K. SREEDHARversusM/S RAUS CONSTRUCTIONS PVT. LTD & ORS.

                          [2023] 1 S.C.R. 579                            579


                          K. SREEDHAR                                    A
                                  v.
        M/S RAUS CONSTRUCTIONS PVT. LTD & ORS.
                  (Civil Appeal Nos. 7402 of 2022)
                        JANUARY 05, 2023                                 B
          [M. R. SHAH AND M. M. SUNDRESH, JJ.]
       Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 : s. 31(i) – Provisions of
the Act not to apply to security interest created in agricultural land
                                                                         C
– Respondent No. 1-debtor availed credit facilities from the Bank
and owing to default in payment, declared NPA – Bank issued
possession notice of the properties and e-auction held – Challenged
to – One of the property purchased by the appellant-auction
purchaser – DRT confirmed the sale in favour of the appellant – In
writ petition, the High Court set aside the e–auction and sale           D
certificate – On appeal, held: High Court ought not to have
entertained Writ Petition as there was a remedy of appeal before
the DRAT – By entertaining the writ petition straightway under Art.
226/227 challenging the order passed by the DRT, the High Court
allowed/permitted the borrower to circumvent the provision of appeal
                                                                         E
before the DRAT under the provisions of the SARFAESI Act – There
was no breach of r. 8(1) & (2) of 2002 Rules as the possession
notices were published in two leading newspapers and served upon
borrowers – There was no breach of r. 9(3) of the 2002 Rules as the
entire 25% of the sale proceed was deposited the very next day of
sale – Also, no breach of r. 9(4) of the 2002 Rules – Merely because     F
the secured property is shown to be agricultural property is not
sufficient for s. 31(i) – Properties must actually be used as
agricultural land when the security interest was created – No
evidence was led to show that property was actually put to use as
agricultural land or any activity was going on – Burden was upon
                                                                         G
the borrower to prove that the secured properties were agricultural
lands and actually being used as agricultural lands and/or
agricultural activities were going on – Order of the High Court set
aside and that of the DRT restored – Security Interest (Enforcement)
Rules 2002.
                                                                         H
                                 579
580            SUPREME COURT REPORTS                      [2023] 1 S.C.R.


A           Allowing the appeals, the Court
            HELD: 1.1 What was challenged before the High Court by
      the borrower in a writ petition under Article 226 of the
      Constitution of India was the judgment and order passed by the
      DRT-I. Against the judgment and order passed by the DRT-I
B     dismissing the application, the borrower had a statutory remedy
      available by way of appeal before the DRAT. If the borrower would
      have preferred an appeal before the DRAT, he would have been
      required to deposit 25% of the debt due. To circumvent the
      provision of appeal before the DRAT and the pre-deposit, the
      borrower straightway preferred the writ petition before the High
C     Court under Article 226/227 of the Constitution. Therefore, in
      view of alternative statutory remedy available by way of appeal
      before the DRAT, the High Court ought not to have entertained
      the writ petition under Article 226/227 of the Constitution of India
      challenging the judgment and order passed by the DRT-I. By
D     entertaining the writ petition straightway under Article 226/227
      of the Constitution of India challenging the order passed by the
      DRT-I, the High Court has allowed / permitted the borrower to
      circumvent the provision of appeal before the DRAT under the
      provisions of the SARFAESI Act. [Para 6][588-F-H; 589-A-B]
E           1.2 The High Court has set aside the sale in favour of the
      auction purchaser with respect to the property at Item No.8 on
      the ground that there was a violation of Rules 8(1) & (2) and 9(4)
      of the Rules, 2002. However, while observing so, the High Court
      has not properly appreciated that. In the present case, the
      Possession Notices were published in two leading newspapers
F     having sufficient circulation in the locality. Even the Possession
      Notices were also served upon the borrowers also. Therefore,
      the High Court has materially erred in holding that there was a
      breach of Rules 8(1) & (2) of the Rules, 2002.[Para 6.2][589-B-
      D]
G           1.3 In the present case, the auction was held on 17.02.2017.
      The auction purchaser deposited Rs.26 lakh through RTGS on
      14.02.2017 i.e. prior to the auction on 17.02.2017. He deposited
      a further sum of Rs.45 lakh again through RTGS on the very
      next day of the sale i.e. on 18.02.2017 itself. Therefore, the
H
  K. SREEDHAR v. M/S RAUS CONSTRUCTIONS PVT. LTD.                     581
                       & ORS.

