Citation Codes

Equivalent Citations

citation codes

Case Number

W.P(MD). Nos. 12280, 12733, 12734 and 12550 to 12553 of 2009 and M.P Nos. 1, 1, 1, 1, 1, 1 and 1 of 2009

Advocates

B. Saravanan, Advocate for Petitioners.
G. Govindasamy, Advocate for Respondents.

Judges

Prabha Sridevan
B. Rajendran, JJ.

Acts

SECTION 31 A SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT
Section 31(i) of the SARFAESI Act reads as follows:31. Provisions of this Act
TAMIL NADU AGRICULTURAL INCOME TAX ACT
Land (Act 28 of 2008) of the Kerala Conservation
ARTICLE 226 CONSTITUTION OF INDIA
Section 31(i) of the SARFAESI Act.11.
Nadu Agricultural Income Tax Act
Kerala Land Reforms Act, 1963
INDIAN INCOME TAX ACT

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Smart Summary

Judgment Summary — Prabha Sridevan, J.

Factual and Procedural Background

The Petitions are Writ Petitions filed under Article 226 of the Constitution of India seeking issuance of a writ of certiorari to call for records and quash an impugned notice issued by the First Respondent on 03.11.2009 in proceedings CRLD:SAR:429, 428, 369, 434, 433, 369 and 428. The Petitioner challenged the notice on the ground that the lands given as collateral security were cardamom plantations and therefore constituted agricultural land immune from attachment under Section 31(i) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). The Bank (Respondent) defended the notice and contended that the question whether the land was agricultural involved statutory definitions and factual inquiry. The matter was decided by Prabha Sridevan, J.

Legal Issues Presented

How should the words "agricultural lands" in Section 31(i) of the SARFAESI Act, 2002 be construed?
Whether the lands described as "Cardamom plantations" and mortgaged to the Respondent-Bank qualify as agricultural land such that the provisions of the SARFAESI Act do not apply?

Arguments of the Parties

Petitioners' Arguments

The mortgaged lands are cardamom plantations; the impugned notice itself refers to "Cardamom plantation", which, without further inquiry, should be construed as agricultural land and therefore immune from SARFAESI attachment.
Produced a Study Report by the M.S. Swaminathan Research Foundation describing cardamom cultivation activities to show those lands are agricultural.
Relied on Supreme Court authorities including W.T. Commr., A.P v. Court of Wards, Paigah (AIR 1977 (1) SC 113) and L.T. Commr. v. Benox Kumar (AIR 1957 SC 768) to support an interpretation of "agriculture" that covers cardamom cultivation.

Respondents' Arguments

Relied on statutory definitions in the Tamil Nadu Agricultural Income Tax Act, the Kerala Land Reforms Act, the Kerala Conservation of Paddy Land Act and other legislative provisions to challenge the automatic classification of the lands as agricultural.
Referred to C.D.E. Kerala v. V. Venugopala (AIR 1977 SC 121) to contend that it would be too wide to hold all forest or similar lands to be agricultural; without evidence that land has been cleared, prepared or earmarked for agricultural purposes it should be treated as prima facie non‑agricultural.
Argued implicitly (and filed written submissions) that the question whether land is agricultural involves predominantly questions of fact which a writ court should not decide in the absence of documentary proof.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
C.D.E. Kerala v. V. Venugopala, AIR 1977 SC 121	Rejected an overly wide view that all forest lands in the State are agricultural; caution against construing "agricultural land" too broadly.	Referenced to acknowledge the proposition that not all land is agricultural without evidence of cultivation/preparation; used by Respondents to argue prima facie non‑agricultural status in absence of such evidence, but the Court distinguished on admitted facts here.
W.T. Commr., A.P. v. Court of Wards, Paigah, AIR 1977 (1) SC 113	Guidance on interpreting terms like "agricultural land" in taxing statutes: interpret words in context and in consonance with the statute's purpose; avoid an unreasonably wide meaning.	Applied to state interpretive approach; Court noted that where two views possible in a fiscal/statutory context a view favourable to the assessee/borrower may be adopted here in favour of the Petitioners.
L.T. Commr. v. Benox Kumar, AIR 1957 SC 768	Defined "agriculture" in the Income‑Tax context as cultivation involving expenditure of human skill and labour; subsequent operations attach to products only if basic operations are performed on the land.	Relied upon to hold that cardamom cultivation involves the basic operations and subsequent integrated activities of agriculture, supporting classification of the lands as agricultural.
D. Ravichandran v. Manager, Indian Overseas Bank, 2006 (132) CC 803 (Mad.)	Held that whether the secured asset is agricultural is a question of fact and in the absence of documentary proof a writ court should not adjudicate the factual question.	Noted by the Court as precedent where a Single Judge refused to go into the question under Article 226 when facts were not supported by documentary proof; Court used this to frame the factual inquiry but found documentary material/admissions here.
Model Financial Corporation v. Indian Bank, W.P. No. 3705 of 2007 (Andhra Pradesh), dec. 20.12.2007	Observed that whether a subject matter of security falls within agricultural lands and whether put to agricultural use are predominantly questions of fact not ordinarily for a writ court.	Cited as authority indicating the factual nature of the enquiry; the Court considered documentary admissions in the present case to answer the legal question on admitted facts.

