REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs.7732-7733 OF 2004

Raj Homes Pvt. Ltd. & Another .. Appellants   

Versus

State of Madhya Pradesh & Others .. Respondents

J U D G M E N T

Dalveer Bhandari, J.

1. The appellants aggrieved by the order of the High Court

of  Judicature  at  Jabalpur  dated  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 dated 24.1.2002.    

2. Brief  facts  giving  rise  to  the  present  appeal  are

recapitulated 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

imposed  on  the  land.   According  to  the  appellants,  the

impugned rule 14 of the Madhya Pradesh Land Revenue Code,

1959 (for 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 imposition of premium as under:

“IMPOSITION OF PREMIUM

13. When the land assessed for any non-agricultural purpose  is  diverted  to  any  agricultural  purpose  no premium  shall  be  imposed  under  Sub-section  (5)  of Section 59 of the Code.

14. (1) For  the  purpose  of  levy  of  premium  on agricultural  land other  than the land specified in the proviso  to  Sub-section  (5)  of  Section  59  of  the  Code

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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  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-Divisional Officer may include any particular  village  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  metre  and  “Kachha”  construction  is  built  on such land.

Explanation I.-  When the ‘abadi’  of  two or more villages  adjoins,  the  population shall  be  taken  as the population of the combined villages.

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:

SCHEDULE Classes For  residential  and  other  purpose

(excluding  Commercial  and  Industrial Purpose)

For Commercial and Industrial Purpose

(1) (2) (3) Class-I In Municipal

Corporation Area

Upto 4 kms. From

Municipal Corporation

Area

From 4 Kms. To 8 Kms. From the area of

Municipal Corporation

In Municipal

Corporation Area

Upto 4 Kms. From

Municipal Corporation

Area

From 4 Kms. To 8 Kms. From the area of

Municipal Corporation

1 2 3 1 2 3

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Entire Municipal Corporation area  of Gwalior, Indore, Ujjain, Bhopal, Jabalpur, Raipur  and Durg  and upto  8 Kms.  from the  outer limits  of Municipal Corporation

Rs. 10 per Square Metre

Rs.7.50 per Square Metre

Rs.5 per Square Metre

Rs.20 per Square Metre

Rs.15 per Square Metre

Rs.10 per Square Metre

Classes For  residential  and  other  purpose (excluding  Commercial  and  Industrial Purpose)

For Commercial and Industrial Purpose

(1) (2) (3) Class-II In Municipal

Corporation Area

Upto 4 kms. From Municipal Corporatio

n Area

From 4 Kms. To 8 Kms. From the area of Municipal Corporatio

n

In Municipal Corporation

Area

Upto 4 Kms. From Municipal Corporatio

n Area

From 4 Kms. To 8 Kms. From the area of Municipal Corporation

1 2 3 1 2 3 Entire Municipal Corporation area excluding the abovementio ned Municipal Corporation s  shown  in Class  I  and upto 8 Kms. from  the outer  limits of Municipal Corporation.

Rs. 7.50 per Square Metre

Rs.5.00  per Square

Metre

Rs.3.75  per Square

Metre

Rs.15  per Square

Metre

Rs.10  per Square

Metre

Rs.7.50  per Square

Metre

Classes For  residential  and  other  purpose (excluding  Commercial  and  Industrial Purpose)

For Commercial and Industrial Purpose

(1) (2) (3)

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Class-III In Municipal Council

Upto 5 Kms. From Municipal Council

In Municipal Council  Area

Upto 5 Kms. From

Municipal Council area

1 2 1 2 Entire area of Municipal Council  more than  50 thousand Population and  upto  5 Kms. from the outer limits of Municipal Council.

Rs. 5.00 per Square Metre

Rs.3.75  per Square Metre

Rs.10  per Square Metre

Rs.7.50  per Square

Metre

Classes For  residential  and  other  purpose (excluding  Commercial  and  Industrial Purpose)

For Commercial and Industrial Purpose

(1) (2) (3) Class-IV In Municipal

Council Upto 3 Kms. From

Municipal Council area In Municipal

Council  Area

Upto 3 Kms. From Municipal Council

area 1 2 1 2

Entire area of Municipal Council  of  20 to  50 thousand population and  upto  3 Kms. from the outer limits of Municipal Council.

