OP (DRT) NO. 274 OF 2023 AGAINST THE ORDER/JUDGMENT IN SA 99/2023 OF DEBT RECOVERY TRIBUNAL- II, ERNAKULAM

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR.JUSTICE C.S.DIAS`** ``` FRIDAY, THE 4[TH] DAY OF AUGUST 2023 / 13TH SRAVANA, 1945 ``` ``` OP (DRT) NO. 274 OF 2023 AGAINST THE ORDER/JUDGMENT IN SA 99/2023 OF DEBT RECOVERY TRIBUNAL- 2, ERNAKULAM ``` ## **`PETITIONERS/APPLICANTS IN S.A:`** ``` 1PUNARTHAM CASHEWS, PERUMKULAM P.O, KOTTARAKKARA KOLLAM, REPRESENTED BY ITS PROPRIETOR MR.JAYAKUMAR R., PIN - 691566 ``` ``` 2JAYAKUMAR R, PUNARTHAM, PERUMKULAM P.O, KOTTARAKARA, KOLLAM, PIN - 691566 ``` ``` 3JYOTHILEKSHMI, W/O JAYAKUMAR R, PUNARTHAM, PERUMKULAM P.O, KOTTARAKARA, KOLLAM, PIN - 691566 ``` ``` BY ADVS. B.J.JOHN PRAKASH P.PRAMEL COLIN ALEX SOORAJ M.S. ``` ## **`RESPONDENT/DEFENDANT IN S.A:`** ``` CANARA BANK, REPRESENTED BY ITS AUTHORISED OFFICER , KOTTARAKARA BRANCH, VIGNESWARA ARCADE, OYOOR ROAD, MARKET JUNCTION, KOTTARAKARA, KOLLAM, KERALA, PIN - 691506 ``` ``` BY ADVS. ISAC T PAUL JOHN NELLIMALA SARAI(K/1214/1999) ``` ``` THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR ADMISSION ON 04.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` OP(DRT) NO. 274 OF 2023 ``` ``` 2 ``` ## **Dated this the 4[th] day of August, 2023** ## **JUDGMENT** The original petition is filed challenging Ext.P13 order passed by the Debt Recovery Tribunal-II, Ernakulam (in short, ‘Tribunal’) in I.A. No.597 of 2023 in S.A. No.99/2023. 2. The relevant factual matrix for the determination of the original petition, is that: - (i) The first petitioner is a proprietory concern. The first petitioner had availed financial assistance from the respondent-Bank – for capital cash credit and other facilities, with an aggregate limit of Rs.1,75,00,000/-, by offering 24.20 Ares and 17.80 Ares of agricultural land as collateral security. The petitioners 2 and 3 are the proprietor and guarantor respectively to the loan. The first petitioner is a MSME Unit. Due to unprecedented floods that lashed the State in the year 2018, and the repercussions due to the Covid-19 pandemic, the first ``` OP(DRT) NO. 274 OF 2023 ``` ``` 3 ``` petitioner was under severe financial stress. Hence, it was unable to pay the instalments on time. Immediately, the respondent classified the loan account as a ‘NPA’ and initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short ‘SARFAESI Act’), that too without complying with the statutory formalities prescribed under the Act. The petitioners have challenged the recovery proceedings before the Tribunal by filing S.A.No.99/2023 (in short ‘S.A.’). The petitioners have contended that the secured asset is an agricultural property, which is exempted under Section 31 of the SARFAESI Act. Hence, the respondent cannot proceed against the said property. To substantiate their contention in the S.A, they filed I.A. No.597/2023 (Ext.P7), to appoint an Advocate Commissioner and elucidate the matter mentioned in the application. The application was opposed by the respondent. The ``` OP(DRT) NO. 274 OF 2023 ``` ``` 4 ``` Tribunal, by the impugned Ext.P13 common order, has rejected Ext.P7 application. Ext.P13 order is ex-facie illegal and erroneous. Hence, the original petition. 3. Heard; Sri.John Prakash B.J, the learned counsel appearing for the petitioners and Sri.Isac T. Paul, the learned counsel appearing for the respondent. 