Sarfaesi act 2002
Rangee
(Querist) 21 November 2014
This query is : Resolved
Dear Experts,
A Land has been sold and transfered under SARFAESI Act by Bank which was in possession of Public Ltd company with defective title.There are buildings erected on the land belonging to company, these buildings are not part of sale. The Buyer of the land has taken into possession of both land and building. What is legal recourse to the Company to obtain orders for using the building to which court we have approach please answer thanks in advance
R.S.K.Singh
Devajyoti Barman
(Expert) 22 November 2014
Check the sale certificate to find out what has been sold out.
The buyer can not have control over what has ot been sold out in auction sale.
Rangee
(Querist) 22 November 2014
Thanks for your immediate reply. I am fighting a case I will be very happy if you can kindly give some SC citation in this behalf.Further which court has jurisdiction to obtain relief.
R.S.K.Singh
K.K.Ganguly
(Expert) 22 November 2014
1. Your quesry is not very clear,
2. was a land and construction thereupon was mortgaged with the lending Bank which it had sold as per SARFAESI Act,2002?
3. Who are you in this matter? Are you the buyer of the mortgaged property? or you are the mortgagor?
4. It is highly unlikely that the Bank will sell only the land upon which a building has been constructed,
5. The Sale Certificate issued by the Bank in this regard is required to be seen for giving proper advice.
Rajendra K Goyal
(Expert) 22 November 2014
Citation not provided in this section.
Rangee
(Querist) 22 November 2014
Public Ltd Company is mortgagor. The Company has not mortgaged any of structures which are constructed on the land. AS per the Sale Certificate issued in favour of buyer, only Land has been sold and transferred not the office building etc. Land is mortgaged with lending Bank. Under the SARAESI Act as per section 34 Civil Court has not jurisdiction.
MY question is also whether Land which is still and agricultural Land in possession of Company be sold in public auction, since as per the State Land Reforms Act Company cannot possess any agricultural land only the company can possess Industrial land. Finally if the Company is in possession of Land which is yet to be transferred from State Govt. can be sold. ( As per Record of Rights, the Land is held in name of State Govt. can such land be sold by Bank.
I Thank all the Experts and in particular Mr. K.K. Ganguly Sir, I will be more thank full for further light in this case.I am advocate, representing the Company in litigation.
R.S.K.Singh
K.K.Ganguly
(Expert) 23 November 2014
1. Normally. land alongwith any future construction thereupon is mortgaged while providing loan,
2. Agriculturalo land can not be mortgaged as per SARFAESI Act,2002. What was mentioned in the schedule while mortgaging the property? Was agricultural land was mentioned or it was specified as industrial land?
3. The Company may be in possession of the land but it will be taken physical possession of by the Bank with the help of police after taking MD's permission based on application filed u/s14 of the Act by the Bank,
4. Civil Court has no jurisdiction in this matter and only DRT can hear your grievance. You still can file an application u/s17 of the Act after being dispossessed by the Bank within 45 days thereof,
5. Bank's physical possession can be reversed if you can prove illegality in Bank's initiation of SARFAESI proceeding.
Rangee
(Querist) 24 November 2014
Thank Mr. K.K.Ganguly Sir,
1. Yes i agree that normally future construction there upon is mortgaged. In the sale certificate only Land is put up for sale and taken into possession and sold.No buildings, or structures plant and machinery are included in the sale certificate.In such circumstances, can company file civil court seeking injunction against the purchaser not to interfere with the rights of company on buildings structures not included in the sale certificate against the purchaser. Please clarify whether jurisdiction of civil is completely taken away in the SARAESI ACT 2002. I am of view that Civil court has residuary jurisdiction in the matter of title deeds of land taken into possession if the property is joint Hindu property and if the land is non industrial land not in the name of company. I am of the view that DRT has no powers to decide whether the land put up for sale is agricultural land or title of land of joint Hindu property among the family
members. only civil court can decide this matter.
2.I agree with you sir the agricultural land cannot be mortgaged and sold under SARFAESi 2002.Does it mean that agricultural mortgaged for securing loan by a Farmer or agricultural land mortgaged by company as security for loan of company. The Company has purchased some agricultural for erecting a industry and the said land is under the possession of company but not yet converted into industrial land by government. Can such land be sold under SARFAESI also part of land is taken over by State Government for non payment of fee for conversion and State Government name is forthcoming in the Revenue Transfer Certificate can such land be sold under SARFAESI.
3.Thank you once again Sir for your kind help in understanding the matter and I will be thank full if you can kindly clarify on the above points.
