TaxTMI 
TaxTMI 
2018 (9) TMI 1600
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....these contentions. Facts: 3. The 1st and the 2nd petitioners are the Private Limited Companies. The 3rd petitioner, an individual, is a Director in both the Companies. In fact, both the Companies are closely held family ventures. Of the respondents, the first respondent is the Bank; the second, the purchaser who purchased two of the four secured assets; and the third, the Tribunal. 4. The 1st petitioner-M/s.Sharada Flour Products Pvt. Ltd- initially took two term loans of Rs. 6 crores and Rs. 1.5 crores, besides a cash credit facility for Rs. 6.5 crores. When the loans were renewed, the cash credit was brought down to Rs. 5.5 crores. When Sharada took the loan, the second petitioner- M/s.Thekkemukkalil Properties Pvt., Ltd.,-mortgaged one among the four properties as collateral security. All the accounts turning Non-Performing Assets, the Bank began recovery proceedings. By 31.07.2017, the overdue amount stood at Rs. 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 s....
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....that though the Bank tried to sell away the other three items, including the agricultural land, but it could not find purchasers. In this context, the learned Senior Counsel argues that the other items, too, had the reserve price fixed at the lowest level. The Bank clubbed both the agricultural and the non-agricultural lands, he also asserts, and brought them up for sale, through a composite sale notice; it violates the statutory scheme. 12. Second, the learned Senior Counsel, more elaborately, focused on item no.3 of the sale notice-that is, 241.70 ares of land. He asserts that it is agricultural land. He draws my attention to the Advocate Commissioner's report, dated 13.03.2018. He also contends that the report unmistakably reveals that the property is agricultural land. The revenue records describe 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....
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....enerically as 'purayidam'; it is a residuary entry. He has also submitted that the petitioners themselves offered the property as security. They could not deny that the property was owned by a commercial entity and the security was offered for a commercial activity. So he would have the Court hold that the petitioners are estopped from contending that the land given in security is agricultural land. An Aside: 19. I may place on record a development in the case: the respondent Bank, during arguments, relied on various documents which were not part of the record. When objected, Sri Karunakaran contended that the petitioners themselves gave to the Bank all the documents, when they had taken the loan. As these documents originate from the petitioners and their authenticity cannot be questioned, 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....
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....rs maintain, does not affect the case prospects. This plea could have been probed, but the Bank came forward to repel the petitioners' case on merits, too. True, the Bank did take a plea about the alternative remedy-only after a fashion. 25. 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. So this issue needs no answer. Issue No.II: Does the alleged undervaluation affect the sale of the secured assets? 26. Let us see how the Bank valued the secured assets before its bringing them for sale. For item No.1, the Bank fixed the reserve price: for land - Rs. 3,62,70,000/-; for land - Rs. 2,92,33,000/-; for the factory - Rs. 2,11,00,000/-. The borrowers contend that the land alone was undervalued by Rs. 2,81,37,000/-, for the land's actual market price must be Rs. 5,73,70,000/-. For item No.2, they plead a difference of Rs. 54,00,000/-; for item No.3, the difference is Rs. 1,78,76,000/-; for item No.4, Rs. 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 ....
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....e building contracts and various other construction activities, "including promoting commercial and residential buildings.'' The company's objectives unmistakably show in the Exhibit R1 (a) that it has no agriculture. 32. Thekkemukkalil is a closely held company, as is Sharada. It has two directors-both NRIs. And now they claim they hold agricultural property. Until the Bank brought the property for sale, nowhere did the Company take a plea that the property was agricultural land. The many documents the Company produced before the Bank, now placed here, would not refer to any agricultural income. The Auditors' report, the Audited Balance Sheet, and Profit and Loss Account till March 2015 are a few of them. The 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 cultiv....
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....Bank of India (1976) 3 SCC 800 to hold that "where a statute does not define a term used in it, the legislature should be presumed to have used that word in its ordinary dictionary meaning." Thus, preferring the lexical meaning, Muhammed Basheer concluded that rubber plantation is agricultural land. 38. Section 31 of the Act, Muhammed Basheer acknowledges, exempts agricultural land "with the predominant thrust on matters attendant to livelihood and small items and that properties of commercial matters are not included therein." It notes the legislative fields of the Center and the State-Entries 86, 87 and 88 of the List I and Entry 18 of the List II-but steers clear, aptly, of constitutional considerations on the agricultural 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.....
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.... deal with "transfer of property". 43. In K. Pappireddiyar, the Supreme Court acknowledges that the lexical provision, Section 2, of the Act does not define the expression "agricultural land". And, then, it observes that "whether a particular piece of land is agricultural in nature is a question of fact." The Court tellingly observes that [T]he classification of land in the revenue records as agricultural is not dispositive or conclusive of the question whether the SARFAESI Act does or does not apply. Whether a parcel of land is agricultural must be deduced as a matter of fact from the nature of the land, the use to which it was being put on the date of the creation of the security interest and the purpose for which 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 purpo....
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....ultural purpose, the land could not be treated as "agricultural land" to earn an exemption under the Act. The Impact: 49. All this said and done, we must, in the end, examine how the borrowers described the land when they offered it as security. Ext.P1 is their proposal to Bank to restructure the loan. It describes the property: Excess charge of EM of 597 cents of vacant land in the name of Thekkemukkalil Properties (P) Ltd., represented by Managing Director Mr. Krishnamurthy Nair, Muraleedharan Nair on the NH side, partly waterlogged at Karuvatta, Haripad, Alapuzha District, in Re Sy. No.12/1-2, 12/2-2, 12/1, 12/2-4, 12/2-3. 50. In fact, this was how the borrowers described the property throughout: from the date they 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....