SHIVAMOGGA: The Union government has clarified that it cannot intervene in banks’ recovery proceedings against defaulting coffee growers under the SARFAESI Act, calling it a commercial decision. It reiterated that coffee plantations are not treated as agricultural land for SARFAESI exemption and said affected borrowers can only seek relief through Debt Recovery Tribunals.
The Union government’s clarification comes at a time when thousands of planters in Karnataka are staring at the imminent auction of their plantations.
Replying to an unstarred question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said that recovery action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act is a commercial decision of banks and financial institutions, and the Centre does not interfere in such matter.
The reply came in response to a question by Udupi-Chikmagalur MP Kota Srinivasa Poojary, who sought details on whether public sector banks were auctioning coffee plantations of overdue borrowers and whether the government planned to stop online auctions, considering the distress faced by growers.
The Finance Ministry clarified that coffee plantations are not treated as ‘agricultural land’ for the purpose of exemption under Section 31(i) of the SARFAESI Act, based on a Karnataka High Court judgment. The court had ruled that plantation crops such as coffee, tea, rubber, pepper and cardamom do not fall under the definition of agricultural land for SARFAESI protection, thereby allowing banks to proceed with enforcement action.
The government further informed that recovery proceedings initiated earlier by Union Bank of India and Indian Bank against coffee estate owners were upheld by the Karnataka High Court in January 2021. While one of the affected borrowers later withdrew his Special Leave Petition before the Supreme Court in August 2023, another petition is still pending. However, there is no stay on the SARFAESI action, enabling banks to continue auctions.
On demands from growers to halt online auctions due to delayed repayments caused by market volatility and rising input costs, the Centre maintained that it does not intervene in individual recovery cases. “The government is not involved in commercial decisions or recovery proceedings of banks or financial institutions,” the minister said in his reply.
Addressing allegations that traders from Dubai were exploiting coffee plantations in Chikkamagaluru district by obtaining licences online, the government said the Coffee Board has not received any such information. As for relief to distressed growers, the Centre pointed out that the only remedy available to borrowers facing enforcement action is to approach the Debt Recovery Tribunal under Section 17 of the SARFAESI Act. No separate policy relief or auction moratorium has been announced for coffee growers.
The parliamentary reply comes as Karnataka’s coffee growers’ associations seek urgent government support amid shrinking margins, labour shortages and climate pressures. Karnataka remains India’s top producer, contributing 248,020 MT in 2022–23, ahead of Kerala and Tamil Nadu.
Karnataka Growers' Federation president H Shivanna told the TNIE that coffee growers will meet Union Minister of Commerce and Industry Piyush Goyal, who is visiting Chikkamaluru district this month. “We will apprise him of the need to come to the rescue of growers to present our core demands,” he said.