Coke when the property owners’ association from Mumbai challenged the amendment made to Chapter VIII-A of the Maharashtra Housing and Area Development Act, 1976 (MHADA). This modification empowered the state to acquire old and dilapidated buildings and transfer ownership and control of them to tenants. The state took shelter of Article 39(b) and the Sanjeev Coke judgment to assert that MHADA was insulated from any legal challenge in terms of Article 31C that gave protection to all statutes intending to further the objectives of Article 39(b).
But the bench wondered if it was legally permissible for a five-judge bench in Sanjeev Coke to follow Justice Iyer’s expansive definition of “material resources,” especially since the majority had expressed its reservation on the judge’s view rooted in Marxist philosophy.
According to Justice Iyer’s opinion, “material resources” in Article 39(b) denoted all private properties, meaning thereby, the state could by law acquire and distribute all such belongings of citizens “so as to subserve the common good.” And such a law would be protected by virtue of Article 31C. Incidentally, the majority never examined the phrase “material resources,” and had, therefore, refrained from commenting on it.
Apart from setting aside Sanjeev Coke’s ruling, the nine-judge bench last week also cleared the air on Article 31C’s status. Introduced in 1971 through the 25th Constitutional Amendment, Article 31C declared that laws advancing DPSPs in Articles 39(b) & (c) cannot be declared void for being inconsistent to Articles 14 and 19. Its second part insulated such laws from being challenged in court on the ground that they did not “give effect” to the two DPSPs.
In 1973, a 13-judge Constitution Bench struck down the second part in the Kesavananda Bharati vs the State of Kerala judgment. Three years later, the 42nd Amendment Act substituted the words of Article 31C and extended its scope to all DPSPs and not just Article 39. Four years later, the Minerva Mills vs Union of India judgment struck down the amendment as unconstitutional.
The Property Owners Association from Mumbai had argued that since Article 31C ceased to exist, in the backdrop of the Minerva Mills decision, their challenge to the property law on the ground that it violated their fundamental rights under Articles 14 & 19 was legally valid.
The recent SC judgment holds that the Minerva Mills decision had the effect of reviving Article 31C, as it upheld the provision’s existence in a narrow form that was delineated in the Kesavananda Bharati judgment.
Since all nine judges were unanimous with respect to Article 31C, the provision would continue to provide a protective shield to distributive laws. However, they can be examined on the basis of the benchmark set by the court while giving a restrictive interpretation to the phrase “material resources.”
Giving a fresh look to the ambit of the expression “material resources of the community” (MROC), the court said that it “may include” privately owned resources, but not every resource owned by an individual.
In the process, the majority judgment, rendered by former Chief Justice of India DY Chandrachud, referred to BR Ambedkar’s speeches in the Constituent Assembly where he said that “economic democracy could be established in various ways” and that the Constitution does not subscribe to any particular economic and political thought. This was to counter references by Justice Iyer in the Ranganatha Reddy case to Karl Marx and Fabian Socialism.
It was for people to elect their government and choose the ways and means to attain economic democracy. Hence, courts should not construe constitutional provisions with a particular political ideology or economic thought in mind. With this perspective, the CJI, speaking for six other bench members, held that while some private resources may be covered, equally some may not be.
He also stressed the qualifying expression “of the community” in Article 39(b). So, before a private property is held to be covered as a “material resource” it must satisfy certain criteria which enables it to be considered as an MROC. A list of non-exhaustive factors, which could be deployed to determine if a particular private property was a MROC, have been underlined in the judgment.
Illustratively, resources such as private ownership of forests, ponds, fragile areas, wetlands, resource bearing lands, spectrum, airwaves, natural gas, mines and minerals as a community have vital interest in retention of their character as a MROC.
Also read: History of private property rights show SC judgments are based on cultural, economic context
Care and caution
While Justice BV Nagarathna concurred with her six brother judges on the definition of material resources, she, in a strongly-worded opinion, condemned their criticism against Justice Iyer for holding a particular ideology. The ninth judge and sole dissenter, Justice Sudhanshu Dhulia, went by Justice Iyer’s socialist philosophy and sided with Justice Nagarathna to express his reservations over the critical observations on the former judge.
The momentous judgment opens up the doors for private resource owners affected by legislations to raise the issue whether their resource is an MROC within the meaning of the expression in Article 39(b). Such owners would gain in case a legal challenge to laws is raised.
They no longer can be contained on the ground that such laws are exempted from judicial scrutiny owing to the protection guaranteed to them in terms of Article 31C. The judgment overcomes these restrictions in Article 31C as well as the ouster of legislations, intending to acquire private properties, from judicial intervention.
However, the opening is small and we are now in an era of privatisations and market driven economy, so we may not expect much litigation. It is pending litigation where the issues would be fought by parties.
The judgment is important also for the sparks generated on the issue of judicial discipline. The former CJI’s opinion strongly criticised the Constitution Bench judgment in Sanjeev Coke for following the three-judge minority opinion penned by Justice Iyer.
Justices Nagarathna and Sudhanshu Dhulia expressed strongly about this castigation, saying it should have been avoided and there is no violation of judicial discipline.
The judges in the Sanjeev Coke case were entitled to be persuaded by Justice Iyer’s views. Their view may be wrong, as now found by majority, but certainly not a breach of judicial discipline. Dissent is right in saying the castigation should have been avoided.
This judgment is also a signal to the state to bestow care and caution while invoking Article 31C with respect to a particular private resource. The invocation should not be arbitrary and mechanical. Vital fundamental rights which are basic features of the Constitution are shut out by Article 31C. Hence, its invocation should involve an exercise to determine the character of the resource and whether it is a MROC.
“Of the Community” is a crucial factor which was overlooked by the previous judgments. Surely no government is going to take away the “personal effects” or the “articles of needs” of individuals.
It is the means of production or productive resources of “private players” or “private persons”, including corporations, which have been the subject of nationalisation and acquisition. And, it is these sectors that would look at this judgment carefully to see what they benefit from it.
A question the Supreme Court did not answer was whether today’s corporations, being juristic persons, functioning on the basis of borrowed depositors’ money from financial institutions and banks and producing for the people at large, both within and without, would necessarily be an MROC.
Rakesh Dwivedi is a Senior Advocate of the Supreme Court. Views are personal.
(Edited by Aamaan Alam Khan)
All wealth of communist and socialist comrades must be taken by the state and used for charity.