Supreme Court Overrules Views Of Justices Krishna Iyer & Chinnappa Reddy On Private Property, Says Constitution Allows Economic Democracy

The Supreme Court, by 7:2 majority, has held as erroneous its previous views that all private properties can be regarded as "material resources of community" which the State is obliged to distribute for common good as per Article 39(b) of the Constitution.

The majority judgment authored by Chief Justice of India DY Chandrachud held that the views expressed by Justice VR Krishna Iyer (in State of Karnataka v. Ranganatha Reddy (1978) 1 SCR 641) and Justice O Chinnappa Reddy (in Sanjeev Coke Manufacturing Company vs. Bharat Coking Coal Ltd. and Anr. (1983) 1 SCR 1000) are erroneous.

"To declare that Article 39(b) includes the distribution of all private resources amounts to endorsing a particular economic ideology and structure for our economy. Justice Krishna Iyer's judgment in Ranganatha Reddy, which was followed inter alia in Sanjeev Coke and Bhim Singhji, was influenced by a particular school of economic thought," CJI Chandrachud wrote.

CJI noted that in Ranganatha Reddy, Justice Krishna Iyer observed that Article 39(b) constitutes “a directive to the State with a deliberate design to dismantle feudal and capitalist citadels of property”.In Bhim Singhji, Justice Krishna Iyer cited Karl Marx in his judgment to observe that taking over large conglomerations of land is necessary to make Article 39 a “constitutional reality”. Similarly, in Sanjeev Coke, Justice Chinappa Reddy states that “the words and thought of Article 39(b) but echo the familiar language and philosophy of socials as expounded by all socialist writers”

"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," CJI observed.

Constitution rejects dogmas, allows economic democracy

Though Justices Krishna Iyer and Reddy referred to the vision of the framers as the basis to advance this view, CJI said that the Constitution did not lay down any particular economic ideology for future governments. To buttress this observation, CJI referred to the views expressed by Dr BR Ambedkar in the Constituent Assembly Debates, which rejected any particular economic dogma. The Constitution was framed in broad terms to allow succeeding governments to experiment with and adopt a structure for economic governance which would subserve the policies for which it owes accountability to the electorate. According to Dr Ambedkar, if the Constitution laid down a particular form of economic and social organisation, it would amount to taking away the liberty of people to decide the social organisation in which they wish to live. He opined on several occasions that economic democracy is not tied to one economic structure, such as socialism or capitalism, but to the aspiration for a 'welfare state'.

"Thus, the role of this Court is not to lay down economic policy, but to facilitate this intent of the framers to lay down the foundation for an 'economic democracy'," CJI stated in the judgment.

The judgment noted that the successive governments of India have experimented with various economic models.

"At the time of independence in the 1950s and 1960s, given the early challenges of our republic, the focus of the government was on planning, a mixed economy, heavy industries, and import substitution policies. Subsequently, in the late 1960s and 1970s, there was a shift towards purportedly 'socialist' reforms and policies. Since the decade of the 1990s, or the liberalisation years, there has been a shift towards pursuing a policy of market-based reforms.150 Today, the Indian economy has transitioned from the dominance of public investment to the co-existence of public and private investment," CJI wrote.

"The doctrinal error in the Krishna Iyer approach was, postulating a rigid economic theory, which advocates for greater state control over private resources, as the exclusive basis for constitutional governance," CJI stated.

The foresighted vision of our framers to establish an 'economic democracy' and trust the wisdom of the elected government, CJI added, 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 judgment stated.

The majority held that private property can come under the scope of Article 39(b) if it meets the condition of being a material resource of the community. The enquiry on whether a resource falls within the ambit of "material resource of community" must be based on the nature of the resource, the characteristics of the resource, the impact of the resource on the well-being of the community, the scarcity of the resource, and the consequence of such a resource being concentrated in the hands of private players. The public trust doctrine can also be applied here.

There are various forms of resources, which may be privately owned, and inherently have a bearing on ecology and/or the well-being of the community. Such resources fall within the net of Article 39(b). To illustrate, non- exhaustively, there may exist private ownership of forests, ponds, fragile areas, wetlands and resource-bearing lands. Similarly, resources like spectrum, airwaves, natural gas, mines and minerals, which are scarce and finite, may sometimes be within private control.

Also Read - 'Harsh, Unwarranted' : Justices Nagarathna & Dhulia Object To CJI Chandrachud's Remarks On Justice Krishna Iyer Doctrine

Why All Private Properties Cannot Be Distributed For Common Good As Material Resources Of Community? Supreme Court Explains

Other reports about the judgment can be read here.

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