Agricultural Land under SARFAESI: Section 31(i) Explained

Section 31(i) keeps agricultural land outside SARFAESI, so a farmer's land cannot be seized and sold without a court. The Supreme Court has made clear that whether land is agricultural is a question of fact, decided by its actual use when mortgaged, and that the borrower must prove it.

1. The Exclusion and the Test

Figure 1: How the exclusion is decided

• The text. The Act does not apply to any security interest created in agricultural land, s.31(i) (Topic 5)
• Purpose. To protect agriculturists from summary dispossession of land that is their livelihood, leaving recovery to the ordinary courts.
• No definition. The Act does not define agricultural land, so the question is decided on facts in each case.
• The test. The nature of the land, its actual use on the date the security interest was created, and the purpose it was set apart for; revenue records are not conclusive.

2. The Leading Cases

Figure 2: Three Supreme Court decisions

• Blue Coast (2018). Land used as part of a hotel project was not agricultural, whatever its classification (Topic 55)
• Pappireddiyar (2018). Classification in revenue records is not dispositive; the court must look at nature and use when the security was created.
• K. Sreedhar (2023). The burden is on the borrower to prove the land was agricultural and actually used as such; the High Court erred in placing it on the bank.
• If the land is agricultural. SARFAESI is unavailable, but the creditor may still sue or proceed under the RDB Act; and a non-agricultural security for a farm loan remains enforceable (Topic 75)

3. Frequently Asked Questions

Can a bank enforce SARFAESI against land shown as agricultural in revenue records?

It may, if the land was not in fact agricultural. In Indian Bank v K. Pappireddiyar (2018) the Supreme Court held that classification in revenue records is not conclusive, and in K. Sreedhar v Raus Constructions (2023) it held that the borrower must prove that the land was actually being used for agriculture on the date the security interest was created.

What can a bank do if the mortgaged land is genuinely agricultural?

It cannot use SARFAESI, but it is not left without a remedy. It may file an original application before the Debt Recovery Tribunal under the RDB Act where the debt is twenty lakh rupees or more, or a civil suit for enforcement of the mortgage. Any other, non-agricultural security for the same loan can still be enforced under SARFAESI.

Does the exclusion depend on the purpose of the loan?

No. Section 31(i) turns on the property, not the loan. A crop or farm loan secured on a house or shop can be enforced under SARFAESI, while a business loan secured on land actually used for agriculture when the security interest was created cannot. The date that matters is the creation of the security interest, so a later change of use does not by itself alter the answer.

4. Related Topics

• Topic 5: Section 31 Exclusions. The full list of excluded transactions.
• Topic 77: SARFAESI and the TP Act. The mortgage behind the security interest.