Neeraj Rohmetra
JAMMU, Dec 16: In a judgement of far reaching consequences, Supreme Court today categorically stated that provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), which empower banks to take possession of secured assets of the borrowers and sell them, are fully applicable to Jammu and Kashmir.
The Apex Court passed this judgment while setting aside the judgement of State High Court dated July 16, 2015, which had ‘wrongly’ upheld that the key provisions of the SARFAESI were outside the Legislative competence of Parliament and were inapplicable to the State of Jammu and Kashmir.
“All the notices issued by the banks in terms of Section 13 of SARFAESI and other coercive methods are valid and can be proceeded with further”, said the Apex Court while hearing the Special Leave Petition (SLP) filed by Union Government challenging the verdict of Division Bench of J&K High Court wherein it was held that SARFAESI Act, enacted by Parliament in 2002, cannot be enforced in the State keeping in view its constitutional position.
Ruling out the contention of the respondent that the SARFAESI Act, which entitles banks to enforce their security interest outside the court’s process to take possession of secured assets of the borrower, would collide with Section 140 of the Transfer of Property Act of Jammu and Kashmir, 1920, the Supreme Court observed, “Rule 8(5) proviso of the Security Interest (Enforcement) Rules, 2002 clearly states that in case of sale of immovable property in the State of Jammu and Kashmir, the provisions of Jammu and Kashmir Transfer of Property Act, 1977 shall apply to the person who acquires such property in the State.”
“Section 140 of the Transfer of Property Act of Jammu & Kashmir will be respected in auction sales that take place within the State. This being the case, it is clear that there is no collision or repugnancy with any of the provisions of SARFAESI and therefore it is clear that the High Court is absolutely wrong in finding that as Section 140 of the Transfer of Property Act will be infracted, SARFAESI cannot be held to apply to the State of Jammu & Kashmir”, says the judgement, the copy of which is available with EXCELSIOR.
Coming down heavily on the State High Court, the Apex Court said, “the judgment begins from the wrong end and therefore reaches the wrong conclusion. It states that in terms of Section 5 of the Constitution of Jammu & Kashmir, the State has absolute sovereign power to legislate in respect of laws touching the rights of its permanent residents qua their immovable properties. The State legislature having enacted Section 140 of the Jammu & Kashmir Transfer of Property Act, therefore, having clearly stated that the State subjects/citizens are by virtue of the said provision protected, SARFAESI cannot intrude and disturb such protection. The whole approach is erroneous”.
The judgment further says, “Entries 45 and 95 of List I empower Parliament with exclusive power to make laws with respect to banking and the entirety of SARFAESI can be said to be referable to Entry 45 and 95 of List I, 7th Schedule to the Constitution of India. This being the case, Section 5 of the Jammu & Kashmir Constitution will only operate in areas in which Parliament has no power to make laws for the State Thus, it is clear that anything that comes in the way of SARFAESI by way of a Jammu & Kashmir law must necessarily give way to the said law by virtue of Article 246 of the Constitution of India as extended to the State of Jammu & Kashmir, read with Section 5 of the Constitution of Jammu & Kashmir. This being the case, it is clear that Sections 13(1) and (4) cannot be held to be beyond the legislative competence of Parliament as has wrongly been held by the High Court”.
The Bench comprising Justice Kurian Joseph and Justice R F Nariman further said, “We are afraid that despite the judgment in Narottamdas Jethabai and Jamshed Guzdar’s case, the High Court, even though it refers to Narottamdas Jethabai, has completely missed this crucial aspect. Most importantly, even if it is found that Section 140 of the Jammu & Kashmir Transfer of Property Act entitles only certain persons to purchase properties in the State of Jammu & Kashmir yet Rule 8(5) proviso which recognizes this provision, has been brushed aside”, adding “in any case an attempt has first to be made to harmonise Section 140 of the Jammu & Kashmir Transfer of Property Act with SARFAESI, and if such harmonization is impossible, it is clear that by virtue of Article 246 read with Section 5 of the Jammu & Kashmir Constitution, Section 140 of the Jammu & Kashmir Transfer of Property Act has to give way to SARFAESI and not the other way around”.
Earlier, Sunil Fernandes, Standing Counsel for the State of Jammu and Kashmir, referred to Article 370 and the Constitution of Jammu and Kashmir in some detail and cited judgments of Supreme Court dealing with the same. He also pointed out local statutory laws which prohibit transfer of land belonging to State residents to non-State residents.
His submission was that though the SARFAESI Act was enacted by Parliament by virtue of Entry 45 List I, yet Section 13(4) alone incidentally encroaches upon the property rights of permanent residents of the State of Jammu and Kashmir and must be read down so that it will not be permissible under this section to sell property belonging to a permanent resident of the State to a person who is not a permanent resident of the State.
He further submitted that the proviso added to Rule 8(5) of the SARFAESI Rules must be read along with Section 13(4) of the SARFAESI Act and if so read, the State of Jammu & Kashmir would have no objection to the SARFAESI Act.
It is pertinent to mention here that SARFAESI Act was enacted by the Parliament in 2002 and under this Act banks have powers to seize the property of the defaulters (loan borrowers) and dispose the same.
In July last year, a Division Bench of Jammu and Kashmir High Court had ruled that (SARFAESI) Act, enacted by Parliament in 2002, cannot be enforced in J&K as the State has its own Constitution and sovereign character which cannot be challenged, altered or abridged.
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