Holding

The imposition of a flat-rate premium under Rule 14 of the Madhya Pradesh Land Revenue Code is within the State’s power under sections 59(5) and 258 and, because it is based on a reasonable classification of land, does not violate Article 14 of the Constitution.

Summary

Raj Homes Pvt. Ltd. and another challenged the Madhya Pradesh Government’s Rule 14, which imposes a flat-rate premium on agricultural land diverted to non‑agricultural use, alleging that the rule exceeds the powers granted under sections 59(5) and 258(iii) of the Madhya Pradesh Land Revenue Code and violates Article 14 of the Constitution. The High Court dismissed the writ petitions and the appellants appealed to the Supreme Court. The Court examined the statutory scheme, held that the State has authority to levy a one‑time premium for betterment under section 59(5) and to make rules under section 258, and that the classification of land based on location, population and other factors constitutes a reasonable differentia. Consequently, the rule was found to be in harmony with the spirit and objects of the Code and not arbitrary or discriminatory. The Supreme Court dismissed the appeals, upholding the State’s power to impose the premium.

Issues considered

The validity of Rule 14 imposing a flat‑rate premium under the Madhya Pradesh Land Revenue Code.
Whether the rule exceeds the powers conferred by sections 59(5) and 258(iii) of the Code.
Whether the rule violates Article 14 of the Constitution by lacking a reasonable classification.

Legislation cited

Constitution of Indias. Article 14
Madhya Pradesh Land Revenue Code, 1959s. 258(iii), s. 58, s. 59, s. 59(5), s. 77, s. 78, s. 79, s. 81, s. 82, s. 98

Subjects

land revenuepremiumdiversion of landArticle 14equalityrule‑making powerMadhya Pradesh Land Revenue Codereasonable classificationbetterment

Judgment

(2008] 12 S.C.R. 821

RAJ HOMES PVT. LTD. & ANOTHER A
v.
STATE OF MADHYA PRADESH & OTHERS
(Civil Appeal Nos. 7732-7733 of 2004)
AUGUST 26, 2008
B
[DALVEER BHANDARI AND LOKESHWAR SINGH
PANTA, JJ.]

Madhya Pradesh Land Revenue Code, 1959 - ss. 59
(5) and 258 (iii) - Rule imposing premium - For diversion of c
Land for non-agricultural use - Challanged as being in excess
of the power granted for such imposition and in violation of
Article 14 of the Constitution - Held: Imposition of premium
was not in excess of the power - It is in consonance with the
\. . spirit and objects of the Code - Rule imposing the premium D
or the Schedule thereof, is not violative of Article 14 of the
Constitution since it is based on reasonable differntia -
Constitution of India, 1950 - Article 14.
Appellants filed writ petitions contending that Rule
14 regarding Imposition of premium u/s 59 (5) of Madhya E
Pradesh Land Revenue Code, 1959 imposing flat rate of
premium was in excess and violative of ss. 59 (5) and 258
(iii) of the Code; and that it is violative of Article 14 of the
Constitution. High Court dismissed the writ petitions.
Hence the present appeals. F
Dismissing the appeals, the Court
HELD: 1.1 The premium is one time charge for
diversion of land for better land use under rule 14 of Madhya
Pradesh Land Revenue Code, 1959. The scheme of the G
Act clearly reveals that the premium is charged only when
land use is converted for betterment. In this view of the
matter, the State is. fully justified in charging the premium
and the same is in consonance with the spirit, objects and
reasons of the Code. [Para 27] [842 A-B]
H
822 SUPREME COURT REPORTS (2008] 12 S.C.R.

--r-
A 1.2 The State Government enjoys ample powers of
not only to fix land revenue rates or to re-fix them upon
conversion/diversion of the land for another use but also
charges premium upon diversion of land for another use.
[Para 27] [841 G-H]
B 2. In view of the entire scheme of the Act and the
)-
provisions of the Code, it cannot be said that Rule 14 is
violative of Article 14 of the Constitution. The classification
of various cities in the State is determined as per the
values of land in different cities, the extent of population
c of those cities and the character .of those cities. The
important cities of the State are classified differently from
smaller cities and towns as also according to their
population. Similarly, villages are also classified differently
and rate of levying premium for conversion is accordingly
D prescribed. The Schedule is based on reasonable
differentia taking into account 31 relevant factors for the
purpose, and it cannot be called arbitrary or discriminatory. ).:
[Para 27] [842 C-F]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
E 7732-7733 of 2004
From the final Judgment and Order dated 26.08.2003 of
the High Court of Judicature at Jabalpur (M.P.) in Writ Petition
No. 27171 & 6269 of 2003
A.K. Sanghi for the Appellants.
F
+·
Vibha Datta Makhija for the Respondents.
The Judgment of the Court was delivered by
DALVEER BHANDARI, J. 1. The appellants aggrieved
G by the order of the High Court of Judicature at Jabalpur dated + 'f"""
...,.
26.8.2003 in Writ Petition Nos.6269 and 27171 of 2003 have
preferred this appeal with the prayer that the respondent State
of Madhya Pradesh be restrained from imposing and collecting
any premium under the impugned rule '14 of the Notification
H dated 24.1.2002.
·~·

