1. By an agreement called 'Cowl' dated October 2, 1830 the PrincipalCollector of Konkan conferred on behalf of the East India Company 'farmrights' upon one Cursetjee Cowasjee Banajee - hereinafter called'Banajee' - in seven villages (1) Mogra, (2) Wasivre, (3) Bandivli(4) Majas, (5) Part Pahadi, (6) Goregaon and (7) Poisar on terms and conditionsset out therein. By two letters dated October 17, 1835 and July 17, 1841 theoriginal cowl was modified and Banajee was required to pay an amount to theEast India Company of Rs. 2,708/7/- per annum in consideration of the benefitsconferred upon him by the said cowl. Banajee constructed extensive salt worksin the villages and expended Rs. 2/- lakhs in improving and developing thevillages. On September 22, 1847 the East India Company granted to Banajee theseven villages on certain terms, freed from the covenants of the cowl, and alsofrom liability to pay assessment on land revenue in consideration of the amountspent by him for improving the villages, and an amount of Rs. 30,000/- paid byhim to the East India Company. The villages were held and enjoyed by thesuccessors of Banajee under the terms of the grant without payment of landrevenue till the year 1952. The Legislature of the Bombay State enacted theSalsette Estates (Land Revenue Exemption Abolition) Act, XLVII of 1951 (hereinaftercalled the Act) which received the assent of the President on January 4, 1952and was brought into force on March 1, 1952. The Act was enacted as a measureof agrarian reform and formed part of a pattern of legislation undertaken bythe State of Bombay to abolish the rights of intermediaries between the Stateand the cultivator of the soil. The Act provided for abolition of exemptionsfrom payment of land revenue enjoyed by estate-holders, in certain specifiedvillages in the Island of Salsette, and for the vesting of waste lands in thevillages.
2. The Collector of Bombay Suburban District by his letter dated February28, 1952 informed the appellant - who is the successor-in-interest of Banajeeunder the grant that with effect from March 1, 1952 as provided by s. 4 of theAct all waste lands which were not the property of the estate-holder under thecowl and all waste lands which had been demised in the cowl as the property ofthe estate-holder but which had not been appropriated before August 14, 1951and all other kinds of property referred to in s. 37 of the Land Revenue Codeand which were not the property of any individual or an aggregate of personslegally capable of holding the same shall vest in the Government. He alsoinvited attention to the provisions of Sections 3 and 5 of the Act and informed andthe appellant that the Bombay Land Revenue Code will apply to all lands of theappellant's villages with effect from March 1, 1952 and directed the appellantfrom that date not 'to collect land revenue or rent as the case may be inrespect of the lands to which the provisions of the Act' applied. Byletter dated March 5, 1952 the appellant submitted that the seven villages wereheld as absolute owner under and by virtue of the indenture of conveyance datedSeptember 22, 1847 between the East India Company and Banajee and that underthe terms of the grant all the lands in the villages were absolutely and forever freed and discharged from the obligations of the Cowl of 1830 and alsofreed and discharged from all liability to pay land revenue, under RegulationXVII of 1827 and from all liability for assessment in nature of land revenue,and that the Act did not and could not apply to the lands of the appellant inthe above-mentioned villages - the appellant being the absolute owner of theland in the villages. By letter dated June 25, 1952 the Collector informed theappellant that the provisions of the Act were applicable to the seven villagesand the requisition to treat the villages otherwise could not be granted.
3. On November 28, 1952 the appellant commenced an action against the Stateof Bombay (which was numbered Suit No. 52 of 1953) in the High Court ofJudicature at Bombay on its original side for a decree declaring that theprovisions of the Act did not apply to the seven villages of the appellant andfor an injunction restraining the State from enforcing the provisions of thesaid Act against the appellant in respect of the said seven villages. The Stateof Bombay by its written statement contended that the appellant was not theabsolute owner of the said seven villages, that the Act applied to thosevillages and a decree for declaration and injunction as claimed could not onthat account be granted. K. K. Desai, J., who heard the suit held that the indenturedated September 22, 1847 was not a lease, but it could be regarded as a grantof a farm of the right to recover revenue as an agent to whom the prerogativeof the State was delegated as provided in the grant, and that in any event theindenture was in the nature of an agreement under which the estate was heldfrom 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. Theestate was also not exempted from the operation of sub-s. (1) of s. (3) of theAct.
