In an important judgment dated 16 July 2015, a division bench comprising of Justice Muzaffar Hussain Attar and Justice Ali Mohammad Magrey of the Jammu and Kashmir high court, at Srinagar, has held that “Constitution of J&K, … is sovereign in character and the State Assembly, exercises sovereign power to legislate laws”. The High Court also held that the Parliament of India had no power to extend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, to the state of Jammu and Kashmir. This judgment was delivered in the case of Bhupinder Singh Sodhi vs. Union of India and Santosh Gupta Vs. Union of India.
In these cases, the petitioners were those people who had borrowed money from different banks / financial Institutions and had hypothecated their properties in favour of the banks / financial Institutions. The notices, u/s 13(2) of the said Act were issued by the banks/secured creditors to the petitioners in respect of debt, which had been classified as Non Performing Asset, and they have been asked to discharge in full the liabilities and pay the money due to the secured creditor within sixty days from the date of notice. Section 13(4) of the said Act confers power on the secured creditor to take the measures for recovering the secured debt which powers are delineated in clause (a), (b),(c) & (d).
However, by filing writ petitions before the J&K High Court, the petitioners challenged the extension of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which is an Act of the Parliament of India, to the state of Jammu and Kashmir. 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. In all, the petitions of about 550 loan defaulters from across the state of J&K were heard together and decided in this case.
The main contentions of the petitioners were as under:
a) The Parliament has no power to enact a law which would affect the immoveable property of the State subjects.
b) Article 370 of the Constitution of India restricts power of the Parliament to enact a law which would affect the immoveable properties of the state subjects/citizens of the State of J&K.
c) Creation of an Authority for recovery of secured debts falls within the definition of ‘administration of justice’ and the Central Government has no authority and power to enact a law in this behalf as the List – I, (Union List) of Schedule 7th of the Constitution of India, does not have any such Entry incorporated therein and the Entry – II-A figures in List – III, (Concurrent List) of 7th Schedule of the Constitution of India is not applicable to State of J&K.
d) The legislature of the State of J&K, alone being competent to make laws about the land, immoveable properties, and section 13 of the said Act of 2002, which provides that, “notwithstanding anything contained in section 69 or 69-A of Transfer of Property Act, 1882” is beyond the legislative competence of the Parliament.
e) The constitutional scheme and framework, as projected by the Constitution of India and Constitution of J&K, do not authorize for making of law like the said Act of 2002 by the Parliament in respect of the State of J&K.
Referring to certain Supreme Court decisions in the case of Prem Nath Kaul v. State of J&K, AIR 1959 SC 749 : 1959 Supp (2) SCR 270 and Sampat Prakash v. State of J&K, (1969) 1 SCC 562 : AIR 1969 SC 1153 : 1969 Cri LJ 1555, the J&K High Court observed that the State of J&K has, legally and validly, framed its Constitution, which is not the position in respect of other States of the country. The provisions of Constitution of India which pertain to the States have also not been made applicable to the State of J&K. List – II, (State List) of 7th Schedule of the Constitution of India has also not been made applicable to the State of J&K.
It was further held by the high court that:
“The power of Parliament to legislate laws for which field is prescribed by List – I, of the 7th Schedule of the Constitution of India and List – III (Concurrent List) thereof, pertain to not all the Entries made in these lists but only to those Entries, which have been applied to State of J&K by employing the constitutional procedure prescribed in article 370 of the Constitution of India. The Union Parliament is lacking the legislative competence to enact laws in respect of ‘administration of justice and constitution of Courts’, which Entry has been shifted to List III (Concurrent List) by constitution (Forty second Amendment) Act 1976 carried in the Constitution in the year 1976, which amendment has not been made applicable to the State of J&K.”