RAJ HOMES PVT. LTD. & ANOTHER v. STATE 823
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]

-~ 2. Brief facts giving rise to the present appeal are A
recapi~ulated as under:

The respondent State of Madhya Pradesh has imposed
premium at flat rate irrespective of use and purpose of the
diverted land or any relation whatsoever with the land revenue
B
imposed on the land. According to the appellants, the impugned
rule 14 of the Madhya Pradesh Land Revenue Code, 1959 (for
-f
short "the Code") is arbitrary, unreasonable and as such violative
of Article 14 of the Constitution of India. The imposition of
premium under rule 14 has been assailed, therefore, it would
be imperative to refer to the relevant provisions regarding
c
imposition of premium as under:
"IMPOSITION OF PREMIUM
13. When the land assessed for any non-agricultural
D
purpose is diverted to any agricultural purpose no premium
• ~
shall be imposed under Sub-section (5) of Section 59 of
_A the Code.
14. (1) For the purpose of levy of premium on agricultural
land other than the land specified in the proviso to Sub- E
section (5) of Section 59 of the Code diverted to non-
agricultural purposes, in any towns and villages in the State
of Madhya Pradesh shall be divided into the following
classes as specified in Column (1) of the Schedule
appended to these rules and the premium shall be imposed F
according to the rates specified in Column (2) and (3) of
the said Schedule as the case may be:
Provided that with the sanction of the State Government
the Sub-Pivisional Officer may include any particular village
G
in higher or lower class than that prescribed in this rule:
' ..
..,.
Provided further that no premium shall be payable on
agricultural land diverted into residential purposes if the
area of diverted land is not exceeding one hundred square
H
824 SUPREME COURT REPORTS [2008] 12 S.C.R.

A
-
metre and "Kachha" construction is built on such land.

Explanation 1.- When the 'abadi' of two or more villages
adjoins, the population shall be taken as the population of
the combined villages.

B Explanation II.- 'Kachha' .construction means such
construction in which only clay and wood (excluding timber
wood) are used.

The Schedule framed under rule 14 reads as under:

c SCHEDULE
Classes For residential and other For Commercial and Industrial
purpose (excluding Commercial Purpose
and Industrial Purpose)
(1) (2) (3)
D Class-I In Upto 4 From 4 In Upto 4 From 4
Municipal kms. Kms. To Municipal Kms. Kms. To 8
Corporation From 8 Kms. Corporation From Kms. ~-
Area Municipal From the Area Municipal From the
Corporation area of Corporation area of
Area Municipal Area Municipal
Corporation Corporation
E 1 2 3 1 2 3
Entire Rs. 10 Rs. 7.50 Rs. 5 per Rs. 20 Rs. 15 Rs. 10
Municipal per per Square per per per
Corporation Square Square Metre Square Square Square
area of Metre Metre Metre Metre Metre
Gwalior,
F Indore,
Ujjain, -.
Bhopal,
Jabalpur,
Raipur
and Durg
and upto
G
8 Kms.
from the
outer
limits of
Municipal
Corporation
H
RAJ HOMES PVT. LTD. & ANOTHER v. STATE 825
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]

Classes For residential and other For Commercial and Industrial A
purpose (excluding Commercial Purpose
and Industrial Purpose)
(1) (2) (3)
Class-II In Upto 4 From 4 In Upto 4 From 4
Municipal kms. Kms. To Municipal Kms. Kms. To 8
8 Kms. Corporation Kms.
Corporation From From B
Area Municipal From the Area Municipal From the
Corporation area of Corporation area of
Municipal Municipal
Area Area
Corporation Corporation
1 2 3 1 2 3
Entire Rs. 7.50 Rs. 5.00 Rs. 3.75 Rs. 15 Rs. 10 Rs. 7.50
Municipal per
Corporation Square
per per per per per c
Square Square Square Square Square
area
Metre Metre Metre Metre Metre Metre
excluding
the
abovementi
oned
Municipal
.~ D
shown in
Class I
and upto
8 Kms.
from the
outer
limits of
Municipal
E
Corporatioh

Classes For residential and other For Commercial and
purpose (exduding Commercial Industrial Purpose
and Industrial Purpose)
(1) (2) (3) F
Class-Ill In Municipal Upto 5 Kms. In Municipal Upto 5 Kms.
Couneil From Municipal Council Area From Municipal
Council Council area
1 2 1 2
Entire area of Rs. 5.00 Rs. 3.75 per Rs. 10 per Rs. 7.50 per
Municipal per Square Square Metre Square Metre Square Metre
Council more G
Metre
than 50
thousand
Population and
upto 5 Kms.
from the outer
limits of
Municipal Council. H

•
826 SUPREME COURT REPORTS [2008) 12 S.C.R.

