Legally speaking, serious implications are dealing with private property rights. It is around the Constitutional Directive Principle of State Policy, especially Article 39(b) of the Constitution. A nine-bench Supreme Court held that the government “cannot acquire” and redistribute all privately-owned property by simply deeming them as “material resources of the community” under Article 39(b) of the Indian Constitution. We need not jump to conclude that the ‘socialist’ principle is incorporated in DPSP. However, there is a significant limitation. The SC discussed the conflict between Fundamental Rights (FR) Articles 19(1)(f) and Article 31.
The Government through Parliament used the power to curtail property rights. The 25th Amendment in 1971 introduced Article 31C, providing immunity to laws to implement Articles 39(b) and 39(c) from challenges violations of Fundamental Rights violations, especially, property rights. This right was downgraded.
Keshavananda holds the fort!
However, in the Kesavananda Bharati case of 1973, the Supreme Court upheld Article 31C but subjected it to “judicial review”. Article 31C was designed to protect laws aimed at ensuring the equitable distribution of resources for the common good (Article 39(b)) and preventing the concentration of wealth (Article 39(c)).
In response to judicial challenges to government policies like bank nationalization, the 25th Amendment Act was introduced in 1971. 25th Amendment expanded Article 31C to protect state laws implementing the principles of Article 39(b) and (c), even if they conflicted with rights under Articles 14, 19, and 31. The legal fight is between the Government and the Supreme Court. Who will win, the Court or the Parliament? The conflict continues, spanning decades, unfortunately. Parliament allowed to reduce the property rights on the strength of, or in the name of DPSP for the welfare of the people. After long litigation, In the Kesavananda Bharati case of 1973, the Supreme Court upheld Article 31C but subjected it to judicial review. While the Government was allowing interference with Fundamental Rights, the judiciary retained the power to question the executive through the ‘judicial review’ principle.
In 1976, the 42nd Amendment extended Article 31C to shield all Directive Principles (Part IV) from challenges. This extension was invalidated by the Minerva Mills judgment (1980), which reaffirmed only the protection for Article 39(b) and (c). Claiming that Article 39(b) mandates the state to promote equitable distribution of material resources in the community.
First order by a seven-judge, 1977
In the State of Karnataka v Shri Ranganatha Reddy (1977), a seven-judge Bench by a 4:3 majority, ruled that privately owned resources are not necessarily “material resources of the community.”
However, Justice Krishna Iyer’s dissenting opinion held that the “material resource of the community” in Article 39(b) extended to all national wealth, public or private, capable of meeting material needs. This view influenced subsequent cases like Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Limited (1982) and Mafatlal Industries Limited v. Union of India (1996), supporting broader government control over private resources.
Second order by seven-judge: Rejected Krishna Iyer’s Justice
In Property Owners’ Association v. State of Maharashtra, a seven-judge Bench sought clarification on Article 39(b), leading to the recent nine-judge decision. The majority opinion, led by seven judges including the Chief Justice, rejected Justice Krishna Iyer’s expansive interpretation of Article 39(b).
Because of these two ‘seven-judge’ orders, a nine-judge was necessitated. The current Judgment of the Supreme Court on 5th November 2024, a landmark, clarifies that the position post-Kesavananda Bharati remains valid, preserving Article 31C protections solely for Article 39(b) and (c).
The latest order limits the government’s authority by rejecting the broad interpretation endorsed by Justice Iyer. The Court ruled that not all privately-owned property can be deemed “material resources of the community” and thus safeguarded from automatic acquisition.
Public Trust Doctrine
It is based the factors such as public trust doctrine, the resource’s intrinsic qualities, its community impact, scarcity, and potential harm from private monopolization must be taken into consideration for consideration as a material resource.
The SC explained the ‘distribution’ term that “distribution” in Article 39(b) allows for either government acquisition or redistribution to private parties, as long as it serves the common good.
What is the impact?
The Supreme Court emphasized that the Constitution’s Directive Principles are guiding policies, not enforceable laws.
Government scope in the acquisition of Private Property is limited to acquiring private property under this Directive Principle Article 39(b). Individual property is supreme, to that extent. The SC judgment states that the Court’s role is not to prescribe economic policy but to support “an economic democracy” as envisioned by the Constitution.
Realising Market!
The apex court has ‘recognized the dramatic shifts like private property’, from traditional assets to data and space exploration. The judgment emphasizes the need to respect evolving market realities. Are we reinforcing of market-oriented economic model?
It is interpreted that this judgment offers protection for marginalized communities against the unjust acquisition of their small farms and forest lands while promoting responsible management of essential public resources. It was also commented that the SC reinforces a balanced approach to property rights, underscoring the Constitution’s flexibility in supporting both private ownership and community welfare. The judgment allows for some private resources to be used for the public good under Article 39(b) while preserving individuals’ property rights, supporting India’s economic growth within a democratic framework.
In a way, the SC ruling affirms the people’s role, in shaping India’s economic direction and adaptation to changing global and domestic conditions. It depends on the ‘people’ and how they think, act, and understand. If they do not think so, that’s how democracy works.
Prof Madabhushi Sridhar Acharyulu, LL. D, MCJ. Mahindra University, Hyderabad.
