High Court dismissed revision petitions against DRT orders refusing agricultural land exemption under SARFAESI Act, holding loans were for industrial mill expansion, rendering collateral non-agricultural.
Revision petitions dismissed; DRT orders upheld; connected miscellaneous petitions closed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 22.03.2017 CORAM THE HONOURABLE MR. JUSTICE S.MANIKUMAR AND THE HONOURABLE MR. JUSTICE G.CHOCKALINGAM
C.R.P.(PD)(MD).Nos.1278 and 1279 of 2015 M.P.(MD)Nos.1 and 1 of 2015
..vs..
The Authorized Officer, Indian Bank, Tiruchengode Branch, T.G.N.Complex, West Car Street, Anna Salai, Tiruchengode, Namakkal District 637 211. .. Respondents in both CRPs.
Prayer in C.R.P.(PD)No.1278 of 2015: Civil Revision Petition filed under Article 227 of the Constitution of India, against the fair and decretal order, dated 05.12.2014 made in I.A.Nos.1810 of 2014 in S.A.No.340 of 2014, on the file of the Debts Recovery Tribunal, Madurai.
Prayer in C.R.P.(PD)No.1279 of 2015: Civil Revision Petition filed under Article 227 of the Constitution of India, against the fair and decretal order, dated 31.03.2015 made in I.A.No.1887 of 2014 in S.A.No.340 of 2014, on the file of the Debts Recovery Tribunal, Madurai.
For Petitioners : M/s.VASTLAW Associates
COMMON ORDER
(Orders of this Court was made by S.MANIKUMAR, J. )
Revision Petitions arises against the orders in I.A.No.1810 of 2014 in S.A.No.340 of 2014, dated 05.12.2014 and I.A.Nos.1887 of 2014 in S.A.No.340 of 2014, dated 31.03.2015, on the file of https://hcservices.ecourts.gov.in/hcservices/ the Debts Recovery Tribunal, Madurai.
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unauthorized power shut downs up to 13 hours a day, the unit was unable to plan its production. Hence the company could not achieve full production capacity. That apart, there was frequent undeclared power cut without and prior intimation. The company was not allowed to purchase electricity power from outside source. Due to short supply of raw materials, labour problem, increase in Electricity consumption charges factory maintenance (Furnace Replacement) the company could not run the factory profitably.
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they had conducted the sale for Item No.3 properties, but the sale has not been confirmed.
"6. The main contention that the subject five properties items in S.No.3 are (also) agricultural properties and cultivation is being done and in support of their contention, the applicants relied on their objections dated 22.09.14, town survey land register of Spl. Thasildar dated 27.10.14, Adangal extract – Fasli years 1421 to 1424 dated 28.10.14 and 30.10.14, certificate of Thasildar dated 28.10.14 and valuation report dated 29.10.14.
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out on the said lands. So it is clear the valuer has not supported that the subject lands in question are agricultural lands but relied on VAO certificate.
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According to the Respondent lands are situated at Tiruchengode Municipality.
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growing agricultural crops every year (para no.14 of the stay petition) . Now the 1st Applicant has risen ground nut crops in the said lands besides coconut standing trees. Further stated there is open well belonging to 2nd Applicant). However, it is not clear 1st petitioner company is cultivating all the lands (S.No.1 to 4 of the sale notice) or only S.No.2 properties. Assuming for arguments sake that the company is also cultivating all the lands or some of the lands, the question arises now is how a company can do agricultural as business and any lease deeds executed leasing other lands in favour of Company. In the petition it is submitted that the company is doing business in the line of steel. The Company is manufacturing steel re-rolling rods. How a company formed for the purpose of manufacturing steel products can do business in other fields like agriculture? Is agriculture also another objective of the company? Whether Memorandum of Association permits the same? Whether in the balance sheet/financial statements the profits derived on these agriculture lands as shown as income and claimed exemption of tax, (if exempted for companies also) in the income tax returns or even by the 2nd Applicant in his Returns ( and claimed exemption of tax as it is from agriculture)? Further doing agriculture by the company will definitely divert the main object of steel product as the agricultural operations requires more and constant supervision, attention, time and lobour. Further the Applicants submitted they have no objections for sale of these agricultural lands belonging to company. Therefore, it is evident that on the one hand Applicants contends that S.No.3 properties are agricultural properties and exempt u/s.31(i) of the SARFAESI Act. Whereas on the other hand, in respect of agricultural lands of company, claiming they are cultivated by the company for the last 34 years, but does not seek any exemption u/s.31(i). So the Applicants are blowing hot and cold.