Court's Reasoning and Analysis

The Court identified a single legal question: the construction of "agricultural lands" in Section 31(i) of the SARFAESI Act. The analysis proceeded in the following logical steps, grounded in the materials and admissions on record:

The Court examined literature on cardamom cultivation and concluded that cardamom farming involves planting and harvesting cycles and a range of operations beyond mere sowing or tilling — an integrated set of activities characteristic of agriculture.
The Court relied on the principle articulated in L.T. Commr. v. Benox Kumar that "agriculture" in the fiscal/ statutory context denotes cultivation involving an expenditure of human skill and labour; subsequent operations attach to the product only if basic operations on the land are performed.
The Court acknowledged authorities (including C.D.E. Kerala and W.T. Commr., Paigah) that caution against an unduly wide meaning of "agricultural land" and which treat the classification as a question of fact when material is lacking.
The Court then turned to the material and admissions in the present case: the impugned notice itself refers to "Cardamom plantations"; the Bank's counter admitted it was a cardamom estate; the sanction order referred to production of cardamom and a loan for "new cardamon planting"; and the Branch Manager's comments (inspection notes) indicated the land was prepared for new planting, had irrigation and an experienced person tending it.
On the basis of these documentary admissions and material, the Court concluded that cardamom cultivation and the associated operations were being carried on the mortgaged land. Given that, the principles from the Supreme Court authorities applied and the land fell within the scope of "agricultural land" for the purpose of Section 31(i).
Because Section 31(i) expressly excludes security interests created in agricultural land from the operation of SARFAESI, the Bank's invocation of SARFAESI against the Petitioners' properties was legally barred on the admitted facts. The Court also observed that it was not necessary to remit the parties to alternate remedies in light of the statutory exclusion.

Holding and Implications

Core Ruling: The Writ Petitions are allowed; the impugned notice is without jurisdiction.

Direct consequences:

The Respondent-Bank cannot proceed against the Petitioners' properties under the SARFAESI Act, 2002 in respect of the mortgaged lands held to be cardamom plantations (agricultural land) within Section 31(i).
The Bank retains its right to recover amounts due by such other lawful remedies as may be available; only the invocation of SARFAESI against these properties is held to be barred by Section 31(i).
No costs were awarded; connected Miscellaneous Petitions were closed.

Broader implications: The opinion applies existing Supreme Court principles on the meaning of "agriculture" and the interpretation of "agricultural land" to the admitted facts; the judgment does not purport to lay down a new general precedent beyond applying those authorities to the documentary admissions in this case.

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J. Malliga v. Authorised Officer, Union Bank Of India

Prayer: Writ Petitions are tiled under Article 226 of the Constitution of India praying to issue a Writ of Certiorari calling for the records relating to the impugned notice issued by the First Respondent in his proceedings CRLD:SAR:429, 428, 369, 434, 433, 369 and 428 dated 03.11.2009 and quash the same as illegal and without jurisdiction.

JUDGMENT

Prabha Sridevan, J.

1. The only question that arises in these Writ Petitions is a legal question as to the construction of the words “agricultural lands” found in Section 31(i) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002.

2. According to the Petitioners, the lands, which were given as collateral security to the Respondents, are cardamom plantations and the impugned notice issued by the First Respondent clearly refers to the word “Cardamom plantation”, and therefore, without any further investigation, it would be logical to conclude that they are agricultural lands, and hence, they are immune from attachment.

