Byramjee Jeejeebhoy (P) Ltd vs State Of Maharashtra

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 560 of 1962

Decision Date: 3 April 1963

Coram: J.C. Shah, Bhuvneshwar P. Sinha, N. Rajagopala Ayyangar

The case Byramjee Jeejeebhoy (P) Ltd v. State of Maharashtra was decided by the Supreme Court of India on 3 April 1963. Justice J.C. Shah authored the judgment, with Justices Bhuvneshwar P. Sinha and N. Rajagopala Ayyangar sitting on the bench. The petitioner was Byramjee Jeejeebhoy (P) Ltd and the respondent was the State of Maharashtra. The decision dated 3 April 1963 listed the bench as Shah, J.C.; Sinha, Bhuvneshwar P.; and Ayyangar, N. Rajagopala. The citation for the judgment appears as 1965 AIR 590 and 1964 SCR (2) 737. The case concerned the validity of the Salsette Estates (Land Revenue Exemption Abolition) Act, XLVII of 1951, and the terms of its grants. The Act defined the terms “Estate” and “Estate‑holder” and set out provisions under sections 2(b), 2(d), 3, 4 and 5 relating to leases, farms, and exemptions. The headnote notes that Bombay State enacted the Salsette Estates (Land Revenue Exemption Abolition) Act, XLVII of 1931, which became effective on 1 March 1952. The purpose of the Act was to eliminate intermediary land rights and to remove the land‑revenue exemption enjoyed by certain estate holders in Salsette, which lies in the Bombay Suburban and Thana districts. Under the Act, “Estate” meant a village or part thereof that appears in the Schedule attached to the legislation. The Schedule named seven villages: Mogra, Wasivre, Bandivli, Majas, Part Pahad, Goregaon and Poisar. Records show the East India Company transferred its farm rights in the seven villages to Banajee by a cowl dated 2 October 1830. Subsequently, on 22 September 1847, the East India Company issued a document granting the same seven villages to Banajee free from any future land‑revenue liability, subject to specified conditions. The freedom from liability to pay land revenue was subject to these restrictions namely (1) to preserve the rights of occupants of land (2) to pay annual rent of Re. I/- if demanded (3) to maintain rights of dewasthans, dharmadawas and customary allowances to pallies (4) to the right of levy of customs and excise duties and also duties in respect of manufacture and sale of spirituous liquids and poisonous or injurious drugs by the Government. The appellant was the successor in interest of Banajee and therefore claimed ownership over the seven villages. The appellant instituted a suit challenging the applicability of the Salsette Estates Act to his lands. The trial court dismissed the suit and the appellate court affirmed that dismissal. The Supreme Court examined whether the 1847 document constituted a lease within the meaning of section 2(d) of the Act. It held that the grant dated 22 September 1847 did not constitute a lease because it transferred ownership rather than merely the right to enjoy the land. The Court also concluded that the grant was not a “farm” because the grantee was not required to pay any revenue as a farmer. Finally, the Court observed that when the Act became effective, the villages were held under an agreement with the State of Bombay that satisfied definition’s conditions. Those conditions required inclusion in the Schedule and holding under a cowl.

In this case the Court observed that the agreement executed with the State of Bombay satisfied both conditions required by the definition, namely the specification in the schedule and the holding under a cowl. The Court further noted that clause three of section three preserves the right of any person who is not the estate holder but who occupies the land in an estate that is exempt from land‑revenue payment, provided that such exemption arises from a special contract or grant recognized under the terms of the cowl or under a law then in force. The appeal concerned civil jurisdiction under appeal number 560 of 1962, which challenged the judgment and decree dated 23 February 1961 of the Bombay High Court in appeal number 50 of 1959. Counsel for the appellant and counsel for the respondent were listed, and the judgment was delivered on 3 April 1963 by Justice Shah.

According to the judgment, an agreement known as a “cowl” dated 2 October 1830 was executed by the Principal Collector of Konkan on behalf of the East India Company, granting “farm rights” to Cursetjee Cowasjee Banajee—hereinafter referred to as Banajee—in seven villages: Mogra, Wasivre, Bandivli, Majas, Part Pahadi, Goregaon and Poisar, on the terms set out in that agreement. The original cowl was subsequently modified by two letters dated 17 October 1835 and 17 July 1841, which required Banajee to pay an annual sum of Rs 2,708 7/‑ to the East India Company as consideration for the benefits conferred by the cowl. Banajee invested heavily in the villages, constructing extensive salt works and spending an amount equal to two lakh rupees in improvement and development works.

