Private properties not ‘material resources of the community’: Supreme Court

The Supreme Court, on Tuesday, 5 November, ruled by a majority of 8:1 that private properties cannot be considered part of the ‘material resources of the community’ that the State is obligated to redistribute equitably under the Directive Principles of State Policy (DPSP) outlined in Article 39(b) of the Constitution.

The Court stated that while certain private properties could fall under Article 39(b) if they serve the community’s needs, not all privately owned resources qualify for redistribution to promote the ‘common good’. The decision arose from the case of Property Owners Association and Ors v State of Maharashtra and Ors.

The nine-judge bench hearing the case, led by Chief Justice of India (CJI) D.Y. Chandrachud, included justices Hrishikesh Roy, B.V. Nagarathna, Sudhanshu Dhulia, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma and Augustine George Masih. The majority opinion was written by CJI Chandrachud, with Justice Nagarathna partially concurring and Justice Dhulia dissenting.

Majority opinion

The majority judgement, authored by Chief Justice D.Y. Chandrachud, clarified that while the term “material resources of the community” could, in theory, include privately owned resources, it should not be interpreted too broadly. The Court rejected the expansive interpretation set out in the minority judgement by Justice Krishna Iyer in State of Karnataka v Shri Ranganatha Reddy, which was later adopted by Justice Chinnappa Reddy in Sanjeev Coke Manufacturing Co. v Bharat Coking Coal Ltd.

The majority held: ‘Not every resource owned by an individual can be considered a material resource of the community merely because it meets the qualifier of material needs.’

The Court further explained that the determination of whether a resource falls under Article 39(b) must be context-specific and based on a range of factors, including:

1. The nature of the resource.

2. Its impact on the well-being of the community.

3. Its scarcity.

4. The consequences of the resource being concentrated in private hands.

The Court also acknowledged that the public trust doctrine could play a role in identifying resources that fall within the scope of ‘material resources of the community’.

The term ‘distribution’ in this context was explained as having a wide connotation, which could encompass various methods, such as vesting the resource in the State, nationalisation, or other mechanisms that ensure the resource serves the common good.

The majority judgement emphasised that the interpretation put forward by Justice Iyer and followed in Sanjeev Coke reflected a particular economic ideology that was not intended by the framers of the Constitution. The Court reaffirmed that Article 31C, as upheld in Kesavananda Bharati, remains in force.

In 1980, a Constitution bench of the Supreme Court in Minerva Mills v Union of India struck down parts of the 42nd Amendment that amended Article 31C.

In light of that ruling, the present bench was asked whether the Court in Minerva Mills had restored the post-Kesavananda Bharati position or struck down Article 31C in its entirety.

Economic ideology and interpretation of Article 39(b)

The majority emphasised that Justice Iyer’s interpretation, which included all private property under the term ‘material resources of the community’, amounted to endorsing a specific economic ideology. The Court stated, “To declare that Article 39(b) includes the distribution of all private resources amounts to endorsing a particular economic ideology and structure for our economy.”

The majority further observed that such an interpretation would only satisfy one of the three requirements of the phrase ‘material resources of the community’ — that the goods must be a resource — but would ignore the essential qualifiers: that the resource must be ‘material’ and ‘of the community’. The Court noted that the words ‘of the community’ are significant and distinct from ‘individual’ and should not be seen as superfluous.

The majority concluded that the inclusion of all private property within the scope of Article 39(b) would misinterpret the constitutional intent, as it overlooks the core concepts of ‘material’ and ‘community’, which are crucial to the provision.

In essence, the Court ruled that not all privately owned resources are subject to redistribution by the State. Only those that meet the defined criteria — serving the community’s well-being and not being overly concentrated in private hands — could potentially be classified as ‘material resources of the community’ under Article 39(b).

Justice Nagarathna’s opinion

Justice Nagarathna’s view was partially in agreement with the majority, although she believed that privately owned resources — except for personal items such as ornaments and household articles — could be considered ‘material resources of the community’ under certain conditions. She outlined several ways in which private resources could transform into community resources, including:

1. Nationalisation

2. Acquisition by the state

3. Operation of law

4. Purchase by the State

5. Donation by the owner.

Justice Nagarathna also affirmed that the decision in Sanjeev Coke was correct in its merits, and cannot be dismissed solely due to its reliance on Justice Iyer’s minority view in Ranganath Reddy.

In her remarks, Justice Nagarathna emphasised that the key issue was how the ownership and control of private material resources could be transformed to serve the common good.

Justice Dhulia’s dissent

The details of Justice Dhulia’s dissent are yet to be fully revealed due to technical issues during the pronouncement. The report will be updated once the full judgement is available.

In his dissent, Justice Dhulia argued that the prerogative to determine the control and distribution of material resources rests with Parliament.

Background and case history

The case traces its origins to 1992, when the Property Owners Association (POA) filed a petition against Chapter VIII-A of the Maharashtra Housing and Area Development Authority (MHADA) Act. This provision, inserted in 1986, allows the state to acquire cessed buildings and the land beneath them for restoration purposes, provided 70 per cent of the occupants make such a request.

The POA contended that such provisions, enacted in furtherance of Article 39(b), contravened the principle that only certain resources which serve the ‘common good’ should be subject to redistribution by the State. The primary legal question at stake was whether privately owned resources could be included within the meaning of ‘material resources of the community’ under Article 39(b) of the Constitution.

Article 39 directs the state to protect and promote the economic welfare of citizens: ‘The State shall, in particular, direct its policy towards securing: (b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.’

The appellants argued that the term ‘material resources’ should include any resource capable of generating wealth for the community, through goods or services. If the framers of the Constitution had intended to include private resources, they would have explicitly done so to prevent any ambiguity.

The Union, however, argued that the interpretation of ‘material resources’ should be guided by evolving constitutional principles, reflecting the community's dynamic economic interactions, rather than by a rigid ideological framework.

The Supreme Court’s decision clarifies the boundaries of private property in relation to public welfare, reaffirming that not all privately owned resources qualify as ‘material resources of the community’ for equitable redistribution under Article 39(b). The ruling provides a framework for understanding how and when private resources may be considered for redistribution in the public interest.