deposit of 25% was permissible not later than next working day        A
and the entire 25% was deposited on 18.02.2017 i.e. on the next
day of the sale dated 17.02.2017. Furthermore, by communication
/ letter dated 08.03.2017, the secured creditor – Bank directed
the auction purchaser to deposit the balance 75% of the bid
amount within 15 days and the auction purchaser deposited the
                                                                      B
balance 75% of the sale price on 23.03.2017, i.e., on the 15th day
from the date of communication by the secured creditor – Bank
to deposit balance 75% of the bid amount within 15 days. As per
Rule 9(4) of the Rules, 2002, the balance amount of purchase
price payable shall be paid by the purchaser to the Authorized
Officer on or before 15th day of confirmation of sale of the          C
immovable property or such extended period, in any case not
exceeding three months. Therefore, the communication dated
08.03.2017 can be said to be the extended period by the secured
creditor / Bank. Therefore, on the 15th day from the date of
communication dated 08.03.2017, when the entire 75% of the
                                                                      D
sale price was deposited, it can be said that the entire sale price
was deposited within the time prescribed under Rules 9(3) and
(4) of the Rules, 2002. Therefore, the High Court has committed
an error in holding that there was a breach of Rules 9(3) & (4) of
the Rules, 2002. [Paras 6.3 and 6.4][590-B-D, E-H]
       1.4 Except the revenue records, the borrowers did not file     E
any evidence to show that the agricultural work was being done
in the said properties. On the contrary, the secured creditor
produced the photographs to show that there was no agricultural
activities being done and no agricultural activity was going on.
The High Court held that the scheduled properties in question         F
were exempted from the provisions of SARFAESI Act in view of
Section 31(i) of the SARFAESI Act on the ground that the revenue
records and Pattadar pass-books and the title deeds show that
the properties were agricultural properties / lands and that no
evidence is produced by the secured creditor that these
properties are non- agricultural lands and have been put to non-      G
agricultural use after obtaining permission from the competent
authorities. Therefore, the High Court has shifted the burden
upon the secured creditor to prove that the properties are non-
agricultural lands. [Para 7][591-B-E]
                                                                      H
582           SUPREME COURT REPORTS                     [2023] 1 S.C.R.


A           1.5 Only in a case where the secured property is actually
      put to use as agricultural land and solely on the basis of the
      revenue records / Pattadar and once the secured property is put
      as a security by way of mortgage etc. meaning thereby the same
      was not treated as agricultural land, such properties cannot be
      said to be exempted from the provisions of the SARFAESI Act
B
      under Section 31(i) of the SARFAESI Act. When no evidence
      was led at all on behalf of the borrowers that the secured
      properties in question were actually put to use as agricultural
      land and/or any agricultural activity was going on, the High Court
      has committed an error in applying Section 31(i) of the SARFAESI
C     Act and quashing and setting aside the entire Possession Notice,
      Auction Notice as well as Sale etc. [Para 7.2][593-F-H]
            1.6 The High Court also materially erred in shifting the
      burden upon the secured creditor to prove that the properties
      were not non-agricultural lands or have been put to non-
D     agricultural use. When it was the case on behalf of the borrowers
      that in view of Section 31(i) of the SARFAESI Act, the properties
      were agricultural lands, the same were being exempted from the
      provisions of the SARFAESI Act, the burden was upon the
      borrower to prove that the secured properties were agricultural
      lands and actually being used as agricultural lands and/or
E     agricultural activities were going on. Therefore, the High Court
      has materially erred in shifting the burden upon the secured
      creditor to prove that the properties are non-agricultural lands
      or have been put to non-agricultural use. [Para 7.3][594-A-C]
           1.7 The impugned judgment and order passed by the High
F     Court is unsustainable and is quashed and set aside and the
      judgment and order passed by the Debts Recovery Tribunal-I
      dismissing SA No.171/2016 is restored. [Para 8][594-D]
           ITC Limited vs. Blue Coast Hotels Limited and Others
           (2018) 15 SCC 99 : [2018] 5 SCR 516, Indian Bank
G          and Another vs. K. Pappireddiyar and Another (2018)
           18 SCC 252 – relied on.




H
  K. SREEDHAR v. M/S RAUS CONSTRUCTIONS PVT. LTD.                              583
                       & ORS.