A .. Classes For residential and other For Commercial and
purpose (exduding Commercial Industrial Purpose
and Industrial Purpose)
(1) (2) (3)
Class-IV In Municipal Upto 3 Kms. In Municipal Upto 3 Kms.
Council From Municipal Council Area From Municipal
8 Council area Council area
1 2 1 2
Entire area of Rs. 3.00 Rs. 1.50 per Rs. 6.00 per Rs. 3.00 per
Municipal per Square Square Metre Square Metre Square Metre
Council of 20 Metre
to 50 thousand
population and
c upto 3'Kms.
from the outer
limits of
Municipal
Council.

Classes For residential and other For Commercial and
D purpose (exduding Commercial Industrial Purpose
and Industrial Purpose)
(1) (2) (3)
Class-V In the area Upto 3 Kms. In the area of Upto 3 Kms.
of Nagar From Nagar nagar From Nagar
Panchayat Panchayat area Panchayat Panchayat area
E 1 2 1 2
Entire area of R$. 1.50 Rs. 1.00 per Rs. 3.00 per Rs. 1.50 per
Nagar per Square Square Metre Square Metre Square Metre
Panchayat and Metre
upto 3 Kms.
from the outer
F limits of Nagar
Panchayats
·~

Class-VI Within Outside the Within village Out of village
limits of limits of area area
village area village area
G 1 2 1 2
Village whose Rs. 0.75 Nil Rs. 1.50 per Nil
population is per Square Square Metre
more than 2 Metre
thousaml

H

.,
I

RAJ HOMES PVT. LTD. & ANOTHER v. STATE 827
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]

• ~
·~ 3. The appellants submitted that reading of section 59
with rules 1to12 and sections 77, 78, 79, 81, 82 and 98 of the
A

Code shows that the land revenue is imposed on the land on
the basis of use, purpose, location, area, size of plot, rental
value, assessment rates, advantages and disadvantages etc.
In this view of the matter, it would be appropriate to set out B
section 59 of the Code as under:

-4 "Section 59. Variation of land revenue according to
purpose for which land is used.- (1) The assessment of
land revenue on any land shall be made with reference to
the use of land- c
(a) for the purpose of agriculture or such farm house,
which is situated on holding of one acre or more;
(b) as sites for dwelling houses;
D
(c) for purposes other than those specified in items (a),
.> (b), (d) or (e);
-} (d) for industrial or commercial purpose;
(e) for the purpose of mining under a mining lease within
the meaning of Mines and Minerals (Regulation and E
Development) Act, 1957 (No.67 of 1959);
Provided that the assessment of land revenue on any land
situated in the areas which are constituted as reserved or
protected forests under the Indian Forest Act, 1927 (16 of F
1927), with reference to use of land for any of the purposes
~ aforesaid shall not be proceeded with or any procedure
relating to the assessment to be followed under the relevant
provisions of the Code shall not be commenced except
on a certificate permitting the use of land issued by an
G
officer of the Forest Department duly authorised by the
State Government in this behalf;
.,,,,r ""-)
Explanation: For the purpose of clause (a) "Farm House"
means such building or construction which is any
improvement as defined in clause 0) of sub-section (1) of H
828 SUPREME COURT REPORTS [2008] 12 S.C.R.

A Section 2, the plinth area of which shall not exceed one
hundred square meter and the built up area shall not
i •'

...
1--
!':-

exceed one hundred fifty square meter. '
(2) Where land assessed for use for any one purpose is
diverted to any other purpose, the land revenue payable
B u13on such land shall, notwithstanding that the term for which
the assessment may have been fixed has not expired, be
liable to be· altered and assessed in. accordance with the
., purpose to which it has been diverted.

c (2-a) The alteration or assessment referred to in sub-
I
section (2) shall be carried out by the Sub-Divisional ,..-
Officer. •
1--

D
(3) Where the land held f~ee from the payment of land
revenue o_n condition of being used for any pufPose ·is
diverted to any other purpose it shall become liable to the
payment of land revenue and assessed in accordance
r ~I
\.
with the purpose to which it has been diverted. "'·
~
(4) The assessment made under sub-section (2) and (3)
shall be in accordc:mce with the rules made by State
* r- '

I
E Government in this behalf and such rules shall be in-
. accordance with the principles contained in Chapter VII or
VIII, as the case may be. ·
(5) Where land for use for any one purpose is diverted to
F any other purpose, and land revenue is assessed thereon
under the pro.visions of this section, the Sub-Divisional
Officer shall also have power to impose a premium oh the
diversion in accordaoce with rules made under this Code:
Provided that no premium shall be imposed for the
G diversion of any land for ·charitable purpose. >.-