On 22 September 1847 the East India Company conveyed the seven villages to Banajee under a grant that released him from the covenants of the cowl and also freed him from any liability to pay land‑revenue assessments, in consideration of the improvements he had made and a payment of Rs 30,000 ‑‑ to the Company. The successors of Banajee continued to hold and enjoy the villages under the terms of that grant without paying land revenue until the year 1952. The Legislature of Bombay State subsequently enacted the Salsette Estates (Land Revenue Exemption Abolition) Act, chapter 47 of 1951, which received presidential assent on 4 January 1952 and became effective on 1 March 1952. The Act formed part of agrarian‑reform measures intended to eliminate intermediary rights between the State and cultivators and provided for the abolition of land‑revenue exemptions enjoyed by estate‑holders in specified villages on Salsette Island, as well as for the vesting of waste lands in those villages.

Following the enactment, the Collector of Bombay Suburban District issued a letter dated 28 February 1952 to the appellant—identified as the successor‑in‑interest of Banajee—informing him that, pursuant to section four of the Act, all waste lands not belonging to the estate holder under the cowl, and all waste lands demised in the cowl but not appropriated before 14 August 1951, together with other lands referred to in section 37 of the Land Revenue Code, would vest in the Government. The Collector further drew the appellant’s attention to sections three and five of the Act, stating that the Bombay Land Revenue Code would apply to all lands of the appellant’s villages from 1 March 1952, and directed the appellant not to collect land revenue or rent with respect to any lands to which the Act applied from that date.

In the notice issued to the appellant, the Collector explained that, pursuant to section 4 of the Salsette Estates (Land Revenue Exemption Abolition) Act, the legal effect of the Act would become operative on 1 March 1952. He stated that, from that date, every piece of waste land that was not already the personal property of the estate‑holder under a cowl, as well as waste land that had been demised in the cowl to the estate‑holder but had remained unappropriated as of 14 August 1951, would vest in the Government. The Collector further added that any other types of property specified in section 37 of the Land Revenue Code, which were not owned by any individual or by a group of persons legally capable of holding such property, would also pass to Government ownership. In addition, the Collector drew the appellant’s attention to sections 3 and 5 of the Act and informed him that, with effect from 1 March 1952, the Bombay Land Revenue Code would govern all lands situated in the appellant’s villages. He directed the appellant, from that same date, to refrain from collecting any land revenue or rent, as the case might be, on any lands to which the provisions of the Act applied.

By a letter dated 5 March 1952, the appellant responded that the seven villages concerned were held by him as an absolute owner, a right that derived from an indenture of conveyance executed on 22 September 1847 between the East India Company and Banajee. According to the appellant, the terms of that grant permanently freed and discharged all lands in the villages from the obligations imposed by the cowl of 1830, from the liability to pay land revenue under Regulation XVII of 1827, and from any assessment that had the nature of land revenue. The appellant asserted that, because he was the absolute owner of the land in those villages, the Act could not and did not apply to those lands. On 25 June 1952, the Collector replied that the provisions of the Act were indeed applicable to the seven villages and that the appellant’s request for a different treatment could not be entertained.

Subsequently, on 28 November 1952, the appellant instituted suit No. 52 of 1953 in the High Court of Judicature at Bombay, filing the suit on its original side. He sought a decree declaring that the Act did not apply to his seven villages and also asked for an injunction restraining the State of Bombay from enforcing any provisions of the Act against him in respect of those villages. The State of Bombay, in its written statement, contested the appellant’s claim of absolute ownership, maintained that the Act was applicable to the villages, and argued that the relief sought—both the declaratory decree and the injunction—could not be granted. Justice K. K. Desai, who heard the suit, held that the indenture dated 22 September 1847 was not a lease; rather, it could be characterized as a grant of a farm, giving the holder the right to recover revenue as an agent appointed by the State.

