Dismissed

Ms Bachhal Poultry Farm and another v. Union Bank of India

DRT28 Nov 2023SA/303/2023

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed a Securitisation Application filed by borrowers challenging enforcement proceedings over agricultural land used for poultry farming. Holding that poultry farming is an agricultural activity, the court noted that Section 31(i) bars enforcement of security interests in such land, rendering the proceedings illegal.

What did the court decide?

The Securitisation Application No.303/2023 was dismissed with costs, and the securitisation proceedings held contrary to Section 31(i) were ruled illegal.

Ms Bachhal Poultry Farm and another versus Union Bank of India — Banking and Recovery | DRT (2023)

¶1

DEBTS RECOVERY TRIBUNAL-2, CHANDIGARH, PRESIDED OVER BY M.M. DHONCHAK

¶2

SECURITISATION APPLICATION NO.303/2023

¶3

DATE OF INSTITUTION: 20.11.2023

¶4

DATE OF DECISION: 28^th DAY OF NOVEMBER, 2023

¶5

M/s Bachhal Poultry Farm, running their business at Village Rattanheri, Tehsil and District Ambala (Haryana)-133104, through its Proprietor, Ms Jaswant Kaur w/o Sh. Harbans Singh

¶6

Ms Jaswant Kaur w/o Sh. Harbans Singh r/o House No. 40, Mahesh Nagar, Ambala Cantt., District Ambala (Haryana)-133101

¶7

….. Applicants

¶8

Versus

¶9

Union Bank of India, Nicholson Road, Sadar Bazar, Ambala Cantt133001, through its Chief Manager

¶10

Union Bank of India, SAM Branch SCO Nos. 137-138, Sector 8-C, Chandigarh, through its Chief Manager

¶11

…..Respondents

¶12

Argued by: Sh. Baldev Singh Advocate for the applicants (SA) Sh. Saurabh Bhardwaj Andvocate for the respondent bank

¶13

FINAL ORDER

¶14

This Securitisation Application has been filed under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’ for brevity).

¶15

In brief, it is the case of the applicants that the respondent bank granted agricultural credit facilities to the tune of Rs. 20 lac as CC limit plus Rs. 10 lac as term loan for agricultural purpose and establishment of poultry farm on 25.03.2016; that applicant No. 2 mortgaged her agricultural land measuring 7 Kanal 14 Marla and mortgage deed dated 22.03.2016 was executed in this regard; that the account of the applicant was declared as NPA on 31.01.2020; that the respondent bank had

¶16

SA/303/2023 M/S BACHHAL POULTRY FARM AND ANOTHER VS UNION BANK OF INDIA 2

¶17

issued notice under Section 13(2) of the Act on 10.02.2020; that the symbolic possession of the mortgaged land was taken on 29.06.2020; that on 09.11.2023, the respondent bank had sent notice under Rule 8(6) of the Security Interest Enforcement Rules, 2002(hereinafter referred to as the ‘Rules of 2002’ for brevity) for holding e-auction of the agricultural land; that an amount of Rs. 5 lac was deposited by the applicant with the respondent bank on 26.09.2023 and the securitisation proceedings were beyond the scope of the SA being in contravention of Section 31(i) of the Act.

¶18

In reply to the SA, it was contended that no agricultural land under cultivation was mortgaged with the respondent bank and only 7 Kanal 17 Marla land wherein poultry farm was built by the applicants along with structures and stocks and path were mortgaged with the respondent bank. It was also contended in the reply that provisions of the Act were duly complied with. Rest of the averments made in the SA were denied in reply to the SA.

¶19

I have heard learned counsel for both the parties and also gone through the record carefully.

¶20

It was argued by the learned counsel for the applicant that primarily the question involved for adjudication was whether the poultry come within the ambit of agricultural activity or it was otherwise. It was further argued that poultry farming was also an allied agricultural activity as per Section 2 (a) and (b) of the Haryana Agricultural Credit Operations and Miscellaneous Provisions (Banks) Act, 1973.

¶21

Learned counsel for the respondent bank has placed reliance upon the Judgment of Hon’ble Supreme Court in the case of ‘ State of U.P. Versus Nand Kumar Aggarwal’, 1998 AIR (Supreme Court) 473, wherein it was held that if the land is mainly used for the purpose of brick kiln business, it will not be material if a small portion thereof was being used for the purpose of agriculture. It was further held that agriculture under the explanation to Clause (O) of Section 2 of the Act, has limited meaning and it includes horticulture but not include cultivation of every type of vegetation or rearing of animals or birds.

¶22

It was admitted by the learned counsel for the parties that as per the Revenue Record, the land in question was shown as agricultural. As per Sh. Baldev Singh Advocate, 3 Kanal land was having agricultural

¶23

SA/303/2023 M/S BACHHAL POULTRY FARM AND ANOTHER VS UNION BANK OF INDIA 3

¶24

activity over it whereas remaining land was for poultry farming. Sh. Baldev Singh Advocate drew the attention of this Tribunal towards Section 2(a) of the National Bank for Agricultural and Rural Development Act, 1981, wherein it has been mentioned that agriculture also includes poultry farming. He further placed reliance upon Master Circular on Priority Sector lending-UCBs Clause 2.1, wherein it was provided that agriculture (Direct and Indirect Finances) shall include short, minimum and long-term loan given for agriculture and allied activities (dairy, fishery, piggery, poultry, bee keeping, etc).

