Calcutta High Court (Appellete Side)
Corporation Bank & Anr vs The State Of West Bengal & Ors on 23 July, 2018
Author: Arindam Sinha
Bench: Arindam Sinha
1
12
suman 23.07.18
Ct.4
W.P. 21145 (W) of 2017
Corporation Bank & Anr.
Versus
The State of West Bengal & Ors.
Mr. Pankaj Kumar Mukherjee
Mr. S. R. Mishra
...for petitioner
Mr. Mahesh Kumar Shaw
Mr. Santosh Kumar Pandey
...for respondent nos. 3 to 6
Mr. Vikram Wadehra Ms. Vidushi Chokham ...for Intervenor Mr. Srijib Chakraborty ...for the State A bank has moved this Court under Article 226 of the Constitution of India. It is aggrieved by order dated 22nd May, 2017 of District Magistrate, Howrah in declining assistance to it under section 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) on the ground security interest was created in agricultural land and hit by section 31 therein.
2Mr. Mukherjee, learned Advocate appeared on earlier occasion on behalf of the Bank and relied on judgment dated 3rd August, 2015 made by a learned Single Judge of this Court in disposing of Civil Revision application ( C.O. no. 1316 of 2014 Uluberia Coke Oven Plant & Ors. vs. Corporation Bank & Ors.) from which following is set out below:
"Undoubtedly, the copies of Record of Rights in respect of the land appertaining to Khatian no.463 placed at Page 566-569 prima facie show the classification of the land as 'Sali' land i.e. agricultural land but at same time it recorded in the name of Uluberia Coke Oven Plant. Admittedly, the petitioner is engaged at all material time in the business of manufacturing cokes, an essential raw material for the purpose of manufacturing pig iron. The land in question though recorded as 'Sali' land being the paddy land but no paddy is grown in the said land on the contrary the user of the land is for the non-agricultural purpose.
It is the clenched position of law that presumption of accuracy of the entry in the Record of Rights does not create or extinguish the title but only raises a presumption which again is not conclusive and can be rebutted by evidence, (see 70 CWN 1066). On the basis of the user of the land prima facie, Record of Rights is created.
Basically the land in question was an agricultural land which has been converted by the petitioner for the purpose of manufacturing cokes and is used for business purpose. It is obvious that the financial institution has rendered loan facility to the petitioners on the basis of mortgage in respect of the land in question on being satisfied as to the user of the land. Since controversy was raised as to the user of the land, M. Chandan Pandey, Advocate was appointed a Special Officer by the Tribunal by Order dated 17.10.2013 to visit the factory premises of the petitioner situated at Uluberia and to submit report to ascertain as to whether the petitioner is carrying on agricultural operation on the land. The report as I have perused goes to show that the petitioner carries on his business for manufacturing coke and there is no agricultural activities inside the premises and in the surrounding."3
He submitted further, land though recorded as agricultural land but if used for non-agricultural purposes, it will be treated as non-agricultural land.
Mr. Chakraborty, learned Advocate appearing on behalf of State had submitted, his client was not a party to the adjudication which resulted in said judgment. In any event question before Revisional Court was whether procedure followed in Debt Recovery Tribunal needed to be regulated in exercising superintending jurisdiction under Article 227 of the Constitution. He too relied on extracted portion of said judgment to point out, land records showed and still show secured property as agricultural land. His further submission was, in any event there arises disputed questions of fact.
In continuance of above submissions, further submissions are made today. Mr. Wadehra, learned advocate appearing on behalf of added respondent/creditor with pari passu charge relies on judgment dated 19th March, 2018 of Supreme Court in Civil Appeal nos. 2928 - 2930 of 2018 (ITC Limited versus Blue Coast Hotels Ltd. & Ors.), inter alia, to paragraphs 39 and 40 therein. He also relies on judgment dated 25th June, 2018 of a learned Single 4 Judge of this Court in W.P. 21148 (W) of 2017 (Corporation Bank & Anr. versus The State of West Bengal & Ors.). Mr. Mukherjee submits, it was in his client's own case judgement dated 25th June, 2018 was passed. It is in respect of self-same property.
