State of Orissa v Titaghur Paper Mills Co. Ltd. (1985)

Shantabai gives you the tree-and-timber line. Titaghur gives you everything else the s. 3 definition needs: the full text of the competing definitions, the reason the General Clauses Act definition applies to the Transfer of Property Act at all, the meaning of a benefit to arise out of land, the difference between a profit a prendre and an easement, and — the point most students miss — a method for construing a document, namely that you read the whole instrument and all the rights it confers, not the one clause that suits the statute in issue.

It is also the case that clears the ground: Chhotabhai Jethabai Patel and State of M.P. v Orient Paper Mills are both declared not good law.

The Government of Orissa issued notifications under the Orissa Sales Tax Act 1947 making bamboos agreed to be severed and standing trees agreed to be severed liable to purchase tax at ten per cent, first with effect from 1 June 1977 and then, after the Orissa Sales Tax (Amendment) Ordinance 1977, from 1 January 1978.

209 writ petitions under Art. 226 challenged the notifications. The petitioners fell into two groups, distinguished by their contracts with the State:

- The Bamboo Contract — Titaghur Paper Mills and others had an agreement described as "a grant of exclusive right and licence to fell, cut, obtain and remove bamboos" for converting them into paper pulp. The term ran to fourteen, thirteen and eleven years for different areas, renewable for a further twelve; it covered bamboos then existing and bamboos yet to grow; the royalty bore no relation to the quantity actually cut and a minimum royalty was payable; and it carried extensive ancillary rights — ingress and egress over lands, roads and streams, and power to build dams, canals, water courses, roads, bridges, buildings and tramways. - The Timber Contract — described in its body as "an agreement for the sale and purchase of forest produce", confined to a particular felling season.

The Orissa High Court quashed the notifications. The State appealed.

1. Were the impugned notifications themselves beyond the State's legislative competence?
2. Was the Bamboo Contract a contract of sale of goods, or a grant of a profit a prendre?
3. Is a profit a prendre moveable or immoveable property, and by what definition?

On the notifications. The High Court had confused the validity of the notifications with the legality of what was done under them. The two are different: if a notification is invalid everything under it falls, but the converse does not follow. "The challenge to the validity of the impugned provisions on the ground of their unconstitutionality must, therefore, fail."

On the Bamboo Contract. It "confers 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 is thus a grant of a profit a prendre". It could not be split into a sale of existing bamboo and a sale of future goods. It was not a lease, because there was no demise and no exclusive possession; the company had "only a right to enter upon the land to take a part of the produce thereof for its own benefit". Being a benefit to arise out of land it is an interest in immovable property, and an attempt to tax the amounts payable under it was ultra vires the Orissa Act and beyond Entry 54 of List II.

Registration. The grant exceeded Rs 100 and was therefore compulsorily registrable and in fact unregistered; but that was immaterial, because it was a grant by the Government and so exempt under s. 90 of the Registration Act. Learn this: it is a favourite trap.

| Term | Where defined | Substance as quoted in the judgment | |---|---|---| | immovable property | TP Act s. 3 | "immovable property" does not include standing timber, growing crops or grass — a negative definition only | | immovable property | General Clauses Act s. 3(26) | shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to any thing attached to the earth | | immovable property | Registration Act s. 2(6) | 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, but not standing timber, growing crops nor grass | | movable property | General Clauses Act s. 3(36) | property of every description, except immovable property | | moveable property | Registration Act s. 2(9) | includes standing timber, growing crops and grass, fruit upon and juice in trees, and property of every other description, except immovable property | | attached to the earth | TP Act s. 3 | rooted in the earth; imbedded in the earth; or attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached | | goods | Sale of Goods Act s. 2(7) | every kind of movable property other than actionable claims and money, including growing crops, grass and things attached to or forming part of the land agreed to be severed before sale or under the contract of sale |

Madon J states the gap and the cure exactly: the s. 3 definition "is strictly speaking not a definition of the term 'immovable property' for it does not tell us what immovable property is but merely tells us what it does not include", so one must turn to the other Acts. The bridge is s. 4 of the General Clauses Act, which applies the s. 3 definitions to Central Acts, so that they apply "when they occur in the Transfer of Property Act" — even though the Transfer of Property Act was enacted about fifteen years earlier.

The judgment adopts Halsbury: a profit a prendre is "a right to take something off another person's land", or more fully "a right to enter another's land and to take some profit of the soil, or a portion of the soil itself, for the use of the owner of the right"; and it "is an interest in land, and for this reason any disposition of it must be in writing".

The distinction from an easement is the one to memorise: "whereas an easement only confers a right to utilise the servient tenement in a particular manner or to prevent the commission of some act on that tenement, a profit a prendre confers a right to take from the servient tenement some part of the soil of that tenement or minerals under it or some part of its natural produce or the animals ferae naturae existing upon it." What is taken must be capable of ownership.

Under Indian law the position is subtler still, and it is worth a line in an answer on easements. Section 4 of the Indian Easements Act defines an easement as a right the owner or occupier of certain land possesses as such for the beneficial enjoyment of that land. So a profit a prendre granted to a dominant owner for the beneficial enjoyment of his heritage is an easement in India; granted otherwise — as here, to a paper mill with no dominant heritage — it is not. On that footing the Bamboo Contract was a profit a prendre but not an easement.

Quoting Mulla, the judgment collects what has been held to be immovable property as a benefit to arise out of land: "a varashasan or annual allowance charged on land, a right to collect dues at a fair held on a plot of land; a hat or market; a right to possession and management of a saranjam; a malikana; a right to collect rent or jana; a life interest in the income of immovable property; a right of way; a ferry; and a fishery; a lease of land." That sentence answers, on its own, most short-note questions on benefits arising out of land.

Ananda Behera v State of Orissa is the anchoring authority: a profit a prendre is a benefit arising out of land and so, by s. 3(26) of the General Clauses Act, immovable property within the meaning of the Transfer of Property Act.

The heart of the case for a property paper is the method. The Court refused the approach taken in State of M.P. v Orient Paper Mills, under which a document is read so as to bring it within whichever statute is in issue, looking only at the clauses that fit. That approach "is fraught with considerable danger and mischief as it may expose documents to the personal predilections and philosophies of individual judges", and would allow the same deed to be a grant of a benefit arising out of land in a land-reform case and a sale of goods in a tax case.

The correct rule is the one laid down by the five-judge Bench in Mahadeo v State of Bombay: the character of the right "has, however, to be examined with reference to all the terms of the documents and all the rights conveyed thereunder". Accordingly Chhotabhai Jethabai Patel & Co. v State of M.P. is not good law, and Orient Paper Mills was decided per incuriam and laid down principles of interpretation "which are wrong in law and cannot be assented to".

1. The Transfer of Property Act's definition of immoveable property is negative only; the affirmative content comes from s. 3(26) of the General Clauses Act, applied through s. 4 of that Act. 2. A profit a prendre is a benefit to arise out of land and therefore immoveable property. 3. A long-term grant to cut and remove produce that will grow in future, with ancillary rights and a minimum royalty unrelated to quantity, is a profit a prendre and not a sale of goods; it is not severable into present and future goods. 4. A document must be construed as a whole, by all its terms and all the rights it confers, and not by the clauses that would attract the statute in issue.