DIVISIONAL FOREST OFFICER AND ORS.

TATA FINLAY AND ANR.

JULY 10,2001

[SYED SHAH MOHAMMED QUADRl AND S.N. VARIAVA, JJ.] B

Kera/a Grants ai1d leases (Modification of Rights) Act: 1980-Seclions 2(b), (c).(d).(e), 3 and 4-Demand of seigniorage rates in respect of cutting and removing _eucalyptus trees grown and used by the lessees on the leased C /and-Validity of-Held, Government has ownership on timber trees grown and removed from leased lands and entitled for seigniorage rates-Timber includes eucalyptus trees-On facts, since the tre_es were cut and removed to the fact01y situated in the same leased lands, the demand for seigniorage rates invalid D Respondents filed a Writ Petition before High Court challenging the constitutional validity of the Kerala Grants and Leases (Modification of Rights) Act, 1980 and legality of demand of seigniorage rates raised by appellants under the Act in respect of cutting and removing eucalyptus trees grown and used by the respondents on the lands held by the respondents as lessees. The High Court held that the Act was not applicable to the lands held by the E respondents and quashed the demand notices issued by the appellants demanding segniorage from the lessees and issued a writ prohibiting the appellants from interfering with the cutting of eucalyptus anci other trees by the respondents and from levying seigniorage on such trees and firewood under the Act.

The respondents contended that the seigniorage rates cannot be levied under Section 4 of the Act on eucalyptus and other trees which were cut and utilised in the factories which are situated within the boundaries of the lands in question ; that the claim of seigniorage implied ownership of a share in

the value of the trees grown in leased lands by the State Government in respect G of which seigniorage is payable on removal of trees ; that the equivalent term in Malayalam is "kuttikonam" whiCh means 'owner' or 'shareholder'; that since the eucalyptus trees are grown by the respondents and the appellants had no share in them, the demand for seigniorage is unsustainable; that the provisions of the Act deal with timber trees and not eucalyptus trees; that 821 H

A since the eucalyptus trees are cut and taken to the factory situated in the

leased land itself, the liability to pay seigniorage rates does not arise for the respondents under the Act.

Dismissing the appeal, the Court

B HELD : 1.1 Under Section 4 of the Kerala Grants and Leases (Modification of Rights) Act, 1980, e\'ery grantee and lessee is made liable to pay the Government seigniorage at the rates in force for the time being for the timber cut and removed from any land held by him under the grant or lease. The contention of the respondent that the Government has no ownership C in the property is not acceptable as in Section 4, the expression seigniorage is employed to enforce a prerogative of the State de ho; s the right of ownership in the property. 1825-F; 827-DI

State of Kera/av. Kanan Devan Hills Produc~ Co., 11991) 2 SCC 272 and Leslie v. State of Kera/a, AIR (1970) Kerala 21, referred to

New Shorter Oxford English Dictionary, referred to.

1.2 A perusal of clause (a) of Section 3 of the Act shows that the word 'timber' used in Section 4 of Act is in the enlarged sense to mean trees -other than teak, blackwood, ebony, Karumthali etc. and in that sense includes E standing eucalyptus trees. 1828-E-FJ

Concise Oxford Dictionary, Eighth Edition, 1990 !Page 12771; Halsbury 's laws of England, Fourth Edition I Vol. 19 page 211; New Webster's Dictionary; Corpus Juris Secundum IVol. 54 Page 1, referred to.

F 1.3. The words 'cut and removed from any land' used in Section 4 of the Act do not suggest felling of the trees and removing the wood from one the part to another part of the land. The words indicate the cutting of the trees and removing them out of the limits of the land held by the grantee or the lessee under the grant or lease. In this case, the eucalyptus trees, which are G felled, are taken to the factory of the respondents which is situated on the lands in question. Therefore, by cutting and taking the wood of the felled eucalyptus trees from the place where they are cut to the factory on the demised

land where they are consumed, the respondent does not incur liability to pay the seigniorage rates under Section 4 of the Act. 1828-G-H; 829-A-BI

H CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2529of1997.

DIVISIONAL FOREST OFFICER v.T ATA FINLAY (QUADRI, J.] 823

From the Judgment and Order dated 31.1.1984 of the Kerala High Court A in O.P. No. 1156 of 1981.

P. Krishnamurthi for T.M. Mohd. Yousuf, Vipin Nair, K.M.K. Nair and P.B. Suresh for the Appellants.

Ashok H. Desai, T.R. Andhyarujina, Joy Joseph, Pallav Sisodia, B.A. B Ranganadhan, J.B. Dadachanji, Darpan Wadhwa and Prateek Jalan for J.B.D. & Co. for the Respondents.

