From socialism to market economy-Power over private property

The judgment allows for some private resources to be used for the public good under Article 39(b) while preserving individuals’ property rights, supporting India’s economic growth within a democratic framework. The court emphasized that DPSPs are not enforceable laws. The government must balance social welfare goals with citizens’ rights.

Recently, former Chief Justice D.Y. Chandrachud led the majority (8:1) and wrote: “India’s economic trajectory has shifted from socialism to liberalization and market reforms. The Constitution does not endorse any single economic ideology.” He added that calling all private property “material resources” forces a rigid socialist theory, which no longer reflects India’s democratic economic reality.

Are there any limits on power of the government over private property? Can the government seize any private property by calling it a “material resource of the community” under Article 39(b) of the Indian Constitution?

On 5 November 2024, a nine-judge Constitution Bench of the Supreme Court of India delivered a historic verdict in the Property Owners Association v. State of Maharashtra case. The ruling settled a long-standing constitutional question: It answered with a clear no, thereby reaffirming individual property rights and limiting government power. This judgment has brought clarity to the conflict between Directive Principles of State Policy (DPSPs) and Fundamental Rights, and overruled earlier judgments that adopted a broad socialist interpretation of Article 39(b).

Ignoring the Directive Principles

Article 39(b) is part of the Directive Principles of State Policy in Part IV of the Constitution. It says:

“The State shall, in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.” It encourages laws for equitable distribution of wealth and resources, but DPSPs are not legally enforceable—they are only guiding principles.

Do we have any Property Rights?

Before 1978, right to property was a Fundamental Right under Article 19(1)(f) and Article 31. However, due to frequent land reforms, bank nationalization, and other socialist welfare measures, the Parliament passed the: 25th Constitutional Amendment (1971): Introduced Article 31C to protect laws made under Article 39(b) and (c) from being challenged for violating Fundamental Rights like Articles 14, 19, and 31. 42nd Constitutional Amendment (1976): Further expanded Article 31C to cover all Directive Principles, not just 39(b) and (c). But in Minerva Mills (1980), the Supreme Court struck down this wider protection, ruling that only Article 39(b) and (c) could remain shielded.

Where Article 31C was upheld:

In the famous Kesavananda Bharati case (1973), the Supreme Court upheld Article 31C, but with a caveat — laws passed under it must still pass judicial review. This was to prevent misuse of DPSPs to undermine basic structure principles like judicial independence or fundamental rights. Thus, the Court permitted limited curtailment of property rights, but only in pursuit of the common good as envisaged in Articles 39(b) and (c), and not at the cost of the basic structure of the Constitution.

A 32-year fight for justice:

Though justice is upheld in some cases, delay is the biggest problem. The current verdict comes from a petition filed by the Property Owners Association (POA) in Mumbai, challenging Chapter VIIIA of the Maharashtra Housing and Area Development Act (MHADA), 1976, which permitted the government to acquire “cessed properties” (old private buildings) for restoration. The POA argued this violated their right to property, and that Article 39(b) had been wrongly used to justify taking over all private property. The case spanned decades and multiple bench references, eventually resulting in this nine-judge bench being formed.

Govt cannot acquire

private property per se:

The Court ruled that not every private property can be called a “material resource of the community”. Article 39(b) does not give the government a blanket power to seize all private assets for the “common good”.

Material resources-

Limited, not universal:

The court clarified that “material resources” must meet specific criteria such as: Belonging in public trust; Having community impact; being scarce or capable of causing harm by monopoly and possessing intrinsic public value like water and minerals, among others. Thus, private homes or businesses do not automatically qualify.

Balanced approach to ‘distribution’

The term “distribution” under Article 39(b) includes: Government acquisition and redistribution to private parties — only when it benefits the common good. So, laws under 39(b) must meet both public interest and proportionality tests.

Survival of Article 31C:

The Court confirmed Article 31C still protects laws made under Article 39(b) and (c) from Fundamental Rights challenges, but not from judicial review. This limits the misuse of Article 31C as a shield.

The court recognized the dramatic shifts like private property, from traditional assets to data and space exploration. The judgment emphasizes the need to respect evolving market realities. Are we reinforcing a market-oriented economic model? It is interpreted that this judgment offers protection for marginalized communities against the unjust acquisition of their small farms and forest lands while promoting responsible management of essential public resources.

The judgment allows for some private resources to be used for the public good under Article 39(b) while preserving individuals’ property rights, supporting India’s economic growth within a democratic framework. The court emphasized that DPSPs are not enforceable laws. The government must balance social welfare goals with citizens’ rights.

Justice Iyer’s opinion was relied on by subsequent Constitution Benches in Sanjeev Coke Manufacturing and Mafatlal Industries judgments in 1982 and 1997, respectively; hence, necessitating a reference to the nine-judge Bench. The CJI quoted a “harsh” observation made by the Chief Justice about Justice V.R. Krishna Iyer in a “proposed judgment”. Justice Iyer was a former top court judge whose humanism and reforms in criminal justice are considered legendary. His coinage “bail is the rule, jail is the exception” is still assiduously quoted in Supreme Court judgments. Justice Krishna Iyer’s dissenting view in Ranganath Reddy (1977) that all private wealth could be treated as public resources. The judgment noted that while Justice Iyer’s ideas were rooted in the socialist vision of the 1970s, India’s voters have since chosen liberal economic policies.

Rejecting the view of Justice Iyer as one presenting a “particular ideology”, the majority opinion penned by Chief Justice Chandrachud said India has moved on from socialism to liberalisation to market-based reforms. Justice Iyer was a former top court judge, whose humanism and reforms in criminal justice are considered legendary. His coinage “bail is the rule, jail is the exception” is still assiduously quoted in Supreme Court judgments. In separate opinions, Justices B.V. Nagarathna and Sudhanshu Dhulia, he had observed that “the Krishna Iyer doctrine does a disservice to the broad and flexible spirit of the Constitution”.

Dissenting: Justice B.V. Nagarathna:

“Judges must not decry the contributions of their predecessors. The institution is greater than individuals.” Justice Dhulia praised Justice Iyer’s humanist vision, saying: “The Krishna Iyer Doctrine was built on fairness and empathy. In dark times, it illuminated our path.” Though he dissented on interpretational grounds, he recognized the spirit of the Constitution as a living document, balancing rights and welfare.

Finally, the November 5, 2024 Supreme Court ruling is a turning point in the constitutional understanding of property rights in India, saying:

Individual property rights are protected. The government cannot seize private property arbitrarily. Article 39(b) remains relevant but must be applied with caution and clear public purpose. Article 31C survives, but judicial review cannot be ousted.

The Directive Principles must align with fundamental rights, not override them. Courts remain vigilant in preserving constitutional balance between economic justice and individual liberty.

This landmark judgment reaffirms the Supreme Court’s role as a constitutional guardian, ensuring that the state acts for public welfare without violating basic rights. It also recognizes the evolving nature of economic policies in a vibrant democracy, where people, not dogmas, shape the nation’s path.

(The writer is Professor of the Constitution of India and founder-Dean, School of Law, Mahindra University, Hyderabad)