**Executive Summary**
This document is the response to Unstarred Question No. 1152 in Lok Sabha, concerning the SARFAESI Act and its application to coffee plantations. It outlines the government's stance on auctioning coffee plantations of overdue borrowers, the concerns of coffee growers regarding online auctions, and allegations of exploitation by Dubai-based traders. The response references court cases and the role of the SARFAESI Act in debt recovery.
**Key Points / Main Content**
* **SARFAESI Act Applicability**:
* Section 31(i) of the SARFAESI Act, 2002 does not apply to security interests created in agricultural land.
* However, the Karnataka High Court has ruled that "agricultural land" in the context of the SARFAESI Act does not include land on which plantation crops like coffee, cardamom, pepper, rubber, and tea are grown.
* **Legal Challenges and Court Decisions**:
* Recovery actions by Union Bank of India and Allahabad Bank under SARFAESI Act were challenged in Writ Petitions, which were initially dismissed by the Karnataka High Court.
* The dismissal was appealed. The Division Bench of the Karnataka High Court upheld the action of the banks.
* Special Leave Petitions (SLP) were filed with the Supreme Court against the High Court's judgment. One SLP was withdrawn, and the other is still pending.
* **Government's Role and Actions**:
* The Central Government administers the SARFAESI Act, allowing banks and financial institutions to recover dues exceeding one lakh rupees without court intervention. The government is not involved in the commercial or recovery decisions of banks.
* The Department of Commerce indicated that the Coffee Board has not received related information.
* Section 17 of the SARFAESI Act allows aggrieved parties, including borrowers, to file a Securitisation Application (SA) in the Debts Recovery Tribunal (DRT) against the actions of a secured creditor.
**Impact Analysis**
**Stakeholder:** Public Sector Banks, Union Bank of India, Allahabad Bank (now Indian Bank)
**Impact:** Banks are being questioned on the legality of using the SARFAESI act on coffee plantations as a result of requests of the coffee growers to abandon the process. Banks may need to alter their recovery strategies for coffee plantation loans based on the final Supreme Court ruling on SARFAESI Act applicability.
**Action Required:** Await Supreme Court ruling on pending SLP to determine final legality of applying SARFAESI Act to coffee plantations.
**Stakeholder:** Coffee Growers/Borrowers
**Impact:** Borrowers and their assets may be subjected to securitization and reconstruction of financial assets, and enforcement of security interest due to their loan situation. The SARFAESI Act is upheld by the courts, though, allowing the banks to continue their recovery processes. Borrowers are impacted by actions under the SARFAESI Act.
**Action Required:** Borrowers have recourse to file a Securitisation Application (SA) in the Debts Recovery Tribunal (DRT) against the actions of a secured creditor under Section 17 of the SARFAESI Act.
**Stakeholder:** The Central Government
**Impact:** The Central Government is the administrator of the SARFAESI Act, and responsible for actions of the secured creditors, as well as answering questions raised on the act. The government must address concerns regarding enforcement action under the Act.
**Action Required:** The Central Government has to address concerns on the application of the SARFAESI act and ensure adequate provisions are in place for action.
Key Entities Referenced
SARFAESI Act: Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, a law concerning the recovery of financial assets.
Karnataka: The state in India where the coffee plantations and related legal disputes are located.
Ministry of Finance: The Indian government ministry responsible for answering questions related to the SARFAESI Act and its impact on coffee plantations.
Section 31(i) of the SARFAESI Act: A specific section of the SARFAESI Act concerning the applicability of the Act to agricultural land.
Debts Recovery Tribunal (DRT): A tribunal where aggrieved parties can file applications related to enforcement actions under the SARFAESI Act.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO. 1152
ANSWERED ON MONDAY, DECEMBER 8, 2025/AGRAHAYANA 17, 1947 (SAKA)
SARFAESI ACT
1152 SHRI KOTA SRINIVASA POOJARY
Will the Minister of FINANCE be pleased to state:
(a) whether Public Sector banks are auctioning the coffee plantations of overdue
borrowers in the name of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest (SARFAESI) Act, if so, the details thereof;
(b) whether the Government has taken note of the request of the coffee growers to
abandon the online auction process if are experiencing delays in paying their loans, if
so, the details thereof
(c) whether the Government noticed that traders in Dubai are unfairly exploiting coffee
plantations in Chikkamagaluru district of Karnataka by obtaining licenses online,
thereby causing injustice to coffee growers;
(d) if so, the details thereof; and
(e) the steps taken by the Government to help farmers to recover coffee plantation
loans arrears by preventing online auctions in the name of the SARFAESI Act?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) Section 31(i) of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest (SARFAESI) Act, 2002 bars the applicability of
provisions of the SARFAESI Act to any security interest created in agricultural land.
The recovery action of the Union Bank of India (erstwhile Corporation Bank) and
erstwhile Allahabad Bank (now Indian Bank) under SARFAESI Act was challenged by
the borrowers i.e. (1) Shri U.M.Ramesh Rao, partner in M/s Vijayadevan Coffee Estate
and M/s Yellikudige Estate; and (2) M/s SSJV Projects Private Limited and its Director
Shri Manohar Shetty, by filing Writ Petition No.12461/2020 and W.P.No.13932/2015,
respectively. Both these Writ Petitions were dismissed vide order (s) dated 13.11.2020
and 14.11.2020 by the Single Judge of the Hon’ble Karnataka High Court. Against theOrder of dismissal, these Petitioners filed Writ Appeal before the Division Bench of the
Hon’ble Karnataka High Court on the ground that coffee plantation is agricultural land
within the meaning of Section 31(i) of the SARFAESI Act and therefore, the said Act
does not apply to coffee plantation.
The action of these Banks under SARFAESI Act has been upheld by the Division
Bench of Hon’ble Karnataka High Court vide a common judgment dated 29.1.2021
interalia holding that, “the expression 'agricultural land' in Section 31(i) of the
SARFAESI Act, does not include land on which plantation crops are grown namely,
cardamom, coffee, pepper, rubber and tea as defined in Section 2(A)(25) of the Land
Reforms Act (The Karnataka Land Reforms Act, 1961). Therefore, the measures
initiated by the respondent banks in relation to the coffee estates in these appeals are
not hit by Section 31(i) of the SARFAESI Act, as the said Act is applicable to land on
which plantation crops are grown, including coffee plantation, in the instant cases.”
The Judgment of the Hon’ble High Court dated 29.1.2021 has been challenged by the
Petitioners by filing Special Leave Petitions before the Hon’ble Supreme Court. The
SLP filed in the matter of Shri U M Ramesh Rao was dismissed as withdrawn on
11.8.2023. The Judgment of the Hon’ble Karnataka High Court has not been stayed
and the issue is sub judice before the Hon’ble Supreme Court, since the SLP filed by
Petitioner in the matter of SSJV Projects is still pending before the Hon’ble Supreme
Court.
(b) The Central Government administers the SARFAESI Act, 2002 which allows
banks and financial institutions to recover their dues exceeding one lakh rupees by
proceeding against secured assets of the borrower/guarantor without the intervention
of the court/tribunals. The Government is not involved in commercial decisions or
recovery proceedings of banks or financial institutions.
(c) & (d) Department of Commerce has informed that Coffee Board has not received
any such information.
(e) In order to address the concerns regarding enforcement action under SARFAESI
Act by any secured creditor, adequate provision has been made under Section 17 of
the SARFAESI Act, wherein any person (including borrower) aggrieved, has recourse
to filing of Securitisation Application (SA) in the Debts Recovery Tribunal (DRT)
against the action of secured creditor under the SARFAESI Act.
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