Abstract
There has been a substantial erosion of the ‘right to property’ with respect to state takings in India, reflected in a progression of amendments to the Indian Constitution. Among other things, these amendments signify a violation of the doctrine of separation of powers. To study the implications of this on governance in relation to state takings, this paper juxtaposes a narration of events that describe the progressive erosion of the ‘right to property’ against a heuristic analytical structure that seeks to capture the costs of violating the doctrine of separation of powers. This analysis is then utilized to point to the social costs that characterize the state acquisitions (takings) regime in India.
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Notes
Keshvananda Bharati vs. State of Kerala (1973) 4 SCC 225.
I use the terms ‘positive’ and ‘negative’ as understood by Berlin (1961).
An account of the debates of the Constituent Assembly that produced the Indian Constitution can be found in Austin (Austin, 1966). In this paper, apart from original research using relevant documents and judgments, I also draw selectively on the descriptions of the Indian Constitution by Austin (1966, 1999).
For instance, prominent among such cases were—the decision of the Bihar High Court to strike down as unconstitutional the Bihar Management of Estates and Tenures Act1949, which was held to violate Articles 19(1)(f) and 31 (Sir Kameshwar Singh (Darbhanga) vs. The Province of Bihar AIR 1950 Patna 392ff); the Allahabad High Court’s questioning the right of the government to take over a private motor bus concern, again on constitutional grounds; and the claim put in to the Bombay High Court by certain mill owners whose concern had been taken over by the government that their fundamental right to property was violated since they received no compensation (Dwarkadas Srinivas vs. The Sholapur Spinning and Weaving Company Ltd. AIR 1951 Bombay 86).
Article 31 A permitted the legislation of laws to acquire estates—a term used cover the properties of zamindars and other categories of revenue farmers, the taking over of property by the State for a limited period either in the ‘public interest’ or to ‘secure the proper management of the property’, amalgamate properties, and to extinguish or modify the rights of managers, managing agents, directors, stockholders, etc. and those who have licenses or agreements to search or own minerals and oil. Such laws, as per this Article could not be declared void on grounds that they are inconsistent with Articles 19, 31 and 14 (Article 14 guarantees ‘Equality before the law’; Article 19 guarantees freedom of speech, assembly, association, movement, property and choice of any occupation, trade or business; Article 31 covered expropriation and compensation connected with property.). Article 31 B protected the various land reform laws enacted by both the Center and the States, by stating that none of these laws, which were to be listed in the Ninth Schedule, can become void on the ground that they violated any Fundamental Right.
This amendment included a number of state level laws that attacked erstwhile ryotwari, inam and jagir tenures, by including them in the Ninth Schedule. The impulse behind the amendment again had its origin in a judgment of the Supreme Court. In 1961, the Supreme Court had held taking of lands under the Kerala Agrarian Relations Act 1961 was unconstitutional under Article 14 because a smaller compensation was paid for large tracts than for smaller holdings (Karimbil Kunhikoman vs. The State of Kerala 1962 (1) SCR 829ff ).
For instance in the case of Dwarkadas Srinivas vs. The Sholapur Spinning and Weaving Company (Dwarkadas Srinivas vs. The Sholapur Spinning and Weaving Company Ltd. AIR 1951 Bombay 86) the police powers of the state were clarified by the Supreme Court—the assets and management of Sholapur Mills had been handed over to state appointed directors’ consequent to a charge of mismanagement. This act was performed without compensation, which prompted the court to declare it to be illegal on the grounds that compensation had not been paid. The position of the court was informed by the view that since a deprivation was also an acquisition under Article 31(2), compensation should be paid. The instance of this and other such cases enunciated the demand by the courts that compensation should be paid whether the state was acquiring property or seeking to regulate it.
In this case (State of West Bengal vs. Mrs. Bela Banerjee AIR 1954 SC 170), the validity of West Bengal Land Development and Planning Act 1948 (a law enacted to acquire land to settle refugees from East Pakistan) which provided for acquisition of land after payment of compensation not exceeding the market value of the land on December 31, 1946 was challenged. The party receiving the compensation felt that the date, on which the compensation was calculated, did not result in adequate compensation. The State reacted by saying that Article 31(2) read with Entry 42 of List III (an entry in this list legitimizes the legislature to make laws pertaining to the category) of the Constitution gave full discretion to the legislature in determining the measure of compensation. The Supreme Court rejected the argument.
Vajravelu Mudliar vs. Special Deputy Collector AIR 1965 SC 1017. This case was related to the acquisition of land under the Land Acquisition (Madras Amendment) Act 1961 for the purpose of building houses. This move was challenged under Articles 31 and 14 of the Indian Constitution and the case ended up with the Supreme Court.
Vajravelu Mudliar vs. Special Deputy Collector AIR 1965 SC 1017.
Union of India vs. Metal Corporation of India Ltd. AIR 1967 SC 634.
In this context a quote from a lecture delivered in 1968 by Chief Justice K. Subba Rao (then retired) under the auspices of the Forum of Free Enterprise, Bombay is useful to reiterate his position—“The Supreme Court in Vajravelu and Metal Corporation cases considered Article 31(2) in the context of compensation and held that if the compensation fixed was illusory or the principles prescribed were irrelevant to the value of the property at or about the time of acquisition, it could be said that the Legislature had committed a fraud on power and therefore the law is bad.” (1969) 2 SCC (Jour) 1.
