India: Leasing Of Agricultural Land: Pandora's Box

The Maharashtra Agricultural Land Leasing Act, 2017 ("Act"), after having received the assent of the President of India, was published in the Maharashtra Gazette on June 27, 2023. Amongst other objects, the primary objects of the Act are (i) to facilitate access to agricultural land by landless and semi-landless poor farmers and to promote accelerated rural growth and transformation, and (ii) to enable the farmers to have better access to loans through credit institutions and other support services provided by the Government. While the intention of the Act appears to be benevolent towards the farmers, there are several voids and ambiguities which might not only lead to complications in the effect and implementation of the Act but also, may defeat the very intent and purpose for which it was framed.

One of the major defects of the Act is the lack of cogent definitions. In this article, we have attempted to highlight a few such defects of the Act and the possible complication that may arise from its reading or, one may say, misreading.

Under the Act, the term "lease" is essentially a contract between the 'land owner – lessor' and the 'lessee cultivator'. Interestingly, the Act has defined the term 'farmer' to mean a person who owns and cultivates land himself or herself and includes a person who may or may not own land but cultivates land by leasing in from others. However, the term 'lessee cultivator' does not make any direct reference to the term 'farmer', instead uses the term 'person'.

On the one hand the term 'person' has not been defined under the Act, on the other, the Act provides that every person competent to transfer agricultural land under Section 7 of the Transfer of Property Act, 1882 ("TP Act") shall be entitled to lease agricultural land. A person competent to transfer under the TP Act includes a natural as well as an artificial person capable of or authorised to dispose property. Therefore, a question may arise as to whether an artificial person, i.e., a company, would also be able to lease agricultural land under the Act.

Further, Section 15 of the Act provides that the Act shall have an overriding effect over the provisions of any other law in force on the subject. This sweeping overriding effect of the Act on any other law in force on the subject, would mean that the provisions of the Maharashtra Tenancy and Agricultural Lands Act, 1948 ("MTAL"), and the Maharashtra Land Revenue Code, 1966 ("MLRC") could be rendered ineffective.

This could be interpreted to mean that the express restriction imposed by Section 63 of the MTAL on the transfer of agricultural land (which includes sale, gift, exchange or lease of any kind or interest therein) to a non-agriculturist has now been relaxed. Such interpretation may open doors for an unfettered transfer of agricultural land in the form of perpetual leases to a non-agriculturist. As an example, a person who would otherwise be disqualified from acquiring agricultural land under MTAL, would now be able to acquire agricultural land in the form of a perpetual lease.

The statutory requirement of maintaining the Record of Rights for every land parcel, as prescribed under the MLRC, has been expressly excluded for leases of agricultural land under the Act. Instead, a separate register in a prescribed form would be maintained by the Competent Authority under the Act for recording all such transactions. Albeit while the Act specifies that no right of tenancy, occupancy, or such other right would be created in favour of the 'lessee cultivator' except the rights created under the Act, maintaining a separate register under the Act could lead to additional burden while conducting title diligence.

Further, the Act requires every lease under the Act to be registered under the provisions of the Registration Act, 1908. While the Act has been enacted as a beneficial legislation, to encourage landless and semi landless poor farmers to cultivate agricultural land as a 'lessee cultivator', the registration fee and stamp duty on such lease deeds will be a major hurdle for the landless/poor farmers, and this problem will have to be addressed by the legislature.

In conclusion, the Act may fail to achieve its intent since it appears that, private entities and non-agriculturists may be able to circumvent the protections granted to agriculturists under the MTAL Act. Further, assuming that poor and marginal farmers are to benefit from this Act, lack of clarity on the costs of registration and stamp duty may disincentivise them from seeking the benefit under this Act.

* Authored by Bhavin Gada, Senior Partner, Ameya Deosthale, Partner & Khushrav Kumana, Senior Associate. The contents of this article do not necessarily reflect the views / position of Stratage Law Partners but remain solely those of the author(s). This article is meant for general information and shall not be deemed to be a legal advice or opinion. This article is neither intended to be an advertisement nor solicitation.