Understanding the term ‘Benefits to arise out of land’

By Pallavi Verma, RMLNLU

Editor’s Note: This article explains how the case laws have interpreted the term ‘benefits to arise out of land’ as used by the Legislature in Section 2(6) of the Registration Act and Section 3(26) of the General Clauses Act.

INTRODUCTION

The phrase ‘benefits to arise out of land’ means profits derived from land without having any substantial control over the land. Benefit arising out of land is also known as ‘profit a prendre’.

Section 2(6) of Registration Act says that: “immovable property includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.”

Section 3(26) of General Clauses Act says that: “Immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.”

The courts have recognised a very limited number of ‘profits a prendre’. There is a numerus clausus of property entitlements and ‘profits’ are one of the classes of this closed list of proprietary entitlements. Courts are reluctant to include more rights in this list because property rights are very durable and creation of a number of entitlements as profits would make it difficult for the subsequent transferees to keep a check on the prior property entitlements.

In my project report, I will discuss five Supreme Court cases that talk about this phrase and help us better understand the meaning of ‘benefits arising out of land’ and as to what all rights are covered under it or how to construe as to whether a particular right is a benefit arising out of land through the help of case laws on this point. The hypothesis of my project is that in essence each and every right is a benefit arising out of land since there cannot be any activity in this world that can be done in isolation of land. Therefore, it is quite unreasonable to make a class of entitlement called ‘benefits arising out of land’ because in this way each and every activity would have to be recognised as a proprietary right. A principle/ doctrine that classifies a certain right as proprietary just because it is already recognised by court and does not recognise a similar right as proprietary is, according to me, arbitrary and unreasonable.

RELEVANT CASES

1. Anand Behera v. State of Orissa[i]

FACTS: The petitioner had obtained a license to catch and appropriate all fish in specific sections of the Chilka lake from its proprietor (Raja of Parikud). With the passing of the Orissa Estates Abolition Act, 1951 ownership of the estate vested in the State of Orissa. State of Orissa refused to recognize the license of petitioner. Petitioner contended that their fundamental rights under Art 19(1)(f) and Art 31(1) is being infringed and they also contended that ‘catching and appropriating fish’ is a transaction relating to sale of future goods (which is the fish) and hence the Act which is applicable only to immovable property would not be applicable on him.

LEGAL PRINCIPLE UPHELD: The court held that the lake is an immovable property and therefore the petitioner’s right to enter in that estate (which he did not own) and carry away fish from the lake is a ‘profit a prendre’ and in India it is regarded as a benefit that arises out of the land and as such is immovable property.

REASONING BEHIND JUDGEMENT: The SC while holding that right to catch and carry away fish from specific sections of the lake over a specified future period is a license to enter on the land coupled with a grant to catch and carry away the fish and this grant is a profit-a-prendre, said that:

“The petitioners claim that the transactions were sales of future goods, namely of the fish, in these sections of the lake, and that as fish is moveable property Orissa Act of 1952 is not attracted as that Act is confined to immoveable property. If this is the basis of their right, then their petition under Article 32 is misconceived because until any fish is actually caught the petitioners would not acquire any property in it.”

“If the petitioners’ rights are no more than the right to obtain future goods under the Sale of Goods Act, then that is a purely personal right arising out of a contract to which the State of Orissa is not a party and in, any event a refusal to perform the contract that gives rise to that right may amount to a breach of contract but cannot be regarded as a breach of any fundamental right.”

Thus, as the sale of grant to petitioner was oral. However, a right related tangible immovable property (in this case, the fish), if it is more than Rs 100 needs to be registered (Sec 54 TPA). As there was no registration in this case therefore no title or interest was passed to the petitioner.

2. Shantabai v. State of Bombay[ii]

FACTS: Shantabai’s husband had granted her the right to take and appropriate all kinds of wood from certain forests in his Zamindary through an unregistered document. With the passing of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, all proprietary rights in land vested in the State U/S 3 of this Act and the petitioner could no longer cut any wood. She obtained an order U/S 6(2) of the Act from the Deputy Commissioner and started cutting trees. The Divisional Forest Officer took action against her and passed an order directing that her name might be cancelled and the cut materials forfeited. She moved the State Government against this order but to no effect. Thereafter she applied to this Court under Art. 32 of the Constitution and contended that the order of Forest Officer infringed her fundamental rights under Arts. 19(i)(f) and 19(1)(g).

LEGAL PRINCIPLE UPHELD: This case basically relates as to what constitutes ‘standing timber’. However, the SC has in its judgement also talked about the phrase ‘benefit arising out of land’ and held that right to enter upon land and cut trees is a benefit arising out of land. The SC has based its decision on this point on the Anand Behera case.

REASONING BEHIND JUDGEMENT:

“In my opinion, the document only confers a right to enter on the lands in order to cut down certain kinds of trees and carry away the wood.”

“It is not a ‘transfer of a right to enjoy the immoveable property’ itself (s. 105 of the Transfer of Property Act), but a grant of a right to enter upon the land and take away a part of the produce of the soil from it. In a lease, one enjoys the property but has no right to take it away. In a profit a prendre one has a licence to enter on the land, not for the purpose of enjoying it, but for removing something from it, namely, a part of the produce of the soil.”

