Right to property trumps economic expropriation

By Vishrov Mukerjee and Yashaswi Kant, J Sagar Associates

In the modern economy, property is conceptually dynamic with varying meaning in different contexts. Legally, whatever the nature of property, such as movable, immovable, tangible or intangible, every type is covered by the right to property, a right which is protected by the constitution of India.

Vishrov Mukherjee, Partner, J. Sagar Associates
Vishrov Mukherjee
J. Sagar Associates

The right to property has a chequered history, given inequitable distribution, the traditional concept of zamindari or ownership of large tracts of land with feudal relationships between land owners and the peasantry, and reforms associated with land ownership. Originally included as a fundamental right under article 19(1)(f) and article 31, the right to property was repealed by the 44th Constitutional Amendment Act, 1978. This repealed these two articles and inserted article 300A in Part XII of the constitution, which downgraded the right to property to a constitutional right. This change was ostensibly to ensure that protection available to fundamental rights would not extend to right to property, and would enable enaction of legislation for the redistribution of land and to ensure equitable allocation of resources.

Despite the removal of its significant status as a fundamental right, the right to property has retained its validity as a constitutional right. Its applicability, however, has been limited mainly to cases involving land acquisition, and requisition and takeover of property by the state. This is despite the fact that article 300A appears to promise not just a defence against deprivation of property but also an affirmative weapon against deprivation of economic rights and in the enforcement of financial obligations.

In the recent case of BK Ravichandra & Ors v Union of India & Ors, the Supreme Court underscored the importance of the right to property as a valuable constitutional right guaranteeing economic liberty and freedom. While recognizing that property connotes many different possibilities, each with its own monetary impact, the Supreme Court held that laws, even those that indirectly impact the enjoyment of property, should be strictly interpreted by the courts on the basis of constitutional law. The court elaborated the importance of the right to property in the context of regulatory laws, holding that the right to property has been regarded as a safeguard against government oppression and economic deprivation.

Yashaswi Kant, Senior associate, J. Sagar Associates
Yashaswi Kant
Senior associate
J. Sagar Associates

Drawing attention to the similarity in language in articles 300A and 21 of the constitution, dealing with the right to life and liberty, the court rightly ascribed a rule of law attribute to this constitutional right by holding that any deprivation of property by the state is antithetical to the rule of law. This stance assumes importance, given the nature and scope of the rule of law as a tool to amplify and effectively enforce constitutional rights.

Over the years, private parties contracting with state entities have faced significant delays in the payment of that which is due, in cases such as engineering, procurement and construction contracts, and infrastructure projects including power projects. Delays in payment by state entities have not only precluded the enjoyment of property, but have also led to complete deprivation and destruction due to non-payment. Such delays have seriously hindered the enjoyment of property.

It is a trite statement that development, especially in infrastructure, requires private participation. Uncertainty and delay in the recovery of costs not only impacts economic sentiment but also increases costs. Moreover, most of these projects are funded by banks and financial institutions deploying public money. A constitutional framework that marries contractual and constitutional rights is needed to address systemic issues across all sectors.

The interpretation of laws must adapt to the times. As traditional concepts of property yield to the new economy, and value becomes more and more intangible, the principal need is to expand the extent of this invaluable constitutional right to protect enterprises. This will enable them to recover what is due to them by granting constitutional support to contractual rights.

This will ensure greater fiscal responsibility by the state and at the same time improve certainty and reduce the cost of doing business in India.

Vishrov Mukerjee is a partner and Yashaswi Kant is a senior associate at J Sagar Associates

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