Allowed

Ms Rishabh Layer Farm v. Bank of Baroda

DRT29 May 2023SA/65/2023

Case brief

AI extract

What is this about?

The Tribunal considered an application challenging the bank's possession of land mortgaged for a poultry farm. Determining that lands used for allied agricultural activities like poultry farming qualify as agricultural land under Section 31(i), the Tribunal exempted the property from the Act's enforcement provisions and allowed the application.

What did the court decide?

Securitisation Application allowed with costs; bank's enforcement action on the agricultural land quashed.

Ms Rishabh Layer Farm versus Bank of Baroda — Banking and Recovery | DRT (2023)

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

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SECURITISATION APPLICATION NO.65/2023 DATE OF INSTITUTION: 22.03.2023 DATE OF DECISION: 29^th DAY OF MAY, 2023

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M/s Rishabh Layer Farm, VPO Rakhi-Khas, Tehsil Narnaund, District Hisar, Haryana-125039, through its Proprietor, Sh. Vipin Malik

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Sh. Vipin Malik S/o Sh. Raj Singh Malik R/o Rakhi-Khas, Tehsil Narnaund, District Hisar, Haryana-125039

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……Applicants

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Versus

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Bank of Baroda, Zonal Stressed Asset Recovery Branch, SCO No 905, 2^nd Floor, NAC Manimajra

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....Respondent

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Argued by: Sh. Ashok Malik Advocate for applicants (SA) Sh. C.S. Pasricha Advocate for respondent Bank

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FINAL ORDER

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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).

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In brief, it is the case of the applicants as per SA that applicant No. 1 is proprietorship firm; that applicant No. 2 is sole proprietor of applicant No. 1; that applicant No. 1 is running a poultry farm and engaged in agricultural and allied activities; that on 10.09.2014 applicant firm was sanctioned term loan of Rs. 94 lacs and cash credit of Rs. 14 lacs; that account of the applicants was wrongly classified as NPA on 28.01.2016 in gross violation of RBI prudential norms and Section 2 of the Act and the Rules framed thereunder; that demand notice dated 17.06.2016, was issued for an amount of Rs. 110.14 lacs; that out of the total land measuring 4.3 acres, the applicants had

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SA/65/2023 M/S RISHABH LAYER FARM AND ANOTHER VS BANK OF BARODA 2

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constructed a poultry farm comprising of 2 sheds measuring 111 square yards each on area measuring 0.30 acre and the remaining land measuring 4 acres is being used solely for agricultural purposes; that on 28.02.2023 possession of the land was taken illegally in respect of 2 poultry sheds along with agricultural land; that demand notice dated 21.01.2017, was never served upon the applicants; that respondent bank had no jurisdiction in view of Section 31(i) of the Act; that jamabandi and khasra girdawari for the Year 2021-2022 clearly corroborate the claim of the applicants; that the land is agricultural and no other activity except cultivation is being done on the same; that applicant No. 1 is MSME Enterprise which should have been rehabilitated by the respondent bank; that the account became eligible for classification as a sick MSME Enterprise on 28.04.2016 and there being exposure of above Rs. 1 crore, the bank ought to have formed a Committee and conducted a viability study and sanctioned a package of relief and concession latest by 30.07.2016 and the Act is not applicable to potentially viable sick MSME Enterprises.

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Reply to the SA was filed wherein inter alia it was contended that the respondent bank was proceeding against the mortgaged property; that notice under Section 13(2) of the Act was duly served and acknowledged by the applicants; that symbolic possession was taken and thereafter, physical possession was taken on 28.02.2023; that when possession was to be taken under Section 14 of the Act, the provisions of Rule 8(1) would not be applicable; that the property in question was not agricultural; that the nature of the property on the day of creation of security interest was to be seen and till the time possession was taken on 28.02.2023, the property was not agricultural in nature. Rest of the averments made in the SA were also denied in reply to the SA.

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Rejoinder to reply to the SA was filed wherein the averments made in the SA were reiterated and that of the reply to the SA were controverted.