“The Parliament has no legislative competence to make laws in respect of J&K, which would affect the interests of the State subjects/citizens of the State as defined by law and section 6 of the Constitution of J&K qua their immoveable properties. It is the State in terms of the section 5 of the Constitution of J&K, which has the absolute sovereign power to legislate laws touching the rights of its State subjects/citizens qua their immoveable properties. Same reasoning applies to section 18(B) as well. On the same analogy, Union Parliament lacks legislative competence to enact provisions like section 34, 35 and 36 of the Act of 2002. Section 13(1) and section 13(4), being the kernel of the Act of 2002, further, as already stated, the Union Parliament having no legislative competence to enact laws, vide 17(A), 18(B), 34, 35, 36, the Act of 2002 cannot be implemented in the State of J&K.”
Relying upon the aforesaid Supreme Court decision in the case of Prem Nath Koul, the high court further observed that signing of Instrument of Accession did not affect the sovereignty of Maharaja over his State. After the Instrument of Accession was signed by Maharaja, his successor in interest issued proclamation for electing Constituent Assembly for framing of Constitution of J&K. The Constituent Assembly was elected on the basis of adult franchise and the said Constituent Assembly framed Constitution, which is called Constitution of J&K. The Constituent Assembly, adopted and gave to the people of the State of J&K the Constitution on 17th day of November, 1956. Sections 2,3,4,5,6,7,8 & 158 came into force at once and the other provisions of Constitution of J&K came into force on 26th day of Jan 1957. The Yuvraj, who issued proclamation for convening of Constitutional Assembly and who possessed sovereign power, thus, by getting the Constituent Assembly elected through adult franchise, transferred sovereignty of the State to the people of the State. Even otherwise, the people are repository of sovereign power of the State. The State of J&K, thus, got its own Constitution for regulating its affairs.
The J&K High Court further observed that:
“The Constitution of India, in the above legal situation, could not apply, by its own force, to the State of J&K. Article 370 of the Constitution of India, provided mechanism and procedure for applying constitutional provisions and statutes to the State of J&K. The dominion Government, however, could not extend provisions of the Constitution or other laws to the State of J&K unilaterally. Same could be done either with consultation with the Government of J&K or with its concurrence. The sovereignty of the State of J&K under the rule of Maharaja, even after signing of Instrument of Accession and in view of framing of its own Constitution, thus, legally and constitutionally remained intact and untampered. The sovereign character of the State Constitution and State Assembly, which, like other wings of the State, is creature of State Constitution, has, thus, sovereign power to make laws for its subjects. The Parliament has been authorized to make laws in respect of those matters in the Union List and Concurrent List, which, in consultation with the Government of the State are declared by the President to correspond to matters specified in the Instrument of Accession, governing the accession of State to the dominion of India. The other laws in the said State could be made by the Parliament with concurrence of the Government of the State, which are to be specified by the President by an order.”
In important observations, the High Court held that the Constitution of J&K is sovereign in character and the State Assembly, exercises sovereign power to legislate laws.
Relying upon the above two decisions of the Supreme Court, the high court also held that in the community of States of India, the State of J&K occupies a distinct, unique and special position. Thus, in law, the State of J&K constitutes a class in itself and cannot be compared to the other states of the country. The constitutional provisions and laws, which have been extended to the State of J&K in accordance with the mechanism and procedure prescribed by article 370 and which constitutional provisions and laws have been made applicable to the State of J&K with modifications etc., make the distinct, unique & special position of the State of J&K more clear. The Constitutional provisions and laws, which have been extended to the State of J&K, are applied to a class of people, who are State subjects of the State of J&K. These laws have not been made applicable, in the same form, to the people of rest of the States of the country.
After giving detailed reasoning, the J&K high court passed an order holding that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (an Act passed by the Parliament of India) cannot be enforced in the State of J&K. It was also held that the provisions of the said Act 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.
It was further held that the State of J&K would be at liberty to enact law similar to that of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for securing the interests of the banks/financial Institutions. However, it was further directed that the State of J&K, in the event of framing such a law, has to ensure that interests of State subjects/citizens of J&K qua their immoveable properties are not affected by transferring the same to non State subjects.
