Not All privately owned resources can be acquired by State – Supreme Court

Introduction

In a recent 9 – judge bench comprising of Chief Justice Dy Chandrachud and Justices Hrishikesh Roy, B.V Nagarathna, Sudhanshu Dhulia, J.B Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma, Augustine George Masih; the Hon’ble Supreme Court adjudicated upon the issue of ‘Whether private resources form a part of the material resources of the community’ under Article 39(b) of the Constitution of India and held in a 7:2 majority that including all the private properties of the community cannot form a part of the material resources of the community.

Additionally, the bench also unanimously noted that Article 31C of the Constitution to the extent that it was upheld in the landmark judgment of Keshavananda Bharti V. State of Kerala wherein the principle of basic structure of the Constitution was given remains in force as the law of land. The majority view of the bench also noted that the opinions given by Hon’ble Justice Krishna Iyer in the judgment of State of Karnataka V. Ranganatha Reddy which stated that “the material resources of the community covered all resources including natural, man – made, publicly and privately owned”.

Brief Background of the Case

The present case was brought before the Hon’ble Supreme Court of India by the Mumbai based ‘Property Owner’s Association’ in order to challenge the constitutional validity of Chapter VIII – A of the Maharashtra Housing and Area Development Act 1976 which contained provisions allowing the State to acquire private property with compensation set at a hundred times of the monthly rent payable. The Petition was initially filed in 1992 and was referred to a 9 – judge bench in 2002 which finally gave its verdict in 2024 after a periodic hearing of more than two decades.

The majority ruling in the present case which was led by the Hon’ble Chief Justice of India was laid upon the foundation of Justice Krishna Iyer’s opinions in 1978 which clarified that private property cannot be classified as a material resource of the community merely based upon the social and economic criterion along with asserting that private assets which are in the name of the common good require rigorous justification. According to the court, Article 39(b) which comes under the Directive Principles of the State Policy is a directive obligation upon the State to work towards the redistribution of resources in order to serve the public interest.

Dissenting Opinion by Justice Nagarathna

Concurring with the majority view, Justice B.V Nagarathna held that privately owned resources can be transformed and can undoubtedly acquire the status of material resources of the community. Additionally, according to her the material resources can be divided into two broad categories – one being the state-owned resources which belong to the state and can be regarded as the community resources held in public trust by the state and second being private resources upon which the state has absolutely no control.

According to Justice Nagarathna, there may exist private ownership of forests, ponds, land pieces and resource bearing lands which fall within the ambit of Article 39(b). Similarly the other resources like spectrums, airwaves, natural gases, mines and minerals and other finite resources may sometimes lie in private control. There are various ways through which private resources can be turned into the material resources of the state such as using means of nationalisation, acquisition, operation of law, owner’s charity or donations or even purchase by the state. Moreover, there are numerous ways in which a resource should be assessed through multiple lenses to qualify as a material resource such as nature and characteristics of the resource, impact upon the welfare of the public, control over the resource, scarcity and availability and most importantly, the implication of the ownership of resources by the private entities.

Implications of the present judgment

The present judgment has underlined and highlighted the importance of protecting the liberty of individuals and their property rights while underlining that resource redistribution serves the interest of the public at large in a justified manner. Additionally, the nine – judge bench has also reiterated the importance of protection of private property against the arbitrary acts of state acquisition and has brought out a pressing need for a more nuanced and transparent approach of equitable resource distribution.

While noting that there is a pressing need for a more – market oriented economic approach policy which departs from the socialist ideas that influenced the earlier rulings, the judgment also brings out the need for a dynamic approach towards the shifting economic policies over the last three decades which has positioned India towards one of the fastest growing economies of the world which is expected to have a significant impact upon the future litigations and disputes involving property rights and state powers across the world.

Conclusion

The present judgment is a critical juncture in the Indian legal landscape of property rights which reaffirms the due importance of due process of law in the country along with the need of adequate compensation in the acquisition of private properties by the state. The judgment has also duly emphasised upon the constitutionality of the Articles 39(b) and (c) by noting that the laws in India aimed towards the welfare of the state enjoy immunity only if they aim to further the constitutional objectives of resource distribution for the welfare of the public and such protection would not extend indiscriminately to state actions and each and every law that invokes Article 31C would have to satisfy the substantive requirements of Article 39(b) and (c).

Since the legal landscape of India along with its economic system has been rapidly developing in the past few decades, this judgment has also brought out a clear and unambiguous view of balancing the individual rights of citizens along with the greater good of the country and the society.

King Stubb & Kasiva,
Advocates & Attorneys

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