The Supreme Court held that not every resource owned by private players qualifies as “material resource of the community” under Article 39(b) of the Constitution for government use to serve the “common good”.

• A nine-judge Constitution Bench of the Supreme Court in the majority decision dismissed such a power of acquisition by the State.

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Background

• Reference to Constitution Bench Based On Petition: The reference to the Constitution Bench was based on petitions filed by parties including the Property Owners Association (POA) 
• The Petitioners filed that private properties cannot be taken over by the state under the garb of constitutional schemes of Articles 39 (b) and 31 C of the Constitution.
  • A total of 16 petitions, including the lead plea filed by POA in 1992, were considered.
  • The case was referred thrice to larger benches of five and seven judges.
  • On February 20, 2002, the matter was referred to a nine-judge Bench.

Key Issues Before the Supreme Court

• Existence of Article 31C: Whether Article 31C, the key constitutional provision that deals with the right to property, exists despite subsequent amendments and court rulings striking down the amendments.
  • The question before the SC in 2024 was whether the SC between 1978-1980 struck down Article 31C as a whole, or did it restore the post-Kesavananda Bharati position wherein Articles 39(b) and (c) remained protected. 
• Interpretation of Article 39(b): Whether the government can acquire and redistribute privately owned properties if they are deemed as “material resources of the community” as mentioned in Article 39(b) of the Constitution.

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Key Observations of the Supreme Court

• Shift from Socialist to Market Economy: Chief Justice Chandrachud, in the majority opinion, rejected Justice Iyer’s view as a “particular ideology.”
  • The court noted that India has moved on from socialism to liberalisation to market-based reforms.
  • The Indian economy has already transitioned from dominance of public investment to the co-existence of public and private investments.
• Rigid Economic Theory: The interpretation that every privately-owned property could be used by the state as material resource to “subserve the common good” postulated a “rigid economic theory which advocates greater state control of private resources”.
• Economic Democracy and the Constitutional Framework: The judgement reaffirmed the concept of economic democracy enshrined in the Indian Constitution. 
  • It acknowledged that the State has a role in regulating economic resources, but this role must be exercised with restraint and in a manner consistent with democratic principles. 
  • Imposing a singular ideology that prioritises state acquisition of private property would undermine the values and principles of our Constitutional framework.

• Contours of Article 39(b): Article 39(b) mandates policy that directs the ownership and control of the material resources of the community are so distributed to best subserve the common good
  • Expansive View cannot be taken: The Court acknowledged that “theoretically” privately-owned resources could be considered as material resources of the community, however an expansive view cannot be taken.
• Context-Based Approach to ‘Material Resources’: The court said the term ‘resource’ in Article 39(b) should be viewed context-wise.
  • Whether a resource could be acquired as a material resource of the community would depend on a series of “non-exhaustive factors” like:
    • The nature and characteristics of the resource.
    • Whether its acquisition is essential for the community’s welfare.
    • The degree of scarcity of the resource.
    • The consequences of the concentration of the resource in the hands of a few private individuals or entities.
  • The Court emphasised that not every privately-owned resource can automatically be deemed essential for public use or common good. 
    • For instance, personal assets like houses and vehicles could not be classified as resources for the community merely because they are privately owned.
• On Existence of Article 31C: The SC has said that the post-Kesavananda position on 31C is restored i.e  while the state can attempt to redistribute material resources for the common good (under Article 39(b)), 
  • It cannot infringe on the basic structure of the Constitution, including the right to private property (protected under Article 300A after the 44th Amendment). 
  • The state must respect the fundamental rights when acquiring private property, following due process.

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Reasons In Support of Redistribution Of Wealth By the State

• Fair and Equitable Distribution of Wealth: Aimed at serving the common interest of all sections of society. 
• Socialisation of Property: Instead of focusing on individual ownership and rights, the emphasis has been on the socialisation of property.

• • For ensuring that property and resources are distributed in a way that benefits the collective welfare, rather than being concentrated in the hands of a few. 
  • This approach seeks to promote social justice and economic equality.
• Poverty Alleviation: Lifts living standards and reduces poverty among marginalised groups.
• Preventing Social Unrest: Mitigates inequality-driven tensions and promotes social harmony. Constitutional Mandates: Aligns with constitutional obligations to promote the welfare of all citizens and achieve the ideal of a Welfare State.

Reasons Against Redistribution Of Wealth By The State

• Infringement on Property Rights: Redistributing wealth can be seen as a violation of the right to private property, undermining individual freedoms and ownership rights guaranteed by the Constitution.
• State Cannot Claim Ownership Through Adverse Possession: State cannot trespass on private property and claim ownership through the concept of ‘adverse possession.’ Doing so makes the state an encroacher.
  • The concept of adverse possession stems from the idea that land must not be left vacant but instead, be put to judicious use. 
  • Essentially, adverse possession refers to the hostile possession of property, which must be “continuous, uninterrupted, and peaceful.”
• Erosion of Free Market Principles: Wealth redistribution undermines laissez-faire economics  leading to less efficient resource allocation and a reduction in overall wealth creation.
  • State may not always be as effective in distributing wealth as the free market.
  • Businesses and individuals may have less incentive to invest or expand their activities.
• Disincentive to Hard Work and Innovation: May reduce individuals’ motivation to work hard or innovate, as they may feel their efforts are not adequately rewarded.
• Increased Dependency: Constant redistribution may foster dependency on government support, discouraging self-sufficiency and personal responsibility among citizens.
  • It could encourage individuals to take financial risks or make poor decisions, knowing that the state will intervene to alleviate the consequences.
• Potential to cause conflicts and Social Unrest: It can cause resentment among the wealthy, leading to social division and conflict between different economic classes.

Challenges Faced By The State In Redistribution Of Property By The State

• Weak Political Will: Political leadership may lack the determination to implement policies for the equitable distribution of resources, particularly in the face of powerful lobbying from vested interests.
• Ambiguity in Defining ‘Material Resources of the Community: The lack of clarity can hinder the consistent application of the redistribution policy across sectors, as different authorities may have different ideas about what constitutes resources to be redistributed for the common good.
• Constitutional Hurdles: Efforts to redistribute resources often face legal challenges under Article 14 (right to equality) and Article 19 (freedom of business and property). 
• Economic Constraints: In a developing economy like India, the fiscal capacity of the state to acquire and redistribute resources might be constrained.

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Way Forward

• Enhancing Judicial Clarity: The judiciary should provide clear and consistent interpretations of property rights under Article 300-A, particularly with respect to the limits of state intervention and private ownership.
• Promotion of Property Rights for Vulnerable Groups: Work towards better property rights for marginalised communities, such as women, tribals, and rural populations.
  • Example: The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 aims to recognize land rights of forest-dwelling tribal communities, but slow implementation has left many without legal recognition of their ownership.
• Balancing Economic Growth and Property Rights: Ensure that laws and policies for economic development, such as land acquisition for infrastructure projects, respect property rights while balancing public welfare.

Conclusion

The Supreme Court’s landmark judgement is crucial in the discourse on property rights and state power in India. 

• By rejecting the expansive interpretation of state acquisition of private property, the Court has reaffirmed the importance of economic democracy and individual freedoms. 

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