(6) Notwithstanding any usage or grant or anything
contained in any law, the right of all persons holding land,
which immediately before the co'ming into force of the
Madhya Pradesh Land Revenue Code, 1954 (II of 1955).
H
RAJ HOMES PVT. LTD. & ANOTHER v. STATE 829
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]

~ was held in malik makbuza right, to exemption from A
payment of premium on diversion of such land is hereby
abolished; but every such person shall, on diversion of
such land, be entitled in lieu of such right to a rebate equal
to the land revenue for one year payable for such land
from the amount of premium determined under sub-section 8
(5)."
4. It would be appropriate to recapitulate rules pertaining
to imposition of premium.
"RULES REGARDING ALTERATION OF
ASSESSMENT AND IMPOSITION OF PREMIUM
c
[Notifications No.175-6477-Vll-N (Rules); dated the 6th
January 1960 and as amended by No.1400-Vll-N-1, dated
21st May 1971, published in M.P. Raj. Pt. 4G, dated
11.6.1971, p. 270 and by No.F.11-7-Vll-S-8-89 dated D
. 24.1.2000]
>-

~ 1. In these rules "Code" means the Madhya Pradesh Land
Revenue Code, 1959 (No.20 of 1959).
A. ALTERATION OF ASSESSMENT E
(i) Diversion from a non-agricultural purpose to an
. agricultural purpose in non-urban and urban areas.
2. When land already diverted to a non-agricultural purpose
and re-assessed on that bas.is is ·-rediverted to an F
agricultural purpose the assessment as refixed shall be
~ equal to the agricultural assessment on the land as fixed
at the last settlement.
3. When land already diverted to a non-agricultural purpose
and assessed on that basis is rediverted to an agricultural G
.,.._, purpose and there is no agricultural assessment to fall
)
back upon, the assessment on rediversion shall be fixed
at the rate adopted for similar soil in the same village or
in a neighbouring village at the last settlement.
H
.,

830 SUPREME COURT REPORTS [2008] 12 S.C.R.

A 4. The assessment fixed under rules 2 and 3 shall remain
,,..
in force till the next succeeding settlement of the village. . '

(ii) diversion from an agricultural purpose to a non-
agricultural purpose.

B (a) Non-Urban a'"eas
5. If any land assessed at agricultural rates is diverted to
a nc;n-agricult~:ral purpose, the assessment thereon shall ~
be revised in accordanc~ with any of the methods specified
below according to the circumstances· of the case, Viz.:-
c
(a) If the area in which the land is situate has an assessment
.,'I--
rate as approved by the State Government under Sub-
.section (2) of Section 77 of the Code, then in accordance
with the assessment rate so prevailing.
D (b) If there be no assessment rate in force as aforesaid,
then the Sub-Divisional Officer shall calculate the estim~ted .(

rental value of the land to be assessed in accordance with
rules 33, 34, 35 and 36 of the rules framed under Clauses
(viii), (ix), (x) & (xii) of Sub-section (2) of section 258 of the
'* ,
E Code, as far as they may apply and fix the assessment of ',,
...
the land up to the maximum of 33 percent of the estimated '-
rental value of the land, taking into account the advantages ·
or disadvantages and other circumstances peculiar to the
survey number to be assessed.
F 6. In fixing the actual assessment, the area of a survey
number of Sub ..division measuring less than 5 sq. metres ~
shall be taken to be 5 sq. metres. In other cases areas up
to 5 sq. metres shall be ignored, and areas exceeding 5 ,;
sq. metres but below 10 sq. n:ietres shall be taken as 10
G square metres. The assessment shall be correct to the
nearest naye Paise. ~
I.. ......
7. The assessment fixed under rule 5 shall remain in force
till the next succeeding settlement of the village.
~
H (b) Urban Areas
RAJ HOMES PVT. LTD. & ANOTHER v. STATE 831
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]
·--\
8. If any land in an urban area assessed at agricultural A
rate is diverted to an non-agricultural purpose, its
assessment shall be altered by fixing the actual
assessment on the basis of the standard rate prevailing
for the area in which the land is situated, if, in such area,
a standard rate as approved by the State Government B
under rule 30 of the rules framed under clauses (xvi), (xvii)
and (xviii) of Sub-section (2) of Section 258 of the Code,
is in force.
9. If no such standard rate is in force, the average letting
value of the land shall be calculated, as far as may be, in c
accordance with rules 25, 26, 27 and 28 of the rules made
under the clauses specified in rule 8 above and a standard
rate determined in accordance with the provisions of rule
30 of the said rules.
D
}
10. On such standard rate being calculated, the Sub-
Jif. Divisional Officer shall fix the actual assessment on the
land diverted to a non-agricultural purpose up to one-third
of the estimated annual· rental value of the land, ifthe land
is held for the purposes mentioned in clause (b) or (c) of
Sub-section (1) of Section 59 of the code and up to orie- E
half of the estimated annual rental value, if the land is held
for purposes mentioned in clause (d) of the said Sub-
section.
11. In fixing the actual assessment, the area of a plot F
~·
measuring less than 5 sq. metres shall be taken to be 5
sq. metres. In other cases areas up to 5 sq. metres shall
be ignored, and areas exceeding 5 sq. metres but below
10 sq. metres shall be taken as 10 sq. metres. The
.,.,_ assessment shall be correct to the nearest naye paise.
G
.. j
12. The assessment fixed under rule 10 shall remain in
force till the next succeeding settlement of the village.'

