M/S.Mira Exports vs The Authorized Officer

[Cites 23, Cited by 0]

Madras High Court

M/S.Mira Exports vs The Authorized Officer

The present writ petition is filed impugning an order dated 26.09.2023 in RA(SA)No.5/2021, of Debt Recovery Appellate Tribunal, Page 2 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 Chennai (hereinafter referred to as “DRAT”). The challenge, primarily is on the premise that subject property is “agricultural land”, thus in terms of Section 31(i) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”) falls outside the purview of SARFAESI Act.

2.Brief facts:

2.1. Mira Exports (P1) is a proprietory concern owned by Mrs.R.Gandhimathi (P2) (collectively called as “petitioner”) inasmuch as a proprietory concern does not have a legal existence distinct and independent of the proprietor. Proprietory concern is an individual trading under a Trade name1 . Petitioner commenced business in 2010.

Petitioner owns 6.5 acres of land in Survey No.214/4 of Alukkuli Village in Erode District. The said survey number comprises of two parcels of land, viz., one measuring 3.24 acres and the other 3.26 acres. For the sake of convenience, we shall refer to parcel of land measuring 3.24 acres as “Land A” and parcel of land measuring 3.26 acres as “Land B”.

1 st and 2nd respondents being the same bank, it is referred collectively as “respondent bank”.

2.2. In the year 2011, petitioner availed Cash Credit facility of 1 Shankar Finance and Investments vs. State of Andhra Pradesh and others, (2008) 8 SCC 531.

Page 3 of 47

https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 Rs.1,20,00,000/- (Rupees One Crore and Twenty lakhs only) from 2nd respondent Bank. Sometime in the year 2013, the credit limit was increased to Rs.1,70,00,000/-.

2.3. Market recession and inadequate power supply affected production and functioning of petitioner's firm, causing loss to petitioner.

Petitioner committed defaults in re-payment of loan.

2.4. Respondent bank, on 30.03.2015 classified petitioner's account as Non Performing Asset (NPA) and proceedings were initiated under SARFAESI Act. Respondent bank issued notice dated 21.04.2015, under Section 13(2) of SARFAESI Act, demanding a sum of Rs.1,85,18,895/- along with interest at 14.35% per annum with monthly rest from 21.04.2015. On receipt of notice, petitioner submitted response dated 24.04.2015, inter alia stating that petitioner has, since date of sanction of cash credit limit, paid Rs.59,89,561/- towards interest; due to recession, petitioner stopped business since April 2014 and requested that cash credit account may be closed. Petitioner also sought One Time Settlement (hereinafter referred to as “OTS”) seeking concession by way of waiver of interest and 34% of loan amount. Thereafter, respondent bank issued possession notice dated 23.06.2015, under Section 13(4) of SARFAESI Act and took symbolic/constructive possession of subject property on 23.06.2015.

Page 4 of 47

https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 2.5. Petitioner filed W.P.No.19637/2015 challenging proceedings under Section 13(4) of SARFAESI Act. Respondent bank did not proceed further. Above writ petition was disposed by a Division Bench of this Court vide order dated 06.07.2015, on the premise that the writ petition was premature inasmuch as no action pursuant to possession notice issued under Section 13(4) of SARFAESI Act, has been initiated by respondent bank. It was also observed that if petitioner apprehends any action consequent to proceeding under Section 13(4) of SARFAESI Act, to redress her grievance, petitioner was at liberty to take recourse to statutory forum available under SARFAESI Act. The prayer to direct respondent bank to consider petitioner's OTS proposal, was rejected on the premise that no such direction can be issued and it is for respondent bank to examine and take a decision. In the mean while, petitioner would state that respondent bank was approached for settlement.

However, respondent bank did not agree for settlement.

2.6. Sale Notice dated 10.06.2016 came to be issued by respondent bank followed by sale notices dated 08.11.2016, 01.02.2017, 31.03.2017 and 26.05.2017. There were, however, no bidders to the above sale notices. Sale Notice dated 08.11.2016 was received by petitioner on 10.1 1.2016. Petitioner preferred an Appeal being SA.No.257/2016 before Debts Recovery Tribunal (hereinafter referred to Page 5 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 as “DRT”). DRT stayed the Sale Notice dated 08.11.2016 by way of a conditional order. Petitioner approached respondent bank and informed that they were ready to comply with the conditional order, subject to their proposal of OTS being accepted. The same is stated to be pending.

2.7. Respondent bank, thereafter, issued a sale notice dated 07.11.2017, to petitioner under Rule 8 and 9 of Security Interest (Enforcement)Rules, 2002. Reserve Price was fixed at Rs.1,42,56,000/-

and date of sale by E-auction was indicated to be 15.12.2017. Schedule of property was described in the said notice as under:

“Schedule of immovable Property Property belongs to Mrs R Gandhimathi W/O Mr Mr N Thangaraj, S F No 214/4 (Old SF No 289) an extent of 3.24 Acres in different boundaries (item No 1 & 2 each property an extent of 1.62+ 1.62 total of 3.24 Acres) situated at Alukkuli Village & Panchayat, Gobichettipalayam Taluk, Erode District.

Boundaries:

Item No:1 Property Boundaries (Doc 966/2011) North: Sathy Main Road South: Andavar Polytechnic College East: Mrs R Gandhimathi's Other Property West: Mrs R Gandmathi's Other Property (3.26 acres) Item No: 2 Property Boundaries (Doc 967/2011) North: Sathy main Road South: Andavar Polytechnic College Page 6 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 East: North-South Itteti in SF No 216 West : Mrs R.Gandhimathi's other property RESERVE PRICE FIXED-Rs.1,42,56,000/- (Rs.One crore Forty-two lakhs and Fifty-six thousand only)” 2.8. Meanwhile, respondent bank vide its letter dated 21.1 1.2017 informed petitioner that a Scheme for OTS of Non Performing Assets, 2017 was available to petitioner. Respondent bank also set out the conditions with regard to eligibility for settlement under Bank of India OTS, 2017 Scheme (BOI OTS, 2017), the relevant portions of which are extracted hereunder:

“(i) Ledger outstanding excluding accrued interest from the date of NPA) on 31.03.2017 Rs.184.62 lakhs.

(ii) Application for OTS, will be processed only on deposit of minimum 5% of Ledger outstanding as on 31.03.2017.

(iii) 20% of the OTS amount will have to be deposited by you as upfront money within thirty days from the date of sanction of OTS. This would include the amount deposited by you along with the application.

(iv) The balance amount can be paid within 6 months from the date of sanction of OTS (the validity period) together with Interest @MCLR+2%, failing which the OTS sanction will be rendered infructuous.

(v) However no interest will be charged, if the entire OTS amount is paid within 3 months from the date of sanction.

(vi) You will be eligible for an additional incentive of 10% discount on the OTS amount, on making payment of the entire OTS amount on or before 31.03.2018.” 2.9. The above communication intimating petitioner of OTS Scheme, also stated that since petitioner has been issued notice under Page 7 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 SARFAESI Act, this notice extending OTS is without prejudice to Bank's right to take/continue actions under SARFAESI Act unless a compromise is settled under the present BOI OTS, 2017.