Two recitals and ground of rejection for assistance sought under section 14 of SARFAESI Act, 2002, as appears from impugned order of District Magistrate, Howrah, is extracted below:-
"Whereas the Authorised Officer once again allowed time and requested to produce all the necessary documents to proceed on but again failed to produce.
And Whereas in pursuance order issued by the Supreme Court in Transcore Vs. Union of India Others (2008) 1 SCC 125 and guideline set forth by Bombay High Court in CRI.
Public Interest Litigation No.24 of 2001 (International Asset Reconstruction Company Private Ltd. Vs. Union of India others) District Magistrate can refuse to pass an order u/s 14 of SARFAESI Act, 2002 in a situation where the notice u/s 13(2) was not properly served to the borrower or to the 3rd party and 5 where the scheduled property attracts section 31 of NPA Act.
Therefore, considering above situation and guideline, the instant application is hereby rejected on following ground.
Ground: The security interest was created in agricultural land, thereby attracts sec 31 of the Act."
On query from Court, clarification was made by the creditors that land was taken as secured asset in the year 2008, that is, long after the Act came into force. Paragraph 39 and a part of paragraph 40 in ITC Ltd. (supra) is extracted below:
"39. In the present case, security interest was created in respect of several parcels of land, which were meant to be a part of single unit i.e. the five star hotel in Goa. Some parcels of land now claimed as agricultural land were apparently purchased by the debtor from agriculturists and are entered as agricultural lands in the revenue records. The debtor applied to the revenue authorities for the conversion of these lands to non-agricultural lands which is pending till date due to policy decision.
40. It is undisputed that these lands were mortgaged in favour of the creditor under a deed dated 26.02.2010. Obviously, since no security interest can be created in respect of agricultural lands and yet it was so created, goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis. .. ... ..."
In WP 21148 (W) of 2017 (supra), inter alia, following reasoning was given and view taken :-
"At the first blush this Court finds that though there is no express bar in creating the security interest in respect of an agricultural land under any other than the SARFAESI Act 6 yet the invocation of the stringent provision contained therein cannot be taken recourse to as such security interest is kept outside the purview of the said Act by virtue of Section 31 thereof. After noticing the unreported judgment of the Apex Court in case of ITC Limited -vs- Blue Coast Hotels Ltd. & Ors in Civil Appeal Nos. 2928-2930 of 2018 decided on March 19, 2018 wherein the Apex Court held that the definition of the security interest in Section 2(zf) of the SARFAESI Act engulfed within itself a deterrence to creation of security interest over the agricultural land and, therefore, the security interest cannot be created in respect of a property specified in Section 31. In view of the aforesaid findings in the said unreported judgment this Court held that the security interest cannot be created in respect of an agricultural land under Section 31 of the said Act.
Even if this Court proceeds that the security interest cannot be created in respect of an agricultural land in view of the express observations made in the said unreported judgment, the other ancillary point which cropped up in the instant case is whether the nature of the land would get change because of its user other than what is recorded in the record-of-rights maintained by the statutory authority.
Section 4A to 4D of the West Bengal Land Reforms Act, 1955 envisages that once the land is recorded to be used for a particular manner or purposes it cannot be used for any other purposes unless the conversion is made by the Collector on an application made by the person. The power is also reserved upon the Collector to take step against the person who uses the land for any other purposes than what has been recorded in the record-of-rights and an order can be passed to restore the same to its original position and on failure to do so the Collector may take steps to restore the land to its original position and a cost for such restoration shall be recovered as a public demand. In addition to the same, Section 4D of the said Act renders those action of the raiyat in treating the property other than for which it is recorded/settled to be punished for a terms of three years or with penalty or with both. If there is a express provision in the State Legislation to treat the land other than settled and entered into record of rights whether for the purpose of SARFAESI Act if the land is used in contravention to and/or in violation of the aforesaid provision it would lose its original character and be deemed to have been converted for other purposes. Such point has now been settled in the said unreported judgment where the Apex Court categorically held that once the parties themselves understood that the lands in question are not 7 agricultural and it also appears that having regard to the use to which that is put, it can not be treated as agricultural land."
