Nature of private property | Day 1: Dilapidated buildings are not “material resources”, argue petitioners

Nature of private property

Judges: D.Y. Chandrachud CJI, Hrishikesh Roy J, B.V. Nagarathna J, Sudhanshu Dhulia J, J.B. Pardiwala J, Manoj Misra J, Rajesh Bindal J, S.C. Sharma J, A.G. Masih J

On 23 April 2023, a nine-judge Constitution Bench led by Chief Justice D.Y. Chandrachud started hearing one of the oldest pending cases before the top court. In this case, the Court will determine whether private property falls within the ambit of Article 39(b) of the Constitution. 

Article 39(b) falls under Part IV of the Constitution— Directive Principles of State Policy. The provision is about distributing “material resources of the community” to “best subserve the common good.” 

More specifically, the Bench is hearing challenges to Chapter VIIIA of the Maharashtra Housing and Area Development Act, 1976 (MHADA). Introduced in 1986, this Chapter 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.

Cessed properties are properties for which a cess or tax is paid by the owner under Chapter VIII of the MHADA (Sections 74-103). To this end, Section 82 of the Act, empowers the Municipal Corporation to levy and collect a cess known as the ‘Mumbai Building Repairs and Reconstruction Cess’ from property owners. The owner’s share of the cess is 10 percent of the rateable value of the property and the rest is recoverable by increasing the rent. 

On behalf of the Property Owners’ Association, the petitioner, the Bench heard arguments from Advocates Sameer Parekh, H. Devarajan and Senior Advocate Zal Andhyarujina. 


Article 39(b), a Directive Principles of State Policy, obligates the State to ensure the distribution of “material resources of the community” to “subserve the common good.” 

In State of Karnataka v Shri Ranganatha Reddy (1977), five judges of the Supreme Court debated whether privately owned resources fell under the ambit of “material resources of the community.” A minority opinion by Justice Krishna Iyer stated that private property fell in the ambit of Article 39(b). 

Five years later, a five-judge bench in Sanjeev Coke Manufacturing Company v Bharat Coking Coal Ltd, led by Justice Chinnappa Reddy, adopted Justice Iyer’s minority view. In 1997, a nine-judge bench in Mafatlal Industries Ltd. v Union of India, followed the Sanjeev Coke precedent.

The challenges of the present case arose in 1986, when the Maharashtra government amended the Maharashtra Housing and Area Development Act, 1976 (MHADA) to insert Chapter VIII-A and Section 1A. Chapter VIII-A allowed the Mumbai Building Repair and Reconstruction Board to acquire certain “cessed properties”—primarily old, dilapidated buildings in Mumbai—for restoration purposes with the consent of 70 percent of the residents. Section 1A declared that the Act was aimed at implementing the principles enshrined in Article 39(b).

In December 1991, the Bombay High Court dismissed the petitions challenging Chapter VIII-A. The Court reasoned that the government was only trying to protect “the shelter of the occupiers in the old dilapidated buildings and saving life and property by preventing collapse of such buildings.” Further, the High Court also held that Article 31C of the Constitution bars any challenges on the grounds of Articles 14 or 19, if the statute has been enacted in furtherance of Article 39(b). The petitioners moved the Supreme Court. 

As the case lay pending, in 2019, subsequent amendments to the MHADA precipitated a new set of challenges. According to the new amendment, if landowners failed to restore property within a deadline, the state government could take over the property. The Property Owners Association (POA) alleged malicious intent on the state government. 

The dispute, which first reached the Supreme Court in 1992, now has several petitions tagged to it. After several references to larger benches, a nine-judge bench started hearing the case on merits on 24 April 2024. This bench is also hearing arguments on the constitutional position of Article 31C.

The scope of the reference

At the outset, Solicitor General Tushar Mehta submitted that the 2002 reference order limited the issue to determining whether private property fell under the ambit of Article 39(b). Contrary to the petitioners’ written submissions, the existence of Article 31C, a saving provision for laws enacted to give effect to Directive Principles of State Policy, was not in question here. 

