The Agricultural Land Shield (Section 31(i)): SARFAESI Bar on Agricultural Properties, Revenue Records & Quashing Unlawful Mortgages

The Agricultural Land Shield: Invoking Section 31(i) SARFAESI Exemption to Bar Securitisation (K. Sreedhar v. R.M.M.S. & Revenue Record Proof)

Published by: Sumanjari & Co. Advocates

Section 1: Executive Overview & Practical Reality

In the aggressive theater of banking asset recovery, agricultural land stands as an impregnable statutory sanctuary. Under Section 31(i) of the SARFAESI Act, 2002, Parliament enacted an express and unconditional legislative embargo: the provisions of the SARFAESI Act shall not apply to any security interest created in agricultural land. This statutory exemption reflects a deliberate socio-economic policy choice to shield agrarian livelihoods and agricultural holdings from sudden extra-judicial foreclosure and private bank auctions.

Despite this clear statutory prohibition, commercial lenders across Uttar Pradesh—from the peri-urban belts of Lucknow, Barabanki, Unnao, and Sitapur to high-value belts in Western UP—routinely flout Section 31(i). In practice, credit officers frequently insist that borrowers mortgage ancestral farm holdings, orchards, or rural agricultural parcels as "collateral cushion" for commercial or industrial credit lines. When default occurs, bank recovery teams mechanically issue Section 13(2) demand notices and Section 13(4) possession notices against these agricultural lands, falsely asserting that because the loan was commercial or because the land lies near a highway, the statutory exemption stands forfeited.

Litigation before the Debt Recovery Tribunals (DRT Lucknow and DRT Allahabad) and the High Court of Judicature at Allahabad has firmly exposed these predatory recovery practices. Establishing the agricultural character of mortgaged property through certified revenue records—specifically Khatauni, Khasra, crop inspection records, and the absence of land use conversion declarations under Section 80 of the U.P. Revenue Code, 2006—strips the bank of statutory jurisdiction. Invoking Section 31(i) is not merely an affirmative defense; it is an absolute jurisdictional bar that completely terminates SARFAESI proceedings ab initio.

Section 2: Statutory & Regulatory Framework

The agricultural exemption is governed by a precise matrix of central securitisation law and state land revenue statutes:

• Section 31(i) of the SARFAESI Act, 2002:"The provisions of this Act shall not apply to— ... (i) any security interest created in agricultural land;"The language of Section 31 is mandatory and exclusionary. The provision begins with the non-negotiable command: "The provisions of this Act shall not apply". Consequently, where security interest is created over agricultural land, the entire machinery of Chapter III—including Section 13(2), Section 13(4), and Section 14—is stripped of legal authority. The secured creditor's remedy is strictly confined to ordinary civil recovery suits or an Original Application (OA) under Section 19 of the Recovery of Debts and Bankruptcy (RDB) Act, 1993 before the DRT.
• The Determination of "Agricultural Land": The SARFAESI Act deliberately does not define "agricultural land". The Supreme Court has authoritatively settled that the character of the land must be determined by: (a) the entry in the state land revenue records as on the date of creation of the security interest, (b) the actual agricultural use or capability of agricultural use, and (c) the absence of any statutory conversion of land use into non-agricultural purposes.
• U.P. Revenue Code, 2006 (Section 80) & U.P. Zamindari Abolition and Land Reforms Act, 1950 (Section 143): In the State of Uttar Pradesh, every parcel of land recorded in the revenue records (Khatauni) retains its agricultural character by operation of law unless a formal, judicial declaration of land use conversion is passed by the Sub-Divisional Magistrate (SDM) / Assistant Collector under Section 80 of the U.P. Revenue Code, 2006 (or erstwhile Section 143 of the UPZALR Act, 1950). In the absence of an authenticated Section 80 declaration duly recorded in the R-6 revenue register, the land remains agricultural in the eyes of law, regardless of its urban proximity or municipal boundary inclusion.
• Revenue Record Evidentiary Documents:
• Khatauni (Record of Rights): Primary legal register establishing ownership, tenure status, and agricultural categorization under the Board of Revenue, U.P.
• Khasra (Field Register / Land Inspection Record): Records the physical survey, crop cultivation details (Kharif, Rabi, Zaid), irrigation sources, and ground-level agricultural operations conducted by the revenue Lekhpal.
• Form CH-41 and Form CH-45 (Consolidation Records): Certified maps and allotment registers generated during consolidation operations under the U.P. Consolidation of Holdings Act, 1953, reflecting rural agricultural plots.

