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JAMMU AND KASHMIR HIGH COURT
Muzaffar Hussain Attar, Ali Mohammad Magrey, JJ
Bhupinder Singh Sodhi and Ors —Petitioners
versus
Union of India and Ors. —Respondents
OWP No.530/2007 and OWP No.1031/2004
Decided on 16.07.2015
For the Petitinoers: :Mr. P.N.Raina, Sr. Advocate, Mr. A. Haqani, Mr. M.A. Qayoom, Advocates and the Ld. Counsel whose names are mentioned in the enclosed cause lists.
For the Respondents:Mr. R.A.Jan, Ld. Advocate General, Mr. Z.A.Shah, Ld. Sr. Advocate with Mr.Hanan, Adv. Mr. S.A.Makroo, Ld. ASGI and the Ld.counsel whose names are mentioned in the enclosed cause lists.
IMPORTANT POINT
S. 13(4) of the Act, 2002 authorizes secured creditor, who being juristic persons, not State Subjects, to take possession of secured assets, which would include immoveable properties of borrowers and armed with power to transfer by way of lease, assignment or sale for realizing money due to them.
Headnote:Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 2, 13, 17-A, 34, 35, 36, 37, 38, — Banking Regulation Act, 1949 — Section 5 (c) —Recovery of Debts Due to Banks and Financial Institutions Act, 1993 — Section 2 (g) — Transfer of property Act, 1882 — Section 67-A, 69, 69-A & 140 — Constitution of India, 1950 — Article 14, 21, 152, 245, 246, 256, 368 & 370 — Sher-i-Kashmir University of Agricultural Science and Technology Act, 1982 — Companies Act, 1956 — Section 4-A — Constitution of Jammu & Kashmir — Section 5 & 6 — Recovery of moneys — Due from borrowers — In terms of the Act, 2002 — Mechanism provided for — HELD — Union Parliament does not have legislative competence to make laws contained in S. 13, 17 (A), 18 (B), 34, 35 & 36 — So far as they relate to State of J&K — SARFAESI Act cannot be enforced in State of J&K — Provisions of SARFAESI Act can be availed of by banks — Which originate from State of J&K for securing monies — Which due to them and advanced to borrowers — Who not State subjects and residents of State of J&K — And who non-State subjects/non-citizens of State of J&K and residents of any other State of India excepting State of J&K. [Para 58]
(ii) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 2, 13, 17-A, 34, 35, 36, 37, 38, — Banking Regulation Act, 1949 — Section 5 (c) —Recovery of Debts Due to Banks and Financial Institutions Act, 1993 — Section 2 (g) — Transfer of property Act, 1882 — Section 67-A, 69, 69-A & 140 — Constitution of India, 1950 — Article 14, 21, 152, 245, 246, 256, 368 & 370 — Sher-i-Kashmir University of Agricultural Science and Technology Act, 1982 — Companies Act, 1956 — Section 4-A — Constitution of Jammu & Kashmir — Section 5 & 6 — Recovery of moneys — Due from borrowers — In terms of the Act, 2002 — Mechanism provided for — Notices issued by respondent-banks in terms of S. 13 or any other coercive method taken under — Quashed and set aside — Respondents Banks/Institutions restrained from proceeding further in terms of action initiated on basis of provisions of SARFAESI Act against State Subjects/citizens of State of J&K — Respondent-banks at liberty to recover money due to them from borrowers by having recourse to appropriate laws and by approaching appropriate forums — State of J&K would be at liberty to enact law similar to that of SARFAESI Act for securing interests of banks/financial Institutions — State of J&K in event of framing such law has to ensure that interests of State subjects/citizens of J&K qua their immoveable properties not affected by transferring same to non-State subjects. [Para 58]
Result: Petitions disposed off
Muzaffar Hussain Attar, J.—The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (for short the Act of 2002) was enacted by the Parliament in the year 2002. It was enforced on 17th December, 2002. The purpose of the Act is to regulate scrutinization and reconstruction of financial assets and enforcement of security interests and for matters connected therewith or incidental thereto. The Act of 2002 was amended in the year 2004 and 2012.2. The legislative evolution, in the field of financial matters of Banks reached to its zenith by the enactment of Act of 2002. It was enacted to facilitate and ensure immediate recovery of finances/money which was/is due to financial Institutions from the borrowers.
3. In the fast changing global financial scenario, the recovery of finances/ money by the lending banks/financial Institutions, from borrowers in our country would proceed on snails pace, thus, affecting the financial health of country. In order to meet the domestic and global financial challenges, it was deemed imperative and essential to have a legislation, which would ensure speedy and hassle free recovery of finances/money from the borrowers/loanees. On proper appraisal of the issues, it was found that the slow speed with which the money is being recovered by the banks/financial Institutions, in view of existing legal system and further for the reason that some of the borrowers/loanees would delay payment of finances/amount by adopting different delaying tactics, it was deemed necessary to enact a law which would arm the financial institutions/banks to recover money without delay.
4. For the overall growth and development in different walks of life and to keep pace with the ever changing financial scenario of the world and further to ensure that the country does not lag behind in its overall growth in all the related fields, it was deemed necessary to enact a law which would ensure immediate, speedy and hassle free recovery of finances/money from the borrowers/loanees. It further appears that because of withholding of the huge amounts by the borrowers/loanees, without any just and reasonable cause, the industrial, agricultural and technological development of the country was badly affected. The huge public interest would suffer by the dubious tactics employed by few individuals, who, illegally and immorally, at the cost of public interest, would make huge benefits, by retaining public money, which they received from the banks/financial Institutions. It is people’s money, which is deposited in the banks/financial Institutions. This money is to be spent for the overall benefit of the people at large, which solemn purpose is/was being defeated by individual borrowers/loanees by not repaying amounts within the time frame fixed in the agreements arrived at between the borrowers/loanees and banks/financial Institutions.
5. Initially, in order to overcome the aforestated difficulties, the Parliament enacted “Recovery Of Debts Due To Banks & Financial Institutions Act 1993” (for short the Act of 1993). With the passage of time, it was found that the Act of 1993 could not measure up to the expectations of the banks/financial Institutions, in as much as, the speed, which was required for recovery of finances/money, was not achieved.
6. It is in this backdrop that the Act of 2002 was enacted to secure the financial interests of the nation.
7. Section 2(a) of the Act of 2002 defines Appellate Tribunal. Clause (b) defines ‘Assets Reconstruction and Clause 2(c) defines ‘banking’. Similarly ‘Banking Company’, ‘Power’, ‘Borrower’, ‘Debt’, ‘Default’, ‘Financial Assistance’, ‘Financial Assets’, ‘Financial Institutions’, ‘Hypothecation’, ‘Non Performing Asset’, ‘Property’, ‘Secured Creditor’, ‘Secured Debt’ and ‘Secured Interest’, also stand defined by section (2) of the Act, 2002. The aforesaid relevant clauses are taken note of :
“2. Definitions :—( 1) In this Act, unless the context oth