The Judgment of the Court was delivered by

SYED SHAH MOHAMMED QUADRI, J. The State ofKerala and The C Divisional Forest Officers of two divisions are in appeal, by special leave, against the judgment and order of the High Court of Kerala at Ernakulam in O.P. No. 1156 of 1981 dated January 31, 1984. The High Court held that the Kerala Grants and Leases (Modification of Rights) Act, 1980 (for short 'the 1980 Act') was no applicable to the lands held by the respondents under D lease and quashed the impugned demand notices issued by the appellants demanding seigniorage rates from the lessees for all the produce cut and removed from the demised lands, as per sanction given, including produce consumed inside the concession area by them.

The dispute centres round the validity of demand of seigniorage rates E raised by the appellants in respect of cutting and removing eucalyptus trees grown and used by the respondents on the land held by them as lessee.

To make the controversy intelligible, it will be necessary to note the relevant facts.

The first respondent is the successor-in-interest of the lessee of Poon jar concession land. It carries on the business of plantation and manufacturing

tea. On July 11, 1877, Poonjar Chief granted concession by way of lease of large extent of land in the erstwhile Travancore State, in favour of one John Daniel Munro for consideration of Rs 5000 and yearly rent of Rs. 3,000. The G grant was ratified by Maharajah of Travancore under a deed executed on November 28, 1878. On a request made by the said Munro, a further concession was granted in respect of the same land with some extended rights on July 26, 1879. That land which corn prises of Kannan Devan Hills was later transferred

by him in favour of North Travancore Land Planting and Agricultural Society Ltd. on December 8, 1879. With reQ; ard to reduction of the tax liability under H

A the said deed an agreement was entered into between the society and the

Poon jar Chief on August 2, 1886. By a Royal Proclamation dated September 24, 1899 made by the Maharaja the territory of Poonjar Chief including the lands in question was made part of the State of Travancore reserving the right of Poon jar Chief to receive the annual rent of Rs. 3000 under the aforementioned concession. The first respondent also holds as lessee 'Malki Marai Estate' B which was leased out by the Maharaja of the erstwhile Government of Cochin in favour of its predecessor-in-interest: The land in dispute encompasses both Kannan Devan Hills area as well as Malki Marai Estate. The second respondent is the Regional Officer of the first respondent (hereinafter they will be referred to as 'the respondent'). c After States re-organization the State ofTravancore and Cochin became part of the State of Kerala. In 1971, the State of Kerala passed the Kannan Devan Hills (Resumption of Lands) Act, 1971 (for short 'the 1971 Act') which came into force on January 21, 1971. By Sction 3( 1) of the 1971 Act the possession of the entire extent of the land situated in the Kannan Devai:i Hills D village in the Devicolam taluk stood transferred to and vested in the Government of Kerala free from all encumbrances. Clause (a) of sub-section (2) of St?ction 3 provides that sub-section (I) shall not apply to plantations other than plantations belonging to tresspassers. Under Section 4 of the said Act

I possession of the land which had vested in the State under Section 3(1 ), was restored on the application of the respondent on the same terms and conditions on which it was holding before the appointed day. Thereafter, the State of Kera la passed the aforementioned 1980 Act. Section 3 of the 1980 Act specifies the grants and leases of lands to which that Act applies. Section 4 which is in the nature of charging section imposes an obligation on the grantees and lessees to pay seigniorage rates in force for the time being for the timber cut F and removed from any land held by him under the grant or lease. It is under that section that the appellants raised demand against the respondents. Jn O.P. No. 1156-H of 1981, filed in the High Court of Kerala at Ernakulam, the respondent challenged the constitutional validity of the Act, the legality of the demand and sought a writ prohibiting the appellants from interfering with G felling of eucalyptus and other trees for the use of the respondent and from levying seigniorage on such trees and firewood under the Act. The High Court by judgment dated January 31, 1984, under challenge, declared that the provisions of the 1980 Act did not apply to the lands in question, quashed the demand raised under various letters and issued a writ prohibiting the appellants from interfering with the cutting of eucalyptus and other trees for H the respondents' own requirement and from levying seigniorage on such

.J,

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DIVISIONAL FOREST OFFICER v.TATA FINL!\ Y fQUADRI. J.) 825

trees and firewood under the Act.