Section 3: Landmark Judicial Precedents

The jurisprudence governing Section 31(i) has evolved through landmark decisions of the Supreme Court and the Allahabad High Court:

• K. Sreedhar v. R.M.M.S. & Ors. (2022) SCC OnLine SC 1279 / 2023: The Supreme Court delivered a defining judgment on the interpretation of Section 31(i). The Court held:"Whether a particular land is an agricultural land or not cannot be decided merely on the basis of its entry in the revenue records or solely on the basis of whether agricultural operations were being carried out at a given point in time... It must be established whether the land was actually being used for agricultural purposes or was capable of being used as agricultural land, and the purpose for which the security interest was created."The Court clarified that if a debtor creates a mortgage over land that is agricultural in nature, and no conversion has been obtained, the mere fact that the borrower obtained a commercial loan does not automatically strip the land of its agricultural character. The burden of proof lies on the party asserting that the land has lost its agricultural identity.
• ITC Limited v. Blue Coast Hotels Ltd. (2018) 15 SCC 99: The Supreme Court considered whether mortgaged land forming part of a luxury five-star hotel project could claim Section 31(i) exemption because some surrounding parcels were recorded as agricultural in revenue records. The Court held that where agricultural land has been completely converted into a commercial hotel resort with built structures, gardens, and infrastructure, the debtor cannot take refuge under Section 31(i). The Court established the "Actual Purpose and Use Doctrine"—holding that agricultural exemption cannot be used as a colorable device for land deliberately transformed into commercial use.
• Indian Bank v. K. Pappireddiyar (2018) 18 SCC 252: The Supreme Court held that the question whether a property is agricultural land under Section 31(i) is a mixed question of fact and law. The Court ruled:"The classification of land in revenue records as agricultural is a strong prima facie proof, but the High Court or Tribunal must also consider the nature of the property, its location, the presence of trees or cultivation, and whether non-agricultural activity has been established."
• Ram Kumar v. Union Bank of India (Allahabad High Court): The High Court held that where a parcel of land in Uttar Pradesh is recorded as agricultural in the revenue Khatauni, and no declaration under Section 143 of the UPZALR Act (now Section 80 of the U.P. Revenue Code) was ever granted by the revenue authorities, the bank has no jurisdiction to invoke the SARFAESI Act. The Court set aside the Section 13(2) and 13(4) notices and held that the bank's remedy lies exclusively under the RDB Act before the DRT.
• Gajraj Singh v. State of U.P. (Allahabad High Court, Lucknow Bench): The Court reaffirmed that municipal inclusion or surrounding urban development does not automatically extinguish the agricultural nature of land unless statutory land use conversion is formally completed under state revenue laws.

