Rolling Series

PROPERTY OWNERS’ ASSOCIATION v. THE STATE OF MAHARASHTRA

This post is authored by Kartikey Singh, 2nd year at Rajiv Gandhi National Univesity of Law, Punjab

INTRODUCTION

The Directive Principles of State Policy (DPSP), as per the chief designer of the Indian Constitution, B.R. Ambedkar, ‘have a great value for they lay down that our ideal is economic democracy.’[1] Therefore, the constitutional model is also economic democracy and not only political democracy, and for that reason, DPSP has been incorporated as a part of the Indian Constitution. The primary goal of including part IV (DPSP) in our Constitution is that it may establish a set of directions issued to the prospective legislators for their administration for good governance[2]. Part IV holds a very crucial position in the constitutional design as it imposes responsibility and obligation on the State to take positive steps for creating socio-economic conditions in which there will be impartial social harmony with economic and social equity to all. Though DPSPs impose an obligation on the State, they are not enforceable in any court.

The term “socialist” was incorporated by the 42nd Amendment in 1976, which made the philosophy of “socialism” a part of the Indian Constitution. While interpreting the constitution, the socialist shade has always been supported by the Directive Principles, especially by Article 39(b) which talks about the principle of Distributive justice. Distributive justice aims at the distribution of material resources of the community in such a way as to serve the common good. Article 39(b) uses the phrase “material resources of the community” and the said phrase has been interpreted broadly and uniquely in various judgments.

In the case of State of Karnataka v. Ranganatha Reddy[3], Justice Krishna Iyer, J speaking for himself and two other judges, held that “material resources of the community in the context of re-ordering the national economy embraces national wealth, not merely natural resources, all the private and public sources of meeting material needs, not merely public possession.”[4] In the case of State of Tamil Nadu v. Abu Kavur Bai, [5]the court pronounced that the “Material resources as enshrined in Article 39(b) are wide enough to cover not only natural or physical resources but also moveable or Immovable properties.”

The view taken by Justice Krishna Iyer, J. in the State of Karnataka v. Ranganatha Reddy[6], was later affirmed by a Constitution Bench in the case of Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Ltd[7]. The Hon’ble Supreme Court has decided to reconsider the judgment given in Sanjeev Coke and also re-interpret Article 39(b) of the Constitution in the pending case of Property Owners’ Association v. The State of Maharashtra[8]. In this article, I have tried to explore and analyze the Directive Principles in Article 39(b) regarding “material resources of the community” in the light of the case of Property OwnersAssociation and Fundamental Rights enshrined in the Indian Constitution.

BACKGROUND OF THE CASE

“Landowner’s right to property is a fundamental right and it could not be suspended”. –  B.R. Bhattad, President, Property Owners Association

After the Maharashtra government took measures to forcibly take possession of crumbling structures in the city, the Property Owners’ Association (POA), a body representing over 20,000 landowners in Mumbai, has filed a lawsuit in the Supreme Court. The state Cabinet approved various amendments to the Maharashtra Housing and Area Development Act, 1976, on August 28, 2019, making time-bound redevelopment of dilapidated rented and non-rented properties mandatory. The changes will allow the Maharashtra Housing and Area Development Authority (MHADA), which is managed by the state, to forcibly acquire properties in cases where landowners or developers have slowed down renovations.[9]

The dispute centres on a twenty-three-year legal battle that is currently being considered by a Supreme Court bench of nine judges. The state government had also amended the MHAD Act in 1986 to add a new section (Section 103B) that allows the Mumbai Building Repair and Reconstruction Board (MBRRB) of MHADA to acquire cessed properties with the consent of seventy percent of the residents for restoration purposes. After losing the test in the lower court, the Property Owners’ Association challenged the action in the Bombay High Court and then in the Supreme Court. The case was initially assigned to a three-judge bench in the Supreme Court, but it has since been referred to larger benches. The property owner’s right to property, according to the president of the Property Owners Association, is a fundamental right that cannot be suspended. According to the most recent provision, landowners of structures deemed unfit for human habitation will have six months to begin renovation. 

If the former neglects or fails to do so, the residents will be given an extra six months, after which the MHADA board will take possession of the properties forcibly. The whole debate is pointed toward obtaining land at cheap costs from landowners, and afterward bundle it out to large designers and contractors. “Rather than working on the redevelopment guidelines and speeding up the approval method for redevelopment with the active support of the owners, the public authority seems inclined on to make new deterrents to their patch up,” Over the last 4 decades, the landowners have either redeveloped or started redevelopment of 5,000-odd structures and on the other hand, the MBRRB has repaired only 442 old and rundown structures. The seven judges bench observed that they have ‘some difficulty in sharing the broad view that material resources of the community under Article 39(b) covers what is privately owned’ and now to interpret the phrase “material resources of the community” under Article 39(b) of Constitution, the case is pending before the nine judge bench of the apex court.

MATERIAL RESOURCES OF THE COMMUNITY

In terms of “material resources,” the phrase is broad enough to encompass not only natural resources but also immovable and movable properties. So far, there hasn’t been any disagreement. The problem arises from the question of whether the phraseology of the Article includes the material resources of individual community members. The argument that the community’s material resources imply property vested in the society, that is the State, has been made before the courts several times. Hence, it does not cover private property. As a result, individual members of the community’s material resources are not included in the community’s material resources. In Ranganatha Reddy, a majority of a seven-judge Supreme Court bench felt it was important to consider the legality of the Karnataka Contract Carriages (Acquisition) Act, 1976, in light of Articles 14 and 19. The Act was found to be constitutional due to its compliance with Articles 14 and 19. It was thought necessary to judge the acquisition Act’s constitutionality against the touchstones of Articles 14 and 19, rather than using Article 31C read with Article 39(b) as protection.

