On 5th November 2024, a nine-judge bench of the Supreme Court of India delivered a landmark judgment redefining the application of Article 39(b) within the framework of the Constitution of India. The bench was headed by Chief Justice DY Chandrachud and included Justices Hrishikesh Roy, BV Nagarathna, Sudhanshu Dhulia, JB Pardiwala, Manoj Misra, Rajesh Bindal, SC Sharma, and AG Masih. The bench addressed whether the term “material resources of the community” in Article 39(b) includes privately owned properties. The apex court ruled that the state cannot redistribute all privately owned properties. OpIndia accessed the judgment copy in the matter Property Owners Association & Ors vs State of Maharashtra & Ors.
With this judgment, India has decisively moved away from an earlier socialist-leaning interpretation of the said Article, as it upholds that private property rights are constitutionally protected against broad state intervention aimed at using it for the public’s “greater good.” The judgment will have long-term implications as it sets boundaries on how the state can exercise power over privately owned assets under the guise of “greater good.”
The judgment concerned the Maharashtra Housing and Area Development Act (MHADA) of 1976 and its 1986 amendments. These provisions allowed the state to take possession of private buildings in Mumbai for repair, reconstruction, or transfer to cooperative societies. To do so, the government did not require full owner consent, which led to the interpretation that the state could take over any private property by treating it as a “community resource.”
The property owners argued that the provisions introduced by the amendments infringed upon their rights by treating their property as “community resources” and subjecting it to redistribution. The apex court’s decision, delivered after a 30-year-long battle, clarified fundamental questions on property rights and the socialist aspect of the previous amendments. The court has firmly refuted the notion that the Constitution endorses an inherent socialist approach to private property for public purposes.
Background of the case
The matter revolves around the constitutional validity of Chapter-VIIIA, which was introduced in 1986 as an amendment to the Maharashtra Housing and Area Development Act,(MHADA) of 1976. It deals with the acquisition of specific properties and requires the state to pay a rate equivalent to 100 times the monthly rent of the premises that needed to be acquired. Furthermore, Section 1A of the Act was also incorporated through the said amendment making it possible to implement Article 39(b) of the Constitution.
A series of petitions were filed when the Maharashtra government made a law to deal with old and unsafe buildings in Mumbai. These buildings, often occupied by tenants with landlords having no resources to repair them, would be taken over by the government as per the law under certain conditions to fix them up and transfer them to people who need housing.
With the law, the question came to the fore if privately owned properties could be seen as “material resources of the community” as mentioned in Article 39(b) of the Constitution. The Property Owners Association argued that the law was discriminatory against landlords and violated their rights to equality under Article 14 of the Constitution.
In 1978, the Supreme Court of India delivered two judgments in the matter of State of Karnataka vs Ranganatha Reddy & Anr. As per the judgment delivered by Justice Krishna Iyer, material resources of the community covered everything including natural and man-made resources, publicly or privately owned.
However, in the second judgment delivered by Justice Untwalia, the necessity to express any opinion in connection to Article 39(b) was not considered. Furthermore, it was stated that the judges did not subscribe to the view with respect to Article 39(b) by Justice Iyer. In 1982, the Constitutional Bench affirmed the view taken by Justice Iyer in the matter of Sanjeev Coke Manufacturing vs Bharat Coking Coal Ltd. It was again affirmed by a 1996 case of Mafatlal Industries Ltd vs Union of India.
Notably in 2002, a 7-judge bench of the Supreme Court, before forwarding the case to the 9-judge bench, stated that the interpretation of Article 39(b) needed reconsideration. The court said, “We have some difficulty in sharing the broad view that material resources of the community under Article 39(b) covers what is privately owned.”
Bench refused to reopen discussion on law under Article 31C of the Constitution
Notably, when the matter was last heard in April 2024, there was one important aspect of the case as a question was raised among the bench if the decision in the Kishavananda Bharati case should be revisited or not. Article 31C deals with certain principles in the Constitution related to the government’s policies. Originally, it said that laws made to achieve certain societal goals would not be cancelled just because they clash with individual rights guaranteed by the Constitution.