Section 4: Stage-by-Stage Procedural Roadmap

To successfully deploy the Section 31(i) agricultural shield against bank recovery, counsel and borrowers must execute a meticulous operational roadmap:

• Step 1: Immediate Revenue Record Extraction (Days 1 to 7 upon 13(2) Notice):
• Obtain certified copies of the current Khatauni (Fasli year) from the concerned Tehsil / Land Records Registry (e.g., Tehsil Mohanlalganj or Sarojini Nagar, Lucknow) bearing the official seal and digital signature of the Tehsildar / Revenue Inspector.
• Obtain certified copies of Khasra entries for the past three agricultural years showing crop inspection details (such as paddy, wheat, mustard, or mango orchard cultivation).
• Apply for a formal Revenue Certificate from the Sub-Divisional Magistrate (SDM) / Tehsildar certifying that: (a) the subject Khasra number is recorded as agricultural land, and (b) no declaration under Section 80 of the U.P. Revenue Code, 2006 has ever been issued converting the land into non-agricultural or residential use.
• Step 2: Section 13(3A) Jurisdictional Objection (Days 10 to 45):
• Draft a comprehensive objection under Section 13(3A) asserting a complete lack of subject-matter jurisdiction.
• Annex certified copies of the Khatauni, Khasra, and SDM Certificate. State that any further action under Section 13(4) or Section 14 will constitute deliberate statutory disobedience of Section 31(i) and expose bank officials to civil and criminal liability.
• Step 3: Filing Pre-Emptive Representation Before the District Magistrate (Days 45 to 60):
• If the bank approaches the District Magistrate under Section 14 for physical possession, immediately file a preliminary objection before the DM / Additional District Magistrate (Finance & Revenue).
• Bring to the Magistrate's attention that under Section 14(1), the DM must verify the 9-point affidavit submitted by the bank, which must include a statement that the asset is enforceable under the Act. Demonstrate that enforcing agricultural land violates Section 31(i), and the DM lacks statutory jurisdiction to issue police assistance orders over exempt land.
• Step 4: Instituting Section 17 Application Before DRT or Article 226 Writ:
• If the bank proceeds to Section 13(4) symbolic possession, file a Section 17 Securitisation Application before DRT Lucknow or DRT Allahabad within 45 days. Seek an immediate declaration that the proceedings are null and void under Section 31(i).
• The Writ Alternative: Where the bank's action is patently ultra vires on the face of certified revenue records and the DRT is non-functional or incapable of granting immediate protection against demolition of agricultural structures or orchards, invoke the extraordinary writ jurisdiction of the Allahabad High Court under Article 226, relying on the exception to Satyawati Tondon for patent lack of statutory jurisdiction.

Section 5: Tactical Offenses, Defenses & Critical Pitfalls to Avoid

Litigating agricultural property exemptions demands precise forensic execution to counter aggressive lender arguments:

• Tactical Offenses:
• Spot Inspection by Court Commissioner: In Section 17 DRT proceedings, immediately move an application for the appointment of an Advocate Commissioner to conduct a local physical inspection of the property. A contemporaneous commission report documenting active crops, irrigation tubewells, standing fruit orchards, or cattle sheds completely destroys the bank's claim that the land is commercial.
• Electricity Tariff Classification: Produce electricity bills showing an agricultural power connection (PTW - Private Tube Well tariff) from Madhyanchal Vidyut Vitran Nigam Ltd. (MVVNL), which confirms state recognition of agricultural use.
• Lender's Own Valuation Report: Demand the production of the bank's initial pre-sanction valuation report. In many cases, the bank's approved valuer explicitly describes the property as "agricultural land / orchard" in the original appraisal, estopping the bank from later claiming it is commercial.
• Lender Defenses to Anticipate:
• Lenders will cite ITC v. Blue Coast Hotels to argue that the land has potential for industrial development or is located near an express highway. Counter this by emphasizing that potential future use does not extinguish current legal status, and in Blue Coast Hotels the land was already built upon as a luxury hotel.
• Lenders will claim that because the mortgage was created for an industrial or commercial loan facility, the borrower waived the protection of Section 31(i). Counter with the settled constitutional principle that statutory exemptions founded on public policy cannot be waived by private contract.
• Critical Pitfalls to Avoid:
• Relying Solely on Oral Assertions: Never approach the DRT or High Court asserting that land is agricultural without certified revenue records (Khatauni/Khasra) issued within the preceding three months. Unsubstantiated claims will be summarily rejected.
• Concealing Inconsistent Documents: If the borrower previously submitted an architectural layout or map for commercial warehouse construction to the bank, disclose and address this upfront. Concealment of prior non-agricultural representations can lead to an adverse inference of fraud under K. Sreedhar.
• Ignoring Boundary Encroachments: If a small portion of a large agricultural parcel has a residential farmhouse, delineate the farm portion clearly to prevent the bank from using the farmhouse as an excuse to seize the entire farm holding.

