States can't acquire all private properties for common good, rules SC

In a significant verdict, the Supreme Court by a majority of 7:2 on Tuesday held all private properties cannot form part of "material resources of the community" empowering states to take them over for distribution to serve "common good" under the Constitution.

The judgment of the nine-judge Constitution bench headed by Chief Justice D Y Chandrachud provided clarity on the interpretation of Articles 31C and 39(b) of the Constitution, pivotal provisions concerning the rights of individuals against the State's authority to control resources for public good.

The majority ruling has significant implications for laws impacting property and resource distribution, particularly in Maharashtra, where ageing buildings pose severe safety hazards and their restoration was a major issue.

The vexed legal question, which was decided by the top court, was whether private properties can be considered "material resources of the community" under Article 39(b) and taken over by state authorities for distribution to subserve the "common good".

The CJI authored the 193-page majority judgment on behalf of six other judges -- Justices Hrishikesh Roy, J B Pardiwala,  Manoj Misra, Rajesh Bindal, Satish Chandra Sharma, Augustine George Masih -- to decide the two issues.

Also on the nine-judge bench were Justice B V Nagarathna, who partially concurred with the majority view, and Justice Sudhanshu Dhulia, who dissented from the majority opinion.

The majority judgment did not agree with the view expressed by Justice Krishna Iyer in the case of Ranganatha Reddy of 1978 wherein it was held that private properties could be regarded as community resources.

"The direct question referred to this bench is whether the phrase 'material resources of the community' used in Article 39(b) includes privately-owned resources. Theoretically, the answer is yes, the phrase may include privately owned resources," noted the CJI.

The CJI, however, wrote, ”This court is unable to subscribe to the expansive view adopted in the minority judgment authored by Justice Krishna Iyer in Ranganatha Reddy and subsequently relied on by this court in Sanjeev Coke. Not every resource owned by an individual can be considered a 'material resource of the community' merely because it meets the qualifier of 'material needs'."

The majority view said the enquiry on whether a resource fell 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,” said the CJI.

The bench, in its conclusions, upheld Article 31C, which provided immunity to certain laws from judicial scrutiny, "to the extent that it was upheld in Kesavananda Bharati v Union of India remains in force".

The Kesavananda Bharati judgment had held that ”the first half of Article 31C granting immunity to laws enacted in furtherance of clauses (b) or (c) of Article 39 (on taking over of properties) against challenges based on Articles 14,19 and 31 was valid” and the second half of the Article excluding judicial review over whether a law in truth furthers the principles set out in clauses (b) or (c) of Article 39 was struck down.

The CJI, therefore, noted, “The majority judgment in Ranganatha Reddy expressly distanced itself from the observations made by Justice Krishna Iyer (speaking on behalf of the minority of judges) on the interpretation of Article 39(b). Thus, a coequal bench of this court in Sanjeev Coke erred by relying on the minority opinion.”

The majority verdict said the single-sentence observation in the Mafatlal case that "material resources of the community" included privately-owned resources was not part of the ratio decidendi (rationale for the decision) and hence, not binding on the nine-judge bench.

”The term 'distribution' has a wide connotation. The various forms of distribution which can be adopted by the State cannot be exhaustively detailed. However, it may include the vesting of the resources concerned in the State or nationalisation. In the specific case, the court must determine whether the distribution 'subserves the common good',” it said.

The top court, however, did not deal with the validity of Chapter VIII-A of the Maharashtra Housing and Area Development Authority (MHADA) Act, which was inserted in 1986 to empower state authorities to acquire cessed buildings and the land on which those are built if 70 per cent of the occupants make such a request for restoration purposes.

It left the issue of validity of the MHADA provision to be decided by a smaller bench in the light of present judgment.

The case stemmed from Mumbai, where many pre-1940 structures had become increasingly unsafe due to factors like age, overuse, and damage from environmental conditions.

Despite long-standing legislations, including the MHADA Act of 1976, which introduced mechanisms to repair and rebuild dilapidated buildings, the issue of structurally unsound housing continues.

A contentious part of the MHADA Act -- Chapter VIII-A, allowing the acquisition of such buildings by cooperative societies of occupants -- was challenged on constitutional grounds, leading to the present judgment.

The top court had heard 16 petitions, including the lead petition filed by the Mumbai-based Property Owners' Association (POA) in 1992.