Case: Byramjee Jeejeebhoy (P) Ltd Vs. State Of Maharashtra

1. By an agreement called Kowl dated October 2, 1830 the Principal Collector of Konkan conferred on behalf of the East India Company "farm rights" upon one Cursetjee Cowasjee Banajee - hereinafter called "Banajee" - in seven villages (1) Mogra, (2) Wasivre, (3) Bandivili, (4) Majas, (5) Part Pahadi, (6) Goregaon and (7) Poisar on terms and conditions set out therein. By two letters dated October 17, 1835 and July 17, 1841 the original cowl was modified and Banajee was required to pay an amount to the East India Company of Rs. 2,708/7 /- per annum in consideration of the benefits conferred upon him by the said cowl. Banajee constructed extensive salt works in the villages and expended Rs. 2 lakhs in improving and developing the villages. On September 22, 1847 the East India Company granted to Banajee the seven villages on certain terms, freed from the covenants of the cowl, and also from liability to pay assessment on land revenue in consideration of the amount spent by him for improving the villages, and an amount of Rs. 30,000/-paid by him to the East India Company. The villages were held and enjoyed by the successors of Banajee under the terms of the grant without payment of land revenue till the year 1952. The Legislature of the Bombay State enacted the Salstte Estates (Land Revenue Exemption Abolition) Act, XLVII of 1951 (hereinafter called the Act) which received the assent of the President on Jan. 4, 1952 and was brought into force on March 1, 1952. The Act was enacted as a measure of agrarian reform and formed part of a pattern of legislation undertaken by the State of Bombay to abolish the rights of intermediaries between the State and the cultivator of the soil. The Act provided for abolition of exemptions from payment of land revenue enjoyed by estate-holders, in certain specified villages in the Island of Salsette, and for the vesting of waste lands in the villages.2. The Collector of Bombay Suburban District by his letter dated February 28, 1952 informed the appellant - who is the successor-in-interest of Banajee under the grant that with effect from March 1, 1952 as provided by S. 4 of the Act all waste lands which were not the property of the estate-holder under the kowl and all waste lands which had been demised in the kowl as the property of the estate holder but which had not been appropriated before August 14, 1951 and all other kinds of property referred to in S. 37 of the Land Revenue Code and which were not the property of any individual or an aggregate of persons legally capable of holding the same shall vest in the Government. He also invited attention to the provisions of Ss. 3 and 5 of the Act and informed the appellant that the Bombay Land Revenue Code will apply to all lands of the appellants villages with effect from March 1, 1952 and directed the appellant from that date not "to collect land revenue or rent as the case may be in respect of the lands to which the provisions of the Act" applied. By letter dated March 5, 1952 the appellant submitted that the seven villages were held as absolute owner under and by virtue of the indenture of conveyance dated September 22, 1847 between the East India Company and Banajee and that under the terms of the grant all the lands in the villages were absolutely and forever freed and discharged from the obligations of the Kowl of 1830 and also freed and discharged from all liability to pay land revenue under Regulation XVII of 1827 and from all liability for assessment in the nature of land revenue, and that the Act did not and could act apply to the lands of the appellant in the above-mentioned villages - the appellant being the absolute owner of the land in the villages. By letter dated June 25, 1952 the Collector informed the appellant that the provisions of the Act were applicable to the seven villages and the requisition to treat the villages otherwise could not be granted.3. On November 28, 1952 the appellant commenced an action against the State of Bombay (which was numbered Suit No. 52 of 1953) in the High Court of Judicature at Bombay on its original side for a decree declaring that the provisions of the Act did not apply to the seven villages, of the appellant and for an injunction restraining the State from enforcing the provisions of the said Act against the appellant in respect of the said seven villages. The State of Bombay by its written statement contended that the appellant was not the absolute owner of the said seven villages, that the Act applied to those villages and a decree for declaration and injunction as claimed could not on that account be granted. K. K. Desai, J., who heard the suit held that the indenture dated September 22, 1847 was not a lease, but it could be regarded as a grant of a farm of the right to recover revenue as an agent to whom the prerogative of the State was delegated as provided in the grant, and that in any event the indenture was in the nature of an agreement under which the estate was held from the Government and therefore the seven villages were an "estate" in the hands of the appellant within the meaning of S. 2 (b) of the Act. The estate was also not exempted from the operation of sub-s. (1) of S. 3 of the Act .4. In appeal a Division Bench of the High Court held that the indenture dated September 22, 1847 created a right not of the nature of a lease or farm, but the villages were held under an agreement from the State Government within the meaning of S. 2(d) of the Act and therefore under a kowl and the villages were an estate within the meaning of S. 2 (b) and exemption from payment of land revenue conferred by the indenture was statutorily abolished. The Court also held that the rights of the appellant in the villages as grantee of the exemption were not saved by cl. (3) of S. 3, and confirmed the decree passed by the trial Court. With certificate granted by the High Court this appeal is preferred by the appellant.