Having regard to the nature of real controversy which arises in this appeal, we consider it unnecessary to refer to the various contentions urged by Mr. f'. Krishnamurthi, the learned senior counsel appearing for the appellants

and Mr. Ashok H. Desai, the learned counsel appearing for the respondents.

The respondent is primarily aggrieved by levy of seigniorage rates under B Section 4 of the 1980 Act on the eucalyptus and other trees which were cut and utilised in the factories which are situated within the boundaries of the lands in question. This issue can be resolved with reference to the provisions of Section 4 of the 1980 Act which reads as under :

"4 Grantees and lessees to pay current seigniorage rates-( I) C Notwithstanding anything contained in any law for the time being in force, or in any grant, lease deed, contract or agreement, or in any judgment, decree or order of any court, with effect on and from the commencement of this Act, every grantee and every lessee shall be bound to pay to the Government the seigniroage rates in force for the D time being for the timber cut and removed from any land held by him under the grant or lease."

The section, quoted above, commences with a nonobstante clause and gives an overriding effect to the provisions of that section over anything contained in any law for the time being in force, or in any grant, lease deed, E contract or agreement, or in any judgment, decree or order of any court, with effect on and from the commencement of that Act (June 25, I 980). The impost seigniorage rates in force for the time being-is payable by every grantee and lessee to the Government for the timber cut and removed from any land held by him under the grant or lease. Thus, it is clear that every grantee and every lessee is made liable to pay the Government seigniorage at the rates in force F for the time being in force for the timber cut and removed from any land held by him under the grant or lease. Since the liability to pay seigniorage is cast on the grantee and the lessee, it may be necessary to notice the meanings of the terms 'grant, grantee, lease and lessee' defined in clauses (b), (c) (d) and (e) respectively of Section 2. They are as follows : G

"(b) "grant" means any grant to which this Act applies;

(c) "grantee" means the person in whose favour a grant has been made and includes his heirs, successors and assigns;

(d) "lease'' means any lease to which this Act applies; H

(e) "lessee" means the person in whose favour a lease deed has been executed and includes his heirs, successors and assigns."

A perusal of the definition oftenns 'grant' and 'lease' indicates that the liability under Section 4 extends to only those grants and leases which satisfy the requirements of Section 3 of the 1980 Act. The High Court, as noted B above, held that the 1980 Act would not apply to subject 'leases'. In our view, as alluded, without touching upon .that aspect, the appeal can be dedded on the terms of Section 4 of the J 980 Act, referred to above. ·

Now, reverting to Section 4 of the 1980 Act, Mr. Ashok .Desai would contend that a claim for seigniorage implied ownership of a share in the C property in respect of which it would be payable; that word is equivalent of Malyalam term, "kuzhi kanam" which means owner or.shareholder _and as the eucalyptus trees were grown by the respondent arid the appellants had no share in them, the impugned demand was unsustainable and was rightly so held by the High Court. The first point that is required to be examined is the

I D import of the expression "seigniorage". It is not d_efined in the Act. It is not a term of art. It has to be understood in the meaning it bears in English. The rele".ant meaning of that expression "seigniorage" given [in the New Shorter Oxford English Dictionary] is : Profit made by a government by issuing currency; the difference or margin between the face value of coins and their production costs; t)le Crown's right to charge a percentage on .bullion .brought E. to a mint for coining; the amount charged, something claimed by a monarch or feudal lord as a .prerogative.

From the above meaning, it inay be seen that the expression '\seigniorage" has two distinct meanings (i) profit made by a Government by issuing currency, the Crown's right to charge a percentage on bullion brought to a mint for coining; and (ii) something claimed by monarch or feudal lord as a prerogative.

We are unable. to accept that' seigniorage is used in .Section 4 synonymous with "kuzhi Kanam" because the legislature has used the said expression in clause (d) of SectiOn 3 in the sense of conferment of right of ownership by the State on payment of royalty, kuzhi kanam.

The distinction between kuttikanom and seigniorage is, explairted by a Kerala High Court. in Leslie v. State of Kera/a, AIR [1970] Kerala 21 in the following words :

"We do not think that 'kuttikanom' is either a fee or tax. A tax or fee H is levied in the exercise of sovereign power. We think that in the

DIVISIONAL FOREST OF(ICER v.TATA FINLAY JQUADRi, J.] 827

 context 'kuttikanol)l' means the Government's share of the value of A the reserved trees."

