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TMI Blog2018 (9) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... id take a plea about the alternative remedy-only after a fashion - Much time spent on hearing the case on merits, I reckon it is imprudent for me to shun adjudication on this count: the alternative remedy - this issue needs no answer. Does the alleged undervaluation affect the sale of the secured assets? - Held that:- Curious is the petitioners’ plea. They pleaded, as noticed by the DRT, that they had sold all the mortgaged properties (4 items) to various persons for ₹ 1,52,35,000/-. So the DRT observed that the sale price of all the four properties by the petitioners themselves was very much below the Reserve Price of the 1st item in the auction. In the writ petition, too, this pleading remained unamended or explained, as rightly contended by the Bank’s counsel. So I find this issue against the petitioners: the Bank did assign valid reasons for the upset price it fixed. Did the Bank bring to sale any agricultural land, violating Section 31 of the Act? - Held that:- Thekkemukkalil Company (a) does not answer the description of an agriculturist; (b) does not cultivate the land; (c) derives no income from agriculture; (d) does not have agriculture as an object; and (e) di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bank began recovery proceedings. By 31.07.2017, the overdue amount stood at ₹ 10,80,58,608/-. 5. Neither the debtor nor the guarantor-that is, Sharada or Thekkemukkalil-responded to the Bank's notices, statutory or otherwise. So after completing the stages under Sections 13 and 14 of the SARFAESI Act, the Bank brought all the four secured assets for sale, through the auction notice dated 20.12.2017. In the sale held on 05.02.2018, it sold two items. 6. To claim the fourth item, that is 67.45 Ares of land, one Roy Cheriyan filed WP(C) No.2264 of 2018 in January 2018 and obtained an interim order. This Court held that the Bank may go ahead with the sale of the properties, but it should take up the fourth asset as the last item-only if the bank could not realise the loan amount with the sale of the other three items. In the end, the Bank tried to sell the last item, too; but no bidder came forward. True, the Bank also failed to sell both the third item. 7. First and second items, however, were sold to the 2nd respondent. All the three petitioners-the two companies and one Director-filed SA No.90 of 2018, taking various pleas. Principal among them are these: tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the property as 'purayidam'. Then taking me through Section 31 of the Act, the learned Senior Counsel contends that the third item of sale notice ought not to have been brought to sale. 13. Faced with the alternative remedy, the learned Senior Counsel submits that the petitioners in this writ petition have raised a jurisdictional issue. According to him, the Tribunal ought to have interdicted the Bank's action in bringing the third item to sale. In other words, since SARFAESI Act does not apply to agricultural lands, it is essentially a question of jurisdiction-or the lack of it. So he contends that the writ petition against Ext.P5 order of the Tribunal sustains itself. 14. To support his proposition about undervaluation, about applying the SARFAESI Act to agricultural land, and about the jurisdictional justification, the Senior Counsel has relied on these judgments: Muhammed Basheer v Deputy General Manager, Kannur District Co-op. Bank Ltd. 2010(2) KHC 385, Narayanan Nair v. Lokeshan Nair 2014 (2) KLT 868, Authorized Officer, State Bank of Travancore v Mathew 2018(1) KHC 786, Commissioner of Income Tax v Chhabil Dass Agarwal 2014 (1) SCC 603, Bhpinder Singh v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the objection at best could be technical. 20. Then. Sri S. Sreekumar for the petitioners submitted that if the Bank brought them on record through a proper petition, the petitioners would contest their, the veracity or relevance. So the first respondent filed a counter affidavit and brought on record the second set of documents. Arguments Continued: 21. Sri Karunakaran has referred to the Company's Memorandum and Articles of Association. Among the Company's many activities, agriculture is not one. He has also referred to the Company's Balance Sheet and Profit Loss Account to emphasize that the Company had no income or even expenditure under the head agricultural activities . In other words, in neither document is there a head 'Agriculture'. 22. About the valuation of the properties, Sri Karunakaran contends that the Bank, first, got the properties valued through one valuer. But it felt that the value was abnormal-on the higher side. So, later, it got the valuation redone by another valuer. Then, it has also called for the market value from the government records. After comparing all these values, the Bank has fixed the upset price. The Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued by ₹ 2,81,37,000/-, for the land s actual market price must be ₹ 5,73,70,000/-. For item No.2, they plead a difference of ₹ 54,00,000/-; for item No.3, the difference is ₹ 1,78,76,000/-; for item No.4, ₹ 1,66,27,000/-. 