¶25

The Hon’ble Supreme Court in the case of ‘Indian Bank and Another Vs. K. Peppirediyar and another in Civil Appeal No. 6641 of 2018 decided on 20.07.2018’, held as under:

¶26

The classification of land in the revenue records as agricultural is not dispositive or conclusive of the question whether the SARFAESI Act does or does not apply. Whether a parcel of land is agricultural must be deduced as a matter of fact from the nature of the land, the use to which it was being put on the date of the creation of the security interest and the purpose for which it was set apart.

¶27

The Hon’ble Supreme Court held that the question as to whether the land is agricultural has to be determined on the basis of the totality of facts and circumstances including the nature and character of the land; the use to which it was put and the purpose and intention of the parties on the date on which the security interest was created.

¶28

Again, Hon’ble Supreme Court in ‘ITC Limited Vs. Blue Coast Hotels Limited and Others’ (2018) 15 Supreme Court Cases, 99’ held as under:

¶29

“36. The purpose of enacting Section 31(i) and the meaning of the term “agricultural land” assume significance. This provision, like many others is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court. The plain intention of the provision is to exempt agricultural land from the provisions of the Act. In other words, the creditor cannot enforce any security interest created in his favour without intervention of the Court or Tribunal, if such security interest is in respect of agricultural land. The exemption thus protects agriculturists from losing their source

¶30

SA/303/2023 M/S BACHHAL POULTRY FARM AND ANOTHER VS UNION BANK OF INDIA 4

¶31

of livelihood and income i.e. the agricultural land, under the drastic provision of the Act. It is also intended to deter the creation of security interest over agricultural land as defined in Section 2(1) (zf). Thus, security interest cannot be created in respect of property specified in Section 31.

¶32

37. In the present case, security interest was created in respect of several parcels of land, which were meant to be a part of single unit i.e. the five star hotel in Goa. Some parcels of land now claimed as agricultural land were apparently purchased by the debtor from agriculturists and are entered as agricultural lands in the revenue records. The debtor applied to the Revenue Authorities for the conversion of these lands to non-agricultural lands which is pending till date due to policy decision.

¶33

38. It is undisputed that these lands were mortgaged in favour of the creditor under a deed dated 26.02.2010. Obviously, since no security interest can be created in respect of agricultural lands 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. The undisputed position is that the total land on which the Goa Hotel was located admeasures 182225 sq. m. Of these, 2335 sq. m are used for growing vegetables, fruits shrubs and trees and captive consumption of the hotel. There is no substantial evidence about the growing of vegetables but what seems to be on the land are some trees bearing curry leaves and coconut. This amounts to about 12.8% of the total area.

¶34

39. The Corporate Loan Agreements that deals with the mortgage in question in the relevant clause reads as follows:

¶35

“The borrower shall create mortgage on exclusive basis on the ‘Park Hyatt Goa Resort and Spa’ Hotel Property admeasuring 1,82,225 sq m with a built-up area of 25182 sq m situated at 23 C Arossim, Canasaulim Goa. The mortgage is thus intended to cover the entire property of the Goa Hotel. Prima facie, apart from the fact that the parties themselves understood that the lands in question are not agricultural, it also appears that having regard to the use to which they are put and the purpose of such use, they are indeed not agricultural.”

¶36

SA/303/2023 M/S BACHHAL POULTRY FARM AND ANOTHER VS UNION BANK OF INDIA 5

¶37

To a question put to the learned counsel of the respondent bank as to what was going on the spot, he stated that the poultry activities were going on at the spot in question. When the poultry activity is agricultural activity, the nature of land in the facts and circumstances of the present case remains agricultural. Therefore, the securitisation proceedings in respect of the agricultural land being barred by the provisions of Section 31(i) of the Act, cannot be said to be legal.

¶38

No other point was urged before this Tribunal.

¶39

In view of the above discussion, the SA is dismissed with costs.

¶40

Pronounced in the open Tribunal

¶41

(M.M. Dhonchak) Presiding Officer DRT-2, Chandigarh

Ms Bachhal Poultry Farm and another v. Union Bank of India

Case brief

What is this about?

What did the court decide?

Ms Bachhal Poultry Farm and another v. Union Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

M/s Sham Cotton & General Mills versus State Bank of Patiala

Sh Varinder Singh versus the Baghat Urban Co. Operative Bank Ltd.

Sadda Swetha versus Hdfc Housing Finfnce Ltd. Limited

Punjab National Bank (United Bank of India) versus M/S Ganesh International

Uco Bank versus M/S Shivam Building Material

Jabeena Afroz versus Jammu and Kashmir Bank Limited