Supreme Court: The Nine-Judge Constitution Bench comprising of CJI Dr. DY Chandrachud, Hrishikesh Roy, B.V. Nagarathna, Sudhanshu Dhulia, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma and Augustine George Masih, JJ., delivered its judgment on the issue of whether private resources form part of the ‘material resource of the community’ under Article 39(b) of the Constitution. The majority judgment delivered by CJI Dr. DY Chandrachud by the ratio of 7:2 held that all the ‘private properties’ cannot form part of the ‘material resources of the community‘ under Article 39(b) of the Constitution. The Court unanimously held that Article 31-C of the Constitution to the extent that it was upheld in Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225 remains in force.
The majority view held that the view expressed by Justice Krishna Iyer in State of Karnataka v. Ranganatha Reddy (1977) 4 SCC 471 that- material resources of the community covered all resources, natural and man-made, publicly and privately owned and relied on by Justice Chinnappa Reddy in Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd. (1983) 1 SCC 147 cannot be accepted.
Genesis
Chapter VIII of the Maharashtra Housing and Area Development Act, 1976 (‘MHADA’) provides for the repairs and reconstruction of dilapidated buildings in ‘Brihan Mumbai’ or the erstwhile ‘Greater Bombay’. Subsequently, an amending Act- Maharashtra Housing and Area Development (Second Amendment) Act, 1986 which inserted Chapter VIII- A of the MHADA Act came into force. The chapter deals with the ‘acquisition of cessed properties for co-operative societies of occupiers’, and its provisions apply to the buildings in Category A, i.e. cessed buildings erected before 1-09-1940 in Brihan Mumbai.
Chapter VIII-A deals with the acquisition of specific properties, wherein the State requires payment at a rate equivalent to one hundred times the monthly rent for the premises in question.
Section 1A of the MHADA also incorporated through the 1986 amendment, states that MHADA is designed to implement Article 39(b) of the Constitution. Chapter VIII-A allowed the Mumbai Building Repair and Reconstruction Board (MBRRB) to acquire certain “cessed properties” for restoration purposes with the consent of 70 percent of the residents. The genesis of the matter lies in several challenges raised in 1992 to constitutional validity of Chapter VIII-A of the MHADA Act.
Section 1A of the MHADA also incorporated through the 1986 amendment, states that MHADA is designed to implement Article 39(b) of the Constitution. Chapter VIII A allowed the Mumbai Building Repair and Reconstruction Board (MBRRB) to acquire certain “cessed properties” for restoration purposes with the consent of 70 percent of the residents. The genesis of the matter lies in several challenges raised in 1992 to constitutional validity of Chapter VIII-A of the MHADA Act. The Property Owners Association (appellants) initiated proceedings before the Bombay High Court challenging the constitutionality of the Chapter VIII-A of the MHADA Act. The case of the appellants was that the provisions of Chapter VIII-A are violative of Articles 14 and 19 of the Constitution. It was urged that the provisions are arbitrary, deprive property owners of their rights for illusory amounts and the classification of the buildings had no rational nexus to their object. The High Court dismissed the writ petitions and upheld the constitutionality of the provisions of Chapter VIII-A of the MHADA Act. Aggrieved, the appellants instituted Special Leave Petitions before the Court.
Reference Orders
The batch of appeals was first placed before a bench of three judges. By an order dated 1-5-1996 in Property Owners’ Assn. v. State of Maharashtra, (1996) 4 SCC 49, the Bench therein noted that since Article 31C no longer survived after an amendment to the provision was invalidated in Minerva Mills Ltd. v. Union of India, (1980) 3 SCC 625, it could not exclude an attack on the constitutional validity of the MHADA Act on the grounds of Articles 14 and 19. The three-judge bench observed that since the decisions in Minerva Mills (supra), Waman Rao v. Union of India, (1980) 3 SCC 587 and Sanjeev Coke (supra) were all rendered by a bench of five judges and the assumption that Article 31C remains in force was disputed, it would be appropriate to refer the matter to a larger bench.
The Five-Judge Bench expressed the need to reconsider the view taken in Sanjeev Coke (supra) on the interpretation of Article 39(b), where this Court relied on a concurring opinion authored by Justice Krishna Iyer in Ranganatha Reddy (supra), on behalf of a minority of Judges. The question of interpretation of Article 39(b) of the Constitution which speaks of the distribution for the public good of the ownership and control of the material resources of the community, was raised before the Five-Judge Bench. The Five-Judge Bench referred the question to a Bench of Seven Judges opining that the view expressed in Sanjeev Coke (supra) required consideration.
