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| JK has no vestige of sovereignty outside Constitution of India: SC | | Sets aside HC judgment on SARFAESI Act, holds notices issued under Sec 13 by banks as valid | | Early Times Report
Srinagar, Dec 16: Holding that State of Jammu and Kashmir has no vestige of sovereignty outside the constitution of India and its own constitution, the Supreme Court of India today set aside J&K High Court's judgment regarding applicability of the SARFAESI Act in the state.
"Having held (by the High Court) that the provisions of SARFAESI cannot be applied to the State of Jammu & Kashmir, it is a contradiction in terms to state that SARFAESI can be availed of by banks which originate from the State of Jammu & Kashmir for securing monies which are due to them and which have been advanced to borrowers who are not the residents of the State of Jammu & Kashmir," said a division of the apex court comprising Justices Kurian Joseph and R.F. Nariman while setting aside the judgment of the High Court. "As a result, notices issued by banks in terms of Section 13 and other coercive methods taken under the said Section are valid and can be proceeded with further," the apex court said.
The apex court while comparing preamble to the Constitution of Jammu & Kashmir and Constitution of India, 1950 observed that the former been wholly omitted in the Constitution of Jammu & Kashmir.
"There is no reference to sovereignty. Neither is there any use of the expression "citizen" while referring to its people. The people of Jammu & Kashmir for whom special rights are provided in the Constitution are referred to as "permanent residents" under Part III of the Constitution of Jammu & Kashmir," the apex court said, adding that the Constitution of Jammu & Kashmir has been made to further define the existing relationship of the State with the Union of India as an integral part thereof.
"It is thus clear that the State of Jammu & Kashmir has no vestige of sovereignty outside the Constitution of India and its own Constitution, which is subordinate to the Constitution of India. It is therefore wholly incorrect to describe it as being sovereign in the sense of its residents constituting a separate and distinct class in themselves," the apex court said and "reminded" the High Court that residents of J&K are first and foremost citizens of India.
The apex court said that it has been constrained to observe this because in at least three places the High Court has "gone out of its way to refer to a sovereignty which does not exist."
Referring to High court's reliance on Article 35A of the Constitution of India as it applies to the State of Jammu & Kashmir, the apex court said that it fails to understand how Article 35A carries the matter any further. "This Article only states that the conferring on permanent residents of Jammu & Kashmir special rights and privileges regarding the acquisition of immovable property in the State cannot be challenged on the ground that it is inconsistent with the fundamental rights chapter of the Indian Constitution," the court said, adding that conferring such rights and privileges as mentioned in Section 140 of the Jammu & Kashmir Transfer of Property Act is not the subject matter of challenge on the ground that it violates any fundamental right of the Constitution of India.
State's view
Sunil Fernandes, Standing Counsel, for the State of Jammu & Kashmir, referred to Article 370 and the
Constitution of Jammu & Kashmir in some detail and cited judgments of the Apex 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 & 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. It was his further submission that the provison 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 applying to the State of Jammu & Kashmir.
What is SARFAESI Act
It is an enactment which inter alia entitles banks to enforce their security interest outside the court's process by moving under Section 13 thereof to take possession of secured assets of the borrower and sell them outside the court process.
Its Sections 13 pertains to Enforcement of security interest and it states:
(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 2 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act.
(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt. (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. |
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