All private properties can’t be taken over by state, rules top court

Amid the raging debate over redistribution of wealth, the Supreme Court on Tuesday ruled that not all private properties can be termed “material resources of the community” under Article 39(b) of the Constitution and taken over by the state to subserve the “common good”.

A nine-judge Constitution Bench led by CJI DY Chandrachud said, “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’.”

Writing the verdict for himself, Justice Hrishikesh Roy, Justice JB Pardiwala, Justice Manoj Misra, Justice Rajesh Bindal, Justice SC Sharma and Justice AG Masih, the CJI, however, said, “Theoretically, the answer is yes, the phrase may include privately owned resources” even as he sought to emphasise that “this court must not tread into the domain of economic policy, or endorse a particular economic ideology while undertaking constitutional interpretation.”

Justice Nagarathna wrote a partially concurring verdict while Justice Dhulia delivered a dissenting judgment.

To decide if a particular private resource was a “material resource, the court must determine if its distribution would subserve common good”, the CJI said while pronouncing the verdict.

“Whether the resource in question falls within the ambit of Article 39(b) must be context-specific and subject to a non-exhaustive list of factors such as the nature of the resource and its characteristics; the impact of the resource on the well-being of the community; the scarcity of the resource; and the consequences of such a resource being concentrated in the hands of private players,” the CJI said. The majority verdict said, “In some cases, the mere vesting of the resource in the hands of the government serves the common good, while in other cases, a resource may be distributed amongst private players to achieve this purpose. To illustrate, a large privately owned pond may be acquired and put in control of a governmental agency or a cooperative society so that the pond is preserved.

“To hold that the term ‘distribution’ cannot encompass the vesting of a private resource would amount to falling into the same error as the Justice Krishna Iyer doctrine i.e. to lay down a preference of economic and social policy,” the CJI said in his majority verdict, disapproving of observations made by Justice Iyer in a 1978 verdict.

In the run-up to the 2024 Lok Sabha poll, Congress leader Rahul Gandhi had talked about growing inequality and the need for wealth redistribution. “First, we will conduct a caste census. After that, the financial and institutional survey will begin. Subsequently, we will…distribute the wealth of India, jobs and other welfare schemes to these sections based on their population,” he had said.

However, the majority verdict rejected this line of constitutional thinking.

“India’s economic trajectory indicates that the Constitution and the custodians of the Constitution -– the electorate -– have routinely rejected one economic dogma as being the exclusive repository of truth. The foresighted vision of our framers (of the Constitution) to establish an ‘economic democracy’ and trust the wisdom of the elected government has been the backbone of the high growth rate of India’s economy... To scuttle this constitutional vision by imposing a single economic theory, which views the acquisition of private property by the state as the ultimate goal, would undermine the very fabric and principles of our constitutional framework,” the CJI said in his majority verdict.

Article 39(b) in the Directive Principles of State Policy says that “the State shall, in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good”.

While dealing with nationalisation of state road transport services, a seven-judge Bench of the top court had in the State of Karnataka and another etc. versus Ranganatha Reddy & another (1978) had given two concurring opinions. Justice VR Krishna Iyer and two other judges held that material resources of the community would include both natural and man-made, publicly and privately owned resources.

The other view articulated by Justice NL Untwalia and three other judges, however, said they did not subscribe to the view taken in respect of Article 39(b) by Justice Iyer.

The matter was referred to the nine-judge Bench as Justice Iyer’s minority view was affirmed in 1982 in Sanjeev Coke Manufacturing Company vs Bharat Coking Coal Ltd and another. It was further affirmed by a verdict in Mafatlal Industries Ltd. vs Union of India (1996).