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2010 DIGILAW 870 (MAD)

J. Malliga v. Union Bank of India

2010-02-25

B.RAJENDRAN, PRABHA SRIDEVAN

body2010
JUDGMENT : Prabha Sridevan, J. 1. The only question that arises in these writ petitions is a legal question as to the construction of the words "agricultural lands" found in Section 31(f) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SRFAESI), 2002. 2. According to the Petitioners, the lands, which were given as collateral security to the Respondents, are cardamom plantations and the impugned notice issued by the Respondent No. 1 clearly refers to the word "cardamom plantation", and therefore, without any further investigation, it would be logical to conclude that they are agricultural lands, and hence, they are immune from attachment. 3. The learned Counsel appearing for the Respondents, however, referred to the definition of the word in the Tamil Nadu Agricultural income tax Act and the definition of the words "paddy land" in Kerala Land Reforms Act, 1963 and also the Wet Land (Act 28 of 2008) of the Kerala Conservation of Paddy Land and also the definition of land in Section 2(nnn) of the Tamil Nadu Agricultural income tax Act and referred to Controller of Estate Duty, Kerala Vs. V. Venugopala Varma Rajah, (1976) 4 SCC 3 , wherein the Supreme Court held that the of the Kerala High Court that "all forest lands in this State are agricultural lands in the sense that they can be prudently and profitably exploited for agricultural purposes" is too wide. Therefore, according to the Respondents, without evidence to show that such land had been cleared and prepared or earmarked for agricultural purposes, it must be treated as prima facie non-agricultural land. The learned Counsel for the Respondents has also filed written submissions. 4. The learned Counsel for the Petitioner, on the other hand, produced study report made by Dr. M.S. Swaminathan Research Foundation to describe the activities that are done for cardamom cultivation to show that the lands, where the cardamom is cultivated, would be agricultural lands. He also relied on the Judgments of the Supreme Court in Commissioner of Wealth Tax, Andhra Pradesh Vs. Officer-in-charge (Court of Wards), Paigah, (1976) 3 SCC 864 and also in Commissioner of Income Tax, West Bengal, Calcutta Vs. Raja Benoy Kumar Sahas Roy, AIR 1957 SC 768 . 5. We find from the literature relating to the cardamom cultivation that there are planting periods and there are harvesting periods depending on the time when they are planted. Officer-in-charge (Court of Wards), Paigah, (1976) 3 SCC 864 and also in Commissioner of Income Tax, West Bengal, Calcutta Vs. Raja Benoy Kumar Sahas Roy, AIR 1957 SC 768 . 5. We find from the literature relating to the cardamom cultivation that there are planting periods and there are harvesting periods depending on the time when they are planted. The cardamom cultivation does not comprise merely raising the products of the land in the narrower sense of the term like tilling of the land, sowing of the seeds, planting and irrigation and similar work done on the land, but also includes the subsequent operations set out. The above operations, which are basic as well as the subsequent activities, form one integrated activity of the agriculturist. The above activities would indicate that they are similar to what is normally described as agricultural activities, L. T. Commr. v. Benox Kumar (supra), which arose out of the income tax Act, the Supreme Court held that the terms "agriculture" and "agricultural lands" used in the definition of agricultural income in Section (2)(1) not having been defined in the income tax Act, the Court must necessarily fall back upon the general sense in which they have been understood in common parlance. The Supreme Court further observed that agriculture in its root sense means "ager a field" and "cultura-cultivation", cultivation of field which of course implies expenditure of human skill and labour upon land. The Supreme Court referred to various decisions including the English decisions and some of the observations are relevant for this case: The expression "agricultural land" means any land used as parable, meadow, or pasture ground only, cottage gardens exceeding one-quarter of an acre, market gardens, nursery grounds, orchards, or allotments, but does not include land occupied together with a house as a park, gardens other than as aforesaid pleasure grounds or any land kept or preserved mainly or exclusively for purposes of sport or recreation or land used as a race course. 6. The Supreme Court observed that cultivation of the soil was considered an essential ingredient, which rendered the income derived from the tendu leaves "agricultural income" within the meaning of its definition in Section 2(1)(a) of the Act. 6. The Supreme Court observed that cultivation of the soil was considered an essential ingredient, which rendered the income derived from the tendu leaves "agricultural income" within the meaning of its definition in Section 2(1)(a) of the Act. The Supreme Court also held that the cases referred noted that "all of them involve some expenditure of human skill and labour either on the land or the produce of the land, for without such expenditure there would be no question of the income derived from such land being agricultural income." But, where the products of the land are of wild, or spontaneous growth involving no expenditure of human labour and skill, there is unanimity of opinion that no agricultural operations were at all involved and there is no agricultural income. If these conditions were satisfied in regard to any particular land, then such land can be said to be used for agricultural purposes and the income derived therefrom constitute agricultural income within the meaning of Section 2(1)(a) of the Act. The term "Agriculture" for the purpose of Indian income tax Act was thus in effect defined by their Lordships to mean some measure of cultivation of the land and some expenditure of skill and labour upon it and unless the operations, whether they be agricultural operations or forestry operations conformed with those definitions, they could not be styled agricultural operations so as to constitute the land on which they were performed land used for agricultural purposes. 