Supreme Court Rules: State Cannot Acquire Every Private Property

Supreme Court Rules: A 9-judge constitution bench of the Supreme Court on Tuesday ruled that the state can’t classify every private property as a “community resource”.

The 8:1 verdict means the state can’t take over private property just for community welfare.

The majority opinion by CJI D.Y. Chandrachud said the Directive Principles of State Policy (DPSP) under Article 39(b) of the Constitution which says the state must distribute resources equitably cannot be applied to all private properties.

Article 39(b) says the government must direct its policies to ensure ownership and control of community resources are for the common good.

The other 8 judges were Hrishikesh Roy, B.V. Nagarathna, Sudhanshu Dhulia, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma and Augustine George Masih.

While Dhulia was the lone dissenter, Nagarathna was partial dissent.

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Previous judgements

The verdict rejected previous judgments including Justice Krishna Iyer’s minority verdict in Ranganath Reddy case which said privately owned resources could be considered community resources.

The court clarified that the term “material resources of the community” cannot be stretched to include all private properties just because they serve individual needs.

CJI criticized Justice Iyer’s judgment saying it was an ideological view.

He said the classification of a resource as a “material resource” should depend on its nature, characteristics, community impact, scarcity and the implications of its concentration in private hands.

The top court also said the makers of the Constitution didn’t intend India to follow any economic doctrine. CJI wrote the majority verdict.

The note of dissent

Nagarathna wrote a separate judgment agreeing with the majority verdict but dissenting on the criticism of earlier judgments which held private property as material wealth.

According to Nagarathna, judges like Justice Krishna Iyer who authored those judgments were products of their time and circumstances and should not be condemned for their views.

“Justice Krishna Iyer adjudicated on material resources of a community in the backdrop of a constitutional and economic structure that gave primacy to the state in a broad manner. The 42nd Amendment had included socialism in the Constitution. Can we castigate former judges and allege they did a disservice only because they reached a different interpretive outcome," asked Justice Nagarathna.

"It is concerning how judicial brethren of the future may view past judges, possibly losing sight of the context in which they served and the socio-economic policies pursued by the state,” she added.

She said the paradigm shift after 1991 does not justify branding earlier judges as having done a disservice to the Constitution. "Such observations from this court calling them untrue to their oath of office cannot be accepted”, and future judges should not adopt this practice.

She said material resources can be divided into two categories: State owned and private owned.

She said private resources like essential items like furniture and kitchen tools can be converted into community material resources.

She listed 5 ways to convert private resources into community material resources: (1) nationalization, (2) acquisition, (3) operation of law, (4) purchase by the state, (5) donation by the owner.

Dhulia wrote a dissenting judgment agreeing with the earlier judgments that private property is material wealth.

But the judgment held that Article 31C remains valid as held in Kesavananda Bharati.

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The case file

The case dates back to 1992 and was referred to a nine judge bench in 2002 as to whether private resources should be included in the definition of “material resources of the community” under Article 39(b).

The petitioners argued that “material resources” means any resource which can generate wealth for the community.

They said if the law wanted to include private properties, the language would have said so to avoid misinterpretation.

The government said the interpretation of Article 39(b) should be based on evolving constitutional principles and not fixed ideologies, that a resource is the community’s dynamic economic activity and contribution.

The judgment comes at a time when income inequality is rising in the country. Experts say the judgment doesn’t completely bar the government from making policies on wealth distribution. But it restricts its powers.

“It appears that the ruling does not completely block the government from implementing wealth redistribution policies but narrows the interpretation of ‘material resources of the community’ under Article 39(b),” said Gauhar Mirza, partner at law firm Cyril Amarchand Mangaldas.

"The Supreme Court’s emphasis on private property rights signals a shift from nationalistic policies to a market-oriented approach that values ownership and investment security," Mirza added.

Income inequality in India has risen since 2000s, with the top 1% income share reaching 22.6% and wealth reaching 40.1% in 2022-23 according to a working paper titled Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj.

Written by Thomas Piketty, Lucas Chancel and Nitin Kumar Bharti, the paper shows a huge increase in wealth concentration between 2014-15 and 2022-23. By 2022-23, India’s top 1% income share is the highest globally, surpassing South Africa, Brazil and US.

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