Supreme Court of India
STEEL AUTHORITY OF INDIA LTD.versusSTATE OF M.P. AND ORS.
- Citation
- 1999 INSC 155
- Decided
- 5 April 1999
- Disposal
- Appeal(s) allowed
Holding
No land revenue is payable by the appellant company as the exemption under Section 58, arising from the capitalised payment and the contract between the governments, is valid and transfers to the successor.
Summary
The Central Government sought land in Madhya Pradesh for the Bhilai Steel Plant and, under the 1925 Rules, agreed to pay the State a one‑time capitalised amount equal to 25 times the assessed land revenue, thereby obtaining exemption from further land revenue. The land was transferred to Hindustan Steel Ltd, whose successor company is the appellant. The Deputy Collector later assessed land revenue for the period 1962‑1987, which the appellant challenged, arguing that the exemption under Section 58 of the Madhya Pradesh Land Revenue Code, 1959, and the contract between the governments barred any further demand. The Supreme Court examined whether a valid contract existed despite the lack of compliance with Article 299, and whether the exemption could be inherited by the successor-in-interest. It held that the capitalised payment satisfied the exemption, that the contract was valid, and that the exemption transferred to the appellant company. Consequently, the demand for land revenue was quashed and the appeal was allowed.
Issues considered
- Whether the appellant company is liable to pay land revenue for the land transferred for the Bhilai Steel Plant.
- Whether the exemption under Section 58 of the Madhya Pradesh Land Revenue Code, 1959, applies based on the 1925 Rules and the contract between the Central and State Governments.
- Whether a contract under Article 299 of the Constitution is required for the exemption, and if such a contract exists.
- Whether the exemption can be inherited by the successor-in-interest (the appellant company).
- Whether the assessment of land revenue is barred by limitation.
Legislation cited
- Constitution of Indias. Article 299
- Madhya Pradesh Land Revenue Code, 1959s. 264, s. 58
Subjects
land revenueexemptioncapitalisationcontractsuccessor-in-interestMadhya Pradesh Land Revenue CodeArticle 299steel plantland acquisition
Judgment
A STEEL AUTHORITY OF INDIA LTD.
v.
STATE OF M.P. AND ORS.
APRIL 5, 1999
B [M. JAGANNADHA RAO AND S.N. PHUKAN, JJ.]
Land Laws:
Madhya Pradesh Land Revenue Code, 1959 : Section 58-Exemption
C from payment of land revenue by special grant or contract-Acquisition of
land by Central Government from State Government for establishing steel
plant-Agreement entered into between the Governments for payment of
capitalised value of land revenue at 25 times-Transfer of land to appellant-
Company-Assessment-order demanding land revenue from Company-
D Validity of-Held, once land revenue was capitalised and paid, no further
amount could be realised-Right t.o exemption accrued to the Central
Government not to pay land revenue also available to appellant-Company
as successor-in-interest-Demand of land revenue quashed
Constitution of India, 1950 : Article 299-Contract executed by virtue
E of statutory power-Applicability of
Words & Phrases:
''Capitalise' '-Meaning of
The Central Government wrote to the Chief Secretaries of States
F informing about a proposal to establish Russian Technical Assistance Steel
Plants.
For the said steel plant, the Central Government needed land free of
cost and•wanted to know whether the State Government would be prepared
G to extend the facilities. In pursuance to the offer, the respondent-State
Government showed its willingness. Subsequently, the Respondent-State
Government brought to the notice of the Central Government the rules
framed by the Secretary of State in 1925. The salient features of the said
rules were that in respect of land belonging to private persons, the Central
Government would pay the cost of acquisition, to the owners of the land and
H capitalised value at 25 times the amount of land revenue assessed on such
408
STEEL AUTHORITY OF INDIA v. ST ATE 409
land to the State Government. The Central Government by two deeds of A ·
assignment transferred the land etc. to a company wholly owned by it. The
appellant was the successor of the said company. The Deputy Collector
passed an assessment order demanding land revenue dues for the period
1962 to 1987 from the appellant-company the appellant company
Jmsuccessfully challenged the said order before the Commissioner, Board B
of Revenue and High Court. Hence the present appeal.
