The Nine-Judge Constitution Bench, consisting of the then Chief Justice of India (CJI), D.Y. Chandrachud, and Justices Hrishikesh Roy, B.V. Nagarathna, Sudhanshu Dhulia, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma, and Augustine George Masih, delivered its judgment, on November 5, 2024, on whether “private properties” qualify as a part of the “material resource of the community” as per the Directive Principles of State Policy (DPSP) under Article 39(b) of the Constitution on November 5, 2024.
In a majority judgment delivered by the then CJI, D.Y. Chandrachud, with a 7:2 ratio, the court ruled that not all “private properties” could be considered part of the “material resources of the community” under Article 39(b) of the Constitution. The court also unanimously affirmed that Article 31C, as upheld in Kesavananda Bharati vs State of Kerala (1973), remains in force.
Article 31C, inserted by the Constitution (Twenty-fifth Amendment) Act, 1971, ensures that laws aimed at implementing the directive principles in Part IV of the Constitution are not considered invalid, even if they conflict with or limit rights under Articles 14 or 19. Such laws cannot be challenged in court for not fully implementing the policy. However, if a state legislature enacts such a law, it will only apply if the president has given his/her approval after the law is reserved for his/her consideration.
Article 39(b) states that the State shall direct its policy towards securing that the ownership and control of the material resources of the community are distributed in a manner that best serves the common good.
Background
Chapter VIII of the Maharashtra Housing and Area Development Act, 1976 (MHADA) addresses the repair and reconstruction of dilapidated buildings in Brihan Mumbai (formerly Greater Bombay). The MHADA (Second Amendment) Act, 1986, introduced Chapter VIII-A, which focuses on the “acquisition of cessed properties for co-operative societies of occupiers”. This provision specifically applies to Category A buildings, which are cessed properties constructed before September 1, 1940, in Brihan Mumbai.
Chapter VIII-A of the MHADA pertains to the acquisition of certain properties, with the State required to pay compensation at a rate equivalent to one hundred times the monthly rent for the property in question.
Section 1A of the MHADA, inserted in 1986, states that the purpose of MHADA is to implement Article 39(b) of the Constitution. Chapter VIII-A empowered the Mumbai Building Repair and Reconstruction Board (MBRRB) to acquire certain “cessed properties” for restoration, provided 70 per cent of the residents consented. The issue arose from challenges to the constitutional validity of Chapter VIII-A of the MHADA, first raised in 1992.
The Property Owners Association (appellants) filed proceedings before the Bombay High Court, arguing that the provisions of Chapter VIII-A violated Articles 14 and 19 of the Constitution. They claimed the provisions were arbitrary, unjustly deprived property owners of their rights for inadequate compensation and that the classification of buildings had no rational connection to the objectives. The high court dismissed the writ petitions and upheld the constitutionality of Chapter VIII-A. The appellants were dissatisfied with the high court ruling and they filed special leave petitions before the SC.
Reference Orders
The court heard the petitions from the Property Owners’ Association of Mumbai challenging Chapter VIII-A of the MHADA, introduced in 1986. This provision allows the State to acquire Mumbai’s old dilapidated buildings, referred to as “cessed properties”, for the benefit of co-operative societies of occupiers. The amendment further included a declaration that the act aims to implement the DPSP outlined in Article 39(b) of the Constitution.
The State argued that “housing stock” constitutes a material resource of the community and that the reconstruction of dilapidated buildings serves the common good, as the old buildings are unsafe. The MHADA further contended that building owners had refused to carry out repairs because of the freezing of rents since September 1, 1940, resulting in very low rental income that was insufficient to cover the property taxes they were required to pay.
However, the property owners opposed the State’s move, arguing that Article 39(b) could not be interpreted to include privately owned property. They also challenged the Maharashtra Rent Control Act, 1999 for setting excessively low standard rents. In response, MHADA contended that Article 39(b) should be interpreted broadly to encompass private property as well.
The uncertainty in the law stemmed from the interpretation of a seven-judge-bench decision in the State of Karnataka vs Ranganatha Reddy (1977) case, which examined the application of Article 39(b) in the context of the nationalisation of contract carriages.
The majority view did not support the inclusion of private property under Article 39(b). However, the minority view, expressed by Justice (retd) V.R. Krishna Iyer, held the opposite. This minority view later became the foundation for the five-judge bench in the Sanjeev Coke Manufacturing Company vs Bharat Coking Coal Ltd case (1982), where the issue of Article 39(b) was considered in the context of the nationalisation of coke oven plants. In that case, private property was ruled to be part of material resources of the community. This minority view was later referenced in Mafatlal Industries Limited vs Union of India (1996).
Some Points of Focus and the Final Verdict
On Justice Iyer and Justice Reddy judgment, the 7 : 2 majority ruling stated that the view expressed by Justice Iyer and Justice Chinnappa Reddy in the Sanjeev Coke case was incorrect, as it failed to distinguish that a material resource belongs to the community, not the State.
