M/S. Cemax Plants Pvt. Ltd. v. The Authorised Officer, Indian Overseas Bank, Ernakulam Branch, and The Assistant General Manager, Indian Overseas Bank, Ernakulam Branch

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM** **WEDNESDAY, THE 19TH JANUARY 2011 / 29TH POUSHA 1932** **WP(C).No. 37243 of 2010(E)** **---------------------------------------** ## **PETITIONER(S):** **----------------------** **M/S. CEMAX PLANTS PVT. LTD., 19/37, PUTHIYAPALAM, KASABA VILLAGE KOZHIKODE, REPRESENTED BY ITS MANAGING DIRECTOR, M.P. ABDUL NAZAR, AGED 51 YEARS, S/O. MOOSAKOYA HAJI, THOUFEEQ MANZIL, POTTAMMAL, KOZHIKODE.** **BY ADV. SRI.ESM.KABEER** ## **RESPONDENT(S):** **-------------------------** **1. THE AUTHORISED OFFICER, INDIAN OVERSEAS BANK, ERNAKULAM BRANCH, 682 011.** **2. THE ASSISTANT GENERAL MANAGER, INDIAN OVERSEAS BANK, ERNAKULAM BRANCH, M.G. ROAD, ERNAKULAM, 682 011.** **R1 & R2 BY ADV. SRI.P.B.SURESH KUMAR, SC,I.O.BANK.** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19/01/2011,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **rs** ## C.K.ABDUL REHIM,J. ------------------------------WP(C).NO. 37243 of 2010 --------------------------------Dated this the 19th day of January, 2011 ## JUDGMENT Petitioner is a company incorporated which had purchased 150 acres of agricultural land in Vaithiri Taluk of Wyanad District. The petitioner had availed various agricultural loans and credit facilities from the respondent Bank by mortgaging the above said property, which according to them is a cardamom plantation, along with certain other items of properties. Consequent to default committed in repayment of amounts due, the respondent Bank had initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act). Sustainability of the demand raised under section 13(2) of the Act was the subject matter of challenge in WP(C).No.31089/2010 filed before this court on the premise that the property is exempted under section 31(i) of the Act. Petitioner placed reliance on the decisions of this court reported in **Muhammed Basheer vs. Kannur District Co-operative Bank Ltd., (2010** WP(C) .37243/2010 2 **(2)KLT 577)** and **Karshaka Sanghatana Aykyavedi vs. State Bank of Travancore (2010 (3) KLT 719)** . The above said writ petition was disposed of through Ext.P7 judgment. This court had reserved liberty to the petitioner to raise such contentions through objections to be submitted against the notice issued under section 13(2). Respondent Bank was directed to consider such objections if any made, and to take a decision thereon as contemplated under section 13(3)(a) of the Act . Pursuant to the judgment, the petitioner filed Ext.P8 and P9 objections, which were considered by the 2[nd] respondent and Ext.P10 proceedings was issued. Relevant portion of the finding in Ext.P10 is extracted below: _“As regards your allegation that the property offered as security was plantation wherein cardamom is planted and the same is agriculture activity and is exempted under Section 31(i) of the SARFAESI Act is strongly denied. In law, plantation has been defined as an industry and as such your contention that plantation of cardamom is agriculture is not maintainable in law. Further, during our visit to the property we found that the land given to us as security is being used for_ WP(C) .37243/2010 3 _various activities, other than agriculture. Your contention that for the last two years the crop was very bad due to heavy rains and the yield was very poor is also not acceptable to us. On the other hand we find that the estate is well maintained and the yield is also good and the price of cardamom is also very high. Therefore your contention that you are entitled to concession is not acceptable.”_ 2. On the basis of Ext.P10, the respondents proceeded with further steps by publishing notice under Rule 8(1) of the Security Interest (Enforcement) Rules 2002 intimating steps taken under section 13(4). Petitioner is challenging such steps on the basis that their contention regarding exemption from the purview of SARFAESI Act stands fortified through the finding contained in Ext.P10. Petitioner had produced copy of Ext.P1 title deed through which the property in question was purchased, which will indicate that it is a cardamom plantation. According to the petitioner, since the finding contained in Ext.P10 is also to the effect that the property in question is a cardamom plantation, it is liable to be exempted from the purview of the SARFAESI Act and further steps now initiated is unsustainable under the eye of WP(C) .37243/2010 4 law, is the contention. Exts.P4 and P5 receipts evidencing payment of plantation tax. 3. In a statement filed on behalf of the respondents it is contended that 150 Acres of land described as item 1 in Ext.P3 and Ext.P6 notices are being used for various activities other than agriculture. It is stated that the 1[st] respondent found during local inspection that, the property is now being extensively used for cattle rearing, poultry farming, rabbit farming and various other non-plantation activities. However it