4. In appeal a Division Bench of the High Court held that the indenturedated 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 Governmentwithin the meaning of s. 2(d) of the Act and therefore under a 'cowl' and thevillages were an 'estate' within the meaning of s. 2(b) and exemption frompayment of land revenue conferred by the indenture was statutorily abolished.The Court also held that the rights of the appellant in the villages as granteeof the exemption were not saved by clause (3) of s. 3, and confirmed the decreepassed by the Trial Court. With certificate granted by the High Court thisappeal is preferred by the appellant.
5. The appellant had initially challenged the validity of the Act asinfringing the fundamental rights under Arts. 19(1)(f) and 31 of theConstitution but this plea was abandoned after the enactment of theConstitution Fourth Amendment Act, 1955. Two questions survive in this appeal :
(1) Whether the villages held bythe appellant constitute an estate within the meaning of s. 2(b) of the BombayAct 47 of 1951; and
(2) If the villages constitute anestate, whether the exemption from payment of land revenue granted under theindenture is saved by sub-s. (3) of s. 3.
6. The Act was enacted with the object, as the preamble recites, to abolishexemption from land revenue enjoyed by the holders of certain estates in theIsland of Salsette in the Bombay Suburban and Thana District in the state ofBombay. By sub-s. (2) of s. 1 the Act extends to the villages specified in theSchedule to the Act and the seven villages granted to Banajee are included inthe Schedule. Section 2 defines by clause (b) an 'estate' as meaning a villageor a part thereof specified in the Schedule, and held under a cowl. Clause (d)of s. 2 defines 'cowl' as meaning a lease, a farm or an agreement under whichan estate is held from the State Government. The material provisions of s. 3(1)(a)and (3) are as follows :-
'(1) Notwithstandinganything contained in the cowl, a decree or order of a court or any otherinstrument or any law for the time being in force, but subject to theprovisions of sub-section (3).
(a) all lands in any estate areand shall be liable to the payment of land revenue to the State Government inaccordance with the provisions of the Code and the rules made thereunder;'
7. '(3) Nothing in sub-section (1) shall be deemed to affect the rightof any person to hold any land in an estate wholly or partially exempt from thepayment of land revenue under a special contract, or grant made or recognizedby the terms of the cowl in respect of the estate or under a law for the timebeing in force in favour of any person other than the estate-holder.'
8. By sub-s. (1) of s. 3 all lands in an estate subject to the exceptioncontained in sub-s. (3) are made liable to pay land revenue to the state : thisis so notwithstanding anything contained in the cowl, a decree or order of a courtor any other instrument or any law for the time being in force. Sub-section (1)is, however, subject to the provisions of sub-s. (3) to which we willseparately refer. Lands rendered liable for payment of land revenue by sub-s.(1) of s. 3 are lands in an estate which means a village or part of a villagespecified in the schedule to the Act and held under a cowl. Every village indispute held by the appellant is included in the schedule, but unless thevillage is held under a lease, a farm or an agreement from the State Governmentit will not be an estate for the purpose of the Act.
