High Court of KeralaSingle Judge2024-02-16OP(DRT) disposed of as above.

O.P.(DRT) No.35/2024

Case / Petition Number:OP (DRT) No.35/2024

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: N. Nagareesh
Judgment Date: 2024-02-16
Court Decision / Holding: Ext.P13 order dated 19.12.2023 of the Debts Recovery Tribunal-I, Ernakulam in IA No.145/2022 is set aside. The Tribunal is directed to reconsider IA No.145/2022 and pass appropriate orders expeditiously. The Tribunal shall proceed with SA No.51/2022 only after considering IA No.145/2022 afresh. OP(DRT) is disposed of as above.
Final Disposition: OP(DRT) disposed of as above.

Parties to the Case

Appellants / Petitioners

M/S. PERIYAR POLYMERS OKKAL, ERNAKULAM represented by K.M.PAULY
M/S. TWO IN ONE STORAGE EXTRUSIONS OKKAL, ERNAKULAM represented by K.M.PAULY
K.M.PAULY
K.M.JAMES
REJI PAULY
SMT. KOCHUTHRESSIA

Respondents

FEDERAL BANK LTD, represented by its Manager
AUTHORISED OFFICER, FEDERAL BANK LTD., LCRD/ERNAKULAM DIVISION

Legal Representation & Advocates

Counsels for Petitioners

• K. Saneesh Kumar
• P. Shrihari
• V.B. Santhini

Counsels for Respondents

• Leo George

Case Synopsis & Summary

This Kerala High Court judgment concerns O.P.(DRT) No.35/2024 filed by M/s Periyar Polymers Okkal and associates seeking to set aside Exts. P12 to P14 passed by Debts Recovery Tribunal-I, Ernakulam. Ext.P12 rejected stay of proceedings; Ext.P13 denied appointment of an Advocate Commissioner for local inspection; Ext.P14 refused to stay Section 14 proceedings. The petitioners, who run partnership firms and individuals, faced a Section 13(2) notice following demonetisation and the Covid-19 pandemic, and challenged the Tribunal’s orders arguing that appointment of an Advocate Commissioner could reveal whether the secured asset (item No.10) is agricultural land, which is critical for invoking Section 31(i) exemption under the SARFAESI Act. The respondents argued that the loan facilities are not agricultural and that the petitioners have an alternative remedy under Section 18; the matter was argued before the court. Relying on Jayakumar v. State Bank of India (Kerala High Court) and the principle of best evidence, the court held that local inspection could help ascertain the land’s status on the date of creation of security. The court found that Ext.P5 certifying a bona fide farmer status is not enough alone to prove agricultural status at the time of mortgage. Ext.P13 is set aside; IA 145/2022 is to be reconsidered expeditiously; the Tribunal may proceed with SA 51/2022 only after fresh consideration. The OP-DRT is disposed of accordingly, and the court underscores the evidentiary value of a local inspection and the need to determine the land’s status on the date of security creation.

Provisions of Law Cited

Section 13(2) of the SARFAESI ActSection 31(i) of the SARFAESI ActSection 14 of the SARFAESI ActSection 18 of the SARFAESI Act

Legal Doctrines & Maxims

Best evidence rule (as applied to local inspection reports to determine agricultural status)
Status of land as agricultural land at the time of creation of security to invoke Section 31(i) exemption
Admissibility of local inspection to establish status of land (cited Jayakumar v. SBI)

Submissions & Arguments

Contentions of Appellants / Petitioners

Petitioners submit that Exts. P12 to P14 are wrongly decided; rejection of Advocate Commissioner appointment effectively shuts out the best evidence to establish whether item No.10 property is agricultural land on the date of creation of security. They contend a local inspection could reveal the land’s character, potentially enabling exemption under Section 31(i) of the SARFAESI Act. They rely on Jayakumar v. SBI to support reconsideration and seek setting aside of Exts. P12 and P14 and reconsideration of IA 145/2022.

