Supreme Court verdict on private property: How it strikes a balance between public welfare and individual rights

The Supreme Court ruled that private properties are not automatically considered 'material resources of the community'.

In a landmark ruling recently, the Supreme Court observed that all private properties are not automatically considered "material resources of the community" and can’t be taken over by the state authorities to subserve the “common good”.

What was the case?

The ruling, which was held by 8-1 majority at the top court, was delivered in the Property Owners Association & Ors v State of Maharashtra case. The case began with the Property Owners Association (POA) of Mumbai challenging Chapter VIIIA of the Maharashtra Housing and Area Development Act (MHADA) of 1976, which allows the state to acquire privately-owned buildings, or “cessed properties”, for restoration. Initially filed in 1992, the case saw multiple referrals to larger benches over the years. The case this month finally reached a nine-judge bench of the Supreme Court. The bench was tasked with determining the constitutional scope of Article 39(b) in relation to private property.

The bench, led by CJI Chandrachud, overturned verdicts post 1978 that adopted socialist theme and ruled that states can take over all private properties for the common good.

The judgement balances the Directive Principles with the need to respect private property rights. The verdict also answered two key questions: what is the status of Article 31C and does Article 39(b) allow the state to acquire private property as “material resources of the community”.

What does Article 39(b) state?

Part IV of the Constitution outlines the “Directive Principles of State Policy” (DPSP). It includes Article 39(b) which mandates the state to adopt policies ensuring that “the ownership and control of the material resources of the community are so distributed as best to subserve the common good.” The court was tasked with interpreting the scope of “material resources” under Article 39(b).

The court also examined whether laws enacted to further the objectives of Article 39(b) could be shielded from constitutional challenges based on fundamental rights, such as the right to equality and freedom of expression. Fundamental rights, enshrined in Part III of the Constitution, and DPSPs have long been in conflict.

Why was Article 31C introduced?

Article 31C was introduced through the 25th Constitutional Amendment in 1971. It sought to protect laws made under Article 39(b) and (c) from constitutional challenges based on the fundamental rights to equality and freedoms. It also barred courts from assessing whether a law genuinely advanced the objectives outlined in Articles 39(b) and (c).

What is the status for Article 31C?

In 1992, when the petitioners in the Property Owners Association case approached the top court to appeal Bombay HC’s decision from a year before, they argued that Minerva Mills verdict effectively struck down Article 31C in its entirety. In the Minerva Mills case in 1980, the top court ruled two amendments to the Constitution introduced by the 42nd Amendment Act of 1976 was null and unconstitutional.

Now, the 42nd Amendment had substituted the words “the principles specified in clause (b) or clause (c) of article 39” in Article 31C with the words “all or any of the principles laid down in Part IV”.

However, the court in Property Owners Association case clarified when striking down the amendment in Minerva Mills, the words “all or any of the principles laid down in Part IV” would not simply be deleted as this would lead to “absurd outcomes or render the text wholly unworkable”, as reported by Indian Express.

Impact of verdict

The court has acknowledged the state’s role in promoting social welfare while respecting individual property rights. By acknowledging this, the Supreme Court has charted a middle path that resonates with India’s economic growth ambitions.

During the 2024 Lok Sabha polls, Congress leader Rahul Gandhi advocated for a comprehensive census followed by wealth redistribution among various socio-economic groups. In response, Prime Minister Narendra Modi sounded alarm bells over what he characterised as the Congress’s dubious attempt to confiscate private wealth and redistribute it among Muslims.