4. Sri.John Prakash B.J. reiterated the contentions in the original petition. He placed reliance on the judgment of the Honourable Supreme Court in **ITC Limited v. Blue Coast Hotels Ltd and Others** [2018 KHC 6194], to canvass the position that, when there is substantial evidence to prove that there is agricultural activity in a property, the same is more than sufficient to attract Section 31 of the Act. He further argued that Ext.P3 certificate issued by the Agricultural Officer, Ext.P4 photographs and Ext.P5 receipt all prove that agricultural activity is being carried out in the secured asset, which is more than sufficient to attract Section 31 ``` OP(DRT) NO. 274 OF 2023 ``` ``` 5 ``` of the SARFAESI Act. The petitioners had filed Ext.P7 application, only for the purpose of corroborating their contentions. The Tribunal has erroneously relied on the decisions of this Court and the Honourable Supreme Court, to pass Ext.P13 order. Ext.P13 is untenable and is liable to be quashed. 5. Sri.Isac T.Paul, on the contrary, drew the attention of this Court to the counter affidavit filed by the respondent in the original petition, wherein, Exts.R1(a) to R1(e) documents have been produced, to prove that the secured asset is a dry land and that there are residential and commercial buildings in the property. The petitioners maintained stoic silence all through out the said period. It is at this belated stage, the petitioners have raised the present contention that the secured asset is an agricultural land and is, therefore, exempted from the application of the SARFAESI Act. It is only to wriggle out of the applications of the SARFAESI Act, ``` OP(DRT) NO. 274 OF 2023 ``` ``` 6 ``` that the petitioners have raised the contentions. He also placed reliance on the decision of this Court in **Rahiya V. Authorised Officer, South Indian Bank** [2023 (1) KLT 739], to canvass the position that the borrowers cannot be permitted to approbate and reprobate, as per their whims and caprice that the property which was initially offered as non- agricultural land is an agricultural property. He argued that the original petition may be dismissed. 6. The question is whether there is any illegality in Ext.P13 order. 7. A reading of Ext.P7 S.A. shows that the petitioners had availed financial assistance from the respondent – Bank in the year, 2017. Exts. R1(a) to R1(e) documents establish that the secured asset is dry land and there are residential and other buildings in the property. It is after the respondent had initiated proceedings under the SARFAESI Act, the petitioners approached the Tribunal ``` OP(DRT) NO. 274 OF 2023 ``` ``` 7 ``` and filed the S.A. It is for the first time in the S.A that the petitioners have raised the contention that the secured asset is an agricultural property, and is hence exempted from the application of the SARFAESI Act in view of Section 31. 8. The petitioners have produced Ext.P3 certificate dated 18.1.2023 issued by an Agricultural Officer, to substantiate that the property is an agricultural land. They have also produced Ext.P4 photographs to show the nature of the property and Ext.P5 receipt to show that they are selling rubber sheets from the rubber trees being cultivated in the secured asset. 9. In order to fortify the petitioners contentions in the S.A, they preferred Ext.P7 application, to appoint an Advocate Commissioner, to elucidate the nature of the property and the agricultural activities being carried in the property. The application was resisted by the respondent through Ext.P10 counter affidavit. ``` OP(DRT) NO. 274 OF 2023 ``` ``` 8 ``` 10. The Tribunal, after adverting to the rival pleadings and relying on the decision of this Court in **Kaningat Ramachandra Menon v. State Bank of** **India** [O.P(DRT) No.216/2023], which in turn was rendered based on the decisions of the Honourable Supreme Court in **Indian Bank & Another v. K. Pappireddiyar & Another** [2018(18) SCC 252] and **K.Sreedhar v. M/s Raus Constructions Pvt. Ltd. & Others** [Civil Appeal No.7402/2022], by the impugned Ext.P13 order, rejected Ext.P7 application. 