Parekh and Andhyarujina came prepared to convince the Bench that Article 31C of the Constitution, as it stood after the Court’s decision in Kesavananda Bharati v State of Kerala, (1973), did not exist on the books and therefore, did not prevent the petitioners from challenging the amendment to the MHADA. 

The Article 31C conundrum

Article 31C was introduced via the 25th Constitutional Amendment Act in 1971. It had the effect of saving acts legislated to give effect to Article 39(b) and (c) from judicial review.

Here’s how it read when it was introduced:

“Notwithstanding anything contained in article 13, no law giving effect to the policy of the State towards securing the principles specified in clause (b) or clause (c) of article 39 shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridges any of the rights conferred by article 14, article 19 or article 31; and no law containing a declaration that it is for giving effect to such policy shall be called in question in any court on the ground that it does not give effect to such policy.”

In Kesavananda Bharati v State of Kerala (1973), a 13-judge Constitution Bench struck down the second part of Article 31C. In other words, the Bench held that a law can be tested in Court on the grounds of its nexus with Article 39(b) and (c)

Subsequently, the 42nd Constitutional Amendment Act in 1976, amended Article 31C further. It substituted the “the principles specified in clause (b) or clause (c) of Article 39”, with the words “all or any of the principles laid down in Part IV.” 

In 1980, a five-judge Constitution Bench invalidated the above amendment in Minerva Mills v Union Of India

The petitioners in the present case argued that following the judgement in Minerva Mills, the question of whether Article 31C as it existed after the Kesavananda Bharati judgement continued to exist or not had to be answered. 

Reading excerpts from the 1996 Division Bench reference and the 2001 five-judge bench reference in Property Owners, Parekh submitted that though the position that Article 31C as it existed after the Kesavananda Bharati judgement was upheld in cases like Waman Rao v Union of India (1980) and Sanjeev Coke Manufacturing Company v Bharat Coking Coal Ltd. (1982), the Bench had referred the question of law to be considered by a larger bench. 

The position in I.R. Coelho

To buttress the point that Chapter VIIIA of the MHADA is open to review, Andhyarujina also relied on the nine-judge bench decision in I.R. Coelho (Dead) v State Of Tamil Nadu (2007). In this case, the Court had held that if a law that abrogates a fundamental right also breaches the Basic Structure Doctrine, it can be challenged even if the law is included in the Ninth Schedule. The Ninth Schedule lists several laws that cannot be challenged in Court. 

In I.R. Coelho, the Court had held that any law added to the Ninth Schedule after Kesavananda Bharati was “open to challenge on the ground that it destroys or damages the basic structure as indicated in Article 21 read with Article 14, Article 19 and the principles underlying thereunder.” 

With this position, Andhyarujina submitted that it was very difficult to assess what remained of Article 31C. The Chief was quick to respond that Andhyarujina was essentially arguing for a reconsideration of Kesavananda Bharati. “We are a bench of nine judges, we are bound by the decision of Kesavananda Bharati which upheld the originally enacted Article 31C,” the Chief said. “These walls are a witness to what happened after Kesavananda…do not forget the history of this Court,” the Chief remarked. 

The Bench, however, echoed the Solicitor General’s view that Article 31C or its revival was not in question in the present case. The only constitutional question was whether “private property” fell within the purview of “material resources” under Article 39(b) of the Constitution. 

Seemingly, this prompted both Parekh and Andhyarujina to conclude and make way for Devarajan before lunch. 

Article 39(b) must be read in the wider context of Part IV

Devarajan focused his argument on the nature of Article 39(b). He asserted that that provision had to be read within the context of Part IV. 

