New Delhi: In a major verdict, the Supreme Court on Tuesday, by a majority of 7:2, held that not all privately owned resources can be acquired by the state. The apex court, however, clarified that the State can stake claims over resources that are material and are held by the community, for public good.
The verdict by the nine-judge bench, headed by Chief Justice D Y Chandrachud, provided clarity on the interpretation of Articles 31C and 39(b) of the Constitution, crucial provisions in connection with the rights of individuals against the state’s authority to control resources for public good. The apex court held that Justice V Krishna Iyer's previous decisions which declared that all privately owned resources can be acquired by the state, was motivated by a particular economic and socialist ideology.
The apex court emphasized that 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’.
The CJI, who authored the judgment on behalf of himself and six judges on the bench, said in essence, the text of the provision indicates that not all privately owned resources fall within the ambit of the phrase. However, privately owned resources are not excluded as a class and some private resources may be covered, said the CJI. The majority ruled that it is incorrect to hold that all private properties would belong to community resources.
“The resource in question must meet the two qualifiers, i.e. it must be a ‘material’ resource and it must be ‘of the community’. Thus, the judgments doubted in the reference before us 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’”, said the CJI.
The CJI said the direct question referred to this bench is whether the phrase ‘material resources of the community’ used in Article 39(b) of the Constitution includes privately owned resources. Theoretically, the answer is yes, the phrase may include privately owned resources, he added.
The apex court said it is unable to subscribe to the expansive view adopted in the minority judgement authored by Justice Krishna Iyer in State of Karnataka Vs Ranganatha Reddy (1977) and subsequently relied on by this court in Sanjeev Coke Manufacturing Co Vs Bharat Coking Coal Ltd (1983). The CJI said the previous ruling by Justice Iyer was rooted in particular economic thought.
The majority judgment was authored by the CJI Chandrachud, for himself, and justices Hrishikesh Roy, J B Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma, and Augustine George Masih.
The CJI said: “There is a distinction between holding that private property may form part of the phrase ‘material resources of the community’ and holding that all private property falls within the net of the phrase. It is here that the judgment by Justice Krishna Iyer in Ranganatha Reddy, and the consequent observations in Sanjeev Coke fall into error. Justice Krishna Iyer 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)”.
Justice Krishna Iyer observed, by way of an illustration, that not only do factories which produce cars fall within the net of Article 39(b), but even privately owned cars are covered by the provision.
The apex court noted that similarly, even in Sanjeev Coke, the net is cast wide and this court observed that “all things capable of producing wealth of the community” fall within the ambit of the phrase. “In both decisions, it was observed that all resources of the individual are consequentially the resources of the community”, said the bench.
“If Article 39(b) was meant to include all resources owned by an individual, it would state the ownership and control of resources is so distributed as best to subserve the common good. Similarly, if the provision were to exclude privately owned resources, it would state ‘ownership and control of resources of the state …’ instead of its current phrasing. The use of the word of the community rather than of the state indicates a specific intention to include some privately owned resources”, said the bench.
The bench said in essence, the text of the provision indicates that not all privately owned resources fall within the ambit of the phrase. “However, privately owned resources are not excluded as a class and some private resources may be covered. The resource in question must meet the two qualifiers, i.e. it must be a ‘material’ resource and it must be ‘of the community’”, said the bench.
In Ranganatha Reddy, Justice Krishna Iyer observed that Article 39(b) constitutes “a directive to the State with a deliberate design to dismantle feudal and capitalist citadels of property”. In Bhim Singhji, Justice Krishna Iyer cited Karl Marx in his judgment to observe that taking over large conglomerations of land is necessary to make Article 39 a “constitutional reality”.
Interestingly, in the same decision, Justice Krishna Iyer also expressed his view about the nature of the economy and observed that our economy was “in the transitional stage … undergoing a fabian transformation”.
The bench noted that in essence, the interpretation of Article 39(b) adopted in these judgments is rooted in a particular economic thought and the belief that an economic structure which prioritises the acquisition of private property by the state is beneficial for the nation.
The apex court said the Constitution was framed in broad terms to allow succeeding governments to experiment with and adopt a structure for economic governance which would subserve the policies for which it owes accountability to the electorate. The bench said according to Dr Ambedkar, 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.
“Thus, the role of this Court is not to lay down economic policy, but to facilitate this intent of the framers to lay down the foundation for an ‘economic democracy’”, said the CJI.
“Since the decade of the 1990s, or the liberalisation years, there has been a shift towards pursuing a policy of market-based reforms. Today, the Indian economy has transitioned from the dominance of public investment to the co-existence 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”, noted the bench.
The majority ruling has significant implications for laws impacting property and resource distribution, particularly in Maharashtra, where ageing buildings pose severe safety hazards and their restoration was a major issue.