11. The Hon'ble Supreme Court in **Indian Bank & Anr. vs. K. Pappi Reddiyar & Anr.** [(2018) 18 SCC 252] has emphatically held thus: “9. The 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. 10. The Division Bench of the Madras High Court has ``` OP(DRT) NO. 274 OF 2023 ``` ``` 9 ``` failed to adjudicate on the basic issue as to whether the land in respect of which the security interest was created, was agricultural in nature. The DRT rejected the objection of the debtor that the land was agricultural. In appeal, the DRAT reversed that finding. Apart from referring to the position in law, the impugned judgment of the High Court contains no discussion of the material which was relied upon by the parties in support of their respective cases; the Bank urging that the land was not agricultural while the debtor urged that it was. Both having regard to the two-Judge Bench decision in Blue Coast Hotels Limited and as explained above, **the question as to whether the land is agricultural has to be determined on the basis of the totality of facts and circumstances including the nature and character of the land, the use to which it was put and the purpose and intent of the parties on the date on which the security interest was created. In the absence of a specific finding, we are of the view that it would be appropriate and proper to set aside the judgment of the High Court and to remit the proceedings for being considered afresh.”** 12. Likewise, in **K. Sreedhar v. Raus Constructions Pvt. Ltd.** [2023 SCC OnLine SC 13], the Hon'ble Supreme Court has held as follows: ``` OP(DRT) NO. 274 OF 2023 ``` ``` 10 ``` “30. Thus, as per the law laid down by this Court in the aforesaid two decisions, **only in a case where the secured property is actually put to use as agricultural land and solely on the basis of the revenue records/Pattadar and once the secured property is put as a security by way of mortgage etc. meaning thereby the same was not treated as agricultural land, such properties cannot be said to be exempted from the provisions of the SARFAESI Act under Section 31(i) of the SARFAESI Act** . Applying the law laid down in the aforesaid two decisions to the facts of the case on hand and when no evidence was led at all on behalf of the borrowers that the secured properties in question were actually put to use as agricultural land and/or any agricultural activity was going on, the High Court has committed an error in applying Section 31(i) of the SARFAESI Act and quashing and setting aside the entire Possession Notice, Auction Notice as well as Sale etc.” [emphasis supplied]. 13. Thus, when a contention is raised that the secured asset is an agricultural property, the pertinent question that needs to be looked into is whether the secured asset was an agricultural land or not, as on the date of creation of the security interest. 14. In the case at hand, the respondent has ``` OP(DRT) NO. 274 OF 2023 ``` ``` 11 ``` produced Ext.R1(a) to R1(e) documents before the Tribunal and this Court, which were the documents handed over by the petitioners at the time of creating the security interest, which proves that the secured asset is a ‘dry land’ and there are buildings situated therein. 15. On the contrary, the petitioners have now produced Ext.P3 certificate dated 18.1.2023, certain photographs and Ext.P5 receipt issued by some traders of the years 2019, 2021 and 2022, to prove the agricultural activities. However, Ext.P5 receipt does not show that the rubber sheets were sold from the secured asset. 