                         Case Law Reference                                    A
[2018] 5 SCR 516                   relied on           Para 3.7
(2018) 18 SCC 252                  relied on           Para 3.7
      CIVIL APPELLATE JURISDICTION : Civil Appeal No.7402
of 2022.                                                                       B
       From the Judgment and Order dated 06.03.2020 of the High Court
for the State of Telangana at Hyderabad in W.P. No.12081 of 2019.
         With
         Civil Appeal No.7404 of 2022.
                                                                               C
      Dhruv Mehta, Pratap Narayan Sanghi, Sr. Advs., Himanshu
Munshi, Dr. Ram Kishor Choudhary, Amit Kumar Chourasia, Avinash
Kumar Bharti, Manish Garani, S. V. S. Chowdary, Yelamanchili Shiva
Santosh Kumar, Tarun Gupta, Abhishek Sharma, Avdhesh Narayan
Sanghi, Krishna Kumar Singh, Advs. for the appearing parties.
                                                                               D
         The Judgment of the Court was delivered by
         M. R. SHAH, J.
       1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 06.03.2020 passed by the High Court for the State of
Telangana at Hyderabad in Writ Petition No.12081/2019 by which the             E
High Court has allowed the said writ petition preferred by the debtor
and has quashed and set aside the order passed by the Debts Recovery
Tribunal – I (hereinafter referred to as “DRT-I”) in SA No.171/2016 as
well as the Possession Notice dated 05.02.2016 and the Sale Notice
dated 10.01.2017 issued by the Indian Bank (hereinafter referred to as         F
“secured creditor”) and also the sale of Item No.8 property mentioned
in the Sale Notice pursuant to the auction held, the auction purchaser as
well as the secured creditor have preferred the present appeals.
         2. The facts leading to the present appeals in nut-shell are as
under:                                                                         G
       2.1 That, the respondent No.1 herein – M/s. Raus Constructions
Private Ltd. (hereinafter referred to as “Debtor”) availed financial
assistance, credit facilities in the year 2012 from the Indian Bank i.e. the
secured creditor. Due to defaults on the part of the borrowers in servicing
the loan account, the same was classified as NPA. The secured creditor
                                                                               H
584            SUPREME COURT REPORTS                           [2023] 1 S.C.R.


A     initiated the proceedings under the Securitisation and Reconstruction of
      Financial Assets and Enforcement of Security Interest Act, 2002
      (hereinafter referred to as “SARFAESI Act”) and issued the demand
      Notice to the borrowers including the mortgagors and the guarantors,
      calling upon them to pay the outstanding amount. As the amount of the
      Demand Notice was not paid, the secured creditor issued Notice to the
B
      borrowers / mortgagors / guarantors. That, the Possession Notice was
      issued with respect to Item Nos.1 to 8. The secured creditor on 05.02.2016
      issued a consolidated Possession Notice detailing the possession of 12
      items of properties and the dates on which the possession of the same
      was taken. The Possession Notice was published in newspapers.
C     Thereafter, the secured properties including the property Item No.8
      (property in question) was put to auction through e-auction notice dated
      28.03.2016. That, the borrowers filed the writ petition before the High
      Court being aggrieved by the e-auction and sought stay of all further
      proceedings initiated by the secured creditor under the provisions of the
      SARFAESI Act and pursuant to the Possession Notice dated 05.02.2016,
D
      including e-auction Notice, till the disposal of SA No.171/2016 on the file
      of DRT-I, Hyderabad. That, the writ petition came to be dismissed by
      the High Court in view of the pendency of SA No.171/2016 before the
      DRT-I, Hyderabad. A fresh e- auction Notice was issued. That, the
      property Item No.8 was purchased by the auction purchaser (appellant
E     herein) in Civil Appeal arising out of Special Leave Petition No.14695/
      2020 on 17.02.2017. The e-auction was conducted on 17.02.2017 in
      which the auction purchaser was declared the successful bidder. He
      was issued the Letter of Acceptance on 18.02.2017. The auction
      purchaser deposited 25% of the amount of sale consideration on
      18.02.2017. The sale in favour of the auction purchaser came to be
F
      confirmed on 08.03.2017. On deposit of the entire/full sale consideration,
      the sale certificate came to be issued in favour of the auction purchaser
      on 23.03.2017.
             2.2 By an order dated 16.05.2019, the DRT-I, Hyderabad dismissed
      SA No.171/2016 filed by the borrowers and confirmed the sale certificate
G     issued in favour of the auction purchaser. At this stage it is required to
      be noted that before the DRT-I, it was the case on behalf of the borrowers
      that the property Item No.8 was the agricultural land and therefore, the
      same could not have been the subject matter of auction under the
      provisions of the SARFAESI Act. However, the DRT-I while dismissing
H     the aforesaid SA No.171/2016 did not accept the same by observing
  K. SREEDHAR v. M/S RAUS CONSTRUCTIONS PVT. LTD.                             585
                & ORS. [M. R. SHAH, J.]