xxxx"
5. Sections 77, 78, 79, 81, 82 arid 98 are also set out. H
832 SUPREME COURT REPORTS [2008] 12 S.C.R.

')-·
A Section 77. Fixation of assessment rates.- (1) On
completing the necessary inquiries, as may be prescribed,
the Settlement Officer shall forward to the State Government
his proposals for assessment rates for different classes
of land in such form and along with such other particulars
B as may be prescribed.
(2) The State Government may approve the assessment \-
rates with such modifications as it may deem fit.
Section 78. Maximum and minimum limits for the rate of
c assessment.- The maximum and minimum limits for the
assessment rate shall respectively be one and quarter
times and three-fourth of the assessment rate in force for
the time being:
Provided that in the event it is considered desirable to
D alter the minimum or maximum limits, aforesaid, a proposal
.-i,
to that effect shall be laid on the table of the Legislative
Assembly for its approval and the limits of assessment ~
rate shall thereafter be altered in accordance with the
proposals as approved.
E Section 79. Fixation of fair assessment.- The Settlement ~
Officer shall fix the assessment on each holding in
accordance with t_he assessment rates approved under
section 77 and the provisions of the section 81 and such
assessment shall be the fair assessment of such holding.
F
Section 81. Principles of assessment.- (1) The fair ).__
assessment of all lands shall be calculated in accordance
with the principles and restrictions set forth in the section.
(2) No regard shall be had to any claim to hold land on
G privileged terms. ~-
4,
(3) Regard shall be had in the case of agricultural land to
the profits of agriculture, to the consideration paid for
leases' to the sale prices of land and to the principal
moneys on mortgages, and_ in the case of non-agricultural
H
. ,, .. ·.-···'--·~---·
RAJ HOMES PVT. LTD. & ANOTHER v. STATE 833
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.J

land, to the values of the land for the purpose for which it A.
is held.
(4) The fair assessment on land used for non-agricult11ral
purposes shall not exceed thirty-three per centum of the,
estimated rental value of the land.
B
(5) Where an improvement has been effected at any time
in any holding held for the purpose of agriculture by or at
the expense of the holder thereof, the fair assessment of
such holding shall be fixed as if the improvement had not
been made. c
(6) Except for special reasons to be approved in each
case by the State Government, no increase in the fair
assessment of a holding for the purpose of agriculture
shall exceed fifty per centum of the existing assessment.
D
Section 82. Announcement of settlement.- (1) When the
assessment of any land has been fixed in (:!CCOrdance
with section 79, notice thereof shall be given in accordance
with rules made under this Code, and such notice shall be
called the announcement of the settlement.
E
(2) The assessment of any land, as announced under this
section, shall be the land revenue payable annually on
such land during the term of the settlement unless it is
modified in accordance with the provisions of this Code,
or any other law. f
Section 98. Fixation of standard rates of assessment.- .
The Collector shall keep a record in accordance with the
rules made under this Code of all registered sales and ·
leases of lands in the different blocks in urban areas in
respect of land held for each of the purpose mentioned in G
sub-section (1) of section 59.

(2) The average annual letting value of lands in each block
in respect of land held for purposes mentioned in sub-
section (1) of section 59 shall be determined separately H
834 SUPREME COURT REPORTS (2008] 12 S.C.R.
j-- -

A in the prescribed manner on the basis of transactions of
sales and leases in respect of the land held for each of the
aforesaid purposes in such block during the period of five
years immediately preceding the year in which the letting
value is being determined, so far as the information about
B such transactions is available:
'y
Provided that if the transactions which have taken place
in any block in respect of any land held for any of the
aforesaid purpose are not sufficiently representative
transactions in respect of the land held for the
c corresponding purpose during the same period in adjacent
block may be taken as basis for determining the letting
value.
(3) The standard rate of assessment for lands held for
purposes mentioned in clause (b) or (c) of sub-section (1)
D
of section 59 shall be equal to one-third of the average
annual letting value determined or the block in respect of j.,
such land under sub-section (2) and for purposes
mentioned in clause (b) of sub-section (1) of section 59
shall be one half of the average annual letting value ,l
E determined for the block in respect of such land.
(4) The standard rates for lands held for agricultural
purposes shall be fixed with due regard to soil and position
of land and to the profits of agriculture to the consideration
F paid for leases and to the sale prices of such lands.
6. Mr. A.K. Sanghi, the learned counsel for the appellants
submitted that there are restrictions for not exceeding the rental
value and assessment rates under sections 81(4) & 81(6) and
rule 5 (b) of section 59, which are quoted above. Mr. Sanghi
G also submitted that the imposition of land revenue is guided by )r