2.10. On 04.01.2018, petitioner paid a sum of Rs.10,00,000/-

which is equivalent to 5% of the Condition No.(ii) in terms of the above scheme and made application agreeing to accept all terms and conditions of OTS. It is stated that petitioner was ready to deposit 20% i.e., Rs.40,00,000/- in terms of clause (iii) of OTS and arranged funds to get an additional 10% as per OTS Clause (vi) and to pay balance amount on or before 31.03.2018. Respondents' official received OTS Application of petitioner on 04.01.2018 and informed petitioner that the property was sold in E-auction conducted on 15.12.2017 to 3rd and 4th Respondents.

2.11. The sale notice dated 07.11.2017 and consequential e-

auction dated 15.12.2017 was challenged in S.A.No.10 of 2018 on the premise that respondent bank illegally brought to sale the subject property, even when OTS was offered and petitioner was willing to fully comply with terms of OTS. More importantly, sale of subject land under SARFAESI is not valid inasmuch as property brought to sale was “agricultural land”, thus outside purview of SARFAESI Act. That sale certificate though issued to respondents 3 and 4 was not registered and Page 8 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 possession was also not delivered and therefore, petitioner had right of redemption.

2.12. During pendency of S.A.No.10 of 2018, petitioner deposited balance OTS amount of Rs.1,25,00,000/- (Rupees One Crore and Twenty five lakhs only) before DRT, Coimbatore as per Scheme of OTS thereby making entire payment as per approved OTS. The table below would show the payments made by petitioner:

                                  Schedule of OTS payment                Date of            Amount
                                                                        payment
                          5% for processing application                 04.01.2018            10,00,000
                          20% within 30 days                            12.01.2018            50,00,000
                          Balance in 6 months                           22.03.2018          1,25,00,000
                                                                                 Total      1,85,00,000

2.13. Meanwhile, respondent bank filed an Application under Section 14 of SARFAESI Act before District Collector/DM, Erode District, seeking to take physical possession of secured asset and hand over the same to auction purchaser. Application under Section 14 of SARFAESI Act was rejected by an order dated 12.02.2018, on the ground that subject property is “agricultural land”, thus falls outside the purview of SARFAESI Act. Respondent bank filed a writ petition W.P.No.26721 of 2019 in this Court to quash the impugned order passed in Page 9 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 Na.Ka.663/2017/E2 dated 12.02.2018. Respondent Nos.3 and 4 filed W.P.No.4087 of 2019 in this Court praying to quash the order dated 12.02.2018 in R.C.No.663/2017/E2 to direct respondent bank therein to provide assistance under Section 14 of SARFAESI Act to petitioner.

This Court framed the following question:

“whether the District Magistrate/District Collector while deciding application under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "SARFAESI Act") can hold an enquiry in the issue whether the land in question, which is claimed to be security interest by the lender bank, is an agricultural land or not, so as to be exempted and therefore outside the ambit and scope of the provisions of SARFAESI Act by virtue of Section 31 (i) of the Act.” 2.14. This Court vide order dated 13.09.2019, disposed the writ petitions by a common order with the following observations/directions:

“12. We find considerable force in the contention raised by the learned counsel for the Bank that the District Collector could not have solely proceeded on the basis of the revenue entries in the revenue records and some coconut trees found on the land, where an industry also existed and held it to be agricultural land so as to be exempted under the provisions of SARFAESI Act without holding proper and comprehensive enquiry in the matter as to whether the security interest of the lender Bank was covered the said land also, being an industry set up on such land. These facts of industry existing there do not appear to have been taken note of by the learned District Collector, who proceeded to hold the land in question to be agricultural land merely on the basis of the claim of parties Page 10 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 about the revenue entries in the revenue records. The said order of the District Collector, therefore, appears to be not falling within the four corners of Section 14 of the Act read in the scheme of the SARFAESI Act. Though the learned District Collector may be said to have power to determine the character of land being agricultural or not but without holding proper enquiry in the matter after looking into all the relevant facts and loan documents etc., he cannot take a one sided view and reject the application under Section 14 of the Act.

13. Section 14 of the SARFAESI Act empowers and at the same time obligates the Chief Judicial Magistrate or the District Magistrate to assist the secured creditor in taking possession of the secured asset in the process of recovery under the provisions of SARFAESI Act because the lending Financial Institutions may find themselves ill-equipped to take the possession of the assets or security interest from the borrowers or persons in whose possession such assets may be and, therefore, the District Collector or the Chief Judicial Magistrate has been empowered to pass suitable orders in this regard on the application filed by the Banks. This provision is apparently to assist the secured creditor in the process under special law in the form of SARFAESI Act.

14. From the order impugned before us, it appears that the learned District Collector did not hold a comprehensive and proper enquiry into the matter and without looking into the facts, as they existed at site in question, where the security interest in the form of industry was established by the borrower which implied that parties themselves did not treat the land in question as an agricultural land, he has proceeded to hold it to be agricultural land merely on the basis of the assumption of the revenue entries which might have continued to show the land to be agricultural land in the revenue records even after sanction of the loan for the industry and default and recovery proceedings having been initiated by the lender Bank under the provisions of SARFAESI Act. Therefore, apparently, that cannot be the sole criteria for granting such an exemption under Section 31(i) of the Act in respect of Page 11 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 the said land which in fact was utilised for setting up of industry or other assets thereon which might fall within the four corners of "security interest" of the lending financial institution. In the absence of any such proper enquiry held by the learned District Collector, particularly, in the light of the observations made by the Hon'ble Supreme Court in the aforesaid judgment, we feel that the matter deserves to go back to the learned District Collector for deciding the application of the lender Bank filed under Section 14 of the Act afresh in accordance with law.

15. We make it clear that this remand and direction to the learned District Collector to decide the application under Section 14 of the Act again will not come in the way of the applicant Bank of India or borrower or auction purchasers to make out their respective cases before the Debts Recovery Tribunal where proceedings are said to be pending under Section 17 of the Act in the form of S.A.No.10 of 2018.

16. The learned District Collector will hold a fresh and proper enquiry under Section 14 of the Act after affording an opportunity to the concerned parties viz., lender Bank, borrower, guarantors and auction purchasers as well as the revenue authorities, in the matter, who may adduce relevant evidence and raise their contentions before the learned District Collector. The learned District Collector will pass a fresh order in accordance with law within a period of three months from today. The parties, without any notice from the side of the learned District Collector, may appear before the learned District Collector, Erode in the first instance on 26.09.2019.” 2.15. Pursuant to the above order dated 13.09.2019 of this Court in W.P.Nos.4087 and 26721 of 2019, S.A.No.10 of 2018 came to be dismissed on 13.01.2020, by DRT after finding the following:

“16. ... Since the Applicants failed to send their Page 12 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 willingness for OTS proposal sooner after receipt of the notice Exh.A-02 and prior to sale of the secured assets, their contention that the Defendants 1 and 2 did not terminate the OTS offer given by the Applicants and that they sold the properties arbitrarily does not hold good.

...

