The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (hereinafter referred as SARFAESI Act) can be taken use of by the Banks and other financial institutions for speedy recovery of non-performing assets/defaulted loans. Both movable and immovable properties can be proceeded against. In case of immovable property, agriculture land is exempted from proceeding with under Sarfaesi Act. This is as per Section 31(i). As per this section the provisions of Sarfaesi Act does not apply to any security interest created on agricultural land. But what if the property is only partly used for agriculture. The question is, whether the Bank can move against the non-agriculture portion of the property under Sarfaesi Act.
The question has been discussed in M/S. CEMAX PLANTS PVT. LTD vs THE AUTHORISED OFFICER by the Honourable High Court of Kerala.
In the above case, the petitioner(borrower) had availed various agricultural loans from the bank of the respondent-Authorised Officer by mortgaging agricultural properties.Later the accounts became Non-Performing Assets and the Bank initiated steps under Sarfaesi Act to recover the loans. Demand notice under Section 13(2) was issued. Thereafter the borrower raised the contention that his land is exempted under the Sarfaesi Act. The bank stated that they found part of the property non-agricultural on physical verification. After considering the arguments the Court decided that the Bank can initiate fresh steps against those properties which can be segregated as non-agricultural ones.