Earlier, the Bench had remarked that “material resources” were not dependent on title and that it could not be said that privately owned property could not be a material resource. Citing the example of private mines, the Chief remarked: “They may be private mines. But in a broader sense, these are material resources of the community. The title may rest in a private individual but for the purpose of Article 39 (b), our readings should not be constricted but must have that broad understanding.”

Devarajan submitted that he was not arguing on title but on the nature of the Directive Principles. DPSPs, he said, were essentially instructions to the State so words could not be added or deleted when interpreting them. 

If private property was to be considered a “material resource”, the word “private” had to be added and the word “community” removed from Article 39(b). 

A policy cannot be selective 

Devarajan also pointed out that under Article 39(b), the “policy” of a State cannot selectively apply only to Mumbai for it to subserve the common good. It had to apply uniformly across the state. 

The Bench resisted this argument. They pointed out that laws could be made to meet the special needs of a particular area. 

“The reason why the state legislature came out with this (Act) was that these are old buildings of the 1940s…With the kind of monsoon in Mumbai, these buildings get dilapidated because of the saline weather,” the Bench remarked. They also remarked that the community is directly affected if a building falls. 

The background of Justice Iyer’s judgement in Ranganatha Reddy is important

In State of Karnataka v Shri Ranganatha Reddy (1977), a seven-judge bench of the Court in a 4:3 majority, had held that privately owned resources did not fall within the ambit of “material resources of the community.” The minority opinion authored by Justice Krishna Iyer, however, held that both public and private resources fell within that ambit. 

Subsequently, in Sanjeev Coke (1983), the Bench adopted Justice Iyer’s minority view. 

Devarajan submitted that Justice Iyer’s minority view was only in the context of nationalisation of resources. It came in  a case where private property was taken and given to the public at large, not where it was taken and given to another private person. Therefore, it was not as if Justice Iyer said “private property” was a “material resource.”

Later, when Justice B.V. Nagarathna pointed out that private property was redistributed under legislations like the Land Reforms Act, Devarajan pointed out that it was not done under the purview of Article 39(b)—those redistributions had their own constitutional justifications like Article 31A.

Chapter VIIIA is for preservation of housing stock

Justice Hrishikesh Roy asked Devarajan to walk the Bench through the contested chapter in the MHADA. The Chief also stated that it needed to be assessed if Chapter VIIIA met the requirements of Article 39(b). Notably, the Bench clarified that they were not considering the constitutional validity of the Act but were simply trying to assess whether Chapter VIIIA fell in the ambit of Article 39(b). 

Devarajan submitted that the “pith and substance” of the Chapter was “preservation” of old building stock in Mumbai. “Not just preserve them, but actually reconstruct them as well,” the Chief said. Devarajan responded that Section 103(d) made it clear that its primary goal was “preservation” and then restoration. 

The entire cost of acquisition and repairs fell on the property owners without a “single penny” taken from the state’s coffers. Further, he said that the effect of the chapter was that control of the property lay with the Repair and Reconstruction Board and not the cooperative society—this was not in public interest. 

“Material resources” must produce goods and services for the community

Devarajan focused his argument on the nature of Article 39(b) and asserted that “material resources” under this provision meant resources that produced goods and services for the community. He relied on observations in Sanjeev Coke where the Bench held “the expression ‘material resources of the community’ means all things which are capable of producing wealth for the community.” 

The Chief pointed out that in Paragraph 80 of the judgement in Ranganatha Reddy, Justice Iyer had noted that “material resources of the community in the context of reordering the national economy embraces all the national wealth, not merely natural resources, all the private and public sources of meeting material needs, not merely public possessions.” 

After Devarajan, Parekh and Andhyarujina got another chance to address the Bench for a few minutes. Parekh, among other things, contended that we did not live in a “Marxian state” where private property could be taken from one and given to another. Andhyarujina submitted that under Article 39(b), there must be a distribution of both ownership and control. He also submitted that not all important resources could be said to be “material resources.”

Arguments will resume on 24 April 2024.