23. The Applicants have miserably failed to prove their case that classification of their loan account as Non performing Asset is against the RBL guidelines and that the 1st Defendant has failed to consider their objection/representation sent for the Demand Notice and that the request for One Time Settlement proposal was not considered and that secured assets are agricultural properties.” 2.16. District Collector/DM vide order dated 21.02.2020 placing reliance upon the order of DRT in S.A.No.10 of 2018 dated 13.01.2020 found that subject properties are not agricultural land as could be seen from the following portions of the order:

“The Tribunal has finally concluded that the applicants (borrower) are not entitled to get the reliefs as prayed and in the result the S.A.10/18 is dismissed. This Tribunal order is final and the District Administration sale Notice dt: 07.11.2017 and E-Auction sale conducted on 15.12.2017 has been vindicated.

The Tribunal had intervened and passed a clear order rejecting the borrower / Applicants prayer part and parcel. From the above discussed points and the observation of the Tribunal even though the land S.F.214/4 was classified as Punjai land in the settlement deeds. The mere description of the nature of the land as punjai land in the Sale Deeds or Title Deeds cannot be taken as a criteria to hold the view that the properties are Agricultural Properties. The word 'Punjai land' refers to the source of irrigation for Agricultural activities. The actual usage of the land is for industrial purpose and a unit for which loan was sought and Page 13 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 obtained, actually existed and being operated at the land S.F.No.214/4 has been established beyond iota of doubt. The sale Notice dated 07.1 1.2017 and E-Auction Sale conducted on 15.12.2017 has been vindicated by Debts Recovery Tribunal at Coimbatore.

In view of the above said facts, it is confirmed that the disputed Lands are not agricultural lands and the borrower had run a business in that land and the original intention and utilization of the land is other than agricultural operations, though it was recorded as agricultural land in Revenue records.” 2.17. Aggrieved by the above order of District Collector/ DM, petitioner preferred a Writ Petition before this Court in W.P.No.6337 of 2020 and the same was disposed on 01.12.2022, with the following direction:

“We, therefore, dispose of the writ petition leaving the issue, namely whether the land in question is agricultural land or not, to be decided by the Appellate Tribunal. In view of the contradictory findings given by the District Collector with regard to the nature of the land, we direct the Appellate Tribunal to go into the question whether the land in question is an agricultural land or not uninfluenced by the observations made herein and the parties are at liberty to produce relevant documents before the Appellate Tribunal".

2.18. In the meantime, DRAT vide order dated 12.03.2020 directed petitioner to pre-deposit Rs.1,45,00,000/- (Rupees One Crore and Forty-Five lakhs only), same was compiled by petitioner in the following manner and respondent bank received the above payment.

Page 14 of 47

https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 Payment Details Date Amount From revalidation through DD 12.03.2020 60,00,000 Deposit before DRAT, Registry 20.03.2020 85,00,000 Total 1,45,00,000 2.19. DRAT disposed of the appeal in R.A. (SA)No.5/2021 vide order dated 26.09.2023 confirming order of DRT in S.A.No.10/2018, finding that order of DRT in S.A.No.10/2018 does not suffer from any error warranting interference, while relying upon the decision of Apex Court in ITC ltd., v. Blue Coast Hotels Ltd and Ors.2 The relevant portion of DRAT order is extracted hereunder:

“16. ..... So, in view of above judgement of Hon'ble Supreme Court, any length of argument from the Appellant's side, without any plea and evidence to show that the Appellant lost their source of livelihood and income on the agricultural land in view of the Securitization action, would not help Appellant.

17. Learned Presiding Officer has dealt with every aspect touching the nature of land, and came to a right conclusion. In fact, most of the submissions of Appellant herein, are nothing but reiteration, that were advanced before DRT, and adding factor here is, about subsequent events. As already referred to above, to decide the nature of land, the crucial date is, the creation of security interest, and subsequent events may be in corroborating nature, but they cannot be taken as main evidence.

18. On a scrutiny of entire materials, I am of the considered view that the Tribunal below has not committed any error in dismissing the Securitization Application and there are no grounds to interfere with the well reasoned 2 (2018) 15 SCC 99 Page 15 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 Order of DRT, Coimbatore.”

3. Having set out broadly the litigative history leading up to the present writ petition, question that arises for consideration is as to whether the subject property i.e., property mortgaged by petitioner with respondent bank and sold to 3rd and 4th respondents, is agricultural land or non-agricultural land. The above question assumes significance inasmuch as if the subject property is agricultural in nature, the same would fall outside the purview of SARFAESI Act and sale of the same under provisions of SARFAESI Act would be illegal, bad for want of jurisdiction.

4. Case of Petitioner:

i) That provisions of SARFAESI Act, do not apply to subject property of petitioner mortgaged with bank, being agricultural land as established by petitioner but failed to be considered by DRT and DRAT.

ii) That subject property being agricultural land is exempted from the rigors of SARFAESI Act under Section 31(i) of SARFAESI Act.

iii) That in the face of substantial evidence let in by petitioner that subject property being agricultural land from the beginning and on the date of creation of security interest and continues to be till date, the Page 16 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 contentions of respondents (Bank & Auction Purchaser) that subject property is non-agricultural is unsustainable in law and facts.

iv) That DRT and DRAT failed to consider the payments made by petitioner towards OTS offered by respondent bank, opportunity to settle being lost by sale under SARFAESI Act, resulting in loss of petitioner's right of redemption.

v) That it is relevant to note that schedule of secured asset does not indicate that any unit or building with sheds existed in the subject property.

vi) That Advocate Commissioner appointed by this Court visited the subject property on 31.08.2024 and vide his report dated 09.09.2024, found that subject property is agricultural in nature and reported that there was no building in subject property, but had two agricultural bore wells. Report was filed by Advocate Commissioner along with several enclosures viz, revenue records, certificate from Assistant Director of Agriculture Department and photographs of subject property. The report of Advocate Commissioner would show that the impugned order suffers from error in law and fact.

Page 17 of 47

https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023

5. Case of Respondent:

i) SARFAESI Act does not provide for a right of appeal to High Court, thus while considering any challenge to order of DRAT in exercise of its power of judicial review under Article 226, Court would not interfere unless there is gross perversity or illegality in the order nor would re-appreciate evidence.

ii) That intent and object of Section 31(i) of SARFAESI Act is to provide protection to agriculturist and actual agricultural activity from action of bank under SARFAESI Act. In the present case, petitioner was running a garments industry and it is not the case of petitioner that she had lost her source of livelihood or income from the agricultural lands due to action under SARFAESI Act nor has petitioner pleaded that agriculture income from the mortgaged property is her source of income and that is lost. Plea of agricultural land by petitioner is only to avoid proceedings under SARFAESI Act, Section 31(i) of SARFAESI Act, has no applicability to the facts and circumstance of the present case.

iii) That once an agricultural land is given as collateral for obtaining a loan for a purpose of investment in an industry, the said land loses its character as an agricultural land at the time of sanction of loan, thereafter provisions of SARFAESI Act will apply.

iv) That the stand of petitioner that subject property is agricultural Page 18 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 land is an after thought. Petitioner admitted in the affidavit filed before this Hon’ble Court in W.P.No.19637 of 2015, that mortgaged land was an extent of 3.24 acres and 50 cents of the said land has been utilized for putting up buildings /premises of Mira Exports. Petitioner has not offered any explanation for such admission in the affidavit filed in support of writ petition in W.P. No.19637 of 2015.

v) Though valuation certificate dated 09.04.2011, described subject property as “vacant land”, even in the said report there is reference to AC sheet roof building in a portion of subject property and the other portion of the said building is found/stated to be located in adjoining property viz., Land B.

vi) That market value of secured asset is arrived at in Valuation Report by considering sale value of house sites in the surrounding area, again indicative of the fact that the property in question is not agricultural property.

vii) Reliance was placed on valuation reports dated 14.04.2011, 18.04.2011, 02.05.2015 and 19.01.2017 wherein presence of building i.e., garment factory is shown in subject property.

viii) Reliance was placed on extract of Village Adangal which would show the presence of building in subject property.

ix) Advocate Commissioner report or any document subsequent to Page 19 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 the date of creation of mortgage would be irrelevant in determining the nature of land for considering the question of applicability or otherwise, of the exception provided under Section 31(i) of SARFAESI Act. Since petitioner created security interest in Land A (3.24 acres), petitioner herself had not considered it as agricultural land for the purpose of availing loan.

