By S&S Co. Advocates & Solicitors · Published 17 October 2026 · Informational content, not legal advice: see our disclaimer
A farmer-borrower who mortgaged land to raise a loan, and now faces a SARFAESI notice, often assumes that because the land is classified as agricultural in the revenue records, the bank simply cannot touch it. Section 31(i) of the SARFAESI Act does carve out an exemption for security interests created on agricultural land, and this belief is not baseless. What the Supreme Court has made clear, most recently and firmly in a January 2023 ruling, is that the exemption depends on how the land was actually being used, not on what the revenue register happens to say, and that the burden of proving actual agricultural use falls on the borrower, not the bank.
That shift in the burden of proof changes how a borrower should approach a SARFAESI notice touching agricultural land. Simply producing a revenue extract showing the land as agricultural, and assuming that settles the matter, is the single most common mistake borrowers make when trying to resist enforcement on this ground.
What Section 31(i) Actually Exempts
Section 31(i) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 excludes from the Act's reach any security interest created on agricultural land. Where this exemption genuinely applies, a bank cannot use the fast-track, largely extrajudicial SARFAESI machinery, meaning the notice under Section 13(2), the right to take possession under Section 13(4), and the sale process that follows, to enforce its security over that land. The lender would instead have to pursue an ordinary civil suit or a proceeding before the Debt Recovery Tribunal under the Recovery of Debts and Bankruptcy Act.
The exemption exists because agricultural land in India carries protections under various state tenancy and land reform laws, and Parliament chose not to let SARFAESI's summary enforcement procedure override those protections where land is genuinely being used for agriculture. But the provision was never meant to let a borrower shield commercial or non-agricultural property from enforcement simply by having it recorded as agricultural land in a revenue document that no longer reflects how the land is actually used.
The Supreme Court's 2023 Ruling: Burden Shifts to the Borrower
In K. Sreedhar v. M/s Raus Constructions Pvt. Ltd., decided on 5 January 2023, the Supreme Court addressed exactly this gap. The borrowers had produced only revenue records showing the mortgaged land as agricultural, while the secured creditor placed photographs before the court showing no agricultural activity was actually taking place on the land. The Telangana High Court had sided with the borrowers and set aside the bank's possession and sale notices, but the Supreme Court reversed that decision.
The Court held that the burden of proving that a particular property is agricultural land, in the sense the exemption requires, rests on the borrower, and that the High Court had erred by effectively shifting that burden onto the secured creditor. Relying on its own earlier decisions in ITC Limited v. Blue Coast Hotels Limited and Indian Bank v. K. Pappireddiyar, the Court reaffirmed that merely showing land as agricultural in revenue records is not sufficient; what matters is whether the land was actually being used for agriculture, both at the time the security interest was created and, relevantly, at the time enforcement is sought.
What Actually Counts as Evidence of Agricultural Use
Because the classification in land records is not decisive, a borrower relying on the exemption needs to build an evidentiary record showing real, ongoing agricultural activity, such as crop cultivation records, irrigation arrangements, agricultural income reflected in tax filings, photographs and site inspection reports, and witness evidence from neighbouring landholders or the local revenue official familiar with the land's actual condition.
A bank resisting the exemption will typically do the opposite: commission a site inspection close to the time of the SARFAESI notice, photograph the land to show it lying fallow, built upon, or used for a non-agricultural purpose, and point to the loan documentation itself, since a loan sanctioned for a commercial or industrial purpose, with agricultural land offered only as collateral rather than as the subject of the business being financed, weakens a borrower's claim that the exemption was ever meant to apply to that transaction. A mismatch between what the loan proposal said the land would be used for and what the borrower now claims in the SARFAESI reply is exactly the kind of inconsistency a tribunal will notice and hold against the borrower.
