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2023 Supreme(Online)(KER) 14135
HIGH COURT OF KERALA
C.S. DIAS, J
WILSON JOSEPH – Appellant
Versus
THE AUTHORIZED OFFICER/CHIEF MANAGER, SOUTH INDIAN BANK LTD – Respondent
OP (DRT) 220 2023
ARUN KRISHNA DHAN, T.K.SANDEEP, ARJUN SREEDHAR, ALEX ABRAHAM, VEENA HARIKUMAR, SWETHA R.HARIKRISHNAN, P.B.
A declaration regarding land use is binding unless successfully challenged by proof of execution under duress, impacting its classification under the SARFAESI Act.
Headnote:
SARFAESI - Debt Recovery - SARFAESI Act Section 31 - Court upheld that the nature of the secured asset must be established, and a declaration against its nature can be binding unless evidence shows it was made under duress or vitiating circumstances.
Fact of the Case:
The petitioner, a guarantor for a loan, used agricultural land as collateral, asserting its protected status under the SARFAESI Act. After the debtors defaulted, the Tribunal's rejection of his request to appoint an Advocate Commissioner challenged his claim regarding the land's nature.
Finding of the Court:
The court found that the petitioner had previously declared the land as non-agricultural, which weakened his argument. There was insufficient evidence to prove the property was agricultural at the time the security was created.
Issues: Whether the Debt Recovery Tribunal erred in dismissing the application to ascertain the nature of the secured agricultural land.
Ratio Decidendi: The classification of land as agricultural is not solely determined by revenue records but requires a factual determination of its use at the time the security interest was established.
Final Decision: The original petition is dismissed.
The original petition is filed challenging Ext.P6 common order that has been passed by the Debt Recovery Tribunal II, Ernakulam (in short, 'Tribunal'), rejecting I.A.No.1255/2023 in S.A.No.571/2022 (Ext.P4), filed by the petitioner to appoint an Advocate Commissioner.
2. The brief relevant facts leading to Ext.P6 order are: the petitioner had stood as a guarantor for a loan availed by the respondents 5 and 6 from the 2nd respondent Bank. The petitioner offered his agricultural land as collateral security. The principal borrowers had defaulted in payment of the EMIs. The 2nd respondent has initiated proceedings under the SARFAESI Act , against the property of the petitioner. To substantiate the fact that the secured asset is an agricultural land, which is exempted from the purview of the Act, the petitioner filed the above Ext.P4 application, to ascertain and report regarding the nature of the land and the cultivation being carried out in the scheduled property. But, the Tribunal, by the impugned Ext.P6 order, dismissed the application. Ext.P6 is patently wrong and ex-facie illegal. Hence, the original petition.
3. Heard; Sri.Arun Krishna Dhan, the learned Counsel appearing for the petitioner and Sri.Augustine P.A., the learned Counsel appearing for the respondents 1 to 4.
4. Sri.Arun Krishna Dhan, reiterated the contentions in the original petition and contended that in view of Exts.P2 and P3 certificates issued by the authorities, the secured asset is undoubtedly an agricultural land. It is to prove the above aspect, the petitioner had filed Ext.P4 application. However, the Tribunal, without considering the application in its proper perspective, has in a mechanical manner rejected the same. Ext.P6 warrants to be interfered with by this Court.
5. Sri.P.A.Augustine, on the contrary, argued that along with Ext.P4 application the petitioner had filed an application to stay further coercive proceedings. The Tribunal, by the impugned Ext.P6 common order, had directed the petitioner to deposit an amount of Rs.22,50,000/- on or before 30.05.2023. Yet, the petitioner did not deposit the amount. Instead, on the same day, the petitioner has filed the present original petition. Furthermore, the petitioner has submitted Ext.P5 declaration before the 2nd respondent, undertaking that he could not take a volte face and contend that the secured asset is an agricultural land, which is exempted from the purview of the Act. Therefore, there is no bonafides or merits in the writ petition, which is only liable to be dismissed.
6. The point is whether there is any error in Ext.P6 order warranting interference by this Court.
7. On an appreciation of the pleadings and materials on record, I find that the petitioner has executed Ext.P5 declaration before the 2nd respondent Bank stating as follows:
“4) That I/We hereby declare that above said immovable property is non agricultural in nature & usage and shall continue to be in non agricultural usage until the full tenure of the loan. That I/We shall be precluded from taking any contrary view as to the nature and usage of the land at any time during the tenure of the loan so as to affect enforcement of the above property under any applicable law.
5) That I/We hereby declare that no charge or encumbrance over the property shall be created by me/us by way of sale, lease, exchange, gift, settlement, mortgage or in any other manner, during the subsistence of the loan from the bank”.
8. When, the above declaration was brought to the notice of the learned Counsel appearing for the petitioner, he then contended that the declaration was executed under vitiating circumstances. Consequently, the declaration is void and not binding on the petitioner.
9. The Hon'ble Supreme Court in Indian Bank &
Anr. vs. K. Pappi Reddiyar & Anr. [(2018) 18 SCC 252]
has empatically held thus:
“9. The classification of land in the revenue records as agricultural is not dispositive or conclusive of the question whether the SARFAESI Act
