Not All Private Property Can Be Considered Material Resource Of The Community: Supreme Court

The Supreme Court today held that the phrase “material resources of the community” in Article 39(b) of the Constitution does not include all property that is privately held with potential to be taken over by the State to "subserve the common good".

A nine-judge Bench delivered three Judgments in the case. One authored by the Chief Justice of India Dr. D.Y. Chandrachud on behalf of himself, Justice Hrishikesh Roy, Justice Rajesh Bindal, Justice J.B. Pardiwala, Justice Satish Sharma, Justice Manoj Misra and Justice Augustine George Masih, a  separate concurring Judgment by Justice B.V. Nagarathna and a partially dissenting Judgment by Justice Sudhanshu Dhulia.

The Bench was dealing with three questions: One, whether Article 31C as upheld in the Keshavananda Bharati case survives in the Constitution after the amendment of the provision by the 42nd Amendment was struck down in the Minerva Mills v. Union of India (1980. Second, whether the interpretation of Article 39(b) adopted in State of Karnataka v. Ranganatha Reddy (1977) case and followed in Sanjeev Coke Manufacturing v. Bharat Coking Coke (1982). must be reconsidered. Third, whether the phrase "material resource of the community" can be interpreted to include resources which are owned privately.

“If Article 39(b) was meant to include all resources owned by an individual, it would state that the ownership and control of resources is so distributed so as to subserve the common good. Similarly, if the provision were to exclude privately owned resources, it would state ownership and control of the State instead of its current phrasing.” the Court said.

The majority held that the use of the words “of the community” rather than “of the State” in Article 39(b) indicates a specific intention of the legislature to include some, but not all, privately owned resources. The words “of the community” must be understood distinct from the individual. The majority Judgment further holds that to declare Article 39(b) to include all privately owned resources would be to endorse a particular economic ideology and structure for our economy.

In Ranganath Reddy, a seven-judge Bench through a 4:3 majority held that privately owned resources did not fall within the ambit of "material resources of the community." Justice V. Krishna Iyer dissented with the majority in taking an expansive view of Article 39(b). Five years later, in Sanjeev Coke, the Court adopted the interpretation provided by Justice Iyer while upholding the nationalisation of coal mines. "The words (in Article 39(b)) must be understood in the context of the constitutional goal of establishing a sovereign, socialist, secular, democratic republic. Though the word 'socialist' was introduced into the Preamble by a late amendment of the Constitution, that socialism has always been the goal as is evident from the Directive Principles of State Policy," the Bench said in Sanjeev Coke.

Later, a nine-judge Bench in Mafatlal Industries Ltd. v. Union of India (1997) upheld the view adopted in Sanjeev Coke, holding that the ambit of Article 39(b) includes natural and physical resources and also movable or immovable property, including all private and public sources of meeting material needs, not merely confined to public resources.

In 2001, while hearing Property Owners Association v. State of Maharashtra, the case in which the Court delivered its Judgment today, it was noticed a conflict between the Judgments of Ranganatha Reddy and Sanjeev Coke on the interpretation of Article 39(b) and referred the case to a Bench "of not less than seven judges" for reconsidering the views expressed in Sanjeev Coke. In 2002, the Court referred the case to a nine-judge Bench.

The majority held that Justice Iyer's observations in Ranganatha Reddy were incorrect in holding that all private property could be considered a material resource of the community. The Bench held that private property can be considered a material resource only if it fulfils certain criteria.

The Court today revived the unamended text of Article 31C, to the extent it was upheld by Kesavananda Bharati v. State of Kerala. The unamended text read, “...[N]o law giving effect to the policy of the State towards securing the principles specified in clause (b) or clause (c) of article 39 shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridges any of the rights conferred by article 14, article 19 or article 31; and no law containing a declaration that it is for giving effect to such policy shall be called in question in any Court on the ground that it does not give effect to such policy.” In Kesavananda Bharati, the first part was held to be valid, and the second part was invalidated.

Justice Nagarathna observed that privately owned resources except for personal objects can come under the ambit of the phrase “material resources of the community” in Article 39(b). She stated that principles of liberalisation, privatisation and globalisation adopted in India have been in application since 1991. Reforms in the economy and structural changes brought about since then hold a mirror against socio-economic policy adopted in India after attaining independence.

Justice Nagarathna divided material resources into two categories: state-owned resources and privately owned resources. She clarified that privately owned material resources can transform and acquire the status of resources of a community. But this would not include personal objects of an individual such as household items. Privately owned material resources can turn into resources of the community by way of nationalisation, acquisition, operation of law, purchase of material resources from a private person or the owner donating, gifting or creating a public trust.

In his dissenting Judgment, Justice Dhulia clarified that he agrees with the majority’s view on Article 31C, but differed on the interpretation of Article 39(b). Justice Dhulia agreed with Justice Iyer's wide interpretation on the phrase “material resources of the community” and stated that material resources of the community include privately owned property. He said that control and distribution of material resources is the task of the legislature. But if a legislation does not subserve the common good of the community, it can be struck down.

Cause Title: Property Owners Association v. State of Maharashtra [W.P.(C) No. 934/1992]

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