Summary
After the DRT dismissed a borrower's securitisation application, the borrower went straight to the Telangana High Court under Article 226 instead of appealing to the DRAT. The High Court quashed the possession notice, the sale notices and an auction sale. It found breaches of Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 and treated the lands as exempt agricultural land under Section 31(i). The Supreme Court restored the DRT's order. The writ petition should not have been entertained, as the borrower used it to avoid the statutory appeal and pre-deposit. The possession notices had been duly published and served. The 25% deposit was made by the next working day, and the balance within the period the bank extended. Revenue entries alone do not make land agricultural under Section 31(i), and the borrower bears the burden of proving actual agricultural use.
Issues
- Whether the High Court should have entertained a writ petition against the DRT's order when an appeal lay to the DRAT.
- Whether the auction sale breached Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002, and whether the secured properties were exempt as agricultural land under Section 31(i) of the SARFAESI Act.
Provisions considered
- Articles 226 and 227, Constitution of IndiaA writ petition against the DRT's order should not have been entertained, since it allowed the borrower to bypass the statutory appeal to the DRAT and its pre-deposit requirement. (¶ 6)
- Rules 8(1), 8(2), 9(3) and 9(4), Security Interest (Enforcement) Rules, 2002The 25% may be paid on the day of sale or the next working day, and the balance within 15 days of confirmation or an extended period agreed in writing not exceeding three months. (¶¶ 6.2, 6.3, 6.4)
- Section 31(i), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Following ITC v. Blue Coast Hotels and Indian Bank v. K. Pappireddiyar, whether land is agricultural is a question of fact turning on its actual use when the security interest was created, not on revenue entries. (¶¶ 7, 7.1, 7.2)
Held
- The High Court erred in entertaining a writ petition against the DRT's order when a statutory appeal to the DRAT was available; by doing so it allowed the borrower to circumvent the appeal and the pre-deposit. (¶ 6)
- There was no breach of Rules 8 and 9: the possession notices were published in two leading newspapers and served; 25% of the bid was deposited by 18.02.2017, the day after the auction; and the balance was paid on 23.03.2017, within the 15 days allowed by the bank's letter of 08.03.2017. (¶¶ 6.2, 6.3, 6.4)
- The borrowers produced only revenue records and led no evidence of actual agricultural use, while the bank's photographs showed none; the High Court wrongly placed on the secured creditor the burden of proving non-agricultural use, which lay on the borrower claiming the exemption. (¶¶ 7, 7.2, 7.3)
Result
Civil Appeal Nos. 7402 and 7404 of 2022 allowed; the Telangana High Court judgment dated 06.03.2020 in W.P. No. 12081 of 2019 set aside and the DRT-I, Hyderabad order dated 16.05.2019 dismissing S.A. No. 171 of 2016 restored; no costs.