Kuttikanam / Seigniorage

In George Leslie v. State of Kerala, AIR 1970 Ker 21 the term ‘Kuttikanam’ was explained as under:

“In the Malayalam and English Dictionary by Rev. II. Gundert D. Ph. page 278, ‘Kuttikanam’ is defined as meaning ‘the price of timber; fee claimable by the owner for every tree cut down by the renter’.

In ‘The Manual of Malabar Law’ by Kadaloor Ramachandra Iyer, Chapter, VII, page 44, it is stated: “Kuttikanam is a mortgage of forests by which the landlord assigns on mortgage a tract of forest land, receiving a stipulated fee for every trees felled by the mortgagee, the entire number of the trees, to be cut down and the period within which they are to be felled being expressly fixed in the karar entered into between the parties…”

In the Glossary attached to the Land Revenue Manual (1916) Vol. IV, at page 883, the word ‘Kuttikanam’ is said to mean ‘a fee paid to the sirkar for feeling trees other than royal trees and tax-paying trees’.”

It was held, that ‘Kuttikanam’ is neither a fee nor a tax. A tax or fee is levied in the exercise of sovereign power. ‘Kuttikanam’ means the Government’s share of the value of the reserved trees. It was further held by Mathew J. that ‘Kuttikanam’ being the Government’s share of the value of the trees owned by the Government it has the power to fix the value of the trees.

The ‘reasoning and conclusions reached by Mathew J.’ were agreed with by the SC in State of Kerala v. Kanan Devan Hills, (1991) 2 SCC 272. It was held, the Government may, in the absence of any provision to the contrary in the title deed, sanction the sale of timber which is the property of Government to the holder of the land on which such timber is standing, on payment of ‘Kuttikanam or Seigniorage‘ or such other rates as may be specified by Government in each individual case [See, Tata Finaly, (2001) 5 SCC 684].

In respect of all matters where the question arises whether ‘Seigniorage can be claimed by the State in respect of trees which are planted’ the decision in Kanan Devan, (1991) 2 SCC 272 has to be applied [See, Kanan Devan, AIR 1998 Ker 267]. The question is of implementation. An assessment of Seigniorage without the application of an identifiable test is nothing but perverse and arbitrary.The absence of any identifiable standard would naturally give rise to the scope for arbitrary assessment at the hands of different authorities.

There are several definitions out of which one can be picked up to satisfy the definition of ‘Kuttikanam’ according to some authority and another definition to fit in with the concept of ‘Seigniorage’ according to another authority. It is absolutely necessary to define the word ‘Seigniorage’ so that there can be no doubt or confusion in the mind of either of the authority or of the Seigniorage payer with regard to the Seigniorage.

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Recently on 05.09.2017, the Supreme Court in State of Kerala v. Tata Tea Ltd., [Civil Appeal Nos. 7481 of 2008] felt it ‘necessary to decide whether ‘Seigniorage’ is constitutionally valid.’ I briefly assisted Senior Advocate, Mr. Jaideep Gupta in the matter.

On 25.10.2017, Nariman And Kaul JJ. remanded the matter to the High Court stating:

After hearing learned counsel for the parties for sometime, we are of the view that the present Writ Petition raises a large number of questions which include, inter alia, the true meaning of the expression “Seigniorage”; whether this expression is different from “Kuttikanam”; whether the Kerala Grants and Leases (Modification of Rights) Act, 1980 would apply to the lands in question; whether Seigniorage can be levied on the trees planted by the Respondent; as also whether the Act is constitutionally valid. We find from the laconic judgment of the Division Bench that none of these aspects are adverted to except to state that the decision of the Full Bench of the Kerala High Court and the Supreme Court have decided all issues. We are of the view that the issues adverted to need to be authoritatively decided as a result of which we set-aside the judgment of the Division Bench and remand the matter to a Division Bench of the High Court. It is made clear that all issues which arise from the said Writ Petition both on facts and law will be open to be argued by both the parties.”

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