MS DURGA BHAVANI AGRO TECH INDUSTRY v. CANARA BANK

i) SA.No.289/2016 The Applicant is a partnership firm engaged in the agri-business activity of running a paraboiled rice mill and during its course of business, the Applicant firm availed Cash Credit limit of Rs.400.00 lakhs towards working capital facilities and 2 Term Loans of Rs.72.74 lakhs from the 1st Respondent Bank towards security of plant & machinery and the agricultural lands described in the application schedule. After availing the said credit facilities, though the Applicant paid the loan instalments regularly for some time, later on due to un-favourable market conditions, there was delay in making payments to the lst Respondent Bank.

The l"t Respondent Bank issued Demand Notice dt. 16.05.2011, u/s.13(2) of the SARFAESI Act, calling upon the Applicant and other guarantors for payment of the entire outstanding dues of Rs.4,82,87,781/-. After receipt of the said Demand Notice, the Applicant raised objections vide letter dt. l4.OZ.2Ol1 but the lst Respondent Bank without issuing any reply to the said objections as contemplated u/ s. 13(3A) of the SARFAESI Act, issued Possession Notices u/s.13(4) of the SARFAESI Act, in respect of the schedule properties on 76.07.2011 and 22.OT.2011. Challenging the said action of the 1"t Respondent Bank, the Applicant filed SA.No.213/2011 before this Tribunal. However, the said SA was disposed of by this Tribunal as the lst Respondent Bank has withdrawn the said Possession Notices.

iii) Thereafter, the 1st Respondent Bank has issued another Possession Notice dt.06.11.2014, u/s. 13(a) of the SARFAESI Act, in respect of the application schedule properties, which was served $PPlicant in person. Subsequently, the 1"t Respondent Bank physical possession of the schedule properties, t & machinery, without conducting inventory &

as contemplated u/r. 4 of the Security Interest ii)

Rules, 2002.

2

iu) v)

SA.No.289/2016 Subsequently, the 1st Respondent Bank, without issuing Rule g(6) notice, issued e-Auction Notices dt.09.06.2016 u/r. 9 of the Rules, 2OO2, for auction of the agricultural properties on 14.O2.2016 and Machinery Auction Sale Notice dt.29.06.2016 fixing the auction on r1.o7.2016.

The application schedule properties are agricultural lands, which are exempted u/s.31(i) of the SARFAESI Act and so the 1st Respondent Bank is barred in proceeding against the said properties under the provisions of the SARFAESI Act. Further, the Machinery Auction Sale Notice dt.29.06.2016 was dispatched on 30.06.2016 by registered post and same was served on the Applicant on O4.O7.2016 and whereas the auction of the machinery was conducted by the lst Respondent Bank on 1I .O7 .2016, without there being 3O days gap from the date of service of auction notice and date of auction and so, the said auction of the plant & machinery conducted by the 1"t Respondent Bank is bad in low. The reserve price fixed by the 1$ Respondent Bank is very 1aw when compared with the existing market price and the 1"t Respondent Bank has not obtained correct vaiuation of the properties from the approved valuer as contemplated under Rule 8(6) of the Rules, 2OO2. The 1st Respondent Bank has not published the statutory notices in two leading newspapers and has also not affixed the statutory notices on the schedule properties.

vi) While the present SA is pending, the l"t Respondent Bank with an ulterior motive issued Notice under Rule 8(6) and e-Auction Notice Rule 9(1) of the Rules, 2OO2, i.e., on 16.O2.2078, for auction ../,ffi o

assets on 28.O3.2018, thereby depriving the right of *-*Bthe Apifli

t to redeem the secured assets as contemplated '".:;.;;;;,;" r"ffit't'1

SARFAESI Act. Further, the 1st Respondent Bank

"'::;;ffi18 on the secured assets and has arso not pubrished

3

SA.No.289/2016

3.

the said notice in two leading newspapers. so, the l"t Respondent Bank has violated Rules 8(5), 8(6) , 8(7) & 9(1) of the Rules, 2oo2. The auction purchasers i.e,, Respondents No.2 & 3 herein have not deposited 25o/o and 75o/o bid amount within the time stipulated under Rules 9(3) & 9g) of the Rules, 2oo2 and so the alleged auction conducted and the consequential actions i.e., issuance of sale confirmation and sale certificates by the lst Respondent Bank are invalid, arbitrary and against the principles of natural justice, Hence the SA.