Court's reasoning:
We are unable to accept this contention. It is true that where property is transferred absolutely by one person to another, it cannot be said that the property transferred is held under an agreement with the transferor merely because of the covenant of title. But when the State transfers property to a citizen, it does not thereby, in the absence of an express provision, grant exemption from liability to pay revenue. The right to recover revenue is not an incident of ownership: it is a prerogative of the sovereign, or a liberty or franchise of some authority claiming derivatively from the sovereign. Mere grant of land by the State does not absolve the grantee from liability to pay revenue. Under the indenture dated September 22, 1847, the grantee was given a right to hold the villages free from liability to pay revenue on certain terms, one of which was to pay rent of Re. 1/- per annum when demanded. The villages were granted subject to the restrictions, in absolute right and freedom from liability to pay revenue in respect of the villages was given subject to certain conditions. Imposition of these conditions subject to which exemption from liability to pay land revenue was granted, and acceptance thereof constituted an agreement within the meaning of S. 2(d). The villages though held in absolute right are still in the matter of liability to pay land revenue held under an agreement from the State Government. In the grant in question there is in the first instance an obligation to pay annual rent, if demanded. There is also an obligation to respect the rights of the holders of the lands and of Dewasthans, Dharamdawas and to make allowance to Pals. There is then an obligation not to alter the rights of the holders of land to their prejudice, and the grant of the right to exemption from payment of revenue is made subject to all laws and regulations which are from time to time in force in the Island of Salsette touching the sale and manufacture of spirituous liquors or poisonous or injurious drugs or substances. These are all covenants which raise contractual obligations on the exemption from land revenue, absolute grant of the land notwithstanding. Both the conditions prescribed under the definition, namely, specification in the Schedule and holding under a kowl as defined under the Act were therefore fulfilled, and the villages were at the date of the Act, held under an agreement from the State of Bombay.12. The next question is whether the grant is exempt from the operation of sub-s. (1) of S. 3, under which all lands in an estate are and shall be liable to the payment of land revenue to the State Government. This liability is imposed notwithstanding anything contained in the kowl, or decree or order of a court or any other instrument or any law for the time being in force. Prima facie, the covenants contained in the kowl whereby the grantee was discharged and absolved from liability to pay land revenue must be regarded as superseded by the statutory imposition of liability to pay land revenue. But the operation of sub-s. (1) of S. 3 is subject to the provisions of sub-s. (3). That sub-section states that nothing in subsection (1) shall be deemed to affect the right of any person to hold land in an estate wholly or partially exempt from the payment of land revenue under a special contract, or grant made or recognized by the terms of the kowl in respect of the estate or under a law for the time being in force in favour of any person other than the estate-holder. This clause only protects the rights of a person to hold land in an estate exempt from payment of land revenue, if such exemption is under a special contract or grant made or recognised by the terms of the kowl in respect of the estate or under a law for the time being in force, and a person whose rights are not so affected must be a person other than the estate-holder. By sub-s. (1) therefore exemption granted from payment of land revenue to the grantee of the kowl is extinguished: sub-section (3) however saves the rights of persons other than the estate-holder, who hold land in the estate. By express provision the estate-holder is excluded from the benefit of sub-s. (3). The intention of the Legislature is clear: it is to withdraw the exemption in favour of the estate-holder from payment of land revenue if such right was granted under a kowl. That withdrawal is not to affect the rights of persons holding land in an estate under a special contract, or grant which was made or recognized by the terms of the kowl even if the right was to hold the land exempt from the payment of land revenue. The futility of the argument that the expression "person" when it first occurs in sub-s. (3) includes the estate-holder, becomes obvious if the clause is read after substituting the expression "estate-holder for "person".