The Court observed that the prerogative of the State had been delegated pursuant to the terms of the grant, and that, in any event, the indenture of 22 September 1847 constituted an agreement under which the estate was held from the Government. Consequently, the seven villages were regarded as an “estate” in the possession of the appellant within the meaning of section 2(b) of the Act. The Court further held that the estate was not exempted from the operation of subsection (1) of subsection (3) of the Act. On appeal, a Division Bench of the High Court had ruled that the 1847 indenture created a right that was neither a lease nor a farm, but that the villages were held under an “agreement” from the State Government as defined by section 2(d) of the Act. Accordingly, the villages were deemed to be held under a “cowl” and qualified as an “estate” within the meaning of section 2(b). The High Court therefore concluded that the exemption from land‑revenue liability that the indenture had conferred was statutorily abolished. The Court also found that the appellant’s rights in the villages as grantee of the exemption were not preserved by clause (3) of section 3, and it affirmed the decree issued by the Trial Court. After the High Court granted a certificate, the appellant preferred this appeal. Initially, the appellant had challenged the validity of the Act on the ground that it infringed the fundamental rights guaranteed by Articles 19(1)(f) and 31 of the Constitution; however, that plea was abandoned following the enactment of the Constitution Fourth Amendment Act, 1955. Two questions remained for determination: first, whether the villages held by the appellant constituted an estate within the meaning of section 2(b) of the Bombay Act 47 of 1951; and second, assuming the villages were an estate, whether the exemption from land‑revenue payment granted by the indenture was saved by subsection (3) of section 3. The Act had been enacted, as its preamble stated, with the purpose of abolishing land‑revenue exemptions enjoyed by holders of certain estates in the Island of Salsette in the Bombay Suburban and Thana District of the State of Bombay. By subsection (2) of section 1, the Act applied to the villages listed in its Schedule, and the seven villages granted to Banajee were included in that Schedule. Section 2, clause (b), defined an “estate” as a village or part thereof specified in the Schedule and held under a cowl. Clause (d) of section 2 defined “cowl” as a lease, a farm, or an agreement under which an estate is held from the State Government. The material provisions of sections 3(1)(a) and 3(3) read as follows: “(1) Notwithstanding anything contained in the cowl, a decree or order of a court or any other instrument or any law for the time being in force, but subject to the provisions of subsection (3), (a) all lands in any estate are and shall be liable to the payment of land revenue to the State Government in accordance with the provisions of the Code and the rules made thereunder;” and “(3) Nothing in subsection (1) shall be deemed to affect the right of any person to hold any 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 cowl 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.”

The Court explained that subsection (3) of section 3 expressly stated that nothing in subsection (1) would affect the right of any person to hold land in an estate that was wholly or partially exempt from land‑revenue liability under a special contract, a grant, or any agreement recognized by the terms of the cowl, or under any law then in force for the benefit of a person other than the estate‑holder. By virtue of subsection (1) of section 3, all lands forming part of an estate that fell within the exception mentioned in subsection (3) became liable to pay land revenue to the State Government, and this liability applied irrespective of any terms contained in the cowl, any decree or order of a court, any other instrument, or any existing law. The Court noted, however, that the operation of subsection (1) was subject to the provisions of subsection (3), to which it would refer separately. The lands made liable for revenue under subsection (1) were defined as lands situated in an estate, where “estate” meant a village or a portion of a village that was specified in the Schedule to the Act and held under a cowl. The Court observed that every village in dispute, which was held by the appellant, was indeed listed in the Schedule. Nonetheless, the Court clarified that a village would not qualify as an estate for the purposes of the Act unless it was held under a lease, a farm, or an agreement granted by the State Government.

The Court then turned to the nature of the grant that formed the basis of the appellant’s claim. It described the grant as a meticulously drafted document comprising several distinct parts: a preamble, premises, reservations, a habendum clause, covenants of both the transferor and the transferee, and an unconditional covenant of title. In the preamble of the cowl, which had been granted in 1830 by the East India Company concerning seven villages, the document recited the terms of that grant and recorded the expenditure incurred by Banajee on the villages, specifically the sum of two lakh rupees spent on the construction of extensive salt works. The preamble further referenced a request made by Banajee to the East India Company for a grant in consideration of the amounts he had expended, together with an offer to pay thirty thousand rupees to the Company in exchange for the villages being freed and absolutely discharged from the cowl, along with the rents or annual sums due under it. The grant subsequently noted that Banajee had indeed paid the thirty thousand rupees pursuant to the agreement entered into. Thereafter, the grant set out its operative premises, stating that the East India Company "by these presents do grant, alien and release to the said Cursetjee Cowasjee Banajee, his executors, administrators and assigns, all those seven villages" together with all rights and appurtenances belonging to the villages, while expressly reserving to the Company and other persons the rights of navigation and fishing as presently exercised, as well as the reversion, reversions, remainders, yearly rents, issues and profits arising from the villages.

