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IN THE HIGH COURT OF JUDICATURE AT MADRAS
S. MANIKUMAR, V. BHAVANI SUBBAROYAN, JJ.
M/s. S.M.K. Construction - Petitioner
Vs.
The Authorised Officer, Bank of Baroda, Erode Branch & Anr. - Respondents
W.P. No. 8862 of 2017 & W.M.P. No. 9732 of 2017
Decided On : 23-08-2017
SARFAESI Act - Agricultural Property - Section 13(2), Section 13(4), Section 17(1), Section 31(i) - The court dismissed the writ petition seeking a declaration that the measures taken by the respondents under the SARFAESI Act, 2002, were contrary to Section 31(i) of the SARFAESI Act, 2002. The court held that the petitioner had an effective and alternative remedy under the SARFAESI Act, 2002, and had not taken any action. The court also emphasized that the purpose for which the loan was availed and the failure to comply with interim orders were crucial factors in reaching the decision.
Fact of the Case:
The petitioner availed an Over Draft loan facility for business purposes, secured by mortgaging agricultural land. The bank initiated measures under the SARFAESI Act, and the petitioner filed a writ petition seeking a declaration that the measures were illegal.
Finding of the Court:
The court found that the petitioner had an effective and alternative remedy under the SARFAESI Act, 2002, and had not taken any action. The court also noted the purpose for which the loan was availed and the failure to comply with interim orders.
Issues: The main issues were the applicability of Section 31(i) of the SARFAESI Act to agricultural land, the failure to comply with interim orders, and the availability of an alternative remedy under the SARFAESI Act, 2002.
Ratio Decidendi: The court emphasized that the petitioner had an effective and alternative remedy under the SARFAESI Act, 2002, and had not taken any action. The purpose for which the loan was availed and the failure to comply with interim orders were crucial factors in reaching the decision.
Final Decision: The writ petition was dismissed, and no costs were awarded. The court held that the petitioner had an effective and alternative remedy under the SARFAESI Act, 2002, and had not taken any action. The purpose for which the loan was availed and the failure to comply with interim orders were crucial factors in reaching the decision.
S. Manikumar, J.
Petitioner has availed Over Draft loan facility of Rs.90 Lakhs from Bank of Baroda, Erode on 23.01.2010 for business purpose. Bank Guarantee to the tune of Rs.10 Lakhs was also sanctioned, but not utilised. Loan was secured by mortgaging lands in SF No.119/2A, Old Survey No.26, 22 F, 25/B and 25/C and 102 A, Thottipalayam, 17-Oodayum Village, Muthur Town Panchayat, Vella Koil Sub Registrar Office, Kangeyam Taluk, Tirupur District measuring an extent of 5.05 acres.
2. According to the petitioner, land is an agricultural property classified as 'punja' with 600 coconut trees, 3500 Eucalyptus trees, 2000 Casuarina trees and other trees including rubber and bamboo trees. Petitioner has further stated that corn was also planted in and around 1.50 acres. There was also a cattle farm.
3. Petitioner has further contended that electricity service connection in S.C.No.167 was obtained from TANGEDCO, exclusively for agricultural activity. There is a blue metal crush unit in the portion of the land. Farmers in and around the said land objected to the crush unit, pursuant to which the Tamilnadu Pollution Control Board, passed an order dated 16.12.2016. Writ petitioner has further contended that subject property has also been partitioned by way of execution of partition deed dated 07.08.1991.
4. According to the petitioner though payments were made regularly, recession in the market, caused hindrance and on 31.03.2016, account has been classified as NPA. On 04.04.2016, demand notice under Section 13(2) of the SARFAESI Act, 2002, has been issued. Payment of Rs.6,00,000/- has been made on various dates via., a sum of Rs.3,00,000/- on 08.06.2016, a sum of Rs.2,00,000/- on 07.10.2016 and Rs.1,00,000/- on 27.10.2016.
5. When the matter stood thus, petitioner was shocked to receive an order dated 16.02.2017 of the District Magistrate-cum-District Collector, Tiruppur District, passed under Section 14 of the SARFAESI Act, 2002, by which, the District Magistrate-cum-District Collector, Tiruppur District, has authorised the Assistant Collector, Dharapuram to take possession of the property, and hand over the assets to the Authorized Officer, M/s. Bank of Baroda, Erode Main Branch, Erode, under proper acknowledgment.
6. Thereafter, on 30.03.2017, possession notice dated 24.03.2017, was served. Petitioner has contended that no opportunity was given by the District Magistrate-cum-District Collector, Tiruppur District, before passing an order under Section 14 of the SARFAESI Act, 2002.
7. Contending inter alia that subject property mortgaged is an agricultural property and inviting the attention of this Court to Section 31(i) of the SARFAESI Act, 2002, that the provisions of the Act shall not apply to any security interest created in agricultural land, instant writ petition has been filed for a declaration, declaring that the measures takes by the respondents under the SARFAESI Act, against the petitioner as illegal, contrary to Section 31(i) of SARFAESI Act and void ab initio.
8. Supporting the prayer sought for, attention of this Court was invited to Patta No.435 for S. No. 102/1A & 102/1B, Patta No.437 for S.No.119/2A & 123/1B, Chitta for S. Nos. 102/1A, 102/1B, 119/1A and 119/2A.
9. Record of proceedings shows that on 12.04.2017, a Hon'ble Division Bench of this Court has ordered notice. On 26.04.2017 interim stay has been granted on condition that the petitioner should pay a sum of Rs.10,00,000/-. For brevity, order dated 26.04.2017, is reproduced.
“List the matter on 12.06.2017. In the meantime, the petitioner is directed to pay a sum of Rs.10,00,000/- (Rupees ten lakhs). If the petitioner complies with this order, by paying the amount of Rs.10,00,000/-, there shall be an order of interim stay."
10. Subsequently, on 12.06.2017, this Court passed the following order.
“List the matter on 20.06.2017. In the meantime, the petitioner /borrower is directed to pay another sum of Rs.10,00,000/- (Rupees ten lakhs only).”
11. Thus, it could be seen
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