Contentions of Respondents

Respondents contend the loan facilities are not agricultural and the petitioners are not agriculturists; there is an available remedy under Section 18; the petitioners have not established the land’s agricultural status on the date of security creation; an Advocate Commissioner cannot conclusively determine this date. They maintain the Tribunal’s decisions should stand.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
Indian Bank and others v. K. Pappireddiyar and others	AIR 2018 SC 3540	Positive	Cited to establish that Section 31(i) exemption requires the property to be agricultural on the date of creation of security.
Jayakumar v. State Bank of India	2024 (1) KLT 458	Positive	Cited to support that appointment of an Advocate Commissioner for local inspection can help determine whether the land was agricultural at the time of mortgage.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE N.NAGARESH** **FRIDAY, THE 16[TH] DAY OF FEBRUARY 2024 / 27TH MAGHA, 1945** **OP (DRT) NO. 35 OF 2024** **SA.51/2022 OF DEBT RECOVERY TRIBUNAL, ERNAKULAM** ## **PETITIONERS:** - **1 M/S. PERIYAR POLYMERS OKKAL, ERNAKULAM REPRESENTED BY ITS PARTNER K.M.PAULY, PIN - 683574** - **2 M/S. TWO IN ONE STORAGE EXTRUSIONS OKKAL, ERNAKULAM REPRESENTED BY ITS PARTNER K.M.PAULY, PIN - 683550** - **3 K.M.PAULY AGED 61 YEARS S/O. K.P.MATHAI, KALLOOKADAN HOUSE, OKKAL.P.O, PERUMBAVOOR, ERNAKULAM, PIN - 683550** - **4 K.M.JAMES AGED 56 YEARS S/O. K.P.MATHAI, KALLOOKADAN HOUSE, OKKAL.P.O, PERUMBAVOOR, ERNAKULAM, PIN - 683550** - **5 REJI PAULY AGED 52 YEARS W/O. K.M.PAULY, KALLOOKADAN HOUSE, OKKAL.P.O, PERUMBAVOOR, ERNAKULAM, PIN - 683550** - **6 SMT. KOCHUTHRESSIA AGED 65 YEARS W/O. LATE ANTONY, PEREPPATTU MANJALY HOUSE, KORATTY, THRISSUR, PIN – 680308** **BY ADVS. K.SANEESH KUMAR P.SHRIHARI V.B.SANTHINI** O.P.(DRT) No.35/2024 : 2 : ## **RESPONDENTS:** - **1 FEDERAL BANK LTD GROUND FLOOR, VAREKULAM BUILDING, NEAR PRIVATE BUS STAND, KALADY, ERNAKULAM REPRESENTED BY ITS MANAGER, PIN - 683574** - **2 AUTHORISED OFFICER FEDERAL BANK LTD., LCRD / ERNAKULAM DIVISION, GROUND FLOOR, FEDERAL TOWERS, MARINE DRIVE, KOCHI-, PIN – 682031** ## **BY ADV LEO GEORGE** **THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR ADMISSION ON 16.02.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** O.P.(DRT) No.35/2024 : 3 : ## **N. NAGARESH, J.** ````````````````````````````````````````````````````````````` ## O.P.(DRT) No.35 of 2024 ````````````````````````````````````````````````````````````` _Dated this the 16[th] day of February, 2024_ ## **J U D G M E N T** ~ ~ ~ ~ ~ ~ ~ ~ ~ Petitioners 1 to 6 have filed this OP(DRT) seeking to set aside Exts.P12 to P14. Ext.P12 is an order passed by the Debts Recovery Tribunal-I, Ernakulam in IA No.144/2022 declining stay of proceedings. Ext.P13 is an order in IA No.145/2022 declining to appoint Advocate Commissioner for local inspection. Ext.P14 is order in IA No.3812/2023 refusing to stay Section 14 proceedings. 2. Petitioners 1 and 2 are Partnership Firms and petitioners 3 to 5 are Partners thereof. The petitioners, for business purpose, availed financial facilities like renewed Cash Credit and Term Loan. When the petitioners failed to maintain the loan accounts due to demonetisation and O.P.(DRT) No.35/2024 : 4 : Covid-19 pandemic, the 1[st] respondent-Bank issued Ext.P2 Section 13(2) notice. The petitioners filed objection. The petitioners filed Ext.P6 IA No.144/2022 to stay further proceedings. Ext.P7 IA No.145/2022 was filed by the petitioners for appointment of an Advocate Commissioner to inspect and report the nature and cultivation in the secured asset. They also filed IA No.3812/2023 to stay all measures including Section 14 proceedings. 3. The Debts Recovery Tribunal rejected IA No.144/2022 as per Ext.P12 order and dismissed IA No.3812/2023 as per Ext.P14 order. The application of the petitioners for appointment of Advocate Commissioner for local inspection was rejected as per Ext.P13 order. The petitioners challenge Exts.P12 to P14 orders. 4. The counsel for the petitioners argued that the rejection of the commission application is _per se_ illegal as the Tribunal virtually shut a valid opportunity of the petitioners to establish before the Tribunal that item No.10 property in Ext.P2 notice is an agricultural property and cultivating land. O.P.(DRT) No.35/2024 : 5 : 5. The 2[nd] respondent resisted the OP(DRT) filing a statement. The 2[nd] respondent submitted that a sum of ₹14,22,59,911/- is due to be recovered from the petitioners as on 31.08.2021. The credit facilities availed by the petitioners are not agricultural loans. The petitioners are not agriculturists and they are not depending on the income derived from agricultural operations carried out in item No.10 property. The petitioners have alternate remedy under Section 18 of the Act, 2002 to challenge Exts.P12 to P14. The OP(DRT) is therefore liable to be dismissed. 