Can all private properties be acquired by the state? | Explained 

For representative purposes.
| Photo Credit: iStockphoto

The story so far:

A nine-judge Constitution Bench of the Supreme Court, in a majority judgment (8:1), held that not every private resource can be considered a ‘material resource of the community’ to be used by the government to serve the ‘common good.’ This overturns the earlier interpretation formed in 1977 that has been followed by the Supreme Court till 1997.

What are constitutional provisions?

Part IV of the Constitution contains the Directive Principles of State Policy (DPSP). These are principles that the government should follow to achieve social and economic justice in our society. Article 39(b) in Part IV provides that ‘ownership and control of material resources of the community are so distributed as best to subserve the common good.’

The Constitution originally guaranteed right to property and compensation for acquisition as a Fundamental Right under Articles 19(1)(f) and 31 respectively. Article 31C was added through the 25th amendment in 1971. It provided an exception that laws made to fulfil the principles under Articles 39(b) and (c) shall not be void on the ground that it violated Fundamental Rights including right to property. In the Kesavananda Bharati case (1973), a 13-judge Bench of the Supreme Court upheld the validity of Article 31C but made it subject to judicial review. In 1978, the right to property was omitted from Fundamental Rights and made a constitutional right under Article 300A. Any law to acquire private property by the government should only be for a public purpose with adequate compensation meted out.

What were earlier judgments?

In State of Karnataka versus Ranganatha Reddy (1977), a seven-judge Bench of the Supreme Court upheld a Karnataka State law that nationalised private bus transport services. Justice V.R. Krishna Iyer wrote a separate ‘afterword’ interpreting the phrase ‘material resource of the community’ contained in Article 39(b). He held that it embraces all national wealth, not merely natural resources, and all the private and public sources of meeting material needs. This minority judgment formed the basis of the Sanjeev Coke Manufacturing Company versus Bharat Coking Coal Limited (1982) case, that upheld the nationalisation of coke oven plants. It was again relied on in Mafatlal Industries Limited versus Union of India (1996).

What is the current ruling?

In Property owners’ association versus State of Maharashtra, a seven-judge Bench referred the issue of interpretation of Article 39(b) to a nine-judge Bench. The current majority opinion (for seven judges including the CJI) held the interpretation of V.R. Krishna Iyer, that every privately-owned property could be used by the state as a ‘material resource’ to ‘subserve the common good’, as a rigid economic ideology that advocates greater governmental control over private resources. Therefore, it was rejected by the majority opinion which said that India has moved on from a socialistic model to a market-based liberalised economic model.

It held that to qualify as a ‘material resource of the community,’ a resource must be ‘material’ and ‘of the community.’ The ‘public trust doctrine’ and context-specific key factors that would determine this are the inherent characteristics of the resource; its impact on community well-being; its scarcity; and the impact due to its concentration in private hands. Hence, certain resources like forests, ponds, spectrum, mines and minerals may fall within the scope of Article 39(b) even if they are privately held. However, not every private resource automatically qualifies just because it meets material needs. The term ‘distribute’ in Article 39(b) also carries a wide meaning that can include both government acquisition and redistribution to private players, as long as it serves the common good. Justice Nagarathna concurred partially with the seven-judge majority while opining that all private resources except ‘personal effects’ like apparel, jewellery etc., can be transformed into a ‘material resource of the community’ through nationalisation, acquisition etc. Justice Sudhanshu Dhulia wrote the sole dissenting opinion where he upheld the interpretation of V.R. Krishna Iyer in the Ranganatha Reddy case and opined that it is for the legislature to decide on how the ownership and control of material resources is to be distributed.

What is the way forward?

Our economy has changed from a socialistic pattern to a liberalised, market-oriented model. The ensuing growth has uplifted vast majority of people from abject poverty. However, there is also a growing inequality that needs to be addressed. This judgment should protect the small farm and forest lands of marginalised sections from forceful acquisitions by the government. Equally important is the sustainable exploitation and distribution of material public resources within the domain of the government.

We must bear in mind that we have not inherited the earth and its resources from our ancestors but have borrowed it from our future generations.

Rangarajan. R is a former IAS officer and author of ‘Polity Simplified’. Views expressed are personal.