that apart from the revenue records, the borrowers did not file any           A
evidence to prove that the agricultural activity was going on in the land
mortgaged with the secured creditor whereas the secured creditor filed
photographs showing no agricultural activities were going on. Therefore,
the DRT- I held that the lands in question (property Item No.8) were not
exempted from the provisions of the SARFAESI Act.
                                                                              B
       2.3 Feeling aggrieved and dissatisfied with the judgment and order
passed by the DRT-I, Hyderabad dated 16.05.2019 dismissing the SA
No.171/2016, the borrowers filed the writ petition being Writ Petition
No.12081/2019. By the impugned judgment and order, the High Court
has allowed the said writ petition and has quashed and set aside the
order passed by the DRT- I dismissing the SA No.171/2016. By the              C
impugned judgment and order the High Court has also set aside the
Possession Notice as well as the Sale Certificate issued in favour of the
auction purchaser with respect to the Sale of Item No.8 property
mentioned in the auction Notice. While allowing the writ petition, the
High Court has observed and held that there was non-compliance of the         D
Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 (hereinafter
referred to as “Rules, 2002”) inter alia on the ground that 25% of the
amount of sale price and thereafter 75% of the balance sale price was
not deposited within the time stipulated under Rule 9 of the Rules, 2002.
The High Court also observed and held that in view of Section 31(i) of
the SARFAESI Act, the property Item No.8 being an agricultural land           E
could not have been put to auction.
       2.4 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the High Court quashing and setting aside the sale
with respect to property Item No.8, auction purchaser as well as secured
creditor have preferred the present appeals.                                  F

       3. Shri Dhruv Mehta, learned senior counsel appearing on behalf
of the auction purchaser and learned senior counsel appearing on behalf
of the secured creditor have vehemently submitted that the High Court
has materially erred in entertaining the writ petition against the judgment
and order passed by the DRT-I. It is submitted that against the order         G
passed by the DRT-I, the borrower was required to prefer an appeal
before the Debts Recovery Appellate Tribunal (hereinafter referred to
as “DRAT”). It is submitted that only with a view to circumvent the
provisions of the appeal before the DRAT and to get out of the deposit
of the pre-deposit amount, the borrower straightway preferred writ            H
586             SUPREME COURT REPORTS                           [2023] 1 S.C.R.


A     petition before the High Court against the judgment and order passed by
      the DRT-I, which ought not to have been entertained by the High Court
      in view of availability of alternative statutory remedy under the provisions
      of the SARFAESI Act.
            3.1 It is further submitted that even on merits also, the High Court
B     has materially erred in holding that there was breach of Rule 9(3) and
      Rules 8(1) & (2) of the Rules, 2002.
             3.2 It is submitted that the High Court has not properly appreciated
      and/or considered the amendment in 2016 with respect to Rule 9(3)
      whereby 25% of payment could be made within next day of auction. It
C     is submitted that therefore the High Court has materially erred in setting
      aside the sale transaction on the basis of such manifest ignorance.
             3.3 It is submitted that in the present case, the auction purchaser
      deposited the amount within the time prescribed under Rule 9(4) of the
      Rules, 2002 and thereafter the sale certificate was issued on 23.03.2017
D     for the said item which was registered on 07.02.2018 and the possession
      was also handed over to the auction purchaser.
             3.4 It is further submitted by the learned senior counsel appearing
      on behalf of the auction purchaser that in the present case the auction
      purchaser quoted Rs.2,76,10,000/- for item No.8 of the Possession
E     Notice. He deposited on 14.02.2017, prior to the auction on 17.02.2017,
      Rs.26 lakh vide RTGS; that he deposited after the auction was held on
      17.02.2017 pursuant to the letter dated 18.02.2017 an amount of Rs.45
      lakh again through RTGS. It is submitted that the respondent secured
      creditor – Bank vide communication dated 08.03.2017 directed the auction
      purchaser to deposit balance 75% of the bid amount within 15 days and
F     he gave cheque dated 23.03.2017 for an amount of Rs.2,05,10,000/-. It
      is submitted that therefore the entire amount was deposited within the
      time stipulated. It is submitted that therefore in the facts and
      circumstances of the case the High Court has materially erred in quashing
      and setting the sale on the ground that there was violation of Rules 8(1)
G     & (2) and 9(3) of the Rules, 2002.
             3.5 It is further submitted by the learned senior counsel appearing
      for the auction purchaser that the High Court ought to have appreciated
      that after the payment of full sale consideration, the sale certificate was
      issued in favour of the auction purchaser on 23.03.2017 which was
      registered on 07.02.2018 and after the possession was handed over to
H
  K. SREEDHAR v. M/S RAUS CONSTRUCTIONS PVT. LTD.                                 587
                & ORS. [M. R. SHAH, J.]

