Private property and the ‘common good’: Unpacking the SC verdict

While upholding the law in 1991, the Bombay High Court had said that laws passed to give effect to Article 39(b) are protected under Article 31C of the Constitution. Introduced by the Constitution (Twenty-Fifth) Amendment Act in 1971, Article 31C was meant to further the Indira Gandhi government’s stated socialist goals. The original provision contained two parts.

The first part said “no 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 [right to equality], article 19 [assorted rights including freedom of speech and freedom to practise any profession] or article 31 [right to property, repealed and replaced by Article 300 A in 1978]”.

The second half said “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” — effectively protecting laws meant to give effect to Articles 39(b) and (c) from being being challenged in court. This part was struck down by the SC in its landmark Kesavananda Bharti in 1973. But the first part remained in effect.

The Constitution (Forty-Second Amendment) Act, 1976 further expanded the scope of Article 31C to all articles in Part IV of the Constitution (Articles 36-51). But this amendment was struck down by the SC in the Minerva Mills case in 1980.

Question 1: Status of Article 31C

In 1992, when the petitioners in the Property Owners Association case approached the SC to appeal Bombay HC’s decision from a year before, they argued that Minerva Mills verdict effectively struck down Article 31C in its entirety. This, they argued, opened the Maharashtra law to be quashed on the grounds that it violated Article 14.

Now, the 42nd Amendment had substituted the words “the principles specified in clause (b) or clause (c) of article 39” in Article 31C with the words “all or any of the principles laid down in Part IV”.

The court in Property Owners Association case clarified when striking down the amendment in Minerva Mills, the words “all or any of the principles laid down in Part IV” would not simply be deleted as this would lead to “absurd outcomes or render the text wholly unworkable”.

Instead, the version of Article 31C that was upheld in Kesavananda Bharati — the first part of the original provision — would remain. The court thus held that the repeal of the earlier wording in the Constitution and the substitution of the new one are a part of the same action by Parliament.

The whole Bench, including Justice BV Nagarathna, who authored a concurring opinion, and Justice Sudhanshu Dhulia, who delivered the sole dissent, agreed on this point.

Question 2: Interpretation of Article 39B

Justice Krishna Iyer, in his concurring opinion in Ranganatha Reddy (1977), specifically dealt with what constituted a “material resource of the community”. He held that “all resources, natural and man-made, public and private-owned” that satisfy material needs fall within the ambit of the phrase “material resources of the community” used in Article 39(b).

The SC relied on this minority opinion in Sanjeev Coke Manufacturing Co (1983). In a challenge to the Coking Coal Mines (Nationalisation) Act, 1972, the court held that the nationalisation of coke oven plants owned by the petitioners was immune from being challenged for violating Article 14.

The court in Property Owners Association, however, drew a distinction between whether private property can be considered as “material resources of the community”, and if all private property is included in this phrase (as Justice Iyer had held). It held that if Article 39(b) was meant to include all private property, the provision would have been worded differently to make this clear.

Justice Iyer’s interpretation, the court said, was rooted in “the belief that an economic structure which prioritises the acquisition of private property by the state is beneficial for the nation”. This was an “error” since it was based on a single “rigid economic theory”.

“Today, the Indian economy has transitioned from the dominance of public investment to the co-existence of public and private investment,” the court said and that “a construction of Article 39(b) which provides that all private property is included within the ambit of Article 39(b) is incorrect”. Justice Nagarathna, however, disagreed and said the interpretation of Article 39(b) “cannot be critiqued… merely because the socio-economic policies of the State have changed”.

The majority opinion provided four factors that must be considered to determine whether private property may be deemed as a material resource of the community:
– The nature of the resource and its inherent characteristics;
– The impact of the resource on the well-being of the community;
– The scarcity of the resource; and
– The consequences of the resource being concentrated in the hands of private owners.

In his dissent, Justice Dhulia wrote in favor of retaining the view that all private resources can be considered the material resources of the community. He stated that though poverty may have decreased “in absolute terms”, this does not mean that overall inequality and “the gap between the rich and the poor” has decreased. Addressing this requires “welfare measures…under Article 39(b) & (c) of the Constitution, as interpreted in Ranganatha Reddy and Sanjeev Coke”, he held.