Home Legal News SARFAESI Act Applicable To Coffee Plantations In State Of Karnataka : Karnataka High Court [Read Judgment]

SARFAESI Act Applicable To Coffee Plantations In State Of Karnataka : Karnataka High Court [Read Judgment]

by Shreya
SARFAESI act coffee plantation
A division bench of Justice B V Nagarathna and Justice Nataraj Rangaswamy of Karnataka High Court has ruled that ‘Coffee plantations’  securities can be enforced for the realization of debts as coffee plantations would not come within the scope and ambit of agricultural land, under the SARFAESI Act, in the State of Karnataka.

The Court observed while hearing two appeals filed by U.M. RAMESH RAO and M/S. SSJV PROJECTS PRIVATE LIMITED that “The expression ‘agricultural land’ in Section 31(i) of the SARFAESI Act, does not include land on which plantation crops are grown namely, cardamom, coffee, pepper, rubber and tea as defined in Section 2(A)(25) of the Land Reforms Act.”

The petitioners challenged the order declining to entertain the writ petitions on the ground of availability of an alternative remedy of appeal available under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Averments by Petitioners

The petitioners argued that writ petitions have been dismissed without entertaining the fact that of question of jurisdiction of the respondent/Banks in initiating action under provisions of the SARFAESI Act, on the schedule lands which are coffee plantations, as under Section 31(i) of the said Act, they, being agricultural lands, the Act does not apply.

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The provisions of the Act in respect of the coffee plantations being agricultural lands was questioned by filing the petition under Article 226 of the Constitution of India, the petitioners contended.

The writ petitions were maintainable as there is no definition of the expression “agricultural land” under the provisions of the SARFAESI Act and it was necessary to interpret.

Further it was argued that coffee plantation is just like any other plantation and the Madras High Court and Kerala High Court have held that the lands on which cardamom, coca, turmeric, cinnamon and rubber are grown, are plantation crops.

Opposition Plea of Banks

Union Bank of India contended that the Single Judge had rightly dismissed writ petition on the ground of maintainability of an alternative remedy under Section 17 of the SARFAESI Act and said that DRT has the jurisdiction to consider the issue of the applicability of the Act to coffee plantations, which are the subject matter in the case. There is an efficacious, alternative remedy available before the DRT which could have considered the issues raised in these cases.”

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“The use to which the agricultural land was put to is one of the major considerations to be taken note of while determining whether the SARFAESI Act applies or not, the respondent contended.

Issues Raised

  1. Whether the writ petitions were rightly dismissed on the ground of maintainability in view of the availability of an alternative remedy before the Debt Recovery Tribunal (DRT)?

The bench considered that “In such a case, the High Court (Single Judge bench) cannot adopt a pedantic approach but has to decide the matter keeping in view the fact that right to property continues to be an important constitutional right and in terms of Article 300A, no person can be deprived of his property except by authority of law.”

The bench further opined “In our view, the writ petition raised a question about applicability of SARFAESI Act to coffee plantation/estate on the ground that the same is an agricultural land, having regard to Section 31(i) of the SARFAESI Act. Whether the said provision is not applicable to agricultural land and therefore, the action initiated is illegal and contrary to the object and purpose of the provision had to be considered. It was necessary to give an answer to such a question before concluding, whether, the actions of the respondent/banks were in accordance with law or not in these cases.”

Further it said “It would not be a sound exercise of discretion to relegate the parties to the remedy by way of an appeal. This is particularly so, when a constitutional right, such as Article 300A of the Constitution is involved and the applicability of the SARFAESI Act to coffee estate in the context of whether it is an agricultural land or not would be an important question which has to be decided in the first instance before deciding on the legality of the action otherwise.”

The Bench held, “Hence, in our view, the writ petitions filed under Article 226 of the Constitution in the instant case were maintainable. This is particularly so, having regard to the issue raised in these writ petitions as it involves interpretation of law. It also touches upon the applicability of the SARFAESI Act and the jurisdiction of the respondent/bank to take measures under Section 13 of the said Act vis-à-vis the subject lands, which are coffee plantations.

  • Whether coffee plantation is an agricultural land under Section 31(i) of the SARFAESI Act?

The court observed the definition of the word ‘agriculture’, Land, plantation and Agricultural Income, under various enactments under various acts.

The bench concluded that “Thus, under both the Land Reforms Act and Land Revenue Act, plantation crops and plantation land refer to only cardamom, coffee, pepper, rubber and tea.”

The bench observed “On an analogy, the expression plantation crops would include coffee. Under the APMC Act also, under Schedule 8, coffee is included as a plantation crop. In all the aforesaid enactments, coffee has been defined to be a plantation crop.”

Court’s Observations

After which it laid down various points which would act as the test to interpret the expression “agricultural land” under the SARFAESI Act. It further noted, “The Karnataka State Legislature has been very cautious in exempting only lands on which plantation crops are grown from the purview of Sections 79-A, 79-B and Section 80 of the Land Reforms Act, which means that, the bar contained in those sections would apply in the case of lands on which crops which are not in the nature of plantation crops are raised. Such lands only i.e., lands on which plantation crops are not raised, in our view, are agricultural lands for the purpose of Section 31(i) of the Act.”

This means the bar contained under Sections 79-A, 79-B and 80 of the Land Reforms Act, do not apply as per Section 104 of the said Act to plantation lands or land on which plantation crops are grown. Such lands would not come within the purview of agricultural land under Section 31(i) of SARFAESI Act.”

The Court concluded,”Land on which plantation crops are raised (coffee in the instant case), if mortgaged or given by way of a security to a financial institution to obtain a credit facility, whether for an agricultural purpose or for a non-agricultural purpose, the said security could be enforced and Section 31(i) of SARFAESI Act does not apply to such land. That means the financial institution can enforce the security created on such lands.”

Read the Judgment here:

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