If x paper says "y et al.  have found so and so in the water of India", why can't I use the exact same words as the "x paper" and just cite ? My understanding is this- since x paper does not own the set of words that was used to explain what y has found, it's not their 'idea'. And stating that another paper have found something doesn't give x paper credit for the findings. It's a bit like saying that just because some person said "This store makes tables", I can't use these words and instead I have to say "Tables are made by this store", which, I think is an unnecessary restriction.
Generally there are two things to consider and they are not the same: copyright and plagiarism.
Plagiarism is attributing the ideas of others to yourself. Your reuse of "a few words" doesn't have that effect, so it isn't plagiarism. In most places, plagiarism is a social, not legal matter, though there are some exceptions.
Copyright violations involve copying and republishing the words (music, ...) of others, even if you properly attribute it. Copyright is a civil law matter (most places) and laws differ though there is a movement to unify national copyright laws. One of the principles of most copyright law is whether the copying reduces the value of the original to the copyright holders. Again, a few words is almost always unlikely to do that and certainly not in your case. Copying a paragraph, or a chapter, from a copyrighted work is a much different matter.
But another principle of copyright law (generally speaking) is that for some things there is really only one way to say it. Some mathematical definitions and theorems fall into this category and they aren't limited by copyright which is aimed at creative expression.
It seems like you are operating ethically. You properly attribute the idea to Y, just as X did. It is only a few words. There are few ways to express the same (proper) idea.
There could be closely aligned situations, however, in which the idea you are trying to get across is that X agrees withy Y, rather than Y says something. In that case, a citation of X might be needed.
The title question, however, can't be answered without context. Sometimes yes (as above) and sometimes no, depending on what you want to copy. When in doubt cite and also quote, while minimizing your quotes.
If x paper says "y et al.  have found so and so...," then you need to read and cite the original y paper, not the citing x paper.
No, paper x does not own the words. You could obviously write a very similar, if not identical, sentence like it is written in paper x after reading paper y. And as long as you really, really do not use paper x as a source there is no issue at all. In this case, the identical wording is pure conincidence and you would not have to cite paper x.
However, if you use paper x as a source you must make that transparent, especially if you in fact copy and paste their words. Never ever simply copy words you read without citing properly. There really is no reason to deny the authors of paper x the credit.
If this is a piece of assessed work, then leaving aside the copyright/plagiarism issues (well covered by @Buffy), it is worth bearing in mind that assessments are set to give you an opportunity to demonstrate your understanding of the topic (as that is generally what is being assessed). Direct quoting or close paraphrasing only demonstrate that you are able to identify a suitable source, not that you understand it. Use the literature review to demonstrate that you understand the relevance of the source for your project/work. All to often literature reviews are just thinly paraphrased quotes from the abstracts of the papers, which does not create a good impression and conveys little useful information.
The fact that you are able to write "x paper says 'y et al.  have found so and so in the water of India'" strongly suggests that x paper has been helpful to you in identifying the original Y et al. reference. This suggests that you did not come up with these exact words yourself, but that you got them from x paper. This raises the issue of copyright. Facts and ideas are not copyrightable--no one owns the fact that y et al had a particular finding. However, the precise way that ideas are expressed in recorded form (specifically in writing, sound recording, video, etc.) is copyrightable. The first person to express an idea in a specific way gets copyright to it. Others who come after them are supposed to find their own original way to express the same idea.
You seem to object to this application because the phrase ("y et al.  have found so and so in the water of India") is so short. But if it is so short, then you should have no problem reading y et al yourself and then expressing what they did in your own original words. If you read y et al yourself and then use your own words to summarize what they found, then there is no need to cite x paper at all and then there is no problem. But if you somehow feel that you cannot come up with an original way of saying "y et al.  have found so and so in the water of India", then indeed you should quote and cite x for their original way of saying that. (That said, as some of the other answers have indicated, scholarly rigour expects you to read the original source and cite it directly rather than taking the shortcut that "x said that y said…".)
It's like saying that just because some person said "This store makes tables", I can't use these words and instead I have to say "Tables are made by this store", which is totally unnecessary.
I don't think you have a correct understanding of the issue of plagiarism. If copying the words "This store makes tables" were plagiarism, then changing it to "Tables are made by this store" would still be plagiarism (but the change in words might fool some plagiarism detectors). If you find yourself changing words or "paraphrasing" then you are trying to hide something, you should stop and reconsider what you are doing.
Plagiarism is about presenting somebody else's work as your own. It's not about whether you use the same words or not, but whether you use the same ideas (without proper attribution). If you write your literature review by very closely mimicking the structure of another literature review (citing the same references in the same order, synthesizing the ideas in a very similar way) then it's plagiarism. It doesn't matter how many words you replace by synonyms and how you change the structure of the sentences, it's still plagiarism.
As a general rule, I would never, ever, use the literal ctrl+c, ctrl+v way of copy pasting anything from another paper without immediately putting it in quotation marks with a citation. Even if the amount you copy is "small enough" to not be plagiarism, I think the fact that you are even considering copying and pasting from a paper is a very troubling sign that you are writing your own work with the other's work too close in hand, and there's a very real risk you would mimick the structure and synthesis of ideas too much.
If you end up writing the same words by chance then it is okay and not plagiarism. A good lithmus test is the following: if you were to forget about the paper for a week and then continue writing (without consulting the source you are "copying" from again), would you still use the same words?