Holding

Section 4 imposes seigniorage only when timber is cut and removed out of the demised land, and since the eucalyptus was taken to a factory within the same lease, no seigniorage liability arises, although ‘timber’ includes eucalyptus trees.

Summary

The appellants, the State of Kerala and Divisional Forest Officers, appealed against a Kerala High Court order that quashed demand notices for seigniorage on eucalyptus trees cut by the respondents, Tata Finlay, on leased plantation lands. The Supreme Court examined Section 4 of the Kerala Grants and Leases (Modification of Rights) Act, 1980, which obliges grantees and lessees to pay seigniorage on timber cut and removed from any land held under a grant or lease. It held that ‘timber’ in the Act is to be given its enlarged meaning and includes standing eucalyptus trees. However, the phrase ‘cut and removed from any land’ requires removal of the timber outside the demised land; since the felled eucalyptus was taken to a factory situated within the same leased area, the respondents were not liable to pay seigniorage. Consequently, the Court dismissed the appeal and upheld the High Court’s order quashing the demand.

Issues considered

Whether Section 4 of the Kerala Grants and Leases (Modification of Rights) Act, 1980 imposes a liability of seigniorage on lessees for eucalyptus trees.
Whether the term ‘timber’ under the Act includes eucalyptus trees.
Whether ‘cut and removed from any land’ includes removal of timber to a factory located within the same leased land.
Whether the 1980 Act applies to the specific leases in question (the Court refrained from deciding).
Constitutional validity of the 1980 Act (raised but not decided).

Subjects

seignioragetimbereucalyptusleaseKerala Grants and Leases Actforest lawstate ownershipremoval of timber

Judgment

DIVISIONAL FOREST OFFICER AND ORS. A
v.
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.
F
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
822 SUPREME COURT REPORTS (200 I] 3 S.C.R.

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.
1

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
D
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 IVol. 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.
F
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 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
824 SUPREME COURT REPORTS (2001] 3 S.C.R.

A 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 .J,
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'
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 S~ction 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

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

trees and firewood under the Act. A
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 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, 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
826 SUPREME COURT REPORTS [200 I] 3 S.C.R.

A (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 J980 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
orfeudal 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
F
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.
G
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:
B
"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 c
. 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.
D
· 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
E
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
F
Halsbury's Laws of England, Fou~h 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
828 SUPREME COURT REPORTS [200 I] 3 S.C.R.

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

c . 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 it
well as enlarged sense. In the restricted sense means 'specified trees like '
oak, ash~ elm, blackwood, ab~ny, 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 lan~s 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.
F 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
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. B
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 questiori as to whether Section 3 of the
C

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.