9. The grant is an elaborately drawn up document. It consists of thepreamble, premises, reservations, habendum, covenants of the transferor and thetransferee and unconditional covenant of title. In the preamble of the cowlgranted in 1830 by the East India Company of seven villages and the termsthereof and the expenditure incurred by Banajee upon the said villagesamounting to Rs. 2 lakhs on the construction of extensive salt works, arerecited. Then there is a reference to a request by Banajee to the East IndiaCompany for grant to him in consideration of the sums expended by him and to anoffer to pay Rs. 30,000/- to the East India Company of the said villages freedand absolutely discharged from the cowl and the rents or annual sums payablethereunder and from the terms and stipulations thereof. It then refers to thepayment of Rs. 30,000/- by Banajee in pursuance of the agreement so enteredinto. The grant then proceeds to set out the premises, viz. : 'they thesaid East India Company x x x by these presents do grant alien and release tothe said Cursetjee Cowasjee Banajee his executors, administrators and assignsall those seven villages' together with all rights in and appertaining tothe villages, x x x 'except, and reserving to the said Company x x x andall other persons, all rights of navigation and fishing as at present exercisedand the reversion and reversions remainder and remainders yearly and otherrents issues and profits of all and singular the villages land hereditamentsand premises hereinbefore granted, aliened and released or expressed andintended so to be together with the fees to arise upon the grant of licences bythe Collector of Thana or other revenue authority of the district x x x. Andall the estate, right, interest, inheritance, use, trust possession, property,possibility, claim and demand whatsoever both at law and in equity of the saidEast India Company of into from and out of the same premises and every part andparcel thereof.' Then follows the habendum 'To have and to hold alland singular the villages lands hereditaments and premises hereinbefore grantedaliened and released or mentioned and expressed so to be unto and to the use ofthe said Cursetjee Cowasjee Banajee his heirs and assigns absolutely foreverfreed and absolutely discharged from the said cowl and the several provisionsthereof and the rents and annual sums payable thereunder to the said Company xx x and freed and discharged from all liability to contribute to the landrevenue under Regulation XVII of 1827 and from all liability to assessment inthe nature of land revenue but subject nevertheless to all laws and regulationswhich now are or from time to time may be in force in the Island of Salsettetouching the sale and manufacture of spirituous liquors or poisonous orinjurious drugs or substances and subject to all duties of customs and excisenot being in the nature of land revenue or in substitution thereof or of anypart thereof and subject also to the payment of an annual rent of sum of Rupeeone to be paid on the first day of January in each year forever to the saidEast India Company their successors and assigns if demanded and subject also tosuch estates rights and interests as any villages tenants and occupiers had inany lands in their respective occupation on the second day of October onethousand eight hundred and thirty.' The indenture then proceeds to recitethat Banajee had covenanted with the East India Company that he, his heirs,successors, executors, administrators and assigns shall continue to pay thesaid rent reserved on the terms mentioned if demanded, continue devasthans,dharamadawas and allowance to Pals and shall not make any innovations and shallconform to the rules, ordinances and regulations as existing and applicable tofarmers. Finally, the indenture grants an unconditional covenant of title andquiet enjoyment to the village lands and authorises Banajee to take rents andprofits thereof without let or hinderance from the grantor.
10. The scheme of the document as disclosed by the terms is to relieve thegrantee Banajee from the Cowl of the year 1830 and the covenants andobligations thereunder and to grant to him in ownership in consideration of theamounts spent by him and the amount of Rs. 30,000/- paid by him to the grantorthe seven villages together with all rights therein except those which wereexpressly reserved. The rights reserved were the rights of navigation andfishing, reversion and reversions remainder and remainders, rents, issues andprofits and fees to arise upon the grant of licences by the Collector of Thanafor the sale of poisonous drugs. The grantee is by the terms of the grantexempt from liability to pay land revenue under Regulation XVII of 1827 andassessment in the nature of land revenue in future, but the exemption issubject (a) to all laws and Regulations relating to the sale and manufacture ofspirituous liquors or poisonous or injurious drugs or substances, (b) to paymentof duties of customs and excise not being in the nature of land revenue, (c)also to the payment of an annual rent of Re. 1/- if demanded, and (d) to suchestates rights and interests of the tenants and occupiers of the lands in thevillages. The indenture then imposes upon the grantee an obligation to maintainall dewasthans, dharmadawas and allowances to Pals, and to receive only theprevailing rates of assessment and not to make any innovations in that behalfand to conform to all laws applicable to farmers and the relation subsistingbetween him and the tenants, and to be liable for all acts of his servants andagents for injury caused to any person. The grant of the villages free fromliability to pay land revenue, was therefore subject to a triple restriction :
(1) Restriction in the interestof the tenants or occupants holding lands in the estate and also of the rightsof dewasthans, dharmadawas and customary allowances to Pals;
(2) The sovereign right to levycustoms and excise duties and also duties in respect of manufacture and sale ofspirituous liquors and poisonous or injurious drugs; and
(3) Subject to a liability to payan annual rent of Re. 1/-, if demanded.
