Rustom Cavasjee Cooper & Ors. [RC Cooper] v. Union of India
Rustom Cavasjee Cooper & Ors. v. Union of India
Citation: AIR 1970 SC 564
Court: Supreme Court of India
Bench: Chief Justice Mohammad Hidayatullah and others
Legal Area: Constitutional Law — Fundamental Rights — Right to Property (Article 31) — Legislative Competence — Bank Nationalization
Background:
This case arose from the Bank Nationalization Act, 1969, where the Indian government nationalized 14 major banks.
Rustom Cavasjee Cooper, a shareholder and depositor in one of the nationalized banks, challenged the constitutionality of the Act.
He claimed the Act violated his fundamental right to property guaranteed under Article 31 of the Indian Constitution (prior to its amendment).
The case raised important constitutional questions about the scope of the right to property, compensation, and the limits on legislative power.
Facts:
The Bank Nationalization Act, 1969 took control of 14 banks, transferring ownership from private shareholders to the government.
Shareholders like R.C. Cooper contended that:
The Act deprived them of their property (shares) without adequate compensation.
The compensation provisions under the Act were inadequate and arbitrary.
The Act violated Articles 14 (Equality before law), 19(1)(f) (freedom to acquire, hold and dispose of property), and 31 (right to property).
The government defended the Act as a measure for public interest and economic policy.
Legal Issues:
Whether the Bank Nationalization Act, 1969, violated the right to property under Articles 19(1)(f) and 31 of the Constitution.
Whether the compensation offered under the Act was just and reasonable.
Whether the Act was discriminatory and violated the principle of equality under Article 14.
The scope and limits of Parliament’s power to nationalize private property.
Constitutional Provisions Involved:
Article 14: Equality before the law.
Article 19(1)(f): Freedom to acquire, hold, and dispose of property.
Article 31: Protection against deprivation of property without compensation.
Judgment:
The Supreme Court struck down significant portions of the Bank Nationalization Act, 1969, holding:
1. Violation of Right to Property:
The Court held that the Act did violate Articles 19(1)(f) and 31 by depriving shareholders of their shares without adequate compensation.
The compensation offered was neither “just” nor “reasonable” as required by the Constitution.
Deprivation of property must meet the “just compensation” standard.
2. Discrimination and Violation of Equality:
The Court found the Act to be discriminatory because it affected only certain banks selectively.
This violated Article 14 (the equality clause), which requires laws to be reasonable and non-arbitrary.
3. Doctrine of Proportionality:
The Court applied the doctrine of proportionality to test whether restrictions on rights were reasonable.
The Act’s restrictions were found disproportionate to the objective sought.
4. Limits on Parliament’s Power:
Parliament’s power to nationalize is not unlimited and must respect constitutional safeguards.
Deprivation of property without just compensation is unconstitutional.
Significance:
R.C. Cooper case is a landmark judgment that reinforced the sanctity of property rights under the Indian Constitution (before the eventual curtailment of Article 31).
The judgment clarified that even in public interest, the state must provide just and reasonable compensation when taking private property.
It emphasized the need for non-discriminatory laws and upheld the principle of equality under Article 14.
The case is often cited for the application of the doctrine of proportionality in constitutional law.
This judgment was a setback to the government's attempt to nationalize banks without fair compensation.
Later Developments:
Following this decision, the 44th Amendment Act, 1978 abolished Article 31, and the right to property was demoted from a fundamental right to a constitutional/legal right under Article 300A.
Despite this, the principles of fair compensation and non-arbitrariness continue to influence property and constitutional law in India.
Related Case Laws:
Kesavananda Bharati v. State of Kerala (1973):
Supreme Court affirmed the basic structure doctrine but upheld fundamental rights including property (pre-44th amendment).
Bela Banerjee v. Union of India (1964):
Earlier case on nationalization and compensation.
Maneka Gandhi v. Union of India (1978):
Expanded the scope of Article 21 but also discussed reasonableness in state actions.
Summary Table:
| Aspect | Holding in R.C. Cooper Case |
|---|---|
| Right to Property | Protected under Articles 19(1)(f) and 31; just compensation required |
| Compensation | Must be just and reasonable, not arbitrary |
| Equality (Article 14) | Law must be non-discriminatory and reasonable |
| Parliamentary Power | Limited by fundamental rights and constitutional safeguards |
| Outcome | Struck down sections of Bank Nationalization Act, 1969 |
Conclusion:
The Rustom Cavasjee Cooper v. Union of India case remains a milestone in Indian constitutional jurisprudence protecting property rights against arbitrary state action. It asserted that state policy objectives must comply with fundamental rights, particularly regarding compensation and equality, reinforcing constitutionalism and rule of law.
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