The appellant contended that there was an implied contract that Central
Government should make one time payment of land revenue for 25 years. In
addition, the 1925 Rules also provide tha~ if land is transferred by the State
to Centr,al Government and if such a payment is made, the Central Government C
need not pay any further land revenue to the State. Thus both on the ground
of contract and Rules, the Central Government gets exemption under sub-
clause (1) of section 58 of the Madhya Pradest. Land Revenue Code, 1959.
Allowing the appeal, this Court
D
HELD : 1.1. There is no liability on the appellant-Company to pay any
land revenue as it has been capitalised and paid at 25 times by the Central
Government (418-A-B; F-G]
1.2. The object of the Rules framed by the Secretary of State in 1925
is clear that land revenue was to be capitalised and collected once for all and E
that no land revenue could be further recovered thereafter. Moreover from
the conduct of the parties it is very clear that both the Governments agreed
with the terms mentioned in the letter of the State Government dated 25th
September, 1958 and, therefore, there was also a contract between the parties
regarding exemption from payment ofland revenue, if25 times of the land
revenue was paid once for all. Section 58 of the Madhya Pradesh Land F
Revenue Code, 1959 provides that land revenue is payable in respect of all
land unless it is exempted from such liability by special grant or contract
with the State Government. Thus, in view of the agreement between the two
Governments and in view of the provisions of section 58 of the Code, no land
revenue is payable for the land in question as it has been capitalised at 25 G
times of the land revenue prevailing at that time. [416-G; 417-C; G-H]
Blacks law Dictionary, Fifth Edition Oxford English Dictionary, Vol.
11-C, referred to.
2. Article 299 of the Constitution applies only to contracts to be H
410 SUPREME COURT REPORTS (1999] 2 S.C.R.
.A executed in exercise of "executive power" and not those executed by virtue
of statutory power like section 58 of the Code. Thus, the contention that
there was no contract between the Central Government and State Government
regarding non-payment of land revenue as it was not executed in the form
required under Article 299 cannot be accepted. [417-D; BJ
B State of Haryana v. Lal Chand, (1984) 3 SCC 634 and Lalji Khimji v.
State of Gujarat, [1993) Suppl. 3 SCC 567, relied on.
3. The privileges of or right to exemption accrued to the Central
Government not to pay land revenue to the State Government under section
C 58 of the Code would also be available to the appellant-company, as a successor-
in-interest to the Central Government. Two deeds of assignments were
executed on consideration for transferring shares by the Company to the
Central Government. It is clear from the clauses of the deeds of assignment
that while trasferring the land to the company, rights, liberties, privileges
etc. to the said land were also transferred. Thus the demand of land revenue
D made by the Collector form the appellant-company is quashed.
(418-B; F-G; 419-B)
CIVIL APPELLATE JURISDICTION : Civil Appeal No.5518 of
1993.
E From the Judgment and Order dated 29.4.93 of the Madhya Pradesh
High Court in Misc. P. No.1026of1993.
C.S. Vaidyanathan, Additional Solicitor General, Vijay Hansaria and Sunil
Kumar Jain for the Appellant.
F B.S. Banthia and S.K. Agnihotri for the Respondents.
The Judgment of the Court was delivered by
S.N. PHUKAN, J. This appeal is directed against the Judgment and
Order passed by the Madhya Pradesh High Court at Jabalpur in Misc. Petition
G No. 1826of1993.
to
A few facts leading this appeal deserve to be noted at the outset for
highlighting the grievance of the appellant in the present appeal.
The Central Government, Ministry of Production wrote a letter dated 8th
H January, 1955 to the Chief Secretaries of the States of West Bengal, Bihar and
STEEL AUTHORITY OF INDIA v. STATE {S.N. PHUKAN, J.] 411
Madhya Pradesh. In this letter it was indicated that it was under consideration A.
of the Central Government to establish Russian technical assistance steel
plants at three places in the three States. For this purpose a piece of land
measuring about 50 sq. miles, would be required. Therefore, the Central
Government by letter dated the 8th January, 1955 wanted to know from the
State Governments whether the Governments would be prepared to accord B
facilities. The said three facilities are stated below:-
"(l) 50 sq. miles of land, free to the extent it is the property of the
State Government, and guarantee of a ceiling cost for the acquisition.