The 1st Respondent Bank filed its Reply and Additional Reply Statements denying all the adverse allegations made in the application. The contentions of the 1st Respondent Bank, in brief, are as under:-

The loan account of the Applicant became Non-performing Asset on o4.o4.2oll and so the lst Respondent Bank issued Demand Notice dt.16.05.2o11 u/s.13(2) of the sARFAESI Act calling upon the Applicant and other guarantors to pay the total outstanding dues of Rs.4,79,89,9681-. The Applicant replied to the said Demand Notice vide letter dt.r4.o2.2o11, which was received by the 1st Respondent Bank on 18.o7.2o1t. The l"t Respondent Bank sent its reply to the Managing partner of the Applicant on l8.o7.2oll in compliance of sec.13(3A) of the SARFAESI Act, which was returned with postal endorsement as Addressee Left,. Since the Applicant rice mill was already closed, it was not sent to the Applicant rice mill address.

The schedule of properties A-l to IV referred to in the Demand are no more agricultural lands as the entire land in question yerted into non-agricultural land by constructing a Rice year 2006 in the name of M/s. Srinidhi Agro Tech

nd the said partnership firm was reconstituted in the f O, changing the name of the firm as M/s. Durga

ffigrotectr Industries. The properties referred to in i)

Mill i

-B are only residential plots and hence there cannot be rQil

:":l

, I llltl

4

SA.No.289/2016 any allegation of the said property not coming under the purview of SARFAESI Act.

iii) The Applicant filed SA.No.2 tgl2olt challenging the earlier Possession Notice issued and the l"t Respondent Bank has withdrawn the said Possession Notice. Thereafter, possession Notice was reissued on 06.11.2014, which was also published in English and vernacular language newspapers on L2.ll.2ol4. The valuation reports were obtained in respect of the schedule properties from the approved valuer in respect of the schedule properties and basing on the valuation given by the approved valuer, reserve price of the properties has been fixed. The sale notices for the sale of machinery as per the hypothecation agreement were issued on 2s.o4.2o16 on 29.06.2016. The e_ auction sale notices in respect of the immovable properties described in application schedule were issued on 2g.l2.2ols, 09.06.2016, 22.O2.2017, 77.O4.2017, 16.02.2018 and on 06.03.2019. Before issuing the said e-auction notices, notices under Rule 8(6) were issued to the Applicant and other guarantors. The sale notices were affixed on the secured assets and were also published in two newspapers.

The machinery was sold as per the hypothecation agreement on t1.o7.2016, pursuant to the Sale Notice dt.2g.o6.2ot6. The said sale Notice in respect of the machinery was published in the newspapers dt.30.06.20 l6 and was also issued to the Applicant. In the auction sale of the machinery conducted on ll.or.2016, one Shri Mohd. Ismail stood as successful bidder for an amount of iu)

.nffi,oool-.:oo,,.o:,":':'"*ofentiresaleconsideration,Sale ,;i{'

.* "*ffi

l1.hH;:J:::: ::,li:fl::;:^l:.:

z 2016 and'[he

i I

O ,t* *

*$Jtion

schedures (i) to (iv) immovable properties were sord 1.$r,^'" -t#Mction conducted on 28.03.2018, pursuant to the Sale *s**#,,rffi 16.02.2018. rhe said Sare Notice dt.16.02. 2otl, issued

5

SA.No.289/2016 under Rule 8(6) & g(1) of the Rules, 2oo2, was sent to the Applicant and other guarantors, affixed on the secured assets and was also published in two newspapers. In the e-auction sale of the said application schedules (i) to (iv) properties conducted on 28.o3.2018, Sri v. Satya Murthy and Sri A. Abhilash i.e., Respondents No.2 & 3 herein stood as highest bidders for an amount of Rs.l,9r,22,g4sl-. They deposited the said amount within the period stipulated under the statute, which is as under:_ vi)

The present application is filed the litigation and therefore same by the Applicant only to protract is liable to be dismissed.

