(1) With effect from the date of vesting all homesteads comprised in an estate or tenure and being in the possession of [an intermediary] on the date of such vesting shall, [subject to the provisions of Sections 7A and 7B] be deemed to be settled by the State with such [intermediary] and he shall be entitled to retain possession of the land comprised in such homesteads and to hold it as a tenant under the State free of rent:
Provided that such homestads as are used by the [intermediary] for purposes of letting out on rent shall be subject to the payment of such fair and equitable ground rent as may be determined by the Collector in the prescribed manner.
(2) If the claim of [an intermediary] as to his possession over such homestead or as to the extent of such homesteads is disputed by any person within three months from the date of such vesting, the Collector shall, on application, make such inquiry into the matter as he deems fit and pass such order as may appear to him to be just and proper.