him, he spent huge amount in leveling the plot; applied for permission to         A
the Municipal Authorities to construct the house in the plot. It is submitted
that therefore the High Court has seriously erred in quashing and setting
aside the sale.
       3.6 Learned senior counsel appearing on behalf of the auction
purchaser has further submitted that the High Court has also erred in             B
setting aside the Sale Notice, Possession Notice etc. on the ground that
the properties were exempted from the provisions of the SARFAESI
Act in view of Section 31(i) of the SARFAESI Act.
       3.7 It is submitted that as such the scheduled properties were not
actually put to use for agricultural purposes. It is submitted that there         C
was no proof filed to prove that agriculture is being done in the scheduled
properties in question. It is submitted that there was no agricultural activity
taking place. It is submitted that in fact the photographs were filed which
proved that no agricultural activities were going on. It is submitted that
therefore when the secured properties in question were not put to use
for agricultural purposes and/or no agricultural activity was going on, the       D
properties in question were not exempted under Section 31(i) of the
SARFAESI Act. Heavy reliance is placed on the decisions of this Court
in the case of ITC Limited vs. Blue Coast Hotels Limited and
Others reported in (2018) 15 SCC 99 (Para 36) and Indian Bank
and Another vs. K. Pappireddiyar and Another reported in (2018)                   E
18 SCC 252 (Paras 7 & 8).
       3.8 Now, so far as taking the possession of Item Nos.1 to 12 and
the issuance of Possession Notice on 05.02.2016 and the findings recorded
by the High Court on Section 13(4) of the SARFAESI Act that the
Possession Notice was issued after a period of one year is concerned, it          F
is submitted that there was a typographical error in mentioning the
possession date. It is submitted that instead of 03.02.2016, 04.02.2016
and 05.02.2016, dates were mentioned as 03.02.2015, 04.02.2015 and
05.02.2015, which were nothing but typographical error. It is submitted
that therefore the Possession Notice cannot be said to be in breach of
Section 13(4) of the SARFAESI Act.                                                G
      Making above submissions, it is requested to allow the present
appeals.
     4. Present appeals are vehemently opposed by Mr. Pratap Narayan
Sanghi, learned senior counsel appearing on behalf of the borrower. It is
                                                                                  H
588             SUPREME COURT REPORTS                           [2023] 1 S.C.R.


A     submitted that in the facts and circumstances of the case and having
      found that there was a breach of Rules 8(1) & (2) and 9(4) of the Rules,
      2002 and Section 13(4) of the SARFAESI Act, the High Court has not
      committed any error in entertaining the writ petition under Article 226 of
      the Constitution of India against the judgment and order passed by the
      DRT-I.
B
             4.1 It is further submitted that so far as the property Item No.8 is
      concerned, there was a clear breach of Rules 8(1) & (2) and 9(4) of the
      Rules, 2002. It is submitted that therefore the High Court has not
      committed any error in quashing and setting aside the sale with respect
      to the property Item No.8.
C
            4.2 It is further submitted that so far as other properties are
      concerned, as the said properties were agricultural lands / properties, in
      view of Section 31(i) of the SARFAESI Act, with respect to those
      properties / agricultural lands, the SARFAESI Act would not be
      applicable. It is submitted that in the revenue records, properties in
D     question were shown as agricultural lands and therefore, the said
      properties were exempted from the provisions of the SARFAESI Act in
      view of Section 31(i) of the SARFAESI Act.
            Making above submissions, it is requested to dismiss the present
      appeals.
E
            5. We have heard the learned counsel appearing on behalf of the
      secured creditor – Bank as well as the learned senior counsel appearing
      on behalf of the auction purchaser of property at Item No.8 and learned
      senior counsel appearing on behalf of the borrower.

F            6. At the outset, it is required to be noted that what was challenged
      before the High Court by the borrower in a writ petition under Article
      226 of the Constitution of India was the judgment and order passed by
      the DRT-I. Against the judgment and order passed by the DRT-I
      dismissing the application, the borrower had a statutory remedy available
      by way of appeal before the DRAT. If the borrower would have preferred
G     an appeal before the DRAT, he would have been required to deposit
      25% of the debt due. To circumvent the provision of appeal before the
      DRAT and the pre-deposit, the borrower straightway preferred the writ
      petition before the High Court under Article 226/227 of the Constitution.
      Therefore, in view of alternative statutory remedy available by way of
      appeal before the DRAT, the High Court ought not to have entertained
H
  K. SREEDHAR v. M/S RAUS CONSTRUCTIONS PVT. LTD.                               589
                & ORS. [M. R. SHAH, J.]

the writ petition under Article 226/227 of the Constitution of India            A
challenging the judgment and order passed by the DRT-I. By entertaining
the writ petition straightway under Article 226/227 of the Constitution of
India challenging the order passed by the DRT-I, the High Court has
allowed / permitted the borrower to circumvent the provision of appeal
before the DRAT under the provisions of the SARFAESI Act.
                                                                                B
     6.1 Even on merits also, for the reasons stated hereinafter, the
impugned judgment and order passed by the High Court is unsustainable.
       6.2 By the impugned judgment and order, the High Court has set
aside the sale in favour of the auction purchaser with respect to the
property at Item No.8 on the ground that there was a violation of Rules         C
8(1) & (2) and 9(4) of the Rules, 2002. However, while observing so,
the High Court has not properly appreciated that in the present case, the
Possession Notices were published in two leading newspapers having
sufficient circulation in the locality. Even the Possession Notices were
also served upon the borrowers also. Therefore, the High Court has
materially erred in holding that there was a breach of Rules 8(1) & (2)         D
of the Rules, 2002.
      6.3 Now, so far as the finding recorded by the High Court on
Rules 9(3) and 9(4) of the Rules, 2002 is concerned, the findings recorded
by the High Court are just contrary to the provisions of Rule 9 of the
Rules, 2002. The High Court has observed that 25% of the amount was             E
not deposited on the date of auction and that balance 75% amount was
not deposited on or before 15th day of confirmation of the sale. Both the
aforesaid findings are just contrary to Rules 9(3) and (4) of the Rules,
2002. Rules 9(3) and 9(4) read as under:
      “9. Time of sale, issue of sale certificate and delivery of possession,   F
      etc.
      (3) On every sale of immovable property, the purchaser shall
      immediately, i.e. on the same day or not later than next working
      day, as the case may be, pay a deposit of twenty five per cent of
      the amount of the sale price, which is inclusive of earnest money         G
      deposited, if any, to the authorized officer conducting the sale and
      in default of such deposit, the property shall be sold again;
      (4) The balance amount of purchase price payable shall be paid
      by the purchaser to the authorized officer on or before the fifteenth
      day of confirmation of sale of the immovable property or such             H
590            SUPREME COURT REPORTS                           [2023] 1 S.C.R.