Section 6: Ready-to-Use Court Drafting Template

Below is an unabridged, practical model legal petition specifically drafted as an Article 226 Writ Petition filed before the Hon'ble High Court of Judicature at Allahabad, Lucknow Bench, challenging SARFAESI proceedings initiated by Indian Bank over agricultural land in violation of Section 31(i).

IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD

BENCH AT LUCKNOW

CIVIL MISCELLANEOUS WRIT PETITION (WRIT-C) NO. _______ OF 2026

(DISTRICT: LUCKNOW)

IN THE MATTER OF:

1. Shri Harish Chandra Verma, S/o Late Ram Dularey Verma

2. Shri Satish Chandra Verma, S/o Late Ram Dularey Verma

Both Residents of: Village Gosainganj, Pargana Mohanlalganj, Tehsil Mohanlalganj, District Lucknow ... PETITIONERS

VERSUS

1. State of Uttar Pradesh

Through the Principal Secretary (Revenue), Government of U.P., Civil Secretariat, Lucknow ... RESPONDENT NO. 1

2. The District Magistrate / Collector, Lucknow

Collectorate Campus, Qaisarbagh, Lucknow ... RESPONDENT NO. 2

3. Indian Bank

(Erstwhile Allahabad Bank), Stressed Assets Recovery Branch, 2nd Floor, Hazratganj, Lucknow - 226001

Through its Authorized Officer / Chief Manager ... RESPONDENT NO. 3

WRIT PETITION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING FOR ISSUANCE OF A WRIT OF CERTIORARI QUASHING THE IMPUGNED SECTION 13(2) NOTICE DATED 10TH JUNE 2026 AND SECTION 13(4) POSSESSION NOTICE DATED 18TH AUGUST 2026 ISSUED BY RESPONDENT NO. 3 AS BEING VOID AB INITIO AND BARRED UNDER SECTION 31(i) OF THE SARFAESI ACT, 2002.

TO,

THE HON'BLE THE CHIEF JUSTICE AND HIS COMPANION JUDGES OF THE SAID HON'BLE COURT.

THE HUMBLE PETITION OF THE PETITIONERS ABOVENAMED RESPECTFULLY SHOWETH:

1. That the Petitioners are law-abiding citizens of India, permanent agricultural landholders, and resident farmers belonging to Village Gosainganj, Tehsil Mohanlalganj, District Lucknow. The Petitioners are invoking the extraordinary constitutional writ jurisdiction of this Hon'ble Court to prevent the patent usurpation of statutory authority and gross violation of Section 31(i) of the SARFAESI Act, 2002 by Respondent No. 3.

2. That the Petitioners are the absolute recorded tenure holders of ancestral agricultural land comprised in Khasra No. 342 (Area 1.850 Hectares) and Khasra No. 344 (Area 1.200 Hectares), situated at Village Gosainganj, Pargana Mohanlalganj, District Lucknow. The certified copy of the Khatauni for Fasli Year 1429-1434 is annexed herewith as ANNEXURE P-1.

3. That the Petitioners have been actively cultivating the subject land for generations. Active agricultural operations are continuously carried out thereon, consisting of paddy (Kharif) and wheat (Rabi) crops, supported by a dedicated agricultural tubewell power connection bearing Account No. 7419082341 issued by MVVNL. The certified copies of the Khasra entries for the last three agricultural years and the electricity bills are annexed herewith as ANNEXURE P-2 (COLLY).

