2006 (2) TMI 286 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the notice issued under section 13(2) of the SARFAESI Act.
2. Classification of the secured asset as "agricultural land."
3. Maintainability of the writ petition under Article 226 of the Constitution.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 13(2) of the SARFAESI Act:
The petitioner challenged the notice issued by the respondent-bank under section 13(2) of the SARFAESI Act, which aimed to sell the secured assets due to the petitioner's default in loan repayment. The court noted that the notice under section 13(2) is essentially a show-cause notice, and the petitioner has the opportunity to respond to it. The court emphasized that the notice itself does not affect any rights or liabilities of the borrower and that the challenge to the notice is premature. The court cited the Division Bench judgment in *Digivision Electronics Ltd. v. Indian Bank* and the Supreme Court's decision in *Mardia Chemicals Ltd. v. Union of India*, which held that borrowers cannot approach courts at the interlocutory stage of proceedings under the SARFAESI Act. Therefore, the writ petition challenging the notice was dismissed as premature.

2. Classification of the Secured Asset as "Agricultural Land":
The petitioner argued that the secured assets were agricultural lands and thus exempt from the SARFAESI Act under section 31(i). The court examined this claim and found no documentary evidence to support the petitioner's assertion that the lands were used for agricultural operations. The court referred to the Constitution Bench judgment in *CWT v. Officer-in-charge (Court of Wards)*, which overruled the Full Bench judgment of the Andhra Pradesh High Court and held that the term "agricultural land" should not be given a wide interpretation. The court concluded that the lands in question were not agricultural lands but barren lands assessed to property tax and used for commercial activities, such as establishing a poultry farm. Therefore, the exemption under section 31(i) did not apply.

3. Maintainability of the Writ Petition Under Article 226 of the Constitution:
The respondent-bank argued that the writ petition was not maintainable as it challenged a notice issued under section 13(2) of the SARFAESI Act and involved disputed questions of fact, such as whether the secured asset was agricultural land. The court agreed, stating that such factual disputes could not be resolved in a writ petition under Article 226. The court emphasized that the petitioner should respond to the notice, and the respondent-bank would then decide on the objections. If the objections were rejected, the petitioner could appeal under section 17 of the SARFAESI Act. The court held that the writ petition was not maintainable and dismissed it on these grounds.

Conclusion:
The writ petition was dismissed on the grounds that it was premature, involved disputed questions of fact, and was not maintainable under Article 226 of the Constitution. The court upheld the validity of the notice issued under section 13(2) of the SARFAESI Act and rejected the claim that the secured assets were agricultural lands exempt from the Act.