11. Such a grant cannot be regarded as a lease, for a lease contemplates ademise or a transfer of a right to enjoy land for a term or in perpetuity inconsideration of a price paid or promised or services or other things of valueto be rendered periodically or on specified occasions to the transferor. Thegrant does not purport to demise merely a right of enjoyment of land : itconfers rights of ownership in land. There is again no contractual rightreserved either expressly or by implication, to determine the grant. Thereservation of the reversion and reversions remainder and remainders yearly,and rents issues and profits of all the lands hereditaments and profits in thepremises clause, is of the nature of a restriction upon the estate transferredand does not restrict the quality of the estate. The rent to be demanded wasagain not stipulated as consideration for the grant of the right to enjoy land,but expressly in consideration of granting freedom from liability to payassessment. The conclusion of the trial Court and High Court that the villageswere not held under a lease within the meaning of s. 2(d) of Act 47 of 1951must be accepted.
12. Nor is the indenture of the nature of a 'farm' within the meaning ofthat clause. The Island of Salsette in which the seven villages are situate wastaken over in 1774 by the East India Company from the Peshvas who had onlyabout 40 years earlier wrested it from the Portuguese. The Portugueseadministrators were originally accustomed to farm out all revenues of thevillages to the highest bidders. It appears that the Peshva rulers did notalter the system of farming out the revenues. After assumption of authority,the East India Company modified the system of land tenures and revenueadministration. In the first instance the Company gave certain hereditaryrights to the old occupants of the land which were to ensure so long as theypaid a fixed assessment measured in most cases in kind. Farming of revenue wasalso modified. The farmers were given grants of villages either for a limitedterm or in perpetuity under which, in consideration of paying a fixed lump sumto the East India Company the grantee enjoyed all the rights of revenue,agricultural as well as non-agricultural, except the rights expressly excludedfrom the grant. It appears that the original cowl in favour of Banajee was afarm of this nature. By the indenture of 1847 he was discharged from allliability under the farm or the cowl of 1830 and all the obligations thereofceased, and the villages subject to the reservations already mentioned weregranted absolutely without reserving any power to cancel the grant or to resumethe lands. The grantee was not accountable for collection of the revenue and hewas not required to make any payment either fixed or proportionate to therevenues collected by him to the East India Company, annually as a farmer. Itis true that in relation to the occupants of holders of the land before thedate of the grant, the grantee was constituted a superior holder and had merelythe right to collect land revenue payable by the holders. But under the termsof the indenture Banajee was a grantee of the sovereign right to recover landrevenue : he was in consideration of the money expended and paid by himentitled to appropriate all the collections. Banajee was not an agent of theEast India Company for recovering the revenue, nor was he a transferee of aright to recover revenue of land belonging to the East India Company inconsideration of payment either a fixed sum; or a share in the revenuecollected. He was made a grantee both of the lands and of the right to recoverland revenue from the occupants. Such a grant cannot be regarded as in thenature of a farm.
13. But we agree with the Trial Court and the High Court that the villageswere held by Banajee under an agreement with the East India Company. By theindenture the villages were granted to Banajee, and he was freed from liabilityto pay assessment. The freedom from liability to pay land revenue was subjectto certain covenants - covenants to respect the rights of occupants of the landand not to introduce innovations in the rates of assessment in respect of alllands in the possession of tenants, to continue Dewasthans, Dharmadawas andallowances and to pay 'annual rent' of Re. 1/- if demanded. The right to holdthe villages free from liability to pay land revenue was therefore conferred bythe indenture subject to the restrictions imposed by agreement between the EastIndia Company and the grantee.
