Opinion Think

Where Do We Go? Where Do We Go Now?

In the final essay in an eight-part series on The Right to Property, we look at how the weakening of the Right to Property has made the state a reverse Robin Hood, taking land from the poor and giving it to the rich. But there is hope. Earlier essays: OneTwoThreeFourFiveSix, Seven.

The Indian economy managed to shake off the so-called ‘Hindu rate of growth’ in the post-liberalization years, and India witnessed a growth of big business. The modern punchline is to be ‘pro-business’ and ‘pro-markets’, and socialism, it seems, has gone out of vogue. But can there be any kind of free market or capitalism without the foundation of the Right to Property? In the system we have, political allocation mixes in with market allocation, and crony capitalism is the result.

I ended my last essay by arguing that without private property, cronyism and corruption replaces the system of market allocation. In a world with weak and vulnerable property rights protections, an alternate system of property rights protection has emerged – one through political patronage. But as we all know, cronyism is not just used to protect one’s own rights, but also used to encroach upon the rights of others. This essay explores three facets of the lack of property rights protections post-1978, and the efforts made to fix this problem in recent years. The first is the judiciary’s response to Article 300A on the question of compensation for eminent domain. The second is the land acquisition debate, mainly on the new attempts by the government to legislate on the question of public purpose and compensation for both public and private takings. And the third is the effort to get the right to property reinstated in the constitution.

300A – Is There Just Compensation?

My last essay discussed in detail the precise phrasing of Article 300A and the lack of any explicit requirement of public purpose and compensation for takings. Since the deletion of the Right to Property as a fundamental right in 1978, these have been the key questions before the courts – (1) Is the requirement of public purpose and compensation implicit in the constitutional protection provided by Article 300A; and, if not, (2) can this be read in by courts using other constitutional features; or (3) is there no requirement to provide compensation?

There are a number of cases on these issues, and also jurists providing opinions for either side. HM Seervai, after the deletion in 1978, argued in his book (The Constitutional Law of India, 1983, third edition) that the requirement of compensation must be read into the law. His principle was that acquisition is fundamentally different from confiscation (which is taking of property as a penalty). Acquisition, within its meaning for the purposes of the lists in Schedule 7, does not cover confiscation. Therefore, any law taking private property for a public purpose without compensation, is confiscatory, would fall outside Entry 42 in List III and cannot be supported by another Entry in List III. The requirements of a public purpose and the payment of compensation have to be read into Entry 42 List III.

PK Tripathi, made a similar argument in a 1980 paper titled ‘Right to Property after 44th Amendment – Better Protected than Ever Before.’ He argued that the right of the individual to receive compensation when his property is acquired or requisitioned by the State continues to be available in the form of an implied condition of the power of the State to legislate on ‘acquisition or requisition of property’ in Schedule 7.

In KT Plantation v State of Karnataka (2011 9 SCC 1), a five-judge bench of the Supreme Court read in both public purpose and compensation as a requirement for takings under Article 300A. The Court held:

Public purpose is a pre-condition for deprivation of a person from his property under Article 300A and the right to claim compensation is also inbuilt in that Article and when a person is deprived of his property the State has to justify both the grounds which may depend on scheme of the statute, legislative policy, object and purpose of the legislature and other related factors.

This was based on a detailed analysis on rule of law and arguments made by scholars like Seervai and Tripathi. The court argued that rule of law is not explicitly mentioned in the constitution, and yet it is implicit while adjudicating every provision. This analysis was rightfully extended to Article 300A. The court concluded: “Let the message, therefore, be loud and clear, that rule of law exists in this country even when we interpret a statute, which has the blessings of Article 300A.”

While this is a major step forward in the development of property rights jurisprudence, it is important to note that in the past the courts have given a lot of deference to the legislature on the question of public purpose, and only struck down illusory compensation, while allowing inadequate compensation. Therefore, even after KT Plantation, there may be arbitrary takings with inadequate compensation. Having said that, the court has renewed protections that were previously stripped away by amendments and legislation.

