Supreme Court Doubts Argument That Private Property Isn't Included In 'Material Resources Of Community' As Per Article 39(b) [Day 2]

The CJI explained that the minority decision strived to balance the economic needs of the society, which are furthered in the form of Directive Principles (DPSPs) in the Constitution. Article 39(b) being one of the DPSPs reflects the Gandhian Principles which take a middle group as opposed to the two extremes of capitalism and socialism of the political theory spectrum.

On one hand, Capitalism propagates individual ownership of resources, while on the other hand, Socialism doesn't recognize private property and asserts all property to be owned only by the community. However, in India, the philosophy of property is governed by the Gandhian ethos which regards property to be held in trust. One doesn't just hold the property for future generations but also the environment and in turn contribute to the cause of sustainable development and intergenerational equity.

“Our DPSPs are in pursuance of the Gandhian ethos and ideology. What is that ethos? Our ethos regards property that is held in trust. We don't go as far as to adopt a socialistic model that there is no private property at all, of course, there is private property, and that concept of trust which is now being applied in the context of sustainable development in the environmental context ……Our concept of property has undergone a very different, very subtle change - from either the extreme capitalist perspective or the extreme socialist perspective. We regard property as something we hold in trust. We hold a property in trust for the succeeding generations in the family but broadly we also hold the property in trust for the wider community, that's the whole concept of sustainable development- that's what we call intergenerational equity”

When it comes to the interpretation given to Article 39(b), CJI posited that Justice Krishna Iyer and Justice Reddy (who concurred with the minority decision) dwell deep into two main points: where property comes from, and who benefits from it. They argue that even if something didn't originally belong to the community, if it benefits the community, like natural resources, it can be considered under this law. If in the event the government takes control of property, through nationalisation, and uses it for the community's benefit, it fits within Article 39(b). The broader vision is that it's not about handing out property to individuals; it's about using it in a way that helps everyone.

“Both Justice Krishna Iyer and Justice Reddy deal with 2 aspects of Article 39(b) - (1) the origin and (2) the beneficiary....if something doesn't originate in the community, then 39(b) cannot apply. (2) The distribution postulates the distribution to individuals. If you are not distributing it to individuals, then 39(b) will not apply. They deal with both these arguments at the philosophical level by saying that even if something that does not originate in the community, if it is a property of nature that bearing on the community 39b is capable of application. (2) On distribution, they say that even if it is not being distributed to individuals - supposing nationalisation, you take over the property, and vest it in a state corporation, this is not a distribution to an individual. That concept is also within the purview of 39b , because why were you nationalising, you were taking over the private property but using in trust for the wider society but it's not being given or distributed.”

Article 39(b) To Be Seen From The Lens Of 'Social Transformation' Goal Of Constitution

The CJI, suggesting to be disinclined to completely accept the view of the appellants that private resources are excluded from 'Material Resources of the Community', expressed that the provision has to be seen in the context of the larger goal of social transformation as envisaged by the framers of the Constitution. Excluding private property from being a community resource would be an extreme and dangerous interpretation of Article 39(b). The CJI illustrated this by giving the example of a private forest. Even though private, the forest constitutes a vital resource for the community.

“It will be a little extreme to suggest that resources with the community will not mean private property of the individual. Why it would be dangerous to take that view- if it is a private forest, for us to say it is private and therefore 39(b) will not apply and therefore it is hands off - it would be extremely dangerous. We must put ourselves back to the 1950s when the Constitution was made. The Constitution was intended to bring about social transformation…”

The CJI further analysed that a law made under Article 39(b) can survive in two ways (1) that it is proven to be connected to the object of Article 39(b) and (c), thus getting a safe harbour under Article 31C; (2) even if one assumes Article 31C to be struck down, the laws can be protected as long as it proves to be reasonable in fulfilling the principle laid down in the constitution.

Fate Of Article 31C Post Minerva Mills: The Bench Faces A Conundrum

In the first day's arguments, the appellants contended that the interpretation and effectiveness of Article 39(b) was correlated to the effectiveness of Article 31C. Since Article 31C provides a safe harbour to laws made under Article 39(b), the former's effectiveness has to be evaluated in light of the decisions of Kesavananda Bharati v. State of Kerala and in Minerva Mills v. Union of India . While Kesavananda partially upheld Article 31C, the amended version of it in the 42nd Amendment was struck down in Minerva Mills. The main conundrum that the bench now faces is whether the striking down of the amended version of Article 31C would revive the upheld version in Kesavananda Bharati.