R,S.K.Singh
K.K.Ganguly
(Expert) 25 November 2014
1. Civil Court has no jurisdiction to hear about the joint title of the mortgaged property taken possession of by initiating SARFAESI Proceeding. The agrieved parties including the other co-owners have ample scope to approach the DRT to object to such SARFAESI step taken by the Bank.However, having said the above I feel that the SARFAESI proceeding is over after issuing the sale certificate which has been issued for the sale of the land only. You can now very well go to civil court to claim that the building constructed upon the land belonged to yours though the land belonged to the purchaser. You will loose the case in due course but you shall be able to drag the matter for some time,
2. Agricultural land can not be taken as mortgage by the Bank as per SARFAESI Act,2002. Till the agricultiral land is converted to industrial land, it stays as agricultural land being disqualified to be mortgaged under SARFAESI Act,2002.
Rangee
(Querist) 25 November 2014
Thank you very much sir, I have been very much enlightened by your experts reply. I take this opportunity to record in this forum the good nature of yours in giving very accurate reply to this query.
With due respects to your knowledge, i still think the title and partition of joint family property can be decided by Civil Court only not by DRT and it is independent process of SARFAESI Proceedings. Once the Property has been mortgaged,the Authorized officer is well with in his powers to taken into possession of the property which is mortgaged irrespective of the fact whether it is joint family property or otherwise. But after taking into possession, the Bank Officer should find out correct title of Land before auctioning the property, otherwise the purchaser has to face lot of litigation.It is well known that the bankers have first charge over the joint family property but one person of family has no right to mortgage the entire property belonging to the joint members of family.
Thanks you once again sir, if you think I have dragged this issue too long please excuse me. I am highly obliged and honored to receive a reply from you sir,
R,S.K.Singh
K.K.Ganguly
(Expert) 25 November 2014
1. Your thinking will not help here legally. What is required is proviso of the Act and/or pronounced Judgments,
2. Section 34 of SARFAESI Act,2002 takes away Jurisdiction from the Civil Courts to try SARFAESI matters,
3. Regarding your specific matter, there is a clear Supreme Court Judgment in similar matter viz. Appeal No. 9771 of 2013. Jagdish Singh .....Appellant Vs..Heeralal and Ors........Respondemts, which was a partition suit post SARFAESI Action making the Bank a party. In this case the order passed by the Civil court in said partition suit which was rejected on maintainibility ground was upheld by the Apex Court. I myself has cited the said Supreme Court Judgment in case no. T.S. 08 of 2013. Aparna Das Vs. Allahabad Bank filed by the relatives of the borrower before the 2nd Civil Judge ( Sr. Div), Barasat, after the borrower got adverse order from DRT & DRAT. My application under Order 7 Rule 11 to reject the said partition suit mentioning about the SARFAESI Action taken by Allahabad Bank alongwith the said Apex Court Judgment was accepted and the said partition suit was rejected by the said Civil Court,
3. It will take just 2/3 hearings by the Bank's experienced lawyer to get the said partition suit, if filed by other relatives of the borrower, rejected on maintainibility ground after filing application under order 7 Rule 11 of CPC,
4. Do not be wastfully adventurous in legal matters.
Rangee
(Querist) 25 November 2014
Sir, I thank you once again for you immediate reply. I am retired official and I am upcoming lawyer and this is my first suit I have filed with association of my senior. I whole heatedly accept your advise in the last para No.4 and avoid adventurous Legal matters.
I have filed suit against the buyer of the property which is defective in title and I know if make Bank as party suit will be dismissed under the provisions of law. Do you mean to say what ever may the defect in title of the property that gets legalized just because it is mortgaged and taken into possession by the Bank. If this principle is accepted than rights of property are sold for premium just because some one mortgaged the Land to Bank for the purpose of loan amount.
One example Land now is government acquired land from farmers at price say 1.00 lakh 20 years ago per acre.The money is paid by company to the farmer. This land has been allotted to Company on leave licence for the purpose of use for industry for public cause. Such Land has been sold under SARFAESI and the buyer get the land for small price. If this principle is accepted then the AO of Bank is acting like Land acquisition officer and the land is traded for premium and poor farmer looses his money. Government consent is not obtained by the Bank directly sold and how can bank value Land which is under leave and licence of State Government. This act of AO amounts to transfer of Land to buyer violating all the Rules of land acquisition. There cannot be valuation of land which is under direct of control of State Government. As per land Reforms Rules, if the company is wind up then the land is not liquidated since no value can be fixed the land has to be returned to government and the buyer has apply fresh duly paying the present value and in such situation part of money will go farmer from whom the land has been acquired.
