Excelsior Correspondent
Srinagar, Feb 20: The Supreme Court has issued notice to State Government for filing objections in a petition challenging the judgment of High Court whereby an Act (SARFAESI Act) passed by the Parliament was held not to be applicable for the State.
The Special Leave Petition has been filed by the Union Government challenging the verdict of Division Bench of State High Court wherein it was held that Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, enacted by Parliament in 2002, cannot be enforced in the State in keeping with its Constitutional position.
The Division Bench of Supreme Court comprising Justice Kurian Joseph and Justice Rohinton Fali Nariman after condoning the delay in filing the petition by Union Government asked the State Government to file objections to a petition challenging Jammu and Kashmir High Court verdict of Division Bench of State High Court
The SARFAESI Act was enacted by the Parliament in 2002 and under this Act, banks could have seized the property of the defaulters ( loan borrowers) and dispose the same under the said act.
In July, last year, a Division Bench of Jammu and Kashmir High Court comprising Justice Muzaffar Hussain Attar and Justice Ali Mohammad Magrey in a judgment 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.
The bench had ruled that “Provisions of the Act can be availed of by the banks, which originate from the State of J&K, for securing the money which is due to them and which has been advanced to the borrowers, who are not State subjects and residents of the State of J&K and who are non-State subjects/non-citizens of the State of J&K and residents of any other State of India, excepting the State of J&K”.
The judgment underlined that Parliament does not have legislative competence to make laws contained in Section 13, Section 17 (A), Section 18 (B), Section 34, 35 and Section 36, so far as they relate to the State of J&K.
Quashing the notices issued by the banks in terms of Section 13 of the SARFAESI Act against those persons who have had obtained loan facility from the banks and defaulted in paying the loan amount the court had restrained the banks and other financial institutions from proceeding further in keeping with the Act, against the State Subjects or citizens of Jammu and Kashmir.
The court had, however, put the banks at liberty to recover the money due to them from the borrowers by having recourse to the appropriate laws and by approaching the appropriate forums.
While the court had put the J&K State at liberty to enact law similar to that of the SARFAESI Act 2002 for securing the interests of the banks/financial Institutions, it had, however, added: “State of J&K, in the event of framing such a law, has to ensure that interests of State subjects/citizens of J&K regarding their immoveable properties are not affected by transferring the same to non-State subjects.”
Citing the Constitution of India, the Court held that “Article 35(A) which has been applied to the State of J&K clarifies the already existing constitutional and legal position and does not extend something new to State.”
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