14. Counsel for the appellant urged that the agreement contemplated by s.2(d) of the Act is a personal agreement and not one relating to the estategranted, and submitted that the covenants in the indenture being not of thatnature the appellant does not hold the villages under an agreement. We areunable to accept this contention. It is true that where property is transferredabsolutely by one person to another, it cannot be said that the propertytransferred is held under an agreement with the transferor merely because ofthe covenant of title. But when the State transfers property to a citizen, itdoes not thereby, in the absence of an express provision, grant exemption fromliability to pay revenue. The right to recover revenue is not an incident ofownership : it is a prerogative of the sovereign, or a liberty or franchise ofsome authority claiming derivatively from the sovereign. Mere grant of land bythe State does not absolve the grantee from liability to pay revenue. Under theindenture dated September 22, 1847, the grantee was given a right to hold thevillages free from liability to pay revenue on certain terms, one of which wasto pay rent of Re. 1/- per annum when demanded. The villages were grantedsubject to the restrictions, in absolute right and freedom from liability topay revenue in respect of the villages was given subject to certain conditions.Imposition of these conditions subject to which exemption from liability to payland revenue was granted, and acceptance thereof constituted an agreementwithin the meaning of s. 2(d). The villages though held in absolute right arestill in the matter of liability to pay land revenue held under an agreementfrom the State Government. In the grant in question there is in the firstinstance an obligation to pay 'annual rent', if demanded. There is also anobligation 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 toalter the rights of the holders of land to their prejudice, and the grant ofthe right to exemption from payment of revenue is made subject to all laws andregulations which are from time to time in force in the Island of Salsettetouching the sale and manufacture of spirituous liquors or poisonous orinjurious drugs or substances. These are all covenants which raise contractualobligations on the exemption from land revenue, absolute grant of the landnotwithstanding. Both the conditions prescribed under the definition, namely,specification in the Schedule and holding under a cowl as defined under the Actwere therefore fulfilled, and the villages were at the date of the Act heldunder an agreement from the State of Bombay.
15. The next question is whether the grant is exempt from the operation ofsub-s. (1) of s. 3, under which all lands in an estate 'are and shall be liableto the payment of land revenue to the State Government'. This liability isimposed notwithstanding anything contained in the cowl, or decree or order of acourt or any other instrument or any law for the time being in force. Primafacie, the covenants contained in the cowl whereby the grantee was dischargedand absolved from liability to pay land revenue must be regarded as supersededby the statutory imposition of liability to pay land revenue. But the operationof sub-s. (1) of s. 3 is subject to the provisions of sub-s. (3). Thatsub-section states that nothing in sub-section (1) shall be deemed to affectthe right of any person to hold land in an estate wholly or partially exemptfrom the payment of land revenue under a special contract, or grant made orrecognized by the terms of the cowl in respect of the estate or under a law forthe 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 estateexempt from payment of land revenue, if such exemption is under a specialcontract or grant made or recognised by the terms of the cowl in respect of theestate or under a law for the time being in force, and a person whose rightsare 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 ofthe cowl is extinguished : sub-section (3) however saves the rights of personsother than the estate-holder, who hold land in the estate. By express provisionthe estate-holder is excluded from the benefit of sub-s. (3). The intention ofthe Legislature is clear : it is to withdraw the exemption in favour of theestate-holder from payment of land revenue if such right was granted under acowl. That withdrawal is not to affect the rights of persons holding land in anestate under a special contract, or grant which was made or recognized by theterms of the cowl even if the right was to hold the land exempt from thepayment of land revenue. The futility of the argument that the expression'person' when it first occurs in sub-s. (3) includes theestate-holder, becomes obvious if the clause is read after substituting theexpression 'estate-holder' for 'person'.
16. In that view of the case, this appeal fails and is dismissed with costs.
17. Appeal dismissed.