Can Government Redistribute Privately Owned Property?

Context

The Supreme Court is hearing the question whether ‘material resources of the community’ includes privately owned resources in its ambit under Article 39(b) of the Constitution.

Provision for Redistribute Privately Owned Property

• Article 39(b) of the Constitution: Falling under Part IV of the Constitution titled as Directive Principles of State Policy (DPSP), Article 39(b) places an obligation on the state to create policy towards securing the ownership and control of the material resources of the community that are so distributed as best to subserve the common good.
• Non-Enforceable Guidelines: DPSP are meant to be guiding principles for the enactment of laws, but are not directly enforceable in any court of law.

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Evolution of Opinions on Redistribute Privately Owned Property

• State of Karnataka v Shri Ranganatha Reddy 1977: A seven-judge Bench of the SC by a 4:3 majority, held  that privately owned resources did not fall within the ambit of “material resources of the community”. 
  • Minority opinion of Justice Krishna Iyer: Privately owned resources must also be considered material resources of the community.
• Sanjeev Coke Manufacturing Company v Bharat Coking Coal (1983): A five judge bench held that the provision considers the transformation of wealth from private-ownership into public ownership and is not confined to that which is already public-owned.
• Mafatlal Industries Ltd v Union of India (1996): Justice Paripoornan concurred with Justice Iyer opinion held that ‘material resources’ will include  natural or physical resources which is movable or immovable property and includes all private and public sources of meeting material needs, not merely confined to public possessions.

Maharashtra Housing and Area Development Act, 1976 (MHADA)

• Objective: It  was enacted to address the problem of old, dilapidated buildings housing (poor) tenants despite becoming increasingly unsafe.
• Cessed properties: MHADA imposed a cess on the buildings  occupants, which would be paid to the Mumbai Building Repair and Reconstruction Board (MBRRB) to oversee repair and restoration projects.
• The 1986 Amendment: By invoking Article 39(b), 
  • Added Section 1A to MHADA: It aims to execute plans for acquiring lands and buildings, in order to transfer them to “needy persons” and the “occupiers of such lands or buildings”. 
  • Added Chapter VIII-A: It contains provisions allowing the state government to acquire cessed buildings (and the land they are built on) if 70% of the occupants make such a request.
• Violation of Right to Equality: The Property Owners’ Association in Mumbai challenged Chapter VIII-A of the MHADA at the Bombay High Court claiming that the provisions violate the property owners’ Right to Equality under Article 14 of the Constitution.
• • Immunity to DPSP: The court held that laws enacted in furtherance of DPSP could not be challenged on the grounds that they violated the right to equality, as per Article 31C of the Constitution (“Saving of laws giving effect to certain directive principles”).
• Interpreting Material Resources of the Community: The Association appealed the decision in the SC in December 1992. 
  • In the apex court, the central question became whether “material resources of the community” as per Article 39(b) includes privately owned resources which would include cessed buildings.

Conclusion

The result of this hearing has the potential to redefine the extent of governmental authority over private property in India, especially concerning the distribution of wealth for public welfare. This ruling will draw upon years of legal analysis and could have implications for property rights and social policies in the future.

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