• Agriculture land mortgage for commercial purpose is legally valid

Can bank avail loan on agriculture land for commercial loan ?and the mortgage itself is valid or void pls let me know how to get out of it if the agriculture land is given as a collateral security and the property given as a colletral security is agriculture land as per revenue records.
Asked 4 years ago in Property Law
Religion: Hindu

13 answers received in 1 day.

Lawyers are available now to answer your questions.

13 Answers

The agriculter land cannot be attached in Sarfesi act under section 31 of the act since there is no agriculture loan on the agriculture land it cannot be attached to recover any commercial loan.

Further since.the sarfesi act doesn't define agriculture land the meaning of it has to be deduced that the land used for primary activity of the cultivation cannot be attached for recovery since there is no direct mortgage on the agriculture land your father is guarantor the bank cannot attach the agriculture land.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

If the bank proceeds on default of loan against the recovery proceedings and a possession notice is issued same can be challange before the DRT under section 17 showing the nature of the land.

Further kindly clarify the position of facts.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

This is my response to you:

1. Unless the property is converted for non-agriculture purpose, no commercial bank can give loan for commercial purpose on the security of agriculture property (even if it is offered as registered mortgage);

2. General loan can be given only for agriculture loan i.e. for purchase of tractor, seeds, fertilizers etc.

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

, SARFAESI Act will have no application to the security interest created in agricultural land

2)the security interest in agricultural land cannot be enforced inasmuch as the same is exempted under the provisions of Section 31(i),

Ajay Sethi
Advocate, Mumbai
89083 Answers
6362 Consultations

5.0 on 5.0

bank is at liberty to proceed against the principal debtor and guarantor for recovery of loan

Ajay Sethi
Advocate, Mumbai
89083 Answers
6362 Consultations

5.0 on 5.0

What do want to clarify?

Do you want to say that whether the agriculture property can be given as collateral security for bank loan, yes it can be given.

A collateral security can be in the form of agricultural lands also. However action under Securitisation Act (SARFASI) is not available to Bank like other residential or commercial properties. Banks accept agricultural as collateral security for all loans. Now the question is whether part of the land offered can be sold before repaying the loan

T Kalaiselvan
Advocate, Vellore
79241 Answers
1618 Consultations

5.0 on 5.0

My father is guarantor principal borrower is our relative

Normally, no agricultural land can be mortgaged for raising loan for other than agricultural activities. This is of course, state specific and you have to check if in your state this condition is applicable or not.

In case the banks are ready to accept your agricultural land as security , you are not permitted to sell off any part of it till your liability is cleared. However, bank may permit you to do so, provided the sale proceeds are either fully or proportionately directly credited to the loan account. At no point banks will agree for a dilution of security.

T Kalaiselvan
Advocate, Vellore
79241 Answers
1618 Consultations

5.0 on 5.0

1) The borrower has to clear the loan or mortgage different property instead of agriculture land. So this land will come out or will be free from loan.

Ganesh Kadam
Advocate, Pune
12420 Answers
193 Consultations

4.9 on 5.0

Dear Client,

Approval of loan depends on the terms of banks, Most banks refuse to grant loan on agriculture land, as the recovery proceeding against the agriculture land cannot be proceeded in case of default.

Check with the banks, if equitable mortgage facility is available on agriculture land.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

The bar of security interest is created on Agricultural Land is provided under Section 31(i) of the Securitization and Reconstruction of the Financial Assets and Enforcement of Security Interest, 2000.

Siddharth Jain
Advocate, New Delhi
6095 Answers
101 Consultations

5.0 on 5.0

In the matter of ITC Limited Vs Blue Coast Hotels Ltd., 2018(4) SCALE 628, the Supreme Court dealt with the bar of security interest to be created on Agricultural Land, provided under Section 31(i) of the Securitization and Reconstruction of the Financial Assets and Enforcement of Security Interest, 2000 (the Act) and held that the bar is subject to the determination of purpose for which the agricultural land is held by the debtor.

Siddharth Jain
Advocate, New Delhi
6095 Answers
101 Consultations

5.0 on 5.0

1. The Bank can take the agricultural land as mortgaged security while providing loan.

2. However, the said lending Bank can not initiate SARFAESI proceeding to take possession of the said mortgaged property and sell it of to recover the dues of the mortgagor/borrower.

3. However, the Bank can claim the said mortgaged property by filing civil suit if a mortgage deed has been registered by the parties while availing the said loan.

4. it appears that the Bank has inadvertently provided loan by creating equatable mortgage on the said agricultural land by keeping deposit of its original title deed.

5. It is to be noted that you may not be able to escape your responsibility to repay the loan as the Bank can file an Original Application (O.A.) before the local Debt Recovery Tribunal and get all your properties, including the said agricultural land, attached for taking possession by the Recovery Officer of the DRT for selling and recovering the dues of the said lending bank.

Krishna Kishore Ganguly
Advocate, Kolkata
26792 Answers
726 Consultations

5.0 on 5.0

1. Guarantor, after signing the agreement for guarantee, steps in to the shoes of the Borrower,

2. However, the amount to be paid by the guarantor is limited to the amount mentioned by him in the agreement for guarantee only with interest accrued thereupon.

Krishna Kishore Ganguly
Advocate, Kolkata
26792 Answers
726 Consultations

5.0 on 5.0

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer