V.Ajayakumar & anr vs Federal Bank & anr on 21 October 2026

ORDER

1. Aggrieved against the order passed in TSA No.575/2016 (SA No. 737/2013) by the learned Presiding Officer, DRT-II, Kerala at Ernakulam dated 6.10.2018, appellants filed this appeal under Section 18 of the SARFAESI Act.

2. SA 737/2013, re-numbered as TSA 575/2016 has been filed seeking the following reliefs:

(i) to declare the entire proceedings initiated under the SARFAESI Act as null and void;

(ii) to declare the property mentioned in Annexure-A2 is not liable to be proceeded; and

(iii) direction to the respondents/defendants not to take any steps to dispossess the applicants from the secured assets.

3. Annexure-II, is the postal article from Advocate Bindu, Thiruvananthapuram, a copy of the letter addressed by her to the Sub- Inspector of Police, Neyyardam Police State, Thiruvananthapuram indicating about the orders passed by the learned Chief Judicial Magistrate,

Thiruvananthapuram in MC 565/2013. By the said order, she sought police assistance to execute the order of the learned Chief Judicial Magistrate.

4. Several grounds have been raised in the securitization application and some of the important grounds relevant for this case are:

i) No demand notice has been issued to the appellants and therefore, the measures taken under Section 14 of the SARFAESI Act is illegal;

ii) Measures under the SARFAESI Act had been taken arbitrarily without following the requirement under the SARFAESI Act and compliance of the mandatory provisions;

iii) Annexure-I, certificate issued would show that security interest admeasuring 1.85 acres is an agricultural land and thus, exempted from the provisions of the SARFAESI Act.

5. The learned Presiding Officer, on going through the material produced and submissions of the learned counsel appearing for the parties found that, “demand notice was served and that the certificate issued by the agricultural officer cannot be construed as conclusive proof to determine the nature of the property at the time of creation of security interest. It was further observed that the appellants have not produced any tax receipt. Had it been an agricultural land, the land would have been assessed for tax applicable to agricultural property and tax would have been paid. Mere presence of certain trees and plants, cannot be conclusive proof to treat the land as an agricultural land. Not only the potential of the land is important but more important is user of the land. Appellants failed to discharge the burden fastened on them to establish that the land in question is an agricultural land.” The stand of the appellant that the land is agricultural land was negative. Resultantly, securitization application was dismissed. Against this order, this appeal is filed.

6. Learned counsel for the appellants reiterated and reaffirmed the grounds taken in the SA stating that no demand notice has been served on the appellants and therefore measures taken under Section 14 of the SARFAESI Act are null and void. Due to non service of demand notice, appellants were denied the opportunity of raising their statutory objections under Section 13(3A) of the SARFAESI Act. Most importantly, the certificate given by the Agricultural Officer and the report of the Advocate Commissioner would show that the land in question is an agricultural land and thus exempted under Section 31(i) of the SARFAESI Act.

6.1 He further submitted that Learned Presiding Officer had not considered the grounds raised in the SARFAESI application and the documents produced before the Tribunal below, especially the fact that the loan was granted for seasonal agricultural operations and cultivation of vegetables and other cash crops. Advocate Commissioner found that the land was divided into several steps for agricultural purposes and this aspect was not considered by the Learned Presiding Officer. There is no finding with regard to the nature and use of the land at the time of creation of mortgage on 27.3.2006/28.3.2006. Advocate Commissioner’s report clearly proves that there are trees and agricultural operations have been carried out. Apart from the agricultural operations, aqua culture was also done. The description of the property as ‘purayidam’ is not a conclusive proof for the classification of the nature of the land. Rubber plantation is held as agricultural operation and the land in which rubber plantation is done is treated as an agricultural land. Without considering the entire evidence in a holistic way, Tribunal below dismissed the SA.

6.2 In support of his submissions, he pressed into service the decision of the Hon’ble Supreme Court of India in re, Indian Bank Vs. V.K. Pappireddiyar reported in 2018 18 SCC 252 for the proposition that the question as to whether the land is an agricultural land has to be determined on the basis of the totality of the facts and circumstances, including the nature and the character of the land, the use to which it was put to use and the purpose and intent of the parties on the date on which the security interest was created.