16. In **ITC Limited (supra)** , the Honourable Supreme Court has in paragraph 40 succinctly held as follows:- “ 40. It is undisputed that these lands were mortgaged in favour of the creditor under a deed dated 26/02/2010. **Obviously, since no security interest can be created in respect of agricultural lands and yet it was so created, goes to show that the parties did not treat the land as** ``` OP(DRT) NO. 274 OF 2023 ``` ``` 12 ``` ## **agricultural land and that the debtor offered the land** **as security on this basis.** The undisputed position is that the total land on which the Goa Hotel was located admeasures 182225 sq. mtrs. Of these, 2335 sq. mtrs. are used for growing vegetables, fruits, shrubs and trees for captive consumption of the hotel. There is no substantial evidence about the growing of vegetables but what seems to be on the land are some trees bearing curry leaves and coconut. This amounts to about 12.8 % of the total area.” (emphasis given) ## 17. Recently, this Court in **Rahiya (supra)** in ## paragraph 5.4 held as follows:- 5.xxxx “4) The petitioner cannot be allowed to approbate and reprobate and the petitioner cannot take a contention today that the land in question is agricultural land. The rule is succinctly stated in the opinion of Scrutton L.J in Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. Ltd. (1921) 2 K.B. 608, in the following words: - "A plaintiff is not permitted to "approbate and reprobate." The phrase is apparently borrowed from the Scots law, where it is used to express the principle embodied in our doctrine of election - namely, that no party can accept and reject the same instrument: Ker v. Wauchope, (1819) 1 Bli. 1,21; Douglas - Menzies v. Umphelby, (1908) A.C. 224. The doctrine of election is not however confined to instruments. A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then ``` OP(DRT) NO. 274 OF 2023 ``` ``` 13 ``` turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction." The Supreme Court in Chairman, N. T. P. C. Ltd. v. Reshmi Constructions, Builders and Contractors (2004 (1) KLT 1065 (SC) = 2004 KHC 170), has held: - "36. In Halsbury's Laws of England, 4th Edition, Vol. 16 (Reissue) para 957 at page 844 it is stated: On the principle that a person may not approbate and reprobate a special species of estoppel has arisen. The principle that a person may not approbate and reprobate express two propositions: (1) That the person in question, having a choice between two courses of conduct is to be treated as having made an election from which he cannot resile. (2) That he will be regarded, in general at any rate, as having so elected unless he has taken a benefit under or arising out of the course of conduct, which he has first pursued and with which his subsequent conduct is inconsistent." The petitioner has derived the benefit of sanction of a loan by issuing an undertaking in the form of Ext.R1(b). It is, therefore, not open to him to now turn around and contend that, the said undertaking is contrary to law and cannot be pressed into service by the Bank to substantiate that the action initiated under the SARFAESI Act is valid and legal.” 18. On an analysis of the pleadings and materials on record, the rival submissions made across the Bar and the materials referred above, especially since Exts.R1(a) to R1(e) documents were issued at the time of creation of ``` OP(DRT) NO. 274 OF 2023 ``` ``` 14 ``` security interest, which undoubtedly prove that the secured asset is ‘dry land’ and there are buildings in the property, I do not find any useful purpose at this point of time to depute an Advocate Commissioner to ascertain the nature of the secured asset nearly after five long years after the creation of security interest. 