27. As to the item No.1, not in dispute is the fact that when the borrowers availed themselves of the credit facility in 2014, the land, with incomplete structure and without machinery, was valued at ₹ 1.35 crore. In 2015, when the borrowers had the credit limits renewed, the value was ₹ 2.85 crore-with structures, as is evident from the Ext.R1(f). The account declared an NPA, the bank had its panel valuer determine the property's market value in February 2017; he valued it at ₹5.76 crore. The Bank contends that it noticed huge difference in the value. So it wanted to have a second opinion, so to say. Then, its another panel valuer, in May 2017, reckoned the value at ₹2,70,00,000/-. The Bank felt it reasonable. The Ext.R1(h) reflects this exercise. Yet the Bank secured the fair value fixed by the Registration Department, as seen from the Ext. R1 (i). 28. Finally, the Bank justifies its action, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner s Report: 33. The Tribunal, on the petitioners' request in I.A. No.445 of 2018, appointed an Advocate Commissioner, who inspected and submitted Ext.P2 report. The Advocate-Commissioner does note that he has verified the BTR (Basic Tax Register) helped by the Village officer. The property in the village records is 'purayidam.' The Agricultural Officer has opined that the property is an agricultural land, where coconut is cultivated. He also records that the land owner, so far, has taken no subsidy for conducting agricultural activities. He finds coconut groves and records the average yield of 3000 coconuts every forty-five days- an estimate, though. What is an Agricultural Land? 34. What is an agricultural land ? This question crops up often, but yields no definite answer. With no statutory definition to aid the Courts, the judicial efforts to define the term have fluctuated. 35. Section 31(i) of the SARFAESI Act mandates that it will not apply, among other things, to any security interest created in agricultural land. In fact, 'security interest' was defined, before its amendment, in Section 2(zf) as follows: 2(zf) securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultural land getting exempted under Section 31. For Muhammed Basheer it may not be a safe method of interpretation . . . to look into the legislative wisdom . . . unless such a course becomes inevitable. This observation proved prophetic because of the later precedential developments, especially, in Blue Coast Hotel case. 39. But a Division Bench of this Court in Remani Thomas v. Assistant General Manager, (Judgment, dt.06.06.2016), clarified Muhammed Basheer. And, fittingly, the clarification came from none other than the same learned judge who rendered Muhammed Basheer: Sri Justice Thottathil Radhakrishnan, the Ag. CJ., as his Lordship then was. In Remani Thomas, the petitioner took the same plea as did the borrowers here. She relied on Muhammed Basheer. The Division Bench observed that in Muhammed Basheer, the question was whether rubber plantation could be treated as agricultural land. It observes that the decision is not decisive and is not applicable to the question on hand, i.e., as to whether a particular land is to be treated as agricultural land on the materials available and the facts of the particular case. 40. In Narayanan Nair, a learned Single Judge, in a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was set apart. 44. To conclude thus, K. Pappireddiyar continues its reasoning advanced in Blue Coast Hotels. So let us examine that decision, vigorously relied on both by the borrowers and by the banker. 45. In Blue Coast Hotels, the Supreme Court has examined the constitutional contours of the SARFAESI Act, especially Section 31. It has also adopted the purposive interpretation to unravel the statutory significance of agricultural land. The purpose of enacting Section 31(i) and the meaning of the term agricultural land , according to Blue Coast Hotels, 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 enforcing the security interest without the court s intervention. The plain intention of the provision is to exempt agricultural land from the Act. In other words, the creditor cannot enforce its security interest in agricultural land without the intervention of the Court or Tribunal. The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey took the loan till the date they property was brought for sale. The records the borrowers offered to the Bank do not whisper the land is agricultural. It is the defence the borrowers took only when the Bank brought the property for sale. 51. Indeed, the nature of land came to light, first, only through the Commissioner s report. Neither Company informed the Bank at any stage that the property is agricultural land. It is not even the borrowers case that the Bank knew about land. 52. Going by the holding of Blue Coast Hotels, Section 31 intends to protect agricultural land held for agricultural purposes by agriculturists. It also notes that the exemption protects agriculturists from losing their source of livelihood and income- that is, the agricultural land-under the drastic provision of the Act. 53. Regrettably, the borrower Companies have miserably failed to measure up to the exceptions engrafted in Blue Coast Hotels, to claim immunity for their property from the SARFAESI Act. 54. To sum up, Thekkemukkalil Company (a) does not answer the description of an agriculturist; (b) does not cultivate the land; (c) derives no income from agriculture; (d) does not have agric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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