Not all private properties can be termed 'material resources of community', rules SC

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, however, said, “Theoretically, the answer is yes, the phrase may include privately owned resources’ even as it 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, adding, the public trust doctrine evolved by this top court may also be applied to identify resources which fall within the ambit of the phrase “material resource of the community”.

It 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.

“Similarly, the material resource of spectrum may be auctioned to the highest bidder who may be a private company, who would then utilise the spectrum along with their technology to best sub-serve the common good. These are questions of economic and social policy which fall outside the ambit of judicial inquiry,” it noted.

“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, ie, 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 polls, Congress leader Rahul Gandhi had talked about growing inequality and the need for wealth redistribution. "First, we will conduct a caste census to know the exact population and status of backward castes, SCs, STs, minorities and other castes. After that, the financial and institutional survey will begin. Subsequently, we will take up the historic assignment to 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. As participants in a vibrant multi-party ‘economic democracy’, the ‘People of India’ have voted to power governments which have adopted varied economic and social policies, based on the country's evolving development priorities and challenges.

“The foresighted vision of our framers (of 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, making it one of the fastest-growing economies in the world. 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.

The nine-judge Constitution Bench was asked to decide whether private properties can be considered "material resources of the community" within the meaning of Article 39(b) of the Constitution and consequently, taken over by the state to sub-serve the common good.

Article 39(b) in the Directive Principles of State Policy says, “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 sub-serve 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 Shri 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. v Union of India (1996).

On Tuesday, the majority judgment by CJI Chandrachud held that the phrase "material resources of the community" may theoretically include privately owned resources; however, the expansive view expressed by Justice Krishna Iyer in Ranganath Reddy case (1978) and relied on by Justice Chinnappa Reddy in Sanjeev Coke case can't be accepted.

“In essence, the interpretation of Article 39(b) adopted in these judgements is rooted in a particular economic ideology and the belief that an economic structure which prioritises the acquisition of private property by the state is beneficial for the nation,” the CJI wrote.

The Bench unanimously held that Article 31C – which protects laws giving effect to certain directive principles -- remained in force to the extent it was upheld in the Kesavanda Bharati case in 1973.