Rs.3.00  per Square

Metre

Rs.1.50  per Square  

Metre

Rs.6.00  per Square

Metre

Rs.3.00   per Square  

Metre

Classes For  residential  and  other  purpose (excluding  Commercial  and  Industrial Purpose)

For Commercial and Industrial Purpose

(1) (2) (3) Class-V In the area of

Nagar Panchayat

Upto 3 Kms. From Nagar Panchayat area

In the area of Nagar Panchayat

Upto 3 Kms. From Nagar Panchayat

area 1 2 1 2

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Entire area of Nagar Panchayat and  upto  3 Kms. from the outer limits of Nagar Panchayats

Rs.1.50  per Square

Metre

Rs.1.00  per Square  

Metre

Rs.3.00  per Square

Metre

Rs.1.50  per Square  

Metre

Class-VI Within limits of village

area

Outside the limits of village area

Within village area

Out of village area

1 2 1 2 Villages whose population  is more  than  2 thousand

Rs.0.75  per Square

Metre

Nil Rs.1.50   per Square

Metre

Nil

3. The appellants submitted that reading of section 59 with

rules 1 to 12 and sections 77, 78, 79, 81, 82 and 98 of the

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

section 59 of the Code as under:

“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—

(a) for the purpose of agriculture or such farm house, which is situated on holding of one acre or more;

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(b) as sites for dwelling houses;

(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 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 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 officer of the Forest Department duly authorised by the State Government in this behalf;

Explanation:  For  the  purpose  of  clause  (a)  “Farm House” means such building or construction which is any improvement as defined in clause (j) of sub- section  (1)  of  Section  2,  the  plinth area  of  which shall not exceed one hundred square meter and the built  up  area  shall  not  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  upon  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.

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

(3) Where the land held free from the payment of land  revenue  on  condition  of  being  used  for  any purpose  is  diverted  to  any  other  purpose  it  shall become liable to the payment of land revenue and assessed in accordance with the purpose to which it has been diverted.

(4) The  assessment  made  under  sub-section  (2) and (3) shall be in accordance with the rules made by State 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 any other purpose, and land revenue is assessed  thereon  under  the  provisions  of  this section,  the Sub-Divisional  Officer shall  also have power  to  impose  a  premium  on  the  diversion  in accordance with rules made under this Code:

Provided that no premium shall be imposed for the 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 coming into  force  of  the  Madhya  Pradesh  Land  Revenue Code, 1954 (II of 1955), was held in malik makbuza right,  to  exemption from 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 (5).”  

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4. It would be appropriate to recapitulate rules pertaining

to imposition of premium.

“RULES REGARDING ALTERATION OF ASSESSMENT AND IMPOSITION OF PREMIUM

[Notifications No.175-6477-VII-N (Rules); dated the 6th January 1960 and as amended by No.1400-VII- 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-VII- S-8-89 dated 24.1.2000]

1. In these rules “Code” means the Madhya Pradesh Land Revenue Code, 1959 (No.20 of 1959).

A. ALTERATION OF ASSESSMENT (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 basis is  rediverted  to  an  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  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.

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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.  

(a)  Non-Urban areas

5. If any land assessed at agricultural rates is  diverted  to  a  non-agricultural  purpose,  the assessment thereon shall be revised in accordance with any of the methods specified below according to the circumstances of the case, Viz.:--

(a) If  the  area in which the land is  situate has an assessment 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.

(b) If there be no assessment rate in force as aforesaid,  then  the  Sub-Divisional  Officer  shall calculate the estimated 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 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.

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

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below 10 sq.  metres shall  be taken as 10 square metres.   The  assessment  shall  be  correct  to  the nearest naye Paise.

7. The assessment fixed under rule 5 shall remain in force till the next succeeding settlement of the village.

(b) Urban Areas

8. If any land in an urban area assessed at agricultural 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 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 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.

10. On such standard rate being calculated, the  Sub-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,  if  the 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 one-half of the estimated annual rental value, if the land is held for purposes mentioned in clause (d) of the said Sub-section.

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11. In fixing the actual assessment, the area of a plot 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.

12. The assessment fixed under rule 10 shall remain in force till the next succeeding settlement of the village.

x  x  x  x  ”

5. Sections 77, 78, 79, 81, 82 and 98 are also set out.

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  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  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 alter the minimum or maximum limits, aforesaid, a proposal to that effect shall be laid on

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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.

Section  79.   Fixation  of  fair  assessment.-  The Settlement Officer shall fix the assessment on each holding  in  accordance  with  the  assessment  rates approved under section 77 and the provisions of the section 81 and such assessment  shall  be the fair assessment of such holding.

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 privileged terms.

(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 land, to the values of the land for the purpose for which it is held.

(4) The  fair  assessment  on  land  used  for non-agricultural  purposes  shall  not  exceed  thirty- three per centum of the estimated rental value of the land.

(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.

(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

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of agriculture shall  exceed fifty per centum of the existing assessment.

Section  82.  Announcement  of  settlement.-  (1) When the assessment of any land has been fixed in accordance 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.

(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. 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  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 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 such transactions is available:

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 corresponding purpose during the same

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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) of section 59 shall be equal to one-third  of  the  average  annual  letting  value determined  or  the  block  in  respect  of  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 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 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 also submitted that the imposition of land revenue is

guided by number of factors, principles, restraints which are

not to be found while imposing premium under section 59(5)

or the impugned rule 14.  There are no guidelines or nexus

either with section 59 or the Code itself.

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7. Mr. Sanghi further submitted that the impugned Rule 14

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 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,

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 by way of additional revenue.   

