Agricultural Officer Certificate Not Enough To Claim SARFAESI Exemption For Agricultural Land: DRT Ernakulam

The Debts Recovery Tribunal at Ernakulam has recently held that a certificate issued by an Agricultural Officer is not sufficient by itself to prove that a secured property is agricultural land exempt from recovery under the SARFAESI Act, reiterating that the burden lies on the borrower to establish the nature of the land at the time the loan was availed.

Presiding Officer Sovan Kumar Dash dismissed a securitization application filed by borrowers challenging recovery proceedings initiated by Indian Bank.

“The certificate given by the Agricultural officer would not discharge the burden of the applicant in establishing the nature of land at the time of availing the loan. The applicants have failed to establish the nature of the land at the time of availing the loan. Mere existence of some rubber trees, the land cannot be treated as agricultural land exempted under SARFAESI Act in view of the ratio decided by the Hon'ble Apex Court.” the tribunal said.

The dispute arose after the first applicant availed a Kisan Credit Card facility, claiming the loan was meant for agricultural activities. The loan was secured by creating an equitable mortgage over the subject property, and the second applicant stood as guarantor.

The borrowers contended that they were cultivating crops over a larger extent of land measuring about 81.50 acres and claimed that the secured asset was agricultural land.

After the account was classified as a non-performing asset, the bank issued a demand notice under the SARFAESI Act seeking repayment of the outstanding amount. The borrowers challenged the proceedings before the tribunal, arguing that the secured asset was agricultural land containing rubber plantations and therefore exempt from enforcement under the Act.

The borrowers relied on land tax receipts as well as a certificate issued by an Agricultural Officer to claim that the secured property was agricultural land.

The tribunal observed that the burden to prove the nature of the land at the time the loan was availed lay on the applicants themselves. A scrutiny of the records showed that the certificate issued by the Agricultural Officer did not indicate that the property was being used for agricultural purposes when the loan was taken.

Referring to the Supreme Court's decision in K. Sreedhar v. Raus Constructions Pvt. Ltd., which explains the scope of the agricultural land exemption under the SARFAESI Act, the tribunal noted that the mere presence of rubber trees on the property would not, by itself, make the land agricultural.

In the absence of material to show that the secured asset was agricultural land when the loan was sanctioned, the tribunal found no illegality in the action taken by the bank. The securitization application was accordingly dismissed, and the recovery proceedings were allowed to continue.