Supreme Court Clarifies “Commercial Site” Under Kerala Land Reforms Act: K.H. Nazar vs. Mathew K. Jacob (2019)

Date of the Judgment: September 30, 2019
Citation: 2019 INSC 1177
Judges: L. Nageswara Rao, J., Hemant Gupta, J.
Can land used for quarrying be considered a ‘commercial site’ and thus be exempt from the Kerala Land Reforms Act, 1963? The Supreme Court of India addressed this question in a recent case, clarifying the scope of the term ‘commercial site’ under the Act. The Court examined whether the activity of quarrying, which involves extracting and breaking rocks, qualifies as a commercial activity that would exempt the land from the land ceiling provisions of the Act. This judgment is significant for landowners and those involved in land use in Kerala, as it clarifies what constitutes a ‘commercial site’ and what does not, under the Kerala Land Reforms Act. The majority opinion was delivered by Justice L. Nageswara Rao, with Justice Hemant Gupta concurring.

Case Background

The case revolves around a dispute regarding land used for quarrying in Kerala. The appellant, K.H. Nazar, sought environmental clearance for quarrying on his land. This request was initially recommended by the District Expert Appraisal Committee (DEAC) on April 25, 2017. Respondents No. 1 and 2, Mathew K. Jacob & Ors., filed a writ petition challenging this recommendation, arguing that the land was a plantation site and should not be used for quarrying. The appellant’s land was previously exempt from the Kerala Land Reforms Act, 1963 (the Act) as it was considered a plantation. The core issue arose when the respondents objected to the change of land use from plantation to quarrying.

Timeline

Course of Proceedings

The matter initially came before a single judge of the High Court of Kerala, who, after examining previous judgments, doubted the correctness of the judgment in State of Kerala v. Mohammedali Haji, which had held that quarrying is a commercial operation and therefore falls within the ambit of ‘commercial site’. The single judge then referred the matter to a larger bench. A Full Bench of the Kerala High Court, comprising three judges, heard the writ petition filed by Respondents No. 1 and 2. The majority opinion of the Full Bench ruled against the appellant, holding that land used for quarrying does not fall under the definition of ‘commercial site’ and is therefore not exempt from the Kerala Land Reforms Act. The appellant, aggrieved by this judgment, appealed to the Supreme Court of India.

Legal Framework

The core of this case involves the interpretation of the Kerala Land Reforms Act, 1963. Specifically, the following sections are relevant:

• Section 83 of the Kerala Land Reforms Act, 1963: This section states that no person can own, hold, or possess land exceeding the ceiling area, effective from a date notified by the Government of Kerala.
• Section 82(6) of the Kerala Land Reforms Act, 1963: This section specifies that lands exempted under Section 81 shall be excluded from the computation of the ceiling area.
• Section 81(1)(q) of the Kerala Land Reforms Act, 1963: This section provides exemptions from the provisions of the Act, including an exemption for ‘commercial sites’.
• Section 2(5) of the Kerala Land Reforms Act, 1963: This section defines “commercial site” as:

  “any land (not being a kudiyiruppu or a kudikidappu or karaima) which is used principally for the purposes of any trade, commerce, industry, manufacture or business;”

The key issue is whether a quarry, used for extracting and breaking rocks, falls within the definition of a ‘commercial site’ and is therefore exempt from the land ceiling provisions of the Act.

Arguments

Appellant’s Arguments:

• The appellant argued that the definition of ‘commercial site’ in Section 2(5) of the Kerala Land Reforms Act, 1963 is broad and includes any land used for trade, commerce, industry, manufacture, or business.
• The appellant contended that quarrying involves breaking rocks, which is a manufacturing activity, and that the sale of stones is a commercial activity for trade and business.
• The appellant stated that there should be no distinction between activities done above and below the surface of the land when determining if the land is a commercial site.
• The appellant criticized the majority opinion of the Full Bench for incorrectly applying the mischief rule of statutory interpretation.
• The appellant supported the dissenting Judge’s opinion, arguing that a quarry should be considered a commercial site.
• The appellant argued that environmental issues are not relevant to the interpretation of Sections 2(5) and 81(1)(q) of the Kerala Land Reforms Act, 1963.

Respondents’ Arguments:

• The respondents argued that the Kerala Land Reforms Act, 1963 is a beneficial legislation aimed at land redistribution and should be interpreted to promote its objectives.
• The respondents submitted that the term ‘commercial site’ is a term of art and should be interpreted based on the context in which it is used.
• The respondents contended that exemption provisions in beneficial legislation should be narrowly construed.
• The respondents argued that literal interpretation should be avoided in favor of purposive construction.

State of Kerala’s Arguments:

• The State of Kerala argued that the expression ‘commercial site’ is a term of art and has to be interpreted on the basis of the context in which it is used.

Submissions Table:

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. What is the scope and meaning of the expression ‘commercial site’ as used in Section 2(5) and Section 81(1)(q) of the Kerala Land Reforms Act, 1963?

