What Supreme Court’s verdict implies for property rights in India

The Supreme Court, in a significant ruling on November 5, held by 8-1 majority that not all privately-owned properties can be classified as “material resources of the community” under Article 39(b) of the Constitution. This interpretation directly impacts how the government can redistribute resources for the “common good”.
The court clarified that only certain types of private property, based on their nature, significance and impact on public welfare, could potentially fall under this provision, marking a departure from previous, more expansive interpretations rooted in socialist ideals. The majority opinion was authored by Chief Justice of India D.Y. Chandrachud, with Justice B.V. Nagarathna partially concurring and Justice Sudhanshu Dhulia dissenting.
The landmark case began with the Property Owners Association (POA) of Mumbai challenging Chapter VIIIA of the Maharashtra Housing and Area Development Act (MHADA) of 1976, which allows the state to acquire privately-owned buildings, or “cessed properties”, for restoration. The legislation, amended in 1986, provided a framework for transferring private property to cooperative societies, asserting that this policy aligned with Article 39(b) of the Constitution by serving the broader public welfare.
The POA and other stakeholders argued that such acquisitions violated property rights and contended that Article 39(b) does not encompass privately-owned resources.
Initially filed in 1992, the case saw multiple referrals to larger benches over the years. The case this year finally reached a nine-judge bench of the Supreme Court, which was tasked with determining the constitutional scope of Article 39(b) in relation to private property.
CJI Chandrachud’s majority opinion, also agreed to by Justices Hrishikesh Roy, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, S.C. Sharma and A.G. Masih, acknowledged that, in theory, privately-owned resources could qualify as “material resources of the community”. However, the judgment rejected the idea that all private properties could automatically be considered community resources simply because they have material value.
The court emphasised that resources falling under Article 39(b) must demonstrate specific criteria, such as scarcity, public welfare impact and consequences if concentrated among private entities. This interpretation suggests a narrow, context-dependent view rather than a broad application, countering earlier judgments that had placed significant weight on Justice V.R. Krishna Iyer’s socialist perspectives in the 1977 State of Karnataka vs Ranganatha Reddy case.
In 1977, a seven-judge constitution bench of the Supreme Court, led by then Chief Justice M.H. Beg, reviewed the constitutionality of the Karnataka Contract Carriages (Acquisition) Act, 1976. This legislation enabled the state to acquire all contract carriages operating within Karnataka. The court ultimately focused on interpreting Article 39(b) and, in a 4-3 majority, concluded that privately-owned resources did not fall under “material resources of the community”. However, Justice Krishna Iyer, writing the minority verdict, argued that both public and private resources should be considered as “material resources of the community” as defined by Article 39(b).
In 1983, a five-judge bench led by Justice Chinappa Reddy heard Sanjeev Coke Manufacturing Company vs Bharat Coking Coal Ltd., which involved challenges to four Union laws passed between 1971 and 1973 to nationalise coking and non-coking coal mines, as well as coke oven plants. Affirming Justice Iyer’s minority view from Ranganatha Reddy, the court held that “material resources of the community” encompassed not only natural and publicly-owned resources but also private assets. The bench emphasised that the Constitution’s aim was to establish a “sovereign, socialist, secular democratic republic”.
In 1997, a nine-judge constitution bench, led by then Chief Justice A.M. Ahmadi, in Mafatlal Industries Ltd vs Union of India considered whether claims could be made for refunds against unauthorised tax levies. The court upheld the position taken in Sanjeev Coke Manufacturing, affirming that “material resources of the community” included privately-owned resources and were not limited to publicly held assets.
The Supreme Court’s current bench revised this legal trajectory, suggesting that such broad interpretations may now be seen as economically restrictive. It also observed that Justice Reddy’s interpretation of Article 39(b) was rooted “in a particular economic ideology and ideological structure” that prioritised distribution of public wealth. The bench said that the framers of the Constitution never intended economic democracy to be tied to any particular social structure or ideology but for the welfare of society.
In the November 5 judgment, the Supreme Court outlined non-exhaustive criteria to determine when a resource could be classified as a “material resource of the community”. These criteria include the resource’s nature, impact on public welfare and implications of ownership concentration. The majority further articulated that the public trust doctrine could serve as a guiding principle in assessing such resources, underscoring that not all privately-owned assets qualify as community resources solely because they meet basic economic needs.
Justice Dhulia’s dissent contended that excluding privately-owned properties from the purview of Article 39(b) disregards the practical reality that certain private resources might indeed benefit the public if distributed equitably. He argued that any blanket rejection of private resources within Article 39(b) risks undermining the Directive Principles’ broader intent.
Justice Nagarathna offered a partial concurrence, acknowledging that some private resources, especially those integral to public welfare, could theoretically qualify under Article 39(b), but clarified that personal effects and everyday possessions should be exempt from this categorisation.
On the related question of whether laws enacted to implement Article 39(b) are protected by Article 31C from constitutional challenges, the nine-judge bench unanimously agreed that such immunity is indeed available. Article 31C, introduced by the 25th Amendment in 1971, shields any law intended to advance the state’s policies under Article 39(b), even if it in conflict with the rights to equality and freedom under Articles 14 and 19.
This protection was upheld in the landmark 1973 Kesavananda Bharati case, which also established the “basic structure” doctrine. While the court in Kesavananda supported Article 31C’s protection of Article 39(b) objectives, it struck down the clause that restricted judicial review of these laws.
In 1976, the 42nd Amendment expanded Article 31C’s scope, extending immunity to all Directive Principles of State Policy (DPSPs), which would have shielded any law based on DPSPs from challenges under Articles 14 and 19. However, this broader application was later overturned in the Minerva Mills case.
The current bench held that Article 31C, in its original form, remains valid, protecting laws enacted to support Article 39(b) without judicial interference. However, the court also clarified that this immunity cannot be used to justify arbitrary acquisitions of private property, ensuring that constitutional principles stay flexible and relevant to India’s evolving economic needs.
The ruling carries political weight as wealth distribution and property rights became focal issues leading up to the Lok Sabha elections this year. During the campaign, Prime Minister Narendra Modi accused the Congress of promoting policies that would redistribute citizens’ wealth if it came to power. This claim stemmed from a speech by Congress leader Rahul Gandhi, who had proposed a comprehensive caste survey to assess the demographics and socio-economic conditions of various communities, including backward classes, SCs, STs and minorities. Gandhi also outlined plans to allocate wealth, job opportunities and welfare schemes based on the survey’s findings. His statement sparked public debates on property rights and socio-economic fairness.
The court’s interpretation also reinforces the notion that the Directive Principles, while central to policymaking, must coexist with the Fundamental Rights enshrined in the Constitution. In acknowledging the state’s role in promoting social welfare while respecting individual property rights, the Supreme Court has charted a middle path that resonates with India’s economic growth ambitions.
This Supreme Court decision underscores the enduring relevance of constitutional interpretation in shaping India’s social and economic fabric. By defining the limits of “material resources of the community” under Article 39(b), the court has struck a delicate balance between state intervention and private rights. India’s transition from a planned economy to a liberalised, market-oriented system over recent decades underscores the importance of private sector participation. By rejecting the wholesale redistribution of private assets, the court aligns with a vision of balanced economic growth that values both state oversight and individual property rights.
The ruling reflects a forward-looking approach that prioritises both economic dynamism and social welfare, suggesting that India’s path to prosperity must honour individual rights while promoting collective wellbeing. In doing so, the court has reaffirmed the Constitution’s adaptability to a rapidly changing world, ensuring that its principles remain as relevant today as they were at the nation’s founding.
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