6. Chain of Passage of title to subject property:

6.1. Petitioner owns 6.5 acres of land in survey No.214/4 of Allukkuli Village, Erode District. The above survey number comprises of two parcels of land viz., one measuring 3.24 acres i.e., Land A and the other 3.26 acres i.e., Land B. It is not in dispute that what was offered as security to respondent bank for availing cash credit facility was Land A. Petitioner was engaged in export of garments. The above garment manufacturing facility was located in Survey No.214/4. The controversy revolves around whether the said export facility/factory was located in Land A or Land B. It is the case of petitioner that export facility/factory viz., Mira Exports was located in Land B and thus proceedings initiated in respect of Land A under SARFAESI Act is without jurisdiction inasmuch as Land A is agricultural land thereby falling outside the purview of SARFAESI Act under Section 31(i). On the other hand it is Page 20 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 the case of respondent bank that the above export facility/factory was located in Land A thus not agricultural land, hence proceeding under SARFAESI is valid and legal.

6.2. Land A was purchased by Ramasamy Gounder, father of petitioner, vide two sale deeds dated 30.01.1988 and 02.02.1988 each measuring 1.62 acres (totally 3.24 acres) vide document Nos.97 and 1 1 1 of 1988 with specific boundaries. The above property was settled in favour of petitioner by her father vide two deeds of settlement dated 09.03.2011 in respect of 1.62 acres each in Doc.Nos.966 and 967 of 2011.

6.3. Petitioner's mother purchased 3.26 acres vide Doc. Nos. 96 and 1 12 of 1988 measuring 1.62 and 1.64 acres respectively, in all 3.26 acres. During 2010, above extent of land measuring 3.26 acres was granted/obtained to/by petitioner under a family partition dated 02.02.2010 in Doc.No.264 of 2010, with specific boundaries. Above property/land was also covered in same survey No.214/4. Above property was mortgaged with Indian Overseas Bank on 08.06.2010 and released on 08.08.2016 as evident from Doc. Nos.1798 of 2010 and 2358 of 2016.

6.4. It is not in dispute that petitioner carried on business of manufacture and export of garments and there was a building/structure Page 21 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 from where the said business was carried, in the name and style of Mira Exports in Survey 214/4. As stated supra, dispute is as to whether said Mira Exports was located in Land A or Land B both parcels of land covered by Survey No.214/4.

7. Valuation Reports – Considered by Tribunal/Appellate Tribunal:

7.1. To resolve the above dispute, documentary evidence let in by both sides including five valuation reports had been examined/ considered by DRT and DRAT. There is inconsistency even in the above reports. The following table is relevant in this regard:

                      S.No.         Date          Nature of Report                    Finding
                      1.            09.04.2011    Valuation Report                    Relied    by     Petitioner
                                                                                      subject     property     is
                                                                                      referred to as “Vacant
                                                                                      Land” (Even in this report
                                                                                      reference is made to a
                                                                                      “shed” portion of which is
                                                                                      the Subject property)
                      2.            14.04.2011    Valuation Report                    Relied by Respondent
                                                                                      Subject Property described
                                                                                      as comprising “AC sheet
                                                                                      roof”      situated     in
                                                                                      “Commercial Area”
                      3.            18.04.2011    Valuation Report                    Relied by Respondent
                                                                                      Subject Property described
                                                                                      as comprising “AC sheet”,
                                                                                      “Mangalore Tile Roof” and
                                                                                      “a set of garment factory
                                                                                      building,”
                      4.            02.05.2015    Valuation Report                    Relied by Respondent
                                                                                      Subject Property described

                     Page 22 of 47



https://www.mhc.tn.gov.in/judis                   ( Uploaded on: 06/06/2025 07:18:52 pm )
                                                                                                  W.P.No.30999 of 2023

                      S.No.         Date            Nature of Report                    Finding
                                                                                        as comprising “AC sheet
                                                                                        roof   and   RCC   roof
                                                                                        building”
                      5.            19.01.2017      Valuation Report                    Relied by Respondent
                                                                                        Subject Property described
                                                                                        as comprising “Residential
                                                                                        building    and    factory
                                                                                        building”

7.2. Apart from the above valuation reports following evidence were let in by petitioner to show that no building existed in the subject property measuring 3.24 acres and that Mira Exports was located in the land adjacent to subject property measuring 3.26 acres covered in same Survey No.214/4, however, some of the above documents were not filed in the writ petition, as would be evident from table below:

S.No. Date Description of Exhibit Description of land document

1. 03.11.2014 Certificate issued by the A5 Not filed in the VAO in respect of SA Writ petition schedule mentioned property

2. 26.07.2016 Certificate issued by the A6 Not filed in the VAO in respect of SA Writ petition schedule mentioned property is an agricultural land

3. 07.06.2007 Xerox copy of Adangal A7 House site and extract issued in respect mentions coconut of the SA Schedule trees, Areca nut, mentioned property of Lemon Trees and the Fasali 1415 in Banana plantain.

favour of Ramasamy Page 23 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 S.No. Date Description of Exhibit Description of land document

4. 25.06.2015 Computerised A10 Not filed in the Patta/Chitta extract in Writ petition favour of Gandhimathi

5. 01.02.1988 Certified copy of Sale A13 Not filed in the deed executed by Writ petition Periyarengasamy and others, in favour of Angammal

6. 30.01.1988 Certified Xerox copy of A14 Not filed in the Sale Deed executed by Writ petition Periyarengasamy and others in favour of Ramasamy Gounder

7. 02.02.1988 Certified Xerox copy of A15 Not filed in the Sale Deed executed by Writ petition Periyarengasamy and others in favour of Ramasamy Gounder

8. 03.02.1988 Certified Xerox copy of A16 Not filed in the Sale deed executed by Writ petition Periyarengasamy and others, in favour of Angammal

9. 1 1.01.2010 Copy of Adangal issued A17 House site and for the Fasali 14 18 in mentions coconut favour of Ramasamy trees, Areca nut, Lemon Trees and Banana plantain.