4.

The Respondents No.2 & 3 (auction purchasers) fired their common Reply Statement denying aI the adverse allegations made in the application and contending that, they are the successful bidders in the auction of the properties conducted by the 1st Respondent Bank and they purchased the schedule properties for a total sale consideration of Rs. 1,9 1,22,3451- and upon payment of the said amount, Sale certificate dt.r2.o4.2o18 was issued by the 1"t Respondent Bank in their favour and so they prayed for the dismissal of the present sA. ts of the respective Ld. Counsels.

6r.

l" qjril, 6. Now, the poin

at arise for consideration are,- 2$lut{2m ri) whet$:6t-tie Applicant has established any valid grounds

",.d$., s"tti#E*He fhe orrnrinn ^r +l^^ ^^r^^J--.r^ .^-^ for

by

S.No.

Amount Date

Mode of Transfer

01

Rs.19,00,000/- 22.O3.2018

Fund Transfer o2

Rs.28,83,0861-

28.O3.20t8 Fund Transfer

03 Rs. 1,20,00,000/ -

12.o4.2078 Fund Transfer o4 Rs.23,39 ,2591- 12.o4.20t8 Fund Transfer Total: Rs. 1,9 1,22,3451 -

'i{J**,,,.'., ,.,:.:+LftHFe t auction of

the schedute

properties conducted '.r..'!- 1r, i r ;th.t f,-:l'fttspondent Bank?"- l.l):.;* :-_ ;;:. _ ;*,ll -''

7.

SA.No.289/2016

ii) To what relieP Polnt No.(ll:-

During the course of arguments, Ld. Counsels appearing for the Applicant, lst Respondent Bank and Respondents No.2 & 3 reiterated the versions of the Applicant, 1st Respondent Bank and Respondents Nos.2 & 3, as stated supra.

There is no dispute regarding the fact that the Applicant ava ed roans from the l"t Respondent Bank for agri-business activity of running a paraboiled rice mill and mortgaged the apprication schedule properties in favour of the 1st Respondent Bank towards securiqr. The fact that the Applicant committed defaurt in repaying the loan amount is also not in dispute.

The specific contention of the Applicant is that application schedure properties are agricultural lands but the said properties were auctioned by the 1"t Respondent Bank though the said lands are exempted u/s.31(i) of the SARFAESI Act and so the sale of the schedule properties conducted by ths 1"t Respondent Bank is liable to be set_ aside. Whereas, the contention of the 1st Respondent Bank is that though the application schedule properties were agricultural lands as per the sale deeds deposited for creation of equitable mortgage, the entire lands in question were converted into non_agricultural lands by constructing Rice mill and the said lands are not being used for agricultural purposes and in fact the said schedule properties are l1:ary land and building, shed, equipment, rooms etc., bounded on all mpound wall for running rice mill activity, for which the ailed loans from the l st Respondent Bank and that the failed to establish that the said lands are used for at any time. So, it is contended that the 1"t

has rightly conducted the auction of the schedule

8.

9.

..?

:'$

,F

)

1

**' z u ffir**",-$ licant

duly following the procedure laid down under the

7

SA.No.289/2016 SARFAESI Act, while issuing Demand Notice, Possession Notice and the Sale Notice and to substantiate the same, the 1st Respondent Bank has filed copies of material documents along with its Reply and Additional Reply Statements.

