sarfaesi-act-and-sarfaesi-rules-faq

FAQ About Assets for Which Sarfaesi Action Can Not Be Taken Including Agricultural Land

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of any Security Interest created in agricultural land.

Answer: The expression agricultural land has not been defined in Sarfaesi Act, 2002. We have to rely on judgements about the meaning of ‘agricultural land’ in connection with other Acts

In CWT Versus Officer In-charge (Court of Wards) reported in (1976)3 Supreme Court Cases Page 864, Supreme Court held as follows:- 

“We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user e of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of "assets", but its actual condition and intended user which has to be seen for purposes of exemption from wealth tax. One of the objects of the exemption seemed to be to encourage cultivation or actual utilisation of land for agricultural purposes. 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.” 

In the case of Kunjaukutty Sahib Versus State of Kerala reported in (1972)2 Supreme Court Cases Page 364, Supreme Court held as follows:-

“We suppose that something or other can be, and often is, grown on any vacant land, but that would not necessarily make it agricultural land for our purposes. 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.”

In the case of ITC Limited Versus Blue Coast Hotels Limited reported in (2018)15 Supreme Court Cases Page 99, the question of agricultural land under Sarfaesi Act, 2002, was directly involves. In this case the Supreme Court held inter alia as follows:- 

“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 d 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.”

Answer : Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in a case in which the amount due in less than twenty per cent of principal amount and interest thereon.

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of a lien on any goods, money or security given by or under the Indian Contract Act, 1872 or Sale of Goods Act, 1930 or any other law for the time being in force

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of creation of any security in any aircraft as defined in clause(1) of Section 2 of Aircraft Act, 1934.

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of creation of any security in any aircraft as defined in clause(1) of Section 2 of Aircraft Act, 1934.

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of creation of Security interest in any vessel as defined in clause (55) of Section 3 of Merchant Shipping Act, 1958.

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of any Rights of unpaid seller under Section 47 of Sale of Goods Act, 1930.

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of any properties not liable to attachment ( excluding the properties specifically charged with the debt recoverable under Sarfaesi Act, 2002) or Sale under the first proviso to sub section 1 of Section 60 of the Code of Civil Procedure, 1908.

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of any security interest for securing repayment of any financial asset not exceeding one lakh rupees.
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