Nature of private property | Judgement Summary

Brief history of Article 31C

Introduced through the 25th Constitutional Amendment in 1971, Article 31C did two things. The first part of Article 31C declared that laws advancing the Directive Principle of State Policy (DPSP) in Articles 39(b) and (c) cannot be declared void for being inconsistent with Articles 14 and 19. The second part saved such laws from being challenged in court if they failed to “give effect” to the principles enshrined under the two DPSPs. 

In Kesavananda Bharati v State of Kerala (1973), a 13-judge Constitution Bench struck down the second part of the provision. Kesvananda Bharati is famously known for developing the “basic structure doctrine” of the Constitution. After the decision, in 1976, Parliament passed the 42nd Amendment. Section 4 of this Act substituted the words “clause (b) or clause (c) of article 39″ in Article 31C, with the words “all or any of the principles laid down in Part IV”. In essence, it extended the scope of Article 31C to encompass all DPSPs.

Later in Minerva Mills v Union of India (1980), a five-judge bench struck down the substitution as unconstitutional. In Property Owners, the question emerged: Did the narrower version of Article 31C, as it was upheld in Kesavananada Bharati, survive or was the provision effaced in its entirety? 

Property owners challenging Chapter VIII-A of the MHADA contended that after Minerva Mills, no version of Article 31C existed in the Constitution. The respondents relied on the doctrine of revival to claim that after the substituted text of the provision was struck down, its narrow version as upheld by the Court in Kesavaanada Bharati was restored. 

Does Article 31C remain in the Constitution?

All nine judges agreed unanimously that Article 31C remains in the Constitution post-Minerva Mills. “It is not appropriate to separate an amendment which substitutes certain words with certain other words into multiple steps and examine the legal effect of invalidation on each of these steps independently,” CJI Chandrachud wrote. 

He explained that when an amendment involves the substitution of the original text of a law with a new text, the two acts—removing the text and inserting an alternative text, happen simultaneously. Therefore, assessing the validity of each step separately would be contrary to legislative intent. 

In this case, he said, legislative intent has two expressions: the original and revised text. Invalidating the amended text leaves the original as the sole legitimate expression of legislative intent unless there has been a repeal of the original. The Chief elaborated that in instances where a substituted text of a law is invalidated, the question that needed to be answered was: “Would the legislature have repealed the original text without giving effect to the amended text?” Unless the legislature expressed its clear intent to repeal the original text, “it is presumed that the unamended text stands revived.”

But if the Court were to invalidate the original text as well without its expressed repeal, it would result in a “third outcome, a legal vacuum which was neither intended by the legislature that enacted the original text nor by the legislature which adopted the amended the text.” Crucially, the Chief noted, “this third outcome would fail to give effect to either legislative intent despite there being no constitutional fault in the original provision.”

Applying these rules to Article 31C the Chief held that the invalidation of the substituted text of the 42nd Amendment, meant that the original text, to the extent that it was upheld in Kesavananada Bharati, was revived. If Parliament had the intent to remove the original text, it would have done so in an expressed act of repeal. “After Minerva Mills invalidated Section 4 of the Forty-Second Amendment, the composite legal effect of Section 4 was nullified and the unamended text of Article 31-C stands revived,” he wrote. 

Justices Nagarathna and Dhulia concurred wholly with the Chief’s reasoning. 

Brief precedential history of Article 39(b)

Article 39(b) empowers the state to acquire ownership and control of “material resources of the community” to “subserve the common good.”

The bench had to decide whether the phrase “material resources of the community” included privately owned property. This question emerges from Justice Krishna Iyer’s concurring, minority opinion in the seven-bench decision in Ranganatha Reddy v State of Karnataka (1977).

Justice Iyer, speaking for himself and two other judges, had observed that all resources that satisfy material needs, including privately owned resources, fall within the ambit of the phrase “material resources of the community” used in Article 39(b). 

A five-judge Constitution Bench in Sanjeev Coke Manufacturing v Bharat Coking Coke (1982), unanimously adopted Justice Iyer’s view. Later in Mafatlal Industries v Union of India (1997), a nine-judge bench, in  a single-line observation, held 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.”

The validity of these decisions came to be contested before the bench in the present case. The property owners submitted that Justice Iyer incorrectly held that private property can be a “material resource”. This, they argued, is a Marxist idea of property where the distinction between public and private does not exist. Respondents, adopting Justice Iyer’s views, had argued that it was incorrect to say that only public or state-owned properties can be “material resources of the community.” 

Were Justice Krishna Iyer’s observations in Ranganatha Reddy incorrect? 

CJI Chandrachud’s majority opinion held that Justice Iyer in Ranganath Reddy ventured into the contours of Article 39(b) when the majority had stayed away from it. The Chief’s opinion noted that Justice Iyer’s issues on “the interpretation of Article 39(b), and particularly the purport of the terms ‘distribution’ and ‘material resources’ were not even framed as issues by the majority, let alone answered”.