And it has been approved by this Court in State of Kera/av. Kanan Devan Hills Produce Co., [1991] 2 SCC 272, in paragraph 20 which reads as under:

"It was further held by Mathew, J. that kuttikanom being the Government's share of the value of the tree owned by the Government it has the power to fix the value of the trees. We agree with the reasoning and conclusions reached by Mathew, J. Since the ownership over the tree growth and timber in Concession Area vests with the Government it has a right to impose kuttikanom on the removal of the . trees from within the Concession Area."

In Section 4(1), the expression "seigniorage" is employed to enforce a prerogative of the State de hor.s , the right of ownership in the. property.

Therefore, the contention of Mr: Desa(cannot be accepted.

 Th~ second point for consideration is : whether eucalyptus tre; s fall within thi meaning of timber .. This term is also ot defined in the Act. Its.

Ordinary meaning in English may be gathered from :

The Concise Oxford Dictionary, Eight Edition, 1990 at p.1277

Timber : wood prepared for building, carpentry. etc.

 a piece of wood or beam, esp. as the rib of a vessel '

large standing trees suitable for timber; woods or forest

a warning cry that a tree is about to fall

Halsbury's Laws of England, Fouh Edn. Vol. 19 at p.21.

Timber : At common law oak, ash and .elm are timber if over twenty years old, but not so old as to have no usable wood. in them. Other trees may be timber by the custom of the country. Thus beech is timber by the custom of Buckinghamshire and parts of Gloucestershire. G Aspen and horse-chestnut are timber in some countries. Trees less than six inches in diameter have been said not to be timber.

Agricultural usages between landlord and tenant also frequently . definethe species of trees which are regarded as timber in the localities . \\'here th~ usages subsist. In a contract for the sale of_standing timber, I-I

A "timber" may synonymous with "trees" and sci include lops and tops as well as trunks. By statute, "timber" includes all forest products.

In New Webster's Dictionary, the meaning of the word 'timber' is

' "Building material, timber ......... wood suitable for building or for use B in carpentry; the wood of growing trees suitable for structural uses; growing trees themselves; a single beam or peace of wood forming or capable of forming part of a structure........ '

Corpus Juris Secundum, Vol. 54 at p. l

. The word "timber~' has an enlarged or estricted senSe, acCording to the connection in which it is emp.loyed, and may refer to standing trees or wood suitable for the manufacture of lumber to be used for building and allied purposes.

Thus,· it is seen that the word 'timber' may be used in a restricted as D well as enlarged sense. In the restricted sense it means 'specified trees like '

oak, ash~ elm, blackwood, abny, karumthali etc. and in the enlarged sense it means Joods suitable 'for building, furniture and carpentry etc. and includes standing trees. It true meaning has to be determined from the context in which it is employed. In this connection it will be appropriate to refer to Section 3 of the 1980 Act which specifies the terms and conditions of the grants and E leases of lans to which the Act applies." A perusal of clause (a) in the light of the meaning of'timber', noted above, shows that the word 'timber' is used in section 4 of the 1980 Act, in the enlarged sense to mean irees other than teak, blackwood, ebony, Karumthali etc. and in that sense it includes landing

eucalyptus trees.

The last aspect that needs to be addressed is whether felling of eucalyptus trees. and taking the,;; to the factory of the respondent situate on .. the land in dispute, amounts to removal of timber cut from any land held by it under the lease: : •

G In our view, the words 'cut and removed from any land' used in Section 4 do not suggest felling of the trees and removing the. wood from one part to another on the land. They would indicate cutting the trees and removing them out of the limits of the land held by the grantee or the lessee under the grant or lease. ' . '. -- H Admittedly, in this case, the eucalyptus trees which are felled are taken

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DIVISIONi\I. l'ORJSr OFFICLR 1.TJ\T:\ l'INl.J\ Y IUU/\DRI. .I.I 829

to the factory of the respondents which is on the lands in question. Therefore, A by cutting and taking the wood of the felled eucalyptus trees from the place where they are cut to the factory on the demised land where they are consumed. the respondent does not incur liability to pay seigniorage rates under Section 4 of the 1980 Act. On this ground alone, the impugned demand is liable to be quashed and to that extent we confirms the impugned judgment of the High Court.

Inasmuch as the High Court had held that the letters of demand were unsustainable in law and quashed them. it was not necessary for the High Court to go into the question as to whether the provisions of the 1980 Act would apply to the leases of the lands in question. In this view of the matter. C we are not inclined to go into the questiori as to whether Section 3 of the

1980 Act applies to the leases of the land in question and leave the question open to be decided in an appropriate matter. We/therefore, vacate the findings recorded by the High Court on this points.

In the result we dismiss the appeal and direct the parties to bear their D own costs.

B.S.

Appeal dismissed.