Thank you Sir please kindly give your expert opinion.
R.S.K.Singh
T. Kalaiselvan, Advocate
(Expert) 25 November 2014
Expert Mr. Ganguly has taken strenuous efforts to explain the academic query raised by an upcoming lawyer. It is rather hypothetical asking plenty of question without involving proper legal aspect but to enrich his academic knowledge by the author.
K.K.Ganguly
(Expert) 25 November 2014
1. Either you are confused with thematter or myself,
2. You have mentioned "Land now is government acquired land from farmers at price say 1.00 lakh 20 years ago per acre.The money is paid by company to the farmer. This land has been allotted to Company on leave licence for the purpose of use for industry for public cause. Such Land has been sold under SARFAESI and the buyer get the land for small price." I did not make out anything from it. If the Government has acquired the land from the farmers thgen why did the Company pay for it? When the said land has been allotted to the Company on lease and license basis, then how cpuld the Company mortgage it with the Bank since leased property can not be mortgaged? Moreover, how could the agricultural land be mortgaged with the Bank?
3. I feel that something important is not made clear by you in this regard,
4. When the land is not mortgegable being a leased and also agricultural land, why is that you are not approaching the DRT u/s17 of the SARFAESI Act,2002?
5. What is the defect in the Title of the Deed? Was it that there was no mention of the building in the said Deed? If that is so, then it is not a defect at all. Bank's lawyer will state that it is clear that the building was constructed on the mortgaged land. So, the building also will go to the buyer since construction of the said building on the mortgaged land is illegal as mortgaged property can not be dealt with in any way without the written consent of the mortgagee,
7. SARFAESI Act,2002 is a draconian Act enacted to recover outstanding dues from the defaulters of loans provided by the Banks from the public money. It is an open & shut case in your matter unless the mortgage was bad,
8. The Company had availed loan which it has to repay with agreed interest & there is no escape for him,
9. Civil Court has no jurisdiction to hear the matter for reason already informed you in my earlier post,
10. File an application before the DRT, if you can prove that the property was not mortgageable being a leased property &/or an agricultural land, as it may be.
Rangee
(Querist) 15 December 2014
Dear Sir,
Thank you Sir, Sorry for the delay in getting back to you.
1. Public Ltd company intending to erect an industry has purchased x acres of agricultural land from farmers for sale consideration money and later applies to state government for conversion of land from agriculture to industrial use. The conversion fee fixed by the state govt. is not paid by company and hence state government revert back ownership of land in its name and the name of state government is entered in khatha/record of rights.
2. Such land which is held in the name of State Government has been acquired under SARFASI and sold to buyer for consideration.
3.The Land is not converted into industrial purpose as per state Land reforms act hence my plea is that the land is not dispossessed from state government at the time issue of notice under section 13
4. It is neigther an agricultural land since no agricultural operation are being carried out or not a land converted into industrial purpose not reflected in the balance sheet of company as an asset.
5. Let me give one more example. X company enters into MOU with State Government for starting industry and request is made to State Government for acquisition of x acres of land. The land is acquired from farmers and X company pays compensation amount to farmers say y price for acre. Later on X company never starts the industry and sells the entire company including the land acquired to Z company at premium including the land. Such sale is not permissible since the land held with X company is land on leave and license from state government and selling the company along with land with premium is not permissible under State Law with out consent of State Govt.
If such land is taken into possession by the Bank under SARFAESI and sold does this transaction tantamount to making profit by the Bank and buyer of land and such an action cannot be taken by the Bank without the consent of State Govt. In such situation what is remedy for state government or borrower, filing criminal complaint for mischief wrongful gain and loss and if the sale of such land is allowed it amounts to delegation the powers of land acquisition to Authorized Officer of Bank.
My last question is permission under Section 197 of CRPC is required for registering a complain against the Authorized Officer since he is public servant for lodging criminal complaint for any fraudulent and mischief done by him during the course of taking possession and selling of property and later on transferring the property colluding with buyer.
Kindly clarify
Thanking your once again
R.S.K.Singh
Rangee
(Querist) 15 December 2014
Dear Mr. Devajyoti Barman,
Thanks for your reply. If the buyer takes into possession the property which is not included in the sale certificate or the sale certificate is not clear about the details of movable property or the check band-hi or geographical location with reference to North etc has been shown in the sale certificate, can the Borrower has remedy in civil court please let me know.
R.S.K.Singh
