2020 (5) TMI 750 - HC - Indian Laws

District Magistrate's order under SARFAESI Act quashed as Section 31(i) excludes agricultural land from provisions

MP HC quashed District Magistrate's order under SARFAESI Act, 2002 regarding agricultural land. Court held the order was void ab initio as Section 31(i) ... Non-application of SARFAESI Act to agricultural land - Section 31(i) of the SARFAESI Act, 2002 - exclusion of agricultural land from Act - Nullity of executive action taken under SARFAESI in respect of agricultural land - Availability of alternate judicial/remedial fora for recovery of debtNon-application of SARFAESI Act to agricultural land - Section 31(i) of the SARFAESI Act, 2002 - exclusion of agricultural land from Act - Nullity of executive action taken under SARFAESI in respect of agricultural land - Impugned order passed by the District Magistrate under the SARFAESI Act in respect of agricultural land is void and liable to be set aside. - HELD THAT: - The Court noted that the proceedings undisputedly concern agricultural holdings and relied upon earlier Division Bench reasoning in Anil Karma v. State of M.P., which applied the statutory exclusion in Section 31(i) of the SARFAESI Act, 2002. Section 31(i) exempts any security interest created in agricultural land from the operation of the Act, thereby precluding enforcement under the Act without court or tribunal intervention. The Court further accepted the treatment of Section 31(i) in the Supreme Court's decision discussed in the judgment, which affirms that security interests in agricultural land fall outside the Act's ambit. Applying that principle, the District Magistrate's order made under SARFAESI in respect of agricultural land is a nullity and must be quashed. The Bank is not restrained from pursuing other legal remedies for recovery of its dues.Impugned District Magistrate order under SARFAESI quashed as void in respect of agricultural land; bank permitted to pursue other remedies.Final Conclusion: Writ petition allowed; the order dated 30.07.2019 passed by the District Magistrate under the SARFAESI Act in respect of agricultural land is quashed as void ab initio while leaving the bank free to avail other legal remedies. Issues Involved:1. Applicability of the SARFAESI Act, 2002 to agricultural land.2. Validity of the District Magistrate's order under the SARFAESI Act.3. Remedies available to the secured creditor for debt recovery.Issue-wise Detailed Analysis:1. Applicability of the SARFAESI Act, 2002 to Agricultural Land:The central issue in this case is whether the provisions of the SARFAESI Act, 2002 apply to security interests created in agricultural land. The judgment highlights that Section 31(i) of the SARFAESI Act explicitly states that the provisions of the Act do not apply to 'any security interest created in agricultural land.' This exemption is intended to protect agriculturists from losing their source of livelihood and income, i.e., the agricultural land, under the drastic provisions of the Act. The High Court cited the Supreme Court's interpretation in ITC Limited Vs. Blue Coast Hotels Limited, where it was affirmed that agricultural land is exempt from the provisions of the SARFAESI Act, thereby preventing the enforcement of security interests created in such land without court intervention.2. Validity of the District Magistrate's Order:The judgment examined the validity of the order passed by the District Magistrate under the SARFAESI Act. It was determined that the order was 'void ab initio' because the Act does not apply to agricultural land. The High Court referred to its previous decision in Anil Karma and another Vs. State of M.P., which concluded that any order passed under the SARFAESI Act concerning agricultural land is a nullity. This is because the Act's provisions are not applicable to such land, rendering any enforcement action taken under the Act invalid.3. Remedies Available to the Secured Creditor for Debt Recovery:While the SARFAESI Act does not apply to agricultural land, the judgment clarifies that the secured creditor, in this case, the bank, is not left without recourse. The Court emphasized that the bank is free to pursue other legal remedies available under the law to realize its debts. This implies that while the specific mechanism under the SARFAESI Act is unavailable, the creditor can explore alternative legal avenues for debt recovery, such as filing a suit in a civil court or pursuing arbitration if applicable.Conclusion:The High Court quashed the impugned order dated 30.07.2019, which was passed by the District Magistrate under the SARFAESI Act, due to its inapplicability to agricultural land. The writ petition was allowed, reinforcing the principle that agricultural land is protected from the provisions of the SARFAESI Act, while also ensuring that creditors retain the right to seek other legal remedies for debt recovery.