In a significant ruling, the Supreme Court of India has clarified the application of conversion fees under the Kerala Conservation of Paddy Land and Wetlands Act, 2008. The Court determined that the exemption from conversion fees, as outlined in Section 27A of the Act, applies exclusively to properties measuring up to 25 cents. Landholdings exceeding this size are required to pay the conversion fee on the entire extent of the property.
This decision overturns a previous judgment by the Kerala High Court, which had interpreted that for properties larger than 25 cents, the conversion fee should be calculated only on the portion exceeding 25 cents. The Supreme Court found this interpretation inconsistent with the legislative intent of the Act and the subsequent notification issued by the Kerala Government on February 25, 2021.
The notification aimed to provide relief to small landholders by exempting properties up to 25 cents from the conversion fee. However, for properties larger than this threshold, the notification stipulated a conversion fee of 10% of the fair value of the entire landholding. The Supreme Court emphasized that this exemption is intended solely for small plots and should not be extended to larger properties.
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The Court stated, "The interpretation of the High Court is that such calculation of 10% fair value of total land, which exceeds 25 cents, shall be computable after having reduced the 25 cents, as exempted from the total. We are unable to accept such a view."
Furthermore, the Supreme Court underscored the principle that exemption notifications must be interpreted literally and strictly. The Court acknowledged the state's authority to create classifications based on land size to grant exemptions, noting that the state intended to distinguish between small and large landholders.
The Court observed, "The appellant (State) has sought to create two separate classes: one of people having land 25 cents or less; and the second, where people have land in excess of 25 cents. It has been submitted that the object of the exemption of fee for the people belonging to the former class is to enable them to have ease in constructing either housing or small buildings, etc., without being burdened with having to pay a fee for conversion of the land."
Additionally, the Court referenced a subsequent notification dated July 23, 2021, in which the Kerala Government clarified that the exemption does not apply to lands exceeding 25 cents. This further reinforced the state's intent to limit the exemption to smaller landholdings.
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The case originated when a landowner with 14.5 ares (approximately 36.65 cents) sought to remove his property from the data bank, as it was erroneously classified as paddy land despite being dry land for decades. Upon application, he was instructed to remit a conversion fee amounting to 10% of the property's fair value. Challenging this, he contended that the fee should only apply to the portion exceeding 25 cents. While the Single Judge and Division Bench of the Kerala High Court ruled in his favor, the Supreme Court has now set aside these judgments, upholding the state's interpretation of the Act.
This ruling has significant implications for landowners in Kerala, particularly those with properties exceeding 25 cents. It clarifies that the conversion fee exemption is strictly limited to smaller plots, and larger landholdings are subject to the fee on their entire extent. This decision aims to balance the state's interest in conserving paddy lands and wetlands with the rights of landowners seeking to repurpose their land.
Case Title: STATE OF KERALA V. MOUSHMI ANN JACOB, Petition(s) for Special Leave to Appeal (C) No(s). 25736- 25737/2023