“Following the decision in Ananda Behera’s case, I would hold that a right to enter on land for the purpose of cutting and carrying away timber standing on it is a benefit that arises out of land. There is no difference there between the English and the Indian law.”

3. Bihar Eastern Gangetic Fishermen Cooperative Society Limited v. Sipahi Singh[iii]

FACTS: The fishery rights in the Gangapath Islampur Jalkar which was with the Fishermen Cooperative Society from 1974 to 1975 for Rs. 150000 was made in favour of the respondent Sipahi Singh for the period 1975 to 1976 as a result of the public auction at which he offered the highest bid of Rs. 165000. However, the respondent requested for a remission in the amount at which the settlement had been made in his favour, on the ground that he had suffered a heavy loss during the year 1975-76, due to the unlawful activities of the appellants and if this was not possible, then in the alternative give him a continuance of fishery rights for the years 1976-1977 and 1977-1978 so that he could recoup his losses. The Government agreed to extend the time for his fishery rights in consideration of a deposit of Rs 165000. However, the government changed its mind later and settled the fishery rights with the appellant. Sipahi Singh (the respondent) challenged this order by filing a writ petition under Art 226 of the Constitution.

LEGAL PRINCIPLE UPHELD: The SC affirmed Anand Behera v State of Orissa case.

REASONING BEHIND JUDGEMENT: The SC said that there is no binding and enforceable contract between the State of Bihar and Sipahi Singh because the requirements for a government contract to be valid as provided in Art 299 of the Constitution were not complied with.

“The right to catch and carry away the fish being a ‘profit a prendre’ i.e. a profit or benefit arising out of the land, it has to be regarded as immovable property within the meaning of the Transfer of Property Act, read in the light of s. 3(26) of the General Clauses Act. If a ‘profit a prendre’ is tangible immovable property, its sale has to be by means of a registered instrument in case its value exceeds Rs. 100/- because, of section 54 of the Transfer of Property Act. If it is intangible, its sale is required to be effected by, a registered instrument whatever its value. Therefore, in either of the two situations, the grant of the ‘profit a prendre’ has to be by means of a registered instrument. Accordingly, the transaction of sale of the right to catch and carry away the fish if not effected by means of a registered instrument, would pass no title or interest.”

4. State of Orissa v. Titagarh Paper Mills Company Limited[iv]

FACTS: Section 3B of Orissa Sales Tax Act, 1917 empowered the State Government to declare goods or class of goods liable to be taxed. The government issued a notification through which standing trees and bamboos agreed to be severed were liable to be taxed on the turnover of purchase.  Writ petitions were filed by a group of those people who had entered into bamboo contracts and timber contracts with the State. The respondent (group of petitioners who had entered into agreement with the State for the felling, cutting obtaining and removing bamboos from forest areas ‘for the purpose of converting the bamboo into paper pulp or for purposes connected with the manufacture of paper or in any connection incidental therewith’, i.e., bamboo contracts) contended before the High Court that the subject matter of the bamboo contract was not a sale or purchase of goods but was a lease of immovable property or was a creation of an interest in immovable property by way of grant of ‘profit a prendre’ and due to this the royalty payable under the bamboo contracts could not be made exigible to either sales tax or purchase tax.

LEGAL PRINCIPLE UPHELD: The SC after referring to the terms and conditions of the bamboo held that “felling, cutting, obtaining and removing bamboos from forest areas for the manufacture of paper” is a benefit to arise out of land and it would thus be an interest in immovable property.

REASONING BEHIND JUDGEMENT:

“The Bamboo Contract is not a lease nor is it a grant of an easement to the respondent company, as it was not a grant of any right for the beneficial equipment of any of the respondent company. In addition to the right of entry there are other important rights flowing from the contract. It is a grant of a profit a prendre which in Indian law is a benefit to arise out of land and thus creates an interest is immovable property. A profit a prendre is a benefit arising out of land and in view of section 3(26) of the General Clauses Act, it is ‘immovable property’ within the meaning of the Transfer of Property Act.”

“Bamboo contract is not a contract of sale of goods. It is a grant of exclusive right and licence to fell, cut, obtain and remove bamboos. The person giving the grant the Governor of the State, is referred to as “grantor”; the consideration payable is “royalty” which is not a term used in legal parlance for the price of goods sold. It is not an agreement to sell bamboos standing in the contract area with the accessory licence to enter upon such area for the purpose of felling and removing bamboos nor is it for a particular felling season only. It is an agreement for a period ranging from fourteen, thirteen and eleven years with the option to renew the contract for further terms of twelve years.

The payment of royalty has no relation to the actual quantity of bamboos cut and removed. The respondent company was bound to pay a minimum royalty and the royalty paid was always in excess of the royalty due on the bamboos cut in the contract areas.

