Govt can't take over all private properties for 'common good': SC

The ruling may impact policies aimed at wealth distribution

Not every resource owned by a person can be considered a “material resource of community” to be used for “common good”, the Supreme Court ruled on Tuesday.

 

The judgment, therefore, ensures that policies aimed at wealth distribution must be carefully crafted to avoid sweeping or indiscriminate appropriations of private assets without a clear benefit to the community.

 

In a majority judgment by a nine-judge Bench, the court stated that private properties are not part of “the material resources of the community” which the State is obliged to equitably redistribute as per the Directive Principles of State Policy under Article 39(b) of the Constitution. “The interpretation of Article 39(b), both as a precursor to the protection of Article 31C and as an aspirational Directive Principle, cannot run counter to the constitutional recognition of private property. To hold that all private property is covered by the phrase ‘material resources of the community’ and that the ultimate aim is state control of private resources would be incompatible with the constitutional protection detailed above,” it said.

 

 

Article 31C protects laws enacted to ensure the “material resources of the community” are distributed for common good. It was inserted by the 25th Amendment Act of 1971.

 

Chief Justice D Y Chandrachud and Justices Hrishikesh Roy, J B Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma, and Augustine George Masih gave the Bench’s majority opinion. However, Justice B V Nagarathna partially concurred, and Justice Sudhanshu Dhulia dissented.

 

This judgment diverges from the stance taken in the State of Karnataka vs Ranganatha Reddy (1978) case, where Justice Krishna Iyer (in the minority view) had expressed that private properties could be regarded as community resources. The judgment in Sanjeev Coke Manufacturing Company vs Bharat Coking Coal Ltd and another -- which agreed with Justice Iyer’s view -- was held to be erroneous.

 

“The direct question referred to this Bench is whether the phrase ‘material resources of the community’ used in Article 39(b) includes privately owned resources. Theoretically, the answer is yes -- the phrase may include privately owned resources. However, this court is unable to subscribe to the expansive view adopted in the minority judgment authored by Justice Krishna Iyer in Ranganatha Reddy and subsequently relied on by this court in Sanjeev Coke. 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’,” stated the judgment written by CJI Chandrachud.

 

The apex court held some private properties may come under Article 39(b) provided they are material and belong to the community. Article 39(b) says 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.

 

The court had earlier remarked that holding every private resource of an individual as part of the material resource of the community will be far-fetched and this will scare away investors. It reserved its verdict on May 1.

 

One critical question before the court was whether the government has the authority to acquire and redistribute privately-owned properties if they are demeed “material resources of the community” under Article 39(b) of the Constitution. Article 39(b) comes under Directive Principles of State Policy which are guiding principles for the enactment of laws, but are not directly enforceable in any court of law.

 

Since the 44th Constitution Amendment in 1978, the right to property is no longer a fundamental right, but it continues to be a constitutional right.

 

Article 300A of the Constitution of India says “no person shall be deprived of his property save by authority of law”.

 

In August 2020, a Bench led by now former Supreme Court judges Justices Indu Malhotra and Indira Banerjee had ruled that while property is no longer a fundamental right, it remains protected as a constitutional right under Article 300A and is considered a human right.

 

Unlike fundamental rights, which are granted to everyone without any discrimination, constitutional rights are not granted to everyone.

 

Legal experts anticipate that this Supreme Court judgment will impact both private and government sectors. Gauhar Mirza, a partner at Cyril Amarchand Mangaldas, commented that “the ruling could influence future government policies on wealth distribution and social welfare by limiting how broadly the state can define ‘community resources.’ The private sector, which is a major stakeholder, may benefit from this clarification as it means there won’t be an automatic application of welfare strategies.”

 

Tushar Kumar, advocate at the Supreme Court of India, echoed this view, adding, “Property owners can now expect a stronger legal framework to challenge unjust government actions, reinforcing their property rights. For state authorities, the judgment necessitates a more rigorous evaluation of community impact and resource scarcity before intervening in private ownership, thereby promoting greater accountability and aligning actions with the public good.”

 

'Harsh': Justices Nagarathna and Dhulia on CJI's remarks against Justice Iyer

 

In the State of Karnataka v Shri Ranganatha Reddy case in 1977, a seven-judge Bench, by a 4:3 majority, held that privately-owned resources did not fall within the ambit of “material resources of the community”. Justice Krishna Iyer had dissented from the majority and the court had in 1983 endorsed Justice Iyer's view. In 2024, the Supreme Court disagreed with Justice Iyer's view.

 

Justices Nagarathna and Dhulia on Tuesday expressed strong objections to the remarks made by CJI Chandrachud on Justice Iyer’s doctrine. “...this court must not tread into the domain of economic policy, or endorse a particular economic ideology while undertaking constitutional interpretation. To hold that the term “distribution” cannot encompass the vesting of a private resource would amount to falling into the same error as the Justice Krishna Iyer doctrine, i.e. to lay down a preference of economic and social policy,” Justice Chandrachud’s majority judgment said.

 

Justice Nagarathna said: “Regardless, on a conspectus understanding of all contributing factors such as the discussions in Constituent Assembly and the tide of the times that found in the broad house of economic democracy a legitimate State policy, can we castigate former judges and allege them with ‘disservice’ only for reaching a particular interpretive outcome?”

 

Meanwhile, Justice Dhulia said that the criticism was “harsh”, which “could have been avoided”. “Before I conclude, I must also record here my strong disapproval of the remarks made on the Krishna Iyer Doctrine as it is called. This criticism is harsh, and could have been avoided,” he said.

 

While reading his majority opinion, the CJI  highlighted India’s shifting economic priorities, contrasting the earlier focus on a mixed economy and state-controlled policies in the 1950s and 60s with the liberalisation and market-based reforms of the 1990s.  “Today, the Indian economy has transitioned from the dominance of public investment to the coexistence of public and private investment. The doctrinal error in the Krishna Iyer approach was postulating a rigid economic theory, which advocates for greater state control over private resources as the exclusive basis for constitutional governance. India’s economic trajectory indicates that the constitution and the custodians of the constitution, the electorate, have routinely rejected one economic dogma as being the exclusive repository of truth.”

 

The court further said: “The foresight vision of our framers to establish an economic democracy and trust the wisdom of the elected government has been the backbone of the high growth rate of India’s economy, making it one of the fastest growing economies in the world.” It said that “to scuttle this constitutional vision by imposing 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 our constitutional framework.”

 

(With inputs from Archis Mohan) 

What the court said

 

The interpretation of Article 39(b), both as a precursor to the protection of Article 31C and as an aspirational Directive Principle, cannot run counter to the constitutional recognition of private property. To hold that all private property is covered by the phrase 'material resources of the community' and that the ultimate aim is state control of private resources would be incompatible with the constitutional protection detailed above,” it said.

 

Article 39(b)

 

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

 

Article 31C

 

It protects laws enacted to ensure the material resources of the community are distributed for common good. It was inserted by the 25th Amendment Act of 1971