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some of the photos (filed at page no.40 to 42 of SA by the petitioners) that in the back ground of these lands, there are several buildings/houses are seen. Further, at some of the photos at page No.40, there are some Iron / Aluminium sheets as part of compound wall or behind the brick compound with a Gate (right side). Even it can be seen another Iron Gate partly left side at page No.40 of the first photo. So, under any stretch of imagination these lands can be categorized as being used for the cultivation purpose and activity.
"(i) It is submitted that the order dated 31.03.2015 in I.A.No. 1887 of 2014 in S.A.No. 340 of 2014 on the file of DRT, Madurai is against law, facts and equity and in gross violation of the SARFAESI Act, in so far as the Tribunal hastily and contrary to the facts jumped to the conclusion that the subject properties are no agricultural properties to enable the respondent to get over the exemption under the SARFAESI Act.
(ii) It is submitted that the impugned order dated 05.12.2014 is passed in clear misconception of facts and law and the same is https://hcservices.ecourts.gov.in/hcservices/ liable to be set aside as being against the decision of the Hon'ble Supreme Court of India and several high courts in the matter of finding
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as to the nature of property sought to be proceeded under SARFAESI.
(iii) It is submitted that DRT, Madurai miserably failed to note and consider the documents produced by the petitioners in support to establish the schedule properties are agricultural properties. It has confused that the town survey land register and the adangal extract has been issued by the same authority. Even though the adangals has been obtained after the demand notice they have been issued for the past fasli years. The DRT, Madurai ought to have seen that nearly because the adangal has been obtained after the issuance of the demand notice, that doesn't mean that the contents of the addangal is false that to in any absence of any contra evidence produced by the bank.
(iv) It is submitted that the DRT, Madurai accepted and admitted that the schedule properties are punja lands where only dry crops can be cultivated during rainy season. But the Tribunal held contra to the said position unmindful of the fact that punja land will not change the character of the land. The DRT, Madurai failed to accept the fact that even in punja lands and dry lands agricultural activities can be carried on.
(v) It is submitted that the DRT, Madurai has come to a conclusion that the lands belong to the company and the company is not carrying on agricultural activities. But the fact remains that the lands belongs to the 2nd petitioner, individual and he is carrying on agricultural activities for the past 34 years and he has been showing agricultural income in his income tax returns.
(vi) It is submitted that the DRT, Madurai has not properly considered the photos produced by the petitioners. The photos clearly show that there are several tall coconut trees and irrigation well inside the schedule properties. How could these coconut trees grown immediately. Therefore the DRT, Madurai ought to have accepted that the 2nd petitioner has been carrying on agricultural activities in the lands of the schedule properties.
(vii) It is submitted that the DRT, Madurai has passed the above order accepting the https://hcservices.ecourts.gov.in/hcservices/ arguments of the respondent back without there being any documentary proof and has merely relied on strange statements and by disbelieving
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the valid documents which establish the nature of property.
(viii) It is submitted that the DRT, Madurai has wrongly come to the conclusion that since the subject lands are having compound wall in all sides almost with gate, no agricultural activities can be carried out in such place. It is submitted that no Act does specify that agricultural lands should not have compound walls with gate.
(ix) It is submitted that the DRT, Madurai while considering the photos produced by the petitioners have noted the buildings but failed to appreciate/not that there are several tall coconut trees.
(x) It is submitted that the DRT, Madurai has accepted the additional documents filed by the petitioners i.e., income tax returns showing agricultural income of the 2nd petitioner and the certificate issued by the TNEB showing that the 2nd petitioner as an agriculturist, but failed to appreciate and make note of the same.
(xi) It is submitted that the DRT, Madurai has wrongly come to the conclusion that appointing an Advocate Commissioner will not serve any purpose. On the other land, if the Advocate Commissioner is appointed he could note down the standing crops and the trees and the well and pump in the schedule properties which are now with the possession of the respondent bank.
(xii) It is submitted that the DRT, Maduari has passed this impugned order simply by following the orders passed earlier in the stay petition. The DRT, Madurai failed to decide this application independently. It is submitted that the DRT, Madurai has passed the above order accepting the arguments of the respondent bank without there being any documentary proof.