10' The Applicant has not disputed the fact of receipt of Demand Notice dt.16.o5.2otl, issued by the 1"t Respondent Bank u/s.13(2) of the SARFAESI Act. However, it is the contention of the Applicant that though the Applicant has taken objections to the said Demand Notice vide letter dt.14.07.2ot1, the lst Respondent Bank without issuing any reply to the said objections as contemplated u/s.13(3A) of the SARFAESI Act, has proceeded u/s.13(a) of the SARFAESI Act. But, the lst Respondent Bank by filing a copy of the reply dt.2o.oT.2ol| issued to the objections taken by the Applicant, has proved that it has duly complied with Sec.13(3A) of the SARFAESI Act. It is a matter of record that, the Applicant filed SA.No.213l20tI challenging the earlier Possession Notices dated 16.07.2O1 1 and 27.OT.2O1 1 and however the said SA was disposed of by this Tribunal as the 1st Respondent Bank has withdrawn the said Possession Notices. Later oo, the 1.t Respondent Bank has issued fresh Possession Notice dt.06. tl.2ol4 and it is clear from the documents filed by the 1st Respondent Bank that the said Possession Notice was served on the Applicant personally and the said Possession Notice was also published in two newspapers. 11' As per the documents filed by the 1st Respondent Bank, the 1st Respondent Bank for the first time issued Sale Notice under Rules g(6) and also the e-Auction Notice under Rule 9(1) of the Rules,2OO2 on ..28i'? ry,*p.,fixing the auction of the immovable properties and plant & ,r,' -'

'machirrb+y,b1.

03.02.2016. Hovrever, it appears that the said auctio, i' :- did not maGritilize.

_ m[il]-Ba "i':' .,'{'tz' Subsequently, tI-re, 1"t Respondent Bank took possession of the plant & '., '" . machinery on-'15.03.2016 and to this effect, the l"t Respondent Bank filed copies of inventory and panchanama along with photographs

8

SA.No.289/2016

13.

taken at the time of possession. The 1"t Respondent Bank has also filed a copy of the letter dt.16.03.2016, issued by it to the Applicant and other guarantors, wherein it is clearly mentioned that on 14.O3 .2OlS, the Managing Partner viz., sri M. Sridhar was asked to come to the Unit for seizure of the machinery available at the Unit but he failed to attend and so, the lst Respondent Bank has seized the available machinery at the unit on 15.03.2016. so, it cannot be said that the Applicant was not put to notice for taking possession of the plant & machinery. Thereafter, the lsr Respondent Bank, by exercising its right under the hypothecation agreement, issued Sale Notice dt.29.06.2016 for auction of the machinery fixing the date of auction on 1 I .or.2016. A copy of the said Sale Notice issued to the Applicant and copies of publication of the said sale Notice in the newspapers dt.30.06.2016, are filed by the 1st Respondent Bank in its material documents. In the auction sale of the machinery conducted on ll.or.2016, one Shri Mohd. Ismail stood as successful bidder for an amount of Rs.23,6s,000/- and on depositing of entire sale consideration, Sale Certificate was issued in his favour on 16'07 '2o 16 and the machinery was delivered to the auction purchaser. A copy of the Sale certificate dt.16.07.2016 in respect of the machinery, issued in favour of the auction purchaser, is filed by the lst Respondent Bank in its material documents.

Even though the lst Respondent Bank has contemplated sale of the immovable properties by issuing e-Auction Sale Notices on various occasions i.e., on 28.r2.2o15, 09.06 .2016, 22.02.2orr, rr.o4.2o17, the sale did not materiarize. Finaly, the sale of application schedules (i) to --r;*P=.ff€Iable

properties materialized pursuant to the e-Auction Sale pf6cedure plated under the SARFAESI Act and the Rules, 2002, 2⁰"I[tlJ@r,ardg the auction of the application schedules (i) to (iv) 8.03.2018, pursuant to the e-Auction Sale Notice t4.

