Supreme Court Limits State Power To Claim Private Property For Community Use

In a landmark decision on Tuesday, the Supreme Court of India ruled that states cannot broadly classify all private property as “material resources of the community” to justify its acquisition. An 8:1 decision from the nine-judge constitutional bench emphasizes limits on state power over private property under Article 39(b) of the Indian Constitution.

The ruling clarifies that the Directive Principles of State Policy (DPSP), particularly Article 39(b)—which encourages the equitable distribution of resources for the common good—cannot be applied to all privately owned properties merely because they serve individual or societal needs. The court’s decision was based on a majority opinion penned by Chief Justice D.Y. Chandrachud, with supporting opinions from Justices Hrishikesh Roy, B.V. Nagarathna, Sudhanshu Dhulia, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma, and Augustine George Masih.

Justice Sudhanshu Dhulia wrote a dissenting opinion, while Justice Nagarathna partially dissented, cautioning against an overly critical view of past judicial perspectives that supported state control over private property.

Rejecting Previous Precedents

The Supreme Court’s decision overturns previous judgments, notably a minority opinion by Justice Krishna Iyer in the Ranganath Reddy case. Justice Iyer had argued that private resources could be deemed community resources, advocating for a broad interpretation to empower the state in distributing material wealth. Chief Justice Chandrachud criticized this view as ideologically driven, emphasizing that a resource should only be classified as a “material resource” based on its nature, community impact, scarcity, and potential effects if concentrated in private ownership.

The Constitution’s Economic Vision

The court underscored that India’s Constitution does not endorse any specific economic model, highlighting that its framers avoided adherence to a rigid economic doctrine. While affirming the state’s role in resource distribution, the bench clarified that it cannot indiscriminately reallocate private resources.

Justice Nagarathna, in her partial dissent, argued that Justice Iyer’s interpretations were a product of their time, reflecting the socio-economic environment when socialism was embedded in the Constitution following the 42nd Amendment. She cautioned against labeling these historical judgments as misguided, stating, “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.” She expressed concern over the tendency to scrutinize previous judgments without acknowledging the context in which they were made, particularly given the shift toward market-oriented reforms since the early 1990s.

Justice Nagarathna also suggested that privately owned resources can, under certain conditions, be transformed into community resources through methods such as nationalization, acquisition, operation of law, state purchase, or owner donation.

Background of the Case

The case, originally filed in 1992 and referred to a nine-judge bench in 2002, focused on whether private property could be considered part of “material resources of the community” under Article 39(b). Petitioners argued that any resource with the potential for generating community wealth could fall under this provision, while the state argued for a more expansive, adaptable interpretation aligned with evolving socio-economic goals.

The court’s decision also touched on Article 31C, which protects the DPSP provisions from judicial review, as upheld in the landmark Kesavananda Bharati case.

The Broader Economic Implications

Gauhar Mirza, a partner at Cyril Amarchand Mangaldas, noted that while the ruling narrows the state’s power to appropriate private property, it does not fully restrict the government’s ability to implement policies for wealth redistribution. “The judgment seems to limit the application of ‘material resources of the community’ under Article 39(b) but stops short of barring wealth distribution policies altogether,” Mirza said.

The ruling signals a shift toward safeguarding private property rights, which some experts interpret as favoring a market-oriented approach in which private ownership and investment security are prioritized.

Rising Economic Inequality

The ruling arrives amid growing economic inequality in India. A recent working paper, Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj, by economists Thomas Piketty, Lucas Chancel, and Nitin Kumar Bharti, indicates that the top 1% of India’s population held 22.6% of the country’s income and 40.1% of its wealth by 2022-23. These figures position India among the highest in global wealth concentration.

While the Supreme Court’s ruling narrows the state’s reach over private property, it also underscores the challenges in balancing private ownership with rising calls for equitable wealth distribution in a rapidly transforming economy.