The sub-issue that the court dealt with under the main issue was whether quarrying activity falls within the ambit of ‘commercial site’.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court noted that the judgment in K. Krishnankutty v. State of Kerala and Others, which held that blasting of rocks does not render the area a ‘commercial site’, was doubted by a Single Judge of the High Court.
• The Court noted that the judgment in State of Kerala v. Mohammedali Haji, which held that quarrying is a commercial operation, was doubted by a Single Judge of the High Court and was overruled by the Full Bench of the High Court.
• The Court relied on State of Kerala v. K. A. Gangadharan [1977] 1 SCC 208* to emphasize the legislative intent of the Act as imposing a ceiling on land holdings and distributing excess land.
• The Court relied on Regional Executive, Kerala Fishermen’ Welfare Fund Board v. Fancy Food [1995] 4 SCC 346*, Bombay Anand Bhavan Restaurant v. ESI Corporation [2009] 9 SCC 61* and Union of India v. Prabhakaran Vijay Kumar [2008] 9 SCC 527* to emphasize that beneficial legislation should be construed with a purpose-oriented approach and that literal construction should be avoided.
• The Court relied on Bharat Singh v. Management of New Delhi T uberculosis Centre [1986] 2 SCC 614* to emphasize that the Court has a duty to discern the intention of the legislature.
• The Court relied on Workmen v. American Express International Banking Corpn. [1985] 4 SCC 71* to emphasize that words in social welfare legislation are not to be shrunk to Liliputian dimensions.
• The Court relied on Indian Performing Rights Society v. Sanjay Dalia [2015] 10 SCC 161* to emphasize that the problem that the statute was designed to remedy should be identified.
• The Court relied on Shivram A. Shiroor v. Radhabai Shantram Kowshik [1984] 1 SCC 588* to emphasize that exclusionary provisions in a beneficial legislation should be construed strictly.
• The Court relied on Minister Administering the Crown Lands Act v. NSW Aboriginal Land Council [2008] HCA 48* to emphasize that exceptions in beneficial legislations should be construed narrowly.
• The Court relied on Rajasthan SEB v. Associated Stone Industries [2006] 6 SCC 141* to hold that breaking rocks is not a manufacturing activity.

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the following factors:

• Legislative Intent: The Court emphasized that the primary objective of the Kerala Land Reforms Act, 1963 is to impose a ceiling on land holdings and distribute excess land to the landless. This intent guided the Court’s interpretation of the term ‘commercial site’.
• Beneficial Legislation: The Court recognized the Act as a beneficial legislation and stressed that its provisions should be interpreted to promote its objectives. This meant avoiding literal interpretations and adopting a purposive construction.
• Narrow Interpretation of Exemptions: The Court held that exemption clauses in beneficial or social welfare legislations should be given strict construction. This principle was crucial in determining that ‘commercial site’ should not be interpreted broadly to include quarrying.
• Distinction between ‘Lands’ and ‘Sites’: The Court drew a distinction between the terms ‘lands’ and ‘sites’ as used in Section 81 of the Act. It noted that ‘sites’ generally refer to land occupied by structures, whereas ‘lands’ can refer to vacant land. This distinction was key in determining that a quarry, which is essentially vacant land, does not qualify as a ‘commercial site’.
• Manufacturing Activity: The Court rejected the argument that quarrying is a manufacturing activity, relying on the precedent that breaking rocks into smaller pieces does not create a new commercial product.

Sentiment Analysis Table:

Fact:Law Ratio Table:

Logical Reasoning:

The Court rejected the argument that quarrying is a manufacturing activity, stating, “Breaking of rock into small pieces of stone, according to us, is not a manufacturing activity.” The Court also stated that, “A commercial site is a land on which there is a structure being utilized for an industrial or commercial purpose.” The Court further clarified, “Extension of the words ‘commercial site’ to quarries would result in defeating the purpose of the Act.”

The Court did not consider any alternative interpretations that would have led to a different decision.

The majority opinion was delivered by Justice L. Nageswara Rao, with Justice Hemant Gupta concurring. There was no minority opinion in this case.

Key Takeaways

• Land used for quarrying in Kerala is not considered a ‘commercial site’ under the Kerala Land Reforms Act, 1963.
• The term ‘commercial site’ refers to land with structures used for commercial purposes, not vacant land used for quarrying.
• The Kerala Land Reforms Act, 1963, being a beneficial legislation, should be interpreted to promote its objectives of land redistribution.
• Exemption clauses in such legislation should be construed strictly.
• This judgment clarifies the scope of ‘commercial site’ and provides guidance for landowners and those involved in land use in Kerala.

Directions

The Supreme Court dismissed the appeals, upholding the majority opinion of the Full Bench of the Kerala High Court.

Development of Law

The ratio decidendi of this case is that the term ‘commercial site’ under Section 2(5) and Section 81(1)(q) of the Kerala Land Reforms Act, 1963 does not include land used for quarrying. This decision clarifies the interpretation of ‘commercial site’ and restricts the exemption to land with structures used for commercial purposes. The Supreme Court upheld the Full Bench decision of the Kerala High Court and overruled the Division Bench decision in State of Kerala v. Mohammedali Haji. This decision reinforces the legislative intent of the Act to redistribute land and prevents the evasion of land ceiling provisions through broad interpretations of exemptions.

Conclusion

In the case of K.H. Nazar vs. Mathew K. Jacob, the Supreme Court of India clarified that land used for quarrying does not fall under the definition of ‘commercial site’ as per the Kerala Land Reforms Act, 1963. The Court emphasized that the Act is a beneficial legislation aimed at land redistribution and that exemptions should be narrowly construed. This ruling has significant implications for land use in Kerala, ensuring that the objectives of the Act are upheld.