The document described the conveyance of all the villages, lands, hereditaments and premises that had previously been granted, alienated and released, or that were expressed and intended to be so, together with any fees that might arise from licences granted by the Collector of Thana or any other revenue authority of the district. It further stated that every estate, right, title, interest, inheritance, use, trust, possession, property, possibility, claim and demand, whether at law or in equity, belonging to the East India Company and relating to the said premises, in all their parts and parcels, were included in the conveyance.

The habendum clause then provided that the grantor intended to have and to hold all and singular the villages, lands, hereditaments and premises, as previously described, to the use of Cursetjee Cowasjee Banajee, his heirs and assigns, absolutely and forever. The clause declared that Banajee and his successors were freed and absolutely discharged from the cowl and from the several provisions thereof, including any rents and annual sums payable to the Company, and that they were also released from any liability to contribute to land revenue under Regulation XVII of 1827 or to any assessment in the nature of land revenue. However, this discharge was subject to compliance with all laws and regulations then in force, or that might be enacted in the future, in the Island of Salsette concerning the sale and manufacture of spirituous liquors or poisonous or injurious drugs or substances. It also required adherence to all customs and excise duties that were not of the nature of land revenue, and it imposed an obligation to pay an annual rent of one rupee on the first day of January each year, forever, to the East India Company or its successors and assigns, if demanded. In addition, the grantor reserved the right to enforce any estates, rights and interests that any village tenants or occupiers might have in the lands as of the second day of October, eighteen hundred and thirty.

Subsequently, the indenture recorded that Banajee had covenanted with the East India Company that he, together with his heirs, successors, executors, administrators and assigns, would continue to pay the reserved rent on the terms specified, would maintain all devasthans, dharamadawas and allowances to Pals, would not make any innovations, and would conform to the rules, ordinances and regulations applicable to farmers. Finally, the document granted an unconditional covenant of title and of quiet enjoyment over the village lands to Banajee, authorising him to collect rents and profits from them without hindrance from the grantor. The overall scheme of the indenture was to relieve Banajee from the cowl imposed in the year 1830 and its associated covenants and obligations, and to confer upon him ownership of the seven villages in consideration of the expenses he had incurred and the payment of thirty thousand rupees to the grantor.

In the deed the parties expressly reserved certain rights, namely the rights of navigation and fishing, the reversion and remainder interests, and the entitlement to rents, issues, profits and fees that would arise from licences issued by the Collector of Thana for the sale of poisonous drugs. By the terms of the grant the grantee was released from any liability to pay land revenue under Regulation XVII of 1827, that is, the grantee would not be required to make future assessments of a land‑revenue character. However, this exemption was conditioned upon four specific obligations. First, the grantee remained bound by all statutes and regulations governing the manufacture and sale of spirituous liquors or poisonous and injurious substances. Second, the grantee was required to pay any customs or excise duties that were not classified as land revenue. Third, the grantee had to pay an annual rent of one rupee if the rent was demanded. Fourth, the grantee’s obligations extended to respecting the estate rights and interests of the tenants and occupiers of the villages. The indenture further imposed on the grantee a duty to maintain all dewasthans, dharmadawas and customary allowances to the Pals, to accept only the prevailing rates of assessment, to refrain from introducing any innovations in that regard, to comply with all laws applicable to farmers, to observe the relationship that existed between the grantee and the tenants, and to be liable for any injury caused to any person by the acts of his servants or agents. Consequently, the grant of the villages free from the liability of paying land revenue was subject to three distinct restrictions. The first restriction protected the interests of the tenants or occupants holding lands in the estate as well as the rights of dewasthans, dharmadawas and customary allowances to the Pals. The second restriction preserved the sovereign power to levy customs, excise duties and duties in respect of the manufacture and sale of spirituous liquors and poisonous or injurious drugs. The third restriction required the payment of an annual rent of one rupee if demanded. The Court observed that such a grant could not be characterized as a lease, because a lease involves the demising or transfer of a right to enjoy land for a term, whether temporary or perpetual, in exchange for a price, a promise, services or other valuable consideration payable periodically or on specified occasions to the transferor. In contrast, the grant did not merely demise a right of enjoyment; it conferred ownership rights in the land. Moreover, there was no contractual right, either expressly or by implication, reserved to determine the grant. The reservation of the reversion, remainder, rents, issues and profits of all the hereditaments and premises functioned as a restriction on the estate transferred and did not affect the quality of the estate. Finally, the rent that might be demanded was not stipulated as consideration for the grant of the right to enjoy the land; rather, it was expressly stipulated as consideration for granting freedom from liability to pay assessment. The Court therefore affirmed the conclusions reached by the trial Court and the High Court that the villages were not held under a lease within the meaning of the relevant statutory provision.