9. According  to  Mr.  Sanghi,  the  premium has  to  be  less

than  the  land  revenue  imposed  on  the  diverted  land.   It

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cannot exceed the land revenue itself.  According to him, in

the present case, the premium sought to be imposed is about

100 times 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

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 demand of

Rs.4,05,000/-  was  made  on  account  of  premium  and  the

modified  land  revenue  of  Rs.52,756.   In  the  case  of

Indraprastha 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

that the appellant herein made the following two submissions

before the High Court:

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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 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  was  arbitrary,  and  the

categories  of  land  therein  did  not  take  into

account  any  intelligible  differentia  while

prescribing  different  slabs  of  flat  rates  for

imposing premium upon diversion of the use

of land.”

12. Other grounds which were though challenged in the 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

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illegal and arbitrary since it does not take into account various

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 also be imposed only within the

limits of such a cap.

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 other matters relating thereto in force in different

regions of the 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:

“258. General rule making power.-  (1)  The State Government  may  make  rules  generally  for  the

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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—

(i) …. ….

(ii) …. …..

(iii) regulation of assessment of land revenue on  diversion  of  land  to  other  purposes  and imposition of premium under section 59.

………… …………. ”

15. Learned  counsel  for  the  State  also  submitted  that  the

Revenue  Code  is  comprehensive  Code  encompassing  all

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  Government.   Learned  counsel  for  the  State  also

contended that section 58(2) states that such revenue is “land

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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 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.

16. Section  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  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

addition  to  the  levy  of  the  land  revenue,  section  59(5)

prescribes  a  one  time  levy  of  premium  on  such

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conversion/diversion  in  accordance  with  the  Rules  made

under the Revenue Code.

18. Learned counsel for the State further submitted that in

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-VII-N (Rules);  dated  the 6th January 1960 and as

amended  by  Notification  No.1400-VII-N-1,  dated  21st May

1971, published in M.P. Raj. Pt. 4G, dated 11.6.1971, p. 270

and by Notification No.F.11-7-VII-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.   

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/diversion of land

for another use, but also charge premium upon the diversion

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of  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  counsel  for  the

appellants  with  regard  to  arbitrary  imposition  of  rates  of

revenue, the learned counsel for the State submitted that the

imposition 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 arbitrary fashion.

21. Learned  counsel  for  the  State  further  submitted  that

bare perusal of the scheme of Revenue Code clearly empowers

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

as  prescribed  under  the  Code.   According  to  the  learned

counsel for the State, reliance of the appellants on sections 75

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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 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

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 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  recurrent  nature  which  is  required  to

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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  existence  of  rule  13  which

prescribes  that  when  any  land  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 not be refunded,

no further premium shall be charged for re-diversion.  Thus,

upon amalgamation of agricultural lands in urban areas, the

value of such lands inherently undergo a betterment in value

and  thus  the  premium  is  validly  charged  a  condition  for

granting permission to better  the usage of land.  Thus,  the

charge  i.e.  the  premium  which  has  a  direct  nexus  to  the

opportunity of betterment of a parcel of land shall be valid and

legal.

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23. Learned counsel for the State further submitted that the

classes prescribed in Schedule under rule 14 are based on an

intelligible differentia taking into account the location of land.

Since the location of land is determinative of the value of the

potential  use  of  the  land,  the  criteria  of  classifying  the

categories  according  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  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 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  cities  is  again

determined as per the values of land in these cities, the extent

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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 accordingly

prescribed.  As such, the schedule is based on a reasonable

differentia  after taking into account relevant factors for this

purpose,  and is  thus non-arbitrary  and non-discriminatory.

As  such,  neither  the  rule  14  nor  the  Schedule  prescribed

therein is ultra vires Article 14 of the Constitution of India.

24. Learned  counsel  for  the  State  also  submitted  that  the

requirement  of  classifying  various  cities,  towns and villages

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 exceeded its jurisdiction in legislating the

impugned rule 14 and the scheduled thereto.  Rule 14 and

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schedule  thereto  are  not  arbitrary  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 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 therein neither suffers from absence of

intelligible differentia nor does it invite the wrath of equality

clause  as  engrafted  under  Article  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

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.    

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26. We  have  carefully  perused  the  pleadings,  impugned

judgment  and  the  submissions  made  on  behalf  of  the

appellants and respondent State of Madhya Pradesh.   

27. Careful analysis of the facts and reasons of the Revenue

Code lead to the following conclusions:-

I) 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.   

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  59

(5).  The scheme of the Act clearly reveals that

the premium is charged only when land use is

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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 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.   

III) The classification of various cities in the State

is  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,

villages are also classified differently and rate

of  levying  premium  for  conversion  is

accordingly prescribed.  The Schedule is based

on reasonable  differentia  taking into account

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relevant factors for the purpose and it cannot

be called arbitrary or 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 are directed to bear their own costs.

..….….……………………..J.   (Dalveer Bhandari)

……….……………………..J.   (Lokeshwar Singh Panta)

New Delhi; August 26, 2008.

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