Divisional Forest Officer & Ors vs Tata Finlay Ltd. & Anr on 10 July, 2001

Supreme Court of India
Divisional Forest Officer & Ors vs Tata Finlay Ltd. & Anr on 10 July, 2001
Author: S S Quadri
Bench: S.N.Variava, S.S.M.Quadri
           CASE NO.:
Appeal (civil) 2529  of  1997



PETITIONER:
DIVISIONAL FOREST OFFICER & ORS.

	Vs.

RESPONDENT:
TATA FINLAY LTD. & ANR.

DATE OF JUDGMENT:	10/07/2001

BENCH:
S.N.Variava, S.S.M.Quadri




JUDGMENT:

SYED SHAH MOHAMMED QUADRI, J.

The State of Kerala and the 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 not applicable to the lands held by the respondents
under 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 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
Poonjar 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 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 comprises 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 regard to reduction of the tax liability under the said
deed an agreement was entered into between the society and the
Poonjar 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 Poonjar Chief to receive the annual
rent of Rs.3000/- under the aforementioned concession. The first
respondent also holds as lessee ‘Malki Marai Estate’ 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’).
After States re-organization the State of Travancore 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 Section 3(1) of the 1971 Act the possession of the entire
extent of the land situated in the Kannan Devan Hills 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
Section 3 provides that sub-section (1) shall not apply to plantations
other than plantations belonging to tresspassers. Under Section 4 of
the said Act 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 Kerala 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 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. In 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 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 the respondents own
requirement and from levying seigniorage on such 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.P.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 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 – (1) 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 seigniorage 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 section, quoted above, commences with a non-obstante
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, 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, 1980). 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 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 :
“(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;

(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 of terms ‘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 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 decided on the terms of Section 4
of the 1980 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 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 and 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 import of the
expression “seigniorage”. It is not defined in the Act. It is not a term
of art. It has to be understood in the meaning it bears in English. The
relevant 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; the Crown’s right to charge a
percentage on bullion brought to a mint for coining; the amount
charged, something claimed by a monarch or feudal lord as a
prerogative.

From the above meaning, it may 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 a 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
explained by a Kerala High Court in Leslie vs. State of Kerala [AIR
1970 Kerala 21] in the following words :

“We do not think that ‘kuttikanom’ is either a fee
or tax. A tax or fee is levied in the exercise of
sovereign power. We think that in the context
‘kuttikanom’ means the Government’s share of the
value of the reserved trees.”

And it has been approved by this Court in State of Kerala vs. 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
trees 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 hors the right of ownership in the
property. Therefore, the contention of Mr.Desai cannot be accepted.
The second point for consideration is : whether eucalyptus trees
fall within the meaning of timber. This term is also not 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, Fourth 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. 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 define the species of
trees which are regarded as timber in the
localities where the usages subsist. In a
contract for the sale of standing timber,
“timber” may be synonymous with “trees”

and so 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 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.1

The word “timber” has an enlarged or
restricted sense, according to the connection
in which it is employed, 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 well as enlarged sense. In the restricted sense it means
specified trees like oak, ash, elm, teak, blackwood, abony, karumthali
etc. and in the enlarged sense it means woods suitable for building,
furniture and carpentry etc. and includes standing trees. Its 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 leases of lands 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 trees other than teak, blackwood, ebony,
Karumthali etc. and in that sense it includes standing eucalyptus trees.
The last aspect that needs to be addressed is whether felling of
eucalyptus trees and taking them 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.

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.
Admittedly, in this case, the eucalyptus trees which are felled
are taken to the factory of the respondents which is 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 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 confirm 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, we are not inclined to go into the question 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 point.

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

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