A           extended period as may be agreed upon in writing between the
            purchaser and the secured creditor, in any case not exceeding
            three months.”
             The purchaser was required to deposit 25% of the amount of the
      sale price on the same day of sale or not later than the next working day.
B     Therefore, 25% of the sale price could have been deposited either on
      the same day of the sale or on the next working day. In the present case,
      the auction was held on 17.02.2017. The auction purchaser deposited
      Rs.26 lakh through RTGS on 14.02.2017 i.e. prior to the auction on
      17.02.2017. He deposited a further sum of Rs.45 lakh again through
      RTGS on the very next day of the sale i.e. on 18.02.2017 itself. Therefore,
C     the entire 25% of the sale price came to be deposited by 18.02.2017.
      Therefore, the deposit of 25% was permissible not later than next working
      day and the entire 25% was deposited on 18.02.2017 i.e. on the next day
      of the sale dated 17.02.2017. Therefore, the High Court has committed
      an error in observing and holding that there was a breach of Rule 9(3) of
D     the Rules, 2002.
             6.4 Similarly, the High Court has also erred in holding that there
      was a breach of Rule 9(4) of the Rules, 2002. The High Court has held
      so by observing that the auction purchaser did not deposit the balance
      75% of the sale price on or before 15th day of confirmation of sale.
E     However, it is required to be noted that by communication / letter dated
      08.03.2017, the secured creditor – Bank directed the auction purchaser
      to deposit the balance 75% of the bid amount within 15 days and the
      auction purchaser deposited the balance 75% of the sale price on
      23.03.2017, i.e., on the 15th day from the date of communication by the
      secured creditor– Bank to deposit balance 75% of the bid amount within
F     15 days. As per Rule 9(4) of the Rules, 2002, the balance amount of
      purchase price payable shall be paid by the purchaser to the Authorized
      Officer on or before 15th day of confirmation of sale of the immovable
      property or such extended period, in any case not exceeding three
      months. Therefore, the communication dated 08.03.2017 can be said to
G     be the extended period by the secured creditor / Bank. Therefore, on
      the 15th day from the date of communication dated 08.03.2017, when
      the entire 75% of the sale price was deposited, it can be said that the
      entire sale price was deposited within the time prescribed under Rules
      9(3) and (4) of the Rules, 2002. Therefore, the High Court has committed
      an error in holding that there was a breach of Rules 9(3) & (4) of the
H     Rules, 2002.
  K. SREEDHAR v. M/S RAUS CONSTRUCTIONS PVT. LTD.                             591
                & ORS. [M. R. SHAH, J.]

       7. Now, so far as with respect to remaining properties / secured       A
assets viz. Item Nos.3 and 9 to 12 and the submission on behalf of the
borrowers that as the said scheduled properties were agricultural
properties, therefore the said properties were exempted from the
provisions of the SARFAESI Act in view of Section 31(i) of the
SARFAESI Act is concerned, at the outset, it is required to be noted that
                                                                              B
except the revenue records, the borrowers did not file any evidence to
show that the agricultural work was being done in the said properties.
On the contrary, the secured creditor produced the photographs to show
that there was no agricultural activities being done and no agricultural
activity was going on. The High Court has observed and held that the
scheduled properties in question were exempted from the provisions of         C
SARFAESI Act in view of Section 31(i) of the SARFAESI Act on the
ground that the revenue records and Pattadar pass-books and the title
deeds show that the properties were agricultural properties / lands and
that no evidence is produced by the secured creditor that these properties
are non- agricultural lands and have been put to non-agricultural use
                                                                              D
after obtaining permission from the competent authorities. Therefore,
the High Court has shifted the burden upon the secured creditor to prove
that the properties are non-agricultural lands. The view taken by the
High Court is just contrary to the two decisions of this Court in the case
of Blue Coast Hotels Limited and Others (Supra) and K.
Pappireddiyar and Another (Supra). In both the aforesaid decisions,           E
this Court has specifically observed and held after considering the object
and purpose of Section 31(i) of the SARFAESI Act that merely because
in the revenue records the secured properties are shown as agricultural
land is not sufficient to attract Section 31(i) of the SARFAESI Act. In
the aforesaid decision, it is specifically observed and held that for the
                                                                              F
purpose of attracting Section 31(i) of the SARFAESI Act, the properties
in question ought to be actually used as agricultural lands at the time
when the security interest was created. In the case of Blue Coast
Hotels Limited and Others (Supra), it is also further observed by
this Court that since no security interest can be created in respect of
agricultural lands and yet it was so created, goes to show that the parties   G
did not treat the land as agricultural land and that the debtor offered the
land as security on this basis. After following the decision of this Court
in the case of Blue Coast Hotels Limited and Others (Supra), in
the case of K. Pappireddiyar and Another (Supra), it is observed and
held in paragraphs 8 and 9 as under:
                                                                              H
592      SUPREME COURT REPORTS                            [2023] 1 S.C.R.