4. That in the year 2022, M/s Awadh Agro-Cold Storage Pvt. Ltd. (a commercial borrower) availed a credit facility from Respondent No. 3. At the persistent insistence of the bank officials, the Petitioners executed a third-party equitable mortgage over the aforesaid agricultural land parcels as additional collateral security.

5. That following an alleged commercial default by the principal borrower, Respondent No. 3 initiated extra-judicial recovery measures under the SARFAESI Act, 2002. Respondent No. 3 issued a Demand Notice dated 10th June 2026 under Section 13(2) claiming Rs. 7,42,80,000/-, specifically including the Petitioners' agricultural lands in Schedule-B.

6. That the Petitioners immediately submitted a detailed Objection dated 15th July 2026 under Section 13(3A) of the Act, bringing to the notice of Respondent No. 3 that the mortgaged property is pure agricultural land and, by virtue of the express statutory prohibition contained in Section 31(i) of the SARFAESI Act, 2002, the bank has no jurisdiction whatsoever to initiate any measures under the Act. A copy of the Objection dated 15th July 2026 is annexed as ANNEXURE P-3.

7. That completely disregarding the statutory mandate of Section 31(i), Respondent No. 3 rejected the representation by an unreasoned letter dated 28th July 2026 and proceeded to execute a purported Possession Notice dated 18th August 2026 under Section 13(4) of the Act, affixing the same on the agricultural tubewell shed of the Petitioners.

8. That Respondent No. 3 has further approached Respondent No. 2 (District Magistrate, Lucknow) by filing an application under Section 14 of the Act seeking deployment of police force to forcibly take physical possession of the agricultural fields and standing crops.

9. GROUNDS FOR INVOKING WRIT JURISDICTION NOTWITHSTANDING ALTERNATIVE REMEDY:

A. FOR THAT the present writ petition is maintainable despite the existence of the alternative remedy under Section 17 before the DRT, as the impugned action of Respondent No. 3 is a patent nullity, taken in total lack of jurisdiction, and in direct defiance of the legislative embargo enacted under Section 31(i) of the SARFAESI Act. In Whirlpool Corporation v. Registrar of Trade Marks (1998) 8 SCC 1 and Harbanslal Sahnia v. Indian Oil Corporation (2003) 2 SCC 107, the Hon'ble Supreme Court authoritatively held that an alternative remedy does not operate as an absolute bar where the order or proceeding is wholly without jurisdiction.

B. FOR THAT Section 31(i) of the SARFAESI Act, 2002 categorically commands: "The provisions of this Act shall not apply to... (i) any security interest created in agricultural land;" When a statute creates an express negative embargo, any proceeding initiated in breach thereof is void ab initio, non-est, and coram non judice.

C. FOR THAT the subject property is indisputably agricultural land in the revenue records of the State of Uttar Pradesh. No declaration under Section 80 of the U.P. Revenue Code, 2006 has ever been made by any revenue court converting the land to non-agricultural use. The Sub-Divisional Magistrate, Mohanlalganj, Lucknow has issued a formal Certificate dated 5th August 2026 confirming that the land remains un-converted agricultural land. A copy of the SDM Certificate is annexed as ANNEXURE P-4.

D. FOR THAT the Hon'ble Supreme Court in K. Sreedhar v. R.M.M.S. & Ors. (2022) SCC OnLine SC 1279 held that where land is agricultural and actively used or capable of being used for agriculture, the bar under Section 31(i) operates with full statutory force.

E. FOR THAT if Respondent No. 2 acts upon the Section 14 application and deploys police force to evict the Petitioners from their agricultural fields, the standing paddy crops ready for harvest will be destroyed, resulting in irreparable ruin to the rural farming family.

