A recent examination of the reported judgments on Article 300A of the Constitution revealed a startling fact: the right to property has become more meaningful as a constitutional right than it was as a fundamental right under Articles 19(1)(f) and 31.

During 1950-70, the primary reason for the confrontation between the then ruling party and the Supreme Court was the issue of compensation.  The First Amendment of 1951, which operated retrospectivity, inserted Articles 31A and 31B and the Ninth Schedule to protect legislation relating to agrarian reform and the zamindari abolition.

But the challenge to payment of inadequate compensation continued in other cases. In 1954, the Supreme Court held that compensation payable must be a just equivalent of what the owners were deprived of (State of West Bengal v. Bela Banerjee). This decision led to the Constitution (Fourth Amendment) Act, 1955, which substituted sub-section (2) of Article 31 and prohibited any law from being challenged on the ground that compensation was inadequate.

Ten years later, despite this amendment, it was held that although the adequacy of compensation could not be challenged, the law could be struck down if it laid down irrelevant principles to determine the  value of property or provided for compensation which was illusory (Vajravelu Mudaliar v. Sp. Dy. Collector).

However, the observations in this case were held to be obiter and that it had the effect of nullifying the Fourth Amendment. It was no longer necessary that compensation must be a just equivalent. (State of Gujarat v. Shantilal Mangaldas). On facts, it was also held that the principles for determining compensation were neither irrelevant nor illusory.

The issue of compensation was again came to the fore in the Bank Nationalisation case. A bench of 11 judges, by 10:1, struck down certain provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969 mainly on the ground that the compensation was wholly inadequate. The facts were quite shocking: the provision for compensation required only some of the assets were to be valued.  The value of land and building was deemed to be just 12 times the annual rent received. Thus, in most cities which had rent control, the value would be abysmally low. Certain interest payments were to be deducted twice. Finally, whatever compensation was calculated on the basis of these absurd principles was to be paid after ten years.

This case led to the Constitution (Twenty-Fifth Amendment) Act, 1971, which substituted “compensation” by “amount”. Thus, the need for just equivalence was eliminated. The amount could be otherwise than in cash.  The validity of this amendment was upheld in the Kesavananda Bharati  case.

While the Congress consistently whittled down the right to property, it was the Janata Party, which came to power after the Emergency, that abolished Article 19(1)(f) and Article 31 and substituted them with Article 300A. Thus, from 1978, the right to property was no longer a fundamental right.

It is indeed paradoxical that the right to property became meaningful after it ceased to be a fundamental right.

In KT Plantation P Ltd v. State of Karnataka, a Constitution Bench held that the public purpose component of eminent domain would continue to be a precondition for involving Article 300A. There was no inherent or inbuilt right to claim compensation under Entry 42 of List-III.  However, nil compensation or an illusionary amount would have to be justified on judicial standards and only for measures to achieve greater social justice. The right to claim compensation, though not expressly included in Article 300A, can be inferred from that Article. It is for the State to justify its stand which may be based on legislative policy, object and purpose of the statute.

It has also been held that when property is acquired, it must be for a public purpose and reasonable compensation must be paid. [Hindustan Petroleum Corportion Ltd. v. Darius Shapur Chenai; Ultra-Tech Cement Ltd. v. Mast Ram]. While highlighting the duties of the State when acquiring property, the Supreme Court once again reiterated the right of restitution or fair compensation in Kolkata Municipal Corporation v. Bimal Kumar Shah.

Thus, the right to claim compensation has been resurrected after the right to property was demoted from a fundamental right to a constitutional right. The bar on judicial review, even if a mere amount is paid, is also removed. A strange but welcome turn of events indeed.

Arvind P Datar is a Senior Advocate.