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2025 Supreme(Online)(Kar) 31398
KARNATAKA HIGH COURT
M. NAGAPRASANNA, J
M/S. SLN GAJA INDUSTRIES A PARTNERSHIP FIRM CONSISTING OF TWO PARTNERS MR. G.LOKESH AND MRS.R.VEENA – Appellant
Versus
THE AUTHORISED OFFICER ARM BRANCH-II – Respondent
WRIT PETITION NO. 7823 OF 2025 (GM-DRT)
For the Appellants/Petitioners: SRI. RAJENDRA M. A.
For the Respondents: SRI. VIGNESH S. SHETTY, SRI ARJUN RAO.
The High Court must not entertain a writ petition when an effective alternative remedy exists under the SARFAESI Act, particularly regarding the sale of properties deemed non-agricultural.
Headnote:(A) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13(2), Section 31(i) - Challenge against auction notification - Petitioners, having defaulted on payments, challenged the auction; Court upheld the Debt Recovery Tribunal's dismissal as the properties were converted non-agricultural lands, which negated the applicability of agricultural land exemption - There was insufficient evidence produced by petitioners to support their claim of agricultural use - Statutory remedies under the Act must be exhausted before approaching the High Court. (Paras 5, 11, 15, 30)
(B) Writ Jurisdiction - Improper exercise of jurisdiction - High Courts should refrain from exercising writ jurisdiction under Article 226 when an effective alternative remedy exists, particularly in recovery matters involving secured creditors. (Paras 14, 30, 101)
| Table of Content |
|---|
| 1. factual background of the case. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. parties' arguments regarding the nature of the land. (Para 7 , 8 , 9) |
| 3. court's reasoning on the agricultural status of the land. (Para 10 , 11 , 12 , 13) |
| 4. principle regarding the burden of proof in the identification of agricultural land. (Para 14) |
| 5. conclusion and dismissal of the petition. (Para 15) |
ORAL ORDER
The petitioners, the borrowers are at the doors of this Court calling in question the order passed by the Debt Recovery Tribunal-I (for short ‘the DRT’) in S.A.No.265/2024 dated 24.02.2025, by which, challenge to the auction notification of the first respondent-Bank by the petitioners comes to be turned down.
2. Heard learned counsel Sri.Rajendra M.A. for petitioners, learned counsel Sri.Vignesh S. Shetty for respondent No.1 and Sri.Arjun Rao, learned counsel for respondent No.2.
3. Facts in brief, germane, are as follows:
The petitioners are the borrowers; borrow finance from Canara Bank by mortgage of the scheduled properties. The averment in the petition is, all the properties mortgaged are agricultural lands.
4. The petitioner defaults in making the payment for three consecutive months. The account slips into becoming a non-performing asset (NPA) and it is declared as one, on 29.10.2018.
5. On 03.11.2018, respondent No.1 - bank issues a demand notice invoking Sub-section(2) of Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘the Act’). Thus, begins the proceedings against the petitioners under the Act. The proceedings were taken forward by seeking an order of possession from the hands of the learned Magistrate. The learned Magistrate passes an order under Section 14 of the Act permitting to take physical possession of the properties on 18.09.2019.
6. This act of taking possession is challenged by the petitioners before the DRT in S.A.No.238/2020. This comes to be dismissed on 26.10.2020. Four years thereafter, respondent No.1 - bank puts up the properties for sale in terms of the auction notification dated 24.10.2024, indicating that the auction would be held on 27.11.2024. The petitioners approach the DRT challenging the notification of auction in S.A.No.265/2024. The DRT protects the interest of the petitioners on certain conditions. The conditions are not complied with. The petition gets dismissed on 24.02.2025. The Bank proceeds with the sale; confirms the sale and issues the sale certificate in favour of the successful auction purchaser on 25.02.2025, the day after the DRT rejected the application in S.A.No.265/2024. The subject petition is preferred on 11th March, 2025 long after issuance of sale certificate by the respondent-Bank in favour of successful auction purchaser.
7. Learned counsel appearing for the petitioners project a solitary circumstance. The circumstance of statutory aberration. It is violation of Section 31 of the Act. Learned counsel for the petitioners submits that the lands that are mortgaged were agricultural and would not come within the ambit of the Act for the Bank to bring the mortgaged properties to sale. He would submit that the DRT did not consider this crucial aspect that the lands were agricultural. It is therefore submitted that the petition would become entertainable at the hands of this Court.
8. Per contra, learned counsel representing respondent No.1 – Bank, Sri.Vignesh Shetty takes this Court through the objections filed and would submit that the lands were not agricultural at all. They were converted in the year 2013 itself, and a perusal at the averments in the application – S.A.No.265/2024, preferred by the petitioners themselves would indicate that the lands were already converted. Whether there is dispute with regard to the conversion or otherwise, is not within the scope of the petitioners.
9. The learned counsel Sri Arjun Rao, appearing for respondent No.2, the successful auction purchaser would contend that th