6.3 The decision of the Hon’ble High Court of Kerala in re Narayanan Nair Vs. Lokesh Nair reported in 2014 (2) KLT 868 is relied for the proposition that the term ‘ agricultural land’ is not defined under in the Court Fees Act. When the pre-dominant purpose is agricultural operation or agricultural operation cum residence, then, the Court Fees Act will apply. Agriculture is an activity in which the person involved therein cultivates the land. It need not necessarily be a paddy cultivation. An arecanut garden or a coconut garden will also come within the terms of ‘agricultural land’ under Sub- section 2 of Section 7 of Court Fees Act. Mere presence of residential house in such land would not make it a non agricultural land.

6.4 The decision of Hon’ble Supreme Court of India, in re, ITC Ltd. Vs. Blue Coast Hotels Ltd. reported in 2018 15 SCC 99 is relied for the proposition that the prime intention of Section 31(i) is to exempt agricultural and from the provision of the SARFAESI Act. In other words, creditor cannot enforce any security interest created in his favour without intervention of the court or Tribunal, if such security interest is in respect of an agricultural land. It is also intended to deter the creation of security interest over the agricultural land.

6.5 Decision of Hon’ble Supreme Court of India, in re, Sreedhar K. Vs. M/s Raus Constructions Pvt. Ltd. reported in 2023 KHC Online 6012 is relied for the proposition that the burden lies on the borrower to prove that the secured properties are agricultural land and actually being used as agricultural lands and or agricultural activities are going on.

6.6 Decision of Hon’ble High Court of Kerala in re, K.P. Muhammed Basheer Vs. Deputy General Manager (Authorised Officer), Kannur District Co- operative Bank Ltd. reported in 2010 (2) KLT 577 is relied for the proposition that the land planted with rubber is agricultural land and is exempted under Section 31(i) of the SARFAESI Act.

7. Refuting this contention of the learned counsel for the appellants, it is the submissions of the learned counsel for the first respondent bank that demand notice was served by hand delivery and through post. Proof of service of demand notice by hand delivery and through post had been produced before the Tribunal by producing a copy of the hand delivery of the demand notice and postal acknowledgment card. Appellants deliberately omitted to file those documents.

7.1 Claim of the land as an agricultural land is made only for the purpose of this appeal. If the land is really an agricultural land, appellants should have sent the objection to the demand notice raising this ground. Certificate of the Agricultural Officer and the report of the advocate commissioner will not conclusively establish the fact that land in question is an agricultural land and that agricultural operations had been carried out at the time of creation of security interest and continued till SARFAESI measures were taken. There is a house in the property and there are some trees and plants. However, there is no evidence to show that systematic, structured and continuous agricultural operations had been carried out by production of necessary documents to show agricultural operations like tilting of soil, seedling, manuring, watering, harvesting, etc. by production of supporting documents. What is important is the intention of the parties. Here, in this case, the intention of the appellants is to create equitable mortgage for availing loan facility. Therefore, even assuming that the land in question is an agricultural land, when the equitable mortgage is created in respect of the agricultural land, it is deemed that mortgagors have not treated the land as an agricultural land. Therefore, it is submitted that the learned

Presiding Officer has rightly considered all these aspects and dismissed the SA.

7.2 In support of his submissions, Learned Counsel for the respondents relied on the decision Hon’ble High Court of Andhra Pradesh in re, Gajula Exim (P) Ltd. Vs. Authorised Officer, Andhra Bank reported in 2008 AIR AP 184 for the proposition that revenue records would not conclusively establish that land is an agricultural land and used for agricultural purpose especially when there is factory in the land.

7.3 Decision in re, Indian Bank and another Vs. K. Pappirddiyar and another is relied for the proposition that security interest cannot be created in respect of the agricultural property because it is exempted under Section 31(i) of the SARFAESI Act. Since no security interest can be created in respect of the agricultural land and yet it was so created, it goes to say that parties did not treat the land as an agricultural land.