(xiii) In any event the finding of DRT, Madurai with regard to the nature and character of the property is not legally sustainable and the same is liable to the set aside. In absence of which the petitioners would be seriously prejudiced in canvassing their pleas in the SA at the time of disposal of the matter."
Heard the learned counsel appearing for the parties and https://hcservices.ecourts.gov.in/hcservices/ perused the materials available on record.
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to consider the nature of the property, at the time of creation of security interest and the purpose, for which, loan was availed for the purpose of application of the provisions of the SARFAESI Act.
"3(1) agriculture includes --
and agricultural shall be construed accordingly."
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are agricultural lands, there is no necessity for any compound wall with some Iron/Aluminium sheets. The Tribunal further observed that in the back ground of the lands, there are several buildings/houses.
"(1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue?
(2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time?
(3) Whether such user of the land was for a long period or whether it was of a temporary character or by way of a stop-gap arrangement?
(4) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land?
(5) Whether the permission under section 65 of the https://hcservices.ecourts.gov.in/hcservices/ Bombay Land Revenue Code was obtained for the nonagricultural use of the land? If so, when and by whom
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(the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date?
(6) Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such cesser and/or alternative user was of a permanent or temporary nature?
(7) Whether the land, though entered in the revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes?
(8) Whether the land was situate in a developed area? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural?
(9) Whether the land itself was developed by plotting and providing roads and other facilities?
(10) Whether there were any previous sales of portions of the land for non-agricultural use?
(11) Whether permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such non-agriculturist was for nonagricultural or agricultural user?
(12) Whether the land was sold on yardage or on acreage basis?
(13) Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield?"
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be excluded under the provisions of the SARFAESI Act, we are not in agreement with the claim of the petitioners, inasmuch as the above said documents themselves cannot be held to be conclusive proof that the secured property as an agricultural land and the claim of the petitioners will have to be established, that too, when the respondent-bank has been consistently disputing the nature of the land.
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purpose and therefore, as rightly observed by the Tribunal, it is crystal clear that having availed the loans, the petitioners have to expand the Mill activities in these lands and that the same cannot be used for any other purpose.
Assistant Registrar(Crl side)
/True copy/
Sub Assistant Registrar
To
The Debts Recovery Tribunal, Madurai.
+1cc to M/s.Special Government Pleader,SR.17385 +1cc to Mr.T.Govindasamy,Advocate,SR.17826 +1cc to M/s.VastLaw Associates,Advocate,SR.17827
skm
KK/SV MMS/SAR4-21.08.2017-15P-5C
C.R.P.(MD)Nos.1278 and 1279 of 2015
22.03.2017
2 issues framed by the court
Whether mortgaged properties used for mill expansion purposes qualify as agricultural lands exempt under Section 31(i) of the SARFAESI Act.
Whether findings of the Debts Recovery Tribunal regarding the non-agricultural nature of the properties can be interfered with under Article 227.
Colour shows how this judgement treated each authority
Collector of Wealth Tax, Andhra Pradesh vs. Officer-in-charge (Court of Wards), The PaigahReferred¶91
Commissioner of Wealth Tax, Andhra Pradesh versus Officer-in-charge (Court of Wards), Paigah reported in AIR 1977 SC 113 · Who else cites this
Sarifa Bibi Mohamed Ibrahim and others v. Commissioner of Income Tax, GujaratReferred¶92
Sarifa Bibi Mohmed Ibrahim and others v. Commissioner of Income Tax, Gujarat reported in 1993 Supp (4) SCC 707 · Who else cites this
Eshwar Purushothaman Gardens v. Authorised Officer, Indian BankDistinguished¶111
Eshwar Purushothaman Gardens v. AO, Indian Bank Zonal Office reported in 2012 (5) MLJ 571
J. Malliga v. The Authorised Officer, Union Bank of IndiaReferred¶113
J.Malliga v. The Authorised Officer, Union Bank of India reported in 2010 (4) CTC 710
Gajula Exim (P) Ltd. v. Authorised Officer, Andhra BankReferred¶40
Gajula Exim (P) Ltd., Vs. Authorized offier, Andhra Bank 2008 (4) ALD 385=2009 (149) Company Cases 489
4 provisions across 2 enactments
M/s. Pavai Alloys and Steels (P) Ltd.
Mr. V. Kuppusamy
The Authorized Officer, Indian Bank
S. Manikumar
G. Chockalingam
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