The Bamboo contract conferred upon the respondent-company a benefit to arise out of land, namely, the right to cut and remove bamboos which would grow from the soil coupled with several ancillary rights and was thus a grant of a profit a prendre. Being a profit a prendre or a benefit to arise out of land any attempt on the part of the State Government to tax the amounts payable under the Bamboo Contract would not only be ultra vires the Orissa Act but also unconstitutional as being beyond the State’s taxing power under Entry 54 in List II in the Seventh Schedule to the Constitution of India.”

The SC looked into the substance of the contract by reading into the language of the contract and held that bamboo contracts are a grant of profits-a-prendre, i.e., benefits arising out of land.

5. Bibi Sayeeda v. State of Bihar[v]

FACTS: Certain municipal plots were transferred to Sayed Imam by his predecessor Zamindar. He constructed several shops in 4 plots of the land and let them out to diverse tenants on monthly rentals. The state wanted to acquire these shops under the Bihar Land Reforms Act. The question raised in this case was about the meaning of the word ‘Bazar’ within Section 4(a) of the Bihar Land Reforms Act 30 of 195 or short the ‘Act’. The appellants (legal representatives of Syed Imam) claimed in the writ petition that the shops are ‘homestead’[vi] within the meaning of Section 2 (j) of the Bihar Land Reforms Act and these shops are not bazars. They do not vest in the State and, therefore, they remain to be the property of the appellants. The High Court repelling the contention held that ‘hats’ or ‘bazars’ are vested in the State. A congregation of buyers and sellers is enough to constitute a bazaar and the right to hold a bazar is an interest in the land.

LEGAL PRINCIPLE UPHELD: The Supreme Court affirming the decision of the High Court held that right to hold a bazaar is a benefit arising out of immovable property.

REASONING BEHIND JUDGEMENT:

“…holding a hat or bazar or mela is only a mode of user by the owner of his land. Just as he can enjoy the land belonging to him in other ways, he can use it for the purpose of having a concourse of people – buyers and sellers and others for a hat, or bazar or mela subject, as in the case of other user, to the requirement of other use. The right to hold mela has always been considered in this country to be an interest in land, an interest which the owner of the land can transfer to another along with the land or without the land.”

FINDINGS

In order to determine whether a particular grant is a ‘benefit arising out of the land’ the Courts have in some cases looked at the substance of the agreement and the terms and conditions incorporated in the agreement by the parties (as was done in the case of State of Orissa v Titagurh Paper Mills Ltd.). Some of the other landmark judgements of the SC which discuss about ‘benefits’ rely on the Anand Behera case (eg: Shantabai v State of Bombay; Bihar Eastern Gangetic Fishermen Cooperative Society Ltd v Sipahi Singh).  So basically, there is no specific test laid down to classify a grant as a ‘benefit’ which makes it very vague. Courts have relied on precedents to recognise a right as ‘benefit’ and the classification of this type of a grant is not based on any sound legal test/principle.

CONCLUSION

The phrase ‘benefits arising out of land’ is a very vague terminology that has been incorporated in the Registration Act and the General Clauses Act after looking at the English cases. ‘Benefits’ have no where been defined in any statute nor does any judgement clearly give an exhaustive list of ‘benefits’. ‘Benefits arising out of land’ should be excluded from the class of property entitlements in order to ensure uniformity and less vagueness in the law of property.

Suppose that a person ‘A’ is given a right to extract latex from rubber trees from a parcel of land which belongs to ‘B’. This right can be a ‘profit’ because ‘A’ is entering in the land of ‘B’ and is extracting latex and taking it away for the purpose of selling it/producing rubber. So the right of ‘A’ to extract latex is a benefit arising out of land as ‘A’ has no substantial control over ‘B’s’ land. The relationship between A and B is predominantly through the land and extracting latex from the land is a right that basically accommodates a piece of land.

The numerous clausus principle recognises only a limited number of pre-existing grants as ‘profits’. The right to extract latex from a piece of land  is not a pre-recognised ‘benefit’ but I see no reason why it cannot be recognised as a ‘benefit arising out of land’ while the right to extract fishes from a lake is a ‘profit’. Now if I were to present a contradictory situation, I could argue from the other side that latex, being the produce of rubber tree can be considered as growing crop and as the S. 2(6) Registration Act specifically mentions that growing crop is not immovable property so the right to extract latex also would not a property right over immovable property.

Either the legislators should make their minds clear as to what exactly are ‘benefits arising out of land’ and provide and exhaustive list of ‘benefits’ in a statute or else this class of entitlement should be scrapped from the list of proprietary rights rather than recognising any pre-existing right as a ‘profit’ just because it was recognised as a proprietary right in some case.

Edited by Hariharan Kumar

[i] (1955) 2 SCR 919

[ii] AIR 1958 SC 532

[iii] (1977) 4 SCC 145

[iv] AIR 1985 SC 1293

[v] (1996) 9 SCC 516

[vi] “Homestead” means a dwelling house either used by the proprietor or tenure- holder for the purpose of his own residence or for the purpose of letting out on rent together with any courtyard, compound, attached garden, orchard and out-buildings and includes any outbuildings used for purposes connected with agriculture or horticulture and any tank, library and place of worship appertaining to such dwelling house were treated as a homestead.

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