In this case, the Court accepted the finding of the High Court that the seven villages were not held under a lease within the meaning of section 2(d) of Act 47 of 1951. The Court also held that the indenture creating the rights over the villages could not be described as a “farm” within the same provision. The Island of Salsette, on which the villages are located, was taken over in 1774 by the East India Company from the Peshvas, who themselves had seized the island from the Portuguese about forty years earlier. Under Portuguese rule the administrators had customarily leased the entire revenue of the villages to the highest bidders. The Peshva rulers appear to have continued this system of leasing revenue. When the East India Company assumed authority, it re‑formed the system of land tenures and of revenue administration. Initially the Company granted certain hereditary rights to the existing occupants of the land on the condition that they continued to pay a fixed assessment, usually in kind. The Company also altered the method of farming revenue. Under the new arrangement, farmers received grants of villages for either a limited period or in perpetuity. In each case the farmer paid a fixed lump sum to the Company and, in return, obtained all rights to the revenue of the village, both agricultural and non‑agricultural, except for those rights that the Company expressly excluded from the grant. The original grant in favour of Banajee appears to have been of this character. By the indenture dated 1847 Banajee was released from all liability under the earlier farm or grant of 1830, and all obligations arising from that earlier arrangement ceased. The villages, subject to the reservations previously mentioned, were then conveyed to Banajee absolutely, without any power retained by the Company to cancel the grant or to resume the lands. The grant did not require the grantee to collect revenue or to make any fixed or proportionate payment to the East India Company on an annual basis as a farmer would. It is true that with respect to the occupants or holders of the land who existed prior to the grant, Banajee was deemed a superior holder and possessed only the right to receive land revenue payable by those occupants. However, the terms of the indenture made Banajee the grantee of the sovereign right to recover land revenue; having spent and paid the consideration, he was entitled to appropriate all such collections. Banajee was therefore neither an agent of the East India Company for revenue recovery nor a transferee of a limited right to recover revenue in exchange for a fixed sum or a share of the revenue. He was granted both the land itself and the right to recover land revenue from the occupants. Such a grant cannot be characterized as a farm. Nonetheless, the Court agreed with both the Trial Court and the High Court that the villages were held