."',f;c$fu,Fed'e}W2.2ot8 fixing the date or auction on 28.o3.2ol.8.^{so, it} l-" ffi,o u.ffiined whether the 1st Respondent Bank has followed the The contention of the Applicant that the 1st Respondent

9

SA.No.289/2016 .,,,/

-7:

;/,,S'

'

k

Bank has failed to obtain valuation report from the approved valuer as contemplated under Rule 8(5) and the reserve price fixed by the 1st Respondent Bank is much less than the market value of the schedule properties is negated by the 1st Respondent Bank by filing valuation reports obtained from the approved valuer, basing on which it has fixed the reserve price of the properties. The 1st Respondent Bank has filed a copy of the Rule 3(6) Notice and the e-Auction Notice dt.16.02. 2}lg, issued to the Applicant and other guarantors along with copies of returned postal covers and postal acknowledgements, from which it is clear that the l"t Respondent Bank has duly sent the said notices to the Applicant and other guarantors. The l"t Respondent Bank has also filed copies of photographs taken at the time of affixture of the sale Notice on the secured assets and also the copies of publication of the e- Auction Notice under Rule 9(1) of the Rules, 2oo2, in English and vernacular language newspapers. so, the said documents amply prove that the 1st Respondent Bank has duly complied with Rures g(6), g(7) and 9(1) of the Rules, 2OO2.

15' In the auction conducted on 2g.o3.2o1g, Respondents No.2 & 3 stood as successful bidders in respect of the application schedules (i) to (iv) properties for the sale price of Rs. r,gr,22,34s l - and on deposit of entire sale price, the lst Respondent Bank has issued Sale certificate dt.72.o4.2018 in favour of Respondents No.2 & 3, a copy of which is filed by the 1st Respondent Bank in its material documents. It is the contention of the Applicant that, the Respondents No.2 & 3 have not deposited the sale price within the time stipulated under Rule g(3) & (4) of the Rules, 2002. But, it is very crearly mentioned by the lst :ffiankintheSaleCertificatedt.12.O4.2oL8issuedinfavour^. rrr Lrrc Dare uerflrrcate dt.12.o4.20Lg issued in favour No.2 & 3 that, it has received the sale price of

,91,22,3*p7,- by way of transfer of money i.e., Rs.19,00,000/_ on

-tf-&ft" -o *{

,

o'""ffin."

K#l. l

? $ TlflqBta; rFn.28,83,086/- on 28.03.2018; Rs.1,20,00,000/- on - t:2 04'o:.8,.S,$ finallv Rs.23,3e ,2ss r- on 12.04.2018 by way of NEFT. So, 1,.ie;1-$i'that, as on the date of auction i.e., 2g.o3.2ot8, the

Responiieirts No.2 & 3 deposited Rs.47,g3 ,086l- es%o of the sale price)

10

11

and the balance of amount i.e., Rs.1,43,3g,2gg /_ (ZS% of was deposited by them on l2.o4.2olg, which is within 15 not find any violation/non-compliance of Rule 9(S) & (4)

2002.

SA.No.289/2016 the sale price) days. So, I do of the Rules, 16' Thereafter, the lst Respondent Bank contemplated sale of remaining secured assets by issuing Rule g(6) Notice dt.27.r2.201g, a copy of which along with returned postal covers was filed by the 1st Respondent Bank in its material documents. Thereafter, the 1sr Respondent Bank issued sale Notice dt.o6.03.2olg for sale of application schedules (v) &

(vi) properties, fixing the date of auction on ts.o4.2olg. The lst Respondent Bank has fited a copy of the said Sale Notice dt.1s.O4.2olg along with copies of publication of the said notice in English and vernacular newspapers dt.13.03.2019. In the auction conducted on l5'o4'2o19, one Sri Nakka Nagaraju stood as successful bidder in respect of schedule (vi) property for a sale price of Rs.6,30,0o0/_ and on deposit of 25oh of the bid amount, the 1st Respondent Bank has issued sale confirmation letter dt.17.o4.2olg advising the said highest bidder to deposit the balance Tsoh of the bid amount i.e., Rs.4,72,oool_ on or before o2.o5.2o19. A copy of the said letter dt.1 7.o4.2019 is filed by the 1"t Respondent Bank in its material documents.

17.

As per the documents liled by the referred supra, it is clear that the followed the procedure laid down conducting the auction of the secured l"t Respondent Bank, which are 1st Respondent Bank has duly under the SARPAESI Act while assets.