0
of privately owned land, it being understood that any cost in excess
of the guaranteed ceiling would be borne by the State Government C(
concerned.
(2) A guarantee of adequate and continuous water supply, as required
for the steel plant, associated projects and the town, at rates to be
mutually agr{.ed upon between the State Government and the
Government of India and/or an autonomous State Co. to be registered Q
for the purpose.
(3) Guarantee of prior claim on all unleased mining concessions iit
respect of iron-ore, coal, limestone, dolomite and any other raw material
discovered or to be discovered within the territory of the State
concerned and required for the steel project." E
By letter dated l lth of January, 1955 the Government of Madhya Pradesh
informed the Central Government that the State Government was prepared to
accord all the above facilities.
Another letter was sent dated 25th of September, 1958 by the Government F
of Madhya Pradesh bringing to the notice of the Central Government the rules
framed by the Secretary of State in 1925. Two salient features of the rules
particularly A and B were stated in the said letter. These features are:
"(A) When any land is required by the Central Government that
Government are required to pay (i) cost of acquisition, if the land is G
occupied and market value of land, if the land belongs to the State
Government and (ii) capitalised value of land revenue at the assessment
to the State Government the loss of land revenue, as no land revenue
can be recovered from the Central Government.
(B) When any land is not required by the Central Government for the H
412 SUPREME COURT REPORTS [1999] 2 S.C.R.
A purpose for which it was acquired, the State Government are given the
first option to take it back on payment of its market value. Should the
State Government. exercise the option and pay the market value of the
I.and then they are at liberty to dispose it of in such a manner as they
'deem fit."
B By this letter Central Government was informed that the land for the
Bhilai Steel Plant might be classified in two categories namely land belonging
to private persons and land belonging to State. It was brought to the notice
_... of the Central Government that the Central Government agreed to pay the cost
of acquisition of land and that the State Government was also entitled to claim
C the amount awarded, that is, market value plus 15% on account of compulsory
nature of acquisition from the Central Government. It was further brought to
the notice of the Central Government that the State Government would be
entitled to recover capitalised value of land revenue at 25 times the amount
of land revenue in accordance to above 1925 rules.
D Regarding land which belonged to State Government as per earlier
agreement it was agreed to transfer such land free of cost.
We may like to quote paragraph 10 of the said letter which is as follows:
"The State Government are, therefore, of the view that the land shall
E be held by the Central Government on the following terms and
conditions :-
(1) Land acquired/transferred for the Bhilai Steel Plant should be
treated as if it were in possession of the Central Government for the
purposes of the Union.
F
(2) in respect of occupied land, i.e., land belonging to private persons,
the Central Government should pay the cost of acquisition, including
15% on account of compulsory nature of acquisition, to the owners
of the land and capitalised value at 25 times the amount of land
revenue assessed on such land to the State Government.
G
(3) in respect of unoccupied land, i.e., land belonging to the State
Government, neither the cost nor capitalised value of land revenue
shall be payable by the Central Government.
(4) the State Government shall be entitled to recover royalty on all
H minor and major minerals extracted from lands acquired transferred at
STEEL AUTHORITY OF I~DIA v. STATE {S.N. PHUKAN, J.] 413
rates fixed by the State Government. A
(5) if any land acquired/transferred for Bhilai Plant is not required for
the purposes of the plant, the first option to take it back should be
given to the State Government and the State Government should pay
the cost of acquisition minus 15% on account of compulsory nature
- of the acquisition, where at the time of acquisition, it was paid for. In
cases where the Central Government have not been required to pay
the cost of any land, the State Govt. should get it back without any
payment whatsoever; and
B
(6) if, however, the Central Government wants to transfer any land
acquired/transferred for ~hilai Plant or any right therein to any private C
persons, the terms and conditions of such transfer should be intimated
to the State Government and their concurrence obtained before the
transfer and in appropriate cases, divide or allocated the proceeds
between the Central and State Govt. on agreed terms."