8. I have considered the rival submissions and perused the records.

9. From the pleadings set out in the SARFAESI application and submissions made by learned counsel for the appellants, there is no dispute with regard to availing of credit facilities by appellants from the respondent bank and

creation of equitable mortgage by deposit of title deed relating to 1.85 acres of land comprised in RS No.250/6 of Kallikadu Village of Neyyattinkara Taluk in Thiruvananapuram District belonging to the first appellant. Certificate of the Agricultural Officer dated 5.11.2013 reads as follows:

“Certified that Shri V. Ajaykumar, Lalitha vilasam, Kaalipara is a farmer at Kallikad Panchayat, owning an area of about 0.73 are in survey number 250/6 at Kallikad Village (as per tax receipt No.7083 dated 29/0/2023 of the Village Officer, Kallikad) cultivating crops like, Coconut, Rubber, Banana and mainly Aquaculture(fish culture)”

This certificate shows that there are crops like coconut, rubber, banana and aquaculture i.e., fish culture.

9.1 Report of the Advocate Commissioner dated 27.10.2015 shows that there is shed with tin sheeted roof used for residential purpose. The property is divided into several steps for agricultural purpose. Several crops like rubber, plantain, etc. is cultivated in the property. Apart from the crops, Aqua-culture, guinea pig and rabbit farms are situated in the property.

9.2 It is observed in the report that from the nature of improvements in the property, it appears to be an agricultural land. Commissioner also noted that cash crops like areca, nutmegs, bitter gourd, plantain are cultivated in the property. There are also jackfruit tree, teak, betel and other cash crops are cultivated. There are 30 cents of land including tin sheeted roof shed used for acqua culture purpose. There are 20 fishponds constructed for acqua culture purposes. Rubber is being tapped. There are 64 coconut yielding trees, 4 areca trees, Jackfruit tree, Mahogany, teak, nutmegs, betel and other cash crops in the property. It appears that appellants have shown other documents to the advocate commissioner to show that the first appellant is an acqua culture co-ordinator and received ‘Good Farmer Award’ from the Coconut Development Board. There is a shed in the property and it is used by the appellants for residential purposes.

10. Advocate Commissioner’s report shows that he came to the conclusion that the land appears to be an agricultural land. Scope of physical inspection by the Advocate Commissioner is to report back what is the physical feature that exists at the time of inspection by the Advocate Commissioner. Advocate Commissioner is not supposed to give any finding as to whether the land in question is an agricultural land or not. Advocate Commissioner gave a finding that the land appears to be an agricultural land.

10.1 Therefore, the next question that arises is, when these improvements were made i.e., cultivation of coconut, rubber, banana, areca, Jackfruit tree, Mahogany, teak, nutmegs, betel and other cash crops and Aqua-culture (fish ponds), guinea pig and rabbit farms. Admittedly, the loan was availed in the year 2006 and the mortgage was created by deposit of title documents in the year 2006. There is absolutely no evidence produced by the appellants as to the character of the land – whether it was an agricultural land and agricultural operations were carried out or not, at the time of availing loan and creation of security interest.

10.2 Even to the advocate commissioner, representatives of the bank stated that fish tanks for aqua culture were not there and at the time of sanction of loan, there were only temporary tanks and the appellants were paying building tax to Kallikadu Panchayath. There is no physical evidence as to the nature of the land mortgaged, when it was mortgaged in the year 2006. What is important is that the land in question should have been an agricultural land and it should have been used for agricultural purpose by carrying out agricultural operations at the time of creation of mortgage and continued till SARFAESI measures were initiated. At the risk of repetition, it is reiterated that there is no evidence produced by the appellants to show that the land in question was an agricultural land at the time of creation of mortgage in the year 2006. The possibility of improvements like cultivation of various trees as detailed above and aqua culture, guinea pig and rabbit farms must have been made later, cannot be ruled out. Report of the advocate commissioner given in 2015 in respect of the mortgage created on the secured asset in the year 2006 cannot be relied to decide the character of the land. Therefore, this Tribunal finds that the report of the advocate commissioner and the certificate issued by the agricultural officer are of no use to the case of the appellants to determine that the property in question is an agricultural property and is exempted under Section 31(i) of the SARFAESI Act.

11. Even if the classification of land in the revenue records is shown as agricultural lands, it is not a conclusive proof to decide the land as an agricultural land. No other documents were produced by the appellants except the certificate from the agricultural officer. As already stated, intention of the parties at the time creation of mortgage is the paramount consideration to decide as to whether the party treated the land as an agricultural land or not.