3. The learned Counsel appearing for the Respondents, however, referred to the definition of the word in the Tamil Nadu Agricultural Income Tax Act and the definition of the words “paddy land” in Kerala Land Reforms Act, 1963 and also the Wet Land (Act 28 of 2008) of the Kerala Conservation of Paddy Land and also the definition of land in Section 2(nnn) of the Tamil Nadu Agricultural Income Tax Act and referred to C.E.D Kerata v. V. Venugopala, AIR 1977 SC 121, wherein the Supreme Court held that the view of the Kerala High Court that “all forest lands in this State are agricultural lands in the sense that they can be prudently and profitably exploited for agricultural purposes” is too wide. Therefore, according to the Respondents, without evidence to show that such land had been cleared and prepared or earmarked for agricultural purposes, it must be treated as prima facie non-agricultural land. The learned Counsel for the Respondents has also filed written submissions.

4.The learned Counsel for the Petitioner, on die other hand, produced a Study Report made by Dr. M.S Swaminathan Research Foundation to describe the activities that are done for Cardamom cultivation to show that the lands, where the Cardamom is cultivated, would be agricultural lands. He also relied on the Judgments of the Supreme Court in W.T Commr., A.P v. Court of Wards, Paigah, AIR 1977 (1) SC 113 and also in L.T Commr. v. Benox Kumar, AIR 1957 SC 768.

5. We find from the literature relating to the Cardamom cultivation that there are planting periods and there are harvesting periods depending on the time when they are planted. The Cardamom cultivation does not comprise merely of raising the products of the land in the narrower sense of the term like tilling of the land, sowing of the seeds, planting and irrigation and similar work done on the land, but also includes the subsequent operations set out. The above operations, which are basic as well as the subsequent activities, form one integrated activity of the agriculturist. The above activities would indicate that they are similar to what is normally described as agricultural activities. In L.T Commr. v. Benox Kumar, AIR 1957 SC 768, which arose out of the Income Tax Act the Supreme Court held that the terms “agriculture” and “agricultural lands” used in the definition of agricultural income in Section 2(1) not having been defined in the Income Tax Act, the Court must necessarily tall back upon the general sense in which they have been understood in common parlance. The Supreme Court further observed that agriculture in its root sense means “ager a field” and “cultura-cultivation”, cultivation of field which of course implies expenditure of human skill and labour upon land. The Supreme Court referred to various decisions including the English decisions and some of the observations are relevant for this case:

“The expression “agricultural land” means any land used as arable, meadow, or pasture ground only, cottage gardens exceeding one-quarter of an acre, market gardens, nursery grounds, orchards, or allotments, but does not include land occupied together with a house as a park, gardens other than as aforesaid pleasure grounds or any land kept or preserved mainly or exclusively lor purposes of sport or recreation or land used as a race course.”

6. The Supreme Court observed that cultivation of the soil was considered an essential ingredient, which rendered the income derived from the tendu leaves “agricultural income” within the meaning of its definition in Section 2(1)(a) of the Act. The Supreme Court also held that the cases referred noted that “all of them involve some expenditure of human skill and labour either on the land or the produce of the land, for without such expenditure there would be no question of the income derived from such land being agricultural income”. But, where the products of the land are of wild, or spontaneous growth involving no expenditure of human labour and skill, there is unanimity of opinion that no agricultural operations were at all involved and there is no agricultural income. If these conditions Were satisfied in regard to any particular land, then such land can be said to be used for agricultural purposes and the income derived therefrom constitute agricultural income within the meaning of Section 2(1)(a) of the Act. The term “Agriculture” for the purpose of Indian Income-Tax Act was thus in effect defined by their Lordships to mean some measure of cultivation of the land and some expenditure of skill and labour upon it and unless the operations, whether they be agricultural operations or forestry operations conformed with those definitions, they could not be styled agricultural operations so as to constitute the land on which they were performed land used for agricultural purposes.

7. The Supreme Court further held that it is only if the products are raised from the land by the performance of these basic operations that the subsequent operations attach themselves to the products of the land and acquire the characteristic of agricultural operations. The cultivation of the land does not comprise merely of raising the products of the land in the narrower sense of the term like tilling of the land, sowing of the seeds, planting, and similar work done on the land but also includes the subsequent operations set out above all of which operations, basic as well as subsequent, form one integrated activity of the agriculturist and the term “agriculture” has got to be understood as connoting this integrated activity of the agriculturists. The Supreme Court finally held that nevertheless there is present all throughout the basic idea that there must be at the bottom of it cultivated of land in the sense of tilling of the land, sowing of the seeds, planting and similar work done on the land itself. This basic conception is the essential sine qua non of any operation performed on the land constituting agricultural operation. If the basic operations are there, the rest of the operations found themselves upon the same.