Land Acquisition Legislation

Post liberalization, India has grown in terms of GDP per capita and seen a trend towards urbanization. This has led to a greater demand for, and a lagging supply of, state infrastructure in the form of roads, damns, public utilities etc. However, much of this requires taking of land for the new infrastructure projects, and often this is done without compensation. The public purpose provision is usually fulfilled, even by strict standards, but compensation seems like a pipe dream. The Narmada river dam project and its various protests highlight this aspect of the new surge to provide public infrastructure.

Another interesting development in the post-liberalized India is a number of state and privately initiated development projects. These are sometimes in the form of Special Economic Zones (SEZs) or acquisitions for industrial development, where the government will acquire land using the power of eminent domain for a private party (individual or firm). The idea is that these new ventures will foster more economic growth and development than agriculture. And the government is taking land from the farmer, signaling that the farmer does not have the potential to contribute to GDP as much as some other individuals and sectors; and then transferring that land to someone who will use it for contributing to India’s ‘growth.’ This is both tragic and ironic, since agricultural productivity is the first causality of state intervention and regulation in India. The state is using eminent domain power to solve a problem that it created.

There is no public use involved in these kinds of takings, and the change of ownership is an entirely private affair with the government using its power to intervene as a real-estate dealer to transfer land from one private person to another. Naturally, within such a system, the rich manage to exploit the loopholes and find themselves on the more profitable side of the land transaction, while the poor (in this case the farmers) are not given adequate compensation as their assets and livelihood are taken.

Unsurprisingly, these kinds of private takings resulted in large-scale protests and political movements opposing this kind of development. The conversation took a shrill ‘pro’ versus ‘anti’ development tone; and the main issue, one of just takings with compensation was left behind. However, this kind of grassroots opposition by farmers led to some legislative action in the form of a new land acquisition law to replace the paternalist and archaic 1894 colonial Land Acquisition Act. The new act passed was called The Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013 (also known as LARR).

This legislation attempted to create categories of public and private takings (and allowing both types), and also trying to create a scheme of compensation. It is actually the first systematic attempt to delineate public purpose for takings, and is an important first step given the lack of any legislative or judicial doctrine previously defining public purpose. However, virtually all state-led projects (not just public goods and utilities) are included in this expansive definition, making LARR less than perfect on this ground. Government housing, cooperative ventures, residences for workers in government utilities, etc. all fall within public purpose. Also, for certain government projects, the compensation requirement was waived. Where the acquisition is made under certain legislation, such acquisitions would be exempt from compensation requirements; thirteen Acts (such as the National Highways Act, 1956 and the Railways Act, 1989) are exempt from the provisions of LARR. There are some weak checks, like the requirement of Social Impact Assessment (SIA) to be conducted to determine whether the potential benefits of the project would outweigh the social costs. But agricultural productivity is so low and shackled that virtually any industrial project would meet this requirement.

The issue of compensation is more complicated, especially because both public and private takings were allowed. Compensation was set at two-to-four times of prevailing market rates, and minimum norms for rehabilitation and resettlement of affected persons were prescribed. Market value is to be calculated using sale deeds or the agreements to sell recorded in preceding years. While two to four times the prevailing market rates sounds like adequate compensation, it is far from it. The Indian regulatory system has distorted markets to such a high extent that the actual price of the transaction and what is recorded are completely different. Land prices in India are routinely under-reported to avoid high stamp duties and taxes, a problem so rampant that even the standing committee for the LARR recorded it as a serious concern for evaluating fair compensation.

A second issue is that regulations on agricultural land prevent farmers from using it for non-agricultural use, or from selling to a non-farmer. This has resulted in the market for agricultural land being destroyed; ‘market’ values within the purview of these regulations are severely depressed. With the undervaluation of land, it is unlikely that landowners will receive compensation close to the real market price.

Finally there was the question of resolving holdouts and getting consent from property owners for assembling large parcels of land. Where projects require large parcels of land, acquisition of land through the market requires the consent of every single landowner. In this sense, the notion of private takings is pernicious and unnecessary. But the LARR has singularly focused on potential holdouts and created different levels of consent requirements from owners. For public projects, no consent is required under the LARR. In the case of private takings, the consent requirement is only 80 per cent of landowners within a group for fully private projects, and only 70 per cent of landowners within a group for public-private partnerships.