6. I have heard the learned counsel for the petitioners and the learned Standing Counsel representing the respondents. 7. The application of the petitioners for appointment of Advocate Commissioner stands rejected as per Ext.P13 order of the Debts Recovery Tribunal. The Tribunal noted that in order to claim exemption under Section 31(i) of the SARFAESI Act, the petitioners ought to have placed relevant material before the Tribunal to show that the secured asset O.P.(DRT) No.35/2024 : 6 : was agricultural property on the date of creation of security interest over the same, as laid down by the Hon’ble Apex Court in _**Indian Bank and others v. K. Pappireddiyar and others** [AIR 2018 SC 3540]_ . Relying on a judgment of this Court, the Tribunal concluded that the pertinent question to be decided, when a contention that the property is an agricultural land, is to ascertain whether the land is agricultural or not on the date of creation of the security interest for the purpose of taking loan. 8. The Tribunal held that the petitioners have not produced any material before the Tribunal to show that the secured asset was agricultural property on the date of creation of security interest. The Tribunal held that even if an Advocate Commissioner makes site visit, he cannot give a finding as to whether what was the nature of the property on the date of creation of security interest over the same. 9. I find that the petitioners had produced Ext.P5 certificate issued by the Agricultural Officer certifying that the 6[th] petitioner is a _bona fide_ farmer and belongs to small and O.P.(DRT) No.35/2024 : 7 : marginal farmer category. She is actively cultivating crops in the property including coconut trees, nutmegs, rubber, arecanut, etc. 10. That may by itself not be sufficient for the petitioners to avail the benefit of Section 31(i). To get the benefit of Section 31(i), the petitioners have to further establish that the property was used as agricultural land at the time of creating security interest in the property. It is for this purpose that the petitioners moved application for appointment of Advocate Commissioner for local inspection. 11. This Court in the judgment in _**Jayakumar v. State Bank of India** [2024 (1) KLT 458]_ considered the issue of appointment of Advocate Commissioner for making local inspection of secured asset. This Court held that the petitioners can possibly establish the status of the land as agricultural land at the time of mortgage by causing local inspection. Rejection of the application submitted by the petitioners for local inspection in the circumstances would amount to shutting out the best evidence in the case in the O.P.(DRT) No.35/2024 : 8 : form of report on local inspection. 12. Following the said judgment of this Court in _**Jayakumar**_ (supra), Ext.P13 order dated 19.12.2023 of the Debts Recovery Tribunal-I, Ernakulam in IA No.145/2022 in SA No.51/2022 is set aside. The Debts Recovery Tribunal is directed to reconsider IA No.145/2022 and pass appropriate orders thereon expeditiously. The Tribunal shall proceed with SA No.51/2022 only after considering IA No.145/2022 afresh. ## OP(DRT) is disposed of as above. Sd/- **N. NAGARESH, JUDGE** aks/13.02.2024 : 9 : ## O.P.(DRT) No.35/2024 ## **APPENDIX OF OP (DRT) 35/2024** ## **PETITIONER'S EXHIBITS** |**Exhibit P1**|**TRUE COPY OF AMENDED S.A.51/2022**| |---|---| ||**PRODUCED WITHOUT ANNEXURES FILED ON**| ||**3/1/2024.**| |**Exhibit P2**|**A TRUE COPY OF DEMAND NOTICE DATED**| ||**03/09/2021 ISSUED BY THE 2ND**| ||**RESPONDENT.**| |**Exhibit P3**|**TRUE COPY OF POSSESSION NOTICE DATED**| ||**04/01/2022 ISSUED BY THE 2ND**| ||**RESPONDENT.**| |**Exhibit P4**|**TRUE COPY OF POSSESSION NOTICE DATED**| ||**17/01/2022 ISSUED BY THE 2ND**| ||**RESPONDENT.**| |**Exhibit P5**|**A TRUE COPY OF THE CERTIFICATE ISSUED**| ||**BY THE AGRICULTURAL OFFICER DATED**| ||**21.1.2022.**| |**Exhibit P6**|**- A TRUE COPY OF THE I.A.144/2022**| ||**FILED BY THE PETITIONER ON 9.2.2022.**| |**Exhibit P7**|**A TRUE COPY OF THE I.A.145 OF 2023**| ||**FILED FOR THE APPOINTMENT OF ADVOCATE**| ||**COMMISSIONER ON 9.2.2022**| |**Exhibit P8**|**A TRUE COPY OF THE I.A 3812/2023 FILED**| ||**ON 2.11.2023**| |**Exhibit P9**|**A TRUE COPY OF THE COUNTER FILED IN**| ||**I.A 144/2022 ON 1.12.2023**| |**Exhibit P10**|**A TRUE COPY OF THE COUNTER FILED IN**| ||**145/2022 ON 1.12.2023.**| |**Exhibit P11**|**A TRUE COPY OF THE COUNTER FILED IN**| ||**I.A.3812/2023 ON 1.12.2023**| |**Exhibit P12**|**A TRUE COPY OF THE ORDER PASSED IN I.A**| ||**144/2022 DATED 19.12.2023**| |**Exhibit P13**|**A TRUE COPY OF THE ORDER PASSED IN I.A**| ||**145/2023 DATED 19.12.2023**| |**Exhibit P14**|**A TRUE COPY OF THE ORDER PASSED IN I.A**| ||**3812/2023 DATED 19.12.2023**|