The recent High Court Division Bench's verdict on exemption of agricultural land from the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 has come as a great relief to the growers of coffee, tea, cocoa, cardamom, pepper, cashew and rubber. These farmers were facing loan recovery proceedings initiated on the basis of a single judge's observations.
The verdict of the Division Bench came on appeals filed by P.C. Thomas, president of the Karshaka Sanghatana Aikyavedi, and another person against a single judge's order excluding rubber plantations from the preview of Section 31 (i) of SARFAESI Act. The Section says that the provisions of the Act do not apply to the security interest (the claim of the creditor on the collateral pledged by the borrower) created in agricultural land.
The single judge had held that the considering the scope of the relevant provisions of the law, it could be understood that the rubber plantation was not included in the definition of the agricultural land.
The Bench, while allowing the appeals, observed that agriculture was understood as the process of putting land to use for growing crops by employing human skills. Agriculture includes raising, on the land, of products which had some utility either for consumption or for trade. The term “agriculture” could not be defined by the nature of products cultivated. No such classification was conceivable unless it was specifically provided in the statutes.
The primary exercises in agriculture could not be treated as activity alien to agriculture, even if it related to growing and harvesting of product or crop which went in for consumption otherwise than as an edible item. Rubber sap was a biological product generated from the rubber trees which were grown as plantations, using labour and by carrying out an agricultural process starting with preparing the land for the cultivation. The mere fact that the ultimate product was sap that went into processing or consumption other than as food was “not intelligible criteria” to say that rubber sap was not an agricultural produce or that cultivation of rubber was not agriculture.
The court also noted that Parliament thought it fit not to define the term “agriculture land” for the purpose of Act. It had not expressed any intention to classify agricultural land on any basis. The Bench quashed all the recovery proceedings initiated against farmers under the Act by various banks against the rubber growers.