Businesses unwilling to pay the market price to landowners or projects that do not have the support of the landowners in the community will exploit LARR and use their political clout to coerce individual landowners. The LARR 2013 Act had a few amendments attached to it in 2014 and 2015. The amendments diluted many provisions of the LARR. The main issue was that five types of projects were exempt from consent requirements: (i) defence, (ii) rural infrastructure, (iii) affordable housing, (iv) industrial corridors set up by the government/government undertakings, up to one km on either side of the road/railway corridor, and (v) infrastructure including PPP projects where the government owns the land. Further, these projects were also exempt from the Social Impact Assessment (SIA) requirement. The exemptions include both public and private takings within their ambit.

These amendments were initially promulgated by ordinance, twice. Eventually after the ordinance lapsed in 2015, there has been no support for introducing these amendments by legislation. One hopes that these amendments diluting the original LARR are not revived and instead a greater effort is made to create proper restrictions on the government taking land by, (1) only allowing public takings, (2) with sensible and realistic compensation requirement, and (3) requiring greater level of consent for large-scale takings.

It is possible for such a move to come from the legislature, however, we still need a fundamental Right to Property and protections from takings to ensure that legislation like LARR and other state legislation are constrained and follow the parameters of just takings for public purpose and with compensation.

Reinstating the Right to Property

In recent years there has been some support to reinstate the right to private property. In Sanjiv Agarwal v Union of India (WP 2009), Sanjiv Agarwal filed a writ petition before the Supreme Court to invalidate the Forty-Fourth Amendment and reinstate the Right to Property as a fundamental right justiciable under Article 32. The public interest nature of the petition was in representing the plight of the victims of displacement due to SEZ and dam projects. In 2010 the Supreme Court dismissed the petition because the petitioner was a public interest litigant, not directly affected by the deletion of the fundamental right to property. The case to reinstate the right to property was never heard on its merits.

One way to think about this case on its merit is that the 1978 deletion of the right to property was enacted after April 24, 1973 and therefore must pass the basic structure test. This date is crucial because it was the date of the decision of Kesavananda Bharati v State of Kerala (AIR 1973 SC 1461). In Kesavananda, the Court recognized Parliament’s power to amend the constitution, but also protected individual rights by formulating the ‘basic structure’ doctrine. The result of this case was that the Parliament could amend Fundamental Rights, but the amendments had to pass the Basic Structure Test. According to this test, the amending power of the Parliament could not be exercised in a manner as to destroy or emasculate the basic structure or the fundamental features of the Constitution. However, the court did not provide a clear and exhaustive list of the features that comprise the basic un-amendable core of the constitution. Instead, the court enumerated a non-exhaustive list of such features, including supremacy of the constitution, republican and democratic form of government, separation of powers, federal character of the constitution, etc. The right to property was expressly left out of the basic structure in 1973.

Since 1973, the Court has added to the list. In Minerva Mills & Ors. v Union of India (AIR 1980 SC 1789) Supreme Court clearly established that Articles 14, 19 and 21, which were the right to equality, freedoms listed in 19, especially free speech and expression, and due process protections were un-amendable, and protected by the basic structure doctrine. However, other Fundamental Rights, like Article 31, which also protect the individual from the excesses of the State, may not be part of the basic structure of the constitution. The court did not provide adequate reasoning for why some fundamental rights are more fundamental than others.

A specific question regarding the Right to Property and its exceptions was raised. And the validity of the Ninth Schedule in the light of the Kesavananda was questioned in 1981 in Waman Rao v Union of India (AIR 1981 SC 271). The court followed the basic structure doctrine and held that the Ninth Schedule was in itself constitutionally valid since it was created before Kesavananda. The court also held that any inclusions to the Ninth Schedule after April 24 1973 (the date of the Kesavananda judgment) were open to challenge on the ground that these laws violate the basic structure of the Constitution. In other words, all additions to the Ninth Schedule after Kesavananda would have to pass the scrutiny of the basic structure doctrine. The argument of the court in Waman Rao was:

A large number of properties must have changed hands and several new titles must have come into existence on the faith and belief that the laws included in the Ninth Schedule were not open to challenge on the ground that they infringe Articles 14, 19 and 31. We will not be justified in upsetting settled claims and titles and in introducing chaos and confusion into the lawful affairs of a fairly orderly society.

The Waman Rao opinion on the basic structure test applying to legislation protected by the Ninth Schedule (post April 24, 1973) was affirmed in IR Coelho v Union of India (2007 2 SCC 1).

This puts the question of the deletion of Article 31 and Article 19(1)(f) in an interesting light. Since the deletion took place in 1978, the Forty-Fourth Amendment has to be subject to the basic structure test. If it is found that the Right to Property is part of the basic structure, then its deletion is invalidated. There is an excellent case to be made for the Right to Property forming a part of the basic structure. First, as argued in my first two essays (1, 2),  it is fundamental to any prosperous economic society and just legal system. Second, as argued in essays 4 to 7, when property rights are violated, the state engages in pernicious and arbitrary action, and the weakest members of society are left most vulnerable. Third, the burden of proof must lie with the government and the judiciary to demonstrate why property rights are not as fundamental as other Fundamental Rights protected within the basic structure.

Jurisprudentially there is another compelling reason. Post Waman Rao and IR Coehlo, the exception to Article 31, the Ninth Schedule under Article 31B, has to comply with the discipline of the basic structure test. So, it would be legally absurd for only the exception and not the rule to be protected under the basic structure. The courts, in my opinion, can make an excellent case for turning the clock back on property rights, and restoring Article 31 and Article 19(1)(f) to its state on April 24, 1973.

Aside from the question of legal absurdity, in Sanjiv Agarwal, the petitioner argued that following the broader decision in IR Coehlo, no fundamental right could be excluded from the basic structure test. One can only hope that if the matter of protection of property rights and the basic structure test comes up before the courts, they hear the matter on merit, and treat property rights equal to other fundamental rights and protect it under the basic structure test.

Another way to reinstate the right to property is through a formal constitutional amendment that actually re-introduces Articles 31 and 19(1)(f) through Parliament. This seems more unlikely, since the major push to amend and delete property rights initially came from Parliament. However, if property rights protections become a popular demand, then this could become a reality. In the past, rich zamindars were the victims of these infringements and therefore there was little support toward strengthening property rights. Now, however, it is farmers, tribal groups, displaced individuals and groups with little economic and political agency who are victims of takings. Perhaps this may lead to popular demands to strengthen property rights protections.

Conclusion

The Indian saga of property rights has come full circle. The founding fathers weakened property rights to act like Robin Hood – in taking property from the rich (like Kameshwar Singh) and giving to poor landless peasants. That system quickly transformed from genuine socialism to crony-socialism by Indira Gandhi’s time, where state power was used for personal and political benefit for herself and her supporters. In the present age of crony capitalism, the same loopholes created over the years to ostensibly favor the poor are being used by rich industrialists with political clout. We have entered an upside-down world, where there are only reverse Robin Hood political moves. We now take land from poor peasants, and give it to rich industrialists for ‘development. Lack of property rights protections always leaves the poor and the powerless most vulnerable. Without property rights, there is no peace and no justice.

Article 300A is better than the alternative of no protection at all. And the LARR is a terrible law; but India has seen more arbitrary and pernicious legislative action. In this scenario, the only just course of action is to find a way to reinstate the right to property and constrain the state’s power of eminent domain. Both Parliament and the judiciary can turn the clock back on these terrible wrongs committed against the Indian people, and reinstate the right to property.

*

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.

Don't miss anything
Once a week. Just 5 minutes.
Get Pragati in your inbox.
Don't miss anything
Once a week. Just 5 minutes.
Get Pragati in your inbox.
Zero spam. 1-click unsubscribe.
Please share

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.