number of factors, principles, restraints which are not to be
• ~

found while imposing premium under section 59(5) or the i
I

impugned rule 14. There are no guidelines or nexus either with . '
section 59 or the Code itself.
.H
RAJ HOMES PVT. LTD. & ANOTHER v. STATE 835
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]
-t
7. Mr. Sanghi further submitted thatthe impugned Rule 14 A
which imposed a flat rate of premium irrespective of the factors
or considerations which go in imposing land revenue is in excess
and violative of section 59(5) and section 258(2)(iii) of the Code.
The premium which is sought to be levied cannot exceed the
land revenue itself. The land revenue is the main object and B
~· purpose of the M.P. Land Revenue Code, 1959.
8. Mr. Sanghi contended that the preamble of the Code
says that it is an Act to consolidate and amend the law relating
to land revenue, the powers of the Revenue Officers, rights and
liabilities of the holders of land from the State Government, c
agriculture tenures and other matters relating to land and the
liabilities incidental thereto in Madhya Pradesh. As such, the
premium under sub-section (5) to section 59 which has been
charged for diverting the land use from agricultural to non-
agriculture is only a part of the land revenue and is being charged D
by way of additional revenue.
k
9. According to Mr. Sanghi, the premium has to be less
than the land revenue imposed on the diverted land. It cannot
exceed the land revenue itself. According to him, in the present
case, the premium sought to be imposed is about 100 times E
than the existing one and is admittedly more than the land
revenue in most of the cases.

10. Ms. Vibha Datta Makhija, learned counsel appearing
--..(
for the respondent State of Madhya Pradesh submitted that the F
appellants own 10.48 acres of agricultural land situated in village
Narela Shankari, Bhopal, Madhya Pradesh~ After obtaining
permission for diversion of the land being sought from
agricultural purpose to residential purpose, a dernand of
..,.._ Rs.4,05,000/- was made on pccount of premium and the
..., J modified land revenue of Rs.52,756. In the case of lndraprastha
G
Grah Nirman Sahakari Sanstha Ltd., a demand for Rs.1,72,054/
- was made on account of premium under the impugned Rule
14 and a sum of Rs.2,42,400/- towards land revenue.
11. Ms. Makhija, learned counsel for the State submitted H
836 SUPREME COURT REPORTS [2008] 12 S.C.R.

t
A that the appellant herein. made the following two submissions
before the High Co'urt:
i) The State did not have the power to impose premium
since the power prescribed under section 258 which
is the source of rule making power in the Code is
B limited to "regulation" of land revenue; and
ii) Rule 14 and the Schedule appended thereto was
ultra vires the constitutional provisions since it
violated the mandate of Article 14, inasmuch as, it
c was arbitrary, and the categories of land therein did
not take into account any intelligible differentia while
prescribing different slabs of flat raJes for imposing
premium upon diversion of the use of land."
12. Other grounds which were though challenged in the
D High Court were not pressed by the appellants before this court.
Learned counsel for the appellants has also conceded that
there is no lack of power on behalf of the State to impose the --!.
premium but has argued that the classification of the rates is
illegal and arbitrary since it does not take into account various
E factors that are statutorily required to be taken into account for
the purpose of assessment of land revenue It has been argued
that there is a cap on the quantum of land revenue that can be
imposed under section 81 (4) and rule 5(b) regarding alteration
of assessment.and imposition of premium, the premium could
F also be imposed only within the limits of such a cap. f
)'---

13. Ms. Makhija, learned counsel for the respondent
submitted that the objects and reasons of the Revenue Code
state that the Code has been enacted to consolidate the different
set of laws regarding land revenue. agricultural tenures and
G other matters relating thereto in force in different regions of the )r
State of Madhya Pradesh with the purpose of having uniform • .....
legislation in the whole of the State.
14. Section 258 is the source of the rule making power of
the State which reads as under:
H

I
......
RAJ HOMES PVT. LTD. & ANOTHER v. STATE 837
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]

