A Supreme Court constitutional justice, by an 8-1 majority, on Tuesday set limits on the government’s power to take private resources for distribution to the public, ruling that only certain private resources that meet specific criteria as that “material resources of the community” can be considered for acquisition by the State.

The majority decision, delivered by Chief Justice of India (CJI) Dhananjaya Y Chandrachud, delineated the limits of the state’s power to acquire resources under Article 39(b) of the Constitution. This guiding principle encourages the state to manage resources in a way that benefits the general public. The bench, however, clarified that this provision does not automatically allow the government to acquire or nationalize all private properties for the benefit of the public.

The decision clarified decades of judicial interpretation of Section 39(b), which have historically seen varied perspectives on the balance between private property rights and the public interest. Article 39(b) states that “the State shall direct its policy toward ensuring that ownership and control of the material resources of the community are distributed in a manner that best serves the common good.” Previously, different court rulings had both expanded and restricted state power, sometimes taking divergent economic views on the issue.

Concretely, this decision means that not all private assets are open to acquisition by the State with a view to public distribution. Instead, each acquisition will depend on factors such as the nature of the resource, its scarcity, its impact on community well-being, and whether it best serves public interests in private or public hands.

In ruling on this case, the bench overturned previous judgments which had taken a broader view of the power of the state in the acquisition of private resources. The Court emphasized the Constitution’s commitment to “economic democracy” rather than rigid adherence to socialist or capitalist principles, recognizing that while redistribution for the public good is essential, it must be balanced against individual property rights.

The majority view also overturned a 1982 decision in the Sanjeev Coke case, which had relied on Justice VR Krishna Iyer’s interpretation in the 1977 Ranganath Reddy case. Justice Iyer had held that all property private sector could be considered as “material resources of the community” for the purposes of redistribution. However, the majority said Justice Iyer’s view was influenced by a specific economic ideology. He reiterated that India’s constitutional framework supports “economic democracy”, which does not favor any particular economic system.

As CJI Chandrachud said in the judgment he wrote for himself and six other judges – Justices Hrishikesh Roy, JB Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma and Augustine George Masih – the Constitution does not does not impose a single economic theory but seeks to establish a balance that respects both public well-being and private rights.

In its interpretation of Section 39(b), the majority opinion recognized that private resources could theoretically be “material resources of the community,” but emphasized that not all such resources met this test. The court established two key criteria: a resource must be both “material” and “of the community.” This nuanced interpretation means that resources must serve the community in a way that justifies state intervention.

Outlining this approach, CJI Chandrachud noted that the importance of a resource would be judged on a case-by-case basis, based on factors such as the nature of the resource, its availability and the impact of its concentration in private hands. For example, resources that are scarce or vital to community well-being could more easily benefit from state intervention. He also noted that the “public trust doctrine,” in which the state holds certain resources in trust for the public, could guide this determination. He added that the relative importance of a private resource and whether it has a community element cannot be determined in isolation and must be identified on a case-by-case basis.

The court further clarified that Section 39(b) must be interpreted in harmony with Section 300A, which, although no longer guaranteeing a fundamental right to property, still protects property rights under the Constitution . The decision cautions against interpreting Section 39(b) as carte blanche for the state to acquire private property, as such an interpretation would disregard the constitutional guarantee of property rights under the section 300A.

Justice BV Nagarathna, while agreeing with the majority on certain points, offered a distinct view. She criticized the majority view for being dismissive of Justice Iyer’s earlier interpretation, warning against undermining past judicial wisdom. “The mere paradigm shift in economic policies… cannot lead to characterizing the justices of this erstwhile Court as a disservice to the Constitution,” she wrote. Justice Nagarathna pointed out that Justice Iyer’s judgments were a product of their historical context, reflecting a period when the state prioritized public welfare over private property, particularly in the post-independence period. where socialist ideals prevailed.

Justice Nagarathna also emphasized that resources classified as “community material resources” could only be distributed by the state if they met specific criteria. She clarified that personal effects such as household items, clothing and jewelry cannot be redistributed under Section 39(b), even if they belong to individuals. According to her, resources only become “material resources of the community” if they are nationalized or acquired by the state or if their owners voluntarily devote them to the public good.

The only dissent was written by Justice Sudhanshu Dhulia, who agreed with the view taken by Justices Iyer in the Sanjeev Coke case. He said: “It is not for this court to decide how and when ‘private resources’ fall within the definition of ‘material resources’. It is not obligatory.

The key factor, he says, is whether these resources will serve the common good. “It is clear that the acquisition, ownership or even control of every private resource will not serve the common good. Yet, at this stage, we cannot draw up a catalog of do’s and don’ts. We must leave this exercise to the wisdom of legislatures.

The move follows a dispute involving the Maharashtra Housing and Area Development Authority (MHADA), which had acquired old and deteriorated buildings in Mumbai for redevelopment as part of a state policy to improve housing. The owners challenged the acquisition, arguing that the law infringed on their rights to equality and freedom, as enshrined in Articles 14 and 19. In response, MHADA and the Maharashtra government cited Article 31C of the Constitution, which protects laws that implement Article 39(b) from being challenged on fundamental rights grounds.

The nine judges were unanimous on the question of whether laws favoring Article 39(b) enjoy protection under Article 31C of the Constitution. Section 31C grants immunity from constitutional challenges to laws passed by the state to ensure that “ownership and control of the material resources of the community” serves the common good. Originally introduced in the 1971 constitutional amendments and amended by the 42nd Amendment in 1976, the protections of Section 31C were reduced by the Supreme Court in the Minerva Mills case (1980), which struck down parts of the section which prevented judicial review of these laws. However, the unamended core of Section 31C – its “safe harbor” provision for laws seeking to achieve the purposes of Section 39(b) and (c) – remains in force and continues to protect laws admissible against invalidation under Article 14. (equality) and 19 (fundamental freedoms).

In the ruling, the bench said that the unamended Section 31C is still in force and has been legally functional for over four decades, making its practical and legal significance well-established. This interpretation provides clarity to laws that align with Section 39(b) and (c), ensuring that such laws benefit from immunity if they are genuinely intended to promote the constitutional goals of distributing resources for the good -be public. However, the Court emphasized that this protection does not extend indiscriminately to all State action, as each law invoking Section 31C must still satisfy the substantive requirements of Section 39(b) and (c).