18' Tjrolicant having taken a specific plea that application schedule ,.*.:'-;::^*&.- ,,:r'i1*1s-8{off '' "*.'-u.effeCt

are agricultural lands, has not filed any document to the

.+""-'6';&"*-"Wt thmfl*.tstffultural activity is being conducted in the said property. ' r@1 trom fpe\usal of copies of photographs filed by the Applicant, it is oi$-.milt*:;l:JJT:T::,:'J:'il:'::JT::T.*:::;

oot:*T,t""t' If':establishing that it is running agricultural operations in

SA.No.289/2o16 the said property. Moreover the copies of photographs filed by the l"t Respondent Bank, which are taken at the time of affixture of statutory notices, clearly estabrish that factory building and shed are constructed in the disputed property. Even according to the Applicant, it has availed loans from the l"t Respondent Bank, for running rice mill in the disputed property. So, when the schedule properties are factory land and building with equipment and machinery installed in it, the Applicant is estopped from contending that the schedure properties are agricultural lands.

19. The Hon'ble Apex Court in a recent judgment in the case of ,.K. Sreedhar Vs. M/s. Raus Constructions put. Ltd..,,, reported in 2023 SCC online sc 13, has categoricaly held that when the borrower is contending that the land which is mortgaged in favour of the secured creditor is an agricultural land, the burden lies on him and it is not for the secured creditor to prove that the said land is not an agricultural land and it is not being used for the agricultural activities. paragraphs 7, 7.1, 7.2 & 7.3 of the said judgment are relevant, which are reproduced below:-

7.

-Now,^so far as taith respect to remaining properties /seanred assets uiz. Item Nos.3 oid g to i2 and titi submission on behalf of the borrowers thot os the

"aia ,cn irlei properties uere agricwltural properties, therefore the said. properties were ?.\ot"q from the prouisions o1 itte senfaasi ait in uieu.t ofSection 31(i) of the SARFAEST atr ls "o"."^"i,- ii1-he outset, it is reEtired to be noted. that except the reuenue record.s, the ?.::_:y::: did not.fite ans. euidenci to "n"* tnoi-^in"

-asicutturat

tDorK u)as betng d.one in the said properties. On the contrary, the secured creditor produced the photigraphs to slnut that there was no agricultural actiuiti.es being d.one and_ no agicultural

. - -._.:-_ -*=f\^,

Ct'cl\ -- .B a.ctiuity was going on. The High C6urt has ;i"";;"; and held. 131{f .::l"r"t:l p:?."!:g". in question *L,.-"""^pt.a y,o^rns o/ SARFAESI Act in uieta of Section 3ili) oi;;;;Act on the ground that the ieuenue ,."iiar'ini -books and tt@ title d.eeds show that thiz agicultural properties / land s and. that no .!!fSg ls\frroduced bs the' ".*r"i "i"iitoi inot n"""non-agianlfural lands and haue been put to non_ e afier obtaining permission from the' competent

rcrefbre, the High Court has shified. the iurd_en

red creditor to proue that the properties or. nir_

'-J,.-*

1O JU

lands. The uiew taken bg the'nigh i.ii'L ist

12

13

contrary to the ttuo decisions of this court in the case of Brue coast Hotels Limited" and otheis (supra)

"a i.-p"ppired.digarand Another (supra). In both the afoiesaid" decis;ionJ, thi" court has- spectfi.callg obserued. and herd. after "o""ii"riig the object and purpose of section sl(i) of tne senpelSl Actinat m"i.tgbecause in the reuenue record.s the secured_ properties are s^\own as agricalturar rand" is not sufficient to Lttiact section 31(i) of the SARFAESI Act. In the -iforesaid. decision, lf is speciftcallg obserued and" herd. that for ih" purpo"e if attracting section 31(i) of the sARFAESI Act, the piopirties in question ought to be actually used. as agriculLtural land.s at the time when the secuitg interest was

"r"ot"d".

