May 22, 2022

Plantations are not agricultural land under SARFAESI Law, Karnataka HC rule

The High Court declared that the land on which plantation crops are grown is not agricultural land within the meaning of section 31 (i) of the Securitization and Reconstruction of Financial Assets and Enforcement Act 2002. sureties (SARFAESI).

Dismissing the appeals filed by the owners of the estate, a divisional court headed by Judge BV Nagarathna ruled that the term “agricultural land” in the SARFAESI law did not include plantation land on which crops such as cardamom, coffee, pepper, rubber and tea are cultivated.

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

The bench also said that the bar contained in Sections 79-A, 79-B and 80 of the Karnataka Land Reform Law does not apply to plantation land. Although currently abolished, Articles 79-A and 79-B prohibit the purchase and holding of agricultural land by non-farmers.

The petitioners argued that since the SARFAESI law did not apply to agricultural land, the measures taken or the action taken by the banks regarding the coffee plantations were incompetent.

The applicants requested the court to examine the case on the merits since there is no decision yet on whether the coffee plantation is agricultural land within the meaning of Article 31 ( i) of the SARFAESI law.

The court said income inflows showing the land was agricultural in itself would not be a determining factor. All of the facts and circumstances of the case should be kept in mind, the court said.

“Therefore, in the present case, the guarantees created in the coffee plantations can be enforced for the realization of the debts, since the coffee plantation would not fall within the scope of agricultural land under Article 31 (i) of the SARFAESI law as far as the state of Karnataka is concerned ”, declared the magistracy.

Fund

During the period 1998-2004, the appellants were granted various credit facilities in the form of cash farm loans, farm term loans and mortgages.

The loan guarantee consisted of coffee plantations in the villages of Hirekolale, Yelagudige and Aldur de Chikkamagalur taluk. In the event of non-payment of the loans, the banks sent a formal notice and the assets were put up for sale in November 2020.