Mere Depiction Of Secured Property As Agricultural Land In Revenue Records Won't Exclude It From Purview Of SARFAESI Act: Himachal Pradesh High Court

The Himachal Pradesh High Court has recently reiterated that the mere depiction of a secured property as agricultural land in revenue records does not qualify for Section 31(i) of the SARFAESI Act. For the provision to apply, the property must have been genuinely utilized as agricultural land at the time of establishing the security interest, it clarified.

Section 31(i) of the SARFAESI Act refers to the protection of agricultural land from being sold by a secured creditor without the prior approval of the Chief Metropolitan Magistrate or the District Magistrate. This provision only applies if the land in question is actually used for agricultural purposes at the time when the security interest was created.

The observations were made by Acting Chief Justice Tarlok Singh Chauhan and Justice Virender Singh while hearing a plea in terms of which the petitioner had prayed for a writ of certiorari seeking quashing and setting aside the impugned sale notice passed by the District Magistrate, Shimla and notice under Section 13 of SARFAESI Act for being illegal, arbitrary and bad in the eyes of law. The petitioner further prayed that a writ of mandamus may be issued, directing the respondent Bank to afford the petitioner opportunity of One Time Settlement with regard to repay of the outstanding amount of House Loan.

In the instant matter the petitioner had obtained a house loan from the respondent bank and subsequently took another loan to complete the house. Despite repaying the initial loan, the petitioner owed an amount of Rs. 2,91,823 to the bank. The petitioner was willing to enter into a settlement with the bank, but the bank started proceedings to sell the petitioner's agricultural land. As a result, the petitioner filed the instant writ petition.

Challenging the sale the petitioner contended that the respondent bank has sought to sell his agricultural property contrary to the provisions of Section 31(i) of the SARFAESI Act, and hence the same needs to be set aside.

Adjudicating upon the matter the bench observed that the perusal of the record reveals that the petitioner had obtained the house loan and not agricultural loan from the respondents and he has defaulted in repaying the same and thus essentially, the land was not agricultural.

Referring to Indian Bank and Another vs. K. Pappireddiyar and Another (2018) 18 SCC 252, the bench observed merely because in the revenue records the secured properties are shown as agricultural land is not sufficient to attract Section 31(i) of the SARFAESI Act. For the purpose of attracting Section 31(i) of the SARFAESI Act, the property in question ought to be actually used as agricultural land at the time when the security interest was created, the bench underscored.

Relying on ITC Limited vs. Blue Coast Hotels Limited and others (2018), the bench explained that since no security interest can be created in respect of agricultural land and yet it was so created, goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis.

In view of the said legal position the bench noted that there was nothing on record to suggest that the land in question was actually being used as agricultural land.

"Rather, there is an overwhelming material on record to suggest that the petitioner offered this land as security for availing of the loan facility and if that be so, obviously, the provisions of Section 31(i) of the SARFAESI Act are not at all attracted to the present case as the loan otherwise had been availed for completion of house and not for agricultural purpose or activities", the bench pointed.

Thus, the bench found the petition devoid of any merit and dismissed the same.

Case Title: Rakesh Kumar Kashyap Vs State Bank of India

Citation: 2023 LiveLaw (HP) 35

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