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

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SA/65/2023 M/S RISHABH LAYER FARM AND ANOTHER VS BANK OF BARODA 3

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It was argued by Sh. C.S. Pasricha Advocate that the bank had obtained valuation report dated 17.12.2022 in respect of the property in question wherein the nature of the property was specifically mentioned as industrial and not agricultural. It was argued by the learned counsel for the applicants that the secured asset was agricultural property and thus, it was exempted from the proceedings under the Act in view of Section 31 (i) of the Act. On the other hand, Sh. C.S. Pasricha Advocate argued that the property in question, was being used for running a poultry farm and running a poultry farm was not an agricultural activity. It was argued by Sh. Ashok Malik Advocate that the sheds where the poultry activities were being conducted, was standing on the land measuring around 1800 square yards or .03 acre of the total mortgaged land measuring 35 Kanals 9 Marlas, i.e. 4.38 acres.

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On the other hand, Sh. C.S. Pasricha Advocate argued that the mortgage was created for the purpose of poultry activities and not for the agricultural land. It was further argued that at the time of taking possession, no agricultural activity was going on the spot. On the other hand, Sh. Ashok Malik Advocate argued that photographs Annexure A6 made it amply clear that agricultural activity was going on in the land, which was not covered by the sheds and in the sheds, poultry activity was going on.

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It was argued by Sh. C.S. Pasricha Advocate that as per valuation report, it was industrial land and building. Sh. Ashok Malik Advocate argued that as per valuation report furnished by the respondent bank, the actual area of floors was 16,980 square yards. It was argued by Sh. C.S. Pasricha Advocate that rearing of the birds or running of hatchery was not an agricultural activity in view of the law by the laid down by the 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

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include cultivation of every type of vegetation or rearing of animals or birds.

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Sh. Ashok Malik Advocate argued that out of the total land only a small portion was being used for poultry activity and even, if poultry activity was not deemed as an agricultural activity, the respondent bank had no right to sell the land which was not part of the two sheds.

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Sh. Ashok Malik Advocate further argued that there were four parcels of land and the land was not one unit as suggested by Sh. C.S. Pasricha Advocate during the course of the arguments.

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From both the sides, photographs have been produced before this Tribunal to show the land being under cultivation or otherwise. The photographs produced by the respondent bank show that the land was not under cultivation but the photographs shown by the applicants show that land was under cultivation. A piece of land is not supposed to be having crops over it round the clock. Therefore, this Tribunal is not inclined to accept the version of the respondent bank and it is more inclined to accept the version as set up by the applicants. The reason behind this inclination of the Tribunal is the fact that the land is otherwise being shown agricultural in the revenue record produced by the applicants. Even otherwise, it is not the case of the respondent bank that some other activity is going on in the land in question.

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The facts and circumstances of the case in hand and the case of State of UP versus Nand Kumar Aggarwal (supra) being not identical, the authority (supra) is not applicable to the case in hand.

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“The Hon’ble Supreme Court in the case of “Indian Bank and Another Vs. K. Peppirediyar and another (2018)”, held as under:

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“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.”

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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

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

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“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 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.

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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.

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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

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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.

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

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“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.”

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No other point was urged before this Tribunal.

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Coming to the facts of the present case, the applicants have produced on record revenue record showing the land as agricultural. There is no force in the argument of Sh. C.S. Pasricha Advocate that the revenue record pertained to the period after land was mortgaged. In fact, there is old revenue record also which shows the land as agricultural and under self-cultivation. This position has been reflected in Annexure A4 which is jamabandi for the Years 2016-2017 and Annexure A5 which is latest Khasra Girdawari for the Years 20212022. It is true that description of the land in the revenue record is agricultural and the same is not conclusive of the matter but it is also not the case of the defendants that any other activity was/is being carried out in the land in question. The respondent bank has not established any such case. In the facts and circumstances of the case, this Tribunal is of the considered opinion that the land in question is agricultural and not non-agricultural. This opinion of the Tribunal finds support from the fact that the land in question is chiefly agricultural even as on date. Only on a small portion of the land the sheds are in existence and the sheds being for the purpose of poultry farming is also an allied agricultural activity. As per Section 2 (a) and (b) of the

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SA/65/2023 M/S RISHABH LAYER FARM AND ANOTHER VS BANK OF BARODA 7

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Haryana Agricultural Credit Operations and Miscellaneous Provisions (Banks) Act, 1973, poultry farming is an agricultural activity. Therefore, the whole land warrants to be protected under the provisions of Section 31(i) of the Act. In these circumstances, the SA is allowed with costs.

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Announced in the open Tribunal

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

Ms Rishabh Layer Farm v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

Ms Rishabh Layer Farm v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

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