In a landmark decision last week, the Supreme Court addressed the constitutional scope of property rights in Property Owners Association & Ors v State of Maharashtra. Led by Chief Justice DY Chandrachud, the nine-judge Bench examined the status of Article 31C, a provision protecting certain State policy laws from being invalidated on grounds of violating equality rights. The Court reaffirmed the original version of Article 31C, as validated in Kesavananda Bharati (1973), which shields laws implementing Articles 39(b) and (c). This clarification comes after earlier attempts to expand Article 31C’s scope through the Minerva Mills case (1980) were struck down. The case pertained to a Maharashtra law from 1986 that allowed a public housing body to acquire deteriorating private buildings under Article 39(b), obligating the State to ensure resource distribution for the common good.
A key issue was whether “material resources of the community” under Article 39(b) includes all private property. Justice Krishna Iyer’s broad interpretation in Ranganatha Reddy (1977) included all resources within this phrase, but the Court in Property Owners Association refined this view. The majority opinion held that not all private property could be considered community resources unless certain factors were met: (1) the resource’s scarcity, (2) its inherent characteristics, (3) its impact on societal well-being, and (4) the consequences of its concentration under private ownership.
This narrower interpretation aligns with India’s economic shift from public dominance to a mixed investment model. In India, the right to property was established as a fundamental right in India’s Constitution under Article 31, showing the framers’ intention to protect private ownership while ensuring economic security for individuals. However, during the Constituent Assembly debates, this provision became a point of contention, with members divided on balancing individual property rights with the State’s responsibility to promote social justice and equality.
BR Ambedkar and KT Shah discussed the potential risks of allowing excessive property rights that could hinder land reforms and perpetuate inequality. Ultimately, Article 31 was crafted with provisions for fair compensation in cases of State acquisition, but the State retained the power to acquire land for public purposes. This compromise reflected the framers’ attempts to protect property ownership without compromising on social and economic restructuring goals.
In the decades that followed, the tension between private property rights and the State’s development objectives led to several amendments, culminating in the 44th Constitutional Amendment in 1978, which downgraded the right to property to a constitutional right under Article 300A. This shift allowed the government more flexibility in land redistribution and industrial policies without rigid compensation obligations.
Around this time, Justice VR Krishna Iyer introduced a notable perspective through the Krishna Iyer Doctrine, emphasising that property rights must be subordinate to social welfare and public good. The judgment argued that the right to property should not be seen in absolute terms but rather within a framework where the State has the authority to reallocate resources for the collective benefit. This doctrine reinforced the idea that individual property rights could be limited in the public interest, aligning with India’s evolving socialist priorities during that period.
One should read Justice SC Sen’s dissenting observations in this case. He argued that “Article 39 cannot justify the retention of unlawfully acquired property by the government for the so-called common good. Simply put, the Directive Principles of State Policy do not authorise the government to rob Peter to pay Paul.”
Fundamental flaws
There were four fundamental flaws with the Krishna Iyer doctrine. First, it gave the State excessive discretionary power. The doctrine’s broad endorsement of State discretion in limiting property rights for social welfare grants the government sweeping authority without adequate checks. This has many times led to overreach and potentially arbitrary applications of “public interest” as a justification for expropriation.
Second was the weakening of due process protections. By subordinating property rights to social welfare without stringent procedural requirements, the doctrine risked eroding due process standards, particularly regarding notice, fair hearing, and the right to appeal in expropriation cases. The lack of procedural safeguards is at odds with established principles in constitutional law. Third, the doctrine failed to incorporate a proportionality test, a key standard in modern legal systems that ensures any limitation on rights is necessary, appropriate, and proportionate to the intended public purpose. Proportionality has become a guiding principle in constitutional rights cases globally, as seen in S v. Makwanyane (1995) in South Africa, which applied proportionality to protect individual rights from excessive State intervention. Without proportionality, the doctrine’s “public interest” rationale can be interpreted too broadly, potentially justifying expropriation even in cases where the public benefit is marginal or disproportionate to the harm caused to individual property owners.
Fourth, there was a conflict with economic security and investment stability. Property rights are not solely individual entitlements but are fundamental to economic stability and growth, as propounded by Hernando de Soto in his work on property rights and economic development. The doctrine’s subordination of property rights creates legal uncertainty, potentially deterring both domestic and foreign investment. There is no dearth of empirical study demonstrating that secure property rights are essential for encouraging investment and economic productivity.
In India’s case, the uncertainty created by the Krishna Iyer Doctrine hindered the stable environment necessary for large-scale infrastructure projects and entrepreneurial initiatives, ultimately affecting the very social welfare it seeks to prioritise.
Against this backdrop, the recent judgment is very progressive. The majority judgment, authored by Chief Justice DY Chandrachud, upholds the Constitution’s flexibility in economic governance, aligning with Ambedkar’s vision of “economic democracy” where no rigid economic ideology —like socialism — should bind future governments. This judgment has significant implications for India’s economic governance and property rights. By affirming flexibility in Article 39(b), the Court enables future governments to adopt diverse economic policies without constitutional limitations. It strengthens property rights by narrowing ‘material resources of the community’ to those genuinely impacting public welfare, limiting arbitrary State acquisition.
Integrating the Public Trust Doctrine only for public-benefit resources, the Court sets clear criteria for State intervention, promoting fairness and protecting against unwarranted encroachment. This approach respects the separation of powers, ensuring that economic policy remains adaptable to democratic mandates and evolving needs.
The writer is an Officer on Special Duty, Research, Economic Advisory Council to the Prime Minister. Views are personal