In a landmark judgment on legislative relations between the State of Jammu and Kashmir (J&K) and the Union of India, a two judge bench of Supreme Court set aside the Jammu and Kashmir High Court’s judgment which had held that various key provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 were outside the legislative competence of Parliament, as they collided with Section 140 of the Transfer of Property Act of Jammu & Kashmir, 1920.
The bench also rejected the J&K High Court’s view that the J&K Constitution was equal to the Constitution of India.
The Supreme Court of India has held that, “Jammu and Kashmir has ‘no vestige’ of sovereignty outside the Indian Constitution and its own, while the citizens of the state are “first and foremost” citizens of India”.
The Supreme court made the observation while terming as “wholly incorrect” the conclusion arrived at by Jammu and Kashmir High Court which had held that the state has “absolute sovereign power” to legislate laws touching the rights of its permanent residents regarding their immovable properties.
“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,” a bench of Justices Kurian Joseph and R F Nariman said.
“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 residents of Jammu & Kashmir, we need to remind the High Court, are first and foremost citizens of India,” it said.
The apex court said this while holding that provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) are within the legislative competence of Parliament and can be enforced in Jammu and Kashmir.
The bench set aside the verdict of Jammu and Kashmir High Court that had held that any law made by Parliament, which affects the laws made by state legislature, cannot be extended to Jammu and Kashmir.
“The High Court 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 apex court said.
It further said, “We may also add that permanent residents of Jammu & Kashmir are citizens of India, and there is no dual citizenship as is contemplated by some other federal Constitutions in other parts of the world“.
Applying the doctrine of pith and substance to SARFAESI, the bench held that in pith and substance the entire Act is referable to Entry 45 List I read with Entry 95 List I in that it deals with recovery of debts due to banks and financial institutions, inter alia through facilitating securitization and reconstruction of financial assets of banks and financial institutions, and sets up a machinery in order to enforce the provisions of the Act. In pith and substance, SARFAESI does not deal with “transfer of property”. In fact, in so far as banks and financial institutions are concerned, it deals with recovery of debts owing to such banks and financial institutions and certain measures which can be taken outside of the court process to enforce such recovery.
Background:
The apex court judgement came on the appeal by State Bank of India (SBI) against the high court verdict which had held that the SARFAESI Act would collide with the Transfer of Property Act of Jammu & Kashmir, 1920.
SARFAESI is an enactment which entitles banks to enforce their security interest outside the court process to take possession of secured assets of the borrower and sell them outside the court process.
READ ORIGINAL FULL JUDGEMENT HERE.
