AGRICULTURAL LAND LAWS: MALCHA, 1961

This article gives a bird’s-eye view of the MALCHA (also ‘the Act’). This Act is relevant to companies since it lays down the ceiling/maximum limit on the holding of agricultural land in the State of Maharashtra. The Act also provides that the excess land can be acquired by the Government and distributed. The idea behind the Act is to ensure equality of agrarian land since agricultural is the main form of livelihood for the rural India. The Act is a part of the Government’s efforts to create social justice.

The Act applies to the whole of the State of Maharashtra.

Family Unit: U/s.4 of the Act the ceiling on the holding of agricultural lands is per ‘Family Unit’. This is a very unique and important concept introduced by the Act. It is very essential to have a clear picture as to who is and who is not included in one’s ceiling computation since that could make all the difference between holding and acquisition of the land. A family unit is defined to mean the following:

A person

His spouse or more than one spouse if that be the case — thus, if a person dies leaving two or more widows, then they would constitute one consolidated family unit for considering the ceiling — State of Maharashtra v. Smt. Banabai and Anr., (1986) 4 SCC 281.

His minor sons

His minor unmarried daughters

If his spouse is dead, then the minor sons and minor unmarried daughters from that spouse.

The definition of the term is exhaustive and hence, only the classes of relatives defined would be covered. Thus, the married daughter of a person, whether minor or major, would constitute a separate family unit and hence, any land held by such a daughter would not be included in computing the ceiling for a person. This is the reason why the simplest form of planning involves transferring land to one’s married daughter so as to exclude it from the ceiling limits. Since a daughter is a relative u/s.56(2)(vii) of the Income-tax Act, the transaction is out of the purview of that Section. Similarly, a daughter is a relative under the Bombay Stamp Act, 1958 and hence, a gift to one’s married daughter attracts a concessional stamp duty @ 2% instead of the standard rate of 5%. However, as in the case of any planning, commercial considerations must take precedence over tax concessions.

Further, it is important to note that a person’s parents are not included in his ceiling and hence, if either or both of one’s parents are alive and holding land, then the same would not be included in the person’s ceiling computation.

Similarly, land held by one’s major son and/or his wife is not included in a person’s ceiling computation.

Even in case of a joint family where a father and his sons and possibly are living and working together, the ceiling would be separate for each major male and his immediate family. For instance, in a joint family where there are two brothers and each of them has two major sons, there would be six separate ceilings and not one consolidated ceiling for the family even though they are joint in residence and business.

A very interesting scenario arises in the case of testate/intestate succession. For instance, there is a person who is holding land up to the maximum limit permissible. His major son is also independently holding another piece of land up to the maximum limit permissible. The father dies and his sole legal heir is his son. On his death, the land becomes that of the son. Can the son contend that since he has received the land by inheritance, the ceiling should not apply to the second land received by him? The Supreme Court had an occasion to consider this issue in the case of State of Maharashtra v. Annapurnabai and Others, AIR 1985 SC 1403. The facts were that the declarant died pending determination of excess ceiling area. A contention was raised that on his death the proceedings stand abated and that therefore, the authorities have no jurisdiction to proceed further with the determination of the excess land under the Act. The Supreme Court held that until the proceedings are completed, there is no abatement and the excess ceiling land has to be computed pursuant to the declaration under the provisions of the Land Ceiling Act and that therefore, the Government continues to have jurisdiction to determine the excess land. It held that the heirs and legal representatives of a deceased holder cannot be treated as independent tenure holders for fixing ceiling. Therefore, each heir would not be treated as independent tenure holders for fixing the ceiling.

Similarly, the Supreme Court in Bhikoba Shankar Dhumal v. Mohan Lal Punchand Tathed, 1982 SCR (3) 218 held that the persons on whom his ‘holding’ devolves on his death would be liable to surrender the surplus land as on the appointed day, because the liability attached to the holding of the deceased would not come to an end on his death. The heirs of the deceased cannot be permitted to contend to the contrary and allowed to get more land by way of inheritance than what they would have got if the death of the person had taken place after the publication of the Notification u/s. 21.

Where the family unit consists of more than five members, the unit would be entitled to hold land in excess of the ceiling area to the extent of 1/5th of the ceiling area for each member in excess of five members. However, the total holding of the family cannot exceed twice the ceiling area.