10. 09.03.2011 Certified Xerox copy of A18 Punjai Thotta land settlement deed executed by Ramasamy Gounder in favour of Gandhimathi 1 1. 09.03.2011 Certified Xerox copy of A19 Punjai Thotta land settlement deed executed by Ramasamy Gounder in favour of Gandhimathi Page 24 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 S.No. Date Description of Exhibit Description of land document

12. 18.12.2017 Copy of Adangal (2) A20 Coconut trees issued for the Fasali (S.No.214/4A) 1427, Fasali 1426 in favour of Gandhimathi Coconut trees, Building + Houseite with EB connection, Baniyan company with EB connection (S.No.214/4B)

13. 22.10.2018 Computerised copy of A21 Not filed in the Chitta extract in favour Writ petition of Gandhimathi

14. 19.12.2017 True xerox copy of A22 Not filed in the computerised chitta Writ petition copy in favour of Gandhimathi

15. 16.06.2011 Certified copy of A26 Mentioned only as memorandum of “Land” deposit of title deeds executed by Gandhimathi in relation of defendant bank

16. 03.09.2018 Certified copy of A32 Coconut trees Adangal extract in (S.No.214/4A) favour of Gandhimathi for the Fasali 1427 Coconut trees, Building + Houseite with EB connection, Baniyan company with EB connection (S.No.214/4B)

17. 12.02.2018 Xerox copy order A41 SF No. 214/4A passed by the District measuring an Collector, Erode, in extent of 3.24 Na.Ka.663/2017/E2 acres are addressed to the agricultural authorised officer/ properties Chief Manager, Bank of Page 25 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 S.No. Date Description of Exhibit Description of land document India, Avinashi Road Junction, Tiruppur-641 603.

18. - Colour Photos 6 sheets A42 -

7.3. Following documents were let in by respondent bank in support of its case that Mira Exports was located in Land A measuring 3.24 acres and thus proceedings under SARFAESI Act for default in repayment of cash credit facility was legal and justified:

S.No. Date Description of Exhibit Description of land document

1. 24.04.2015 Xerox copy of letter B1 -

from the 1 st applicant to the 2nd defendant

2. 28.02.2011 Xerox copy of B2 Readymade acknowledgement Garments issued by the Department of Industries & Commerce, Government of Tamil Nadu

3. Xerox copy of Fire & B3 Not filed in the special perils policy Writ petition issued by the New India Assurance Company Limited

4. 19.01.2017 Xerox copy of valuation B4 Land with mixed report of Er. S. type roof Devanadan in No. residential and 1 132/2017 garments

5. 06.09.2018 Xerox copy of the FIR of B5 Buildings in the Kadathur Police Station disputed property Page 26 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 S.No. Date Description of Exhibit Description of land document have been damaged

6. 22.10.2018 Xerox copy of reply B6 Not filed in the from Tamil Nadu Writ petition Generation & Distribution Corporation Limited to the Authroized Officer, Bank of India regarding RTI enquiry

7. 25.07.2018 Xerox copy of letter of B16 Not filed in the 2nd applicant addressed Writ Petition to Smt. J. Sujatha, Deputy General Manager, Consumer Education and Protection Cell (CEPC), Reserve Bank of India, Chennai

8. 08.09.2018 Xerox copy of Extract B18 Not filed in the from the Registration Writ petition Department, Gobichettipalayam Joint-I, SRO, in respect of SA schedule mentioned property

9. 01.08.2018 Xerox copy of letter B19 Not filed in the from the 2nd applicant Writ petition addressed to the Chief Vigilance Officer, Bank of India, Head Office, Bandra (East), Mumbai

- 400051 Page 27 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023

8. Finding of Tribunals below:

8.1. Finding of DRT:

On considering the above evidence, DRT found that subject property was not agricultural land, thereby rejecting the challenge to proceedings under SARFAESI as being without jurisdiction. The relevant portion is extracted hereunder:

“19. Admittedly in the Sale Deeds under Exh.A-13 to A-16 and in the Settlement Deeds in Exh.A-18 and Exh.19, there are recitals in the description of the properties that the properties are punja lands. The mere description of the nature of the land as punja land in the Sale Deeds or Title Deeds cannot be taken as criteria to hold the view that the properties are Agricultural properties. The word "punja land" refers to the source of irrigation for Agricultural activities. In State Bank of India, SARM Branch Vs. District Collector, Tirupur[CDJ 2018-4982) cited by the Ld. Counsel for the Defendants 1 and 2, the Hon'ble High court of madras has observed that a patta need not necessarily show as to whether the property is being put to agricultural use or not and that many times a change in use of land is not reported and that entries in patta are not altered and that the sale deed reflects the property as "punja land" which can be defined as dry land put in agricultural use and the Just because the sale deed reflects the land as punja that does not mean that is automatically agricultural land and that the description in the sale deed of patta cannot be finally determined as to what is being done on the land. In any event, the above said sale deeds were executed very long back ie to say in the year 1988 the Settlement deeds under Exh.A-18 and Exh.19 in the year 2011. It is a customary practice for document writers to reproduce the description of the property in the newly executed deeds as found in the earlier deeds. Therefore, the mere recitals found in the Settlement Deeds would not strengthen the contention of the Applicants that the secured properties are agricultural Page 28 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 properties.

20. The Adangal Extracts Exh.A-07 is pertaining to the year 2005, where in the cultivation of Coconut trees, Areca Trees, Lemon tree, sugarcane and plantain has been mentioned. In Exh.A-08 and A-09 which are pertaining to the year 2013 and 2014 respectively, the cultivation of coconut tree and Areca tree has been mentioned. Further, the existence of Mira Export factory has also been mentioned in Exh.A-08 and A-09. But the Applicants have not produced the relevant adangal extract pertaining to the year 2011 during which security interest was created over the SA schedule mentioned properties. In patta/Chitta Extracts Exh.A-10, A-21, A-22 the nature of the land has been mentioned as punja land. It cannot be ascertained through these documents as to whether the secured assets were the agricultural properties at the time of creation of security interest. In the Certificates under Exh.A-05 & A-06 issued by the concerned Village Administrative Officer it has been mentioned that the lands are agricultural lands. The above certificates were obtained in the year 2014 and 2016 respectively. It cannot be ascertained from the above said certificates as to whether the secured assets were the agricultural properties at the time of creation of security interest. No reliance has been placed upon Exh.A-42 which are the photographs to accept the contention of the Applicant firm that the secured assets are Agricultural lands. In the photographs, the existences of coconut trees are seen. But, no supporting documents have been produced to show that these photographs are pertaining to the secured assets.

21. The mere existence of coconut trees in the land is not sufficient to show that the land is used as an agricultural land. This is not uncommon in the residential premises wherein many coconut trees would have been planted for domestic purpose. Such property cannot be considered as an agricultural property. The periodical ploughing, sowing, cultivating and harvesting in the land are the agricultural activities or operations. Such land alone can be considered as the agricultural land. The Applicants Page 29 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 have not produced any material before this Tribunal to show that the above said agricultural activities were being carried on in the secured assets at the time of creation of security interest.