In the case of- Brue coastHotels Limited and others (supra), it rs a/so furthei Jserued" by this court that since no seanriig interest can be created. inre_spect of agricultu.ral l-a.nds and. get it was so created., goes to show .that the parties did. not treai the rand. as agicatturar tand and thot the debtor offered. the land. o" ""aralj oi-tni" basrs. {t., fo-llouing the d.ecision of this court in tie case of Brue coast Hotels Limited and. oihers (supra), in the io"" of K. Pappireddigar and Another (supra), it is obserued" and held. inparagraphs B and 9 as und.er:

"8, The expression ,,security interest',, both before and after the amend.ment, exclud"es what i" "p"i\r"i in Section 31. Clause (t) of Section 31 stipulatLs that the proubions of the Act will not be applicable to any securitg interest created. in agricultural tand. The statutory dictionary in section -2 d.o"s not contain q d_efinttion of the expression ,,agricultural lan"d,,. Whether a particutar piece of land. is agricultuit fn nature is a question of fact. In the d-ecisioi of this couLrt in Blue Coast Hotels Ltd..,a securitg inierest wascreated in respect of seueral parcets" of land *ii"nwere meant ,o .b7.a^part of a single unit, fo,establishing a hoter in Goa. some of the parcets'wLre purchased by the debtor from agriculturiits and. were

7!er9d as agricultural land.s ii the reuenue records.

The debtor had applied. to the reuenue authoritg for theconuersion of the land to non_agricultural usei 6ut the applications u)ere pending. This court held" that the

fact that the debtor had" ciated. a secaritg interest waslndicatiue of the position that the partiei did not treat the land as agricultural lqnd.. The undisputed" position

y:^t\?t.:.|? !:"t:*as tocated" on 1,8b,22s sq i .f

SA.No.289/2016

?0 rui|m

land of which 2335 sq m were ttsed" for g;o*ingiuqffilab/es yn! fruits for captiue consumption. tn this nd, the tuo-Judge Bench of this Court hetd

The mortgage is thus intend.ed. to couer

ire property of the Goa Hotel. prima

ayart from the fact that the parties

;.elues understood that the lands in

tton.are not agricultural, it also appears

hauing regard to the use to wniii tney

.,s

:i'.- *4..

,l)'o, i-iYoel#{:{}v{ff$" Y,!

!4 are put and the purpose of such use, theu are indeed not agicaltura.l.i: r The Court further held. that:

"57. ...hauing regard" to the cha"racter of the land the ?urpose for which it is set ipii,we are of the uiew that the land. in queition is not an agricultural land. The Hign Coii

misdirected itsetf in holding that "the lanLd

u)as an agricultural land merelg because it

stood as such in the reuenue intries, euen though the application mad.e for suchconuersation lies pending till d"ate.,; 9 rlt'e classification of rand. in the reuenue records as agricaltural is not d"ispositiue or conclusiue of the question whether the sARFAESI Act does or dois not appla. whether a parcer of rand" is agricurtui"i ii,"t au deduced as a. *"t:31 of fact yrom"the "iri'n"ly tn"land, the use to which il was Leing put on ti. iit" oythe .creation of the securitg interest and the purpose fortuhich it was set apart.,, l'l rle purpose of enacting section sr(i) of the sARFAESI Act has been consid.ered. bg tiis court in tirc""i". j-iru" coastHotels Ltd. (supra) in paragraph 36, ,thich read.s as under:

SA.No.289/2016

"36. The purpose of enacting Section 31(i) and the meaning of the term ,,agicultural land"i, o""u*.signifi.cance. This prouisiin, like manA others rs intended to protect agriculturat lani n"ta- jo,agricultural purposes ba agricutturbts yroi ii"ertraordinary prouisions of thii ect, tahich piouii"""\L, enforcement of securitg inierest tuiihout inieruentiii oy the Court. lhe ptain intention of the prouision is to exempt agricurturar rand from the- prouiiions of the Ait.In other words, the cred.iio,