A     “8. The expression “security interest”, both before and after the
      amendment, excludes what is specified in Section 31. Clause (i)
      of Section 31 stipulates that the provisions of the Act will not be
      applicable to any security interest created in agricultural land. The
      statutory dictionary in Section 2 does not contain a definition of
      the expression “agricultural land”. Whether a particular piece of
B
      land is agricultural in nature is a question of fact. In the decision
      of this Court in Blue Coast Hotels Ltd.,4 a security interest was
      created in respect of several parcels of land which were meant to
      be a part of a single unit, for establishing a hotel in Goa. Some of
      the parcels were purchased by the debtor from agriculturists and
C     were entered as agricultural lands in the revenue records. The
      debtor had applied to the revenue authority for the conversion of
      the land to non-agricultural use, but the applications were pending.
      This Court held that the fact that the debtor had created a security
      interest was indicative of the position that the parties did not treat
      the land as agricultural land. The undisputed position was that the
D
      hotel was located on 1,82,225 sq m of land of which 2335 sq m
      were used for growing vegetables and fruits for captive
      consumption. In this background, the two-Judge Bench of this
      Court held that:
         “49. The mortgage is thus intended to cover the entire property
E        of the Goa Hotel. Prima facie, apart from the fact that the
         parties themselves understood that the lands in question are
         not agricultural, it also appears that having regard to the use to
         which they are put and the purpose of such use, they are indeed
         not agricultural.”
F     The Court further held that: (SCC OnLine SC para 57)
         “57. …having regard to the character of the land the purpose
         for which it is set apart, we are of the view that the land in
         question is not an agricultural land. The High Court misdirected5
         itself in holding that the land was an agricultural land merely
G        because it stood as such in the revenue entries, even though
         the application made for such conversation lies pending till
         date.”
      9. The classification of land in the revenue records as agricultural
      is not dispositive or conclusive of the question whether the
H
  K. SREEDHAR v. M/S RAUS CONSTRUCTIONS PVT. LTD.                               593
                & ORS. [M. R. SHAH, J.]

      SARFAESI Act does or does not apply. Whether a parcel of land             A
      is agricultural must be deduced as a matter of fact from the nature
      of the land, the use to which it was being put on the date of the
      creation of the security interest and the purpose for which it was
      set apart.”
      7.1 The purpose of enacting Section 31(i) of the SARFAESI Act             B
has been considered by this Court in the case of Blue Coast Hotels
Ltd. (Supra) in paragraph 36, which reads as under:
      “36. 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        C
      agricultural purposes by 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       D
      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. It is also intended to deter the creation of
      security interest over agricultural land as defined in Section            E
      2(1)(zf)35. Thus, security interest cannot be created in respect of
      property specified in Section 31.”
       7.2 Thus, as per the law laid down by this Court in the aforesaid
two decisions, only in a case where the secured property is actually put
to use as agricultural land and solely on the basis of the revenue records      F
/ Pattadar and once the secured property is put as a security by way of
mortgage etc. meaning thereby the same was not treated as agricultural
land, such properties cannot be said to be exempted from the provisions
of the SARFAESI Act under Section 31(i) of the SARFAESI Act.
Applying the law laid down in the aforesaid two decisions to the facts of
the case on hand and when no evidence was led at all on behalf of the           G
borrowers that the secured properties in question were actually put to
use as agricultural land and/or any agricultural activity was going on, the
High Court has committed an error in applying Section 31(i) of the
SARFAESI Act and quashing and setting aside the entire Possession
Notice, Auction Notice as well as Sale etc.                                     H
594              SUPREME COURT REPORTS                        [2023] 1 S.C.R.


A            7.3 The High Court has also materially erred in shifting the burden
      upon the secured creditor to prove that the properties were not non-
      agricultural lands or have been put to non-agricultural use. When it was
      the case on behalf of the borrowers that in view of Section 31(i) of the
      SARFAESI Act, the properties were agricultural lands, the same were
      being exempted from the provisions of the SARFAESI Act, the burden
B
      was upon the borrower to prove that the secured properties were
      agricultural lands and actually being used as agricultural lands and/or
      agricultural activities were going on. Therefore, the High Court has
      materially erred in shifting the burden upon the secured creditor to prove
      that the properties are non-agricultural lands or have been put to non-
C     agricultural use.
             8. In view of the above and for the reasons stated above, the
      impugned judgment and order passed by the High Court is unsustainable
      and the same deserves to be quashed and set aside. Accordingly, the
      impugned judgment and order dated 06.03.2020 passed by the High Court
D     for the State of Telangana at Hyderabad in Writ Petition No.12081/2019
      is hereby quashed and set aside and the judgment and order dated
      16.05.2019 passed by the Debts Recovery Tribunal-I, Hyderabad
      dismissing SA No.171/2016 is hereby restored.
             Presently appeals are allowed accordingly. No costs.
E
      Nidhi Jain                                                 Appeals allowed.
      (Assisted by : Abhishek Pratap Singh, LCRA)




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