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I have a company and it has become NPA in the year 2015. All the collateral security has been auctioned and the prime security has also been auctioned. The properties that are not auctioned are all agricultural properties. How will the bank proceed at this juncture and do i have any protection for my agricultural properties that i have given as collateral security.
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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
2) 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.
3) Clause (i) of Section 31 stipulates that the
provisions of the Act will not be applicable to any security interest created in agricultural land
4)if land is used for agricultural purposes provisions of SARFESI act would not be applicable to agricultural land
1. If the said property which is recorded as agricultural property is not used for the purpose of agriculture for a reasonably long period and it has been surrounded by land upon which buildings have been constructed then, the Bank can initiate SARFAESI proceedings on the said so called agricultural land claiming that it is no longer an agricultural land.
2. However, if it is still used as an agricultural land then the Bank can file Original Application (O.A.) for attaching and selling all properties on which mortgage right has not been enforced by the Bank.
Normally, no agricultural land can be mortgaged for raising loan for other than agricultural activities. This is of course, state specific and you have to check if in your state this condition is applicable or not.
During the notice period, you can make your representation to the authorised officer and put forth your objections to the repossession notice. “The officer has to reply within seven days, giving valid reasons if he rejects the representation and objections raised by the borrower.
Normally, no agricultural land can be mortgaged for raising loan for other than agricultural activities.
SARFAESI Act is not applicable on agricultural land,
However, if the said Agricultural land is not used for the purpose of agriculture and is used for constructing residential apartments, then the said land is not considered as agricultural land and SARFSESI Act is applicable on such land
It's not clear whether agricultural property is made collateral or not.
Even if it is the bank can not proceed under SARFAESI Act against thus but its free to proceed under DRT Act to recover your dues.
Dear Sir/Madam,
There are some relaxations as regards to agricultural properties and you may avail the benefits of the same.
Agricultural land cannot be sold under SARFAESI Act as creation of security interest on the same itself is barred u/s. 31(i) of the act and applying the principle of marshalling under section 56 of TP Act, if recovery of debt is possible by disposing off other properties then the bank cannot sell the agricultural lands. Please refer judgment of Hon'ble Supreme Court in the case of Maharaji Educational Trust vs. Housing and Urban Development Corporation Ltd. reported in 2017 (14) SCC 453.
Agriculture land cannot be proceeded for recovery of loan. In case the agriculture land was mortgaged then only it can be auctioned otherwise the agriculture land cannot be auctioned by the bank.
Hi
In general agricultural properties are exempted under Sarfaesi act vide Section 31(i) of Sarfaesi act and as such banks cannot invoke Section 13/ Section 14 of SARFAESI Act against agricultural properties. Also DRT cannot pass orders for sale/ possession of agricultural properties.
So, agricultural properties will remain with the owner of land regardless of whether it is offered as a collateral or not (it will be bank's fault for taking agricultural properties as collateral).
So, whenever the matter is listed at DRT, kindly ensure to file objections against any action taken by the bank for recovery of monies .
Hope this information is useful.