Article 31C of the Constitution, in its original form, was introduced through the Constitution (25th Amendment) Act, 1971. As per the Article, two key things were introduced, (1) Even if a law conflicts with articles 14 (equality before the law) or 19 (freedom of speech, etc.), as long as it is trying to implement the goals set out in Part IV, it won't be considered invalid; (2) if a law declares its objective is to fulfil these broader goals of public good under the DPSPs, the effectiveness of such a law cannot be scrutinized under the principles of Judicial review.

However, in the landmark case of Kesavananda Bharati v. State of Kerala, the second part of Article 31C namely providing immunity to the Centre's legislations made in furtherance of the DPSPs from the judicial review was struck down. It may noted that now the operative part of Article 31C reads :

“Notwithstanding anything contained in article 13, no law giving effect to the policy of the State towards securing all or any of the principles laid down in Part IV shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridges any of the rights conferred by article 14 or article 19.

Provided that where such law is made by the Legislature of a State, the provisions of this article shall not apply thereto unless such law, having been reserved for the consideration of the President, has received his assent.”

Subsequently the 42nd Amendment Act, 1976 introduced by the Parliament further amended Article 31C. Herein the expression “The principles specified in clause (b) or clause (c) of article 39", was substituted with "all or any of the principles laid down in Part IV" (section 4 of the 1976 Amendment Act)

The said amendment when put to challenge in the case of Minerva Mills was struck down completely. The decision in Minerva holds that since giving an umbrella protection to all laws made in furtherance of DPSPs under Part 4 from being challenged on grounds of Article 14 and 19 violates the basic structure doctrine, the said substituted amendment was struck down.

Highlighting the present conundrum, the CJI noted that since the principles laid in parts (b) and (c) of article 39 are included in the broader expression "All or any of the principles laid down in part 4.", if the broader expression replaces the earlier specificity, then striking out of the broader provision would not automatically bring back the original, specific expression that was replaced.

“ The principles specified in clauses b and c of article 39 is subsumed in the expression "All or any of the principles laid down in part 4"...so if the earlier words are subsumed in what is substituted then the entirety of what is struck down, that will not result in the revival of the original provision. That is the problem.”

Answering this, the Solicitor General (SG) Mr Tushar Mehta representing the Union contended that the decision in Minerva Mills only strikes out the amended version brought by S.4 of the 42nd Amendment while the upheld version by the decision in Kesavananda Bharati would still survive.

It may be noted that before the coming of the 42nd Amendment, the upheld part of Article 31C (relevant herein) would read as follows :

“Notwithstanding anything contained in article 13, no law giving effect to the policy of the State towards securing all or any of the principles specified in clause (b) or clause (c) of article 39 shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridges any of the rights conferred by article 14 or article 19 and no law containing a declaration that it is for giving effect to such policy shall be called in question in any court on the ground that it does not give effect to such policy.” ( Italicized part was struck down in Kesavananda Bharati)

The SG supplemented this with the analogy that “if a player is on the field and you send a substitute, the substitute goes, the player also doesn't go simultaneously, he remains.”

Senior Advocate Mr Rakesh Dwivedi appearing for one of the respondents, further added that when the Court in Minerva declared S.4 of the 42nd Amendment as unconstitutional, then “logical sequitur is that Article 31C as upheld in Kesavananda Bharati stands as part of the constitution.”

Mr Dwivedi explained that when S.4 was considered 'void ab initio' and declared as a stillborn law, it wouldn't have the effect of replacing the original version of Article 31C.

The Union then relied upon the declaration made by the Court in Waman Rao v. Union of India wherein the court, though was testing the constitutional validity of Article 31A but also held that the unamended version of Article 31C as upheld by Kesavananda Bharati remains valid. The relevant portion of the declaration reads as :

“57.....Putting it simply, and there is no reason why simple matters should be made complicated, the ratio of the majority judgments in Kesavananda Bharati (Supra) is that the first part of Article 31C is valid.

58. Apart from this, if we are right in upholding the validity of Article 31A on its own merits, it must follow logically that the unamended Article 31C is also valid. The unamended portion of Article 31C is not like an unchartered ship. It gives protection to a defined and limited category of laws which are passed for giving effect to the policy of the State towards securing the principles specified in Clause (b) or Clause (c) of Article 39. These clauses of Article 39 contain directive principles which are vital to the well-being of the country and the welfare of its people. Whatever we have said in respect of the defined category of laws envisaged by Article 31A must hold good, perhaps with greater force, in respect of laws passed for the purpose of giving effect to Clauses (b) and (c) of Article 39….”

Seemingly unsatisfied with the answer, the CJI pointed out that the decision in Waman Rao is silent on the effect of the substitution and only dwells on the understanding of what was upheld in Kesavanad Bharati.

“ It only tells us what the decision in Kesavanand, mainly of 31C prior to Kesavanand and as upheld in Kesavanand. That's all. It doesn't deal with the effect of the substitution, the substitution being stuck down at all….Waman Rao doesn't give us an answer to the conundrum.”

