New Delhi: The Supreme Court has ruled that exemption from the conversion fee under Section 27A of the Kerala Conservation of Paddy Land and Wetlands Act, 2008, will not apply to landholdings exceeding 25 cents.

A bench comprising Justice Sanjay Karol and Justice Manmohan set aside a Kerala High Court ruling that allowed landowners to deduct 25 cents from the total land while computing the conversion fee. The Supreme Court clarified that the exemption applies only to landholdings of 25 cents or less and cannot be extended to larger properties.

"The interpretation of the High Court, which suggested that the conversion fee for land exceeding 25 cents should be calculated after deducting the exempted portion, is not acceptable," the court observed.

The Kerala government had issued a notification on February 25, 2021, exempting small landholdings up to 25 cents from the conversion fee, which is calculated at 10% of the fair value of the land. The Supreme Court held that this exemption was intended for small landowners and did not extend to larger plots. The court also referred to a subsequent government notification dated July 23, 2021, which clarified that landholdings exceeding 25 cents were not eligible for exemption.

Applying the principle of strict interpretation of exemption notifications, the Supreme Court upheld the state's power to classify landowners based on property size. "The state has created two distinct categories: one for landholders with up to 25 cents and another for those exceeding 25 cents. The exemption aims to assist small landowners in constructing houses or small buildings without additional financial burdens," the court noted.

The ruling came in response to a case where a petitioner owning 14.5 Ares (36.65 cents) of land sought removal of his property from the data bank, arguing that it had been classified as paddy land despite remaining dry for decades. The petitioner was asked to remit a conversion fee of Rs 1,74,814, calculated at 10% of the land's fair value. A Single Judge of the High Court had directed authorities to levy the fee only on the portion exceeding 25 cents, a decision later upheld by a division bench. The Kerala government challenged this ruling in the Supreme Court, which had stayed the High Court's order in December 2023 before delivering its final judgment.
(With LiveLaw inputs.)