Above view taken is that there is no bar to creation of security interest in respect of agricultural land but invocation of stringent provision contained in SARFAESI Act cannot be taken recourse to as such security interest is kept outside its purview by section 3 thereof.
It will also appear from said view in W.P. 21148 (W) of 2017 (supra) extracted above, West Bengal Land Reforms Act, 1955 allows for conversion with power reserved to Collector to take steps against person who uses land for any other purpose than what has been recorded. Writ petition discloses application under section 14 made to District Magistrate, Howrah. There is no copy of application for conversion made disclosed therein. If conversion application had been made, the administration would have addressed the issue.
Petitioner Bank cannot be said to be unaware or ignorant of stringent provisions of law aiding it in recovery proceedings. When it extended facilities to borrower, it also knew or is deemed to have known that property secured for repayment stood recorded as agricultural land. Mr. Mukherjee could not make any submission on this aspect for lack of disclosure in the writ petition as well as, he submitted, instructions. He, however, referred 8 to judgment dated 3rd August, 2015 (supra) in which the learned Single Judge had made following observations:-
"In this revisional application, the petitioners have assailed the finding in a portion of the order impugned on the score that the land in question is an agricultural land in respect of which the learned DRT invoked the provision of SARFAESI Act. It would reveal from the observation made in para-3 of the impugned order that out of four plots aggregating about an area of 231 decimals, only one plot was converted for non-agricultural use before creation of mortgage and other plots were subsequently converted for non-agricultural purpose. The record of right passed in service by the petitioner goes to show that the land is in the nature of agricultural land but no agricultural activities is carried out. In order to ascertain the actual user of the land in question a receiver was appointed by DRT.
The report of the Receiver is placed at pages 590-592 of the Paper Book which depict that there is no agricultural activity going on over the land."
It is clear from immediately above extract that conversion 9 referred to therein is in respect of physical conversion, to ascertain nature of which DRT appointed receiver. Procedure adopted by DRT was challenged by moving this Court under Article 227 of the Constitution. Said learned Single Judge in same judgment, as in earlier extract above, noticed that the land stood classified in the records as 'Sali'.
Distinguishing feature on facts in this case from ITC Limited (supra) is, in case before Supreme Court parties had created security interest over portion of agricultural land in respect of which application for conversion had already been made. Supreme Court expressed view that parties themselves had treated the land otherwise than agricultural. In this case there is no application pending for conversion of the land.
District Magistrate was not favoured with any document to show application for conversion. Procedure in the Land Act not having had been resorted to, District Magistrate acted in terms of section 14 of SARFAESI Act. This Court has not been shown any procedure for ascertaining nature or character of land incorporated as a provision in section 14.
When petitioner Bank chose to extend credit facilities to a borrower on strength of security created over, admittedly recorded agricultural land, and could not produce before Magistrate even particulars of an application for conversion of record in respect thereof, District Magistrate acted in accordance with law by relying upon the record and lawful 10 presumption available, to pass impugned order. There must have been an intention for the purpose of enactment of exemptions under section 31, in applying stringent provisions. As such, this Court does not find any reason to interfere with impugned order. The writ petition is dismissed.
However, view taken by this Bench is in conflict with view taken in W.P.21148 (W) of 2017 (supra) by another learned Single Judge of this Court. Divergence emanates from applying ITC Ltd. (supra) to similar facts and circumstances. As such, place before the Hon'ble The Chief Justice for referring above different views.
(Arindam Sinha, J.)