Senior Advocate Mr Andhyarujina further informed that the question of the unconstitutionality of a substituted provision was never present before the judges in Waman Rao's case, for the simple reason that when the hearings stood concluded the result of Minerva Mills was not out.

Why The Court Couldn't Apply The Test Of Severability In Minerva Mills?

As per the Doctrine of Severability, the Court can uphold a certain part of a law consistent with the Constitutional Principles while invalidating the other part. In essence, the Court 'severs' the unconstitutional limb of the provision and keeps the valid part intact. If the Court comes to the conclusion that severing the invalid provisions of the law would result in altering the fundamental purpose or intent of the law, it may choose not to apply the test and allow a complete striking down of the law.

In the case of Minerva Mills, the amendment in question had completely diluted the expression “ principles specified in clause (b) or clause (c) of article 39” into a broad-ranging spectrum of “ "all or any of the principles laid down in Part IV”. It was due to this reason, the CJI explained, that the Court therein was devoid of the option of severing only the unconstitutional part and upholding the protection granted to Article 39(b) in specific.

The CJI expressed, “The bench in Minerva mills did not have the ability to say it was severable, because the severability would not arise because it was one amendment, one substitution. It was composite, otherwise they would have severed it. Otherwise, they would have said that what has been upheld in Kesavanand, we cannot strike it down. They didn't have that choice here.”

Stressing the composite nature of S.4 of the 42nd Amendment, the CJI highlighted did not leave any specificity for Article 39(b) in the provision to survive by itself after striking out the invalid aspects.

“When you apply the test of severability, something which is valid has to survive, here they could apply the test because it was composite....therefore they had to strike down the entirety of section 4 of the 42nd Amendment.”

Conclusively, the CJI posed a question for the counsels and the Court to ponder: Does Waman Rao's decision mean that the original Article 31C stands as it was only until the new changes of the 42nd Amendment were introduced, or does it mean that the original provision remains valid at all times, even after the Minerva Mills judgement?

Put simply, does the original (unamended) Article 31C remain in effect before and after the Minerva Mills decision struck down the changes brought in by the 42nd Amendment?

Background

The batch of petitions initially arose in 1992 and was subsequently referred to a nine-judge bench in 2002. After more than two decades of being in limbo, it is finally being revisited in 2024. The main question to be decided is whether material resources of the community under Article 39(b) (one of the Directive Principles of the State Policy), which states that the government should create policies to share community resources fairly for the common good, includes privately owned resources. Article 39(b) reads as follows:

"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;”

The issue in these petitions revolves around the constitutional validity of Chapter-VIIIA, introduced in 1986 as an amendment to the Maharashtra Housing and Area Development Act,(MHADA) of 1976. Chapter VIIIA deals with the acquisition of specific properties, wherein the State requires payment at a rate equivalent to one hundred times the monthly rent for the premises in question. Section 1A of the Act also incorporated through the 1986 amendment, states that the Act is designed to implement Article 39(b) of the Constitution.

A three-judge bench first heard this matter. In 1996, it was referred to a five-judge bench, which then referred to a seven-judge bench in 2001. Eventually, in 2002, the matter was put before a nine-judge bench.

The reference was with regard to the interpretation of Article 39(b) of the Constitution. Put shortly, in State of Karnataka v. Ranganatha Reddy & Anr. (1978), two judgments were delivered. The judgment delivered by Justice Krishna Iyer stated that material resources of the community covered all resources– natural and man-made, publicly and privately owned. The other judgment, delivered by Justice Untwalia, did not consider it necessary to express any opinion with regard to Article 39(b). However, the judgement stated that the majority of Judges did not subscribe to the view taken in respect of Article 39(b) by Justice Iyer. The view taken by Justice Iyer was affirmed by a Constitution Bench in the case of Sanjeev Coke Manufacturing v. Bharat Coking Coal Ltd. (1982). This was also affirmed by a judgment of a nine-judge bench in the case of Mafatlal Industries Ltd. v. Union of India.

The seven-judge bench in the present matter stated that this interpretation of Article 39(b) required to be reconsidered by a Bench of nine learned Judges. It held–

"We have some difficulty in sharing the broad view that material resources of the community under Article 39(b) covers what is privately owned."

Accordingly, the matter was referred to a nine-judge bench in 2002.

The bench hearing the issue comprises CJI DY Chandrachud and Justices Hrishikesh Roy, B.V. Nagarathna, Sudhanshu Dhulia, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma and Augustine George Masih.

Case Details: Property Owners Association v. State of Maharashtra (CA No.1012/2002) & Other Connected Matters