DIVIDED JUDICIAL UNDERSTANDINGS

Krishna Iyer J. said that the wordings adopted in Article 39(b) encompass private property in his concurring opinion in Ranganatha Reddy. This viewpoint is based on the assumption that “distribute” is the important term in Article 39(b), and that distribution entails nationalization. If nationalization is permitted under Article 39(b), then the private property must clearly be included in the distribution. This point of view was adopted by Chinappa Reddy J. in his ruling in Sanjeev Coke. Neither the Krishna Iyer J/s decision nor the Sanjeev Coke ruling provides any support for this approach. Krishna Iyer J/s concept was also used in the second Minerva Mills case. In that case, the Court refused to rule on whether the 1974 Sick Textiles Undertakings (Nationalization) Act violated Articles 14 and 19. Chinappa Reddy J. was one of the two judges on the two-judge bench in this case. In Kavur Bai, the Tamil Nadu State Carriages and Contract Carriages (Acquisition) Act, 1971 was found to be constitutional under Article 39(b) of the Constitution. However, in Property Owners Association, the Supreme Court opined that the opinions in Sanjeev Coke deserved reconsideration by a higher bench while dealing with laws involving acquisition in the Maharashtra Housing and Development Act, 1976. As a result, the judicial view on the matter is split.

THE RIGHT LEGAL STANCE

The alternative approach, which differs from Krishna Iyer J.’s, is to define “material resources of the community” as those resources that vest in the community, that is the State, and hence distribution cannot involve nationalization. The State may nationalize as part of a justified restriction on the right to property, as long as it complies with the Fundamental Rights. Nationalization cannot be protected by Article 39(b) read together with Article 31C. When it comes to the government’s distribution of proceeds, Article 39(b) only applies when the nationalization is completed. To put it another way, when it comes to taxation, Article 31C protection applies to the distribution of the proceeds after the taxes have been collected and not to the collection of taxes itself.

Any asset collection including a breach of Articles 14 and/or 19 cannot, in actuality, serve the general good and, as a result, cannot fall under the purview of Article 39(b). This strategy appears to be consistent with the definition of the verb “to distribute”: “to distribute” means “to hand out”, not “to acquire.” The correct legal stance is that “distribution” solely refers to the distribution of assets, not their accumulation. As a result, in order to collect assets from a private party, Articles 14 and 19 must be followed. Only when selecting what to do with the gathered assets does the bar of Article 31C read with Article 39(b) come into play. In this context, the term “community material resources” in Article 39(b) can only refer to resources that have already been vested in the State. Where private parties own resources, the State must first acquire them without depending on Article 39(b).

It’s difficult to believe that a law that blatantly violates basic Fundamental Rights can ever be in the public interest. Indeed, the public interest would demand that the balance between Directive Principles and Fundamental Rights be maintained, with the former not being privileged by the courts. The Supreme Court has consistently maintained that the balance between Part III and Part IV is a basic feature of the Constitution, which gives even greater support to this argument.

Furthermore, eliminating private property from Article 39(b) does not jeopardize “socialism’s” objectives. In the Indian context, socialism is not ideologically rigid, and it cannot be seen as opposing the concept of private property. Furthermore, the ideology of socialism must be balanced alongside fundamental rights.

CONCLUSION

In this paper, I have examined the link between the Directive Principles of State Policy and the Fundamental Right in light of the case of Property Owners’ Association v. The State of Maharashtra. The strategy of harmonizing and balancing the two, in my opinion, is the most acceptable. I have further looked at the interpretation of the Constitution’s Article 39(b). The words “distribute” and “material resources of the community” have been given special attention. It is argued that the decision in Sanjeev Coke, which held that “community material resources” encompass private property and that “distribute” includes asset acquisition/collection, is erroneous in its whole.

Sanjeev Coke’s logic can readily be applied to other issues besides nationalization, particularly taxation. Are we to believe that tax laws are exempt from the provisions of Articles 14 and 19? The Supreme Court’s approach demonstrates that this is not the case. If tax regulations can be challenged under Articles 14 and 19, there’s no reason why acquisition and nationalization laws can’t be challenged as well. The framers’ goal in enacting Article 39(b) was to exclude private property from the definition of “material resources of the community.” The strategy of balancing Fundamental Rights and Directive Principles should be preferred and Article 39(b) must be interpreted in light of Articles 14 and 19.

With reverence, it is submitted that the judiciary’s latest approach, calling into question Sanjeev Coke’s interpretation in Property Owners’ Association v. The State of Maharashtra is far from reproachable and deserves to be appreciated.


[1] Mahendra P. Singh, V.N. Shukla s Constitution of India 345-46 (Eastern Book Company, 11th Edn. 2008).

[2] Ambedkar, III Constituent Assembly Debates at 41.

[3] State of Karnataka v. Ranganatha Reddy, 1978 AIR 215, 1978 SCR (1) 641.

[4] Id.

[5] State of Tamil Nadu v. Abu Kavur Bai, 1984 AIR 326, 1984 SCR (1) 725.

[6] Supra Note 3.

[7] Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Ltd, 1983 AIR 239, 1983 SCR (1)1000.

[8]Property Owners’ Assn. v. State of Maharashtra, (2013) 7 SCC 522.

[9] Neeraj Tiwari, ‘Mumbai landowners up in arms against government move to forcibly acquire properties’, The Indian Express, (Mumbai 31 Aug 2019).

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