By two deeds of assignment executed on 31st day of March, 1959 and D
27th of March, 1978 the Central Government transferred land etc. as indicated
in the schedules to a company wholly owned by the Central Government
-·
namely Hindustan Steel Ltd. The present company is a successor company
of Hindustan Steel Ltd. in respect ofBhilai Steel Plant. We may state here also
that by letter dated 7th of May, 1963 the Central Government informed the E
State Government that as advised land could be acquired for Union of India
-
---------
for the Bhilai Steel Plant though the project had been handed over to the
Hindustan Steel Ltd. and for this purpose Central Government authorised the
General Manager of the Bhilai Steel Plant to act for the Central Government
in all matters relating to acquisition of land and while doing so the General
--- Manager would not d~emed to be acting on behalf of the company.
The Deputy Collector, Durg by letter dated 4th of March, 1987 informed
F
the Bhilai Steel Plant authority that a sum of Rs. 3,27,90,220.00 was due as
land revenue for the years 1962-87 from the above Steel Plant and amount had
. to be realised. From the letter in the subject it was mentioned that this was G
so done in view of the report of the Comptroller and Auditor General of India
for the year 1981-82.
From the letter dated 23rd of June, 1987 issued by Deputy Collector,
Durg to the Assistant Estate Manager (Land), Bhilai Steel Plant it appears that
a piece of land measuring 32759.00 acres was allotted to the Steel Plant and H
-(
414 SUPREME COURT REPORTS [1999) 2 S,C.R..
.
A revenue was payable @ Rs. 40 per acre per annum and assessment for the
land revenue was for the years 1962-86. Finally, the Collector ,Durg by an
order dated 27th of January, 1990 _assessed the land revenue at Rs.
3,73,96,873.20 after making some deduction and passed an order for immediate
realisation of the above amount. The area of land was assessed by .the
B . Collector for 32759.00 acres and land revenue was assessed@ Rs. 40 per acre .
per annum. An appeal was filed before the Commissioner, Raipur ,Division
which was dismissed by order dated 19th January, 1992. Thereafter matter was
taken up before the Board of Revenue and by order dated 16th of November,
1992 it was dismissed. .
---
c PetitionTheNo.appellant-company approached the High Court by filing Misc.
1826193 under Article 226 and 227 of the Constitution oflndia
---
which was dismissed by order dated 29.04.1993. Hence the present appeal.
'
.
We have heard Mr. C.S. Vaidyanathan, learned Additional Solicitor
General for the appellant and Mr. B.S. Banthia, learned advocate for the
D respondents.
Section 58 of the Madhya Pradesh Land Revenue Code, 1959 (for short.
the Code) which fixes the liability of land to payment of .land revenue is
quoted below:-
E "Sec. 58 - (I) All land, to whatever purpose applied and wherever
situate, is liable to the payment of revenue to the State Government,
except such land as has been wholly exempted from such liability by
special grant of or contract with the State Government, or under the
-,
provisions of any law or rule for the time being in force. (Emphasis
F
supplied)
(2) Such revenue is called °'land revenue'', and that term includes all
moneys payable to the State Government for land notwithstanding
--
that such other manner in any enactment, rule, contract or deed."
• ti
We also quote Section 264 of the Cq~e:
G
"Sec. - 264. Nothing .contained in this Code shall apply to· a person
who holds land from the Central Government: "(Emphasis supplied)
The only point to be decided is whether in view of the above facts and
la~s the appellant i~ liable to pay any land revenue for the land in occupation
H of Bhilai Steel Plant.
STEEL AUTHORITY OF INDIA v. STATE {S.N. PHUKAN, J.] 415
It will be noticed that we are concerned with two separate pieces of A
land, one assigned by the Central Government to the Company on 31st
March, 1959 and another on 27th March, 1978. The assessment to land
revenue by the State of Madhya Pradesh covers the period from 1962-1987.
