Payment of conversion tax under the A.P. Agricultural Land (Conversion for Non-Agricultural Purposes) Act, 2006 renders agricultural land non-agricultural, making it subject to SARFAESI Act proceedings.

(Per Hon‟ble Sri Justice R. Raghunandan Rao)

Heard Sri K.A. Narasimham, learned counsel appearing for the petitioners and Ms. G. Sudha Madhuri, learned Standing Counsel appearing for the 1^st respondent.

2. The 1^st respondent-bank had advanced certain financial assistance to the 2^nd respondent herein. The 1^stpetitioner, as security for repayment of the said financial assistance, had acted as guarantor and mortgaged her land admeasuring Ac.0.73 cents in D.No.116/B-1 of Putthur Village, Guntur District. On account of non-payment of dues, the loan advanced to the 2^nd respondent had become a non-performing asset. Subsequently, the 1^st respondent had initiated proceedings under the SARFAESI Act, 2002 for sale of the land of the 1^stpetitioner.

3. Aggrieved by the proceedings of the 1^st respondent, initiated to conduct an auction on 05.08.2024, under the provisions of SARFAESI Act, 2002, the petitioner has approached this Court by way of the present writ petition.

4. Sri K.A. Narasimham, learned counsel appearing for the petitioners contends that the land in question is agricultural land, which is exempted from the provisions of the SARFAESI Act, 2002. He draws the attention of this Court to Section 31 of the SARFAESI Act, 2002, which excludes agricultural land from the provisions of the SARFAESI Act, 2002.

5. The learned counsel for the petitioner, would also fairly concede that the 1^st petitioner had taken steps for converting this land from agricultural land to non-agricultural land and had also paid necessary conversion amount, which had been calculated by the revenue authorities.

6. The learned counsel for the petitioner would contend that though the conversion amount had been paid by the petitioner, no consequential order of conversion has been passed and as such, the land would remain agricultural land. He would also submit that agricultural operations are still being carried on in the said land and contends that in such a situation, the land cannot be treated as non-agricultural land which could be subjected to the recovery procedure under SARFAESI Act, 2002. The learned counsel would rely upon the judgment of the Hon‟ble Supreme Court in Commissioner of Wealth Tax, Andhra Pradesh vs. Officer In-Charge (Court of Wards), [1AIR 1977 SC 1123], and ITC Limited vs. Blue Coast Hotels Ltd., and Ors.,, [2AIR 2018 SC 3063] .

7. In Commissioner of Welth Tax, Andhra Pradesh vs. Officer In-Charge (Court of Wards), the issue that came up before the Hon‟ble Supreme Court was whether agricultural land would have to be excluded from the definition of assets under the Wealth Tax Act. The Hon‟ble Supreme Court, after reviewing various judgments on this issue, had held that the land over which agricultural operations are carried on, would amount to agricultural land. The principle laid down by the Hon‟ble Supreme Court has been summarized, in the following manner.

24. For the reasons already given, we do not think that the term “agricultural land” had such a wide scope as the Full Bench appears to have given it for the purposes of the Act we have before us. We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of “assets”, but its actual condition and intended user which has to be seen for purposes of exemption from wealth tax. One of the objects of the exemption seemed to be to encourage cultivation or actual utilization of land for agricultural purposes. If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agri