19. The Hon’ble Supreme Court has, in **Waryam Singh and another vs. Amarnath and another** [AIR 1954 SC 215], **Shalini Shyam Shetty and another vs. Rajendra Shankar Patil** [ (2010) 8 SCC 329], M **/s.Garment Craft vs. Prakash Chand Goel** [(2022) 4 SCC 181] and a plethora of precedents, delineated the powers of the High Courts under Article 227 of the Constitution of India. It is well settled that the power conferred under the Article is to keep the courts/ tribunals within their bounds of authority and to see that they do their duty as expected of them in a legal manner. The power is restricted to the cases of serious dereliction ``` OP(DRT) NO. 274 OF 2023 ``` ``` 15 ``` of duty and flagrant violation of fundamental principles of law and justice, where if this Court does not interfere, a grave injustice will remain uncorrected. But, this does not mean that the said power is to be exercised indiscriminately and to correct mere errors. 20. Viewed in the above legal and factual background, I do not find any error or illegality in Ext P13 order passed by the Tribunal declining to appoint an Advocate Commissioner in the S.A. No.99/2023 for the purposes sought for in Ext.P7 application. It would be up to the petitioners to prove and substantiate with cogent evidence that they are entitled to the benefit of the exemption under Section 31 of the SARFAESI Act. The original petition sans substance or merits and is hence, consequentially dismissed. ## **SD/-** **C.S.DIAS, JUDGE** rmm9/8/2023 ``` OP(DRT) NO. 274 OF 2023 ``` ``` 16 ``` ## **`APPENDIX OF OP (DRT) 274/2023`** ``` PETITIONER EXHIBITS ``` - `Exhibit-P1` ``` TRUE COPY OF THE S.A NO. 99 OF 2023 FILED BEFORE THE HON. DEBT RECOVERY TRIBUNAL - II, ERNAKULAM DATED 26.01.2023, WITHOUT THE ANNEXURES. ``` - `Exhibit-P2 THE TRUE COPY OF THE NOTICE ISSUED BY THE ADVOCATE COMMISSIONER DATED 12.01.2023` - `Exhibit-P3 THE TRUE COPY OF THE CERTIFICATE ISSUED BY THE AGRICULTURAL OFFICER` - `Exhibit-P4 THE TRUE COPIES OF PHOTOGRAPHS DEMONSTRATING AGRICULTURAL ACTIVITIES IN THE PROPERTIES` - `Exhibit-P5 THE TRUE COPY OF THE RECEIPTS ISSUED BY THE TRADERS TO THE PETITIONER FOR RUBBER SHEETS` - `Exhibit-P6 THE TRUE COPY OF THE STAY PETITION NUMBERED AS I.A NO. 596 OF 2023 IN S.A NO. 99 OF 2023 BEFORE THE HON. DEBT RECOVERY TRIBUNAL - II, ERNAKULAM` - `Exhibit-P7 THE TRUE COPY OF THE I.A NO. 597 IN S.A 99 OF 2023 FOR APPOINTMENT OF ADVOCATE COMMISSIONER` - `Exhibit-P8 TRUE COPY OF THE PROCEEDING DATED 11.04.2023 & 01.06.2023 IN S.A NO 99 OF 2023 OF THE DRT- II AT ERNAKULAM` - `Exhibit-P9 TRUE COPY OF THE COUNTER AFFIDAVIT FILED BY THE RESPONDENT BANK IN EXHIBIT P6` ``` Exhibit-P10TRUE COPY OF THE COUNTER AFFIDAVIT FILED BY THE RESPONDENT BANK IN EXHIBIT P7 ``` ``` OP(DRT) NO. 274 OF 2023 ``` ## **`17`** ``` Exhibit-P11THE TRUE COPY OF THE URGENT HEARING PETITION FILED BY THE PETITIONER DATED 12.06.2023 IN S.A. NO. 99 OF 2023 ``` - `Exhibit-P12 TRUE COPY OF THE JUDGMENT DATED 15.06.2023 IN OP (DRT) NO. 240 OF 2023` ``` Exhibit-P13TRUE COPY OF THE ORDER DATED 07.07.2023 IN SA NO. 99 OF 2023 ``` ``` RESPONDENT EXHIBITS ``` ``` Exhibit-R1(a) ``` - `TRUE COPY OF VALUATION REPORT DATED 22.09.2020 IN RESPECT OF 14.10 ARES OF LAND IN MYLOM VILLAGE` - `Exhbit-R1(b) TRUE COPY OF VALUATION REPORT DATED 22.09.2020 IN RESPECT OF 10.10 ARES OF LAND IN MYLOM VILLAGE` - `Exhibit-R1(c) TRUE COPY OF VALUATION REPORT DATED 27.06.2022 IN RESPECT OF 17.80 ARES IN MYLOM VILLAGE` ``` Exhibit-R1(d)TRUE COPY OF PHOTOGRAPHS OF RESIDENTIAL BUILDING STANDING ON THE SECURED ASSET Exhibit-R1(e)TRUE COPY OF PHOTOGRAPHS OF PROCESSING SHED STANDING ON THE SECURED ASSET ```