22. The Defendants 1 and 2 have produced the documents to disprove the contention of the Applicants that the secured assets are not agricultural properties. The Exh.B-01 is the letter dated 24.04.15 sent by the Applicant firm to the 2nd Defendant. The Letter pad of the Applicant firm has been used for sending the letter with caption "Mira Exports, Nanthavana Thottam, Kovai Pirivu, Alukkuli (Post), Gobichettipalayam, Erode District". The above said address and the address mentioned in the schedule of the property of the SA are one and the same. In the above said letter, the Proprietrix of the Applicant firm has stated that she has closed her business since 2014. The Exh.B-02 is the acknowledgment issued by the Department of Industries and Commerce, Government of Tamilnadu for the Application dated 28.02.2011 submitted by the Applicant firm. In the above said application, the Applicant firm has mentioned against the heading "nature of activity" as "Manufacturing" in the secured assets. In the same application, it has also been mentioned that 15 workers were employed.

23. A perusal of the Exh.B-03 which is the copy of insurance policy issued by the New Assurance Co. Itd.

would show that policy has been created against firm for the buildings and stocks in the secured assets. The Exh.B-04 is the copy of valuation report given by the approved valuer in respect of the secured assets wherein the existence of large extent of land with mixed type roof residential and garments buildings has been clearly mentioned. The Exh.B- 05 is the copy of FIR registered by the Kadathur Police station against the partners of the Applicant firm on the complaint lodged by the 1st Defendant. In the above said report, the functioning of the applicant firm and the existence of commercial land and buildings in the secured assets has been mentioned. The Exh.B-06 is the reply letter sent by the Tamilnadu Generation and Distribution Page 30 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 Corporation Limited to the 1st Defendant under RTI enquiry, wherein the granting of service connection to the Applicant firm for industrial purpose in the secured assets has been mentioned. It is established from the aforesaid documents that huge buildings have been constructed in the secured assets for the purpose of running Manufacturing Unit for Garments and that three phase service connection has been provided for industrial purpose.

23. In Exh.B-16 is the copy of letter dated 25.07.18 sent by the 2nd Applicant to the Deputy General Manager, Consumer Education and Protection Cell, Reserve Bank of India, Chennai, wherein she has stated that she was running a Hosiery Units in the name of Mira Exports in Survey No.214/4(Old No.289) and New S.F.No.214/4A at Alukkuli Village, Gobichettipalayam, Erode District. In It cannot be disputed that this property is referred to the secured asset. In Exh.B-18 which is the copy of extract issued by the Registration Department, Gobichettipalayam, Joint-I SRO, in respect of the secured assets wherein the category of land has been mentioned as Class-I. 3-1. The Exh.B-19 is the copy of the complaint dated 01.08.18 sent by the 2nd Applicant to the Chief Vigilance Officer, Bank of India, Mumbai. In the above said complaint also she has categorically stated that she was running a Hosiery unit in the name of the 1 st applicant firm in the secured asset. The above said documents which have been produced by defendants 1 and 2 undoubtedly establish the fact that secured assets cannot be agricultural properties.

24. Once it is established that activities of manufacturing unit of 1 Applicant firm is being carried on in the secured assets, the contention of the applicants that secured assets are the agricultural properties does not hold good. In Blue Coast Hotel Pvt. Ltd. case which has been referred to supra, the Hon'ble Supreme Court has held as follow "It is undisputed that the lands mortgaged in favour of the creditor are referred as agricultural lands in the sale deed and settlement deed. What is mentioned in the settlement deed is not the criteria. Since no security interest can be created in respect of agricultural land and yet it was Page 31 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 so created goes to show that the parties did not consider the land as Agricultural land and the debtor offered the land as security on this basis. The above observation of the Hon'ble Supreme Court can be applied to the present case on hand for the reason that the Applicants themselves have offered the SA Schedule mentioned properties (even assuming for argument's sake that the properties are agricultural properties), as collateral securities by executing Memorandum of Deposit of title deeds in favour of the 2nd Defendant Bank. Therefore, the Applicants cannot be permitted to contend that since the secured assets are agricultural properties, they are exempted from the SARFAESI proceeding as per the Sec. 31(i) of the SARFAESI Act 2002.

25. Admittedly, the Application filed under Sec. 14 of the SARFAESI Act by the 1st Defendant to the District Magistrate for taking actual possession of the secured assets was rejected on the ground that the secured assets are agricultural properties. The Ld. Counsel appearing for the Defendants 3 and 4 have stated during his advancement of argument that the Writ Petition filed by the Defendants 3 and 4 against the order of the District Magistrate is pending before the Hon'ble High Court of Madras. It is the contention of the Defendants 1 to 4 that the District magistrate, who is the executive magistrate does not have any jurisdiction to adjudicate the nature of the assets and that therefore, the order of the Districts magistrate is not only without jurisdiction but is also not bending on them in support of the above contention the Ld. Counsel appearing for the Defendants 1 and 2 has cited the judgment of Hon'ble High Court of Madras (CD1 2018-MHC-Page- 4982(State Bank of India, Stressed Assets Recovery Management Branch Vs. District Collector, Tirupur)) wherein it has been held that the District collector has no jurisdiction to decide the nature of the land. Therefore, the rejection of the application filed by the 1st Dellendant under Sec.14(1) of the SARFAESI act for taking physical assets on the ground that the properties are agricultural properties cannot ipso facto strengthen the contention of the Applicants that secured assets are agricultural Page 32 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 properties. Above all, it has been established by some of the documents of the Applicants that manufacturing activity is being carried on in the secured assets apart from export of Hosiery garments from the manufacturing unit situated in the secured assets.

26. The Applicants have miserably failed to prove their case that classification of their loan account as Non performing Asset is against the RBI guidelines and that the 1 Defendant has failed to consider their objection/representation sent for the Demand Notice and that the request for One Time Settlement proposal was not considered and that secured assets are agricultural properties.

In view of the foregoing reasons this Tribunal holds that the Applicants are not entitled to get the reliefs as prayed. Thus this point is answered.

In the result the SA No. 10/18 is dismissed. No costs.” 8.2. Finding of DRAT:

Order of DRT was confirmed by DRAT finding that DRT has passed a considered order while arriving at the conclusion that subject property is not agricultural land. The relevant portion of DRAT order is extracted hereunder:

“15. As already referred to above, security interest is created in 2011, and in the same year, in the applications furnished to Government departments, this 3 acres 24 cents, is referred as land with building. In fact, in Securitization Application itself, in the Schedule, Appellants themselves have referred this 3 acres 24 cents as land and building. which means secured asset consists of buildings. As seen from the documents produced before Tribunal Page 33 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 below, which were also referred in the Order, buildings in the Schedule land are referred as manufacturing Unit.

16. Though several judgements are referred to by all the parties, in view of judgement of Hon'ble Supreme Court in ITC Ltd. Vs. Blue Coast Hotels Ltd & Ors., reported in (2018) 15 SCC 99, there is no necessity to refer to other judgements. In Blue Coast Hotels Ltd., Hon'ble Supreme Court, in para 36 of its judgement, held as follows "36. The purpose of enacting Section 31(i) and the meaning of the term "agricultural land" assume significance. This provision, like many others is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court. The plain intention if the provision is to exempt agricultural land from the provisions of the Act. In other words, the creditor cannot enforce any security interest created in his favour without intervention of the Court or Tribunal, such security interest is in respect of agricultural land. The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act. It is also intended to deter the creation of security interest over agricultural land as defined in Section 2 (2) 36.

Thus, security interest cannot be created in respect of property specified in Section 31.