The majority opinion stated that Justice Iyer’s and Justice Reddy interpretation “amounts to endorsing a particular economic ideology”. It added that declaring Article 39(b) includes the distribution of all private resources effectively endorses a specific economic ideology and structure for the economy.
The majority judgment stated that interpreting Article 39(b) to include all private property under the term “material resources of the community” satisfies only one of the three requirements of the phrase—that the goods in question must be a “resource”. However, it overlooks the other qualifiers, namely, the resource must be “material” and belong to the “community”. The bench emphasised, “The use of the words ‘material’ and ‘community’ are not meaningless superfluities… The words ‘of the community’ must be understood as distinct from the individual”.
The court pointed out that if the Article 39(b) were meant to include all resources owned by an individual, it would have stated that the ownership and control of resources are to be “disputed” as best to subserve the common good, rather than focusing on the distribution of material resources for the community.
The court further clarified that if the provision was intended to exclude privately owned resources, it would have stated “ownership and control of resources of the State” instead of “of the community”. The use of the words “of the community” rather than “of the State” indicates a specific intention to include some privately owned resources. Essentially, the text of the provision suggests that not all privately owned resources fall within its scope; however, privately owned resources are not excluded as a class and some may still be covered.
The court added that the Ranganath Reddy and Sanjeev Coke judgments “are incorrect to the extent that they hold that all resources of an individual are part of the community and, thus all private property is covered by the phrase ‘material resources of the community’.”
On India’s economic democracy The majority view referenced B.R. Ambedkar’s perspective that “if the Constitution laid down a particular form of economic and social organisation, it would amount to taking away the liberty of people to decide the social organisation in which they wish to live”. Drawing on this, the ruling framed the court’s role as “not to lay down economic policy, but to facilitate the intent of the framers to lay down the foundation for an ‘economic democracy’”.
The majority opinion referred to India’s economic growth trajectory, highlighting the mixed economy of the 1950s and 1960s, which included heavy industries and import substitution. It also noted the shift towards “socialist reforms” in the late 1960s and 1990s, followed by the “market-based reforms” of the 1990s or the “liberalisation years”.
The court stated that this arc reveals Justice Iyer’s “doctrinal error” in postulating a “rigid” economic theory. It emphasised how the “Constitution and the custodians of the Constitution, the electorate, have routinely one economic dogma as being the exclusive repository of the truth”.
The court remarked that “as participants in a vibrant, multiparty economic democracy, the people of India have voted to power governments which have adopted varied economic and social policies based on the country’s evolving development strategies and challenges. The foresight and 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”. The court added 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”.
Justice Nagarathna’s view In a separate judgment, Justice Nagarathna concurred with the majority view on what constitutes a material resource of the community. She emphasised the need for a ‘flexible interpretation’ of the Constitution, recognising it as an “organic text” that should adapt to changing times. She stated, “Neither could there be canonisation of the socialist policy followed by the State, nor could the principles akin to laissez-faire economies be ignored at time when they have been resurrected by the State itself to suit the developments of the economy in the country and for the benefit of the people of India”.
Justice Nagarathna, however, disagreed with the majority view regarding interpretations by Justice Krishna Iyer and Chinnappa Reddy. She stated, “The observations of the judges in those decisions would not call for any critique in the present times. Neither is it justified nor warranted.”
Justice Dhulia’s view In his dissenting judgment, Justice Dhulia stated that the “broad and inclusive” meaning of “material resources of the community” given by Justice Iyer and Justice Reddy “has stood us in good stead and has lost none of its relevance, or jurisprudential value, nor has it lost the audience which appreciates these values.”
Implications of the Judgment
By reinforcing that not all private property qualifies as a community resource, the judgment bolsters individual property rights, protecting owners from arbitrary State confiscation. The decision ensures that State actions like land acquisition and public projects must have a clear public need, preventing indiscriminate use of eminent domain powers. It emphasises that such interventions should be based on specific circumstances directly tied to public welfare.
The judgment also introduces a more structured approach for assessing when the State can intervene in private property matters. This case-by-case analysis gives property owners more legal certainty, especially in sectors like real estate and infrastructure, where land acquisition is common. It ensures that State actions are justified, transparent, and proportionate, minimising potential misuse of power.
Additionally, the ruling impacts land reforms aimed at redistributing resources. While supporting the need for such reforms, it stresses that they must align with constitutional protections of property rights.
Conclusion
The ruling which clarifies that not all private property is a community resource, has far-reaching consequences for property rights and State intervention in private ownership. By adopting a case-by-case approach, the court has reaffirmed the importance of protecting private property rights, while also ensuring that the State can intervene when there is a genuine public need.
The judgment represents a cautious but necessary step towards safeguarding individual rights while balancing them with the broader needs of the public. In doing so, it provides a framework for the State to act responsibly and proportionately, ensuring that any acquisition of private property is for a legitimate public purpose and justifiable under the law.
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