Introduction

Traditionally, the Indian economy has depended on agriculture as its largest source of income. After India gained independence, government policy was influenced by the colonial experience, which Indian leaders saw as largely exploitative. Therefore, post-independence domestic policy tended towards protectionism. As a result of these circumstances, the Maharashtra government introduced the Bombay Tenancy and Agricultural Lands Act 1948 (now known as the Maharashtra Tenancy and Agricultural Lands Act 1948). The act was introduced with a view to assume the management of landowners' estates in order to improve the economic and social conditions of farmers and ensure the full and efficient use of agricultural land.

Maharashtra Tenancy and Agricultural Lands Act

It is important to understand the socio-economic conditions which led to implementation of the act. During the British rule, the government had introduced various land revenue systems (eg, Zamindari, Raiyatwari and Mahalwari) in order to maximise the collection of land revenue. In doing so, certain intermediaries (so-called 'collectors') were given powers to collect land revenue from farmers.

However, due to factors beyond farmers' control (eg, floods, irregular rainfall and droughts), they were unable to pay the required land revenue. With no reprieve, farmers were forced to mortgage their lands at exorbitant rates in order to pay land revenues and subsequently failed to redeem the mortgaged lands. The mortgagee landowners in turn let farmers continue to work these lands in return for produce or money. Over time, the exploitative revenue policies led to a few accumulating significant wealth and land, while farmers were reduced to mere tenants.

In order to protect tenant farmers, Section 32 of the act, among other things, provided that on or after Tillers Day (ie, April 1 1957), the tenants cultivating the land would become the owners of the land on payment of a nominal purchase price, to be made in reasonable instalments. The provision successfully:

  • granted rights to the otherwise impoverished farmers;
  • incentivised farmers to use the land fully and efficiently; and
  • reduced neglect of the land due to disputes with landowners or lack of interest.

Section 43 of the act required the collector's prior permission in order to transfer land which had been purchased by a tenant under Section 32. The collectors would approve applications, subject to conditions prescribed by the state government.

Restrictions were imposed on the transfer of land in order to:

  • prevent tenants from taking undue advantage and selling the land for profit, as landlords were forced to sell their lands to tenants at concessional rates under the act, with the intention that tenants would use them to earn a living; and
  • safeguard tenants' interests and prevent any third party from taking undue advantage of them in order to purchase the lands at a discounted rate.

Therefore, Section 43, read with the Bombay Tenancy and Agricultural Lands Rules 1956, prescribed the circumstances under which collectors would authorise a sale, typically subject to continued agricultural activities.

Amendments

Due to increasing industrialisation and modernisation, safeguards such as requiring collectors' prior approval in order to transfer tenant lands are now viewed as impediments, as this is a time-consuming and bureaucratic process. In light of this, the Maharashtra government amended Section 43 of the act, with effect from February 7 2014. The amended provision provides that if 10 years have elapsed since the land was transferred to the tenant, the collector's permission is no longer required to transfer the land, as long as the following conditions are met:

  • a fee equivalent to 40 times the land's revenue is paid to the government;
  • the purchaser is an agriculturist;
  • the purchaser does not hold land in excess of the cap set out in the Maharashtra Agricultural Lands (Ceilings on Holdings) Act 1961; and
  • the Bombay Prevention of Fragmentation and Consolidation of Holdings Act 1947 is not violated.

Similar amendments were made to Section 50B of the Hyderabad Tenancy and Agricultural Lands Act 1950 and Section 57 of the Bombay Tenancy and Agricultural Lands (Vidarbha Region) Act 1958.

While there are several interpretations on how the amended section will operate, a plain reading clarifies that it will apply prospectively only (ie, to lands sold after February 7 2014). This section cannot be used to overturn any decisions of a collector which took place before February 7 2014, even if the relevant conditions were met before that date. In short, the section cannot be applied retrospectively.

Comment

By this amendment, the government has eliminated the need to obtain collectors' permission before selling agricultural lands, as long as the aforementioned conditions have been met. Thereafter, the purchaser may convert the lands for non-agricultural purposes under Section 3 of the Maharashtra Land Revenue Code (Second Amendment) Act 2014 and use them for any commercial purpose.

This is a significant step forward, as it recognises the need to ease bureaucratic processes, promotes investment and development in India and helps to achieve the 'Made in India' initiative.

For further information on this topic please contact Pranav Phadke at Dhaval Vussonji & Associates by telephone (+91 22 6662 3535) or email (pranav.phadke@dvassociates.co.in).

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