37.From a reading of the above para, it is very clear the exemption is to protect the agriculturists from losing their very source of livelihood and income through agricultural land. Here admittedly, the loan is for commercial purpose and it is not the case of Appellant that their source of livelihood is on the agricultural produce realized from Schedule land. So, in view of above judgement of Hon'ble Supreme Court, any length of argument from the Appellarit's side, without any plea and evidence to show that the Appellant lost their source of livelihood and income on the agricultural land in view of the Securitization action, would not help Appellant.”

17. Learned Presiding Officer has dealt with every aspect touching the nature of land, and came to a right conclusion. In fact, most of the submissions of Appellant Page 34 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 herein, are nothing but reiteration, that were advanced before DRT, and adding factor here is, about subsequent events. As already referred to above, to decide the nature of land, the crucial date is, the creation of security interest, and subsequent events may be in corroborating nature, but they cannot be taken as main evidence.

18. On a scrutiny of entire materials, I am of the considered view that the Tribunal below has not committed any error in dismissing the Securitization Application and there are no grounds to interfere with the well reasoned order of DRT, Coimbatore.”

9. Analysis:

i) It is necessary to bear in mind that the purpose of enacting Section 31(i) of SARFAESI Act is with a view/object of protecting agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of SARFAESI Act. In this regard, it may be relevant to refer to the judgment of the Supreme Court in ITC Ltd. v.

Blue Coast Hotels Ltd.,3 wherein it was held as under:

“36. The purpose of enacting Section 31(i) and the meaning of the term “agricultural land” assume significance. This provision, like many others is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court. The plain intention of the provision is to exempt agricultural land from the provisions of the Act. In other words, the creditor cannot enforce any security interest created in his favour without intervention 3 Cited supra Page 35 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 of the court or tribunal, if such security interest is in respect of agricultural land. The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act. It is also intended to deter the creation of security interest over agricultural land as defined in Section 2(1)(zf) [“2.(1)(zf)“security interest” means right, title or interest of any kind, other than those specified in Section 31, upon property created in favour of any secured creditor and includes—(i) any mortgage, charge, hypothecation, assignment or any right, title or interest of any kind, on tangible asset, retained by the secured creditor as an owner of the property, given on hire or financial lease or conditional sale or under any other contract which secures the obligation to pay any unpaid portion of the purchase price of the asset or an obligation incurred or credit provided to enable the borrower to acquire the tangible asset; or(ii) such right, title or interest in any intangible asset or assignment or licence of such intangible asset which secures the obligation to pay any unpaid portion of the purchase price of the intangible asset or the obligation incurred or any credit provided to enable the borrower to acquire the intangible asset or licence of intangible asset;”] .

Thus, security interest cannot be created in respect of property specified in Section 31.”

ii) Classification of land in Revenue records as agricultural or otherwise is not dispositive or conclusive4. However, entries in revenue records are good prima facie evidence5. The nature and character of land for determining whether the land in question would be covered within the scope of exemption from the purview of SARFAESI Act in terms of Section 31(i) of SARFAESI Act, ought to be determined on the 4 K.Sreedhar vs. Raus Constructions Private limited, (2023) 11 SCC 169 5 Commissioner of Wealth Tax, Andhra Pradesh vs. Officer-in-charge (Court of Wards), Paigah, (1976) 3 SCC 864 Page 36 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 date on which security interest was created6. Burden to prove that secured assets were agricultural lands and actually being used as agricultural lands and agricultural activities are carried out is on the borrowers7 . There is no straight jacket formula/ test to determine whether a particular land is agricultural or not but ought to be determined on the basis of totality of facts and circumstances including nature and character of land, use to which it was put and purpose and intent of parties on the date on which security interest was created.

Agricultural land is a species of land, it may be land which could be said to be either actually used or ordinarily used or meant to be used for agricultural purposes. Agricultural land must have a connection with an agriculture use or purpose. It is not the possibility of some possible future use for agricultural purpose or potentiality of the land for use for agricultural purpose which is the test but it is its actual condition/ use and intended use which ought to be seen to determine whether the land would qualify as agricultural land or otherwise.

10. On a close reading of the orders of DRT and DRAT, it appears to us that DRT except to refer/ mention the evidence let in by both sides, has neither examined the probative value of evidence let in nor 6 Indian Bank and another vs. K.Pappireddiyar and another, (2018) 18 SCC 252 7 Cited supra Page 37 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 discharged its obligation to analyse or sift or assess the evidence on record with reference to trustworthiness and truthfulness by a process of dispassionate judicial scrutiny adopting an objective approach. Courts have a duty while scrutinising evidence to separate grain from chaff8. It may also be relevant to note that evidence ought to be weighed and not counted9. The test which ought to be applied by court is that evidence has a ring of truth, it is cogent, credible and trustworthy or otherwise.

Courts would lay emphasis on value, weight and quality of evidence rather than quantity, multiplicity or plurality of evidence10. If we keep the above principles in mind, we find that DRT has not evaluated the evidence let in by either side.

10.1. We also find that both DRT and DRAT have not considered/examined the following aspects viz.,

a) While the first report dated 09.04.2011 would describe the subject property as vacant land, subsequent reports would state that there was a building/shed/garment factory building in the subject property. There was nothing on record to indicate the need for obtaining 4 valuation reports in addition to the report dated 09.04.2011. DRAT ought to have enquired into the need for obtaining these additional 8 Sardul Singh v. State of Haryana, (2002) 8 SCC 372 9 Muluwa v. State of M.P., (1976) 1 SCC 37 10 Takdir Samsuddin Sheikh v. State of Gujarat (2011) 10 SCC 158 Page 38 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 reports which it failed.

b) Assuming that there was a shed or a structure that by itself would not have a bearing in determining the nature of the land unless shown that the structure/shed/ building was used for non-agricultural purposes, in the present case manufacture/trading/export of garments was carried out in the said structure/building/shed.

c) Assuming that there is commercial activity in a portion of land, i.e., Land B, would it convert the entire parcel of land including Land A, into a non-agricultural land? Would it make a difference if the owner of both parcels of land is the same person? This ought to have been examined keeping in view whether the portion of land in subject property other than the building (assumed to have existed) was incidental for the purpose of running the business or petitioner intended to use the portion of land of the subject property other than the building (assumed) for agricultural purposes.

d) District Collector/District Magistrate rejected the Application filed under Section 14 of SARFAESI Act on the premise that the subject property was agricultural land. The above order was challenged before this Court in W.P.No.4087 and 26721 of 2019. This Court on finding that Application under Section 14 of SARFAESI Act was decided without holding a comprehensive enquiry, remanded the matter back to the Page 39 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 District Collector to hold a fresh and proper enquiry after affording opportunity to concerned parties. Importantly, District Collector/District Magistrate considered report/certificate from registration department and Deputy Director of Agriculture, Gobichettypalayam, which would indicate subject property to be agricultural land with more than 180 coconut trees some of which were more than 20 years old. The report of the Deputy Collector/District Magistrate has not been set aside. Still, DRT merely stated that rejection of application under Section 14 of SARFAESI Act on the ground of the property being agricultural property is not conclusive and did not deal with the above certificates, the relevant portion is extracted hereunder:

“25. ..... Therefore, the rejection of the application filed by the 1 st Defendant under Sec.14(1) of the SARFAESI act for taking physical assets on the ground that the properties are agricultural properties cannot ipso facto strengthen the contention of the Applicants that secured assets are agricultural properties.” 10.2. DRAT while confirming the order of DRT made no enquiry as to admissibility/relevance and probative value of the above material/certificate for the purposes of deciding the appeal. In our view DRAT ought to have considered the above certificate while deciding the question as to whether subject property is agricultural land or otherwise.

