WHETHER THE BANK CAN AUCTION THE AGRICULTURAL LANDS?

– PURPOSE AND USER TEST

QUESTION & OPINION

B. Kanaga sabapathy 27.03.2022

Question :

What is use and user test?

Opinion :

1. This test is related to whether the agricultural lands used for any other purpose is SARFAESI compliant or not.

2. In the case of “ITC limited vs. Blue Coast Hotels Ltd. – 2018 (4) Scale 628 – Bar on creation of security interest on agricultural land is not absolute – Supreme court on SARFAESI” – the Apex court choose to lay down the purpose and user test for the purpose of determining the applicability of the bar under section 31(i) of the SARFAESI Act.

The purpose is: Non-agricultural but to run hotels and develop villas.

User is Not a farmer but a hotel management.

3. An article written by this author on the above case laws is attached herewith for a detailed understanding.