Opinion Think

The Nehruvian Years

In the fifth essay in an eight-part series on The Right to Property, we look at how property rights were weakened all through the Age of Nehru. Earlier essays: OneTwo, Three, Four.

Read the rest of the essays here: Six, Seven, Eight.

Property rights were increasingly contested in courts as victims of takings petitioned the judiciary on grounds that these takings violated their Fundamental Rights. This contest manifested in three particular ways. The first was a battle between the individual and the state – usually fought in courts. The second was a battle between the judiciary and the executive – as the judiciary invalidated some of the government’s agenda on grounds of violating the constitution. And finally, a battle between the legislature and the Constitution that was intended to constrain the legislature – each time the Constitution placed an inconvenient roadblock, Parliament amended the Constitution.

The case that didn’t matter

Because of the decision of the Patna High Court, the Provisional Parliament hastily amended the right to property and diluted the constraints imposed on the state to take property (discussed in detail in my previous essay). While the Bihar legislation was invalidated, the United Province and Madhya Pradesh land reform legislation were held valid. Unsurprisingly, all three decisions were challenged in the Supreme Court. In State of Bihar v Kameshwar Singh (AIR 1952 SC 252) the Supreme Court ruled on the constitutional validity of the Bihar, United Province, and Madhya Pradesh land reform legislation.

The Supreme Court held the Bihar legislation constitutional, but found (in majority of 3:2) two of its provisions unconstitutional. However, the Bihar law had already been protected by the Ninth Schedule added through the First Amendment.

The First Amendment was challenged regarding its constitutional validity in Shankari Prasad v Union of India (AIR 1951 SC 455). The main question before the Supreme Court was the power of the provisional parliament to amend the Constitution. The Courts overlooked the fact that the First Amendment was not passed by a bicameral legislation, as required under Article 368, because at the time the general elections were pending and the Rajya Sabha was yet to be constituted. The Court upheld the First Amendment, held that the Parliament had the power to amend the constitution, and as long as the procedure laid down for amendment of the Constitution in Article 368 was followed, amendments would be considered constitutional.

Even though the First Amendment had removed many of these constitutional difficulties, the Supreme Court still gave an opinion on the key arguments raised by counsel, and it was the first major case that determined the scope of Article 31 and its exceptions enacted through the First Amendment.

One important issue raised in Kameshwar Singh was whether the exception to Article 31(2) laid down in Article 31(4) protected legislation from violating the public purpose and/or the compensation requirement. On this, the court, while upholding the Bihar legislation, had different points of view. For instance, Chief Justice Sastri felt that Article 31(4) protected legislation from being challenged under both, the public purpose requirement and the compensation requirement. His view was that otherwise the protection provided by Article 31(4) is pointless.

Justice Mahajan, on the other hand, held that the language in Article 31(2) assumes that compulsion acquisition can be for a “public purpose” only, which is thus inherent in such acquisition. Hence Article 31(4) “does not bar the jurisdiction of the court from inquiring whether the law relating to compulsory acquisition of property is not valid because the acquisition is not being made for a public purpose.”

While this was the first case to clearly state that the courts could test whether or not an acquisition was made under public purpose as required by Article 31(2), it neither created the requirements of a valid test or doctrine, and in the future, courts did not perform a public purpose test, and instead deferred to the legislature on the question of public purpose.

Public Purpose Deference

Mahajan’s opinion on public purpose in Kameshwar Singh has been completely ignored by both courts and scholars while analyzing Article 31. The initial deference of the courts, with respect to the question of public purpose, was developed because of the land reform agenda. However, even in the case of other acquisitions, the courts have always maintained deference.

Other cases around the same time included questioning the takeover of a private motor bus concern (Saghir Ahmad v The State of Uttar Pradesh, 1955 SCR 707); and the temporary takeover of a textile mill without paying adequate (Dwarkadas Shrinivas v The Sholapur Spinning and Weaving Company Ltd. AIR 1951 Bombay 86). Though neither case had any relation to the land reform agenda of the government, and did not fall under the protection provided by the exceptions to protect land reform legislation; the courts did not question whether the acquisitions were made for a public purpose. In all these non-agrarian relation takings, the Court deferred to the legislature on the question of public purpose.

In Surya Pal Singh v State of Uttar Pradesh (1952 1 SCR 1052), the Court held that public purpose is “elastic and could only be developed through a process of judicial inclusion and exclusion in keeping with the changes in time, the state of society and its needs.” Within a few years, the Court went a step further and held that acquisitions that benefited a particular person, or entity, could also further public purpose as long as they were part of a larger scheme of public benefit (State of Bombay v RS Nanji AIR 1956 SC 294)

What this essentially meant in practice was that if the legislature felt the acquisition was for a public purpose, the courts would not challenge it. If the public purpose requirement is one of the legs of a just eminent domain policy, then the courts’ deference essentially left justice amputated.

The moment eminent domain policy allows private individuals and industry to benefit from the state power of takings, then all individuals are left vulnerable. Cronyism results, where private parties benefit from government takings instead of legitimately buying land through voluntary exchange. This is exactly what one witnesses in post-liberalization India. And the courts have systematically made the idea of public purpose so broad that it includes almost any kind of taking.

Consequently, in recent years the Court has allowed acquisition for private industry; such as a paper mill (Sarmukh Singh Grewal v State of UP 1995 Supp 4 SCC 489); development of technology parks and residential townships (P Narayanappa v State of Karnataka 2006 7 SCC 578); public sector undertakings (Hindustan Petroleum Corporation v Darius Shapur Chenai 2005 7 SCC 627); cooperative housing societies and residential developments (Venkataswamappa v Special Deputy Commissioner 1997 9 SCC 128; Kanaka Gruha Nirmana Sahakara Sangha v Narayanamma 2003 1 SCC 228).

This kind of deference on the question of public purpose, as well as a very broad reading of the stated goals of any legislation, has led to a kind of cronyism also penetrating the courts. Transactions that must necessarily remain within the purview of voluntary exchange of the market are now negotiated with the state as a middle man.

Not-really-just Compensation

On the question of compensation, in Kameshwar Singh the Court held that Article 31(4) saves legislation even if the legislation violates the compensation requirement; and the provision implies that courts cannot look into the question of adequacy of compensation. Further, laws that are protected from judicial review, through Article 31A and 31B, automatically excluded the courts from questioning the adequacy of compensation. While compensation for acquisition was a fundamental right, because of the exceptions to Article 31(2), land reform laws were saved from judicial review over this question.  This jurisprudence, however, developed quite specifically for agrarian reform. But soon after, compensation for other kinds of acquisition was also questioned.

In State of West Bengal v Bela Banerjee (AIR 1954 SC 170), the validity of the West Bengal Land Development and Planning Act, 1948, was challenged. This legislation was enacted to acquire land for resettlement of refugees following the Partition of India. The legislation also specified a payment of compensation not exceeding the market value of the land on December 31, 1946.

The Supreme Court invalidated the legislation since compensation was pegged to market value on a date anterior to the acquisition. The Court reasoned that while the legislature has the discretion to lay down principles on the basis of which the government paid compensation for appropriated property, such principles must ensure that the compensation is “a just equivalent to what the owner has been deprived of” and that the content of such principles be adjudicated by the court.

This decision of the Supreme Court in Bela Banerjee, prompted Parliament to pass the Constitution (Fourth Amendment) Act, 1955, to continue acquisition of land in keeping with plan objectives. This had already proved to be a successful maneuver to circumvent court decisions of the Patna High Court through the First Amendment. And after  the Courts upheld the validity of the First Amendment in Shankari Prasad v Union of India (AIR 1951 SC 455), this legal trick also acquired legitimacy. And once again after Bela Banerjee, Nehru’s government amended the Constitution when it became inconvenient.

The Fourth Amendment’s Statement of Objects and Reasons clarified “It is considered necessary, therefore, to re-state more precisely the State’s power of compulsory acquisition and requisitioning of private property and distinguish it from cases where the operation of regulatory or prohibitory laws of the State results in deprivation of property.” The Amendment also added three state land reform laws in the Ninth Schedule.

Specifically to address the roadblock imposed by Bela Banerjee, the Fourth Amendment amended Article 31(2) to read “No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for compensation for the property so acquired or requisitioned and either fixes the amount of the compensation or specifies the principles on which, and the manner in which, the compensation is to be determined and given; and no such law shall be called in question in any court on the ground that the compensation provided by that law is not adequate” (emphasis added).

In addition to land reforms, the focus on industry continued in the Five Year Plans formulated by the Planning Commission under Nehru. The Constitution prevented the government from taking over private firms or control of management, and the Fourth Amendment was used to get around this roadblock.  Through the Fourth Amendment, Chapter III-A of the Industrial Disputes Act, 1951 was added to the Ninth Schedule. The Chapter empowered the state to assume management or control of an industrial undertaking in certain cases. Similar provisions involving insurance and the railways were also enabled through the Ninth Schedule.

While the Court had a great beginning in developing a doctrine for compensation in Bela Banerjee, over the next decade, until bank nationalization by India Gandhi’s government, the court went back and forth and was extremely inconsistent on its test for just compensation.

In KK Kochuni v State of Madras (AIR 1960 SC 1080), the Court held that removing judicial review reform questioning compensation was only limited to cases which where the land acquisition was to further the land reform agenda. In all other non-agrarian reform cases, the compensation must be market-value compensation.

Soon after the Kerala land reform legislation was challenged. In Kunhikoman v State of Kerala (AIR 1962 SC 723) the Court held that the question of adequacy of compensation could not be determined by the Court after the enactment of the Fourth Amendment, which specifically removes the Court’s jurisdiction on the matter of compensation.

However, the Court revised itself in Vajravelu Mudaliar v Special Deputy Collector (AIR 1965 SC 1017) where it tried to develop a doctrine for just compensation, despite the severe restrictions imposed by the Fourth Amendment. The Court tried to distinguish between four types of compensation and restricted itself to only intervening in the most severe case. It held that there was a difference between the following types of compensation (1) just equivalent; (2) just equivalent but inadequate; (3) not illusory compensation, though inadequate compensation; and (4) illusory compensation, which was a colorable exercise of power. The Court held that while it would not intervene in the first three cases (in light of the Fourth Amendment), it was obligated to intervene in the case of illusory compensation despite the Fourth Amendment. While this was not ideal, within the various restrictions imposed by constitutional amendments, the Court attempted to place some restraints on the state acquisition of property.

There was a second roadblock imposed by the Courts in Kunhikoman. The Court held that land held under the ryotwari system of tenure did not fall under the meaning of estate, because a ryot was a tenant. Therefore, the Kerala act did not qualify for the protection afforded by Article 31A(2) which protected acquisition of estates from the requirements of Article 31(2).

As all these different kinds of land acquisition and tenancy laws were challenged, the Nehru government attempted to find some kind of systematic solution to enable the government’s socialist agenda, which necessarily involved some kind of ease of property acquisition.

To give the new land redistribution and tenancy laws legitimacy, Nehru had repeatedly amended the Constitution throughout his tenure. And his final act as Prime Minister was to introduce the Seventeenth Amendment to the Constitution. With this amendment, Nehru continued to remove roadblocks in the path of land reform, industrialization, and nationalization.

The Constitution (Seventeenth Amendment) Act, 1964 “proposed to amend the Ninth Schedule by including therein certain State enactments relating to land reform in order to remove any uncertainty or doubt that may arise in regard to their validity.” The Act added 44 laws pertaining to land reform, land consolidation, and tenancy to the Ninth Schedule.

To solve the problem raised by the Court in Kunhikoman, the Seventeenth Amendment also amended the definition of “estate” in Article 31A of the Constitution because “the expression ‘estate’ has been defined differently in different States, and as a result of the transfer of land from one State to another on account of the reorganisation of the States, the expression has come to be defined differently in different parts of the same State. Moreover, many of the land reform enactments relate to lands, which are not included in an estate. Several State Acts relating to land reform were struck down on the grounds that the provisions of those Acts were in violation of Articles 14, 19 and 31 of the Constitution and that the protection of Article 31A was not available to them.” (Statement of Objects and Reasons – Constitution (Seventeenth Amendment) Act, 1964). Nehru died after the introduction, but before the passing, of the Seventeenth Amendment.

The constitutional validity of the Seventeenth Amendment was challenged in the Supreme Court in 1964 in Sajjan Singh v State of Rajasthan (AIR 1965 SC 845). The main question before the Supreme Court was once again the power of the Parliament to amend the Constitution. The majority opinion of the Supreme Court held that the Parliament had the power to amend the constitution, and as long as the procedure laid down for amendment of the Constitution in Article 368 was followed, amendments would be considered constitutional.

Conclusion

There are many reasons to separate the Nehru years from the Indira Gandhi years. For most scholars, it is because they believe that Indira Gandhi’s policies were a draconian infringement on individual rights. While that is true that everything took a turn for the worse in Indira Gandhi’s regime, analyzing the right to property in chronological order, also demonstrates that the assault on property rights by Indira Gandhi had actually been set in motion just after independence, a long time prior to her time as Prime Minister. The legal maneuvers of the Parliament had set clear precedents on how to subvert not just property rights but the entire constitution.

In my next essay I will continue the analysis of the various government policies and court opinion on property rights, in light of the government’s intention to achieve “commanding heights” and nationalize various sectors of the economy.

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Read the next essay here and the previous essay here

Also listen toImagine No Possessions, Episode 26 of The Seen and the Unseen, in which Shruti Rajagopalan talks to host Amit Varma about The Right to Property.

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About the author

Shruti Rajagopalan

Shruti Rajagopalan is an Assistant Professor in Economics at Purchase College, State University of New York, and Fellow at the Classical Liberal Institute, New York University Law School.