12. It is pertinent to refer to the decision of the Hon’ble Supreme Court of India in re, ITC Limited Vs. Blue Coast Hotels Ltd. reported in AIR 2018 SC 3063, wherein it is held, as follows:

“38. The purpose of enacting Section 31(i) and the meaning of the term “agricultural land” assume significance. This provision, like many others is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court. The plain intention of the provision is to exempt agricultural land from the provisions of the Act. In other words, the creditor cannot enforce any security interest created in his favour without intervention of the Court or Tribunal, if such security interest is in respect of agricultural land. The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act. It is also intended to deter the creation of security interest over agricultural land as defined in Section 2 (zf). Thus, security interest cannot be created in respect of property specified in Section 31.”

12.1 It is further held that since no security interest can be created in respect of an agricultural land, yet, it was so created, it goes to show that the parties did not treat the land as agricultural land and later offered the land as security.

12.2 It is further held in re, Indian Bank Vs. K. Pappireddiyar reported in AIR 2018 SCC 3540 that merely because the revenue records show that secured property is an agricultural land that is not sufficient to attract

Section 31(i) of the SARFAESI Act and the property in question has to be actually in use for agricultural purpose at the time when security interest was created. These propositions are also referred in the decision rendered by the Hon’ble Supreme Court of India in re, K. Sreedhar Vs. M/s Raus Constructions Pvt. Ltd reported in (2023) 11 SCC 169.

12.3 In re, M/s Parsn Medicinal Plants Pvt. Ltd. Vs. Indian Bank and others in Writ Petition No.14553/2017, it is held by Hon’ble High Court of Madras, as follows: “The wider meaning given to agricultural operations, such as breeding and rearing of live-stock, poultry farming, or dairy farming will not be applicable. It held that the correct test to apply would be to find out whether human labour had been applied to the land itself, in order to extract from its natural powers, added to or aided by other natural or artificial sources of strength to the soil a product which can yield an income”

13. From decisions relied by Learned Counsel for appellants and respondents, the following facts are to be established in determining whether the land is an agricultural land or not.

a) Land should have been an agricultural land at the time of creation of mortgage and continued to be used as agricultural land with agricultural operations from the date of mortgage till the litigation started.

b) Agricultural operations include ploughing, tilting, sowing, manure and fertilizer application, irrigation, weeding, harvesting, and crop storage and these activities have been done regularly.

14. The certificate from the Agricultural Officer was given on 5.11.2013, after 7 years of creation of mortgage. This certificate is not corroborated or substantiated with any other documents to show that agricultural operation were being carried out. Though advocate commissioner’s report establishes that there are various trees available, it is not known when these trees were planted. Advocate Commissioner visited and filed his report in the year 2015. Trees and plants may have been cultivated after the creation of mortgage. There is no material to show that the land was used as agricultural land in the year 2006, when the mortgage was created. Therefore, on the basis of the agricultural officer’s certificate and advocate commissioner’s report, the land in question cannot be determined as an agricultural land.

15. Therefore, this Tribunal is of the view that appellants failed to prove and establish that land in question was an agricultural land at the time of creation of mortgage and used as an agricultural land till the litigation started with the issuance of demand notice. Even assuming that the land was used for agricultural purposes, when the appellants chose to create equitable mortgage on this land, as decided in ITC Ltd. case, it can only be considered that appellants did not treat the land as agricultural land, therefore, created security interest in favour of the respondent bank. Having created security interest, it is not open to the appellants to claim that the land is an agricultural land and therefore measures under SARFAESI Act cannot be initiated.

16. In this view of the matter, this Tribunal finds that there is no ground made out by the appellants for interfering with the order of the Learned Presiding Officer, DRT-II, Ernakulam . Accordingly, the order of the Learned Presiding Officer, DRT-II, Ernakulam dated 6.10.2018 passed in TSA 575/2016 (SA No.737/2013) is confirmed.

17. In the result, Appeal RA(SA) 48/2019 is dismissed.

18. Parties are directed to bear their own costs.

19. Pending IAs, if any, stand closed.

[Dictated to PS (SN) transcribed by him, corrected, signed and pronounced by me in open court, this 21st October, 2026)

Sd/- (JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON