Kerala HC: Fees Under S.27A(3) of Paddy Land Act Must Go to Agricultural Promotion Fund (S.27D), Not State's Consolidated Fund - 2025-06-21

Kerala High Court Mandates Proper Use of Over ₹1500 Crore Paddy Land Conservation Fund

Court Orders State to Stop Diverting Fees to Consolidated Fund, Ensure Utilization for Act's Purpose

Kochi , Kerala: In a significant ruling addressing the mismanagement of environmental conservation funds, the High Court of Kerala, helmed by Chief Justice Nitin Jamdar and Justice S. Manu , has directed the State of Kerala to ensure that all fees collected for the conversion of paddy lands under Section 27A(3) of the Kerala Conservation of Paddy Land and Wetland Act, 2008, are credited directly to the statutorily created "Agricultural Promotion Fund" (under Section 27D) and utilized strictly for the purposes outlined in Rule 14 of the Kerala Conservation of Paddy Land and Wetland Rules, 2008. The judgment came in response to two Public Interest Litigations (WP(C) No. 26592/2022 and WP(C) No. 35561/2022) filed by T.N. Mukundan.

Case Background: Funds Meant for Conservation Diverted

The core issue revolved around the Kerala Conservation of Paddy Land and Wetland Act, 2008, an legislation enacted to conserve paddy lands and wetlands, promote agriculture, and sustain the ecological system in Kerala. Section 27D of this Act mandates the establishment of an "Agricultural Promotion Fund," primarily sourced from fees collected under Section 27A for permissions granted to change the nature of unnotified lands (e.g., converting paddy land for commercial purposes).

The petitioner, T.N. Mukundan, represented by Senior Advocate Mr. Renjith Thampan, contended that crores of rupees collected as fees under Section 27A were not being transferred to this dedicated Fund. Instead, these substantial amounts were being diverted to the State's general consolidated fund, leading to a severe lack of resources for the Act's intended purposes, such as the restoration of illegally converted paddy lands (under Section 13) and other conservation efforts. The petitioner highlighted that, as of October 18, 2024, over ₹1510 crore had been collected, yet vital conservation activities were stalled due to a purported lack of funds.

State's Position and Court's Rebuttal

The State of Kerala, represented by Special Government Pleader Mr. S. Renjith, acknowledged that the collected fees were credited to the State's consolidated fund. While administrative steps like opening a treasury account and appointing a Land Revenue Commissioner (Dr. A. Kowsigan IAS) as the State- Level Officer for fund management were cited, the State argued it was releasing necessary funds "in tune with the spirit of the Act." The State also alluded to its financial condition as a reason for this practice.

The High Court, however, found the State's position untenable and its interpretation of the statutory provisions "entirely fallacious." The judgment meticulously analyzed the Act and Rules, stating:

"The State, in its affidavit, has clearly stated that no funds have been transferred to the Agricultural Promotion Fund at all. Therefore, there is no State Level Audit carried out as required under Section 27D (2) of the Act of 2008... This argument [that it's not mandatory for fees to be deposited in the Fund] is entirely fallacious and is not supported by the provisions of the Act of 2008 and the Kerala Conservation of Paddy Land and Wetland Rules, 2008 (Rules of 2008)." (Para 19)

The Court further noted the stark disparity between collections and actual expenditure on conservation:

"From the affidavit of the Land Revenue Commissioner, it can be seen that ₹1510 crores have been collected from conversion charges... What is concerning in the affidavit is that only ₹6 lakhs out of the ₹1510 crores have been allocated for the restoration of paddy lands, which is a primary objective of the Act." (Para 22)

The Court emphasized that the State's financial difficulties could not justify a "blatant bypass" of statutory provisions:

"The only argument the Special Government Pleader sought to be made before us adopting this method is the state of finances of the Government. This could be the case; however, it does not mean that the provisions of the statute can be blatantly bypassed... Without amending the statutory framework or without statutory sanction, the amounts cannot not be diverted." (Para 27)

The judgment also highlighted the critical ecological and food security objectives behind the 2008 Act, noting the alarming decline in rice cultivation and wetland areas in Kerala, which the Act aims to address.

Key Directions Issued by the Court

After finding a clear breach of the statutory framework, the Court issued a series of mandatory directions:

Direct Crediting to Fund : "All amounts collected under Rule 27A(3) of the Act of 2008 from 1 December 2024 onwards shall be credited directly to the Agricultural Promotion Fund constituted under Section 27D of the Act of 2008 to be utilised as per Rule 14 of the Rules of 2008."

Minimum Allocation Percentages : "The minimum percentage of allocation under each head of Rule 14 of the Rules of 2008 will be decided by the State within two months from today, and the same will be published on the website. The minimum amount fixed shall be commensurate to the object sought to be achieved under each head under Rule 14."

Transfer of Accumulated Funds : "Twenty-five percent (25%) of the amount, as specified in the affidavit filed by the Land Revenue Commissioner dated 2 November 2024 [approx. ₹1510 crore], collected as fee under Section 27A(3) of Act of 2008 in state shall be transferred to the Agricultural Promotion Fund within four months from today. The remaining seventy-five percent (75%) of the amount, shall be transferred to the Agricultural Promotion Fund within twelve (12) months from in a phase-wise manner of twenty-five percent (25%) every four month."

Annual Audit and Transparency : "There shall be a yearly audit of the Agricultural Promotion Fund to be audited by the State Audit Department, and the result of the audit shall be published on the website of the concerned department."

Implications of the Judgment

This landmark judgment underscores the judiciary's role in ensuring that funds collected under specific statutes are utilized for their designated purposes, particularly in the realm of environmental protection. It serves as a strong reminder to the executive to adhere to legislative mandates regarding the management and disbursal of public funds. The decision is expected to channel significant financial resources towards the much-needed conservation and restoration of Kerala's invaluable paddy lands and wetlands, thereby strengthening the state's ecological resilience and agricultural sector.