"258. General rule making power. - ( 1) The State A
Government may make rules generally for the purpose of
carrying into effect the provisions of this Code.
(2) In particular and without prejudice to the generality of
the foregoing powers such rules may provide for-
-~ B
(i) ... .
(ii) ... .
(iii) regulation of assessment of land revenue on diversion
of land to other purposes and imposition of premium under c
section 59.
"
15. Learned counsel for the State also submitted that the
Revenue Code is comprehensive Code encompassing all D
aspects pertaining to land. Under the scheme of the Code,
ownership of all lands of the State is vested in the Government
except for legally vested private rights in lands. Section 58 of
the Revenue Code empowers the State Government to levy
land revenue on all land except the land that has been exempted
from such liability by special grant or contract with the State E
Government. Learned counsel for the State also contended
that section 58(2) states that such revenue is "land revenue",
and that the term includes all moneys payable to the State
Government for land, notwithstanding that such moneys may be
described as premium, rent lease money, quit-rent or in any F
other manner, in any enactment, rule, contract, or deed. As
such, the State Government has been empowered to levy "land
revenue" on all land, under different heads which would not only
include the yearly assessment of revenue on the land, but also
other heads like premium, quit-money etc. G
16. s·ection 59 mandates the variation of land revenue
according to the purpose for which land is used. Thus, in the
event of diversion of land from a particular land use to another
land use, a reassessment of the land revenue is prescribed. In
H
838 SUPREME COURT REPORTS [2008] 12 S.C.R.

t
A addition, the Government has also been empowered to impose
a premium for such a purpose.
17. Section 59(2) empowers the State Government to re-
assess and re-fix the land revenue leviable on such a parcel of
land the use of which is required to be converted/diverted. In
B addition to the levy of the land revenue, section 59(5) prescribes
a one time levy of premium on such conversion/diversion in ~
accordance with the Rules ma·de under the Revenue Code.
18. Learned counsel for the State further submitted thatin
c exercise of powers under section 258 and section 59, the State
Government framed the Rules regarding alteration of
assessment and imposition of premium vide notification No.
175-6477-Vll-N (Rules); dated the 5th January 1960 and as ,
amended by Notification No.1400-VI l-N-1, dated 21st May 1971,
published in M.P.. Raj. Pt. 4G, dated 11.6.1971, p. 270 and by
D
Notification No.F.11-7-Vll-S-8-89 dated 24.1.2000. As per the
amendment made in the year 2000, the Schedule prescribes -)..,
the premium leviable on the conversion of the use of land
increased manifold keeping in account the steep escalation in
land values.
E
19. Learned counsel for the State also argued that it is
clear that the Government has full power to not only fix land
revenue rates, re-fix them upon conversion/diversiOf! of land for
another use, but also charge premium upon the diversion of ·
F land for another use. Thus, the levy of premium on conversion
of the use of land by the Government is unequivocal, legal and ~.
valid and cannot be questioned.
20. In reply to the argument of learned co.unsel for the
appellants with regard to arbitrary imposition of rates of revenue,
G the learned counsel for the State submitted that the imposition
,..If
of the land revenue is guided by number .of factors and ' .....
principles. According to various provisions of the Code, they
are not imposed in an arbitra1y fashion.
21. Learned counsel for the State further submitted that
H
RAJ HOMES PVT. LTD. & ANOTHER v. STATE 839
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]

' --r bare perusal of the scheme of Revenue Code clearly empowers A
the State Government to impose a premium in addition to the
land revenue. The Statement of Objects and Reasons of the
Revenue Code as well as the explanation of the term "land
revenue" in section 58(2) clearly establishes that land revenue
includes a recurrent periodic levy and other levies on the land B
as prescribed under the Code. According to the learned counsel
-~ for the State, reliance of the appellants on sections 75 to 98 is
of no relevance in the present case since they pertain to the
initial fixation of the land revenue. The factors as prescribed in
these provisions mandate that the land revenue should be directly c
proportionate to the use and value of land and must be arrived
at after determining all the factors that would govern the value
of a particular parcel of land.
22. Learned counsel for the State further submitted that
the factors that determine the land revenue of a particular parcel 0
of land _cannot be the determining factors for fixing the rates of
premium to be imposed on conversion/diversion of the land for
~ a different use. Learned State counsel submitted that the factors
governing the imposition of premium are inherently different
from those governing the assessment/determination of land E
revenue. This is so since the purpose and object of both the
levies are inherently different in character. While the land revenue
is a levy closely identifiable with the benefits arising out of
occupation of land, premium is a charge on the benefit arising
out of betterment of ones holding. The land revenue is of a F
recurrent nature which is required to determine in relation to a
particular parcel of land and its actual value whereas premium
is a one time charge, the basis of determination of which is the
estimated value of benefit that is estimated to accrue by virtue
of a change in better land use. This basis is fortified by the
G
existence of rule 13 which prescribes that when any land
..... ~
f
assessed for any non-agricultural purpose is diverted to any
agricultural purpose no premium shall be imposed under section
59(5). Similarly, rule 15 prescribes that upon re-diversion of
land from other uses to agricultural, although the premium shall
H
840 SUPREME COURT REPORTS [2008] 12 S.C.R.

