SBI challenges JK High Court’s order on SARFAESI Act.
In a significant development, country’s largest public sector bank- State Bank of India- has filed a Special Leave Petition in the Supreme Court challenging a judgment of the J&K High Court on Sarfaesi Act 2002. The J&K High Court had ruled that the Parliament-enacted Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002 was not applicable to Jammu and Kashmir.
“The HC erred in holding that Sarfaesi Act adversely impacts the inherent natural and constitutional right of the state subjects. There cannot be any inherent natural and constitutional right to take a loan from a bank and decline to repay the same,” the SBI pleads in its petition.According to the bank the purpose behind Sarfaesi Act was to “empower secured creditors to take measures for recovery of their dues without the intervention of courts or tribunals and help reduce their non-performing assets (NPAs).”
“Parliament has the power to enact this special provision, that is Sarfaesi Act, because recovery of dues is an essential function of any banking institution and in exercise of its legislative powers the Parliament can provide a mechanism by which loans can be recovered,” the bank pleads in its petition.The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (also known as the Sarfaesi Act) is an Act of the Parliament of India.
It allows banks and other financial institution to auction residential or commercial properties to recover loans.A senior SBI official informed Greater Kashmir that the bank filed the petition seeking revision of JK High Court order as the Parliament had enacted Sarfaesi Act to enable the banking industry tackle delay in recovery of loans.
“The Act allows banks to recover debts by taking possession of secured assets and sell them without intervention of tribunals or courts in other parts of the country. However, in Jammu and Kashmir, the banks are finding it difficult to recover loan amounts due to non-applicability of the securitization Act,” he said.
“Parliament had specifically provided that all transfer of properties under the Sarfaesi Act would be appealable before the District Judge or the high court to protect state subjects’ interests in their properties,” SBI pleaded before the Supreme Court.Interestingly banks- both private and public sector – have been pressing for applicability of SAFAESI Act in the state.However, the Jammu and Kashmir HC ordered in the petition filed earlier before it that SARFAESI Act cannot be extended to state.
A division bench of the High Court comprising Justice M H Attar and A M Magrey had held in the 76-page judgment earlier this year that any law made by the Parliament which affects the laws made by State legislature cannot be extended and applied to J&K.
“The State of J&K would be at liberty to enact law similar to that of SARFAESI Act for securing the interests of the banks and financial Institutions,” it observed.
“Article 35(A) of the Constitution of India, 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 of J&K,” the bench held, observing that Article 35-A was only a clarificatory provision to clear the issue of constitutional position obtaining in rest of country in contrast to J&K.
“This provision clears the constitutional relationship between people of rest of country with people of J&K. It is in essence an information to the citizens of rest of country that on constitutional and legal plank they in all respects do not constitute a class with citizens of J&K,” the court had said and held that the J&K citizens have their own constitution and their sovereign character which cannot be challenged, altered or abridged.
Meanwhile, a bench of Justices J S Khehar and R Banumathi issued notice to the writ petitioners, mainly traders from Jammu and Kathua, who had successfully challenged the application of Sarfaesi Act to the residents of J&K.