Nature of private property | Judgement pronouncement: “Material resource” under Article 39(b) does not include all private property, holds SC

Nature of Private Property

Judges: D.Y. Chandrachud CJI, Hrishikesh Roy J, B.V. Nagarathna J, Sudhanshu Dhulia J, J.B. Pardiwala J, Manoj Misra J, Rajesh Bindal J, S.C. Sharma J, A.G. Masih J

Today, a nine-judge Constitution Bench of the Supreme Court held that not all privately owned property is a “material resource of the community” under Article 39(b) of the Constitution, putting to rest a long-pending case. 

The bench, led by CJI D.Y. Chandrachud also unanimously held that Article 31C remains in the Constitution. Inserted through the 25th Constitutional Amendment, Article 31C protected laws which fulfilled the goal of redistributing material resources to “subserve the common good” from legal challenges on fundamental rights violations.

Background

Article 39(b), a Directive Principles of State Policy, obligates the State to ensure the distribution of “material resources of the community” to “subserve the common good.”

In State of Karnataka v Shri Ranganatha Reddy (1977), five judges of the Supreme Court debated whether privately owned resources fell under the ambit of “material resources of the community.” A minority opinion by Justice Krishna Iyer stated that private property fell in the ambit of Article 39(b).

Five years later, a five-judge bench in Sanjeev Coke Manufacturing Company v Bharat Coking Coal Ltdled by Justice Chinnappa Reddy, adopted Justice Iyer’s minority view. In 1997, a nine-judge bench in Mafatlal Industries Ltd. v Union of India, followed the Sanjeev Coke precedent.

The challenges of the present case arose in 1986, when the Maharashtra government amended the Maharashtra Housing and Area Development Act, 1976 (MHADA) to insert Chapter VIII-A and Section 1A. Chapter VIII-A allowed the Mumbai Building Repair and Reconstruction Board to acquire certain “cessed properties”—primarily old, dilapidated buildings in Mumbai—for restoration purposes with the consent of 70 percent of the residents. Section 1A declared that the Act was aimed at implementing the principles enshrined in Article 39(b).

In December 1991, the Bombay High Court dismissed the petitions challenging Chapter VIII-A. The Court reasoned that the government was only trying to protect “the shelter of the occupiers in the old dilapidated buildings and saving life and property by preventing collapse of such buildings.” Further, the High Court also held that Article 31C of the Constitution bars any challenges on the grounds of Articles 14 or 19, if the statute has been enacted in furtherance of Article 39(b). The petitioners moved the Supreme Court.

As the case lay pending, in 2019, subsequent amendments to the MHADA precipitated a new set of challenges. According to the new amendment, if landowners failed to restore property within a deadline, the state government could take over the property. The Property Owners Association (POA) alleged malicious intent on the state government.

The dispute, which first reached the Supreme Court in 1992, now has several petitions tagged to it. After several references to larger benches, a nine-judge bench started hearing the case on merits on 24 April 2024. This bench is also hearing arguments on the constitutional position of Article 31C.

Issues:

  • Does the phrase “material resources of the community” in Article 39(b) include privately owned property?
  • Whether Article 31C, a Directive Principle of State Policy remains in the Constitution after its amended version was struck down in Minerva Mills v Union of India (1980)?

Article 31C remains in the Constitution

The question concerning the existence of Article 31C emerged from a series of Parliamentary amendments and Supreme Court decisions between 1971 and 1980. 

  • The provision as introduced in the 25th Constitutional Amendment in 1971 did two things. The first part of Article 31C declared that laws advancing the DPSPs in Articles 39(b) and (c) cannot be declared void for being inconsistent with Articles 14 and 19. The second part of the provision saved such laws from being challenged in court on the ground that they did not “give effect” to the two DPSPs. 
  • In Kesavananda Bharati v State of Kerala (1973) a 13-judge Constitution Bench struck down the second part of the provision. 
  • In 1976, Parliament passed the 42nd Amendment, which substituted the words of Article 31C, extending its scope to encompass all DPSPs.
  • In Minerva Mills v Union of India (1980), a five-judge bench struck down the substitution as unconstitutional. 

Property owners had argued that after Minerva Mills, the provision was erased in its entirety from the Constitution. The Union had argued that only the substitution was struck down and the narrower version, as upheld in Kesavananada Bharati, remained in the books. 

The bench today unanimously affirmed that Article 31C was not struck down in its entirety. They noted the Parliamentary intent in the 42nd Amendment was not to strike down the provision or repeal it in its entirety. They held that when an amendment substituting certain text with alternate text is invalidated, the effect is not total repeal, rather it is that the unamended text continues to remain in force.

Privately owned property may be a material resource if it fulfils certain criteria

Article 39(b) allows the State to acquire ownership and control of “material resources of the community” distributed to best “subserve the common good”. In Ranganatha Reddy v State of Karnataka (1977), Justice Krishna Iyer’s dissenting opinion noted that all privately owned property was a material resource of the community. This view was adopted by a five-judge bench in Sanjeev Coke Manufacturing v Bharat Coking Coke (1982). 

The bench had differing opinions on this question. CJI Chandrachud authored the majority opinion, Justice B.V. Nagarathna authored a partial dissent and Justice Sudhanshu Dhulia dissented from the majority opinion in its entirety. 

Speaking for six other judges, CJI Chandrachud held that Justice Iyer, in Ranganatha Reddy, incorrectly held that all resources of an individual are part of the community and thus all private property is covered by the phrase “material resource of the community.” This view, the majority held, amounts to endorsing a particular “economic ideology” and structure for our economy, which the Court could not do. Our Constitution, the majority said, endorsed “economic democracy” and did not intend to lay down a particular form of social structure or economic policy for future governments.

They concluded that privately owned property could “theoretically” be considered a material resource. However, it had to be assessed in specific contexts based on factors such as nationalisation, availability and scarcity of the resource, its uses etc. 

Justice Nagarathna also noted that private property could become a “material resource of the community” through the following means: 

  1. Nationalisation
  2. Acquisition 
  3. Operation of law
  4. Purchase of material from private persons
  5. By the owner of a privately owned property donating by gift etc. 

However, she held that it would be incorrect to question or overrule Justice Krishna Iyer’s observations in Ranganatha Reddy, for it was suited to the context of the time. A change or evolution in socio-economic policies did not mean that the Court could “castigate” former judges and allege them with disservice. “The institution of the Supreme Court of India is greater than individual judges who only are a part of it at different stages of history of this great country. I do not concur with the observations of the learned Chief Justice,” she said. 

Justice Dhulia on his part agreed squarely with Justice Iyer’s opinion in Ranganatha Reddy and also held that the bench in Sanjeev Coke was not incorrect to rely on Justice Iyer’s views. 

Stay tuned for our detailed judgement summary for more reasonings in each opinion.