The contention for the appellant is as follows:
B
So far as the first assignment, is concerned, no doubt, during this
period i.e. from 1962 the said extent was owned by the Company after
assignment by the Central Government on 31st March, 1959. This land not
being owned by the Central Government from 1959 (i.e. after 1962) is not
covered by Article 285 of the Constitution of India. It may be assumed that
this piece of land is also not held by a person from the Central Government · C
so as to claim the benefit of Section 264 of the Code. But the right to levy
land revenue can be lost by 'contract' and by, rules as provided in sub-clause
(1) of Section 58. In the present case, there is a contract implied by the
correspondence that Central Government should make a one time payment of
land revenue for 25 years. In addition, the 1925 Rules also provide that if land D
is transferred by the State to Central Government, and if such a payment is
made, the Central Government need not pay any further land revenue to the
State. Both on ground of contract and Rules, the Central Government gets
exemption under S!lb-clause (1) of Section 58. So far as the extent covered by
the second assignment dated 27.3.1979 is concerned, the contention is two
fold - the Central Government is exempted in view of the Article 285 and E
--- Section 264 of the Code upto 26.3.1979. No levy on its successor, (the
Company) can be made upto 26.3.1979. On or after 27.3.1979, the Company
is not liable because of the contract (evidenced by correspondence) and also
because of the 1925 Rules, the case comes within sub-clause (1) of Section
58.
F
On the other hand, the contention for the respondent-State of Madhya
Pradesh is that the company is liable for the whole period 1962-1987 in respect
of both the pieces of land assigned to the company on 31st March, 1959 and
27th March, 1978 inasmuch as Article 285 cannot help the Company, even if
all its shares are held by the Central Government. The Company is a different G
juristic entity. Nor can Section 264 of the Code apply because the Company
is not holding the land for the Central Government for after the assignments,
the Central Government cannnt be said to be holding the land thr~mgh the
Company. So far as sub-clause (I) of Section 58 is concerned, there is no
contract entered into between the Central and State Governments in accordance
with Article 299 of the Constitution of India, waiving the further land revenue H
+
416 SUPREME COURT REPORTS [1999] 2 S.C.R.
A on the ground that once 25 times of land revenue was paid, no further land
revenue need be paid. There can be no estoppel against statute. The 1925
Rules cannot also help the appellant. Nor has any exemption been granted
-
under Section 59 of the Code.
It will be noticed that in the letter of the Madhya Pradesh Government
B dated 25.9.58 which was referred to above, the salient features of the rules
framed by the Secretary to the Madhya Pradesh Government in 1925 were
referred to. The condition No. A clearly lays down that the capitalised value
-
of the land revenue has to be assessed and paid to the State Government
towards loss of land revenue as no land revenue can be recovered from the
C Central Government later on. From paragraph 10 of the letter which has been
quoted above we also find that land revenue in respect of land held by the
private persons has to be capitalised at 25 times and capitalised value of land
revenue shall be payable by the Central Government to the Government of
Madhya Pradesh.
D A memorandum dated 17th July, 1958 from the Government of Madhya
Pradesh was issued to the Commissioner of Raipur division raising a query
as to whether capitalised value of land revenue had been recovered or not
and if not, the amount to be reported to the Government so that it could be
claimed from the Central Government.
E According to the Black's Law Dictionary (Fifth Edition.) the word
'capitalize' means ... "To convert a periodical payment into an equivalent
capital sum or sum in hand. To compute the present value of an income
extended over a period of time ..."