7. The Supreme Court further held that it is only if the products are raised from the land by the performance of these basic operations that the subsequent operations attach themselves to the products of the land and acquire the characteristic of agricultural operations. The cultivation of the land does not comprise merely of raising the products of the land in the narrower sense of the term like tilling of the land, sowing of the seeds, planting, and similar work done on the land but also includes the subsequent operations set out above all of which operations, basic as well as subsequent, form one integrated activity of the agriculturist and the term "agriculture" has got to be understood as connoting this integrated activity of the agriculturists. The Supreme Court finally held that nevertheless there is present all throughout the basic idea that there must be at the bottom of it cultivated of land in the sense of tilling of the land, sowing of the seeds, planting and similar work done on the land itself. This basic conception is the essential sine qua non of any operation performed on the land constituting agricultural operation. If the basic operations are there, the rest of the operations found themselves upon the same. 8. In C.E.D. Kerala v. V. Venugopala (supra), the Supreme Court held as follows: 9. So far as the correct interpretation of the term "agricultural land" in a taxing statute, such as the one before us, is concerned, we have already dealt with the question in our judgment in Commissioner of Wealth-tax, Andhra Pradesh v. Officer-in-Charge, Court of Wards, Paigah where we have said: 'We think that it is not correct to give as wide a meaning as possible to terms used in a statute simply because the statute does not define an expression. The correct rule is that we have to endeavour to find out the exact sense in which the words have been used in a particular context. We are entitled to look at the statute as a whole and give an interpretation in consonance with the purposes of the statute and what logically follows from the terms used. We are to avoid absurd results. If we were to give the widest possible connotation to the words 'agricultural land', as the Full Bench of the Andhra Pradesh High Court seemed inclined to give to the term 'agricultural land', we would reach the conclusion that practically all land, even that covered by buildings, is 'agricultural land' inasmuch as its potential or possible use could be agricultural. The object of the Wealth-tax Act is to tax surplus wealth. It is clear that all land is not excluded from the definition of assets. It is only 'agricultural land' which could be exempted.' Therefore, it is imperative to give reasonable limits to the scope of the 'agricultural land', or, in other words, this exemption had to be necessarily given a more restricted meaning than the very wide ambit given to it by the Andhra Pradesh Full Bench. 9. In the present case, the impugned notice itself refers to the land as "cardamom plantations". 9. In the present case, the impugned notice itself refers to the land as "cardamom plantations". The cultivation of the cardamom requires normal agricultural activities, and therefore, applying the normal principles of interpretation in fiscal statutes, according to which, if there are two views possible, one favourable to the Assessee should be given. In this case, the one favourable to the Petitioners, who are the borrowers, should be given. Section 31(i) of the SRFAESI Act reads as follows: 31. Provisions of this Act not to apply in certain cases-The provisions of this Act shall not apply to- (i) any security interest created in agricultural land... In D. Ravichandran Vs. The Manager, Indian Overseas Bank, Idigarai Branch and The Authorised Officer, Indian Overseas Bank, Idigarai Branch, (2006) 132 CompCas 803, the Bank contended that the asset in that case was not an agricultural land but a barren land. A learned Single Judge of this Court held that, "the question whether the secured asset in question is an agricultural land or not, whether any agricultural operations are being carried on by the Petitioner therein, etc., in the absence of any documentary proof on record are undoubtedly question of fact...and refused to go into the question under Article 226 of the Constitution of India." In Model Financial Corporation and Another Vs. Indian Bank, ARMB and Another, (2008) 3 BC 526 decided on 20th December, 2007, a learned Single Judge of the Andhra Pradesh High Court observed that the submissions made "relating to the aspect whether the subject matter of the security would fall within the agricultural lands or not and, at present, whether they are being put to agricultural use or not are predominantly questions of fact and cannot be gone into by a writ Court". In the present case, it is admitted that it is a cardamom estate, in para 4 of the counter. The sanction order refers to production of cardamom. The General Comments at Col. 12 of the sanction order shows that the loan is for "new cardamom planting". The recommendation by the Branch Manager of the Bank for sanctioning the term loan is as follows: The undersigned inspected the land on 8th May, 2005. The land is well prepared for new planting. For irrigation, sufficient amount of water available in a well within the field. The whole area is irrigated with the help of pipe line. The recommendation by the Branch Manager of the Bank for sanctioning the term loan is as follows: The undersigned inspected the land on 8th May, 2005. The land is well prepared for new planting. For irrigation, sufficient amount of water available in a well within the field. The whole area is irrigated with the help of pipe line. The applicant's husband T.K.S. Jothi has good experience in cardamom plantation. He is looking after the land. Therefore, the fact that the mortgaged land is a cardamom estate is not disputed. The loan is for planting the crop. When it is admitted by the Respondent-Bank that the above activities are carried on in the land and that cardamom is planted, then the judgments in W.T. Commr., A. P. v. Court of Wards, Paigah (supra), L.T. Commr. v. Benox Kumar (supra) and C.E.D. Kerala v. V. Venugopala (supra) will necessarily apply, since as stated earlier, cultivation of cardamom requires normal agricultural activities. In these circumstances, it is not necessary to direct the Petitioner to invoke the alternate remedy since as per the section extracted above, the Act does not apply to agricultural land. 10. In view of the above, the impugned notice is without jurisdiction and the Respondent-Bank cannot proceed against the properties of the Petitioners under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SRFAESI), 2002. It is needless to say that the Respondent-Bank has the right to recover the amounts due in a manner known to law. The invocation of this Act alone is held to be barred by Section 31(i) of the SRFAESI Act. 11. The writ petitions are allowed in the above terms. No costs. Consequently, the connected miscellaneous Petitions are closed.