In Ranganatha Reddy (supra) two judgments were delivered. In one of the judgments delivered by Krishna Iyer, J., the view was taken that material resources of the community covered all resources, natural and man-made, publicly and privately owned. This view was affirmed by a Constitution Bench in Sanjeev Coke (supra). The view in Sanjeev Coke (supra) was referred to in Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536, wherein Five-Judge Bench affirmed this view, that ‘the material resources of the community’ are not confined to public resources but include all resources, natural and man-made, public and private owned’. The Seven-Judge Bench in Property Owners’ Assn. v. State of Maharashtra, (2013) 7 SCC 522 opined that this interpretation of Article 39(b) required to be reconsidered by a Bench of Nine Judges, for having difficulty in sharing the broad view that material resources of the community under Article 39(b) covers what is ‘privately owned’.
Majority view
Issues
1. Whether Article 31-C (as upheld in Kesavananda Bharati) survives in the Constitution after the amendment to the provision by the 42nd amendment was struck down by this Court in Minerva Mills (supra).
Article 31-C provides statutes with immunity against constitutional challenges for alleged breaches of Articles 14 and 19 provided that the statutes give effect to the principles set out in clauses (b) or (c) of Article 39. The Court pointed out that the text adopted by the Parliament in the 42nd Amendment itself made it abundantly clear that there was no independent intention to repeal. The effect of Section 4 of the 42nd Amendment was to expand the scope of the immunity provided by Article 31-C to legislation. The Court stated that under the unamended Article 31-C, immunity was only provided to legislation if it gave effect to the Directive Principles found in clause (b) or clause (c) of Article 39. However, through Section 4 of the 42nd Amendment, the scope of this immunity was significantly expanded to immunise legislations that gave effect to any or all of the Directive Principles in Part IV of the Constitution. Thus, the intention of Parliament in enacting Section 4 was undoubtedly to expand the scope of the immunity granted by Article 31-C. Hence, the Court said that it cannot be suggested that the Parliament would have repealed the words “the principles specified in clause (b) or clause (c) of article 39” if it did not simultaneously enact the broader language expanding the scope of Article 31-C. Therefore, the Court found that the legislative intent of Parliament when adopting Section 4 of the Forty-Second Amendment was to composite, to repeal and enact (i.e., to substitute) through one single action and the same cannot be disaggregated [the steps of repeal and enactment and give effect to the repeal even after invalidating the enactment] by the Court. The Court held that after Minerva Mills (supra) invalidated Section 4 of the 42nd Amendment, the composite legal effect of Section 4 was nullified and the unamended text of Article 31-C stood revived.
Further, the Court added that the text of the unamended Article 31-C was challenged, and the first part of the Article was upheld in Kesavananda Bharati (supra) while the latter half of the Article was invalidated. Therefore, the Court pointed out that the first half of unamended Article 31-C, which was the subject matter of the present controversy, was undoubtedly constitutional as held in Kesavananda Bharati and further by the Constitution Bench in Waman Rao. Therefore, if as a consequence of the decision in Minerva Mills, the unamended Article 31-C continues in force, there can be no question of any unconstitutionality or adverse consequences associated with the unamended Article 31-C. Further, the Court clarified and held-
“given that the unamended Article 31-C has been given effect for over four decades as demonstrated by the decisions in Bhim Singh and Sanjeev Coke, no argument can be raised concerning any legal or practical difficulties with the operation of the unamended Article 31-C. The unamended Article 31-C continues in force.”
2. Whether the interpretation of Article 39(b) adopted by Justice Krishna Iyer in Ranganatha Reddy (supra) and followed in Sanjeev Coke (supra) must be reconsidered. Whether the phrase ‘material resources of the community’ in Article 39(b) can be interpreted to include resources that are owned privately and not by the state.
Sanjeev Coke (supra) erred in relying on the observations of the minority in Ranganatha Reddy (supra)
The Court clarified that the Bench of Five-Judges in Sanjeev Coke (supra) was bound by the view of the majority in Ranganatha Reddy (supra), which was a decision rendered by a bench of Seven-Judges. The view taken by a minority of three judges and specifically disagreed with by the majority of four judges could not be relied on by a smaller bench of five judges in Sanjeev Coke. Not only was the opinion in the judgment of a minority of judges not binding, but it also could not be relied on as having persuasive value, since there was a majority opinion of a larger bench disagreeing with the view. The Court observed that the majority in Ranganatha Reddy (supra) 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 the Court in Sanjeev Coke (supra) erred by relying on the minority opinion.
