Supreme Court on Bequests of Agricultural Land

The Supreme Court has held that a bequest of agricultural land would not be permissible, when made to a non-agriculturist under a will. In coming to this conclusion, the Court applied the provisions of the Bombay Tenancy and Agricultural Lands Act, 1948 as applicable to the State of Gujarat, in this case of Vinodchandra Sakarlal Kapadia v. State of Gujarat. The case was decided on July 15, 2020.

Highlights

(i)   Certain agricultural land was in the possession and ownership of the testator, who had acquired it through a statutory purchase. The testator was also the cultivator of the land, and bequeathed it to the appellant under a will.

(ii)  The appellant was not an agriculturist as per the definition of ‘agriculturist’ under the Bombay Tenancy Act, which defines an agriculturist to mean a person who cultivates land personally e. on one’s own account: (i) by one’s own labour; (ii) by the labour of any member of one’s family or; (iii) under the personal supervision of oneself or any member of one’s family, by hired labour or by servants on wages payable in cash or kind but not in crop share.

(iii)  In evaluating the validity of the bequest, the Supreme Court examined the relevant provisions of the Bombay Tenancy Act, which do not specifically deal with inheritances but which restrict other forms of transfers such as a lifetime sale, gift, exchange, lease or mortgage in favour of non-agriculturists.

(iv) The Court then held that if a testator is statutorily barred from transferring agricultural land to a non-agriculturist during his lifetime, he cannot then be permitted to undertake such a transfer under his will, as such an attempt would be against public policy and would defeat the objects of the Bombay Tenancy Act.

Practical Issues

(i)   Although the Supreme Court ruling bars bequests of agricultural land to non-agriculturists under a will, this should not interfere with most transfers to next of kin under a succession plan, as children of agriculturists are also generally considered agriculturists for the purposes of the Bombay Tenancy Act. In the instant case, it appears from the facts that the beneficiary was neither an agriculturist nor a legal heir of the deceased, which adds further context to the conclusions of the Supreme Court.

(ii)  Having said that, testators who are planning bequests of property do nevertheless need to keep in mind that special restrictions may apply to agricultural property. For example, although Indian residents are generally permitted to gift immovable property to a defined category of non-resident “relatives”, any gifts of agricultural property to non-residents require the approval of the Reserve Bank of India. State specific legislations pertaining to agricultural lands may also vary and would need to be evaluated prior to putting a succession plan in place.

Date: August 4, 2020