It may be noted that under the Bombay Tenancy and Agricultural Lands Act, 1948, land is said to be cultivated personally if a land is cultivated by the labour of one’s family members, i.e., spouse, children or siblings in case of a joint family. A joint family under that Act is defined to mean an HUF and in case of other communities, a group or unit the members of which are by custom joint in estate or residence. In one case, even a married sister living with her husband has been regarded as a part of the family — Case No. 8953 O/154 of 1954. Thus, the definition of family is different under different laws.

Ceiling area: No person or family unit can hold land in excess of ceiling area. Any excess is deemed to be surplus land. The Ceiling Area is fixed u/s.5 r.w. First Schedule to the Act. The ceiling varies depending upon the class of the land in question. The five classes of land and their respective ceilings are as given in Table-1:

No person or family unit can hold land in excess of ceiling area. Any excess is deemed to be sur-plus land. The Ceiling Area is fixed u/s.5 r.w. First Schedule to the Act. The ceiling varies depending upon the class of the land in question. The five classes of land and their respective ceilings are as given in Table-1:

Various classes of land and respective ceilings

The above ceilings are mutually exclusive. Hence, a person can, at the same point of time, hold 54 acres of dry crop land as well as 18 acres of a land with an assured water supply.

The principle is better the irrigation and crop yielding capabilities of a land, the lower the ceiling and vice versa. Land which is totally unfit for cultivation is not to be included while computing the above ceilings. Thus, it becomes very important to ascer-tain the irrigation source of a particular land. For instance, in one case which I have come across the land holder was granted permission by a Collector to operate an electric water pump for irrigation at his own responsibility. The question arose that since the Collector’s permission was required for the pump, could it be said that the land was a Class 3 land and hence, the land was subject to a ceiling of 36 acres or was it a dry crop land and hence, subject to a ceiling of 54 acres. It is essential to note that it is not every case of a sanction which attracts a 36 acre ceiling. Only if the water sanctions are temporary or are linked to the quantity of water availability, the land becomes a Class 3 land. Hence, in this case, the ceiling was 54 acres and not 36 acres.

Restriction on transfer:

Any person holding surplus land cannot transfer the same. Transfer for this purpose means:

    Sale

    Mortgage with possession

    Exchange

    Lease

    Assignment for maintenance

    Surrender of tenancy

Similarly, no person or family unit can acquire land by transfer in excess of the ceiling area. If any person transfers any surplus land, then in computing the ceiling limit of that person, the land transferred would also be considered and the excess would be deemed to be excess land even though he may be divested of its possession. This is true even if after the transfer the transferor’s land holding is lower than the permissible ceiling.

In Kewal Keshari Patil v. State of Mah., 1966 Mah LJ 94 it was held that a Will is not a transfer. When will was executed, it is not a transaction which is contravening the Act.

Surplus land:

If any person is in possession of surplus land in excess of the ceiling area, then he must, within a period of one month from the date of possessing the excess land, furnish a return to the Collector. The Collector would then determine the surplus land by such person or family unit. The Collector can do so even suo moto without a person filing a return. The Collector can acquire the surplus land by determining the compensation in the manner laid down in the Act. While determining the compensation, the Collector would give a notice to interested persons to submit their claims for compensation.

Significance of agricultural land laws:

Over the past few months, we have analysed three laws dealing with agricultural lands. Laws dealing with agricultural land are very important since they provide for acquisition of surplus land by the State Government in case of violation of the laws. Further, in case of acquisition of agricultural land, the buyer of the land should ensure that he is getting a valid title.

An auditor basically conducts audit under the provisions of a statute. His report is also according to the requirements of the relevant statute, e.g., report under Section 227 of the Companies Act, 1956. An auditor is not an investigator and hence, does not make roving enquiries. Hence, in case the auditor comes across documents dealing with agricultural land, he may consider whether or not the auditee should obtain an opinion on the legality of its title.

By broadening his peripheral knowledge, the auditor can make intelligent enquiries and thereby add value to his services. He can caution the auditee of likely unpleasant consequences which might arise. It needs to be repeated and noted that an audit is basically under the relevant law applicable to an entity and an auditor is not an expert on all laws relevant to business operations of an entity. All that is required of him is exercise of ‘due care’ and ‘diligence’.