SARFAESI Act, 2002 is unenforceable in the state of Jammu & Kashmir

Jammu and Kashmir High Court- Giving a landmark judgment regarding the applicability of the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (SARFAESI) in the State of Jammu and Kashmir
(hereinafter State), a division bench of M.H. Attar and A.M. Magrey JJ, held
that the SARFAESI Act, 2002 cannot be enforced in the State as the Union
Parliament does not have legislative competence to enact laws contained in
Sections 13, 17(A), 18(B), 34, 35 and 36 so far they relate to the State.
Giving reasons, the Court observed that the SARFAESI Act modifies the State
transfer of property Act, State Civil Procedure Code, Civil Courts Act, State
Limitation Act and adversely impacts the inalienable property rights of State
Subjects, hence is beyond legislative competence of the Parliament to the
extent of State of Jammu and Kashmir.

The petition is
in the backdrop of SARFAESI Act wherein banks can seize property of the
borrowers and dispose it off. Learned Counsel, A. Haqani, on behalf of the
petitioners argued that the authority created and mechanism prescribed by the
SARFAESI Act is covered by the expression “administration of justice” and the
Parliament has no power to legislate any law on this subject. While Zafar A. Shah,
learned Senior Advocate, appearing for respondent Bank, argued that in view of
Entry 45 of List I, (Union List) of 7th Schedule of the Constitution of India,
the Parliament is competent to legislate the SARFAESI Act.

The Court
pointed out that Parliament has no power to legislate law on the subjects of
administration of justice, the land and other immovable properties. The Court
further observed that the Constitution of Jammu and Kashmir
is sovereign in character and the State Assembly exercises sovereign power to
legislate laws. Referring to Prem Nath
Koul vs. State of J&K, 1959 Supp (2) SCR 270:AIR 1959 SC 749, the Court
also held that the State of Jammu and Kashmir occupies a distinct, unique and
special position and constitutes a class in itself, thus cannot be compared to
other states in the country. The Court further explained that the
constitutional provisions and laws extended to the State of Jammu and Kashmir
in accordance with the mechanism and procedure under Article 370 and those
constitutional provisions and laws which have been made applicable to the State
with modifications make the distinct and special position of the State more
clear. The Court also gave liberty to the State to enact law similar to
SARFAESI Act for securing the interest of banks or financial institutions. [Bhupinder Singh Sodhi v. Union of India, decided on 16.07.2015]
Source: Legal news India

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