Court holds that genuine agricultural land is exempt under Section 31(i); directs refund of auction money with 6.85% interest to successful bidder.
The Andhra Pradesh High Court has set aside an e-auction sale notice and the subsequent auction of two lands in Guntur district after finding that the secured assets were genuinely agricultural lands and therefore exempt from the SARFAESI Act, 2002 under Section 31(i).
A division bench of Justice Battu Devanand and Justice Sunitha Gandham heard the petition filed by Jampani Satyanarayana, who challenged the bank’s decision to proceed against lands in Nadimpalem village, Prathipadu mandal. The petitioner argued that the properties were dry agricultural lands continuously used for cultivation and could not be brought to sale under the SARFAESI framework.
The case arose after Canara Bank classified the borrower’s loan account as a non-performing asset, issued a demand notice under Section 13(2) of the SARFAESI Act, and later issued an e-auction sale notice dated 10.03.2025. The auction was conducted on 28.03.2025, and respondent No.2 emerged as the successful bidder by depositing Rs.81,50,000/-. However, the sale certificate had not yet been registered.
The Court examined whether the lands were truly agricultural and whether the petitioner had a right to protect them from enforcement action. It referred to Supreme Court precedents, including Indian Bank v. K. Pappireddiyar, ITC Limited v. Blue Coast Hotels Limited, K. Sreedhar v. Raus Constructions, and Govind Kumar Sharma v. Bank of Baroda, to reiterate that revenue records alone are not conclusive and that the actual use of land at the time of creation of security interest is decisive.
To verify the nature of the land, the Court appointed an Advocate Commissioner. The Commissioner’s report showed that the land was under active cultivation, with standing crops and irrigation signs observed during inspection. The report also noted crop booking in the e-Panta portal for fodder maize and other supporting agricultural indicators. The petitioner further produced adangal records, pattadar passbooks, title deeds, soil health cards, cultivation certificates, photographs, and third-party affidavits from neighboring landowners and an agricultural labourer, all suggesting continuous cultivation since 2013.
The Bench held that the petitioner had discharged the burden of proving that the lands were agricultural in nature and were being used for agricultural purposes. It observed that the bank had failed to exercise due diligence before accepting the lands as security, especially when the sale deeds themselves described them as dry lands. Proceeding with auction in violation of Section 31(i) was therefore illegal.
The Court also noted that the auction purchaser had already paid the sale amount but had not received a registered sale certificate or possession. Relying on Supreme Court guidance, it directed that the entire auction money be refunded to the bidder along with interest at 6.85% per annum from the date of deposit until payment.
Accordingly, the High Court allowed the writ petition, set aside the sale notice dated 10.03.2025 and the auction held on 28.03.2025, and left the parties to work out their remedies before the civil court in respect of the disputed lands.
Bottom Line :
Properties classified as agricultural land in revenue records are exempt from the provisions of the SARFAESI Act, 2002 under Section 31(i). However, the determination of whether the land is genuinely agricultural depends on its actual use at the time of creating the security interest, and creditors must exercise due diligence while accepting such properties as security.
Statutory provision(s): SARFAESI Act, 2002 Section 31(i), SARFAESI Act, 2002 Section 13(2), Transfer of Property Act, 1882 Section 60
Jampani Satyanarayana v. Canara Bank, (Andhra Pradesh)(DB) : Law Finder Doc id # 2955683