A not be· refunded, no further premium shall be charged for re- r- /

diversion. Thus, upon amalgamation of agricultural lands in urban
are-as, the value of such lands inherently undergo a betterment in
value and thus the premium is validly charged a condition for
granting permission to betterthe usage of land. Thus, the charge
8 i.e. the premium which has a direct nexus to the opportunity of
betterment of a parcel of land shall be valid and legal.
23. Learned counsel for the State further submitted that r
the ciasses prescribed in Schedule under rule 14 are based on
ari intelligible differentia taking into account the location of land.
c Since the location of land is determinative of the value of the
potential use of the land, the criteria of classifying the categories
according
I
to the area in which.
the' property falls has a direct
nexus to the potential value of the land. The Schedule prescribes
different classes according to the municipal area or the rural
D area that the parcel of land is situated. Within the categories of
various municipal areas/village areas, the distance of the
'\
property from the center of municipal area is also taken into
account. Different rates for different areas are prescribed: As ~
such, the estimated appreciation of value is assessed on the
E basis of the location of the property which is the determinative
factor for this purpose. The said criteria are clearly directly
related to the development policies of the government to
amalgamate rural holdings falling within and/or outside the
municipal areas of various cities. The classification of various
F cities is again determined as per the values of land in these
cities, the extent of population of these cities, and the character
of cities. Thus, the important cities of the State are classified \-
differently from the smaller cities and towns, as also according
to their population. Further, the villages are also classified
differently, and the rate for levying premium for conversion is
G
accordingly prescribed. As such, the schedule is based on a
reasonable differentia after taking into account relevant factors -1'
• !""'
for this purpose, and is thus non-arbitrary and non-discriminatory.
As such, neitherthe rule 14 nor the Schedule prescribed therein
is ultra vires Article 14 of the Constitution of India.
H
....,,
RAJ HOMES PVT. LTD. & ANOTHER v. STATE 841
OF MADHYA PRADESH & OTHERS [DALVEER BHANDARI, J.]
_.
, 24. Learned counsel for the State also submitted that the
requirement of classifying various cities, towns and villages
A

according to rational criteria is also based on the requirement of
having uniformity of levies in the whole of the State, which is the
very primary object of the Revenue Code. Learned counsel for the
State submitted that in the instant case, the legislature has not B
exceeded its jurisdiction in legislating the impugned rule 14 and
the scheduled there!o. Rule 14 and schedule thereto are not arbitrary
''1
and have a direct nexus with the objective still to be achieved.
25. Learned counsel for the State submitted. that in the
impugned judgment, the Division Bench of the High Court was c
justified in arriving at the conclusion that the rule which has
been assailed on the ground that the rule making authority has
gone beyond the statute is totally without any basis or foundation.
Learned counsel further submitted that the High Court was
justified in coming to the conclusion that the classification made D
therein neither suffers from absence of intelligible differentia
nor does it invite the wrath of equality clause as engrafted under
'
·~ At1icle 14 of the Constitution. According to the learned counsel
for the respondent, the Division Bench was justified in concluding
that the respondent was fully empowered to the premium on E
conversion of land. Learned counsel. for the respondent also
submitted that the impugned judgment has correctly analysed
and interpreted the various provisions of the Revenue Code
and hence no interference is warranted by this court.
26. We have carefully perused the pleadings; impugned- F
~

judgment and the submissions made on behalf of the appellants
-I and respondent State of Madhya Pradesh.
27. Careful analysis of the facts and reasons of the
Revenue Code lead to the following conclusions:-
G
(I) The State Government enjoys ample powers of not
-A' , -.i..,
i only to fix land revenue rates or to re-fix them upon

- conversion/diversion of the land for another use but
also charges premium upon diversion of land for
another use. H
842 SUPREME COURT REPORTS [2008} 12 S.C.R.

A (II) The premium is one time charge for diversion of
land for better land use under rule 14 of the Code.
Rule 13 prescribes when land is assessed for any
non-agricultural purpose is diverted to any agriculture
purpose, no premium shall be imposed under section
B 59(5). The scheme of the Act clearly reveals that the
premium is charged only when land use is converted
for betterment.· In this view of the matter, the State is
fully justified in charging the premium and the same
is in consonancewith the spirit, objects and reasons
c of the M.P. Land Revenue Code.
On careful analysis of the entire scheme of the Act and the
provisions of the Code it cannot be said that rule 14 is violative
of Article 14 of the Constitution.
(Ill) ·. The classification of various cities in the State is
D
determined as per the values of land in different cities,
the extent of population of those cities and the
character of those cities. The important cities of the
State are classified differently from smaller cities and
. towns as also according to their population. Similarly,
t
E villages are also classified differently and rate of
levying premium for conversion is accordingly
preschbed. The Schedule is based on reasonable
differentia taking into account relevant factors for the
. purpose and it cannot be called arbitrary or
F .. discriminatory.
28. In view of our aforesaid findings these appeals filed by \--- \

the appellants being devoid of any merit are accordingly
dismissed. In the facts and circumstances of the case, the parties
G are directed to bear their own costs.
K.K.T. Appeals dismissed.