Allowed

Punjab National Bank v. District Magistrate Sirmaur at Nahan and Others

Himachal Pradesh HC11 Sept 2024CWP/5324/2020

Case brief

AI extract

What is this about?

A secured creditor challenged the District Magistrate's refusal under Section 14 SARFAESI to hand over possession of mortgaged land, which cited agricultural revenue entries and a later state excise lien. The High Court held both reasons illegal and set aside the order.

What did the court decide?

Writ petition allowed; impugned order dated 25.08.2020 set aside; District Magistrate directed to assist delivery of possession of the mortgaged property to petitioner.

Punjab National Bank Vs District Magistrate… — Banking and Recovery | Himachal Pradesh HC (2024)

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2024:HHC:8307

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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

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CWP No.5324 of 2020 Decided on: 11^th September, 2024

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------------------------------------------------------------------------------------- Punjab National Bank …..Petitioner Versus

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District Magistrate, Sirmaur at Nahan and others .....Respondents ------------------------------------------------------------------------------------Coram

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Ms. Justice Jyotsna Rewal Dua

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Whether approved for reporting?

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For the Petitioner: Mr. Arvind Sharma, Advocate. For the Respondents: Mr. L.N. Sharma and Mr. Amandeep Sharma, Additional Advocates General with Mr. Sanjay Dutt Vasudeva, Deputy Advocate General, for respondents No.1 to 3.

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-----------------------------------------------------------------------------------Jyotsna Rewal Dua, Judge

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Petitioner is a secured creditor, who has laid

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challenge to the order passed by the District Magistrate, Sirmour at Nahan on 25.08.2020, refusing to deliver possession of the subject mortgaged land to the petitioner in its application moved under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short ‘SARFAESI Act’).

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¹ Whether reporters of print and electronic media may be allowed to see the order? Yes.

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2024:HHC:8307

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The District Magistrate has given following two

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reasons for not exercising its jurisdiction under Section 14 of the SARFAESI Act in favour of the petitioner:-

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(i). Subject land was classified as ‘Gair Mumkin Nadi’ and also as ‘Obad Abal Bagicha Faldar’ in the revenue record, therefore, exempt from the provisions of the SARFAESI Act.

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(ii). State Taxes and Excise Department of Himachal

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Pradesh exercises lien over the subject land.

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In view of the aforesaid two reasons, the possession of the land in question was not handed over to the petitioner.

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2. Heard learned counsel for the parties and considered the case file.

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3. Insofar as the nature of secured/mortgaged land as recorded in the revenue record is concerned, it has been held by the Hon’ble Apex Court in K. Sreedhar Versus M/s

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Raus Constructions Pvt. Ltd. & Ors.¹ that merely because the scheduled properties have been recorded as agricultural properties in the revenue record would not be sufficient to exempt them from the provisions of SARFAESI Act in view of Section 31(i) thereof. It is only in a case where the secured property is actually put to use as agricultural

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1 Civil Appeal No.7402 of 2022, decided on 05.01.2023

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2024:HHC:8307

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land and this fact is established by the borrower that the property can be said to be exempted under Section 31(i) of the SARFAESI Act. Merely on the basis of entries in the revenue record, a property cannot be said to be exempted from the provisions of the SARFAESI Act. Relevant paras from the judgment read as under:-

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“7.2 Thus, as per the law laid down by this Court in the aforesaid two decisions, only in a case where the secured property is actually put to use as agricultural land and solely on the basis of the revenue records/Pattadar and once the secured property is put as a security by way of mortgage etc. meaning thereby the same was not treated as agricultural land, such properties cannot be said to be exempted from the provisions of the SARFAESI Act under Section 31(i) of the SARFAESI Act. Applying the law laid down in the aforesaid two decisions to the facts of the case on hand and when no evidence was led at all on behalf of the borrowers that the secured properties in question were actually put to use as agricultural land and/or any agricultural activity was going on, the High Court has committed an error in applying Section 31(i) of the SARFAESI Act and quashing and setting aside the entire Possession Notice, Auction Notice as well as Sale etc.

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7.3 The High Court has also materially erred in shifting the burden upon the secured creditor to prove that the properties were not non-agricultural lands or have been put to non-agricultural use. When it was the case on behalf of the borrowers that in view of Section 31(i) of the SARFAESI Act, the properties were agricultural lands, the same were being exempted from the provisions of the SARFAESI Act, the burden was upon the borrower to prove that the secured properties were agricultural lands and actually being used as agricultural lands and/or agricultural activities were going on. Therefore, the High Court has materially erred in shifting the burden upon the secured creditor to prove that the properties are non-agricultural lands or have been put to non-agricultural use.”

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2024:HHC:8307

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In the instant case, the petitioner alongwith its

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rejoinder has placed on record valuation report, in terms of which, there are sheds constructed over the property. The property falls in the industrial area. It has been valued to the tune of Rs.112.44 Lakhs. The property was mortgaged by respondent No.4 for establishing an industrial unit (Alcohol Bottling Plant), therefore, the District Magistrate by merely relying upon entries in the revenue record, clearly erred in holding that the property was exempted under Section 31(i) of the SARFAESI Act.

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4. The second reason given by the District Magistrate for not handing over the possession of the subject land in favour of the petitioner is also not in consonance with law and is also against the facts. In the instant case, the subject property was mortgaged with the petitioner-bank vide mutation No.1201, attested on 12.05.2016, whereas, lien was created in favour of the State Taxes and Excise Department over the property in question on 13.06.2019, i.e. subsequent to the creation of mortgage in favour of the petitioner-Bank.

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Following the decisions in Punjab National Bank Vs. Union of India & Ors.² and Mankind Life Sciences Private Limited Vs. The State of Himachal

2 (2022) 7 SCC 260

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Pradesh & Anr.³ , a Division Bench of this Court on 15.12.2023, while deciding CWP No.8502 of 2023 (State

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Bank of India Versus State of H.P. & Ors.) , has held that once the petitioner (State Bank of India therein) is a secured creditor and had created first charge over the property, then, it had the first right to realize its dues. The ratio of the aforesaid decision squarely applies to the facts of the instant case. The petitioner-Bank had created first charge over the land in question.

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Accordingly, both reasons recorded by the District Magistrate in the impugned order dated 25.08.2020 are held to be illegal.

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5. For the foregoing reasons, the writ petition is allowed. Impugned order dated 25.08.2020 (Annexure P-2) is set aside. Consequently, the District Magistrate, District Sirmour is directed to provide assistance to the petitioner for delivery of possession of the subject property without unnecessarily delaying the matter.

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The writ petition stands disposed of in the above terms, so also the pending miscellaneous application(s), if any.

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September 11, 2024 Mukesh

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Jyotsna Rewal Dua Judge

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3 CWP No.4701/2023, decided on 01.09.2023

Punjab National Bank v. District Magistrate Sirmaur at Nahan and Others

Case brief

What is this about?

What did the court decide?

Punjab National Bank v. District Magistrate Sirmaur at Nahan and Others

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Cases cited

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