In this case the Court observed that the villages were held by Banajee under an agreement with the East India Company. By the terms of the indenture the villages were conveyed to Banajee, and the indenture expressly released him from any liability to pay the land assessment. However, that freedom from liability was not absolute; it was conditioned on a series of covenants. The covenants required Banajee to respect the existing rights of the occupants of the land, to refrain from introducing any new rates of assessment for any of the lands possessed by the tenants, to continue the traditional duties called Dewasthans and Dharmadawas, to maintain certain allowances, and to pay an “annual rent” of one rupee whenever such rent was demanded. Accordingly, the right to hold the villages free from liability to pay land revenue was conferred by the indenture, but only subject to the restrictions that the agreement between the East India Company and the grantee imposed. Counsel for the appellant argued that the agreement contemplated by section 2(d) of the Act was a personal agreement and not one that related to the estate that had been granted, and submitted that because the covenants in the indenture were not of that nature the appellant did not hold the villages under an agreement. The Court was unable to accept that contention. It noted that while an absolute transfer of property from one person to another does not by itself create an agreement with the transferor merely because a covenant of title exists, the situation is different when the State transfers property to a private citizen. In the absence of an express provision the State does not automatically grant exemption from the liability to pay revenue. The right to recover revenue is a sovereign prerogative, not an incident of ownership, and a mere grant of land by the State does not relieve the grantee of the duty to pay revenue. The Court referred to the indenture dated 22 September 1847, which gave the grantee a right to hold the villages free from liability to pay revenue on certain terms, one of which required payment of a rent of one rupee per year when demanded. Thus, although the villages were granted in absolute right, the freedom from liability to pay revenue was given subject to specific conditions. The imposition of those conditions and Banajee’s acceptance of them constituted an agreement within the meaning of section 2(d). Consequently, even though the villages were held in absolute right, the liability to pay land revenue remained governed by an agreement with the State Government. The grant created several obligations: the obligation to pay the annual rent if demanded; the obligation to respect the rights of the land holders, the Dewasthans and Dharmadawas, and to make the specified allowances; the obligation not to alter the rights of the land holders to their prejudice; and the obligation that the exemption from revenue payment would be subject to all laws and regulations that might be enacted from time to time. All of these covenants, the Court held, raised contractual obligations that qualified the exemption from land‑revenue liability, even though the grant of the land itself was absolute.

In this matter the Court observed that the covenants which applied to the island of Salsette covered the sale and manufacture of spirituous liquors as well as poisonous or injurious drugs or substances. These covenants created contractual obligations even though the land was granted absolutely and exempt from land‑revenue liability. The Court noted that the two conditions laid down in the definition were satisfied: the villages were listed in the Schedule and the land was held under a cowl as defined by the Act. Consequently, at the date the Act came into force the villages were held by the State of Bombay under an agreement. The Court then turned to the question of whether that grant was exempt from the operation of sub‑section (1) of Section 3, which provides that every piece of land in an estate “are and shall be liable to the payment of land revenue to the State Government”, and that such liability is imposed notwithstanding anything contained in the cowl, any decree, court order, other instrument or any law then in force. At first glance, the covenants in the cowl that released the grantee from the duty to pay land revenue appeared to be overridden by the statutory liability imposed by sub‑section (1). However, the Court pointed out that the effect of sub‑section (1) is qualified by sub‑section (3). Sub‑section (3) declares that nothing in sub‑section (1) shall be taken to affect the right of any person to hold land in an estate wholly or partially exempt from land‑revenue payment under a special contract or a grant that is made or recognised by the terms of the cowl, or under any law then in force, in favour of any person other than the estate‑holder. This provision therefore protects the rights of a person who holds land exempt from revenue, provided that the exemption arises from a special contract or a grant recognised by the cowl, and the person must not be the estate‑holder. Accordingly, under sub‑section (1) the exemption that had been given to the cowl grantee is extinguished, while sub‑section (3) preserves the rights of persons other than the estate‑holder who hold land within the estate. By express wording the estate‑holder is barred from enjoying the benefit of sub‑section (3). The Court concluded that the Legislature’s intention was clear: to withdraw the exemption from land‑revenue liability in favour of the estate‑holder where such exemption was granted under a cowl, but not to disturb the rights of other persons who hold land in the estate under a special contract or grant recognised by the cowl, even if that right provided for exemption from land‑revenue payment. The Court rejected the argument that the word “person” when it first appears in sub‑section (3) could be read to include the estate‑holder.

The Court observed that sub‑section (3) of the provision does in fact cover the estate‑holder. This conclusion became apparent when the language of the clause was read with the word “person” replaced by the term “estate‑holder.” By making that substitution, the wording of the clause clearly showed that the estate‑holder fell within the class of individuals intended to be included under sub‑section (3). Having reached this interpretation, the Court proceeded to apply it to the matter before it. On the basis of the finding that the estate‑holder was encompassed by sub‑section (3), the Court determined that the appellant’s arguments could not be sustained. Consequently, the appeal was held to have no merit. The Court therefore ordered that the appeal be dismissed. In addition, the Court directed that the costs of the proceedings be awarded against the appellant. The order thus affirmed the dismissal of the appeal and imposed the cost liability on the party who had brought the appeal.