Page 40 of 47

https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 Merely because the order dated 12.02.2018 under Section 14 of SARFAESI Act was set aside for a fresh enquiry that would not ipso facto render the evidence in the form of a report/certificate of Registration Department and Deputy Director of Agriculture, collected / gathered/ obtained irrelevant/ inadmissible.

10.3. We find adjudication made by DRAT is incomplete and stands vitiated inasmuch as it failed to examine the evidence on record independently nor made enquiries which were relevant, rather failed to consider relevant material as could be seen from discussion supra. It is trite that a tribunal order which fails to take into account relevant or considers irrelevant material would stand vitiated. In this regard, it may be relevant to quote the following judgments of the Apex Court:

i) Omar Salay Mohd. Sait v. CIT1 1 :

“33. We are aware that the Income Tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this Court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be

11 (1959) 37 ITR 151 Page 41 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings even though on questions of fact will be liable to be set aside by this Court.”

ii) Siemens Aktiengeselischaft & Siemens Ltd. v. DMRC Ltd.,12:

“22. More recently in Heinz India (P) Ltd. v. State of U.P. [(2012) 5 SCC 443 : (2012) 3 SCC (Civ) 184 : (2012) 3 SCC (Cri) 198] , this Court speaking through one of us (Thakur, J.) examined the legal dimensions of judicial review and quoted with approval the following passage from Reid v. Secy. of State for Scotland [Reid v. Secy. of State for Scotland, (1999) 2 AC 512 : (1999) 2 WLR 28 :

(1999) 1 All ER 481 (HL)] which succinctly sums up the law: (Heinz India (P) Ltd. case [(2012) 5 SCC 443 : (2012) 3 SCC (Civ) 184 : (2012) 3 SCC (Cri) 198] , SCC pp. 470-

71, para 68) “68. … ‘Judicial review involves a challenge to the legal validity of the decision. It does not allow the court of review to examine the evidence with a view to forming its own view about the substantial merits of the case. It may be that the tribunal whose decision is being challenged has done something which it had no lawful authority to do. It may have abused or misused the authority which it had. It may have departed from the procedures which either by statute or at common law as a matter of fairness it ought to have observed. As regards the decision itself it may be found to be perverse, or irrational or grossly disproportionate to what was required. Or the decision may be found to be erroneous in respect of a legal deficiency, as for example, through the absence of evidence, or of sufficient evidence, to support it, or through account being taken of irrelevant matter, or through a failure for any 12 (2014) 1 1 SCC 288 Page 42 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 reason to take account of a relevant matter, or through some misconstruction of the terms of the statutory provision which the decision-maker is required to apply. But while the evidence may have to be explored in order to see if the decision is vitiated by such legal deficiencies it is perfectly clear that in a case of review, as distinct from an ordinary appeal, the court may not set about forming its own preferred view of the evidence.’ (Reid case [Reid v. Secy. of State for Scotland, (1999) 2 AC 512 : (1999) 2 WLR 28 :

(1999) 1 All ER 481 (HL)] , AC pp. 541 F-H and 542 A)”

iii) Dhirajlal Girdharlal v. CIT13:

“8. ..... It is well established that when a court of fact acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises.” 10.4. Applying the above test to the order of DRAT, we find that order of DRAT stands vitiated inasmuch as it has not considered relevant material nor made enquiries which are imperative.

10.5. We also find that order of DRAT is contrary to the directions of this Court in W.P.No.6337 of 2020 wherein this Court was pleased to direct DRAT to decide the question as to whether the subject property is agricultural land or otherwise. The relevant portions of the order are extracted hereunder:

“5. We, therefore, dispose of the writ petition leaving the issue, namely whether the land in question is agricultural land or not, to be decided by the Appellate

13 (1954) 2 SCC 557 Page 43 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 Tribunal. In view of the contradictory findings given by the District Collector with regard to the nature of the land, we direct the Appellate Tribunal to go into the question whether the land in question is an agricultural land or not uninfluenced by the observations made herein and the parties are at liberty to produce relevant documents before the Appellate Tribunal.

6. It is made clear that till the disposal of the matter by the Appellate Tribunal, the respondents shall not interfere with the possession of the land in question by the petitioner.

7. Since learned counsel on either side assured this court that they will extend their fullest cooperation for speedy disposal of the matter pending before the Appellate Tribunal, we direct the Appellate Tribunal to dispose of the matter within two months from the date of receipt of a copy of this order.” (emphasis supplied) 10.6. A perusal of order of DRAT would show that it has merely affirmed the order of DRT and has not appreciated/ re-appreciated evidence independently, the above exercise ought to have been made by DRAT in view of directions of this Court, in W.P.No.6337 of 2020. That apart DRAT is final statutory body/Tribunal under SARFAESI Act, thus making it all the more necessary for the DRAT to appreciate/re-

appreciate evidence on record independently.

10.7. We also find that none of the above tests discussed supra relating to determination of nature of land, whether it is agricultural or otherwise14 has been applied by DRT or DRAT while assessing / 14 Commissioner of Income tax v. Minguel Chndra Pais, (2006) 282 ITR 618 Page 44 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 evaluating the evidence let in by both sides.

10.8. We are thus inclined to set-aside the impugned order dated 26.09.2023 in RA(SA)No.5 of 2021 and remand the matter back to DRAT for reconsidering the issue by considering/evaluating the evidence let in by both sides and to apply the tests laid down by the Hon'ble Supreme Court and this Court and enquire into all relevant aspects including those discussed in paragraphs 10.1 (a) to (d) supra and determine whether subject property in question is agricultural or otherwise.

1 1. Writ petition stands disposed of. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.





                                           (K.R.SHRIRAM, CJ.)                    (MOHAMMED SHAFFIQ, J.)
                                                                          02.06.2025


                     Index                    : Yes/No
                     Neutral Citation         : Yes/No
                     mka/spp




                     Page 45 of 47



https://www.mhc.tn.gov.in/judis                    ( Uploaded on: 06/06/2025 07:18:52 pm )
                                                                                      W.P.No.30999 of 2023




                     To:
                     1.The Debt Recovery Appellate Tribunal,
                       Chennai.

                     2.The Authorized Officer,

Bank of India, Asset Recovery Department, 'Star' House, No.324, Oppanakara Street, Coimbatore – 641 001.

3.The Branch Manager, Bank of India, Tiruppur SME Branch, Gobichettipalayam, Erode District – 638 452.

Page 46 of 47

https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm ) W.P.No.30999 of 2023 The Hon'ble Chief Justice and Mohammed Shaffiq, J.

mka/spp W.P.No.30999 of 2023 02.06.2025 Page 47 of 47 https://www.mhc.tn.gov.in/judis ( Uploaded on: 06/06/2025 07:18:52 pm )

Unlock Advanced Research with PRISMAI

Madras High Court