is stated that part of the said property is still retained as cardamom plantation and the petitioner is deriving good yield from that part of the property. Therefore contention of the petitioner is that the dictum laid down by this court in **Muhammed Basheer vs. Kannur District Co-operative Bank** **Ltd., (2010 (2)KLT 577)** is not applicable and that the question as to whether the property is agricultural land is a disputed fact which could not be decided by this court in a writ petition under Article 226 of the Constitution of India. It is also contended that the portion of land for which the property is retained as plantation and the portion used for non plantation activities is to WP(C) .37243/2010 5 be segregated and is a question of fact which could not be resolved herein. 4. In the normal circumstances in a case where the borrower is seeking exemption as provided under section 31(i) of the Act and when the creditor is disputing the fact that the property is not an agricultural land, this court may not be in a position to resolve such dispute and in such case the effective forum to adjudicate such dispute is the authority contemplated under section 17(1). But in the case at hand, through Ext.P7 judgment this court issued specific direction to the respondents to consider such objection and to take a decision thereon, as contemplated under section 13(3). Therefore Ext.P10 could not be considered as a notice issued in the usual course of the proceedings under the provisions of the SARFAESI Act. On the other hand, it is evident that, the order is having characteristics of an adjudicatory order, issued after taking note of the objections on the disputed aspect. It is pertinent to note that one of the observations contained in Ext.P10 that “we find that the estate is well maintained and the yield is also good and the price of cardamom is also very high. Therefore your contention WP(C) .37243/2010 6 that you are entitled to concession is not acceptable.” Of course, in the very same proceedings it is further mentioned that, “during our visit to the property we found that the land given to us as security is being used for various activities, other than agriculture.” Further I notice that in Ext.P10 one of the reasons stated for denying the claim for exemption is that, the plantation has been defined as an industry and as such the contention that the plantation of cardamom is agriculture is not maintainable in law. Merely because plantation is defined as industry for some other purpose, under some other statute, it could not be contended that the same is outside the purview of the “agricultural land” which is exempted by virtue of section 31 (i) of the SARFAESI Act. It is evident that there is admission on the part of the respondents that the property in question is well maintained cardamom plantation. Of course such admission is subject to a rider that certain activities other than agriculture is also being carried out in some portion of the land. However, as long as there is an admission to the effect that it is a cardamom plantation, respondents are not entitled to proceed with further steps under section 13(4), without even segregating the portion WP(C) .37243/2010 7 which is used for non agricultural purposes. 5. Learned Standing Counsel appearing for the respondent Bank submitted that on physical verification the authorities of the Bank had found that there are activities like cattle rearing, poultry farming, rabbit farming etc. But the fact remains that the extent of the property is 150 Acres. Hence it can reasonably be presumed that even if the area used for such purpose is liable to be proceeded against, such area can only be very less in proportion with the area in which cardamom plantation is situated. 6. Under the above circumstances, I am of the considered opinion that the respondents could not be permitted to proceed on the basis of Ext.P10 with further steps as contemplated under section 13(4). Of course since it is conceded that the other items of property mentioned in Ext.P6 and P11 are not non-agricultural land, respondents will be at liberty to take fresh steps against such properties. It is also made clear that if the respondent can segregate the portions of the property, within item No.1, which is alleged to have been used for non agricultural purpose, fresh steps can be initiated against such portion. WP(C) .37243/2010 8 7. In the result, Ext.P11 notice and steps initiated under section 13(4) with respect to property described thereunder as item No.1 is hereby quashed. Needless to say that the respondents will be at liberty to proceed against other items of property. It is further made clear that liberty of the respondents as mentioned above is reserved for taking fresh steps under section 13(4) with respect to portions if any which can be segregated within item 1, as one being used for non agricultural purposes. Of course the petitioner will be at liberty to dispute such action on the basis of all factual contentions available. ## C.K.ABDUL REHIM,JUDGE pmn/ WP(C) .37243/2010 9