New ruling by Supreme Court curbs state power to take over private resources

The Supreme Court has made a landmark decision, ruling that not all private properties can be acquired by the government under Article 39(b) of the Indian Constitution, which mandates the distribution of “material resources” for the common good. In a nuanced judgment, a nine-judge Constitution bench, led by Chief Justice DY Chandrachud, emphasized that the state does not have an unrestricted right to acquire private resources simply by defining them as “material resources of the community”.

The bench’s decision overturns the long-standing precedent set by Justice Krishna Iyer in 1977, which suggested that the state could seize private property under the notion of serving a socialist ideal. Justice Iyer’s perspective had influenced decisions in major cases such as Sanjeev Coke Manufacturing and Mafatlal Industries. Chief Justice Chandrachud’s majority opinion, supported by six other justices, shifts away from this interpretation, arguing that India’s economic landscape has transformed significantly since then, moving from a socialist economy to one driven by liberalization and private investment.

The court ruled that private property could be deemed a “material resource” only in specific cases, depending on factors like the resource’s scarcity, its nature and its impact on the public. The judgment emphasized that the decision should not be based on a rigid economic ideology, but rather consider India’s current mixed economy. This shift recognizes the role of both public and private sectors in economic development and rejects a singular, state-controlled model of resource distribution.

Chief Justice Chandrachud noted that Article 39(b) should not be interpreted to suggest that all private assets can be seized by the government for the “common good”. Instead, each case must be evaluated individually, based on the context and the actual impact on the community. This perspective acknowledges the evolution of India’s economy, stating that it would be inappropriate to adhere to a singular economic dogma from the past, especially in a democracy where diverse economic policies are regularly endorsed through elections.

The bench also clarified that laws furthering Article 39(b) objectives would retain constitutional immunity under Article 31(C), which protects laws that aim to prevent the concentration of wealth. However, it dismissed the idea of imposing outdated economic frameworks on contemporary India, advocating instead for a balanced approach that respects private ownership while allowing the state to intervene only in necessary situations.

Justices B.V. Nagarathna and Sudhanshu Dhulia voiced partial dissent, with Dhulia opposing the majority view entirely. This judgment marks a shift in constitutional interpretation, recognizing the importance of both state and private interests in India’s economic framework. It highlights the Supreme Court’s role in adapting constitutional principles to the nation’s changing economic realities and reinforces the judiciary’s commitment to balancing individual rights with the public good.