According to the Oxford English Dictionary' (Being a Corrected Re-
F issue with an Introduction, Supplement, and Bibliography of A New English
Dictionary on Historical Principles, Volume 11-C) the word 'Capitalize' means
..... 2"To convert (a periodical income or payment) into an equivalent capital
sum; to compute or realize the present value of such a payment for a definite
or indefinite length of time ..... "
G
The object of the Rules framed by the Secretary of State in 1925 is clear
that land revenue was to be capitalised and collected once for all and that
no land revenue could be further recovered thereafter. Land revenue had to
be paid periodically and in view of the above dictionary meanings and in view
of the rules framed in 1925, once land revenue was capitalized and paid, no
H further amount could be realised by the State Government for the land
STEEL AUTHORITY OF INDIA v. STATE {S.N. PHUKAN, J.] 417
transferred. Thereafter the case falls under sub-clause (I) of Section 58 which A
states that by virtue of provisions in a rule made, land revenue could become
exempt
Though Mr. Banthia has urged that as no reply was sent to the letter
of the State Government dated 25th September, 1958, therefore, there was no
contract under Article 299 of the Constimtion of India between the Central B
Government and the State Government regarding the non-payment of land
revenue, we are unable to accept the contention of the learned counsel
inasmuch as by the conduct of the parties it is very clear that both the
Governments agreed with the terms mentioned in the letter of the State
Government dated 25th September, 1958 and, therefore, there was also a C
contract between the parties regarding the exemption from payment of land
revenue, if 25 times of the land revenue was paid once for all. The contention o
that such a contract is not executed in the form required under Article 299
cannot be accepted. This point was not raised in the High Court. Apart from
that it is clear that Article 299 applies only to contracts to be executed in
exercise of"executive power' and not to those executed by virtue of statutory D
power like Section 58 of the Code. See State ofHaryana v. Lal Chand, [1984]
3 SCC 634 and Lalji Khimji v. State of Gujarat, [1993] Suppl. 3 SCC 567. In
the latter case, Anand, J.(as he then was) observed as follows:
"There is a marked distinction between contracts which are executed E
in exercise of the executive powers and agreements or orders made
which are statutory in nature ....... In State of Haryana v. Lal Chand,
this Court considered a contract granting exclusive privilege of liquor
vending, in exercise of the statutory powers referable to Punjab Excise
Act, 1914 and Punjab Liquor Licence Rules, 1956, and held that the
grant of the exclusive privilege gave rise to a contract of a statutory F
nature, distinguished from the one executed under Article 299( I) and,
therefore, compliance with Article 299(1) was not required in such a
case."
Section 58 of the Code provides that land revenue is payable in respect G
of all land unless it is exempted from such liability by special grant or contract
with the State Government. In view of the agreement between both the
Governments and in view of the above provisions of Section 58 of the Code
we hold that no land revenue is payable for the land in question more
particularly as it has been capitalized at 25 times of the land revenue prevailing
at that time. H
+
418 SUPREME COURT REPORTS (1999) 2 S.C.R.
A Thus, whether it is because of the 1925 Rules or the Contract, Central
Government was not liable to pay land revenue once it had paid the 25 time
land revenue as a one time payment.
The . next question is whether after the land was transferred to the
Company, the Company wo.uld be liable to pay any land revenue under the
B Code?
· Two deeds of assignments were executed on consideration for
transferring shares by the Company to the Central Government. We may refer
to relevant portions of the assignment deeds;
C "..... the Government doth hereby grant convey transfer assign and
assure unto the Company all those several pieces or parcels of lands
~ and hereditaments situate .. "
" .....rights, liberties, privileges, easements, advantages, and opportunas
whatsoever to the said lands, hereditaments and premises appertaining
D to or with the same or any part thereof now or hereto have or may
hereafter be occupied or enjoyed or reputed or known as part and
parcel or member thereof or appertaining thereto( hereinafter called
"the said lands and buildings")
" ..... and all the estate, right, title and interest, claim and demand of
E the Government into and upon the lands and buildings, the plant or
every part thereof and also all the deeds and other evidences of title
in any way relating .to the said lands and hereditaments and all
receipts and documents and other evidence of title to the plant and
the component parts thereof an installed or brought in by the
Government in connection with the said "Bhilai Steel Project" .... "
F
Thus it is clear from the above clauses of the deeds of assignment that
. while transferring the land to the Company rights, liberties, privileges etc. to
the said land were also transferred. Therefore, the privileges of or right to
exemption accrued to the Central Government not to pay land revenue to the
G State Government under Section 58 of the Code would also be available to
-
the appellant company, as a successor in interest to the Central Government.
Another point has been urged on behalf of the appellant that assessment
of land revenue is barred by limitation. We need not entertain into this aspect
as we have held that the appellant company is not liable to pay any land
H revenue.
+
STEEL AUTHORITY OF INDIA v. STATE [S.N. PHUKAN, J.] 419
-- We may mention that the State Government was also aware that no land
· revenue was payabl_e but the proceedings were started in view of the audit
A
objection.
For the reasons stated above the appeal is allowed. The impugned
judgments and orders are set aside. We also quash the demand of the land
revenue made by the Collector from the appellant. No order as to costs. - B
S.V.K.l Appeal allowed.
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