Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - ss. 31(i), 2(zf) – Security interest created in agricultural land – Applicability of SARFAESI Act – Held: 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 – On facts, in the absence of a specific finding, the holding of the High Court that the proceedings initiated by the bank under the SARFAESI Act are nullity as the Act does not apply to agricultural land, thus, security interest in agricultural land cannot be enforced, set aside – Proceedings remitted back for being considered afresh.
The issue arose whether the High Court was correct in holding that the proceedings initiated by the bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 are nullity.
Allowing the appeals, the Court
HELD: 1.1 The expression ‘security interest’, both before and after the amendment, excludes what is specified in Section
31 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002. Clause (i) of Section 31 stipulates that the provisions of the Act will not be applicable to any security interest created in agricultural land. The statutory dictionary in Section 2 does not contain a definition of the expression “agricultural land”. Whether a particular piece of land is agricultural in nature is a question of fact. [Para 8] [615-G-H; 616-A]
1.2 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. [Para 9] [616-G]
1.3 The Division Bench failed to adjudicate on the basic issue as to whether the land in respect of which the security interest was created, was agricultural in nature. The DRT rejected the objection of the debtor that the land was agricultural. In appeal, the DRAT reversed that finding. Apart from referring to the position in law, the impugned judgment of the High Court contains no discussion of the material which was relied upon by the parties in support of their respective cases; the Bank urging that the land was not agricultural while the debtor urged that it was. Both having regard to the decision in *Blue Coast Hotels Limited and as explained, 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 intent of the parties on the date on which the security interest was created. In the absence of a specific finding, it would be appropriate and proper to set aside the judgment of the High Court and to remit the proceedings for being considered afresh. The impugned judgment and order of the High Court is set aside. [Paras 10, 11] [616-G-H; 617-A-D]
*ITC Limited v. Blue Coast Hotels Limited (2018) SCC Online SC 237 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.