The apex court’s defence of private business and private property is par for the times when applying socialist interventions of yore can end up alienating investors
By Vikram Kilpady
For those familiar with the comic novel The Hitchhiker’s Guide to The Galaxy by Douglas Adams, the destruction of the Earth to make way for a hyperspace bypass pitchforks Arthur Dent, an Englishman, into a rollicking adventure. Similar dispossessions, though followed not by galactic escapades, but mere successive rounds of courts, have happened in our very own country, with every property owner and farmer whose land or homes have been gobbled up for widening highways, establishing industrial parks and the like. Their lot has been to soldier on despite the odds.
Arthur Dent’s analogy is best kept in mind if one is to look at the industrialisation of India with some restrained optimism. Recently, the Supreme Court reserved its verdict on a question of whether private property would fall within the definition of a community’s material resource as per Article 39(b) of the Constitution.
The Court was called on to decide on the disparate views given by two judges, one of whom was the venerable Justice VR Krishna Iyer ruling in 1978 on a case involving the nationalisation of road transport services in Karnataka. Justice Krishna Iyer in his order had said the community’s material resources would comprise the private and public resources whether natural or man-made. The other judge, Justice NL Untwalia, said he and the majority judges did not agree with Justice Iyer’s view vis-a-vis Article 39b.
Part of the Directive Principles of State Policy, Article 39b, reads: “The state shall, in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.” The next subsection of the Article, ie Article 39(c), is a paean to the Fabian socialist dream, a forgotten relic in the days of thousands of crores of market capitalisation. It reads: “The operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.”
The observations made by the nine-judge Constitution bench when reserving the verdict also show the futility of sticking to principles set to a different timestamp and have withered away now. Chief Justice of India (CJI) Justice DY Chandrachud posited the analogy of a semi-conductor chip manufacturer from Taiwan who sets up a plant in India since the country needs semi-conductor chips. Then, threatening to take away the resource since it was a material resource of the community would see investors not ready to invest in India, the CJI said.
The CJI cited the Taiwan example when Senior Advocate Gopal Sankaranarayanan said 16 judgments of various Constitution benches have interpreted material resources to include private property and private resources. Considering every private resource of an individual as part of the material resource of the community will be far-fetched and would make investors wary of the level of protection they can get, the Court noted.
When Sankaranarayanan specified that the bench needs to focus only on the limited question referred to it, the CJI replied that if the bench accepted that all private property was to be counted henceforth as material resources for the community, then the other issues need not be gone into further.
Sankaranarayanan had cited the example of a vaccine-making unit and how the purely-for-profit company had to be brought into the fight against Covid because the government and community demanded it. The state had to intervene when it became of paramount importance, the senior advocate underlined.
When the CJI said some limits need to be set regardless of the fact that private properties may fall under Article 39(b), Sankaranarayanan reminded the Court that putting straitjacket definitions may impact the community as a whole later.
Another judge, Justice BV Nagarathna, got to the nub of the bench’s views when she said the material resource of a community indicated it is for distribution under the provision. She also said reading into 39(c) that such distribution was to prevent the economic system from concentrating money and the means of production into the hands of a few.
She added the aim of the provisions is not to redistribute the factory assets of a capitalist to workers, for example.
The other seven judges on the bench are Justices Hrishikesh Roy, Sudhanshu Dhulia, JB Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma and Augustine George Masih.
On the penultimate day of the hearing, Solicitor General Tushar Mehta had said things changed with time, from nationalisation to disinvestment. That was because investment by the private sector was boosting the public good now than it did in 1949.
Earlier, CJI Chandrachud had pointed out that the bench will have to reinterpret the provisions in the context of the here and now, not the 1950s. The CJI also noted that in today’s times, 39b cannot be read as an expression of giving in fully to communism or socialism.
That the arguments for protecting private business and private property in a 1978 reference to a constitutional provision set in the statute in 1949 should come to light in the heat and dust of the 2024 Lok Sabha campaign is possibly nothing more than a coincidence.
The last three phases had seen extensive campaigning by the BJP against the Congress’ “plans to redistribute citizens’ wealth”. Such statements usually saw the leader who made the offending utterance getting a notice from the Election Commission. This time, the party seems to have got it. A new precedent, perhaps.
The Congress agenda, or at least the publicity surrounding it, has been as high on empowering citizens with jobs and financial inclusion as is the BJP manifesto. Turning the Congress manifesto promises into a mangalsutra-snatching attempt is what politicians are in the business for. The latest phase saw more polarising tactics after the mangalsutra snatch didn’t click conclusively; whether promoting the fear that reservation for the OBCs, the SCs and the STs will be snatched and given to Muslims has carried sufficient electoral sway will be seen only when the results are in. The mix of religion and caste is indeed heady and pungent.
The larger question of Article 39b and the 1978 reference needs to be seen in the light of its author and the times. Justice VR Krishna Iyer was the Opposition candidate for president in 1987 and lost to R Venkataraman, who was supported by the then Rajiv Gandhi-led Congress.
The late 1970s were not as clearly defined as the post-1991 years. The erstwhile Soviet Union was then very much around and was about to launch the invasion of Afghanistan the very next year, which eventually ended the Cold War bloc. Socialism was a key ideology of the 1940s and 1950s, and despite the turn to liberalise the country in the post-Soviet world order, still looks like a valid proposition for India. For 2024, the Congress seems to have turned into a social-democratic party, which it clearly is not, but given the populism evoked by job creation and other such declarations, its present line has managed to win over some sections.
The Supreme Court’s insistence on protecting business and private property from state interference is a must for the times we are in. Investment can bring factories, which can beget jobs. Capital flees faster under curbs than a fictional demolition of Planet Earth.