The Chief also noted that Justice Iyer’s opinion was incorrect because it “cast the net wide, holding that all resources which meet “material needs” are covered by the phrase and any attempts by the government to nationalise these resources would be within the scope of Article 39(b).” Further, the majority held that Justice Iyer was also wrong to hold that not just “means of production” but also the “goods so produced” fell within the net of the provision. To be considered a “material resource of the community”, the majority held that three criteria must be fulfilled: 

1. It must be a resource
2. It must be material and 
3. It must be of the community 

Holding that all private property within the net of  “material resources of the community,” the Chief held, satisfied only the first requirement. The words “of the community”, they said, must be understood as distinct from the “individual”.

Therefore, the majority held that Justice Iyer’s opinion amounted to endorsing a particular economic policy for the country. This was contrary to the vision of the framers of the Constitution who envisioned “economic democracy” and did not want to lay down a “particular form of social structure or economic policy for future governments.”

The majority also pointed out that Dr B.R. Ambedkar had on several occasions opined that “economic democracy is not tied to one economic structure, such as socialism or capitalism, but to the aspiration for a ‘welfare state’.”

In this light, the seven judges concluded that Justice Iyer’s opinion was a doctrinal error as it postulated “a rigid economic theory, which advocates for greater state control over private resources, as the exclusive basis for constitutional governance.” Privately owned property, they said, could be a material resource, but not all private property was a material resource. 

In her partial dissent, Justice Nagarathna agreed with the Chief’s view that theoretically, private property could be a material resource of the community if it transformed into one. An inquiry on whether a property had transformed depended on context-specific factors such as the nature of the resource and its characteristics; the impact of the resource on the well-being of the community; the scarcity of the resource; and the consequences of such a resource being concentrated in the hands of private players. 

The transformation could also occur in the following ways: 

1.  Nationalisation;
2. by acquisition;
3. by vesting of the said resource in the state, by operation of law under specific statutes and
4. by the owner of a material resource converting such a resource into a “material resource of the community” by way of donation or a gift, creation of a charitable endowment, a grant or a dedication so that the said material resource is useful.

However, she disagreed with the Chief’s reasoning that Justice Iyer’s opinion “ does a disservice to the broad and flexible spirit of the Constitution.” Interestingly, this line is missing from the text of the Chief’s majority opinion. The Chief’s opinion on Justice Iyer’s judgement, she said, was “unwarranted and unjustified.” 

She noted that his opinion came in “in the backdrop of a constitutional, economic and social culture that gave primacy to the State over the individual in a broad-sweeping manner.”

She noted that it was a matter of “concern” that the judicial brethren of posterity viewed the “judgments of the brethren of the past, possibly by losing sight of the times in which the latter discharged their duties and the socio-economic policies that were pursued by the State and formed part of the constitutional culture during those times.” 

In his dissenting opinion. Justice Dhulia also expressed “strong disagreement” with the Chief’s conclusions on Justice Iyer’s opinion. He concluded that Justice Iyer’s opinion was based on “strong humanist principles of fairness and equity.” He also endorsed Justice Iyer’s view that all private property is a material resource of the community. 

Can the decisions in Sanjeev Coke and Mafatlal be faulted for judicial indiscipline?

 The majority opinion held that the five judges in Sanjeev Coke erred by relying on Justice Iyer’s minority view in Ranganatha Reddy. The majority view in Ranganatha Reddy was the binding precedent, as it expressly stated its  “inability to agree” with the observations made by Justice Iyer’s minority view.  Therefore, by relying on the non-binding minority view, Justice Chinnappa Reddy’s decision in Sanjeev Coke was an act of judicial indiscipline. 

Justice Nagarathna expressed caution. She stated that Justice Iyer or Chinnappa Reddy’s opinions came at a different time. Holding that their views amounted to a “disservice” to the Constitution, she cautioned, would amount to “implying that they may not have been true to their oath of office as a Judge of the Supreme Court of India.” She further noted that “the institution of the Supreme Court of India is greater than individual judges, who are only a part of it at different stages of history of this great Country!” and warned that a paradigm shift in the economic policy of the country could not result in branding the opinions of judges of the past “as doing a disservice to the Constitution”

In his dissent, Justice Dhulia noted that it was difficult for him to even accept that the majority of four judges in Ranganatha Raddy entirely disagreed with Justice Iyer’s minority opinion. In Justice Dhulia’s view, when the majority of judges in Ranganatha Reddy held that they “must not be understood to agree” with the minority, it was not “exactly disagreement.” Rather, they simply chose to remain silent on the issue. When the majority view was silent on some aspects, the minority view would have “persuasive value,” he said. 

All judges concurred that the single-line observation made in Mafatlal was an obiter and not the ratio or the binding part of the decision.