State of Gujarat vs. Shantilal Mangaldas AIR 1969 SC 624, 1969 (1) SCC 509. In this case the validity of Bombay Town Planning Act 1958 was challenged on the grounds that the owner was to be given market value of land at date of declaration of scheme, which was not the just equivalent of the property acquired. In response to this claim, the court stated that after the passage of the Fourth Amendment resulting in the changes to Article 31(2) thereof, any question of ‘adequacy of compensation’ could not be entertained. It was maintained that the market value of land in 1927 was ‘a good principle for payment of compensation’ in 1957.
R.C Cooper vs. Union of India 1970 (2) SCC 298.
To get a favor of the judgment the following quotations are illustrative—“The Constitution guarantees a right to compensation—an equivalent in money of the property compulsorily acquired. That is the basic guarantee. The law must therefore provide compensation, and for determining compensation relevant principles must be specified; if the principles are not relevant the ultimate value determined is not compensation.” It is also noteworthy that the court felt that certain principles must be kept in mind while determining compensation—“The broad object underlying the principle of valuation is to award to the owner the equivalent of his property with its existing advantages and its existing potentialities. Where there is an established market for the property acquired the problem of valuation presents little difficulty. Where there is no established market for the property, the object of the principle of valuation must be to pay to the owner for what he has lost, including the benefit of advantages present as well as future, without taking into account the urgency of acquisition, the disinclination of the owner to part with the property, and the benefit which the acquirer is likely to obtain by the acquisition.”
I.C Golaknath and Others vs. State of Punjab AIR 1967 SC 1647.
Article 19 (1) (g) says ‘All citizens shall have the right to practice any profession, or to carry on any occupation, trade or business’.
Once again this case was sourced in a takeover of church lands by land reform laws legislated in the state of Kerala.
Keshvananda Bharati vs. State of Kerala (1973) 4 SCC 225.
For example—Indira Nehru Gandhi vs. Raj Narian 1975 Supp SCC 1.
Jilubhai Nanbhai Khachar vs. State of Gujarat 1995 Supp (1) SCC 596, AIR 1995 SC 142.
Elizabeth Samuel Aron vs. State of Kerala (AIR 1991 Ker 162).
Jilubhai Nanbhai Khachar vs. State of Gujarat 1995 Supp (1) SCC 596, AIR 1995 SC 142.
It is of interest to note that the date of legislation made it immune to any constitutional challenge—even before the Forty Fourth Amendment, on account of the provisions of Article 31 5(a), which said ‘Nothing in clause 2 shall affect—(a) the provisions of any existing law.’
For instance a judgment of the Supreme Court (Special Dy. Collector vs. Kurra Sambasiva Rao (1997) 6 SCC 41) seeking to comment on the broad principles of compensation for acquired land states:“The guiding star or the acid test would be whether a hypothetical willing vendor would offer the lands and a willing purchaser in normal human conduct would be willing to buy as a prudent man in normal conditions prevailing in the open market in the locality in which the acquired lands are situated as on the date of the notification under Section 4(1); but not an anxious buyer dealing at arm’s length with throw-away price, nor façade of sale or fictitious sales brought about in quick succession or otherwise to inflate the market value. The judge should sit in an armchair of the said willing buyer and seek an answer to the question whether in the given set of circumstances as prudent buyer he would offer the same market value which the court proposed to fix for the acquired land in the available market conditions.”
Section 3 (f) Land Acquisitions Act.
Section 40(a), (aa), (b) Land Acquisitions Act.
Section 5A Land Acquisitions Act.
Baji Rao T. Kote vs. State of Maharashtra (1995) 2 SCC 449.
In the Indian version of these ‘norms’, in the Preamble to the Constitution of India it is said ‘We THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVERIGN SOCAILIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens: JUSTICE, social, economic and political; LIBERTY of thought, expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among them all. FRATERNITY assuring the dignity of the individual and the unity and integrity of the Nation’.
This follows Allen’s definition of transaction costs as the resources used to establish and maintain property rights, and the term is understood in the same sense here as well (Allen, 1999).
Vajravelu Mudliar vs. Special Deputy Collector AIR 1965 SC 1017.
Jilubhai Nanbhai Khachar vs. State of Gujarat 1995 Supp (1) SCC 596, AIR 1995 SC 142.
R.C Cooper vs. Union of India 1970 (2) SCC 298.
A very widely quoted definition of property is given by the following passage—“Now the term property in the context of Article 31 which is designed to protect property in all its forms must be understood both in a corporeal sense, as having reference to all those specific things that are susceptible to private appropriation and enjoyment, as well as its juridical or legal sense, of a bundle of rights which the owner can exercise under the municipal law with respect to the use and enjoyment of things to the exclusion of others” (emphasis added). State of West Bengal vs. Subodh Gopal, AIR 1954 SC 92.
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Acknowledgements
I deeply appreciate the valuable inputs I have received in the course of working on this paper from T.C.A. Anant and Julian Moti Q.C. Thanks are also due to an anonymous referee for constructive suggestions.
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A version of this paper was presented at the conference 75 Years of Development Research held at Cornell University in May 2004.
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Singh, J. Separation of powers and the erosion of the ‘right to property’ in India. Constit Polit Econ 17, 303–324 (2006). https://doi.org/10.1007/s10602-006-9008-7
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DOI: https://doi.org/10.1007/s10602-006-9008-7