The Procedural Trap: Why the High Court Writ Petition Often Fails Too
Even where a borrower has a genuine agricultural-use argument, the Supreme Court's ruling in K. Sreedhar flagged a separate, purely procedural problem that trips up many borrowers: the High Court should not have entertained a writ petition under Articles 226 and 227 of the Constitution at all, since the SARFAESI Act itself provides a statutory appeal to the Debt Recovery Appellate Tribunal under Section 18. That appeal must ordinarily be filed within thirty days of the order being challenged, and comes with a condition that the borrower deposit fifty percent of the amount of debt claimed by the secured creditor, or determined by the Debt Recovery Tribunal, whichever is less, though the Appellate Tribunal may reduce this, for reasons recorded in writing, to not less than twenty-five percent.
Courts have repeatedly discouraged bypassing this statutory route through a writ petition, treating the deposit requirement as Parliament's deliberate choice to filter out borrowers unwilling to put any money behind their challenge, not as an unreasonable barrier to be worked around through a parallel High Court remedy. A borrower who goes straight to the High Court risks losing time on a petition that gets dismissed for this reason alone, quite apart from how strong the underlying agricultural-use argument might have been.
Building the Defence Before the Section 13(2) Notice Escalates
The practical window for raising the agricultural-land exemption effectively is the reply to the Section 13(2) notice itself, filed within the sixty days the Act allows, rather than waiting until possession is actually threatened. A reply that lays out the specific evidence of agricultural use, attaches whatever documentation already exists, and puts the bank on formal notice of the exemption claim creates a record that matters later, whether the dispute proceeds to the Debt Recovery Tribunal, the Appellate Tribunal, or is resolved without further escalation.
A farmer-borrower who waits until a possession notice arrives, and then produces a revenue extract as the sole basis for resisting enforcement, is relying on exactly the argument the Supreme Court rejected in K. Sreedhar. Building a fuller evidentiary picture early, and understanding that the statutory appeal route through the DRAT is the forum where that evidence actually gets tested, gives the exemption claim a genuine chance rather than a token one. Where a family holding genuinely depends on the land for its livelihood, the difference between filing a well-documented reply at the first notice and scrambling for proof after possession is taken can decide whether the exemption argument is heard on its merits at all, or dismissed as an afterthought raised too late in the process to be credible.
Frequently Asked Questions
If my land is shown as agricultural in the revenue records, is it automatically protected from SARFAESI action?
No. The Supreme Court held in K. Sreedhar v. Raus Constructions (2023) that revenue records alone are not sufficient, and that the borrower must actually prove the land was being used for agriculture, both at the time the mortgage was created and when enforcement is sought.
Who has to prove whether the land is genuinely agricultural, the bank or the borrower?
The borrower. The Supreme Court specifically rejected a High Court approach that had placed this burden on the secured creditor, holding instead that a borrower claiming the Section 31(i) exemption must establish actual agricultural use with evidence, not merely rely on how the land is classified in revenue records.
Can I challenge a SARFAESI notice touching agricultural land directly in the High Court?
Usually not successfully. The Supreme Court has held that a borrower should pursue the statutory appeal to the Debt Recovery Appellate Tribunal under Section 18 instead of a writ petition, and that appeal requires filing within thirty days along with depositing a percentage of the claimed debt.
What evidence actually helps prove agricultural use of mortgaged land?
Cultivation and irrigation records, agricultural income shown in tax filings, site photographs and inspection reports, and testimony from neighbours or local revenue officials familiar with the land's actual condition, rather than the bare land classification entry, which the Supreme Court has already held is not enough on its own.
References & Further Reading
The provisions and rulings below were relied on for this guide. The position can change with amendments and later decisions, so check the current text and the latest case law before acting on any of it.
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 31(i) (exemption of security interests created on agricultural land from the Act's enforcement provisions)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 18 (appeal to the Debt Recovery Appellate Tribunal, within thirty days, with a deposit condition)
- K. Sreedhar v. M/s Raus Constructions Pvt. Ltd., Supreme Court, 5 January 2023 (burden of proving actual agricultural use rests on the borrower; revenue records alone are not sufficient)
- ITC Limited v. Blue Coast Hotels Limited, (2018) 15 SCC 99 (merely showing land as agricultural in revenue records is not sufficient to claim the Section 31(i) exemption)
- Indian Bank v. K. Pappireddiyar, (2018) 18 SCC 252 (the land must actually have been used as agricultural land when the security interest was created)