The Supreme Court on Monday decided to hear the State Bank of India's appeal seeking implementation of laws related to recovery of money from loan defaulters in Jammu and Kashmir.
The Supreme Court on Monday decided to hear the State Bank of India’s appeal seeking implementation of laws related to recovery of money from loan defaulters in Jammu and Kashmir.
A bench headed by Justice JS Khehar sought reply from various borrowers, who have mortgaged their properties in favour of the banks/financial institutions, after SBI challenged the J&K High Court’s judgment that held that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, enacted by Parliament in 2002, cannot be enforced in the state owing to this unique constitutional position.
The HC had quashed the notices issued by the banks in terms of section 13 of the SARFAESI Act, thus restraining the banks from recovering debts by non-adjudicatory process like possession of the secured assets and sale of properties.
The HC said that Parliament is not competent to legislate the provisions of SARFAESI Act as “the constitutional provisions and laws, which have been extended to J&K in accordance with the mechanism and procedure prescribed by Article 370 and which constitutional provisions and laws have been made applicable to J&K with modifications etc make the distinct, unique and special position of the State of J&K more clear.”
However, “provisions of the Act (2002) can be availed of by the banks, which originate from the State of J&K, for securing the monies which are due to them and which have 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 HC stated in its August order. The order, thus restrained the banks from proceeding further under SARFAESI Act against the state subjects/citizen of J&K.
Attorney general Mukul Rohatgi, appearing for the Bank, asked the bench to consider the issue as around 7,000 cases have been disposed of citing this order.
The bench, while refusing to stay the order without hearing the respondents, said that “the issue needs to be considered as it is the root of many issues.”
The bank said that the 2002 is valid and is capable of being enforced even in J&K.
Referring to Article 370, it submitted that in view of Constitution (Application to Jammu and Kashmir) Order of 1954 issued by the President of India, the Parliament has been authorised to legislate laws in respect of various Entries in the List – I, (Union List) of 7th Schedule of the Constitution of India including Entry 45 which stands extended to J&K in terms of the constitutional order.