In Keshavananda Bharati, the court changed that perception. It said that though these laws could still be made, they could be reviewed by the court if they violated fundamental rights. Now, it is a question before the court if the decision in this particular case is still valid. One side in the case argues that as certain rights like equality mentioned in Article 14 and freedom of speech mentioned in Article 19 are considered important if any law violates these rights, it should be reconsidered. However, the other side argued that Keshavananda Bharati case had already settled this matter, confirming that Article 31C stands as it originally did. It provides government immunity to be challenged based on individual rights.
Notably, CJI made it clear that the bench was bound by the decision in Keshavananda Bharati as it was heard by a larger bench of 13 judges. They would not reopen discussion on the matter linked to Article 31C and the court would stick to its interpretations.
Departure from socialist interpretations of Article 39(b)
Notably, in earlier cases such as State of Karnataka vs Ranganatha Reddy and Sanjeev Coke Manufacturing Co vs Bharat Coking Coal Ltd, Justice VR Krishna Iyer ruled that Article 39(b) of the Constitution allowed privately held resources to be used as “material resources of the community.” His approach, which favoured a socialist view, suggested that the state had the power to appropriate private property to further social and economic equity.
Over time, the interpretation of Article 39(b) influenced state policies as a basis for acquiring or controlling private properties. In a way, this interpretation could also be seen as a blanket approval for wealth redistribution.
However, the recent judgment marked a departure from that view. The apex court categorically rejected the use of Article 39(b) as a blanket justification for the state to acquire private properties and warned that such an interpretation is not mandated by the Constitution.
Chief Justice Chandrachud, in his majority opinion, underscored that Directive Principles such as Article 39(b) should guide policy. However, these provisions cannot override the rights of individuals provided by the Constitution of India under Part III. The apex court’s stance aligns with the views of Dr BR Ambedkar, which focused on safeguarding individual freedoms and rights while pursuing social justice, without binding the state to any specific economic ideology, including socialism.
The court revisited the Constituent Assembly debates and noted that Dr Ambedkar had advocated a flexible economic framework for India. He also cautioned against embedding any rigid system within the Constitution. The concept of a welfare state envisioned by Dr Ambedkar was one that ensured socio-economic justice without overstepping on the property rights of individuals.
The court ruled that Article 39(b) is intended to ensure that the material resources of the community “best subserve the common good,” but does not imply appropriating private property for socialist aims. Thus, the court reaffirmed that private ownership rights are protected.
Article 31C and the limitations on socialist-oriented policies
Though in a previous hearing in April, the court refused to re-examine Article 31C, which grants immunity to laws furthering Article 39(b) from challenges under Articles 14 and 19 of the Constitution of India, in the judgment, the apex court revisited it.
Historically, Article 31C has served as a protective mechanism for socialist-inspired policies and has had a deep impact on privately owned properties. However, the apex court has now clarified that Article 31C cannot be used as a broad shield to protect any policy or law that infringes on private property rights. To do so, there must be strict criteria demonstrating a clear public benefit, the court added.
The court further noted that any law seeking immunity under Article 31C must demonstrate a substantial public purpose beyond merely advancing a socialist ideal. With this judgment, the court has placed limitations on the application of the said Article, stating that policies based on Article 39(b) must not conflict with the fundamental structure of the Constitution that balances collective welfare with individual rights.
Conclusion
The judgment has redefined and reinforced the line between social equity goals and constitutional property rights. It has effectively curbed socialist-inspired state acquisition of private assets. The court has limited the state’s authority to classify private properties as “material resources of the community” and has set a high bar for future laws and policies that may seek to appropriate private wealth. With this judgment, India’s Constitution has shifted away from the socialist-influenced policies of the past. It affirms that while social justice holds utmost importance, it does not mean that the state has the right to infringe upon fundamental private ownership rights without a clearly justified public interest.