PRAYER:

Wherefore, it is most respectfully prayed that this Hon'ble Court may graciously be pleased to:

(i) Issue a writ, order, or direction in the nature of CERTIORARI quashing the impugned Demand Notice dated 10th June 2026 issued under Section 13(2) and the impugned Possession Notice dated 18th August 2026 issued under Section 13(4) of the SARFAESI Act, 2002 by Respondent No. 3 in so far as they pertain to the agricultural land comprised in Khasra No. 342 and Khasra No. 344, Village Gosainganj, Tehsil Mohanlalganj, District Lucknow;

(ii) Issue a writ, order, or direction in the nature of MANDAMUS commanding Respondent No. 2 (District Magistrate, Lucknow) not to entertain, register, or execute any application or order under Section 14 of the SARFAESI Act, 2002 in respect of the Petitioners' agricultural land;

(iii) Issue an ad-interim order restraining Respondent No. 3 from taking any coercive recovery measures, publishing auction notices, or interfering with the peaceful agricultural possession and cultivation of the Petitioners over Khasra No. 342 and 344 during the pendency of this writ petition; and

(iv) Pass such other and further orders as this Hon'ble Court may deem fit and proper in the circumstances of the case.

Dated: 12th September 2026

Place: Lucknow

PETITIONERS

THROUGH

SUMANJARI & CO. ADVOCATES

Counsel for the Petitioners

Chamber No. D-311, Block D, Allahabad High Court, Lucknow Bench

Section 7: Practical FAQs

• Can a bank bypass Section 31(i) if the borrower mortgaged agricultural land to secure a commercial or industrial loan?Answer: No. Section 31(i) does not create any exception based on the nature, purpose, or classification of the underlying loan advance. Whether the loan was sanctioned for agricultural operations (Kisan Credit Card / Tractor Loan) or as working capital for an industrial manufacturing corporate unit, if the security interest is created over "agricultural land", the SARFAESI Act is wholly inapplicable. The statutory bar attaches to the intrinsic character of the secured asset, not the character of the loan facility. The lender's remedy is restricted to ordinary recovery suits or an Original Application before the DRT under Section 19 of the RDB Act, 1993.
• What happens if the land is recorded as agricultural in the Khatauni, but is situated within a municipal corporation limit or next to a national highway?Answer: The mere inclusion of land within the territorial limits of a Municipal Corporation (Nagar Nigam) or its physical proximity to a commercial highway does not automatically alter its legal status under land revenue laws. In Uttar Pradesh, land remains agricultural until a formal judicial order of conversion is passed under Section 80 of the U.P. Revenue Code, 2006. Unless the competent revenue authority (SDM) has passed a Section 80 declaration and altered the revenue records, the land enjoys the full protection of Section 31(i), provided agricultural cultivation or orchard activity is demonstrated on the ground.
• If agricultural land has a small farm house or tubewell room on it, does it lose its Section 31(i) exemption?Answer: No. Under Section 4 of the U.P. Revenue Code, 2006, "land" held for agricultural purposes includes land occupied by buildings which are improvements made for agricultural purposes, such as tubewell rooms, tractor garages, grain storage sheds, and farm dwellings occupied by the cultivator. Such ancillary structures are integral to agrarian operations and do not transform the holding into commercial real estate.
• Can a borrower approach the High Court directly under Article 226 if the bank issues a notice over agricultural land, despite the alternate remedy before DRT?Answer: Yes, under well-defined exceptions. While the Supreme Court in Satyawati Tondon cautioned against entertaining writ petitions in SARFAESI matters, the Court consistently carved out exceptions where: (a) the action is wholly without jurisdiction, (b) the statute itself does not apply, or (c) there is a gross violation of fundamental rights. Since Section 31(i) is an express statutory bar that strips the bank of subject-matter jurisdiction, the Allahabad High Court has repeatedly entertained writ petitions at the notice stage where incontrovertible certified revenue records establish the agricultural nature of the property and demonstrate patent illegality on the part of the secured creditor.

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