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2012 Supreme(All) 873
UTTARAKHAND HIGH COURT
B.Sverma, J.
Sahara Industries Patrampur Road Jaspur, Distt.Udham Singh Nagar -Appellant
Versus
State Bank of India -Respondent
Writ Petition (M/S) No. 2707 of 2011
Decided On : 30-3-2012
The central legal point established is the applicability of the SARFAESI Act to land declared non-agricultural and subsequently re-declared as agricultural, and the influence of such declarations on the initiation of recovery proceedings.
Headnote:
SARFAESI - Applicability of SARFAESI Act to Agricultural Land - Section 13(2) - Section 31(i) - Section 143 - Section 144
Fact of the Case:
The petitioner, a partnership firm, took a loan from the respondent Bank. The Bank issued a notice under Section 13(2) of the SARFAESI Act, 2002, classifying the accounts as non-performing assets (NPA) and demanding payment. The petitioner contended that the land mortgaged was agricultural and thus exempt from the SARFAESI Act.
Finding of the Court:
The court found that the land in question was declared non-agricultural under Section 143 of the U.P. Zamindari Abolition and Land Reforms Act, 1950, and subsequently re-declared as agricultural under Section 144 after the initiation of recovery proceedings. The court held that the SARFAESI Act was applicable, and the recovery proceedings could be initiated against the petitioner.
Issues: The main issue was whether the land mortgaged by the petitioner was agricultural and exempt from the SARFAESI Act.
Ratio Decidendi: The court relied on the orders under Section 143 and Section 144 of the U.P. Zamindari Abolition and Land Reforms Act, 1950, to determine the agricultural status of the land. It also considered the applicability of the SARFAESI Act based on the land's status at the time of loan and the impugned notice.
Final Decision: The writ petition was dismissed, and the court held that the SARFAESI Act was applicable, allowing the recovery proceedings against the petitioner to proceed.
By means of this writ petition, the petitioners have sought the following reliefs:-
I. To issue a writ, order or direction in the nature of certiorari to quash the notice dated 9-11-2011 (Annexure No.1) issued by the respondent Bank u/s 13(2) of the SARFAESI Act, 2002.
II. To issue any other writ, order or direction or grant such other further relief in favour of the petitioners, which this Hon’ble Court may deem fit and proper in the facts and circumstances of the case.
III. Award the cost of the petition to the petitioners.
Both the learned counsel for the parties have submitted that since pleadings have been exchanged, the writ petition may be disposed of finally at the admission stage.
2. Brief facts giving rise to the present writ petition, according to the petitioners, are that petitioner no. 1 is a partnership firm and is engaged in the business of processing of seeds and Mr. Vijay Singh son of Mr. Babu Singh is its partner. In the year 2010, petitioner no.1 firm took a loan from the respondent Bank under Cash Credit Limit facility to the tune of Rs. 65 lacs and a term loan of Rs. 5 lacs, which were paid to the petitioners on 6.6.2010. On 9-11-2011, the respondent-Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (for short SARFAESI Act, 2002) of sixty days informing that the accounts of the petitioner company have been classified as non-performing asset (NPA) in accordance with the directive/guidelines relating to asset classifications of the Reserve Bank of India as mentioned in paragraph no.4 of the writ petition and demanded the payment of the secured debt from the petitioners. The total outstanding amounts of the two loans have been mentioned to the tune of Rs. 69,52,680-00. The petitioner no.1 filed objection/representation to the notice and also sent reply of the letter dated 9-11-2011 sent by the respondent Bank on 7-12-2011 mentioning therein that the respondent Bank has wrongly classified the account of the petitioner no.1-firm as NPA and that too against the guidelines and directives of the RBI. The petitioner no.1 in reply to the letter of the respondent Bank has mentioned that the land of Plot no. 312/5 area 0.444 hectare situated at village Meghavala Tehsil Jaspur, District Udham Singh Nagar recorded in the name of Smt. Ramesh Devi is an agricultural land and that the agricultural activities are going on over the said land. According to the petitioners the said land being agricultural land is beyond the purview of the SARFAESI Act, 2002 as per provision of Section 31 (i), which provides that the provisions of this Act shall not apply to any security interest created in agricultural land.
3. The main ground of challenge advanced by the petitioners is that the respondent-Bank has wrongly classified the accounts of the petitioners as NPA and against the guidelines and directives of the Reserve Bank of India and no proceeding of recovery can be initiated under the SARFAESI Act 2002, since the land in question is an agricultural land.
4. On behalf of the respondent-Bank a short counter affidavit has been filed in this writ petition. In paragraph no. 13 and 14 of the counter affidavit, the following averments have been made:-
“13. That after classified the account of the borrower NPA, admittedly on 9.11.2011 the respondent Bank served a notice on the petitioners and against the said notice the petitioners made a representation on 26.11.2011 to the Bank and the Bank vide notice dt. 9.12.2011 decided and rejected the representation of the petitioners and there after no notice Under Sec. 13(4) was ever served to the petitioners but in anticipation to make a undue pressure on the Bank and with mala-fide intention and to create the hindrance for further action by the Bank Under Sec. 13(4) of the Act, on 22.12.2011 the petitioners filed the present writ petition on totally fale and frivolous grounds and succeeded in
