Supreme Court holds conversion fee payable on entire holding where land exceeds 25 cents; exemption limited to separate class up to 25 cents

A bench of Justices Sanjay Karol and Manmohan heard State of Kerala’s appeals challenging Kerala High Court orders that had interpreted a Government Notification to allow exemption of conversion fee by deducting 25 cents from a larger holding. The appeals arose from disputes under the Kerala Conservation of Paddy Land and Wetland Act, 2008 concerning the calculation of reclamation or conversion fees where land originally recorded as “paddy land” was sought to be converted for alternate use.

The Court allowed the appeals and overruled the judgments of the Single Judge and the Division Bench. It held that the Notification created two distinct classes — lands up to 25 cents, which “can be considered for category change without any fee,” and holdings exceeding 25 cents, which were liable to pay the prescribed fee on the entire holding. The Court emphasised that exemptions must be interpreted strictly and that the Notification did not permit bifurcating larger holdings to apply the 25-cent exemption only to part of the land. The Court, in its reasoning, observed: “What follows from a plain reading of the above two clauses is that, (a) lands up to 25 cents as on 30th December 2017 can seek a change of category without having to pay any fee; (b) when a category change is sought in respect of land(s) that exceeds the limit of 25 cents, such a change shall be permissible upon having paid 10% of the fair value of such land. Clause 4 also specifies the situation when the person seeking a change of category has lands exceeding 1 Acre. In such a situation, 20% of the fair value is to be paid.” The Court further noted that “the exemption is only intended for lands up to 25 cents” and rejected the High Court’s approach of computing the 10% fee on the portion exceeding 25 cents.

Background The respondent owned 14.57 acres (approximately 36.56 cents) recorded as paddy land in Idukki. She applied under Form-6/Section 27A to change the land’s nature in October 2019. The Revenue Officer de-notified the land in January 2021 and demanded 10% of fair value (Rs.1,74,840) as conversion fee. The State issued a Government Order dated 25 February 2021 providing, inter alia, that “Lands, which are having an extent up to 25 Cents can be considered for category change without any fee” while “Those properties having more than 25 cents in extent shall impose the fee at the rate of 10% of fair value.” A clarification dated 23 July 2021 reiterated that the waiver applied only to lands not exceeding 25 cents as on 30 December 2017 and that if total extent exceeded 25 cents the exemption could not be allowed.

The respondent challenged the demand before the High Court, which set aside the demand and directed recalculation by treating the first 25 cents as exempt and levying fee only on the excess. The Division Bench and a review petition refused to interfere, stating “the fee for conversion of land is payable only for lands in excess of 25 cents.” The State filed special leave petitions in this Court.

The Supreme Court analysed principles of delegated legislation, the strict construction owed to exemption notifications and relevant rules (Rule 12(9) and the Schedule). Applying the plain meaning and classification rationale, the Court held that the Notification created separate categories and that where holdings exceeded 25 cents the applicable fee had to be levied on the whole holding as per the Notification and rules. The Court allowed the appeals, overruled the High Court and Division Bench on this point, and directed that the respondent must pay the conversion fee calculable on the total extent of land in her ownership. Pending applications stood disposed of.

Case Details: Case No.: 2025 INSC 255 Case Title: State of Kerala & Ors. v. Moushmi Ann Jacob Appearances: For the Petitioner(s): Not indicated in the judgment For the Respondent(s): Not indicated in the judgment