"onnoi enforce

""U ",iii.a interest created. in his fauour uithotut inteiention ofthe court or tribunal, if such ""ruitg ;;;;;;;t; i"respect of agricultural ta.nd.. The exemption thus protects agriculturists

. frory losing their "our""

-

iytiuelihood and income i.b. the "gri;rttirii u6'",i"a\,the drastic prouision of the aci n rs a/so intendei lo ?1": t!" :r?t^{o1t .of} 2ecaritg intere:st ouer agricutturat '.1:f!_^:: 1:{::! in section" 2(l)(zflss. rhuJ, security ;1ff.1?'j" ",1T:]., ?" -Sryated

in respect of property

? 0 rffi m'.TJft l!:,a',;:i? ; l!J, "!_i,k;"i ry;; ::;' "zix;:

in Section 31."

?S\P. o.r, .the tqw taid d.own by this Court in the

nd solelg on

::{ !!" .reuenue record"i / p"tt"a"r*ir"i """"",#

the

(topeny is put as a secLtrity bg wag of mortgage erithere by the same was not treaied" as agricultural land", !

14

15

such properties cannot be said. to be exempted. from the prouisions of the SARFAESI Act und.er secti6n 3ili) of thes.A{r.AEsr Act. Apprging the lau raid down in tie aforesaid" twodecisions to the facts of the co,se on hand and when no euid.ence was led at all on beharf of the borrowers that the secured. properties in question u)ere actually put to use as agricttltural l2nd and/or ang agricurturar actiiitg *o" goinj-oi, th" ,ighcourt h,,s committed an error in apptying "section 31(i) of the SARFAES/ Acf and quashing and- Jetting a.side- the entirePossession Notice, Auction Notice as weil as"sare etc. l'3 rhe High court h,,s arso materiailg erred in shifiing the burden upon the seanred. cred"itor to proue that the properties were not non-agrianrturar rands or ha.ue been put to non- agricwlturar use. when it wo,s the case on ainat| 0f the borrowers that in uiew of section sl(i) of the sARFAESI Act, the properties u)ere agrianltural land.s, in" same i"r" beingexempted from the prouisions of the sARFAESI Act, the burd.en was upon the borrower to proue that the secured" properties were agricultural rands and actuailt4 being used as agricurturar lands and/ or agicurturqr actiuities were going on. Therefore, the High court has materiailg erred" in shifiiig tie uuraen upon thesecured creditor to proue that the properties are non-agricarturar lands or haue been put to non-agicutiuroiu"i.- '-"'' *' sA.No.289/2016

20' so, as per the ratio raid down by the Hon,ble Apex court in the

aforesaid judgment, it is very clear that the Applicant herein has to

establish that the land in dispute is an agricultural land and it is

actually being used for agricultural purposes. But, no material is placed

by the Applicant for estabrishing that the disputed rand is an

agricultural land. The very fact that the Applicant was running rice mill

by constructing factory building with equipment and machinery erected

in the disputed land disproves the version of the Applicant that the said

land is an agricultural land. So, when the land in dispute is not an

agricultural land, the lst Respondent Bank is entitled to proceed under

the provisions of the SARFAESI Act, in the event

of committing default was availed by it bythe loan by the Applicant, which '):

21, So,

16

that the 1st Respondent Bank has failed to follow the procedure laid down under the SARFAESI Act, in issuing Demand Notice, possession Notice and the sale Notice, including conducting of auction of the applicant schedule properties. So, I do not find any merits in the present SA and same is liabte to be dismissed. Accordingly, this point is answered against the Applicant.

Point No.liit:-

--

SA.No.289/2016

dismissed.

?ny, shall

22.

In the result, the present Securitization Apprication Consequently, the Interlocutory Applications, pending stand disposed of. No order as to costs. is

if

23. communicate a copy of this order to the parties concerned. (#';."^'r:&':;.H;W:tary, transcribed bs him, corrected, sisned and pronounced bs me in the open court on this sd/-

(G. coPrcHAND)

Presiding Officer

*

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TRUE^COPY

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