8. In C.D.E Kerala v. V. Venugopal, AIR 1977 SC 121, the Supreme Court held as follows:

9. So far as the correct interpretation of the term “agricultural land'” in a taxing statute, such as the one before us is concerned, we have already dealt with the question in our judgment in Commissioner of Wealth Tax, Andhra Pradesh v. Officer-in-Charge (Court of Wards) Paigah, where we have said:

“We think that it is not correct to give as wide a meaning as possible to terms used in a statute simply because the statute does not define an expression. The correct rule is that we have to endeavour to find out the exact sense in winch the words have been used in a particular context. We are entitled to look at the statute as a whole and give an interpretation in consonance with the purposes of the statute and what logically follows from the terms used. We are to avoid absurd results. If we were to give the widest possible connotation to the words ‘agricultural land’, as the Full Bench of the Andhra Pradesh High Court seemed inclined to give to the term ‘agricultural land’, we would reach the conclusion that practically all land, even that covered by buildings, is ‘agricultural land’ inasmuch as its potential or possible use could be agricultural. The object of the Wealth Tax Act is to tax surplus wealth. It is clear that all land is not excluded from the definition of assets. It is only agricultural land' which could be exempted.' Therefore, it is imperative to give reasonable limits to the scope of the agricultural land', or in other words, this exemption had to be necessarily given a more restricted meaning than the very wide ambit given to it by the Andhra Pradesh Full Bench.”

9. In the present case, the impugned notice itself refers to the land as “Cardamom plantations”. The cultivation of the Cardamom requires normal agricultural activities, and therefore, applying the normal principles of interpretation in fiscal statutes, according to which, if there are two views possible, one favourable to the assessee should be given. In this case, the one favouorable to the Petitioners, who are the borrowers, should be given. Section 31(i) of the SARFAESI Act reads as follows:

“31. Provisions of this Act not to apply in certain cases.— The provisions of this Act shall not apply to—

(i) any security interest created in agricultural land …”

In D. Ravichandran v. Manager, Indian Overseas Bank, 2006 (132) CC 803 (Mad.), the Bank contended that the asset in that case was not an agricultural land but a barren land. A learned Single Judge of this Court held that, “the question whether the secured asset in question is an agricultural land or not, whether any agricultural operations are being carried on by the Petitioner therein, etc., in the absence of any documentary-proof on record are undoubtedly question off act…” and refused to go into the question under Article 226 of the Constitution of India. In Model Financial Corporation v. Indian Bank, W.P No. 3705 of 2007 decided on 20.12.2007, a learned Single Judge of the Andhra Pradesh High Court observed that the submissions made “relating to the aspect whether the subject matter of the security would fall within the agricultural lands or not and, at present, whether they are being put to agricultural use or not are predominantly questions of fact and cannot be gone into by a Writ Court”. In the present case, it is admitted that it is a Cardamom estate, in paragraph 4 of the counter. The sanction order refers to production of Cardamom. The General Comments at column 12 of the Sanction Order shows that the loan is for “new cardamon planting”. The recommendation by the Branch Manager of the Bank for sanctioning the term loan is as follows:

“The undersigned inspected the land on 8th May, 2005. The land is well prepared for new planting. For irrigation, sufficient amount of water available in a well within the field. The whole area is irrigated with the help of pipe line. The Applicant's husband Mrs. T.K.S Jothi has good experience in Cardamom plantation. He is looking after the land.”

Therefore, the fact that the mortgaged land is Cardamom estate is not disputed. The loan is for planting the crop. When it is admitted by the Respondent-Bank that the above activities are carried on in the land and that Cardamom is planted, then the judgments in W.T Commr., A.P v. Court of Wards, Paigah, AIR 1977 (1) SC 113; L.T Commr. v. Benox Kumar, AIR 1957 SC 768 and C.D.E Kerala v. V. Venugopal, AIR 1977 SC 121 cited supra will necessarily apply, since as stated earlier, cultivation of Cardamom requires normal agricultural activities. In these circumstances, it is not necessary to direct the Petitioner to invoke the alternate remedy since as per the Section extracted above, the Act does not apply to agricultural land.

10. In view of the above, the impugned notice is without jurisdiction and the Respondent-Bank cannot proceed against the properties of the Petitioners under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002. It is needless to say that the Respondent-Bank has the right to recover the amounts due in a manner known to law. The invocation of this Act alone is held to be barred by Section 31(i) of the SARFAESI Act.

11. The Writ Petitions are allowed in the above terms. No costs. Consequently, the connected Miscellaneous Petitions are closed.

BV