The single-line observation in Mafatlal (supra)- obiter dicta
Regarding the precedential value of the single-line observation [“the ‘material resources of the community’ are not confined to public resources” but include all resources, including privately owned resources”] in Mafatlal (supra), the Court clarified that the single-sentence is not part of the ratio decidendi of the judgment. Thus, it was not binding on the Court. The Court said that the above observation indicated that the relevance of Article 39(b) to the judgement was limited to the larger socio-economic values which it espouses. The Court added that the ratio decidendi of the majority judgment was that the constitutional values contained in the Preamble and Part IV of the Constitution, including Article 39(b) must be considered while interpreting Article 265 and determining whether a refund of taxes is permissible to a person who has passed on the burden; and that the single-line observation on Article 39(b) encompassing privately owned property was not relevant to this holding.
Interpretation of Article 39(b)
“Article 39(b) is not a source of legislative power. The inclusion or exclusion of ‘privately-owned resources’ from the ambit of the provision does not impact the power of the legislature to enact laws to acquire such resources. The power to acquire private resources, in certain situations, continues to be traceable to other provisions in the Constitution, including the sovereign power of eminent domain.”
Saying that there is a distinction between holding that private property may form part of the phrase ‘material resources of the community’ and holding that all private property falls within the net of the phrase, the Court pointed out that the minority opinion by Justice Krishna Iyer in Ranganatha Reddy (supra) fell into error here, and the consequent observations in Sanjeev Coke (supra) fall into error. The majority Bench noted that Justice Krishna Iyer held that- all resources which meet “material needs” are covered by the phrase [material resources of the community] and any attempts by the Government to nationalise these resources would be within the scope of Article 39(b).
The Court explained that an interpretation of Article 39(b) which places all private property within the net of the phrase “material resources of the community” only satisfies one of the three requirements of the phrase, i.e. that the goods in question must be a ‘resource’. However, it ignores the qualifiers that they must be “material” and “of the community”. The Court added that such a construction of the provision which renders these terms “material” and “community” otiose cannot be adopted.
“If Article 39(b) was meant to include all resources owned by an individual, it would state the “ownership and control of resources is so distributed as best to subserve the common good”.
The Court answered that theoretically, the phrase ‘material resources of the community’ may include privately owned resources, however, the Court refused to agree with the expansive view taken by Justice Iyer in Ranganatha Reddy (supra).
The Court held that- “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 inquiry about whether the resource in question falls within the ambit of Article 39(b) must be context-specific and subject to a non-exhaustive list of factors such as the nature of the resource and its characteristics; the impact of the resource on the well-being of the community; the scarcity of the resource; and the consequences of such a resource being concentrated in the hands of private players.
The Court said that the Public Trust Doctrine may also help identify resources which fall within the ambit of the phrase “material resource of the community”. Regarding the term ‘distribution’, the Court clarified that it 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 concerned resources in the state or nationalisation. In the specific case, the Court must determine whether the distribution ‘subserves the common good’.
Dissenting view on Article 39(b)- Justice BV Nagarathna and Justice Sudhanshu Dhulia
Justice BV Nagarathana partially concurred with the majority on the aspect of Article 31-C, however, on the aspect of Article 39(b) she dissented opining that a private owned resource can be transformed and can indeed acquire a status of ‘material resource of the community’. The view taken in Sanjeev Coke (supra) was held to be correct by Justice Nagarathana.
She viewed that the view taken in Sanjeev Coke was correct as on merits it cannot be held that Sanjeev Coke violated judicial discipline. One cannot lose sight of the fact that in Sanjeev Coke this Court did not decide the case only on the basis of the opinion of Krishna Iyer, J. in Ranganatha Reddy but on merits on the validity of the Nationalisation Act. Therefore, Sanjeev Coke is good law insofar as on the merits of the matter is concerned. Disagreeing with the majority opinion on the legal distinction between how a private resource qualifies as one “of the community” and how such a resource is subsequently distributed to subserve the common good, Justice Nagarathna dissented by saying that, a privately owned material resource can be transformed and can indeed acquire a status of “material resource of the community”.
Justice Sudhanshu Dhulia agreed with the majority on the view taken on Article 31-C, however, he dissented from the majority view on aspect of Article 39(b). He stated-
“there should be no confusion that the expression “material resources of the community” used in Article 39(b) includes privately owned resources. This has been the consistent view of this Court. It could not have been otherwise. To my mind a reference to material resources in Article 39(b) without privately owned resources being a part of it, does not even make any sense. It is only when we include privately owned resources, as a part of the “material resources of the community” that the purpose of Articles 38 and 39 is fully realised. It is only then that the socialist and democratic principles incorporated in our Constitution get their true meaning.”
[Property Owners Assn. v. State of Maharashtra, 2024 SCC OnLine SC 3122, decided on: 05-11-2024]
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