SECURITY INTEREST ON AGRICULTURE LAND UNDER SARFAESI ACT

Section 31(i) under SARFAESI Act: Such provision is intended to protect agriculture land held for agriculture purpose by agriculturist from extraordinary provisions of this Act, which provide for enforcement of security interest without intervention of the court.

It simply means that the creditor can not enforce any security interest created in his favor without the intervention of the court or Tribunal if such security interest is created in the Agriculture land. 

It was argued that the Central Government can not legislate on the suject of the Land because it comes under List II, but this Court suggested to go for entry 45 of the List I and mentioned the following case laws:

In A.S. Krishna and Ors. v. The State of Madras41 this Court observed as follows:-

“It would be quite an erroneous approach to the question to view such a statute not as an organic whole, but as a mere collection of sections, then disintegrate it into parts, examine under what heads of legislation those parts would severally fall, and by that process determine what portions thereof are intra vires, and what are not.”

Therefore, it is wrong to say that CG can't legislate on such a subject. 

Further, this Court mentioned that the following case while deciding what factors constitute the Agriculture land:

In 'commissioner of wealth tax, Andhra Pradesh v. officer in Charge, this Court interpreted the definition of the term 'Agriculture land' . This court observed:- 

"If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be "agricultural land" for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence.”

To give an example the possibility of cultivating, or even the actual cultivation of, what is essentially a building site in the heart of a town would not make it agricultural land. It is the purpose for which it is held that determines its character and the existence of a few coconut trees or a vegetable patch on the land cannot alter the fact that it is held for purposes of building and not for purposes of agriculture.” (page 29, ITC Limited Vs Blue Coast Hotel Ltd, SC, 2018)

 It was held that the land is not agriculture land.[ITC Limited Vs Blue Coast Hotel Ltd, SC, 2018]

If it was proved that the transferred land was agriculture land then Security Interest can not be enforced.