Constitution and the redistribution of wealth

Constitution and the redistribution of wealth

The story so far:

There have been heated exchanges between the ruling government and the Opposition with respect to the redistribution of wealth during the ongoing election campaign. The Supreme Court has also constituted a nine-judge Bench to interpret the Directive Principles of State Policy (DPSP) with respect to ownership and control of material resources.

The Preamble to the Constitution aims to secure to all citizens social and economic justice, liberty and equality. Part III of the Constitution lists down the fundamental rights that guarantee liberty and equality while Part IV contains the DPSP. These are principles that the central and State governments should follow to achieve social and economic justice in our country. Unlike the fundamental rights in Part III, the DPSP is not enforceable in court. They are nevertheless fundamental in the governance of the country. Article 39(b) and (c) in Part IV contain principles that are aimed at securing economic justice. They provide that ownership and control of material resources of the society should be distributed to serve the common good and that the operation of the economic system does not result in concentration of wealth to the common detriment.

The Constitution originally guaranteed right to property as a fundamental right under Article 19(1)(f). It provided under Article 31 that the state shall pay compensation in case of acquisition of private property. It is pertinent to note that at the time of independence, the main property rights related to agricultural and other land. The government had to acquire the rights in such estates for carrying out land reforms and construction of public assets. Considering the inadequate resources with the government and in order to provide greater flexibility in acquiring land for public welfare, various amendments were carried out curtailing the right to property. Notable among them are exceptions under Articles 31A, 31B and 31C that are briefly explained in Table 1.

The Supreme Court in various cases has interpreted the relationship between fundamental rights and the DPSP. Most of these cases were against constitutional amendments made by the state that curtailed the right to property that was then a fundamental right. In the Golak Nath case (1967), the Supreme Court held that fundamental rights cannot be abridged or diluted to implement DPSP. Finally, in the Kesavananda Bharati case (1973), a thirteen-judge Bench of the Supreme Court upheld the validity of Article 31C but made it subject to judicial review. In the Minerva Mills case (1980), the Supreme Court ruled that the Constitution exists on a harmonious balance between fundamental rights and DPSP.

In 1978, in order to avoid excessive litigation directly in the Supreme Court by the propertied class, the 44th amendment act omitted right to property as a fundamental right and made it a constitutional right under Article 300A. The right to private property continues to be an important constitutional cum legal right. Any law to acquire private property by the state should be only for a public purpose and provide for adequate compensation.

Indian governments in the first four decades after independence followed a “socialistic model” of economy. There were many laws made by the Centre and States to acquire land from zamindars and big landlords for public purpose. The economic policies resulted in the nationalisation of banking and insurance, extremely high rates of direct taxes (even up to 97%), estate duty on inheritance, tax on wealth etc. There were also regulations that placed restrictions on growth of private enterprise like The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). The rationale behind these measures during those times was to reduce inequality and redistribute wealth among the poorer sections who constituted majority of the population. However, such measures stifled growth and also resulted in the concealment of income/wealth. Taxes like estate duty and wealth tax generated revenue that was much less than the cost incurred in administering them.