Plantations not agriculture land under SARFAESI Act, rules Karnataka HC

The High Court has said that land on which plantation crops are grown is not agricultural land within the meaning of Section 31 (i) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

Dismissing the appeals filed by the estate owners, a division bench headed by Justice B V Nagarathna held that the expression ‘agricultural land’ in SARFAESI Act does not include plantation land on which crops like cardamom, coffee, pepper, rubber and tea are grown.

“Any land used for raising a plantation crop, if mortgaged to a financial institution, even if for non-agricultural purposes, could also be sold for enforcement of the said security,” the court said.

The bench also said that the bar contained under Sections 79-A, 79-B and 80 of the Karnataka Land Reforms Act do not apply to plantation lands. Though presently abolished, Sections 79-A and 79-B prohibit purchase and holding of agricultural land by non-agriculturists.

The petitioners contended that since SARFAESI Act does not apply to agricultural lands, the measures taken or the action initiated by the banks in respect of coffee plantations were without jurisdiction.

The petitioners requested the court to consider the matter on merits since there is no decision till date on the question whether the coffee plantation is an agricultural land within the meaning of section 31 (i) of the SARFAESI Act.

The court said the revenue entries showing the land to be agricultural in nature would not per se be a determinative factor. The totality of the facts and circumstances of the case has to be borne in mind, the court said.

“Hence, in the instant case, the securities created in the coffee plantations can be enforced for the realization of the debts as coffee plantation would not come within the scope and ambit of agricultural land under Section 31(i) of the SARFAESI Act insofar as the State of Karnataka is concerned,” the bench said.

Background

During the 1998-2004 period, the appellants were extended various credit facilities in the nature of agricultural cash credit loans, agricultural term loans and mortgage loans.

The security for the loans was coffee plantations at Hirekolale, Yelagudige and Aldur villages of Chikkamagalur taluk. Upon non-payment of loans, banks sent demand notice and the assets were put for sale in November 2020.